United States securities and exchange commission logo
January 11, 2023
Robert McKee
Chief Executive Officer
Kodiak Gas Services, Inc.
15320 Highway 105 W, Suite 210
Montgomery, TX 77356
Re: Kodiak Gas
Services, Inc.
Draft Registration
Statement on Form S-1
Submitted December
12, 2022
CIK No. 0001767042
Dear Robert McKee:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted December 12, 2022
Cover Page
1. We note your
disclosures that after the completion of the offering, EQT and Kodiak
Holdings will control a
significant percentage of your voting power, and EQT will be able
to influence matters
that require approval by your stockholders. Please advise whether
you will be a
controlled company under NYSE rules. If so, please include appropriate
disclosure of this
status on the prospectus cover page, Prospectus Summary, and Risk
Factors. Please also
disclose the corporate governance exemptions available to a
controlled company and
whether you intend to rely on these exemptions.
Robert McKee
FirstName
Kodiak GasLastNameRobert
Services, Inc. McKee
Comapany
January 11,NameKodiak
2023 Gas Services, Inc.
January
Page 2 11, 2023 Page 2
FirstName LastName
Summary
Non-GAAP Financial Measures
Adjusted Gross Margin and Adjusted Gross Margin Percentage, page 17
2. We note your tables under the section reconcile from gross margin to
adjusted gross
margin and gross margin percentage. Within these tables, please also
include disclosure
of the gross margin percentage as calculated in accordance with GAAP,
in order to
comply with the equal prominence guidance under Item 10(e)(1)(i)(A) of
Regulation S-
K.
Risk Factors
We have several key customers. The loss of one or more of these customers would
result in a
decrease in our revenues, page 22
3. We note your disclosure that you provide compression operations under
contracts with
several key customers, and the loss of all or even a portion of the
compression operations
you provide to your key customers, as a result of competition or
otherwise, could have a
material adverse effect on your business, results of operations and
financial condition. In
this regard, we note that your two largest customers accounted for
approximately 24% of
your revenues for the year ending December 31, 2021 and 23% for the
year ending
December 31, 2020, your largest customer accounted for approximately
12% of our
revenues for the years ended December 31, 2021 and December 31, 2020,
and your ten
largest customers accounted for approximately 59% and 60% of your
revenue for the
years ended December 31, 2021 and 2020, respectively. To the extent
you are
substantially dependent on contracts with these customers, please
describe the material
terms of such contracts and file the contracts as exhibits to your
registration statement
Refer to Item 601(b)(10) of Regulation S-K. If you believe you are not
substantially
dependent on such contracts, please provide us with an analysis to
explain your basis.
EQT controls a significant percentage of our voting power, page 41
4. Please revise to clarify the relationship between EQT and Kodiak
Holdings, including
EQT's voting control over Kodiak Holdings. In this regard, we note
your disclosure on
page ii that Kodiak Holdings means Frontier TopCo Partnership,
L.P., an affiliate of
EQT AB and holder of record of Kodiak Gas Services, Inc. common stock.
Future sales of our common stock in the public market could reduce our stock
price, page 46
5. We note your disclosure that Kodiak Holdings and certain of your other
stockholders will
be party to the Stockholders Agreement, which will require you to
effect the registration
of their shares in certain circumstances no earlier than the
expiration of the lock-up period
contained in the underwriting agreement entered into in connection
with this offering.
Please revise to disclose the aggregate number of shares of common
stock which will be
subject to these registration rights.
Robert McKee
FirstName
Kodiak GasLastNameRobert
Services, Inc. McKee
Comapany
January 11,NameKodiak
2023 Gas Services, Inc.
January
Page 3 11, 2023 Page 3
FirstName LastName
Dividend Policy, page 51
6. We note your disclosure stating, "After completion of this offering,
we may pay cash
dividends...". We further note your disclosure within risk factors on
p. 80 that "We
believe that our resilient business model will support an attractive
through-cycle dividend
to our stockholders." Please revise your disclosure here, and
elsewhere, to clarify your
expectations regarding your intention to pay dividends. Further, if
you do not intend to
pay dividends to shareholders, please clarify why you believe the
presentation of cash
available for dividends is a significant metric in assessing your
operating results and
profitability.
7. Your disclosure under this heading states "We expect to adopt a
written dividend policy
relating to such dividends...". Please tell us the status of such
written dividend policy, and
if applicable, include the written policy in your prospectus.
Business, page 72
8. We note your use of industry and market data here and throughout your
prospectus
derived from reports by third parties, including EIA and the
International Agency. Please
revise to include the names and dates of these reports. Please also
provide us with
supplemental support for all statements that relate to your
competitive position within
your industry or revise your disclosure to make clear the basis for
the statement. The
following are examples of these statements.
We are a leading operator of contract compression infrastructure
in the United States
( U.S. ).
We are a market leader in the Permian Basin, which is the largest
producing natural
gas and oil basin in the U.S.
Furthermore, we maintain an intense focus on being the most
sustainable and
responsible operator of contract compression infrastructure.
We lead the industry in large horsepower compression, with
approximately 80% of
our approximately 2.9 million horsepower fleet comprised of
compression units
larger than 1,000 horsepower.
Our partnership-focused business model provides best-in-class
reliability...
We believe these factors make us the leading choice for our
customers.
Financial Statements, page F-1
9. Please revise to provide unaudited interim financial statements as of
and for the quarterly
and year-to-date period ended September 30, 2022 as required by Rule
8-08 of Regulation
S-X.
Note 8. Stockholders' Equity, page F-21
10. We note that Kodiak Holdings issued incentive awards to certain
employees of Kodiak
Gas Services, LLC (a wholly-owned subsidiary of the Company). The
Company records
Robert McKee
Kodiak Gas Services, Inc.
January 11, 2023
Page 4
stock compensation expense associated with these awards because of the
employment
relationship of the grantees with Kodiak Gas Services, LLC. Please tell
us and
disclose the pertinent rights and privileges of the these outstanding
awards. For example,
disclose the number of awards issued as well as the exercise prices and
pertinent dates of
vesting. Further, quantify any compensation expense associated with these
awards for all
periods presented.
11. We note that On March 6, 2019, 61,098.4 of Class B incentive units (
Class B Units )
were authorized under the 2019 Class B Unit Award Agreement, to certain
employees and
non-employee board members. These Class B Units constitute profits
interests . As of
December 31, 2021, there were authorized 61,068.0 Class B Units, and as
of February 15,
2021, 57,502.4 Class B Units were granted. Please file these compensation
agreements as
an exhibit to this registration statement. See Item 601(b)(10)(iii) of
Regulation S-K.
Exhibits
12. Please file the Term Loan Credit Agreement as an exhibit to your
registration statement or
tell us why you believe it is not required to be filed. Refer to Item
601(b)(10) of
Regulation S-K.
General
13. Please provide us with supplemental copies of all written communications,
as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
have presented or expect to present to potential investors in reliance on
Section 5(d) of the
Securities Act, whether or not you retained, or intend to retain, copies
of the
communications.
You may contact Mark Wojciechowski, Staff Accountant, at (202) 551-3759
or John
Cannarella, Staff Accountant, at (202) 551-3337 if you have questions regarding
comments on
the financial statements and related matters. Please contact Cheryl Brown,
Staff Attorney, at
(202) 551-3905 or Irene Barberena-Meissner, Staff Attorney, at (202) 551-6548
with any other
questions.
Sincerely,
FirstName LastNameRobert McKee
Division of
Corporation Finance
Comapany NameKodiak Gas Services, Inc.
Office of Energy &
Transportation
January 11, 2023 Page 4
cc: Matt Pacey
FirstName LastName