Q3 2025 Ranger Energy Services Inc Earnings Call
Speaker #2: 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 risk described in our periodic reports filed with the Securities and Exchange Commission.
Speaker #2: Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures will be referenced during this call.
Speaker #2: A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. Joining me today are Stuart Bodden, our Chief Executive Officer, and Melissa Cougle, our Chief Financial Officer.
Speaker #2: Stuart will begin with a strategic and operational overview, including commentary on our acquisition of American Well Services. Melissa will then walk through a financial summary of the transaction, and the results for Ranger's third quarter.
Speaker #2: Following the remarks, we'll open the call for Q&A. With that, I'll turn it over to Stuart.
Speaker #3: Thank you, Joe, and good morning, everyone. Today marks a significant milestone in Ranger's journey. This morning, we are proud to announce the acquisition of American Well Services, a leading Permian Basin-focused well services provider with a fleet of 39 active workover rigs, new complimentary service lines, and over 550 employees.
Speaker #3: This transaction represents a strategic acquisition that strengthens our position as the largest well servicing provider in the Lower 48 and enhances our ability to deliver differentiated technology-enabled solutions to our customers.
Speaker #3: Let me start by sharing why AWS is such a compelling addition to Ranger. Outside of adding meaningful scale to our high-specification rig business in the Permian Basin, AWS brings a well-maintained fleet of high-spec rigs that includes extensive supporting equipment and an excellent safety track record.
Speaker #3: The AWS business also provides a suite of complimentary service lines to Ranger including tubing rentals and inspection, chemical sales, mixing plants, and transportation and logistics, amongst other services.
Speaker #3: Their operations are deeply rooted in the Permian Basin since founding, and their team has built a reputation for safety, reliability, and operational excellence similar to that of Ranger.
Speaker #3: They have grown the business strategically over the past seven years through a combination of inorganic and organic growth. They have established themselves with a strong customer base anchored by major operators.
Speaker #3: This acquisition will expand Ranger's rig count by approximately 25%. It strategically increases our market share in the Permian oil and gas basin in the Lower 48 while also unlocking meaningful pull-through revenue opportunities for Ranger's own high-spec rig business.
Speaker #3: AWS's customer base is highly complementary to ours. While we share some of our largest customers, there are new customer relationships that broaden our market reach on the AWS side, and we look forward to further expanding these relationships in the future.
Speaker #3: From a financial standpoint, the purchase price of approximately 90.5 million dollars represents less than two and a half times trailing 12 months EBITDA with consideration consisting of a prudent mix of cash and equity along with an earnout that is tied to AWS's assets generating at least 36 million dollars of EBITDA over the next 12 months.
Speaker #3: Additionally, we expect to realize approximately $4 million in annual cost and revenue synergies once integration is complete. The transaction is immediately accretive to earnings and cash flow with minimal dilution.
Speaker #3: In addition to the share repurchases we have been successfully executing over the past two years, AWS represents an even higher return on capital comparatively, given the discount of the deal multiple to our own trading multiple.
Speaker #3: We are supporting the transaction with minimal borrowings on our revolver and pro forma leverage of less than one-half term. On a pro forma basis, Ranger is now expected to produce over 100 million dollars in adjusted EBITDA in 2026 under current market conditions.
Speaker #3: With an earnings potential that is much higher when commodity prices recover in the future. Our executive vice president of well services, Matt Hooker, Melissa, and I are here in the Permian Basin today while hosting this call to welcome our new Ranger team members aboard.
Speaker #3: And continue the integration planning that has already commenced. We have been preparing comprehensive integration plans based on proven playbooks from prior acquisitions, including our successful integration at the basic energy assets.
Speaker #3: AWS personnel share our cultural focus on safety and operational excellence, and we are excited about building upon the great foundation already created by both companies to forge an even stronger path together in the future.
Speaker #3: We will complete the integration with focus and efficiency, and we anticipate finishing the majority of integration activities during the third quarter of 2026. AWS is a strategic extension of what we already do well.
Speaker #3: It strengthens our existing capabilities in our flagship service line, cements our footprint in the Permian Basin, and enhances our ability to serve customers. All while doing so at a great valuation.
Speaker #3: Acquisitions like AWS accelerate our strategic roadmap, position us for continued success, and give us the ability to weather cycles better while enjoying enhanced pro forma cash flows that enable other ongoing efforts, like the ECHO rig deployment program.
Ranger's Echo rig is the first of its kind— a double electric hybrid rig—bringing to market a program to convert existing conventional workover rigs into a new rig. This greatly reduces emissions while also taking a meaningful step forward with regards to safety.
The first two echo rigs have been delivered to the field and are currently completing their final testing before they begin working on live wells.
Customer interest remains robust. And we see strong demand for the efficiency. Safety and environmental benefits. These rigs offer and expect additional contracts to be signed in the coming quarters.
Before I turn the call over to Melissa, I'd like to make some comments about our quarterly performance as well as some early views on 2026.
For the quarter, our financial results showed continued resilience in our core production-focused service lines. Although we did see weakness in declines in completion-focused areas and some of our Northern-focused districts, our commodity price pressures are leading to activity declines.
We mentioned in our prior call higher-than-normal levels of asset turnover as certain customers adjusted their programs in light of current market conditions. This has resulted in greater than expected standby time on the books for this quarter.
We reported 128.9 million in revenue for the third quarter, which represented a quarter over a quarter decline, largely. As a result of our completion exposed businesses,
Rangel reported 16.8 million of adjusted ebit off of the quarter, achieving a 13%, adjusted,
Our high-spec rig statement, continued to be the Cornerstone of our business, contributing 80.9 million of Revenue, and 15.7 million dollars of adjusted evaa with margins of 19.4%.
Activity levels within our production, focused rigs, increase quarter over quarter, and our on track to return to previous year Peaks.
That said, completions activity. Declines more than offset. Those increases where customers took extended breaks between drill Out programs and release some rigs due to budget exhaustion or generalized activity, reductions.
Our ancillary segment had mixed results. This quarter with the largest declines coming on the back of depressed quilt, tubing activity.
Year-over-year, the combination of completion activity, declines, and reduced PNA activity, brought about by depressed commodity prices, has put pressure on this segment.
We expect to see a rebound in both of these businesses in the back half of 2026 when lingering commodity supply concerns are resolved.
We've also been encouraged by recent progress and contract signed within our PNA business with regulatory bodies for safety-sensitive plug and abandonment work, where Ranger's experience and track record make it the provider of choice.
This quarter, our W line segment, should some stability despite lower activity levels.
With revenue of 17.2 million, and $400,000 of adjusted. Evita
At the end of the quarter, we were encouraged by the signing of two new customer contracts with major independent operators, which give us light of sight to more sustainable revenue levels in 2026.
Looking forward to 2026. We are encouraged and optimistic on the back of newly created growth Avenues with the AWS acquisition. We have whether the pullback over the past, several quarters with continued, strong, cash, flows and deploy. These cash flows wisely to make investments count. Our cyclically buying back a meaningful. Number of our own shares in the stock came under pressure. And today, announcing an acquisition that is anticipated to bring about strong Returns on Capital.
Next year, we expect to generate greater than 100 million dollars of ibid do for the first time in Rangers history, which represents a pivotal milestone in our growth path.
We believe there is much room to grow from there and market conditions improve. And when our Echo rigs, see increasing adoption in future periods,
With that, I'll turn the call over to Melissa before providing a few final closing comments.
Thank you, Stuart, I'd like to first walk through a few specifics around, our announced transaction. Today, Ranger entered into an agreement to acquire American well, services for a purchase price of approximately 90.5 million in a cash-free debt-free transaction. The consideration consists of approximately 60.5 million of cash with reductions for indebtedness and select other items. As well as 2 million shares of Ranger or common stock
And earn out of 5 million payable in cash. In 1 year is dependent on achieving 36 million of ibida in the first 12 months.
Ranger used its existing cash on the balance sheet for the cash consideration portion of the transaction and supplemented it with borrowings on its credit facility.
Proforma, Ranger anticipates having approximately 30 million dollars of borrowing post close on its facility representing less than 1 half turn of Leverage.
Ranger intends to repay the borrowing and debt with free cash flow.
The company has identified $4 million of operational and administrative synergies that are anticipated to be realized by the end of the third quarter of 2026.
Everyone on the ranger team is excited about what the future holds for the combined organization.
Turning to third quarter results. Revenue for the quarter was 128.9 million. A decrease of 16% from 153 million and the third quarter of 2024 and down 8% from 140.6 million in the second quarter of 2025.
The decline was primarily driven by reduced completions activity in the broader market, as well as activity declines in the Balkan and Powder River Basin this year.
Net income was 1.2 million or 5 cents per diluted share compared to 8.7 million or 39 cents per diluted share in the third quarter of 2024.
And $7.3 million, or 32 cents per diluted share, in the second quarter of 2025.
Net income, reductions are a consequence of the aforementioned reductions in activity, both year-over-year and quarter over quarter.
Ranger is reported adjusted by the quarter of 16.8 million representing a 13% margin.
Now, let's look at performance by segment.
Hi-spec Riggs, generated 80.9 million in Revenue down from 86.7 million in the prior year, period and 86.3 million in the prior quarter.
Rick hours totaled. 111,200 hours for the quarter, with an average hourly rate of 727
We're at our reductions were related to a reduction in completions devoted rigs during the quarter or make hourly rates. Were affected by larger than normal amounts of standby time for rigs when they operated a much lower margin between active jobs, adjusted, ebits offer, the quarter was 15.7 Million.
Crossing Solutions in ancillary Services, delivered 30.8 million in Revenue down from 36 million in the prior year and 32.2 million in the prior quarter. While operating income was 3.4 million and adjusted IBA was 5.5 million for the quarter.
Year-over-year activity declines were predominantly in plugging abandonment and called Tubing Service lines. While quarter over quarter declines, were related to Coil Tubing and torrent service lines were some recently. Idled equipment has not yet found new contracts.
Finally Wireless Services reported $17.2 million in revenue with an operating loss of $4.2 million and adjusted EVA of dollars.
This segment was impacted by lower activity as well as non-cash inventory adjustments of 1.6 million dollars that affected operating income.
But were treated as an adjustment to ebit dog. Given their 1-time nature.
On most evident, When comparing the positive Eva, does this quarter with the 2.3 million Eva Dal loss. And the first quarter of this year, where we had similar Revenue levels,
we intend to build upon these efficiencies in 2026 with the signing of additional contracts, as Stuart mentioned in his comments.
And turning to the balance sheet as of September 30th. 2025 total liquidity was 116.7 Million consisting of 71.5 million of capacity on a revolving credit facility and 45.2 million of cash on hand.
Free cash flow for the quarter was $8 million or 37 cents per share reflecting continued strength in our cash conversion.
Year to date. We've generated 25.8 million in free cash flow which has been deployed in the announced transaction today with AWS as well as through our shareholder return program
During the quarter, we were very active in purchasing 668,000 shares for $8.3 million. This brings year-to-date shareholder returns, including both Sheri purchases and our base load dividend, to $15.6 million.
Our capital allocation strategy remains focused on balancing disciplined growth with shareholder returns.
Capital expenditures, year-to-date total 19.1 million down from 2 8. 7 0.
The current year-to-date figure includes payments related to procure and build are to newly delivered, Echo rigs.
Our leverage profile remains conservative and we continue to maintain Financial flexibility to pursue strategic growth opportunities, like the AWS transaction while simultaneously returning Capital to shareholders.
We will continue to be prudent stewards of our balance sheet and capital returns framework in the future.
Before I hand it back to Stuart for closing comments, I want to reiterate that our financial discipline, strong liquidity and consistent free, cash flow generation position as well to execute on our strategic priorities.
Thanks Melissa, as we close out the third quarter. I want to reflect on the progress we've made and the opportunities ahead.
The acquisition of American Wealth Services is a clear example of our disciplined approach to growth.
It's a transaction that enhances our scale, expands our service offerings and strengthens our position in a key basin.
With AWS, we're not changing who we are. We're building on what we do best.
Our integration plan is already in motion and we're confident in our ability to execute. We've done this before and we'll do it again. With measured urgency precision and a focus on creating value for our customers and shareholders.
At the same time, our Echo hybrid electric rig program continues to gain traction.
These rigs represent the future of wealth servicing and the AWS acquisition gives us a better platform upon which we can accelerate that future.
Together, we're delivering Innovation, efficiency and safety in ways that set us apart.
We remain committed to our purpose: to be the best wealth servicing provider in the lower 48, on behalf of our customers, partners, employees, and shareholders.
Strong free. Cash flows and prudent returns to investors remain. Our guiding principle.
And we will continue to make our strategic decisions and allocate our Capital with discipline and foresight.
With our balance sheet and excellent shape, our integration playbook in action and our technology roadmap expanding, I'm more optimistic than ever about the next chapters for Ranger.
I want to thank our Ranger employees, customers, and the AWS team for their partnership and commitment throughout this process.
We're excited to welcome AWS into the range of family and look forward to everything. We will achieve together.
Thank all of you for your continued support. We will now open the call for questions.
Thank you. We will now begin the question and answer session.
To ask a question, you may press *101 on your touchtone phone.
If you are using a speaker phone, please pick up your handset before. Pressing the keys.
if at any time your question has been addressed and you would like to withdraw your question please press star 10 to
at this time, we will pause momentarily to assemble our roster.
The first question comes from.
Don Chris, with Johnson rice. Please go ahead.
Good morning guys and congrats on getting AWS transaction across the finish line.
Good morning. Um, I wanted to ask about kind of, the geographic footprint of AWS is, is it mostly in the Permian or does this kind of expand you into other areas? And I guess that goes for both the workover rigs as well as the other service lines.
Every everything is in the Permian Basin.
It's a it's a 100% Permian Basin player.
Okay. And then as far as tubing rentals and inspection and some of the other business lines that you're not in now, like how big is that in relation, or maybe you want to characterize it in IBA or whatever metric you want to use, as compared to the high-spec rig fleet?
Yeah, from from a, from a revenue perspective, it's about 45.555 meaning about 55% of their revenue is a direct overlap with Ranger in about 45% is service lines that are unique to Ranger. But I think 1 of the things we're excited about is a lot of those service lines are are being sold into some of our existing customers and so we think they're there may be an opportunity to expand them in the future.
Interesting. Um, and my last question and I'll return. The queue is on the echo rigs. Uh, where where are we? In the process? I believe they both been
Delivered but have have either 1 of them going to work and kind of what are your first impressions you know now having it in your possession.
So the there, there's 2. Uh, 1 is in the bakan uh, currently, and 1 is in the Permian Basin. Uh, they are each kind of undergoing final testing. Uh, we expect the 1 in the bachan to be working on live wells within the week. Um and uh we think the 1 in the per the permanent Basin right after that. Um, we're we're pretty excited. Don uh, if you just kind of just go, if you go up to the rig, if you just think about the safety features, it has how quiet it is. You know, we've obviously talked about some of the environmental benefits but I think everybody that has been up up and close to it is uh is in pretty blown away. So uh we're very much uh excited to get it over a live. Well,
it's going to be a momentous, uh,
Concert for y'all, for sure. Um, I uh, I'll turn back the queue. I appreciate the caller.
All right, thanks a lot.
The next question comes from John, Daniel, with Daniel Energy Partners. Please go ahead.
Good morning. I'll Echo Don's comments on consolidating the permanent good for you. Uh, first question is the customer base for American, can you?
Name the customer, but can you give some color as to the customer base?
yeah, they're they have, uh,
Pretty similar customers to us. Uh, they they have a, a very large customer uh, that we're very familiar with uh, as well. That we do a lot of work with, um, but I think as I made an in the comments, they do have some other customers that that Ranger has not historically worked with. So we think there's an opportunity there. Um, okay. But um, but but but for sure, you know, there's some some meaningful overlap with the customers but but we think that's going to be uh a positive uh we spoke to all that work to continue.
Got it. And then on the Echo rig, when your customers are looking at that, are they looking at the adoption to...
Replace an existing 1 of their working workover Rigs. And when they do that, are they looking to displace 1 of your competitors. Or are you, are you, is this potentially a maintenance capex growth capex. Could you just elaborate on how you see the adoption rolling out and how that changes the the competitive landscape with those customers that take the rig?
Sure. So, so right now that they're, they're additive, you know, we're not taking away. Okay? That said, as we think about over time, we would expect that. Um, these rigs would be deployed and would either replace some existing Rigs of ours or competitors. Um, but we don't think that's going to be 1 for 1, right? So you know, if you put 2 echo, rigs out, maybe they collectively displace 1 conventional, something like that.
Fair enough. And then just the final one, which I'll try to get you the answer to. Um, would you give us an over/under on how many Echo rigs get built in 2026?
And over under in 26. Uh, yeah.
What would make you happy and what would disappoint you? How about that to learn another way? Um,
We'll take the over/under at.
10.
Okay, fair enough.
Thank you very much. See you guys this week, absolutely.
Thank you.
This concludes our question-and-answer session.
I would like to turn it back over to Stuart Boren for any closing remarks.
Thanks. Uh, thanks Steve again. Uh, just just thanks, uh, to all of you, uh, for your continued interest in Ranger, as we said, it's an incredibly exciting time, uh, with the deal, uh, with the echo rigs were really, just excited about, everything's coming together. So we look forward to talking to all of you in the weeks ahead. Thanks a lot.
Thank you. The conference has now concluded.
Thank you for attending today's presentation. You may now disconnect