Ranger Energy Services, Inc. — Q1 2021 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2021. Ranger provides onshore well-service rigs, completion and other oilfield services, and modular natural-gas processing solutions across U.S. basins. Results are unaudited and may not indicate future performance.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $38.3 million | $81.0 million |
| Cost of services | $34.1 million | $63.1 million |
| Gross profit (revenue less cost of services) | $4.2 million; 11% margin | $17.9 million; 22% margin |
| Operating income (loss) | $(7.3) million | $4.0 million |
| Net income (loss) | $(8.3) million consolidated; $(4.6) million attributable to Ranger, Inc. | $2.8 million consolidated; $1.5 million attributable to Ranger, Inc. |
| Basic and diluted EPS | $(0.54) | $0.17 basic; $0.15 diluted |
| Adjusted EBITDA (non-GAAP) | $(0.2) million | $11.4 million |
| Operating cash flow | $(1.9) million | $8.5 million |
| Capital expenditures | $0.4 million cash purchases; $1.2 million segment-reported capex | $4.7 million cash purchases; $6.0 million segment-reported capex |
At March 31, cash was $1.5 million, working capital was $2.1 million, and management reported total liquidity of $12.7 million, including $11.2 million available under the revolving credit facility. Debt was $24.0 million net of issuance costs (aggregate principal of $24.6 million); finance and operating lease obligations were additional liabilities. Current and long-term debt carrying amounts were $10.3 million and $13.7 million, respectively. Total liabilities were $58.4 million and stockholders’ equity was $176.9 million.
Material changes versus the prior comparable period
- Revenue fell 53%. High-spec rig revenue declined 38%, completion and other services declined 64%, and processing solutions declined 61%.
- High-spec rig hours fell 31% to 43,200; utilization decreased 29%, and average revenue per rig hour declined 12% to $493. Average active wireline units fell from 11 to six. Average MRU utilization declined from 17% to 9%.
- Cost of services decreased 46%, less than the revenue decline, and rose to 89% of revenue from 78%; gross margin consequently contracted.
- Operating results shifted from profit to loss, and Adjusted EBITDA declined by $11.6 million to a loss. The 2020 comparison included a $2.1 million gain on retirement of debt.
- Operating cash flow turned negative. Cash decreased $1.3 million during the quarter to $1.5 million; investing cash flow was approximately flat, compared with $4.6 million of investing outflow in Q1 2020.
Outlook, risks, contingencies and unusual items
- Management expected available liquidity to be sufficient for at least 12 months after issuance of the statements and expected to meet debt covenants. The company reported covenant compliance at March 31, 2021. This is management’s assessment, not a revenue or earnings forecast; the filing provides no quantified operating guidance.
- Management said activity had increased in some areas as restrictions eased, but warned renewed containment measures could curtail growth. COVID-19 effects, commodity-price volatility, oil-and-gas oversupply, customer spending, asset utilization, customer payment capacity, and possible impairment of property or intangible assets remain risks.
- One customer, EOG Resources, represented 24% of Q1 2021 revenue and approximately 12% of net receivables. The company also disclosed concentration among receivables by customer and segment.
- In April 2021, after quarter-end, the company agreed to sell and lease back operational facilities in Colorado for $13.0 million. The lease term is 15 years with annual rent escalations of 2%; proceeds provided additional liquidity. A separate Q1 sale-leaseback of fixed assets generated $3.5 million and did not qualify for sale accounting.
- The company had deferred $1.9 million of payroll taxes under the CARES Act; half was due by December 31, 2021. No material litigation was reported, and management said existing matters were not expected to materially affect financial position or results.
- The company disclosed no material off-balance-sheet arrangements and no material changes in internal control over financial reporting; disclosure controls were assessed as effective at March 31, 2021.
Important facts for investors to verify
- Whether improving oilfield activity translates into higher rig hours, utilization, wireline demand, pricing, and segment margins.
- Whether cash generation and working capital improve, and whether the reported $11.2 million of revolver availability remains accessible as the borrowing base changes.
- The full economics and liquidity impact of the $13.0 million Colorado facility sale-leaseback, including long-term rental commitments and escalations.
- Debt maturity and covenant exposure: debt principal was scheduled to mature principally in the 12 months ending March 31, 2023, and the Encina agreement carries a 9.5% rate at March 31, 2021.
- Customer concentration and collections, especially EOG’s share of revenue and receivables, and the high customer concentrations in Processing Solutions receivables.
- Non-GAAP Adjusted EBITDA reconciliation and the effects of unusual items, including the prior-year debt-retirement gain and current-period asset-sale and severance/reorganization adjustments.