Good day, and welcome to the Ranger Energy First Quarter 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Darron Anderson, Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to Ranger Energy Services first quarter 2020 earnings conference call. Joining me today is Brandon Blossman, our CFO, who will offer his comments in a moment. Well, a lot has changed since we last spoke. But before we focus on the changes, I'll briefly discuss what has remained constant across Q1. Record rig revenue per hour and record wireline stage count again led to consistent revenue and EBITDA performance, both approximately flat to 4Q 2019 results. Strong cash flow from operations were directed toward modest growth CapEx items, debt reduction and stock buybacks, which Brandon will cover in detail momentarily. I think our results speak for themselves, and frankly, we were off to start the track on top of our 2020 plan. Now let's move to the market changes and our new path forward for 2020. While we are experiencing some relative outperformance versus peers, on an absolute basis, the reduction activity over the last several weeks has been extraordinary. The activity reductions have only been dramatic in scale but also swift in timing. While this downturn has outpaced all previous market declines, our management team has weathered previous storms, and we know exactly what actions have to be taken. While we've always taken pride in operating a lean and efficient cost structure, we immediately redesigned and rightsized our business to match current activity levels. I first want to give you a clear picture of our current activity before moving on to our cost adjustments. Starting with our High Spec Rigs. For April, rig hours declined approximately 53% as compared to our first quarter monthly average. While Ford visibility is near nonexistent, we do not believe a bottom has yet been reached. Pricing has been impacted to a lesser extent, as activity clients…

Thanks, Darren, and good morning to everyone on the call. All right, we're moving back to Q1, and going to jump right into a full walkthrough of the numbers. First, on a consolidated basis, relative to last quarter, Q1's revenues were up 1% or approximately $1 million moving from $80 million to $81 million. Adjusted EBITDA was flat at $11.4 million, while adjusted EBITDA margins held in at just over 14%. Now moving to the segment level and starting with revenue. Quarter-over-quarter revenues saw an increase at our Completion and Other Services segment, which was partially offset by declines at processing solutions, while high-spec rig revenue was just up from flat. Specifically high-spec rig revenue was up a $100,000 to $35 million with an increase in rig rates being offset by a decrease in period rig hours. Notably hourly rig rates set a new peak this quarter, moving from $534 an hour to $558 an hour, which was an increase of $24 an hour or a 4% increase. On the other hand, revenue hours went down from 64,400 to 62,400, a 2000 hour or 3% decline. In the Completion and Other Services segment revenue was up 5% or $2.2 million moving from $41 million to $43 million for the quarter with wireline showing growth and the other non wireline services seeing some declines. Here, wireline revenues were up 10% sequentially driven by a record 22% increase in period stage count partially offset by a 10% reduction in rate per stage. Note that there's 22% increase in stage count is on top of a previous Q4 record stage count. While the drop-off and other non wireline service lines was primarily driven by a soft January in the DJ Basin service lines. And finally at our Processing Solutions segment revenues here were…

Thank you, Brandon. I’ll wrap up with a couple of strategic comments. First, while I’m sure everyone would like an update on our controlling shareholder take-private offer, I did not have anything incremental to share beyond what has been publicly filed. Secondly, we continue to spend time on the consolidation front. If anything, this downturn magnifies the need to rightsize our industry. Costs must be managed tightly and organizational efficiencies have to be gained. We think we’re pretty good at this and plan to not only demonstrate it through our internal performance, but hopefully, across a larger platform. While this market is extremely difficult, I’m highly confident that we are taking the correct and necessary steps to be an even stronger organization on the other side of it. This concludes our prepared remarks. And operator, we’ll now open up the call for any questions.

Thank you. [Operator Instructions] And our first question will come from Dylan Glosser with Simmons Energy. Please go ahead.

Hi, good morning, guys.

good morning, Dylan.

good morning, Dylan.

I apologize if you guys said this, like my call dropped about midway through the call. So – but I think you guys mentioned that April, on high-spec rig segment that you saw a 50% decline from the Q1 average. Solaris came out and said that they expect 75% to 85% activity decline quarter-over-quarter. Are you guys seeing something similar as you kind of go through Q2? Or how are you thinking about just overall activity in both your high-spec rig segment as well as your Completions segment?

Yes, great. Thanks for the question. Yes. The comment was that we had a 53% regards drop for April as compared to the average for Q1. I’ll follow with a comment of saying that we do not think we’ve seen bottom yet. If you were to ask me what I think about the industry overall and up me with Solaris commentary, I think if you think about Q4 and the first two months of Q1 have kind of been somewhat stable activity, so relative to that period of time to kind of a mid-Q2. I think we should be prepared for the industry to be in the 75% to 80% down activity-wise. Now that being said, Ranger is not that level across any of our bids levels. We've enjoyed having a high quality customer base. We've enjoyed and been fortunate that some of our customers have maintained an active level greater than a lot of the customers out there. So we're not at that level yet. Again, there's some downside exposure that we do have of course, but we're not at the 75% to 80%. And again, I use that as kind of average for the industry. I can give you several scenarios of competing service companies on a smaller scale that have gone to zero activity. So when I think about 75% to 80% industry average that factors in, some that have gone to zero and others that have maintained kind of a 16% activity level.

Okay. Great, thank you for that. I guess some clear questions I have, from the $100 million in annualized cost savings you guys mentioned in your release, how much of that lies within SG&A? And what do you suspect might be a good run rate for you guys in the remainder of 2020?

Brandon you can help chime in here. I think our SG&A cost in historical basis has always been low and that's one thing that we definitely have prided ourselves on. We had the headcount reductions that affect our SG&A group and a large part of the cost saving was from the head count reduction. Brandon, do you have any comments you want to add that more granular?

No. Darron, certainly offline, we can go through line item-by-line item and give you some color on where those costs buckets lie. But in general SG&A – here's a big picture comment. We're moving the business structurally and redesigning it on the fly here and so that is a point in time cost savings estimate and anything that we say here today could change tomorrow in terms of how we design the business and how it functions going forward and that is especially true at the corporate level. So that is an inclusive number. There certainly is a material contribution from the SG&A component, but I would hate to give you a forecast of a go-forward SG&A, other than to say it's materially lower than it has been historically. And there's a possibility that, that steps down again.

Okay. Thank you. And I guess one last point of clarification. I think I heard you guys mention that through the remainder of 2020, expect to be cash flow neutral, just wanted to confirm that. And then also as far as on the CapEx front, you guys had about $0.5 million in maintenance CapEx in Q1, is this a good quarterly run rate to kind of think about through the remainder of the year or what's a good number to use for CapEx?

Let's do CapEx for maintenance CapEx first. My expectation and I'll get Darron to chime in here too, is that it approaches zero for the rest.

Yes. The Q1 is not the proper run rate for moving forward. I mean, we had a very nice first 2.5 months of the quarter, right. And our maintenance CapEx reflected that. But as the activity has pulled back, of course we'll see the same relative pullback of maintenance CapEx to Brandon comments are targeted to get that to nil. I'll let you provide comments.

Yes. So the commentary from Darren on neutral cash flow is a target and our objective is to do better than that. But that is our worst case scenario. Now we may stumble for a month or so, but as we think through the business design and look at current and the best of our ability, future activity levels, we want to do no worse than neutral cash flow and take the necessary actions to at least achieve that target if not a bit better.

Thank you guys so much for your time and I'll turn it over. Thank you.

Thank you.

[Operator Instructions] Our next question will come from Tom Curran with B.Riley FBR. Please go ahead.

Good morning.

Good morning, Tom.

Brandon. What's your battle plan for deleveraging in this kind of environment? And based on this scenario as you modeled what's the most likely range for where aggregate debt should aggregate?

I'm sorry, that last part of the question, Tom?

Where aggregate debt, the most likely range based on the modeling you've done, where aggregate debt will end the year?

So I'll tell you we are updating our model once a week, right now. So I don't feel confident in a forecast that is even a few days stale. I don't know is the answer. So the game plan to deleverage, game plan one is to ensure that we have at least neutral to positive cash flow. And given the changes in activity level that we've seen over the last six weeks, I think I'd be remissed to even pretend that I had an idea of where we were going to be at the end of the year in terms of leverage. But the point there is, if we're at neutral cash flow, it should get no worse. And if we do better than neutral cash flow, it will be better, because we certainly aren't going to be spending any money on CapEx. So that will be the only source or the only think for any incremental cash flow will be leveraged reduction.

Right. That's reassuring me here. Darron, when we do get to the other side of this oil consumption activity canyon, you're one of the best positioned contractors to benefit from the restart of shutting wells. When it comes to that initial wave of wells that will be bought back online, how do you expect that activity to break down by basin? And what's your strategy to ensure you do capture as large a share of that work as you should?

Yes. So I think one of the opportunities that our balance sheet is affording us right now is, we're not worried about making it to the other side and we're still actively managing the business and engaging customers. So our engagement is not necessarily because we're going to load out formal wireline trucks and 10 more rigs tomorrow. But it's in preparation that we will make it to the other side. I don't think everyone will make to the other side. We're going to be in a position to be able to service immediately. As we're having customer discussions, customers are concerned about wealth being shut in, tariff and build up inside of tubing, all leaning to additional work over opportunities. We're going to be in a position to capitalize on that. I made the comment about why we have reduced our headcount, we strategically positioned the organization's staffing levels, which I won't go into detail that will allow us to quickly respond when a rebound does occur. So I think, we're going to be very, very well positioned, we're preparing for it, we're engaging with customers on it through Skype calls literally every other day, and we're still working very hard again. So it's going to be a tough, tough next several months But we're going to be very well positioned on the other side of this.

Last one for both of you. On the M&A front, given how the outlook is evolving for U.S. shale how would you characterize your interest in extending within completion services versus production services at this point? And how does the asset attractiveness and valuations you're seeing compare between the two?

So I think on the completion side we’ve had objectives to grow the completion side of our business, even prior to this downturn. I think that on the other side of it, we will see the basis activity come back quickly. I think we're going to see completion activity follow that because there are wells that are going to start to build up the DUC inventory. And there's going to be opportunities there. So our objective hasn't changed to want to grow the completion side of our business. What was the second part of the question? I apologize.

I was just curious, when you look at the deal flow you've been seeing within completion services and then compare that to the prospects that have been arising within production services. How have the asset attractiveness and valuations compared?

Well, I would say that we've always wanted to participate in consolidation and we've been very discipline on doing that with the right organizations that meet our value expectations that meet the asset quality. So the opportunities are definitely hydrated the way we look at them and eliminated a lot of opportunities. That being said, I think facing the condition of the market there are more open and willing discussions, I say today than there has been historically. So we are participating in discussions, we'll continue to participate in those. And again, we'll figure out what is the right opportunity that creates value for our shareholders.

Thanks for fielding my questions guys. Stay safe.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Darron Anderson for any closing remarks. Please go ahead.

I just simply want to thank everyone for joining us for today's call and we look forward to speaking next quarter. So echo the comment, everyone stay safe, and we'll visit here in a quarter. Thank you everyone.

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