RPC Inc (RES) 2012 Q4 法說會逐字稿

Good morning, and thank you for joining us for RPC, Inc.'s fourth-quarter and year end 2012 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 this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.

Thank you, Tom, 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 have to mention a few things that are not historical facts. Some 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 2011 10-K and other public filings that outline those risks, all of which can be found on our website at www.RPC.net.

Also, in today's earnings release and conference call, we'll 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 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 it's calculated.

If you have 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.

Thanks, Jim. This morning we issued our earnings press release for RPC's fourth quarter of 2012. Following my comments, Ben Palmer will discuss our financial results in more detail. During the fourth quarter, RPC continued to experience a challenging operating environment characterized by increasing competitive pressures and inefficiencies resulting from equipment relocations. Spot market pricing for all of our major service lines declined, and utilization in most service lines was lower as well.

Low natural gas prices, greater competition, and a lower rig count continue to put pressure on our revenues and operating margins. The decline in natural gas directed drilling, which remains near a 13-year low, continues to impact our business. The price of natural gas remained below our customers' required minimum prices in the more service-intensive natural gas spaces. At the end of the third quarter, we located several pressure pumping fleets from a dry gas basin in which a contractual relationship had ended to several areas with higher customer activity. We continue to benefit from our manager's ability to effectively make these types of adjustments in response to changing market conditions. Our CFO, Ben Palmer, will now review our financial results.

Thank you, Rick. For the quarter ended December 31, 2012, revenues decreased 2.7% to $469.9 million compared to $482.8 million in the prior year. These lower revenues resulted primarily from lower activity levels and increasingly competitive pricing in most of our service lines, partially offset by a larger fleet of revenue producing equipment. EBITDA for the fourth quarter decreased 15.2% to $145.6 million compared to $171.8 million for the same period last year. Operating profit for the quarter decreased 26.8% to $89.3 million compared to $122 million in the prior year.

Our diluted earnings per share for the quarter were $0.26, a 23.5% decrease compared to $0.34 in the prior year. Cost of revenues increased from $268.5 million in the fourth quarter of the prior year to $279.4 million in the fourth quarter of the current year. Cost of revenues for the fourth quarter as a percentage of revenues increased from 55.6% in the prior year to 59.5% due primarily to more service-intensive work performed and competitive pricing during the quarter compared to the prior year.

Selling, general, and administrative expenses during the quarter were $44.7 million, an increase of 6.2% compared to $42.1 million in the prior year. SG&A costs as percentage of revenues increased from 8.7% last year to 9.5% this year. This percentage increase was primarily due to the relatively fixed nature of these expenses. Appreciation and amortization were $55.3 million for the fourth quarter, an increase of 12.9% compared to $49 million in the prior year. This increase is a result of additional equipment placed in service during the past 12 months.

Our Technical Services segment revenues decreased 2.1%. Operating profit for this segment decreased to $85.6 million compared to $114 million in the prior year. The decrease in revenue and operating profit was primarily due to lower pricing for our services coupled with lower equipment utilization within this segment. Our fourth-quarter Support Services segment revenues decreased by 9.4% and operating profits decreased by 35.1% due primarily to the lower activity levels and pricing within the rental tool service line, the largest service line within this segment. On a sequential basis, RPC's fourth-quarter consolidated revenues decreased from $472.4 million in the third quarter to $469.9 million, a decrease of less than 1%.

Cost of revenues in the fourth quarter increased from $271.4 million to $279.4 million. Cost of revenues as a percentage of revenues increased to 210 basis points from 57.4% in the third quarter to 59.5% in the fourth quarter. This increase was primarily due to lower pricing for our services and more service-intensive work. SG&A expenses as percentage of revenues increased slightly from 9.1% to 9.5%. RPC's sequential EBITDA decreased 7.6% from $157.6 million in the third quarter to $145.6 million in the fourth quarter. And our EBITDA margin decreased 240 basis points from 33.4% to 31%.

Our Technical Services segment generated revenues of $434.8 million, slightly lower than prior quarter revenues of $436.1 million and an operating profit of $85.6 million compared to $98.7 million in the prior quarter. Our operating margin in this segment declined 290 basis points from 22.6% of revenues in the third quarter to 19.7% in the current quarter. Most of our service lines within this segment experienced lower pricing and utilization, although pressure pumping fleet relocation efforts led to slightly higher sequential revenues.

Revenues in our Support Services segment declined 3.3% due primarily to lower activity and pricing in our rental tools business. Support Services operating profit declined to $9.4 million in the fourth quarter compared to $10 million in the third quarter. Our operating margin in this segment declined 80 basis points from 27.5% of revenues in the third quarter to 26.7%. RPC's pressure pumping fleet during the quarter remained unchanged at 683,000 hydraulic horsepower. We currently have no additional pressure pumping horsepower on order although our pump refurbishment program will remain an ongoing initiative.

Fourth quarter of 2012 capital expenditures were $55 million and $329 million for the full year. Currently, we expect to spend approximately $300 million on capital expenditures in 2013. Of this amount, approximately 50% will be used to maintain our pressure pumping fleet and other operating and support equipment. Our growth capital expenditures for 2013 will depend upon identifying attractive opportunities and the ultimate timing of payments and equipment deliveries.

RPC's outstanding debt under its credit facility at the end of fourth quarter was $107 million. The balance increased by 23.3% compared to the end of the third quarter, and our ratio of debt to total capitalization is 10.6%. And with that, I'll turn it back to Rick for a few closing remarks.

Thank you, Ben. As evidence of RPC's commitment to its stockholders, we paid a special dividend in the fourth quarter of 2012. Despite this and other uses of cash, we maintain a conservative capital structure with the debt to total capitalization ratio that is near our historic low. Our long-term focus on generating shareholder returns continued this quarter with our Board of Directors voting yesterday to increase our quarterly dividend by 25% to $0.10 per share.

RPC's strategy is to be both geographically and product-line diverse. While this approach does not make us immune to systemic downturns, it allows us to better withstand adverse fluctuations in the marketplace. During 2012, the benefits of this strategy played out as many of our operating regions and service lines struggled to maintain profitability while others performed relatively better. Our ability to relocate equipment and personnel helped to reduce the impact on our results in this difficult operating environment.

As we begin 2013, we remain concerned about a declining rig count, persistently low natural gas prices, and a highly-competitive operating environment. We will continue to closely monitor our costs and capital expenditures as we manage through the cycle. I would like to thank you for joining us this morning, and at this time, we'll open up the lines to answer your questions.

(Operator Instructions)

We'll take our first question from Jeff Spittel with Global Hunter Securities.

Thank you. Good morning, fellows. I guess we could start off with general body language from clients. It sounds as if you're not getting a great line of sight in terms what their spending patterns are going be as we progress into the rest of Q1 and maybe into the spring. Is that a fair assessment?

This is Ben. I would say -- we didn't say in our opening comments, but we had a lot of holiday slowdown in the fourth quarter from our customers, a lot of discussion about running out of budgets and things like that. Some of our people think -- or commented that it's about the most extended holiday break that they had seen for some time. But we're also hearing stories about customers getting back to work early this year, so I think there are some positive anecdotes there. But clearly, we're not expecting things to come roaring back immediately, but we are hearing some positive signs and seeing some positive body language using your term.

Okay. That's encouraging. And I guess specifically with regard to west Texas, pretty sure you guys mobilized an additional spread into that market. Are we starting to see some signs of maybe some of the larger customers behaving a little bit better in terms of pricing on the spot market, and I'm assuming you are starting to get a benefit from the move in terms of mixed to horizontal drilling?

Jeff, this is Jim Landers. In terms of what west Texas is like, high activity, but there's been a lot of people who have gone to the area too, so the competition is tough. We are benefiting from an activity standpoint because of the shift to horizontal and directional drilling. In fact, the mix, I don't have the numbers in front of me, but it's flip-flopped between unconventional and conventional last year to this year, so that's helpful. And pricing is still tough. Fourth-quarter pricing declined, but I think we are closer to the end of those pricing declines, much closer than the beginning in west Texas.

But the latter part of your point, we are seeing a lot more horizontal work in west Texas, and that has been incrementally beneficial.

Thank you, gentlemen. Congrats on another very good quarter.

Thank you, Jeff. Appreciate it.

We'll go next to Andrea Sharkey with Gabelli.

Hi. Good morning. I was wondering if maybe you could give a little bit more detail on the fleets that came off contract in the quarter, maybe how much horsepower those fleets represent and how much they impacted the quarter. Was it the beginning, middle, end of the quarter? And then looking forward, how many more of those types of situations do you have where you have fleets that are going to be rolling off contract through 2013?

Well, let me answer the latter half, and Jim maybe will provide a little numbers. At this point, in terms of the legacy contracts, we really don't have that many that are left. There may be one or two. So there will be some transition going on there, but we don't view that to be significant since there are so few. Not sure at this point that that will necessarily result in any more relocations at this point. I think we're comfortable today where our fleets are located, and so that's sort of a little bit of a flavor on that impact.

Yes, Andrea, this is Jim. We had two fleets totaling maybe 45,000 or 50,000 hydraulic horsepower in total that moved. They actually moved right at the end of the third quarter and beginning of the fourth quarter, and for that reason, there was an inefficiency due to the move time, but they did both work and generate revenues and profits in the fourth quarter. They went from an expiring contract to the spot market during a tough time in the cycle, so the P&L and the financial returns on those fleets were not as good in December as they would have been in a more high utilization contract environment, but they did work. They're not stacked. They're working. So what does that mean? Well, we've probably lost three weeks to a month of production of revenue-generating time, and the revenue that was generated was lower margin.

Okay. I guess what I'm trying to get at is should we expect to see an increased impact from that next quarter, but it seems like, no, the majority of the negative impact hit in Q4 and then maybe flattish in Q1 from that move?

Yes. I think that's right. It's a tough quarter to do that calculation on because it was fourth quarter where things were slow anyway. If anything, the sequential impact of the subject we are discussing would be positive because now we've got a full quarter, no holidays, and the equipment and crews are settling in a little bit better.

Okay. And then on the CapEx plans for 2013, when you talk about the growth CapEx spending, what particular areas or product lines do you think that you're leaning towards spending that growth CapEx on? Would it be pressure pumping? Is it coil tubing? Are there other product lines that you might want to increase your presence in? Maybe just some more color on that would be helpful.

This is Ben. At this point, honestly, we have a few ideas and a few plans, but it's still a little early. I think it's safe to say that, from a percentage standpoint, much more of it would go to pressure pumping, coil tubing, and some of the other bigger service lines. So I guess there's really no -- at this point, we're not expecting any real surprises as it relates to any other service lines. No significant increase in spending in any particular service line other than our traditional large ones that we have now.

Okay. Thanks. That's helpful. And then just one last one for me. For uses of cash, did you repurchase any shares in the quarter, and do you have any plans to do that in 2013? What's the way you think about the right timing on doing share repurchases?

None in the fourth quarter, and -- but we stand by. We're ready. It's something we constantly look at, and we don't necessarily set dollar targets or total amount that we want to spend irregardless of what the stock price is. So we're -- it's just something we deal with day to day.

Okay. Thanks a lot.

Sure.

Thanks, Andrea.

And we'll take our next question from Robert MacKenzie with Friedman, Billings, Ramsey.

Hello?

Hello.

Hey, Rob.

Good morning. My first question for you guys is centered around something you touched on briefly in your prepared remarks, and that's recapitalizing some of your older equipment or upgrading that. At least one of your competitors is in the process of replacing some of their older frac pumps with newer, more efficient designs, supposedly last longer. Any process there on your front to do something similar, and do you see the benefits of doing something like that?

I think we have looked at and evaluated some changes. We've tweaked our equipment over time that we think helps incrementally. The program that we're referring to, we're not doing anything dramatically different to our pumps, but it's something, certainly, we're open to and trying to evaluate the cost benefit of trying to come out with some new designs. We would clearly be interested, and I think under the right configuration and circumstances, sure, it's something that we would look at. We are working with some of our customers for some innovative dual power designs that might help from an operating cost standpoint. It's in the very early experimental stages. But any sort of widespread program, no, we don't have anything in place right now.

Okay. Is that something that some of the equipment providers are starting to offer now, or is it still a little bit early for that?

We've seen some things in the past but nothing that I'm aware of here recently.

Okay. My next question is a little bit of a crystal ball-type question, and I appreciate any answer you can give. In the context of an industry that's built out tremendous amount of equipment and capacity in a short period of time, it's hard to see how we end up as short in a year or two's time a year or so ago. In that context, how do you see the competition and/or the cycle differing this time from last time, and how you are positioning RPC to win in that environment?

Rob, this is Jim. Crystal ball questions are difficult in the oil field. But one thing that we noticed as we did our fourth quarter reviews with all our different operational managers is that things aren't necessarily bad, but competition is high and seems to remain steady. So that speaks to a pretty flattish 2013 kind of operating environment unless natural gas prices rise. You know our business really well. We need service-intensive completions in the natural gas basins to utilize this hydraulic horsepower. So these -- we characterize them as persistent low natural gas prices. Maybe they'll get better with -- looks like the winter going to be colder than some people thought, but natural gas prices and drilling related to that are real key.

We have heard and seen a lot of things among competitors. Some people have said, we're drawing the line; we're not going to price any lower than this. We've seen the newer people, the smaller people, and the startups pricing below their contribution margin, EBITDA contribution margin kind of costs, so that's usually a sign of the bottom or things that won't last forever. But it seems like people have been a little more rational this time. But we do have a pretty high -- pretty large amount of equipment that's out there on the market, so it feels like a slow grind at this point.

And we're really committed to this refurbishment program. We think that it will take awhile and probably will continue to be, certainly, ongoing for sometime and maybe for the foreseeable future. We believe that our steady and committed maintenance of our equipment, historically, has set us apart, and we think it will, too, going into the future. We feel that we have some of the best equipment out there, and with this refurbishment program, that will continue. So we're proud of that and think that, again, will continue to be a great contributor to our ability to deliver quality services to the customer.

Great. Thanks. And final question. Given the very competitive pricing environment that we are all aware of, how would you describe the state of M&A opportunities, and what is your level of interest in potentially acquiring something?

Rob, that's a good question. Actually, we've seen fewer and fewer opportunities recently, like in the last two or three months, so I don't know if that was fiscal cliff or end of the year or whatever, but we've seen fewer than we have seen in the past. We're certainly interested in a flat environment characterized by high competition for the current capacity, a way to grow as -- a better way to grow, perhaps, by acquisition rather than adding more equipment. So we continue to remain interested, and as Rick discussed, we've got the war chest. We've got a strong balance sheet to do that sort of thing. But we remain focused on our return on invested capital metric, and that governs how much we can pay for an acquisition.

Great. Thanks, guys. I'll turn it back.

We will take our next question from John Daniel with Simmons & Company.

Good morning, guys. Good quarter. Q4 revenues held up very well despite the holiday slowdowns, the fleet downtime which you referenced, as well as the pricing pressures. What do you attribute the revenue strength to?

I think we talked about the fleet relocations. I think that was certainly a net positive. And I think just the incremental improvements. It's a very good question. It's obviously very hard to say anything in particular. We didn't do anything dramatically different during the quarter. I -- reflecting back, we had a weak fourth quarter '11 relative to the third quarter of '11 and had a pretty nice bounce-back in the first quarter of '12. Certainly not sitting here promising that.

But I think -- we're hearing that we think first quarter could be just naturally better because of that -- the starting back up of our customers. So again, not counting on it, but hoping for it. And -- but beyond that, in terms of the fourth quarter, I think it's just the little things and the tweaking around the edges, and again, I think those strategic moves. I think our guys have done a great job of if a contract -- assessing the market and trying to make good, smart decisions and sooner rather than later making decisions to move equipment around where it makes sense. And I think overall, I think that benefited us.

Okay. But when we look at it from a Q3-versus-Q4 sequential, without those fleet relocations, you seem like you could have been up for the quarter. Is that a fair statement?

Without the relocations?

Am I not --

Well, we relocated them because the revenue was running off, so.

Yes, I know, but you mentioned --

I don't know if that's responsive.

Right, but you mentioned three to four weeks where those two fleets weren't working at all. I'm just trying to understand -- let's say it this way. Can you guys give us a breakdown of the revenues by product line like you normally do?

Yes, sure John. This is Jim. I could do that. And that might be able to --

That might help direct us.

During fourth quarter, let's see, pressure pumping was 55% of revenue. Our second biggest service line, which is Thru Tubing Solutions, was about 14% of revenue. Rental tools was around 5%. Nitrogen was somewhere in the 6% range I think. I am going to give you some better numbers in a moment.

And Thru Tubing Solutions?

Yes. So let's see. So Thru Tubing Solutions was -- I apologize. Okay, so Thru Tubing Solutions was 15%. Pressure pumping was 55%. Coil tubing was 11%. Nitrogen was about 4%. Rental tools was about 5%.

Got it. So it looks like your pressure pumping revenues were actually up Q4 versus Q3.

That's right.

Yes.

We mentioned that.

So then Is that a function, Jim, of perhaps increased work in gas-directed markets in Q4?

No, John. I'd like to say that it was more work in the Permian. I think relocating the fleets and getting them working was a good thing. To your point, had they been working from October 1 to December 31, revenues would have been better, but we were pretty pleased with how they were. And in west Texas, with the more service-intensive work, profits may not be what you like, but you do work more.

I think maybe -- go ahead, John.

I have one last one for me and I'll turn it over to others. It sounds like the growth CapEx is expected to be roughly $150 million in '13. When you -- based on the (inaudible) number you threw out. And what are the EBITDA pay-back assumptions that you guys employ with the growth CapEx, broadly speaking? Two, three year, what type of pay-back assumptions?

Well, obviously, it depends on where we think we're going to be in the cycle. Historically, yes, I would think, clearly, three year is normal, but a lot of it depends on the specific instance, and it varies over time. At this point in time, where we are in the cycle, that's like what we referred to. We have not committed at this point in time to much of that $150 million, so --

Fair enough.

The decisions about the $150 million will be based on the opportunities presented. And your question's, certainly, fair enough, but certainly, a three year will get our interest up, but we evaluate the different options that are available to us.

Okay. Well, let me ask it this way. And it'll by, I promise, my last question. Assuming you're spending money for growth CapEx, which would, in theory, be additive to earnings and EBITDA, would you expect to see EBITDA growing throughout on a quarterly basis from the Q4 run rate as you get into '13, or would the pricing pressures offset the growth CapEx spend?

Honestly, think at this point since we don't have a lot of committed CapEx, it will be difficult to take delivery and generate a tremendous amount of benefit from a larger fleet of equipment. I can't see that at this point in time. I think more of the improvement would have to come from improved conditions or specific customer opportunity wins. And that -- what I was going to refer to just a moment ago that might be somewhat Illustrative. We referred in our opening comments about our diversity -- geographic diversity and also with the service lines. Speaking of geographically, it's always interesting, there can be a lot of volatility quarter to quarter with our results depending on our customers and so forth. We have, obviously -- talking about pressure pumping, we have 683,000 hydraulic horsepower that's spread around the various basins, and like we talked about, we've moved it around. But there can be some dramatic swings from quarter to quarter.

We did have some success in some gas basins in the fourth quarter relative to the third quarter. We had other areas that were down. It can move around quite a bit. And we try to be responsive and capture the opportunities when they present themselves. But there's still a lot of volatility as both contract roll-off, relationships with customers change, and -- but we're doing a pretty good job of managing through that right now. So things could stabilize somewhat, and we could get more, firmer relationships in place. I think that would present a lot of opportunity from a revenue and EBITDA improvement standpoint.

Fair enough. Well, thank you very much. And again, very good quarter.

Thank you.

And we'll take our next question from Michael Marino with Stephens.

Good morning. To follow up on some more detail around the quarter and the sequential progression. If I -- what I'm trying to figure out here is on the margin front. Do you guys think things have flattened out in your business if you -- obviously, if you adjust for some seasonality around the holidays, the fleet relocations and the impact those had on Q4, is it unreasonable to think that margins maybe bottom out here in the fourth quarter, or is there more to go as pricing continues to flow through the business at lower rates?

Michael, this is Jim. You might as well be sitting in our seat because you just gave the answer. Fourth quarter had some things that made margins decline, and parenthetically, we had a few of our managers say that they saw some pretty severe holiday slowdowns, more so than in the past. So that speaks to improving margins. However, the competition is still tough. And as we start the first quarter here, the rig count just seems to be declining a few rigs a week.

And so as Ben said earlier, we have seen some good indications from customers about starting back up more in the first quarter, but competition is still tough, so it honestly could go either way. Q4 could have been the trough in margins, and we're not talking about revenue or profits, but margins. But there still could be another quarter or two of pain based on the competitive environment. And I've just told you everything we know.

Sure, so basically, it depends on activity levels.

Yes.

That's probably right.

Okay. Fair enough. And just to get some product-level detail, specifically margins in the coil business, how you see those tracking maybe -- or pricing rather. I've been hearing some comments about utilization declines and some pricing, but just get your guys' opinion on the coil market.

Michael, this is Jim again. That's -- interesting question. We've actually seen utilization rates declining somewhat but not pricing, and that really has to do with us for -- with job mix and the fact that our coil tubing deliveries that we've taken were of the larger units. So if you were to look under the covers on the income statement, you'd see that coil tubing pricing is not declining. In fact, it's incrementally kind of strong, maybe increasing a bit. It's utilization that's declined some, and that's causing sequential -- that caused a sequential decline in coil tubing revenue.

I think what we're experiencing, hearing from our guys a little bit too, is that there's a little less standby time, which is a lower, all things being equal, lower pricing, revenue per day kind of scenario. So that's shifting now. There seems to be a little less of that, but that freezes up for other -- we're going to call it spot market opportunities or whatever. So net-net, there hasn't been a significant change, but I think we're just in a period of transition. I wouldn't suggest that -- it's neither necessarily positive or negative, but just something we're going to have to manage through that process.

If you look at your -- putting the two questions together, if you look at your different business lines and the uncertainty as it relates to margins, where do you think the biggest wild card is? Is it coil and rental and Thru Tubing, or is it still on the pumping side?

Still on the pumping side.

Okay. Great. Thank you, guys.

(Operator Instructions)

We'll go next to Michael Cerasoli with Goldman Sachs.

Thanks. Good morning. You mentioned in the press release about doing some more service-intensive work relative to the year-ago quarter. Is this just part of a longer-term trend, or was there a recent change that you observed from operators? And also, was this in regards to a specific play?

Hi, Michael. It's Jim. That's in response -- or that comment related to west Texas primarily. If you looked at the west Texas rig count a year or two years ago or 70 years ago, it was primarily vertical and oil directed. With the advent of these new shale plays in west Texas, it's still oil and liquids, but it's more service intensive because we're remaining on the job longer and things like that. That's one item in west Texas to think about. The other thing is that some of these shale plays are -- they lie on top of each other at various levels, and so even though the well and completion is vertical by definition and you're using wire line instead of coil tubing, you're on site for maybe four or five days using a couple of different kinds of proppant and fracking different zones. So it approaches being unique in that it's a vertical well and a vertical completion, but you're there for a long time with a lot of proppant, a lot of pump time. That's where things -- that was the main piece of background behind that comment.

Okay. So it was more of a general comment. And then, just separately, can you maybe provide some higher-level views on how the industry is approaching maintenance. We've seen new watering effectively end a year ago. Utilization isn't terrible. Do you get the sense the broader market is not maintaining their equipment, and do you think that this can help potentially alleviate oversupply conditions?

We don't have detailed insight into our competitors, but it's certainly something that we internally focus on a lot and something that -- we will spend first to maintain our equipment versus trying to grow it. But to the extent that is the case, if there are, and I think there have been some of our competitors, especially some of the smaller ones, that maybe are struggling a little bit with funding and liquidity and things like that, that they may be skipping a bit on maintenance. And that could present an opportunity in the short term. That certainly can be alleviated longer term if somebody spends the necessary money to get the equipment in shape. So it could present an opportunity, but not something at this point that we're counting on.

Okay. And then just my final question. This is more of a follow up to a prior capital allocation question. Just thinking about you guys, the special dividend that you did at the end of 2012 and today's dividend increase, how does that impact your capacity for a buyback, or should we think about the two completely independently?

I think independently. Those actions don't really impact our repurchase capability.

Okay. Great. Thank you.

Thanks.

And we do have a question from Daniel Burke with Johnson Rice.

Hi, guys. Thanks for taking the call.

Sure, Daniel.

I want to go back to the trajectory of the pressure pumping top line. Was wondering if you could comment or maybe bracket the extent of the seasonal decline you feel like you witnessed in pressure pumping because to the extent that a couple of frac fleets were able to offset that decline, it doesn't appear that the seasonal impacts you all would have seen were particularly pronounced. Is that fair?

All things being equal, yes, but as I indicated, we've had -- in an environment like this, there is decent amount of volatility that can happen month to month and quarter to quarter from region to region. So I think overall, the relocations, and I think some positive developments with some customers. Getting back to work in Marcellus is an example. I think we've heard stories that overall, Marcellus has been a bit busier. We saw some of that. We had some positive sequential improvement as it relates to pressure pumping in the Marcellus, and some of that's just timing. Some of that's just timing and when a customer is ready to go back to work. So it's hard to draw too large of a conclusion on that one time frame. But I think those are the two main factors of the relocations, and probably in this particular quarter, was Marcellus having a nice bump.

Okay. And then, to instead look ahead into Q1 then, it sounds like the couple of transferred fleets having missed three or four weeks of Q4 maybe have room to see top line there creep a little higher. Marcellus, I assume, since you mentioned it, the momentum is intact, and then across the rest of the fleet, maybe some ability to creep back from some Q4 seasonality. If we put it in three buckets, does that work?

That's a possibility.

All right. Thanks, guys, I appreciate it.

Thank you.

And we do have a follow-up question coming through from John Daniel with Simmons & Company.

Hey, guys. Just one more for me, and a bit of a somewhat granular question here. But I presume you are able to track margins at the fleet level. Is that a fair statement?

It -- we -- with some work. It's not -- we don't spend the effort trying to do that, certainly, daily or weekly or monthly.

I understand. I'm just -- where I'm going with this is I'm just wondering with the fleets that are in the spot market that were impacted by the seasonality of Q4 in terms of their margins, it -- I think we would agree that activity levels, job counts are probably up in Q1 versus Q4. All else being equal, if that pricing is leveling out in the spot market, do you see the margins on the spot frac fleets improving in Q1 versus Q4?

John, this is Jim. Yes. Defined that way, I would say yes. And yes, that makes sense.

Okay.

As to my comment earlier, activity -- the level of activity would have a big impact on it.

That's fair. And I'm making the assumption that job counts are going to grow here this quarter. It sounds like from your commentary that pricing, challenge, yes, but on a leading-edge basis in these markets that the spot level seems to be stabilized. Or am I misinterpreting what you guys said?

Leading-edge pricing on the spot level? Probably, John, that would depend on the region you're in. And I hate to answer it that way because that doesn't -- that answer's not helpful, but it's accurate, and I think --

It is still developing.

Okay. Fair enough. All right, guys. Thank you very much.

Thank you.

And ladies and gentlemen, I'd like to give everybody a final opportunity today.

(Operator Instructions)

Mr. Landers, there appears to be no further questions at this time. I'd like to turn the call back over to you.

All right, Tom. Thank you. We appreciate everybody calling in and listening this morning, and we appreciate the questions, too. We enjoy the dialogue. Talk to you all later, and hope everybody has a good day. Thanks.

And thank you, ladies and gentlemen. Just a reminder that a replay of today's conference call will be available starting in two hours by going to the RPC website at www.RPC.net. This does conclude today's conference. We appreciate your participation.