Earnings call transcript: Ranger Energy Q1 2025 earnings miss, stock drops 13%

Ranger Energy Services Inc. (RNGR) reported its first-quarter 2025 earnings, revealing a significant miss in both earnings per share (EPS) and revenue compared to forecasts. The company’s stock reacted negatively, dropping 13.11% in after-hours trading. Ranger’s EPS was $0.03, falling short of the expected $0.25, while revenue reached $135.2 million, missing the forecasted $137.3 million. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.1 out of 4, and current trading levels suggest the stock may be undervalued relative to its Fair Value.

Key Takeaways

• Ranger Energy’s EPS of $0.03 missed expectations by $0.22.
• Revenue for Q1 2025 was $135.2 million, below the forecast of $137.3 million.
• Stock price dropped 13.11% following the earnings announcement.
• Adjusted EBITDA increased by 42% year-over-year.
• The company maintains a strong liquidity position with no long-term debt.

Company Performance

Ranger Energy Services experienced a challenging first quarter in 2025, with revenue declining from the previous quarter’s $143.1 million. Despite this, the company reported a 42% year-over-year increase in Adjusted EBITDA, highlighting improved operational efficiency. The company continues to focus on modernizing its rig fleet and expanding its gas capture and processing platform, Torrent.

Financial Highlights

• Revenue: $135.2 million, down from $143.1 million in Q4 2024.
• Earnings per share: $0.03, missing the forecast by $0.22.
• Adjusted EBITDA: $15.5 million, a 42% increase year-over-year.
• Free Cash Flow: $3.4 million ($0.15 per share).
• Liquidity: $104.4 million, with $40.3 million cash on hand.

Earnings vs. Forecast

Ranger Energy’s Q1 2025 results missed analyst expectations, with EPS at $0.03 against a forecast of $0.25, and revenue at $135.2 million compared to the expected $137.3 million. The EPS miss represents an 88% shortfall, reflecting significant challenges faced during the quarter.

Market Reaction

Following the earnings announcement, Ranger Energy’s stock fell by 13.11%, closing at $10.965 in after-hours trading. This places the stock closer to its 52-week low of $9.27, indicating investor concerns over the earnings miss and broader market conditions. The stock currently trades at a P/E ratio of 13.2x, while analysts maintain a Strong Buy consensus with a $20 price target. InvestingPro research reports provide comprehensive analysis of RNGR’s valuation metrics and growth potential.

Outlook & Guidance

Ranger Energy remains committed to its strategic priorities, focusing on maximizing free cash flow, prioritizing shareholder returns, and exploring merger and acquisition opportunities. The company expects margins to return to mid-teen levels as market conditions stabilize. Historical performance supports this outlook, with the company achieving an impressive 11% revenue CAGR over the past five years. Discover more detailed growth metrics and industry comparisons with a comprehensive InvestingPro subscription, which includes exclusive access to advanced financial metrics and expert analysis for over 1,400 US stocks.

Executive Commentary

CEO Stuart Boden emphasized Ranger’s resilience, stating, "Ranger is a durable, high return business designed to perform through the cycle." CFO Melissa Kugel highlighted the company’s financial strength, noting, "Our financial strength allows us to make smart capital allocation decisions for the long-term benefit of our shareholders."

Risks and Challenges

• Market uncertainty due to global economic conditions.
• Impact of extreme weather events on operations.
• Potential tariff impacts being monitored.
• Stagnation in completions activity in the North.
• Challenges in the wireline segment due to market conditions.

Q&A

During the earnings call, analysts questioned the company’s resilience in workover versus new drill budgets, challenges in the wireline segment, and the potential for mergers and acquisitions. Executives addressed these concerns, emphasizing strategic priorities and market adaptability.

Full transcript - Ranger Energy Services Inc (RNGR) Q1 2025:

Conference Operator: Good day, and welcome to the Ranger Energy First Quarter of twenty twenty five Conference Call. All participants will be in a listen only mode for the duration of the call. After today’s presentation, there will be an opportunity to ask questions. Also, please be aware that today’s call is being recorded. I would now like to turn the call over to Joe Meese, Vice President of Finance.

Please go ahead, sir.

Joe Meese, Vice President of Finance, Ranger Energy Services: Thank you, and welcome to Ranger Energy Services first quarter twenty twenty five results conference call. Ranger has issued a press release outlining our operational and financial performance for the three months ended 03/31/2025. The press release and accompanying presentation materials are available at 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 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. With that, I would now like to turn the conference call over to our CEO, Stuart Boden and our CFO, Melissa Kugel, their prepared remarks. Thanks,

Stuart Boden, CEO, Ranger Energy Services: Joe. Good morning, everyone, and thank you for joining us today to discuss our first quarter results. The past couple of months have brought about a new level of uncertainty into the global economy and the oil and gas industry. In the midst of market volatility, Ranger continues to stand out among small cap oilfield service companies for its ability to be resilient through the cycle. Both for durability, our business has always and will continue to benefit from a production oriented focus and a fortress balance sheet.

Having been through many cycles, we have been very intentional in building this business for the long term, making tough choices to preserve strength and optionality in all of our business lines. Because we operate conservatively in strong markets, we connect decisively during downturns, allocating capital in ways to drive long term shareholder value. As we report our first quarter’s results and look ahead to the remainder of 2025, we remain steadfast in our conviction that Ranger is a differentiated oilfield services business. During the first quarter, despite the typical impacts of weather and seasonality, we reported significant improvements year over year in adjusted EBITDA and margin, led once again by the strength of our high specification rigs business. We reported revenue of $135,200,000 and adjusted EBITDA of $15,500,000 achieving a margin of 11.4%, a significant improvement over the same period last year.

While first quarters are often impacted by seasonality, this year brought two polar vortex events in January and February, followed by March windstorms. Still, our core business line delivered and we achieved strong operational and financial results. We talk about our production focus all the time, but it’s worth emphasizing again why this is so important during market turbulence. We often use the analogy that we are the mechanic, not the car manufacturer. Our services are critical to maximizing production, which are our customers’ lowest cost incremental barrel.

When commodity prices force difficult decisions, it’s capital expenditure budgets to which we have limited exposure that typically get trimmed first. Over the past two years, Ranger has bucked a trend of the typical E and P consolidation outcome that two plus two equals three, posting material growth in the face of major operator consolidation and benefiting from scale and exposure across basins as other vendors were rationalized. All of this was achieved during declining drilling rig and frac spread counts. The High Specification Rig segment recorded its fifth consecutive quarter of revenue growth driven by consistent rig hours and a higher blended rate. Margins were slightly down quarter over quarter due to weather, but increased by two eighty basis points over the prior year period.

We expect the stability and resiliency of this business to continue throughout the year despite the noise from the broader market. Our customer base includes some of the largest operators in the world working in some of the highest quality oil and gas assets in the world. We have stayed and will continue to stay in close communication with them regarding their well intervention programs and the current commodity price environment. Although some customers are making contingency plans for reduced activity in a lower for longer commodity price scenario, today we have not seen material reductions in the well services production space. Ancillary services also continues to be a bright spot for Ranger.

This performance pulled back modestly from the last quarter due to seasonality, but increased substantially from the first quarter of twenty twenty four. Revenue increased by 25% from the prior year period with adjusted EBITDA more than doubling and margins remaining in the high teens. As I have highlighted the last couple of quarters, Torrent, our gas capture and processing platform is a standout performer. Compared to the same period last year, revenues quadrupled and with very strong fall through, with margins now solidly between 2530% monthly. We are pleased with the demand for this service and continue to evaluate opportunities to put additional resources behind this segment in 2025.

Our rentals and P and A service lines both showed continuing strong margin performance and have developed the ability over the past couple of years to respond more quickly to activity pullbacks to minimize margin degradation. Our wireline units struggled in the first quarter as completions activity in the North stagnated due to the severe weather, reporting negative adjusted EBITDA of $2,300,000 which weighed on our consolidated performance. Our January and February performance was our most challenged to date. However, we did post positive margins in March and look to be building on that again in April. We made an additional round of adjustments to the organization to align the cost structure of this segment with the market conditions, along with redeployment of assets into both the conventional wireline space and to our plugging and abandonment business to meet increasing customer demand.

We believe this will be a benefit over the longer term and demonstrates our flexible equipment base that can work across our various business segments. Turning now to our strategic priorities. I would like to spend a few minutes addressing the current market environment and potential impacts to Ranger’s business. While the macroeconomic environment is currently being impacted by a number of factors, including the current tariff situation, it is not possible to accurately determine the impact to our business and our guidance remains the same in absence of concrete data to indicate otherwise. Today, we’ve had very limited impact, and our customers largely remain in a holding pattern for now.

The market share gains we’ve experienced through customer consolidation have allowed us to deepen our relationship with the strongest operators holding the best acreage in the Lower 48, and these operators have given us every indication that they plan to continue using Ranger as a preferred provider. In each of our calls, we reaffirm our strategic priorities since they do not change. Our goals always are to maximize free cash flow, prioritize shareholder returns, defend the balance sheet and grow through disciplined accretive M and A. These priorities are never more important than in an uncertain market. We are inherently able to maximize cash flow because of the light capital intensity of our assets.

Our CapEx spend in Q1 reflected strategic investments to enhance our service offerings to major customers, which increases customer loyalty and brings consistent margins. We will be particularly judicious with incremental CapEx in the coming quarters since it’s important to us to maximize our capital allocation flexibility. We remain convicted in our capital return strategy and announced a 20% increase to the dividend last quarter to $06 per share, again affirming that commitment today in this quarter’s announcement. Capital returns through aggressive share buybacks at compelling valuations were an important part of our strategy for value creation in 2024, and this buyback strategy remains an important tool in the toolkit in 2025 to maximize returns. Our cash flows not only allow for optimizing capital returns, but we can also maintain balance sheet strength that is far beyond that of any other peer.

As of March 31, Ranger had zero long term debt, dollars 104,400,000.0 of liquidity and $40,000,000 of cash on hand. Finally, we continue to evaluate opportunities to grow that are both strategic and accretive. The bid ask spread has remained an obstacle, but as market conditions evolve, we see potential for actionable opportunities. With our financial strength in public currency, Ranger continues to be an ideal natural consolidator with a proven track record on the integration front. We believe Ranger is a safe haven during these uncertain times and that there is no other small cap oil field services company that comes close to offering the free cash flow, shareholder returns and balance sheet strength that we do.

Our confidence isn’t rooted in the call market. It’s built on a track record of disciplined execution and a shareholder focused strategy. In short, Ranger is a durable, high return business designed to perform through the cycle. Melissa will now review our quarterly financials.

Melissa Kugel, CFO, Ranger Energy Services: Thanks, Stuart, and good morning, everyone. To reiterate the themes that Stuart mentioned, High Spec Rigs continue to exceed expectations with consistent revenue growth and operational stability. We are pleased with our first quarter results in High Spec Rigs and Ancillary, both of which maintained higher margins in the face of unusually severe winter weather, holding margins higher than typical for Q1, and our production focus is a clear differentiator in the services industry. Revenue for the first quarter was $135,200,000 down from $143,100,000 in the fourth quarter affected by unusually strong winter weather. The first quarter revenue was down slightly from $136,900,000 in the first quarter of twenty twenty four.

This was due exclusively to the Wireline segment with both High Spec Rigs and Ancillary segment revenues growing materially year over year. Adjusted EBITDA increased 42% year over year to $15,500,000 Quarter over quarter sequential declines were experienced as a consequence of the winter weather events and heavier costs that are carried in the first quarter such as payroll taxes. As we emerge from the winter months, we expect margins to return to mid teen levels. We also posted free cash flow during the quarter of $3,400,000 or $0.15 a share. Turning to segment results.

High Spec Rigs reported revenue of $87,500,000 Margins compressed slightly from 21.7% to 19.9% quarter over quarter due to typical elevated first quarter costs such as elevated labor carrying costs during winter. High Spec Rigs reported adjusted EBITDA of $17,400,000 an increase of 28% from the first quarter of twenty twenty four. Ancillary services segment revenue was $30,500,000 up $6,100,000 or 25% from the first quarter of twenty twenty four, while down slightly from the fourth quarter. Our plug in abandonment and coiled tubing service lines saw a slower start in depressed activity levels compared to the fourth quarter at the start of the year, but we expect those to rebound to historical levels through the remainder of this year pending market conditions. These service lines were nonetheless stronger when compared to the prior year period.

Adjusted EBITDA for the quarter was $5,600,000 up $3,100,000 from the first quarter of twenty twenty four and down $2,400,000 from the fourth quarter. Wireline revenue for the quarter was $17,200,000 a decrease of $5,400,000 or 24% compared to $22,600,000 in the fourth quarter and down 48% compared to $32,800,000 in the first quarter of twenty twenty four. Adjusted EBITDA turned negative during the quarter for Wireline given the significant weather reporting an EBITDA loss of $2,300,000 We are constantly responding to market conditions in this segment and our efforts in January and February yielded positive margins in March that are expected to continue in the next couple of quarters, during which time we will evaluate the broader market conditions and optionality for this segment. The balance sheet remains a distinct advantage. At the end of the first quarter, we had $104,400,000 of liquidity, consisting of $64,100,000 of capacity on revolving credit facility and $40,300,000 of cash on hand.

We have zero net debt and have prioritized pay down historically to maintain maximum optionality. Our financial strength allows us to make smart capital allocation decisions for the long term benefit of our shareholders. We did spend $7,200,000 in the first quarter on equipment with some capital investment directed towards modernizing our rig fleet and enhancing customer offerings, which we expect will support future margin expansion. These investments have the added benefit of strengthening customer relationships and solidifying Ranger as the well service vendor of choice for our customers. With that, I will turn the call back to the operator to open the line for questions.

Conference Operator: And our first question here will come from Don Crist with Johnson Rice. Please go ahead.

Don Crist, Analyst, Johnson Rice: Good morning, Stuart and Melissa. Hopefully, you all are doing well.

Stuart Boden, CEO, Ranger Energy Services: Morning, How are you?

Don Crist, Analyst, Johnson Rice: Well. I wanted to start with, kind of the differentiation between kind of workover projects and new drills for your major customers. I would assume that those are kind of separate budgets and given your production focus, activity levels and that being so much more than completions, you could be mostly isolated from any kind of potential slowdowns that we may see in the back half of the year?

Stuart Boden, CEO, Ranger Energy Services: Sure. Thanks, Don. I’ll start and Melissa will chime in. About 80% of our revenues are associated, to your point, with production focus, which typically are aligned with OpEx budgets of our customers versus CapEx budgets. And so, kind of as you indicated, we think that obviously makes us a lot more resilient through the cycle because they tend to be different budgets and the OpEx budget tends to be a lot more resilient.

That’s been our experience. You kind of hinted at something else, which I think is worth highlighting and that’s just our customer mix. Certainly, over the last several years, we’ve really tried to align ourselves with the largest customers who typically have the most consistent programs. And we’ve really aligned ourselves with them just because they know that a lot of changing activity levels in kind of a knee jerk way really harms their vendors. So those would be certainly two things that we would highlight right

Melissa Kugel, CFO, Ranger Energy Services: now. Agreed.

Don Crist, Analyst, Johnson Rice: Okay. I appreciate that color. And on the wireline side, obviously, sounds like in your commentary that you made some changes there and margins came up. As you kind of move into the second quarter, obviously that’s a little bit more completions focused, but how do you see that kind of playing out throughout the quarter? Can you get back to kind of historical margins in that business or is it still kind of challenge for the rest of this year?

Stuart Boden, CEO, Ranger Energy Services: I think as we look at the back part of the year, we certainly think it will move into positive territory. I think we are I think we’ve been pretty open about some of the challenges in that space. Obviously, it was a disappointing quarter for wireline. Seasonality hit it particularly hard that the weather event is the most of our business is in the North. And so weather hit it particularly hard this quarter.

As we’ve talked about in the past, Don, we’re really trying to orient that business more on the kind of conventional wireline, which typically has a lot more exposure to production versus completion. The plug and perf or completions market has been particularly challenged over the last couple really last coming year and a half or so. But again, I think we’re working hard to kind of move it into positive territory. So it’s at least a positive contributor for the year.

Don Crist, Analyst, Johnson Rice: Okay. And I did want to touch on your balance sheet. Obviously, it’s a fortress balance sheet and differentiates you from a lot of other players out there. But as you kind of look forward and generate free cash flow going into the second quarter, how do you balance that versus M and A potential? I’m assuming some bid ask spreads are coming in closer to where you like them and kind of stock buybacks.

Like how do you just look at the balance sheet more broadly?

Melissa Kugel, CFO, Ranger Energy Services: Yes. I’ll take that, Don. And I think, look, given how sideways the market is sort of the territory everybody feeling a little bit uncertain about what the future holds, I would say two things. One, we recognize and part of the reason why we wanted the balance sheet strength and we’ve highlighted it is because we feel like not only does it allow us to weather the storm, but to sort of take advantages of opportunities during periods where the market is challenged. And I think we’d be thinking about the rest of this year and however long this period of uncertainty lasts is that kind of opportunity set for us.

I think for us right now, the focus on M and A, it feels like with all of the uncertainty, it almost feels like Stuart and I were talking about it earlier, more challenged in the very short term. But as we get into sort of near term and midterm, we actually think that potentially later this year, we might have further closing in the bid ask spread. And I think our hope is that we can finally start to push something over the line. We remain really interested in continuing to grow and scale the business. We think that there’s that much more opportunity set to create value through a down cycle.

So I think we are really focused on continuing to be very active in M and A dialogue, while also recognizing now is probably not the time to pull the trigger, but that could change in ninety days. I think the other thing is looking at it through the buyback. So I think everything that we’re thinking about is, well, we have $40,000,000 of cash, we have lots of capacity on the revolver, how do we be really mindful to taking advantages of opportunities through the next six months to a year or however long this lasts to be able to come out on the other side of this stronger than ever, like we’ve done before.

Stuart Boden, CEO, Ranger Energy Services: Yes. And all I would add to that is Melissa talked about M and A. We obviously have investments in organic investments we can make and then share repurchases. I think just as a management team, how we think about those is they ultimately all compete for capital with one another, right, as we go forward. And you saw us in the past get pretty aggressive with share repurchases at times of when the share price come under pressure, and that’s certainly something we’ll be looking at as well going forward.

Don Crist, Analyst, Johnson Rice: I appreciate all the color. I’ll turn it back to the operator. Thanks.

Melissa Kugel, CFO, Ranger Energy Services: Thanks, Don.

Stuart Boden, CEO, Ranger Energy Services: Thanks, Don.

Conference Operator: Our next question will come from John Daniel with Daniel Energy Partners. Please go ahead.

John Daniel, Analyst, Daniel Energy Partners: Hey, guys. Thank you. I’m going to dig into the minutiae here and talk about your coil business. We’ve seen the cost of strings go up here recently. And I’m curious the ability you’ve had to pass that through to your customers via surcharge.

And then given the strength of your rig business, what are the opportunities to perhaps have small surcharges tied to tariffs there as well?

Stuart Boden, CEO, Ranger Energy Services: Yes. Thanks for the question, John. Again, I’ll start and Melissa can chime in. Maybe just kind of a first, a broader comment about sort of the impacts of potential impacts of tariffs on our business. In general, we typically don’t think that there’s a lot in our supply chain our direct supply chain.

Think you’ve highlighted the one place that it could be potentially material and that’s on coil. I think right now, I wouldn’t say that there’s an opportunity to necessarily push a lot of those through, but I think there is certainly a recognition on our customers’ behalf that as our cost base changes, we’re going to have to recoup some of that. So I think right now, it feels like a fairly balanced conversation. I think what we’re looking for looking at is as we take a step back is just the broader macro and kind of what happens in that environment because obviously that will dictate some of our ability to have those conversations.

John Daniel, Analyst, Daniel Energy Partners: Okay. Thank you. The second one, the final one is one of your peers just recently shut down its Williston yard. And over the last couple of quarters, we’ve seen a handful, not a ton, but a handful of your small sort of 15 rig competitors or less closing as well. I’m just curious, are you seeing do you see more of that coming?

Are you being contacted by smaller equipment brokers trying to help liquidate these companies? Just do you think that market is a year from today?

Stuart Boden, CEO, Ranger Energy Services: Yes. I think we are seeing that. I guess the first thing I would sort of highlight on just the Williston and Bakken in general, for us, that’s it obviously had, as we indicated earlier, a lot of weather impacts. That said, it’s a business and a market for us that’s been really strong is the first thing I would say. I think, again, on the broader point about are we seeing some of the smaller players come under pressure, I think the answer is yes.

And I don’t think it’s necessarily it’s not just one basin. I mean, I think that as we’ve talked about in the past, as the E and Ps have consolidated they’re consolidating their vendor base, I think companies like Ranger have been the beneficiary of that, but that certainly helped us. But I do think that, that has hit some of the smaller players particularly hard. So we do get contacted about, again, assets in distress.

Melissa Kugel, CFO, Ranger Energy Services: And I would only add to that, I think what’s important to point out is I don’t think that that’s a recent phenomenon. Think that that’s something that’s been happening sort of the past two years as you’ve heard us talk repeatedly about us benefiting from operator consolidation. I think what’s changed more recently is you have a lot of the smaller players who were sort of hanging on. And with this latest market turn, I think a lot of them are, well, I’m out of time. And so I think that’s where you’re seeing a little bit more of the rollover here recently is a consequence of the pressure they had been put under.

And now it’s not looking like I think everybody was hopeful last year, ourselves included, to be honest, that this year was going to be a better year. And as it’s played out, it hasn’t kind of played out that way, but it kind of gets back to how do we end up kind of taking advantage of opportunities through this whole cycle is as these companies sort of realize that, well, I’m not going to probably be able to weather the storm the same way, whether it’s combining with Ranger or other things, we think it will provide for more opportunities for Ranger through sort of the mid cycle.

Don Crist, Analyst, Johnson Rice: Got it. Okay.

John Daniel, Analyst, Daniel Energy Partners: That’s all I had. Thank you for letting me ask some questions.

Stuart Boden, CEO, Ranger Energy Services: Absolutely. Thanks, John. Appreciate it.

Conference Operator: And this concludes our question and answer session. I’d like to turn the conference back over to Stuart Bowden for any closing remarks.

Stuart Boden, CEO, Ranger Energy Services: Thanks, operator, and thanks, everyone, for joining the call and your interest in Ranger. Just a couple of quick closing comments. We sit here ready for all scenarios. I think we’re aware of the headwinds, potential headwinds in the market. But certainly, we feel like our production focus, our alignment with some of the largest customers working in the best rock in the Lower 48 and our balance sheet strength are real benefits here.

So again, thank you for your interest and I hope everybody has a great week.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.

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