Hello and welcome to the Ranger Energy Services Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. As a reminder, this conference is being recorded today. I would now like to hand the call to Joe Meath, Vice President of Finance. Please go ahead.

Thank you and welcome to Ranger Energy Services Third Quarter 2024 Results Conference Call. Ranger has issued a press release summarizing operating and financial results for the three months ended September 30th, 2024. This press release, together with 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 measurements 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 Stuart Bodden, Ranger's CEO, and Melissa Cougle, Ranger's CFO, for their prepared remarks.

Thank you, and good morning, everyone. We are pleased to welcome you to our third quarter 2024 earnings conference call. This quarter's performance continues to demonstrate Ranger's differentiated business model that enables strong performance regardless of macro conditions. Drilling rig count declines, completion activity decreases, and gas market pressure have all contributed to challenging market conditions since early in 2023. Despite these conditions, Ranger's financial performance has been markedly more resilient than the broader OFS complex. We have once again validated our production-focused business model and set a new high watermark for some of our service lines. Our High Specification Rig segment continues to execute at a very high level, setting another quarterly record for revenue and adjusted EBITDA. Ancillary Services also achieved near-record results with our coiled tubing business posting a new quarterly revenue record and our Torrent brand showing exceptional growth. Encouragingly, we saw a positive rebound in our Wireline segment, giving us an indication of the future earnings potential of the business. These results are a testament to our teams and crews in the field. Ranger was able to deliver the second best quarterly results in our company's history with sales of $153 million and adjusted EBITDA coming in at $25.1 million. Adding a few details around our segments, in our High Specification Rigs business, we achieved another record quarter with revenues of $86.7 million and adjusted EBITDA of $19.2 million, resulting in gross margins of 22%. This performance highlights our scale and targeted basins and the investments we have made in our partnerships with core customers. Over the past year, we have worked diligently to showcase Ranger's commitment to quality assets and personnel at every well site, partnering closely with our customers and making strategic investments alongside them as well. The results of those investments are now taking shape. Our production focus and commitment to quality have allowed us to grow our base of work with the highest quality customers and deliver more incremental services. As we head into Q4, we do expect seasonality to affect business performance because of weather and holiday impacts. But core customer demand remains strong and we anticipate another robust year in 2025 for this segment. Processing and Ancillary services also had an outstanding quarter, with revenues of $36 million and adjusted EBITDA of $8.8 million, which resulted in an impressive gross margin of 25%. We increased revenue by 17% and adjusted EBITDA by 21% quarter-over-quarter with our coiled tubing business and Torrent business driving the growth in this segment. Coiled tubing increased revenue by 33% and EBITDA by 52% over last quarter with record margins. The winter and holiday season will likely bring some declines in this service line, but we believe the declines will be less severe than those encountered last year. We are frequently asked about our gas conditioning and processing service line, branded Torrent. This business is focused on infield gas processing and has exposure to the fast-growing field power generation market. It showed impressive growth during the third quarter, nearly doubling its EBITDA from Q2. Service line margins are now touching 25% in some months and there is room to continue deploying additional assets with minimal reactivation CapEx. We have a great team leading this business and we are excited to see it continue to grow its contribution to Ranger as we reach further into this high-growth market. Lastly, I want to touch on Wireline services. Third quarter performance in Wireline was encouraging, with revenue and margins growing quarter-over-quarter, giving us a sense that our restructuring efforts are paying off. We have discussed previously how the Wireline completions plug and perf space has become commoditized, which has put collateral pressure on traditional production Wireline work and Pump Down work as well. We continue to pursue opportunities to grow production in Pump Down related Wireline services work. Our progress has been slow but steady in production and Pump Down and we have seen revenues grow each quarter—a great accomplishment given current market conditions. Due to our heavier exposure in our Northern region, seasonality is expected to more significantly impact this segment's margins in the fourth quarter and first quarter, where margins are expected to decline. However, moving into the spring, we believe we should return to an upward trajectory in Wireline and grow from the base we've created this year. We talk frequently of our balance sheet strength and how significant a role it plays in our overall financial strategy. Through current market conditions, we've made maintaining a rock-solid balance sheet a priority, which provides us maximum flexibility to execute on opportunities for the benefit of our shareholders. We operate in a fragmented industry that is ripe for consolidation, and we believe we are well positioned to continue to be a consolidator in this space. While we continue to look for opportunities to further consolidate the industry, we have taken dramatic action on the shareholder returns front, given the compelling investment our shares represent, and we believe our shareholder returns efforts have been second to none in small-cap energy. We have returned over 80% of our free cash flow year-to-date to our shareholders through a regular dividend and significant share repurchases. We have put our money where our mouth is and bought back our stock at highly accretive valuations. Despite strong financial results, cash flows, and compelling capital returns, we believe the market continues to undervalue Ranger, and we will continue to capture strong returns through our share repurchases from this value gap. Our multiples of adjusted EBITDA and free cash flow represent significant untapped value, and our production focus and commitment to superior service quality and safety have proven remarkably resilient despite anemic US land rig count. We believe with consistent execution and greater understanding of our business model, our strengths will be more widely recognized and acknowledged by the market. Looking forward to 2025, we are becoming increasingly confident that we will achieve year-over-year growth. High Specification Rigs should continue its climb and further cement its role as a market leader, and Ancillary Services is poised to keep increasing its contribution to our overall results as well. But once smaller components of our business, such as P&A, coiled tubing, and Torrent, are now growing into larger service lines that generate robust margins with further growth potential. Finally, we are cautiously optimistic that Wireline will continue to stabilize and that 2025 will bring about further improvement in this regard. I want to thank our leadership team for their dedication and our employees for showing up every day, no matter the conditions, with an excellent spirit and a dedication to service and safety. And I want to thank our customers for their loyal partnership. We are frequently asked about the impact of operator consolidation on our business, and the answer is that we believe consolidation has been a net benefit to Ranger. Ranger continues to be a preferred partner with larger operators that prefer to work with high-quality service providers that will show up on time and perform the work on budget with well-trained crews and well-maintained equipment. Ranger has successfully built a reputation for quality and reliability, which is one of the key reasons for our continued success through the cycle. Finally, I would like to recognize and thank Charlie Leykum, who has announced he will be stepping down from Ranger's Board of Directors. Charlie and CSL have been with Ranger since its founding, and he has been instrumental in setting the company's strategic direction and supporting its growth. Quite simply, Ranger would not be where it is today without his leadership and guidance. He has been an invaluable member of the Board, and we are grateful for his contributions and everything he has done for the company. With that, I will turn the call over to Melissa to review our operations and financial results.

Good morning, everyone, and thank you for joining us today to discuss Ranger's third quarter 2024 financial results. We take great pride in the progress we have made as an organization and particularly in our differentiated performance. While we have faced our share of challenges, our trajectory has been undeniably positive. Our slow and steady approach has allowed us to build a business that delivers consistent, resilient performance with notably less impact from broader market conditions. When we have felt those effects, we have rallied together as a team and worked to streamline the organization according to market conditions and tweak strategy as appropriate. Starting with the top line, revenue for the third quarter was $153 million, an 11% increase over the second quarter and down 7% year-over-year due to Wireline completion activity declines. In fact, every service line in the company showed year-over-year growth in the third quarter, excluding Wireline completions. Net income for the quarter was $8.7 million, resulting in earnings per share of $0.39, which represents an improvement of 86% from the prior quarter, representing both our improved performance and the accretive impact of our share repurchase program. Cost of services for the quarter was $122 million, representing 80% of revenue. This is a 200 basis point improvement from both the previous quarter and the prior year period, reflecting the operating leverage we achieved by effectively managing white space on our calendar, capitalizing on favorable summer weather conditions, and longer days that optimize utilization while also closely controlling operating costs. Ranger is operating more efficiently than ever, focusing on the highest quality service lines, customers, and assets. Adjusted EBITDA for the quarter was $25.1 million, a 20% increase from $21 million in the second quarter and a 5% increase over the prior year period of $24 million. Gross margin was 16.5%, nearly matching our prior peak level. Looking further into our segment results, High Spec Rigs set a new quarterly revenue record at $86.7 million, increasing an incremental 5% from the record set last quarter at $82.7 million and an increase of 9% year-over-year. Rig hours increased by 3% from the previous quarter and 4% from the third quarter of 2023. Our pricing environment has remained relatively flat and resilient as well, with the blended hourly rig rate for the quarter coming in at $741 per hour. In Ancillary Services, revenue was $36 million in the third quarter, a 17% increase from Q2 and a 13% increase over the prior year period. Coiled tubing was a standout performer with revenue up 33% quarter-over-quarter and adjusted EBITDA up 52%. Torrent gas processing service line also had its best quarter in recent history with EBITDA nearly doubling from the second quarter and on track for further significant growth in the fourth quarter. As Stuart mentioned, Wireline showed significant improvement in Q3. This segment concentrated in the Northern Basin benefits greatly from the longer summer days without weather disruption. The strong performance is an indication that our production-focused pivot is taking hold and the bottom of the market has likely been found. Revenue grew 24% from the second quarter, reaching $30.3 million with both production and Pump Down service lines showing double-digit growth from the prior quarter. Year-over-year, Wireline is down 43%, with the decline being entirely driven by Wireline completion activity. Adjusted EBITDA was $2.7 million, a significant improvement from the $400,000 in Q2, with 9% EBITDA margins for the quarter. Turning to the balance sheet, we maintain a net debt zero position providing us with flexibility to manage our business in the best interest of our shareholders. We ended the quarter with $86.1 million of liquidity, consisting of $71.3 million of capacity on our revolving credit facility and $14.8 million of cash on hand. For the first nine months of 2024, we generated $51.8 million in cash from operating activities, comparable to the $53.1 million reported during the same period of last year. Year-to-date, free cash flow stands at $23.1 million as compared to $25.2 million over the same prior year period. Capital expenditures of $28.7 million this year are running slightly above 6% of revenue due to the elimination of Wireline completions revenue stream and the deployment of growth CapEx earlier this year to upgrade coiled tubing assets and provide ancillary equipment in support of additional rig work with stronger customers. Our capital allocation strategy remains disciplined, and we are focused on investing in our business to preserve future cash flows while also continuing to return excess cash to shareholders. Year-to-date, we have repurchased approximately 1.5 million shares for a total of $15.5 million. This is nearly double the amount repurchased in 2023 and represents our steadfast commitment to allocate cash flows toward their highest return potential, which has been our own stock to date. Over the past year, we have far exceeded our minimum return commitment of 25% of free cash flow to shareholders. Since a little over one year ago, we've returned over $40 million to shareholders by repurchasing the company's outstanding shares and paying a quarterly cash dividend of $0.05 per share, and we will continue to repurchase shares opportunistically and in keeping with our commitments to our shareholders. Ranger's financial position and operational execution are unmatched in our space, and we believe, over time, this will be recognized more and more in the marketplace by both customers and potential shareholders. We are steadfast in our belief that over time, our production-focused business model will produce undeniable results and serve as a testimony in the energy services sector. Our attractive free cash flow profile and yield sets us apart, and we are eager to engage with investors on the merits of our story. We appreciate your support and look forward to connecting with you in the weeks and months to come. With that, we will turn the call back over to the operator for questions.

Thank you. We will now begin the question-and-answer session. Today's first question comes from Don Crist with Johnson Rice. Please go ahead.

Good morning, guys. How are you all this morning?

Hey, we're good.

Good.

Good morning, Don. How are you?

Doing well. Stuart, you touched on this in your opening comments, but the theme coming out of this quarter for all the OFS guys has been industry consolidation and the slowdown that they've experienced. You all have really bucked that trend. I know you touched on it in your opening comments, but can you give us a little bit more detail around what you all are doing to actually grow market share in a market that's actually slowing a little bit?

Sure. Thanks for the question, Don. I think there are a couple of things that I would highlight. One is, as I mentioned in my remarks, the consolidation on the A&P side has been a net benefit to us. We have, through our investments, spent a lot of time really trying to partner with the best customers. As we've done that over the last several years, that's really benefited us, again, because the consolidation has helped us and has tended to give us more potential work. The other thing is if you look at some of the other service lines and the broader OFS complex—things like fueling efficiencies and frac efficiencies have hit them pretty hard, but because of our production focus, it hits us a lot less hard. I think that's also helped us buck the trend quite a bit as well.

I appreciate that. And obviously, the fourth quarter is going to slow as normal with seasonality and weather. But can you touch on '25 and what gives you confidence today that you should see growth next year? I mean, is it more P&A work or is it just the total addressable market for workovers, etc., growing in '25 that gives you confidence that you'll see growth next year?

I think it's really across the board. If you start off with the well service space, our High Spec Rig space, again, based on our discussions with our customers, we have a lot of confidence going into the year. But I think that's really across all the service lines. As Melissa touched on, we feel like we've probably seen the bottom in Wireline. We think that as you move into spring, that will really start to improve as well. In Ancillary, P&A has been strong. Coil has been strong. Torrent has nice tailwinds behind it. So it's not really one thing. I think it's multiple things. But again, I think the core is based on our conversations with our customers. We have a lot of confidence that we'll see some modest growth next year.

I appreciate that as well. And just one further one for me. I know Charlie has been on the Board for a long time. Is there anything else around him stepping down that you'd like to highlight?

Well, I appreciate the question. The first thing I would want to reiterate is our appreciation for Charlie and the CSL organization. They've done wonderful work with the organization since the Actio in 2014. They've really been instrumental in getting us to where we are today. We maintain a good relationship with them. Melissa and I are going to be in Boston later this week to talk about a case study on the Ranger IPO that's going to be there. Regarding his shares, as you know, CSL has agreed not to sell any stock until the end of '24. Beyond that, we don't know of any specific plans that he or CSL has. We'll maintain a relationship with them and obviously try to be supportive down the road when we can be, but we do not know of any specific plans right now.

I appreciate the color. I'll jump back in queue. Thanks.

Thanks, Don.

Thank you. The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Thanks. Stuart or Melissa, you all highlighted the margin improvement in the quarter compared to pre-pandemic. Can you talk about any specific areas going forward where you think you can further increase margins? As a follow-up to that, in a fragmented industry, are there certain acquisition opportunities that you think could present themselves that will be margin accretive and further support your capital return to shareholder plans?

Sure. Thanks for the question, Jeff. I'll touch on M&A, and I think Melissa has a chance to address some of the margin improvement things we're working on. On the M&A front, we continue to be believers that M&A would benefit the company. That's part of the reasons that we maintained a very conservative balance sheet. We think it gives us a lot of optionality. We have been in a number of discussions. There's still just a bit of a spread is what we've been finding. That doesn't mean we're not talking to a lot of folks. We do think there are some attractive opportunities for the company that would make both companies stronger on the back of M&A, but again, right now, the bid-ask has been a bit of an issue.

Yes. And maybe on the internal side, I guess I'll just say, I think it's—I've used the term slow and steady whenever I made my comments, and I think that's really how we think about further margin improvement. Further revenue dollars, particularly last year, margins came under a little bit of pressure because we talk a lot about white space. When we have an opportunity to manage our calendar better, we can really plan our business better and optimize labor and optimize a lot of our expenditure profile. As we look forward in the future, barring consolidation, which would bring about economies of scale, we could scale up facilities much better and bring synergies in that way. I think, on a standalone basis, we would see incremental improvements really from operational efficiencies. We are continuing to chip away at the edges in terms of well site planning and things like that, which would probably yield some results. We also are seeing some of our other service lines growing. We mentioned Torrent, which again is very small, but those margins are just generally higher and so we're getting better fall-through on those as well. Everything is helping a little bit, but we don't expect huge differentiation in terms of margin until we probably look at getting another deal under us. Thanks for your question.

Thank you.

Thank you.

The next question comes from John Daniel with Daniel Energy Partners. Please go ahead.

Hi all. Thanks for including me.

Hey, John.

You just touched on this in the prepared remarks, I missed it, so I apologize. But as you look to '25, where would you most likely allocate growth CapEx?

So, right now, when we look at '25, it really goes back to our biggest customers. If you look at our growth CapEx even this year, there were some in coiled, but a lot was invested into additional equipment around our well service rigs on the well site. We think this will likely continue as well next year. What we're finding, John, is the biggest customers don't just want the well service rigs; they want complete packages around that. They can include pipe handlers, power swivels, and pumps, etc. So I think most of it would likely be around that because that's where we see the biggest demand from our customers.

Okay. Are there any lead time issues associated with this product at this stage?

There are. You've touched on something we're debating a lot right now. There are some issues depending on the equipment; some things have lead times of six plus months. So you do have to be pretty thoughtful about when you want the equipment to show up to match with additional rig deployments.

Okay. That's all I got. Thanks for including me.

All right. Thanks, John.

This concludes our question-and-answer session. I would now like to turn back to management for any closing remarks.

Thanks, operator. Thanks, everyone, for joining the call today. I appreciate your continued interest in Ranger, and we will be reaching out to many of our investors shortly. We look forward to speaking with you. Have a good day, everybody.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.