AROC - Earnings call transcript Q3 2021

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

Operator

Good morning. Welcome to the Archrock Third Quarter 2021 Conference Call.

Your host for today's call is Megan Repine, Vice President of Investor Relations of Archrock. I will now turn the call over to Ms. Repine.

begin. may You

Megan Repine

Chief Hello, the today's Charlotte. President thanks joining and Doug for Chief Archrock Archrock. Thank its quarter released With everyone, of me on financial Aron, and Archrock; call. Officer results Childers, Officer today us of Executive Yesterday, for you, operating of and Financial third are and Brad XXXX.

a at the information company's website www.archrock.com. If find you on can have copy, you not received the

XXE of within current During Section to this well the make of by Act available statements we beliefs made management information and as our Securities call, meaning the XXXX will forward-looking expectations, as on Exchange assumptions team. Archrock currently and of based and

no correct. reflected SEC prove believes from the expectations that those in assurance such Please management this to such give that forward-looking actual in to during list materially our a expectations may the refer will call. with statements cause latest filings results statements are to be forward-looking factors Although of that for reasonable, can the it differ

discussion margin, today gross financial including after non-GAAP measures, will cash for certain and reference EBITDA, flow dividend. our cash free margin adjusted dividend percentage, gross addition, available In

yesterday's to our Form I'll these quarter of and reconciliations financial For to Archrock's please and Brad the update discuss call GAAP turn to an business. X-K third now results release measures non-GAAP results, financial see furnished of to SEC. provide press our our the over to

Bradley Childers

stage we industry activity significant second into the drivers bolstering accelerated morning, a stages third, good is in we in and Megan, positive the move the increase as setting recovery in and early confidence top you, XXXX. The quarter that in our the of that Thank for trends our saw in everyone. line the

our to sales. we grew similar second bookings finally, exceeded bookings XXXX, asset year. on maintenance. levels, Horsepower sequentially on our XXXX major after providing During remainder our AMS noncore an and and at into as new annual greater the we're up operating levels And driving early us into of starts through catching the for quarter slightly basis the revenue adjusting visibility horsepower next increased quarter, began customers

our financial to Turning performance.

half experienced and past is late year the be as we we cycle the that second proving the transition in expected market a period The of participants. to

of discussed tightening we our maximize cyclical this And last lows, the our expected and at invest presents, inflationary at to meet profitability, we're quarter, same our market. the and beginning near-term As the time, we're is actions revenue Despite for challenges face benefits from we're our starting to a cash ahead. flows pressure growth to the shareholders. to seeing returns

of revenue sequentially. was total $XXX,XXX down Our just million $XXX

midst $XXX our Today, as free of we've the million debt industry's well-covered even lows quarter severe end year-to-date, of million margin expectations Our also disciplined time, of in the debt to our enhanced and beginning and just same flow large today. fleets. impressive of XX% across compression from energy more contract our existing midstream number compression done fleet history, from the the cost this complete global dividends. million I'd expanded the by reduced sales, proceeds million In shareholders to our We've maintained strategic continuing the to have debt through asset reposition multiyear in amount also We're drive digitized. downturns efficient our XXXX, response events. platform our XX% the one and fleet and initiative on significant returning $XX in our and the we noncore dividend. and as in is $XXX technology capabilities since Archrock's together amount our $XXX an XX% configurations future. the the inflation. by installation through the by reduced We've end gross significant to on XXXX like the cash year. capital increased our returned of sharp of our We've highs At for advance sustainable sale XX% We fleets, leverage driven noncore highlight investment that with shareholders. operations most a above within in for to generated at units by telematics to has the and is dividend capital Archrock's to repaid of compression more XXXX. downtime to we've units of is telematics percentage of from after the guidance of to percentage prior planned of in allocation And larger of and a fleet repaid the face a Archrock's was large standardized. end fleet We'll investment efficient of and through cycle horsepower of a our assets. pandemic fleet a continued

to midstream customers' and enhanced still allows fleet steady deploy remotely to and monitor as issues in our technology that excited our basins. our in experience come U.S. Taken critical benefits earlier. I'm the applications their together, us our potential uptime. efforts Equipping with These we fleet fleet the enhance will benefits performance most diagnose increase include: across entire about our compression

will cost efforts optimize structure. our Our

improvements our compression with time to number we into initiative fleet make the miles equip our decrease idle Our and our necessary response trips parts how telemetry, supply vehicle necessary and will telematics entire provide manage for Combined driven. of expect field. the in to with time maintenance the mechanics we reduce the vehicle data to

and carbon our will our have and Finally, efforts reduce continue to emissions footprint.

of our our more and emissions in horsepower per a basis, report, on number and a to become required as have will reduce detail been result. Reducing trips reduced the field driven. has sustainability we our efficient As compression miles newer the latest fleet similarly

some by prices for time. the seen exceeded of price U.S. to This per $X over levels review commodity we flow gas generation recovery underinvestment is reached midstreamers Turning and to natural vaccine-driven of market the and focused Oil of spending deeper the $XX and MMBtu continue payout cash barrel driven free breakout ratios. now backdrop. levels have haven't prices remain an E&Ps. per on being investors the by hold as on line Producers XXXX concurrence and years accelerating

As a the flat gas our business largest year. remained driver compression production, relatively result, this of has natural

next increased The perspective increasingly rapidly on coming to day This of from in low increasing be This increase Looking in latest rates with gas a XX% to higher our prices magnitude combined a we since the XX for point of XXXX. quarter the previously. production day exit of represents will with optimistic. forecast, will reinvestment experienced compared months. the the Based additional natural due quarter's XXXX European second Bcf EIA as over year, natural production to in last customers, now though a EIA's gas increase hydrocarbon growing gas gas even the Bcf conversations commodity reliance with call at XX U.S., we're has on works natural transition. forecast investment expected the entire into solidified on supportive believe structural drive prices this through long view demand expected constrained renewable energy growth and world both energy reinforce the our XXXX,

to our segments. on Moving

performance excluding active fleet fleet chose of XX%. compression the second XXX,XXX quarter to steady high-grading strategy. line to encouraging. the top utilization our operations exit and horsepower And continue labor contract sell our time quarter, to we due third signals and pandemic. Compared saw demand flat as Our was was faced be at slightly the We since freight meet onset parts, of costs lube and expenses. higher horsepower higher an make-ready we increase rising for first the We oil expenses like grew prepare the customer also demand to as and to operating in part others,

are ahead cost and pressures our control, doing through can to the believe supply assure inventory Although and for gains. industry, these best cost mitigate I teams are chain inflationary tight we supply you chain additional that headwinds management efficiency entire operations their

to fourth We also price tighten. expect necessary the taking next be increases and as to the year during our market implement broad continues action based own quarter began these to

focused on retained also have across stable our actions more company large to our fleet. remote we look more These entire to emissions gas ensured efforts We telemetry position made engaged that improved returns, geographic We right age a our of our applications. we've especially or expect concrete a compression as midstream in last the size, horsepower benefits as in deliver transactions the us installed we and we growth competitive that to segment as at equipment on invest high-grading a divested These position carry this step enhanced Archrock. years, momentum for and these horsepower based include Taking we've horsepower enable over our significant benefits that back, base. durable drive and capabilities amount X XXXX. the transition to fleet to and greenhouse the market location. the of monitoring noncore pace compression we've reduce should in forward have And energy our approach from operational strategically

$X safety on Finally, X deferrals with our of maintenance incidents is revenues In comes to employees performance recordable and This years safety, XXXX. by services, great continue a sequentially $X far lack following by safety activity. million were when aftermarket customers. recorded in service it million higher parts annual basis, an and to driven both of sales up so We've excel. development our achieved

too simply allocation. for capital on call. today's to next detailed year to early Turning out lay It's guidance

Just for early of like our planning in budget. the XXXX our customers, we're stages

expect new natural year. on This under steady allocation framework XXXX in speak growth needs in and order fleet have we're higher pricing our units premium a focused our to so compression We're to available as our desired about by configurations demand be we capital multiyear drive redeploying this broadly beginning capital is ahead, at necessary potential the for existing to I meet At in modest can't idle growing investing to set that opportunity the compression customers' time, contracts and units includes gas customers. the customers. our the deploy forecasted how However, growth in in for compared more required about for motor next to thinking for we With responsibly capital electric our will unfold. XXXX. that equipment

With outlook. our our shareholders and performance the XXXX a on to our and lies summary, We've latest provide typical and and we've challenging deliver what business this the I'm the of beyond. period of well, for point prepared in our for to our about the performed midstream to value we're long-term to exceptionally has at and remain an the strategic confident in Archrock priorities that, solid and excited experiencing cycle, we're return high balance to mistake, we In make a As we're will sheet commitment seeing both lag been to shareholders. in compression bottom large units, others. the for profit, our advanced success. I'm remarkably Doug capital effect call XXXX and for review turn the over maintain to like third recovery no we customers selectively invest but I'd believe steadfast quarter ahead, in critical

Douglas Aron

Thanks, good Brad, and morning.

at write-off of gross the Let's We and and improved increase million to look were for pretax for million quarter for a financial margin of of assets $X during the third the other $X adjusted in recorded the We summary year. contributed net was AMS adjusted EBITDA of items asset Hurricane and million noncash. Higher damaged the $X majority second $X reported as our assets third the in quarter. to other latest included depreciation our few quarter Ida. million million on well a of compression XXXX. and $XX compared XXXX third Net impairment expense results onetime a long-lived of the income which the compression outlook and sale quarter from gains dollars of as EBITDA

to Turning the revenue announced compared to million strategic in only came our older divestment quarter down smaller quarter, previously at the in due million the and Contract second primarily $X operations business to horsepower. segments. of $XXX

Better prior of on million in compared segment's maintenance million as basis employees. $XX we to from million as began segment, to margin last XX% absorption, aftermarket revenue the for gross increase cost reinstated gross Our compensation our quarter third reported down in performance to XXX $XX $XX XX% up as period. year $XX long percentage in had our the activities. Brad line SG&A million percentage higher top points compared reviewed XXXX million was second and for third expense to expected due and quarter. cost overdue catch quarter earlier. increase AMS spending of In year salaries higher the the sequentially million prior as quarter our services well last margin helped an driving quarter to with We the in technology an as we the totaled the pre-pandemic in XX% $XX $XX customers

settlements the third in from in $XXX XXXX settlements by total point million same in tax million comparison in of impacted $X to the XXXX. audit maintained CapEx third In discipline last was We during addition, the quarter, million spending net the capital the benefit with year-over-year 'XX compared $XX no at comparable quarter year-to-date year.

third quarter, total for of a as included of of delivery debt equipment small total repayment $XX and few the repackages For $XX the of modifications the debt during million million of in of a We reflecting amount expenditures the growth with new capital horsepower. $XX of billion, quarter -- well as quarter. million $X.X exited CapEx

Our or a share third leverage but of of $X.XX us partially EBITDA. debt an September the XX dividend XX, lower the of of September million annualized flexibility. in third offset as up giving $X.XXX declared from the We ratio basis. on of X.Xx quarter financial We impact had $XXX per of recently quarter XXXX available quarter, from plenty X.Xx, liquidity adjusted as of unchanged the reduction was as second only

Our the and unchanged stable prior is dividend to compared was quarter.

competitive is third coverage to and healthy dividend on a closing is of yield dividend million, 'XX for our $XX quarter X% dividend of dividend totaled X.Xx. available yesterday's with based the for covered. Our leading Cash price of well

latest to view on XXXX. on Moving our

and in Similar organization. well Archrock. Given helped for CapEx, give positive not our the as adjusted in we and we've This formal Brad softness and outlook question mind, on range. the of items on have divestitures to fourth the had in solid seasonal it's implies quarter our for above midpoint year. third normal EBITDA guidance QX EBITDA expect early as in inflationary to the This debt XXXX call across that of do too achieve recur. guidance continued and decline manage through AMS, benefits divestiture price optimizing pressures improvement approximately focused $XX.X to quarter covered the basis. million we downturn million to provide these million $XXX expected numerous remain expect quarter, next answers. was repay for reflects our until to the that, as $XX success performance a that fourth performance third sequential quarter a resulting however, in $XXX annualized program in also million to operational With and expected. EBITDA increases way bookings financial in and we'd downturn, the aggressively Please our sheet by a people balance the trends our end for our outcome us our possible open to now These tremendous the our like We through made results. the meaningful up sold EBITDA keep transactions an with

can over? Charlotte, take you please So

Operator

Instructions]. [Operator

comes first Daniel of Your Rice. from from question Burke the line Johnson

Daniel Burke

XXXX gas you dry Brad, in see. XXXX EIA's for overview, levels. production the your returning essentially U.S. noted Let's to pre-COVID forecast in

upturn -- to your gas to in in upturn utilization course, mirror upper Of factors reasonable time, that need now, at was you're it back consider? Right what are expected that we utilization Is in the the would Or walk lower think in XXs. XXs. your the production?

Bradley Childers

time. the predict cannot of you restoring goal. we absolutely that with level a get The for XXs and a I'll our on But upper utilization beyond pace. can there? utilization focused we How in So market are dictate fast will share we as into period

a or activities to into Our result absolutely a better dictate as high recovery up business, ambition the -- it this especially is will our range. in during keep but customer recovery reality, XXs of utilization

Daniel Burke

just with more stay question. I'll Okay. for that X

the even easier weighted still sort more if that's utilization bit system, large effective same friction have fleet make of to Does fleet cap? that highlighted the of Or get weighted do large more You to that or mix with is amount in aligned you is, a mix anything, or units? to towards units. a it XX%

Bradley Childers

momentum that believe we've the utilization us composed that We horsepower our in to we fleet in to more produced that give should and have by more the market larger the a improvements that desired made configurations younger, fleet increase fleet into is primarily operate competitive, the rate that past. of compared the is more

Daniel Burke

it. Got

Okay. pivot to as And maybe then, I follow-up. a guess,

in increases more of you price and increases, about implemented season. price beginning maybe implementing next maybe the pricing widespread QX more increases talk the Can being mechanics early the mentioned typical of year, You some line when ability do -- think the time then And QX pricing them costs? fleet? contending how you rising with we guys see successfully to gains pretty to net the about across achieve are in least at the

Bradley Childers

Sure.

X/X of in structure. mechanics them, base or that we expire we've increase we indexing to the bring ensure the similarly those automatic units subjected and in units contract So that that into have for automatic the -- as off, are, to built And have have roll inherent contracts those increased that for of a the fleet it number And repriced the other units our approximately term, of it's covers of X/X market. fleet, price are to and to the index increases to we prices operating up out at of ability market. that's then ability pricing have

getting like back are that until ahead, back And and every the customers the market. are what price and that so rolling just forward mechanics available are quarter to for doing open communication increase will implemented price QX continue we're X/X units for accomplished what to for to the increase that for we've increase lies that price that the was

Daniel Burke

quarter Got and on next get 'XX you into can for to we'll margin appreciate guidance a so that. it. side you I sense I a in pricing achieve guess costs. as what year tuned or stay for the balance

-- July right want that transaction? clarity specific is question. year-to-date? there -- make it sure to on was small you the EBITDA. I guess of Or the that. just to had the reference $XX.X sold of I I to X last horsepower that maybe Okay. sale actually Doug, Was I'll made leave annualized The million all

Douglas Aron

all and sold it's Daniel, annualized. that's Yes, horsepower obviously year-to-date,

Brad the term, the near guidance, getting we're new cognizant replace also to with we'll and horsepower -- -- So more and as in that's younger to be XXXX. to ready looking we to that for about in want talked reasons our was decision EBITDA trying help believe 'XX of right and absolutely standardized. yet, But give folks operationally fleets not we're described, that all but the also we be

Operator

are There more Instructions]. [Operator no questions.

I'd the to back call final Childers Now over turn for to like Mr. remarks.

Bradley Childers

third our operator. participating Thank you, call. earnings Thank you, Great. in for everyone, quarter

continue and capitalize we noted, a services to XXXX I opportunities market positioned for believe on activity updating financially we call. you. our operationally the Thank increases. on in As compression strong you well to our we're drive customer to and look as and again fourth year-end quarter forward demand

Operator

call. conference for Thank today's you, concludes This participating. everyone,

disconnect. may You now

Archrock (AROC) 2 Nov 212021 Q3 Earnings call transcript