With our next event, I am pleased to introduce our next guest, Joe Bob Edwards, President and CEO of the newly minted IPO at Flowco, who's fresh off his first earnings release and calls a public company. We titled this session, "Disrupting the Artificial Lift Market," and that's exactly what Flowco is doing. Joe Bob, first off, congratulations on the successful IPO. Thank you. That was a fun ride. Secondly, we appreciate you making the time here to join us today. Thank you for having me. No, this is always a great event. I am a very proud Simmons alum. Always great to be back in Vegas. Awesome. By the way, welcome to you. Thank you. Yeah, it's good to be here. I've been really enjoying it. Maybe just as an introduction, just given your newly minted IPO company, let's just start off with a brief history lesson. I think it'll be beneficial for the audience just to run through your background, your management team's background, how Flowco was formed, and then what led you to the public markets. Yeah, happy to do that. Just briefly on me, I've spent a career as an energy investor, mostly on the private side. Spent roughly half of that time, very happy years at First Reserve, leading the efforts in oilfield service investing there. The back half of my private equity career was at a firm called White Deer, where for the last five years I was managing partner, responsible for the firm's operation. Really, Derek, over the last 10 years, I've spent an inordinate amount of time in and around the production theme in the United States. Early days of investing in OFS, the U.S. onshore was a bit of a backwater. Along came the shale revolution, and in the last 10 years in particular, figuring out how to get fluid, how to get oil out of tight formations became an investable theme. I had some particular experience and some passion in and around artificial lift and other forms of production optimization, and talked to my partners and decided to go all in and jump in the deep end, into the hot seat, instead of sitting across the boardroom table to be the judge of somebody else's performance, was willing to take it on the chin on a quarter-by-quarter basis. Had the very good fortune to negotiate with a longtime competitor and collaborator at a different private equity firm, GEC, to merge together two of their portfolio companies that had a very similar strategy to what we were prosecuting at White Deer and to create what is today Flowco. Our merger was closed in June of 2024, but the component pieces that make up today's Flowco are well over 10 years old. Each of the businesses is number one in what they do. Each one of them has a particular expertise around a very specific market niche, and together these businesses make sense, and they're complementary. Customers are responding well to the combination. The investment community has responded well as well to the story. I'm thrilled to be here. I'm also particularly thrilled to get through our first quarterly call, which was yesterday. It's a series of firsts. Thrilled to be here. To answer your broader question, to make it less about me, we've got a very deep team of experts in everything we do. Very fortunate to have founders that are still at the business. We created over 40 millionaires at the IPO. That's a stat I'm particularly pleased with. We have over 100 employee owners of Flowco in total. The expertise that exists in and around gas compression technology, in and around downhole artificial lift techniques is really second to none. I think that's what our customers lean on us for in terms of choosing the right form of artificial lift, the right form of production optimization for the right well condition. Great. Yeah. Let's dive into that because I just want to spend some time on the HPGL, the high-pressure gas lift versus the kind of the ESP technology out there. I mean, I'll be honest, I didn't know about high-pressure gas lift until I was first introduced to the Flowco story and came out and saw you guys in Oklahoma City. Let's dig into that technology, the value proposition compared to ESPs, the opportunity set, adoption curve, and maybe as far as like kind of helping us with your competitors out there, as far as like who else is doing this. Just to level set, Flowco operates through two segments. We've got production solutions, which are our artificial lift solutions, and we have natural gas technologies, which largely is our vapor recovery solution. What we're talking about is a portion of our production solutions product offering. That's roughly 60% of our business, production solutions. Our highest growing product line and in many ways our most exciting product offering is high-pressure gas lift. Just to level set for the audience what we're talking about. High-pressure gas lift pioneered by Flowco, one of our predecessor entities, is utilizing compressed natural gas to produce the early days of a shale well at a rate similar to an ESP. Having owned ESP companies in my past life, I can tell you that we as an ESP operator, as well as the industry, were largely skeptical that this technique could work. We partnered with two oil company clients to perfect the technique over five years ago. We actually were so convinced of it, we wrote an SPE paper co-authored with them and put it out there for everybody to read, and went about a journey to actually convince operators that compressing natural gas to lift fluid to the surface can be done more efficiently, more cost competitively than utilizing an ESP. Why is that? Shale wells decline quickly. Shale wells have a lot of sand, and increasingly they have rising gas to oil ratios, so lots of gas. What is an ESP really engineered to do? An ESP likes benign downhole conditions, maybe not benign, but certainly consistent downhole conditions, consistent levels of fluid being lifted, and they really don't like gas. It's the perfect tool for an offshore well. It's a perfect tool for a conventional reservoir. It's a perfect tool for a water flood. There's a massive market out there for electrical submersible pumps, which is never going to go anywhere because it's the right tool for the job. What I think we have proven to ourselves as well as to our customers who have embraced the technique is that lifting fluid out of the hole in a shale well with high-pressure gas lift can be more profitable and can increase their NPV on that location. We've got over 60 customers today. That's up from one when we started. We're very proud to be the leader in that space. Great. Maybe since you're kind of getting to the customer base, do you want to expand on that? Obviously, the E&Ps are consolidating pretty quickly and rapidly here. As far as this technology, HPGL, how does this consolidation really play to your strengths? We have come out on the right end of all the customer consolidation, which is the good news. I can also say hand on heart that where HPGL has worked and where it has been chosen as the right lift technique in place of an ESP, once a customer has tried it, they have not gone back. That has been very pleasing for us. The consolidation in many sectors of the OFS space has been a terrible thing, right? Operators making do with less. Two rigs plus five rigs equals four rigs. That is high-level math there. Same for frag spreads. For high-pressure gas lift in particular, given how new it is, you have the consolidation of, let's just take for instance, Pioneer into Exxon. Exxon, slow to move, slow to adopt new techniques, very proud of what they do, as they should be, as one of the leaders in the upstream. Pioneer, much more aggressive, much more willing to try new techniques, early adopter of high-pressure gas lift. When Exxon got a hold of the Pioneer production and they looked across the lease line at their checkerboarded situation that they just folded into their existing operations, they went down the list of what they did differently and they said, "How in the world are they able to produce better than we are? We're Exxon, right?" They ultimately came down to this technique. We are slowly starting to make inroads with XTO, Exxon in the Permian, for instance. Look, we could go through all of the consolidation and tell similar anecdotes, but we've been pleased with the reception of all of the buyers that have come out on the top end of upstream consolidation. Maybe just a quick follow-up to that as far as you obviously list a bunch of blue-chip customers, right, as far as within those 60s. We were having this conversation at dinner last night, but the "holdouts," right, of the E&Ps, I guess, what's your take on to approach that? Is it just education time or is there anything specific that these guys need to see before they really dive in with HPGL? Look, oilfield inertia is real. Hard to get a customer to try something new. Hard to get them to trust you, a relative unknown, with their mother's milk, right? It's their production. They've got to actually produce oil to keep the lights on, right? If they're going to try something new, they need to be convinced. The inertia is mostly what we have faced in terms of customer adoption. We've worked with Rystad to actually size the market. If you think about the North American or the U.S. ESP market in total, we think it's about a $3.5 billion market. We think that only about $1.5 billion of that is a market that HPGL can go after. Of that, we think that only about 15% of that market has been penetrated. Okay. A lot of room to go, a lot of room to have customers continue to use our system over the competitive technique. We're just knocking it down one at a time. Right. Great. To just wrap up the HPGL conversation, maybe just kind of run some through of the metrics here. I know investors always ask the rent versus the buy model, the average contract length, just paybacks as far as HPGL. Yeah. Got to be careful to not get ahead of what we're formally guiding here. The system is built in-house, is designed in-house. We lean on critical suppliers like Ariel Compression, who are—we're a top buyer of aerial compressors of our specific size. We make everything ourselves. Very importantly, Derek, we will not sell these systems to operators. Okay. We think that the rental model, the operation of the system, the design of the system, the actual utilization and the ability to keep this thing running virtually full-time is something that really sets us apart. We are in the rental service business on this specific product line. Will that change over time? I doubt it. Look, that's the oilfield, right? Operators like to outsource capital decisions to the service sector. They also like to focus on what they're good at, which is producing fluid out of the ground, not operating equipment at the surface. Look, the returns on this are attractive as a company. We have greater than a 20% ROCE, and we define that as EBIT divided by total asset base. We think that's among the best in the industry. We're going to continue to invest at an accretive level of growth capital in not only high-pressure gas lift, but across our rental items. Great. No, it's a very exciting space. I do want to move into more your conventional gas and plunger lift too, because that's obviously a big part of the Flowco story as well. That brings you through the rest of the well life cycle, right? You kind of start with HPGL, then you can get into more conventional gas and into plunger lift. Maybe just a quick state of the market there and how, and I already asked you this on the call, but I'm going to ask you again, as far as the potential synergies and the customer stickiness starting at HPGL and then bringing you through with all types of lift solutions. I really wish that an operator would embrace a life of field contract. Unfortunately, the competition out there is too great. They're not going to embrace that. Also, you've got these supply chain gurus inside of oil companies that force the asset managers to check the market. What we are advertising and increasingly able to get is, "Give us the first part of the well. We're there with you to make the decision to switch to traditional gas lift." I'll take you through how that works here in a second. We're the incumbent. We oftentimes get to work with them on timing, work with them on sizing, work with them on actually having visibility in when and how to make that switch. The same can be said when you get past the well's useful life for traditional gas lift and get into plunger lift. All along the way, you've got to win your work, right? Every day in this sector, you have competition, you have those that are trying to knock off the incumbent. We have to maintain our culture of innovation and our customer service and most importantly, our service quality. I was having a meeting earlier today with an investor who was asking about patent protection and asking about proprietary techniques. We certainly have both, right? We have ways of doing things that are unique. We have patents that actually help us protect a lot of what we do, but we win based on service quality. This industry broadly enjoys short bursts of, call it monopoly around patents, but they're not durable. We win with our customers based on the service quality we deliver every day. Real quick, because you asked about it, high-pressure gas lift takes gas from 1,000 pounds of pressure, cycles it up to 5,000 pounds of pressure, and injects it into the well to produce the fluid. You've got to have 1,000-pound pressure gas at the inlet to make that a reality. What does that require? That requires field compression. Gas typically in a gathering system is at 100 pounds of pressure. Field compression takes it up to 1,000. Once the high-pressure gas lift system is no longer the right tool, that system can be removed. You still have gas in the field at 1,000 pounds. That's the perfect pressure to utilize a conventional gas lift system downhole where you have a series of valves that open and close to lift the fluid during that sort of intermediate decline phase. We offer both, right? We offer the operator the ability to seamlessly transfer between the early solution to the mid solution, right? Just to wrap up kind of the HPGL and gas lift, because it came up at dinner, I thought this was an interesting way you put it as far as HPGL producing through the annulus, a wider surface to increase flow. I think that all goes for more uptime, pulling production forward. Maybe just if you can just restate those comments to me last night because I found those pretty interesting. Yeah. When you inject gas down the production tubing, you're kind of reversing the flow of a typical well, right? Typical wells flow up the production tubing, hence the name, right? When you look at the cross-sectional area of the annulus, it's five times greater than the area of the production tubing. More area to move more fluid, right? That's been the challenge that we solved with HPGL, getting gas up to a level and providing the reliability at the surface to maintain that level to lift a comparable amount of fluid through the annulus with no downhole moving parts. Very important distinction. ESPs, you've got a motor, you've got a pump, you've got other downhole systems that help optimize those two devices. They're connected together mechanically. You've got an extension cord that runs to the surface to plug into a power source. What could go wrong, right? Again, they don't like the decline curve. They don't like gas. The HPGL system is just a more elegant solution, right? What we've been able to do is to prove to operators that with our mechanical availability, our uptime on average of 99.6% of the time compares to an ESP that if you add up the failures and the pulls and the reruns, ESPs on average, we think, operate about 92% of the time. That 7%-8% mechanical uptime is everything and increasing NPV to the operator to a point where they can pull forward cash flow that would otherwise be deferred. Our commercial model goes after as much of that efficiency gain as we can, candidly. We maintain a dynamic pricing model, various contract lengths with the customers that have adopted the technique. Great. Let's move. You have another exciting part of the business as well with VRUs. Let's spend some time here. Maybe expand on the technology, the value proposition for customers there, what the adoption curve looks like, and again, maybe as far as kind of the competitive landscape, but as far as for VRUs. Our VRUs, first of all, everybody in the audience has utilized a VRU, okay? A VRU is present every time you fill your tank up in your car, right? You're putting gasoline from one tank to another, and just the movement of that fluid creates vapors that need to be handled. Otherwise, you have an issue, right? Every gas station pump has the ability to capture those vapors and stick them back in the ground. The technology has been around a long time. What we have done is we have perfected it specific to an application that has long been ignored, right? In the early days of the oil and gas business, and even today, very, very frequently, fugitive emissions were seen as a waste product, okay? If I have a tank battery and I've got gas that settles out of solution, I've got to get rid of it. Only two ways to get rid of it historically. You open a hatch and you vent it to the atmosphere, or you send it to a flare stack and you burn it. That's why the badlands of North Dakota light up at night is because of all the flare stacks, right? Our VRU helps eliminate those emissions. Now, is it an environmental solution? Absolutely. Is it an economic uplift to an oil company? Undoubtedly. That's how our business has been built. We actually enable an oil company to capture what was seen as a waste product and monetize those molecules. Okay. What's required to monetize the molecules, though, is takeaway capacity. The ability to actually handle the natural gas after you get it is at the forefront of making this whole business model work. As natural gas infrastructure has been built to largely oily basins, we've seen an increasing take-up in vapor recovery deployment. Our systems have similar mechanical availability to our HPGL systems. We're so proud of it. In fact, you can find it on our website. We advertise that as a competitive edge. That is really what allows us to win and to lead the market there. We also offer technology around the vapor recovery unit to enable an operator to operate multiple units as a system and remotely control when and how these things are actually operating. Just to be clear, at the core of a VRU sits a compressor, okay? Our natural gas technologies business and our production solutions business share the expertise in utilizing gas compression to do something with natural gas. In the natural gas technology, in the VRU part of our business, though, we utilize screw compression at a much, much lower inlet pressure and a much lower discharge pressure. It's a way more complicated operating environment to make that system work 99%+ of the time. Gases are constantly, given kind of where they sit in the phase, they're constantly wanting to settle into liquids versus gas, and it causes the system to need to be optimized and fine-tuned quite finely. I think we've developed the best mousetrap out there, but we definitely have competition from those that would see this as a commoditized product. We sit, I think, at the higher end of the technology curve, and our pricing would demonstrate that. Great. I know you touched a little bit on this as far as the economic kind of versus the regulatory motive for this. Clearly, economics as far as those paybacks that E&Ps can get with knocking out the liquids and selling it down the meter. Maybe just spend a little time on as far as the regulatory tale. Obviously, a lot of unknowns right now with the current administration, but what's out there today, what's your expectation, and what kind of adoption uplift could a regulatory, if that's installed, look like for VRU? 100% of our business today has been built on the back of economics associated with deploying VRU in the oil field. The economics for an oil company to deploy our systems are just undeniable, right? If they rent a system from Flowco, they get an immediate payback inside of a month, okay? That has to do with the amount of vapors they're capturing and the value of those vapors as they sell them, okay? Some shareholders would say, "We're not charging enough," right? That's a constant battle with our customer base. We try to get as much of that profit share as we can. The economic incentive for an oil company to utilize our systems is undeniable. We see as potential tailwind the regulatory attention that's being paid to methane emissions in particular. We've worked very closely with the states of New Mexico and Colorado to help them write their methane rules and be there to help solve the problem that we helped define. Those two states in particular have been on the front foot of trying to incentivize through various regulatory pressures operators to eliminate methane emissions. The federal government obviously got involved through the Inflation Reduction Act, which was passed a couple of years ago under the Biden administration. Terrible name for a piece of administration, but that's another story. Embedded within that was what's known as a waste emissions charge that the EPA went through several rounds of defining that in 2025 will levy upon the upstream taxation through various fees associated with methane emissions. It's received a lot of attention here recently with the change in administration. In fact, the House just voted to overturn the waste emissions charge part of the IRA. We will see where it goes. Rest assured, though, we are keeping an eye on all that. We consider any increased regulatory pressure as additional tailwind for what we do. What we do helps oil companies make money. They deploy our systems to help uplift their production through what was otherwise a waste product. No, that's great. We went through HPGL, went through more of your conventional gas and plunger lift, just wrapped up with VRU. I think another big question that I get from investors as far as what's the moat, right? What's the moat, particularly with HPGL? Big growth rate, really nice margin profile, good economics. Why wouldn't anyone get into this, right? We just obviously had a private capital panel before us. Maybe talk about the moat, why you feel like you have a strong position, why you're not concerned or overly concerned about increased competition within these spaces. Yeah. We've got this question a lot on the road, obviously. I should have this memorized, but I think I always give a slightly different nuanced answer. The honest answer is we have proprietary technologies, techniques, some patent protection, but what we do is just highly specialized, okay? Could someone with a checkbook get into this business? Sure, right? Convincing that oil company client to trust you with their production is hard. You have to have the track record of doing it repeatedly for them to actually trust you with the most important part of their operation, which is managing production. We estimate we have a $1 billion investment across our fleet of rental assets. We've obviously got a 10-year head start on knowing how to do this really well. We have customers that are asking us to do more, and we're obliging with our growth capital investment. We have competition. It's not as if we don't have those that try to compete against us. The main thing that I would highlight is that what we do that is unique is we're the only company that has the surface expertise in and around gas compression and the downhole expertise that is required to understand how compressed natural gas interfaces with the reservoir. If you take those that compete with us in conventional gas lift and in plunger lift, they only focus downhole, right? All they want to do is work with an oil company to install the jewelry downhole to actually make that system work, right? If you look at the other end, the gas compression companies have been telling investors for years that they want to de-emphasize what they consider to be small horsepower compression, which our compression is. They also get allergic to any sort of exposure to downhole conditions, right? The very successful, very large compression companies like to operate large assets, long-term contracts, and effectively operate a toll road, okay? They have said they do not want to get into this size range. The downhole guys have said that it is too capital-intensive to get into the surface. We really like where we sit to do both. I think most importantly, what I think our shareholders need to understand and what hopefully they continue to believe us when we say we are number one in what we do for a reason. Our customers look to us every day for our expertise and our service quality and our uptime that enables them to actually accelerate their NPV and all of their production in the field. That's helpful. All right. We have time for one more question. I think maybe a good place to end it all would be around just capital allocation strategy and kind of the growth trajectory of the company. I know this came up a lot during the roadshow as far as what that capital allocation looks like, as far as growing the business. Potential M&A, obviously, is out there. Then maybe if you think about as you start to formulate some shareholder return story as we move forward here. We sold our story on really two legs: the ability to deploy free cash flow that we generate in very high-return organic growth efforts and the ability to grow in a relatively flat market. We want to prove out that throughout 2025. We think we've got visibility to continue to deploy on the order of $150 million of growth capital. That's what we've done successfully for the last couple of years. That's going to be largely split between our conventional gas lift fleet, our high-pressure gas lift fleet, and our VRU fleet. Our maintenance CapEx is relatively low. You're talking $20 million-$25 million across an asset base of roughly $1 billion. These assets, even though they're seen as capital-intensive, the capital intensity is in and around growth. It's not in and around maintenance. We will continue to invest at that level at rates of return that are accretive to our 20% ROCE that we have advertised. M&A is definitely part of our strategy. We wanted to get through our IPO. We wanted to get through yesterday's first quarter call. Frankly, we wanted to get through today, our first conference and this somewhat terrifying event that I am doing now. No, we have an M&A strategy, but every M&A opportunity has to compete for capital with what we can do internally, right? We are stewards of other people's money, and we cannot look at M&A just because it is return or just because its earnings are accretive. It has to be returns accretive. We have some really good opportunities to deploy capital internally. As I like to say in the artificial lift space in particular, we only attack about half the market. For the half that we're not going after, we think we've got a technique that can take share, but we're never going to get all of it. There is a big world out there. There are lots of customers that like other forms of production enhancement, and we'd like to expand beyond what we do. Great. I think it's a great place to end it. Joe Bob Edwards, thank you so much. That wasn't too scary. Not too much. Not too much. Thank you very much.