Q3 2024 Ranger Energy Services Inc Earnings Call
Speaker Change: The End of the World
Speaker Change: Hello and welcome to the Ranger Energy Services 3rd quarter 2020 for earnings 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.
Speaker Change: 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 you will draw from the question queue. You may press star, then two.
Speaker Change: As a reminder, this conference is being recorded today.
Speaker Change: I would now look ahead to hear the call to Joe Meef by President of Finance. Please go ahead.
Joe Meef: Thank you, and welcome to Ranger Energy Services third quarter 2021 for Results Comfort Call. Ranger has issued a press release summarizing operating and financial results for the three months ended September 30, 2024.
Joe Meef: This press release together with accompanying presentation materials are available in the Investor Relations section of our website at www.rangerenergy.com
Joe Meef: Today's discussion may contain forward-looking statements about future business and financial expectations.
Joe Meef: Actual results made differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risk described in our periodic reports filed with these securities and exchange commission.
Joe Meef: Accept as required by law. We undertake no obligation to update our forward-looking statements.
Joe Meef: Further, please note that non-gap financial measurements may be disclosed during this call. A full reconciliation of gap to non-gap measurements are available in our latest quarterly earnings release and conference call presentation.
Speaker Change: With that, I would now like to turn the conference call over to Stuart Bodden, Ranger CEO, and Melissa Cougle, Rangers CFO for their prepare the marks.
Speaker Change: Thank you and good morning everyone. We are pleased to welcome you to our third quarter, 2024, Irmigames Conference Call. This quarter's performance continues to demonstrate range or differentiated business model that enables strong performance no matter macro-conditions.
Speaker Change: Drilling Rick County Clawons, Completion Activity Decreases, and Gas Market Pressure have all contributed to challenging market conditions since early in 2023.
Speaker Change: Despite these conditions, Rangers' financial performance has been markedly more resilient than the broader OFS complex. And we have once again validated our production focus business model, instead of new watermark for some of our service lines.
Speaker Change: Our high specification rig segment continues to execute at a very high level, setting another corley record for revenue and adjusted e-betaugh.
Speaker Change: and Salari Services, also achieved near record results with our Qual2ing business posting a new quarterly revenue record in our Torrent brand showing exceptional growth.
Speaker Change: and I'm going to be a part of the research that we have done in the past, and we have
Speaker Change: These results are a testament to our teams and crews in the field. Ranger was able to deliver the second best quarterly results in our company's history, with sales of $153 million and adjusted EBITDA coming in at $25.1 million.
Speaker Change: Adding a few details around our segments and our high specification rigs business, we achieved another record quarter, the revenues of 86.7 million and a just at EBITDA of 19.2 million, resulting in gross margins of 22%.
Speaker Change: This performance highlights our scale and targeted basins and the investments we had made in our partnerships with core customers.
Speaker Change: Over the past year, we have worked diligently to showcase Rangers' commitment to quality assets and personnel at every well site, partnering closely with our customers and making strategic investments alongside of them as well.
Speaker Change: The results of those investments are now taking shape. Our production focus and commitment to quality have allowed us to grow our base of work with the highest quality customers and deliver more incremental services.
Speaker Change: As we head into Q4, we do expect seasonality will affect business performance because of weather and holiday impacts. But core customer demand remains strong and we anticipate another robust year in 2025 for this segment.
Speaker Change: Processing and Ancillary Services also had an outstanding quarter, with revenues of 36 million and adjusted EBITDAV 8.8 million dollars, which resulted in an impressive gross margin of 25%
Speaker Change: We increased revenue by 17% and adjusted EBITDA by 21% quarter of a quarter with our coil to be in business and torrent business driving the growth in this segment.
Speaker Change: 122 in increased revenue by 33% and EBITDA by 52% of the last quarter with record margins. The winner in holiday season will likely bring some declines in the service line, but we believe that declines will be less severe than those encountered last year.
Speaker Change: We are frequently asked about our gas conditioning and processing service line branded tournaments. This business is focused on infield gas processing and has exposure to the fast growing field power generation market.
Speaker Change: It showed impressive growth during the third quarter, nearly doubling its edith off from Q2.
Speaker Change: Service line margins are now touching 25% in some months and there is room to continue deploying additional assets with minimal reactivation capings. We have a great team leaving this business and we are excited to see it continue to grow its contribution to Ranger as we reach further into this high growth market.
Speaker Change: Lastly, I want to touch on wireless services.
Speaker Change: Third quarter performance in Wyeland was encouraging with revenue and margins growing quarter over quarter giving us a sense that all restructuring efforts are paying off.
Speaker Change: We have discussed previously how the Whireline Conclusion plugin per space has become a commodity touch, which has put collateral pressure on traditional production Whireline work and pumped down the work as well.
Speaker Change: We continue to pursue opportunities to grow production and pump down related wireline services work. Our progress has been slow but steady and production and pump down, and we have seen revenue grow each quarter a great accomplishment given current market conditions.
Speaker Change: De Twar at Heavy York's closure in our Northern region, seasonalities expected to, more significantly, impact this segment's margins in the fourth quarter and first quarter, from margins are selected to decline.
Speaker Change: However, moving into the spring, we believe we should return to an upper trajectory in Warr line and grow from the base we created this year.
Speaker Change: We talk frequently about our balance sheet strength and healthy, nifigent, a role it plays in our overall financial strategy.
Speaker Change: Through current market conditions, we made a priority of maintaining a rock-soluble balance sheet, which provides us maximum flexibility to execute on opportunities for the benefit of our shareholders.
Speaker Change: We operate in a fragmentary industry that is right for consolidation. And we believe we are real physicians to continue to be a consolidated in this space.
Speaker Change: While we continue to look for opportunities to further consolidate the industry, we have taken dramatic action on the shareholder returns front, given the compelling investment our own shares represent, and we believe our shareholder returns efforts have been second to none in small cap energy.
Speaker Change: We have returned over any percent of our free cash flow year-to-day to our shareholders through a regular dividend and significant share-re purchases.
Speaker Change: We have put on many wear-amountes and bought back our stock at highly-acquied evaluations.
Speaker Change: Dispike strong financial results, cash flows and compelling cap returns, we believe the market continues to undervalue danger.
Speaker Change: and we will continue to capture strong returns through our shared repurchases from this value gap.
Speaker Change: are multiples of adjusted EBITDA and pre-cast flow represents significant untapped value. And our production focus and commitment to superior service quality and safety have proven remarkably resilient despite anemic U.S. land-rick count.
Speaker Change: We've worked with consistent execution and greater understanding of our business model. Our strengths will be more widely recognized and acknowledged by the market.
Speaker Change: Looking forward to 2021, we are becoming increasingly confident that we will achieve year over year growth. High specification rigs should continue its climb and further cement its role as a market leader. Ancillary Services is pleased to keep increasing its contribution to our overall results as well.
Speaker Change: But once we're smaller components of our business such as P&A, girl tubing and torrent, are now growing into larger service lines that generate robust margins with further growth potential.
Speaker Change: Finally, we are cautiously optimistic that Wyrland will continue to stabilize in the 2025 we'll bring about further improvement in this regard.
Speaker Change: I want to thank our leadership team for their dedication and our employees for showing up every day, no matter the conditions with an excellent spirit and a dedication to service and safety. And I want to thank our customers for their loyal partnership.
Speaker Change: Rear frequently asked about the impact of operator consolidation on our business and the answer is that we believe consolidation has been a net benefit to Ranger.
Speaker Change: Ranger continues to be a preferred partner with larger operators that prefer to work with high quality service providers that will show up on time and perform the work on budget.
Speaker Change: with well-trained crews and well maintained equipment.
Speaker Change: Ranger has successfully built a reputation for quality and reliability, which is one of the key reasons for our continued success through the cycle.
Speaker Change: Finally, I would like to recognize and thank Charlie Likom, who is announced he will be stepping down from Rangers Board of Directors.
Speaker Change: Charlie and CSL have been a stranger since its founding and has been instrumental in setting the company's strategic direction and supporting its growth. Quite simply, Ranger would not be where it is today without his leadership in guidance.
Speaker Change: He has been an invaluable member of the board and we are grateful for his contributions and everything he has done for the company.
Speaker Change: With that, I will turn the call over to Melissa to review our operations and financial results.
Melissa Cougle: Good morning everyone and thank you for joining us today to discuss Rangers' third quarter 2020 for financial results.
Melissa Cougle: We take great pride in the progress we have made as an organization and particularly in our differentiated performance.
Melissa Cougle: While we at face to our share of challenges, our trajectory has been undeniably positive. Our slow and steady approach has allowed us to build a business that delivers consistent, resilient performance with notably less impact from broader market conditions.
Melissa Cougle: When we have self-desafecs, we have rallied together as a team and worked to streamline the organization according to Market Conditions and Tweak Strategy as appropriate.
Speaker Change: Starting with the South line, revenue for the third quarter was $150 million and 11% increase over the second quarter and down 7% year over year due to wire-on completion activity to climb.
Speaker Change: In fact, every service line in the company showed you your over-year growth in the third quarter, excluding wireless completion.
Speaker Change: Medin come for the quarter with $8.7 million resulting in earnings per share of 39 cents, which represents an improvement of 86% from the prior quarter. Representing both our improved performance and the accretive impact of our shared purchase program.
Speaker Change: Cost of Services for the Porter was $122 million representing 80% of revenue.
Speaker Change: This is a 200 basis point improvement from both the previous quarter.
Speaker Change: and the prior year period reflecting the operating leverage we achieved by effectively managing white states on our calendar, capitalizing on favorable summer weather conditions and longer days that optimize utilization while also closely controlling operating costs.
Speaker Change: Ranger is operating more efficiently than ever focusing on the highest quality service lines, customers and assets.
Speaker Change: I just did even though for the quarter was $25.1 million, a 20% increase from $21 million in the second quarter, and a 5% increase over the prior year period of $24 million.
Speaker Change: Gross Margin was 16.5% nearly matching our prior peak level.
Speaker Change: Looking further into our segment results.
Speaker Change: High spec rigs set a new quarterly revenue record at $86.7 million. Increasing an incremental 5% from the records that last quarter at $82.7 million, and an increase of 9% year over year.
Speaker Change: RIG hours increased by 3% from the previous quarter, and 4% from the third quarter of 2023. Our pricing environment has remained relatively flat and resilient as well, with the blended hourly rig rigs for the quarter coming in at $741 per hour.
Speaker Change: An Insularies Services, revenue was $36 million in the third quarter, and 17% increase from Q2, and a 13% increase over the prior year period. Coal choosing was a standout performer with revenue up 33% quarter of a quarter, and adjusted EBITDA up 52%.
Speaker Change: to our guest processing service line also had its best quarter in recent history with EBITDA nearly doubling from the second quarter in on track for further significant growth in the fourth quarter.
Speaker Change: and Stuart mentioned, why are one showed significant improvement in Q3?
Speaker Change: This segment concentrated in the Northern Basins benefits greatly from the longer summer days without weather disruption. The strong performance is an indication that our production focus-titted is taking hold, and the bottom of the market has likely been found.
Speaker Change: Revenue grew 24% from the second quarter, reaching $30.3 million, with both production and pump-down service lines showing double-digit growth from the prior quarter. Year over year, wire line is down 43% with the decline being entirely driven by a wire-line completion activity.
Speaker Change: Yes.
Speaker Change: Adjusted EBITDA was $2.7 million at significant improvement from the $400,000 in Q2 with 9% EBITDA margins for the quarter.
Speaker Change: Turning to the balance sheet, we maintain a net-de-zero position, providing us with flexibility to manage our business and the best interest of our shareholders.
Speaker Change: We ended the quarter with $86.1 million of liquidity consisting of $71.3 million of capacity on our revolving credit facility and $14.8 million of cash on hand.
Speaker Change: For the first nine months of 2024, we generated $51.8 million in cash from operating activities, comparable to the $53.1 million reporting during the same period of last year.
Speaker Change: Year to date, free cash list stands at $23.1 million as compared to $25.2 million over the same prior year period.
Speaker Change: Capital expenditures of $28.7 million this year are running slightly above 6% of revenues due to the elimination of Lyla and completion's revenue stream.
Speaker Change: and the deployment of growth capex earlier this year to upgrade cool-tooping assets and provide ancillary equipment in support of additional rig work with stronger customers.
Speaker Change: Our capital allocation strategy remains disciplined, and we are focused on investing in our business to preserve future cash flows while also continuing to return excess cash to shareholders.
Speaker Change: Year to date we have repurchased approximately 1.5 million shares for a total of $15.5 million.
Speaker Change: This is nearly doubling on that, we're purchased in 2023 and represents our steadfast commitment to allocate cash flows toward their highest return potential, which has been our own stock today.
Speaker Change: Over the past year, we have far exceeded our minimum return commitment of 25% of free cash flow to shareholders.
Speaker Change: Since a little over one year ago, we've returned over $40 million to shareholders by repurchasing the company's outstanding shares and paying a quarterly cash dividend a five-sense per share and we will continue to repurchase shares opportunistically and in keeping with our commitments to our shareholders.
Speaker Change: Rangers Financial Physician and Operational Execution are unmatched in our space and we believe over time this will be recognized more and more in the marketplace by both customers and potential shareholders.
Speaker Change: We are steadfast in our belief that over time our production focus business model will produce undeniable results in service attestemony in the energy services sector. Our attractive free cash flow profile and yield sets us apart and we are eager to engage with investors in the merits of our story.
Speaker Change: We appreciate your support and much forward to connecting with you in the weeks and months to come. With that, we will turn the call back over to the operator for questions.
Speaker Change: Thank you. We will now begin the question and answer session. 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 hands at before pressing the keys.
Speaker Change: To withdraw your question, you may press star, then too.
Speaker Change: At this time we will pause them in terribly to assemble our roster.
Speaker Change: Today's first question comes from Don Christ with Johnson Rice. Please go ahead.
Don Christ: Good morning guys, all the girls wanted.
Speaker Change: Hey, we're good, we're in John, are you?
Don Christ: You're well
Don Christ: Stuart, you touched on this in your open and comments, but the theme coming out of this quarter for all the Oathest guys has been in treat consolidation and the slow down that they've experienced.
Speaker Change: Y'all really buck that trend. I know you touched on in your open comments, but can you give us a little bit more detail so a round with y'all at doing to actually grow market share in a market that's actually slowing a little bit?
Stuart Bodden: Sure thanks for the question done. I think there's a couple things that I would highlight. I mean, one is, as I mentioned in my remarks, the consolidation on the ENP side has been a net benefit to us.
Stuart Bodden: We had, and through our investment, it's been a lot of time, really trying to partner with the best customers.
Stuart Bodden: and as has done that over a lot several years, that's what it benefited us again because the consolidation is helped us and it's tended to give us more potential work.
Stuart Bodden: I think the other thing is if you look at some of the other servers on the broader OFS complex, things like drilling efficiencies and tracking efficiencies really, really has been pretty hard, but because of our production focus it hits us a lot less hard and I think that's also an perfect question, what it is, what it is, well.
Stuart Bodden: Love.
Speaker Change: and I would say fourth quarter is going to slow us as normal with seasonality and weather. But can you touch on 25 and what gives you confidence today that you should see growth next year? I mean, is it more PNA work or is it just the total industrial market for workovers, et cetera, growing in the 25 that gives you confidence at this growth metric?
Speaker Change: You know, I sensed really across the board and if you start off with with the well-service space, our high-spec workspace again, I think just back on.
Speaker Change: are discussions with our customers. You know, we have a lot of confidence going into the year, but I think that's really possible to solve this one. Right? It's Melissa touched on. We're very pleased.
Speaker Change: You know, probably hopefully seen the bottom in the Ireland. You think that as you move into spring, that herbalist start to improve as well. And then in an ancillary, P&A has been strong. The coil has been strong. Torrent has gotten nice, gel went behind it. So it's not really one thing. I think it's multiple things.
Speaker Change: and I think the core is based on our conversations about our customer, we have a lot of confidence that we'll see. The movement we'll see from the moment we're at the next year.
Speaker Change: I appreciate that as well and just one further one for me. I know Charlie has been on the board for a long time. Is there anything else around his stepping down that did you like the highlight?
Speaker Change: Well, appreciate the question. The first thing I would just say is that, you know, what I reiterate my appreciation for our appreciation for Charlie and the CSL organization. Yeah, they've been with the organization since we actually have in 2014, they're going to be in the instrumental one.
Speaker Change: and getting what we are today. We maintain a good relationship with them. Melissa and I are going to be in Boston with us this week to talk about the case, part of the business, okay, study on the link to our poll that's going to be there.
Speaker Change: Regarding his shares, did you know, as you probably recall, on CSL as agreed not to sell any stocks until the end of 24?
Speaker Change: Beyond that, we don't really know if any specific plans that he has with CSL has, but obviously, maintain a relationship with him and obviously try to be supportive, you know, down the road when we can be, but we do not know if any specific plans are now.
Speaker Change: I appreciate the color of Drumpacking 2. Thanks.
Speaker Change: Thanks John.
Speaker Change: Thank you. The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.
Speaker Change: Hi, I'm Melissa, you all highlighted the margin improvement in the quarter compared to pre-pandemic. Can you talk about any specific areas going forward where you think it's in further increase margins?
Speaker Change: and then there's a follow-up to that in a fragment of industry are there certain acquisition opportunities.
Speaker Change: that you think could preserve themselves, it would be margin-accredeated and support further support. Here's a capital return to shareholder plans.
Speaker Change: Chair, thanks for the question Jeff, why don't I, I'll put on the M&A and...
Speaker Change: and I'm going to let you know that the March and Prudent McTang's people working on. On the lemonade front, we continue to have the reverse that in a, with benefit, the company that's part of the reason that you maintain.
Speaker Change: and American Children's Balance, you think it's a lot of optionality. We've been in a number of discussions. They're still just a bit asked, right? What we've been finding.
Speaker Change: We are, again, that's, doesn't mean we're not talking to a lot of those we do think there's some attractive opportunities for the company that would make both companies stronger on the back of the MNA that, again, right now, the bit of an issue.
Speaker Change: Yeah, and maybe only internal side. I guess I'll just say, I think it, you know, I use the term flow instead, whenever I made my comments and I think that's really how we think about further margin improvement. For the revenue dollars, in particular last year, margins came under a little bit of pressure because we talk a lot about white space.
Speaker Change: When we have an opportunity to manage our calendar better, we can really plan our business better and sort of optimize labor and optimize a lot of our expenditure profile. And as we look forward in the future, barring consolidation, which would bring about, you know, we could scale up facilities a lot better and bring synergies in that way. I think I think on a standalone basis, we would see incremental really from operational efficiency. So we're sort of just continuing the chip away at the edges in terms of well-site planning and things like that. We'd probably yield some results. We also were seeing some of our other service lines that are growing. We mentioned to aren't, again, very small, but those margins are just generally higher and so we're getting better fall through those on those as well. So every-
Speaker Change: Everything's helping a little bit, but I don't think we're expecting huge differentiation in terms of margin until we probably look at getting another deal under us.
Speaker Change: Thank you. Thank you.
Speaker Change: Love Thank You.
Speaker Change: The next question comes from John Daniel with Daniel Energy Partners. Please go ahead.
John Daniel: and I'll thank you for including me. There's just touched on this in the prepare to mark the missed and typologized. But as you look to 25, where would you most likely allocate growth capex?
Speaker Change: So right now when we look at it 25 and it really goes back to our biggest customers.
Speaker Change: and we touched on it, if you kind of look at our group, Cat Bikes in this year. There was some in coil but a lot was worth additional equipment.
Speaker Change: and I'm going to start with a round-out-well service rigs on the well side. And we think that that will likely continue as well next year. What we're finding on is that biggest customers don't just want the well-service rigs, but they want to complete packages around that.
Speaker Change: and Dick and Inc. with pipe hammers and power swables and, you know, pump, etc. So, I think most of it would likely be around that because that's where we do the biggest amount of work of the merch.
Speaker Change: Okay, another ending.
Speaker Change: and Lexington's first place in place.
Speaker Change: from the Executive Exchange.
Speaker Change: There are, so you've touched on something that we're debating a lot. Right now at this moment, there are some issues depending on what the equipment is. Some things have six plus months, probably time. So you do have a pretty thoughtful about when you want to show up to marry up a traditional way to the coinage.
Speaker Change: Ok.
Speaker Change: That's all I got, thank you for including me. Alright, thanks, done.
Speaker Change: Thank you. This concludes our question and answer session. I would now like to turn back to management for any closing remarks.
Speaker Change: Thanks, operator. Thanks everyone for joining the call today. I appreciate your continued interest in Ranger and we will be reaching out to many of our investors. Surely in the least, we're speaking with you. Have a good day everybody.
Speaker Change: Yolanda.
Speaker Change: The conference is now concluded. Thank you for your participation. You may now disconnect your lines.