Archrock (NYSE: AROC) posts Q1 2026 profit growth and refinances debt
Archrock, Inc. reported solid first‑quarter 2026 results, with revenue of $373.8 million, up from $347.2 million a year earlier, driven mainly by growth in its contract operations business.
Net income increased to $73.8 million from $70.9 million, and basic and diluted earnings per share rose to $0.41 from $0.40. Adjusted gross margin improved to $247.4 million from $222.1 million, reflecting higher contract operations revenue and relatively stable costs of sales.
Contract operations revenue grew to $330.9 million from $300.4 million, while aftermarket services revenue eased to $42.9 million from $46.8 million. Operating cash flow strengthened to $185.9 million from $115.6 million, supporting capital expenditures of $113.5 million and dividends of $39.9 million.
Archrock ended March 31, 2026 with $4.39 billion in total assets, $2.87 billion in liabilities and $1.52 billion in equity. Long‑term debt totaled $2.38 billion, including $800.0 million of new 6.0% senior notes due 2034 and $700.0 million of 6.625% senior notes due 2032, while borrowings under its Credit Facility declined to $96.8 million.
Positive
- None.
Negative
- None.
Key Figures
Key Terms
adjusted gross margin financial
Credit Facility financial
2034 Notes financial
NGCS Acquisition financial
variable interest entity financial
Share Repurchase Program financial
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, zip code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ | | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | | Smaller reporting company | |
| | | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of shares of the common stock of the registrant outstanding as of April 29, 2026:
Table of Contents
TABLE OF CONTENTS
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Glossary | 3 |
Forward-Looking Statements | 5 |
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Part I. Financial Information | |
Item 1. Financial Statements (unaudited) | 6 |
Condensed Consolidated Balance Sheets | 6 |
Condensed Consolidated Statements of Operations | 7 |
Condensed Consolidated Statements of Equity | 8 |
Condensed Consolidated Statements of Cash Flows | 9 |
Notes to Unaudited Condensed Consolidated Financial Statements | 10 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 37 |
Item 4. Controls and Procedures | 37 |
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Part II. Other Information | |
Item 1. Legal Proceedings | 38 |
Item 1A. Risk Factors | 38 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 39 |
Item 3. Defaults Upon Senior Securities | 39 |
Item 4. Mine Safety Disclosures | 39 |
Item 5. Other Information | 39 |
Item 6. Exhibits | 40 |
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Signatures | 41 |
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GLOSSARY
The following terms and abbreviations appearing in the text of this report, including the Financial Statements, have the meanings indicated below.
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2020 Plan | 2020 Stock Incentive Plan |
2025 Form 10-K | Annual Report on Form 10-K for the year ended December 31, 2025 |
2027 Notes | $500.0 million of 6.875% senior notes due April 2027 |
2027 Notes Redemption | $300.0 million redemption of the 2027 Notes, completed in November 2025 |
2027 Notes Tender Offer | $200.0 million partial redemption of the 2027 Notes, completed in August 2024 |
2028 Notes | $800.0 million of 6.250% senior notes due April 2028 |
2028 Notes Redemption | $800.0 million redemption of the 2028 Notes, completed in April 2026 |
2032 Notes | $700.0 million of 6.625% senior notes due September 2032 |
2034 Notes | $800.0 million of 6.000% senior notes due February 2034 |
Amended and Restated Credit Agreement | Amended and Restated Credit Agreement, dated May 16, 2023, which amended and restated that Credit Agreement, dated as of March 30, 2017, and which governs the Credit Facility |
Archrock, our, we, us | Archrock, Inc., individually and together with its wholly owned subsidiaries |
ASU | Accounting Standards Update |
CODM | Chief operating decision maker |
ColdStream | ColdStream Energy Holdings, LLC |
Credit Facility | $1.5 billion asset-based revolving credit facility due May 2028, as governed by the Amended and Restated Credit Agreement, as amended |
ECOTEC | Ecotec International Holdings, LLC |
ESPP | Employee Stock Purchase Plan |
Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
FGC Holdco | FGC Holdco LLC, a subsidiary of ColdStream |
Financial Statements | Condensed consolidated financial statements included in Part I Item 1 of this Quarterly Report on Form 10-Q |
First Amendment to the Amended and Restated Credit Agreement | First Amendment to the Amended and Restated Credit Agreement, dated August 28, 2024, which amended the Amended and Restated Credit Agreement |
Form 10-Q | Quarterly Report on Form 10-Q for the three months ended March 31, 2026 |
GAAP | Accounting principles generally accepted in the U.S. |
GHG | Greenhouse gases (carbon dioxide, methane and water vapor for example) |
Hilcorp | Hilcorp Energy Company |
Ionada | Ionada PLC |
LIBOR | London Interbank Offered Rate |
MaCH4 NRS | Natural gas liquid recovery patented technology solution developed by ColdStream, capable of capturing natural gas liquids instead of burning them and simultaneously delivering lean, dry fuel gas to natural gas fired engines and equipment at compressor stations |
NGCS | Natural Gas Compression System, Inc. (“NGCSI”), and NGCSE, Inc. (“NGCSE”) |
NGCS Acquisition | Transaction completed on May 1, 2025 (“NGCS acquisition date”) pursuant to certain definitive agreements dated as of March 10, 2025, whereby Archrock acquired all of the issued and outstanding equity interests in NGCS, referred to as “NGCSI Merger Agreement” and “NGCSE Merger Agreement” (together, “Merger Agreements”) |
OB3 Tax Law | Public Law No. 119-21, a comprehensive tax and spending reform bill signed into law on July 4, 2025 also known as the “One Big Beautiful Bill Act” or “OBBBA” |
OTC | Over-the-counter, as related to aftermarket services parts and components |
Pillar 2 | A framework proposed by the Organization for Economic Co-operation and Development to implement a minimum global tax of 15% for companies with global revenues and profits above certain thresholds |
SAFE | Simple agreement for future equity |
SEC | U.S. Securities and Exchange Commission |
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Second Amendment to the Amended and Restated Credit Agreement | Second Amendment to the Amended and Restated Credit Agreement, dated May 16, 2025, which amended the Amended and Restated Credit Agreement |
Securities Act | Securities Act of 1933, as amended |
SG&A | Selling, general and administrative |
Share Repurchase Program | Share repurchase program approved by our Board of Directors that allows us to repurchase outstanding common stock and retire shares repurchased for a designated amount and period of time |
SOFR | Secured Overnight Financing Rate |
Spin-off | Spin-off of our international contract operations, international aftermarket services and global fabrication businesses into a standalone public company operating as Exterran Corporation in November 2015. Exterran Corporation was subsequently acquired by Enerflex Ltd. (“Enerflex”) in October 2022. The separation and distribution agreement specifies our right to receive payments from Enerflex and our obligation to satisfy capital calls from Enerflex |
Tax Cuts and Jobs Act | Public Law No. 115-97, a comprehensive tax reform bill signed into law on December 22, 2017 |
Third Amendment to the Amended and Restated Credit Agreement | Third Amendment to the Amended and Restated Credit Agreement, dated December 12, 2025, which amended the Amended and Restated Credit Agreement |
TOPS | Total Operations and Production Services, LLC |
TOPS Acquisition | Transaction completed on August 30, 2024 (“TOPS acquisition date”) pursuant to that certain purchase and sale agreement, dated as of July 22, 2024, whereby Archrock acquired all of the issued and outstanding equity interests in TOPS |
U.S. | United States of America |
VIE | Variable interest entity |
WACC | Weighted average cost of capital |
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FORWARD–LOOKING STATEMENTS
This Form 10-Q contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this Form 10-Q are forward-looking statements within the meaning of the Exchange Act, including, without limitation, statements regarding our business growth strategy and projected costs; future financial position; the sufficiency of available cash flows to fund continuing operations and pay dividends; the expected amount of our capital expenditures; anticipated cost savings; future revenue, adjusted gross margin and other financial or operational measures related to our business; the future value of our equipment; and plans and objectives of our management for our future operations. You can identify many of these statements by words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “will continue,” or similar words or the negative thereof.
Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this Form 10-Q. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Known material factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include the risk factors described in our 2025 Form 10-K and those set forth from time to time in our filings with the SEC, which are available through our website at www.archrock.com and through the SEC’s website at www.sec.gov. These risk factors include, but are not limited to, risks related to macroeconomic conditions, including an increase in inflation and trade tensions; pandemics and other public health crises; ongoing international conflicts and tensions; risks related to our operations; competitive pressures; risks of acquisitions or mergers to reduce our ability to make distributions to our common stockholders; inability to make acquisitions on economically acceptable terms; inability to achieve the expected benefits of the NGCS Acquisition and difficulties integrating NGCS; risks related to our sustainability initiatives; uncertainty to pay dividends in the future; risks related to a substantial amount of debt and our debt agreements; inability to access the capital and credit markets or borrow on affordable terms to obtain additional capital; inability to fund purchases of additional compression equipment; vulnerability to interest rate increases and fluctuations; erosion of the financial condition of our customers; risks related to the loss of our most significant customers; uncertainty of the renewals for our contract operations service agreements; risks related to losing management or operational personnel; dependence on particular suppliers and vulnerability to product shortages and price increases; information technology and cybersecurity risks; tax-related risks; legal and regulatory risks, including climate-related and environmental, social and governance risks.
All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Form 10-Q. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Form 10-Q.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Archrock, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value and share amounts)
(unaudited)
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| | March 31, 2026 | | December 31, 2025 | ||
Assets |
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Current assets: |
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Cash and cash equivalents | | $ | | | $ | |
Accounts receivable, net of allowance of $ | |
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Inventory | |
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Tax refund receivable | | | | | | |
Other current assets | |
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Total current assets | |
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Property, plant and equipment, net | |
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Operating lease right-of-use assets | |
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Goodwill | | | | | | |
Intangible assets, net | |
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Contract costs, net | |
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Deferred tax assets | |
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Other assets | |
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Non-current assets of discontinued operations | |
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Total assets | | $ | | | $ | |
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Liabilities and Stockholders' Equity | |
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Current liabilities: | |
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Accounts payable, trade | | $ | | | $ | |
Accrued liabilities | |
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Deferred revenue | |
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Total current liabilities | |
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Long-term debt | |
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Operating lease liabilities | |
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Deferred tax liabilities | |
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Other liabilities | |
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Non-current liabilities of discontinued operations | |
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Total liabilities | |
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Commitments and contingencies (Note 8) | |
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Equity: | |
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Preferred stock: $ | |
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Common stock: $ | |
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Additional paid-in capital | |
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Accumulated deficit | |
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Treasury stock: | |
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Total equity | |
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Total liabilities and equity | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Archrock, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
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| | Three Months Ended | ||||
| | March 31, | ||||
| | 2026 | | 2025 | ||
Revenue: |
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Contract operations | | $ | | | $ | |
Aftermarket services | |
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Total revenue | |
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Cost of sales, exclusive of depreciation and amortization | | | | | | |
Contract operations | |
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Aftermarket services | |
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Total cost of sales, exclusive of depreciation and amortization | |
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Selling, general and administrative | |
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Depreciation and amortization | |
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Long-lived and other asset impairment | |
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Restructuring charges | | | | | | |
Interest expense | |
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Transaction-related costs | | | | | | |
Gain on sale of assets, net | | | ( | | | ( |
Other income, net | |
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Income before income taxes | |
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Provision for income taxes | |
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Income before equity in net loss of unconsolidated affiliate | | | | | | |
Equity in net loss of unconsolidated affiliate | |
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Net income | | $ | | | $ | |
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Basic and diluted earnings per common share | | $ | | | $ | |
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Weighted-average common shares outstanding: | |
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Basic | |
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Diluted | |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Archrock, Inc.
Condensed Consolidated Statements of Equity
(in thousands, except shares and per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | |
| | | | Additional | | | | | | | | | | | | ||||
| | Common Stock | | Paid-in | | Accumulated | | Treasury Stock | | | | ||||||||
| | | Amount | | Shares | | Capital | | Deficit | | | Amount | | Shares | | Total | |||
Balance at December 31, 2024 | | $ | | | | | $ | | | $ | ( | | $ | ( | | ( | | $ | |
Shares repurchased | | | — | | — | |
| — | |
| — | | | ( | | ( | | | ( |
Shares withheld related to net settlement of equity awards | | | — | | — | |
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| — | |
| ( | | ( | | | ( |
Cash dividends ($ | | | — | | — | |
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| ( | |
| — | | — | |
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Shares issued under ESPP | | | — | | | |
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Stock-based compensation, net of forfeitures | | | | | | |
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| — | | ( | |
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Time-based cash or equity settled units settled as equity | | | | | | | | | | | — | | | — | | — | | | |
Contribution to Enerflex | | | — | | — | | | ( | | | — | | | — | | — | | | ( |
Net income | | | — | | — | |
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Balance at March 31, 2025 | | $ | | | | | $ | | | $ | ( | | $ | ( | | ( | | $ | |
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Balance at December 31, 2025 | | $ | | | |
| $ | | | $ | ( | | $ | ( | | ( | | $ | |
Shares repurchased | | | — | | — | |
| — | |
| — | | | ( | | ( | | | ( |
Shares retired | | | ( | | ( | | | ( | | | — | | | | | | | | — |
Shares withheld related to net settlement of equity awards | | | — | | — | |
| — | |
| — | |
| ( | | ( | |
| ( |
Cash dividends ($ | | | — | | — | |
| — | |
| ( | |
| — | | — | |
| ( |
Shares issued under ESPP | | | — | | | |
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| — | |
| — | | — | |
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Stock-based compensation, net of forfeitures | | | | | | |
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| — | |
| — | | ( | |
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Time-based cash or equity settled units settled as equity | | | | | | | | | | | — | | | — | | — | | | |
Net income | | | — | | — | |
| — | |
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| — | | — | |
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Balance at March 31, 2026 | | $ | | | | | $ | | | $ | ( | | $ | ( | | ( | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Archrock, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
| | 2026 | | 2025 | ||
Cash flows from operating activities: | | | | | | |
Net income | | $ | | | $ | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
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Depreciation and amortization | |
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Long-lived and other asset impairment | |
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Equity in net loss of unconsolidated affiliate | | | | | | — |
Inventory write-downs | |
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Amortization of operating lease right-of-use assets | | | | | | |
Amortization of deferred financing costs | | | | | | |
Amortization of debt premium | | | ( | | | ( |
Amortization of capitalized implementation costs | | | | | | |
Stock-based compensation expense | |
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Provision for (benefit from) credit losses | |
| ( | |
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Gain on sale of assets, net | |
| ( | |
| ( |
Deferred income tax provision | |
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Amortization of contract costs | | | | | | |
Deferred revenue recognized in earnings | | | ( | | | ( |
Changes in operating assets and liabilities: | |
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Accounts receivable, net | | | ( | | | ( |
Inventory | | | ( | | | ( |
Other assets | | | | | | ( |
Contract costs | | | ( | | | ( |
Accounts payable and other liabilities | | | | | | ( |
Deferred revenue | | | | | | |
Other | | | | | | |
Net cash provided by operating activities | |
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Cash flows from investing activities: | |
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Capital expenditures | |
| ( | |
| ( |
Proceeds from sale of property, equipment and other assets | |
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Proceeds from insurance and other settlements | | | — | | | |
Investments in unconsolidated affiliates | | | ( | | | ( |
Net cash used in investing activities | |
| ( | |
| ( |
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Cash flows from financing activities: | |
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Borrowings of long-term debt | |
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Repayments of long-term debt | |
| ( | |
| ( |
Proceeds from 2034 Notes offering | | | | | | — |
Payments of debt issuance costs | |
| ( | |
| — |
Dividends paid to stockholders | |
| ( | |
| ( |
Repurchases of common stock | | | ( | | | ( |
Taxes paid related to net share settlement of equity awards | | | ( | | | ( |
Proceeds from stock issued under ESPP | | | | | | |
Contribution to Enerflex | |
| — | |
| ( |
Net cash (used in) provided by financing activities | |
| ( | |
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Net increase in cash and cash equivalents | |
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Cash and cash equivalents, beginning of period | |
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Cash and cash equivalents, end of period | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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1. Description of Business and Basis of Presentation
We are an energy infrastructure company with a primary focus on midstream natural gas compression. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Our business supports a must–run service that is essential to the production, processing, transportation and storage of natural gas.
We operate in
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to this Form 10-Q and do not include all information and disclosures required by GAAP. Therefore, this information should be read in conjunction with our consolidated financial statements and notes contained in our 2025 Form 10-K. The information furnished herein reflects all adjustments that are, in the opinion of management, of a normal recurring nature and considered necessary for a fair statement of the results of the interim periods reported. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
2. Recent Accounting Developments
Accounting Standards Updates Implemented
Measurement of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends Topic 326 to provide for a practical expedient for all entities and an accounting policy election for entities other than public business entities related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under FASB ASU 2016-10, Revenue from Contracts with Customers (Topic 606). All entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. We adopted ASU 2025-05 on January 1, 2026 and elected the practical expedient. The adoption did not have a material impact on our condensed consolidated financial statements.
Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disclosures, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. We adopted ASU 2023-09 retrospectively during the year ended December 31, 2025.
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Business Combinations – Joint Venture Formations
In August 2023, the FASB issued ASU 2023-05, to reduce diversity in practice and provide decision-useful information to a joint venture’s investors by requiring that a joint venture apply a new basis of accounting upon formation. By applying a new basis of accounting, a joint venture will recognize and initially measure its assets and liabilities at fair value, with exceptions to fair value measurement that are consistent with the business combinations guidance, on the date of formation. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025, may elect to apply the amendments retrospectively if it has sufficient information to do so. Early adoption is permitted in any interim or annual period in which financial statements have not been issued or been made available for issuance, either prospectively or retrospectively. We adopted ASU 2023-05 during the three months ended March 31, 2025 and its adoption had no impact on our condensed consolidated financial statements.
Accounting Standards Updates Not Yet Implemented
Accounting for Internal-Use Software Costs
In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to clarify and modernize the accounting for costs related to internal-use software. ASU 2025-06 removes all references to software project development stages in Subtopic 350-40 and clarifies cost capitalization may begin when (1) management has authorized and committed to funding the project and (2) it is probable the project will be completed, and the software will be used to perform its intended function and provides new examples to illustrate its application. ASU 2025-06 specifies that the property, plant and equipment disclosure requirements apply to capitalized software costs accounted for under Subtopic 350-40, regardless of how those costs are presented in the financial statements. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Entities may apply the guidance using a prospective, retrospective or modified transition approach. Early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40), which will require tabular disclosures about certain expenses included in the expense captions presented on the face of the income statement, as well as disclosures about selling expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Entities are required to adopt ASU 2024-03 prospectively with the option for retrospective application. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.
3. Business Transactions
NGCS Acquisition
On May 1, 2025, we completed the NGCS Acquisition, whereby we acquired all of the issued and outstanding equity interests in NGCS, including a fleet of approximately
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The NGCS Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the NGCS acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill. The preliminary allocation of the purchase price, which is subject to certain adjustments, was based upon preliminary valuations. Our estimates and assumptions are subject to change upon the completion of management’s review of the final valuations. We are in the process of finalizing valuations related to deferred tax liabilities, tax contingencies and goodwill, which could impact future income tax expense. The final valuation of net assets acquired is expected to be completed as soon as practicable, but no later than one year from the NGCS acquisition date.
The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the NGCS acquisition date:
| | | | | | | | | |
(in thousands) | | NGCSI | | NGCSE | | NGCS | |||
Cash | | $ | | | $ | | | $ | |
Accounts receivable | | | | | | | | | |
Inventory | | | | | | — | | | |
Other current assets | | | | | | — | | | |
Property, plant and equipment | | | | | | | | | |
Operating lease right of use asset | | | | | | — | | | |
Goodwill | | | | | | | | | |
Intangible assets | | | | | | | | | |
Other assets | | | | | | — | | | |
Accounts payable, trade | | | ( | | | ( | | | ( |
Accrued liabilities | | | ( | | | ( | | | ( |
Operating lease liabilities | | | ( | | | — | | | ( |
Deferred tax liabilities | | | ( | | | ( | | | ( |
Other liabilities | | | ( | | | — | | | ( |
Purchase price | | $ | | | $ | | | $ | |
Goodwill
The amount of goodwill resulting from the NGCS Acquisition is attributable to the expansion of our services in the Permian Basin where we currently operate and was allocated to our contract operations segment. The goodwill recorded is considered to have an indefinite life and will be reviewed annually for impairment or more frequently if indicators of potential impairment exist.
Tax Contingency and Indemnification
We recorded a non-income tax-based contingency of $
Results of Operations
The results of operations attributable to the NGCS Acquisition have been included in our condensed consolidated financial statements as part of our contract operations segment since the NGCS acquisition date. We are unable to provide earnings attributable to the assets acquired and liabilities assumed since the NGCS acquisition date, as we do not prepare full stand-alone earnings reports for those assets and liabilities.
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Transaction-Related Costs
The following table presents transaction-related costs incurred in connection with the NGCS Acquisition by cost type:
| | | | | | |
| | Three months ended | ||||
(in thousands) | | March 31, 2026 | | March 31, 2025 | ||
Professional fees (1) | | $ | | | $ | |
Compensation-related costs (2) | | | | | | — |
Total transaction-related costs | | $ | | | $ | |
Valuation Methodologies
The valuation methodologies and significant inputs for fair value measurements associated with the NGCS Acquisition are detailed by significant asset class below. The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and therefore represent Level 3 measurements.
Property, Plant and Equipment
Property, plant and equipment is primarily comprised of natural gas and electric motor drive compression equipment that will depreciate on a straight-line basis over an estimated average remaining useful life of
Other fixed assets were valued using the indirect cost method, whereby we applied asset-specific trend information using published indexes to calculate the estimated replacement cost of assets that were identified to be reflected at historical cost. Other assets were depreciated based on published normal useful life estimates and prior experience with similar assets.
Intangible Assets
The intangible assets consist of customer relationships and trade names that have estimated useful lives of
The fair value of the identifiable intangible assets related to customer relationships was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired. Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets. To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our WACC to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired.
The trade name fair market value was measured using the relief-from-royalty method under the income approach, whereby we calculated the royalty savings by estimating a reasonable royalty rate that a third party would negotiate in a licensing agreement expressed as a percentage of total revenue involving a trade name. The revenue related to the trade name was multiplied by the selected royalty rate over the estimated expected useful life of the trade name to arrive at the royalty savings. The royalty savings were tax effected and discounted to present value using a discount rate commensurate with the risk profile of the trade name relative to our WACC and the return on the other acquired assets.
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4. Inventory
Inventory is comprised of the following:
| | | | | | |
(in thousands) | | March 31, 2026 | | December 31, 2025 | ||
Parts and supplies | | $ | | | $ | |
Work in progress | |
| | |
| |
Inventory | | $ | | | $ | |
5. Property, Plant and Equipment, Net
Property, plant and equipment, net is comprised of the following:
| | | | | | |
(in thousands) | | March 31, 2026 | | December 31, 2025 | ||
Compression equipment, facilities and other fleet assets | | $ | | | $ | |
Land and buildings | |
| | |
| |
Transportation and shop equipment | |
| | |
| |
Computer hardware and software | |
| | |
| |
Other | |
| | |
| |
Property, plant and equipment | |
| | |
| |
Accumulated depreciation | |
| ( | |
| ( |
Property, plant and equipment, net | | $ | | | $ | |
6. Investments in Unconsolidated Affiliates and Other Strategic Investments
Investment in FGC Holdco
In October 2024, we, together with ColdStream, entered into a limited liability agreement with FGC Holdco, a company that designs, manufactures and sells MaCH4 NRS equipment through distributors. As of the effective date of the agreement, FGC Holdco had initial authorized capital of
We determined FGC Holdco is a VIE over which we do not have the power to direct the activities that most significantly impact economic performance and therefore are not the primary beneficiary. The board of directors of FGC Holdco have control over the activities that most significantly impact the economic performance, and while we have voting rights through board participation, we do not have the ability to control board decisions. We apply the equity method of accounting to account for this investment. The carrying value of our equity investment is impacted by our share of investee income or loss, distributions, amortization or accretion of basis differences and other-than-temporary impairments.
As of March 31, 2026, we had a $
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The investment is included in other assets in our condensed consolidated balance sheets. Cash contributions are included in the investing activities section of our condensed consolidated statements of cash flows. See Note 16 (“Related Party Transactions”) for further details.
Investment in Ionada
We are the lead investor in a series A preferred financing round for Ionada, a global carbon capture technology company committed to reducing GHG emissions and creating a sustainable future. We have elected the fair value measurement alternative to account for this investment. See Note 15 (“Fair Value Measurements”) for further details.
On March 13, 2026, we invested an additional $
Investment in ECOTEC
We hold a
Other Strategic Investments
In December 2025, we entered into a SAFE with Shoreline AI, a software-as-a-service company, focused on predictive maintenance for energy infrastructure assets. We have elected the fair value measurement alternative to account for this investment and as of March 31, 2026 and December 31, 2025, the carrying value of our investment was equal to its $
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7. Long-Term Debt
Long–term debt is comprised of the following:
| | | | | | |
(in thousands) | | March 31, 2026 | | December 31, 2025 | ||
Credit Facility | | $ | | | $ | |
| | | | | | |
| | | | | | |
Principal outstanding | | | | |
| — |
Unamortized debt issuance costs | | | ( | |
| — |
| | | | |
| — |
| | | | | | |
Principal outstanding | | | | |
| |
Unamortized debt issuance costs | | | ( | |
| ( |
| | | | |
| |
| | | | | | |
Principal outstanding | |
| | |
| |
Unamortized debt premium | | | | |
| |
Unamortized debt issuance costs | |
| ( | |
| ( |
| |
| | |
| |
| | | | | | |
Long-term debt | | $ | | | $ | |
Credit Facility
Third Amendment to the Amended and Restated Credit Agreement
In December 2025, we amended our Amended and Restated Credit Agreement to, among other things, remove the
As of March 31, 2026, there were $
As of March 31, 2026, we were in compliance with all covenants under our Amended and Restated Credit Agreement. Additionally, all undrawn capacity on our Credit Facility was available for borrowings as of March 31, 2026.
Second Amendment to the Amended and Restated Credit Agreement
In May 2025, we amended our Amended and Restated Credit Agreement to, among other things, increase the borrowing capacity of the Credit Facility from $
During the year ended December 31, 2025, we incurred $
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First Amendment to the Amended and Restated Credit Agreement
In August 2024, we amended our Amended and Restated Credit Agreement to, among other things:
| ● | increase the borrowing capacity of the Credit Facility from $ |
| ● | increase the portion of the Credit Facility available for the issuance of swing line loans from $ |
| ● | increase the cash dominion trigger threshold amount from $ |
| ● | add certain financial institutions as lenders under the Credit Facility; |
| ● | join a newly formed wholly owned subsidiary of Archrock Services, L.P. as a guarantor and grantor under the Credit Facility; and |
| ● | modify certain other covenants to which we are subject. |
We incurred $
2034 Notes
On January 21, 2026, we completed a private offering of $
The 2034 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2034 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act. The 2034 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us, and by all of our existing subsidiaries, other than Archrock Services, L.P. and Archrock Partners Finance Corp., which are the issuers of the 2034 Notes. The 2034 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior unsecured indebtedness.
We may, at our option, redeem all or part of the 2034 Notes at any time on or after February 1, 2029, at specified redemption prices, plus any accrued and unpaid interest. In addition, prior to February 1, 2029, we may redeem up to
The indenture governing the 2034 Notes contains covenants that, among other things, limit our ability to pay dividends on, repurchase or redeem our common stock or repurchase or redeem subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred securities; create or incur certain liens; sell assets; consolidate, merge or transfer all or substantially all of our assets; enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; engage in transactions with affiliates; and create unrestricted subsidiaries. If the 2034 Notes achieve an investment grade rating from any two out of three of Moody’s Investors Service, Inc., Fitch Ratings, Inc. and S&P Global Ratings and no default has occurred and is continuing, many of these covenants will terminate. The indenture governing the 2034 Notes also contains customary events of default.
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2032 Notes
In August 2024, we completed a private offering of $
The 2032 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2032 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act.
The 2032 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us, and by all of our existing subsidiaries, other than Archrock Partners, L.P. and Archrock Partners Finance Corp., which are the issuers of the 2032 Notes. The 2032 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior unsecured indebtedness.
We may, at our option, redeem all or part of the 2032 Notes at any time on or after September 1, 2027, at specified redemption prices, plus any accrued and unpaid interest. In addition, prior to September 1, 2027, we may redeem up to
The indenture governing the 2032 Notes contains covenants that, among other things, limit our ability to pay dividends on, repurchase or redeem our common stock or repurchase or redeem subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred securities; create or incur certain liens; sell assets; consolidate, merge or transfer all or substantially all of our assets; enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; engage in transactions with affiliates; and create unrestricted subsidiaries. If the 2032 Notes achieve an investment grade rating from each of Moody’s Investors Service, Inc. and S&P Global Ratings and no default has occurred and is continuing, many of these covenants will terminate. The indenture governing the 2032 Notes also contains customary events of default.
2028 Notes
In December 2020, we completed a private offering of $
The net proceeds from the 2028 Notes were used to repay borrowings outstanding under our Credit Facility. Issuance costs related to the 2028 Notes were considered deferred financing costs, and together with the issue premium of the December 2020 offering of 2028 Notes, were recorded within long-term debt in our consolidated balance sheets and were being amortized to interest expense in our consolidated statements of operations over the terms of the notes.
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2028 Notes Redemption
On April 1, 2026, we repurchased our 2028 Notes. The 2028 Notes were redeemed at
2027 Notes
In March 2019, we completed a private offering of $
The net proceeds from the 2027 Notes were used to repay borrowings outstanding under our Credit Facility. Issuance costs related to the 2027 Notes were considered deferred financing costs and were recorded within long-term debt in our consolidated balance sheets and were being amortized to interest expense in our consolidated statements of operations over the terms of the notes.
2027 Notes Tender Offer
In connection with the offering of the 2032 Notes, we completed a concurrent cash tender offer of $
2027 Notes Redemption
In November 2025, we repurchased our 2027 Notes. The 2027 Notes were redeemed at
8. Commitments and Contingencies
Insurance Matters
Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business, however, losses and liabilities not covered by insurance would increase our costs.
Additionally, we are substantially self–insured for workers’ compensation and employee group health claims in view of the relatively high per–incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. We are also self–insured for property damage to our offshore assets.
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Tax Matters
We are subject to a number of state and local taxes that are not income–based. As many of these taxes are subject to audit by the taxing authorities, it is reasonably possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of March 31, 2026 and December 31, 2025, we accrued $
As of March 31, 2026 and December 31, 2025, $
We settled certain sales and use tax audits for which we recorded a net benefit of $
Litigation and Claims
In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows, including our ability to pay dividends.
9. Stockholders’ Equity
NGCS Acquisition
In May 2025, we completed the NGCS Acquisition and issued approximately
Share Repurchases
Share Repurchase Program
Our Board of Directors authorized the Share Repurchase Program in April 2023 that allowed us to repurchase and retire up to $
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Under the Share Repurchase Program, shares of our common stock may be repurchased periodically, including in the open market, privately negotiated transactions, or otherwise in accordance with applicable federal securities laws, at any time.
Since April 2023 and through March 31, 2026, we have repurchased
Shares Withheld Related to Net Settlement of Equity Awards
The 2020 Plan allows us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date.
The following table summarizes shares repurchased and shares withheld:
| | | | | | | | | | |
| | | Three Months Ended March 31, 2026 | |||||||
(dollars in thousands, except per share amounts) | | | Total Number of Shares | | Average Price per Share | | Total Cost of Shares | |||
Shares repurchased under the Share Repurchase Program | | | | | | $ | | | $ | |
Shares withheld related to net settlement of equity awards | | | | | | | | | | |
Total | | | | | | $ | | | $ | |
| | | | | | | | | | |
| | | Three Months Ended March 31, 2025 | |||||||
(dollars in thousands, except per share amounts) | | | Total Number of Shares | | Average Price per Share | | Total Cost of Shares | |||
Shares repurchased under the Share Repurchase Program | | | | | | $ | | | $ | |
Shares withheld related to net settlement of equity awards | | | | | | | | | | |
Total | | | | | | $ | | | $ | |
Cash Dividends
The following table summarizes our dividends declared and paid in each of the quarterly periods of 2026 and 2025:
| | | | | | |
| | Dividends per | | | ||
(dollars in thousands, except per share amounts) | | Common Share | | Dividends Paid | ||
2026 | |
| | |
| |
Q1 | | | | | | |
| | | | | | |
2025 |
| | |
| | |
Q4 | | $ | | | $ | |
Q3 | |
| | | | |
Q2 | |
| | | | |
Q1 | |
| | | | |
On
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10. Revenue from Contracts with Customers
The following table presents our revenue from contracts with customers by segment and disaggregated by revenue source:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Contract operations: | | | | | | |
| $ | | | $ | | |
|
| | |
| | |
Over | |
| | |
| |
Other (1) | |
| | |
| |
Total contract operations revenue (2) | |
| | |
| |
| | | | | | |
Aftermarket services: | |
| | |
| |
Services | |
| | |
| |
OTC parts and components sales | |
| | |
| |
Total aftermarket services revenue (3) | |
| | |
| |
| | | | | | |
Total revenue | | $ | | | $ | |
See Note 17 (“Segments”) for further details.
Performance Obligations
As of March 31, 2026, we had $
| | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | Thereafter (1) | | Total | |||||||
Remaining performance obligations | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
We do not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year.
Receivables from Contracts with Customers
As of March 31, 2026 and December 31, 2025, our receivables from contracts with customers, net of allowance for credit losses, were $
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Allowance for Credit Losses
The changes in our allowance for credit losses are as follows:
| | | |
(in thousands) | | 2026 | |
Balance at beginning of period | | $ | |
Benefit from credit losses | | | ( |
Write-offs charged against allowance | | | ( |
Balance at end of period | | $ | |
Contract Liabilities
Freight billings to customers for the transport of compression assets, customer–specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. As of March 31, 2026 and December 31, 2025, our contract liabilities were $
During the three months ended March 31, 2026 and 2025, we deferred revenue of $
11. Long-Lived and Other Asset Impairment
Compression Fleet
We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use.
In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value.
The following table presents the results of our compression fleet impairment review as recorded in our contract operations segment:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(dollars in thousands) | | 2026 | | 2025 | ||
Idle compressors retired from the active fleet |
| | |
| | |
Horsepower of idle compressors retired from the active fleet |
| | |
| | |
Impairment recorded on idle compressors retired from the active fleet | | $ | | | $ | |
See Note 15 (“Fair Value Measurements”) for further details.
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12. Restructuring Charges
During the second quarter of 2025, management approved and initiated a plan to exit certain facilities that were no longer deemed economical for our business, and during the first quarter of 2026, we continued to execute the plan and incurred $
During the first quarter of 2025, management approved and executed a plan to exit a facility no longer deemed economical for our business, and in the first quarter of 2025, we incurred $
The following table presents restructuring charges incurred by segment:
| | | | | | | | | | | | |
| | Contract | | Aftermarket | | | | | | | ||
(in thousands) | | Operations | | Services | | Other(1) | | Total | ||||
Three months ended March 31, 2026 | | | | | | | | | | | | |
Facility closure | | $ | | | $ | — | | $ | — | | $ | |
Total restructuring charges | | $ | | | $ | — | | $ | — | | $ | |
| | | | | | | | | | | | |
Three months ended March 31, 2025 | | | | | | | | | | | | |
Facility closure | | $ | | | $ | — | | $ | | | $ | |
Total restructuring charges | | $ | | | $ | — | | $ | | | $ | |
| (1) | Represents expense incurred within our corporate function and not directly attributable to our segments. |
The following table presents restructuring charges incurred by cost type:
| | | | | | |
| | Three Months Ended March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Facility closure | | | | | | |
Severance costs | | $ | — | | $ | |
Property disposal and closure costs | | | | | | |
Total restructuring costs | | $ | | | $ | |
13. Income Taxes
Effective Tax Rate
The year-to-date effective tax rate for the three months ended March 31, 2026 differed significantly from our statutory rate primarily due to state taxes, unrecognized tax benefits and the limitation on executive compensation partially offset by the benefit from equity-settled long term incentive compensation.
14. Earnings Per Common Share
Basic earnings per common share is computed using the two–class method, which is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two–class method, basic earnings per common share is determined by dividing net income, after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock–settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, only distributed earnings (dividends) are allocated to participating securities, as participating securities do not have a contractual obligation to participate in our undistributed losses.
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Diluted earnings per common share is computed using the weighted average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding performance–based restricted stock units and stock to be issued pursuant to our ESPP unless their effect would have been anti–dilutive.
The following table shows the calculation of net income attributable to common stockholders, which is used in the calculation of basic and diluted earnings per common share, potential shares of common stock that were included in computing diluted earnings per common share and the potential shares of common stock issuable that were excluded from computing diluted earnings per common share as their inclusion would have been anti–dilutive:
| | | | | | | |
| | | Three Months Ended | ||||
| | | March 31, | ||||
(in thousands) | | | 2026 | | 2025 | ||
Net income | | | $ | | | $ | |
Less: Allocation of earnings to participating securities | | |
| ( | |
| ( |
Net income attributable to common stockholders | | | $ | | | $ | |
| | | | | | | |
Allocation of earnings to cash or share settled restricted stock units (1) | | | | — | | | |
Diluted net income attributable to common stockholders | | | $ | | | $ | |
| | | | | | | |
Weighted-average common shares outstanding used in basic earnings per common share | | | | | | | |
Effect of dilutive securities: | | | | | | | |
Performance-based restricted stock units | | | | | | | |
Time-based restricted stock units | | | | | | | — |
ESPP shares | | | | | | | |
Weighted-average common shares outstanding used in diluted earnings per common share | | | | | | | |
| (1) | Excludes the income effect of participating liability awards that permit share settlement as the effect would be anti-dilutive. |
15. Fair Value Measurements
The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:
| ● | Level 1 – quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement. |
| ● | Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model–derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers. |
| ● | Level 3 – model–derived valuation in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information. |
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
Investment in ECOTEC
As of March 31, 2026, we owned a
The fair value determination of this investment primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples. Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement. This fair value measurement is classified as Level 3. See Note 6 (“Investments in Unconsolidated Affiliates and Other Strategic Investments”) for further details.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Investments in Unconsolidated Affiliates and Other Strategic Investments
As of March 31, 2026 and December 31, 2025, the carrying value of our investments in which we have elected the fair value measurement alternative was $
Compression Fleet
During the three months ended March 31, 2026, we recorded nonrecurring fair value measurement adjustments related to our idle compressors. Our estimate of the compression fleet’s fair value was primarily based on the expected net sale proceeds compared with other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of
The fair value of our impaired compression fleet as of March 31, 2026 and December 31, 2025 was as follows:
| | | | | | | | |
(in thousands) | | | | March 31, 2026 | | December 31, 2025 | ||
Impaired compression fleet | | | | $ | | | $ | |
The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compression fleet being measured. Additional quantitative information related to our significant unobservable inputs follows:
| | | | |
| | Range | | Weighted Average (1) |
Estimated net sale proceeds: | | | | |
As of March 31, 2026 | | $ | | $ |
As of December 31, 2025 | | $ | | $ |
See Note 11 (“Long-Lived and Other Asset Impairment”) for further details.
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Other Financial Instruments
The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short–term nature of these instruments.
The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to its variable interest rate. The fair value of these outstanding borrowings is a Level 3 measurement.
The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:
| | | | | | |
(in thousands) | | March 31, 2026 | | December 31, 2025 | ||
Carrying amount of fixed rate debt (1) | | $ | | | $ | |
Fair value of fixed rate debt | |
| | |
| |
16. Related Party Transactions
ECOTEC
During both the three months ended March 31, 2026 and March 31, 2025, we made purchases of $
FGC Holdco
During the three months ended March 31, 2026, we made
The carrying value of assets and liabilities recognized in our condensed consolidated balance sheets related to our variable interests in FGC Holdco and our maximum exposure to loss related to our involvement with an unconsolidated VIE were as follows:
| | | | | | |
(in thousands) | | March 31, 2026 | | December 31, 2025 | ||
Inventory | | $ | | | $ | |
Investment in unconsolidated affiliate | |
| | |
| |
Total VIE assets | | | | | | |
Maximum exposure to loss | | $ | | | $ | |
Hilcorp
From August 2019 to present, our Board of Directors has included a member affiliated with our customer Hilcorp or its subsidiaries or affiliates. Revenue from Hilcorp and affiliates was $
Accounts receivable, net due from Hilcorp and affiliates was $
Shoreline AI
During the three months ended March 31, 2026, we made
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17. Segments
We manage our business segments primarily based on the type of product or service provided. We have
Our CODM is our President & Chief Executive Officer. Our CODM evaluates the performance of our segments and allocates resources primarily based on adjusted gross margin, defined as revenue less cost of sales, exclusive of depreciation and amortization, which are key components of segment operations. Adjusted gross margin is the primary measure used by our CODM to evaluate segment performance because it focuses on the current performance of segment operations and excludes the impact of the prior historical costs of assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. Our CODM considers adjusted gross margin forecast to actual results and period over period financial variances in conjunction with product and customer service metrics and market trends when assessing segment performance and deciding how to allocate resources.
Summarized financial information for our reporting segments is shown below:
| | | | | | | | | |
| | Contract | | Aftermarket | | | | ||
(in thousands) | | Operations | | Services | | Total | |||
Three months ended March 31, 2026 |
| | |
| | |
| | |
Revenue(1) | | $ | | | $ | | | $ | |
Cost of sales, exclusive of depreciation and amortization | | | | | | | | | |
Adjusted gross margin | |
| | |
| | |
| |
| | | | | | | | | |
Three months ended March 31, 2025 | |
| | |
| | |
| |
Revenue(1) | | $ | | | $ | | | $ | |
Cost of sales, exclusive of depreciation and amortization | | | | | | | | | |
Adjusted gross margin | |
| | |
| | |
| |
| (1) | Segment revenue includes only sales to external customers. |
The following table reconciles gross margin, the most directly comparable GAAP measure, to adjusted gross margin:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Total revenues | | $ | | | $ | |
Cost of sales, exclusive of depreciation and amortization | |
| ( | |
| ( |
Depreciation and amortization | |
| ( | |
| ( |
Gross margin | |
| | |
| |
Depreciation and amortization | | | | | | |
Adjusted gross margin | | $ | | | $ | |
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The following table reconciles adjusted gross margin to income before income taxes:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Adjusted gross margin | | $ | | | $ | |
Less: | |
| | |
| |
Selling, general and administrative | |
| | |
| |
Depreciation and amortization | |
| | |
| |
Long-lived and other asset impairment | |
| | |
| |
Restructuring charges | | | | | | |
Interest expense | |
| | |
| |
Transaction-related costs | | | | | | |
Gain on sale of assets, net | | | ( | | | ( |
Other income, net | |
| ( | |
| ( |
Income before income taxes | | $ | | | $ | |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q and in conjunction with our 2025 Form 10-K.
OVERVIEW
We are an energy infrastructure company with a primary focus on midstream natural gas compression and a commitment to helping our customers produce, compress and transport natural gas in a safe and environmentally responsible way. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Our business supports a must-run service that is essential to the production, processing, transportation and storage of natural gas.
We operate in two business segments: contract operations and aftermarket services. Our contract operations business primarily includes designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. Our aftermarket services business provides a full range of services to support the compression needs of our customers that own compression equipment, including operations, maintenance, overhaul and reconfiguration services and sales of parts and components.
Significant 2026 Transactions
2028 Notes Redemption
On April 1, 2026, we repurchased our 2028 Notes. The 2028 Notes were redeemed at 100% of their $800.0 million aggregate principal amount plus accrued and unpaid interest of approximately $25.0 million with borrowings under the Credit Facility. We recorded a debt extinguishment gain of $0.7 million during the second quarter of 2026 due to the write-off of unamortized debt premium of $4.0 million, which was partially offset by the write-off of unamortized debt issuance costs of $3.3 million. See Note 7 (“Long-Term Debt”) for further details.
2034 Notes
On January 21, 2026, we completed a private offering of $800.0 million aggregate principal amount of 6.0% senior notes due 2034 and received net proceeds of $789.4 million after deducting issuance costs. In January 2026, the approximately $10.6 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. The net proceeds were used to repay borrowings outstanding under our Credit Facility. See Note 7 (“Long-Term Debt”) for further details.
Operating Highlights
| | | | | | |
| | Three Months Ended |
| |||
| | March 31, | ||||
(horsepower in thousands) | | 2026 | | | 2025 | |
Total available horsepower (at period end)(1) | | 4,765 | | | 4,461 | |
Total operating horsepower (at period end)(2) | | 4,528 |
| | 4,283 | |
Average operating horsepower(3) | | 4,553 |
| | 4,254 | |
Horsepower utilization: | | |
| | | |
Spot (at period end) | | 95 | % | | 96 | % |
Average | | 95 | % | | 96 | % |
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Non–GAAP Financial Measures
Management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measure of adjusted gross margin.
We define adjusted gross margin as total revenue less cost of sales, exclusive of depreciation and amortization. Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales, exclusive of depreciation and amortization, which are key components of our operations. We believe adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. In addition, depreciation and amortization may not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs of current operating activity. As an indicator of our operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin, net income or any other measure presented in accordance with GAAP. Our adjusted gross margin may not be comparable to a similarly titled measure of other entities because other entities may not calculate adjusted gross margin in the same manner.
Adjusted gross margin has certain material limitations associated with its use as compared to net income. These limitations are primarily due to the exclusion of SG&A, depreciation and amortization, long-lived and other asset impairment, restructuring charges, interest expense, transaction-related costs, gain on sale of assets, net, other income, net, provision for income taxes and equity in net loss of unconsolidated affiliate. Because we intend to finance a portion of our operations through borrowings, interest expense is a necessary element of our costs and our ability to generate revenue. Additionally, because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue, and SG&A is necessary to support our operations and required corporate activities. To compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.
The reconciliation of net income to adjusted gross margin is as follows:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Net income | | $ | 73,794 | | $ | 70,850 |
Selling, general and administrative | |
| 45,231 | |
| 37,207 |
Depreciation and amortization | |
| 69,734 | |
| 57,620 |
Long-lived and other asset impairment | |
| 5,259 | |
| 972 |
Restructuring charges | | | 136 | | | 665 |
Interest expense | |
| 39,510 | |
| 37,741 |
Transaction-related costs | | | 596 | | | 3,935 |
Gain on sale of assets, net | | | (10,116) | | | (7,335) |
Other income, net | |
| (605) | |
| (684) |
Provision for income taxes | |
| 23,404 | |
| 21,136 |
Equity in net loss of unconsolidated affiliate | | | 480 | | | — |
Adjusted gross margin | | $ | 247,423 | | $ | 222,107 |
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The following table reconciles gross margin, the most directly comparable GAAP measure, to adjusted gross margin:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Total revenues | | $ | 373,767 | | $ | 347,163 |
Cost of sales, exclusive of depreciation and amortization | |
| (126,344) | |
| (125,056) |
Depreciation and amortization | |
| (69,734) | |
| (57,620) |
Gross margin | |
| 177,689 | |
| 164,487 |
Depreciation and amortization | | | 69,734 | | | 57,620 |
Adjusted gross margin | | $ | 247,423 | | $ | 222,107 |
RESULTS OF OPERATIONS
Summary of Results
Revenue was $373.8 million and $347.2 million during the three months ended March 31, 2026 and 2025, respectively. The increase in consolidated revenue was primarily due to increased revenue from our contract operations business. See “Contract Operations” and “Aftermarket Services” below for further details.
Net income was $73.8 million and $70.9 million during the three months ended March 31, 2026 and 2025, respectively. The increase was primarily driven by higher adjusted gross margin from our contract operations business, a decrease in transaction-related costs and a higher gain on sale of assets, net. These increases were partially offset by increases in depreciation and amortization, SG&A, long-lived and other asset impairment and provision for income taxes.
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Contract Operations
| | | | | | | | | |
|
| Three Months Ended | | | | ||||
| | March 31, | | Increase | | ||||
(dollars in thousands) | | 2026 | | 2025 | | (Decrease) | | ||
Revenue | | $ | 330,880 | | $ | 300,397 | | 10 | % |
Cost of sales, exclusive of depreciation and amortization | |
| 93,271 | |
| 89,799 | | 4 | % |
Adjusted gross margin | | $ | 237,609 | | $ | 210,598 | | 13 | % |
Adjusted gross margin percentage (1) | |
| 72 | % |
| 70 | % | 2 | % |
| (1) | Defined as adjusted gross margin divided by revenue. |
Revenue in our contract operations business increased approximately $30.5 million due primarily to the compression units acquired in the NGCS Acquisition as well as higher rates.
The increase in cost of sales, exclusive of depreciation and amortization, was primarily due to a $4.0 million increase in employee compensation and benefits expense and a $1.9 million increase in parts expense due to compression units acquired in the NGCS Acquisition. These increases were partially offset by a decrease of $2.5 million in lube oil expenses primarily due to lower prices, partially offset by an increase in volumes purchased.
The increases in adjusted gross margin and adjusted gross margin percentage were mainly driven by revenue growth that outpaced the increase in cost of sales, exclusive of depreciation and amortization.
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Aftermarket Services
| | | | | | | | | |
|
| Three Months Ended |
| | | ||||
| | March 31, | | Increase | | ||||
(dollars in thousands) | | 2026 | | 2025 | | (Decrease) | | ||
Revenue | | $ | 42,887 | | $ | 46,766 |
| (8) | % |
Cost of sales, exclusive of depreciation and amortization | |
| 33,073 | |
| 35,257 |
| (6) | % |
Adjusted gross margin | | $ | 9,814 | | $ | 11,509 |
| (15) | % |
Adjusted gross margin percentage (1) | |
| 23 | % |
| 25 | % | (2) | % |
Revenue in our aftermarket services business decreased primarily due to reduced customer demand for major maintenance service activity.
The decrease in cost of sales, exclusive of depreciation and amortization, was primarily driven by decreased service activity, including differences in the scope, timing and type of services performed.
Costs and Expenses
| | | | | | |
|
| Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Selling, general and administrative | | $ | 45,231 | | $ | 37,207 |
Depreciation and amortization | |
| 69,734 | |
| 57,620 |
Long-lived and other asset impairment | |
| 5,259 | |
| 972 |
Restructuring charges | | | 136 | | | 665 |
Interest expense | |
| 39,510 | |
| 37,741 |
Transaction-related costs | | | 596 | | | 3,935 |
Gain on sale of assets, net | | | (10,116) | | | (7,335) |
Other income, net | | | (605) | | | (684) |
Selling, general and administrative. SG&A increased for the three months ended March 31, 2026 primarily due to higher long-term incentive compensation expense, including a $4.1 million increase in cash-settled incentive compensation expense as a result of an increase in our stock price and a $3.7 million acceleration of expense recognition for long-term incentive compensation pursuant to an executive retention agreement, as well as a $1.3 million increase attributable to higher employee benefits and compensation expense. These increases were partially offset by a $2.0 million decrease in professional fees.
Depreciation and amortization. Depreciation and amortization increased primarily due to fixed assets additions, including depreciation and amortization associated with the compression units and intangible assets acquired in the NGCS Acquisition. The increase was partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives as well as compression and other asset sales.
Long-lived and other asset impairment. We periodically review the future deployment of our idle compressors for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. We also evaluate for impairment our idle units that have been culled from our compression fleet in prior years and are available for sale. The following table presents the results of our compression fleet impairment review, as recorded in our contract operations segment:
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| | | | | | |
|
| Three Months Ended | ||||
| | March 31, | ||||
(dollars in thousands) | | 2026 | | 2025 | ||
Idle compressors retired from the active fleet |
| | 60 |
| | 20 |
Horsepower of idle compressors retired from the active fleet |
| | 24,000 |
| | 6,000 |
Impairment recorded on idle compressors retired from the active fleet | | $ | 5,259 | | $ | 972 |
Restructuring charges. Restructuring charges of $0.1 million during the three months ended March 31, 2026 consisted of property disposal and closure costs, whereas restructuring charges of $0.7 million during the three months ended March 31, 2025 consisted of severance, property disposal and closure costs. See Note 12 (“Restructuring Charges”) for further details.
Interest expense. Interest expense increased for the three months ended March 31, 2026 primarily due to a higher average outstanding balance of long-term debt, including the 2034 Notes. This increase was partially offset by the 2027 Notes Redemption and a decrease in the weighted average effective interest rate.
Transaction-related costs. We incurred professional fees, compensation and other costs related to the NGCS Acquisition during the three months ended March 31, 2026 and 2025 of $0.3 million and $2.9 million, respectively. We incurred compensation and other costs related to the TOPS Acquisition during the three months ended March 31, 2026 and 2025 of $0.3 million and $1.1 million, respectively. See Note 3 (“Business Transactions”) for further details.
Gain on sale of assets, net. Gain on sale of assets, net increased for the three months ended March 31, 2026, primarily due to gains of $8.2 million and $1.9 million on compression and other asset sales, respectively, compared to gains of $7.1 million and $0.2 million on compression and other asset sales, respectively, during the three months ended March 31, 2025.
Provision for Income Taxes
Provision for income taxes increased during the three months ended March 31, 2026 primarily due to the tax effect of the increase in book income and the limitation on executive compensation partially offset by the benefit from equity-settled long term incentive compensation.
| | | | | | | | | |
|
| Three Months Ended |
| | | ||||
| | March 31, | | Increase | | ||||
(dollars in thousands) | | 2026 | | 2025 | | (Decrease) | | ||
Provision for income taxes | | $ | 23,404 | | $ | 21,136 |
| 11 | % |
Effective tax rate | |
| 24 | % |
| 23 | % | 1 | % |
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our ability to fund operations, finance capital expenditures, pay dividends and fund share repurchases depends on the levels of our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under our Credit Facility. Our cash flow is affected by numerous factors including prices and demand for our services, oil and natural gas exploration and production spending, conditions in the financial markets and other factors. We have no near-term maturities and believe that our operating cash flows and borrowings under the Credit Facility will be sufficient to meet our liquidity needs in the next twelve months and beyond.
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, may be material, will be upon terms and prices as we may determine and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
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Cash Requirements
Our contract operations business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is primarily dependent on the demand for our contract operations services and the availability of the type of compression equipment required for us to provide those contract operations services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:
| • | operating expenses, namely employee compensation and benefits, inventory and lube oil purchases; |
| • | growth capital expenditures; |
| • | maintenance capital expenditures; |
| • | interest on our outstanding debt obligations; |
| • | dividend payments to our stockholders; and |
| • | shares repurchased under the Share Repurchase Program and to cover taxes required to be withheld on the vesting date of long-term incentive grants to employees. |
Capital Expenditures
Growth Capital Expenditures. The majority of our growth capital expenditures are related to the acquisition cost of new compressors when our idle equipment cannot be reconfigured to economically fulfill a project’s requirements and the new compressor is expected to generate economic returns that exceed our cost of capital over the compressor’s expected useful life. In addition to newly-acquired compressors, growth capital expenditures include the upgrading of major components on an existing compression package where the current configuration of the compression package is no longer in demand and the compressor is not likely to return to an operating status without the capital expenditures. These expenditures substantially modify the operating parameters of the compression package such that it can be used in applications for which it previously was not suited.
Growth capital expenditures were $64.9 million and $139.4 million for the three months ended March 31, 2026 and 2025, respectively.
Maintenance Capital Expenditures. Maintenance capital expenditures are related to major overhauls of significant components of a compression package, such as the engine, electric motor, compressor and cooler, which return the components to a like-new condition, but do not modify the application for which the compression package was designed.
Maintenance capital expenditures were $34.0 million and $22.8 million during the three months ended March 31, 2026 and 2025, respectively. The increase in maintenance capital expenditures was primarily due to an increase in scheduled and unscheduled maintenance activities due to maintenance cycle requirements and the addition of the compression units acquired in the NGCS Acquisition, partially offset by lower make–ready investment.
Projected Capital Expenditures. We currently plan to spend approximately $400 million to $445 million on capital expenditures during 2026, primarily consisting of approximately $250 million to $275 million for growth capital expenditures and approximately $125 million to $135 million for maintenance capital expenditures.
Returning Capital to Stockholders
We continue to return capital to stockholders through quarterly dividends and share repurchases. On April 30, 2026, our Board of Directors declared a quarterly dividend of $0.22 per share of common stock to be paid on May 19, 2026 to stockholders of record at the close of business on May 12, 2026. Any future determinations to pay cash dividends to our stockholders will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations and credit and loan agreements in effect at that time and other factors deemed relevant by our Board of Directors. In October 2025, our Board of Directors approved an additional increase to our Share Repurchase Program of $100.0 million through December 31, 2026, and as of March 31, 2026, available capacity under the Share Repurchase Program was $113.2 million. The actual number of shares repurchased will depend on prevailing market conditions, alternative uses of capital and other factors, and will be determined at management’s discretion.
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2028 Notes Redemption
On April 1, 2026, we repurchased our 2028 Notes. The 2028 Notes were redeemed at 100% of their $800.0 million aggregate principal amount plus accrued and unpaid interest of approximately $25.0 million with borrowings under the Credit Facility. We recorded a debt extinguishment gain of $0.7 million during the second quarter of 2026 due to the write-off of unamortized debt premium of $4.0 million, which was partially offset by the write-off of unamortized debt issuance costs of $3.3 million.
2027 Notes Redemption
In November 2025, we repurchased our 2027 Notes. The 2027 Notes were redeemed at 100% of their $300.0 million aggregate principal amount plus accrued and unpaid interest of approximately $2.6 million with borrowings under the Credit Facility. We recorded a debt extinguishment loss related to unamortized debt issuance costs of $0.9 million during the fourth quarter of 2025.
Sources of Cash
Credit Facility
In December 2025, we amended our Amended and Restated Credit Agreement to, among other things, remove the 0.10% per annum credit spread adjustment that was previously included in the calculation of the interest rate applicable to the loans made under the Credit Facility, decrease the applicable margin for all borrowings by 0.25% per annum such that the applicable margin for borrowings varies and decrease the commitment fee payable on the daily unused amount of the Credit Facility from 0.375% per annum to 0.25% per annum when less than 50% of the Credit Facility is utilized.
In May 2025, we amended our Amended and Restated Credit Agreement to, among other things, increase the borrowing capacity of the Credit Facility from $1.1 billion to $1.5 billion and provide for the ability for the borrowers to request additional increases in the aggregate commitments under the Credit Facility to a total amount not to exceed $2.3 billion (with any increase being at the discretion of the lenders and subject to the satisfaction of certain conditions set forth in the Amended and Restated Credit Agreement).
During the three months ended March 31, 2026 and 2025, our Credit Facility had an average daily balance of $314.6 million and $460.6 million, respectively. The weighted average annual interest rate on the outstanding balance under the Credit Facility was 5.1% and 5.8% at March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, there were $2.6 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 1.4%.
As of March 31, 2026, we were in compliance with all covenants under our Amended and Restated Credit Agreement. Additionally, all undrawn capacity on our Credit Facility was available for borrowings as of March 31, 2026.
2034 Notes
On January 21, 2026, we completed a private offering of $800.0 million aggregate principal amount of 6.0% senior notes due 2034 and received net proceeds of $789.4 million after deducting issuance costs. In January 2026, the approximately $10.6 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. The net proceeds were used to repay borrowings outstanding under our Credit Facility.
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Cash Flows
Our cash flows, as reflected in our condensed consolidated statements of cash flows, are summarized below:
| | | | | | |
|
| Three Months Ended | ||||
| | March 31, | ||||
(in thousands) | | 2026 | | 2025 | ||
Net cash provided by (used in): |
| | |
| | |
Operating activities | | $ | 185,853 | | $ | 115,628 |
Investing activities | |
| (93,951) | |
| (164,031) |
Financing activities | | | (88,994) | |
| 48,819 |
Net increase in cash and cash equivalents | | $ | 2,908 | | $ | 416 |
Operating Activities
The increase in net cash provided by operating activities was primarily due to tax refund receipts of $35.4 million and higher adjusted gross margin from our contract operations business as a result of an overall increase in levels of activity.
Investing Activities
The decrease in net cash used in investing activities was primarily due to a $54.7 million decrease in capital expenditures, as well as an $18.4 million increase in proceeds from the sale of property, plant and equipment.
Financing Activities
The change to net cash used in financing activities from net cash provided by financing activities was primarily due to net repayments on our Credit Facility of $821.7 million, payment of debt issuance costs of $10.5 million, a $5.7 million increase in dividends paid to stockholders and a $4.2 million increase in shares repurchased under the Share Repurchase Program. These increases were partially offset by $800.0 million of gross proceeds from the 2034 Notes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks associated with changes in the variable interest rate of our Credit Facility.
As of March 31, 2026, we had $96.8 million of variable interest rate indebtedness outstanding at a weighted average annual interest rate of 5.1%.
A 1% increase or decrease in the effective interest rate on our Credit Facility’s outstanding balance at March 31, 2026 would have resulted in an annual increase or decrease in our interest expense of $1.0 million.
ITEM 4. CONTROLS AND PROCEDURES
This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a–14 of the Exchange Act included in this Form 10–Q as Exhibits 31.1 and 31.2.
Management’s Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.
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As of the end of the period covered by this Form 10-Q, our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in the rules and forms of the SEC. Based on the evaluation, as of March 31, 2026 our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows, including our ability to pay dividends.
ITEM 1A. RISK FACTORS
There have been no material changes or updates to the risk factors previously disclosed in our 2025 Form 10–K.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES BY ISSUER AND USE OF PROCEEDS
Sales of Unregistered Securities
None
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes shares repurchased and shares withheld during the three months ended March 31, 2026:
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | Total number of | | Approximate dollar | |
| | | | Average | | shares repurchased | | value of shares | ||
| | | | price | | as part of publicly | | that may yet be | ||
| | Total number | | paid per | | announced plans | | purchased under the | ||
(dollars in thousands, except per share amounts) | | of shares purchased(1) | | share(2) | | or programs(3) | | plans or programs(3) | ||
January 1, 2026 — January 31, 2026 | | 635,098 | | $ | 27.31 | | 170,952 | | $ | 113,233 |
February 1, 2026 — February 28, 2026 |
| — | |
| — |
| — |
|
| 113,233 |
March 1, 2026 — March 31, 2026 |
| — | |
| — |
| — |
|
| 113,233 |
Total |
| 635,098 | | $ | 27.31 |
| 170,952 |
| | |
| (1) | Represents shares of common stock purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards and shares repurchased under the Share Repurchase Program during the period. See Note 9 (“Stockholders’ Equity”) for further details. |
| (2) | Average price paid per share includes costs associated with the purchase or repurchase, as applicable. |
| (3) | Our Board of Directors authorized the Share Repurchase Program in April 2023, which allowed us to repurchase and retire up to $50.0 million of outstanding common stock. Between April 2024 and October 2025, extensions of the Share Repurchase Program were approved by our Board of Directors to repurchase and retire outstanding common stock through December 31, 2026. See Note 9 (“Stockholders’ Equity”) for further details. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Insider Trading Arrangements
During the three months ended March 31, 2026, none of our directors or officers
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ITEM 6. EXHIBITS
The exhibits listed below are filed or furnished as part of this report:
| | |
| | |
3.1 | | Composite Certificate of Incorporation of Archrock, Inc., as amended as of November 3, 2015, (incorporated by reference to Exhibit 3.3 to Archrock Inc.’s Annual Report on Form 10–K for the year ended December 31, 2015) |
3.2 | | Fourth Amended and Restated Bylaws of Exterran Holdings, Inc., now Archrock, Inc. (incorporated by reference to Exhibit 3.1 to Archrock Inc.’s Current Report on Form 8–K filed on July 27, 2023) |
4.1 | | Indenture, dated as of January 21, 2026, by and among Archrock Services, L.P., Archrock Partners Finance Corp., the guarantors party thereto and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to Archrock Inc.’s Current Report on Form 8–K filed on January 21, 2026) |
10.1 | | Purchase Agreement, dated as of January 6, 2026, by and among Archrock Services, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and J.P. Morgan Securities LLC, as representative of the initial purchasers named therein (incorporated by reference to Exhibit 10.1 to Archrock Inc.’s Current Report on Form 8–K filed on January 7, 2026) |
10.2 | | Transition and Separation Agreement, dated March 25, 2026, between Douglas S. Aron and Archrock, Inc. (incorporated by reference to Exhibit 10.1 to Archrock Inc.’s Current Report on Form 8–K filed on March 26, 2026) |
31.1* | | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 |
31.2* | | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 |
32.1** | | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 |
32.2** | | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 |
101.1* | | Interactive data files (formatted in Inline XBRL) pursuant to Rule 405 of Regulation S–T |
104.1* | | Cover page interactive data file (formatted in Inline XBRL) pursuant to Rule 406 of Regulation S–T |
# Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). Archrock agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
* Filed herewith
** Furnished, not filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
| Archrock, Inc. | |
| | |
| By: | /s/ Douglas S. Aron |
| | Douglas S. Aron |
| | Senior Vice President and Chief Financial Officer |
| | (Principal Financial Officer) |
| | |
| By: | /s/ Donna A. Henderson |
| | Donna A. Henderson |
| | Vice President and Chief Accounting Officer |
| | (Principal Accounting Officer) |
| | |
| | May 6, 2026 |
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