Ranger Energy Services, Inc. Q1 FY2025 earnings call

• Ranger emphasizes its production focus, comparing itself to a mechanic rather than a car manufacturer, as its services are crucial for maximizing production. - Despite seasonality and weather impacts like polar vortexes and windstorms in the first quarter, Ranger saw significant year-over-year improvements in adjusted EBITDA and margin, led by the High Spec Rigs business. Revenue was $135.2 million, adjusted EBITDA was $15.5 million, and margin was 11.4%. - The High Spec Rigs segment achieved its fifth consecutive quarter of revenue growth, with margins slightly down quarter-over-quarter but up 280 basis points year-over-year. - Ancillary services had revenue up 25% year-over-year, and adjusted EBITDA more than doubled. - Wireline struggled in the first quarter because of weather, but March saw positive margins, and adjustments were made to align the segment's cost structure with market conditions. - Strategic priorities include maximizing free cash flow, prioritizing shareholder returns, defending the balance sheet, and growing through disciplined accretive M&A.

In the first quarter of 2025, Ranger Energy's segments had distinct financial performances. The High Spec Rigs segment generated revenue of $87.5 million, which accounted for approximately 64.7% of the total revenue of $135.2 million. Its adjusted EBITDA was $17.4 million. The Ancillary services segment recorded revenue of $30.5 million, making up about 22.6% of the total revenue, with an adjusted EBITDA of $5.6 million. The Wireline segment had revenue of $17.2 million, constituting around 12.7% of the total revenue, and reported a negative adjusted EBITDA of $2.3 million due to weather-related challenges in the first quarter.

• The macroeconomic environment's impact on the business is difficult to accurately determine, so guidance remains unchanged in the absence of concrete data. - Ranger will be judicious with incremental capital expenditure in the coming quarters. - The dividend was increased by 20% last quarter to $0.06 per share, and capital returns through share buybacks remain an important part of the value creation strategy. - Ranger continues to evaluate strategic and accretive M&A opportunities as market conditions evolve.

• Macroeconomic factors and tariff situations introduce uncertainties to the business. - Weather and seasonality can have an impact on operational results. - Market volatility in the oil and gas industry may lead to customers trimming capital expenditure budgets, which could affect Ranger's business.

Q: Wanted to start with the differentiation between workover projects and new drills for major customers and how Ranger is resilient through the cycle.

A: About 80% of Ranger's revenues are associated with production focus, which is aligned with customers' OpEx budgets rather than CapEx budgets. This makes Ranger more resilient through the cycle. Additionally, Ranger has aligned with large customers who have consistent programs, which helps in withstanding market fluctuations.

Q: On the wireline side, what is the outlook for the second quarter and margins?

A: Stuart Bodden stated that the wireline business is expected to move into positive territory in the back part of the year. Ranger has been working to orient the wireline business more towards conventional wireline, which has more exposure to production rather than completion.

Q: Talk about the balance sheet and M&A potential.

A: Melissa Cougle mentioned that the fortress balance sheet allows Ranger to weather the storm and take advantage of opportunities during uncertain times. Regarding M&A, there is interest in continuing dialogue, and while the near term is challenging, there is hope for closing bid-ask spreads later this year. Share buybacks are also considered as part of capital allocation.

Q: Discuss the coil business cost pass-through and the market of small competitors.

A: Stuart Bodden said there is a balanced conversation regarding passing through coil cost increases to customers. Regarding small competitors, Ranger is seeing smaller players under pressure, and is being contacted about distressed assets, with the market potentially having changes a year from today.