Q1 2025 Atlas Energy Solutions Inc Earnings Call
Speaker Change: Greetings and welcome to the Atlas Energy Solutions First Quarter 2025 Financial and Operational Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kyle Turlington Investor Relations.
Please go ahead sir.
Speaker Change: Hello, and welcome to the Atlas Energy Solutions Conference call and webcast for the first quarter of 2025.
Speaker Change: With us today, our John Turner, President and CEO , Blake McCarthy, CFO , Chris Scholla, COO, and Bud Brigham, Executive Chair.
Speaker Change: John Blake, Chris and Blood will be sharing their comments on the company's operational and financial performance for the first quarter 2025, after which we will open the call for Q&A.
Speaker Change: Before we begin our prepared remarks, I would like to remind everyone that this call will include foreign looking statements to find under the US Security's laws.
Speaker Change: Such statements are based on the current information and means with expectations as of this statement and are not guaranteed a future performance.
Speaker Change: Ford-looking statements involve certain risk and uncertainties and assumptions are difficult to predict. As such, our actual outcomes and results could differ materially.
Speaker Change: You can learn more about these risks in the annual report on Form 10K. We filed with the SEC on February 25th, 2025, our quarterly reports on Form 10Q and current reports on Form 8K and other SEC filings.
Speaker Change: 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 measures and statistics.
Speaker Change: You will find the gap reconciliation comments and calculations in yesterday's press release. With that said, I will turn the call over to John Turner.
John Turner: Thank you, Kyle, for the first quarter of 2025, Alice delivered revenues of $297.6 million, and adjusted the EBITDA of $74.3 million, represented a margin of 25%.
John Turner: While results were modestly impacted by a few discrete items, primary, higher than expected commissioning costs related to the didn't express, our core performance remains strong.
Blake: Blake will speak to the items in more detail here shortly.
Blake: Overall, Q1 was a milestone porter for Atlas. We completed the acquisition of Motor Energy Systems.
Blake: Executed a successful equity raise, refinanced our debt, set production records on our core facilities, and launched commercial operations for the Dan Express.
Blake: Before diving into those accomplishments, I want to directly address the uncertainty currently facing the local sector and how Atlas is uniquely positioned to navigate this environment with confidence. [inaudible]
Blake: Regent Volatility, largely driven by global trade concerns and macroeconomic uncertainty has pressured commodity prices, WTS Ford strip that decline approximately 20% since early April .
Blake: DeSyn Amics, or influencing customer spending behavior and deferring some near-term activity.
Speaker Change: That said, what management teams and markets dislike most is uncertainty. And we've structured to all this from the outset to perform through both up cycles and downturns. We are not reacting from a position of weakness, we're actually kidding from a position of strength.
Atlas was built to lead through cycles, not follow them. [inaudible]
In times like these, companies that control costs, [inaudible]
Speaker Change: Prioritized Capital Disciplines and Innovate with Purpose will be the ones that emerge stronger. On the sand and logistic side, are Kermit and Monahan's operations in combination with our on-board network, and now the Dune Express, Physician Atlas, as the absolute low end of the Permian Sand Cost Curve.
Speaker Change: On the power side, Moser Energy's integrated manufacturing and field lock service platform allows us to offer lower cost, higher up time solutions that create meaningful value for our customers.
Speaker Change: Moreover, our business model is designed for resilience. We operate with low-sustaining capital requirements. Our annual maintenance cap vectors are approximately $45 to $50 million.
Speaker Change: and we maintain the flexibility to scale the spending up or down in response to market conditions. Our recent refinancing consolidates our debt into a single facility with Eldridge, reducing our annual amortization to under $20 million in enhancing liquidity and optionality.
Speaker Change: Unlike many who also serve as peers who struggle to break even in downturns, Alice's structural advantage is enable us to generate healthy free cash flow in wheat markets while capturing outside returns when conditions tighten.
Speaker Change: We're already seeing some customers' growth plans at Adopt A flat until further clarity stands.
Speaker Change: While this has delayed some second quarter-gimes into the back half of the year, we enter 2025 with a strong allocation base of our approximately 22 million times and continue to bid on meaningful Newland tenders. [inaudible]
Speaker Change: This pause is not a reset, it's a retaliation, and we expect activity to resume as visibility improves.
Speaker Change: Turning to what gives us confidence. The due to express while contributing minimally to Q1's financials is entering a critical phase.
Speaker Change: William Verstabilizing, and we began routing deliveries through our end-of-line facility, optimizing last mile execution. We continue to expect Q2 to be the first period where the economic benefits of the new express are reflected in our logistics margins.
Speaker Change: This is a long-term infrastructure advantage and its early traction is already validating the strategy.
Speaker Change: Simole, the integration of motor energy systems is progressing exceptionally well. The cultural alignment has been seamless, and customer feedback has been overwhelmingly positive.
Speaker Change: Just as we disrupted the status quo in the Santa logistics business, we are taking a fresh approach, distributed power, exploring new business models, strategic partnerships to increase efficiency and lower customer costs.
Speaker Change: Mosher, Spirit of Innovation, is evident with next-generation offerings already in development that will further differentiate our power platform.
Speaker Change: In closing, while short-term uncertainty remains, our long-term outlook is grounded in strategic clarity, operational discipline and structural advantage across our portfolio. We are confident in the platform we built.
Chris Scholla: and then the team's executing our vision every day. With that, I'll turn the call over to Chris Scholla.
Chris Scholla: Thanks, Sean. At Atlas, we made a commitment to the communities of West Texas and New Mexico to enhance public safety by reducing truck traffic through the deployment of the Dan Express.
Chris Scholla: Since its first delivery on January 12, the Dune Express has already eliminated an estimated 1.8 million truck miles from our roads, and we're just getting started.
Chris Scholla: The system continues to ramp steadily, setting new shipment records each month. This progress reflects the strength of our strategic execution and the long-term vision that guides our business.
Chris Scholla: The Dune Express is a powerful validation of our disruptive logistics model, one that simultaneously delivers cost savings to our customers, margin expansion for atlas, and meaningful improvements in public road safety.
Chris Scholla: These achievements are rooted in our recommitment to the fundamentals of operational excellence.
Chris Scholla: Over the past year, we've gone back to the basics and built around three core pillars.
Chris Scholla: People, processes, and technology. Each reinforcing our long-term ambition to create resilient, scalable, and high-performing operations.
Chris Scholla: We've invested in people by strengthening leadership, restructuring teams for accountability and fostering a culture of ownership and cross functional collaboration.
Chris Scholla: Disalignment around common goals is driving operational discipline across the organization.
Chris Scholla: We've optimized our processes through standardized workflows, improved visibility and the removal of bottlenecks.
Chris Scholla: These efforts are translating directly into improved execution and cost efficiencies across the business.
Chris Scholla: And on the technology front, we're enabling smarter data driven operations from implementing reliability based maintenance strategies to leveraging sensor data for predictive analytics. We're using technology to drive performance. [inaudible]
Chris Scholla: Our autonomous trucking program has already completed over 500 deliveries to date and were poised to scale this significantly in the quarters ahead.
Chris Scholla: In March, we set new monthly production records at our current facility and achieved a last mile volume record of 1.8 million tons delivered.
Chris Scholla: Encore continues to perform exceptionally well, maintaining strong volumes and demand.
Chris Scholla: This operational momentum is the result of a focused transformation effort and a return to fundamentals.
Chris Scholla: Before I hand the call over to Blake, I want to recognize and thank all of our teams across Atlas. It's your execution, dedication and teamwork that are delivering results today while positioning Atlas for long term sustainable success.
Thanks, Chris.
Blake: and Q1 2025, Alice Generator Revenue of $297.6 million, and adjusted EBITDA of $74.3 million, at 25% margin.
Blake: Eben Delphell, Flyley Blower Guidance due to elevated costs from commissioning the Dune Express, an incremental third-party trucking bonuses to ensure deliveries during challenging winter
Blake: These factors were just Q1 EBDA by approximately 4 million impacting service margins early in the quarter.
Blake: January service margins, dip to the mid single digits, well below are a historical 10 to 15 percent range, but rebounded by 1100 bases points by March.
Blake: We expect this recovery to accelerate in Q2 with service margins surpassing 20% as the Dan Express's benefits begin to materialize, though still below its full potential.
Blake: Breaking down revenue, profit sales totaled $139.7 million, logistics operations contribute $150.6 million, and power rentals added $7.3 million.
Blake: Proper volumes reached 5.7 million tons, up sequentially, despite weather related disruptions.
Blake: Encore volumes, more sensitive to freezing conditions, were 1.7 million tons, slightly down from Q4.
Blake: Average revenue per tonne was 24.71, boosted by shortfall revenue from unmet customer pickups, excluding this, the average price was $22.51 per tonne.
Blake: Full cost of sales, excluding DDA, was $206.1 million, comprised of $65.2 million in plant operating costs, $133.5 million in service costs, $2.3 million in rental costs, and $5.1 million in royalties.
Blake: Perton Plant Operating Coss, built to $11.53 excluding royalties, down from Q4 with further normalization expected in Q2 due to improved efficiencies.
Blake: Cash SGNA was 26.6 million, including 8.2 million in transaction costs tied to the Moser acquisition and the subsequent financing activities.
Blake: Excluding these, SGNA was 18.5 million, up 6% from Q4. We anticipate SGNA rising above 20 million per quarter starting in Q2 due to his integration.
Blake: DDNA was 37.0 million, Ned Income was 1.2 million, and Earnings for Share was one set. Adjusted pre-cash flow, which we define as adjusted EBITDA, List Maintenance CapEx, was 58.8 million, or 19.7% of revenue.
Blake: Total incurred capex was $38.9 million, including $23.4 million in growth capex, and $2.1 million for power.
Blake: and 15.5 million in maintenance capex. Q1 capex included Dune Express commissioning costs, and we expect a sequential declining Q2. For 2025, we're budgeting 115 million in total capex, with flexibility to adjust based on market conditions.
Blake: As John noted, economic and commodity price uncertainty is prompting caution amongst our customers with several Q2 development plans deferred to the second half of 2025 .
Speaker Change: Rather than play the game of death by a thousand cuts, let's focus on what we know for Atlas in 2025. First, we have strong visibility on 22 million tons with 3 million tons of potential upside-pending.
Speaker Change: Second, the Dune Express and our Mobile Mind Network provide unmatched logistical cost advantages, facilitating high utilization even in software markets.
Speaker Change: Assuming no additional opportunistic volumes this year, and thus lower due and expressed throughput than previously forecast, we are currently projecting quarterly adjusted EBITDA run rate of 70 to 80 million.
Speaker Change: If deferred projects proceed, this could rise to 80 to 100 million. In either scenario, our financial obligations, including the current dividend are fully covered, even without tapping our capex flexibility.
Speaker Change: Atlas' robust financial position allows us to keep investing for long-term growth. Based on current market conditions and activity trends, we expect Q2 volumes in Evidda to be flat to up from Q1. Before we open the call for Q&A, a few remarks from our chairman, Bud Brigham. Thank you very much.
Thank you, Blake.
Bud Brigham: I will be brief in general given that the team has updated very well the current operational and financial aspects of our business.
Speaker Change: With over 35 years of experience in the oil and gas industry, starting my first company in 1990, and now having managed three public companies, we've learned to not only navigate but thrive in the industry's cyclical nature.
Speaker Change: The ability to transform challenges into opportunities has been a key driver of long-term success.
This approach defines Atlas.
Speaker Change: We're our low-cost structure and unique operational and logistical advantages, including the Dune Express, Autonomous Trucking, and our distributed power systems, set us distinctly apart.
Speaker Change: These drinks position us to build lasting value during market downturns as we did during the pandemic.
Speaker Change: As prices and activity improve, I'm confident Atlas will emerge even stronger, solidifying our commanding leadership in the industry.
Speaker Change: That concludes our call. We would be happy to answer any questions.
Thank you. We'll now be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star one on your telephone keypad.
Derek Podheiser: Thank you. Our first question is from Derek Podhaizer with Piper Sandler.
Derek Podheiser: Hey, good morning guys. So I just wanted to ask if you can give us some additional color. I want your guidance of flat to up sequentially is assuming. Think about the do and express ramping up full contribution from your power power business. So what are you seeing on activity pricing and cost for tone as we move through the year? Yeah.
Derek Podheiser: Shakespeare, this is John , and I'm not surprised to provide some flimera comments, and Blake and Chris will follow up, you know, apparently.
And we don't
Derek Podheiser: We currently don't see any near-term upside in this market. You can see that by what you've been here in, especially like last night. I mean you look at Travis's letter to shareholders. And I said it in my comments. You know what we've seen is, you know.
Derek Podheiser: Kind of a wait and see attitude on what's happening, no additions where there were some additions that were planned that have been postponed. However,
Derek Podheiser: and you know how you're starting to see the news come out where some offers are cutting activity, cutting crews because of what's going on in the in the in the in the markets.
Derek Podheiser: So, but you know, so right now we don't necessarily see near term upside, but obviously on the on the on the other side of that. We see, you know, there's a response. You're already starting to see a production is probably. [inaudible]
Derek Podheiser: We're starting to have a supply response out of the party in base, and obviously that near term could turn into a positive on the other side, don't you want to go ahead? Yeah, for the second quarter, we're taking a conservative broke on boys as we're not assuming any incremental update versus what customers have already spoken for. We would typically see customers begin to accelerate their development plans this time of year.
Speaker Change: You know, if they work through the capex budgets before our seasonal drop-off at the end of the year, but the movement to moderate prices, you know, that certainly that urgency is evaporated. [inaudible]
Speaker Change: We are seeing larger bodies taken off the end of the Dune Express, which is beginning to positively impact our logistics margins, which are expected to be at the 20% range of this quarter.
Speaker Change: That's still part-cribed from what we ultimately generate with the Dune Express. With respect to the rest of the year, I think it's anyone's guess, but my rises remain around current levels. I'd expect activity to wane throughout the course of the year, beginning particularly with the smaller players. [inaudible]
Speaker Change: Fortunately for Atlas, we're lever to the operators with highest return assets in the Permian Basin, and our whole business model builds around saving money through both efficiencies, and as we'll call flyers, it's going to become increasingly important as they look to cut well up. Well, what, well, A.F.E.?
Speaker Change: So, you know, it looks like these quilt cloths. We're going to look again in criminal market share and anti-utilization just as we have the prior downturns.
Brigham, that's helpful, maybe just the kind of...
Speaker Change: Doug Taylor off of that, obviously we've mentioned entering a period of softer activity when we hear it all over the place but maybe you know you touched a put on your your opening comments but
Speaker Change: Further expand on the 22 million tons you have committed.
Speaker Change: This year confidence around those volumes for the remainder of the year, I know last call we talked about potentially getting. [inaudible]
Speaker Change: to North of 25 million, so it's just maybe some additional color and comments as far as hitting those 22 millions and what we need to see to get up to that 25 million number.
Speaker Change: Yeah, good morning. This is Chris Scholla. I'll take that one. You know, we remain confident in the demand for that 22 million tons. We have allocated for the remainder of the year. And I think this is really supported by by strong fundamentals. And I'll see you guys next time.
Speaker Change: I'll share some stats with you just to try to help put this in perspective, right?
Speaker Change: Approximately 75% of our allocated volumes are tied to simile or trinal completions.
Speaker Change: which are really the most efficient and cost-effective frack methods out there. Making those completions much less likely to be impacted by any slow down activity. [inaudible]
Speaker Change: Over 70% of our volumes are committed to large cap operators, and that number of rates is up to 85% when you add in those mid cap operators.
Speaker Change: We do this really, you know, providing that stability through the larger long-term products.
Speaker Change: And you look at it from a fully delivered world cost basis, right? The sand volumes off the dunes, fresh and mobile mini. It's really unlikely that we see those customers have a pullback from those most cost effective supply options out there.
Speaker Change: That said, we still recognize, you know, the markets exposed to many macroeconomic and geopolitical uncertainties.
Speaker Change: But, you know, the market appears stable for now, and we're in this kind of wait and see Goldilocks, you know, holding zone, we're really, you know, $10 move, an oil price either way could provide, you know, significant risk downward or significant opportunity to work the back up. [inaudible]
Yeah.
Speaker Change: Great, very helpful, appreciate all the color guys, I'll turn it back.
Speaker Change: Our next question is from Sarah Pond with Bank of America.
Hi, good morning, John Blake and Chris.
Orders for all. Order.
Speaker Change: John Chris, maybe I want to start up more as a follow-up to what Derek was asking in terms of the guide, right? I want to specifically focus on the Dune Express, maybe?
Speaker Change: Spend a little time talking about the ramp up what you're seeing thus far both on the operational and the commercial side of things and then just maybe help us think through the cost inefficiencies because
Speaker Change: I think Blake, you were talking about how lower volumes are impacting your cost structure on the Dune Express, so maybe just spend a little time on that and just help us think through the near term earnings power of the Dune Express.
Speaker Change: Yeah, I'll just start off from it and then I'll hand it over to Chris. You know, the first and second quarters, I mean...
Speaker Change: When you start looking at the sand that's going down the Dan Expressway, we still have a cost associated with the Dan Express operating full operating probably even higher costs because we're in a commissioning phase.
Speaker Change: Yeah, you're not really necessarily sending a whole lot of volume about the data express until we reset.
Speaker Change: Breach that maximum capacity of selling sand all the dead expresses where you're going to obviously see the cool impact to our margins.
Speaker Change: You know, I think, you know, you can look at the million times that have been sent down to Dane Express to date.
Speaker Change: I think a majority of that has happened in the second quarter. And our plan is to continue to ramp this up, and we're very excited about what we are seeing off the dinner's press.
Speaker Change: and obviously more activity in the areas where they're doing express is located is going to and operations and as operators utilize it more. You're going to start seeing the full impact of our largest Christian. You want to go ahead and talk about that. Yeah, I think just just from a high level macro perspective, right? The doom express just a reminder delivers to. [inaudible]
Chris Scholla: You know, the most prolific region in North America, and you know, you look at the last downturn, and that's really where all these, these breaks can be factored to us. And so I think, you know, we are in a well position area on the dude from a demand basis. [inaudible]
Thanks for your time, folks.
Chris Scholla: We're kind of in that typical phase of the commissioning process, you know, working through control system refinements and, you know, supplier programming adjustments to really further optimize the operations.
Chris Scholla: You know, these type of refinements are really expected of a project of this scale in complexity, but we're confident in our team's ability to address this collectively.
Chris Scholla: You know, in late March, we completed our first scheduled maintenance cycle, you know, on time, no issues there. We completed those mechanical improvements, right, like the belt shortening at the transfer station optimizations. [inaudible]
Chris Scholla: and they're already contributing to the overall consistency of the tune.
Chris Scholla: Just some, you know, some numbers here, right? Simple launch. The didn't express a ship over a million tons and eliminated roughly 1.8 million truck miles from public roads. So that, that to us is really tangible proof of the systems growing impact out there. [inaudible]
Chris Scholla: You know, you talk about the financial contribution of it along with that ramp, right? Q1 was a bit modest I think, you know, due to that upfront commission cost and volumes being on the front end of that commissioning ramp. [inaudible]
Chris Scholla: But as operations normalize, and the system efficiency is continue to build up, we expect those margins to expand meaningfully as we move towards that back off our ramp in Q2.
Chris Scholla: As well, kind of a, you know, some data points out there right over the last 30 days, our shipments down the dunes for us. They've been running a clip around, you know, six million tonning here to run rate, and we continue to push that upwards every
Chris Scholla: Really, you know, from our perspective, the Dan Express in summary kind of remains that we're a stone of our long-term strategy and we believe it will be that key driver of margin expansion as well as the lasting competitive advantage moving forward market. [inaudible]
Chris Scholla: Yeah, that's wrong, but we have Blake here piggybacking all of Chris here, just to give you a little inside base ball on the numbers there. So we, in preparing moments, we talked about, you know, the logistics margins in January were compressed by your weather salt.
Chris Scholla: But by March with the Rant employees down the due express, we saw the 1100 basis points in margin expansion in logistics business.
Chris Scholla: with volumes containing a rap off the dine express, newer expectations of religious artistic margins to reach a two-manel in a second quarter.
Chris Scholla: We're still below what we ultimately can achieve with the system. So let me declare, you know, every incremental ton we deliver opportunity to express is highly accreted to as this consolidated margin, you know, it's blown through the margins of 50% right now. So we're just continuing to focus on pushing more, more volume there.
Speaker Change: Okay, now that's fantastic color and Blake, maybe I'll stick with you and a follow up question I had was on the free cash flow side of things.
Speaker Change: of Precars to the way we define it as CFO . CFO less Scopex was weaker than I was thinking at least.
Speaker Change: Right, but lots of things going on, I know, working capital CapEx. So maybe just help us think through the free cash flow profile, maybe just walk us through what happened in one queue. And then what should we expect the remainder of the year from a moving piece of standpoint to work in capital CapEx, you touched on in your prepared remarks, right, maybe a little bit on cash interest, tax expenses, right. So just
Speaker Change: The moving pieces of Rikasha, the remainder of the year, Blake.
Speaker Change: Yeah, yeah, so there were a few moving pieces of cashflow in Q1 that are going to change moving forward. So first, Q1 can be our largest spinning order. Here in terms of CapEx with the commissioning of the didn't express. We're going to move on to the next one.
Speaker Change: So a total cap that can produce 38.9 million. And that is currently expected to decline to approximately 25 million per quarter, stay alive for a budget of 115 million. Additionally, we had a really big build in working capital during the quarter. Networking capital expanded from 18 million at the end of the year to 109 million at the end of March. [inaudible]
Speaker Change: with almost the entirety of that build coming into counts receivable. The reason for that build is twofold.
Speaker Change: First, we had some large customers hold payments at the end of the quarter, likely to make their own working capital metrics with better. But we've already seen that again in reverse at the start of this quarter was in big collection weeks. Second, we have a receivable with the pressure pumping customer that has been building due to short falls on take pay contract.
Speaker Change: We have an enforceable contract there and expect to collect this receivable. So moving forward, we expect to see improved working capital efficiency and don't expect working capital to be a headwind to cashflow generation has been moved through the year. Which cash taxes, we expect that to be a minimal impact this year.
Speaker Change: Lee, right now estimates are anywhere from 6 to 10 million. And so, you know, all in all, like, you know, we expect cash load to improve moving forward as we as we've had through the year. [inaudible]
Speaker Change: Okay, perfect, and a very quick follow-up on what you just said, Blake, on the contract shortfall. How should we think about that if a customer, let's say, of that 22 million tons for whatever reason does not pick up the contracted volume? How enforceable are these contracts and how much I do think shortfall payments could be? [inaudible]
David Smith, Neil Mehta, John Turner, John Turner,
Speaker Change: We are very confident in the language in that contract and believe it is an enforceable contract and have every intention of collecting on that receipt.
Okay, both of them. Okay, I've done it back. Thank you.
Howard Eich's question is from Jim Rollyson with Raymond James
Speaker Change: On the power side of things have kind of been singing the praises and actually ramping up their capex [inaudible]
Speaker Change: based on Outlooks, Opportunity, etc. Maybe, I know it's early days because you've only had the business for a couple of months now, but maybe just expand a little bit on what you guys are seeing in terms of opportunity and maybe future growth upside to the 60 million cat-backs you guys talked about in the past. [inaudible]
Yes, I understand that, you know, that a few. [inaudible]
You're right.
Speaker Change: We have on this business for this over 60 days now and obviously the integration is going well.
Speaker Change: Very excited about what we're seeing from them on the motor side and the motor team.
Speaker Change: You know, the response that we've received from our customer base.
Speaker Change: has been pretty overwhelming. You know, we're still working through what all that means is for Atlas as an organization. I mean, we're very, very excited about the opportunity with power. And when we bought a motor, you know, we did buy a well established.
Speaker Change: Power Company that's providing cash flow from the start so it is a cash flowing business.
Speaker Change: You know, there's some obviously some big opportunities out there for us.
Speaker Change: And we're still trying to work, we're still working through those opportunities [inaudible]
Speaker Change: We are, you know, I think one thing is that the market is very inefficient when it comes to the power side of the business and
Speaker Change: and I think coming from the standpoint of what we did as a sand business and disruptive and that's a reason why we got in the business because we thought it was an opportunity for us to operate efficiently and help our customers save money.
Speaker Change: But we're very excited about what we're seeing and we'll have more about that to say, you know, probably recently we're still working through some things, but we don't have a lot of comments on it because it's just that we haven't owned it that long, but, you know, with Needless to say, it's very exciting opportunity and we'll have more about that stand future.
Speaker Change: Appreciate that, and maybe as a follow-up. One of the things over the last few quarters we've obviously, you guys in the whole industry has endured some pretty soft sand pricing historically after some period of time, that soft sand pricing adder or in some cases below.
Speaker Change: where other people's off-ex is you tend to start seeing some supply impacts. [inaudible]
Speaker Change: and you've had some consolidation in the space here recently. Just curious what you all are seeing on the sand supply side if we're kind of headed towards some of your competitors, you know, dialing back output or posing minds or what have you like we saw through the last downturn.
Speaker Change: Yeah, maybe I'll start by addressing a little bit of thoughts on the supply side and then we can kind of walk into a little bit of the pricing side of it, right?
Speaker Change: So in a look on the supply side, I think he has a nail on his, you know, we believe that those capacity additions that really peaked out out down.
Speaker Change: You know, some customers that we've seen just just drive by, right, have started to reduce shifts or idle low production to be competitors and then idle low production, you know, particularly with those high cost mind and disadvantaged operations that we've seen.
Speaker Change: You know, it's approximately called a hundred million something a year, but they ain't played
and Spot Crisis Net, and that mid-teen, mid to high-teens area.
Speaker Change: We do see additional rationalization, really the forces of the market, right? You see the recent competitor consolidation that has gone out there with pricing, you know, at or below that breakeven pricing of their manufacturing price. [inaudible]
Speaker Change: We see this as long-term, very constructive for the industry. I think we're really well positioned there.
Speaker Change: I mean, but we've been through this down cycle before, right? We know the playbook, we came out of the last downturn in a position of strength in the market, and we don't think this market's any different than that.
Speaker Change: Except if you look at now, we have significant structural advantages on a total of the liver cost basis by the additions of the mobile mini-mines and the dune express, you know, as part of our ammo box there.
Speaker Change: You know, from the pricing side of things, where we all know it, I mean, current low price environment.
Speaker Change: You know, the operators are under increased pressure of reduced costs all the way across their value, right? They're focused on sand pricing and overall completion costs. Let's go.
Speaker Change: You know, I think the students for us really, and the on-board plants, we've got to take a step back and look at that FOB pricing versus a total delivered cost pricing. I think you've heard us for a while now.
Speaker Change: You know, stressed those total delivered cost solution, which accounts for logistics, temptation, infrastructure integration.
Speaker Change: That I think people are really looking for more than, you know, competitive pricing of the mind from an H.O.E. perspective. [inaudible]
Speaker Change: We're looking for that comprehensive cost effects and effective solution that delivers it all the way to the well side at the total lowest possible cost.
Speaker Change: And that's really where, again, great didn't express non-core coming to play here with integrated logistics solutions that really provides that efficiency and total lows to whether to cost
Speaker Change: Look from a value proposition basis. We've really stopped looking at FOB sand pricing and looked at that total of the litter costs and efficiencies are the top priorities for this.
Cooperator, South Dakota.
Thanks for the color, Chris.
Our next question is from Atid Modak with Goldman Sachs.
Ati Modak: Hi, good morning, team. I guess on the deferred volumes, it sounds like it's on the non-contracted volumes. Can you give us any more color on what the nature of the conversation there is? It sounds like there might be some flexibility on ramping that up. Anything around that, and then could you divert these volumes to some other producers? How should we think about it? [inaudible]
Speaker Change: Yeah, so I mean, really the project falls mainly driven by macro uncertainties. So, you know, some of these McDonald's have seen their startup dates, pushed out a second half of the year from this quarter, because that's the indication hasn't now.
Speaker Change: Operators just aren't willing to admit to more volumes until they have a better grasp where their plans are going forward.
Speaker Change: Again, existing projects moving along as planned, you know, it's a consistent theme that we've heard throughout this earning season, but it's just new incremental work is on hold. Yeah, that's unfortunate, is that being really easy to talk from sand and logistics job utilizing the express and rather significant, and that was changing that, you know, is causing us to change guidance.
Speaker Change: Yeah, there are opportunities out there. We expect, as people get their feet under them, to figure out the lay of the land, we expect the opportunity to surface.
Speaker Change: and you know, as Chris alluded to, you know, how this isn't in a position to some competitive advantage with our total delivered cost of sand is that
Speaker Change: You know, there's really, we are in the campwork seat when it comes from a competitive position standpoint. And so we expect to, to go out there and get those as they come around, but just in the time being, I think the advice is trying to figure out the new land.
Speaker Change: Yeah, I think just that on radar, our focus through in there is to secure those long-term commitments that align with our, which is next infrastructure and structural advantages from the whole many of it.
Express.
Speaker Change: I'd appreciate that on the apologies if I missed this earlier but Blake could you talk about where the price is on the contracted volumes and where what your perspective is on what happens to those price levels in the second half of the year in terms of the FOB price you were talking about
Speaker Change: You know, on the allocated tons, the 20,000,000 of allocated tons, those are, you know, that...
Speaker Change: that, you know, no 20s, that we've been at over the last two quarters, next shortfall, shortfall revenues. We'll continue to be at those levels with the slides.
You have slight declines as just legacy contracts for a law [inaudible]
Speaker Change: You know, the spot price of saying right now is in the mid to high teens so as we, you know, if any incremental volumes that we do book. [inaudible]
Speaker Change: would be deluded to that average sales price, but would be very creative to the overall consolidated margin, just to point out our variable cost.
Speaker Change: or Langsey Minds is, you know, four to five dollars a ton, so anything that we can add on in terms of incremental volume is going to be juiced or financials. Then you add on top of that, the margins that we get off of our, you know, logistics and so.
Speaker Change: I would expect that price to continue to decline just with the current environment, but that's not necessarily negative for what's happening.
Speaker Change: Or a, you know, a little bit just trying to look at it at combined price and when you compare that.
Power Next Question is from Eddie Kim with Barclays.
Eddie Kim: Hey, good morning. Just wanted to ask about some more color on the deferrals of the development projects. Were these concentrated to a few large customers, or was this more kind of a...
Eddie Kim: Abroad-based deferral activity across your customer base. And I know you mentioned that these are being deferred into the latter half of this year. What's your confidence level at this point?
Eddie Kim: in that second half, you know, target and not, you know, potentially being deferred further out into 2026.
Eddie Kim: Now, you know, I think it'd be quite a bit of hubris to say, I know exactly what's going to happen in the market right now, but, you know, I think it's really, you know, customers are in the same boat that we're in right now, we're, you know, the ground is shitting underneath them. So, really, they're pulling back the reins on, you know, deploying it to no cap X until they get a lip of our clarity on where things are headed to appear. [inaudible]
Eddie Kim: So it wasn't just one of us, there were several projects there that both on the mobile mind side and then all the details for us side. We're just a general pause in the market and I think that that's been pretty clear in the commentary you've seen from the public E&Bs recently where.
Eddie Kim: You know, a lot of the news that came out last night was the news to us. We've been having those conversations with customers for a while. You know, it's something that we're aware of, but we're having active dialogue with them where. [inaudible]
Eddie Kim: You know, they're looking to save on their AFEs and Atlas's way that they can start to harvest some of those savings and so we're continuing to push there and show them the math and I think that it's starting to catch some attention.
Speaker Change: Got it. Thanks Blake. It apologies if I missed this but it sounds like your expectation for total volumes this year is now 22 million tons, which represents that committed or contracted capacity. Just given Kurt market conditions, is it possible that some of that 22 million tons flips into 26 or are how confident in you that? [inaudible]
Speaker Change: 22 million tons, it will be delivered this year.
David Smith, Neil Mehta, Sean Mitchell,
Speaker Change: So the 20 million is what we have allocated currently. We did say in the very remarks there's about 3 million tons of pending opportunities. So, you know more than 3 million tons. So, you know, there is a path to get back to that 25 million tons. It's just
Speaker Change: We wanted to be, you know, transparent with the market where paid like the reality of the market is that, you know, oil prices have come off.
Speaker Change: You know, it's a giant circular reference where operators are going to pull back on Capix and so
Speaker Change: You know, I think we have a fair bit of confidence in that 22 million times and, you know, in a bit of optimistic about some of those incremental volumes, but I wanted to be very, very transparent with our investor base that's really where stance is right now. And I think it's important because, you know, we're listening to what our customers are telling us. [inaudible]
Speaker Change: And that's why we're working conservative on our forecast for the second quarter. You know, we said we don't really see any near term upside in this market. However, you know, obviously if things change, you start to stand up thick and commodity prices to get more clarity on what's happening with the tariffs. And that's why we're working conservative on our forecast for the second quarter.
Speaker Change: You know, I think there's obviously some potential upside there for additional volumes to come on, but this is just what we're hearing from our customers. And you know, we fell to a lot of the most of the operators in the Permian. And so we're not, we're not, I mean,
Speaker Change: So, you know, those three million times, you know, they could come and it would be great if they did, but at this point in time, you know, we just don't have the clarity on that, because we're just repeating what we've been told.
Speaker Change: I might just ask this great way that John Vice comments. I mean, right now we happen to have this call during Pete uncertainty. I mean, uncertainty is the biggest issue for our industry right now. Not knowing where all processes are going to be and that's just. [inaudible] I'm sorry, I'm sorry
He's that directly.
Speaker Change: Drafts Their Activity. So once we get beyond this and wherever we get beyond the tariffs and all this uncertainty in the market, I think that's when we'll start to see the benefits of this cycle. Atlas, since the benefit from this is a low cost producer that's logistically advanced to. So.
Speaker Change: or the Wellheads in the Permian. And we're going to better fit on the other side of this because we're able to produce through the cycles and we're going to have more more of the market share on the other side of this and more
Speaker Change: Understood, understood, appreciate that clarification and all that color. I'll turn it back.
Speaker Change: Thank you. There are no further questions at this time. I'd like to hand the floor back over to John Turner, CEO for any closing comments.
John Turner: Thank you guys, thank you everybody for joining. Obviously very excited about what's going on with the company and the dinner express. Obviously, there's a lot of uncertainty in the market, but, you know, Alice's build is, you know, like we said in our, in our, in our prepared remarks, that this is a. [inaudible]
Speaker Change: Company, that was built, that was sent, and go through these ups and downs, these down cycles, and then to come through stronger. We look forward to reporting our second quarter numbers in August .
Thanks
Speaker Change: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.