Revenues declined compared to the previous year due to lower equipment utilization and more competitive pricing in most of RPC’s service lines. Operating profit for the quarter decreased 67% to $8.49 million, compared with the $25.4 million in the previous year. Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 23.1% to $40.5 million compared to $52.7 million in the previous year.
Cost of revenues was $109,970,000, or 62.4% of revenues, during the first quarter of 2009, compared to $117,670,000, or 59.7% of revenues, in the previous year. The decline in these costs was because of the variable nature of several of these expenses, including fuel and materials and supplies. As percentage of revenues, cost of revenues increased because of lower pricing for our services, higher maintenance and repairs expenses and negative leverage from direct personnel costs.
Selling, general and administrative expenses decreased by 2.5% in the first quarter of 2009 to $27,606,000 from $28,317,000 in the prior year. This decrease was due primarily to lower incentive compensation and the impact of cost control measures. As a percentage of revenues, however, these costs increased to 15.7% in 2009 compared to 14.4% last year. Depreciation and amortization increased to $32,020,000 during the quarter, compared to $27,326,000 last year, due to capital expenditures made during the last year. Interest expense decreased from $1,471,000 last year to $ 594,000 in 2009 due to reduced interest rates and a lower average balance on RPC’s revolving credit facility.
During the first quarter of 2009 RPC began to experience the dramatic impact of declining domestic activity and lower commodity prices that began in the latter part of 2008, stated Richard A. Hubbell, RPC’s president and chief executive officer. Many of our customers delayed their drilling and completion activities due to low commodity prices, unfavorable opinions about the economy, or lack of financing due to the unstable credit markets. The average domestic rig count during the first quarter was 1,344, a 24.1% decrease compared to the same period in 2008. The price of natural gas decreased 47.6%, and the price of oil decreased 55.5% during this period compared to the prior year. RPC’s revenues decreased by less than these industry benchmarks due to some capacity increases and our presence in several of the unconventional drilling areas in the domestic market. Although the rig count declined during the quarter, almost 57% of the wells that were drilled were unconventional. This is a higher percentage than last year, and is an indication of relatively higher activity in this type of drilling.
We continue to see indications during the second quarter that the oil and gas industry is in the midst of a harsh cyclical downturn. We continue to focus on managing our direct costs, and we have started reducing our overhead as well. Our capital expenditures were $19.5 million during the quarter, as we focus on maintaining a conservative balance sheet and investing only in those projects which have acceptable financial returns in this subdued operating environment. The balance on our revolving credit facility at the end of the quarter was $132.5 million, a $42 million decrease compared to the end of 2008. We will continue our cost reduction and capital conservation efforts as we continue in this cyclical downturn, concluded Hubbell.
Summary of Segment Operating Performance
RPC’s business segments are Technical Services and Support Services.
Technical services include RPC’s oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues. The technical services segment includes pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools, surface pressure control equipment, well control, and fishing tool operations.
Support services include RPC’s oilfield service lines that provide equipment for customer use or services to assist customer operations. The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.
Technical services revenues declined 10.7% for the quarter compared to the prior year, impacted by competitive pricing and lower equipment utilization. Support services revenues decreased by 10% during the quarter compared to the prior year because of decreased activity in the rental tool service line, which is the largest service line within support services. Operating profit decreased in technical and support services segments due to lower revenues and higher costs and expenses as percentage of revenues.
