Q2 2024 Archrock Inc Earnings Call

Operator: Good morning. Welcome to the Archrock second quarter 2024 conference call. Your host for today's call is Megan Repine, Vice President of Investor Relations at Archrock. I will now turn the call over to Ms. Repine. You may begin.

Good morning, welcome to the Archrock second quarter 2024 conference call.

Operator: Welcome to the Art Rock second quarter 2024 conference call.

Megan Repine: Your host for today's call is Megan Repine, Vice President and Investor Relations at Art Rock. I will now turn the call over to Miss Repine. You may begin.

making routine: Your host for today's call is making routine vice president of Investor Relations at Archrock.

Speaker Change: I will now turn the call over to Mr. <unk> you may begin.

Megan Repine: Thank you, Jail. Hello, everyone, and thanks for joining us on today's call. With me today are Brad Childers, president and chief executive officer of Art Rock, and Doug Aaron, chief financial officer of Art Rock. Yesterday, Art Rock released its financial and operating results for the second quarter of 2024.

Megan Elizabeth Repine: Thank you, JL. Hello, everyone, and thanks for joining us on today's call. With me today are Brad Childers, President and Chief Executive Officer of Archrock, and Doug Aron, Chief Financial Officer of Archrock. Yesterday, Archrock released its financial and operating results for the second quarter of 2024. If you have not received a copy, you can find the information on the company's website at www.archrock.com.

Speaker Change: Thank you J L Hello, everyone and thanks for joining us on today's call with me today are Brad Childers, President and Chief Executive Officer of Archrock, and Doug Aron Chief Financial Officer of Archrock Yesterday, Archrock released its financial and operating results for the second quarter of 2024, if you have not received a copy.

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

Speaker Change: You can find the information on the company's website at Www Dot Archrock Dot com.

Megan Repine: During this call, we will make four looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on our current beliefs and expectations, as well as assumptions made by an information currently available to Art Rock's management team. Although management believes that the expectations reflected in such four-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to defer materially from those in the four looking statements made during this call.

Megan Elizabeth Repine: During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, based on our current beliefs and expectations, as well as assumptions made by and information currently available to Archrock's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.

Speaker Change: During this call we will make forward looking statements within the meaning of section 20, <unk> of the Securities and Exchange Act of 1934 based on our.

Speaker Change: Our current beliefs and expectations as well as assumptions made by and information currently available to Archrock management team.

Although management believes that the expectations reflected in such forward looking statements are reasonable it can give no assurance that such expectations will prove to be correct.

Speaker Change: Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward looking statements made during this call.

Megan Elizabeth Repine: In addition, our discussion today will reference certain non-GAAP financial measures, including adjusted EBITDA, adjusted gross margin, adjusted gross margin percentage, free cash flow, free cash flow after dividend, and cash available for dividend. For reconciliations of these non-GAAP financial measures to our GAAP financial results, please see yesterday's press release and our Form 8K furnished to the SEC. I'll now turn the call over to Brad to discuss our truck's second quarter results and provide an update on our business.

Megan Repine: In addition, our discussion today will reference certain non-GAAP financial measures, including adjusted HIBIDOT, adjusted gross margin, adjusted gross margin percentage, free cash flow, free cash flow after dividend, and cash available for dividend. For reconciliations of these non-GAAP financial measures toward GAAP financial results, please see yesterday's press release at our Form 8-K furnished to the SEC.

Speaker Change: In addition, our discussion today will reference certain non-GAAP financial measures, including adjusted EBITDA adjusted gross margin adjusted gross.

Speaker Change: Margin percentage free cash flow free cash flow after dividend and cash available for dividend for reconciliations of these non-GAAP financial measures to our GAAP financial results. Please see yesterday's press release, and our form 8-K furnished to the SEC I'll now turn the call over to Brad to discuss Archrock second quarter results and to provide an update of our.

Brad Childers: I'll now turn the call over to Brad to discuss our truck's second quarter results and to provide an update of our business.

Brad Childers: Thank you, Megan, and good morning, everyone. Art Rock's second quarter performance reflects the earnings power we built through our investment in high quality assets, exceptional customer service, and efficient execution. The long-term and year-over-year strength and durability we see in our overall performance and as reflected in our second quarter results is also supported by the affordability and abundance of U.S. natural gas, which will continue to fuel growth in its demand, use, and production. And this strong performance, as well as the strength and durability, are both further bolstered structurally by the continued capital discipline being employed across the energy sector.

Brad Childers: Thank you, Megan, and good morning, everyone. Archrock's second-quarter performance reflects the earnings power we've built through our investment in high-quality assets, exceptional customer service, and efficient execution. The long-term and year-over-year strength and durability we see in our overall performance and as reflected in our second-quarter results are also supported by the affordability and abundance of U.S. natural gas, which will continue to fuel growth in its demand And this strong performance, as well as its strength and durability, are both further bolstered structurally by the continued capital discipline being employed across the energy sector. With that in mind, let me start today's call with a summary of key highlights from the second quarter.

Brad: Thank you Megan and good morning, everyone.

Brad: Archrock second quarter performance reflects the earnings power, we built through our investment in high quality assets.

Speaker Change: And all customer service.

Brad: Consistent execution.

Brad: The long term and year over year strength and durability, we see our overall performance and as reflected in our second quarter results is also supported by the affordability and abundance of U S natural gas, which will continue to fuel growth in its demand.

And production.

Brad: And this strong performance as well as the strength and durability of our book further bolstered structurally by the continued capital discipline being employed across the energy sector.

Brad Childers: Now that backdrop, let me start today's call with a summary of key highlights from the second quarter. Our net income of $34 million was up from $25 million in the second quarter of 2023. Adjusted EBITDA of $130 million was up 15% versus the prior year period. The increase was driven primarily by higher pricing combined with a sharp focus on cost management, leading to strong profitability. We maintained our sector leading financial position, including a leverage ratio of 3.2 times. We continue to deliver meaningful returns to our shareholders. Our quarterly dividend per share was up 6% compared to a year ago, all while maintaining robust dividend coverage of 2.6 times for the quarter.

Speaker Change: Now with that backdrop, let me start today's call with a summary of key highlights from the second quarter.

Brad Childers: Our net income of $34 million was up from $25 million in the second quarter of 2023. Adjusted EBITDA of $130 million was up 15% versus the prior year period. The increase was driven primarily by higher pricing combined with a sharp focus on cost management leading to strong profitability. We maintained our sector-leading financial position, including a leverage ratio of 3.2 times. We continue to deliver meaningful returns to our shareholders. Our quarterly dividend per share was up 6% compared to a year ago, all while maintaining robust dividend coverage of 2.6 times for the quarter. This was a great quarter for Archrock, thanks to a fantastic team of dedicated employees who work hard every day to deliver safe and excellent service to our customers and attractive returns to our shareholders.

Brad: Our net income of $34 million was up from $25 million in the second quarter of 2023.

Brad: Adjusted EBITDA of $130 million was up 15% versus the prior year period.

Brad: The increase was driven primarily by higher pricing combined with a sharp focus on cost management, leading to strong profitability.

We maintained our sector, leading financial position, including a leverage ratio of three two times.

Brad: We continue to deliver meaningful returns to our shareholders our quarterly dividend per share was up 6% compared to a year ago, all while maintaining a robust dividend coverage of two six times for the quarter.

Brad Childers: This was a great quarter for our track, thanks to a fantastic team of dedicated employees who work hard every day to deliver safe and excellent service to our customers and attractive returns to our shareholders. And now, with the acquisition of costs that we announced last week, we will further enhance our position as the premier contract compression services company in the US, and I'll expand on that in a bit. Turning to Archrock operations, market conditions for compression remain highly constructed, predominantly in oil plays with associated gas production like the Perving Basin. The robust market is reflected in our Q2 contract operations, operating and financial results.

Brad: This was a great quarter for Archrock, thanks to a fantastic team of dedicated employees, who work hard everyday to deliver safe and excellent service to our customers at attractive returns to our shareholders.

Brad Childers: And now, with the acquisition of Tufts, that we announced last... will further enhance our position as the premier contract compression services company in the U.S., and I'll expand on that in a bit. Turning to Archrock Operations, market conditions for compression remain highly constructive, predominantly in oil plays with associated gas production, like the Permian Basin. The robust market is reflected in our Q2 contract operations operating and financial results. Our fleet remained fully utilized, with utilization exiting the corridor at a rate of 95%.

Brad: And now with the acquisition of POS that we announced last week will further enhance our position as the premier contract compression services company in the U S and I'll expand on that a bit.

Brad: Turning to Archrock operations market conditions for compression remains a highly constructive predominantly in oil plays with associated gas production like the Permian basin.

Brad: The robust market as reflected in our Q2 contract operations' operating and financial results.

Brad Childers: Our fleet remained fully utilized, with utilization extended quarter at a rate of 95%. Booking activity increased sequentially as we continue to build an order book into 2025. We expect to see sustained compression booking demand well into the future as our customers plan for the call on natural gas production to support LNG export capacity growth and incremental electric generation demand from AI and data centers. On pricing with utilization at historic highs and continued strong booking activity, we're maintaining the pricing froggative and capturing additional rate increments. The second quarter marks our 11th consecutive quarter of sequential increases in our monthly revenue per horsepower, which increased to $20.85.

Brad: Our fleet remained fully utilized with utilization exiting the quarter at a rate of 95%.

Brad Childers: Booking activity increased sequentially as we continue to build an order book into 2025. We expect to see sustained compression booking demand well into the future as our customers plan for the call on natural gas production to support LNG export capacity growth and incremental electric generation demand from an AI and data center. On Pricing With utilization at historic highs and continued strong booking activity, we're maintaining the pricing prerogative in capturing additional rate increments.

Brad: Booking activity increased sequentially as we continue to build an order book into 2025.

Brad: We expect to see sustained compression booking demand well into the future as our customers plan for the call on natural gas production to support LNG export capacity growth and incremental electric generation demand for AI and data centers.

Brad: On pricing with utilization at historic highs and continued strong booking activity, we're maintaining the pricing progress in capturing additional rate increments.

Brad Childers: The second quarter marks our 11th consecutive quarter of sequential increases in our monthly revenue per horsepower, which increased to $20.85. Continued price increases and strong cost control drove adjusted gross margin percentage to 65% of 300 basis points year-over-year and consistent with the prior quarter.

Brad: The second quarter marks our 11th consecutive quarter of sequential increases in our monthly revenue per horsepower, which increased to $20.85.

Brad Childers: Continue price increases and strong cost control drove adjusted gross margin percentage to 65% of 300 basis points year over year and consistent with the prior quarter.

Brad: Continued price increases and strong cost control drove adjusted gross margin percentage to 65% up 300 basis points year over year and consistent with the prior quarter.

Brad Childers: The aftermarket service segment had another solid quarter. Revenue is totaling $45 million, remained elevated as great service is driving repeat business with customers. Second quarter adjusted gross margin of 22% exceeded our full year guidance expectation as we continue to focus on high quality and high margin work. From our first rate customer base to our highly standardized fleet and excellent customer service, we are known for in the field. To our most recent digitization and emission reduction efforts, the actions we've taken to enhance our business should benefit our performance for years to come.

Brad Childers: The aftermarket service segment had another solid quarter. Revenues totaling $45 million remained elevated as great service is driving repeat business with customers. Second quarter adjusted gross margin of 22% exceeded our full year guidance expectation as we continue to focus on high quality and high margin. From our first rate customers, to our highly standardized fleet and excellent customer service we are known for in the field, to our most recent digitization and emission reduction efforts, the actions we've taken to enhance our business should benefit our performance for years to come.

Brad: The aftermarket service segment had another solid quarter revenues totaling $45 million remained elevated as great service is driving repeat business with customers.

Brad: Second quarter, adjusted gross margin of 22% exceeded our full year guidance expectation as we continue to focus on high quality and high margin work.

Brad: From our first rate customer base, so our highly standardized fleet and excellent customer service, we are known for in the field. So our most recent digitization and emission reduction reduction efforts. The actions we've taken to enhance our business should benefit our performance for years to come.

Brad Childers: The acquisition of tops aligned with this strategic focus and is an exceptional opportunity to expand our contract compression operations, earnings, and cash available for dividend. With tops, we're adding 580,000 horsepower of young assets, including approximately 500,000 operating horsepower and a substantial and contracted backlog of new equipment. As we previously discussed, this strategic and immediately accretive acquisition carries four main benefits. First, the acquisition of highly of high quality assets with contracted cash flows as meaningful low-risk growth. The top fleet has an average age of three years, is 95% utilized, and backed by fee-based contracts with blue chip customers.

Brad Childers: The acquisition of TOPS aligns with this strategic focus and is an exceptional opportunity to expand our contract compression operations, earnings, and cash available for dividends. With TOPS, we're adding 580,000 horsepower of young assets, including approximately 500,000 operating horsepower and a substantial and contracted backlog of new equipment. As we previously discussed, this strategic and immediately accretive acquisition carries four main benefits. First, the acquisition of high-quality assets with contracted cash flows adds meaningful low-risk growth.

Brad: The acquisition of tops aligns with this strategic focus and is an exceptional opportunity to expand our contract compression operations earnings and cash available for dividend.

Brad: With Pops, we're adding 580000 horsepower of young assets, including approximately 500000 operating horsepower and a substantial and contracted backlog of new equipment.

Brad: As we previously discussed this strategic and immediately accretive acquisition carries four main benefits.

Brad: First.

Brad: The acquisition of highly of high quality assets with contracted cash flows as meaningful low risk growth.

Brad Childers: The Topps fleet has an average age of 3 years, is 95% utilized, and is backed by fee-based contracts with Blue Chip Customs. Second, the acquisition enhances our scale and complements our existing Permian Basin compression capacity. The addition of T.O.P.S.

Brad Childers: The tops fleet has an average age of three years is 95% utilized and backed by fee based contracts with blue chip customers.

Brad Childers: Second, the acquisition enhances our scale and compliments our existing premium-based compression capacity. The addition of costs is expected to increase Artrach's premium-based compression capacity by 30% to approximately 2.2 million operating horsepower. Third, this acquisition accelerates the growth of our electric motor drive fleet and augments our internal electrical expertise. Toss is the leading provider of electric motor drive compression. With this acquisition, we expect our electric compression fleet to increase to 648,000 horsepower, or 15% of our pro-forma fleet. Fourth, this transaction is consistent with our financial and capital allocation priorities, and we expect it will facilitate the accelerated return of capital to shareholders.

Brad: Second the acquisition enhances our scale and complements our existing Permian basin compression capacity.

Brad Childers: is expected to increase Archrock's permeant basin compression capacity by 30% to approximately 2.2 million operating hours. Third, this acquisition accelerates the growth of our electric motor drive fleets and augments our internal electrical expertise. TAS is the leading provider of electric motor drive compression.

Brad: The addition of <unk> is expected to increase Archrock Permian basin compression capacity by 30% to approximately $2 2 million operating horsepower.

Brad: Third this acquisition accelerates the growth of our electric motor drive fleets and augments our internal electrical expertise.

Brad: <unk> is the leading provider of electric motor drive compression.

Brad Childers: With this acquisition, we expect our electric compression fleet to increase to 648,000 horsepower, or 15% of our pro forma fleet. And fourth, this transaction is consistent with our financial and capital allocation priorities, and we expect it will facilitate the accelerated return of capital to shareholders. We're buying a rapidly growing business with a substantial and contracted backlog, and we expect the acquisition to be more than 10% accretive to earnings per share and at least 20% accretive to cash available for dividend per share in 2024.

Brad: With this acquisition, we expect our electric compression fleet to increase to 648000 horsepower or 15% of our pro forma fleet.

Brad Childers: And fourth this transaction is consistent with our financial and capital allocation priorities and we expect it will facilitate the accelerated return of capital to shareholders.

Brad Childers: We're buying a rapidly growing business with a substantial and contracted backlog, and we expect the acquisition to be more than 10% accretive to earnings per share and at least 20% accretive to cash available for dividend per share in 2025. Toss has both high caliber equipment and a talented team that we're excited to welcome to Archrock.

Brad: We're buying a rapidly growing business with a substantial and contracted backlog.

Brad: And we expect the acquisition to be more than 10% accretive to earnings per share and at least 20% accretive to cash available for dividend per share in 2025.

Brad Childers: TAS has both high-caliber equipment and a talented team that we're excited to welcome. The transaction is expected to close by the end of 2024, and we're confident in our ability to effectively integrate the acquired assets into our existing business. In summary, with today's robust market of growing natural gas production and compression demand, one of our top priorities has been investing in high-quality and high-return compression assets. And equally as important, we've been funding these investments within our cash flow so that we've been able to deliver on our commitment, increasing cash returns to investors while maintaining a strong balance.

Brad: To access both high caliber equipment and a talented team that were excited to welcome to Archrock.

Brad Childers: The transaction is expected to close by the end of 2024, and we're confident in our ability to effectively integrate the acquired assets into our existing business. In summary, with today's robust market of growing natural gas production and compression demand, one of our top priorities has been investing in high quality and high return compression assets. And equally as important, we've been funding these investments within our cash flow so that we've been able to deliver on our commitments to increasing cash returns to investors while maintaining a strong balance sheet.

Brad: Transaction is expected to close by the end of 2024, and we are confident in our ability to effectively integrate the acquired assets into our existing business.

Brad: In summary, with today's robust market of growing natural gas production and compression demand one of our top priorities has been investing in high quality and high return compression assets.

Brad: And equally as important we've been funding these investments within our cash flow. So that we have been able to deliver on our commitments to increasing cash returns to investors, while maintaining a strong balance sheet.

Brad Childers: The acquisition of tops aligns with this strategic focus and is an exciting milestone for Archrock that builds on the meaningful progress we've made or anything our business for the future and for long-term success.

Brad Childers: The acquisition of TOPS aligns with this strategic focus and is an exciting milestone for Archrock that builds on the meaningful progress we've made orienting our business for the future and for long-term success. With that, I'd like to turn the call over to Doug for a review of our second quarter performance.

Speaker Change: The acquisition of puffs aligns with our strategic focus and is an exciting milestone for archrock that builds on the meaningful progress we've made orienting our business for the future and for long term success.

Doug Aaron: With that, I'd like to turn the call over to Doug for review of our second quarter performance, 2024 standalone guidance, and financing strategy for the top acquisition.

Brad: With that I'd like to turn the call over to Doug for a review of our second quarter performance 2024, Standalone guidance and financing strategy with tops acquisition.

Douglas S. Aron: Thanks, Brad, and good morning, everyone. Archrock delivered another strong quarter of financial results. Net income for the second quarter of 2024 was $34 million. This included a non-cash $4.4 million long-lived and other asset impairment, as well as transaction-related expenses of approximately $1.8 million.

Doug Aaron: Thanks, Brad, and good morning, everyone. Archrock delivered another strong quarter of financial results. Net income for the second quarter of 2024 was $34 million. This included a non-cash $4.4 million long-lived and other asset impairment, as well as transaction-related expenses of approximately $1.8 million. We reported adjusted EBITDA of $130 million for the second quarter 2024. Underlying business performance was strong in the second quarter as we delivered higher total adjusted gross margin on a sequential basis. for the second quarter, Growth Capital Expenditures totaled $62 million, bringing year-to-date growth capex to $140 million. We expect our 2024 Growth Capital will be first half-weighted.

Doug: Thanks, Brad and good morning, everyone Archrock delivered another strong quarter of financial results net income for the second quarter of 2024 was $34 million.

Doug: This included a noncash $4 $4 million long lived and other asset impairment as well as transaction related expenses of approximately $1 8 million.

Douglas S. Aron: We reported adjusted EBITDA of $130 million for the second quarter of 2024. Underlying business performance was strong in the second quarter as we delivered higher total adjusted gross margin on a sequential basis. For the second quarter, growth capital expenditures totaled $62 million, bringing year-to-date growth capex to $140 million. We expect our 2024 growth capital will be first half weighted. Maintenance and other CapEx for the second quarter of 2024 was $29 million, bringing the total for the first half of 2024 to $51 million.

Speaker Change: We reported adjusted EBITDA of $130 million for the second quarter 2024.

Doug: Underlying business performance was strong in the second quarter as we delivered a higher total adjusted gross margin on a sequential basis.

Doug: For the second quarter growth capital expenditures totaled $62 million, bringing year to date growth capex to $140 million.

Doug: We expect our 2020 for growth capital will be first half weighted.

Doug Aaron: Maintenance and other capex for the second quarter of 2024 was $29 million, bringing the total for the first half of 2024 to $51 million. Turning to the balance sheet, we exited the quarter with long-term debt of $1.6 billion. Our leverage ratio at the end of the quarter was 3.2 times, calculated as total debt divided by our trailing 12-month-adjusted EBITDA.

Doug: Maintenance and other Capex for the second quarter of 2024 was $29 million, bringing the total for the first half of 2000 $24 million to $51 million.

Douglas S. Aron: Turning to the balance sheet, we exited the quarter with long-term debt of $1.6 billion. Our leverage ratio at the end of the quarter was 3.2 times, calculated as total debt divided by our trailing 12-month adjusted EBITDA.

Doug: Turning to the balance sheet, we exited the quarter with long term debt of $1 6 billion.

Doug: Our leverage ratio at the end of the quarter.

Doug: Order was three two times calculated as total debt divided by our trailing 12 months adjusted EBITDA.

Doug Aaron: As Brad mentioned earlier, we are acquiring tops for total consideration of $983 million, which will be funded with a combination of $826 million in cash and $6.87 million newly issued common Archrock shares to the seller. Archrock intends to fund the $826 million cash portion of the total consideration with a combination of equity and debt. On the equity portion, last week we announced the pricing of a common stock offering, raising net proceeds of $256 million at an offering price of $21 per share. The funding structure keeps us on track to achieve our financial targets, including maintaining a consistent leverage ratio of between 3.3 and 3.5 times.

Douglas S. Aron: As Brad mentioned earlier, we are acquiring TOPS for a total consideration of $983 million, which will be funded with a combination of $826 million in cash and 6.87 million newly issued common Archrock shares to the seller. Archrock intends to fund the $826 million cash portion of the total consideration with a combination of equity and debt. On the equity portion, last week we announced the pricing of a common stock offering raising net proceeds of $256 million at an offering price of $21 per share.

Doug: As Brad mentioned earlier, we are acquiring tops for total consideration of $983 million, which will be funded with a combination of $826 million in cash and $6 87, and $6 87 million newly issued common archrock shares to the seller.

Doug: Archrock intends to fund the $826 million cash portion of the total consideration with a combination of equity and debt.

Doug: On the equity portion last week, we announced the pricing of our common stock offering raising net proceeds of $256 million at an offering price of $21 per share.

Douglas S. Aron: The funding structure keeps us on track to achieve our financial targets, including maintaining a consistent leverage ratio of between three and three-and-a-half times. Post-transaction announcement and equity raise, all three rating agencies reaffirmed their Archrock credit ratings and out.

Doug: The funding structure keeps us on track to achieve our financial targets, including maintaining a consistent leverage ratio of between three and three five times.

Doug Aaron: Post transaction announcement and equity raised, all three rating agencies reaffirmed their Archrock credit ratings and outlook. The strong financial flexibility I just described continued to support increased capital returns to our shareholders. We recently declared a second quarter dividend of $16.5 per share or 66 cents on an annualized basis. This is consistent with the first quarter of 2024 dividend level and up 6% versus the year-ago period. Cash available for dividend for the second quarter of 2024 totaled $72 million, leading to an impressive quarterly dividend coverage of 2.6 times. Importantly, we believe the increase in pro forma discretionary cash flow from the addition of tops will further enhance our financial flexibility and capacity to increase dividends to our shareholders over time.

Brad: Both transaction announcements and equity raised all three rating agencies reaffirmed their archrock credit ratings and outlook.

Douglas S. Aron: The strong financial flexibility I just described continued to support increased capital returns to our shareholders. We recently declared a second quarter dividend of $0.165 per share, or $0.66 on an annualized basis. This is consistent with the first quarter of 2024 dividend level and up 6% versus the year-ago period. Cash available for dividends for the second quarter of 2024 totaled $72 million, leading to an impressive quarterly dividend coverage of 2.6 times.

Brad: The strong financial flexibility I, just described continued to support increased capital returns to our shareholders.

Douglas S. Aron: We recently declared a second quarter dividend of $16 <unk> per share or <unk> 66 on an annualized basis.

Brad: This is consistent with the first quarter of 2024 dividend level and up 6% versus the year ago period.

Brad: Cash available for dividend for the second quarter of 2024 totaled $72 million, leading to an impressive quarterly dividend coverage of two six times.

Douglas S. Aron: Importantly, we believe the increase in pro forma discretionary cash flow from the addition of TOPS will further enhance our financial flexibility and capacity to increase dividends to our shareholders over time. As you saw in our earnings release issued yesterday, Archrock reaffirmed its full year 2024 annual EBITDA and capital expenditure guidance, which excludes the pending acquisition of TOPS.

Brad: Importantly, we believe the increase in pro forma discretionary cash flow from the addition of tops will further enhance our financial flexibility and capacity to increase dividends to our shareholders over time.

Doug Aaron: As you saw in our earnings release issued yesterday, Archrock reaffirmed its full year 2024 annual EBITDA and capital expenditure guidance. Our guidance excludes the pending acquisition of Tops.

Douglas S. Aron: We plan to announce our expectations for the combined company once the transaction closes by the end of 2024. Excluding TOPS, our 2024 adjusted EBITDA is expected to range from $510 to $540 million, which represents an increase of 17% compared to $450 million in 2023. 2024 growth capex is expected to total approximately $190 million. This is flat compared to growth capex of $190 million in 2023. Our full year 24 maintenance CapEx forecast of $80-85 million and other CapEx forecasts of $20-25 million both remain unchanged.

Brad: As you saw in our earnings release issued yesterday Archrock reaffirmed its full year 2024 annual EBITDA and capital expenditure expenditure guidance, our guidance excludes the pending acquisition of tops.

Doug Aaron: We plan to announce our expectations for the combined company once the transaction closes by the end of 2024. Excluding tops, our 2024 adjusted EBITDA is expected to range from $510 to $540 million, which represents an increase of 17% compared to $450 million in 2023. 2024 growth cap X is expected to total approximately $190 million. This is flat compared to the growth cap x of $190 million in 2023. Our full year 24 maintenance CAPEX forecast of 80 to 85 million dollars and other CAPEX forecast of 20 to 25 million dollars both remain unchanged.

Brad: We plan to announce our expert expectations for the combined company once the transaction closes by the end of 2024.

Brad: Excluding tops our 2024 adjusted EBITDA is expected to range from $510 million to $540 million, which represents an increase of 17% compared to $450 million.

Brad: In 2023.

Brad: 2020 for growth Capex is expected to total approximately $190 million. This.

Brad: This was flat compared to the growth capex of $190 million in 2023.

Brad: Our full year 'twenty for maintenance Capex forecast of $80 million to $85 million and other capex forecast of $20 million to $25 million both remain unchanged.

Doug Aaron: In closing, the market remains as strong as we've ever seen it, and Archrock is in the strongest position in the company's 70 year history. We have an opportunities rich market and expect to invest in high return opportunities, profitably grow our business while prioritizing and growing shareholder returns and maintaining an industry leading balance sheet. We are excited to welcome the top's team, and we look forward to building an even stronger Archrock together for the benefit of our employees, our customers, and our investors.

Douglas S. Aron: In closing, the market remains as strong as we've ever seen it, and Archrock is in the strongest position in the company's 70-year history. We have an opportunities-rich market and expect to invest in high-return opportunities, profitably grow our business while prioritizing and growing shareholder returns, and maintaining an industry-leading balance sheet. We are excited to welcome the T.O.P.S. team, and we look forward to building an even stronger Archrock together for the benefit of our employees, our customers, and our investors. JL, with that, we are now ready to open the line for questions. Thank you. The floor is now open.

Brad: In closing the market remains as strong as we've ever seen it and Archrock is in the strongest position in the company's 70 year history.

Brad: We have an opportunity rich market and expect to invest in higher return opportunities profitably grow our business, while prioritizing and growing shareholder returns and maintaining an industry leading balance sheet.

Douglas S. Aron: We are excited to welcome the <unk> team and we look forward to building, an even stronger archrock together.

Douglas S. Aron: The benefit of our employees, our customers and our investors.

Operator: JL, with that, we are now ready to open the line for questions. Thank you. The floor is not open for questions.

JL: JL with that we are now ready to open the line for questions.

Operator: Thank you. The floor is now open for questions. If you have dialed in or would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking a question. And again, it is star number one to join the queue. Your first question comes from the line of Jim Rollyson of Raymond James. Your line is open.

Speaker Change: Thank you the floor is now open for questions. If you have dialed in we would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.

Operator: If you have dialed in or would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. And again, it is star one to join the queue.

Speaker Change: I would like to withdraw your question simply press Star one again.

JL: If you are called upon to ask a question and are listening via loud speaker on your device. Please pickup your handset to ensure that your phone is not on mute when asking a question.

JL: And again it is star one to join the queue.

Jim Rolison: Your first question comes from the line of Jim Rolison of Raymond James. Your line is open.

JL: Your first question comes from the line of Jim Rollyson, Raymond James Your line is open.

Jim Rolison: Hey, good morning, guys. Good morning.

James Michael Rollyson: Hey, good morning, guys.

James Michael Rollyson: Good morning.

Jim Rolison: Brad, so year to date, you've obviously spent well more than half of your growth cap ex, which in by the softer second half on that front. But just curious, your horsepower totals haven't moved that much in the active category so far.

Brad Childers: Brad, so year-to-date, you've obviously spent well more than half of your growth CapEx, which implies a softer second half on that front. But, just curious, your horsepower totals haven't moved that much in the active category so far. Just maybe, and I know you've also realized some proceeds from selling some stuff still, but maybe just a little color on kind of fleet dynamics, like how much horsepower you've delivered, how much has been put in the field, how much have you sold, just kind of color around that, if you don't mind.

Operator: And Brad so year to date, you've obviously spent well more than half of your growth Capex.

Speaker Change: Which implies the.

James Michael Rollyson: Softer second half on that front, but just curious your horsepower totals haven't moved that much in the active category. So far just maybe and I know you've also realized some proceeds from selling some stuff spill, but maybe just a little color on kind of freak dynamics like how much horsepower you delivered how much has been put in the field.

Jim Rolison: Just maybe in, I know you've also realized some proceeds from selling some stuff still, but maybe just a little color on kind of fleet dynamics, like how much horsepower you've delivered, how much has been put in the field, how much have you sold, just kind of color on that, if you don't mind. Thanks, Jim.

Speaker Change: How much have you sold just kind of some color around that if you don't mind.

Brad Childers: Sure. Thanks, Jim. On the overall position of the horsepower in the business, we're super excited to just maintain the 95% utilization rate that we've achieved. One of the impacts of that, as you can imagine, it does mean that we've put to work a ton of the idle fleet horsepower that we previously had, maintaining it at a high rate. And that also means there's less horsepower in the fleet to go back to work.

James Michael Rollyson: Sure. Thanks, Jim.

Brad Childers: On the overall position of the horsepower in the business, we're super excited to just maintain the 95% utilization rate that we've achieved. One of the impacts of that, as you can imagine, it does mean that we've put to work a ton of the idle fleet horsepower that we previously had, maintaining it at a high rate. And that also means there's less horsepower in the fleet to go back to work. So the tradeoff is, we get to book less of that, but it's because it's active, working, and highly profitable. So that's one dynamic that you're seeing on the relatively flat horsepower quarter over quarter.

Speaker Change: On the overall position of the horsepower in the in the business. We're super excited to just maintain that 95% utilization rate that we've achieved one of the impacts of that as you can imagine it does mean that we've put to work a ton of the idle fleet horsepower that we previously had maintaining it at a high rate.

Brad Childers: So the tradeoff is we get to book less of that, but it's because it's active, working, and highly profitable. So that's one dynamic that you're seeing on the relatively flat horsepower quarter over quarter. The second thing we'll note is that the market has definitely cooled a bit as we've seen a little bit of give back in some of the dry gas plays. Fortunately, as you can see in the numbers, it's completely immaterial to our overall fleet position as the vast bulk of our horsepower is going to work in liquids-rich places.

Brad Childers: And that also means there's less horsepower in the fleet to go back to work. So the tradeoff is we get to book less of that but it's because of the active working and highly profitable. So that's one dynamic that youre seeing on the relatively flat horsepower quarter over quarter. The second thing. We will note is that the <unk>.

Brad Childers: The second thing we'll note is that the market has definitely cooled a bit, as we've seen a little bit of give back in some of the dry gas place. Fortunately, as you can see in the numbers, it's completely immaterial to our overall fleet position, as the fast bulk of our horsepower is going to work in the liquid-rich place. 60% of it goes to work on the permeant on a booking basis right now. So those are a couple of the dynamics we've seen. And what I think is a relatively flat period of time, but finally, on a really good news front, booking has continued to remain robust.

Brad Childers: It has definitely cooled a bit as we've seen a little bit of give back in some of the dry gas plays.

Speaker Change: <unk> as you can see in the numbers, it's completely immaterial to our overall fleet position as the vast bulk of our horsepower going to work in the liquids rich place 60% of it is to work in the Permian on a bookings basis right. Now. So those are a couple of the dynamics, we've seen and what I think is relatively flat.

Brad Childers: Sixty percent of it goes to work in the Permian on a bookings basis right now. So those are a couple of the dynamics we've seen in what I think is a relatively flat period of time. But finally, on a really good news front, bookings have continued to remain robust. And so even though the horsepower activity itself is a little bit flattish for us in this current period, what 2025 offers is still a very robust booking set from our customers as they prepare for future natural gas production growth starting in 2025 as LNG projects come online. That's a lot of what you're seeing. And then, finally, I'd point out that, factually, you're right, the CapEx budget for the year 2024 was definitely front-end loaded.

Brad Childers: That period of time, but finally on really good news front bookings has continued to remain robust.

Brad Childers: And so, even though the horsepower activity itself is a little bit flatish for us in this current period, what 2025 offers is still a very robust bookings set from our customers as they prepare for future natural gas production growth starting in 2025 as allergy projects come online. That's a lot of what you're seeing.

Brad Childers: And so even though the horsepower activity itself is a little bit flattish for us in this current period.

Speaker Change: 2025 offers is still a very robust bookings.

Speaker Change: Set from our customers as they prepare for future natural gas production growth starting in 2025 as LNG projects come online.

Brad Childers: And then finally, I'd point out that actually you're right; the capex budget for the year 2024 was definitely front-end loaded.

Speaker Change: That's a lot of what Youre seeing and then finally I would point out that actually you are right. The capex budget for the year 2024 was definitely front end loaded.

Brad Childers: Yep, I appreciate that color and just kind of, since you brought up the new build part of that equation or new orders, just maybe kind of a status update on what lead times look like today. And another thing that's been helping, in addition to the tight market drive pricing, is just the fact that the cost of equipment has gone up and maybe just some color on kind of what inflation's been there as that's starting to level off, etc. So, actually on the easy stuff, lead times are in the 40 weeks plus or minus to being upon the category equipment, but we would describe it as a very normalized market.

Brad Childers: Yep, I appreciate that color. And just kind of since you brought up the new build part of that equation or new orders, maybe a status update on what lead times look like today. And another thing that's been helping, in addition to the tight market driving prices, is just the fact that the cost of equipment has gone up. And maybe some color on kind of what inflation has been there. Is that starting to level off?

Speaker Change: Yes, I appreciate that color and just kind of since you brought up the newbuild part of that equation or new orders, just maybe kind of a status update on what lead times look like today and then another thing Thats been helping in addition to the tight market drive pricing is just the fact that the cost of equipment has gone up and maybe just some color.

Speaker Change: We're on kind of what inflation.

Speaker Change: <unk> been there or is that starting to level off et cetera.

Brad Childers: Factually, on the easy stuff, lead times are in the 40 weeks, plus or minus depending upon the category of equipment, but we would describe it as a very normalized market. Inflation has returned to more historic levels, and that is for equipment coming into the system at the three to five percent range on a per annum increase basis. That's our expectation. That's what we're seeing, and that's what we expect.

Speaker Change: So actually on the easy stuff lead times are in the 40 weeks plus or minus depending upon the category of equipment, but we would describe it as a very normalized market inflation has returned to more historic levels.

Brad Childers: But inflation has returned to more historic levels, and that is for equipment coming into the system in the three, three to five percent range. Our paradigm increase basis, that's our expectation, is what we're seeing and it's our expectation. So, that's the easy stuff to point out, but what we also see then is just robust bookings continuing going forward with that.

Brad Childers: And that is for equipment coming into the system in the three.

Speaker Change: 3% to 5% range on a per annum increase basis Thats, our expectation is what we're seeing and it's our expectation.

Brad Childers: So that's.

Brad Childers: The easy stuff to point out, but what we also see then is just robust bookings continuing going forward with that with.

Brad Childers: So that's the easy stuff to point out. But what we also see then is just robust bookings continuing going forward with that. What's exciting about the market today, though, is that it's not about lead times anymore. Equipment costs are definitely up, and that means the price of bets has gotten bigger and further reinforced a lot of discipline in the market. Capital still remains at elevated levels, so that cost has enforced discipline in the market.

Brad Childers: What's exciting about the market today, though, is that it's not about lead times; it's constraining the market. Equipment costs are definitely up, and that means the price of bets has gotten bigger and further reinforced a lot of discipline in the market. Capital still remains at elevated levels so that cost is enforced discipline in the market. But what all of this goes to is the thing we think is really driving a lot of discipline in the market is the investors' demand and focus on free cash flow generation, strong balance sheets, and continued growth in returns to investors.

Brad Childers: What's exciting about the market today, though is that it's not about lead times, that's constraining the market.

Brad Childers: Shipment costs are definitely up and that means the price of bets has gotten bigger and further reinforce a lot of discipline in the market capital still remains elevated.

Speaker Change: Elevated levels of that cost is enforced discipline in the market who had all of this goes to is the thing. We think is really driving a lot of discipline in the market is the investors demand and focus on free cash flow generation strong balance sheets and continued growth and returns to investors that <unk>.

Brad Childers: But what all of this goes to is the thing we think is really driving a lot of discipline in the market is investors' demand for and focus on free cash flow generation, strong balance sheets, and continued growth in returns to investors. That level of discipline means that no one's going to borrow expensive money to place expensive bets without the security of a commitment and a booking with a contract in place with a customer already. That's what's really driving the market. We think it's about capital discipline. We don't think it's about supply chain constraints. I got it.

Brad Childers: That level of discipline means that no one's going to borrow expensive money to place expensive bets without the security of a commitment and a booking with a contract in place with a customer already. That's what's really driving the market.

Brad Childers: Level of discipline means that no one's going to borrow expensive money to place extensive bets without the security of the commitment and a booking with a contract in place with the customer already.

Brad Childers: That's what's really driving the market, we think it's about capital discipline, we don't think it's about supply chain constraints.

Brad Childers: We think it's about capital discipline; we don't think it's about supply chain constraints. Got it.

Operator: Got it. Yeah, it's certainly nice to see you, and I'll let somebody else ask questions. Appreciate the time.

Jim Rolison: Yeah, it's certainly nice to see, and I'll let somebody else ask questions. Appreciate the time.

Speaker Change: Got it yes, it's certainly nice to see and I'll, let somebody else ask a question I appreciate the time.

Steve Feruzani: Thanks, Jim. Your next question comes from line of Steve Feruzani of Sedotti.

John: Thanks, John.

Brad Childers: Okay.

Operator: Your next question comes from the line of Steve Ferazani of Sidoti. Your line is open. Good morning, Brad, good morning.

Speaker Change: Your next question comes from the line of Steve <unk> of Sidoti Your line is open.

Steve Feruzani: Your land is open. Morning, Brad. Morning, Doug. Appreciate all the detail on the call. Obviously impressive continued growth on the revenue per horsepower. I'm just trying to get a sense now. Are we getting closer to spot?

Operator: Morning, Brad. Morning, Doug.

Doug: Good morning, Brad Doug I appreciate all the detail on the call.

Speaker Change: Obviously impressive continued growth on the revenue per horsepower.

Operator: Appreciate all the detail on the call. Obviously, impressive continued growth on the revenue per horsepower. I'm just trying to get a sense now, are we getting closer to spot? Is there still a lot of room to go as you reset pricing on previous contracts and with the new capacity coming online?

Stephen Michael Ferazani: I'm just trying to get a sense now are we getting closer to spot is there still a lot of room to go as you as you reset pricing on previous contracts and with the new capacity coming online.

Steve Feruzani: Is there still a lot of room to go as you reset pricing on previous contracts and with the new capacity coming online?

Brad Childers: At these levels of high utilization, we still believe we have pricing prerogative. Spot pricing remains elevated compared to where the entire fleet is, and we will continue to opportunistically bring the fleet up to market pricing as our contracts permit us to do so over time.

Brad Childers: At these levels of high utilization, we still believe we have pricing prerogatives. Spot pricing remains elevated compared to where the entire fleet is, and we will continue to opportunistically bring the fleet up to market prices as our contracts permit us to do so over time. And on the good news front, when we evaluate our ability to either increase pricing because the contract is eligible for it, because it has a renegotiation clause in it, or it has an automatic price increase in it, or we have the ability to drive pricing under the contract terms, we estimate that over the next 18 months, we'll still be able to increase prices on 80 to 90% of the horsepower in the fleet. So over time, we expect to continue to work on closing that gap.

Speaker Change: At these levels of high utilization, we still believe we have pricing prerogative.

Speaker Change: Spot pricing remains elevated compared to where the entire fleet is and we will continue to opportunistically bring the fleet up to market pricing as our contracts permit us to do so over time and the good news front, when we evaluate our ability to either increase pricing because the contract is.

Brad Childers: And on the good news front, when we evaluate our ability to either increase pricing because the contract is eligible for it because it has a renegotiations in it or it has an automatic price increase in it, or we have the ability to drive pricing under the contract terms, we estimate that over the next 18 months will still be able to increase pricing on eligible to increase pricing on 80 to 90% of the horsepower and the fleet. So, over time, we expect to continue to work on bringing that gap, narrowing that gap.

Brad Childers: Eligible for it because it has a.

Renegotiation in it or it has an automatic price increase or.

Brad Childers: Or we have the ability to drive pricing under the contract terms, we estimate that over the next 18 months, we'll still be able to increase pricing on eligible to increase pricing on 80% to 90% of the.

Brad Childers: The horsepower in the sleep. So over time, we expect to continue to work on bringing that gap narrowing that gap.

Brad Childers: Excellent. As you talked about, you have less idle capacity to bring back. The only number that surprised me about the quarter was the higher maintenance capex yet. Your guidance didn't change, which implies this is by far the highest quarter. Usually that's because of a higher make ready. Is that what happened? Did you just happen to have more idle capacity coming back this quarter? Or was there something else in that higher maintenance capital expenditure?

Brad Childers: Excellent.

Steve Feruzani: You talked about you have less idle capacity to bring back.

Speaker Change: You talked about.

Speaker Change: You have less idle capacity to bring back.

Steve Feruzani: The only number that surprised me on the quarter was the higher maintenance cap-backs, yet your guidance didn't change, which implies this is by far the highest quarter. Usually, that's because a higher make ready. Is that what happened? Did you just happen to have more idle capacity coming back this quarter? Or was there something else in that higher maintenance cap-backs?

Speaker Change: The only number that surprised me in the quarter was the higher maintenance capex yet.

Speaker Change: <unk> didn't change, which implies this is by far the highest quarter, usually that's because of higher make ready is that what happened did you just happen to have more idle capacity coming back this quarter or was there something else in that higher maintenance capex.

Douglas S. Aron: No, Steve, I definitely would not read anything into that. I think we had some parts expenses, some timing in the quarter, you know, some of that can vary just depending on when the work gets done. So, as you said, we think our current guidance is absolutely good, and I wouldn't read into anything beyond that.

Doug Aaron: No, Steve, I definitely would not read anything into that. I think we had some parts expense, some timing in the quarter. Some of that can vary just depending on when the work gets done. So, as you said, we think our current guidance is absolutely good, and I wouldn't read into anything beyond that.

Speaker Change: No Steve I definitely would not reading anything into that I think we had some some parts expense some timing in the quarter. Some of that can can vary just depending on when the work gets done. So as you said, we think our current guidance is absolutely good and I wouldn't read into anything.

Douglas S. Aron: Beyond that.

Steve Feruzani: Okay, that's helpful.

Brad Childers: Okay, that's helpful. And last one for me, just on the continued strength of the aftermarket business. Is this a new reasonable run rate for your aftermarket? And can you maintain these above 20% margins? What's your outlook? Any changes?

Speaker Change: Okay. That's helpful and last one for me just on the continued strength with the aftermarket business is this a new reasonable run rate for your for your aftermarket and can you maintain these above 20% margins. How are you what's your outlook any changes.

Steve Feruzani: And last one for me, just on the continued strength with the aftermarket business. Is this a new reasonable run rate for your aftermarket, and can you maintain these above 20% margins? What's your outlook? Any changes?

Brad Childers: With the market as tight as it is, not just in contract operations, but also in the fleets of our customers. Our customers are very focused on maintaining their horsepower can't be better than they have in the past. There's less idle capacity.

Brad Childers: With the market as tight as it is, not just in contract operations but also in the fleets of our customers, our customers are very focused on maintaining their horsepower, candidly, better than they have in the past. There's less idle capacity.

Speaker Change: With the market as tight as it is not just in contract operations, but also in the fleets of our customers. Our customers are very focused on maintaining their horsepower candidly better than they have in the past, there's less idle capacity and so that's driving a lot of really good surge.

Brad Childers: And so that's driving a lot of really good service activity, which is higher margin and higher profit work for Archrock. And our team's doing an excellent job of both capturing it and executing on it. So I believe that as the market remains at these elevated levels of utilization, that translates into strength and continued profitability, both on the revenue line as well as in the profit we can obtain in our aftermarket services.

Brad Childers: And so that's driving a lot of really good service activity, which is higher margin and higher profit work to our track. And our team is doing an excellent job, but we're both capturing it and executing on it. So, I believe that if the market remains at these elevated levels of utilization, that translates into strength and continued profitability both on the revenue line as well as in the profit we can obtain in our aftermarket service business.

Speaker Change: This activity, which is higher margin and higher profit work.

Speaker Change: Archrock and our team is doing an excellent job both capturing it and executing on it. So I believe that as the market remains at these elevated levels of utilization that translates into strength and continued profitability. Both on the revenue line as well as in the profit we can obtain in our aftermarket service business.

Brad Childers: Alright.

Steve Feruzani: Thanks, Brad. Thanks, Doug.

Operator: Thanks, Brad. Thanks, Doug.

Brad Childers: Brad Thanks, Doug.

Selman Akyol: Thank you. Your next question comes from the line of Soma, Akio of Stiefel. Your line is open.

Brad Childers: Okay.

Operator: Your next question comes from the line of Selman Akyol of Stifel. Your line is open. Thank you.

Speaker Change: Your next question comes from the line of summer Kilo of Stifel. Your line is open.

Brad Childers: We should not expect to see a bump; you should not expect to see any real impact on the redeployment of those assets. What I was suggesting, however, is that with the small amount of horsepower in the dry gas plays that were reduced in the quarter, and we're talking about a fractional percentage of our fleet, it still has an impact on marginal growth in a period of time when equipment is not going back to work as aggressively in 2024 as it did in 2023.

Operator: Thank you. I wanted to follow up on a couple of comments. In your prepared remarks, I think you talked about the market being cooled, some give back in dry gas plays, and you're repositioning those assets into liquid plays. Can you maybe quantify how long that takes and, you know, how much horsepower we are looking at, and should we see some sort of bump from redeploying those assets in the third or fourth quarter?

Selman Akyol: Thank you. I wanted to follow up on a couple of comments. In your prepared remarks, I think you talked about the market is cooled, some give back and dry gas plays, and you're repositioning those assets into liquid plays.

Speaker Change: Thank you.

Speaker Change: Wanted to follow up on a couple of comments.

Speaker Change: In your prepared remarks, I think you talked about the market has cooled some give back in dry gas plays.

Operator: Your repositioning those assets into liquid plays can you maybe quantify how long that takes and how much horsepower. We're looking at and should we see some sort of bump from redeploying those assets in the third or fourth quarter.

Brad Childers: Can you maybe quantify how long that takes and how much horsepower are we looking at, and should we see some sort of bump from redeploying those assets in the third or fourth quarter? Thanks, Alman. We should not expect to see a bump. You should not expect to see any real impact, and the redeployment of those assets. What I was suggesting, however, is that with the small amount of horsepower in the dry gas plays that was reduced in the quarter, and we're talking about a fractional percentage of our fleet. It still has an impact in marginal growth in a period of time when equipment is not going back to work as aggressively in 2024 as it did in 2023.

Amit: Thanks, Amit.

Speaker Change: We should not expect to see a bump you should not expect to see any real impact to the redeployment of those assets.

Speaker Change: Suggesting however is that with the small amount of horsepower in the dry gas plays that was reduced in the quarter and we're talking about a fractional percentage of our fleet is still has an impact and marginal growth at a period of time when equipment is not going back to work as aggressively in 2024.

Operator: As it did in 2023, so I don't think you should expect to see any negative impact on that at all other than that equipment will go back to work probably in some of the dry gas plays some of it will be redeployed elsewhere over time, but it's so marginal that it will not be transparent from a financial perspective from a cost perspective is what I really.

Brad Childers: So I don't think you should expect to see any negative impact on that at all, other than that equipment will go back to work probably in some of the dry gas plays.

Brad Childers: So I don't think you should expect to see any negative impact on that at all. Other than that, equipment will go back to work, probably in some of the dry gas plays, and some of it will be redeployed elsewhere over time, but it's so marginal that it will not be transparent from a financial perspective or from a cost perspective, I really think.

Selman Akyol: Some of it will be redeployed elsewhere over time, but it's so marginal that it will not be transparent from a financial perspective or from a cost perspective is whatever. What should I say? Understood.

Brad Childers: I should say.

Brad Childers: And then just following up on the last question in terms of getting closer to spot, I think you said over the next 18 months you get price increases on 80-90% of the eligible fleet, and I was wondering if I could push you and just ask how much of the fleet is eligible over the next 18 months.

Brad Childers: Understood.

Selman Akyol: And then just following up sort of on the last questioning in terms of getting a closer to spot, I think you said over the next 18 months you get price increases on 80% to 90% of the eligible fleet, and I was wondering if I could push you and just ask how much of the fleet is eligible over the next 18 months to be reprised? That was the number between 80% and 90% of the fleet should be eligible for reprising in that period of time. Okay, understood.

Brad Childers: And then <unk>.

Speaker Change: Just following up sort of on the last question in terms about getting closer to spot.

Brad Childers: Tom.

Brad Childers: That was the number between 80% and 90% of the fleet should be eligible for repricing in that period of time.

Speaker Change: I think you said over the next 18 months.

Brad Childers: You get price increases on 80% to 90% of the eligible fleet and I was wondering.

Brad Childers: If I could push you and just ask how much of the fleet is eligible over the next 18 months.

Speaker Change: To be repriced.

Speaker Change: That was that was the number between 80% to 90% of the fleet should be eligible.

Brad Childers: For repricing in that period of time.

Operator: Okay, I understand. Thank you very much.

Speaker Change: Okay understood. Thank you very much.

Selman Akyol: Thank you very much. Thanks.

Brad Childers: Thanks.

Brad Childers: There are no more questions. No, I'd like to turn the call back over to Mr. Childers for final remarks.

Brad Childers: There are no more questions. Now, I'd like to turn the call back over to Mr. Childers for final remarks.

Brad Childers: There are no more questions I'd like to turn the call back over to Mr. Childers for final remarks.

Brad Childers: Okay.

Brad Childers: Great.

Brad Childers: Great. Thank you, everyone, for participating in our Q2 review call. Archrock's underlying business performance is outstanding, and we're excited about the top line, which we believe will create substantial shareholder value. I look forward to updating you on our progress in the future. Thanks, everyone. This concludes today's conference call. You may now disconnect.

Brad Childers: Thank you, everyone, for participating in our Q2 review call. Our tracks underlying business performance is outstanding and we're excited about the top still, which we believe will create substantial shareholder value.

Speaker Change: Great. Thank you everyone for participating in our Q2 review call.

Mr. Childers: Archrock underlying business performance is outstanding and we're excited about the top scale, which we believe will create substantial shareholder value.

Operator: I look forward to updating you on our progress in the future. Thanks, everyone.

Brad Childers: I look forward to updating you on our progress in the future. Thanks.

Brad Childers: Thanks, everyone.

Operator: This concludes today's conference call. You may know.

Brad Childers: This concludes today's conference call you may now disconnect.

Brad Childers: [music].