Ranger Energy Services(RNGR) - 2019 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Unaudited interim financial statements for Q3 2019 report total assets of $308.4 million, net income of $4.5 million, and operating cash flow of $36.3 million Unaudited Interim Condensed Consolidated Balance Sheets As of September 30, 2019, total assets increased to $308.4 million, liabilities decreased to $105.9 million, and stockholders' equity rose to $202.5 million Balance Sheet Summary | Balance Sheet Items | Sep 30, 2019 (in millions) | Dec 31, 2018 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $68.5 | $61.1 | | Property and equipment, net | $222.8 | $229.8 | | Total Assets | $308.4 | $302.5 | | Total Current Liabilities | $58.9 | $58.9 | | Long-term debt, net | $37.0 | $44.7 | | Total Liabilities | $105.9 | $110.5 | | Total Stockholders' Equity | $202.5 | $192.0 | Unaudited Interim Condensed Consolidated Statements of Operations Q3 2019 saw revenues rise to $84.1 million but a net loss of $0.9 million, while nine-month revenues grew 18% to $256.7 million with a net income of $4.5 million Statements of Operations Summary | Metric (in millions) | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $84.1 | $82.1 | $256.7 | $217.8 | | Operating Income (Loss) | $1.6 | $4.4 | $10.8 | $(5.4) | | Net Income (Loss) | $(0.9) | $4.0 | $4.5 | $(7.5) | | Diluted EPS | $(0.06) | $0.24 | $0.26 | $(0.51) | Unaudited Interim Condensed Consolidated Statements of Cash Flows Nine months ended September 30, 2019, generated $36.3 million in operating cash, with investing cash use decreasing to $19.0 million, leading to a $5.4 million increase in cash Cash Flow Summary | Cash Flow Activity (in millions) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36.3 | $24.9 | | Net cash used in investing activities | $(19.0) | $(56.1) | | Net cash (used in) provided by financing activities | $(11.9) | $27.9 | | Increase (decrease) in Cash | $5.4 | $(3.3) | | Cash and Cash Equivalents, End of Period | $8.0 | $2.0 | Notes to Unaudited Interim Condensed Consolidated Financial Statements Notes detail business structure, accounting policies, and financial components, including the adoption of ASU 2016-02 and segment performance across three operational areas - The company is a provider of high-specification well service rigs and associated services, operating through three segments: High Specification Rigs, Completion and Other Services, and Processing Solutions[17][74][75] - Effective January 1, 2019, the company adopted the new lease accounting standard (ASU 2016-02), recognizing an initial operating lease right-of-use asset and corresponding liability of $8.3 million[23][27] Debt Instrument Breakdown | Debt Instrument | Sep 30, 2019 (in millions) | Dec 31, 2018 (in millions) | | :--- | :--- | :--- | | ESCO Notes Payable | $5.8 | $5.8 | | Wells Fargo Credit Facility | $17.5 | $17.9 | | Encina Master Financing Agreement | $29.5 | $36.8 | | Total Debt | $52.8 | $60.5 | - In June 2019, the Board of Directors approved a share repurchase program authorizing the purchase of up to 10% of outstanding Class A Common Stock held by non-affiliates, not to exceed 580,000 shares or $5.0 million[59] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 18% revenue increase for the nine months ended September 30, 2019, driven by segment growth, with Adjusted EBITDA rising to $39.4 million and solid liquidity of $8.0 million cash Results of Operations Q3 2019 revenues grew 2% to $84.1 million with a 64% operating income decline, while nine-month revenues increased 18% to $256.7 million driven by Completion and Processing Solutions Quarterly Revenue by Segment | Revenue by Segment (in millions) | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | High Specification Rigs | $32.5 | $38.7 | (16)% | | Completion and Other Services | $45.3 | $39.4 | 15% | | Processing Solutions | $6.3 | $4.0 | 58% | | Total Revenues | $84.1 | $82.1 | 2% | Nine-Month Revenue by Segment | Revenue by Segment (in millions) | Nine Months 2019 | Nine Months 2018 | % Change | | :--- | :--- | :--- | :--- | | High Specification Rigs | $97.3 | $114.6 | (15)% | | Completion and Other Services | $143.2 | $92.3 | 55% | | Processing Solutions | $16.2 | $10.9 | 49% | | Total Revenues | $256.7 | $217.8 | 18% | - The High Specification Rigs segment saw a decrease in rig hours, from 74,200 in Q3 2018 to 62,400 in Q3 2019, and from 224,600 to 184,700 for the respective nine-month periods[102][103][108] - Growth in the Completion and Other Services segment was primarily driven by the wireline business, which expanded its unit count by 44% to 13 units as of September 30, 2019, from 9 units a year prior[109][122] Non-GAAP Financial Measure: Adjusted EBITDA Adjusted EBITDA for Q3 2019 was $12.2 million, while the nine-month period saw a 44% increase to $39.4 million, driven by strong segment performance Adjusted EBITDA by Segment | Adjusted EBITDA (in millions) | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | High Specification Rigs | $3.3 | $5.6 | $12.0 | $17.6 | | Completion and Other Services | $10.7 | $11.4 | $35.7 | $24.1 | | Processing Solutions | $3.5 | $2.2 | $9.3 | $5.8 | | Other | $(5.3) | $(6.6) | $(17.6) | $(20.1) | | Total Adjusted EBITDA | $12.2 | $12.6 | $39.4 | $27.4 | Liquidity and Capital Resources As of September 30, 2019, liquidity included $8.0 million in cash and $17.2 million credit facility availability, with $36.3 million cash generated from operations - Primary sources of liquidity as of September 30, 2019, include $8.0 million in cash and $17.2 million in availability under the Credit Facility[148] Cash Flow Summary | Cash Flow Summary (in millions) | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | | Cash from Operating Activities | $36.3 | $24.9 | | Cash from Investing Activities | $(19.0) | $(56.1) | | Cash from Financing Activities | $(11.9) | $27.9 | | Net change in cash | $5.4 | $(3.3) | - Working capital increased to $9.6 million as of September 30, 2019, from $2.2 million as of December 31, 2018[154] Item 3. Quantitative and Qualitative Disclosures About Market Risks The company faces market risks including commodity price, interest rate, and credit risk, with a 1% interest rate change impacting annual expense by $0.5 million - The company is exposed to interest rate risk on its Credit Facility and Financing Agreement. A hypothetical 1.0% change in the weighted average interest rate would affect annual interest expense by approximately $0.5 million[175] - The market for the company's services is indirectly exposed to fluctuations in oil and natural gas prices, which impact the activity levels of its E&P customers[177] - As of September 30, 2019, the top three customer trade receivable balances represented approximately 15%, 10%, and 8% of total accounts receivable[176] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[178] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2019, that materially affected, or are reasonably likely to materially affect, internal controls[179] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not subject to material litigation, and management expects no material adverse effect on financial position from existing legal matters - The company is not currently subject to any material litigation, and management does not expect existing matters to have a material adverse effect on its financial condition[180] Item 1A. Risk Factors This section refers to the Annual Report's 'Risk Factors' for a detailed discussion of potential material adverse effects on the business - For a detailed discussion of risk factors, the report refers to the 'Risk Factors' section in the company's Annual Report[181] Item 2. Unregistered Sales of Securities and Use of Proceeds In the first nine months of 2019, a $3.0 million liability was settled by issuing 206,897 shares, and 47,474 shares were repurchased for $0.3 million in Q3 - A $3.0 million liability was settled through the issuance of 206,897 shares of Class A Common Stock to CSL Energy Holdings I, LLC and CSL Energy Holdings II, LLC[182] Share Repurchase Program Activity | Period | Total Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2019 | — | $— | | August 2019 | 20,874 | $6.51 | | September 2019 | 26,600 | $6.56 | | Total Q3 2019 | 47,474 | N/A | - As of September 30, 2019, a maximum of 532,526 shares may yet be purchased under the share repurchase program[186] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report, including reorganization agreements, corporate governance, and officer certifications