Ranger Energy Services 2026 Q3 Earnings Call

Good morning, and welcome to the Ranger Energy Services Third Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your touch-tone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Joe Mease, Vice President of Finance. Please go ahead. Good morning, and thank you for joining Ranger Energy Services Third Quarter 2026 Results Conference Call.

Before we begin, Ranger has issued a press release outlining our operational and financial performance for the quarter ended September 30, 2026. This press release, along with our most recent investor presentation, is 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 crude oil and natural gas prices, customer activity levels, operating risks, competitive pressures, weather conditions, integration risks related to acquisitions, and other risks as described in our filings with the Securities and Exchange Commission. We will also reference certain non-GAAP financial measures during today's call, including Adjusted EBITDA and Free Cash Flow. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in our earnings release. Joining me on the call today are Stuart Bodden, our Chief Executive Officer, and Melissa Cougle, our Executive Vice President and Chief Financial Officer. Stuart will begin with an overview of the quarter and our strategic progress, including the completion of the STEP coiled tubing acquisition and the continued build-out of our ECHO rig fleet.

Melissa will then walk through our third quarter financial results in more detail. Following their remarks, we will open the call for questions. With that, I will turn it over to Stuart.

Thank you, Joe, and good morning, everyone. We appreciate you joining us today. Consistent execution and steady progress define Ranger, and this quarter, we continued to deliver against our strategic goals. Most notably, we completed the acquisition of the STEP U.S. coiled tubing assets, making Ranger the second-largest coiled tubing provider in the Lower 48. In addition to this transaction, Chevron committed to four additional ECHO hybrid electric workover rigs, which will take our contracted ECHO rig fleet to 24 rigs by the end of 2027. Finally, strong cash generation allowed us to fully repay the revolver borrowings from our American Well Services acquisition, allowing us to exit the quarter with zero net debt less than a year after closing that transaction. This progress was a result of intentional and consistent effort from the organization that continues to strengthen Ranger as we approach 2027.

I firmly believe Ranger has more ways to grow today than at any point in our history. First, a few words about the quarter itself. Ranger generated revenue of $162.8 million and Adjusted EBITDA of $20.1 million in the third quarter, results that were softer than we expected. Customers managed their budgets more closely, smaller competitors lowered price to win back work, and we absorbed cost inflation across several cost categories, the largest being an incremental $1.5 million in employee medical costs compared to the second quarter. Considerable time has been spent recently with our operating teams, evaluating ways to improve utilization and margins, and many of those efforts are already in flight. Melissa will walk through some additional color in the segment detail. Cash generation, however, remains strong.

Ranger produced $20 million of Free Cash Flow in the third quarter, which allowed us to fully repay our revolver borrowings while continuing to return capital to shareholders and giving us capacity to complete the STEP acquisition. Now let me turn to the STEP asset acquisition, which we closed on October 8th. I want to first welcome our new professionals to Ranger. The STEP team has earned a strong reputation for technical execution, service quality, and solving customers' most challenging drill-out applications safely and reliably, and they are a tremendous addition to our organization. This transaction does three important things for Ranger. First, it gives our coiled tubing business scale. We have long been proud of our coiled tubing operation in the north, but it was a single-basin business, and in coiled tubing, scale drives utilization and returns.

STEP adds 13 coiled tubing units operating from the Bakken through South Texas, with its largest presence in the Permian Basin, right alongside our High Specification Rig fleet. We are now a multi-basin coiled tubing provider in the U.S. coiled tubing market estimated at $1.5 billion annually. Second, it gives us differentiated technology. The COIL+ extended reach technology has helped operators successfully reach total depth on more than 60 long lateral wells, with its deepest well exceeding 30,000 feet. As laterals get longer, that capability lets us compete for the most demanding work in our basins, and it gives customers real flexibility in their drill-out programs, because Ranger can now offer either a coiled tubing unit or a High Specification Rig for the job. Third, it creates pull-through. The overlap between STEP's customers and our own is significant, and a larger coiled tubing business lets us provide more services and equipment to those customers across more of their wells.

We acquired these assets for approximately $27.5 million, and we expect STEP's coiled tubing assets to contribute more than $10 million of Adjusted EBITDA in 2027, with significant further upside expected in 2028. That is a compelling valuation for a business of this quality, and exactly the kind of targeted M&A that continues to set Ranger apart. We are adding shareholder value at attractive prices in businesses we know well. Turning to ECHO. During the quarter, we were awarded contracts for four additional ECHO rigs.

This represents additional expansion of our ECHO relationship with Chevron this year, following the rigs committed to earlier in the year, and it will bring our total contracted fleet to 24 rigs by the end of 2027. Repeat orders from an operator of this caliber are the strongest validation of this technology we could possibly ask for. The ECHO build program is also running slightly ahead of schedule. Five ECHO rigs have been delivered through the third quarter, with the balance of the fleet scheduled for delivery through the third quarter of 2027. Customer feedback has been positive, reinforcing both the efficiency of operations and the enhanced safety ECHO brings to location, and our current customer conversations point to additional rig commitments in the future.

We are beginning to track safety and operational performance on these rigs, and feel over time their value proposition will become increasingly evident in the data, driving further demand. Importantly, ECHO represents growth where our customers are investing alongside Ranger. Our agreements include upfront customer payments or day rate premiums that support returns on the capital we invest. As ECHO's efficiency gains are solidified, we expect the fleet to help push down overall service costs for our customers. That is a powerful combination in a market where operators are looking to do more with less. We have also now passed the one-year mark since closing AWS. We have realized approximately $5.2 million of annualized cost synergies, ahead of the $5 million we targeted, and we have fully repaid the borrowings used to fund the transaction.

The acquired High Specification Rigs have largely tracked our expectations, while some of the ancillary service lines, particularly transportation, mixing plants, and tubing inspection, underperformed during the third quarter. We have taken several operational steps to reorganize those operations to improve accountability, utilization, and profitability. In High Specification Rigs, customers managed their spending more closely in the third quarter, creating incremental white space across our fleet. At the same time, as Ranger has gained share through operator consolidation, smaller displaced competitors have offered price reductions to regain work, and some budget-constrained customers took advantage of those savings. We have held our pricing discipline, which allows us to maintain our standards for safety and service quality, and we expect that decision to pay off as the market normalizes and budgets reset next year.

Elsewhere, our legacy rentals and plugging and abandonment service lines continued to perform well, with P&A supported by an expanding and steady base of work from the Texas Railroad Commission. Our Wireline Services segment performed as we expected, with the break in customer well programs. The team managed the activity decline with timely cost reductions, demonstrating the progress made in creating a more responsive cost structure. New work programs began in October, and we believe that the fourth quarter will provide improvement from this quarter. Stepping back, crude prices moved sharply higher during the third quarter, and U.S. production and land drilling activity continued to grow. Although commodity prices have recently retreated somewhat, we believe Ranger's production-focused services, which deliver the fastest and lowest-cost incremental barrels from existing wells, are well-positioned as our customers' budgets reset.

As we head into 2027, we have a fast-growing ECHO fleet, an expanded coiled tubing platform, reorganized ancillary service lines, and a Wireline Services segment that has shown its resilience. The moat is deeper now than it has ever been, and we remain focused on our goal of achieving $100 million of annualized Adjusted EBITDA, supported by these initiatives. With that, I'll turn the call over to Melissa.