Ranger Energy Services, Inc. Class A

Good day, and welcome to the Ranger Energy first quarter of 2025 conference call. All participants will be in a listen-only mode for the duration of the call, and should you need any 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. To withdraw a question, please press star, then two. Also, please be aware that today's call is being recorded. I would now like to turn the call over to Joe Meese, Vice President of Finance. Please go ahead, sir.

Thank you, and welcome to Ranger Energy Services' first quarter 2025 results conference call. Ranger has issued a press release outlining our operational and financial performance for the three months ended March 31, 2025. The press release and accompanying presentation materials are available at 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. Please note that non-GAAP financial measures will be referenced during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. With that, I would now like to turn the conference call over to our CEO, Stuart Bowden, and our CFO, Melissa Kugel, for their prepared remarks.

Thanks, Joe. Good morning, everyone, and thank you for joining us today to discuss our first quarter results. The past couple of months have brought about a new level of uncertainty into the global economy and the oil and gas industry. In the midst of market volatility, Ranger continues to stand out among small-cap, well-filled service companies for its ability to be resilient through the cycle. Built for durability, our business has always and will continue to benefit from a production-oriented focus and a fortress balance sheet. Having been through many cycles, we have been very intentional in building this business for the long term, making tough choices to preserve strength and optionality in all of our business lines. Because we operate conservatively in strong markets, we can act decisively during downturns, allocating capital in ways that drive long-term shareholder value. As we report our first quarter's results and look ahead to the remainder of 2025, we remain steadfast in our conviction that Ranger is a differentiated oilfield services business. During the first quarter, despite the typical impacts of weather and seasonality, we reported significant improvements year over year in adjusted EBITDA and margin, led, once again, by the strength of our high-specification rigs business. We reported revenue of $135.2 million and adjusted EBITDA at $15.5 million, achieving a margin of 11.4%. a significant improvement over the same period last year. While first quarters are often impacted by seasonality, this year brought two polar vortex events in January and February, followed by March windstorms. Still, our core business line delivered, and we achieved strong operational and financial results. We talk about our production focus all the time, but it's worth emphasizing again why this is so important during market turbulence. We often use the analogy that we are the mechanic, not the car manufacturer. Our services are critical to maximizing production, which is our customer's lowest cost incremental barrel. When commodity prices force difficult decisions, it's capital expenditure budgets, to which we have limited exposure, that typically get trimmed first. Over the past two years, Ranger has bucked the trend of the typical E&P consolidation outcome that two plus two equals three. posting material growth in the face of major operator consolidation and benefiting from scale and exposure across basins as other vendors were rationalized. All of this was achieved during declining drilling rig and frack spread counts. The high-specification rig segment recorded its fifth consecutive quarter of revenue growth, driven by consistent rig hours and a higher blended rate. Margins were slightly down quarter over quarter due to weather, but increased by 280 basis points over the prior year period. We expect the stability and resiliency of this business to continue throughout the year, despite the noise from the broader market. Our customer base includes some of the largest operators in the world, working in some of the highest quality oil and gas assets in the world. We have stayed and will continue to stay in close communication with them regarding their well intervention programs in the current commodity price environment. Although some customers are making contingency plans for reduced activity in a lower for longer commodity price scenario, today we have not seen material reductions in the well services production space. Ancillary services also continues to be a bright spot for Ranger. Its performance pulled back modestly from the last quarter due to seasonality, but increased substantially from the first quarter of 2024. Revenue increased by 25% from the prior year period, with adjusted EBITDA more than doubling and margins remaining in the high teens. As I have highlighted the last couple of quarters, Torrent, our gas capture and processing platform, is a standout performer. Compared to the same period last year, revenues quadrupled and with very strong fall through, with margins now solidly between 25% and 30% monthly. We are pleased with the demand for this service and continue to evaluate opportunities to put additional resources behind this segment in 2025. Our rentals and P&A service lines both showed continuing strong margin performance and have developed the ability over the past couple of years to respond more quickly to activity pullbacks to minimize margin degradation. Our wireline units struggled in the first quarter as completions activity in the north stagnated due to the severe weather, reporting negative adjusted EBITDA of $2.3 million which weighed on our consolidated performance. Our January and February performance was our most challenged to date. However, we did post positive margins in March and look to be building on that again in April. We made an additional round of adjustments to the organization to align the cost structure of this segment with the market conditions, along with redeployment of assets into both the conventional wireline space and to our plugging and abandonment business to meet increasing customer demands. We believe this will be a benefit over the longer term and demonstrates our flexible equipment base that can work across our various business segments. Turning now to our strategic priorities, I would like to spend a few minutes addressing the current market environment and the potential impacts to Ranger's business. While the macroeconomic environment is currently being impacted by a number of factors, including the current tariff situation, it is not possible to accurately determine the impact to our business and our guidance remains the same in absence of concrete data to indicate otherwise. Today, we've had very limited impact, and our customers largely remain in a holding pattern for now. The market share gains we've experienced through customer consolidation have allowed us to deepen our relationship with the strongest operators holding the best acreage in the lower 48, and these operators have given us every indication that they plan to continue using Ranger as a preferred provider. In each of our calls, we reaffirm our strategic priorities since they do not change. Our goals always are to maximize free cash flow, prioritize shareholder returns, defend the balance sheet, and grow through disciplined accretive M&A. These priorities are never more important than in an uncertain market. We are inherently able to maximize cash flow because of the light capital intensity of our assets. Our CapEx spend in Q1 reflected strategic investments to enhance our service offerings to major customers, which increases customer loyalty and brings consistent margins. We will be particularly judicious with incremental CapEx in the coming quarters, since it's important to us to maximize our capital allocation and flexibility. We remain convicted in our capital return strategy and announced a 20% increase to the dividend last quarter to $0.06 per share, again affirming that commitment today in this quarter's announcement. Capital returns through aggressive share buybacks at compelling valuations were an important part of our strategy for value creation in 2024, and this buyback strategy remains an important tool in the toolkit in 2025 to maximize returns. Our cash flows not only allow for optimizing capital returns, but we can also maintain balance sheet strength that is far beyond that of any other peer. As of March 31st, Ranger has zero long-term debt, $104.4 million of liquidity, and $40 million of cash on hand. Finally, we continue to evaluate opportunities to grow that are both strategic and accretive. The bid-ask spread has remained an obstacle, but as market conditions evolve, we see potential for actionable opportunities. With our financial strength in public currency, Ranger continues to be an ideal natural consolidator with a proven track record on the integration front. We believe Ranger is a safe haven during these uncertain times and that there is no other small-cap, willful services company that comes close to offering the free cash flow, shareholder returns, and balance sheet strength that we do. Our confidence isn't rooted in a calm market. It's built on a track record of disciplined execution and a shareholder-focused strategy. In short, Ranger is a durable, high-return business designed to perform through the cycle. Melissa will now review our quarterly financials.