Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the Natural Gas Services Group Inc., Third Quarter 2022 Conference Call. All lines have been placed on mute any background noise. After the speakers’ remarks there will be a question-and-answer session. Instructions]. [Operator

like Officer. conference Please now Foster, to turn Financial Chief go to would over the Micah I ahead.

Micah Foster

Thank everyone. you, morning, Dennis, and good

Service we to based forward-looking as an to leadership call, Before the as Securities Group's of need well that Act of Natural current I this of information beliefs Exchange during expectations, XXXX Section remind XXE by we our within currently assumptions statements you make Gas made and available the on meaning team. will begin, and

Although that statements expectations that results those during actual statements in are factors States to to reflected reasonable, will materially United differ in and assurance the call. to forward-looking the refer be Securities expectations the we that no our Exchange the may believe with for this made from such latest correct. Please cause we forward-looking can such filings prove give Commission

financial adjusted gross In certain today will discussion reference non-GAAP among EBITDA, measures margin addition, including adjusted and others. our EBITDA

For yesterday afternoon's financial reconciliations see XX-K in Forms our to SEC. results, release and measures GAAP X-K, financial the of to Q press please furnished our these XX- non-GAAP

call will I John Chisholm. the to now over turn

John Chisholm

Thank Micah. you,

I NGS, time as our but until provide of which a always can has that read most of required be but for NGS been likely my past years with I've for the concluded XXXX. XX My not release sufficient. I value other the and X, will would as March that Director CEO in creates the obligation, shareholder was what you night, international, last are some growing most resigned remain As as Director Interim NGS press a focus over

NGS months I and thanks last and employees contributed directors value the our of extended of trust company. I leading fellow creation. the this my foundation I've want to to NGS for that six

Steve? friend my Taylor. longtime Steve colleague, Now, and

Stephen Taylor

look me this forward and you assistance to value And guidance. knowledge to contributions I thank thank have NGS. and your thanks for you, your during Good given and transition. morning, all We insight. continued everyone John, the for your you

remarks, reiterate want ongoing our to I to CEO. reinforce search prepared the my Before will get that I continue which is for company do permanent and

note to and and would Foster, of We will also happy our I Jim to be Chief under updates Micah required. in third with your us is our addition as Financial current discussion I will like Services. Hazlett, Technical President questions after quarter Vice that Jim Micah, Officer, provide environment. results to answer today of the operating our

the environment by techniques. pressures being continued a crude strength second traditional play compression with to the gas noted oil operating quarter energy career. typically current our have Upstream higher There's unique industry in weak call, influenced prices. commodity business, demand volumes assisted amount we supports through Turning increased as in existing their of supplies, and clearly capital my our basins restraint, is and customers which in gas large with earnings macro attention oil for crude continued the is prices produced in declining demand, strong in dynamic natural [indiscernible] and commodity

this commodity beyond. high is advantage take from of at are discipline least unique that a and these beginning XXXX and to prices. spending. divorced large-scale compression our of at appreciably It's a couple the a demonstrates years is year financial positioned of of capital believe we event, beginning dynamic demand Absent that well with we past geopolitical gas presently to NGS higher opportunities

visibility operational on been continue efficiencies, We growth have stronger. and large been focused to be our a organic opportunities never will horsepower market of and has

highly new accretive started and with discussions provide and financing the liquidity significant build understand have needs their XXXX horsepower beyond, to worked to us rates. needed additions partners out We have diligently our inside at with customers in to large

been have our of sheet. protective We always balance

the a in land to have opportunity. of ability opportunities We now on are execute we and financial

has finalized. XXXX ultimate for capital not yet required been While of amount the program

We have new are long-term horsepower already board complete begun working our meaningful with we already contracts. with and has of large amounts on compression work that along bank committed the to process under this,

addition, horsepower in conversion on XX conversion by XXX is our will a our anticipate deploy plants this, underway first horsepower number mid-year In to these of our previously units next to complete electrification announced year. units Additive electric the well we units we our XXXX. and XXXX of project that of

our capital additions, we in units we be our gas-powered And electric traditional for opportunities do are horsepower customers. think more of there'll realm. is engine Most from high more committed seeing to demand this

quarterly our of $XX.X revenue are from X% increased to Rental XX%, primarily this operating increased second results, rental seventh in to decline million report X.X quarter year quarter quarter's margins. million pressures, revenues. the pleased rental in QX our of business on third over last we $XX.X revenue Turning and after the in and drove a lubricants improved decline. labor, million. margins slight parts Inflationary consecutive consecutive rental quarters of saw our

over back not due the our increases concessions fleet During packed prudently these pandemic. to to in of to roll the quarter, half price seen the price last fourth January our and to inflation out fleet rental beginning we approximately increases or but increase with recapture to inflationary were needed only three during the we pressures. the in when given years continued negotiated worked the two costs rolled XXXX. The pricing operating These the balance customers quarter, price active increases of rental

These increases our continue compression to to restore in have and cost will the and bring and current believe new positive customers out will our and environment to the levels business sustained activities. price in invest needed appropriate margins impact revenues to on the support a EBITDA. We are these

you're our cash market shift be nearly excellent and As an and higher been all has continues margins began horsepower years source aware, strategic towards five we return. ago the to and of

towards sized to weighted still count is heavily medium Our however, small compression. mix, asset by unit

by comprised provide units But these utilized of horsepower approximately our approximately count. our unit large XX% stream. rental assets revenue Our XX% current fleet current of

will we As it that our impact medium meaningful a anticipate not size most unit stream. to volatility competitive, will But have price small current most the and market experience months. utilization sensitive, revenue over the some coming is compression thus

However, our that we grow growth. reflecting large anticipate horsepower to utilization continue will horsepower our

With that, over turn the I'll call to in discuss to results Micah detail. more quarterly our

Micah Foster

Thank you, Steve.

the packages. mentioned, last total increased of deployment the to XX.X revenue XXXX. higher from quarter year previously third million the XX% units of ended primarily due As XX, horsepower XX, to increased XX.X million year months of the in September for increased XX.X this quarter September million third in XX.X the million rental months Rental revenue for from ended three to three XXXX

horsepower in As as XX, September We rented horsepower, September of XXXX compared representing on horsepower third same XXX,XXX XXXX units XXXX, when ago the by XX.X% when horsepower ended horsepower comparing increased we quarter units third XXXX. per revenue X% the basis unit to Utilized utilization XX.X% XX, compared periods. the year rented of the with utilization X.X% basis. representing a a increased had to and quarter on period, while XXX,XXX per

a increase $X.X total in million $XXX,XXX revenues revenues. million compared of quarter million primarily the to service quarter and and million third a in the increase increased XX.X in revenues, in in Sequentially, decrease offset X.X% rental partially $X.X XXXX sales maintenance XX.X second to by of due XXXX revenue to a

morning, million release XX%, the of period this our noted X.X compared million adjusted when increased in rental same to As gross XXXX. X.X margin in in

a quarter margin marginal compared year. as of quarter and decline Adjusted XXX 'XX revenues when XX% the million a gross XXXX. quarter this X.X XXXX of points of in rental With third basis and was for rental percent for second the recognized the XX% to the both of second of

XXXX, G&A, the for partially three million X.X to to loss rental the months million Executive for Steve driven loss increased retirement September due XXXX. loss costs ended was compared improved operating of September an our higher Operating three related of former Officer, by margins, ended XX, offset severance Taylor. primarily X.X to by Chief primarily months Operating XX, the

of operating was of a a and second operating current increased of XXX,XXX charges product in income reported severance the period lesser the The decline expenses. income Sequentially during in rental quarter extent, XXXX. to

months diluted Our and or XX, for million of diluted per a per for XXXX. the loss net and $X.XX September net X.X $XX,XXX, a $X.XX three or basic to ended the compared share basic September XX, three ended was share, loss XXXX months

$XX,XXX a combined basic with the in primary a a loss margins the and recorded sale second year, of assets the from decreased per million the net rental gain We certain $X.XX of quarter of fleet rental X.X the net loss. Improved or share. diluted on contributors were our to

of higher result EBITDA period on to a the the of ended million margins EBITDA or This gains X.X increased and increase September result XX% primarily dispositions. Sequentially million, Adjusted XXXX, from XX, from adjusted for X.X asset months increased as for primarily was X.X dispositions. same asset XX% in XXXX. three the recorded rental million

SG&A in executive was to million, CEO, year. this expenses transition other a and increase approximately increases from X.X our primarily an the related X.X ago attributable and to the million quarter the year as well period, of process. approximately increase the quarter the severance company our as former These of million between second in X.X to were retirement related costs agreement

midpoint to nature, of SG&A, While expect and activity, and costs impact to we severance are where in executive transition fluctuations business XXXX. we not in beyond anticipate temporary our there them the heightened anticipate be do

Our XX.X the rental of the expended million as our credit September In from X.X for realized of million, outstanding and X operations facility. on million with nine balance capital under months cash first year, used we approximately which expenditures, was a XXXX, XX.X flow cash XX, fleet. of million revolving was XX.X million of

daily second inquiring are the horsepower. availability from of customers remains compression primarily higher our quarter call, fielding calls market strong new and in noted compression we the our earnings about As

XX we to During equipment our our of the year we the will the high-end quarter, development million and of previously spend. end CapEx forecasted anticipate second accelerated XX million program, at new

the turn I'll call that, over to With back Steve.

Stephen Taylor

Micah. also the our be on of Besides large is now XXXX large already an comments, strategy. significant, installing leverage evidenced assets. this ago we be with revenue new our is will Thanks, mentioned fleet opening successful, that We our about by started my horsepower horsepower and complementary phase there's large horsepower and a growth horsepower into have compression We're that our is providing want this our been to and I that everyone that's five to drive embarking avenue, moving we fleet XX% will part units first, we established. horsepower that years quite phase to remake understand asset another like I XXXX infrastructure associated ship of the only additional able fabricating and rental In on today but been size. fact existing

see general the market. as In chain the very market, positive general past, entry time our with this by contracts growth level horsepower awarded we've large With year. we we customer XXXX that aspects been and horsepower compression activity. disruptions delays fortunate term continue These horsepower anticipate certainly double and been being in equipment of range. rental higher in this contract with the three longer the will impact our anticipate next digit into Supply priced utilized

Reduction carbon the our we're compression package have promise not we the Inflation taxes the reduce experience, technological to methane of [indiscernible] optimum related business, our prowess reduce type that Act. the operators the in equipment, initiatives simultaneously capitalize both only pay also think seeing Besides in our our to as Combined those packages and with of recently to emissions. reduction footprint traditional be we legislated evidenced on compression continue will the gas

be If at uniquely team, we grow positioned in and expect operating not NGS to I'm predicting all, positive like to the back NGS company. the we're in in the excellent comes room, But John's this the pretty conservative of position take Did any through to NGS when cycle. for an coming advantage efforts it looks certainly daily contributions time are you to followed future. of

and Our compression continue deployment to maintaining will service new focus on capital our of execution, be equipment quality.

course end the call. I of will year provide further our on updates of

take questions. any happy we're to Now

So up lines. open Dennis, please

Operator

Street Lake first Please from Capital. Instructions]. the your line Brown [Operator And go Rob question of with ahead. is

Rob Brown

to be Good Steven. morning, talking Good again.

Stephen Taylor

Rob. Hey,

Rob Brown

the quite the On strength you market? strong you high And driving and seeing you're are it. horsepower the where across said what's increasing, environment, or it's guess, demand? seeing on is is really board activity I focused Or it demand that customer really

Stephen Taylor

demand. or think the spent our across increase I XX% last it's are over seeing large XX%, a natural horsepower was horsepower big some few anyway. we're concentrating and has horsepower, But, which of we're pretty CapEx prices the the the good. large But seeing but and a are that I years been primarily overall, majority, has number board, seeing We gas indicative mean,

you that? to Jim, to want do add anything

James Hazlett

of XXXX size out plan horsepower, build out be Well, or units. horsepower, Steve, the build our XXXX Most large in will you're correct. absolutely horsepower,

As you some know, but very ones, small not there much. are

Stephen Taylor

Rob, just gas in Jim. natural prices pretty traditional, South that. Juan, compared with power I just but I pure mean, very the to compression. Yes. and been Barnett decent There Thanks still Texas, decade. natural think last technique everywhere. commodity to maybe gas price places has San is volatile, horsepower the driving basins, the Really and what's oil demand lift or large gas like uplift

So indirect one a it's four seeing kind That's I is So we activity. gas or the any Are is five thing. transient of of years? bad the end thing. lift horsepower don’t an that But driven. really market last want

big horsepower Just oil are that driving higher of vast majority demand. prices the

Rob Brown

Yes.

of opening the of opportunity that kind next and then, of you. Thank and beyond? drivers for growth kind do market, you, support? Great. terms Okay. government that's you How reduction see the and methane up in on year And

Stephen Taylor

right? it methane a directed also it's towards makes portions misnomer. having that an quite Well, the reduction. Act of it's some It's opportunity by double-edged sword, legislation a legislation Reduction driven It's but Inflation and

kind buying on bit down think little of a other some of stuff. even the I that day double

standpoint So the more to stuff all got, to a seeing -- all every that point the answer Certainly, with along. the boys we're popular, going be be going from legislative you're the gets that the the you're is the come cleaner it an machine because girl opportunity from quarter.

a them and correct Act Jim Inflation the on of based is regime I wrong, I'm carbon emissions I that. Reduction in stuff and things but me there if think in was methane tax one emissions, there think And like

looking taxes at emissions. imposed mentioned of phase and equipment operating you type And the taxes decomp, going or bit electric reduce just we're to a or using can whether on as that I the our methane so equipment, to start engines particularly of when quite we drives, it's that due

So there and to on started opportunities get and financial, it's is whether around, all it's we're whether environmental, kinds to grow. going bit the quite a of just getting it it's

equipment got I else you've don't Jim, that So, or if act secrets. you're about now weighing anything know our

James Hazlett

on changing from traditional packaging that the by get can devices we it the electric It escaping things a down bit, we close to involves move capturing we methane and a and drives down like do end can our and it it quite pretty zero.

heard it's -- like Mexico So, to mention even is Steve, I on yesterday quota you're I that increasing New right would that restrictions also their methane.

do So it's and coming more down better. to who can

you're at So dance. girl right, is the the

Stephen Taylor

New Basin. mentioned Jim part that’s the and of So, Mexico Permian

of So, on lot Permian this a concentration is a driving of the horsepower, cetera. et lot this big

we we're a equipment So the offer be in or we're testing a and I about able some start be in to to positioned clean But think so. machine. that phases of going well operator the month going to to pretty

Rob Brown

and round of flow how, can then for the the you. how take Thank to into pricing increasing sort of average? you That's fleet pricing environment, about And the a what great and then maybe your of color. you question rest great. last degree calling pricing pieces Okay, is talked the on get your the second

Stephen Taylor

time over business equipment, the as fleet year. fourth Well in much on of half mentioned of them. the are into rates about equipment see size the in we rental Maybe for will and increases same than the quarter type of the first half where, next how price depending and price the quarter increases buried and on current the the they rental go different other

and among cost low high certainly things are it's when With higher or activity environment and put certain activity others. on a the you than environment your the same out in areas like or and because customers stuff that depending customers that

things get out do one you rental profile. and to everything rates So of get a up obviously there different the got return to is decent

on this that know X% were increases anything increases? price effort instead were, in we circling the the the in. which shotgun will approach to surgical across more have just and generally credit to So, Micah, there like that did if board broad of don't some X% and flat different, your come that of did you all March down else a say and I sort is

Micah Foster

Steve. say XX%, quarter rolling contract half with the the balance basis terms. think still the is that of we've large fourth in is customer quarter. Yes, it, looking I at This the into uplift primarily that really will And revenues right, so first piece from hit you under revenue when price we're of we a got see is, our big one who equipment a

to bearing it's got the prove And there, do here's we're can't out cost price out, real we've increases where going that a just so negotiating prove that to there them. negotiation to unilaterally, we and burden

we're that's come to expecting first So quarter. what in the

is and intimated this concerned. kind is small of price quarter market rest the a of in as our obviously as lot base customer But that across most is on fourth the this script far as the competitive within we in the that of was the compression

our And volatility units a as utilization going forward to so, anticipate come Rob in of we little these some us. back

on said We in this operating the we've field here the is occasions, realize for we customer have talked with the and you. also keep price need machine several to to that when

and equipment that does and well. forward really have times our done those strategy older you customers so and as This raised sell then that and is maintain of core us for us at is -- said, of kind going to hey, part their it hand it would some that we've

to customers available So time that the invest business. in we're their to with need us the at realize continue the us operations continue our go working help we margins same options forward help to but all -- through to to the to

Stephen Taylor

digression, better know, or compressor in it's respects pretty bought a not, in -- abated, spite on supply because store all excuse the other certainly inflationary a some respects, you had supply not it’s in significantly. been the what little of hadn't still they're obviously says part inflation while, lot government of issues has lot of pressures, to price Biden getting chain driven pricing my a advancing grocery Rob in as a cost in still not a chain

in So the continue equipment. it we're active. costs, we of lot immediate to to is now and horsepower them we're fortunate lot realm right as provide our pretty I there some XXXX is demand high to and margins this get narrative, out is unique the need There to a pretty to in certainly market a where recover of it's and is XXXX to that mentioned

be So, think to And bigger shape we’re too. that forward. getting equipment mentioned is on we're going we new in excellent the good the going as contracts I

think through XXXX we and have for you'll that disruption should into a So the see I market pricing certainly long hold flow some in as as bit. don't that

Rob Brown

I'll color. over. Okay. That's turn excellent you. Thank it

Operator

[Operator Instructions].

next is Your go Please the Sullivan question line of Maxim from ahead. the Tate with Group.

Tate Sullivan

again. voice your hear to nice Steve, Hey,

on being not comfortable financial this with commented You in other using to mean, market, how using more are I higher larger maybe a type you earlier historically finance more just you I to rationalize debt seeking the partners as have customer and demand of than to compressors. build building mean horsepower? debt

Stephen Taylor

new $XXX,XXX, medium to you maybe you and we're mentioned XXXX issue been like you Well, stuck start talking horsepower realm you that to use hard that's too runs moving $XXX,XXX things I to have million. and brand it's others we're traditionally in because into yes horsepower and as -- and get has the that the million move XXXX we into $X definitely than have get into liquidity going zero. more, but traditionally additional run $X.X to you so be about And not more equipment horse we

such of even million We're and XXXX be get we're it into can't one go demand to to a equipment But number is just number that. equipment the have $X and just operating of right that higher the cash what of have of you advantage expenditures take [indiscernible]. and leading have going to to escrow on now. get want Micah that have because, more going little we're and the moving $X.X cost grows though to stronger our the of the million that’s horsepower cash, magnitude just other going our some yes doing so so you sorted a flow to, you sources supplement on Start to to outside we're Micah charge the that? going

Micah Foster

No.

doesn't we've gap opportunity the times. rights sheet, you said on the it We've that is are leverage and protective I can those supply and returns seeing wide new we you numerous with something up. can the between hit of us been too just that horsepower get achieve and large take it's the the think to this right right waiting it's secure rights to it on Steve, we -- with operating bother very and today in for can something very that we're additions balance kind the of don't on as this market demand, investments the accretive good environment, pass it you

opportunities So the it's sure on something us. up have we're talking can execute we banks with working and that we the on make to to others so financing our go available diligently lined

Stephen Taylor

mention I keeping go five the but we're eye EBITDA an eagle like Tate, sheet, balance that. there didn't to stuff times on and out leverage will six I did that

fleet So we're reasonable still it vigorously. while grow being the to to going in realm pretty able the keep

Tate Sullivan

the rental horsepower, element installment you --? construction the upfront until to to XXXX of industry payments to an have And as the then they payments larger go receiving do or do Or larger the is horsepower? not it customers the whole the related any to for finance

Stephen Taylor

all on Well, yes rental us. it's on

build Now but progress we're just get to sell payments a that's upfront margins. things somebody, the certainly that not expense. some and capital for building we payments, like That's

It is and whole rent we're the So that we've too that we too for put capital rental got stuff that there, it the impact around to and bill not won’t that about then worried return. equipment much. profile right our turn

Tate Sullivan

Thank Micah. you, Thank Steve. Okay, you, great.

Stephen Taylor

Tate. Thanks, Okay.

Operator

for I time to any remarks. be further questions. will closing this to At no appear now Steve over turn there call the

Stephen Taylor

contribution all continue want for and call in and opportunity his Okay. to Jim to join incite and NGS for us. calling company and I certainly to of in everybody again the the of thank we've a Micah of and got the employees, appreciate John lot certainly appreciate front

will So see next and you. thanks we Thank you everybody quarter.

Operator

This Gas call. your participation. for Group third the thank XXXX does conclude We Inc., quarter Natural Services conference you

disconnect. now may You

Natural Gas Services (NGS) 15 Nov 222022 Q3 Earnings call transcript