Ranger Energy Services, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Ranger provides U.S. onshore well-service rigs, wireline services, processing solutions and ancillary services.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $157.5 million | $123.6 million |
| Operating income (loss) | $9.2 million | $(5.2) million |
| Net income (loss) | $6.2 million | $(5.7) million |
| Diluted earnings (loss) per share | $0.25 | $(0.31) |
| Adjusted EBITDA (non-GAAP) | $20.1 million | $9.6 million |
| Net cash from (used in) operations | $17.4 million | $(12.1) million |
| Cash and cash equivalents, March 31 | $14.4 million | — |
Revenue less cost of services was $26.6 million, or approximately 16.9% of revenue, versus $15.6 million, or 12.6%, a year earlier. Operating margin was approximately 5.8%, compared with a 4.2% operating loss margin. Cost of services increased 21%, slower than revenue growth of 27%. General and administrative expense declined 18% to $8.4 million; depreciation and amortization fell 14% to $10.0 million; and net interest expense declined 43% to $1.2 million.
By segment, revenue was $77.5 million for High Specification Rigs, $49.9 million for Wireline Services and $30.1 million for Processing Solutions and Ancillary Services. Segment operating income was $11.9 million, $1.8 million and $3.4 million, respectively; corporate and other costs produced a $7.9 million operating loss.
Liquidity, debt and cash flow
Management reported total liquidity of $68.4 million: $14.4 million cash and $54.0 million available under the revolving facility, after a $1.6 million letter of credit. Working capital was $73.1 million, versus $65.6 million at December 31, 2022. Operating cash flow was $17.4 million; investing activities used $1.1 million and financing activities used $5.6 million. Cash increased $10.7 million during the quarter.
Total debt carrying value was $15.6 million at March 31, down from $18.4 million at year-end. It included $9.6 million net under the M&E term loan, a $5.6 million secured promissory note and $0.4 million of installment purchases; there were no revolver borrowings. The company had $8.5 million of debt classified as current. The revolving facility matures in September 2025, while the $5.6 million promissory note matures in January 2024. The company was in compliance with its debt covenants and reported a fixed-charge coverage ratio above 1.0. Debt is secured by substantially all company assets under the credit agreement.
Changes, outlook and risks
- Year-over-year improvement: Revenue rose 27%, and the company moved from a net loss to net income. Adjusted EBITDA more than doubled. Rig hours were unchanged at 112,500, while average rig revenue per hour increased 19% to $689. Wireline completed stage counts declined 14% to 6,400, but pricing, standby charges, pump-down and production services supported revenue growth.
- Management outlook: The company expected business opportunities and financial results to show “mild increases” as the global economy stabilized. It cited an expected 2023 oil-price range of approximately $80–$85 per barrel, while noting uncertain demand, OPEC+ production cuts and geopolitical developments. The filing gives no specific company revenue or earnings guidance.
- Capital returns: A share-repurchase program authorizes up to $35 million over 36 months. The company repurchased 39,400 shares for $0.4 million under the program during the quarter. A quarterly dividend of $0.05 per share is planned after achieving net debt of zero; management stated an intention to return at least 25% of annual cash flows to investors.
- Control weakness: Management and the CEO and CFO concluded disclosure controls were ineffective as of March 31, 2023, due to previously reported material weaknesses involving segregation of duties, IT access controls and accounting for complex transactions. Remediation was underway; the weaknesses were not considered remediated pending effective operation and testing.
- Other risks and contingencies: Results are exposed to oil and gas activity and commodity-price volatility; the company does not hedge its indirect commodity exposure or interest-rate risk. A hypothetical one-percentage-point interest-rate change was estimated to affect annual interest expense by less than $0.2 million. Two customers each represented about 10% of quarterly revenue. The company reported no material litigation, no material off-balance-sheet arrangements and no material subsequent events requiring disclosure.
Important facts for investors to verify
- Whether higher revenue and margins persist, particularly given the lower wireline stage count and sensitivity to customer activity and commodity prices.
- Debt repayment and net-debt progress, including the January 2024 promissory-note maturity, borrowing-base availability and covenant compliance.
- Progress in remediating the material weaknesses and whether controls are subsequently tested and deemed effective.
- Execution and funding of the repurchase and dividend plans; distinguish the 39,400 program purchases from the 126,501 total shares reported as repurchased, which also includes shares withheld for employee tax obligations.
- That Adjusted EBITDA is a non-GAAP measure and should be assessed alongside GAAP earnings and cash flow; also note the difference between reported segment capital expenditures of $7.7 million and cash purchases of property and equipment of $5.4 million.