Kodiak Gas Services, Inc. · NYSE:KGS
Kodiak Gas Services — Debt Investor Presentation (January 2024)
45 slides from Kodiak Gas Services's debt investor presentation, January 2024
Slide 1: Investor Presentation January 2024
INVESTOR PRESENTATION JANUARY 2024
Slide 2: Disclaimer
Disclaimer Forward Looking Statements. This presentation, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neithe
Slide 3: Today's Presenters
Today’s Presenters Mickey McKee John Griggs President & Chief Executive Officer Chief Financial Officer Years in Kodiak: 13 years Years in Kodiak: 1 year Industry experience: 20 years Industry experience: 23 years ⚫ Formed Kodiak in 2010 ⚫ Joined Kodiak in January 2023 ⚫ Previously held positions as
Slide 4: Table of Contents
Table of Contents 1 Executive Summary 2 Company Overview 3 Transaction Overview 4 Industry Overview 5 Credit Highlights 6 Financial Summary 7 Appendix KODIAK GAS SERVICES January 2024 Investor Presentation
Slide 5: Executive Summary
Executive Summary KODIAK.> GAS SERVICES
Slide 6: Executive Summary
Executive Summary Kodiak’s Acquisition & Financing of CSI Compressco LP Kodiak Gas Services, Inc. (NYSE: KGS) (“Kodiak” or “KGS”) is one of the largest contract compression services providers in the United States with a revenue-generating fleet of approximately 3.2 million horsepower Focused con
Slide 7: Transaction Overview And Capitalization Summary
Transaction Overview And Capitalization Summary KODIAK WILL REMAIN CONSERVATIVELY CAPITALIZED FOLLOWING THE ACQUISITION Sources and Uses Sources Uses ($ in millions) Amount ($ in millions) Amount Issuance of Kodiak Shares for CCLP Equity (as of 1/18/2024) $266 Acquire CCLP Equity (as of 1/18/2024) $
Slide 8: Pro Forma Organizational Structure
Pro Forma Organizational Structure CCLP Public Shareholders Spartan Energy & Other Kodiak Public Shareholders CCLP Electing Shareholders1, 2 86.3% 5.5% 8.2%3 Common Shares Common Shares Preferred Shares (Vote + Economic) (Vote + Economic) (Vote Only) OpCo Units Kodiak Gas Services, Inc. (Economic On
Slide 9: Summary Indicative Senior Unsecured Notes Terms
Summary Indicative Senior Unsecured Notes Terms Parent: Kodiak Gas Services, Inc. Issuer: Kodiak Gas Services, LLC Issue: $750 million Senior Unsecured Notes (the “Notes”) Guarantors: Parent and each of Parent’s Subsidiaries (other than the Issuer) that is a borrower or guarantor under the ABL Credi
Slide 10: Company Overview
Company Overview KODIAK.> GAS SERVICES
Slide 11: Evolution of Kodiak into Market Leader
Evolution of Kodiak into Market Leader January 2012 October 2019 May 2010 Kodiak deploys its first two Kodiak acquires Pegasus December 2023 Kodiak Gas Services founded compressors Optimization Managers Kodiak announces CSI acquisition June 2011 February 2019 June 2023 February 2024 Kodiak partners
Slide 12: Kodiak Overview
Kodiak Overview LEADING PROVIDER OF DOMESTIC ENERGY INFRASTRUCTURE AT-A-GLANCE By the Numbers: ▪ NYSE: KGS ▪ Enterprise Value: $3.5 billion1 ▪ Shares Outstanding: 77.4 million ▪ LQA Q3 2023 Adj. EBITDA: $440 million2 ▪ Market Cap: $1.7 billion1 ▪ Net Debt / LQA Q3 2023 Adj. EBITDA: 4.0x2 3.2mm Reven
Slide 13: Purpose-Built, Standardized Compression Fleet
Purpose-Built, Standardized Compression Fleet KODIAK’S FOCUS ON LARGE, EXPERTLY-MAINTAINED UNITS DESIGNED FOR LIQUIDS-RICH BASINS HAS RESULTED IN A PURPOSE-BUILT, STANDARDIZED COMPRESSION FLEET Fleet by HP Size (% of Total HP) End-of-Period Revenue-Generating HP (000’s) & Avg. HP / Unit1 Revenue-Gen
Slide 14: Transaction Overview
Transaction Overview KODIAK.> GAS SERVICES
Slide 15: Financially Accretive Pathway to Industry Leadership
Financially Accretive Pathway to Industry Leadership Acquisition Highlights Largest Fleet in North America ~4.2mm Revenue- ❑ On December 19, 2023, Kodiak announced an all-equity acquisition Generating HP1 ~3.2mm HP ~1.0mm HP of CSI Compressco LP valued at $854 million (based on December 18th market
Slide 16: Key Transaction Benefits
Key Transaction Benefits ❑ Enhanced cash flows help achieve leverage goal of 3.5x by year end 2025 Attractive ❑ Over $20 million of high-confidence expected annual cost synergies Transaction ❑ Transaction value of ~6.6x CSI LTM Q3 2023 Adjusted EBITDA, excluding synergies Economics ❑ Expected to be
Slide 17: CSI Business Overview
CSI Business Overview CSI IS A LEADING GLOBAL PROVIDER OF NATURAL GAS COMPRESSION, TREATING, COOLING, AND RELATED MIDSTREAM SERVICES Segment Overview1 CSI Operations Natural Gas Movement through pipelines and Compression2 facilities (73% of LTM Natural gas engine or electric motor Revenue) drive
Slide 18: Pro Forma Horsepower
Pro Forma Horsepower CSI CSI 70k HP Northern Rockies Other2 71k HP Kodiak 336k HP 211k HP Kodiak 266k HP 140k HP CSI CSI 190k HP Mid-Continent 48k HP International Kodiak 295k HP 48k HP Kodiak 105k HP None CSI CSI Eagle Ford 157k HP 507k HP Permian 583k HP Kodiak Kodiak 2,779k HP Kodiak Headquarters
Slide 19: Pro Forma Peer Comparison
Pro Forma Peer Comparison Key Operating Statistics by Company (HP in millions) North American Contract Compression Market 16.3mm HP (~27% of Total NA Compression Market)4 4.21 Pro Forma Kodiak 3.62 4.2mm HP1 (~7% of Total NA Compression Market) 3.41 3.23 2.74 1.02 0.94 0.53 0.44 0.41 0.34 Other Publ
Slide 20: Kodiak Peer Comparison Summary (Credit Metrics)
Kodiak Peer Comparison Summary (Credit Metrics) KODIAK’S COMBINED BUSINESS AND FINANCIAL CHARACTERISTICS ARE COMPARABLE TO LEADING RATED PLAYERS IN GAS COMPRESSION SERVICES Combined1 LQA Q3 2023 Revenue $1,323 $1,014 $868 LQA Q3 2023 Adj. EBITDA2 $596 $481 $521 Financial ($ millions) Combined Compre
Slide 21: Industry Overview
Industry Overview KODIAK.> GAS SERVICES
Slide 22: Compression Required Throughout U.S. Energy Value Chain
Compression Required Throughout U.S. Energy Value Chain GAS COMPRESSION IS MISSION-CRITICAL TO NATURAL GAS & OIL PRODUCTION Centralized Gas Lift Gathering Systems Gas Processing Large horsepower, centralized facilities used to pressurize gas lift systems for field-wide reinjection to lift oil Large
Slide 23: Global Demand for Natural Gas/Oil > Population Growth
Global Demand for Natural Gas/Oil > Population Growth ▪ EIA projects that population growth combined with increased per capita energy consumption will drive a 34% increase in global energy consumption from 2022 to 20501 ▪ Renewables will play a role, but natural gas and oil consumption are projected
Slide 24: U.S. LNG – Clean, Secure & Affordable Energy for the World
U.S. LNG – Clean, Secure & Affordable Energy for the World U.S. LNG Exports, 2015 - 2050, LNG Export Capacity Current U.S. Dry Gas Production ≈ 104.5 Bcf/d 50 Approved + 13.2 Bcf/d 40 Under Construction + 16.9 Bcf/d 30 Bcf/d 20 In Service = 14.4 Bcf/d 10 - 2015 2020 2025 2030 2035 2040 2045 2050 Ref
Slide 25: Compression Market Must Grow to Meet U.S. Gas Demand
Compression Market Must Grow to Meet U.S. Gas Demand ▪ Spears & Associates estimates the total U.S. gas compression market at ~57 million horsepower in 2023 ▪ This implies “compression intensity” of ~560k horsepower per Bcf/d of U.S. dry gas production ▪ Feedgas to supply LNG export terminals under
Slide 26: Kodiak Compression Fleet is Well-Positioned
Kodiak Compression Fleet is Well-Positioned U.S. LNG Export Capacity (Bcf/d) Kodiak Owned Units In Service 14.4 Under Construction 16.9 Approved 13.2 Potential Capacity 44.5 >90% of potential export capacity located on Gulf Coast Permian Eagle Ford Sabine Pass Cameron Port Arthur Golden Pass Calcasi
Slide 27: Credit Highlights
Credit Highlights KODIAK.> GAS SERVICES
Slide 28: Key Credit Highlights
Key Credit Highlights 1 Stable cash flows through commodity price cycles 2 Contract structure contributes to cash flow visibility Differentiated operating approach results in longer-term relationships with blue chip 3 customers 4 Extensive fleet provides strong asset coverage for bondholders 5 Conse
Slide 29: Steady Cash Flows in Most Commodity Price Environments
1 Steady Cash Flows in Most Commodity Price Environments Quarterly Compression Operations Adjusted Gross Margin COVID-19 Pandemic 900 99.0% 98.3% 99.0% 99.1% 99.6% 99.8% 99.9% 99.9% 99.6% 99.7% 99.9% 99.9% 99.9% 99.9% 1 96.8% 1 1 779 1 750 765 755 1 728 $121 1 1 120 673 $117 14.0 1 700 $112 $115 1 $
Slide 30: Steady Growth Results in Industry-Leading Utilization
1 Steady Growth Results in Industry-Leading Utilization End-of-Period Revenue-Generating HP by Company (in thousands)1, 2 3,926 3,608 3,396 3,388 3,448 3,210 3,310 3,200 3,247 3,132 2,933 2,997 2,964 2,747 2,601 2019 2020 2021 2022 Q3 2019 2020 2021 2022 Q3 2019 2020 2021 2022 Q3 2023 2023 2023 End-
Slide 31: Compression Sector Durability during COVID-19
1 Compression Sector Durability during COVID-19 DURING THE COVID-19 PANDEMIC, KODIAK’S PEERS CONTINUED TO SERVICE THEIR DEBT Adjusted EBITDA & Adjusted 0.6EBITDA / Interest Coverage $200 $0.53 $0.53 $0.53 $0.53 $0.53 $0.53 $0.53 $0.53 0.16 ($ in millions) $180 ($ in millions) 0.5 $160 4.5x 0.14 140
Slide 32: Contract Structure Supports Cash Flow Visibility
2 Contract Structure Supports Cash Flow Visibility 1 Fixed monthly revenue with multi-year terms 2 Annual Producer Price Index rate adjustments 3 Advance billing improves working capital cycle 4 98% mechanical availability guarantee 5 Customer bears mobilization and demobilization costs Kodiak Statu
Slide 33: Kodiak's Operating Strategy Is Designed to Maximize Uptime
3 Kodiak's Operating Strategy Is Designed to Maximize Uptime KODIAK’S RIGOROUS ENGINE AND COMPRESSOR MAINTENANCE PROGRAM, STRONG WORKFORCE AND DISTRIBUTED SPARE PARTS INVENTORY SYSTEM MATERIALLY DIFFERENTIATE ITS OPERATIONS ▪ Data-driven, preventative maintenance strategy ▪ Program systemically ensu
Slide 34: Superior Performance
3 Superior Performance Premier Mechanical Availability1, 2 Monthly Kodiak Mechanical Availability Avg. Kodiak Mechanical Availability COVID-19 Pandemic Winter Storm Uri 100.0% 99.0% 98.0% Average 4-year mechanical 97.0% availability of ~99.5% 96.0% 95.0% Mar 2019 Sep 2019 Mar 2020 Sep 2020 Mar 2021
Slide 35: Premier Customer Base Supports Superior Growth
3 Premier Customer Base Supports Superior Growth Top 5 Pro Forma Customer Overview 1 Pro Forma Customers by Type2 Top 5 Customer Customer Customer Customer Customer customers1 A B C D E Credit rating BBB+ A- BBB A BBB- 55% 45% % of Revenue as 8.8% 5.8% 5.3% 4.4% 4.1% of Q3 2023 Length of relationshi
Slide 36: Fleet Detail – Asset Coverage
4 Fleet Detail – Asset Coverage EXTENSIVE PRO FORMA FLEET PROVIDES STRONG ASSET COVERAGE TO BONDHOLDERS ($ in millions) Current A/R1 172 Assets Inventories1 117 Fleet Detail2 Gross Fleet (Orderly Liquidation Value – In Place)2,3,4 3,554 Units HP Fleet Less: Liquidation Expenses (89) Compression 6,94
Slide 37: Capital Allocation Framework
5 Capital Allocation Framework Adjusted EBITDA 80% of pro forma debt either Stable and growing cash flow base insulated from short-cycle commodity price swings fixed rate or swapped to fixed, large NOL balance and Cash Interest Cash Taxes Maintenance Capex predictable maintenance (-) 80% of pro form
Slide 38: Leadership Team is One of the Best in the Industry
6 Leadership Team is One of the Best in the Industry THE KODIAK LEADERSHIP TEAM AVERAGES ~20 YEARS OF INDUSTRY EXPERIENCE Mickey McKee John Griggs Chad Lenamon President & Chief ExecutiveOfficer Chief Financial Officer Chief Operations Officer Years in Kodiak: 13 years Years in Kodiak: 1 year Years
Slide 39: Financial Summary
Financial Summary KODIAK.> GAS SERVICES
Slide 40: Combined Historical Results
Combined Historical Results Revenue ($mm) Adjusted Gross Margin1 ($mm) $1,600 $800 $658 $1,216 $1,200 $596 $1,061 $600 $532 $171 $911 $384 $156 $353 $135 $800 $304 $400 $833 $441 $487 $400 $200 $396 $708 $606 $0 $0 2021A 2022A Q1-Q3 2023A Annualized 2021A 2022A Q1-Q3 2023A Annualized KGS CCLP KGS CC
Slide 41: Well Positioned with Robust Balance Sheet
Well Positioned with Robust Balance Sheet PF Maturity Profile Commentary ($ in millions) ❑ Simple, streamlined capital $2,500 $2,200 structure $2,000 ❑ No near-term maturities $1,500 ❑ Ample liquidity position $1,000 $1,721 $750 ❑ Well hedged with $1.2bn in swaps $500 (80% of pro forma debt either f
Slide 42: Appendix
Appendix KODIAK.> GAS SERVICES
Slide 43: Kodiak Standalone Non-GAAP Reconciliation Summary
Kodiak Standalone Non-GAAP Reconciliation Summary Discretionary Cash Flow and Free Cash Flow Adjusted EBITDA (in thousands) (in thousands) 2021 2022 Q1 - Q3 2023 Q3 2023 2021 2022 Q1 - Q3 2023 Q3 2023 Net income $180,963 $106,265 $26,940 $21,766 Net (loss) income $180,963 $106,265 $26,940 $21,766 De
Slide 44: Kodiak Standalone Adj. Gross Margin for Compression Operations Reconciliation
Kodiak Standalone Adj. Gross Margin for Compression Operations Reconciliation Adjusted Gross Margin for Compression Operations by Quarter (Q1 2020 – Q4 2021) (in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Total Revenues 131,616 123,499 128,355 132,259 137,445 142,622
Slide 45: CSI Standalone Non-GAAP Reconciliation Summary
CSI Standalone Non-GAAP Reconciliation Summary Discretionary Cash Flow and Free Cash Flow1 Adjusted EBITDA (in thousands) (in thousands) 2021 2022 Q1 - Q3 2023 Q3 2023 2021 2022 Q1 - Q3 2023 Q3 2023 Net loss ($50,272) ($22,095) ($6,133) ($947) Net loss ($50,272) ($22,095) ($6,133) ($947) Provision f
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