Q3 2023 Atlas Energy Solutions Inc Earnings Call

[music].

Greetings and welcome to the Atlas Energy solutions third quarter, 2023 financial and operational results conference call. At this time, all participants are in a listen only mode.

Brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Kyle turning to Vice President of Investor Relations. Thank you. Sir you may begin Hello, and welcome to the Atlas Energy Solutions Conference call and webcast for the third quarter of 2023 with US today are Bud Brigham Chairman and Chief Executive Officer, John Turner, President and CFO, and Chris Shaw Chief supply chain Officer.

Sure.

Hi, John and Chris will be sharing their comments on the company's operational and financial performance for the third quarter of 2023, after which we will open the call for Q&A.

We begin our prepared remarks, I would like to remind everyone that this call will include forward looking statements as defined under the U S Securities laws such statements are based on current information and management's expectations as of this day event and are not guarantees.

Future performance forward looking statements involve certain risks uncertainties and assumptions that are difficult to predict.

Actual outcomes and results could differ materially.

You can learn more about these risks in the prospectus, we filed with the Securities and Exchange Commission on September 12, 2023, and connection with our <unk> Central location, our quarterly reports on Form 10-Q and our.

Our other SEC filings.

You should not place undue reliance on forward looking statements and we undertake no obligation to update. These forward looking statements. We will also make reference to certain non-GAAP financial measures such as adjusted EBITDA adjusted free cash flow and other operating metrics and statistics, you will find the GAAP reconciliation comments and calculations in yesterday's press release with that said.

I will turn the call over to Bud Brigham.

Thank you Carl and thanks to everyone for joining us today for our third quarter conference call.

Despite a 10% drop in the Permian rig count since the beginning of the year demand for Atlas property remains resolute and we are rapidly growing our logistics platform.

We are pleased with our third quarter operational and financial results as our team continues to deliver across a range of operational and profitability metrics, including total sales sales volumes net income and adjusted EBITDA.

Importantly to investors Atlas continues to generate industry, leading margins, which in my view are underappreciated benefiting from our exceptionally low cost structure.

And we continue to work to drive cost down even lower over the course of 2023, we reduced our operating costs on a per ton basis.

And we expect to achieve further reductions in the middle of next year when our two new fit for purpose strategy has come online and achieve their planned utilization levels, all of which should benefit our industry leading margins.

Three major capital projects to grow our business the <unk> Express conveyor system. The new Kermit facility addition, and the build out of our trucking fleet are progressing as planned on time and on budget.

Now I will briefly review our growth initiatives, but I would also encourage you to watch the video update summarizing these initiatives, which is linked on page three of our updated presentation.

Starting with our production expansion, our new facility at the Kermit location is now in the commissioning process with commercial and service expected late in the fourth quarter.

As a reminder, this new facility will increase our Permian, leading production by approximately 50% to over 15 million tonnes further enhancing our scale, which is crucial in order to reliably match the scale demand and efficiencies of our large scale customers.

The second area is our logistics offering which includes our innovative had capacity trucking and delivery assets.

Our logistics and delivery assets enhance efficiencies and reliability for the industry and as a result, our market share is growing as Chris will discuss in a bit.

Our logistics offering is also important given that these trucking and delivery assets will seamlessly interface with the <unk> Express, which is expected to come online late in 2024.

As a reminder, we rolled out our innovative high capacity trucking and delivery assets to prepare the market, but the <unk> xpress and facilitate a more seamless transition to that infrastructure based solution.

This brings me to our third major growth initiative are doing express conveyor, which is really more similar to a midstream asset.

Like the other capital investments that do not express remains on time and on budget with an expected commencement in the fourth quarter of 2024.

We have ordered approximately 90% of the equipment and materials for the project and have also contracted approximately 80% of the installation and labor, which significantly reduces budget risk.

Operator: At this time, all participants are in a listen-only mode.

To date, we have taken delivery of more than 57 miles of conveyor belts and over 100 miles of fiber optic cable.

We believe that <unk> express and our logistics offering.

Provide substantial environmental and societal benefits as we aim to vastly reduced the number of trucks on commercial roads in the Permian, which is expected to reduce emissions and save lives.

Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Furthermore, our logistics offering has the potential to enable our customers to realize efficiency gains by increasing the throughput potential of proppant to serve frac crews that continue to find ways to pump faster and consume saying that increasingly impressive rates.

In terms of sales.

Kyle Turlington: As a reminder, this conference is being recorded and is now my pleasure to introduce your host, Kyle Turlington, Vice President of Investor Relations.

Despite an estimated 10% reduction in completion activity in Q3.

<unk> sale volumes remained sold out in Q3 and were flat sequentially Derma.

Demonstrating correct alignment with prominent Permian basin customers.

For 2024, we currently have $6 2 million tonnes of production contracted which represents 40% of our anticipated production capacity of $15 5 million tons for next year.

It is worth reminding investors that oil and gas companies have been working on their 2020 for budgets and are just now entering the early stages of contracting their sand and logistics needs for 2024.

These negotiations will run from now through the first and into the second quarter of 2024.

As expected there was very little contracting in August and September with our existing customers and potential new customers.

Kyle Turlington: Thank you, sir, you may begin. Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the third quarter of 2023. With us today, our Bud Brigham chairman and chief executive officer, John Turner, president and CFO, and Chris Scholla chief supply chain officer. Bud John and Chris will be sharing their comments on the company's operational and financial performance for the third quarter of 2023, after which we will open the call for Q&A.

Our sector, leading margins benefiting from our low cost structure, which should only get lower with the fit for purpose dredges around midyear 2024, and lower again in 2025 with our <unk> Express.

Kyle Turlington: Before we begin our prepare of remarks, I would like to remind everyone that this call will include forward-looking statements, it's defined under the U.S, security laws. Such statements are based on the current information and management expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks and certainties and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially. You can learn more about these risks and the perspectives we filed with the Securities and Exchange Commission on September 12, 2023, and connection with our upsea simplification, our quarterly reports on form 10Q and our other SEC filings.

And bandwidth are expanding revenue streams.

Provides us with confidence that we will be able to layer on the additional contracts and accomplish our financial goals, which includes growing distributable cash flow into next year and the years to come.

Kyle Turlington: You should not place undue reliance on forward-looking statements and we undertake no obligation to update these forward-looking statements. We will also make reference to certain non-gap financial measures such as Adjusted EBITDA, Adjusted Free Casual, and other operating metrics and statistics.

Of note Atlas has adjusted its overall portfolio over the last two years to ensure a contractual continuity through staggered terms with regards to both contract duration and timing of renewals.

Kyle Turlington: You will find the gap reconciliation comments and calculations in yesterday's press release.

Our goal remains to have 80 plus percent of our capacity committed in 2024, and we remain confident in that goal for several reasons.

First we're currently in negotiations for several million annualized tons of sand and logistics enrolling contracts with existing customers, where historically, we have had very high retention rates.

Current contract discussions include not only sand and logistics supply agreements, but also some more complex and long term conversations about our revolutionary infrastructure based solution for the Permian.

In addition, we have a number of meaningful opportunities to add volumes with new customers, including large customers that stand to benefit from that Didnt Express.

Our growth in the logistics business and our progress on the <unk> Xpress combined with our unmatched reliability and scale uniquely positioned Atlas to meet the growing demand, but to also grow our market share in the Permian.

While operators generally control the timing of the initiation of these contracts we control the access to future volumes that would go down that do not express.

For these reasons, we remain assured that we will exit contract season with not only a strong contract backlog, but alignment with the most efficient and highest quality customers.

Regarding sand pricing investors should recognize that they're a stratification and differentiation in the proppant and logistics markets.

Some of the factors in proppant marketability, and thus pricing include the company's ability to scale up to reliably meet the needs of increasingly large operators in the Permian, particularly given the increase in pad development drilling and some of Frac activity.

In this regard Atlas is unmatched in our ability to deliver proppant with the scale and reliability required for these projects in order to effectively de bottleneck sand in these massive completion operations.

Associated with that are innovative logistics offerings and associated incremental dependability and reliability with site provide to our customers.

Our expanded logistics offerings differentiate Atlas and the market further enhancing our industry, leading dependability and reliability.

And my view is a former operator I can state unequivocally that dependability and reliability are of major importance to our customers and they are absolutely mission critical and the value proposition we offer.

Given our unmatched scale.

Our host historical delivery execution, and our ongoing logistical innovations, we feel confident in our ability to deliver a step change in performance that are large scale operators Nathan.

Another point on sand pricing is the fact that there are numerous variables involved.

For example are you selling wet or dry sand.

Atlas currently sales only dry sand and we've been sold out all year, while others have had to sell meaningful sand volumes on the spot market.

All of that to simply say that investors should not read too much into discussions of spot pricing.

Bud Brigham: With that said, I will turn the call over to Bud Brigham. Thank you, Kyle, and thanks to everyone for joining us today for our third quarter conference call. Despite a 10% drop in the Permian rig count since the beginning of the year, demand for Atlas Propert remains resolute and we are rapidly growing our logistics platform. We are pleased with our third quarter operational and financial results as our team continues to deliver across a range of operational and profitability metrics, including total sales, sales volumes, net income, and Adjusted EBITDA.

While lower spot pricing can directly in the index indicative of pricing trends. There are reasons that some products fly off the shelf and are even contracted before other products are sold and there were recently some products on the shelf has to be discounted.

And of course, the distance to the wellhead and associated deliberate cost plays an important role in sand pricing and the all in costs for the operators.

Importantly, the <unk> xpress will eliminate the distance related benefits of some of the wet sand options in the Delaware Basin.

Further when you add in the advantage Atlas has it inventory security of supply quality and throughput potential our customers ability to pursue operational excellence on a scale basis, we will only be enhanced.

As the largest proppant producer in the Permian with the largest and highest quality reserves. Our differentiated advantage also makes our results less volatile.

As evidenced by our quarter to quarter performance.

While that benefits and is of significant value to our customers those attributes, including our unique dredging operations also benefit us by lowering our cost structure.

Bud Brigham: Importantly to investors, Atlas continues to generate industry-leading margins, which in my view are underappreciated, benefiting from our exceptionally low cost structure. And we continue to work to drive costs down even lower. Over the course of 2003, reduced our operating costs on a per ton basis, and we expect to achieve further reductions in the middle of next year when our two new fit-for-purpose stretches come online and achieve their planned utilization levels, all of which should benefit our industry-leading margins.

Regarding the macro environment, we are operate again, despite the drop off in activity the Permian proppant market remains healthy driven in part by the continuing advancements and efficiencies.

Bud Brigham: If we made your capital project to grow our business, the Dune Express conveyor system, the new permit facility addition, and the build-out of our trucking fleet, are progressing as planned on time and on budget. Now, I will briefly review our growth initiatives, but I'll also encourage you to watch the video update summarizing these initiatives, which is linked on page three of our updated presentation. Starting with our production expansion, our new facility at the current location is now in the beginning process with commercial and service expected late in the fourth quarter.

Frac crews are continuing to pump more profit on a per day basis.

On the supply side pardon me on proppant producers have been disciplined with.

With modest supply additions recently coming in response to a long period of significant under supply in the Permian.

Again, the market into a more balanced position as we enter 2024.

Optimism surrounding the recent movement in oil prices and early signals from customers leads us to believe that a strong recovery in frac activity is around the corner.

And expected ramp in activity next year.

Bond with continued increases in proppant per Frac crew per se.

The supply side that is much more patient and making growth investments than we've seen historically.

Leads us to believe that the sand market more tighten again next year.

Again, we remained sold out in Q3 and expect to remain very busy in Q4, particularly given how heavily contracted we are.

With the current geopolitical uncertainty the call for more Permian barrels has never been greater and more crucial for energy security in the United States.

Bud Brigham: As a reminder, this new facility will increase our Permian leading production by approximately 50% to over 15 million tons, further enhancing our scale, which is crucial in order to reliably match the scale, demand, and efficiencies of our large scale customers. The second area is our logistics offering, which includes our innovative high capacity trucking and delivery assets. Our logistics and delivery assets enhance efficiencies and reliability for the industry. And as a result, our market share is growing as Chris will discuss in a bit.

In addition, the previously announced corporate reorganization transaction or upstate simplification closed on October 2nd.

We now trade under a single class of common stock with the previous dual class stock structure now eliminated.

We are optimistic that our simpler more efficient corporate structure will enable us to broaden our investor base.

Finally, given our strong margins and quarter end liquidity, we're excited to put forward another quarterly dividend of <unk> 20 per share.

Similar to the previous quarter. The dividend is comprised of a 15 cent per share base dividend with a <unk> <unk> per share a variable dividend.

Last I want to point investors to slide 12 in our Investor presentation.

As previously mentioned.

Leslie it's all of the other public companies in the oilfield service sector in both margins and growth.

This is truly a remarkable enterprise and we've now demonstrated that performance on a consistent quarter to quarter basis without the volatility experienced by others in our space.

Given those margins and the growth we expect to achieve in 2024 and 2025, while our major capex initiatives are winding down we expect to enjoy exceptional cash generation flexibility, which should increasingly be recognized in the market.

Bud Brigham: Our logistics offering is also important given that these trucking and delivery assets will seamlessly interface with the Dune Express, which is expected to come online late in 2024. As a reminder, we rolled out our innovative high capacity trucking and delivery assets to prepare the market for the Dune Express and facilitate a more seamless transition to that infrastructure based solution. This brings me to our third major growth initiative, our Dune Express conveyor, which is really more similar to a midstream asset.

With that I will turn the call over to our chief supply chain Officer, Chris shoulder.

To provide you with an update regarding our trucking and logistics business. Thank.

Thank you Bob we continue to build out our fleet of high capacity and logistics assets and provides seamless delivery of double and triple trailers to our customer well sites with payloads that exceed the industry standard tonnage by three to four times respectively.

Our customer base and multi trailer operations continue to grow as evidenced by an over 100% increase in multi trailer jobs and adoption by some of the largest operators in the Permian since the beginning of this year.

Shown in our Investor presentation, we added an additional drop depot facility during the quarter, which almost doubles, our existing heat zone multi trailer delivery areas to over 1000 square miles.

We expect to commission, our third dropped depot facility. During Q4 of this year, which will expand our multi trailer delivery area to over 500 square miles in the Delaware Basin.

We also commissioned our remote infield command center.

Which is presently located 18 miles west of our current facility.

This command center was designed to be completely remote and mobile.

Eventually be placed in the heart of the Delaware Basin near end of line load out facility upon completion of the <unk> Express.

Our new infield command center puts our logistics base of operations significantly closer to customers well sites ultimately supporting superior infield customer service.

Bud Brigham: Like the other capital investments, the Dune Express remains on time and on budget with an expected commencement in the fourth quarter of 2024. We have ordered approximately 90% of the equipment and materials for the project, and have also contracted approximately 80% of the installation and labor, which significantly reduces budget risk. Today, we have taken delivery of more than 57 miles of conveyor belts and over 100 miles of fiber optic cable. We believe that Dune Express and our logistics offering will provide substantial environmental and societal benefits, as we aim to vastly reduce the number of trucks on commercial roads in the Permian, which is expected to reduce emissions and save lives.

Bud Brigham: Furthermore, our logistics offering has the potential to enable our customers to realize efficiency gains by increasing the throughput potential of profit to serve track crews that continue to find ways to improve. In terms of sales, despite an estimated 10% reduction in completion activity in Q3, Alice sale volumes remained sold out in Q3, and were flat sequentially demonstrating correct alignment with prominent Permian based in customers. For 2024, we currently have 6.2 million tons of production contracted, which represents 40% of our anticipated production capacity of 15.5 million tons per next year.

With that I will turn the call over to our President and CFO John Turner.

Thank you Chris today, I will review, our third quarter, 2023 financial and operating results and comment on our financial position.

For the third quarter, we reported total sales of $158 million or profit sales revenues or $115 million. Our proppant sales volumes were relatively flat over the period, while our average mine gate price declined moderately.

The sequential price decline is a function of higher priced shorter duration contracts rolling off and being replaced by new contracts at lower rates as well as quarterly pricing resets on certain contracts.

Bud Brigham: It is worth reminding investors that oil and gas companies have been working on their 2024 budgets, and are just now entering the early stages of contracting their sand and logistics needs for 2024. These negotiations will run from now through the first and into the second quarter of 2024. As expected, there was very little contracting in August and September with our existing customers and potential new customers. Our second leading margins benefiting from our low cost structure, which should only get lower with the fifth purpose stretches around mid year 2024 and lower again in 2025 with our drainage press.

Moving service sales, which is revenue generated by our logistics operations.

Ported a quarterly record of $43 million in revenues for the quarter represented a 17% increase when compared to our prior period. This increase in service sales is related to an increase in the number of active jobs. During the period enabled by an increase in the number of trucks deployed and continued customer adoptions of our single and multi trailer law.

Just ticked off rates as of October 31, we had taken delivery of 97 trucks, which is an addition of 35 trucks at the last quarter and expect to take ownership of a total of 120 trucks by year end.

And total cost of sales, excluding D&A for the quarter increased by 4 million to $6 million to $8 million.

This increase was primarily driven by higher trucking and last mile logistics costs, resulting from the increase in the size of our fleet and increasing number of active jobs for the third quarter our per ton plant operating costs were $9 66.

Which is in line with that of the prior period.

Further we expect the delivery of our new specialized dredging equipment in early 2024 to provide for incremental improvements in operational performance and further reductions are mining costs. Once those assets are fully commissioned by the middle of next year.

Royalty expenses for the quarter were down 16% to $3 $6 million due to lower realized prices.

SG&A expense for the quarter was $14 million, representing a sequential increase of 17% increase was driven primarily by increases in consulting and professional fees, which includes $3 million in nonrecurring transaction costs related to the <unk> simplification and the refinancing of our term loan.

Interest expense for the quarter was $5 million, which was offset by $3 million of interest income generated during the period, we expect our interest income to decline in future quarters as we drawdown on our cash reserves to fund our growth projects.

Depreciation depletion and accretion expense for the quarter increased eight 4% to $10 million. This increase was due to an additional depreciable assets placed into service as compared to the prior period.

Bud Brigham: Convind with our expanding revenue streams, provides us with confidence that we will be able to layer on the additional contracts and accomplish our financial goals, which includes growing distributed cash flow into next year and the years to come. Of note, Atlas has adjusted its overall portfolio over the last two years to ensure contractual continuity through staggered terms with regards to both contract duration and timing of renewals. Our goal remains to have 80 plus percent of our capacity committed in 2024 and we remain confident in that goal for several reasons.

We generated net income.

<unk> $56 million for the quarter represented a strong net income margin of 36% and earnings per share of <unk> 51 per share.

Net cash provided by operating activities for the quarter was $55 million compared to $104 million during the second quarter.

$38 million of this decrease was associated with changes in operating assets and liabilities that were largely associated with with an increase in accounts receivable during the quarter combined with lower net net income we have seen the accounts receivable balance normalized since the end of the quarter.

Bud Brigham: First, we're currently in negotiations for several million annualized tenants of standard logistics in rolling contracts with existing customers, where historically we have had very high retention rates. Current contract discussions include not only sand and logistics supply agreements, but also some more complex and long term conversations about a revolutionary infrastructure based solution for the Permian. In addition, we have a number of meaningful opportunities to add volumes with new customers, including large customers that stand to benefit from the drainage press.

Adjusted EBITDA for the period was $84 million, representing a sequential decrease of nine 4%.

Bud Brigham: Our growth in the logistics business and our progress on the drainage press, combined with our unmatched reliability and scale uniquely positioned Atlas to meet the growing demand, but to also grow our market share in the Permian. While operators generally control the timing of the initiation of these contracts, we control the access to future volumes that would go down the drainage press. For these reasons, we remain assured that we will exit contract season with not only a strong contract backlog, but alignment with the most efficient and highest quality customers.

Adjusted EBITDA margin of 53% adjusted free cash flow, which we define as adjusted EBITDA less maintenance capex for the quarter was $69 million, representing a sequential decrease of 21% and adjusted free cash flow margin of 43% looking to the fourth quarter of this year, we expect our EBITDA to be flat to down.

Bud Brigham: Regarding sand pricing, investors should recognize that there is stratification and differentiation in the profit and logistics markets. Some of the factors in profit marketability and thus pricing include the company's ability to scale up to reliably meet the needs of increasingly large operators in the Permian, particularly given the increase in pad development drilling and summer track activity. In this regard, Atlas is unmatched in our ability to deliver profit with the scale and reliability required for these projects in order to effectively debobble next sand in these massive completion operations associated with that are innovative logistics offerings and associated incremental dependability and reliability, which they provide to our customers.

When compared to the third quarter, depending on the degree of seasonal and holiday impacts we see this year.

Bud Brigham: Our expanded logistics offerings differentiate Alice in the market further enhancing our industry leading dependability and reliability. Dean. In my view as a former operator, I can state unequivocally that dependability and reliability are of major importance to our customers, and they are absolutely mission-critical in the value proposition we offer. Given our unmatched scale, our historical delivery execution, and our ongoing logistical innovations, we feel confident in our ability to deliver the step-changing performance that our large-scale operators need.

During the third quarter, given our low levels of required maintenance capital expenditures, we converted just over 81% of our adjusted EBITDA to adjusted free cash flow.

Capital expenditures for the quarter or $139 million. This includes $124 million spent on growth projects, which includes our new Kermit facility that Didnt Express.

Our well site delivery assets and production enhancements at our existing facilities, we incurred $16 million of maintenance capex during the quarter, we expect growth capital expenditures to continue to increase as we progress on doing express construction, which will be partially offset by declining new Kermit facility expenditures as.

<unk> activities taper off as we approach commercial in service of that additional capacity before the end of this year.

As of September 30, we have spent $132 million out of our budget at $400 million on the <unk> Express.

For our new Kermit facility, we have spent $180 million with an additional $25 million remaining that new Kermit facility is currently being commissioned and is expected to be fully online by the end of this year.

Bud Brigham: Another point on sand processing is the fact that there are numerous variables involved. For example, are you selling wet or dry sand? Atlas currently sells only dry sand, and we've been sold out all year, while others have had to sell many full sand volumes on the spot market. All of that to simply say that investors should not read too much into discussions of spot pricing. While lower spot pricing can directly be indicative of pricing trends, there are reasons that some products fly off the shelf and are even contracted before other products are sold, and there are reasons that some products on the shelf have to be discounted.

Bud Brigham: And of course, the distance to the wellhead and associated delivery costs plays an important role in sand processing, and the all-in cost for the operators. Importantly, the Dune Express will eliminate the distance-related benefits of some of the wet sand options in the Delaware Basin. Further, when you add in the advantage Atlas has an inventory, security of supply, quality and throughput potential, our customer's ability to pursue operational excellence on a scaled basis will only be enhanced.

As of September 32023, our total liquidity was $439 million. This was comprised of $265 million in cash and equivalents $74 million of availability under our ABL facility under which we had no borrowings outstanding and $100 million of availability under our delayed draw term.

Bud Brigham: As the largest profit producer in the Permian, with the largest and highest quality reserves, our differentiated advantage also makes our results less volatile, as evidenced by our quarter to quarter performance. While that benefits and its significant value to our customers, those attributes, including our unique dredging operations, also benefit us by lowering our cost structure. Regarding the macro environment we're operating in, despite the drop-off in activity, the Permian profit market remains healthy, driven in part by the continuing advancements in efficiencies.

Bud Brigham: Brack crews are continuing to pump more profit on a per day basis. On the supply side, Permian profit producers have been disciplined. With modest supply additions recently coming in response to a long period of significant under-supply in the Permian, bringing the market into a more balanced position as we enter 2024. Optimism surrounding the recent movement in oil prices and early signals from customers leads us to believe that a strong recovery in frack activity is around the corner.

Bud Brigham: At expected rampant activity next year, combined with continued increases in profit per frack crew per day, against a supply side that is much more patient in making growth investments than we've seen historically, leads us to believe that the sand market will tighten again next year. Again, we remain sold out in Q3 and expect to remain very busy in Q4, particularly given how heavily contracted we are, with the current geopolitical uncertainty, the call for more permeant barrels has never been greater and more crucial for energy security in the United States.

Loan facility.

We streamlined our capital structure during the period with a new $180 million term loan that refinanced our previous term loan and finance leases. The principal balance of our new term loan sits at $180 million and our current financial finance lease balances half a million dollars. So our total debt outstanding currently has $181 million.

And we ended the quarter with a debt.

LTM adjusted EBITDA ratio of five times.

That concludes our prepared remarks and.

And we will now let the operator open the line for questions. Thank you all for joining our third quarter call.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Star two.

Like to remove your question from the queue.

So you limit yourself to one question and a follow up to that others may have an opportunity to ask questions for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.

One moment please poll for questions.

Our first question comes from Luke Lemoine.

Please Piper Sandler. Please proceed with your question.

Hey, good morning.

Martin you talked about six hey, good morning, when you talked about $6 2 million tons already contracted for 24.

And then you talked about and negotiations for several million tons with existing customers, which would pretty much take you to your 23 production levels.

I guess within that $6 2 million tonnes, you've already contracted can you talk roughly about <unk>.

New versus existing customer mix and then on the incremental production volumes are adding.

Bud Brigham: In addition, the previously announced corporate reorganization transaction or upsea simplification closed on October 2nd. We now trade under a single class of common stock with the previous dual-class stock structure now eliminated. We are optimistic that our simpler, more efficient corporate structure will enable us to broaden our investor base. Finally, given our strong margins and quarter-end liquidity, we're excited to put forward another quarterly dividend of 20 cents per share. Similar to the previous quarter, the dividend is comprised of a 15 cent per share base dividend with a 5 cent per share variable dividend.

Is the goal to try to place as much as possible with operators that can offload.

From the June express or is there a wet versus dry consideration as well or just kind of some of the variables there.

Okay.

So hey look this is John obviously talking about our contracting we don't really talk about specifics on what we're currently working on but as you said we're currently.

Perhaps 40% of our 2024 volumes contracted at very attractive pricing.

We're currently in discussions with a number of existing customers and new customers regarding volumes.

We expect these particular discussions that go on throughout the quarter. It would be wrapped up by the end of this quarter and early next.

Bud Brigham: Last, I want to point investor to slide 12 in our investor presentation. As previously mentioned, Atlas leads all the other public companies in the oil field service sector in both margins and growth. This is truly a remarkable enterprise. And we've now demonstrated that performance on a consistent quarter to quarter basis without the volatility experience by others in our space. Given those margins and the growth we expect to achieve in 2024 and 2025, while our major CAPEX initiatives are winding down, we expect to enjoy exceptional cash generation flexibility, which should increasingly be recognized in the market.

We also have a lot of contract renewals coming up in the first and second quarter of next year. Many of those discussions have not yet started but we don't expect them to until we get closer to the renewal dates and finally, there are a number of new opportunities that were started that are starting to come out. We are evaluating these to see if we have the tonnage to meet these.

Chris Scholla: With that, I will turn the call over to our chief supply chain officer, Chris Shilva, to provide you with an update regarding our trucking and logistics business. Thank you, bud. We continue to build out our fleet of high-capacity logistics assets and provide seamless delivery of double and triple trailers to our customer wall sites with payloads that exceed the industry standard tonnage by three to four times respectively. Our customer base and multi-trailer operations continue to grow as evidence by an over 100% increase in multi-trailer jobs and adoption by some of the largest operators and the Permian since the beginning of this year.

Contracts suggested as a reminder.

Our run rate is 11 million tonnes.

This year and we currently plan on selling 15 million tons next year. We're currently working on contracts that would far exceed those numbers from our stated goal for next year to be 80% contracted on 15 million tonnes should be noted that it's not a requirement to exit this year and be 80% on 24 volumes given all the renewals.

It happened in the first and second quarter. This is not really a race to see how much of our 24 guys speaking contract as quickly as we can.

There are more than enough opportunities out there for us to be 100% contracted.

Our primary goal here is to secure contracts with high quality operators and pressure pumper.

<unk> will take the take what they contract.

And pay on time so.

He might want to add anything to that.

Hopefully that helps you.

Yeah definitely I appreciate the comments on.

Working on deals for over 15 million tonnes. So that's definitely helpful and counting the picture. So appreciate it.

Chris Scholla: As shown in our investor presentations, we added an additional drop depot facility during the quarter, which almost doubles our existing heat zone multi-trailer delivery areas to over 1000 square miles. We expect to commission our third drop depot facility during Q4 of this year, which will expand our multi-trailer delivery area to over 1500 square miles in the Delaware Basin. We also commissioned our remote infield command center, which is presently located 18 miles west of our current facility.

You bet.

Our next question comes from Derek <unk> with Barclays. Please proceed with your question.

Hey, I just wanted to ask about fourth quarter seasonality. In particular is so you said in your opening commentary would be very busy in the fourth quarter. The guide was EBITDA could be flat to down slightly compared to third quarter, we'd have to think about the kermit expansion on line by the end of the year you talked about the wet.

Chris Scholla: This command center was designed to be completely remote and mobile. We will eventually be placed in the heart of the Delaware Basin near the end of line loadout facility upon completion of the Dune Express. Our new infield command center puts our logistics base of operations significantly closer to customers' wall sites, ultimately supporting superior infield customer service.

Plant coming online could you help quantify for us how youre thinking about volumes pricing and activity as we go into fourth quarter.

John Turner: With that, I will turn the call over to our president and CFO, John Turner. Thank you, Chris.

Yes, maybe I'll start John and the team I want to add to it.

John Turner: Today, I will review our third quarter 2023 financial and operating results and comment on our financial position. For the third quarter, we reported total sales of $158 million. Our profit sales revenues were $115 million. Our profit sales volumes were relatively flat over the period while our average mind-gate price declines moderately. The sequential price decline is a function of higher priced, shorter duration contracts rolling off and being replaced by new contracts at lower rates, as well as quarterly pricing reset on certain contracts.

As part of our release, we are sold out during the third quarter.

We've also continued to be very very busy here through October.

John Turner: Moving to service sales, which is revenue generated by our logistics operations, we reported a quarterly record of $43 million in revenues for the quarter, representing a 17% increase when compared to our prior period. This increase in service sales is related to an increase in the number of active jobs during the period enabled by an increase in the number of trucks deployed and continued customer adoptions of our single and multi-trailer logistics offerings.

So.

John Turner: As of October 31st, we had taken delivery of 97 trucks, which is an addition of 35 trucks since the last quarter and expect to take ownership of a total of 120 trucks by year-end. In total, cost of sales, excluding BDNA, for the quarter increased by $4 million to $68 million. This increase is primarily driven by higher trucking and last mile logistics costs resulting from the increase in the size, partly, an increasing number of active jobs.

But it is it is.

The holiday season and so.

It just it does create more of an error bar as far as the.

The winter weather and the holidays.

And all of that but.

We're in really good place right now in terms of activity.

And sold out I don't know if you guys wanted to ask it for me.

The slowdown in the fourth quarter.

In December you see the holidays.

And then there is the weather that's always very unpredictable so.

We do use this time for some less some needed maintenance.

Like I said October is one of our busiest months concession from a volume and service perspective.

Based on what we know right now for the fourth quarter volumes will likely be flattish, we had a busy October and as of right now we see activity slowed in November and December.

John Turner: For the third quarter, our per ton plant operating costs were $9.66, which is in line with that of the prior period. Further, we expected delivery of our new specialized regime equipment in early 2024 to provide for incremental improvements in operational performance, and further reductions are in mining costs once those assets are fully commissioned by the middle of next year.

The weather was worse than expected in those numbers may go downtown.

<unk> side, we see activity is flattish to it as well as far as activity in the fourth quarter. You know we hear both sides of the coin. Some companies are taking breaks and some are continuing and potentially picking up activities recently, we have a couple of companies indicate.

John Turner: World Day expenses for the quarter were down 16% to $3.6 million due to lower realized my day prices. SGNA expense for the quarter was $14 million, representing a sequential increase of 17%. The increase was driven primarily by increases in consulting and professional fees, which includes $3 million in non-recurring transaction costs related to the up-sea simplification and the refinancing of our term loans. Interest expense for the quarter was $5 million, which was offset by $3 million of interest income generated during the period.

They plan on extended some activity in the fourth quarter and as of right. Now we really don't know if that's going to happen. If it does there could be some upside in the fourth quarter and we really expect a real pick up in activity to begin in the first quarter of 'twenty four.

I think John makes an important point there is a former operator.

Yes.

No we would we would be thinking about.

Recognizing that activity is going to pick up in 2024 that we want to be at the front of the line generally we wanted to be at the front of the line on that so thats. The question is how many operators kind of kind of pick up a little bit earlier.

John Turner: Expect our interest income to decline in future quarters as we draw down on our cash reserves to fund our growth projects. Appreciation, depletion, and accretion expense for the quarter increased 8.4% to $10 million. This increase was due to an additional depreciable assets placed in the service as compared to the prior period.

John Turner: We generated net income of $56 million for the quarter, represented a strong net income margin of 36% and earnings for 50 what says for share. Net cash provided by operating activities for the quarter was $55 million, compared to $104 million during the second quarter. $38 million of this decrease was associated with changes in operating assets and liabilities that were largely associated with an increase in accounts receivable during the quarter combined with lower net income. We have seen the accounts receivable balance normalized since the end of the quarter.

The fourth quarter as opposed to the first quarter of two.

2024.

Highly highly confident that it's going to be.

A meaningful uptick in activity in 2024 is just a question of how much.

John Turner: Adjusted EBITDAW for the period was $84 million, representing the sequential decrease of 9.4% and an adjusted EBITDAW margin of 53%. Adjusted free cash flow, which we define as the adjusted EBITDAW, as maintenance cap ex for the quarter, the $59 million, representing the sequential decrease of 21% and an adjusted free cash flow margin of 43%.

John Turner: Looking to the fourth quarter of this year, we expect our EBITDA to be flat just down slightly when compared to the third quarter, depending on the degree of seasonal and holiday impacts we see this year. Director. During the third quarter, given our low levels of required maintenance capital expenditures, we converted just over 81% of our Adjusted EBITDA to adjusted free cash flow.

We are getting some positive signals, but it's a question of how many how many of the operators do pull forward a little bit into Q4.

John Turner: Capital expenditures for the quarter are $139 million. This includes $124 million spent on growth projects, which includes our new permit facility, the DIN express, our well-slide delivery assets, and production enhancements at our existing facilities. We incurred $16 million of maintenance tax during the quarter. We expect growth capital expenditures to continue to increase, as we progress, on DIN express construction, which will be partially offset by declining new permit facility expenditures as construction activities taper off as we approach commercial end service of that additional capacity before the end of this year. As a September 30, we have spent $132 million out of our budgeted $400 million on the DIN express. For our new permit facility, we have spent $180 million with an additional $25 million remaining.

Got it okay. That's all helpful. So fair to say, if you think volumes would be likely likely fat flattish you don't know how November December going to shake out it seems like.

EBITDA guide flat to down it's more of the.

Similar pricing reset that might drive that down more so pricing and volume.

Well, maybe I'll start and these guys might add too.

Third quarter.

Our our same park just over $40 a ton.

Okay.

The market is pretty balanced right now.

And.

And as we're moving through the fourth quarter. So so.

So we will say we are in discussions now regarding next year.

Anticipating an uptick in activity.

We're having those discussions right now and we'll see how it plays out for next year.

Okay.

People on the site.

Yes.

No.

The guidance the guidance is there I mean.

We may have some maintenance expense in there.

As.

We said flattish.

There's obviously opportunity for weather.

That's kind of what we're seeing right now.

Got it okay. That's helpful.

And then follow up on operator, M&A, obviously, youre seeing a lot of deals going on Exxon pioneer Chevron has a lot of publix buying our privates.

This tends to lead to potentially more risk around customer concentration around pricing and volumes I guess, how you guys are approaching attacking that M&A wave that we're seeing and how do you win in this type of environment.

Yes. This is Bob I'll start on that.

The M&A.

Certainly.

Inevitable that it's going to continue.

We'll leverage with scale.

And.

Given the uptick in leverage down per unit cost.

Benefit from from that scale.

More automation outlets as.

Very much differentiated in that regard as the largest pop and producer with growing logistics offerings.

Nobody else can match, so it really plays to our strength.

Over the long haul.

Nobody is better at providing.

Large amounts of proppant timely and reliably.

Then atlas sales and with our growing logistics offerings in the solutions, we're providing particularly that don't express.

Only going to get better so so.

<unk> activity plays to our strengths and we'll continue to over time.

John Turner: The new permit facility is currently being commissioned and is expected to be fully online by the end of this year.

So do you guys want to add to that.

John Turner: As a September 30 at 2023, our total liquidity was $439 million. This was comprised of $265 million in cash and equivalents, $74 million of availability under our ABL facility, under which we had no borrowings outstanding, and $100 million of availability under our delayed draw term loan facility.

Jeff or John Yes, I will just say.

One example is our recent M&A has created overall market share increased opportunity within the newco as a result of one our current position in both sand and logistics within the independent entities of the M&A.

John Turner: We streamlined our capital structure during the period with a new $180 million term loan that refinanced our previous term loaned finance leases. The principal balance of our new term loan sits at $180 million, and our current finance leases balance is half a million dollars, so our total debt outstanding currently is $181 million, and we ended the quarter with a debt to LTM E-adjusted EBITDA ratio of 0.5 times.

Operator: That concludes our prepared remarks, and we will now let the operator open the line for questions. Thank you all for joining our third quarter call. At this time, we will be conducting a question and answer session. If you would like to ask the question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Operator: We ask that you limit yourself to one question and a follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handsets before pressing the star key. One moment please, will we pull for questions?

Our proven reliability that we've demonstrated internally.

And three our new our new industry, leading scope scale and offerings. So this is all translating into an atlas of damage for the newco moving forward. So overall, creating an accretive union.

Luke Lemoine: Our first question comes from Luke Limone with Piper Samma. Please proceed with your question.

Bud Brigham: Thank you, Good morning. But you talked about six a morning, but you talked about 6.2 million times already contracted for 24, and then you talked about, you know, in negotiations of several million tons with existing customers, which would pretty much take you to your 23 production levels. I guess within that 6.2 million tons, you've already contracted. Can you talk roughly about new versus existing customer mix and then on the incremental production volumes you're at?

I mean, just in the big picture when I think back several decades ago. The Permian was probably dominated to a degree.

Mahler operators kind of mom and Pops and I think that day is kind of.

As John.

Now, it's all about scale and the leverage associated with that and so these operators need you got scale proppant.

And logistics solutions provider and Thats, what Atlas is positioned to provide.

Great I appreciate the color I'll turn it back.

Our next question comes from Jim Rollyson with Raymond James. Please proceed with your question.

Good morning, gentlemen.

But you mentioned just when we talked about pricing and the different dynamics in the market on wet sand versus dry scale, guys that need to hit the spot market versus contracted and obviously you guys have done a fantastic job over.

Your history.

Growing the scale and being reliable et cetera, I'm curious how you view the.

The value to that scale and reliability when it comes to kind of pricing premium over the spot market numbers that we all see quoted.

John Turner: Thank you. Is the goal to try to place as much as possible with operators that can offload, you know, from the doon express, or is there a wet versus dry consideration as well, or just kind of some of the variables there. Yeah, so hey, look, this is John, you know, obviously talking about our contracting, you know, we don't really talk about specifics on what we're currently working on, but as you said, we're currently have 40% of our 2024 volumes contracted at very attractive pricing.

Market like we've been in where things have kind of softened a little bit now we feel like we're bottoming is starting to turn but just maybe.

Some color commentary on pricing premium for what you guys actually provide.

Yes, well thank you.

Well first.

Just some general comments. So there is a reason.

Some companies.

Specifically outlets are fully contracted while others have proppant to offer on the market and the spot market.

And as I mentioned in my comments a lot of it does.

Reliability and dependability and yes, it's an operator there is nothing that will upset.

<unk>.

Sure.

Your return on your projects and your production and your goals then not having the profit when you need it and not having quality proppant when you need it and so that is mission critical for us and I think it's what differentiates us in the market some of the smaller proppant providers in some of the different.

Wed say it has its own issues et cetera are just not as optimal for the large scale operators who really.

Are dependent on that reliability and dependability as well as the other infrastructure solutions that we're offering.

To enhance that so I think there is a real bifurcation in the market.

John Turner: You know, we're currently in discussions with the number of existing customers and new customers regarding volumes. You know, we expect these particular discussions to go on throughout the quarter and be wrapped up by the end of this quarter and early next. We also have a lot of contract renewals coming up in the first and second quarter of next year. You know, many of those discussions have not yet started. We don't expect them to until we get closer to the renewal dates.

And.

So I think thats spot pricing can kind of be a little bit indicative of pricing trends directionally, but I do think there's been too much attention on this.

John Turner: And finally, there are a number of new opportunities that were started that are starting to come out. You know, we are evaluating what we're doing. We're evaluating these to see if we have the tonnage to meet these additional contracts. So, just as a reminder, you know, our run rate is 11 million tons this year. And, you know, we currently plan on selling 15 million tons next year. You know, we're currently working on contracts that would far exceed those numbers.

John Turner: You know, our stated goal for next year is to be adjacent contracts on 15 million tons. Should be noted that, you know, it's not a requirement to exit this year and be 80% on 24 volumes given all the renewals. It's going to happen in the first and second quarter. You know, this is not really a race to see how much of our 24 volumes we can contract as quickly as we can.

On the spot pricing in the market.

Maybe an extrapolation of what that indicates.

John Turner: There are more than enough opportunities out there for us to be 100% contracted. You know, in our primary goal, here's secure contracts with high quality operators and pressure pumpers who stay busy will take the, you know, take what they contract and pay on time. So you might want to add anything to that. Hopefully that helps you. Yeah, yeah, no, definitely appreciate the comments on. You know, working on deals for over 15 million tons. That's definitely helpful in counties. The picture. I appreciate it.

John Turner: You bet.

We've been told by a number of our customers that they contract with Atlas because of our reliability and service and they also indicate stake pay more atlas more than they do understand the logistics companies.

Derek Podhaizer: Our next question comes from Derek Todd Hizer with Barclays. Please proceed with your question. Hey, I just want to ask about fourth quarter seasonality in particular. So you said in your opening commentary, we very busy in fourth quarter. The guide was able to be flat to down slightly compared to third quarter. We have to think about the current expansion online, but the year you talk about the wet plant coming online.

Really don't know happy to answer toward that we don't have an answer what that amount is our customers don't tell us what they are paying our competitors. We're standing in service, but what I will say is that I do think an example of our quality as shown in our level of contract and our high level of activity over the past few quarters, you've seen a 20% decrease in the frac market over the past over the past six months.

We've maintained very high activity levels during that time.

Bud Brigham: Could you help quantify for us how you're thinking about volumes pricing and activity as we go into fourth quarter? Yeah, maybe I'll start with John and team they want to add to it. You know, for our release, we were sold out on the third quarter. We've also continued to be very, very busy here through October. So, you know, it's, but it is, it is the holiday season. And so it just, it does create more of an air bar as far as the winter weather and then the holidays and in all of that, but we're in a really good place right now in terms of activity and, and, and, and sold out.

Yeah, I'll add that this is nothing new right.

Yes.

We know those those players and folks that come in and offer extremely low prices, we have seen that throughout.

Our five years of existence and throughout the cycles.

I think what we don't have any peers that are pure play Permian.

Sand logistics companies that are public.

Sure.

See that quantify that price for you, but I will say that we price our products and services.

According to that value proposition for our customers and we've been extremely successful pricing.

Pricing them appropriately.

Yes, I didn't expect you to give an absolute number so the color is very helpful and John maybe as a follow up when we think about costs.

Obviously, you guys had the step up in costs late last year as you were rolling from third party to internal on the dredging side and those kind of come down it seems like they've flattened out as we think about this over the next four quarters or so should we think about opex generally being relatively stable until the new dredges come in.

Were fully functional and operating in mid next year, and then maybe just a little kind of color on how much that should improve costs, maybe on a percentage basis.

Backing.

Good quite a bit of that.

So at least at some point next year Youre going to start seeing our cost trend down.

More towards that.

<unk> hundred 50, I mean, probably more in the $7 $750 mid seven type range and Thats kind of where we're focused right now.

That's helpful. Thank you.

Bud Brigham: I mean, we always expect to slow down in the fourth quarter, you know, in December, you see the holidays, like Bud said, and then there's the weather. That's always very unpredictable. So, you know, we do use this time for some, some, some needed maintenance. You know, like Bud said, October's one of our busiest months of confession from a volume of service perspective. You know, based on what we know right now for the fourth quarter, you know, volumes will likely be flatish.

Our next question comes from Noah <unk> with Goldman Sachs. Please proceed with your question.

Hi, good morning team.

Some progress on the <unk> Xpress, obviously, it stays on track, but maybe help us understand the steps that you are looking at till it gets commenced in the fourth quarter of next year and any factors that you are keeping an eye on.

Bud Brigham: You know, we had a busy October and as of right now, we see activities slow in November and December. And if the weather is worse than expected, then those numbers may go down some. You know, the list is excited. We see activity as flatish to as well. As far as activity in the fourth quarter, you know, we hear both sides of the coin. Some companies are taking breaks and some are continuing and potentially picking up activities.

Bud Brigham: Recently, we have a couple of companies in the case that they plan on extended to the activity in the fourth quarter. And as of right now, you know, we really don't know if that's going to happen. If it does, there could be some upside in the fourth quarter. And you know, we really expect to real pick up an activity to begin in the first quarter or twenty four. Yeah, I'm not as John makes an important point there as, you know, as a former operator.

Yes, maybe I'll just start based out my attitude.

Built both of our plants, we did the expansion.

That's nearing completion here in the fourth quarter ourself.

Bud Brigham: You know, I know we would, we would be thinking about, you know, as it was recognizing that activity is going to pick up in 2024. That we want to be at the front of the line. Generally, we wanted to be at the front of the line on that. So that's the question is how many operators kind of kind of pick up a little bit earlier here in the fourth quarter, as opposed to the first quarter of a, 2024.

And obviously our team is really.

Barry.

Skilled and had been very successful.

Bud Brigham: I'm highly, highly confident there is going to be a meaningful uptick and activity in 2024. It's just the question of how much. And we are getting some positive signals, but it's a question of how many, how many of the operators do pull forward a little bit in the queue for? God, okay, it's all helpful. So fair to say, if you think volumes should be likely fat, flatish, you don't know how November to February shake out.

Probably more complex projects then building Madhu next breath. So then expresses.

Bud Brigham: It seems like it's either a guy flat to down, it's more of the more pricing reset and my drive down, more so pricing than volume. Well, I mean, maybe I'll start these guys might add to it, you know, our third quarter, our same price would just over $40 a ton. And, you know, the market is pretty balanced right now. And as we're moving to the fourth quarter. So, so we'll see, we're in discussion now regarding next year, but anticipating enough to connect activity.

It's kind of a rinse and repeat process down the length of the line.

Building.

I don't know.

You guys can answer.

An area given that we bought are the majority of the material and contracted the labor.

Bud Brigham: We're having those discussions right now and we'll see how it plays out for next year. I don't know what you want to say, thank you. No, and I mean, let's look at the guy that's the guy that's there. I mean, you know, we may have some maintenance expense in there. I mean, there's just, you know, there's, you know, we said, flatish, you know, there's obviously option for weather, but you know, that's kind of what we're seeing right now. God, okay, that's helpful.

As I've mentioned in my conference call <unk> that really mitigates that.

Risks to the budget.

Bud Brigham: And then follow up on operator MNA, obviously, we're seeing a lot of deals going on next on Pioneer Chevron has a lot of public buying up privates. This tends to lead to potentially more risk around customer concentration around pricing and volumes. I guess, how are you guys approaching and attacking this MNA wave that we're seeing and how do you win in this type of environment? Yeah, this, but I'll start on that.

Yes, it's not a very not very complex project in terms of the construction of the <unk>.

Mike as far as does that equipment goes I mean, there is the opportunity to make sure that it comes in on time and.

Making sure that it comes in meat snacks is that we're.

We're reaching out to a lot of our vendors right now we're actually doing these vendor audits, we do this pretty periodically to make sure that.

Bud Brigham: The MNA, you know, is totally inevitable that it's going to continue. There's real leverage with scale. And, and, and, you know, given the opportunity to leverage down per unit cost and benefit from that scale and with more automation analysis, very much differentiated in that regard is the largest pop and producer with growing logistics offerings that nobody else can match. So it really placed our strength over over the long haul. Nobody is better at providing large amounts of profit timely and reliably than atlasios and with our growing logistics offerings and the solutions were provided, particularly to do and express.

Bud Brigham: It's only going to get better. So, so the MNA activity is placed on our strength and will continue to over time. So, you guys want to add to that? Jeff or John? Yeah, I'll just say, you know, one example is a recent MNA has created an overall market share increase opportunity within the new co as a result of one our current position in both fan and logistics within the independent entities of the MNA are proven reliability that we demonstrated internally.

The equipment, we've ordered it making sure that it will show up on time and on spec.

<unk>.

We've taken the hit we've taken.

We have already happened.

The number of equipment starting to starting to arrive you've got concrete sleepers are starting to rise that's what the that's what the data express will sit on.

We are starting to take.

Delivery of like a lot of fiber optic cable.

Bud Brigham: And, three, our new, our, our new industry leading scope scale and offerings. So this is all translating into an adolescent then for the new co moving forward. So, overall creating and a creative union. Yeah, I mean, just in the big picture when I think back to several decades ago, you know, the premium was probably dominated to a degree by smaller operators kind of moment pops and I think that day is kind of.

So I mean, there is theres a number of things that we're currently where we currently are.

Tim you construct it.

We can do in the interim is just to make sure that didn't express comes on time and on budget.

Does that answer your question.

Yes. Thank you so much I appreciate the answer.

Bud Brigham: It's gone past and now it's all about scale and leverage associated with that. And so these operators need a scale profit and legit and logistic solutions provider and that's what atlas is finishing the provider. Great. Appreciate the color.

Just on a follow up you mentioned in the press release that there were some quarterly price resets on certain contracts, maybe help us understand that a little better.

Like what does that exposure look like on your overall contracted volumes and how does that actually work.

Bud Brigham: I'll turn it back.

Jim Rollyson: Our next question comes from Jim Rollyson with Raymond James. Please proceed with your question.

Bud Brigham: Good morning, gentlemen. And Bud, you mentioned just when we talked about pricing and the different dynamics in the market on, you know, wet sand versus dry scale, guys that need to hit the spot market versus contracted. And obviously you guys have done a fantastic job over your history of growing the scale and being reliable, etc. I'm curious how you view the value to that scale and reliability when it comes to kind of pricing premium over the spot market numbers that we all see quoted, you know, in a market like we've been in where things have kind of softened a little bit.

Jeff do you want to take that.

Yes.

Bud Brigham: Now we feel like we're bottoming and starting to turn, but just maybe some color commentary on, you know, pricing premium for what you guys actually provide. Yeah, well, thank you. Well, as far as just some general comments, there's a reason that some companies, as specifically, Atlas are fully contracted while others have profit to offer on the market and the spot market. And as I mentioned in my comments, a lot of it does is a function of reliability and defendability.

Yes.

Pending on the market and how it's working quarterly resets have been it's been apart.

Bud Brigham: And it's an operator, there's nothing that will obsess your quarter, your red return on your projects and your production and your goals, then not having the profit when you need it and not having quality profit when you need it. And so that is mission critical for us. And I think it's what differentiates us in the market, you know, some of the smaller profit providers and some of the different, you know, the web fans have their own issues, et cetera, are just not as optimal for the large scale operators who really are dependent on that reliability and dependability, as well as the other infrastructure solutions that were often continue to enhance that.

Pricing strategies and portfolios for a long time.

Within some of the.

The pricing agreements that we have now we have some quarterly resets and you can see some of our pricing is.

Bud Brigham: So I think there is a real bifurcation in the market. And so I think spot pricing can kind of be a little bit indicative of pricing trends and directionally, but I think there's been too much attention on the spot pricing in the market and maybe an over extrapolation of what that indicates on the same thing. Yeah, we've been told by a number of our customers that they contract with Atlas because of our boards and they do, you know, other standard logistics companies.

Bud Brigham: You know, I really don't have an answer toward that. We don't have an answer what that amount is. You know, our customers don't tell us what they're paying our competitors for standing service. But what I will say is that I do think an example of our quality is shown in our level of contracting or high level of activity over the past few quarters. I mean, you've seen a 20% decrease in the frack market over the past over the past six months, you know, and we've maintained very high activity levels during that time.

In this third quarter and moving into the fourth quarter is.

The effect of the pricing.

Bud Brigham: Yeah, I'll add that this is nothing new, right? You know, we know those players and folks that come in and offer extremely low prices. We've seen that throughout, you know, our five years of existence throughout the cycles. I think what, you know, we don't have any peers that are pure by that price for you, but I will say that we price our products and services, according to that value proposition for our customers and we've been extremely successful pricing them appropriately.

Roughly.

We have roughly 25% to 30% of our pricing historically on a quarterly reset its probably move into more of a 50% as we move into 2024.

And you know it.

Quarterly resets really adjust to.

The market pricing not.

Not only with regard to numerically, but with regard to the trend and so we feel that.

With an uptick in the activity moving forward in the back half.

This should yield some some positive results core yes, I mean, our view is and I think everybody can say I think we kind of move through a trough in the rig count in the Frac spreads.

Bud Brigham: Yeah, I didn't expect you to give an absolute number, so the color is very helpful. And John maybe as a follow-up, when we think about cost, obviously you guys had to step up and cost late last year as you were rolling from third party to internal on the dredging side. And those that kind of come down, it seems like they flattened out. As we think about this over the next, you know, four quarters or so, should we think about OPEX generally being relatively stable until the new dredging?

And I think.

We certainly and I think most of the industry is anticipating a pickup in activity in 2024, So I think the quarterly recess gib customers and us.

Comfort, we have great relationships with these guys will be able to adjust to changing market conditions.

Bud Brigham: Or should we just come in and are fully functional in operating in mid next year, and then maybe just a little kind of color on how much that should improve costs, you know, maybe on a percentage basis. It's quite a bit of that. So, you know, at least, you know, at some point next year you're going to start seeing our cost trend down more towards that, you know, $6.50, I mean, probably more in the $7.50, you know, the mid seven type range, and that's kind of where we're focused right now. That's helpful. Thank you.

And my view is it sets up very well for 2024.

Thanks, I'll turn it over.

Our next question comes from Sara <unk> with Bank of America. Please proceed with your question.

Hi, Good morning, Bob and John maybe I'll, just start with a quick one on mobile.

Clearly youre, making a lot of good progress on that including on the ground.

Wanted to ask in terms of how customers look at data NBC that progress. So are you seeing more intuitive customers coming to you asking on the project getting familiar with that and showing interest in contracting volume through that just talk to how your customers are responding to the progress youre, making on the ground.

Well I mean, I think clearly the customers who are excited about.

The <unk> express coming online and so I do think.

That does.

Jeff can talk about.

Of course, we have our existing customers, but we have a number of new potential customers that were in discussions with.

We think it's obvious that they're doing expresses that's very attractive to them and compelling so.

Atidrip Modak: Our next question comes from a team modax with golden sex. Please proceed with your question. Hi, good morning, team. You noted some progress on the dune express. Obviously it stays on track, but maybe help us understand the steps that you're looking at till it gets commenced in the fourth quarter of next year and any factor that you are keeping an eye on. Yeah, maybe I'll just start me as my add to it.

We'll be having those discussions over the next three to four months.

And.

We expect to grow our customer base, Jeff I don't know if you want that one.

Now is this just.

Didnt Express is just over a year away and.

And so any contract and now we're doing right now in the Delaware Basin is going to is contemplating taking stand off the did express.

Atidrip Modak: You know, we built both of our plans. We did the expansion that's on this nearing completion here in the fourth quarter ourselves. And obviously our team is really very skilled and been very successful at these probably more complex projects than building the dune express, which didn't express as kind of a rinse and repeat process down the leap of the line building it. I don't know. You guys can answer is a sort of an area given that we've ordered the majority of the material and contracted the labor.

Yes. There is there is a lot of interest from from.

Some operators that are out there.

In the Permian, especially the Delaware, the Delaware that are looking for that size and scale.

The trucks off the road, that's a real issue out there the efficiency is coming with this coming with this is with.

With the data express side, yes, yes, yes.

As John stated earlier, it's not a race to get to 2024 volumes contracted but more of an effort to align with high quality clients are both e&ps as well as pressure pumper that are sustainable on a go forward basis.

Current contract discussion are not just sand and logistics supply agreements, but more complex and long term conversation about revolutionary infrastructure base solution for the Permian and let me define infrastructure solution based infrastructure based solution. It means a compilation of sand production expansion to meet the needs of our large scale high.

Atidrip Modak: I think it's a mention of my conference call tags that that really mitigates the risk to the budget. Yeah, it's not a very not a very complex project in terms of the construction of the dune express. I mean, there's like as far as that equipment goes, I mean, there is the opportunity to make sure that it comes in on time and making sure that it comes in meeting our spec. We're reaching out to a lot of our vendors right now.

Efficiency customers are unique.

Logistics solution that Chris alluded to earlier with three to four times transit capacity with a phased interface a multi trailer delivery from the drop depot model to the eventual do express delivery solution, but just add approximately a year out.

Atidrip Modak: We're actually doing these vendor audits. We do this pretty periodically to make sure that the equipment we've ordered it, making sure that it will show up on time and on spec. You know, we've taken like they said, we've taken we've already haven't so we've already the number of the equipment starting to start in the ride. You got concrete sleepers are starting to ride. That's what that's what the dune express will sit on.

This all leads to security and reliability of supply for years to come. So it is a journey and we've had tremendous amount of traction early on so we're working this we're just taking these these ideas and putting them to paper right now with the customer I mean this is something we've been talking to these customers for about for a long time, three or four years now and now it's now assist with that.

Atidrip Modak: You know, we're starting to take the delivery of like a lot of fiber optic cable. You know, we so I mean, there's also there's a number of things that we're currently working as we currently work continue constructed. You know, things that we can do in the interim is just to make sure that the dune express comes on time and on budget. Did that answer your question? Yeah, thank you so much. Appreciate the answer.

A year and so.

Yes, yes, yes.

<unk> now that the project is within a year of completion rate customers see progress on the ground there should be more tracking right and it sounds like there is more to electronically thats encouraging.

Okay, Perfect and then a quick follow up of multiple housekeeping question on Capex cash Capex, particularly.

John Turner: Just on a follow-up, you mentioned in the press release that there were some quarterly price resets on certain contracts, maybe help us understand that a little better. Like, what does that exposure look like on your overall contracted volumes and how does that actually work? Yeah, if you want to take that. Yeah, as we, you know, depending on the, the market and how it's working in the quarterly resets have been a part of pricing strategies and portfolios for a long time.

John maybe you can remind us how much of the capex associated with that unit has been spend bad debts blind harmless motors lap and then just for the fourth quarter, how should we think about capex and the residue and capex.

It will become an expensive debt coming online this quarter.

Hey, Brian has never done ill, let him answer this yes, we've spent $180 million on the Kermit expansion, so there's $20 million and $25 million left and on the data Express where we've got $132 million behind us another 268 and of course thanks.

John Turner: Yeah, within some of the pricing agreements that we have now, we have some quarterly resets. And you can see some of our pricing is in this third quarter and moving into the fourth quarter is an effect of the pricing. Roughly, you know, we have roughly 25 to 30% of our pricing historically on quarterly resets probably moving to more of a 50% as we move into 2024. And, you know, the quarterly resets really adjust to the market pricing, not only with regard to numerically, but with regard to the trend.

Five quarters.

Okay. Okay perfect. Okay, guys. Thank you Yep I got that okay. Thank you.

Thank you.

Our next question comes from Jeff J D.

Daniel Energy Partners. Please proceed with your question.

Hey, guys just a quick one for me thinking about back to the M&A question, a little bit obviously.

Companies either get together.

I guess are really to put together in the future and lateral lengths increase I'm just kind of curious what that does in your minds are kind of overall sand demand.

John Turner: And so we feel that, you know, with the, with the uptick in the activity moving forward in the back half, this should, this should yield some positive results. Yeah, I mean, our view is, and I think everybody can see it, that we kind of moved through a trough in the recount in the flash spreads and, and I think we certainly, and I think most of the industry is anticipating a pickup and activity in 2024.

And sort of what that kind of means for you guys in your business.

Okay.

Yes. This is Bob I'll start thanks, guys may want to add to my comments.

I did touch on it earlier I think yes.

Firstly, it's hit or Miss as to the acquiring company is it an existing customer or not but generally the larger customers are the larger operators are customers of Atlas energy solution, because we match up really well to provide the scale and the liability that they need so so I do think.

John Turner: So, I think, I mean, the quarterly resets give customers and us, you know, comfort. We have great relationships with these guys that will be able to adjust the changing market conditions. And my view has it set up very well for 2024. Thanks, I'll turn it over.

Long term it is very beneficial for us.

It's more difficult for a mom and pop type operators to match up with these large scale, operator, particularly given increasing pad.

Drilling and completions, increasing sama fracs, which just require a lot of profit very quickly and we're uniquely positioned to provide that.

Saurabh Pant: Our next question comes from Sir Ab with Bank of America. Please proceed with your question. Hi, good morning, bud and John. Maybe I'll just start with a quick one on the new experts. Clearly, you're making a lot of good progress on that, including on the ground. Just for the last in terms of how customers look at it and they see that progress, are you seeing more interest customers coming to you asking on the project, getting familiarized with that and showing interest in contracting volume through that.

So so.

So I think it's very beneficial at our scale and our growing scale is really important in that I don't know if you guys want to add to that.

Yeah, I think I agree with you I think that larger scale operations means larger scale services that need to go along with that and we've seen it in other basins you saw it in the Eagle Ford like 15% or 15 years ago, when the large operators move in.

It's the larger larger service company that can service their needs across the entire and across our entire operation is what they're really looking for they need that reliability, because they're putting a lot of money in on this and that they wanted to make sure they execute on that but as al mentioned, what other bankers.

Saurabh Pant: Just also how your customers are responding to the problem if you're making on the ground. Well, I may not think clearly the customers are excited about the doing express coming online. And so I do think that does Jeff can talk about, you know, of course we have our existing customers. But we have a number of new potential customers that we're in discussions with that we think it's obvious that the doing expresses is very attractive to them and compelling.

Your question might also stem from a concern does it mean less drilling activity.

And.

Again.

Net.

Saurabh Pant: So we'll be having those discussions over the next three to four months. And we expect to grow our customers. Yes, I don't know. Yeah, one thing. No, is this this, you know, if the didn't express is just over a year away. And so any contract in that we're doing right now in the Delaware basin is going to is contemplating taking stand off the didn't express so. And yes, there is there is a lot of interest from from from from operators that are out there in the in the in the in the Permian, especially the devil.

Some of the smaller private operators.

Are actively growing our production to make them more attractive.

As an acquisition target however, as you've seen from us on a quarter to quarter basis. Our results are very stable because we're contracted.

A large degree with these large operators that have very steady.

And longer term planned activity. So again, we just match up really well with these with these with these companies that are combining.

Saurabh Pant: I mean, the Delaware that are looking for that size and scale. And you get the trucks off the road. That's a real issue out there. The efficient reason coming with this coming with this is the, you know, with the didn't express. So yeah, yeah, I as John stated earlier, it's not a race to get to 2024 volumes contracted. But more of an effort to align with high quality clients, both EMPs as well as pressure pumpers that are sustainable on a go forward basis.

Creating more scale, so I don't think.

And the other thing is and we've included the Raj that chart in the appendix of our presentation. It really is remarkable.

What a great job that operators and pressure pumper or doing increasing the efficiency in the field and so the the proppant pump per day per Frac crew. Just continues up and took arrived so so I think all of these trials for more efficiency.

Saurabh Pant: Current contract discussion are not just sand and logistics supply agreements, but more complex and long term conversation about revolutionary infrastructure based solution for the Permian. And let me define infrastructure solution based infrastructure based solution. It means a compilation of sand production expansion to meet the needs of our large scale high efficiency customers. A unique logistic solution that Chris alluded to earlier with three to four times transit capacity with a phase interface of multi trailer delivery from the drop depot model to the eventual doom express delivery solution, but just approximately a year out.

To some degree are associated with scale to drive up the efficiencies of drop down the cost per unit again, they all play to our strengths.

Excellent. Thanks, that's really helpful.

Thank you.

Alright go ahead Sir.

Oh I'm sorry.

90 answering my question. Thank you.

Our next question comes from.

Michael <unk> with Stephens. Please proceed with your question.

Saurabh Pant: This all leads to security and reliability of supply for years to come. So it's a journey and we've had tremendous amount of attraction early on. So we're working this. We're just taking these, these ideas and putting them to paper right now with the customer. I mean, this is something we've been talking to these customers for about for a long time, three or four years now. And now it's now it's within a year. And so yeah. Yeah. P.F.

It sounds like you're pretty confident you can be fully contracted on about 16 million tons per year next year is it fair to think you can go beyond that if the demand is there at a price you're okay with.

You don't need to spend any additional capital to to do that with the efficiencies you're seeing are kermit and.

Is the Capex number that the consensus says yet right now for next year of about $325 million that seem.

John Turner: No, now that the project is within a year of completion, right customer seep progress on the ground, they should be more track and right, and it sounds like there is more track. So that's encouraging. Okay, perfect.

Seemed like a good number to you.

Yes.

Jeff touched on we are in discussions for volumes and John touched on as well that are in excess of.

John Turner: And then I quite follow up a more of how's keeping question on capex, cash capex, particularly John, maybe you can remind us how much of capex associated with the new experience has been spent at this point, how much more is left and then just for the fourth quarter, how should we think about capex and there is a capex related to decommissioned expansion that's coming online this quarter? Brian has those numbers, I'm going to let him answer those.

That.

About 16 million tonnes.

That said.

When we built our original plants.

We thought.

Our expectation was they would produce three to 4 million tons that produced $5 5 million tons and so our expansion we will see.

We might be able to produce more.

With the expansion that we're anticipating so time will tell on that.

John Turner: Yeah, we've spent 180 million on the current expansion, so there's, you know, 20 million, 25 million left. And on the June express, we've, we've got 132 million behind us and other 268 over the course of acts. Yeah, five quarters. Okay, okay, thank you. Yep, I got that. Okay, thank you. I send it back.

And we do have opportunities to further grow our production by its John I don't know.

John Turner: Thank you.

I mean like.

Like we said earlier that it's $60 million I mean, our goal is 80% of 2014 15 really.

If you if you and you look at that we want to keep somewhat bottomless be a decision that we need to make.

Keith Mackey: Our next question comes from Jeff Jay with Daniel energy partners, please proceed with your question. Hey guys, just a quick one for me, think it's back to the M&A question a little bit. Obviously, those companies you get together or, you know, I guess really to get together in the future and later on makes increased. I'm just kind of curious what that does, you know, in your mind that kind of overall sand demand and sort of, you know, what that kind of means for you guys in your business.

At the time, whether or not it depends on what our customers want like we said there is new opportunities that are out there that we're evaluating to see what those additional volumes, we're looking like and so on the Capex numbers I think we're going to have to I mean.

We will need to come back on those because I know that there is a lot of.

We do our best to forecast, how capex is going to be spent.

That never never ever successful, giving you forecasting that the ebbs and flows of that but you should think of it.

The timing of it but for but.

Keith Mackey: Yeah, this but also these guys may want to add to my comments, but I did touch on it earlier, I think. First, it's hitter masters is the, you know, the client company is at an existing customer or not, but generally the larger customers, the larger operators are customers of Atlas energy solutions, because we match up really well to provide the scale and the liability that they need. So, so I do think, you know, long term, it is very beneficial around us.

Right now I mean don't express we plan to spend 400 million in total on that and then obviously the plant carpet plant expansion is on time and on budget I think we mentioned those numbers in our in our call, but we can circle back on that does that help you.

It does yes. Thank you.

And I guess on the logistics side do you expect those who had some tremendous growth there surprised now for a couple of quarters in a row.

Do you expect any further step up there before doing express is completed is it just a matter of.

Keith Mackey: You know, it's more difficult for moment type operators to match up with these large scale operators, particularly given increasing pad drilling and completions, increasing summer frags, which just require a lot of profit very quickly and and we're uniquely positioned to provide that. So, so I think it's very beneficial in our scale and our growing scale is really important in that. I don't know if you guys want to add to that. No, I think that I agree with you.

Further adoption of these double and triple trailers I know you mentioned the.

The next drop depot.

That youre planning for the fourth quarter.

I guess just.

Any visibility on further growth before doing express goes into operation.

Yes, I will let Chris answer that for you.

We've always we've always projected that that growth into the <unk>. When you look at where we've come from.

Keith Mackey: I think that larger scale operations means larger scale services that need to go along with that. And you know, we've seen it in other basins you saw in the eagle for like 15 to 15 years ago. I mean, when the up large operators move in, you know, it's a larger because larger service companies that can servicer their needs across, you know, the entire and cross their entire operations, what they're really looking for.

This year to where we're at now as you said right.

Dedicated fit for purpose assets multi trailer offering that is differentiated in the market no one else can offer and all of that while Meanwhile, opening and expanding our dropped depot footprint.

Keith Mackey: They need that reliability because they're putting a lot of money in on this and that, you know, they want to make sure they execute on that. Now, I'll mention one other thing because, you know, your question may also stem from a concern. Does it mean less drilling activity? And again, it can in that, you know, some of the smaller private operators, you know, maybe are actively growing their production to make them more attractive as an acquisition target.

You know that.

That growth that you will see over the next year. The plan is not to show up with <unk> Express day one.

Hit a button and expect everything to be delivered at that point well in advance of the <unk> Express we want to be delivering 100% of those volumes.

Sand and logistics to the well site so that when they do an express comes on from a customer perspective, it's a seamless transition and they don't even see a difference.

Keith Mackey: However, as you've seen from on a quarter to quarter basis, our results are very stable because we're contracted, to a large degree with these large operators that have very steady and longer term planned activity. So, again, we just match up really well with these, with these, with these companies that are combining and, and creating more scale. So, I don't think, um, and, and the other thing is, and we've included the rise stat chart in the appendix of our presentation.

Hopefully that answers your question.

I think we've added another dropdown.

Dropped people you might touch on that step towards that.

<unk> from the transition period.

We've got over 1000 miles of accessible.

<unk> thousand square miles of accessible multi trailer operations out there and plan to add another one in Q4, while we plan while we.

So flattish in Q4 based on just the activity volumes as we talked about earlier, we do expect to grow in that last mile with the with the Q1 pop as well.

Keith Mackey: It really is remarkable. What a great job that operators and pressure operators are doing, increasing the efficiency in the field. And so, the profit per die per fat crew just continues up into the rise. So, so I think all these drives for more efficiency, the, the, to some degree or associate with scale, uh, to drive up the efficiencies and drive down the cost per unit. Again, they all played our strings.

That help you.

Yes. It does thank you very much guys.

Youre welcome.

Our next question comes from Doug Becker with capital one. Please proceed with your question.

Thank you.

Wanted to follow up on logistics, but on the margin side. It looks like they were down just a little bit in the third quarter at least in part because of the shorter haul distances what's.

Bud Brigham: Excellent. Thanks. That's really helpful. Thank you. All right, go ahead, sir. Oh, I'm sorry. I, uh, that's the answer to my question. Thank you.

What's the expected trajectory on margins as we move toward doing express at the end of next year.

Yes, I think through through next year.

We've been we've run historically.

Michael Scialla: Our next question comes from Michael Siala with Steven's. Please proceed with your question. All right, it sounds like you're pretty confident. You can be fully contracted on about $16 million per year next year. Is it fair to think you can go beyond that if the demand is, is there at a price you're okay with? And you don't need to spend any additional capital to, uh, to do that with the efficiencies you're seeing a permit.

Historically in that 10% to 13% margin I think as we as we get into next year, we're going to see more of a 15% to 20% margin business approaching it Didnt express that longer term longer I mean longer term once once I didn't express it up and running.

Upward 50% margins.

And so just to refine that kind of 15%, 20% through the first three quarters of next year and then a step up as doing express comes on.

Michael Scialla: And, uh, is the capex number that the consensus has yet right now for next year? About 325 millions that seem like a good number to you. Yeah, it's yep. Test on. We are in discussions for volumes and John test on as well that are in excess of, of that, you know, of that $16 million. That said, you know, when we built our original plants, we, uh, we thought, you know, the expectation was they would produce three to four million tons and I produce five and a half million tons.

That's right as we ramp into it I wouldn't expect it to happen immediately.

Not that you want but it will be a wrap up what the other express volumes.

Makes sense.

And just on the timing of Kermit I know <unk> been highlighting late fourth quarter I've been assuming December 1st, but just wanted to get a sense is there potential or any visibility is a little bit earlier, a little bit later.

If we can have a pretty big impact on the fourth quarter.

I think.

We're still looking at December startup on that when it comes to.

Michael Scialla: And so our expansion will see, you know, we might be able to produce more, um, it's current mess with the expansion that what we're anticipating. So Tom will tell on that. And, uh, and we do have opportunities to further grow our products and buy some. Yeah, and I, I mean, I guess like we said earlier, though, I mean, it's 16 million. I mean, our goal is 80% of 16. I mean, a 15 really.

When it comes to the.

When it comes to coming on I don't know that were going to get that on any sooner than now gathered volumes available.

And then.

Thank you very much.

Great. Thank you.

Our next question comes from Keith Mackey with RBC capital markets. Please proceed with your question.

Hi, Thanks, and good morning, just following up on Doug's question on the Kermit volumes can you just talk a little bit more about how those volumes should trend the sales volumes should trend through 2024 as the plant expansion comes online is it is it a step up in Q1 or is it a slow and steady ramp through.

Michael Scialla: Um, if you, if you, and you look at that, we want to keep someone spot and let's be a decision that we need to make. Uh, at the time, um, whether or not, it depends on what our customers want. Like we said, there's new opportunities that are out there that we're evaluating the scene. What does additional volume for looking like? And so on the capex numbers, I think we're going to have to, I mean, we'll need to come back on those because, uh, I know that there's a lot of, uh, you know, we, we do our best to forecast how capex is going to be spent.

The year.

We haven't given any guidance on that but it's going to be more of a slow and probably more probably a slow and steady ramp is what it is what we're thinking.

Michael Scialla: And, you know, and that never, we're never ever successful cat giving you forecasting that they add some flows of that. But you know, the time you know of it, but the, but the, but for, but, you know, right now, I mean that the dude expressed, we plan to spend 400 million total on that. And then, you know, obviously that the plant cover plant expansions on time and on budget. I think we mentioned those numbers in our, in our call, but we can circle back on that. Does that help? Yeah. It does, yeah, thank you.

However, we do we brought we bought we're bringing this on because we were asked to by our customers. So.

I think we could see some increased activities, but we'll just have to say, but its probably a move or slowest days Pavel what we're thinking.

Got it got it and then just one last one on the <unk>.

June sagebrush lizard down there was some discussion about that potentially becoming a added to the dangerous lift endangered species lifting and you feel you've mitigated a lot of potential risk around that but can you just give us an update on your latest.

Chris Scholla: I guess on the logistic side, do you expect, obviously, you had some tremendous growth there, surprised, you know, for a couple of quarters in a row, do you expect any further step up there before doing expresses completed, is it just a matter of further adoption of these double and triple trailers, and you mentioned the next drop depot that you're planning for the fourth quarter, I guess, just visibility on further growth before doing express goes into operation. Yeah, we'll like pure sense of that for you.

Latest thoughts around around that potential.

Yes. This is Bob.

I'll start and these guys can add we felt let's say.

We're in great shape, given that we're one of the early members of the conservation agreement.

So even if it is less likely but it should be fully operational and it shouldnt affect our business.

Yes.

Numerous.

Chris Scholla: Yeah, you know, look, we've always, we've always projected that growth into the doing express, and you look at, you know, where we've come from earlier this year to, to where we're at now, as you said, right, dedicated fit for purpose assets, multi-trailering offering that is differentiated in the market, no one else can offer, and all of that, while, meanwhile, opening and expanding our drop depot footprint, you know, that growth that you will see over the next year, the plan is not to show up with June Express day one, you know, hit a button and expect, you know, everything to be delivered at that point, well in advance of the doon express, we want to be delivering 100% of those volumes, you know, sand and logistics to the well site, so when the doon express comes on from a customer perspective, it's a seamless transition, and they don't even see a difference. Hopefully that answers your question, you might have heard of it.

And bulk.

Barry voluminous responses have been filed to the.

So the potential lifting its going to take until.

Our general counsel break Fletcher, but it's going to take probably.

Quite a while.

The department of interior.

Fish and wildlife to work through.

And in response to all of those and so it's probably.

Just a year or a couple of years out.

R R.

The best projection right now before a determination on that.

Yes.

So we just we think about that we just responded to that.

Question period for that.

The department of interior that put out so.

So we're kind of in that one we're in that CCA, where early adopters, we were instrumental in getting it put in place and so we.

We feel like it's.

In the event of a listing that.

Chris Scholla: We've added another, he's dropped people, he might have touched on that. Yeah, I would step towards that. Yeah, exactly from the transitionary period, you know, we've got over a thousand miles of accessible, thousands square miles of accessible multi-trailer operations out there and plan to add another one in Q4, while we plan it, while we, you know, show flatish in Q4, based on just the activity volumes as we talked about earlier, we do expect to grow in that last mile with the Q1 pop as well. Is that healthy? Yeah, it does, thank you very much, yes. You're welcome.

We're pretty well covered.

Alright, thanks, very much I appreciate the comments.

Thank you.

Our next question comes from Scott Gruber with Citigroup. Please proceed with your question.

Yeah. Thanks for squeezing me in just a quick follow up on on logistics.

If the revenue trends there as is flattish in <unk>, we continue to add trucks.

It seems like you guys will be a bit under utilized.

Just trying to get a sense of as you.

You step into 'twenty, four and completion activity improves how quickly do you think you can get the asset turns on the trucks.

Doug Becker: Our next question comes from Doug Becker with Capital One, please proceed with your question. Thank you. I wanted to follow up on logistics, but on the margins side, it looks like they were down just a little bit in the third quarter, at least in part because of the shorter haul distances. What's the expected trajectory on margins as we move toward doing express at the end of next year? Yeah, I think through next year, you know, we've run in, you know, historically in that, you know, 10 to 13 percent margin, I think as we get into next year, we're going to see more of a 15 to 20 percent margin business approaching it didn't express.

Back to where you were kind of mid year.

24 is that a <unk> kind of how quickly to get those assets.

Nearly fully utilized.

Yeah. Thanks, Scott just as a just as a reminder.

From an asset side of things we've been fully utilized.

Our trucks and trailers at this point, we do have strategic third party partnerships as we started this business right with with third parties and transitioned to a more.

A mix of having our own and third parties.

Doug Becker: A bit longer term? Longer, I mean longer term once it didn't express it up and running, you know, upward 50 percent margins. And so just to refine that kind of 15, 20 percent through the first three quarters of next year, and then a step up as Dune Express comes on. That's right. As we ran into it, I wouldn't expect it to happen if it didn't look good. I think that would be very bad.

We do still run a significant amount of third party.

Trucks on that so as we continue that flat and growth trend in the future. We will make sure that our trucks are also.

<unk> remain at that 100% utilization rate.

So you'll be able to get some.

And kind of tracking our revenue per truck.

Doug Becker: Not day one, but over the ramp up, what's your next best volume? Makes sense. And just on the timing of permit, I know I've been highlighting late fourth quarter. I've been assuming December 1st, but just wanted to get a sense, is there potential or any visibility as a little bit earlier, a little bit later, obviously can have a pretty big impact on the fourth quarter. You know, I think we're still looking at December start up on that when it comes to, when it comes to the, when it comes to coming on, I don't know that we're going to get that on any sooner than now. You have those volumes available. Thank you very much. Right. Thank you.

So when the <unk> kind of be back to.

The <unk> rate that.

Yeah, our revenue our revenue per truck should should on the <unk> I would I would agree with that.

That being aligned to the Q3 rates.

Okay. Okay.

Okay. That's it thank you.

Great. Thank you.

We have reached the end of our question and answer session I would now like to turn the floor back over to Bud Brigham for closing comments.

Well I want to thank everybody for joining our call and we look forward to reporting on our fourth quarter results. Thank you again.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Keith Mackey: Our next question comes from Keith McKee with RBC capital markets. Please proceed with your question. I think some good morning just following up on on Doug's question on the Kermit volumes. Can you just talk a little bit more about how those volumes should trend? And the sales volumes should trend through 2024 as the plant expansion comes online. Is it a step up in Q1 or is it a slow and steady ramp throughout the year?

Yeah.

[music].

Keith Mackey: You know, we haven't given any guidance on that, but it's going to be more of a slow and probably a slow and steady ramp is what we're thinking. However, you know, we do, we brought, we brought, we're bringing this on because we were asked to buy our customer. So, you know, I think, you know, we could see some increased activities, but we'll just have to say that's probably going to move a more slow and steady. It's probably what we're thinking. Yeah, got it, got it.

Bud Brigham: And, and just one last one on the, the Dune Sage brush lizard. There was some discussion about that potentially becoming added to the endangered list and endangered species list. And, and you feel you've mitigated a lot of potential risk around that. But can you just give us an update on your latest latest thoughts around around that potential? Yeah, this, but I'll start these guys can add. I mean, we feel like, obviously we're in great shape given that we're one of the early members of a conservation agreement.

Uh huh.

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Bud Brigham: So even if it is listed, we will should be fully operational and shouldn't affect our business. You know, the numerous and, and, and ball, you know, a very voluminous responses have been filed to the, to the potential listing. It's going to take a, I'm told by our general counsel, Greg Fletcher, that it's going to take probably quite a while for the Department of Interior and, and Fish and Wildlife to work through.

Okay.

Mhm.

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Yes.

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Bud Brigham: And, and, and, and, and respond to all of those. And so it's probably at least a year or a couple of years out is, is our best projection right now before the combination on that. Yeah, and, and so we just, we'd like both that we just responded to the, to the, you know, the questions on period for the, for the Department of Interior that put out. We're in that CCA, we're early adopters, we were instrumental in getting to put in place and so we feel like it's in the event of a listing that we're pretty well covered.

Okay.

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Operator: All right, thanks very much appreciate the comments.

Scott Gruber: Our next question comes from Scott Gruber with City Group, please proceed with your question. Yeah, thanks. Just a quick follow up on logistics. You know, if the revenue trend there is flatish and 4Q, we continue to add trucks. It seems like you guys will be a bit underutilized. Just trying to get the sense of, you know, as you step into 24 and completion activity improves, you know, how quickly do you think you can get the asset turns on the trucks?

Yeah.

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Scott Gruber: You know, back to where you were kind of mid year, you know, in 24 is that a one two event is a two Q kind of how quickly to get those assets. You know, nearly fully utilized. Yes, thanks Scott, just as a reminder, you know, from an asset side of things, we've been fully utilized. You know, our trucks and trailers at this point we do have strategic third party partnerships as we started this business right with with third parties in transition to a mix of having our own and third parties.

Scott Gruber: We do still run a significant amount of third party trucks on that. So as we continue that flat and growth trend in the future, we'll make sure that there are trucks are are also, you know, remain at that 100% utilization rate. You'll be able to, you know, we just been kind of tracking the revenue kind of per truck. So whether the one Q kind of be back to a 3Q rate then. Yeah, our revenue, our revenue per truck should should on the one key, I would, I would agree with, with that being aligned to the key three rates. Okay. Thank you. Good. Thank you.

Bud Brigham: We have reached the end of our question and answer session. I would now like to turn the floor back over to bud for clues and comments. Well, I want to thank everybody for joining our call and we look forward to reporting on our fourth quarter results. Thank you again. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Thank you.

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