Good day, and welcome to the Ranger Energy Services Second Quarter 2025 Conference Call. Please note, this event is being recorded. I would now like to turn the call over to Joe Mease, Vice President of Finance. Please go ahead.

Thank you, and welcome to Ranger Energy Services Second Quarter 2025 Results Conference Call. Ranger has issued a press release outlining our operational and financial performance for the 3 months ended June 30, 2025. The press release and accompanying presentation materials are available in the Investor Relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports 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 will be referenced during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. With that, I would like to now turn the conference call over to our CEO, Stuart Bodden; and our CFO, Melissa Cougle, for their prepared remarks.

Thanks, Joe. Good morning, everyone. Today, I'm pleased to report another strong quarter for Ranger. Second quarter results reflect the resilience of our production-oriented strategy, the hard work of our field teams and our ongoing commitment to disciplined execution. We exited the winter with a strong pickup in activity early in the second quarter, which has continued into the summer months. We have seen higher-than-normal levels of asset turnover as certain customers adjusted their well programs in light of current market conditions. That said, demand in Ranger's core service lines remain strong, and Ranger's results showcased the consistent earnings power and resilience of our business model, our focus on capital discipline and our ability to lead the sector in innovation. For the second quarter, we reported $140.6 million in revenue, a year-over-year improvement that is impressive given the drilling rig and frac spread declines currently impacting drilling and completion exposed businesses. Ranger reported $20.6 million of adjusted EBITDA for the quarter, achieving 14.7% margins, consistent with last year's performance and sequentially stronger than Q1. All segments delivered sequentially improving results despite falling rig counts with company-wide Q2 revenue and adjusted EBITDA improving 4% and 33% quarter-over-quarter, respectively. Our High Spec Rigs segment continued to be the cornerstone of our business, contributing $86.3 million of revenue and $17.6 million of adjusted EBITDA, with margins staying over 20%, again, demonstrating the stability and profitability of production-focused services. Activity levels in customer demand remained stable, although managing through recent white space has put some pressure on margins. We are encouraged by a consistent base of work heading into the second half of the year and the resilience in pricing stability we have seen thus far. Ancillary Services and Wireline both improved quarter-over-quarter, with Ancillary Services generating $32.2 million in revenue and $6.6 million…

Thanks, Stuart, and good morning, everyone. As mentioned, Ranger showed up in the second quarter with another set of consistent results, further reinforcing our production-focused resiliency in the face of declining rig counts. Second quarter revenue was $140.6 million, up 4% sequentially from Q1 and up 2% year-over-year when comparing to the second quarter of 2024. Adjusted EBITDA for the second quarter was $20.6 million, a sequential increase of 33% from the first quarter and 2% lower than the prior year quarter due to both service line mix and some margin pressure from rig transitions between customers. Consolidated margins were 14.7%, a significant improvement from the first quarter and consistent to those seen in the second quarter of 2024. From a segment perspective, the High Specification Rigs segment reported $86.3 million in revenue and $17.6 million in adjusted EBITDA. Revenue slipped slightly quarter-over-quarter and improved year-over-year while adjusted EBITDA and associated margins improved quarter-over-quarter and decreased year-over-year. Rig hours have continued to improve and grow showing strong demand and utilization of the fleet. While pricing slipped 2% quarter-over-quarter, these declines were isolated and driven largely by adjustments to rig packaging profiles. Turning to Processing Solutions and Ancillary Services, revenues for the quarter were $32.2 million, an improvement of 6% from the prior quarter and 4% from the prior year quarter. Adjusted EBITDA for the segment was $6.6 million with 20.5% margins for the second quarter, an improvement from the first quarter, but decreased from the prior year due to service line contribution mix. Wireline returned to profitability with positive EBITDA of $1.6 million on $22.1 million of revenue, a significant sequential improvement that we believe is repeatable in the third quarter. We remain focused on creating a more consistent activity profile and looking for ways to further drive down fixed…

Thanks, Melissa. To summarize, Q2 reflects the strength and consistency of our business model, strong cash conversion, resilient core segments and disciplined execution. Importantly, it also is the exciting start of something new with the launch of ECHO, a platform that showcases how Ranger can lead with innovation without sacrificing returns or reliability. We remain committed to generating free cash flow, returning capital to shareholders, maintaining balance sheet strength and delivering smart growth, both organically and through selective M&A. Thanks again to our employees, partners and shareholders for your continued support. With that, operator, I would like to open up the call for questions.

[Operator Instructions] The first question comes from Don Crist with Johnson Rice.

I wanted to start with the new ECHO rig contract. Congrats for getting this over the finish line after 2 years. But I'm assuming that these assets are going to cost to touch more. But on the contract, is it designed to have a similar payback as you would on a normal rig? I'm just assuming that these are going to be a little bit more expensive for the operator but save money in the long run from a diesel perspective.

Yes, I'll kick it off and then Melissa can chime in, Don. The short answer is, we do think they'll have very similar return profiles or maybe even better. We'll see how the market is. The way that we thought about it is, you're right. There's an incremental cost to doing these refurbs and making the ECHO rigs over and above what we would typically do in a complete refurb. The customers have -- the 2 contracts we referenced, the customers have spent a lot of time with us and they have a lot of faith in the technology. So they have actually through kind of a combination of down payments and agreements for increased rates over a defined set of hours to pay or to help share that incremental cost. And when you kind of put that all together, we get very similar return profiles as a typical refurb for us.

Okay. And I wanted to ask about Wireline Services. Obviously, that market has been challenged for quite a while, but there's been some M&A in the sector, some companies going away and others buying other companies. And in the second quarter, your results were much better than I would have expected. And I wanted to know if the market was tightening and some of those excess assets are going away through M&A? Or is it something more on your side that you're doing to control costs and boost margins?

I think on the impact of potential consolidation in the Wireline, I think it's too early to tell, Don, or too early to really see the benefits of it. I think the improvements are really related to 2 things. One is the team really has done a great job of really getting incredibly focused on cost and managing labor costs and fixed costs. So a lot of that has been on the Ranger side. The second thing is, just as you move out of Q1 and into Q2, we do typically see kind of steadier activity in Q2, particularly in the North, and we did see that. So some benefit from the market but I would also say a lot of benefit from internal actions.

Okay. And then one final one for me. You were not the first company this quarter to say that the fourth quarter is kind of uncertain at this time. But do you think there's an opportunity for some of the gas basins to pick up and kind of fill in some of those white spaces that may crop up in the fourth quarter through other actions in the gas -- in the oil basins?

I think we're certainly hopeful that, that could be the case, Don. We certainly saw that earlier this year when the forward curve firmed up in gas. We saw an increase in activity and then a little bit of a slowdown once the decline. But I think there is that -- I think also a lot will just depend on where people are as relative to their budgets and production profiles as you get into the back half of the year. It's just too early to say, but certainly, a strengthening gas market would help for sure.

The next question comes from Derek Podhaizer from Piper Sandler.

I wanted to ask a question around scaling the ECHO rig. Just how do we think about that, whether this is customer demand driven? Where do we go from 2 rigs to something greater than that? How should we -- is it a natural maintenance cycle or natural attrition of your legacy rigs? Maybe just some more help so we can understand what the total addressable market can be for the ECHO rig in the future.

Sure. Thanks for the question, Derek. I think right now, I think it's really related to customer demand. I think we are -- we don't want to build a number of these and build it and hope they will come. So I think it will really be tied to customer demand. What I would say, though, is based on the conversations we've been having with the 2 customers in particular and some other customers that have looked at it as well, there appears to be significant demand for this. And I think it's hard to know exactly what the TAM is ultimately on this. But I do think that if we had in the next 3 to 5 years, 20-plus ECHO rigs out it, I don't think it would surprise us. But I think we do just want to make sure we're being really disciplined about how we spend the capital related to ECHO and make sure that they're tied to customer -- to a specific customer demand.

That makes sense. Is this basin agnostic? Can these go in every basin across the U S.?

They can. Interestingly, the 2 that are deploying, one is going to be deployed in the Permian Basin, one is going to be deployed in the North. So we are actually testing different kind of weather packages with the 2 different rigs that are going out. But yes, it will be weather agnostic or basin agnostic.

Right, right. That makes sense. So sticking on High Spec Rigs. I noticed the rig hours obviously picked up here, so that's great to see. And looking back in the model, I mean we're at the highest level since 2022. Maybe could you just help us, again, understand holistically the primary drivers of that. Obviously, you're an efficient operator, safety and all that, you had some vendor consolidation. But what's helping you capture that market share? Or is it just this focus on production efficiencies from your customers? Maybe just help us understand what the big drivers are that we're seeing this rig hour increase despite kind of the deflationary market that we've been in, in U.S. land since 2022.

It really is a combination of the things that you just said. So one is, as you know, we have really worked hard to make sure we have strong relationships with the biggest players just because we think they have the most consistent profiles and that continues. So a lot of it has been driven by that. A lot of it has been, as we've talked about before, just on the back of consolidation generally and particularly in high-spec rigs, consolidation has helped us. I think the other thing I would say is when you kind of look at the customer mix, we are really having kind of increased success in deploying rigs for kind of not necessarily the majors, but other larger customers, but even some kind of mid-tier from a size perspective. And I think the reason that we're getting that work really is around efficiency, safety, reliability, et cetera.

Got it. Okay. That's helpful. Just last one for me. Torrent, you guys mentioned it in the release. But maybe just an update there. I know that's an exciting growth avenue for you guys. I think you previously guided us doubling EBITDA in 2025. But maybe where does Torrent stand? And how do you think about it as we move through the rest of the year to next year?

I think right now, it remains on track to double EBITDA. It's -- again, I think it's been pretty steady. The team has done a great job of kind of enhancing the customer base. I think as we look to the year, I think the big decision for us is what kind of capital do we want to deploy into that business. Again, it will need to be tied to customer demand. I don't think we just want to do kind of spec builds. But again, right now, it looks to be kind of on track for the year.

The next question is from John Daniel with Daniel Energy Partners.

I guess I'm going to focus on ECHO as well. Stuart, when you -- some of your customers have like 50-plus rigs, workover rigs across the country at any given time. And I would assume that the people that are starting at the ECHO are the larger, higher quality names. I'm just curious like when someone adopts 1 or 2 of these rigs, how quickly will they -- would you expect or hope that they would really rapidly accelerate? Because if you're using one and you're having a good experience, it would seem like you'd want to have more than one, if that makes any sense. So just let you pontificate.

Yes. It makes a lot of sense. What I would say is with both of the customers we're talking about, I think we mentioned in the press release and mentioned in the script that there's basically an option to build additional rigs for both of these customers. They are both indicating that they would like additional rigs. Again, they spend a lot of time with us. They're very familiar with the technology where they have gotten themselves very familiar to the technology. So to that point, it wouldn't surprise us. We don't have anything firmed up yet, but we're having a lot of conversations, John. And it wouldn't surprise us that very quickly they come back and ask us for a number of additional ECHO rigs.

Okay. And then one more for me. I don't know if you want to disclose it. But from the time you started retrofitting ECHO rig one to the time it was completed. I'm curious like what that time frame was and then what's the optimal time frame, you could get it down to once you start seeing multiple repeating orders? How quickly can you improve the retrofit process?

Yes. We think that just given the demand that we think is going to come, we've been talking a lot with our vendors on this. The first ECHO rig has been, I think months, right? It's been a number of months. But I think that when we sit down and we talk with the vendors, we think that we can actually get it down significantly quicker than that. The one thing I will say is that there are a number of long lead time items, right? Particularly around batteries. And so I think that's one of the things that when we've been talking to customers is that if they say, "Hey, I want one and make it up March of 2026," well, that means we need to start sort of buying long lead time items now, right, or very quickly. So that's kind of the nature of the conversation. But assuming we have those items in place, the actual refurb process can be pretty quick.

[Operator Instructions] The next question comes from Peter Sidoti from Sidoti & Company.

I wonder if you, gentlemen -- or you can give me a hand on capital spending this year and next year. And you seem to be building a fairly large cash forward here, a strong balance sheet. If you could provide a little more meat on what you'll be doing with that.

Peter, so I'll take that and give a start, and Stuart can tuck in behind it. So what we previously guided was year-over-year similar, so in the ballpark of low 30s, and we don't see that being particularly different this year. ECHO was included in that budget, if you will. So I think we see a steady state. We are looking at, hey, if the market got a lot worse, could we throttle it back a little bit in the back half of the year. We'll see. The ECHO rigs are more than 50% paid or about 2/3 paid for at this point. As far as the cash balance, we do have a cash balance. I think there is a lot of discussions we have internally around capital allocation. You saw us start to spend. We were a little bit hesitant at the beginning of the year when the market started to inflect. And part of it was just sort of some cautiousness. We also saw a lot of support in the stock price at a much higher level. Then we had Liberation Day and we had OPEC come in behind. So we just thought it was prudent to kind of take a little bit of a step back. This summer, we actually saw the distribution of our largest shareholder. And you saw us kind of start to take a -- put our toe back in the water, so to speak. We've done repurchases. We intend to continue to do repurchases. They have continued into Q3 as I made in my comments. I think the balance remains wanting to hold on to a little bit. So to the extent the share price is a really compelling investment for us. I think you would see us continue to do that because…

Yes. Peter, I don't have anything to add. Melissa said it exactly right. I mean I think the intention is through a combination of repurchases and potential M&A, those would all be good uses of cash. The only thing I would say is when we speak to investors, we're not out and specifically trying to build a war chest, right? I think that's just kind of how it's happened a little bit. But again, I think we see real opportunities both through capital returns and also M&A in the future.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back to Stuart Bodden for closing remarks.

Thanks, Steve. Again, thanks to everyone, to our employees, our partners, our investors for your continued interest in Ranger. We're very excited about ECHO. Please follow us and follow along social media. We'll have more things being announced in the coming months around ECHO. So again, thank you very much, and I hope everyone has a great week.

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