Ranger Energy Services, Inc. ($RNGR)

Good morning, and welcome to Ranger Energy Services First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe Mease, Vice President, Finance. Please go ahead.

Good morning, and thank you for joining Ranger Energy Services First Quarter 2026 Earnings Conference Call. Before we begin, Ranger has issued a press release outlining our operational and financial performance. The press release and accompanying presentation materials are available in the Investor Relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, changes in oil and natural gas prices, customer activity levels, operating risks, competitive pressures, weather conditions, integration risks related to acquisitions and other risks described in our filings with the Securities and Exchange Commission. Further, please note that non-GAAP financial measures will be referenced during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. Joining me on the call today are Stuart Bodden, Ranger's Chief Executive Officer; and Melissa Cougle, our Executive Vice President and Chief Financial Officer. With that, I'll turn the call over to Stuart.

Thank you, Joe, and good morning, everyone. We appreciate you joining us today as we discuss Ranger's first quarter 2026 results and our strong financial performance. Despite a challenging start to the year, driven by the severity of winter storm firm, Ranger delivered solid financial results with meaningful year-over-year growth and continued progress against our strategic priorities. For the first quarter, Ranger generated total revenue of $159.1 million and adjusted EBITDA of $23.3 million, representing growth both sequentially and versus the prior year. Importantly, these results reflect a quarter that began sluggishly but finished with strong momentum as February and March activity levels rebounded across our portfolio. The severe winter storm in January temporarily disrupted activity in all regions for several days, particularly in the Permian Basin. However, conditions improved and activity levels rebounded and we exited the quarter with stronger utilization and improving operating cadence. That positive momentum has continued into April. From a strategic standpoint, we remain focused on execution, safety and disciplined growth. We continue to integrate the AWS businesses, advance our Echo hybrid rig program and invested in areas that support long-term value creation while maintaining operational and financial discipline. Looking at some specifics, high-spec rigs once again delivered strong results in the first quarter and continues to serve as the cornerstone of Ranger's performance. Revenue in the segment increased both sequentially and year-over-year, driven by incorporation of a full quarter of legacy AWS rigs an improvement in utilization across the legacy Ranger fleet and resilient pricing. Top line growth in the quarter was driven by a meaningful shift in rig activity beginning in March. While some slight margin pressure was felt due to higher levels of white space earlier in the quarter and some maintenance-related expenses. Despite this, segment margins remained over 20% and we expect them to improve in the second and third quarter of this year as we continue to focus on disciplined cost management, efficient scheduling and as we realize the benefits of increased scale. Operational execution across the fleet remains strong. Our teams continue to deliver safe, reliable service while maintaining high service quality and customer satisfaction. This was reflected in an expansion of our rig rate to $731 per hour. Customer demand for high-quality workover rigs remains healthy, particularly in mature basins where operators are focused on maximizing production from existing assets. We continue to see Ranger's high-spec rig fleet viewed as a preferred solution due to our reliability, performance and safety record. During the quarter, we also made continued progress on our Echo hybrid electric rig program. We announced the signing of a new 15 rig contract as part of our year-end earnings and construction activities are underway and advancing as planned. Our first Echo rigs deployed in late 2025 are in the field operating currently and the early operational results are impressive. We are seeing a high amount of productive time and receiving positive customer feedback about the capabilities of these rigs. The fleet additions remain on track for delivery beginning later this year. Having visited the manufacturer and spent time on the rig and exploring its capabilities we are more convinced than ever that Echo represents a meaningful differentiator for Ranger, delivering improved efficiency, lower fuel consumption and emissions benefits for our customers while at the same time, generating attractive returns for our shareholders. Turning to ancillary services. This segment continues to grow in strategic importance within Ranger. We see meaningful opportunity to expand this segment organically through cross-selling, improved utilization and leveraging our scale and customer relationships. The first quarter marked another period of solid growth and improving contribution. Revenue and profitability increased sequentially and year-over-year, driven by higher activity across several service lines and a full quarter's inclusion of expanded offerings acquired through the AWS transaction. Integration efforts progressed well during the quarter, and we are realizing early benefits from combining these assets with Ranger's broader platform. Speaking specifically to a couple of our service lines, within our P&A group, we commenced activity on our recently awarded Texas Railroad Commission contracts and are pleased with how that work is progressing and how our relationship with the regulatory bodies, both within and outside of Texas are developing. This contract aligns well with our capabilities, provides a steady source of activity and further diversifies our revenue base. The tubing rental and inspection business acquired in the fall has also been a bright spot with significant capacity to grow with minimal capital and strong incremental margins, we are looking to increase our business in this service line and see its contribution to our bottom line grow in the coming quarters. On wireline services, we were particularly pleased with the overall financial performance and stability of this segment through the first quarter. We have historically had a difficult time navigating to positive adjusted EBITDA in Q1 given winter weather and the more northern exposure of the business. Activity improved meaningfully in March, and the business exited the quarter with stronger operational performance and respectable margins. Before turning the call over to Melissa, I want to briefly touch on the broader market environment. When we entered 2026, macro sentiment across the energy sector remain cautious with many operators planning for relatively flat to down activity levels. As the quarter progressed, geopolitical developments and improving crude oil futures began to modestly improve sentiment. We've seen this reflected in customer conversations that are increasingly constructive particularly around production-focused work and maintenance activity. Ranger's business model is well suited to this environment. Our portfolio is heavily weighted toward workover maintenance and production optimization services on existing wells. Services that are essential, cost-effective and critical to sustaining production and bringing short-cycle barrels to market. Combined with our scale across the Lower 48 and our long-lived asset base, we believe we are well positioned to respond efficiently as activity levels evolve. With that, I'll turn the call over to Melissa to walk through our financial results in more detail.

Thank you, Stuart, and good morning, everyone. I'll through our first quarter 2026 financial results in more detail and then spend some time on cash flow, the balance sheet and capital allocation. For the first quarter of 2026, Ranger generated total revenue of $159.1 million compared to $142.2 million in the fourth quarter of 2025 and $135.2 million in the first quarter of 2025. The sequential and year-over-year increase in revenue was driven primarily by higher activity levels in our high-spec rigs business and continued growth in our ancillary services segment, including a full quarter of contribution from the legacy AWS business. Net income for the quarter was $3 million or $0.12 per diluted share compared to $600,000 or $0.03 per diluted share in the first quarter of 2025. Adjusted EBITDA for the first quarter was $23.3 million, representing a margin of 14.6%, this compares to adjusted EBITDA of $20.3 million and a 14.3% margin in the fourth quarter of 2025 and $15.5 million and an 11.5% margin in the first quarter of last year. The year-over-year improvement in adjusted EBITDA and margins reflects higher revenue, improved contribution from ancillary services, stronger performance in high-spec rigs and much improved results in wireline relative to last year. General and administrative expense was $7.8 million in the first quarter compared to $8.9 million in the fourth quarter of 2025 reflecting the elevated transaction expenses in the fourth quarter as a consequence of the AWS transaction. Now turning to segment performance. Revenue in our High Spec Rigs segment was $106.2 million in the first quarter compared to $92.3 million in the fourth quarter of 2025. The sequential increase was driven primarily by higher rig hours, which totaled approximately 145,400 hours in the quarter compared to 128,500 hours in the fourth quarter and 115,700 hours in the first quarter of 2025. Adjusted EBITDA increased to $21.4 million compared to $19.6 million in the fourth quarter and $17.4 million in the prior year quarter. Adjusted EBITDA margins remained strong and above 20%, reflecting solid execution, cost discipline and operating leverage. Revenue in our Processing Solutions and Ancillary Services segment was $42.3 million in the first quarter compared to $37.5 million in the fourth quarter and $30.5 million in the first quarter of 2025. Adjusted EBITDA was $8 million, up from $6.2 million in the fourth quarter and $5.6 million in the prior year period. The increase reflects higher activity across several service lines and the continued ramp-up of services acquired through the AWS transaction. Revenue in our Wireline Services segment was $10.6 million in the first quarter. As Stuart mentioned, activity levels improved meaningfully in February and March, and the business exited the quarter with good momentum. On an adjusted EBITDA basis, the segment was essentially breakeven in the first quarter, a meaningful improvement compared to an adjusted EBITDA loss of $2.3 million in the prior year period. Ranger's free cash flow for the first quarter was negative $21.7 million compared to positive $3.4 million in the prior year period. The primary driver of the year-over-year change in cash flow was working capital timing with cash flow in the first quarter impacted by the buildup in accounts receivable related to customer instituted billing blackout periods at year-end, transition-related billing changes associated with new price books and billing protocols within the legacy AWS business as well as temporary timing impacts associated with the transition to Ranger's ERP system. We expect that working capital levels will return to more normalized levels over the next 2 quarters. Capital expenditures for the first quarter totaled $18.3 million, compared to $7.2 million in the first quarter of 2025. The increase was primarily driven by milestone payments related to the Echo hybrid rig build-out program. During the quarter, we also received a large upfront contribution from a key customer related to our Echo hybrid rig build-out program. These payments also contributed to an increase in liabilities in the balance sheet as those payments will be recognized as revenue over the life of the contract. Echo represents a strategic investment in next-generation equipment that we believe will deliver attractive returns, improve operating efficiency and enhance Ranger's competitive position. Turning to liquidity. As of March 31, 2026, total liquidity was $42.5 million consisting of $35.6 million of availability under our revolving credit facility and $6.9 million of cash on hand. We continue to believe our balance sheet provides ample flexibility to support operations fund planned capital investments and pursue disciplined capital allocation. With that, I'll turn the call back to Stuart for closing remarks.

Thank you, Melissa. In summary, the first quarter highlighted the resilience and strength of Ranger's business. We delivered solid financial results, generated meaningful adjusted EBITDA and exited the quarter with improving momentum. Our high-spec rigs and ancillary services businesses continue to perform well. The AWS integration is progressing as planned, and our investments in next-generation equipment position us well for the future. As we move into the second quarter, we remain focused on disciplined execution, safety and delivering value for our shareholders. We believe Ranger is well positioned to navigate the current environment and capitalize on opportunities as activity levels evolve. With that, operator, we can now open the call for questions.

[Operator Instructions] And the first question today comes from Don Crist with Johnson Rice.

Hope you all are doing well.

And Don.

I wanted to start with what we've been hearing out of a lot of other companies that the oil strip has really kind of been reset here. And while a lot of people think that if Iran War ended today that the long end of the strip is going to continue to rise going forward. I don't know if you have any thoughts on that kind of macro view. But can you relate that and how you're seeing your customer behavior conversations going as a result of kind of that narrative that we're seeing come through the industry?

Sure. Thanks for the question, Don. I think when we talk to our customers, what we're hearing and it really depends a little bit on the size and kind of geography of the customer. So I think in our conversations, most of the biggest customers for now are remaining fairly disciplined. We are taking more inbounds. We're getting kind of more interest. But at the moment, they're not meaningfully changing workover. I mean the workover programs. I mean, I think we are seeing some stuff on the margins. I think as you get into some of the smaller players or in some basins that were a little bit more on the margin. We are certainly seeing an increase in activity and more demand, particularly to accelerate barrels, right? So on the workover program. I think our sense is that as this continues to play out that we think things are setting up pretty well for the back half of the year. And I guess the second thing, third thing I would highlight is on our quarter and I think in the comments from both me and Melissa, we highlighted that we exited the quarter strongly and that's a trend that has continued into April. So we are certainly seeing some tailwinds.

Okay. And just as far as a function of kind of white space in your calendars, I know when we met a couple of weeks back, you said that, that was going away rapidly. But are we to the stage where you could possibly reactivate rigs to meet demand? Or we still have a little bit of slack in the system?

There's a little bit, but not much. I'd say we're kind of getting to the point now where like if somebody wants to do a smaller program and we have a little bit of stacking the schedule, we can fit them in. But we're kind of getting to the point now to where we're hiring crews and we'll need to add capacity.

Okay. And Melissa, 1 for you. I think the working capital build this quarter kind of shocked several of us. And I know in your comments, you said that, that should unwind. But any further comments there? I mean, it seemed like a pretty decent-sized number, but that should reverse pretty quickly in my opinion.

Yes, Don, we did -- I think it was -- we knew it would be, and we have tried to signal that it would be a negative cash flow quarter because we saw some of it early days. To be fair, I think we were hoping to have more progress by the time we get to March 31, the reality is we had a very substantial billing blackout by 1 of our biggest customers in December. And when we look at legacy Ranger businesses, we're still kind of hit with 10 days unwinding and trying to push through from that. Then on top of that, you had exacerbated issues around AWS because we were getting to combine pricing books where those price books, they tend to drag out your billing cycle because you have to get all these different pieces of the puzzle in place to allow the invoices to flow through on the new price book. Then I would say, on a final on the AP side, because we were moving the AWS organization into Ranger for April 1. We made a call late in the quarter to actually clear out the open AP so we paid out and there was an extra few million dollars that was paid out that long-term benefit to Ranger to kind of make that transition much smoother. But again, short-term impact to the quarter on the working capital side. We do believe when we get into Q2, the April 1 go live on the ERP will probably continue to leave us challenge for the next month on -- and then I think we'll start to finally start to see DSO really improve when we get into May and June. So I don't think you'll see everything get back to normal by the end of Q2, but I think we'll see a lot of normalization in Q2 and then we'll pick the final piece of it up in Q3 on the DSO side. Helpful.

And your next question comes from John Daniel with Daniel Energy Partners.

I think I'm going to stick with the theme of Don's question because we also hear the same view that operators believe the forward curve is mispriced and should be higher and smaller operators are reacting to that right now, as you mentioned, and we've seen, and we know those small players are always the first movers and larger companies as we also know tend to be slower. But presumably, they make the upwards activity shift next year. So forgive that long-winded preamble to my question, but if you share that view, how would this glass half full outlook impact your vision for Ranger? What I mean by this Stuart, is now the time to get ahead of it in either fast track consolidation? Is now the time to accelerate even more new builds? Or do you just get a little bit aggressive on the front end and start pushing pricing a bit harder. I know there's probably other choices, but just kind of if you could opine on strategy.

Yes. I think you probably sort of characterize the conversations right in that. I think as we go in and we look at activity and it can be a range of things, right? Our willingness to get multi-rig discounts. As you can imagine, that's becoming more challenging to entertain. As we think about sort of hiring a crew when you have line of sight to 50% utilization or full utilization. So I think on the margin, it's easier just to be more confident, more aggressive on that. I do think on the Echo program, we've had a lot of discussion about as we bring those rigs into the market, will they displace rigs? Or will they be completely additive. And I think as we go forward, we're feeling more and more confident that they will be additive, which has a huge impact to the business. So I feel like with those rates coming in, we are kind of naturally adding capacity and hopefully, at the right time. So hopefully, that kind of makes sense. But I mean, I think just in general, I think I'm not sure you're going to see a massive shift in strategy, but I think on the margin, we're certainly feeling pretty confident.

Okay. And if I remember correctly in the slide deck, I think you had 193 active rigs, maybe that was as of year-end. Can you just say what the active count is today and...

Yes. I mean, right now, it's about the same. It hasn't meaningfully changed. That number includes -- you always have some rigs that are getting preventative maintenance or refurbs, et cetera. But I'd say right now, it's about the same. But again, kind of to Don's question earlier, we're kind of getting near that point where to satisfy new demand, we're going to have to activate rigs.

Okay. And I got 1 more, and then I'll turn it back over but One of your very, very small competitors was complaining to me that they can't find parts to reactivate equipment. Can you just speak to the supply chain and do you think that's an anomaly? Or just how does that impact you guys?

I'm not sure it's an anomaly, but I don't think we have felt that. So I don't think we're feeling supply chain issues, what I would tell you is it wouldn't surprise me if 2 quarters from here, we're talking about labor tightness, again, which we haven't really talked about for a while. But at the moment, we're not having issues on supply chain.

[Operator Instructions] Your next question comes from Derek Podhaizer with Piper Sandler.

And hit on the production optimization theme that you highlighted in your opening comments talking about accelerating barrels. Maybe just help educate us in the market as far as how we should think about a Ranger taking advantage of the current macro, be it on the workover program. You obviously have rigs that are dedicated towards completion or production coiled tubing, anything else inside of the ancillary solutions segment of yours. Just trying to think about how you guys can also benefit as these E&Ps look to accelerate us or optimize our current production base to take advantage of the front month here?

Yes. Thanks for the question, Derek, if you're doing well. Again, I think kind of when we talk to customers, I mean obviously, the shorter-cycle barrels they have is to go in and just go into a workover. And certainly, we're seeing right now, some of the smaller customers get pretty aggressive on those programs to go do a drill completion kind of create a program for that, obviously, takes time and the curve is still pretty backwardated and as you know, not very liquid from a trading perspective in the out years. So I think what we're seeing is people try to get physical barrels in the market pretty quickly. That obviously is right down the fairway on everything that we do in the high spec rig segment. I would say for some of our other service lines that tend to be a little more completion oriented. And so I'm thinking things like the cold tubing business, some of the ancillary completion the way that services were picked up with AWS. I think what we are seeing is those are just kind of generally firming up. So I'm not sure it's again -- it's not like it's a doubling of activity, but where somebody maybe in the past said, "Hey, I've got some work, I'm going to go give them back to you in 6 weeks now they're saying, "You know what, I want to keep it because I don't want to give it back. So I think we are seeing just sort of really steady work on the completions side, which obviously sort of helps the financials across the board.

This concludes our question-and-answer session. I would like to turn the conference back over to Stuart Bodden for any closing remarks.

Thank you, operator. Thanks to all of you for your interest in Ranger. And obviously, please reach out to us if you have any questions. Have a good week, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.