Ranger Energy Services, Inc. Class A

Good morning and welcome to Ranger Energy Services third quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your touch-tone keypad. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Joe Meese, Vice President, Finance. Please go ahead.

Good morning and welcome to Ranger Energy Services' third quarter 2025 earnings conference call. We appreciate you joining us on an exciting day in Ranger's growth journey. Before we begin, Ranger has issued a press release outlining our operational and financial performance for the three months ended September 30th, 2025. The press release and 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 will be referenced during this call. A full reconciliation of gap to non-gap measurements is available in our latest quarterly earnings release and conference call presentation. Joining me today are Stuart Bowden, our Chief Executive Officer, and Melissa Kugel, our Chief Financial Officer. Stuart will begin with a strategic and operational overview, including commentary on our acquisition of American Wealth Services. Melissa will then walk through a financial summary of the transaction and the results for Ranger's third quarter. Following their remarks, we'll open the call for Q&A.

With that, I'll turn it over to Stuart. Stuart Miller Thank you, Joe, and good morning, everyone. Today marks a significant milestone in Ranger's journey. This morning, we are proud to announce the acquisition of American Wealth Services. a leading Permian Basin-focused well services provider with a fleet of 39 active workover rigs, new complimentary service lines, and over 550 employees. This transaction represents a strategic acquisition that strengthens our position as the largest well servicing provider in the lower 48 and enhances our ability to deliver differentiated technology-enabled solutions to our customers. Let me start by sharing why AWS is such a compelling addition to Ranger. Outside of adding meaningful scale to our high-specification rig business in the Permian Basin, AWS brings a well-maintained fleet of high-spec rigs that includes extensive supporting equipment and an excellent safety track record. The AWS business also provides a suite of complementary service lines to Ranger, including tubing rentals and inspection, chemical sales, mixing plants, and transportation and logistics, amongst other services. Their operations are deeply rooted in the Permian Basin since founding, and their team has built a reputation for safety, reliability, and operational excellence similar to that of Ranger. They have grown the business strategically over the past seven years through a combination of inorganic and organic growth, and they have established themselves with a strong customer base that is anchored by major operators. This acquisition will expand Ranger's rig count by approximately 25 percent, strategically increasing our market share in the premier oil and gas basin in the lower 48, while also unlocking meaningful pull-through revenue opportunities for Ranger's own high-spec rig business. AWS's customer base is highly complementary to ours. While we share some of our largest customers, There are new customer relationships that broaden our market reach on the AWS side, and we look forward to further expanding these relationships in the future. From a financial standpoint, the purchase price of approximately $90.5 million represents less than two and a half times trailing 12 months EBITDA, with consideration consisting of a prudent mix of cash and equity, along with an earn out that is tied to AWS's assets generating at least $36 million of EBITDA over the next 12 months. Additionally, we expect to realize approximately $4 million in annual costs and revenue synergies once integration is complete. The transaction is immediately accretive to earnings and cash flow with minimal delusion. In addition to the share repurchases we have been successfully executing over the past two years, AWS represents an even higher return on capital comparatively. given the discount of the deal multiple to our own trading multiple. We are supporting the transaction with minimal borrowings on our revolver and pro forma leverage of less than one half-term. On a pro forma basis, Ranger is now expected to produce over $100 million in adjusted EBITDA in 2026 under current market conditions, with an earnings potential that is much higher when commodity prices recover in the future. Our Executive Vice President of Wealth Services, Matt Hooker, Melissa, and I are here in the Permian Basin today while hosting this call to welcome our new Ranger team members aboard and continue the integration planning that has already commenced. We have been preparing comprehensive integration plans based on proven playbooks from prior acquisitions, including our successful integration of the basic energy assets. AWS personnel share our cultural focus on safety and operational excellence, and we are excited about building upon the great foundation already created by both companies to forge an even stronger path together in the future. We will complete the integration with focus and efficiency, and we anticipate finishing the majority of integration activities during the third quarter of 2026. AWS is a strategic extension of what we already do well. It strengthens our existing capabilities in our flagship service line, cements our footprint in the Permian Basin, and enhances our ability to serve customers, all while doing so at a great valuation. Acquisitions like AWS accelerate our strategic roadmap, position us for continued success, and give us the ability to weather cycles better while enjoying enhanced pro forma cash flows that enable other ongoing efforts like the ECHO rig deployment program. Last quarter, we announced our ECHO hybrid electric rig program, which represents a step change in the work over rig space and continues to gain momentum. Ranger's EcoRig is the first of its kind double electric hybrid rig, bringing to market a program to convert existing conventional workover rigs into a new rig that greatly reduces emissions while also taking a meaningful step forward with regards to safety. The first two EcoRigs have been delivered to the field and are currently completing their final testing before they begin working on live wells. Customer interest remains robust, and we see strong demand for the efficiency, safety, and environmental benefits these rigs offer and expect additional contracts to be signed in the coming quarters. Before I turn the call over to Melissa, I'd like to make some comments about our quarterly performance as well as some early views on 2026. For the quarter, our financial results showed continued resilience in our core production-focused service lines. Although we did see weakness and declines in completion-focused areas, and in some of our northern focus districts, where commodity price pressures are leading to activity declines. We mentioned in our prior call higher than normal levels of asset turnover as certain customers adjusted their well programs in light of current market conditions. And this has resulted in greater than expected standby time on the books this quarter. We reported $128.9 million in revenue for the third quarter, which represented a quarter-over-quarter decline largely as a result of our completion exposed businesses. Ranger reported $16.8 million of adjusted EBITDA for the quarter, achieving a 13 percent adjusted EBITDA margin. Our high-spec rig segment continued to be the cornerstone of our business, contributing $80.9 million of revenue and $15.7 million of adjusted EBITDA with margins of 19.4 percent. Activity levels within our production-focused rigs increased quarter over quarter, and are on track to return to previous year peaks. That said, completion activity declines more than offset those increases, where customers took extended breaks between drill-out programs and released some breaks due to budget exhaustion or generalized activity reductions. Our ancillary segment had mixed results this quarter, with the largest declines coming on the back of depressed quill tubing activity. Year over year, the combination of completion activity declines and reduced P&A activity brought about from depressed commodity prices has put pressure on this segment. We expect to see a rebound in both of these businesses in the back half of 2026 when lingering commodity supply concerns are resolved. We've also been encouraged by recent progress and contracts signed within our P&A business with regulatory bodies for safety-sensitive plug-in abandonment work where rangers' experience and track record make it the provider of choice. This quarter, our wireline segment showed some stability despite lower activity levels with revenue of $17.2 million and $400,000 of adjusted EBITDA. At the end of the quarter, we were encouraged by the signing of two new customer contracts with major independent operators, which give us light of sight to more sustainable revenue levels in 2026. Margins in this segment remain challenged, and we expect this trend will continue through the winter months, with recovery planned in March as the winter weather effects subsides. Looking forward to 2026, we are encouraged and optimistic on the back of newly created growth avenues with the AWS acquisition. We have weathered the pullback over the past several quarters with continued strong cash flows and deployed these cash flows wisely to make investments counter-cyclically. buying back a meaningful number of our own shares when the stock came under pressure, and today announcing an acquisition that is anticipated to bring about strong returns on capital. Next year, we expect to generate greater than $100 million of EBITDA for the first time in Ranger's history, which represents a pivotal milestone in our growth path. We believe there is much room to grow from there when market conditions improve and when our echo rigs see increasing adoption in future periods. With that, I'll turn the call over to Melissa before providing a few final closing comments.