Jonathan Byers: At least for a year.
John Jackson: At least for a year. And I would say so far this year, on our engine deliveries, they’ve actually been behind the expected delivery when we initially contracted them. We’re — I think the next few engines are going to be on time, but that’s been the theme over the last six to nine months as they’ve been four to eight weeks behind their delivery, they quoted when we place the order. So take that what you will, a year out, give or take a couple of months.
Jonathan Byers: Right.
Operator: And the next question comes from Selman Akyol with Stifel.
Selman Akyol: So let me just ask, you talked about your units already being sold out for ’24. And are all of those in excess of 1,000 horsepower, should we think of it as all being that large than probably going out for five years?
John Jackson: Yes. Yes. They’re all — they’re all 1,875 or 2500-horsepower units. That’s what we’re building in ’24. And they’re all four-, five-year type contracts.
Selman Akyol: Got it.
Jonathan Byers: Everything, we’ve built since 2021 has been a 36 or larger.
Selman Akyol: Understood. And then you also talked about sort of ’25 and looking to be sold out pretty early on that as well. And I’m just kind of wondering, can you talk about sort of the price increases you’re seeing between stuff that you’re looking to deploy in ’24, plus 25%? Are you still getting additional prices as you’re engaged in those conversations? Or is there any flat to it?
John Jackson: I would say what you’re seeing go out at this quarter and in the first quarter of next year was contracted well over a year ago. And what we’re talking about now a year later is contracting 2025, the prices have moved a lot since then on Aerial, on Cat, on the tightness in the market, on the capital that people have across the compression industry to deploy. I think everybody is being capital disciplined. I said that in my opening comments, and that remains the case. So for anyone to deploy capital today, I can’t speak for the other companies, but what I’m seeing and hearing from our customers, from anyone to deploy their capital today you want full cash on cash payback in the cycle of the contract that you’re signing to put this to work.
So that’s requiring price increases dynamically. So as you think about this — so we sign a contract — let’s just say we signed a contract at the end of this year to deploy in the May of 2025, and you put a CPI price protection on that. It doesn’t kick in — the first CPI inflator doesn’t hit until May of 2026. So, it’s two years away before you’re almost getting your first price increase, and you don’t know what inflation is going to do during that window. So even though you have CPI protection, you’re still exposed in this initial almost 18-month window. So you combine that with the price increases that are going on in the new build delivery, the limited capital you have, prices are absolutely up a significant amount from last year to this year on quoting new build capital.
So I said that we could be sold out by the end of Q1 or by early Q1. It’s going to depend on what people decide to do because we’re pricing this as a valuable commodity to us. So we want solid returns that show up really well. Whether customers make all those decisions and consume all our capital in that window remains to be seen. But we have a lot of inquiries, and we’re really trying to cherry pick and battle order what we want to quote first and second and third because once it’s gone, it’s gone. We’re done.
