Breaking Down Ranger Energy Services, Inc. (RNGR) Financial Health: Key Insights for Investors

Understanding Ranger Energy Services, Inc. (RNGR) Revenue Streams

Understanding Ranger Energy Services’ Revenue Streams

Revenue Overview: Revenue for the nine months ended September 30, 2024 decreased $57.1 million, or 12%, to $428.0 million from $485.1 million for the nine months ended September 30, 2023.

Breakdown of Primary Revenue Sources

The revenue streams are categorized into three main segments:

• High Specification Rigs: Revenue increased $14.8 million, or 6%, to $249.1 million from $234.3 million.
• Wireline Services: Revenue decreased $70.0 million, or 44%, to $87.6 million from $157.6 million.
• Processing Solutions and Ancillary Services: Revenue decreased $1.9 million, or 2%, to $91.3 million from $93.2 million.

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rates for the segments are as follows:

Contribution of Different Business Segments to Overall Revenue

The contributions of each segment to overall revenue for the nine months ended September 30, 2024 are as follows:

• High Specification Rigs: 58.2% of total revenue.
• Wireline Services: 20.5% of total revenue.
• Processing Solutions and Ancillary Services: 21.3% of total revenue.

Analysis of Significant Changes in Revenue Streams

The most notable changes in revenue streams include:

• The significant decrease in Wireline Services revenue, attributed to a 63% decrease in completed stage counts.
• High Specification Rigs showed resilience with a 6% revenue increase, driven by a 5% increase in average revenue per rig hour.
• Processing Solutions and Ancillary Services experienced a slight decline of 2%, reflecting a mixed performance across various service lines.

Summary Table of Revenue by Segment

A Deep Dive into Ranger Energy Services, Inc. (RNGR) Profitability

A Deep Dive into Ranger Energy Services, Inc. (RNGR) Profitability

Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:

The decrease in gross profit margin from 17.1% in 2023 to 16.8% in 2024 reflects increased operational costs amid declining revenue.

Operating Profit Margin: Operating income for the nine months ended September 30, 2024 was $19.7 million compared to $32.3 million in 2023, resulting in an operating profit margin of 4.6% for 2024 versus 6.6% for 2023.

Net Profit Margin: The net income for the nine months ended September 30, 2024 was $12.6 million compared to $21.7 million in 2023, leading to a net profit margin of 2.9% for 2024 and 4.5% for 2023.

These declines in profit margins indicate a challenging operational environment, exacerbated by reduced revenue from core business segments.

Trends in Profitability Over Time

Analyzing the profitability trends over the past two fiscal years shows:

The consistent decline in all three profitability metrics over the years highlights the pressures faced by the company in adapting to market dynamics.

Comparison of Profitability Ratios with Industry Averages

For 2024, the profitability ratios of the company compared to the industry averages are as follows:

The company's profitability ratios fall below industry averages, indicating potential challenges in maintaining competitive pricing and cost management.

Analysis of Operational Efficiency

Examining operational efficiency, cost management has been crucial for profitability. The cost of services for the nine months ended September 30, 2024 decreased to $356.0 million, down from $402.0 million in 2023.

Despite a decrease in total costs, the percentage of revenue for Wireline Services indicates an increase in operational inefficiency, with costs rising relative to revenue, reflecting the challenges faced in that segment.

Debt vs. Equity: How Ranger Energy Services, Inc. (RNGR) Finances Its Growth

Debt vs. Equity: How Ranger Energy Services, Inc. Finances Its Growth

As of September 30, 2024, the total debt of Ranger Energy Services, Inc. is reported as follows:

The company has a debt-to-equity ratio of 0.0, indicating no reliance on debt financing at this point, which is significantly lower than the industry average of approximately 1.0 for companies in the energy services sector.

In terms of recent debt activity, the company entered a Credit Agreement with Wells Fargo Bank, N.A. on May 31, 2023, establishing a credit facility of $75 million. As of September 30, 2024, the company has maintained its compliance with the credit agreement, particularly the Fixed Charge Coverage Ratio (FCCR) of greater than 1.0.

Interest expense for the nine months ended September 30, 2024, was reported at $2.1 million, reflecting a decrease of 25% compared to $2.8 million for the same period in the previous year, due to reduced borrowing levels and refinancing efforts completed in 2023.

The company has adopted a strategy that balances between debt financing and equity funding effectively. As of September 30, 2024, total liquidity is reported at $86.1 million, which includes $14.8 million in cash and $71.3 million available under the Wells Fargo Revolving Credit Facility.

Additionally, the company has an ongoing share repurchase program authorized for up to $85 million, which reflects a commitment to returning value to shareholders while managing its capital structure prudently.

This financial structure reflects a conservative approach to financing, emphasizing equity and liquidity while minimizing debt exposure.

Assessing Ranger Energy Services, Inc. (RNGR) Liquidity

Assessing Ranger Energy Services, Inc. Liquidity

Current and Quick Ratios

The current ratio for Ranger Energy Services, Inc. as of September 30, 2024, is calculated at 1.65, indicating a strong liquidity position. The quick ratio, which excludes inventory, stands at 1.25. These ratios suggest that the company is well-positioned to cover its short-term liabilities with its short-term assets.

Analysis of Working Capital Trends

Working capital, defined as total current assets minus total current liabilities, was $66.2 million as of September 30, 2024, compared to $66.4 million at the end of December 31, 2023. This indicates a relatively stable working capital position over the period.

Cash Flow Statements Overview

The following table summarizes the cash flows from operating, investing, and financing activities for the nine months ended September 30, 2024, and 2023:

Potential Liquidity Concerns or Strengths

As of September 30, 2024, total liquidity is reported at $86.1 million, consisting of $14.8 million in cash and $71.3 million available under the Wells Fargo Revolving Credit Facility. The total loan capacity under this facility is $75.0 million, net of $3.7 million in letters of credit. This liquidity level reflects an increase from $61.7 million available as of September 30, 2023. The company is managing its liquidity effectively, with expectations of sufficient funds to meet both short and long-term obligations.

Conclusion

Cash generated from operations remains a primary source of liquidity, and the company’s ability to manage working capital effectively has been demonstrated through stable working capital figures. However, the slight decline in cash flows from operating activities may warrant monitoring in future periods.

Is Ranger Energy Services, Inc. (RNGR) Overvalued or Undervalued?

Valuation Analysis

In assessing the valuation of Ranger Energy Services, Inc. (RNGR), several key financial ratios provide insights into whether the company is overvalued or undervalued. Below are the relevant metrics:

• Price-to-Earnings (P/E) Ratio: RNGR has a P/E ratio of 15.2.
• Price-to-Book (P/B) Ratio: The P/B ratio stands at 1.7.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is 7.5.

Over the last 12 months, the stock price of RNGR has demonstrated the following trends:

Regarding dividends, RNGR has a dividend yield of 2.5% with a payout ratio of 20%.

Analyst consensus on the stock valuation indicates a mixed outlook:

• Buy: 2 analysts
• Hold: 5 analysts
• Sell: 1 analyst

These metrics suggest a cautious yet positive sentiment towards the company's valuation in the current market environment.

Key Risks Facing Ranger Energy Services, Inc. (RNGR)

Key Risks Facing Ranger Energy Services, Inc. (RNGR)

The financial health of Ranger Energy Services, Inc. (RNGR) is impacted by various internal and external risk factors that investors should consider. These risks can be categorized into operational, financial, and strategic risks.

Industry Competition

Intense competition within the oil and gas service industry poses a significant risk. The company has experienced a 44% decrease in Wireline Services revenue for the nine months ended September 30, 2024, which dropped to $87.6 million from $157.6 million in the same period of 2023. This decline is attributed to pricing pressures and increased competition from frac providers.

Regulatory Changes

Regulatory changes remain a concern, as federal and state legislative initiatives can lead to increased operational costs. The impact of environmental and occupational health laws could expose the company to significant liabilities.

Market Conditions

Fluctuations in oil and natural gas prices create a volatile market environment. As of September 30, 2024, the company reported a 12% decrease in total revenue, amounting to $428.0 million, down from $485.1 million for the same period in 2023. These market conditions directly affect demand for the company's services.

Operational Risks

Operational risks include challenges in managing growth, particularly through acquisitions. The company has also reported difficulties in attracting and retaining skilled employees due to market competition, which can adversely affect service delivery and operational efficiency.

Financial Risks

Financial risks are highlighted by the company's reliance on a few large customers, which accounted for approximately 41% of net accounts receivable as of September 30, 2024. This customer concentration can lead to revenue volatility. Additionally, interest expense for the nine months ended September 30, 2024, was $2.1 million, down 25% from $2.8 million in the previous year.

Mitigation Strategies

The company has taken steps to manage these risks through proactive monitoring of capital sources and maintaining liquidity. As of September 30, 2024, total liquidity was reported at $86.1 million, comprising $14.8 million in cash and $71.3 million available under the Wells Fargo Revolving Credit Facility. The total loan capacity under this facility is $75 million.

Future Growth Prospects for Ranger Energy Services, Inc. (RNGR)

Future Growth Prospects for Ranger Energy Services, Inc.

Ranger Energy Services, Inc. is poised for significant growth driven by several key factors. The company is actively pursuing product innovations and market expansions, which are expected to enhance its competitive positioning.

Key Growth Drivers

• Product Innovations: The company has focused on enhancing its High Specification Rigs segment, which saw a revenue increase of $14.8 million, or 6%, to $249.1 million for the nine months ended September 30, 2024, compared to $234.3 million for the same period in 2023.
• Market Expansions: The average revenue per rig hour increased 5% to $730 in the first nine months of 2024 from $693 in 2023.
• Acquisitions: The company has maintained a focus on strategic acquisitions to expand its service offerings and geographic footprint, although specific acquisitions were not detailed in the latest reports.

Future Revenue Growth Projections

Revenue for the nine months ended September 30, 2024, decreased by $57.1 million, or 12%, to $428.0 million from $485.1 million in the prior year. However, the High Specification Rigs segment's resilience indicates a potential for recovery as operational activity increases.

Earnings Estimates

The net income for the nine months ended September 30, 2024, was $12.6 million, down 42% from $21.7 million in the prior year. This decline reflects challenges in the Wireline Services segment, which experienced a 44% decrease in revenue. Analysts predict a gradual recovery as market conditions stabilize.

Strategic Initiatives and Partnerships

The company has initiated a share repurchase program totaling $85.0 million to enhance shareholder value. This strategic move aims to improve stock performance and investor confidence, potentially driving future growth.

Competitive Advantages

Ranger Energy Services benefits from several competitive advantages, including:

• Operational Efficiency: Cost of services for the nine months ended September 30, 2024, decreased $46.0 million, or 11%, to $356.0 million from $402.0 million.
• Liquidity Position: As of September 30, 2024, total liquidity stood at $86.1 million, consisting of $14.8 million in cash and $71.3 million available under the credit facility.
• Market Demand: Increasing operational activity in the High Specification Rigs segment suggests a growing demand in the sector.

The company's growth strategy, driven by market expansions and product innovations, positions it well for future opportunities despite current challenges in specific segments.

Article updated on 8 Nov 2024

Resources:

• Ranger Energy Services, Inc. (RNGR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Ranger Energy Services, Inc. (RNGR)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View Ranger Energy Services, Inc. (RNGR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.