Morningstar

Morningstar, Inc.

Equity Bottom-Up

We are reducing our fair value estimate for RPC to $11.25 from $13.50 owing to reduced expectations across the company's business lines. Our no-moat rating is unchanged
First, we are reducing our expectations for the pressure-pumping business, which is in the technical services segment and accounted for 55% of RPC's 2018 revenue. We now expect pressure pumping to generate $145 in annual operating income per fleet horsepower at midcycle (2023), down from $180 previously. For reference, we think…

RPC is among the highest-quality oilfield-services companies. During the cycle heights of 2010-14, the company bested nearly every peer in terms of ROIC, including SLB, HAL, and BHI. Although the downturn of 2015-16 put severe pressure on RPC’s profitability, particularly due to the company’s focus on pressure pumping, the weakest performing oilfield services sub-sector, RPC returned to strong economic profits in 2018 as activity recovered. However, investors should take care not to value RPC as…

RPC had a terrible first quarter, with revenue decreasing 11% sequentially and adjusted operating margin falling to negative 2% from 5% previously, the worst result since the fourth quarter of 2016. The bulk of the top-line decrease was accounted for by a 19% drop in pressure pumping revenue. Non-pressure pumping revenue was down just about 3%, in line with U.S. shale activity levels. RPC doesn't report bottom-line results by business line, but assuredly, most of the drop in operating income was…

<p>We're lowering our fair value estimate for U.S. land-focused service firm RPC to $13.50 from $14.50 previously. The lower fair value estimate is chiefly owing to a more negative near-term outlook, particularly for the company's pressure pumping business (which accounted for 55% of RPC's revenue in 2018). Our no-moat rating remains in place.</p>

United States

RPC, Inc. provides specialized oilfield services and equipment to independent and major oilfield companies.  The Company's services include snubbing services, coiled tubing services, pressure pumping services, marine services, firefighting and well control, and rental of drill pipe and other equipment.

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