Atlas Energy Solutions Inc.

Greetings and welcome to Atlas Energy Solutions, Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kyle Turlington, VP, Investor Relations. Thank you. You may begin.

Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the fourth quarter of 2025. With us today are John Turner, President and CEO, Blake McCarthy, CFO, Tim Ondrak, President of Power, and Bud Brigham, Executive Chairman. John, Blake, and Bud will be sharing their comments on the company's operational and financial performance for the fourth quarter of 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 under the U.S. securities laws. Such statements are based on the current information and management's expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially. You can learn more about these risks in the annual report on Form 10-K we will file with the SEC on February 24, 2026, our quarterly reports on Form 10-Q, and current reports on Form 8K 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 Turner.

Thank you, Kyle. For the fourth quarter, Atlas generated $36.7 million of adjusted EBITDA on $249 million of revenue, representing a 15% adjusted EBITDA margin. For the full year 2025, we delivered $221.7 million of adjusted EBITDA on $1.1 billion of revenue, achieving a 20% adjusted EBITDA margin. Our Q4 results exceeded our initial expectations. Volumes came in at 5.3 million tons, flat sequentially with the third quarter. The typical end of year seasonality was notably muted as customers took minimal downtime around the holidays. This was particularly encouraging following the steep decline in West Texas completion activity we experienced over the summer. It now appears that most operators have adjusted their activity levels to align with a $50 to $60 WTI strip and are comfortable maintaining operations at these levels. The quarter also marked the highest utilization we've seen to date on the Dune Express, as Delaware Basin customers increasingly recognize the efficiency and reliability benefits that this system brings to their logistics supply chain. We view this as a strong indicator of the system's performance heading into 2026. In November, we announced the order of 240 megawatts of power generation equipment, accelerating our strategic evolution into a leading provider of behind-the-meter long-term power solutions across a broad range of domestic industries. We see the evolving power market over the next decade as a truly generational opportunity, and we're moving aggressively to capitalize on it. After years of relatively flat U.S. electricity consumption, the grid is now confronting surging demand, which hit record levels in 2025 and is projected to grow by as much as 25% by 2030, driven by the explosive expansion of data centers and the resurgence in domestic manufacturing. Utilities are struggling to keep pace amidst infrastructure constraints and reliability challenges. where rising residential electricity prices up 7.4% in 2025 alone are creating political and economic pressure for more affordable, dependable alternatives. This dynamic is pushing developers to secure dedicated, behind-the-meter power assets to de-risk their projects and meet timelines. For many of these companies, grid constraints represent a new and urgent challenge, compressing decision-making windows dramatically. Since the summer of 2024, Atlas has been positioned in itself as the go-to solution in this space. The measure acquisition completed this time last year provided a cash flow platform and critical engineering expertise that complements our strength in large-scale project execution. Over the past nine months, we've been actively transitioning the business from a traditional short-term generator rental model to a power-as-a-service approach that selling electrons under longer-term arrangements. This shift has involved upgrading communication systems, refining our sales process, and focusing our commercial efforts towards customers seeking dense, long-term deployments. We're encouraged by the progress. We've reached a tipping point in this transformation. Earlier this year, we successfully deployed our first microgrid with a Permian EMP customer, which has since been upsized. In the first quarter of 2026 alone, we anticipate deploying at least 30 megawatts under long-term microgrid multibation contracts with ENP and midstream customers. Based on our current pipeline, we are targeting more than 50% of our existing fleet under long-term contracts by year-end. January also marked the initial deployment of our patented hybrid battery solution, which integrates with generators as a grid-forming system. delivering meaningful improvements in cost and maintenance efficiency. The commercial potential for this technology extends far beyond the oil field. While these advancements in our existing power business are promising, the larger behind-the-meter project represents a true step change opportunity for Atlas. We have active commercial negotiations underway and expect to provide greater visibility on equipment placement and the resulting economic impact to Atlas in the near term. Our pipeline features a broad range of behind-the-meter power projects across multiple industries, including energy, data centers, manufacturing, and others, with contract terms typically spanning five to 15 years, creating durable, long-term cash flows. We have particular strength and see especially compelling risk-adjusted returns in projects in the 50 to 500 megawatt range, where our modular platform enables efficient execution and high-density deployments. At the same time, Our differentiated track record with large CapEx infrastructure projects, such as our high-capacity plants and the Dune Express conveyor system, combined with our scalable design and growing expertise, advantage us for the execution of even larger-scale opportunities as customer demand intensifies. The opportunity set continues to expand rapidly, with several prospects advancing from initial discussions to formal proposals and active negotiations. We are targeting more than 500 megawatts deployed across our fleet in 2027 with the potential for substantial additional growth beyond that as we secure larger scale projects and build on our initial orders. The ordered equipment is slated for delivery starting in the second half of 2026 with energization targeted to begin in Q1 2027. Each of these projects has the potential to meaningfully enhance Atlas' cash flow profile and I am very excited to share more details with you as we close transactions. So stay tuned for the updates. I will now turn the call over to our CFO, Blake McCarthy, for our financials and more details. Thanks, John.

The underlying performance in our sand and logistics business improved in the fourth quarter, despite a continued challenging pricing environment. Plant operating expense per ton declined sequentially to $12.28. Despite elevated costs in October related to the operational challenges in Q3, and higher maintenance spending during December. Our cost of production, although improved, remain elevated our flagship Kermit complex due to current limitations on our dredge fee. This is expected to be alleviated with the deployment of our two new Twinkle dredges, which are scheduled for commissioning in the second quarter. The market backdrop for West Texas sand and logistics remains challenging with current pricing at the industry's marginal cost of production. Premium completion activity is expected to be down year over year, although it appears to have stabilized at Q4 levels for now. Despite the challenging market environment, Atlas' commercial team has positioned us well to grow volumes in 2026. Leaning on our cost-advantaged minds and logistics network, we were able to increase our share of current customers' sand procurement spend, while also adding some key new customers, relationships we expect to grow and scale over the course of 2026 and beyond. The current oil macro environment remains quite opaque, so we don't have significant visibility into all of our customers' full-year plans. But our Q1 schedule is very busy, with sales volume expected to be up approximately 10% sequentially, and further growth expected in the second quarter. The winter storm at the end of January impacted everyone's operations in the Permian, and we lost approximately four days of production and deliveries. This temporary shutdown is expected to negatively impact Q1 EBITDA by approximately $6 million. However, I'm proud to say Atlas was the last sand provider delivering in the Delaware before we had to shut down due to ICE. The fact that it was made possible by the Dune Express, removing so much road mileage and the related risks. Speaking of the Dune Express, it continues to run extremely well. January 12th marked the one-year anniversary of its first commercial delivery, and thanks to our partners, I am proud to announce that we have eliminated more than 21 million miles of truck traffic in the Delaware Basin. We are very proud of the fact that the Dune Express is materially improving the quality of life and safety for families and the broader community in the region. The Dune Express achieved record shipments in the fourth quarter of approximately 2.1 million tons, including a monthly shipment record in November of 760,000 tons. For the first quarter, we expect new customer wins and continued spot volumes to drive improvements in Dune Express volumes, and believe we are positioned to deliver north of 10 million tons via the Dune Express this year. We are grateful to our customers for partnering with us to make the Permian Basin a safer place to live and work. All that said, the obvious question is, If the Dune Express is working so well, why were Q4 service margins so weak? While Q4 numbers were burdened by large load bonuses to ensure driver availability through the holidays, the real answer to that question is simply pricing. Logistics pricing in the Permian has fallen to completely unsustainable levels, well below those seen during COVID. To compete with the Dune Express, we have seen increasingly irrational behavior from some of our logistics competitors, which we believe sets both them and their customers up for eventual problems and disruptions. We believe several companies are currently delivering standard prices where they are effectively subsidizing their customers. Thus, the margin differential provided by the Dune Express is there. It's just partially insulating us from historically bad pricing. Encouragingly, we are seeing signs of this market beginning to break the other way. Third-party trucking rates are beginning to see upward momentum, echoing what we're seeing in the broader over-the-road market. That is typically the first sign that trucking companies are tired of subsidizing their customers, and as a result, margins have to come up. In November, Atlas introduced our first last-mile storage pile system to the market. While other pile systems in the market essentially use mining equipment that has been reapplied for the oil field, our system is built for purpose. Today, we have six systems in place to support our wet sand operations, with testing underway for deploying the system in dry sand operations. These systems are key to continuing our further enabling of our customers' continuous pumping initiatives, which are driving record sand consumption per completion group. While the market for standard logistics in 2026 looks like it will remain challenging, we are looking to take advantage of the weaker market conditions to cement Alice's position as the provider of choice. The pricing pendulum in our industry has swung too far for too long, and the pricing rubber band is certainly tight. We're hearing more anecdotes of competitors struggling to fulfill customer obligations, and I'll echo the comments from the large-cap oil field services calls when I say that it's only going to take a very small increase in completions activity for pricing to move. This RFP season, we saw market share shift to the higher quality suppliers, with fewer volumes being spread amongst the lower quality mines. The supply demand for sand in the Permian is much tighter than the market realizes, especially for dry sand. On our last conference call, we set a cost savings target of $20 million in annualized savings. As it stands today, we have executed upon that target through a combination of the elimination of third-party last-mile equipment, reductions in rental equipment, headcount optimization, and procurement savings. Despite the early success of these efforts, we will continue to push for further cost optimization as we look to lower the fixed cost structure of our business across the organization. Moving to our financials. As John touched on earlier, Atlas recorded full year 2025 revenue of 1.1 billion. Total company adjusted EBITDA was 221.7 million, or 20% of revenue. Deconstructing full year revenues, profit sales totaled 478 million, on volumes of 21.6 million tons, while logistics and power contributed 558.8 million and 58.5 million, respectively. Fourth quarter 2025 revenue of 249.4 million broke down to the following. Profit sales totaled 105.2 million, logistics contributed 126.1 million, and power rentals added 18.1 million. Total profit sales volume was slightly up sequentially to 5.3 million tons, while the logistics business delivered approximately 4.9 million tons. Our average sales price for the fourth quarter was approximately $19.85 per ton. For the first quarter, we expect volumes to be up approximately 10% sequentially, with the average sales price as and to be approximately $18 per ton. Q4 cost of sales, excluding DD&A, were $187.3 million, consisting of $60.6 million in plant operating costs, $115.2 million of service costs, $7 million in rental costs and $4.5 million in royalties. For the fourth quarter, our per-ton plant operating costs were approximately $12.28, including royalties, down sequentially from the third quarter, but still elevated versus our normalized levels. Higher volumes and a reduction in extraneous costs at the plants for Q3 levels drove the lower plant operating costs. For the first quarter, we expect our OPEX per ton to be approximately in line with the levels in the fourth quarter, reflecting the impact of the severe weather in January. Over the course of 2026, we expect to see improvements in our realized variable costs as the new dredges are commissioned at our current facility. Cash SG&A for the quarter was $22.6 million. SG&A, excluding litigation expenses, is expected to decline in the first quarter due to our previously announced cost-cutting initiatives. Adjusted free cash flow, which we define as adjusted EBITDA, less maintenance capex, was $22.9 million, or 9% of revenue. Growth capex equated to $5.1 million, the majority of which was tied to our power segment, and maintenance capex during the quarter was $14.4 million. The elevated maintenance capex spend was primarily tied to preparations related to the dredging and wet plant operations at Kermit ahead of the Twinkle dredge deliveries. We expect cash capital spending in 2026 to be approximately $55 million, down significantly year-over-year and heavily weighted to the first half. Maintenance capex of approximately $45 million is planned. approximately 10 million dedicated to growth, evenly split between Santa logistics and power. Additionally, we expect to make progress payments on the 240 megawatts of power assets we have on order as they begin to be delivered over the course of the second half of the year. These payments will be financed from our recently announced lease facility with Eldridge and are expected to total approximately 190 million over the course of the second half of the year. Net interest expense is expected to be approximately 16.5 million per quarter in the first and second quarters, rising to approximately $20.5 million in the third quarter and $22 million in the fourth quarter. As John also touched on in his remarks, our plants have begun the year quite busy, with WTI prices hovering around $60. Oil prices will dictate if we continue to keep this pace up. We have a clear line of sight on strong volumes for the first half of this year, but many of our customers are taking a wait-and-see approach with respect to their second-half completion schedules. Our recent market share gains are a testament to Atlas's efforts to position ourselves as the reliable partner of choice to the best operators in the Permian Basin. For the first quarter, while volumes are expected to be up sequentially, the expected decline in sales price per ton combined with the lost days of revenue due to the winter storm will be a headwind of margins. Additionally, our logistics business was burdened by load bonuses to ensure driver availability around the turn of the calendar, which will mute logistics margins improvement until later in the quarter. However, we are seeing a return to more normal cost structure as the quarter progresses, which combined with a growing delivery schedule will yield an improved margin structure through the quarter. Additionally, the power business is expected to generate a greater contribution sequentially. Thus, we expect EBITDA to be approximately flat with Q4 levels, with the company exiting the quarter at a higher run rate in March versus January. I will now hand the call over to our Executive Chairman, Bud Brigham, for some closing remarks before we turn the call over for some Q&A.

Thanks, Blake. While we're navigating another cyclical trough in oil prices, the future for Atlas has never been brighter. Just as we were ideally positioned for the post COVID Permian recovery, which substantially expanded our cash flows, we're primed for the inevitable rebound in oil and gas activity today. But in addition, as I stated on our last call, we're going hybrid. Today, Atlas is laying the groundwork for transformative long-term growth through behind-the-meter power contracts. These five- to 15-year agreements are expected to deliver robust revenue visibility paired with predictable costs, including fixed and stable expenses for SG&A, maintenance and interest, complementing our powerful but more volatile oil and gas revenue streams. Our proven expertise in large-scale infrastructure, amplified by the Moser acquisition, uniquely equips us to power the surge in AI, robotics, and manufacturing. We see these initial permanent power projects as a strategic springboard, drawing in more customers and building a portfolio of assets that generate steady recurring cash flows. As discussed by John, demand for behind the meter power is accelerating rapidly, fueled by rising costs and potential grid shortfalls that are pushing commercial, industrial, and data center users towards swift commitments for bridge and permanent solutions. We're witnessing a seismic shift in power sourcing. To borrow from our partners at Bloom Energy, onsite power has evolved from a last resort to a business necessity. U.S. power demand is growing at its fastest rate in decades. Let me emphasize, the Atlas investment story is more exciting than ever. Chronic underinvestment in exploration spending coupled with Shell's maturation and steep decline rates sets the stage for what I believe will be a prolonged upcycle. While most US shale basins struggle with inventory depletion, the Permian, where Atlas leads in profit production and logistics, will be key to meeting rising oil demand. Even at today's cyclical lows in sand and logistics pricing, our low-cost model shines through, thanks to the Dune Express and efficient mining operations. When activity rebounds, and it's a question of when, not if, We anticipate stronger utilization, pricing, and margins, sparking a sharp profitability upturn. By investing ahead of this oil upcycle, while we are also launching our high potential power business, Atlas offers investors dual catalysts for substantial growth. I'm deeply grateful to our exceptional team, the true innovators fueling our advancements. Their dedication has me more optimistic than ever about Atlas's future. Thank you for joining our fourth quarter and year-end conference call. I'll now hand it over to the operator for Q&A.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. Our first question is coming from Jim Molison of Raymond James. Please go ahead.

Hey, good morning, everyone. John, you talked a bit about the power side. Obviously, a quarter ago, you ordered the 240 megawatts. I'm pretty sure you mentioned then you had line of sight on customer opportunities there. You've since secured financing, which I presume doesn't happen without similar line of sight. So maybe just an update on kind of what's taken a little while on getting that contracted and do you have good line of sight on where that equipment's actually going at this point since we're less than a year out from its deployment?

Yeah, great question, Jim. Thanks for asking. Yeah, we do have strong visibility into the customers that are expected to take, you know, the substantial majority of this equipment package. which is on track for delivery. I think deliveries, they began in late 2026. These are high-quality, credit-worthy counterparties that are across diversified markets and have indicated meaningful follow-on requirements beyond their initial commitment, providing for clear pathways for additional equipment orders and sustained growth into the future. Our strategies still remain solely focused on behind-the-meter power solutions, We're not pursuing grid interconnected or utility scale opportunities. Instead, we are delivering reliable on-site power directly to customers facing grid constraints. In many cases, these engagements begin with bridge power to address immediate needs, which generates significant near-term cash flow and accelerates our path to full development. These bridge arrangements quickly transition into long-term behind-the-meter agreements that we primarily are working on as customers recognize the prolonged red timelines and value of our integrated approach. So, you know, yes, the answer to that is yes, we do have clear line of sight on who those customers are and, you know, expect to be, you know, reporting on that here shortly.

Appreciate that. And maybe as a follow-up is kind of related here is I've watched this market evolve and different players kind of approach this in different ways. It seems like there's, two strategies I've seen, one being guys that are just providing power equipment basically on a rental basis, and then the second being guys that are providing the entire solution, all the, you know, balance of plant, et cetera. I'm kind of curious if you could elaborate on kind of which strategy fits yours and how you see the return opportunity there.

Yeah, go ahead. I'm going to let Blake. Yeah, and then we have Tim Ondrak, our leader of the power business, who can obviously talk more intelligently about it as well, but it's a really good question, Jim. Like, you know, there's obviously the equipment, and that's what I think most people in the market have a much clearer line of sight of, like, hey, it costs X, and, you know, therefore you rent for Y, and you have return, but when you get into these behind the meter solutions, right, depending on the function, like the function of the facility, there's different requirements for the balance of plant, different equipment that you need. And so that can change that, you know, dollar per megawatt provided, both on the front end and then what, therefore, what you have to charge. You know, our strategy has been like, let's get in really early with some of these customers that we know they're making big investments in facilities. And, you know, they're facing, you know, the grid has indicated them like, hey, you're not getting on for what you require. Really get to understand what they're trying to accomplish within their activities. And, you know, do a lot of front-end engineering to really meet their needs. And that can have a pretty broad range in terms of, you know, what, like, One, what our facility costs, and two, what we have to charge them. Because we're always going to be targeting a strong, unlevered return on our capital deployed. And obviously, when it comes to return on equity, with the leverage you use on these, it gets pretty attractive. So thinking about these first ones, there's going to be a pretty broad range, and that's why we're excited to share the economics on things. And we'll be very transparent about that. as we consummate deals.

And I also think that it is the reason why it's taken a little longer to sign. Another comment on why it's taken so long to sign these agreements is that these just aren't generator rental agreements. These are actually, you have to go in and do planning, engineering. You have to line up all the equipment. There's a lot of different things that you have to do on that front. So I think that's why it's taken longer to sign than to generate a rental agreement.

But it also makes those facilities much stickier because it's fit for purpose.

Yeah. And I think, you know, just to kind of close out, I think, you know, our strategy is rich to permanent. And when we look at the thesis that really drives that, you know, we view power as a structural need. And so, you know, depending on the utility region and where, you know, folks are building out their facilities, those delays can be 2028 all the way up to, I think we've heard 2034 from some people. And so when a customer looks at what their power need is as they start their facilities, it can be substantially less than their growth intentions. And so the model that that we have to execute on that is to provide mobile power generation into a permanent facility that meets that long-term need and gets the customer to a place where they don't need to worry about a utility timeline and they can worry about operating their business.

Makes perfect sense, guys. Appreciate it, Collar. See you next week. Thanks, Jeff.

Thank you. The next question is coming from Derek Podhazer of Piper Sandler. Please go ahead.

Hey, good morning, guys. We want to keep going on the economics question. So obviously, there's some numbers out there. We talk about, you know, plus or minus $300,000 per megawatt per year of EBITDA. You know, kind of compare that to your current financing costs. Maybe just help us understand, you know, when you talk about the receipts, building the facility, the balance of plan included in there, you know, how should we think about the economics and the earnings of these potential projects that you're working on? Just maybe a little bit of help around that as far as some of the numbers that we're hearing out in the market.

Yeah, I'll start off, and Blake can follow up. I mean, economics, obviously, like we said earlier, depend on a number of factors. If you talk about, you know, balance of plant facility development, you know, those are common factors. and our turnkey behind the meter solutions. And then, obviously, balance that with the initial contract term. You know, we focused on, you know, longer-term contract structure for stability. You know, our goal is attractive internal rates of return, well above our cost of capital on the initial term, with upside from extensions and expansions. Do you want to add to that?

Yeah. Derek, kudos to you. I'm really glad you asked this question. So, you know, I think it's a great question because I know people want to have some type of metric to plug in their estimates. John's comment on IRR is probably the best way to backdoor to that. So, for these projects, you know, we're targeting unlevered IRR in the high teens, which we find very attractive considering the contracted nature of these cash flows. So, when you layer on any type of leverage on top of those cash flows, the returns on equity, as I mentioned, get very attractive. But, like, you know, I – from a long-term perspective, You know, I think that that, you know, people talk about that, like, you know, $300 per megawatt. That's probably a good proxy for just equipment alone. But it's a little too simple when it comes to, like, you're actually doing these bespoke power facilities. So I think that, you know, using that IRR and, you know, hey, we, you know, disclosed kind of the, you know, obviously the magnitude of our facility has been disclosed. I think that's a good way to kind of backdoor into getting there. You should be able to use that and cost equipment. you get a decent proxy for cash flows that we expect off these projects.

Okay, great. That's super helpful. And then just my follow up as far as question around lead times for your additional equipment. You talked about going, you know, 400 to 500 megawatts of deployed capacity. Is this going to be a continuation of the 240 megawatts, those larger four megawatt receipts that you recently ordered? And if so, how should we think about when you be able to get those deliveries and the lead times around that and then really beyond? potential 500 megawatts maybe line of sight on the future orders beyond the 500?

Yeah, I mean, thanks, Eric. I'll take that question if anybody, but Tim, if you want to chime in on this. I mean, you know, our relationships with the key OEMs and our differentiated track record execution on large-scale infrastructure project continue, those continue to be major advantages, you know, which enabled us to initially secure the 240 megawatts at the, you know, four four-megawatt reciprocating units that are going to be delivered for later in 2026, and also enable us to maintain a solid line of sight and two additional equipment for high-quality opportunities in more than two-gigawatt pipeline that we're talking about. These relationships are built on trust, scale and early positioning, giving us access to redirected capacity from delayed projects elsewhere in the industry. So, you know, lead times for additional four megawatt receipts are now extended into late 2027, which reflects the strong industry-wide demand for behind-the-meter generation equipment. You know, that said, you know, our recent $375 million lease facility provides flexible, non-diluted support tailored to our needs, allowing milestone payments during the fact to conversion into term finance upon delivery. You know, this has been instrumental in funding our initial 240 megawatt commitment and positions as well for near-term deployments as we move towards our target of 500 megawatts by 2027. So, you know, with the majority of that under a long-term contract. You know, as far as beyond 2027, particularly as we pursue larger, denser, you know, behind-the-meter opportunities across, you know, diversified end markets, you know, we anticipate Needing additional financing to support further equipment orders, we've actively evaluated options that align our discipline capital approach, leveraging our proven track record with financing strong cash flow generation from bridge to permanent transitions. I think that as far as additional equipment packages, I mean, yeah, right now the package that we've acquired is these four megawatt resifts. I mean, there could be other potential opportunities out there, and I'll let Tim comment more on that. Thank you.

Yeah, so Derek, I think there's equipment available. Yeah, I think if you look at global capacity, a lot of it has been backlogged. I think there's been a lot of announcements publicly to kind of back into what may be left. So we really see two pools of equipment that come available. The first pool is where you have to be in the market. You have to be talking to people. And, you know, orders cancel or portions of orders cancel or get delayed. And so there's, you know, equipment that comes to market. And I think there's a second where, you know, OEMs are doing the same thing that we're doing where they're, you know, outbuilding relationships with the groups that are putting these in place. And I think as John alluded to, we're in a strong position to take advantage of those relationships. You know, you look at the folks that are on this team. and the relationships that they bring. And then you look at the reputation of Atlas in being able to manage and develop these substantial projects. And I think that gives confidence to OEMs that when they place assets with Atlas, it's going to be a good long-term relationship and it's gonna give all of us a good name. So I think that's what we're leaning into. And we've got line of sight into

uh the equipment that we would would use to to take us to that 500 megawatts great we'll appreciate all the color i'll turn it back thank you our next question is coming from steven jangaro of stifle please go ahead uh thanks good morning everybody i guess staying on the power theme you know one of the things we've sort of learned over the last couple of years was there's a skillset required to sort of deploy these assets at the site and operate them effectively and efficiently. Can you talk about sort of your internal expertise to execute these behind the meter projects?

Yeah, I'll lead off on that. And then, you know, again, to Tim, who's again, much more well-spoken on this subject, but when you think about the history of Atlas, right, I mean, we've got a lot of experience in building big, complicated facilities, right? So, you know, we constructed the Kermit and the Monahans facilities from when there was just a bunch of dirt out there in West Texas to some of the more sophisticated sand manufacturing facilities in the industry. And then you've got to remember that we're the guys that thought it was a good idea to build a 42-mile conveyor belt in the middle of the desert, which I think a lot of people rolled their eyes at that concept. And then, lo and behold, here we are a year later, and that's moving. So I think that when we have these initial conversations, people are like, wow, these guys are good at building big, complicated infrastructure projects from the ground up. And then you combine that with the electrical expertise that we brought in-house with the Moser acquisition. And then we haven't been sitting on our hands since we did that deal. We've been bringing in quite a bit of talent, some really, really strong people in terms of adding to that roster. And when you combine those two things, it becomes really powerful. And then as people learn about Atlas, and this thing is that This is a different customer set than we've ever dealt with, right? This isn't just, you know, the 25 EMPs that we all know and love. It is, you know, this is across the broader economy. And so there's a lot of education about who is Atlas that we have to do with them. And once they start to see, like, who we are and what we've done, they get a lot of comfort around that. And then, you know, we bring in some of our electrical experts and, you know, they start to wow them with their knowledge. Those Those commercial discussions progressed pretty quickly. I'll turn it over to Tim for actual specifics, though.

Yes, I think Blake touched on a couple of things there. I think, first and foremost, when we acquired Mosier, we got a team with a 50-year operating history. And so that was a great place to start from, from a talent perspective. We added to that team... you know, with some outside talent that have helped us substantially in the CNI, the larger megawatt deployments. And then from a long-term perspective, we've built an operating team with, you know, 20-plus years of experience in operating large engine systems. And so, you know, we really think combining all of those things, we're able to deliver, you know, the same level of execution that we've delivered in in the sand and logistics space and, you know, brought that over to the power space.

Okay. No, that's helpful. That's good color. Thank you. The other question I had is, and you mentioned, I think, in response to a prior question, the sort of the delays in grid interconnection. And you also, I think, made a comment about, you know, you sort of think about this as a bridge to permanent power. But it feels to us like that bridge to permanent power is pretty long. And I was just curious what you're hearing on the utility interconnection side and kind of the cues for larger loads to be delivered and how that kind of impacts your planning and thought process.

Yeah, so I think, you know, that's a big question. And I think that's a big question because when you look at the utility network in the United States, it is incredibly complicated, right? The rules change. you know, sometimes as you cross the street. And so when we're talking to folks about their projects, every one of them has a different story with similar themes. And the similar theme is that utilities aren't going to get there. And so they need to look at, you know, what they call a bridge solution. But I think when you really understand the challenges that the utilities face and, you know, you see projects from the utilities push, in different districts, you understand that that's going to affect, you know, really the entire industry. And so what we're hearing from utilities, and I think I mentioned this earlier, it's anywhere from 2028 to 2034 freight and purchase load to interconnect, and that's kind of across the U.S. And there's some places where you can pull data points that say it's longer, it's shorter. But if you take that perspective, what we're really talking about is infrastructure. And so you can bridge that, and I think we've got a good solution to bridge that. We've got 200 megawatts plus of bridge equipment in what we acquired from Mosher. But again, our thesis is this is a long-term infrastructure play. And so that bridge system has some disadvantages and The way you solve some of those disadvantages, whether they're fuel efficiency, footprint, whatever, is you install a long-term system that is designed to sit in place and operate. We talk about five- to 10-year contracts, 15-year contracts, but really these are 30-year facilities if they need to be. And so we think that that structural shift in this market is going to benefit those that take ownership of that and install their own systems today. And, you know, we think the broader grid really benefits from private capital installing broad infrastructure really across the entire United States.

Yeah, I mean, Stephen, it's such a fluid space too. Like, I feel like every morning there's four or five headlines around that interconnect to getting longer and pushing to the right. You know, and I think we're all pretty big believers in that and more pressure on the utilities to probably stiff-arm some of these interconnects, too, just because we think that affordability is going to become a bigger and bigger buzzword in the political landscape. It's probably in everybody's best interest for the private sector to solve this problem as opposed to leaning on the public utilities to get it done.

Yeah, even if they can get power from the grid, they can't get all of their power from the grid. And so, I mean, like Tim said, we're not only talking to end users, we're talking to the providers. And this is what we're getting from the providers is that we may be able to provide some of the power, but we're not going to be able to provide all the power. And they're also being told that in order for us to provide you power, you need to show us that you can provide yourself, supply yourself with a certain amount of power to get that additional power from the grid.

Obviously, a lot going on, a lot changing here, but that's kind of what we just know. And I think the one last point I'll make on that is, you know, we're out and we're talking to people every day that are looking at big projects. And the two things that are most consistent are, one, the utility has moved the goal line on when they're actually going to show up. And two, that they're not going to meet the full request for power.

Great. No, thanks for all the color. That's helpful.

Thank you. The next question is coming from Doug Becker of Capital One. Please go ahead.

Thank you, John. I think the questions are really appropriately focused on power up until this point, but I did want to touch base on the Sandman Logistics business. First half volumes look very good. Appreciate the lack of visibility around the second half of the year, but Any type of range you could provide for production growth for the full year to kind of give us some goalposts to think about?

Yeah, I mean, it's a good question, and sorry for being opaque, but, you know, right now, and I appreciate it on part of our customers, too, is that the outlook is a little opaque. You know, I think that... If you rewind three months ago, it seemed like every macro note you were reading was pointing to oil being $45 to $50 at this point in the year, and here we are sitting at $66 WTI. Granted, there's a lot of geopolitical risk premium built into that, but I don't think any of us think we live in a world where there's not going to be geopolitical risk. So our commercial team did a great job of going out there, and we told them, hey, go get the volumes. And they went out there and they did that. And it sets us up for a very strong first half. That being said, you know, there's a lot of our customers were, you know, they're like, hey, like, we've got our schedule for first six months of the year. And, you know, we'd like to leave a little bit of optionality on what our plans, our schedule looks like in the second half of the year. You know, so I think a lot of that's dependent on the commodity table. Right now, from where we sit, our expectations are for our overall volumes to be up year over year. That would imply – and that gives us – I appreciate that that's a pretty big window in terms of second-half volumes because we do expect to have pretty significant volumes in the first half of the year. That being said, like, you know, pricing environment remains pretty challenging. So, you know, that's obviously a headwind. But we're – so that has us, you know, focused on things we can control, which is driving down the variable cost of our production at the plants. We're pretty excited about the dredge commissionings that we've got coming up, you know, later this quarter into Q2. That's going to drive some significant improvements in our current facility. I think that really our objective on the sand logistics side is to just really cement ourselves as the leading sand logistics provider in Permian and position ourselves so that when the cycle does turn, hey, we're that sticky supplier of quality that, hey, nobody wants us not to be delivering sand onto their well side because we make it where their operations doesn't have to think about it.

That's fair point. On the logistics side, you know, highlighted the trucking challenges, but pointed out some upward momentum in trucking rates. Just any color on the margin outlook in logistics for this year, you know, after a pretty slow start on the margin front with the Dean Express?

Yeah, that's a good question. You know, I tried to give a little, you know, transparency on that because, you know, I think it's a question we get a lot. You know, we're positioned to move to improve off the low base we ended 2025 at and started 2026 with. You know, so during both late Q4 and early Q1, our logistics business was burdened by pretty heavy load bonuses that we offered to third-party carriers to ensure that we have the drivers available to meet customer needs during the holiday season and to ensure delivery when, quite frankly, the weather's pretty miserable, which it certainly was in January. Additionally, as we mentioned in the prepared remarks, like I said, our sales team, they were really feeling their oats during the contracting season, so they've done a great job securing pretty attractive work in what is a really tough market. And that includes a good amount of work that's going to drive incremental Dune Express volumes, which is the biggest driver of creating more margin differential in a weak pricing environment. Yeah, so from a numbers perspective, Doug, you know, I think logistics margins at Q1 are probably going to look pretty similar to Q4, with December of last year and January of this year representing low points. You know, Q2 is currently, like, I'm, you know, loose projections right now, but I've taken a nice step up into the double digits. You know, maybe not quite mid-teens, but a nice step up and a huge relative gap to where the rest of the market is.

Got it. Thank you.

Thank you. The next question is coming from John Daniel of Daniel Energy Partners. Please go ahead.

Hey, guys. Thanks for having me. First question is can you speak to the actual number or the volume of power increase coming from the EMP operators for microgrids? And then have you tried or will you try to tie sand volumes to contracts for that power?

Hi, John. Yeah, so the volume of increase on microgrids coming from EMP, I think what we're seeing is a little bit basin dependent. But in probably two of our three most active basins, I would say about half of the new requests coming in for well site generators are in some type of microgrid system. And that's typically tying the production from anywhere from two to maybe four pads together. But we expect that as the year progresses, we will allocate more and more units to those types of systems.

You know, as far as tying the sand volumes to the power, you know, that's obviously a good idea. We like to be, you know, we want to be a broad provider of solutions for our customers. As of now, you know, a lot of the teams that deal with those are separate. You've got completion teams that are working versus the production teams that they're mostly different in a lot of these organizations. But from a sales standpoint, we're always working to be a better solutions provider for our customers. So I'm not going to count that out of the question.

All right. That's all I had. Thanks, guys. JD.

Thank you. Our next question is coming from Eddie Kim of Barclays. Please go ahead.

Hey, good morning. Just wanted to circle back to the volumes theme. You mentioned that you're adding – sorry, you're in discussions on adding new customers this year, and you're taking greater share of the wallet with your existing customers, and it seems like you've been successful with that. Just to be clear, Are those wins fully reflected in your first quarter volumes guidance, or do those volumes really start to kick in later in the year?

I would say those wins are not necessarily reflective in our first quarter volumes. I mean, first quarter volumes are going to be depressed some because of the weather, but I would expect to see some of those impacts kicking in as we move. You're going to see some of it in the first quarter, and then it's going to kick in second and third.

Yeah, I mean, like – There's always a ramp in customer activity. January always starts a bit slow, and we have a steady ramp through the course of the quarter. And then that winter storm in January, obviously, it topped out about four and a half days of operations out there for everybody. And so not fully reflected in those volumes. Our expectation is for it Q2 volumes to be a step up from Q1.

Got it. And then just to get on that theme, I mean, you mentioned strong volumes in the first half, but customers take in sort of a wait-and-see approach in the second half. I guess just based on your conversations, it seems like E&Ps might not really be buying this $65 WTI oil price right now. And are they, do you think, still operating as if We're in kind of the mid-50s environment. And I'm just curious, what oil price do you think we'd have to get down to for them to consider a volumes reduction in the second half of the year?

Yeah, I think that their budgets for this year are based around like $50 to $55 oil. And I think today's activity in West Texas is reflective of that commodity strip. And, you know, they're not going to deviate from their, you know, they just set those capex budgets and they're not going to deviate from that just on, you know, gyrations of the commodity price. But the longer the commodity price, you know, stays up and people get more comfortable with it, but I'm sure they're not complaining about the incremental cash flows they've got. They're ripping off right now.

I mean, the wealth, the investment cycle, I mean, you know, the decision timeline is pretty short. So they can wait longer with these shell wells to go out and make a decision. So, you know, I think, like Blake said, they're comfortable where they are now. And that continues. You'll probably see steady, you know, activity through the end of the year. But it just depends on where prices go.

Great. Thank you. I'll turn it back.

Thank you. The next question is coming from Michael Ciela of Stevens. Please go ahead.

Morning, everybody. You mentioned the last mile storage system. Just wanted to ask about that. Wow's continuous pumping of wet sand. You said you're testing a dry sand solution. What needs to happen there for that to be successful, and what could the opportunity be? be for that system if it works?

Yeah, so, you know, earlier this year or late last year, we launched a system that was designed for, you know, really well site, you know, increasing the amount of sand that's delivered to the well site, timeliness of that, That's going to increase the efficiencies to enable operators to pump down more sand. We've been seeing, and we kicked this off on the wet sand side, we have all of those systems deployed right now. And we do have a number of our customers that are using them that want more. As far as the dry sand goes, there's still going to be some work that we're going to have to do on that front. And, you know, as far as timing goes, it's way to be seen. But there's some testing that we're working on, and we'll be able to comment more about that here later. But we do, what we are seeing, the results of that are promising. You know, I think some of the things, some of the themes you're going to see going forward is continuous pumping. A lot of our customers are asking it or requiring it because, and you're starting to see some significant results from, you know, our delivery of sand to the well site, you know, that enables things to, things like the Dune Express and, you know, our wet sand offerings. And then this is just another, you know, step in that direction of, you know, helping our customers with their needs. and providing them with solutions that work that enable them to accomplish their goals.

Yeah, and then the continuous pumping thing is such an important trend in our space. You know, those are the completion crews we're providing sand to that are on continuous pumping operations. The amount of sand they pump monthly is multiples of what you'd see from a traditional zipper crew. But the big constraint, right, is it becomes, you know, well site footprint. you know, things like boxes and silos, you know, they are constraints, right? And so the pile system, but going to piles, you know, obviously allows you to put more sand in one spot. But what we think our system does is it enables two piles, but to do it very efficiently and with clean sand and combine that with the prop flow technology, it is a key enabler of very, very efficient continuous pumping operations. And it's something that, you know, just continues to push that tailwind of the sand intensity of each individual completion crew, which we think long-term is a, you know, when people stop planning budgets around $50 oil and maybe get a little bit more comfortable around something like $65 plus, see a little bit more incremental activity, we think the market tightens up pretty darn quick.

I appreciate that detail. Also wanted to ask about your budget. You mentioned your hybrid power system. I guess what differentiates that and what's the opportunity for those assets look like?

Yeah, so the hybrid power system essentially combines battery technology that we've developed in-house, own the patents on, and that was funded through a DOD grant that the legacy Mosher business obtained in 2018. And what that system essentially does is hybridizes with our existing generators and it controls the operation of those generators so that they run at essentially a peak load and the battery then distributes power into that system, shuts the generator off. And so what it does is it lowers the runtime on those generators, which extends our maintenance cycles from essentially once once-a-month service to once every 45 days as much as once every 60 days. It lowers the fuel costs for our operators, and it decreases the risk of a shutdown event on the customer's location, which those are not good for downhole pumps, which is primarily what we do in that business. And so we're pretty excited about the potential to deploy that at scale in the legacy Mosier business. We think it's differentiated. We've proven it on multiple well sites. But I think when you apply that to the broader industry outside of oil and gas, it's got uses really across every industry where you know, folks want clean, reliable power, and that battery system provides clean, reliable power that can integrate with whatever systems they're using, whether they're prime power systems or backup systems.

Great. Thank you, guys. Thank you.

Thank you. Our final question today is coming from Jeff LeBlanc of TPH. Please go ahead.

Good morning, John and team. Thank you for taking my question. Okay. I wanted to see if you could provide some color on the expected cost savings over the second half of the year once the twinkle dredges come online.

He wants to go to the cost savings that we're going to expect in the second half of the year once the dredges come on. Oh, yeah. I'll cover that.

Yeah. So, you know, we haven't had a steady dredge feed at our primary permit facility for a going on over a year now. And that facility is really designed to have a clean, steady dredge feed. And so what that's created is just a different bottleneck to the process that has elevated the optics per ton coming out of that facility versus, I mean, when that facility is cooking, it is our lowest cost. It's the lowest cost facility in the entire Permian Basin. So as those two dredges come on and, you know, like, These flinkle dredges, we've added flinkle dredge in the fleet. We've got one in the fleet now, and that is the most consistent producer we've got. So we're very confident, and we think they're the F-150 of dredges. Feeding those online will significantly enhance the quality of our dredge feed, which has just – really positive knock-on effects to the entire process. It improves wet shed operations. It reduces stress on the dryers. It just makes the whole facility run more efficiently. If you think about that, our overall variable costs, you know, probably have been elevated by about a buck across the complex because of those drainage feed issues. And so that's over the course of the first half of the year. That will flow off. And there, so it's, again, it's a pretty big circular reference, though, in terms of the overall OPEX per ton, just because so much of that is based on volume throughput. And that's dependent on customer activity in the second half. But if you were to just extrapolate first half activity in the second half, you know, you'd see a pretty significant improvement in OPEX per ton as we work through the year.

Awesome. Thank you for the color. I'll hand the call back to the operator.

Thank you. At this time, I'd like to turn the floor back over to Mr. Turner for closing comments.

Thank you, Operator, and thank you all for joining us today and for all the great questions. We truly appreciate the time you've taken with us through our accessible team. Thank you for all the hard work to our customers. Thank you for your partnership and trust in our investors. Thank you for your committed And continued support, Believe in Atlas. We look forward and are excited about reporting our results going for 2026 and our first quarter results here in two or three months. Thanks, everyone, for joining. And that is the call. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.