RNGR stock bounced 12% on July 20, 2021, after the company did a 61.8% Fibonacci retracement on the daily chart.
RNGR Stock Chart
What made RNGR stock bounce off its 61.8% retracement level is the upgrade from Barclays on July 19, 2021.
Ranger Energy upgraded to Overweight from Equal Weight at Barclays
On July 19, 2021, Barclays analyst J. David Anderson upgraded Ranger Energy Services to Overweight from Equal Weight with a price target of $13, up from $5. Ranger over the past two months acquired both Patriot and PerfX in separate stock and assumed debt deals, adding 55 wireline units and “meaningful scale” to its current wireline fleet of 13, Anderson tells investors in a research note. The analyst believes the deal valuations look attractive.
Ranger Energy Services Acquires PerfX Wireline Services
On July 9, 2021, Ranger Energy Services, Inc. (NYSE: RNGR) continues the expansion of its wireline services business with the announcement of the acquisition of PerfX Wireline Services (“PerfX”).
Ranger is pleased to announce the acquisition of PerfX, its second wireline acquisition in the last several weeks. The first, the previously announced acquisition of Patriot Completion Services (“Patriot”), closed on May 14th while the PerfX acquisition closed yesterday, July 8th. The combination of Patriot and PerfX significantly increases the scale and scope of our existing Mallard wireline business. We are extending our range of services beyond our current completion-oriented work to now include a full suite of production services as well as adding geographic diversity.
Bill Austin, Chairman of the Board and interim CEO of Ranger stated, “Similar to our previously announced acquisition of Patriot, the addition of PerfX to our Ranger portfolio of companies checks a number of strategic boxes. With these two acquisitions we now have the scale, scope and diversification necessary to ensure the long-term success of our wireline service offerings under the Ranger umbrella. Moving forward, Ranger will continue its focus on balance sheetThe balance sheet is a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity. strength and free cash flowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... generation. We are pleased to have completed these two transactions and expect more opportunities to grow our businesses through acquisitions.”
Together, the Patriot and PerfX transactions add 55 wireline trucks, 10 cranes, and four pump-down pumps to Ranger’s existing Mallard fleet of 13 wireline trucks and eight pumps. Additionally, these acquisitions bring eight locations and 27 incremental customers, as well as full packages of other ancillary equipment. Both Patriot and PerfX are young companies with a full suite of recently built state-of-the-art assets. As a result, we expect to see only nominal maintenance capital expense associated with these assets over the next few years.
As noted, these acquisitions add significant scale to Ranger’s existing wireline business, increasing Mallard’s 13 unit count to a post-transactions total of 68 wireline trucks. Geographically, we are expanding beyond Mallard’s current Permian focus to a footprint that includes the DJ, Bakken and Powder River basins in eight incremental locations. In addition to the geographic diversity, Patriot adds an extensive production services focus to Mallard’s completion-only offering. This balances our service intensity across the entire well life helping to smooth revenueThe income statement provides a summary of a company's revenue and expenses over a specified period of time, typically a year or a quarter. It shows the company's total revenue, th... and earnings volatility across the commodity cycles. These acquisitions also enhance our wireline customer diversification with the addition of 27 incremental wireline customers.
On a combined basis, for both the Patriot and PerfX transactions, Ranger has issued 2.256 million shares of Class A Common Stock representing 12% of the pro-forma, post-transaction outstanding Class A and B Common Stock. Additionally, Ranger has assumed a total of $12 million of light duty vehicle leases and rolling-stock associated term debt.
In Q1 2021, the combination of Patriot and PerfX posted $30 million of revenue, a proforma increase of 78% over Ranger’s reported total company revenue of $38 million. Gross margins for the acquired businesses are currently in the 12-16% range. Once fully integrated, we expect these margins to increase to at least 20%, a margin level more in-line with Mallard’s historic operating performance. Note that the Patriot and PerfX Q1 2021 revenue reflects a 45% wireline truck utilization. Both businesses currently have an operating capability up to a target 75% utilization, demonstrating significant upside beyond already accretive near-term expectations. On a NTM basis we expect EV/EBITDA accretion of 27% and FCF/share accretion of 34%.
The PerfX purchase price includes a 30% ownership option in XConnect through a warrant structure. XConnect is the manufacturer of a perforating gun system developed over the last several years by the PerfX sellers alongside the PerfX Wireline service business. This ownership option is conditioned on the maintenance of a specific minimum level of XConnect purchases. Post-acquisition, XConnect is expected to remain the preferred gun supplier to PerfX’s current customer base.
Ranger is an independent provider of well service rigs, wireline and associated services in the United States, with a focus on unconventional horizontal well completion and production operations. Ranger also provides services necessary to bring and maintain a well on production through its Processing Solutions segment which engages in the rental, installation, commissioning, start-up, operation and maintenance of MRUs, Natural Gas Liquid stabilizer and storage units and related equipment.
Ranger Energy Services Acquires Patriot Completion Solutions in All-Stock Transaction
On May 17, 2021, Ranger Energy Services, Inc. (NYSE: RNGR) announced the acquisition of Patriot Completion Solutions LLC (d/b/a Patriot Well Soluitions) (“Patriot”) in an all-stock transaction. The acquisition of Patriot further expands Ranger’s high quality wireline business while maintaining our considerable balance sheet strength. Patriot’s market leading reputation for wireline evaluation and intervention services, combined with its strong market presence in the Permian, Bakken, DJ, and Powder River Basins, and debt free balance sheet, created a highly attractive opportunity for Ranger.
Darron Anderson, CEO of Ranger Energy Services stated, “The addition of Patriot to our Ranger portfolio of companies checks a number of strategic boxes. Operators continue to drive capital discipline resulting in a material growth of well maintenance and intervention style work. Patriot’s primary service offering of wireline evaluation and intervention plays an integral role in these types of operations, significantly expanding Ranger’s current capabilities. Secondly, Patriot’s wireline completion units will be integrated into our highly efficient Mallard wireline business resulting in greater scale and immediate synergy capture. Most importantly, Patriot brings an extremely talented and technical team to the Ranger family along with an asset base of 22 wireline units which significantly increases our fleet size and geographical reach.”
Patriot, a portfolio company of White Deer Energy, is led by CEO Dragan Cicvaric. “We are extremely proud to have represented White Deer, and our team thanks them for their partnership and continued support of Patriot and now Ranger. As we move into our next phase of growth, we are excited to be joining the Ranger family of companies. Ranger has demonstrated their knowledge and commitment to the wireline business through their Mallard brand. Their reputation and experience bring an extreme level of excitement and confidence to our team,” said Mr. Cicvaric.
During Ranger’s first quarter 2021 earnings call, management made note of potentially closing a wireline acquisition within days along with the opportunity of closing a second acquisition within the next couple of months. Ranger remains committed to building a sustainable, high returns business centered upon top quality clients, excellent service and assets, effective technologies, efficient operations and processes, and ESG stewardship. While the addition of Patriot is a great milestone toward Ranger achieving its goals, the Company continues to pursue additional accretive strategic transactions.
