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SEC-RPT-Panel


1	+ cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing
2	+ 0000742278,RES,RPC INC,10-K,2015-02-27,2014-12-31,2015-02-27T18:49:09.000Z,0001571049-15-001479,t81553_10k.htm,FORM 10-K,12719064,1,0,https://www.sec.gov/Archives/edgar/data/742278/000157104915001479/t81553_10k.htm,https://www.sec.gov/Archives/edgar/data/742278/000157104915001479/,2014,2014,1

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally organized in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. The services and equipment provided include, among others, (1) pressure pumping services, (2) downhole tool services, (3) coiled tubing services, (4) snubbing services (also referred to as hydraulic workover services), (5) nitrogen services, (6) the rental of drill pipe and other specialized oilfield equipment, and (7) well control. RPC acts as a holding company for its operating units, Cudd Energy Services, Patterson Rental and Fishing Tools, Bronco Oilfield Services, Thru Tubing Solutions, Well Control School, and others. As of December 31, 2014, RPC had approximately 4,500 employees.
+2
+Business Segments
+RPC’s service lines have been aggregated into two reportable oil and gas services business segments, Technical Services and Support Services, because of the similarities between the financial performance and approach to managing the service lines within each of the segments, as well as the economic and business conditions impacting their business activity levels.
+During 2014, approximately one percent of RPC’s consolidated revenues were generated from offshore operations in the U.S. Gulf of Mexico and in the Gulf of Alaska. We also estimate that 60 percent of our 2014 revenues were related to drilling and production activities for oil, and 40 percent were related to drilling and production activities for natural gas.
+Technical Services include RPC’s oil and gas service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address well control issues. This business segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing. The principal markets for this business segment include the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. Customers include major multi-national and independent oil and gas producers, and selected nationally owned oil companies.
+Support Services include RPC’s oil and gas service lines that primarily provide equipment for customer use or services to assist customer operations. The equipment and services include drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian regions and project work in selected international locations in the last three years including primarily Canada, Latin America and the Middle East. Customers primarily include domestic operations of major multi-national and independent oil and gas producers, and selected nationally owned oil companies.
+Technical Services
+The following is a description of the primary service lines conducted within the Technical Services business segment:
+Pressure Pumping . Pressure pumping services, which accounted for approximately 57 percent of 2014 revenues, 55 percent of 2013 revenues and 53 percent of 2012 revenues are provided to customers throughout Texas, and the Appalachian, mid-continent and Rocky Mountain regions of the United States. We primarily provide these services to customers in order to enhance the initial production of hydrocarbons in formations that have low permeability. Pressure pumping services involve using complex, truck or skid-mounted equipment designed and constructed for each specific pumping service offered. The mobility of this equipment permits pressure pumping services to be performed in varying geographic areas. Principal materials utilized in the pressure pumping business include fracturing proppants, acid and bulk chemical additives. Generally, these items are available from several suppliers, and the Company utilizes more than one supplier for each item. Pressure pumping services offered include:
+Fracturing — Fracturing services are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid gel and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths. Sand, bauxite or synthetic proppant, which is often suspended in gel, is pumped into the fracture. When the pressure is released at the surface, the fluid gel returns to the well surface, but the proppant remains in the fracture, thus keeping it open so that oil and natural gas can flow through the fracture into the production tubing and ultimately the well surface. In some cases, fracturing is performed in formations with a high amount of carbonate rock by an acid solution pumped under pressure without a proppant or with small amounts of proppant.
+Acidizing — Acidizing services are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of oil and natural gas. Acidizing services can also enhance production in limestone formations.
+3
+Downhole Tools . Thru Tubing Solutions (“TTS”) accounted for approximately 15 percent of 2014 revenues, 16 percent of 2013 revenues and 14 percent of 2012 revenues. TTS provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes to operators and service companies in drilling and production operations, including casing perforation at the completion stage of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling and completion activities. TTS’ experience providing reliable tool services allows it to work in a pressurized environment with virtually any coiled tubing unit or snubbing unit.
+Coiled Tubing . Coiled tubing services, which accounted for approximately nine percent of 2014 and 2013 revenues and 11 percent of 2012 revenues, involve the injection of coiled tubing into wells to perform various applications and functions for use principally in well-servicing operations and to facilitate completion of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter of less than four inches manufactured in continuous lengths of thousands of feet and wound or coiled around a large reel. It can be inserted through existing production tubing and used to perform workovers without using a larger, more costly workover rig. Principal advantages of employing coiled tubing in a workover operation include: (i) not having to “shut-in” the well during such operations, (ii) the ability to reel continuous coiled tubing in and out of a well significantly faster than conventional pipe, (iii) the ability to direct fluids into a wellbore with more precision, and (iv) enhanced access to remote or offshore fields due to the smaller size and mobility of a coiled tubing unit compared to a workover rig. Increasingly, coiled tubing units are also used to support completion activities in directional and horizontal wells. Such completion activities usually require multiple entrances in a wellbore in order to complete multiple fractures in a pressure pumping operation. A coiled tubing unit can accomplish this type of operation because its flexibility allows it to be steered in a direction other than vertical, which is necessary in this type of wellbore. At the same time, the strength of the coiled tubing string allows various types of tools or motors to be conveyed into the well effectively. The uses for coiled tubing in directional and horizontal wells have been enhanced by improved fabrication techniques and higher-diameter coiled tubing which allows coiled tubing units to be used effectively over greater distances, thus allowing them to function in more of the completion activities currently taking place in the U.S. domestic market. There are several manufacturers of flexible steel pipe used in coiled tubing services, and the Company believes that its sources of supply are adequate.
+Snubbing . Snubbing (also referred to as hydraulic workover services), which accounted for approximately three percent of revenues in 2014 and four percent of revenues in 2013 and 2012, involves using a hydraulic workover rig that permits an operator to repair damaged casing, production tubing and downhole production equipment in a high-pressure environment. A snubbing unit makes it possible to remove and replace downhole equipment while maintaining pressure on the well. Customers benefit because these operations can be performed without removing the pressure from the well, which stops production and can damage the formation, and because a snubbing rig can perform many applications at a lower cost than other alternatives. Because this service involves a very hazardous process that entails high risk, the snubbing segment of the oil and gas services industry is limited to a relative few operators who have the experience and knowledge required to perform such services safely and efficiently. Increasingly, snubbing units are used for unconventional completions at the outer reaches of long wellbores which cannot be serviced by coiled tubing because coiled tubing has a more limited range than drill pipe conveyed by a snubbing unit.
+Nitrogen . Nitrogen accounted for approximately three percent of revenues in 2014 and four percent of revenues in 2013 and 2012. There are a number of uses for nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside of the oilfield. For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in various drilling applications. Increasingly, it is used as a displacement medium to increase production in older wells in which production has depleted. It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing medium for our fracturing service line. In addition, nitrogen can be complementary to our snubbing and coiled tubing service lines, because it is a non-corrosive medium and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our pressure pumping service line as well, because foam-based nitrogen stimulation is appropriate in certain sensitive formations in which the fluids used in fracturing or acidizing would damage a customer’s well.
+For non-oilfield industrial users, nitrogen can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of pumping unit configurations that inject nitrogen in its various applications. Some of these pumping units are set up for use on offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these sources of supply are adequate.
+Well Control . Cudd Energy Services specializes in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and internationally. In connection with these services, Cudd Energy Services, along with Patterson Services, has the capacity to supply the equipment, expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years, the Company has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds to well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the most critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work. Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs. In these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations can resume as promptly as safety permits.
+4
+Wireline Services . Wireline is classified into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well, conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring objects into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor line into a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline services can be an integral part of the plug and abandonment process, near the end of the life cycle of a well.
+Fishing . Fishing involves the use of specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation. The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+The following is a description of the primary service lines conducted within the Support Services business segment:
+Rental Tools . Rental tools accounted for approximately four percent of 2014 and 2013 revenues and five percent of 2012 revenues. The Company rents specialized equipment for use with onshore and offshore oil and gas well drilling, completion and workover activities. The drilling and subsequent operation of oil and gas wells generally require a variety of equipment. The equipment needed is in large part determined by the geological features of the production zone and the size of the well itself. As a result, operators and drilling contractors often find it more economical to supplement their tool and tubular assets with rental items instead of owning a complete set of assets. The Company’s facilities are strategically located to serve the major staging points for oil and gas activities in Texas, the Gulf of Mexico, mid-continent region, Appalachian region and the Rocky Mountains.
+Patterson Rental Tools offers a broad range of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for both oilfield and non-oilfield customers.
+Well Control School . Well Control School provides industry and government accredited training for the oil and gas industry both in the United States and in limited international locations. Well Control School provides training in various formats including conventional classroom training, interactive computer training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff engineering and well site management.
+Refer to Note 12 in the Notes to the Consolidated Financial Statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities of its customers in Texas, the Gulf of Mexico, the mid-continent, the southwest, the Rocky Mountains and the Appalachian regions. Demand for RPC’s services in the U.S. tends to be extremely volatile and fluctuates with current and projected price levels of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions about capital investment toward the development and production of oil and gas reserves.
+5
+Due to aging oilfields and lower-cost sources of oil internationally, the drilling rig count in the U.S. has declined by approximately 66 percent from its peak in 1981. However, due to recently enhanced technology, more wells are being drilled, and these wells are increasingly productive. For these reasons, the domestic production of natural gas has risen to record levels, and we estimate that the domestic production of crude oil during 2014 was at its highest level since 1986. Oil and gas industry activity levels have historically been volatile, experiencing multiple cycles, including down cycle troughs in 1986, 1992, 1999 (with April 1999 recording the lowest U.S. drilling rig count in the industry’s history), 2002 and again in 2009. The rig count during the peak of the most recent cycle occurred at the end of the third quarter of 2014, and began to decline sharply during the fourth quarter of 2014 and into the first quarter of 2015. Early in the first quarter of 2015, the U.S. domestic drilling rig count has declined by approximately 30 percent from the peak.
+The
+fluctuations in domestic drilling activity since 2008 are consistent with the changes in the prices of oil and natural
+gas, the overall economic recovery following the recession in 2008 and 2009, and most recently, the large increase in global
+oil production that became apparent during the third and fourth quarters of 2014. During 2014 the average price of
+natural gas increased by approximately 15 percent, although it began to decline during the end of the first quarter of 2014,
+and at the end of the year was approximately 35 percent lower than at the same time in 2013. During the first quarter
+of 2015, the price of natural gas continued to decline slightly. The average price of oil decreased by
+approximately five percent during 2014 compared to 2013. However, the price of oil decreased significantly during the
+third and fourth quarters of 2014, falling by approximately 48 percent during that time. The price of oil has continued
+to decline during 2015, and in the first quarter to date was approximately five percent lower than at the end of 2014.
+RPC believes that the decrease in the price of oil during this period has been caused by increased supply from the domestic
+U.S. market, weak global demand, the actions of the OPEC cartel, and the strength of the U.S. dollar on global
+currency markets. The precipitous decline in the price of oil during the third and fourth quarters of 2014 and the
+first quarter of 2015 has caused a significant decrease in oil-directed drilling activity. During this period the U.S.
+domestic oil-directed drilling rig count has fallen by approximately 21 percent. The price of natural gas liquids has become
+an increasingly important determinant of our customers’ activity levels, since it is produced in many of the
+shale resource plays which also produce oil, and production of various natural gas liquids has increased to a level
+comparable to that of natural gas. During 2014 the average price of natural gas liquids increased by approximately five
+percent compared to 2013, but early in the first quarter of 2015 had declined by approximately seven percent. The
+declines in the prices of oil, natural gas, and natural gas liquids during 2014 and the first quarter of 2015 to date carry
+significant negative implications for RPC’s customer activity levels for the next twelve months.
+From
+2001 to 2009, gas drilling rigs represented over 80 percent of the drilling rig count. In 2010, the percentage of
+drilling rigs drilling for natural gas began to decline, and by early in the first quarter of 2015 had fallen to
+approximately 21 percent of total drilling activity. Although the demand for natural gas has remained stable, the price
+of natural gas has fallen in recent years due to increased domestic reserves, productivity of new wells, and high natural gas
+production from oil-directed wells. The price of natural gas has declined following a colder than normal winter in
+2014, and by early in the first quarter of 2015 had fallen below $3 per Mcf for the first time since the third quarter of
+2012. Early in the first quarter of 2015, the amount of natural gas in storage in the United States was approximately
+one percent lower than the five-year average at this time in the year. We believe that these natural gas market
+dynamics discourage our customers from conducting natural gas-directed drilling activities. In spite of these
+unfavorable near-term dynamics, the long-term demand outlook for natural gas is still favorable because, unlike oil, foreign
+imports of natural gas do not compete with domestic production to a meaningful degree. This lack of foreign competition tends
+to keep prices high enough to ensure that domestic drilling and production will continue at certain minimum levels. We
+anticipate that oil-directed drilling will continue to represent the majority of the total drilling rig count, in spite of
+the fact that the price of oil has declined tremendously during the third and fourth quarters of 2014 and the first quarter
+of 2015 to date. Over the long term, we believe that natural gas-directed drilling will increase due to the lack of
+natural gas production from oil-directed drilling and increased natural gas demand from U.S. exports of natural gas and
+changes in demand due to increased use of natural gas as a transportation fuel or for other purposes. We continue
+to believe in the long-term growth opportunities for our business due to the continued high demand for hydrocarbons generally
+and the growing production of oil in the domestic U.S. market in particular. Furthermore, we note that the techniques
+used to extract oil and natural gas in the U.S. domestic market increasingly require the types of services that RPC provides
+to its customers, and during 2014 equipment and raw materials requirements of the services we perform for our customers
+continued to increase.
+There are certain types of wells being drilled in the U.S. domestic market for which there is a higher demand for RPC’s services. Known as either directional or horizontal wells, these wells are more difficult and costly to complete. They have become an increasingly large percentage of the U.S. domestic market, and since the third quarter of 2008, have consistently comprised the majority of U.S. domestic drilling. Because they are drilled through a typically narrow and relatively impermeable formation such as shale, they require additional stimulation when they are completed. Also, many of these formations require high pumping rates of stimulation fluids under high pressures, which in turn requires a great deal of pressure pumping horsepower to complete the well. Furthermore, since they are not drilled in a straight vertical direction from the Earth’s surface, they require tools and drilling mechanisms that are flexible, rather than rigid, and can be steered once they are downhole. Specifically, these types of wells require RPC’s pressure pumping and coiled tubing services, as well as our downhole tools and services.
+6
+International. RPC has historically operated in several countries outside of the United States, and international revenues presently account for approximately four percent of RPC’s consolidated revenues. RPC’s equipment investments over the last several years have emphasized domestic rather than international expansion because of higher expected financial returns. International revenues for 2014 increased compared to 2013 due to higher customer activity levels in Australia, Argentina and Gabon partially offset by lower customer activity in Canada. During 2014, RPC provided snubbing, well control and oilfield training services in several countries including Gabon and Australia. We also provided downhole motors and tools in Canada, Mexico and Oman, and rental tools in Bolivia and Equatorial Guinea. We continue to focus on the selected development of international opportunities in these and other markets, although we believe that it will continue to be less than five percent of total revenues in 2015.
+RPC provides services to its international customers through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties, including the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic operations. Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting the timing and duration of contract work is not possible. Refer to Note 12 in the Notes to Consolidated Financial Statements for further information on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate excellent long-term returns on investment through the effective and conservative management of its invested capital to generate strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies are focused on selected customers and markets in which we believe there exist opportunities for higher growth, customer and market penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added products and services. RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist. However, the favorable long-term outlook for our industry and the strong historical profitability of many potential acquisitions has encouraged potential sellers of businesses to expect high valuations for their businesses. Due to these high valuations and the potential difficulty of integrating acquired businesses into our existing operations, we believe we generate better returns on investments growing organically in service lines and geographic locations in which we have experience and presence. We will continue to be selective in pursuing growth through acquisitions of existing businesses.
+RPC has a revolving credit facility to fund the purchase of revenue-producing equipment and other working capital requirements. In January 2014, this facility was extended for five years. We have pursued this capital source because of the high returns on investment that have been generated by many of our service lines during the previous several years, and because of the low cost and ready availability of debt capital. During 2014, we purchased additional revenue-producing equipment to support high industry activity levels. We began to take delivery of this equipment during the third and fourth quarters of 2014, and anticipate that the remainder of the equipment will be delivered during the first quarter of 2015. The outstanding balance on our credit facility at the end of 2014 was higher than at the end of the prior year due to an increase in capital expenditures and working capital, and our ratio of debt to total capitalization continues to be conservative compared to a number of our peers.
+Customers
+Demand for RPC’s services and products depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist of major and independent oil and natural gas producing companies. During 2014, RPC provided oilfield services to several hundred customers, none of which accounted for more than 10 percent of revenues.
+Sales are generated by RPC’s sales force and through referrals from existing customers. Over the past three years we have from time to time entered into agreements, with terms beyond one year, to provide services to certain domestic customers. We monitor closely the financial condition of these customers, their capital expenditure plans, and other indications of their drilling and completion activities. Due to the short lead time between ordering services or equipment and providing services or delivering equipment, there is no significant sales backlog in most of our service lines.
+7
+Competition
+RPC operates in highly competitive areas of the oilfield services industry. Our products and services are sold in highly competitive markets, and the revenues and earnings generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets, general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors, including the largest integrated oilfield services companies. Strong oilfield activity during the past several years and the availability of capital have encouraged several new, smaller companies to seek debt and equity capital and accelerate their growth rates. The presence of these new competitors has increased competitive pricing pressures as domestic oilfield activity moderated during 2012, 2013 and 2014. Although the growth in the overall domestic fleet of revenue-producing equipment has moderated, pricing for our services remains competitive. RPC believes that the principal competitive factors in the market areas that it serves are product availability and quality of our equipment and raw materials used to provide our services, service quality, reputation for safety and technical proficiency, and price.
+The oil and gas services industry includes a small number of dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton Company, Baker Hughes and Schlumberger Ltd., and a significant number of locally oriented businesses.
+Facilities/Equipment
+RPC’s equipment consists primarily of oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These manufacturers of our oilfield service equipment may not be able to meet our requests for timely delivery during periods of high demand which may result in delayed deliveries of equipment and higher prices for equipment.
+RPC both owns and leases regional and district facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive offices in Atlanta, Georgia are leased. The Company has two primary administrative buildings, one it leases in The Woodlands, Texas that includes the Company’s operations, engineering, sales and marketing headquarters, and one it owns in Houma, Louisiana that includes certain administrative functions. RPC believes that its facilities are adequate for its current operations. For additional information with respect to RPC’s lease commitments, see Note 9 of the Notes to Consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state, federal and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to worker safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how such laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by laws and regulations relating to the exploration for and production of natural resources such as oil and natural gas. These regulations are subject to change, and new regulations may curtail or eliminate our customers’ activities in certain areas where we currently operate. We cannot determine the extent to which new legislation may impact our customers’ activity levels, and ultimately, the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations, which management believes are important but are not indispensable to RPC’s success. Although RPC anticipates seeking patent protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its competitive position.
+Availability of Filings
+RPC makes available, free of charge, on its website, www.rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports on the same day as they are filed with the Securities and Exchange Commission.
+8

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1	+ Item 13. Certain Relationships and Related Party Transactions and Director Independence
2	+ Information concerning certain relationships and related party transactions will be included in the RPC Proxy Statement for its 2015 Annual Meeting of Stockholders, in the sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence will be included in the RPC Proxy Statement for its 2015 Annual Meeting of Stockholders in the section titled “Director Independence and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and procedures — The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this report, December 31, 2014 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.
+Management’s report on internal control over financial reporting — Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal control over financial reporting is included on page 30 of this report. Grant Thornton LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of internal control as of December 31, 2014 and issued a report thereon which is included on page 31 of this report.
+Changes in internal control over financial reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 11: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment. RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products Corporation (a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then distributing the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products entered into various agreements that define the companies’ relationship.
+In accordance with a Transition Support Services agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations that are subsidiaries of the Company) for such services were $663,000 in 2014, $670,000 in 2013, and $544,000 in 2012. The Company’s receivable due from Marine Products for these services was $47,000 as of December 31, 2014 and $145,000 as of December 31, 2013. The Company’s directors are also directors of Marine Products and all of the executive officers are employees of both the Company and Marine Products.
+Other
+The Company periodically purchases in the ordinary course of business products or services from suppliers, who are owned by significant officers or stockholders, or affiliated with the directors of RPC. The total amounts paid to these affiliated parties were $1,092,000 in 2014, $1,039,000 in 2013 and $1,676,000 in 2012.
+RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is otherwise affiliated with RPC). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent totaled $84,000 in 2014 and $83,000 in 2013 and 2012.
+54
+NOTES TO CONSOLIDATED FINANCIAL
+STATEMENTS
+RPC, Inc. and Subsidiaries
+Years ended December 31, 2014, 2013 and 2012
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power.
+During the year ended December 31, 2014, RPC and Marine Products entered into a joint venture creating a limited liability company called 255 RC, LLC that is owned 50 percent each for the purchase and ownership of a corporate aircraft. 255 RC, LLC was funded with a contribution of approximately $2,554,000 each from RPC and Marine Products. The purchase of the aircraft was completed in January 2015 and each of RPC and Marine Products have entered into an operating lease agreement with 255 RC, LLC for a period of five years.

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $753,000 in 2015.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. The purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $2,554,000 contribution by each company to 255 RC, LLC. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2015, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $186,000 for the corporate aircraft.
+During 2015, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. R. Randall Rollins, Chairman, and Mr. Gary W. Rollins, Director, are officers, directors and controlling stockholders of LOR, Inc. In 2015, payments totaling approximately $1,127,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services including an allocation for office space from Rollins. The service agreements between Rollins and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $100,000 in 2015.
+27
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins, his brother Gary W. Rollins who is also a director, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, “Corporate Governance and Board of Directors Committees and Meetings, Director Independence and NYSE Requirements, Controlled Company Exemption.” The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law, consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at www.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2015 were reviewed, approved and/or ratified by the Nominating and Corporate Governance Committee in accordance with the Code.

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2	+ 0000742278,RES,RPC INC,10-K,2016-02-29,2015-12-31,2016-02-29T20:04:23.000Z,0001571049-16-012371,t1600094_10k.htm,FORM 10-K,6544061,1,0,https://www.sec.gov/Archives/edgar/data/742278/000157104916012371/t1600094_10k.htm,https://www.sec.gov/Archives/edgar/data/742278/000157104916012371/,2015,2015,1

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally
+organized in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+RPC provides a broad range of specialized
+oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production
+and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico,
+Rocky Mountain and Appalachian regions, and in selected international markets. The services and equipment provided include, among
+others, (1) pressure pumping services, (2) downhole tool services, (3) coiled tubing services, (4) snubbing services (also referred
+to as hydraulic workover services), (5) nitrogen services, (6) the rental of drill pipe and other specialized oilfield equipment,
+and (7) well control. RPC acts as a holding company for its operating units, Cudd Energy Services, Patterson Rental and Fishing
+Tools, Bronco Oilfield Services, Thru Tubing Solutions, Well Control School, and others. As of December 31, 2015, RPC had approximately
+3,100 employees.
+2
+Business Segments
+RPC’s service lines have been aggregated
+into two reportable oil and gas services business segments, Technical Services and Support Services, because of the similarities
+between the financial performance and approach to managing the service lines within each of the segments, as well as the economic
+and business conditions impacting their business activity levels.
+During 2015, less than one percent of RPC’s
+consolidated revenues were generated from offshore operations in the U.S. Gulf of Mexico and in the Gulf of Alaska. We also
+estimate that 70 percent of our 2015 revenues were related to drilling and production activities for oil, and 30 percent were related
+to drilling and production activities for natural gas.
+Technical Services include RPC’s oil
+and gas service lines that utilize people and equipment to perform value-added completion, production and maintenance services
+directly to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest
+capital toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or
+to address well control issues. This business segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing,
+nitrogen, well control, wireline and fishing. The principal markets for this business segment include the United States, including
+the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. Customers
+include major multi-national and independent oil and gas producers, and selected nationally owned oil companies.
+Support Services include RPC’s oil
+and gas service lines that primarily provide equipment for customer use or services to assist customer operations. The equipment
+and services include drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and
+consulting services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels.
+The principal markets for this segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and
+Appalachian regions and project work in selected international locations in the last three years including primarily Canada, Latin
+America and the Middle East. Customers primarily include domestic operations of major multi-national and independent oil and gas
+producers, and selected nationally owned oil companies.
+Technical Services
+The following is a description of the primary
+service lines conducted within the Technical Services business segment:
+Pressure Pumping . Pressure pumping
+services, which accounted for approximately 54 percent of 2015 revenues, 57 percent of 2014 revenues and 55 percent of 2013 revenues
+are provided to customers throughout Texas, and the Appalachian, mid-continent and Rocky Mountain regions of the United States.
+We primarily provide these services to customers in order to enhance the initial production of hydrocarbons in formations that
+have low permeability. Pressure pumping services involve using complex, truck or skid-mounted equipment designed and constructed
+for each specific pumping service offered. The mobility of this equipment permits pressure pumping services to be performed in
+varying geographic areas. Principal materials utilized in the pressure pumping business include fracturing proppants, acid and
+bulk chemical additives. Generally, these items are available from several suppliers, and the Company utilizes more than one supplier
+for each item. Pressure pumping services offered include:
+Fracturing — Fracturing services
+are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly
+important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons
+is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid gel
+and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths. Sand,
+bauxite or synthetic proppant, which is often suspended in gel, is pumped into the fracture. When the pressure is released at the
+surface, the fluid gel returns to the well surface, but the proppant remains in the fracture, thus keeping it open so that oil
+and natural gas can flow through the fracture into the production tubing and ultimately the well surface. In some cases, fracturing
+is performed in formations with a high amount of carbonate rock by an acid solution pumped under pressure without a proppant or
+with small amounts of proppant.
+Acidizing — Acidizing services
+are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage
+due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated
+acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of
+oil and natural gas. Acidizing services can also enhance production in limestone formations.
+Downhole Tools . Thru Tubing Solutions
+(“TTS”) accounted for approximately 18 percent of 2015 revenues, 15 percent of 2014 revenues and 16 percent of 2013
+revenues. TTS provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes
+to operators and service companies in drilling and production operations, including casing perforation at the completion stage
+of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling and completion activities.
+TTS’ experience providing reliable tool services allows it to work in a pressurized environment with virtually any coiled
+tubing unit or snubbing unit.
+3
+Coiled Tubing . Coiled tubing services,
+which accounted for approximately nine percent of revenues in 2015, 2014 and 2013, involve the injection of coiled tubing into
+wells to perform various applications and functions for use principally in well-servicing operations and to facilitate completion
+of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter of less than four inches manufactured in continuous
+lengths of thousands of feet and wound or coiled around a large reel. It can be inserted through existing production tubing and
+used to perform workovers without using a larger, more costly workover rig. Principal advantages of employing coiled tubing in
+a workover operation include: (i) not having to “shut-in” the well during such operations, (ii) the ability to reel
+continuous coiled tubing in and out of a well significantly faster than conventional pipe, (iii) the ability to direct fluids into
+a wellbore with more precision, and (iv) enhanced access to remote or offshore fields due to the smaller size and mobility of a
+coiled tubing unit compared to a workover rig. Increasingly, coiled tubing units are also used to support completion activities
+in directional and horizontal wells. Such completion activities usually require multiple entrances in a wellbore in order to complete
+multiple fractures in a pressure pumping operation. A coiled tubing unit can accomplish this type of operation because its flexibility
+allows it to be steered in a direction other than vertical, which is necessary in this type of wellbore. At the same time, the
+strength of the coiled tubing string allows various types of tools or motors to be conveyed into the well effectively. The uses
+for coiled tubing in directional and horizontal wells have been enhanced by improved fabrication techniques and higher-diameter
+coiled tubing which allows coiled tubing units to be used effectively over greater distances, thus allowing them to function in
+more of the completion activities currently taking place in the U.S. domestic market. There are several manufacturers of flexible
+steel pipe used in coiled tubing services, and the Company believes that its sources of supply are adequate.
+Snubbing . Snubbing (also referred
+to as hydraulic workover services), which accounted for approximately three percent of revenues in 2015 and 2014 and four percent
+of revenues in 2013, involves using a hydraulic workover rig that permits an operator to repair damaged casing, production tubing
+and downhole production equipment in a high-pressure environment. A snubbing unit makes it possible to remove and replace downhole
+equipment while maintaining pressure on the well. Customers benefit because these operations can be performed without removing
+the pressure from the well, which stops production and can damage the formation, and because a snubbing rig can perform many applications
+at a lower cost than other alternatives. Because this service involves a very hazardous process that entails high risk, the snubbing
+segment of the oil and gas services industry is limited to a relative few operators who have the experience and knowledge required
+to perform such services safely and efficiently. Increasingly, snubbing units are used for unconventional completions at the outer
+reaches of long wellbores which cannot be serviced by coiled tubing because coiled tubing has a more limited range than drill pipe
+conveyed by a snubbing unit.
+Nitrogen . Nitrogen accounted for approximately
+four percent of revenues in 2015, three percent of revenues in 2014 and four percent of revenues in 2013. There are a number of
+uses for nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside
+of the oilfield. For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in
+various drilling applications. Increasingly, it is used as a displacement medium to increase production in older wells in which
+production has depleted. It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing
+medium for our fracturing service line. In addition, nitrogen can be complementary to our snubbing and coiled tubing service lines,
+because it is a non-corrosive medium and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our
+pressure pumping service line as well, because foam-based nitrogen stimulation is appropriate in certain sensitive formations in
+which the fluids used in fracturing or acidizing would damage a customer's well.
+For non-oilfield industrial users, nitrogen
+can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of
+pumping unit configurations that inject nitrogen in its various applications. Some of these pumping units are set up for use on
+offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these sources
+of supply are adequate.
+Well Control . Cudd Energy Services
+specializes in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and
+internationally. In connection with these services, Cudd Energy Services, along with Patterson Services, has the capacity to supply
+the equipment, expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years,
+the Company has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting
+staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds to
+well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the most
+critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental
+damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events
+ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work.
+Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs. In
+these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations can
+resume as promptly as safety permits.
+4
+Wireline Services . Wireline is classified
+into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well,
+conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring objects
+into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor line into
+a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline services can
+be an integral part of the plug and abandonment process, near the end of the life cycle of a well.
+Fishing . Fishing involves the use
+of specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service
+required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically
+declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation.
+The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+The following is a description of the primary
+service lines conducted within the Support Services business segment:
+Rental Tools . Rental tools accounted
+for approximately four percent of revenues in 2015, 2014 and 2013. The Company rents specialized equipment for use with onshore
+and offshore oil and gas well drilling, completion and workover activities. The drilling and subsequent operation of oil and gas
+wells generally require a variety of equipment. The equipment needed is in large part determined by the geological features of
+the production zone and the size of the well itself. As a result, operators and drilling contractors often find it more economical
+to supplement their tool and tubular assets with rental items instead of owning a complete set of assets. The Company’s facilities
+are strategically located to serve the major staging points for oil and gas activities in Texas, the Gulf of Mexico, mid-continent
+region, Appalachian region and the Rocky Mountains.
+Patterson Rental Tools offers a broad range
+of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield
+Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic
+and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s
+inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers
+are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control
+of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity
+cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for
+both oilfield and non-oilfield customers.
+Well Control School . Well Control
+School provides industry and government accredited training for the oil and gas industry both in the United States and in limited
+international locations. Well Control School provides training in various formats including conventional classroom training, interactive
+computer training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy
+Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and
+workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff
+engineering and well site management.
+Refer to Note 12 in the Notes to the Consolidated
+Financial Statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services
+to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities
+of its customers in Texas, the Gulf of Mexico, the mid-continent, the southwest, the Rocky Mountains and the Appalachian regions.
+Demand for RPC’s services in the U.S. tends to be extremely volatile and fluctuates with current and projected price levels
+of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions
+about capital investment toward the development and production of oil and gas reserves.
+5
+Due to aging oilfields and lower-cost sources
+of oil internationally, the drilling rig count in the U.S. has declined by approximately 89 percent from its peak in 1981. However,
+due to continuously enhanced technology, more wells are drilled during periods of strong industry activity, and these wells are
+increasingly productive. For these reasons, the domestic production of natural gas rose to record levels in the third quarter of
+2015, and domestic production of crude oil in the third quarter of 2015 reached its highest level since the third quarter of 1971.
+Domestic production of both natural gas and oil began to decline during the third and fourth quarters of 2015, however, due to
+the decline in domestic drilling and completion activities. Oil and gas industry activity levels have historically been volatile,
+experiencing multiple cycles, including down cycle troughs in 1986, 1992, 1999 (with April 1999 recording the lowest U.S. drilling
+rig count in the industry’s history), 2002 and again in 2009. The rig count during the peak of the most recent cycle occurred
+at the end of the third quarter of 2014, and began to decline sharply during the fourth quarter of 2014. The rig count continued
+to decline in 2015 and 2016. Early in 2016, the U.S. domestic drilling rig count had declined by approximately 73 percent from
+its most recent peak in 2014 and was only five percent higher than the April 1999 record low drilling rig count.
+The fluctuations in domestic drilling activity
+since the most recent peak in the third quarter of 2014 are consistent with global supply of and demand for oil, the domestic supply
+of and demand for natural gas, U.S. domestic storage levels of oil and natural gas, fluctuations in the value of the U.S. dollar
+on world currency markets, and projected near-term economic growth. During 2015 the average price of natural gas decreased by approximately
+39 percent compared to the prior year, but during the first quarter of 2016 stabilized at a price approximately equal to the average
+price in the fourth quarter of 2015. The average price of oil decreased by approximately 48 percent during 2015 compared to 2014.
+Early in the first quarter of 2016, the price of oil decreased by approximately 26 percent compared to the fourth quarter of 2015.
+RPC believes that the decrease in the price of oil during this period has been caused by the actions of the OPEC cartel, increased
+supply from the domestic U.S. market, weak global demand, the strength of the U.S. dollar on global currency markets and high storage
+levels of oil. The precipitous decline in the price of oil that has taken place since the third quarter of 2014 has caused a significant
+decrease in oil-directed drilling activity. During this period the U.S. domestic oil-directed drilling rig count has fallen by
+approximately 70 percent. In addition to oil and natural gas, the price of natural gas liquids has become a determinant of our
+customers’ activity levels, since it is produced in many of the shale resource plays which also produce oil, and production
+of various natural gas liquids has increased to a level comparable to that of natural gas. During 2015 the average price of natural
+gas liquids decreased by approximately 56 percent compared to 2014, and early in the first quarter of 2016 had declined by approximately
+26 percent compared to the average price in 2015. The declines in the prices of oil, natural gas, and natural gas liquids during
+2015 and the first quarter of 2016 to date carry significant negative implications for RPC’s customer activity levels over
+the near term.
+From 2001 to 2009, gas drilling rigs represented
+over 80 percent of the drilling rig count. In 2010, the percentage of drilling rigs drilling for natural gas began to decline,
+and by early in the first quarter of 2015 had fallen to approximately 18 percent of total drilling activity. In absolute terms,
+the natural gas drilling rig count early in the first quarter of 2016 was the lowest natural gas drilling rig count ever recorded.
+Although the demand for natural gas has remained stable, the price of natural gas has fallen in recent years due to increased domestic
+reserves, productivity of new wells, and high associated natural gas production from oil-directed wells. The price of natural gas
+has declined in 2015 and early in the first quarter of 2016, and has fallen to a level not observed since the fourth quarter of
+1998. We have observed that these natural gas market dynamics discourage our customers from conducting natural gas-directed drilling
+activities. In spite of these unfavorable near-term dynamics, the long-term demand outlook for natural gas is still favorable because,
+unlike oil, foreign imports of natural gas do not compete with domestic production to a meaningful degree, and in the fourth quarter
+of 2015, the United States began to export natural gas for the first time. We anticipate that oil-directed drilling will continue
+to represent the majority of the total drilling rig count, in spite of the fact that the price of oil has declined tremendously
+from the third quarter of 2014 through the first quarter of 2016 to date. Over the long term, we believe that natural gas-directed
+drilling will increase due to the lack of natural gas production from oil-directed drilling and increased natural gas demand from
+U.S. exports of natural gas and changes in demand due to increased use of natural gas as a transportation fuel or for other purposes.
+We continue to believe in the long-term growth opportunities for our business due to the continued high demand for hydrocarbons
+generally and the growing production of oil in the domestic U.S. market in particular. Furthermore, we note that the techniques
+used to extract oil and natural gas in the U.S. domestic market increasingly require the types of services that RPC provides to
+its customers.
+There are certain types of wells being drilled
+in the U.S. domestic market for which there is a higher demand for RPC’s services. Known as either directional or horizontal
+wells, these wells are more difficult and costly to complete. They have become an increasingly large percentage of the U.S. domestic
+market, and since the third quarter of 2008, have consistently comprised the majority of U.S. domestic drilling. Because they are
+drilled through a typically narrow and relatively impermeable formation such as shale, they require additional stimulation when
+they are completed. Also, many of these formations require high pumping rates of stimulation fluids under high pressures, which
+in turn require a great deal of pressure pumping horsepower on location to complete the well. Furthermore, since they are not drilled
+in a straight vertical direction from the Earth’s surface, they require tools and drilling mechanisms that are flexible,
+rather than rigid, and can be steered once they are downhole. Specifically, these types of wells require RPC’s pressure pumping
+and coiled tubing services, as well as our downhole tools and services.
+6
+International. RPC has historically
+operated in several countries outside of the United States, and international revenues accounted for approximately six percent
+of RPC’s consolidated revenues in 2015 and four percent in 2014 and 2013. RPC’s equipment investments over the last
+several years have emphasized domestic rather than international expansion because of higher domestic activity levels and expected
+financial returns. International revenues decreased primarily due to lower customer activity levels in Canada, Australia, Bolivia
+and Mexico in 2015 partially offset by increased activity in Argentina compared to the prior year. During 2015, RPC provided snubbing,
+well control and oilfield training services in several countries including Gabon and Australia. We also provided downhole motors
+and tools in Argentina, Canada, China and Oman, and rental tools in Equatorial Guinea. We continue to focus on the selected development
+of international opportunities in these and other markets, although we believe that it will continue to be less than ten percent
+of total revenues in 2016.
+RPC provides services to its international
+customers through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties,
+including the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international
+projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective
+with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic operations.
+Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different
+objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting the timing and
+duration of contract work is not possible. Refer to Note 12 in the Notes to Consolidated Financial Statements for further information
+on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate
+excellent long-term returns on investment through the effective and conservative management of its invested capital to generate
+strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the
+long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies
+are focused on selected customers and markets in which we believe there exist opportunities for higher growth, customer and market
+penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added products and services.
+RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large
+customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities
+through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Historically, we have found that
+we generate higher financial returns from organic growth in service lines and geographical locations in which we have experience.
+Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist,
+and we frequently consider such opportunities. We have consummated relatively few acquisitions, however, due to high seller valuation
+expectations and the risk of integrating acquired businesses into our existing operations. As the current industry downturn continues,
+we believe that many financial investors who have provided capital to smaller oilfield service companies in the past several years
+are seeking to liquidate their investments. This development, along with continued depressed financial results in our industry,
+may make valuations for acquisition targets more attractive. We will continue to consider the acquisitions of existing businesses
+but will also continue to maintain a conservative capital structure, which may limit our ability to consummate large transactions.
+RPC has a revolving credit facility to fund
+the purchase of revenue-producing equipment and other working capital requirements. In January 2014, this facility was extended
+for five years, and in November of 2015, RPC voluntarily reduced the borrowing capacity of the facility. We have pursued this capital
+source because of the high returns on investment that have been generated by many of our service lines during the previous several
+years, and because of the low cost and ready availability of debt capital. During 2014, we purchased additional revenue-producing
+equipment to support high industry activity levels. We took delivery of this equipment during the third and fourth quarters of
+2014 and the first and second quarters of 2015. We had no outstanding balance on our credit facility at the end of 2015 due to
+a decrease in capital expenditures and working capital. Our capital structure is more conservative than that of many of our peers.
+Customers
+Demand for RPC’s services and products
+depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells,
+the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist
+of major and independent oil and natural gas producing companies. During 2015, RPC provided oilfield services to several hundred
+customers. Of these customers, only one, Anadarko Petroleum Corporation (Anadarko) at approximately 23 percent of revenues, accounted
+for more than 10 percent of revenues. RPC believes that the relationship with this customer is good, but the loss of this customer
+could have a material adverse effect on Company revenues in the near term.
+7
+Sales are generated by RPC’s sales
+force and through referrals from existing customers. Over the past three years we have from time to time entered into agreements,
+with terms beyond one year, to provide services to certain domestic customers. We monitor closely the financial condition of these
+customers, their capital expenditure plans, and other indications of their drilling and completion activities. Due to the short
+lead time between ordering services or equipment and providing services or delivering equipment, there is no significant sales
+backlog in most of our service lines.
+Competition
+RPC operates in highly competitive areas
+of the oilfield services industry. Our products and services are sold in highly competitive markets, and the revenues and earnings
+generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets,
+general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors,
+including the largest integrated oilfield services companies. Strong oilfield activity during the past several years and the availability
+of capital have encouraged several new, smaller companies to seek debt and equity capital and accelerate their growth rates. The
+presence of these new competitors has increased competitive pricing pressures as domestic oilfield activity moderated during 2013,
+2014 and 2015. Although the growth in the overall domestic fleet of revenue-producing equipment has moderated, pricing for our
+services remains competitive. RPC believes that the principal competitive factors in the market areas that it serves are product
+availability and quality of our equipment and raw materials used to provide our services, service quality, reputation for safety
+and technical proficiency, and price.
+The oil and gas services industry includes
+a small number of dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton
+Company, Baker Hughes and Schlumberger Ltd., and a significant number of locally oriented businesses.
+Facilities/Equipment
+RPC’s equipment consists primarily
+of oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially
+all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These
+manufacturers of our oilfield service equipment may not be able to meet our requests for timely delivery during periods of high
+demand which may result in delayed deliveries of equipment and higher prices for equipment.
+RPC both owns and leases regional and district
+facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive
+offices in Atlanta, Georgia are leased. The Company has two primary administrative buildings, one it leases in The Woodlands, Texas
+that includes the Company’s operations, engineering, sales and marketing headquarters, and one it owns in Houma, Louisiana
+that includes certain administrative functions. RPC believes that its facilities are adequate for its current operations. For additional
+information with respect to RPC’s lease commitments, see Note 9 of the Notes to Consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state,
+federal and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to
+worker safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how
+such laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations
+will be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by
+laws and regulations relating to the exploration for and production of natural resources such as oil and natural gas. These regulations
+are subject to change, and new regulations may curtail or eliminate our customers’ activities in certain areas where we currently
+operate. We cannot determine the extent to which new legislation may impact our customers’ activity levels, and ultimately,
+the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations,
+which management believes are important but are not indispensable to RPC’s success. Although RPC anticipates seeking patent
+protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its
+competitive position.
+Availability of Filings
+RPC makes available, free of charge, on its
+website, www.rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
+to those reports on the same day as they are filed with the Securities and Exchange Commission.
+8

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+Item 13. Certain Relationships and Related Party Transactions
+and Director Independence
+Information concerning certain relationships
+and related party transactions will be included in the RPC Proxy Statement for its 2016 Annual Meeting of Stockholders, in the
+sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence
+will be included in the RPC Proxy Statement for its 2016 Annual Meeting of Stockholders in the section titled “Director Independence
+and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and
+procedures — The Company maintains disclosure controls and procedures that are designed to ensure that information required
+to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
+the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including
+the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this
+report, December 31, 2015 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and
+with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness
+of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer
+and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable
+assurance level as of the Evaluation Date.
+Management’s report on internal
+control over financial reporting — Management is responsible for establishing and maintaining adequate internal control
+over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal
+control over financial reporting is included on page 30 of this report. Grant Thornton LLP, the Company’s independent registered
+public accounting firm, has audited the effectiveness of internal control as of December 31, 2015 and issued a report thereon which
+is included on page 31 of this report.
+Changes in internal control over financial
+reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s
+internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially
+affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 11: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the
+business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment.
+RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products Corporation
+(a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then distributing
+the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products entered into
+various agreements that define the companies’ relationship.
+In accordance with a Transition Support Services
+agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting
+and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations
+that are subsidiaries of the Company) for such services were $753,000 in 2015, $663,000 in 2014, and $670,000 in 2013. The Company’s
+(payable) receivable due (to) from Marine Products for these services was $(11,000) as of December 31, 2015 and $47,000 as of December
+31, 2014. The Company’s directors are also directors of Marine Products and all of the executive officers are employees of
+both the Company and Marine Products.
+Other
+The Company periodically purchases in the
+ordinary course of business products or services from suppliers, who are owned by significant officers or stockholders, or affiliated
+with the directors of RPC. The total amounts paid to these affiliated parties were $1,127,000 in
+2015, $1,092,000 in 2014 and $1,039,000 in 2013.
+RPC receives certain administrative services
+and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is otherwise affiliated
+with RPC). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement
+basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration
+of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries
+of the Company) for such services and rent totaled $100,000 in 2015, $84,000 in 2014 and $83,000 in 2013.
+A group that includes the Company’s
+Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain companies
+under their control, controls in excess of fifty percent of the Company’s voting power.
+RPC and Marine Products own 50
+percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a
+corporate aircraft. The purchase of the aircraft was completed in January 2015, and the purchase was funded primarily
+by a $2,554,000 contribution by each company to 255 RC, LLC. Each of RPC and Marine Products is a party to an operating
+lease agreement with 255 RC, LLC for a period of five years. During 2015, RPC recorded certain net operating costs comprised
+of rent and an allocable share of fixed costs of approximately $186,000 for the corporate aircraft. The Company accounts for this investment using the equity method and its proportionate share of income or
+loss is recorded in selling, general and administrative expenses. As of December 31, 2015, the investment closely approximates
+the underlying equity in the net assets of 255 RC, LLC.
+56
+NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+RPC,
+Inc. and Subsidiaries
+Years
+ended December 31 2015, 2014 and 2013

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $753,000 in 2015.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. The purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $2,554,000 contribution by each company to 255 RC, LLC. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2015, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $186,000 for the corporate aircraft.
+During 2015, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. R. Randall Rollins, Chairman, and Mr. Gary W. Rollins, Director, are officers, directors and controlling stockholders of LOR, Inc. In 2015, payments totaling approximately $1,127,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services including an allocation for office space from Rollins. The service agreements between Rollins and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $100,000 in 2015.
+27
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins, his brother Gary W. Rollins who is also a director, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, “Corporate Governance and Board of Directors Committees and Meetings, Director Independence and NYSE Requirements, Controlled Company Exemption.” The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law, consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at www.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2015 were reviewed, approved and/or ratified by the Nominating and Corporate Governance Committee in accordance with the Code.

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2	+ 0000742278,RES,RPC INC,10-K,2017-02-28,2016-12-31,2017-02-28T20:40:18.000Z,0001571049-17-001715,t1700131_10k.htm,FORM 10-K,6090144,1,0,https://www.sec.gov/Archives/edgar/data/742278/000157104917001715/t1700131_10k.htm,https://www.sec.gov/Archives/edgar/data/742278/000157104917001715/,2016,2016,1

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally organized
+in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+RPC provides a broad range of specialized
+oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production
+and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico,
+Rocky Mountain and Appalachian regions, and in selected international markets. RPC acts as a holding company for its operating
+units: Cudd Energy Services, Thru Tubing Solutions and Patterson Services. Selected overhead including centralized support services
+and regulatory compliance are classified under Corporate. RPC is further organized into Technical Services and Support Services
+which are its operating segments. As of December 31, 2016, RPC had approximately 2,500 employees.
+2
+Business Segments
+RPC manages its business as either
+services offered on the well site with equipment and personnel (Technical Services) or services and equipment offered off the
+well site (Support Services). The businesses under Technical Services generate revenues based on equipment, personnel
+operating the equipment and the materials utilized to provide the service. They are all managed, analyzed and reported based
+on the similarities of the operational characteristics and costs associated with providing the service. The businesses under
+Support Services are primarily able to generate revenues through one source, which is either a hard
+asset or a personnel resource. During 2016, less than one percent of RPC’s consolidated revenues were generated from
+offshore operations in the U.S. Gulf of Mexico. We also estimate that 70 percent of our 2016 revenues were related to
+drilling and production activities for oil, and 30 percent were related to drilling and production activities for natural
+gas.
+Technical Services include RPC’s oil
+and gas services that utilize people and equipment to perform value-added completion, production and maintenance services directly
+to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital
+toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address
+well control issues. This operating segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen,
+well control, wireline and fishing. Customers include
+major multi-national and independent oil and gas producers, and selected nationally owned oil companies. The services offered
+under Technical Services are high capital and personnel intensive businesses. The common drivers of operational and financial
+success of these services include diligent equipment maintenance, strong logistical processes, and appropriately trained personnel
+who function well in a team environment. The Company considers all of these services to be closely integrated oil and gas well
+servicing businesses, and makes resource allocation and performance assessment decisions based on this operating segment as a
+whole across these various services. The principal markets for this business segment include the United States, including the southwest,
+mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets.
+Support Services include all of the
+services that provide (i) equipment for customers’ use on the well site without RPC personnel and (ii) services that
+are provided in support of customer operations off the well site such as classroom and computer training, and other
+consulting services. The primary drivers of operational success for equipment provided for customers’ use on the well
+site without RPC personnel are offering safe, high quality and in-demand equipment appropriate for the well design
+characteristics. The drivers of operational success for the other Support Services relate to meeting customer needs off the
+well site and competitive marketing of such services. The equipment and services offered include drill pipe and related
+tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for
+these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this
+segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian regions and
+project work in selected international locations in the last three years, including primarily Canada, Latin America and the
+Middle East. Customers primarily include domestic operations of major multi-national and independent oil and gas producers,
+and selected nationally owned oil companies.
+A brief description of the primary services
+conducted within each of the operating segments follows:
+Technical Services
+Pressure Pumping . Pressure pumping services,
+which accounted for approximately 46 percent of 2016 revenues, 54 percent of 2015 revenues and 57 percent of 2014 revenues are
+provided to customers throughout Texas, and the mid-continent and Rocky Mountain regions of the United States. We primarily provide
+these services to customers in order to enhance the initial production of hydrocarbons in formations that have low permeability.
+Pressure pumping services involve using complex, truck or skid-mounted equipment designed and constructed for each specific pumping
+service offered. The mobility of this equipment permits pressure pumping services to be performed in varying geographic areas.
+Principal materials utilized in the pressure pumping business include fracturing proppants, acid and bulk chemical additives.
+Generally, these items are available from several suppliers, and the Company utilizes more than one supplier for each item. Pressure
+pumping services offered include:
+3
+Fracturing — Fracturing services
+are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly
+important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons
+is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid
+gel and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths.
+Sand, ceramics, or synthetic materials, which are often coated with a material to increase their resistance to crushing, are pumped
+into the fracture. When the pressure is released at the surface, the fluid gel returns to the well surface, but the proppant remains
+in the fracture, thus keeping it open so that oil and natural gas can flow through the fracture into the production tubing and
+ultimately to the well surface. In some cases, fracturing is performed in formations with a high amount of carbonate rock by an
+acid solution pumped under pressure without a proppant or with small amounts of proppant.
+Acidizing — Acidizing services
+are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage
+due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated
+acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of
+oil and natural gas. Acidizing services can also enhance production in limestone formations. Acid is also frequently used in the
+beginning of a fracturing operation.
+Downhole Tools . Thru Tubing Solutions
+(“TTS”) accounted for approximately 23 percent of 2016 revenues, 18 percent of 2015 revenues and 15 percent of 2014
+revenues. TTS provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes
+to operators and service companies in drilling and production operations, including casing perforation at the completion stage
+of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling and completion activities.
+TTS’ experience providing reliable tool services allows it to work in a pressurized environment with virtually any coiled
+tubing unit or snubbing unit.
+Coiled Tubing . Coiled tubing services,
+which accounted for approximately 10 percent of revenues in 2016 and nine percent in 2015 and 2014, involve the injection of coiled
+tubing into wells to perform various applications and functions for use principally in well-servicing operations and to facilitate
+completion of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter of less than four inches manufactured in
+continuous lengths of thousands of feet and wound or coiled around a large reel. It can be inserted through existing production
+tubing and used to perform workovers without using a larger, costlier workover rig. Principal advantages of employing coiled tubing
+in a workover operation include: (i) not having to “shut-in” the well during such operations, (ii) the ability to
+reel continuous coiled tubing in and out of a well significantly faster than conventional pipe, (iii) the ability to direct fluids
+into a wellbore with more precision, and (iv) enhanced access to remote or offshore fields due to the smaller size and mobility
+of a coiled tubing unit compared to a workover rig. Increasingly, coiled tubing units are also used to support completion activities
+in directional and horizontal wells. Such completion activities usually require multiple entrances in a wellbore in order to complete
+multiple fractures in a pressure pumping operation. A coiled tubing unit can accomplish this type of operation because its flexibility
+allows it to be steered in a direction other than vertical, which is necessary in this type of wellbore. At the same time, the
+strength of the coiled tubing string allows various types of tools or motors to be conveyed into the well effectively. The uses
+for coiled tubing in directional and horizontal wells have been enhanced by improved fabrication techniques and higher-diameter
+coiled tubing which allows coiled tubing units to be used effectively over greater distances, thus allowing them to function in
+more of the completion activities currently taking place in the U.S. domestic market. There are several manufacturers of flexible
+steel pipe used in coiled tubing services, and the Company believes that its sources of supply are adequate.
+Snubbing . Snubbing (also referred to
+as hydraulic workover services), which accounted for approximately three percent of revenues in 2016, 2015 and 2014, involves
+using a hydraulic workover rig that permits an operator to repair damaged casing, production tubing and downhole production equipment
+in a high-pressure environment. A snubbing unit makes it possible to remove and replace downhole equipment while maintaining pressure
+on the well. Customers benefit because these operations can be performed without removing the pressure from the well, which stops
+production and can damage the formation, and because a snubbing unit can perform many applications at a lower cost than other
+alternatives. Because this service involves a very hazardous process that entails high risk, the snubbing segment of the oil and
+gas services industry is limited to a relative few operators who have the experience and knowledge required to perform such services
+safely and efficiently. Increasingly, snubbing units are used for unconventional completions at the outer reaches of long wellbores
+which cannot be serviced by coiled tubing because coiled tubing has a more limited range than drill pipe conveyed by a snubbing
+unit.
+4
+Nitrogen . Nitrogen accounted for approximately
+five percent of revenues in 2016, four percent of revenues in 2015 and three percent of revenues in 2014. There are a number of
+uses for nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside
+of the oilfield. For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in
+various drilling applications. Increasingly, it is used as a displacement medium to increase production in older wells in which
+production has depleted. It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing
+medium for our fracturing service. In addition, nitrogen can be complementary to our snubbing and coiled tubing services, because
+it is a non-corrosive medium and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our pressure
+pumping service as well, because foam-based nitrogen stimulation is appropriate in certain sensitive formations in which the fluids
+used in fracturing or acidizing would damage a customer’s well.
+For non-oilfield industrial users, nitrogen
+can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of
+pumping unit configurations that inject nitrogen in its various applications. Some of these pumping units are set up for use on
+offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these
+sources of supply are adequate.
+Well Control . Cudd Energy Services specializes
+in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and internationally.
+In connection with these services, Cudd Energy Services, along with Patterson Services, has the capacity to supply the equipment,
+expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years, the Company
+has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting
+staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds
+to well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the
+most critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental
+damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events
+ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work.
+Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs.
+In these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations
+can resume as promptly as safety permits.
+Wireline Services . Wireline is classified
+into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well,
+conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring
+objects into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor
+line into a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline
+services can be an integral part of the plug and abandonment process near the end of the life cycle of a well.
+Fishing . Fishing involves the use of
+specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service
+required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically
+declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation.
+The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+Rental Tools . Rental tools accounted
+for approximately three percent of revenues in 2016 and four percent of revenues in 2015 and 2014. The Company rents specialized
+equipment for use with onshore and offshore oil and gas well drilling, completion and workover activities. The drilling and subsequent
+operation of oil and gas wells generally require a variety of equipment. The equipment needed is in large part determined by the
+geological features of the production zone and the size of the well itself. As a result, operators and drilling contractors often
+find it more economical to supplement their tool and tubular assets with rental items instead of owning a complete set of assets.
+The Company’s facilities are strategically located to serve the major staging points for oil and gas activities in Texas,
+the Gulf of Mexico, mid-continent region, Appalachian region and the Rocky Mountains.
+5
+Patterson Rental Tools offers a broad range
+of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield
+Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic
+and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s
+inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers
+are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control
+of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity
+cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for
+both oilfield and non-oilfield customers.
+Well Control School . Well Control School
+provides industry and government accredited training for the oil and gas industry both in the United States and in limited international
+locations. Well Control School provides training in various formats including conventional classroom training, interactive computer
+training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy
+Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and
+workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff
+engineering and well site management.
+Refer to Note 12 in the Notes to the Consolidated
+Financial Statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services
+to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities
+of its customers in Texas, the Gulf of Mexico, the mid-continent, the southwest, the Rocky Mountains and the Appalachian regions.
+Demand for RPC’s services in the U.S. tends to be extremely volatile and fluctuates with current and projected price levels
+of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions
+about capital investment toward the development and production of oil and gas reserves.
+Due to aging oilfields and
+lower-cost sources of oil internationally, the drilling rig count in the U.S. has declined by approximately 83 percent from
+its peak in 1981. However, due to continuously enhanced technology, more wells are drilled during periods of strong industry
+activity, and these wells are increasingly productive. For these reasons, the domestic production of natural gas rose to
+record levels in the third quarter of 2015, and domestic production of crude oil in the third quarter of 2015 reached its
+highest level since the third quarter of 1971. Due to the decline in domestic drilling and completion activities, domestic
+production of both natural gas and oil began to decline during the third and fourth quarters of 2015, although production
+continues to remain high in comparison to historical levels. Oil and gas industry activity levels have historically been
+volatile, experiencing multiple cycles, including six down cycle troughs between 1981 and 2016, with May 2016 marking the
+lowest U.S. domestic rig count in U.S. oilfield history. The rig count during the peak of the most recent cycle occurred at
+the end of the third quarter of 2014, and began to decline sharply during the fourth quarter of 2014. The rig count continued
+to decline in 2015 and 2016, until June of 2016 when it stabilized and began to increase. Early in 2017, the rig count had
+recovered by approximately 87 percent from the historical low set during the second quarter of 2016, but was still
+approximately 62 percent lower than the most recent cyclical peak in the third quarter of 2014.
+6
+The fluctuations in domestic drilling activity
+since the most recent peak in the third quarter of 2014 are consistent with global supply of and demand for oil, the domestic
+supply of and demand for natural gas, U.S. domestic storage levels of oil and natural gas, fluctuations in the value of the U.S.
+dollar on world currency markets, and projected near-term economic growth. During 2015 and into the first quarter of 2016, the
+price of oil fell by approximately 78 percent from its most recent cyclical peak in the third quarter of 2014. From its low price
+in early 2016, the price of oil had risen by approximately 80 percent early in the first quarter of 2017. RPC believes that the
+decrease in the price of oil during this period was caused by the actions of the Organization of the Petroleum Exporting Countries
+(OPEC) cartel, increased supply from the domestic U.S. market, weak global demand, the strength of the U.S. dollar on global currency
+markets and high storage levels of oil. The precipitous decline in the price of oil that took place between the third quarter
+of 2014 and the second quarter of 2016 caused a significant decrease in oil-directed drilling activity. The price of natural gas
+fell during this time as well, declining by approximately 42 percent from the beginning of 2015 to the second quarter of 2016.
+Early in the first quarter of 2017, however, the price of natural gas had risen by approximately 77 percent from the low recorded
+in the second quarter of 2016, and was approximately 19 percent higher than its price early in 2015. Early in 2017, the price
+of oil was high enough to encourage increased drilling and production activity, but the price of natural gas had not reached levels
+that were adequate to encourage natural gas-directed drilling activity in the U.S. domestic oilfield. In addition to oil and natural
+gas, the price of natural gas liquids is a determinant of our customers’ activity levels, since it is produced in many of
+the shale resource plays which also produce oil, and production of various natural gas liquids has increased to a level comparable
+to that of natural gas. During 2015 the average price of natural gas liquids decreased by approximately 56 percent compared to
+2014, but during 2016 the average price of natural gas liquids increased by approximately six percent compared to 2015. Early
+in the first quarter of 2017, the price of natural gas liquids had increased by approximately 65 percent compared to the average
+price in 2016. The fluctuations in the prices of these commodities, and in particular, the extreme volatility in the price of
+oil, significantly impact RPC’s financial results.
+From 2001 to 2009, gas drilling rigs represented
+over 80 percent of the drilling rig count. In 2010, the percentage of drilling rigs drilling for natural gas began to decline,
+and by early in the first quarter of 2015 had fallen to approximately 18 percent of total drilling activity. In absolute terms,
+the natural gas drilling rig count in the third quarter of 2016 was the lowest natural gas drilling rig count ever recorded. Early
+in the first quarter of 2017, the natural gas drilling rig count had risen by approximately 79 percent, although it remains very
+low by historical standards. Although the demand for natural gas has remained stable, the price of natural gas has fallen in recent
+years due to increased domestic reserves, productivity of new wells, and high associated natural gas production from oil-directed
+wells. In spite of these unfavorable near-term dynamics, the long-term demand outlook for natural gas is still favorable because,
+unlike oil, foreign imports of natural gas do not compete with domestic production to a meaningful degree, and in the fourth quarter
+of 2015, the United States began to export natural gas for the first time. We anticipate that oil-directed drilling will continue
+to represent the majority of the total drilling rig count during the near term. Over the long term, we believe that natural gas-directed
+drilling will increase due to the lack of natural gas production from oil-directed drilling and increased natural gas demand from
+U.S. exports of natural gas and changes in demand due to increased use of natural gas as a transportation fuel or for other purposes.
+We continue to believe in the long-term growth opportunities for our business due to the continued high demand for hydrocarbons
+generally and the growing production of oil in the domestic U.S. market in particular. Furthermore, we note that the techniques
+used to extract oil and natural gas in the U.S. domestic market increasingly require the types of services that RPC provides to
+its customers.
+Unconventional wells generate a higher
+demand for RPC’s services because they are difficult and costly to complete. They comprise the majority of U.S.
+domestic drilling and reached a historical high of approximately 90 percent of total drilling during the first quarter of
+2017. Because they are drilled through a typically narrow and relatively impermeable formation such as shale, they require
+additional stimulation when they are completed. Also, many of these formations require high pumping rates of stimulation
+fluids under high pressures, which in turn require a great deal of pressure pumping horsepower on location to complete the
+well. Furthermore, since they are not drilled in a straight vertical direction from the Earth’s surface, they require
+tools and drilling mechanisms that are flexible, rather than rigid, and can be steered once they are downhole. Specifically,
+these types of wells require RPC’s pressure pumping and coiled tubing services, as well as our downhole tools and
+services.
+International. RPC has historically
+operated in several countries outside of the United States, and international revenues accounted for approximately seven percent
+of RPC’s consolidated revenues in 2016, six percent in 2015 and four percent in 2014. RPC’s allocation of growth capital
+over the last several years have emphasized domestic rather than international expansion because of higher domestic activity levels
+and expected financial returns. International revenues decreased 29 percent in 2016 compared to the prior year primarily due to
+lower customer activity levels in Australia, Gabon, Equatorial Guinea, China and Argentina partially offset by increased activity
+in Bolivia. During 2016, RPC provided snubbing, well control and oilfield training services in several countries including Gabon
+and Australia. We also provided downhole motors and tools in Argentina, Canada, China and Oman, and rental tools in Equatorial
+Guinea. We continue to focus on the selected development of international opportunities in these and other markets, although we
+believe that it will continue to be less than ten percent of total revenues in 2017.
+7
+RPC provides services to its international customers
+through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties, including
+the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international
+projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term
+perspective with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic
+operations. Additionally, the international market is dominated by major oil companies and national oil companies which tend to
+have different objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting
+the timing and duration of contract work is not possible. Refer to Note 12 in the Notes to Consolidated Financial Statements for
+further information on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate
+excellent long-term returns on investment through the effective and conservative management of its invested capital to generate
+strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the
+long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies
+are focused on selected customers and markets in which we believe there exist opportunities for higher growth, customer and market
+penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added products and services.
+RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large
+customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities
+through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Historically, we have found that
+we generate higher financial returns from organic growth with our services and geographical locations in which we have experience.
+Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist,
+and we frequently consider such opportunities. We have consummated relatively few acquisitions, however, due to high seller valuation
+expectations and the risk of integrating acquired businesses into our existing operations. As the current industry downturn continues,
+we believe that many financial investors who have provided capital to smaller oilfield service companies in the past several years
+are seeking to liquidate their investments. This development, along with continued depressed financial results in our industry,
+may make valuations for acquisition targets more attractive. We will continue to consider the acquisitions of existing businesses
+but will also continue to maintain a conservative capital structure, which may limit our ability to consummate large transactions.
+RPC has a revolving credit facility which
+can be used to fund working capital requirements. The borrowing base for this credit facility is the lesser of $125 million
+or a specified percentage of eligible accounts receivable less the amount of any outstanding letters of credit. There was no
+outstanding balance on this credit facility as of December 31, 2016. Our capital structure is more conservative than that of
+many of our peers.
+Customers
+Demand for RPC’s services and products
+depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells,
+the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist
+of major and independent oil and natural gas producing companies. During 2016, RPC provided oilfield services to several hundred
+customers. Of these customers, there were no customers in 2016 and only one, Anadarko Petroleum Corporation (Anadarko) at 23 percent
+of revenues in 2015, that accounted for more than 10 percent of revenues.
+Sales are generated by RPC’s sales force
+and through referrals from existing customers. We monitor closely the financial condition of these customers, their capital expenditure
+plans, and other indications of their drilling and completion activities. Due to the short lead time between ordering services
+or equipment and providing services or delivering equipment, there is no significant sales backlog in most of our services.
+8
+Competition
+RPC operates in highly competitive areas of
+the oilfield services industry. We sell our products and services in highly competitive markets, and the revenues and earnings
+generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets,
+general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors,
+including the largest integrated oilfield services companies. During the past several years, a number of small oilfield services
+companies as well as several of our publicly traded peers have become insolvent and either been forced to liquidate or undergo
+bankruptcy proceedings. During the third and fourth quarters of 2016, however, the availability of capital and high public equity
+valuations have allowed many insolvent companies to resume operations or continue operations as the result of a business combination.
+As of the first quarter of 2017, RPC has not experienced increased competition from these entities, but we assume that the financial
+capabilities of these competitors will increase competitive pressures in the future. Pricing for our services has been extremely
+competitive over the past several years due to the severe industry downturn and the oversupply of equipment and crews operating
+in the U.S. domestic oilfield. RPC believes that the principal competitive factors in the market areas that it serves are product
+availability and quality of our equipment and raw materials used to provide our services, service quality, reputation for safety
+and technical proficiency, and price.
+The oil and gas services industry includes
+dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton Company,
+Baker Hughes and Schlumberger Ltd. The industry also includes a number of publicly traded peers whose operations are more
+similar to RPC, including Patterson-UTI Energy, Inc., Superior Energy Services, Weatherford International, Inc., Mammoth
+Energy Services, Inc. and Keane Group, Inc., as well as numerous smaller, locally owned competitors.
+Facilities/Equipment
+RPC’s equipment consists primarily of
+oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially
+all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These
+manufacturers of our oilfield service equipment may not be able to meet our requests for timely delivery during periods of high
+demand which may result in delayed deliveries of equipment and higher prices for equipment.
+RPC both owns and leases regional and district
+facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive
+offices in Atlanta, Georgia are leased. The Company has two primary administrative buildings, one it leases in The Woodlands,
+Texas that includes the Company’s operations, engineering, sales and marketing headquarters, and one it owns in Houma, Louisiana
+that includes certain administrative functions. RPC believes that its facilities are adequate for its current operations. For
+additional information with respect to RPC’s lease commitments, see Note 9 of the Notes to Consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state, federal
+and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to worker
+safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how such
+laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will
+be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by laws
+and regulations relating to the exploration for and production of natural resources such as oil and natural gas. These regulations
+are subject to change, and new regulations may curtail or eliminate our customers’ activities in certain areas where we
+currently operate. We cannot determine the extent to which new legislation may impact our customers’ activity levels, and
+ultimately, the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations,
+which management believes are important but are not indispensable to RPC’s success. Although RPC anticipates seeking patent
+protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its
+competitive position.
+Availability of Filings
+RPC makes available, free of charge, on its
+website, www.rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
+to those reports on the same day as they are filed with the Securities and Exchange Commission.
+9

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+Item 13. Certain Relationships and Related Party Transactions
+and Director Independence
+Information concerning certain relationships
+and related party transactions will be included in the RPC Proxy Statement for its 2017 Annual Meeting of Stockholders, in the
+sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence
+will be included in the RPC Proxy Statement for its 2017 Annual Meeting of Stockholders in the section titled “Director
+Independence and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and procedures
+— The Company maintains disclosure controls and procedures that are designed to ensure that information required to
+be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
+the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including
+the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this
+report, December 31, 2016 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and
+with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness
+of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer
+and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable
+assurance level as of the Evaluation Date.
+Management’s report on internal control
+over financial reporting — Management is responsible for establishing and maintaining adequate internal control over
+financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal
+control over financial reporting is included on page 33 of this report. Grant Thornton LLP, the Company’s independent registered
+public accounting firm, has audited the effectiveness of internal control as of December 31, 2016 and issued a report thereon
+which is included on page 34 of this report.
+Changes in internal control over financial
+reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s
+internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially
+affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 11: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the
+business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment.
+RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products
+Corporation (a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then
+distributing the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products
+entered into various agreements that define the companies’ relationship.
+In accordance with a Transition Support Services
+agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting
+and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations
+that are subsidiaries of the Company) for such services were $739,000 in 2016, $753,000 in 2015, and $663,000 in 2014. The Company’s
+receivable (payable) due to (from) Marine Products for these services was $60,000 as of December 31, 2016 and $(11,000) as of
+December 31, 2015. The Company’s directors are also directors of Marine Products and all of the executive officers are employees
+of both the Company and Marine Products.
+Other
+The Company periodically purchases in the
+ordinary course of business products or services from suppliers, who are owned by significant officers or stockholders, or affiliated
+with the directors of RPC. The total amounts paid to these affiliated parties were $890,000 in 2016, $1,127,000 in 2015 and $1,092,000
+in 2014.
+RPC receives certain administrative services
+and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is otherwise affiliated
+with RPC). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement
+basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration
+of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are
+subsidiaries of the Company) for such services and rent totaled $111,000 in 2016, $100,000 in 2015 and $84,000 in 2014.
+61
+NOTES TO CONSOLIDATED
+FINANCIAL STATEMENTS
+RPC,
+Inc. and Subsidiaries
+Years
+ended December 31 2016, 2015 and 2014
+A group that includes the Company’s
+Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain
+companies under their control, controls in excess of fifty percent of the Company’s voting power.
+RPC and Marine Products own 50 percent each
+of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft.
+The purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $2,554,000 contribution
+by each company to 255 RC, LLC. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC,
+LLC for a period of five years. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs
+of approximately $197,000 in 2016 and $186,000 in 2015 for the corporate aircraft. The Company accounts for this investment using
+the equity method and its proportionate share of income or loss is recorded in selling, general and administrative expenses. As
+of December 31, 2016, the investment closely approximates the underlying equity in the net assets of 255 RC, LLC.

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $739,000 in 2016.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2016, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $197,000 for the corporate aircraft.
+During 2016, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. R. Randall Rollins, Chairman, and Mr. Gary W. Rollins, Director, are officers, directors and controlling stockholders of LOR, Inc. In 2016, payments totaling approximately $895,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services including an allocation for office space from Rollins. The service agreements between Rollins and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $111,000 in 2016.
+26
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins, his brother Gary W. Rollins who is also a director, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, “Corporate Governance and Board of Directors Committees and Meetings, Director Independence and NYSE Requirements, Controlled Company Exemption.” The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law, consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at www.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2016 were reviewed, approved and/or ratified by the Nominating and Corporate Governance Committee in accordance with the Code.

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally
+organized in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+RPC provides a broad range
+of specialized oilfield services and equipment primarily to independent and major oil and gas companies engaged in
+the exploration, production and development of oil and gas properties throughout the United States, including the
+southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. RPC
+acts as a holding company for the following legal entity groupings: Cudd Energy Services, Thru Tubing Solutions and Patterson
+Services. Selected overhead including centralized support services and regulatory compliance are classified as Corporate. RPC
+is further organized into Technical Services and Support Services which are its operating segments. As of December 31, 2017,
+RPC had approximately 3,500 employees.
+2
+Business Segments
+RPC manages its business as either services
+offered on the well site with equipment and personnel (Technical Services) or services and equipment offered off the well site
+(Support Services). The businesses under Technical Services generate revenues based on equipment, personnel operating the equipment
+and the materials utilized to provide the service. They are all managed, analyzed and reported based on the similarities of the
+operational characteristics and costs associated with providing the service. The businesses under Support Services are primarily
+able to generate revenues through equipment or services offered off the well site. During 2017, less than two percent of RPC’s
+consolidated revenues were generated from offshore operations in the U.S. Gulf of Mexico. We also estimate that 70 percent
+of our 2017 revenues were related to drilling and production activities for oil, and 30 percent were related to drilling and production
+activities for natural gas.
+Technical Services include RPC’s
+oil and gas services that utilize people and equipment to perform value-added completion, production and maintenance services directly
+to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital
+toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address
+well control issues. This operating segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen,
+well control, wireline and fishing. Customers include major multi-national and independent oil and gas producers, and selected
+nationally owned oil companies. The services offered under Technical Services are high capital and personnel intensive businesses.
+The common drivers of operational and financial success of these services include diligent equipment maintenance, strong logistical
+processes, and appropriately trained personnel who function well in a team environment. The Company considers all of these services
+to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions
+based on this operating segment as a whole across these various services. The principal markets for this business segment include
+the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and selected
+international markets.
+Support Services include all of the
+services that provide (i) equipment offered off the well site without RPC personnel and (ii) services that are provided in
+support of customer operations off the well site such as classroom and computer training, and other consulting services. The
+primary drivers of operational success for services and equipment provided off the well site without RPC personnel are
+offering safe, high quality and in-demand equipment appropriate for the well design characteristics. The drivers of
+operational success for the other Support Services relate to meeting customer needs off the well site and competitive
+marketing of such services. The equipment and services offered include rental tools, drill pipe and related tools, pipe
+handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for these services
+tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include
+the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian regions and project work in
+selected international locations in the last three years, including primarily Canada, Latin America and the Middle East.
+Customers primarily include domestic operations of independent oil and gas producers and major multi-nationals and
+selected nationally owned oil companies.
+A brief description of the primary services
+conducted within each of the operating segments follows:
+Technical Services
+Pressure Pumping . Pressure pumping
+services, which accounted for approximately 62 percent of 2017 revenues, 46 percent of 2016 revenues and 54 percent of 2015 revenues
+are provided to customers throughout Texas, and the mid-continent and Rocky Mountain regions of the United States. We primarily
+provide these services to customers in order to enhance the initial production of hydrocarbons in formations that have low permeability.
+Pressure pumping services involve using complex, truck or skid-mounted equipment designed and constructed for each specific pumping
+service offered. The mobility of this equipment permits pressure pumping services to be performed in varying geographic areas.
+Principal materials utilized in pressure pumping operations include fracturing proppants, acid and bulk chemical additives. Generally,
+these items are available from several suppliers, and the Company utilizes more than one supplier for each item. Pressure pumping
+services offered include:
+3
+Fracturing — Fracturing services
+are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly
+important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons
+is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid gel
+and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths. Sand,
+ceramics, or synthetic materials, which are often coated with a material to increase their resistance to crushing, are pumped into
+the fracture. When the pressure is released at the surface, the fluid gel returns to the well surface, but the proppant remains
+in the fracture, thus keeping it open so that oil and natural gas can flow through the fracture into the production tubing and
+ultimately to the well surface. In some cases, fracturing is performed in formations with a high amount of carbonate rock by an
+acid solution pumped under pressure without a proppant or with small amounts of proppant.
+Acidizing — Acidizing services
+are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage
+due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated
+acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of
+oil and natural gas. Acidizing services can also enhance production in limestone formations. Acid is also frequently used in the
+beginning of a fracturing operation.
+Downhole Tools . Thru Tubing Solutions
+(“TTS”) accounted for approximately 19 percent of 2017 revenues, 23 percent of 2016 revenues and 18 percent of 2015
+revenues. TTS provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes
+to operators and service companies in drilling and production operations, including casing perforation and bridge plug drilling
+at the completion stage of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling
+and completion activities. TTS’ experience providing reliable tool services allows it to work in a pressurized environment
+with virtually any coiled tubing unit or snubbing unit.
+Coiled Tubing . Coiled tubing services,
+which accounted for approximately seven percent of revenues in 2017, 10 percent of revenues in 2016 and nine percent of revenues
+in 2015, involve the injection of coiled tubing into wells to perform various applications and functions for use principally in
+well-servicing operations and to facilitate completion of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter
+of less than four inches manufactured in continuous lengths of thousands of feet and wound or coiled around a large reel. It can
+be inserted through existing production tubing and used to perform workovers without using a larger, costlier workover rig. Principal
+advantages of employing coiled tubing in a workover operation include: (i) not having to “shut-in” the well during
+such operations, (ii) the ability to reel continuous coiled tubing in and out of a well significantly faster than conventional
+pipe, (iii) the ability to direct fluids into a wellbore with more precision, and (iv) enhanced access to remote or offshore fields
+due to the smaller size and mobility of a coiled tubing unit compared to a workover rig. Increasingly, coiled tubing units are
+also used to support completion activities in directional and horizontal wells. Such completion activities usually require multiple
+entrances in a wellbore in order to complete multiple fractures during a pressure pumping operation. A coiled tubing unit can accomplish
+this type of operation because its flexibility allows it to be steered in a direction other than vertical, which is necessary in
+this type of wellbore. At the same time, the strength of the coiled tubing string allows various types of tools or motors to be
+conveyed into the well effectively. The uses for coiled tubing in directional and horizontal wells have been enhanced by improved
+fabrication techniques and higher-diameter coiled tubing which allows coiled tubing units to be used effectively over greater distances,
+thus allowing them to function in more of the completion activities currently taking place in the U.S. domestic market. There are
+several manufacturers of flexible steel pipe used in coiled tubing services, and the Company believes that its sources of supply
+are adequate.
+Snubbing . Snubbing (also referred
+to as hydraulic workover services), which accounted for approximately two percent of revenues in 2017 and three percent of revenues
+in 2016 and 2015, involves using a hydraulic workover rig that permits an operator to repair damaged casing, production tubing
+and downhole production equipment in a high-pressure environment. A snubbing unit makes it possible to remove and replace downhole
+equipment while maintaining pressure on the well. Customers benefit because these operations can be performed without removing
+the pressure from the well, which stops production and can damage the formation, and because a snubbing unit can perform many applications
+at a lower cost than other alternatives. Because this service involves a very hazardous process that entails high risk, the snubbing
+segment of the oil and gas services industry is limited to a relative few operators who have the experience and knowledge required
+to perform such services safely and efficiently. Increasingly, snubbing units are used for unconventional completions at the outer
+reaches of long wellbores which cannot be serviced by coiled tubing because coiled tubing has a more limited range than drill pipe
+conveyed by a snubbing unit.
+4
+Nitrogen . Nitrogen accounted for approximately
+two percent of revenues in 2017, five percent of revenues in 2016 and four percent of revenues in 2015. There are a number of uses
+for nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside of the
+oilfield. For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in various
+drilling applications. Increasingly, it is used as a displacement medium to increase production in older wells in which production
+has depleted. It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing medium
+for our fracturing service. In addition, nitrogen can be complementary to our snubbing and coiled tubing services, because it is
+a non-corrosive medium and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our pressure pumping
+service as well, because foam-based nitrogen stimulation is appropriate in certain sensitive formations in which the fluids used
+in fracturing or acidizing would damage a customer's well.
+For non-oilfield industrial users, nitrogen
+can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of
+pumping unit configurations that inject nitrogen in its various applications. Some of these pumping units are set up for use on
+offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these sources
+of supply are adequate.
+Well Control . Cudd Energy Services
+specializes in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and
+internationally. In connection with these services, Cudd Energy Services, along with Patterson Services, has the capacity to supply
+the equipment, expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years,
+the Company has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting
+staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds to
+well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the most
+critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental
+damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events
+ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work.
+Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs. In
+these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations can
+resume as promptly as safety permits.
+Wireline Services . Wireline is classified
+into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well,
+conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring objects
+into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor line into
+a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline services can
+be an integral part of the plug and abandonment process near the end of the life cycle of a well.
+Pump Down Services. Pump down services
+are an integral part of the well completion process and are critical in multiple-stage, unconventional well completions which use
+various types of bridge plugs and perforation techniques. Pump down services use fluids and low-capacity pressure pumping equipment,
+and work in coordination with wireline services, to place completion equipment at the desired location in a well bore. This process
+is repeated for each stage, moving from the most distant end of the wellbore to the end that is closest to the wellhead.
+Fishing . Fishing involves the use
+of specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service
+required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically
+declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation.
+The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+Rental Tools . Rental tools accounted
+for approximately two percent of revenues in 2017, three percent of revenues in 2016 and four percent of revenues in 2015. The
+Company rents specialized equipment for use with onshore and offshore oil and gas well drilling, completion and workover activities.
+The drilling and subsequent operation of oil and gas wells generally require a variety of equipment. The equipment needed is in
+large part determined by the geological features of the production zone and the size of the well itself. As a result, operators
+and drilling contractors often find it more economical to supplement their tool and tubular assets with rental items instead of
+owning a complete set of assets. The Company’s facilities are strategically located to serve the major staging points for
+oil and gas activities in Texas, the Gulf of Mexico, mid-continent region, Appalachian region and the Rocky Mountains.
+5
+Patterson Rental Tools offers a broad
+range of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield
+Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic
+and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s
+inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers
+are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control
+of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity
+cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for
+both oilfield and non-oilfield customers.
+Well Control School . Well Control
+School provides industry and government accredited training for the oil and gas industry both in the United States and in limited
+international locations. Well Control School provides training in various formats including conventional classroom training, interactive
+computer training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy
+Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and
+workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff
+engineering and well site management.
+Refer to Note 12 in the Notes to the Consolidated
+Financial Statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services
+to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities
+of its customers in Texas, the Gulf of Mexico, the mid-continent, the southwest, the Rocky Mountains and the Appalachian regions.
+Demand for RPC’s services in the U.S. tends to be extremely volatile and fluctuates with current and projected price levels
+of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions
+about capital investment toward the development and production of oil and gas reserves.
+Due to aging oilfields and lower-cost
+sources of oil internationally, the drilling rig count in the U.S. has declined by approximately 79 percent from its peak in
+1981. However, due to continuously enhanced rig and other completion technologies, more wells are drilled during periods of
+strong industry activity, and these wells are increasingly productive. For these reasons, the domestic production of natural
+gas rose to record levels in the third quarter of 2015, and domestic production of crude oil in the third quarter of 2015
+reached its highest level since the third quarter of 1971. With the decline in domestic drilling and completion activities
+beginning in early 2015, domestic production of both natural gas and oil began to decline during the third and fourth
+quarters of 2015, although production continues to remain high in comparison to historical levels. Oil and gas industry
+activity levels have historically been volatile, experiencing multiple cycles, including six down cycle troughs between 1981
+and 2016, with May 2016 marking the lowest U.S. domestic rig count in U.S. oilfield history. The rig count during the peak of
+the most recent cycle occurred at the end of the third quarter of 2014, and began to decline sharply during the fourth
+quarter of 2014. The rig count continued to decline in 2015 and 2016, until June of 2016 when it stabilized and began to
+increase. Early in 2018, the rig count had recovered by approximately 141 percent from the historical low set during the
+second quarter of 2016, but was still approximately 51 percent lower than the cyclical peak in the third quarter of 2014.
+Because of the increased efficiency of drilling
+rigs, the Company also monitors well completions in the U.S. domestic oilfield. Well completions are particularly important to
+RPC because the majority of its services are utilized during the completion stage of an oil or gas well’s life cycle, so
+they are an important indicator of the demand for RPC’s services. From a cyclical peak of 21,355 wells completed during 2014,
+well completions fell by 62.3 percent to 8,060 in 2016. During 2017, well completions in the U.S.
+increased by 39.9 percent compared to 2016, but were still 47.2 percent lower than 2014 well completions.
+6
+The fluctuations in domestic drilling activity
+since the third quarter of 2014 peak are consistent with global supply of and demand for oil, the domestic supply of and demand
+for natural gas, U.S. domestic storage levels of oil and natural gas, fluctuations in the value of the U.S. dollar on world currency
+markets, and projected near-term economic growth. During 2015 and into the first quarter of 2016, the price of oil fell by approximately
+78 percent from the cyclical peak in the third quarter of 2014. From its low price in early 2016, the price of oil had risen approximately
+122 percent by early in the first quarter of 2018. RPC believes that the increase in the price of oil since early 2016 is due to
+increasing global demand, the moderation of global supply, and the belief that the actions of the Organization of the Petroleum
+Exporting Countries (OPEC) to moderate that cartel’s production will be effective. The price of natural gas fell during this
+time as well, declining by approximately 42 percent from the beginning of 2015 to the second quarter of 2016. Early in the first
+quarter of 2018, however, the price of natural gas had risen by approximately 122 percent from the low recorded in the second quarter
+of 2016, and was approximately 10 percent higher than its price at the same time in 2017. Early in 2018, the price of oil was high
+enough to encourage increased drilling and production activity, but the price of natural gas had not reached levels that were adequate
+to encourage natural gas-directed drilling activity in the U.S. domestic oilfield. In addition to oil and natural gas, the price
+of natural gas liquids is a determinant of our customers’ activity levels, since it is produced in many of the shale resource
+plays which also produce oil, and production of various natural gas liquids has increased to a level comparable to that of natural
+gas. During 2017 the average price of natural gas liquids increased by approximately 58 percent compared to 2016. Early in the
+first quarter of 2018, the price of natural gas liquids had increased by approximately 18 percent compared to the average price
+in 2017. The fluctuations in the prices of these commodities, and in particular, the extreme volatility in the price of oil, significantly
+impact RPC’s financial results.
+From 2001 to 2009, gas drilling rigs represented
+over 80 percent of the drilling rig count. In 2010, the percentage of drilling rigs drilling for natural gas began to decline,
+and by early in the first quarter of 2015 had fallen to approximately 18 percent of total drilling activity. In absolute terms,
+the natural gas drilling rig count in the third quarter of 2016 was the lowest natural gas drilling rig count ever recorded. Early
+in the first quarter of 2018, the natural gas drilling rig count had risen by approximately 124 percent, although it remains very
+low by historical standards. Although the demand for natural gas has remained stable, the price of natural gas has fallen in recent
+years due to increased domestic reserves, productivity of new wells, and high associated natural gas production from oil-directed
+wells. In spite of these unfavorable near-term dynamics, the long-term demand outlook for natural gas is still favorable because,
+unlike oil, foreign imports of natural gas do not compete with domestic production to a meaningful degree, and for several years,
+the United States has exported increasing volumes of natural gas to other countries. We anticipate that oil-directed drilling will
+continue to represent the majority of the total drilling rig count during the near term. Over the long term, we believe that natural
+gas-directed drilling will increase due to the lack of natural gas production from oil-directed drilling and increased natural
+gas demand from U.S. exports of natural gas and changes in demand due to increased use of natural gas as a transportation fuel
+or for other purposes. We continue to believe in the long-term growth opportunities for our business due to the continued high
+demand for hydrocarbons generally and the growing production of oil in the domestic U.S. market in particular. Furthermore, we
+note that the techniques used to extract oil and natural gas in the U.S. domestic market increasingly require the types of services
+that RPC provides to its customers.
+Unconventional wells generate a higher demand
+for RPC’s services because they are difficult and costly to complete. They comprise the majority of U.S. domestic drilling
+and during the fourth quarter of 2017 and early in the first quarter of 2018, have reached a historical high of approximately 93
+percent of total drilling. Because they are drilled through a typically narrow and relatively impermeable formation such as shale,
+they require additional stimulation when they are completed. Also, many of these formations require high pumping rates of stimulation
+fluids under high pressures, which in turn require a great deal of pressure pumping horsepower on location to complete the well.
+Furthermore, since they are not drilled in a straight vertical direction from the Earth’s surface, they require tools and
+drilling mechanisms that are flexible, rather than rigid, and can be steered once they are downhole. Specifically, these types
+of wells require RPC’s pressure pumping and coiled tubing services, as well as our downhole tools and services.
+International. RPC has historically
+operated in several countries outside of the United States, and international revenues accounted for approximately four percent
+of RPC’s consolidated revenues in 2017, seven percent in 2016 and six percent in 2015. RPC’s allocation of growth capital
+over the last several years have emphasized domestic rather than international expansion because of higher domestic activity levels
+and expected financial returns. International revenues increased 9.1 percent in 2017 compared to the prior year primarily due to
+higher customer activity levels in Canada, Argentina, Kuwait and Colombia, partially offset by decreased activity in Gabon and
+Bolivia. During 2017, RPC provided snubbing services in Gabon. We also provided downhole motors and tools in Argentina, Canada,
+China and Oman, and rental tools in Bolivia. We continue to focus on the selected development of international opportunities in
+these and other markets, although we believe that it will continue to be less than ten percent of total revenues in 2018.
+7
+RPC provides services to its international
+customers through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties,
+including the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international
+projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective
+with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic operations.
+Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different
+objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting the timing and
+duration of contract work is not possible. Refer to Note 12 in the Notes to Consolidated Financial Statements for further information
+on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate
+excellent long-term returns on investment through the effective and conservative management of its invested capital to generate
+strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the
+long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies
+are focused on selected customers and markets in which we believe there exist opportunities for higher growth, customer and market
+penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added equipment and services.
+RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large
+customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities
+through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Historically, we have found that
+we generate higher financial returns from organic growth with our services and geographical locations in which we have experience.
+Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist,
+and we frequently consider such opportunities. We have consummated relatively few acquisitions, however, due to high seller valuation
+expectations and the risk of integrating acquired businesses into our existing operations. We will continue to consider the acquisitions
+of existing businesses but will also continue to maintain a conservative capital structure, which may limit our ability to consummate
+large transactions.
+RPC has a revolving credit facility which
+can be used to fund working capital requirements. The borrowing base for this credit facility is the lesser of $125 million, or
+a specified percentage of eligible accounts receivable, less the amount of any outstanding letters of credit. There was no outstanding
+balance on this credit facility as of December 31, 2017. Our capital structure is more conservative than that of many of our peers.
+Customers
+Demand for RPC’s services and equipment
+depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells,
+the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist
+of major and independent oil and natural gas producing companies. During 2017, RPC provided oilfield services to several hundred
+customers. Of these customers, there were no customers in 2017 or 2016 that accounted for more than 10 percent of revenues.
+Sales are generated by RPC’s sales
+force and through referrals from existing customers. We monitor closely the financial condition of these customers, their capital
+expenditure plans, and other indications of their drilling and completion activities. Due to the short lead time between ordering
+services or equipment and providing services or delivering equipment, there is no significant sales backlog in most of our services.
+Competition
+RPC operates in highly competitive areas
+of the oilfield services industry. We sell our equipment and services in highly competitive markets, and the revenues and earnings
+generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets,
+general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors,
+including the largest integrated oilfield services companies. During the oilfield downturn of 2015 and 2016, a number of smaller
+oilfield services companies as well as several of our publicly traded peers reduced the scope of their operations or became insolvent.
+More recently, however, an improving industry environment and the positive outlook on the industry from the financial markets have
+facilitated the formation of new companies and allowed existing companies to expand their operations. RPC believes that these expanded
+or newly formed companies will increase competitive pressures during the near term, as they seek to provide services to our existing
+customers at lower prices, and hire experienced personnel from more established companies such as RPC. Pricing for our services
+has improved significantly during 2017, but remains below the highest levels experienced during the most recent period of strong
+industry activity in 2014. RPC believes that the principal competitive factors in the market areas that it serves are product availability
+and quality of our equipment and raw materials used to provide our services, service quality, reputation for safety and technical
+proficiency, and price.
+8
+The oil and gas services industry includes
+dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton Company, Baker
+Hughes, a GE Company, and Schlumberger Ltd. The industry also includes a number of other publicly traded peers whose operations
+are more similar to RPC, including Basic Energy Services, C&J Energy Services, Keane Group, Inc., Liberty Oilfield Services,
+Mammoth Energy Services, Inc., NCS Multistage Holdings, Inc., Nine Energy Service, Patterson-UTI Energy, Inc., ProPetro Holding
+Corporation and Superior Energy Services, as well as numerous smaller, locally owned competitors.
+Facilities/Equipment
+RPC’s equipment consists primarily
+of oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially
+all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These
+manufacturers may not be able to meet our requests for timely delivery during periods of high demand which may result in delayed
+deliveries of equipment and higher prices for equipment.
+RPC owns and leases regional and district
+facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive
+offices in Atlanta, Georgia are leased. The Company has two primary administrative buildings, one leased facility in The Woodlands,
+Texas that includes the Company’s operations, engineering, sales and marketing headquarters, and one owned facility in Houma,
+Louisiana that includes certain administrative functions. RPC believes that its facilities are adequate for its current operations.
+For additional information with respect to RPC’s lease commitments, see Note 9 of the Notes to Consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state,
+federal and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to
+worker safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how
+such laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations
+will be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by
+laws and regulations relating to the exploration and production of natural resources such as oil and natural gas. These regulations
+are subject to change, and new regulations may curtail or eliminate our customers’ activities. We cannot determine the extent
+to which new legislation may impact our customers’ activity levels, and ultimately, the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations
+which management believes are important, but are not indispensable, to RPC’s success. Although RPC anticipates seeking patent
+protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its
+competitive position.
+Availability of Filings
+RPC makes available, free of charge, on its
+website, www.rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
+to those reports on the same day they are filed with the Securities and Exchange Commission.

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+Item 13. Certain Relationships and Related Party Transactions
+and Director Independence
+Information concerning certain relationships
+and related party transactions will be included in the RPC Proxy Statement for its 2018 Annual Meeting of Stockholders, in the
+sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence
+will be included in the RPC Proxy Statement for its 2018 Annual Meeting of Stockholders in the section titled “Director Independence
+and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and
+procedures — The Company maintains disclosure controls and procedures that are designed to ensure that information required
+to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
+the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including
+the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this
+report, December 31, 2017 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and
+with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness
+of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer
+and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable
+assurance level as of the Evaluation Date.
+Management’s report on internal
+control over financial reporting — Management is responsible for establishing and maintaining adequate internal control
+over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal
+control over financial reporting is included on page 33 of this report. Grant Thornton LLP, the Company’s independent registered
+public accounting firm, has audited the effectiveness of internal control as of December 31, 2017 and issued a report thereon which
+is included on page 34 of this report.
+Changes in internal control over financial
+reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s
+internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially
+affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 11: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the
+business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment.
+RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products Corporation
+(a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then distributing
+the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products entered into
+various agreements that define the companies’ relationship.
+In accordance with a Transition
+Support Services agreement, which may be terminated by either party, RPC provides certain administrative services,
+including financial reporting and income tax administration, acquisition assistance, etc., to Marine Products. Charges from
+the Company (or from corporations that are subsidiaries of the Company) for such services were $849,000 in 2017, $739,000 in
+2016, and $753,000 in 2015. The Company’s receivable due from Marine Products for these services was $47,000 as of
+December 31, 2017 and $60,000 as of December 31, 2016. Many of the Company’s directors are also directors of Marine
+Products and all of the executive officers are employees of both the Company and Marine Products.
+Other
+The Company periodically purchases in the
+ordinary course of business equipment or services from suppliers, who are owned by significant officers or stockholders, or affiliated
+with the directors of RPC. The total amounts paid to these affiliated parties were $1,372,000 in 2017, $890,000 in 2016 and $1,127,000
+in 2015.
+RPC receives certain administrative services
+and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is otherwise affiliated
+with RPC). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement
+basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration
+of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries
+of the Company) for such services and rent totaled $104,000 in 2017, $111,000 in 2016 and $100,000 in 2015.
+58
+NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+RPC,
+Inc. and Subsidiaries
+Years
+ended December 31, 2017, 2016 and 2015
+A group that includes the Company’s
+Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain companies
+under their control, controls in excess of fifty percent of the Company’s voting power.
+RPC and Marine Products own 50 percent
+each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. The
+purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $2,554,000 contribution by each
+company to 255 RC, LLC. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a
+period of five years. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $197,000
+in 2017 and 2016, and $186,000 in 2015 for the corporate aircraft. The Company accounts for this investment using the equity method
+and its proportionate share of income or loss is recorded in selling, general and administrative expenses. As of December 31, 2017,
+the investment closely approximates the underlying equity in the net assets of 255 RC, LLC.

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $849,000 in 2017.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2017, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $197,000 for the corporate aircraft.
+During 2017, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. R. Randall Rollins, Chairman, and Mr. Gary W. Rollins, Director, are officers, directors and controlling stockholders of LOR, Inc. In 2017, payments totaling approximately $1,372,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services including an allocation for office space from Rollins. The service agreements between Rollins and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $104,000 in 2017.
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins, his brother Gary W. Rollins who is also a director, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, “Corporate Governance and Board of Directors Committees and Meetings, Director Independence and NYSE Requirements, Controlled Company Exemption.” The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law, consistent with the Company’s corporate governance policies (including those relative to conflicts of
+27
+interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at www.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2017 were reviewed, approved and/or ratified by the Nominating and Governance Committee in accordance with the Code.

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2	+ 0000742278,RES,RPC INC,10-K,2019-02-28,2018-12-31,2019-02-28T21:31:32.000Z,0001144204-19-011175,tv514318_10k.htm,FORM 10-K,6418727,1,0,https://www.sec.gov/Archives/edgar/data/742278/000114420419011175/tv514318_10k.htm,https://www.sec.gov/Archives/edgar/data/742278/000114420419011175/,2018,2018,1

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally
+organized in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+2
+RPC provides a broad range of specialized
+oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production
+and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico,
+Rocky Mountain and Appalachian regions, and in selected international markets. RPC acts as a holding company for the following
+legal entity groupings: Cudd Energy Services, Thru Tubing Solutions and Patterson Services. Selected overhead including centralized
+support services and regulatory compliance are classified as Corporate. RPC is further organized into Technical Services and Support
+Services which are its operating segments. As of December 31, 2018, RPC had approximately 3,600 employees.
+Business Segments
+RPC manages its business as either services
+offered on the well site with equipment and personnel (Technical Services) or services and equipment offered off the well site
+(Support Services). The businesses under Technical Services generate revenues based on equipment, personnel operating the equipment
+and the materials utilized to provide the service. They are all managed, analyzed and reported based on the similarities of the
+operational characteristics and costs associated with providing the service. The businesses under Support Services are primarily
+able to generate revenues through equipment or services offered off the well site. During 2018, approximately three percent of
+RPC’s consolidated revenues were generated from offshore operations in the U.S. Gulf of Mexico. In 2018, we also estimate
+that 85 percent of our revenues were related to drilling and production activities for oil, while 15 percent of revenues were related
+to drilling and production activities for natural gas.
+Technical Services include RPC’s
+oil and gas services that utilize people and equipment to perform value-added completion, production and maintenance services directly
+to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital
+toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address
+well control issues. This operating segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen,
+well control, wireline and fishing. Customers include major multi-national and independent oil and gas producers, and selected
+nationally owned oil companies. The services offered under Technical Services are high capital and personnel intensive businesses.
+The common drivers of operational and financial success of these services include diligent equipment maintenance, strong logistical
+processes, and appropriately trained personnel who function well in a team environment. The Company considers all of these services
+to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions
+based on this operating segment as a whole across these various services. The principal markets for this business segment include
+the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and selected
+international markets.
+Support Services include all of the services
+that provide (i) equipment offered off the well site without RPC personnel and (ii) services that are provided in support of customer
+operations off the well site such as classroom and computer training, and other consulting services. The primary drivers of operational
+success for services and equipment provided off the well site without RPC personnel are offering safe, high quality and in-demand
+equipment appropriate for the well design characteristics. The drivers of operational success for the other Support Services relate
+to meeting customer needs off the well site and competitive marketing of such services. The equipment and services offered include
+rental tools, drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting
+services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal
+markets for this segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian
+regions and project work in selected international locations in the last three years, including primarily Canada, Latin America
+and the Middle East. Customers primarily include domestic operations of independent oil and gas producers and major multi-nationals
+and selected nationally owned oil companies.
+A brief description of the primary services
+conducted within each of the operating segments follows:
+Technical Services
+Pressure Pumping . Pressure pumping
+services, which accounted for 55 percent of 2018 revenues, 62 percent of 2017 revenues and 46 percent of 2016 revenues are provided
+to customers throughout Texas, and the mid-continent and Rocky Mountain regions of the United States. We primarily provide these
+services to customers in order to enhance the initial production of hydrocarbons in formations that have low permeability. Pressure
+pumping services involve using complex, truck or skid-mounted equipment designed and constructed for each specific pumping service
+offered. The mobility of this equipment permits pressure pumping services to be performed in varying geographic areas. Principal
+materials utilized in pressure pumping operations include fracturing proppants, acid and bulk chemical additives. Generally, these
+items are available from several suppliers, and the Company utilizes more than one supplier for each item. Pressure pumping services
+offered include:
+3
+Fracturing — Fracturing services
+are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly
+important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons
+is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid gel
+and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths. Sand,
+ceramics, or synthetic materials, which are often coated with a material to increase their resistance to crushing, are pumped into
+the fracture. When the pressure is released at the surface, the fluid gel returns to the well surface, but the proppant remains
+in the fracture, thus keeping it open so that oil and natural gas can flow through the fracture into the production tubing and
+ultimately to the well surface. In some cases, fracturing is performed in formations with a high amount of carbonate rock by an
+acid solution pumped under pressure without a proppant or with small amounts of proppant.
+Acidizing — Acidizing services
+are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage
+due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated
+acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of
+oil and natural gas. Acidizing services can also enhance production in limestone formations. Acid is also frequently used in the
+beginning of a fracturing operation.
+Downhole Tools . Thru Tubing Solutions
+(“TTS”) accounted for 25 percent of 2018 revenues, 19 percent of 2017 revenues and 23 percent of 2016 revenues. TTS
+provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes to operators
+and service companies in drilling and production operations, including casing perforation and bridge plug drilling at the completion
+stage of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling and completion activities.
+TTS’ experience providing reliable tool services allows it to work in a pressurized environment with virtually any coiled
+tubing unit or snubbing unit.
+Coiled Tubing . Coiled tubing services,
+which accounted for six percent of revenues in 2018, seven percent of revenues in 2017 and 10 percent of revenues in 2016, involve
+the injection of coiled tubing into wells to perform various applications and functions for use principally in well-servicing operations
+and to facilitate completion of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter of less than four inches
+manufactured in continuous lengths of thousands of feet and wound or coiled around a large reel. It can be inserted through existing
+production tubing and used to perform workovers without using a larger, costlier workover rig. Principal advantages of employing
+coiled tubing in a workover operation include: (i) not having to “shut-in” the well during such operations, (ii) the
+ability to reel continuous coiled tubing in and out of a well significantly faster than conventional pipe, (iii) the ability to
+direct fluids into a wellbore with more precision, and (iv) enhanced access to remote or offshore fields due to the smaller size
+and mobility of a coiled tubing unit compared to a workover rig. Increasingly, coiled tubing units are also used to support completion
+activities in directional and horizontal wells. Such completion activities usually require multiple entrances in a wellbore in
+order to complete multiple fractures during a pressure pumping operation. A coiled tubing unit can accomplish this type of operation
+because its flexibility allows it to be steered in a direction other than vertical, which is necessary in this type of wellbore.
+At the same time, the strength of the coiled tubing string allows various types of tools or motors to be conveyed into the well
+effectively. The uses for coiled tubing in directional and horizontal wells have been enhanced by improved fabrication techniques
+and higher-diameter coiled tubing which allows coiled tubing units to be used effectively over greater distances, thus allowing
+them to function in more of the completion activities currently taking place in the U.S. domestic market. There are several manufacturers
+of flexible steel pipe used in coiled tubing services, and the Company believes that its sources of supply are adequate.
+Snubbing . Snubbing (also referred
+to as hydraulic workover services), which accounted for one percent of revenues in 2018, two percent of revenues in 2017 and three
+percent of revenues in 2016, involves using a hydraulic workover rig that permits an operator to repair damaged casing, production
+tubing and downhole production equipment in a high-pressure environment. A snubbing unit makes it possible to remove and replace
+downhole equipment while maintaining pressure on the well. Customers benefit because these operations can be performed without
+removing the pressure from the well, which stops production and can damage the formation, and because a snubbing unit can perform
+many applications at a lower cost than other alternatives. Because this service involves a very hazardous process that entails
+high risk, the snubbing segment of the oil and gas services industry is limited to a relative few operators who have the experience
+and knowledge required to perform such services safely and efficiently. Increasingly, snubbing units are used for unconventional
+completions at the outer reaches of long wellbores which cannot be serviced by coiled tubing because coiled tubing has a more limited
+range than drill pipe conveyed by a snubbing unit.
+4
+Nitrogen . Nitrogen accounted for three
+percent of revenues in 2018, two percent of revenues in 2017 and five percent of revenues in 2016. There are a number of uses for
+nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside of the oilfield.
+For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in various drilling
+applications. Increasingly, it is used as a displacement medium to increase production in older wells in which production has depleted.
+It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing medium for our fracturing
+service. In addition, nitrogen can be complementary to our snubbing and coiled tubing services, because it is a non-corrosive medium
+and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our pressure pumping service as well,
+because foam-based nitrogen stimulation is appropriate in certain sensitive formations in which the fluids used in fracturing or
+acidizing would damage a customer's well.
+For non-oilfield industrial users, nitrogen
+can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of
+pumping unit configurations that inject nitrogen in its various applications. Some of these pumping units are set up for use on
+offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these sources
+of supply are adequate.
+Well Control . Cudd Energy Services
+specializes in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and
+internationally. In connection with these services, Cudd Energy Services, along with Patterson Services, has the capacity to supply
+the equipment, expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years,
+the Company has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting
+staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds to
+well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the most
+critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental
+damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events
+ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work.
+Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs. In
+these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations can
+resume as promptly as safety permits.
+Wireline Services . Wireline is classified
+into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well,
+conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring objects
+into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor line into
+a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline services can
+be an integral part of the plug and abandonment process near the end of the life cycle of a well.
+Pump Down Services. Pump down services
+are an integral part of the well completion process and are critical in multiple-stage, unconventional well completions which use
+various types of bridge plugs and perforation techniques. Pump down services use fluids and low-capacity pressure pumping equipment,
+and work in coordination with wireline services, to place completion equipment at the desired location in a well bore. This process
+is repeated for each stage, moving from the most distant end of the wellbore to the end that is closest to the wellhead.
+Fishing . Fishing involves the use
+of specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service
+required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically
+declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation.
+The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+Rental Tools . Rental tools accounted
+for three percent of revenues in 2018, two percent of revenues in 2017 and three percent of revenues in 2016. The Company rents
+specialized equipment for use with onshore and offshore oil and gas well drilling, completion and workover activities. The drilling
+and subsequent operation of oil and gas wells generally require a variety of equipment. The equipment needed is in large part determined
+by the geological features of the production zone and the size of the well itself. As a result, operators and drilling contractors
+often find it more economical to supplement their tool and tubular assets with rental items instead of owning a complete set of
+assets. The Company’s facilities are strategically located to serve the major staging points for oil and gas activities in
+Texas, the Gulf of Mexico, mid-continent region, Appalachian region and the Rocky Mountains.
+5
+Patterson Rental Tools offers a broad
+range of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield
+Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic
+and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s
+inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers
+are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control
+of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity
+cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for
+both oilfield and non-oilfield customers.
+Well Control School . Well Control
+School provides industry and government accredited training for the oil and gas industry both in the United States and in limited
+international locations. Well Control School provides training in various formats including conventional classroom training, interactive
+computer training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy
+Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and
+workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff
+engineering and well site management.
+Refer to Note 13 in the Notes to the Consolidated
+Financial Statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services
+to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities
+of its customers in Texas, the Gulf of Mexico, the mid-continent, the southwest, the Rocky Mountains and the Appalachian regions.
+Demand for RPC’s services in the U.S. tends to be extremely volatile and fluctuates with current and projected price levels
+of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions
+about capital investment toward the development and production of oil and gas reserves.
+Due to aging oilfields and lower-cost sources
+of oil internationally, the drilling rig count in the U.S. has declined by approximately 77 percent from its peak in 1981. However,
+due to continuously enhanced rig and other technologies, more wells are drilled during periods of strong industry activity, and
+these wells are increasingly productive. For these reasons, the domestic production of natural gas rose to record levels in the
+third quarter of 2015, and domestic production of crude oil in the third quarter of 2015 reached its highest level since the third
+quarter of 1971. With the decline in domestic drilling and completion activities beginning in early 2015, domestic production of
+both natural gas and oil began to decline during the third and fourth quarters of 2015, although production continues to remain
+high in comparison to historical levels. Oil and gas industry activity levels have historically been volatile, experiencing multiple
+cycles, including six down cycle troughs between 1981 and 2016, with May 2016 marking the lowest U.S. domestic rig count in U.S.
+oilfield history. The rig count during the peak of the most recent cycle occurred at the end of the third quarter of 2014, and
+began to decline sharply during the fourth quarter of 2014. The rig count continued to decline in 2015 and 2016, until June of
+2016 when it stabilized and began to increase. Early in 2019, the rig count had recovered by approximately 159 percent from the
+historical low set during the second quarter of 2016, but was still approximately 46 percent lower than the cyclical peak in the
+third quarter of 2014.
+6
+Because of the increased efficiency of drilling
+rigs, the Company also monitors well completions in the U.S. domestic oilfield. Well completions are particularly important to
+RPC because the majority of its services are utilized during the completion stage of an oil or gas well’s life cycle, so
+they are an important indicator of the demand for RPC’s services. As reported by the U.S. Energy Information Administration
+during the first quarter of 2019, annual well completions fell from a cyclical peak of 21,370 in 2014 to 8,106 in 2016. Between
+2016 and 2018, annual well completions increased by 6,456 or 79.7 percent. In spite of the increase in well completions during
+the past two years, annual well completions in 2018 were 31.9 percent lower than the 2014 cyclical peak.
+The fluctuations in domestic drilling
+activity since the third quarter of 2014 peak are consistent with global supply of and demand for oil, the domestic supply of
+and demand for natural gas, U.S. domestic storage levels of oil and natural gas, fluctuations in the value of the U.S. dollar
+on world currency markets, and projected near-term economic growth. During 2015 and into the first quarter of 2016, the price
+of oil fell by approximately 78 percent from the cyclical peak in the third quarter of 2014. From its low price in early
+2016, the price of oil had risen approximately 155 percent to its recent cyclical peak early in the fourth quarter of 2018.
+Between this cyclical peak and early in the first quarter of 2019, the price of oil fell by approximately 28 percent. RPC
+believes that the increase in the price of oil between 2016 and 2018 was due to increasing global demand and a perceived
+moderation of global supply, and that the recent decline in the price of oil was due to a change in sentiment regarding
+supply and demand. The average price of natural gas increased by approximately 6.4 percent during 2018 as compared with 2017
+and early in the first quarter of 2019, the price of natural gas was approximately 18 percent lower than the price at
+the end of 2018. RPC does not believe that the current price of natural gas is sufficient to encourage natural gas-directed
+drilling, and we note that many oil-directed wells produce a great deal of natural gas and natural gas liquids as well. In
+addition to oil and natural gas, the price of natural gas liquids plays a minor role in determining our customers’
+activity levels, since it is produced in many of the shale resource plays which also produce oil, and production of various
+natural gas liquids has increased to a level comparable to that of natural gas. During 2018 the average price of natural gas
+liquids increased by approximately 15 percent compared with 2017. Early in the first quarter of 2019, the price of natural
+gas liquids increased by approximately 29 percent compared to the average price in 2018. During 2018, the price of oil
+was high enough to encourage increased drilling and production activity, but the unexpected and significant drop in the price
+of oil during the fourth quarter of 2018 has caused many of RPC’s customers to delay or curtail their drilling and
+completion plans for the near term. The fluctuations in the prices of these commodities, and in particular, the extreme
+volatility in the price of oil, significantly impact RPC’s financial results.
+From 2001 to 2009, gas drilling
+rigs represented over 80 percent of the drilling rig count. In 2010, the percentage of drilling rigs drilling for natural
+gas began to decline, and by early in the first quarter of 2015 had fallen to approximately 18 percent of total
+drilling activity. In absolute terms, the natural gas drilling rig count in the third quarter of 2016 was the lowest natural
+gas drilling rig count ever recorded. During 2018 and early into the first quarter of 2019, the natural gas drilling rig
+count as a percentage of the total rig count remained steady at approximately 18 percent of total drilling. Although the
+demand for natural gas has remained stable, the price of natural gas has fallen in recent years due to increased domestic
+reserves, productivity of new wells, and high associated natural gas production from oil-directed wells. In spite of these
+unfavorable near-term dynamics, the long-term demand outlook for natural gas is still favorable because, unlike oil, foreign
+imports of natural gas do not compete with domestic production to a meaningful degree, and for several years, the United
+States has exported increasing volumes of natural gas to other countries. We anticipate that oil-directed drilling will
+continue to represent the majority of the total drilling rig count during the near term. Over the long term, we believe that
+natural gas-directed drilling will increase due to the lack of natural gas production from oil-directed drilling
+and increased natural gas demand from U.S. exports of natural gas in addition to changes in demand due to increased use of
+natural gas as a transportation fuel or for other purposes. We continue to believe in the long-term growth opportunities for
+our business due to the continued high demand for hydrocarbons generally and the growing production of oil in the domestic
+U.S. market in particular. Furthermore, we note that the techniques used to extract oil and natural gas in the U.S.
+domestic market increasingly require the types of services that RPC provides to its customers.
+Unconventional wells generate a higher demand
+for RPC’s services because they are difficult and costly to complete. They comprise the majority of U.S. domestic drilling
+and during the fourth quarter of 2018 and early in the first quarter of 2019, have reached a historical high of approximately 94
+percent of total drilling. Because they are drilled through a typically narrow and relatively impermeable formation such as shale,
+they require additional stimulation when they are completed. Also, many of these formations require high pumping rates of stimulation
+fluids under high pressures, which in turn require a great deal of pressure pumping horsepower on location to complete the well.
+Furthermore, since they are not drilled in a straight vertical direction from the Earth’s surface, they require tools and
+drilling mechanisms that are flexible, rather than rigid, and can be steered once they are downhole. Specifically, these types
+of wells require RPC’s pressure pumping and coiled tubing services, as well as our downhole tools and services.
+7
+International. RPC has historically
+operated in several countries outside of the United States, and international revenues accounted for five percent of RPC’s
+consolidated revenues in 2018, four percent in 2017 and seven percent in 2016. RPC’s allocation of growth capital over the
+last several years have emphasized domestic rather than international expansion because of higher domestic activity levels and
+expected financial returns. International revenues increased 61.9 percent in 2018 compared to the prior year primarily due to higher
+customer activity levels in Argentina and to a lesser extent, Mexico and Pakistan, partially offset by lower activity in
+Gabon. During 2018, RPC provided downhole motors and tools in Argentina, Canada, Mexico and Oman, as
+well as rental tools in Pakistan. We also provided snubbing services in Gabon. We continue to focus on the selected development
+of international opportunities in these and other markets, although we believe that it will continue to be less than ten percent
+of total revenues in 2019.
+RPC provides services to its international
+customers through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties,
+including the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international
+projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective
+with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic operations.
+Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different
+objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting the timing and
+duration of contract work is not possible. Refer to Note 13 in the Notes to Consolidated Financial Statements for further information
+on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate
+excellent long-term returns on investment through the effective and conservative management of its invested capital to generate
+strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the
+long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies
+are focused on selected customers and markets in which we believe there exist opportunities for higher growth, customer and market
+penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added equipment and services.
+RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large
+customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities
+through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Historically, we have found that
+we generate higher financial returns from organic growth with our services and geographical locations in which we have experience.
+Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist,
+and we frequently consider such opportunities. We have consummated relatively few acquisitions, however, due to high seller valuation
+expectations and the risk of integrating acquired businesses into our existing operations. We will continue to consider the acquisitions
+of existing businesses but will also continue to maintain a conservative capital structure, which may limit our ability to consummate
+large transactions.
+RPC has a revolving credit facility which
+can be used to fund working capital requirements. The borrowing base for this credit facility is $125 million less the amount of
+any outstanding letters of credit. There was no outstanding balance on this credit facility as of December 31, 2018. Our capital
+structure is more conservative than that of many of our peers.
+Customers
+Demand for RPC’s services and equipment
+depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells,
+the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist
+of major and independent oil and natural gas producing companies. During 2018, RPC provided oilfield services to several hundred
+customers. Of these customers, there was no customer in 2018 or 2017 that accounted for more than 10 percent of revenues.
+Sales are generated by RPC’s sales
+force and through referrals from existing customers. We monitor closely the financial condition of these customers, their capital
+expenditure plans, and other indications of their drilling and completion activities. Due to the short lead time between ordering
+services or equipment and providing services or delivering equipment, there is no significant sales backlog.
+8
+Competition
+RPC operates in highly competitive areas
+of the oilfield services industry. We sell our equipment and services in highly competitive markets, and the revenues and earnings
+generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets,
+general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors,
+including the largest integrated oilfield services companies. During the oilfield downturn of 2015 and 2016, a number of smaller
+oilfield services companies as well as several of our publicly traded peers reduced the scope of their operations or became insolvent.
+During 2017, however, an improving industry environment and the positive outlook on the industry from the financial markets facilitated
+the formation of new companies and allowed existing companies to expand their operations. RPC believes that these expanded or newly
+formed companies increased competitive pressures during the near term, since they began to provide services to our
+existing customers at lower prices, and hired experienced personnel from more established companies such as RPC. Pricing for our
+services improved significantly during 2017, but began to decline during the fourth quarter of 2017 and throughout 2018. RPC believes
+that the principal competitive factors in the market areas that it serves are product availability and quality of our equipment
+and raw materials used to provide our services, service quality, reputation for safety and technical proficiency, and price.
+The oil and gas services industry includes
+dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton Company, Baker
+Hughes, a GE Company, and Schlumberger Ltd. The industry also includes a number of other publicly traded peers whose operations
+are more similar to RPC, including Basic Energy Services, C&J Energy Services, Keane Group, Inc., Liberty Oilfield Services,
+Mammoth Energy Services, Inc., NCS Multistage Holdings, Inc., Nine Energy Service, Patterson-UTI Energy, Inc., ProPetro Holding
+Corporation and Superior Energy Services, as well as numerous smaller, locally owned competitors.
+Facilities/Equipment
+RPC’s equipment consists primarily
+of oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially
+all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These
+manufacturers may not be able to meet our requests for timely delivery during periods of high demand which may result in delayed
+deliveries of equipment and higher prices for equipment.
+RPC owns and leases regional and district
+facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive
+offices in Atlanta, Georgia are leased. The Company has two primary administrative buildings, one leased facility in The Woodlands,
+Texas that includes the Company’s operations, engineering, sales and marketing headquarters, and one owned facility in Houma,
+Louisiana that includes certain administrative functions. RPC believes that its facilities are adequate for its current operations.
+For additional information with respect to RPC’s lease commitments, see Note 10 of the Notes to Consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state,
+federal and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to
+worker safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how
+such laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations
+will be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by
+laws and regulations relating to the exploration and production of natural resources such as oil and natural gas. These regulations
+are subject to change, and new regulations may curtail or eliminate our customers’ activities. We cannot determine the extent
+to which new legislation may impact our customers’ activity levels, and ultimately, the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations
+which management believes are important, but are not indispensable, to RPC’s success. Although RPC anticipates seeking patent
+protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its
+competitive position.
+9
+Availability of Filings
+RPC makes available, free of charge, on its
+website, www.rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
+to those reports on the same day they are filed with the Securities and Exchange Commission.

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+Item 13. Certain Relationships and Related Party Transactions
+and Director Independence
+Information concerning certain relationships
+and related party transactions will be included in the RPC Proxy Statement for its 2019 Annual Meeting of Stockholders, in the
+sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence
+will be included in the RPC Proxy Statement for its 2019 Annual Meeting of Stockholders in the section titled “Director Independence
+and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and
+procedures — The Company maintains disclosure controls and procedures that are designed to ensure that information required
+to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
+the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including
+the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this
+report, December 31, 2018 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and
+with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness
+of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer
+and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable
+assurance level as of the Evaluation Date.
+Management’s report on internal
+control over financial reporting — Management is responsible for establishing and maintaining adequate internal control
+over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal
+control over financial reporting is included on page 32 of this report. Grant Thornton LLP, the Company’s independent registered
+public accounting firm, has audited the effectiveness of internal control as of December 31, 2018 and issued a report thereon which
+is included on page 33 of this report.
+Changes in internal control over financial
+reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s
+internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially
+affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 12: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the
+business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment.
+RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products Corporation
+(a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then distributing
+the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products entered into
+various agreements that define the companies’ relationship.
+In accordance with a Transition Support Services
+agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting
+and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations
+that are subsidiaries of the Company) for such services were $873,000 in 2018, $849,000 in 2017, and $739,000 in 2016. The Company’s
+receivable due from Marine Products for these services was $28,000 as of December 31, 2018 and $47,000 as of December 31, 2017.
+Many of the Company’s directors are also directors of Marine Products and all of the executive officers are employees of
+both the Company and Marine Products.
+Other
+The Company periodically purchases in the
+ordinary course of business equipment or services from suppliers, who are owned by significant officers or stockholders, or affiliated
+with the directors of RPC. The total amounts paid to these affiliated parties were $1,467,000 in 2018, $1,372,000 in 2017 and $890,000
+in 2016.
+RPC receives certain administrative services
+and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is otherwise affiliated
+with RPC). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement
+basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration
+of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries
+of the Company) for such services and rent totaled $101,000 in 2018, $104,000 in 2017 and $111,000 in 2016.
+59
+NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+RPC,
+Inc. and Subsidiaries
+Years
+ended December 31, 2018, 2017 and 2016
+A group that includes the Company’s
+Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain companies
+under their control, controls in excess of fifty percent of the Company’s voting power.
+RPC and Marine Products own 50 percent each
+of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. The
+purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $2,554,000 contribution by each
+company to 255 RC, LLC. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a
+period of five years. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $199,000
+in 2018 and $197,000 in 2017 and 2016 for the corporate aircraft. The Company accounts for this investment using the equity method
+and its proportionate share of income or loss is recorded in selling, general and administrative expenses. As of December 31, 2018,
+the investment closely approximates the underlying equity in the net assets of 255 RC, LLC.

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $873,000 in 2018.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. Each of RPC and Marine Products is a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2018, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $199,000 for the corporate aircraft.
+During 2018, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. R. Randall Rollins, Chairman and Mr. Gary W. Rollins, Director, are officers, directors and controlling stockholders of LOR, Inc. In 2018, payments totaling approximately $1,467,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services including an allocation for office space from Rollins. The service agreements between Rollins and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $101,000 in 2018.
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins, his brother Gary W. Rollins, who is also a director, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, “Corporate Governance and Board of Directors Committees and Meetings, Director Independence and NYSE Requirements, Controlled Company Exemption.” The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law,
+27
+consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at www.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2018 were reviewed, approved and/or ratified by the Nominating and Governance Committee in accordance with the Code.

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2	+ 0000742278,RES,RPC INC,10-K,2020-02-28,2019-12-31,2020-02-28T19:52:19.000Z,0001104659-20-027017,res-20191231x10k4d7590.htm,FORM 10-K,11746701,1,1,https://www.sec.gov/Archives/edgar/data/742278/000110465920027017/res-20191231x10k4d7590.htm,https://www.sec.gov/Archives/edgar/data/742278/000110465920027017/,2019,2019,1

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally organized in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. RPC acts as a holding company for the following legal entity groupings: Cudd Energy Services, Thru Tubing Solutions and Patterson Services. Selected overhead including centralized support services and regulatory compliance are classified as Corporate. RPC is further organized into Technical Services and Support Services which are its operating segments. As of December 31, 2019, RPC had approximately 2,700 employees.
+2
+Business Segments
+RPC manages its business as either services offered on the well site with equipment and personnel (Technical Services) or services and equipment offered off the well site (Support Services). The businesses under Technical Services generate revenues based on equipment, personnel operating the equipment and the materials utilized to provide the service. They are all managed, analyzed and reported based on the similarities of the operational characteristics and costs associated with providing the service. The businesses under Support Services are primarily able to generate revenues through equipment or services offered off the well site. During 2019, approximately four percent of RPC’s consolidated revenues were generated from offshore operations in the U.S. Gulf of Mexico. In 2019, we also estimate that 82 percent of our revenues were related to drilling and production activities for oil, while 18 percent of revenues were related to drilling and production activities for natural gas.
+Technical Services include RPC’s oil and gas services that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address well control issues. This operating segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing. Customers include major multi-national and independent oil and gas producers, and selected nationally owned oil companies. The services offered under Technical Services are high capital and personnel intensive businesses. The common drivers of operational and financial success of these services include diligent equipment maintenance, strong logistical processes, and appropriately trained personnel who function well in a team environment. The Company considers all of these services to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions based on this operating segment as a whole across these various services. The principal markets for this business segment include the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and selected international markets.
+Support Services include all of the services that provide (i) equipment offered off the well site without RPC personnel and (ii) services that are provided in support of customer operations off the well site such as classroom and computer training, and other consulting services. The primary drivers of operational success for services and equipment provided off the well site without RPC personnel are offering safe, high quality and in-demand equipment appropriate for the well design characteristics. The drivers of operational success for the other Support Services relate to meeting customer needs off the well site and competitive marketing of such services. The equipment and services offered include rental tools, drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian regions and project work in selected international locations in the last three years, including primarily Canada, Latin America and the Middle East. Customers primarily include domestic operations of independent oil and gas producers and major multi-nationals and selected nationally owned oil companies.
+A brief description of the primary services conducted within each of the operating segments follows:
+Technical Services
+Pressure Pumping . Pressure pumping services, which accounted for 42 percent of 2019 revenues, 55 percent of 2018 revenues and 62 percent of 2017 revenues are provided to customers throughout Texas, and the mid-continent and Rocky Mountain regions of the United States. We primarily provide these services to customers in order to enhance the initial production of hydrocarbons in formations that have low permeability. Pressure pumping services involve using complex, truck or skid-mounted equipment designed and constructed for each specific pumping service offered. The mobility of this equipment permits pressure pumping services to be performed in varying geographic areas. Principal materials utilized in pressure pumping operations include fracturing proppants, acid and bulk chemical additives. Generally, these items are available from several suppliers, and the Company utilizes more than one supplier for each item. Pressure pumping services offered include:
+Fracturing — Fracturing services are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid gel and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths. Sand, ceramics, or synthetic materials, which are often coated with a material to increase their resistance to crushing, are pumped into the fracture. When the pressure is released at the surface, the fluid gel returns to the well surface, but the proppant remains in the fracture, thus keeping it open so that oil and natural gas can flow through the fracture into the production tubing and ultimately to the well surface. In some cases, fracturing is performed in formations with a high amount of carbonate rock by an acid solution pumped under pressure without a proppant or with small amounts of proppant.
+3
+Acidizing — Acidizing services are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of oil and natural gas. Acidizing services can also enhance production in limestone formations. Acid is also frequently used in the beginning of a fracturing operation.
+Cementing — Cementing services are used at the completion stage of an oil or natural gas well to seal the wellbore after the casing string has been run. The process of cementing includes developing a cement slurry formulated for a well’s unique characteristics, pumping the cement through the wellbore and into the space between the well casing and well bore, and allowing it to harden. In addition to completion uses, cementing can also be used to seal a lost circulation zone in an existing well, and to plug a well at the end of its life cycle.
+Downhole Tools . Thru Tubing Solutions (“TTS”) accounted for 34 percent of 2019 revenues, 25 percent of 2018 revenues and 19 percent of 2017 revenues. TTS provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes to operators and service companies in drilling and production operations, including casing perforation and bridge plug drilling at the completion stage of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling and completion activities. TTS’ experience providing reliable tool services allows it to work in a pressurized environment with virtually any coiled tubing unit or snubbing unit.
+Coiled Tubing . Coiled tubing services, which accounted for seven percent of revenues in 2019, six percent of revenues in 2018 and seven percent of revenues in 2017, involve the injection of coiled tubing into wells to perform various applications and functions for use principally in well-servicing operations and to facilitate completion of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter of less than four inches manufactured in continuous lengths of thousands of feet and wound or coiled around a large reel. It can be inserted through existing production tubing and used to perform workovers without using a larger, costlier workover rig. Principal advantages of employing coiled tubing in a workover operation include: (i) not having to “shut-in” the well during such operations, (ii) the ability to reel continuous coiled tubing in and out of a well significantly faster than conventional pipe, (iii) the ability to direct fluids into a wellbore with more precision, and (iv) enhanced access to remote or offshore fields due to the smaller size and mobility of a coiled tubing unit compared to a workover rig. Coiled tubing units are also used to support completion activities in directional and horizontal wells. Such completion activities usually require multiple entrances in a wellbore in order to complete multiple fractures during a pressure pumping operation. A coiled tubing unit can accomplish this type of operation because its flexibility allows it to be steered in a direction other than vertical, which is necessary in this type of wellbore. At the same time, the strength of the coiled tubing string allows various types of tools or motors to be conveyed into the well effectively. The uses for coiled tubing in directional and horizontal wells have been enhanced by improved fabrication techniques and higher-diameter coiled tubing which allows coiled tubing units to be used effectively over greater distances, thus allowing them to function in more of the completion activities currently taking place in the U.S. domestic market. There are several manufacturers of flexible steel pipe used in coiled tubing, and the Company believes that its sources of supply are adequate.
+Snubbing . Snubbing (also referred to as hydraulic workover services), which accounted for one percent of revenues in 2019, one percent of revenues in 2018 and two percent of revenues in 2017, involves using a hydraulic workover rig that permits an operator to repair damaged casing, production tubing and downhole production equipment in a high-pressure environment. A snubbing unit makes it possible to remove and replace downhole equipment while maintaining pressure on the well. Customers benefit because these operations can be performed without removing the pressure from the well, which stops production and can damage the formation, and because a snubbing unit can perform many applications at a lower cost than other alternatives. Because this service involves a very hazardous process that entails high risk, the snubbing segment of the oil and gas services industry is limited to a relative few operators who have the experience and knowledge required to perform such services safely and efficiently. Increasingly, snubbing units are used for unconventional completions at the outer reaches of long wellbores which cannot be serviced by coiled tubing because coiled tubing has a more limited range than drill pipe conveyed by a snubbing unit.
+Nitrogen . Nitrogen accounted for four percent of revenues in 2019, three percent of revenues in 2018 and two percent of revenues in 2017. There are a number of uses for nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside of the oilfield. For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in various drilling applications. Increasingly, it is used as a displacement medium to increase production in older wells in which production has depleted. It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing medium for our fracturing service. In addition, nitrogen can be complementary to our snubbing and coiled tubing services, because it is a non-corrosive medium and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our pressure pumping service as well, because foam-based nitrogen stimulation is appropriate in certain sensitive formations in which the fluids used in fracturing or acidizing would damage a customer's well.
+4
+For non-oilfield industrial users, nitrogen can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of pumping unit configurations that inject nitrogen in its various applications. Some of these pumping units are set up for use on offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these sources of supply are adequate.
+Well Control . Cudd Energy Services specializes in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and internationally. In connection with these services, Cudd Energy Services, along with Patterson Services, has the capacity to supply the equipment, expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years, the Company has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds to well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the most critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work. Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs. In these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations can resume as promptly as safety permits.
+Wireline Services . Wireline is classified into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well, conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring objects into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor line into a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline services can be an integral part of the plug and abandonment process near the end of the life cycle of a well.
+Pump Down Services. Pump down services are an integral part of the well completion process and are critical in multiple-stage, unconventional well completions which use various types of bridge plugs and perforation techniques. Pump down services use fluids and low-capacity pressure pumping equipment, and work in coordination with wireline services, to place completion equipment at the desired location in a well bore. This process is repeated for each stage, moving from the most distant end of the wellbore to the end that is closest to the wellhead.
+Fishing . Fishing involves the use of specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation. The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+Rental Tools . Rental tools accounted for four percent of revenues in 2019, three percent of revenues in 2018 and two percent of revenues in 2017. The Company rents specialized equipment for use with onshore and offshore oil and gas well drilling, completion and workover activities. The drilling and subsequent operation of oil and gas wells generally require a variety of equipment. The equipment needed is in large part determined by the geological features of the production zone and the size of the well itself. As a result, operators and drilling contractors often find it more economical to supplement their tool and tubular assets with rental items instead of owning a complete set of assets. The Company’s facilities are strategically located to serve the major staging points for oil and gas activities in Texas, the Gulf of Mexico, mid-continent region, Appalachian region and the Rocky Mountains.
+5
+Patterson Rental Tools offers a broad range of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for both oilfield and non-oilfield customers.
+Well Control School . Well Control School provides industry and government accredited training for the oil and gas industry both in the United States and in limited international locations. Well Control School provides training in various formats including conventional classroom training, interactive computer training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff engineering and well site management.
+Refer to Note 14 in the Notes to the Consolidated Financial Statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities of its customers in Texas, the mid-continent, the southwest, the Gulf of Mexico, the Rocky Mountains and the Appalachian regions. Demand for RPC’s services in the U.S. tends to be extremely volatile and fluctuates with current and projected price levels of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions about capital investment toward the development and production of oil and gas reserves.
+Due to aging oilfields and lower-cost sources of oil internationally, the drilling rig count in the U.S. has declined by approximately 83 percent from its peak in 1981. However, due to continuously enhanced rig and other technologies, more wells are drilled during periods of strong industry activity, and these wells are increasingly productive. For these reasons, the domestic production of both oil and natural gas rose to record levels in the fourth quarter of 2019. Oil and gas industry activity levels have historically been volatile, experiencing multiple cycles, including six down cycle troughs between 1981 and 2016, with May 2016 marking the lowest U.S. domestic rig count in U.S. oilfield history. In the current cycle, the rig count peaked late in the fourth quarter of 2018, and by early in the first quarter of 2020, had fallen by approximately 27 percent.
+Because of the increased efficiency of drilling rigs, the Company also monitors well completions in the U.S. domestic oilfield. Well completions are particularly important to RPC because the majority of its services are utilized during the completion stage of an oil or gas well’s life cycle, so they are an important indicator of the demand for RPC’s services. As reported by the U.S. Energy Information Administration during the first quarter of 2020, annual well completions fell from a cyclical peak of 21,381 in 2014 to 8,123 in 2016. Between 2016 and 2019, annual well completions increased by 7,684 or 94.6 percent. In spite of the increase in well completions during the past three years, annual well completions in 2019 were 26.1 percent lower than the 2014 cyclical peak.
+6
+The fluctuations in domestic drilling and completions activity since the recent cyclical peak in late 2018 are consistent with the prices of oil and natural gas, global supply and demand for oil and natural gas, the domestic supply of natural gas, capital availability to fund the operations of exploration and production companies, projected near-term economic growth and fluctuations in the value of the U.S. dollar on world currency markets. Following a cyclical peak in the fourth quarter of 2018, the price of oil had fallen by approximately 25 percent as of the first quarter of 2020. Although total world oil production was unchanged in 2019, and production increased slightly during this period, expectations for slowing global economic growth have caused the price of oil to decline.
+The average price of natural gas decreased by approximately 19.2 percent during 2019 as compared with 2018 and early in the first quarter of 2020, the price of natural gas was approximately 4.9 percent lower than the price at the end of 2019. RPC does not believe that the current price of natural gas is sufficient to encourage natural gas-directed drilling, and we note that many oil-directed wells produce a great deal of natural gas and natural gas liquids as well. In addition to oil and natural gas, the price of natural gas liquids plays a minor role in determining our customers’ activity levels, since it is produced in many of the shale resource plays which also produce oil, and production of various natural gas liquids has increased to a level comparable to that of natural gas. During 2019 the average price of natural gas liquids decreased by approximately 37.9 percent compared with 2018. Early in the first quarter of 2020, the price of natural gas liquids decreased by approximately 26.1 percent compared to the average price in 2019. During 2019, the declining price of oil began to discourage drilling and production activity as our customers increasingly began to scrutinize their projected financial returns. This scrutiny has increased early in 2020 due to continued lower commodity prices and budget pressure imposed by capital sources. Fluctuations in the prices of these commodities, particularly the price of oil, significantly impact RPC’s financial results.
+From 2001 to 2009, gas drilling rigs represented over 80 percent of the drilling rig count. In 2010, the percentage of drilling rigs drilling for natural gas began to decline, and by early in the first quarter of 2015 had fallen to approximately 18 percent of total drilling activity. In absolute terms, the natural gas drilling rig count in the third quarter of 2016 was the lowest natural gas drilling rig count ever recorded. During this time period the natural gas drilling rig count as a percentage of the total rig count remained steady at approximately 18 percent of total drilling, though it declined to approximately 15 percent of total drilling early in 2020. Although U.S. domestic demand for natural gas has increased, and U.S. exports of liquified natural gas have become approximately three percent of U.S. natural gas production, the price of natural gas has fallen in recent years due to increased domestic reserves, productivity of new wells, and high associated natural gas production from oil-directed wells. In spite of these unfavorable near-term dynamics, the long-term demand outlook for natural gas is still favorable because, unlike oil, foreign imports of natural gas do not compete with domestic production to a meaningful degree. In addition, liquified natural gas exports, which began in 2013, have increased tremendously and now account for a meaningful use of U.S. natural gas production. We anticipate that oil-directed drilling will continue to represent the majority of the total drilling rig count for the foreseeable future. We do not believe that natural gas-directed drilling will increase during the near term because of the tremendous productivity of existing natural gas wells, as well as the associated production of natural gas in wells that are directed towards oil drilling. We continue to believe in the long-term growth opportunities for our business due to the continued high demand for hydrocarbons generally and the growing production of oil in the domestic U.S. market in particular.
+Unconventional wells generate a higher demand for RPC’s services because they are difficult and costly to complete. They comprise the majority of U.S. domestic drilling and during the fourth quarter of 2019 and early in the first quarter of 2020, have reached a historical high of approximately 95 percent of total drilling. Because they are drilled through a typically narrow and relatively impermeable formation such as shale, they require additional stimulation when they are completed. Also, many of these formations require high pumping rates of stimulation fluids under high pressures, which in turn require a great deal of pressure pumping horsepower on location to complete the well. Furthermore, since they are not drilled in a straight vertical direction from the Earth’s surface, they require tools and drilling mechanisms that are flexible, rather than rigid, and can be steered once they are downhole. Specifically, these types of wells require RPC’s pressure pumping and coiled tubing services, as well as our downhole tools and services.
+International. RPC has historically operated in several countries outside of the United States, and international revenues accounted for five percent of RPC’s consolidated revenues in 2019, five percent in 2018 and four percent in 2017. RPC’s allocation of growth capital over the last several years have emphasized domestic rather than international expansion because of higher domestic activity levels and expected financial returns. International revenues increased 61.9 percent in 2019 compared to the prior year primarily due to higher customer activity levels in Algeria and to a lesser extent, Mexico and Pakistan, partially offset by lower activity in Gabon. During 2019, RPC provided downhole motors and tools in Argentina, Canada, Mexico and Oman, as well as rental tools in Pakistan. We also provided snubbing services in Gabon. We continue to focus on the selected development of international opportunities in these and other markets, although we believe that it will continue to be less than ten percent of total revenues in 2020.
+7
+RPC provides services to its international customers through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties, including the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic operations. Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting the timing and duration of contract work is not possible. Refer to Note 14 in the Notes to Consolidated Financial Statements for further information on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate excellent long-term returns on investment through the effective and conservative management of its invested capital to generate strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies are focused on selected customers and markets in which we believe there exist opportunities for higher growth, customer and market penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added equipment and services. RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Historically, we have found that we generate higher financial returns from organic growth with our services and geographical locations in which we have experience. Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist, and we frequently consider such opportunities. We have consummated relatively few acquisitions, however, due to high seller valuation expectations and the risk of integrating acquired businesses into our existing operations. We will continue to consider the acquisitions of existing businesses but will also continue to maintain a conservative capital structure, which may limit our ability to consummate large transactions.
+RPC has a revolving credit facility which can be used to fund working capital requirements. The borrowing base for this credit facility is $125 million less the amount of any outstanding letters of credit. There was no outstanding balance on this credit facility as of December 31, 2019. Our capital structure is more conservative than that of many of our peers.
+Customers
+Demand for RPC’s services and equipment depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist of major and independent oil and natural gas producing companies. During 2019, RPC provided oilfield services to several hundred customers. Of these customers, there was no customer in 2019 or 2018 that accounted for more than 10 percent of revenues.
+Sales are generated by RPC’s sales force and through referrals from existing customers. We monitor closely the financial condition of these customers, their capital expenditure plans, and other indications of their drilling and completion activities. Due to the short lead time between ordering services or equipment and providing services or delivering equipment, there is no significant sales backlog.
+Competition
+RPC operates in highly competitive areas of the oilfield services industry. We sell our equipment and services in highly competitive markets, and the revenues and earnings generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets, general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors, including the largest integrated oilfield services companies. During the oilfield downturn of 2015 and 2016, a number of smaller oilfield services companies as well as several of our publicly traded peers reduced the scope of their operations or became insolvent. During 2017, however, an improving industry environment and the positive outlook on the industry from the financial markets facilitated the formation of new companies and allowed existing companies to expand their operations. RPC believes that these expanded or newly formed companies increased competitive pressures during the near term, since they began to provide services to our existing customers at lower prices, and hired experienced personnel from more established companies such as RPC. Pricing for our services improved significantly during 2017, but began to decline during the fourth quarter of 2017 and throughout 2019. Rising oil and gas production because of completion efficiencies is contributing to competitive pricing. RPC believes that the principal competitive factors in the market areas that it serves are product availability and quality of our equipment and raw materials used to provide our services, service quality, reputation for safety and technical proficiency, and price.
+8
+The oil and gas services industry includes dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton Company, Baker Hughes Company, and Schlumberger Ltd. The industry also includes a number of other publicly traded peers whose operations are more similar to RPC, including Basic Energy Services, Liberty Oilfield Services, Mammoth Energy Services, Inc., NCS Multistage Holdings, Inc., NexTier Oilfield Solutions, Nine Energy Services, Patterson-UTI Energy, Inc., ProPetro Holding Corporation and Superior Energy Services, as well as numerous smaller, locally owned competitors.
+Facilities/Equipment
+RPC’s equipment consists primarily of oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These manufacturers may not be able to meet our requests for timely delivery during periods of high demand which may result in delayed deliveries of equipment and higher prices for equipment.
+RPC owns and leases regional and district facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive offices in Atlanta, Georgia are leased. The Company has two primary administrative buildings, one leased facility in The Woodlands, Texas that includes the Company’s operations, engineering, sales and marketing headquarters, and one owned facility in Houma, Louisiana that includes certain administrative functions. RPC believes that its facilities are adequate for its current operations. For additional information with respect to RPC’s lease commitments, see Note 10 of the Notes to Consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state, federal and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to worker safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how such laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by laws and regulations relating to the exploration and production of natural resources such as oil and natural gas. These regulations are subject to change, and new regulations may curtail or eliminate our customers’ activities. We cannot determine the extent to which new legislation may impact our customers’ activity levels, and ultimately, the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations which management believes are important, but are not indispensable, to RPC’s success. Although RPC anticipates seeking patent protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its competitive position.
+Availability of Filings
+RPC makes available, free of charge, on its website, rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports on the same day they are filed with the Securities and Exchange Commission.

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1	+ Item 13. Certain Relationships and Related Party Transactions and Director Independence
2	+ Information concerning certain relationships and related party transactions will be included in the RPC Proxy Statement for its 2020 Annual Meeting of Stockholders, in the sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence will be included in the RPC Proxy Statement for its 2020 Annual Meeting of Stockholders in the section titled “Director Independence and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and procedures — The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this report, December 31, 2019 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.
+Management’s report on internal control over financial reporting — Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal control over financial reporting is included on page 32 of this report. Grant Thornton LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of internal control as of December 31, 2019 and issued a report thereon which is included on page 33 of this report.
+Changes in internal control over financial reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 13: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment. RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products Corporation (a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then distributing the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products entered into various agreements that define the companies’ relationship.
+59
+NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+RPC, Inc. and Subsidiaries
+Years ended December 31, 2019, 2018 and 2017
+In accordance with a Transition Support Services agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations that are subsidiaries of the Company) for such services were $ 865,000 in 2019, $ 873,000 in 2018, and $ 849,000 in 2017. The Company’s receivable due from Marine Products for these services was $ 55,000 as of December 31, 2019 and $ 28,000 as of December 31, 2018. Many of the Company’s directors are also directors of Marine Products and all of the executive officers are employees of both the Company and Marine Products.
+Other
+The Company periodically purchases in the ordinary course of business equipment or services from suppliers, who are owned by significant officers or stockholders, or affiliated with the directors of RPC. The total amounts paid to these affiliated parties were $ 1,625,000 in 2019, $ 1,467,000 in 2018 and $ 1,372,000 in 2017.
+RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is otherwise affiliated with RPC). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months ’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent totaled $ 104,000 in 2019, $ 101,000 in 2018 and $ 104,000 in 2017.
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. The purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $ 2,554,000 contribution by each company to 255 RC, LLC. Each of RPC and Marine Products is currently a party to an operating lease agreement with 255 RC, LLC for a period of five years . RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $ 199,000 in 2019 and 2018 and $ 197,000 in 2017 for the corporate aircraft. The Company has a payable to 255 RC, LLC of $ 1.0 million as of December 31, 2019 and $ 0.8 million as of December 31, 2018. The Company accounts for this investment using the equity method and its proportionate share of income or loss is recorded in selling, general and administrative expenses. As of December 31, 2019, the investment closely approximates the underlying equity in the net assets of 255 RC, LLC.

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $865,000 in 2019.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. Each of RPC and Marine Products is currently a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2019, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $199,000 for the corporate aircraft.
+During 2019, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. R. Randall Rollins, Chairman and Mr. Gary W. Rollins, Director, are officers, directors and controlling stockholders of LOR, Inc. In 2019, payments totaling approximately $1,625,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services including an allocation for office space from Rollins. The service agreements between Rollins and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $104,000 in 2019.
+A group that includes the Company’s Chairman of the Board, R. Randall Rollins, his brother Gary W. Rollins, who is also a director, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, “Corporate Governance and Board of Directors Committees and Meetings, Director Independence and NYSE Requirements, Controlled Company Exemption.” The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law,
+28
+consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2019 were reviewed, approved and/or ratified by the Nominating and Governance Committee in accordance with the Code.

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2	+ 0000742278,RES,RPC INC,10-K,2021-02-26,2020-12-31,2021-02-26T21:22:58.000Z,0001104659-21-029211,res-20201231x10k.htm,FORM 10-K,12304527,1,1,https://www.sec.gov/Archives/edgar/data/742278/000110465921029211/res-20201231x10k.htm,https://www.sec.gov/Archives/edgar/data/742278/000110465921029211/,2020,2020,1

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+Item 1. Business
+Organization and Overview
+RPC is a Delaware corporation originally organized in 1984 as a holding company for several oilfield services companies and is headquartered in Atlanta, Georgia.
+RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. RPC acts as a holding company for the following legal entity groupings: Cudd Energy Services, Cudd Pressure Control, Thru Tubing Solutions and Patterson Services. Selected overhead including centralized support services and regulatory compliance are classified as Corporate. RPC is further organized into Technical Services and Support Services which are its operating segments. As of December 31, 2020, RPC had approximately 2,000 employees.
+2
+Business Segments
+RPC manages its business as either services offered on the well site with equipment and personnel (Technical Services) or services and equipment offered off the well site (Support Services). The businesses under Technical Services generate revenues based on equipment, personnel operating the equipment and the materials utilized to provide the service. They are all managed, analyzed and reported based on the similarities of the operational characteristics and costs associated with providing the service. The businesses under Support Services are primarily able to generate revenues through equipment or services offered off the well site. During 2020, less than five percent of RPC’s consolidated revenues were generated from offshore operations in the U.S. Gulf of Mexico. In 2020, we also estimate that 75 percent of our revenues were related to drilling and production activities for oil, while 25 percent of revenues were related to drilling and production activities for natural gas.
+Technical Services include RPC’s oil and gas services that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address well control issues. This operating segment consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing. Customers include major multi-national and independent oil and gas producers, and selected nationally owned oil companies. The services offered under Technical Services are high capital and personnel intensive businesses. The common drivers of operational and financial success of these services include diligent equipment maintenance, strong logistical processes, and appropriately trained personnel who function well in a team environment. The Company considers all of these services to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions based on this operating segment as a whole across these various services. The principal markets for this business segment include the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and selected international markets.
+Support Services include all of the services that provide (i) equipment offered off the well site without RPC personnel and (ii) services that are provided in support of customer operations off the well site such as classroom and computer training, and other consulting services. The primary drivers of operational success for services and equipment provided off the well site without RPC personnel are offering safe, high quality and in-demand equipment appropriate for the well design characteristics. The drivers of operational success for the other Support Services relate to meeting customer needs off the well site and competitive marketing of such services. The equipment and services offered include rental tools, drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian regions and project work in selected international locations. Customers primarily include domestic operations of independent oil and gas producers and major multi-nationals and selected nationally owned oil companies.
+A brief description of the primary services conducted within each of the operating segments follows:
+Technical Services
+Pressure Pumping . Pressure pumping services, which accounted for 37 percent of 2020 revenues, 42 percent of 2019 revenues and 55 percent of 2018 revenues are provided to customers throughout Texas, and the mid-continent and Rocky Mountain regions of the United States. We primarily provide these services to customers to enhance the initial production of hydrocarbons in formations that have low permeability. Pressure pumping services involve using complex, truck or skid-mounted equipment designed and constructed for each specific pumping service offered. The mobility of this equipment permits pressure pumping services to be performed in varying geographic areas. Principal materials utilized in pressure pumping operations include fracturing proppants, acid and bulk chemical additives. Generally, these items are available from several suppliers, and the Company utilizes more than one supplier for each item. Pressure pumping services offered include:
+Fracturing — Fracturing services are performed to stimulate production of oil and natural gas by increasing the permeability of a formation. Fracturing is particularly important in shale formations, which have low permeability, and unconventional completion, because the formation containing hydrocarbons is not concentrated in one area and requires multiple fracturing operations. The fracturing process consists of pumping fluid gel and sometimes nitrogen into a cased well at sufficient pressure to fracture the formation at desired locations and depths. Sand, ceramics, or synthetic materials, which are often coated with a material to increase their resistance to crushing, are pumped into the fracture. When the pressure is released at the surface, the fluid gel returns to the well surface, but the proppant remains in the fracture, thus keeping it open to allow oil and natural gas to flow through the fracture into the production tubing and ultimately to the well surface. In some cases, fracturing is performed in formations with a high amount of carbonate rock by an acid solution pumped under pressure without a proppant or with small amounts of proppant.
+3
+Acidizing — Acidizing services are also performed to stimulate production of oil and natural gas, but they are used in wells that have undergone formation damage due to the buildup of various materials that block the formation. Acidizing entails pumping large volumes of specially formulated acids into reservoirs to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of oil and natural gas. Acidizing services can also enhance production in limestone formations. Acid is also frequently used in the beginning of a fracturing operation.
+Cementing — Cementing services are used at the completion stage of an oil or natural gas well to seal the wellbore after the casing string has been run. The process of cementing includes developing a cement slurry formulated for a well’s unique characteristics, pumping the cement through the wellbore and into the space between the well casing and well bore, and allowing it to harden. In addition to completion uses, cementing can also be used to seal a lost circulation zone in an existing well, and to plug a well at the end of its life cycle.
+Downhole Tools . Thru Tubing Solutions (“TTS”) accounted for 34 percent of revenues in 2020, 34 percent of revenues in 2019 and 25 percent of 2018 revenues. TTS provides services and proprietary downhole motors, fishing tools and other specialized downhole tools and processes to operators and service companies in drilling and production operations, including casing perforation and bridge plug drilling at the completion stage of an oil or gas well. The services that TTS provides are especially suited for unconventional drilling and completion activities. TTS’ experience providing reliable tool services allows it to work in a pressurized environment with virtually any coiled tubing unit or snubbing unit.
+Coiled Tubing . Coiled tubing services, which accounted for nine percent of revenues in 2020, seven percent of revenues in 2019 and six percent of revenues in 2018, involve the injection of coiled tubing into wells to perform various applications and functions for use principally in well-servicing operations and to facilitate completion of horizontal wells. Coiled tubing is a flexible steel pipe with a diameter of less than four inches manufactured in continuous lengths of thousands of feet and wound or coiled around a large reel. It can be inserted through existing production tubing and used to perform workovers without using a larger, costlier workover rig. Principal advantages of employing coiled tubing in a workover operation include: (i) not having to “shut-in” the well during such operations, (ii) the ability to reel continuous coiled tubing in and out of a well significantly faster than conventional pipe, (iii) the ability to direct fluids into a wellbore with more precision, and (iv) enhanced access to remote or offshore fields due to the smaller size and mobility of a coiled tubing unit compared to a workover rig. Coiled tubing units are also used to support completion activities in directional and horizontal wells. Such completion activities usually require multiple entrances in a wellbore to complete multiple fractures during a pressure pumping operation. A coiled tubing unit can accomplish this type of operation because its flexibility allows it to be steered in a direction other than vertical, which is necessary in this type of wellbore. At the same time, the strength of the coiled tubing string allows various types of tools or motors to be conveyed into the well effectively. The uses for coiled tubing in directional and horizontal wells have been enhanced by improved fabrication techniques and higher-diameter coiled tubing which allows coiled tubing units to be used effectively over greater distances, thus allowing them to function in more of the completion activities currently taking place in the U.S. domestic market. There are several manufacturers of flexible steel pipe used in coiled tubing, and the Company believes that its sources of supply are adequate.
+Snubbing . Snubbing (also referred to as hydraulic workover services), which accounted for one percent of revenues in 2020, one percent of revenues in 2019 and one percent of revenues in 2018, involves using a hydraulic workover rig that permits an operator to repair damaged casing, production tubing and downhole production equipment in a high-pressure environment. A snubbing unit makes it possible to remove and replace downhole equipment while maintaining pressure on the well. Customers benefit because these operations can be performed without removing the pressure from the well, which stops production and can damage the formation, and because a snubbing unit can perform many applications at a lower cost than other alternatives. Because the well being serviced by a hydraulic workover unit is often under pressure, which is hazardous by nature, the snubbing segment of the oil and gas services industry is limited to relatively few operators who have the experience and knowledge required to perform such services safely. Increasingly, snubbing units are used for unconventional completions at the outer reaches of long wellbores which cannot be serviced by coiled tubing because coiled tubing has a more limited range than drill pipe conveyed by a snubbing unit.
+Nitrogen . Nitrogen accounted for five percent of revenues in 2020, four percent of revenues in 2019 and three percent of revenues in 2018. There are a number of uses for nitrogen, an inert, non-combustible element, in providing services to oilfield customers and industrial users outside of the oilfield. For our oilfield customers, nitrogen can be used to clean drilling and production pipe and displace fluids in various drilling applications. Increasingly, it is used as a displacement medium to increase production in older wells in which production has depleted. It also can be used to create a fire-retardant environment in hazardous blowout situations and as a fracturing medium for our fracturing service. In addition, nitrogen can be complementary to our snubbing and coiled tubing services, because it is a non-corrosive medium and is frequently injected into a well using coiled tubing. Nitrogen is complementary to our pressure pumping service as well, because foam-based nitrogen stimulation is appropriate in certain sensitive formations in which the fluids used in fracturing or acidizing would damage a customer's well.
+For non-oilfield industrial users, nitrogen can be used to purge pipelines and create a non-combustible environment. RPC stores and transports nitrogen and has a number of pumping unit configurations that inject nitrogen in its various applications. Some of these
+4
+pumping units are set up for use on offshore platforms or inland waters. RPC purchases its nitrogen in liquid form from several suppliers and believes that these sources of supply are adequate.
+Well Control . Cudd Pressure Control specializes in responding to and controlling oil and gas well emergencies, including blowouts and well fires, domestically and internationally. In connection with these services, Cudd Pressure Control, along with Patterson Services, has the capacity to supply the equipment, expertise and personnel necessary to restore affected oil and gas wells to production. During the past several years, the Company has responded to numerous well control situations in the domestic U.S. oilfield and in various international locations.
+The Company’s professional firefighting staff has many years of aggregate industry experience in responding to well fires and blowouts. This team of experts responds to well control situations where hydrocarbons are escaping from a wellbore, regardless of whether a fire has occurred. In the most critical situations, there are explosive fires, the destruction of drilling and production facilities, substantial environmental damage and the loss of hundreds of thousands of dollars per day in well operators’ production revenue. Since these events ordinarily arise from equipment failures or human error, it is impossible to predict accurately the timing or scope of this work. Additionally, less critical events frequently occur in connection with the drilling of new wells in high-pressure reservoirs. In these situations, the Company is called upon to supervise and assist in the well control effort so that drilling operations can resume as promptly as safety permits.
+Wireline Services . Wireline is classified into two types of services: slick or braided line and electric line. In both, a spooled wire is unwound and lowered into a well, conveying various types of tools or equipment. Slick or braided line services use a non-conductive line primarily for jarring objects into or out of a well, as in fishing or plug-setting operations. Electric line services lower an electrical conductor line into a well allowing the use of electrically-operated tools such as perforators, bridge plugs and logging tools. Wireline services can be an integral part of the plug and abandonment process near the end of the life cycle of a well.
+Pump Down Services. Pump down services are an integral part of the well completion process and are critical in multiple-stage, unconventional well completions which use various types of bridge plugs and perforation techniques. Pump down services use fluids and low-capacity pressure pumping equipment, and work in coordination with wireline services, to place completion equipment at the desired location in a well bore. This process is repeated for each stage, moving from the most distant end of the wellbore to the end that is closest to the wellhead.
+Fishing . Fishing involves the use of specialized tools and procedures to retrieve lost equipment from a well drilling operation and producing wells. It is a service required by oil and gas operators who have lost equipment in a well. Oil and natural gas production from an affected well typically declines until the lost equipment can be retrieved. In some cases, the Company creates customized tools to perform a fishing operation. The customized tools are maintained by the Company after the particular fishing job for future use if a similar need arises.
+Support Services
+Rental Tools . Rental tools accounted for four percent of revenues in 2020, four percent of revenues in 2019 and three percent of revenues in 2018. The Company rents specialized equipment for use with onshore and offshore oil and gas well drilling, completion and workover activities. The drilling and subsequent operation of oil and gas wells generally require a variety of equipment. The equipment needed is in large part determined by the geological features of the production zone and the size of the well itself. As a result, operators and drilling contractors often find it more economical to supplement their tool and tubular assets with rental items instead of owning a complete set of assets. The Company’s facilities are strategically located to serve the major staging points for oil and gas activities in Texas, the Gulf of Mexico, mid-continent region, Appalachian region and the Rocky Mountains.
+5
+Patterson Rental Tools offers a broad range of rental tools including:
+Blowout Preventors
+Diverters
+High Pressure Manifolds and Valves
+Drill Pipe
+Hevi-wate Drill Pipe
+Drill Collars
+Tubing
+Handling Tools
+Production Related Rental Tools
+Coflexip® Hoses
+Pumps
+Wear Knot TM Drill Pipe
+Oilfield Pipe Inspection Services, Pipe Management and Pipe Storage. Pipe inspection services include Full Body Electromagnetic and Phased Array Ultrasonic inspection of pipe used in oil and gas wells. These services are provided at both the Company’s inspection facilities and at independent tubular mills in accordance with negotiated sales and/or service contracts. Our customers are major oil companies and steel mills, for which we provide in-house inspection services, inventory management and process control of tubing, casing and drill pipe. Our locations in Channelview, Texas and Morgan City, Louisiana are equipped with large capacity cranes, specially designed forklifts and a computerized inventory system to serve a variety of storage and handling services for both oilfield and non-oilfield customers.
+Well Control School . Well Control School provides industry and government accredited training for the oil and gas industry both in the United States and in limited international locations. Well Control School provides training in various formats including conventional classroom training, interactive computer training including training delivered over the internet, and mobile simulator training.
+Energy Personnel International . Energy Personnel International provides drilling and production engineers, well site supervisors, project management specialists, and workover and completion specialists on a consulting basis to the oil and gas industry to meet customers’ needs for staff engineering and well site management.
+Refer to Note 15 in the consolidated financial statements for additional financial information on our business segments.
+Industry
+United States . RPC provides its services to its domestic customers through a network of facilities strategically located to serve oil and gas drilling and production activities of its customers in Texas, the mid-continent, the southwest, the Gulf of Mexico, the Rocky Mountains and the Appalachian regions. Demand for RPC’s services in the U.S. is extremely volatile and fluctuates with current and projected price levels of oil and natural gas and activity levels in the oil and gas industry. Customer activity levels are influenced by their decisions about capital investment toward the development and production of oil and gas reserves.
+Due to aging oilfields and lower-cost sources of oil internationally, the drilling rig count in the U.S. has declined by approximately 95 percent from its peak in 1981. However, due to continuously enhanced rig and other technologies during the last decade, an increased number of wells have been drilled during periods of strong industry activity, and these wells are increasingly productive. For these reasons, the domestic production of both oil and natural gas rose to record levels in the fourth quarter of 2019. Oil and gas industry activity levels have historically been volatile, experiencing multiple cycles, including seven down cycle troughs between 1981 and 2020, with August 2020 marking the lowest U.S. domestic rig count in U.S. oilfield history. Between August 2020 and early in the first quarter of 2021, the U.S. domestic rig count rose by approximately 63 percent.
+Since the majority of RPC’s services are utilized at the completion stage of an oil or gas well’s life cycle, the Company closely monitors well completions in the U.S. domestic oilfield. As recently reported by the U.S. Energy Information Administration, annual well completions fell from a cyclical peak of 21,382 in 2014 to 8,135 in 2016. Between 2016 and 2019, annual well completions increased by 6,227 or 76.6 percent. During the oilfield downturn that occurred in 2020, only 7,394 wells were completed, the lowest number of annual well completions recorded during the seven years that these data have been reported.
+Historical fluctuations in domestic drilling and completions activity are consistent with the prices of oil and natural gas, global supply and demand for oil and natural gas, the domestic supply of natural gas, capital availability to fund the operations of exploration and production companies, projected near-term economic growth and fluctuations in the value of the U.S. dollar on world currency markets. Following the most recent cyclical peak in the fourth quarter of 2018, the price of oil fell by approximately 25 percent by the
+6
+first quarter of 2020. During 2020, the historic collapse in oil prices discouraged drilling and production activity as our customers faced a potential collapse in global oil demand. Fluctuations in the prices of these commodities, particularly the price of oil, significantly impact RPC’s financial results.
+The average price of natural gas decreased by approximately 20.9 percent during 2020 as compared with 2019. Early in the first quarter of 2021, the price of natural gas was approximately 8.9 percent higher than the price at the end of 2020. RPC does not believe that the current price of natural gas is sufficient to encourage increasing levels of natural gas-directed drilling, and we note that many oil-directed wells produce a great deal of natural gas and natural gas liquids as well. In addition to oil and natural gas, the prices of various natural gas liquids also determine our customers’ activity levels, since it is produced in many of the shale resource plays which also produce oil, and production of various natural gas liquids has increased to a level comparable to that of natural gas. During 2020 the average price of benchmark natural gas liquids decreased by approximately 14.4 percent compared with 2019. Early in the first quarter of 2021, however, the price of natural gas liquids increased by approximately 85.5 percent compared to the average price in 2020.
+From 2001 to 2009, gas drilling rigs represented over 80 percent of the drilling rig count. In 2010, the percentage of drilling rigs drilling for natural gas began to decline, and since that time has consistently comprised less than 50 percent of total U.S. drilling. Although U.S. domestic demand for natural gas has increased, and U.S. exports of liquified natural gas have become a source of demand for U.S. natural gas, while the price of natural gas generally has fallen in recent years. Unlike oil demand, which is impacted by numerous global factors, the demand for natural gas is determined by U.S. domestic and export demand. We anticipate that oil-directed drilling will continue to represent the majority of the total drilling rig count for the foreseeable future. We continue to believe in the long-term importance of our business due to continued worldwide demand for hydrocarbons generally and the high production of oil in the domestic U.S. market.
+Unconventional wells are drilled in a direction other than a straight vertical direction from the Earth’s surface. Because they are drilled through relatively impermeable formations such as shale, they require additional stimulation when they are completed. Also, many of these formations require high pumping rates of stimulation fluids under high pressures, which can only be accomplished by using a great deal of pressure pumping horsepower to complete the well. Furthermore, since these types of wells are not drilled in a straight vertical direction, they require tools and drilling mechanisms that are flexible, rather than rigid, and can be steered once they are downhole. For these reasons, unconventional wells require more of RPC’s services than conventional wells. Specifically, these types of wells require RPC’s pressure pumping and coiled tubing services, as well as our downhole tools and services. Since 2016, unconventional oil and gas wells have comprised greater than 80 percent of U.S. domestic drilling and RPC believes that they will continue to comprise the majority of drilling activity because of their high initial production rates. The advent of unconventional drilling in the U.S. domestic market, which RPC believes to be a permanent change, continues to have a positive impact on the demand for RPC’s services.
+International. RPC has historically operated in several countries outside of the United States, and international revenues accounted for six percent of RPC’s consolidated revenues in 2020, five percent in 2019 and five percent in 2018. RPC’s allocation of growth capital over the last several years have emphasized domestic rather than international expansion because of higher domestic activity levels and expected financial returns. International revenues decreased 44.5 percent in 2020 compared to the prior year primarily due to lower customer activity levels in Argentina, and Canada, partially offset by higher activity in Algeria. During 2020, RPC provided downhole motors and tools in Argentina, Canada, Mexico and Saudi Arabia. We continue to focus on the selected development of international opportunities in these and other markets, although we believe that it will continue to be less than ten percent of total revenues in 2021.
+RPC provides services to its international customers through branch locations or wholly owned foreign subsidiaries. The international market is prone to political uncertainties, including the risk of civil unrest and conflicts. However, due to the significant investment requirement and complexity of international projects, customers’ drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective with regard to oil and natural gas pricing, and therefore have the potential to be more stable than most U.S. domestic operations. Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different objectives and more operating stability than the typical independent oil and gas producer in the U.S. Predicting the timing and duration of contract work is not possible. Refer to Note 15 in the consolidated financial statements for further information on our international operations.
+Growth Strategies
+RPC’s primary objective is to generate excellent long-term returns on investment through the effective and conservative management of its invested capital to generate strong cash flow. This objective continues to be pursued through strategic investments and opportunities designed to enhance the long-term value of RPC while improving market share, product offerings and the profitability of existing businesses. Growth strategies are focused on selected customers and markets in which we believe there exist
+7
+opportunities for higher growth, customer and market penetration, or enhanced returns achieved through consolidations or through providing proprietary value-added equipment and services. RPC intends to focus on specific market segments in which it believes that it has a competitive advantage and on potential large customers who have a long-term need for our services in markets in which we operate.
+RPC seeks to expand its service capabilities through a combination of internal growth, acquisitions, joint ventures and strategic alliances. Historically, we have found that we generate higher financial returns from organic growth with our services and geographical locations in which we have experience. Because of the fragmented nature of the oil and gas services industry, RPC believes a number of acquisition opportunities exist, and we frequently consider such opportunities. We have consummated relatively few acquisitions in recent years, however, due to high seller valuation expectations and the risk of integrating acquired businesses into our existing operations. We will continue to consider the acquisitions of existing businesses but will also continue to maintain a conservative capital structure, which may limit our ability to consummate large transactions.
+RPC has a revolving credit facility which can be used to fund working capital and other capital requirements. The borrowing base for this credit facility is $100 million, including a $35 million letter of credit sublimit, and a $35 million swingline sublimit. There was no outstanding balance on this credit facility as of December 31, 2020. Our capital structure is more conservative than that of many of our peers.
+Customers
+Demand for RPC’s services and equipment depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of production enhancement activity worldwide. RPC’s principal customers consist of major and independent oil and natural gas producing companies. During 2020, RPC provided oilfield services to several hundred customers. Of these customers, there was no customer in 2020 or 2019 that accounted for 10 percent or more of revenues.
+Sales are generated by RPC’s sales force and through referrals from existing customers. We monitor closely the financial condition of these customers, their capital expenditure plans, and other indications of their drilling and completion activities. Due to the short lead time between ordering services or equipment and providing services or delivering equipment, there is no significant sales backlog.
+Competition
+RPC operates in highly competitive areas of the oilfield services industry. We sell our equipment and services in highly competitive markets, and the revenues and earnings generated are affected by changes in prices for our services, fluctuations in the level of customer activity in major markets, general economic conditions and governmental regulation. RPC competes with many large and small oilfield industry competitors, including the largest integrated oilfield services companies. During the oilfield downturn of 2015 and 2016, a number of smaller oilfield services companies as well as several of our publicly traded peers reduced the scope of their operations or became insolvent. During 2017, however, an improving industry environment and the positive outlook on the industry from the financial markets facilitated the formation of new companies and allowed existing companies to expand their operations. Pricing for our services improved significantly during 2017 but declined during the fourth quarter of 2017 and throughout the following years before achieving some level of stability early in 2021. RPC believes that expanded service capacity during the three years prior to 2020 increased competitive pressures and caused labor price increases because these companies hired experienced personnel from more established companies such as RPC. During this period, improving completion services efficiency also served to increase effective capacity and impose another catalyst for declining pricing. As in the oilfield downturn of 2015 and 2016, several oilfield services companies became insolvent or sought bankruptcy protection during 2020 as the impact of the COVID-19 pandemic drove oilfield activity to historically low levels. RPC believes that the principal competitive factors in the market areas that it serves are product availability and quality of our equipment and raw materials used to provide our services, service quality, reputation for safety and technical proficiency, and price.
+The oil and gas services industry includes dominant global competitors including, among others, Halliburton Energy Services Group, a division of Halliburton Company, Baker Hughes Company, and Schlumberger Ltd. The industry also includes a number of other publicly traded peers whose operations are more similar to RPC, including Basic Energy Services, Liberty Oilfield Services, Mammoth Energy Services, Inc., NCS Multistage Holdings, Inc., NexTier Oilfield Solutions, Nine Energy Services, Patterson-UTI Energy, Inc., ProPetro Holding Corporation and Superior Energy Services, as well as numerous smaller, locally owned competitors.
+8
+Human Capital
+The table below shows the number of employees at December 31, 2020 and 2019:
+At December 31,
+2020
+2019
+Employees
+2,005
+2,656
+The Company operates in a cyclical business where financial performance and headcount is influenced by, among other things, changes in oil and natural gas prices. The Company’s key human capital management objectives are focused on fostering talent in the following areas:
+Diversity and Equality - The Company’s workforce reflects the diversity of the communities in which it operates. Our dedicated team of employees works towards a common purpose. Our Company is strong in its values, relationships and consistency in management. We have long been dedicated to recruiting and hiring recently discharged military personnel, and dedicated resources undertake this recruiting effort at our company. The Company received the U.S. Department of Labor's "2019 Hire Vets Medallion Award" in recognition of this effort and its success. The Board of Directors has a diversity committee that monitors compliance with applicable non-discrimination laws related to race, gender and other protected classes. The Committee provides a report of such incidences to the Board on an annual basis.
+Development and Training - The Company’s management team and all its employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. We have implemented and maintained a corporate compliance program to provide guidance for everyone associated with the Company, including its employees, officers and directors (the "Code"). Annual review of the Code is required which prohibits unlawful or unethical activity, including discrimination, and directs our employees, officers, and directors to avoid actions that, even if not unlawful or unethical, might create an appearance of illegality or impropriety. In addition, the Company provides annual training for preventing, identifying, reporting and ending any type of unlawful discrimination. The Company also provides a wide variety of opportunities for professional growth for all employees with in-classroom and online training, on-the-job experience, education tuition assistance and counseling.
+Compensation and Benefits - The Company focuses on attracting and retaining employees by providing compensation and benefit packages that are competitive in the market, taking into account the location and responsibilities of the job. We provide competitive financial benefits such as a 401(k) retirement plan with a company match, and generally grant awards of restricted stock for certain of our salaried employees. We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs that support their physical and mental health by providing tools and resources to help them improve or maintain their health status.
+RPC has always believed in the long-term value of education, and has demonstrated this belief through a college scholarship program for the children of employees. This program, which awards four-year college scholarships based on merit, parents' tenure, and need has invested more than $1 million to support hundreds of children of employees as they earn college degrees. A number of these college graduates have come to work for RPC and have followed their parents to become valuable employees.
+RPC and its subsidiaries have regularly participated in efforts to support the communities in which we live. We have participated in the United Way Campaign in the city in which our corporate headquarters is located for more than 30 years. In addition, we have sponsored several emergency relief efforts following natural disasters, such as hurricanes and tornados, in communities in which our field offices are located.
+Safety - The Company adheres to a comprehensive safety program to promote a safe working environment for its employees, contractors and customers at its operational locations and active job sites. This program complies with applicable regulatory guidelines for oilfield operations and is enhanced by our analysis of workplace-related incidents and evolving preventative measures. We monitor our workplace safety record and compare it to industry benchmarks and our internal metrics to find areas for improvement. In addition, a component of our field employee compensation plans is based on safety measures.
+RPC is making technology and process investments which reduce the number of employees on a job location and change the roles of the remaining employees in ways that reduce their exposure to safety hazards. We believe that this reduced exposure to active areas of a job location has led to fewer safety incidents in a service line which has a high concentration of employees.
+9
+In response to the COVID-19 pandemic, we implemented a response plan that we believe was in the best interest of our employees and the communities in which we operate. This included transitioning our workforce to a remote work model where possible, while implementing additional safety measures for essential employees continuing critical on-site work.
+Facilities/Equipment
+RPC’s equipment consists primarily of oil and gas services equipment used either in servicing customer wells or provided on a rental basis for customer use. Substantially all of this equipment is Company owned. RPC purchases oilfield service equipment from a limited number of manufacturers. These manufacturers may not be able to meet our requests for timely delivery during periods of high demand which may result in delayed deliveries of equipment and higher prices for equipment.
+RPC owns and leases regional and district facilities from which its oilfield services are provided to land-based and offshore customers. RPC’s principal executive offices in Atlanta, Georgia are leased. The Company has four primary administrative buildings, two leased facilities in The Woodlands, Texas, and Midland, Texas that include the Company’s operations, engineering, sales and marketing headquarters, and two owned facilities, one in Houma, Louisiana that includes certain administrative functions and one in Oklahoma City, Oklahoma that includes operations, sales and equipment storage yards. RPC believes that its facilities are adequate for its current operations. For additional information with respect to RPC’s lease commitments, see Note 16 of the consolidated Financial Statements.
+Governmental Regulation
+RPC’s business is affected by state, federal and foreign laws and other regulations relating to the oil and gas industry, as well as laws and regulations relating to worker safety and environmental protection. RPC cannot predict the level of enforcement of existing laws and regulations or how such laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will be adopted, or the effect such changes may have on it, its businesses or financial condition.
+In addition, our customers are affected by laws and regulations relating to the exploration and production of natural resources such as oil and natural gas. These regulations are subject to change, and new regulations may curtail or eliminate our customers’ activities. We cannot determine the extent to which new legislation may impact our customers’ activity levels, and ultimately, the demand for our services.
+Intellectual Property
+RPC uses several patented items in its operations which management believes are important, but are not indispensable, to RPC’s success. Although RPC anticipates seeking patent protection when possible, it relies to a greater extent on the technical expertise and know-how of its personnel to maintain its competitive position.
+Availability of Filings
+RPC makes available, free of charge, on its website, rpc.net, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports on the same day they are filed with the Securities and Exchange Commission.

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1	+ Item 13. Certain Relationships and Related Party Transactions and Director Independence
2	+ Information concerning certain relationships and related party transactions will be included in the RPC Proxy Statement for its 2021 Annual Meeting of Stockholders, in the sections titled, “Certain Relationships and Related Party Transactions.” Information regarding director independence will be included in the RPC Proxy Statement for its 2021 Annual Meeting of Stockholders in the section titled “Director Independence and NYSE Requirements.” This information is incorporated herein by reference.

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+Item 9A. Controls and Procedures
+Evaluation of disclosure controls and procedures — The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
+As of the end of the period covered by this report, December 31, 2020 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.
+Management’s report on internal control over financial reporting — Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal control over financial reporting is included on page 29 of this report. Grant Thornton LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of internal control as of December 31, 2020 and issued a report thereon which is included on page 30 of this report.
+Changes in internal control over financial reporting — Management’s evaluation of changes in internal control did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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+Note 14: Related Party Transactions
+Marine Products Corporation
+Effective in 2001, the Company spun off the business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment. RPC accomplished the spin-off by contributing 100 percent of the issued and outstanding stock of Chaparral to Marine Products Corporation (a Delaware corporation) (“Marine Products”), a newly formed wholly owned subsidiary of RPC, and then distributing the common stock of Marine Products to RPC stockholders. In conjunction with the spin-off, RPC and Marine Products entered into various agreements that define the companies’ relationship.
+56
+NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+RPC, Inc. and Subsidiaries
+Years ended December 31, 2020, 2019 and 2018
+In accordance with a Transition Support Services agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations that are subsidiaries of the Company) for such services were $ 846,000 in 2020, $ 865,000 in 2019, and $ 873,000 in 2018. The Company’s receivable due from Marine Products for these services was $ 49,000 as of December 31, 2020 and $ 55,000 as of December 31, 2019. Many of the Company’s directors are also directors of Marine Products and the executive officers are employees of both the Company and Marine Products.
+Other
+The Company periodically purchases in the ordinary course of business equipment or services from suppliers, who are owned by significant officers or stockholders, or affiliated with the directors of RPC. The total amounts paid to these affiliated parties were $ 1,030,000 in 2020, $ 1,625,000 in 2019 and $ 1,467,000 in 2018.
+RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. Gary W. Rollins is also Chairman, and which is controlled by Mr. Rollins and his affiliates). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months ’ notice. The services covered by these agreements include office space, selected administration services for certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent totaled $ 104,000 in 2020, $ 104,000 in 2019 and $ 101,000 in 2018.
+A group that includes the Company’s Chairman of the Board, Gary W. Rollins, who is also a director of the Company, and certain companies under his control, controls in excess of fifty percent of the Company’s voting power.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. The purchase of the aircraft was completed in January 2015, and the purchase was funded primarily by a $ 2,554,000 contribution by each company to 255 RC, LLC. Each of RPC and Marine Products is currently a party to an operating lease agreement with 255 RC, LLC for a period of five years . RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $ 200,000 in 2020 and $ 199,000 in 2019 and 2018 for the corporate aircraft. The Company has a payable to 255 RC, LLC of $ 1.2 million as of December 31, 2020 and $ 1.0 million as of December 31, 2019. The Company accounts for this investment using the equity method and its proportionate share of income or loss is recorded in selling, general and administrative expenses. As of December 31, 2020, the investment closely approximates the underlying equity in the net assets of 255 RC, LLC and the undistributed earnings represented in retained earnings was approximately $ 462,440 .

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+CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
+Effective with the spin-off in 2001, the Company began providing certain administrative services to Marine Products. The service agreements between Marine Products and the Company provide for the provision of services on a cost reimbursement basis and may be terminated upon six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges from the Company (or from corporations which are subsidiaries of the Company) for such services aggregated approximately $867,000 in 2021.
+RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. Each of RPC and Marine Products is currently a party to an operating lease agreement with 255 RC, LLC for a period of five years. During 2021, RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of approximately $200,000 for the corporate aircraft.
+During 2021, a subsidiary of RPC conducted business with companies owned by LOR, Inc. Mr. Gary W. Rollins, Non-Executive Chairman, is an officer, director and controlling stockholder of LOR, Inc. In 2021, payments totaling approximately $1,210,000 were made to these LOR, Inc. companies primarily for the purchase of parts and repair services related to certain of RPC’s oilfield operating equipment. RPC believes the charges incurred are at least as favorable as the charges that would have been incurred for similar purchases from unaffiliated third parties.
+RPC receives certain administrative services from Rollins, Inc., a company of which Mr. Gary W. Rollins is also Chairman, and which is controlled by Mr. Rollins and his affiliates. The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, administration of certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated approximately $108,000 in 2021.
+A group that includes the Company’s Non-Executive Chairman of the Board, Mr. Gary W. Rollins, and certain companies under his control, possesses in excess of fifty percent of the Company’s voting power. Please refer to the discussion above under the heading, Board of Directors and Corporate Governance. The group discussed above also controls in excess of fifty percent of Marine Products’ voting power.
+33
+Our Code of Business Conduct and Ethics for Directors and Executive Officers and Related Party Transactions Policy provides that related party transactions, as defined in Regulation S-K, Item 404(a) must be reviewed, approved and/or ratified by our Nominating and Corporate Governance Committee. As set forth in our Code, our Nominating and Corporate Governance Committee has the responsibility to ensure that it only approves or ratifies related party transactions that are in compliance with applicable law, consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Committee has the authority to hire legal, accounting, financial or other advisors as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. A copy of the Code is available on our website at www.rpc.net under the Governance section. All related party transactions for the fiscal year ended December 31, 2021 were reviewed, pre-approved and/or ratified by the Nominating and Corporate Governance Committee in accordance with the Code.

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