RPC Inc (RES) 2013 Q2 法說會逐字稿

Good morning, and thank you for joining us for RPC, Inc.'s second-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 for questions. I would like to advise everyone that the 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 are going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. I would 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.

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, the nearest GAAP financial measure. Please review that disclosure if you're 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 to see a copy.

I will now turn the call over to our President and CEO, Rick Hubbell.

Thank you, Jim. This morning we issued our earnings press release for RPC's second quarter of 2013. Following my comments, Ben Palmer will discuss our financial results in more detail. RPC continues to face challenges resulting from a competitive operating environment, including the transition from contract to spot work in difficult pricing. Our customers continue to drill and complete increasingly service-intensive wells. This is providing opportunity for our equipment and personnel to remain on the job sites for longer periods. While we were pleased that the second quarter representing the first sequential increase in revenues and profit in over a year, we do not expect to generate consistently improving sequential results until natural gas fundamentals recover.

Our CFO, Ben Palmer, will now review our financial results in detail for the second quarter.

Thank you, Rick. For the second quarter ended June 30 2013, revenues decreased 8.5% to $457.6 million, compared to revenues of $500.1 million in the prior year. These lower revenues resulted primarily from increasingly competitive pricing coupled with lower activity levels in several of our service lines. EBITDA for the second quarter decreased 30.4% to $120.4 million, compared to $172.9 million for the same period last year. Operating profit for the quarter decreased 43.4% to $67.9 million, compared to $119.9 million in the prior year. Our diluted earnings per share for the quarter were $0.19, a 42.4% decrease compared to $0.33 in the prior year.

Cost of revenues increased from $281.3 million in the second quarter of the prior year to $287.6 million in the current year, due to greater service intensity within our pressure pumping service line. Cost of revenues, as a percentage of revenues, increased from 56.2% in the prior year to 62.8% for the second quarter of the current year, due primarily to lower pricing for our services and increased materials and supplies expense due to job mix. Selling general and administrative expenses during the quarter were $47.6 million, compared to $43.1 million in the prior year. SG&A expenses, as a percentage of revenues, increased from 8.6% last year to 10.4% this year. This percentage increase was primarily due to an increase in bad debt expense, coupled with lower revenues. Depreciation and amortization were $52.8 million for the second quarter of 2013, a decrease of 2.2% compared to $54 million in the prior year.

Our Technical Services segment revenues for the quarter decreased 8.1% compared to the prior year. Operating profit for this segment decreased $66.1 million, or 41.2%, compared to $112.4 million during the same period in the prior year. The decrease in revenues and operating profit was primarily due to lower pricing for our services. Our second-quarter Support Services segment revenues decreased by 12.8%, and operating profit decreased by 43.5%, due primarily to lower activity levels coupled with lower pricing within the rental tools service line, the largest service line within this segment. On a sequential basis, RPC's second-quarter consolidated revenues increased from $425.8 million in the first quarter to $457.6 million, an increase of 7.5%, due to improved activity levels.

Cost of revenues increased from $268.2 million in the prior quarter to $287.6 million, due to increased activity levels and corresponding increased materials usage. Cost of revenues, as a percentage of revenues, was relatively unchanged from 63% in the first quarter to 62.8% in the second quarter. SG&A expenses, as a percentage of revenues, were 10.5%, relatively unchanged from 10.4% in the first quarter. RPC's sequential EBITDA increased 8.9%, from $110.6 million in the first quarter to $120.4 million in the second quarter. Our EBITDA margin increased slightly from 26% to 26.3%.

Our Technical Services segment generated revenues of $424 million, 7.6% higher than revenues of $394 million in the prior quarter, and an operating profit of $66.1 million compared to $58.5 million. Our operating margin in this segment increased from 14.8% of revenues in the first quarter to 15.6% in the current quarter. Many of our service lines within this segment experienced improved utilization; however, the pricing environment remained challenging. Revenues in our Support Services segment increased 5.4%, due primarily to higher activity and slightly improved pricing due to job mix within our rental tools business.

Support Services operating profit increased to $7.1 million in the second quarter, compared to $6.3 million in the first quarter. Our operating margin in this segment increased from 19.7% of revenues in the first quarter to 21.1% in the second quarter. RPC's pressure pumping fleet during the quarter remained unchanged at approximately 680,000 hydraulic horsepower. Although we had no plans to add additional horsepower, we were presented with an opportunity to acquire new pumps, totaling 30,000 hydraulic horsepower, at an attractive price. We expect to take delivery of this equipment by the end of the third quarter.

Second-quarter 2013 capital expenditures were $55.5 million, an increase of $2.4 million compared to the first quarter. Currently, we expect to spend, in total, approximately $250 million on capital expenditures for full year 2013. A significant portion of our total capital expenditures continues to be directed towards capitalized maintenance of our pressure pumping fleet and other operating and support equipment. Similar to last quarter, RPC did not relocate any equipment during the current quarter, and we are satisfied with the geographic distribution of our equipment and personnel. While we experienced some weather-related disruptions during the second quarter, due to a late Canadian spring breakup and record rainfall in North Dakota, we estimate this negatively impacted our sequential revenues by approximately 1%.

During the current quarter, we repurchased 1.2 million of our shares on the open market, and the Board authorized an increase of 5 million shares to our repurchase program. RPC's outstanding debt under its credit facility at the end of the second quarter was $67.2 million. The balance decreased by $20.4 million compared to the end of the first quarter. Currently, our ratio of debt to total capitalization is 6.8%.

With that, I will turn it back over to Rick for a closing remark.

Thank you, Ben. In the second half of 2013, we believe that our industry will remain in a mild cyclical downturn, characterized by flat rig count and competitive pricing. Also, commodity prices will continue to hamper drilling activities in natural gas shale plays. However, we are encouraged by higher well counts, increased net footage, and greater service intensity, all of which positively impact business prospects. RPC's ability to successfully compete and benefit from these current market trends reflect favorably on the quality of our equipment and personnel. In this environment, we will continue to focus on operational execution, cost controls, supply chain management, and capital discipline. This should benefit RPC and optimize our return on invested capital when natural gas fundamentals recover.

I would like to thank you for joining us on the conference call this morning. At this time, we will open up the lines to answer your questions.

(Operator Instructions)

Neal Dingmann, SunTrust.

Ben, a question for you. You were talking about the additional, I guess, assets -- you had the 30,000 that you are bringing on shortly. Number one, I guess you guys are always pretty opportunistic, as far as looking for additional assets. Are you seeing small deals out there that maybe are catching your interests, as far as private equity, having some horsepower that you might be interested, I guess? That would be my first question, I think.

I think this particular transaction could be indicative of that type of activity increasing. We have seen other types of equipment, yes, that seems to becoming available in pieces, so don't know the actual origin of the equipment, or where it's coming from, and what the equity or debt [backers] might look like. Yes, I think that could be a trend. That perhaps could be positive if there's a shakeout taking place.

Okay. And then, any idea of where you are taking this -- and then, in conjunction to -- where you are taking the 30,000, or where you will place that initially, And then, Ben, in conjunction with that, just wondering, versus I think the last time you, or Clint, or somebody, was out looking at the breakdown where you have 40% in the Permian and about 16% in Eagle Ford -- your top-two areas. I know you didn't move any other assets. Just wondering if that's still a pretty good breakdown?

Jim will run through a breakdown. Regarding the new equipment, of course, that represents a little less than 5% increase in our fleet, so it's not tremendous. We're glad to have it. And it happens to be, we believe, at this point, headed toward West Texas and the Bakken.

Jim will tell you about where we think the equipment will be situated.

Yes, good morning, Neal, this is Jim. Just a pro forma percentage rundown -- and by pro forma I mean, if the new pumps were in place right this moment -- of course, they aren't, but if they were. And again, as Ben said, it doesn't change things a whole lot. West Texas is around 41%. Appalachia is pretty close to 13%, so you see these things aren't changing a whole lot. Mid-con around 12% -- and recall for you and for others, that does not include Arkansas. East Texas is around 12%, South Texas about 14%, and the Bakken, now, would be about 6%. Then, recall that we have that little -- that rotational fleet that supports equipment that's being maintained, and that's 2% or 3%.

Okay. Thanks, Jim. And then, very last one, Ben, for you. As far as -- you mentioned in the press release about the intensity. I know some of your peers have mentioned the same thing. Just wondering, again, does that mean more of your crews, I guess, now -- or, what percent are on the 24-hour basis, as far as what they are running? Do you see this intensity continuing through the remainder of the year to -- at that point, do you think that will start to help push pricing more than it has at this point?

When we speak of the intensity, I guess that's, to this point, less than the fact that we are moving more to 24-hour work. We are still seeing relatively low percentage of our fleet working 24 hours. We certainly will have and will continue to entertain appropriate opportunities to do that. I think the service intensity reflects more on the type of jobs, the longer laterals pumping a tremendous amount of -- on those jobs we are participating in, pumping a tremendous amount of additional propylene, and so forth. Again, less so on the 24 hours, but we are still -- Jim, what are we, 6%?

Yes, about 6%

6% of our equipment is working on 24 hours, so it really hasn't expanded. We haven't found those opportunities, yet, that make sense for us. Again, we are open to it and evaluating them as we speak.

Very good. Thank you, both.

Megan Repine, FBR Capital Markets.

I was hoping you could talk about how you think about customer budget plans for the remainder of the year, and any risk of a fourth-quarter slowdown?

Hey, Megan, this is Jim. We don't really have any visibility into customer budgets for the remainder of the year. The fourth-quarter slowdown, as we all know, is always a specter in our business. People may decide that they've run out of their budgets in October and November. Good question, I'm afraid we don't have any analysis or any information to share with you.

Okay. And then, my next question is on coiled tubing. Can you talk about the progression of activity and pricing over the three months in the quarter?

Yes, Megan, Jim again. Coiled tubing was flat during the quarter, compared to the first quarter. There were some regional differences, but nothing that jumps out as anything that is meaningful from a business point of view. Coiled tubing utilization and pricing has, over the quarter, stayed pretty similar.

Okay. And then, finally, can you provide the revenue breakdown by product line that you usually give?

Yes, by all means. As a percentage of consolidated revenues for the second quarter that we are reporting today, pressure pumping was 54.5% of revenue, ThruTubing Solutions was 14% -- 14.4% of revenue, number three was coiled tubing at about 9.5% of revenue, and our snubbing-hydraulic workover service line was about 3.9% of revenue. I should have mentioned rental tools right before that -- rental tools was 4.5%.

Okay, great. Thank you. I will turn it back.

Luke Lemoine, Capital One Southcoast.

Ben, I think you had mentioned that you only had 6% of your horsepower on 24/7-hour ops. Is that one crew now? Because, I thought you had two previously.

Luke, it sort of 1.5 crews. It's hard to measure about 24-hour work. It is the same as it was before, yes.

One-ish in the Marcellus and one-ish in the Eagle Ford, at times?

At times, yes.

Some work more steady than others.

Okay. And then, the 30,000-horsepower that you are buying, is that brand new?

Yes, it's never been used.

Can you say how much you are paying for it?

I'd rather not.

Okay --

It is an attractive price.

Okay. Your CapEx, now, is $250 million. I think last quarter it was $275 million -- so you are decreasing it even with buying 30,000 horsepower --?

Correct.

What's the difference there? What's coming out?

I think, obviously, as we get deeper into the year, the number hopefully gets a bit more refined, but I think it's, too, it's our guys looking at what their requirements are, and we are trying to keep it to a minimum in this environment. We'll certainly add the capacity if opportunities like this new horsepower if it's attractive and we want to jump on it, we clearly have that capability. But right now, and just routinely and what we see on the radar, we see that trending down at this point. Very reasonable question, we, too, were looking at it, but I think we are all focused on trying to keep the CapEx as low as possible, keep our capital invested as low as possible in this environment, and wait for the right time to begin to increase the spending.

Okay. And then, you said Bakken and Canada impacted revs by about 1%. Do you have that number for the EBIT margins -- how much it impacted EBIT margins?

We don't.

We don't. It would be about in line, Luke.

Okay. All right, great. I will turn it back. Thanks.

John Daniel, Simmons & Company.

Just want to follow-up on the equipment -- the [jump up] on the equipment order. The equipment, was that -- the 30,000 horsepower -- was that equipment that someone walked away from? Or, was this equipment that the builder had built on spec? Any idea?

Somebody walked away from it. Similar to what Neal's earlier question was, that someone had ordered it and walked away and we were able to step in.

Okay, got it. Then, I don't know if you said this or not, I apologize, but is the intent -- I know it's going to the Bakken and West Texas, but is it going out to replace legacy equipment? Or, are you going actually try to find a crew to [crew] this stuff up, independently?

I don't know that net-net it will increase the number of employees, we just think it will position us better in those particular regions. Get -- whatever you want to call it -- higher-quality jobs, better jobs, or whatever. So, we are not planning to move equipment out. It will be a net addition to those regions.

Okay. Quickly on the outlook for Q3 activity levels, can you help us -- specifically, any color on June activity, or June revenue versus the Q2 average -- how the run rate is shaping up for Q3?

John, this is Jim. I hate to say that it's flat, because that doesn't seem to be very illuminating, but sequentially during second quarter, things were flat. That's the way it looks going forward.

I think what -- in our commentary, I think what we're trying to say is there doesn't appear to be -- we're very pleased with the sequential increase. We always say around here -- it seems like in the oil field, what we always experienced, that things are either getting better or they're getting worse. They are never stable. It seems like we have been in a stable period the last couple of quarters. We're, obviously, very pleased that we had a sequential increase, but we are not sitting here, today, saying -- okay, we're off to the races, and we know that next quarter is going to be better. We are in that period where we say that there could be some volatility.

I guess what we are signaling is, we wouldn't be surprised if our results continued to progress in the [second quarter], but we likewise would not be surprised if it was flat, or even slightly down. I think there is -- still more of that same period where it's a little uncertain. It's not uncertain that we don't know how far it's going to go down, it's just uncertain as to when it's going to pick up. Hopefully, this is maybe a signal that it has troughed, but --

Okay --

We're in a wait-and-see mode and picking our spots and hoping for the best.

Fair enough. I appreciate not wanting to give specific financial guidance, but in the realm of flat results, top-line quarter over quarter, assuming that were to play out, given the pricing pressures alluded to in the commentary and in the release, would you expect, in that scenario, margins to be lower in Q3 versus Q2?

No.

No, we wouldn't.

Okay. Fair enough. Thanks, guys.

Michael Marino, Stephens.

To follow up on the new equipment, you mentioned West Texas and the Bakken -- if you could help me understand the reasons it's going to those markets -- is it that RPC specific, or are those the best markets from a pricing standpoint where you think you can find more work for it?

Probably a combination, I guess. It's probably more related to us and what we see in our particular circumstances. Again, it's less -- I can run the number, but it's less than 5% of our total fleet. Again, it's not huge. Glad to have it. We think it will be a real benefit but not a big needle mover. Reasonable question, but I think it's combination of the market and where we are positioned and what opportunities we think we have in front of us.

Michael, it might give us a little -- and again, we are talking about small things that don't move the needle, as Ben says, but it would give us a little more critical mass in the Bakken, where there are opportunities, and we are gaining a foothold, so that's an opportunity. In West Texas, we have a big market share and are doing a lot there. We are encouraged by the increasing intensity, with longer laterals and everything else going on in Texas, so we think there's an opportunity there also.

Right.

Sure. Okay, makes sense. Regionally, are you seeing any real discrepancies in pricing for pumping, or have things leveled out here and no one region jumps out at you?

Kind of a replay of the first-quarter call, but the mid-continent remains the weakest for us, the Permian, a little better. The Marcellus has shown some strength, but not -- there's nothing that jumps out as particularly good or particularly bad or we would be moving equipment, so that tells you something.

Okay. Great. Thanks for the color.

Jeff Tillery, Tudor, Pickering, Holt.

To circle back to John's question earlier, it seems like the progression that you have witnessed was pretty good increase in March coming out of winter weather, versus February and January, and then from there, it has been pretty steady -- is that a fair characterization of what you have seen?

Yes, that is fair, reasonable --

And then, the pricing commentary -- obviously, pressure pumping pricing is the most important thing to you because of the waiting, from a revenue standpoint, but as you think about the portfolio, where do you see the best pricing dynamics? Where do you see the softest -- independent of size, raw pricing changes or price pressures in the portfolio.

Jeff, this is Jim. There's not a whole lot that stands out, again, good or bad, favorable or unfavorable. In our rental tools service line, we did have lower discounts to our price book during second quarter than the first quarter, so pricing improved incrementally -- marginally. ThruTubing Solutions continues to be strong, but certainly didn't improve. And then, the others were fairly flat.

We are hopeful, I guess, with the Permian -- again, with the increased horizontal drilling, that we will be able to capture a lot of that, and I think, will definitely benefit our business. So, I think that's a positive. Otherwise, I think the commentary gets back to what Jim talked about before about the relative weakness in the mid-con and some of those other areas.

Anything going on, on the raw materials side, that we need to be watching for potential, either margin benefits or margin pressures, as you step through the second half of the year?

Nothing of note right now. Reasonable question -- it seems to be fairly steady at this point in time. Not seeing or detecting any particular shortages or excesses, so we are comfortable with where we're positioned and not expecting any relative benefits or weaknesses from materials and supplies expenses in the latter half.

Last question. Just for clarity, the horsepower you are acquiring -- or you are buying, that's in the $250 million CapEx number for the year -- is that correct?

That is correct.

All right. Thank you.

Brian Uhlmer, Global Hunter.

I've got a few quick and easy ones. You mentioned G&A and bad debt expense going into that number. I was curious if you could help us out on the level of that, and if you expect some recurrence of that, and what occurred there? And, a little bit of guidance for next quarter's G&A, and how the run rate shakes out?

It was about an extra $4 million. Most of that was one particular customer that we've done a lot of work for, and there was no indication of any problems, but they declared bankruptcy in the second quarter. We fully reserved for that particular outstanding with that customer. We do not expect that to recur. We don't think that is a trend of any type. Relative to SG&A, I think, adjusting that out, we are on a, we believe, more of a normal run rate if you adjust out that $4 million or so.

Very helpful. Thank you. Second question, on the new equipment, that was included in the $55.5 million during the second quarter, and that's in your PP&E for the Q2 balance sheet data, is that correct?

No, the new equipment will take delivery in the third quarter, so there's been no advancement of funds yet.

Okay. And then, on the loss on disposition of assets, what did you dispose of, and what was -- I'm trying to reconcile the balance sheet, here, with the PP&E and CapEx and on the loss on the disposition of assets -- what did you dispose of and what was the value approximately?

There was nothing unusual. What that line includes a lot of is some of the components in pressure pumping that get disposed of as it wears out prematurely. So, it is nothing unusual, or it's about consistent with prior quarters. To be honest with you, I don't have those details right in front of me, now, but it's nothing unusual.

Nothing unusual, okay. That's all I was trying to clarify. That's all I had, thank you.

Doug Dyer, Heartland Advisors.

My question has been answered, thank you.

(Operator Instructions)

Daniel Burke, Johnson Rice.

In the ThruTubing business -- a differentiated business there, but in this flattish domestic market, can you all continue to grow that business? Or, can that business grow over the back half of the year, or is it essentially capped out by the flat market?

It's very -- we do believe it can grow. There are some new innovations that we have in place which should allow us to continue to grow that service line.

Okay, so second half -- it would be reasonable to expect in this flattish environment, second-half '13 revenues above first-half '13 revs?

For TTS, yes.

Yes.

Okay. Any thought as to the magnitude or how meaningful those new offerings are?

Not currently (laughter). We would rather not comment at the present time. We will see -- we are in very good shape, and it has been operating. The acceleration is yet to be determined, but we will all watch it and see what happens.

Okay. And then, one other one. If I heard you all correctly, addressing Q3, I think you said in a flat-activity environment, you wouldn't expect margins to be lower in Q3. Was that correct? And if so, what's the inference to make on pricing, based on that comment?

Daniel, this is Jim. Prior comment is correct. The inference on pricing, or our implication on pricing, would be that it is flat.

Okay, so it --

Let me comment. I know this always comes up. I guess we -- with the size of our portfolio -- somebody else used that word -- our portfolio of pumps, and the fact that we've currently moved from a contract to a spot market, there is, again, as we talked about earlier, the opportunity for volatility. We could win an opportunity or two and have a nice improvement. We could lose an opportunity or two and have a slight degradation in our results, so it's still a very fluid environment.

We feel good about our position in the market and our capability to participate in these new trends, with again, more horizontals and longer laterals and all that, we think we are, again, well positioned and capable and have a good reputation in that area. But with the size of our portfolio, there is that potential for volatility, either to the upside or the downside. I don't know if that color helps at all, but that's the way we look at it. We are, day to day, month to month, quarter to quarter, doing the best we can, getting ourselves positioned and waiting for the opportunity in the market to improve and jump on opportunities that are presented to us.

That's helpful. That answer does help. Thank you, guys.

Michael Cerasoli, Goldman Sachs.

It looks like there was a gradual pickup in utilization, but it sounds like it might be more customer specific than anything meaningful, from a geographic perspective, if I heard you correctly earlier. Was this pickup in utilization -- is it more driven by larger players doing a little bit more? Or, was it more the smaller, private companies reacting to some recent positive trends in the market?

Mike, this is Jim. A lot of it was the January-February affect of we had a very slow start to the first quarter, and so there was flatness in the second quarter. I think also, more than customer specific, we did have -- and it's hard to measure and it's hard for the industry to measure, but higher intensity, longer pump times, longer laterals for horizontal completions, more time on the job, and that's part of what happened in the second quarter as well.

Okay, so not much of a variation between the larger customers and the smaller customers out there?

That's correct.

Okay. And then, returning real quick to the Bakken weather and Canadian break up -- it sounds like it was a pretty negligible impact from your perspective, but some of the others out there talked about it being much more meaningful. From a higher-level market perspective, do you get the sense that there is a larger-than-normal backlog as result of what happened? Were operators not rushing to get back to where they expected to be at this time of year -- sort of lack of urgency, if you will?

One reason it wasn't hugely impactful on us is the fact that our exposure to Canada and North Dakota is relatively small. We have -- ThruTubing is very active in Canada, but other than that, we have very little work up there for other service lines. That's the main reason it was negligible for us. Through our discussions, we have told that things are getting back to work pretty aggressively as it relates to Canada. From our perspective, we feel good about the progression up there in the third quarter compared to the second quarter.

Thanks for taking my questions.

Matt Conlan, Wells Fargo.

If I did my math right, your pressure pumping revenue increased quite a bit, up about 20% sequentially. I know you got off to a slow start of the year. Can you give us some guidance as to how -- what your sequential growth was in stages, versus what was an increase in intensity, say revenue per stage?

Matt, this is Jim, and you're a smart fellow. You are smarter than I am, but your sequential increase in pressure pumping is a little bit off. It was more in the 12% range. As we referred to before -- I apologize that it's kind of hard to measure, but again, it is hard for the industry to measure -- that did not relate to pricing improvements, it just related to more work. Again, more time on the job site, longer laterals, more pump times, more profit, more raw materials, where were a big part of the pressure pumping ticket, and that's what it related to.

We are also in an environment, now, where a big customer can decide to do something or not decide to do something, and that impacts you too. That does not reflect on the market, but even if the market is better or worse, as these completions require more personnel and more equipment and certainly more profit, sometimes things happen or don't happen, again, for seemingly random reasons. But to try to answer your question, specifically, about first to second quarter -- it was more like a 12% sequential increase and had to do with just increasing service intensity and harder work.

Okay, thanks. I will definitely recheck my numbers (laughter).

Sorry, I had to bring it up.

No, I appreciate it. Do you have any sense as what percentage profit increase you are using? Is it a broad-based increase in putting more sand down the wells?

It is -- I'm sorry, I don't have a good sequential increase for you, although it's not too far apart from where our sequential revenue increase is.

Keep in mind, too, that sequential increase was generated from, or resulted from, the fact that pressure pumping, too, got out of the gates slow in the first quarter --

Yes --

So, that's part of the impact as well. But, we are seeing those trends. We are working on more and more horizontal wells, as an overall percentage, and we are tending to the jobs, the amount of materials being used is continuing to increase.

Okay, great. Thank you very much.

(Operator Instructions)

Luke Lemoine, Capital One Southcoast.

Just one follow up -- on the $4 million of bad debt expense in the G&A, how was that allocated between Technical Services, Support Services, and corporate?

Technical. What was your second question?

That was the only question. So, it was all in Technical?

Correct.

Okay. Thank you.

John Daniel, Simmons & Company.

You talked about the higher-intensity jobs that you saw this quarter. Is it safe to assume that work is resulting in greater wear and tear on the equipment?

All things being equal, yes. Although, it's only worth mentioning, but this is not like really service-intensive [painful] work that tearing up the pumps. It is more like pumps working at lower RPMs for a longer period of time. Which isn't the worst thing in the world, but it's a little bit different from the nature of the work a few years ago.

Okay. Fair enough. And then, one on ThruTubing Solutions. Can you, Jim, provide an update on the competitive landscape, here in the US, what you are seeing there? I know one of your competitors has talked about a desire to get into that segment. Just some thoughts on the business?

In general, I think we are seeing -- starting to see some competitive pressure in ThruTubing Solutions. It's a good business. There has been a little bit more competition, than in the past --

The nature of that business, though, it is a little more specialty, which [inflates] it some degree. But, yes, I think there is more competition. There's been a lot of development, again, of new products and new techniques. We expect, like everything else, it will remain competitive.

Okay. I don't know if you want to answer this one, but are you seeing any signs that people are making a run at your folks in that product line, and thus, potential that we could see revenue hits by an exodus of folks?

That's always a possibility. Not to any significant degree, at this point.

Not at this point, okay. Thank you very much.

Adam France, 1492 Capital.

Ben, you made a relatively short comment on the bad debt expense -- $4 million. What is a normal level? You are always very conservative and smart folks. How did you get mixed up with a poor credit, I guess?

Good question. Certainly, we have been lucky enough in the last several years, we have not had much in the way of bad debt. I don't know. We have done work with this particular customer in other areas. There was no indication, based on our work, that there was any problem. And of course, we are not evaluating these credits alone, we are using a lot of outside information, as well, so it did come very much as a surprise.

Maybe it will come out later that there's something more to it. We don't think it was a failure in our internal processes or anything like that. I think it just -- whatever you want to say -- came out of the blue, or whatever, so --

No, that happened, it (multiple speakers) --

We did the work in the first quarter. They filed bankruptcy in the second quarter. There was no hint. And, it's not like we had been sitting around waiting for 10 months to collect it and can't get it and they filed bankruptcy --

It's a good point --

They did the work and filed bankruptcy. It happened very quickly.

Very good. Thank you, guys.

That does conclude our question-and-answer session. I would like to turn the call back to you, Mr. Landers, for any additional or closing remarks.

Okay, thanks. We appreciate everybody calling in and listening this morning, and we appreciate the questions. Hope everyone has good day. Thank you.

As a reminder, a replay of today's conference will be available on RPC, Inc.'s website, www.rpc.net, within two hours. Thank you, everyone, for your participation. This now concludes the call. Have a great day.