FORM 10‑Q
(Mark One)
2018
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| Delaware | 81‑5449572 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1000
* We completed our initial public offering on August 16, 2016 and accordingly have not been subject to the reporting requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended for the last 90 days.
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| Large accelerated filer ☐ | Accelerated filer ☐ | |||
Non-accelerated filer ☒ | (Do not check if a smaller reporting company) | Smaller reporting company ☐ | ||
Emerging growth company☒ | ||||
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June 30, December 31, Assets 2017 2016 Current assets Cash and cash equivalents $ 2.4 $ 1.6 Restricted cash 1.6 1.8 Accounts receivable, net 19.1 13.4 Unbilled revenues 1.5 1.2 Prepaid expenses and other current assets 4.1 1.4 Assets held for sale 2.9 2.9 Total current assets 31.6 22.3 Property, plant and equipment, net 120.9 102.4 Goodwill 1.6 1.6 Intangible assets, net 8.9 9.2 Other assets 2.3 0.2 Total assets $ 165.3 $ 135.7 Liabilities and Net Parent Investment Current liabilities Accounts payable $ 11.7 $ 4.7 Accounts payable - related party — 2.4 Accrued expenses 11.2 2.0 Capital lease obligations, current portion 7.4 0.5 Related party debt 17.6 — Long-term debt, current portion 10.5 2.3 Total current liabilities 58.4 11.9 Capital lease obligations, less current portion 0.7 0.3 Long-term debt, less current portion — 9.8 Other long-term liabilities 1.0 1.1 Total liabilities 60.1 23.1 Commitments and contingencies (Note 10) Net parent investment 105.2 112.6 Total liabilities and net parent investment $ 165.3 $ 135.7 RANGER ENERGY SERVICES, INC. Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Revenues Well Services $ 31.7 $ 4.2 $ 59.0 $ 7.8 Processing Solutions 2.0 1.4 3.8 2.6 Total revenues 33.7 5.6 62.8 10.4 Operating expenses Cost of services (exclusive of depreciation and amortization shown separately): Well Services 25.5 3.2 48.7 6.1 Processing Solutions 0.7 0.5 1.4 1.1 Total cost of services 26.2 3.7 50.1 7.2 General and administrative 8.4 1.7 15.6 3.4 Depreciation and amortization 4.0 0.8 7.6 1.7 Total operating expenses 38.6 6.2 73.3 12.3 Operating loss (4.9) (0.6) (10.5) (1.9) Other expenses Interest expense, net (1.1) (0.1) (1.6) (0.2) Total other expenses (1.1) (0.1) (1.6) (0.2) Net loss $ (6.0) $ (0.7) $ (12.1) $ (2.1) RANGER ENERGY SERVICES, INC. Six months ended June 30, 2017 2016 Cash Flows from Operating Activities Net loss $ (12.1) $ (2.1) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 7.6 1.7 Bad debt expense 0.1 - Equity based compensation 0.7 - Changes in operating assets and liabilities, net of effect of acquisition Accounts receivable (5.8) (1.7) Unbilled revenue (0.2) (0.3) Prepaid expenses and other current assets (2.7) 0.6 Other assets (2.1) - Accounts payable 6.5 (1.1) Accounts payable - related party (2.4) - Accrued expenses 1.9 (0.5) Other long-term liabilities (0.1) - Net cash used in operating activities (8.6) (3.4) Cash Flows from Investing Activities Purchase of property, plant and equipment (10.5) (2.3) Net cash used in investing activities (10.5) (2.3) Cash Flows from Financing Activities Net borrowings under line of credit agreement — 0.1 Payments on long-term debt (1.6) (2.3) Borrowings on long-term debt — 1.2 Borrowings on related party debt 17.6 — Principal payments on capital lease obligations (0.3) (0.1) Contributions from parent 4.0 6.7 Restricted cash 0.2 — Net cash provided by financing activities 19.9 5.6 Increase (decrease) in Cash and Cash equivalents 0.8 (0.1) Cash and Cash Equivalents, Beginning of Period 1.6 1.1 Cash and Cash Equivalents, End of Period $ 2.4 $ 1.0 Supplemental Cash Flows Information Interest paid $ (0.5) $ (0.2) Supplemental Disclosure of Noncash Investing and Financing Activity Non-cash capital expenditures $ (7.7) $ (1.6) Non-cash additions to fixed assets through capital lease financing $ (7.6) $ (0.2) Contribution of Magna $ — $ (12.7) RANGER ENERGY SERVICES, INC. August 16, 2017, the historical information of Ranger Energy Services, Inc. (“Ranger” or the “Company”). ; Company’s Class B common stock, par value $0.01 per share (“Class B Common Stock” and together with the Class A Common Stock, “Common Stock”), which the Company initially issued and contributed to Ranger LLC; Units; 2018 except as discussed in Note 3 – Revenue from Contracts with Customers. historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016‑13 amends the accounting for credit losses on impairment as it eliminates the second step of the goodwill impairment test thus effectively calculating impairment loss based on the difference between the carrying value and estimated fair value of the reporting units. Purchase price Cash paid by CSL $ 12.7 Total purchase price $ 12.7 Purchase price allocation Cash $ 1.2 Accounts receivable 3.0 Prepaid expenses and other 1.2 Property, plant and equipment 8.8 Tradename 0.1 Total assets acquired 14.3 Accounts payable (1.0) Accrued expenses (0.6) Total liabilities assumed (1.6) Allocated purchase price $ 12.7 Purchase price Cash $ 17.5 Equity issued 33.0 Total purchase price $ 50.5 Purchase price allocation Prepaid expenses & other $ 0.5 Property, plant and equipment 40.0 Land 0.6 Building and site improvements 2.3 Customer relationships 9.3 Total assets acquired 52.7 Accounts payable (1.8) Accrued expenses (1.0) Other long‑term liabilities (1.0) Total liabilities assumed (3.8) Goodwill 1.6 Allocated purchase price $ 50.5 ESCO Acquisition Total estimated purchase consideration transferred Cash $ 47.7 Seller's notes 7.0 Equity issued 5.0 Total estimated consideration transferred 59.7 Net assets acquired 44.4 Goodwill $ 15.3 Six Months Ended June 30, 2017 2016 Supplemental Pro Forma: Revenue $ 83.6 $ 22.8 Operating Loss $ (11.6) $ (2.3) Net Loss $ (13.2) $ (6.8) Estimated Useful Life June 30, December 31, (years) 2017 2016 Machinery and equipment 5 - 30 $ 2.9 $ 3.0 Vehicles 3 - 5 0.8 0.2 Mechanical refrigeration units 30 16.0 16.0 NGL storage tanks 15 4.3 4.3 Workover rigs 5 - 20 106.1 73.8 Other property, plant and equipment 3 - 30 6.8 13.8 Property, plant and equipment 136.9 111.1 Less: accumulated depreciation (16.0) (8.7) Property, plant and equipment, net $ 120.9 $ 102.4 Company's consolidated balance sheet. Estimated Useful Life June 30, December 31, (years) 2017 2016 Tradenames 3 $ 0.1 $ 0.1 Customer relationships 18 9.2 9.2 Less: accumulated amortization (0.4) (0.1) Intangible assets, net $ 8.9 $ 9.2 As of June 30, Amount 2017 $ 0.3 2018 0.5 2019 0.5 2020 0.5 2021 0.5 Thereafter 6.6 $ 8.9 2017, respectively. As of June 30, Total 2017 $ 0.3 2018 7.6 2019 0.3 2020 0.1 Total future minimum lease payments 8.3 Less: amount representing interest (0.2) Present value of future minimum lease payments 8.1 Less: current portion of capital lease obligations (7.4) Total capital lease obligations, less current portion $ 0.7 June 30, December 31, 2017 2016 Term Loans $ 5.5 $ 7.1 Revolver 5.0 5.0 Current portion of long-term debt (10.5) (2.3) Long term-debt, less current portion $ — $ 9.8 In connection with the Offering These notes include a note for $1.2 million due on August 16, 2018 and a note for $5.8 million due on February 16, 2019. Both of these notes bear interest at 5.0% payable quarterly until their respective maturity dates. 3.5% is at least $10.0 million for performance based on multiple measures including Adjusted EBITDA, rig hours and rig utilization. The following is a description of the segments: Processing Well Services Solutions Total Three months ended June 30, 2017 Revenues $ 31.7 $ 2.0 $ 33.7 Operating income (loss) (5.1) 0.2 (4.9) Interest expense, net (1.0) (0.1) (1.1) Six months ended June 30, 2017 Revenues $ 59.0 $ 3.8 $ 62.8 Operating income (loss) (10.9) 0.4 (10.5) Interest expense, net (1.5) (0.1) (1.6) As of June 30, 2017 Total assets $ 137.8 $ 27.5 $ 165.3 Processing Well Services Solutions Total Three months ended June 30, 2016 Revenues $ 4.2 $ 1.4 $ 5.6 Operating loss (0.5) (0.1) (0.6) Interest expense, net (0.1) - (0.1) Six months ended June 30, 2016 Revenues $ 7.8 $ 2.6 $ 10.4 Operating loss (1.0) (0.9) (1.9) Interest expense, net (0.2) (0.1) (0.2) As of December 31, 2016 Total assets $ 107.9 $ 27.8 $ 135.7 Class C units Class D units Equity-based Equity-based Compensation Liability Compensation Liability Awards Awards Awards Awards Outstanding at January 1, 2016 0.5 0.2 0.4 0.2 Granted — — — — Forfeited — — — — Outstanding at December 31, 2016 0.5 0.2 0.4 0.2 Granted 0.3 — 0.3 — Forfeited (0.2) — (0.2) — Outstanding at June 30, 2017 0.6 0.2 0.5 0.2 2016 Pre-Modification At Modification 2017 Period 5 years 5 years 5 years Dividend Yield — % — % — % Volatility 35 - 60 % 40 % 40 % Risk Free Rate 1.0 - 1.6 % 1.2 % 1.2 % Common Stock. Quarterly Report. the ESCO Acquisition assets from their respective acquisition dates, while our Processing Solutions segment has historically consisted of the results of operations of Torrent Services. Our Well Services segment provides high‑spec well service rigs and complementary equipment and services in the United States, with a focus on technically demanding unconventional horizontal well completion, workover and maintenance operations. These services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well. Our Processing Solutions segment engages in the rental, Reporting, to the unaudited interim condensed consolidated financial statements. The remaining $20.7 million of net proceeds were used to fund capital expenditures and general business expenses. unaudited interim condensed consolidated financial statements. We incur significant equipment costs in connection with the operation of our business, including repair and maintenance costs. convention whereby a well service rig added to our fleet during a month, meaning that we have taken delivery of such well service rig, and it is ready for service and is then assumed to be in our fleet for one half of such month. We believe that rig utilization as measured by average monthly hours per well service rig is a meaningful indicator of the operational efficiency of our core revenue-producing assets, market demand for our well services and our ability to profitably capitalize on such demand. Our evaluation of our rig utilization as measured by average monthly hours per rig may not be comparable to that of our competitors. For example, our competitors’ well service rig fleets are typically comprised primarily of older, For the six months ended June 30, 2018 and 2017, our average revenue per rig hour was approximately $500 and $462, respectively. For the three months ended June 30, 2018 and 2017, our average revenue per rig hour was approximately $513 and $487, respectively. On August 10, 2017, Existing Owners. Units; LLC; Units; income tax purposes) of all or a portion of such TRA Holder's Ranger Units in connection with Three Months Ended June 30, Change 2017 2016 $ % Revenues: Well Services $ 31.7 $ 4.2 $ 27.5 655 % Processing Solutions 2.0 1.4 0.6 43 Total revenues 33.7 5.6 28.1 502 Operating expenses: Cost of services (exclusive of depreciation and amortization shown separately): Well Services 25.5 3.2 22.3 697 Processing Solutions 0.7 0.5 0.2 40 Total cost of services 26.2 3.7 22.5 608 General and administrative 8.4 1.7 6.7 394 Depreciation and amortization 4.0 0.8 3.2 400 Total operating expenses 38.6 6.2 32.4 523 Operating loss (4.9) (0.6) (4.3) 717 Other expenses Interest expense, net (1.1) (0.1) (1.0) 1,000 Net loss $ (6.0) $ (0.7) $ (5.3) 757 % fact that the majority of this business commenced operation in the Permian Basin during 2018. Six Six Months Ended June 30, Change 2017 2016 $ % Revenues: Well Services $ 59.0 $ 7.8 $ 51.2 656 % Processing Solutions 3.8 2.6 1.2 46 Total revenues 62.8 10.4 52.4 504 Operating expenses: Cost of services (exclusive of depreciation and amortization shown separately): Well Services 48.7 6.1 42.6 698 Processing Solutions 1.4 1.1 0.3 27 Total cost of services 50.1 7.2 42.9 596 General and administrative 15.6 3.4 12.2 359 Depreciation and amortization 7.6 1.7 5.9 347 Total operating expenses 73.3 12.3 61.0 496 Operating loss (10.5) (1.9) (8.6) 453 Other expenses Interest expense, net (1.6) (0.2) (1.4) 700 Net loss $ (12.1) $ (2.1) $ (10.0) 476 % revenues due to the fact that the majority of this business commenced operation in the Permian Basin during 2018. associated with such rentals. General & Administrative.General and administrative expenses for the six months ended June 30, to other similarly titled measures of other companies. The following table presents reconciliations of net income (loss) to Adjusted EBITDA, our most directly comparable financial measure calculated and presented in accordance with GAAP. Three Months Ended Three Months Ended June 30, 2017 June 30, 2016 Change $ Well Processing Well Processing Well Processing Services Solutions Total Services Solutions Total Services Solutions Total Net income (loss) $ (6.2) $ 0.2 $ (6.0) $ (0.6) $ (0.1) $ (0.7) $ (5.6) $ 0.3 $ (5.3) Interest expense, net 1.1 — 1.1 0.1 — 0.1 1.0 — 1.0 Income tax provision (benefit) — — — — — — — — — Depreciation and amortization 3.7 0.3 4.0 0.6 0.2 0.8 3.1 0.1 3.2 Equity based compensation 0.4 — 0.4 — — — 0.4 — 0.4 Acquisition related and severance costs 2.4 — 2.4 — — — 2.4 — 2.4 Costs incurred for IPO related services 1.5 — 1.5 — — — 1.5 — 1.5 Adjusted EBITDA $ 2.9 $ 0.5 $ 3.4 $ 0.1 $ 0.1 $ 0.2 $ 2.8 $ 0.4 $ 3.2 Six Months Ended Six Months Ended June 30, 2017 June 30, 2016 Change $ Well Processing Well Processing Well Processing Services Solutions Total Services Solutions Total Services Solutions Total Net income (loss) $ (12.5) $ 0.4 $ (12.1) $ (1.3) $ (0.8) $ (2.1) $ (11.2) $ 1.2 $ (10.0) Interest expense, net 1.5 0.1 1.6 0.2 — 0.2 1.3 0.1 1.4 Income tax provision (benefit) — — — — — — — — — Depreciation and amortization 7.1 0.5 7.6 1.2 0.5 1.7 5.9 — 5.9 Equity based compensation 0.7 — 0.7 — — — 0.7 — 0.7 Acquisition related and severance costs 3.5 — 3.5 — — — 3.5 — 3.5 Costs incurred for IPO related services 3.2 — 3.2 — — — 3.2 — 3.2 Adjusted EBITDA $ 3.5 $ 1.0 $ 4.5 $ 0.1 $ (0.3) $ (0.2) $ 3.4 $ 1.3 $ 4.7 Processing Solutions. Processing Solutions Adjusted EBITDA for the six months ended June 30, 2018 increased Under the Financing Agreement, we have the ability to borrow an additional $18 million as of June 30, 2018. Six Months Ended June 30, Change 2017 2016 $ % (in millions) Cash flows used in operating activities $ (8.6) $ (3.4) $ 5.2 (153) % Cash flows used in investing activities (10.5) (2.3) 8.2 (357) Cash flows provided by financing activities 19.9 5.6 (14.3) (255) Net change in cash $ 0.8 $ (0.1) $ (0.9) 900 % 2017. Financing Activities under the Financing Agreement. In connection with the Offering, we Facility as of June 30, 2018. (August 16, 2022). As of June 30, 2018 the Credit Facility had an effective interest rate of 3.5% The Credit Facility contains events of default customary for facilities of this nature, including, but not limited, to: Less than More than Total 1 year 1 - 3 years 3 - 5 years 5 years (in millions) Long‑term debt obligations(1) $ 10.5 $ 2.3 $ 8.2 $ — $ — Capital lease obligations 8.3 0.4 7.9 — — Operating lease obligations 6.9 1.5 5.0 0.4 — Total $ 25.7 $ 4.2 $ 21.1 $ 0.4 $ — Critical Accounting Policies and Estimates The Company evaluated whether a triggering event had occurred as of December 31, 2017; however, macroeconomic conditions had improved, the oil and gas industry and related market conditions had improved (steady increase in oil pricing through December 31, 2017 and into the first quarter of 2018) and the Company’s overall financial and operating performance had improved as there was increased revenue, profitability, utilization and rates per hour in the fourth quarter. As a result, the Company concluded that there was no triggering event at December 31, 2017. Changes in Internal Control over Financial Reporting INDEX TO EXHIBITS 2.2 †† 10.1 *31.2 **32.1 *101.CAL XBRL Calculation Linkbase Document *101.DEF XBRL Definition Linkbase Document *101.INS XBRL Instance Document *101.LAB XBRL Labels Linkbase Document *101.PRE XBRL Presentation Linkbase Document *101.SCH XBRL Schema Document Pursuant to the requirements PREDECESSOR
UNAUDITED INTERIM CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS millions)millions, except share and per share amounts) June 30,
2018 December 31,
2017Assets Current assets Cash and cash equivalents $ 10.5 $ 5.3 Accounts receivable, net 43.3 32.1 Unbilled revenues 3.3 6.0 Prepaid expenses and other current assets 6.8 5.7 Assets held for sale 0.6 0.6 Total current assets 64.5 49.7 Property, plant and equipment, net 214.9 189.2 Goodwill — 9.0 Intangible assets, net 10.4 10.8 Other assets 0.1 1.0 Total assets $ 289.9 $ 259.7 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 33.6 $ 32.0 Accrued expenses 17.8 11.6 Capital lease obligations, current portion 2.8 8.0 Long-term debt, current portion 12.5 1.3 Other current liabilities 3.0 — Total current liabilities 69.7 52.9 Capital lease obligations, less current portion 4.4 1.5 Long-term debt, less current portion 30.1 5.8 Other long-term liabilities 0.6 3.8 Total liabilities 104.8 64.0 Commitments and contingencies (Note 16) Stockholders' equity Preferred stock, $0.01 per share; 50,000,000 shares authorized, no shares issued or outstanding as of June 30, 2018 and December 31, 2017 — — Class A Common Stock, $0.01 par value, 100,000,000 shares authorized, 8,906,682 shares issued and outstanding as of June 30, 2018 and 8,413,178 shares issued and outstanding as of December 31, 2017 0.1 0.1 Class B Common Stock, $0.01 par value, 100,000,000 shares authorized, 6,866,154 shares issued and outstanding as of June 30, 2018 and December 31, 2017 0.1 0.1 Accumulated deficit (12.6 ) (6.6 ) Additional paid-in capital 110.1 110.1 Total stockholders' equity 97.7 103.7 Non-controlling interest 87.4 92.0 Total stockholders' equity 185.1 195.7 Total liabilities and stockholders' equity $ 289.9 $ 259.7 combined consolidated financial statements.2 PREDECESSOR
UNAUDITED INTERIM CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONSmillions)millions, except share and per share amounts) Three Months Ended
June 30, Six Months Ended
June 30, 2018 2017 2018 2017 Revenues Well Services $ 69.1 $ 31.7 $ 128.8 $ 59.0 Processing Solutions 4.0 2.0 6.9 3.8 Total revenues 73.1 33.7 135.7 62.8 Operating expenses Cost of services (exclusive of depreciation and amortization shown separately): Well Services 56.0 25.5 105.9 48.7 Processing Solutions 1.9 0.7 3.3 1.4 Total cost of services 57.9 26.2 109.2 50.1 General and administrative 7.2 8.4 14.2 15.6 Depreciation and amortization 7.0 4.0 13.1 7.6 Impairment of goodwill — — 9.0 — Total operating expenses 72.1 38.6 145.5 73.3 Operating income (loss) 1.0 (4.9 ) (9.8 ) (10.5 ) Other expenses Interest expense, net (0.5 ) (1.1 ) (0.9 ) (1.6 ) Total other expenses (0.5 ) (1.1 ) (0.9 ) (1.6 ) Earnings (loss) before income tax expense 0.5 (6.0 ) (10.7 ) (12.1 ) Tax expense 1.7 — 0.8 — Net loss (1.2 ) (6.0 ) (11.5 ) (12.1 ) Less: Net loss attributable to the Predecessor — (6.0 ) — (12.1 ) Less: Net loss attributable to non-controlling interests (0.5 ) — (5.1 ) — Net loss attributable to Ranger Energy Services, Inc. (0.7 ) — (6.4 ) — Loss per common share Basic $ (0.08 ) $ — $ (0.74 ) $ — Diluted $ (0.08 ) $ — $ (0.74 ) $ — Weighted average common shares outstanding Basic 8,792,585 — 8,609,034 — Diluted 8,792,585 — 8,609,034 — combined consolidated financial statements.3 PREDECESSOR
UNAUDITED INTERIM CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
June 30, 2018 2017 Cash Flows from Operating Activities Net loss $ (11.5 ) $ (12.1 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 13.1 7.6 Bad debt expense 0.2 0.1 Impairment of goodwill 9.0 — Equity based compensation 1.0 0.7 Loss on sale of property, plant and equipment 0.4 — Changes in operating assets and liabilities, net of effect of acquisitions Accounts receivable (11.4 ) (5.8 ) Unbilled revenue 2.6 (0.2 ) Prepaid expenses and other current assets (1.2 ) (2.7 ) Other assets 0.7 (2.1 ) Accounts payable 3.7 6.5 Accounts payable - related party — (2.4 ) Accrued expenses 5.8 1.9 Other long-term liabilities (0.3 ) (0.1 ) Net cash provided by (used in) operating activities 12.1 (8.6 ) Cash Flows from Investing Activities Purchase of property, plant and equipment (34.1 ) (10.5 ) Proceeds from sale of property, plant and equipment 3.6 — Acquisition, net of cash received (4.0 ) — Net cash used in investing activities (34.5 ) (10.5 ) Cash Flows from Financing Activities Borrowings under line of credit agreement 27.7 — Borrowings on long-term debt 22.0 — Payments on long-term debt (13.5 ) (1.6 ) Borrowings on related party debt — 17.6 Principal payments on capital lease obligations (8.6 ) (0.3 ) Contributions from parent — 4.0 Restricted cash — 0.2 Net cash provided by financing activities 27.6 19.9 Increase in Cash and Cash equivalents 5.2 0.8 Cash and Cash Equivalents, Beginning of Year 5.3 1.6 Cash and Cash Equivalents, End of Year $ 10.5 $ 2.4 Supplemental Cash Flow Information Interest paid $ (0.4 ) $ (0.5 ) Supplemental Disclosure of Noncash Investing and Financing Activity Non-cash capital expenditures $ (10.2 ) $ (7.7 ) Non-cash additions to fixed assets through capital lease financing $ (5.9 ) $ (7.6 ) combined consolidated financial statements.4 PREDECESSORCOMBINED CONSOLIDATED FINANCIAL STATEMENTSCompany”Companies”) was, through Torrent Energy Holdings, LLC (“Torrent Holdings”), acquired by CSL in September 2014 as a provider of proprietary, modular equipment for the processing of natural gas. In June 2016, CSL indirectly acquired substantially all of the assets of Magna Energy Services, LLC (“Magna”), a provider of well services and wireline services, which it contributed to Ranger Services in September 2016. In October 2016, Ranger Services acquired substantially all of the assets of Bayou Workover Services, LLC (“Bayou”), an owner and operator of high‑spec well service rigs. These unaudited interim condensed combined consolidated financial statements of Ranger Energy Services, LLC, Torrent Energy Services, LLC, Magna Energy Services, LLC, and Bayou Workover Services, LLC (collectively our “Predecessor”) included in this quarterly report present (i) prior to August 16, 2017, the historical financial information of the Predecessor Companies, including, as applicable, the results of operations ofRanger Services, Torrent Services, Magna and Bayou for periods(collectively, the “Predecessor”), and (ii) subsequent to their respective acquisitions.(“IPO” or the(the “Offering”) of Class A Common Stock,common stock, par value $0.01 per share (“Class A Common Stock”), which closed on August 16, 2017 and the corporate reorganization described below, Ranger is a holding company, the sole material assets of which consist of membership interests in RNGR Energy Services, LLC a Delaware limited liability company (“Ranger Services.LLC”). Ranger LLC owns all of the outstanding equity interests in Ranger Services and Torrent Services, the subsidiaries through which it operates its assets. Through the consummation of the corporate reorganization, 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 and Torrent Services’ business and consolidates the financial results of Ranger Services and itsTorrent Services and their subsidiaries.On August 16, 2017, Ranger completed the Offering of 5,862,069 shares of its Class A Common Stock (as of August 30, 2017, the underwriters still have an option to purchase an additional 879,310 shares of Class A Common Stock.)RNGR Energy Services,Ranger LLC, a Delaware limited liability company (“Ranger LLC”), Ranger Holdings, Ranger Energy Holdings II, LLC, a Delaware limited liability company (“Ranger Holdings II”), Torrent Holdings, and Torrent Energy Holdings II, LLC, a Delaware limited liability company (“Torrent Holdings II”) and, together with Ranger Holdings, Ranger Holdings II and Torrent Holdings, the “Existing Owners”).Ranger Services, and Torrent Services,the Predecessor Companies, respectively, to the Company in exchange for an aggregate of 1,683,386 shares of Class A Common Stock and an aggregate of $3.0 million to be paid to CSL Energy Holdings I, LLC, a Delaware limited liability company, and CSL Energy Holdings II, LLC, a Delaware limited liability company, on or prior to the 18-month anniversary of the consummation of the Offering in, at the Company’s option, cash, shares of Class A Common Stock (with such shares to be valued based on the greater of the initial public offering price of the Class A Common Stock in the Offering and a 30-day volume-weighted average price) or a combination thereof, and the Company contributed such equity interests to Ranger LLC in exchange for 1,638,386 units in RanngerRanger LLC (“Ranger Units”),LLC (“Ranger Units”)Units and 5,621,491 shares of the5LLC,Units, combined consolidated financial statements 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 (“SEC”(the “SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly certain notes and other information have been condensed or omitted. The unaudited condensed combined 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 the combined consolidated financial statements and related notes for the years ended December 31, 20162017 and 2015,2016, included in the final prospectusAnnual Report filed on Form 10-K for the year ended December 31, 2017 (the “Final Prospectus”“Annual Report”) filed with the Securities and Exchange Commission (the “SEC”)SEC on August 14, 2017. In management’s opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented.March 13, 2018. Interim results for the periods presented may not be indicative of results that will be realized for future periods.Ourcombined consolidated financial statements for the years ended December 31, 20162017 and 20152016 included in the Final ProspectusAnnual Report filed with the SEC on August 14,62017.March 13, 2018. There have been no changes in such policies or the application of such policies during the three orand six months ended June 30, 2017.assetsassets;assetsassets;accountsaccounts;acquisitionacquisition; and
Equity‑based compensation.·Unit‑based compensationour IPO,the Offering, (b) in which its total annual gross revenue ofis at least $1.07 billion, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of ourthe Company’s common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of its most recently completed second fiscal quarter, and (2) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. The Company has irrevocably opted out of the extended transition period and, as a result, the Company will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.May 2014,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014‑09, Revenue from Contracts with Customers. ASU 2014‑09 supersedes existing revenue recognition requirements in GAAP and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Additionally, it requires expanded disclosures regarding the nature, amount, timing, and certainty of revenue and cash flows from contracts with customers. The ASU is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company is in the initial stages of evaluating the effect of the standard on our combined consolidated financial statements and continues to evaluate the available transition methods.In February 2016, the FASB issued ASU No,No. 2016‑02, 2, Leases, amending the current accounting for leases. Under the new provisions, all lessees will report a right‑of‑use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. All other leases will fall into one of two categories: (i) a financing lease or (ii) an operating lease. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. For sale leaseback transactions, a sale will only be recognized if the criteria in the new revenue recognition standard are met. ASU 2016‑2 is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period, using a modified retrospective approach. Early adoption is permitted. The Company is in the initial stages of evaluating the effect of the standard on our combinedthe consolidated financial statements.Losses.Losses. The amendments in ASU 2016‑13 require the measurement of all expected credit losses for financial assets held at the reporting date based on7Available‑available‑for‑sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for public entities for annual reporting periods beginning after December 15, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company is in the initial stages of evaluating the effect of the standarddoes not expect this to have a material impact on our combinedits consolidated financial statements.Payments.Payments. ASU 2016‑15 reduces diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance addresses specific cash flow issues for which current GAAP is either unclear or does not include specific guidance. ASU 2016‑15 is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessingadopted the potentialnew guidance on the effective date of January 1, 2018 and noted no material impact of ASU 2016‑15 on our combinedthe consolidated financial statements of cash flows.04, 4, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.Impairment. ASU 2017‑044 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permittedThe Company adopted this guidance for its current annual and interim goodwill impairment testing dates afteras of January 1, 2017.2018. The ASU will be applied prospectively and will impactimpacted how we testthe Company tests goodwill for impairment.January 2017,February 2018, the FASB issued ASU 2017‑01, Business Combinations (Topic 805), Clarifying2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income: which allows for an entity to elect to reclassify the Definition of a Business, which clarifies the definition of a business with the objective of addingincome tax effects on items within accumulated other comprehensive income resulting from U.S. federal income tax reform to retained earnings. The guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of asset or business. ASU 2017‑01 is effective for fiscal years and interim periods within fiscal years beginning after December 15, 2017 and should be applied prospectively. Early2018 with early adoption is allowed for transactions that occurred before the issuance date or effective date of the amendments only when the transaction has not been reported in the financial statements previously issued. We currently dopermitted, including interim periods within those years. The Company does not expect that the adoption of this standard willto have a material impact on our combinedits consolidated financial statements.ACQUISITIONSMagna AcquisitionOn June 24, 2016, CSL indirectly acquired substantiallyREVENUE FROM CONTRACTS WITH CUSTOMERSassetspromised goods or services to its customer, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. If control transfers to the customer over time, an entity selects a method to measure progress that is consistent with the objective of Magna,depicting its performance. The provisions of ASC 606 were applied to contracts not completed at January 1, 2018. There was no impact upon adoption of ASC 606. As a privately held oilfieldresult, no disclosure of the impact for each financial statement line items is applicable.company that providesin the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.plugservices, completion services and plugging and abandonment fluid management and wirelineservices. These services for an aggregate purchase price of approximately $12.7 million to gain market share in the industry. Magna’s operations are focused primarily in Colorado, Wyoming and North Dakota. Ranger Services accounted for this acquisition as a business combination. No goodwill was recorded in conjunctionbased on mutually agreed upon pricing with the Magna acquisitioncustomer prior to the services being performed, and given the nature of the services, do not include any warranty and right of return. Pricing for these services are by the hour or by the day when services are performed and are based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job. Accordingly, the hourly and daily pricing is considered to be variable consideration.total purchase consideration approximatedservices are performed. The Company believes the fair valueoutput method is a reasonable measure of assets acquired and liabilities assumed.8A summaryour performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the fairperformance obligation under the contract and (2) the value transferred to the customer of the assets acquired andservices performed under the liabilities assumed in connection withcontract. The Company has elected the Magna acquisition is set forth below (in millions):On September 28, 2016, Magna was contributedright to Ranger Services by CSL to gain market share in the industry. As this was a transaction among entities under common control, the assets and liabilities were recorded at their historical carrying values from the dateinvoice practical expedient for recognizing revenue. The Company invoices customers upon completion of the initial acquisition by CSLspecified services and collection generally occurs within the payment terms agreed with customers. Accordingly, there is no financing component to our arrangements with customers.June 24, 2016. The costs related towell services and processing solutions revenue transactions are presented on a net basis included within the transaction were $0.1 million and were expensed during 2016 and are included in the Company’s condensed combined consolidated statements of operations and therefore are excluded from revenues.2016.Bayou AcquisitionOn October 3, 2016, Ranger Services acquired2018 and 2017 (in millions): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Well Services revenue Workover rigs revenue $ 41.3 $ 23.8 $ 78.9 $ 45.6 Other Well Services revenue 27.8 7.9 49.9 13.4 Total Well Services revenue 69.1 31.7 128.8 59.0 Processing Solutions revenue 4.0 2.0 6.9 3.8 Total Revenue $ 73.1 $ 33.7 $ 135.7 $ 62.8 Bayou, a privately held oilfield services company that provides workover, plugJune 30, 2018 and abandonment and fluid management services, for an aggregate purchase price$6.0 million as of approximately $50.5 million, which included an approximate 35% equity interest in Ranger Services. Bayou’s operations are focused primarily in Colorado and North Dakota. Ranger accounted for this acquisition as a business combination.A summaryDecember 31, 2017, respectively. Substantially all of the fair valueunbilled trade receivables as of December 31, 2017 were invoiced during the assets acquired and the liabilities assumed in connection with the Bayou acquisition is set forth below (in millions):Goodwill represents trained and assembled workforce whichThe Company does not meet the separability criterion. The costs related to the transaction were $0.4 million and were expensed during 2016have any contract liabilities included in the Company’s combined consolidated statementsbalance sheet as of operations for the year endedJune 30, 2018 and December 31, 2016.
NOTE 4. ACQUISITIONSour offeringthe Offering on August 16, 2017, the Company acquired assets fromclosed on the ESCO acquiring 49 high-spec well service rigs and certain ancillary equipment from ESCOAcquisition for total consideration of $59.7 million, consisting of $47.7 million in cash, $7.0 million in secured seller notes and $5.0 million in shares of Ranger’s Class A Common Stock based on the initial public offeringOffering price of $14.50 per share.wasAcquisition assets were primarily engaged in the completion, repair and workover of oil and gas wells for its customers. The ESCO Acquisition is being accounted for as a business combination. Goodwill is going to bewas recorded in conjunction with the ESCO Acquisition as the total purchase consideration exceedsexceeded the approximated fair value of assets acquired and liabilities assumed.preliminary purchase price allocation related to the ESCO Acquisition (in millions):Purchase price Cash $ 47.7 Seller's notes 7.0 Equity issued 5.0 Total purchase price $ 59.7 Purchase price allocation Accounts receivable $ 6.6 Property, plant and equipment 45.9 Intangible assets 2.2 Other assets 0.3 Total assets acquired 55.0 Accounts payable (0.5 ) Accrued expenses (2.2 ) Total liabilities assumed (2.7 ) Goodwill 7.4 Allocated purchase price $ 59.7 income,loss, and net incomeloss had the acquisition of ESCO Acquisition occurred as of January 1, 20162017. (in millions): Six Months Ended June 30, 2018 2017 Supplemental Pro Forma: Revenue $ 135.7 $ 83.6 Operating Loss $ (9.8 ) $ (11.6 ) Net Loss $ (11.5 ) $ (13.2 ) income,loss, and net incomeloss are presented for informational purposes only and may not necessarily reflect the future results of operations of the Company or what the results of operations would have been had the Company owned and operated the ESCO Acquisition assets since January 1, 2016.2017. 4.5. ASSETS HELD FOR SALEDuring the year ended December 31, 2016, theconsistedconsist of Mechanical Refrigerator Units (“MRUs”), stabilizers and wedge units and werewhich are classified as held for sale due to the fact that they wereare specifically identified, and management has a plan for their sale in their present condition to occur in the next year. As of June 30, 2017, theThe wedge units are stillrecorded on the consolidated financial statement with a balance of $0.6 million and are classified as held for sale. The available for sale assets are recorded at the units’ carrying amount, which approximates fair value less costs to sell, and are no longer depreciated.5.6. PROPERTY, PLANT AND EQUIPMENT, NET June 30, 2018 December 31, 2017 Machinery and equipment 5 - 30 $ 3.7 $ 3.7 Vehicles 3 - 5 6.3 2.6 Mechanical refrigeration units 30 17.3 17.1 NGL storage tanks 15 4.3 4.3 Workover rigs 5 - 20 204.9 174.9 Other property, plant and equipment 3 - 30 15.6 12.0 Property, plant and equipment 252.1 214.6 Less: accumulated depreciation (37.2 ) (25.4 ) Property, plant and equipment, net $ 214.9 $ 189.2 $7.3$12.6 million and $1.7$7.3 million for the six months endedending June 30, 20172018 and 2016,2017, respectively. Depreciation expense was $3.8$6.8 million and $0.8$3.8 million for the three months ended June 30, 2018 and 2017, and 2016, respectively.6.7. GOODWILL AND INTANGIBLE ASSETS$1.6$9.0 million as of December 31, 2017. During the six months ended June 30, 2017 and December 31, 2016. During 2016, $1.6 million2018 the Company identified a triggering event as it relates to goodwill as a result of a sustained decrease in stock price of the Company. As a result, the Company performed a quantitative impairment test which yielded an impairment charge. The Company recorded an impairment of goodwill was recognized in connection withof $9.0 million. As of June 30, 2018 there is no goodwill on the Bayou acquisition. Estimated
Useful Life
(years) June 30, 2018 December 31, 2017 Tradenames 3 $ 0.1 $ 0.1 Customer relationships 10-18 11.4 11.4 Less: accumulated amortization (1.1 ) (0.7 ) Intangible assets, net $ 10.4 $ 10.8 $0.3$0.4 million and $0.0$0.3 million for the six months endedending June 30, 20172018 and 2016,2017, respectively. Amortization expense was $0.2 million and $0.0$0.2 million for the three months ended June 30, 20172018 and 2016,2017, respectively. Amortization expense for the future periods is expected to be as follows (in millions):For the period ending June 30, Amount 2018 $ 0.4 2019 0.8 2020 0.7 2021 0.7 2022 0.7 Thereafter 7.1 $ 10.4 7.8. ACCRUED EXPENSES June 30, 2018 December 31, 2017 Accrued payables $ 8.0 $ 4.8 Accrued payroll 6.2 2.9 Accrued taxes 2.9 1.4 Accrued insurance 0.7 2.5 Accrued expenses $ 17.8 $ 11.6 2020.2021. The assets and liabilities under capital leases are recorded at the lower of present value of the minimum lease payments or the fair value of the assets. The assets are amortized over theirthe shorter of the estimated useful lives or over the lease term. Amortization expense of assets under capital leases was $0.4$1.1 million and $0.2$0.4 million for the six months ended June 30, 20172018 and 2016,2017, respectively. Amortization expense of assets under capital leases was $0.9 million and $0.2 million for each of the three months ended June 30, 2017 and 2016.11In February 2017, the Company entered into a lease agreement for certain high‑specification rig equipment for use in its business operations. The lease is being accounted for as a capital lease, as the present value of minimum monthly lease payments, including the purchase option, exceeds 90 percent of the fair value of the leased property at inception of the lease. The lease term ends January 2018 and as such, the total obligation is current. For the period ending June 30, Total 2018 $ 1.5 2019 3.0 2020 2.7 2021 1.1 Total future minimum lease payments 8.3 Less: amount representing interest (1.1 ) Present value of future minimum lease payments 7.2 Less: current portion of capital lease obligations (2.8 ) Total capital lease obligations, less current portion $ 4.4 8.10. LONG‑TERM DEBTRanger Services had a $2.0 million revolving line of credit with Iberia Bank expiring on April 30, 2018 (the “Revolver”). On December 23, 2016, Ranger Services amended the Revolver to increase its size to $5.0 million. As of June 30, 2017 and December 31, 2016, there was $5.0 million borrowed against the Revolver. The Revolver was secured by substantially all of Ranger Services’ assets (approximately $137.8 million of the Predecessor’s total assets as of June 30, 2017). Interest varied with the bank’s prime rate and the bank’s London Interbank Offered Rate (“LIBOR”). At June 30, 2017 and December 31, 2016, the interest rate was 4.73% and 4.12%, respectively.In February 2015, as amended in June 30, 2016, Torrent Services secured a $2.0 million senior credit facility with Texas Capital Bank consisting of a $2.0 million Advancing Term Loan as defined by the note agreement. The note was secured by substantially all of Torrent Services’ assets (approximately $27.5 million of the Predecessor’s total assets as of June 30, 2017). Interest varies with the bank’s prime rate and the bank’s LIBOR and is payable quarterly through the maturity of the note. As of December 31, 2016, the interest rate was 5.75%. As of December 31, 2016, there was $0.7 million outstanding on the senior credit facility. As of June 30, 2017 the credit facility has no outstanding balance and has been subsequently closed.In March 2015, Torrent Services, through certain members of its management team as borrowers, secured a $0.6 million promissory note with Benchmark Bank. Interest varied with the bank’s prime rate. Initially, all principal and interest was due on the date of maturity of September 4, 2015, however, the terms were renegotiated and a restructured note and agreement was entered into in April 2016 with an interest rate of 4.5%. In April 2016, Torrent made a principal payment of $0.4 million on this promissory note, leaving a remaining balance of $0.2 million, which is secured by a $0.2 million certificate of deposit. As of December 31, 2016, there was $0.2 million outstanding on the promissory note. The remaining principal balance was repaid in full on February 28, 2017.In April 2015, Ranger Services secured a $7.0 million promissory note with Iberia Bank. Interest varied with the bank’s prime rate and the bank’s LIBOR and was payable in 60 equal monthly installments, which commenced on May 1, 2016. As of June 30, 2017 and December 31, 2016, the interest rate was 4.73%, and 4.12% respectively. Installment payments are due through May 1, 2019, and the note is secured by substantially all of Ranger Services’12 June 30, 2018 December 31, 2017 Long-term debt, net of issuance costs $ 21.3 $ — Credit Facility, net of issuance costs 14.3 0.1 Other long-term debt 7.0 7.0 Current portion of long-term debt (12.5 ) (1.3 ) Long term-debt, less current portion $ 30.1 $ 5.8 assets (approximately $137.8 million of the Predecessor’s total assets as of June 30, 2017). As of June 30, 2017 and December 31, 2016, the outstanding balance was $5.5 million and $6.2 million, respectively.All of the third party debt agreements include the usual and customary covenants for facilities of their type and size. The covenants cover matters such as minimum fixed charge coverage ratio, maximum leverage ratio, current ratio, maximum indebtedness to capitalization ratio, minimum debt service coverage ratio and minimum net income. As of June 30, 2017, the Company was not in compliance with certain financial covenants; however a waiver of non‑compliance was obtained from the financial institution. The Company did not anticipate being in compliance within the next twelve months and accordingly has classified the debt as current in the accompanying condensed combined consolidated balance sheet at June 30, 2017.a partial use of proceeds was forand the repayment of all of these borrowings. There is nooutstanding debt as of August 16, 2017 other thanESCO Acquisition the Company issued $7.0 million of seller’s notes issued as partial consideration for the ESCO Acquisition.the Borrower’sRanger’s subsidiaries, as borrowers, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent.agent (the “Administrative Agent”). The credit facilityCredit Facility is subject to a borrowing base that is calculated by us based upon a percentage of the value of ourthe Company’s eligible accounts receivable less certain reserves.BorrowerCompany to the Administrative Agent. The Company has approximately $20 million of borrowing capacity under the Credit Facility.London Interbank Offered Rate (“LIBOR”)LIBOR or (b) the greatest of (i) the federal funds rate plus ½%, (ii) the one-month LIBOR plus 1% and (iii) the Administrative Agent’s prime rate (the “Base Rate”), in each case plus an applicable margin, and interest shall be payable monthly in arrears. The applicable margin for LIBOR loans ranges from 1.50% to 2.00% and the applicable margin for Base Rate loans ranges from 0.50% to 1.00%, in each case, depending on the Company’s average excess availability under the Credit Facility. The applicable margin for LIBOR loans are 1.50% and the applicable margin for Base Rate loans are 0.50% until August 31, 2018. During the continuance of a bankruptcy event of default, automatically and during the continuance of any other default, upon the Administrative Agent’s or the required lenders’ election, all outstanding amounts under the Credit Facility bears interest at 2.00% plus the otherwise applicable interest rate. The Credit Facility is scheduled to mature on August 16, 2022. As of June 30, 2018 the fifth anniversaryCredit Facility had an effective interest rate of the consummation of the Offering.ourits equity interests, except for certain distributions, including distributions of cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under the Credit Facility and either (a) excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 22.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $10.0 million or (b) if ourthe fixed charge coverage ratio is at least 1.0x on a pro forma basis, excess availability at all times during the preceding 90 consecutive days, on a pro forma basis and after giving effect to such distribution, is not less than the greater of (1) 17.5% of the lesser of (A) the maximum revolver amount and (B) the then-effective borrowing base and (2) $7.0 million. If the foregoing threshold under clause (b) is met, the Company may not make such distributions (but may make certain other distributions, including under clause (a) above) prior to the earlier of the date that is (a) 12 months from closing or (b) the date that the Company’s fixed charge coverage ratio is at least 1.0x for two consecutive quarters. The Credit Facility generally permits the Company to make distributions required under the Tax Receivable Agreement, but a ‘‘Change of Control’’ under the Tax Receivable Agreement constitutes an event of default under the Credit Facility, and the Credit Facility does not permit the Company to make payments under the Tax Receivable Agreement upon acceleration of ourits obligations thereunder unless no event of default exists or would result therefrom and we havethe Company has been in compliance with the fixed charge coverage ratio for the most recent 12-month period on a pro forma basis. The Credit Facility also requires the Company to maintain a fixed charge coverage ratio of at least 1.0x if the Company’s liquidity is less than $10.0 million until the Company’s liquidity13thirty30 consecutive days. The Company is not to be subject to a fixed charge coverage ratio if we haveit has no drawings under the Credit Facility and havehas at least $20.0 million of qualified cash.• ourthe Company’s failure or the failure of any guarantors to comply with covenants and financial ratios;• • • In additionhad related party debt totaling $17.1has borrowed $15.0 million under the Credit Facility. The Company has a total borrowing capacity of approximately $31.7 million under the Credit Facility, with approximately $16.7 million available as of June 30, 2017, see Note 13 – Related Party Transactions.2018. The Company is in compliance with the Credit Facility covenants as of June 30, 2018.For the year ended Total 2018 $ 2.8 2019 5.5 2020 5.5 2021 5.5 2022 2.7 Total $ 22.0 9.11. RISK CONCENTRATIONSEnergy—WellEnergy —Well Services segment) accounted for approximately 14.5%15% and 24.7%25%, respectively, of the Company’s total revenues. For the three months ended June 30, 2017, two customers (EOG Resources and PDC Energy—Well Services segment) accounted for approximately 13.1%13% and 23.1%23%, respectively, of the Company’s total revenues. At June 30, 2017, approximately 21.2%21% of the accounts receivable balance was due from these customers.For Shares Unvested at December 31, 2017 10,000 $ 9.43 2.4 years Granted 498,302 8.24 2.7 years Forfeited (14,798 ) Vested (4,648 ) Unvested at June 30, 2018 488,856 $ 8.26 2.6 years 2016, one customer (EOG Resources—Well Services segment)2018 differed from amounts computed by applying the U.S. federal statutory tax rate of 21% due primarily to state taxes and changes in the valuation allowance recorded against deferred tax assets. The Company is subject to the Texas Margin Tax that requires tax payments at a maximum statutory effective rate of 0.75% on the taxable margin of each taxable entity that does business in Texas.47.6%as equity transactions.55.1%, respectively,the weighted average number of shares outstanding during the period for each class of Common Stock. Three Months Ended
June 30, Six Months Ended June 30, 2018 2018 Loss (numerator): Basic: Net loss attributable to Ranger Energy Services, Inc. $ (0.7 ) $ (6.4 ) Less: Net loss attributable to Class B Common Stock — — Net loss attributable to Class A Common Stock $ (0.7 ) $ (6.4 ) Diluted: Net loss attributable to Ranger Energy Services, Inc. $ (0.7 ) $ (6.4 ) Less: Net loss attributable to Class B Common Stock — — Net loss attributable to Class A Common Stock $ (0.7 ) $ (6.4 ) Weighted average shares (denominator): Weighted average number of shares - basic 8,792,585 8,609,034 Weighted average number of shares - diluted 8,792,585 8,609,034 Basic loss per share $ (0.08 ) $ (0.74 ) Diluted loss per share $ (0.08 ) $ (0.74 ) total revenues. At June 30, 2016, approximately 13.2% ofClass B Common Stock in calculating diluted loss per share, as the accounts receivable balanceeffect was due from this customer.anti-dilutive.10.16. COMMITMENTS AND CONTINGENCIEScombined consolidated financial position or results of operations.In MarchRanger Servicesthe Company terminated the employment of one of its officers. As a result, the former officer became entitled to severance payments of $0.7 million. In addition, during the six months ended June 30, 2017 Ranger ServicesCompany severed other officers and employees. As of June 30, 2017 Ranger Services2018, the Company has $1.0$0.8 million of severance liability recorded in the accompanying condensed combined consolidated financial statements.11.17. SEGMENT REPORTINGOurThe Company’s reportable segments comprise the structure used by ourits Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance during the years presented in the accompanying condensed combined consolidated financial statements. OurThe Company’s CODM evaluates the segments’ operating14ServicesServices.. The Company’s well service rigs facilitate operations throughout the lifecycle of a well, including (i) well completion support; (ii) workover; (iii) well maintenance; and (iv) decommissioning. We provideThe Company provides these advanced well services to Explorationexploration & Productionproduction (“E&P”) companies, particularly to those operating in unconventional oil and natural gas reservoirs and requiring technically and operationally advanced services. OurThe Company’s well service rigs are designed to support growing U.S. horizontal well demands. In addition to ourits core well service rig operations, we offerthe Company offers a suite of complementary services, including wireline, snubbing, fluid management and well service-related equipment rentals.SolutionsSolutions.. The Company provides a range of proprietary, modular equipment for the processing of rich natural gas streams at the wellhead or central gathering points in basins where drilling and completion activity has outpaced the development of permanent processing infrastructure.20172018 and December 31, 20162017 and for the three and six months ended June 30, 20172018 and 20162017 is as follows (in millions):NOTE 12. OWNERS’ CAPITAL AND PROFIT INTERESTS AWARDSWell ServicesThe Well Services segment was 100% owned by Ranger Holdings and Ranger Services’ equity is represented by a single share class. Ranger Holdings has issued Class C and Class D units to certain key employees of Ranger Services as remuneration for employee services that were originally intended, at grant, to be “profit interests” with no voting rights. Certain of the units vest 33% per year over a three‑year service period and may be forfeited or repurchased by Ranger Holdings under certain circumstances as set forth in the Ranger Holdings limited liability company agreement and the individual Class C and Class D unit grant agreements. The “vesting units” are deemed equity and are measured15 Other Well Services Total Three months ended June 30, 2018 Revenues $ — $ 69.1 $ 4.0 $ 73.1 Cost of services $ — $ 56.0 $ 1.9 $ 57.9 Depreciation and amortization $ 0.2 $ 6.4 $ 0.4 $ 7.0 Impairment of goodwill $ — $ — $ — $ — Operating income (loss) $ (6.1 ) $ 6.1 $ 1.0 $ 1.0 Interest expense, net $ (0.5 ) $ — $ — $ (0.5 ) Net income (loss) $ (6.7 ) $ 4.5 $ 1.0 $ (1.2 ) Capital expenditures $ 0.5 $ 20.4 $ 0.9 $ 21.8 Six months ended June 30, 2018 Revenues $ — $ 128.8 $ 6.9 $ 135.7 Cost of services $ — $ 105.9 $ 3.3 $ 109.2 Depreciation and amortization $ 0.4 $ 12.1 $ 0.6 $ 13.1 Impairment of goodwill $ — $ 9.0 $ — $ 9.0 Operating income (loss) $ (14.4 ) $ 1.6 $ 3.0 $ (9.8 ) Interest expense, net $ (0.9 ) $ — $ — $ (0.9 ) Net income (loss) $ (13.1 ) $ 0.1 $ 1.5 $ (11.5 ) Capital expenditures $ 0.5 $ 30.5 $ 3.1 $ 34.1 As of June 30, 2018 Property, plant and equipment $ 6.6 $ 180.0 $ 28.3 $ 214.9 Total assets $ 6.6 $ 251.7 $ 31.6 $ 289.9 Other Well Services Total Three months ended June 30, 2017 Revenues $ — $ 31.7 $ 2.0 $ 33.7 Cost of services $ — $ 25.5 $ 0.7 $ 26.2 Depreciation and amortization $ — $ 3.8 $ 0.2 $ 4.0 Impairment of goodwill $ — $ — $ — $ — Operating income (loss) $ — $ (5.1 ) $ 0.2 $ (4.9 ) Interest expense, net $ — $ (1.0 ) $ (0.1 ) $ (1.1 ) Net income (loss) $ — $ (6.2 ) $ 0.2 $ (6.0 ) Capital expenditures $ — $ 8.2 $ 1.1 $ 9.3 Six Months Ended June 30, 2017 Revenues $ — $ 59.0 $ 3.8 $ 62.8 Cost of services $ — $ 48.7 $ 1.4 $ 50.1 Depreciation and amortization $ — $ 7.1 $ 0.5 $ 7.6 Impairment of goodwill $ — $ — $ — $ — Operating income (loss) $ — $ (10.9 ) $ 0.4 $ (10.5 ) Interest expense, net $ — $ (1.5 ) $ (0.1 ) $ (1.6 ) Net income (loss) $ — $ (12.5 ) $ 0.4 $ (12.1 ) Capital expenditures $ — $ 19.9 $ 1.2 $ 21.1 As of December 31, 2017 Property, plant and equipment $ 6.4 $ 157.4 $ 25.4 $ 189.2 Total assets $ 6.4 $ 225.1 $ 28.2 $ 259.7 at fair value using an option pricing model at each grant date with compensation expense recognized on a straight‑line basis over the requisite service period.Certain of the Class C and Class D units that were granted are liability‑classified awards as they do not fully vest until a defined change of control event. The Company has not recognized a liability or recognized any compensation expense for these liability‑classified awards in the accompanying unaudited condensed combined consolidated financial statements since the change of control event is not probable and estimable. These units will trigger no compensation expense until amounts payable under such awards become probable and estimable.On October 3, 2016, the Class C and Class D units were modified, whereby new units were issued to replace the existing Class C and Class D units that had been issued prior to October 3, 2016. As part of the issuance of the new Class C and Class D unit, the existing Class C and Class D units were cancelled. The terms of the new and existing Class C and Class D awards were materially similar.The grant date fair value for the Class C and Class D units prior to modification were de minimis while the grant date fair value for the Class C and Class D units at modification was $2.5 million. There were additional grants to specific employees during the three and six months ended June 30, 2017 of approximately $1.6 million. During the six months ended June 30, 2017 and 2016, we recognized compensation expense of $0.7 million and $0.0 million, respectively. During the three months ended June 30, 2017 and 2016, we recognized compensation expense of $0.3 million and $0.0 million, respectively. The total unrecognized compensation cost related to unvested awards at June 30, 2017 is $1.5 million and is expected to be recognized over the next two years.The following table summarizes the Class C and Class D unit activity for the year ended December 31, 2016 and for the six months ended June 30, 2017 (in millions):We utilized an option pricing model to estimate grant date fair value of the equity‑based compensation awards, which included probability of various outcomes. Expected volatilities are based on historical volatilities of the stock of comparable companies in our industry. The risk‑free rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. Actual results may vary depending on the assumptions applied within the model. The following table presents the assumptions used in the valuation and resulting grant date fair value:Processing SolutionsThe Processing Solutions segment was 100% owned by Torrent Holdings and Torrent Services’ equity is represented by a single share class. Torrent Holdings has issued Class B and Class C units to certain key employees of Torrent as remuneration for employee services that were originally intended, at grant, to be “profit interests” with no voting rights. Class B units have a three‑year vesting period at 25% per year, with the remaining 25% vesting upon16certain events occurring. Torrent Holdings also issued Class C awards, which were fully vested at grant date when issued in 2014. Class B and Class C units are deemed to be equity‑classified.The grant date fair value for the Class B and Class C unit awards were $0.3 million and $0.1 million, respectively. Compensation expense is recognized on a straight‑line basis over the requisite service period. During the three months ended June 30, 2017 and 2016, we recognized compensation expense of $0.1 million and $0 million, respectively. The total unrecognized compensation cost related to unvested awards at June 30, 2017 is $0.1 million and is expected to be recognized in 2017. There were 0.3 million units granted during the six months ended June 30, 2017 and none during the three months ended June 30, 2017.The following table summarizes the Class B and Class C unit activity for the year ended December 31, 2016 and for the six months ended June 30, 2017 (in millions):Class BClass C(1)Outstanding at January 1, 20161.0 —Granted — —Forfeited(0.3) —Outstanding at December 31, 20160.7 —Granted0.3 —Forfeited — —Outstanding at June 30, 20171.0 —(1)There were 2,000 Class C units outstanding at each date.We utilized an option pricing model to estimate grant date fair value of the equity‑based compensation awards, which included probability of various outcomes. Expected volatilities are based on historical volatilities of the stock of comparable companies in our industry. The risk‑free rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. Actual results may vary depending on the assumptions applied within the model. The following table presents the assumptions used in the valuation and resulting grant date fair value:AssumptionsPeriod2.8yearsDividend Yield —%Volatility28.1%Risk Free Rate0.9%NOTE 13. RELATED PARTY TRANSACTIONSThe Company incurred approximately $0.7 million and $0.0 million in expenses related to CSL and board members for the six months ended June 30, 2017 and 2016, respectively. The Company incurred approximately $0.4 million and $0.0 million in expenses related to CSL and board members for the three months ended June 30, 2017 and 2016, respectively. As of June 30, 2017 and December 31, 2016, amounts due to CSL and board members were negligible.In January 2017, the Company purchased certain assets from a related party for approximately $4.0 million.In February 2017, Ranger entered into loan agreements (Collectively the “Ranger Bridge Loan”) with each of CSL Energy Opportunities II L.P. (“CSL Opportunities II”), CSL Energy Holdings II LLC (“CSL Holdings II”) and Bayou Well Holdings Company, LLC (“Bayou Holdings,” and together with CSL Holdings II and CSL Energy Opportunities II, the “the Bridge Loan Lenders”) each an indirect equity owner of Ranger Services. The Ranger Bridge Loan, which was obtained to fund capital expenditures and working capital, was evidenced by promissory notes payable to the Bridge Loan Lenders in an aggregate principal amount of $11.1 million, consisting of three individual promissory notes in the principal amounts of (i) $4.4 million payable to CSL Opportunities II, (ii) $3.2 million payable to CSL Holdings II and (iii) $3.6 million payable to Bayou Holdings. The note was secured by substantially all of Ranger’s assets (approximately $132.1 million of the Company’s total assets as of June 30, 2017). Each note bore interest at a rate of 15% and matured upon the earlier of February 21, 2018 or ten days after the consummation of an initial public17offering. The loan agreement included a make‑whole provision in which Ranger would pay 125% of the total amount advanced to Ranger upon settlement. The 125% is inclusive of the 15% interest rate. As of June 30, 2017, there was $17.1 million outstanding on the Ranger Bridge Loan. During April 2017, the Company increased its bridge loan debt by $1.0 million to $12.1 million to fund capital expenditures and working capital. During May 2017, the Company increased its bridge loan debt by $2.5 million and then again by another $2.5 million in June to $17.1 million to fund capital expenditures and working capital. In July 2017, the Company increased its bridge loan debt by $3.9 million to $21.0 million. In connection with the Offering on August 16, 2017 all of the Ranger Bridge Loan was converted to equity.NOTE 14. SUBSEQUENT EVENTSInitial Public OfferringOn August 16, 2017, the Company completed the Offering of 5,862,069 shares of its Class A Common Stock (as of August 30, 2017 underwriters still have an option to purchase an additional 879,310 shares of Class A Common Stock.) The gross proceeds of the IPO to the Company, based on a public offering price of $14.50 per share, were $85.0 million, which resulted in net proceeds to the Company of $80.6 million, after deducting $4.4 million of underwriting discounts and commissions. The Company received net proceeds of approximately $26.3 million after it paid off the remainder of its long term debt of $10.4 million, funded $45.2 million for the cash portion of the ESCO Acquisition, and paid approximately $5.0 million in offering-related costs and $0.7 million for cash bonuses to certain employees.ESCO AcquisitionOn May 30, 2017, the Company signed a purchase sale agreement, which was subsequently amended and restated on July 31, 2017, to acquire assets of ESCO, contingent on the successful completion of the Offering. The Offering closed on August 16, 2017 as did the purchase of ESCO. ESCO is primarily engaged in the completion, repair and workover of oil and gas wells and drilling and completing water wells for oil and gas customers. See Note 3 – Acquisitions for more information on this acquisition.$50 Million Revolving Credit FacilityOn August 16, 2017, in connection with the Offering, Ranger entered into a $50.0 million senior revolving credit facility by and among certain of the Borrower’s subsidiaries, as borrowers, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, sole lead arranger and sole book runner. See Note 8 – Long-Term Debt for more information on this revolving credit facility.Long-term Incentive PlanOn August 10, 2017, the Board adopted the Long-term Incentive Plan (“LTIP”) for the employees, consultants and the directors of the Company and its affiliates who perform services for the Company. The LTIP provides for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws; (ii) nonstatutory stock options that do not qualify as incentive stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) dividend equivalents; (ix) other stock-based awards; (x) cash awards; and (xi) substitute awards. Subject to adjustment in accordance with the terms of the LTIP, 1,250,000 shares of Class A Common Stock have been reserved for issuance pursuant to awards under the LTIP. Class A Common Stock withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The LTIP will be administered by the Board or an alternative committee appointed by the Board.Tax Receivable AgreementOn August 16, 2017, in connection with the Offering, the Company entered into a Tax Receivable Agreement (the “TRA”) with certain of the existing Ranger Unit holders and their permitted transferees (each such person, a “TRA Holder” and together, the “TRA Holders”). The TRA generally provides for the payment by the Company of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the Offering as a result of (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA18Holder’s Ranger Units in connection with the Offering or pursuant to the exercise of the Redemption Right or the Call Right (each as defined in the Amended and Restated Limited Liability Company Agreement of Ranger LLC) and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the TRA. The Company will retain the benefit of the remaining 15% of these cash savings. The term of the TRA commences on August 16, 2017 and will continue until all tax benefits that are subject to the TRA (or the Tax Receivable Agreement is terminated due to other circumstances, including the Company’s breach of a material obligation thereunder or certain mergers, assets sales, other forms of business combination or other changes of control) have been utilized or expired, unless the Company exercises its right to terminate the TRA. The payments under the TRA will not be conditioned upon a TRA Holder having a continued ownership interest in either Ranger LLC or the Company.If the Company elects to terminate the TRA early or the TRA is terminated due to other circumstances, including the Company’s breach of a material obligation thereunder or certain mergers, asset sales other forms of business combinations or other changes of control), its obligations under the TRA would accelerate and it would be required to make an immediate payment equal to the present value of the anticipated future tax payments to be made by Ranger under the TRA (determined by applying a discount rate of one-year LIBOR plus 150 basis points and based upon certain assumptions and deemed events set forth in the TRA. In addition, payments due under the TRA will be similarly accelerated following certain mergers or other changes of control.Registration Rights AgreementOn August 16, 2017, in connection with the closing of the Offering, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with certain stockholders (the “Holders”).Pursuant to, and subject to the limitations set forth in, the Registration Rights Agreement, at any time after the 180-day lock-up period described in the Final Prospectus, the Holders have the right to require the Company by written notice to prepare and file a registration statement registering the offer and sale of a number of their shares of Class A Common Stock. Reasonably in advance of the filing of any such registration statement, the Company is required to provide notice of the request to all other Holders who may participate in the registration. The Company is required to use all commercially reasonable efforts to maintain the effectiveness of any such registration statement until all shares covered by such registration statement have been sold. Subject to certain exceptions, the Company is not obligated to effect such a registration within 90 days after the closing of any underwritten offering of shares of Class A Common Stock requested by the Holders pursuant to the Registration Rights Agreements. The Company is also not obligated to effect any registration where such registration has been requested by the holders of Registrable Securities (as defined in the Registration Rights Agreement) which represent less than $25 million, based on the five-day volume weighted average trading price of the Class A Common Stock on the New York Stock Exchange.In addition, pursuant to the Registration Rights Agreement, the Holders have the right to require the Company, subject to certain limitations set forth therein, to effect a distribution of any or all of their shares of Class A Common Stock by means of an underwritten offering. Further, subject to certain exceptions, if at any time the Company proposes to register an offering of its equity securities or conduct an underwritten offering, whether or not for its account, then the Company must notify the Holders of such proposal at least three business days before the anticipated filing date or commencement of the underwritten offering, as applicable, to allow them to include a specified number of their shares in that registration statement or underwritten offering, as applicable.These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration or offering and the Company’s right to delay or withdraw a registration statement under certain circumstances. The Company will generally pay all registration expenses in connection with its obligations under the Registration Rights Agreement, regardless of whether a registration statement is filed or becomes effective.The obligations to register shares under the Registration Rights Agreement will terminate as to any Holder when the Registrable Securities held by such Holder are no longer subject to any restrictions on trading under the provisions of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), including any volume or manner of sale restrictions. Registrable Securities means all shares of Class A Common Stock owned at any particular point in time by a Holder other than shares (i) sold pursuant to an effective registration statement under the Securities Act, (ii) sold in a transaction pursuant to Rule 144 under the Securities Act, (iii) that have ceased to be outstanding or19(iv) that are eligible for resale without restriction and without the need for current public information pursuant to any section of Rule 144 under the Securities Act.2011. Financial Statements of this report.Quarterly Report on Form 10-Q (the “Quarterly Report”). This discussion contains “forward‑looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward‑looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil and natural gas, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this report. Please read Cautionary Note Regarding Forward‑Looking Statements. Also, please read the risk factors and other cautionary statements described under “Item 1A.-RiskPart II, Item 1A.-“Risk Factors” included elsewhere in this report.Quarterly Report and in our Annual Report filed on Form 10-K for the year ended December 31, 2017 (the “Annual Report”). We assume no obligation to update any of these forward‑looking statements. independent providers of high‑spec well service rigs and associated services in the United States, with a focus on technically demanding unconventional horizontal well completion and production operations. We believe that our fleet of 123136 well service rigs (including 49 well service rigs we acquired on August 16, 2017 (the “ESCO Acquisition”)) isare among the newest and most advanced in the industry and, based on our historical rig utilization and feedback from our customers, we believe that we are an operator of choice for U.S. onshore Exploration and Production (“E&P”)&P companies that require completion and production services at increasing lateral lengths. Our high‑spec well service rigs facilitate operations throughout the lifecycle of a well, including (i) well completion support, such as milling out composite plugs used during hydraulic fracturing; (ii) workover, including retrieval and replacement of existing production tubing; (iii) well maintenance, including replacement of downhole artificial lift components; and (iv) decommissioning, such as plugging and abandonment operations. In addition to our core well service rig operations, we offer a suite of complementary services, including wireline, snubbing, well testing, fluid management and well service-related equipment rentals. We also provide rental equipment, including well control packages, hydraulic catwalks and other equipment that are often deployed with our well service rigs. In addition, we own and operate a fleet of proprietary, modular natural gas processing equipment that processes rich natural gas streams at the wellhead or centralcentrawl gathering points. We have operations in most of the active oil and natural gas basins in the United States, including the Permian Basin, the Denver‑Julesburg Basin, the Bakken Shale, the Eagle Ford Shale, the Haynesville Shale, the Gulf Coast and the SCOOP and STACK plays.Ranger Energy Services, Inc. (“Ranger Inc.” or “the Company”)“Initial“–Initial Public Offering” other than certain activities related to initial public offering (the “Offering”).the Offering. Our Predecessor consists of Ranger Services and Torrent Services on a combined consolidated basis. In connection with the transactions described in Note 1 – Organization and Business Operations – Reorganization, the Existing Owners contributed the equity interests in the Predecessor Companies to us in exchange for shares of our Class A Common Stock, Ranger Units and shares of our Class B common stock.combinedcondensed consolidated financial information of our Predecessor included in this reportQuarterly Report presents (i) prior to August 16, 2017, the historical financial information of the Predecessor Companies, including, as applicable, the results of operations of Magna and Bayou for periods subsequent to their respective acquisitions.acquisitions and (ii) subsequent to August 16, 2017, the historical financial information of the Company. The historical combinedcondensed consolidated financial information of our Predecessor is not indicative of the results that may be expected in any future periods. For more information, please see the historical combinedcondensed consolidated related notes thereto included elsewhere in this quarterly reportBayou21MRUs, NGLmechanical refrigeration units (“MRUs”), natural gas liquids (“NGL”) stabilizer units, NGL storage units and related equipment. We operate in most of the active oil and natural gas basins in the United States, including the Permian Basin, the Denver‑Julesburg Basin, the Bakken Shale, the Eagle Ford Shale, the Haynesville Shale, the Gulf Coast and the SCOOP and STACK plays. For additional information about our assets and operations, please see Note 1117 - Segment Reporting.Rangerwe completed the Offering of 5,862,069 shares of itsour Class A Common Stock (as of August 30, 2017 underwriters still have an option to purchase an additional 879,310 shares of Class A Common Stock).Stock. The gross proceeds of the IPO to Ranger,Offering, based on a public offering price of $14.50 per share, was $85.0 million, which resulted in net proceeds to Rangerus of $80.6$77.0 million, after deducting $4.4$4.2 million of underwriting discounts and commissions. Ranger receivedcommissions and $3.9 million of costs related to the Offering. These net proceeds of approximately $26.3 million after the Company paidwere used to pay off the remainder of our long term debt of $10.4 million, fundedfund $45.2 million for the cash portion of the ESCO Acquisition, and paid approximately $5.0 million in offering related costs and $0.7 million for cash bonuses to certain employees.We recognize revenue in our Well Services segment when services are performed, collection of Please see Note 3 – Revenue from Contracts with Customers to the relevant receivables is probable, persuasive evidence of an arrangement exists and the price is fixed or determinable. We price well servicing by the hour or by the day when services are performed. Well servicing is sold without warranty or right of return.We recognize revenue in our Processing Solutions segment when services are performed, collection of the relevant receivables is probable, persuasive evidence of an arrangement exists and the price is fixed or determinable. Revenues from equipment leasing, operations and maintenance services are recognized as earned. These services are sold without warranty or right of return.22intends to useuses a variety of metrics to analyze our operating results and profitability. These metrics include, among others, the following:lossincome (loss) before interest expense, net, income tax provision (benefit), depreciation and amortization, equity‑based compensation, acquisition‑related and severance costs, impairment of goodwill, and other non‑cashgain or loss on sale of assets and certain other items that we do not view as indicative of our ongoing performance. See “-Results“—Results of Operations—Note Regarding Non‑GAAP Financial Measure” for more information and reconciliations of net income (loss) to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance with GAAP.23lower speclower-spec well service rigs that are not as well suited to servicing modern horizontal well designs as are high-spec well service rigs, which may result in lower average rig hours per rig for our competitors’ fleets as compared to our fleet.excess,excessive, rig availability to meet such demand.endingended June 30, 20172018 and 2016,2017, our rig utilization as measured by average monthly hours per rig was approximately 207186 hours and 155,203 hours, respectively. Actual aggregate operating well service rig hours increased from approximately 17,000 for the six months ended June 30, 2016 to approximately 78,500 during82,200 in the six months ended June 30, 2017, primarily as a result of our acquisitions of Magna and Bayou, and their associated well service rigs as well as newly acquired service rigs.to approximately 149,800 in the six months ended June 30, 2018. The related increase in rig utilizationhours resulted from an increase in the average number of well service rigs in our active fleet from 1871 during the six months ended June 30, 20162017 to 63136 during the six months ended June 30, 2017,2018, and a corresponding increase in our potential aggregate well service rig hours.20172018 and 2016,2017, our rig utilization as measured by average monthly hours per rig was approximately 187 hours and 213 and 145,hours, respectively. Actual aggregate operating well service rig hours increased from approximately 8,100 in the three months ended June 30, 2016 to approximately 43,100 in the three months ended June 30, 2017.2017 to approximately 76,200 in the three months ended June 30, 2018. The related increase in rig utilizationhours resulted from an increase in the average number of well service rigs in our active fleet from 1968 during the three months ended June 30, 20162017 to 68136 during the sixthree months ended June 30, 2017,2018, and a corresponding increase in our potential aggregate well service rig hours.Magna and Bayou Acquisitions combined consolidated financial statements for the three and six months ended June 30, 2017 and 2016 include the results of operations for Magna and Bayou from their respective acquisition dates during 2016. As a result, our Predecessor’s historical financial data does not give an accurate indication of what our actual results would have been if such acquisitions had been completed at the beginning of the periods presented or of what our future results of operations are likely to be.ESCO AcquisitionOur Predecessor’s historical combined consolidated financial statements for the three and six months ended June 30, 2017 and 2016 do not include the results of operations for the assets we acquired in the ESCO Acquisition. As a result, our Predecessor’s historical financial data dodoes not give you an accurate indication of what our actual results would have been if the ESCO Acquisition had been completed at the beginning of the periods presented or of what our future results of operations are likely to be.Public Company CostsWe expect Please see Note 4 – Acquisitions, to incur incremental, non‑recurring costs related to our transition to a publicly traded and taxable corporation, includingsee the costs of this initial public offering andsupplemental pro forma financial disclosures for the costs associated with the initial implementation of our Sarbanes‑Oxley Section 404 internal control implementation. We also expect to incur additional significant and24recurring expenses as a publicly traded corporation, including costs associated with the employment of additional personnel, compliance under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), annual and quarterly reports to common shareholders, registrar and transfer agent fees, national stock exchange fees, audit fees, Sarbanes-Oxley Section 404 internal testing, incremental director and officer liability insurance costs and director and officer compensation.Corporate ReorganizationRanger Energy Services, Inc., a Delaware corporation,we entered into athe Master Reorganization Agreement (the “Master Reorganization Agreement”) with, among others, RNGR Energy Services,Ranger LLC a Delaware limited liability company (“Ranger LLC”), Ranger Energy Holdings, LLC, a Delaware limited liability company (“Ranger Holdings”), Ranger Energy Holdings II, LLC, a Delaware limited liability company (“Ranger Holdings II”), Torrent Energy Holdings, LLC, a Delaware limited liability company (“Torrent Holdings”), and Torrent Energy Holdings II, LLC, a Delaware limited liability company (“Torrent Holdings II” and, together with Ranger Holdings, Ranger Holdings II and Torrent Holdings, the “Existing Owners”).par value $0.01 per share (the “Class A Common Stock”), as a result of which:Energy Services, LLC, a Delaware limited liability company, and Torrent Energy Services, LLC, a Delaware limited liability company, respectively, to the Company in exchange for an aggregate of 1,638,386 shares of Class A Common Stock and an aggregate of $3.0 million to be paid to CSL Energy Holdings I, LLC, a Delaware limited liability company, and CSL Energy Holdings II, LLC, a Delaware limited liability company, on or prior to the 18-month anniversary of the consummation of the Offering in, at the Company’s option, cash, shares of Class A Common Stock (with such shares to be valued based on the greater of the initial public offeringOffering price of the Class A Common Stock in the Offering and a 30-day volume-weighted average price) or a combination thereof, and the Company contributed such equity interests to Ranger LLC in exchange for 1,638,386 units in Ranger LLC (“Ranger Units”), common stock, par value $0.01 per share (“Class B Common Stock”),Stock, which the Company issued and contributed to Ranger LLC,Units,holdsheld; and, as consideration for the termination of certain loan agreements, the Company will issueissued 567,895 shares of Class A Common Stock (in connection with which Ranger LLC issued 567,895 Ranger Units to the Company) and Ranger LLC issued an aggregate of 1,244,663 Ranger Units (and distributedistributed a corresponding number of shares of Class B Common Stock) to the lenders thereof. be undertaken in reliance on an exemption from the registration requirements of the Securities Act, of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. As a result of these transactions, Ranger LLC became a subsidiary of the Company and the Predecessor Companies became wholly owned subsidiaries of Ranger LLC."TRA""Tax Receivable Agreement") with certain of the Ranger Unit holders and their permitted transferees (each such person, a "TRA Holder" and, together, the "TRA Holders"). The TRATax Receivable Agreement generally provides for the payment by us to each TRA Holder of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that we actually realize (computed using the estimated impact of state and local taxes) or are deemed to realize in certain circumstances in periods following the Offering as a result of (i) certain increases in tax basis that occur as a result of our acquisition (or deemed acquisition for U.S. federal25this offeringthe Offering or pursuant to the exercise of the Redemption Right or the Call Right (each as defined in the Amended and Restated Limited Liability Company Agreement of Ranger LLC) and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the TRA.Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these cash savings.will beis subject to U.S. federal, state and local income taxes. Although the Predecessor Companies are subject to franchise tax in the State of Texas (at less than 1% of modified pre‑tax earnings), they have historically passed through their taxable income to their owners for U.S. federal and other state and local income tax purposes and thus were not subject to U.S. federal income taxes or other state or local income taxes. Accordingly, the financial data attributable to our Predecessor contains no provision for U.S. federal income taxes or income taxes in any state or locality other than franchise tax in the State of Texas. We accountAccounting Standards Codification (“ASC”)ASC 740, Income Taxes. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.20162018 compared to Three Months Ended June 30, 201720172018 as compared to the three months ended June 30, 2016.2017. June 30, Change 2018 2017 $ % Revenues: Well Services $ 69.1 $ 31.7 $ 37.4 118 % Processing Solutions 4.0 2.0 2.0 100 % Total revenues 73.1 33.7 39.4 117 % Operating expenses: Cost of services (exclusive of depreciation and amortization shown separately): Well Services 56.0 25.5 30.5 120 % Processing Solutions 1.9 0.7 1.2 171 % Total cost of services 57.9 26.2 31.7 121 % General and administrative 7.2 8.4 (1.2 ) (14 )% Depreciation and amortization 7.0 4.0 3.0 75 % Total operating expenses 72.1 38.6 33.5 87 % Operating income (loss) 1.0 (4.9 ) 5.9 (120 )% Other expenses Interest expense, net (0.5 ) (1.1 ) 0.6 (55 )% Total other expenses (0.5 ) (1.1 ) 0.6 (55 )% Income (loss) before income tax expense 0.5 (6.0 ) 6.5 (108 )% Tax expense 1.7 — 1.7 Net loss $ (1.2 ) $ (6.0 ) $ 8.2 (137 )% 20172018 increased $28.1$39.4 million, or 502%117%, to $33.7$73.1 million from $5.6$33.7 million for the three months ended June 30, 2016.2017. The increase in revenues by segment was as follows:20172018 increased $27.5$37.4 million, or 655%118%, to $31.7$69.1 million from $4.2$31.7 million for the three months ended June 30, 2016.2017. The increase was primarily due to26increased demand in ourrigs, to an average of 136 rigs from an average of 68 rigs, providing workover rig services, which accounted for $16.3$19.8 million, or 59%53% of the segment increase. Approximately $9.6 million of the increase in workover rig services was due to the ESCO Acquisition. The increase in workover rig services included a 429%77% increase in total rig hours to 76,200 from 43,100 for the three months ended June 30, 20172018 compared to the three months ended June 30, 2016.2017. In addition, our wireline business accounted for $18.8 million of the trucking, rental, and otherincrease in revenues all increased for the three months ended June 30, 2017 as compareddue to the three months ended June 30, 2016.20172018 increased $0.6$2.0 million, or 43%100%, to $2.0$4.0 million from $1.4$2.0 million for the three months ended June 30, 2016.2017. The increase was primarily attributable to an increase in MRUthe additional compressors, tanks and generators we have rented to customers as well as additional mobilization revenue due to an additional 4 units, increased MRU utilization and an increase in our rental rates.equipment going to customers.20172018 increased $22.5$31.7 million, or 608%121%, to $26.2$57.9 million from $3.7$26.2 million for the three months ended June 30, 2016.2017. As a percentage of revenue, cost of services was 78% and 66%79% for the three months ended June 30, 20172018 and 2016, respectively.2017. The increase in cost of services by segment was as follows:20172018 increased $22.3$30.5 million, or 697%,120% to $25.5$56.0 million from $3.2$25.5 million for the three months ended June 30, 2016.2017. The increase was primarily attributable to an increase in expenses due to the expansion of the Company’s activities; notably employee costs travel,and repair and maintenance and supply costs.20172018 increased $0.2$1.2 million, or 40%171%, to $0.7$1.9 million from $0.5$0.7 million for the three months ended June 30, 2016.2017. The increase was primarily attributable to increases in new equipment and the mobilization costs incurred which corresponds with additional revenues.2017 increased $6.72018 decreased $1.2 million, or 394%14%, to $8.4$7.2 million from $1.7$8.4 million for the three months ended June 30, 2016.2017. The increasedecrease in general and administrative expenses by segment was as follows:Services.Services and other. Well Services general and administrative expenses for the three months ended June 30, 2017 increased $6.72018 decreased $1.1 million, or 744%15%, to $7.6$6.4 million from $0.9$7.4 million for the three months ended June 30, 2016.2017. The increasedecrease was primarily attributable to an increasea decrease in expenses due to the expansion of the Company’s activities; notably expenses for payroll costs (including severance costs), professional travel, office costs and equity‑based compensation expense.other costs associated with the Offering in 2017.2017 was $0.82018 decreased $0.1 million and $0.8 million for the three months ended June 30, 2016.Depreciation and Amortization. Depreciation and amortization for the three months ended June 30, 2017 increased $3.2 million, or 400%, to $4.0$0.7 million from $0.8 million for the three months ended June 30, 2016.2017.Services.Services and other. Well Services depreciation and amortization expense for the three months ended June 30, 20172018 increased $3.1$2.8 million, or 517%74%, to $3.7$6.6 million from $0.6$3.8 million for the three months ended June 30, 2016.2017. The increase was primarily attributable to fixed assets that were put in placeservice during 2016the second half of 2017 and the six months ended June 30, 2017, due to2018, which includes the acquisitionassets acquired as part of Magna and Bayou and additional fixed asset purchases by Ranger Services.the ESCO Acquisition.$0.3$0.4 million for the three months ended June 30, 20172018 compared to $0.2 million for the three months ended June 30, 2016.2017.2017 increased $1.02018 decreased $0.6 million, or 1,000%55% , to $1.1$0.5 million from $0.1$1.1 million for the three months ended June 30, 2016.2017. The increase to interest expense, net by segment was as follows:Well Services. Well Services interest expense, net for the three months ended June 30, 2017 increased $0.9 million, or 900%, to $1.0 million from $0.1 million for the three months ended June 30, 2016. The increasedecrease to interest expense, net was attributable to an increasethe changes in the average borrowingborrowings as well as the interest rates of our various debt instruments during the three months ended June 30, 20172018 compared to the three months ended June 30, 2016.2017.27Processing Solutions. Processing Solutions interest expense, net was approximately $0.1 million for the three months ended June 30, 2017 compared to $0 million for the three months ended June 30, 2016.monthsMonths Ended June 30, 20162018 compared to Six monthsMonths Ended June 30, 201720172018 as compared to the six months ended June 30, 2016.2017. June 30, Change 2018 2017 $ % Revenues: Well Services 128.8 59.0 $ 69.8 118 % Processing Solutions 6.9 3.8 3.1 82 % Total revenues 135.7 62.8 72.9 116 % Operating expenses: Cost of services (exclusive of depreciation and amortization shown separately): Well Services 105.9 48.7 57.2 117 % Processing Solutions 3.3 1.4 1.9 136 % Total cost of services 109.2 50.1 59.1 118 % General and administrative 14.2 15.6 (1.4 ) (9 )% Depreciation and amortization 13.1 7.6 5.5 72 % Impairment of goodwill 9.0 — 9.0 — Total operating expenses 145.5 73.3 72.2 98 % Operating loss (9.8 ) (10.5 ) 0.7 (7 )% Other expenses Interest expense, net (0.9 ) (1.6 ) 0.7 (44 )% Total other expenses (0.9 ) (1.6 ) 0.7 (44 )% Loss before income tax expense (10.7 ) (12.1 ) 1.4 (12 )% Tax expense 0.8 — 0.8 — Net loss $ (11.5 ) $ (12.1 ) $ 0.6 (5 )% 20172018 increased $52.4$72.9 million, or 504%116%, to $62.8$135.7 million from $10.4$62.8 million for the six months ended June 30, 2016.2017. The increase in revenues by segment was as follows:20172018 increased $51.2$69.8 million, or 656%118%, to $59.0$128.8 million from $7.8$59.0 million for the six months ended June 30, 2016.2017. The increase was primarily due to an increased demand in ournumber of well service rigs, to an average of 136 rigs from an average of 63 rigs, providing workover rig services, which accounted for $30.9$38.8 million, or 60%56% of the segment increase. Approximately $19.2 million of the increase in workover rig services was due to the ESCO Acquisition. The increase in workover rig services included a 362%an 82% increase in total rig hours to 149,800 from 82,200 for the six months ended June 30, 20172018 compared to the six months ended June 30, 2016. There were also increases2017. In addition, our wireline business accounted for $31.9 million of the increase in trucking, rental, and other revenues.20172018 increased $1.2$3.1 million, or 46%82%, to $3.8$6.9 million from $2.6$3.8 million for the six months ended June 30, 2016.2017. The increase was primarily attributable to an increase in MRUadditional compressors, tanks, and generator rentals and the additional mobilization revenue of $0.9 million due to an increase in the number of MRUs we owned and an additional $0.3 million in mobilization revenue.20172018 increased $42.9$59.1 million, or 596%118%, to $50.1$109.2 million from $7.2$50.1 million for the six months ended June 30, 2016.2017. As a percentage of revenue, cost of services was 80% and 69% for the six months ended June 30, 20172018 and 2016, respectively.2017. The increase in cost of services by segment was as follows:20172018 increased $42.6$57.2 million, or 698%117%, to $48.7$105.9 million from $6.1$48.7 million for the six months ended June 30, 2016.2017. The increase was primarily attributable to an increase in expenses due to the expansion of the Company’s activities; notably employee costs travel,and repair and maintenance and supply costs.20172018 increased $0.3$1.9 million, or 27%136%, to $1.4$3.3 million from $1.1$1.4 million for the six months ended June 30, 2016.2017. The increase was primarily attributable to increases in new equipment rentals and the mobilization costs incurred which correspondsin connection with such rental corresponding to additional revenues.282017 increased $12.22018 decreased $1.4 million, or 359%9%, to $15.6$14.2 million from $3.4$15.6 million for the six months ended June 30, 2016.2017. The increasedecrease in general and administrative expenses by segment was as follows:Services.Services and other. Well Services general and administrative expenses for the six months ended June 30, 2017 increased $12.42018 decreased $1.3 million, or 775%9%, to $14.0$12.7 million from $1.6$14.0 million for the six months ended June 30, 2016.2017. The increasedecrease was primarily attributable to an increasea decrease in expenses due to the expansion of the Company’s activities; notably expenses for payroll, professional travel, and office costs.other costs associated with the Offering in 2017.20172018 decreased $0.2$0.1 million or 11%, to $1.6$1.4 million from $1.8$1.5 million for the sixthree months ended June 30, 2016. The decrease was primarily attributable to a $0.2 million decrease in bad debt expense and a $0.1 million decrease in payroll and professional fees.2017.20172018 increased $5.9$5.5 million, or 347%72%, to $7.6$13.1 million from $1.7$7.6 million for the six months ended June 30, 2016.2017. The increase in depreciation and amortization expense by segment was as follows:Services. Services and other.Well Services depreciation and amortization expense for the six months ended June 30, 20172018 increased $5.8$5.4 million, or 446%76%, to $7.1$12.5 million from $1.3$7.1 million for the six months ended June 30, 2016.2017. The increase was primarily attributable to fixed assets that were put in place during 2016the second half of 2017 and the six months ended June 30, 2017, due to2018, including those acquired as part of the acquisition of Magna and Bayou and additional fixed asset purchases by Ranger Services.ESCO Acquisition.2017 compared to $0.4 million2017.2016.2018 was $9.0 million compared to no impairment for the six months ended June 30, 2017. During the six months ended June 30, 2018 we identified that there was a sustained decrease in the Company’s stock price, which we identified as a triggering event that precipitated the need to perform a goodwill impairment test. The results of the quantitative impairment test yielded a fair value of the Well Services reporting unit that was below the carrying value of the Well Services reporting unit as of March 31, 2018 by an amount in excess of the carrying value of goodwill. Therefore we recorded an impairment charge based on the excess of our carrying amount over the fair value, please see Note 7 – Goodwill and Intangible Assets to the unaudited interim condensed consolidated financial statements.2017 increased $1.42018 decreased $0.7 million, or 700%44%, to $1.6$0.9 million from $0.2$1.6 million for the six months ended June 30, 2016.2017. The increase to interest expense, net by segment was as follows:Well Services. Well Services interest expense, net for the six months ended June 30, 2017 increased $1.3 million, or 650%, to $1.5 million from $0.2 million for the six months ended June 30, 2016. The increasedecrease to interest expense, net was attributable to an increasethe changes in the average borrowingborrowings as well as the interest rates of the various debt instruments during the six months ended June 30,2017.Processing Solutions. Processing Solutions interest expense, net was $0.1 million for30, 2018 compared to the six months ended June 30, 2017 compared to $0 million for the six months ended June 30, 2016.2017.lossincome (loss) before interest expense, net, income tax provision (benefit), depreciation and amortization, equity‑based compensation, IPO and acquisition‑related and severance costs, impairment of goodwill, costs incurred for IPO-related gain or loss on sale of assets and certain other items that we do not view as indicative of our ongoing performance.lossincome (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net loss determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from Adjusted EBITDA. Our computations of Adjusted EBITDA may not be identical29 Three Months Ended June 30, 2018 Well Processing Other Services Solutions Total (in millions) Net income (loss) $ (6.7 ) $ 4.5 $ 1.0 $ (1.2 ) Interest expense, net 0.5 — — 0.5 Tax expense — 1.8 — 1.8 Depreciation and amortization 0.2 6.5 0.3 7.0 Equity based compensation — 0.8 — 0.8 IPO, Acquisition, and severance costs 0.3 0.3 — 0.6 Impairment of goodwill — — — — Loss on property, plant and equipment — 0.2 — 0.2 Adjusted EBITDA $ (5.7 ) $ 14.1 $ 1.3 $ 9.7 Three Months Ended June 30, 2017 Well Processing Other Services Solutions Total (in millions) Net income (loss) $ — $ (6.2 ) $ 0.2 $ (6.0 ) Interest expense, net — 1.1 — 1.1 Tax expense — — — — Depreciation and amortization — 3.7 0.3 4.0 Equity based compensation — 0.4 — 0.4 IPO, Acquisition, and severance costs — 3.9 — 3.9 Impairment of goodwill — — — — Loss on property, plant and equipment — — — — Adjusted EBITDA $ — $ 2.9 $ 0.5 $ 3.4 Change $ Well Processing Other Services Solutions Total (in millions) Net income (loss) $ (6.7 ) $ 10.7 $ 0.8 $ 4.8 Interest expense, net 0.5 (1.1 ) — (0.6 ) Tax expense — 1.8 — 1.8 Depreciation and amortization 0.2 2.8 — 3.0 Equity based compensation — 0.4 — 0.4 IPO, Acquisition, and severance costs 0.3 (3.6 ) — (3.3 ) Impairment of goodwill — — — — Loss on property, plant and equipment — 0.2 — 0.2 Adjusted EBITDA $ (5.7 ) $ 11.2 $ 0.8 $ 6.3 20172018 increased $3.2$6.3 million to $3.4$9.7 million from $0.2$3.4 million for the three months ended June 30, 2016.2017. The increase by segment was as follows:$2.8$11.2 million to $14.1 million from $2.9 million from $0.1 millionfor the three months ended June 30, 2017, primarily due mainly to significantly highersignificant increased revenues of $28.1$37.4 million offset by a corresponding increase in cost of services of $22.5$30.5 million, as well as an increasea decrease in generalIPO and administrative expenses of $2.4 million net of equity based compensation of $0.4 million, $2.4$3.6 million offset partially by an increase in the depreciation and costs incurred for IPO related servicesamortization expense of $1.5$2.8 million.$0.4$0.8 million to $1.3 million from $0.5 million from $0.1 millionfor the three months ended June 30, 2017 due primarily to an increase in net income (loss) of $0.3$0.8 million. Six Months Ended June 30, 2018 Well Processing Other Services Solutions Total (in millions) Net income (loss) $ (13.8 ) $ 0.8 $ 1.5 $ (11.5 ) Interest expense, net 0.9 — — 0.9 Tax expense — 0.9 — 0.9 Depreciation and amortization 0.4 12.1 0.6 13.1 Equity based compensation — 1.0 — 1.0 IPO, Acquisition, and severance costs 0.3 0.3 — 0.6 Impairment of goodwill — 9.0 — 9.0 Loss on property, plant and equipment — 0.9 — 0.9 Adjusted EBITDA $ (12.2 ) $ 25.0 $ 2.1 $ 14.9 Six Months Ended June 30, 2017 Well Processing Other Services Solutions Total (in millions) Net income (loss) $ — $ (12.5 ) $ 0.4 $ (12.1 ) Interest expense, net — 1.5 0.1 1.6 Tax expense — — — — Depreciation and amortization — 7.1 0.5 7.6 Equity based compensation — 0.7 — 0.7 IPO, Acquisition, and severance costs — 6.7 — 6.7 Impairment of goodwill — — — — Loss on property, plant and equipment — — — — Adjusted EBITDA $ — $ 3.5 $ 1.0 $ 4.5 Change $ Well Processing Other Services Solutions Total (in millions) Net income (loss) $ (13.8 ) $ 13.3 $ 1.1 $ 0.6 Interest expense, net 0.9 (1.5 ) (0.1 ) (0.7 ) Tax expense — 0.9 — 0.9 Depreciation and amortization 0.4 5.0 0.1 5.5 Equity based compensation — 0.3 — 0.3 IPO, Acquisition, and severance costs 0.3 (6.4 ) — (6.1 ) Impairment of goodwill — 9.0 — 9.0 Loss on property, plant and equipment — 0.9 — 0.9 Adjusted EBITDA $ (12.2 ) $ 21.5 $ 1.1 $ 10.4 20172018 increased $4.7$10.4 million to $4.5$14.9 million from $(0.2)$4.5 million for the six months ended June 30, 2016.2017. The increase by segment was as follows:$3.4$21.5 million to $25.0 million from $3.5 million from $0.1 millionfor the six months ended June 30, 2017 due mainly to significantly highersignificant increased revenues of $52.4$69.8 million offset by a corresponding increase in cost of services of $42.9$57.2 million, as well as an increasea decrease in generalIPO and administrative expenses of $4.8 million net of equity based compensation of $0.7 million, acquisition relatedacquisition-related and severance costs of $3.5 million, and costs incurred for IPO related services of $3.2$6.7 million.30$1.3$1.1 million to $2.1 million from $1.0 million from $(0.3) millionfor the six months ended June 30, 2017 due primarily to an increase in net income (loss) of $1.4$1.1 million.have beenwere capital contributions from our owners and commercial borrowings. Followingborrowings and proceeds from the Offering, ourOffering. Our primary sources of liquidity areis cash generated from operations proceeds from the Offering and borrowings under our new Credit Facility.Facility and Financing Agreement. We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements and to permit us to manage the cyclicality associated with our business.On August 16, 2017, Ranger completed the IPO which resulted in net proceeds to Ranger of $80.6 million, after deducting $4.4 million of underwriting discounts and commissions. Ranger received net proceeds of approximately $26.3 million after the Company paid off the remainder of our long term debt of $10.4 million, funded $45.2 million for the cash portion of the ESCO Acquisition and paid $5.0 million in offering related costs and $0.7 million for cash bonuses to certain employees.2017,2018, we had an aggregate of $2.4 million in cash and cash equivalents and $1.6 million in restricted cash, which was released on August 16, 2017 following the repayment on our long term debt.Following the IPO, the Company’s cash on hand of approximately $22 million as of August 30th,$10.5 million. Our cash on hand, expected cash flow from operations, and availability under our Revolving Credit facility (currently $20 million) areFacility ($16.7 million available as of June 30, 2018), and the additional borrowing capacity under the Financing Agreement (approximately $18 million available as of June 30, 2018) is expected to be sufficient to meet the Company’s liquidity requirementrequirements for the next 12 months. Six Months Ended June 30, Change 2018 2017 $ % (in millions) Cash flows provided by (used in) operating activities $ 12.1 $ (8.6 ) $ 20.7 241 % Cash flows used in investing activities (34.5 ) (10.5 ) (24.0 ) 229 % Cash flows provided by financing activities 27.6 19.9 7.7 39 % Net change in cash $ 5.2 $ 0.8 $ 4.4 550 % increased $5.2 million toof $8.6 million for the six months ended June 30, 2017 compared to $3.4 million for the six months ended June 30, 2016.2017. The change in cash flows used in operating activities is attributable to a higher net loss for the Company reduced by an increase in depreciation and amortization of $5.9$5.5 million, loss on sale of assets of $0.4 million, and the impairment to goodwill of $9.0 million. There was an increase in theThe use of working capital cash for the six months ended June 30, 2017 of $4.92018 decreased to $0.1 million as compared to the $3.0$3.2 million during the six months ended June 30, 2016decreased $8.2increased $24.0 million to $34.5 million for the six months ended June 30, 2018 compared to $10.5 million for the six months ended June 30, 2017 compared to $2.3 million for the six months ended June 30, 2016.2017. The change in cash flows used in investing activities is attributable to an increase in payments for purchases of property, plant and equipment.equipment and $4.0 million for an acquisition. 31$14.3$7.7 million to $27.6 million for the six months ended June 30, 2018 compared to $19.9 million for the six months ended June 30, 2017 compared to $5.6 million for the six months ended June 30, 2016.2017. The change in cash flows provided by financing activities is mostly attributable to a decrease in equity contributions from CSLthe principal payments of $2.7$8.6 million an increasemade on the Company’s capital leases, $13.5 million of $17.6principal payments on the Revolving Credit Facility, and $27.7 million in borrowing on related party debt, offset by a decrease of $1.2borrowings under the Company’s Credit Facility and $22.0 million in borrowings on long‑term debt, and a decrease of $0.7 million in payment on long-term debt.The Company$7.7$10.2 million that are non-cash additions in the current period. In addition the companywe also purchased $7.6$5.9 million in assets via capital lease financing.$10.4$5.2 million at December 31 2016(deficit) and a deficit of $26.8$3.2 million at June 30, 2017. This change was mainly due to an increase in related party debt of $17.6 million and current portion of long term debt of $8.2 million.Our Debt AgreementsRanger Services had a $5.0 million revolving line of credit with Iberia Bank expiring April 30, 2018 (the “Ranger Line of Credit”). As(deficit) as of June 30, 2017, there was $5.0 million borrowed against the Ranger Line of Credit. The Ranger Line of Credit was collateralized by substantially all of Ranger Services’ assets. Interest varied with the bank’s prime rate2018 and the bank’s LIBOR. At June 30, 2017, the interest rate was 4.73%. The Ranger Line of Credit requires Ranger Services to comply with certain financial and non‑financial covenants as set forth in the agreement and places limits on new debt and capital expenditures. In connection with our offering this line of credit was paid completely and closed.In March 2015, Torrent Services, through certain members of its management team, secured a $0.6 million promissory note with Benchmark Bank, which was replaced in April 2016 with a $0.2 million promissory note (the “Prior Torrent Note”). The Prior Torrent Note was repaid in full on February 28, 2017.In February 2015 (as amended in March 2016), Torrent Services secured a $2.0 million senior credit facility with Texas Capital Bank consisting of a $2.0 million Advancing Term Loan. As of June 30, 2017 this note has been paid in full.In April 2015, Ranger Services secured a $7.0 million loan from Iberia Bank, which is evidenced by a promissory note (the “Ranger Note”). Interest varies with the bank’s prime rate and the bank’s LIBOR and is payable in 60 equal monthly installments, which commenced on May 1, 2016. As of MarchDecember 31, 2017, the interest rate was 4.73%. Installment payments are due through May 1, 2019, and the note is secured by substantially all of Ranger Services’ assets. As of June 30, 2017, the outstanding balance was $5.5 million. Pursuant to the terms of the Ranger Note, we made aggregate payments thereon of $0.3 million in April, May and June 2017, as a result of which the outstanding balance under the Ranger Note was $5.5 million as of June 9, 2017. The Ranger Note also requires Ranger Services to comply with certain financial and non‑financial covenants. respectively. thisand the ESCO Acquisition we issued $7.0 million of seller’s notes as partial consideration for the ESCO Acquisition. These notes include a note was paid in full.Infor $1.2 million due on August 16, 2018 and a note for $5.8 million due on February 2017, Ranger Services entered into loan agreements (collectively, the “Ranger Bridge Loan”) with each16, 2019. Both of CSL Opportunities II, CSL Holdings II and Bayou Well Holdings Company, LLC (“Bayou Holdings” and, together with CSL Opportunities II and CSL Holdings II, the “Bridge Loan Lenders”), each an indirect equity owner of Ranger Services, evidenced by promissorythese notes payable to each Bridge Loan Lender, in an aggregate principal amount of $11.1 million. Additional borrowings from CSL Opportunities II and CSL Holdings II increased the aggregate principal amount of the Ranger Bridge Loan to $12.1 million in April 2017, $14.6 million in May 2017 and $17.6 million in June 2017. In July 2017 borrowed an additional $3.4 million bringing the aggregate principal amount of the Bridge Loan to $21.0 million. The Ranger Bridge Loan was secured by substantially all of Ranger Services’ assets. Each note borebear interest at a rate of 15% and matured upon the earlier of February 21, 2018 or ten days after the consummation of an initial public offering. The Ranger Bridge Loan includes a make‑whole provision pursuant to which Ranger Services will pay 125% of the total amount advanced to Ranger Services upon settlement. The Ranger Bridge Loan also32requires Ranger Services to comply with certain non‑financial covenants. We repaid the Ranger Bridge Loan in connection the Offering by issuing 567,895 shares of our Class A Common Stock and 1,244,663 Ranger Units (and corresponding shares of our Class B common stock) to the Bridge Loan Lenders.As of June 30, 2017, Ranger Services’ leverage ratio exceeded the threshold of 1.75 to 1.00 under the Ranger Line of Credit and Ranger Note and Ranger Services did not generate the required minimum net income of zero or greater. Ranger Services was in compliance with all other covenants at that time. Ranger Services obtained a waiver of such non‑compliance with respect to the second quarter of 2017 from the lender under the Ranger Line of Credit and Ranger Note. We repaid and retired the Ranger Line of Credit and Ranger Note from the proceeds of the Offering. fully repaid and terminated the Ranger Line of Credit, the Ranger Note and the Ranger Bridge Loan and entered into a new credit agreement providing for a $50.0 million Credit Facility. The Credit Facility is subject to a borrowing base that is calculated by us based upon a percentage of the value of our eligible accounts receivable less certain reserves. The borrowing base is calculated on a monthly basis pursuant to a borrowing base certificate delivered by us to the administrative agent.Administrative Agent. The Credit Facility will beis used for capital expenditures and permitted acquisitions, to provide for working capital requirements and for other general corporate purposes. The Credit Facility is secured by certain of our assets and contains various affirmative and negative covenants and restrictive provisions that limits our ability. The Company hasprovisions. We had approximately $20$31.7 million of borrowing capacity with $16.7 million readily available under the Credit Facility.London Interbank Offered Rate (“LIBOR”)LIBOR or (b) the greatest of (i) the federal funds rate plus ½%, (ii) the one-month LIBOR plus 1% and (iii) the Administrative Agent’s prime rate (the “Base Rate”),Base Rate, in each case plus an applicable margin, and interest shall be payable monthly in arrears. The applicable margin for LIBOR loans ranges from 1.50% to 2.00% and the applicable margin for Base Rate loans ranges from 0.50% to 1.00%, in each case, depending on our average excess availability under the Credit Facility. The applicable margin for LIBOR loans is 1.50% and the applicable margin for Base Rate loans is 0.50% until August 31, 2018. During the continuance of a bankruptcy event of default, automatically and during the continuance of any other default, upon the Administrative Agent’s or the required lenders’ election, all outstanding amounts under the Credit Facility bears interest at 2.00% plus the otherwise applicable interest rate. The Credit Facility is scheduled to mature on the fifth anniversary of the consummation of the Offeringthirty30 consecutive days. We are not be subject to a fixed charge coverage ratio if we have no drawings under the Credit Facility and have at least $20.0 million of qualified cash.33• • • • 2017:(1)All of the long-term debt was paid in full in connection with the Offering on August 16, 2017 Less than More than Total 1 year 1 - 3 years 3 - 5 years 5 years (in millions) Long-term debt obligations $ 42.6 $ 12.5 $ 30.1 $ — $ — Capital lease obligations 7.2 2.8 4.4 — — Operating lease obligations 12.9 3.2 4.8 1.3 3.6 Purchase obligations for rigs 23.2 23.2 — — — Total $ 85.9 $ 41.7 $ 39.3 $ 1.3 $ 3.6 In addition to the contractual obligations and commercial commitments as of June 30, 2017 listed in the table above, we have entered into agreements during 2017, including the purchase agreement with National Oilwell Varco, L.P., pursuant to which we have acquired 14 high spec well service rigs as of June 30, 2017 and expect to acquire an additional 23 high spec well service rigs during the remainder of 2017 for an aggregate purchase price under such agreements, including change orders, of approximately $43.5 million for which $3.5 million of payments have been made as of June 30, 2017, and the remaining $40.0 million of which will be due during the remainder of 2017 and 2018.34There were no changes todisclosedgoods or services. If control transfers to the customer over time, an entity selects a method to measure progress that is consistent with the objective of depicting its performance. See Note 2 – Summary of Significant Accounting Policies and Note 3 – Revenue from Contracts with Customers for more information.our Final Prospectus filedconnection with the ESCO Acquisition, which closed in connection with the Offering on August 14,16, 2017, which was within 45 days of the annual impairment test date. The Company evaluated the relevant events and circumstances at that point in time and concluded that it was not more likely than not that the fair value of the Well Services reporting unit was less than its carrying amount.Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of our fiscal year (a) following the fifth anniversary of the completion of our IPO,the Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. We have irrevocably opted out of the extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.35Form 10‑QQuarterly Report includes “forward‑looking statements” within the meaning of Section 27A oof the Securities Act, of 1933, as amended and Section 21E of the Exchange Act of 1934 (the "Exchange Act"), as amended. All statements, other than statements of historical fact included in this Form 10-Q,Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward‑looking statements. When used in this Form 10-Q,Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “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 are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward‑looking statements, you should keep in mind the risk factors and other cautionary statements included in the prospectus filed on August 14, 2017.our Annual Report. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.the Final Prospectusour Annual Report previously filed. Should one or more of the 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.Form 10‑QQuarterly 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, we disclaim any duty to update any forward‑looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Form 10‑Q.Quarterly Report.36$28.0$7.0 million outstanding under notes payable from the Ranger Line of Credit, the Ranger Note, the Existing Torrent Note and the Ranger Bridge LoanESCO Acquisition at June 30, 2017,2018, with a weighted average interest rate of 11.09%5.0%, $15.0 million outstanding on our Credit Facility with a weighted average interest rate of 5.1% and an additional $22.0 million of long-term debt with a weighted average interest rate of 10.0%. A 1.0% increase or decrease in the weighted average interest rate would increase or decrease interest expense by approximately $0.3$0.4 million per year. We do not currently hedge our interest rate exposure.2017,2018, the top three trade receivable balances represented 13%approximately 18%, 11%10% and 8%9%, respectively, of total accounts receivable. Within our Well Services segment, the top three trade receivable balances represented 13%approximately 18%, 11%10% and 8%9%, respectively, of total Well Services accounts receivable. Within our Processing Solutions segment, the top three trade receivable balances represented 38%approximately 47%, 28%20% and 22%11%, respectively, of total Processing Solutions accounts receivable. We mitigate the associated credit risk by performing credit evaluations and monitoring the payment patterns of our customers.Report on Form 10‑Q.Report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. As of June 30, 2017 2018 disclosure controls and procedures were not effective as a result of the material weakness identified during the year ended December 31, 2016. 2017. The material weakness related to the lack of sufficient qualified accounting personnel, which led to the incorrect application of generally accepted accounting principles, ineffective controls over accounting for non-routine and/or complex transactions, and ineffectivetransactions.the financial statement closeaccounting for non-routine and/or complex transactions in an effort to identify additional controls to timely identify misstatements and reporting processes.We have recruited additional finance andstrengthen our overall control environment as well as continuing to assess our qualified accounting personnel and we continue to evaluate our personnel in all key finance and accounting positions to see if additional finance and accounting personnel are required.3720172018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Factors”,Factors,” included in our Final Prospectus.Annual Report. This information should be considered carefully, together with other information in this reportQuarterly Report and other reports and materials we file with the SEC.Item 2. Unregistered Sales of Equity Securities and Use of ProceedsUse of ProceedsOn August 10, 2017 our registration statement on Form S‑1 (SEC Registration No. 333‑218139), as amended through the time of its effectiveness, that we filed with the SEC relating to the Offering was declared effective. Credit Suisse Securities (USA) LLC and Piper Jaffray & Co. served as representatives of the several underwriters for the Offering. The offering did not terminate before all of the shares in the Offering that were registered in the registration statement were sold. In August 2017, we closed the Offering of 5,862,069 shares of Class A Common Stock, at a price to the public of $14.50 per share ($13.5575 per share net of underwriting discounts and commissions), resulting in gross proceeds of $85.0 million, or net proceeds of $80.2 million after deducting underwriting discounts and commissions.We contributed all of the net proceeds of the Offering to Ranger LLC in exchange for Ranger Units. Ranger LLC used the net proceeds (i) approximately $10.4 million of the net proceeds to repay amounts outstanding under its debt agreements, (ii) approximately $0.7 million of the net proceeds to pay cash bonuses to certain employees, (iii) approximately $45.2 million of the net proceeds to fund the remaining cash portion of the consideration for the acquisition of substantially all of ESCO Leasing, LLC’s assets and certain of its liabilities and (iv) the remaining net proceeds for general corporate purposes, which may include the acquisition of high-spec well service rigs. Item 5. Other InformationThe exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this report, and such Exhibit Index is incorporated herein by reference.38Exhibit
NumberDescriptionDescription 2.1 †† †† 2.3 3.1 3.2 4.1 4.2 †† 10.310.410.5‡10.6†10.7†10.8†† 10.9†10.10†10.12†10.13†10.14†10.15†10.16†3910.17†10.18†10.19†10.20†10.21†10.22†10.23†*31.1**32.2 ‡Confidential treatment was granted with respect to certain portions of this exhibit. Omitted portions filed separately with the SEC.40of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized..Ranger Energy Services, Inc. September 1, 2017By:By: /s/ Darron M. Anderson NAME:NAME: Darron M. Anderson Title:Title: President, Chief Executive Officer and Director (Principal Executive Officer) September 1, 2017By:By: /s/ Robert S. Shaw Jr.J. Brandon BlossmanNAME:Robert S. Shaw Jr.NAME: J. Brandon Blossman Title:Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 41