required to meet our customer needs the current priority for excess cash flow is to prioritize that two and a half percent of growth per annum in new horsepower balanced long-term growth should continue to elevate underlying value of the units and positions the company to have more flexibility as it relates to distribution discussions in the future additionally we intend to maintain a competitive and prudent leverage profile that sustains us through distribution cycles and provides flexibility for future growth opportunities. Finally, as you noted, our current yield is competitively positioned with the broader Allerian index and should be considered an attractive entry point for any prospective unit holder given the aforementioned growth. It also clearly differentiates us from our... so that's how we're thinking about it right now, Doug. We ultimately want to see a distribution that is supportive of the underlying value of the business and clearly enumerates the underlying value of the business. Today we see that being the case and we'll continue to evaluate that in the future.

Yeah, that's a helpful color. And maybe as a follow-up, just wanted to touch on the lube oil costs that you also mentioned in the prepared program works, helpful detail on the expected kind of monthly impact. Just curious how you're thinking about your ability to potentially pass those costs on within your contracts if they prove to be more durable. And then just in general, kind of what your latest pricing expectations are here over the meeting term, just given what lead times are and how tight the market is today.

Hey, Doug, great question. So in regards to Louisville, as contracts expire and renew, we're doing our best to cover the increased cost inputs, but we don't have a direct pass-through in our contract related to increases or decreases in Louisville prices. So as those contracts renew, we're doing our best to renegotiate terms and try to cover those costs as we renew. In regards to pricing trends, you know, our new units, contracting units at a healthy rate of return, in regards to more of an idle unit set, you know, we're seeing, we're not seeing the price increases that we once have experienced. But RFPs are high. There's a lot of demand. We're super excited about the future. We've got a healthy backlog of contracted units, so we're really excited about the back half of it.

Hey, Doug, I also want to add in that we still have CPIU escalators to offset the inflation piece of it going forward as well.

Understood. Thanks for the time.

Your next question comes from the line of Jim Rolison with Raymond James. Your line is now open.

Hey, good morning, everyone. Clint or Chris, whoever, if you kind of look at margins and the relative decline, obviously you stepped down in one queue, just kind of mix related to JW, and you came down a bit in two queue. Maybe help me understand a little bit the drivers of the sequential margin degradation between Lou Boyle, which you talked about, between the ERP system implementation and just kind of integration of JW and how we should think about that kind of progression going forward.

Hey, good morning. Thanks for the question. It's Chris Lawson. We expected margins to drop with the JW acquisition. We had a full operating quarter combined now, so manufacturing and AMS do lower contract services historical average. But, you know, the next part of that is where do margins go from here? So with our investment in telemetry, remote monitoring, and driving efficiencies, I expect to see the results later this year into 27 and beyond. So this will enable us to get super efficient in regards to route management, predictive failures, and all we'll see margins improve slightly quarter over quarter.

Got it. Appreciate that color. And Clint, when you talk to customers with where lead times have stretched out to now, you know, how are they adapting to planning horizons that have changed dramatically? I mean, just a couple of years ago, that was starting to kind of normalize it about a year. And then, I mean, it's literally gone from one year to four plus years. And I imagine those guys aren't accustomed to normally planning that far out. But I just love to kind of hear how that all goes for you and, you know, your ability to serve those customers.

That's a great question. and one of the reasons we've committed to a portion of the cost of 500,000 horsepower, and when I say a portion of that cost, I want to explain it. By having the JW facility, that gives us flexibility that we wouldn't have elsewhere because we only have to commit to the engine cost in the out years. But when you get back to the conversation about we've all had to adapt um 40 to we ran 40 to 60 week delivery lead time on on equipment for years and years and years and then and then the last few years with with the generator market uh growing like it has it has driven out to 200 weeks and and it caught a lot of us by surprise it caught us by surprise earlier this year uh for for orders for 27 uh that's the main reason we jumped on it and and we're we're able to order equipment for 28 and 29 and we'll be looking at 30 here pretty quick uh everyone's learning how to operate in that in that market customers hopefully you know they have a a good line of sight on demand and they have they have a good line of sight on on the compression that we can provide them and so we seem to all be getting along pretty well right now jim Nice to be wanted for a change.

Appreciate your time.

Your next question comes from the line of Nate Pendleton with Texas Capital. Your line is now open.

Good morning. Thanks for taking my question. Clint, in your prepared remarks, you talked about advancing through integration this year. As you're going through that process, are there any additional deficiencies you're uncovering with the combined business? And perhaps any thoughts on any fleet optimization or high grading potential?

So as far as deficiencies, no. I think we're really happy with what we were able to acquire. It fits really well with us. The footprint puts us where we want to be in all the basins with all the different horsepower ranges like we've talked about before. We're extremely happy with where we are. We are continuing to evaluate the idle horsepower that came over. We knew some of it may not be redeployable immediately. We'll continue to evaluate that through the rest of this year. We've also talked about looking at secondary markets maybe outside the country to deploy some of this equipment. But we're extremely happy with the JW acquisition. And like I said, on the announcement call back in December, we liked the whole enchilada when it came to that acquisition.

Got it. I appreciate that. And then perhaps just staying on the integration of JW, with that well underway and the leverage already below target, how is your team thinking about potential M&A going forward? Is that really something you guys could do in the near term? And if so, what are the key considerations right now given the environment we're in?

We're absolutely always looking at M&A. We evaluate those. We're going to remain disciplined, focused. It has to be accretive. It has to make sense for us to be able to do it, but we are definitely in the M&A market and looking for opportunities to make that work.

The one other thing I would note, Nate, is the energy high yield market has really remained resilient. The midstream portion of that in particular has remained resilient. I know that to the extent we can be opportunistic, we will be. Yields have moved away from us here recently at 10 years. But we continue to watch. We continue to look for opportunities to add consistency and so to the extent we find an m&a opportunity that makes sense got it i appreciate it the detailer plan chris thank you your next i'm sorry um your next question comes from the line of ellie jocelyn from jp morgan your line is now open hey guys um just want to think about

jw's manufacturing or fabrication capabilities in the context of the guidance you provided today Um, so how, how can you remind us what JW offers you as you look to add half a million horsepower through the decade? Um, and you know how critical that is to, to meeting that order book?

Absolutely. Uh, so the, the, the manufacturing facility today, the way it sits, can build about 100 to 125,000 horsepower, uh, in, in that facility. And then we'll supplement the additional, you know, 20 to 60,000 horsepower a year over through other facilities or other shops. But the flexibility that it provides is that we can order the engine and then we can wait until 30 to 40 weeks to order the compressor or the package, all the other parts and components. And we can build it right in house. And then, you know, we always have to think about what could happen if things changed. And if things changed, we wouldn't be on the hook for the entire package cost from now until 29. So we really like that flexibility that it provides.

Got it. And then maybe building on the prior question regarding M&A, you guys obviously have a pretty diversified footprint across different basins. You know, recognize that compression is tight. I would imagine that, you know, ask price on asset packages are pretty high. but how would you think about sort of geographic preference for any type of M&A? You know, do you feel that other basins might have more realistic price tags on them, and how should we think about that?

It's a great question. There's certainly, you know, some standout basins overall in terms of the growth profile for the U.S., or at least as it stands today. the Permian and associated gas basins but certainly the Permian lead that way through 2031 those associated gas basins are probably 11 BCF a day of growth the Permian's about then the drier gas basins like the northeast and the Hainesville will make up about 12 BCF of growth both of those about 60. so you go where the growth is there's no doubt that's a problem And then additionally, there's opportunities in basins that are underserved. I'd say the Rockies overall has been an underserved base from a lot of the larger competitors out there. And we saw that with the JW deal. We saw the underlying value. We saw the amount of long-term gas growth. So without giving away all of our cards, you go towards growth. You go towards underserved base. Make sure that by early, there's excellent opportunities out there in the compression Got it.

All right. Really appreciate the caller. Thanks.

Thank you.

Again, if you would like to ask a question, press star 1 in your telephone keypad. And your next question comes from the line of Gabe Marine with Nizuho. Your line is now open.

Hi, this is Ryan on the line for Gabe. So my first question is around how are you thinking about refinancing or turning out the amounts currently drawn on the revolver, particularly given, you know, the current interest rate environment.

To re-terming, presently our rate for ABL is, so the SOFR rate really has remained relatively unchanged over the past six months at around 3.65 percent, and our number comes in a little north of 200 basis points on top of that, so we're still well below six percent. When you look at the ability to go out longer term at eight, eight and a half years, the numbers are probably 50 basis points north of that today. So those are the things that you ultimately weigh in terms of that decision, but we also want to have the flexibility longer term for our business. And so to the degree we can get that 50 basis points to tighten and we see the opportunity set, then we'll strongly look at public market opportunities.

Got it. Thank you for that. So for my follow-up, how are customers thinking about compression demand and capital requirements in 2027 and 2028? And also, is growth more likely to be constrained by available compression equipment or by the level of customer demand?

Hey, great question. It's Chris Walton. So in regards to how customers are thinking to their growth, you know, as I mentioned earlier, it's a different way of business right when you have to think out not only next year but two years and three years and even beyond that because that's four years is right around the corner with lead times doing what they're doing but our customers our our tier one customers are definitely planning well in advance you know their demand and their growth projectories are definitely out there and we're working with them hand in hand we're having conversations with them every week you know we're We're working hand-in-hand to meet their needs, so it is a challenge, right? And the challenging part for us is what the world's going to do in three and four years, but it's actually quite promising how everybody's working together. So looking forward to that and just see where the future goes.

Great. Thank you so much, guys. Thanks, Ron.

That concludes our question-and-answer session. I will now turn the conference back over to Mr. Clint Green for closing remarks.

Thank you all for joining the call this afternoon. I want to touch on a few more points and reiterate. The amount of RFQs we're seeing is very strong. The state seems to be set for large amounts of demand growth over the next four to five years. The demand is expected to be about 140 BCF by the end of 2031. That's up over 30 BCF from 20-25 averages. You know, the majority of that is LNG demand growth between 18-20 BCF a day of growth there. We sit just below our target leverage ratio of 3.75 times. We have equipment secured through 20-29. Our in-house manufacturing capabilities tied with demand growth gives us huge flexibility. We believe we're in well-positioned to grow in the future with great flexibility. But we really appreciate you all joining our call. Thank you very much and have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.