Ranger Energy Services, Inc. Class A

Welcome to the Ranger Energy Services second quarter 2022 investor conference call. All participants will be in listen-only mode until the question and answer portion of this call. Please note, this event is being recorded. I would now like to turn the conference over to Stuart Bowden, President and CEO, and Melissa Kugel, CFO. Please go ahead.

Good morning, everyone. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting views from the company about future prospects, revenues, expenses, or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the beliefs of the company based on current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, and adjusted net debt, are not a substitute for GAAP measures, and they may not be comparable to similar measures of other companies. A reconciliation of these items are presented in our earnings release, which is available on our website. I will now turn the call over to Stuart.

Thank you, Melissa, and good morning to everyone joining us today. Although you just heard from Herb, I'm pleased to introduce Ranger's new CFO, Melissa Kugel, and welcome her to the Ranger team. Melissa brings a wealth of experience and strategic insight into the CFO role, and she's already bringing fresh new perspectives to our leadership team. It's great to have her on board. Since I joined Ranger in the fall of last year, we have been communicating our belief in the importance of consolidation, our strong sense that market fundamentals were quickly improving for oilfield services, and that Ranger specifically was much stronger and had far more earnings potential as a result of our acquisitions. All of these beliefs have been and continue to show in our financial results. Our performance in Q2 shows that our 2021 acquisitions have created shareholder value and provided needed scale and operating leverage, which will allow Ranger to capitalize on what is expected to be a multi-year upcycle. The future of Ranger is exciting, and this quarter demonstrates why. Quarter over quarter, we grew revenue by 24%, achieving nearly double the revenues seen pre-COVID. Our adjusted EBITDA increased nearly 90%, approaching a doubling from the prior quarter, with EBITDA margins improving by more than 400 basis points from increasing prices, activity, and strong operating leverage. While some peers have been building working capital on the back of increasing revenues, Beginning in Q1, we placed significant focus on managing working capital, which facilitated the generation of $20 million of operating cash flow in this quarter. Combined with the ongoing sales of surplus assets, these efforts allowed us to deleverage by more than $21 million, reducing our total net debt balance by almost 25% in a single quarter. Ranger now stands with a debt load that is less than one time its current EBITDA run rate. When thinking about market conditions and how our services could fare even through a potential recession, we believe the U.S. land domestic production market has shown significant resilience over the past several years and that our services will remain in demand in almost any commodity price environment. Given our leverage to work over in production barrels, which are typically the cheapest incremental barrels for any producer and the quickest to bring online, Ranger feels our business segments are particularly well-suited to be resilient and generate sustainable cash flows in the future, despite any macroeconomic uncertainty today. Over the last several quarters, we have been working diligently to integrate our most recent acquisitions, and we have made significant strides in ensuring operations maintain our strong service delivery reputation and are running consistently to Ranger standards. I'd now like to spend a few minutes to talk about each of our segments. In our high specifications rigged business, We deployed more rigs this quarter and worked on high-grading work toward more 24-hour work, and we've seen progress on both rig count and rig hours worked per day. Rig rates are presently higher than pre-COVID levels and north of $630 per hour on a blended basis, a ranger record. We've had to absorb a fair amount of inflationary cost pressure, particularly on the labor side, but feel we're doing a good job of managing these costs, and we believe normalized margins in this segment are currently around 20%. In the coming quarters, we're going to continue to focus on strong execution and operating efficiency that we feel will drive more market penetration and continue expanding margins. Our confidence comes from the high operating standards of our crews, which we know will pay off over the long run. As an example, we were recently acknowledged by a key client in Oklahoma who remarked that Ranger crews were a pivotal piece of their success in running a series of completion jobs that allowed them to achieve significant operational efficiency and time savings on their program. This customer made a specific request to retain ranger crews and ensure the schedule was managed to allow them to keep that specific rig and that specific crew working for them. Moving to our wireline segment, we were disappointed in our first quarter and made a series of changes to this business, including changes in leadership, a focus on improving service quality, redeployment of assets, and ensuring our rates are appropriately profitable. Although recently enacted, we're already seeing the changes paying off, with revenue up nearly 30% from the prior quarter and now commensurate with the back half of 2021. And EBITDA margins in Q2 approached 10%. We've seen a sharp reduction in non-billable labor and improved pricing by 10% quarter over quarter in completion-related services. In short, we have regained lost traction in the business and fill their significant room to run, and we will be pushing for additional growth and utilization of our wireline assets. Finally, in our ancillary services segment, things are really, really picking up. Several of these services were acquired during the basic asset acquisition, and this year we have started to more actively manage these product lines. We are happy with the results and their future earnings potential. Our coil business has shown the most growth at 157% percent year to date and is producing 25% segment level EBITDA margins. We decided to complete an additional quill tubing spread that had been acquired from BASIC, and that unit will be deployed in the coming weeks. Our Reynolds business has grown 65% since year end and is realizing margins of 24%, showing promise as well. Finally, both our P&A and snubbing businesses have shown notable growth this year. All told, we feel this quarter really came together with good traction in all segments. We're incredibly proud of our achievements and the financial results that back them up. We'll talk about our financial outlook here shortly, but operationally, our focus in the coming quarters is to continue the momentum game today. Finally, and most importantly, I would be remiss if I did not thank everyone at Ranger for their hard work and dedication to achieving such an outcome. It has truly been a team effort, and I'm proud of what they've accomplished. Now, I'll turn the call over to Melissa to walk through some of the details of our financial results.