Good afternoon, everyone. I'm just waiting for the room to fill in a little bit here. I can see people are still coming in, but as we have this pause, let me just remind everyone that if you have any questions following, which should be an informative presentation, press that Q&A button at the bottom of your screen and type them in at any point during the presentation, and we'll get to as many questions as we can, time permitting, following the presentation. With that said, I'm Steve Ferazani of Sidoti. I'm so pleased to welcome Ranger Energy Services, ticker RNGR, joined by CEO Stuart Bodden and CFO Melissa Cougle. With that, let me turn it over to Stuart and Melissa.
Great. Thanks, Steve. Thanks, everybody, for joining us today, and thanks for your interest in Ranger Energy Services. As Steve said, we'll go through a few slides, talk a little bit about the company and recent performance, and then we'll leave some time for Q&A at the end. Just a little bit about Ranger. We are one of the largest well service providers in the United States. As Steve said, our ticker is RNGR, market cap of about $330 million at recent stock prices. A couple of things that I would just highlight, kind of going to the upper right of the slide. One is, and we'll talk a lot about this in the next few minutes, being a production-focused well service company, and what we really mean is we're very much focused on maintaining existing wells. We don't drill new wells.
We have a little bit of some of our services support the completions of new wells, but really our bread and butter is focused on existing and maintaining existing wells. Second thing we would highlight is our cash flow conversion through the cycle. You know, on average, we convert about 60% of our EBITDA to free cash flow. So we generate quite a bit of cash, and we'll talk about how we think we've used that quite wisely over the last couple of years. That really leads into our balance sheet strength, returns-focused strategy. We are very focused on dividends, on share repurchases, and we have a very clean balance sheet. Just to give you a size of the company, last year we did just shy of $600 million in revenue. About 60% of that was what we call high-spec rigs.
These are well service rigs, again, mobile rigs used to support the maintenance of existing wells. Our wireline business, which is just shy of 20%, and ancillary services. Ancillary services include our plugging and abandonment business, Torrent, which is infield gas processing. We also have a coiled tubing business in there and a rental and fishing tool. We did just shy of $79 million of EBITDA last year, $50 million of cash flow. As I said earlier, about 60% last year, a little bit more than that, conversion of EBITDA to free cash. We really think there's four things that I think we would, again, kind of highlight as we go through this. I mentioned the first one, our cash flow generation. That's been very stable over the last couple of years. We are in a leading position on the well services side. We're believers in consolidation.
We've proven that we can do that very successfully, but we also have the capacity and the assets to grow organically. We think that there's potential to grow, excuse me, both ways. Shareholder returns, we have a commitment to return 25% of our free cash flow back to investors, either through dividends or share repurchases. In 2023 and 2024, we actually returned 40% of free cash flow back to investors. The remaining cash, again, has been on the balance sheet. We sit in front of you today with zero net debt, but $120 million in total liquidity at the end of last year. Just to talk a little bit about our service lines, and I'll start with high-spec rigs. As I mentioned earlier, it's really our anchor business. We've been steadily increasing revenues and growing margins. We do have excess capacity that we can deploy.
It would take some maintenance CapEx to deploy that. We're very disciplined about that. We're just not going to put assets in the market unless we think they can earn a fair return, but we do have that ability. Again, in last year, it was about just shy of 60% of our revenue and a little bit more than that on the EBITDA side. Processing and ancillary, as I mentioned, it's a coiled tubing business, rental, P&A, and Torrent. Just to spend a little bit of time on plugging and abandonment, which is P&A. That's one of the things that we've actually been growing and investing in that business. We're pretty excited about it for a couple of reasons. Our biggest customers feel like it's an important part of their program.
They would say they're licensed to operate, that they need to responsibly plug existing wells at the end of their life. There are some regulatory requirements on them as well. Some states are really requiring that they P&A wells in order to get new drilling permits. There is obviously the IRA money that was in the Inflation Reduction Act for the Orphan Well Program, and that would really be targeted to our P&A activities. We think that some of that money has been flowing into the states a little slowly, but we think that there's a chance that that will actually free up going forward. I would highlight Torrent. Torrent is infield gas processing. You've heard a lot about infield power lately.
If that power is, and it is very often supported, whereas gas fired, if you have a high BTU content gas stream, our service lines, our mechanical refrigeration units, which is what these assets are, can take out the liquids and provide a cleaner gas stream into the power gen, and then use those liquids that can be monetized to offset any kind of rental needs for the equipment. On wireline, wireline, it's primarily a northern business for us. This one's been a bit challenged. We've been moving it more to conventional wireline on the production side, but completions-related wireline. Really, a lot of the efficiencies you hear about on completions have really sort of driven down frac crew counts.
Our completion-related wireline tends to follow those crews, so the reduction in frac crews is actually driving a reduction in wireline crews needed, which has actually created some surplus capacity. Pricing has been pretty challenged in that market as well. To combat that, we're really taking those assets and deploying them more on what we'd say conventional wireline, so much more intervention-related wireline or working on existing wells. I mentioned again when I started that we're a production-focused well service company. Again, just to kind of put that into numbers, if you think about across this chart, across the top, the value chain. You would drill in a well, you would complete it. Completing is when you actually put in all the tubing and actually do the fracking. You would produce, and you would decommission the well.
During the production phase, which is most of our work happens, the way we kind of talk about it is once a well comes online, you need to maintain that well, kind of in the same way that you maintain your car. And so that's really a lot of the services that we provide. And we would tell you, which is coming up here in a slide or two, that as long as the industry drills more wells that are being plugged and abandoned, our addressable market is naturally growing. And that's really where the bulk of our activity sits. We won't say it's completely immune from volatility, but certainly I think you'll see in the upcoming slides that we've really kind of bucked the trend.
Even though drilling rig count because of efficiencies has come down, we've actually managed to grow our business three times, which is exactly here on page seven. What we did just to give you a sense is we took E&P spending, and we kind of broke it into three buckets and indexed it over time. Production, which is really, again, sort of focused on spend after drilling and completions, completion spending, which again is all the fracking, and then exploration and drilling. If you kind of go back to 2010 and you index, what you'll see is, yes, there's some volatility, but exploration, drilling, and spending kind of through that time period has been, it was lower as we kind of moved into a lot of the build-out of the shale. It's been relatively flat through the cycle, down a little bit.
Completion spending has had some volatility, but has been up modestly. Production spending, there's been a lot more money that's actually been spent on production. We would tell you that our services are much more tied to the OPEX cycle of our customers, whereas completion, exploration, and drilling spending is much more tied to the CapEx cycle. That's something that we actually quite like in our profile. As I said earlier, we think it makes us a lot more resilient. As I mentioned earlier, and this is on the left-hand side, you can see this is the growth of existing horizontal onshore wells in the U.S. There's probably about 200,000 or so horizontal wells. Again, that's really kind of our bread and butter.
As I mentioned earlier, as that market grows and it grows more than wells are being plugged and abandoned, we think our addressable market is growing. On the right-hand side, you can see the yellow line, the production revenues. These are Ranger revenues that are tied to the production stream. You can see how they've roughly tracked along with Lower 48 production. Again, I think we're just trying to drive this point home that as production continues to grow, we think that's a benefit to Ranger. I mentioned earlier just about how we feel like that we have bucked the trend. I'll kind of point you to the middle slide here and on the bars. On the bars, you'll see our high-spec rig revenue. These are our high-specification well service rigs.
You can see how we've actually grown it each quarter over the last five quarters. The line that you see through there, starting at 622 and going down to 569, that is the drilling rig count. These are sometimes you'll hear it referred to as the Baker Hughes rig count. These are land drilling rigs. These are rigs that are drilling new wells. That has actually declined over time. However, even though land rigs have declined, we've grown our business again because you have to maintain these wells once they're put into production and they're pretty long lived. On the right-hand side, you can see just the EBITDA profile. We've really, as we've more and more aligned ourselves with the biggest customers, what we have found is that those are stable work programs. It makes us manage our schedules a lot better.
Also, they want more complete packages on location. What I mean by that is it's not just a rig, but it's also the other equipment that sits around it, handling pipes, blowout preventers, things like that. That tends to be high margin. That really sort of helped us continue to steadily grow the EBITDA and really improve margins. Page 10, and I'm going to turn it over to Melissa after this page, but what you can see on the columns here is, this is our blended hourly rate over the last several quarters. What you can see is that we've steadily grown our rates over time. Recently, a lot of that has been, as I mentioned earlier, because we're now putting more complete packages on location for our biggest customers.
That gives us the ability to increase our revenue per hour. On the previous slide, you saw the benefit of that when you saw our margin profile. The last thing I'll say about Ranger is all of this is really a testament to our customers. We work with the largest players onshore U.S. Our bread and butter customers are ExxonMobil, Chevron, ConocoPhillips, Oxy. Again, the largest customers. The reason that they work with Ranger is because we have very robust safety systems. We train our people well. We invest in our equipment. We make sure that it's properly certified. It's properly maintained. That really translates in us being the preferred provider for those customers and also letting us really earn a fair return going forward.
I'll touch back on some of the financial highlights and our capital returns program just for a couple of minutes, sort of drawing together some of the key themes that you've heard from Stuart. When you look at our consolidated annual revenues over the past few years, what you'll see is just a lot of steadiness. The declines from 2023 to 2024 were really isolated into the wireline completions. If you actually look underneath the cover there, you'll find all of our service lines actually increased revenue, including in the wireline segment and the more production focus that we talked about, save the wireline completion space. In fact, the high-spec rigs business, or if you will, flagship business, actually grew 7%. This is all through the lens of a declining rig count profile.
Through that, you also can see in the bottom left-hand corner where we've actually expanded margins through those revenue contractions. It was revenue that we had been holding on to in wireline completions. That was fairly low margin. At the same time, as we were packaging this equipment with the larger providers, we're getting better pull-through revenue and margins on that. Also, just on a pure operational, you just heard Stuart mention our work with the majors. We actually achieved our lowest TRIR, or total recordable incident rate, on record for the company, which is really an indication of the robustness of our safety systems, the training our crews go through, and a real cultural mindset to be safe on the well side. We are quite proud of that, and we feel like that is a differentiator on the margins dealing with these customers.
When we look at this, we talked, Stuart, I think mentioned on at least a couple of slides earlier, and you'll see me mention it on at least a couple of these last slides. We really feel like our free cash flow profile is wildly underappreciated by the market. We have a really strong conversion rate. We have capital intensity in that these rigs, when they were first purchased, create some barriers to entry because they are a capital investment. That said, because they're not destroying rock, because they're not pulling and pushing intensively, they tend to be extraordinarily long-lived. We have the opportunity to really harvest cash over them for an extended period of time. You can see that evidence now. We've posted really admirable conversion rates of our EBITDA to free cash flow for the past three years in a row, averaging in the 60% range.
We can really manage down very prudently the capital that we're spending to make sure we're harvesting as much cash to give us as many opportunities to both return that cash and continue to grow the company. In the bottom right-hand corner, what you can see is effectively when we've chosen to spend the cash where we have spent it. We feel very strongly that as a subscale or smaller oilfield service provider, maintaining an absolutely pristine balance sheet is really prudent. We actually do use debt. We have used it before to actually make acquisitions smartly. Then we chose to pay them off because we thought, well, that's the best thing we can do to insulate the company, to give us and put us in the best position to make the next best use of our capital.
We've also instituted base load dividends, which we'll talk about in a second. We've done a few small capital acquisitions over that time that we really felt like positioned the company better to continue to monetize the asset base. We posted an average return on invested capital of 7% over the past year. Altogether, we feel like this really positions the company nicely from a financial health perspective. Where we feel like this is underappreciated, we've built and demonstrated this slide to actually show that conversion rate across our peer group. We get asked frequently, "Who are your peers?" We would tell you, there's not really another company that does well services. What that really leads you to is a peer group that more sits earlier in that drilling cycle we were talking about within drilling and within completions more so.
What you'll also notice in the top graph is that we actually have a much higher conversion rate than the vast majority of our competitors. Whenever you drop to the second one and you look at, it's a rarely looked at metric, but if you look at free cash flow multiple, you can see where our conversion rate is the highest and we're getting less credit on a relative basis according to our peer group as compared to our competitor group, right? When you look at then the bottom, which is the more typical EBITDA multiple, what you see is we start to have a more competitive EBITDA multiple, but then it starts to have that much more value appreciation opportunity set within the Ranger share price on free cash flow as well. We really added this slide most recently because we had several investors.
The share price has moved. We've been very proud to see it move over the past 12 months. When we got to the fall, we sort of had a mindset and feedback that, "Oh, now you've lived into your share price. You've grown into your multiple." That was true on an EBITDA multiple basis, but there is so much room to move on a cash flow multiple basis. We really wanted to call attention to that here. We've talked before about the capital returns program, and we're really quite proud of what we've done in capital allocation in this area. We decided two years ago in order to, I apologize.
We decided two years ago to sort of put our money where our mouth was and institute a base load dividend to show the market that we felt we could generate cash flows in any environment and cycle. We also instituted, because our share price was so undervalued, a very active repurchase program. Over the past two years, we've actually given back 40% of our free cash flow to investors, largely through share repurchases. We've repurchased 15% of the company as of outstanding shares from December 31. We also have an ongoing commitment to at least give back 25%. We think that with that mindset of at least 25%, there's still plenty of room with the other 75% to grow and deploy capital wisely at Ranger.
To sort of close us out, we wanted to highlight a few things that we really are kind of revisiting through this deck, which is, one, we really have some compelling investment fundamentals with strong free cash flow conversion and really strong return on invested capital. We think we actually have shown the ability to grow through cyclicality. You see drilling rig count declines and Ranger is still growing. We expect that that will continue as the majors continue to consolidate and we benefit from that consolidation. We have asset capacity that we touched on a little bit. We have a fair number of idle rigs, and those rigs take a small amount of CapEx to deploy.
As the market does grow again and as the cycle starts to expand again, we will be able to bring those rigs to market at a much lower capital cost than any peers would be able to do. We also have a really robust capital returns framework where we think our investors benefit from a variety of options in terms of how they get value creation underneath Ranger. With that, I'll stop and open it to Steve for any questions of the group.
Great. Thanks so much, Stuart and Melissa. Appreciate the informative presentation. Really appreciated the free cash flow slide. I don't think I'd ever seen that from an OFS name before, so kudos to you for the addition.
First question of coming in here is stock is up nicely over the last year, but could you talk about trends in the stock price over the last few months?
Yeah. Just to kind of recap a little bit, obviously in Q4, we had really nice runs. We had a really strong Q3. Really on the back end of the election, continued the run. I think we kind of view it in Q1, we had a really strong Q4. I think literally within hours of announcing that, we were kind of flirting with all-time highs. I think, Steve, we just kind of felt like we kind of got caught up with everyone and some of the uncertainty around the market, the uncertainty about the long-term potential impacts, if any, of tariffs.
It is just kind of a bit of a pullback as people, we think, are just kind of waiting to see what is going to happen. I think the other thing too, as Melissa said, as that was happening, we continue to kind of point people to, if you look at the stability of the earnings stream, the stability of the cash flow generation, and how we are valued on a cash flow multiple, we think there is just strength in the performance of the business that is probably not kind of getting appreciated by the market. We are just kind of getting swept up with everybody else.
Yeah. I would only add to that, Steve, you can look at our earnings coinciding actually with the OPEC announcement that they were going to bring back online capacity and then tariffs the very next day.
Really, when you look at the recent declines, that was the catalyst.
Macro. You said macro-driven.
It's purely, and again, we would point back to our countercyclicality. Nonetheless, we were an OFS company. You go the way the macro grows, which is why we're here to kind of say, "Hey, look," but we actually, not to say we feel nothing from that, but you can really look at our results and see where we do not pull back nearly the extent that some of the other providers do.
Balance sheet helps a lot too in that case.
Yeah, absolutely.
Question about your stock buyback. How opportunistic are you with it, or is it more systematic and just general capital allocation thoughts?
Yeah, I'll start.
On the cash flow, sort of the uses of that, we always felt like that because of the high cash flow conversion that we could, I would not say it's a do-it-all strategy, but we could be opportunistic and we could do share repurchases, have a dividend, and actually build some cash when the time was right for M&A. As kind of Melissa alluded to, last year, certainly in the front part of the year when the stock was under pressure, we were very opportunistic, right? We bought quite a number of shares. I won't still list this number because she loves to sort of give the stats, but we bought quite a bit of stock at
$10.37.
I think during that time, we really felt like it was just the best investment that we had was our own business, right?
When things ran in the fall, we tend to quarter by quarter establish a 10b with kind of our parameters. In that sense, it's a set it and forget it sort of inside of a quarter. Obviously in Q4, we kind of ran past some of the parameters, but we're really happy to see it.
Yeah. Yeah. I mean, I think the systematic part of it, it is a both answer because I think the systematic part of it is, look, we've made a public commitment that we're returning 25% of cash flows, right? One way or another, those are coming back eventually. I think we don't want to be so systematic that we're always just buying 25% on autopilot because when you look at it, you do have volatility and there's great buying opportunities.
We sort of have a combo approach of we try to be thoughtful about when we're being more aggressive and when we're letting the stock kind of play out on its own, just to try to be smart about the deployment.
Okay. The other side of that, any changes in the M&A environment?
We appreciate the question. We do get it fairly often. I sort of joke that I feel like I'm a broken record on it. We've seen over the last couple of years that there's been a bit of spread. We're believers in consolidation. We think M&A ultimately will be a big part of the Ranger story again going forward. It has been in our past. It feels like things are a little bit better.
Right now, you have a little more, I think there's kind of probably more consensus that 2025 is a year of kind of steady as she goes, right? Which puts a degree of just kind of rational thinking into the conversations. Obviously, we've had some strength in our stock price that maybe gives us a little more flexibility and we have some cash. We are hopeful this is the year, Steve, but I think I've been saying the same thing.
I'll try to stop asking.
Patience can be your friend, right? We're certainly not desperate to do a deal. I think we absolutely are convinced that it will free up for us eventually. Patience is our friend, frankly, because we're best positioned and we have a great balance sheet.
I have a question about opportunities. Are there levers to pull to further improve ROE?
Yeah. I mean, I think that that's fair. I think the levers really are continued expansion in the well services product lines. I mean, 7% growth in a declining rig count market is admirable. And our E&P operator, the biggest customers, they're still consolidating, whether it's Chevron, whether it's Exxon, whether it's Oxy. That consolidation is still playing out. Ranger is anticipating to benefit from that. Fall through on that will, I believe, expand return on equity over time. I think that's the biggest lever we would tell you. We always look at the smaller things on the margin, but I think that's really barring a macro catalyst. We look at LNG exports and we think there will eventually, because it's a cyclical industry, there will eventually be a macro catalyst. We're not hinging our hopes on that.
We think the growth over the past couple of years has demonstrated we can still do something even when the macro is not favorable.
Okay. To ask about the gains in a, well, declining on the drilling and completion side, but given the current macro, your growth with the high-spec rigs, fair to assume you're picking up a lot of market share.
Yeah. Yeah. I think that is fair. We think we're doing it really at the expense of small regional players who had been working for some of basically the targets that the larger companies had bought, right? If you think about Exxon when it buys Pioneer, Pioneer is going to shrink the vendor list. That will benefit us and some of the legacy providers to Pioneer, as an example, could go away. That is kind of what we're saying, which ultimately means we're gaining share. That's right.
Gotcha. And then any other, you talked about adding packages to the high-spec rigs, which I mean, that's an impressive chart, the revenue, the per rig in this market. Is there more to come there or is that?
We do think there's more to come. What we're seeing is, I think there is a trend of the larger companies to do that. They're not all doing it, right? So not all of our customers at the moment are doing that. We do think that they're starting to go that way. It's just another way for them to shrink their vendor list and basically have more preferred partners going forward. It's easier for them. And truthfully, it's beneficial to us.
Okay. I think we're just about wrapping up here. Very informative half hour. Any closing thoughts before we say goodbye?
No. Just thank you very much for your interest. I think we would obviously just remind everybody to follow the cash. We try to be very open with investors. If you have any questions, do not hesitate to reach out to the company. Great.
This was Stuart Bodden, CEO, and Melissa Cougle, CFO of Ranger Energy Services. Thanks so much for being with us. Hopefully everyone enjoys the remainder of Sidoti's virtual investor conference. Thanks, everyone. Thank you. Thank you.