March 20, 2020Archrock Inc. said a modernization initiative has “substantially improved” earnings from its fleet of rental compressors.
Brad Childers, president and CEO, said, “The company’s transformation over the past several years puts us in an enviable position within the compression industry and the broader energy landscape. In my time with Archrock, our fleet has never been younger, and our competitive position has never been better.”
The Houston-based company is the largest operator in the nation. Its fleet was 4,395,000 hp (3277 MW) at the end of 2019 versus 3,963,000 hp (2955 MW) a year earlier. The gain of 432,000 hp (322 MW) was despite the sale of 220,000 hp (164 MW) for US$76 million.
“We’ll look for additional ways to prune our assets where it makes strategic sense,” Childers said. “This high grading will continue to be a substantial contributor to our gross margin performance in contract operations.”
Average operating horsepower was 3,708,000 hp (2765 MW) at the end of 2019 compared to 3,386,000 (2525 MW) a year earlier. Average horsepower utilization was 88%, up a percentage point from 2018.
Childers said despite the downturn in prices, U.S. gas output will set a record in 2020. That benefits contract compression companies because they collect tolls on throughput, not prices.
“While our guided capex range implies no growth — to a slight decline — in operating horsepower this year, we believe the current market environment warrants additional prudence,” Childers said. Archrock forecasts growth capital of US$80-100 million for 2020, which at the midpoint represents a 70% reduction vis-a-vis 2019.
Archrock’s net income was US$46 million in the fourth quarter of 2019, compared to US$13 million in the same period of 2018. Adjusted earnings before interest, taxes, depreciation and amortization were US$112.5 million, versus US$97.6 million in the 2018 fourth quarter.