7.24 DEP Earnings Observations: RNGR and SLB

Earnings today: Ranger Energy Services and Schlumberger.  Look for recaps of their conference calls, as well as others, on Sunday.

Ranger Energy Services

• Q2 revenue = $31M vs. $81M in Q1, (-62% q/q)
• Adjusted EBITDA = $3.2M or a ~10% margin
• Excluding equity-based comp, adjusted EBITDA would have been $2.3M.
• Q2 well service rig hours = 24,600 vs. 62,400 in Q1 (-61% q/q).
• Composite well service rig rates down 17% to $463/hour vs. $558/hour in Q1
• We submit the decline is a combo of fewer drillouts as well as price concessions.
• Net debt at the end of Q2 = $28M, down from $43M at the end of Q1.
• Capex = $0.7M in Q1 and a total of $5.8M in 1H’20
• The collapse in well service hours is not a surprise and something we highlighted in early April when E&P’s went to shut-down mode.
• The real story is not Q2, but current trends.  On that point, RNGR notes a pick up in rig hours beginning in May as well as wireline deployments.
• While RNGR has one of the newer well service fleets, the real gem continues to be its wireline business.
• Adjusted EBITDA margins for well service were ~15%, but the Completion Segment, which houses wireline, posted adjusted EBITDA margins of ~26%.

Schlumberger

• Consolidated revenue declined 28% q/q
• SLB’s North American operation witnessed a 48% sequential decline, with land down ~60%.
• More charges.  SLB incurred $3.7B in restructuring charges and asset impairments in Q2.
• YTD charges total $12.2B.
• The restructuring appears to be working as reported decremental operating margin of ~18% this quarter.
• Cash flow from operations came in at $803M or 15% of revenue.  FCF was $465M.
• Comparing SLB’s reported results to street consensus estimates on FactSet, it appears the quarterly results, notably FCF performance, is better than expected (we don’t model SLB or publish company specific financial estimates).
• Restructuring examples: SLB is consolidating 17 product lines into 4 divisions, reducing headcount and focusing on lean operations.  This is expected to reduce costs by $1.5B.
• A number of operational highlights are listed in the release, but we’ll focus one U.S. centric highlight.
• In West Texas, SLB calls out its fit-for-basin frac technology which is designed to minimize parent-child production impacts.  It cites an example where a well which had been treated with its BroadBand Shield Technology achieved 10% higher production than infill wells not treated with the technology.
• This is a quick review and hardly detailed review of SLB’s earnings.  It’s press release is 18 pages.  A number of nuggets and success, particularly in the international realm are detailed in the release.
• SLB sees Q3 revenue flat sequentially with improved margins due to the restructuring efforts.
• It highlights some uplift in frac completion activity while International could still see some disruptions.