Ranger Energy’s strategic entry into the market

Oil companies have not been hot for an IPO for a long time now, but the US market has witnessed several issuances in the first quarter of 2017. It is surprising because, with the current oil glut, you would think that most companies would put off their IPOs until the end of it. That would be the best way to negotiate the best for their shares after all. But Ranger Energy just filed for an IPO, and it seems like they are more comfortable in their position than ever.

Ranger Energy Services LLC (Pending: RNGR) is one of those companies that seem to do it all. If you take a look at the company’s website, you will see that the company deals with anything that has oil wells and oil well services related to it. In fact, the company is one of the largest to offer those services in mainland US according to Bloomberg. When you are heading into an IPO that is good news for both investors and the management. There’s nothing adverse about making a bit of money after all. On Monday Ranger Energy announced that it would be selling off shares to come up with $100 million, most probably a placeholder for the deal.

According to Ranger CEO Brett Agee, the IPO is most likely going to be successful because the company has been strategic in the past two years. Just how true is that?

Ranger Energy has been financed by investors and venture backers since it began in 2014. The data for how much that backing is worth is not public, but so far it looks like that money was put to good use. Since 2014 Ranger Energy has run well-maintained wells. Its consumer base, according to its website, mainly revolves around Colorado, North Dakota and Texas. In the beginning, Ranger Energy just did the regular well stuff. Maintaining wells and giving E&Ps support when they were drilling. The firm started diversifying into water services and transporting fluids in 2015.

In 2016, Ranger Energy dipped its toes into a few M&A deals that expanded its geographical reach and diversified its portfolio. The first was that Ranger Energy bought Bayou Workover. With Workover Ranger Energy could now tune up oil and gas wells so that they could produce more product for longer. That acquisition was a major boost that tells investors that they will be getting their money back within no time. For now, Ranger plans to tot this policy around as it waits to list on the NYSE market.

The second acquisition was a little less direct than the first. One of Ranger Energy’s backers bought a second firm, Magna Energy, and the two companies were merged. Magna Energy is a lot like Ranger Energy. The only upside is that Ranger Energy expanded its market and consumer base.

Ranger’s CEO Agee thinks that this combination will be enough to stave off the downside of launching an IPO in an unsteady market. “The combination is strong, and it will put us in a good position when the market inevitably recovers,” Agee said. The fate of this IPO will be decided after tomorrow’s OPEC meeting.