Q1 2025 Ranger Energy Services Inc Earnings Call
Speaker Change: [music].
Good day and welcome to the Ranger Energy first quarter of 2025 conference call.
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Joe: I would now like to turn the call over to Joe <unk> Vice President of Finance. Please go ahead, Sir Thank you and welcome to Ranger Energy Services' first quarter 2025 results conference call.
Joe: <unk> issued a press release outlining our operational and financial performance for the three months ended March 31st 2025.
Joe: Press release and accompanying presentation materials are available at the Investor Relations section of our website.
Joe: At Www Dot Ranger energy dotcom.
Joe: Today's discussion may contain forward looking statements about future business and financial expectations.
Joe: 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.
Joe: Except as required by law, we undertake no obligation to update our forward looking statements.
Joe: Further please note that non-GAAP financial measures will be referenced during this call a full reconciliation of GAAP to non-GAAP measurements is 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 our CEO Stuart Bowden, and our CFO Melissa Google for their prepared remarks.
Speaker Change: Thanks, Joe Good morning.
Speaker Change: Everyone and thank you for joining us today to discuss our first quarter results.
Speaker Change: The past couple of months have brought about a new level of uncertainty into the global economy, and the oil and gas industry and.
Speaker Change: In the midst of market volatility Ranger continues to stand out amongst small cap oilfield service companies.
Speaker Change: Its ability to be resilient through the cycle.
Speaker Change: Both for durability, our business has always and will continue to benefit from our production oriented focus and a fortress balance sheet.
Speaker Change: Having been through many cycles, we have been very intentional in building this business for the long term.
Speaker Change: Making tough choices to preserve strength and optionality in all of our business lines.
Speaker Change: As we operate conservatively in strong markets. We can act decisively during downturns allocating capital in ways that drive long term shareholder value.
Speaker Change: As we report our first quarters results and look ahead to the remainder of 2025.
Speaker Change: We remain steadfast in our conviction that Ranger is a differentiated oilfield services business.
Speaker Change: During the first quarter.
Speaker Change: The typical impacts of weather and seasonality, we reported significant improvements year over year, and adjusted EBITDA and margin.
Speaker Change: Led once again by the strength of our high specification rigs business.
Speaker Change: We reported revenue of $135 $2 million.
Speaker Change: And adjusted EBITDA of $15 $5 million, achieving a margin of 11, 4%.
Speaker Change: It can improvement over the same period last year.
Speaker Change: While first quarters are often impacted by seasonality. This year brought two polar vortex events in January and February followed by March Windstorms still our core business lines delivered and we achieved strong operational and financial results.
Talked about our production focus all the time, but it's worth emphasizing again why this is so important during market turbulence we are.
Speaker Change: And use the analogy that we are the mechanics, not the car manufacturer. Our services are critical to maximizing production, which is our customers lowest cost incremental barrel.
Speaker Change: When commodity prices force difficult decision.
Speaker Change: Capital expenditure budgets to which we have limited exposure that typically get trimmed first.
Speaker Change: Over the past two years Grainger has bucked the trend of the typical E&P consolidation outcome that two plus two equals III.
Speaker Change: Hosting material growth in the face of major operator consolidation.
Speaker Change: And benefiting from scale and exposure across basins as other vendors were rationalized.
Speaker Change: All of this was achieved during a declining drilling rig and frac spread counts.
Speaker Change: The high specification rig segment recorded its fifth consecutive quarter of revenue growth driven by consistent rig hours and a higher blended rate.
Speaker Change: <unk> were slightly down quarter over quarter due to weather, but increased by 280 basis points over the prior year period.
Speaker Change: We expect the stability and resiliency of this business to continue throughout the year. Despite the noise from the broader market.
Speaker Change: Our customer base includes when the largest operators in the world working at some of the highest quality oil and gas assets in the world. We have stayed and we will continue to stay in close communication with them regarding their well intervention programs in the.
Speaker Change: Current commodity price environment.
Speaker Change: Although some customers are making contingency plans for reduced activity and a lower for longer commodity price scenario today, we have not seen material reductions in the well services production space.
Speaker Change: Ancillary services also continues to be a bright spot for Ranger.
Speaker Change: This performance pulled back modestly from the last quarter due to seasonality, but increased substantially from the first quarter of 2024.
Speaker Change: Revenue increased by 25% from the prior year period, with adjusted EBITDA more than doubling and margins remaining in the high teens.
Speaker Change: As I have highlighted the last couple of quarters.
Speaker Change: At our gas capture and processing platform is the standout performer.
Speaker Change: Impaired to the same period last year revenues quadrupled and with very strong fall through with margins now solidly between 25 and 30% monthly.
Speaker Change: We are pleased with the demand for this service and continue to evaluate opportunities to put additional resources behind this segment in 2025.
Speaker Change: Our rentals and PNA service lines, both showed continuing strong margin performance and have developed the ability over the past couple of years to respond more quickly to activity pullbacks to minimize margin degradation.
Speaker Change: Our wireline unit struggled in the first quarter as completions activity in the north stagnated due to the severe weather reporting negative adjusted EBITDA of $2 $3 million, which weighed on our consolidated performance.
Speaker Change: Our January and February performance was our most challenged today.
Speaker Change: However, we did post positive margins in March and look to be building on that again in April.
Speaker Change: We made an additional round of adjustments to the organization to align the cost structure of this segment with the market conditions, along with redeployment of assets into both the conventional wireline space into our plugging and abandonment business to meet increasing customer demand. We believe this will be a benefit over the longer term and demonstrates our flexible equipment.
Speaker Change: Base that can work across our various business segments.
Speaker Change: Turning now to our strategic priorities I would like to spend a few minutes addressing the current market environment and potential impacts to Rangers business while.
Speaker Change: While the macroeconomic environment is currently being impacted by a number of factors, including the current tariff situation. It.
Speaker Change: It is not possible to accurately determine the impact to our business and our guidance remains the same and absence of concrete data to indicate otherwise.
Speaker Change: Today, we've had very limited impact in our customers largely remained in a holding pattern for now.
Speaker Change: The market share gains we've experienced through customer consolidation have allowed us to deepen our relationship with the strongest operators holding the best acreage in the lower 48, and these operators have given us every indication that they plan to continue using ranger as a preferred provider.
Speaker Change: And each of our calls we reaffirm our strategic priorities since they do not change our goals always are to maximize free cash flow prioritize shareholder returns defend the balance sheet and grow through disciplined accretive M&A.
Speaker Change: These priorities are never more important than in an uncertain market.
Speaker Change: We are inherently able to maximize cash flow because of the life capital intensity of our assets. Our capex spend in Q1 reflect strategic investments to enhance our service offerings to major customers, which increases customer loyalty and brings consistent margins.
Speaker Change: We will be particularly judicious with incremental capex in the coming quarters since its important to us to maximize our capital allocation flexibility.
Speaker Change: We remain convicted in our capital return strategy and announced a 20% increase to the dividend last quarter.
Speaker Change: <unk> per share again, affirming that commitment today in this quarter's announcement.
Speaker Change: Capital returns through aggressive share buybacks at compelling valuations were an important part of our strategy for value creation in 2024, and this buyback strategy remains an important tool in the tool kit in 2025 to maximize returns.
Speaker Change: Our cash flows not only allow for optimizing capital returns, but we can also maintain balance sheet strength that is far beyond that of any other peer.
Ranger: As of March 31, Ranger has zero long term debt of $104 $4 million of liquidity and $40 million of cash on hand.
Ranger: Finally, we continue to evaluate opportunities to grow that are both strategic and accretive the bid ask spread has remained an obstacle but as market conditions evolve, we see potential for actionable opportunities with our financial strength and public currency Ranger continues to be an ideal natural consolidator with a proven track record on.
Ranger: The integration front.
Ranger: We believe Ranger the safe Haven during these uncertain times and there is no other small cap oilfield services company that comes close to offering a free cash flow shareholder returns and balance sheet strength that we did.
Ranger: Our confidence is that Rudy and call market is built on a track record of disciplined execution and a shareholder focused strategy ensured ranger as a durable high return business designed to perform through the cycle.
Ranger: Melissa will now review our quarterly financials.
Melissa Google: Thanks, Karen and good morning, everyone.
Speaker Change: To reiterate the teams that Stuart mentioned high spec rigs continue to exceed expectations with consistent revenue growth and operational stability.
Speaker Change: We are pleased with our first quarter results in high spec rigs and ancillary both of which maintained higher margins in the face of unusually severe winter weather holding margins higher than typical for Q1.
Speaker Change: And our production focus is a clear differentiator in the services industry.
Speaker Change: Revenue for the first quarter was $135 $2 million down from $143 $1 million in the fourth quarter affected by unusually strong winter weather.
Speaker Change: The first quarter revenue was down slightly from $136 $9 million in the first quarter of 2024.
Speaker Change: This was due exclusively to the wireline segment with those high spec rigs and ancillary segment revenues growing materially year over year.
Speaker Change: Adjusted EBITDA increased 42% year over year to $15 $5 million quarter over quarter sequential declines were experienced as a consequence of the winter weather events and heavier costs that are carried in the first quarter such as payroll taxes.
Speaker Change: As we emerge from the winter months, we expect margins to return to mid teen levels.
Speaker Change: We also posted free cash flow during the quarter of $3 $4 million or 15 cents a share.
Speaker Change: Turning to segment results high spec rigs reported revenue of $87 $5 million.
Margins compressed slightly from 21, 7%.
Speaker Change: 19, 9% quarter over quarter due to typical elevated first quarter costs, such as elevated labor carrying costs during winter.
Speaker Change: High spec rigs reported adjusted EBITDA of $17 $4 million, an increase of 28% from the first quarter of 2024.
Speaker Change: Ancillary services segment revenue was $35 million.
Speaker Change: At $6 $1 million or 25% from the first quarter of 2024, while down slightly from the fourth quarter.
Speaker Change: Plug and abandonment and coiled tubing service line saw a slower start and depressed activity levels compared to the fourth quarter at the start of the year.
Speaker Change: But we expect those to rebound to historical levels through the remainder of this year pending market conditions.
Speaker Change: These service lines were nonetheless stronger when compared to the prior year period.
Speaker Change: Adjusted EBITDA for the quarter was $5 $6 million up $3 $1 million from the first quarter of 2024 and down to $4 million from the fourth quarter.
Speaker Change: Wireline revenue for the quarter was $17 $2 million, a decrease of $5 $4 million or 24% compared to $22 $6 million in the fourth quarter and down 48% compared to $32 $8 million in the first quarter of 2024.
Speaker Change: Adjusted EBITDA, turning negative during the quarter for wireline given the significant weather reporting an EBITDA loss of $2 3 million.
Speaker Change: We are constantly responding to market conditions in this segment and our efforts in January and February yielded positive margins in March that are expected to continue in the next couple of quarters during which time, we will evaluate the broader market conditions and optionality for the segment.
Speaker Change: The balance sheet remains a distinct advantage at the end of the first quarter, we had $104 $4 million of liquidity consisting of $64 $1 million of capacity on our revolving credit facility and $43 million of cash on hand.
Speaker Change: We have zero net debt and have prioritized paydown historically can maintain maximum optionality, our financial strength allows us to make smart capital allocation decisions for the long term benefit of our shareholders.
Speaker Change: We did spend $7 $2 million in the first quarter on equipment with some capital investment directed towards modernizing our rig fleet and enhancing customer offerings, which we expect will support future margin expansion.
Speaker Change: These investments have the added benefit of strengthening customer relationships and solidifying Ranger at the well service vendor of choice for our customers.
Speaker Change: With that I will turn the call back to the operator to open the line for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Again to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: Sure.
Don Crist: And our first question here will come from Don Crist with Johnson Rice. Please go ahead.
Speaker Change: Good morning, Stuart Melissa hopefully you all are doing well.
Speaker Change: Good morning, John how are you.
Don Crist: Doing well.
Speaker Change: I wanted to start with kind of the differentiation between kind of workover projects and new drills for your major customers I would assume that those are kind of separate budgets and given your production focus our activity levels and.
Speaker Change: That being so much more than completions, you could be mostly isolated from any kind of potential slowdowns that we may see in the back half of the year.
Don Crist: Sure Thanks, Don I'll start and Melissa.
Speaker Change: The wall will chime in.
Don Crist: About 80%.
Speaker Change: Of our revenues are associated.
Speaker Change: With production focus, which typically are aligned with opex budgets of our customers versus capex budgets.
Speaker Change: And so kind of as you indicated we think that obviously makes us a lot more resilient through the cycle because they tend to be different budgets.
Speaker Change: And the Opex budget tends to be a lot more resilient that's been our experience.
Speaker Change: You kind of hinted at something else, which I think is worth highlighting and that's just our customer mix certainly over the last.
Speaker Change: Several years, we've really tried to aligned ourself with the with the largest customers who.
Speaker Change: Who typically have the most consistent program.
Speaker Change: And we've really aligned ourselves with them just because they know that a lot of.
Speaker Change: Changing activity levels and kind of a knee jerk way really harms their vendors so.
Speaker Change: Those would be certainly two things that we would highlight right now.
Speaker Change: Okay.
Speaker Change: Okay, I appreciate that color and on the wireline side, obviously it sounds like in your commentary that you made some changes there.
Speaker Change: And margins came up as you kind of move into the second quarter, obviously, that's a little bit more completions focused but.
Speaker Change: How do you see that kind of playing out throughout the quarter can you get back to kind of historical margins in that in that business or is it still kind of a challenge for the rest of this year.
Speaker Change: I think it was that I think as we look at the back part of the year, we certainly.
Speaker Change: I think it will move into positive territory.
Speaker Change: I think we are.
Speaker Change: I think we've been pretty pretty open about some of the challenges in that space. Obviously, it was a disappointing quarter for wireline seasonality hit, particularly hard that the weather event because the most most of our business is in the north.
Speaker Change: And so whether it is it really hard this quarter.
Speaker Change: As we've talked about in the past, we're really trying to orient that business more more on the kind of conventional wireline, which typically has a lot more exposure to production versus completion, the plug and perf completions market has been particularly challenged over the last couple.
Speaker Change: Really.
Speaker Change: A year and a half or so.
Speaker Change: But.
Speaker Change: I think we're working hard to kind of move it into positive territory. So at.
Speaker Change: At least a positive contributor for the year.
Speaker Change: Yes.
Speaker Change: Okay, and I did want to touch on your balance sheet, obviously, it's a fortress balance sheet and differentiate you from a lot of other players out there, but as you kind of look forward and generate free cash flow going into the second quarter.
Speaker Change: How do you balance that versus you know M&A potential I'm, assuming some bid ask spreads are coming in closer to where you like them and kind of stock buybacks like how do you just look at the balance sheet more broadly.
Don Crist: Yeah, I'll take that Don and I think well look.
Don Crist: Given how exactly the market is sort of the territory everybody feeling a little bit uncertain about what the future holds I would take two things one we recognized and part of the reason why we wanted the balance sheet strength and we've highlighted it is because we feel like not only does it allow us to weather the storm, but just sort of take advantages of opportunities during <unk>.
Don Crist: Periods, where the market challenge and I think we'd be thinking about the rest of this year and however, long this period of uncertainty laughed at that kind of opportunity set for us.
Don Crist: I think for US right now the focus on M&A it feels like with all of the uncertainty it almost feels like Stuart and I were talking about earlier more challenged in the very short term, but as we get into sort of near term and mid term, we actually think that that potentially later this year, we might have further close.
Don Crist: And the bid ask spread and I think our hope is that we can finally start to push something over the line, we remain really interested and continuing to grow and scale. The business. We think that there is that much more opportunity set to create value through it through a down cycle.
Don Crist: I think we are really focused on continuing to be very active in M&A dialogue. While also recognizing how was probably not the time to pull the trigger but that could change in 90 days I think the other thing is looking at it through the buyback. So I think everything that we're thinking about it as well we have $40 million of cash we have lots of capacity on the revolver.
Don Crist: How do we be really mindful to taking advantage of opportunities through the next six months to a year. However, long this lab to be able to come out on the other side of this stronger than ever like we've done before.
Don Crist: Yes.
Speaker Change: All I would add to that is Melissa talked about M&A, we obviously have investments.
Speaker Change: And organic investments, we can make and then share repurchases I think just as a management team how we think about those as they ultimately all compete for capital with one another right as we go forward.
Speaker Change: And you saw us in the past it pretty aggressive with share repurchases.
Speaker Change: At times of when the share price come under pressure and that's certainly something we'll be looking at as well going forward.
Speaker Change: I appreciate all the color I'll turn it back to the operator, thanks, Thanks, Alright, Thanks, Sean.
Speaker Change: As a quick reminder, if you have a question or a follow up you May Press Star then one to join the queue.
John Daniel: Our next question will come from John Daniel with Daniel Energy Partners. Please go ahead.
John Daniel: Hey, guys. Thank you.
John Daniel: Got to dig into the minutiae here and talk about your coil business.
John Daniel: And we've seen the cost of strings go up here recently and I'm curious.
John Daniel: The ability you've had to pass that through to your customers via surcharge.
John Daniel: And then.
John Daniel: Given the strength of your rig business what are the opportunities to perhaps have small surcharges.
John Daniel: Tied to tariffs.
John Daniel: There as well.
Speaker Change: Yes. Thanks for the question John again, I'll start and most of them can chime in maybe just kind of a first a broader comment about sort of the impacts of potential impacts of tariffs on our business in general we typically don't think that there's a lot in our supply chain, our direct supply chain.
John Daniel: You've highlighted the one place that did it.
John Daniel: It could be potentially material and that's on coil.
John Daniel: I think right now.
John Daniel: Wouldn't say that there is an opportunity necessarily.
John Daniel: Puts a lot of those through but I think there is certainly a recognition on our customers' behalf that as our cost base changes.
John Daniel: We're going to have to recoup some of that so I think right now it feels like a fairly balanced conversation.
John Daniel: I think what we're looking for looking at us as we take a step back and just just a broader back to that broader macro.
John Daniel: And kind of what happens in that environment, because obviously that will dictate some of our ability to to have those conversations.
John Daniel: Okay.
John Daniel: Thank you the second one like the final one is one of your peers, just recently shut down its Williston yard.
John Daniel: And you know over the last couple of quarters, we've seen a handful not a ton, but a handful of your small sort of 15 rig competitors are less close floors as well I'm just curious.
John Daniel: Are you seeing do you see more of that coming or are you being contacted by smaller equipment brokers trying to help.
John Daniel: Help liquidate these companies just where do you think that market is a year from today.
John Daniel: Yes.
John Daniel: We are seeing that I guess, the first thing I would sort of highlight on just the Williston Bakken in general for Us.
John Daniel: It obviously had.
John Daniel: We indicated earlier.
John Daniel: Weather impacts that said, it's a business in a market for us it's been really strong as the first thing I would say.
John Daniel: I think again on a broader point about are we seeing some of the smaller players come under pressure I think the answer is yes.
John Daniel: And I don't think it's necessarily.
John Daniel: It's not just one basin and I think that as we've talked about in the past as the E&ps are consolidated and they are consolidating their vendor base.
John Daniel: I think companies like Ranger had been the beneficiary of that but that certainly helped us but I do think that that has hit some of the smaller players, particularly hard. So so we do get contacted about again assets in distress and I would only add to that John I think I think it's important to point out is I don't think that that's a recent phenomenon.
John Daniel: I think that that's something that's been happening sort of the past two years as you've heard us talk repeatedly about benefiting from operator consolidation I think what's changed more recently you have a lot of the smaller players who were sort of hanging on.
Alison: And with this latest market turn I think a lot of them are well I'm Alison.
Alison: And so I think that's where you're seeing a little bit more of the rollover here recently it is a consequence of the pressure that had been put under.
Alison: And now it's not looking like I think everybody was helpful. Last year ourselves included to be honest that this year was going to be a better year and as it played out it hasn't yet.
Alison: Played out that way, but it kind of gets back to how do we end up kind of taking advantage of opportunities through this whole cycle is as these companies sort of realized that you know well I'm not going to probably be able to weather. The storm the same way, whether it's combining with ranger or other things. We think it will provide for more opportunities for Ranger.
Alison: Toward the mid cycle.
Alison: Got it okay.
Alison: That's all I had thank you for letting me ask some questions absolutely. Thanks, John appreciate it.
Alison: And this concludes our question and answer session.
Speaker Change: Like to turn the conference back over to Stuart Bowden for any closing remarks.
Speaker Change: Thanks, operator, and thanks to everyone for joining the call and your interest in Ranger.
Speaker Change: Just a couple of quick closing comments, we sit here ready for all scenarios.
Speaker Change: I think we're all aware of the headwinds potential headwinds in the market, but certainly we feel like our production focus our alignment with some largest customers working in the best rock in the lower 48, and our balance sheet, our balance sheet strength.
Speaker Change: A real benefits here. So again, thank you for your interest and I hope everybody has a great week.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.