Good morning and welcome to the Ranger Energy Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.I would now like to turn the conference over to Darron Anderson, Chief Executive Officer. Please go ahead.

Thank you, operator. Good morning and welcome to Ranger Energy Services' fourth quarter 2019 earnings conference call. Joining me today is Brandon Blossman, our CFO, who will offer his comments in a moment.While today's call is focused on our Q4 results and sharing outlook for 2020, I would like to spend the beginning of this call highlighting some of our operational accomplishments and metrics for the full year of 2019.To set the backdrop for 2019, I would like to remind you a few strategies we communicated early this -- early last year. Our primary focus entering 2019 was cash flow generation and using that cash to further paydown the modest level of debt carried on our balance sheet. Operationally, we were seeking to drive efficiencies not only at the wellhead, but also within our back-office processes and systems. And finally, we wanted to broaden our customer base by increasing our exposure to existing and new top-tier customers.As you will know, strategy execution can often be met with headwinds. One particular headwind of 2019 was the softening market as compared to 2018. On a year-over-year basis, average oil and natural gas prices dropped 12% and 18%, respectively. The U.S. land drilling rig count dropped 10%, while completion activity finished 14% below 2018 levels. In spite of these market conditions, I'm very proud of the results produced by our team and our successful strategy execution.So, speaking of the strategies. First, the strategy to drive efficiencies. Defined year-over-year markets softness, Ranger’s combined business delivered an 11% growth in revenue and a 24% adjusted EBITDA growth.While we're pleased with these results, the real accomplishment was achieving this growth while operating more efficiently. Efficiency gains were delivered at the wellhead, bringing value not only to ourselves, but equally important to our customers. Additionally, we achieve…

Thanks, Darron and good morning to everybody on the call. Let's jump right into a full walk through the numbers for the quarter. I'll reiterate the highlights Darron covered and add some incremental detail.Again, on a consolidated basis, relative to last quarter, Q4's overall revenue was down 5% or $4 million from $84 million to $80 million. Adjusted EBITDA down 7% or $800,000 from 12.2% to $11.4 million, and resulting EBITDA margins tick down just slightly from 14.5% to 14.2%.Now moving to segment details and starting with revenue. Quarter-over-quarter revenues saw decreases at both Processing Solutions and Completion and Other Services. Those declines were partially offset by the growth that we saw at the High Spec Rig segment.Specifically in our High Spec Rig segment, revenue was up a healthy 7% or $2.3 million moving from $33 million to $35 million, on a 3% increase in both rig rates and period rig hours. Hourly rig rates went from $519 an hour in Q3 to $535 an hour in Q4, while revenue hours themselves were up 62,400 to 64,400 hours in Q4.This revenue -- this rig revenue hour increase is even more notable given that our expectations at the single rig level where for revenue hours have been down about 10% quarter-over-quarter, given the holiday and other seasonality impacts. So against that down 10% expectation, the increase in rig hours implies a fourth quarter market share gain in the low-teens on a percentage gain basis. Also our completion rig count bumped up one rig to average 14 rigs for the quarter.In the Completion and Other Services segment, revenue was down 9% or $4.2 million from $45 million to $41 million in Q4, with both Wireline and other non-Wireline services seeing declines during the fourth quarter. Wireline revenues themselves were down 8% sequentially,…

Thank you, Brandon. So, looking forward, as we turn the page to 2020, I'm sure the first question is how happy year started? My answer would be, it has started in a similar fashion to 2019. And we have some service lines for 50 geographical locations start slow as customers move to the 2020 budgets.Additionally, our locations with higher natural gas exposure such as our Mid-Con region are seeing even greater challenges as we move into the New Year. But offsetting we've experienced positive results such as our Mallard Completions business yet again raising the bar for stage count in January and continued High Spec Rig rate improvement driven by full rig packages. Netting these dynamics together, we continue to be pleased with our position early in 2020.Moving into the year, our first objective is to continue with a couple of already successful strategies. We are maintaining our commitment to pursue and work for customers who share the common goals of safety, quality, efficiency and value for both parties. While progress was made in 2019, we still have ample room for improvement and further market share gains across each of our reporting segments.So far in 2020 alone, our Mallard brand has added a new dedicated Permian customer who maintains a very active completion calendar and our High Spec Rig and Processing Solutions Groups are an active dialogue or bidding processes with two new incremental LOCs.Efficiency will again be a primary focus for 2020. We will continue to challenge ourselves by driving technology and data collection further into our business. This effort combined with one of the best leads of assets in the industry will continue to drive efficiencies at the wellhead for our customers and for ourselves.Another focused similar to 2019 is our balance sheet. While last year our strong…

We will now begin the question-and-answer session. [Operator Instructions]Our first question is from Jacob Lundberg with Credit Suisse. Please go ahead.

Hey, good morning, guys.

Morning Jacob.

I guess, just to start off and Darron you kind of touched on this in your prepared remarks, but perhaps a little more just on your recent customer conversations we've had about $15 decline in crude oil prices since the beginning of the year. You guys have done a good job reorienting the customer base towards -- operators will be a little less sensitive to changes in oil prices, but it is a fairly dramatic change. Do you get the sense that anybody is rethinking their FY 2020 budgets in light of what's happened in the crude -- with crude prices?

Yeah. So, great question. I mean, it is a very, very tough market, as I said in my opening comments. I think, as we've started 2020 and we had operators, I think certain budget level expectations. January was a little bit of a slow start. But as we got into the early part of February, as we say here today, activity significantly starts to pick up.Now, as recently as last night got a phone call from a particular operator who was running a pretty healthy freq count and dropped about 50% of their spread. So, no impact to Ranger, but just an example of, I think it's going to be a very dynamic market here over the next quarter, and I think operators will be rethinking their plans. Again, we're not seeing any impact outside of the softness that we saw within the first three weeks of January. Specifically on the rig side, we're back to producing our highest revenue run rate in February, that we've seen over past year on rig side. Our Mallard side of the business, again set a record count for the month of January. They started off very, very strong.So, we continued to be very excited about our business. But we're very aware that this market will present challenges and it is going to be a very difficult year, and we're going have to work very, very hard to deliver the results that we have planned.

Got it. That's helpful. And then, one on the capital allocation front. So, as stated in the earnings release and you touched on it in your comments as well, if you're going to be growing EBITDA year-over-year with lower CapEx are obviously set for another strong year of free cash flow generation. So you touched on the potential for increased shareholder returns in 2020. But I'm also curious on your take on M&A in terms of what's available in the market.Is it an appealing -- are there appealing assets out there that are being shopped? And are they anywhere near prices that would incentivize you guys to look at inorganic growth over shareholder returns? If you could just kind of speak generally to what sort of assets -- markets you guys would be interested in? I'm just kind of curious what you're seeing in the market today?

Well, I think that's the whole balanced approach comment, generating that type of free cash flow. We do feel that we would like to return cash back to shareholders and that's being discussed at the board level, but the balanced approach is also continued to grow and build the business. Coming into 2019 at the board level, one of our objectives was to be conservative on the cap expand, clean up the balance sheet, build a fortress balance sheet, so we could be positioned if when the market turned like this to act on acquisition opportunities. So, we continue to, I think, review opportunities and we'll see if there's a great opportunity we can act upon. I think, we look at specific assets and values for acquiring assets out there -- anytime we're having to have assets, we are not going straight to the new market. We are looking at what existing assets that are out in good high quality of shape that we can bring on.I'll give you a couple examples. On the drill out rigs, we've seen horsepower needs going from 600 horsepower to 1,000 horsepower and now up to 2,500 horsepower. The frac market has had some struggles. There's a lot of assets come online from a sales process. We were able to pick up 2,500 horsepower pumps at a very, very reduced value compared to new that were in great shape that we will pair with our drill out rig. So having a balance sheet like we do, allows us to be opportunistic when those opportunities present itself. Asset values are very low at this point. And so, we'll continue to identify those opportunities across 2020.

Okay. And just a follow-up there. Are there -- are there actual new service -- new service or product lines you would look to enter, or would you mostly look to augment the existing business?

It’s the combination of both. I think when you look at our business, if you look at our Mallard Completion business and that's really a strong platform to build around. So, how do we augment that business and what additional service lines can we provide inside of that Mallard platform and these are service lines that would be operationally offered in conjunction with the Mallard type operation. So again, how do we build around the core? The same thing on the rig side, but in two parts. Our drill out rigs, what are the service lines come out with our drill out rigs? Is there a way we can offer some of those services as well as team to augment our rigs with high pressure pumps, like I talked about the 2,500 horsepower case?And then same thing with our well service rig on the production side, what services are provided alongside production operations or P&A operations that we can get into. So, if they -- it's a combination, I won't go into more detail than that, but it's not just of augmented, it also maybe adding additional service lines.

All right. Very helpful. Thanks for taking my questions.

The next question is from Daniel Burke - Johnson Rice. Please go ahead.

Yeah. Hey, good morning, guys.

Good morning Daniel.

Good morning Daniel.

Hey, Darron, you've made reference to sort of opportunistic -- sort of asset purchases and potential to expand into some ancillary service lines, but if it feels like the word consolidation and features heavily in your sort of prepared comments. And I was wondering if I'm reading too much into that, or what reasons -- or what your current level of interest is, and in more meaningful consolidation opportunities in the States?

We definitely think specifically well services are consolidation needs to occur. We've always said we wanted to be part of that, but we do have to be cautious -- we think about the asset quality and consolidation efforts. In my prepared comments, I've made some notes about market share gains we are getting us or us list of phone calls. We do have customers who are reaching out to us that frankly as we're targeting these IOCs, it's a process takes time and there are group of customers that we just haven't even gotten to yet and we're getting us is the cost and those customers pursuing us because of our asset quality relative to what we're -- they're getting from their other service providers. So, we do support consolidation. We want to be part of that, but we are being conservative, because the value that we're bringing to our customers asset quality, balance sheet, we don't want to hinder that and change the direction of our organization.Brandon, do you want to add anything to that?

So, one, absolutely did not intend anybody to read anything into a change of focus in terms of consolidation versus not. So we are, if anything redoubling our efforts this year relative to 2019 on that front, so transformative M&A is still fund center in terms of our thinking for the longer term.I think just kind of adding to Darron's comments, the asset quality absolutely, when we look at combinations, one of the first stops that we have in terms of deal metrics is cash flow contribution to a combined entity. And while it's a good problem to have, it's still a bit of a hurdle when we look at our expected cash flow for 2020 and beyond relative to perhaps some of the potential merger candidates that we're looking at. And so, we have to get through that part of the process, and to date that's been challenging, given the current macro backdrop as in last week or so that makes it even harder.So, we absolutely don't want our current shareholders on a cash flow generation -- from a cash flow generation perspective and the dynamic market here creates opportunities absolutely, but it also being so dynamic create some roadblocks to getting deals done easily.

Got it. That's helpful. And then, it may be a more specific question. It was great to hear -- kind of helpful to hear sort of the overarching EBITDA expectations for full year 2020 versus 2019 and we could certainly fill in the pieces. But I guess more specifically to the High Spec Rigs in Q1 2020, I think I heard you all reference the -- thought that that revenue per hour will tick higher again in Q1 2020.I’m just curious to understand a little bit more what hours look like is as 2020 comes along, recognizing there was a slow start to the year, but also -- and the gas markets had been challenged, but also weather hasn't been too big an impediment this quarter and I’d imagine there's some of the share gain opportunities captured in Q4, you'll have full capture of in Q1. So, I was just wondering a mid single-digit or 10% type increase in well service hours as possible, or if that's way too ambitious?

So agree with everything you said for the driver -- for increase in hours. And I will go out and say that we are expecting revenue to be up on the High Spec Rig side even with a slow start to January given that we're two months into the quarter. Again that is being fueled by the combination of the rates which is due to the rig packages, full rig packages and the increase utilization that we're getting here in the month of February. March, there's no indication that's going to slow down, so we're quite happy with what we're trending on the top line for the rig side.I think from the margin, not that they'll be challenged, but may will -- may be subdued relative to the increase revenues, because as we're putting out these additional rigs there, its costs associated with it, and that's both labor costs, that's repair and maintenance cost. We're bringing rigs out that literally haven't worked for quite a period of time. So, there's an upfront investment into the rig that most of that does just get expensed during income statement. There's on-boarding crews, and so we'll have that additional cost that will hit us across Q1 on the rig side.So, optimistic for the direction of that business, optimistic to have the new contracts that will get the full benefit from for the full year of 2020 that we only had partial for 2019.

Got it. And maybe one last -- one maybe a little bit quicker with this one. But just to the extend, it seems like maintenance CapEx run rate for you guys is probably $5 million if we look at -- and last year's figure maybe if I'm off let me know, what warrants or what's in the growth CapEx budget, albeit small growth cap budget, what's in that budget for 2020?

I won't go into specifics, but I mean, when you talk about the dollar figures, we’re saying low double-digits and you're probably not too far off with your maintenance CapEx expectation, so it doesn't leave much room there. So, it's really just a continue of -- needed ancillaryequipment, but I wouldn't say it's exactly identified. But we know we're going to continue to grow market share, win contracts that we've earmarked to capital for supporting assets that would be needed to support future contracts.

Got it. Okay. Guys, thanks for the time.

Thank you. Thanks for questions, Daniel.

[Operator instructions]The next question is from Chris Voie with Wells Fargo. Please go ahead.

Morning, guys.

Good morning, Chris.

So, understand the shift in the backdrop is pretty sudden and recent. But thus far, have you had any customers reaching out on the rig side asking for price break?

So, I will say that we are done a very good job defending our price point. When you look at the rig hour growth that we had across Q4 and even what we're seeing early in Q1, those hours could have been higher. But we're only seeing the rigs out at a price point that we can get the margin at return that we're looking for. So, it is a difficult market. The pricing pressure exists in the Wireline side, it's definitely there on the rig side. But we're defending that price point, I think, very aggressively and it's showing definitely in the results. So, we're happy with where we stand there.

Okay. And then, in the quarter, pretty impressive gain in rig hours. In the rig service business, in general, are you seeing competitors kind of consolidating to their core basins or exiting certain basins to facilitate that kind of growth?

It's a combination. Yes, we're seeing basically competitors shutting the doors in some basins. I think the most prevalent [ph] area is definitely in the Mid-Con. We've seen a little bit -- but the Mid-Con is definitely leader where we've seen competitors shut doors, so that's definitely a driver. I think that Ranger -- you got to remember, we're still a fairly young company relative to the competitor. So, we're still penetrating customers for the first time. So the internal efforts we're doing there, I think we're differentiating ourselves, especially on the 24-hour drill out market requiring some of the higher horsepower or higher pressure rating type equipment and really picking up market share there. So, it's a combination and one of those attributes is competitors that were at breakeven in this market are losing money and some of them are shutting the doors.

Okay. And if I could just sneak one more in. On the Wireline side, you mentioned the pricing pressure, where is the leading edge for pricing for Wireline right now compared to the average in 4Q? In other words, how much assuming flat activity? How much lower would revenues be just based on where pricing is right now?

Yeah. Again, I won't give specific numbers. And I think the Wireline side, whether it's our Mallard business or any other competitors, there's a lot of pricing variability and that's because the overall ticket price for Wireline relative to that completion is low. And so if you can execute and perform and bring efficiency, allow operator to get more stages per day, you're typically going to see an operator can't will pay your higher price point. So, yes, we have been impacted across all of 2019. I think our team has done a very good job executing us allowed us to get the best available price in the market, while we have been hindered getting the best available price in the market. So, again, don't want to give you specifics on absolute numbers.

Okay. Got it. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Darron Anderson for any closing remarks.

Well, I just want to thank everyone for their participation. I want to thank all of our brands delivering this performance across 2019. I want to thank them for the good start we have for 2020. And we look forward to sharing our results on future calls with you. So, thank you very much everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.