Atlas Energy Solutions (AESI) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Atlas reported revenues of $288 million for Q2 2024, a 49$72 million, representing 25% of revenue, while net income was $14.8 million, or 5$20 million to $40 million range previously estimated [24] Business Line Data and Key Metrics Changes - Revenues from product sales were approximately$128 million on volumes of 4.9 million tons, with an average sales price of about $26.07 per ton [23] - Service revenues reached approximately$159 million, doubling from Q1 levels due to the Hi-Crush acquisition and growth in the legacy business [23] - The logistics team set a quarterly record for loads delivered, with over 50% of sand volumes delivered using in-house last mile crews [23] Market Data and Key Metrics Changes - The Permian rig count has declined approximately 10% over the past 12 months and is expected to remain stagnant through the latter half of the year [15] - Despite a decline in rig activity, proppant demand is expected to increase slightly year-over-year, with the average amount of sand pumped per fracture rising from approximately 40,000 tons to over 65,000 tons [17] - The supply-demand balance in the Permian proppant market is looser than the previous year, with spot prices nearing breakeven for less advantaged competitors [17][18] Company Strategy and Development Direction - The construction of the Dune Express, a 42-mile overland conveyor system, is on track for commissioning by the end of the year, which is expected to significantly enhance proppant logistics in the Permian Basin [11][12] - Atlas is focusing on innovations in logistics, including a partnership with Kodiak Robotics for autonomous trucking, which is anticipated to improve last-mile delivery efficiency [14] - The company aims to maintain its competitive edge by leveraging its low-cost structure and operational efficiencies to navigate current market challenges [45][46] Management's Comments on Operating Environment and Future Outlook - Management noted that 2024 has been a challenging year for the oilfield, with weak natural gas prices impacting drilling and completion activities [15] - Despite current market conditions, Atlas remains confident in its ability to generate healthy margins and returns, as its operational advantages allow it to thrive even when competitors struggle [18] - The company is optimistic about future growth, particularly with the Dune Express expected to enhance logistics capabilities and customer service [35][36] Other Important Information - The company has increased its dividend to $0.23 per share, representing a 5% increase over the prior period, and has shifted to a stand-alone ordinary dividend structure [28] - Atlas has launched OnCore 8 in the Midland Basin, which has a production capacity exceeding one million tons annually [21] Q&A Session Summary Question: Impact of trucking rates on logistics business - Chris Scholla explained that while trucking rates have fallen, Atlas's structural advantages will enhance margins as the Dune Express ramps up [32][34] Question: Customer demand and volume outlook - Bud Brigham indicated that the sales team has secured over 9 million tons for delivery next year, and they are optimistic about future contracts [37] Question: Logistics outlook for Q3 - Blake McCarthy noted that while Q2 logistics results were exceptional, some normalization is expected in Q3, but no significant degradation in market conditions is anticipated [40] Question: Supply and demand dynamics in the proppant market - John Turner mentioned that some competitors are shutting down operations due to low pricing, which could positively impact pricing dynamics in the long run [42][43] Question: Market conditions in the Delaware Basin - Bud Brigham highlighted that the Dune Express will significantly enhance Atlas's position in the Delaware Basin, where demand is strong [49][50] Question: Future M&A considerations - John Turner stated that while the market is fragmented and consolidation is likely, Atlas will be selective in any future acquisitions to maintain its competitive position [87] Question: Ramping last mile deliveries ahead of Dune Express - Chris Scholla confirmed that they are expanding last mile contracts and targeting additional crews as the Dune Express nears completion [92]