Operator: Good morning, and welcome to Ranger Energy Services Second Quarter 26 Earnings Conference Call. All participants will be in listen-only mode. To ask a question, 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.
Joe Mease: Good morning, and thank you for joining Ranger Energy Services Second Quarter 26 Earnings Conference Call. Before we begin, Ranger has issued a press release outlining our operational and financial performance for the quarter ended June 30, 26. 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. 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 described in our filings with the Securities and Exchange Commission. Further, please note that non GAAP financial measures will be referenced during this call. A full reconciliation of GAAP to non GAAP measurements is available in our latest quarterly earnings release and conference call presentation. Joining me on the call today are Stuart N. Bodden, our Chief Executive Officer and Melissa Cougle, our Chief Financial Officer. Following their remarks, we will open the call for Q&A. And with that, I will turn it over to Stuart.
Stuart N. Bodden: Thank you, Joe, and good morning, everyone. Appreciate you being with us today for Ranger's second quarter 26 results. I will take a few minutes to review where we are strategically and operationally and share some high level financial context. Melissa will then walk through the more detailed P and L cash flow and balance sheet results. Overall, Ranger's second quarter performance reinforced the earnings power we believed we could achieve following the AWS acquisition. The integration of AWS continues to build momentum and the business is performing well. We were pleased to see the team's dedication and hard work translate into meaningful sequential improvement in both revenue and EBITDA. Activity levels were strong as anticipated and market sentiment continued to improve modestly throughout the quarter. Going forward, we remain focused on converting that momentum into sustained operating consistency stronger execution across the combined footprint, and taking advantage of cross selling opportunities. As always, our teams in the field remain focused on executing safely reliably, and efficiently for our customers. Ranger once again delivered sequential top line growth across our core segments with total revenue of $177 million up 10.9% sequentially. Ranger generated adjusted EBITDA of $28.6 million representing a 16.2% EBITDA margin expanded 160 basis points quarter over quarter. We have now passed a key milestone of generating an annualized adjusted EBITDA run rate in excess of $100 million Consistent with the target we first shared with investors, after the AWS acquisition. We continue to believe adjusted EBITDA for 2026 will exceed $100 million with Q3 expected to be similarly strong as Q2, before typical potential softening in Q4 due to holiday and weather impacts. Let me put the headline results in the context of what we are seeing in the market. At the start of the year, U. S. Onshore market was relatively muted. With activity expectations broadly consistent with 2025. Stable to slightly lower. During the second quarter, we saw a modest increase in workover and maintenance activity supported by normal seasonal strength from longer summer days and more favorable weather. Those trends played out as expected across Ranger's broader portfolio. With a business model heavily weighted toward production focused work, Ranger remains best in class at delivering cost efficient, high quality workover and intervention services on existing wells. In a market where customers continue to exercise capital discipline, demand for our fleet has remained strong. Providing some comments on each of our segments, our High Spec Rig segment had a strong second quarter with revenue increasing 4%. Supported by increased rig hours quarter over quarter, and a modest rate uplift on the back of fuel surcharges passed along to customers early in the quarter to offset increases in our fuel costs. The third quarter is traditionally our strongest quarter of the year and we are forecasting slight increases in the top line with margins expected to improve closer towards 20% as has traditionally been the case in our High Spec Rig segment. In our ancillary service lines, we saw standout performance from our coiled tubing service line during the quarter with good growth in our plugging and abandonment and torrent service lines as well. With all 3 service lines growing by 20% or more quarter over quarter on the top line. Performance within the other service lines was somewhat inconsistent and we are focused on finding better opportunities to nurture and grow these businesses in the future. Contribution from our Wireline segment this quarter was exceptionally strong. We made changes to the leadership team a little less than a year ago and the entire Wireline team's effort over the past several months is showing real results. The team secured several contracts earlier this year that drove much of the outperformance. And it was encouraging to see profitability materialize for the Wireline segment. As we look ahead, the contract awards that drove these results have concluded while our long term outlook for wireline is favorable, we expect the back half of the year to experience reduced EBITDA margins potentially back to single digits and a softer top line. The key themes driving our operational performance have not changed. We remain singularly focused on a few key areas this year. First, we always prioritize safety, and service execution. Our operational teams continue to deliver work safely and on schedule is why we maintain the strongest relationships with the largest E and P operators in the U.S. wind market. The customers value our safety forward culture and focus on ensuring asset reliability and crew competency. Which positions us well as activity continues to pick up in the future. Second, we achieved a significant milestone last year with the acquisition of American Well Services. And we remain focused on fully completing the integration and capturing synergies. In our second full quarter post acquisition, we continued to improve the legacy business, advance cross selling opportunities, standardized billing protocols, and drive toward full utilization, greater consistency, and growth in adjacent service lines. Across the Ranger footprint. We also continue to make meaningful progress on the rollout of our Echo fleet. The construction of our fleet of next generation hybrid electric workover rigs remains on schedule. The first 2 rigs contracted under our award announced at the start of the year are presently undergoing field testing and are expected to be operational by the end of the third quarter. Recently, we also announced that 1 of our core customers, Chevron, is committing to 3 additional Echo rigs. This vote of confidence in Echo's capabilities and this continued partnership is something we take great pride in at Ranger. Echo remains a differentiated asset in the market delivering enhanced safety, lower fuel consumption and emissions and improved operating efficiency. We continue to see market signs that Echo adoption will accelerate in the future and provide for further differentiation of Ranger services. Finally, Ranger began a journey to improve our cash flow generation potential over 3 years ago. And we continue to be focused on allocating capital where it has the potential to create maximum value for our shareholders, while maintaining unparalleled balance sheet strength. As a small cap energy services player. This quarter, we deployed nearly $4.5 million of excess cash into share repurchases of 283 thousand shares and we have now repurchased 4.6 million shares for a total of $52.1 million since mid-2023. At the same time declaring our standard quarterly dividend. Deploying cash flow strategically whether towards share repurchases towards acquisitions like AWS, we feel our approach to managing capital deployment is as much a strategic advantage as our Echo fleet. Ranger is as strong as ever. and continues to create value for shareholders, customers, and employees. We are positioning the company for long term value creation, we are increasingly optimistic about the growth opportunities ahead. With our supporting market expansion tied to U. S. Energy independence, and the build out of data centers and computing power, pursuing value accretive acquisitions expanding our differentiated Echorig fleet, or strategically repurchasing shares in the open market. Ranger is setting a differentiated path to continued growth and strong performance. With that, I will turn over the call to Melissa for a few remarks and the financial performance specifics.
Melissa Cougle: Good morning, and thank you, Stuart. We appreciate you all joining the call. This morning, I will take you through the numbers in more detail providing some additional color on what is driving our results. Starting with net income, we reported $6.9 million in the second quarter or $0.29 per diluted share. Versus $3 million or $0.12 per diluted share in the first quarter and $7.3 million or $0.32 per diluted share in the year ago quarter. Ranger remains a low federal cash taxpayer benefiting from historical net operating losses, which are expected to continue in the near to mid term. Ranger's total consolidated revenue for the quarter was $177 million up 10.9% sequentially from $159 million in the first quarter of 26 and up 25.5% year over year from $141 million in Q2 25. The quarter over quarter increases were driven by performance in both our ancillary services and wireline segments while year over year increases were largely a result of the AWS acquisition. From these revenues, Ranger generated adjusted EBITDA of $28.6 million representing a 16.2% margin, which compares to $23.3 million and a 14.6% margin in Q1 26 and $20.6 million and a 14.7% margin in Q2 of 25. In absolute dollars, adjusted EBITDA increased 23% quarter over quarter and we are excited to be seeing margins once again above 15% and expect that trend to continue going forward. High spec rigs produced revenues of $113 million in Q2. An increase of $4.3 million or 3.9% sequentially from $109 million in Q1 26 and an increase of $27.1 million or 31.4% from $86.3 million in Q2 of 25. Rig hours were 147 thousand and modestly improved from the prior quarter, while up 25% year-over-year with benefit of the expanded rig fleet. Average hourly rig rates were $772 per hour up about 6% sequentially from $731 per hour and up about 5% year-over-year from $738 per hour. Sequential and year over year increases in rig rates were driven by pass through of surcharges to customers to cover increased fuel costs. Adjusted EBITDA for the High Spec Rig segment was $20.6 million compared to $21.4 million in the first quarter and $17.6 million in the year ago quarter, while segment margins for the quarter were just under 19%. A small amount of softness on margins crept in this quarter and was driven by an unusual state sales tax audit that is currently under challenge as well as some make ready costs on our upcoming Echo deployment. In our ancillary segment, Q2 revenue was $44.5 million up 13% sequentially and 38% year-over-year. As Stuart mentioned, this segment has benefited from not only the AWS service lines acquired last year, but also from good expansion in our P&A and Torrent service lines. Adjusted EBITDA in this segment was $10 million for the quarter with margins of 22.5%. This segment continues to hold potential for Ranger through multiple service lines that we will be exploring in the back half of the year. Finally, we are happy to report a great quarter for the Wireline segment with revenue of $18.6 million up 75% from $10.6 million in Q1 with 2.56 thousand completed stages with contributions from a completions contract that was efficient and well executed. Our pump down service line hit record results during the quarter as well as more than doubling their top line with strong fall through and a great margin expansion as a result. Our conventional production focused service line tripled its margins as well while expanding top line results from the prior quarter. The operating team knocked it out of the ballpark this quarter producing overall margins of 19% with adjusted EBITDA of $3.6 million We are focused on finding more good opportunities even if they are sometimes hard to find. Until then, we are facing softness in the back half of the year, that will pull top line back down somewhat along with margin degradation expected with strong operating leverage that works both ways. Turning to the balance sheet, we made progress on collections early during the quarter. Although receivables and contract assets remained elevated at quarter end, due in part to delays experienced in June. We continue to diligently work with customers to resolve and reduce billing delays and improve collection timing, while also pursuing further automation opportunities within our billing processes designed to reduce our DSO. We expect these initiatives to support incremental working capital improvements during the second half of the year. Capital expenditures year to date were $24.7 million with $12.7 million of that commitment specific to Echo Rigs and the remainder allocated largely to maintenance CapEx. For the year, we believe total CapEx will be approximately $50 million with approximately $23 million of that echo payment related. And dependent on rig deliveries through year end. Finally, free cash flow for the quarter was a healthy $20 million supported by cash provided by operating activities for the quarter of $26.4 million Year to date, free cash flow is neutral given the build in working capital early in the year and spend on the Echo fleet. We do expect further working capital releases in the back half of 26 to support further debt pay down and strategic opportunities. We used our free cash flow generated this quarter to fund more than $4.5 million of share repurchases during the second quarter and bought back 283 thousand shares at attractive prices. As of June 30, total liquidity remained healthy at $61.3 million comprised of $57.1 million available revolver capacity and $4.2 million of cash on hand. Now, I will turn the call back over to Stuart for closing remarks.
Stuart N. Bodden: We thank everyone for joining us today. This quarter was gratifying for the whole team here at Ranger. Surpassing $25 million of adjusted EBITDA was a benchmark run rate for us post acquisition and we handily beat it. Additionally, our wireline group and some of our ancillary service lines including coiled tubing, P&A and Torrent, posted incredibly strong results. Ranger's second quarter underscores yet again our operational resilience, and ability to grow our business and create ever more differentiation while producing good cash flows, and allocating capital wisely. We look forward to updating you again in November. And with that, operator, let's open up the line for questions.
Operator: We will now begin the question and answer session. Our first question today comes from Don Crist with Johnson Rice. Please go ahead.
Don Crist: Good morning, guys. Hopefully, you all doing well this morning.
Stuart N. Bodden: Thanks, Don. How are you?
Don Crist: I am doing well. I wanted to start with Workover Rig segment. I mean, we are hearing a lot more antidotes around the industry that the E and Ps think that oil prices are going be higher for longer and they are starting to look towards 2027 for increased activity, etcetera. Just wanted to see your kind of macro thoughts on that and how the business is developing now with more 24 hour work and weekend work than we have seen and in months and quarters past. Just anything along those lines.
Stuart N. Bodden: Yes. Thanks for the question, Don. I think we kind of share that view that as you move into 2027. Just as the forward curve is strengthened and strengthened in the back part, that we will see an increase. You know, I am not sure it is translated at the moment into kinda meaningful changes from our customers. It will be interesting to see how things develop when they pour budgets. I would say what we are seeing right now is kind of an increase in smaller programs. Right? So kind of us filling up white space, which is helping you know, just with utilization. But I do not think we have seen enough kind of change yet to meaningfully add capacity into the market. I think we are watching pretty closely as we move into budgeting season.
Don Crist: Okay. And then on the echo rig program, I know you were spooling up with your vendor to try to hit a goal of certain amount of rigs per month. Just any updates on where you are with that process? And with the 18 rigs on order, obviously, 2 of them are doing field testing right now. But are you on a run rate of 1 or 2 per month coming out that we should see for the back half of the year and in 2027?
Stuart N. Bodden: Yeah. I think that is right. that is right, Don. So we have 2 in the field that are working right now. Those are the first 2 that went out. The 2 we referenced in are 2 from the contract that we announced earlier in the year. So when those 2 go into the field, you know, at the end of Q3, that would be 4 in the field. And I think that is right. We would expect We announced 15 earlier this year. We would think those would all be deployed by the end of next year, so that kinda gets you to 17. So that is about right. I mean, kinda think 1-ish a month is a pretty good run rate. So we are kind of on track with that. You know, right now.
Analyst: And then, obviously, we had the additional contract for 3 more. So there are now a total of 23 under contract.
Don Crist: Okay. And those should be incremental to your rig count, not displace current rigs. Right?
Stuart N. Bodden: it is 1 of the things that we are working through right now to see I think we are getting increasingly confident that a lot of these will be additive But we do expect to see kind of modest shuffling And that is kind of 1 of the things the teams are working on right now is to reallocate those rigs. Okay. I will turn it back to the operator and get back in queue.
Don Crist: Thanks for the answers.
Stuart N. Bodden: I appreciate it, Don.
Operator: The next question is from Derek Podhaizer with Piper Sandler. Please go ahead.
Derek Podhaizer: Hey, good morning, guys. Maybe sticking on Echo, and just trying to think through the prepayments and how they affect the margin. I know margins came off a little bit in high spec. A couple of things weighing on those. But maybe could you help educate us, just as far as the margins attached with Echo's as you get these things out, how we should think about that? Accretive, dilutive? I know there is some funky things with prepayments now at impacts the cash flow into the P and L. So maybe just help around that how we should think about these margins as you continue to ramp up Echo?
Melissa Cougle: Yes. No, it is a good question, Derek. And we will have a little bit of additional clarity coming out, in the updated investor presentation coming out today. The best guidance we can give you for now is largely going to be unnoticeable. We will end up adjusting back out the amortization of the upfront payments. So it will in essence, lift revenue but it will not lift EBITDA being as it is a non cash item over the longer term. That said, as premium day rates come into play to the extent there are those on contracts, those would potentially have margin uplift effect because they are being billed and their cash items being collected real time. What we sort of committed to the community writ large was that as that started to play out and it became noticeable, and started to quantify 50 bps, of margin, etcetera, etcetera, we will give you quarter to quarter updates on that. But for right now, it is it is largely a muted no impact effect. Got it. Okay. that is super helpful. Thanks, Melissa.
Derek Podhaizer: And then you had a line in the press release talking about potentially stepping out with new service lines through advantageous acquisitions. Position you well for the future. Stuart, maybe just if you could talk to that, what you are seeing, if it is some of the stuff you got from AWS, some of the stuff you are growing organically like Torin. Or other items that you are targeting as you think about how the shape of the recovery in the future of your business. So maybe just some thoughts around what you are seeing in M&A and just talk to that line you had in the press release.
Stuart N. Bodden: Yes. Thanks for the question, Derek. In ancillary, in general, we were really pretty pleased with how the quarter went and the outlook. As you kind of referenced coil, P and A, Torrents are infill gas processing, all had really strong quarters. Some of the service lines we picked up in AWS, we picked up a mixing plant business, picked up a trucking business, we picked up a tubing inspection business. I would say some of those were a little bit mixed Some were quite strong. Some were less strong, and I think that is kinda where we are focused is getting those more consistent. And there is a couple in there that we really like the margin profile, and I think we just wanna be confident that we see sustained demand before we kinda meaningfully lean into it. But hopefully, that kinda gives you a sense of kind of what we are thinking.
Derek Podhaizer: And then I think there might have been a question in there about the M&A, kind of what we are looking at going forward. You know, I do not think it would surprise you to say that we are we are looking at a number of things, but generally, they are by and large in line with things that we are currently in the service lines we currently have. Okay. Got it. And maybe just a little bit more on Torrent. You know, it is kind of an interesting business you have as far as potential attachment to some power generations out there. It sounds like it had a good quarter, maybe some of the drivers of that. How you are thinking about that business longer term?
Stuart N. Bodden: Yes. We were again, pretty excited about how it came out. I think how we have been thinking about it and you are exactly right. So infill gas processing, we are cleaning up gas streams and knocking out the liquids of gas streams that cannot get into permanent processing facilities. So you can kind of imagine about the types of fields where that occurs. We are definitely seeing an uptick in demand I think how we are thinking about it is we wanna see, again, I think, how do we think about the longer term outlook and just sort of getting to sustained full utilization. We are not quite there yet. So again, I think we are trying to be thoughtful about it. And, you know, see where we can meaningfully invest it. But at the moment, I think we are most focused on getting out existing equipment.
Derek Podhaizer: Okay, great. Appreciate all the comments, guys. Turn it back.
Stuart N. Bodden: Yeah. Thanks, Derek. Thank you.
Operator: The next question is from John Daniel with Daniel Energy Partners. Please go ahead.
John Daniel: Hey, good morning, Stuart and Melissa. Thanks for including me. Congrats on the Echo contract. My question is when you look at the companies like the Chevron's of the world, you know, they are running dozens upon dozens of workover rigs across the country. Do you envision a scenario or a point in time where they might make a complete shift to ECHO-type technology?
Stuart N. Bodden: Yeah. I will give some kind of the flavor of the conversations that we have with them. I think they are still trying to determine that. To be honest, John, I think we have heard some where some of the larger players have indicated they might want a certain base load to be electric rigs. Right? So if they kind of think about hey. Under almost any kind of long term commodity price scenario, they are gonna run x rigs, and they want x to be electric or hybrid rigs, and then they will kind of flex with conventional rigs on top of that. We have heard some people wanna make a kind of more aggressive shift than that, but I think everybody's really just trying to figure it out right now. But I would kinda reiterate that we are pretty encouraged by the demand and the conversations we are having right now.
John Daniel: I misspoke slightly earlier.
Stuart N. Bodden: We are at 20 under contract right now. And I do not think we would be surprised to see more come under contract in the next, you know, kind of 9 to 12 months.
Melissa Cougle: I would only add to Stuart's comments that I think a lot of the dependency is really on how these rigs start because they are-- you know, I mean, we have only had 2, and the only other electric workover rig out there, I think there are 5. They have only really got 2 years of run time. Right. And they do not have the same sort of economic value proposition that eFrac had. So I think a lot of the dependency will be sort of over time. How meaningfully do safety statistics move and frankly efficiency statistics. So to the extent the efficiencies that we believe will ultimately mature within the electric workover rig as they come to pass, the likelihood is adoption kind of continues to increase.
John Daniel: Okay. Right. And I am not looking for names with this question, but I would suspect the incremental orders you get in the near term would be more with existing customers. But assuming that is true, when would you anticipate some of the independent operators really kicking the tires?
Stuart N. Bodden: I would say we have a couple independents that are kicking tires, but I would say it is very-- you know, it is kind of early days. I think how I would answer the question is kinda going back to Melissa's comments, is that I think when there is a established track record of safety improvement, efficiency gains that I think it will be easier for some of the smaller players to then point to it right now. Of the early signs are really encouraging, but at least I think my informal conversations is they want a kind of a longer track record. Of the smaller players.
John Daniel: Very helpful. Final 1, if I may, is just your latest thoughts on The US coiled tubing market. I will turn it back over. What you are seeing.
Stuart N. Bodden: Yes. So coiled tubing for us, was a really strong quarter. We are focused in the Rockies. And again, I think we were pretty encouraged by what we saw there. it is not a surprise that as drilling rig count is starting to tick up and frac count is slowly ticking up, the quilt would follow. But, again, we are pretty happy with the quarter we saw.
John Daniel: Okay. Thank you very much.
Stuart N. Bodden: All right. Thank you so much.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Stuart N. Bodden for any closing remarks.
Stuart N. Bodden: Again, thank you everyone for joining us today. We appreciate it and we look forward to speaking to you in November. Take care, everyone.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
