Ranger Energy Services, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report; the supplied filing does not provide a clear standalone fourth-quarter income statement or cash-flow breakdown.
Business context
Ranger provides onshore U.S. oilfield services through High Specification Rigs, Completion and Other Services, and Processing Solutions. Its services include well completion support, workovers, maintenance, wireline, fluid management, and modular natural-gas processing. Results are closely tied to customer activity, commodity prices, and E&P capital spending.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $187.8 million | $336.9 million |
| Cost of services | $147.9 million; 78% of revenue | $263.0 million; 78% of revenue |
| Operating income (loss) | $(15.1) million | $12.4 million |
| Net income (loss) | $(18.5) million | $4.4 million |
| Net loss attributable to Ranger, Inc. | $(10.3) million; $(1.21) per share | $1.8 million; $0.21 per share |
| Adjusted EBITDA | $22.2 million | $50.8 million |
| Cash from operating activities | $25.5 million | $51.9 million |
| Capital expenditures | $7.8 million (segment disclosure) | $23.5 million (segment disclosure) |
Revenue fell 44%, and Adjusted EBITDA fell 56%. Operating loss was about 8% of revenue in 2020, versus operating income of about 4% in 2019 (calculated from reported figures). Operating cash flow declined 51%. Investing activities used $5.4 million, while financing activities used $24.2 million; cash decreased $4.1 million to $2.8 million.
At year-end, reported liquidity was $16.0 million: $2.8 million cash and $13.2 million of revolving-credit availability. Working capital was $2.7 million, down from $3.6 million. Principal debt was $25.2 million; the balance-sheet carrying amount of debt was $24.5 million, excluding finance leases. Total liabilities were $55.8 million. The company reported compliance with its credit-facility and Encina covenants at year-end.
Material changes and unusual items
- Revenue declined across all segments: High Specification Rigs fell 38% to $82.5 million; Completion and Other Services fell 47% to $98.5 million; Processing Solutions fell 67% to $6.8 million.
- Rig hours decreased 36% to 160,300, rig utilization decreased 35%, and average revenue per rig hour declined 3% to $514. Average active wireline units fell from 11 to 7; average rented MRUs declined 80%.
- Management cut costs and reduced the workforce and salaries. Planned growth capital expenditures were eliminated in April 2020; investing cash outflow fell substantially versus 2019.
- The company settled ESCO claims and the seller note for $3.8 million, recognizing a $2.1 million gain on debt retirement. It also paid $2.4 million to repurchase shares from ESCO. Open-market repurchases were $0.7 million in each of 2020 and 2019.
- Despite pandemic- and commodity-related impairment indicators, the company reported that its 2020 long-lived-asset impairment analysis found no impairment.
- On February 22, 2021, the company agreed to sell and lease back certain vehicles for $3.5 million cash.
Outlook, risks, and contingencies
Management said it expected sufficient funds to meet liquidity needs and comply with debt covenants for at least 12 months from the financial statements’ issuance. No quantified revenue, earnings, or activity guidance was provided. The company said the duration and effects of COVID-19, customer activity, oil and gas prices, and supply-demand conditions remained uncertain.
- Industry and demand: COVID-19, oil-market disruption, price volatility, storage constraints, and reduced E&P spending could further pressure service demand, utilization, pricing, and collections.
- Customer concentration: The top five customers generated 57% of 2020 revenue, versus 49% in 2019. EOG and Concho accounted for approximately 21% and 17%, respectively.
- Liquidity and debt: The borrowing base fell to $20.7 million from $30.5 million in 2019 as activity and receivables declined. Credit-facility availability and covenant requirements depend partly on receivables and liquidity; cash dominion was triggered in Q1 2020 and reverted to the company in Q2.
- Tax Receivable Agreement: A change of control or early termination could accelerate payments. The estimated present value of termination payments as of December 31, 2020 was approximately $9.9 million; actual payments could differ and may exceed realized tax benefits.
- Regulatory and operating exposures: Environmental, emissions, climate, hydraulic-fracturing, permitting, induced-seismicity, transport, safety, and cybersecurity developments could raise costs or constrain customers’ operations. These are disclosed risks, not quantified projected losses.
- Legal matters: Ranger reported ordinary-course claims and lawsuits, but did not expect them to have a material adverse effect. It reported no legal proceeding expected to be material individually or in aggregate.
Most important facts for investors to verify
- Whether post-2020 customer activity, rig utilization, service pricing, and segment margins recovered from the sharp 2020 declines.
- Current liquidity, borrowing-base availability, covenant headroom, and ability to meet upcoming debt maturities.
- Customer concentration and payment performance, particularly for EOG, Concho, and the five largest customers.
- Whether the vehicle sale-leaseback closed and how its proceeds and new lease obligations affect liquidity.
- The assumptions and potential cash impact of the TRA, including any acceleration-triggering transaction.
- Whether subsequent operating results or asset values require impairment charges; the 2020 review concluded no impairment was needed.
Audit and controls: BDO issued an unqualified opinion on the consolidated financial statements. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal-control effectiveness.