Ranger Energy Services, Inc. Class A

Hello and welcome to the Ranger Energy Services third quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, 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. And to withdraw from the question queue, you may press star, then two. As a reminder, this conference is being recorded today. I would now like to hand the call to Joe Meese, Vice President of Finance. Please go ahead.

Thank you, and welcome to Ranger Energy Services' third quarter 2024 results conference call. Ranger has issued a press release summarizing operating and financial results for the three months ended September 30, 2024. 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 measurements may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measurements are available in our latest quarterly earnings release and conference call presentation. With that, I would now like to turn the conference call over to Stuart Bowden, Ranger's CEO, and Melissa Kugel. Ranger CFO for their prepared remarks.

Thank you, and good morning, everyone. We are pleased to welcome you to our third quarter 2024 earnings conference call. This quarter's performance continues to demonstrate Ranger's differentiated business model that enables strong performance no matter macro conditions. Drilling rig count declines, completion activity decreases, and gas market pressure have all contributed to challenging market conditions since early in 2023. Despite these conditions, Ranger's financial performance has been markedly more resilient than the broader OFS complex. And we have once again validated our production-focused business model and set a new high watermark for some of our service lines. Our high-specification rig segment continues to execute at a very high level, setting another quarterly record for revenue and adjusted EBITDA. Ancillary services also achieved near-record results, with our coil tubing business posting a new quarterly revenue record and our torrent brand showing exceptional growth. Encouragingly, we saw a positive rebound in our wireline segment, giving us an indication of the future earnings potential of the business. These results are a testament to our teams and crews in the field. Ranger was able to deliver the second best quarterly results in our company's history, with sales of $153 million and adjusted EBITDA coming in at $25.1 million. Adding a few details around our segments, in our high-specification rigs business, we achieved another record quarter with revenues of $86.7 million and adjusted EBITDA of $19.2 million, resulting in gross margins of 22%. This performance highlights our scale and targeted basins and the investments we have made in our partnerships with core customers. Over the past year, we have worked diligently to showcase Ranger's commitment to quality assets and personnel at every well site, partnering closely with our customers and making strategic investments alongside of them as well. The results of those investments are now taking shape. Our production focus and commitment to quality have allowed us to grow our base of work with the highest quality customers and deliver more incremental services. As we head into Q4, we do expect seasonality will affect business performance because of weather and holiday impacts. But core customer demand remains strong, and we anticipate another robust year in 2025 for this segment. Processing and ancillary services also had an outstanding quarter, with revenues of $36 million and adjusted EBITDA of $8.8 million, which resulted in an impressive gross margin of 25%. We increased revenue by 17% and adjusted EBITDA by 21% quarter over quarter, with our coil tubing business and torrent business driving the growth in this segment. Coil tubing increased revenue by 33% and EBITDA by 52% over last quarter with record margins. The winter and holiday season will likely bring some declines in this service line, but we believe the declines will be less severe than those encountered last year. We are frequently asked about our gas conditioning and processing service line, branded Torrent. This business is focused on infield gas processing and has exposure to the fast-growing fuel power generation market. It showed impressive growth during the third quarter, nearly doubling its EBITDA from Q2. Service line margins are now touching 25% in some months, and there is room to continue deploying additional assets with minimal reactivation capex. We have a great team leading this business, and we are excited to see it continue to grow its contribution to Ranger as we reach further into this high-growth market. Lastly, I want to touch on wireline services. Third quarter performance in wireline was encouraging, with revenue and margins growing quarter over quarter giving us a sense that our restructuring efforts are paying off. We have discussed previously how the wireline completion's plug-in perf space has become commoditized, which has put collateral pressure on traditional production wireline work and pump-down work as well. We continue to pursue opportunities to grow production and pump-down related wireline services work. Our progress has been slow but steady in production and pump-down, and we have seen revenues grow each quarter, a great accomplishment given current market conditions. Due to our heavier exposure in our northern region, seasonality is expected to more significantly impact this segment's margins in the fourth quarter and first quarter, where margins are expected to decline. However, moving into the spring, we believe we should return to an upward trajectory in wireline and grow from the base we've created this year. We talk frequently of our balance sheet strength and how significant a role it plays in our overall financial strategy. Through current market conditions, we've made a priority of maintaining a rock-solid balance sheet, which provides us maximum flexibility to execute on opportunities for the benefit of our shareholders. We operate in a fragmented industry that is ripe for consolidation, and we believe we are well positioned to continue to be a consolidator in this space. While we continue to look for opportunities to further consolidate the industry, we have taken dramatic action on the shareholder returns front, given the compelling investment our own shares represent, and we believe our shareholder returns efforts have been second to none in small cap energy. We have returned over 80% of our free cash flow year to date to our shareholders through a regular dividend and significant share repurchases. We have put our money where our mouth is and bought back our stock at highly accrued evaluations. Despite strong financial results, cash flows, and compelling capital returns, we believe the market continues to undervalue Ranger, and we will continue to capture strong returns through our share repurchases from this value gap. Our multiples of adjusted EBITDA and free cash flow represent significant untapped value, and our production focus and commitment to superior service quality and safety have proven remarkably resilient despite anemic U.S. land rig count. We believe with consistent execution and greater understanding of our business model, our strengths will be more widely recognized and acknowledged by the market. Looking forward to 2025, we are becoming increasingly confident that we will achieve year-over-year growth. High-specification rigs should continue its climb and further cement its role as a market leader, and ancillary services is poised to keep increasing its contribution to our overall results as well. What once were smaller components of our business, such as P&A, grow tubing and torrent, are now growing into larger service lines that generate robust margins with further growth potential. Finally, we are cautiously optimistic that Wireline will continue to stabilize and that 2025 will bring about further improvement in this regard. I want to thank our leadership team for their dedication, and our employees for showing up every day, no matter the conditions, with an excellent spirit and a dedication to service and safety. And I want to thank our customers for their loyal partnership. We are frequently asked about the impact of operator consolidation on our business, and the answer is that we believe consolidation has been a net benefit to Ranger. Ranger continues to be a preferred partner with larger operators that prefer to work with high-quality service providers that will show up on time and perform the work on budget. with well-trained crews and well-maintained equipment. Ranger has successfully built a reputation for quality and reliability, which is one of the key reasons for our continued success through the cycle. Finally, I would like to recognize and thank Charlie Lycom, who has announced he will be stepping down from Ranger's board of directors. Charlie and CSL have been with Ranger since its founding, and he has been instrumental in setting the company's strategic direction and supporting its growth. Quite simply, Ranger would not be where it is today without his leadership and guidance. He has been an invaluable member of the board, and we are grateful for his contributions and everything he has done for the company. With that, I will turn the call over to Melissa to review our operations and financial results.