Item 1. Financial Statements
Item 1. Financial Statements (Unaudited)
RANGER ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share amounts)
March 31, 2022 December 31, 2021
Assets
Cash and cash equivalents $ 3.8 $ 0.6
Accounts receivable, net 88.6 80.8
Contract assets 20.3 13.0
Inventory 3.9 2.5
Prepaid expenses 4.2 8.3
Assets held for sale 5.6 —
Total current assets 126.4 105.2
Property and equipment, net 250.5 270.6
Intangible assets, net 7.6 7.8
Operating leases, right-of-use assets 6.3 6.8
Other assets 3.7 2.7
Total assets $ 394.5 $ 393.1
Liabilities and Stockholders' Equity
Accounts payable $ 23.1 $ 20.7
Accrued expenses 24.4 30.3
Other financing liability, current portion 1.1 2.2
Long-term debt, current portion 61.1 44.1
Other current liabilities 5.0 5.4
Total current liabilities 114.7 102.7
Operating leases, right-of-use obligations 5.6 5.8
Other financing liability 12.1 12.5
Long-term debt, net 15.6 18.4
Other long-term liabilities 3.8 5.0
Total liabilities 151.8 144.4
Commitments and contingencies (Note 15)
Stockholders' equity
Preferred stock, $ 0.01 per share; 50,000,000 shares authorized; 6,000,001 shares issued and outstanding as of March 31, 2022 and December 31, 2021
0.1 0.1
Class A Common Stock, $ 0.01 par value, 100,000,000 shares authorized; 19,223,189 shares issued and 18,671,361 shares outstanding as of March 31, 2022; 18,981,172 shares issued and 18,429,344 shares outstanding as of December 31, 2021
0.2 0.2
Class B Common Stock, $ 0.01 par value, 100,000,000 shares authorized; no shares issued or outstanding as of March 31, 2022 and December 31, 2021
— —
Less: Class A Common Stock held in treasury at cost; 551,828 treasury shares as of March 31, 2022 and December 31, 2021
( 3.8 ) ( 3.8 )
Accumulated deficit ( 13.7 ) ( 8.0 )
Additional paid-in capital 259.9 260.2
Total controlling stockholders' equity 242.7 248.7
Noncontrolling interest — —
Total stockholders' equity 242.7 248.7
Total liabilities and stockholders' equity $ 394.5 $ 393.1
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RANGER ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except share and per share amounts)
Three Months Ended
March 31,
2022 2021
Revenues
High specification rigs $ 64.9 $ 21.7
Wireline services 38.6 12.1
Processing solutions and ancillary services 20.1 4.5
Total revenues 123.6 38.3
Operating expenses
Cost of services (exclusive of depreciation and amortization):
High specification rigs 50.8 19.0
Wireline services 40.4 11.3
Processing solutions and ancillary services 16.8 3.8
Total cost of services 108.0 34.1
General and administrative 9.2 3.5
Depreciation and amortization 11.6 8.0
Total operating expenses 128.8 45.6
Operating loss ( 5.2 ) ( 7.3 )
Other expenses
Interest expense, net 2.1 0.6
Total other expenses 2.1 0.6
Loss before income tax expense ( 7.3 ) ( 7.9 )
Tax (benefit) expense ( 1.6 ) 0.4
Net loss ( 5.7 ) ( 8.3 )
Less: Net loss attributable to noncontrolling interests — ( 3.7 )
Net loss attributable to Ranger Energy Services, Inc. $ ( 5.7 ) $ ( 4.6 )
Loss per common share
Basic $ ( 0.31 ) $ ( 0.54 )
Diluted $ ( 0.31 ) $ ( 0.54 )
Weighted average common shares outstanding
Basic 18,472,909 8,581,642
Diluted 18,472,909 8,581,642
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RANGER ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in millions, except share amounts)
Three Months Ended March 31,
2022 2021 2022 2021
Quantity Amount
Shares, Series A Preferred Stock
Balance, beginning of period 6,000,001 — $ 0.1 $ —
Balance, end of period 6,000,001 — $ 0.1 $ —
Shares, Class A Common Stock
Balance, beginning of period 18,981,172 9,093,743 $ 0.2 $ 0.1
Issuance of shares under share-based compensation plans 339,401 333,076 — —
Shares withheld for taxes on equity transactions ( 97,384 ) ( 97,513 ) — —
Balance, end of period 19,223,189 9,329,306 $ 0.2 $ 0.1
Shares, Class B Common Stock
Balance, beginning of period — 6,866,154 $ — $ 0.1
Balance, end of period — 6,866,154 $ — $ 0.1
Treasury Stock
Balance, beginning of period ( 551,828 ) ( 551,828 ) $ ( 3.8 ) $ ( 3.8 )
Balance, end of period ( 551,828 ) ( 551,828 ) $ ( 3.8 ) $ ( 3.8 )
Accumulated deficit
Balance, beginning of period $ ( 8.0 ) $ ( 18.4 )
Net loss attributable to controlling interest ( 5.7 ) ( 4.6 )
Balance, end of period $ ( 13.7 ) $ ( 23.0 )
Additional paid-in capital
Balance, beginning of period $ 260.2 $ 123.9
Equity based compensation 0.8 0.9
Shares withheld for taxes on equity transactions ( 1.1 ) ( 0.5 )
Impact of transactions affecting noncontrolling interest — 0.7
Balance, end of period $ 259.9 $ 125.0
Total controlling interest shareholders’ equity
Balance, beginning of period $ 248.7 $ 101.9
Net loss attributable to controlling interest ( 5.7 ) ( 4.6 )
Equity based compensation 0.8 0.9
Shares withheld for taxes on equity transactions ( 1.1 ) ( 0.5 )
Impact of transactions affecting noncontrolling interest — 0.7
Balance, end of period $ 242.7 $ 98.4
Noncontrolling interest
Balance, beginning of period $ — $ 82.9
Net loss attributable to noncontrolling interest — ( 3.7 )
Impact of transactions affecting noncontrolling interest — ( 0.7 )
Balance, end of period $ — $ 78.5
Total Stockholders' Equity
Balance, beginning of period $ 248.7 $ 184.8
Net loss ( 5.7 ) ( 8.3 )
Equity based compensation 0.8 0.9
Shares withheld for taxes on equity transactions ( 1.1 ) ( 0.5 )
Balance, end of period $ 242.7 $ 176.9
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RANGER ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Three Months Ended March 31,
2022 2021
Cash Flows from Operating Activities
Net loss $ ( 5.7 ) $ ( 8.3 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 11.6 8.0
Equity based compensation 0.8 0.9
Gain on disposal of property and equipment ( 1.0 ) ( 0.4 )
Income tax expense (benefit) ( 1.6 ) 0.4
Other expense, net 0.2 —
Changes in operating assets and liabilities
Accounts receivable ( 7.8 ) ( 1.4 )
Contract assets ( 7.3 ) ( 0.6 )
Inventory ( 1.4 ) —
Prepaid expenses 4.2 ( 1.0 )
Other assets 0.9 —
Accounts payable 2.4 ( 1.2 )
Accrued expenses ( 5.9 ) 1.7
Other current liabilities ( 0.2 ) —
Other long-term liabilities ( 1.3 ) —
Net cash used in operating activities ( 12.1 ) ( 1.9 )
Cash Flows from Investing Activities
Purchase of property and equipment ( 1.6 ) ( 0.4 )
Proceeds from disposal of property and equipment 6.6 0.4
Net cash provided by investing activities 5.0 —
Cash Flows from Financing Activities
Borrowings under Credit Facility 137.9 6.4
Principal payments on Credit Facility ( 120.0 ) ( 5.3 )
Principal payments on Eclipse M&E Term Loan ( 0.2 ) —
Principal payments under Eclipse Term Loan B ( 1.4 ) —
Principal payments on Secured Promissory Note ( 2.1 ) —
Principal payments on financing lease obligations ( 1.2 ) ( 0.8 )
Principal payments on other financing liabilities ( 1.5 ) —
Shares withheld on equity transactions ( 1.1 ) ( 0.5 )
Payments on Installment Purchases ( 0.1 ) ( 0.2 )
Principal payments on Encina Master Financing Agreement — ( 2.5 )
Proceeds from financing of sale-leasebacks — 3.5
Net cash provided by financing activities 10.3 0.6
Increase in cash and cash equivalents 3.2 ( 1.3 )
Cash and cash equivalents, Beginning of Period 0.6 2.8
Cash and cash equivalents, End of Period $ 3.8 $ 1.5
Supplemental Cash Flow Information
Interest paid $ 0.3 $ 0.5
Supplemental Disclosure of Non-cash Investing and Financing Activities
Capital expenditures $ — $ ( 0.6 )
Additions to fixed assets through installment purchases and financing leases $ ( 0.8 ) $ ( 0.2 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RANGER ENERGY SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Organization and Business Operations
Business
Ranger Energy Services, Inc. (“Ranger, Inc.,” “Ranger,” or the “Company”) is a provider of onshore high specification (“high-spec”) well service rigs and complementary services in the United States. The Company also provides an extensive range of well site services to leading United States (“U.S”). exploration and production (“E&P”) companies that are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well.
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.
• Wireline Services. Provides services necessary to bring and maintain a well on production and consists of our wireline completion, wireline production, and pump down lines of business.
• Processing Solutions and Ancillary Services. Provides other services often utilized in conjunction with our High Specification Rigs and Wireline Services segments. These services include equipment rentals, plug and abandonment, logistics hauling, processing solutions, as well as snubbing and coil tubing.
The Company’s operations take place in most of the active oil and natural gas basins in the U.S., including the Permian Basin, Denver-Julesburg Basin, Bakken Shale, Eagle Ford Shale, Haynesville Shale, Gulf Coast, South Central Oklahoma Oil Province and Sooner Trend Anadarko Basin Canadian and Kingfisher Counties plays.
Organization
Ranger, Inc. was incorporated as a Delaware corporation in February 2017. Ranger, Inc. is a holding company, and its sole material assets consist of membership interests in RNGR Energy Services, LLC, a Delaware limited liability company (“Ranger LLC”). Ranger LLC owns all of the outstanding equity interests in Ranger Energy Services, LLC (“Ranger Services”) and Torrent Energy Services, LLC (“Torrent Services”), the subsidiaries through which it operates its assets. Ranger LLC is the sole managing member of Ranger Services and Torrent Services, and is responsible for all operational, management and administrative decisions relating to Ranger Services and Torrent Services’ business and consolidates the financial results of Ranger Services and Torrent Services and their subsidiaries.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 2021 has been derived from audited financial statements and the Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and the Securities and Exchange Commission’s (the “SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain notes and other information have been condensed or omitted. The Condensed Consolidated Financial Statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results of operations for the interim periods. These interim financial statements should be read in conjunction with the consolidated financial statements and related notes for the years ended December 31, 2021 and 2020, included in the Annual Report filed on Form 10-K for the year ended December 31, 2021 (the “Annual Report”). Interim results for the periods presented may not be indicative of results that will be realized for future periods.
Investments in which the Company exercises control are consolidated and the noncontrolling interests of such investments, which are not attributable directly or indirectly to the Company are presented as a separate component of net income or loss and equity in the accompanying condensed consolidated financial statements. The Company had ownership interests in Ranger, LLC, which was consolidated within the Company’s consolidated financial statements, but was not wholly owned by the Company. Upon conversion of the Class B Common Stock during the year-ended December 31, 2021, all noncontrolling interests were eliminated. Changes in the Company’s ownership interest in Ranger, LLC, while it retains its controlling interest, are accounted for as equity transactions.
We have made certain reclassifications to our prior period operating revenue and cost of sales amounts due to the change in reportable segments whereby our Wireline and Ancillary Services were bifurcated from our historical Completion and Other
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Services segment as a result of our fourth quarter operating segment changes. The Ancillary Services were combined with the historical Processing Solutions segment. None of these reclassifications have an impact on our consolidated operations results, cash flows or financial position.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in Note 2 — Summary of Significant Accounting Policies of the Annual Report.
Use of Estimates
The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Management uses historical and other pertinent information to determine these estimates. Actual results could differ from such estimates. Areas where critical accounting estimates are made by management include:
• Depreciation and amortization of property and equipment and intangible assets;
• Assets acquired and liabilities assumed in business combinations;
• Impairment of property and equipment and intangible assets;
• Revenue recognition;
• Income taxes; and
• Equity-based compensation.
Emerging Growth Company Status and Smaller Reporting Company Status
The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012. 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 its initial public offering (“IPO”), (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 the Company’s 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. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. 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 Securities Exchange Act of 1934, as Amended. 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 has (i) market value of common stock held by non-affiliates of less than $250 million; or (ii) 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.
New Accounting Pronouncements
Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses , which replaces the incurred loss impairment methodology to reflect expected credit losses. The amendment requires the measurement of all expected credit losses for financial assets held at the reporting date to be performed based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the effect of this accounting standard on its condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for accounting contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships and other transactions that reference the London Interbank Offering Rate (“LIBOR”) or another reference rate expected to be discontinued due to the reference rate reform. ASU 2020-04 became effective as of March 12,
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2020 and can be applied through December 31, 2022. The Company has not made any contract modifications as of the date of this report to transition to a different reference rate, however it will consider this guidance as future modifications are made.
With the exception of the standards above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to the Company’s Condensed Consolidated Financial Statements.
Note 3 — Business Combinations
The Company completed three acquisitions during the year ended December 31, 2021 where all purchases were accounted for using the acquisition method of accounting under the FASB Accounting Standards Codification 805, Business Combinations (“ASC 805”). The results of operations for each of the acquisitions are included in the accompanying Condensed Consolidated Statements of Operations from the respective date of each acquisition. Under the acquisition method of accounting, the assets and liabilities have been recorded at their respective estimated fair values as of the date of completion of the acquisition and reported into Ranger’s Condensed Consolidated Balance Sheets.
Patriot Well Solutions (“Patriot”) Acquisition
On May 14, 2021, the Company acquired all of the outstanding stock of Patriot, a provider of wireline evaluation and intervention services that operate in the Permian, Denver-Julesburg and Powder River Basins and Bakken Shale.
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. The financial results of Patriot are included in the Wireline Services reporting segment. The Company finalized the purchase price allocation in the fourth quarter of 2021.
PerfX Wireline Services (“PerfX”) Acquisition
On July 8, 2021, the Company acquired the assets 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. The financial results of PerfX are included within 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 Secured Promissory Note bears an interest rate of 8.5 % per annum and holds certain assets as collateral through the scheduled maturity date of January 31, 2024. Refer to “Note 10 — Debt” for further details related to the Secured Promissory Note. The Company finalized the purchase price allocation in the fourth quarter of 2021.
The Company reported revenue and an operating loss during the three months ended March 31, 2022 of approximately $ 24.5 million and $ 2.1 million, respectively.
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. The value of the warrant by the Company is negligible as of March 31, 2022. The Company finalized the purchase price allocation in the fourth quarter of 2021.
The following table presents the fair value of assets acquired and liabilities assumed in accordance with ASC 805 (in millions):
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Cash $ 1.0
Accounts receivable 4.6
Inventory 2.4
Prepaid and other current assets 0.1
Operating leases, right-of-use asset 1.1
Property and equipment 18.4
Total assets acquired 27.6
Accounts payable 5.4
Accrued expenses 1.0
Operating lease right-of-use obligation 1.1
Total liabilities assumed 7.5
Allocated purchase price $ 20.1
Basic Energy Services, Inc. (“Basic”) Acquisition
On September 15, 2021, Ranger Energy Acquisition, LLC (“Ranger Acquisitions”) entered into an Asset Purchase Agreement for certain assets of Basic and certain of its subsidiaries (the “Basic Sellers”), which closed on October 1, 2021. Ranger Acquisitions 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 inclusive of, but not limited to, real property owned in New Mexico, North Dakota, Oklahoma, and Texas.
All assets associated with the Basic Acquisition, were recorded at their fair value based on a preliminary purchase price allocation. The purchase price allocation has not been finalized due to additional items to be settled that the Company expects to be immaterial to the financial statements. The Company used the market approach to value as of the closing date, October 1, 2021, to apply fair values to the assets purchased based on the selling price of similar assets. As a result of comparing the purchase price to the fair value of the assets acquired, a $ 37.2 million bargain purchase gain, net of tax, was recognized in year ended December 31, 2021. The bargain purchase gain is primarily attributable Basic’s distressed financial position and lack of financing options available to avoid liquidation. The Company reported revenue and operating income during the three months ended March 31, 2022 of approximately $ 42.2 million and $ 7.5 million, respectively.
The following table presents the fair value of assets acquired and liabilities assumed in accordance with ASC 805 (in millions):
Property and equipment $ 89.5
Total assets acquired 89.5
Finance lease obligations 3.9
Bargain purchase deferred tax liability 10.8
Total liabilities assumed 14.7
Net assets acquired 74.8
Bargain purchase 37.2
Purchase price $ 37.6
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Note 4 — Property and Equipment, Net
Property and equipment, net include the following (in millions):
Estimated Useful Life
(years) March 31, 2022 December 31, 2021
High specification rigs 20 $ 144.8 $ 145.4
High specification rigs machinery and equipment 5 - 10
45.8 47.8
Wireline services machinery and equipment 5 - 10
52.5 53.1
Processing solutions and ancillary services machinery and equipment 3 - 30
77.7 78.0
Vehicles 3 - 15
53.0 52.7
Other property and equipment 5 - 25
23.3 31.2
Property and equipment 397.1 408.2
Less: accumulated depreciation ( 149.2 ) ( 140.5 )
Construction in progress 2.6 2.9
Property and equipment, net $ 250.5 $ 270.6
Depreciation expense was $ 11.4 million and $ 7.8 million for the three months ended March 31, 2022 and 2021, respectively.
Note 5 — Assets Held for Sale
Assets held for sale includes the net book value of excess assets acquired as part of the Basic Acquisition that the Company plans to sell within the next 12 months. Long-lived assets that meet the held for sale criteria are held for sale and reported at the lower of their carrying value or fair value less estimated costs to sell. The Company intends to sell the excess assets to fund repayment of the Eclipse M&E Term Loan and the Eclipse Term Loan B. Refer to “Note 10 — Debt” for further details related to the Eclipse M&E Term Loan and the Eclipse Term Loan B.
As of March 31, 2022, the Company classified land and building assets and supporting equipment, within our High Specification Rigs and Processing Solutions and Ancillary Services segments and being actively marketed, as held for sale. During the three months ended March 31, 2022, the Company did not record any gain or loss to assets held for sale as the carrying value was less than fair value less estimated costs to sell. Assets held for sale at March 31, 2022 consisted of the following (in millions):
March 31, 2022
Land and buildings $ 4.4
Other PP&E 1.3
Assets held for sale $ 5.7
Note 6 — Intangible Assets
Definite lived intangible assets are comprised of the following (in millions):
Estimated Useful Life
(years) March 31, 2022 December 31, 2021
Customer relationships 10 - 18
$ 11.4 $ 11.4
Less: accumulated amortization ( 3.8 ) ( 3.6 )
Intangible assets, net $ 7.6 $ 7.8
Amortization expense was $ 0.2 million and $ 0.2 million for the three months ended March 31, 2022 and 2021 respectfully. Amortization expense for the future periods is expected to be as follows (in millions):
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For the twelve months ending March 31, Amount
2023 $ 0.7
2024 0.7
2025 0.7
2026 0.7
2027 0.8
Thereafter 4.0
Total $ 7.6
Note 7 — Accrued Expenses
Accrued expenses include the following (in millions):
March 31, 2022 December 31, 2021
Accrued payables $ 12.6 $ 12.5
Accrued compensation 8.3 12.7
Accrued taxes 1.8 2.1
Accrued insurance 1.7 3.0
Accrued expenses $ 24.4 $ 30.3
Note 8 — Leases
Operating Leases
The Company has operating leases, primarily for real estate and equipment, with terms that vary from one to seven years , included in operating lease costs in the table below. The operating leases are included in operating leases, right-of-use assets, other current liabilities and operating leases, right-of-use obligations in the Condensed Consolidated Balance Sheets.
Lease costs associated with yard and field offices are included in cost of services and executive offices are included in general and administrative costs in the Condensed Consolidated Statements of Operations. Lease costs and other information related to operating leases for the three months ended March 31, 2022 and 2021 and 2021, are as follows (in millions):
Three Months Ended March 31,
2022 2021
Short-term lease costs $ 2.5 $ 0.3
Operating lease cost $ 0.6 $ 0.3
Operating cash outflows from operating leases $ 0.5 $ 0.3
Weighted average remaining lease term 5.0 years 5.9 years
Weighted average discount rate 8.9 % 8.5 %
Aggregate future minimum lease payments under operating leases are as follows (in millions):
For the twelve months ending March 31,
Total
2023 $ 1.4
2024 1.4
2025 1.4
2026 1.4
2027 1.3
Thereafter 1.2
Total future minimum lease payments 8.1
Less: amount representing interest ( 1.3 )
Present value of future minimum lease payments 6.8
Less: current portion of operating lease obligations ( 1.2 )
Long-term portion of finance lease obligations $ 5.6
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Finance Leases
The Company leases certain assets, primarily automobiles, under finance leases with terms that are generally three to five years . The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are amortized over the shorter of the estimated useful lives or over the lease term. The finance leases are included in Property and equipment, net, Other current liabilities and Other long-term liabilities in the Condensed Consolidated Balance Sheets.
Lease costs and other information related to finance leases for the three months ended March 31, 2022 and 2021, are as follows (in millions):
Three Months Ended March 31,
2022 2021
Amortization of finance leases $ 0.5 $ 0.8
Interest on lease liabilities $ 0.1 $ 0.1
Financing cash outflows from finance leases $ 1.2 $ 0.8
Weighted average remaining lease term 1.4 years 3.0 years
Weighted average discount rate 1.9 % 6.2 %
Aggregate future minimum lease payments under finance leases are as follows (in millions):
For the twelve months ending March 31, Total
2023 $ 4.7
2024 2.2
2025 0.5
Total future minimum lease payments 7.4
Less: amount representing interest ( 0.4 )
Present value of future minimum lease payments 7.0
Less: current portion of finance lease obligations ( 4.4 )
Long-term portion of finance lease obligations $ 2.6
Note 9 — Other Financing Liabilities
During the year ended December 31, 2021, the Company entered into an agreement to sell a parcel of land and a building attached thereto, and subsequently leased back the property. The Company received cash of $ 12.1 million from the sale and the lease has a 15 year term with an annual rent escalation of two percent per annum.
During the year ended December 31, 2021, the Company entered into an agreement to sell certain of other fixed assets and subsequently leased back such assets. The Company received cash of $ 3.5 million to be paid over 18 to 60 months.
These sales did not qualify for sale accounting, therefore these leases were classified as finance leases and no gain or loss was recorded. The net book value of the assets remained in Property and equipment, net and are depreciating over their original useful lives.
As of March 31, 2022, aggregate future lease payments of the financing liabilities are as follows (in millions):
For the twelve months ending March 31,
Total
2023 $ 1.1
2024 0.6
2025 0.6
2026 0.7
2027 0.7
Thereafter 9.5
Total future minimum lease payments $ 13.2
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Note 10 — Debt
The aggregate carrying amounts, net of issuance costs, of the Company’s debt consists of the following (in millions):
March 31, 2022 December 31, 2021
Eclipse Revolving Credit Facility 44.8 27.0
Eclipse M&E Term Loan, net 12.0 12.2
Eclipse Term Loan B 10.7 11.9
Secured Promissory Note 8.3 10.4
Installment Purchases 0.9 1.0
Total Debt 76.7 62.5
Current portion of long-term debt ( 61.1 ) ( 44.1 )
Long term-debt, net $ 15.6 $ 18.4
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”). Debt under the Eclipse Loan and Security Agreement is secured by a lien on substantially all of the Company’s assets. The Company was in compliance with the Eclipse Loan and Security Agreement covenants as of March 31, 2022.
On January 7, 2022, the Company entered into the First Amendment to Loan and Security Agreement (the Eclipse Loan and Security Agreement, as amended by the First Amendment, the “Amended Loan Agreement”) with EBC and Eclipse Business Capital SPV, LLC, which increased the Maximum Revolving Credit Facility Amount (as defined in the Amended Loan Agreement) to $ 65.0 million, among other things.
Revolving Credit Facility
The Revolving Credit Facility was drawn in part on September 27, 2021, to repay the indebtedness under the existing EBC Credit Facility, which was terminated in connection with such repayment, 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 serve as collateral for the borrowings under the Revolving Credit Facility, which 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. The borrowings of the Revolving Credit Facility, therefore, will be classified as Long-term debt, current portion on the Condensed Consolidated Balance Sheet.
Under the Revolving Credit Facility, the total loan capacity was $ 51.2 million, which was based on a borrowing base certificate in effect as of March 31, 2022. The Company had outstanding borrowings of $ 44.8 million under the Revolving Credit Facility, leaving a residual $ 6.4 million available for borrowings as of March 31, 2022. 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 interest rate for the loan was 6.0 % for the three months ended March 31, 2022.
The Company capitalized fees of $ 1.8 million associated with the Revolving Credit Facility, which are included in Other assets in the Condensed Consolidated Balance Sheets. Such fees will continue to be amortized through maturity and are included in Interest expense, net on the Condensed Consolidated Statement of Operations. Unamortized debt issuance costs as of March 31, 2022 were $ 1.6 million.
M&E Term Loan Facility
Under the M&E Term Loan Facility, the Company had outstanding borrowings of $ 12.3 million where the monthly principal installments commenced 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 M&E Term Loan was 9.0 % for the three months ended March 31, 2022. The M&E Term Loan Facility is scheduled to mature in September 2025. Any principal amounts repaid may not be reborrowed.
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The Company capitalized fees of $ 0.3 million associated with this M&E Term Loan Facility, which are included in the Consolidated Balance Sheets as a discount to the Long-term debt, net. Such fees will continue to be amortized through maturity and are included in Interest expense, net on the Condensed Consolidated Statement of Operations. Unamortized debt issuance costs as of March 31, 2022 were $ 0.3 million. The Company paid approximately $ 0.2 million on M&E Term Loan subsequent to March 31, 2022, where such cash was generated from the sale of certain assets under the M&E Term Loan.
Term Loan B
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 13 % 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 weighted average interest rate for Term Loan B was 13.0 % for the three months ended March 31, 2022.
On October 1, 2021, the Term Loan B was drawn in full to repay borrowings under the Revolving Credit Facility and as of March 31, 2022 the principal balance outstanding was $ 11.0 million. Principal payments are generated from the proceeds from the sale of Basic assets, and may not be reborrowed. The Company capitalized fees of $ 0.6 million associated with Term Loan B, which are included in the Condensed Consolidated Balance Sheets as a discount to the Long-term debt, current portion. Such fees will continue to be amortized through maturity and are included in Interest Expense, net on the Condensed Consolidated Statement of Operations. Unamortized debt issuance costs as of March 31, 2022 were $ 0.3 million. The Company paid approximately $ 4.9 million on Term Loan B subsequent to March 31, 2022, where such cash was generated from the sale of Basic assets under the Term Loan B.
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 March 31, 2022, the aggregate principal balance outstanding was $ 8.3 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. The Company made a cash payment of $ 1.5 million payment in February 2022 on the Secured Promissory Note, where such cash was generated from the sale of assets with an attached lien.
Other Installment Purchases
During the year 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 March 31, 2022, the aggregate principal balance outstanding under the Installment Agreements was $ 0.9 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.
Debt Obligations and Scheduled Maturities
As of March 31, 2022, aggregate future principal payments of total debt are as follows (in millions):
For the twelve months ending March 31, Total
2023 $ 61.4
2024 8.5
2025 2.5
2026 4.8
Total $ 77.2
Note 11 — Equity
Series A Preferred Stock
On September 10, 2021, the Company consummated the private placement under the Securities Purchase Agreement, dated September 10, 2021, with certain accredited investors of 6.0 million newly issued shares of Series A Convertible Preferred Stock, par value $ 0.01 per share, in exchange for cash consideration in an aggregate amount of $ 42 million. The transaction closed on October 1, 2021 and in April 2022, the Preferred Stock automatically converted into shares of the
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Company’s Class A Common Stock upon effectiveness of the registration statement filed on Form S-1 by the Company on March 31, 2022 (File No. 001-699-039).
Equity-Based Compensation
In 2017, the Company adopted the Ranger Energy Services, Inc. 2017 Long Term Incentive Plan (the “2017 Plan”). The Company has granted shares of restricted stock (“restricted shares” or “RSAs”) and performance-based restricted stock units (“performance stock units” or “PSUs”) under the 2017 Plan.
Restricted Stock Awards
The Company has granted RSAs, which generally vest in three equal annual installments beginning on the first anniversary date of the grant. As of March 31, 2022, there was an aggregate $ 2.5 million of unrecognized expense related to restricted shares issued which is expected to be recognized over a weighted average period of 1.5 years. Subsequent to March 31, 2022, the Company granted approximately 398,000 RSAs with an approximated aggregate value of $ 4.0 million.
Performance Stock Units
The performance criteria applicable to performance stock units that have been granted by the Company are based on relative total shareholder return, which measures the Company’s total shareholder return as compared to the total shareholder return of a designated peer group, and absolute total shareholder return. Generally, the performance stock units are subject to an approximated three-year performance period. As of March 31, 2022, there was an aggregate $ 1.0 million of unrecognized compensation cost related to performance stock units which are expected to be recognized over a weighted average period of 1.5 years. Subsequent to March 31, 2022, the Company granted approximately 72,000 PSUs (based on target).
Note 12 — Risk Concentrations
Customer Concentrations
For the three months ended March 31, 2022, two customers, Occidental Petroleum Corporation and Chevron, accounted for 11 % and 10 %, respectively, of the Company’s consolidated revenues. As of March 31, 2022, approximately 27 % of the net accounts receivable balance was due from these two customers.
For the three months ended March 31, 2021, one customer, EOG Resources, accounted for 24 % of the Company’s consolidated revenues. As of March 31, 2021, approximately 12 % of the accounts receivable balance was due from this customer.
Note 13 — Income Taxes
The Company is a corporation and is subject to U.S. federal income tax. The effective U.S. federal income tax rate applicable to the Company for the three months ended March 31, 2022 and 2021 was 22.5 % and ( 5.4 )%, respectively. The Company is subject to the Texas Margin Tax that requires tax payments at a maximum statutory effective rate of 0.75 % on the taxable margin of each taxable entity that does business in Texas.
As a result of the initial public offering and subsequent reorganization, the Company recorded a deferred tax asset. However, a valuation allowance (“VA”) has been recorded to reduce the Company’s net deferred tax assets to an amount that is more likely than not to be realized. The VA is based upon the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes.
Total income tax expense for the three months ended March 31, 2022 and 2021 differed from amounts computed by applying the U.S. federal statutory tax rates to pre-tax income or loss primarily due to the release of the valuation allowance on deferred tax assets, the impact of permanent differences between book and taxable income, and income attributable to noncontrolling interest that is not subject to federal income taxes.
The Company is subject to the following material taxing jurisdictions: the United States and Texas. As of March 31, 2022, the Company has no current tax years under audit. The Company remains subject to examination for federal income taxes and state income taxes for tax years 2019, 2018, 2017 and 2016.
The Company has evaluated all tax positions for which the statute of limitations remains open and believes that the material positions taken would more likely than not be sustained upon examination. Therefore, as of March 31, 2022, the Company had not established any reserves for, nor recorded any unrecognized benefits related to, uncertain tax positions.
The Coronavirus, Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the three months ended March 31, 2022, there were no material tax impacts to the Condensed Consolidated Financial Statements as it relates to COVID-19 measures. However, the Company has deferred payroll tax payments of $ 1.1 million as of
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March 31, 2022 and was included in Accrued expenses on the Condensed Consolidated Balance Sheet. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.
Note 14 — Loss per Share
Loss per share is based on the amount of net loss allocated to the shareholders and the weighted average number of shares outstanding during the period for each class of Common Stock. The numerator and denominator used to compute loss per share were as follows (in millions, except share and per share data):
Three Months Ended March 31,
2022 2021
Loss (numerator):
Basic:
Net loss attributable to Ranger Energy Services, Inc. $ ( 5.7 ) $ ( 4.6 )
Net loss attributable to Class A Common Stock $ ( 5.7 ) $ ( 4.6 )
Diluted:
Net loss attributable to Ranger Energy Services, Inc. $ ( 5.7 ) $ ( 4.6 )
Net loss attributable to Class A Common Stock $ ( 5.7 ) $ ( 4.6 )
Weighted average shares (denominator):
Weighted average number of shares - basic 18,472,909 8,581,642
Weighted average number of shares - diluted 18,472,909 8,581,642
Basic loss per share $ ( 0.31 ) $ ( 0.54 )
Diluted loss per share $ ( 0.31 ) $ ( 0.54 )
During the three months ended March 31, 2022 and 2021, the Company excluded approximately 0.7 million and 0.9 million of equity-based awards, respectively, in calculating diluted loss per share, as the effect was anti-dilutive. During the three months ended March 31, 2022 and 2021, the Company excluded 6.0 million shares of Series A Preferred Stock issuable upon an effective registration statement and 6.9 million shares of Common Stock issuable upon conversion of the Company’s Class B Common Stock, respectively, in calculating diluted loss per share, as the effect was anti-dilutive.
Note 15 — Commitments and Contingencies
Legal Matters
From time to time, the Company is involved in various legal matters arising in the normal course of business. The Company does not believe that the ultimate resolution of these currently pending matters will have a material adverse effect on its condensed consolidated financial position or results of operations.
Note 16 — Segment Reporting
The Company’s operations are located in the United States and organized into three reportable segments: High Specification Rigs, Wireline Services and Processing Solutions and Ancillary Services. The reportable segments comprise the structure used by the Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance during the years presented in the accompanying Condensed Consolidated Financial Statements. The CODM evaluates the segments’ operating performance based on multiple measures including Operating income, Adjusted EBITDA, rig hours and state counts. The tables below present the operating income measurement, as the Company believes this is most consistent with the principals used in measuring the Condensed Consolidated Financial Statements.
The following is a description of each operating segment:
High Specification Rigs . Provides high-spec well service rigs and complementary equipment and services to facilitate operations throughout the lifecycle of a well.
Wireline Services . Provides services necessary to bring and maintain a well on production and consists of our wireline completion, wireline production and pump down lines of business.
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Processing Solutions and Ancillary Services . Provides other services often utilized in conjunction with our High Specification Rigs and Wireline Services segments. These services include equipment rentals, plug and abandonment, logistics hauling, processing solutions, as well as snubbing and coil tubing.
Other . The Company incurs costs, indicated as Other, that are not allocable to any of the operating segments or lines of business and include corporate general and administrative expenses as well as depreciation of office furniture and fixtures and other corporate assets.
Segment information as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 is as follows (in millions):
High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total
Three Months Ended March 31, 2022
Revenues $ 64.9 $ 38.6 $ 20.1 $ — $ 123.6
Cost of services 50.8 40.4 16.8 — 108.0
Depreciation and amortization 6.4 2.7 2.0 0.5 11.6
Operating income (loss) 7.7 ( 4.5 ) 1.3 ( 9.7 ) ( 5.2 )
Interest expense, net — — — 2.1 2.1
Net income (loss) 7.7 ( 4.5 ) 1.3 ( 10.2 ) ( 5.7 )
Capital expenditures $ 1.2 $ 0.9 $ 0.3 $ — $ 2.4
As of March 31, 2022
Property and equipment, net $ 133.7 $ 38.3 $ 61.0 $ 17.5 $ 250.5
Total assets $ 210.5 $ 60.3 $ 96.1 $ 27.6 $ 394.5
High Specification Rigs Wireline Services Processing Solutions and Ancillary Services Other Total
Three Months Ended March 31, 2021
Revenues $ 21.7 $ 12.1 $ 4.5 $ — $ 38.3
Cost of services 19.0 11.3 3.8 — 34.1
Depreciation and amortization 4.8 1.2 1.6 0.4 8.0
Operating income (loss) ( 2.1 ) ( 0.4 ) ( 0.9 ) ( 3.9 ) ( 7.3 )
Interest expense, net — — — 0.6 0.6
Net income (loss) ( 2.1 ) ( 0.4 ) ( 0.9 ) ( 4.9 ) ( 8.3 )
Capital expenditures $ 1.0 $ 0.2 $ — $ — $ 1.2
As of December 31, 2021
Property and equipment, net $ 140.4 $ 41.5 $ 63.3 $ 25.4 $ 270.6
Total assets $ 203.9 $ 60.3 $ 91.9 $ 37.0 $ 393.1
Note 17 — Subsequent Events
Series A Preferred Stock
On September 10, 2021, the Company consummated the private placement under the Securities Purchase Agreement, dated September 10, 2021, with certain accredited investors of 6.0 million newly issued shares of Series A Convertible Preferred Stock, par value $ 0.01 per share, in exchange for cash consideration in an aggregate amount of $ 42 million. On April 18, 2022, the Preferred Stock were automatically converted into shares of the Company’s Class A Common Stock upon effectiveness of the registration statement filed on Form S-1 by the Company on March 31, 2022 (File No. 001-699-039).
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.