Ranger Energy Services, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless otherwise noted. Ranger provides U.S. onshore well-service rigs, wireline, processing and ancillary services. Results include businesses acquired in 2021, notably Basic, Patriot and PerfX.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $123.6 million | $38.3 million; up 223% |
| Cost of services | $108.0 million; 87% of revenue | $34.1 million; 89% of revenue |
| Operating loss | $5.2 million; 4.2% operating loss margin | $7.3 million; 19.1% operating loss margin |
| Net loss | $5.7 million; diluted loss per share $0.31 | $8.3 million consolidated net loss; diluted loss per share $0.54. Q1 2021 included $3.7 million attributable to noncontrolling interests. |
| Adjusted EBITDA (non-GAAP) | $9.6 million | Loss of $0.2 million |
| Operating cash flow | $(12.1) million | $(1.9) million |
| Cash and liquidity | $3.8 million cash; $10.2 million total liquidity, including $6.4 million revolver availability | Cash was $0.6 million at December 31, 2021 |
| Debt | $76.7 million carrying value; $61.1 million classified current | $62.5 million carrying value at December 31, 2021 |
| Working capital | $11.7 million | $2.5 million at December 31, 2021 |
Revenue rose across all segments: High Specification Rigs $64.9 million, Wireline Services $38.6 million, and Processing Solutions and Ancillary Services $20.1 million. Growth reflected acquisitions as well as increased activity and pricing. Rig hours increased 161% to 112,500; completed wireline stages rose 163% to 7,400. Segment profitability was uneven: High Specification Rigs generated $14.1 million of Adjusted EBITDA, Wireline lost $1.8 million, and Processing and Ancillary generated $3.3 million.
Operating cash use reflected working-capital investment, including increases in receivables and contract assets. Investing cash inflow was $5.0 million, including $6.6 million of asset-sale proceeds and $1.6 million of cash purchases of property and equipment. Financing provided $10.3 million, with borrowing activity funding working capital. Interest expense increased to $2.1 million from $0.6 million.
Material changes and unusual items
- The 223% revenue increase was substantially acquisition-related. Basic contributed $32.7 million of High Specification Rigs revenue and $9.5 million of Processing and Ancillary revenue; Patriot and PerfX contributed $7.3 million and $24.5 million of Wireline revenue, respectively.
- The $9.8 million year-over-year improvement in Adjusted EBITDA was driven mainly by High Specification Rigs. Wireline Adjusted EBITDA declined from income of $0.8 million to a loss of $1.8 million as costs grew faster than revenue.
- Ranger recorded $5.6 million of assets held for sale on the balance sheet, with the note describing approximately $5.7 million. Proceeds from excess Basic-acquisition asset sales are intended to repay acquisition-related loans.
- In April 2022, 6.0 million Series A preferred shares automatically converted into Class A common shares. The filing reports 24,700,212 Class A shares outstanding on April 27, 2022.
Outlook, risks and contingencies
- Management stated it expects sufficient funds to meet liquidity needs and comply with debt covenants for at least 12 months from issuance of the financial statements. No specific revenue or earnings guidance was provided.
- Debt is secured by substantially all company assets. The Term Loan B, with an approximately 13% weighted-average rate for the quarter, was scheduled to mature in September 2022; the company reported a $4.9 million payment after quarter-end from Basic-asset sale proceeds. Total scheduled debt principal payments for the 12 months ending March 31, 2023 were $61.4 million. The company reported covenant compliance at March 31, 2022.
- Management cited uncertainty from COVID-19, oil and gas price and activity volatility, and the Russia-Ukraine conflict. The company had not experienced material operational interruptions from the conflict as of the filing. A 1 percentage-point interest-rate change was estimated to affect annual interest expense by approximately $0.7 million.
- Two customers, Occidental Petroleum and Chevron, represented 11% and 10% of Q1 revenue; together they accounted for approximately 27% of net receivables at quarter-end. The company reported no material litigation and no material off-balance-sheet arrangements.
- Disclosure controls were deemed ineffective as of March 31, 2022 due to a previously identified material weakness in controls over non-routine and complex transactions. Management was evaluating and strengthening controls. Ranger expected to lose emerging-growth-company status on December 31, 2022.
Important facts for investors to verify
- Whether operating cash generation and working-capital collection improve, given Q1 operating cash use and limited $6.4 million revolver availability.
- Repayment or refinancing progress for near-term debt maturities, including the Term Loan B, and the impact of asset-sale proceeds on remaining balances.
- The extent to which revenue and profitability gains persist apart from acquisitions, particularly in Wireline Services.
- The effect of the preferred-stock conversion on share count and per-share results, and subsequent equity awards disclosed in the filing.
- Remediation of the material weakness and any subsequent change in disclosure-control effectiveness.