Ranger Energy Services (NYSE:RNGR) reported robust financial and operational results for the third quarter of 2023, demonstrating resilience amid declining US onshore drilling activity and weak natural gas basins. The company recorded sequentially increasing revenue, adjusted EBITDA, and adjusted EBITDA margin each quarter in 2023, reflecting a strong operational performance and efficient redeployment of idle assets.
Key takeaways from the earnings call include:
- Ranger reported net revenue of $164.4 million, marking the second-highest revenue quarter in its history.
- The company's net income on a year-to-date basis was $21.7 million, triple that of the same period in 2022.
- Adjusted EBITDA for the core was $24.0 million, with an increased adjusted EBITDA margin of 14.6% in the third quarter.
- Ranger implemented a capital return framework, including a quarterly dividend and share repurchases, exceeding its 25% annual shareholder return commitment.
- The company anticipates increased activity levels in 2024 and has a positive long-term view of North American resource development.
Ranger's production-focused business model and strong operational teams allowed the company to maintain revenue levels despite industry challenges. The company also signed a new customer agreement with a major integrated onshore operator, boosting confidence in their 2024 plan and opening opportunities for further growth.
In Q3 2023, Ranger reported a 1% increase in revenue from the previous quarter, reaching $164.4 million. Net income for the quarter was $9.4 million, a significant improvement from Q2. Adjusted EBITDA reached $24 million, a 10% increase from the second quarter. Ranger also repurchased $2.7 million worth of shares and initiated a $0.05 per share quarterly dividend. The company closed an acquisition of pump-down assets for their Wireline business and reported a liquidity of $70 million at the end of the quarter.
During the earnings call, company representatives discussed Ranger's strategy and outlook. They highlighted the focus on high-spec rigs and longer laterals, which they believe will benefit the company in the long term despite the current slowdown in the rig count. They also expressed optimism about the future demand for their high-spec rigs as more wells require remedial work or artificial lift.
Ranger is confident about the growth of their total addressable market as long as more new wells are being drilled than abandoned. The company also discussed its efforts to consolidate operations in basins and control costs, emphasizing their lean G&A structure and the ownership of a larger percentage of yards and shops, which helps in reducing expenses during a downturn. The company acknowledged the tight labor market in the industry but expressed readiness to act quickly if necessary.
The company is well-positioned to benefit from E&P consolidation and is focused on delivering value to shareholders. It continues to work on determining the intrinsic value of its shares through a multiyear model, which they refresh every quarter. The company also discussed changes in the Board, which was prompted by the lack of diversity and turnover.
Ranger remains positive on market fundamentals and expects activity to increase modestly in 2024. Despite lower-than-expected results in Q3, they expect a lighter fourth quarter before picking back up in 2024.
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