Ranger Energy Services, Inc. Class A

Welcome to the Ranger Energy Services third quarter 2022 investor conference call. I am Shelly Weimer, vice president of reporting and finance. 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 Melissa Kugel, chief financial officer of Ranger.

Good morning, everyone. Joining me today is Stuart Bowden, our CEO, and Justin Whitley, who has joined us at Ranger as our new general counsel. We're excited to have him on board. Before we begin today, 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 are not a substitute for GAAP measures, and they may not be comparable to similar measures of other companies. A reconciliation of these items is 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. As Melissa just mentioned, Justin Whitley has joined Ranger as General Counsel, and we are very excited to have him on board. Justin brings a wealth of oil and gas service experience to the company, and I know he's going to be a great fit for us. Again, welcome to the team, Justin. All of us are excited to speak with you this morning to share our Q3 results, discuss our outlook for the sector in Ranger, and outline some of our strategic thoughts as we look to the future. Ranger delivered another quarter of strong performance in Q3, with all three of our business segments showing increased revenue and expanded margins during the quarter. Our strong performance is the direct result of the hard work of our teams and our continuous focus on service quality and disciplined execution. We have spent a year integrating the companies acquired during 2021 and getting the fundamental building blocks in place to execute with excellence. Due to those efforts, financial performance at Ranger is much improved from prior years and even the first half of this year. Our performance in Q3 shows that our 2021 acquisitions have created shareholder value and provided valuable scale and operating leverage, which have positioned the company to capitalize on what is expected to be a multi-year upcycle. We hosted our first leadership team meeting this past quarter in several years, and our team developed new and shared objectives to find incremental efficiencies and opportunities for growth across segments. We are creating a new wave of initiatives and organizational changes, such as the one that brought Justin to our team. As our Ranger vision states, these new efforts will help us strive toward new thinking and enhance our positive energy culture. Looking at our specific results, the company grew revenue by 15% quarter over quarter, nearly doubling the pre-COVID revenue levels of the company. Our adjusted EBITDA increased 69% to $32.3 million, with EBITDA margins improving by more than 500 basis points to just over 17%, on the back of increasing prices and activity, as well as strong operating leverage. Our revenue and EBITDA levels are the highest that we have ever seen historically, and we have operating capacity and assets yet to tap into the future. Our operating performance, continued focus on managing working capital, and ongoing sales of surplus assets has allowed Ranger to deleverage by $13 million this quarter, reducing our total debt balance by 19%. This year, Ranger has been able to nearly half its debt load and currently stands at a leverage level that is well below one times its current EBITDA run rate. I'd now like to spend a few minutes to talk about our segments. In our high-specification RIGS business, we continue to increase the total number of RIG hours worked, which totaled 123,000 hours for the quarter, an approximately 3% increase quarter over quarter. Rig rates have moved higher than at any time on record for Ranger at $648 per hour on a blended basis. We anticipate these rates will be stable going forward with the possibility of some additional moderate gains to be had during 2023. Our active rig count has stayed steady the past quarter with puts and takes for rigs moving between customers and into the yards for maintenance and certifications. Our teams continue to be focused on strong execution, cost management and operating efficiency which we feel will drive more market penetration and continue expanding margins. We received several customer acknowledgements this quarter, most notably the Rig of the Quarter Award from Pioneer Natural Resources in the Permian region. We've been proud of the partnership and relationship with this key customer. We also received acknowledgement from two separate supermajors this quarter for outstanding safety in our operations and effective use of stock work accountability. Our stop work accountability program, which we call I Got Your Six, stresses the importance of stopping activities that are unsafe, confident in the knowledge that management has got your back. For our rigs business in Q4, we do expect typical seasonality and holiday impacts. We are seeing some isolated impacts of budget exhaustion, although the few rigs that have been released have largely been redeployed with other customers. Moving to our wireline segment, revenue increased 22% with segment E to over $11 million with margins of 19% in Q3. This improvement is the result of a series of changes we made to this business earlier in the year, including changes in leadership, a focus on improving service quality, redeployment of assets, and ensuring our rates are appropriately profitable. In short, we have made significant strides in this business. We are proud of this progress and continue to believe there is more potential in the wireline segment. We do expect to encounter some seasonality, particularly in our northern operations during the latter part of this year and into the first quarter of 2023. As activity begins to pick back up in the first quarter of next year, we will be pushing for additional growth and utilization of our wireline assets. Finally, in our ancillary services businesses, we had a very strong quarter, more than doubling segment-level EBITDA and realizing segment-level EBITDA margins above 25%. Coil tubing, P&A, rentals and fishing, and Torrent, our fuel gas processing division, all saw increased revenue and margins quarter over quarter. Our coil tubing business has grown 157% year-to-date and produced 25% EBITDA margins in Q3, while our rental and fishing business has grown 65% since year-end and is realizing margins of 24%, showing promise as well. As we approach year end and reflect on the company's accomplishments and where we go from here, it is clear that our acquisitions executed last year are now delivering strong returns, demonstrating the value of our consolidation strategy for Ranger and for the sector more broadly. The Ranger management team and board believe that consolidation remains an essential and ongoing process for the company within both existing and adjacent product lines, and we continue to be actively engaged on this front. We regularly field inbound opportunities and maintain active dialogues with potential partners to look at ways to create value together. We hope our investor group shares our excitement about this quarter's results. Our teams across all three of our business segments have worked hard and shown incredible dedication to the company, and our financial results back them up. It has truly been a team effort, and I am proud of what they have accomplished. I'll talk more about our outlook and strategic priorities here shortly, but I'll now turn the call over to Melissa to walk through some of the details of our financial results.