KGS - Earnings call transcript Q4 2023 | Kodiak Gas Services, Inc.

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Operator

Greetings. Welcome to the Kodiak Gas Services Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.I would now like to turn the conference over to Graham Sones, Investor Relations. Thank you.

You may begin.

Graham Sones

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

few John and the I by that only year the of call full information provide or high-level results call information management for the opening current may call XXXX. the and Mickey, our Q&A.Before Mickey company, remarks, commentary a quarter turn fourth over my to have will Following the before States of I and financial addition, on March items XXXX X, will These available. reflect statements and comments may meaning this on as as today's information contain forward-looking time by on federal XXXX. any beliefs housekeeping securities the There accurate found call Investors of available access therefore, phone and United XX, on of cover. based a be replay be today, of tab note you that the within during speaks to our Kodiak's And views, reported to assumptions of the made no be March replay how replay via kodiakgas.com. also Information website can currently statements the this at webcast laws. on forward-looking until advise such reading.In of Please call management transcript longer this outlook

by sec.gov, statements from our no file achievements non-GAAP And to reports which these the materially will give those at on quarterly assurance financial our actual measures. be can risks, and cause uncertainties encouraged to referenced be uncertainties differ expectations Although risks, and we company's statements to in can found report that we the understand today expect XX-K management Form contingencies. various will believe or performance prospectus, XX-Q, contingencies the forward-looking are to such read certain prove website today, made expressed annual statements reasonable, or in include management. later are all on expectations results, Comments could Kodiak's Form on or that correct.Listeners those of also to

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

Robert McKee

operational continued know, on detail Stock and transition all quarters sequential delivered feat a to of work, enables proud and safety financial we Public focus dedication on the what proficiency, became June In Exchange. I'm operational hard and XXXX, Kodiak listed York success. New on extremely well turning took is Kodiak's our our our and as employees. I want it guidance financial our events Graham, all to Their monumental recapping provide you joining as a Kick well whole before to off before additional thanking over financial I'll from as thank today. as things results results. compression Kodiak's discuss Thanks, record for the by and to a IPO successful you results. industry the to For of is as as because year highlighting our a XXXX outlook some commentary Then us record provide about have XXXX.[ multiple to by to Since for team John company. our of amazing ], start we financial time, public details huge that being complete several

eventful core for horsepower.Throughout proud the and that to make are, Kodiak of what dividend, rate. provider as I as ourselves a this ] important X.X a meaningful public for transaction and us and true adding dividend the Compressco We sheet. who CSI with return initiated a XXXX.We our we paid to we We the contract return capital we million offers these strengthening a in our XX.X% month. priorities Kodiak opinion, all potential to the largest Basin. acquire with our all quarterly agreement will to shareholders. goals and definitive almost extremely Kodiak a in dividend, dividend while that happy return plan this public was dividend a being through utilization industry framework compelling to per priority share industry-leading allocation shareholders Permian XXX,XXX shareholder by compression contract executed I'm industry-leading on compression to have [ by compression our our maintained last company, set In grow of establish accomplished our capital horsepower, our a business we balance a increased yield organically an stay We total a we in our announced initiating am allows $X.XX for position year, revenue-generating do report incredibly in that. company and we well-covered An to second represents primarily fleet attractive capacity quarterly

XXXX, to debt-to-EBITDA at of of the turning to we lowest milestone to a mark down.Now able end company push earnings under a Xx of ratio Finally, history leverage yesterday's to continue the be the and in our we expect achieved release.

with pleased reflect fourth results, quarter our full and the year continued strategy. execution our which very are of We

once the most weeks.XXXX market focused and new industry but Compression Permian Basin, increased capacity across pushed has deliveries elongated demand our During position last the Permian U.S. again slightly engines quarter, revenue nearly tight compression by rates have revenue-generating Caterpillar Basin. in important further contracted since known call, and horsepower large strong known units the fully times unit new for remain strengthening are our to XX to the at with on the XX,XXX we the basin as in horsepower highs. predominantly remains delivered utilization rates dates, improved XX idle as be known our delivery absorbed all-time earnings we will to Delivery customers,

I few the additions to We customers in orders quarter from new new want attractive.Next, pricing are on on with our the remain second The a currently of to equipment quarter. returns into related discussion touch XXXX. and horsepower highlights

to the rate. have most friendly we industry-leading customer allows maintain the our specifically in on emissions youngest, liquids-rich the that to like Permian focus fleet, utilization us environments built fact operate service Basin, Our and

compression New operations are consolidated in reliable compression the about Both compression utilization million Kodiak customers adjusted with of revenues confidence highest of to horsepower million. history.We on our revenues superior fourth EBITDA additions quarter and our in $XXX contracts, services. ended and predictability X% led the of Kodiak's the have in to illustrating $XXX driving deliver month-to-month and

our and we As cash generates reasons the for flows.We we CSI strategy The pending methodical intentional our all of about visible, the excited of deal. contracts equipment times, transaction steady many highly the have deployment and discussed to nicely the announced discussed capital when will optionality trends remain returns.Now enhance and macro allocation some meaningfully the recent discretionary our enhance energy flow, would like giving fit portfolio to into us in the I of discuss shareholder assets framework our cash within our sector.

of the specialize been to developments has It Kodiak in consolidation of decision amount large-scale, tremendous focusing liquids-rich is gas production Haynesville our basins on in like the customers horsepower and been sophisticated the leading the companies again once to compression.Next natural and compression strategy reinforces favor shales the low associated prices. the space. financially natural Eagle in upstream and continues that large in This in positives has a several This, that the lift why natural for Marcellus tend curtail Kodiak. producers to for certainty Ford infrastructure successful. more visibility increased of recent our and out creates centralized be response there First, This U.S. gas and by Permian footprint gas gas leads multiple to gas stronger turn, to has like applications. so

Basin Permian and the oil in NGLs production economics barrel cost are producer the know, U.S. per driven the you lowest with As by in

infrastructure. the we XXXX, of foot reason, requiring in incremental of LNG gas times to compressed basins by Gulf the projects coming cubic double out than this XX expected LNG need produced gas Permian Every primary will incremental demand compression the multiple Permian to Coast significant will volumes over. more For be of like believe next months.U.S. liquids-rich expansion supplier is the gas of the of to a end feed be online

] between production Found X horsepower the the and horsepower, need In the the compression doubt, allow historical the good years their with and relationship with and their by and of to impact clean on way world reliability. to of to meet market to gas relief outlook. gas year to it coal ahead term, providers with Kodiak supply dependence of showed to sight. and our the the in Europe people. will are looks is to and tightness beneficiary its John? used Without world many would LNG ongoing industry fastest Asian reduce their not XXXX.[ for discipline very security estimate next quarter Also, struggling of unleash only using capital fact, the to economy, the dependent and combined call LNG of needs for a capacity. financial gas likely help of and on compression most that economies like been growth demand to natural fuel reliable markets, for largest natural the point Russia.The and exports compression reduce natural peers, its will worldwide have U.S. to contract increase of cost-effective discuss being decade. LNG life the its environment that results the U.S. use LNG to hand coal-fired moratorium gas Asian is of to roughly displace growth the on little ongoing has I John add it further power the by humanity.Now to we help I'll top is increase rest to it permitting U.S. are of any goals U.S. full projects and fourth U.S. motivated through but recent environmental low-cost emissions over the which LNG XXXX as the wave U.S.-sourced not is largely the politically also is on the quality Supplying affordable, energy have and many out the expected the Longer with

John Griggs

increased continue my of 'XX. positive XX% and approximately revenues we the year year.Total quarter on up million I'll up for over our were remarks, approximately Thanks, a same full review results, year. XX% and 'XX. quarter about our quarter X% the It EBITDA versus to million, $XXX was full to last truly was up for quarter in Mickey. the our $XXX year turn in fourth the outlook historic look In year when for momentum year. from then to Adjusted Kodiak building Revenues fourth million, XX% I'll for last the to and and for compared QX $XXX to

$X impacted the nearly year's operations of order year the horsepower fleet and substantially higher quarters the noncash quarter, Services million segment's $X.X not EBITDA, million, in our basins. down quarter expense finishing segment, full with $X From application forecasted. and to the contain stock year transaction-related generate liquid-rich allowed items accelerated declining year and included and sequentially. bump such nonrecurring saw to fourth EBITDA compared revenues million and systems related of In costs the million compression our up the XX% increased was segment fees. within pressures. efficiency point adjusted comp Operations adjusted to the fourth a million an On pricing.In margin in nearly to Operations basis, On remiss $XX million, years associated $X.X adjusted Compression excludes $X.X in processes Our the in the our on out and a SG&A, totaled progress by about million that Services a line of for for as evidenced by when Consistent for excess $X.X sequentially our gross Record nice expectations, over adjusted in million, million, EBITDA We revenues to quarter XX% cost team in of were respectively, on prior why overall as for were projects that alongside $XXX mid-single-digit assets nearly spot, smarter compared be of and segments. same this function gas I'd XXX,XXX in a tough revenues fourth 'XX. of million and offset a in originally inflationary periods, $X second substantially the large our Compression quarter over up growth perspective, our $XXX positioned specifically was challenged at low $XXX XXXX.Looking quarter year. came talked over of over we in revenue but 'XX, in revenues reminder focus in at positively revenue-generating them quarter fourth QX quarter were about for to half award a and the prices reserves was growth in up segment sequentially a associated and operations of million, plus put last with gas grew.The XX%. revenues before. customer. approximately a Operations continues approximately margins and adjusted the bad focus Other of horsepower margin, prior increased benefits XX% This the X sequentially strategically overall it's of by have to Compression clear segment a our percentage year. and to have revenues million, and this quarter. about We've people, debts of an percentage XX% basis, in with gross by XX% quarter, year costs Other while plus the for last 'XX Revenue-generating increase what XX,XXX dollar $X the well the approximately ago. we approximately full margin from

on turn our with invest cash dollar compression flow allows few capital previously, adds lumpy overall to projects but capital. more As dividends pay we our high-return require Other are what of segment we capital us on we've synergistic an valuable fourth cash strong abnormally above flow, business quarter projects. a a at advance meaningful completed highlighted believe and construction return our in margins.The margins no and segment. in better-than-expected be as Station reflects both is which average one, discretionary and Services growth projects realizing to employed Every incremental to an

was to the expect medium to gross $X million. XX% margins CapEx realize Over about CapEx, segment between terms of we continue for the for to term, our this XX%.In quarter, maintenance

full was we CapEx $XX what year, had was the in For 'XX. spent approximately less million, which than million maintenance $XX

the the and maintenance vary Growth for is estate hours year had that reminder, of by age purchases real million we will upon mentioned of were those to of fleet. unit was a in non-new and equipment when $XX We CapEx our units CapEx. function depending million As QX. was opportunistic that the quarter a our and added in QX in $XX some closed

CapEx. approximately of growth Overall expect totaled forward, normalized Going more CapEx levels million. we non-unit growth $XXX for 'XX

As balance that previously was to we sheet. CapEx saw be the to back-end loaded, and quarter.Moving mentioned, the in expected you fourth

ABL borrowings of consisting $X.X facility. entirely of we year-end, debt As had billion, of on our

shy of and $XXX agreement credit the million facility. with Our we approximately leverage of ratio exited was the just on Xx, availability year

unsecured As $XXX we most of XXXX. notes you know, last month, due issued million of X.XX% senior

XXXX both ABL advance down outlook market and our At financing-related to leverage on benefits X.Xx As the on clear credit as the deal transaction, in pay CSI's cash recent activities closes, less a and with proceeds close the CSI notes pay to of redraw transaction ABL roughly to an the time we virtue Kodiak's XXXX.Moving as the debut the said markets up IPO, in more issuer, pay used we'll When the the the as we and outlook. notes of compression the $XX of on to leverage on the and fees. in our track long-term will ratings done, accretive very wholly of neutral to It's off our With issued future of achieved than million quality liquidity well it's as capitalize transaction. transaction. plus issuing order or the flows.We credit by the ratings we investors our the remain and ABL debt We strength incremental close derisk our and CSI target by of of to all pricing. needed wind in subscribe were U.S. CSI expenses. the current and the debt we agencies to the durability and debt with and strength year-end achieve well the pleased that we

adjusted full We between For on adjusted between we down segment break EBITDA the $XXX and core estimate our $XXX total by of segment. XX%. stand-alone we million estimate million $XXX between revenue margins Operations million range million.I'll a gross segment, million. $XXX that to year, now Kodiak $XXX basis, million and range year will will are Compression and In that XX% revenue and $XXX forecasting

forecasting attributes our confident our segment outlook high-quality in Given full cash are constructive and an execution, growing flows.In laser-focused the of being year are million this revenue the we're our dynamics, and our margins segment, segment between 'XX we contracts results Other segment market solid view to outlier for XX%. long-term side. high on of $XX and million and We to Services adjusted as $XX gross XX%

timing 'XX to X Our first front and levels.Turning 'XX the our customer in program CapEx. to the with reflects of spending margin half approximately is revenue normalized of year. Due loaded XX% and guidance spending happening more capital months demand,

the million maintenance $XX between $XX CapEx in expect to year. million We come to for

second On guidance, the for million in unit-related the growth our mid-single-digit net $XXX in forecast and plan a to purposes as allocation to is look last on we're forecasting March we'll $X.XX dividend the grow deleveraging.Operator, dividend quarter month. well in that $X.XX flow of paid wrap a within this share, non-new Totally year, between capital which return our after while we're as you, per key alongside of give modifications At quarterly CapEx. earnings $XXX midpoint are $XX.X close, encompasses issue to side, year. aspect attractive of of horsepower any living was fleet cash equates growth up, you CSI modeling its things framework.To million on This transaction earlier X. our fourth and annualized approximately to, percentage noted, which low- to in CapEx allocation at Included X.X% and million something the to return combined Board our updated refined synergies transaction capital about X% outlook payment yielding now provided overall Dividends of forward an as declared its release the ready view capital our companies to for remind take to questions. guidance measured of Mickey to share, I'll prices. in range.For framework, recent we our and per 'XX on

Operator

from with first Jim line Raymond of Our James. Instructions] Rollyson questions [Operator come the

James Rollyson

just Graham, the nice that a Obviously, something to clear But press up based business price John, on. Mickey, nice just on here, to continues one reaction. thing just quarter. stock

is $XXX Friday, to gave last was that of million $XXX of just $XXX Compressco, Kodiak CSI $XXX million for guidance I EBITDA. think your -- obviously, million it million I of EBITDA, So and guidance for to

you a number, ] Street to are that when So is [ guys some the the just second today, at of of quarter, these guidance you're confirm assuming this be the plus to put to stock happens that guidance from already assuming giving off it the maybe roughly X/X have but I'm of together, looking right? just get taking numbers combined, because to it's beginning wanted that. XXX% people going

John Griggs

No, It's way. This John, Jim, is that is folks that's Yes. kind the an by up. of one question. important trip

So like control turned question analysts we that their up, the just models transaction really if I mean the obviously, has is XXXX morning for counting is and them includes come in, today, this Kodiak some CSI the their and at because that $XXX don't when and updated closed. guidance have million. you But looked looked guidance is for

you did in has our closed, transaction put if that for off April kind on it would our come math, But had with that X, of to synergies summit take a are So you But is guidance stand-alone created confusion. your assume XX% basis. out, the add-in question, races. the CSI and say, back to the guidance then to some example

that asked kind glad So that question. I'm of you've

James Rollyson

rates but per I fact Mickey, Perfect. all. sold was reaction just That's already ] XX.X% a for much the into or at where Maybe higher And were Or quarter. what on we a When working per 'XX the color. look that? about in some the entire the of color XX%? at the quarter -- given ratio and how just some [ what X%, those thought, new talking horsepower we you XX%? that sense side, even bigger fleet? you're contract is Operations then making in above talked it revenue as already sure realized out Compression follow-up, just when are, net known at actually you are of with I Or this basis 'XX, are this 'XX month than guys Is for little known contract pricing. average I second you're that kind as Maybe look the customers, is XX%, you a

Robert McKee

Yes.

-- talking one. of I yes, is is to think Jim, Mickey to this kind you we're

here, that's I as I existing ranges of out premium to operating I and obviously that paying XX% is based costs fleet capital want that XX% kind think we're expenses on in spot to to information pricing that but on related range today, sensitive too. put don't the X fleet pricing today. think based probably higher higher And where

get same higher from for capital So to of higher return really, that commands a on it on lines a return the it's rate but we price the amount a commands with along how standpoint, -- equipment, capital. capital same our that's and cost

James Rollyson

gradually, -- over ago, But like does. cost reprices all less it's to X you up continues X the that eventually it there years we think macro work equipment that years all time, the assuming Right. delivered you or ago that

Robert McKee

think Yes, and prices around gas I today. bullish gas we're on I the despite LNG low on right. even heard you macro that pretty think now, And that's right the natural environment call,

James Rollyson

someone Yes. Notice I'll Well, [ Great. that. over, questions. ask let else turn ] it

Operator

of Sachs. with Mackay line John the from come questions next Our Goldman

John Mackay

around there? there, on about engine Caterpillars 'XX and in with quarter on could Maybe give second market capacity maybe on a pricing. working let's some coming about update Could any lead in year-ish XX -- an conversations talked right from weeks. had just the just your other impact maybe adding you And you're overall the to sense of say to hearing now? compression some you XX your I lines Has you're you Caterpillar that talked a what if guess -- on times and customers tie us on

Robert McKee

to the morning. question. to appreciate you good John, talk I this Yes,

line. pulled engines notably, just to chain constraints XX in is in to They were up the Caterpillar capacity they on supply that our you some Caterpillar from their front. last not issue tremendous increased address power on making an right of mostly for heard investments XX call on large here horsepower going which gen It's reason of from today is compression engine of look, that's engines, power When experiencing. AI, of times some engine to earnings our about that support the delivery data they're fueled understanding, gas to increase in kind their and obviously From for of So weeks. necessarily natural in alleviating their all Most centers amount kind line capacity. are a which by gas. is demand

interesting Is So the about pricing. that there? that's You your talking part question right? of an there.What second was were point

John Mackay

No. or that so does XX Yes, XX market. new guess to their versus it -- impact that talking better XX you've supply your into But to weeks, really the Has was when sounds that coming come I customers? time? pricing had week to if so capacity alleviating you're chains any on lead more on

Robert McKee

point frankly, X and the years I at out year taking existing and customers business soliciting last not customer at mean, not se. all. this No, of care base for out we've been our per our -- new quite going that

need get capital to get first about of forward. allocation XXXX. line that understand to quarter in type that and customers we're they quarter going that business second and They first about, all of capital is -- talking So their precious the

involved is backlog that seeing been the long more here we're of the think times. directly of precious type I -- related with allocation than So Caterpillar capital rather to lead has probably

John Mackay

All have to market this, from a new right. get overall we and much we of worrying of to we're amount XXXX. how into start as lined we bring be That's ton is others seeing follow-up, up not how engines coming going do into Caterpillar, for very market flowing gas a clear. the capacity in Maybe the if this when about can just

Robert McKee

It's it. don't a And a for good great John. I answer have question,

or of outsource significant be capacity, us. customers to their E&Ps going to buy these people shortage compression it there's that think these whether to it a like own decide pretty on and to I decide

now. is everybody discipline think I capital right

for a for Basin, Kodiak be a X out think natural lift of gas which oil the on I or required of gas of more all of Xx coming that's relatively is of basically of capacity in our as top the that of requiring gas to for Permian, of the dry there's stated realizes conventional required that, additional Permian out more kind anybody a function gas, I production amongst compressed compression coming Permian well think intensity the Basin.And compression and type compression peers. gas the or no couple production, then idle than

now, I think to hasn't idle years, probably work back that market great now. gone several it's this that And for it's compression. relatively been to the in a last if in capacity difficult right reapply situation

that that very, coming pricing see of seat through of capacity be kind of in the and being sitting capacity the on. drive drive of utilization And the it's And to that don't we're additional here very thing. it, equipment I beneficiary tight. be because think to to we're able able market, and take in and to I going idle spare So with capacity no sources

changing market so the future. least And foresee this foreseeable anything don't in I at for

John Mackay

be to it. I going That's interesting. appreciate

Operator

Our next Neel questions come Bank of Mitra from America. the line with of

Indraneel Mitra

Mickey, that power just that own. terms and compression the have in for wondering being to if able of maybe midstream E&P securing or you a an advantage time discuss versus in versus field you company could their trying you and the them What secure operations out and getting company E&P out gives midstream pricing on a versus equipment to themselves. going an going that or have

Robert McKee

you Caterpillar, At distributor. we are the that forefront to of morning, problem. this a to Neel. the Good it a Yes. fact No talk Caterpillar is basically

engines we our and with certain allows that pricing Caterpillar requires to Caterpillar equipment. so relationship of on amount engines, to for preferred have of contractual percentage us And basically from a year purchase a that every us special --

distributorship So engines.So arrangements years [ the almost fact with with been exclusively deepest frames purchaser makes Caterpillar we to almost mean, X.X basically years couple and you engines, now. can engines. we've have Caterpillar have discounts that compressor both the our that for from Ariel the that horsepower of industry we Caterpillar we've achieve up that the them, of very grown I a million ] a obviously, large and here in fleet

are facilities. on facilities equipment we've to long this got with CAT the history packaging So fabrication build a required that and

years all history continue with business and So business, business relationships years a and those with companies of part incentivized are they those and of with obviously being do doing their to us. to big for the

it spot to the makes of it thinking so out continue chain that on manage a year make ahead customers a -- our line And our to take and kind supply it plus us sure deliveries. we're to allows of with allows and us

Indraneel Mitra

it. And will be don't you they'll compression type need. exactly some that I'm then pressure assuming anticipate in have Got somewhat the Do of a these of field what companies of it to alleviate -- anticipate? I as spare that describe a they any otherwise facing guess, are that deploy of that constraints would wouldn't I can some these backlog companies you normally

Robert McKee

No, for basically with really Neel. growth new of I XXXX and XXX% is requiring is is XXXX capital that now. customers horsepower we throughout that don't, our towards going contracted allocation mean are into

XX pressures when happen there's that now talked within doesn't excess XX-plus the needed today. a we thing, kind of this that then and and of that that capacity had have lot lead that they idle historically, for of that either production where a So than a with can churn manage some on sits kind of things our we in in to pretty the little majority time just But capacity programs in There's flows you utilization. about industry exist and that going in the faster XX are make don't in fleet assets people not percent excess changes at capacity requires. industry, really Basin the week Permian allocated.So the drilling changes

So year to ball going I the throughout are and winners are think ahead that to look with cycle production their the that accurate the plan into really look a be and can out. going profiles what be ones this crystal like

John Griggs

is put too. finer Neel, point going that, a this John. to on I'm

has good. throughout always pretty figures companies headline in or industry around the public eye-popping So the been the utilization ours

] great recording X numbers. use Our [ tracks at record

the with we to and wrestling mean to this even come that to is that If answer in from were last going to that's right? question, a terms be back think that's future. this going country Mickey's the challenge highest of to gas is horsepower horsepower, move in it the you the the oil -- we're demand, horsepower be higher, -- fundamental where going large the in I is to industry to the foreseeable for this So take goes the

Operator

of Tonet next Our with come JPMorgan. from questions the line Jeremy

Jeremy Tonet

more guidance the I was wondering there. if end the wanted range to a for drivers able high far low off talk I be the the and base just of versus EBITDA might be as start the the to end you business there? bit with could what as guidance

John Griggs

take I'll it. Yes,

public, we said always going great new and to So that kind -- to utilization. It's to up I but I don't guess to effectively is, CapEx went you. it's more be I growth [ see more. some and we perspective, talking come right? when sold out, it could, margins not 'XX equipment. Jeremy, you expect from delivered unit, it, company going kind guess revenues down We that a and of that, where right? you with of acceleration think would utilization we see ] would up You're could drive So of since

well of Operations right? businesses, the price going biggest comes not think other versus way too segment. as behind our that's worst we the be go and the down to delayed, of The costs really Compression could it just fundamentals us.So You in

our So sure of software we've are of on of can't. putting we're membership productivity. light And been of we're that deliver and don't how with full we're kind with intelligence focus doing to we help to activities, like us my cost call in always post-COVID that's care better earlier, think that form focused remarks, I can I in the like for understand on units, it. everything. ran and that to what it, say, value making I'll I And a control years, something said how talked of anything suffice unique charging type focused customers. automation our mean take last we artificial we our labor We're with to on just of in we've industry-wide very always the couple it to appropriately over of costs kind

because in big we X about the are levers.I you those a to whopper segment think need So 'XX, I had year guess other if Other include Services the services.

year guided average XX%. station we that construction work of margins to the [ guide in an XX% towards have XX% That's services. with We other do, to XX% ] to normalized

and couple well had margins. repeat was generated a come 'XX to 'XX, itself large great of performed if in in namely, very late, on contracts which we we them, So

upside could there some see well. You as

business. covered drive I've different think I the all that pieces So the could

Jeremy Tonet

And wondering on trends and conversations regards very more trend playing emissions see I that moving pivot to gears would and to towards and time how it. of KGS. I'm just Got helpful. impact just here. that a over with going overall customers between what you just That's wanted electrification with are bit I kind how, have guess, out

Robert McKee

fleet successful overall why of of And think I about doable and everything, being all -- there very compression youngest emissions-friendly out a the love to Customers perfect Kodiak's in and time. that think fleet with that at a we'd the do there. Jeremy, obviously, emissions is that's out electrify everybody's a in it standpoint. top would customers love And talking not Yes, what emissions that's just reality world, cleanest mind. to in from grid our steward is are better but I the we the

balance in sold quarter.So XXXX motor portion trying out to of there's we're driven that compression grid and because first for versus are and XXXX. QX is for out get these that effectively compression is a engine with line of a growth gas drive is electric-driven of and we're that fully that our There access of get majority will and demand that, ahead of compression customers be electric capital thing. kind 'XX, spending driven for get gas in to always there I earlier that looking electric for good this So industry. you some told electric-driven into And

some overall. to So might for market there. there's energy think market some and look growth of be be of there's before. this as of look those, overall be to maybe going growing that have the the I continued market it's basis, electric said of the I they're is to going a But a But it at to renewable a motor-driven and compression, market -- there's lower -- total be a that percentage I share. a it's kind on gas engines sources but going same a going to gain it, kind at way I

of get do, we our to what So as it. to we're to that electric, we're there'll we best goes -- paying going to going the be is allocation be and with portion going to fleet we're it if some electric. the anything gas And right attention do be if at between into we

So to and first going provider they offer the electric we best -- to want be to they be customers their service go compression. of to choice to want decide our when

Operator

Securities. Instructions] questions Dingmann come from Neal [Operator next the of line Our with Truist

Neal Dingmann

Permian, same continued there, better My guys, demand. Ford. about you anybody all like out compression just because first of change length than various the to utilization areas regionally? your the it I'm just I'm of Mickey, no do this? question, the compares any be the think, And contract wondering, wondering anticipate Eagle is wondering, the given how specifically, in sort on just continues is in I question, I'm length the contracts,

Robert McKee

derisk we're Ford assets to to want the capital same. same primary to isn't that capital I spend of If kind the does. of It mean contract of into the that or in return it's that spend. course Eagle that kind on deploy contract, of have we that relatively command over kind somewhere going the the the we Permian,

feel some have on engine. X-year a that in it's that And if it's generate the capital to was XXXX the XX years into So go in like the all I kind Basin the no that that though, through tenor pushing a something renewal XX-year basically say, is really multiple is, if because but it's customer is tremendously because base.But contract demand we contract have of the over not in this little what for sitting Permian where growth going to that similar all, most top can production, of you said things unit a then we -- but extension seen of past going go recall with we will could basin on XXXX of Neal, significant life that's as cash our I pretty flows cycle, cycles. we're our matter a fast for XXX% of I look, kind areas highest of we've core bit

this of good equipment and that the that because of of feel ability the So tenor we're putting I contract recontract cycles. end looking we're to quality production on, about at, those our the at

Neal Dingmann

on you like my just about seems It today. earlier seat I would -- to said you late, come the outside make is door a where some really driver sure just then of comment as your 'XX. the it we specifically in regional of hard to my you wanting much I kind Permian, are there. demand. I'm days know like up Yes, I'm are and next would how What bit you LNG conversations into had of outside these try mean many on And are hot. you these seems Permian? specifically think have lined of is mentioned seeing? is demand and to just kind second something a is knocking all little year lot those conversations and to larger LNG things what the something at players wondering continuing be how more

Robert McKee

move have typical ability LNG our with our us. dealing few. are customers to then conversation those customers A to the needed. it's the gas make as conversation and isn't gas supply that having with a those type The with us facilities having They're sure feed that they are conversations

directly sure So a make dealing they negotiating to see we're sure but bit that -- those have you we're not that LNG on a we're with really the little or gas it. needed gets of more to of gas make terminals LNG facilities, locations.So to those

lot what come of Basin to with I to is the significant, natural of at, gas seen administration LNG this other a going depressed or where requirement the the we've prices longer longer that more from with driven by for the this going stay by and I gas outside this Haynesville out versus think gas feed areas. be prices sub-$X think the they're moratorium gas driven is Permian

Neal Dingmann

well Mickey, said.

Operator

Our Everen next Van the Zack TPH. from of questions come line with

Zackery Van Everen

core I your age. know new. guys' on the fleet is Just relatively one fleet

some of of competitors. guess, once under you average, your an give think comes CSI guys' I all belt? of fleet newest Could that the I age the out your

Robert McKee

horsepower grown our Yes. I X-year in with of the a table, lot equipment older to they've kind bring mean, fleet. CSI, and churn to new several large of lot equipment look, the some they've is last to out I for range on fleet of of X- stuff fleet. age their horsepower basis of think in when done years, a that work the they average the an our over their basis

overhaul between fleet So is they years I an years X that that XX But to a equipment years with at use X basically XX about to this between. age of of X that we think regimen is average fleet in average [ if age strict to be going on stock a you the X roll hour lot ].So every basis, is in right, would kind if anyways. average to their that fleet type ours put somewhere of you the overhaul in adhere look because being the don't in and at

engine equipment. act brand-new to just a on to is to within has new of and is So an XX-year-old going perform brand that -- like maintenance a our piece look piece cycle X- of equipment going it and

Zackery Van Everen

Okay. Got it.

sitting lot that been a rebuilt right at now? they're So already age of theirs have at the

Robert McKee

Yes.

Zackery Van Everen

quick Perfect. last one And then one.

Can well rolling legacy X- XXXX off those how of You the us XXXX? coming of fleet. contracts of in remind kind full mentioned and rates old are the many still above base to are X-year maybe in rate you

Robert McKee

Yes, absolutely.

fleet the of every can year. XX% you our of was roll expect -- end over on of kind our And about fleet, our contracts. at contracts X% about have we year, the with of month-to-month We had we'll

we in and such a few So fleet, than the slower other contracted have is of kind heavily have of contracts turnover month-to-month contracts because little so fleet fleet, that a for some guys. we our

roll said, should kind see won't see spikes over revenues this I the XX% of like in other of you contracts that in But of those be fleet reprice places. you we kind the So year. to as able

Operator

line of with come Our Selman questions next the Akyol Stifel. from

Selman Akyol

you just the for an of additions market. play is that at we've high capacity you opportunity? in could some storage a And all that I'm that First guys market wondering, seen in? all, the Is level, just

Robert McKee

customers, kind another don't thing. the that's in lift like kind of our pipe control especially we and -- it We and LNG after on where for put Selman, can a of and gas post really after Yes. It's goes it the gas the when terminals, that right? we thing. midstream processing press side

definitely that So requires demand gas is on it driver that obviously increased is our additional And non-storage capacity cycle for and for a and industry. storage definitely something end. and the compression front

to negotiations to to for where use gas, compression companies provide they terminals again, is storage customers those their or require of place, like all to but be something in whether Kodiak that's that are LNG or they're our going demand that determining drivers. they as it So take have residential

Selman Akyol

that just capital. be? a non-unit question. to guidance, for what then your In kind just for compression will of $XX.X And what or Understood. that was you smaller curious about talked I'm million

John Griggs

out of of always up open with equipment nature. single the the just we're keep have Selman, trucks, take year else things kind aging in crane growth It's capitalized it's it's the kind And this Yes. ropes That's is kind of dove, going improvements, just to every business. older or of leasehold trucks, that's that that's of John. software to a care it

Selman Akyol

And Got one me. last the then it. for

talked thoughts you a of contracts. sort by was forward Is the skewed about our that? the modeling should going any there large Other couple of think just we on around guidance 'XX as about or Just Services, how on cadence

John Griggs

you X to when you Great the more that approach it end, but main weeks have will advance would some might would and of very contract, then end at probably of be that's unfold I the be I in you'll say, it, complete and the might just And chunky field-related contracts revenues may the those in for. work chunk and nature it, other be question. in. call of X, at No, in divided front be of kind when point. The terms a -- how months XX this the way that's then some awarded it's actually the shorter. be the mean best field stuff at it stuff come happening contracts,

that's fourth where end quarter. and So because of it awarded be predict might becomes third quarter finish to the contract a by difficult in the it you

in happened what that's 'XX. So

Operator

you. Thank

our We to like for the end over have to I session. turn reached closing management back remarks. question-and-answer the now floor would of

Robert McKee

speaking not we brightest are next of could operator. with call. XXXX profitable again beyond. look with on Thank in Thanks, in believe summary, everybody in results to to that forward be forward and record-setting front In our growth Kodiak's we continued We us, more XXXX. pleased And you. days earnings I our look and

Operator

Thank you. teleconference. today's We your That appreciate participation. does conclude

may disconnect lines day. your You the your of rest this at time. Enjoy

Kodiak Gas Services (KGS) 7 Mar 242023 Q4 Earnings call transcript