What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-13 compared with 2022-03-30 · 160 added, 196 removed, 261 unchanged (58% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil and natural gas, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this report.

Please read Cautionary Statement Regarding Forward‑Looking Statements.

read Cautionary Statement Regarding Forward‑Looking Statements.

Also, please read the risk factors and other cautionary statements described under “Part I, Item 1A.-Risk Factors.” We assume no obligation to update any of these forward‑looking statements, except as required by applicable law.

Recent Events and Outlook

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.

2022 Business Update

Acquisitions and Integrations

During the years ended December 31, 2022 and 2021, the Company integrated the businesses, operations and assets acquired from each of the acquisitions, described below, into current business processes.

Through the integration, Ranger continued to refine business strategies and processes to focus on the performance of the Company.

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

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

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.

Ranger Energy Acquisitions, LLC (“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.

The operating results of Basic are included within the High Specification Rigs and Processing Solutions and Ancillary Services segments.

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 aggregate consideration was $20.1 million, which included 1.1 million shares of Class A Common Stock and a Secured Promissory Note of $11.4 million.

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.

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.

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.

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

During the year ended December 31, 2022 and through the issuance of these financial statements, significant progress has been made to combat COVID-19 and its multiple variants.

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

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 $1.1 million as of December 31, 2021 under the CARES Act, which will become due on December 31, 2022.

We qualified for limited aid under the CARES Act and have deferred payroll tax payments of $0.9 million as of December 31, 2022 under the CARES Act.

The deferred payroll tax payment was paid in January 2023.

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.

We and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting as of December 31, 2022.

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.

Based on its assessment, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022 due to material weaknesses in our control environment whereby the Company did not maintain (1) adequate controls over segregation of duties related to the review of manual journal entries and account reconciliations.

Specifically, certain personnel had the ability to both (a) create and post journal entries within our general ledger system, and (b) review account reconciliations;

(2) adequate information technology general controls related to administrative user access to the Company’s information systems that are relevant to the preparation of financial statements to ensure appropriate segregation of duties and to adequately restrict access to financial applications and data;

and (3) the material weakness previously reported in 2021 Annual Report pertaining to ineffective controls over the accounting for complex transactions continued to exist as of

December 31, 2022.

The Company’s management has (1) implemented a remediation plan to update its design and implementation of controls to remediate these deficiencies and enhance the Company’s internal control environment.

The material weaknesses did not result in any adjustments to the Consolidated Financial Statements;

(2) initiated a remediation plan to improve information technology general controls related to administrative user access by restricting privileged access, implementing change monitoring controls and improving segregation of duties within information technology environments based on roles and responsibilities;

and (3) been enhancing processes and designing and implementing additional internal controls to properly account for complex transactions.

Additionally, the Company has hired 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 these deficiencies 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.

We are required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 beginning with this Annual Report due to our ceasing to be an "emerging growth company" within the meaning of Section 2(a)(19) of the Securities Act.

Business Outlook

We are a provider of onshore high specification (“high-spec”) well service rigs and complementary services in the United States.

We provide an extensive range of well site services to leading U.S.

exploration and production (“E&P”) companies that are fundamental to establishing and enhancing the flow of oil and natural gas throughout the productive life of a well.

See discussion below for a description of our reporting segments.

We operate in most of the active oil and natural gas basins in the United States, 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.

Looking forward to 2023, we expect business opportunities and financial results to show mild increases as the global economy continues to slowly stabilize and improve.

The International Energy Agency stated that global oil demand is set to rise by 1.9 million barrels per day in 2023 where the U.S.

ranks as the world’s leading source of supply growth.

Commodity pricing reached over $130 per barrel with a low of $70 per barrel during 2022 and is expected to remain at approximately $85 per barrel during 2023 as global oil inventories increase.

However, we believe the geopolitical events will continue to have an impact on the macroeconomic backdrop of our industry, specifically surrounding China as COVID-19 restrictions are lifted and uncertainty regarding Russia’s oil supply while under sanctions.

How We Evaluate Our Operations

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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:

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

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

• High Specification Rigs.

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• Wireline Services.

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

Provides services necessary to bring and maintain a well on production and consists of our completion, production and pump down service lines.

• 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.

The services primarily include equipment rentals, coil tubing, plug and abandonment, snubbing and processing solutions.

Other 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.

For additional financial information regarding our segments, please see “Part II—Item 8—Note 17 — Segment Reporting.”

Financial Metrics

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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.

The rates for which the customer is billed is generally predetermined based upon a contractual agreement.

Costs of Conducting Our Business

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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.

Our primary costs associated with our cost of services are related to personnel expenses, repairs and maintenance of our fixed assets and, as it relates to our Wireline Services segment, 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.

Further, there is generally a correlation between our revenue 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.

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General & Administrative.

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

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

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 analyze our operating income or loss by segment, which we have defined as revenue 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.

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We view Adjusted EBITDA, which is a non‑GAAP financial measure, as an important indicator of performance.

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 and severance costs, impairment of goodwill and other non‑cash and certain other items that we do not view as indicative of our ongoing performance.

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

See “—Results of Operations” and “—Note Regarding Non‑GAAP Financial Measure” for more information and reconciliations of net income (loss) to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance with GAAP.

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The following is an analysis of our operating results.

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.

See “—How We Evaluate Our Operations” for further details explaining how operating results are measured and key performance indicators used.

Year Ended December 31, Variance

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Processing Solutions and Ancillary Services 118.3 35.1 83.2 237 %

Total revenues 293.1 187.8 105.3 56 %

Total revenue 608.5 293.1 315.4 108 %

Operating expenses

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Depreciation and amortization 44.4 36.8 7.6 21 %

Impairment of fixed assets 1.3 — 1.3 100 %

Gain on sale of assets (0.7) (1.1) 0.4 (36) %

Total operating expenses 588.8 333.6 255.2 76 %

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Interest expense, net 7.3 5.0 2.3 46 %

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

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

Gain on bargain purchase, net of tax (3.6) (37.2) 33.6 (90) %

Total other income and expenses 3.7 (32.2) 35.9 (111) %

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

Income tax expense (6.2) — (6.2) 100 %

Income (loss) before income tax expense (benefit) 16.0 (8.3) 24.3 293 %

Income tax expense (benefit) 0.9 (6.2) 7.1 115 %

Net income (loss) $ 15.1 $ (2.1) $ 17.2 819 %

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:

Revenue increased $315.4 million, or 108%, to $608.5 million for the year ended December 31, 2022 from $293.1 million for the year ended December 31, 2021.

The change in revenue by segment was as follows:

High Specification Rigs.

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.

High Specification Rig revenue increased $153.1 million, or 109%, to $293.2 million for the year ended December 31, 2022 from $140.1 million for the year ended December 31, 2021.

The increased rig services revenue included an 82% increase in total rig hours to 469,000 for the year ended December 31, 2022 from 257,900 for the year ended December 31, 2021.

The average revenue per rig hour increased 15% to $625 compared to $543 for the year ended December 31, 2021.

Of the total segment revenue increase, $119.4 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.

Wireline Services revenue increased $79.1 million, or 67%, to $197.0 million for the year ended December 31, 2022 from $117.9 million for the year ended December 31, 2021.

The increased wireline services revenue was primarily attributable to completion services which accounted for $44.3 million of the segment revenue increase and included a 15% increase in completed stage count to 31,400 for the year ended December 31, 2022 from 27,200 for the year ended December 31, 2021.

Additionally, the increase was attributable to the production and pump down services which accounted for $25.2 million and $9.6 million of the segment increase, respectively.

The increase in wireline services revenue included a 79% increase in average active wireline units to 41 units from 23 units for the year ended December 31, 2021.

Of the segment revenue increase, $63.8 million and $34.9 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.

Processing Solutions and Ancillary Services revenue increased $83.2 million, or 237%, to $118.3 million for the year ended December 31, 2022 from $35.1 million for the year ended December 31, 2021.

The increase in processing solutions and ancillary services revenue is primarily attributable to our coil tubing, rentals and plugging and abandonment services which accounted for $32.9 million, $28.5 million and $21.2 million of the segment increase, respectively.

Of the total segment revenue increase, $53.9 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 (exclusive of depreciation and amortization) increased $240.6 million, or 91%, to $503.9 million for the year ended December 31, 2022 from $263.3 million for the year ended December 31, 2021.

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

As a percentage of revenue, cost of services was approximately 83% and 89% for the years ended December 31, 2022 and 2021, respectively.

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

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High Specification Rig cost of services increased $113.9 million, or 96%, to $232.7 million for the year ended December 31, 2022 from $118.8 million for the year ended December 31, 2021.

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.

The increase was primarily attributable to an increase in variable expenses, notably employee-related labor costs, fuel and repair and maintenance costs of $69.0 million, $10.9 million and $10.4 million, respectively.

Additionally, the increased costs correspond with the increase in rig hours and revenue.

Of the segment cost of services increase, $94.6 million is attributable to the Basic Acquisition.

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Wireline Services cost of services increased $62.8 million, or 54%, to $178.4 million for the year ended December 31, 2022 from $115.6 million for the year ended December 31, 2021.

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.

The increase was primarily attributable to the completion and production service lines which accounted for $41.0 million and $16.0 million of the segment increase.

Across all service lines, the increase was attributable to increased variable expenses, notably employee-related labor costs of $28.1 million.

Of the total segment cost of services increase, $87.4 million and $29.1 million is attributable to the assets acquired in the PerfX and Patriot Acquisitions, respectively.

Processing Solutions and Ancillary Services.

Processing Solutions and Ancillary Services cost of services increased $63.9 million, or 221%, to $92.8 million for the year ended December 31, 2022 from $28.9 million for the year ended December 31, 2021.

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.

The increase in processing solutions and ancillary services is primarily attributable to our coil tubing, rentals and plugging and abandonment services which accounted for $25.6 million, $18.2 million and $18.4 million of the segment increase, respectively, and aligns with the increased revenue.

Of the total segment cost of services increase, $46.1 million is attributable to the Basic Acquisition.

General and administrative.

General and administrative expenses increased $5.3 million, or 15%, to $39.9 million for the year ended December 31, 2022 from $34.6 million for the year ended December 31, 2021.

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.

The increase in general and administrative expenses is primarily due to corporate employee costs added subsequent to the Basic Acquisition, coupled with legal and professional fees incurred during the latter half of the year ended December 31, 2022.

Depreciation and amortization.

Depreciation and amortization increased $7.6 million, or 21%, to $44.4 million for the year ended December 31, 2022 from $36.8 million for the year ended December 31, 2021.

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.

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

This was partially offset by depreciation expense related to fixed assets disposed of during the year ended December 31, 2022.

Interest expense, net.

Net interest expense increased $2.3 million, or 46%, to $7.3 million for the year ended December 31, 2022 from $5.0 million for the year ended December 31, 2021.

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.

The increase to net interest expense was attributable to higher interest rates on each tranche of the Eclipse Loan and Security Agreement that closed on September 27, 2021, partially offset by the decreased principal balances on the debt instruments.

Income tax expense (benefit).

Income tax expense increased $7.1 million, or 115%, to an expense of $0.9 million for the year ended December 31, 2022 from a tax benefit of $6.2 million for the year ended December 31, 2021.

The increase in income tax expense was attributable to the increased operational activity during the year ended December 31, 2022.

Note Regarding Non‑GAAP Financial Measure

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 define Adjusted EBITDA as net income or loss before net interest expense, income tax expense (benefit), depreciation and amortization, equity‑based compensation, gain or loss on disposal of assets, legal fees and settlements, and other non-cash and certain other items that we do not view as indicative of our ongoing performance.

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

We exclude the items listed above from net income or loss in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods, book values of assets, capital structures and the method by which the assets were acquired.

the assets were acquired.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income or loss determined in accordance with US GAAP.

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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.

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

The Year Ended December 31, 2022 compared to The Year Ended December 31, 2021

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Interest expense, net — — — 7.3 7.3

Income tax benefit — — — (6.2) (6.2)

Tax expense (benefit) — — — 0.9 0.9

Depreciation and amortization 26.2 11.0 5.3 1.9 44.4

Equity based compensation — — — 3.8 3.8

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

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

Gain on disposal of property and equipment — — — (0.7) (0.7)

Severance and reorganization costs — — — 1.6 1.6

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Legal fees and settlements — — — 1.5 1.5

Impairment of fixed assets — — — — — 1.3 1.3

Gain on bargain purchase, net of tax — — — (3.6) (3.6)

TRA termination expense — — — — —

Allowance for AR write-off — — — — —

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

Adjusted EBITDA $ 60.5 $ 18.6 $ 25.5 $ (25.1) $ 79.5

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Interest expense, net — — — 5.0 5.0

Income tax benefit — — — — —

Tax expense (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

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

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

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

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Legal fees and settlements — — — 0.9 0.9

Impairment of fixed assets — — — — —

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

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 — — — — —

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

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Interest expense, net — — — 2.3 2.3

Income tax benefit — — — (6.2) (6.2)

Tax expense (benefit) — — — 7.1 7.1

Depreciation and amortization 4.7 2.9 (0.6) 0.6 7.6

Equity based compensation — — — 0.6 0.6

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)

Gain on disposal of property and equipment — — — 0.4 0.4

Severance and reorganization costs — — — 2.0 2.0

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Legal fees and settlements — — — 0.6 0.6

Impairment of fixed assets — — — 1.3 1.3

Gain on bargain purchase, net of tax 37.2 — — (3.6) 33.6

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 $ 39.2 $ 16.3 $ 19.3 $ (8.1) $ 66.7

Adjusted EBITDA for the year ended December 31, 2021 decreased $9.4 million to $12.8 million from $22.2 million for the year ended December 31, 2020.

Adjusted EBITDA for the year ended December 31, 2022 increased $66.7 million to $79.5 million from $12.8 million for the year ended December 31, 2021.

The change by segment was as follows:

High Specification Rigs.

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.

High Specification Rigs Adjusted EBITDA increased $39.2 million to $60.5 million from $21.3 million primarily due to an increase in revenue of $153.1 million partially offset by a corresponding increase in cost of services of $113.9 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.

Wireline Services Adjusted EBITDA increased $16.3 million to $18.6 million from $2.3 million due to an increase in revenue of $79.1 million partially offset by a corresponding increase in cost of services of $62.8 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.

Processing Solutions and Ancillary Services Adjusted EBITDA increased $19.3 million to $25.5 million from $6.2 million due to an increase in revenue of $83.2 million partially offset by a corresponding increase in cost of services of $63.9 million.

Other Adjusted EBITDA decreased $8.1 million for the year ended December 31, 2022 to a loss of $25.1 million from a loss of $17.0 million due to increased general and administrative expenses, which was related to increased employee costs and professional fees.

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

Liquidity and Capital Resources

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

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

Our primary sources of liquidity have historically been cash generated from operations and borrowings under our EBC Credit Facility.

As of December 31, 2022, we had total liquidity of $61.0 million, consisting of $3.7 million of cash on hand and availability under our Revolving Credit Facility of $57.3 million.

As of December 31, 2022, our borrowing base under the Revolving Credit Facility was $60.3 million compared to $45.0 million as of December 31, 2021, as a result of increased operational activity and accounts receivable.

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.

We currently expect to have sufficient funds to meet the Company’s liquidity requirements and comply with our covenants of our debt agreements for at least the next 12 months from the date of issuance of these financial statements.

We currently expect to have sufficient funds to meet the Company’s short and long term liquidity requirements and comply with our covenants of our debt agreements.

For further details, see “—Our Debt Obligations.”

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(in millions)

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) provided by financing activities 73.6 (24.2) 97.8 404 %

Net cash provided by (used in) operating activities $ 44.5 $ (39.4) $ 83.9 213 %

Net cash provided by (used in) investing activities 11.3 (36.4) 47.7 131 %

Net cash provided by (used in) financing activities (52.7) 73.6 (126.3) (172) %

Net change in cash $ 3.1 $ (2.2) $ 5.3 241 %

Operating Activities

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.

Net cash flows from operating activities increased $83.9 million to cash generated of $44.5 million for the year ended December 31, 2022 compared to cash used of $39.4 million for the year ended December 31, 2021.

The change in cash flows provided by operating activities is attributable to increased operational activity and efficiencies.

Cash used from working capital decreased to $19.1 million for the year ended December 31, 2022 from cash used of $38.6 million for the year ended December 31, 2021 which was due to increased cash receipts on outstanding accounts receivable.

Investing Activities

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.

Net cash flows from investing activities increased $47.7 million to cash generated of $11.3 million for the year ended December 31, 2022 compared to cash used of $36.4 million for the year ended December 31, 2021.

The change in cash flows generated by investing activities is attributable to the cash outlay for the Basic Acquisition that took place during the year ended December 31, 2021, partially offset by significant asset sales during the year ended December 31, 2022.

Financing Activities

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.

Net cash flows from financing activities decreased $126.3 million, or 172%, to cash used of $52.7 million for the year ended December 31, 2022 compared to cash provided of $73.6 million for the year ended December 31, 2021.

The change in cash flow is attributable to the utilization of cash generated from operations and asset sales to pay debt outstanding.

During the year ended December 31, 2022 the Company paid $25.6 million, net to the Credit Facility and paid $12.4 million to retire Term Loan B.

Supplemental Cash Flow Disclosures

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.

During the year ended December 31, 2022, the Company added fixed assets of $5.5 million which were finance leased arrangements across all operating segments.

Additionally, the Company paid approximately $1.2 million in interest related to debt and finance leased assets.

Working Capital

Our working capital, which we define as total current assets less total current liabilities, was $65.6 million and $2.5 million as of December 31, 2022 and 2021, respectively.

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

The increased accounts receivable and contract assets and assets considered to be held for sale, coupled with efforts to pay down debt, led to the working capital increase.

Our Debt Agreements

Credit Facility

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

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 (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%.

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, 2022.

On January 7, 2022, the Company entered into the First Amendment to Loan and Security Agreement with EBC and Eclipse Business Capital SPV, LLC (collectively, the “EBC Lenders”), which increased the Maximum Revolving Credit Facility Amount (as defined in the Amended Loan Agreement (as defined below)) to $65 million, among other things.

On September 23, 2022, the Company entered into the Fourth Amendment to Loan and Security Agreement with the EBC Lenders, which, among other things, designated the change in reference rates from LIBOR to SOFR, and designated a Letter of Credit in the amount of $1.6 million to be utilized for working capital and general corporate purposes, as needed.

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 Revolving Credit Facility was drawn, in part, on September 27, 2021, to repay the indebtedness under the existing 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.

2 unchanged sentences

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.

The borrowings of the Revolving Credit Facility, therefore, are classified as current maturities of long-term debt on the Consolidated Balance Sheet.

Under the Revolving Credit Facility, the maximum borrowing capacity was $60.3 million, which was based on a borrowing base certificate in effect as of December 31, 2022.

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.

The Company had outstanding borrowings of $1.4 million under the Revolving Credit Facility and a $1.6 million Letter of Credit, leaving a residual $57.3 million available for borrowings as of December 31, 2022.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum ranging from 4.5% to 5.0% in excess of SOFR and 3.5% to 4.0% in excess of the Base Rate, dependent on the fixed cost coverage ratio, through January 1, 2023.

The weighted average applicable margin for the loan was 6.6% for the year ended December 31, 2022.

The weighted average applicable margin for the loan was 9.0% for the period ended February 28, 2023.

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.

Under the M&E Term Loan Facility, the Company had outstanding borrowings of $10.4 million where the monthly installments of $0.2 million 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 SOFR and 7% in excess of the Base Rate.

The weighted average interest rate for the loan was 9.9% for the year ended December 31, 2022.

The weighted average applicable margin for the loan was 12.6% for the period ended February 28, 2023.

The M&E Term Loan Facility is secured by a lien on certain high-spec rig assets and is scheduled to mature in September 2025.

Principal amounts repaid are not available to be reborrowed.

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

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

The weighted average interest rate for Term Loan B was 13.0% through the maturity date of August 16, 2022.

On August 16, 2022, the remaining balance of the loan was $0.3 million, which was paid utilizing funds from the Revolving Credit Facility.

At the time, the Company had capitalized fees associated with Term Loan B of $0.1 million, which was charged to interest expense on the Consolidated Statement of Operations.

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.

In connection with the PerfX Acquisition, on July 8, 2021, Bravo Wireline, LLC, a wholly owned subsidiary of Ranger Services, 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.

2 unchanged sentences

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.

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 December 31, 2022, the aggregate principal balance outstanding under the Installment Agreements was $0.5 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

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 $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.

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

Future Cash Obligations

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(1) Debt and finance lease obligations include estimated interest to be paid in future periods.

(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.

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

Capital Returns Program

On March 1, 2023, the Board of Directors authorized a $35 million share repurchase program that can be utilized for up to 36 months.

Additionally, the Board of Directors has approved a quarterly dividend of $0.05 per share, which will be initiated once the Company achieves its goal of being net debt zero.

The Company believes that a share repurchase and dividend framework provides the best overall value creation potential for investors and intends to return at least 25% of annual cash flows to investors going forward.

Critical Accounting Estimates and Policies

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

Judgements and assumptions

Judgments 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.

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Key assumptions used to determine the undiscounted future cash flows include estimates of future fleet utilization and demands based on our assumptions around future commodity prices and capital expenditures of our customers.

During the first and second quarter of 2020, the Company noted a sustained decline in stock price due to the reduced demand and oversupply of oil and natural gas, which was an indication that the fair value of the Company’s long-lived assets could have fallen below their carrying values.

As a result, an impairment analysis was performed and it was determined that no impairment existed.

Revenue Recognition

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

Emerging Growth Company and Smaller Reporting Company Status

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.

An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable 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 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.

Smaller Reporting Company Status

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

or (i) has annual revenue 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