Ranger Energy Services, Inc. Q2 2026 Earnings Call

Good morning, and welcome to Ranger Energy Services' second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. 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. Good morning, and thank you for joining Ranger Energy Services second quarter 2026 earnings conference call.

Before we begin, Ranger has issued a press release outlining our operational and financial performance for the quarter ended June 30th, 2026. 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 Bodden, our Chief Executive Officer, and Melissa Cougle, our Chief Financial Officer. Following their remarks, we'll open the call for Q&A. With that, I'll turn it over to Stuart.

Thank you, Joe, and good morning, everyone. We appreciate you being with us today for Ranger's second quarter 2026 results. I'll take a few minutes to review where we are strategically and operationally and share some high-level financial context. Melissa will walk through the more detailed P&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 a total revenue of $176.5 million, up 10.9% sequentially. Ranger generated adjusted EBITDA of $28.6 million, representing a 16.2% EBITDA margin, which 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 a 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, the 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 Services lines, we saw standout performance from our Coiled Tubing Services line during the quarter, with good growth in our plugging and abandonment and Torrent service lines as well, with all three 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 Services segment this quarter was exceptionally strong. We made changes to the leadership team a little less than a year ago, and the entire Wireline Services 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 Services segment. As we look ahead, the contract awards that drove these results have concluded, and while our long-term outlook for Wireline Services 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 haven't 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, which is why we maintain the strongest relationships with the largest E&P operators in the U.S. land 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, standardize billing protocols, and drive towards full utilization, greater consistency, and growth in adjacent service lines across the Ranger footprint.

We also continued 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 two 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 one of our core customers, Chevron, is committing to three additional ECHO rigs. The 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 prove our cash flow generation potential over three years ago. 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 282,900 shares. We have now repurchased 4.6 million shares for a total at $52.1 million since mid-2023, while at the same time declaring our standard quarterly dividend. Deploying cash flow strategically, whether towards share repurchases or 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. Whether 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 ECHO rig fleet, or strategically repurchasing shares in the open market, Ranger is setting a differentiated path for continued growth and strong performance. With that, I'll turn over the call to Melissa for a few remarks on the financial performance specifics.

Good morning. Thank you, Stuart. We appreciate you all joining the call. This morning, I'll 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 midterm. Ranger's total consolidated revenue for the quarter was $176.5 million, up 10.9% sequentially from $159.1 million in the first quarter of 2026, and up 25.5% year-over-year from $140.6 million in Q2 2025.

The quarter-over-quarter increases were driven by performance in both our Ancillary Services and Wireline Services 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 2026, and $20.6 million and a 14.7% margin in Q2 of 2025. In absolute dollars, adjusted EBITDA increased 23% quarter-over-quarter. 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 $113.4 million in Q2, an increase of $4.3 million, or 3.9% sequentially from $109.1 million in Q1 2026, and an increase of $27.1 million, or 31.4%, from $86.3 million in Q2 of 2025.

Rig hours were 146,800. 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 Rigs 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 Services 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 on 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 Services segment, with revenue of $18.6 million, up 75% from $10.6 million in Q1, with 2,560 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.

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. 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 2026 to support further debt paydown 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 282,900 shares at attractive prices. As of June 30th, total liquidity remained healthy at $61.3 million, comprised of $57.1 million available revolver capacity and $4.2 million of cash on hand. I'll turn the call back over to Stuart for closing remarks.

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 Services lines, including Coil 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. With that, operator, let's open up the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Don Crist with Johnson Rice. Please go ahead. Morning, guys.

Hopefully, y'all doing well this morning.

Thanks, Don. How are you?

I'm doing well. I wanted to start with workover rig segment. We're hearing a lot more anecdotes around the industry that the E&Ps think that oil prices are gonna be higher for longer, and they're starting to look towards 2027 for increased activity, et cetera. Just wanted to see your macro thoughts on that and how the business is developing now with more 24-hour work and weekend work than we've seen in months and quarters past. Just anything along those lines.

Yeah, thanks for the question, Don. I think we share that view, that as you move into 2027, just as the forward curve is strengthening the back part, that we'll see an increase. I'm not sure it's translated at the moment into meaningful changes from our customers. It'll be interesting to see how things develop when they pour budgets. I'd say what we're seeing right now is an increase in smaller programs, right? Us filling up white space, which is helping just with utilization. I don't think we've seen enough change yet to meaningfully add capacity into the market. I think we're watching pretty closely as we move into budgeting season.

Okay. 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 two of them are doing field testing right now. Are you on a run rate of one or two per month coming out that we should see for the back half of the year and through 2027?

I think that's right. That's right, Don. We have two in the field that are working right now. Those are the first two that went out. The two we referenced in the script are two from the contract that we announced earlier in the year. When those two go into the field at the end of Q3, that'd be four in the field. I think that's right. We announced 15 earlier this year. We would think those would all be deployed by the end of next year, so that gets you to 17. Yeah, that's about right. We think one-ish a month is a pretty good run rate. We're on track with that right now. Then obviously, we had the additional contract for three more. There are now a total of 23 under contract.

Okay. Those should be incremental to your rig count, not displace current rigs, right?

It's one of the things that we're 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 some kind of modest shuffling. That's one 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. Thanks for the answers. All right.

Appreciate it, Don. The next question is from Derek Podhaizer with Piper Sandler.

Please go ahead. 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 specs. Got a couple things weighing on those, but maybe could you help educate us, just as far as the margins attached with ECHO as you get these things out, how we should think about that? Accretive, dilutive, I know there's some funky things with the prepayments now. It impacts the cash flow into the P&L. Maybe just help around that, how we should think about these margins as you continue to ramp up ECHO.

Yeah, no, it's a good question, Derek. We'll 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 it's 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's a non-cash item over the longer term. That said, as the premium day rates come into play, to the extent there are those on contracts, those would potentially have margin uplift effect because they're being billed and they're cash items being collected real time.

What we committed to the community writ large was that as that started to play out and it became noticeable and started to quantify 50 basis points of margin, et cetera, we will give you quarter-to-quarter updates on that. For right now, it's largely a muted, no impact effect.

Got it. Okay. That's super helpful. Thanks, Melissa. Then you had a line in the press release talking about potentially stepping out with new service lines through advantageous acquisitions that position you well for the future. Stuart, maybe just if you could talk to that, what you're seeing, if it's some of the stuff you got from AWS, some of the stuff you're growing organically like Torrent, or other items that you're targeting as you think about how the shape of the recovery in the future of your business. Maybe just some thoughts around what you're seeing in M&A and just talk to that line you had in the press release.

Yeah, thanks for the question, Derek. In Antero, in general, we were really pretty pleased with how the quarter went, and the outlook. As you kind of referenced, Coil, P&A, Torrent. Torrent's our infield gas processing, all had really strong quarters. Some of the service lines we picked up in AWS, we picked up a mixing plant business, we 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's kind of where we're focused, is getting those more consistent. There's a couple in there that we really like the margin profile, and I think we just want to be confident that we see sustained demand before we kind of meaningfully lean into it.

Hopefully that kind of gives you a sense of what we're thinking. I think there might've been a question in there about the M&A, kind of what we're looking at going forward. I don't think it would surprise you to say that we're looking at a number of things, but generally they're by and large in line with things that service lines we currently have.

Okay, got it. Maybe just a little bit more on Torrent. I know that's kind of an interesting business you have as far as potential attachment to some power generations out there. It sounds like it had a really good quarter, maybe some of the drivers of that and how you're thinking about that business longer term.

Yeah. We were, again, pretty excited about how it came out. I think how we've been thinking about it, and you're exactly right. Infield gas processing, we are cleaning up gas streams and knocking out the liquids of gas streams that can't get into permanent processing facilities. You can kind of imagine about the types of fields where that occurs. We're definitely seeing an uptick in demand. I think how we're thinking about it is we want to see, again, I think, how do we think about the longer term outlook into sort of getting to sustained full utilization? We're not quite there yet. Again, I think we're trying to be thoughtful about it, and see where we can meaningfully invest. At the moment, I think we're most focused on getting out our existing equipment.

Okay, great. Appreciate all the comments, guys. Turn it back. Yeah, thanks, Derek.

Thank you. Again, if you have a question, please press star then one.

The next question is from John Daniel with Daniel Energy Partners. Please go ahead. Hey, good morning, Stuart, Melissa.

Thanks for including me. Congrats on the ECHO contract. My question is, when you look at the companies like the Chevrons of the world, they're 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?

Yeah, I'll start, Melissa can chime in. I'll give you maybe just some kind of the flavor of the conversations that we have with them. I think they're still trying to determine that, to be honest, John. I think we've heard some where some of the larger players have indicated they might want a certain base load to be electric rigs, right? If they kind of think about, hey, under almost any kind of long-term commodity price scenario, they're gonna run X rigs, and they want X to be electric or hybrid rigs, and then they'll kind of flex with conventional rigs on top of that. We've heard some people want to make a kind of more aggressive shift than that, I think everybody's really just trying to figure it out right now.

I would kind of reiterate that we're pretty encouraged by the demand and the conversations we're having right now. I misspoke slightly earlier. We're at 20 under contract right now. I don't think we'd be surprised to see more come under contract in the next kind of nine to 12 months.

I would only add to Stuart's comments that I think a lot of the dependency is really on how these rigs start, because we've only had two, and the only other electric workover rig out there, I think there's five. They've only really got two years of runtime.

Right. They don't have the same sort of economic value proposition that a frac had.

I think a lot of the dependency will be sort of over time, how meaningfully do safety statistics move, and frankly, efficiency statistics. 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.

Okay. I'm not looking for names with this question, I would suspect the incremental orders you get in the near term would be more with existing customers. Assuming that's true, when would you anticipate some of the independent operators really kicking the tires?

I'd say we have a couple independents that are kicking tires, I would say it's kind of early days.

Yeah. I think how I would answer the question is kind of going back to Melissa's comments, is 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.

Right. All of the early signs are really encouraging, at least I think my informal conversations is they want a kind of a longer track record, the smaller players.

Okay. Very helpful. Final one, if I may, is just your latest thoughts on the U.S. Coil Tubing market. I'll turn it back over. What you're seeing? Yeah. Coil Tubing for us was a really strong quarter.

We are focused in the Rockies.

Right. Again, I think we were pretty encouraged by what we saw there.

It's not a surprise that as drilling rig count is starting to tick up and frac count is slowly ticking up, that Coil would follow. Again, we're pretty happy with the quarter we saw.

Okay. Thank you very much.

All right. Thank you so much.

This concludes our question and answer session. I would like to turn the conference back over to Stuart Bodden for any closing remarks.

Again, thank you everyone for joining us today. We appreciate it. We look forward to speaking to you in November. Take care, everyone. The conference is now concluded.

Thank you for attending today's presentation.