Business Overview and Company History
Ranger Energy Services, Inc. (RNGR) is one of the largest providers of high specification mobile rig well services, cased hole wireline services, and ancillary services in the U.S. oil and gas industry. The company's services facilitate operations throughout the lifecycle of a well, including the completion, production, maintenance, intervention, workover, and abandonment phases.
Ranger was incorporated as a Delaware corporation in February 2017 and went public in August 2017 through an initial public offering. Prior to the IPO, the company underwent a corporate reorganization, with Ranger, Inc. becoming a holding company and the sole material assets consisting of membership interests in RNGR Energy Services, LLC.
RNGR Energy Services, LLC owns all of the outstanding equity interests in Ranger Energy Services, LLC and Torrent Energy Services, LLC, along with the company's other subsidiaries. Ranger Energy Services, LLC is the sole managing member of Ranger Services and Torrent Services and is responsible for all operational, management, and administrative decisions relating to their businesses.
The company operates in three reportable segments: High Specification Rigs, Wireline Services, and Processing Solutions and Ancillary Services. The High Specification Rigs segment provides high specification well service rigs and complementary equipment and services to facilitate operations throughout the lifecycle of a well. The Wireline Services segment provides services necessary to bring and maintain a well on production, including completion, production, and pump-down service lines. The Processing Solutions and Ancillary Services segment provides complementary services often utilized in conjunction with the company's High Specification Rigs and Wireline Services segments, such as equipment rentals, plug and abandonment, snubbing, and processing solutions.
Ranger's operations take place in most of the active oil and natural gas basins in the U.S., including the Permian Basin, Denver-Julesburg Basin, Bakken Shale, Eagle Ford Shale, Haynesville, Gulf Coast, South Central Oklahoma Oil Province and Sooner Trend, Anadarko Basin, and Canadian and Kingfisher Counties plays.
Since its founding, Ranger has focused on building out its high specification rig fleet and expanding its wireline services capabilities through strategic acquisitions. In 2021, the company acquired PerfX Wireline Services, which significantly enhanced its wireline services capabilities. These investments have allowed Ranger to establish itself as one of the largest providers of these services in the U.S. oil and gas industry.
Throughout its history, Ranger has faced various challenges, including market downturns and industry consolidation. The COVID-19 pandemic in 2021 presented significant headwinds, severely impacting oil and gas activity levels. In response, the company implemented restructuring efforts and cost-cutting measures to adapt to the changing market conditions. Despite these obstacles, Ranger's focus on maintaining a strong balance sheet and operational excellence has helped it weather the storm and position itself for future growth.
Financial Overview
As of the latest financial reporting period, Ranger had total assets of $373.9 million and total liabilities of $106.3 million, resulting in a net debt-free position. The company's current ratio stood at 1.99, indicating a strong short-term liquidity position. The quick ratio was 1.91, further emphasizing the company's robust liquidity.
For the nine months ended September 30, 2024, Ranger reported revenue of $428.0 million, a decrease of 12% compared to the same period in 2023. Net income for the nine-month period was $12.6 million, down from $21.7 million in the prior-year period.
The company's High Specification Rigs segment generated revenue of $249.1 million in the first nine months of 2024, up 6% year-over-year. The Wireline Services segment reported revenue of $87.6 million, a 44% decline compared to the same period in 2023, primarily due to a decrease in wireline completions activity. The Processing Solutions and Ancillary Services segment saw revenue of $91.3 million, a 2% decrease from the prior-year period.
Ranger's operating cash flow for the nine months ended September 30, 2024, was $51.8 million, compared to $53.1 million in the same period of 2023. Free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, was $23.1 million in the first nine months of 2024, compared to $25.2 million in the prior-year period.
For the most recent fiscal year (2023), Ranger reported revenue of $636.6 million, net income of $23.8 million, operating cash flow of $90.8 million, and free cash flow of $54.3 million. In the most recent quarter (Q3 2024), the company reported revenue of $153.0 million, a 7% decrease year-over-year, net income of $8.7 million, operating cash flow of $17.7 million, and free cash flow of $10.8 million.
Liquidity
The company maintained a net debt-free position as of September 30, 2024, with $86.1 million in total liquidity, consisting of $71.3 million in available capacity under its $75 million Wells Fargo Revolving Credit Facility and $14.8 million in cash on hand. Ranger's debt-to-equity ratio was essentially zero, with only $0.1 million in current debt as of September 30, 2024.
Operational Highlights and Challenges
Ranger's flagship High Specification Rigs segment continued to deliver strong performance, setting another quarterly revenue record in the third quarter of 2024 and maintaining steady margins. The company's focus on partnering with top customers and providing high-quality assets and services has enabled it to gain market share despite broader industry consolidation and slowdown. In Q3 2024, the High Specification Rigs segment generated revenue of $86.7 million, up 9% year-over-year. The average revenue per rig hour increased from $700 in Q3 2023 to $741 in Q3 2024, while total rig hours increased from 112,400 in Q3 2023 to 116,900 in Q3 2024.
The Wireline Services segment, however, has faced challenges, with a 44% year-over-year decline in revenue for the first nine months of 2024 due to a decrease in wireline completions activity. In Q3 2024, the segment reported revenue of $30.3 million, down 43% year-over-year. The completed stage counts decreased from 6,800 in Q3 2023 to 2,500 in Q3 2024, a 63% decline. Despite these challenges, Ranger has made efforts to streamline this business and pivot toward more production-oriented services, which have shown signs of stabilizing in the third quarter.
The Processing Solutions and Ancillary Services segment has been a bright spot, with the coil tubing and Torrent gas processing service lines driving growth and margin expansion. In Q3 2024, this segment reported revenue of $36.0 million, up 13% year-over-year. The company's focus on production-related services and diversification into higher-margin offerings has helped offset the declines in the Wireline Services segment.
Ranger has maintained a strong balance sheet and liquidity position, which has provided the flexibility to navigate the industry challenges. The company has also been active in returning capital to shareholders, having repurchased over 14% of its outstanding shares since the inception of its share repurchase program in 2023.
Guidance and Outlook
For the fourth quarter of 2024, Ranger expects to see typical seasonal slowdowns and holiday impacts, but the company remains optimistic about its ability to continue executing at a high level. The High Specification Rigs segment is expected to lead the way, with the company anticipating year-over-year growth in this business line.
The Wireline Services segment is expected to show further stabilization, with the company's pivot toward production-oriented services beginning to bear fruit. The Processing Solutions and Ancillary Services segment is also poised for continued strong performance, driven by the coil tubing, plug-and-abandonment, and Torrent service lines.
Looking ahead to 2025, Ranger is cautiously optimistic about achieving year-over-year growth across its business segments. The company believes its production-focused strategy, balance sheet strength, and commitment to shareholder returns position it well to navigate the industry's challenges and capitalize on future opportunities. While specific numerical guidance for 2025 was not provided, management expressed increasing confidence in achieving year-over-year growth.
The company expects that the High Specification Rigs segment will continue its upward trajectory and further cement its role as a market leader. The Ancillary Services segment is anticipated to keep increasing its contribution to the overall results. Ranger is also cautiously optimistic that the Wireline segment will continue to stabilize, with 2025 expected to bring about further improvement in this service line.
Risks and Challenges
Ranger faces a variety of risks and challenges, including:
- Volatility in oil and natural gas prices, which can impact the activity levels of its exploration and production (E&P) customers.
- Intense competition, particularly in terms of pricing, which may cause the company to lose market share.
- Dependence on a few large customers, with the top three customers accounting for a significant portion of its consolidated net accounts receivable.
- Challenges in managing the growth of the business, including through potential future acquisitions and mergers.
- Exposure to various operational risks, such as accidents, blowouts, and releases of hazardous materials.
- Regulatory changes and environmental and occupational health and safety laws and regulations that could result in increased costs and additional operating restrictions or delays.
- Seasonality and weather-related disruptions that could negatively impact the company's operations.
Conclusion
Ranger Energy Services has demonstrated its resilience and ability to navigate the industry's challenges through its production-focused strategy, balance sheet strength, and commitment to shareholder returns. While the company has faced headwinds in its Wireline Services segment, its High Specification Rigs and Processing Solutions and Ancillary Services segments have continued to deliver strong performance.
In the third quarter of 2024, Ranger achieved the second-best quarterly results in the company's history, with sales of $153 million and adjusted EBITDA of $25.1 million. The High Specification Rigs segment set another quarterly revenue and adjusted EBITDA record, while the Ancillary Services segment, including coiled tubing and the Torrent gas processing service line, saw revenue increase by 17% and adjusted EBITDA increase by 21% quarter-over-quarter.
Looking ahead, Ranger remains cautiously optimistic about its prospects for 2025, with the potential for year-over-year growth across its business segments. The company's focus on partnering with top customers, diversifying its service offerings, and maintaining a healthy financial position positions it well to capitalize on future opportunities in the fragmented oilfield services industry. As Ranger continues to execute its strategy and adapt to changing market conditions, it aims to strengthen its market position and deliver value to its shareholders in the coming years.