Atlas Energy Solutions Inc. Q4 FY2025 Earnings Call

Greetings and welcome to Atlas Energy Solutions, Inc. 4th quarter and year-end 2025 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kyle Turlington, VP, Investor Relations. Thank you. You may begin.

Hello, and welcome to the Atlas Energy Solutions Conference Call and Webcast for the fourth quarter of 2025. With us today are John Turner, President and CEO, Blake McCarthy, CFO, Tim Ondrak, President of Power, and Bud Brigham, Executive Chairman. John, Blake, and Bud will be sharing their comments on the company's operational and financial performance for the fourth quarter of 2025, after which we will open the call for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined under the U.S. securities laws. Such statements are based on the current information and management's expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially. You can learn more about these risks in the annual report on Form 10-K we will file with the SEC on February 24, 2026, our quarterly reports on Form 10-Q, and current reports on Form 8-K, and our 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'll turn the call over to John Turner.

Thank you, Kyle. Now, for the fourth quarter, Atlas generated $36.7 million of adjusted EBITDA on $249 million of revenue, representing a 15% adjusted EBITDA margin. For the full year, 2025, we delivered $221.7 million of adjusted EBITDA on $1.1 billion of revenue, achieving a 20% adjusted EBITDA margin. Our Q4 results exceeded our initial expectations. Volumes came in at 5.3 million tons, flat sequentially with the third quarter. The typical end-of-year seasonality was notably muted as customers took minimal downtime around the holidays. This was particularly encouraging following the steep decline in West Texas completion activity we experienced over the summer. It now appears that most operators have adjusted their activity levels to align with a $50 to $60 WTI strip and are comfortable maintaining operations at these levels. The quarter also marked the highest utilization we've seen to date on the Dune Express, as Delaware Basin customers increasingly recognize the efficiency and reliability benefits of this system brings to their logistic supply chains. We view this as a strong indicator of the system's performance heading into 2026. In November, we announced the order of 240 megawatts of power generation equipment, accelerating our strategic evolution into a leading provider of behind-the-meter, long-term power solutions across a broad range of domestic industries. We see the evolving power market over the next decade as a truly generational opportunity, and we're moving aggressively to capitalize on it. After years of relatively flat U.S. electricity consumption, the grid is now confronting surging demand, which hit record levels in 2025 and is projected to grow by as much as 25% by 2030, driven by the explosive expansion of data centers and the resurgence in domestic manufacturing. Utilities are struggling to keep pace amidst infrastructure constraints and reliability challenges, where rising residential electricity prices up 7.4% in 2025 alone are creating political and economic pressure for more affordable, dependable alternatives. This dynamic is pushing developers to secure dedicated behind-the-meter power assets to de-risk their projects and meet timelines. For many of these companies, grid constraints represent a new and urgent challenge, compressing decision-making windows dramatically. Since the summer of 2024, Atlas has been positioned in itself as the go-to solution in this space. The Mosier acquisition, completed this time last year, provided a cash flow platform and critical engineering expertise that complements our strength in large-scale project execution. Over the past nine months, we've been actively transitioning the business from a traditional short-term generator rental model to a powers of service approach, selling electrons under longer-term arrangements. This shift has involved upgrading communication systems, refining our sales process, and focusing our commercial efforts towards customers seeking dense, long-term deployments. We're encouraged by the progress. We've reached a tipping point in this transformation. Earlier this year, we successfully deployed our first microgrid with a Permian EMP customer, which has since been upsized. In the first quarter of 2026 alone, we anticipate deploying at least 30 megawatts under long-term microgrid multibation contracts with ENP and midstream customers. Based on our current pipeline, we are targeting more than 50% of our existing fleet under long-term contracts by year end. January also marked the initial deployment of our patented hybrid battery solution, which integrates with generators as a grid-forming system, delivering meaningful improvements in cost and maintenance efficiency. The commercial potential for this technology extends far beyond the oil field. While these advancements in our existing power business are promising, the larger behind-the-meter project represents a true-step change opportunity for Atlas. We have active commercial negotiations underway and expect to provide greater visibility on equipment placement and the resulting economic impact to Atlas in the near term. Our pipeline features a broad range of behind-the-meter power projects across multiple industries, including energy, data centers, manufacturing, and others, with contract terms typically spanning 5 to 15 years, creating durable, long-term cash flows. We have particular strength and see especially compelling risk-adjusted returns in projects in the 50 to 500 megawatt range, where our modular platform enables efficient execution and high-distance deployments. At the same time, our differentiated track record with large CapEx infrastructure projects, such as our high-capacity plants and the DUNE Express conveyor system, combined with our scalable design and growing expertise, advantage us for the execution of even larger-scale opportunities as customer demand intensifies. The opportunity set continues to expand rapidly, with several prospects advancing from initial discussions to formal proposals and active negotiations. We are targeting more than 500 megawatts deployed across our fleet in 2027 with the potential for substantial additional growth beyond that as we secure larger scale projects and build on our initial orders. The ordered equipment is slated for delivery starting in the second half of 2026 with energization targeted to begin in Q1 2027. Each of these projects has the potential to meaningfully enhance Atlas' cash flow profile, and I am very excited to share more details with you as we close transactions. So stay tuned for the updates. I will now turn the call over to our CFO, Blake McCarthy, for our financials in more

Thanks, John. The underlying performance in our sand and logistics business improved in the fourth quarter, despite a continued challenging pricing environment. Plant operating expense per ton declined sequentially to $12.28, despite elevated costs in October related to the operational challenges in Q3 and higher maintenance spending during December. Our cost of production, although improved, remained elevated at our flagship Kermit Complex due to current limitations on our dredge fees. This is expected to be alleviated with the deployment of our two new Twinkle Dredges, which are scheduled for commissioning in the second quarter. The market backdrop for West Texas sand and logistics remains challenging, with current pricing at the industry's marginal cost of production. Premium completion activity is expected to be down year over year, although it appears to have stabilized the Q4 levels for now. Despite the challenging market environment, Atlas's commercial team has positioned us well to grow volumes in 2026. Leading on our cost-advantaged minds and logistics network, we were able to increase our share of current customers' sand procurement spend, while also adding some key new customers. relationships we expect to grow in scale over the course of 2026 and beyond. The current oil macro environment remains quite opaque, so we don't have significant visibility into all of our customers' full-year plans, but our Q1 schedule is very busy. The sales volume is expected to be up approximately 10% sequentially and further growth expected in the second quarter. The winter storm at the end of January impacted everyone's operations in the Permian, and we lost approximately four days of production and deliveries. This temporary shutdown is expected to negatively impact Q1 EBITDA by approximately 6 million. However, I'm proud to say Atlas was the last sand provider delivering in the Delaware before we had to shut down due to ice. The fact that it was made possible by the Dune Express, removing so much road mileage and the related risks. Speaking of the Dune Express, it continues to run extremely well. January 12th marked the one-year anniversary of its first commercial delivery, And thanks to our partners, I'm proud to announce that we have eliminated more than 21 million miles of truck traffic in the Delaware Basin. We are very proud of the fact that the Dune Express is materially improving the quality of life and safety for families and the broader community in the region. The Dune Express achieved record shipments in the fourth quarter of approximately 2.1 million tons, including a monthly shipment record in November of 760,000 tons. For the first quarter, we expect new customer wins and continued spot volumes to drive improvements in Dune Express volumes, and believe we are positioned to deliver an worth of 10 million tons via the Dune Express this year. We are grateful to our customers for partnering with us to make the Permian Basin a safer place to live and work. All that said, the obvious question is, if the Dune Express is working so well, why were Q4 service margins so weak? While Q4 numbers were burdened by large load bonuses to ensure driver availability through the holidays. The real answer to that question is simply pricing. Logistics pricing in the Permian has fallen to completely unsustainable levels, well below those seen during COVID. To compete with the Dune Express, we have seen increasingly irrational behavior from some of our logistics competitors, which we believe sets both them and their customers up for eventual problems and disruptions. We believe several companies are currently delivering standard prices where they are effectively subsidizing their customers. Thus, the margin differential provided by the Dune Express is there, it's just partially insulating us from historically bad pricing. Encouragingly, we are seeing signs of this market beginning to break the other way. Third-party trucking rates are beginning to see upward momentum, echoing what we're seeing in the broader over-the-road market. That is typically the first sign that trucking companies are tired of subsidizing their customers, and as a result, margins have to come up. In November, Atlas introduced our first last-mile storage pile system to the market, while other pile systems in the market essentially used mining equipment that has been reapplied for the oil field, our system is built for purpose. Today, we have six systems in place to support our wet sand operations with testing underway for deploying the system in dry sand operations. These systems are key to continuing our further enabling of our customers' continuous pumping initiatives, which are driving record sand consumption per completion crew. While the market for sand logistics in 2026 looks like it will remain challenging, we are looking to take advantage of the weaker market conditions to cement Alice's position as the provider of choice. The pricing pendulum in our industry has swung too far for too long, and the pricing rubber band is certainly tight. We're hearing more anecdotes of competitors struggling to fill customer obligations, and I'll echo the comments from the large cap oil field services calls when I say that it's only going to take a very small increase in completion's activity for pricing to move. This RFP season, we saw market share shift to the higher quality suppliers, with fewer volumes being spread amongst the lower quality mines. The supply and demand for sand in the Permian is much tighter than the market realizes, especially for dry sand. On our last conference call, we set a cost savings target of $20 million in annualized savings. As it stands today, we have executed upon that target through a combination of the elimination of third-party last-mile equipment, reductions in rental equipment, headcount optimization, and procurement savings. Despite the early success of these efforts, we will continue to push for further cost optimization as we look to lower the fixed cost structure of our business across the organization. Moving to our financials. As John touched on earlier, Atlas recorded full-year 2025 revenue of $1.1 billion. Total company adjusted EBITDA was $221.7 million, or 20% of revenue. Deconstructing full-year revenues, profit sales totaled $478 million on volumes of 21.6 million tons, while logistics and power contributed 558.8 million and 58.5 million, respectively. Fourth quarter 2025 revenue of 249.4 million broke down to the follow. Profit sales totaled 105.2 million, logistics contributed 126.1 million, and power rentals added 18.1 million. Total profit sales volume was slightly up sequentially to 5.3 million tons, while a logistics business delivered approximately 4.9 million tons. Our average sales price for the fourth quarter was approximately $19.85 per ton. For the first quarter, we expect volumes to be up approximately 10% sequentially, with the average sales price of sand to be approximately $18 per ton. The few forecasts of sales, excluding DD&A, were $187.3 million, consisting of $60.6 million in plant operating costs, $115.2 million in service costs, $7 million in rental costs, and $4.5 million in royalties. For the fourth quarter, our per-ton plant operating costs were approximately $12.28, including royalties, down sequentially from the third quarter, but still elevated versus our normalized levels. Higher volumes and a reduction in extraneous costs of the plants for Q3 levels drove the lower plant operating costs. For the first quarter, we expect our OPEX per ton to be approximately in line with the levels in the fourth quarter, reflecting the impact of the serial weather in January. Over the course of 2026, we expect to see improvements in our realized variable costs as the new dredges are commissioned at our current facility. Cash SG&A for the quarter was $22.6 million. SG&A, excluding litigation expenses, is expected to decline in the first quarter due to our previously announced cost-cutting initiatives. adjusted free cash flow which we define as adjusted evidot less maintenance capex was 22.9 million or nine percent of revenue growth capex equated to 5.1 million the majority of which was tied to our power segment and maintenance capex during the quarter was 14.4 million the elevated maintenance capex spend was primarily tied to preparations related to the dredging and wet plant operations at kermit ahead of the twinkle dredge deliveries we expect expect cash capital spending in 2026 to be approximately $55 million, down significantly year-over-year and heavily weighted to the first half. Maintenance capex of approximately $45 million is planned, with approximately $10 million dedicated to growth, evenly split between Santa Logistics and Power. Additionally, we expect to make progress payments on the 240 megawatts of power assets we have on order as they begin to be delivered over the course of the second half of the year. These payments will be financed from our recently announced lease facility with Eldridge, and are expected to total approximately $190 million over the course of the second half of the year. Net interest expense is expected to be approximately $16.5 million per quarter in the first and second quarters, rising to approximately $20.5 million in the third quarter and $22 million in the fourth quarter. As John also touched on in his remarks, our plants have begun the year quite busy. With WTI prices hovering around $60, oil prices will dictate if we continue to keep this pace up. We have a clear line of sight on strong volumes for the first half of this year, but many of our customers are taking a wait-and-see approach with respect to their second-half completion schedules. Our recent market share gains are a testament to Atlas's efforts to position ourselves as the reliable partner of choice to the best operators in the Permian Basin. For the first quarter, while volumes are expected to be up sequentially, the expected decline in sales price per ton combined with the lost days of revenue due to the winter storm will be a headwind of margins. Additionally, our logistics business was burdened by load bonuses to ensure driver availability around the turn of the calendar, which will mute logistics margins improvement until later in the quarter. However, we are seeing a return to more normal cost structure as the quarter progresses, which combined with a growing delivery schedule will yield an improved margin structure through the quarter. Additionally, the power business is expected to generate a greater contribution sequentially. Thus, we expect EBITDA to be approximately flat with Q4 levels, with the company exiting the quarter at a higher run rate in March versus January. I will now hand the call over to our Executive Chairman, Bud Grigam, for some closing remarks before we turn the call over for some Q&A.

Thanks, Blake. While we're navigating another cyclical trough in oil prices, the future for Atlas has never been brighter. Just as we were ideally positioned for the post-COVID premium recovery, which substantially expanded our cash flows, We're primed for the inevitable rebound in oil and gas activity today. But in addition, as I stated on our last call, we're going hybrid. Today, Atlas is laying the groundwork for transformative long-term growth through behind-the-meter power contracts. These 5- to 15-year agreements are expected to deliver robust revenue visibility paired with predictable costs, including fixed and stable expenses for SG&A, maintenance and interest, complementing our powerful but more volatile oil and gas revenue streams. Our proven expertise in large-scale infrastructure, amplified by the Moser acquisition, uniquely equips us to power the surge in AI, robotics, and manufacturing. We see these initial permanent power projects as a strategic springboard drawing in more customers and building a portfolio of assets that generate steady, recurring cash flows. As discussed by John, demand for behind-the-meter power is accelerating rapidly, fueled by rising costs and potential grid shortfalls that are pushing commercial, industrial, and data center users towards swift commitments for bridge and permanent solutions. We're witnessing a seismic shift in power sourcing. To borrow from our partners at Bloom Energy, on-site power has evolved from a last resort to a business necessity. U.S. power demand is growing at its fastest rate in decades. Let me emphasize, the Atlas investment story is more exciting than ever. Chronic underinvestment in exploration spending, coupled with shale's maturation and steep decline rates, sets the stage for what I believe will be a prolonged upcycle. While most U.S. shale basins struggle with inventory depletion, the Permian, where Atlas leads in profit production and logistics, will be key to meeting rising oil demand. Even at today's cyclical lows in sand and logistics pricing, our low-cost model shines through, thanks to the Dune Express and efficient mining operations. When activity rebounds, and it's a question of when, not if, we anticipate stronger utilization, pricing, and margins, sparking a sharp profitability upturn. By investing ahead of this oil upcycle, while we are also launching our high-potential power business, Atlas offers investors dual catalysts for substantial growth. I'm deeply grateful to our exceptional team, the true innovators fueling our advancements. Their dedication has me more optimistic than ever about Atlas's future. Thank you for joining our fourth quarter and year-end conference call. I'll now hand it over to the operator for Q&A.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star 1 to register a question at this time. Our first question is coming from Jim Mullison of Raymond James. Please go ahead.

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

Yeah, great question, Jim. Thanks for asking. Yeah, we do have strong visibility into the customers that are expected to take, you know, a substantial majority of this equipment package, which is on track for deliveries they began in late 2026. These are high-quality, credit-worthy counterparties that are across diversified markets and have indicated meaningful follow-on requirements beyond their initial commitment, providing for clear pathways for additional equipment orders and sustained growth into the future. You know, our strategies still remain solely focused on behind-the-meter power solutions. We're not pursuing grid interconnected or utility-scale opportunities. Instead, we are delivering reliable on-site power directly to customers facing grid constraints. You know, in many cases, these engagements begin with bridge power to address immediate needs, which generates significant near-term cash flow and accelerates our path to full development. You know, these bridge arrangements quickly transition into long-term behind-the-meter agreements that we primarily are working on as customers recognize a prolonged grid timelines and value of our integrated approach. So, you know, yes, the answer to that is yes, we do have clear line of sight on who those customers are and, you know, expect to be, you know, reporting on that here shortly.

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

Yeah, go ahead. I'm a little bit blank. Yeah, and then we have Tim Mondrak, our leader of the power business, who can obviously talk more intelligently about it as well. But it's a really good question, Jim. Like, you know, there's obviously the equipment, and that's what I think most people in the market have a much clearer line of sight of the K and cost X. And, you know, therefore you rent for Y and you have return. But when you get into these behind-the-meter solutions, right, depending on the function, like, the function of the facility, there's different requirements for the balance of plant, different accoutrement equipment that you need. And so that can change that, you know, dollar per megawatt provided, both on the front end and then, therefore, what you have to charge. you know our strategy has been like let's get in really early with some of these customers that we know they're making big investments in facilities and you know they're facing you know they're there they've been the grid has indicated them like hey you're you're not getting on for what you require really get to understand what they're trying to accomplish within their within their their activities and you know do a lot of front end front end engineering to really meet their needs. And that can have a pretty broad range in terms of, you know, what, like, one, what our facility costs, and two, what we have to charge them. Because we're always going to be targeting, you know, a strong, unlevered return on our capital deployed. And obviously, when it comes to return on equity, with the leverage you use on these, it gets pretty attractive. So, you know, thinking about, like, these first ones, there's going to be a pretty broad range. And that's why we're excited to share the economics on things. And we'll

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

than the time management. But it also makes those facilities much stickier. Exactly. Because it's

fit for purpose. Yeah. And I think, you know, just to kind of close out, I think, you know, our strategy is rich to permanent. And when we look at the thesis that really drives that, you know, know, we view power as a structural need. And so, you know, depending on the utility region and where, you know, folks are building out their facilities, those delays can be, you know, 2028 all the way up to, I think we've heard 2034 from some people. And so, you know, when a customer looks at what their power need is, you know, as they start their facilities, it can be substantially less than their growth intentions. And so the model that we have to execute on that is to provide mobile power generation into a permanent facility that meets that long-term need and gets the customer to a place where they don't need to worry about a utility timeline and they can worry about operating their business. Makes perfect sense, guys. Appreciate it,

color. We'll see you next week. Thanks, Jeff. Thank you. The next question is coming from Derek Podhazer of Piper Sandler. Please go ahead. Hey, good morning, guys. Maybe we want to keep

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

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

Yeah, Derek, kudos to you. I'm really glad you asked this question. So, you know, I think it's a great question because I know people want to have some type of metric to plug in their estimates. John's comment on IRR is probably the best way to backdoor to that. So, for these projects, you know, we're targeting on leverage, which we find very attractive considering the contractive nature of these cash flows. So, when you layer on any type of leverage on top of those cash flows, the returns on equity, as I mentioned, get very attractive. um that's like you know from a like long-term perspective uh you know i think that that you know people talk about that like you know three hundred dollars per megawatt that's probably a good proxy for just equipment alone um but it's a little too simple when it comes to like you're actually doing these bespoke power facilities uh so i think that you know using that irr and you know hey we you know disclose kind of the one of our facilities been disclosed i think that's a good way to kind of backdoor into getting there. You should be able to use that. You get a decent proxy for cash flows that we expect off these projects.

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

Yeah, I mean, thanks, Eric. I'll take that question if anybody, but Tim, if you want to chime in on this. I mean, our relationships with the key OEMs and our differentiated track record of execution on large-scale infrastructure project continue to be major advantages, you know, which enabled us to initially secure the 240 megawatts of the, you know, 4 megawatt recidivating units that are going to be delivered for later in 2026, and also enable us to maintain a solid line of sight to additional equipment for high-quality opportunities in, you know, more than 2 gigawatt pipeline that we're talking about. You know, these relationships are built on trust, scale, and early positioning, you know, have given us access to redirected capacity from delayed projects elsewhere in the industry. So, you know, lead times for additional 4-megawatt re-sips are now extended into late 2027, which reflects the strong industry-wide demand for behind-the-meter generation equipment. You know, that said, you know, our recent $375 million lease facility provides flexible, non-diluted support tailored to our needs, allowing milestone payments during the activity conversion into term finance upon delivery. You know, that is, this has been instrumental in funding our initial 240 megawatt commitment and positions as well for near-term deployments as we move towards our target of 500 megawatts by 2027. So, you know, with the majority of that under long-term contract, you know, as far as 2020, beyond 2027, particularly as we pursue larger, denser, you know, behind-the-meter opportunities across, you know, diversified end markets. You know, we anticipate needing additional financing and support for their equipment orders. We've actively evaluated options that will learn our discipline capital approach, leveraging our, you know, a proven track record with, you know, financing strong cash flow generation from bridge to permanent transitions. You know, I think that as far as additional equipment packages, I mean, yeah, right now the package that we've acquired is these four megawatt resips. I mean, there could be other potential opportunities out there, and I'll let Tim, you know, comment more on that.

Yeah, so, Derek, I think there's, you know, there's equipment available. Yeah, I think if you look at global capacity, a lot of it has been backlogged. I think there's been a lot of announcements, you know, publicly to kind of back into what may be left. So, we really see two pools of equipment that come available. The first pool is where you have to be in the market. You have to be talking to people, and orders cancel or portions of orders cancel or get delayed, and so there's equipment that comes to market. And I think there's a second where OEMs are doing the same thing that we're doing, where they're outbuilding relationships with the groups that are putting these in place. And I think, as John alluded to, we're in a strong position to take advantage of those relationships. You know, you look at the folks that are on this team and the relationships that they bring, and then you look at the reputation of Atlas and, you know, being able to manage and develop these substantial projects. And I think that gives confidence to OEMs that when they place assets with Atlas, you know, it's going to be a good long-term relationship, and it's going to give all of us a good name. So, I think that's what we're leaning into, and we've got line of sight into the equipment that we would use to take us to that 500 megawatts.

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

Thank you. Our next question is coming from Stephen Jangaro of Stiefel. Please go ahead.

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

Yeah, I'll lead off on that and then, you know, again, defer to Tim, who's, again, much more well-spoken on this subject. But when you think about the history of Atlas, right, I mean, we've got a lot of experience in building big, complicated facilities, right? So, you know, we constructed the Kermit and the Monaghan's facilities from where there's just a bunch of dirt out there in West Texas to some of the, you know, more sophisticated sand manufacturing facilities in the industry. And then, you know, you've got to remember that we're the guys that thought it was a good idea to build a 42-mile conveyor belt in the middle of the desert, which I think a lot of people, you know, rolled their eyes at that concept. And then, lo and behold, here we are a year later, and that's moving. So I think that, you know, when we have these initial conversations, people are like, wow, these guys are good at building big, complicated infrastructure projects from the ground up. And then you combine that with the electrical expertise that we brought in-house with the Moser acquisition. And then, you know, we haven't been sitting on our hands since we did that deal. We've been bringing in quite a bit of talent, some really, really strong people in terms of adding to that roster. And, you know, when you combine those two things, it becomes really powerful. And then as people, you know, learn about Atlas, and this thing is that this is a different customer set than we've ever dealt with, right? This isn't just, you know, the 25 E&Ps that we all know and love. it is you know this is across the broader economy and so there's a lot of education about who is atlas that we have to do with them and once they start to see like who we are and what we've done they get a lot of comfort around that and then you you know you bring in some of our electrical experts and you know they start to wow them with their knowledge those those commercial discussions progress pretty quickly yes i think blake you know blake touched on on a

couple of things there i think you know first and foremost when we acquired mosher you know we got a team with you know a 50-year operating history and so you know that was a great place to start from from a talent perspective we added to that team uh you know with some outside talent that that have helped us substantially in the in the cni the larger megawatt deployments And then from a long-term perspective, we've built an operating team with, you know, 20-plus years of experience in operating large engine systems. And so, you know, we really think combining all of those things, we're able to deliver, you know, at the same level of execution that we've delivered in the same logistics space and, you know, brought that over to the power space.

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

Yeah, so I think, you know, that's a big question. And I think that's a big question because when you look at the utility network in the United States, it is incredibly complicated, right? The rules change sometimes as you cross the street. And so when we're talking to folks about their projects, every one of them has a different story with similar themes. And the similar theme is that utilities aren't going to get there. And so they need to look at what they call a bridge solution. But I think when you really understand the challenges that the utilities face and, you know, you see projects from the utilities push in different districts, you understand that that's going to affect, you know, really the entire industry. And so, what we're hearing from utilities, and I think I mentioned this earlier, it's anywhere from 2028 to 2034 for a large load to interconnect, and that's kind of across the U.S. And there's some places where you can pull data points that say it's longer, it's shorter. But if you take that perspective, what we're really talking about is infrastructure. And so, you can bridge that, and I think we've got a good solution to bridge that. We've got, you know, 200 megawatts plus of bridge equipment in what we acquired from Mosier. But, again, our thesis is this is a long-term infrastructure play, and so that bridge system has some disadvantages, and the way you solve some of those disadvantages, whether they're fuel efficiency, footprint, whatever, is you install a long-term system that is designed to sit in place and operate. We talk about 5- to 10-year contracts, 15-year contracts, but really these are 30-year facilities if they need to be. And so we think that structural shift in this market is going to benefit those that take ownership of that and install their own systems today. And, you know, we think the broader grid really benefits from private capital installing broad infrastructure really across the entire United States.

Yeah, I mean, Stephen, it's such a fluid space, too. Like, I feel like every morning there's four or five headlines around that interconnect to getting longer and pushing to the right. You know, and I think we're all pretty big believers in that there's going to be more and more pressure on the utilities to, you know, probably, you know, stiff arm some of these interconnects too just because we think that affordability is going to become a bigger and bigger buzzword in the political landscape. And it's just – it's probably in everybody's best interest for the private sector to solve this problem as opposed to, you know, leaning on the public utilities to get it done.

Yeah, even if they can get power from the grid, they can't get all of their power from the grid. So, I mean, like Tim said, you know, we're not only talking to end users, we're talking to the providers. And, you know, this is what we're getting from the providers is that, you know, we may be able to provide some of the power, but we're not going to be able to provide all the power. And they're also being told that in order for us to provide you power, you need to show us that you can provide yourself, you know, supply yourself with a certain amount of power to get that additional power from the grid.

So, obviously, a lot going on, a lot changing here, but that's kind of what we need to know. And I think the one last point I'll make on that is, you know, we're out and we're talking to people every day and they're looking at big projects. And the two things that are most consistent are, one, the utility has moved the goal line on when they're actually going to show up, and two, that they're not going to meet the full request for power.

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

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

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

Yeah, I mean, it's a good question, and sorry for being opaque, but, you know, right now, and I appreciate it as part of our customers, too, is that the outlook is a little opaque. You know, I think that if you rewind three months ago, it seemed like every macro note you were reading was, you know, pointing to oil being, you know, $45 to $50 at this point in the year, and here we are sitting at, you know, 66 WTI. uh granted there's a lot of geopolitical risk premium built into that but um i don't think any of us think we live in a world where there's not going to be geopolitical risk um so you know our commercial team did a great job of going out there and you know we told them hey go go get the volumes and they they they went out there and they did that and it sets us up for a very strong first half that being said you know there's a lot of our customers were you know They're like, hey, like, we've got our schedule for the first six months of the year, and, you know, we'd like to leave a little bit of optionality on what our plans, our schedule looks like in the second half of the year. You know, so I think a lot of that's dependent on the commodity tape. Right now, from where we sit, you know, our expectations are for our overall volumes to be up year over year. um that you know would imply and you know that gives us i i appreciate that that's a pretty big window in terms of second half volumes because uh yeah we we do expect to have um pretty significant volumes in the first half of the year um that being said like you know pricing environment remains pretty challenging so um you know that's obviously a headwind um but we're so that that has us you know focused on things we can control which is our production at the plants um we're pretty excited about the dredge commissionings that we've got coming up, you know, later this quarter into Q2. That's going to drive some significant improvements in our Kermit facility. And, you know, I think that, you know, really our objective on the stand-up logistics side is to just really cement ourselves as the leader of the Permian and position ourselves so that when the cycle does turn, hey, we're that sticky supplier quality that, you know, hey, nobody wants us onto their well side. That's fair. On the logistics side, you know,

highlighted the trucking challenges, but pointed out some upward momentum in trucking rates. Just any color on the margin outlook in logistics for this year after a pretty slow start on the margin front with the Gene Express?

Yeah, that's a good question. You know, and I tried to give a little, you know, transparency on that because, you know, I think it's a question we get a lot. You know, we're positioned to move to improve off the low base we ended 2025 at and started 2026 with. Yeah, so during both late Q4 and early Q1, our logistics business was burdened by pretty heavy load bonuses that we offered to third-party carriers to ensure that we have the drivers available to meet customer needs during the holiday season and to ensure delivery when, quite frankly, the weather's pretty miserable, which it certainly was in January. Additionally, as we mentioned in the prepared remarks, you know, like I said, our sales team, they were really feeling their oats during the contracting season. So, they've done a great job securing pretty attractive work in what is a really tough market. And that includes a good amount of work that's going to drive incremental Dune Express volumes, which is the biggest driver of creating more margin differential in a weak pricing environment. You know, so from a numbers perspective, Doug, you know, I think logistics margins in Q1 are probably going to look pretty similar to Q4. With December of last year and January of this year representing low points, you know, and then Q2 is currently – like, I'm, you know, loose projections right now, but I'm taking a nice step up into the double digits. You know, maybe not quite mid-teens, but a nice step up and a huge relative gap to where the rest of the market is.

Got it. Thank you.

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

Hey, guys. Thanks for having me. First question is, can you speak to the actual number or the volume of power increase coming from the EMP operators for microgrids, and then have you tried or will you try to tie SAN volumes to contracts for that power?

Hi, John. Yeah, so the volume of increase on microgrids coming from EMP, I think what we're seeing is a little bit basin dependent, but in, you know, probably our – two of our three most active basins, I would say about half of the new requests coming in for well site generators are in some type of microgrid system. And, you know, that's typically tying, you know, anywhere, the production from anywhere from two to maybe four pads together. But we expect that, you know, as the year progresses, we will allocate more and more units to those types of systems.

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

All right. That's all I had.

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

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

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

Yeah, I mean, like, there's always a ramp in customer activity. You know, January always starts a bit slow, and, you know, we have a steady ramp through the course of the quarter. And then that winter storm is out there for everybody. And so not fully reflected in those volumes. You know, our expectation is for Q2 volumes to be –

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

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

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

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

Thank you. The next question is coming from Michael Ciela of Stevens. Please go ahead.

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

Yeah, so, you know, earlier this year or late last year, we launched a system that was designed for, you know, really well site, you know, increasing the amount of sand that's delivered to the well site, timeliness of that, that's going to increase the efficiencies to enable operators to pump downfall, more sand. You know, we've been seeing, and we kicked this off on the wet sand side. You know, we have all of those systems deployed right now, and we do have a number of our customers that are using them that want more. You know, as far as the dry sand goes, there's still going to be some work that we're going to have to do on that front. And, you know, as far as timing goes, it's way to be seen, but there's some testing that we're working on, and we'll be able to comment more about that here later. But we do, what we are seeing, the results of that are promising. And, you know, I think some of the things you're going to see going forward is continuous pumping. A lot of our customers are asking it or requiring it because, and you're starting to see some significant results from, you know, our delivery of sand to the well site, You know, that enables things through things like the Dune Express and, you know, our wet sand offerings. And then this is just another, you know, step in that direction of, you know, helping our customers with their needs and providing them with solutions that work that enable them to accomplish their goals.

Yeah, and then the continuous pumping thing is such an important trend in our space. You know, those are the completion crews we're providing sand to that are on continuous pumping operations. It's like the amount of sand they pump monthly is, you know, multiples of what you'd see from a traditional zipper crew. But the big constraint, right, is it becomes, you know, well-site footprint. You know, things like boxes and silos, you know, they are naturally constraints, right? And so, the pile system, like going to piles, you know, obviously allows you to put more sand in one spot. But what we think our system does is it enables to do piles, but to do it very efficiently, and we clean sand and combine that with the prop flow technology. It is a key enabler of very, very efficient continuous pumping operations, and it's something that just continues to push that tailwind of the sand intensity of each individual completion crew, which we think long-term is a, you know, when people stop planning budgets around $50 oil and maybe get a little bit more comfortable around something like $65 plus, see a little bit more incremental activity, we think the market tightens up pretty darn quick.

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

yeah so the uh the hybrid power system is uh it's essentially combines battery technology that that we've developed in-house on the patents on and that was um you know that was funded through a dot grant that the legacy motor business obtained in 2018 and what that system essentially does is hybridizes with our existing generators and it it controls the operation of those generators so that they they run at essentially a peak load and the battery then distributes power into that system shuts the generator off and so what it does uh is it it lowers the runtime on those generators which extends our maintenance cycles from, you know, essentially once a month service to, you know, once every 45 days as much as once every 60 days. It lowers the fuel cost for our operators, and it decreases the risk of a shutdown event on the customer's location, which, you know, those are not good for downhole pumps, which is primarily what we do in that business. And so, you know, we're pretty excited about the potential to deploy that at scale in the legacy Mosher business. You know, we think it's differentiated. We've proven it on multiple well sites. But I think when you apply that to, you know, the broader industry outside of oil and gas, It's got uses really across every industry where folks want clean, reliable power, and that battery system provides clean, reliable power that can integrate with whatever systems they're using, whether they're prime power systems or backup systems.

Thank you, guys. Thank you.

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

Good morning, John and team. Thank you for taking my question. I wanted to see if you could provide some color on the expected cost savings over the second half of the year once the twinkle dredges come online.

Sorry, Jeff. He wants to go to the cost savings that we're going to expect in the second half of the year once the dredges come on. Oh, yeah. I'll cover that.

Yeah. So, you know, we haven't had a steady dredge feed at our primary permit facility for going on over a year now. And that facility is really designed to have a clean, steady dredge feed. And so what that's created is just different bottlenecks in the process that has elevated the – I mean, when that facility is cooking, it is our lowest cost – it's the lowest cost facility in the entire Birmingham Basin. So as those two dredges come on, and these are – these twinkle dredges, we've had a twinkle dredge in the fleet. It's the most consistent producer we've got, so we're very confident, and we think they're the F-150 of dredges. Getting those online will significantly enhance the quality of our dredge feed, which has just really positive knock-on effects to the entire process. It improves wet shed operations. It reduces stress on the dryers. It just makes the whole facility run more efficiently. If you think about that, our overall variable costs probably have been elevated by about a buck across the complex because of those dredge feed issues. And so, that's over the course of the first half of the year. That will flow all. And so, again, it's a pretty big circular reference, though, in terms of the overall OPEX per ton, just because so much of that is based on volume throughput. And that's dependent on customer activity in the second half. But if you were to just extrapolate first half activity in the second half, you know, you'd see a pretty significant improvement as we work through the year.

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

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

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

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