Ranger Energy Services, Inc. — Q3 2023 Form 10-Q
Business context and reporting period. Ranger provides U.S. onshore well-service rigs, wireline, processing and ancillary services. This unaudited filing covers the quarter and nine months ended September 30, 2023; comparisons are with the corresponding 2022 periods. Amounts below are in millions except per-share data and operating metrics.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $164.4 | $177.0 | $485.1 | $454.2 |
| Operating income | $11.7 | $18.0 | $32.3 | $10.6 |
| Net income | $9.4 | $13.6 | $21.7 | $7.5 |
| Diluted EPS | $0.38 | $0.54 | $0.86 | $0.33 |
| Adjusted EBITDA (non-GAAP) | $24.0 | $30.3 | $66.0 | $57.9 |
- Margins: Operating margin was approximately 7.1% in Q3 2023 versus 10.2% a year earlier, and 6.7% for the first nine months versus 2.3%. Cost of services was 82% of revenue in Q3 2023 versus 78% in Q3 2022; it was 83% in both nine-month periods.
- Q3 segment revenue: High Specification Rigs $79.2 (down 1%); Wireline Services $53.2 (down 12%); Processing Solutions and Ancillary Services $32.0 (down 13%). For the first nine months, revenue increased in all three segments, to $234.3, $157.6 and $93.2, respectively.
- Cash flow, nine months: Operating cash flow was $53.1, investing cash outflow $23.0 and financing cash outflow $25.6. Cash increased $4.5 to $8.2. Cash purchases of property and equipment were $27.9; reported segment capital expenditures, which include non-cash additions, totaled $34.6.
- Balance sheet and liquidity: At September 30, cash was $8.2, current assets $151.0 and current liabilities $79.6; working capital was $71.4. Funded debt was $10.3, all classified as current, versus total debt of $18.4 at December 31, 2022. Total liquidity was $69.9, including $61.7 available under the Wells Fargo facility.
Material changes and notable items
- Q3 revenue fell 7% year over year, while net income fell 31% and Adjusted EBITDA fell $6.3. Management attributed the revenue and profit pressure mainly to lower wireline completion activity and reduced activity in processing and ancillary services. Rig hours declined 9% to 112,400; average revenue per rig hour rose 8% to $700. Wireline completed stage counts declined 26% to 6,800.
- For the first nine months, revenue grew 7%, net income rose to $21.7 from $7.5 and Adjusted EBITDA increased to $66.0 from $57.9. Pricing and activity gains in rigs and wireline supported results; Processing Solutions and Ancillary Services Adjusted EBITDA declined.
- On May 31, 2023, Ranger replaced its Eclipse facilities and secured promissory note with a $75 million Wells Fargo revolving facility, maturing May 31, 2028. It recognized a $2.4 loss on debt retirement. At quarter-end it had $10.1 drawn and $3.2 of letters of credit; the borrowing base and facility terms determine availability. The company reported covenant compliance, with a fixed-charge coverage ratio above 1.0.
- Ranger acquired Pegaso pump-down assets for $7.3 cash in August; acquired assets were recorded as construction in progress. It also recorded a $0.4 fixed-asset impairment and a $1.6 net gain on asset sales for the nine months.
- The company repurchased 781,000 shares for $8.6 during the first nine months and paid its first $0.05-per-share quarterly dividend in September. The Board declared another $0.05 dividend payable December 1, 2023. Management stated an intention to return at least 25% of annual cash flows to investors going forward; future dividends remain subject to Board approval.
- Income tax expense was $5.4 for the nine months. Ranger released previously recorded valuation allowances on deferred tax assets, recognizing a discrete tax benefit, and disclosed a 2023 ownership change that triggered another Section 382 limitation analysis. Management did not expect a material cash tax impact for the remainder of 2023.
Outlook, risks and controls
Management described the business outlook as stable and anticipated mild increases in activity, citing asset redeployment, expected commodity-price stabilization and projected higher 2024 oil demand. It gave no quantified revenue, earnings or cash-flow guidance. Management cautioned that E&P consolidation could temporarily reduce activity, and that geopolitical events, commodity-price volatility and macroeconomic conditions may materially affect results.
Key risks include customer concentration and receivable credit exposure, oil and gas activity levels, labor availability and costs, inflation, safety and environmental events, regulation, interest rates and competition. One customer represented approximately 11% of Q3 revenue and 7% of net receivables at September 30. The Wells Fargo facility is secured by substantially all assets and includes borrowing-base, covenant and cash-dominion provisions.
Management concluded disclosure controls were ineffective at September 30, 2023 because previously disclosed material weaknesses remained: segregation of duties over journal entries and reconciliations, IT access controls, and accounting for complex transactions. Remediation steps were largely completed, but the weaknesses will not be considered remediated until controls operate effectively and are tested. Management reported no material litigation and no material off-balance-sheet arrangements.
Investor verification points
- Track rig hours, wireline stage counts and segment margins to assess whether Q3 activity declines stabilize and utilization improves.
- Verify ongoing Wells Fargo borrowing-base availability, covenant compliance, interest costs and the effect of cash-dominion triggers.
- Review year-end testing and remediation status for the disclosed material weaknesses in financial reporting controls.
- Assess the Section 382 analysis, deferred-tax-asset assumptions and the sustainability of the reported tax benefit.
- Monitor capital spending, share repurchases and dividend distributions against operating cash generation and management’s stated capital-return intention.