Atlas Energy Solutions Inc. (NYSE:AESI) Q4 2024 Earnings Call Transcript

Atlas Energy Solutions Inc. (NYSE:AESI) Q4 2024 Earnings Call Transcript February 25, 2025

Operator: Greetings, and welcome to Atlas Energy Solutions Fourth Quarter and Year End 2024 Financial. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kyle Turlington, Vice President, Investor Relations. Thank you. You may begin.

Kyle Turlington: Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the fourth quarter of 2024. With us today are Bud Brigham, Executive Chair; John Turner, President and CEO; Blake McCarthy, CFO; and Chris Scholla, COO. Bud, John, Blake, and Chris will be sharing their comments on the company’s operation financial performance for the fourth quarter of 2024, 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 US 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 filed with the SEC on February 27, 2024, our quarterly reports on Form 10-Q, and current reports on Form 8-K and other SEC filings. You should not place undue reliance on forward-looking statements. 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.

John Turner: Thank you, Kyle. Thanks to everyone for joining us today to discuss our full year and fourth quarter 2024 operational and financial results. 2025 is set to be a transformational year for Atlas, and we have come out of the blocks at a full sprint. On January 12, we announced our first commercial delivery off the Dune Express. Our team is now focused on ramping our volumes working towards our goal of full effective utilization by midyear, if not sooner. Additionally, on January 24, we announced that we had delivered 100 loads of proppants utilizing our first two robo trucks which are semitrucks equipped with a self-driving system enabled through our partnership with Kodiak Robotics. By the end of this month, we expect the number to have grown to approximately 300 loads.

I want to take a minute to look back to Atlas’ IPO in March of 2023 and demonstrate how much has changed since that time. At the time of our IPO, the Dune Express was just a 42-mile right of way. Today, we are making commercial deliveries off the second longest conveyor ever built. We encountered quite a few eye rolls when we said we were going to bring autonomous driving technology to the oil fields of West Texas and New Mexico. Today, Atlas is now running the world’s first commercial driverless delivery operation and will soon be doing autonomous deliveries off the Dune Express. The concept of multi-trailer operation was viewed as a novelty. Today, we are doing multi-trailer deliveries off the Dune Express delivering 70 to 100 tons per driver, versus over-the-road deliveries of approximately 24 tons.

Back in March of 2023, Atlas’s annual productive capacity stood around 11 million tons with no wet sand offering, we were running only 11 last mile crews that delivered just 20% of our total sales volumes. Today, our productive capacity is nearly two and a half times larger with the largest wet sand offered in the Permian. Our logistics operation is currently running 26 crews delivering more than 80% of our total sales volumes. Since our IPO, we have also completed two transformational acquisitions that have expanded our solutions offering on enhancing our cash flow generation. Finally, at the time of the IPO, we kept reinforcing that shareholder returns and critically return of capital to shareholders were core to Atlas’s corporate DNA. On February 19, we announced a 4% increase to our quarterly dividend from $0.24 a share to $0.25 a share, which represents a 67% increase from our initial dividend of $0.15 a share.

We talked a big game during our IPO. While we have certainly had some bumps in the road, we have delivered on those promises. I could not be prouder of what our team has accomplished and the milestones we have achieved. This is only the beginning for Atlas. Yesterday, we closed on the acquisition of Mosier Energy Systems, our platform investment into the distributed power market. With this large fleet of natural gas-powered reciprocating generators, the Mojo platform provides us with a new avenue of growth into a rapidly expanding market. Mosier also provides a greater degree of cash flow durability by adding significant exposure to the more stable production phase of the OFS value chain. As discussed on our call on January 27, we currently plan to grow Mosier’s fleet from its current size of 212 megawatts to approximately 310 megawatts by the end of 2026.

Customer reception to the Mojo acquisition has been very positive to say the least, reinforcing our initial investment thesis. As we work through the integration process, this customer interest begins to translate into hard contracts, we have ample room to accelerate the growth of this platform. To our new team members joining us from Mojo, welcome aboard. It’s going to be a fun ride. Turning back to our profit and logistics business, the Permian profit market has begun to show early signs of the healing we have been looking for. Spot sand prices fell to cyclical lows during the fourth quarter driven by reduced customer demand related to seasonal slowdown and competitors throwing out desperation Hail Mary pricing during the RFP season. Coming into the RFP season with the imminent commercial deployment of the Dune Express, we armed our sales force with the objective to go out there and seize the volumes with our best customers.

However, we certainly were not willing to contract our volumes with the desperation pricing thrown out there by our more distressed competitors. Fortunately, the key customers we have been targeting recognize that out delivery to distress providers just to save a few bucks per ton is a recipe for disaster. Instead, we are seeing customers choose to commit 100% of their 2025 sand volumes to Atlas, their partner of choice in profit and supply and logistics. They correctly identified that they can rely on Atlas to eliminate the operational headache that sand can represent in the oilfield. And when things do go wrong, we will break our backs making things right. Which is why we entered the year in a highly contracted position that we expect to grow over the coming weeks.

This is the turn of the year, with the great hope of large RFP volume wins on a distant memory for many of our competitors, we have seen much more rational behavior on the pricing front. The combination of the seasonal recovery and completion activity and recent production issues across the industry due to extremely cold weather led to a spike in spot prices over the last few weeks. While spot prices have since moderated, we do not expect them to return to lows in the fourth quarter anytime soon. Additionally, as some of the more disadvantaged mines continue to struggle with underutilization, we are actively watching for supply attrition in the market. Consequently, we are reasonably bullish about a gradual return to normalcy in sand pricing although at this point, we do not expect that until late in the year.

With that, I will now turn the call over to Chris Scholla to provide more details around the commission at Dune Express and our exciting leap into drivers. Deliveries. Thanks, John.

Chris Scholla: We continue to make significant progress in the operational ramp-up of the Dune Express. The commissioning process remains on schedule. And while there are still components and processes that require optimization, we are pleased with the steady progress thus far. Infrastructure systems of this size and scale do not simply reach full capacity at the flip of a switch. It takes time and meticulous refinement. That said, over the first two months of operation, we have seen a strong and consistent ramp remain on track to reach our full target capacity sometime in the second quarter. Another key milestone was achieved in December when we completed the construction of a two-mile Caliche Road and on-load facility connecting our legacy high crush Kermit mines to the Dune Express.

This provides incremental flex volumes to the system, allowing us to better optimize silo volumes across multiple distribution points. The Dune Express is a highly sophisticated logistics ecosystem that requires close synchronization between our mining operations and logistics teams. And we are making rapid strides toward our desired end state. In addition, we are making meaningful advancements in our autonomous trucking program. By the end of this month, our two Kodiak-enabled autonomous trucks will have completed approximately 300 deliveries in the Delaware Basin. We have already begun transitioning autonomous deliveries off the Dune Express. As we further integrate autonomy into our operations, we move closer to our ultimate goal of delivering sand directly to customer well sites without human intervention.

Lastly, I want to take a moment to recognize the incredible team that is making this all possible. As John mentioned earlier, this has required long days and even longer nights. And I am extremely proud of our Atlas team. What was once an ambitious vision is now becoming a market-changing reality. And this is a testament to the team’s hard work and dedication. With that, I will now turn the call over to our CFO, Blake McCarthy, for a financial update. Thanks, Chris.

Blake McCarthy: Total company’s adjusted EBITDA was $288.9 million or 27% of revenue. Logistics revenue for the year was $140.5 million. Fourth quarter of 2024, reported total sales of $271.3 million and adjusted EBITDA of $63.2 million or 23.3% of revenue. Revenue from proppant sales was $128.4 million. Total profit sales volumes per quarter declined sequentially to 5.1 million tons. The decline was driven primarily by the seasonal slowdown in activity witnessed in the Permian as operators exhausted capital budgets. Despite the slowdown witnessed during the quarter, our Encore distributed mining network set a quarterly volume record. Our average revenue per ton for the quarter was $25.31, which was bolstered by contractual payments related to required customer stand pickups not made during the holiday slowdown.

Adjusted for these payments, average sales price for the fourth quarter was $23.28 per ton. The sequential decline in realized pricing relative to those of the third quarter was less than expected due primarily to contracted volumes representing a larger percentage of the overall volume mix. Moving to service sales, which is revenue generated by our logistics operations, we reported revenue of $142.9 million for the quarter. Total cost of sales for Atlas excluding DD and A for the quarter were $191 million, consisting of $61 million of plant operating costs, $124.3 million related to service costs, and $5.7 million in royalties. For the fourth quarter, our per ton plant operating costs were $12.02 per ton, excluding royalties, which was down sequentially from the third quarter but still elevated versus our normalized levels.

Lower volumes and plant optimization expenses related to our previously announced initiatives in Q3 drove the elevated fourth quarter plant operating loss. We expect OpEx per ton cost to further normalize in the first quarter primarily driven by higher volumes and more efficient operations. Cash SG and A expense for the quarter was $19.1 million, elevated relative to our historical levels by consulting and litigation expenses. Interest expense for the quarter was $12.3 million. Depreciation, depletion, and amortization expense for the quarter was $30.4 million. Net income was $14.4 million or 5.3% of revenue and earnings per share was $0.13. Net cash provided by operating activities for the quarter was $70.9 million. Adjusted EBITDA for the period was $63.2 million and adjusted EBITDA margin of 23.3%.

Adjusted free cash flow, which we define as adjusted EBITDA less maintenance CapEx for the quarter, was $47.9 million or 17.7% of revenue. CapEx during the quarter equated to $50 million, which included construction of the Dune Express, ancillary Dune Express expenditures like the Sand Highway, offload facilities, and upgrades to our primary Kermit plant. Maintenance CapEx during the quarter was $15.3 million. As John mentioned earlier, we are raising our quarterly dividend to $0.25 per share, which represents a 4% increase and equates approximately to a 4.8% annualized yield. Accounting for our latest dividend announcement, we have paid out $252 million in total dividends and distributions since inception. The combination of our recent equity offering, which raised $254.1 million of net proceeds from the sale of shares of our common stock, after deducting underwriting discounts and commissions, and our recently announced debt refinancing simplifies our go-forward capital structure.

Collapsing four different loan facilities into a single term loan reduces our annual debt service costs. This should enable increased optionality as we look to optimally redeploy go-forward free cash flow through a combination of growth investment opportunities and return of capital to shareholders. As John also touched on in his remarks, we expect our plants to be quite busy this year. Today, we have approximately 22 million tons committed in 2025 and expect that number to surpass 25 million tons in relatively short order. We expect to sell north of 25 million tons in 2025, which compares to around 20 million tons sold in 2024. Our recent market share gains are a testament to Atlas’s efforts to position itself as the reliable partner of choice to the best operators in the Permian Basin.

Average sales price for the year is expected to be in the low 20s. With the construction of the Dune Express completed, our capital spending will come down significantly year over year. Total CapEx for 2025 is currently expected to be approximately $115 million, of which $27 million is budgeted for expanding the asset base at Mosier. The remainder is evenly split between growth and maintenance for our prop and logistics business. With the turn of the calendar, customers are now looking to deploy their refreshed capital budgets and are actively ramping activity. Despite recent disruptions caused by colder weather, consequently, we expect Q1 volumes to be up 10% to 15% sequentially relative to four levels. For the first quarter of 2025, we expect adjusted EBITDA to be between $75 million and $85 million.

As the year progresses, we expect our financials to more fully reflect the accretive impact of the Dune Express on our logistics margins. And expect Q1 to represent the lowest quarter for this fiscal year. Based on current market conditions and our expectations of incremental customer demand, we expect full-year 2025 adjusted EBITDA, which is inclusive of ten months of contribution from the Mosier acquisition. For future reporting, we will break out our power business as a separate segment. Before we open up the call for Q&A, a few comments from our Chairman. Thank you, Blake.

Bud Brigham: I just want to briefly piggyback and amplify some of John’s earlier comments about just how far Atlas has come since we founded the company. Growing up in Midland, I have vivid memories of visiting the nearby sand dunes for picnics and birthday parties. Looking back now, it seems crazy that as recently as 2017, the majority of the sand being pumped downhole into Permian wells was shipped from Wisconsin mines that were 1,200 miles away through a very expensive, complex, and unreliable supply chain. Over the last seven years, Atlas has delivered a continuum of constructive enhancements to the Permian, as the premier producing region in the country and as a more efficient, reliable, and safer energy factory on the ground.

First, it was the state-of-the-art plants we built at Kermit and Monahan’s. Plants that uniquely included redundancy, conveyors, and remote automation from here in Austin. Later, we added the encore mobile mines with our Hi Crush acquisition. And now we have completed the revolutionary Dune Express. A project that many thought was a pipe dream which effectively extends our Kermit mines 42 miles to the west into the premier producing region in the entire country. As a result of these Atlas innovations, we are now delivering sand with less than 20 trucking miles. That’s a reduction from 1,200 miles of rail and trucking to less than 20 miles via increasingly efficient, automated, and safer delivery systems. Our last mile deliveries are increasingly via multi-trailers and we are continuing to stage in driverless deliveries with our Kodiak Autonomous Jeez.

As we have stated before, Atlas is uniquely positioned to modernize proppant and logistic systems in the Permian Basin and we are doing just that. With much more to come. I will briefly summarize some high-level facts about Atlas’s position in the profit and logistic space. Today, Atlas is the largest and lowest-cost proppant producer in the Permian and that’s for both wet and dry sand. We are also the largest last-mile provider. We are now running the world’s first proppant conveyor system and the world’s first driverless oilfield delivery operation. We are both logistically and cost-advantaged to almost every drilling operation in the Midland and Delaware basins. As the premier continues to mature into a factory model with increasingly scaled operators, scale and automation per profit and logistics are increasingly essential.

Atlas is unique and differentiated. We are the one-stop shop for the largest raw material and delivery systems in the Permian energy manufacturing process. And now we are also beginning our journey into distributed power generation with Mosier Energy Systems. Our team is very excited about collaborating with the great Mosier innovators to find ways to innovate, disrupt, and grow in the power market to solve problems for our EMP customers that we proudly serve. In closing, our mission is to improve human beings’ access to the hydrocarbons that power our lives. And by doing so, we maximize the value creation for our shareholders. As we celebrate our two-year anniversary as a public company and approach eight years as a company, we remain steadfastly committed to that mission.

I could not be prouder of our talented and inspirational employees who come to work every day delivering on that mission. They are making the Permian Basin a more efficient, safer, and cleaner place to work and live. Last and importantly, as mentioned given our core commitment to our shareholders, accounting for the latest dividend announcement, I am proud to proclaim that since inception, Atlas has paid out $252 million in cash distributions. With more to come. This is only the beginning for Atlas. With that, I would like to now turn the call back to the operator for Q&A.

Q&A Session

Operator: Thank you. The floor is now open for questions. Before pressing star keys. We do ask that you please limit yourself. Today’s first question is coming from Keith MacKey of RBC Capital Markets. Please go ahead.

Keith MacKey: Hi. Good morning, and thanks for all the color so far. I just wanted to start out on the Dune Express. Can you speak to maybe how much volume you have moved down the dune thus far since the commissioning in early January there? And maybe some of the gating factors that are required to get to that full effective utilization by midyear there?

Chris Scholla: Yeah. Thanks, Jean. This is Chris Scholla. Look, I think reflecting back. Right? Hindsight being 20/20 years ago, we really should have said we were launching Q1 of 2025 rather than kicking off a project leading into the Christmas and New Year’s holiday. That always has a bit of an impact. And on that note, I do want to give a big thank you to our employees and vendors that really supported us over the holiday launch of this project. You know, in general, we really haven’t had to overcome any serious obstacles. I mean, you know, we had some programming issues when we started out this kind of slow this in December and January. But that was really just startup and optimization synchronization of the system, if you will.

You know, we had to work through some power issues, but we have solutions there and are making really great improvements. We’re already running close to 50% to 60% of capacity today. There will be some planned downtime in March. As a startup, you gotta go tighten up that belt. But I would say, overall, the ramp phase is really going as expected. We’ve already proven running the belt at a full still, it’s really about increasing our daily run time through reducing the system nuisance trips and working to eliminate and reduce that daily planned commissioning downtimes.

Bud Brigham: Yes. Keith, if you think about it from a financial perspective, the full impact in logistics margins won’t be fully realized until midyear. But it will be a steady pre-tail end as we work through the first half. So the ton delivered also do express our highest margin tons by far. So we go from marginal amounts in early January to full run rate at some point of Q2, margins realized by our logistics business. Those will steadily increase Q3 representing the first quarter of full financial impact. Bringing logistic margins into the mid to high twenties. So with respect to the first half, the impact is obviously smallest in Q1 as we made our first commercial delivery in January, have been ramping since then. So while it is in a straight line, flip points us to getting to our target annual run rate of 10 to 11 million tons.

On an annualized basis. At some point in Q2, if you think about it, marginal impact in Q1, more of a tailwind in Q2, and full impact in the second half of the modeling perspective.

Keith MacKey: Oh, got it. That’s helpful. Maybe just turning to capital allocation. I see you’re expecting to spend $115 million CapEx this year, which certainly is down year over year. But can you maybe speak to how you’re balancing some of the opportunities that you see in the organic portfolio now with returning cash to shareholders? Do you have an expected free cash flow allocation in terms of split between returns and growth and other things? Or is it really just on a highest return basis?

John Turner: You know, this is John. You know, our goal is to keep the base dividend at a lower level where investors can be confident that they’re going to get the cash every quarter no matter what market conditions and know, so, you know, we’re obviously looking to stress our cash flows. You know, our opportunities right now from the standpoint of our CapEx expenditures next year, are based on, you know, simply know, what’s the best return possible to our investors. And so as we continue to go throughout the year, I mean, we’re just not gonna raise our dividend significantly. We’re gonna continue to grow that dividend. You know, moving into the Mosier biz or the Mosier acquisition is gonna give us the ability to, you know, blunt some of that volatility associated with the side of the business.

So yeah. I mean, in 2024 I mean, 2025, we do have some growth initiatives going on there. That are gonna that are high return projects. We’re gonna continue to evaluate those and, you know, continue to put capital to those types of investments, but then our goal is to continue to raise, you know, continue to raise the dividend and also look at other opportunities, you know, stop buyback. I mean, our board initiated a stop buyback program earlier last year and you know but one thing is you know obviously last year we were looking a lot of amortization debt pay down so when you look at our new term loan, you know, that that that frees up some cash flow for us to either, you know, return to the investors or make additional one free investments into the higher return of projects.

Keith MacKey: Got it. Thanks for that color. That’s it for me.

Operator: Thank you. The next question is coming from Don Crist of Johnson Rice. Please go ahead.

Don Crist: Good morning guys and thanks for letting me in. I wanted to start with Mosier. You know, congrats on getting that closed quickly. And you know, obviously, it’s a different market than some of the other companies that have entered that market. In more of a rental market that Mosier operates in today. Can you talk about your future plans? Is there plans to go into bigger turbines or, you know, kinda what are your overall arching plans for that segment as you kinda roll everything together?

John Turner: Yeah. You know, I’ll Don, I’ll start on that, and then, you know, they can chime in. I mean, you know? When we entered into the you know, when we when we acquired Mojo or made the acquisition, you know, we were obviously, you know, thinking it’s a it’s a it’s a good platform for Atlas to expand in the power business. You know, right now. There there’s a significant need for power in the oil in the on in the oil field. You know, I don’t necessarily see the the need for power any different than than what you see in other parts of in other areas of the power business. There know, we have pretty high return on our on our on our investments, and but, you know, that and, you know, we can grow that organically and and we have some ability to expand pretty pretty much pretty rapidly that that those investments in in on on the Mosier platform, but know, we’re always gonna keep our eye out for areas and other parts of the power business that that, you know, that makes sense for us to grow into.

Blake McCarthy: And just feedback on that, you know, We view the Mosier acquisition as the first investment in a power platform we think we can grow and do very significantly for the overall Atlas portfolio. And that’s not necessarily just for M&A, although I’ll never rule out that out if the right deal presents itself. The manufacturing capacity of Mosier was just something that drew us to business. It gives us a lot of flex, our ability to ramp up the growth of that business. So if concrete customer demand is there to justify the investments, we can ramp that up rather quickly. Additionally, you know, Atlas has always prided itself on leading with innovation and disruption. And we think there’s a lot of room for that in this market.

So we don’t wanna just be swinging generators from the parking lot. Luckily, we have some people on that the team much farther than me that hit the ground running, and they’re gonna start making this market? And we’re really excited to see what they’re gonna do.

Don Crist: I appreciate that color. And one on the autonomous trucking. I mean, a lot of us, you know, two and a half years ago before you went public, we’re a little bit skeptical that business, but y’all have really grown that and made big strides there. Can you talk about, number one, the cost savings of using autonomous versus a regular driver truck. And what are your plans going forward? How big can that business be? Just on the autonomous side?

Chris Scholla: Yeah. This is Chris. Can take that one. You know, look, I think Kodiak has been a great partner and these guys have done everything they’ve said. That they would do. Right? They’ve delivered their technology actually a bit ahead of schedule. But look, I mean, the deal we have with them, it’s a performance-based deal. So as long as they keep executing on that trend, you’re gonna see our fleet really continue to grow. I think on the scaling and margin improvement, you know, most new businesses, they don’t really see a huge huge pop. There until you reach scale. I think that inflection point occurs with us somewhere between, you know, that fifty to seventy trucks, in service. And you look at you you know, to answer your question on the growth potential of this, right, You look at all the deliveries we’ve made to date, the been on lease roads with light traffic.

Right? Low speeds, twenty-five miles an hour. So it may be a bit too early to tell when we’ll see start seeing those, you know, over the road type deliveries. But once those capabilities include, you know, over the road, I think you’ll see our uptime sleep really expand quickly.

Don Crist: And just one clarification. If I remember correctly, isn’t about eighty percent or seventy percent or like that of of the cost of operating the truck labor?

Chris Scholla: Yes, sir.

Don Crist: I appreciate it. I’ll turn it back.

Operator: Thank you. The next question is coming from Sean Mitchell of Daniel Energy Partners. Please go ahead.

Sean Mitchell: Hey, guys. Thanks for taking my question. Maybe for Blake. The industry at large is kind of been I guess, prepared for what I would call flat to down activity in the US for 2025. This would be kind of the second year I would call flattish activity in North America. What are you guys seeing? We’re seeing service companies, like, buy power companies get into the power business. But what are you seeing in terms of deal flow from a standpoint of consolidating the profit market in the US and or when when are we potentially gonna see some of these people go away? In the profit market? Or do you have an opinion or thoughts around that?

Blake McCarthy: Well, I always have pain, Sean. I don’t know how much to work. But, you know, I think that in terms of deal flow, you know, I think we saw a lot of consolidation opportunities into late last year. Where people were proactively reaching out to us, but I think we we’ve been pretty public about we are very happy with where our same line portfolio sits within Permian Basin, right, where We did. Yeah. The if you think of the Atlas legacy assets, we had the best assets from reserves, and an OpEx return standpoint. And when we acquired High Crush, we acquired the portfolio that sits neatly adjacent to us on the cost curve. And so Yeah. A lot of the stuff that would be available to us from an expansion standpoint, would be remoted to our overall portfolio, and we don’t want to really undermine the overall to the overall portfolio at this point.

You know, thinking about the sand market, overall, you know, I think that in in John’s comments, there was you know, some some positive undertones with respect to what we’re seeing in the same market. So know, I think the extreme cold events that we had in January and last and last week you know, exposed some of the fragility that care characterize the whole same network in West in West Texas. You know, everyone plans that there’d be weather in January or February. But it was really really cold. And, you know, that has an effect on both mining and logistics operations. So we had our own issues that are baked into guidance but I think these weather events hit some of our competitors who haven’t been investing heavily into maintenance much harder.

And Sandflagged got really short in the market in a hurry. And we know, it shows that the health delinquent debt balances. So, you know, we sold the same prices by significantly in those weeks and while they come back down to Ursa, they have become close to getting back to the mid-teen levels that were thrown around the spot market in Q4. You know, we think that’s a really healthy development. Mark certainly isn’t fully healed yet. But we are seeing much more rational behaviors from our competitors around pricing. And I think that’s people actually thinking about the economics of margin of production. When you’re running a skeleton crew, on a mine that you have a hard ceiling on which you produce, and you know, your OpEx per ton. You know, it’s significantly higher than it would be if your facility was at full utilization.

The fixed cost leverage in this business is just it’s just so darn high. So they have an opportunity to response in sales, they, you know, they have the seller production at that elevated level. Because you’re not gonna be adding a second shift, but there’s zero confidence that the volume of tech would be there. So it’s a difficult situation to be in. Bit of a double-edged sword. So you’re likely not covering overhead and boost levels, but you don’t wanna throw gas on fire either. So it’s a tough situation for a lot of players out there. And I think they just need to make side why we think supply attrition is gonna continue to play out.

Sean Mitchell: Yeah. That’s great color. Thanks. One maybe one more for me. Just you have a slide in the deck, I think slide seventeen. Where you show Permian frac count. It’s essentially been don’t know. I wanna call it flat between ninety and a hundred frac fleets in the Permian Basin for the past four years, but you actually show sand or profit volume trending higher, and it looks like that continues again this year even with frac count potentially going lower. I think a lot of this is driven by what you say in your slide deck, simul and trimul fracs. My question to you guys is, are you seeing I mean, obviously, we know the big E and Ps that have large scale development doing simulant trammel frac. Are we starting to see some of the other operators participate in the simul Tramilfrac on the on the on the completion side?

Chris Scholla: Yeah. This is Chris. This point, we really are seeing that trend, you know, you know, smaller independents that have been with us for years are kicking off their first time line. I think that’s just a great example of you know, continuing to roll out if you will, that that effectiveness of the the technology factory on the ground. And as these technology you know, and completion enhancements make it from, you know, the the big guys. I think there is a little bit of copycat out there. Right? And we’re seeing that trend. You know, continue across the board.

Sean Mitchell: Okay. That’s helpful. Thanks, guys. I’ll turn it back.

Operator: Thank you. The next question is coming from Adi Motta of Goldman Sachs. Please go ahead.

Adi Motta: Hi. Good morning. I think you guys talked about twenty-five million tons in volumes for the full year. And then you mentioned some key customers as well. So I was just wondering if you can talk about what is that of that is the key customers? Where is the pricing conversation with them? And maybe if you can talk about the longer-term activity expectations of those customers based on your conversations.

Chris Scholla: Well, Adi, I think we’re gonna avoid overall market share conversations, but you know, I think that we, you know, we as as John talked about, we, you know, we set a hard floor on pricing during our peak season. We we know that we we offer certainly, advantage reliability and just better overall service levels. And, you know, operators can they they know how it’s gonna be there. Their standards could show up on time, and we’re never getting we’re not getting gonna we we we do everything we can, not to be the reason that you know, people have, you know, NTT on-site. So, you take that very seriously and that that tends to pay us dividends, when it comes to our customer relationships. And that’s evidenced by, you know, if there’s some other customers that come in to partner with Atlas on a hundred percent of their sand needs, it’s not something that we’ve seen in the past.

So you know, I think that’s just the proof that that that that the market and the customer first, I’m showing the reliability, the durability, and the the last they put on Atlas as a logistics provider. It was a it was a key differentiator during this RFP season is that operators knew they’re like, you know, it is one thing to be like, okay. Hey, I can get the cheapest sand. But it might not be there in June, July because, you know, that that those guys might not be there. And, they know that ours is gonna be there and that we’re gonna do everything we can to to partner with them for the long term. And our our sales team fantastic job of going out there and getting those volumes. So we feel really good about where we’re going for that.

Adi Motta: That makes sense. And then maybe on the mine side, you can give us what your latest thoughts are on the cost profile progression. I know you talked about the fourth quarter numbers, but just if you can give us how we should think about the progression on there for the full year.

Chris Scholla: Yeah. So we’ll continue to you know, so the we actually solve Aetna like, on the ground level significant improvements, just in processes, stuff like that. That team’s doing a great job. Just didn’t really flow through the financials just because you had the the step down in volumes with with the seasonal holiday slowdown. As you as you come back into, you know, it’s with reloaded capital budgets, we’ll see that volume uptick. You know, up in Q1 and even more so in Q2. And so you’ll see that fixed cost leverage start to flow through to the OpEx per time. So, you know, thinking about, you know, getting to, you know, high tens in the Q1 level. In Q1 numbers and continued improvement through midyear. Is is a pretty.

Yep. We’re probably, like, have have put you up from modeling perspective. We won’t get back to, you know, our full full optimal levels until early 2026. As we talked about when we get this those new dredges in our primary and current mine. But there’s we’re continuing to focus on process improvements and optimization projects. They’re doing a fantastic job, so we’ll continue to see that being a great tailwind to the financial we worked through the year.

Adi Motta: That’s awesome. Thank you, guys.

Operator: Thank you. The next question is coming from David Smith of Pickering Energy Partners. Please go ahead.

David Smith: Good morning and thank you for taking my question. Most of my questions were were asked or addressed in the prepared remarks. Right. Sorry if I didn’t catch this. Did did you mention where your current contract coverage sits for the year?

Blake McCarthy: I think we said so we we came we currently have approximately twenty-two million tons contracted already and expect that number to move up as we work through the rest of the the first quarter. You know, I think that, there’s this misconception that RPCs have stops at New Year’s Eve, but some of the some players, you know, that contract processes rank for January, February. So yeah, we’ll that number will move up between now and the Q1 call. I mean, we enter in a in a contract pretty much in every quarter, maybe with the exception of the, like, third quarter. But but we are we are contracting sand and logistics services throughout the year.

David Smith: Appreciate it. And I was curious if you’ve seen interest from from customers to sign longer-term contracts? And if so, how do you think about the trade-off between interest in longer duration versus the relatively lower current prices?

Chris Scholla: Yeah. I think for us, we we really you know, as John mentioned earlier, we’ve really seen customers it pull from customers to move to more you know, tenorist type model, hundred percent supply. Here’s my here’s my you know, here’s my frac schedule. You guys you guys cover it. And and I think that all comes with, you know, our ability to execute bottlenecks. So so look for a, you know, three to five year term, are you probably gonna have a little bit a little bit lower pricing on long-term deals than than, you know, spot pricing or six-month, you know, arrangements. Yeah. Absolutely. Right? But I think, you know, that’s made up for in in volume by far and, you know, from a from a total customer perspective, you know, that’s what what we really wanna do is is partner with our customers, continue to get a hundred percent of of their volumes and and execute and remove bottlenecks you know, in their operation.

David Smith: Appreciate the color. That’s it for me. Thank you.

Operator: Thank you. The next question is coming from Michael Scialla of Stephens. Please go ahead.

Michael Scialla: Hi. Good morning. Blake, could you say again how much of the twenty-five CapEx going towards growth. I I was jotting that down and missed it then. Can you give any detail on what those growth opportunities look like?

Blake McCarthy: Yeah. So just the CapEx breakdown again. So we’ve gotten to a hundred and fifteen million for twenty twenty-five CapEx. Twenty-seven million of that is committed to growing the the Moza platform. And the remainder is evenly split between maintenance and growth for our our legacy business. On the growth CapEx side, for legacy business, we continue to invest into our logistics and mile operations. We’ve got some exciting projects there that have a fantastic return profile. So we’re really excited to share those with the street over the coming months.

Michael Scialla: Okay. Can you talk about any of the opportunities on the the PowerGen side in in that twenty-seven million think you had mentioned that there are some applications that could require more than ten megawatts. Anything there in particular that is worth noting.

Blake McCarthy: Yeah. So in that number, so that and that twenty-seven million from Moser, in that within that and that’s the the cumulative most or number that that includes a small amount very small amount maintenance. But what really attracted to us is this investment was their internal manufacturing capacity, and the referring profiles on those generators, their cost basis. It’s just so fantastic. So that that number you know, as we talked about, includes, you know, growing that that megawatt base from two hundred twelve megawatts three hundred and ten by the end of of twenty twenty-six. So we will be, you know, working to fully deploy the existing fleet, which requires some remanufacturing. And then on top of that, adding new capacity.

So that’s going to be, you know, that that Moser contribution going to grow, between now and the end of the year. And, you know, we’re John mentioned it was kind of throwaway comment a little bit, but customer response to this acquisition has been really positive. So it’s you know, our sales guys are always complaining. They all do their jobs hard, but when the phone when their when their job consists of picking up the phone and answering customer inquiries, it gets a little easier. And we’re getting quite a few of those, and so certainly given us some food for thought about how we wanna think about the growth potential of this business because it’s it’s been a little overwhelming to us more.

Michael Scialla: Sounds good. Thank you.

Operator: Thank you. Our next question is coming from Kurt Hallead of Benchmark. Please go ahead.

Kurt Hallead: Hey, good morning, everybody. Sorry. I got had a couple couple of follow-ups. I think, John, in in your your commentary, you referenced that you expect sand pricing to return to, you know, normalized levels. And as we know in this business, I’m not really sure what normalized is anymore. But in the in the in the context of that, you know, is is a mid kinda twenties per ton, what you would consider normalized in today’s environment?

John Turner: Yeah. I mean, low mid to low twenties. Is what I would say to normalize. I mean, we were really referring to what was going on in the fourth quarter.

Kurt Hallead: Right. Right. Yeah. So okay. That’s fine. And then second question is on the Mosier acquisition, you reference again some commentary about some things dependent upon additional, you know, I guess offtake agreements or contracts or whatever. In your initial press release, you referenced Movers in front front and about let’s call it, you know, forty forty-five million of of of annualized EBITDA. On a ten month, I think, basis, you guys. So just can you help me connect the dots? So it sounds like there’s already contract place. So what was the commentary about depending on on other contracts being signed?

John Turner: That is that was what Blake we would was Blake was referring to is we’ve had a lot of positive feedback from our customer base on on the acquisition of Mosier, which kind of Yeah. Really reaffirms our our decision to make the acquisition and know, we don’t have anything necessarily, you know, in in a hard contract right now that’s something that we’re that we’re working on, and it’s obviously something that we can we can easily you know, bring on additional volume and capacity if we need to with with our manufacturing operation. So that’s really what that’s talking about here.

Kurt Hallead: Okay. And then then maybe one for for Bud. Bud, you you started the business around, you know, frac sand and evolve that into a a premium logistics services business and now you’re adding on to some power solution. So maybe maybe you could share with us kind of what your what your vision is over the next three to five years terms of you know, building out these three pieces or you got a couple of lower things up your sleeve?

Bud Brigham: Yeah. A non-op business, an operated business, and a royalty business. Can you can you repeat that question? We were having a little hard time hearing you.

Kurt Hallead: Yeah. Yeah. No. No. Look. I yeah. I just said, look. But you but but you started this business, right, with with frac sand, then you layered on a premium logistics services, and now are you rolling into power solutions. So I’m just kinda curious, you know, what you see over the next three to five years. Are these the kind of three core building blocks? Or do you have a couple more you know, tricks up your sleeve so to speak?

Bud Brigham: Well, I think I mean, certainly Atlas has demonstrated by the BOSER acquisition a unique and, platform for modernizing the old field, You know, first profit is missing critical for every single well and oilfield and and and then the delivery of that Pop it. The logistics is is is is integral to the you know, to the efficiency of factory on the ground. So so I think there’s gonna continue to be more more opportunities to to innovate and and and and associated with that green shoots for apples. Again, Mosher and and distributed power in the oil field is just one example of that. I do think, you know, the other companies are are are really just providing liquidity and and and bringing sophistication and and and experience and and and and knowledge to the other asset classes in the Permian.

One of the things that came up earlier that I think is important maybe I’ll just take off two to point it out is that, you know, as the oil field becomes more efficient and you see that with the drilling rigs, and you see that with the frack crews, They they they tend to they’ll be those efficiency tend to cannibalize that equipment, but Alice is on the other side of that because because as the frac spreads get more efficient, that just means more sand consumption. So we’re kind of the inverse of that. And benefit from that. In a way kinda like a midstream enterprise. There’s there’s gonna be more sand flowing into the wells in the Permian. So so I just think Atlas is in a in a great as a is is the Permian development accelerates with a larger scale off operators with larger operations.

Atlas has the scale and and the technology to complement the operators and and to reliably provide them the services that that they need. Hopefully, that helps you a little bit.

Kurt Hallead: Absolutely. Exactly.

John Turner: Donna, we come out of the top of the hour. I think we have time for one more question.

Kurt Hallead: That was it? Okay. Showing the further question came to you.

Bud Brigham: Mister Turner, do you have any closing comments?

John Turner: Yeah. I wanna thank everybody for coming to join us for this call. See, we’re very excited about about what what Atlas has done and about the future. And Atlas is we look forward to reporting our our first quarter results and operational results here. Been a few months. Thanks.

Operator: Ladies and gentlemen, 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.