Good morning. And welcome to the Ranger Energy Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the conference over to Shelley Weimer Vice President of Reporting and Finance. Please go ahead.

Thank you, operator. And welcome to the Ranger Energy Services Fourth Quarter and Full Year 2022 Results Conference call. Before the market opened today, Ranger issued a press release summarizing operating and financial results for the three and 12 months ended December 31, 2022. This press release together with the accompanying presentation material are available in the investor relations section of our website at www.rangerenergy.com. Today’s discussion may contain forward-looking statements about business and financial expectations. Actual results may differ significantly from those projected in today’s forward-looking statements due to various risk and uncertainties including the risks described in our periodic report filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures maybe disclosed during this call. A full reconciliation of GAAP to non-GAAP measures are available in our latest quarterly earnings release and conference call presentation. With that, I would now like to turn the conference call over to Stuart Bodden, Ranger’s Chief Executive Officer, for his prepared remarks.

Thank you, Shelley. Good morning, everyone. On today's call, we will be discussing our fourth quarter and full year 2022 results, as well as our outlook for 2023. Ranger’s growing portfolio of high return assets delivered exceptional results in 2022. We more than doubled top line revenue and increased adjusted EBITDA more than 500% from the previous year and went from negative free cash flow to paying down over $50 million of debt, reducing our debt by 72% from its peak in March to adjusted net debt balance at year end of approximately $22 million. We were clear throughout 2022 that we were committed to achieving net debt zero, and I am proud to say that we are very much on track to achieve that goal in mid-2023. Importantly, the team's efforts have put us in a position to enter 2023 with a business that generates substantial free cash flow, allowing us to pursue opportunistic growth opportunities and implement a meaningful capital return framework that includes a combination of a share repurchase and a sustainable dividend. Specifically, our Board has authorized $35 million worth of potential share buybacks available for up to 36 months. And the Board has also approved a quarterly dividend of $0.05 per share that will commence once the company achieves its net debt zero target. The Ranger board and management have committed to returning at least 25% of our annual cash flows to investors, and this amount will potentially increase in future years as we weigh our potential acquisition opportunities with the value of repurchasing our shares or returning further capital through dividends. Behind our strong financial performance in 2022 was tremendous execution from our operations and support teams as they successfully and seamlessly integrated the acquisitions we made during 2021, which resulted in improved operating…

Thanks, Stuart. I'm really pleased by the financial results achieved during 2022 and the progress we made in fortifying our balance sheet. Focusing on the fourth quarter, as Stuart mentioned, although we experienced some seasonality, we experienced an outsized impact from Winter Storm Elliot. Despite the decline in our revenue, a huge credit is due to our team for moderating the storm's impact with strong responsiveness on the cost line that resulted in profitability meeting our expectations. Fourth quarter revenue of $154.3 million was 25% higher than the fourth quarter of 2021. The company posted net income for the quarter of $7.6 million, or $0.31 per share. Adjusted EBITDA for the fourth quarter was $21.6 million, 137% higher than the fourth quarter of 2021, with adjusted EBITDA margins at 14%. At the segment level, fourth quarter 2022 revenue for high specification rigs was $72.6 million, up 22% from the fourth quarter of 2021. We recorded operating activity of 113,600 hours in the fourth quarter, with average pricing of $640 per rig hour, both rig hours and rate increasing year-over-year. Adjusted EBITDA for the high specification rig segment was $15.2 million for the quarter, up from $8.8 million in the fourth quarter of 2021. Increased pricing activity and margin expansion all contributed to the improvement year-over-year, despite 4,300 rig hours of downtime due to Winter Storm Elliot. In the Wireline segment, revenues in the fourth quarter increased by 8% year-over-year to $48.3 million. This segment took the brunt of the winter storm impact, resulting in 13 downtime days in December, which negatively impacted revenues by approximately $3 million relative to expectations. Adjusted EBITDA margins in the wireline segment were 10%, a material improvement compared to the negative 1% margin from the fourth quarter of 2021. In our Processing and Ancillary Services…

Thanks, Melissa. In our earnings release this morning, we provided thoughts on where we expect our 2023 financial performance to fall, and I would like to review some of that information and provide you some further context. As I hope you can tell, we feel confident in our business on the back of a strong 2022 and positive customer conversations as we head into 2023. Despite a drum beat at potential recessionary indicators and concerns about the natural gas markets. Activity levels are picking back up off of our December lows and have been resilient in our core service offerings. The company has entered into several rig and wireline service contracts that will begin in March and April once the harsher winter months are behind us. Giving us additional comfort that our business will ramp to peak activity levels beginning in the second quarter and continuing into the third quarter. As we have indicated, this is a very typical pattern of demand for Ranger’s core service offerings, given seasonality and weather impacts. There have been declines in well servicing rig count in traditional gas basins resulting from the decline in natural gas prices. That said, position to other customers in basin or in other basins. Based on conversations with our customers, we remain optimistic that EMP activity will remain steady and potentially increase in the back half of the year. Turning now to our 2023 financial guidance. We expect revenues for 2023 to fall between $685 million and $715 million or 15% growth at the midpoint when compared to 2022. We expect to generate adjusted EBITDA between $95 million and $105 million off of that revenue base, which would grow EBITDA by over 30% at the midpoint year-over-year. One of the operating metrics where Ranger is particularly differentiated is free…

[Operator Instructions] At this time, we will take our first question, which will come from Don Crist with Johnson Rice.

Good morning, guys. How are you all this morning? Pretty good. Stuart, I wanted to ask, obviously there's been some weakness in completions on the gas side and a little bit of rig reductions in the Permian, but I wanted to dive in a little bit and ask what portion of the rig business is related to completions versus workovers. I believe it's a majority are on the workover side. And how is the demand on the workover side outside of seasonality? Is that holding pretty firm these days?

Yes, the answer to the first part of the question is roughly we're kind of 25% completion related and 75 5% workover related from a revenue basis. Workover demand has actually held up incredibly well, so we're actually quite excited about that. There's been a little softness, as we talked about in the natural gas markets, but we also felt like we had some unmet demand with other customers both in basin and actually in some of the oily basin. So we feel like most of those rigs, we think we'll find a home and many have and will in short order.

To take that one step further. I know in the past you've talked about P&A opportunities. Where are we in that life cycle? I know you had talked about dedicating some rigs to P&A opportunities that could be coming up that could be pretty big. Where are we in that?

Yes, I think we're in the early but sort of rapidly increasing stage of that just a couple of anecdotes. So one is some of the money associated with the Infrastructure Act that was available to P&A is now starting to trickle through the system. So we are seeing more bids out for that. We've also seen some of our larger customers just embark on kind of P&A programs as part of their regular operations. So we're seeing pretty market increase in demand for P&A.

Okay. And one for, I believe, Melissa here. Can you outline the CapEx spend this year and kind of where that's going to versus growth versus kind of maintenance.

So the vast majority, we only have a couple of million dollars sort of earmarked. We do have increase; we have a couple of million dollars earmarked for growth CapEx really geared towards ESG related growth CapEx. So electrification or emissions reductions is the only real growth we are investing. The 25 to 35 also includes sort of the vehicle leases. There is sort of a fleet refresh budget out there. So I don't think of that as growth, that's maintenance, but that's a piece of it that's probably outsized and then everything else is sort of maintenance CapEx, but also trickled into that. I don't call it growth CapEx, but it's sort of that reactivation of rigs. So we do have 10-15 rigs earmarked to reactivate this year and put into service. As those come out, they require a couple of hundred thousand dollars each. So that's included in that number. Again, we think of it as sort of longer term maintenance, not necessarily growth CapEx.

I appreciate all the colors there. And one further one for me before jumping back in the queue on the M&A side, Stuart. Is the bid ask coming closer to reality these days, or is it still pretty wide?

No, it is, I think since we all last talked at the end of Q3, the number of inbounds that we're taking has increased substantially. And those conversations, obviously before we spend a whole lot of time, we're public, you can see where we're trading ,right and we explain that. And I do think that people understand that and are becoming a lot more realistic about what's available. So I do think the bid ask is starting to close.

Our next question will come from Luke Lemoine with Piper Sandler.

Good morning, Stuart, Melissa. I'm doing well. Stuart, just wanted to touch on it, I guess you mentioned it earlier with a potential speed bump and kind of overall industry activity due to gas, you're moving assets or placing it with new customers within the basin. But I just want to get your thoughts on how you think about pricing returns in this framework. I would assume you're moving kind of in an equivalent price, but if you can't get your desired price return, would you consider just stacking assets and remaining pretty disciplined there?

Yes. Thanks for the question, Luke. So we as part of those conversations, we have some customers, I'd say, in the gas basins that have asked for price concessions. What I would say is that when we speak to them and explain that our labor costs haven't declined, our cost structure hasn’t, or our cost of goods hasn't declined, I think generally, people understand why we need to keep prices flat in those kinds of, I would say, rare examples where they decide to release the rig. As I said, we're finding homes for those rigs at commensurate prices. At this point, we would rather stack rigs than drop prices.

Our next question will come from John Daniel with Daniel Energy.

Hi. Good morning. Thank you for including me. One first question. I think I heard you say in terms of the CapEx that there was some money being allocated to reactivating 10 to 15 rigs. I just want to see if I heard that correctly. And if so, which areas of the country are you seeing incremental demand for rigs?

So you did hear me correctly. That is largely the plan right now, and I think more of the rigs are probably deployed towards the north. The south region has probably been the one that's felt the pressure that you've heard Stuart speak about on the gas side. So we're largely looking at sort of the more northerly region and then also out in Permian area.

Okay, got it. And then going back towards M&A. I'm curious, as you see the weak gas price and just the initial salvos of customers asking for concessions, which presumably are limited to Haynesville and those types of areas, is it in your best interest to hold off on M&A to sort of let the pain settle in, if you will, or how do you approach the transactional opportunities?

Yes, I mean I do think it makes sense to be realistic, particularly for those M&A opportunities that have significant exposure to the Haynesville in North Texas, to wait to see how things play out. Again, what I would say is I do think that because of some of the softness in the natural gas markets, it's closing the bid ask, and I think people will, we're all pricing in M&A. Some uncertainty around the gas markets.

I might only add to the back of what Stuart said, that it is worthy, I think long term, most of the market, and certainly the Ranger team thinks we're pretty bullish on the market in general. So we view this as sort of an opportunistic if you think long term the commodity prices are going to hold really on the gas and the oil side, that I think it makes sense to have these conversations, but we are going into them sort of eyes wide open.

Fair enough. And then the last one for me, I think we always tend to think of acquisition opportunities likely coming in either the core rig business or wireline. But Stuart, I think you said in your prepared remarks the coil tubing results have been sort of a hidden gem. I think I heard that.

Yes.

I'm curious I'm sitting here in Steamboat right now, so I'm trying to pay attention to the call and ski. But the question is, as you look at the coil market, is that an area that you'd be considering consolidating or do you let the others that have been doing it just continue that and you reap the benefits? And that’s my final question.

Yes. I 'd say in general on coil, I think we're content to let others consolidate that one. I think what I would say is when we think about it, obviously, well servicing and wireline, we really think about our business as being production base load with completion upside. And so I think other service lines that have that profile, we're looking at as well.

And our next question will come from John Fichthorn with Dialectic Capital.

Hi. Thanks, guys. Nice year and good guidance. Could you talk a little bit about kind of the top growth drivers if you had to rank them to achieving your guidance for 2023 and then maybe speak to the top risk and the top potential upside as well?

Yes, I appreciate it. Thanks, John. So I think the key driver for us is one I would just say continued sort of steady growth both in wireline, ancillary and the rig business. I do think the wireline in particular has more upside baked in both on activity and pricing. As we mentioned, we've actually been focused over the last several months of kind of growing, particularly our production related business on the wireline side in the south, which we think is an attractive opportunity. And we have a lot of equipment from previous acquisitions that we think can be deployed there. So again, I think there's sort of continued demand across all segments and then really ability for us to grow the wireline. I think the key risk probably people have started to hit on it today is if the natural gas markets really continued to struggle and some of that equipment shows up in other basins and some of our competitors start to drop price. We haven't seen that. As we've said, we think that it's important for us to earn a return on our assets. But I think if I were to say the risk, I think that's probably the risk that people talk about the most.

Super. Also, could you maybe talk about within the capital return part of your announcement? You rank M&A; you had a share buyback. Could you talk about how we think about M&A within share buyback? Can you really do M&A with your multiple as the lowest in the group, at least on free cash flow? And then talk about your three year authorization for a share repurchase? How do we think about that? Is that an authorization for the three years? Is that an execution over three years? What are we supposed to think about with that?

Yes, no. Good question. Thanks, John. So I think the first thing I would say is I don't think it's fair to say that we're prioritizing M&A over our share repurchase or over a dividend. I think that one of the things we felt was important is that we had the ability to do all of those. And depending on market conditions, we can kind of flex any one of those up kind of based on what we had now. So I don't think that there's necessarily an order as much as there is a view that all of these need to be balanced. And luckily, we expect to generate enough free cash flow to be able to satisfy all three. So I don't think there is necessarily a preference to either one. So that's the first thing.

Okay, keep going .Execution of the three year share repurchase.

And so execution on the three years, we don't have a defined timeline. We don't have a defined more needs to be in year one versus year three. But we thought it was important, again, to kind of give us the flexibility to be able to execute over a longer period of time, if necessary. But just as easily we could do the majority of that this year in the first six months, whatever the market conditions, dictate.

And so 25% comes back to us, the other 75% of free cash flow.

So thing I would say is that a lot of that we're talking about 2023, right? So kind of trying to establish the baseline. Obviously, we still have the $22 million of net debt that we want to pay down. We think that ultimately benefits shareholders. So, yes, that probably uses about a third of it. Then we've got the committed dividend, so there's call it $5 million, and then I think after that, let's see what the market does with the stock, and let's see what the M&A opportunities are.

This concludes our question-and-answer session. I'd like to turn the call back over to Stuart Bodden for any closing remarks.

Thank you, operator. Again, thanks, everyone, for your participation this morning. Thank you for your interest, and we look forward to speaking with you soon. Take care.

The conference has now concluded. Thank you very much for your participation today. You may now disconnect your lines.