Q1 2024 Atlas Energy Solutions Inc Earnings Call
Speaker Change: [music].
Greetings welcome to Atlas Energy solutions incorporated first quarter, 'twenty 'twenty, four financial and operational results conference call. At this time, all participants are in a listen only mode.
<unk> 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. Please note. This conference is being recorded I will now turn the conference over to Kyle trailing 10, Vice President Investor Relations. Thank you you may begin Hello, and welcome to the Atmos Energy Solutions conference call and webcast.
The first quarter of 2024 with US today are Mike Brigham's Executive Chairman, John Turner, CEO, President and Chief Financial Officer, and John will be sharing their comments on the company's operational and financial performance for the first quarter of 2024, after which we will open the call for Q&A.
Ben M. Brigham: Before we begin our prepared remarks, I would like to remind everyone that the call will include forward looking statements.
Ben M. Brigham: And out of the U S Securities laws such statements are based on the current information and management's expectations as at this statement and are not guarantees of future performance.
Ben M. Brigham: Forward looking statements involve certain risks uncertainties and assumptions that are difficult to predict.
Our actual outcome.
And results could differ materially you can learn more about these risks in the annual report on Form 10-K, we filed with the U S. D. C. On February 27 2024.
Ben M. Brigham: Our quarterly reports on Form 10-Q, and our other SEC filings.
Ben M. Brigham: 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 the mornings press.
Ben M. Brigham: Please.
With that said I'll turn the call over to break them.
Brad: Thank you Carl and thanks to everyone for joining us today for our first quarter conference call.
In addition to reviewing our first quarter results, we'll spend some time this morning, providing an update on the great progress we are making integrating high question Atlas since the closing of that acquisition in early March.
Additionally, we also need to discuss the recent power at the Kermit facility and perhaps more importantly, the impressive response from our team to maintain both safety onsite.
Brad: And reliable supply of sand to our customers throughout the disruptive but then.
Brad: I'll go ahead and state that no other proppant producer could've, possibly continued delivering product to their customers the way Atlas has.
Brad: Our differentiated scale recently enhanced by our acquisition of Hi, crush sand and they're great people.
Brad: She added production, but done at CS and are geographically distributed production assets uniquely positioned Atlas to continue reliably serving our customers.
Brad: Even pretty rare unexpected disruptions.
Brad: And whether it's a fire severe weather or traffic accidents disruptions do occur.
Brad: All this makes the Permian supply chain more reliable and sustainable.
Briefly reviewing me up as well.
Brad: Around noon on Sunday April 14th a fire broke out at our Atlas facility damaged equipment involved in our feed system, which takes sand from the separation and drawing process to our silos.
Brad: Due to the quick actions of our employees and quick response from the West Odessa comment Monahan and Andrew as fire departments, the rest of the plant, including all production centers what's unscathed.
Brad: This incident was limited to affecting our ability to load trucks at Kermit and did not impact our ability to produce sand.
Thankfully and most importantly, we quickly ascertained that all of our employees and vendors were safe and accounted for.
Brad: I want to again, thank the first responders and our team up wonderful employees here at Atlas for keeping everyone safe and limiting the damage to the plant.
Within hours of the incident, our sales and supply chain teams begin notifying our customers, albeit that and also began taking the steps to ensure their supply needs. We continue to be met.
Brad: All thing and uninterrupted service and zero sand related nonproductive time that customer well sites through the incident.
Brad: Again, I think it's obvious that no other company could have to accomplish this.
Brad: And under 48 hours.
Brad: Mobile load out equipment, and mobile towers began showing up at a crime that plant to lay the groundwork for temporarily no doubt solution, while we began conducting repairs.
Brad: Went down 11 days from the time, we reopened to come that facility and began loading trucks with sand.
Brad: Day, they come out facility is loading close to 6000 tonnes of sand.
Brad: It's about a third of that Barbara throughput prior to the incident.
Brad: By the end of this month, we expect to receive all of the necessary equipment to completely rebuild the damage feed system and we expect the damaged portion of the Kermit plant to be fully restored by the end of June.
This quick turnaround is another clear demonstration of atlas's unique culture.
Brad: Our exceptional team collaborated across our entire platform of distributed assets almost instantaneously.
Brad: The pace at which that mood, what's almost shocking.
Brad: Think that when you reopen a comeback facility within just 11 days of the fire still seems unbelievable, but knowing the quality of our people I know at this point that I shouldn't be surprised.
Brad: When you partner with Atlas, you can count on quality and reliability, even under extreme circumstances.
Brad: Again, thanks to our great people, our innovative culture, our unmatched scale, our relationships and our diverse distributed assets that we are uniquely able to perform through these disruptions.
Could not be proud of how we have responded to this unexpected setback.
Speaker Change: With respect to the answer to that Carmen.
Speaker Change: We wanted to provide more information about what happened and the improvements we're making to address the risk of a repeat of that in the future.
Speaker Change: We see these a dance as opportunities to make that less better.
Speaker Change: First.
Speaker Change: Now that we have completed the root cause analysis. There are a number of contributing factors that combined to result in a higher starting in the feed system.
Speaker Change: The plant and the silos.
Speaker Change: These factors included mechanical and process failures.
Speaker Change: We are responding by taking a number of actions to improve our systems and processes to protect us from the risk of Bria cuts for example in the near term, we have enhanced and increased inspections and preventative maintenance procedures.
In addition, some of the technological enhancements in the design and construction that Theyre doing express specifically, the multi layered belt detection system and more advanced auto lubricating systems well.
Will it be installed in our paid systems at the plants.
This is important to spend a moment on.
Speaker Change: The five years of design and our significant investments in technology, we've made in planning that Didnt Express.
Speaker Change: Particularly in the automation around preventative maintenance events.
Speaker Change: Dresses the risk of an incident like this occurring on the doing express.
For example.
Speaker Change: In addition to the smart I've noticed we've been discussing previously we will have dual monitors on the poly bearings for two separate systems.
Speaker Change: One for preventative maintenance and the other for real time monitoring and prevention of catastrophic failures as well as dual monitors for belt detection and slippage with analogs to Scott they can pay or if the belt is loose or slipping.
Speaker Change: The system will be hard wired to shut down the conveyor if a politics detected.
Speaker Change: Further all poly bearings will be auto lubricated, which will mitigate the basketball incidents.
Speaker Change: Lastly on the don't express monitors sensors and cameras will provide real time data and security along the 42 a conveyor route.
Speaker Change: I believe that do next pass is likely the most technologically advanced adult material conveyer ever built.
Speaker Change: Wrapping up my section.
Speaker Change: Subsequent to the closing of the Hi crush acquisition.
Speaker Change: The board of directors named John Turner, as Chief Executive Officer effective March six 2024.
Speaker Change: As executive Chairman.
Speaker Change: Our my well remain very active in the company's operations.
Speaker Change: Continuing to provide leadership ideas and vision to the company's management team and I will continue to focus on identifying antibody against strategic opportunities.
Speaker Change: John and I were founders, but that was back in 2017 and as a proven oil and gas entrepreneur. John has been and will continue to lead our outstanding management team to successfully manage day to day operations, while building Atlas ended up Premier proppant and logistics company and a highly competitive.
The industry.
Speaker Change: Atlas has a big future and I believe Johns leadership and executive experience working with the rest of our outstanding management team will result in continued innovation and growth to continue creating shareholder value.
In addition to the much deserved promotion of John Turner.
It may 13th.
Speaker Change: <unk> is pleased to announce the appointment of Blake Mccarthy Chief Financial Officer about us.
Blake Mccarthy: Like most recently served as president of N O P Grant Pratico.
Blake Mccarthy: We welcome Blake our board and are excited to have his leadership and expertise to help guide us into the future.
Blake Mccarthy: With that I will now pass the call over to John.
John G. Turner: Thank you Bob for those tied words and I Echo your comments regarding the addition of Blake.
John G. Turner: Look forward to working side by side with Blake as we navigate the road ahead for Atlas.
Blake expertise of integration when acquisitions, along with his deep understanding of financial markets and the oil service industry will be a welcome addition, as we have just started our journey as a public company.
John G. Turner: The first quarter was an exciting period for Atlas with the closure of the Hi crush acquisition. The completion of the Kermit expansion and commissioning of the first of two new state of the art dredges.
John G. Turner: The acquisition of Hi, crush is already off to a great start and.
John G. Turner: March high fresh set a monthly volume record for their cardiac plants.
John G. Turner: All hard along with Atlas is last mile.
John G. Turner: A monthly record for total laws.
John G. Turner: We successfully floated our first new dredge in February and our recently voted our second in late April.
We expect the commissioning process for both graduates to be completed by the end of June.
John G. Turner: And we are well on our way to a fourth quarter 2024 commercial in service date for the Daily Express.
John G. Turner: Yeah, let's continues to evolve into a more integrated provider of diverse solutions for our customers is emphasized by our addition of pronghorn logistics footprint, which amplifies atlas's offerings of doing express and expanded payload capacity and logistics assets.
John G. Turner: It has been a remarkable first year as a public company. Our team has a lot to be proud of and I'm sure proud of them.
John G. Turner: Regarding the hi, crush acquisition, we are off to the races with our integration and it is exciting to think about what the combination that these very talented and innovative workforces will be able to accomplish as we share resources and best practices.
John G. Turner: We are working through the identification of additional potential synergies beyond the $20 million that we initially announced at the time of the acquisition.
John G. Turner: I am a hi crush is carve out operations to the express the potential for dredge mining to be brought to hi, crush carpet and the combination of our utilities infrastructure and procurement programs are among some of the potentially impactful initiatives that we are currently working through.
John G. Turner: We have received positive feedback from our customers on the acquisition and look forward to better serving our customers through the combined offering of the don't express the oncor mines and the last mile solutions.
John G. Turner: The addition of Hi, crush truly provides atlas with an unparalleled portfolio of profit logistics assets.
Regarding logistics Atlas remains the market leader in last mile with 28 crews of which 24 are in the Permian.
John G. Turner: We now deliver over 50% of our total sand volumes using our last mile crews.
John G. Turner: Not only is Atlas leading with fully integrated solutions. We are also leading with technology.
On our digital platforms capability to monitor proppant inventory at our customers of all sides. We released our automatic ordering feature a seamless technology assisted stand offering feature based on live inventory and operational data feeds.
John G. Turner: Our off the order feature provides the foresight to keep our sand production optimized while also giving our customers confidence in meeting their operational targets.
John G. Turner: On the hills of off the order. We also released Gen. Whatever off do dispatch feature a first of its kind digital functionality to autonomous reschedule optimized and dispatch sand delivery without human intervention.
John G. Turner: Combined after ordering and off the dispatch set the Atlas This digital platform well ahead of the competition.
John G. Turner: Our automation efficiency scale and innovation continue to drive market differentiation, while advancing the digital transformation of the Permian basin.
John G. Turner: Operation of Oncor number eight is currently underway and we expect that unit to commit sales later this month under a long term contract with an existing customer in the Midland Basin.
John G. Turner: This is the third encore unit deployed with this customer.
John G. Turner: Further validating the value proposition the oncor solution delivers two operators and the leadership position. The encore team has established within the infill mobile mining market.
John G. Turner: No number eight as a larger unit, but the production capacity roughly double that of our seven other units that are currently deployed in the Permian.
John G. Turner: Regarding future encore deployments beyond eight we had placed orders with our vendors for the equipment that will compromise unit nine weeks.
John G. Turner: We expect to take some degree of this equipment in the third quarter and have multiple mine site secured under option agreements. We're in advanced discussions with a number of potential customers about the deployment of this unit.
John G. Turner: The construction of the <unk> Express remains on time and on budget and was not impacted by the events last month at our credit facility.
We have more than 200 personnel on the ground daily working on construction and we continue to make great strides I remain confident on our fourth quarter delivery timeline. Notable construction milestones include as of the end of April we have substantially completed both of our major highway crosses 16 of our 20 at least read crossings.
John G. Turner: Nine if our 19 cattle and wildlife crossings instilled.
John G. Turner: The installation of the sand Beach system part of the data Express, which we have described as the pant leg beside commenced in April and will run through June.
John G. Turner: The installation of the concrete sleepers will be completed by the end of this month.
John G. Turner: At the end of April more than 60% of the conveyor modules were completed and we expect to be 95% complete by the end of this month and as of today, 95% of the belt and it's been flight that is ready for installation.
Speaker Change: Thanks to our strong first quarter results, the heavily contracted and low cost nature of our business and our quick turnaround at the Kermit facility, we're going to increase our dividend, 5% to 22 cents per share.
Speaker Change: Up a penny when compared to our dividend last quarter.
Speaker Change: Based on this dividend and our closing price on May 3rd we now have a current annualized dividend yield of 4%.
Pro forma maintenance Capex beyond 'twenty 'twenty four is expected to be around $60 million annually, providing atlas with multiple avenues to further increase shareholder returns once the remaining growth capex associated with the <unk> Express subsides.
Speaker Change: The overall sand market remains steady.
Speaker Change: Improvements in oil prices have not led to a pick up in activity yet, but it has changed the conversation from how low the rig count can go.
Speaker Change: Which was the dialogue in the fall to today's topic when will that recovery occur.
Speaker Change: Frac efficiency remains a nice tailwind for Atlas and our peers.
Speaker Change: One of the main benefits of consolidation in the Permian is the increased mix of five only triangle fracs, which today represents more than 20% of the Permian completions market.
Speaker Change: Furthermore, we see continued year over year growth in drilling and completion efficiencies.
Speaker Change: Amplifies the effect of fleet additions resulted in increased levels of proppant consumption.
Speaker Change: Atlas remains highly contracted for 'twenty 'twenty four derisking matches, the sand price volatility for this year.
Speaker Change: For the first quarter of 2024, which includes a 27 day contribution from Hi, crush we reported total sales of $193 million.
Speaker Change: Our revenue from profit sales, but it's $113 million on volumes of $3 9 million tons.
As expected we saw the first quarter get off to a slow start in January from an activity standpoint, but returned to a more normal cadence for February and March.
Speaker Change: Our average sales price for the first quarter was approximately $29 per ton.
Speaker Change: Moving to service sales, which is revenue generated by our logistics operation, we reported a $79 million in revenues for the quarter.
Speaker Change: And total cost of sales excluding DD&A for the quarter was $107 million, which consists of plant operating costs of $40 million or logistics operating costs of $67 million.
Speaker Change: For the first quarter, our parts on plant operating costs were $10.88, which was negatively impacted by less stretch feat as we were commissioning a new dredge in March and thus we were more dependent on traditional mining throughout the quarter. We expect the commencement of both of our new dredges to provide incremental improvements in operational performance and further.
Speaker Change: Actions in our mining hospitalist, the rebuild of the carve out facility is complete.
Speaker Change: Yeah.
Royalty expense for the quarter was $3 million.
Speaker Change: SG&A expense for the quarter was $29 million, which includes $11 million of nonrecurring transaction costs and $4 million of noncash stock based compensation.
Speaker Change: Cash interest expense for the quarter was $6 million, which was offset by $2 million of interest income generated during the period.
Speaker Change: We expect our interest income to decline in future quarters, as we draw on our cash reserves to fund our growth projects.
Speaker Change: DD&A for the quarter was $17 million and we generated net income of $27 million, representing the net income margin of 14% and an earnings per share of 26 cents.
Speaker Change: Net cash provided by operating activities was $42 million adjusted EBITDA for the period was $76 million, representing an adjusted EBITDA margin of 39%.
Speaker Change: We expect our adjusted EBITDA margins to decline in subsequent quarters as we ramp up revenue from our lower margin logistics segment and incorporate the lower margin profile from the hi crush acquisition.
Speaker Change: Adjusted EBITDA margins should improve in 2025 with the commencement of the don't express adjusted free cash flow, which we define as adjusted EBITDA less maintenance capex for the quarter was $71 million, yielding an adjusted free cash flow margin of 37%.
Lastly, we spent a total of $88 million on growth projects in the first quarter $75 million of this spend was for the <unk> Express with the majority of the remaining $13 million going towards the completion of the Kermit plant expansion and our new encore facilities cash.
Speaker Change: Cash and equivalents at the end of the quarter stood at $187 million with total debt of 481 billion.
Speaker Change: For the second quarter, we expect a $20 million to $40 million EBITDA impact from the fire that occurred on April 14th and subsequent 11 day plant closure, which implies our second quarter financial results will be in line with the results of our first quarter.
The EBITDA impact from having to source meaningful amounts of lower margin third party volumes the loss of some spot sand sales and higher opex costs associated with a more manual less efficient temporary load out implementation, which will be in place until the fee system. This rebuilt which is expected to occur in late June.
As mentioned earlier, the fire had no impact on the plant's production centers and wants to rebuild that the fee system is complete we expect the plant to resume normal operations in the third quarter after a normal ramp up.
Speaker Change: We expect the rebuild cost to be fully covered by our insurance policies minus a $250000 deductible.
Speaker Change: Once again, we do not expect the event to have any impact on the timing of the construction of the express or cause any M. P. G for our customers.
Speaker Change: Although a modest financial impact I could not be more proud of the quick collaboration teamwork and resourcefulness of our employees to limit the impact and quickly reopen our facility. So we can reliably serve our great customers.
Speaker Change: To the extent the fire has any additional lingering impacts to our financials, we will update guidance when appropriate.
Speaker Change: That concludes our prepared remarks, and we will now let the operator open the line for questions. Thank you all for joining in on our first quarter call.
Speaker Change: Thank you 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. You May press star two if he would like to.
Speaker Change: A question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Our first question is from Sean Mitchell with Danielle Energy Partners. Please proceed.
Sean Mitchell: Hey, good morning, guys, John but congrats on the higher Ah I think you are very lucky to have Blake Mccarthy joined the team and a great hire but living.
Moving on to kind of business you guys were able to reopen the plant pretty quickly after the fire, which was quite impressive can you walk us through the steps taken in the collaboration you talked about required to kind of reopen so quickly.
Speaker Change: Yeah, sure I'm going to I'll, just start and I'll, let Chris kind of walk into the details that.
Chris: You know very very.
Chris: I'm very proud of the team and the way they perform there I mean it was a collaboration that came across you know.
Chris: Both the Atlas at Hi, crush employees coming together.
Chris: Chris Chris showed Atlanta, Atlanta is efforts out there and then obviously to get to to get the operation back up and I'll, let him right into that Ive got through it but what exactly we get yeah. Thanks, John So first we really had to take a step back to understand our post event process capabilities at the plant.
John G. Turner: So after that evaluation, we saw look our wet plants dryers screening tower and moat out equipment were essentially unaffected. So we can produce sand. The challenge was finding a creative way to load sand into the trucks.
Chris: We were able to modify the conveyors under our screening tower to enable a redundant flow of sand through our new temporary loadout stations. These conveyors are bidirectional, one direction feeding haul trucks to transport sand to our temporary load out in the other direction feeding a ground level zipper can bear the transport Sand Hill road out.
Chris: And the last week or different conveyor has proven capability to handle the main feed with the haul trucks, becoming a pure bleed backup solution.
It was incredible to watch all the different teams come together across our newly combined organizations. This was an absolute combined effort involving leadership and functions from both companies, including manufacturing last mile load out encore construction and safety functions.
Chris: Look no formal integration process was required here. It just occurred organically our teams and leadership naturally came together to develop a creative solution to get our Kermit facility back online and serving our customers. The fact that within two weeks, our Kermit facility was loading trucks wasn't accomplishment nothing.
Chris: Sort of incredible and hats off to the entire team.
Chris: I think this highlights our combined company's strength scale and adaptability as well as our deep relationships across the industry that will continue to differentiate atlas in the future.
Speaker Change: Sean just last thing on that as I mentioned on the call.
Speaker Change: I think this validates our view on scale and and the culture.
Speaker Change: Hi, crush all this happened we had of innovation and collaboration.
Speaker Change: So it's a more reliable no other company could have done.
Speaker Change: Worked away Atlas has taught me this disruption.
Speaker Change: So Seth it's.
It's making the Permian better.
Seth: Got it thanks, guys. That's great response I appreciate it.
Speaker Change: Our next question.
Speaker Change: Ken is from Jim Rollyson with Raymond James. Please proceed.
James Michael Rollyson: Hey, good morning, everyone, and obviously again great job on [laughter].
James Michael Rollyson: Running the fire drill for what you guys had to do.
James Michael Rollyson: John maybe for you just a couple of questions around the dredges.
James Michael Rollyson: Everything seems to be on time from commissioning maybe a just a reminder of the cost impact on opex.
James Michael Rollyson: Once those things are fully set up and running starting in the third quarter and I noticed in the slides you mentioned the trial of using one of the older dredges.
James Michael Rollyson: A b at the hi, crush as Kermit facility.
James Michael Rollyson: How are you guys you know as you've had time to look at that maybe how are you thinking about that opportunity and an odds of success up there.
Speaker Change: Yeah as far as the Dredges go you know we're looking at.
Obviously, you know once we get these two dredges commissioned up and running and working together.
Speaker Change: We're looking at.
Speaker Change: Probably around a $3 decrease in cost per ton out there although on a monthly basis that would just be a carpet show.
Speaker Change: You know back in 2021, when we were you know.
Speaker Change: Feeding all of our mines mining feed through the through our dredge as you know we were running at I think around 650 and talent on all Opex.
Speaker Change: But obviously, we have a you know probably won't see that in that entire number hit our entire opex base. Because obviously, we have a lot more assets in the system now as it relates to you've got them on our hands and you've also got all the <unk> also got all non core mines as well as.
Speaker Change: As far as what's going to happen with the karmic dredge, yeah, we're going to decommission, a drag or take a dredge out we're going to run that dredge over it over to hi, crush they have a pond over there.
Speaker Change: That you know we're going to go out and we're gonna put this we're gonna put dish rental dredge out there see if it works and that's probably not going to happen until later this year. We just wanted to make sure that we want the team focused on getting these two new dredges up and running and commissioned and running together.
Speaker Change: The likely I don't really know what the likelihood of success as we do not have a bond that they can plug that dredging.
I think that the.
Speaker Change: Part of that is as you know I do.
Speaker Change: Don't think that they were willing to bring up to sign a long term contract to bring a dredge down to see if it would work, but given that we still have one on lease you know we're going to run over there and see how this works out.
Speaker Change: If it doesn't work out is there any other ways that we could utilize that dredge feed on that he had a carpet minds. If we're not able to you know dredge mine over there I still think there's an opportunity.
Speaker Change: Two you know utilize dredge mining across the entire Kermit facility out there which would be right.
Speaker Change: But the you know both the hi, crush sand and the and the Atlas mine. So we're still we're still in the early early stages of figuring that out Jim.
James Michael Rollyson: Got it that's helpful and maybe one for Bud Bud you have one of your largest competitors recently get taken out.
Bud: By private equity just kind of curious your view on that from both the valuation and strategic perspective, and how you think that might impact the market.
Bud: Yeah. Thank you.
Bud: It's good to see a very sophisticated investor like Apollo reckon.
Bud: Recognize that U S silica was trying to get a really depressed value.
Bud: Pay a premium for a good business with excellent free cash flow and so I mean, I would encourage investors to look at slide 17 in our deck.
Bud: It is just.
Bud: That's all they say.
Bud: Very objective.
Bud: Confirmation of what's shown on that slide that this company Atlas is really special in terms of op margins and our cash generation.
Bud: Growth profile and.
And in those attributes certainly merit a much higher.
Bud: Multiple than what we're saying probably more in line with the midstream or production and field services tied to enterprise and so there's a lot of a lot of opportunity here for let's say, a multiple expand particularly with our distribution to expand with it.
Bud: With the growing cash flows and that don't express in 2025.
Speaker Change: Thanks for that thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question is from Scott Gruber with Citigroup. Please proceed.
Scott Andrew Gruber: Yes, good morning.
Scott Andrew Gruber: Good morning.
Scott Andrew Gruber: Hey, Greg Congrats to John on the promotion and the Blake I'm sure is listening I wanted to come back to the Opex question you guys have long discussed the benefits of our of these dredges I'm. Just curious you know just in terms of putting all together with a new hi crush assets as well.
As you get these dredges up and running and kind of move into 2025 should we still be thinking around a $9 per ton opex figure for next year is that the bogey.
Greg: Yeah, I think I think a nine dollar gas, where we're kind of shooting for obviously, hoping that we get some additional benefit from the from the integration from the you know some synergies in there, but I think nine to $9 range is probably a good number to look at.
Greg: Okay.
Greg: Yeah.
Speaker Change: Great No I appreciate it and then coming back to do an express just wanted to get some updated color on contracting the associated loads anywhere. We're just now six months out for herself from startup so.
So what are you hearing from customers around <unk> around the system in.
Speaker Change: You know any additional color you can provide on especially with longer term.
Speaker Change: Contracts are associated with the system.
Speaker Change: Yeah, you know, we don't necessarily have Didnt express contracts, but what we do have are contracts that will be taken at standoff inexpressive basically fanned out logistics contracts with a number of operators that are operating in the Delaware basin.
Speaker Change: Yes, a lot of our customers that were down there that are going to be taken off the Dana Express are very excited about it because they're obviously wanting to take trucks off the road and make it make it safer and they also see the efficiencies that are going to come up with the Dan Express. They see you know the wealth side efficiencies the ability to utilize a pure asset to deliver more sand in the well.
Speaker Change: So look I feel very good about where our our contracting sets are as it relates to the sand supply and logistics contracts for Delaware basin customers in and where I'll say right. Now currently working with some customers getting them signed up some folks that we don't currently work with getting them signed up the contracts I'm just taking it off the off within express and then.
Speaker Change: You know one of the thing is right now as we are running 13, Delaware Basin crews right now and you know Chris you may want to talk about that I mean, that's something that.
Speaker Change: We've been working hard on tests to increase our exposure there but go ahead, yeah from a you know we we know that do not express is coming on and continuing that build to be able to seamlessly integrate those customers and do an express I think you know years ago. We approached this as going after peer do you and express type of contracts and I think you know.
What we've seen through.
Speaker Change: Through that transition work the basket is just leveraging our current customer agreements right running those 13 crews in having that naturally come in.
Speaker Change: And take all the mileage off the public road see the efficiency of the <unk> Express in the multi trailer operations.
We expect our current customers in the Delaware that back that customer set continue to grow.
Speaker Change: With current customers sprawling seamlessly right into the Aegean Express upon on commissioning.
Speaker Change: Great I appreciate all the color I'll turn it back thank you.
Speaker Change: Our next question is from Derek parties, there with Barclays. Please proceed.
Derek: Hey, Good morning, guys. I was wondering if you could provide us an update on how you're looking at pricing moving through this year I know, it's come down quite a bit.
So pricing volumes, obviously had an impact of the Kermit mine volumes are on the sideline.
Derek: And then just the amount of of your volumes in our contract just an update around those three items would be helpful for the rest of the year.
Derek: Yeah.
Speaker Change: Yes, so first off as I'll talk about pricing and some contracting that works that we are you know recently then we you know we're still signing contracts, we're signing contracts probably somewhere in the mid twenties.
Speaker Change: And those are obviously a lot of that also includes logistics, which is different. So you know that's just the price that's just the price of sand.
Speaker Change: Right now we have around 80% of our contract our volumes for this year contracted we are still there are still a number of contracts that were currently working on the contracting season really runs from probably.
Speaker Change: Probably just say the fourth quarter and all the way ends at the end of this probably middle of the end of the third quarter I mean, it probably you know probably say August timeframe.
Speaker Change: And that's kind of that's kind of the time that we have a contract that's why we're really contracting volumes.
Speaker Change: We do have a we didn't lose the spot volumes with it with the events that happened at Kermit.
Speaker Change: The spot volumes you know we have we like those we let that go you know obviously does we think those volumes would be coming back and then there's also opportunity in some of our own core minus two to increase would save oncor, one of our own core mice just coming on.
Speaker Change: Be able to see there's going to be a lot of demand out there for taking additional volumes got some spare capacity in that in mind, that's coming on out there so look.
Speaker Change: Yeah, I think that going through the year I mean, there's still a number of the number of contracts out there to be had.
And you know obviously, we're looking at both sand and logistics contracts here not just sand contracts. So.
Speaker Change: I don't know if anybody Christian.
Speaker Change: Talk a little bit about the patients 80, something we certainly have a tailwind.
Continued improvement.
Speaker Change: The improvement in efficiency.
Speaker Change: Queens out there with more some effects in trough racks et cetera, So that's a tailwind for us.
Speaker Change: What I'm, saying.
Speaker Change: Personally.
Speaker Change: I'm optimistic about the fundamentals of oil prices.
Speaker Change: The Sanchez nobody knows but our sense is that the private operators, probably going to pick it up a little bit in the second half of the year that should be constructed and you know I think we're a internally I mean, I think we're seeing sand demand up probably 10% to 15% year over year. I mean, there are some other forecasts that we've seen out there that are hired.
Speaker Change: Than that but obviously I think the frac efficiencies, even though you haven't seen a significant increase in the number of crews right and but you are seeing with the silo fracs in trauma Fracs, you're starting to see a more sand pumped per se per well.
Speaker Change:
Speaker Change: Kurt.
Speaker Change: And then there's one more thing to add real quick the increased adoption of electric fleets is certainly health war that right.
I didn't know completion efficiency, so that there isn't a lot more efficient than.
Speaker Change: Dual fuel and and where you have a diesel fleet. So that's certainly helping drive that demand.
Speaker Change: Right now that's all very helpful. I appreciate that color.
Speaker Change: Just wanted to think about 2025 Capex I know you mentioned in the opening comments about $60 million being towards that maintenance, but could you help us with what potential growth projects that youll see in 'twenty, five obviously small versus 'twenty, four but thinking about additional encore units or additional logistics pronghorn units, obviously, we're going to have a big step down in capex.
Speaker Change: Free cash flow increases youre, raising the dividend I'm sure you will have a more structured capital allocation return program in 'twenty five but just to help us think about 2025 capex any other moving pieces aside from that 60 million in maintenance would be helpful.
Speaker Change: You know, we haven't laid that out I mean, obviously, there's going to be some run over from the den Express I mean, we're doing express will be commissioned by the end of the fourth quarter, but yeah, theres still going to be some capex next year, probably I don't know how much that's going to be but we can.
Speaker Change: But the other things we'll be looking at as we are looking at potentially deploying some additional on core units.
Speaker Change: The autonomous trucking, obviously as you will be hearing more about that you're saying.
Speaker Change: As we as we.
Speaker Change: Percy.
Speaker Change: The path to delivering sand autonomously theres going to be some probably some capex related with probably some marvell load outs and things like that off the data express theres going to be.
Speaker Change: But I don't we don't have any big projects, but I would say.
Speaker Change: Currently and like in our in our plans that could change, but in general as you know.
Speaker Change: We've been through a period of very heavy capex. When do you like its own expansion that we had and that Didnt Express and we're ramping down on that.
Speaker Change: And so that's.
That's pretty remarkable in my view. The fact that we've had these healthy distributions even through that that high level of investment and a capex, but it does.
Speaker Change: Ramping down here in the second half of the year and particularly as you point out in 2025 or so so we're gonna be in a very I think a relatively luxurious position given our margins and our cash generation to be able to ramp up the distributions, but also to invest in some capex some more right.
Speaker Change: The return on projects.
Speaker Change: To drive efficiencies for the industry and drive up the liability.
Speaker Change: And.
Of course, they're doing express is a big part of that at the highest capacity trucking and eventually autonomous delivery.
Speaker Change: So so 2025 it was like some really exciting in that regard.
Speaker Change: Great. Good stuff. Thank you guys I'll turn it back.
Speaker Change: Thank you.
Speaker Change: Our next question is from Keith Mackey with RBC capital markets. Please proceed.
Hi, good morning.
Keith MacKey: First started I wanted to ask about your your appetite for acquisitions from here I know you certainly.
Just close on a sizable one and there's lots of organic growth opportunities within the company, but also the experience you've added to your C. Suite today might suggest that the inorganic opportunities are still a still a potential priority for you can you just sort of lay out how you think about acquisitions.
Keith MacKey: Going forward.
Keith MacKey: You want to go.
Keith MacKey: Okay.
Alright.
Speaker Change: As far as acquisitions go obviously that the hi, Chris acquisition has been a big one the integration is really kicked off.
And if it weren't for you now.
We're working on that integration I'm, saying things are going very well, they're bringing these two teams together.
Speaker Change: Don't have anything identified future.
Speaker Change: Your guys as far as acquisitions go, but I will tell you that that is something that we will continue to to continue to evaluate them. We got a we kind of look at acquisitions from the same thing the same way as we look at you know any any sort of project here any sort of large project. You know we've got return goals. We've got you know what does it do.
Speaker Change: You know.
Speaker Change: Help us.
Speaker Change: Enhance our story with our with our with our with our cash flow return story. That's what we're looking for high margin businesses does it meet our internal rate of return project hurdles.
Speaker Change: There's obviously a number of things that we look at when were making these and making these investments, but you know we do like I said this week.
Speaker Change: We just like I said, we just think this hi crush acquisition down.
Speaker Change: We're gonna get that integrated but yeah, we are going to continue looking at opportunities to grow and.
Speaker Change: And create value for our investors through through acquisition, Yeah, and I'll just add just a general comment.
Speaker Change: They say given the rate of return on projects such as it did in express and the highest capacity trucking and our margins and our cash generation. It is a high bar, but as you can see from the high close acquisition that was an extremely accretive acquisition.
Speaker Change: And I am optimistic that we will have more acquisitions in the future.
Speaker Change: We don't have anything that I can point to right now.
Speaker Change: Okay appreciate that and maybe if we just think about it a little bit from the customer standpoint lots of customer consolidation happening in the Permian right. Now can you just talk about what that means.
Speaker Change: For for a while.
Speaker Change: Field services in general and and your position within the market as well.
Speaker Change: Yeah. Thank you I'll start and these guys might want to add to it.
Speaker Change: Scale matters, and and you know as a former operator.
We've appreciated that and recognize that in and you were saying that execution by operators to two of them to grow their scale that that and that will tend to drive down costs and drive up their margins.
Speaker Change: And there was a lot of leverage associated with that in there says the same thing is true on the oilfield service side.
Speaker Change: And particularly for Atlas as the largest proppant producer the largest logistics provider we saw it to this recent disruption that our scale.
Speaker Change: And our culture are innovative collaborative culture, and all the great people enable us despite disruptions.
Speaker Change: We were able to perform and deliver for our customers. So so.
I think you know we're.
Speaker Change: We're benefiting from that and it's important that we continue to them too.
Speaker Change: Too.
Speaker Change: Operate as efficiently as we can to reliably service customer so.
Speaker Change: Oh, I think Atlas is in a unique position nobody nobody could have.
Speaker Change: For them the way that we have through that disruption and and we're going to continue to perform that way I don't know if you want to add to that I mean, yeah. I mean, I think it said you know a lot of a lot of customers are looking for diversification strategy. The Atlas as a diversification strategy I mean, we have four dry mine locations, we got eight wax white sand locations 409.
Speaker Change: Obviously with the large logistics offering I mean, you know theres not theres no. Other company out there that can provide that and we're going to continue to build on that to be up to.
Speaker Change: To continue to serve our great well done, let's say nobody can match that.
Speaker Change: Perfect. Thanks, very much that's it for me.
Speaker Change: Thank you.
Speaker Change: Our next question is from David Smith with ticketing Energy partners. Please proceed.
David Smith: Hey, good morning, and thank you.
David Smith: So good morning, I'll just read.
David Smith: Want to reiterate that congratulations on the incredible response to the buyer as well as the hiring of Blake Mccarthy.
David Smith: Yeah.
David Smith: Thought it was really impressive with over half of your Q1 volumes were delivered.
David Smith: Your own logistics.
David Smith: And I'm sorry, if I missed this but you can all have you talked about what you're seeing for your average delivery volumes in the areas to be served by getting express and if youre seeing a greater mix of double and triple trailer deliveries, but really how do average volumes per delivery.
David Smith: Compared to where you would expect them to be once again express is fully online.
David Smith: Yes.
Speaker Change: Okay got it yeah, I think from a from a total volume perspective, you know Didnt express capacity with current you know.
Speaker Change: Average volume monthly volumes per crew today will need to be up around that that 'twenty to 'twenty. One cruise is what were looking at as you've seen us right. Our business looking at the last mile side of things specifically in the Delaware I mean, we've grown somewhere in that eight to 10 times range in the last 24 months. So you know.
Speaker Change: Our ability to to achieve an additional seven crews 70 crews out there we see as a as highly highly probable as we as we continue down that pathway.
Speaker Change: Okay.
Speaker Change: Yeah, absolutely I appreciate that and maybe I asked the question.
Speaker Change: The wrong way, but you know when thinking about you know you've got 120 trucks right and you know total delivery capability is really going to be a function of you know turns per day and an average volumes per per trip to the wall side.
Speaker Change: I was more thinking about that average volumes curve picks up to the well site.
Customers are taking advantage of the Duluth to deliver to.
Speaker Change: Or are the retailers at a time.
Speaker Change: So I.
Speaker Change: I guess, you're asking the multi trailer success, yeah, yeah. So from a multi from a multi trailer side of side of this.
Speaker Change: We've recently opened up our and additional depot.
Speaker Change: Up in up in polygon, six which will be the and where the end of the June Express lives are opening up pretty significant volume for US there, we've now run double and triple trailers with five customers out there.
Speaker Change: And we continue to see our average payloads go up.
Speaker Change: You know I believe.
Speaker Change: With our first triple trailers, starting out April 5th of last year to where we are today with now.
Speaker Change: Two depots are looking to open a third one here shortly I think our customers that are utilizing them.
Speaker Change: We've even had customers looking to modify their their completions program to optimize the use of double and triple trailers. So you know while two years ago people thought. This was a was a a a very creative but would never happen idea. It was the same thing with the <unk> Express right and once our customers.
Speaker Change: See the efficiencies that they gain on location minimizing the trucks and also getting those trucks off the public road.
Speaker Change: Yeah, we've had nothing but success in there and also in recent conversations with Fox to even.
Speaker Change: Optimize the pad layout and sizing around double trailers. So I think those those type of those type of actions in conversations for our customers really show.
Speaker Change: You know where this is where this is heading with it with a multi trailer operations.
Speaker Change: That's great color. Thank you so do you have to.
Speaker Change: Our next question is from Neil Mehta with Goldman Sachs. Please proceed.
Neil Singhvi Mehta: Yeah. Thanks for this but thanks for your comments John John Congrats on your promotion and Blake.
Neil Singhvi Mehta: You as well.
Neil Singhvi Mehta: My first question is just around the <unk> Express as we think about construction. We are we're getting really close to come into service. So what are the last kind of gating items and can you give us a sense of your confidence interval around executing some of the last bottlenecks that might exist.
Speaker Change: You know.
Speaker Change: I mean, obviously the they did express construction has been moving along we have 200 over 200 people out there working on the construction of that.
Speaker Change: Fire itself, but theres not going to impact that don't express construction at all and backup I think it's going to enable our crews to install that tie into the plant more quickly.
Speaker Change: You know.
As far as the next bottleneck. So I mean I think the next milestones for US is going to be starting to commission. This commission that start commissioning the commissioning process, which is supposed to start at the end of the third quarter early fourth quarter and then what would be you know, obviously wont be selling any sand often can express for a while but the commissioning of that process is going to take another.
Speaker Change: Sure.
Speaker Change: You know another three up until the end of the fourth quarter to you John.
Speaker Change: John about what the commission gave us it will be Robbins.
John G. Turner: Yeah, I mean, it's just with the commissioning process is just getting up to say youre not really run any sand down the belts, but what youre doing is youre running those belts to make sure that they are.
John G. Turner: The belts tracking to make sure that they are working in order to making sure that you've got all the all the bugs worked out but as far as that is miles I mean as far as the kind of the gating items. We've ordered all of the equipment. We've got all the folks out there.
John G. Turner: I'm working on working on the working.
John G. Turner: Working on the construction, we've already done our two major open overhead road crossing some major over overhead crossings, we still got some we still have some some some cattle and wildlife processing to go with somebody show processing to go but you know everything is moving along as expected on the day and express.
Yeah.
Speaker Change: Okay. Thanks, John and then that you alluded to this free cash flow inflection, which we see in 2025 as well.
Speaker Change: And the potential to return more capital to shareholders do you do you have a preference in terms of doing it through the dividend versus buybacks or is it is it price dependent just talk about the framework of <unk>.
Speaker Change: How the board is thinking about the return of capital.
Speaker Change: You know right now we're really focused on returning cash to our investors, we think that paying that dividend. This is a it is obviously something that you know is that we're really focused on as an organization.
Speaker Change: I would say stock buybacks is that something that we've really discussed that's something that we won't likely be putting into a formal plan here in the next before we get to the end of this year, but right now.
Speaker Change: That's what we're focused is really returning cash to our shareholders.
Speaker Change: Thanks, Ken.
Speaker Change: Our next question is from silver at Pat with Bank of America. Please proceed.
Silver: Hi, Good morning, Bud and John if I can just go back to the Heico's integration I know there were a couple of questions early on but if we come back to that and as you move through the integration process as youre going out and talking to the customer was looking at the assets not just government, but the onboard assets can you.
Silver: Sure some feedback you've heard from the customers from the old steam though there are both positive and negative just are not that you have owned those assets a photo.
Silver: I think you just don't know two months right now.
Speaker Change: Okay, maybe I'll just make a real quite general comment and then you guys might want to add to it. This is bad I mean.
Speaker Change: You know obviously.
Speaker Change: Atlas Park to the highest gross acquisition, we had to have a really strong customer base in the Delaware basin.
Speaker Change:
John Open dunes in all of our Oh high capacity trucking and logistical.
Speaker Change: So it's been sort of in the excitement over there don't express.
Speaker Change: <unk> has attracted a really strong customer base for Atlas in the Delaware Basin.
Speaker Change: As the largest pulp producer in the basin, even powered a hard question.
Speaker Change: And clearly have cross did a great job with the oncor minds approximated proximity of those mines to the operators in the Midland Basin was it gave them a very strong customer base and in the Midland Basin. So.
Speaker Change: So you know it's obvious that the customers are really excited about but now we provide.
Speaker Change: Just to clear advantage to both the Midland and the Delaware basin to make it the benefit of atlas's scale and reliability and quality.
Speaker Change: So it's been very positive, but I don't know if you want.
Speaker Change: I mean, I think Budd just boil it down I mean, it's it's about locating.
Speaker Change: Our mines are saying possible to every every well sought out there you know and there are a lot of concerns that customers had about going with the U S.
Speaker Change: Singles and providers they couldn't get them if they were in the Delaware basin than they need to stand in the Midland Basin.
You aren't going to be able to provide that for today.
Speaker Change: We're delivering sand, obviously to the to the back of the Blender.
Speaker Change: You know to all of our customers across whether theyre in the met whether in Midland Basin player Delaware place them based on player for us.
Speaker Change: Just adding to that scale to be a better partner for our customers.
Speaker Change: Okay Awesome awesome and just one more for me, maybe just talk a little bit about your pricing strategy I'm thinking pricing strategy more broadly more broadly from a government versus our own code perspective, right. Because unquote has a very different kind of I said I'm, assuming you would continue to have slightly lower price, but longer duration contra.
Speaker Change: And those assets, but maybe you can talk to that a little bit on there just maybe remind us that if the 26 to $28 per ton pricing guidance that you gave for the full year does that is that still the right place to be.
Speaker Change: You know, we're not really talking about what our pricing strategy is that Theyre. Obviously, that's that's that's just something that we you know.
Speaker Change: Obviously internally work on here.
Speaker Change: I will say is we have a low cost to produce sand and we're going to we're going to bring those costs down and so we want we are very competitive when it comes to you know obviously each sandwich sand delivery dates obviously, both the sand sand price and delivery costs I mean, it's really it's about the lowest costs.
Speaker Change: To the well site and so that's really kind of where we focus their shop.
Speaker Change: Okay perfect. Okay, John Thanks for that I just found it back.
Speaker Change: Thank you.
Speaker Change: We have reached the end of our question and answer session I would like to turn the conference back over to management for closing remarks.
Speaker Change: Alright.
Speaker Change: We'd like to thank everybody for joining us.
For our first quarter call and we look forward to reporting our second quarter results on our next call. Thank you very much. Thank you. Thank you everybody.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Speaker Change: Mhm.
Speaker Change: [music].