Executive Summary / Key Takeaways

• Portfolio Rebalancing as Defense Mechanism: RPC is aggressively shifting away from commoditized pressure pumping (now just 27.9% of Q3 2025 revenues) toward higher-margin, technology-enabled services like wireline and downhole tools, creating a more resilient business model that can generate cash flow even in weak commodity cycles.

• Pintail Acquisition Transforms Scale and Customer Quality: The $245 million acquisition of Pintail Alternative Energy in April 2025 added $99.8 million in Q3 revenues (23.6% of total) and concentrated RPC's Permian Basin exposure to ~60% of pro forma revenues, locking in blue-chip E&P customers with dedicated 24/7 operations and limited seasonality.

• Technology Differentiation Drives Independent Growth: RPC's UnPlug system and A10 downhole motor are gaining commercial traction across 50+ customers, delivering faster drill-out times and superior performance in longer laterals—creating potential revenue streams that are less correlated to broad OFS demand and offering a path to premium pricing.

• Capital Discipline Preserves Balance Sheet Strength: Despite a challenging market, RPC maintains over $163 million in cash, zero revolver debt, and is idling unprofitable pressure pumping fleets rather than chasing market share, demonstrating the financial conservatism needed to survive industry consolidation.

• Execution Risks Dominate the Investment Case: The thesis hinges on successful Pintail integration amid intensifying wireline pricing pressure, while pressure pumping oversupply and 60% Permian concentration create geographic and cyclical vulnerabilities that could pressure margins if oil prices deteriorate further.

Setting the Scene: From Commodity Services to Specialized Solutions

RPC, Inc., incorporated in 1984, has spent four decades building a diversified oilfield services platform, but the company's current strategic positioning reflects a deliberate response to industry structural decay. The business operates through two segments: Technical Services (94% of Q3 2025 revenues) provides equipment and personnel directly at the wellsite for completion and production activities, while Support Services (6%) offers rental tools and inspection services offsite. This bifurcation matters because it separates high-capital, cyclical businesses like pressure pumping from more stable, relationship-driven service lines.

The oilfield services industry has become a graveyard of capital. Pressure pumping capacity remains oversupplied as efficiency gains from simul-frac operations and longer laterals have effectively increased supply faster than demand. RPC's management has been brutally clear: the market is "highly competitive" and "over-supplied," with efficiency gains contributing to excess capacity that depresses pricing and utilization. This environment forced RPC to make a choice—continue competing in a race to the bottom or reallocate capital toward services where expertise and technology create defensible positions.

RPC's response has been systematic. The company has idled pressure pumping fleets without adequate returns, upgraded equipment selectively, and pursued acquisitions that rebalance the portfolio toward high cash flow generating service lines. The 2023 Spinnaker acquisition set the stage, but the April 2025 Pintail deal represents the cornerstone of this transformation. Headquartered in Midland, Texas—the epicenter of U.S. shale activity—Pintail immediately made RPC the largest wireline provider in the Permian Basin while shifting the customer mix toward blue-chip E&Ps who value reliability over price. This matters because it moves RPC from a commodity provider to a strategic partner with customers who have deeper pockets and more consistent activity.

Technology, Products, and Strategic Differentiation: Building Moats in a Commodity Business

RPC's technology investments are not incremental improvements; they represent attempts to create entirely new service categories that command premium pricing. The UnPlug system, which completed field trials in Q3 2024 and entered full commercial deployment, eliminates or reduces the need for bridge plugs while delivering faster drill-out times and highly effective stage isolation. Why does this matter? Because it directly addresses the biggest cost driver in modern completions—time. Every hour saved on drill-out translates to lower total well costs for operators, creating a quantifiable value proposition that RPC can capture through higher day rates. The technology's growth potential is "largely independent of broader oilfield services demand," meaning it could generate revenue even if the rig count continues falling.

The A10 downhole motor serves a parallel purpose. Proving "highly effective, particularly in longer laterals," the motor has been utilized by more than 50 customers and is gaining market share. Longer laterals are the dominant trend in Permian development, with operators pushing past 10,000 feet to maximize reservoir contact. The A10's ability to deliver reliable performance in these extreme conditions creates switching costs—once an operator has standardized its drilling program around this technology, switching to a competitor's motor risks operational disruption. The "Metal Max" component, which has completed over 100 runs with major operators, reinforces this lock-in effect.

In late June 2025, RPC took delivery of the largest coiled tubing unit in the U.S. (2 7/8-inch), which began operations in July. This asset is "uniquely suited for large pad customers drilling long laterals" and has generated strong customer interest. The strategic significance extends beyond the revenue from this single unit. It signals RPC's ability to invest in specialized capacity that larger competitors might overlook, creating a niche where RPC can be the only viable provider. While Schlumberger (SLB) and Halliburton (HAL) focus on global scale, RPC can profit from domestic idiosyncrasies.

Cudd Pressure Control's diversification into regulatory-driven gas storage well maintenance and geoexchange well projects further insulates RPC from drilling activity cycles. These services generate recurring revenue streams tied to infrastructure maintenance rather than new well completions, smoothing cash flows across commodity cycles. Similarly, Cudd Energy Services' testing of a 100% natural gas frac pump positions RPC to capture the growing ESG-driven demand for lower-emission completion technologies, potentially opening access to operators with net-zero commitments.

Financial Performance & Segment Dynamics: Evidence of Strategic Execution

RPC's Q3 2025 results provide the first clean look at the transformed business. Technical Services revenues surged 34.7% year-over-year to $422.2 million, entirely driven by the Pintail acquisition. Excluding Pintail, revenues declined due to pressure pumping weakness, which reinforces the strategic imperative behind the deal. The segment generated $23.6 million in operating income, up 44.5% year-over-year, but this increase was "primarily due to results from the recently acquired Pintail, partially offset by lower pricing in pressure pumping." The math is stark: without Pintail, RPC's core business would have shown operating income decline.

The revenue mix shift tells the real story. Pressure pumping fell to 27.9% of total revenues in Q3 2025, while wireline (23.5%) and downhole tools (23.5%) now match it. Combined, non-pressure pumping service lines represent 72% of revenues and generated a 3% sequential increase in Q3. This diversification matters because it reduces RPC's exposure to the most commoditized, cyclical segment while building scale in services with better pricing dynamics. The 6% sequential improvement in Technical Services revenues was led by pressure pumping, coiled tubing, and downhole tools, but the underlying trend shows pressure pumping's recovery is fragile and pricing remains challenged.

Support Services, while small, demonstrated stability with 3.1% year-over-year growth to $24.9 million and 4% sequential growth led by rental tools. This segment's 22% operating margin (5.45 million on 24.9 million revenue) exceeds Technical Services' 5.6% margin, highlighting the value of less capital-intensive businesses. Management's strategy to "bolster less capital-intensive service lines" is financially rational even if the absolute dollars are smaller.

The balance sheet remains RPC's strongest competitive weapon. With over $163 million in cash, a $50 million seller note, and zero outstanding debt on its $100 million revolving credit facility, RPC has liquidity to survive an extended downturn while smaller competitors face distress.

The company generated $139.5 million in operating cash flow for the nine months ended September 30, 2025, down from $255.2 million in the prior year period due to unfavorable working capital changes and lower net income. The $52.8 million tax refund received in the prior year distorts the comparison, but the underlying message is clear: RPC remains cash flow positive while idling assets and integrating a major acquisition.

Capital discipline is evident in the 2025 capex guidance of $170-190 million, which is "primarily related to maintenance and inclusive of opportunistic asset purchases." This represents a fraction of what larger competitors spend on new fleets, reflecting management's commitment to "rigorously assess the through-cycle economics of investments." When management states "our 2025 plans still do not include a new frac fleet," it signals that RPC will not chase market share in a structurally oversupplied market.

Outlook, Management Guidance, and Execution Risk

Management's commentary reveals cautious optimism tempered by market realities. CEO Ben Palmer noted that while RPC is "comfortable with where things are for the fourth quarter," the company is "bracing for" customer slowdowns during the holidays. This hedged language reflects the uncertainty facing all OFS companies as operators exhaust budgets and oil price volatility persists. The guidance for full-year 2025 capital spending between $170-190 million remains unchanged, reinforcing the maintenance-only approach.

The Pintail integration is proceeding but with tempered expectations. While the acquisition is expected to be accretive in 2025, management now anticipates "slightly lower EBITDA margins than previously communicated" due to intensifying wireline pricing pressure. Pintail contributed $99.8 million in Q3 revenues and $7.2 million in net income, but the competitive environment is eroding some of the premium RPC expected. The $65.1 million in acquisition-related employment costs will be recognized equally over the next 10 quarters, creating a drag on earnings and contributing to the unusually high 42.6% effective tax rate in Q3 2025.

Technology commercialization offers the clearest path to upside. The UnPlug system is "actively marketed and developed" after completing hundreds of stages, while the A10 motor is "gaining traction" with over 50 customers. These products could generate meaningful revenue in 2026 if adoption accelerates, potentially offsetting pressure pumping weakness. The largest coiled tubing unit's strong customer interest suggests it will be fully utilized, providing a modest revenue boost.

The macro environment remains challenging. The average domestic rig count was 7.8% lower in Q3 2025 than the prior year period, while oil prices were 14% lower. Natural gas prices were 44.8% higher, but this provides limited benefit to RPC's oil-weighted Permian focus. Management's observation that "some smaller, less well-capitalized competitors may disproportionately struggle" suggests RPC anticipates market share gains as distressed assets exit, but this consolidation could take "some time to play out."

Risks and Asymmetries: What Could Break the Thesis

The most material risk is Pintail integration failure amid intensifying competition. Wireline pricing pressure is "intensifying" as "smaller competitors and less consistent work" attempt to increase utilization. If this dynamic erodes Pintail's margins more than expected, the acquisition's accretion timeline could extend materially, and the strategic rationale of "strengthening customer mix by focusing on blue-chip E&Ps" could prove illusory if those same customers demand price concessions.

Permian Basin concentration creates geographic vulnerability. With approximately 60% of pro forma 2024 revenues coming from this single basin, RPC is exposed to any regional disruption—whether from takeaway capacity constraints, regulatory changes, or localized weather events. While the Permian remains the most active U.S. basin, its concentration amplifies volatility compared to more geographically diversified peers like Schlumberger and Halliburton.

Pressure pumping's structural decline could accelerate. Management laid down a fleet in October 2025 and reduced staffing, but if efficiency gains continue to increase effective supply, even Tier 4 DGB assets could face pricing pressure. The risk is that RPC's remaining pressure pumping business becomes a permanent drag rather than a cyclical headwind, requiring more aggressive asset retirement that could trigger impairment charges.

The effective tax rate poses a persistent earnings headwind. At 42.6% in Q3 2025, the rate is "primarily due to the non-deductible portion of acquisition-related employment costs." These costs will be recognized over 10 quarters, meaning the tax burden will remain elevated through 2027, compressing net income even if operating performance improves.

On the upside, technology adoption could exceed expectations. If UnPlug and the A10 motor achieve widespread adoption, they could generate margins well above traditional service lines and create a recurring revenue stream from consumables or licensing. Additionally, if smaller competitors exit pressure pumping as management anticipates, RPC's disciplined approach could position it to acquire distressed assets at bargain prices, accelerating market share gains when the cycle turns.

Valuation Context: Discounted Cash Flow Story with Execution Discount

At $5.75 per share, RPC trades at an enterprise value of $1.19 billion, representing 0.77x TTM revenue and 5.38x EBITDA. These multiples represent a significant discount to direct competitors: Schlumberger trades at 1.85x revenue and 8.5x EBITDA, Halliburton at 1.35x and 7.13x, and even smaller peer Liberty Energy (LBRT) trades at 0.95x and 6.23x. The discount reflects market skepticism about RPC's ability to execute its strategic pivot while managing pressure pumping decline.

The price-to-operating cash flow ratio of 5.43x is particularly compelling, suggesting the market values RPC's cash generation at less than six years' payback. This compares favorably to Liberty's 5.25x and Halliburton's 7.26x, indicating that if RPC can stabilize its business mix, significant multiple expansion is possible. The 2.78% dividend yield, supported by a 72.73% payout ratio, provides income while investors wait for the transformation to mature.

However, the 26.14x P/E ratio is elevated for a cyclical services company, reflecting expectations that Pintail's integration and technology commercialization will drive earnings growth. The risk is that if wireline pricing pressure continues or pressure pumping losses deepen, earnings could disappoint, making the multiple appear rich rather than reasonable. The net cash position (positive $113 million after subtracting the $50 million seller note) provides a margin of safety, but the market is clearly demanding proof that RPC's new business mix can generate sustainable returns.

Conclusion: A Transformation in Progress with Execution Premium

RPC, Inc. is executing a textbook portfolio rebalancing in an industry where most competitors are doubling down on broken strategies. By acquiring Pintail, the company has gained scale in the Permian's largest wireline business while shifting its customer base toward blue-chip operators who value reliability. By developing UnPlug and the A10 motor, RPC is building technology moats that can generate growth independent of commodity cycles. By maintaining capital discipline and a fortress balance sheet, the company has the staying power to survive industry consolidation.

The investment case hinges on two variables: successful Pintail integration amid intensifying pricing pressure, and commercial scale-up of technology products to offset pressure pumping's structural decline. If management can deliver on both, RPC's current valuation discount to peers should close as margins expand and earnings become less volatile. If either falters, the company risks becoming a permanently smaller player in a consolidating market.

For investors, RPC offers a levered play on Permian resilience and OFS consolidation, but with a more diversified risk profile than pure-play pressure pumpers. The 2.78% dividend yield provides compensation while the market waits for proof that this transformation can generate sustainable returns. The key monitorables are Pintail's EBITDA margins over the next four quarters and the revenue contribution from UnPlug and A10 by mid-2026. If both trend positively, RPC's strategic pivot will have created a more durable and valuable enterprise.