What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-07-28 compared with 2020-05-01 · 247 added, 127 removed, 255 unchanged (59% of the section changed)

17 unchanged sentences

Financial Information — Note 13 — Segment Reporting.”

Rec e nt Events and Outlook

The recent outbreak of the novel coronavirus (“COVID-19”) has spread across the globe and has been declared a public health emergency by the World Health Organization (“WHO”) and a National Emergency by the President of the United States.

Recent Events and Outlook

The outbreak of the novel coronavirus (“COVID-19”) has spread across the globe and has been declared a public health emergency by the World Health Organization (“WHO”) and a National Emergency by the President of the United States.

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has, and will likely continue to, adversely affect the operations of the Company’s business, as the significantly reduced global and national economic activity has resulted in reduced demand for oil and natural gas.

4 unchanged sentences

The extent of the COVID-19 outbreak on the Company’s operational and financial performance will significantly depend on certain developments, including the duration and spread of the outbreak and its continued impact on customer activity and third-party providers.

The direct impact to the Company’s operations began to take affect at the close of the first quarter ended March 31, 2020;

The direct impact to the Company’s operations began to take affect at the close of the first quarter ended March 31, 2020 and continued through the close of the second quarter ended June 30, 2020;

however the full extent to which the COVID-19 outbreak may affect the Company’s financial conditions, results of operations or liquidity subsequent to the issuance of these financial statements is uncertain.

At the time of this filing, cases of COVID-19 in the U.S.

were increasing rapidly, particularly in Texas, where we conduct significant operations.

COVID-19 and numerous public and political responses thereto have contributed to equity market volatility and potentially the risk of a global recession.

We expect this global equity market volatility experienced in the first quarter of 2020 to continue at least until the outbreak of COVID-19 stabilizes, if not longer.

We expect this global equity market volatility experienced in the first and second quarters of 2020 to continue at least until the outbreak of COVID-19 stabilizes, if not longer.

The response to the COVID-19 outbreak (such as stay-at-home orders, closures of restaurants and banning of group gatherings) and slowing of the global economy has contributed to increased unemployment rates.

In addition to the COVID-19 outbreak, in March 2020, OPEC, Russia and certain other oil producing states, commonly referred to as “OPEC Plus,” failed to agree on a plan to cut production of oil and natural gas.

Subsequently, Saudi Arabia announced

plans to increase production to record levels and reduce the prices at which they sell oil and, in turn, Russia responded with threats to also increase production.

Collectively, these events created an unprecedented global oil and natural gas supply and demand imbalance, reduced global oil and natural gas storage capacity, caused oil and natural gas prices to decline significantly and resulted in continued volatility in oil, natural gas and NGLs prices into the second quarter of 2020.

The severe drop in economic activity, travel restrictions and other restrictions due to COVID-19 have had a significant negative impact on the demand for oil and gas.

In addition to the impact of the COVID-19 outbreak, in March 2020, OPEC, Russia and certain other oil producing states, commonly referred to as “OPEC Plus,” failed to agree on a plan to cut production of oil and natural gas.

Subsequently, Saudi Arabia announced plans to increase production to record levels and reduce the prices at which they sell oil and, in turn, Russia responded with threats to also increase production.

Collectively, these events created

an unprecedented global oil and natural gas supply and demand imbalance, reduced global oil and natural gas storage capacity, caused oil and natural gas prices to decline significantly and resulted in continued volatility in oil, natural gas and NGLs prices into the second quarter of 2020.

On April 12, 2020, OPEC Plus agreed to cut oil production by 9.7 million barrels per day in May and June 2020;

Due to the significantly reduced demand for oil and natural gas as a result of the COVID-19 pandemic and the current oversupply of oil and natural gas in the market, available storage and capacity for our customers’ production may be limited or completely unavailable in the future.

In April 2020, extreme shortages of transportation and storage capacity caused the WTI oil futures price to go as low as a negative $37.63 per Bbl.

This negative pricing resulted from the holders of expiring front month oil purchase contracts being unable or unwilling to take physical delivery of crude oil and accordingly forced to make payments to purchasers of such contracts in order to transfer the corresponding purchase obligations.

In addition, E&P companies in the United States have recently encouraged regulatory intervention to prorate production among operators to stabilize hydrocarbon production in the United States.

In particular, the Texas Railroad Commission is expected to vote on proration of production on May 5, 2020.

We cannot predict whether any of these activities will reduce the global supply and demand imbalance or whether or when oil and natural gas production and economic activities will return to normalized levels.

however, on July 15, 2020 OPEC Plus agreed to increase production by 1.6 million barrels per day starting in August 2020.

With the combined effects of the increased production levels earlier in 2020, the recent increase in production and the reduction in demand caused by COVID-19, the global oil and natural gas supply and demand imbalance persists and continues to have a significant adverse effect on the oil and gas industry.

We cannot predict whether or when the global supply and demand imbalance will be resolved or whether or when oil and natural gas production and economic activities will return to normalized levels.

In the absence of additional reductions to global production, oil, natural gas and NGLs prices could remain at current levels, or decline further, for an extended period of time.

5 unchanged sentences

If prolonged, such factors may also negatively affect the carrying values of our property and equipment and intangible assets.

As of the date of this report, the Company has initiated cost reductions throughout the organization and will continue to manage costs to preserve liquidity through this downturn.

As of the date of this report, the Company has initiated cost reductions throughout the organization, including a reduction in workforce of approximately 60% and salary reductions across the Company’s organizational structure, which has reduced payroll expense by greater than 70% since the beginning of 2020.

Additionally, we have made various other operational, travel and organizational expense reductions and will continue to manage costs to preserve liquidity through this downturn.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers and stakeholders.

Currently, we expect to have sufficient liquidity to operate our business and remain in compliance with the financial covenants under our Credit Facility agreement.

On March 27, 2020, the U.S.

government passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the largest relief package in U.S.

The CARES Act, a $2.2 trillion stimulus package, includes various provisions intended to provide relief to individuals and businesses in the form of tax changes, loans and grants, among others.

We qualify for limited aid under the CARES Act related to the deferment of certain employer taxes and we do not believe the CARES Act will have a material impact on us;

however, we do believe it will aid the economy by providing relief to certain individuals and smaller businesses.

We continue to monitor the potential for inflation or other macroeconomic risks resulting from the CARES Act and similar economic stimulus plans.

On April 9, 2020, the Federal Reserve announced the establishment of a Main Street Lending Program (the “Main Street Lending Program”) to support lending to small and medium sized businesses that were in good financial standing before the onset of the COVID-19 pandemic.

The Main Street Lending Program operates through two facilities:

(i) the Main Street New Loan Facility, which will provide new loans to companies with up to 10,000 employees or 2019 revenues of not more than $2.5 billion and (ii) the Main Street Expanded Loan Facility, to provide upsizes to loans made prior to April 8, 2020 to companies with up to 10,000 employees or with 2019 revenues of not more than $2.5 billion.

The Company would be required to make certain attestations and meet certain conditions in order to qualify for a loan or loan expansion under the Main Street Lending Program.

The Company is currently evaluating whether it can meet such conditions and benefit from the Main Street Lending Program.

government has implemented a number of programs in the wake of the impacts of COVID-19, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the largest relief package in U.S.

history, and the Main Street Lending Program established by the Federal Reserve.

Although we qualified for limited aid under the CARES Act related to the deferment of certain employer taxes, the Company is currently evaluating whether it can meet the conditions of and benefit from the Main Street Lending Program.

On March 12, 2020, the Company received a non-binding offer from CSL Capital Management, L.P.

2 unchanged sentences

in a cash merger transaction for $6.00 per share (the “Take Private Proposal”).

The Take Private Proposal continues to be reviewed, evaluated and negotiated by members of an independent special committee (“Special Committee”) of the board of directors of the Company.

On May 11, 2020, CSL announced their decision to not pursue the possible acquisition of shares outstanding of Ranger at this time and abandon the Take Private Proposal.

How We Generate Revenues

5 unchanged sentences

Costs of Conducting Our Business

The principal expenses involved in conducting our business are personnel, repairs and maintenance costs, general and administrative, depreciation and amortization and interest expense.

The principal expenses involved in conducting our business are personnel, repairs and maintenance costs as well as other direct material costs, general and administrative, depreciation and amortization and interest expense.

We manage the level of our expenses, except depreciation and amortization and interest expense, based on several factors, including industry conditions and expected demand for our services.

8 unchanged sentences

Costs for these employees are not directly tied to our level of business activity.

At the close of the first quarter ended March 31, 2020, the Company initiated a reduction in our workforce due to the impacts of the COVID-19 and geo-political events that have recently taken place.

During the six months ended June 30, 2020, the Company significantly reduced the workforce due to the impacts of the COVID-19 and geopolitical events that have recently taken place.

Additionally, we implemented salary reductions across our organizational structure.

The combined impact of the workforce reduction and salary reductions has resulted in payroll expense decreasing by greater than 70% since the beginning of 2020.

We will continue to actively manage costs and take further actions as necessary.

See “—Recent Events and Outlook” above.

We incur significant equipment costs in connection with the operation of our business, including repair and maintenance costs, as well as direct material costs.

How We Evaluate Our Operations

17 unchanged sentences

We measure rig utilization by reference to average monthly hours per rig, which is calculated by dividing (a) the approximate, aggregate operating well service rig hours for the periods presented by (b) the aggregate number of high-spec rigs in our fleet during such period, as aggregated on a monthly basis utilizing a mid-month convention whereby a high-spec rig added to our fleet during a month, meaning that we have taken delivery of such high-spec rig and it is ready for service, assumed to be in our fleet for one half of such month.

We believe that rig utilization as measured by average monthly hours per high-spec rig is a meaningful indicator of the operational efficiency of our core revenue-producing assets, market demand for our well services

and our ability to profitably capitalize on such demand.

Our evaluation of our rig utilization as measured by average monthly hours per rig may not be comparable to that of our competitors.

1 unchanged sentence

(i) customer demand, which is influenced by factors such as commodity prices, the complexity of well completion operations and technological advances in our industry, and (ii) our ability to meet such demand, which is influenced by changes in our fleet size and resulting rig availability, as well as weather, employee availability and related factors.

The primary factors that have historically impacted, and will likely continue to impact, the aggregate number of high-spec rigs in our fleet during any specified period are the extent and timing of changes in the size of our well service rig fleet to meet short-term and expected long-term demand, and our ability to successfully maintain a fleet capable of ensuring sufficient, but not excessive, rig availability to meet such demand.

fleet to meet short-term and expected long-term demand, and our ability to successfully maintain a fleet capable of ensuring sufficient, but not excessive, rig availability to meet such demand.

Results of Operations

Three Months Ended March 31, 2020 compared to Three Months Ended March 31, 2019

The following table presents the operating results for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 .

Three Months Ended

Three Months Ended June 30, 2020 compared to Three Months Ended June 30, 2019

The following table presents the operating results for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.

Three Months Ended June 30, Change

2020 2019 $ %

High specification rigs $ 11.4 $ 33.1 $ (21.7) (66) %

3 unchanged sentences

Operating expenses

Cost of services (exclusive of depreciation and amortization shown separately):

Cost of services (exclusive of depreciation and amortization):

High specification rigs 10.1 28.7 (18.6) (65) %

5 unchanged sentences

Total operating expenses 38.8 80.3 (41.5) (52) %

Operating income

Operating income (loss) (8.1) 4.0 (12.1) (303) %

Other expenses

1 unchanged sentence

Total other expenses 0.8 1.9 (1.1) (58) %

Income before income tax expense

Revenues for the three months ended March 31, 2020 decrease d $7.3 million , or 8% , to $81.0 million from $88.3 million for the three months ended March 31, 2019 .

Income (loss) before income tax expense (8.9) 2.1 (11.0) (524) %

Tax expense — 0.3 (0.3) (100) %

Net income (loss) $ (8.9) $ 1.8 $ (10.7) (594) %

Revenues for the three months ended June 30, 2020 decreased $53.6 million, or 64%, to $30.7 million from $84.3 million for the three months ended June 30, 2019.

The decrease in revenues, across all reporting segments, is due to the deterioration of crude oil pricing and significantly reduced demand for our services during the three months ended June 30, 2020, as described in “—Recent Events and Outlook” above.

The change in revenues by segment was as follows:

High Specification Rigs.

High Specification Rig revenues for the three months ended March 31, 2020 increase d $3.2 million , or 10% , to $34.9 million from $31.7 million for the three months ended March 31, 2019 .

The increase in rig services revenue included a 4% increase in total rig hours to 62,400 for the three months ended March 31, 2020 from 60,100 for the three months ended March 31, 2019 .

The increased rig hours drove a 6% increase in rig utilization.

Our average revenue per rig hour increased 7% to $558 from $522 for the three months ended March 31, 2019 .

High Specification Rig revenues for the three months ended June 30, 2020 decreased $21.7 million, or 66%, to $11.4 million from $33.1 million for the three months ended June 30, 2019.

The decrease in rig services revenue included a 60% decrease in total rig hours to 24,600 for the three months ended June 30, 2020 from 62,200 for the three months ended June 30, 2019.

The decreased rig hours attributed to a 60% decrease in rig utilization.

The average revenue per rig hour decreased 13% to $463 from $530 for the three months ended June 30, 2019.

Completion and Other Services.

Completion and Other Services revenues for the three months ended March 31, 2020 decrease d $8.3 million , or 16% , to $43.3 million from $51.6 million for the three months ended March 31, 2019 .

Completion and Other Services revenues for the three months ended June 30, 2020 decreased $28.6 million, or 62%, to $17.7 million from $46.3 million for the three months ended June 30, 2019.

The decrease was primarily attributable to our wireline business, which accounted for approximately $18.9 million, or 66%, of the segment revenue decrease.

The decrease in wireline services revenue included a 50% decrease in active wireline units to five units as of June 30, 2020 from ten units as of June 30, 2019.

All other service lines also had comparable revenue reductions.

Processing Solutions.

Processing Solutions revenues for the three months ended June 30, 2020 decreased $3.3 million, or 67%, to $1.6 million from $4.9 million for the three months ended June 30, 2019.

The decrease was primarily attributable to a decrease in Mechanical Refrigeration Unit (“MRU”) utilization to 12% as of June 30, 2020, from 78% as of June 30, 2019, which accounted for approximately $1.4 million, or 88%, of the revenue decline.

The MRU utilization decrease was due to

certain of our customer contracts that terminated, as scheduled, without renewal.

The revenue decrease within the segment is also due to a decline in mobilization and maintenance revenue related to our MRUs.

Cost of services (excluding depreciation and amortization shown separately).

Cost of services for the three months ended June 30, 2020 decreased $41.8 million, or 64%, to $23.8 million from $65.6 million for the three months ended June 30, 2019.

As a percentage of revenue, cost of services was 78% for both the three months ended June 30, 2020 and 2019.

The decline in cost of services, across all segments, corresponds with the decreased demand for our services, as described above.

The declines are primarily attributable to a reduction in employee cost related to our reduction in workforce.

The change in cost of services by segment was as follows:

High Specification Rigs.

High Specification Rig cost of services for the three months ended June 30, 2020 decreased $18.6 million, or 65% to $10.1 million from $28.7 million for the three months ended June 30, 2019.

The decrease was primarily attributable to a decrease in variable expenses, notably employee costs and repair and maintenance costs.

Completion and Other Services.

Completion and Other Services cost of services for the three months ended June 30, 2020 decreased $21.7 million, or 62%, to $13.3 million from $35.0 million for the three months ended June 30, 2019.

The decrease was primarily attributable to the decrease in wireline business, which accounted for approximately $13.5 million, or 62%, of the segment cost of sales decrease.

The decrease was primarily attributable to a decrease in variable expenses related to employee costs and direct material costs across all service lines.

Processing Solutions.

Processing Solutions cost of services for the three months ended June 30, 2020 decreased $1.5 million, or 79%, to $0.4 million from $1.9 million for the three months ended June 30, 2019.

The decrease was primarily attributable to a decrease in employee costs and costs associated with ancillary equipment rentals, corresponding with a decrease in revenue.

General & Administrative.

General and administrative expenses decreased $0.8 million, or 13%, to $5.5 million for the three months ended June 30, 2020 compared to $6.3 million for the three months ended June 30, 2019.

The decrease is attributable to lower employee costs, which is related to our reduction in workforce, and lower professional fees during the three months ended June 30, 2020.

Depreciation and Amortization.

Depreciation and amortization for the three months ended June 30, 2020 increased $1.1 million, or 13%, to $9.5 million from $8.4 million for the three months ended June 30, 2019.

The increase is attributable to depreciation expense for fixed assets placed into service during the trailing 12 months, partially offset by asset retirements.

Interest Expense, net.

Interest expense, net for the three months ended June 30, 2020 decreased $1.1 million, or 58%, to $0.8 million from $1.9 million for the three months ended June 30, 2019.

The decrease to net interest expense was attributable to the reduction of the principal balance on our Encina Master Financing Agreement and Credit Facility, coupled with a decrease in London Interbank Offering Rate (“LIBOR”).

Six Months Ended June 30, 2020 compared to Six Months Ended June 30, 2019

Six Months Ended June 30, Change

2020 2019 $ %

High specification rigs $ 46.3 $ 64.8 $ (18.5) (29) %

Completion and other services 61.0 97.9 (36.9) (38) %

Processing solutions 4.4 9.9 (5.5) (56) %

Total revenues 111.7 172.6 (60.9) (35) %

Operating expenses

Cost of services (exclusive of depreciation and amortization):

High specification rigs 40.0 56.1 (16.1) (29) %

Completion and other services 45.0 72.9 (27.9) (38) %

Processing solutions 1.9 4.1 (2.2) (54) %

Total cost of services 86.9 133.1 (46.2) (35) %

General and administrative 10.5 13.5 (3.0) (22) %

Depreciation and amortization 18.4 16.8 1.6 10 %

Total operating expenses 115.8 163.4 (47.6) (29) %

Operating income (loss) (4.1) 9.2 (13.3) (145) %

Other expenses

Interest expense, net 1.9 3.2 (1.3) (41) %

Total other expenses 1.9 3.2 (1.3) (41) %

Income (loss) before income tax expense (6.0) 6.0 (12.0) (200) %

Tax expense 0.1 0.6 (0.5) (83) %

Net income (loss) $ (6.1) $ 5.4 $ (11.5) (213) %

Revenues for the six months ended June 30, 2020 decreased $60.9 million, or 35%, to $111.7 million from $172.6 million for the six months ended June 30, 2019.

The decrease in revenues, across all reporting segments, is due to the deterioration of crude oil pricing and significantly reduced demand for our services during the six months ended June 30, 2020, as described in “—Recent Events and Outlook” above.

The change in revenues by segment was as follows:

High Specification Rigs.

High Specification Rig revenues for the six months ended June 30, 2020 decreased $18.5 million, or 29%, to $46.3 million from $64.8 million for the six months ended June 30, 2019.

The decrease in rig services revenue included a 29% decrease in total rig hours to 87,000 for the six months ended June 30, 2020 from 122,300 for the six months ended June 30, 2019.

The decreased rig hours drove a 28% decrease in rig utilization.

Our average revenue per rig hour increased 1% to $531 from $526 for the six months ended June 30, 2019.

Completion and Other Services.

Completion and Other Services revenues for the six months ended June 30, 2020 decreased $36.9 million, or 38%, to $61.0 million from $97.9 million for the six months ended June 30, 2019.

The decrease is primarily attributable to our wireline business, which accounted for approximately $23.3 million, or 63%, of the revenue decrease.

The decrease is due to the deterioration of crude oil pricing and demand within the industry.

The decrease in wireline revenue included a 50% decrease in active wireline units to five units as of June 30, 2020 from ten units as of June 30, 2019.

All other service lines also had revenue reductions.

Processing Solutions.

Processing Solutions revenues for the three months ended March 31, 2020 decrease d $2.2 million , or 44% , to $2.8 million from $5.0 million for the three months ended March 31, 2019 .

The decrease was primarily attributable to a decrease in MRU utilization to 16% as of March 31, 2020, from 76% as of March 31, 2019, which accounted for $1.0 million, or 45%, of the revenue decline.

Processing Solutions revenues for the six months ended June 30, 2020 decreased $5.5 million, or 56%, to $4.4 million from $9.9 million for the six months ended June 30, 2019.

The decrease was primarily attributable to a decrease in MRU utilization to 12% as of June 30, 2020, from 78% as of June 30, 2019, which accounted for approximately$2.7 million, or 61%, of the revenue decline.

The MRU utilization decrease was due to certain of our customer contracts that terminated, as scheduled, without renewal.

The decreases were partially offset by increased revenues associated with gas cooler rentals.

Cost of services (excluding depreciation and amortization shown separately).

Cost of services for the three months ended March 31, 2020 decrease d $4.4 million , or 7% , to $63.1 million from $67.5 million for the three months ended March 31, 2019 .

As a percentage of revenue, cost of services was 78% for the three months ended March 31, 2020 and 76% for the three months ended March 31, 2019 .

Cost of services for the six months ended June 30, 2020 decreased $46.2 million, or 35%, to $86.9 million from $133.1 million for the six months ended June 30, 2019.

As a percentage of revenue, cost of services was approximately 78% for both the six months ended June 30, 2020 and 2019.

The decline in cost of services, across all segments, corresponds with the decreased demand for our services, as described

The declines are primarily attributable to a reduction in employee cost.

The change in cost of services by segment was as follows:

High Specification Rigs.

High Specification Rig cost of services for the three months ended March 31, 2020 increase d $2.5 million , or 9% to $29.9 million from $27.4 million for the three months ended March 31, 2019 .

The increase was primarily attributable to an increase in variable expenses, notably employee costs and repair and maintenance costs, corresponding with an increase in total rig hours and revenue.

High Specification Rig cost of services for the six months ended June 30, 2020 decreased $16.1 million, or 29%, to $40.0 million from $56.1 million for the six months ended June 30, 2019.

The decrease was primarily attributable to a decrease in variable expenses, notably employee costs and repair and maintenance costs, corresponding with a decrease in total rig hours.

Completion and Other Services.

Completion and Other Services cost of services for the three months ended March 31, 2020 decrease d $6.2 million , or 16% , to $31.7 million from $37.9 million for the three months ended March 31, 2019 .

The decrease was primarily attributable to the decrease in wireline business.

Completion and Other Services cost of services for the six months ended June 30, 2020 decreased $27.9 million, or 38%, to $45.0 million from $72.9 million for the six months ended June 30, 2019.

The decrease was primarily attributable to the decrease in wireline business, which accounted for $16.1 million, or 58%, of the segment cost of services decrease.

The decrease was primarily attributable to a decrease in variable expenses related to employee costs and direct material costs across all service lines.

Processing Solutions.

Processing Solutions cost of services for the three months ended March 31, 2020 decrease d $0.7 million , or 32% , to $1.5 million from $2.2 million for the three months ended March 31, 2019 .

The decrease was primarily attributable to a decrease in labor costs and costs associated with compressor rentals, corresponding with a decrease in revenue.

Processing Solutions cost of services for the six months ended June 30, 2020 decreased $2.2 million, or 54%, to $1.9 million from $4.1 million for the six months ended June 30, 2019.

The decrease was primarily attributable to a decrease in labor costs and costs associated with ancillary equipment rentals, corresponding with a decrease in revenue.

General & Administrative.

General and administrative expenses decreased $2.2 million , or 31% , to 5.0 million for the three months ended March 31, 2020 compared to $7.2 million for the three months ended March 31, 2019 .

The decrease is attributable to the gain on debt retirement of $2.1 million related to the settlement of the ESCO Seller’s Notes during the three months ended March 31, 2020 .

General and administrative expenses for the six months ended June 30, 2020 decreased $3.0 million, or 22%, to $10.5 million from $13.5 million for the six months ended June 30, 2019.

The decrease is attributable to the gain on debt retirement of $2.1 million related to the settlement of the ESCO Seller’s Notes during the six months ended June 30, 2020, as well as lower employee costs, which is related to our reduction in workforce, and lower professional fees.

Depreciation and Amortization.

Depreciation and amortization for the three months ended March 31, 2020 increase d $0.5 million , or 6% , to $8.9 million from $8.4 million for the three months ended March 31, 2019 .

The increase is attributable to depreciation expense for fixed assets placed into service during the second half of 2019 .

Depreciation and amortization for the six months ended June 30, 2020 increased $1.6 million, or 10%, to $18.4 million from $16.8 million for the six months ended June 30, 2019.

The increase is attributable to depreciation expense for fixed assets placed into service during the trailing 12 months, partially offset by asset retirements.

Interest Expense, net.

Interest expense, net for the three months ended March 31, 2020 decrease d $0.2 million , or 15% , to $1.1 million from $1.3 million for the three months ended March 31, 2019 .

The decrease to net interest expense was attributable to the reduction of the principal balance on our Encina Master Financing Agreement and a decrease in London Interbank Offering Rate (“LIBOR”).

Interest expense, net for the six months ended June 30, 2020 decreased $1.3 million, or 41%, to $1.9 million from $3.2 million for the six months ended June 30, 2019.

The decrease to net interest expense was attributable to the reduction of the principal balance on our Encina Master Financing Agreement and Credit Facility, coupled with a decrease in LIBOR.

Note Regarding Non-GAAP Financial Measure

Adjusted EBITDA is not a financial measure determined in accordance with GAAP.

We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax provision (benefit), depreciation and amortization, equity‑based compensation, IPO and acquisition‑related and severance costs, impairment of goodwill, gain or loss on disposal of assets and certain other items that we do not view as indicative of our ongoing performance.

We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax provision (benefit), depreciation and amortization, equity-based compensation, acquisition-related, severance and reorganization costs, impairment of goodwill, gain or loss on disposal of assets and certain other items that we do not view as indicative of our ongoing performance.

We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure.

5 unchanged sentences

The following table presents reconciliations of net income (loss) to Adjusted EBITDA, our most directly comparable financial measure calculated and presented in accordance with GAAP.

Three Months Ended March 31, 2020 compared to Three Months Ended March 31, 2019

Three Months Ended

March 31, 2020

High Specification Rigs

Completion and Other Services

Processing Solutions

Three Months Ended June 30, 2020 compared to Three Months Ended June 30, 2019

Three Months Ended June 30, 2020

High Specification Rigs Completion and Other Services Processing Solutions Other Total

(in millions)

1 unchanged sentence

Interest expense — — — 0.8 0.8

Tax expense — — — — —

Depreciation and amortization 5.2 2.6 1.3 0.4 9.5

Equity based compensation — — — 0.9 0.9

Gain on retirement of debt

Gain on disposal of property and equipment

Severance and reorganization costs 0.4 0.2 — 0.4 1.0

(Gain) loss on disposal of property and equipment — — — (0.1) (0.1)

Adjusted EBITDA $ 1.7 $ 4.6 $ 1.2 $ (4.3) $ 3.2

Three Months Ended

March 31, 2019

Three Months Ended June 30, 2019

High Specification Rigs Completion and Other Services Processing Solutions Other Total

(in millions)

Net income (loss) $ (0.4) $ 8.4 $ 2.5 $ (8.7) $ 1.8

Interest expense — — — 1.7 1.7

Tax expense — — — 0.3 0.3

Depreciation and amortization 4.8 2.9 0.5 0.2 8.4

Equity based compensation — — — 0.9 0.9

Severance and reorganization costs — — — — —

(Gain) loss on disposal of property and equipment — — — (0.1) (0.1)

Adjusted EBITDA $ 4.4 $ 11.3 $ 3.0 $ (5.7) $ 13.0

High Specification Rigs Completion and Other Services Processing Solutions Other Total

(in millions)

Net income (loss) $ (3.5) $ (6.6) $ (2.6) $ 2.0 $ (10.7)

Interest expense — — — (0.9) (0.9)

Tax expense — — — (0.3) (0.3)

Depreciation and amortization 0.4 (0.3) 0.8 0.2 1.1

Equity based compensation — — — — —

Severance and reorganization costs 0.4 0.2 — 0.4 1.0

(Gain) loss on disposal of property and equipment — — — — —

Adjusted EBITDA $ (2.7) $ (6.7) $ (1.8) $ 1.4 $ (9.8)

Adjusted EBITDA for the three months ended June 30, 2020 decreased $9.8 million to $3.2 million from $13.0 million for the three months ended June 30, 2019.

The change by segment was as follows:

High Specification Rigs .

High Specification Rigs Adjusted EBITDA for the three months ended June 30, 2020 decreased $2.7 million to $1.7 million from $4.4 million for the three months ended June 30, 2019, due to decreased revenues of $21.7 million, partially offset by a corresponding decrease in cost of services of $18.6 million.

Completion and Other Services.

Completion and Other Services Adjusted EBITDA decreased $6.7 million to $4.6 million from $11.3 million for the three months ended June 30, 2019, due to a decrease in revenues of $28.6 million, partially offset by a corresponding decrease in cost of services of $21.7 million.

Processing Solutions .

Processing Solutions Adjusted EBITDA for the three months ended June 30, 2020 decreased $1.8 million to $1.2 million from $3.0 million for the three months ended June 30, 2019, due to a decrease in revenue of $3.3 million, partially offset by a corresponding decrease in cost of services of $1.5 million.

Other Adjusted EBITDA for the three months ended June 30, 2020 increased $1.4 million to a loss of $4.3 million from a loss of $5.7 million for the three months ended June 30, 2019.

The balances included in Other reflect other general and administrative costs not directly attributable to High Specification Rigs, Completion and Other Services or Processing Solutions.

The decrease is due to a reduction in the Company’s general and administrative costs.

For further information regarding the results of operations for each segment, please see “Item 1.

Financial Information —Note 13 — Segment Reporting.”

Six Months Ended June 30, 2020 compared to Six Months Ended June 30, 2019

Six Months Ended June 30, 2020

High Specification Rigs Completion and Other Services Processing Solutions Other Total

(in millions)

1 unchanged sentence

Interest expense — — — 1.9 1.9

Tax expense — — — 0.1 0.1

Depreciation and amortization 10.5 5.3 1.9 0.7 18.4

Equity based compensation — — — 1.7 1.7

Severance and reorganization costs 0.4 0.2 — 0.4 1.0

Gain on retirement of debt — — — (2.1) (2.1)

Gain on disposal of property and equipment

(Gain) loss on disposal of property and equipment — — — (0.3) (0.3)

Adjusted EBITDA $ 6.7 $ 16.2 $ 2.5 $ (10.8) $ 14.6

High Specification Rigs

Completion and Other Services

Processing Solutions

Six Months Ended June 30, 2019

High Specification Rigs Completion and Other Services Processing Solutions Other Total

(in millions)

1 unchanged sentence

Interest expense — — — 3.2 3.2

Tax expense — — — 0.6 0.6

Depreciation and amortization 9.6 5.7 1.0 0.5 16.8

Equity based compensation — — — 1.5 1.5

Severance and reorganization costs — — — — —

Gain on retirement of debt — — — — —

Gain on disposal of property and equipment

(Gain) loss on disposal of property and equipment — — — (0.3) (0.3)

Adjusted EBITDA $ 8.7 $ 25.0 $ 5.8 $ (12.3) $ 27.2

Adjusted EBITDA for the three months ended March 31, 2020 decreased $2.8 million to $11.4 million from $14.2 million for the three months ended March 31, 2019 .

High Specification Rigs Completion and Other Services Processing Solutions Other Total

(in millions)

Net income (loss) $ (3.3) $ (8.6) $ (4.2) $ 4.6 $ (11.5)

Interest expense, net — — — (1.3) (1.3)

Tax expense — — — (0.5) (0.5)

Depreciation and amortization 0.9 (0.4) 0.9 0.2 1.6

Equity based compensation — — — 0.2 0.2

Severance and reorganization costs 0.4 0.2 — 0.4 1.0

Gain on retirement of debt — — — (2.1) (2.1)

(Gain) loss on disposal of property and equipment — — — — —

Adjusted EBITDA $ (2.0) $ (8.8) $ (3.3) $ 1.5 $ (12.6)

Adjusted EBITDA for the six months ended June 30, 2020 decreased $12.6 million to $14.6 million from $27.2 million for the six months ended June 30, 2019.

The change by segment was as follows:

High Specification Rigs .

High Specification Rigs Adjusted EBITDA for the three months ended March 31, 2020 increased $0.7 million to $5.0 million from $4.3 million for the three months ended March 31, 2019 , due to increased revenues of $3.2 million , partially offset by a corresponding increase in cost of services of $2.5 million .

High Specification Rigs Adjusted EBITDA for the six months ended June 30, 2020 decreased $2.0 million to $6.7 million from $8.7 million for the six months ended June 30, 2019, due to decreased revenues of $18.5 million, partially offset by a corresponding decrease in cost of services of $16.1 million.

Completion and Other Services.

Completion and Other Services Adjusted EBITDA decreased $2.1 million to $11.6 million from $13.7 million for the three months ended March 31, 2019 , due to a decrease in revenues of $8.3 million , partially offset by a corresponding decrease in cost of services of $6.2 million .

Completion and Other Services Adjusted EBITDA for the six months ended June 30, 2020 decreased $8.8 million to $16.2 million from $25.0 million for the six months ended June 30, 2019, due to decreased revenues of $36.9 million, partially offset by a corresponding decrease in cost of services of $27.9 million.

Processing Solutions .

Processing Solutions Adjusted EBITDA for the three months ended March 31, 2020 decreased $1.5 million to $1.3 million from $2.8 million for the three months ended March 31, 2019 , due to a decrease in revenue of $2.2 million , partially offset by a corresponding decrease in cost of services of $0.7 million .

Other Adjusted EBITDA for the three months ended March 31, 2020 increased $0.1 million to a loss of $6.5 million from a loss of $6.6 million for the three months ended March 31, 2019 .

Processing Solutions Adjusted EBITDA for the six months ended June 30, 2020 decreased $3.3 million to $2.5 million from $5.8 million for the six months ended June 30, 2019, due to decreased revenues of $5.5 million, partially offset by a corresponding decrease in cost of services of $2.2 million.

Other Adjusted EBITDA for the six months ended June 30, 2020 increased $1.5 million to a loss of $10.8 million from a loss of $12.3 million for the six months ended June 30, 2019.

The balances included in Other reflect other general and administrative costs not directly attributable to High Specification Rigs, Completion and Other Services or Processing Solutions.

The slight decrease is due to a reduction in the Company’s general and administrative costs.

The decrease is due to a reduction in the Company’s general and administrative costs.

For further information regarding the results of operations for each segment, please see “Item 1.

3 unchanged sentences

Our primary sources of liquidity are cash generated from operations and borrowings under our Credit Facility.

The borrowing base under our Credit Facility is calculated monthly on a percentage of our eligible accounts receivable less certain reserves.

During the three months ended June 30, 2020, our borrowing base was reduced from $31.5 million to $15.8 million as a result of decreased accounts receivable during the period.

We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements and to permit us to manage the cyclicality associated with our business.

As of March 31, 2020 , we had cash on hand of approximately $11.4 million , operating cash flows of $8.5 million and availability under our Credit Facility of $10.2 million .

As of April 29, 2020, our cash on hand and available borrowings under our Credit Facility approximated $20.3 million.

As of June 30, 2020, we had cash on hand of $6.0 million, operating cash flows of $24.2 million and availability under our Credit Facility of $10.8 million.

As of July 22, 2020, our cash on hand and available borrowings under our Credit Facility approximated $11.1 million.

We expect to have sufficient funds to meet the Company’s liquidity requirements and to stay within our covenants of our debt agreements for at least the next 12 months.

1 unchanged sentence

The following table presents our cash flows for the periods indicated:

Three Months Ended

Six Months Ended June 30, Change

2020 2019 $ %

(in millions)

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Net cash provided by operating activities $ 24.2 $ 14.2 $ 10.0 70 %

Net cash used in investing activities (5.5) (15.5) 10.0 65 %

Net cash (used in) provided by financing activities (19.6) 0.4 (20.0) (5,000) %

Net change in cash $ (0.9) $ (0.9) $ — — %

Operating Activities

Net cash flows from operating activities decreased $1.4 million to cash provided of $8.5 million for the three months ended March 31, 2020 compared to $9.9 million for the three months ended March 31, 2019 .

The change in cash flows provided by operating activities is primarily attributable to a decrease in gross margin and operating income for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 .

The use of working capital cash increased $1.8 million , or 47% , to a use of $ 2.0 million for the three months ended March 31, 2020 , as compared to the use of $3.8 million during the three months ended March 31, 2019 .

Net cash provided by operating activities increased $10.0 million to cash provided of $24.2 million for the six months ended June 30, 2020 compared to cash provided of $14.2 million for the six months ended June 30, 2019.

The change in cash flows provided by operating activities is primarily attributable to cash collections related to accounts receivable, partially offset by cash payments related to our accounts payable and accrued expenses.

The Company increased cash from working capital by $20.5 million, or 178%, to cash generated from working capital of $9.0 million during the six months ended June 30, 2020, compared to the use of working capital cash of $11.5 million during the six months ended June 30, 2019.

This increase was partially offset by a decline in the operating margin during the six months ended June 30, 2019.

Investing Activities

Net cash flows from investing activities increased $5.9 million to a use of cash of $4.6 million for the three months ended March 31, 2020 compared to a use of cash of $10.5 million for the three months ended March 31, 2019 .

The change in cash flows used in investing activities is primarily attributable to fixed assets acquired during the three months ended March 31, 2019 , where such assets were financed through our Credit Facility and Financing Agreement.

Net cash used in investing activities decreased $10.0 million to a use of cash of $5.5 million for the six months ended June 30, 2020 compared to a use of cash of $15.5 million for the six months ended June 30, 2019.

The change in cash flows used in investing activities is attributable to a significant reduction in capital expenditures during the current year, in response to

the economic events that have taken place in the industry, coupled with an increased level of fixed assets acquired during the six months ended June 30, 2019, relative to the corresponding period of the current year.

Financing Activities

Net cash flows from financing activities decreased $3.1 million to cash provided of $0.6 million for the three months ended March 31, 2020 compared to cash provided of $3.7 million for the three months ended March 31, 2019 .

The change in cash flows provided by financing activities is primarily attributable to the settlement of the ESCO Note Payable and repurchases of our Class A Common Stock, partially offset by additional borrowings under our Credit Facility during the three months ended March 31, 2020.

Net cash flows used in financing activities increased $20.0 million to a use of cash of $19.6 million for the six months ended June 30, 2020 compared to cash provided of $0.4 million for the six months ended June 30, 2019.

The change in cash flows from financing activities is primarily attributable to repayments on the principal balance of our Credit Facility and Encina Master Financing Agreement, settlement of the ESCO Note Payable and repurchases of our Class A Common Stock during the six months ended June 30, 2020.

Supplemental Disclosures

We added assets of $0.8 million that were non-cash additions in the three months ended March 31, 2020 and purchased $0.5 million in finance leased assets.

We added fixed assets of $0.1 million that were non-cash additions and added $1.0 million of fixed assets through financing leases during the six months ended June 30, 2020.

In addition, we early terminated certain of our vehicle financing leases, thereby reducing our current and long-term obligations by $0.7 million.

Working Capital

Our working capital, which we define as total current assets less total current liabilities, was a deficit of $6.3 million as of March 31, 2020 compared to a surplus of $3.6 million as of December 31, 2019 .

The decrease in our working capital was primarily attributable to the increase of our current debt maturities related to our Credit Facility as of March 31, 2020.

During the three months ended March 31, 2020, the Company borrowed against the Credit Facility such that the available borrowings were less than $6.25 million , causing dominion to revert to the Administrative Agent.

For 30 consecutive days (the “collection period”), the Company was required to either (a) maintain available borrowings of no less than the greater of $6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base (which approximated $3.9 million as of March 31, 2020) or (b) have no revolver drawings and available cash of at least $20.0 million for dominion to revert back to the Company.

During such collection period, the Administrative Agent had rights to operating cash inflows, therefore the total borrowings under the Credit Facility were reclassified to current maturities of long-term debt as of March 31, 2020.

As of April 29, 2020, the Company maintained available borrowings under the Credit Facility of at least $6.25 million for 30 consecutive days, therefore cash dominion has reverted back to the Company.

As of April 29, 2020 the Company had borrowings of $8.9 million with available borrowings of $15.8 million under the Credit Facility.

Our working capital, which we define as total current assets less total current liabilities, was a deficit of $1.4 million as of June 30, 2020 compared to a surplus of $3.6 million as of December 31, 2019.

The reduction in the Company’s profitability, due to the current macroeconomic environment, is the primary reason for this decrease in working capital.

In April 2020, we eliminated all planned growth capital expenditures for the remainder of 2020.

While our maintenance capital expenditures have historically been low due to the quality of our asset base, we expect minimal capital expenditures for the remainder of 2020.

Our Debt Agreements

1 unchanged sentence

In August 2017, we issued $7.0 million of Seller’s Notes as partial consideration for the acquisition of ESCO Leasing, LLC (“ESCO”).

These notes included a note for $1.2 million , which was paid in August 2018 and a note for $5.8 million , which was due in February 2019.

These notes included a note for $1.2 million, which was paid in August 2018 and a note for $5.8 million, which was settled during the six months ended June 30, 2020.

Both notes bore interest at 5.0% payable quarterly until their respective maturity dates.

2 unchanged sentences

Interest on the outstanding principal balance was accrued through the maturity date of the Note Payable.

During the three months ended March 31, 2020 , the Company paid $3.8 million to settle the note and any unpaid interest, and recognized a gain on the retirement of the note of $2.1 million .

During the six months ended June 30, 2020, the Company paid $3.8 million to settle the note and any unpaid interest, and recognized a gain on the retirement of the note of $2.1 million.

Credit Facility

In August 2017, we entered into a $50.0 million Credit Facility by and among certain of Ranger’s subsidiaries, as borrowers, each of the lenders’ party threto and Wells Fargo Bank, N.A., as administrative agent.

In August 2017, we entered into a $50.0 million Credit Facility by and among certain of Ranger’s subsidiaries, as borrowers, each of the lenders’ party thereto and Wells Fargo Bank, N.A., as administrative agent.

The Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of our eligible accounts receivable less certain reserves.

1 unchanged sentence

The applicable margin for the LIBOR loans ranges from 1.5% to 2.0% and the applicable margin for Base Rate loans ranges from 0.5% to 1.0%, in each case, depending on our average excess availability under the Credit Facility.

The applicable margin for the LIBOR loan was 1.8% and the applicable margin for Base Rate loans were 0.8% as of March 31, 2020 .

The weighted average interest rate for the borrowings under the Credit Facility was 3.4% as of March 31, 2020 .

As of March 31, 2020 , under the Credit Facility, we borrowed $21.3 million , with a borrowing capacity of $31.5 million , and a residual $10.2 million available for borrowing.

As of April 29, 2020 the Company had borrowings of $8.9 million with available borrowings of $15.8 million under the Credit Facility.

We were in compliance with the Credit Facility covenants as of March 31, 2020 .

The applicable margin for the LIBOR loan was 1.75% and the applicable margin for Base Rate loans were 0.75% as of June 30, 2020.

The weighted average interest rate for the borrowings under the Credit Facility was 3.1% during the six months ended June 30, 2020.

Under the Credit Facility, the total loan capacity was $15.8 million, which was based on a borrowing base certificate in effect as of June 30, 2020.

The Company had outstanding borrowings of $5.0 million under the Credit Facility, leaving a residual $10.8 million available for borrowings as of June 30, 2020.

The Company paid the $5.0 million debt balance in July 2020.

As of July 22, 2020, the Company did not have any borrowings under the Credit Facility and had available borrowings of $10.1 million.

We were in compliance with the Credit Facility covenants as of June 30, 2020.

We capitalized fees of $0.7 million associated with the Credit Facility, which will be amortized through maturity.

Unamortized debt issuance costs as of March 31, 2020 was $0.4 million .

Unamortized debt issuance costs as of June 30, 2020 was $0.4 million.

The Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of the Company’s eligible accounts receivable less certain reserves.

The Credit Facility includes cash dominion provisions that permit the Administrative Agent to sweep cash daily from the Company’s bank accounts into an account of the Administrative Agent to repay the Company’s obligations under the Credit Facility.

Such dominion is triggered when excess availability is less than the greater of $6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base as of such date of determination.

When the Company is subject to dominion, for 30 consecutive days it is required to either (a) maintain excess availability in excess of the greater of $6.25 million and 12.5% of the lesser of (x) the maximum revolver amount and (y) the borrowing base as of such date of determination and no event of default has occurred and is continuing or (b) have no revolver drawings and available cash of at least $20.0 million for dominion to revert back to the Company.

The Credit Facility is scheduled to mature on August 16, 2022.During the three months ended March 31, 2020, the Company borrowed against the Credit Facility causing dominion to revert to the Administrative Agent, however after the 30 consecutive day period, as defined above, dominion reverted back to the Company in April 2020.

The borrowings under the Credit Facility, and related issuance costs, were included in long-term debt, net in the Condensed Consolidated Balance Sheets as of June 30, 2020, as the Company was not subject to dominion.

The Credit Facility is scheduled to mature on August 16, 2022.

In addition, the Credit Facility restricts our ability to make distributions on, or redeem or repurchase, our equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Credit Facility and either (a) excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 22.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $10.0 million or (b) if our fixed charge coverage ratio is at least 1.0x on a pro forma basis, excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 17.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $7.0 million.

If the foregoing threshold under clause (b) is met, we may not make such distributions (but may make certain other distributions, including under clause (a) above) prior to the earlier of the date that is (a) 12 months from closing or (b) the date that our fixed charge coverage ratio is at least 1.0x for two consecutive quarters.

Our Credit Facility generally permits us to make distributions required under the TRA, but a ‘‘Change

of Control’’ under the TRA constitutes an event of default under our Credit Facility, and our Credit Facility does not permit us to make payments under the TRA upon acceleration of our obligations thereunder unless no event of default exists or would result therefrom and we have been in compliance with the fixed charge coverage ratio for the most recent 12-month period on a pro forma basis.

Our Credit Facility generally permits us to make distributions required under the Tax Receivable Agreement (“TRA”), but a ‘‘Change of Control’’ under the TRA constitutes an event of default under our Credit Facility, and our Credit Facility does not permit us to make payments under the TRA upon acceleration of our obligations thereunder unless no event of default exists or would result therefrom and we have been in compliance with the fixed charge coverage ratio for the most recent 12-month period on a pro forma basis.

Our Credit Facility also requires us to maintain a fixed charge coverage ratio of at least 1.0x if our liquidity is less than $10.0 million until our liquidity is at least $10.0 million for 30 consecutive days.

6 unchanged sentences

Upon the occurrence and during the continuation of an event of default, subject to the terms and conditions of the Credit Facility, the lenders are able to declare any outstanding principal of our Credit Facility debt, together with accrued and unpaid interest, to be immediately due and payable and exercise other remedies.

Additionally, the Lender agrees to use commercially reasonable efforts to rescind an activation instruction with respect to each collection account if after the occurrence of the applicable triggering event either (A) (1) 30 consecutive days have passed during which excess availability has exceeded the greater than 12.5% of the available balance and $6.25 million and (2) no event of default has occurred and is continuing or (B) the Credit Facility balance is zero and qualified cash is greater than or equal to $20.0 million.

During the three months ended March 31, 2020, the Company borrowed against the Credit Facility such that the available borrowings were less than $6.25 million, causing dominion to revert to the Administrative Agent.

See “— Working Capital” above.

Encina Master Financing and Security Agreement (“Financing Agreement”)

3 unchanged sentences

Subsequent to the first financing, we borrowed an additional $17.8 million, net of expenses and in two tranches, under the Financing Agreement.

As of March 31, 2020 , the aggregate principal balance outstanding was $25.2 million under the Financing Agreement.

As of June 30, 2020, the aggregate principal balance outstanding was $22.7 million under the Financing Agreement.

The total borrowings under the Financing Agreement were borrowed in three tranches, where the amounts outstanding are payable ratably over 48 months from the time of each borrowing.

1 unchanged sentence

The Financing Agreement is secured by a lien on certain of our high specification rig assets.

Borrowings under the Financing Agreement bear interest at a rate per annum equal to the sum of 8.0% plus LIBOR, which was 1.5% , as of March 31, 2020 .

Borrowings under the Financing Agreement bear interest at a rate per annum equal to the sum of 8.0% plus LIBOR, which was 1.5%, as of June 30, 2020.

In no event will LIBOR fall below 1.5%.

The Financing Agreement requires that the Company maintain leverage ratios of 2.5 to 1.0.

The Company was in compliance with the covenants under the Financing Agreement as of March 31, 2020 .

The Company was in compliance with the covenants under the Financing Agreement as of June 30, 2020.

The Company capitalized fees of $0.9 million associated with the Financing Agreement and will be amortized through maturity.

Unamortized debt issuance costs as of March 31, 2020 approximated $0.7 million .

Tax Receivable Agreement

Unamortized debt issuance costs as of June 30, 2020 approximated $0.5 million.

With respect to obligations we expect to incur under our TRA (except in cases where we elect to terminate the TRA early, the TRA is terminated early due to certain mergers, asset sales, other forms of business combination or other changes of control or we have available cash but fail to make payments when due), generally we may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA or if our contractual obligations limit our ability to make these payments.

8 unchanged sentences

Our significant accounting policies are discussed in our Annual Report and have not materially changed since December 31, 2019.

As of March 31, 2020, the Company noted a decline in stock price due to the reduced demand and oversupply of oil and natural gas, which was an indication that the fair value of our long-lived assets could have fallen below their carrying values.

During the three and six months ended June 30, 2020, the Company noted a decline in stock price due to the reduced demand and oversupply of oil and natural gas, which was an indication that the fair value of our long-lived assets could have fallen below their carrying values.

As a result, the Company performed an impairment analysis and determined there was no impairment.

24 unchanged sentences

• the continuation of a sharp decline in global crude oil demand and crude oil prices for an uncertain period of time that may lead to a significant reduction of domestic crude oil and natural gas production;

global or national health concerns, including pandemics such as the outbreak of COVID-19 at the beginning of 2020;

• global or national health concerns, including pandemics such as the outbreak of COVID-19;

• uncertainty regarding future actions of foreign oil producers such as Saudi Arabia and Russia and the risk that they take actions that will prolong or exacerbate the current over-supply of crude oil;

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis