Kodiak Gas Services, Inc.

Greetings and welcome to the Kodiak Gas Service's first quarter earnings conference call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance at 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, Graham Sloan, Investor Relations. Thank you. Please go ahead.

Good morning. We appreciate you joining us for the Kodiak Gas Services conference call and webcast to review first quarter 2024 results. Participating from the company today are Mickey McKee, President and Chief Executive Officer, and John Griggs, Chief Financial Officer. Following my remarks, Mickey and John will provide high-level commentary on the company, our first quarter financial results, and our updated 2024 outlook before opening the call for Q&A. Before I turn the call over to Mickey, I have a few housekeeping items to cover. There will be a replay of today's call available via webcast and also by phone until May 16, 2024. Information on how to access the replay can be found on the Investors tab of our website at todyatgas.com. Please note that information reported on this call speaks only as of today, May 9, 2024, and therefore you are advised that Such information may no longer be accurate as of the time of any replay listing or transcript reading. The comments made by management during this call may contain forward-looking statements within the meeting of United States federal securities laws. These forward-looking statements reflect the current views, beliefs, and assumptions of Kodiak's management based on information currently available. Although we believe the expectations referenced in these forward-looking statements are reasonable, Various risks, uncertainties, and contingencies could cause the company's actual results, performance, or achievements to differ materially from those expressed in the statements made by management, and management can give no assurance that such statements or expectations will prove to be correct. The comments today will also include certain non-GAAP financial measures. Additional details and reconciliations to the most comparable GAAP measures are included in yesterday's earnings release, which can be found on our website. Now I'd like to turn the call over to Kodiak's CEO, Mr. Mickey McKee. Mickey?

Thanks, Graham, and thank you for joining us today. Let me get started by welcoming all the talented and dedicated CSI employees to the Kodiak family. By joining our team, each of you are contributing to Kodiak's increased scale and scope of service offerings to our customers and helping further expand our industry leading footprint in key operating areas like the Permian Basin and Eagleford Shale. I would also like to thank all of our Kodiak employees who have worked tirelessly on integration planning and execution, while simultaneously staying focused on our ongoing business, which produced record adjusted EBITDA for yet another consecutive quarter. Extraordinary execution by an extraordinary workforce. We are now more than a month into the integration process with CSI and are extremely pleased with how the process is going. As I have previously stated, we are very confident in our ability to deliver upon significant synergies provided by this combination, which will drive incremental value for our combined shareholder base. We are updating our guidance for the year and are very excited to announce revised adjusted EBITDA guidance of 580 to 610 million. This reflects a full year of Kodiak's contribution, three quarters of CSI's contribution, and anticipated synergies we expect to realize throughout the rest of the year. John will discuss acquisition synergies further in his remarks, along with providing first quarter highlights and reviewing our outlook in more detail. So let's jump into it. Our first quarter results came in better than expected while maintaining our industry-leading horsepower utilization at 99.8%. In addition to record-setting adjusted EBITDA contributions of $118 million for the quarter, up 11% versus the prior year period, we continued to strategically grow our large horsepower Permian-focused fleet increasing revenue-generating horsepower by over 26,000 horsepower in Q1. We also paid another quarterly, well-covered dividend with a compelling yield, reinforcing our commitment to returning capital to shareholders consistent with our previously discussed capital allocation strategy, targeting a three-and-a-half times leverage by the end of 2025. But as you might imagine, I'm even more excited for the future due to the step change we've made at Kodiak by becoming the largest contract compression provider in the industry with over 4.4 million horsepower. We're still in the early days following the close of the CSI acquisition and are in the evaluation phase of determining if there are small non-core assets that we could or should sell. Our strategy of focusing on large horsepower in liquids-rich associated gas basins has not changed, and the majority of the horsepower acquired in the transaction continues to fit that strategic growth profile. This increase in that strategic horsepower is extremely attractive given the long-term bullish outlook for natural gas compression and the tight supply, as reflected by our industry-leading utilization level of 99.8%. As we have previously discussed, Kodiak is fully contracted on our 2024 new unit deliveries, including CSI new unit deliveries, and we are now fully contracted through the first three quarters of 2025. When we couple that contracted growth with our leading position in the Permian Basin, the addition of CSI's more than 600,000 horsepower of large horsepower compressors, the result is a dominant position in the most prolific oil and gas producing regions in the United States. As many of our peers have recently discussed, the U.S. is poised to see a step change in natural gas demand as numerous factors are shaping up to lay the foundation for a multi-year period of above average growth. The next wave of U.S. Gulf Coast LNG export capacity is expected to become operational soon with the first project slated to start up in the fourth quarter of this year. Natural gas exports to Mexico are set to increase at a faster rate over the next several years. Lastly, we are expecting to see exponential growth in power demand due to the proliferation of AI and data center technology, which will largely have to be sourced from natural gas fired power generation. In total, we are seeing estimates that are calling for as much as a 20% increase in natural gas demand by 2030. The Permian is strategically positioned to meet this incremental demand and supply the US and the world with clean, reliable, and cheap fuel to power energy security while reducing worldwide emissions and energy poverty. However, in order to achieve this, there will need to be a large increase in horsepower compression capacity. Given the historical relationship between compression horsepower and domestic natural gas production, that much incremental demand would require more horsepower than the current combined fleets of Kodiak, our truck, and USA Compression, which took decades to build. Combined with the well-documented supply and demand macro trends for our industry, We believe Kodiak is well positioned to be the critical compression infrastructure partner of choice. Our focus on customers and employees, industry leading mechanical availability and utilization, and our market position will be instrumental to meet this expected demand. And now I'll pass the call on to John Griggs to review first quarter financial highlights and discuss our updated outlook. John. Thanks, Nicky.