Good day, and welcome to the Ranger Energy Services, Inc. Fourth Quarter 2024 Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Joe Meath, Vice President of Finance.

Please go ahead, sir..

Thank you, and welcome to Ranger Energy Services, Inc. fourth quarter and full year 2024 results conference call. Ranger has issued a press release summarizing operating and financial results for the three and twelve months ended December 31, 2024.

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.

Further, please note that non-GAAP financial measures may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation.

With that, I would now like to turn the conference call over to our CEO, Stuart Bodden, and our CFO, Melissa Cougle, for their prepared remarks..

the maximization of free cash flow, the prioritization of shareholder returns, and growth through accretive acquisitions while defending our balance sheet strength. We maximize cash flows by benefiting from light capital intensity, particularly as it compares to drillers and crackers.

Each year, we expect maintenance CapEx to be between 4% and 6% of revenue, which allows us to generate significant free cash flow. In 2024, we achieved free cash flow of $50.4 million or 64% of adjusted EBITDA.

When you consistently generate cash as a small company, it provides flexibility for management to make the highest return capital allocation decisions, and you see that in our shareholder returns this year. We have also prioritized returning capital to our shareholders.

We made a commitment in 2023 to return at least 25% of free cash flow to shareholders, and we greatly exceeded that baseline in 2023 and 2024, returning 40% of free cash flow to shareholders through a regular dividend and opportunistic share repurchases in both years.

Because of our high cash conversion rate and our pristine balance sheet, we can take advantage of opportunities, whether internal or external to the company.

For much of this year, the value of our own stock was the most compelling investment we could make, and we bought aggressively, spending $15.5 million net of tax to repurchase shares and reducing outstanding shares at an average price of just $10.11 per share, an investment that has returned nearly 6% at current prices.

As we look at 2025 and our continued belief in our strong cash flows, management, together with our board of directors, is pleased to announce a 20% increase to the regular quarterly dividend from $0.05 per share to $0.06 per share, replacing our confidence in the stability and strength of our business, and further demonstrating our commitment to return capital to shareholders in meaningful ways.

When it comes to our balance sheet, if you have been a Ranger Energy Services, Inc. shareholder for a while, you have heard us repeat the theme of flexibility, being able to take advantage of opportunities to grow long-term value. We can be nimble, opportunistic, and smart allocators of capital because of our balance sheet strength.

At year-end, we had nearly $41 million in cash and zero long-term debt. We are constantly evaluating opportunities for where our next dollar of capital should be deployed for returns, which leads us to our final priority of growing through accretive acquisitions. We believe we are a natural consolidator of a fragmented industry.

We have been diligent in our search for opportunities to take Ranger Energy Services, Inc. to the next level but also prudent, as the bid-ask spread has been too wide for comfort. We remain highly disciplined in evaluating opportunities and will only pursue acquisitions that are strategically and financially accretive.

We do not see signs of capitulation in the services M&A market, but we do see it becoming more rational and believe there may be attractive opportunities to pursue in 2025 that would add scale and efficiencies to the Ranger Energy Services, Inc. portfolio.

As we enter 2025, we are well-positioned to build on our momentum, leveraging our operational strengths and financial flexibility to drive sustainable growth and shareholder value.

Our commitment to disciplined capital allocation remains unchanged, and we will continue to prioritize shareholder returns while investing in opportunities that drive sustainable growth.

Melissa will now review our financials and 2025 outlook, and we think you will see in the numbers why we are so confident in the strength of our business and our ability to deliver shareholder value.

Melissa?.

Thanks, Stuart, and good morning, everyone. As Stuart mentioned, we delivered another great quarter, continuing our track record of operational excellence and financial discipline. Revenue for the fourth quarter was $143.1 million, down from $153 million in the third quarter, reflecting typical seasonality through the holiday season.

Adjusted EBITDA came in at $21.9 million with a margin of 15.3%, which is slightly lower than the previous quarter but up 320 basis points from the fourth quarter of 2023.

It is worth repeating Stuart's earlier comment that each of the past three quarters over the previous year, we are seeing continued operational efficiencies and growth in some of our higher-margin service lines, supporting our profitability.

For the full year, revenue of $571.1 million was 10% down from the previous year, almost exclusively due to lower activity levels and wireline completions.

Adjusted EBITDA of $78.9 million was down slightly from $84.4 million in 2023, largely a consequence of the slower start to the year as well as the previously mentioned wireline completions activity decline.

Most notably, cash flows in the fourth quarter were expected to be and came in quite strong, enabling us to achieve full-year free cash flow of $50.4 million in 2024. Looking at segment results, High Spec Rigs set another quarterly revenue record at $87 million.

We reported adjusted EBITDA of $19 million, which is up 21% over the same period last year, with slight margin compression compared to the third quarter due to holiday operations.

For the full year, 2024 was the best year in the company's history for high-spec rigs, with revenues of $336.1 million and adjusted EBITDA of $70.5 million, up 7% and 10% respectively year over year.

Ancillary services also had its best year in the company's history, with revenue of $124.8 million and adjusted EBITDA of $26.6 million, increases of 1% and 18% respectively year over year.

The 300-plus basis point improvement in margin and significant increase in adjusted EBITDA was driven mainly by our plug-in abandonment, rentals, and torrent service lines, each of which saw increases in 2024. Finally, and as Stuart touched on, wireline remained a challenge.

Fourth quarter revenue of $22.6 million was 26% lower than the prior quarter with breakeven margin. These declines were anticipated, and the margin shifts between the third and fourth quarters.

Winter slowdowns have been heavy thus far in 2025, and we expect that the first quarter will continue to be depressed given the extreme winter weather we have experienced. That said, we will benefit from the same operating leverage beginning in the second quarter as spring arrives and activity picks back up. Our balance sheet remains in great shape.

We built cash during the fourth quarter and ended the quarter with $40.9 million in cash and total liquidity of $112.1 million. This liquidity gives us ample flexibility to execute on our strategic priorities. We remain disciplined in our approach to capital expenditure and saw lower CapEx during the fourth quarter totaling $5.4 million.

We had CapEx spend for the year of $34.1 million, including the incremental growth CapEx that we deployed earlier in the year, in support of a new customer contract. Looking ahead, we expect the US land services market to remain subdued through the first half of 2025, with potential for some recovery in the back half of the year.

Our largest customers have indicated consistent activity levels throughout the year. However, Ranger Energy Services, Inc.'s start to the year has been impacted by two polar vortex events, significantly reducing activity levels in January and February.

Given these challenges, we believe it is unlikely that total company EBITDA will reach $20 million in the first quarter. That said, absent further disruptions, we should get above mid-teens. For the full year, we expect 2025 to track closely with 2024, with the potential for modest upside in the back half of the year as commodity prices hold up.

Getting into segment specifics, we expect that high-spec rigs and ancillary segments will post modest year-over-year growth. We do not see significant improvement in broader market conditions for the wireline segment this year. We will continue pushing for growth of conventional wireline work.

Regardless of this growth, in the more production-exposed area, we believe it is possible that wireline revenues may decline slightly year over year. We do expect margins will improve to the high single digit in this segment in the second and third quarter. Similar to 2024, we expect maintenance CapEx will remain in the range of 4% to 6% of revenue.

We are anticipating modest investment of additional growth CapEx for opportunities next and believe that CapEx for 2025 will be similar to 2024. We remain committed to enhancing shareholder value through a balanced approach to growth and returns. With that, I will turn the call back over to Stuart for closing remarks..

maximize free cash flow, return capital to shareholders, maintain our financial strength, and pursue disciplined growth opportunities. With a strong balance sheet, resilient business model, and a proven ability to execute, we are well-positioned to drive sustainable long-term value for our shareholders, customers, and employees.

Thank you for your time today. And with that, we will open the call for questions..

And your first question today will come from Don Crist with Johnson Rice..

Good morning, Stuart and Melissa, and happy Mardi Gras..

Happy Mardi Gras, Don.

How are you?.

I am doing well. Stuart, I think I heard you correctly in your prepared remarks saying that you all made some investments into the P&A market held there. Excuse me.

Can you discuss kind of what those investments may have been and is the increase in P&A work, is that driven just by the E&Ps, or is it more government-related that's driving the increase in the P&A market as we move through 2025?.

So it is mainly on the E&P side. We do have an effort to really get a lot more kind of focused on potentially getting and bidding on some of the government work that is associated with IRA.

As far as the equipment and the spreads, a lot of that is just activating additional spreads on the P&A side, which typically consist of a wireline truck, a well-serviced rig, and then a submitting unit. So that is really what the investment has been..

Okay. And as we have gone through earnings this season, we have heard a couple of gas companies or several gas companies that have talked about adding rigs, particularly in the Haynesville and other gas basins.

In your discussions, are you seeing the potential for a pickup as we kind of move into the third quarter, maybe fourth quarter, to get ready for some LNG gas that is needed in 2026? Are you hearing those as well?.

We are hearing that, right now in the back half of the year. We have also seen some strength in the kind of Mid Con and Haynesville markets on the well service side with the recent run-up in gas prices. So we have seen some strengthening.

I think we are cautiously optimistic as we kind of look forward, but we are hearing some of the same things that you are..

Okay. And if I could ask just a more kind of broader question on the health of the business. You highlighted that TRIR in the press release and congratulations on that.

But as you are talking to these larger companies that continue to get larger through M&A, how important is the safety record and the maintenance schedules and the training of your people factoring into contracts and work as you work for these larger and larger companies as they continue to consolidate?.

Yeah. I will start off and Melissa can chime in as well. So we are seeing it becoming increasingly important, Don. Typically, when we deploy a spread, not only does it go through our own inspection process before we deploy it, but typically, the largest customers will come in and inspect the equipment.

Very often, they will go, make sure that the training documents for our crew have been completed, and, again, we are very open about our safety programs and a lot of times we have been going through some of our customers' training programs, our crews are as well. So I think we are seeing it becoming increasingly important.

We have also commented in the past that they want not only a well service rig, but they want a complete package on the wellsite from us. And, again, I think that all just goes to confidence in our systems and our safety and maintenance records..

I think the only thing I would add to that, Don, is the scale of it too. So in addition to everything that Stuart said, because they are looking to shrink vendor lists, they are looking to work with vendors that can work with them across multiple basins. So that also puts Ranger Energy Services, Inc.

and only a couple of our peers really in the runnings for some of these bigger contracts. They know some of our customers have shown interest in a lower 48 contract. They want somebody who can cover and provide rigs across all basins.

And so the ability to have all of the things that Stuart mentioned, but across multiple basins, I think, is actually proving to be somewhat of a differentiation as well..

And, Don, if I can, just as an example, last week, our EVP of well services and I were in an all-day event with one of our largest customers and a select number of vendors on their side. And so these were all global vendors and going through their safety systems and records and brainstorming with them what we can all do to improve.

So, again, we are all tied pretty closely to HIPAA on this..

I appreciate the color. I will get back in queue. Thanks..

Thanks, Don..

And your next question today will come from John Daniel with Daniel Energy Partners. Please go ahead..

Hey, guys. Thanks for including me. Hope you can hear me okay..

Yep. We can..

I am just curious. At this stage, do you have much visibility into the rig demand coming up from the major oil and gas companies over the next few quarters or getting calls for more rigs? Just any color there would be appreciated..

I think what we are seeing, John, is with the largest customers, what we kind of hear is steady as she goes. So very consistent demand going forward over the next couple of quarters. So that is the message we hear. We are hearing from some of our biggest customers that have consolidated or that have bought other companies.

We may pick up a little bit of work associated with that. But, generally, the overall message is just very consistent work programs..

Okay. And then, I guess, a little bit of a follow-on to sort of Don's questions. Are you getting any indication from those operators that they might be dropping smaller incumbents so that even though they are working, they are flat, you guys get more work yourselves? Or is it....

That is certainly what happened through 2024, and we think some of that will continue into 2025. So we are seeing that. It just takes a little bit of time and go.

Some of these majors now have incredibly large workover programs, but yes, we do think that the overall trend is that we as a larger player will gain share at the expense of some of the smaller ones..

Okay. That is all I had. Thanks for including me..

Thanks, John..

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

Thanks, operator. Thank you, everyone, for joining us today. Thank you for your interest in Ranger Energy Services, Inc., and we look forward to hearing from you. Have a great day, everyone..

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