What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-30 compared with 2021-02-26 · 275 added, 227 removed, 182 unchanged (73% of the section changed)

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Recent Events and Outlook

The outbreak of the novel coronavirus (“COVID-19”) in the first quarter of 2020 and its continued spread across the globe during 2020 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.

Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies.

Various containment measures, which included the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe decline in general economic activity and a resulting decrease in energy demand.

In addition, the global economy has experienced a significant disruption to global supply chains.

The risks associated with the COVID-19 pandemic have impacted our workforce and the way we meet our business objectives.

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 and continued through the year-ended December 31, 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.

remain high, including 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 during 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.

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 through the year ended December 31, 2020.

On April 12, 2020, OPEC Plus agreed to cut oil production by 9.7 million barrels per day (“mb/d”) in May and June 2020;

however, on July 15, 2020 OPEC Plus agreed to increase production by 1.6 mb/d starting in August 2020.

On December 3, 2020, OPEC Plus agreed to increase production by an additional 1.0 mb/d in January 2021, resulting in total production cuts of 7.1 mb/d by the end of February 2021.

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.

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, which may further negatively impact the price of oil.

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.

Factors deriving from the COVID-19 response, as well as the oil oversupply, that have and may continue to negatively impact sales, liquidity and gross margins in the future include, but are not limited to:

limitations on the ability of our suppliers to provide materials or equipment, limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state or federal orders requiring employees to remain at home;

reduction of capital expenditures and discretionary spend;

limitations on the ability of our customers to conduct business;

and limitations on the ability of our customers to pay us on a timely basis.

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

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.

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.

Business Combinations

Basic Energy Services, Inc.

(“Basic”) Acquisition

On September 15, 2021, Ranger Energy Acquisition, LLC, entered into an Asset Purchase Agreement for certain assets of Basic, closing on October 1, 2021.

The Company purchased assets associated with Basic’s well servicing, fishing and rental, coiled tubing operations and rolling stock assets required to support the operating assets being purchased and real property locations located in New Mexico, Oklahoma and Texas, among others.

The material financial and operating results of Basic are included within the High Specification Rigs segment, and other immaterial results are included within the

Processing Solutions and Ancillary Services segment.

Please see “—Results of Operations” below and “Part II—Item 8.—Note 3 — Business Combinations” for further information.

As consideration for the assets acquired, the Company paid $36.7 million in cash, where such cash was generated through the issuance of Series A Preferred Stock.

PerfX Wireline Services (“PerfX”) Acquisition

On July 8, 2021, the Company completed the acquisition of PerfX, a provider of wireline services that operate in Williston, North Dakota and Midland, Texas.

Following the acquisition of PerfX, the Company significantly expanded its scale and scope of the existing wireline business into production-related services through this acquisition.

The financial results of PerfX are included in the Wireline Services reporting segment.

The aggregate consideration was $20.1 million, which included 1,000,000 shares of Class A Common Stock and a Secured Promissory Note of $11.4 million.

The Class A Common Stock issuance includes 100,000 shares that will be issued by the Company on the 12-month anniversary of the acquisition date.

The PerfX purchase price includes a warrant to acquire a 30% ownership in the XConnect Business (“XConnect”), which expires on July 8, 2031.

XConnect is the manufacturer of a perforating gun system developed by the PerfX sellers alongside the PerfX wireline service business.

The warrant requires the Company to maintain a specific minimum level of purchases of XConnect’s manufactured products.

Should the Company fail to maintain the specified minimum level of purchases, a forfeiture event would occur.

The Company may elect to cure the forfeiture event through a cash payment to XConnect.

If the Company elects to not cure the forfeiture event, the ownership percentage would reduce to 15%.

Upon the occurrence of a second uncured forfeiture event, the warrant is deemed to be cancelled.

Patriot Well Solutions (“Patriot”) Acquisition

On May 14, 2021, the Company completed the acquisition of Patriot, a provider of wireline evaluation and intervention services that operate in the Permian, Denver-Julesburg and Powder River Basins and Bakken Shale.

The financial results of Patriot are included in the Wireline Services reporting segment.

As consideration for the Patriot Acquisition the Company paid an aggregate of $11.0 million, which included 1.3 million shares of Class A Common Stock and cash payments of $3.3 million, net of cash acquired.

Coronavirus (“COVID-19”)

During the year ended December 31, 2021 and through the issuance of these financial statements, significant progress has been made to combat COVID-19 and its multiple variants, however, it remains a global challenge and continues to have an impact on our financial results.

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

While commodity prices, as well as our stock price and operational activity, have improved during the year ended December 31, 2021, we expect this global market volatility to continue at least until the outbreak of COVID-19, including any new variants, stabilizes, if not longer.

government implemented a number of programs in the early 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.

We qualified for limited aid under the CARES Act and have deferred payroll tax payments of $1.9 million as of December 31, 2020 under the CARES Act.

Our service offerings consist of well completion support, workover, well maintenance, wireline, fluid management, other complementary services, as well as installation, commissioning and operating of modular equipment, which are conducted in three reportable segments, as follows:

• High Specification Rigs .

Provides high-spec well service rigs and complementary equipment and services to facilitate operations throughout the lifecycle of a well.

• Completion and Other Services .

Provides wireline completion services necessary to bring a well on production and other ancillary services often utilized in conjunction with our high-spec rig services to enhance the production of a well.

• Processing Solutions .

Provides proprietary, modular equipment for the processing of natural gas.

For additional financial information about our segments, please see “Part II, Item 8.

Financial and Supplementary Data —Note 15 — Segment Reporting.”

We qualified for limited aid under the CARES Act and have deferred payroll tax payments of $1.1 million as of December 31, 2021 under the CARES Act, which will become due on December 31, 2022.

Internal Controls and Procedures

We and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting as of December 31, 2021.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The Company is working to remediate the material weakness in internal control over financial reporting and is taking steps to improve the internal control environment.

Specifically, the Company is enhancing processes, and designing and implementing additional internal controls to properly account for complex transactions.

Additionally, the Company is hiring additional accounting personnel and implementing training of new and existing personnel on proper execution of designed control procedures.

We can give no assurance that these actions will remediate this deficiency in internal control or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future.

Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

We are required to comply with the SEC's rules implementing Section 302 of Sarbanes-Oxley, which requires our management to certify financial and other information in our quarterly and Annual Reports.

We will not be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 until our first Annual Report subsequent to our ceasing to be an "emerging growth company" within the meaning of Section 2(a)(19) of the Securities Act.

How We Evaluate Our Operations

Management uses a variety of metrics to analyze our operating results and profitability, which include operating revenues, costs of conducting our operations, operating income (loss) and adjusted EBITDA, among others.

Within our High Specification Rig segment, management uses additional metrics to analyze our activity levels and profitability, including rig hours and rig utilization.

How We Generate Revenues

We generate revenues through the provision of a variety of oilfield services.

These services are performed under a variety of contract structures, including a long term take‑or‑pay contract and various master service agreements, as supplemented by statements of work, pricing agreements and specific quotes.

A portion of our master services agreements include provisions that establish pricing arrangements for a period of up to one year in length.

However, the majority of those agreements provide for pricing adjustments based on market conditions.

The majority of our services are priced based on prevailing market conditions and changing input costs at the time the services are provided, giving consideration to the specific requirements of the customer.

We analyze our revenues by comparing actual revenues to our internal projections for a given period and to prior periods to assess our performance.

We believe that revenues are a meaningful indicator of the demand and pricing for our services.

Within our High Specification Rigs segment, we analyze rig hours as an important indicator of our activity levels and profitability.

Rig hours represent the aggregate number of hours that our well service rigs actively worked during the periods presented.

We typically bill customers on an hourly basis during the period that a well service rig is actively working, making rig hours a useful metric for evaluating our profitability.

Rig Utilization

Within our High Specification Rigs segment, we analyze rig utilization as a further important indicator of our activity levels and profitability.

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 specification rigs in our fleet during such period, as aggregated on a monthly basis utilizing a mid-month convention whereby a high-spec rig is added to our fleet during a month, meaning that we have taken delivery of such high-spec rig and is ready for service, is 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.

The primary factors that have historically impacted, and will likely continue to impact, our actual aggregate well service rig hours for any specified period are (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 fleet to meet short-term and expected long-term demand, and our ability to successfully maintain a fleet capable of ensuring sufficient, but not excess, rig availability to meet such demand.

We provide services within the United States that are organized into three reporting segments, which include:

High Specification Rigs, Wireline Services, and Processing Solutions and Ancillary Services, which are described below.

The reportable segments have been categorized based on the nature of services provided in each line of business.

The reportable segments comprise the structure used by the Chief Operating Decision Maker (“CODM”) to make key operational decisions and assess performance.

The CODM evaluates operating performance based on multiple measures for each reportable segment.

As a result of three business combinations, coupled with executive management changes, primarily the hiring of a new chief executive officer, in September 2021, the Company reevaluated its segment reporting.

Based on that review, the Company updated the reportable segments according to how the CODM reviews the financial results during the fourth quarter.

The key financial metrics the CODM reviews for each reportable segment include:

(i) Revenue, (ii) Cost of Services & Depreciation, (iii) Operating Income or Loss and (iv) Adjusted EBITDA, all of which are described further below.

As a result of three business combinations, coupled with executive management changes, the Company re-evaluated the

reportable segments accordingly.

During the fourth quarter of 2021, the Company bifurcated the legacy Completion and Other Services segment into Wireline Services and Ancillary Services, where the historical Processing Solutions segment has been consolidated into the Ancillary Services segment.

Prior periods have been revised to conform to the current presentation.

Following such re-evaluation, our reporting segments include:

• High Specification Rigs.

Provides high-spec well service rigs to facilitate operations throughout the life cycle of a well.

• Wireline Services.

Provides services necessary to bring and maintain a well on production and consists of our completion and production businesses.

• Processing Solutions and Ancillary Services.

Provides complimentary services often utilized in conjunction with our High Specification Rigs and Wireline Services segments.

The services primarily include logistics, equipment rentals, plug and abandonment and processing solutions.

Our Other segment represents costs not allocable to the reporting segments and includes corporate general and administrative expense and depreciation of corporate furniture and fixtures, amortization, impairments, debt retirements and other items similar in nature.

Financial Metrics

How we Generate Revenue

Rig hours and stage counts, as it relates to our High Specification Rigs and Wireline Services segments, respectively, are important indicators of our activity levels and profitability.

The stage count metric has become increasingly important with the update in our external reporting segments.

Rig hours represent the aggregate number of hours that our well service rigs actively worked, whereas stage counts represent the number of completed stages during the periods presented.

Generally, during the period our services are being provided, our customers are billed on an hourly basis for our high-spec rig services or, as it relates to our wireline services, they are billed upon the earlier of the completion of the well or on a monthly basis.

The rates for such rig hours and completed wells at which the customer is billed is generally predetermined based upon a contractual agreement.

Costs of Conducting Our Business

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

In addition, a significant portion of the costs we incur in our business is variable based on the quantities of specific services provided and the requirements of such services.

Direct cost of services and general and administrative expenses include the following major cost categories:

(i) personnel costs and (ii) equipment costs (including repair and maintenance).

The principal costs associated with conducting our business are personnel, repairs and maintenance, general and administrative, and depreciation expense.

Cost of Services.

Our primary costs associated with our cost of services are related to personnel expenses, repairs and maintenance of our fixed assets and perforating and gun costs.

A significant portion of these expenses are variable, and therefore typically managed, based on industry conditions and demand for our services.

Further, there is generally a correlation between our revenues generated and personnel and repairs and maintenance costs, which are dependent upon the operational activity.

Personnel costs associated with our operational employees represent a significant cost of our business.

A substantial portion of our labor costs is attributable to our crews and is partly variable based on the requirements of specific customers and operations.

A substantial portion of our labor costs is attributable to our field crews and is partly variable based on the requirements of specific customers.

A key component of personnel costs relates to the ongoing training of our employees, which improves safety rates and reduces attrition.

We also incur costs to employ personnel to support and manage our services and perform maintenance on our assets.

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

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

Operating Income (Loss)

We analyze our operating income (loss), which we define as revenues less cost of services, general and administrative expenses, depreciation and amortization, impairment and other operating expenses, to measure our financial performance.

We believe operating income (loss) is a meaningful metric because it provides insight on profitability and true operating performance based on the historical cost basis of our assets.

We also compare operating income (loss) to our internal projections for a given period and to prior periods.

General & Administrative.

As described above general and administrative expenses are corporate in nature and are included within the Other segment.

These costs are not attributable to any of our lines of businesses nor reporting segments.

Operating Income or Loss

We analyze our operating income or loss by segment, which we have defined as revenues less cost of services and depreciation expense.

We believe this is a key financial metric as it provides insight on profitability and operational performance based on the historical cost basis of our assets.

Adjusted EBITDA

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The following is an analysis of our operating results.

See “—How We Evaluate Our Operations” for definitions of rig hours, rig utilization and other analogous information.

The significant declines in operational activity, across all segments, as well as corporate-related expenses are related to the deterioration of crude oil pricing and significantly reduced demand for our services during the year ended December 31, 2020, as described in “—Recent Events and Outlook.” The information presented below is in millions.

See “—How We Evaluate Our Operations” for how we measure our operating results and key performance indicators.

The significant increases in operational activity, across all segments, as well as corporate-related expenses, are related to the business combinations that took place, coupled with increased crude oil pricing and demand for our services during the year ended December 31, 2021, as described in “—Recent Events and Outlook.” During the fourth quarter 2021, the Company re-evaluated its reporting segments and bifurcated the legacy Completions and Other Services segment into Wireline Services, Processing Solutions and Ancillary Services.

As such, prior period amounts were recast to conform with the new segment reporting presentation.

The information presented below is in millions.

Year Ended December 31, Variance

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High specification rigs $ 140.1 $ 82.5 $ 57.6 70 %

Completion and other services 98.5 184.3 (85.8) (47) %

Processing solutions 6.8 20.5 (13.7) (67) %

Wireline Services 117.9 79.0 38.9 49 %

Processing Solutions and Ancillary Services 35.1 26.3 8.8 33 %

Total revenues 293.1 187.8 105.3 56 %

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High specification rigs 118.8 71.5 47.3 66 %

Completion and other services 73.7 139.0 (65.3) (47) %

Processing solutions 2.7 9.2 (6.5) (71) %

Wireline Services 115.6 57.0 58.6 103 %

Processing Solutions and Ancillary Services 28.9 19.4 9.5 49 %

Total cost of services 263.3 147.9 115.4 78 %

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Depreciation and amortization 36.8 35.0 1.8 5 %

Gain on debt retirement (2.1) — (2.1) (100) %

Total operating expenses 333.6 205.0 128.6 63 %

Operating income (loss) (40.5) (17.2) (23.3) 135 %

Other expenses

Other income and expenses

Interest expense, net 4.8 3.4 1.4 41 %

Total other expenses 3.4 5.8 (2.4) (41) %

(Gain) loss on debt retirement 0.2 (2.1) 2.3 (110) %

Gain on bargain purchase (37.2) — (37.2) 100 %

Total other income and expenses (32.2) 1.3 (33.5) (2,577) %

Income (loss) before income tax expense (8.3) (18.5) 10.2 (55) %

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Net income (loss) $ (2.1) $ (18.5) $ 16.4 (89) %

Revenues decreased $149.1 million, or 44%, to $187.8 million for the year ended December 31, 2020 from $336.9 million for the year ended December 31, 2019.

Revenues increased $105.3 million, or 56%, to $293.1 million for the year ended December 31, 2021 from $187.8 million for the year ended December 31, 2020.

The change in revenues by segment was as follows:

High Specification Rigs.

High Specification Rig revenues decreased $49.6 million, or 38%, to $82.5 million for the year ended December 31, 2020 from $132.1 million for the year ended December 31, 2019.

The decrease in rig services revenue included a 36% decline in total rig hours to 160,300 for the year ended December 31, 2020 from 249,100 for the year ended December 31, 2019.

The decreased rig hours attributed to a 35% reduction in rig utilization.

The average revenue per rig hour decreased three percent to $514 compared to $527 for the year ended December 31, 2019.

The decrease in rig hou rs, rig utilization and average revenue per rig hour is attributable t o the decline in cr ude oil pricing.

Completion and Other Services.

Completion and Other Services revenues decreased $85.8 million, or 47%, to $98.5 million for the year ended December 31, 2020 from $184.3 million for the year ended December 31, 2019.

The decrease is primarily attributable to our wireline business, which accounted for approximately $56.0 million, or 65%, of the segment revenue decrease.

The decrease in wireline services revenue included a 36% decrease in average active wireline units to seven units for the year ended December 31, 2020, from 11 units for the year ended December 31, 2019.

All other service lines within the segment also experienced revenue declines due to the deterioration of crude oil pricing.

Processing Solutions.

Processing Solutions revenues decreased $13.7 million, or 67%, to $6.8 million for the year ended December 31, 2020 from $20.5 million for the year ended December 31, 2019.

The decrease was primarily attributable

to a decline in mobilization and maintenance revenue related to our Mechanical Refrigeration Units (“MRU”).

Additionally revenues related to MRU rentals declined $5.0 million and included an 80% decrease in average MRU’s rented.

High Specification Rig revenues increased $57.6 million, or 70%, to $140.1 million for the year ended December 31, 2021 from $82.5 million for the year ended December 31, 2020.

The increased rig services revenue included a 61% increase in total rig hours to 257,900 for the year ended December 31, 2021 from 160,300 for the year ended December 31, 2020.

The average revenue per rig hour increased 6% to $543 compared to $514 for the year ended December 31, 2020.

Of the total segment revenue increase, $29.5 million is attributable to the assets acquired in the Basic Acquisition.

The increase in revenue, rig hours and average revenue per rig hour is also related to increased crude oil pricing and industry activity.

Wireline Services.

Wireline Services revenues increased $38.9 million, or 49%, to $117.9 million for the year ended December 31, 2021 from $79.0 million for the year ended December 31, 2020.

The increased wireline services revenue was primarily attributable to completion services which included a 96% increase in completed stage count to 27,200 for the year

ended December 31, 2021 from 13,900 for the year ended December 31, 2020.

The increase in wireline services revenue included a 229% increase in average active wireline units to 23 units from seven units for the year ended December 31, 2020.

Of the segment revenue increase, $55.5 million and $11.6 million is attributable to the assets acquired in the PerfX and Patriot Acquisitions, respectively.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services revenues increased $8.8 million, or 33%, to $35.1 million for the year ended December 31, 2021 from $26.3 million for the year ended December 31, 2020.

Of the total segment revenue increase, $8.5 million is attributable to the Basic Acquisition.

The increase in processing solutions and ancillary services is primarily attributable to a $5.5 million increase in both of our equipment rentals and plugging and abandonment services to $7.4 million and $7.3 million, respectively.

Cost of services.

Cost of services decreased $115.1 million, or 44%, to $147.9 million for the year ended December 31, 2020 from $263.0 million for the year ended December 31, 2019.

As a percentage of revenue, cost of services was approximately 78% for both of the years ended December 31, 2020 and 2019.

Cost of services (exclusive of depreciation and amortization) increased $115.4 million, or 78%, to $263.3 million for the year ended December 31, 2021 from $147.9 million for the year ended December 31, 2020.

As a percentage of revenue, cost of services was approximately 89% and 78% for the years ended December 31, 2021 and 2020.

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

High Specification Rigs.

High Specification Rig cost of services decreased $43.3 million, or 38%, to $71.5 million for the year ended December 31, 2020 from $114.8 million for the year ended December 31, 2019.

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

Additionally, the reduction corresponds with the decrease in rig hours and revenues.

Completion and Other Services.

Completion and Other Services cost of services decreased $65.3 million, or 47%, to $73.7 million for the year ended December 31, 2020 from $139.0 million for the year ended December 31, 2019.

The decrease was primarily attributable to a reduction in our wireline business, which accounted for approximately $41.9 million, or 64%, of the segment cost of services decrease.

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

Processing Solutions.

Processing Solutions cost of services decreased $6.5 million, or 71%, to $2.7 million for the year ended December 31, 2020 from $9.2 million for the year ended December 31, 2019.

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

High Specification Rig cost of services increased $47.3 million, or 66%, to $118.8 million for the year ended December 31, 2021 from $71.5 million for the year ended December 31, 2020.

The increase was primarily attributable to an increase in variable expenses, notably employee costs and repair and maintenance costs, which amounted to $29.0 million and $4.3 million, respectively.

Additionally, the increase corresponds with the increase in rig hours and revenues.

Of the segment cost of services increase, $22.3 million is attributable to the Basic Acquisition.

Wireline Services.

Wireline Services cost of services increased $58.6 million, or 103%, to $115.6 million for the year ended December 31, 2021 from $57.0 million for the year ended December 31, 2020.

The increase was primarily attributable to increased employee costs due to the acquisitions of PerfX and Patriot, and, to a lesser extent, maintenance costs.

Of the total segment cost of services increase, $29.1 million and $5.5 million is attributable to the assets acquired in the PerfX and Patriot Acquisitions, respectively, whereas the increased maintenance costs amounted to $5.9 million.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services cost of services increased $9.5 million, or 49%, to $28.9 million for the year ended December 31, 2021 from $19.4 million for the year ended December 31, 2020.

The increase was primarily attributable to increased variable employee costs with the upturn of operational activity, which amounted to $5.0 million.

Of the segment cost of services increase, $7.6 million is attributable to the Basic Acquisition.

General and administrative.

General and administrative expenses decreased $4.6 million, or 17%, to $22.1 million for the year ended December 31, 2020 from $26.7 million for the year ended December 31, 2019.

The decrease in general and administrative expenses is primarily due to employee costs, which is related to our reduction in workforce, and lower professional fees during the year ended December 31, 2020.

General and administrative expenses increased $11.4 million, or 52%, to $33.5 million for the year ended December 31, 2021 from $22.1 million for the year ended December 31, 2020.

The increase in general and administrative expenses is primarily due to corporate employee costs and increased professional fees during the year ended December 31, 2021.

The increased professional fees included $8.6 million of costs associated with the acquisitions of Patriot, PerfX and Basic and $3.8 million related to the termination of the tax receivable agreement during the year ended December 31, 2021.

Depreciation and amortization.

Depreciation and amortization increased $1.8 million, or 5%, to $36.8 million for the year ended December 31, 2021 from $35.0 million for the year ended December 31, 2020.

The slight increase was attributable to depreciation expense for fixed assets placed into service during the year ended December 31, 2019, across all operating segments.

Gain on debt retirement.

Gain on debt retirement increased $2.1 million, or 100%, to $2.1 million for the year ended December 31, 2020, which is attributable to the settlement of the ESCO Seller’s Notes during the year ended December 31, 2020.

The increase was attributable to assets acquired through the business combinations during the year ended December 31, 2021.

This was partially offset by depreciation expense related to fixed assets disposed of during the last half of the year ended December 31, 2020.

Gain (loss) on debt retirement.

Gain on debt retirement decreased $2.3 million, or 110%, to a loss of 0.2 million for the year ended December 31, 2021, which is attributable to the settlement of the ESCO Seller’s Notes during the year ended December 31, 2021.

Gain on bargain purchase.

Gain on bargain purchase increased $37.2 million, or 100%, to a gain of $37.2 million for the year ended December 31, 2021, which is attributable to the Basic Acquisition during the year ended December 31, 2021.

Interest expense, net.

Net interest expense decreased $2.4 million, or 41%, to $3.4 million for the year ended December 31, 2020 from $5.8 million for the year ended December 31, 2019.

The decrease to net interest expense was attributable to the reduction of the principal balances on our Encina Master Financing Agreement (“Financing Agreement”) and Credit Facility.

Tax expense decreased $2.2 million, or 100% from $2.2 million for the year ended December 31, 2019.

The decrease was primarily attributable to the net loss incurred during the year ended December 31, 2020 compared to net income generated during the year ended December 31, 2019.

Net interest expense increased $1.4 million, or 41%, to $4.8 million for the year ended December 31, 2021 from $3.4 million for the year ended December 31, 2020.

The increase to net interest expense was attributable to increased principal balances on our Revolving Credit Facility (as defined below), coupled with higher interest rates on each tranche of the Loan and Security Agreement that closed on September 27, 2021.

Note Regarding Non‑GAAP Financial Measure

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

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

Adjusted EBITDA is not a financial measure determined in accordance with generally accepted accounting principles in the United States (“US GAAP”).

We define Adjusted EBITDA as net income or loss before net interest expense, income

tax expense, depreciation and amortization, equity‑based compensation, gain or loss on retirement of debt, gain or loss on disposal of property and equipment, severance and reorganization costs, acquisition-related costs, legal fees and settlements, TRA termination expense, allowance for AR write-offs, and gain on bargain purchase.

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.

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Our presentation of Adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from Adjusted EBITDA.

Our computations of Adjusted EBITDA may not be identical to other similarly titled

measures of other companies.

Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

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

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Year Ended December 31, 2021

High Specification Rigs Completion and Other Services Processing Solutions Other Total

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

(in millions)

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Interest expense, net — — — 4.8 4.8

Income Tax expense — — — — —

Income tax benefit — — — (6.2) (6.2)

Depreciation and amortization 21.5 8.1 5.9 1.3 36.8

Equity based compensation — — — 3.2 3.2

Severance and reorganization costs 0.4 0.2 — — 0.6

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

Gain (loss) on retirement of debt — — — 0.2 0.2

Gain (loss) on disposal of property and equipment — — — (1.1) (1.1)

Severance and reorganization costs — — — (0.4) (0.4)

Acquisition related costs — — — 8.6 8.6

Legal fees and settlements — — — 0.9 0.9

TRA termination expense — — — 3.8 3.8

Allowance for AR write-off — — — 1.5 1.5

Gain on bargain purchase, net of tax (37.2) — — — (37.2)

Adjusted EBITDA $ 21.3 $ 2.3 $ 6.2 $ (17.0) $ 12.8

Year Ended December 31, 2020

High Specification Rigs Completion and Other Services Processing Solutions Other Total

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

(in millions)

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Interest expense, net — — — 3.4 3.4

Income Tax expense — — — 2.2 2.2

Income tax benefit — — — — —

Depreciation and amortization 20.2 5.6 7.8 1.4 35.0

Equity based compensation — — — 3.7 3.7

Severance and reorganization costs 0.1 — — — 0.1

Gain on retirement of debt — — — — —

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

Gain (loss) on disposal of property and equipment 0.6 (0.2) — (0.3) 0.1

Severance and reorganization costs 0.4 0.2 — — 0.6

Acquisition related costs — — — — —

Legal fees and settlements — — — — —

TRA termination expense — — — — —

Allowance for AR write-off — — — — —

Wireline cost of sales — — — — —

Gain on bargain purchase, net of tax — — — — —

Adjusted EBITDA $ 12.0 $ 22.0 $ 6.9 $ (18.7) $ 22.2

High Specification Rigs Completion and Other Services Processing Solutions Other Total

High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total

(in millions)

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Interest expense, net — — — 1.4 1.4

Income Tax expense — — — (2.2) (2.2)

Income tax benefit — — — (6.2) (6.2)

Depreciation and amortization 1.3 2.5 (1.9) (0.1) 1.8

Equity based compensation — — — (0.5) (0.5)

Severance and reorganization costs 0.3 0.2 — — 0.5

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

Gain (loss) on retirement of debt — — — 2.3 2.3

Gain (loss) on disposal of property and equipment (0.6) 0.2 — (0.8) (1.2)

Severance and reorganization costs (0.4) (0.2) — (0.4) (1.0)

Acquisition related costs — — — 8.6 8.6

Legal fees and settlements — — — 0.9 0.9

TRA termination expense — — — 3.8 3.8

Allowance for AR write-off — — — 1.5 1.5

Wireline cost of sales — — — — —

Gain on bargain purchase, net of tax (37.2) — — — (37.2)

Adjusted EBITDA $ 9.3 $ (19.7) $ (0.7) $ 1.7 $ (9.4)

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High Specification Rigs.

High Specification Rigs Adjusted EBITDA decreased $5.4 million to $12.0 million from $17.4 million primarily due to a decrease in revenues of $49.6 million partially offset by a corresponding decrease in cost of services of 43.3 million.

Completion and Other Services.

Completion and Other Services Adjusted EBITDA decreased $20.5 million to $24.8 million from $45.3 million due to a decrease in revenues of $85.8 million partially offset by a corresponding decrease in cost of services of $65.3 million.

Processing Solutions.

Processing Solutions Adjusted EBITDA decreased $7.2 million to $4.1 million from $11.3 million due to a decrease in revenue of $13.7 million partially offset by a corresponding decrease in cost of services of $6.5 million.

Other Adjusted EBITDA increased for the year ended December 31, 2020 to a loss of $18.7 million from a loss $23.2 million due to decreased general and administrative expenses, which was related to a reduction of employee costs and professional fees.

High Specification Rigs Adjusted EBITDA increased $9.3 million to $21.3 million from $12.0 million primarily due to an increase in revenues of $57.6 million partially offset by a corresponding increase in cost of services of 47.3 million.

Wireline Services.

Wireline Services Adjusted EBITDA decreased $19.7 million to $2.3 million from $22.0 million due to an increase in revenues of $38.9 million partially offset by a corresponding increase in cost of services of $58.6 million.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services Adjusted EBITDA decreased $0.7 million to $6.2 million from $6.9 million due to an increase in revenue of $8.8 million partially offset by a corresponding increase in cost of services of $9.5 million.

Other Adjusted EBITDA increased for the year ended December 31, 2021 to a loss of $17.0 million from a loss $18.7 million due to increased general and administrative expenses, which was related to increased employee costs and professional fees.

The balances included in Other reflect the general and administrative costs, interest expense, net and tax expense or benefit not directly attributable to any of our Segments.

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We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, investments and acquisitions.

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

As of December 31, 2020, we had total liquidity of $16.0 million, consisting of $2.8 million of cash on hand and availability under our Revolving Credit Facility of $13.2 million.

As of December 31, 2020, our borrowing base, under the Credit Facility, was reduced to $20.7 million, compared to $30.5 million as of December 31, 2019, as a result of decreased operational activity, and accounts receivable, during the period.

Historically, our primary sources of liquidity have been cash generated from operations and borrowings under our Credit Facility.

During the year ended December 31, 2021, we refinanced all of our outstanding debt and as of December 31, 2021, we had total liquidity of $18.6 million, consisting of $0.6 million of cash on hand and availability under our Revolving Credit Facility of $18.0 million.

As of December 31, 2021, our borrowing base, under the Credit Facility, increased to $45.0 million, compared to $20.7 million as of December 31, 2020, as a result of increased operational activity, and 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.

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

Years Ended December 31, Variance

Year Ended December 31, Variance

2021 2020 $ %

(in millions)

Net cash provided by operating activities $ 25.5 $ 51.9 $ (26.4) (51) %

Net cash (used in) provided by operating activities $ (39.4) $ 25.5 $ (64.9) (255) %

Net cash used in investing activities (36.4) (5.4) (31.0) (574) %

Net cash used in financing activities (24.2) (24.2) — — %

Net cash (used in) provided by financing activities 73.6 (24.2) 97.8 404 %

Net change in cash $ (2.2) $ (4.1) $ 1.9 46 %

Operating Activities

Net cash provided by operating activities decreased $26.4 million to $25.5 million for the year ended December 31, 2020 compared to $51.9 million for the year ended December 31, 2019.

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

Cash generated from working capital decreased to $4.0 million for the year ended December 31, 2020 from $7.4 million for the year ended December 31, 2019.

Net cash flows from operating activities decreased $64.9 million to cash used of $39.4 million for the year ended December 31, 2021 compared to cash generated of $25.5 million for the year ended December 31, 2020.

The change in cash flows provided by operating activities is attributable to the bargain purchase of $37.2 million related to the Basic Acquisition.

Also included were cash payments related to accounts payable and accrued expenses, partially offset by cash receipts related to our accounts receivable.

Cash used from working capital decreased to $38.6 million for the year ended December 31, 2021 from cash generated of $4.0 million for the year ended December 31, 2020.

the bargain purchase related to the Basic Acquisition accounted for $37.2 million of the decline.

Investing Activities

Net cash used in investing activities decreased $18.0 million to a use of $5.4 million for the year ended December 31, 2020 compared to $23.4 million for the year ended December 31, 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, as all planned growth capital expenditures were eliminated in April 2020.

Additionally, there was an increased level of fixed assets acquired during the year ended December 31, 2019, relative to the corresponding period of the current year.

Net cash used in investing activities increased $31.0 million to a use of $36.4 million for the year ended December 31, 2021 compared to $5.4 million for the year ended December 31, 2020.

The change in cash flows used in investing activities is attributable to the cash used for the acquisition of Basic and Patriot assets.

To a lesser extent, during the year ended December 31, 2020, there was a significant reduction to capital expenditures in response to the severe economic events that had taken place.

Financing Activities

Net cash used in financing activities remained flat at a use of cash of $24.2 million for both of the years ended December 31, 2020 and 2019.

Although there was no change to net cash used in financing activities, during the year ended December 31, 2020, there were additional cash outflows related to the settlement of the ESCO Note Payable and repurchases

of Class A Common Stock, which was offset by a reduction in net cash payments on the principal balance of our Credit Facility.

Net cash flows from financing activities increased $97.8 million, or 404%, to cash provided of $73.6 million for the year ended December 31, 2021 compared to cash used of $24.2 million for the year ended December 31, 2020.

The change in cash flow is attributable to $42 million of capital raised for the issuance of the Series A Preferred Stock, which was used to finance the purchase of the Basic assets.

Additionally, with the refinancing of our debt, there were net increased borrowings under our Credit Facilities of $19.5 million and additional net borrowings of $22.4 million under Term Loans.

received $15.6 million from sale-leaseback transactions, all of which were partially offset by recurring debt payments related to Encina of $17.7 million and finance lease obligations of $5.4 million.

Supplemental Cash Flow Disclosures

We added assets of $0.1 million that were non-cash additions in the year ended December 31, 2020 and purchased $1.0 million in finance leased assets.

In addition, we early terminated certain vehicle financing leases, thereby reducing our current and long-term obligations by $1.3 million.

During the year ended December 31, 2021, the Company acquired Patriot and PefX by issuing $16.4 million of Class A Common Stock and $11.4 million Secured Promissory Note.

Additionally, the Company entered into installment agreements, thereby increasing our current and long-term debt obligations by $1.5 million and added fixed assets of $1.6 million for finance leases, all of which were non-cash additions.

Working Capital

Our working capital, which we define as total current assets less total current liabilities, was $2.5 million and $2.7 million as of December 31, 2021 and 2020, respectively.

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

The reduction in the Company’s operational activity is due to the timing of cash receipts and payments as described above.

Our Debt Agreements

ESCO Notes Payable

In connection with the initial public offering (the “Offering”) and the ESCO Leasing, LLC (“ESCO”) acquisition, both of which occurred on August 16, 2017, the Company issued $7.0 million of Seller’s Notes as partial consideration for the ESCO acquisition.

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.

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

During the year ended December 31, 2018, the Company provided notice to ESCO that the Company sought to be indemnified for breach of contract.

The Company exercised its right to stop payments of the remaining principal balance of $5.8 million on the Seller’s Notes and any unpaid interest, pending resolution of certain indemnification claims.

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

During the year ended December 31, 2020, the Company settled the indemnification claims, paid $3.8 million to settle the note and any unpaid interest, in full, and recognized a gain on the retirement of debt of $2.1 million.

Credit Facility

On August 16, 2017, Ranger, LLC entered into a $50.0 million senior revolving credit facility (the “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 “Administrative Agent”).

On August 16, 2017, Ranger, LLC entered into a $50.0 million senior secured revolving credit facility (the “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 was subject to a borrowing base that was calculated based upon a percentage of the Company’s eligible accounts receivable less certain reserves.

The applicable margin for 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 Ranger LLC’s average excess availability under the Credit Facility.

The applicable margin for the LIBOR loan was 2.2% and the Credit Facility’s interest rate was 4.3% as of December 31, 2020.

The weighted average interest rate for the borrowings under the Credit Facility was 2.3% for the year ended December 31, 2021.

Under the Credit Facility, the total loan capacity was $20.7 million, which was based on a borrowing base certificate in effect as of December 31, 2020.

The Company had outstanding borrowings of $7.5 million under the Credit Facility, leaving a residual $13.2 million available for borrowing as of December 31, 2020.

The Company was in compliance with the Credit Facility covenants as of December 31, 2020.

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.

Such calculation is submitted, in the form of a borrowing base certificate, to the Administrative Agent within ten business days of each preceding month end.

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.

During the first quarter of 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 the second quarter of 2020.

The borrowings under the Credit Facility, and related issuance costs, were included in long-term debt, net in the Consolidated Balance Sheets as of December 31, 2020, as the Company was not subject to dominion and the scheduled maturity date is 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 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.

We are not subject to a fixed charge coverage ratio if we have no drawings under the Credit Facility and have at least $20.0 million of qualified cash.

The Credit Facility contains events of default customary for facilities of this nature, including, but not limited, to:

• events of default resulting from our failure or the failure of any guarantors to comply with covenants and financial ratios;

• the occurrence of a change of control;

• the institution of insolvency or similar proceedings against us or any guarantor;

• the occurrence of a default under any other material indebtedness we or any guarantor may have.

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.

The Credit Facility was extinguished as of September 30, 2021 in connection with the Eclipse Loan Security Agreement, which is described further below.

Encina Master Financing and Security Agreement

June 22, 2018, the Company entered into a Financing Agreement with Encina Equipment Finance SPV, LLC (the “Lender”).

The amount available to be provided by the Lender to the Company under the Financing Agreement was contemplated to be not less than $35.0 million, and not to exceed $40.0 million.

The first financing was required to be in an amount up to $22.0 million, which was used by the Company to acquire certain capital equipment.

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

The Company utilized the additional net proceeds to acquire certain capital equipment.

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

As of December 31, 2020, the aggregate principal balance outstanding under the Financing Agreement was $17.7 million.

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.

The three tranches mature in July 2022, November 2022 and January 2023.

Borrowings under the Financing Agreement bear interest at a rate per annum equal to the sum of 8.0% plus the London Interbank Offered Rate (“LIBOR”), subject to a floor of 1.5%.

June 22, 2018, the Company entered into a Financing Agreement (the “Financing Agreement”) with Encina Equipment Finance SPV, LLC (the “Lender”).

The Company received an aggregate of $40 million to acquire certain capital equipment.

The Financing Agreement was secured by a lien on certain high-spec rig assets.

Borrowings under the Financing Agreement bear interest at a rate per annum equal to the sum of 8.0% plus LIBOR, subject to a floor of 1.5%.

As of December 31, 2021, LIBOR was 1.5%.

Under the terms of the Financing Agreement, the Company is required to maintain a leverage ratio of 2.50 to 1.00.

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

Contractual and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments as of December 31, 2020:

Total Less than

1 year 1 - 3 years 3 - 5 years More than

The outstanding balance of the Financing Agreement was paid in full as of September 30, 2021 in connection with the Eclipse Loan and Security Agreement.

Please see below for further details.

Eclipse Loan and Security Agreement

On September 27, 2021, the Company entered into a loan and security agreement with Eclipse Business Capital LLC (“EBC”) and Eclipse Business Capital SPV, LLC, as administrative agent providing the Company with a senior secured credit facility in an aggregate principal amount of $77.5 million (the “EBC Credit Facility”), consisting of (i) a revolving credit facility in an aggregate principal amount of up to $50.0 million (the “Revolving Credit Facility”), (ii) a machinery and equipment term loan facility in an aggregate principal amount of up to $12.5 million (the “M&E Term Loan Facility”) and (iii) a term loan B facility in an aggregate principal amount of up to $15.0 million (the “Term Loan B Facility”).

The Company capitalized fees of $2.7 million associated with the EBC Credit Facility, which are included in the Consolidated Balance Sheets as a discount to the EBC Credit Facility.

Such fees will continue to be amortized through maturity and are included in Interest Expense, net on the Consolidated Statement of Operations.

The Company was in compliance with the Eclipse Loan and Security Agreement covenants as of December 31, 2021.

Revolving Credit Facility

The Revolving Credit Facility was drawn in part on September 27, 2021, to repay existing Credit Facility, and to pay for the fees, costs and expenses incurred in connection with the EBC Credit Facility.

The undrawn portion of the Revolving Credit Facility is available to fund working capital and other general corporate expenses and for other-permitted uses, including the financing of permitted investments and restricted payments.

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

The Company’s eligible accounts receivable serves as collateral for the borrowings under the Revolving Credit Facility and is scheduled to mature in September 2025.

The Revolving Credit Facility includes a subjective acceleration clause and cash dominion provisions that permits the administrative agent to sweep cash daily from certain bank accounts into an account of the administrative agent to repay the Company’s obligations under the Revolving Credit Facility.

Therefore, the borrowings of the Revolving Credit Facility will be classified as current maturities of long-term debt indefinitely.

Under the Revolving Credit Facility, the maximum borrowing capacity was $45.0 million, which was based on a borrowing base certificate in effect as of December 31, 2021.

The Company had outstanding borrowings of $27.0 million under the Revolving Credit Facility, leaving a residual $18.0 million available for borrowings as of December 31, 2021.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to 5% in excess of the LIBOR Rate and 4% in excess of the Base Rate through April 1, 2022.

The weighted average applicable margin for the loan was 5.1% for the three months ended December 31, 2021.

M&E Term Loan Facility

Under the M&E Term Loan Facility, the Company had outstanding borrowings of $12.5 million where the monthly installments commence on March 1, 2022.

Borrowings under the M&E Term Loan Facility bear interest at a rate per annum equal to 8% in excess of the LIBOR Rate and 7% in excess of the Base Rate.

The weighted average interest rate for the loan was 8.1% for the three months ended December 31, 2021.

The Financing Agreement is secured by a lien on certain high-spec rig assets.

The M&E Term Loan Facility is scheduled to mature in September 2025.

Any principal amounts repaid may not be reborrowed.

On September 27, 2021, the M&E Term Loan Facility was drawn in full to repay existing Encina Master Financing Agreement and Credit Facility.

On October 1, 2021, the Term Loan B, was finalized in connection with the closing of the Basic Acquisition.

Borrowings under Term Loan B bear interest at a rate per annum equal to 12% in excess of the LIBOR Rate and 11% in excess of the Base Rate.

Term Loan B is scheduled to mature in September 2022.

The Financing Agreement is secured by a lien on certain Basic acquired assets.

On October 1, 2021, Term Loan B was drawn in full to repay borrowings under the Revolving Credit Facility and as of December 31, 2021 the principal balance outstanding was $12.4 million.

Any principal amounts repaid may not be reborrowed.

Secured Promissory Note

In connection with the PerfX Acquisition, on July 8, 2021, Bravo Wireline, LLC, a wholly owned subsidiary of Ranger, entered into a security agreement with Chief Investments, LLC, as administrative agent, for the financing of certain assets acquired.

Certain of the assets acquired serve as collateral under the Secured Promissory Note.

As of December 31, 2021, the aggregate principal balance outstanding was $10.4 million.

Borrowings under the Secured Promissory Note bear interest at a rate of 8.5% per annum and is scheduled to mature in January 2024.

Other Installment Purchases

During the three and twelve months ended December 31, 2021, the Company entered into various Installment and Security Agreements (collectively, the “Installment Agreements”) in connection with the purchase of certain ancillary equipment, where such assets are being held as collateral.

As of December 31, 2021, the aggregate principal balance outstanding under the Installment Agreements was $1.0 million and is payable ratably over 36 months from the time of each purchase.

The monthly installment payments contain an imputed interest rate that are consistent with the Company’s incremental borrowing rate and is not significant to the Company.

ESCO Notes Payable

ESCO acquisition.

These notes included a note for $5.8 million, which was settled in March 2020.

During the year ended December 31, 2020, the Company paid $3.8 million to settle the note and any unpaid interest, in full, and recognized a gain on the retirement of debt of $2.1 million, which is included in the Consolidated Statement of Operations within General and administrative expenses.

Future Cash Obligations

Our operating cash requirements, scheduled debt and finance lease repayments and interest payments for the fiscal year 2022 are expected to be funded through current cash and cash to be provided from operating activities.

We will obtain additional funding from our Revolving Credit Facility on an as needed basis.

The table below presents our current significant cash requirements over the next five years.

Total 2022 2023 2024 2024 2026

(in millions)

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(2) In addition to our right-of-use asset obligation, the operating leases include our obligations for contracts with terms of less than 12 months.

Tax Receivable Agreement

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 combinations 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.

Any such deferred payments under the TRA generally will accrue interest.

In certain cases, payments under the TRA may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the TRA.

We intend to account for any amounts payable under the TRA in accordance with ASC 450, Contingencies.

Further, we intend to account for the effect of increases in tax basis and payments for such increases under the TRA arising from future redemptions as follows:

• when future sales or redemptions occur, we will record a deferred tax asset for the gross amount of the income tax effect along with an offset of 85% of this as a liability payable under the TRA;

the remaining difference between the deferred tax asset and tax receivable agreement liability will be recorded as additional paid‑in capital;

• to the extent we have recorded a deferred tax asset for an increase in tax basis to which a benefit is no longer expected to be realized due to lower future taxable income, we will reduce the deferred tax asset with a valuation allowance.

Critical Accounting Policies and Estimates

Critical Accounting Estimates and Policies

Our financial statements are prepared in accordance with US GAAP.

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To the extent the expenditures extends the expected useful life, these expenditures are capitalized and depreciated over the extended useful life.

Assets Acquired and Liabilities Assumed in Business Combinations

Policy description

The Company accounts for its business combinations under the provisions of Accounting Standards Codification Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the purchase method of accounting be used for all business combinations.

Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values.

For transactions that are business combinations, the Company evaluates the existence of goodwill.

Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination.

ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill.

Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.

Judgements and assumptions

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable management judgment.

The most significant variables in these valuations are discount rates and the number of years on which to base the cash flow projections, as well as other assumptions and estimates used to determine the cash inflows and outflows.

Management determines discount rates based on the risk inherent in the acquired assets, specific risks, industry beta and capital structure of guideline companies.

The valuation of an acquired business is based on available information at the acquisition date and assumptions that are believed to be reasonable.

However, a change in facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year from the acquisition date.

Long‑lived Asset Impairment

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We must make a determination at the time our services are provided whether the customer has the ability to make payments to us.

While we do utilize past payment

history, and, to the extent available for new customers, public credit information in making our assessment, the determination of whether collection of the consideration is probable is ultimately a judgment decision that must be made by management.

While we do utilize past payment history, and, to the extent available for new customers, public credit information in making our assessment, the determination of whether collection of the consideration is probable is ultimately a judgment decision that must be made by management.

Policy description

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Financial Statements and Supplementary Data—Note 2 — Summary of Significant Accounting Policies”

Off‑Balance Sheet Arrangements

We currently have no off‑balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Emerging Growth Company and Smaller Reporting Company Status

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

The Company is an “emerging growth company” as defined in the JOBS Act.

The Company will remain an emerging growth company until the earlier of (1) the last day of its fiscal year (a) following the fifth anniversary of the completion of the Offering, (b) in which its total annual gross revenue is at least $1.07 billion, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of its most recently completed second fiscal quarter, or (2) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

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The Company has irrevocably opted out of the extended transition period and, as a result, the Company will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

The Company will lose its EGC status on December 31, 2022, as this will represent the last day of the fiscal year following the fifth anniversary of our first Form S-1, which was filed in August 2017.

The Company is also a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act.

Smaller reporting company means an issuer that is not an investment company, an asset-back issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that (i) has a market value of common stock held by non-affiliates of less than $250 million;

or (i) has annual revenues of less than $100 million and either no common stock held by non-affiliates or a

market value of common stock held by non-affiliates of less than $700 million.

$250 million;

or (i) has annual revenues of less than $100 million and either no common stock held by non-affiliates or a market value of common stock held by non-affiliates of less than $700 million.

Smaller reporting company status is determined on an annual basis.

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-K

Item 7. Management’s Discussion and Analysis