Participants
Benjamin Palmer; President, Chief Executive Officer, Director; RPC Inc
Michael Schmit; Chief Financial Officer, Vice President, Corporate Secretary; RPC Inc
Donald Crist; Analyst; Johnson Rice
Stephen Gengaro; Analyst; Stifel, Nicolaus & Co
Presentation
Benjamin Palmer
We see this technology as being well positioned to capture share of the North American land frac plug market and believe it has the potential to be a positive growth catalyst that is largely independent of broader OFS demand. Rental tools also declined slightly in the quarter due mostly to seasonal factors.
Mike will now discuss the quarter's financial results.
Michael Schmit
Thanks, Ben. Shifting to the fourth quarter financial results with sequential comparisons to the third quarter of 2024, revenues decreased 1% to $335 million, driven primarily by lower non-pressure pumping activity, specifically downhole tools and rental tools, which offset growth in pressure pumping.
Breaking down our operating segments, technical services, which represented 94% of our total revenues in the quarter, was essentially unchanged. Support services were down 14% and represented 6% of our total fourth quarter revenues.
The following is a breakdown of our fourth quarter revenues for our top five service lines. Pressure pumping, 40%; downhole tools, 27.9%; coiled tubing, 9.9%; cementing, 8.3%; rental tools, 4.3%. Together, these service lines accounted for 90% of our total revenues.
Cost of revenues, excluding depreciation and amortization during the fourth quarter, increased by $2.7 million to $250.2 million or a 1% increase. The higher cost of revenues is primarily due to higher insurance costs related to our operations. We also incurred higher employee costs, primarily related to healthcare benefits, which can fluctuate throughout the year. These cost increases were partially offset by lower maintenance and repair expenses.
As you may recall, our pumping operations were particularly soft in the third quarter. Thus, we use that downtime to perform more maintenance work on our assets. Given the sequentially higher utilization in the fourth quarter, we performed less of this maintenance work toward the end of the year.
SG&A expenses were $41.2 million, up from $37.7 million, largely reflecting the fixed cost of our support service functions as well as timing of year-end incentive amounts. Our fourth quarter effective tax rate was 9.1%, which was below the company's typical tax rate, primarily due to the implementation of certain tax strategies and interest received on some tax refunds.
Diluted EPS was $0.06 for the fourth quarter, down from $0.09 in the third quarter. There were no non-GAAP adjustments to either of those EPS figures. EBITDA was $46.1 million, down from $55.2 million with EBITDA margins decreasing 270 basis points sequentially to 13.7%.
For the quarter, operating cash flow was $94.2 million and after CapEx of $40.5 million, free cash flow was $53.7 million. For the full year, operating cash flow was $349.4 million and after CapEx of $219.9 million, our free cash flow was $129.5 million. Of note, our 2024 cash flow included the receipt of a $53 million tax refund earlier in the year as well as some other working capital benefits later in the year related to the timing of customer payments.
In light of challenging business conditions, we are pleased with our two-year cumulative free cash flow of more than $340 million, even after adding a Tier 4 DGB fleet in each of those years. This supported steady capital returns to our investors while still leaving our balance sheet highly liquid and capable of funding growth opportunities. At year-end, we had $326 million in cash and no debt on the balance sheet.
During the quarter, we paid $8.6 million in dividends, bringing our 2024 total to more than $34 million. We also repurchased nearly $10 million of stock during the year, mostly related to our buyback program. We spent $220 million in 2024 on capital expenditures, finishing within our guided range of $200 million to $250 million. We currently project to spend between $150 million to $200 million in capital expenditures throughout 2025.
I'll now turn it back over to Ben for some closing remarks.
Benjamin Palmer
Thank you, Mike. Coming out of 2024, I'd like to reiterate several themes as we enter the new year and articulate a few strategic, operational and capital allocation themes, so you have a firm understanding of our operating philosophy and intentions.
Our corporate objective is to create long-term shareholder value by delivering world-class oilfield services to our customers with a conservative financial management approach. We believe RPC has a well-established track record of profitability and free cash flow, despite the many ups and downs of the oilfield services industry. And within this cyclical backdrop, we have exercised financial discipline, which has afforded us the ability to invest in our operations as well as support consistent dividends and periodic share buybacks.
We believe the company is fairly diversified with an attractive mix of service offerings, customers and geographic presences, consider ourselves well positioned financially to further invest and grow the business. We see several strategic imperatives to executing on our goals, improve margins and execution and optimize our assets, increase operational scale through M&A, rebalance our portfolio with a focus on high cash flow service offerings and strengthen our customer mix by increasing our focus on blue-chip E&Ps, given industry consolidation.
As we plan for 2025 and beyond, we have some action plans aligned with these strategic themes, which we believe together will help drive profitable growth, financial strength and long-term value. As discussed, we continue to invest in innovation, bringing proprietary and novel services and products to market to distinguish ourselves from our competition.
We are also diligently monitoring costs, capacity and headcount, and we'll continue to take actions to align with demand and maximize margins. Furthermore, we have information technology projects underway to support improved data collection and analysis, which we believe will lead to optimized decision-making and improved efficiencies. And lastly, we constantly evaluate sales of non-core assets to sharpen our focus on core operations and monetize any nonstrategic assets.
Lastly, with respect to M&A, we continue to evaluate opportunities and feel the environment remains favorable for a potential acquisition. We are focused on high cash flow operations with quality management teams, strong customer service and value propositions and synergy opportunities. We believe we are a buyer of choice, given our reputation in the market, for supporting companies we bring under the RPC umbrella and look forward to sharing M&A developments when they materialize.
In an often volatile market, our discipline remains consistent with a focus on financial stability and long-term shareholder returns. I want to thank all of our employees who work tirelessly to deliver high levels of service and value to our customers.
Thanks for joining us this morning. And at this time, we're happy to address any questions.
Question and Answer Session
Operator
(Operator Instructions) Don Crist, Johnson Rice.
Donald Crist
I wanted to start with the technical services segment. I mean, obviously, margins compressed a little bit in the fourth quarter there. Was there something in there on the cost side? Because it looks like it was more on the cost side than on the revenue side, like maybe repositioning of fleet for work or something else that we can't readily point to that maybe compress those margins. And do you think those kind of rebound as we move into the first quarter?
Michael Schmit
This is Mike. We had some higher-than-normal insurance costs during the quarter. We reset our insurance deductibles near the end of the year and actuaries do their thing, and we had some pretty significant increases there. So that really impacted us during the quarter. So it was less operational and kind of more -- it was insurance-related operations, but just kind of an unusual event and we don't anticipate that will be recurring.
Donald Crist
Okay. And obviously, there's been a lot of reports that as pressure pumping weakened in the fourth quarter during the RFP season, it was kind of bad timing from that standpoint. But as you kind of look to '25, do you anticipate any kind of reductions there, particularly on the pressure pumping side, due to increased competition as we kind of move through '25? I know you're more in the spot market than contracted market, but are you seeing that as well?
Benjamin Palmer
Don, this is Ben. It's very difficult to predict. Again, we did see some improvement there in the fourth quarter. Many of the customers we work for in the -- during the fourth quarter, we have opportunities with well into 2025. So at this point in time, we're not currently anticipating any or see on the horizon any particular softness arising. Likewise, we certainly can't say that we are highly optimistic that our revenues there will continue to progress, but we feel pretty good about who we're working for right now and the level of activity we have currently.
Michael Schmit
Don, just when the year started, we had a lot of weather issues across the country. So that impacted everybody. As we started Q1, things started a little slower, but that's less about customers, more just about weather, and we think that's really going to impact everybody in Q1.
Donald Crist
And I think I asked this every quarter, but given your cash hoard on the balance sheet and your propensity to do M&A, how is that market looking today? I mean, obviously, deals kind of slowed down as we moved through '24 as the bid mask kind of widened some. But are the bid-ask spreads coming closer into parity or where you think that it's a value to actually deploy some of that capital and grow into some of the other business lines?
Benjamin Palmer
Don, this is Ben. We're certainly interested in trying to create some growth with some accretive acquisitions with respect to the bid-ask spreads and where those are heading or where they've been, I can't -- I mean, we have a number of things we've looked at. I'm not sure we could say that we've got a large enough universe of opportunities to specifically say we're seeing those spreads change. I don't know that we could speak to that directly. Maybe an investment banker seeing many more opportunities could speak to that. But obviously, there's been a lot of volatility, right? The OFS market did see some increase in share prices within the last few weeks, but we've also recently seen some weakness.
So it's variable, difficult to predict, but we'll just have to see. And obviously, that's part of the process to try to reach a deal, reach an agreement that hopefully is a win-win situation and can be accretive to our results. That's clearly what we're looking to achieve.
Operator
Stephen Gengaro, Stifel.
Stephen Gengaro
I apologize if this was asked. Did you give the product line breakdowns for the quarter?
Michael Schmit
I did, but I'm happy to do it again.
Stephen Gengaro
I'll look at the transcript. You don't have to say it again. It's fine. You mentioned in the press release the insurance settlement. And did you give -- or the insurance -- elevated insurance costs, did you give a magnitude of that? I'm trying to kind of calibrate the impact that had on the margins and the EBITDA in the quarter.
Michael Schmit
Yes. I don't think we gave an exact number. It was a few million dollars, and it was less of a settlement and more we have some changes in our deductibles and everybody's insurance costs are going up and ours kind of reset in the fourth quarter. So the actuaries do their magic, and we are a bit surprised by the amount of the impact, but it definitely impacted our margins.
Stephen Gengaro
And then just a final one. When you talk to customers on the pressure pumping side, and I know the dynamics are fluid and there's been some pricing pressures as others have talked about, but what are the conversations like as far as kind of contract term and -- I believe you guys have talked a little bit about over the last year trying to get maybe a little bit more and a little less spot market work. Where does that kind of situation stand right now?
Benjamin Palmer
Steve, for us, we still don't have any long-term firm contracts. These are all just sort of customer agreements. We are pleased with the direction of the mix of our business. We've come into in the last several months, some opportunities that we would call more semi-dedicated. They're not necessarily -- there's not line of sight for the next year plus, but we do have kind of a multi-month view. So that's good. We're pleased with where it is today and we'll continue to work on that and try to improve that mix, maintain that and hopefully improve it a bit.
Stephen Gengaro
The final question I had was you've talked on the dual-fuel fleet side, and I'm pretty sure to date, you haven't done anything on the electric side. We've heard that operators kind of prefer the flexibility of dual fuel in a lot of cases. What do you see in the market? And are e-fleets something that you're considering? Or do you think you'll stick with sort of the dual fuel approach?
Benjamin Palmer
Yes. It varies from customer to customer, and dual fuel does have some flexibility that electric doesn't. That is a true statement. We said before and continue to say we're not going to address or right or wrong lack of electric fleet capability. We're not going to lean into that and begin to invest in that over a multi-year prospect.
Is it an issue? I mean it's a segment of the market that we're currently not competing in, and we're not going to compete in that from an organic perspective. So we'll continue to lean in. The technology continues to evolve and change. Customers like to have the latest and greatest technology. There are some new technologies that are on the horizon. So we'll just see. We'll continue to monitor it. We do like the flexibility of the Tier 4 dual fuel. And so we'll see where it goes from there. Again, we're not going to lean into an electric offering from an organic perspective.
Operator
[Kassimo Boda,] Gabelli.
Yes, I guess most of mine got asked. But just in terms on your CapEx guidance for 2025, I know you said $50 million range between it. So that's kind of pricing in, I guess, one fleet. So I was just wondering your outlook and whether you think the chances that you're going to get another fleet and what the lead time for that might be?
Benjamin Palmer
Well, actually, that range, I think we said that, that does not include a new Tier 4 DGB in that range that we communicated. We're going to watch it. If we can get some firm commitments enough from a customer, we'll certainly move up that decision. But in terms of the timeline, it's probably -- it hasn't changed a whole lot in terms of what we know or what we're told. It's probably a six to nine-month process to get a full fleet ordered and delivered. So that's kind of where we are. We're playing it that way at this point in time. We'll see. Again, we've got some good customer relationships, semi-dedicated, pretty well keeping us busy. So we'll see. That will be a decision a little bit down the road, but we'll keep you guys apprised.
Operator
(Operator Instructions) There are no further questions at this time. That concludes our Q&A session. I will now turn the conference back over to Mr. Ben Palmer for closing remarks.
Benjamin Palmer
Thank you very much, everybody. Appreciate you joining us this morning and appreciate your questions and your interest. Hope you have a good rest of the day and look forward to touching base. Take care.
Operator
Ladies and gentlemen, that concludes today's call. Please be reminded that the conference call will be replayed on rpc.net within two hours following the completion of the call. You may now disconnect. Thank you all for joining.
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