Jim Rollyson

Jim Rollyson inquired about the implications of extended lead times for compression equipment on Kodiak's 2027 and 2028 planning, including potential impacts on the distributed power business.

Answer

Mickey McKee, President and CEO of Kodiak Gas Services, explained that the company is actively securing its supply chain, with shop space and engines secured through 2027 and into 2028. He noted that customers are aware of market tightness and are engaging in early conversations, with the situation being monitored in real-time. Regarding equipment costs, Mr. McKee anticipates future pricing power due to increased replacement costs and long lead times, though no significant price increases from Caterpillar have been announced yet.

Jim Rollyson inquired about the escalating lead times for compression and power equipment, specifically how Kodiak Gas Services is planning for 2027 and 2028, and how customers are adapting to these extended timelines. He also asked if recent conversations with Caterpillar indicate further material pricing increases due to current lead times, and if this would allow Kodiak to realize similar pricing benefits going forward.

Answer

President and CEO Mickey McKee acknowledged the challenging and fluid environment, stating that Kodiak has secured shop space and engines through 2027 and into 2028 to stay ahead of supply chain issues. He noted that customers are aware of market tightness and are engaging in early conversations. Regarding Caterpillar pricing, Mr. McKee expects some pricing power in future constructive conversations due to 100+ week lead times, though significant increases haven't been heard yet.

Jim Rollyson of Raymond James Financial inquired about the disconnect between strong market fundamentals for natural gas compression and weaker investor sentiment, and also asked about the future trajectory of gross margins.

Answer

President & CEO Mickey McKee explained the market disconnect stems from investors incorrectly linking compression demand to oil growth instead of the more relevant natural gas growth in the Permian Basin. He added that while Kodiak hopes for continued margin improvement driven by new technology like their ERP system and AI, there may be a short-term learning curve with the new system implementation.

Jim Rollyson followed up on extended lead times, asking if Archrock anticipates material price increases from suppliers like Caterpillar for future deliveries (2027 and beyond) and how that might enable Archrock to adjust its own pricing to maintain returns. He also questioned Archrock's long-term strategy for deploying excess free cash flow, given its strong leverage position and potential M&A opportunities or expansion into new business lines like power.

Answer

Brad Childers, President and Chief Executive Officer, indicated no significant changes in Caterpillar's pricing strategy or from packagers, but affirmed Archrock's flexibility to pass on any future cost increases to customers. He emphasized that value creation from the existing installed base currently outweighs inflationary pressures. Regarding capital allocation, Mr. Childers expressed excitement about the strong free cash flow, noting that Archrock will continue to seek accretive organic and inorganic growth opportunities, including potential M&A within the compression space. He also acknowledged the industrial logic of peers entering the power market but highlighted Archrock's focus on long-term infrastructure applications.

Jim Rollyson followed up on extended lead times, asking if potential future price increases from Caterpillar would allow Archrock to maintain returns by passing those costs on. He also questioned Archrock's strategy for deploying excess free cash flow, considering M&A opportunities and potential new business lines given the strong gas backdrop.

Answer

Brad Childers, President and Chief Executive Officer, stated that Archrock has not seen significant changes in Caterpillar's or packagers' pricing strategies but has the flexibility to price in any future increases. He highlighted that the value created from the existing installed base outweighs near-term inflationary impacts. Regarding excess cash flow, Mr. Childers expressed excitement, seeing continued M&A opportunities within the compression space and noting potential synergies with the power market, but emphasized a focus on long-term infrastructure applications.

Jim Rollyson asked about Archrock's capital deployment strategy given its strong free cash flow generation and low leverage, inquiring how the company plans to utilize its dividend growth, expanded share repurchase program, and M&A opportunities. He also followed up on the sustainability and drivers of Archrock's impressive gross margins, particularly the underlying operational improvements beyond pricing gains and tax benefits.

Answer

Brad Childers (President and CEO) explained that the primary capital allocation priority remains investing in and growing the business organically due to robust returns. He also highlighted the opportunity to grow the dividend (up 20% year-over-year) and use share repurchases opportunistically when the stock is undervalued. Childers attributed strong gross margins (70.4% underlying) to continued pricing prerogative, excellent cost management, and disciplined investments in technology like telemetry and big data, which improve operational efficiency and unit runtime.

Jim Rollyson asked about Archrock's capital allocation strategy, specifically how the company plans to deploy its increasing free cash flow given its strong financial position and low leverage, considering dividend growth, share repurchases, and M&A opportunities. He also inquired about the sustainability and drivers of Archrock's improving gross margins beyond pricing gains, particularly regarding technology investments.

Answer

President and CEO Brad Childers emphasized that the primary capital allocation priority remains investing in and growing the business organically due to robust returns. He noted the company's ability to also grow its dividend (up 20% year-over-year) and opportunistically repurchase shares, leveraging market dislocations. Regarding margins, Mr. Childers highlighted that the base business outperformed, driven by pricing and excellent cost management. He attributed significant margin improvement to disciplined investments in technology, including telemetry, sensors, and big data, which enhance operational efficiency and customer service.

Jim Rollyson from Raymond James Financial, Inc. asked for an update on customer sentiment in the Permian and other basins amid a softer oil macro, and inquired about any potential impact from tariffs on equipment from OEMs.

Answer

President & CEO D. Bradley Childers reported that customer activity remains consistent, with the Permian leading the order book at 55-80%. He also noted growing activity in the Eagle Ford, Haynesville, and other plays. Childers emphasized that Permian gas production is expected to grow regardless of oil price fluctuations. Regarding tariffs, he stated there is no material impact expected for 2025 and only a limited, manageable impact in 2026 due to a predominantly domestic supply chain.

Jim Rollyson asked for an update on customer sentiment and order book activity in the Permian and other basins, considering the strong long-term gas demand versus a softer oil macro. He also inquired about the potential impact of tariffs.

Answer

President & CEO D. Bradley Childers stated that customer activity remains consistent, with the Permian leading the order book at 60-80%. He also noted growing activity in other plays like the Eagle Ford and Haynesville. Mr. Childers affirmed that Permian gas production will continue to grow, but other basins will be needed to meet overall demand. Regarding tariffs, he clarified the impact is not expected to be material for 2025 and will be limited in 2026 due to a predominantly domestic supply chain.

Jim Rollyson from Raymond James Financial asked for an update on customer sentiment and order book activity, particularly in the Permian and other basins, in light of strong long-term gas demand but a softer near-term oil macro. He also requested an update on the potential impact of tariffs from OEMs.

Answer

President & CEO D. Bradley Childers responded that customer activity remains consistent, with the Permian leading the order book at 60-80% of new orders. He also noted incremental activity in other basins like the Eagle Ford and Haynesville, emphasizing that Permian gas volumes will continue to grow regardless of the oil macro. Regarding tariffs, Childers stated there is no expected material impact for 2025 and very limited impact in 2026, as Archrock's supply chain is predominantly U.S.-based.

Jim Rollyson of Raymond James inquired about the progress on Atlas Energy Solutions' 240MW power generation equipment order, specifically regarding customer commitments, financing, and the timeline for deployment. He also asked about Atlas's power strategy, differentiating between equipment rental and full solution provision, and the associated return opportunities.

Answer

President and CEO John Turner confirmed strong visibility into creditworthy counterparties for the majority of the equipment, with deliveries on track for late 2026. CFO Blake McCarthy and SVP and President of Power Tim Ondrak elaborated that Atlas focuses on bespoke, fit-for-purpose behind-the-meter solutions, targeting high-teens unlevered IRRs, which makes the process more complex and time-consuming than simple generator rentals but results in stickier, long-term contracts.

Jim Rollyson inquired about the progress and customer visibility for Atlas Energy Solutions' 240 megawatts of power generation equipment, including the timeline for contracting and deployment, and sought clarification on the company's strategy regarding power solutions (equipment rental vs. full turnkey) and the expected return opportunities.

Answer

President and CEO John Turner confirmed strong customer visibility for the majority of the equipment, emphasizing a focus on behind-the-meter solutions and a bridge-to-permanent approach. CFO Blake McCarthy and SVP and President of Power Tim Ondrak elaborated that the strategy involves bespoke, fit-for-purpose facilities requiring extensive front-end engineering, targeting high-teens unlevered IRRs, which makes the process longer but results in stickier, more attractive returns on equity.

Jim Rollyson of Raymond James Financial asked how Atlas is navigating intense customer pressure on costs and inquired about the company's confidence in securing the 12 million tons of additional sales opportunities for the Dune Express in 2026.

Answer

EVP & President of Sand and Logistics Chris Scholla stated that Atlas thrives in the current environment by focusing on total delivered value through its integrated platform, rather than competing on sand price alone. He expressed high confidence in securing new Dune Express contracts, explaining that initial customer skepticism has shifted to active engagement now that the system is operational, with the upcoming RFP season being perfectly timed to capture new, long-term partnerships.

Jim Rollyson, an analyst at Raymond James, questioned the future trajectory of the Offshore Manufactured Products segment's backlog, specifically whether the company anticipates sustained book-to-bill ratios significantly above 1x, potentially reaching historical highs, given the expected increase in offshore spending. He also inquired about the company's capital allocation strategy post-debt repayment, focusing on the balance between share repurchases and M&A, and sought an outlook on the military products segment, including the nature of its offerings and growth prospects.

Answer

President and CEO Cindy Taylor expressed optimism for continued growth in the Offshore Manufactured Products backlog, citing enhanced manufacturing capabilities, new product introductions like MPD assets and the mineral riser system, and recent military awards. Executive Vice President and CFO Lloyd Hajdik confirmed plans for opportunistic share repurchases and increased M&A optionality after the Convertible Senior Notes repayment. Ms. Taylor clarified that military products are legacy flex joint technologies for submarine sound dampening, with potential for expansion through R&D with the Navy and international defense sectors.

Jim Rollyson asked about the long-term outlook for the Offshore Manufactured Products segment, given sustained book-to-bill ratios above 1x despite a recent dip in offshore spend, and whether new products and market trends could drive backlog to historical highs. He also inquired about the company's capital allocation strategy post-debt repayment, focusing on shareholder returns versus M&A, and sought clarification on the military products segment's offerings and outlook.

Answer

President and CEO Cindy Taylor highlighted the company's global footprint, enhanced facilities, and new product introductions like MPD assets and the mineral riser system, alongside healthy military awards, as drivers for continued growth. She noted the balance sheet strength for future opportunities. Executive Vice President and CFO Lloyd Hajdik confirmed that free cash flow, potentially boosted by asset sales, would be used opportunistically for share repurchases and M&A, with Ms. Taylor emphasizing a focus on globally diversified, technology-differentiated tuck-ins. Ms. Taylor described military products as legacy flex joint technology for submarine sound dampening, with R&D and international expansion opportunities.

Jim Rollyson of Raymond James Financial inquired about the stability of the offshore market, the potential impact of trade tariffs, and sought clarification on the full-year free cash flow outlook, particularly regarding capital expenditures.

Answer

President & CEO Cindy Taylor confirmed that Oil States' long-cycle production infrastructure projects remain on track, unlike more discretionary spending, and expects a book-to-bill ratio above 1.0 for the remainder of the year. She also stated that tariff impacts are not expected to be material. EVP & CFO Lloyd Hajdik updated the full-year CapEx guidance to approximately $30 million to support the completion of the Batam facility and new contracted riser equipment.

Jim Rollyson (Raymond James) inquired about the expected ramp-up in offshore rig activity from late 2026 into 2027, seeking an order of magnitude for the opportunity set related to spares, upgrades, and components. He also asked for an update on the company's ability to pass through tariff costs and the progress of the $100 million cost-out program.

Answer

Jose Bayardo (CEO, NOV) expressed optimism for the offshore market, citing increased FPSO deliveries in 2025 and a significant rise in offshore rig tendering with longer contract durations, signaling a shift to field development. He anticipates strong demand for offshore production equipment, with potential for 10 FPSO FIDs in 2026. Bayardo acknowledged challenges in passing tariff and inflationary costs in a soft market but noted some success. He confirmed good progress on the $100 million cost-out program, expecting more visible benefits in H2 2026 as tariffs stabilize.

Jim Rollyson inquired about the order opportunity for offshore rig spares and upgrades, given the expected ramp-up in offshore activity in late 2026 and 2027, and how it compares to the laid out FPSO opportunity set.

Answer

CEO Jose Bayardo expressed optimism for the offshore space, highlighting increased offshore rig tendering (59 contracts vs. 33 year-over-year) with longer durations, and strong demand for offshore production equipment (potential for 10 FPSO FIDs in 2026, averaging 8 through 2030). He anticipates significant benefits for NOV's rig aftermarket business from higher activity, service, repairs, recertifications, and upgrades. Regarding tariffs and cost-out programs, Jose Bayardo acknowledged some success in passing costs despite a difficult market, noting specific inflationary pressures like tungsten carbide. He stated that while the $100 million cost-out program is progressing, its full impact on the P&L is offset by these headwinds, with more visible benefits expected in the second half of 2026 as tariffs stabilize.

Jim Rollyson of Raymond James inquired about the energy equipment segment's potential for continued year-over-year growth through 2026, leveraging its record backlog, and the expected margin profile for 2026, considering the mix of capital equipment versus aftermarket sales, tariffs, and cost offsets.

Answer

Clay Williams, Chairman and CEO, noted that the record backlog, particularly in production-related equipment, would help growth, but general market softness and caution on quick-return items like aftermarket spares might temper results. Jose Bayardo, President and COO, added that the quality of the backlog and improved operational efficiencies position the capital equipment well for 2026, with potential for significant earnings amplitude when various business cycles converge in late 2026 and 2027, especially for offshore and international markets.

Jim Rollyson inquired about the Energy Equipment segment's ability to sustain year-over-year growth through 2026, leveraging its record backlog despite a softer near-term market, and the segment's margin profile for 2026 considering the mix of capital equipment versus aftermarket, production-related equipment, tariffs, and cost offsets.

Answer

Clay Williams (Chairman and CEO, NOV) and Jose Bayardo (President and COO, NOV) confirmed that the record backlog, particularly in production-related equipment, would support growth, though near-term softness in North America and aftermarket caution are expected. Jose Bayardo and Rodney Reed (Senior VP and CFO, NOV) highlighted the improving quality and embedded pricing within the backlog, along with operational efficiencies in offshore production, as positive for margins. They noted that the timing of offshore rig re-contracting would influence aftermarket demand and overall margin amplitude, with a stronger convergence of cycles anticipated in late 2026 and 2027.

Jim Rollyson of Raymond James Financial, Inc. asked about the trajectory of NOV's profit margins, inquiring what might cause them to bottom out and what factors could drive a recovery into 2026. He also asked whether the deepwater or international unconventional market represents the larger long-term opportunity for the company.

Answer

Clay Williams, Chairman & CEO of NOV, acknowledged the near-term margin pressures from tariffs and market uncertainty but expressed strong optimism for 2026 and beyond. He identified two primary long-term growth drivers: the application of North American unconventional technology in international markets and the re-emergence of deepwater activity. Williams stated that while both are significant, deepwater development is 'probably' the larger of the two opportunities over the next decade.

Jim Rollyson with Raymond James inquired about Patterson-UTI's cost reduction efforts across OpEx, CapEx, maintenance, and SG&A, and their impact on margins. He also asked about the company's philosophy on capital allocation, share buybacks, and dividend increases, especially given strong free cash flow generation.

Answer

Andy Hendricks, President and CEO, credited teams for rigorous cost control, focusing on maintenance CapEx, refurbishing parts, and supplier negotiations. Andy Smith, CFO, added that efficiency gains in crew sizes, support structure consolidation, and back-office integration contributed to cost savings. Mr. Smith reiterated that the company's philosophy remains maximizing free cash flow per share, with capital allocation decisions (investing, buybacks, M&A) evaluated on this metric. Mr. Hendricks added that strong free cash flow in a softer market gave confidence for the dividend increase.

Jim Rollyson asked about Patterson-UTI's cost reduction efforts in completion and drilling services, inquiring about the stage of these initiatives. He also questioned the company's capital allocation philosophy, particularly regarding share buybacks, given the consistent exceeding of the 50% free cash flow return target and the recent dividend increase.

Answer

Andy Hendricks, President and CEO, praised teams for scrutinizing OpEx and CapEx, focusing on maintenance (refurbishing, supplier negotiations) and efficiency. Andy Smith, CFO, added that cost savings come from optimizing crew sizes, consolidating support facilities, and integrating back-office functions. Mr. Smith reiterated the philosophy of maximizing free cash flow and evaluating capital allocation (investing, buybacks, M&A) based on cash flow per share accretion, noting Q4 buyback pause was due to working capital lumpiness. Mr. Hendricks emphasized that strong free cash flow, even in a softer market, supported the dividend hike.

Jim Rollyson (Raymond James Financial, Inc.) asked for Andy Hendricks' perspective on how the current cycle, which has differed from historical violent downturns with better pricing and technology benefits, will unfold as gas and oil rig counts eventually recover. He also inquired about the revenue and profit opportunity for the digital suite on the completion side (EOS Completions platform, Vertex Automation Controls) assuming high customer adoption.

Answer

President and CEO Andy Hendricks acknowledged the prolonged moderation over the past two and a half years, stating that the company continues to adjust its structure. He believes the reverse inflection could be similar, with a potentially quicker rebound on the gas side, offering upside in late 2026 and 2027. He expressed optimism due to a strong balance sheet, cash flexibility, and continued technology deployment. Regarding the completion digital suite, Mr. Hendricks noted it's "still early days" for revenue, but the drilling side's Cortex digital suite already generates millions annually, with new AI-layered applications enhancing productivity. He emphasized that these are software investments, not heavy capital.

Jim Rollyson asked how the current cycle, characterized by sustained activity moderation but resilient pricing and a technology focus, will unfold as activity recovers, particularly regarding pricing leverage in frac versus drilling. He also inquired about the revenue and profit opportunity from the digital suite on the completion side (EOS Completions platform, Vertex Automation Controls) once customer adoption is high.

Answer

Andy Hendricks, President and CEO, noted the current cycle's unique two-and-a-half years of moderation, requiring continuous company adjustments. He believes the recovery might mirror the downturn's pattern, with potential quicker inflection on the gas side. He remains upbeat due to a strong balance sheet, cash flexibility, and continued technology deployment, which commands payment. Mr. Hendricks stated it's 'still early days' for completion digital services, with contracts being signed for next year. He mentioned that the drilling side's Cortex digital suite generates 'millions of dollars a year' in revenue, with new AI-layered applications enhancing productivity. He emphasized that these are software investments, not heavy capital, offering revenue upside.

Jim Rollyson from Raymond James asked about Weatherford's positioning and evolving business model in North America, specifically how it aims to perform better than the projected mid- to high-single-digit activity decline in 2026.

Answer

President and CEO Girish Saligram explained that Weatherford's U.S. land business is more production-oriented, with Artificial Lift being a significant product line that helps mitigate declines. While acknowledging impacts from rig and well count on other products, he stated the focus is on optimizing the operational footprint for efficiency and driving differentiation through innovation in areas like well construction and digital business (e.g., production optimization). The goal is to secure higher quality revenue with improved EBIT and cash contribution, rather than being immune to activity declines.

Jim Rollyson from Raymond James asked about Weatherford's positioning and evolving business model in North America, given the expected mid- to high-single-digit activity decline in 2026, and how the company aims to outperform.

Answer

Girish Saligram, President and CEO, explained that Weatherford's North America business is more production-oriented, with artificial lift being a significant product line in U.S. land. He outlined strategies to optimize footprint for efficiency, drive differentiation through innovation (e.g., well construction products, digital business, production optimization), and focus on higher-quality revenue with better EBIT and cash contribution to offset activity declines.

Jim Rollyson asked for an update on the U.S. Land market, seeking clarity on Weatherford's business mix between production and drilling, and requested quantification of the impact from tariffs.

Answer

President and CEO Girish Saligram stated that Weatherford's U.S. Land business is primarily product-oriented, with a focus on production via artificial lift. He noted that a further decline is expected in Q3 due to tariff impacts on inventory, and the company will continue to defend margins rather than chase price in the competitive market.

Jim Rollyson of Raymond James asked about the execution strategy for Weatherford's new share buyback program, specifically whether it would be programmatic or opportunistic. He also inquired about the potential impact of the company's digital strategy on future growth.

Answer

Executive Arunava Mitra explained that the buyback execution will be a hybrid approach: programmatic to offset dilution from employee compensation, and careful and opportunistic for the remainder based on market signals. Executive Girish Saligram described digital as a significant 'pocket of growth' that is highly accretive to margins, less capital-intensive, and central to the company's technology-driven margin expansion strategy.

Jim Rollyson asked about the market's trajectory for 2026, specifically whether the return of drilling activity, combined with growing production support and EPCI markets, would allow Tidewater to achieve pricing leverage sooner than if drilling alone had to reach 2024 peak levels. He also inquired if the absence of share repurchases in Q3 2025, despite significant cash generation, indicated the company was holding dry powder for potential M&A opportunities.

Answer

President and CEO Quintin Kneen confirmed that increased activity in FPSOs and EPCI, alongside vessel attrition, would likely enable Tidewater to push day rates sooner than relying solely on drilling activity returning to 2024 peaks. Regarding capital allocation, Mr. Kneen stated that the company had "material non-public information during the quarter," which influenced the decision not to repurchase shares.

Jim Rollyson asked about the market outlook for 2026, specifically if the combination of growing production support, EPCI activity, and returning rig demand would accelerate pricing leverage compared to 2024 peak rig levels. He also inquired if the lack of share repurchases this quarter, despite significant cash generation, indicated active pursuit of M&A opportunities.

Answer

Quintin Kneen, President and CEO, confirmed that increased FPSO and EPCI activity, alongside vessel attrition, would likely lead to earlier pricing leverage, emphasizing the need for 2024 drilling activity levels for significant day rate increases. Regarding capital allocation, Mr. Kneen stated that the company had material non-public information during the quarter, implying ongoing M&A discussions influenced capital allocation decisions.

Jim Rollyson of Raymond James Financial inquired about Tidewater's M&A outlook following its recent refinancing and asked for an update on demand visibility for the second half of 2026 and beyond, particularly regarding the potential to increase day rates.

Answer

President & CEO Quintin Kneen noted that M&A discussions have become more constructive as market participants' expectations have aligned with the cycle's pace, though any deal must surpass the value of share repurchases. EVP & COO Piers Middleton added that the outlook for H2 2026 is positive, with rising tender activity for drilling and subsea work expected to tighten vessel supply and create opportunities to push rates higher again.

Jim Rollyson followed up on the Devon Energy discussion, asking if word about NGS's technology and service quality is spreading to drive new customer opportunities. He also asked for clarification on the 2026 CapEx outlook, comparing it to 2024's absorption year and whether it sets up for a ramp-up in 2027.

Answer

CEO Justin Jacobs stated that attracting new customers is an ongoing effort, involving multiple conversations, demonstrations, and engaging with operational and engineering teams to showcase technology benefits and service performance. He confirmed that 2026 CapEx is expected to be generally in line with 2024, noting that 2023 was an outlier and 2025 includes particularly large customer wins. He expressed encouragement for continued significant organic growth and market share capture into 2027, citing early RFP activity.

Jim Rollyson asked about new customer acquisition strategies, specifically if the success with existing large customers like Devon and Oxy is generating word-of-mouth interest and driving new potential customers to NGS.

Answer

Justin Jacobs, CEO, described new customer acquisition as an ongoing effort involving multiple conversations, demonstrations, and direct engagement with operational and engineering teams. He noted that while there are positive indicators, it requires continuous work to showcase the benefits of NGS's technology and service performance.

Jim Rollyson of Raymond James Financial inquired about the long-term opportunity for water infrastructure contracts, asking what 'inning' the market is in, and about the market potential for the Peak Rentals distributed power business.

Answer

President, CEO & Chairman John Schmitz stated that while major infrastructure projects are well underway, the company is just beginning to see 'add-on' opportunities from adjacent, undedicated acreage. EVP & COO Michael Skarke added that the project backlog remains strong. Regarding Peak, John Schmitz explained its strategic shift from supporting temporary completion sites to providing longer-term power for production and midstream operations, highlighting the economic and efficiency benefits of pairing natural gas generators with proprietary battery systems.

Jim Rollyson of Raymond James asked for clarity on the customer rationale for deferring well intervention work, whether the revised guidance impact would be felt more in Q3 or Q4, and the cause of the recent increase in Days Sales Outstanding (DSO).

Answer

CEO Owen Kratz attributed work deferrals to a combination of weaker oil prices and regulatory uncertainty. CFO Erik Staffeldt confirmed the guidance reduction is primarily concentrated in Q4 due to market uncertainty and seasonality. He also explained the DSO increase was due to payment timing with a few large, blue-chip customers, which he expects to resolve.