Atlas Energy Solutions Inc. Q1 FY2025 Earnings Call

Greetings and welcome to the Atlas Energy Solutions First Quarter 2025 Financial and Operational Results Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kyle Turlington, Investor Relations. Please go ahead, sir.

Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the first quarter of 2025. With us today are John Turner, President and CEO; Blake McCarthy, CFO; and Chris Scholla, COO; and Bud Brigham, Executive Chair. John, Blake, Chris, and Bud will be sharing their comments on the company’s operational and financial performance for the first quarter of 2025, after which we will open the call for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined under the U.S. Securities Laws. Such statements are based on the current information and management’s expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially. You can learn more about these risks in the annual report on Form 10-K we filed with the SEC on February 25, 2025, our quarterly reports on Form 10-Q and current reports on Form 8-K, and other SEC filings. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update these forward-looking statements. We will also make reference to certain non-GAAP financial measures such as adjusted EBITDA, adjusted free cash flow, and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in yesterday’s press release. With that said, I will turn the call over to John Turner.

Thank you, Kyle. For the first quarter of 2025, Atlas delivered revenues of $297.6 million and adjusted EBITDA of $74.3 million, representing a margin of 25%. While results were modestly impacted by a few discrete items, primarily higher-than-expected commissioning costs related to the Dune Express, our core performance remains strong. Blake will speak to those items in more detail here shortly. Overall, Q1 was a milestone quarter for Atlas. We completed the acquisition of Moser Energy Systems, executed a successful equity raise, refinanced our debt, set production records at our core facilities, and launched commercial operations for the Dune Express. Before diving into those accomplishments, I want to directly address the uncertainty currently facing the oilfield sector and how Atlas is uniquely positioned to navigate this environment with confidence. Recent volatility, largely driven by global trade concerns and macroeconomic uncertainty, has pressured commodity prices. WTI’s forward strip has declined approximately 20% since early April. These dynamics are influencing customer spending behavior and deferring some near-term activity. That said, what management teams and markets dislike most is uncertainty. And we’ve structured Atlas from the outset to perform through both up cycles and downturns. We are not reacting from a position of weakness; we are executing from a position of strength. Atlas was built to lead through cycles, not follow them. In times like these, companies that control costs, prioritize capital discipline, and innovate with purpose will be the ones that emerge stronger. On the Sand and Logistics side, our Kermit and Monahans operations, in combination with our OnCore network and now the Dune Express, position Atlas at the absolute low end of the Permian sand cost curve. On the power side, Moser Energy’s integrated manufacturing and field log service platform allows us to offer lower cost, higher uptime solutions that create meaningful value for our customers. Moreover, our business model is designed for resilience. We operate with low sustaining capital requirements. Our annual maintenance CapEx is approximately $45 million to $50 million, and we maintain the flexibility to scale the spending up or down in response to market conditions. Our recent refinancing consolidates our debt into a single facility, reducing our annual amortization by $220 million and enhancing liquidity and optionality. Unlike many oilfield service peers, who struggle to break even in downturns, Atlas’ structural advantage enables us to generate healthy free cash flow in weak markets, while capturing outsized returns when conditions tighten. We’re already seeing some customers pause growth plans and adopt a wait-and-see attitude until further clarity emerges. While this has delayed some second quarter volumes into the back half of the year, we entered 2025 with a strong allocation base of approximately 22 million tons and continue to bid on meaningful new tenders. This pause is not a reset. It’s a recalibration, and we expect activity to resume as visibility improves. Turning to what gives us confidence: the Dune Express, while contributing minimally to Q1’s financials, is entering a critical phase. Volumes are stabilizing, and we begin routing deliveries through our end-of-line facility, optimizing last mile execution. We continue to expect Q2 to be the first period where the economic benefits of the Dune Express are reflected in our logistics margins. This is a long-term infrastructure advantage and its early traction is already validating the strategy. Similarly, the integration of Moser Energy Systems is progressing exceptionally well. The cultural alignment has been seamless, and customer feedback has been overwhelmingly positive. Just as we disrupted the status quo in the standard logistics business, we are taking a fresh approach in distributed power, exploring new business models and strategic partnerships to increase efficiency and lower customer costs. Moser’s spirit of innovation is evident with next-generation offerings already in development that will further differentiate our Power platform. In closing, while short-term uncertainty remains, our long-term outlook is grounded in strategic clarity, operational discipline, and structural advantage across our portfolio. We are confident in the platform we've built, and the team is executing our vision every day. With that, I’ll turn the call over to Chris Scholla.

Thanks, John. At Atlas, we made a commitment to the communities of West Texas and New Mexico to enhance public safety by reducing truck traffic through the deployment of the Dune Express. Since its first delivery on January 12, the Dune Express has already eliminated an estimated 1.8 million truck miles from our roads, and we’re just getting started. The system continues to ramp steadily, setting new shipment records each month. This progress reflects the strength of our strategic execution and the long-term vision that guides our business. The Dune Express is a powerful validation of our disruptive logistics model – one that simultaneously delivers cost savings to our customers, margin expansion for Atlas, and meaningful improvements in public road safety. These achievements are rooted in our recommitment to the fundamentals of operational excellence. Over the past year, we’ve gone back to the basics and built around three core pillars: people, processes, and technology. Each reinforces our long-term ambition to create resilient, scalable, and high-performing operations. We’ve invested in people by strengthening leadership, restructuring teams for accountability, and fostering a culture of ownership and cross-functional collaboration. This alignment around common goals is driving operational discipline across the organization. We’ve optimized our processes through standardized workflows, improved visibility, and the removal of bottlenecks. These efforts are translating directly into improved execution and cost efficiencies across the business. And on the technology front, we’re enabling smarter, data-driven operations, from implementing reliability-based maintenance strategies to leveraging sensor data for predictive analytics. We’re using technology to drive performance. Our autonomous trucking program has already completed over 500 deliveries to date, and we’re poised to scale this significantly in the quarters ahead. In March, we set new monthly production records at our Kermit facility and achieved a last mile volume record of 1.8 million tons delivered. OnCore continues to perform exceptionally well, maintaining strong volumes and demand. This operational momentum is a result of a focused transformation effort and a return to fundamentals. Before I hand the call over to Blake, I want to recognize and thank all of our teams across Atlas. It’s your execution, dedication, and teamwork that are delivering results today while positioning Atlas for long-term sustainable success.

Thanks, Chris. In Q1 2025, Atlas generated revenues of $297.6 million and adjusted EBITDA of $74.3 million, a 25% margin. EBITDA fell slightly below our guidance due to elevated costs from commissioning the Dune Express and incremental third-party trucking bonuses to ensure deliveries during challenging winter road conditions. These factors reduced Q1 EBITDA by approximately $4 million, impacting service margins early in the quarter. January service margins dipped to the mid-single digits, well below our historical 10% to 15% range, but rebounded by 1,100 basis points by March. We expect this recovery to accelerate in Q2, with service margins surpassing 20% as the benefits of the Dune Express begin to materialize, though still below its full potential. Breaking down revenue, proppant sales totaled $139.7 million. Logistics operations contributed $150.6 million, and Power rentals added $7.3 million. Proppant volumes reached 5.7 million tons, up sequentially despite weather-related disruptions. OnCore volumes, more sensitive to freezing conditions, were 1.7 million tons, slightly down from Q4. Average revenue per ton was $24.71, boosted by shortfall revenue from unmet customer pickups. Excluding this, the average price was $22.51 per ton. Total cost of sales, excluding DD&A, was $206.1 million, comprised of $65.2 million in plant operating costs, $133.5 million in service costs, $2.3 million in rental costs, and $5.1 million in royalties. Per ton plant operating costs fell to $11.53 excluding royalties, down from Q4, with further normalization expected in Q2 due to improved efficiencies. Cash SG&A was $26.6 million, including $8.2 million in transaction costs tied to the Moser acquisition and the subsequent financing activities. Excluding these, SG&A was $18.5 million, up 6% from Q4. We anticipate SG&A rising above $20 million per quarter starting in Q2 due to Moser’s integration. DD&A was $37.0 million. Net income was $1.2 million, and earnings per share was $0.01. Adjusted free cash flow, which we define as adjusted EBITDA less maintenance CapEx, was $58.8 million or 19.7% of revenue. Total incurred CapEx was $38.9 million, including $23.4 million in growth CapEx, $2.1 million for Power, and $15.5 million in maintenance CapEx. Q1 CapEx included Dune Express commissioning costs, and we expect a sequential decline in Q2. For 2025, we’re budgeting $115 million in total CapEx with flexibility to adjust based on market conditions. As John noted, economic and commodity price uncertainty is prompting caution amongst our customers, with several Q2 development plans deferred to the second half of 2025. Rather than play the game of death by a thousand cuts, let’s focus on what we know for Atlas in 2025. First, we have strong visibility on 22 million tons, with 3 million tons of potential upside pending. Nearly all allocated volumes are tied to dedicated crews, minimizing exposure to volatile spot crews. Second, the Dune Express and our mobile mine network provide unmatched logistical cost advantages, facilitating high utilization even in softer markets. Assuming no additional opportunistic volumes this year, and thus lower Dune Express throughput than previously forecast, we are currently projecting a quarterly adjusted EBITDA run rate of $70 million to $80 million. If deferred projects proceed, this could rise to $80 million to $100 million. In either scenario, our financial obligations, including the current dividend, are fully covered even without tapping our CapEx flexibility. Atlas’ robust financial position allows us to keep investing for long-term growth. Based on current market conditions and activity trends, we expect Q2 volumes and EBITDA to be flat or up from Q1. Before we open the call for Q&A, a few remarks from our Chairman, Bud Brigham.

Thank you, Blake. I will be brief, given that the team has updated very well on the current operational and financial aspects of our business. With over 35 years of experience in the oil and gas industry, starting my first company in 1990 and now having managed three public companies, we’ve learned to not only navigate but thrive in the industry's cyclical nature. The ability to transform challenges into opportunities has been a key driver of long-term success. This approach defines Atlas. Where our low-cost structure and unique operational and logistical advantages, including the Dune Express, autonomous trucking, and our distributed power systems set us distinctly apart. These strengths position us to build lasting value during market downturns, as we did during the pandemic. As prices and activity improve, I’m confident Atlas will emerge even stronger, solidifying our commanding leadership in the industry. That concludes our call. We would be happy to answer any questions.

Thank you. Our first question is from Derek Podhaizer with Piper Sandler.

Hey, good morning, guys. I just wanted to ask if you can give us some additional color on what your guidance of flat to up sequentially is, especially with the Dune Express ramping up, full contribution from your power business. So what are you seeing on activity, pricing, and cost per ton as we move through the year?

Thanks, Derek. This is John, and I’ll provide some preliminary comments and then Blake and Chris will follow up. Currently, we don’t see any near-term upside in this market. You can see that about what you’ve been hearing, especially last night; I mean, you look at Travis’ letter to shareholders. As I said in my comments, what we’ve seen is kind of a wait-and-see attitude on what’s happening. No additions, where there were some additions that were planned, have been postponed. However, you start to see the news come out with some operators cutting activity, cutting crews because of what’s going on in the markets. So right now, we don’t necessarily see near-term upside. But obviously, on the other side of that, we see there’s a response. You’re already starting to see a production response that we’re starting to have in the Permian Basin. And obviously, that near term could turn into a positive on the other side. Blake, do you want to go ahead?

Yes. Derek, it’s Blake. For the second quarter, we’re taking a conservative growth on volumes as we’re not assuming any incremental uptake versus what customers have already spoken for. We would typically see customers begin to accelerate their development plans this time of the year as they work through their CapEx budgets before a seasonal drop-off at the end of the year. But with the move in commodity prices, certainly, that urgency has evaporated. We are seeing larger volumes taken off the end of the Dune Express, which is beginning to positively impact our logistics margins, which are expected to be in the 20% range this quarter. That’s still far from what we ultimately generate with the Dune Express. With respect to the rest of the year, I think it’s anyone’s guess, but if the commodity prices remain around current levels, I’d expect activity to wane throughout the course of the year, particularly with the smaller players. Fortunately, for Atlas, we’re levered to the operators with the highest return on assets in the Permian Basin. And our whole business model is built around saving money through both efficiencies and as a low-cost supplier, which is going to become increasingly important as they look to cut well AFEs. As they look to reduce well costs, we’re going to look again at incremental market share and enhanced utilization just as we have in prior downturns.

Great. Now, that’s helpful. And maybe just to kind of dovetail off of that. Obviously, you’ve mentioned entering a period of softer activity, and we hear it all over the place. But maybe – I know you touched upon it in your opening comments, but further expand on the 22 million tons you have committed this year, confidence around those volumes for the remainder of the year? I know last call, we talked about potentially getting to north of $25 million. So just maybe some additional color and comments as far as hitting those 22 million and what we need to see to get us to that $25 million number?

Yes. Good morning. This is Chris Scholla; I’ll take that one. We remain confident in the demand for the 22 million tons we have allocated for the remainder of the year. And I think this is really supported by strong fundamentals. I’ll share some stats with you just to try to help put this in perspective: Approximately 75% of our allocated volumes are tied to Simul or Trimul completions, which are really the most efficient and cost-effective frac methods out there, making those completions much less likely to be impacted by any slowdown in activity. Over 70% of our volumes are committed to large-cap operators, and that number rises to 85% when you add in those mid-cap operators. We view this as really providing that stability through the larger long-term products. And looking at it from a fully delivered low-cost basis, the sand volumes of the Dune Express and Mobile Mini make it really unlikely that we see those customers pull back from these cost-effective supply options. With that said, we still recognize the market is exposed to many macroeconomic and geopolitical uncertainties. But the market appears stable for now, and we’re in this kind of wait-and-see moment, where really a $10 move in oil price either way could provide significant risk downward or significant opportunity upward in the back half of the year.

Great. Appreciate all the color, guys. I’ll turn it back.

Our next question is from Saurabh Pant with Bank of America.

Good morning, John, Blake, and Chris.

Morning, Saurabh.

John, Chris, maybe I want to start up more as a follow-up to what Derek was asking in terms of the guide, right, I want to specifically focus on the Dune Express. Maybe spend a little time talking about the ramp-up, what you’re seeing thus far, both on the operational and the commercial side of things. And then just maybe help us think through the cost inefficiencies, because I think Blake, you were talking about how lower volumes are impacting your cost structure on the Dune Express rate. So maybe just spend a little time on that and just help us think through the near-term earnings power of the Dune Express.

Yes, I’ll just start off, Saurabh, and then I’ll hand it over to Chris. The first and second quarters, I mean, when you start looking at the sand that’s going down the Dune Express, we still have the costs associated with the Dune Express operating at full capacity and probably even higher costs because we’re in a commissioning phase. You’re not really sending a whole lot of volume out to the Dune Express. Until we reach that maximum capacity to sell the sand off the דּ נ eExpress, that’s where you’re going to obviously see the full impact on our margins. I think if you look at the 1 million tons that have been sent down to the Dune Express to date, I think a majority of that happened in the second quarter. Our plan is to continue to ramp this up, and we’re very excited about what we are seeing off the Dune Express. Obviously, more activity in the areas where the Dune Express is located, and as operators utilize it more, will start to show the full impact on our margins. Chris, do you want to go ahead and talk about those?

Yes. I think just from a high-level macro perspective, the Dune Express, just a reminder, delivers to the most prolific region in North America. And you look at the last downturn; that’s really where all these rigs contracted to us. I think we are in a well-positioned area with the Dune from a demand basis. Just an update on commissioning of the Dune Express: we continue to progress well. We’ve addressed the most significant initial technical challenges, focusing on motor uptime and overall power performance, and it’s already led to much more stable operations and more consistent throughput. We’re kind of in that typical phase of the commissioning process, working through control system refinements and supplier programming adjustments to further optimize the operations. These types of refinements are really expected with a project of this scale and complexity, but we’re confident in our team’s ability to address this effectively. In late March, we completed our first scheduled maintenance cycle on time, and there were no issues. We completed those mechanical improvements, like the belt shortening and transfer station authorizations, and they’re already contributing to the overall consistency of the Dune. Since the launch, the Dune Express has shipped over 1 million tons and eliminated roughly 1.8 million truck miles from public routes. So that, to us, is really tangible through the system's growing impact out there. You talked about the financial contribution of it along with that ramp – Q1 was a bit modest, I think due to those upfront commissioning costs and volumes being on the front end of that commissioning ramp. But as operations normalize and the system efficiencies continue to build up, we expect those margins to expand meaningfully as we move towards the back half of our ramps in Q2. Some data points: over the last 30 days, our shipments down the Dune Express have been running at a clip of around a 6 million-ton-a-year run rate, and we continue to push that upward every month. From our perspective, the Dune Express remains that cornerstone of our long-term strategy, and we believe it will be the key driver of margin expansion as well as a lasting competitive advantage moving forward in the market.

Yes, Saurabh. I’m piggybacking, it’s Chris here. Just to give you a little inside baseball on the numbers there. In the prepared remarks, we talked about the logistic margins in January being compressed by severe weather. However, by March, with the ramp in volumes down the Dune Express, we saw 1,100 basis points of margin expansion in the logistics business. As volumes continue to ramp off the Dune Express, we expect the logistics margins to reach a 20% range in the second quarter. We’re still below what we ultimately can achieve with the system. So let me be clear: every incremental ton we deliver off the Dune Express is highly accretive to Atlas’ consolidated margin. They’re flowing through an incremental margin above 50% right now, so we’re just continuing to focus on pushing more and more volume there.

Okay. No, that’s fantastic color. And Blake, maybe I’ll stick with you. A follow-up question I had was on the free cash flow side of things. Free cash flow, the way we define it as CFFO, less CapEx, was weaker than I was thinking at least, right? But lots of things going on: working capital, CapEx. So maybe just help us think through the free cash flow profile. Maybe just walk us through what happened in Q1 and then what should we expect for the remainder of the year from a moving piece standpoint to working capital and CapEx you touched on in your prepared remarks, right? Maybe a little bit on cash interest, tax expenses? Just the moving pieces of free cash for the remainder of the year. Blake?

Yes. There were a few moving pieces of cash flow in Q1 that are going to change moving forward. First, Q1 was going to be our largest spending quarter this year in terms of CapEx with the commissioning of the Dune Express. So total CapEx incurred was $38.9 million, and that is currently expected to decline to approximately $25 million per quarter, staying in line with our budget of $115 million. Additionally, we had a really big build in working capital during the quarter. Net working capital expanded from $18 million at the end of the year to $109 million at the end of March, with almost the entirety of that build coming in accounts receivable. The reason for that build is twofold: first, we had some large customers make payments at the end of the quarter, likely to make their own working capital metrics look better; however, we’ve already seen that begin to reverse at the start of this quarter with some big collection weeks. Second, we have a receivable with a pressure pumping customer that has been building due to shortfalls on a take-or-pay contract. We have an enforceable contract there and expect to collect this receivable. Moving forward, we expect to see improved working capital efficiency and don’t expect working capital to be a headwind to cash flow generation as we move through the year. With respect to cash taxes, we expect that to be a minimal impact this year. Right now, estimates are anywhere from $6 million to $10 million. All in all, we expect cash flow to improve moving forward as we head through the year.

Okay, perfect. And a very quick follow-up on what you just said, Blake, on the contract shortfall. How should we think about that? If a customer, let’s say, of that 22 million tons for whatever reason does not pick up the contracted volume? How enforceable are these contracts? And how much do you think shortfall payments could be?

We are very confident in the language in that contract and believe it is enforceable. We have every intention of collecting on that receivable.

Okay, perfect. I’ll turn it back. Thank you.

Our next question is from Jim Rollyson with Raymond James.

Hey, good morning, guys. If I could maybe switch gears for a second here. Obviously, you got the challenges going on in the oil and gas markets, but the peers you’re kind of competing with to some degree on the power side of things have kind of been singing praises and actually ramping up their CapEx based on outlooks, opportunity, et cetera. Maybe – I know it’s early days because you’ve only had the business for a couple of months now, but maybe just expand a little bit on what you guys are seeing in terms of opportunity and maybe future growth upside to the $60 million CapEx you talked about in the past?

Yes. Thanks, Jim. You’re right. We have had this business for just over 60 days now. Obviously, I mean, the integration is going well. I’m very excited about what we’re seeing from the Moser side and the Moser team. The response that we’ve received from our customer base has been pretty overwhelming. We’re still working through what all that means for Atlas as an organization. I mean, we’re very, very excited about the opportunity with Power. When we bought Moser, we acquired a well-established power company that’s providing cash flow from the start. So it is a cash-flowing business with some big opportunities out there for us. We’re still trying to work through those opportunities. I think one thing is that the market is very inefficient, especially on the power side. Coming from the standpoint of what we did in the sand business and disrupting it, that’s the reason we got into the business – there’s an opportunity for us to operate efficiently and help our customers save money. But needless to say, it’s a very exciting opportunity, and we’ll have more about that in the future.

Appreciate that. And maybe as a follow-up, one of the things over the last few quarters, we’ve noticed you guys and the whole industry has endured some pretty soft sand pricing. Historically, after some period of time, that soft sand pricing, at or in some cases below where other people’s OpEx is, tends to lead to some supply impacts. You’ve had some consolidation in the space recently. Just curious what you all are seeing on the sand supply side, if we’re kind of headed towards some of your competitors dialing back output or closing mines or what have you, like we saw through the last downturn.

Yes. Maybe I’ll start by addressing a little bit of thoughts on the supply side, and then we can kind of walk into the pricing side of it. On the supply side, I think you hit the nail on the head. We believe that those capacity additions have really peaked out. Some customers that we’ve seen, driven by conditions, have started to reduce shifts or idle their production, and competitors have been idling production, particularly those high-cost mines and disadvantaged operations that we’ve seen. Approximately, call it, 100 million tons a year of nameplate capacity in the Permian, with spot prices in that mid-teens area. We saw additional rationalization really being forced into the market. You see the recent competitor consolidations that have gone out there with the pricing at or below that breakeven pricing of their manufacturing price. We see this, though, as long-term, very constructive for the industry. I think we’re really well-positioned there. We’ve been through this down cycle before; we know the playbook, and we came out of the last downturn in a position of strength. We don’t think this market is any different than that. Looking now, we have significant structural advantages on a total delivered cost basis due to the additions of the Mobile Mini mines and the Dune Express. From the pricing side of things, as everyone knows, the current low-price environment puts operators under increased pressure to reduce costs across their entire value chain. They’re focused on sand pricing and overall completion costs. I think the Dune Express and the OnCore plants have really given us an advantage here. It’s important to remember, our customers are looking for more than just competitive pricing; they’re looking for a comprehensive, cost-effective solution that delivers it to their well site at the lowest possible cost. That’s where both the Dune Express and OnCore add value, providing integrated logistics solutions while ensuring optimal delivery costs for our customers.

Thanks for the color, Chris.

Our next question is from Atidrip Modak with Goldman Sachs.

Hi, good morning team. I guess on the deferred volumes, it sounds like it’s on the non-contracted volumes. Can you give us any more color on what the nature of the conversation there is? It sounds like there might be some flexibility on ramping that up? Anything around that? And then could you divert these volumes to some other producers? How should we think about it?

Yes. So the project deferrals were mainly driven by macro uncertainty. Some of these projects have seen their startup dates pushed out to the second half of the year from this quarter because that’s the indication as of now. Operators aren’t willing to commit to more volumes until they have a better grasp on their plans going forward. It wasn’t just one customer; there were several projects on both the Mobile mine side and then the Dune Express side - just kind of a general pause in the market. This has been pretty clear in the commentary you’ve seen from public E&Ps recently, where a lot of the news that came out last night wasn’t news to us; we’ve been having those conversations with customers for a while. We’re aware of the situation, and we’re having active dialogue with them where they’re looking to save on their AFEs. Atlas is a way that they can start to harvest some of those savings. And so we’re continuing to push there and show them the math, and I think that’s starting to catch some attention.

Yes, I think just to add on; our focus really there is to secure those long-term commitments that align with our logistics and infrastructure and structural advantages from those Mobile Mini and Dune Express.

Got it. Appreciate that. And apologies if I missed this earlier, but Blake, could you talk about where the price case are on the contracted volumes? And what your perspective is on what happens to those price levels in the second half of the year in terms of the FOB price you were talking about?

On the allocated tons, the $22 million of allocated tons, those are in that low-20s range that we’ve been at over the last few quarters. The shortfall revenues will continue to be at those levels with slight declines as just legacy contracts roll off. The spot price we’re seeing right now is in the mid- to high teens. Any incremental volumes we do book would be dilutive to that average sales price, but we would be very accretive to the overall consolidated margin. Just pointing out that our variable cost in our legacy mines is $4 to $5 a ton, so anything we can add on in terms of additional volumes will be beneficial for our financials. Adding on top of that, the margins we obtain from our logistics: I would expect that price to continue to decline just with the current environment, but that’s not necessarily negative from a financial standpoint.

And it’s really important to remember; we’re talking about total delivered costs here, and that’s what our customers are looking at. They’re not necessarily looking at a sand price or logistic price - they’re looking at a combined price. When you compare that to our OpEx and delivery cost, that’s when you start really seeing the benefits of Dune Express. Once we see more activity come off the Dune Express, we expect that to happen as we progress through the year.

That’s very helpful guys, thank you.

Our next question is from Eddie Kim with Barclays.

Hi, good morning. Just wanted to ask for some more color on the deferrals of the development projects. Were these concentrated with a few large customers, or was this more kind of a broad-based deferral activity across your customer base? And I know you mentioned that these are being deferred into the latter half of this year. What’s your confidence level at this point in that second half target and not potentially being deferred further out into 2026?

Eddie, I think it would be quite a bit of hubris to say I know exactly what’s going to happen in the market right now. Customers are in the same boat we are, where the ground is shifting underneath them. They’re pulling back on deploying CapEx until they get more clarity on where things are headed. So it wasn’t just one customer; there were several projects on both the Mobile mine side and the Dune Express side - just a general pause in the market. I think that’s been pretty clear in the commentary from the public E&Ps recently. A lot of the news that came out last night wasn’t news to us; we’ve been having those conversations for a while. We are aware of it, and we’re engaging actively with customers about strategies to save on their AFEs. Atlas can help them by harvesting some of those savings. We continue to push to demonstrate the math; that’s starting to catch attention.

Yes, the 22 million tons we have allocated currently represents our capacity. We did say in the prepared remarks that there’s about 3 million tons of pending opportunities, giving us a potential upside. We feel fairly confident about that 22 million tons and have hope for incremental volumes. We want to assure our investors where we currently sit in the market.

I might just add briefly to John’s comments. Right now, we’re experiencing peak uncertainty. Uncertainty is the biggest issue for our industry right now, as it directly impacts the activity we see. Once we move beyond this uncertainty and gain clarity on oil prices and other dynamics, I believe that’s when we’ll see significant benefits, as Atlas tends to benefit as a low-cost producer with logistical advantages in the Permian. We’ll come out stronger through this cycle, with more market share and enhanced pricing power.

Understood. Appreciate that clarification and all that color. I’ll turn it back.

Thank you. There are no further questions at this time. I’d like to hand the floor back over to John Turner, CEO, for any closing comments.

All right. Thank you, guys. Thank you, everybody, for joining. Obviously, I’m very excited about what’s going on with the company and the Dune Express. Obviously, there’s a lot of uncertainty in the market, but Atlas is built to withstand and navigate through these ups and downs and come out stronger. We look forward to reporting our second-quarter numbers in August. Thanks.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.