Archrock(US:AROC)2022-11-03 19:51Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2022 was $92 million, reflecting solid underlying business performance and sequential growth in total gross margin dollars [7][27] - Net income for Q3 2022 was $15 million, including a noncash $4 million long-lived asset impairment [27] - Total debt at the end of the quarter was $1.5 billion, with a leverage ratio of 4.3x [30][25] - Cash available for dividend for Q3 2022 totaled $41 million, leading to a dividend coverage of 1.8x [31] Business Line Data and Key Metrics Changes - Contract operations revenue was $170 million in Q3 2022, up $4 million or 3% compared to Q2 2022 [28] - Aftermarket services segment revenue was $43 million, up $7 million or 19% year-over-year [29] - Gross margin percentage for contract operations was 58%, consistent with expectations for a decline in the second half of the year [28] Market Data and Key Metrics Changes - Year-to-date bookings have doubled compared to the same time last year, indicating strong demand [9] - Exit utilization increased by 200 basis points to a record 89%, with 90% utilization as of the end of October [8][16] - Spot pricing for new deployments is up a minimum of 20% year-over-year across major asset classes [16] Company Strategy and Development Direction - The company is focusing on fleet high-grading to improve utilization and profitability through market cycles [10] - Plans to electrify the fleet by converting existing units and building new electric units [11] - The company is committed to developing solutions for emissions management and has introduced a methane capture technology [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand for natural gas and the strong market conditions for midstream compression [7] - Supply-demand balances for oil and gas are tight, with elevated commodity prices supporting strong well economics [13] - The company expects prudent investment from upstream and midstream customers, leading to low to mid-single-digit production growth rates [14] Other Important Information - The company has maintained a strong balance sheet and liquidity, with $492 million available as of September 30 [30] - The dividend yield is currently at 8%, with a commitment to return capital to investors [25][31] Q&A Session Summary Question: How should commercialization of methane capture technology be measured? - Management indicated that it will take time to build out the commercial model and engage customers, with expectations for clarity by mid-2023 [35][36] Question: Is pricing power sufficient to increase shareholder returns while investing in CapEx? - Management believes that pricing power is strong enough to potentially increase shareholder returns before achieving a leverage ratio below 4x [38][40] Question: What is the demand and supply chain situation for electric compression? - There is good demand for electric motor drive units, with about 15% of CapEx allocated to this segment [42] Question: Is carbon capture an opportunity for the company? - Management sees multiple opportunities in the carbon capture economy, including providing compression for carbon capture projects [48]