Atlas Energy Solutions, Inc. ((AESI)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Atlas Energy Solutions, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. While the company is experiencing growth in its power business, it faces significant challenges, including operational issues at its Kermit facility, a decline in sand volumes, and the suspension of dividends. Despite these hurdles, Atlas is focusing on cost-saving measures and market share growth to navigate the current downturn.
Adjusted EBITDA and Revenue Performance
Atlas Energy Solutions reported generating $40.2 million in adjusted EBITDA on $260 million in revenue, achieving a 15% adjusted EBITDA margin. This performance comes despite challenges in the West Texas completions market, showcasing the company’s resilience in maintaining profitability.
Power Business Expansion
The company is making significant strides in its power business, aiming to deploy over 400 megawatts by early 2027. With the majority of these assets under long-term contracts, Atlas has already ordered more than 240 megawatts of new power generation assets, indicating a strong commitment to expanding its energy footprint.
Market Share Growth
Atlas has successfully increased its market share in the Permian Basin to approximately 35% during the current down cycle. The company anticipates further growth in the coming year, signaling confidence in its strategic positioning and market penetration.
Cost Savings Initiative
In response to current challenges, Atlas has launched a cost-saving initiative targeting $20 million in annual savings. This initiative focuses on improving efficiencies in corporate general and administrative expenses, fixed cost structure, and procurement processes.
Operational Challenges at Kermit
The Kermit facility has faced operational challenges, leading to an increase in operating expenses per ton to $13.52. Issues with the dredge feed and wet shed have resulted in elevated third-party service costs and downtime, impacting overall operational efficiency.
Dividend Suspension
To protect its balance sheet and optimize growth in the power market, Atlas has decided to temporarily suspend its dividend. This strategic decision is aimed at reallocating capital towards growth opportunities that require significant investment.
Decline in Sand Volumes
The company reported a slight sequential decline in third-quarter sand volumes to 5.25 million tons, with further declines expected in the fourth quarter. This is attributed to seasonality and reduced customer completions activity, reflecting broader market trends.
Logistics Margin Pressure
Logistics margins are under pressure, with expectations of a decline due to seasonality and planned customer crew rings. Trucking rates have fallen below even COVID-era levels, posing additional challenges to the company’s logistics operations.
Forward-Looking Guidance
Atlas Energy Solutions provided guidance indicating a forecasted decline in sand volumes to approximately 4.8 million tons in the fourth quarter. The company is targeting over 400 megawatts of power deployment by early 2027 and has initiated a $20 million annual cost-saving plan. These strategic moves are part of Atlas’s efforts to navigate current market conditions and capitalize on future growth opportunities.
In summary, Atlas Energy Solutions’ earnings call highlighted a mixed outlook, with growth in the power business tempered by operational and market challenges. The company’s focus on cost-saving initiatives and market share growth reflects its strategic approach to overcoming current hurdles and positioning itself for future success.