Q3 2023 Ranger Energy Services Inc Earnings Call

Good day and welcome to the Ranger Energy third quarter 2023 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'll be an opportunity to ask questions.

To ask a question you May Press Star then one on your Touchtone phone 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 Justin Whitley Rangers General Counsel. Please go ahead.

Thank you operator, and welcome to Ranger Energy Services' third quarter 2023 results conference call before the market opened today Ranger issued a press release summarizing operating and financial results for the third of nine months.

At September 32023.

Best result press release together with accompanying presentation materials are available in our Investor Relations section of our website Www Dot Ranger energy Dot 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 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 non-GAAP financial measures may be disclosed during this call a full reconciliation of GAAP to non-GAAP measurements is available.

Our latest quarterly earnings release and conference call presentation with that I would like to now turn the conference call over to Stuart Brodie Ranger, CEO and Melissa Cool Ranger CFO for their prepared remarks.

Thank you Justin and good morning, everyone. Thank you for joining us today I'm pleased to share our third quarter 2023 financial and operational results results that reflects <unk> resilience and ability to succeed despite the lower U S onshore drilling activity experienced this year and sustained weakness in natural gas space.

I will begin with a summary of our third quarter performance by segment, followed by our thoughts to the macro setup as we head into our 2020 for planning cycle.

As we reflect on our business. This year, we are incredibly proud of the hard work of our teams and the resilience demonstrated by our business at a consolidated level Ranger has seen sequentially, increasing revenue adjusted EBITDA and adjusted EBITDA margin each quarter in 2023, Despite U S rig count dropping by more.

15% since the end of last year, we talked frequently about our production focused business model and our differentiation and service quality and safety performance and this year, we saw that differentiation inaction.

To elaborate we do have 30% to 40% of our revenues exposed to completion activity and some of our assets and Gasior basin. We saw some of those exposed assets get released during the spring and early summer due to the households, our operations teams and strong collaboration across regions, along with a strong reputation for service.

You're in safe operations, we were able to redeploy idled assets sufficiently to keep revenue moving in the right direction and the highest specification rigs segment. This year, we did have to contend with more white space than anticipated due to rig redeployments into third quarter, but having the bulk of our assets allocated to production focused work in all your basins allowed us.

To limit churn and turnover to keep our baseline activity largely unaffected our ability to hold our revenue level and even increase them in some segments. Despite the decline in overall onshore activity. This year should provide clear evidence about the flexibility and robustness of our production focus business model and strong operational teams.

Finally, and as further support of our strong operational performance. We are pleased to have signed a new customer agreement with a major integrated onshore operator this quarter that provides for significant market share of the wealth service work and their onshore U S asset portfolio disagree.

This agreement and commitment for where it provides us with higher confidence in our 2024 plan and opportunities for further growth from an already strong base of revenue with this customer.

We have talked in the past about our positioning with larger customers and vendor consolidation momentum and it is encouraging to realize the first of what we hope will be a series of similar agreements.

Stated already but worth reiterating is the fact that our highest quality customers are willing to get stickier in their agreements with Ranger, which is a testament to the commitment and service reliability of our teams and the industry leading quality of our assets.

Moving on to our third quarter specifics, we reported net revenue of $164 $4 million, the second highest revenue quarter in <unk> history.

Looking at trends in our business I am pleased that although down from a record third quarter of last year, we have been able to provide steadily increasing results across 2023.

Net income on a year to date basis is $21 7 million.

Our triple that of the $7 $5 million reported over the same period in 2022.

Adjusted EBITDA for the quarter was $24.0 million and adjusted EBITDA margin has increased from 12, 8% a big gain at the beginning of this year to 14, 6% in the third quarter, we realized higher EBITDA quarter over quarter in all segments and fueled this sequential growth quarter over quarter will prove rare across north.

American onshore service providers.

Our high specification rig business has been a consistent source of stability and strength for us. This year, we've talked a lot about Rangers production focus and how it helps us weather energy sector volatility and this segment's performance. This year as exhibit day, despite unexpected white space in the schedule and due to several rig change outs that created.

Some additional labor costs rig hours held steady quarter over quarter with slight pricing improvements.

Moving onto our wireline business, the North region, which is our largest country contributor to this segment substantially improved its margins this quarter by focusing on strong execution and efficiency.

However, the South region continues to experience significant competition and price destruction in completion services revenue versus the progress. We made last year are continuing to make a strategic focus.

Our strategic shift to focus on production and pump down oriented wireline work with in the South region, while choosing not to bid at breakeven levels or below this work better aligns with the Rangers production focus and comes with higher margins as well and we expect this realignment will result in stronger segment contribution as we move into 2024.

And provide for more seasonal resilience.

Relative to the fourth quarter of 2022, we've grown revenue by 10%. Despite the decline in U S drilling and completion activity and we are also more than doubled operating income over the same period and increased adjusted EBITDA by 57%.

Finally, with our ancillary services business, we have achieve modest sequential improvements largely across the board in 2023, our P&A business has grown by double digits. This year, which has been an intentional effort on our part and our coil and rental businesses have held steady despite activity declines we have seen some pricing declines, but it's within our <unk>.

Business as well as our rental business because of new competition that migrated from gas basins. This year, which has affected our year to date margins. We're hard at work to maintain growth momentum in our P&A business and also restart growth in our rentals and club business.

We have achieved steady, albeit moderated growth this year, despite significantly lower than expected customer activity the activity declines on the completion side certainly threw off our original much more ambitious growth plans for the year and we have aggressively reacted to those activity declines by redeploying assets pursuing operating efficiencies and reorganizing where.

Brigit.

The great news is that the challenges we've experienced in 2023 have made our fundamental business stronger today than it was a year ago with higher margins and more streamlined operations you saw in our earnings release. This morning that we adjusted our full year guidance to calibrate for year to date results and although disappointed to pull back our expectations our team.

Mishandled the market challenges this year remarkably well and is poised to hit the ground running in 2024. We're also still on track to convert 60% of our adjusted EBITDA to free cash flow. This year, which is an important differentiator for Ranger and influences our capital return strategy.

The latter part of 2022 and early part of this year, it's been evaluating developing and ultimately rolling out our capital return framework. The framework, we announced included returning at least 25% of free cash flow to shareholders through our quarterly dividend and share repurchases no. Other small cap oilfield service company has the fundamental strength.

Confidence in its business to be able to offer this kind of sharp water returns program in the third quarter, we paid off the first quarterly dividend in Rangers' history at five cents per share. Additionally, I am pleased to report that year to date, we have repurchased approximately 781000 shares for approximately approximately $8 $6 million.

Our belief that Ranger shares traded at a compelling discount to their intrinsic value.

We have approximately $26 million of authorization remaining or 14% of our current float and intend to opportunistically deploy that capital to buy back shares should conditions be supportive, although we remain mindful of liquidity.

Through the end of the third quarter, we have already exceeded our 25% annual shareholder return and return commitment.

Looking ahead, we hold a similar view to other industry observers, who believe the rig count is close to its bottom and we anticipate increased activity levels in 2024 as customer budgets reset.

Global supply and demand balance suggest a constructive oil and gas market and our early conversations with customers have been positive.

Furthermore, the two recent major consolidation announcements and E&P indicate a positive long term view of North American resource development and an opportunity for the highest quality service providers to continue to gain market share. We are observing an increasingly prevalent trend among our customers to consolidate their service providers, which holds a positive.

<unk> for Rangers business, particularly as we look forward to recovery in rig activity going into 2024.

In conclusion, while we have experienced while we have faced unexpected market headwinds this year, our ability to adapt innovate and focus on efficiency has allowed us to not just weather the storm, but to thrive we remain steadfast in our commitment to create value for our shareholders. The steps, we've taken including accretive acquisitions.

Share repurchases and the initiatives the initiation of a quarterly dividend showcase our dedication to delivering value to our shareholders.

I turn the call over to Melissa I want to mention our other press release issued this morning.

As part of our board succession process, we initiated a search earlier this year for two new board members and we are happy to announce that Carlin Muszynski and Sean Woolverton have agreed to join the Ranger Board starting in the new year. They both bring a wealth of industry related experience and fresh food fresh perspectives to our board that we are excited to have available to us.

Yes.

As part of these changes Bill Austin, who has been our chairman and <expletive> AG emerged as private wealth service company into Ranger before the IPO will both be exiting their seats at the end of this year. Both have helped nurture and guide range over these past several years and have been instrumental in the growth experience since 2021.

Because of their leadership and guidance range already successfully completed multiple acquisitions simplified its capital structure achieved net debt zero and implementing a capital returns program, we could not have done this without them and we wish them well as they take on new endeavors as part of this transition Michael Kearney will assume the role of chairman and <unk>.

24 <unk>.

He has been chairman of two other publicly traded companies and brings not only the deep knowledge of Ranger, having served on the board for several years, but also his wealth of knowledge from his prior experiences.

An exciting time at Ranger, we are successfully navigating the headwinds in 2023 and positioning the company for continued for continued growth and to benefit from E&P consolidation.

With that I'd like to turn the call over to Melissa to discuss our financial results and outlook.

Thank you Stuart and good morning, everyone I will now provide further insights into our financial performance for the third quarter.

And the third quarter of 2023, our revenue was $164 $4 million, marking a 1% increase from the second quarter of this year.

Eric mentioned, we experienced some unexpected white space early in the quarter and our high spec rig business, which resulted in lower growth than expected year to date, our revenue is $485 $1 million, marking a 7% increase from the prior year.

Net income for the quarter was $9 $4 million or <unk> 38 per fully diluted share. This is a significant improvement from the $6 $1 million or 24 cents per share in the second quarter of this year.

Our continued focus on operational efficiency has contributed to this increase.

Year to date net income stands at $21 $7 million or <unk> 86 cents per fully diluted share.

Michigan improvement from $7.5 million or 33 cents per share in the prior year.

We achieved an adjusted EBITDA of $24 million in the third quarter, representing a 10% increase from the second quarter of this year. This performance underscores our commitment to controlling what we can control we achieved an adjusted EBITDA of $66 million year to date, representing a 14% increase from the prior year.

During the quarter, we repurchased two $7 million worth of shares under our existing share repurchase authorization, bringing the total repurchases year to date to $8 $6 million. We also initiated a five cent per share quarterly dividend during the quarter and announced today that the board has approved our fourth quarter dividend as well.

The growth side during the quarter, we closed on our acquisition of pump down as that for our wireline business paying approximately seven point to $5 million with some of those assets already working and the remainder undergoing upgrades and refurbishments to bring them up to Ranger standard.

We remain active in screening acquisition and consolidation opportunities, but have committed to being very disciplined in our approach the pump assets proved a great fit given their relatively easy pull through in our existing service line and too good to pass up from evaluation perspective, with payback economics of less than two years.

We would call attention to the increase in capital expenditures. This quarter is not only where the pumps to treat it as capex as well as their ongoing refurbishment, but we also spent some capital dollars in support of the contract that Stuart mentioned earlier, we expect capital costs remain may remain in the elevated in the next couple of quarters driving us to the high end of our guidance range.

As these certifications and Refurbishments are completed and additional equipment on order is delivered to.

To conclude our review of the financials, let me touch briefly on the balance sheet, our liquidity was $70 million at the end of the quarter. We ended the quarter with approximately $10 $3 million in debt and $8 $2 million of cash financially Ranger is as strong as it's ever been with near zero net debt and over double the liquidity it had one year ago.

Cash flow for the quarter was affected by the accounting treatment of the pump down asset that were treated as capital expenditures and some build in working capital, which is already trending in the right direction in the fourth quarter on tomorrow.

Turning to 2023 guidance.

Previewed in his comments given the lower than expected results during the third quarter, we have revised our expectations accordingly for the year.

While revenue growth hasn't been as robust as we had hoped at the beginning of the year. The revised forecast does reflect the resiliency of our business and there has been a trough in onshore activity this year.

We want to stress that our fourth quarter will be dependent on a variety of factors, both positive and negative and we expect a lighter order before picking back up in 2024, we're already contending with some early winter effects and talking about holiday planning with customers offsetting those challenges we have continued to deploy new assets during October.

Somewhat moderate our seasonality impact.

These adjustments reflect our commitment to transparent communications delivering value to our shareholders and our dedication to managing our financial performance and an ever changing environment.

We are currently in the process preparing and reviewing our 2020 for budget and look forward to sharing insights on 2024 and updating our investment community with Edison insights as part of our year end report, we remain positive about our market fundamentals and the constructive backdrop for a multiyear growth cycle and we currently expect activity to increase modestly in 2020.

Sure.

Thank you again for your time and interest. This morning, we look forward to updating you on our progress next quarter with that we would like to open the floor to any questions. You may have operator. Please go ahead.

Thank you.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Okay.

Our first question comes from John Daniel with Daniel Energy Partners. Please go ahead.

Thank you for having me.

Congratulations on the incremental work you guys are getting from the.

The bigger E&P companies I guess, the first question Stuart is there any way that you can provide some quantification as to what the incremental rig opportunities will be.

And then just touch on the ability to find people to man those rigs or will you just transition rates from existing customers to take that work.

Good morning, John Thanks for the question I think it can be a little bit of both I think there'll be some rigs that transition from existing customers and I think there will be some incremental growth as we go into the year.

I think on the labor markets. What we're finding is it's still there's a tight labor market, but it is certainly better than it was in 2023. So I think we're we're confident that if we need to find those crews that we can.

I think I would reiterate as you know I think just sort of depending on how budgets play out it could be a combination of new rigs or incremental rig adds but also some kind of reshuffling amongst amongst customers.

Okay and then just two other quick housekeeping does the agreement.

<unk> provide for a pass throughs in the event of inflationary labor or other costs are you are you locked in at a certain rate.

It allows for pass throughs.

And then on the wireline business as you shift to.

More of our production work.

What happens to our U R. You're idling some of the.

The completion oriented units did they did this become candidates to sell or can you just repurpose them for the production work that.

And that's my final question.

Yes.

I appreciate the question John there can be repurposed.

Repurposed for production work relatively easy easily we do through the acquisitions have a fair amount of kind.

Kind of wireline production related equipment and tools. So we don't think we need to really do anything incrementally.

Other than just really kind of put greater emphasis on that okay.

Okay. Thank you very much.

Yeah, you bet.

Our next question comes from Don Crist with Johnson Rice. Please go ahead.

Good morning, guys.

Morning, John.

It looks like the fourth quarter's going to be impacted by normal seasonality, but given that we're in the RFP season right. Now I mean, obviously you signed a new contract, but can you give us any indication on 24.

Operator: Good day, and welcome to the Ranger Energy Third Quarter 2023 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.

With the caveat that I know, it's still early.

Yeah I.

I think what we'd say is.

Early and kind of hard to get a definite read.

What I would say is on the rig side and with the contract that we recently signed.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded.

That pricing was was strong as we are excited about that.

I think we are seeing in some rfps like on the wireline side for instance.

Justin Whitley: I would now like to turn the conference over to Justin Whitley, Ranger's General Counsel. Please go ahead.

There had been some some contracts that we won that.

I think we would say are attractive pricing and then there have been some that we have lost at pricing that we've been really quite surprised at how at how low they went for from what we understand so I think it's a bit of a mixed bag at the moment and again I think as you said, it's still kind of early days.

Justin Whitley: Thank you, operator, and welcome to Ranger Energy Services Third Quarter 2023 results covered conference call. Before the market opened today, Ranger issued a press release, summarizing operating and financial results for the third and nine months in the September 30, 2023. The press results, press release, together with accompanying presentation materials are available in our investor relations section of our website, www.RangerEnergy.com.

Okay and.

On the recent consolidation you know obviously those deals haven't closed the bigger ones anyway.

Do you think that impacts your business any do you think theres any kind of synergies there that maybe you could go are.

Justin Whitley: Today's discussion may contain four lucky statements about future business and financial expectations. Actual results may differ significantly from those including 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 four lucky statements. Further, please note, non-gap financial measures may be disclosed during this call. A full reconciliation of gaps in non-gap measurements is available in our latest quarterly earnings release with end conference call presentation.

Our working for those bigger companies now and kind of expand operations or how does how do you think that kind of plays out over time.

I think ultimately we feel like it's a positive I think there might be.

Yes, without kind of get it.

You must have to answer about each one of the announcements a little bit differently. So so I think there is one that we would very clearly you feel like is a long term positive for us.

There is one that we would say.

<unk> will be a positive long term, but there could be a little bit of kind of near term choppiness just depending on.

And sort of how that closes.

Stuart Bowdoin: With that, I would like to now turn the conference call over, Stuart Bowdoin, Ranger CEO, and Alyssa Kuhl, Ranger CFO for the prepared remarks. Thank you, Justin, and good morning, everyone. Thank you for joining us today.

So, but generally I think we view that the trend of consolidation the trend to our E&P customers wanting fewer providers fewer higher quality providers. We can that's ultimately a good thing for Ranger.

Stuart Bowdoin: I'm pleased to share our third quarter 2023 financial and operational results. Results that reflect Ranger's resilience and ability to succeed despite the lower U.S, on toward drilling activity experience this year and sustained weakness in natural gas stations. I will begin with the summary of our third quarter performance by segment followed by our thoughts for the macro setup as we head into our 2024 planning cycle. As we reflect on our business this year, we are incredibly proud of the hard work of our teams and the resilience demonstrated by our business.

Okay, and it looks like the pricing.

He used the hourly pricing on the rigs ticked up a little bit.

The indication of the market bottom in European Union or do you think that that's just a shift between lesser.

Lesser quality customers towards higher quality customers in your opinion.

Yeah in general I think we would say, it's a move to higher quality customers.

Underlying that too I think as we've gone forward, we've really been focusing on getting additional ancillary equipment out with those rigs that ultimately helps pricing and margins as well.

Stuart Bowdoin: At a consolidated level, Ranger has seen sequentially increasing revenue, adjusted EBITDA and adjusted EBITDA margin each quarter in 2023, despite U.S, rig count dropping by more than 15% since the end of last year. We talked frequently about our production focus business model and our differentiation and service quality and safety performance, and this year we saw that differentiation in action. To elaborate, we do have 30 to 40% of our revenues exposed to completion activity and some of our assets and gas year basins.

Okay I appreciate it thanks, so much ill get back to you Jeff Thanks, John.

Our next question comes from Donovan Schafer with Northland Capital markets. Please go ahead.

Hey, guys. Thanks for taking my questions.

First one I want to ask is.

With the lower rig count I know that some of that and.

Stuart Bowdoin: We saw some of those exposed assets get released during the spring and early summer. Due to the hustle of our operations teams and strong collaboration across regions, along with the strong reputation for service quality and safe operations, we were able to redeploy idle assets efficiently to keep revenue moving in the right direction in the high specification rigs, this year. We did have to contend with more white space and anticipated due to rig redeployment in the third quarter, but having the bulk of our assets allocated to production focus work in earlier basins allowed us to limit turn and turn over to keep our baseline activity largely unaffected.

Some bases is being offset by focusing on longer or trying to go a bit longer on the laterals.

And.

So I'm wondering if there's any kind of offsetting benefit for you guys with that over time, just I know the focus on the highest spec rigs with services.

Is with the idea in mind that you know more wells are going to have.

Yeah, we're gonna be horizontal and.

Higher.

The ability to pull heavier loads against friction in the horizontal section or whatever.

Stuart Bowdoin: Our ability to hold our revenue level and even increase them in some segments despite the decline in overall onto our activity this year should provide clear evidence about the flexibility and robustness of our production focus business model and strong operational teams. Finally, and its further support of our strong operational performance, we are pleased to have signed a new customer agreement with a major integrated onto our operator this quarter that provides for significant market share of the wealth service work in their onshore US asset portfolio.

So yes, it's a slowdown near term is there any like later benefit a year a year out two years out when these wells go on.

Yeah, I need to go on artificial lift or something and.

It skews things more favorably or adds to the relative value of your highest spec rigs just I think to that.

Yes.

Again in most of the China.

I appreciate the question Donovan.

Again, I think long term, we would say that does that does help us because I think to go do you know whether it's routine while work a more intensive work over work.

Stuart Bowdoin: This agreement and commitment for work provides us with higher confidence in our 2024 plan and opportunities for further growth from an already strong base of revenue with this customer. We have talked in the past about our positioning with larger customers and vendor consolidation momentum and it is encouraging to realize the first of what we hope will be the a series of similar agreements. Stated already but worth reiterating is the fact that our highest quality customers are willing to get stickier in their agreements with Ranger which is a testament to the commitment and service reliability of our teams and the industry leading quality of our assets.

You do need higher spec equipment over time to get into the outer reaches of the lateral. So so we do think that that that will help us and it becomes harder and harder as an example to get coil out there if youre doing any kind of remedial work. So ultimately we think that's a good thing for us.

You are also kind of kind of highlighting another issue that we'll just say that as long as the industry is drilling more new wells than are being sort of plugged and abandoned ultimately we feel like our total addressable market is growing so.

Stuart Bowdoin: Moving on to our third quarter specifics, we reported net revenue of $164.4 million, the second highest revenue quarter in Ranger's history. Looking at trends in our business, I'm pleased that although down from our record third quarter last year, we have been able to provide steadily increasing results across 2023. Net income on a year-to-date basis is $21.7 million or triple that of the $7.5 million reported over the same period in 2022. Adjusted EBITDA for the quarter was $24.0 million and adjusted EBITDA margin has increased from 12.8% at the beginning of this year to 14.6% in the third quarter.

And certainly we believe we're in that environment right now.

So again I think long term, we think that Thats a positive.

Okay.

And then a follow up question on that.

With the.

Kind of talking about your different segments and yeah wireline completion activity is obviously going to be.

Pretty tightly tied to like the rig the rig count for drilling new wells, but I'm curious for the for the servicing side the highest spec.

Service rigs.

Is there any kind of rule of thumb or anything for.

Like a time lag, where if you get a big jump or a big drop in the rig count for you.

Stuart Bowdoin: We realize higher EBITDA quarter over quarter in all segments and feel this sequential growth quarter over quarter will prove rare across North American onshore service providers. Our high specification of rig business has been a consistent source of stability and strength for us this year. We've talked a lot about Ranger's production focus and how it helps us whether energy sector volatility and this segment's performance this year is exhibit A. Despite unexpected white space in the schedule due to several rigged changeouts that created some additional labor costs, rig hours, held steady quarter over quarter with slight pricing improvements.

And then on the new well side of things is there like a one year lag two year lag, where you see yeah, maybe its a less pronounced movement, but some kind of a compare a some kind of a correlated movement.

On the demand for the high spec servicing rigs again, maybe you know maybe it's like a typically a one year before they go to artificial lift or something like that.

Any way to kind of what the lag there is between rig count on the front end for new wells and kind of demand for the highest spec servicing regs.

Stuart Bowdoin: Moving on to our wireline business, the North region, which is our largest contributor to this segment, substantially improved its margins this quarter by focusing on strong execution and efficiency. However, the South region continues to experience significant competition and price destruction and completion services by voting votes of the progress we made last year. We're strategic shift to focus on production and pump down oriented wireline work within the South region while choosing not to bid at break even levels or below.

I don't think we've found a situation, where we can kind of model it with any kind of accuracy, but but again Donovan I think I guess I would just say a couple of things generally within the first year or less after a well has been drilled.

Typically go back yet we the industry typically goes back in and put that well on artificial lift.

So I do think that that happens.

<unk> quickly and then every year or two you.

Tend to go back into the wells to do to do well service work I think the only thing I would just sort of point to is if you kind of look at on the high specification rig segment.

Stuart Bowdoin: This work better aligns with Ranger's production focus and comes with higher margins as well and we expect this re-alignment will result in stronger segment contribution as we move into 2024 and provide for more seasonal Relative to the fourth quarter of 2022, we've grown revenue by 10%, despite the decline in US drilling and completion activity, and we've also more than doubled operating income over the same period, and increased suggested EBITDA by 57%. Finally, with our Ancillary Services Business, we have achieved modest sequential improvements largely across the board in 2023.

Through this year.

And ours have really been quite steady all through the year. Despite the fact that drilling rig count has dropped pretty substantially. So again I think we've kind of talked about it earlier, but I think we feel like being really.

Exposed and oriented towards this production focus business model and making sure that we're keeping existing wells online just makes us a lot more resilient through the cycle.

Okay.

Stuart Bowdoin: Our PNA business has grown by double digits this year, which has been an intentional effort on our part, and our coil and rentals businesses have held steady despite activity declines. We have seen some price and declines both within our coil business, as well as our rental business because of new competition that migrated from gas to base this year, which has affected our year-to-day margins. We're hard at work to maintain growth momentum in our PNA business, and also restart growth in our rentals and coil business.

That's helpful and on the plugging and abandoning kind of opportunity.

And something I haven't I didn't need to brush up on I'm trying to remember the stay of legislation around there. So just has there been any more updates or guidance clarifications or anything around.

You know potential to monetize our credits for reducing methane emissions.

Stuart Bowdoin: We have achieved steady albeit moderated growth this year, despite significantly lower than expected customer activity. The activity declines on the completion side certainly throughout our original, much more ambitious growth plans for the year, and we have aggressively reacted to those activity declines by redeploying assets, pursuing operating efficiencies, and reorganizing where appropriate. The great news is that the challenges we've experienced in 2023 have made our fundamental business stronger today than it was a year ago, with higher margins and more streamlined operations.

Going back and doing plugging and abandoning whether at the federal or the state level or just kind of the current state of affairs for the.

The subsidized.

Subsidize or statutory kind of side of that would.

It would be great.

So on the P&A side, there is a lot of different ways to kind of take it.

To start to answer the question.

I'll sort of start you know as you know theres a lot of money that was in the inflation reduction act that was targeted to the orphan well program and that's federal money that ultimately gets distributed by the states I think what we're seeing is.

Stuart Bowdoin: You saw in our earnings releases morning that we adjusted our full-year guidance to calibrate for year-to-day results, and although disappointed to pull back our expectations, our team has handled the market challenges this year remarkably well, and it's poised to hit the ground running in 2024. We are also still on track to convert 60% of our adjusted EBITDA to free cash flow this year, which is an important differentiator for ranger and influences our capital returns strategy.

Kind of very early days some of that state money is actually showing up in the industry in the form of former bids.

So we're we've seen kind of one of the early ones that have come out in the last several weeks.

No.

On the orphan well program as it relates to the inflation reduction Act I would say that money is just now starting to come in I think what we are seeing on on kind of a broader trend is that certainly our larger customers feel like this that they are really developing their own PNA programs outside.

Stuart Bowdoin: The latter part of 2022, an early part of this year, which has been evaluating, developing, and ultimately rolling out the capital returns framework. The framework we announced included returning at least 25% of free cash flow to share holders through a quarterly dividend and or share repursacies. No other small-calf-will-full-service company has the fundamental strength and confidence in its business to be able to offer this kind of share-order returns program.

The IRR because they feel like that thats part of their ESG effort and so a lot of our work right now.

Stuart Bowdoin: In the third quarter, we paid out the first quarterly dividend in ranger's history at five points per share. Additionally, I'm pleased to report that year-to-day we have repurposed approximately 781,000 shares for approximately $8.6 million. Reflecting our belief that ranger shares traded at a compelling discount to their intrinsic value. We have approximately $26 million of authorization remaining or 14% of our current flow and intense opportunity to deploy that capital to buy back shares should conditions be supported, although we remain mindful of liquidity.

On the PMA side is actually directly with E&ps outside of the inflation reduction Act and I guess the third thing I would say is I think there's several people that are trying to you know.

Think through does it make sense to buy a big package of wells do PNA on them and then take the carbon offsets.

I'm not sure there is a business model that has sort of developed that is the winning way yet, but we're seeing lots of different people trying to piece that together.

Hopefully that answers the question Donovan.

Yeah, no that does.

Stuart Bowdoin: Through the end of the third quarter, we have already exceeded our 25% annual shareholder return commitment. Looking ahead, we hold a similar view to other industry observers who believe the rate count is close to its bottom and we anticipate increased activity levels in 2024 as customer budgets reset. The tight global supply and demand balance suggests a constructive oil and gas market and our early conversations with customers have been positive. Furthermore, the two recent major consolidation announcements in ENP indicate both a positive long-term view of North American resource development and an opportunity for the highest quality service providers to continue to gain market. We are observing an increasingly prevalent trend among our customers to consolidate their service providers, which holds positive implications for Rangers business, particularly as we look forward to recovery and reactivity going into 2024.

And actually if I can squeeze just one more in about kind of I'm curious if there are any trends to be mindful of in terms of approaches to workovers or or artificial lift.

Installations that are either either hurt or benefit the economics for work out you know the high spec Workover rigs like you think about if theres more use of electric submersible pump fibrosis.

Placement of pump jacks or something.

Kind of trends, there moving positively or negatively.

So I don't think we've seen any trend on that as an example of the type of artificial lift I mean, obviously it varies by region. It that but I don't think we've seen that trend I do think what we've seen with customers is as customers have become very focused on efficiency I think as it relates to a lot of our work.

They see is that continuity of crews and specific crews.

It's actually really driving a lot of efficiency. So I actually think that we talked about the contract earlier I think a lot of that is driven by safety is one but I think it's also driven by efficiency and they are saying I think our biggest customers are saying they recognize that if they have steady work programs that that basically allows for crew continuity.

Stuart Bowdoin: So, before I turn the call over to Melissa, I want to mention our other press release issued this morning.

Did they say that they see improved performance across the board.

Stuart Bowdoin: As part of our board succession process, we initiated a search earlier this year for two new board members, and we are happy to announce that Carla Mishinsky and Sean Wilburton have agreed to join the Ranger Board starting in the new year. They both bring a wealth of industry-related experience and fresh perspectives to our board that we are excited to have available to us.

I'll just add to that point.

That's a trend that youre seeing for hospital service lines, whether that'd be frac, whether that'd be.

Whatever drilling programs are getting tighter, which which altogether is better better serves the industry.

Theres less white space for everyone. I think this year has been a bit anomalous just given the gas market conscious that we had to kind of freed up and then and then part of it had to deal with assets being redeployed.

Stuart Bowdoin: As part of these changes, Bill Lawson, who has been our chairman, and Dick AG, who merged his private wealth service company into Ranger before the IPO, will both be exiting their seats at the end of this year. Both have helped nurture and guide Ranger for these past several years, and have been instrumental in the growth experience since 2021. Because of their leadership and guidance, Ranger had successfully completed multiple acquisitions, simplified its capital structure, achieved net debt zero, and implemented a capillary turns program. We could not have done this without them, and we wish them well as they take on doing debtors.

Yes.

Okay that makes a lot of sense alright, thanks, guys I'll take the rest of my questions offline.

Alright. Thank.

Thank you.

Our next question comes from Jeff Robertson with water Tower Research. Please go ahead.

Good morning, Thanks for taking my question Stuart on the contract.

I assume it's a one year contract from the way. The press release was written and secondly can you just talk about what level of business you would like to see underwritten by these types of agreements.

Stuart Bowdoin: As part of this transition, Michael Carney will assume the role of chairman in 2024. Mike has been chairman of two other publicly traded companies, and brings not only his deep knowledge of Ranger, having served on the board for several years, but also his wealth of knowledge from his prior experiences. It's an exciting time at Ranger. We are successfully navigating the headlands of 2023, and positioned to come in for continued growth, and to benefit from EMP consolidation.

Yeah.

So it is a one year contract that has evergreen provisions in it.

<unk>.

So we actually think it could go for quite a long time so.

Yes.

On the first.

We don't really have a target per se.

This type of a contract is pretty unique I think if you look at our portfolio. We can point to one other it has slightly different mechanics, but I think has a lot of the same kind of duration, if you will to it.

Stuart Bowdoin: With that, I'd like to turn the call over to Melissa to discuss our financial results and outlook. Thank you, Stewart.

Melissa Cougle: Good morning, everyone. I'll now provide further insights into our financial performance through the third quarter. In the third quarter of 2023, our revenue was $164.4 million, marking a 1% increase from the second quarter of this year. As Stewart mentioned, we experienced some unexpected white space early in the quarter and our high-spec red business, which resulted in lower growth and expected. Year to date, our revenue is $485.1 million, marking a 7% increase from the prior year.

Through time, what what I can just say is that we have some other larger customers that are again and I think it relates to this conversation about efficiency and continuity of work that.

That have kind of opened up discussions about doing something similar.

It does tend to be with larger customers is again I think that they want us to get a lot more and.

And matched with their SAP.

And guidelines and protocols et cetera.

Melissa Cougle: Our net income for the quarter was $9.4 million or $38 cents per fully diluted share. This is a significant improvement from the $6.1 million or $24 cents per share and the second quarter of this year. Our continued focus on operational efficiency has contributed to this increase. Year to date, net income stands at $21.7 million or $86 cents per fully diluted share. A significant improvement from $7.5 million or $33 cents per share in the prior year.

I presume that's just to help drive their efficiencies in their capital program as Melissa alluded to earlier.

Absolutely.

And secondly is is this agreement does it span multiple basins or is it just in one basin.

It's multiple basins.

Okay.

Thank you very much.

Yeah.

Our next question is a follow up from Don Crist with Johnson Rice. Please go ahead.

Melissa Cougle: We achieved an adjusted EBITDA of $24 million in the third quarter, representing a 10% increase from the second quarter of this year. This performance underscores our commitment to controlling what we can control. We achieved an adjusted EBITDA of $66 million year to date, representing a 14% increase from the prior year. During the quarter, we repurchased $2.7 million worth of shares under our existing share repurchase authorization, bringing the total repurchases year-to-date to $8.6 million.

Thanks, Thanks for letting me back in Melissa just one for you.

<unk> capital ticked up a little bit in the third quarter, but it sounds like it's starting to release a little bit any color there and should we expect all that to kind of come out of the fourth quarter, just kind of trying to model your cash as we go into the fourth quarter year end.

No. Good question and yes, we actually saw a nice big release, we had done some automation, where we were pushing through at sort of invoices automatically with customers and saw a nice release early in the year.

Melissa Cougle: We also initiated a 5 cent per share of quarterly dividend during the quarter and announced today that the board has approved our fourth quarter dividend as well. On the growth side, during the quarter, we closed on our acquisition of pump-down assets for our wireline business, paying approximately $7.25 million with some of those assets already working and the remainder undergoing upgrades and refurbishments to bring them up to ranger standards. We remain active in screening acquisition and consolidation opportunities but have committed to being very disciplined in our approach.

What we didn't what we didn't anticipate it over the summer that we basically had a loss as we ran out of PL on several of our biggest customers.

Melissa Cougle: The pump-assets proved a great fit given their relatively easy pull-through in our existing service line and too good to pass up from evaluation perspective with payback economics of less than two years. We would call attention to the increase in capital expenditures this quarter, as not only were the pumps treated as capex, as well as their ongoing refurbishment, but we also spent some capital dollars in support of the contract that Stuart mentioned earlier.

And things really got stalled out in getting those PFS replenish.

And then by the time, we noticed thinking well we were in remediation.

But these things just take a couple of months to sort of sort themselves out. So I do think we're going to get back right here in the fourth quarter fourth quarter is always tricky because everybody sort of manages their cash at year end.

But we certainly have seen the contract asset Moore's running into AAR and more collections have really we had sort of our best collection weak just the week before last so we're certainly seeing a trend back in the right direction.

Melissa Cougle: We expect capital calls may remain a bit elevated in the next couple of quarters, driving us to the high end of our guidance range, as these certifications and refurbishments are completed, and additional equipment on order is delivered.

If that holds we'll get to where we'll get to a fairly comfortable place for year end.

Little bit of anybody's guess.

Depending upon who wants to squeeze cash at the end of the year.

Completely understandable.

Thanks for letting me back in appreciate it now probably your best.

Our next question comes from William Kim with.

Melissa Cougle: To conclude, our review of the financials let me touch briefly on the balance sheet. Our liquidity was $70 million at the end of the quarter. We ended the quarter with approximately $10.3 million in debt and $8.2 million of cash. Financialy ranger is as strong as it's ever been with near zero net debt and over double liquidity it had one year ago. Free cash flow for the quarter was affected by the accounting treatment of the pump-down assets that were treated as capital expenditures and some build and working capital which is already trending in the right direction in the fourth quarter once more.

Credit <unk> asset management. Please go ahead.

Stuart My salary.

Good morning, good morning.

Morning, Human changes earlier in the call I think in your prepared.

Remarks regarding the intrinsic value of your shares looking attractive.

Attractive.

Hey, guys. How are you viewing intrinsic value what do you I guess, a little bit of thought process between.

In determining what do you think intrinsic value is.

Melissa Cougle: Turning to 2023 guidance, as Stuart previewed in his comments, given the lower than expected results during the third quarter, we have revised our expectations accordingly for the year. While revenue growth hasn't been as robust as we had hoped at the beginning of the year, the revised forecast does reflect the resiliency of our business and that would have been a trough and an onture activity this year. We would stress that our fourth quarter will be dependent on a variety of factors, both positive and negative, and we expect a lighter quarter before picking back up in 2024. We are already continuing with some early winter effects and talking about holiday planning with customers. I'll setting those challenges we have continued to deploy new assets during October which somewhat moderate our seasonality impact.

Yeah. So we had an initiative we kicked off this year.

I'll take this one.

Yes.

Fashion fashion projects of mine.

We had an initiative we kicked off this year.

To actually do some intrinsic value work, so we actually get a multi year model and built out our first ETF. We started with just kind of a three year view and we're adding on to five year view.

So we're driven by that that's how we get to intrinsic value.

And then we also since it is so what happens if there is some upside what happens if things continue to languish.

So we build a fundamental model that we think is here's our best guess of what we think the world's going to play out to be and here's how much harsher view and here's an outside view and then we try to triangulate between those as well as sort of where the share price is that today.

Melissa Cougle: These adjustments reflect our commitment to transparent communications, delivering value to our shareholders, and our dedication to managing our financial performance and an ever-changing environment. We are currently in the process preparing and reviewing our 2024 budgets and look forward to sharing insights on 2024 and updating our investment community with those insights as part of our year-end report. We remain positive about our market fundamentals and the constructed backdrop for a multi-year growth cycle, and we currently expect activity to increase modestly in 2024.

And so every quarter. We're now refreshing if this is actually the second quarter, we refreshed. It. So we're really proud to get it done.

Then we kind of sit back around the table Stuart and I on so how do we want to think about share repurchases through that lens and then we also make an approach and a proposal to the board to the same extent.

Got it.

So quick follow up.

Melissa Cougle: Thank you again for your time and interest this morning. We look forward to updating you on our progress next quarter.

Change in the board is there something that prompted that.

This is just regular retirement, how does that kind of come about.

Operator: With that, we would like to open the floor to any questions you might have. Operator, please go ahead. Thank you.

No.

William was just part of our kind of ongoing refresh process.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble a roster.

That we undertook so there was again.

So it's been sort of in the works for a while and planned.

Yes, just to make sure as part of good governance, we're kind of keeping good turnover through the board Yeah. I mean, he thought he saw I'll add to that you saw us do a little bit earlier as part of proxy.

We made some initial changes these had been discussed to sort of at a high level back then and we've been working towards our board hadn't.

John Daniel: Our first question comes from John Daniel with Daniel Energy Partners. Please go ahead. Thank you for having me and congratulations on the incremental work you guys are getting from the the bigger EMP companies.

We had had outside parties institutions on our board.

Blackstone diversity number one and then also frankly.

Had not had any turnover in it and when we thought it was appropriate to kind of start that process.

Stuart Bowdoin: I guess the first question, Stuart, is there any way that you can provide some quantification as to what the incremental rig opportunities will be and then just touch on the ability to find people to man those rigs or will you just transition rigs from existing customers to take that work? Good morning, John. Thanks for the question. I think you can be a little bit of both. I think there will be some rigs to transition from existing customers and I think there will be some incremental growth as we go into the year.

Got it I guess last question for me is.

If you look at the last downturn in 2000 22021 range of managed to kind of hang in there pretty well as a company.

I guess, yes, there's a lot of talk of recession coming.

That work to kind of happen again.

How are you looking at.

Liquidity cash flow and how do you think.

Stuart Bowdoin: I think on the labor market, what we're finding is it still is a type labor market, but it is certainly better than it was in 2023. So I think we're confident that if we need to find those crews that we can, but again, I think I would reiterate is I think just sort of depending on how budgets play out, it could be a combination of the new rigs or incremental rig at but also some kind of reshuffling amongst customers.

Asset base, because it's a much larger company now how do you think ranger with fur.

Im sorry, Im sorry, you can go for.

So again I appreciate the question.

I think.

Couple of things that I'm really quite proud of the team has done is.

Much like we had back then but we've been very focused on making sure that we have large operations in basins versus a lot of scattered kind of.

Stuart Bowdoin: Okay, and then just two other quick housekeeping. Does the agreement provide for pass-throughs and the event of inflationary labor or other costs or are you locked in at a certain rate? No, it allows for pass-throughs.

Local shops, which really in a downturn in particular, if you have like a lot of scattered shops. It's.

It's very hard to control costs in those environments I think we've done a very good job just by doing that and consolidated our footprint as kind of one of the first things that you do structurally to prevent where to position yourself for a downturn if that happens. So I think we've actually done a really nice job of that and I think that's one thing we run very lean G&A again kind of on Qualcomm <unk>.

Stuart Bowdoin: Okay, and then on the wireline business as you shift to more of a production work, what happens? Are you idling some of the completionary units? Do they become candidates to sell or can you just repurpose them for the production work? That's my final question. Yeah, appreciate the question, John. They can be repurposed for production work, relatively easy easily. We do, through the acquisitions, have a fair amount of kind of wireline production-related equipment and tools. So we don't think we need to really do anything incrementally other than just really kind of put greater emphasis on that. Okay, thank you very much.

Both in the corporate center and also in the regions again trying to be protected.

In case, there is something I would also sort of highlighted in the wake of the acquisitions, we have a larger percentage of our yards in shops that we own.

Which actually just kind of lowers our burn rate in a downturn.

So I guess I feel like that.

Lot of the structural things that we've kind of worked on position as well.

And.

Yeah, I mean, I would only add to that to say I think what we're also doing that just pure financials and management perspective is we've really worked hard over the past year to get more real time data before I, even showed up Stuart had been working on power bi dashboards to show.

Donald Crist: David. My next question comes from Don Christ with Johnson Rights. Please go ahead. Morning, guys. It looks like the fourth quarter is going to be impacted by normal seasonality but given that we're in the RFP season right now, I mean, obviously, you saw in a new contract but can you give us any indication on 24 with the caveat that I know it's still early? Yeah, I think what we'd say is early and kind of a hard to get a definite read.

What rigs are working where how much.

We've really worked to expand that to make our monthly financial revenues much more impactful to really start to proliferate much more deeply our views on profitability.

And finally, we have a lot of the same team Matt Hookers here in the room with US. He has managed the COVID-19 process. If you will.

And Ranger appreciate that survivability is priority number one.

Donald Crist: I mean, what I would say is on the rig side and with the contract that we recently signed, that pricing was strong, as we were excited about that. I think we are seeing in some RFPs like in the wireline side, for instance, there had been some contracts that we won that I think we would say are the track surprising and then there have been some that we have lost at pricing that we've been really quite surprised at how, at how low they went from what we understand. So I think it's a bit of a mixed bag at the moment and again, I think as you said, it's still kind of early days.

And I would tell you that if we had no one wants to make tough decisions again.

But we recognize we have to lead times.

Yes, I think thats that last part is kind of where I was looking for some clarity.

Ranger was very very quick to cut costs. When you. When you saw weakness out there I guess what is the state of the labor market now.

History in it.

How does that compare to 2000 2020 coming on.

Yes. It is.

As I said earlier I mean, what we would say is as it is actually still pretty tight.

It Hasnt kind of quote freed up like you might have thought.

Stuart Bowdoin: Okay, and on the recent consolidation, you know, obviously those deals have been closed, the bigger ones anyway. Do you think that impacts your business? Any do you think there's any kind of synergies there that maybe you could go or working for those bigger companies now and kind of expand operations or how do you think that kind of plays out over time? I think ultimately we feel like it's a positive. I think there might be you know without kind of getting you must have to answer about each one of the announcements a little bit differently.

But again I think just to kind of reiterate what Melissa said and this.

This is the team that for better or for worse.

It has been through a couple of downturns in.

We know that acting quick is in the best interest of related survivability of the company. So.

Hopefully we don't have to.

To do that but we're ready if we have to.

Great. Thank you can you can keep up the great work.

Alright, Thank you Tim.

This concludes our question and answer session I would like to turn the conference back over to Stuart for any closing remarks.

Stuart Bowdoin: So I think there's one that we would very clearly feel like is a long term positive for us. I think there's one that we would say will be a positive long term, but there could be a little bit of kind of near term shopiness just depending on, you know, on sort of how that closes. So but generally, I think we view that the trend of consolidation, the trend to our EMP customers wanting fewer providers, fewer higher quality providers. We think that's just ultimately a good thing for Ranger.

Thank you everyone for your interest in Ranger, joining the call today happy Halloween and I hope everybody has a great and safe week. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Stuart Bowdoin: Okay, and it looks like the pricing at least the hourly pricing on the rigs ticked up a little bit. Is that the indication of the market bottom in your opinion, or do you think that that's just a shift between, you know, lesser quality customers towards higher quality customers in your opinion? Yeah, in general, I think we would say it's a move to higher quality customers. I think underlying that too. I think as we've gone for, we've really been focusing on getting additional ancillary equipment out with those rigs that ultimately helps pricing in margins as well. Okay, I appreciate it. Thanks so much. Yeah, thanks Don.

Donovan Sheifer: Our next question comes from Donovan. Sheifer with Northland capital markets. Please go ahead. Hey guys. Thanks for taking the questions. The first one I want to ask is with the, you know, lower rig count. I know that some of that, you know, in some basis, is being offset by focusing on longer. You know, trying to go a bit longer on the laterals. And so I'm wondering if there's any kind of offsetting benefit for you guys without over time just, I know that the focus on high spec rigs with services is with the idea in mind that, you know, more wells are going to have.

Donovan Sheifer: Yeah, we're going to be horizontal and, you know, acquire the ability to pull heavier loads against friction and horizontal section or whatever. So, you know, if it's a slow down near term, is there any like later benefit a year, a year out, two years out when these wells go on. And, you know, need to go on artificial list or something and excuse things more favorably or add to the relative value of your high spec rigs.

Donovan Sheifer: Just, I think you that. Yeah, again, and Melissa Triment. No, I appreciate the question, Donovan. So again, I think long term we would say that does help us because I think to go do, you know, whether it's routine well work or more intensive work over work, you do need higher spike equipment over time to get into the outer reaches of the lateral. So we do think that that will help us. And, you know, it becomes harder and harder as an example to get coil out there if you're doing any kind of remedial work.

Donovan Sheifer: So ultimately, we think that's a good thing for us. And I think you're also kind of, you know, kind of highlighting, you know, another issue that, you know, we'll just say that as long as the industry is drilling more new wells, then our beings sort of plugged in abandoned. Ultimately, we feel like our total addressable market is growing. So, and certainly we believe we're in that that environment right now. So again, I think, you know, long term, we think that that's okay.

Donovan Sheifer: And then a follow-up question on that with, you know, kind of talking about your different segments and, you know, wireline completion activity is obviously going to be pretty tightly tied to like the rig, the rig count for drilling new wells. But I'm curious for the, for the servicing side, the high-spec, you know, service rigs, is there any kind of rule of thumb or anything for like a time lag where if, you know, you get a big jump or a big drop in the rig count for, you know, on the new well side of things, is there like a one-year lag, two-year lag where you see, yeah, maybe it's a less pronounced movement, but some kind of a compare, some kind of a correlated movement on, you know, demand for the high-spec servicing rigs.

Donovan Sheifer: Again, maybe, you know, maybe it's like a, typically a one-year before they go to artificial lists or something like that. Just, anyway, to kind of what the lag there is between rig count on the front end for new wells and kind of demand for the high-spec servicing rigs. I don't think we found the situation where we can kind of model it with any kind of accuracy, but again, Donna, then I think, I guess I would just say a couple of things, you know, generally within the first, you know, year or less, after a well has been drilled, we typically go back in, you know, we, the industry typically goes back in and puts that well on artificial lists.

Donovan Sheifer: So, I do think that, you know, that happens, you know, relatively quickly and then every year to, you know, tend to go back into the wells to do, to do well service work. I think the other thing I would just sort of point to is if you kind of look at on the high-specification rig segment, you know, through this year, you know, hours and, you know, hours have really been quite steady all through the year, despite the fact that, you know, drilling rig count has a drop rate substantially.

Donovan Sheifer: So, you know, again, I think, we kind of talked about it earlier, but I think we feel like being really, you know, exposed and oriented towards this production focus business model, and making sure that we're keeping existing wells online just makes us a lot more resilient to the cycle. Okay, that's helpful.

Donovan Sheifer: And on the plugging and abandoning kind of opportunity, something I haven't, I need to kind of brush up on, I'm trying to remember the state of legislation around there. So, just, have there been any more updates or guidance, clarifications or anything around, you know, potential to monetize credits for, you know, reducing methane emissions from going back and doing plugging and abandoning whether at the federal or the state level or just kind of, though the current state of affairs for the and subsidized their statutory kind of side of that equation would be great.

Donovan Sheifer: So on the P&H side, there's a lot of different ways to kind of start to answer the question, but as you know, there's a lot of money that was in the inflation reduction act that was targeted to the working well program. And that's federal money that ultimately gets distributed by the states. I think what we're seeing is kind of very early days. Some of that state money is actually showing up in the industry in the form of informer pigs.

Donovan Sheifer: So we're, you know, we've seen kind of one of the early ones come out in the last several weeks. So, you know, on the orphan well program as it relates to the inflation reduction act, I would say that money is just now starting to come in. I think what we are seeing on kind of a broader trend is that certainly our larger customers feel like that they're really developing their own P&A programs outside of the IRA because they feel like that's part of their ESG effort.

Donovan Sheifer: And so a lot of our work right now on the P&A side is actually directly with the NPs outside of the inflation reduction act. And I guess the third thing I would say is I think there's several people that are trying to, you know, think through, does it make sense to buy a big package of, well, do P&A on them and then take the carbon offsets? I'm not sure there is a business model that has sort of developed that is quote, the winning way yet, but we're seeing lots of different people trying to piece that together. So hopefully that answers the question, Donovan. Yeah, no, that does.

Stuart Bowdoin: And actually, if I can squeeze just one more in about kind of I'm curious if there are any trends to be mindful of like in terms of approaches to workovers or artificial lift, you know, installations that are either, you know, that either hurt or benefit the economics for work out, you know, the high-tech workover rigs. Like, you know, think about if there's more use of electric, you know, submersible pump versus, you know, displacement pump jacks or something.

Stuart Bowdoin: Any kind of trends there moving positively or negatively? So I don't think we've seen any trend on the, you know, as an example, the type of artificial lift. I mean, obviously it varies by region a bit, but I don't think we've seen that trend. And I didn't think what we've seen with customers is as customers had become very focused on efficiency. I think as it relates to a lot of our work, what they see is that continuity of crews and specific crews is actually really driving a lot of efficiency.

Stuart Bowdoin: So I actually think that we talked about the contract earlier. I think a lot of that is driven by safety is one, but I think it's also driven by efficiency. And they're saying, I think our biggest customers are saying they recognize that if they have steady work programs that basically allows for crew continuity, that they see improve performance across the board.

Stuart Bowdoin: I'll just ask about it. I think that's the trend that you're seeing throughout multiple service lines, whether that be fracked, whether that be whatever drilling, the programs are getting tighter, which all together is better, better serves the industry. There's less white space for everyone. I think this year has been a bit anomalous, just given the gas market crunch that we had to kind of freed up. And then a lot of us had to deal with assets being redeployed. Okay, that makes a lot of sense.

Donovan Sheifer: All right. Thanks, guys. I'll take the rest of my questions offline. All right. Thanks, Donald.

Jeffrey Robertson: Thank you. Our next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Stuart Bowdoin: Good morning. Thank you for taking my question. Stuart, on the contract, can you... I assume it's a one-year contract from the way that press release is written? And secondly, can you just talk about what level of business you would like to see underwritten by these types of agreements? So it is a one-year contract that has evergreen provisions in it. So we actually think it could go for quite a long time. So that's on the first.

Stuart Bowdoin: You know, we don't really have a target per se. This type of contract is pretty unique. I think if you look in our portfolio, we can point to one other. It has slightly different mechanics, but I think has a lot of the same kind of duration, if you will, to it through time. What I can just say is that we have some other larger customers. There are, again, I think it relates to this conversation about efficiency and continuity of work that have kind of opened up discussions about doing something similar.

Stuart Bowdoin: It does tend to be with larger customers is, again, I think that they want us to get a lot more, you know, enmeshed with their SOPs and guidelines and protocols, etc. I presume that's just to help drive their efficiencies in their capital program as Melissa alluded to earlier. Absolutely. And secondly, is this agreement? Does it span multiple basins or is it just in one basins? It's multiple basins. Okay.

Stuart Bowdoin: Thank you very much.

Donald Crist: Our next question is a follow-up from Don Christ with Johnson Rice. Please go ahead. Thanks for letting me back in.

Melissa Cougle: Melissa, just one for you. The working capital ticked up a little bit in the third quarter, but it sounds like it's starting to release a little bit. Any color there and should we expect all that to kind of come out the fourth quarter, just kind of trying to model your cash as we go into the fourth quarter, you're in. Now, good question. And yes, we actually saw a nice big release. We had done some automation where we were pushing through sort of invoices automatically with customers and saw a nice big release early in the year.

Melissa Cougle: What we didn't anticipate is over the summer that we basically hit a wall because we ran out of a PO on several of our biggest customers. And things really got stalled out and getting those POs replenished. And by the time we noticed, if you will, we were in remediation mode, but these things just take a couple of months to sort of sort themselves out. So I do think we're going to get back right here in the fourth quarter.

Melissa Cougle: Fourth quarter is always tricky because everybody sort of manages their cash at your hand. But we certainly have seen the contract asked that more is running into AR and more collections of really we had sort of our best collection week just a week before last. So we're certainly seeing trends back in the right direction. If that holds, we'll get to where we'll get to a really comfortable place three or in. There's a little bit of anybody's guess, depending on who wants to squeeze cash at the end of the year. Completely understandable. I, uh, thanks for letting me back in. Appreciate it. No problem.

William Kim: Our next question comes from William Kim with Pradistito Asset Management. Please go ahead. I just go ahead, Melissa. Um, morning. Good morning. You mentioned earlier in your call. I think you can repair remarks regarding the intrinsic value of your shares looking attractive for repurchase. I guess, how are you viewing intrinsic value? What do you, I guess what was the thought process between, uh, and determining what you think intrinsic value is? Yeah, so, so we had an initiative we kicked off this year.

Stuart Bowdoin: I'll take this one. I guess it's a, it's a fashion, fashion project of mine. Um, we had an initiative we kicked off this year, um, to actually do some intrinsic value works. We actually did a multi year model, um, build out our first CCS. We've started, which is kind of a three year view. And we're adding on, you know, to five year view. So, so we're driven by that. That's how we get to intrinsic value assessment.

Stuart Bowdoin: And then we also synthesize that. So what happens if there's some upside, what happens if, you know, things continue to language. Um, so, so we build a fundamental model that we think is here's our best guess of what we think the world's going to play out to be. And here's a much harsh review and here's an upside view. And then we try to triangulate between those as well as sort of where the share price is at today.

Stuart Bowdoin: And, you know, sort of every quarter, we're now refreshing. If this is actually the second quarter, we refresh it. So we're really proud to get it done. Um, and then we kind of sit back around the table, stood an eye on the high we want to think about share references, um, through that lens. And then we also make an approach and proposals to the board to the same extent.

Stuart Bowdoin: And then as a separate follow up, um, change in the board, is there something that prompted that? Is it just the regular retirement? How did that kind of come about? No, that that William was just part of a kind of ongoing repressed process. Um, that that we undertook said there, there was, um, again, it's been sort of in the works for a while and planned. Um, you know, just just to make sure as part of good governance, we're kind of keeping good turnover through the board.

Stuart Bowdoin: Yeah, I mean, you saw, you saw all I see that you saw us do a little bit earlier as part of proxy. Um, we made some initial changes. These had been discussed just sort of at a high level back then, and we'd been working towards our board hadn't, we, we had had outside party institutions point out our board. Um, lack of diversity, number one, and then also, frankly, um, had, had not had any turnover in it. So we thought it was appropriate to kind of start that process. I thought it.

Stuart Bowdoin: I guess the last question for me is, um, you know, if you look at the last downturn in 2020, 2021, Ranger managed to kind of hang in there pretty well as a company. I guess if there's a lot of talk every session coming that were to kind of happen again, how are you looking at, you know, liquidity cash flow. And how do you think in the current asset base because it's a much larger company now, how do you think Ranger?

Stuart Bowdoin: with Fair. I appreciate the question. I think a couple things that I'm really quite proud that the team has done is much like we had back then, but we've been very focused on making sure that we have large operations in basins versus a lot of scattered kind of local shops, which really in a downturn in particular, if you have like a lot of scattered shops, it's very hard to control costs in those environments.

Stuart Bowdoin: I think we've done a very good job just by doing that and consolidating our footprint is kind of one of the first things that you do structurally to prevent or to position yourself for a downturn if it happens. So I think we've actually done a really nice job of that. I think that's one thing. You know, we run very lean GNA, you know, again, kind of on focus on purpose, both in in the corporate center and also in the regions, again, trying to be protected in case you're something.

Stuart Bowdoin: I also sort of highlight that in the wake of the acquisitions, we have a larger percentage of our yards and shops that we own, which actually just kind of lowers our burn rate in a downturn. So I because I feel like that, you know, a lot of the structural things that we kind of worked on position as well. And, you know, it kind of. Yeah. I mean, I would only add to that to say I think what we're also doing from just pure financial management perspective is.

Stuart Bowdoin: We've really worked hard over the past year to get more real time data before I even showed up Stewart had been working on Power BI dashboards to show, you know, what rigs are working where? How much? We've really worked to expand that to make our monthly financial reviews much more impactful to really start to proliferate, you know, much much more deeply our views on profitability. And then I finally say look, we have a lot of the same team Matt Hooker's here in the room with us.

Stuart Bowdoin: He helps manage the COVID process, if you will. And Ranger appreciate that, you know, survivability is priority number one. And I would tell you that if we had no one wants to make test decisions again. But, but we recognize we have to at times.

Stuart Bowdoin: Yeah, I think that that last part is kind of where I was looking for some clarity, you know, Ranger was very, very quick to cut costs when you saw weakness out there. I guess what is the state of the labor market now in your industry and, you know, how does that compare to 2020, 2021? Yeah, so it's kind of as I said earlier, but what we would say is it is actually still pretty tight.

Stuart Bowdoin: It hasn't, you know, kind of quick freed up like like you might have thought. But again, I think it's kind of reiterate what Melissa said and this is the team that for better or for worse. I've been through a couple of down terms and, you know, we know that, you know, acting quick is in the best interest of really the survivability of the company. So hopefully we don't have to do that, but we're ready. We have to.

Stuart Bowdoin: Great. Thank you. Keep us a great work. All right. Thank you.

Stuart Bowdoin: This concludes our question and answer session. I would like to turn the conference back over to Stuart Bowen for any closing remarks. Thank you everyone for your interest in ranger joining the call today. Happy Halloween and I hope everybody has a great and safe week. Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.