Ranger Energy Services, Inc. Class A

Good morning, and welcome to the Ranger Energy fourth quarter and full year 2022 conference call. All participants will be in a listen-only mode, and should you need any assistance during the call, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw a question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Shelly Weimer, Vice President of Reporting and Finance. Please go ahead.

Thank you, Operator, and welcome to the Ranger Energy Services fourth quarter 2022 results conference call. Before the market opened today, Ranger issued a press release summarizing operating and financial results for the three and 12 months ended December 31st, 2022. This press release, together with accompanying presentation materials, are available in the Investor Relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measures are available in our latest quarterly earnings release and conference call presentations. With that, I would now like to turn the conference call over to Stuart Bowden, Ranger's Chief Executive Officer, for his prepared remarks.

Stuart Bowden Thank you, Shelly. Good morning, everyone. On today's call, we will be discussing our fourth quarter and full year 2022 results, as well as our outlook for 2023. Ranger's growing portfolio of high return assets delivered exceptional results in 2022. We more than doubled top line revenue and increased adjusted EBITDA more than 500 percent from the previous year and went from negative free cash flow to paying down over $50 million of debt, reducing our debt by 72 percent from its peak in March to adjusted net debt balance at year end of approximately $22 million. We were clear throughout 2022 that we were committed to achieving net debt zero, and I'm proud to say that we are very much on track to achieve that goal in mid-2023. Importantly, The team's efforts have put us in a position to enter 2023 with a business that generates substantial free cash flow, allowing us to pursue opportunistic growth opportunities and implement a meaningful capital return framework that includes a combination of a share repurchase and a sustainable dividend. Specifically, our board has authorized $35 million worth of potential share buybacks available for up to 36 months. And the board has also approved a quarterly dividend of 5 cents per share that will commence once the company achieves its net debt zero target. The Ranger Board and management have committed to returning at least 25% of our annual cash flows to investors, and this amount will potentially increase in future years as we weigh our potential acquisition opportunities with the value of repurchasing our shares or returning further capital through dividends. Behind our strong financial performance in 2022 was tremendous execution from our operations and support teams. as they successfully and seamlessly integrated the acquisitions we made during 2021, which resulted in improved operating leverage and efficiencies. The vast majority of the credit for our performance goes to our dedicated teams, whether in the field or working in our offices, who have collaborated across segments and geographies to achieve these tremendous results. The team's success was evident in the consistently improved margin performance through the first three quarters of the year. And while the fourth quarter saw a step down in activity due to typical holiday and seasonal trends with an incremental hit from winter storm Elliott, we still achieved record fourth quarter financial and operating results as compared to previous years. Melissa will discuss the details of the fourth quarter financials in a few minutes, but for the year, I would like to reiterate that we more than doubled our revenue during 2022. reporting total revenue for the year of $609 million compared to $293 million in 2021. We also more than tripled gross profit, which speaks to the efficiencies gained during the year and the determination of our operating teams to manage costs and expand margins. Furthermore, our adjusted EBITDA improved by $67 million year-over-year to $80 million. Free cash flow conversion as a percentage of adjusted EBITDA also improved to 39% for the year, resulting in approximately $31 million of free cash flow generation, which was supplemented by the sale of non-revenue generating assets acquired through the basic asset acquisition. Moving into our specific segments, we possess the largest modern fleet of high-specification well servicing rigs in the industry with experienced, safety-focused crews. These rigs service a broad spectrum of wells, from the completion and drill-out of new horizontal wells to the workover and maintenance of existing wells. Given this business is well-suited to provide services to both new completions and existing producing wells, it can flex based on market conditions, allowing us to generate above-market returns through the cycle. For the year, our high-spec rig segment achieved revenue of $293 million, a 109 percent increase over the prior year. On the back of a record 469,000 operating hours, as compared to 257,900 hours in 2021. Due to industry consolidation and a supportive macro backdrop, we were able to drive meaningful pricing increases from $543 per hour in 2021 to an average of $625 per hour in 2022. The high specification rate segment traces back to Ranger's origins, and we are proud to see it achieve such growth since our IPO. We feel this segment is well-positioned to continue growing in 2023 as our customers look for opportunities to create value in their supplier partnerships. We are also having active dialogues around opportunities for expanding services, improving performance monitoring and data acquisition systems, and also reducing emissions by making modifications to our fleet. In our wireline segment, we currently have a fleet of 67 wireline units and 13 high-pressure pump-down units that we use to provide services necessary to complete wells, bring new wells into production, and also maintain these wells through their production lifecycle. Completed stage count during the year increased 50% year-over-year to $31,400, with revenue increasing 67% to $197 million in concert with the activity increase. Seasonality is particularly impactful to the wireline business due to our large presence in the northern basins where weather hinders activity during the winter months. We have an initiative in 2023 to focus on further diversifying our footprint to create more anchor contracts and basins where the weather impacts are not as acute, creating more resiliency and ultimately more profitability. Finally, our ancillary services business increased substantially this year. Revenue for the full year of $118 million was up 237% year over year. All product lines achieved increased revenues, including Coil Tubing, P&A, Reynolds & Fishing, and Torrent, our fuel and gas processing division. Several of these ancillary businesses were bolstered through the basic asset acquisition and, although previously mentioned, it bears repeating that they have been hidden gems to Ranger. Our coil tubing and wrap businesses each contributed $8 million of EBITDA to Ranger during 2022, and we look forward to seeing the full-year impact of these businesses that were brought online during 2022. Our P&A business grew significantly during the year and has recently won incremental contracts to be commenced during 2023. More of our torrent assets are seeing utilization presently, and we intend to continue growing this business in 2023 as well. I'm now going to turn the call over to Melissa to dive deeper in the financial results from the quarter, and I'll come back to share our outlook for the year ahead, including our strategic priorities and financial guidance expectations. Melissa?