Good morning. Welcome to the Archrock First Quarter 2020 Conference Call. Your host for today's call is Megan Repine, Vice President of Investor Relations at Archrock. I will now turn the call over to Ms. Repine. You may begin.

Thank you, Christine. Hello, everyone and thanks for joining us on today's call. With me today are Brad Childers, President and Chief Executive Officer of Archrock; and Doug Aron, Chief Financial Officer of Archrock. Yesterday Archrock released its financial and operating results for the first quarter of 2020. If you have not received a copy, you can find the information on the company's website at www.archrock.com. During the call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, based on our current beliefs and expectations as well as assumptions made by and information currently available to Archrock's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can have no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. In addition, our discussion today will reference certain non-GAAP financial measures, including adjusted EBITDA, gross margin, gross margin percentage, and cash available for dividend. For reconciliations of these non-GAAP financial measures to our GAAP financial results, please see yesterday's press release and our Form 8-K furnished to the SEC. I'll now turn the call over to Brad to discuss Archrock's first quarter results and provide an update of our business.

Thank you, Megan, and good morning. I appreciate everyone joining the call today. A lot has changed since our last quarterly earnings call. In response to the interest in the COVID-19 pandemic and the resulting drop in commodity demand and prices, Archrock moved swiftly and decisively over the last several weeks to adjust our strategy, spending, and action plan for 2020. Before addressing the current market and the company's plan, I don't want to miss the opportunity to discuss our solid first quarter performance, which highlights several of the significant operational strengths we will leverage in this market. We had outstanding execution in the quarter driven by our high-quality asset and customer base and our excellent customer service and dedicated employees. Among the accomplishments in the quarter, we grew adjusted EBITDA by 24% compared to the prior year period. We continue to transform and standardize the fleet, with additional non-core asset sales totaling 35,000 horsepower. We maximized the performance in our contract operations segment delivering a 19% year-over-year increase in gross margin. We maintained excellent financial flexibility, including substantial liquidity, and reduced our leverage to 4.0 times. And as always, we've prioritized the safety and well-being of our employees, customers, and communities. We took appropriate steps early in the COVID-19 pandemic to minimize risks of exposure and community spread of the virus. I'm pleased to report that we have maintained full capabilities and our operations continued without interruption. On our fourth quarter conference call, I emphasized that in my time with Archrock, our fleet has never been younger and our competitive position has never been better. This is evidenced in the company's first quarter performance. And while the road ahead is much different than we expected coming into the year, I'm confident we're prepared for success in the face of these challenges. We entered 2020 expecting a slowdown in the annual natural gas production growth rate, with declines materializing in the second half of the year. Since then, the COVID-19 pandemic has driven severe demand destruction in a very short period of time, particularly for oil. Given the resulting price declines and widespread capital reductions by producers and midstreamers, we too are now planning for more significant declines in associated natural gas production for the balance of this year and into 2021. In the next few months, it's also likely that some producers will temporarily shut in uneconomic loans as storage constraints further hamper oil prices. On the natural gas demand side, the near-term outlook has also softened, driven primarily by a sharp decrease in COVID-19-related industrial demand. Even though demand will be at record highs from earlier in the year, the summer season should still benefit from solid levels of exports to Mexico and LNG demand, both of which are expected to be up year-over-year. In the longer term, we remain optimistic that as a low-cost and cleaner-burning fuel, natural gas will experience healthy growth in demand, and in turn, U.S. natural gas production will resume. We believe these supportive fundamentals will hold even in the event of a prolonged oil price challenge. The exact magnitude of the downturn as well as the shape of the recovery is unknown today. Just as we've done in the past, we'll manage through this environment by differentiating the performance that our more stable compression businesses can deliver, drawing on our leadership team's deep experience and keeping our employees engaged. As we do so, we'll remain focused on the following: Providing exceptional service to our customers, retaining our technical expertise, driving free cash flow generation, preserving long-term value for our shareholders, and maintaining our opportunity set for eventual recovery. With these guiding principles, we've taken the following actions to date, which translate into annualized cash savings of between $75 million and $85 million. We've further reduced our planned 2020 capital expenditures to between $140 million and $170 million. At the midpoint, that's a reduction of 60% compared to 2019 capital expenditures of $385 million. Of this, our growth capital is now anticipated to be between $70 million and $90 million. At the midpoint, this represents a reduction of $220 million compared to 2019 growth capital expenditures. About $49 million in growth CapEx was spent during the first quarter, and 90% of the units to be acquired in 2020 are already contracted with customers. We completed a business unit reorganization, as we saw an opportunity to streamline our organizational structure and better align our teams for maximum customer service and profitability. This included the rationalization of headcount at the executive and senior leadership levels. Now we are taking further steps to align our corporate cost structure with the current environment. This includes deep cuts to discretionary spending as well as compensation adjustments. The executive management team and the Board of Directors have voluntarily agreed to a reduction in base salaries and retainer fees, with retainer fees for the members of the Board reduced by 25%, my base salary by 25%, and the executive management team's base salaries being reduced by 10%. We're also implementing temporary decreases in employee base salaries of between 5% and 10%, with no expected change for employees below a targeted compensation threshold. For hourly employees, we're optimizing labor efficiency, including a significant reduction in overtime hours. We recently declared a dividend of $0.145 per share, with $0.58 annualized unchanged from last quarter and a 10% increase compared to the first quarter of 2019. Turning to our operations, in contract operations, first quarter results reflect our leading position in the U.S. compression industry. With our focus on large horsepower units deployed in midstream applications, our first quarter exit utilization was flat sequentially at 89%. And we drove an increase in contract operations' gross margin to 62% in the fourth quarter, up 300 basis points versus the first quarter of 2019. As we move through the year, absent a material rebound in commodity prices, we would expect to see top line pressures from both horsepower and pricing declines. However, we are working closely with our customers to develop solutions to mitigate equipment returns and long-term price reductions. In addition, a significant portion of our operating costs are variable. This enables rapid adjustments to changing market conditions while still meeting the needs of our customers. This puts us in a good position to hold and maintain margin at attractive levels. Moving on to our aftermarket services business, customers are still delaying maintenance activity on their equipment. And in some cases, they're using internal resources to perform work they have historically outsourced. That said, first quarter revenue and margin comparisons were favorable compared to the fourth quarter of 2019. As I've emphasized in the past, compression maintenance cannot be deferred indefinitely, and we expect an uptick in this business when the environment improves. Meanwhile, we remain focused on optimizing gross margins through this challenging period. Our capital allocation framework remains focused on balancing appropriate levels of investments, leverage, and return of capital to shareholders through commodity cycles. We invested significantly in our fleet over the past three years to meet the needs of our customers, participate in the significant infrastructure buildup required to support the 20%-plus growth in natural gas demand and production, and capture the attractive investment opportunities carried by the market. Our updated 2020 capital and adjusted EBITDA guidance continues to support free cash flow generation. And we're adjusting our capital allocation to reflect what we expect to be a meaningful reduction in investment required to meet our customers' compression needs and to adjust to a market with infrastructure that should be mostly sufficient to support natural gas production for the next few years. As a result, we've shifted our capital allocation priorities given today's environment as follows: First, we believe having a reliable and attractive dividend is important to our investors and the value of our company. We will continue to prioritize shareholder returns even during this downturn. And as we always do, we'll work with our Board each quarter to assess our forward views of future cash flows and the dividend. Our second priority is debt reduction. We will execute all available measures to reduce our debt and protect our strong financial position. Finally, as we de-emphasize growth through the downturn, we expect capital investment to be a distant third priority. I can assure you we remain operationally and financially prepared to resume improved growth from high-return investments once customer demand returns. Before turning the call over to Doug, I want to share why I'm so grateful to be entering this downturn from Archrock's unique position of strength. We provide much-needed services. Compression is a critical part of the midstream value chain, bringing natural gas from production to end markets. We typically enter into multi-year contracts for our compression services. These are fee-based with no direct commodity or volumetric exposure. We've worked diligently over the past several years to create a modern, diverse, and scalable fleet. We've aligned ourselves with great customers and will preserve these strong relationships during this challenging period. And we also have a solid liquidity position with no need for external financing and a business that we expect to manage to generate free cash flow. These factors combined with our production-related business model will help mitigate the impacts of this downturn. And finally, we've assembled an experienced management team. We know what it will take to navigate this downturn successfully. And as we've demonstrated in the past, we will emerge from this challenging time even stronger. With that, I'd like to turn the call over to Doug for a review of our first quarter performance and our updated 2020 guidance.

Thanks Brad and good morning. Let's look at the summary of first quarter results and then cover our updated guidance. First quarter revenues totaled $250 million, reflecting an increase of 6% compared to the prior year period. Adjusted EBITDA of $113 million was up 24% over the first quarter of 2019 and was driven by horsepower and pricing increases in our contract operations segment, as well as cost management across all segments. The first quarter results included $4 million in gains related to the sale of assets. We recorded a net loss for the first quarter of 2020 of $61 million, which included several one-time charges, the majority of which were non-cash impairments. Adjusting for these items, we reported significant year-over-year growth in net income. In the first quarter, we reduced the goodwill balance related to our acquisition of Elite Compression to zero. We recorded a goodwill impairment of $100 million in light of the significant deterioration in macroeconomic conditions caused by the COVID-19 pandemic. We booked a tax benefit on the entire non-recurring goodwill impairment charge of $23 million during the first quarter of 2020. Also in the first quarter, we conducted an extensive review of our fleet and identified compression units that were either not likely to go back to work or did not warrant additional investment to be put back in the field. From this review, we decided to retire 23,000 operating horsepower and recorded a $6 million long-lived asset impairment. Finally, we took a $2 million restructuring charge, primarily related to severance benefits. Turning to our business segments. In contract operations, revenue and gross margin dollars were relatively flat compared to the prior quarter and were up meaningfully on an annual basis. We had record revenue of $207 million, up 13% from the first quarter of 2019. This increase, as compared to the prior year, resulted from higher operating horsepower and pricing. We delivered gross margin in contract operations of $128 million, up from $108 million in the prior year, as we focused on aggressive cost management. First quarter gross margin percentage of 62% was up 300 basis points from the prior year quarter. In our aftermarket services segment, we reported first quarter 2020 revenue of $43 million, up 3% compared to the fourth quarter of 2019, but below the $54 million in the prior year first quarter. Gross margins continue to hold up well, considering revenue pressures. First quarter AMS gross margin of 18% was up from 15% in the fourth quarter of 2019 and flat year-over-year. SG&A was unchanged compared to the prior quarter at $31 million and was up from $29 million from the prior year period, the year-over-year increase primarily related to our ongoing technology investments. For the first quarter, growth capital expenditures totaled $49 million and will represent the highest quarter of investment for the year. Maintenance and other CapEx for the first quarter of 2020 was $23 million, equal to the fourth quarter of 2019. We expect lower levels of investment for the balance of the year. On April 1, we successfully repaid all $350 million of our senior notes due 2022 with our revolving credit facility. We maintained significant financial flexibility with liquidity totaling $410 million after taking into account the 2022 senior notes redemption. Our borrowing base is well collateralized and we continue to receive great support from our lenders. On our bond indentures, we got ahead of the multi-year wave of energy debt refinancings, which will now likely come at a much higher cost of capital. With the $1 billion in maturities we pushed out last year, our next maturity is now not until 2027. Our total debt of $1.8 billion was effectively unchanged compared to the fourth quarter. Our leverage ratio of 4.05 times was down from 4.4 times from the first quarter of 2019. As Brad mentioned, leverage continues to be a primary focus for Archrock and we expect to allocate 2020 free cash flow to absolute debt reduction this year. However, with anticipated declines in EBITDA, our leverage ratio is anticipated to expand modestly on a go-forward basis. While our 3.5 to 4 times leverage target remains a goal for the company, given our updated outlook, we no longer anticipate being able to achieve this by the end of 2020. We recently declared a first quarter dividend of $0.145 per share or $0.58 on an annualized basis, unchanged from the prior quarter and reflecting an increase of 10% over the prior year. Our dividend payout is supported by our internal cash generation, strong balance sheet, and robust dividend coverage. Cash available for the dividend for the first quarter of 2020 totaled $62 million, leading to strong first-quarter dividend coverage of 2.8 times. Our existing dividend still represents a compelling yield of 13% based on yesterday's closing price. We remain committed to returning cash to shareholders and to reducing our debt from available free cash flow.

I'll end with our updated 2020 guidance, which includes our best estimate, based on what we know today of the COVID-19 pandemic and the commodity price decline impacts. We now expect 2020 adjusted EBITDA in the range of $380 million to $420 million. Although down from our prior guidance of $415 million to $450 million, the updated range highlights the resiliency of our business. Based on our view of the market today, we are optimistic we can deliver adjusted EBITDA above the midpoint of this range and perhaps closer to the higher end, yet are cognizant of the possibility of rapidly changing market conditions that could impair our current view. In contract operations, we anticipate the largest impacts will occur, beginning in the second half of the year, as productions decline from budget cuts materialize. As Brad commented earlier, we are working to mitigate impacts with aggressive cost management. In AMS we've lowered our expectations for the year, as our customers have further delayed releasing their budgets for maintenance work. Turning to capital, on a full-year basis we now expect total capital expenditures of $140 million to $170 million. Of this, we expect growth CapEx to total between $70 million and $90 million, down 11% from the prior guidance midpoint. Deliveries of new equipment will largely wrap up by midyear, and we will have additional spending flexibility moving into 2021. We also anticipate maintenance capital savings as we redeploy fewer units to the field. Finally, as it relates to our multiyear technology project, this remains critical to our future success. That said, we are prioritizing 2020 work streams and plan to rationalize and defer some of those costs until 2021. Importantly, given our current operating outlook and reduced CapEx profile, we remain well positioned to generate free cash flow as we have done in prior downturns. And with that, operator, we'd now like to open up the line for questions.

Thank you. Our first question comes from TJ Schultz with RBC. Please go ahead with your question.

Great, Brad. Good morning. I think first, you mentioned working with customers to mitigate some of the returns and permanent price reductions. If you can just give a little color on what you've seen so far, on returns. And what are some options you have with customers to mitigate some of those returns. Thanks.

Sure. Thanks, TJ. Well, look, number one, you guys have heard us say this in the past. Compression compared to other parts of the upstream, in particular, has a lag time. What we typically see happening upstream, we get to see for a couple of quarters before it impacts us. And that gives us a little bit of time to work with our customers, on their production side. That said, it's still pretty early in this downturn for us. And so, the discussions with customers for us are only a quarter into it and are still in very early stages and very preliminary. It’s also the case that, I have the opportunity to share with you that we have a great customer base. The largest customers in the upstream and midstream spaces are those that we service, and that puts us in an enviable position to work with them to make sure that we have a partnership to help meet their needs. With the large horsepower and solutions that we've put in with our customers, these are very expensive to relocate, and they don't want to see the change. So the business can be very sticky, and we work with them long-term to keep the horsepower available for them when they don't need it immediately without removing it from site. Moving to standby becomes an option for some of those larger installations, and that's the tone and tenor of the discussion with our customers right now. Again, it's early in this cycle, so that's about as far as we've seen in the dialogue with our customers yet.

Okay. On the revised EBITDA guidance, I guess, two things there. If you can kind of frame, how you thought about utilization trending through the year into that guidance. And then, on some of the cost savings, if you could just break out that $75 million to $85 million, if that includes CapEx. And what's coming out of OpEx and SG&A? And how much of that is captured in the EBITDA guidance? Thanks.

Sure. Look, I'll take the market part of the question, and Doug will talk a little bit about our cost-savings initiatives. When we look at the market, number one, it's early going. None of us know, and we don't want to get over our skis and ascertain we know more than we do regarding the shape and duration of the downturn or the timing and shape of the recovery. But we are all looking at very similar estimates. We're staying close to our customers. What we see in the marketplace has oil production declining in 2020 and 2021 in the 10% to 13% range and gas production experiencing a decline around 5%, plus or minus, over the 2020 and 2021 timeframe. It's against those benchmarks and that forecast that we are basing our demand for compression, which is basically proportional, if you want to think about it that way. The good news is that when you consider a 10% decline in oil or a 5% plus or minus decline in natural gas, and then transposing that to the compression business, these are not the types of declines that other businesses will be experiencing in the energy space. So we feel really good about the fact that when we think about those production levels, our business is levered to production, and this puts us in a strong position to continue generating good earnings and strong free cash flow. Let me ask Doug to talk about cost savings.

Sure. We look at this in two ways, and I don't want to make this a full modeling discussion. We have our expectations for 2020, which I am considering on an annualized basis. I will cover the annualized aspect, and you can follow up with Megan for specifics on 2020. Generally, consider this as roughly 8/12 of the annualized figure. We anticipate approximately $21 million to $33 million in savings from contract compression in our OpEx business, around $10 million in SG&A savings, $18 million to $23 million in savings from our growth CapEx, about $19 million in maintenance savings, and nearly $5 million in other savings, totaling between $75 million to $85 million.

Perfect. Got it. Thank you very much.

Thank you.

Our next question comes from the line of Daniel Burke with Johnson Rice. Please proceed with your question.

Yeah, thanks. Good morning, guys.

Morning.

I apologize for sticking with a question that is somewhat grounded in the model, but I was curious. Doug, you mentioned that contract operations would experience the largest impact in the second half of the year. I assume that comment is focused on gross margin. However, I would like to know about the anticipated horsepower and releases. Do you expect Q2 to be the busiest quarter, or is that hard to determine? Is it possible that stronger releases might occur in Q3?

Hey, Daniel, it's Brad. I'll take that one. It's hard to see. Right now, our customers are still working through their production forecasts and impacts, especially beyond what we expect could be some very short-term shut-ins in the second quarter. The duration of those shut-ins, which are very market-driven and immediate, is also difficult to estimate; the expectations from lots of the customers are that they're going to be temporary. They just don't have an estimate on the timeframe. So number one, the fact that it’s early going; number two, the fact that we expect some short-term shut-ins, and the duration is unclear; and then in a downturn, visibility is always slightly impaired. Those factors make it more challenging to see where the sub-activity will be the heaviest in the year. So I don't mean to be evasive, but that's the visibility we have into it right now.

Okay, got it. Brad, could you discuss the advantages of having a significant amount of horsepower, particularly considering the heavy growth spending over the past few years? I assume there are various options available with all customers, but could you elaborate on the benefits of primary term contracts this year and whether those benefits will carry into 2021?

Sure. At any one time, and right now we have about 40% of our horsepower that is under contract with a term that exceeds 12 months, and some of it is out two years, some of it is out three years. These contracts, along with the integrity of the contract structure with our customers, provide stability to that portion of our revenue through the contract term. Additionally, this business is also very sticky, particularly with the large horsepower range. Customers want to keep the horsepower out there as long as it is operationally suitable and economically feasible for them.

Got it. And then maybe just a quick final one. Not sure the standby count will be sufficient or meaningful enough to be material, but in terms of margin impact of standby, is it accretive to the gross margins we typically think about when we look at the margin projection for this year?

It's not. It's neither dilutive nor accretive. A couple of thoughts on that. We don't expect that the amount of horsepower that moves to standby will be material to the overall amount of horsepower we operate. It's not insignificant, but it will not be material. Second, we have a pricing structure where we work with our customers. They need us most when they're suffering and can't generate revenues; when they need us to step up. We put in place reduced rates, and we also take out a lot of variable costs. The combination of the amount not being material to the fleet together with our ability to take variable costs out swiftly, along with the rate modifications during the standby period with our customers means that I don't expect it to be dilutive or accretive to gross margin. And in fact, that's the principle with which we structured it. We're not trying to take advantage of customers who can’t produce, nor do we want to take a financial hit because of their upstream needs.

Got it. Makes sense. Appreciate that. Thanks for the time.

You bet. Thank you.

Thank you. Our next question comes from the line of Thomas Curran with B. Riley FBR. Please proceed with your question.

Good morning.

Good morning.

Brad and Doug, regarding the technology modernization program, have there been any changes in the estimated 2020 budget of $16 million and/or completion timing of early 2021? And then which of that program's initiatives would you expect to be most beneficial in this current down cycle, and then looking out longer-term in the next up cycle?

Let me talk about the benefits of the project first, and I’ll ask Doug to help me out on the numbers. First and foremost, it's a great project for us. It is going to enable better efficiency in the way we manage labor in the field, manage attachments and connections to our units, the supply chain behind that, as well as migrate our ERP into the cloud. Those are the major steps of the project that we're still very excited about. That said, this is a period where we're rationalizing all our cost expenses and especially discretionary investments. We've pushed some activities into 2021, which equates to a couple of million bucks of investment being moved from 2020 into 2021 to support the project. Where we expect to get the biggest return, however, we have not slowed down that investment; that is in expanding our communications and telemetry capabilities throughout our operational structure in the field. That investment is proceeding at a pace where we do expect to complete it within the 2021 timeframe. It's a cost-focused project; thus, even in a downturn, it will provide great returns in a short-term basis. We're still happy with how it's proceeding even if we're deferring a component of it into 2021.

Yes, I think Brad covered most of it, including the deferral of some costs. I heard in the question that we may not have anticipated completing the project in the first quarter of 2021. I would say that spending will continue throughout most of 2021, and we expect to see some benefits accrue in 2021, while the majority will likely materialize in 2022 and beyond.

Okay, Doug. Any estimates on how the remaining spending would break down between 2020 and 2021?

Yes. We've got about $4 million of CapEx and $6 million of SG&A was the 2019 number. So comparatively, for 2020, about $7.6 million of CapEx and the same, about $6 million of SG&A. And then for 2021, we go to $7.3 million of CapEx and $4.3 million of SG&A.

Great. Thank you for the comprehensive update from both of you on that. Regarding the revised growth CapEx budget of $70 million to $90 million, it seems that with this lower budget, you are expecting to take delivery of new units totaling between 70,000 and 100,000 horsepower. Can you confirm or clarify that?

Yes, absolutely. I think you are correct. We are considering a number closer to about 80,000 horsepower. We spent nearly $50 million in the first quarter, driven by customer orders and the requirements for units that have already been delivered, which are in almost all cases operational. As mentioned earlier, 90% of our units are already secured under firm contracts. The rest of the year is likely to be steady, though there are some fluctuations as our sales team interacts with customers. This market is more dynamic than usual. However, 50 out of the 80 are already operational and generating revenue for us. Tom, was there another part to your question?

Just wanted to try to understand where they're headed geographically.

That's right. Yes. Predominantly, that was to the Permian. And again, those were orders that were placed a year in advance. So that's where the majority or even the vast majority went of what we had expected for this year. Again, some of that could change given the new market dynamic, but for now, that's, I think, Megan, unless we have new information, that's still where most of that horsepower went.

Got it. Thanks for taking my questions.

Thank you.

Good morning.

Good morning.

I wanted to follow up on our conversation about capital allocation and the distribution. I apologize if this has already been addressed, but given that the distribution was kept flat in the first quarter and considering your long-term goal of increasing it by 10% to 15% annually, I’m curious about your current thoughts on the distribution policy for the rest of this year and looking ahead to next year.

Yes. Kyle, fair question and one that obviously we wish we had an easy and very visible answer to you. I can assure you that reaching 4.05 at the end of the first quarter and knowing we were well on our way to our longer-term goal was met with more than a little frustration by Brad and I and, frankly, the rest of the management team and Board. To say that this is a black swan event probably doesn't do that justice. Timing on that has been deferred. Frankly, while thinking about raising our dividend at that 10% to 15% is just not likely a prudent action in this market and not something that we would be likely to do. Obviously, maintaining extraordinary coverage is something we will do easily. We will continue to generate significant free cash flow pre- and post-dividend in 2020 certainly. While we're not in a position yet to give guidance for 2021, I would call it a near certainty that we will be significantly free cash flow positive in 2021 as well, which should be supportive of continuing with a competitive dividend program and with paying down significant portions of our debt. Our Board, as all public companies say, will evaluate that quarterly. No different for us; our Board and management team will evaluate it quarterly. But specifically to the 10% to 15% increase, it just doesn't feel prudent in this market. So I hope that's helpful in giving you some clarity on where we see the next several quarters.

Absolutely. That makes a lot of sense. And then the last one for me, I was wondering if you could talk a little bit more around your assumptions for the revised guidance in the contract ops business, maybe a little bit more detail around utilization trends through the year, pricing. I realize you also covered a lot on the variable costs. So any additional color would be great.

So look, I mean, I think you can use history as a little bit of a guide for you and look at the last downturn where our utilization peak to trough was 89% down to about 79%, which I think bottomed in the fourth quarter of 2016 or maybe early 2017. Since then, our fleet has gotten younger, and we've continued to sell assets that we see as non-core. So again, it’s there's not maybe the level of clarity we would love to have to forecast. But if you look at our guidance range for EBITDA, as I mentioned, we're still hopeful to perform at better than the midpoint for the year. That would indicate utilization is certainly hanging in there for 2020 and beyond.

Okay, got it. And I guess one of the things that we've talked about in the past is the rate of change for the utilization in the last downturn. While it was maybe erratic from one quarter to the next, it was pretty steady around 1% declining each quarter over that time period. Do you have any idea about maybe the rate of change this time if it may be quicker or do you think it could be similar to what we saw in the last cycle?

Yes, Kyle. This is Brad. Look, I don't think we have enough visibility to compare this downturn yet to the prior downturn. Your assumption is right, by the way. In the prior downturn, we lost 9%, and it did happen ratably over several quarters. If the decline is much sharper, it could also mean the recovery is much sharper. We’re just not in a position with visibility to speak to that. I don’t want to assert a perception that we don’t support with data or forecasts. What I would emphasize is that when we look back at actual utilization, including the prior downturn, we had two quarters below 80%. The vast bulk of this business for the last seven years has operated in the mid-80s or higher. Since then, and through that period of time, we have taken steps to drastically improve the competitive position of this fleet. That includes age, size of horsepower, location in the field, and the customers that we provide it to. While I never want actually a downturn to test how well we've done, I believe this fleet is positioned to endure this better than we did the prior downturn. Although the scope and shape of the downturn remains to be determined, I feel really good about the position that this fleet has in the marketplace to endure and perform as well as possible during this downturn. That includes maintaining good margins in the guidance range we provided you, as well as good utilization to support it.

Got it. That's very helpful. All right. That's all for me. Thanks for the additional information.

Sure. Thanks.

Thanks, Scott.

We have reached the end of the question-and-answer session. Mr. Childers, I would now like to turn the floor back over to you for closing comments.

Great. Thanks, operator. Thank you, everyone. We appreciate your interest in Archrock and Archrock's performance. Our operating momentum continues. Our financial position remains sound. I'm confident we have the right team in place to preserve value through this downturn, manage exceptionally well, and emerge as a stronger company on the other side. Thank you, and I look forward to talking to you in next quarter's call.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.