Business context and reporting period
Ranger Energy Services, Inc. provides onshore well-service rigs, wireline, processing and ancillary services to U.S. oil and gas exploration and production companies. This Form 10-K reports the fiscal year ended December 31, 2022, compared with fiscal 2021; it is not a standalone fourth-quarter report. Operations are organized into High Specification Rigs, Wireline Services, and Processing Solutions and Ancillary Services.
Financial results and key metrics
Amounts are in millions of dollars unless otherwise stated.
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $608.5 | $293.1 |
| Operating income (loss) | $19.7 | $(40.5) |
| Net income (loss) | $15.1 | $(2.1) |
| Adjusted EBITDA | $79.5 | $12.8 |
| Cash from (used in) operations | $44.5 | $(39.4) |
- Revenue increased 108%; operating margin was approximately 3.2%, versus a loss margin of approximately 13.8% in 2021. Cost of services declined to approximately 83% of revenue from 89%.
- Segment revenue was $293.2 for High Specification Rigs, $197.0 for Wireline Services, and $118.3 for Processing Solutions and Ancillary Services. Segment Adjusted EBITDA was $60.5, $18.6, and $25.5, respectively.
- Rig hours rose 82% to 469,000, while average revenue per rig hour increased 15% to $625. Wireline completed stages increased 15% to 31,400.
- Year-end cash was $3.7. Total liquidity was $61.0, including $57.3 of revolver availability. Working capital was $65.6, compared with $2.5 a year earlier.
- Debt principal was $18.6 at year-end, compared with $63.2 at the end of 2021; the debt table reports a carrying amount of $18.4. The company paid down debt during 2022, including $25.6 net on the credit facility and $12.4 to retire Term Loan B.
- Investing activities provided $11.3, primarily reflecting asset-sale proceeds; cash purchases of property and equipment were $13.8. Financing activities used $52.7. The filing reports segment capital expenditures of $19.1.
Material changes versus the prior comparable period
Growth reflected higher activity and pricing as well as the full-year contribution of acquisitions completed in 2021, particularly Basic, PerfX and Patriot. The acquisitions contributed substantially to reported segment revenue growth, so the year-over-year increase is not solely organic. Adjusted EBITDA improved across all three operating segments, while corporate and other Adjusted EBITDA loss widened to $25.1 from $17.0, partly due to higher employee and professional costs.
Interest expense rose to $7.3 from $5.0, reflecting higher rates on debt, partly offset by lower balances. A $3.6 bargain-purchase gain was recorded in 2022 from final measurement-period adjustments related to the Basic acquisition; 2021 included a larger $37.2 gain. The company also recorded a $1.3 impairment of assets held for sale in 2022.
Outlook, risks and unusual items
- Management expected business opportunities and financial results to increase mildly in 2023. It cited expected oil demand growth and oil prices of approximately $85 per barrel, while noting macroeconomic and geopolitical uncertainty, including developments involving China and Russian oil supply. This is management’s outlook, not a quantified earnings or revenue forecast.
- Management stated it expected sufficient funding for short- and long-term liquidity needs and covenant compliance. The company was in compliance with its credit agreement covenants at December 31, 2022.
- On March 1, 2023, the board authorized share repurchases of up to $35 million over 36 months and approved a quarterly dividend of $0.05 per share once net debt reaches zero. Management said it intended to return at least 25% of annual cash flows to investors; the dividend was conditional and had not yet commenced.
- Key business risks include oil and gas price and customer-spending volatility, seasonality and severe weather, customer concentration, competition, labor availability and cost inflation, safety and environmental liabilities, regulatory and climate-related changes, and cyber incidents. One customer represented approximately 10% of 2022 revenue; the top five accounted for 36%.
- Internal control over financial reporting was ineffective at year-end. Management and the auditor identified material weaknesses involving segregation of duties over journal entries and reconciliations, IT access controls, and accounting for complex transactions. The auditor issued an adverse opinion on internal controls, while giving an unqualified opinion on the financial statements. Management reported remediation efforts, but the weaknesses were not yet considered remediated.
- Legal matters arising in the ordinary course were disclosed; management did not expect them to have a material adverse effect. The filing notes that insurance may not cover all potential claims and environmental exposures.
Important facts for investors to verify
- How much of the revenue and EBITDA increase reflects acquired businesses versus organic activity, pricing and utilization.
- Whether cash generation and working-capital performance remain sustainable, given year-end receivables of $91.2 and contract assets of $26.9.
- Progress in remediating the three material weaknesses and whether subsequent testing demonstrates effective controls.
- Current borrowing-base availability, variable-rate borrowing costs, debt maturities and compliance with credit-facility conditions.
- Whether the company reaches net debt zero and initiates the proposed dividend, and how any repurchases are funded within the authorized limit.
- The operational and financial effects of oilfield activity, customer concentration, regulatory changes and other risks identified in the filing.