Atlas Energy Solutions - Q4 2025

Transcript

Operator (participant)

Welcome to Atlas Energy Solutions, Inc. fourth quarter and year-end 2025 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kyle Turlington, VP in Investor Relations. Thank you. You may begin.

Kyle Turlington (VP of Investor Relations)

Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the fourth quarter of 2025. With us today are John Turner, President and CEO; Blake McCarthy, CFO; Tim Ondrak, President of Power; and Bud Brigham, Executive Chairman. John, Blake, and Bud will be sharing their comments on the company's operational and financial performance for the fourth quarter of 2025, 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 U.S. 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 will file with the SEC on February 24, 2026. Our quarterly reports on Form 10-Q and current reports on Form 8-K in our 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 (President and CEO)

Thank you, Kyle. For the fourth quarter, Atlas generated $36.7 million of Adjusted EBITDA on $249 million of revenue, representing a 15% Adjusted EBITDA margin. For the full year 2025, we delivered $221.7 million of Adjusted EBITDA on $1.1 billion of revenue, achieving a 20% Adjusted EBITDA margin. Our Q4 results exceeded our initial expectations. Volumes came in at 5.3 million tons, flat sequentially with the third quarter. The typical end-of-year seasonality was notably muted as customers took minimal downtime around the holidays. This was particularly encouraging following the steep decline in West Texas completion activity we experienced over the summer. It now appears that most operators have adjusted their activity levels to align with a $50-$60 WTI strip and are comfortable maintaining operations at these levels.

The quarter also marked the highest utilization we've seen to date on the Dune Express, as Delaware Basin customers increasingly recognize the efficiency and reliability benefits of this system brings to their logistics supply chains. We view this as a strong indicator of the system's performance heading into 2026. In November, we announced the order of 240MW of power generation equipment, accelerating our strategic evolution into a leading provider of behind-the-meter long-term power solutions across a broad range of domestic industries. We see the evolving power market over the next decade as a truly generational opportunity, and we're moving aggressively to capitalize on it.

After years of relatively flat U.S. electricity consumption, the grid is now confronting surging demand, which hit record levels in 2025 and is projected to grow by as much as 25% by 2030, driven by the explosive expansion of data centers and the resurgence in domestic manufacturing. Utilities are struggling to keep pace amidst infrastructure constraints and reliability challenges. While rising residential electricity prices, up 7.4% in 2025 alone, are creating political and economic pressure for more affordable, dependable alternatives. This dynamic is pushing developers to secure dedicated behind-the-meter power assets to de-risk their projects and meet timelines. For many of these companies, grid constraints represent a new and urgent challenge, compressing decision-making windows dramatically. Since the summer of 2024, Atlas has been positioning itself as the go-to solution in this space.

The Moser acquisition, completed this time last year, provided a cash flow platform and critical engineering expertise that complements our strength in large-scale project execution. Over the past 9 months, we've been actively transitioning the business from a traditional short-term generator rental model to a Power-as-a-Service approach, selling electrons under longer-term arrangements. This shift has involved upgrading communication systems, refining our sales process, and focusing our commercial efforts towards customers seeking dense, long-term deployments. We're encouraged by the progress. We've reached a tipping point in this transformation. Earlier this year, we successfully deployed our first microgrid with a Permian E&P customer, which has since been upsized. In the first quarter of 2026 alone, we anticipate deploying at least 30MW under long-term microgrid multi-basin contracts with E&P and midstream customers.

Based on our current pipeline, we are targeting more than 50% of our existing fleet under long-term contracts by year-end. January also marked the initial deployment of our patented hybrid battery solution, which integrates with generators as a grid-forming system, delivering meaningful improvements in cost and maintenance efficiency. The commercial potential for this technology extends far beyond the oil field. While these advancements in our existing power business are promising, the larger behind-the-meter projects represents a true step change opportunity for Atlas. We have active commercial negotiations underway and expect to provide greater visibility on equipment placement and the resulting economic impact to Atlas in the near term. Our pipeline features a broad range of behind-the-meter power projects across multiple industries, including energy, data centers, manufacturing, and others, with contract terms typically spanning 5-15 years, creating durable long-term cash flows.

We have particular strength and see especially compelling risk-adjusted returns in projects in the 50 to 500MW range, where our modular platform enables efficient execution and high density deployments. At the same time, our differentiated track record with large CapEx infrastructure projects, such as our high-capacity plants and the Dune Express conveyor system, combined with our scalable design and growing expertise, advantage us for the execution of even larger scale opportunities as customer demand intensifies. The opportunity set continues to expand rapidly, with several prospects advancing from initial discussions to formal proposals and active negotiations. We are targeting more than 500MW deployed across our fleet in 2027, with the potential for substantial additional growth beyond that as we secure larger scale projects and build on our initial orders.

The ordered equipment is slated for delivery starting in the second half of 2026, with energization targeted to begin in Q1, 2027. Each of these projects has the potential to meaningfully enhance Atlas's cash flow profile, and I am very excited to share more details with you as we close transactions. Stay tuned for the updates. I will now turn the call over to our CFO, Blake McCarthy, for our financials in more detail.

Blake McCarthy (CFO)

Thanks, John. The underlying performance in our sand and logistics business improved in the fourth quarter, despite a continued challenging pricing environment. Plant operating expense per ton declined sequentially to $12.28, despite elevated costs in October related to the operational challenges in Q3 and higher maintenance spending during December. Our cost of production, although improved, remain elevated at our flagship Kermit complex due to current limitations on our dredge feed. This is expected to be alleviated with the deployment of our 2 new Twinkle dredges, which are scheduled for commissioning in the second quarter. The market backdrop for West Texas sand and logistics remains challenging, with current pricing at the industry's marginal cost of production. Permian completion activity is expected to be down year-over-year, although it appears to have stabilized at Q4 levels for now.

Despite the challenging market environment, Atlas's commercial team has positioned us well to grow volumes in 2026. Leaning on our cost advantage mines and logistics network, we were able to increase our share of current customer sand procurement spend while also adding some key new customers, relationships we expect to grow and scale over the course of 2026 and beyond. The current oil macro environment remains quite opaque, we don't have significant visibility into all of our customers' full year plans. Our Q1 schedule is very busy, with sales volume expected to be up approximately 10% sequentially and further growth expected in the second quarter. The winter storm at the end of January, impacted everyone's operations in the Permian, and we lost approximately 4 days of production and deliveries. This temporary shutdown is expected to negatively impact Q1 EBITDA by approximately $6 million.

I'm proud to say Atlas was the last sand provider delivering in the Delaware before we had to shut down due to ice. That was made possible by the Dune Express, removing so much road mileage and the related risks. Speaking of the Dune Express, it continues to run extremely well. January 12th marked the one-year anniversary of its first commercial delivery, thanks to our partners, I'm proud to announce that we have eliminated more than 21 million miles of truck traffic in the Delaware Basin. We are very proud of the fact that the Dune Express is materially improving the quality of life and safety for families and the broader community in the region.

The Dune Express achieved record shipments in the fourth quarter of approximately 2.1 million tons, including a monthly shipment record in November of 760,000 tons. For the first quarter, we expect new customer wins and continued spot volumes to drive improvements in Dune Express volumes and believe we are positioned to deliver north of 10 million tons via the Dune Express this year. We are grateful to our customers for partnering with us to make the Permian Basin a safer place to live and work. All that said, the obvious question is: if the Dune Express is working so well, why were Q4 service margins so weak? While Q4 numbers were burdened by large load bonuses to ensure driver availability through the holidays, the real answer to that question is simply pricing.

Logistics pricing in the Permian has fallen to completely unsustainable levels, well below those seen during COVID. To compete with the Dune Express, we have seen increasingly irrational behavior from some of our logistics competitors, which we believe sets both them and their customers up for eventual problems and disruptions. We believe several companies are currently delivering standard prices where they are effectively subsidizing their customers. The margin differential provided by the Dune Express is there. It's just partially insulating us from historically bad pricing. Encouragingly, we are seeing signs of this market beginning to break the other way. Third-party trucking rates are beginning to see upward momentum, echoing what we're seeing in the broader over-the-road market. That is typically the first sign that trucking companies are tired of subsidizing their customers, and as a result, margins have to come up.

In November, Atlas introduced our first last mile storage pile system to the market. While other pile systems in the market essentially use mining equipment that has been reapplied for the oil field, our system is built for purpose. Today, we have six systems in place to support our wet sand operations, with testing underway for deploying the system in dry sand operations. These systems are key to continuing our further enabling of our customers' continuous pumping initiatives, which are driving record sand consumption per completion crew. While the market for sand and logistics in 2026 looks like it will remain challenging, we are looking to take advantage of the weaker market conditions to cement Atlas's position as the provider of choice. The pricing pendulum in our industry has swung too far for too long, and the pricing rubber band is certainly tight.

We're hearing more anecdotes of competitors struggling to fill customer obligations. I'll echo the comments from the large cap oil field services calls when I say that it's only gonna take a very small increase in completions activity for pricing to move. This RFP season, we saw market share shift to the higher quality suppliers, with fewer volumes being spread amongst the lower quality mines. The supply demand for sand in the Permian is much tighter than the market realizes, especially for dry sand. On our last conference call, we set a cost savings target of $20 million in annualized savings. As it stands today, we have executed upon that target through a combination of the elimination of third-party last mile equipment, reductions in rental equipment, headcount optimization, and procurement savings.

Despite the early success of these efforts, we will continue to push for further cost optimization as we look to lower the fixed cost structure of our business across the organization. Moving to our financials. As John touched on earlier, Atlas recorded full year 2025 revenue of $1.1 billion. Total company Adjusted EBITDA was $2,221.7 million, or 20% of revenue. Deconstructing full year revenues, proppant sales totaled $478 million on volumes of 21.6 million tons, while logistics and power contributed $558.8 million and $58.5 million, respectively.

Fourth quarter 2025 revenue of $249.4 million broke down to the following: Proppant sales totaled $105.2 million, logistics contributed $126.1 million, and power rentals added $18.1 million. Total proppant sales volume was slightly up sequentially to 5.3 million tons, while our logistics business delivered approximately 4.9 million tons. Our average sales price for the fourth quarter was approximately $19.85 per ton. For the first quarter, we expect volumes to be up approximately 10% sequentially, with the average sales price of sand to be approximately $18 per ton.

Q4 cost of sales, excluding DD&A, were $187.3 million, consisting of $60.6 million in plant operating costs, $115.2 million in service costs, $7 million in rental costs, and $4.5 million in royalties. For the fourth quarter, our per ton plant operating costs were approximately $12.28, including royalties, down sequentially from the third quarter, but still elevated versus our normalized levels. Higher volumes and a reduction in extraneous costs at the plants for Q3 levels drove the lower plant operating costs. For the first quarter, we expect our OpEx per ton to be approximately in line with the levels in the fourth quarter, reflecting the impact of the severe weather in January.

Over the course of 2026, we expect to see improvements in our realized variable costs as the new dredges are commissioned at our current facility. Cash SG&A for the quarter was $22.6 million. SG&A, excluding litigation expenses, is expected to decline in the first quarter due to our previously announced cost-cutting initiatives. Adjusted Free Cash Flow, which we define as Adjusted EBITDA less maintenance CapEx, was $22.9 million, or 9% of revenue. Growth CapEx equated to $5.1 million, the majority of which was tied to our power segment, and maintenance CapEx during the quarter was $14.4 million. The elevated maintenance CapEx spend was primarily tied to preparations related to the dredging and wet plant operations at Kermit ahead of the Twinkle dredge deliveries.

We expect cash capital spending in 2026 to be approximately $55 million, down significantly year-over-year and heavily weighted to the first half. Maintenance CapEx of approximately $45 million is planned, with approximately $10 million dedicated to growth, evenly split between sand and logistics and power. Additionally, we expect to make progress payments on the 240 MW of power assets we have on order as they begin to be delivered over the course of the second half of the year. These payments will be financed from our recently announced lease facility with Eldridge and are expected to total approximately $190 million over the course of the second half of the year.

Net interest expense is expected to be approximately $16.5 million per quarter in the first and second quarters, rising to approximately $20.5 million in the third quarter and $22 million in the fourth quarter. As John also touched on in his remarks, our plants have begun the year quite busy. With WTI prices hovering around 60, oil prices will dictate if we continue to keep this pace up. We have a clear line of sight on strong volumes for the first half of this year, but many of our customers are taking a wait-and-see approach with respect to their second half completion schedules. Our recent market share gains are a testament to Atlas's efforts to position ourselves as the reliable partner of choice to the best operators in the Permian Basin.

For the first quarter, while volumes are expected to be up sequentially, the expected decline in sales price per ton, combined with the lost days of revenue due to the winter storm, will be a headwind to margins. Our logistics business was burdened by load bonuses to ensure driver availability around the turn of the calendar, which will mute logistics margins improvement until later in the quarter. We are seeing a return to more normal cost structure as the quarter progresses, which, combined with a growing delivery schedule, will yield an improved margin structure through the quarter. The power business is expected to generate a greater contribution sequentially. We expect EBITDA to be approximately flat with Q4 levels, with the company exiting the quarter at a higher run rate in March versus January.

I will now hand the call over to our Executive Chairman, Bud Brigham, for some closing remarks before we turn the call over for some Q&A.

Bud Brigham (Executive Chairman)

Thanks, Blake. While we're navigating another cyclical trough in oil prices, the future for Atlas has never been brighter. Just as we were ideally positioned for the post-COVID Permian recovery, which substantially expanded our cash flows, we're primed for the inevitable rebound in oil and gas activity today. In addition, as I stated on our last call, we're going hybrid. Today, Atlas is laying the groundwork for transformative long-term growth through behind-the-meter power contracts. These 5 to 15-year agreements are expected to deliver robust revenue visibility, paired with predictable costs, including fixed and stable expenses for SG&A, maintenance, and interest, complementing our powerful but more volatile oil and gas revenue streams. Our proven expertise in large-scale infrastructure, amplified by the Moser acquisition, uniquely equips us to power the surge in AI, robotics, and manufacturing.

We see these initial permanent power projects as a strategic springboard, drawing in more customers and building a portfolio of assets that generate steady, recurring cash flows. As discussed by John Turner, demand for behind-the-meter power is accelerating rapidly, fueled by rising costs and potential grid shortfalls that are pushing commercial, industrial, and data center users towards swift commitments for bridge and permanent solutions. We're witnessing a seismic shift in power sourcing. To borrow from our partners at Bloom Energy, on-site power has evolved from a last resort to a business necessity. U.S. power demand is growing at its fastest rate in decades. Let me emphasize, the Atlas investment story is more exciting than ever. Chronic underinvestment in exploration spending, coupled with shale's maturation and steep decline rates, sets the stage for what I believe will be a prolonged upcycle.

While most U.S. shale basins struggle with inventory depletion, the Permian, where Atlas leads in proppant production and logistics, will be key to meeting rising oil demand. Even at today's cyclical lows in sand and logistics pricing, our low-cost model shines through, thanks to the Dune Express and efficient mining operations. When activity rebounds, and it's a question of when, not if, we anticipate stronger utilization, pricing, and margins, sparking a sharp profitability upturn. By investing ahead of this oil upcycle, while we are also launching our high-potential power business, Atlas offers investors dual catalysts for substantial growth. I'm deeply grateful to our exceptional team, the true innovators fueling our advancements. Their dedication has me more optimistic than ever about Atlas's future. Thank you for joining our fourth quarter and year-end conference call. I'll now hand it over to the operator for Q&A.

Operator (participant)

Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. Our first question is coming from Jim Rollyson of Raymond James. Please go ahead.

Jim Rollyson (Director and Equity Research Analyst)

Hey, good morning, everyone. John, you talked a bit about the power side. Obviously, a quarter ago, you ordered the 240MW. I'm pretty sure you mentioned then you had line of sight on customer opportunities there. You've since secured financing, which I presume doesn't happen without similar line of sight. Maybe just an update on kind of what's taken a little while on getting that contracted and, you know, do you have good line of sight on where that equipment's actually going at this point, since we're less than one year out from its deployment?

John Turner (President and CEO)

Yeah, great question, Jim. Thanks for asking. Yeah, we do have strong visibility into the customers that are expected to take, you know, the substantial majority of this equipment package, which is on track for delivery. I think deliveries, they begin in late 2026. You know, these are high quality, creditworthy counterparties that are across diversified markets and have indicated meaningful follow-on requirements beyond their initial commitment, providing for clear pathways for additional equipment orders and sustained growth into the future. You know, our strategies still remain or remain solely focused on behind-the-meter power solutions, but we're not pursuing grid, interconnected or utility scale opportunities. Instead, we are delivering reliable on-site power directly to customers facing grid constraints.

You know, in many cases, these engagements begin with bridge power to address immediate needs, which generates significant near-term cash flow and accelerates our path to full development. You know, these bridge arrangements quickly transition into long-term behind-the-meter agreements that we primarily are working on as customers recognize the prolonged grid timelines and value of our integrated approach.

...you know, yes, the answer to that is yes, we do have clear line of sight on who those customers are and, you know, expect to be, you know, reporting on that here shortly.

Jim Rollyson (Director and Equity Research Analyst)

Appreciate that. Maybe as a follow-up, that's kind of related here, is I've watched this market evolve and different players kind of approach this in different ways. It seems like there's 2 strategies I've seen, one being guys that are just providing power equipment, basically on a rental basis, and then the second being guys that are providing the entire solution, all the, you know, balance of plant, et cetera. I'm kind of curious if you could elaborate on kind of which strategy fits yours and how you see the return opportunity there?

Tim Ondrak (SVP and President)

Yeah, go ahead. I'm going to let Blake want to answer that.

Blake McCarthy (CFO)

Yeah, then we have Tim Ondrak, our leader of the Power Business, who could obviously talk more intelligently about it as well. Yeah, it's a really good question, Jim. Like, you know, there's obviously the equipment, and that's what I think most people in the market have a, you know, much clearer line of sight of, okay, it costs X, and, you know, therefore, you rent for Y, and you have return. When you get into these behind-the-meter solutions, right? Depending on the function, like, the function of the facility, there's different requirements for the balance of plant, different nutriment equipment that you need. So that can change that, you know, $ per MW provided, both on the front end and then therefore, what you have to charge.

You know, our strategy has been like, let's get in really early with some of these customers that we know they're making big investments in facilities and, you know, they're facing, you know, they've been... The grid has indicated to them, like, "Hey, you're not getting on for what you require." Really get to understand what they're trying to accomplish within their activities. You know, do a lot of front-end engineering to really meet their needs. That can have a pretty broad range in terms of, you know, what, like, one, what our facility costs, and two, that what we have to charge them. Because we're always gonna be targeting, you know, a strong unlevered return on our capital deployed.

Obviously, when it comes to return on equity, with the leverage you use on these, it gets pretty attractive. You know, thinking about, like, these first ones, there's gonna be a pretty broad range, and that's why we're excited to share the economics on things, and we'll be very transparent about that as we consummate deals.

Tim Ondrak (SVP and President)

I also think that it is the reason why it's taken a little longer to sign. Another comment about why it's taken so long to sign these agreements is that, you know, these just aren't generator rental agreements. These are actually... You know, you have to go in and do planning, engineering. You know, you have to do, you have to line up all the, you know, the equipment. There's a lot of different things that you have to do on that front. I think that's why it's taking longer than signing a generator.

Blake McCarthy (CFO)

It also makes those facilities much stickier...

Tim Ondrak (SVP and President)

Exactly.

Blake McCarthy (CFO)

because it's fit for purpose.

Tim Ondrak (SVP and President)

Yeah, I think, you know, just to kind of close out, I think, you know, our strategy is bridge to permanent. When we look at the thesis that really drives that, you know, we view power as a structural need. Depending on the utility region and where, you know, folks are building out their facilities, those delays can be, you know, 2028, all the way up to, I think we've heard 2034 from some people. When a customer looks at what their power need is, you know, as they start their facilities, it can be substantially less than their growth intentions.

The model that we have to execute on that is to provide mobile power generation into a permanent facility that meets that long-term need and gets the customer to a place where they don't need to worry about a utility timeline, and they can worry about operating their business.

Jim Rollyson (Director and Equity Research Analyst)

Makes perfect sense, guys. Appreciate the color. I'll see you next week.

Blake McCarthy (CFO)

Thanks, Jim.

Operator (participant)

Thank you. The next question is coming from Derek Podhaizer of Piper Sandler. Please go ahead.

Derek Podhaizer (Director and Senior Research Analyst)

Hey, good morning, guys. Maybe I want to keep going on the economics question. Obviously, there's some numbers out there. We talk about, you know,plus or minus $300,000 per MW per year of EBITDA. You know, kind of compare that to your current financing costs. Maybe just help us understand, you know, when you talk about the recips, building the facility, the balance of plan included in there, you know, how should we think about the economics and the earnings of these potential projects that you're working on? Just maybe a little bit of help around that as far as some of the numbers that we're hearing out in the market.

Tim Ondrak (SVP and President)

I'll start off, Blake, you know, Blake can he can follow up. I mean, economics, obviously, like we said earlier, depend on a number of factors. If you talk about, you know, balance of plant, facility development, you know, those are common in our turnkey behind-the-meter solutions. Obviously, balance that with the initial contract term. You know, what we focused on, you know, longer term contract structure for stability. You know, our goal is attractive internal rates of return, well above our cost of capital on the initial term, with upside from extensions and expansions. Do you want to add to that?

Blake McCarthy (CFO)

Yeah. Derek, kudos to you. I'm really glad you asked this question. You know, I think it's a great question because I know people want to have some type of metric to plug in their estimates. John's comment on IRR is probably the best way to back door to that. For these projects, you know, we're targeting unlevered IRR in the high teens, which we find very attractive, considering the contracted nature of these cash flows.

When you layer on any type of leverage on top of those cash flows, the returns on equity, as I mentioned, get very attractive. Like, you know, I, from a, like, long-term perspective, you know, I think that, you know, people talk about that like, you know, $300 per MW. That's probably a good proxy for just equipment alone, it's a little too simple when it comes to, like, you're actually doing these bespoke power facilities. I think that, you know, using that IRR and, you know, hey, we, you know, disclose kind of the, obviously, the magnitude of our facility has been disclosed. I think that's a good way to kind of backdoor into getting there.

You should be able to use that in the cost of equipment to get to a decent proxy for cash flows that we expect off these projects.

Derek Podhaizer (Director and Senior Research Analyst)

Got it. Okay, great. That's super helpful. Then just my follow-up as far as question around lead times for your additional equipment. You talked about going, you know, 400-500MW of deployed capacity. Is this gonna be a continuation of the 240MW, those larger 4MW recips that you recently ordered? If so, how should we think about when you'd be able to get those deliveries and the lead times around that? Then really beyond the potential 500MW, maybe line of sight of the future orders beyond the 500.

John Turner (President and CEO)

Yeah, I mean, Thanks, Eric. I'll take that question if anybody, but Tim, if you wanna chime in on this. I mean, you know, our relationships with the key OEMs and our differentiated track record of execution on large-scale infrastructure projects those continue to be major advantages, you know, which enabled us to initially secure the 240 MW at the, you know, 4MW reciprocating units. They're gonna be delivered for later in 2026 and also enable us to maintain a solid line of sight in, you know, to additional equipment for high-quality opportunities and, you know, more than 2-gigawatt pipeline that we're talking about. You know, these relationships are built on trust, scale, and early positioning.

you know, have given us access to redirected capacity from delayed projects elsewhere in the industry. you know, lead times for additional 4MW recips are now extended into late 2027, which reflects the strong industry-wide demand for behind-the-meter generation equipment. You know, that said, you know, our recent $375 million lease facility provides flexible, non-dilutive support tailored to our needs, allowing milestone payments during the packaging conversion into term finance upon delivery. You know, this has been instrumental in funding our initial 240MW commitment and positions us well for near-term deployments as we move towards our target of 500MW by 2027. you know, with the majority of that under long-term contract.

As far as beyond 2027, particularly as we pursue larger, denser, behind-the-meter opportunities across diversified end markets, we anticipate needing additional financing support for other equipment orders. We've actively evaluating options that align our disciplined capital approach, leveraging our proven track record with financing strong cash flow generation from bridge to permanent transitions. I think that as far as additional equipment packages, right now, the package that we've acquired is these 4MW recips. There could be other potential opportunities out there, and I'll let Tim comment more on that.

Tim Ondrak (SVP and President)

Yeah. Derek, I think there's, you know, there's equipment available. Yeah, I think if you look at global capacity, a lot of it has been backlogged. I think there's been a lot of announcements, you know, publicly to kind of back into what may be left. We really see two pools of equipment that come available. The first pool is, you know, where you have to be in the market, you have to be talking to people and, you know, orders cancel or portions of orders cancel or get delayed and so there's, you know, equipment that comes to market. I think there's a second where, you know, OEMs are doing the same thing that we're doing, where they're, you know, out building relationships with the groups that are putting these in place.

I think as John alluded to, we're in a strong position to take advantage of those relationships. You know, you look at the folks that are on this team and the relationships that they bring, and then you look at the reputation of Atlas and, you know, being able to manage and develop these substantial projects. I think that gives confidence to OEMs that when they place assets with Atlas, you know, it's going to be a good long-term relationship, and it's gonna give all of us a good name. I think that's what we're leaning into. We've got line of sight into the equipment that we would, we'd use to take us to that 500MW.

Derek Podhaizer (Director and Senior Research Analyst)

Great. Well, appreciate all the color. I'll turn it back.

Tim Ondrak (SVP and President)

Thank you. Our next question is coming from Stephen Gengaro of Stifel. Please go ahead.

Stephen Gengaro (Managing Director)

Thanks. Good morning, everybody.

Tim Ondrak (SVP and President)

Morning, David.

Stephen Gengaro (Managing Director)

I guess staying on the power theme, you know, one of the things we sort of learned over the last couple of years was there's a skill set required to sort of deploy these assets at the site, and operate them effectively and efficiently. Can you talk about sort of your internal expertise to execute these behind-the-meter projects?

Blake McCarthy (CFO)

Yeah, I'll lead off on that and then, you know, again, defer to Tim, who's again much more well spoken on this subject. When you think about the history of Atlas, right, I mean, we've got a lot of experience in building big, complicated facilities, right? You know, we constructed the, you know, the Kermit and the Monahans facilities from where there's just a.

... out there in West Texas to some of the, you know, more sophisticated sand manufacturing facilities in the industry. You know, you got to remember that we're the guys that thought it was a good idea to build a 42-mile conveyor belt in the middle of the desert, which I think a lot of people, you know, rolled their eyes at that concept. Lo and behold, here we are a year later, and it's that's moving. I think that, you know, when we had these initial conversations, people are like: Wow, these guys are good at building big, complicated infrastructure projects from the ground up. You combine that with the, you know, the electrical expertise that we brought in-house with the Moser acquisition.

We, you know, we haven't been sitting on our hands since we did that deal. We've been bringing in quite a bit of talent, some really, really strong people, in terms of adding to that roster. You know, when you combine those two things, it becomes really powerful. Then you, as people, you know, learn about Atlas, and this thing is that this is a different customer set than we've ever dealt with, right? This isn't just, you know, the, you know, 25 E&Ps that we all know and love. It is, you know, this is across the broader economy, and so there's a lot of education about who is Atlas that we have to do with them.

Once they start to see, like, who we are and what we've done, they get a lot of comfort about around that. Then, you know, we bring in some of our electrical experts, and, you know, they start to wow them with their knowledge. Those commercial discussions progress pretty quickly. I'll turn it over to Tim for actual specifics, though.

Tim Ondrak (SVP and President)

Yes, I think Blake, you know, Blake touched on a couple of things there. I think, you know, first and foremost, when we acquired Moser, you know, we got a team with, you know, a 50-year operating history, and so, you know, that was a great place to start from a talent perspective. We added to that team, you know, with some outside talent that have helped us substantially in the, in the CNI and the larger MW deployments. From a long-term perspective, we've built an operating team with, you know, 20+ years of experience in operating large engine systems. You know, we really think combining all of those things, we're able to deliver, you know, the same level of execution that we've delivered in the sand and logistics space and, you know, brought that over to the power space.

Stephen Gengaro (Managing Director)

Okay. No, that's helpful. That's good color. Thank you. The other question I had is, you mentioned, I think, in response to a prior question, the sort of the delays in grid interconnection, you also, I think, made a comment about, you know, you sort of think about this as a bridge to permanent power. It feels to us like that bridge to permanent power is pretty long, and I was just curious what you're hearing on the utility interconnection side and kind of the queues for larger loads to be delivered, and how that kind of impacts your planning and thought process.

Tim Ondrak (SVP and President)

Yeah. I think, you know, that's a, that's a big question. I think that's a big question because when you look at the utility network in the United States, it is incredibly complicated, right? The, the rules change, you know, sometimes as you cross the street. When we're talking to folks about their projects, every one of them has a different story with similar themes. The, the similar theme is that utilities aren't going to get there, and so they need to look at, you know, what they call a bridge solution. I think when you really understand the challenges that the utilities face, and, you know, you see projects from the utilities push in different districts, you understand that that's gonna affect, you know, really the entire industry.

What we're hearing from utilities, and I think I mentioned this earlier, is anywhere from 2028 to 2034 for a load to interconnect, and that's kind of across the U.S. There's some places where you can pull data points that say it's longer, it's shorter. If you take that perspective, what we're really talking about is infrastructure. You can bridge that, and I think we've got a good solution to bridge that. We've got, you know, 200MW+ of bridge equipment in what we acquired from Moser. Again, our thesis is this is a long-term infrastructure play, that bridge system has some disadvantages.

The way you solve some of those disadvantages, you know, whether they're fuel efficiency, footprint, whatever, is you install a long-term system that is designed to sit in place and operate. You know, we talk about, you know, 5-10-year contracts, 15-year contracts, but really, these are 30-year facilities if they need to be. We think that structural shift in this market is going to benefit those that take ownership of that and install their own systems today. You know, we think the broader grid really benefits from private capital installing a broad infrastructure, really across the entire United States.

Bud Brigham (Executive Chairman)

Yeah, I mean, Stephen, it's such a fluid space, too. Like, I feel like every morning there's four or five headlines around that interconnect to getting longer and pushing to the right. you know, I think we're all pretty big believers in that there's going to be more and more pressure on the utilities to, you know, probably, you know, stiff-arm some of these interconnects, too, just because we think that affordability is going to become a bigger and bigger buzzword in the political landscape. it's probably in everybody's best interest for the private sector to solve this problem, as opposed to, you know, leaning on the public utilities to get it done. Yeah, even if they can get power from the grid, they can't get all of their power from the grid.

I mean, like Tim said, you know, we're not only talking to end users, we're talking to the providers. You know, this is what we're getting from the providers, is that, you know, we may be able to provide some of the power, but we're not going to be able to provide all the power. They're also being told that in order for us to provide you power, you need to show us that you can provide yourself, you know, supply yourself with a certain amount of power to get that additional power from the grid. Obviously, there's a lot going on, a lot changing here, but that's kind of where it is now.

Blake McCarthy (CFO)

I think the, you know, one last point I'll make on that is, you know, we're out and we're talking to people every day, and they're looking at big projects. The two things that are most consistent are, one, the utility has moved the goal line on when they're actually going to show up. Two, that they're not going to meet the full request for power.

Stephen Gengaro (Managing Director)

Great. No, thanks for all the color. That's helpful.

Operator (participant)

Thank you. The next question is coming from Doug Becker of Capital One. Please go ahead.

Douglas Becker (Managing Director and Senior Equity Research Analyst)

Thank you, John. I think the questions are really appropriately focused on power up until this point. I did want to touch base on the sand and logistics business. 1st half volumes look very good. Appreciate the lack of visibility around the 2nd half of the year. Any type of range you could provide for production growth for the full year to kind of give us some goalposts to think about?

John Turner (President and CEO)

Yeah, I mean, it's a good question, and, sorry for being opaque, but, you know, right now, I appreciate it on part of our customers, too, is that the outlook is a little opaque. You know, I think that, if you rewind three months ago, it seemed like every macro note you were reading was, you know, pointing to oil being, you know, $45-$50 at this point in the year, and here we are sitting at, you know, $66 WTI. Granted, there's a lot of geopolitical risk premium built into that, but, I don't think any of us think we live in a world where there's not going to be geopolitical risk.

You know, our commercial team did a great job of going out there, and, you know, we told them, "Hey, go get the volumes." They went out there, and they did that, and it sets us up for a very strong first half. That being said, you know, there's a lot of our customers were, you know, they're like: Hey, like, we've got our schedule for the first six months of the year, and, you know, we'd like to leave a little bit of optionality on what our plans, our schedule looks like in the second half of the year. You know, I think a lot of that's dependent on the commodity tape. Right now, from where we sit, you know, our expectations are for our overall volumes to be up year-over-year.

That, you know, would imply... You know, that gives us... I appreciate that that's a pretty big window in terms of second half volumes, because, you know, we do expect to have pretty significant volumes in the first half of the year. That being said, like, the pricing environment remains pretty challenging, so, you know, that's obviously a headwind, but so that has us, you know, focused on things we can control, which is driving down the variable cost of our production at the plants. We're pretty excited about the dredge commissionings that we've got coming up, you know, later this quarter and into Q2. That's going to drive some significant improvements in our current facility.

You know, I think that, you know, really our objective on the sand logistics side is to just really cement ourselves as the leading sand logistics provider in Permian and position ourselves so that when the cycle does turn, hey, we're that sticky supplier of quality that, you know, hey, nobody wants us not to be delivering sand onto their well site because, you know, we make it where their operations doesn't have to think about it.

Douglas Becker (Managing Director and Senior Equity Research Analyst)

No, that's fair. On the logistics side, you know, highlighted the trucking challenges, pointed out some upward momentum in trucking rates. Just any color on the margin outlook in logistics for this year, you know, after a pretty slow start on the margin front with the Dune Express?

Blake McCarthy (CFO)

Yeah, that's a good question. You know, I tried to give a little, you know, transparency on that because, you know, I think it's a question we get a lot. You know, we're positioned to move to improve off the low base we ended 2025 at, started 2026 with. You know, during both late Q4 and early Q1, our logistics business was burdened by pretty heavy load bonuses that we offered to third-party carriers to ensure that we have the drivers available to meet customer needs during the holiday season. To ensure delivery when, quite frankly, the weather's pretty miserable, which it certainly was in January.

Additionally, as we mentioned in the prepared remarks, you know, like I said, our sales team they were really feeling their oats during the contracting season, they've done a great job securing pretty attractive work in what is a really tough market. That includes a good amount of work that's going to drive incremental Dune Express volumes, which is the biggest driver of creating more margin differential in a weak pricing environment. You know, from a numbers perspective, Doug, you know, I think logistics margins in Q1 probably going to look pretty similar to Q4, with December of last year and January of this year representing low points.

You know, Q2 is currently, you know, loose projections right now, but I've taken a nice step up into the double digits, you know, maybe not quite mid-teens, but a nice step up and a huge relative gap to where the rest of the market is.

Douglas Becker (Managing Director and Senior Equity Research Analyst)

Got it. Thank you.

Operator (participant)

Thank you. The next question is coming from John Daniel of Daniel Energy Partners. Please go ahead.

John Daniel (Founder)

Guys, thanks for having me. First question is, can you speak to the actual number or the volume of power inquiries coming from the E&P operators for microgrids? Have you tried or will you try to tie sand volumes to contracts for that power?

Blake McCarthy (CFO)

Hi, John. Yeah, the volume of increase on microgrids coming from E&P, I think what we're seeing is a little bit base independent. In, you know, probably our two of our three most active basins, I would say about half of the new requests coming in for well site generators are in some type of microgrid system. That's typically tying, you know, anywhere the production from anywhere from two to maybe four pads together.

John Daniel (Founder)

Okay.

Blake McCarthy (CFO)

We expect that, you know, as the year progresses, we will allocate more and more units to those types of systems.

Tim Ondrak (SVP and President)

You know, as far as tying the sand volumes to the power, you know, that's obviously a good idea. We like to be, you know, we wanna be a broad provider of solutions for our customers. As of now, you know, a lot of the teams that deal with those are separate. You got completion teams that are working versus the production teams, that they're, you know, mostly different in a lot of these organizations. From a sales standpoint, we're always working to be a better solutions provider for our customers. I'm not gonna count that out of the question.

John Daniel (Founder)

Okay. All right. That's all I had. Thanks, guys.

Tim Ondrak (SVP and President)

JD.

Operator (participant)

Thank you. Our next question is coming from Eddie Kim of Barclays. Please go ahead.

Eddie Kim (VP in Equity Research)

Hey, good morning. Just wanted to circle back to the volumes theme. You mentioned that your discussions on adding new customers this year, and you're taking greater share of the wallet with your existing customers, and it seems like you've been successful with that. Just to be clear, are those wins fully reflected in your first quarter volumes guidance, or do those volumes really start to kick in later in the year?

Tim Ondrak (SVP and President)

Those I would say, those wins are not necessarily reflective in our first quarter volumes. I mean, first quarter volume is gonna be depressed some because of the weather, but I would expect to see some of those impacts, kicking in as we move. You're gonna see some of it in the first quarter, and then it's gonna kick in second and third.

Blake McCarthy (CFO)

Yeah, I mean, like, there's always a ramp in customer activity. You know, January always starts a bit slow, and, you know, we have a steady ramp through the course of the quarter. That winter storm in January, obviously, you know, it knocked out about four and a half days of operations out there for everybody. Not fully reflected in those volumes. You know, our expectation is for Q2 volumes to be a step up from Q1.

Eddie Kim (VP in Equity Research)

Got it. Got it. Just to get on that theme, I mean, you mentioned strong volumes in the first half, but customers taking sort of a wait-and-see approach in the second half. I guess, just based on your conversations, it seems like E&Ps might not really be buying this $65 WTI oil price right now. Are they, you think, still operating as if we're in kind of the mid-50s environment? So I mean, just curious, what oil price do you think we'd have to get down to for them to consider a volumes reduction in the second half of the year?

Blake McCarthy (CFO)

Yeah, I think that their budgets for this year are raised, based around, like, $50-$55 oil. I think today's activity in West Texas is reflective of that commodity strip. They're, you know, they just set those CapEx budgets, they're not gonna deviate from that just on, you know, gyrations of the commodity price. The longer the commodity price, you know, stays up, people get more comfortable with it. I'm sure they're not complaining about the incremental cash flows They're ripping off right now.

Tim Ondrak (SVP and President)

I mean, the wall, the investment cycle is, I mean, you know, the decision timeline is pretty short, so they can wait longer with these shale wells to go out and make a decision. You know, I think like Blake said, they're comfortable where they are now. That, if that continues, you'll probably see steady, you know, steady, you know, activity through the end of the year, but it just depends on where prices go.

Eddie Kim (VP in Equity Research)

Great. Thank you. I'll turn it back.

Operator (participant)

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

Michael Scialla (Managing Director)

Morning, everybody. You mentioned the last mile storage system. Just wanted to ask about that, allows continuous pumping of wet sand. You said you're testing a dry sand solution. What needs to happen there for that to be successful, and what could the opportunity be for that system if it works?

Tim Ondrak (SVP and President)

You know, earlier this year or late last year, we launched a system that was designed for, you know, with really well site, you know, increasing the amount of sand that's delivered to the well site, timeliness of that. That's gonna increase the efficiencies to enable operators to pump down hole more sand. You know, we've been seeing. We kicked this off on the wet sand side.

... you know, we have all of those systems deployed right now. We do have a number of our customers that are using them that want more. You know, as far as the dry sand goes, there's still gonna be some work that we're gonna have to do on that front. You know, as far as timing goes, it's way to be seen, but there's some testing that works, that we're working on, and we'll be able to comment more about that here later. What we are seeing, the results of that are promising. You know, I think some of the things, well, some of the things you're gonna see going forward is continuous pumping.

A lot of our customers are asking it, or requiring it, because. You're starting to see some significant results from, you know, our delivery of sand to the well site, you know, that enables things through things like the Dune Express, and, you know, our wet sand offerings. This is just another, you know, step in that direction of, you know, helping our customers with their needs and providing them with solutions that work, that enable them to accomplish their goals.

Blake McCarthy (CFO)

The continuous pumping thing is such an important trend in our space. You know, those are our, the completion crews we're providing sand to, that are on continuous pumping operations. Like, the amount of sand they pump monthly is, you know, multiples of what you'd see from a traditional zipper crew. But the big constraint, right, is it becomes, you know, well site footprint. You know, things like boxes and silos, you know, they are matched to their constraints, right? The pile system, like, going to piles, you know, obviously allows you to put more sand in one spot. But what we think our system does is it enables to do piles, but to do it very efficiently and with clean sand, and combine that with the PropFlow technology.

It is a key enabler of very, very efficient, continuous pumping operations. It's something that, you know, just continues to push that tailwind of the sand intensity of each individual completion crew, which we think long term is a, you know, when people stop planning budgets around $50 oil and maybe get a little bit more comfortable around something like $65+, see a little bit more incremental activity, we think the market tightens up pretty darn quick.

Michael Scialla (Managing Director)

Appreciate that detail. Also wanted to ask about your, you mentioned your hybrid power system. I guess, what differentiates that and what's the opportunity for those assets look like?

Tim Ondrak (SVP and President)

Yeah. The hybrid power system is it essentially combines battery technology that we've developed in-house, own the patents on, and that was, you know, that was funded through a DoD grant that the legacy Moser business obtained in 2018. What that system essentially does is hybridizes with our existing generators, and it controls the operation of those generators so that they run at essentially a peak load, and the battery then distributes power into that system, shuts the generator off. What it does is it lowers the runtime on those generators, which extends our maintenance cycles from, you know, essentially once a month service to, you know, once every 45 days, as much as once every 60 days.

It lowers the fuel costs for our operators, and it decreases the risk of a shutdown event on the customer's location, which, you know, those are not good for downhole pumps, which is primarily what we do in that business. You know, we're pretty excited about the potential to deploy that at scale in the legacy Moser business. You know, we think it's differentiated. We've proven it on multiple well sites. I think when you apply that to, you know, the broader industry outside of oil and gas, you know, it's got uses really across every industry where, you know, folks want clean, reliable power, and that battery system provides clean, reliable power that can integrate with whatever systems they're using, whether they're prime power systems or backup systems.

Michael Scialla (Managing Director)

Great. Thank you, guys.

Blake McCarthy (CFO)

Thank you.

Operator (participant)

Thank you. Our final question today is coming from Jeff LeBlanc of TPH. Please go ahead.

Jeff LeCorgne (Director in the Equity Research division)

Good morning, John, and team. Thank you for taking my question.

Blake McCarthy (CFO)

Yep.

Tim Ondrak (SVP and President)

Yeah.

Jeff LeCorgne (Director in the Equity Research division)

I wanted to see if you could provide some color on the expected cost savings over the second half of the year once the Twinkle dredge come online.

Blake McCarthy (CFO)

Sorry, Jeff, he wants to get at the cost savings that we're gonna expect in the second half of the year once the dredges come on.

Tim Ondrak (SVP and President)

Oh, yeah.

Blake McCarthy (CFO)

Yeah.

Tim Ondrak (SVP and President)

I'll likely cover that.

Blake McCarthy (CFO)

Yeah. You know, we haven't had a steady dredge feed at our primary Kermit facility for going on over a year now. That facility is really designed to have a clean, steady dredge feed. What that's created is just different bottlenecks to the process that has elevated the OpEx per ton coming out of that facility versus... I mean, when that facility is cooking, it is our lowest cost facility in the entire Permian Basin. As those two dredges come on and, you know, like, just to highlight that these are these Twinkle dredges we've had. We've had a Twinkle dredge in the fleet, got one in the fleet now, and that is the most consistent producer we've got.

We're very confident in it. We think they're the F-150 of dredges. Getting those online will significantly enhance the quality of our dredge feed, which has just really positive knock-on effects to the entire process. It improves watershed operations, it reduces stress on the dryers, it just makes the whole facility run more efficiently. If you think about that, our overall variable costs, you know, probably have been elevated by about $1 across the complex because of that, those dredge feed issues. That's over the course, you know, over the course of the first half of the year, that will flow on.

It's a pretty big circular reference, though, in terms of the overall OpEx per ton, just because so much of that is based on volume throughput, and that's dependent on customer activity in the second half. If you were to just extrapolate first half activity to the second half, you know, you'd see a pretty significant improvement in OpEx per ton as we work through the year.

Jeff LeCorgne (Director in the Equity Research division)

Awesome. Thank you for the color. I'll hand the call back to the operator.

Operator (participant)

Thank you. At this time, I'd like to turn the floor back over to Mr. Turner for closing comments.

John Turner (President and CEO)

Thank you, operator, and thank you all for joining us today, and for all the great questions. We truly appreciate the time you've taken with us, to our exceptional team, thank you for all the hard work. To our customers, thanks for your partnership and trust, and our investors, thank you for your committed and continued support and belief in Atlas. We look forward and are excited about reporting our results going for 2026, and our first quarter results here in, 2 or 3 months. Thanks everyone for joining, and that ends the call. Thank you.

Operator (participant)

Ladies and gentlemen, thank you for your participation. 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.