Greetings, and welcome to the Kodiak Gas Services third quarter 2023 conference call. At this time today, all participants will be in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. At this time, well, it's my pleasure to introduce your host, Graham Sones, from Investor Relations. Thank you, Mr. Sones. You may begin. Good morning, everyone, and thank you for joining us. Participating from the company today are Mickey McKee, President and Chief Executive Officer, and John Griggs, Chief Financial Officer. Following their prepared remarks, we'll open up the call for Q&A. The comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views, beliefs, and assumptions of Kodiak's management based on information currently available. Although we believe the expectations referenced in these forward-looking statements are reasonable, various risks, uncertainties, and contingencies could cause the company's actual results, performance, or achievements to differ materially from those expressed in the statements made by management. Management can give no assurance that such statements or expectations will prove to be correct. Listeners are encouraged to read Kodiak's prospectus and quarterly report on Form 10-Q, available on our website or at sec.gov, to understand those risks, uncertainties, and contingencies. And now I'd like to turn the call over to Kodiak's CEO, Mr. Mickey McKee. Mickey? Thanks, Graham, and thank you all for joining us today. This is an exciting day as we announce the combination of two leading compression companies to form the largest compression infrastructure company in the industry. This morning, we announced a definitive agreement under which Kodiak will acquire CSI Compressco in an all-equity, no premium, leverage-neutral transaction valued at $854 million, with an anticipated close in the second quarter of 2024. First of all, I want to thank John Jackson and his entire CSI Compressco management team for what a tremendous job they have done on this transaction. I also want to thank all of the Kodiak employees for their tireless work on this. It was a lot of late nights. Everyone involved in this has worked tremendously hard and should be recognized for their contributions, and I'd like to say thank you. Now back to the deal. We believe that this is a strategic and accretive transaction, and we're excited to share some of the details of this transaction and why this is the right deal for Kodiak and CSI Compressco. We expect Kodiak shareholders will see over 8% accretion to discretionary cash flow per share and over 5% accretion to free cash flow per share in the first year. For CSI Compressco unit holders, they will convert to Kodiak stock at an attractive exchange ratio and immediately participate in an increased dividend post-closing. We believe that the financial flexibility Kodiak gains from this transaction will allow us to increase our dividend and implement a share repurchase program after we close, consistent with our capital allocation strategy and our long-term leverage target of 3-3.5 times by the end of 2025. Finally, and importantly, this transaction will increase the public float and trading liquidity of Kodiak's stock, while decreasing the overall ownership percentage of our majority shareholder, EQT. Speaking of EQT, I think it is important to make the point here that this transaction could not have come together without their support, and we thank them for their continued and long-standing investment in Kodiak. As you know, Kodiak provides large horsepower compression equipment under fixed revenue contracts and with industry-leading mechanical availability, and we do this for the best customers in the best basins. This transaction furthers these objectives and bolsters Kodiak's position as the compression provider of choice as we maintain our position of the youngest and most emissions-friendly fleet with the highest utilization in the industry and a continued focus on large horsepower compression. First, let's talk about scale. The combination of Kodiak and CSI Compressco will create a fleet of over 4.4 million horsepower, the largest in the contract compression industry, and it allows us to better serve our customers. In the Permian alone, we will have over 2.8 million horsepower and a combined operating group that is strategically positioned to be a leader in the Permian Basin. As we have seen consolidation in our customer base, it is only natural to think that we would continue that trend to keep up with the growing compression demands of our customers. Earlier this year, we added key players to an already very experienced management team leading up to our IPO. We believe this is the best collection of talent in the compression business and the right team to realize the full potential of the assets we're acquiring. In a labor market that continues to be tight, we look forward to welcoming the hardworking women and men of CSI Compressco to Kodiak. Next, let's expand on the Permian. As you know, the Permian is home to over 70% of Kodiak's horsepower today as a result of our intentional focus on the Permian as a low cost to produce basin with long-life production and deep inventory. Permian producers use natural gas to lift crude oil to the surface for enhanced and sustained production, and the liquids-rich, low-pressure, associated gas that Permian wells produce requires multiple times more compression than conventional reservoirs... as it moves through gathering lines and processing facilities. We talk about a metric called compression intensity, or the amount of compression needed per Bcf of gas production, and the Permian Basin is 3-4 times more compression intense than its conventional counterparts. The Permian is going to continue to be the engine of production growth in the U.S. We expect much of the gas required to feed the roughly 15 Bcf per day of LNG liquefaction capacity being built on the Gulf Coast over the next several years will come from the Permian. This transaction adds about 500,000 operating horsepower to the 2.3 million horsepower that Kodiak operates in the Permian Basin today. This positions us to capitalize on expected Permian gas production growth and enhances our predictable, long-term, stable cash flows with an expanded presence in the Permian. One of the things that attracted us to this deal was how complementary CSI Compressco's customer base is with ours. With minimal overlap, CSI Compressco's top ten customers add several large investment-grade customers to Kodiak's premier customer base, including one of the majors that is also a leading Permian acreage owner and producer. Kodiak's top ten customers represented about 60% of revenues in September, and on a pro forma combined basis, that number drops to about 50%. Like Kodiak, CSI Compressco provides its compression services under long-term, fixed revenue term contracts with inflationary protection. Last, from a strategic standpoint, CSI Compressco brings a gas treating and cooling business as well as aftermarket services. The gas treating and cooling business is a growth opportunity we've evaluated in the past, since we consider it to be a natural extension of the services we provide to our customers on location, similar to the work we do in our other services segment today. CSI Compressco also does some things that Kodiak hasn't focused on historically. Let me take a minute to address those. The first is their international business. About 5% of CSI Compressco's operating horsepower was located outside of the U.S. as of September 30. These international businesses operate fairly autonomously today and are EBITDA and cash flow positive in the aggregate. And on a combined basis, the international business only represents a little over 1% of pro forma adjusted EBITDA. Second is their production enhancement business. About 6% of CSI Compressco's operating horsepower is comprised of small, less than 100 horsepower, Gas Jack and electric VJack units used in a variety of applications, from artificial lift and plunger lift assist to vapor recovery applications. Though there are a lot of units, they represent just over 1% of combined revenue-generating horsepower. The CSI Compressco management team and employee base have done a phenomenal job of managing these businesses. We will continue to evaluate these businesses as we move towards closing and update you on our plans, even though the contribution to the pro forma combination of Kodiak and CSI Compressco is minimal. I mentioned in my introduction that this transaction is accretive. Using Wall Street estimates for CSI Compressco's 2024 EBITDA and the expected $20 million in cost synergies we expect to ultimately realize, we're paying less than 5.5x consensus 2024 EBITDA. That's roughly 1.5 below Kodiak's trading multiple based on yesterday's closing price. The deal will be immediately accretive to Kodiak's discretionary cash flow and free cash flow per share. As I said before, we plan on using this additional cash flow to increase our dividend and implement a share repurchase program after closing, increasing the return of capital that we believe is a key aspect of the Kodiak investment thesis and consistent with our stated capital allocation strategy. Now, I'm going to turn the call over to John to take you through some of the transaction mechanics and give a little bit more detail on synergies. John? Thanks, Mickey, and I echo your excitement about the deal. What I plan to cover now is the following: provide more detail on the structure and financing plan, the synergies we expect to realize, and what that means for the combined company. First, the unit purchase aspect of the transaction is structured using all equity at a 0.086 exchange rate, which means that each unit holder of CSI will receive 0.086 shares of Kodiak stock for each unit owned. There are roughly units outstanding today, so as part of the share conversion, Kodiak will issue approximately 12.3 million shares to CSI unit holders at closing. This will take Kodiak's total share count to approximately 89.7 million shares, and more notably, add to our public float. More than 50% of the total shares issued will be to CSI management and other significant holders, who have also executed a support agreement in which they've agreed to vote in favor of the transaction. The support agreement gives us high confidence in our ability to close the deal. In terms of structure, I want to make it real clear that we're a standard C Corp today, but CSI is an MLP. Post-transaction, however, will continue to be a standard C Corp. As you've seen in our press release, we're utilizing an Up-C structure in this deal. We're doing this to make the transaction as tax efficient as possible for both buyer and sellers.... The CSI unitholders who elect to receive Up-C units, as well as a handful of other unitholders, are going to be locked up for 180 days following closing. Overall, we expect the Up-C units to represent about half the 12.3 million shares issued in the deal. Final three points on the Up-C. Number one, we didn't enter into any tax receivable or other sort of tax-sharing arrangement. Number two, the duration of the Up-C is time-bound. We'll have the ability to unwind it after five years. And last, from a cash tax perspective, by virtue of our preexisting NOL balance, our cash tax rate will be about the same as it was pre-deal. Let's move on to financing. As part of the transaction, Kodiak will be assuming CSI's debt, which was about $635 million gross at the end of the third quarter. However, our plan is to launch a Senior Notes offering here in the near future, the proceeds of which will be used to pay off all the CSI debt, pay transaction fees, as well as pay down a small chunk of our ABL. Now for synergies. We've identified at least $20 million of high-confidence cost synergies, some of which will be realized immediately and all of which we'd expect to achieve between roughly 12-24 months post-close. These cost synergies come in all forms, including redundant systems, facilities, and other aspects of overhead, purchasing savings, and the elimination of certain public company costs, given the public-to-public nature of the transaction. Pro forma for the cost synergies, the transaction is leverage neutral to Kodiak. To be clear, it does nothing to change our long-term leverage target of 3-3.5x, or the expectation that we'll get to those levels sometime in the back half of 2025. To close things out, let me tell you the plan on guidance. Kodiak's plan has always been to provide full year 2024 guidance in connection with our Q4 and full year results early next year. We're going to stick with that schedule and provide full year 2024 standalone guidance at that time. Though the timing of required regulatory approvals is uncertain, we anticipate closing the transaction sometime after the first quarter of next year, hopefully in Q2. You should expect that we will provide an update to our guidance, as well as any updates to our capital allocation and capital return plans sometime in the first few weeks following close. With that, I'm going to hand it back to Mickey. Thanks, John. To recap, we're really excited about the acquisition of CSI Compressco. This all equity, no premium, leverage neutral transaction is going to provide significant scale, deepen our already leading Permian footprint, and be immediately accretive on key cash flow measures, allowing us to increase return of capital to our shareholders after closing. Operator, we'd like to open up the line for questions. Thank you. At this time, we'll be conducting our question-and-answer session for today's Kodiak Gas Services acquisition conference call. If you'd like to ask a question today, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question is from the line of Neal Dingmann with Truist. Please proceed with your questions. Morning, guys. Congrats on the deal. Mickey, my first question, just on the assets, that you're, you know, adding, you know, how do you think—maybe give a little more color. I mean, your assets being some of the highest quality, I think, out there on the market. You know, always been the tough part when adding to make sure that anything you're adding compares with that. Could you just talk about Compressco and how those assets you're bringing in sort of compares with to the high quality you already have? Yeah, absolutely, Neal. Good to talk to you this morning. Thanks for, thanks for joining the call. You know, I think that, you know, we did a pretty extensive amount of diligence on their fleet, and really, it's been a fleet that other than some non-core assets that we addressed in the call there, you know, they've been focusing for many years now, since the Spartan acquisition, in 2021, on large horsepower Cat Ariel type of equipment that's really kind of right down our fairway. And so, I think that, you know, while it's a little bit of an older fleet than ours, we maintain, kind of, over as an overall pro forma fleet, the youngest fleet in the industry. So we're excited about it. We think that, you know, the demand that there is out there for compression today and what we see over the next, you know, by the end of the decade, creates an opportunity for us to continue to redeploy some of their idle horsepower. We're not scared of their fleet at all. It's a high-quality fleet that's been well taken care of and well maintained by the CSI management team and their employees. Great to hear. And then maybe just follow up for John. So I'm just wondering, I know it's early on, sort of, looking at maybe 25 and beyond, but could you talk about how you think you'll be when it comes to shareholder return, will you know, where will the stock repurchases sort of fit in? Do you anticipate being pretty balanced plan or still dividend heavy? Or just maybe just, you know, any further color you could give on expected shareholder return beginning, you know, let's say second half of next year and into 25? Thanks. Yeah, Mickey said in his release, earlier, like, we anticipate increasing the dividend, and, and ultimately entering into some form of share repurchase program. We don't have particular timing around that. We just know that if we execute on these synergies and, run the business like we know we can, that we're going to generate that incremental cash flow to do so. The dividend is and will be always a very critical aspect of our capital allocation framework. Anything else to add on that, Mickey? ... No, I think that, you know, the only thing I'd add is that, you know, we'll come up with kind of official guidance on that after we close, and we still got a little bit of work to do to decide kind of what that level is as far as increasing the dividend and the share repurchases. And that obviously has to be approved by our board before we can put anything like that in place. Thanks, guys. Look forward to the upside. Thank you. Thanks. Our next question is from the line of John Mackay with Goldman Sachs. Please proceed with your questions. Hey, good morning, guys. Thank you for the time. Congrats on the announcement. I wanted to maybe just pick up again on the CSI Compressco LP fleet a little bit. You know, are there—you know, you talked about the kind of the quality of the assets. One thing we haven't really talked about is kind of your relative uptime and kind of where that's printed versus what this fleet has looked like. Is there an opportunity to kind of get uptime utilization levels on their assets, on their footprint that, you know, you guys aren't operating yet? Is there upside there, or is there something kind of structural where, you know, maybe the legacy fleet stays at the 99%+, but this is something that, you know, doesn't quite get there? I think there's definitely the opportunity for increased utilization here when you look at pro forma the two customer bases that are put together. I think there's demand there that hasn't been, obviously hasn't been satisfied. And so we're gonna do a pretty thorough evaluation of what they have idle and what we can redeploy with our customer base as well. So our commercial team has great relationships with our customers, and we think there is some upside there from a revenue perspective that we can redeploy some of their idle assets. And we're gonna look at some programs to, you know, to replace some of the older engines with electric motors and that kind of thing, and some electrification opportunities there as well. So definite upside there. Yeah, and, and Mickey, if I may as well, too, I'll add. There's nothing proprietary about our assets or anybody's assets in this industry. Our success is 100% born from the people and the processes that work at Kodiak, and our formula is real simple: Take care of your customers, take care of your employees, take care of your vendors, and the rest will take care of yourself. Rick said it'll take care of itself. So we're gonna apply that same philosophy with the CSI assets, and we think we'll achieve the same outcome. All right. I appreciate that. And maybe... Sorry, I know, John, you went through this a little bit, but maybe just spend another second on the Up-C, because you did have the common thing. You know, we're a standard C Corp now. We're gonna be a standard C Corp afterwards. I guess, are, are we missing something? Is, is it not the whole company converting into an Up-C? Is it just gonna be this, kind of legacy insiders part of CCLP as a, as a kind of standalone outside the box? Maybe just, just, you know, close the circle for me. Yeah. So it, it is. I think the Up-C structure has become fairly common in M&A land, so it's something that I'm sure you're familiar with some of your other companies. Nothing is changing with the Kodiak tax structure, with the overall C Corp. So what it was, was several of the former unit holders have some negative tax positions, and it was important for the unit holders to be able to maintain that same tax position that they had in the MLP before the announcement. So ultimately, we issued them these Up-C shares, which after I guess at a max of five years, we'll be able to convert those back into C Corp shares. And it allows those certain shareholders to defer their gains that they have in this business. Frankly, it also works to our advantage as well, too, because if we'd not put in place this structure, by virtue of the taxes that some of those shareholders would have had to uphold and the fact that they were receiving stock in the transaction, it could have led to undue selling pressure by those folks who needed to, in effect, pay their tax bills. So this allows them and us to kind of work together to maintain that share ownership for a longer period of time. That's helpful. That, it's clear on our side. Appreciate it. Thank you, guys. Thanks, John. Our next question is from the line of Jeremy Tonet with JP Morgan. Please proceed with your questions. Hi, this is Robi Reddy on for Jeremy. Appreciate the call and the prepared remarks on the Permian, but I was wondering if you could clarify the basin breakdown pro forma for KGS, the split between Permian, Eagle Ford, and other. Yeah, I mean, I think, pro forma, after the transaction, we'll still have north of 65% of our assets located in the Permian Basin, with another 14% located in the Eagle Ford. So, kind of put the two companies together, and you still have, you know, 80% of the assets located in the Permian and the Eagle Ford, combined after the combination. Well, another thing we really liked about the combination here is that the CSI operations that are non-Permian, kind of, assets actually overlay Kodiak operations very relatively nicely. They've got, you know, operations in the Mid-Continent, in the East Texas, Alabama region, that we have operations in, up in the Northeast, where we have operations in the Rocky Mountains, too. It actually does a really good job of those non-Permian and Eagle Ford assets of building some pretty strategic densification in those areas that'll I think will create some upside as well. Great, thanks. And then on the second one, wanted to ask on CapEx. Should we think about CapEx increasing given the larger asset base now or staying the same? Just curious on any thoughts you had there. And, a separate but related question, I guess was, what's the average age of the CSI Compressco LP fleet? Thanks. ... As far as CapEx goes, I think that we'll evaluate that as we get into 2025 and start to budget for 2025 after the integration is done and after the synergies are realized. At this point, you know, CSI has their 2024 capital capital budget kind of budgeted and all spoken for, and so do we. So I would expect that the 2024 CapEx budget is pretty set in stone right now. It'd be just a kind of a one plus one equals two for what they have budgeted and what we have budgeted. But 2025 will be, we'll look and see what kind of what the numbers tell us when we get into that capital allocation strategy of, you know, that 40%-45% of our discretionary cash flow being a dividend, and the rest will be going to looking at growth CapEx and additional debt paydown. So I would think that we will increase growth CapEx with kind of the size, as the size of the company increases. So it's kind of one of the benefits of being able to take care of some of the consolidation amongst our customers. Mickey, you earlier said 40%-45% of DCF going out in the form of dividend, which it was. It's 35%-40%, is what we've been saying. 35%-40%. Just want to make sure that did get this true. Sorry. No, and the answer to your question, your second question, their average fleet age is 10 years. On a combined basis, we're still about 6 years, which within the public universe and contract compression, makes us still the youngest fleet in the industry. Okay, great. Thank you. Our next question is from the line of Jim Rollyson with Raymond James. Please proceed with your questions. Morning, guys. Mickey, you know, the historical kind of Gas Jack, just generally smaller and medium-sized horsepower business, a little different animal from a utilization perspective and how long it's on site, that kind of thing. I'm just curious, how you think about that? Do you just look at this as kind of, you know, the large horsepower assembles into your existing large horsepower fleet, and then you manage the other one separately? And I think, as you mentioned, its percentage of revenues is a pretty small number because utilization. But just kind of curious how you think about managing the two different types of compression businesses, given that what you'll have once this is all combined. Yeah, thanks for the question, Jim. I mean, I think that's part of the evaluation process between now and close. I mean, I think that they obviously have overlap with that small Gas Jack fleet that we'll take care of with our other kind of fleet operations as well. We probably create a lot more overlap than what they've had in the past to be able to have more denser operations and the ability to cover that. That's obviously, again, not our core business. We're looking at this as the core large horsepower recip type of assets, is what we're really excited about in this. And so we'll continue to evaluate what the Gas Jack business means and decide what to do with it down the road. You know, I mean, I think that, by our estimates from through our diligence process, that it—the EBITDA contribution from the Gas Jack- Thank you. Our next question is from the line of Selman Akyol with Stifel. Please proceed with your questions. Thank you. So just sort of following up on that last question, can you maybe talk about, and I'm thinking here for sort of the large horsepower, how the contracting looks compared to your contracting for large horsepower? Ladies and gentlemen, please stand by. We're experiencing technical difficulties. We'll resume with our question and answer session in one moment. Thank you. Ladies and gentlemen, please remain on line. Our conference will continue momentarily. Ladies and gentlemen, please remain on line. Our, your conference will resume momentarily. Please stand by, Mr. Akyol. We'll resume momentarily to answer your questions. Thank you. You're welcome, sir. Once again, ladies and gentlemen, please remain on the line. Your conference will resume momentarily. Thank you. Thank you, ladies and gentlemen. Mickey, you may continue on from your line. Thank you. Okay, we're back. Sorry, we apologize for the technical difficulties there. Not sure where we left off there, but we'll resume with the queue now, operator. ... Thank you. Selman Akyol here. I'm sorry, please go ahead, Mr. Akyol. Hey, no worries. So, first, congrats. And then I guess the first question I had was really just sort of looking at large horsepower and contract structure, and just how does that compare to yours for your large horsepower that you have? Is there major differences, or should we think of them being, you know, pretty identical? Hey, good morning, Selman. Thanks, and sorry about that again. Yeah, I think that's the, that's kind of the key takeaway right here, is the core business, which is over 70% of their revenues, is really very similar to what we do, which is large horsepower reciprocating compression that is a Permian-centric focus with long-term contracts in nature. And I think that, you know, the Spartan management team, when they came in, has really done a good job of pushing the core philosophy at CSI Compressco towards those type of results over time. And what we've seen is it's a very similar operating philosophy to what we have now, and we're excited that the combination is a good, very good fit with our operations group. Got it. And then, given the ownership structure over there, is there gonna be a vote that's needed? And I'm thinking, like, 50% of the publicly held shares, or is it just since they have control, they can just vote it, and therefore, you don't really need to have a vote? So we mentioned in the press release, as well as on the call earlier, that better than 50% of their ownership group has signed support agreements to vote in favor of the deal. So that, in and of itself, secures the deal. Got it. And then the last one for me, was this a shop deal? No. No, it was not. Okay. Thank you, guys. Thank you very much. Thanks. Thank you. At this time, this concludes our question and answer session. I'll hand the call back to Mr. Mickey McKee for closing comments. Thanks, operator. I'll close again by thanking the dedicated team at Kodiak and CSI Compressco for a very successful 2023. Our investors and other stakeholders for their continued support as well. We wish everyone a safe and healthy holiday season, and we'll be back next year to share our Q4 and full year results. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines at this time and have a wonderful day.