Ranger Energy Services, Inc. Announces Q4 2023 and Full Year 2023 Results

Ranger Energy Services, Inc. (NYSE: RNGR) (“Ranger” or the “Company”) announced today its results for the fourth quarter and full year ended December 31, 2023.

Highlights

– Full year 2023 revenue of $636.6 million, a 5% increase from $608.5 million in 2022

– Full year 2023 net income of $23.8 million, or $0.95 per fully diluted share, up from $15.1 million, or $0.65 per share in 2022

– Full year 2023 Adjusted EBITDA(1) of $84.4 million, a 6% increase from $79.5 million in 2022, resulting in a 13.3% Adjusted EBITDA margin

– Full year 2023 free cash flow(1) of $54.3 million or $2.21 per share representing 22% of the trailing 30 day stock price(2)

– Executed a comprehensive capital allocation strategy that included a full pay down of debt, along with the initiation of a dividend and extensive share repurchases that returned $21.7 million to shareholders in 2023, representing 40% of free cash flow(1)

– Share repurchases of 1,805,500 shares during 2023 with additional purchases year-to-date 2024(3) of 736,800 shares, the combined representing over 10% of the Company with shares outstanding as of February 29, 2024 totaling 22,662,569

– Board approval of an additional $50 million share repurchase program authorization, resulting in total share repurchase capacity of $85 million

– Published first ever Ranger Energy Services, Inc. Sustainability Report

Management Comments

Stuart Bodden, Ranger’s Chief Executive Officer, commented, “We are pleased to report the highest annual earnings in Ranger’s history in 2023. Strong customer relationships, superior service quality and our production cycle focus drove the Company to record high revenue, despite a U.S. land rig count which was 20% below the prior year. Ranger also reported record high EBITDA, Free Cash Flow and Earnings per Share despite weaker than anticipated customer activity. This year was pivotal for Ranger in not only proving our investment thesis that the Company can weather drilling activity declines with a resilient profile, but also in transforming the financial profile of the Company through paying down our debt, initiating a dividend and repurchasing a significant amount of our outstanding shares to return meaningful value to our shareholders. The Company’s first shareholder returns program, launched in the second quarter, resulted in a distribution of $21.7 million to shareholders, or 40% of free cash flow, through cash dividends and share repurchases. Share repurchases have continued during the first quarter of 2024 given the compelling value our shares present today. All of these accomplishments were enabled by our committed and resourceful team members, from top to bottom, that truly embody what we term our OneRanger spirit.”

“Our fourth quarter was impacted by customer budget exhaustion and holiday slowdowns. That said, our anchor high specification rigs business showed stability, as it has throughout 2023. Our wireline segment showed some weakness given frac slowdowns at year-end along with more significant seasonality given the heavier exposure to Northern basins. Pricing across segments improved or remained resilient during the year and we remain bullish about the longer-term opportunities for the Company and our ability to grow with existing asset capacity,” continued Bodden.

“I am also proud to announce that Ranger has released its first ever Sustainability Report today, which details the Company’s efforts towards operating more safely and responsibly. Ranger has always taken its environmental, social and governance obligations seriously and we are delighted to share the results of our programs and cast a vision for the future.”

“We begin 2024 from a position of strength. Ranger is debt free with over $85 million of liquidity and confident in our ability to navigate an uncertain environment. Our two strategic priorities in 2024 are to continue our profitable growth and provide meaningful capital returns to shareholders. Our acquisition strategy includes both smaller bolt-on type opportunities, as well as potentially larger transactions, and we will target lower capital intensity service lines, increased in-basin scale, and production cycle focus. As it relates to shareholder returns, we remain fully committed to our dividend and continuing to opportunistically repurchase our shares during the year,” concluded Bodden.

REVIEWING 2023 ACCOMPLISHMENTS

Ranger’s stated four strategic pillars for creating shareholder value are: maximizing cash flow, fortifying its balance sheet, growing through acquisition, and returning meaningful capital to shareholders. These pillars underpinned our success in 2023 and lay the foundation for our path in 2024.

PERFORMANCE SUMMARY

For the fourth quarter of 2023, revenue was $151.5 million, a decrease from $154.3 million in the prior year period, and a decrease from $164.4 million in the prior quarter. Revenue decreases from the prior year were attributable to reduced activity in our wireline and processing and ancillary services segments. Year-to-date revenue was $636.6 million, an increase of 5%, or $28.1 million from $608.5 million in the prior year due to pricing improvements across segments and increasing operating activity in select service lines.

Cost of services for the fourth quarter of 2023 was $129.7 million, or 86% of revenue, compared to $127.8 million, or 83% of revenue in the prior year period. The increase in cost of services as a percentage of revenue from the prior year quarter was primarily attributable to inflationary cost pressures and reduced operating activity during the quarter due to year-end customer activity declines and weather related issues. Year-to-date cost of services was $531.7 million, or 84% of revenue, compared to $503.9 million or 83% of revenue in the prior year period attributable to inflationary pressures on labor, rentals and repair costs with the most significant increase noted medical costs per employee which affected cost of services by $3.5 million in 2023 when compared to 2022.

General and administrative expenses were $6.8 million for the fourth quarter of 2023 compared to $7.5 million in the prior year period and $7.0 million in the prior quarter. General and administrative expenses year-to-date totaled $29.5 million. This compares to general and administrative expenses of $39.9 million in 2022. The decrease in general and administrative expenses was primarily due to prior year elevated acquisition and integration costs related to acquisitions.

Net income totaled $2.1 million for the fourth quarter of 2023 compared to $7.6 million in the prior year period and $9.4 million in the third quarter of 2023. The decrease in net income from the prior year and quarter periods is primarily attributable to increasing costs as compared to the prior year, such as the aforementioned medical costs. 2023 net income of $23.8 million increased 58% from $15.1 million in 2022.

Fully diluted earnings per share was $0.09 for the fourth quarter of 2023 compared to $0.30 in the prior year period and $0.38 in the prior quarter. Fully diluted earnings per share for 2023 was $0.95 compared to $0.65 in the prior year.

Adjusted EBITDA of $18.4 million for the fourth quarter of 2023 decreased $3.2 million from $21.6 million in the prior year period and decreased $5.6 million from $24.0 million in the prior quarter. The decreases were driven by the aforementioned reduction in wireline completions activity and certain ancillary service lines as well as inflationary pressure on costs. 2023 Adjusted EBITDA was $84.4 million, an increase of $4.9 million compared to the prior year.

BUSINESS SEGMENT FINANCIAL RESULTS

High Specification Rigs

High Specification Rigs segment revenue was $79.0 million in the fourth quarter of 2023, a increase of $6.4 million, or 9% relative to the prior year period, and a decrease of $0.2 million relative to the prior quarter revenue of $79.2 million. Rig hours decreased by 4% to 107,900 from 112,400 in the prior quarter and decreased by 5% from 113,600 in the prior year period. Hourly rig rates increased by 5% to $733 from $700 per hour in the prior quarter, reflecting an slight increase in pricing quarter over quarter. Segment revenue for the full year was $313.3 million, an increase of $20.1 million, or 7% compared to 2022. Hourly rig rates increased by 12% from $625 per hour in 2022 to $703 per hour in 2023.

Operating income was $10.0 million in the fourth quarter of 2023, an increase of $0.2 million, or 2% relative to $9.8 million in the prior year period and a decrease of $0.6 million, or 6% compared to $10.6 million in the prior quarter. Adjusted EBITDA was $15.4 million in the fourth quarter, up from $15.2 million in the prior year period and down from $15.7 million in the prior quarter. Operating income was $44.0 million for year-to-date 2023, an increase of $9.7 million, or 28% relative to $34.3 million for year-to-date 2022. Adjusted EBITDA was $64.1 million in 2023, up from $60.5 million in 2022.

Wireline Services

Wireline Services segment revenue was $41.5 million in the fourth quarter of 2023, down $6.8 million, or 14% compared to $48.3 million in the prior year period and down $11.7 million, or 22% compared to $53.2 million in the prior quarter. Our Completions service line completed stage counts of 5,000, a decrease of 26% compared to 6,800 in the prior year period and a decrease of 26% compared to 6,800 for the prior quarter. Stage count pricing was $8,400 for the current quarter as compared to $7,100 for the prior year period and $7,800 for the prior quarter. The decrease in revenue and increase stage count from the prior year period is indicative of lower operational activity, offset by improvements made in pricing. Full year segment revenue was $199.1 million, up $2.1 million, or 1% compared to $197.0 million in 2022. Completed stage counts decreased by 18% from 31,400 during 2022, to 25,600 in 2023.

Operating loss was $1.8 million in the fourth quarter, down $3.8 million, or 190% from operating income of $2.0 million in the prior year period and down $6.1 million, or 142%, from operating income of $4.3 million for prior quarter. Adjusted EBITDA was $2.8 million, down 40% from $4.7 million in the prior year period and down 62% from $7.4 million for the prior quarter. Operating income was $7.1 million, down $0.5 million, or 7% during 2023, from $7.6 million in 2022. Adjusted EBITDA was $20.1 million in 2023, up from $18.6 million for year-to-date during 2022.

Processing Solutions and Ancillary Services

Processing Solutions and Ancillary Services segment revenue was $31.0 million in the fourth quarter of 2023, down $2.4 million, or 7% from $33.4 million for the prior year period and down $1.0 million, or 3% from $32.0 million for the prior quarter. The decrease from the prior year and from the prior quarter was largely attributable to reductions in operational activity within select service lines. Segment revenue was $124.2 million during 2023, up $5.9 million, or 5% from $118.3 million in 2022. The increase in revenue was attributable to full year increases in operational activity services lines such as coil tubing, plug and abandonment services, and logistics services.

Operating income in this segment was $3.4 million in the fourth quarter, down from $4.6 million in the prior year period and down from $4.5 million in the prior quarter. Adjusted EBITDA was $5.3 million, down from $6.6 million in the prior period and down compared to $6.5 million in the prior quarter.

BALANCE SHEET, CASH FLOW AND LIQUIDITY

As of December 31, 2023, the Company had $85.1 million of liquidity, consisting of $69.4 million of capacity on its revolving credit facility and $15.7 million of cash on hand. This compares to $61.0 million of liquidity as of December 31, 2022, which consisted of $57.3 million of capacity on its revolving credit facility and $3.7 million of cash on hand.

The Company had total debt of $0.1 million compared to total debt of $18.4 million at December 31, 2022, a reduction of 99%.

Year-to-date Cash provided by Operating Activities was $90.8 million, compared to $44.5 million over the same period in 2022. The Company’s free cash flow(1) improved significantly year over year to $54.3 million on a year-to-date basis compared to free cash flow(1) of $30.7 million in the prior year. On a year-to-date basis, the Company had capital expenditures of $36.5 million, which includes $7.25 million for the pumping asset acquisition completed during the third quarter.

2024 OUTLOOK

Ranger remains bullish on the long-term opportunities and growth potential for its business; however, the Company expects that operator activity levels are unlikely to grow meaningfully during 2024 while supply and demand dynamics and future global economic activity remain uncertain. Against this backdrop, Ranger sees both positive signals and challenges as it enters the year. We are seeing activity begin to ramp in the back half of February after a slow start to the year due to weather impacts and non-Ranger related safety events and shutdowns. Ranger has also expanded work with the key blue-chip customer agreement announced in 2023 and is optimistic that additional growth opportunities will result from this work and other opportunities. Ranger’s production focused business model demonstrated its cyclical resilience in 2023 and underpins a 2024 budget that includes modest growth year over year dependent on operator behavior remaining stable. Converting 60% of EBITDA to free cash flow(1) through efficient use of capital expenditures will continue to allow Ranger to provide strong return of capital to shareholders during the year.

Conference Call

The Company will host a conference call to discuss its results from the fourth quarter of 2023 on Tuesday, March 5, 2024, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). To join the conference call from within the United States, participants may dial 1-833-255-2829. To join the conference call from outside of the United States, participants may dial 1-412-902-6710. When instructed, please ask the operator to join the Ranger Energy Services, Inc. call. Participants are encouraged to login to the webcast or dial in to the conference call approximately ten minutes prior to the start time. To listen via live webcast, please visit the Investor Relations section of the Company’s website, http://www.rangerenergy.com.

An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately seven days. The replay will also be available in the Investor Resources section of the Company’s website shortly after the conclusion of the call and will remain available for approximately seven days.

About Ranger Energy Services, Inc.

Ranger is one of the largest providers of high specification mobile rig well services, cased hole wireline services, and ancillary services in the U.S. oil and gas industry. Our services facilitate operations throughout the lifecycle of a well, including the completion, production, maintenance, intervention, workover and abandonment phases.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements represent Ranger’s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Ranger’s control that could cause actual results to differ materially from the results discussed in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Ranger does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Ranger to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in our filings with the Securities and Exchange Commission. The risk factors and other factors noted in Ranger’s filings with the SEC could cause its actual results to differ materially from those contained in any forward-looking statement.

RANGER ENERGY SERVICES, INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

Note Regarding Non‑GAAP Financial Measure

The Company utilizes certain non-GAAP financial measures that management believes to be insightful in understanding the Company’s financial results. These financial measures, which include Adjusted EBITDA and Free Cash Flow, should not be construed as being more important than, or as an alternative for, comparable U.S. GAAP financial measures. Detailed reconciliations of these Non-GAAP financial measures to comparable U.S. GAAP financial measures have been included below and are available in the Investor Relations sections of our website at www.rangerenergy.com. Our presentation of Adjusted EBITDA and Free Cash Flow should not be construed as an indication that our results will be unaffected by the items excluded from the reconciliations. Our computations of these Non-GAAP financial measures may not be identical to other similarly titled measures of other companies.

Adjusted EBITDA

We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed below from net income or loss in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods, book values of assets, capital structures and the method by which the assets were acquired. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA.

We define Adjusted EBITDA as net income or loss before net interest expense, income tax provision or benefit, depreciation and amortization, equity‑based compensation, acquisition-related, severance and reorganization costs, gain or loss on disposal of assets, and certain other non-cash items that we do not view as indicative of our ongoing performance.

The following tables are a reconciliation of net income or loss to Adjusted EBITDA for the respective periods, in millions:

Free Cash Flow

We believe free cash flow is an important financial measure for use in evaluating the Company’s financial performance, as it measures our ability to generate additional cash from our business operations. Free cash flow should be considered in addition to, rather than as a substitute for, net income as a measure of our performance or net cash provided by operating activities as a measure of our liquidity. Additionally, our definition of free cash flow is limited and does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as supplemental to our entire statement of cash flows.

The following table is a reconciliation of consolidated operating cash flows to free cash flow for the respective periods, in millions:

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