Good afternoon, everyone. I'm Steve Ferazani, an analyst at Sidoti. Just waiting to give it a few seconds to let everybody fill into the room here. I'll introduce our next speakers in just a second, but before we get started, I'll take this time to remind you we should have a couple minutes at the end of the presentation for questions. If you have any, you press that Q&A button at the bottom of your screen and type them in, and we'll get to as many with time permitting. And with that, pleased to welcome Ranger Energy Services, the ticker is RNGR. We're joined by CEO Stuart Bodden and CFO Melissa Cougle. I don't want to take up any more of your time, so with that, let me turn it right over to Stuart and Melissa. Stuart?
All right. Thanks, Steve. Appreciate it. Hi everyone. Thanks for joining and listening in and your interest in Ranger Energy Services. As Steve said, I'm Stuart Bodden, CEO of Ranger Energy Services, and I'm joined by Melissa Cougle, the CFO of Ranger. And I'll go through the first part of the presentation, and then she'll go through the back part, and then we'll open it up for Q&A. Just to give you a little bit of an overview of Ranger, 2023 was a strong year for the company. So we operate in three primary segments. So our largest is what we call high-spec rigs. These are well service rigs. We do not drill the original hole, but we, with our well service rigs, go back and do maintenance on these wells.
We have a wireline group that's just over 30% of our revenue in 2023, and then the remainder in ancillary services. And ancillary services for us includes a plugging and abandonment business, a coil tubing business focused in the Rockies, a rental fishing tool, and an in-field gas processing. So last year we did $637 million of revenue. That was a 5% growth from 2022. So despite the fact that drilling rig count and activity in the industry declined, drilling rig count declined by 20%, we actually grew revenue 5%. And that's a bit of a theme that we'll talk about as we go through the day, because we think that we are more resilient through the cycle than other segments. We actually grew our EBITDA by 6% last year. So we came in a little over $84 million of EBITDA in 2023.
Something that we're very proud of and something that we're very focused on is our conversion of EBITDA into free cash flow. Last year we generated approximately $54 million of free cash flow. We'll talk a little bit about what we did with that and kind of what we intend to do with that going forward. Again, I think one of the things we hope you take away from today is really a resilient business model, great conversion of EBITDA into free cash flow, and we have a great balance sheet too, which we'll talk about. We're about 2,000 employees, 25 locations, about 3,500 major operational assets. We don't operate in California. We don't operate in the Northeast, but we are kind of up through Texas, Colorado, and into North Dakota and Wyoming.
So Eagle Ford, Permian, Haynesville, Mid-Con, DJ Basin, a little bit of Powder River, and then up into the Bakken as well. We're more of a production-focused service company. Again, less exposed than some other companies to drilling or to completions. Again, balance sheets in great shape, $85 million of liquidity. Last 12 months, EBITDA margins of 13%, and for the last 12 months, our return on invested capital of 9%. You'll start to see these as we kind of go through. We've grown a lot in the last couple of years, and we've really converted that growth into meaningful cash to the bottom line. 2021 in particular was a very accretive year, or a very acquisitive year for the company. We did three major acquisitions in 2021, which Melissa will touch on as we go through there.
We do tend to be more tied to production service-related lines, which just basically means we're not the homebuilder, but we are the plumber and the mechanic. So we do go and make sure that the wells that are in existence are working optimally. We do feel like we have room to grow with our existing asset base. We bought a number of assets in 2021. We're being very disciplined about when we bring those to market. Our capital return framework is something that we're very proud of as well. In 2022, in the wake of the acquisitions, we had a little bit of a debt buildup. We very consciously said we wanted to pay our debt down. We got to net debt zero in the first half of last year.
And then since that time, we gave about 40% of our free cash flow back to shareholders through a combination of dividends and share repurchases. We were very aggressive with share repurchases in particular last year and going into this year as well. We do think that we are a natural consolidator of this base. We think we need to be bigger, but you'll find that we're very, very focused on making sure that anything we do is accretive to our shareholders. Starting off on the left just to kind of how we think about the business. In the lower left, as I mentioned earlier, we did grow revenue of the company 5% year-over-year last year. That converted into a little over $84 million of EBITDA and then about $54 million of cash flow. We talk a lot about converting our EBITDA into free cash flow.
And the reason that we think we can do that is, again, because of the production cycle, more resilient, differentiated service lines. We're big believers in being in taking leading positions in leading basins. So kind of building a subscale position in a subscale basin is something we're particularly interested in, and just making sure that we deploy our assets rationally. And as I said, we had return on invested capital of 9% last year. On the right-hand slide, you can see the quarterly breakout of our ROIC, our adjusted EBITDA and free cash flow conversion. And then again, on the lower right, you'll see kind of annually our revenue. You can see the big jump from 2021 into 2022. A lot of that was on the back of our acquisitions, but also a recovering market. So we more than doubled the company from 2021 to 2022.
And again, if you kind of look at the yellow dots, that's the end-of-year rig count. But you can see from 2022, land drilling rig count that's different than our well service rig count. But a lot of it we use that as a proxy for the industry activity. You see a decline, but we were still able to grow revenues. Talked about, again, our production focus. What that really means, what you can see, and this is spending in the E&P sector or the oil and gas sector, the upstream part of the oil and gas sector, indexed back to 2010. But if you look at the dark, the black line, that's well production spending. That's really where we have more than half of our revenue tied to that.
There is some volatility, but you can see it's muted relative to either completion spending, which is the kind of dark gray line, or exploration and drilling spending, which is the lighter gray line. Again, that's because as long as there are more wells being drilled than are being retired, then that means our addressable market is growing because we're the ones that keep all the existing well base properly maintained. Very similar theme here. I'll just kind of walk through this each level. On the left-hand part of the slide, what you see is in the blue, that's production from existing wells. What you see is that if you did not drill new wells, then production would start to decline.
So even though you've seen drilling rig count decline over the last year and production increase in the U.S., that will roll over, and that trend will stop because the decline curves on these wells is pretty steep. So on the one hand, you actually do need to keep reinvesting in drilling new activity. The middle sort of shows you horizontal well count. And that's really kind of our bread and butter on the wells that we work over as it's continued to grow. As long as you're drilling more wells and you retire, our addressable market is growing, which has been the case. There's probably today about 200,000 what you would call kind of higher spec horizontal wells in the U.S. today. Total well count in the U.S. is probably between probably around 1 million wells across the U.S. in operation.
And then on the right, you can just see an estimate from Spears & Associates of the amount of well services spend over time. And again, it's something that we think will continue to grow through time. This gives you a little bit of a sense of kind of how much of our revenue is tied to the different to the different parts of the value chain. The value chain, if you're moving from kind of left to right on the slide, is obviously you drill a new well. We're not really associated with that. Depending on where you are, it could be a couple of weeks, two to three weeks. Some of the Eagle Ford wells are even faster than that. It tends to be kind of a more volatile space based on kind of E&P's outlook for the need for new wells.
After you drill a new well, you need to go in and complete that well. We're about 30%-40% tied to that part. That's typically roughly a week. That's when you frack the well. That's really completions is where the bulk of that is fracking the well. And then that is more volatile. It's a little less muted relative to drilling because of DUCs can act like a buffer. That's a drilled but uncompleted well. We have the bulk of our revenue in production. Wells tend to last for, call it, 15 to 20 years, and you've got to go back in a well every kind of year or two. So it's something that you're always having to go back in and repair equipment, do clean outs, etc., or help when you put them on artificial lift. Wells typically need help within the first year. It's called artificial lift.
We're very often involved in going back and installing that into existing wells. The volatility is lower than other parts of the value chain. Decommissioning, that's really plugging and abandonment where we are involved as well. One of the things we'd like to highlight is Ranger, we tend to work with a lot of the majors and have kind of if not the largest with most of the majors, we're the second largest, but we're probably the largest well service provider for most of these people here. A lot of that is because we have a real reputation for service quality, for making sure that our equipment is properly maintained, investing equipment, investing in our crews, and making sure that everything is properly certified.
So if you look at our kind of big or large independent in the majors, we're about 60% of our revenue is tied to them, about 40% to smaller players. I mentioned this earlier on our geographic footprint. It's a large position in Eagle Ford, Permian, kind of Mid-Con, Haynesville, also in the DJ, Powder River, and then up in North Dakota. We're not in California. We're not in the Northeast. These are markets that we look at. But certainly, we wouldn't enter those markets unless we felt like we could build a leading position there. Just very quickly, so this is you can kind of see through time. The yellow is our revenue, annual revenue, the EBITDA, and the green. And then the gray line is rig count.
So you can see from 2020 to 2022, we grew with rig count, but we also did some acquisitions in there. What I really want to highlight is from 2022 to 2023, even though rig count, this is drilling rig count, so rigs drilling new wells, declined kind of 20%, we actually grew our revenue. And you can see that we actually grew EBITDA as well. So from 2022 to 2023, revenue for us grew by 5% and EBITDA by 6%. Again, this kind of shows the same thing on the left, but just a couple of highlights. We also increased margins year-over-year despite we had a pretty significant run-up in medical costs that I think hit the industry. So even with that, we were able to expand margins. Net income of $23.8 million or $0.95 for fully diluted share.
The free cash flow of $54 million. We also had surplus assets that were not usable to us that we sold for just shy of $7 million. As I mentioned earlier, we were net debt zero last year. In 2023, we repurchased 1.8 million shares. That continued into 2024. At the end of February, we had repurchased more than 2.5 million shares and more than 10% of the company back. We also paid a dividend. We started that in the Q3 of last year, and that continues going forward. Just very quickly on the shareholder returns, and I'll turn it over to Melissa. We have committed to shareholders that we will return at least 25% of our free cash flow to shareholders through dividends and stock repurchases. Proud to announce that last year, we returned 40% of our free cash flow to investors.
The bulk of the cash flow that wasn't returned to investors was used to pay down debt. So we are today virtually debt-free and obviously have been very committed to returning capital to shareholders. As I mentioned earlier, $19.3 million, 1.8 million shares in 2023 were repurchased. At the end of February, that now stands at over kind of 2.5 million shares and over 10% of our stock. I think our view is we recognize that our shares really or any new capital investment has to compete with our shares. And we kind of look at where we think we're trading. And for a lot of the cash flow going forward, we feel like that repurchasing shares has been a great investment for our shareholders. The right-hand side just kind of gives you a sense of where we use the debt paydown.
So I almost have to or use the cash flow. I almost have to pay down the debt. And then the majority, 40% of that, as I mentioned earlier, was share repurchases and dividends. With that, I will turn it over to Melissa.
Thanks, Stuart. I appreciate everybody joining us today. Stuart told you a lot about sort of Ranger at a high level. I'm going to try to give you a little bit of a feel for our different service lines. We're certainly most known for our high-specification rigs business, but we do have three segments we operate in. If we kind of look at the slide, it talks about not only the strength of the segments, so that which brings benefit to the company, but also how we think about growing that and the opportunities set within each one of those segments.
So if you take high-specification rig, and we'll get into some more specifics, we consider this our anchor business. It's certainly we hold the largest market share in North America in a market that's now acting fairly rational as compared to historically how it behaved. We also hold the majority of the excess asset capacity. So there's been a lot not only of sort of price rationalization and resetting these past couple of years, but we've sort of led the charge on actually cutting up and disposing of a fair amount of assets. And we still also hold the largest piece of the asset capacity that's still available. We are also the most well capitalized with the strongest reputation for service quality and safety. So as a publicly traded company, we take service quality and safety quite seriously. We have fairly robust programs.
And we partner a lot with sort of the larger operators in the United States to try to make sure we are operating as safely and efficiently as we can. So all of that sort of wraps a bow around what we feel like is the best business. We also, Stuart's mentioned a couple of times, we're not sitting on either side of the U.S. So we don't have operations in California. We don't have operations in the Northeast, which are both fairly meaningful operating environments for production capacity. So not necessarily drilling of new wells, but a lot of maintenance of existing wells and plug-and-abandonment work going on. So we consider that we have the ability to grow on both geographies. We also think we don't hold an outsized piece of market share.
I think we hold a view that we could continue to get bigger within that high-specification rig business and continue to be an even bigger player in the market. If we look at the wireline business towards the center, that's our second biggest segment. We divide this business into three different pieces. You'll see us talk about we have wireline completions business, which actually works towards the completions that you saw on the earlier slide. We have a production and a pump-down business. We have talked if you've paid attention to Ranger's discussions in the past, and as we've gone to market, we've been very transparent. This has been a struggling business. The completions business, which is tied to the completions piece of the market, is the one that probably suffers the most. It's had a lack of rational pricing.
We've chosen Ranger to not participate in that. So we only bid at what we think is a fair return, which means we've taken a fair amount of declines in that market over the declines over the past year because that's not only linked to that market. Pricing has deteriorated. We've not chased the pricing. So you've seen that a little bit reflected in our financials. That said, and I'll show you this on a future slide, we do carry the largest market share. So the market's much more fragmented than high-specification rigs. But even in a market that's heavily fragmented, we are kind of alongside two other very large players in U.S. onshore with a very large market share that's also a meaningful market share in the north, so across the Bakken and Powder River basins. We also have a reputation for versatility.
So whereas a lot of other wireline players, they only do completions work, they might specialize in pump-down. We have a variety of skill sets to be able to accomplish multiple jobs. And we think that over the long haul, that will advantage this business in this segment. And I'll share with you the growth opportunity on a future slide about how we think about taking what we view as a high-specification-like business in the north and trying to translate that elsewhere within our other wireline businesses, namely in the south. On the ancillary services side, this is a series of smaller service lines. You've probably heard us talk in the past about coil tubing, which is probably one of the bigger ones. We have a rentals business that goes along with our high-specification rig business. It's kind of an ancillary service that kind of gets sold pull-through with rigs.
And then we also have a plug-and-abandonment business there as well as some smaller lines that kind of support the high-specification rig business. We also have more of a midstream type small business tucked in there called a processing solutions business that we work and serve the midstream market with. And our growth opportunity really here is that all of these service lines are really relatively small in markets that are really relatively healthy. And so we have an opportunity to kind of continue to pursue growing those service lines alongside our other two segments as and when market circumstances look like returns are healthy to do so. If we go to the next slide, this really speaks more deeply to our high-specification rigs business. You can see we talked about this business being sort of more rational.
We think the total working rigs in the market are somewhere between 1,000 and 1,200 rigs. We think that the vast majority of the market, 50% to 60% of it, is actually concentrated against the players on the right-hand side of your screen. We are holding the largest piece of the market, but with several other significant players. We talked a little bit about continued consolidation here. I think this illustrates what happens when you see on the wireline side, you've got a mostly rational market really driven out of a few players, several key players holding a very large market share. That also, though, affords the opportunity. That does mean we have more than 20 companies, as our research suggests, more than 20 companies, mom-and-pops, if you will, holding maybe five, 10, maybe in some cases, 15 rigs.
That split the other 40% to 50% of the market. Ranger can continue to grow and consolidate further to kind of continue to take additional market share as the rest of these players are. I think that's our view that if you looked at the same page another two or three years from now, you're going to continue to see the gray wedge getting smaller and continue to see the yellow wedge getting larger. If we go on to the next slide, this is just look at the financials. Stuart mentioned resiliency right out of the gate. This is the business that shows that most evidently. You can look at the yellow dots. If we're looking at the revenue in the upper left, the yellow dots represent drilling rig count, right?
Because we are frequently at Ranger sort of lumped into the group of other oilfield services, which are characterized by high volatility when your drilling times are good and when your not times are bad. But you can really look at from after we first got the additional acquisitions done in 2021, from the Q1 of 2022, we've had very steady either growth or performance every single quarter since then. Despite what you can look at in 2020, towards the end of 2022, we started to see a pullback into 2023. And despite the drop across the board in 2023, we actually performed relatively well. So we're quite proud of that. We think that really is a hallmark of this business and the healthier backdrop that's been created after the acquisitions in 2022. And you can see the margins there are also quite healthy.
If we look in the wireline segment as well, so wireline, we talked about much more fragmented. So when you're looking at the yellow pie piece, the Ranger market share, it's only 5% to 7%. The next six competitors all holding the same. So far, you kind of have an inverted view as to compare to the pie chart on the prior slide. That said, if you look at Ranger market share, you can see we have between 25% and 30% in just the north, which we think is quite healthy. We do think that that gives us some exposure to volatility in Q4 and Q1 period because we have a harsher winter than a lot. But it also gives us a meaningful base of operations from which to go through.
One of the things we want to, and we've been pretty clear about with our investors, is we want to grow the production business. We want it to look a lot more like high-specification rigs. In order to do that, we need to pursue. So if you imagine on the left-hand side, the total wireline market in U.S. onshore is $3.5 billion. If you're looking at the lower right-hand side, a smaller piece of that, so the lion's share of that is the completions work that we talked about. That's relatively unhealthy right now. But if we pursue the production piece, we hold a very small market share there and have plenty of opportunity to grow. And that's what we're looking to do in the future here. If we continue, we can touch on the financials on the next slide. And you can see this where there's more exposure there.
You could see the winter volatility showing up in the Q4 and the Q1 periods. Then you can also see performance this year being in 2023 affected more so by the rig count declines. It particularly shows up kind of in margins as well that we've struggled with. We're working to kind of pivot that in this business. If we move on, I'll touch on briefly on the processing solutions and ancillaries. So again, you can see more resilience this year. Again, it's supporting the rig business. So you're seeing at the top more consistent performance on revenue. We did see a little bit of pullback towards the end of the year in margins after sort of healthier margins, if you will, in the Q3 period.
So a little bit of utilization really affecting margins this year as we kind of had to pivot more so due to rig count declines. If we keep moving along, this is what I call Stuart's favorite slide or what we call.
That is my favorite slide.
It is definitely his favorite slide. We talked at the outset about Ranger is the company it is today after a series of three acquisitions completed in 2021. Those three acquisitions more than doubled, some would argue tripled the size of this company. And this really just demonstrates sort of the contribution of those three acquisitions over time. So we start with our total investment over that year of 2021. We invested effectively $74 million. And that's including the working capital investment. We looked through a fairly harsh lens to say, how much did we have to spend to get those companies? And then you could see each progressive quarter, the EBITDA contribution that those acquisitions have made. So they've been really strong. We feel like that this well demonstrates our track record to be able to add cash-generative businesses to the portfolio. Yeah.
And then we'll close out on the final slide and take some questions. This really just kind of revisits. We have a strong ability to grow. We've demonstrated that. We actually have great exposure, I should say, to oil lifecycle, very differentiated from most other oilfield service providers. So if you're looking and researching those, the production focus that Ranger has is quite unique. We have several service lines so we can continue to grow there. We're not across all of North America yet. And we have the healthiest balance sheet of any small- or small-cap company in the oilfield services space. So with that, I think we can turn it over to maybe a question or two. I saw one come in, Stuart, in the chat. I don't know if you've had a chance to see it.
Yeah. We have one question in, and I'll remind people we've got two minutes left. If you do have a question, put it in now, and we will touch on the one question we saw, which was so you've talked about the free cash flow you saw. We saw a 20% rig count decline market forecast generally for a flat rig count this year. If production remains healthy, are you still forecasting cash flow in 2024? And what kind of have you given any kind of take on levels?
Sure. Thanks for the question. What we've been saying is that we think that 2024 in a lot of ways looks like 2023, right? And so kind of that's across revenue, EBITDA, free cash flow. What I would say is we do think it may be a little more back weighted this year in 2024. The Q1 is off really for most of the players, off to a bit of a slower start. But we see things starting to ramp. But I think when we get to the end of the year 2024, what we feel like right now is it'll feel like a pretty similar year to 2023.
I mean, what's your take on most are saying probably the drilling recovery is maybe early 2025 now based on LNG export capacity coming online? If we get through a flat rig count, when do we start seeing some weakening of production? When do you start getting a little bit concerned? Frankly, low natural gas price is the result of the fact that natural gas production continues to hit records, right? And I know you're more oil exposed. But just how do you sort of put all of that together when you're thinking about it?
Again, I think just talking to our customers, what most of them feel like is I think everybody's been a little surprised at the resilience of production. But as I mentioned earlier, Steve, I think everybody feels like that the decline curves in existing wells are pretty significant, right? And I think as we move into the back half of the year, we're going to find that production rolls over. And that to keep production up, you're going to have to see more investment back in the and again, back in the E&Ps.
Okay. How are you thinking about capital allocation post-2024? You have the buyback in place. What's the M&A pipeline looking like? We've seen more volume of deals. They've been smaller, but we've certainly seen some pickup in volume. But those might not have been the stuff that got bought, might not have been the right fit for you. How are you thinking about your M&A pipeline?
We do think we still need to grow and have an opportunity to grow. We think that M&A is a part of that. We struggled with a lot of 2023 just having a bid-ask spread that was untenable that we just couldn't close. We feel like it's starting to narrow. I'll also say we're not all the way there yet. We do think that it's starting to be a little more rational in part of the sellers. We're hoping that maybe we can kind of get something done in the next, call it, 12-18 months.
With your balance sheet clean now, are you willing to use a little of that now? Do you prefer to use equity? Has anything changed in terms of how you're thinking about acquisitions?
I think we would use the balance sheet a little bit. At just our trading levels, issuing equity to pay for something is pretty expensive. Maybe we would trade paper, right? But I think we're not afraid to use the balance sheet. We certainly wouldn't lever extensively at all. We're pretty conservative in that regard. But I think we're not afraid to use it.
Just about out of time. Any closing thoughts?
Just again, thanks. If you're on or you're watching, thanks for your interest. Obviously, we are available if you want to reach out to the company directly for additional questions as you continue your research. Thanks for taking a look.
Great. Stuart Bodden, CEO, and Melissa Cougle, CFO of Ranger Energy Services. Thanks so much for the presentation. Hope everybody found it informative and enjoy the remainder of our conference. Thanks, everyone.
Great. Thanks, Steve.