RPC Inc (RES) 2014 Q1 法說會逐字稿

Good morning and thank you for joining us for RPC Incorporated first-quarter 2014 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.

(Operator Instructions)

I would like to advise everyone that this conference is being recorded and Jim will get us started by reading the forward-looking disclaimer. Please go ahead, Sir.

Thank you, Lisa and good morning everybody.

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 we'll make 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 2013 10K and other public filings that outline those risks. All of which are available on our website which is 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 our performance consistently over various periods without regard to changes in our capital structure. We're also required to use EBITDA to report compliance with financial covenants under our revolving credit facility.

Our press release today and also 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 its calculated. If you have not receive a copy of our press release and would like one 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.

Jim, thank you.

This morning we share our earnings press release for RPC's first quarter of 2014. Following my comments, Ben Palmer will discuss our financial results in more detail.

RPC's revenues for the quarter increased 17.8% compared to the first quarter of 2013. Our revenues increased due to higher activity levels in several of our largest service lines, greater service intensity and a larger fleet of revenue producing equipment, partially offset by lower pricing for our services. On a sequential basis our revenues increased by approximately 3% despite a slow start to the year and winter weather. This too is due to higher service intensity and higher activity levels in many of our service lines.

First-quarter operating profit, EBITDA and net income improved sequentially and year-over-year.

Our CFO Ben Palmer will now review our financial results in more detail.

Thanks, Rick.

For the first quarter, revenues increased to $501.7 million compared to revenues of $425.8 million in the prior year. These higher revenues resulted primarily from higher activity levels in most of our largest service lines. EBITDA for the first quarter increased 9.2% to $120.8 million compared to $110.6 million for the same period last year.

Operating profit for the quarter increased 14% to $65.2 million compared to $57.2 million in the prior year. Our diluted earnings per share were $0.18 compared to $0.16 in the prior year.

Although we generated higher revenues compared to the prior quarter and prior year, winter weather had a more significant impact on our revenues during the first quarter, than usual. In several of our markets we experienced customer activity delays and other logistical issues because of these conditions. We estimate our revenues were negatively impacted during the quarter by approximately 5% and that profitability was impacted by a slightly higher percentage.

Cost of revenues increased from $268.2 million in the first quarter of the prior year to $330 million due to higher activity levels and greater service intensity within our pressure pumping service line. Cost of revenues as a percentage of revenues increased from 63% in the prior-year first-quarter to 65.8% due primarily to lower pricing for our services and increased materials and supplies expense due to job mix. We also incurred higher transportation expenses during the first quarter because of rail interruptions which required us to use more expensive trucking for timely delivery of raw materials to meet certain customer job needs.

Selling, general and administrative expenses during the quarter were $48.7 million compared to $44.9 million in the prior year. SG&A expenses as a percentage of revenues decreased slightly from 10.5% last year to 9.7% this year. Depreciation and amortization were $55.5 million during the first quarter of this year, an increase of 5.1% compared to $52.8 million in the prior year.

Our Technical Services segment revenues for the quarter increased 18.5% compared to the prior year. Operating profit for this segment increased $64.9 million or 13.9% of revenues compared to $58.5 million or 14.8% of revenues during the same period in the prior year. Revenues and operating profit increased due to higher activity levels in most of the service lines within the segment as well as greater service intensity including increased raw material usage in pressure pumping.

Our first-quarter support services segment revenues increased 9.2% and our operating profit increased 19.2% compared to the same period in the prior year. This improvement was due primarily to higher activity levels within the rental tool service line, the highest or largest service line within this segment.

On a sequential basis RPC's first-quarter revenues increased to $501.7 million from $487 million. Cost of revenue's increase from $318.9 million in the prior quarter to $330 million due primarily to increased activity levels. Cost of revenues as a percentage of revenues increased slightly from 65.5% in the fourth quarter to 65.8% in the first quarter. SG&A expenses as a percentage of revenues were 9.7% in the first quarter. A slight increase compared to 9.4% in the fourth quarter of 2013.

RPC's effective tax rate decreased to 39.4% in the first quarter compared to 42.3% due to a state income tax true up adjustment of approximately $1.3 million recorded in the fourth quarter of 2013. RPC's sequential EBITDA increased slightly from $119.4 million in the fourth quarter to $120.8 million in the first quarter. While our EBITDA margin was similar in both quarters.

Our Technical Services segment generated revenues of $467 million, a 3% increase to revenues of $453.5 million in the prior quarter. And an operating profit of $64.9 million compared to $65.4 million in the fourth quarter. Our operating margin in this segment decreased from 14.4% of revenues in the fourth quarter to 13.9%.

Revenues in the Support Services segment increased 3.8% due to improved activity in many of these service lines. Support Services operating profit increased to $7.5 million in the first quarter compared to $6.9 million in the fourth quarter. Our operating margin in this segment increased from 20.5% of revenues in the fourth quarter to 21.5% in the first quarter.

RPC's pressure pumping fleet during the quarter remained at 710,000 hydraulic horsepower. For the first quarter of 2014, capital expenditures were only $37.9 million, a decrease of $3.9 million compared to the fourth quarter.

Projected 2014 capital expenditures have been increased to $375 million. Incorporated in this amount is a new pressure pumping expansion plan which will add approximately 170,000 horsepower to our fleet. We anticipate receiving the bulk of this equipment and placing it in service by the beginning of 2015.

Following receipt of this equipment and the previously discussed 30,000 hydraulic horsepower to be delivered, total available horsepower will be 920,000. It is currently anticipated that the equipment will be deployed throughout our existing pressure pumping locations. We are also continuing our pressure pumping refurbishment program and in 2014 approximately 50 pumps will be refurbished to like-new condition.

RPC's outstanding debt under its credit facility at the end of the first quarter was $80.8 million, however we had $44 million in cash on the balance sheet at the end of the quarter, a significant portion of which was available the following day to pay down debt. Our ratio of debt to total capitalization was 7.6%.

And with that I'll turn it back over to Rick for some closing remarks.

Thanks Ben.

We are moderately pleased with the first-quarter financial performance. Although the beginning of the quarter was slow, our monthly results showed a nice progression and in March RPC generated record revenues. However our operating environment continues to be volatile because among other things, unconventional completions are by nature difficult to execute and disruptions negatively impacted our financial results.

We are pleasantly surprised by the recent increase in the prices of natural gas and natural gas liquids. And while we cannot predict the price of these commodities, we believe that these price levels support additional customer activities.

We also continue to see growing service intensity associated with long-duration unconventional work, particularly in the Permian basin where our largest fleet of pressure pumping equipment resides. To effectively compete in this evolving market we are expanding our fleet of pressure pumping equipment, developing more efficient staffing models and improving our logistic procedures.

We will continue to monitor the market and be mindful that we are in a cyclical and volatile industry. While maintaining a conservative balance sheet and focusing on generating strong returns on capital.

I thank you for joining us this morning and we'd be happy to take any questions you may have.

(Operator Instructions)

We'll take our first question from Neal Dingmann with SunTrust.

Good morning, gentlemen.

The question is more on margins -- how much that's differing, play by play. Obviously we continue to hear a lot about the Permian. Just your thoughts. I know again, you're obviously centered on the Permian and Eagle Ford.

I guess two questions here: Jim, would be -- one, just how different margins run play by play? Or are we seeing something that they are running a little bit closer than they have been? And then, I guess, my follow-up to that would be just as far as -- I know in the last call we talked about maybe you going into the TMS or some of these other plays -- if you still have some plans like that?

Neal, this is Jim.

Margins are different play by play, to put it in your vernacular. The areas that have still been a little bit weaker for us -- or have been a little bit weaker for us, still are; and things are margins are stronger for us in the Permian just because of utilization. Pricing hasn't improved yet, but that bifurcation among better regions and less good regions is still there.

We're still interested in TMS. Got an update on that recently. The exploratory wells that they're drilling seem to be taking a long time. But things are probably coming to fruition and people are coming up with good well designs and track designs and we anticipate working there fairly soon. Not with the new physical location necessarily, but we can serve it out of Kilgore to the west and out of Lafayette, Louisiana to the south.

Jim, would you just do frac there? Or would you do rental tools in some other areas when you talk about moving there in some other areas?

It would be many of our completion services, which would be frac and those are frac-intensive or horsepower-intensive. Frac designs, as far as I know right now, as well as probably some coil tubing.

Very good. Thank you

Thanks, Neal

Our next question comes from Jeff Tillery with Tudor, Pickering, Holt.

On the capacity issues, I guess question number one: so the incremental cap backs would imply something in the order of $1000 per horsepower. Is that basically what it's costing? And I'm curious to hear lead times and delivery schedule.

That is about the right number with the ancillary equipment we're ordering. Delivery schedules -- we, in our comments, said that we expect that most of it will be here by the beginning of 2015. We hope to get it earlier, but obviously it's depending upon a lot of different factors. So there's receiving it; there's testing it; proving it and all that. We're working with the manufacturers to firm up the delivery schedules, so we do think we'll get some perhaps during the third quarter and fourth quarter. But we expect it'll be, again, placed in service and working by early in 2015.

If I think about possibility in this segment today, and just looking at what the revenue intensity -- or revenue realization -- for your stimulation equipment was last year, looking somewhere in a 2 1/2 year payback at current pricing levels -- is that about right?

At current pricing levels.

Current margin levels, I guess, is what I was thinking about it.

That sounds reasonable. That type of payback obviously is not too bad. And our decision is based more on the fact that we expect to see improvement over the next few quarters. But your estimate is probably pretty accurate, currently.

If I think about the progression of the business through the course of the year -- so Q1; in the release you talk about 5% revenue impact from the weather disruptions. Is it fair to think about basically taking Q1 actual revenue, adding that 5% in, and then think about that as a new base from which to make any incremental activity changes through the course of Q2? So we could see high single digits revenue increases in Q2? Sequentially?

Jeff, this is Jim. That's as a reasonable as estimate as any. That's something that we're using as a baseline as well.

We're not people to normally beat our chest, but what we tried to make clear in our comments was that March was really strong. Early in the quarter it was really weak. Business is volatile. All those things.

It's difficult to predict, but we certainly feel very good about the strength that we saw late in the quarter. And so we'll see. We certainly haven't taken our late-in-the-quarter run rate, and not assuming that we're going to continue at that pace. It's just difficult to predict. But we feel good that it's headed in the right direction.

Last question I have: the comments in the release just around material cost increases -- I presume that's both transport as well as the proppant cost as well. Is that fair? The general cost pressure you are feeling?

Yes, Jeff. This is Jim.

I think maybe there are two things. One is that proppant was not more expensive in the first quarter, but we see it becoming more expensive as we speak. So, we see cost pressures upward on proppant. Guar was fine for us; so that's the actual cost of the material.

The first quarter was strange -- a lot of other people have talked about it too -- but there were rail shortages. We had to use trucking, which we ordinarily wouldn't have done, and that increased cost during the first quarter.

As you think about the progression on margins, what sort of incremental margin expectations is reasonable for Q2? Intuitively, the weather disruptions recovery should carry high incrementals, but then some of the cost pressures lower that. So should I think about something in the 30% to 40% incremental margin range for Technical Services?

Yes. That's about right, Jeff, based on what we know.

Thank you guys very much.

Thanks.

Rob MacKenzie with IBERIA Capital Partners.

Thanks.

I wanted to come back to that last question a little bit and revisit it, Jim, and your answer. My presumption is, is that in the first quarter, the weather impact of -- call it 5% -- hit to revenue probably had fairly high decremental margins because you incurred a fair bit of cost without the associated revenue. Why wouldn't the swing back in the incremental margins on that recovery be higher than the 30% to 40% range?

Rob, it's a good point. And it should be.

To reiterate what you said and give it a little more detail -- when you don't work because of weather, that really hurts you financially. Because you are prepared to work tomorrow, let's say, so you have your crews lined up and your prop and then everything else, and you don't. It's very different from a secular business slowdown where you realize things are slowing down and you reduce your cost.

The decremental margins were more than 5%, for sure. The decline is more than 5% on the profit point of view. Maybe we're just being a little bit conservative here due to the continued volatile nature of some of the work that's going on. And so we're handicapping what incremental margins should be.

All things being equal, it should be higher. But as Jim pointed out, a lot of volatility, a lot of uncertainty, a lot of things that are getting worked out. First-quarter we talked about these extra transportation costs that squarely impacted the quarter and there's no way that we can accurately predict. It will happen again, but how much, to what extent, how often those kind of things are going to happen -- they're just ongoing issues.

I think the industry is trying to work real hard to smooth some of that out, take some of those disruptions out. Get our work to be a little more steady. That would help our customers and would help us. But it's an ongoing process.

Modeling it at incremental margins of 33% or modeling at 80%, somebody could argue either way. But I think the earlier comments probably were appropriate at this point. Lower incremental margin, just because we don't know for sure.

Fair enough.

Next, I wanted to address a related topic and that's pricing. Come back to that conversation if we can. Halliburton talked in their conference call about starting to see some cost recovery. No net pricing in 1Q, but some cost recovery in 1Q. Where do you all stand on trying to maybe even get ahead of some of this potential cost inflation and recover that, going forward?

Well, Rob, we'll start and end every answer by saying pricing did not improve during first quarter -- net pricing did not improve. It didn't decline, either, but it didn't improve. In one of our service lines, our rental tools, we've issued a new price book and are working through that, and starting a new price book in some of the other service lines. So we think that, that will get -- you call it cost recovery -- we will definitely be able to obtain that.

All signs are there for spot market pricing to begin to improve. It just has not yet. It just continues to be the issue.

I think the cost recovery is something that we're focused on. It didn't have a big impact on us in the first quarter, but I think as things tighten, we see activity levels picking up. As Jim alluded to, hopefully, pricing will firm a bit. And whether that's from up-front pricing, whether that's from cost recovery capabilities, we'll just have to see, and that will shake out over time.

But we do see things -- again, activity was very strong in March, and it's headed in the right direction, so we expect that, that capability -- cost recovery, price improvement -- will improve here in the next little while.

Great. Thank you. And if you don't mind bearing with me for stretching the rules here for one more --

Okay, Rob.

The new equipment you're adding -- can you give us any more color on how that might stair-step in to the fleet?

Timing?

Yes, timing-wise.

It will not. It may contribute some to a noticeable amount in the fourth quarter. But, again, it's a little bit early; as we've all experienced, there can be delays. So if one wanted to -- I think we believe another reason we're doing this, we believe we're a little early. Historically, we've been pretty good about anticipating getting out in front on the ordering and shutting down a little earlier than others.

We talked about how low our CapEx was in the first quarter and even in the fourth quarter, so we see that it's time to ramp that back up. We think we're early; so we think, hopefully, that'll help with the delivery schedules. But I expect, in terms of contribution to results, it may contribute some.

The 30,000 horsepower will be coming in --

July.

Yes, it will be coming in on that time frame. This larger incremental expansion plan we talked about this morning, we expect it will contribute some to the fourth quarter. Pick a percentage -- we're not sure. We're at this point saying it's going to be by early 2015, it will be clearly visible and make a big contribution.

And it's all coming in one batch?

No, there will be at least a couple batches.

Okay. Thank you.

On the new expansion plan, yes.

John Daniel with Simmons & Company.

Thanks, guys.

Jim, first one for me. What percent of Q1 revs did the month of March represent? (laughter)

It was big.

Can you provide some color? Because I know that your answer would obviously help us with not just you, but everybody. No one's really seemed to ask that question to anyone yet.

We always want to be helpful, John.

Let me -- it was way more than a third. It was less than 50%.

Closer to 50% or closer to 40%? (laughter)

Closer to 40%.

Thank you. Okay.

A fairly big order of new equipment, which I suspect will cause or is probably giving cause to some -- just given that pricing hasn't changed and margins are still somewhat sub-par relative to where they were a couple years ago -- and you haven't seen any pricing yet. So I guess the first question is, as you look out on the job board here, how far out are you guys booked?

Let me first comment on the margins. I think we've been talking about the last -- over the time period that you're talking about, again the percentage margins will be coming down. We talked about the fact that we had record revenues in March. So I expect it will be difficult and maybe impossible to get back to historical percentage margins. There's just so much more business that the dynamics and industry have changed. So I don't think we'll get back to that point.

But activity levels -- again, very high. Our customers are driving us toward efficiency. We'll be driving them towards providing us more steady work and/or compensating us for disruptions. That will take some time. But we do see things improving a bit.

I'm not trying to take a slap at you guys, or anyone. I'm trying to understand something here. When you look at the job board, I'm guessing you guys are booked up for three to six months, depending on which part of the country you're in. Is that a reasonable supposition?

Yes. Depending on the part of the country we're looking at, yes. Especially in -- we talk about it all the time, as do you -- but the Permian. There are a couple things that play. The job board is booked up. We know enough about the oil field to know that you better not try to predict anything. But all signs are there for continued higher activity and pricing at some point.

The thing that has struck us over the past six months or so is the huge increase in service intensity and activity levels. Putting aside financial results for a moment, places like the Permian have gone from majority vertical to, soon if not now, majority horizontal. Places like the Eagle Ford are very busy. North Dakota with all its issues has some very service-intensive things. And we think that's the new norm, and we want to be prepared to play there. We've got the balance sheet to step up to a kind of level where we can continue to survive and thrive in a more service-intensive environment.

Now there are challenges. Labor is a big one. We've got to work through those as well. We are biting off something here, but that's where we see the business going and we want to be among the winners.

Let me add to that if I may.

This idea about we are -- there's a lot of customer commitments, and being booked up today is different than it was several years ago too, with these unconventionals, as we all know. Again, there's disruptions. You can be fully committed and not be fully utilized. Because your customers are not working as much as you would like them to be.

So there's lots of room there, again, to smooth out some of the disruptions, smooth out some of the commitments from the customers to do the level of activity that they're promising. And I think we're making some progress there and that's getting better.

That's what I meant. Clearly, the visibility is good; otherwise, you wouldn't be ordering equipment.

But where I'm trying to go with this question is, as you look at the jobs that might be out on the calendar three months, four months from now -- are they already priced? Is there a set price for that job three months from now? Or do you just determine that price, three months, once you actually go out in the field and do the work?

I think it varies. We are not making long-term commitments on pricing at this point.

Okay. Fair enough.

So that the jobs that would be out there -- I'm just trying to get a sense if the jobs are priced higher on the boards three months from now? Why you're not seeing small pricing in your results today, if you've got a reasonable expectation for the pricing when those jobs get completed late Q2, early Q3? And I guess the answer is no. Does that make sense to you?

In other words, the jobs are booked but the pricing is not yet firm? That's the answer, but we feel good about what it's going to be.

Fair enough. A couple quick ones for me and then I'll turn over.

Plans for corporate expansion: how many units, would be the first one? And then second given the higher wear and tear issues on the frac fleet -- lots of people talk about that now -- do you envision any fleet retirement in the next 12 to 18 months?

The second question on the fleet retirement is no. All that is being handled through the refurb program. I think we're out in front on that -- meaning, we're working on the oldest equipment first. So we're not planning to retire anything. And we'll continue on that refurb program that brings them out almost like new, so we don't expect our capacity to change due to retirement.

And John, on your first question -- no more adds to the, quote, [to the] fleet this year.

Thanks, guys.

Thanks.

Mark Bianchi with Cowen.

Good morning.

Just a question for me on the equipment you're adding. Beginning of 2015 seems like a fairly long lead time. I'm curious -- what are the factors that are keeping you from getting that equipment earlier? Maybe you could walk us through some of the bottlenecks that may exist.

Let me see if I can clarify. We are going to get it sooner. We don't believe that it will materially contribute until early 2015. It just takes time to take delivery, test; obviously ahead of time we'll be staffing and training and those sorts of things.

So it will contribute some to the fourth quarter. But we're just saying the bulk of it will begin to meaningfully contribute by early in 2015. We may hear over the next few weeks that may get firmed up, and it may be a little bit sooner. But at this point we're projecting that kind of time frame.

It's about a six-month order-to-receive time frame at this point. And that's about right. We don't want to place rush orders and pay too much. We want to plan for it.

And like Ben just said we want to plan for having the crews ready to go when the equipment comes. It's not urgent enough that we want to do anything ill-advised in terms of paying too much or not being ready.

Our experience has been it always seems to come in later than we anticipate it's going to. So we're just kind of recognizing that.

Okay. That's helpful.

Could you comment on just the competition that you're seeing in the Permian, in terms of any new entrants coming to the market? Or existing players that are migrating fleets and crews into the market that may be impacting the ability to push pricing?

Mark, this is Jim.

I'm not aware of any real new startup pressure-pumping companies -- really any new ones anywhere, including in the Permian. One thing that we noticed we talked about in 2013 and has not changed, is the fact that some of the equipment is owned by people who have a lot of debt and they can't maintain the equipment, so the equipment is getting worn out. We have recently learned about some smaller companies that are interested in selling their equipment, getting rid of their equipment.

So we don't think that the overall fleet has grown or is growing right at this time. But there is still -- I mean, it's a very simple and now outdated metric, but the rig count hasn't changed. Rigs are more productive, we know that; but the rig count hasn't changed.

We haven't yet completely fixed the supply/demand imbalance that's been going on since the first or second quarter of 2012. That's still the short-term issue.

Got it. Thanks, guys.

Thank you.

Doug Dyer with Heartland Advisors.

Gentlemen, when you talk about the potential for profit pricing to go up, is there more potential for pricing advances in sand? Or more in ceramics?

Doug, this is Jim. Thanks for the question. It's a good one.

Perhaps more -- I'm going to caveat this answer. Perhaps more in just natural sand, because that's what our customers are using right now; and so there might be more demand right this moment for that. But those choices on the type of proppant that a customer uses change pretty quickly.

It's a good question. I'm afraid I don't have a great answer about the different kinds of proppant and how those prices might move.

Earlier in the call when you talked about trucking, were you talking about trucking sand to the site? Is there a logistical problem right now?

Yes. What that comment was, is specifically about South Texas due to some of the rail interruptions. And we had to truck actually all the way from the supplier to the basin. So typically, that would have -- could have been brought in by other methods, but we had to truck it on a last-minute basis, so the cost was much higher than normal.

All right. Thank you very much.

(Operator instructions)

Daniel Burke with Johnson Rice.

Good morning.

You guys have referenced the month of March a handful of times. Was there anything about the March tempo you enjoyed that was unsustainable or you'd call out. Were you catching up on any type of weather backlog that induced an efficiency level that'll be hard to maintain in the second quarter?

Daniel, this is Jim.

We actually referenced March once. We referenced it other times in response to questions. But we're happy to talk about it; it's significant. There was nothing -- a standard but very appropriate answer is that there was nothing in March that was out of the ordinary.

It was strong.

Okay. Great.

The other one I had left was, you all have also mentioned sand a couple times. You have some interest in the sand business. And as much as you're up in the CapEx budget for the year, any incremental capital you all are devoting in that direction?

Nothing of note.

Okay. Fair enough. Thanks, guys for the time.

Ben Swomley with Morgan Stanley.

Before my other question, a quick follow-up on some of the proppant questions. You mentioned that customers can change pretty quickly the type of proppant their using. Have you seen that recently? Have you been seen a big shift from one type to another?

Yes. Sometimes even during the same job.

If you're looking for an industry trend, I think it's normal that our customers -- we look at our statistics from month to month, and sometimes it's amazing overall how much it can shift. And it's just depending upon customer requirements and preferences and it may shift back. I don't know that we could give any overall industry direction on that. It's just customer-specific.

Ben, we're with you. It's as hard for us to analyze internally as it is for external people to analyze.

I'm wondering maybe if you have some insight on when customers do shift? And if they shift that frequently even during the middle of a job -- is that in response to technical challenges that they encounter while completing the well? Or is that driven by experimentation and trying to optimize the completion?

It is not -- and I'm not speaking as an expert -- it's not due to technical challenges. It might be due to wanting to experiment and figure and try something else out. And see what's going on and trying to optimize things from that point of view -- to test the efficacy of different kinds of proppant.

In general, there's a trend -- or not a trend, but another impact or another cause is that sometimes a customer chooses cheaper proppant just to get the well completed with the knowledge that it's not quite as good as something else, but they're doing it for cost reasons. And knowing that they may have to refrac the well sooner rather than later, as an example. But they make a very rational choice; but a rational choice to use a cheaper kind of proppant for a certain completion.

That makes sense.

Shifting gears to the new equipment, another question on that front. Do you have a specific customer in mind? Or are there two or three customers that you think you can really place that equipment with? Or are you just adding to be positioned if activity should increase?

This is Ben.

I think a way to describe that is, we indicated that currently, at the present time, it can be changed once the equipment is here or we know when it's coming. We're currently anticipating that we're going to distribute it throughout our existing locations. We do have specific customers in mind that we've had conversations with that we felt strongly enough to factor that into the amount of equipment we wanted to acquire. With that being said, none of this is coming in under any sort of contract or formal absolute commitment.

We just, again, see that activity levels are going up, service intensity is going up. So we think there's going to be the ability to absorb the equipment and put it to good work. And we think there'll be sufficient opportunities out there to choose from over the coming months.

So no firm contracts or commitments at this point to specific customers.

One last one if I can.

On the coil tubing side, I think you said earlier in the call that there was no incremental capital allocated there. What do you see in terms of competitive dynamics?

Sequentially, there's probably a little bit of pricing pressure, a little bit of utilization. But sequentially there's not a whole lot going on that's of note. In other words, you know net pricing is staying the same. Utilization in the first quarter was down a little bit compared to fourth quarter because of the weather issues that we cited. But in general it's very flat.

A little more competitive than pressure pumping at this point.

At this point, yes.

Thanks so much.

Rob MacKenzie with IBERIA Capital Partners.

A quick follow-up for you, Jim, and I apologize if you mentioned this earlier.

Did you run through what percentage of the revenue was split between coil tubing, Thru Tubing, and pressure pumping this quarter?

No, Rob, I didn't. But I'd be happy to right now.

It is in the same order as last quarter but the numbers have changed a little bit. The largest service line is pressure pumping at 57% of revenue. The second largest service line is Thru Tubing Solutions, which is at 15% of revenue. Coil tubing -- I'm rounding here -- coil tubing is 9% of revenue. Rental tools is 4 1/2% or 5% of revenue. Snubbing this quarter was a little over 3% of revenue, and I got that out of order. Nitrogen was 3 1/2% of revenue.

Got it. Thanks.

Follow-up -- coming back to the March topic, what you're seeing so far in April, would you say it's consistent with the activity levels in March?

We've been kind of busy closing the books for the quarter but April looks fine. Yes.

Great.

Thanks, Rob.

John Daniel with Simmons & Company.

Just a quick one from me, Jim

Just looking at the pressure plates, there is a slight uptick. Did you guys do any acquisitions recently?

We did a small one in the fourth quarter and then there was just a little bit of an adjustment to that in the first quarter.

Okay. Can you say what product line that was?

Coil tubing.

Coil tubing and some downhole tool technology.

Right.

Is it safe to say that the strategy for this year will be organic as opposed to acquisition?

Probably, but we -- and we've discussed this, John, a lot of times. There are a lot of opportunities right now to look at. RPC tends not to be all that acquisitive, but you never know. There are a lot of opportunities to look at. I'm telling you all I can tell you.

That's fine. But you did mention earlier in the call about the people lining up to sell some frac assets or companies, whatever it might be. And I just wondered if that's -- I'm going to call it [dumb irony] if that's appealing? Or if you prefer the technology side? And just some color around that would be helpful.

Well, from an acquisition standpoint I think it's just being more opportunistic. And that acquisition, as you can see from the numbers, is again not really large. We would have the ability to bring it in and grow it. We like that; but other pressure pumping companies, a lot of things go into that. If the crews are located in the right place there may be some potential there. But oftentimes there may be located where we don't want them or need them, so that has less value for us. We're standing to stay open-minded.

Thank you for the color.

Thanks, John.

There are no further questions. I'd like to turn the conference back over to Jim Landers for any additional or closing remarks.

Thank you, Lisa. We appreciate everybody who called in today to listen to us, and we appreciate the questions and we'll see everybody soon. Thanks.

This does conclude today's teleconference and the conference will be replayed on our website at www.RPC.net within two hours following the completion of the call. Again, that is www.RPC.net. Thank you for your participation.