RPC Inc (RES) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the RPC second quarter earnings conference call. As a reminder, today's conference is being recorded. Now I would like to turn the conference over to your host, Mr. Jim Landers. Please go ahead, sir.

Thank you, Catherine and good morning. Before we begin our call today, I want to remind you that in order to talk about our Company, we are going to mention 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 would like to refer you to our press release issued today, along with our 2011 10-K and other public filings that outline those risks. All of which can be found on RPC's website at www.rpc.net.

I also need to tell you that in today's earnings release and conference call we will be referring to EBITDA which is a non-GAAP measure of operating performance. 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 are also required to use EBITDA to report compliance with financial covenants under our revolving credit facility. Our press release today and our website provide a reconciliation of EBITDA to net income, which is the nearest GAAP financial measure.

Please review that disclosure if you are interested in seeing how we calculate it. If you have not received our press release for any reason, please visit our website to obtain 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 second quarter of 2012. Following my comments, Ben Palmer will discuss our financial results in more detail.

During the second quarter, we continued our strong operational execution in a difficult operating environment. While we are pleased with our quarterly results, low natural gas prices and the resulting decline in natural gas drilling activity continue to impact RPC's activity levels and pricing. We relocated some equipment from dry gas basins with declining prospects to areas with stronger fundamentals and anticipate that the last fleet of pressure pumping equipment that we received this year will work in the upcoming quarter. Our CFO Ben Palmer will now review our financial results for the second quarter.

Thanks, Rick. For the quarter ended June 30, 2012, revenues increased to $500.1 million, a 12.9% increase compared to the prior year.

These higher revenues resulted primarily from a larger fleet of equipment. EBITDA for the second quarter increased 5.3% to $172.9 million compared to $164.2 million for the same period last year.

An operating profit for the quarter was $119.9 million, essentially unchanged compared to the prior year. Our diluted earnings per share during the quarter were $0.33, also virtually the same compared to last year.

Cost of revenues increased from $243 million in the prior year to $281.3 million in the current yeardue to the variable nature of these expenses. Cost of revenues for the second quarter as a percentage of revenues increased from 54.8% in the prior year to 56.2%, due primarily to an increasingly competitive pricing environment and inefficiencies associated with equipment relocations.

These increases were partially offset by favorable variances in the cost of materials and supplies used in providing our services due to job mix and better logistical management compared to this time last year. Selling general and administrative expenses during the quarter were $43.1 millionan increase of 19.9% compared to $36 million in the prior year, due to higher headcount to support higher activity levels and new operational locations.

SG&A costs as a percentage of revenues increased slightly from 8.1% last year to 8.6% this year. Depreciation and amortization were $54 million for the second quarter, an increase of 20.2% compared to $44.9 millionin the prior year.

This increase is a result of additional equipment placed in service over the past 12 months. Our technical services segment revenues increased 13.5%, operating profits for this segment increased $112.4 million compared to $109.5 millionin the prior year. The improvement in revenue and operating profit was due to higher revenues from the larger fleet of revenue producing equipment, and our pressure pumping and coil tubing service line, as well as more equipment and higher activity levels in our downhole tools business. These improvements were partially offset by lower pricing in most of our service lines within this segment.

Revenues in our support services segment increased by 6%, due primarily to increased activity levels in most of the service lines in this segment, except for our rental tools business. This segment generated an operating profit of $12.5 million compared to $13.2 million last year. This decrease was primarily due to lower utilization in our rental tools service line, the largest service line in this segment.

On a sequential basis, RPC's consolidated revenues decreased from $502.6 million in the first quarter of 2012 to $500.1 million, a decrease of less than 1%. Despite higher utilization in our pressure-pumping service line, revenues decreased from lower pricing and utilization in many of our other service lines.

Cost of revenues increased from $273.8 millionin the first quarter to $281.3 million. Cost of revenues as a percentage of revenues increased 170 basis points from 54.5% in the first quarter of 2012 to 56.2% in the second quarter. This was due to lower pricing, coupled with higher maintenance costs.

SG&A expenses as a percentage of revenues decreased slightly from 8.9% to 8.6%. RPC's sequential EBITDA decreased 5.7% from $183.3 million in the first quarter to $172.9 million in the second quarter, and our EBITDA margin decreased by 190 basis points from 36.5% to 34.6%.

Our technical services segment revenues generated revenues of $461.6 million, unchanged from the prior quarter, and an operating profit of $112.4 million compared to $123.5 million in the prior quarter.

Our operating margin in this segment declined 250 basis points from 26.8% of revenues in the first quarter to 24.3% in the current quarter.

Generally speaking, all of our service lines within this segment experienced lower pricing and utilization. However, pressure pumping did experience higher activity levels as we successfully improved the utilization of our fleet in select markets. Revenue in our support services segment declined 6.3% due to lower activity and pricing in our rental tools business.

Support services operating profit declined to $12.5 millionin the second quarter of 2012 compared to $14 million in the first quarter. Our operating margin in this segment declined 150 basis points from 34.1% of revenues to 32.6% due to lower utilization of our rental tools.

RPC's pressure pumping fleet during the quarter remained unchanged at 683,000 hydraulic horse power. We currently have no additional pressure-pumping horse power on order, although some ancillary equipment is expected to be delivered prior to year end. Second quarter, 2012 capital expenditures were $83 million.

We forecast capital expenditures to be approximately $350 million for the full year of 2012. A majority of the remaining 2012 capital expenditures will be related to maintaining our existing fleet of equipment.

RPC's outstanding debt under its credit facility at the end of the second quarter was $162 million. The balance declined by $18.8 million compared to the end often first quarter, and our ratio of debt to total capitalization is 15.9%, which is the lowest percentage in the last six years. With that, I will turn it back over to Rick for a few closing remarks.

Thanks, Ben. As we begin the third quarter, RPC finds itself in an increasingly dynamic operating environment.

Overall industry activity levels are close to recent cyclical highs, but the national gas directed rig count is at its lowest level in over a decade. In contrast, oil direct drilling has increased tremendously over the past few years. These high activity levels have also increased our need to ensure adequate supplies, raw materials, and to manage the logistical requirements needed to transport them to sometimes remote job locations. In this environment we have found it valuable to have operations in many domestic markets in order to move equipment and personnel from areas of lower activity to areas with stronger fundamentals. We have also benefited from our efforts to secure raw materials that are an increasingly critical component of our work.

We are pleased with our second quarter results, but are closely monitoring commodity prices and rig counts, competitive pressures, and customer activity levels for sign of a deeper cyclical downturn. As always, we will maintain a conservative capital structure and realistic view of our operating environment. We would like to thank you for joining us for the call this morning, and at this time, we will open the lines up to answer your questions.

Thank you. (Operator Instructions). We will take our first question from Neal Dingmann with SunTrust.

Good morning, gentlemen. Question, Rick, for you or Ben, just one. Rick you touched on this at the end, on raw materials. Going forward, are you still having difficulty procuring guar and such other raw materials, and if so, are you locking in anything like some of your peers had, or is it starting to ease a little bit?

This is Ben. Relative to guar it had for us very little impact on the current quarter due to arrangements that we have made beginning a year or more ago. We do not expect it is going to impact us in the next few quarters either. We are in pretty good shape there. It did not impact our quarter sequentially or year-over-year. Otherwise, We have read, heard and believed that maybe overall for the industry, guar availability and prices will probably be better beginning later this year and early next year.

Ben, what about just sand in general then?

Sand is probably a little bit better than it has been. No particular issue there. I think things have freed up a little bit on that store.

Okay, just wanted two more if I could. You have gotten hit the last quarter or two just like others, on the equipment transition or reallocation. Where do you sit now as most of the equipment now in the locations where you would like, or is there still transitions according to this third quarter, and will that happen in the fourth quarter?

Neal, something we constantly look at and monitor, but at this point, we are happy with where it is, but we will watch it and move some additional equipment if we feel we need to or have an opportunity, but right now we are comfortable with where it is.

Okay. Last one, if I could, just on contracts. You mentioned quite a few times in your release about pricing. Obviously, a little bit under pressure for various reasons. Just wanted to know on your contracts that you see out there. Is everything still more or less on a spot basis, or are you able to lock some customers in, the Perm and some of your core areas a bit longer on some sort of arrangements?

Currently, no as it relates to contracts. Very few people are interested in talking about contracts at this point. That is fine for us, too, at this point. We will let the current ones roll off, and we will continue to talk about it and more monitor. But, no, there is not a lot of talk about trying to contract out long term at this point.

Okay, Ben, thanks for the color.

Thank you, and we will take our next question from Andrea Sharkey with Gabelli & Company.

Hi, good morning. Good morning. Hey,

Good morning.

Hey, Andrea.

One thing that was a little bit surprised about in your press release is that you mentioned that there was pricing pressure across other product lines in addition to pressure pumping, which some of the larger service companies have said that their pricing other products, X pressure pumping were hold up. I was wondering if you could maybe give a little bit more color on where you are seeing pricing pressure, whether it is coil tubing, rental tools, things like that? Are you guys maybe take little bit lower price to keep equipment working, and what is going on there?

Andrea, hi, this is Jim. Yes, in addition to pressure pumping, we see downward pricing pressure in the coil tubing service line and rental tools, I think most notably. We talked a lot about coil tubing and what a strong service line is in these directional and horizontal completion activities, but the supply of coil tubing units has increased and the rig count is somewhat flat. So that explains that. Then rental tools, there has been pricing pressure, particularly from our larger competitors who have been more aggressive in pricing. So that has happened as well.

The fact that a lot of the rental tools are moving around has impacted us. I would expect others as well, but that has impacted us, too. Interestingly enough, some of our smaller service lines have hung in very well and pricing is hanging in, and they have performed very well.

Unfortunately in the current quarter and current environment they are not a significant portion of our revenues and profits, but they certainly helped and contributed, and maybe it is some indication of the potential of the overall industry. Some of these service lines that have been directed toward the shale plays and the horizontal plays and they are much more subjected to some of these equipment relocations. So that certainly makes it a little more difficult to - - or makes pricing be much more competitive with all of that movement. It is good news on some of our other service lines are doing very, very well, and we are pleased about that.

Okay, great. Then maybe just sticking with pricing a little bit. Other commentary has been that there is at least been some stabilization in pricing in the natural gas basins for pressure pumping, but now the declines are hitting the liquids regions, particularly the Eagle Ford. I was curious if you could comment on that. If that is what you are seeing as well, and if the declines in the liquid pricing are now similar to the natural gas, which was in the 15% to 20% price decline range?

Andrea, this is Jim again. The comment - - we probably agree with the comment that the rate of decline for pricing declines in the dry gas regions is declining. In other words, pricing may be bottoming there as equipment has moved out, that sort of thing. Kind of harder for us to comment on South Texas because we have been on a contract there and just moved some equipment there. So it is really hard. It is hard for us to have a good pricing trend that we could report to you regarding South Texas.

I would agree with that. Still very dynamic.

Okay, that is fair. One last question, then I will turn it back. I know you guys had recently entered the Bakken pressure pumping market. I was curious if you could talk about how that played out? Did it perform the way you expected it to? Were there start-up issues or things that were different or were better than you expected or worse than you expected?

Andrea, this is Rick. We have just recently been able to work up there in pressure pumping and have not yet started to work. We have some jobs that are scheduled. So as I said in the previous comments, all that equipment will get to work in the third quarter.

Okay, great, thanks so much.

Thank you. (Operator Instructions). We will go on to John Daniel with Simmons and Company.

Hi, guys, good quarter.

Thank you.

Thanks, John.

A couple thoughts. The press release where you noted that the frac course star stayed the same at 683, and then the release talks about preparing the final fleet for deployment this quarter. You coupled that with some of the equipment relocations you had in Q2. Do you see this incremental equipment, if you will, helping generate higher revenue quarter-over-quarter, or does the pricing pressures more than offset that in Q3?

60,000-dollar question.

The incremental equipment, John?

Yes. You talked about the equipment that has been relocated, so presumably operational inefficiencies, loss of revenue, coupled with this final frac fleet getting ready to be deployed.

John, it is kind of hard to know the offsets. As Rick just mentioned to another caller, we have not gone to work yet in the Bakken. We are getting ready to. It would be fairly intuitive that equipment that has just arrived in West Texas will be working at lower pricing than the equipment that has been there for a number of years and is working in good customer relationships. So we are putting it all to our heads. It is a great question.

I am not sure that I know the answer.

It is. I would say that we do not see prices falling precipitously. In the fact that we did move equipment around this quarter. So we do expect that to begin working more this coming quarter than it did in the second quarter, and we do expect Bakken to come on board. With all that being said, we are -- hope it is not a strategy as Mr. Landers always says, but we are hoping with all of that we should have an increase in revenue.

Okay. Good. The prior question we talked about, the former caller talked about the pricing in the dry gas basin. We hear that from a lot of folks.

Can you say whether or not when you look at your pricing on the spot basis in the dry gas basin, are those crews operating at break even margins? In other words, has it leveled off because there isimply no more downside? You follow where I am going with this?

Our crews are working at positive profit margins. Cannot speak to some of the smaller competitor who maybe doing what they did last cycle, but our crews are working and are working profitably in the dry gas basins.

Fair enough. Just two more for me. On the margin front, Jim, can you say whether or not, characterize exit rate margins, June versus April, in terms of magnitude of change as you try to extrapolate into Q3?

You are asking about exit run rate margins versus full quarter margins. There are a few little wiggles that move around. I would say that they are fairly consistent. Margins did not decline in June compared to the other two months of the quarter.

Again, John, these are very reasonable questions, but again it is a very dynamic environment. The fact that we were able to get some equipment working in the second quarter that had not worked as much as we had hoped in the first quarter. So that is certainly a contributor. We have got pricing declines. We have got the Bakken coming on board. Very reasonable questions, but it is dynamic.

Jim's answer is right. It was fairly consistent during the quarter. Clearly, it was down, but June was decent.

Fair enough. Last one for me, then I will try back. I want to understand a bit more on the CapEx in the back half of the year. It looks like about $150 million or so to be spent in the second half, in which the vast majority sounds to be maintenance. Can you just help us just understand what that maintenance CapEx, where that is going? I presume it is going to towards your frac fleet.

Are you rebuilding the equipment? I know you don't have new growth equipment on order, but are you buying pumps to replace the pumps? Can you just walk us through how that money is being spent?

We have talked before about we have an active refurbishing program that we initiated it 12-18 months ago, but it is now underway. We do have some rotational pumps in place to be able to pull our older pumps out of service, send them in to be completely rebuilt.

Okay.

That will be 12 or more month process, but we are into that now. We will see that. That will impact what we are talking about CapEx maintenance CapEx in the later half of this year and even into next year.

Okay, thanks, guys. That is it for me. Good quarter.

Thank you.

Thank you. We will go on to Doug Garber with Dahlman Rose.

Good morning, guys.

Hey, Doug.

I wanted to first ask you about in the dynamic kind of frac market, contract renegotiations, and if your customers are either just doing the minimum in contracts or asking for lower pricing that may be longer terms? How is that conversation going with your customers, and have you had any contract renegotiations on the frac side?

More of what we have experienced with the timing of our contract is that we have had some roll-offs in the dry gas basins. So those customers were not interested in continuing. They moved on. Otherwise it is really pretty preliminary. As you can imagine, customers are asking for pricing concessions. They are certainly not in the mode of trying to allow us to negotiate prices upward. I would say with the timing of the our contract rollovers, honestly, it has not been a tremendous amount of discussion with them at this point.

That would be coming up probably much more next quarter. But we are prepping and expect it will be difficult. Where contracts are going to go, it is hard to know. Being able to put the contracts in place 18 months ago was a lot easier than it is today and that it will be in the next six months. There will be some form of a contract, but who knows exactly where that will end up.

Right now there is just a lot more - - customers are much more interested -- frankly, I may be okay with this, too. They are much more interested in having pricing agreements. There's some terms and conditions and things like that, but they are not as interested in minimums. At this point, if things were to turn by early next year, we may be better off just riding this out and seeing where we end up. We may be in a much better position six months from now.

Okay. A few of your peers have idled or parked equipment or talking about idling or parking equipment. Are you guys having any of those conversations internally, or some of your equipment in the gasy basins. Do you think there is a possibility thank you park any equipment in the next few quarters?

At this point, we do not see that at all.

Doug, we have moved equipment from lower activity levels to areas of more promise, and as you know from knowing us for a while, we have a history of maintaining our equipment and keeping it available to work. And we will work as long as the profit margins meet our criteria, and right now they do.

And previously I think you guys have given the break down of your fleet in terms of percent in gasy basins versus percent in kind of liquid and oily basins on a horse power basis. Is that something that you could give us a update on following a second quarter move?

Sure, Doug. It is migrating more towards oil and away from gas. Clearly, it is still slightly less than 50% gas. I am sorry, slightly less than 50% oil and slightly more than 50% gas.

Okay. And just, Jim, a quick housekeeping question. The corporate expenses were a bit lower in the second quarter. Anything going forward there for a run rate? How should we think about that line item?

We do not see any big change there. It might trend up slightly, but we are pretty set, we think. We are watching our discretionary spending very closely in this environment, and I do not expect it to increase at the same rate coming out of 2011 as it has in early 2012.

Thanks. Just real quick, last housekeeping one. You guys have given historically the percent pressure pumping and percent coil tubing, the revenue break up. Is that something you can share again?

Yes, sure, Doug, this is Jim. Pressure pumping was 53% of second quarter consolidated revenues. Coil tubing was 11% of second quarter consolidated revenues. Our downhole tools service line was 14% of consolidated second quarter revenues.

I will turn it back and let someone else get in the queue. Thanks, guys.

Thanks, Doug.

Thank you. We will now here from Luke Lemoine with Capital One.

Good morning.

Good morning.

Just on your crew mobilizations during the quarter. You moved a crew from the Marcellus to the Permian and one from the Hainesville to Eagle Ford. How long were these down? And when did they recommence operations?

Luke, when all is said and done, they were down for a good part of the quarter just in moving and getting back on somebody else's schedule. They have recommenced operations in the new locations.

Did they recommence in Q2 or was that a 3Q event?

End Q2.

Late Q2 it began to work.

It looks like most of the benefit from pumping posted about a $4 million increase there was due to the new equipment in 1Q and maybe some improvialization in some other place. Is that correct?

Yes.

Okay. And then just kind of looking ahead a little bit you have about 78,000 horse power in the Fayetteville that rolls off of contract at year-end. Where are you thinking about moving that at this point? It seems like the Permian might be a logical choice just due to the pump configurations.

Well, that particular area, Luke, kind of fits our definition of dynamic. It is hard to know. We have actually felt like we would be moving the equipment. We may also have an opportunity to stay in that basin. That is currently an open question for us.

Okay. Then could you remind me when those term contracts were signed? Were those two years ago or what was the time frame on those?

Actually, that one was- - we have been working there under some form of contract for six years. I guess the current one is probably coming up on three years old.

Okay. And then just on a Permian spot pricing. How did that trend in the quarter? From 1Q to 2Q maybe on average, or if you kind of have leading-edge pricing

Trended down and leading-edge pricing is down.

Like 5% to 10%? Something like that?

Actually, I think that is about right.

Okay. Great, that is it for me. Thanks.

Thanks, Luke.

Thank you. And we will now hear from John Lawrence with Tudor Pickering Holt.

Hey guys. Good morning. Congrats on a great quarter in a tough environment.

Thank you. Appreciate it.

Most of my questions have been asked. In this environment, you are still in cash build mode?How do you think about the back half of the year when you talk about stock buybacks, increased dividends, or cash build? Could you write those three?

Number one, we would pay down the debt, which is essentially cash build. Beyond that, well, that is number one is going to be pay down the debt. The others, that is ongoing discussion. So nothing active at this point.

It depends on price of the stock. It depends on how we see prospects for capital expenditures in 2013.

Too early to tell I guess for 2013 as far as CapEx numbers?

Yes.

Yes, think so.

Thanks a lot, guys.

Thanks, John.

Thank you.

Thank you. We will take our next question from Michael Marino with Stephens Incorporated.

Good morning.

Hey Michael.

Question on I guess sequentially you noted that Q2 you had some crews moving around, I guess the Bakken was not working, the Hainesville you were moving and the Marcellus, but revenues held relatively flat in pumping quarter on quarter. Where was the big utilization increase, or was it specific to one region, or was it just the oil basins in general?

It was actually, a little bit of it was in some gas plays and some of it was in more oily plays. I don't know if it is commentary on any particular region. It was just our success in working with particular customers and ceasing an opportunity is what happened.

When you say ceasing an opportunity, just kind of across the board or was there one specific?

Just meaning in those instances where we were able to get the fleet working where they had not been working as much as we had liked it. We had, whatever you want to call it, a relationship win. We were able to begin working actively with a couple of customers we had not been working with.

So market share gains, I guess?

You could say that, yes.

Okay, good.

I was going to clarify and say in some cases we even added crews to existing customers.

Okay. Thanks. Just to draw down a little bit on coil tubing, maybe kind of two-part question. One, how many units? Did you add any in the second quarter and how many adding for the remainder of the year?

Then, kind of the pricing dynamic that you are seeing there. What are the magnitude? What kind of declines are we talking about when you say pricing has weakened, and is it broad-based or is it specific to gas basins at this point?

Michael, this is Jim. On pricing, overall it seems to be declining perhaps, in the mid-single digit range sequentially. For what that is worth to you. We did add a few coil tubing units in the second quarter and we have a few more coming by the end of the year.

Has utilization held?

Yes, it has actually. It is down slightly, but that is not the story. The story is more pricing.

Great. Thanks.

Thank you.

Thank you.

Thank you. We will continue on with Ben [Swormly] with Morgan Stanley.

Hey, congratulations on the quarter.

Thanks, Ben.

I just wanted to dig in a little bit more on your contracted status. Could you just explain to us, sorry if I missed it, but what percent of your frac crews are contracted right now?

About a third.

How do you expect that to evolve over the next three to six months? I am trying to get at is sort of a timeline to when your crews roll into the spot market.

It is three to six months, Ben. It would probably be the same . Early 2013 it might be down or it might be the same.

So for the next two quarters more or less, the contracted status should resemble what we saw in the second quarter?

Yes, more or less, I believe that is correct.

You did mention that some dry gas contracts rolled off in the second quarter, and I was wondering was that closer to the beginning or the end of the quarter?

Beginning.

Okay. So it should look pretty similar, the 2Q's run rate. Trying to put everything together, it sounds like we have some equipment going to work in the Bakken. That should be a positive for revenue. Utilization sounds like it is more or less stabilized, and we are done with equipment moves. Margins did not really decline in June. So the read through from that would be kind of flattish margins going out a quarter or two. So it sounds like higher revenues, margins flat to maybe even up a little bit. It sounds like you expect earnings to trend flat or higher from here rather than taking another turndown. Is that a fair statement?

Ben, one thing you left out was pricing for pressure pumping. When we and our peers say things are uncertain, we are not kidding. It is hard to say what leading edge pricing is going do over the next quarter in the Permian. Oil prices have been down, now we are back up, but they have been down. There is a pricing differential between West Texas intermediate and what you sell for in the Permian. The price of natural gas is up a little bit and that's actually helping with some pockets of activity, but If there is a biased to pressure pumping pricing over the next quarter, I think that bias would be downward, albeit at a lower decline rate then we have seen in the past couple of quarters.

All right, perfect. That is all that I have. Thanks a bunch.

Okay, thanks, Ben.

Thank you. We will take a follow-up from John Daniel with Simmons and Company.

Hey, just two for me. Do you have any comment or guidance for G&A's depreciation for Q3?

I mentioned G&A that it may pick up a bit, but not materially.

Okay.

Depreciation will be up slightly as well, sequentially.

Okay. And then the last one for me. Just on raw materials, as prices for sand and guar go down. Do you guys put in a fixed mark-up or a percentage mark-up? In other words, as those come down and the third party costs goes down, your mark-up goes down, your profits in terms of total dollar profits. Do those start to go down as well just because of the decline in raw material and sand prices? Do you follow where I am going with this?

Yes, exactly. In general, that answer is yes. In the spot market, you can be helped or hurt by your ability to do some transactional pricing on availability of raw materials and what you are able to there. In general, if the price of raw materials goes down, your profit margin in general would stay the same, your dollars would decline.

Okay.

John, let me clarify. On the guar front, make sure we are clear. That did not have any meaningful impact to our results in the current quarter, and we do not see it materially changing our results in the coming quarters.

Okay. I just did not know if the idea of sand prices coming down, if that is going to have any type of material impact in terms of just - - margins do not change, but the actual EBITDA dollars go down.

No, I think that is-- I just want to point out that is an appropriate question. Probably guar and sand for everybody, but for us, the guar price changes will not impact us.

Okay.

The cost declines will not impact our results.

On the guar, right, but on sand?

Yes.

Okay. The margins stay the same because of the decline in sand prices, but we can assume there is a decline in the EBITDA dollars; is that fair, Jim?

Yes, that is fair.

Okay. All right, that i' s it for me, guys. Thanks again.

Thank you, John.

Thank you. (Operator Instructions). We will take a follow-up from Luke Lemoine. Please go ahead.

Jim, I guess you gave us the percentages on the coil tubing, 11% for the quarter. It looks like coil tube had about a $15 million hit on revenue or a 22% decline. Is that right?

You are talking sequentially?

Yes, sequentially.

No. It is a little bit less than that, Luke. Sequentially, more like $5.5 million decline.

Was it 14% in 1Q for coil tubing refs?

Let us see. We have gotten that question a few times. We have said something wrong, made a mistake on our last call. It was about 12% of Q1, and it was 11% of Q2.

Okay. That clears that up. Thank you.

Thank you.

Thank you. We will hear from Jeffrey Spittel with Global Hunter Securities.

Thanks, good morning, guys.

Good morning.

Couple of quick ones. Number one, coil tubing. Are you starting to get any push back from operators on paying for standby times at all?

That is a great question. We are actually not seeing the standby rate being the intervening time from the beginning and the ending of a completion decline. We are just seeing -- again, that is a good question. It is hard to really isolate exactly where declines are happening in pricing.

We have not heard out guys talk much about that. That may have not just come up, but that is clearly an ideal where somebody could attack pricing. We have not heard that to be the case yet.

Okay, that is good news. Finally on the M&A front. I would imagine that there is some packages, equipment sitting out there that are relatively new if not brand new. Are they enticing at all in terms of asking prices at this point where you feel like you could do something opportunistic or counter cyclical?

We are always looking for the opportunistic deals, I guess. We have not seen anything that was too compelling lately. If there is any comment worth giving you it is that you see a lot of things come to market and the sellers evaluation and expectations are probably higher than the market is willing to give right now, especially given the evaluations that public companies are trading for.

Sure.

Given our multiple EBITDA, it is hard for us to pay five or six times EBITDA to a seller.

Sure, understandable. Spectacular quarter, guys, thanks.

Thank you very much.

Thank you. And we have no additional questions. I will turn things back over to our speakers for any additional or closing remarks.

Thank you, Catherine. We appreciate everybody alling in to listen this morning, and we appreciate the questions, enjoyed the dialogue. Hope everybody has a good day and we will talk to you soon. Bye-bye.

Thank you. Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation.