Kodiak Gas Services, Inc. · NYSE:KGS
Kodiak Gas Services — Investor Presentation (March 2024)
29 slides from Kodiak Gas Services's investor presentation, March 2024
Slide 1: Investor Presentation March 2024
INVESTOR PRESENTATION March 2024
Slide 2: Disclaimer
Disclaimer Cautionary Note Regarding Forward-Looking Statements. This presentation contains, 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. Fo
Slide 3: Overview
Overview A leading provider of domestic energy infrastructure, enabling the reliable and secure flow of natural gas and oil to feed growing global demand AT-A-GLANCE 1, 2 We Move Energy. NYSE — KGS Reliably. IPO June 2023 7% Safely. Powder River Basin Responsibly. Dividend Yield 5.6% 2% Appalachian
Slide 4: Investment Thesis
Investment Thesis Leading Market Position ► Purpose-built fleet of >3.2 million revenue-generating horsepower1 ► Market leader in the Permian Basin with <~5% of HP in dry gas basins Industry Leader in Both Growth & Utilization ► Horsepower CAGR of 6% over 5 years ► >99% utilization rate (2021-2023)
Slide 5: 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 6: Compression Market Overview
Compression Market Overview Horsepower Market Share by Company1 Top 3 Compression providers = >70% of the outsourced market2 North America Market Contract Compression3 HP % HP in millions 4.3 Outsourced (contract compression) 16 ~30% 3.8 3.7 Insourced (customer-owned) 39 ~70% Total 55 100% 1.6 0.9 0
Slide 7: LNG Driving U.S. Natural Gas Demand Outlook
LNG Driving U.S. Natural Gas Demand Outlook U.S. Gas Demand Outlook2 ► Associated natural gas from the Permian Basin expected to be one of the primary supply sources for Gulf Coast LNG projects ► Kodiak is a market leader in the Permian Basin with ~2.3 million horsepower ~71% of company’s total HP1
Slide 8: Compression Demand Outlook
Compression Demand Outlook ► U.S. natural gas demand expected to increase by 22 Bcf/d by 2030 – primarily driven by LNG exports ► An increase of ~1.8 million horsepower per year through 2030 required to meet this demand U.S. U.S. Compression Compression Intensity × Gas Demand Outlook = Demand Outloo
Slide 9: Compression Industry Has Displayed Capital Discipline
Compression Industry Has Displayed Capital Discipline ► U.S. dry natural gas production has increased by ~40% since 2017 ► Compression industry capital spending remains constrained Compression industry capital spending …while costs to add HP remains below historical levels1… have risen significantly
Slide 10: Compression Markets Remain Tight
Compression Markets Remain Tight Supply constrained by long lead times from OEMs … Est. Market Share1 >80% Engines Current Delivery Leadtime <10% Packaging Compressor >90% (in weeks) 0 10 20 30 40 50 60 …and high utilization rates 96% HP Utilization Rate, 2021 – 20232 86% Q1 2021 Q2 2021 Q3 2021 Q4
Slide 11: Multiple Compression Touch Points
Multiple Compression Touch Points Gas Processing Residue Centralized Compression Gathering Gas Lift Systems Permian Basin Haynesville Shale NATURAL GAS GROWTH 2020-20231 Bcf/d 7.8 3x – 4x 5.2 Compression Required in the Permian Basin vs Haynesville 1 EIA Drilling Productivity Report Permian Basin Ha
Slide 12: Kodiak's Fleet Was Purpose-Built for the Permian Basin
Kodiak’s Fleet Was Purpose-Built for the Permian Basin The Right Equipment for Today’s Highest-Demand Applications ► Large horsepower focus – average of 1,059 HP/unit1 ► Youngest fleet among public peers – average fleet age of 4.5 years1 ► Compression systems designed for liquids-rich basins – >95%
Slide 13: Operational Systems Designed to Maximize Mechanical Availability
Operational Systems Designed to Maximize Mechanical Availability Every aspect of the business is geared towards providing superior service as defined by industry leading mechanical availability >99% Mechanical Availability Over Past 5 Years Rigorous Engine and Superior Training = Superior Inventory
Slide 14: Experienced and Diverse Leadership Team
Experienced and Diverse Leadership Team 20 yrs 23 yrs 25 yrs Industry Industry Industry Experience Experience Experience Mickey McKee John Griggs Chad Lenamon President & Chief Executive Officer Chief Financial Officer Chief Operations Officer ‣ Formed Kodiak in 2010 ‣ Served as CFO since joining Ko
Slide 15: Premier Customer Base Drives Growth & Stability
Premier Customer Base Drives Growth & Stability Continuous HP Growth¹ Customers by Credit Rating2 Customers by Type3 2019 – 2023 CAGR 6% 3,259 3,132 2,933 47% 42% 2,747 2,601 53% 58% Investment Grade Upstream 2019 2020 2021 2022 2023 Non-Investment Grade Midstream 1 Reflects end-of-period Revenue-ge
Slide 16: Contract Structure Supports Cash Flow Visibility
Contract Structure Supports Cash Flow Visibility 1 Fixed monthly revenue with multi-year terms Percent of Month-to-Month Contracts1 93% HP with Remaining Contract Term 2 Annual inflation index adjustments HP on Month-to-month Contract Term 3 Advance billing improves working capital cycle 7% Weighted
Slide 17: Strategy Translates Into Industry Leading Growth and Utilization
Strategy Translates Into Industry Leading Growth and Utilization End-of-period Revenue-Generating HP by Company (in thousands)1,2 3,926 3,607 3,434 3,388 3,448 3,259 3,310 3,247 3,132 3,200 2,933 2,997 2,964 2,747 2,601 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Avera
Slide 18: Steady Business in any Commodity Price Environment
Steady Business in any Commodity Price Environment Quarterly Compression Operations Adjusted Gross Margin ($M) 140 14 Kodiak Compression Operations Adj. Gross Margin ($M) $126 $121 Average WTI Crude Oil Price ($/bbl) $117 120 $115 12 Average Henry Hub Price ($/MMBtu) $112 $104 $108 $104 $105 100 $97
Slide 19: Capital Allocation Priorities
Capital Allocation Priorities Targeting Investing Reducing 35% – 40% payout in increasing leverage and of discretionary fleet capacity that further balance cash flow to exceeds internal sheet improvements shareholders hurdle rate through dividends Dividends Organic Growth Improving Balance Sheet $0.
Slide 20: 2023 Financial Highlights
2023 Financial Highlights Achieved record financial results ► Compression Operations segment revenues of $736 million, increased by 12% y/y ► Other Services revenues increased by 117% y/y ► Adjusted EBITDA of $438 million, an increase of 10% y/y Increased large horsepower compression capacity by 4%
Slide 21: Full-year 2024 Guidance
Full-year 2024 Guidance (All amounts below are in thousands except per share amounts and percentages) Low High Adjusted EBITDA (1) $ 460,000 $ 490,000 Discretionary Cash Flow (1)(2) $ 295,000 $ 310,000 Segment Information Compression Operations revenues $ 795,000 $ 825,000 Compression Operations Adj
Slide 22: Industry Leader in Sustainability Initiatives
Industry Leader in Sustainability Initiatives Established Published Hart Energy Recognized as a Received Established ‘Bears formal ESG inaugural recognizes Kodiak best place to work Top Workplaces Academy’, a training Committee sustainability report as first-ever ESG Top – Houston Business USA Award
Slide 23: CSI Transaction Overview
CSI Transaction Overview Kodiak to acquire CSI Compressco LP (“CSI”) Largest Fleet in in all-equity transaction valued at $854 million North America ► Fixed exchange ratio of 0.086 Kodiak shares per CSI unit 4.3M ► Kodiak to assume $635 million in outstanding CSI debt + = Revenue- Generating HP2 Pur
Slide 24: Kodiak's Value Proposition
Kodiak’s Value Proposition Leading Market Position Industry Leader in Both Growth & Utilization Attractive Industry Fundamentals We Move Energy. Reliably. Strong and Stable Cash Returns Safely. Responsibly. MARCH 2024 / 2 4
Slide 25: Supplemental Slides
Danlgioa | = SUPPLEMENTAL SLIDES
Slide 26: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Gross Margin to Adjusted Gross Margin Net Cash Provided by Operating Activities (in thousands) 4Q 2022 4Q 2023 (in thousands) 4Q 2022 4Q 2023 Total revenues $179,776 $225,980 Net cash provided by operating activities $32,992 $62,627 Maintenance capital e
Slide 27: Reconciliation of Non-GAAP Financial Measures (cont'd)
Reconciliation of Non-GAAP Financial Measures (cont’d) Gross Margin to Adjusted Gross Margin Net Cash Provided by Operating Activities to DCF & FCF (in thousands) 2021 2022 2023 (in thousands) 2021 2022 2023 Total revenues $606,375 $707,913 $850,381 Net cash provided by operating activities $249,978
Slide 28: Reconciliation of Non-GAAP Financial Measures (cont'd)
Reconciliation of Non-GAAP Financial Measures (cont’d) Gross Margin to Adjusted Gross Margin for Compression Operations (in thousands) 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3Q 2023 4Q 2023 Total Revenues $131,616 $123,499 $128
Slide 29: Thank You
KODIAK.> | | GAS SERVICES’, \ 2 < mm), ge THANK YOU! CONTACT: GRAHAM SONES | VP,IR IR@KODIAKGAS.cOM NYSE.
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