KGS - Earnings call 2 2023 | Kodiak Gas Services, Inc.

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Operator

Hello, and welcome to the Kodiak Gas Services Second Quarter 2023 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Graham Sones, Vice President, Investor Relations. Please go ahead, Graham.

Graham Sones

Good morning. us to Kodiak results. review joining call Services you webcast and second appreciate for Gas the conference We quarter XXXX from Griggs, are Executive today the President Participating Chief and Mickey Officer; Financial Chief McKee, John Officer. and company

will Following a on second financial high-level market, XXXX our provide results my our and and company, outlook. commentary Mickey quarter remarks, John the

Before opening the call for Q&A.

cover. via of reported call have you tab website to a this as on items a only until today, access to phone August call Before in today's Investors I August access can few replay a available of Mickey, I There how over turn XX, of replays be to information on at found be webcast Information will the Please on replay the the kodiakgas.com. release. call can yesterday's speaks XX, will by also housekeeping our XXXX. There earnings XXXX. that note be

as longer advised And that you're accurate reading. transcript replay therefore, time may such no of or any be of information the

views, Kodiak's the within information In statements conference and available. may statements this call by These States the during of on securities management forward-looking forward-looking reflect current made the assumptions laws. meaning contain federal management of the based comments United beliefs currently addition,

results, website contingencies. financial include statements today we the give to those non-GAAP will also can Although performance measures. in no actual on reasonable, management. read be prospectus correct. Listeners sec.gov could assurance or believe to materially various to certain those are statements understand the prove by our these expressed to expectations forward-looking cause and achievements Kodiak's referenced will in The or And uncertainties statements encouraged available risks, comments that risks, company's such the or are expectations contingencies uncertainties and made from management differ

to call press like and which our turn the the now details measures McKee. Mickey be I'd website. And included CEO, comparable to the Mr. found Kodiak's can GAAP Mickey? most to over quarterly are release, reconciliations Additional on in

Robert McKee

Kodiak what IPO and of accomplished we It the no energy XX you a us that joining in of company our Kodiak has today. since all pricing extremely proud In including been of just Graham, Thanks, has of for task. beginning the a founded thank is for IPO compression X years company, ago, today. traded becoming contract I'm publicly each the X was quite COVID-XX and shareholder the easy Kodiak to on getting and want of our Gas the company. thrilled in process, by IPOs pandemic women first the and a I able is to extraordinary June start XX IPO Kodiak Kodiak years. milestone make employee first earnings every men thanking accomplishment I'm It's Services call it on were through XX. a this where of that the out of

in comparable financials questions to Q&A. sure annual identified an steps discussing call our QX interest nature XXXX commentary appropriate on quarter it and accounting begin of The that adjusted in such released XXXX 'XX in cash by X-K statements gains will and to Kodiak some showed gross the the happen first provide margin his I'll or quarter. about and will EBITDA, error adjusted in taking 'XX the flow. Kodiak happy I'll was take conference non-GAAP section. is from outlook. To measures audited second make did John our doesn't highlights again, address net start our the detail a in filing. discretionary go on industry that our yesterday, the hedges and up John details When I'm few the company. then from of additional into this financial provide financial finished, our or second income affect any in as our understated for not error S-X any and noncash was more public And the unrealized for QX to discuss rate We're

earnings release. a QX allowed revenues from an industry-leading This to on of high us almost XX.X% to turning over EBITDA utilization. at Now quarter. in million our deliver To rate few the quarter, touch yesterday's and utilization highlights ending of we the maintained $XXX million record adjusted second $XXX all-time

very of to per record XXXX Kodiak year shows in the of today orders equipment our already As to guidance busy year, approval an horsepower. the to first will completely a which for million dividend XXXX. This will to units, to over we the growing payment enabling to of deliveries are what contract deployed share, full and the We're We global I with provider leading and exceptional role for excited the be the of first our reliable adjusted be subject equipment be of flow new $XXX natural a is the are discuss the Kodiak equipment know to support energy gas annualized believe and in of times as rate exciting Kodiak and EBITDA start, large company, want at oil demand. you compelling remain story, the extended a what our $X.XX we look the between XXXX few remainder continues going define further issue million to contracts infrastructure, lead And indicates are our take X,XXX horsepower is at feed into unit $XXX as minutes beyond firming 'XX, of new believe customer of we makes different. To that deliver what of Board and to cost fourth industry contracted results. public extra being up a we're exclusively and the new Kodiak and over to very and also quarter. Many provides with [indiscernible]. because $X.XX critical the customer our back so we

development clean-burning is LNG Coast the is the export to As transition, with the world of to and fuel for of advantage take secure the supply uniquely affordable Gulf U.S. searches poised capacity. Kodiak a this trend. world to the through gas positioned clean, source energy energy natural

horsepower produce grown development the and has resources. Improvements of gathering efficient allowed centralize significantly due that is being environments technology basins Permian our use compression assets that customers most on decisions demand field-wide intentionally to have of time have with large the we and compression made Basin, compression of over design more our horsepower purpose-built fleet workforce on large predominantly in the equipment their have lift right fleet technologically gas to in large horsepower which and low for infrastructure to and flows and lower loyal location, predictable horsepower the advanced nearly As deployed. and of specifically compression systems Permian horsepower spent is Basin, cost the oil the to investment our and the youngest, Kodiak. we cash XX% customers space, in stable built working The emissions for to employing for production focused for leads horsepower in deploying more wells, require million large specifically gas friendly partnership-based where unconventional cost Permian footprint. to and These drilling X.X hardest engineered rich the by infrastructure in Kodiak, like emissions customers most in industry. At the in large predominantly longer operate like our turn

We our resiliency extreme meaning and cycles. insulated charge business has across is for shown commodity largely fixed also a services, price monthly multiple rate our revenue

geopolitical GDP customers XXXX. Though $X.XX prices global Last Hub our call record to last Henry year to for to adjusted per spikes continued XX% was and spot fuel energy of year, effectively and supplies XXXX EBITDA be fact, a LNG secure many their and importing we events price contract set and a us QX, resulting economies. world the oil well is future affordable and importance in to the to yet the demand growth. deployments race generated fully gas versus fleet countries secure into of and In will MMBtu population continue utilized. with same the revenues The continued off grow underway, for natural respective believe transition over to averaged horsepower energy. that by down of our period as to ample decades support wake-up global energy We to

U.S. to to that benefit ready provide exporter As gas, the world. the at the world's standing #X the of of production continue the and is for gas grow natural clean-burning

that compression roughly an southern the requiring growth, There's approximately Bcf under liquefaction of the gas day and border Added together, stable to from To LNG tip eastern to Bcf feed a put in that reserves, That gas Coast. XX XX% from Gulf facilities represent Permian substantially Coast, pending to increase a it evidence gas new final come additional LNG Despite those of the Eagle to United to perspective, gas Haynesville. grow capacity a [indiscernible] permitted Permian, approximately from of somewhere. come the get feed that XX challenging of additional associated of export decade. As will a day gas from to production. those have it's Gulf of construction. to for deliver has Texas of XX source currently in is projects the LNG Most new more, Coast investment from States day new capacity Gulf of of an approved the plants Bcf volumes predict natural and abundance liquefaction very pipelines transportation to LNG decision. What's likely are the that Northeastern that's that move end gas through means which the forecasters now the the domestic Ford will the or Mississippi.

lift gas-to-oil be important of that's demand, for compressed existing Permian point required and be for new to gas from compression investors. from has oil resources gas additional point processed consider production, unconventional Here's to Eagle we the and pressures times. And for wells. order Ford and move lower and point and rising our to the of field the before In multiple ratios it production for Kodiak and

compression the roughly Permian XX% growth. We in Eagle operating is midstreamers X.X new the feel delivery we times that outlook or and the to think and continued Kodiak's capital about well take to currently million for advantage industry, elongated demand and expected producers of about believe constructive supports in compression Given and that existing market. our desire a engines increasing we're discipline great Ford, services market of continued positioned outsource for by horsepower

on sustainability on to industry, touch is I is differentiator and another ESG. our that want what focus believe in for Kodiak our true and I Finally,

Our responsible to be the industry. most and sustainable in company goal is our

appreciation performance many acquisition companies, us emissions know, significant this solutions goals. on professional was cultural we our One you actively the best emissions customers my it and the monitoring the ecoView, all part stages conjunction is have and place job. sure is in employees, to also that protection proprietary that deployment including with earlier them attract our have honors those talent. exceptional Top achieve Award of while their employees of superb we're to help further and reduction emissions our manage customers EcoView of excellence results data with our year working received produces of giving in important to the USA to allow safety night energy Workplaces for say initiatives, our fleet. We're on commercial very that retain most their this patent home a families that help competitive some culture operational time, safely with our awarded is earlier us have our the the every development. to to great the announced making get system a GHG will year. optimize visibility is of footprint, the real-time As early We're and pay financials. I benefits safety Kodiak example and proud employee work and Kodiak help focused also

a energy, base runway believe we with Coast. Gulf the the multi-decade horsepower to energy is large the market conventional compression and summary, broader LNG export in feed for highly So growing particularly on supportive

the the Our to with return through with growth provide services customers investors providing compelling best on dividend. in in compression and is while strategy sustainably steady the investment their continue an cash safely flows attractive to basins best and

additional financial the closing come comments quarter results to move XXXX our before to I'll for we with outlook, hand Q&A. John? John and some into the back Now and over discuss call I'll

John Griggs

out, more provide the to To want highlighted Mickey I on start X-K, earlier. Mickey. Thanks, color

We results. in no gain of on QX XXXX not identified discretionary results. Obviously, S-X the quarterly measures, on error in QX year, and financials unrealized the QX of including the it corrected million. There time and in QX reporting presented rate the 'XX was incorrectly year interest rather flow. recorded the adjusted or QX financials were we numbers During adjusting we private last at the than gross our Unfortunately, about those non-GAAP hedges, restating quarterly publicly were the margin, understating $XX adjusted entry filing. 'XX by our comparable last journal income EBITDA our by net impact cash cash or related to

firm there business a one. of set we we accounting SOX Things All systems. We change Kodiak, to to As of we're to high taken no result, at We've quarter. possibility happening team, year accounting items our how in all impacted line our and action lead pride again. for ongoing the great and the restate XX-Q. Notably, upgrading Back to work. as a audited big in the opportunities X challenges right. full is improvement soon-to-be-released retaining will something this this like approaching aspects 'XX figures. the view strengthening our take our We certain implementation in like standards that's mitigate

even in contract time time to great an So compression be to Mickey Kodiak. at as in a it better emphasized, be industry is the

quarter are for of EBITDA Both consistent quarter about 'XX were second over almost 'XX. $XXX from expectations. metrics our the million, the revenues the last bit the Adjusted and results up up the versus of of XX% from the were sequentially XX% compared and of modestly Here to up million, quarter quarter. year. $XXX Total same some a QX was with second quarter about for X%

horsepower flat included rates; effectively horsepower a we at of revenue and horsepower combination million, little renewed two, on from grew growth [ ] unit than overall year-over-year. horsepower $XXX grew utilization quarter Compression about existing can revenue-generating XX% the a driven XX.X%. This be operations Revenue-generating PPI by explained about nearly by grew of: rate three, new up revenues a this compelling contracts. one, fleet operations XXX,XXX last time higher X%. new XX% compression at Looking 'XX at while at about or our over year was by segments. We inflators contracts pricing annual our overall with contracts higher at economics; on were faster second

quarter second In XX% Services to Other compared segment, our last quarter. up year's second XXXX revenues were

adjusted Our station substantial we've on multiple now a got segment, expectations with impact of quarter, down this our gross our half perspective, this flat that and we're generated new opportunities backlog segment basis. construction in back the the quarter that line would and revenues were in and both a XX.X% an margin's touch ago business in generally results a the during of XXXX plus compression year margin, into 'XX. From on working a sequential versus operations year

the nearly and was higher On the it for we labor. than the fleet basis, to Other dollar about from of team's quarter margins last key the bit in Each ranging gross basis, margin about Services we the our optimizing $X.X quarter, at which overall, but segment is generally and margin to up Services cost the our percentage adjusted can particular status with was speaking, XX% However, to segment drivers expectations an percentage margin up line and in expect XX%. expect. XX.X%. lubricants the attribute an came from this is margin QX million, vary we on repair a for adjusted produce The XX% year same of continued projects. But focus project different. But absolute of on what maintenance, like gross quarter, based mix percentage quarter-to-quarter 'XX. From QX Other from adjusted from in the gross

SG&A. to Turning

and to systems our to processes goals. in achieve growth people, We continue invest to the allow us

SG&A from compensation million about stock nonrecurring quarter. about last the same Excluding million quarter risen this in expenses $XX.X $XX.X to expense, year and dollars of have

about dollars, the both of efficiency translate revenues. terms into X% of those figures In of

Turning to CapEx.

$XX things maintenance than growth other million million Of our was fleet CapEx, overall in million. towards $X the quarter, about went additions. the roughly For CapEx $XX

the relative timing requires of the in over our IPO The quarter, sheet. conjunction plus completed end the activities of balance Moving to the to sheet further IPO all balance explanation. the with

the it priced until on receive didn't close X. we officially we proceeds While XX, IPO June and the July

$X the was $X.XX IPO. long-term billion of plus roughly drawn their moving billion shoe XX closer the our target that exercised shows us we on proceeds to that to incremental X result we net in account, still the to QX, of is later, ABL $XXX immediately now green capacity. A So day movement, removed that of X.Xx. capital leverage to first X.Xx a million resulting our borrowing leaving underwriters effect normal few million million overallotment weeks X.X applied balance $X.X levered, of loan of about in ABL. business the After and as $XX giving into shares, on to closer in Taking June had the sheet working about as even us the billion, a balance ABL term our the transaction,

to target in leverage expect that hit XXXX. We

Lastly, debt. our on

a floating of XX% We general policy remain of of XX% of we're interest just outstanding debt hedging to we'd at vicinity our have to balance, rate risk. between XX% and that hedged XXXX. shy through our Today, expect in

our move earnings full XXXX Let's outlook. on year 'XX in guidance We release. to included our

we to expect range at the revenue year-over-year For our million, of million X% in $XXX we million adjusted explained increase can alongside revenue-generating XX%. consistent year in estimate while $XXX $XXX the an horsepower Operations will million. In $XXX increase EBITDA maintaining segment, the to range of between which 'XX higher largely to be year, Compression pricing overall would year-over-year be increase midpoint result fleet utilization. approximately about in by a full The

in some the X% to less We growth business, our this contract see segment. of customer-owned comprises overall that line revenues but also than for year operations nice expect business

of million. revenue quarter full we we in the Other same forecast margin, $XX million $XX where Services our year. In this segment, the of per the As expect came balance segment roughly we year percentage to to for maintain

in though year 'XX. us the vary project, some to project contracts projects XX% these backlog in segment this can within We range through mentioned nice margins into that have high the And they're I plus to on get a XX% probability aggregate, projects of earlier. from the

determinant $XX Adjusted in in continued the coming year be growth. timing SG&A of in million. for infrastructure SG&A individual revenues be our the investment project adjusted due We completion. really between XXXX post margin ultimate percentage to will full So IPO support will a $XX biggest our to our and see the million to higher as related of

to CapEx CapEx capital anticipate us expenditures. a expect $XX our year Turning basis, allow $XXX XXX,XXX around somewhere we horsepower of maintenance million add $XX incremental to of million growth to which million. million, between On will and to fleet. full We of $XXX

out All Not full and to [indiscernible] Basin. said, capital year new the our returning nonfleet-related of [ times committed contract. roughly historical orders, returns. Closing with roughly and the ] Unit horsepower X-year items. approach. our We're CapEx, policy. than lead recently Permian new large dividend our CapEx horsepower value under is for given that surprisingly, approved associated with associated on million $XX to through compelling of the Board economics is CapEx are a all creating the shareholders paybacks and disciplined With better allocation growth XXXX

begin out to flow of or neighborhood remains To for of XX% share out $X.XX I'd our But expect end, To excess in returning beginning our midpoint, would to confusion, $X.XX paying $X.XX X% that level shareholders QX. The in related approval. from Dividend Xx. closing Tuesday. just a of to of to would share over with measure our term will something were hedges out non-GAAP IPO amount nearly quarter termination that be QX be realized to at loan the our the by represent $X.XX to discretionary a utilized per in rate foreseeable reduce of paid the the down ratio discretionary range that of point flow our cash interest coverage regular million yield annualized. At an per in utilized like that close. per future. intention we've as XX% the guidance, of third the included cash dividend, pay the annual to to gain at subject quarter, pay to capital price that on We Board quarterly $XX share to specific dollar

prepared math the participation comments. dividend won't factor and in Thanks for [ for support. into our just year. That's again them we ] So your my

Now I'll over turn Mickey. it to back

Robert McKee

Thanks, John.

in recap, quickly quarter second beyond. to continued our very XXXX are growth So forward pleased and to and we with profitable results look

who cost the assembled leader we under fixed and Kodiak of the a worked us most here with Built infrastructure team best of shareholder. continue business, role concentrated what all customers by energy stakeholders long-term one leadership open line commodity resilient our that, with the the of fellow basins has this economic point, we've honored where an compression best that for at are future as So And in advantaged chain. We every including role revenue today, built with have we'll a again experienced commitment fleet like focus hard value to sustainability. And compression questions. to that short-term a that we share the with a in is built the vision to thanking contract our Kodiak? to which now on is infrastructure We've our are purpose-built we its for I'd mission-critical in horsepower to large the up in close get market production. At critical support everyone contracts Operator? cycles. our as energy employees price in domestic

Operator

Mackay Goldman from today first Our [Operator is from Instructions] Sachs. John coming question

John Mackay

level from then on first I trends team, here. just trends. pricing release curious now, to for hear in contracting high numbers and what to any I it some you you're level, seeing we're just to of the wanted seeing? acknowledging kind the to and Mickey, would be where long fleet utilization up the start these take high of overall market but higher could congrats thoughts your of just turn that here how on think

Robert McKee

us Mickey. Thanks for John, this today. is joining

be pricing in we've I of in we're calls and that here, the industry seen in between times the ever of really mean, our the the think pretty compression several and that's it's markets tightest I one to trends, the obvious good market. others On

And a of they're considerable excited fleet to priced at about the today. XXXX is premium current contracts signing we're rates. into half the where we're now, right and those So second

going from and So it's good looking all here. up

I about X.X% think our under a you month-to-month we that, fleet, contracts. contracted of like have only is today highly pretty said, fleet

basically all contracted fully effectively So fleet.

And would -- for expect available would an expect to primary to of XX% be year our contract average years, XX% kind color fleet kind that to recontracting repricing of we kind give some and X we there. I so X term every with of for to of of you

John Mackay

Maybe compression here. just And in margins in or you just about, in acknowledging line-ish you're a great. talking business, gross on that efforts Mickey you could gross the core slightly comments here? second about just where higher on What line-ish guidance quarter, largely of what what or for could some That's maybe as margins, follow-up. would from the rest margins of cost into beyond? let's year mean say, going for pricing talked kind the above, John, but go schedule, some saw that of gross had But is positive for ahead trends, of the I guess, the tracking kind 'XX

John Griggs

Yes. Thanks, John.

cost going too gets So to not I'll at in touch this at But is happen the of on about something overall say what's Kodiak. attention I'd 'XX to much ton speculate that a point. optimization here topic, going

we [ gets it not quarter what down understand kind exactly we ] lot operations a our down. you from mentioned, ] end of last was ago. That's because lot -- our was were that tick something consistent margin [ a just of of a that with gets concern on drove year, As compression tick a our where where

team that is We've here we're focusing that's really needs on So internally dollar side leadership making spent. our on optimizing that. every and on we're great doing our got a what operations sure that's focused wants,

we're put we'll that kind So margin see expansion trying guidance that we leverage but operating see beyond on of think XXXX. rest the be, assured, move where we to we is and the forth focused as

Robert McKee

relief just And from seen things. of add kind that lube oil and signs pressure Yes. of beginning we've of kind those in inflationary some I'll

some forward. I on so some would momentum And we'd margins think see upward going

Operator

from coming Next question Tonet Jeremy is JPMorgan. from

Jeremy Tonet

you Thanks the maybe release capital about initial on here today we've with the energy, with given allocation, process wrap could growth wondering sector start company's to the bit seen this thought want of the far more kind you out. for you together as -- a as dividend to how forward here I color and off. provide guess, talking the allocation, wondering, talked within color if just fall tremendous cash and living I about. But in just everything going as where outlook flows capital could shift

Robert McKee

certainly at We this morning Yes. probably we're opportunities really, team looking willing than from this more more on And just in capital the commercial our growth that the with really, met than have those to of to growth spend we're willing at some capital I've point that -- XXXX. opportunities. to leadership I it's X and time Xx opportunities spend

CapEx our everybody spend our market. So a to obviously, flow we our again, we're cash But and flow, pay to cash defines and is a commitment really capital within tight free the way living very cash we But after live going free from flow within investors dividend. it we a that differently. allocation after growth framework, we've free define made our

that public first we kind of world our the So to sure here. make call that's in that knows want our commitment, and

our minus we the And look that best returns thing the now, have compelling deployed, in front capital strong growth with we obviously, gate. to our EBITDA XX% we we've taxes, of when think cash So us interest we right XX% take equaling allocating now, capital now at our is that that discretionary got out coming with in on that, to of right opportunities flow. We to flow, of do our discretionary and realm. that are the cash minus dividend to cash our then maximize maintenance minus roughly our our and our

to that going we're cash that being sure to that on making going spending going borrowing growth flow we're we're the of -- making sure capital a governors so what forward, XX% and money spend discretionary XX% and those not but forward of And ultimately. to pay dividend

John Griggs

sheet, Jeremy, while all follow financial XXXX. move preserve X.Xx, we're is there the that think to which add The leverage target, just thing which ultimately is only to X balance would going I I that we going up. our other that and to towards do that be flexibility we in long-term was protect will

Jeremy Tonet

Got That's very it. helpful.

wondering focus and that the And the of or their capital expand on or it's are you're where are some seems discipline deploy growing with deployed. wondering It to so talk customer-wise. how customers those basin like capital on think It focus be Permian-based. about could if alongside dollars to the just largely a to is you look little seems where just like going as the there, at there you key given bit maybe to look as portfolio far kind more

Robert McKee

time, Jeremy, in mean, keep customers this up from anyway. need with capital with keep I our core us really to Yes. we allocation what can't a at perspective point up

we're our best customers here. needs that to their sure we with aligned got doing kind bulk that making the So of stay and service the of us

unless at wouldn't that Basin. said, effort to and opportunity And think majority what I I So expand is into a really, I further, a the be dollars think those of are concerted I going head we're make like taking Permian think to suspect the you're probably do step a bit little a portfolio deployed getting to there's that so. the that going compelling I go really to

Operator

Next Neal Dingmann coming Securities. Truist question is from from

Neal Dingmann

is behind EBITDA Other. I'm million million going Compression on $XX even question the My the on as $XX to the positive on market anything as today first in kind Any kind million all of just spoken $XXX for and Obviously, numbers? guide? they're prepared should is on about the to Or I'm million you, quarter. with we there just wondering, you wondering, first of on on have just could that steady Great those -- just to on it what's we you assumptions remarks John, and $XXX maybe, get that changes you just go is be to compression all. have this? [ you ] of major very is sort speak going guidance. stellar

John Griggs

Yes.

increase my is the consistent speaking the year-over-year thanks, we've to So Neal. on remarks past, in a gave everything of speaking pretty in to think horsepower operations the compression about -- what with we basis. But I talked prepared earlier, kind going it's guidance,

XXXX X/X So it's I that's, XXX,XXX will about be what, of horsepower the say when delivered. end will back in terms about so or in loaded horsepower.

as rest in on board. do up step when additions as then reasonably we the margins. around guidance those of CapEx well potential of terms our is So And kind the the see self-explanatory revenue the for come of a

Neal Dingmann

is good obviously wondering, still you on the fantastic speak very just early be on hear anything obviously, other potential anything That's prepared could I'm or or there. any developments LNG to you just much could the talks that's to just any term really on because -- your just too give you near I'm be point, could is just color how how realize amount opportunities. margins about remarks, out my hear. in No, always it's for you to exciting needed contracts. on wondering see all involved could early this. to definitely compression is yet just crazy is of maybe in last any around just could it you to the there just Making

Robert McKee

Well, pipeline and build-out I that play we're of kind or and long-haul of downstream of market really kind on thing. the of that regasification look, -- and a we Gulf of United [ the kind think the the States that, in Coast liquefaction piece typically looking us, and and LNG the it's further ] the that not at

has of benefit stand built that has of amount fact is that what we're just in So from really enormous all have infrastructure to build-out to be feed the be dynamic the that. we to to to going for -- there support just an that upstream gas just

And gas multiple where bit Eagle gas places Ford see and to and necessarily is little And a up type yet not come that creep going the those the today, that pressure Ford. of prices think the environments centralized gas at or talking oil that's prices to like and gas until you for gas compression And about feed Permian the from compression Haynesville and they're additional with to of have I capacity, multiple the you we gas for having compression capacity those need day of a more. BCF gas oil Eagle and compression when reservoir, add you going all which and Permian lift of rock, rich Permian with processing think coming a lift applications tight of gathering to need Basin you're low-pressure residue need about then facilities. stages out low and need lift gathering is

for So is comes ground out the of times compression. part compressed that be every the interesting gas multiple it's of stages -- molecule has to over multiple of

to and world it going amount And -- having being vastly market a now. in just demand space, our is in be compression us to compression that think, us. I right to this in lends in have from undersupplied for of benefit greatly at and invested and an think enormous coming it that's is So everybody an under I environment

Operator

coming from James. from Raymond question next Jim is Your Rollyson

James Rollyson

the like lead the peers, capital in tight kind equipment, Neal's we times LNG kind question kind actually quick actually you capacity at and your essentially of are much growth. some long-term tighter aware of Just the how comment how in -- your enough discipline might of a enough things your fulfill because well adding this? commentary, and being customers terms export everything have sold seems capacity today and that when how for by Mickey, out of go look to back to of of circling are problem big you

there just the of that, but So on how really kind curious customers kind perspective out the sustainability of challenge. cap your your this about of freak are and

Robert McKee

have for even of years can right commitments portion for are core market that's to more our almost of open X capital kind why allocation the but out our we is right names so day have more, and with already XXXX-horsepower with they'll their hat how they in eyes about realization tight customers industry us months right us only now. I every some Well, the for now. the at and think of is that coming more and more get happening XX for And the in now the peers and potentially the that not commitments, looking to

now. it been a ones allows ahead the some in us, we've us it do years got to smart challenge right X that and So really now plan look, to that that's it past. because allows of thing things to right -- ones a business our allows intellectual time the I have the think to us forecast, are And to great us we potentially looking and saying, plan,

like really chain or because -- space engine anytime it's an supply shop get right a environment, And So of soon dynamic an in it's lifting deliveries soon to kind or getting don't and less tightness anytime you interesting equipment now. I tight built that. don't anything see see

are customers the they realization these get that right to in snap in well So now into better plan queue. advance the

James Rollyson

even kind the to And sense. now then 'XX. thinking you that roughly is just as perfect out to pricing trying if that second How contracts than to what back later didn't the the they're guys another rolling ask assuming Makes much Maybe quarter? or 'XX look Just at to get be over for averaged what circling up? pricing of you question. you're to would higher you about a going it just in keep bogey way

Robert McKee

say or can much hurdle my as of top got capital put right place. know how a that we've the head not in -- is off don't higher kind is. of of I as I'm that have we a that What revenues thing. far return exactly I sure percent it

that every for growth cover can so we hurdle that capital put dollar return we place have deploy that we from threshold. a that a perspective, And we that we in make sure

they those same if to the we're that dollars point Kodiak. the buy when are return less at on back still going they so come dollars to And time, higher horsepower, in and get

Operator

next question [indiscernible] coming [ ] Salman is from Your Aqeel from

Unknown Analyst

customers to expectations. setting there. your still kind of are 'XX as discuss those at prices going your and conversations what you outlook today seeing higher just relative back presume briefly I So in to you're with things

Robert McKee

-- tightness the right wants out returns Salman, deploy. if especially queue those in -- going sure mean mean -- want we if get set to the have the market make allocation future capital in to we to dollars -- well pricing with can if into get that that I I this that that we're for we on to yes, the that somebody now, to returns

Unknown Analyst

drivers. about it. of revenues terms for Got quarter, And of sort in talked X you then just this

contracts about running adjustments talked at fleet, And the through. You renewing talked then you about prices. inflation additional higher also

So was the terms the in overall largest higher to you looking say revenues? revenue, of the contributor which at one can

Robert McKee

deployments, portion Probably be the new of I that. would the largest would guess, horsepower

probably and there. smallest the was probably second was was we've that second of that the the opportunities I'm think say the had exactly I for not what adjustments PPI some revenues. some quarter sure I'd the throughout but then distribution recontracting effector there,

Unknown Analyst

tight me. Got I the labor everybody. it. for And then last is one just know for

of how for kind curious going you. just I'm So that's

Robert McKee

It's definitely it.

that for have weighted Permian making especially part training Basin. of in of It we that to that mentoring battle attention fighting and double-edged we're operations the think that the of market, sword heavily the the I Permian. towards kind in pay you the deal Permian day, see being fleet and in within one it the our group. our with sure really than a was our larger of our labor But to we every so we're issue is

up the lower because beef But a think make personnel I really somebody our it in has type pretty did basis normal group that a recognize effort which of there to that some Permian margins concerted is -- ability sure And in we fluctuation. points second up and lower of Basin we been. kind quarter today in XX quarter, experienced think to earlier the brought I the had less second the ever make there's operations hire than is

to more and training them within want them we make so be successful are people and that sure the people. contributors we sure having workforce safely. board make that possible on So them soon enough spend can we enough hiring time they're getting we're to We as speed up sure as and doing that make have

up operating make goes personnel hire that we need and that as operate adequate personnel group kind they sure to to of train resources ability those down, and safely. - experienced the to beef that time kind So of to have

Operator

Barclays. Your from Theresa next is from coming question Chen

Theresa Chen

feed FID? gas of this? in constrain you do you liquefaction I'd to like potentially already comments But will think and back that in growth of of of go delay value and And think Mickey, to the have compression part your some for this the about pace resolves the investment this passed overall do earlier the projects chain. growth how market lack tightness

Robert McKee

us. Thanks good to it's be going for to It's joining interesting. Theresa, to talk you.

there's I have LNG capacity. going we about to talk think to -- the

going of to place advance. bring be the get deal some willing have going planned the are ones of States. a and in I the plan conventional having be losers operating I to end Permian have that to that of other gas horsepower to their to movement able infrastructure at winners losers last to that within and about to to But that support of going to thing. well in lot of and the are in and think needs to the holding think resource ones natural that the up United you're going plays you more that. talked not And horsepower the be minute optimization are winners to caught have the bag support kind of compression kind the be and there's I mean the

seen you've of lower Permian And down you're rig and the counts rumblings all we heard itself at in demand ratios manifests that our compression into any and seeing services higher that of to Basin, I gas because about haven't oil rigs for kind laid being and think thing.

have to capacity takeaway LNG the to pipeline Permian, that be feed going I obviously, and that and to capacity. and -- capacity So processing it's be think in able

tight do which highly going there's ever been So more equipment market. continue that has that that than has may I make seeing it's And be what before, to to compression. It a and do be trend to will to think market it today. is sure adequate it we're utilized that the

market. investment several in a an the a there's shortfall that under-invested market hopefully, compression, be going sure. next think to that but not tight think just is I the I it's massive years for for So And

Theresa Chen

producer overall XXXX your have basins conversations in? they if for then together customers put term, your near the And your operate across more with maybe line And what's Understood. growth you expectation CapEx budget? the top

Robert McKee

flows we've to you to I in capital. projecting right, official back discretionary into year, what yet. strategy, what But going haven't of our we're think that mean, guidance next if XX% the of XX% released I done growth kind allocation for we our of cash capital

single I top digits is kind to XXXX. pretty think high and expect for of reasonable EBITDA revenue line growth that

Theresa Chen

your more Is having to that And if Or more bread to I X one including your more contract capital To that spend. comments about to and lastly, opportunities Understood. that willing compression is earlier well? butter? Xx can in. and within opportunities you're squeeze alone, downstream as

Robert McKee

and core out existing and portfolio. for existing bread just a contract That's going the into the basis on with compression new bring base. customer chasing That's That's our even not butter the day-to-day customers customers that want we even that we would to with opportunities. deal

Operator

like Thank of the our end you. comments. to back for to We or question-and-answer I'd reach any further turn session. closing floor the over management

Robert McKee

to Thanks inaugural us everybody, forward look for been Kodiak call. us, November for joining call. thanks, for earnings again It's us. fun we joining Bye. in you and our Well, morning a quarterly our updating earnings for

Operator

today's That you. and conclude does webcast. teleconference Thank

may your at have We this thank time, for a wonderful participation line you You disconnect your today. day. and

Kodiak Gas Services (KGS) 10 Aug 232023 Q2 Earnings call transcript