RPC Inc (RES) 2020 Q4 法說會逐字稿

Good morning, and thank you for joining us for RPC, Inc.'s Fourth Quarter 2020 Financial 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 Services. (Operator Instructions)

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 will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today along with our 2019 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'll be referring to several non-GAAP measures of operating performance. These non-GAAP measures are adjusted net loss, adjusted loss per share, adjusted operating loss, EBITDA and adjusted EBITDA. We're using these non-GAAP measures today because they allow us to compare performance consistently over various periods without regard to nonrecurring items. In addition, RPC is required to use EBITDA to report compliance with financial covenants under our credit facility.

Our press release and our website contain reconciliations of these non-GAAP financial measures to operating loss, net loss and loss per share, which are the nearest GAAP financial measures. Please review these disclosures if you're interested in seeing how they are calculated. If you haven't received a press release yet and would like one, please see our website, once again, at www.rpc.net for a copy.

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

Thank you, Jim. This morning, we issued our earnings press release for RPC's fourth quarter of 2020, and we will discuss the quarter in a moment. Before we start though, I'd like to thank our employees for working through this incredibly challenging year of 2020. Through their efforts, our company is positioned to benefit from improving business conditions. We appreciate your dedication.

Fortunately, several COVID vaccines have been approved and are now in the early stages of distribution. This development paves the way for a worldwide recovery in hydrocarbon demand. On the supply side, we have experienced a lack of investment in drilling for the past several years, a declining production base and "OPEC+" discipline. This would appear as supply and demand are heading in opposite directions. This confluence of events could potentially lead to an up cycle in our industry. RPC's fourth quarter activity levels improved sequentially for the first time since 2016, consistent with several oilfield key metrics.

Our CFO, Ben Palmer, will discuss this and other financial results in more detail, after which I will provide some closing comments.

Okay. Thank you, Rick. For the fourth quarter of 2020, revenues decreased to $148.6 million compared to $236 million in the fourth quarter of the prior year. Revenues decreased due to lower activity levels and pricing compared to the fourth quarter of the prior year.

Adjusted loss for the fourth quarter was $11.3 million compared to an adjusted operating loss of $17.3 million in the fourth quarter of the prior year. Adjusted EBITDA for the fourth quarter was $7.8 million compared to adjusted EBITDA of $23.2 million in the same period of the prior year. For the fourth quarter of 2020, RPC reported a $0.03 adjusted loss per share compared to a $0.07 adjusted loss per share in the fourth quarter of the prior year.

Cost of revenues during the fourth quarter of 2020 was $117.9 million or 79.3% of revenues compared to $176.9 million or 75% of revenues during the fourth quarter of 2019. Cost of revenues declined primarily due to decreases in expenses, consistent with lower activity levels and RPC's cost reduction initiatives. Cost of revenues as a percentage of revenues increased primarily due to lower pricing for our services and labor inefficiencies resulting from lower activity levels in the fourth quarter as compared to the prior year.

Selling, general and administrative expenses decreased to $26 million in the fourth quarter of 2020 compared to $36.8 million in the fourth quarter of the prior year. These expenses decreased due to lower employment costs, primarily the result of cost reduction initiatives during previous quarters.

Depreciation and amortization decreased to $18 million from the fourth quarter of 2020 compared to $40.3 million in the fourth quarter of the prior year. Depreciation and amortization decreased significantly, primarily due to asset impairment charges recorded in previous quarters, which reduced RPC's depreciable property, plant and equipment, coupled with lower capital expenditures.

Technical Services segment revenues for the quarter decreased 36.5% compared to the same quarter in the prior year. Segment operating loss in the fourth quarter of this year was $11.3 million compared to $17.2 million operating loss in the fourth quarter of the prior year. Our Support Services segment revenues for the quarter decreased 43.6% compared to the same quarter in the prior year. Segment operating loss in the fourth quarter of 2020 was $2.6 million compared to an operating profit of $1.2 million in the fourth quarter of the prior year.

Now on a sequential basis, RPC's fourth quarter revenues increased 27.5%, again, to $148.6 million from $116.6 million in the prior quarter, and this was due to activity increases in most of the segment service lines as a result of higher completion activity. Cost of revenues during the fourth quarter of 2020 increased by $17 million or 16.9% to $117.9 million due to expenses, which increased with higher activity levels, such as materials and supplies and maintenance expenses. As a percentage of revenues, cost of revenues decreased from 86.5% in the third quarter of 2020 to 79.3% in the fourth quarter due to the leverage of higher revenues over certain costs, including more efficient labor utilization.

Selling, general and administrative expenses during the fourth quarter of 2020 decreased 19.6% to $26 million from $32.4 million in the prior quarter. This was primarily due to the accelerated vesting of stock recorded in the prior quarter related to the death of RPC's Chairman.

RPC's recorded impairment and other charges were $10.3 million during the quarter. These charges included a noncash pension settlement loss of $4.6 million and the cost to finalize the disposal of our former sand facility. RPC incurred an operating loss of $11.3 million during the fourth quarter of 2020 compared to an adjusted operating loss of $31.8 million in the prior quarter. RPC's adjusted EBITDA was $7.8 million in the current quarter compared to adjusted EBITDA of negative $12.3 million in the prior quarter.

Technical Services segment revenues increased by $29.7 million or 27.2% to $139 million in the fourth quarter due to increased activity levels in several service lines. RPC's Technical Services segment incurred an $11.3 million operating loss in the current quarter compared to an operating loss of $24.9 million in the prior quarter. Support Services segment revenues increased by $2.3 million or 32.1% to $9.7 million in the fourth quarter. Operating loss narrowed slightly from $3.8 million in the prior quarter to $2.6 million in the current quarter.

So during the fourth quarter, RPC operated 5 horizontal pressure pumping fleets, same as the third quarter, but with improved utilization. At the end of the fourth quarter, RPC's pressure pumping capacity remained at approximately 728,000 hydraulic horsepower.

Fourth quarter 2020 capital expenditures were $12.8 million. We currently estimate 2021 capital expenditures to be approximately $55 million. This will be comprised primarily of capitalized maintenance of our existing equipment and selected growth opportunities.

With that, I'll now turn it back over to Rick for some closing remarks.

Ben, thank you. As 2021 begins, we have greater visibility into the near-term activity levels than in the recent past. Commodity prices have improved, and our customers have a more constructive outlook. However, while we expect activity levels to continue to improve as the year progresses, we remain committed to capital discipline. We will remain disciplined and will not increase our equipment fleet until we have clarity into economic returns, justifying investment.

Currently, our operating plans for 2021 include low capital spending, continued expense management and scrutiny of customer relationships for acceptable profitability. At the end of the fourth quarter, RPC's cash balance was $84.5 million and we remain debt-free.

I'd like to thank you for joining us for RPC's conference call this morning. And at this time, we will open up the lines for your questions.

(Operator Instructions) Your first question comes from Chris Voie with Wells Fargo.

The first question, I guess, on the fourth quarter. The decline in cash is pretty strong. Obviously, a big build in working capital. Is there anything unusual in there? And given that build, do you expect working capital to be a source over the course of '21 or a headwind as revenues grow? Just curious if you could give a little color on that.

Yes, good question. During the fourth quarter, we talked about the sand mine facility that we sold. There was a lot of benefits to executing on that. That did cost us a little bit of cash, but it did generate a lot of tax benefits. You'll notice on the balance sheet that we have $80 million in income tax receivables. Some of that is being generated from the CARES Act, but also because of the closing of the Chippewa mine, and we were able to finalize that and generate a large amount of tax benefits. The collection of those receivables, we're expecting that the vast majority of that will come in over the next 9 months fairly steadily. I mean it will come in chunks, but we think it will be kind of over that 9-month time frame. So that's a good thing.

Also, cash was absorbed to some degree because of the increase in the revenues, obviously, and the increase in our trade AR, so we're expecting to continue to maintain a very strong cash balance. And with our focus on the expense management on -- and capital expenditures, we expect the cash balance to -- despite growth in working capital, we expect the cash balance will remain at these -- at the same levels or even higher going forward.

Okay. And then my second question, in the release you mentioned some visibility for growth as 2021 progresses. Just curious if you could explain a little bit more whether you expect that to be from private companies or public E&Ps? Where the growth is coming from, maybe regionally as well, and whether there's been any pricing improvement coming with that growth?

Well, it's -- the growth will come from a variety of different customers. We have both the public E&Ps and the privates that we have strong relationships with. We obviously have a large presence in West Texas. We think that will continue to be an area of improvement. And I'll comment briefly on pricing and Jim can add some more to it, but we are seeing ourselves and hearing anecdotes of pricing improvements. We're going to remain disciplined. We certainly don't feel that any or many people in the industry are in a position to aggressively increase pricing. But certainly, we hear that there's discussion to make that happen.

So we're very pleased with that. We're trying to play along. We're trying to be someone who's viewed as assisting in maintaining and having an upward pricing move. So thus, one of the reasons our fleet count has remained steady. We don't want to deploy anymore until we're able to get sufficient work at sufficient contribution. So it's -- again, so it's all about the discipline. We do think -- we do have some good, even better visibility here early in 2020, especially given that the fourth quarter we didn't see the normal slowdown, so we didn't have the slow ramp-up in the first quarter. So we're pleased that we're off to a reasonable start. So we're expecting the first quarter to be -- the first quarter should be -- continue to be a strong -- be able to generate some strong results. So -- but we're going to -- we expect it's going to be more slow and steady than other upturns. So we're going to react to what we see and not get ahead of ourselves.

So Jim, is there anything perhaps you want to add on?

Chris, this is Jim. Not a whole lot, except that our frac calendar has much less white space in it than it has in the past and much more visibility. It's a mix of customers, tend to be more private companies and small publics. We have not -- the financials you see today don't have any pricing improvement in them, but we do have a lot of cases where other service providers have gone to customers for price increases. And now they're testing, they're doing price checks. That doesn't yet translate into pricing improvement on the P&L, but it's an early good sign, so that's where we think we are right now.

Your next question comes from Stephen Gengaro with Stifel.

Two things. One, administrative, if you don't mind giving us the segment revenue breakdown. That would be helpful. But -- and then the second question kind of from a bigger picture perspective, if we assume that you're not going to see a whole lot of pricing over the next 3 or 4 quarters. Any guidance on how we should think about incremental margin performance?

Stephen, this is Jim. Let me answer the first one for you. So I'm going to -- I'm about to give percentages of revenue by our service lines for RPC consolidated for the fourth quarter. So pressure pumping is our largest service line at 39.0% of consolidated revenues. Our downhole tools and motors service business was second largest at 31.5% of revenues. Coiled tubing was the third at 9.4% of revenues. Following that, you have nitrogen, which was 4.3% of revenues. Rental tools, which is in support, as a percentage of consolidated revenue, it was 4.1% of fourth quarter revenue and then it kind of drops off from there, but snubbing was 1.8% of revenues in the fourth quarter.

And your second question about...

And then on the incremental margin standpoint, again, with the -- what we're hearing in the market and some of the things that we've experienced directly, we expect there will be some price improvement. But I think absent that, and who knows what the strength and timing of that will be. But I think typically, looking back historically, in a normal sort of increasing in revenue environment, incremental EBITDA margin improvements of 20% to 40% are normal.

We are not, at this point in time, expecting -- I'm maybe repeating myself, but being -- we don't expect this as a straight uphill shot with revenues. We're playing it close to the vest. And again, we want to remain disciplined. We don't want to get ahead of ourselves. We don't want to get busy to get busy and hope we get price improvements later. We're trying to make sure that we have -- that we're winning work that is helping us move forward and not -- like, not just working hard to wait for pricing improvement sometime down the road. That's kind of our objective currently.

Your next question comes from Connor Lynagh with Morgan Stanley.

I was wondering if we could just dial in the first quarter expectations a little bit. I appreciate there's a lot of moving pieces, and you don't want to get ahead of yourselves. But you've had 2 quarters of ballpark, 30% revenue growth sequentially. Can you maybe help us understand, should we be thinking about sequential single-digit revenue growth, double-digit? Can it be anywhere close to what you've seen over the past couple of quarters? I'm just trying to make sure we think about the activity run rate leaving the year versus in the end of the third quarter?

Yes. So it's a valid question. We think that first quarter will be a little bit better than fourth quarter, seasonally adjusted. So as you know, we did -- the seasonal impact for the fourth quarter was less pronounced this year than in 2020 than it usually is. We see a bit of continued improvement in Q1, but revenue growth might be in the high single digits. And keep in mind that we've got a couple of things going on. One is, as we've discussed, we don't see a lot of pricing improvement right now. Another one is that we've got 5 pressure pumping fleets in the field, and they're fairly highly utilized at this point. So we can eliminate more white space in the calendar, but we've already done a lot of that. So we're fairly utilized in pressure pumping as well.

Some of the other businesses can improve some, can grow some. Weather is a little bit iffy at this point. It wasn't really an impact in fourth quarter, but we still have a couple of months of winter left. So put all that together and maybe high single-digit revenue growth would be a way to think about it.

Yes, that's very helpful. Maybe just a higher level one here. So generally speaking, the perception of RPC is you have maybe a bit of a bias towards smaller or private customers. I guess holding that to be true, and you can correct me if that's wrong, but one thing that we've been wondering is, certainly, a lot has been made of the capital discipline argument on the larger public E&Ps. But the wildcard is, of course, how much privates will choose to grow versus maybe there's some balance sheet repair required. And I appreciate we're talking about a large swath here, so maybe there's couple groups you want to discuss. But how would you characterize the desire of private or smaller public E&Ps to increase capital spending this year?

Well, I can tell you that whether it's private or large or small E&Ps, we're certainly hearing from our customers, also that they have ESG in mind, and they want the right amount of equipment. They want equipment that they can feel that they need to have or want to have or be able to say that they have out in the location. So we have -- we responded to that, whether it was directly to that or in anticipation of that with some of the equipment that we added back in 2019, some of the Tier 4 equipment. So that's been desirable to our customers and that is working at a very high utilization level. We have converted some of our earlier tier equipment to dual fuel capacity, and that effort continues. It's not a significant investment, but we're implementing those plans. And that also is desirable to all of our customers, big and small. So that is benefiting us, and we think it will continue to give us additional capacity to meet those requirements going forward. So we are responding.

We clearly have not announced or talked about that we're adding complete new fleets with newer technology. We believe it's -- for us, it's too early to make that decision. We're hopeful that things will improve and the environment and, again, the pricing and commitments from customers will improve to the point where that's an easy decision. But right now, we are return-focused, and it's going to take some time to get back there. So as we said, we're going to remain disciplined in that regard.

I guess, one of the points of the question if you can just expand on a little bit is just expectations for activity growth, sort of building on Chris' question, but maybe less in the near term and just sort of customer sentiment. We hear a lot, obviously, from the public E&Ps, but if you look at sort of the smaller side of your customer book, do you think there'll be growing activity a lot over the next couple of quarters or year or 2 here? What's your sort of thinking on the risk appetite from that group?

Yes. So clearly, that's a hard one. We do think that oil being over $50 was -- is a nice psychological barrier to breakthrough. Not speaking to financial returns, but we think that a sustained level above $50 has improved some activity. If you think back on it, not too long ago, the strip showed us not getting to $50 oil until 2030. So I think that's a nice surprise that maybe -- spurring on some of the animal spirits of the smaller company. But really, great questions. We don't have much more visibility.

Well, I guess the read-through in terms of our comments otherwise are that we're not seeing things headed straight up. We don't have people knocking down our door saying, please come out and we want to get you on our calendar in May and June or whatever. I think everybody is trying to figure out COVID and recovery and commodity prices going forward. I think across the sector, clearly, there's more capital discipline on the E&Ps, be it private or public.

So at least anecdote -- yes, that solving the equation, that's what we're seeing because we are not expecting right now at this point to definitively have a significant addition to our fleet count until work comes to fruition right that it comes to us that it's at a sufficient level that will "pay us back" for putting that additional equipment out to work. So I would say that everybody across the industry is similarly disciplined.

Your next question comes from Taylor Zurcher with Tudor, Pickering, Holt.

Ben, I wanted to try to expand a little bit on your last response there. You talked about not reactivating any additional equipment or you seem to suggest that you wouldn't reactivate any additional equipment until pricing improved. Your fleet count stayed at 5. It sounds like last quarter, and that's where it's at today. So could you just help us understand to get into 6, 7 fleets out in the field, what you're looking for? Is it just pricing? Is it something else? Just help us understand that a little bit more.

Yes. I would say it's, obviously, with the work that we have across all of our service lines, some is better than others. We're trying to go after, obviously, the best work that we can get. Again, it's not all about getting busy, it's about generating sufficient returns. So that's what we're focused on. And so to get more fleets working, we'll have to have the average -- the average of our work needs to be moving up, right? There are opportunities to drop out any customers that we may have worked, that we may have taken on a few months ago that was marginal. We can -- there's always the opportunity to try to be selective. It's very difficult to do at many levels, but that's -- there are examples where we have done that. And we'll continue to do that. So we'll have to have a sufficient portfolio of work before we put additional amounts of equipment to work that will -- whatever you want to call it, unsack or staff or whatever you want to call it. We have to have better, call it, pricing, call it, job characteristics. We'll have to feel that the work we're doing is contributing sufficiently to our financial results that we're moving forward, right, that we're not just getting more busy and staying steady. We want to be -- we want to make progress with respect to our results.

Okay. Fair enough. From a cash flow perspective, last call, you talked about the goal of positive free cash flow for 2021. In the Q&A section of this call, it sounded like maintaining the cash balance in and around $80 million where it's at now is the goal for 2021. So should we read that to mean that the positive free cash flow target for 2021 is still intact, absent some working capital build that may happen as activity continues to trend higher?

Yes, yes. And my comment was we would stay, at least, at the level of $80 million.

Your next question comes from John Daniel with Daniel Energy Partners.

Sort of a big picture question here. But if you envision we're in a stable to slightly improving scenario from an activity standpoint where OFS pricing gains are a bit elusive. Is this the year we finally see the industry come together and consolidate within the OFS sector? Whether you choose to participate or not, just your thoughts on that.

This is Ben. Certainly, there was a lot of discussion about that last year when everyone was highly uncertain about whether we would get back to the point that where we are right now. I think there's -- clearly, that's always a possibility. The ability to take out costs will -- can help the industry, can help individual companies. But I wouldn't doubt that there could be, might be some consolidation. But today, I would say it's less critical than it was 6 months ago. So I wouldn't be surprised if it happened, but not shocked if it continued to be sort of a slow grind and it takes some additional time for those types of transactions to happen.

Okay. So have you seen a step change increase in deals being pitched to you or no?

I would say recently probably not as many. Again, I think people -- many people have either gone bankrupt or gone quiet or whatever. I think it's a little quieter now. It was certainly mid and from June to November last year was certainly quite active, but not as much right now.

No, I guess the question is you see companies get the restructuring, creditors become owners. Do they really want to sit there and run the thing or not? That's -- we'll see.

Yes (inaudible).

And John, this is Jim. Valuations would not be compelling. If everybody's dragging it around book, why don't just keep it.

Yes. I hear you. The flip side is no one's really making any money. And to your earlier point, you need to take cost out of the business. And it's too fragmented such that we can't get pricing. Just sort of -- kind of stating the obvious, something needs to happen.

And input costs, Jim, as we talked to folks out. It seems like asset costs, trucking costs are all moving up fairly sharply recently. Are you able to pass that through right now to customers? Are you going to have -- can you just walk us through what you're seeing from the input costs?

Yes. So we are seeing -- we've started to see or know about what's coming, and that would be price increases for some of the -- some grades of sand, that type of thing. Increased utilization brings with it increased maintenance expense. And it is possible that component costs will increase a little bit. So it's a management issue. We have to go to the customer and say our costs are increasing. And it's a management issue, you have to do that. We're historically pretty good at doing it, but we also think that supply and demand are in a position right now where we can do that. Back to our earlier comment that people are at least testing. You can -- to be able to go to customers and say, "Look, my input costs are increasing." And you can see that because you're buying sand, too. Customers now know a lot more because of what they've been doing with logistics. So we think we can. It's certainly our goal.

Got it. Okay. And I just had to ask you about 2020 CapEx. Can you just tell us what that was?

In 2021?

No, he said...

2020. I got 2021, I missed 2020.

It was $12.8 million, I believe.

For the quarter.

Yes, for the quarter.

And for the year, because I don't have in my truck.

$65 million.

Yes, $65 million.

(Operator Instructions) Your next question comes from Blake Gendron with Wolfe Research.

I want to dig into the upgrades that you mentioned. I appreciate you're approaching 2021 with capital conservatism here. But can you just walk us through the economics of the dual-fuel upgrade?

And in the context of one of your Permian peers having announced a new build, a DGB new build that meaningfully lower pricing than we had thought maybe for new builds. Is there a way that we should think about new build costs today versus what we thought about it, say, 1.5 years or 2 years ago? And is that a pretty low threshold to upgrade this equipment from a capital perspective?

Blake, this is Jim. We can't really speak to new build costs because we aren't doing any. So we can't tell you whether component costs or equipment costs are lower or higher, where that is. So sorry. Regarding dual fuel fleets, we have completed an upgrade of a dual fuel fleet and we are planning to do another one during first quarter. We think the economics on that one -- on that proposition are pretty good because upgrading an existing diesel fleet to dual fuel doesn't cost all that much. And it allows you to win work that you might not have won otherwise. So it is an increased capital cost for, let's just say, for the sake of argument, the same pricing and utilization, but it does get the utilization for you. And it's a good idea. It's a development in the industry, so we ought to do it.

In terms of e-fleets, it just seems too expensive. We just don't like being in the situation where we give our customers all the efficiencies that we spend money to gain for them. So that would have to change before we did something like that.

And our team -- this is Ben. Our team is looking at the various alternatives that are available in the industry. So we're -- I can't say we're actively running the numbers, right, because who knows what the future is going to hold, but we know kind of what the contribution margins are now. And we have an idea about what it would take based on the technology and how it runs and with some assumed cost. But we're -- as we indicated earlier, we're a ways from making a commitment for expanding our work because we do have other equipment that's available. And we do have some other equipment that we think is also convertible to dual fuel that would further expand our capacity of equipment that is desirable by many of our customers.

Yes, that's totally fair. I appreciate that detail. I want to dig into the sand commentary. Is this transitory? Or do you think that we've found a structural bottom in sand pricing? And then could you maybe fine-tune it with respect to Northern White versus in-basin? I would assume in-basin supply is fairly elastic. So if there's any tightness there, perhaps it's not as structural and not as longer term a theme here over the coming quarters?

Yes, Blake, Jim, again, we don't know of any price increases for in-basin sand. Let's remember that drilling and completion activity remains historically low. So there's plenty of supply there. And I can't quote any grades for you that of Northern White that might be increasing in price. But a lot of sand mines have shut down up there. And so any increase in demand would result in price increases there. We don't think -- we've talked to our operations people, we don't see a -- any sort of secular shift back to Northern White from in-basin. It's customer preference and it depends on which customer wants what, et cetera. So we don't see any real shifts in the market, just probably a momentary price increase based on just period tactical supply/demand issues.

Got it. That makes sense. And one more if I could sneak it in. A lot has been made of what's going on with the Biden administration and the federal lands moratorium, and it's probably an overreaction that's playing out in the equities right now and there's certainly plenty of inventory work through over the coming years. But just high-level conceptual question for you. If you saw the mix of activity maybe move away from the Permian, specifically the Delaware, New Mexico side to some of the other basins as E&Ps maybe rationalize the balance. Would you say that, that would be directionally positive or neutral or negative for your operations? Not necessarily just frac, but kind of everything in technical services.

Blake, it's hard -- it's a great question. It's hard to say. There would probably be some short-term friction as operators move away from the federal lands in New Mexico, and that's what we're talking about here. And there's certainly some, I won't say, fear, but concern and some vigilance over what this might actually mean. We want to emphasize, though, that for the short term, this is -- at this point, a drilling permit moratorium. So wells which have been drilled, which we were going to complete in February, we will still -- we'll still complete. But certainly, there's concern, at least in our part of the world, being New Mexico.

But as we always say, our equipment has wheels on it. And if activities is in the eastern part of the Permian and the Midland instead of in the Delaware, we can certainly work there, too, or in other areas. So probably a nonevent, unless you just think about any short-term friction that might happen.

Your next question comes from Waqar Syed with ATB Capital Markets.

What's your maintenance CapEx running per active fleet or where do you expect it to be in 2021?

Waqar, this is Jim. We have that. It's, at this point, less than $1 million per fleet. It's somewhere in the $700,000 to $800,000 range per fleet.

Is that -- that's an annual number or a quarterly number?

That would be annualized.

Okay. Do you think that's sustainable? Or is that -- no, this is for active fleet, right?

Yes. Yes. Is it sustainable? We don't know. It depends a lot on activity and job intensity. So it's probably going to move up from there, I would say.

Now is it low because you take equipment off some of the stacked equipment? Or is it low because of something else, structural, that's going on in the industry?

Well, this is -- this will be an RES-specific answer. As you know, we've disposed off a lot of our fleet. The average age of our equipment is a lot lower today than it was 1.5 years ago. So other things equal, we've got newer equipment that operates more efficiently and doesn't need that much maintenance. Also, we have our 3,000 horsepower pumps, which certainly when they need something, they -- it's expensive, but they run pretty well. So maintenance CapEx on that equipment is lower also. And fourth quarter had some nice utilization, but let's not forget that previous to that, utilization was a good bit lower. So it's a bunch of utilization and newer equipment for us. But understand that there is a lot of variables in that maintenance CapEx number, and it can really move around.

Fair enough. Now what's the average age of the 5 fleets that are working versus the other 9 fleets, I believe, that are not working right now?

That was, without giving a specific number, obviously, the larger pumps we bought in 2019, so -- and they are heavily utilized. So the average age of the ones that are working are slightly lower. But there's not a -- the equipment that we disposed off back in the third quarter of '19, all of the equipment at that point in time, other than the 3,000s, were of a similar vintage. So we're not prioritized. We're not using the newer non-3,000 horsepower pumps. So they're all reasonably comparable in that point.

Fair enough. And then what would be the incremental cost, were to -- were you to reactivate an additional fleet?

Obviously, the -- well, maybe it's not obvious. The first fleet that comes back will be lower. It could be...

It's not significant. We -- if the question is how much CapEx would be needed, it would not -- it should not be significant. There may be -- obviously, there are hiring costs and training costs and things like that, new employees and things like that, but the cost should be minimal.

And after what number of fleets active would it be, like after you have 8 fleets active, that the costs start to go up? Or how many you could place in without significant incremental capital?

Waqar, we don't know. We have a total of 12 or 13 fleets we could put in the field. Again, we've done a lot over the past 1.5 years. So the last fleet that we put in the field will cost a lot more than the first fleet. But overall, it's not -- it doesn't make a big economic impact difference. I'm sorry, that's probably the best I can give you.

Fair enough. And then just one last question. Of your 728,000 hydraulic horsepower, what percentage would be kind of run by these Tier 4 engines?

So the Tier 4 equipment, we have 2 Tier 4 fleets right now, out of 5 working fleets.

And how many would be dual fuel, total?

Dual fuel, we will have at the end of the first quarter, and this is a separate answer, a total of 50 dual fuel pumps at the end of first quarter.

Your next question comes from Stephen Gengaro with Stifel.

Waqar asked a lot of what I was going to hit on, but just one quick one. When you are in conversations with customers and you're talking about the dual fuel capabilities, and you mentioned this a little bit earlier as far as the value you drive and the ability for people to get paid ultimately for e-fleets, et cetera. But when you bring a dual fuel fleet to the negotiations, how does that impact the pricing discussions? It seems like it clearly helps utilization right now. But is there anything on price yet? Or do you think that will evolve as we go through 2021?

Stephen, this is Jim. It doesn't get you better pricing. It just gives you the job. So if I may employ a gambling term, it's just the table stakes increased a little bit, and it's having that dual fuel capability.

And I think there are a couple of different -- to the extent, if and when things begin to tighten, I think it will have more of a pronounced difference. I think the -- at this point or up to this point, I think, as Jim said, I think it's had a little impact on pricing, you really need it for the most part to be in the game. But as the fleet across the industry tightens, it will become more important. I think you'll have some pricing power at that point.

(Operator Instructions) There are no further questions at this time. I will now turn the call back to Jim Landers for closing remarks.

Thank you, and thanks, everybody, for listening in today and for the questions as well. Good to talk to everyone. Hope you have a good day, and we will talk to you soon. Thanks.

Ladies and gentlemen, this concludes today's conference call. A replay of this conference call will be available at www.rpc.net within 2 hours following the completion of the call. Thank you for participating. You may now disconnect.