Morningstar | As Expected, RPC Sees Negative 3Q Owing to Pressure Pumping Headwinds
RPC reported negative third-quarter results, an unsurprising development given the industry headwinds facing pressure pumping, the company’s largest business line. Overall company revenue declined 6% sequentially and adjusted operating margin fell to 12% from 16%. Pressure pumping revenue fell 12%, partially offset by non-pressure pumping revenue increasing about 2%. Our fair value estimate and no-moat rating for the company remain unchanged.RPC’s pressure pumping business was hit with lower utilization and slightly lower pricing, both stemming from a weakening industry environment. Pressure pumping industry supply increased through the quarter yet demand was slightly down as Permian customers began responding to growing oil pipeline takeaway constraints. The takeaway issue should be alleviated by mid-2019, after which demand for pressure pumping will rebound, although we don’t think pricing will resume the upward trend seen from 2017 through early 2018 owing to fierce competition in the industry.
For our covered pressure pumpers, including RPC and Halliburton, our long-held bearish thesis on the cohort has essentially played out. At the beginning of this year, we thought both companies looked over 50% overvalued, but since then their share prices have plunged toward our fair value estimate and now both names look close to fairly valued.
RPC is a holding company for several oilfield services companies. The company provides oilfield services and equipment to oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the U.S., including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. The services provided are: Technical Services, which include pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline services, and fishing; and Support Services, which include rental tools, oilfield pipe inspection services, well control school and energy personnel international.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.