Atlas Energy Solutions Inc.

Greetings and welcome to the second quarter of 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. 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 your host, Kyle Turlington, Vice President of Fresh Relations. Thank you. You may begin.

Hello and welcome to the Atlas Energy Solutions Conference call and webcast for the second quarter of 2025. With us today are John Turner, President and CEO, Blake McCarthy, CFO, Chris Schola, EVP and President of Sanan Logistics, and Bud Brigham, Executive Chair. We will be sharing our comments on the company's operational and financial performance for the second quarter 2025, after which we will open the call for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined in the U.S. Securities Laws. Such statements are based on the current information and management expectations as of this statement and are not guaranteed of future performance. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict. As such, our actual comments and results could differ materially. You can learn more about these risks in the annual report on Form 10-K we filed with the SEC on February 25, 2025, our quarterly report on Form 10-Q for the first quarter, our other quarterly reports on Form 10-Q, and current reports on Form 8-K and our other SEC filings. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update these forward-looking statements. We will also make reference to certain non-GAAP financial measures such as adjusted EBITDA, adjusted free cash flow, and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in yesterday's press release. With that said, I will turn the call over to John Turing.

Thank you, Kyle. For the second quarter, Atlas generated $70.5 million of adjusted EBITDA on $288.7 million of sales representing a 24% adjusted EBITDA margin. Our second quarter results at the low end of our -$80 million guidance range reflected the well-documented slowdown in Permian Basin completion activity, resulting in a slight sequential decline in volumes. This was primarily driven by customer pauses, extended delays between paths, and scheduled shifts rather than outright free reductions as operators navigated recent commodity price uncertainty. For the third quarter, we anticipate a sequential increase in volumes supported by continued market share gains and the strength of our high-quality customer space, despite persistent challenges in the West Texas Oilfield Services market through the end of 2025. The Permian Frac crew count, which averaged over 90 active crews in 2024 and peaked at approximately 95 crews by March of 2025, has declined to around 80, the lowest since 2017, excluding the COVID downturn. This reduction has a magnified impact due to significant frac efficiency gains in recent years. Daily sand pumped per fleet has more than quadrupled since Atlas' founding in 2017 and risen approximately 25% since 2023. As a key enabler of this industry transformation, Atlas benefits long-term from increased sand consumption, but in today's market where customers are delaying completions, each crew reduction or delay has a heightened effect. These efficiency improvements drive better wells and returns for our customers, positioning Atlas as a primary beneficiary when completion activity rebounds. As the Permian's largest sand and logistics provider, our scale and the cost efficiencies of the Dune Express provide clear operational and economic advantages over competitors, though we remain exposed to further declines in activity. Despite an approximate 15% decline in sand volumes from our first quarter exit rates, we anticipate -over-year growth in annual sand volumes driven primarily by our 22 million committed tons for 2025. Based on our internal estimates, Atlas has expanded its market share from just 15% at the time of our IPO to the high 20s by 2024 bolstered by the high-pressure acquisition to approximately 35% of all sand sold today. As we prepare for the fall RFP season, we expect additional market share gains in 2026 as we secure contracts to optimize our productive capacity and maximize utilization of the Dune Express. The synergies of our low-cost mines and integrated logistics network provide a competitive edge in total delivered sand pricing, which we intend to leverage throughout the contracting season. Spot prices for West Texas sand remain in the mid to high teens, levels insufficient to justify continued reinvestment for much of the industry, particularly as mines face low utilization and challenges absorbing fixed costs. While the supply stack has been resilient until recently, we are now seeing competitors idling underutilized mines and reducing shift schedules. We expect further supply rationalizations over the next few quarters and believe 2025 will mark the first year since the in-base and sand industries inception that total supply capacity contracts. Combined with rising per fleet sand intensity, this sets the stage for our pricing recovery when completion activity rebounds, a recovery for which Atlas is strategically positioned to capitalize on. The Dune Express is now fully operational with construction and the commissioning completed on time, a milestone many consider ambitious. Currently, the majority of the sand delivery from our Kermit plant utilized the Dune Express at our end of line and state line facilities, which has reduced public road traffic and emissions in the area. During the second quarter, we sent just over 1.5 million tons of profit down the conveyor. With the Dune Express's operational efficiencies now tangible, customers are actively securing access to its benefits for 2026. Alongside 5 million tons already contracted for next year, we have identified over 12 million tons of additional sales opportunities, signaling strong demand. There won't be room for everyone. The second quarter of 2025 represents the first full quarter of our integrated power operations following the acquisition of Mosier energy systems. The integration of Mosier into the Atlas family has surpassed our expectations, reflecting the strong cultural alignment identified during the diligence process. We are increasingly optimistic about the growth potential of our power business. Our commercial team is actively evaluating over 200 megawatts of opportunities across commercial, industrial, microgrid and production support applications. The well-documented surge in power demand across the broader economy has significantly expanded our potential customer base beyond our traditional oil and gas operators. As the cost of generating capacity rises in today's market, our ability to deliver tailored, efficient power configurations to meet customer-specific needs has driven strong traction within our existing customer base and into new sectors, including manufacturing, technology and other industrial markets. As we enhance our visibility in the broader power market, we anticipate further diversification of our customers in markets, creating growth opportunities for Atlas that mitigate the volatility of the oil and gas industry. A key commercial objective of the Mosier acquisition is to extend the duration of our contracts in this business. While our sales team is securing longer-term contracts with key oil and gas operators, the contract durations sought in these emerging markets are significantly longer, often exceeding a decade, a feature we view as highly attractive for stabilizing cash flows and reducing our exposure to historical cyclicality. Our power team has achieved significant process in enhancing operational efficiencies and expanding manufacturing capacity at our Casper, Wyoming facility, all while maintaining minimal capital expenditure. As we finalize the integration of Mosier Energy Systems, I am increasingly confident that our power business will serve as a critical growth driver for Atlas in 2026 and beyond. Following the close of the second quarter, we acquire PropFlow, a patented on-site profit filtration system that enables 24-hour continuous pumping, which Chris Stoller will discuss in further detail here shortly. Profit filtration has become an increasingly critical aspect of profit delivery and well-site efficiency, and the addition of PropFlow to the Atlas portfolio positions us with what we believe is the industry's leading filtration system. I'd like to take a moment to warmly welcome the PropFlow team to the Atlas family. In closing, while we anticipate ongoing challenges in the West Texas Oilfield Services market through the end of 2025, we believe these conditions will accelerate the necessary steps to rebalance the industry. For Atlas, these challenges also create significant opportunities. The acquisition of Mosier Energy Systems in early 2025 and PropFlow more recently demonstrate our ability to capitalize on difficult market cycles, enabling us to pursue strategic acquisitions and enhance our market position. And through cycle earnings potential, we expect our growing structural advantage in sand and logistics to deliver differentiated performance, which will become increasingly evident as industry conditions improve. Meanwhile, our power business is well positioned to drive sustained growth for Atlas, capitalizing on the secular tailwind shaping the broader power market. Now I will turn over the call to our EVP and President of Sand and Logistics, Chris Scholler.