Good morning, and thank you for joining us for RPC Inc.'s Fourth Quarter 2018 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer..

Thank you, and good morning. Before we begin our call today, I want to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks.

I'd like to refer you to our press release issued today, along with our 2017 10-K, and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net. In today's earnings release and conference call, we'll be referring to two non-GAAP measures of operating performance. The first is EBITDA.

RPC uses EBITDA as a measure of operating performance, because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We're also required to use EBITDA to report compliance with financial covenants under our revolving credit facility.

The second set is non-GAAP financial measures, our net income and diluted earnings per share excluding the impact of tax reform. Management believes that presenting our 2017 operating results without the impact of tax reform enables us to compare RPC’s operating performance during the fourth quarter and full year 2018 to 2017 consistently.

Our press release issued today and our website contains reconciliations of these non-GAAP financial measures to net income and diluted earnings per share, which are the nearest GAAP financial measures. Please review these disclosures if you’re interested in seeing how they are calculated.

If you've not received our press release for any reason, please visit our website at www.rpc.net for a copy. I will now turn the call over to our President and CEO, Rick Hubbell..

Jim, thank you. This morning we issued our earnings press release for RPC’s fourth quarter of 2018. The unexpected decline in oil prices, budgetary constraints and holiday slowdowns during the fourth of 2018 impacted our customers’ drilling and completion activities with many curtailing operations in December.

This decline was most pronounced in our pressure pumping service line. Our CFO Ben Palmer will now review our financial results in more detail, after which I'll have a few closing comments..

Thank you, Rick. For the fourth quarter revenues decreased to $376.8 million compared to $427.3 million in the prior year. Revenues decreased compared to the same period in the prior year due to lower activity levels caused by year end budget depletion among many customers.

EBITDA for the fourth quarter was $61.7 million compared to $101.1 million for the same period last year. Operating profit for the quarter decreased to $19.7 million compared to $60.3 million in the prior year. Our diluted earnings per share were $0.06 compared to $0.18 diluted earnings per share in the prior year, excluding the impact of tax reform.

RPC’s effective tax rate in 2018 was 21% compared to 30% in 2017. Cost of revenues during the fourth quarter was $274.4 million, or 72.8% of revenues, compared to $285.7 million or 66.9% of revenues during the same period last year.

Cost of revenues decreased due to lower materials and supplies expenses within RPC’s pressure pumping service line as well as lower maintenance and repair expenses. As a percentage of revenues, cost of revenues increased due to labor inefficiencies caused by lower activity levels within pressure pumping.

Selling, general and administrative expenses were $40 million in the fourth quarter compared to $42 million last year. As a percentage of revenues, these costs increased from 9.8% in the prior year to 10.6% due to lower revenues and the relatively fixed nature of these expenses during the short-term.

For the full year 2018 selling, general and administrative expenses as a percentage of revenues were 9.8% compared to 10% in 2017. Depreciation and amortization expense was $42.6 million during the fourth quarter of ‘18, an increase of 11.9% compared to $38 million in the prior year.

Our Technical Services segment revenues for the quarter decreased 13.1% compared to the same quarter in the prior year and operating profit decreased to $19.9 million, compared to $67 million in the prior year. These decreases were due to lower activity and lower pricing within our pressure pumping service lines.

Our Support Services segment revenues for the quarter increased 20.8% and operating profit improved to $2.5 million compared to an operating loss of $1.6 million in the same period last year. On a sequential basis RPC's fourth quarter revenues decreased 14.4% to $376.8 million from $440 million in the third quarter.

Revenues decreased due to lower activity levels and slightly lower pricing. Cost of revenues during the fourth quarter of '18 decreased $26.5 million or 8.8%, primarily due to decreases in variable costs, including materials and supplies, fuel and maintenance.

As a percentage of revenues, cost of revenues increased 4.4 percentage points from 68.4% in the third quarter to 72.8% in the current quarter. This was due primarily to the relatively fixed nature of employment costs during the short-term.

Selling, general and administrative expenses during the fourth quarter decreased by 4.2% compared to the third quarter. RPC's operating profit during the fourth quarter of 2018 was $19.7 million compared to $54.6 million in the prior quarter. Our EBITDA decreased from $97.8 million in the prior quarter to $61.7 million in the current quarter.

Technical Services segment revenues decreased $64.2 million or 15.3% to $357 million. Operating profit was $19.9 million compared to $56.2 million in the prior quarter. Our Support Services segment generated revenues in the fourth quarter of $19.7 million or 5.3% higher than the prior quarter.

Operating profit was $2.5 million in the fourth quarter compared to operating profit of $1.8 million in the prior quarter. Our pressure pumping fleet remains at approximately 1,050,000 hydraulic horsepower. And during the fourth quarter of 2018 capital expenditures were $43 million and our full year '18 capital expenditures were $243 million.

We currently estimate that 2019 capital expenditures will be approximately the same amount but could be less if conditions warrant. At the end of the fourth quarter, our cash balance was $116.3 million and we continue to have no outstanding debt. With that, I'll turn it back over to Rick for a couple of closing comments..

Thanks, Ben. During January several customers notified us that they were concerned about the current coal prices and are reevaluating their 2019 budgets. This and current market conditions require us to be cautious regarding our early 2019 outlook. However, we remain focused on executing over the long-term.

Although, 2018 was challenging, we maintained our commitment to RPC’s shareholders through our dividends and share repurchases. Our strong balance sheet, conservative approach and management experience will allow us to manage through the near-term uncertainties.

We've always focused on maximizing on invested capital and will continue to use this key metric to manage our business. Thank you for joining us for RPC's conference call this morning. At this time, we will open up the lines for your questions. .

[Operator Instructions] And we'll take our first question from Marc Bianchi with Cowen. .

I'd like to ask about the comment regarding customer budgets and the changing plans.

What were these customers telling you before, and what's your best guess on where they're headed in 2019 and also near-term here in the first quarter?.

Marc, this is Ben, absolutely very difficult question. The price fell obviously tremendously during the fourth quarter. Everybody is concerned as that begun to happen and I think there is still a lot of uncertainty in their minds. The '19 budgets of course they set those before the end of the year.

It's not like they're shutting down, but they're just a little more cautious at this point in time about how aggressive or how they're just kind of managing carefully just like we're trying to manage our business. So all things being equal, they will remain cautious and would start to react accordingly..

Marc, this is Jim. We believe that oil prices fell at a difficult time of the year because of our customers' budgeting season. So the oil price decline happened as they were budgeting. Now in January oil is up a little bit, but they are extremely uncertain about what 2019 looks like. .

Alright. We move on to our next question. Next we'll go to Chase Mulvehill with Bank of America Merrill Lynch. .

I guess first, kind of coming back to the CapEx, you’re kind of saying more or less kind of flattish.

Can you talk about the ability to kind of scale that down if the environment was slowing that down and maybe talk about how much of your CapEx in a flat environment is kind of replacement or kind of newbuild equipment?.

Chase, this is Ben. We do have some ability to manage that down. We have ordered some additional pressure pumping equipment that will come in towards the middle of next year. This is a decision we didn't take lightly, it's something we've evaluated over time. It's like Rick indicated in his comments, we're trying to manage things over the long-term.

So we think it's the right decision for us as we're committed to the industry. And we think it still provides over time a great return, will provide a good return, adequate return for us and our shareholders. So -- and that will be about a 10% addition to the fleet.

But in terms of those numbers, we're indicating, also we're saying about $240 million, $250 million in CapEx next year.

And in terms of maintenance and growth, Jim, help me out what did we…?.

Probably -- it's probably 60%, maintenance 40% growth, Chase. And we have started placing some orders for some pumps. But there’s some flexibility as Ben indicated on order moving back or deploying things, should we need to. .

Okay.

And that 10% additional horsepower, is that a gross or a net number?.

Well, it's additional horsepower. We are taking up it as two additional fleets coming in the middle of the year. .

Okay, alright. And then as we move -- okay, net two fleets, alright. And then if we think about the dividend and CapEx and the uncertainty around the macro, how should we think about the dividend, do you need to cover it with free cash or free cash plus cash and we just won’t pay you dividend with debt.

So generally just how do we think about the dividend sustainability of it?.

Well it’s simply how ‘19 unfolds and how we eventually see or believe that 2020 will roll out. Historically, I mean we've been conservative in managing our balance sheet and so forth. We’ve obviously maintained the dividend which you have some indication that we believe that’s sustainable at this point in time, but we will react quickly.

We have those levers available to us. And so it’s too early detail, we obviously don’t -- I don't -- we don’t here make decisions for the Board, but we will confer with them. And at this point in time, we believe that it’s intact and sustained. .

We will go to our next question James Wicklund with Credit Suisse. .

I noticed in the review of Q4 that it was -- the down -- 14 point were down essentially with lower activity and slightly lower prices and we were just all kind of wondering what slightly looks like in Q4 and of course the expectation is because Schlumberger and Halliburton have already kind of hinted at us that pricing in Q1 could be down another 10% to 15% from Q4.

Can you guys kind put some numbers around what you think short-term, what happens the rest of the year who knows, but short-term, what pricing is looking like in pressure pumping?.

Jim, this is Jim. The Q4 answer is a lot easier than the Q1 answer. We believe that just based on our price book and our discounts, pricing declined 2% sequentially between third and fourth quarter in pressure pumping. So activity declined a lot more.

We’re trying to find that balance right now of optimizing our EBITDA by finding the right mix of pricing and utilization. Fourth quarter was an anomaly because we had people who absolutely shut down in December. But taking those seasonal things away, we now need to find in the current environment the optimal mix between pricing utilization.

How much our pricing needs to decline in first quarter to get to that mix is not known to us right now, we would just kind of test the market, which our marketing sales teams are doing as we speak, figuring out where that level is. So we don’t have a number. .

We’re about a month in but no early indicators yet, okay. .

Yes..

Okay. And my follow-up if I could, returns, I’m not going to make a big deal about it but talk about -- you're focused on return on invested capital.

Can you just talk just a little bit about what that discipline is and how you determine, what it is and kind of what you think your cost of capital will be or should be? Can you just talk about around those metrics a little bit? Just because nobody in this industry generated consistent positive returns for a while, and so that gives everybody a chance to scramble.

But what do you guys look at as the return on invested capital type hurdle?.

Jim, it's Jim again. We feel that our cost of capital which all of us could look up or calculate individually is somewhere in the low teens. We traditionally look for low 20s as a hurdle because that's risk-adjusted given this is a very risky business and we try to be as flexible as we can both with cost and our capital plans as possible.

In the month of December did we earn that? Potentially not but that is our long-term goal and the leverage that we use to pursue business. And it is a shame that things aren't better for our Group.

We’ve been a publicly traded company without the boat manufacturing company for almost 18 years and our market cap on Friday was almost 8 times our market cap in March of 2001, and almost 44 times the market cap that we had when we were spun-off from a former parent almost 34 years ago.

So we over the long-term have managed that and worked that fairly well. As the cycles appear to be potentially shallower and the high parts of the cycle tend to be shorter, we have to keep watching that but it's always going to be return on capitals. So that's how we're going to continue to manage the business..

Well having a higher market cap than 15 years ago is an accomplishment in this Group, so congratulations. Thanks, guys..

And next we'll go to Mike Urban with Seaport Global Securities..

Just wondering if you could update us on where you stand in terms of spot versus dedicated fleets?.

This is Ben. There hasn't been much change in that regard. And in terms of our level -- our dedicated fleets probably are a little bit different than some of our competitors. I’d say everybody knows about one of our peers putting out their pre-announced results yesterday and they're to be congratulated. That's very impressive.

But as we look at that, it just demonstrates or confirms that there's lots of opportunity out there and we've got the same people operating our businesses that have for quite a while and we've had a lot of success over time.

So I believe we will be able to figure it out and be able to -- we're not in the market share gain, that's more a result than on the strategy. But I expect we will be able to take some steps and be able to increase our level of business.

And as Jim talked about earlier, it's really the balance between pricing and activity and we just need to figure out how to get more activity and make sure the level of dedication we have to the right customers that give us the level of activity we need to generate the revenues and the cash flows to give us the types of returns that we expect even in this environment.

So we think we can do better and guarantee that all of us, including our operations folks are dedicated to doing better than what we have here recently..

So it sounds like the preference is to continue to move toward a more dedicated fleet. I think that was -- I guess was going to be my follow-up.

If there was any pause in that strategy even upon a shorter term basis just given that we’re kind of sitting at -- hopefully sitting on a low point for the market, there might be opportunity to kind of capture some upside as that market recovers.

And I guess the question is, are you continuing to have that preference in terms of striking a balance between price and utilization? It sounds like it's more utilization but I don't want to put words in your mouth?.

Well, it's always a balance, but I think we're striving for more activity at the appropriate level of pricing. So that's what we're focused on. .

Okay. The next we'll go to Ken Sill with SunTrust Robinson Humphrey. .

I wanted to beat on that horse a little bit more. So we had Schlumberger and Halliburton both at least paying lip service to the idea that they're not interested in chasing pricing down, they'd rather stack equipment and then work at lower rates.

You guys have said that before, I mean part of last year you guys were “Look we're not going to work our equipment at too low a return; we’re willing to walk away.” So given their commentary and kind of your history, how do you kind of expect pricing to layout here in the next few months and then do you think it can bottom in Q1 or Q2 here?.

This is Ben. Well, I'm hopeful and that's the better, that's not a -- we are hopefully at a low point. And again for us though, if you look at our margins, our margins are among the best of our peers. So we have some opportunity if you talk about price on a per unit of work, we have the ability to lower that price if we get the right amount of volume.

So we're willing to accept lower margins with the right amount of increased volume. So again that's what we're trying to strike, that's what we're trying to achieve, and we believe with the right balance we can improve our results. .

Okay. And then just kind of a housekeeping question if you guys can do the breakout of revenues like you’ve done in the past in Technical Services and Support Services? And I'll turn it over to somebody else to ask questions. .

Sure, Ken, absolutely. So the numbers I'm about to give are our service line revenues as a percentage of consolidated RPC revenues for the fourth quarter. So it's the quarter not the year.

The pressure pumping was 48.7% of revenues, thru tubing solutions was 29.3% of revenues, coiled tubing was 5.6% of revenues, rental tools was 3.8% of revenues and nitrogen was 3.5% of revenues. .

And next we'll go to John Daniel with Simmons. .

Jim, I guess first question when you look at the total frac horsepower 1,050,000, how would you characterize the effect of marketed capacity?.

We have 16 fleets manned now. .

16. Okay.

And where did that trough in Q4, or is that the trough right now?.

That would be the trough. .

Okay.

The two fleets which you're ordering, is there anything different in the design of those fleets relative to what you’ve brought recently?.

We’ve got -- they’re heavy duty..

Yes, heavy duty. .

Maybe slight differences but nothing significant. The last group that we ordered were much higher capacity and ability to work more intensely and these are the same or maybe even a little more so, little beefier. .

Okay. So in theory, more efficient. .

Yes..

Jim, I’m just trying dial into Q1 here and sorry to be the ball and chain on this call.

But if pricing is going to decline faster or more than in Q4 and that you’re presently at the trough in terms of fleets, it would seem that the revenue compression in Q1 relative to Q4 could be mid teens again, is that a fair assessment? And also the press release talked about white space or the lack of work starting off the quarter..

Well that is a view John. .

It’s a reasonable view. .

And it’s a reasonable view. On the other side, we are working right now to test the market and see how much higher utilization we can get at acceptable margins. And assuming that bears fruit, we -- revenues could be higher in first quarter than that you’ve just articulated. Also oils in the low 50s, starting the upper 40.

We don’t have holidays thus far and no weather issues. So those things, while not huge, could drive revenue higher in first quarter than fourth quarter was. And I wish we had a better -- I wish we had a more certain view of what first quarter looks like. .

I wish I did too.

But I guess when you look at 16 manned fleets right now, and as you look out on a calendar I mean we’re at the end of January, do you see 17 manned fleets in February, right? I mean do you have anything concrete that would say your fleet count is going to rise?.

I personally do not know of that right now. .

There is lot of opportunity to increase the utilization of our existing fleets..

That’s right. .

What I guess I’m trying to get to is, do you feel like at this point Q1 is the bottom in terms of utilization and pricing? Who the hell knows, right? But I think just based off of -- I mean we had some rebound in oil prices slightly but still not great. .

Well, there’s potential that Q4 could be the bottom. .

Yes. .

Huge seasonal impact for us, more so than it appears, more so than many of our peers. So hopefully, there is the normal but somewhat of a bounce back. We don’t have seasonal track. .

The way you kind of characterized the commentary about pricing is likely to accelerate in Q1 on the downside and there is no guarantee that you necessarily pick up more work right? If you could lower your price and not have any more work. If that scenario plays out, you’re lower. .

Yes but I don’t see us lowering, I mean -- John who knows, it's not like we’re asleep at the helm here. .

I’m just trying to make sure I’m not going too crazy here, okay. Well congratulations on the new fleets, there will be I am sure welcome addition and that’s really all I got. .

And next we'll go to Stephen Gengaro with Stifel..

Two quick things. The first is when you looked at the 4Q versus 3Q, I imagine you referenced that the biggest drop off was pressure pumping.

How is pricing holding up in the other product lines in 4Q and into 1Q?.

Actually pretty well. I would say flat probably. We've seen some recent firmness in pricing and in many of our other service lines and not seeing any pressure -- significant pressure at this point in time..

Okay.

And here we can obviously do the math, so the drop off in profitability was largely just decrementals on the pressure pumping side?.

That's correct..

Good.

And then just the second question as you look out to 2019, I know it's tough right now, but when you think about the Technical Services margin trajectory, I mean it sounds like 1Q is clearly lower but do you think that's a bottom, is it hard to tell, do you want to make a guess at this point?.

Stephen, tell us the price of oil in April and we'll answer that question..

Okay. I just figure it out. That's helpful. Thanks for the color and I'll get back in line..

And next we'll go to Connor Lynagh with Morgan Stanley..

Just wondering if I could build up off of what John was sort of getting at here. So I understand that your active horsepower in terms of what's actually working versus sitting on the fence will probably be lower in the first quarter based on what you're saying and I guess correct me if that's wrong.

But can you give us some color for how utilized what you had working in the fourth quarter was? I mean obviously all we sort of get to see is the aggregate numbers. I'm trying to get a feel for sort of true utilization from one quarter to next relative to what you're saying might require some pricing to improve that number.

Any color you could give there would be helpful?.

Pricing didn’t change much.

So utilization falls off, right?.

Yes, so you could talk to utilization, there were a few other things Connor. We pumped more in basin sands in the fourth quarter than we did the third quarter and that has a negative impact on revenue. We all sort of know how that runs through the P&L. So that's part of it too.

But Ben's right, I mean utilization declined from third quarter to fourth quarter. I think in the earlier part of your question you mentioned something about lower utilization in first quarter than fourth quarter, we actually -- that would not be our view right now. And crews are relatively fungible resource.

We mentioned we have 16 fleets manned but we can move crews around and work more if we need to, plus many of our peers have had some layoffs so we can get that skilled labor if we need to. So remember we do try to have as flexible and operational model as possible..

That's fair, I mean I think what I was trying to get at here is, it seems like you have a -- you were saying that the trough in fourth quarter activity is where you are today, in other words your exit rate was lower than your average, right.

Is that correct?.

Well, that is right, but the exit rate was the last week in December which was very low. So yes, the exit rate was lower than the average. And we see some pickup in the first quarter. The big variable is how does the pricing utilization balance work as we seek that. That's our major uncertainty right now. .

Right, understood. Maybe a higher level one. So I mean there is obviously a lot of concern in the market around if the pressure pumping market will balance and certainly it seems that you guys are strongly of the view that it will if you're adding capacity.

So just sort of how you’re seeing industry supply demand, how oversupplied are we when …?.

That's a fair question and characterization. But our view that -- again we don't seek to -- it's not our strategy to increase market share but there is lots of opportunity out there for us given the level that we're beginning the year at, how first quarter will turn out.

But we should have all things being equal lots of opportunity in the next couple of quarters to improve our results. .

Next we'll go to George O’Leary with Tudor, Pickering, Holt & Company. .

Take a little bit of a different tact and not kind of talk about trying to guesstimate when the bottom might be. But just -- could you just remind us, historically, I believe you guys have been a little bit more skewed as a percentage of your customer base towards the privates.

As a percentage of rig count plus or minus 40% of the rig count is private E&P.

So can you just remind us where you sit today or where you sat in the fourth quarter from a private versus public customer perspective?.

I don’t know that have that readily available at our fingertips here. It didn’t change significantly. And I think it -- what -- and that's illustrated I think in our results. So I think the privates as it turns out.

I mean we’ve seen it how the last couple of years are more likely to and more significantly reduced their activity levels around the holidays. And we've experienced that here now two years in a row.

And it just highlights the fact that we need to if you will diversify, we need to spread that out and find that right balance that we talked about between activity and pricing. And we're working on that. .

And then the follow up is, for us, as we kind of pull the audience and talk direct to private players and sponsors and things of that nature, it feels like they're going to behave somewhat like mid-cap E&P space which is likely to cut more than the large caps and the IOCs.

And I think we could potentially -- we estimate that the D&C spend year-over-year could be down something like 15% for those folks.

This is anxiety of express with regards to 2019, customer budgets, is that part and parcel of that or are you particularly worried about those private and then what's the strategy for roping in more larger public E&P customers?.

Yes, George. It's great question. We're formulating that strategy now. We're also mindful of the fact that there appears to be some consolidation in the E&P space certainly of the smaller side.

And we can be a winner or loser in those scenarios, we’ve been neither as of yet but hadn’t impacted us but we certainly want to be there when potential business combination happens.

And we are looking at ways to approach customers who have -- let’s define it this way, who have more line of sight well lined out logistics and other processes who can not only say that they’re going to have a workforce but in fact actually do have a lot of workforce.

Let’s not forget that job delays and operational inefficiencies have played with everybody all year long. So sometimes the right customer may or may not have a New York Stock Exchange ticker, but may in fact have really good logistical processes. So we look at that as well..

Next we will go to Blake Gendron with Wolfe Research. .

So first we’ve heard several large purveyors of horsepower both public and private potentially chopping there capacity around. This might be preemptive just given that your utilization and your existing spreads can improve but maybe this is a back half of 2019 question.

If you have seen these potential deals, is it viable horsepower such that it’s plug-and-play or is there additional capital that potentially need to be put into it? And then secondly, what kind of price would RPC need to see in order to pull the trigger on some of this organic growth?.

Blake, hey, it’s Jim. Can’t speak to whether we have or have not seen any deals, so I’d just have to speak from a 30,000 foot level.

More and more as your fleets get bigger and reliability gets more and more important, you need uniformity and consistency in your fleet configurations and we know that anecdotally from some of our friends who are maybe bigger companies than ours who have that issue.

So then there's also the issue of you can't tell how well maintained equipment has been. And then coming back to our return on invested capital metric, we’ve traditionally done better with organic growth rather than through acquisitions and paying a premium for intangible assets. We’re going to turn the value.

So I don't see us doing anything like that in 2019, even if the environment improves tremendously or significantly which lot of people do believe, we are more in the mood of buying good new equipment that we can spec out ourselves, and operate in these high service intensity environment.

So we’re probably not someone who has good amount of insight for you on that. .

Okay, understood. That’s helpful.

And then my follow-up just for you backing off of those some of the other commentary around, PerPetro seems to be departing from the month-to-month or quarter-to-quarter business model, are there other opportunities to lock in several year term, or is the receptivity among your customer such that they want to stay fairly nimble? And then you as you think about the strategy and maybe how you approach potential dedicated customer arrangements in 2019 and 2020, would you be willing to take a price cut and go lock in I guess incremental visibility like PerPetro has?.

This is Ben. Is it a price cut? I mean we would love to have more of the results and the volume of work and the revenues over a period of time and no doubt to qualify for significantly more utilization, we would have to cut the per unit price. So it's sort of a dynamic formula if you will, but again, this is responsive.

We know we will have to cut the price to get the kind of volume we're looking for. But at the end of the day it's a cash flow relative to your capital invested evaluation and we think there are opportunities to improve that metric from -- relative to our recent performance.

So that's something we are looking at, again trying to strike that balance -- try to balance between the volume of work and the pricing and no doubt to get much higher volumes we would have to reduce pricing but our returns would -- we would expect that our returns would improve..

Okay, understood, just to rephrase I guess on the receptivity part of the question.

Are your customers approaching you with similar thoughts on this type of arrangement or is it still fairly early days I guess in terms of germinating the idea with E&Ps?.

Regarding multiyear arrangements we are not having those kind of discussions right now. Our customers don't have that kind of visibility. The idea of closer alliances is a good topic, it's a very valid topic to discuss. It is too early for us right now to offer a view or to offer a forecast based on really close customer alliances..

And based on our historical experience I think I would doubt our customers would want to and neither would we. I mean given the volatility in the industry to commit multiyear commitments of pricing, we all recognize -- again there is a lot of volatility in the industry and a lot of variables there.

So it's -- the timeframe that you usually are talking about in terms of making those arrangements, obviously it's much shorter than multiyear. It's always subject to change.

I mean we know historically you can have a great relationship with a customer and if price of oil falls precipitously, they're probably going to be asking for some additional help all things being equal. So I think today is at a relatively low level so there's not a whole lot of gears available.

But where that happens, the customer is going to have options and I’d say options about where we can go with our equipment. So those multiyear commitments probably won't happen..

And next we'll take a question from Chuck Minervino with Susquehanna..

Just wanted to touch on the CapEx, just a little bit more. If I heard you correctly I think like 60-40 split there maintenance and growth, seems to imply that the maintenance kind of still is a fairly high level relative to revenue kind of expectations for '19.

You've seen years here where you've taken the CapEx way lower, was just curious the thought process there. I mean if things kind of stay at these levels, do you anticipate that CapEx kind of staying where it is or can you flex that down even further.

Just kind of wanted to hear what the baseline view there was?.

Chuck, this is Jim. Maintenance capital expenditures are concentrated in pressure pumping, no surprise there, and are really the function of utilization. So a general rule is that if utilization in pressure pumping equipment is lower, however, one wishes to define that, maintenance capital financials will be lower as well.

So in a scenario that we are not looking forward, but a scenario in which we have low utilization in 2019, our maintenance capital expenditures would be lower than what Ben has quoted. .

Also I'd like to point out and this scenario is a couple of quarters old, but if I may refresh everybody’s memory. The new equipment that we purchased and took delivery off over the past year or so is better. It has more continuous to the component. And our capitalized maintenance per fleet is lower than it was a year ago.

So that is another indicator of that maintenance CapEx is under control and again is also a function of utilization. So that's kind of best answer I think we would have for you. .

And then just I know you guys have made a comment a little bit earlier that you are kind of testing the market here. You want to see if you can get that work at acceptable margin. And I would guess I was just curious bigger picture, are the customers approaching contracts any different? It seems like in every cycle, there is a different approach.

Are you seeing customers approach contracts differently as we kind of enter 2019 whether it would be, are they looking to stay more spot, are they looking to go more dedicated and take advantage of the lower pricing, pricing that you're not willing to concede at this point.

I was just kind of curious if there was any thoughts on that or things that you can kind of relate to us?.

It's too early in the year to see any discernable differences between customers' agreement behavior now compared to 2018. They certainly are aware of the oversupply of the market, which in large part is due to our increased efficiencies and our ability to work 24 hours a day with better equipment. And that has benefited them.

So they aren't yet going out for long terms, because they think pricing is bottomed. But who knows, again it’s still early in the year. .

And then a last one. I mean you have 16 fleets now, it sounds like manned.

If things kind of stay at this level of demand, just kind of curious do you stay at like what you see today? Do you stay at those 16 fleets manned or would you kind of look to stack more equipment and kind of drive up to utilization of the manned fleets?.

This is Ben. I think we're going to have some patience here to see what we can generate in terms of additional volumes and then we'll be constantly revaluating. But at this point, there is no active plans to tremendously increase or to decrease the fleet. I mean we're okay with that level today but we'll continue to revisit it. .

Next we'll go to Mike Urban with Seaport Global Securities. .

I just had a couple of housekeeping questions. I believe you had ordered some coil and something units that were supposed to startup kind of early part of this year.

How many of those did you have and are those indeed rolling out here in the first quarter or just kind of the rollout schedule for the equipment?.

Mike, it’s Jim. Still looking when they come in, it will be probably towards the end of the first half of the year. .

So it’s more a midyear kind of timeframe.

And then I guess similar question on the new frac need to get shifted on the midyear delivery, that somewhat kind market dependent at this point or do you have a clearer sense of when we might expect to see that deployed?.

We are still working on the spec to some of the components, we are wanting to make sure we get the right components as you know there is a lot of different interchangeable things. We want to get the right components and frankly working on pricing too.

So we don't have a hard date for delivery and putting in service of that new pressure pumping equipment. Let's say end of the first half of the year just for -- just to put a date on it..

And last one from me.

Did you have if you could the revenue from snubbing and fluid pumping?.

Yes. Those are -- fluid pumping is actually a bit bigger than snubbing but they are both fairly small so we haven’t disclosed those two recently. They are each under 2%..

And next we will go to Brad Handler with Jefferies..

Can’t help to come back around I guess at this point in the call certainly to a few questions, but are you ordering -- just on the CapEx side first, are you wondering any other new equipment? I think you -- we had discussed the new coiled units as part of 2018’s capital budget but are you -- is anything else that's on order that would add to your capabilities?.

Nothing of significance. .

We told you about our pressure pumping, coil and snubbing, so that’s it. .

But that the coil and snubbing are they actually following into, may be I shouldn’t say -- I should ask as opposed to just talking, are they falling into you 2019 CapEx, the coil and snubbing unit?.

Yes, they are. Yes, that’s a clarification that we probably should have given, yes. .

And I’m sorry, how many? May be now I am really trying to get this, how many coil units are you adding?.

It looks at this point like four of the large diameter coiled tubing units Brad..

And there are some investments we’re trying to increase the capacity of another four or so units as well..

Then I get back to on the pumping side.

In 4Q there's a spectrum of what happened in December, from a few customers drop like shutting down and doing very, very little work to many customers just dropping a little bit of work, where did December fall out on your -- on that spectrum for you?.

It was probably a smaller number of larger customers Brad, that’s just a qualitative judgment call on my part. .

Customers dropping more significantly, and certainly …?.

Yes. .

Are they the same customers that are stutter stepping with you now and are trying to figure out kind how they approach 2019 or is that a broader set?.

It seems fairly random Brad, in other words people who really shut down in December may or may not be figuring out what they're doing in 2019. So we know that a lot of people have not gotten their budgets yet and again to your comment, October, November and December were bad time for oil prices to fall just because that's budget season.

So we believe that our customers had not yet set their budgets and made firm plans other than things that, there are exceptions to that, things that we don’t know..

And next we'll go to Marc Bianchi with Cowen..

Hey thanks, just wanted to clarify a comment Jim I think you made saying that these extra pressure pumping fleets are coming in next year.

I just want to clarify that's 2019 and not 2020?.

That’s right, mid 2019..

Sorry, we know this is 2019 but it's a 2018 earnings call, thank you, Marc..

In terms of the activity on the ground, I know there's a lot of uncertainty for first quarter but what have you seen so far in January, is it pretty kind of flat with where the exit was in December it sort of sounds that way if you really haven't seen what testing the market will do for your activity?.

We have, as we traditionally do after a seasonal slowdown we do have January is better, early January is better than the exit in late December..

And then the only other one I had was on the 16 fleets.

Could you talk about geographically how they're positioned and then more broadly for RPC overall where the geographic exposure is in the fourth quarter?.

Marc, sure I mean in very broad brush terms you know the center of gravity of RPC is the Permian Basin, a little less than half of our pressure pumping equipment assets are in the Permian.

Then you go sort of low teens exposure in the Eagle Ford, East Texas which is Kilgore as well as the other work that's going that there, the MidContinent and then the Bakken is probably 8 or 9%. We did during 2018 move equipment around to help out and try to be flexible.

We didn't take any out of the Permian, the anticipated take away capacity issue did not hit us in a way that's transparent to us, so everything stayed there. We moved other fleets around and people and they're going back home too. So that's pretty much the geographic distribution in fourth quarter and today as we start 2019.

We don't do pressure pumping in the Marcellus Shale or the Utica but many of our other service lines including coiled tubing and our downhaul tools and motors service lines thru tubing solutions function -- operate in that area as well..

[Operator Instructions] We'll take our next question from Ken Sill with SunTrust Robinson Humphrey. .

I just wanted to ask, flat out.

What was the average number of active fleets in Q4 you started 20 and there were 16 was it 18, 17?.

It's a valid question.

It wasn't 16 it was probably -- Ken it’s hard to look, call it 17 or 18, split of 18?.

And then before you guys have talked about, how many fleets are 24 hour versus doing vertical work.

And you still have a few fleets on straight days?.

Yes, sure. 24 hour work was 90% of our activity in the fourth quarter compared to 94% of activity in the third quarter. .

And we'll move for our next question John Daniel with Simmons. .

Jim, this is -- I am almost embarrassed to ask this questions but a point of clarification for me.

When we are going back and forth talking about whether Q4 or Q1 could mark the bottom, were you guys referring to revenue or EBITDA?.

We’re referring to revenue. John, you're smart. We're referring revenue. And think back on the context of our dialogue. A lot of what we were talking about related to finding that balance between pricing and utilization. And so that would imply certainly lower margins if we increase our utilization and lower pricing.

But the discussion that we were having was definitely one related to revenue..

I'm not as smart as my peers. And I'm still getting confused looking at my model here. But if we get on .... .

People don’t say that about as far as you know so. .

So the revenues are up slightly. It seems like EBITDA could be down. You’ve reset your accruals, payroll taxes all of that stuff.

I mean am I missing anything there?.

It is not outside the realm of possibility. .

That is correct. .

And I'm showing we have no further questions in the queue. I like to turn the call back over to Jim Landers for any additional comments or closing remarks. .

Okay, thank you. We thank everybody for listening in and spending this hour with us. We hope everyone has a good day. And we will see you soon. Thank you. .

A replay will be available at www.rpc.net within two hours following the completion of today's call. We thank you for your participation. You may now disconnect..