RPC Inc (RES) 2013 Q1 法說會逐字稿

Good morning, and thank you for joining us for RPC Incorporated' s first quarter 2013 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 your 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 may 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 2012 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 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 to nearest GAAP financial measure. Please review that disclosure if you're interested in seeing how it is calculated. If you have not received our press release for any reason, please visit our website, again, 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 first quarter of 2013. Following my comments, Ben Palmer will discuss our financial results in more detail.

RPC experienced a challenging first quarter this year. Our revenues declined compared to the prior, quarter and the prior year, due to the increased competitive pressures in all of our markets. While overall industry activity declined moderately, the increase in available equipment in the US domestic market during the past few years has continued to depress market rates for our services. At RPC we especially felt the impact of these competitive forces, because of our transition from stable contract work to highly competitive spot market. Spot market pricing for all of our major service lines experienced weakness, and utilization declined in many of our service lines. Our CFO, Ben Palmer, will now review our financial results in detail for the first quarter.

Okay, thanks, Rick. For the quarter ended March 31, 2013 revenues decreased 15.3% to $425.8 million compared to the record revenues of $502.6 million in the prior year. These lower revenues resulted primarily from increasingly competitive pricing, coupled with lower activity levels in most of our service lines. EBITDA for the first quarter decreased 39.7% to $110.6 million, compared to our record EBITDA of $183.3 million for the same period last year. Operating profit for the quarter decreased 56.3% to $57.2 million compared to $130.9 million in the prior year. Our diluted earnings per share for the quarter were $0.16, a 56.8% decrease compared to $0.37 in the prior year.

Cost of revenues decreased from $273.8 million in the first quarter of the prior year to $268.2 million in the first quarter of the current year, due to lower activity levels. Cost of revenues as a percentage of revenues increased from 54.5% in the prior year to 63% for the first quarter of the current year, due primarily to increased competitive pricing. Selling, general and administrative expenses during the quarter were $44.9 million, which were unchanged from the prior year. SG&A expenses as a percentage of revenues increased from 8.9% last year to 10.5% this year. This percentage increase was primarily due to the relatively fixed nature of these expenses during the short term. Depreciation and amortization were $52.8 million for the first quarter, an increase of 2.4% compared to $51.6 million in the prior year.

Our Technical Services segment revenues decreased 14.6%. Operating profit for this segment decreased to $58.5 million compared to $123.5 million in the prior year. The decrease in revenues and operating profit was primarily due to lower pricing for our services coupled with lower equipment and personnel utilization within this segment. Our first-quarter Support Services segment revenues decreased by 22.5%, and operating profits decreased by 55.3% due primarily to lower activity levels coupled with lower pricing within the rental tool service line, the largest service line within this segment.

On a sequential basis, RPC's first quarter consolidated revenues decreased from $469.9 million in the fourth quarter to $425.8 million, a decrease of 9.4%. Cost of revenues in the first quarter decreased from $279.4 million to $268.2 million last year due to lower activity levels, primarily materials usage. Cost of revenues, as a percentage of revenues, increased 350 basis points from 59.5% in the fourth quarter to 63% in the first quarter of this year. This increase was primarily due to lower pricing for our services, and resulting negative leverage on personnel costs. SG&A expenses, as a percentage of revenues, increased sequentially from 9.5% to 10.5% due to the decline in revenues. RPC sequential EBITDA decreased 24.1%, from $145.6 million in the fourth quarter to $110.6 million in the first quarter, and our EBITDA margin decreased from 31% to 26%.

Our Technical Services segment generated revenues of $394 million, 9.4% lower than prior quarter revenues of $434.8 million, and operating profit of $58.5 million compared to $85.6 million in the prior quarter. Operating margin in this segment declined from 19.7% of revenues in the fourth quarter to 14.8% in the current quarter. Many of our service lines within this segment experienced lower pricing and utilization. Revenues in our Support Services segment declined 9.5%, due primarily to lower activity and pricing in our rental tools business. Support Services operating profit declined to $6.3 million in the first quarter compared to $9.4 million last quarter. Our operating margin in this segment declined from 26.7% of revenues in the fourth quarter to 19.7% in the first quarter of '13. RPC's pressure pumping fleet during the quarter remained unchanged at 680,000 hydraulic horsepower. We currently have no additional pressure pumping horsepower on order, although our pump refurbishment program will remain an ongoing initiative.

First-quarter 2013 capital expenditures were $53 million, a decline of $68 million compared to the first quarter of 2012. We recently reduced our 2013 growth capital expenditures. Currently, we expect to spend, in total, approximately $275 million on capital expenditures in 2013. Because we have high equipment maintenance standards, approximately 70% of total capital expenditures will be directed towards our pressure pumping fleet, and other operating and support equipment. RPC did not relocate any equipment during the first quarter, and we are satisfied with the geographic concentration of our equipment fleets and personnel at this time.

We also note that we have a strong presence in several markets in which the composition of our customers' drilling and completion activities requires equipment and personnel to remain on site for longer periods of time. We have undergone some headcount reductions, resulting from contract expirations, and with our capital expenditure plans, they comprise our short term reaction to the current operating environment. Our operating standards require us to maintain our equipment at very high levels, and to invest in well-trained, competent crews who are capable of providing safe, high quality services. We have the financial strength to continue these investments, and our experience with past oil field business cycles has shown us that this is the right way to earn high financial returns over the long term. ¶ RPC's outstanding debt on its credit facility at the end of the first quarter was $87.6 million, a decrease of $19.4 million compared to the end of the fourth quarter. And our ratio of debt to total capitalization is 8.8%. And with that, I will turn it over to Rick for closing remark.

Ben, thank you. Our first quarter financial results reflect the impact of a lackluster operating environment. As discussed in previous conference calls, we have been concerned about natural gas prices, and the natural gas drilling rig count that lingers close to a 14-year low. However, we are encouraged by the recent rise in the price of natural gas. When supply and demand dynamics in our markets improve, RPC is positioned to capitalize on opportunities that arise. Till that time, we will continue to closely monitor our operations and allocate capital prudently, while maintaining a conservative capital structure. I'd like to thank you for joining us on the call this morning, and at this time we will be glad to take any questions you may have.

(Operator Instructions)

John Daniel with Simmons & Company

Hey, guys, just a few modeling ones for me. In the 10-K, you guys referenced an expectation that 2013 revenue would moderately exceed 2012. In light of the Q1 results, do you guys still maintain that view? And if so, can you walk us through how you will get there?

Hey, John, it's Jim. That verbiage in the 10-K reflected the fact that, in 2013, we will have full utilization of revenue-producing fleets that we took delivery of in 2012, plus, as you know, a couple of a coil tubing units in 2013. That is what was reflected at that time in our 10-K. Today, given the downward pricing pressure and that sort of thing, in the first quarter, that statement is probably less certain.

Okay.

But clearly possible.

Okay, just want to check. And then, on the margin front, the change this quarter, Jim, can you just give us your thoughts? I mean, is there any expectation that margins can recover back to your Q4 levels? And also, you mentioned some headcount reductions things like that, cost-reduction initiatives, were there any severance charges embedded in the numbers this quarter?

John, answer to your second question is, no, there were no severance charges or anything like that in the first quarter, no nonrecurring-type of items. Regarding margins, the answer is, first, relating to pricing, when pricing might get better. And, secondarily, utilization because of cost absorption of higher utilization, higher revenues. The answer is, yes, things will get better, but we are not sure when.

And, the good news for us, John, let me point out, I think this sort of sets up the call as well, is I think it's important to know -- we talked about the fourth quarter, how things had really slowed down for the holidays and we expected things would get off to a quick start, and they didn't. We're not going to pound our chests or say this is for sure an absolute, but the end of the quarter, March, was much better than January and February.

Okay. What was surprising, I think, to some is, I think there was commentary on the call in Q4 that roughly 90% of your fleet had been in the spot market in Q4. With spot pricing leveling out in some cases, I think there was an expectation that revenues would be a bit better behaved, and that wasn't the case. But, you would expect margin improvement in Q2, just given the stronger utilization in the month of March, and presumably April is off to a good start. I mean, that's a theme we're hearing from a lot of folks. Would you share that?

Yes, I believe so, yes.

Okay. I will turn it over to others, thank you, guys.

Andrea Sharkey with Gabelli & Company

Hi, good morning. Maybe talking about any potential impact, have you noticed yet, or do you anticipate seeing any change in customer attitude or plans, given two different competing factors, you have oil prices coming down, and then you also had natural gas prices coming up. What are you guys hearing or expecting as a result of that?

Andrea, this is Jim. Regarding natural gas prices, I think we are not necessarily seeing yet, but certainly hearing some indications that activity in some of the secondary areas might be starting to get better. In the Marcellus, in particular, natural gas staying above $4 for a little while is a pretty good sign. And I think you will see activity pick up in the Marcellus first. And then, there is some other secondary, i.e., not resource shale play markets, in say Texas, Louisiana, and Oklahoma that might pick up incrementally. Regarding the price of oil, the recent decline isn't causing any changes among our customers' activities that we have noticed.

Okay, great. And then, maybe can you give more specific details on -- you said you didn't have any relocations of your fleet this quarter and you are happy with where they are. Can you give us a sense of the breakdown of where they are located?

Sure, I can just take care of it real quickly and if you have extra, additional questions, let me know. Our biggest presence is West Texas, the Permian basin, about 40% of our pressure-pumping fleet is there. In South Texas, the Eagle Ford, we have about 16% of the fleet. We've got about 13% of the fleet in the Marcellus. 12% each in East Texas and the Midcon. We have a small fleet in the Bakken, that's about 3%. And then you are familiar with our refurbishment program, and Ben actually alluded to it in his comments, that is the remainder of our rotation fleet. That is not producing revenue at this time, but it is standing in for equipment that is being refurbished.

Okay, great. I'll turn it back. Thanks.

Luke Lemoine with Capital One Southcoast.

Jim, could you help me out with the product-line revenue split that you typically give us?

Sure. For the first quarter of 2013, pressure pumping accounted for 52% of revenues. And our downhole motors and tools service line was 16%. Coil tubing was 10%. Nitrogen, it was about 5%, and snubbing was around 3%. I'm sorry, rental tools was a little under 5%.

Okay, so, in pumping it looks like roughly the revenue drop was about $37 million there?

We're going to look into that.

Sounds about right. Let's see. Yes, that's about right.

So, just trying to lump that revenue decline into some broad buckets, it looks like you probably had an average price decline in the mid-single digits, does that seem pretty fair, overall?

No, Luke, I would say it was higher than that.

Okay, higher than that. And then there was some impact from the Haynesville crew rolling off, correct?

Yes. The Haynesville crew, yes, that's correct. That rolled off into the spot market, yes, that's right.

And it still looks like you're fairly thin utilization in the Cotton Valley, is that pretty fair?

In the Cotton Valley, yes, that's right. I mean, that's certainly spot market for us out of our East Texas operation location, yes.

And maybe the Marcellus was a little weaker quarter on quarter, as well?

Yes.

And then, on coil, revenues dropped by about $9 million there. Was that more pricing or utilization or just kind of a combo of both?

It was pricing, this time, in coil tubing.

Mainly, that $9 million drop is pretty much all pricing?

Yes, correct.

Great, that is it for me, thanks.

Neal Dingmann with SunTrust.

Good morning, gentlemen. Say, most questions were asked, but just one thing. You mentioned in the press release, and then, Ben, you mentioned, again, about not reallocating any equipment. Just wondering your thoughts now as you have seen the year to date so far. Any thoughts about that, I mean, given, I think, that it sounds like, at least for the year, we started out maybe a little bit slower than you were hoping. And it sounds like competition maybe still a little bit higher than you maybe were hoping. So, based on those two things, any thoughts? I mean, would you take equipment to the Utica, would you take it to TMS, one of these new plays, or your thoughts about that now?

Neal, this is Jim, let me offer a couple thoughts. Our biggest single presence is in the Permian. Relatively speaking, there's a lot of exciting stuff going on there. I mean, year over year, the West Texas, the Permian basin recline declined like 1.2%, but if you take out the vertical well decline, it actually increased slightly, and those wells have more net footage, more frac stages, things like that. That's the good news. The bad news is that it's competitive, to be sure. But when we tell you that we are happy with where we are right now, that concentration in the Permian is helpful to us.

We like the Marcellus as well. It didn't get as bad as some people thought, and we feel like there are some good opportunities there with natural gas prices rising, as we remarked earlier. So, I wish there was a basin where there was a lot of work and no competitors, but we don't have any of those. But I think we are as well positioned as we can be. (multiple speakers) I'm sorry, go ahead.

And then, Jim, I assume what, at least for the foreseeable future, you would continue mostly almost exclusively in the spot market where you are now?

Yes, that is correct.

I think that is right. I think I would characterize, part of what, I think, we are going through right now, too, is that transition, as we have alluded to the transition from the contracts to the spot. Speaking of pressure pumping, we did not have a super significant portion of our fleet under contract, but they were pretty substantial, and we did roll off of those late last year. And I think there is just a transition period. We feel good about the fact that there is a lot of discussions with customers. I would characterize it as, that it's less them trying to bottom fish, or maybe they are trying to bottom fish from the perspective that maybe they think things are down to the level where they want to begin to talk about locking in some pricing. So I think that is a good sign.

We're going to remain disciplined in how we price our services. We're not going to give it away, we're not going to wear out our equipment without making an adequate return, whatever that is. We are playing that, we're watching that. We're trying to watch our pricing strategies very closely, and we hope we are just at that point where, again, things are hopefully now flushing out. And, again, I think we got into contracts a little earlier than some people did, so we may have rolled out earlier than some other folks. So we are, maybe, just at that point where we are experiencing the impact of that, and it just takes a little bit of time to work through it. To transition from contract to spot, and then into pricing agreements, and then, hopefully, eventually, into maybe more firm contracts again, as the market improves.

Okay, great point, Ben. And then last one, Ben, for either you or Jim. Historically, and even recently, you all have done, it seems like, much better than the average as far as keeping raw material costs lower. In fact, I know you were even, I think, selling some guar at some point. It seemed like, to me at least, that your raw materials went up, I would say, in proportion to maybe some others in the industry. Which, again, in other quarters I mentioned to you, it seemed like you guys were able to keep a better lid on raw materials than this. Was there something about, just in this last quarter where it is more abnormal and we would see raw materials come back down more in line to what you all guys historically were? Or, just wanted the thoughts there.

Good question, good point. I think that, at this point, the story is we are more comfortable with our supply, as opposed to the fact that we have a significant price advantage. We benefited from a significant price advantage some, a year ago, especially the middle of last year, and now we don't have as much, again, a price advantage, but we do have a steady supply which means a lot, and is very beneficial and comforting to us and our customers. So, I don't know that we are going to be experiencing any necessary, significant improvement to our margins because of a change in materials prices, but we are comfortable with our supply chain.

Thanks, Ben.

Brian Uhlmer with Global Hunter.

I had a couple quick questions on the remainder of your CapEx, and where you are planning on allocating that. And, also, I had a question with -- on through tubing on the downhole tool side. Obviously, as a percent of revenues, it's increasing, but primarily due to others dropping. How is that segment holding up, and are you going to allocate some more capital to that segment?

Through tubing is holding up well. We continue to invest in it. It, luckily, is not as capital intensive as some of the other service lines, so it doesn't soak up a whole lot of capital. But, we have opened some additional locations. We are still focused internationally, growing it internationally as well, and we have opened up a couple of new domestic offices, as well, to help us better serve our customers in particular basins. So, it continues to do very well, and they're continuing to be real innovative in coming up with new products to help that growth continue.

Okay, fair enough. I had a question on rental tools, you are fairly oil levered in the Bakken, Eagle Ford. I'm just curious if there is specific types of tools that were pricing pressure, or is it just across-the-board over capacity due to those plays not picking up as fast as expected? And how are you looking at that as it advances throughout the year?

Brian, this is Jim, it is more of the latter. Over capacity in rental tools, both from the bigger players, as well as the fact that the rental tool business is fairly fragmented. So you get it from both sides when drilling activity is lower than you might think. We continue to invest in drill pipe that works better in some of the directional drilling, and so that's some of our CapEx towards that, although it's minor in the grand scheme of things. So, rental tools remains good business, but it certainly had a lot of weakness in the first quarter.

Okay. I'm sorry if I missed this, did you state what percent of your pressure pumping is on 24 hour earlier on the call?

We did not. At the present time, about 12% of our pressure-pumping fleet is on 24-hour operations.

Perfect. That's it for me, thank you.

Michael Cerasoli with Goldman Sachs.

Thanks. I think it would be helpful to understand a little bit more about the specifics, in turn, what appeared to be a decent January. In February, was it an overall activity decline? Was there a similar amount of bidding occurring, and the market's just more competitive and jobs didn't come through? And did weather play any role?

To reiterate, it's January and February were weak. Exactly why, again, we slowed down more significantly. Some people in the Company said that we were -- talking about the fourth quarter, that it was one of the worst holiday slowdowns that they had ever seen, and expected it to snap back and it didn't. So, again, January and February were pretty slow. I'm not aware of any, or don't recall any discussion about differences in bidding and things like that, I think it was just a slow start up for us and our customers.

Mike, this is Jim, there was a little bit of weather slowdown in the Midcon for us in the beginning and middle part of February. And it was measurable, but it wasn't material enough to necessarily discuss on this call. So, a little bit of weather slowdown, but nothing serious.

Okay. You mentioned earlier about how March was better than February. Can you give us an idea on the order of magnitude? Was it just a slight pickup, was it more noticeable than that? And then, did it continue on into February -- into April?

It was other than negligible, and I wouldn't want to project beyond that. It certainly didn't reverse course, but we are certainly pleased with it. Certainly, we're not sitting here right now saying we've crawled the bottom, and there isn't any way it's going to go any other direction. But it certainly, more recently, has been much better than January and February. I'll say that, better than January and February -- not much, people could misinterpret that. Comforting is better.

That's good. And then, just out of curiosity, as a result of the lower utilization, did any of your fleet move into the yard in the first quarter or maybe maintenance schedules are accelerated? Or was it really just a matter of, when you talk about lower utilization, you're saying it's just more gaps in between jobs?

Yes, I think more gaps between jobs. And interestingly, what we are hearing a lot of, too, the problem with the spot market -- or one of the complications with it, from an efficiency standpoint for us, or utilization standpoint for us -- is that, if anything -- when you are on contract and you are committed to a particular customer, you work back and forth and you coordinate your schedules. And, if the customer is delayed, we are delayed, but we know that we're going to still be working for that customer.

In the spot market, we are experiencing -- it's just a headwind -- we're experiencing where we get lined up, we are ready to go, a customer has a delay, but unfortunately we already have something else scheduled behind that, so we missed that opportunity. So there is some of that taking place as well. It's inefficient for us, it affects our utilization, it's just something we have to work through. But, having those more firm, if we could transition from the absolute spot market into reasonable pricing agreements and more of a commitment with the customer, so that we are not missing out on revenue days that could be made up. Because, you're still going to be working with that customer and they're going to rush to try to catch up.

It will help us, and I think it will help the customers, too. Because they are seeking, and we are seeking, to be a lot more efficient together. And, I think, right now, again, with the spot market and the way it is, things moving around and all the transition, that is a complication. But, hopefully, that's going to work through, and everyone is going to realize that they are better off if there is some of this alignment of resources and schedules on these more complicated completions. And, right now, I think people are just moving around because of the nature of pricing right now. But, with a little more firmness, I think that will improve.

Okay. And then, just my final question. You talk about, kind of on back of the more complicated completions, slickwater versus more gel-based fracs, have you seen any sort of preference from operators on one versus the other in terms of what they are ordering?

Mike, no changes in preference there. So there's nothing really to report in that area.

Okay, that is it for me. Thanks for taking my questions.

Jeff Tillery with Tudor, Pickering, Holt.

One of the things is, I'm trying to think through the dynamics, I think to one of the questions earlier you indicated you thought Q2 revenues and margins both would be up sequentially. My guess is that is a function of the weakness in January, February not recurring. But my question is -- one, is that what you intended to indicate? And then, two, is pricing going to be lower sequentially in the second quarter, just given the magnitude it seemed to have declined in the first quarter?

Jeff, this is Jim, I think you hit on the two major variables. We do believe, at this point, that because of the higher utilization we will do better in second quarter than first. What we are seeing, what we have seen in the first quarter is very harsh pricing action, usually from some of the smaller players. I want to call it irrational, but I also acknowledge that's self serving. It is the pricing that they are doing, and they're working at that pricing. And, we have seen that in past cycles. I think we expected that this sort of irrational pricing behavior on the part of our competitors would end sooner than it has. Given the fact that it hasn't ended sooner than we thought, it's hard for me to say that it's ending here in April and May.

Got you. Any particular regions stick out where that's more prominent?

Probably the Midcon is the most difficult in pricing.

Okay, thank you for that. And my last question, you answered the question in relation to severance costs in the first quarter. But anything unusual in the first quarter such that we shouldn't use Q1 as the baseline from which to project going forward?

No, it was a clean Q.

Okay. All right, thank you, guys.

Mike Marino with Stephens, Incorporated.

Questioning on the pricing, specifically pumping. How -- would you characterize the spot market as having stabilized, or is it still moving lower?

Reasonable question. I think there hasn't been enough time passed. Again, the fourth quarter was unusual starting out. The first quarter was unusual. So, I'm not sure in that short of a period of time and with those unusual occurrences that we can really make a call on that at this point.

Okay. And can you -- (multiple speakers)

Excuse me, as I alluded to there, there are discussions with customers that appear to be something other than them trying to drive the absolute bottom pricing. So, maybe that is an indication that there are discussions about pricing agreements. So maybe they do believe that -- it would indicate to me that we are closer to the bottom than we would have been a few months ago.

Right, that makes sense. Maybe the same question for coil tubing and the pricing outlook and dynamic there.

Michael, this is Jim. The earlier comment was that pricing certainly declined in first quarter. There's still new coil tubing units coming to market, both among established players like us and new entrants. So, just the supply/demand variables would tell you that pricing is going to continue to be difficult in coil tubing for a while.

Okay, great. Thanks, that's all I had.

Daniel Burke with Johnson Rice

This has been attacked from a lot of different angles, but then you do have a pretty heavy concentration of horsepower in the Permian, where it seems as though rig activity has held up relatively well, year to date. Any comment on how your Permian activity and pricing transitioned, or held from Q4 to Q1?

Daniel, this is Jim. We characterize that as a market with a lot of positive characteristics. We talked earlier about the increasing directional and horizontal rig count in the Permian versus the traditional vertical, and we all know what that can do for utilization for service lines like ours. However, at last count there were 38 pressure-pumping companies in the West Texas region competing for business. So, pricing declined sequentially in the spot market in West Texas, because of that increased competition. And it's hard to give you an exact number, but pricing was difficult in the Permian.

Okay, that is helpful. And then, just on the headcount reductions, then, I haven't heard, just to confirm, you all haven't stacked out any crews, that would simply be scaling back from a larger amount of 24/7 work then?

Well, just as some of our fleets went from contract to spot, which occurred at the end of the third and in the fourth quarter, and as that transition happened, we had some layoffs, attrition, people who didn't want to move, whatever. But let's be clear. One of the features of the oilfield right now is that it's hard to get good people. So we haven't laid off good people, and we haven't stacked any crews or stacked any equipment or told any crews to go on furlough and come back when we call you. It is just what happened with the changing nature of the work, and the headcount reductions were minimal. We did want to mention them, though, because that's something that's -- certainly hasn't happened in the past 8 or 10 quarters.

Great, that's all I had left, thanks.

(Operator Instructions)

Matt Conlan with Wells Fargo.

Hey, guys. So, in the first quarter, the larger integrated service companies seemed to show better resiliency of their operations, some even reporting sequential increases in utilization. I was hoping to get a better understanding of why? I mean, are they catering to different customers? Or are they bundling services? Is there any explanation for why they seem to have better sequential performance than, not just you, but other smaller competitors?

Yes, Matt, we noticed that, too. Some of it might be bundling services, that is a characteristic of their operations, more so than ours -- their, meaning larger companies versus ours -- that might be part of it. Part of it might be a scale that lets them move around a bit more and catch -- I'm using our industry vernacular now -- but catch work because they've got some extra crews available. Just their scale allows them to be a little more flexible, that might be part of it. We do know that they are being more aggressive on pricing. However, it does translate into apparently higher revenue, which we have to acknowledge. So, I wish we had a good answer, but we don't.

Okay. All right, well thanks for trying. We're trying to scratch our heads over here and figure it out as well.

Okay, we appreciate it.

Luke Lemoine with Capital One Southcoast.

Hey, Jim, you had said that 12% of your horsepower was now doing 24/7, which means you probably added one fleet in addition to the Eagle Ford fleet that was on 24/7. Is that incremental 24/7 fleet in the Marcellus?

Yes, it is. But it's not like we added an incremental fleet as in adding horsepower. That is just the fleet that's been working on 24-hour operations, yes.

And what is the potential for putting a fleet on 24/7 in the Permian?

In the Permian, that's a good question. We don't know of any 24-hour opportunities right this moment. It's always a possibility. But that's --

It seems to be less prevalent at this point. Again, as Jim mentioned, we have not done any 24 hours crews in that area yet. But it's something we'd be willing to entertain.

All right, thanks.

And with no further questions, I'd like to turn the call back over to Jim Landers for any additional or closing remarks.

Okay, thank you, operator. We want to thank everybody who called today and participated by asking questions. We do appreciate it and hope everybody has a good day. Talk to you soon.

This concludes today's conference. As a reminder, the conference call will be replayed on our website in the next two hours following this call. Thank you.