Business context and reporting period
Ranger Energy Services, Inc. filed this Form 10-K for the fiscal year ended December 31, 2021. It provides U.S. onshore well-service rigs, wireline services, and processing and ancillary services. Results below compare full-year 2021 with full-year 2020; the filing does not provide a clear standalone fourth-quarter financial summary.
During 2021, Ranger acquired Patriot and PerfX wireline assets and certain Basic Energy Services assets. The acquisitions expanded operations and contributed materially to reported revenue growth. In the fourth quarter, the company revised its segment presentation; prior periods were recast.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $293.1 million | $187.8 million |
| Operating loss | $40.5 million | $17.2 million |
| Net loss, consolidated | $2.1 million | $18.5 million |
| Net income (loss) attributable to Ranger | $8.6 million | $(10.3) million |
| Adjusted EBITDA | $12.8 million | $22.2 million |
| Cash from (used in) operations | $(39.4) million | $25.5 million |
Revenue increased 56%, while cost of services increased 78% to $263.3 million. Cost of services was approximately 89% of revenue, versus 78% in 2020; the resulting service margin before depreciation and amortization was approximately 10% versus 21%. Operating margin was approximately negative 14% versus negative 9%, and Adjusted EBITDA margin was approximately 4% versus 12%. Adjusted EBITDA is a non-GAAP measure and should not be viewed as a substitute for GAAP results.
By segment, revenue was $140.1 million for High Specification Rigs, $117.9 million for Wireline Services, and $35.1 million for Processing Solutions and Ancillary Services. Segment operating results were approximately a $0.2 million loss, a $5.8 million loss, and $0.3 million income, respectively. Rig hours rose 61% to 257,900; wireline completed stages rose 96% to 27,200. Acquisition-related revenue included $38.0 million from Basic, $55.5 million from PerfX, and $11.6 million from Patriot, as reported in the filing’s segment discussion.
The consolidated net loss includes a $37.2 million bargain-purchase gain from the Basic acquisition and a $6.2 million income-tax benefit. Despite the consolidated loss, Ranger reported positive income attributable to the parent, partly reflecting the 2020–2021 change in noncontrolling interests. Basic and diluted earnings per share attributable to Ranger were $0.73 and $0.63, respectively, versus losses of $1.21 per share in 2020.
Operating cash flow was negative $39.4 million, with increased accounts receivable and contract assets among the material working-capital movements. Investing cash use was $36.4 million, including $39.9 million of net cash used for business acquisitions, partly offset by asset-sale proceeds. Financing provided $73.6 million, including $42.0 million from Series A preferred stock and borrowings under the refinanced credit arrangements.
At year-end, cash was $0.6 million, working capital was $2.5 million, and reported total liquidity was $18.6 million, including $18.0 million of revolver availability. Debt was $63.2 million in principal (reported balance-sheet carrying amount: $62.5 million), compared with $25.2 million in principal at year-end 2020. Total assets were $393.1 million and total liabilities were $144.4 million.
Material changes, outlook, risks and unusual items
- Ranger refinanced its prior debt in September 2021 with an Eclipse facility. The $12.4 million Term Loan B was due in September 2022 and bore a stated rate of 12% above LIBOR or 11% above the base rate. The company disclosed covenant compliance at year-end. In January 2022, it amended the agreement, increasing maximum revolver availability to $65 million.
- Management expected available funds and operating cash to meet liquidity needs and debt covenants for at least 12 months from issuance of the financial statements. This is not quantified earnings or revenue guidance.
- Management cited higher commodity prices, industry activity, and acquisitions as drivers of increased activity and revenue. It also cautioned that COVID-19-related uncertainty and market volatility could continue.
- Cost growth outpaced revenue growth, and Adjusted EBITDA declined despite higher revenue. Wireline Services Adjusted EBITDA fell to $2.3 million from $22.0 million; management attributed the pressure chiefly to costs rising faster than segment revenue.
- A material weakness in controls over accounting for non-routine and complex transactions made internal control over financial reporting ineffective at December 31, 2021. Disclosure controls were also deemed ineffective. Management was implementing additional controls, staffing, and training, and expected remediation during 2022; remediation was not yet established.
- The auditor gave an unqualified opinion on the financial statements but did not attest to internal-control effectiveness. Ranger said it was not required to obtain that attestation while an emerging growth company.
- Key risks include oilfield activity and commodity-price volatility, customer concentration, acquisition integration, labor availability, safety and environmental liabilities, climate and hydraulic-fracturing regulation, and variable-rate debt. EOG accounted for 15% and ConocoPhillips 10% of 2021 revenue; the top five customers represented 42%.
- Ranger reported no legal proceeding expected to have a material adverse effect. It deferred $1.1 million of payroll taxes under the CARES Act, due December 31, 2022. The Basic purchase generated a $37.2 million bargain-purchase gain; acquisition and tax-receivable-agreement termination costs also affected the year.
Important facts for investors to verify
- Reconcile the consolidated net loss of $2.1 million with parent-attributable income of $8.6 million and positive reported EPS; review the noncontrolling-interest and preferred-stock treatment.
- Assess the sustainability of operating cash flow and working capital, including receivables and contract assets, against the reported $18.0 million of revolver availability.
- Review near-term debt maturities, especially Term Loan B’s September 2022 maturity, subsequent repayments, and the January 2022 credit amendment.
- Separate acquisition-driven growth from organic activity, and evaluate whether wireline cost increases and lower Adjusted EBITDA margins persist.
- Track the company’s remediation and testing of the material weakness, including whether controls over complex transactions become effective.
- Review acquisition purchase-price allocations and the assumptions supporting the Basic bargain-purchase gain, which the filing said remained subject to finalization.