3rd Quarter 2026 - Conference Call - RANGER ENERGY SERVICES INC

Financial Performance:

• Q3 2026 revenue reached $162.8 million, a 7.8% sequential decrease and 26.3% year-over-year increase.
• Net income was $2.5 million ($0.10 per diluted share); adjusted EBITDA was $20.1 million (12.3% margin), down from 16.2% in Q2 2026.
• Free cash flow generated was $20 million, enabling full repayment of the revolver used for the American Wealth Services (AWS) acquisition.
• Operating costs rose to 85% of revenue, primarily driven by a $1.5 million increase in employee medical costs and fuel inflation.
• Cash provided by operating activities was $30.5 million; year-to-date free cash flow was $18.3 million.
• Share repurchases totaled 142,100 shares ($2.2 million) in Q3; YTD capital returned to shareholders was $11.7 million (64% of YTD FCF).
• Contract liabilities (deferred revenue) stood at $19 million at quarter-end, reflecting upfront customer payments for ECHO rigs.

Guidance and Future Outlook:

• Long-term goal remains $100 million in annualized adjusted EBITDA.
• ECHO hybrid rig fleet is on track to reach 24 contracted rigs by the end of 2027.
• STEP coil tubing assets are projected to contribute over $10 million in adjusted EBITDA in 2027, with significant upside expected in 2028.
• Management expects customer budgets to reset in 2027, leading to a return of activity to higher-quality operators like Ranger.
• ECHO rig delivery schedule is running slightly ahead, with the remaining fleet scheduled for delivery through Q3 2026.
• Future outlook is cautiously optimistic, though management declined to provide specific firm guidance for 2027 due to commodity price volatility and labor market constraints.

Business Segments and Product Lines:

• High-Specification Rigs: Revenue was $110.5 million; adjusted EBITDA margin contracted to 16.7% due to rig downtime ("white space") and pricing pressure from smaller competitors.
• Ancillary Services: Revenue fell 10% to $40 million; margins dropped to 17% due to underperformance in transportation, mixing plants, and tubing inspection acquired via AWS, though P&A margins improved.
• Wireline: Revenue declined 34% to $12.3 million due to gaps in customer completion programs; EBITDA was negligible ($200,000) compared to $3.6 million in Q2.
• M&A Integration (STEP): Completed acquisition of STEP-US coil tubing assets on October 8, 2026, adding 13 units and establishing Ranger as the second-largest coil tubing provider in the lower 48.
• M&A Integration (AWS): Realized $5.2 million in annualized cost synergies ahead of the $5 million target; revolver funding fully repaid within one year.

Market and Competitive Landscape:

• Smaller competitors lowered prices in the Permian Basin and other regions to win back work, displacing some of Ranger's daily rigs.
• Ranger maintained pricing discipline, refusing to follow price cuts despite the risk of lost activity, betting on safety and service quality to regain share.
• Crude oil prices moved higher during the quarter, boosting US production and land drilling activity, though prices recently retreated.
• ECHO technology interest is broadening beyond initial customers, with new inquiries increasing at industry conferences.
• Consolidation among operators continues to drive market share gains for Ranger, while smaller displaced competitors face operational risks.

Risks and Challenges:

• Cost inflation in labor (specifically medical costs) and fuel significantly compressed Q3 margins.
• Rig utilization was impacted by "white space" caused by customers managing budgets closely and laying down rigs intermittently.
• Potential labor market tightening as non-oil construction sectors compete for workers.
• Risks associated with smaller, lower-quality competitors cutting corners on equipment inspection and safety, potentially leading to operational disruptions for customers who choose them.
• Volatility in commodity prices and customer budget exhaustion remain key uncertainties for the near term.

Management Commentary and Tone:

• Management tone was confident and resilient, emphasizing that "Ranger has more ways to grow today than at any point in our history."
• Stuart Bowden (CEO) highlighted strategic progress, including the acquisition of scale via STEP and the expansion of the ECHO fleet, framing the quarter as a test of pricing discipline that was successfully managed.
• Melissa Kugel (CFO) provided transparent analysis of margin pressure, attributing it to known factors like medical costs and customer behavior rather than structural issues.
• Management expressed strong conviction that customers will revert to higher-quality providers as budgets reset and safety concerns rise.

Analyst Questions and Answers:

• Don Crist (Johnson Rice): Asked about STEP integration and customer reversion from lower-cost operators. Management confirmed positive early customer reception for the combined coil/tubing offering and noted it is too early to quantify the reversion trend but remains confident in the long-term shift.
• Don Crist: Inquired about labor constraints; Management acknowledged a tightening labor market but stated it is not yet a full-blown crisis.
• Derek Podheiser (Piper Sandler): Asked about challenges lower-quality competitors face (beyond safety). Management cited operational inefficiencies, lack of proper equipment inspections, and customer preference for familiar, highly trained Ranger crews.
• Derek Podheiser: Requested views on 2027 drivers. Management reiterated the importance of the STEP acquisition, ancillary reorganization, and labor/commodity volatility but declined to provide specific numerical forecasts.
• John Daniel (Daniel Energy Partners): Asked about ECHO interest levels. Management confirmed interest is broadening beyond the initial two or three key customers.

Other Key Points:

• Ranger's high-specification rigs saw a 6% sequential increase in 24-hour activity, offset by overall rig releases.
• The company paid $27.5 million for the STEP acquisition, funded via revolver borrowing post-quarter.
• A quarterly cash dividend of $0.06 per share was declared, payable December 4th to stockholders of record as of November 20th.
• The "OneRanger" culture is being integrated to leverage the combined assets of Ranger, AWS, and STEP.
• Management emphasized that ECHO contracts include upfront customer contributions that improve capital returns and lower overall service costs for operators.