Company Quick10K Filing
Ranger Energy Services
Price6.49 EPS1
Shares9 P/E9
MCap61 P/FCF2
Net Debt46 EBIT13
TEV107 TEV/EBIT8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-28
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-10-25
10-Q 2019-06-30 Filed 2019-07-26
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-03-06
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-13
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-09-01
8-K 2020-07-23 Earnings, Exhibits
8-K 2020-05-08
8-K 2020-03-31
8-K 2020-03-26
8-K 2020-02-27
8-K 2019-10-24
8-K 2019-07-25
8-K 2019-06-27
8-K 2019-05-15
8-K 2019-04-30
8-K 2018-12-31
8-K 2018-12-04
8-K 2018-11-06
8-K 2018-08-07
8-K 2018-07-30
8-K 2018-06-22
8-K 2018-06-15
8-K 2018-06-04
8-K 2018-05-08
8-K 2018-03-06
8-K 2018-01-05

RNGR 10Q Quarterly Report

Part I – Financial Information
Item 1. Financial Statements
Note 1. Organization and Business Operations
Note 2. Summary of Significant Accounting Policies
Note 3. Acquisitions
Note 4. Assets Held for Sale
Note 5. Property, Plant and Equipment, Net
Note 6. Goodwill and Intangible Assets
Note 7. Accrued Expenses
Note 8. Capital Leases
Note 9. Long‑Term Debt
Note 10. Risk Concentrations
Note 11. Equity Based Compensation and Profit Interests Awards
Note 12. Income Taxes
Note 13. Non-Controlling Interests
Note 14. Loss per Share
Note 15. Commitments and Contingencies
Note 16. Related Party Transactions
Note 17. Segment Reporting
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risks
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors.
Item 6. Exhibits
EX-31.1 rngr-20170930ex311899311.htm
EX-31.2 rngr-20170930ex312b8d222.htm
EX-32.1 rngr-20170930ex32148b378.htm

Ranger Energy Services Earnings 2017-09-30

Balance SheetIncome StatementCash Flow
3252601951306502017201820192020
Assets, Equity
9070503010-102017201820192020
Rev, G Profit, Net Income
754923-3-29-552017201820192020
Ops, Inv, Fin

10-Q 1 rngr-20170930x10q.htm 10-Q rngr_Current_Folio_10Q

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10‑Q


(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38183

RANGER ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

81‑5449572

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

800 Gessner Street, Suite 1000

Houston, Texas 77024

(Address of principal executive offices) (Zip Code)

(713) 935‑8900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐

 

 

 

Accelerated filer ☐

Non-accelerated filer ☒

 

(Do not check if a smaller reporting company)

 

Smaller reporting company ☐

Emerging growth company☒

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2017, the registrant had 8,413,178 shares of Class A common stock and 6,866,154 shares of Class B common stock outstanding.

 

 

 


 

RANGER ENERGY SERVICES, INC.

TABLE OF CONTENTS

 

 

 

 

 

 

Page

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION 

 

 

Item 1. Financial Statements 

 

 

Unaudited Interim Condensed Consolidated Balance Sheets 

 

2

Unaudited Interim Condensed Consolidated Statements of Operations 

 

3

Unaudited Interim Condensed Consolidated Statements of Cash Flows 

 

4

Unaudited Interim Condensed Consolidated Statement of Equity 

 

5

Notes to Unaudited Interim Condensed Consolidated Financial Statements 

 

6

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

 

43

Item 4. Controls and Procedures 

 

43

 

 

 

PART II – OTHER INFORMATION 

 

 

Item 1. Legal Proceedings 

 

44

Item 1A. Risk Factors 

 

44

Item 6. Exhibits 

 

44

 

 

 

SIGNATURES 

 

47

 

 

 

 

 

1


 

 

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

RANGER ENERGY SERVICES, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS 
(in millions, except share and per share amounts)

 

 

 

 

 

 

 

 

    

September 30, 

    

December 31, 

Assets

 

2017

 

2016

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

20.7

 

$

1.6

Restricted cash

 

 

0.2

 

 

1.8

Accounts receivable, net

 

 

24.9

 

 

13.4

Unbilled revenues

 

 

3.0

 

 

1.2

Prepaid expenses and other current assets

 

 

6.6

 

 

1.4

Assets held for sale

 

 

0.6

 

 

2.9

Total current assets

 

 

56.0

 

 

22.3

Property, plant and equipment, net

 

 

180.7

 

 

102.4

Goodwill

 

 

8.6

 

 

1.6

Intangible assets, net

 

 

11.0

 

 

9.2

Other assets

 

 

0.7

 

 

0.2

Total assets

 

$

257.0

 

$

135.7

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

22.3

 

$

4.7

Accounts payable - related party

 

 

 —

 

 

2.4

Accrued expenses

 

 

13.5

 

 

2.0

Capital lease obligations, current portion

 

 

7.6

 

 

0.5

Long-term debt, current portion

 

 

1.2

 

 

2.3

Total current liabilities

 

 

44.6

 

 

11.9

Capital lease obligations, less current portion

 

 

1.4

 

 

0.3

Long-term debt, less current portion

 

 

5.8

 

 

9.8

Other long-term liabilities

 

 

0.9

 

 

1.1

Total liabilities

 

 

52.7

 

 

23.1

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity / net parent investment

 

 

 

 

 

 

Preferred stock, $0.01 per share; 50,000,000 shares authorized, no shares issued or outstanding as of September 30, 2017; no shares authorized or issued as December 31, 2016

 

 

 —

 

 

 —

Class A common stock, $0.01 par value, 100,000,000 shares authorized, 8,413,178 shares issued and outstanding as of September 30, 2017; no shares authorized or issued as of December 31, 2016

 

 

0.1

 

 

 —

Class B common stock, $0.01 par value, 100,000,000 shares authorized, 6,866,154 shares issued and outstanding as of September 30, 2017; no shares authorized or issued as of December 31, 2016

 

 

0.1

 

 

 —

Accumulated deficit

 

 

(3.5)

 

 

 —

Additional paid-in capital

 

 

113.2

 

 

 —

Total stockholders' equity

 

 

109.9

 

 

 —

Non-controlling interest

 

 

94.4

 

 

 —

Net parent investment

 

 

 —

 

 

112.6

Total stockholders' equity/net parent investment

 

 

204.3

 

 

112.6

Total liabilities and stockholders' equity/net parent investment

 

$

257.0

 

$

135.7

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

2


 

RANGER ENERGY SERVICES, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2017

    

2016

    

2017

    

2016

Revenues

 

 

  

 

 

  

 

 

  

 

 

  

Well Services

 

$

39.0

 

$

14.2

 

$

97.9

 

$

22.0

Processing Solutions

 

 

2.1

 

 

1.9

 

 

5.9

 

 

4.5

Total revenues

 

 

41.1

 

 

16.1

 

 

103.8

 

 

26.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

  

 

 

  

 

 

  

 

 

  

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

 

 

  

 

 

  

 

 

  

 

 

  

Well Services

 

 

33.1

 

 

11.0

 

 

81.1

 

 

17.1

Processing Solutions

 

 

0.8

 

 

0.7

 

 

2.2

 

 

1.8

Total cost of services

 

 

33.9

 

 

11.7

 

 

83.3

 

 

18.9

General and administrative

 

 

7.9

 

 

2.7

 

 

24.0

 

 

6.1

Depreciation and amortization

 

 

4.1

 

 

1.4

 

 

11.7

 

 

3.1

Total operating expenses

 

 

45.9

 

 

15.8

 

 

119.0

 

 

28.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

(4.8)

 

 

0.3

 

 

(15.2)

 

 

(1.6)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses

 

 

  

 

 

  

 

 

  

 

 

  

Interest expense, net

 

 

(4.3)

 

 

(0.1)

 

 

(5.9)

 

 

(0.3)

Total other expenses

 

 

(4.3)

 

 

(0.1)

 

 

(5.9)

 

 

(0.3)

Income (loss) before income tax expense

 

 

(9.1)

 

 

0.2

 

 

(21.1)

 

 

(1.9)

Tax expense

 

 

(0.4)

 

 

 —

 

 

(0.4)

 

 

 —

Net Income (loss)

 

 

(9.5)

 

 

0.2

 

 

(21.5)

 

 

(1.9)

Less: Net income (loss) attributable to the Predecessor

 

 

(3.2)

 

 

0.2

 

 

(15.2)

 

 

(1.9)

Less: Net loss attributable to non-controlling interests

 

 

(2.8)

 

 

 —

 

 

(2.8)

 

 

 —

Net loss attributable to Ranger Energy Services, Inc.

 

$

(3.5)

 

$

 —

 

 

(3.5)

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.42)

 

$

 

 

$

(0.42)

 

$

 

Diluted

 

$

(0.42)

 

$

 

 

$

(0.42)

 

$

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

8,413

 

 

 

 

 

8,413

 

 

 

Diluted

 

 

8,413

 

 

 

 

 

8,413

 

 

 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

3


 

RANGER ENERGY SERVICES, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30, 

 

    

2017

    

2016

Cash Flows from Operating Activities

 

 

  

 

 

  

Net loss

 

$

(21.5)

 

$

(1.9)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

  

 

 

  

Depreciation and amortization

 

 

11.7

 

 

3.1

Bad debt expense

 

 

0.2

 

 

 —

Issuance of Class A and Class B common stock for settlement of interest on related party debt

 

 

5.2

 

 

 —

Equity based compensation

 

 

0.9

 

 

 —

Changes in operating assets and liabilities, net of effect of acquisition

 

 

 

 

 

 

Accounts receivable

 

 

(5.1)

 

 

(2.3)

Unbilled revenue

 

 

(1.8)

 

 

(0.3)

Prepaid expenses and other current assets

 

 

(4.9)

 

 

(0.5)

Other assets

 

 

(0.7)

 

 

 -

Accounts payable

 

 

1.5

 

 

(1.8)

Accounts payable - related party

 

 

(2.4)

 

 

 —

Accrued expenses

 

 

9.4

 

 

0.9

Other long-term liabilities

 

 

(0.1)

 

 

 —

Net cash used in operating activities

 

 

(7.6)

 

 

(2.8)

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(16.4)

 

 

(5.3)

Acquisitions, net of cash received

 

 

(47.7)

 

 

 —

Net cash used in investing activities

 

 

(64.1)

 

 

(5.3)

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

  

 

 

  

Net borrowings under line of credit agreement

 

 

 —

 

 

0.4

Payments on long-term debt

 

 

(12.0)

 

 

(2.0)

Borrowings on long-term debt

 

 

 —

 

 

0.5

Borrowings on related party debt

 

 

21.0

 

 

 —

Principal payments on capital lease obligations

 

 

(0.8)

 

 

(0.3)

Proceeds from the Offering, net of underwriters' expense of $4.2 million

 

 

80.8

 

 

 —

Payments incurred for the Offering

 

 

(3.8)

 

 

 —

Contributions from parent

 

 

4.0

 

 

11.6

Restricted cash

 

 

1.6

 

 

(1.4)

Net cash provided by financing activities

 

 

90.8

 

 

8.8

 

 

 

 

 

 

 

Increase in Cash and Cash equivalents

 

 

19.1

 

 

0.7

Cash and Cash Equivalents, Beginning of Period

 

 

1.6

 

 

1.1

Cash and Cash Equivalents, End of Period

 

$

20.7

 

$

1.8

 

 

 

 

 

 

 

Supplemental Cash Flows Information

 

 

  

 

 

  

Interest paid

 

$

(0.5)

 

$

(0.4)

Supplemental Disclosure of Noncash Investing and Financing Activity

 

 

  

 

 

  

Non-cash capital expenditures

 

$

(15.6)

 

$

(1.6)

Non-cash additions to fixed assets through capital lease financing

 

$

(9.0)

 

$

(0.2)

Contribution of Magna

 

$

 —

 

$

(12.7)

Issuance of Class A and Class B common stock for payment of related party debt

 

$

(21.0)

 

$

 —

Issuance of Class A common stock for acquisition

 

$

(5.0)

 

$

 —

Seller's Notes for payment for acquisition

 

$

(7.0)

 

$

 —

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

4


 

 

RANGER ENERGY SERVICES, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF EQUITY 
(in millions, except shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

    

Additional

    

 

    

Total

    

Non

    

 

 

    

 

 

 

Class A

 

Class B

 

Paid-in

 

Accumulated

 

Stockholders'

 

Controlling

 

Net Parent

 

Total

 

Shares

 

Value

 

Shares

 

Value

 

Capital

 

Deficit

 

Equity

 

Interests

 

Investment

 

Equity

Balance at December 31, 2016

  

 —

  

$

 —

  

  

 —

  

$

 —

  

$

 —

  

$

 —

  

$

 —

  

$

 —

  

$

112.6

  

$

112.6

Contributions from parent

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4.0

 

 

4.0

Equity based compensation

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

0.1

 

 

0.8

 

 

0.9

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3.5)

 

 

(3.5)

 

 

(2.8)

 

 

(15.2)

 

 

(21.5)

Effects of the Offering:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from shares sold to public

 

5,112,069

 

 

0.1

 

 

 —

 

 

 —

 

 

74.1

 

 

 —

 

 

74.2

 

 

 —

 

 

 —

 

 

74.2

Underwriters fees and discounts

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(4.2)

 

 

 —

 

 

(4.2)

 

 

 —

 

 

 —

 

 

(4.2)

Proceeds from shares sold to related parties

 

750,000

 

 

 —

 

 

 —

 

 

 —

 

 

10.9

 

 

 —

 

 

10.9

 

 

 —

 

 

 —

 

 

10.9

Costs of the Offering

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3.8)

 

 

 —

 

 

(3.8)

 

 

 —

 

 

 —

 

 

(3.8)

Reorganization

 

1,638,386

 

 

 —

 

 

5,621,491

 

 

0.1

 

 

23.0

 

 

 —

 

 

23.1

 

 

79.1

 

 

(102.2)

 

 

 —

Shares issued for acquisition of ESCO

 

344,828

 

 

 —

 

 

 —

 

 

 —

 

 

5.0

 

 

 —

 

 

5.0

 

 

 —

 

 

 —

 

 

5.0

Shares issued to pay for related party debt

 

567,895

 

 

 —

 

 

1,244,663

 

 

 —

 

 

8.2

 

 

 —

 

 

8.2

 

 

18.0

 

 

 —

 

 

26.2

Balance at September 30, 2017

 

8,413,178

 

$

0.1

 

 

6,866,154

 

$

0.1

 

$

113.2

 

$

(3.5)

 

$

109.9

 

$

94.4

 

$

 —

 

$

204.3

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

5


 

RANGER ENERGY SERVICES, INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND BUSINESS OPERATIONS

Organization

Ranger Energy Services, LLC (“Ranger Services”) was, through Ranger Energy Holdings, LLC (“Ranger Holdings”), formed by CSL Capital Management, LLC (“CSL”) in June 2014 as a provider of high‑spec well service rigs and associated services. Torrent Energy Services, LLC (“Torrent Services” and together with Ranger Services, the “Predecessor Company”) was, through Torrent Energy Holdings, LLC (“Torrent Holdings”), acquired by CSL in September 2014 as a provider of proprietary, modular equipment for the processing of natural gas. In June 2016, CSL indirectly acquired substantially all of the assets of Magna Energy Services, LLC (“Magna”), a provider of well services and wireline services, which it contributed to Ranger Services in September 2016. In October 2016, Ranger Services acquired substantially all of the assets of Bayou Workover Services, LLC (“Bayou”), an owner and operator of high‑spec well service rigs. These condensed consolidated financial statements included in this quarterly report (i) prior to August 16, 2017, the historical financial information of Ranger Services, Torrent Services, Magna and Bayou (collectively, our “Predecessor”), including, as applicable, the results of operations of Magna and Bayou for periods subsequent to their respective acquisitions, and (ii) subsequent to August 16, 2017, the historical information of Ranger Energy Services, Inc. (“Ranger” or the “Company”).

Ranger was incorporated as a Delaware corporation in February 2017. In conjunction with Ranger’s initial public offering (the “Offering”) of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), which closed on August 16, 2017 and the corporate reorganization described below, Ranger is a holding company, the sole material assets of which 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 Services and Torrent Services, the subsidiaries through which it operates its assets. Through the consummation of the corporate reorganization, 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.

On August 16, 2017, Ranger LLC acquired 49 high-spec well service rigs, certain ancillary equipment, and certain of its liabilities (the “ESCO Acquisition”).

Reorganization

On August 10, 2017, Ranger Services, entered into a Master Reorganization Agreement (the “Master Reorganization Agreement”) with, among others, Ranger LLC, Ranger Holdings, Ranger Energy Holdings II, LLC, a Delaware limited liability company (“Ranger Holdings II”), Torrent Holdings, and Torrent Energy Holdings II, LLC, a Delaware limited liability company (“Torrent Holdings II” and, together with Ranger Holdings, Ranger Holdings II and Torrent Holdings, the “Existing Owners”).

Subject to the terms and conditions set forth in the Master Reorganization Agreement, the parties thereto effected a series of restructuring transactions in connection with the Offering, as a result of which:

(i) Ranger Holdings II and Torrent Holdings II contributed certain of the equity interests in Ranger Services and Torrent Services (together, the “Predecessor Companies”), respectively, to the Company in exchange for an aggregate of 1,683,386 shares of Class A Common Stock and an aggregate of $3.0 million paid to CSL Energy Holdings I, LLC, a Delaware limited liability company, and CSL Energy Holdings II, LLC, a Delaware limited liability company, on or prior to the 18-month anniversary of the consummation of the Offering in, at the Company’s option, cash, shares of Class A Common Stock (with such shares to be valued based on the greater of the initial public offering price of the Class A Common Stock in the Offering and a 30-day volume-weighted average price) or a combination thereof, and the Company contributed such equity interests to Ranger LLC in exchange for 1,638,386 units in Ranger LLC (“Ranger Units”); 

(ii) Ranger Holdings and Torrent Holdings contributed the remaining membership interests in the Predecessor Companies to Ranger LLC in exchange for 5,621,491 units in Ranger LLC (“Ranger Units”) and 5,621,491 shares of the

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Company’s Class B common stock, par value $0.01 per share (“Class B Common Stock”), which the Company initially issued and contributed to Ranger LLC; 

(iii) the Company contributed all of the net proceeds received by it in the Offering to Ranger LLC in exchange for 5,862,069 Ranger Units; 

(iv) Ranger LLC distributed to each of Ranger Holdings and Torrent Holdings one share of Class B Common Stock received pursuant to (ii) above for each Ranger Unit such Existing Owner held; and

(v) as consideration for the termination of certain loan agreements, the Company issued 567,895 shares of Class A Common Stock (in connection with which Ranger LLC issued 567,895 Ranger Units to the Company) and Ranger LLC issued an aggregate of 1,244,663 Ranger Units (and distributed a corresponding number of shares of Class B Common Stock) to the lenders thereof.

The foregoing transactions were undertaken in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. As a result of these transactions, Ranger LLC became a subsidiary of the Company and the Predecessor Companies became wholly owned subsidiaries of Ranger LLC.

Initial Public Offering

On August 16, 2017, the Company completed the Offering of 5,862,069 shares of its Class A Common Stock. The gross proceeds of the Offering to the Company, based on a public offering price of $14.50 per share, were $85.0 million, which resulted in net proceeds to the Company of $80.8 million, after deducting $4.2 million of underwriting discounts and commissions. The Company received net proceeds of approximately $20.7 million after it paid off the remainder of its long term debt of $10.4 million, funded $45.2 million for the cash portion of the ESCO Acquisition,  $3.8 million of costs incurred due to the Offering and $0.7 million for cash bonuses to certain employees.

Business

The Company is one of the largest providers of high‑spec well service rigs and associated services in the United States, with a focus on technically demanding unconventional horizontal well completion and production operations. The Company’s high‑spec well service rigs facilitate operations throughout the lifecycle of a well, including (i) well completion support, such as milling out composite plugs used during hydraulic fracturing; (ii) workover, including retrieval and replacement of existing production tubing; (iii) well maintenance, including replacement of downhole artificial lift components; and (iv) decommissioning, such as plugging and abandonment operations. The Company also provides rental equipment, including well control packages, hydraulic catwalks and other equipment that are often deployed with its well service rigs. In addition to its core well service rig operations, the Company offers a suite of complementary services, including wireline, snubbing, fluid management and well service-related equipment rentals. In addition, the Company owns and operates a fleet of proprietary, modular natural gas processing equipment that processes rich natural gas streams at the wellhead or central gathering points. The Company has operations in most of the active oil and natural gas basins in the United States, including the Permian Basin, the Denver‑Julesburg Basin, the Bakken Shale, the Eagle Ford Shale, the Haynesville Shale, the Gulf Coast and the SCOOP and STACK plays.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited 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 (“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 unaudited 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, 2016 and 2015, included in the final prospectus (the “Final Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) on August 14,

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2017. In management’s opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented. Interim results for the periods presented may not be indicative of results that will realized for future periods.

These financial statements for the period prior to the Offering on August 16, 2017, represent the combined consolidated financial statements of the Predecessor. Subsequent to the Offering the financial statements included in the results of operations reflect the consolidated balances of the Company.

Significant Accounting Policies

Our significant accounting policies are disclosed in Note 2 of the consolidated financial statements for the years ended December 31, 2016 and 2015 included in the Final Prospectus filed with the SEC on August 14, 2017. There have been no changes in such policies or the application of such policies during the three or nine months ended September 30, 2017.

Use of Estimates

The preparation of financial statements in conformity with 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 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, plant and equipment and intangible assets;

Impairment of property, plant and equipment, goodwill and intangible assets;

Allowance for doubtful accounts;

Fair value of assets acquired and liabilities assumed in an acquisition; and

·

Unit‑based compensation.

Emerging Growth Company status

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

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014‑09, Revenue from Contracts with Customers. ASU 2014‑09 supersedes existing revenue recognition requirements in GAAP and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Additionally, it requires expanded disclosures regarding the nature, amount, timing, and certainty of revenue and cash flows from contracts with customers. The ASU is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. 

The Company is performing its initial assessment of the impact of ASU 2014-09 is expected to have on its current accounting policies, which remains subject to revision following the review and approval of management. The

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implementation of these policies will next require the Company to develop appropriate financial models to permit quantifying the potential impact that application of ASU 2014-09 will have on any previously issued financial statements. Additionally, the implementation of ASU 2014-09 will require training and educating of the Company’s workforce and the investment community regarding the financial statement impact that application of the standard will have based upon the terms of existing contracts and any new contracts that may be executed in the future. The evaluation and modification of existing accounting policies is ongoing, but nearing completion.

In February 2016, the FASB issued ASU No. 2016‑02, Leases, amending the current accounting for leases. Under the new provisions, all lessees will report a right‑of‑use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. All other leases will fall into one of two categories: (i) a financing lease or (ii) an operating lease. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. For sale leaseback transactions, a sale will only be recognized if the criteria in the new revenue recognition standard are met. ASU 2016‑02 is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period, using a modified retrospective approach. Early adoption is permitted. The Company is in the initial stages of evaluating the effect of the standard on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments—Credit Losses. The amendments in ASU 2016‑13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016‑13 amends the accounting for credit losses on available‑for‑sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for public entities for annual reporting periods beginning after December 15, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company is in the initial stages of evaluating the effect of the standard on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016‑15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016‑15 reduces diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance addresses specific cash flow issues for which current GAAP is either unclear or does not include specific guidance. ASU 2016‑15 is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential impact of ASU 2016‑15 on our consolidated financial statements of cash flows.

In January 2017, the FASB issued ASU 2017‑04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017‑04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The ASU will be applied prospectively and will impact how we test goodwill for impairment.

In January 2017, the FASB issued ASU 2017‑01, Business Combinations (Topic 805), Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or business. ASU 2017‑01 is effective for fiscal years and interim periods within fiscal years beginning after December 15, 2017 and should be applied prospectively. Early adoption is allowed for transactions that occurred before the issuance date or effective date of the amendments only when the transaction has not been reported in the financial statements previously issued. We currently do not expect that the adoption of this standard will have a material impact on our consolidated financial statements.     

 

NOTE 3. ACQUISITIONS

Magna Acquisition

On June 24, 2016, CSL indirectly acquired substantially all of the assets of Magna, a privately held oilfield services company that provides workover, plug and abandonment, fluid management and wireline services, for an aggregate purchase price of approximately $12.7 million to gain market share in the industry (the “Magna Acquisition”). Magna’s operations are focused primarily in Colorado, Wyoming and North Dakota. Ranger Services accounted for this

9


 

acquisition as a business combination. No goodwill was recorded in conjunction with the Magna Acquisition as the total purchase consideration approximated the fair value of assets acquired and liabilities assumed.

A summary of the fair value of the assets acquired and the liabilities assumed in connection with the Magna Acquisition is set forth below (in millions):

 

 

 

 

Purchase price

    

 

    

Cash paid by CSL

 

$

12.7

Total purchase price

 

$

12.7

Purchase price allocation

 

 

  

Cash

 

$

1.2

Accounts receivable

 

 

3.0

Prepaid expenses and other

 

 

1.2

Property, plant and equipment

 

 

8.8

Tradename

 

 

0.1

Total assets acquired

 

 

14.3

Accounts payable

 

 

(1.0)

Accrued expenses

 

 

(0.6)

Total liabilities assumed

 

 

(1.6)

Allocated purchase price

 

$

12.7

 

On September 28, 2016, Magna was contributed to Ranger Services by CSL. As this was a transaction among entities under common control, the assets and liabilities were recorded at their historical carrying values from the date of the initial acquisition by CSL on June 24, 2016. The costs related to the transaction were $0.1 million and were expensed during 2016 and are included in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2016.

Bayou Acquisition

On October 3, 2016, Ranger Services acquired Bayou, a privately held oilfield services company that provides workover, plug and abandonment and fluid management services, for an aggregate purchase price of approximately $50.5 million, which included an approximate 35% equity interest in Ranger Services (the “Bayou Acquisition”). Bayou’s operations are focused primarily in Colorado and North Dakota. Ranger accounted for this acquisition as a business combination.

A summary of the fair value of the assets acquired and the liabilities assumed in connection with the Bayou Acquisition is set forth below (in millions):

 

 

 

 

Purchase price

    

 

    

Cash

 

$

17.5

Equity issued

 

 

33.0

Total purchase price

 

$

50.5

Purchase price allocation

 

 

  

Prepaid expenses & other

 

$

0.5

Property, plant and equipment

 

 

40.0

Land

 

 

0.6

Building and site improvements

 

 

2.3

Customer relationships

 

 

9.3

Total assets acquired

 

 

52.7

Accounts payable

 

 

(1.8)

Accrued expenses

 

 

(1.0)

Other long‑term liabilities

 

 

(1.0)

Total liabilities assumed

 

 

(3.8)

Goodwill

 

 

1.6

Allocated purchase price

 

$

50.5

 

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Goodwill represents trained and assembled workforce which does not meet the separability criterion. The costs related to the transaction were $0.4 million and were expensed during 2016 in the Company’s combined consolidated statements of operations for the year ended December 31, 2016.

ESCO Acquisition

In connection with the closing of our offering on August 16, 2017, the Company closed on the ESCO Acquisition for total consideration of $59.7 million, consisting of $47.7 million in cash, $7.0 million in secured seller notes and $5.0 million in shares of Ranger’s Class A Common Stock based on the initial public offering price of $14.50 per share.

The ESCO Acquisition assets were primarily engaged in the completion, repair and workover of oil and gas wells for its customers. The ESCO Acquisition is being accounted for as a business combination. Goodwill is recorded in conjunction with the ESCO Acquisition as the total purchase consideration exceeds the approximated fair value of assets acquired and liabilities assumed.

The following information below represents the preliminary purchase allocation related to the ESCO Acquisition (in millions):

 

 

 

 

Purchase price

    

 

 

Cash

 

$

47.7

Seller's notes

 

 

7.0

Equity issued

 

 

5.0

Total purchase price

 

$

59.7

Purchase price allocation

 

 

 

Cash

 

$

 -

Accounts receivable

 

 

6.6

Property, plant and equipment

 

 

45.9

Intangible assets

 

 

2.2

Other assets

 

 

0.4

Total assets acquired

 

 

55.1

Accounts payable

 

 

(0.5)

Accrued expenses

 

 

(1.9)

Total liabilities assumed

 

 

(2.4)

Goodwill

 

 

7.0

Allocated purchase price

 

$

59.7

 

The following is supplemental pro-forma revenue, operating loss, and net loss had the ESCO Acquisition occurred as of January 1, 2016 (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2017

 

2016

Supplemental Pro Forma:

 

 

 

     

 

  

 

 

     

 

Revenue

 

 

$

126.5

 

 

 

$

90.4

 

Operating Loss

 

 

$

(17.2)

 

 

 

$

(19.4)

 

Net Loss

 

 

$

(23.7)

 

 

 

$

(26.7)

 

 

The supplemental pro forma revenue, operating loss, and net loss are presented for informational purposes only and may not necessarily reflect the future results of operations of the Company or what the results of operations would have been had the Company owned and operated Magna, Bayou and the ESCO Acquisition assets since January 1, 2016. There are no material non-recurring adjustments included in these supplemental pro forma items.

We reported revenue during the three and nine months ended September 30, 2017 that included $5.4 million generated from the assets acquired in connection with the ESCO Acquisition.

 

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NOTE 4. ASSETS HELD FOR SALE

During the year ended December 31, 2016, the Company decided to market and sell non‑core rental fleet assets. The units consisted of Mechanical Refrigerator Units (“MRUs”), stabilizers and wedge units, and were classified as held for sale due to the fact that they were specifically identified, and management has a plan for their sale in their present condition to occur in the next year. As of September 30, 2017,  the Company moved the MRUs and stabilizers with a net book value of $2.3 million back into operating assets. The wedge units representing the remaining balance of $0.6 million are  still classified as held for sale. The available for sale assets are recorded at the units’ carrying amount, which approximates fair value less costs to sell, and are no longer depreciated.

 

NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment include the following (in millions):

 

 

 

 

 

 

 

 

 

 

    

Estimated

    

 

 

    

 

 

 

 

Useful Life

 

September 30, 

 

December 31, 

 

 

(years)

 

2017

 

2016

Machinery and equipment

 

5 - 30

 

$

2.3

 

$

3.0

Vehicles

 

3 - 5

 

 

1.6

 

 

0.2

Mechanical refrigeration units

 

30

 

 

18.2

 

 

16.0

NGL storage tanks

 

15

 

 

4.3

 

 

4.3

Workover rigs

 

5 - 20

 

 

161.5

 

 

73.8

Other property, plant and equipment

 

3 - 30

 

 

12.4

 

 

13.8

Property, plant and equipment

 

  

 

 

200.3

 

 

111.1

Less: accumulated depreciation

 

  

 

 

(19.6)

 

 

(8.7)

Property, plant and equipment, net

 

  

 

$

180.7

 

$

102.4

 

Depreciation expense was  $11.3 million and $3.1 million for the nine months ended September 30, 2017 and 2016, respectively. Depreciation expense was $3.9 million and $1.4 million for the three months ended September 30, 2017 and 2016, respectively.

 

NOTE 6. GOODWILL AND INTANGIBLE ASSETS

Goodwill was $8.6 million and $1.6 million as of September 30, 2017 and December 31, 2016, respectively. During 2017, $7.0 million of goodwill was recognized in connection with the ESCO Acquisition. During 2016, $1.6 million of goodwill was recognized in connection with the Bayou Acquisition.

Definite lived intangible assets are comprised of the following (in millions):

 

 

 

 

 

 

 

 

 

 

    

Estimated

    

 

 

    

 

 

 

 

Useful Life

 

September 30, 

 

December 31, 

 

 

(years)

 

2017

 

2016

Tradenames

 

3

 

$

0.1

 

$

0.1

Customer relationships

 

15 - 18

 

 

11.4

 

 

9.2

Less: accumulated amortization

 

  

 

 

(0.5)

 

 

(0.1)

Intangible assets, net

 

  

 

$

11.0

 

$

9.2

 

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Amortization expense was $0.4 million and $0.0 million for the nine months ended September 30, 2017 and 2016, respectively. Amortization expense was $0.2 and $0.0 million for the three months ended September 30, 2017 and 2016, respectively. Amortization expense for the future periods is expected to be as follows (in millions):

 

 

 

 

As of September 30,

    

Amount

2017

 

$

0.2

2018

 

 

0.6

2019

 

 

0.6

2020

 

 

0.6

2021

 

 

0.6

Thereafter

 

 

8.4