Archrock, Inc. ((AROC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Archrock, Inc. recently reported a robust financial and operational performance during its latest earnings call, highlighting significant increases in adjusted EPS and EBITDA. The company demonstrated a positive outlook on natural gas demand, driven by LNG exports and AI power generation. Despite these achievements, challenges such as commodity price volatility, extended equipment lead times, and slight declines in revenue per average operating horsepower were acknowledged.
Significant Increase in Adjusted EPS and EBITDA
Archrock showcased strong operational and financial performance with a remarkable 50% increase in adjusted EPS and a more than 46% rise in adjusted EBITDA compared to the third quarter of 2024. This substantial growth underscores the company’s effective strategies and operational efficiency.
Strong Dividend and Share Repurchase Program
The company reported a 20% year-over-year increase in its quarterly dividend per share, supported by a robust dividend coverage of 3.7x. Additionally, Archrock has successfully repurchased over 3.9 million shares since April 2023, reflecting its commitment to returning value to shareholders.
High Utilization and Fleet Performance
Archrock maintained a high fleet utilization rate of 96% for the quarter, continuing its trend of strong performance with utilization rates in the mid-90s range for the past 12 quarters. This consistency highlights the company’s operational strength and market demand.
Positive Outlook on Natural Gas Demand
The company expressed optimism regarding the future of natural gas demand, anticipating growth driven by LNG exports and AI-driven power generation. Archrock expects an incremental call on U.S. natural gas production of 20 to 25 Bcf a day by 2030, indicating a promising market environment.
Reduction in Leverage Ratio
Archrock reported a reduction in its leverage ratio to 3.1x at the end of the quarter, down from 3.3x in the previous quarter. This improvement signifies stronger financial stability and a solid balance sheet.
Commodity Price Volatility and Oil Rig Count Declines
The earnings call highlighted concerns over commodity price volatility and declining oil rig counts, which could potentially lead to flattening or slight declines in oil volumes by 2026. These challenges may impact future performance.
Slight Decline in Revenue Per Average Operating Horsepower
There was a slight decline in revenue per average operating horsepower per month in the third quarter of 2025 compared to the previous quarter. This was attributed to the sale of high-pressure gas lift units and the impact of the NGCSI fleet acquisition.
Extended Lead Times for Equipment
Archrock is facing extended lead times for Caterpillar engines, now reaching 60 weeks. This delay affects the company’s ability to swiftly respond to market demands, posing a challenge to operational agility.
Forward-Looking Guidance
During the earnings call, Archrock provided updated guidance for the year, raising its 2025 adjusted EBITDA guidance to $835 million-$850 million. The company also reported a net income of $71 million for the quarter and set its Growth CapEx guidance for 2026 at not less than $250 million. Archrock continues to anticipate positive free cash flow, supported by high fleet utilization and operational efficiency.
In summary, Archrock, Inc. delivered a strong performance in its latest earnings call, marked by significant financial growth and a positive outlook on natural gas demand. While challenges such as commodity price volatility and extended equipment lead times persist, the company’s strategic initiatives and robust financial health position it well for future success.