Q1 2024 Ranger Energy Services Inc Earnings Call
[music].
Unknown Executive: Thank you and welcome to Ranger Energy Services' first quarter of 2024 results conference call. Ranger has issued a press release summarizing operating and financial results for the three months ended March 31st, 2024. This press release, together with accompanying presentation materials, is available in the investor relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including those described in our periodic reports filed with the Securities and Exchange Commission.
Thank you and welcome to Ranger Energy Services' first quarter 2024 results conference call.
Ranger has issued a press release summarizing operating and financial results for the three months ended March 31 2024.
This press release together with accompanying presentation materials are available in the Investor Relations section of our website at 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 the risks described in our periodic reports filed with the Securities and Exchange Commission, except as required by law, we undertake no obligation to update our forward looking statements.
Unknown Executive: Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures may be disclosed during this call. A reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation.
Further please note that non-GAAP financial measures may be disclosed during this call.
A reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation.
Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. And to withdraw your question, please press star, then two. Please also note that this event is being recorded today. And with that, I would now turn the conference call over to Stuart Bodden, Ranger CEO, and Melissa Cougle, Ranger CFO, for their prepared remarks. Please go ahead. Thank you.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Please also note that this event is being recorded today.
Speaker Change: And with that I would like to now turn the conference call over to Stuart Boden Ranger, CEO and Melissa Google Grainger CFO for their prepared remarks. Please go ahead. Thank you and good morning, everyone. We are pleased to welcome you to our first quarter 'twenty 'twenty four earnings call range.
Stuart N. Bodden: Thank you and good morning everyone. We are pleased to welcome you to our first quarter 2024 earnings call. Ranger had a challenging first quarter with revenue of $136.9 million and adjusted EBITDA of $10.9 million, both reductions from the prior quarter and the prior year. The company was presented with a number of challenges and unique circumstances during Q1, and each of our segments was impacted. I will spend meaningful time and detail on today's call because I want to give you a sense of what we see as non-recurring and why we remain bullish on Ranger's outlook and our production-focused business model. Although we were disappointed in the quarter, we believe this quarter is an anomaly and is not representative of the remainder of the year. As mentioned in our year-end call, 2024 got off to a slow start.
Speaker Change: <unk> had a challenging first quarter with revenue of $136 $9 million and adjusted EBITDA of $10 $9 million, both reductions from the prior quarter and the prior year quarter.
Speaker Change: The company was presented with a number of challenges and unique circumstances. During Q1 in each of our segments was impacted I'll spend meaningful time in detail on today's call because I want to give you a sense of what we see is nonrecurring and why we remain bullish on renders outlook and our production focused business model although.
Speaker Change: We were disappointed in the quarter. We believe this quarter is an anomaly and is not representative of the remainder of the year.
Speaker Change: As mentioned in our year end call 'twenty 'twenty four it got off to a slow start as the quarter progressed typical weather disruptions and events outside of our control combined with unsustainable below market pricing offered by competitors and a declining completions market created excess capacity impacting our.
Stuart N. Bodden: As the quarter progressed, typical weather disruptions and events outside of our control, combined with unsustainable, below-market pricing offered by competitors and a declining completions market created excess capacity, impacting our quarterly performance more than originally expected. While we weathered the back half of 2023 with resilience in the face of significant declines in U.S. onshore rig counts, this winter brought additional pressure in our completions-focused areas, which had the most significant impact on our Q1 results.
Speaker Change: Quarterly performance more than originally expected.
Speaker Change: While we weather the back half of 2023 with resilience in the face of significant declines in U S. Onshore rig count. This winter brought additional pressure in our completions focused areas, which had the most significant impact to our Q1 results.
Stuart N. Bodden: We've mentioned before that our business is approximately 65% exposed to production and decommissioning services and about 35% exposed to completion, and it was this 35% where we saw the most pressure. U.S. frack spreads declined by 17% between November and mid-January, which idled wireline and coil tubing assets during the already challenging winter months.
Speaker Change: We've mentioned before that our business is approximately 65% exposed to production and decommissioning services and about 35% exposed to completions and was this 35% where we saw the most pressure.
Speaker Change: U S. Frac spreads declined by 17% between November and mid January which idled in wireline and coil tubing assets during the already challenging winter months.
Stuart N. Bodden: In the north, we experienced a wave of competition that drove down pricing to unprofitable levels on the completions of our line side and sidelined some of our assets temporarily on the coil side. It is important to remember that our weakest quarters are typically the first and fourth quarters, where weather and generalized winter and holiday slowdowns materially impact our business. With that seasonal backdrop, we experience compounding declines given the dynamics I just mentioned.
Speaker Change: And then are worth we experienced a wave of competition the drove down pricing to unprofitable levels on the completions wireline side and sidelines some of our assets temporarily on the coil side.
Speaker Change: It is important to remember that our weakest quarters are typically the first and fourth quarters were whether in generalized winter and holiday slowdowns materially impact our business.
Speaker Change: With that seasonal backdrop, we experienced compounding declines given the dynamics I just mentioned.
Stuart N. Bodden: I'll go into more detail on our wireline and ancillary services to give as much color in these areas as possible, and then wrap up with the high-spec rig. Our wireline services segment experienced significant competitive and pricing pressures throughout the first quarter. Our north wireline region has historically been insulated from the commoditization of plug-and-perf completion wireline services, but this winter season brought a new influx of competition that brought with it significantly lower prices, similar to the dynamics we saw last year in the Permian Basin and have mentioned on prior calls.
Speaker Change: I'll go into more detail on our wireline and ancillary services to give as much color in these areas as possible and then wrap up with a high spec rig business.
Speaker Change: Our wireline services segment experienced significant competitive and pricing pressures throughout the first quarter, our north wireline region has historically been insulated from the Commoditization of plug and perf completion wireline services, but this winter season, but our new influx of competition that brought with it significantly lower.
Speaker Change: Pricing similar to the dynamics, we saw last year in the Permian Basin and have mentioned on prior calls.
Stuart N. Bodden: Many of the quoted bid prices we've encountered are unprofitable and ultimately unsustainable, and we have chosen to only bid at levels that will generate an acceptable level of return for our business. In response to lower anticipated activity levels going forward, Ranger has aggressively adjusted our fixed and support cost base. However, we have chosen to maintain our discipline in the face of these pressures.
Speaker Change: Many of the quoted bid prices, we've encountered are unprofitable and ultimately unsustainable and we have chosen to only bid at levels that will generate an acceptable level of return for our business.
Speaker Change: In response to lower anticipated activity levels going forward Ranger has aggressively adjusted our fixed and support cost basis.
Speaker Change: We have chosen to maintain our discipline in the face of these pressures.
Stuart N. Bodden: And while it's painful in the moment, we believe doing so is essential for this industry to remain sustainable through the cycle. We also believe that the work that we are pushing to grow in the production and pump-down areas will ultimately allow for margin expansion. Our investors know that this quarter is not the first time we have had issues with our wireline services business, given that the barriers to entry into completions-related plug-and-perf operations have been significantly lowered over the past five years.
Speaker Change: And while it's painful in the moment, we believe doing so is essential for this industry to remain sustainable through cycle.
Speaker Change: We also believe that the work that we are pushing to grow in the production and pumped down areas will ultimately allow for margin expansion.
Speaker Change: Our investors know that this quarter is not the first time, we have had issues with our wireline services business.
Speaker Change: Given that the barriers to entry to completions related plug and perf operations have been significantly lowered over the past five years.
Stuart N. Bodden: This is why we have been engaged in a strategic pivot away from conclusion work and have been leaning into production and pump down services, which performed relatively well through the winter months. Our production and pump down businesses have grown year over year, and we consider its continued growth to be one of Ranger's most important 2024 strategic initiatives. This goal is important on a standalone basis, given Ranger's broader production focus.
Speaker Change: This is why we have been engaged in a strategic pivot away from completions work and they've been leaning into production and pumped down services, which performed relatively well through the winter months.
Speaker Change: Our production and pumped down businesses have grown year over year and we consider its continued growth when a rangers most important 2024 strategic initiatives.
Speaker Change: This goal is important on a standalone basis, given Rangers brought our production focus and we will continue to push even harder on this front acknowledging that growth in this area will take time and resources as we are cultivating different customer relationships and establishing a broader skill set base and operational employees.
Stuart N. Bodden: And we will continue to push even harder on this front, acknowledging that growth in this area will take time and resources, as we are cultivating different customer relationships and establishing a broader skill set base in operational employees. Moving on to Processing Solutions and Ancillary Services. This segment was also challenged by a decrease in operating activity in the first quarter, primarily attributable to Coil Tubing Services, where revenue declined in the north region due to increased competition and seasonal lulls in activity. In coil tubing, the drop-in completions activity freed up additional coil tubing units in neighboring areas to compete directly with Ranger at lower prices.
Speaker Change: Moving onto processing solutions and ancillary services. This segment was also challenged by a decrease in operating activity in the first quarter, primarily attributable to coil tubing services, where revenue declined in the north region due to increased competition and seasonal lows and activity.
Speaker Change: In coil tubing, the drop in completions activity freed up additional coiled tubing units in the neighboring areas to compete directly with Ranger at lower prices.
Stuart N. Bodden: Different from our view on wireline completions, however, we don't believe that market dynamics for coil tubing have fundamentally changed, as we have already seen our coil activity begin to recover in March and April from the February low. We expect activity to continue to increase in May and June, with a more substantial rebound potentially on the horizon in the second half of this year. On the bright side, our rental service line performed quite consistently and has seen an improvement in pull-through revenue opportunity, which is creating a much more consistent margin profile each month. Additionally, the Torrance service line has received an increased number of inbound inquiries for infield gas processing, given the increases in liquids pricing and the need for infield power generation.
Speaker Change: Different from our view on wireline completions. However, we don't believe that market dynamics for coil tubing have fundamentally changed as we have already seen our coil activity begin to recover in March and April from the February lows.
Speaker Change: We expect activity to continue to increase in May and June with a more substantial rebound potentially on the horizon in the second half of this year.
Speaker Change: On the bright side, our rental service line performed quite consistently and has seen an improvement in pull through revenue opportunity, which is creating a much more consistent margin profile each month. Additionally.
Speaker Change: Additionally, the Torrance service line has received an increased number of inbound inquiries for infield gas processing given the increases the increases in liquids pricing and the need for and fueled power generation and we are optimistic about the opportunity to grow this business in the future finally, our plug and abandonment business is.
Stuart N. Bodden: And we are optimistic about the opportunity to grow this business in the future. Finally, our plug and abandonment business is experiencing an uptick in demand to complete necessary decommissioning work, and we believe we are well positioned to capitalize on this growing market. P&A is another service line that tends to experience seasonality and declines in the winter months, so this pickup and activity is encouraged. Finally, turning to our high-specification RICs business this quarter, revenues were essentially flat quarter over quarter and increasing year over year.
Speaker Change: Experiencing an uptick in demand to complete necessary decommissioning work and we believe we are well positioned to capitalize on this growing market.
Speaker Change: PMA is another service line that tends to experience seasonality and declines in the winter months. So this pickup in activity is encouraging.
Speaker Change: Finally, turning to our high specification rigs business. This quarter revenues were essentially flat quarter over quarter, and increasing year over year and our year end investor call. We mentioned the material downtime event in January on a non range of rig that was outside of our control.
Stuart N. Bodden: In our year-end investor call, we mentioned a material downtime event in January on a non-Ranger rig that was outside of our control. This event affected 75 rig days in the quarter, during which time we had significantly reduced or zero rig revenue but full cost burdens and extraordinary inspection costs, which pushed down margins for the quarter.
Speaker Change: This event affected 75 rig days in the quarter during which time, we had significantly reduced or zero rig revenue.
Speaker Change: <unk> forecast burdens and extraordinary inspection costs, which pushed down margins for the quarter.
Stuart N. Bodden: Our high-specification RICS business has proven very reliable and the demand for its services consistent for the past two years. Despite the downtime in our typical seasonality, we grew revenues to $79.7 million and rig hours to 111,000 hours, and pricing remains strong at $718 per hour. We had our highest revenue quarter in this segment in Rangers history, which is remarkable given the downtime and that seasonality is typically highest in the first quarter.
Speaker Change: Our high specification rigs business has proven very reliable in the demand for it services consistent for the past two years. Despite the downtime in our typical seasonality, we grew revenues to $79 $7 million and rig hours to 111000 hours and pricing remains strong at 718.
Speaker Change: <unk> per hour.
Speaker Change: We had our highest revenue quarter in this segment in Rangers' history, which is remarkable given the downtime and that seasonality is typically highest in the first quarter.
Stuart N. Bodden: This business has already seen margins recover in March, and we expect to see historical 19 to 21% margins moving forward. Strong activity in pricing continues to reflect the consistent demand we see in the high-specification rigs business, and we are grateful for our strong partnerships with majors, along with large and small independent operators across the premier U.S. bases. We see these relationships only getting stronger, supported by a backdrop of an increasing number of producing horizontal wells requiring maintenance each year.
Speaker Change: This business has already seen margins recover in March and we expect to see historical 19% to 21% margins moving forward.
Speaker Change: Strong activity and pricing continues to reflect the consistent demand we see in the highest specification rigs business and we are grateful for our strong partnerships with majors, along with large and small independent operators across the Premier U S basins.
Speaker Change: We see these relationships only getting stronger supported by a backdrop of an increasing number of producing horizontal wells requiring maintenance each year.
Stuart N. Bodden: As we have repeatedly discussed on these calls, Ranger's production focus provides a buffer from dislocations in the market and a dependable revenue and free cash flow base from which to grow strategically and return capital to shareholders. We are the largest provider of well services in the United States and the only public company that has more than 50% of its revenue tied to production services. That said, this quarter makes clear we are not fully immune to completions activity declines, and we have made a series of changes to our business across all service lines.
Speaker Change: As we have repeatedly repeatedly discussed on these calls Rangers production focused provides a buffer from dislocations in the market and a dependable revenue and free cash flow base from which to grow strategically and return capital to shareholders. We are the largest provider of well services in the United States and the only public company that.
Speaker Change: Has more than 50% of its revenue tied to production services.
Speaker Change: That said this quarter makes clear we are not fully immune to completions activity declines and we have made a series of changes to our business across all service lines.
Stuart N. Bodden: Considering what we view as sustained impairment to the completion space and wireline and the acknowledgement of the efficiencies and process improvements we've generated in the business over the past couple of years, we undertook a deep cost review across all segments, identifying approximately $4 million of annualized cost savings that will help streamline the organization moving forward. These efficiencies are, most significantly, indirect personnel costs with additional efficiencies identified through select administrative and operational spending categories.
Speaker Change: Considering what we view as sustained impairment to the completion space in wireline and to end the acknowledgment of the efficiencies and process improvements we've generated in the business. The past couple of years, we undertook a deep cost review across all segments identifying approximately $4 million of annualized cost savings that will help stream.
Speaker Change: <unk> the organization moving forward these.
Speaker Change: These efficiencies are most significantly and direct personnel cost with additional efficiencies identified through select administrative and operational spending categories.
Stuart N. Bodden: Looking forward, we remain focused on creating long-term value based on our previously communicated four strategic pillars of maximizing cash flows, defending the balance sheet, prioritizing shareholder returns, and growing through acquisition. We continue to execute against these pillars despite a challenging quarter. Importantly, we maintained our net debt zero position and high liquidity, which has been one of our highest priorities because it allows us to ride through the variability of the energy cycle and maintain our dividends.
Speaker Change: Looking forward, we remain focused on creating long term value based on our previously communicated four strategic pillars of maximizing cash flows defending the balance sheet prioritizing shareholder returns and growing through acquisitions.
Speaker Change: We continued to execute against these pillars. Despite a challenging quarter importantly, we maintained our net debt zero position and high liquidity, which has been one of our highest priorities because it allows us to ride through the variability of the energy cycle and maintain our dividend. We can have a tough quarter in steel maximize our returns to shareholders because of our <unk>.
Stuart N. Bodden: We can have a tough quarter and still maximize our returns to shareholders because of our excellent free cash flow conversion rate and our strong balance sheet. In the first quarter, we issued our regular dividend of $0.05 per share and repurchased 846,900 shares for $8.5 million, and today we are announcing our second quarter dividend. Since we implemented our shareholder returns program in the second quarter of last year, we have repurchased over 2.6 million shares for a total value of $27.6 million and returned over 65% of trailing 12 months cash flow to shareholders, with the remaining cash flows going toward repaying outstanding debt. These actions far exceeded our commitment of a 25% minimum free cash flow return.
Speaker Change: Excellent free cash flow conversion rate and our strong balance sheet.
Speaker Change: In the first quarter, we issued our regular dividend of five <unk> per share and repurchased 846900 shares for $8 $5 million and today, we are announcing our second quarter dividend since we implemented our shareholder returns program in the second quarter of last year, we have repurchased over.
Speaker Change: Two 6 million shares for a total value of $27 $6 million and returned over 65% of trailing 12 months cash flow to shareholders with the remaining cash flow is going towards repaying outstanding debt.
Speaker Change: These actions far exceeded our commitment of a 25% minimum free cash flow return.
Melissa K. Cougle: While we are eager to execute a transaction to grow our business, we have a disciplined capital allocation program that also takes into consideration opportunities related to repurchasing our own stock at attractive prices. We have had numerous conversations over the past several quarters and remain in active dialogue with potential counterparties, but we will not consummate a transaction unless it has the ability to create meaningful long-term value for our shareholders. Finally, our view for the full year remains positive, having weathered a perfect storm these past winter months from which we have emerged stronger.
Speaker Change: While we are eager to execute a transaction to grow our business. We have a disciplined capital allocation program that also takes into consideration the opportunities related to repurchasing our own stock at attractive prices. We have had numerous conversations over the past several quarters and remain in active dialogue with potential counterparties, but we.
Speaker Change: We'll not consummated transaction unless it has the ability to create meaningful long term value for our shareholders.
Speaker Change: Finally, our view for the full year remains positive having weathered a perfect storm. These past winter months from which we've emerged stronger through March and April we have seen customer activity and revenue pick back up with a much improved margin profile and we expect as is typical to have strong spring and summer seasons through all of this we will remain committed.
Melissa K. Cougle: Through March and April, we have seen customer activity and revenue pick back up with a much improved margin profile. And we expect, as is typical, to have strong spring and summer seasons. Through all of this, we will remain committed to ensuring strong cash flow generation to maximize shareholder returns. With that, I would now like to turn the call over to Melissa to review the financial results in more detail.
Speaker Change: To ensuring strong cash flow generation to maximize shareholder returns with that I would now like to turn the call over to Melissa to review the financial results in more detail.
Melissa K. Cougle: Good morning, everyone, and thank you for joining us today to discuss Ranger's first quarter 2024 financial results. Faced with challenging market conditions, our revenue for the first quarter totaled $136.9 million, a 13% decrease from $157.5 million in the first quarter of 2023. This decline was primarily due to lower activity levels in wireline completions and coil tubing service lines. We reported a net loss of $800,000, or negative 3 cents per fully diluted share, down from net income of $6.2 million, or 25 cents per share a year ago, and net income of $2.1 million, or 9 cents per share in the fourth quarter of 2023.
Melissa: Good morning, everyone and thank you for joining us today to discuss Rangers first quarter 2024 financial results.
Melissa: The challenging market conditions, our revenue for the first quarter totaled $136 9, million% to 13% decrease from $157 5 million in the first quarter of 2023.
Melissa: This decline was primarily due to lower activity levels, and wireline completions and coiled tubing service line.
Speaker Change: We reported a net loss of $800000 or negative <unk> <unk>.
Speaker Change: Per fully diluted share down from net income of $6 $2 million or 25 per share a year ago, and net income of $2 $1 million or <unk> <unk> per share in the fourth quarter of 2023.
Melissa K. Cougle: The decrease in net income from the prior year and prior quarter periods is primarily attributable to declining activity levels in wireline, as well as processing and ancillary services segments, and increasing costs due to inflationary pressures across cost categories. Cost of services for the quarter was $120.8 million, representing 88% of revenue, compared to $130.9 million, or 83% of revenue in the prior year period. The increase in cost of services as a percent of revenue was primarily attributable to reduced operating activity during the quarter and inflationary pressures on labor, rental, and repair costs. The most significant inflationary cost increase noted is with regard to medical costs per employee, which affected cost of services by $1.8 million in the first quarter of 2024 when compared to the first quarter of 2023.
Speaker Change: The decrease in net income from the prior year and prior quarter periods is primarily attributable to declining activity levels in wireline as well as processing and ancillary services segments, and increasing cost due to inflationary pressures across cost category.
Speaker Change: Cost of services for the quarter was $128 million.
Speaker Change: Representing 88% of revenue compared to $139 million or 83% of revenue in the prior year period.
Speaker Change: Increase in cost of services as a percent of revenue was primarily attributable to reduced operating activity during the quarter and inflationary pressures on labor rentals and repair cost. The most significant inflationary cost increase noted is with regard to medical cost per employee, which affected cost of services by one $8 million in the first.
Speaker Change: Order of 2024, when compared to the first quarter of 2023 as a reminder, ranger began to see these costs escalate significantly during the second quarter of 2023 and they have remained elevated.
Melissa K. Cougle: As a reminder, Ranger began to see these costs escalate significantly during the second quarter of 2023, and they have remained elevated. Adjusted EBITDA for the quarter was $10.9 million, reflecting a decrease of $9.2 million from the prior year period and $7.5 million from the prior quarter. With regard to our segment performance, high specification rig revenue for the first quarter was $79.7 million, an increase of $2.2 million or 3% from the prior year period, and an increase of $700,000 from the fourth quarter of 2023.
Speaker Change: Adjusted EBITDA for the quarter was $10 $9 million, reflecting a decrease of $9 $2 million from the prior year period, and $7 $5 million from the prior quarter.
Speaker Change: With regards to our segment performance high specification rigs revenue for the first quarter was $79 7 million, an increase of $2 $2 million or 3% from the prior year period, and an increase of $700000 from the fourth quarter of 2023.
Melissa K. Cougle: RIG hours increased by 3% from the prior quarter period and decreased by 1% from the first quarter of 2023. The blended RIG hourly rate for the first quarter was $718 per hour, which represented an increase of 4% year over year due to general pricing increases captured in 2023 and decreased 2% from the prior quarter due to customer and asset mix.
Speaker Change: Rig hours increased by 3% from the prior quarter period and decreased by 1% from the first quarter of 2023.
Speaker Change: Blended rig hourly rate for the first quarter was $718 per hour, which represented an increase of 4% year every year due to general pricing increases captured in 2023 and decreased 2% from the prior quarter due to customer and asset mix.
Melissa K. Cougle: This reflects relatively consistent pricing and operating levels quarter over quarter. In addition to the non-recurring downtime event, rig transitions between customers during the quarter also impacted margins with slightly elevated operating costs due to make ready tasks between jobs. In our wireline services segment, revenue was $32.8 million in the first quarter, down 34% as compared to the first quarter of 2023, with stage counts down 47% over that same period. Additionally, revenue was down 21% as compared to the fourth quarter of 2023, with stage counts down 32% over that same period.
Speaker Change: This reflects relatively consistent pricing and operating levels quarter over quarter.
Speaker Change: In addition to the nonrecurring downtime event rig transitions between customers. During the quarter also impacted margins was slightly elevated operating cost due to make ready tasks between jobs.
Speaker Change: In our wireline services segment revenue was $32 8 million in the first quarter down 34% as compared to the first quarter of 2023 with stage counts down 47% over that same period.
Speaker Change: Revenue was down 21% as compared to the fourth quarter of 2023 with stage counts down 32% over that same period.
Melissa K. Cougle: Stuart went into significant detail as to the dynamics in the completion space, and Ranger has initiated reporting of service line detail for this segment going forward to add greater clarity to our financial performance. We have seen year over year growth in both production and pump down services, and we'll be focused on continuing that growth in 2024. In our ancillary services segment, revenue was $24.4 million in the first quarter, down $5.7 million or 19% from $30.1 million in the prior year period and down 21% from the prior quarter. Contributing most significantly to the declines was a reduction in operational activity in the coal tubing service line, affecting both operating income and adjusted EBITDA.
Speaker Change: Stuart went into significant detail as to the dynamics in the completion space and Ranger has initiated reporting of service line detailed for this segment going forward to add greater clarity to our financial performance, we have seen year over year growth in both production and pumped down services and we will be focused on continuing that growth in 2024.
Speaker Change: Our ancillary services segment revenue was $24 4 million in the first quarter down $5 7 million or 19% from $30 $1 million in the prior year period and down 21% from the prior quarter contributing most significantly into the declines was a reduction in.
Speaker Change: While activity and the quality of the service line affecting both operating income and adjusted EBITDA revenues have been improving in both March and April along with profitability.
Melissa K. Cougle: Revenues have been improving in both March and April, along with profitability. In response to reductions in marlin activity levels and to better align the business and drive further efficiencies, Ranger completed an extensive review of all fixed costs within the company, including direct operational costs and direct operational and administrative costs, as well as corporate costs. Through this review, Ranger was able to identify approximately $4 million in annualized savings efficiencies, with $3 million of those savings associated with personnel reductions and another $1 million in support and service-related costs.
Speaker Change: In response to reductions in Maryland activity levels and to better align the business and drive further efficiencies Ranger completed an extensive review of all fixed costs within the company, including direct operational costs and direct operational and administrative costs as well as corporate costs.
Speaker Change: Through this review Ranger was able to identify approximately $4 million of annualized savings efficiencies with $3 million of those savings associated with personnel reductions and another $1 million in support and service related costs. These.
Melissa K. Cougle: These reductions will align more closely with the new operating levels anticipated in wireline completions and allow for improved leverage going forward as revenues continue to ramp during the year. Turning to the balance sheet, we remain in pristine financial health and ended the first quarter with zero net debt once more.
Speaker Change: These reductions will align more closely with the new operating levels anticipated in wireline completions and allow for improved leverage going forward as revenues continue to ramp during the year.
Speaker Change: Turning to the balance sheet, we remain in pristine financial health and ended the first quarter was zero net debt once more we posted cash from operating activities of $12 million. During the first quarter as we were able to further improve collections and saw a reduction in working capital.
Melissa K. Cougle: We posted cash from operating activities of $12 million during the first quarter as we were able to further improve collections and saw a reduction in working capital. Capital expenditures of $6.5 million were slightly elevated as we continue to take delivery of assets associated with our new contract announced in 2023 and upgrade certain coil tubing assets. We expect capital expenditures to decline slightly in the back half of the year. Free cash flow for the quarter was $5.5 million, and we bought back over $8.5 million worth of Ranger shares, aggressively repurchasing when we saw an economic opportunity to do so. Finally, we ended the quarter with $66.5 million in liquidity, consisting of $55.4 million of capacity on our revolving credit facility and $11.1 million of cash on hand.
Speaker Change: Capital expenditures of $6 $5 million was slightly elevated as we continued to take delivery of assets associated with our new contract announced in 2023 and upgraded certain coiled tubing assets, we expect capital expenditures will decline slightly in the back half of the year.
Speaker Change: Free cash flow for the quarter was $5 $5 million and we bought back over $8 $5 million worth of Ranger shares.
Speaker Change: Aggressively repurchasing when we saw an economic opportunity to do so.
Speaker Change: Finally, we ended the quarter with $66 5 million in liquidity, consisting of $55 $4 million of capacity on our revolving credit facility and $11 1 million of cash on hand, we are committed to maintaining the highest degree of financial flexibility. So that we can always act in the best interest of our shareholders.
Melissa K. Cougle: We are committed to maintaining the highest degree of financial flexibility so that we can always act in the best interests of our shareholders. Looking ahead to the remainder of 2024, we expect modest growth in our high-specification rig business and ancillary segment, while anticipating flat operator activity levels for the year. We will continue to focus on expanding our production and pump-down service lines within the wireline services segment and believe the segment can, as a whole, return to very modest profitability in the second quarter, although further wireline revenue declines could occur.
Speaker Change: Looking ahead to the remainder of 2024, we expect modest growth in our high specification rig business and ancillary segment, while anticipating flat operator activity levels for the year, we will continue to focus on expanding our production and pumped down service lines within the wireline side versus segment and believe this segment can as a whole.
Speaker Change: <unk> returned to very modest profitability in the second quarter, although further wireline revenue declines could occur.
Melissa K. Cougle: On a consolidated basis, we believe the improving trend we saw in March's financials will continue in the coming months, providing for a return to more normalized levels of profitability. Our business will continue to prioritize high conversion of EBITDA to free cash flow, which will provide the means for returning meaningful capital to our shareholders. With that, we will turn the call back over to the operator for questions.
Speaker Change: On a consolidated basis, we believe the improving trend we saw in March financials will continue in the coming months, providing for a return to more normalized levels of profitability.
Speaker Change: Our business will continue to prioritize high conversion of EBITDA to free cash flow, which will provide the means for returning meaningful capital to our shareholders.
Speaker Change: With that I will turn the call back over to the operator for questions.
Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And if at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause just momentarily to assemble our roster, and our first question here will come from Don Crist with Johnson Rice. Please go ahead with your question.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you are using a speaker phone please pick up your handset before pressing the keys.
Speaker Change: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: And our first question here will come from Don Crist with Johnson Rice. Please go ahead with your question.
Donald Peter Crist: Morning, Stuart and Melissa. I hope you all are doing well. Morning, Don. How are you? I'm doing well.
Donald Peter Crist: Good morning, Stuart Melissa I Hope you all are doing well.
Donald Peter Crist: Morning, Doug I wanted to.
Stuart N. Bodden: I wanted to start with Torrent. You know, you haven't really talked about it too much over the past year or two. And a lot has been made about the shift to DGB and natural gas usage in the Permian, in particular. I was just wondering if you could kind of walk through what kind of segment you're in, or what kind of services you're providing there? And is this, you know, scrubbing, field gas, etc., to be used for completions, just anything you can give us on the Torrent side? Yeah.
Donald Peter Crist: Doing well I wanted to start with with Torrance.
Donald Peter Crist: You haven't really talked about it too much over the past year or two and a lot has been made over the shifts to DGB and natural gas usage in the Permian in particular I was just wondering if you could kind of walk through what kind of segment your.
Donald Peter Crist: What kind of services, you're providing there and is this scrubbing field gas et cetera to be used for completions. Just anything you can give us on the Torrance right.
Stuart N. Bodden: Yeah, sure. Thanks for the question, Don.
Speaker Change: Yes sure. Thanks for the question Don.
Speaker Change: The bulk of our offering on the tour and service line is until gas processing using EMR use mechanical refrigeration units and that is prescribing and fuel gas knocking out the liquids out in the field and we actually have a pretty pretty exciting and a pilot we're running right now.
Speaker Change: We're out in the Permian as scrubbing gas and that's actually going into a micro grid and also going to a dual fuel frac fleet at the same time.
Speaker Change: And the reason that we're pretty excited about that is obviously, if we can do.
Speaker Change: Processing for <unk> gas and actually Havent go into frac or enter into a power generation is a pretty exciting opportunity. So.
Stuart N. Bodden: The bulk of our offering on the Torrent service line is infill gas processing using MRUs, Mechanical Refrigeration Units, and that is for scrubbing infill gas, knocking out the liquids out in the field. So, yeah, we're starting to see a lot more inbound calls on that. We made some changes to the sales organization inside of that about six months ago that we think are really starting to bear some fruit. So, we are cautiously optimistic about that.
Speaker Change: Yes, we're starting to see a lot more inbounds on that we've made some changes to the sales organization inside of that about six months ago that we think are really starting to bear some fruit so cautiously optimistic on that.
Stuart N. Bodden: I appreciate that color and one on the high-spec rig side. It was unfortunate what happened in the first quarter, which caused some slowdowns there. One-time in nature, obviously, but Given the recent industry consolidation and, you know, the events that occurred, are you gaining any market share in certain geographic regions or are you kind of in the same place where you were before? Just curious as to, you know, if that... operator that had the issues was displaced or not.
Speaker Change: I appreciate that color and one on the high spec rig side. It was unfortunate what happened in the first quarter, which which caused some slowdowns there.
Speaker Change: One time in nature, obviously, but.
Speaker Change: Given the recent.
Speaker Change: Recent.
Speaker Change: Industry consolidation and the events that occurred.
Speaker Change: Gain in many market share in certain geographic regions or are you kind of.
Speaker Change: The same place where you were before just curious as to if that.
Speaker Change: Uh huh.
Speaker Change: Operator that had the issue has been displaced or not.
Stuart N. Bodden: Yeah, we do feel like we are slowly gaining market share in a couple of regions. You know, some of these things take time. Obviously, the incident that occurred, the unfortunate incident that occurred, is sort of taking a little bit of time to work its way through the system, but I think we do feel like that, ultimately, it's potentially an opportunity for us. But again, it just takes a little bit of time to work through the system.
Speaker Change: Yeah.
Speaker Change: We do feel like that we are slowly gaining share.
Speaker Change: And a couple of regions some.
Speaker Change: Some of these things some of these things take time, obviously the incident that occurred was the unfortunate incident that.
Speaker Change: That occurred in sort of taking a little bit of time to work its way through the system, but but I think we do feel like that.
Speaker Change: Ultimately.
Speaker Change: It's potentially an opportunity for us.
Speaker Change: But again just takes a little bit of time to work through the system.
Stuart N. Bodden: Okay, and all of those costs that we're encouraging have been reversed now, right? So the second quarter should return fairly back to normal.
Speaker Change: Okay, and all of those costs that were incurred in that it has been reverse now right. So in the second quarter should return clearly back to normal.
Stuart N. Bodden: Yeah, we are expecting the second quarter to return back to normal levels. Okay, I'll turn it on.
Speaker Change: Yes.
Speaker Change: We are expecting the second quarter to return.
Speaker Change: Back to normal levels.
Donald Peter Crist: Okay, I'll turn it back and get back in queue. Thanks.
Speaker Change: Okay.
Speaker Change: Turn it back and get back in queue. Thanks.
Speaker Change: Great. Thanks, Don.
Speaker Change: Yeah.
John Daniel: And our next question will come from John Daniel with Daniel Energy Partners. Please go ahead.
Speaker Change: And our next question will come from John Daniel with Daniel Energy Partners. Please go ahead.
John Daniel: Hey, good morning, folks. Thanks for including me. Stuart, just a question. I mean, when you look at the strength of the well service business, certainly relative to a lot of other segments out there, and, you know, frankly, also the safety incident that impacted one of your peers and customers, I'm curious, And maybe it's too bold of me to ask this, but are there actually chances for you to continue raising prices this year, just given the quality difference and service, or not?
John Daniel: Hey, good morning folks thanks for including me.
John Daniel: Sure.
John Daniel: Question I mean, when you look at the strength of the well service business certainly relative to a lot of other segments out there.
John Daniel: And frankly also sought safety incident that impacted one of your peers and customers I'm curious.
John Daniel: And maybe it's too bold to me to ask this but are there actually changes for you to continue raising prices. This year, just given the quality difference and service right now.
Stuart N. Bodden: I'd love to tell you that the answer is yes, but I think right now it's difficult to say if we're gonna be able to kind of raise the price meaningfully. I do think, kind of back to Don's question, we are getting more inbounds as a result of, you know, some operators thinking about shifting around their contractors. And ultimately, there could potentially come a point where, you know, as things tighten, there's an opportunity, you know, right now we're holding it steady.
Speaker Change: I'd Love to tell you that the answer is yes.
Speaker Change: I think right now.
Speaker Change: It's difficult to say for him to be able to kind of raise price meaningfully.
Speaker Change: Any kind of back to Don's question, we are getting more inbounds as a result of.
Speaker Change: Some operators thinking about shifting.
Speaker Change: Around our contractors right.
Speaker Change: And ultimately there could potentially come a point where it is.
Speaker Change: <unk> tightened up there is an opportunity right now we're holding it holding steady.
Speaker Change: So.
Speaker Change: Okay and then.
John Daniel: Okay. And then I... And then, you know, given the strength of your balance sheet and so forth, is now the right time to do the smaller tuck-in deals on the work of Riggs Hyde? It would seem to lend itself well to more consolidation in an already strong market.
Speaker Change: And then just given the strength of your balance sheet and so forth.
Speaker Change: Is now the right time to do the smaller tuck in deals and on the Workover rig side, just it would seem to lend itself well to more consolidation in an already strong market.
Stuart N. Bodden: We have started to look at some smaller players. Again, I think that we're very conscious when we do that of asset quality. We yeah, as we've said that there we do have opportunities as we gain some share to pull some additional equipment off the fence and bring that into the market. So with small players, we're very, very focused on asset quality more than Okay.
Speaker Change: We have started to look at some smaller players again I think that we're very conscious when we do that of asset quality.
Speaker Change: We as we've said we do have opportunities as we gained some share to both some additional equipment off the fence and bring that into the market. So on smaller players, we're very very focused on asset quality more than anything.
Speaker Change: Okay.
John Daniel: That's all I have. Thank you for including me. All right. Thanks, John.
Speaker Change: Well, that's all I got it thank you for including me.
Speaker Change: Alright, Thanks John.
Unknown Executive: Again, if you have a question, you may press star and then one to join the queue. Our next question will come from John Fichthorn with Dialectic Capital. Please go ahead.
Speaker Change: Again, if you have a question you May press Star then one to join the queue.
Speaker Change: Our next question will come from John <unk> with Dialectic capital. Please go ahead.
John A. Fichthorn: Hey, guys. Thanks for taking the question. Good morning, John. Good morning.
John Daniel: Hey, guys. Thanks for taking the question.
John Daniel: Good morning, John.
John A. Fichthorn: So... You know, it looked like some of your share repurchasing was kind of on a trend line. And so although you did a nice job and bought back 10% of your shares over the last year, the recent couple of quarters looked like they were trending more towards a 20% type number. I appreciate the opportunistic nature of it. Your stock price is really cheap right now. Just help us understand how you're thinking about that in the present, either at a share price dependency level or just in general.
John Daniel: Good morning so.
John Daniel: It looked like some of your share repurchasing was kind of on a on a trend line.
John Daniel: And so although you did a nice job and bought back 10% of your shares over the last year.
John Daniel: A couple of quarters looked like they were trending more towards that 20% type number I appreciate the opportunistic nature of it your stock prices really cheap.
Speaker Change: Right now just help us understand how you're thinking about that in the present either.
John Daniel: Got it share price dependent level or just in general.
Stuart N. Bodden: Yeah, I'll start off and let other people obviously chime in. I think I'd highlight a couple things. I mean, one, we're obviously very, very committed to returning capital to shareholders. But we also feel like that, you know, our stock is a very good value. And I think we have looked at that somewhat opportunistically through the last couple of quarters, and I think we'll continue to look at that. But I also think we are very committed, as we go forward, to continuing to return capital to shareholders. It's a core part of the program.
John Daniel: Yes.
Speaker Change: I'll start off and most obviously chime in.
Speaker Change: I think Holly.
Speaker Change: A couple of things I mean, one we're obviously very very committed to returning capital to shareholders.
Speaker Change: We also feel like that.
Speaker Change: Our stock is a very good value.
Speaker Change: And I think we have looked at that somewhat opportunistically.
Speaker Change: Through the last couple of quarters and I think we'll continue to look at that.
Speaker Change: I will also say I think we're very committed as we go forward to continuing to return capital to shareholders.
Speaker Change: Part of the program.
Melissa K. Cougle: I would only add to that, John. I think, you know, we are so mindful of just what our cash flows are, right? So, yeah, we moved in really aggressively, kind of through the end of the year and through the beginning of this year.
Speaker Change: I'd only add to that John I think we are.
Speaker Change: Also mindful of just one of our what our cash flows right.
Speaker Change: And we move again really aggressively hedged through the end of the year into the beginning of this year.
Melissa K. Cougle: And I think we're, you know, trying to be mindful of how much cash we're generating in light of how much we can repurchase too. So, not that one has to match the other, but we're just mindful of how much cash we are generating to be able to sort of move into that space, you know, and how much line of sight we see the future cash flows to. So, I think, you know, that's an additional consideration.
Speaker Change: And I think.
Speaker Change: Trying to be mindful of.
Speaker Change: How much cash we're generating in.
Speaker Change: In light of how much we can repurchase two so not that one has to match the other but we're just mindful of how much cash are we generating to be able to sort of move into that space.
Speaker Change: And how much amidst your line of sight do we see the future cash flows.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: An additional consideration.
John A. Fichthorn: Although, you know, you're kind of not changing your guidance for the year, right? on this call? Is that right?
Speaker Change: Although you're kind of you're not changing your guidance for the year right.
Speaker Change: This call is that right.
Stuart N. Bodden: We're not changing guidance, but we're also not giving specific guidance, Sean. You know, when we did the last call, we said that we thought that the year would be relatively consistent versus last year. I'd highlight a couple of things.
Speaker Change: We're not changing guidance, but we're also not giving specific guidance John.
Speaker Change: When we at the last call, we said that we thought that the year would be relatively consistent versus last year.
Stuart N. Bodden: I mean, one is that I think we see a very reasonable path to that happening. The completions market and the natural gas markets, as you know, are under a lot of pressure right now, and I think they are introducing some uncertainty in the market. So, you know, we're not really giving specific guidance right now, given some of the uncertainty we see in the market.
Speaker Change: I'd highlight a couple of things I mean, one is I think we'd see a very reasonable path to that happening the completions market and the natural gas markets. As you know are under a lot of pressure right now and I think they are introducing some uncertainty in the market. So.
Speaker Change: Yes.
Speaker Change: We're not really giving specific guidance right now given some of the uncertainty we see in the market.
John A. Fichthorn: and so, plus or minus, you know, there's, there's, there's uncertainty, but you know, you just seemed like a bad quarter with a one-off incident that materially dinged your cash flow. You're guiding the next quarter to returning to your growth. In most of your business lines, I assume cash flow would kind of be a similar thing for the next quarter. Assuming that's right, them like it seems like when somebody asked about M&A tuck in acquisitions, you're very mindful of asset quality. It seems like there's it's gonna be very difficult to find something more compelling than your share price right here.
Speaker Change: And so.
Speaker Change: But plus or minus.
Speaker Change: There's there's uncertainty but.
Speaker Change: This seems like a bad quarter with a one off incident that materially Ding to your cash flow you're guiding in the next quarter to returning to year on year growth.
Speaker Change: And most of your business lines I assume cash flow would kind of be a.
Speaker Change: Similar thing for the next quarter.
Speaker Change: Assuming that's right.
Speaker Change: Then.
Speaker Change: Like it seems like when somebody asked about M&A tuck in acquisitions, you're very mindful of asset quality and it seems like there is going to be very difficult to find something more compelling than your share price right. Here are all of those thoughts right or if not which which ones aren't.
John A. Fichthorn: Are all of those thoughts right? Or, if not, which ones aren't? Yeah, no, I yeah, yeah, I think I think that is all right. And, you know, I think so.
Speaker Change: Yes, yes.
Speaker Change: Yes, yes, I think I think that is alright.
Speaker Change: As we again think about that.
Stuart N. Bodden: In the fourth quarter and the early part of Q1, we were very aggressive for exactly the reasons that you outlined.
Speaker Change: Fourth quarter and the early part of.
Speaker Change: Q1, we were very aggressive for exactly the reasons you outlined.
John A. Fichthorn: And so, you know, 65%. You have to do a minimum of 25%. You did 65%.
Speaker Change: And so 65% you guided to a minimum of 25% you did 65% great like applause right.
John A. Fichthorn: Great, like applause, right? Are we sticking with our minimum of 25%? And you know, if you guys continue to see value in your share price, like what you do out here? Can we expect something similar? There is a reason not to.
Speaker Change: Or are we sticking with a minimum of 25% and you know if you guys continue to see the value in your sharp share price cycle you got here.
Speaker Change: Can we expect something similar.
Speaker Change: Or is there a reason not to.
Stuart N. Bodden: I think absolutely absolutely. Yeah. Agreed.
Speaker Change: I think absolutely yes agreed.
John A. Fichthorn: And so if that ends up being 20% of your shares outstanding this year, then great. Hallelujah. Yeah, that's right. Okay. Super, I'll get back in the queue. Thanks guys. All right, John.
Speaker Change: So if that ends up being 20% of your shares outstanding. This year then great.
Speaker Change: Olivia.
Olivia: Yes, yes, that's right.
Speaker Change: Okay. Okay.
Speaker Change: Super I'll get back in queue. Thanks, guys alright, Thanks, John.
Unknown Executive: All right. Thanks, John.
Unknown Executive: And again, if you have a question, you may press Star, the one to join the queue. And this will conclude our question and answer session. I'd like to turn the conference back over to Stuart Bodden for any closing remarks.
Speaker Change: And again, if you have a question you May press Star then one to join the queue.
Speaker Change: And this will conclude our question and answer session I would like to turn the conference back over to Stuart Bowden for any closing remarks.
Stuart N. Bodden: I just want to thank everybody for joining the call this morning. Thank you for your continued interest and support of Ranger, and we will see you in a quarter. Thanks.
Stuart Bowden: Just wanted to thank everybody for joining the call. This morning. Thank you for your continued interest and support of Ranger and we will see you on the quarter. Thanks.
Unknown Executive: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.