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. Revenue From Contracts with Customers
Note 4. Acquisitions
Note 5. Assets Held for Sale
Note 6. Property, Plant and Equipment, Net
Note 7. Goodwill and Intangible Assets
Note 8. Accrued Expenses
Note 9. Capital Leases
Note 10. Long‑Term Debt
Note 11. Risk Concentrations
Note 12. Equity Based Compensation and Profit Interests Awards
Note 13. Income Taxes
Note 14. Non-Controlling Interests
Note 15. Loss per Share
Note 16. Commitments and Contingencies
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-10.1 rngr-20180331ex10147d016.htm
EX-10.2 rngr-20180331ex102ed423d.htm
EX-10.3 rngr-20180331ex1039da211.htm
EX-31.1 rngr-20180331ex3111d5c6c.htm
EX-31.2 rngr-20180331ex312c7866d.htm
EX-32.1 rngr-20180331ex321c5cf8f.htm
EX-32.2 rngr-20180331ex32239f658.htm

Ranger Energy Services Earnings 2018-03-31

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-20180331x10q.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 March 31, 2018

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 May 1, 2018, the registrant had 8,900,792 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

Notes to Unaudited Interim Condensed Consolidated Financial Statements 

 

5

 

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

 

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

 

32

Item 4. Controls and Procedures 

 

32

 

 

 

PART II – OTHER INFORMATION 

 

 

Item 1. Legal Proceedings 

 

33

Item 1A. Risk Factors 

 

33

Item 6. Exhibits 

 

33

 

 

 

SIGNATURES 

 

35

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2018

 

2017

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

1.1

 

$

5.3

Accounts receivable, net

 

 

38.5

 

 

32.1

Unbilled revenues

 

 

5.2

 

 

6.0

Prepaid expenses and other current assets

 

 

6.5

 

 

5.7

Assets held for sale

 

 

0.6

 

 

0.6

Total current assets

 

 

51.9

 

 

49.7

Property, plant and equipment, net

 

 

199.9

 

 

189.2

Goodwill

 

 

 —

 

 

9.0

Intangible assets, net

 

 

10.6

 

 

10.8

Other assets

 

 

0.1

 

 

1.0

Total assets

 

$

262.5

 

$

259.7

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

34.5

 

$

32.0

Accrued expenses

 

 

13.9

 

 

11.6

Capital lease obligations, current portion

 

 

1.3

 

 

8.0

Long-term debt, current portion

 

 

7.0

 

 

1.3

Total current liabilities

 

 

56.7

 

 

52.9

Capital lease obligations, less current portion

 

 

1.9

 

 

1.5

Long-term debt, less current portion

 

 

14.9

 

 

5.8

Other long-term liabilities

 

 

3.6

 

 

3.8

Total liabilities

 

 

77.1

 

 

64.0

 

 

 

 

 

 

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.01 per share; 50,000,000 shares authorized, no shares issued or outstanding as of March 31, 2018 and December 31, 2017

 

 

 —

 

 

 —

Class A Common Stock, $0.01 par value, 100,000,000 shares authorized, 8,447,178 shares issued and outstanding as of March 31, 2018 and 8,413,178 shares issued and outstanding as of December 31, 2017

 

 

0.1

 

 

0.1

Class B Common Stock, $0.01 par value, 100,000,000 shares authorized, 6,866,154 shares issued and outstanding as of March 31, 2018 and December 31, 2017

 

 

0.1

 

 

0.1

Accumulated deficit

 

 

(12.5)

 

 

(6.6)

Additional paid-in capital

 

 

110.1

 

 

110.1

Total stockholders' equity

 

 

97.8

 

 

103.7

Non-controlling interest

 

 

87.6

 

 

92.0

Total stockholders' equity

 

 

185.4

 

 

195.7

Total liabilities and stockholders' equity

 

$

262.5

 

$

259.7

 

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

 

 

March 31, 

 

    

2018

    

2017

Revenues

 

 

  

 

 

  

Well Services

 

$

59.7

 

$

27.3

Processing Solutions

 

 

2.9

 

 

1.8

Total revenues

 

 

62.6

 

 

29.1

 

 

 

 

 

 

 

Operating expenses

 

 

  

 

 

  

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

 

 

  

 

 

  

Well Services

 

 

49.9

 

 

23.2

Processing Solutions

 

 

1.4

 

 

0.7

Total cost of services

 

 

51.3

 

 

23.9

General and administrative

 

 

7.0

 

 

7.3

Depreciation and amortization

 

 

6.1

 

 

3.6

Impairment of goodwill

 

 

9.0

 

 

 —

Total operating expenses

 

 

73.4

 

 

34.8

 

 

 

 

 

 

 

Operating loss

 

 

(10.8)

 

 

(5.7)

 

 

 

 

 

 

 

Other expenses

 

 

  

 

 

  

Interest expense, net

 

 

(0.4)

 

 

(0.5)

Total other expenses

 

 

(0.4)

 

 

(0.5)

Loss before income tax expense

 

 

(11.2)

 

 

(6.2)

Tax benefit

 

 

0.9

 

 

 —

Net loss

 

 

(10.3)

 

 

(6.2)

Less: Net loss attributable to the Predecessor

 

 

 —

 

 

(6.2)

Less: Net loss attributable to non-controlling interests

 

 

(4.6)

 

 

 —

Net loss attributable to Ranger Energy Services, Inc.

 

 

(5.7)

 

 

 —

 

 

 

 

 

 

 

Loss per common share

 

 

 

 

 

 

Basic

 

$

(0.68)

 

 

 —

Diluted

 

$

(0.68)

 

 

 —

Weighted average common shares outstanding

 

 

 

 

 

 

Basic

 

 

8,423,445

 

 

 —

Diluted

 

 

8,423,445

 

 

 —

 

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)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

    

2018

    

2017

Cash Flows from Operating Activities

 

 

  

 

 

  

Net loss

 

$

(10.3)

 

$

(6.2)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

  

 

 

  

Depreciation and amortization

 

 

6.1

 

 

3.6

Bad debt expense

 

 

0.1

 

 

0.1

Impairment of goodwill

 

 

9.0

 

 

 —

Equity based compensation

 

 

0.2

 

 

0.4

Loss on sale of property, plant and equipment

 

 

0.7

 

 

 —

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

 

 

 

 

 

 

Accounts receivable

 

 

(6.5)

 

 

(7.2)

Unbilled revenue

 

 

0.7

 

 

(0.5)

Prepaid expenses and other current assets

 

 

(0.8)

 

 

(0.1)

Other assets

 

 

0.1

 

 

(0.8)

Accounts payable

 

 

(1.2)

 

 

1.9

Accounts payable - related party

 

 

 —

 

 

(2.4)

Accrued expenses

 

 

1.0

 

 

4.5

Other long-term liabilities

 

 

(0.2)

 

 

(0.1)

Net cash used in operating activities

 

 

(1.1)

 

 

(6.8)

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(8.2)

 

 

(7.3)

Proceeds from sale of property, plant and equipment

 

 

1.2

 

 

 —

Acquisitions, net of cash received

 

 

(4.0)

 

 

 —

Net cash used in investing activities

 

 

(11.0)

 

 

(7.3)

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

  

 

 

  

Borrowings under line of credit agreement

 

 

15.6

 

 

 —

Payments on long-term debt

 

 

 —

 

 

(0.8)

Borrowings on related party debt

 

 

 —

 

 

11.2

Principal payments on capital lease obligations

 

 

(7.7)

 

 

(0.1)

Contributions from parent

 

 

 —

 

 

4.0

Restricted cash

 

 

 —

 

 

0.2

Net cash provided by financing activities

 

 

7.9

 

 

14.5

 

 

 

 

 

 

 

(Decrease) Increase in Cash and Cash equivalents

 

 

(4.2)

 

 

0.4

Cash and Cash Equivalents, Beginning of Year

 

 

5.3

 

 

1.6

Cash and Cash Equivalents, End of Year

 

$

1.1

 

$

2.0

 

 

 

 

 

 

 

Supplemental Cash Flows Information

 

 

  

 

 

  

Interest paid

 

$

(0.2)

 

$

(0.5)

Supplemental Disclosure of Noncash Investing and Financing Activity

 

 

  

 

 

  

Non-cash capital expenditures

 

$

(5.0)

 

$

(4.5)

Non-cash additions to fixed assets through capital lease financing

 

$

(1.3)

 

$

(7.1)

 

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

 

4


 

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 Companies”) 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 present (i) prior to August 16, 2017, the historical financial information of Ranger Services, Torrent Services, Magna and Bayou (collectively, the “Predecessor”), 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.

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 of Class A Common Stock, as a result of which:

(i) Ranger Holdings II and Torrent Holdings II contributed certain of the equity interests in 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 to be 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 Units and 5,621,491 shares of the Company’s Class B Common Stock, par value $0.01 per share (“Class B Common Stock” and together with the Class A Common Stock, “Common Stock”), which the Company initially issued and contributed to Ranger LLC;

5


 

(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 $77.0 million, after deducting $4.2 million of underwriting discounts and commissions and $3.9 million of costs related to the Offering. These net proceeds were used to pay off the remainder of its long term debt of $10.4 million, fund $45.2 million for the cash portion of the ESCO Acquisition and pay $0.7 million for cash bonuses to certain employees. The remaining $20.7 million of net proceeds were used to fund capital expenditures and general business expenses.

 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, well testing, 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 condensed balance sheet as of December 31, 2017 has been derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the Securities and Exchange Commission’s (the “SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly certain notes and other information have been condensed or omitted. The 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, 2017 and 2016, included in the Annual Report filed on Form 10-K for the year ended December 31, 2017 (the “Annual Report”) filed with the SEC on

6


 

March 13, 2018. Interim results for the periods presented may not be indicative of results that will be realized for future periods.

Financial statements for periods prior to the Offering on August 16, 2017, represent the combined consolidated financial statements of the Predecessor. Financial statements for periods subsequent to the Offering reflect the consolidated financial statements of the Company.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2 of the consolidated financial statements for the years ended December 31, 2017 and 2016 included in the Annual Report filed with the SEC on March 13, 2018. There have been no changes in such policies or the application of such policies during the three months ended March 31, 2018 except as discussed in Note 3 – Revenue from Contracts with Customers.

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

·

Equity‑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 the Company’s common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of its most recently completed second fiscal quarter, 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 the consolidated financial statements.

7


 

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 doesn’t expect this to have a material impact to its 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 adopted the new guidance on the effective date of January 1, 2018 and noted no material impact on the 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. The Company adopted for our annual and interim goodwill impairment testing as of January 1, 2018. The ASU impacted how the Company tests goodwill for impairment as it eliminates the second step of the goodwill impairment test thus effectively calculating impairment loss based on the difference between the carrying value and estimated fair value of the reporting units.

 

NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Effective January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaborative arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when it transfers control of the promised goods or services to its customer, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. If control transfers to the customer over time, an entity selects a method to measure progress that is consistent with the objective of depicting its performance. The provisions of ASC 606 were applied to contracts not completed at January 1, 2018. There was no impact upon adoption of ASC 606.  As a result no disclosure of the impact for each financial statement line items is applicable.

In determining the appropriate amount of revenue to be recognized as the Company fulfills the obligations under the its contracts with customers, the following steps must be performed at contract inception: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Well Services segment consists primarily of maintenance services, workover services, completion services and plugging and abandonment services. These services are based on mutually agreed upon pricing with the customer prior to the services being performed, and given the nature of the services, do not include any warranty and right of return. Pricing for these services are by the hour or by the day when services are performed and are based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job.  Accordingly, the hourly and daily pricing is considered to be variable consideration.  

The Processing Solutions segment consists primarily of equipment rentals, operations and maintenance services and mobilization services. These services are based on mutually agreed upon pricing with the customer prior to the services being performed, and given the nature of the services, do not include any warranty and right of return. Pricing for equipment rentals is based on fixed monthly service fees whereas pricing for operations and maintenance services and mobilization services are by the hour or by the day when services are performed and are based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job.  Accordingly, the hourly and daily pricing is considered to be variable consideration.  

8


 

We satisfy our performance obligation over time as the services are performed. The Company believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. The Company has elected the right to invoice practical expedient for recognizing revenue. The Company invoices customers upon completion of the specified services and collection generally occurs within the payment terms agreed with customers. Accordingly, there is no financing component to our arrangements with customers.

Taxes assessed on well services and processing solutions revenue transactions are presented on a net basis included within the consolidated statements of operations and therefore are excluded from revenues.

Disaggregated Revenue

The following table summarizes our disaggregated revenues for the three months ended March 31, 2018 and 2017 (in millions):

 

 

 

 

 

 

 

 

    

March 31, 

    

March 31, 

 

 

2018

 

2017

 

 

 

 

 

 

 

Well Services revenue

 

 

 

 

 

 

Workover rigs revenue

 

$

37.6

 

$

21.8

Other well services revenue

 

 

22.1

 

 

5.5

Total Well Services revenue

 

 

59.7

 

 

27.3

Processing Solutions revenue

 

 

2.9

 

 

1.8

Total Revenue

 

$

62.6

 

$

29.1

 

Contract Balances

Contract assets representing the Company’s rights to consideration for work completed but not billed amounted to $5.2 million as of March 31, 2018 and $6.0 million as of December 31, 2017, respectively. Substantially all of the unbilled trade receivables as of December 31, 2017 were invoiced during the three months ended March 31, 2018.

The Company does not have any contract liabilities included in the consolidated balance sheet as of March 31, 2018 and December 31, 2017.

 

NOTE 4. ACQUISITIONS

ESCO Acquisition

On August 16, 2017, Ranger LLC acquired 49 high-spec well service rigs, certain ancillary equipment and certain of its liabilities (the “ESCO Acquisition”). In connection with the closing of the 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 exceeded the approximated fair value of assets acquired and liabilities assumed.

9


 

The following information below represents the purchase price 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

 

 

 

Accounts receivable

 

$

6.6

Property, plant and equipment

 

 

45.9

Intangible assets

 

 

2.2

Other assets

 

 

0.3

Total assets acquired

 

 

55.0

Accounts payable

 

 

(0.5)

Accrued expenses

 

 

(2.2)

Total liabilities assumed

 

 

(2.7)

Goodwill

 

 

7.4

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, 2017.  (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

2017

 

Supplemental Pro Forma:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

$

62.6

 

 

 

$

38.2

 

 

Operating Loss

 

 

$

(10.8)

 

 

 

$

(7.5)

 

 

Net Loss

 

 

$

(10.3)

 

 

 

$

(8.0)

 

 

 

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 the ESCO Acquisition assets since January 1, 2017.  

The Company reported revenue during the three months ended March 31, 2018 that included $9.6 million generated from the assets acquired in connection with the ESCO Acquisition.

MVCI Acquisition

On January 31, 2018, the Company closed on the acquisition of MVCI Energy Services (“MVCI Acquisition”) for total consideration of $4.0 million in cash. The MVCI Acquisition assets were primarily engaged in well testing services for its customers. The MVCI Acquisition is being accounted for as a business combination. The Company is currently in the process of evaluating the preliminary purchase allocation. The Pro forma results of operations for the MVCI Acquisition is not presented because the pro forma effects, individually and in the aggregate, are not material to the Company’s consolidated results of operations.

 

NOTE 5. ASSETS HELD FOR SALE

The Company has decided to market and sell non‑core rental fleet assets. The units consist of wedge units which are classified as held for sale due to the fact that they are specifically identified, and management has a plan for their sale in their present condition to occur in the next year. The wedge units are recorded on the consolidated financial statement with a balance of $0.6 million and are 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.

 

10


 

NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET

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

 

 

 

 

 

 

 

 

 

 

    

Estimated

    

 

 

    

 

 

 

 

Useful Life

 

March 31, 

 

December 31, 

 

 

(years)

 

2018

 

2017

Machinery and equipment

 

5 - 30

 

$

3.7

 

$

3.7

Vehicles

 

3 - 5

 

 

2.7

 

 

2.6

Mechanical refrigeration units

 

30

 

 

17.2

 

 

17.1

NGL storage tanks

 

15

 

 

4.3

 

 

4.3

Workover rigs

 

5 - 20

 

 

188.7

 

 

174.9

Other property, plant and equipment

 

3 - 30

 

 

14.1

 

 

12.0

Property, plant and equipment

 

  

 

 

230.7

 

 

214.6

Less: accumulated depreciation

 

  

 

 

(30.8)

 

 

(25.4)

Property, plant and equipment, net

 

  

 

$

199.9

 

$

189.2

 

Depreciation expense was $5.9 million and $3.5 million for the three months ended March 31, 2018 and 2017, respectively.

 

NOTE 7. GOODWILL AND INTANGIBLE ASSETS

Goodwill was $9.0 million as of December 31, 2017. During the three months ended March 31, 2018 the Company  identified a triggering event as it relates to goodwill as a result of a sustained decrease in stock price of the Company.  As a result, the Company performed a quantitative impairment test which yielded an impairment charge.  The Company recorded an impairment of goodwill of $9.0 million. As of March 31, 2018 there is no goodwill on the Company's consolidated balance sheet.

During the quarter ended March 31, 2018, the Company had nonrecurring fair value measurements related to the impairment of goodwill. The fair values were determined through the use of a blended market and income approach, which represent Level 3 measurements within the fair value hierarchy.

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

 

 

 

 

 

 

 

 

 

 

    

Estimated

    

 

 

    

 

 

 

 

Useful Life

 

March 31, 

 

December 31, 

 

 

(years)

 

2018

 

2017

Tradenames

 

3

 

$

0.1

 

$

0.1

Customer relationships

 

10 - 18

 

 

11.4

 

 

11.4

Less: accumulated amortization

 

  

 

 

(0.9)

 

 

(0.7)

Intangible assets, net

 

  

 

$

10.6

 

$

10.8

 

Amortization expense was $0.2 and $0.1 million for the three months ended March 31, 2018 and 2017, respectively. Amortization expense for the future periods is expected to be as follows (in millions):

 

 

 

 

For the period ending March 31,

    

Amount

2018

 

$

0.6

2019

 

 

0.8

2020

 

 

0.7

2021

 

 

0.7

2022

 

 

0.7

Thereafter

 

 

7.1

 

 

$

10.6

 

 

Due to the triggering event and goodwill impairment charged at March 31, 2018, the Company assessed whether the long-lived assets, which consist of property, plant and equipment and intangible assets, were impaired by

11


 

comparing the carrying value of its long-lived assets to the estimating future undiscounted cash flows of their reporting units and concluded they were not impaired.

 

NOTE 8. ACCRUED EXPENSES

Accrued expenses include the following (in millions):

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2018

 

2017

Accrued payables

 

$

6.6

 

$

4.8

Accrued payroll

 

 

4.9

 

 

2.9

Accrued taxes

 

 

1.3

 

 

1.4

Accrued insurance

 

 

1.1

 

 

2.5

Accrued expenses

 

$

13.9

 

$

11.6

 

 

NOTE 9. CAPITAL LEASES

The Company leases certain assets under capital leases which expire at various dates through 2022. The assets and liabilities under capital leases are recorded at the lower of present value of the minimum lease payments or the fair value of the assets. The assets are amortized over the shorter of the estimated useful lives or over the lease term. Amortization expense of assets under capital leases was $0.4 million and $0.2 million for the three months ended March 31, 2018 and 2017, respectively.

Aggregate future minimum lease payments under capital leases are as follows (in millions):

 

 

 

 

For the period ending March 31,

    

Total

2018

 

$

1.3

2019

 

 

1.3

2020

 

 

1.0

2021

 

 

0.1

2022

 

 

 —

Total future minimum lease payments

 

 

3.7

Less: amount representing interest

 

 

(0.5)

Present value of future minimum lease payments

 

 

3.2

Less: current portion of capital lease obligations

 

 

(1.3)

Total capital lease obligations, less current portion

 

$

1.9

 

 

NOTE 10. LONG‑TERM DEBT

Long‑term debt consists of the following (in millions):

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2018

 

2017

Other long-term debt

 

$

7.0

 

$

7.0

Revolver

 

 

14.9

 

 

0.1

Current portion of long-term debt

 

 

(7.0)

 

 

(1.3)

Long term-debt, less current portion

 

$

14.9

 

$

5.8

 

In connection with the Offering and the ESCO Acquisition the Company issued $7.0 million of seller’s notes as partial consideration for the ESCO Acquisition. These notes include a note for $1.2 million due on August 16, 2018 and a note for $5.8 million due on February 16, 2019. Both of these notes bear interest at 5.0% payable quarterly until their respective maturity dates.

On August 16, 2017, in connection with the Offering, Ranger entered into a $50.0 million senior revolving credit facility (the “Credit Facility”)by and among certain of Ranger’s subsidiaries, as borrowers, each of the lenders

12


 

party thereto and Wells Fargo Bank, N.A., as administrative agent (the “Administrative Agent”). The Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the value of the Company’s eligible accounts receivable less certain reserves.

The Credit Facility permits extensions of credit up to the lesser of $50.0 million and a borrowing base that is determined by calculating the amount equal to the sum of (i) 85% of the Eligible Accounts (as defined in the Credit Facility), less the amount, if any, of the Dilution Reserve (as defined in the Credit Facility), minus (ii) the aggregate amount of Reserves (as defined in the Credit Facility), if any, established by the Administrative Agent from time to time pursuant to the Credit Facility. The borrowing base is calculated on a monthly basis pursuant to a borrowing base certificate delivered by the Company to the Administrative Agent. 

Borrowings under the Credit Facility bear interest, at the Company’s election, at either the (a) one-, two-, three- or six-month LIBOR or (b) the greatest of (i) the federal funds rate plus ½%, (ii) the one-month LIBOR plus 1% and (iii) the Administrative Agent’s prime rate (the “Base Rate”), in each case plus an applicable margin, and interest shall be payable monthly in arrears. The applicable margin for LIBOR loans ranges from 1.50% to 2.00% and the applicable margin for Base Rate loans ranges from 0.50% to 1.00%, in each case, depending on the Company’s average excess availability under the Credit Facility. The applicable margin for LIBOR loans are 1.50% and the applicable margin for Base Rate loans are 0.50% until August 31, 2018. During the continuance of a bankruptcy event of default, automatically and during the continuance of any other default, upon the Administrative Agent’s or the required lenders’ election, all outstanding amounts under the Credit Facility bears interest at 2.00% plus the otherwise applicable interest rate. The Credit Facility is scheduled to mature on August 16, 2022.

In addition, the Credit Facility restricts the Company’s ability to make distributions on, or redeem or repurchase, its equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Credit Facility and either (a) excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 22.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $10.0 million or (b) if the fixed charge coverage ratio is at least 1.0x on a pro forma basis, excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 17.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $7.0 million. If the foregoing threshold under clause (b) is met, the Company may not make such distributions (but may make certain other distributions, including under clause (a) above) prior to the earlier of the date that is (a) 12 months from closing or (b) the date that the Company’s fixed charge coverage ratio is at least 1.0x for two consecutive quarters. The Credit Facility generally permits the Company to make distributions required under the Tax Receivable Agreement, but a ‘‘Change of Control’’ under the Tax Receivable Agreement constitutes an event of default under the Credit Facility, and the Credit Facility does not permit the Company to make payments under the Tax Receivable Agreement upon acceleration of its obligations thereunder unless no event of default exists or would result therefrom and the Company has been in compliance with the fixed charge coverage ratio for the most recent 12-month period on a pro forma basis. The Credit Facility also requires the Company to maintain a fixed charge coverage ratio of at least 1.0x if the Company’s liquidity is less than $10.0 million until the Company’s liquidity is at least $10.0 million for 30 consecutive days. The Company is not be subject to a fixed charge coverage ratio if it has no drawings under the Credit Facility and has at least $20.0 million of qualified cash.

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

·

events of default resulting from the Company’s failure or the failure of any guarantors to comply with covenants and financial ratios;

·

the occurrence of a change of control;

·

the institution of insolvency or similar proceedings against the Company or any guarantor; and

·

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

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

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As of March 31, 2018, the Company has borrowed $15.6 million under the Credit Facility. The Company has a total borrowing capacity of approximately $31.7 million under the Credit Facility, with approximately $16.1 available as of March 31, 2018. The Company is in compliance with the Credit Facility covenants as of March 31, 2018.

The Company capitalized fees of $0.7 million associated with the Credit Facility described above, which are included on the unaudited interim condensed consolidated balance sheets as a discount to the long term debt, and will amortize these fees over the life of the Credit Facility. Unamortized debt issuance costs as of March 31, 2018 totals $0.7 million.

 

NOTE 11. RISK CONCENTRATIONS

Customer Concentrations 

For the three months ended March 31, 2018,  two customers (EOG Resources and PDC Energy—Well Services segment) accounted for approximately 21% and 7%, respectively, of the Company’s total revenues. At March 31, 2018,  approximately 23% of the accounts receivable balance was due from these customers.

For the three months ended March 31, 2017,  two customers (EOG Resources and PDC Energy—Well Services segment) accounted for approximately 16% and 25%, respectively, of the Company’s total revenues. At March 31, 2017, approximately 23% of the accounts receivable balance was due from these customers.

 

 

 

NOTE 12.  EQUITY BASED COMPENSATION AND PROFIT INTERESTS AWARDS

Long-term Incentive Plan

On August 10, 2017, the board of directors adopted the Ranger Energy Services, Inc. 2017 Long-term Incentive Plan (“LTIP”) for the employees, consultants and the directors of the Company and its affiliates who perform services for the Company. The LTIP provides for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws; (ii) nonstatutory stock options that do not qualify as incentive stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) dividend equivalents; (ix) other stock-based awards; (x) cash awards; and (xi) substitute awards. Subject to adjustment in accordance with the terms of the LTIP, 1,250,000 shares of Class A Common Stock have been reserved for issuance pursuant to awards under the LTIP. Class A Common Stock withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The LTIP will be administered by the board of directors or an alternative committee appointed by the board of directors. As of March 31, 2018 there have been 34,000 restricted shares granted under the LTIP.

During the three months ended March 31, 2018 there were 24,000 restricted shares issued. The total value at grant date was $0.2 million. During the three months ended March 31, 2018, there was less than $10,000 of amortization and $ 0.3 million of unrecognized expense.

The following table summarizes the changes in the restricted shares outstanding for the three months ended March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average

 

 

Weighted Average

 

 

 

 

 

Grant Date

 

 

Remaining

 

    

 

Shares

    

Fair Value

 

 

Vesting Period

Outstanding at December 31, 2017

 

 

10,000

 

 

9.43

 

 

2.7 years

Granted

 

 

24,000

 

 

8.14

 

 

3.0 years

Outstanding at March 31, 2018

 

 

34,000

 

$

8.52

 

 

2.9 years

 

Well Services

The Well Services segment was 100% owned by Ranger Holdings and Ranger Services’ equity was represented by a single share class. Ranger Holdings has issued Class C and Class D units to certain key employees of Ranger

14


 

Services as remuneration for employee services that were originally intended, at grant, to be “profit interests” with no voting rights. Certain of the units vest 33% per year over a three‑year service period and may be forfeited or repurchased by Ranger Holdings under certain circumstances as set forth in the Ranger Holdings limited liability company agreement and the individual Class C and Class D unit grant agreements. The “vesting units” are deemed equity and are measured at fair value using an option pricing model at each grant date with compensation expense recognized on a straight‑line basis over the requisite service period.

Certain of the Class C and Class D units that were granted are liability‑classified awards as they do not fully vest until a defined change of control event. The Company has not recognized a liability or recognized any compensation expense for these liability‑classified awards in the accompanying unaudited condensed consolidated financial statements since the change of control event is not probable and estimable. These units will trigger no compensation expense until amounts payable under such awards become probable and estimable.

During the three months ended March 31, 2018 and 2017,  the Company recognized compensation expense of $0.2 million and $0.3 million, respectively. The total unrecognized compensation cost related to unvested awards at March 31, 2018 is $1.0 million and is expected to be recognized over the next two years.

Processing Solutions

The Processing Solutions segment was 100% owned by Torrent Holdings and Torrent Services’ equity was represented by a single share class. Torrent Holdings has issued Class B and Class C units to certain key employees of Torrent as remuneration for employee services that were originally intended, at grant, to be “profit interests” with no voting rights. Class B units have a three‑year vesting period at 25% per year, with the remaining 25% vesting upon certain events occurring. Torrent Holdings also issued Class C awards, which were fully vested at grant date when issued in 2014. Class B and Class C units are deemed to be equity‑classified.

The grant date fair value for the Class B and Class C unit awards were $0.3 million and $0.1 million, respectively. Compensation expense is recognized on a straight‑line basis over the requisite service period. During the three months ended March 31, 2018 and 2017,  the Company recognized compensation expense of less than $0.1 million. The total unrecognized compensation cost related to unvested awards at March 31, 2018 is less than $0.1 million and is expected to be recognized in 2018.

 

 

 

NOTE 13. INCOME TAXES

The Company is a corporation and is subject to U.S. federal income tax. The tax implications of the Offering and the Company’s concurrent corporate reorganization, and the tax impact of the Company’s status as a taxable corporation subject to U.S. federal income tax have been reflected in the accompanying condensed consolidated financial statements. The effective U.S. federal income tax rate applicable to the Company for the three months ended March 31, 2018 and 2017 was 7.7% and 0.0%, respectively. Total income tax expense for the three months ended March 31, 2018 differed from amounts computed by applying the U.S. federal statutory tax rate of 21% due primarily to state taxes and changes in the valuation allowance recorded against deferred tax assets.  The Company is subject to the Texas Margin Tax that requires tax payments at a maximum statutory effective rate of 0.75% on the taxable margin of each taxable entity that does business in Texas.

As a result of the Offering and subsequent reorganization, the Company recorded a deferred tax asset; however, a full valuation allowance has been recorded to reduce the Company’s net deferred tax assets to an amount that is more likely than not to be realized and is based upon the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes.

 

 

NOTE 14. NON-CONTROLLING INTERESTS

The Company has ownership interests in Ranger LLC, which is consolidated within the Company’s financial statements but is not wholly owned by the Company. During the three months ended March 31, 2018, the Company reports a non-controlling interest representing the Ranger Units. Changes in the Company’s ownership interest in Ranger LLC while it retains its controlling interest are accounted for as equity transactions. 

 

 

15


 

 

NOTE 15.  LOSS PER SHARE

Loss per share is based on the amount of loss allocated to the shareholders and the weighted average number of shares outstanding during the period for each class of common stock.

Losses related to periods prior to the reorganization and the Offering are attributable to the Predecessor. The following table presents the Company’s calculation of basic and diluted loss per share for the three months ended March 31, 2018 (dollars in millions, except share and per share amounts):

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

 

2018

Loss (numerator):

 

 

 

Basic:

 

 

 

Net loss attributable to Ranger Energy Services, Inc.

 

$

(5.7)

Less: Net loss attributable to Class B Common Stock

 

 

 —

Net loss attributable to Class A Common Stock

 

 

(5.7)

 

 

 

 

Diluted:

 

 

 

Net loss attributable to Ranger Energy Services, Inc.

 

$

(5.7)

Less: Net loss attributable to Class B Common Stock

 

 

 —

Net loss attributable to Class A Common Stock

 

 

(5.7)

 

 

 

 

Weighted average shares (denominator):

 

 

 

Weighted average number of shares - basic

 

 

8,423,445

Weighted average number of shares -  diluted

 

 

8,423,445

 

 

 

 

Basic loss per share

 

 

$ (0.68)

 

 

 

 

Diluted loss per share

 

 

$ (0.68)

For the periods presented, the Company excluded 6.9 million shares of common stock issuable upon conversion of the Company’s Class B Common Stock in calculating diluted loss per share, as the effect was anti-dilutive.

 

 

NOTE 16. COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company is involved in various legal matters arising in the normal course of business. The Company does not believe that the ultimate resolution of these currently pending matters will have a material adverse effect on its condensed consolidated financial position or results of operations.

Employee Severance

During 2017, Ranger Services terminated the employment of one of its officers. As a result, the former officer became entitled to severance payments of $0.7 million. In addition, Ranger Services severed other officers and employees. As of March 31, 2018, Ranger Services has $0.7 million of severance liability recorded in the accompanying condensed consolidated financial statements.

NOTE 17. SEGMENT REPORTING

The Company’s operations are all located in the United States and organized into two reportable segments: Well Services and Processing Solutions. The Company’s reportable segments comprise the structure used by its Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance during the years presented in the accompanying condensed consolidated financial statements. The Company’s CODM evaluates the

16


 

segments’ operating performance based on multiple measures including Adjusted EBITDA, rig hours and rig utilization. The following is a description of the segments:

Well Services.  The Company’s well service rigs facilitate operations throughout the lifecycle of a well, including (i) well completion support; (ii) workover; (iii) well maintenance; and (iv) decommissioning. The Company provides these advanced well services to exploration & production (“E&P”) companies, particularly to those operating in unconventional oil and natural gas reservoirs and requiring technically and operationally advanced services. The Company’s well service rigs are designed to support growing U.S. horizontal well demands. 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.

Processing Solutions.  The Company provides a range of proprietary, modular equipment for the processing of rich natural gas streams at the wellhead or central gathering points in basins where drilling and completion activity has outpaced the development of permanent processing infrastructure.

Other. The Company incurs costs, indicated as Other, that are not allocable to either of the operating segments, and includes mostly corporate general and administrative expenses as well as depreciation of office furniture and fixtures and other corporate assets. Prior to the Offering and subsequent reorganization, the Well Services and Processing Solutions were run as separate companies, therefore there were no such costs or assets

Segment information as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 is as follows (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Processing

    

 

 

 

 

Other

 

Well Services

 

Solutions

 

Total

 

 

 

 

 

Three months ended March 31, 2018

Revenues

 

$

 —

 

$

59.7

 

$

2.9

 

$

62.6

Cost of services

 

$

 —

 

$

49.9

 

$

1.4

 

$

51.3

Depreciation and amortization

 

$

0.2

 

$

5.6

 

$

0.3

 

$

6.1

Impairment of goodwill

 

$

 —

 

$

9.0

 

$

 —

 

$

9.0

Operating income (loss)

 

$

(6.5)

 

$

(4.8)

 

$

0.5

 

$

(10.8)

Interest expense, net

 

$

(0.4)

 

$

 —

 

$

 —

 

$

(0.4)

Net income (loss)

 

$

(7.1)

 

$

(3.7)

 

$

0.5

 

$

(10.3)

Capital expenditures

 

$

 —

 

$

10.1

 

$

2.2

 

$

12.3

 

 

 

 

 

As of March 31, 2018

Property, plant and equipment

 

$

6.3

 

$

166.2

 

$

27.4

 

$

199.9

Total assets

 

$

6.3

 

$

226.3

 

$

29.9

 

$

262.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Processing

    

 

 

 

 

Other

 

Well Services

 

Solutions

 

Total

 

 

 

 

 

Three months ended March 31, 2017

Revenues

 

$

 —

 

$

27.3

 

$

1.8

 

$

29.1

Cost of services

 

$

 —

 

$

23.2

 

$

0.7

 

$

23.9

Depreciation and amortization

 

$

 —

 

$

3.3

 

$

0.3

 

$

3.6

Impairment of goodwill

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Operating income (loss)

 

$

 —

 

$

(5.9)

 

$

0.2

 

$

(5.7)

Interest expense, net

 

$

 —

 

$

(0.5)

 

$

 —

 

$

(0.5)

Net income (loss)

 

$

 —

 

$

(6.4)

 

$

0.2

 

$

(6.2)

Capital expenditures

 

$

 —

 

$

11.7

 

$

0.1

 

$

11.8

 

 

 

 

 

As of December 31, 2017

Property, plant and equipment

 

$

6.4

 

$

157.4

 

$

25.4

 

$

189.2

Total assets

 

$

6.4

 

$

225.1

 

$

28.2

 

$

259.7

 

 

17


 

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

The following discussion and analysis should be read in conjunction with the historical financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”). This discussion contains “forward‑looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward‑looking statements due to a number of factors. 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 Note Regarding Forward‑Looking Statements. Also, please read the risk factors and other cautionary statements described under Part II, Item 1A.-“Risk Factors” included elsewhere in this Quarterly Report and in our Annual Report. We assume no obligation to update any of these forward‑looking statements.

Overview

We are 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. We believe that our fleet of 135 well service rigs is among the newest and most advanced in the industry and, based on our historical rig utilization and feedback from our customers, we believe that we are an operator of choice for U.S. onshore E&P companies that require completion and production services at increasing lateral lengths. Our 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. In addition to our core well service rig operations, we offer a suite of complementary services, including wireline, snubbing, well testing, fluid management and well service-related equipment rentals. We also provide rental equipment, including well control packages, hydraulic catwalks and other equipment that are often deployed with our well service rigs. In addition, we own and operate a fleet of proprietary, modular natural gas processing equipment that processes rich natural gas streams at the wellhead or central gathering points. We have 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.

Our Predecessor and Ranger Energy Services, Inc.

The Company was formed on February 17, 2017, and did not conduct any material business operations prior to the transactions described under “Initial Public Offering” other than certain activities related to the Offering. Our Predecessor consists of Ranger Services and Torrent Services on a combined consolidated basis. In connection with the transactions described in Note 1 – Organization and Business Operations – Reorganization, the Existing Owners contributed the equity interests in the Predecessor Companies to us in exchange for shares of our Class A Common Stock, Ranger Units and shares of our Class B Common Stock.

Ranger Inc. was, through Ranger Holdings, formed by CSL in June 2014 as a provider of high‑spec well service rigs and associated services. Torrent Services was, through 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, 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, an owner and operator of high‑spec well service rigs. The historical condensed consolidated financial information included in this report presents (i) prior to August 16, 2017, the historical financial information of the Predecessor Companies, 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 financial information of the Company. The historical condensed consolidated financial information of our Predecessor is not indicative of the results that may be expected in any future periods. For more information, please see the historical condensed consolidated related notes thereto included elsewhere in this quarterly report.

On August 16, 2017, we acquired 49 high-spec well service rigs, certain ancillary equipment, and certain of its liabilities. ESCO is included in our consolidated financial results from the date of acquisition onward.

18


 

We conduct our operations through two segments: Well Services and Processing Solutions. Our Well Services segment has historically consisted of the results of operations of Ranger Services and, as applicable, Magna, Bayou and the ESCO Acquisition assets from their respective acquisition dates, while our Processing Solutions segment has historically consisted of the results of operations of Torrent Services. Our Well Services segment provides high‑spec well service rigs and complementary equipment and services in the United States, with a focus on technically demanding unconventional horizontal well completion, workover and maintenance operations. These services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well. Our Processing Solutions segment engages in the rental, installation, commissioning, start‑up, operation and maintenance of mechanical refrigeration units (“MRUs”),  natural gas liquids (“NGL”) stabilizer units, NGL storage units and related equipment. We operate 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. For additional information about our assets and operations, please see Note 17 - Segment Reporting to the unaudited interim condensed consolidated financial statements.

Initial Public Offering

On August 16, 2017, we completed the Offering of 5,862,069 shares of its Class A Common Stock. The gross proceeds of the Offering, based on a public offering price of $14.50 per share, was $85.0 million, which resulted in net proceeds to us of $77.0 million, after deducting $4.2 million of underwriting discounts and commissions and $3.9 million of costs related to the Offering.  These net proceeds were used to pay off the remainder of our long term debt of $10.4 million, fund $45.2 million for the cash portion of the ESCO Acquisition, and $0.7 million for cash bonuses to certain employees. The remaining $20.7 million of net proceeds were used to fund capital expenditures and general business expenses.

 

How We Generate Revenues

We currently generate revenues through the provision of a variety of oilfield services. These services are performed under a variety of contract structures, including a long term take‑or‑pay contract and various master service agreements, as supplemented by statements of work, pricing agreements and specific quotes. A portion of our master services agreements include provisions that establish pricing arrangements for a period of up to one year in length. However, the majority of those agreements provide for pricing adjustments based on market conditions. The majority of our services are priced based on prevailing market conditions and changing input costs at the time the services are provided, giving consideration to the specific requirements of the customer. Please see Note 3 – Revenue from contracts with customers to the unaudited interim condensed consolidated financial statements.