What Ranger Energy Services (RNGR) Said on Its Q3 Earnings Call

Key Points

• Q3 performance weakened as revenue fell 7.8% sequentially to $162.8 million and adjusted EBITDA dropped to $20.1 million from $28.6 million. Tighter customer budgets, competitors’ price cuts, schedule gaps, and higher medical and operating costs pressured activity and margins.
• Ranger closed its approximately $27.5 million STEP coiled tubing acquisition on October 8, adding 13 units and expanding its geographic reach. The company expects the assets to generate more than $10 million in adjusted EBITDA in 2027.
• Ranger generated $20 million in free cash flow and had no revolver borrowings at quarter-end, but borrowed afterward to fund the STEP deal. It plans to prioritize ECHO rig delivery payments and repaying the borrowing; Chevron’s latest order brings the contracted ECHO fleet to 24 rigs by the end of 2027.

Ranger Energy Services NYSE: RNGR reported softer-than-expected third-quarter results as customers tightened spending, lower-priced competitors won some work and employee medical costs rose. The company nevertheless generated enough cash to repay its acquisition-related revolving debt before closing another deal in October.

Revenue for the quarter ended September 30 was $162.8 million, down 7.8% from the second quarter but up 26.3% from a year earlier, Chief Financial Officer Melissa Cougle said. The sequential decline reflected lower activity across all three segments, while the year-over-year increase reflected the contribution from American Well Services, or AWS.

Net income was $2.5 million, or $0.10 per diluted share, compared with $6.9 million, or $0.29 per share, in the second quarter. Operating income included a $3 million non-cash benefit from a reduction in contingent consideration related to the AWS acquisition. Adjusted EBITDA fell to $20.1 million from $28.6 million sequentially, and the adjusted EBITDA margin declined to 12.3% from 16.2%.

Pricing Pressure and Higher Costs Weigh on Margins

Chief Executive Officer Stuart Bodden said customers managed budgets more closely during the quarter, while smaller competitors cut prices to regain work. Ranger chose not to match those reductions, a decision Cougle said kept rates stable but cost the company some activity.

High Specification Rigs revenue fell 2.6% sequentially to $110.5 million, and segment adjusted EBITDA declined to $18.4 million from $20.6 million. Rig hours slipped 2% to 143,500, while the average hourly rig rate was $770, essentially flat with the prior quarter.

Cougle said intermittent gaps in rig schedules weighed on margins because idle equipment still carried crew and other costs. Around-the-clock rig activity rose approximately 6% sequentially, but that growth was more than offset by schedule gaps and rig releases. Employee medical costs across the company were $1.5 million higher than in the second quarter, while labor and fuel costs also pressured margins.

In Processing Solutions and Ancillary Services, revenue fell 10% sequentially to $40 million, and adjusted EBITDA dropped to $6.8 million from $10 million. Cougle cited weaker activity in AWS-acquired transportation, mixing plant and tubing inspection operations. Plugging and abandonment and rental margins improved, she said.

Wireline Services revenue declined 34% to $12.3 million as customer completion programs ended, while segment adjusted EBITDA fell to $200,000 from $3.6 million. Bodden said new work programs began in October and that Ranger expects fourth-quarter improvement.

STEP Acquisition Expands Coiled Tubing Business

Ranger closed its approximately $27.5 million acquisition of STEP’s U.S. coiled tubing assets on October 8, after the quarter ended. Bodden said the deal makes Ranger the second-largest coiled tubing provider in the Lower 48 and adds 13 units operating from the Bakken through South Texas, with the largest presence in the Permian Basin.

The acquisition expands a business that had been concentrated in the Rockies and adds STEP’s COIL+ extended-reach technology. Bodden said the technology has helped operators reach total depth on more than 60 long-lateral wells, including one exceeding 30,000 feet. Ranger expects the acquired assets to contribute more than $10 million in adjusted EBITDA in 2027, with further upside in 2028.

Asked about customer discussions, Bodden said the response had been encouraging but that integration remained in its early stages. He also said it was too early to tell whether customers that shifted to lower-priced competitors were returning to Ranger.

ECHO Orders and Cash Allocation

Chevron committed to four additional ECHO hybrid electric workover rigs, bringing Ranger’s contracted ECHO fleet to 24 rigs by the end of 2027, Bodden said. Five rigs had been delivered through the third quarter, and the build program was running slightly ahead of schedule. Interest from other customers is broadening, he said, although no additional customer had contracted for a rig.

Ranger generated $20 million in third-quarter free cash flow and ended September with no borrowings outstanding on its revolving credit facility. Liquidity totaled $76.2 million, including $6 million in cash. Cougle said Ranger subsequently borrowed under the revolver to fund the STEP purchase and expects to direct most cash flow over the next several quarters toward ECHO delivery payments and repayment of those borrowings.

The company repurchased $2.2 million of shares during the quarter and returned $11.7 million through buybacks and dividends in the first nine months of the year. Its board declared a quarterly dividend of $0.06 per share, payable December 4 to shareholders of record on November 20.

Looking toward 2027, Bodden said Ranger was cautiously optimistic but had not formed a firm outlook. He cited potential labor cost increases and commodity price volatility among the uncertainties, while reiterating the company’s goal of achieving $100 million in annualized adjusted EBITDA.

About Ranger Energy Services (NYSE:RNGR)

Ranger Energy Services, Inc. is an oilfield services company that supports the development, maintenance and production of oil and natural gas wells. The company primarily serves the onshore U.S. energy market, providing services throughout the life cycle of mature and producing wells. Its operations include well servicing, workover and completion services, wireline and electric-line services, and equipment rental. Ranger's well-servicing business uses a fleet of rigs to perform activities such as well maintenance, recompletions, remedial work and plugging and abandonment.

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