rngr-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38183

RANGER ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)


Delaware			81-5449572
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

10350 Richmond, Suite 550

Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

(713) 935-8900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 par value

RNGR

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated Filer ☒

Non-accelerated Filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2024, the registrant had 22,883,296 shares of Class A Common Stock and zero shares of Class B Common Stock outstanding.

RANGER ENERGY SERVICES, INC.

TABLE OF CONTENTS


						Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets						5
Condensed Consolidated Statements of Operations						6
Condensed Consolidated Statements of Stockholders’ Equity						7
Condensed Consolidated Statements of Cash Flows						8
Notes to Condensed Consolidated Financial Statements
Note 1 — Organization and Business Operations						9
Note 2 — Summary of Significant Accounting Policies						9
Note 3 — Assets Held for Sale						10
Note 4 — Property and Equipment, Net						11
Note 5 — Intangible Assets						11
Note 6 — Accrued Expenses						12
Note 7 — Leases						12
Note 8 — Other Financing Liabilities						13
Note 9 — Debt						13
Note 10 — Equity						15
Note 11 — Risk Concentrations						16
Note 12 — Income Taxes						16
Note 13 — Earnings (Loss) per Share						17
Note 14 — Commitments and Contingencies						17
Note 15 — Segment Reporting						17
Note 16 — Subsequent Events						18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						18
Item 3. Quantitative and Qualitative Disclosures About Market Risks						28
Item 4. Controls and Procedures						28

PART II – OTHER INFORMATION
Item 1. Legal Proceedings						30
Item 1A. Risk Factors						30
Item 2. Unregistered Sales of Securities and Use of Proceeds						30
Item 5. Other Information						31
Item 6. Exhibits						32

SIGNATURES						33

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “may,” “should,” “intend,” “could,” “believe,” “anticipate,” “estimate,” “expect,” “outlook,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements represent Ranger’s expectations or beliefs concerning future events, and it is possible that the results described in this Quarterly Report will not be achieved.

These forward-looking statements are subject to risks, uncertainties,and other factors, many of which are outside of Ranger’s control. Should one or more of these risks or uncertainties described occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. These risks include, but are not limited to, the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”), those set forth from time-to-time in other filings by the Company with the SEC, and those in this Form 10-Q, including the following factors:

•reductions in capital spending by participants in the oil and natural gas industry;

•volatility of oil and natural gas prices, as well as fuel conservation measures, impacting the supply and demand for oil and natural gas;

•capital expenditures for new equipment as we grow our operations and capital expenditures resulting from environmental initiatives, new regulatory requirements, and advancements in oilfield services technologies;

•intense competition (including as to pricing) that may cause us to lose market share and could negatively affect our ability to market our services and expand our operations;

•reduced demand for our services, including as a result of fuel conservation measures and resulting reduction in demand for oil and natural gas;

•difficulties we may have managing the growth of our business, including through potential future acquisitions and mergers, which could adversely affect our financial condition and results of operations;

•customer concentrations and reliance upon a few large customers that may adversely affect our revenue and operating results;

•increasing competition for workers, as well as labor shortages, and challenges to our ability to attract, hire, and retain qualified and skilled employees;

•unsatisfactory safety performance may negatively affect our current and future customer relationships, and to the extent we fail to retain existing customers or attract new customers, adversely impact our revenue;

•accidents, blowouts, explosions, craterings, fires, oil spills and releases of drilling, completion or fracturing fluids or hazardous materials or pollutants into the environment;

•claims, including personal injury and property damages, which could materially and adversely affect our financial condition, results of operations and prospects;

•federal and state legislative and regulatory initiatives that could result in increased costs and additional operating restrictions or delays, as well as adversely affect demand for our support services;

•environmental and occupational health and safety laws and regulations that may expose us to significant costs and liabilities;

•risks arising from climate change, and increased attention and proposed and future requirements relating to sustainability, environmental, social, and governance (“ESG”) matters and conservation measures may adversely impact our or our customers’ businesses;

•seasonal weather conditions, severe weather events and natural disasters that could severely disrupt normal operations and harm our business;

•cybersecurity and data privacy risks, including interruptions, failures or attacks in our information technology system;

•interest rate risk as a result of our revolving credit facility and financing agreement to fund operations;

•certain restrictions under the terms of our Wells Fargo Revolving Credit Facility may limit our future ability to pay cash dividends;

•liquidity and access to capital that could result in challenges and vulnerabilities associated with our ability to secure the necessary financial resources to support its operations, growth, and strategic initiatives;

•potential challenges, uncertainties, and risks associated with the rapid development and adoption of new technologies that could displace our existing asset base or impact traditional oil and gas operations, including automation, artificial intelligence, and renewable energy solutions;

•sufficiency of our insurance program to adequately protect against potential risks and liabilities;

•commodity price risk due to fluctuations in the prices of oil and natural gas, and resulting impacts on the activity levels of our exploration and production (“E&P”) customers;

•the impact of geopolitical, economic and market conditions on our industry and commodity prices;

•credit risk associated with our trade receivables;

•general economic conditions or a weakening of the broader energy industry, including as a result of inflation or recession; and

•risks related to our ownership and capital structure.

Our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our current and past filings with the SEC. Those documents are available through our website or through the SEC’s Electronic Data Gathering and Analysis Retrieval system at www.sec.gov.

All forward‑looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, any forward-looking statements speak only as of the date on which it is made. We disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this cautionary section, to reflect events or circumstances after the date of this Quarterly Report.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

RANGER ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)


	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	11.1	$	15.7
Accounts receivable, net	70.6		85.4
Contract assets	21.2		17.7
Inventory	6.4		6.4
Prepaid expenses	6.6		9.6
Assets held for sale	0.6		0.6
Total current assets	116.5		135.4

Property and equipment, net	223.1		226.3
Intangible assets, net	6.1		6.3
Operating leases, right-of-use assets	8.9		9.0
Other assets	0.9		1.0
Total assets	$	355.5	$	378.0

Liabilities and Stockholders' Equity
Accounts payable	$	21.7	$	31.3
Accrued expenses	27.0		29.6
Other financing liability, current portion	0.6		0.6
Long-term debt, current portion	—		0.1
Short-term lease liability	7.4		7.3
Other current liabilities	1.3		0.1
Total current liabilities	58.0		69.0

Long-term lease liability	14.2		14.9
Other financing liability	10.8		11.0

Deferred tax liability	10.8		11.3

Total liabilities	93.8		106.2

Commitments and contingencies (Note 14)

Stockholders' equity
Preferred stock, $0.01 per share; 50,000,000 shares authorized; no shares issued or outstanding as of March 31, 2024 and December 31, 2023	—		—
Class A Common Stock, $0.01 par value, 100,000,000 shares authorized; 25,942,816 shares issued and 22,738,588 shares outstanding as of March 31, 2024; 25,756,017 shares issued and 23,398,689 shares outstanding as of December 31, 2023	0.3		0.3
Class B Common Stock, $0.01 par value, 100,000,000 shares authorized; no shares issued or outstanding as of March 31, 2024 and December 31, 2023	—		—
Less: Class A Common Stock held in treasury at cost; 3,204,228 treasury shares as of March 31, 2024 and 2,357,328 treasury shares as of December 31, 2023	(31.6)		(23.1)
Retained earnings	26.5		28.4
Additional paid-in capital	266.5		266.2
Total stockholders' equity	261.7		271.8
Total liabilities and stockholders' equity	$	355.5	$	378.0

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

RANGER ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in millions, except share and per share amounts)


	Three Months Ended
	March 31,
	2024		2023
Revenue
High specification rigs	$	79.7	$	77.5
Wireline services	32.8		49.9
Processing solutions and ancillary services	24.4		30.1
Total revenue	136.9		157.5

Operating expenses
Cost of services (exclusive of depreciation and amortization):
High specification rigs	66.3		60.1
Wireline services	32.6		45.7
Processing solutions and ancillary services	21.9		25.1
Total cost of services	120.8		130.9
General and administrative	6.7		8.4
Depreciation and amortization	11.2		10.0

Gain on sale of assets	(1.3)		(1.0)
Total operating expenses	137.4		148.3

Operating income (loss)	(0.5)		9.2

Other expenses
Interest expense, net	0.8		1.2


Total other expenses	0.8		1.2

Income (loss) before income tax expense (benefit)	(1.3)		8.0
Income tax expense (benefit)	(0.5)		1.8
Net income (loss)	(0.8)		6.2



Income (loss) per common share
Basic	$	(0.04)	$	0.25
Diluted	$	(0.03)	$	0.25
Weighted average common shares outstanding
Basic	22,738,286		24,940,335
Diluted	22,922,284		25,209,980

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

RANGER ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in millions, except share amounts)


	Three Months Ended March 31,
	2024	2023	2024		2023
	Quantity		Amount
Shares, Class A Common Stock
Balance, beginning of period	25,756,017	25,446,292	$	0.3	$	0.3
Issuance of shares under share-based compensation plans	261,072	318,482	—		—
Shares withheld for taxes on equity transactions	(74,273)	(87,101)	—		—
Balance, end of period	25,942,816	25,677,673	$	0.3	$	0.3





Treasury Stock
Balance, beginning of period	(2,357,328)	(551,828)	$	(23.1)	$	(3.8)
Repurchase of Class A Common Stock	(846,900)	(39,400)	(8.5)		(0.4)
Balance, end of period	(3,204,228)	(591,228)	$	(31.6)	$	(4.2)

Retained Earnings
Balance, beginning of period			$	28.4	$	7.2
Net income (loss)			(0.8)		6.2
Dividends declared			(1.1)		—
Balance, end of period			$	26.5	$	13.4

Additional paid-in capital
Balance, beginning of period			$	266.2	$	262.6
Equity based compensation			1.2		1.1
Shares withheld for taxes for equity compensation			(0.9)		(1.0)




Balance, end of period			$	266.5	$	262.7

Total shareholders’ equity
Balance, beginning of period			$	271.8	$	266.3
Net income (loss)			(0.8)		6.2
Dividends declared			(1.1)		—
Equity based compensation			1.2		1.1
Shares withheld for taxes for equity compensation			(0.9)		(1.0)




Repurchase of Class A Common Stock			(8.5)		(0.4)
Balance, end of period			$	261.7	$	272.2

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

RANGER ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)


	Three Months Ended March 31,
	2024		2023
Cash Flows from Operating Activities
Net income (loss)	$	(0.8)	$	6.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11.2		10.0
Equity based compensation	1.3		1.1
Gain on disposal of property and equipment	(1.3)		(1.0)


Deferred income tax expense (benefit)	(0.5)		1.9

Other expense, net	0.2		1.1
Changes in operating assets and liabilities
Accounts receivable	14.7		12.3
Contract assets	(3.6)		(5.3)
Inventory	—		(0.8)
Prepaid expenses and other current assets	3.0		1.5
Other assets	0.1		0.3
Accounts payable	(9.5)		3.3
Accrued expenses	(2.6)		(12.3)
Other current liabilities	0.2		0.2
Other long-term liabilities	(0.4)		(1.1)
Net cash provided by operating activities	12.0		17.4

Cash Flows from Investing Activities
Purchase of property and equipment	(6.5)		(5.4)
Proceeds from disposal of property and equipment	0.8		4.3

Net cash used in investing activities	(5.7)		(1.1)

Cash Flows from Financing Activities
Borrowings under Revolving Credit Facility	2.1		167.7
Principal payments on Revolving Credit Facility	(2.1)		(169.1)

Principal payments on financing lease obligations	(1.3)		(1.3)
Principal payments on Secured Promissory Note	—		(0.6)
Principal payments on other financing liabilities	(0.1)		(0.2)
Principal payments on Eclipse M&E Term Loan Facility	—		(0.6)

Shares withheld for equity compensation	(0.9)		(1.0)
Payments on Other Installment Purchases	(0.1)		(0.1)

Repurchase of Class A Common Stock	(8.5)		(0.4)




Net cash used in financing activities	(10.9)		(5.6)

Increase (decrease) in cash and cash equivalents	(4.6)		10.7
Cash and cash equivalents, Beginning of Period	15.7		3.7
Cash and cash equivalents, End of Period	$	11.1	$	14.4

Supplemental Cash Flow Information
Interest paid	$	0.4	$	0.3
Supplemental Disclosure of Non-cash Investing and Financing Activities
Capital expenditures included in accounts payable and accrued liabilities	$	0.1	$	—
Additions to fixed assets through installment purchases and financing leases	$	(0.9)	$	(1.5)
Additions to fixed assets through asset trades	$	2.6	$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

RANGER ENERGY SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Organization and Business Operations

Business

Ranger Energy Services, Inc. (“Ranger, Inc.,” “Ranger,” “we,” “us,” “our” or the “Company”) is a provider of onshore high specification well service rigs, wireline services, and additional processing solutions and ancillary services in the United States (“U.S.”). The Company provides an extensive range of well site services to leading U.S. E&P companies that are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well.

Our service offerings consist of well completion support, workover, well maintenance, wireline, and other complementary services, as well as installation, commissioning and operating of modular equipment, which are conducted in three reportable segments, as follows:

•High Specification Rigs. Provides high specification well service rigs and complementary equipment and services to facilitate operations throughout the lifecycle of a well.

•Wireline Services. Provides services necessary to bring and maintain a well on production and consists of our completion, production, and pump down service lines.

•Processing Solutions and Ancillary Services. Provides complimentary services often utilized in conjunction with our High Specification Rigs and Wireline Services segments. These services primarily include equipment rentals, plug and abandonment, logistics, snubbing and coil tubing, and processing solutions.

The Company’s operations take place in most of the active oil and natural gas basins in the U.S., including the Permian Basin, Denver-Julesburg Basin, Bakken Shale, Eagle Ford Shale, Haynesville, Gulf Coast, South Central Oklahoma Oil Province and Sooner Trend, Anadarko Basin, and Canadian and Kingfisher Counties plays.

Organization

Ranger, Inc. was incorporated as a Delaware corporation in February 2017. In conjunction with the initial public offering of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), which closed on August 16, 2017 (the “Offering”), and the corporate reorganization Ranger Inc. underwent in connection with the Offering, Ranger Inc. became a holding company, and its sole material assets consist of membership interests in RNGR Energy Services, LLC, a Delaware limited liability company (“Ranger LLC”). Ranger LLC owns all of the outstanding equity interests in Ranger Energy Services, LLC (“Ranger Services”) and Torrent Energy Services, LLC (“Torrent Services”), and the other subsidiaries through which it operates its assets. Ranger LLC is the sole managing member of Ranger Services and Torrent Services, and is responsible for all operational, management and administrative decisions relating to Ranger Services, its subsidiaries, and Torrent Services’ business and consolidates the financial results of Ranger Services, its subsidiaries, and Torrent Services.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and the Securities and Exchange Commission’s (the “SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures have been condensed or omitted. The Condensed Consolidated Financial Statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results of operations for the interim periods. These interim financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in the Annual Report. Interim results for the periods presented may not be indicative of results that will be realized for future periods.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2 — Summary of Significant Accounting Policies of the Annual Report.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Management uses historical and other pertinent information to determine these estimates. Actual results could differ from such estimates.

Areas where critical accounting estimates are made by management include:

•Depreciation and amortization of property and equipment and intangible assets;

•Impairment of property and equipment and intangible assets;

•Collectability of accounts receivable and estimates of allowance for credit losses;

•Income taxes; and

•Equity-based compensation.

New Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Note 3 — Assets Held for Sale

Assets held for sale include the net book value of assets the Company plans to sell within the next 12 months and are primarily related to excess non-working assets. Long-lived assets that meet the held for sale criteria are held for sale and reported at the lower of their carrying value or fair value less estimated costs to sell.

As of March 31, 2024, the Company classified $0.6 million of land and buildings within our High Specification Rigs segment as held for sale as they are being actively marketed. As of March 31, 2023, the Company classified $0.6 million and $0.4 million of land and buildings within our High Specification Rigs and Processing Solutions and Ancillary Services segments, respectively, as held for sale as they were being actively marketed. For the three months ended March 31, 2023, the Company recognized a gain on assets previously classified as held for sale of $1.8 million and recognized a loss on the sale of assets previously held in Property and equipment, net of $0.8 million, which nets to the $1.0 million gain on sale of assets on the Condensed Consolidated Statements of Operations. For the three months ended March 31, 2024, the Company recognized a gain on assets previously held in Property and equipment, net of $1.3 million, which is shown on the Condensed Consolidated Statements of Operations.

Note 4 — Property and Equipment, Net

Property and equipment, net include the following (in millions):


	Estimated Useful Life (years)	March 31, 2024		December 31, 2023
High specification rigs	15	$	141.7	$	138.4
Machinery and equipment	3 - 30	200.8		189.2
Vehicles	3 - 15	51.3		53.8
Other property and equipment	5 - 25	20.5		19.9
Property and equipment		414.3		401.3
Less: accumulated depreciation		(202.8)		(196.6)
Construction in progress		11.6		21.6
Property and equipment, net		$	223.1	$	226.3

On August 9, 2023, pursuant to an asset purchase agreement dated August 4, 2023, the Company acquired certain fixed assets from Pegaso Energy Services, LLC (“Pegaso acquisition”) for consideration of $7.3 million paid in cash. The fixed assets acquired from Pegaso were primarily engaged in pump down services for its customers. Under ASC 805 Business Combination, the Company accounted for the Pegaso acquisition as an asset acquisition. The consideration paid is similar to the fair value of the assets acquired and the Company allocated the consideration paid to each of the assets following the cost accumulation model. As of March 31, 2024, twelve of the fifteen acquired pumps are in service and are included in machinery and equipment. As of March 31, 2024, the remaining three acquired pumps are classified as construction in progress. The Company is completing repairs on these assets prior to transfer to depreciable fixed asset accounts.

Depreciation expense was $11.0 million and $9.8 million for the three months ended March 31, 2024 and 2023, respectively.

Note 5 — Intangible Assets, Net

Definite lived intangible assets are comprised of the following (in millions):


	Estimated Useful Life (years)	March 31, 2024		December 31, 2023
Customer relationships	10-18	$	11.4	$	11.4
Less: accumulated amortization		(5.3)		(5.1)
Intangible assets, net		$	6.1	$	6.3

Amortization expense was $0.2 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively. Amortization expense for the future periods is expected to be as follows (in millions):


For the twelve months ending March 31,	Amount
2025	$	0.7
2026	0.7
2027	0.7
2028	0.6
2029	0.5
Thereafter	2.9
Total	$	6.1

Note 6 — Accrued Expenses

Accrued expenses include the following (in millions):


	March 31, 2024		December 31, 2023
Accrued payables	$	13.7	$	13.0
Accrued compensation	10.0		13.7
Accrued taxes	2.0		1.7
Accrued insurance	1.3		1.2
Accrued expenses	$	27.0	$	29.6

Note 7 — Leases

Operating Leases

The Company has operating leases, primarily for real estate and equipment, with terms that vary from one to nine years, included in operating lease costs in the table below. The operating leases are included in Short-term lease liability and Long-term lease liability in the Condensed Consolidated Balance Sheets.

Lease costs associated with yard and field offices are included in cost of services and executive offices are included in general and administrative costs in the Condensed Consolidated Statements of Operations. Lease costs and other information related to operating leases for the three months ended March 31, 2024 and 2023, are as follows (in millions):


	Three Months Ended March 31,
	2024			2023
Short-term lease costs	$	3.3		$	5.3
Operating lease costs	$	0.8		$	0.8
Operating cash outflows from operating leases	$	0.8		$	0.8

Weighted average remaining lease term	3.4 years			4.2 years
Weighted average discount rate	8.1		%	8.1		%

As of March 31, 2024, aggregate future minimum lease payments under operating leases are as follows (in millions):


For the twelve months ending March 31,	Total
2025	$	3.4
2026	3.3
2027	2.8
2028	1.2
2029	0.3

Total future minimum lease payments	11.0
Less: amount representing interest	(1.4)
Present value of future minimum lease payments	9.6
Less: current portion of operating lease obligations	(2.8)
Long-term portion of operating lease obligations	$	6.8

Finance Leases

The Company leases certain assets, primarily automobiles, under finance leases with terms that are generally three to five years. The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are amortized over the shorter of the estimated useful lives or over the lease term. The finance leases are included in Property and equipment, net, Short-term lease liability and Long-term lease liability in the Condensed Consolidated Balance Sheets.

Lease costs and other information related to finance leases for the three months ended March 31, 2024 and 2023, are as follows (in millions):


	Three Months Ended March 31,
	2024			2023
Amortization of finance leases	$	1.3		$	0.8
Interest on lease liabilities	$	0.5		$	0.3
Financing cash outflows from finance leases	$	1.3		$	1.3

Weighted average remaining lease term	2.3 years			1.7 years
Weighted average discount rate	6.1		%	4.3		%

As of March 31, 2024, aggregate future minimum lease payments under finance leases are as follows (in millions):


For the twelve months ending March 31,	Total
2025	$	5.6
2026	4.1
2027	2.9
2028	1.2


Total future minimum lease payments	13.8
Less: amount representing interest	(1.8)
Present value of future minimum lease payments	12.0
Less: current portion of finance lease obligations	(4.6)
Long-term portion of finance lease obligations	$	7.4

Note 8 — Other Financing Liabilities

The Company has sale, lease-back agreements for land and certain other fixed assets with terms that vary from 18 months to 13 years. The sales did not qualify for sale accounting, therefore these leases were classified as finance leases and no gain or loss was recorded. The net book value of the assets remained in Property and equipment, net and are depreciating over their original useful lives.

As of March 31, 2024, aggregate future lease payments of the financing liabilities are as follows (in millions):


For the twelve months ending March 31,	Total
2025	$	0.6
2026	0.7
2027	0.7
2028	0.8
2029	0.9
Thereafter	7.7
Total future minimum lease payments	$	11.4

Note 9 — Debt

The aggregate carrying amounts, net of issuance costs, of the Company’s debt consists of the following (in millions):


	March 31, 2024		December 31, 2023
Wells Fargo Revolving Credit Facility	$	—	$	—



Installment Purchases	—		0.1
Total Debt	—		0.1
Current portion of long-term debt	—		(0.1)
Long term-debt, net	$	—	$	—

Wells Fargo Bank, N.A. Credit Agreement

On May 31, 2023, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A., providing the Company with a secured credit facility (“Wells Fargo Revolving Credit Facility”) in an aggregate principal amount of $75 million. Debt under the Credit Agreement is secured by a lien on substantially all of the Company’s assets. The Company was in compliance with the Credit Agreement covenant by maintaining a fixed charge coverage ratio of greater than 1.0 as of March 31, 2024.

In addition, on September 25, 2023, the Company entered into an agreement with Wells Fargo Bank, N.A. which designated an additional Letter of Credit in the amount of $1.6 million as part of incremental collateral requirements for the Company’s 2023 insurance renewal. This line of credit falls under the Wells Fargo Revolving Credit Facility aggregate principal amount and matures on September 25, 2024. The interest rate for this Letter of Credit was approximately 1.8% for the three months ended March 31, 2024.

The Wells Fargo Revolving Credit Facility was drawn in part on May 31, 2023, to repay the Revolving Credit Facility, M&E Term Loan Facility, and the Secured Promissory Note, as defined below. The undrawn portion of the Wells Fargo Revolving Credit Facility is available to fund working capital and other general corporate expenses and for other-permitted uses, including the financing of permitted investments and restricted payments, such as dividends and share repurchases. The Wells Fargo Revolving Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the Company’s eligible accounts receivable less certain reserves. The Company’s eligible accounts receivable serve as collateral for the borrowings under the Wells Fargo Revolving Credit Facility, which is scheduled to mature on May 31, 2028. The Wells Fargo Revolving Credit Facility includes an acceleration clause and cash dominion provisions under certain circumstances that permits the administrative agent to sweep cash daily from certain bank accounts into an account of the administrative agent to repay the Company’s obligations under the Revolving Credit Facility. The borrowings of the Wells Fargo Revolving Credit Facility, therefore, will be classified as Long-term debt, current portion on the Condensed Consolidated Balance Sheet.

Under the Wells Fargo Revolving Credit Facility, the total loan capacity was $58.6 million, which was based on a borrowing base certificate in effect as of March 31, 2024. The Company did not have any borrowings under the Wells Fargo Revolving Credit Facility. The Company does have a $3.2 million of Letters of Credit open under the facility, leaving a residual $55.4 million available for borrowings as of March 31, 2024. Borrowings under the Revolving Credit Facility bear interest at a rate per annum ranging from 1.75% to 2.25% in excess of SOFR and 0.75

SEC Form 10-Q filed by Ranger Energy Services Inc.