0001767042--12-312024Q3falseP1Y33111P5Dhttp://fasb.org/us-gaap/2024#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#AccruedLiabilitiesCurrent0xbrli:sharesiso4217:USDiso4217:USDxbrli:shareskgs:segmentxbrli:purekgs:vote00017670422024-01-012024-09-3000017670422024-11-0500017670422024-09-3000017670422023-12-310001767042kgs:ContractServicesMember2024-07-012024-09-300001767042kgs:ContractServicesMember2023-07-012023-09-300001767042kgs:ContractServicesMember2024-01-012024-09-300001767042kgs:ContractServicesMember2023-01-012023-09-300001767042us-gaap:ServiceOtherMember2024-07-012024-09-300001767042us-gaap:ServiceOtherMember2023-07-012023-09-300001767042us-gaap:ServiceOtherMember2024-01-012024-09-300001767042us-gaap:ServiceOtherMember2023-01-012023-09-3000017670422024-07-012024-09-3000017670422023-07-012023-09-3000017670422023-01-012023-09-300001767042us-gaap:CommonStockMember2022-12-310001767042us-gaap:PreferredStockMember2022-12-310001767042us-gaap:AdditionalPaidInCapitalMember2022-12-310001767042us-gaap:TreasuryStockCommonMember2022-12-310001767042us-gaap:RetainedEarningsMember2022-12-310001767042us-gaap:NoncontrollingInterestMember2022-12-3100017670422022-12-310001767042us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001767042us-gaap:RetainedEarningsMember2023-01-012023-03-3100017670422023-01-012023-03-310001767042us-gaap:CommonStockMember2023-03-310001767042us-gaap:PreferredStockMember2023-03-310001767042us-gaap:AdditionalPaidInCapitalMember2023-03-310001767042us-gaap:TreasuryStockCommonMember2023-03-310001767042us-gaap:RetainedEarningsMember2023-03-310001767042us-gaap:NoncontrollingInterestMember2023-03-3100017670422023-03-310001767042us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001767042us-gaap:RetainedEarningsMember2023-04-012023-06-3000017670422023-04-012023-06-300001767042us-gaap:CommonStockMember2023-06-300001767042us-gaap:PreferredStockMember2023-06-300001767042us-gaap:AdditionalPaidInCapitalMember2023-06-300001767042us-gaap:TreasuryStockCommonMember2023-06-300001767042us-gaap:RetainedEarningsMember2023-06-300001767042us-gaap:NoncontrollingInterestMember2023-06-3000017670422023-06-300001767042us-gaap:CommonStockMember2023-07-012023-09-300001767042us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001767042us-gaap:RetainedEarningsMember2023-07-012023-09-300001767042us-gaap:CommonStockMember2023-09-300001767042us-gaap:PreferredStockMember2023-09-300001767042us-gaap:AdditionalPaidInCapitalMember2023-09-300001767042us-gaap:TreasuryStockCommonMember2023-09-300001767042us-gaap:RetainedEarningsMember2023-09-300001767042us-gaap:NoncontrollingInterestMember2023-09-3000017670422023-09-300001767042us-gaap:CommonStockMember2023-12-310001767042us-gaap:PreferredStockMember2023-12-310001767042us-gaap:AdditionalPaidInCapitalMember2023-12-310001767042us-gaap:TreasuryStockCommonMember2023-12-310001767042us-gaap:RetainedEarningsMember2023-12-310001767042us-gaap:NoncontrollingInterestMember2023-12-310001767042us-gaap:RetainedEarningsMember2024-01-012024-03-3100017670422024-01-012024-03-310001767042us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001767042us-gaap:CommonStockMember2024-01-012024-03-310001767042us-gaap:CommonStockMember2024-03-310001767042us-gaap:PreferredStockMember2024-03-310001767042us-gaap:AdditionalPaidInCapitalMember2024-03-310001767042us-gaap:TreasuryStockCommonMember2024-03-310001767042us-gaap:RetainedEarningsMember2024-03-310001767042us-gaap:NoncontrollingInterestMember2024-03-3100017670422024-03-310001767042us-gaap:CommonStockMember2024-04-012024-06-300001767042us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-3000017670422024-04-012024-06-300001767042us-gaap:PreferredStockMember2024-04-012024-06-300001767042us-gaap:NoncontrollingInterestMember2024-04-012024-06-300001767042us-gaap:RetainedEarningsMember2024-04-012024-06-300001767042us-gaap:CommonStockMember2024-06-300001767042us-gaap:PreferredStockMember2024-06-300001767042us-gaap:AdditionalPaidInCapitalMember2024-06-300001767042us-gaap:TreasuryStockCommonMember2024-06-300001767042us-gaap:RetainedEarningsMember2024-06-300001767042us-gaap:NoncontrollingInterestMember2024-06-3000017670422024-06-300001767042us-gaap:RetainedEarningsMember2024-07-012024-09-300001767042us-gaap:AdditionalPaidInCapitalMember2024-07-012024-09-300001767042us-gaap:NoncontrollingInterestMember2024-07-012024-09-300001767042us-gaap:CommonStockMember2024-07-012024-09-300001767042us-gaap:TreasuryStockCommonMember2024-07-012024-09-300001767042us-gaap:CommonStockMember2024-09-300001767042us-gaap:PreferredStockMember2024-09-300001767042us-gaap:AdditionalPaidInCapitalMember2024-09-300001767042us-gaap:TreasuryStockCommonMember2024-09-300001767042us-gaap:RetainedEarningsMember2024-09-300001767042us-gaap:NoncontrollingInterestMember2024-09-300001767042kgs:CSICompresscoLPMember2024-04-010001767042kgs:CSICompresscoLPMember2024-04-012024-04-0100017670422024-04-010001767042kgs:CSICompresscoLPMemberus-gaap:CommonStockMember2024-04-012024-04-010001767042kgs:CSICompresscoLPMemberus-gaap:PreferredStockMember2024-04-012024-04-010001767042kgs:CSICompresscoLPMemberus-gaap:PreferredStockMember2024-04-010001767042kgs:CSICompresscoLPMember2024-09-300001767042kgs:CSICompresscoLPMember2024-01-012024-09-300001767042kgs:CSICompresscoLPMemberus-gaap:CustomerRelationshipsMember2024-04-010001767042kgs:CSICompresscoLPMemberus-gaap:TrademarksAndTradeNamesMember2024-04-010001767042kgs:CSICompresscoLPMembersrt:MinimumMember2024-04-012024-04-010001767042kgs:CSICompresscoLPMembersrt:MaximumMember2024-04-012024-04-010001767042kgs:CSICompresscoLPMember2024-07-012024-09-300001767042kgs:CSICompresscoLPMember2023-07-012023-09-300001767042kgs:CSICompresscoLPMember2023-01-012023-09-3000017670422024-09-1200017670422024-09-122024-09-120001767042us-gaap:TransferredOverTimeMemberkgs:ContractServicesMember2024-07-012024-09-300001767042us-gaap:TransferredOverTimeMemberkgs:ContractServicesMember2023-07-012023-09-300001767042us-gaap:TransferredOverTimeMemberus-gaap:ServiceOtherMember2024-07-012024-09-300001767042us-gaap:TransferredOverTimeMemberus-gaap:ServiceOtherMember2023-07-012023-09-300001767042us-gaap:TransferredOverTimeMember2024-07-012024-09-300001767042us-gaap:TransferredOverTimeMember2023-07-012023-09-300001767042us-gaap:TransferredAtPointInTimeMemberkgs:ContractServicesMember2024-07-012024-09-300001767042us-gaap:TransferredAtPointInTimeMemberkgs:ContractServicesMember2023-07-012023-09-300001767042us-gaap:TransferredAtPointInTimeMemberus-gaap:ServiceOtherMember2024-07-012024-09-300001767042us-gaap:TransferredAtPointInTimeMemberus-gaap:ServiceOtherMember2023-07-012023-09-300001767042us-gaap:TransferredAtPointInTimeMember2024-07-012024-09-300001767042us-gaap:TransferredAtPointInTimeMember2023-07-012023-09-300001767042us-gaap:TransferredOverTimeMemberkgs:ContractServicesMember2024-01-012024-09-300001767042us-gaap:TransferredOverTimeMemberkgs:ContractServicesMember2023-01-012023-09-300001767042us-gaap:TransferredOverTimeMemberus-gaap:ServiceOtherMember2024-01-012024-09-300001767042us-gaap:TransferredOverTimeMemberus-gaap:ServiceOtherMember2023-01-012023-09-300001767042us-gaap:TransferredOverTimeMember2024-01-012024-09-300001767042us-gaap:TransferredOverTimeMember2023-01-012023-09-300001767042us-gaap:TransferredAtPointInTimeMemberkgs:ContractServicesMember2024-01-012024-09-300001767042us-gaap:TransferredAtPointInTimeMemberkgs:ContractServicesMember2023-01-012023-09-300001767042us-gaap:TransferredAtPointInTimeMemberus-gaap:ServiceOtherMember2024-01-012024-09-300001767042us-gaap:TransferredAtPointInTimeMemberus-gaap:ServiceOtherMember2023-01-012023-09-300001767042us-gaap:TransferredAtPointInTimeMember2024-01-012024-09-300001767042us-gaap:TransferredAtPointInTimeMember2023-01-012023-09-300001767042srt:MinimumMember2024-01-012024-09-300001767042srt:MaximumMember2024-01-012024-09-3000017670422023-01-010001767042kgs:ContractServicesMember2024-09-3000017670422024-10-012024-09-3000017670422025-01-012024-09-3000017670422026-01-012024-09-3000017670422027-01-012024-09-3000017670422028-01-012024-09-300001767042us-gaap:ServiceOtherMember2024-09-3000017670422024-10-01us-gaap:ServiceOtherMember2024-09-3000017670422023-01-012023-12-310001767042kgs:NonSerializedPartsMember2024-09-300001767042kgs:NonSerializedPartsMember2023-12-310001767042kgs:SerializedPartsMember2024-09-300001767042kgs:SerializedPartsMember2023-12-310001767042kgs:CompressionEquipmentMember2024-09-300001767042kgs:CompressionEquipmentMember2023-12-310001767042kgs:FieldEquipmentMember2024-09-300001767042kgs:FieldEquipmentMember2023-12-310001767042kgs:BuildingsAndShippingContainersMember2024-09-300001767042kgs:BuildingsAndShippingContainersMember2023-12-310001767042us-gaap:TechnologyEquipmentMember2024-09-300001767042us-gaap:TechnologyEquipmentMember2023-12-310001767042us-gaap:VehiclesMember2024-09-300001767042us-gaap:VehiclesMember2023-12-310001767042us-gaap:LeaseholdImprovementsMember2024-09-300001767042us-gaap:LeaseholdImprovementsMember2023-12-310001767042us-gaap:FurnitureAndFixturesMember2024-09-300001767042us-gaap:FurnitureAndFixturesMember2023-12-310001767042us-gaap:LandMember2024-09-300001767042us-gaap:LandMember2023-12-310001767042us-gaap:PropertyPlantAndEquipmentOtherTypesMember2024-09-300001767042us-gaap:PropertyPlantAndEquipmentOtherTypesMember2023-12-310001767042us-gaap:TradeNamesMember2024-09-300001767042us-gaap:TradeNamesMember2024-01-012024-09-300001767042us-gaap:CustomerRelationshipsMember2024-09-300001767042us-gaap:CustomerRelationshipsMember2024-01-012024-09-300001767042us-gaap:TradeNamesMember2023-12-310001767042us-gaap:CustomerRelationshipsMember2023-12-310001767042kgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:AssetBasedCreditFacilityMember2023-12-310001767042us-gaap:SeniorNotesMember2024-09-300001767042us-gaap:SeniorNotesMember2023-12-310001767042kgs:FourthAmendmentAndRestatedCreditAgreementMemberkgs:AssetBasedCreditFacilityMember2023-03-220001767042kgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:AssetBasedCreditFacilityMember2024-01-012024-09-300001767042kgs:DebtInstrumentCovenantQuarterEndingDecember312024Memberkgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:DebtInstrumentCovenantQuarterEndingMarch312025Memberkgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:DebtInstrumentCovenantQuarterEndingJune302024Memberkgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:DebtInstrumentCovenantQuarterEndingSeptember302024Memberkgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:DebtInstrumentCovenantEachQuarterEndingAfterJune302025Memberkgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:FourthAmendmentAndRestatedCreditAgreementMemberkgs:AssetBasedCreditFacilityMember2024-09-300001767042kgs:ThirdAmendmentToFourthAmendedAndRestatedCreditAgreementMemberkgs:AssetBasedCreditFacilityMember2024-01-220001767042kgs:DebtInstrumentCovenantPeriodOneMemberkgs:AssetBasedCreditFacilityMemberkgs:ThirdAmendmentToFourthAmendedAndRestatedCreditAgreementMember2024-01-220001767042kgs:DebtInstrumentCovenantPeriodTwoMemberkgs:AssetBasedCreditFacilityMemberkgs:ThirdAmendmentToFourthAmendedAndRestatedCreditAgreementMember2024-01-220001767042kgs:ThirdAmendmentToFourthAmendedAndRestatedCreditAgreementMemberkgs:AssetBasedCreditFacilityMember2024-01-222024-01-220001767042kgs:FourthAmendmentAndRestatedCreditAgreementMemberkgs:AssetBasedCreditFacilityMember2023-12-310001767042srt:MinimumMemberkgs:AssetBasedCreditFacilityMember2024-01-012024-09-300001767042srt:MaximumMemberkgs:AssetBasedCreditFacilityMember2024-01-012024-09-300001767042kgs:SeniorNotesDue2029Memberus-gaap:SeniorNotesMember2024-02-020001767042kgs:SeniorNotesDue2029Memberus-gaap:SeniorNotesMember2024-02-022024-02-020001767042kgs:SeniorNotesDue2029Memberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodOneMember2024-02-022024-02-020001767042kgs:SeniorNotesDue2029Memberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2024-02-022024-02-020001767042kgs:SeniorNotesDue2029Memberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodThreeMember2024-02-022024-02-020001767042kgs:TermLoanMember2023-07-032023-07-030001767042kgs:TermLoanMember2023-01-012023-12-310001767042kgs:TermLoanMember2023-07-030001767042kgs:EquipmentFinanceAgreementMemberus-gaap:NotesPayableOtherPayablesMember2024-04-010001767042kgs:EquipmentFinanceAgreementMemberus-gaap:NotesPayableOtherPayablesMember2024-04-012024-04-010001767042kgs:EquipmentFinanceAgreementMemberus-gaap:NotesPayableOtherPayablesMember2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateDecember52024OneMember2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateDecember52024TwoMember2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateJune142025Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateSeptember22025Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateDecember62025Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateJune142026Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateJune222026Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateDecember62026Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateMarch22027Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateMay182027Member2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateMay192027OneMember2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateMay192027TwoMember2024-09-300001767042kgs:InterestRateSwapAndInterestRateCollarsMemberkgs:DerivativeInstrumentMaturityDateDecember62027Member2024-09-300001767042us-gaap:InterestRateSwapMemberus-gaap:NondesignatedMember2024-07-012024-09-300001767042us-gaap:InterestRateSwapMemberus-gaap:NondesignatedMember2023-07-012023-09-300001767042us-gaap:NondesignatedMember2024-07-012024-09-300001767042us-gaap:NondesignatedMember2023-07-012023-09-300001767042kgs:InterestRateCollarsMemberus-gaap:NondesignatedMember2024-01-012024-09-300001767042kgs:InterestRateCollarsMemberus-gaap:NondesignatedMember2023-01-012023-09-300001767042us-gaap:InterestRateSwapMemberus-gaap:NondesignatedMember2024-01-012024-09-300001767042us-gaap:InterestRateSwapMemberus-gaap:NondesignatedMember2023-01-012023-09-300001767042us-gaap:NondesignatedMember2024-01-012024-09-300001767042us-gaap:NondesignatedMember2023-01-012023-09-300001767042us-gaap:CarryingReportedAmountFairValueDisclosureMember2024-09-300001767042us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwapMember2024-09-300001767042us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2024-09-300001767042us-gaap:FairValueInputsLevel3Memberus-gaap:InterestRateSwapMember2024-09-300001767042us-gaap:InterestRateSwapMember2024-09-300001767042us-gaap:FairValueInputsLevel1Member2024-09-300001767042us-gaap:FairValueInputsLevel2Member2024-09-300001767042us-gaap:FairValueInputsLevel3Member2024-09-300001767042kgs:SeniorNotesDue2029Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2024-09-300001767042us-gaap:FairValueInputsLevel1Memberkgs:SeniorNotesDue2029Member2024-09-300001767042us-gaap:FairValueInputsLevel2Memberkgs:SeniorNotesDue2029Member2024-09-300001767042us-gaap:FairValueInputsLevel3Memberkgs:SeniorNotesDue2029Member2024-09-300001767042kgs:SeniorNotesDue2029Member2024-09-300001767042us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310001767042us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwapMember2023-12-310001767042us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2023-12-310001767042us-gaap:FairValueInputsLevel3Memberus-gaap:InterestRateSwapMember2023-12-310001767042us-gaap:InterestRateSwapMember2023-12-310001767042us-gaap:FairValueInputsLevel1Member2023-12-310001767042us-gaap:FairValueInputsLevel2Member2023-12-310001767042us-gaap:FairValueInputsLevel3Member2023-12-310001767042us-gaap:IPOMember2023-07-032023-07-0300017670422023-07-032023-07-030001767042us-gaap:OverAllotmentOptionMember2023-07-132023-07-130001767042us-gaap:OverAllotmentOptionMember2023-12-310001767042kgs:CSICompresscoLPMemberus-gaap:CommonStockMember2024-04-012024-04-010001767042kgs:CSICompresscoLPMemberus-gaap:PreferredStockMember2024-04-012024-04-0100017670422024-09-112024-09-110001767042kgs:ClassBIncentiveUnitsMemberkgs:TwoThousandAndNineteenClassBUnitIncentivePlanMember2019-03-160001767042kgs:ClassBIncentiveUnitsMember2024-09-300001767042kgs:ClassBIncentiveUnitsMember2023-12-310001767042kgs:ClassBIncentiveUnitsMember2024-01-012024-09-300001767042kgs:ClassBIncentiveUnitsMember2023-01-012023-09-300001767042kgs:ClassBIncentiveUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-09-300001767042kgs:ClassBIncentiveUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2024-01-012024-09-300001767042kgs:ClassBIncentiveUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2024-01-012024-09-300001767042kgs:ClassBIncentiveUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-09-300001767042kgs:ClassBIncentiveUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2024-07-012024-09-300001767042kgs:ClassBIncentiveUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-07-012023-09-300001767042kgs:ClassBIncentiveUnitsMemberkgs:TimeVestingMember2024-09-300001767042kgs:OmnibusPlanMember2023-06-200001767042kgs:OmnibusPlanMember2024-01-012024-09-300001767042kgs:OmnibusPlanMemberus-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-09-300001767042kgs:OmnibusPlanMemberus-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2024-05-012024-05-010001767042us-gaap:RestrictedStockUnitsRSUMemberkgs:A2020LongTermIncentivePlanMember2023-12-082023-12-080001767042kgs:OmnibusPlanMemberkgs:PerformanceShareUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:OmnibusPlanMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMembersrt:MinimumMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMembersrt:MaximumMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:DiscretionaryCashFlowMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:ConsolidatedNetLeverageRatioMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:AbsoluteTotalShareholdersReturnMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:ESGScorecardMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:PerformanceAtMaximumMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:PerformanceAtTargetMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:PerformanceAtThresholdMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:PerformanceAtBelowThresholdMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:AchievedESGScorecardMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberkgs:NotAchievedESGScorecardMember2024-01-012024-09-300001767042us-gaap:RestrictedStockUnitsRSUMemberkgs:OmnibusPlanMember2024-04-012024-04-010001767042us-gaap:RestrictedStockUnitsRSUMember2023-12-310001767042kgs:PerformanceShareUnitsMember2023-12-310001767042us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-09-300001767042us-gaap:RestrictedStockUnitsRSUMember2024-09-300001767042kgs:PerformanceShareUnitsMember2024-09-300001767042us-gaap:RestrictedStockUnitsRSUMember2022-12-310001767042kgs:PerformanceShareUnitsMember2022-12-310001767042us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001767042kgs:PerformanceShareUnitsMember2023-01-012023-09-300001767042us-gaap:RestrictedStockUnitsRSUMember2023-09-300001767042kgs:PerformanceShareUnitsMember2023-09-300001767042kgs:PerformanceShareUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2024-07-012024-09-300001767042kgs:PerformanceShareUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2024-01-012024-09-300001767042kgs:PerformanceShareUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-07-012023-09-300001767042kgs:PerformanceShareUnitsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-09-300001767042us-gaap:OperatingLeaseLeaseNotYetCommencedMember2024-09-300001767042kgs:ContractServicesMember2024-07-012024-09-300001767042kgs:OtherServicesMember2024-07-012024-09-300001767042kgs:ContractServicesMember2024-09-300001767042kgs:OtherServicesMember2024-09-300001767042kgs:ContractServicesMember2023-07-012023-09-300001767042kgs:OtherServicesMember2023-07-012023-09-300001767042kgs:ContractServicesMember2023-09-300001767042kgs:OtherServicesMember2023-09-300001767042kgs:ContractServicesMember2024-01-012024-09-300001767042kgs:OtherServicesMember2024-01-012024-09-300001767042kgs:ContractServicesMember2023-01-012023-09-300001767042kgs:OtherServicesMember2023-01-012023-09-300001767042us-gaap:PreferredStockMember2024-07-012024-09-300001767042kgs:RestrictedStockUnitsRSUsAndPerformanceSharesMember2024-07-012024-09-300001767042kgs:RestrictedStockUnitsRSUsAndPerformanceSharesMember2024-07-012024-09-300001767042kgs:RestrictedStockUnitsRSUsAndPerformanceSharesMember2024-01-012024-09-300001767042us-gaap:PreferredStockMember2024-07-012024-09-300001767042us-gaap:PreferredStockMember2024-01-012024-09-300001767042us-gaap:RelatedPartyMember2022-03-012022-03-310001767042us-gaap:RelatedPartyMember2024-01-012024-09-300001767042us-gaap:RelatedPartyMember2024-07-012024-09-300001767042us-gaap:RelatedPartyMember2023-07-012023-09-300001767042us-gaap:RelatedPartyMember2023-01-012023-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM 10-Q
____________________
(Mark One)
| | | | | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
OR
| | | | | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number: 001-41732
____________________
Kodiak Gas Services, Inc.
(Exact Name of Registrant as Specified in its Charter)
____________________
| | | | | | | | |
Delaware | | 83-3013440 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
9950 Woodloch Forest Drive, Suite 1900 The Woodlands, Texas | | 77380 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (936) 539-3300
____________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, par value $0.01 per share | | KGS | | New York Stock Exchange |
____________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | o | | Accelerated filer | o |
| | | | |
Non-accelerated filer | x | | Smaller reporting company | o |
| | | | |
| | | Emerging growth company | x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 5, 2024, the registrant had 87,569,679 shares of common stock, par value $0.01 per share, outstanding.
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding:
•Expected operating results, such as revenue growth and earnings, and our ability to service our indebtedness;
•Anticipated levels of capital expenditures and uses of capital;
•Current or future volatility in the credit markets and future market conditions;
•Potential or pending acquisition transactions or other strategic transactions, the timing thereof, the receipt of necessary approvals to close such transactions, our ability to finance such transactions, and our ability to achieve the intended operational, financial and strategic benefits from any such transactions;
•Expected synergies and efficiencies to be achieved as a result of our acquisition of CSI Compressco LP (“CSI Compressco” and such acquisition, the “CSI Acquisition”);
•Expectations regarding leverage and dividend profile as a result of the CSI Acquisition, including the amount and timing of future dividend payments;
•Expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities, and governmental and regulatory investigations and proceedings;
•Production and capacity forecasts for the natural gas and oil industry;
•Strategy for customer retention, growth, fleet maintenance, market position and financial results;
•Our interest rate hedges; and
•Strategy for risk management.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
•A reduction in the demand for natural gas and oil;
•The loss of, or the deterioration of the financial condition of, any of our key customers;
•Nonpayment and nonperformance by our customers, suppliers or vendors;
•Competitive pressures that may cause us to lose market share;
•The structure of our Contract Services contracts and the failure of our customers to continue to contract for services after expiration of the primary term;
•Our ability to successfully integrate any acquired businesses, including CSI Compressco, and realize the expected benefits thereof;
•Our ability to fund purchases of additional compression equipment;
•A deterioration in general economic, business, geopolitical or industry conditions, including as a result of the conflict between Russia and Ukraine and the Israel-Hamas War, inflation and slow economic growth in the United States;
•A downturn in the economic environment, as well as inflationary pressures;
•International operations and related mobilization and demobilization of compression units, operational interruptions, delays, upgrades, refurbishment and repair of compression assets and any related delays and cost overruns or reduced payment of contracted rates;
•Tax legislation and administrative initiatives or challenges to our tax positions;
•The loss of key management, operational personnel or qualified technical personnel;
•Our dependence on a limited number of suppliers;
•The cost of compliance with existing and new governmental regulations, including climate change legislation;
•The cost of compliance with regulatory initiatives and stakeholders’ pressures, including environmental, social and governance scrutiny;
•The inherent risks associated with our operations, such as equipment defects and malfunctions;
•Our reliance on third-party components for use in our information technology systems;
•Legal and reputational risks and expenses relating to the privacy, use and security of employee and client information;
•Threats of cyber attacks or terrorism;
•Agreements that govern our debt contain features that may limit our ability to operate our business and fund future growth and also increase our exposure to risk during adverse economic conditions;
•Volatility in interest rates;
•Our ability to access the capital and credit markets or borrow on affordable terms to obtain additional capital that we may require;
•Major natural disasters, severe weather events or other similar events that could disrupt operations;
•Unionization of our labor force, labor interruptions and new or amended labor regulations;
•Renewal of insurance;
•The effectiveness of our disclosure controls and procedures; and
•Such other factors set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Report.
Any forward-looking statement made by us in this Report is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
KODIAK GAS SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data) | | | | | | | | | | | | | | |
| | As of September 30, 2024 | | As of December 31, 2023 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 7,434 | | | $ | 5,562 | |
Accounts receivable, net | | 280,436 | | | 113,192 | |
Inventories, net | | 118,085 | | | 76,238 | |
Fair value of derivative instruments | | 4,110 | | | 8,194 | |
Contract assets | | 13,491 | | | 17,424 | |
Prepaid expenses and other current assets | | 19,801 | | | 10,353 | |
Total current assets | | 443,357 | | | 230,963 | |
Property, plant and equipment, net | | 3,406,325 | | | 2,536,091 | |
Operating lease right-of-use assets, net | | 54,489 | | | 33,716 | |
Finance lease right-of-use assets, net | | 4,702 | | | — | |
Goodwill | | 413,532 | | | 305,553 | |
Identifiable intangible assets, net | | 161,263 | | | 122,888 | |
Fair value of derivative instruments | | 5,121 | | | 14,256 | |
Deferred tax assets | | 17 | | | — | |
Other assets | | 3,202 | | | 639 | |
Total assets | | $ | 4,492,008 | | | $ | 3,244,106 | |
Liabilities and Stockholders’ Equity | | | | |
Current liabilities: | | | | |
Accounts payable | | $ | 85,848 | | | $ | 49,842 | |
Accrued liabilities | | 192,762 | | | 97,078 | |
Contract liabilities | | 70,178 | | | 63,709 | |
Total current liabilities | | 348,788 | | | 210,629 | |
Long-term debt, net of unamortized debt issuance cost | | 2,595,398 | | | 1,791,460 | |
Operating lease liabilities | | 50,491 | | | 34,468 | |
Finance lease liabilities | | 2,737 | | | — | |
Deferred tax liabilities | | 94,231 | | | 62,748 | |
Other liabilities | | 3,971 | | | 2,148 | |
Total liabilities | | 3,095,616 | | | 2,101,453 | |
Commitments and contingencies (Note 14) | | | | |
Stockholders’ equity: | | | | |
Preferred stock, par value $0.01 per share; 50,000,000 shares of preferred stock authorized, 5,562,273 and zero shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively | | 56 | | | — | |
Common stock, par value $0.01 per share; 750,000,000 shares of common stock authorized, 84,509,612 and 77,400,000 shares of common stock issued as of September 30, 2024, and December 31, 2023, respectively | | 845 | | | 774 | |
Additional paid-in capital | | 1,159,431 | | | 963,760 | |
Treasury stock, at cost; 1,000,000 and zero shares held as of September 30, 2024, and December 31, 2023, respectively | | (25,000) | | | — | |
Noncontrolling interest | | 149,846 | | | — | |
Retained earnings | | 111,214 | | | 178,119 | |
Total stockholders’ equity | | 1,396,392 | | | 1,142,653 | |
Total liabilities and stockholders’ equity | | $ | 4,492,008 | | | $ | 3,244,106 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
KODIAK GAS SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenues: | | | | | | | |
Contract Services | $ | 284,313 | | | $ | 186,673 | | | $ | 753,962 | | | $ | 545,989 | |
Other Services | 40,334 | | | 44,310 | | | 95,830 | | | 78,412 | |
Total revenues | 324,647 | | | 230,983 | | | 849,792 | | | 624,401 | |
Operating expenses: | | | | | | | |
Cost of operations (exclusive of depreciation and amortization shown below): | | | | | | | |
Contract Services | 96,617 | | | 65,470 | | | 261,832 | | | 193,257 | |
Other Services | 32,674 | | | 38,820 | | | 78,294 | | | 65,907 | |
Depreciation and amortization | 73,452 | | | 46,087 | | | 189,859 | | | 136,414 | |
Long-lived asset impairment | 9,921 | | | — | | | 9,921 | | | — | |
Selling, general and administrative | 35,528 | | | 19,648 | | | 120,279 | | | 46,171 | |
(Gain) loss on sale of property, plant and equipment | 10,376 | | | — | | | 9,203 | | | (721) | |
Total operating expenses | 258,568 | | | 170,025 | | | 669,388 | | | 441,028 | |
Income from operations | 66,079 | | | 60,958 | | | 180,404 | | | 183,373 | |
Other income (expenses): | | | | | | | |
Interest expense, net | (53,991) | | | (39,710) | | | (145,864) | | | (182,030) | |
Loss on extinguishment of debt | — | | | (6,757) | | | — | | | (6,757) | |
Gain (loss) on derivatives | (20,327) | | | 15,141 | | | 6,227 | | | 42,080 | |
Other income (expense), net | (156) | | | 38 | | | (6) | | | 39 | |
Total other expenses, net | (74,474) | | | (31,288) | | | (139,643) | | | (146,668) | |
Income (loss) before income taxes | (8,395) | | | 29,670 | | | 40,761 | | | 36,705 | |
Income tax expense (benefit) | (2,184) | | | 7,904 | | | 10,027 | | | 9,765 | |
Net income (loss) | (6,211) | | | 21,766 | | | 30,734 | | | 26,940 | |
Net income (loss) attributable to noncontrolling interests | (563) | | | — | | | (78) | | | — | |
Net income (loss) attributable to common shareholders | $ | (5,648) | | | $ | 21,766 | | | $ | 30,812 | | | $ | 26,940 | |
Earnings (loss) per share attributable to common shareholders: | | | | | | | |
Basic earnings (loss) per share | $ | (0.07) | | | $ | 0.28 | | | $ | 0.36 | | | $ | 0.41 | |
Diluted earnings (loss) per share | $ | (0.07) | | | $ | 0.28 | | | $ | 0.33 | | | $ | 0.41 | |
Basic weighted average shares of common stock outstanding | 84,292,083 | | 76,731,868 | | 81,774,211 | | 64,954,244 |
Diluted weighted average shares of common stock outstanding | 84,292,083 | | 76,899,483 | | 88,345,983 | | 65,121,859 |
See accompanying notes to the unaudited condensed consolidated financial statements.
KODIAK GAS SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shares | | Preferred Shares | | Additional Paid- In Capital | | Treasury Shares | | Retained Earnings | | Noncontrolling Interest | | Total Stockholders’ Equity |
| Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | | |
Balance, January 1, 2023 | 59,000,000 | | $ | 590 | | | — | | | $ | — | | | $ | 33,189 | | | — | | | $ | — | | | $ | 195,314 | | | $ | — | | | $ | 229,093 | |
Equity compensation - profits interests | — | | — | | | — | | | — | | | (193) | | | — | | | — | | | 879 | | | — | | | 686 | |
Net loss | — | | — | | | — | | | — | | | — | | | — | | | — | | | (12,343) | | | — | | | (12,343) | |
Balance, March 31, 2023 | 59,000,000 | | $ | 590 | | | — | | | $ | — | | | $ | 32,996 | | | — | | | $ | — | | | $ | 183,850 | | | $ | — | | | $ | 217,436 | |
Distribution to parent | — | | — | | | — | | | — | | | (33,189) | | | — | | | — | | | (9,111) | | | — | | | (42,300) | |
Equity compensation | — | | — | | | — | | | — | | | 193 | | | — | | | — | | | 29 | | | — | | | 222 | |
Net income | — | | — | | | — | | | — | | | — | | | — | | | — | | | 17,517 | | | — | | | 17,517 | |
Balance, June 30, 2023 | 59,000,000 | | $ | 590 | | | — | | | $ | — | | | $ | — | | | — | | | $ | — | | | $ | 192,285 | | | $ | — | | | $ | 192,875 | |
Proceeds from initial public offering, net of underwriter discount | 18,400,000 | | 184 | | | — | | | — | | | 277,656 | | | — | | | — | | | — | | | — | | | 277,840 | |
Offering costs | — | | — | | | — | | | — | | | (10,823) | | | — | | | — | | | — | | | — | | | (10,823) | |
Debt novation | — | | — | | | — | | | — | | | 687,590 | | | — | | | — | | | — | | | — | | | 687,590 | |
Equity compensation - profits interests | — | | — | | | — | | | — | | | — | | | — | | | — | | | 502 | | | — | | | 502 | |
Equity compensation - Omnibus Plan | — | | — | | | — | | | — | | | 2,042 | | | — | | | — | | | — | | | — | | | 2,042 | |
Net income | — | | — | | | — | | | — | | | — | | | — | | | — | | | 21,766 | | | — | | | 21,766 | |
Balance, September 30, 2023 | 77,400,000 | | $ | 774 | | — | | $ | — | | $ | 956,465 | | — | | $ | — | | $ | 214,553 | | $ | — | | $ | 1,171,792 |
| | | | | | | | | | | | | | | | | | | |
Balance, January 1, 2024 | 77,400,000 | | $ | 774 | | | — | | | $ | — | | | $ | 963,760 | | | — | | | $ | — | | | $ | 178,119 | | | $ | — | | | $ | 1,142,653 | |
Equity compensation - profits interests, net of forfeitures | — | | — | | — | | | — | | | — | | | — | | | — | | | 161 | | | — | | | 161 | |
Equity compensation - Omnibus Plan, net of forfeitures | — | | — | | — | | | — | | | 2,687 | | | — | | | — | | | — | | | — | | | 2,687 | |
Offering costs | — | | — | | — | | | — | | | (421) | | | — | | | — | | | — | | | — | | | (421) | |
Dividends and dividends equivalents paid to stockholders ($0.38 per common share) | — | | — | | — | | | — | | | — | | — | | | — | | (30,052) | | | — | | | (30,052) | |
Restricted Stock Units vested under the Omnibus Plan, net of 14,698 shares withheld for taxes | 34,577 | | | — | | | — | | | — | | | (294) | | | — | | | — | | | — | | | — | | | (294) | |
Net income | — | | — | | — | | | — | | | — | | — | | | — | | 30,232 | | | — | | | 30,232 | |
Other | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7 | | | — | | | 7 | |
Balance, March 31, 2024 | 77,434,577 | | $ | 774 | | | — | | | $ | — | | | $ | 965,732 | | | — | | | $ | — | | | $ | 178,467 | | | $ | — | | | $ | 1,144,973 | |
Issuance of common shares for business acquisition | 6,785,712 | | | 68 | | | — | | | — | | | 188,099 | | | — | | | — | | | — | | | — | | | 188,167 | |
Issuance of preferred shares and noncontrolling interest for business acquisition | — | | | — | | | 5,562,273 | | | 56 | | | (124) | | | — | | | — | | | — | | | 154,186 | | | 154,118 | |
Equity compensation - profits interests, net of forfeitures | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 21 | | | — | | | 21 | |
Equity compensation - Omnibus Plan, net of forfeitures | — | | | — | | | — | | | — | | | 4,963 | | | — | | | — | | | — | | | 327 | | | 5,290 | |
Offering costs | — | | | — | | | — | | | — | | | (741) | | | — | | | — | | | — | | | — | | | (741) | |
Dividends and dividends equivalents paid to stockholders ($0.38 per common share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (32,796) | | | — | | | (32,796) | |
Restricted Stock Units vested under the Omnibus Plan, net of 13,592 shares withheld for taxes | 92,071 | | | 1 | | | — | | | — | | | (104) | | | — | | | — | | | — | | | — | | | (103) | |
Distributions to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,460) | | | (2,460) | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,228 | | | 485 | | | 6,713 | |
Other | — | | | — | | | — | | | — | | | (90) | | | — | | | — | | | 300 | | | (9) | | | 201 | |
Balance, June 30, 2024 | 84,312,360 | | | $ | 843 | | | 5,562,273 | | | $ | 56 | | | $ | 1,157,735 | | | — | | | $ | — | | | $ | 152,220 | | | $ | 152,529 | | | $ | 1,463,383 | |
Equity compensation - profits interests, net of forfeitures | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 21 | | | — | | | 21 | |
Equity compensation - Omnibus Plan, net of forfeitures | — | | | — | | | — | | | — | | | 3,641 | | | — | | | — | | | — | | | 243 | | | 3,884 | |
Dividends and dividends equivalents paid to stockholders ($0.41 per common share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (35,297) | | | — | | | (35,297) | |
Restricted Stock Units vested under the Omnibus Plan, net of 79,205 shares withheld for taxes | 197,252 | | | 2 | | | — | | | — | | | (2,371) | | | — | | | — | | | — | | | — | | | (2,369) | |
Net effect on deferred taxes and taxes payable related to the vesting of restricted stock | — | | | — | | | — | | | — | | | 418 | | | — | | | — | | | — | | | — | | | 418 | |
Repurchase of common shares | — | | | — | | | — | | | — | | | — | | | 1,000,000 | | | (25,000) | | | — | | | — | | | (25,000) | |
Distributions to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,421) | | | (2,421) | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,648) | | | (563) | | | (6,211) | |
Other | — | | | — | | | — | | | — | | | 8 | | | — | | | — | | | (82) | | | 58 | | | (16) | |
Balance, September 30, 2024 | 84,509,612 | | | $ | 845 | | | 5,562,273 | | | $ | 56 | | | $ | 1,159,431 | | | 1,000,000 | | | $ | (25,000) | | | $ | 111,214 | | | $ | 149,846 | | | $ | 1,396,392 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
KODIAK GAS SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands) | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net income | $ | 30,734 | | | $ | 26,940 | |
Adjustments to reconcile net income to net cash provided by operating activities | | | |
Depreciation and amortization | 189,859 | | | 136,414 | |
Long-lived asset impairment | 9,921 | | | — | |
Equity compensation expense | 12,064 | | | 3,452 | |
Amortization of debt issuance costs | 8,079 | | | 11,260 | |
Non-cash lease expense | 3,164 | | | 3,132 | |
Provision for credit losses | 4,625 | | | 2,047 | |
Inventory reserve | 476 | | | 375 | |
(Gain) loss on sale of property, plant and equipment | 9,203 | | | (721) | |
Change in fair value of derivatives | 13,219 | | | 13,551 | |
Deferred tax provision | 4,821 | | | 6,312 | |
Loss on extinguishment of debt | — | | | 4,359 | |
Changes in operating assets and liabilities, exclusive of effects of business acquisition: | | | |
Accounts receivable | (126,941) | | | (21,371) | |
Inventories | (7,895) | | | 1,174 | |
Contract assets | 3,934 | | | (6,053) | |
Prepaid expenses and other current assets | (747) | | | (3,733) | |
Accounts payable | 40,204 | | | 3,257 | |
Accrued and other liabilities | 9,593 | | | 8,497 | |
Contract liabilities | 5,068 | | | 14,807 | |
Other assets | 121 | | | — | |
Net cash provided by operating activities | 209,502 | | | 203,699 | |
Cash flows from investing activities: | | | |
Net cash acquired in acquisition of CSI Compressco LP | 9,458 | | | — |
Purchase of property, plant and equipment | (263,719) | | | (145,573) | |
Proceeds from sale of property, plant and equipment and sale of entity | 14,977 | | | 1,055 | |
Other | (35) | | | (45) | |
Net cash used in investing activities | (239,319) | | | (144,563) | |
Cash flows from financing activities: | | | |
Borrowings on debt instruments | 2,297,435 | | | 756,418 | |
Payments on debt instruments | (2,114,013) | | | (1,021,556) | |
Principal payments on other borrowings | (3,721) | | | — | |
Payment of debt issuance cost | (16,346) | | | (32,759) | |
Dividends paid to stockholders | (97,506) | | | — | |
Repurchase of common shares | (25,000) | | | — | |
Principal payments on finance leases | (870) | | | — | |
Proceeds from initial public offering, net of underwriter discounts | — | | | 277,840 | |
Offering costs | (1,162) | | | (9,247) | |
Loss on extinguishment of debt | — | | | (1,835) | |
Cash paid for shares withheld to cover taxes | (2,665) | | | — | |
Net effect on deferred taxes and taxes payable related to the vesting of restricted stock | 418 | | | — | |
Distribution to parent | — | | | (42,300) | |
Distributions to noncontrolling interest | (4,881) | | | — | |
Net cash provided by (used in) financing activities | 31,689 | | | (73,439) | |
Net increase (decrease) in cash and cash equivalents | 1,872 | | | (14,303) | |
Cash and cash equivalents - beginning of period | 5,562 | | | 20,431 | |
Cash and cash equivalents - end of period | $ | 7,434 | | | $ | 6,128 | |
Supplemental cash disclosures: | | | |
Cash paid for interest | $ | 106,463 | | | $ | 173,006 | |
Cash paid for taxes | $ | 10,333 | | | $ | 5,946 | |
Supplemental disclosure of non-cash investing activities: | | | |
(Increase) decrease in accrued capital expenditures | $ | 2,961 | | | $ | (6,498) | |
Supplemental disclosure of non-cash financing activities: | | | |
Dividends equivalent | $ | 687 | | | $ | — | |
Issuance of common shares in acquisition of CSI Compressco LP | $ | 188,167 | | | $ | — | |
Issuance of preferred shares and noncontrolling interest in acquisition of CSI Compressco LP | $ | 154,118 | | | $ | — | |
Non-cash debt novation | $ | — | | | $ | (689,829) | |
Non-cash loss on extinguishment of debt | $ | — | | | $ | (563) | |
Non-cash offering costs | $ | — | | | $ | (792) | |
See accompanying notes to the unaudited condensed consolidated financial statements.
KODIAK GAS SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Description of Business
Kodiak Gas Services, Inc. (the “Company” or “Kodiak”) is an operator of contract compression infrastructure and related services in the U.S. The Company operates compression units under fixed-revenue contracts with upstream and midstream customers. The Company formerly managed its business through two operating segments: Compression Operations and Other Services. After the acquisition of CSI Compressco LP (“CSI Compressco” and such acquisition, the “CSI Acquisition”) on April 1, 2024, the Company manages its business through the following two operating segments: Contract Services and Other Services and operates predominantly in the U.S., with international subsidiaries that have limited operations in Mexico, Argentina and Chile. Contract Services consists of operating Company-owned compression, customer-owned compression, and gas treating and cooling infrastructure, pursuant to fixed-revenue contracts, to enable the production, gathering and transportation of natural gas and oil. Other Services consists of station construction, maintenance and overhaul, freight and crane charges, part sales and other time and material-based offerings.
Kodiak operates its business and the majority of the Company’s assets and liabilities under its subsidiary Kodiak Gas Services, LLC (“Kodiak Services”). Kodiak is the primary beneficiary of Kodiak Services, which is a variable interest entity, since the Company has the power to direct the activities that most significantly impact Kodiak Services’ economic performance and the Company has the right (and obligation) to receive benefits (and absorb losses) of Kodiak Services that could be potentially significant to the Company.
See Note 20 (“Segments”) to the Company’s condensed consolidated financial statements.
2. Acquisitions and Divestitures
Merger with CSI Compressco
On April 1, 2024, the Company completed the acquisition of 100% of the issued and outstanding partnership interests of CSI Compressco pursuant to the terms of the Merger Agreement, dated December 19, 2023 (the “Merger Agreement”), for total consideration of $342.3 million, consisting of the issuance of the equity shares in the CSI Acquisition. CSI Compressco provided contract services related to the exploration and production of oil and natural gas, including natural gas compression services and treating services, and provided aftermarket services and compressor package parts and components manufactured by third-party suppliers. Strategically, the CSI Acquisition is expected to afford us the opportunity to capture significant synergies associated with our product and service offerings, further penetrate new and existing markets, and achieve administrative efficiencies and other strategic benefits.
Under the Merger Agreement, CSI Compressco unitholders received 0.086 shares of common stock, par value $0.01 per share, of Kodiak (“common stock”) for each CSI Compressco common unit owned, and certain CSI Compressco unitholders meeting specified requirements (the “Electing Unitholders”) elected to receive limited liability company units (“OpCo Units”) representing economic interests in Kodiak’s subsidiary, Kodiak Services (along with an equal number of shares of Kodiak’s non-economic voting preferred stock), for each CSI Compressco common unit they held. Each OpCo Unit will be redeemable at the option of the holder for (i) one share of common stock (along with cancellation of a corresponding share of preferred stock) or (ii) cash at Kodiak Services’ election, following a 180 days post-closing lock-up and subject to certain conditions. On or after April 1, 2029, Kodiak shall have the right to effect redemption of such OpCo Units. The OpCo Units represent and will be accounted for as noncontrolling interests in Kodiak Services. Each share of preferred stock entitles the holder to one vote per share, voting proportionally with holders of common stock. The preferred stock lacks economic benefits beyond its par value of $0.01 per share (with a maximum value of $50,000), as it does not participate in earnings or cash dividends of Kodiak. Rather, it solely represents a voting share. Pursuant to the Merger Agreement, the Company issued 6,785,712 shares of common stock and 5,562,273 shares of preferred stock (with an equal number of OpCo Units) with an estimated fair value of $342.3 million based on the Company’s stock price on April 1, 2024 of $27.72.
Additionally, subsequent to the close of the CSI Acquisition, the Company used additional draws on the ABL Facility (see Note 10 for further description) of $651.8 million to repay, terminate and/or redeem all of CSI Compressco’s existing
outstanding indebtedness, except for certain equipment financing obligations, and pay fees and expenses related to the 2029 Senior Notes offering (see Note 10) and the CSI Acquisition.
Our preliminary allocation of the purchase price to the estimated fair value of the CSI Compressco net assets is as follows (in thousands):
| | | | | | | | |
Fair value of consideration transferred | | $ | 342,285 |
| | |
Recognized amounts of identifiable assets acquired and liabilities assumed | | |
Cash and cash equivalents | | $ | 9,458 | |
Receivables | | 48,890 | |
Inventory | | 40,738 | |
Prepaid expenses & other current assets | | 8,738 | |
Intangible assets | | 47,502 | |
Property, plant and equipment | | 813,783 | |
Right of use assets | | 26,044 | |
Deferred tax assets | | 17 | |
Other non-current assets | | 3,110 | |
Total assets acquired | | 998,280 | |
| | |
Deferred tax liabilities | | 27,938 | |
Long term debt | | 627,953 | |
Other current liabilities | | 86,212 | |
Other non-current liabilities | | 21,871 | |
Total liabilities assumed | | 763,974 | |
| | |
Total identifiable assets acquired less liabilities assumed | | $ | 234,306 | |
| | |
Goodwill acquired | | $ | 107,979 | |
The allocation of purchase price to CSI Compressco’s net assets and liabilities as of April 1, 2024, is preliminary and subject to the potential identification of additional assets and contingencies or revisions to the deferred income taxes or fair value calculations. As a result, the fair value may be subject to adjustments pending completion of final valuations and post-closing adjustments, and the final purchase price allocation could differ materially from the preliminary allocation above. Actual purchase price allocation amounts will be disclosed in subsequent filings. The purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. The methodologies used, and key assumptions made, were based on a combination of the income approach, market approach, and cost approach. During the nine months ended September 30, 2024, we recognized measurement period adjustments of $10.1 million, primarily related to updated valuations of property, plant and equipment, intangible assets, and deferred tax liabilities. The measurement period adjustment increased goodwill acquired from $97.8 million to $108.0 million.
The fair value of the assets acquired and liabilities assumed are categorized in the following levels:
Level 1 - Cash and cash equivalents; based on observable inputs such as quoted prices in active markets at the measurement date for identical assets or liabilities.
Level 2 - Receivables, inventory, right of use assets, prepaid expenses and other current assets, other non-current assets, long term debt and other current and non-current liabilities; based on inputs that are observable such as quoted prices in markets that are not active (e.g. quoted pricing on CSI Compressco’s debt), or inputs which are observable, for substantially the full term of the asset or liability.
Level 3 - Intangible assets, property, plant and equipment; based on unobservable inputs for which there is little or no market data and which assumption are made about how market participants would price the assets or liabilities. The Company used a combination of the income, cost and market approaches based on various assumptions and inputs.
The preliminary allocation of purchase price includes approximately $108.0 million allocated to nondeductible goodwill and is supported by the strategic benefits (discussed above) expected to be generated from the CSI Acquisition. The assessment of assigning goodwill to our respective segments is not complete as of the issuance date of our condensed consolidated financial statements. The acquired property, plant and equipment is stated at fair value, and depreciation on the acquired property, plant and equipment is computed using the straight-line method over the estimated remaining useful lives of each asset in line with the Company’s polices. The acquired intangible assets as of the CSI Acquisition date represent approximately $41.1 million for customer relationships, and $6.4 million for the trademarks/trade names that are stated at estimated fair value and are amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 15 years.
For the three and nine months ended September 30, 2024, our revenues include $87.9 million and $182.7 million, respectively, associated with the CSI Acquisition after the closing on April 1, 2024. It is impracticable to determine the earnings recorded in the condensed consolidated statements of operations for the three and nine month periods ended September 30, 2024 as we initiated the integration of a substantial portion of CSI Compressco into our ongoing operations during the current period. In addition, acquisition-related costs of approximately $2.6 million and $27.8 million were incurred during the three and nine months ended September 30, 2024, respectively, related to external legal fees, transaction consulting fees, and due diligence costs. These costs have been recognized in selling, general and administrative expenses in the condensed consolidated statements of operations.
Unaudited Supplemental Pro Forma Financial Information
The unaudited supplemental pro forma information presented below has been prepared to give effect to the CSI Acquisition as if the transaction had occurred on January 1, 2023. The unaudited supplemental pro forma information is presented for illustrative purposes only and is based on estimates and assumptions we deemed appropriate. The following unaudited supplemental pro forma information is not necessarily indicative of the historical results that would have been achieved if the acquisition had occurred in the past, and our operating results may have been different from those reflected in the unaudited supplemental pro forma information below. Therefore, the unaudited supplemental pro forma information should not be relied upon as an indication of the operating results that we would have achieved if the transaction had occurred on January 1, 2023 or the future results that we will achieve after the transactions. The unaudited supplemental pro forma results include certain adjustments, primarily due to increases in interest expense due to additional borrowings incurred to finance the acquisition and amortization of debt issuance costs, and acquisition related costs including transaction costs, such as legal, accounting, valuation and other professional services as well as integration costs such as severance.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 (1) | | 2023 | | 2024 | | 2023 |
Revenue | | $ | 324,647 | | | $ | 330,690 | | | $ | 946,902 | | | $ | 912,258 | |
Earnings | | $ | (6,211) | | | $ | 21,647 | | | $ | 35,599 | | | $ | 23,033 | |
(1) No pro forma effect, as amounts included in the condensed consolidated statements of operations.
Sale of Assets
On September 12, 2024, the Company sold certain property, plant and equipment and other assets in the U.S. and our entity in Canada to a third-party buyer. The majority of the operations were included in the Contract Services segment through the date of sale. At the disposal date, total net assets sold were $18.0 million, consisting primarily of compression equipment, inventory, and other assets. Upon disposition, we incurred a loss of $7.0 million included in (gain) loss on sale of property, plant and equipment in our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2024.
3. Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. These unaudited condensed consolidated financial statements include the accounts of Kodiak and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation.
It is the Company’s opinion that all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The Company’s results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the Consolidated
Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Certain prior period amounts have been reclassified to conform to the current period presentation.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which improves reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments in this update are effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is to be applied on a retrospective basis. The adoption of this standard will not have a material impact on our disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 require the annual financial statements to include consistent categories, greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. The Company is currently evaluating the impact of this standard on its disclosures.
4. Revenue Recognition
The following table disaggregates the Company’s revenue by type and timing of provision of services or transfer of goods (in thousands):
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2024 | | 2023 |
Services provided over time: | | | |
Contract Services | $ | 284,313 | | | $ | 184,959 | |
Other Services | 16,417 | | | 39,096 | |
Total services provided over time | 300,730 | | | 224,055 | |
Services provided or goods transferred at a point in time: | | | |
Contract Services | — | | | 1,714 | |
Other Services | 23,917 | | | 5,214 | |
Total services provided or goods transferred at a point in time | 23,917 | | | 6,928 | |
Total revenue | $ | 324,647 | | | $ | 230,983 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
Services provided over time: | | | |
Contract Services | $ | 752,282 | | | $ | 539,575 | |
Other Services | 61,684 | | | 62,852 | |
Total services provided over time | 813,966 | | | 602,427 | |
Services provided or goods transferred at a point in time: | | | |
Contract Services | 1,680 | | | 6,414 | |
Other Services | 34,146 | | | 15,560 | |
Total services provided or goods transferred at a point in time | 35,826 | | | 21,974 | |
Total revenue | $ | 849,792 | | | $ | 624,401 | |
The Company derives its revenue from contracts with customers, which comprise the following revenue streams:
Contract Services
Contract Services consists of operating Company-owned compression, customer-owned compression and gas treating and cooling infrastructure for the Company’s customers, pursuant to fixed-revenue contracts, enabling the production, gathering and transportation of natural gas and oil.
Contract Services for Kodiak-owned compressors, customer-owned compressors, as well as gas treating equipment, are generally satisfied over time, as services are rendered for selected customer locations on a monthly basis and based upon specific performance criteria set forth in the applicable contract. Terms are typically one to seven years, and at the end of the term, transition to a month-to-month term if not cancelled by either party. The monthly service for a location is substantially the same service month to month and is promised consecutively over the contract term. The progress and performance of the service are measured consistently using a straight-line, time-based method; the performance obligations are satisfied evenly over the contract term as the customer simultaneously receives and consumes the benefits provided by the service. Consistent with Kodiak’s satisfaction of its performance obligations, the customer renders payment for services over time in accordance with the terms of the contract.
If variable consideration exists, it is allocated to the distinct monthly service within the series to which such variable consideration relates. The Company has elected to apply the right to invoice practical expedient to recognize revenue for such variable consideration, as the invoice corresponds to the value transferred to the customer based on the Company’s performance completed to date.
There are typically no material obligations for returns, refunds or warranties. The Company’s standard contracts do not usually include non-cash consideration.
Other Services
Other Services consists of a full range of services to support any ancillary needs of customers, including station construction, maintenance and overhaul, freight and crane charges, and other time and material-based offerings.
For most of the Company’s construction contracts, the customer contracts with the Company to provide a service of integrating a significant set of tasks and components into a single contract. Hence, the entire contract is accounted for as one performance obligation. The Company recognizes revenue over time as the Company’s performance creates or enhances an asset that the customer, in turn, controls. For construction contracts, revenue is recognized using an input method. Measure of the progress towards satisfaction of the performance obligation is based on the actual amount of labor and material costs incurred. The amount of the transaction price recognized as revenue each reporting period is determined by multiplying the transaction price by the ratio of actual costs incurred to date to total estimated costs expected for the construction services. Payment terms and conditions vary by contract, but contract terms generally include a requirement of payment upon completion of a milestone. Judgment is involved in the estimation of the progress to completion. Any adjustments to the measure of the progress to completion is accounted for on a prospective basis. Changes to the scope of service are recognized as an adjustment to the transaction price in the period in which the change order is agreed upon and executed. Losses on construction contracts, if any, are recognized in the period when the estimated loss is determined. There have been no losses recognized in the three and nine months ended September 30, 2024 and 2023, respectively.
Services provided based on time spent, parts and/or materials are generally short-term in nature and labor rates and parts pricing are agreed upon prior to commencing the service. The Company applies a gross margin percentage, which is fixed based on historical time and materials-based service, to actual costs incurred. Since revenue is recognized when time is incurred, this revenue is recognized at a point in time when the service is rendered.
Service revenue earned primarily on freight and crane charges that are directly reimbursable by the Company’s customers is recognized at the point in time the service is provided, and control is transferred to the customer. At such time, the customer has the ability to direct the use of the benefits of such service after the performance obligation is satisfied. The amount of consideration the Company receives and the amount of revenue the Company recognizes is based upon the invoice amount.
Contract Assets and Liabilities
The Company recognizes a contract asset when the Company has the right to consideration in exchange for goods or services transferred to a customer. Contract assets are transferred to trade receivables when the Company has the right to
bill. The Company had contract assets of $13.5 million and $17.4 million as of September 30, 2024, and December 31, 2023, respectively. There was a $3.6 million contract asset balance as of January 1, 2023.
The Company records contract liabilities when cash payments are received or due in advance of performance. The Company’s contract liabilities were $70.2 million and $63.7 million as of September 30, 2024, and December 31, 2023. As of January 1, 2024, and January 1, 2023, the beginning balances for contract liabilities were $63.7 million and $57.1 million, all of which was recognized as revenue in the nine months ended September 30, 2024, and September 30, 2023, respectively.
Performance Obligations
As of September 30, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to the Company’s revenue for the Contract Services segment is $1.4 billion.
The Company expects to recognize these remaining performance obligations as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder of 2024 | | 2025 | | 2026 | | 2027 | | 2028 and thereafter | | Total |
Remaining performance obligations | $ | 241,230 | | | $ | 640,751 | | | $ | 358,243 | | | $ | 123,175 | | | $ | 27,326 | | | $ | 1,390,725 | |
As of September 30, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to the Company’s revenue for the Other Services segment is $20.7 million, of which $9.8 million is expected to be recognized by December 31, 2024.
5. Accounts Receivable, net
Accounts receivable, net consist of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, 2024 | | As of December 31, 2023 |
Accounts receivable | $ | 293,026 | | | $ | 121,242 | |
Less: allowance for credit losses | 12,590 | | | 8,050 | |
Accounts receivable, net | $ | 280,436 | | | $ | 113,192 | |
The allowances for credit losses were $12.6 million and $8.0 million as of September 30, 2024, and December 31, 2023, respectively, which represents the Company’s best estimate of the amount of probable credit losses included within the Company’s existing accounts receivable balance. For the nine months ended September 30, 2024 the Company recorded a net increase in the allowance for credit losses of $4.5 million.
The changes in the Company’s allowance for credit losses are as follows (in thousands):
| | | | | |
| Allowances for Credit Losses |
Balance at January 1, 2023 | $ | 949 | |
Current-period provision for expected credit losses | 7,101 |
Write-offs charged against allowance | — | |
Balance at December 31, 2023 | $ | 8,050 | |
Current-period provision for expected credit losses | 4,625 | |
Write-offs charged against allowance | (85) | |
Balance at September 30, 2024 | $ | 12,590 | |
6. Inventories, net
Inventories consist of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, 2024 | | As of December 31, 2023 |
Non-serialized parts | $ | 97,529 | | | $ | 62,784 | |
Serialized parts | 20,556 | | | 13,454 | |
Total inventories, net | $ | 118,085 | | | $ | 76,238 | |
7. Property, Plant and Equipment, net
Property, plant and equipment, net consist of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, 2024 | | As of December 31, 2023 |
Compression equipment | $ | 4,135,178 | | | $ | 3,166,214 | |
Field equipment | 92,190 | | | 19,286 | |
Buildings and shipping containers | 16,418 | | | 11,942 | |
Technology hardware and software | 14,828 | | | 11,161 | |
Trailers and vehicles | 14,342 | | | 9,885 | |
Leasehold improvements | 11,301 | | | 8,093 | |
Furniture and fixtures | 2,613 | | | 2,053 | |
Land | 1,748 | | | 743 | |
Other | 217 | | | 374 | |
Total property, plant and equipment, gross | 4,288,835 | | | 3,229,751 | |
Less: accumulated depreciation and impairment | (882,510) | | | (693,660) | |
Property, plant and equipment, net | $ | 3,406,325 | | | $ | 2,536,091 | |
Depreciation expense was $69.0 million and $179.6 million for the three and nine months ended September 30, 2024, respectively, and is recorded within depreciation and amortization on the accompanying condensed consolidated statements of operations. Depreciation expense was $43.7 million and $129.3 million for the three and nine months ended September 30, 2023, respectively.
8. Goodwill and Identifiable Intangible Assets, net
The increase in goodwill from December 31, 2023 to September 30, 2024, is attributable to the CSI Acquisition. See Note 2 (“Acquisitions and Divestitures”) for more details. The change in the carrying amount of goodwill by reportable segment
for the nine months ended September 30, 2024, is preliminary and subject to change. Actual allocation by segment will be disclosed in subsequent filings.
Change in carrying amount of goodwill is shown below (in thousands):
| | | | | |
| Goodwill |
Balance as of December 31, 2023 | $ | 305,553 | |
Acquisition of CSI Compressco | 97,837 | |
Measurement period adjustment | 10,142 | |
Balance as of September 30, 2024 | $ | 413,532 | |
The Company’s identifiable intangible assets consist of the following as of September 30, 2024, and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 | | |
| Original Cost | | Accumulated Amortization | | Net Amount | | Remaining Weighted Average Amortization Period (years) | | Remaining Weighted Average Amortization Period (years) for acquired intangibles |
Trade name | $ | 19,400 | | | $ | (4,308) | | | $ | 15,092 | | | 10.8 | | 4.5 |
Customer relationships | 191,100 | | | (44,929) | | | 146,171 | | | 12.9 | | 14.7 |
Total identifiable intangible assets | $ | 210,500 | | | $ | (49,237) | | | $ | 161,263 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Original Cost | | Accumulated Amortization | | Net Amount | | Remaining Weighted Average Amortization Period (years) |
Trade name | $ | 13,000 | | | $ | (3,181) | | | $ | 9,819 | | | 15.1 |
Customer relationships | 150,000 | | | (36,931) | | | 113,069 | | | 12.8 |
Total identifiable intangible assets | $ | 163,000 | | | $ | (40,112) | | | $ | 122,888 | | | |
Amortization expense was $3.7 million and $9.1 million for the three and nine months ended September 30, 2024, and is recorded within depreciation and amortization on the condensed consolidated statements of operations. Amortization expense was $2.4 million and $7.1 million for the three and nine months ended September 30, 2023, respectively.
As of September 30, 2024, the following is a summary of future minimum amortization expense for identified intangible assets (in thousands):
| | | | | |
| Amount |
Years ending December 31, | |
Remainder of 2024 | $ | 3,430 | |
2025 | 13,494 | |
2026 | 13,494 | |
2027 | 13,494 | |
2028 | 13,494 | |
Thereafter | 103,857 | |
Total | $ | 161,263 | |
9. Long-Lived and Other Asset Impairment
Long-lived assets, including property, plant and equipment and other finite-lived identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances, including the removal of compressors from the active fleet, indicate that the carrying amount of an asset may not be recoverable. Such events may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in the Company’s business strategy, among others. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to estimated future undiscounted net cash flows expected to be generated by the asset. Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its estimated future discounted net cash flows.
For the three and nine months ended September 30, 2024, we determined that certain events occurred to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of assets may not be recoverable. As a result, we recorded an impairment of compression equipment of $9.9 million for the three and nine months ended September 30, 2024. No impairment was recorded, and no triggering events were identified for the three and nine months ended September 30, 2023.
10. Debt and Credit Facilities
Debt consists of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, 2024 | | As of December 31, 2023 |
ABL Facility | $ | 1,891,719 | | | $ | 1,830,346 | |
2029 Senior Notes | 750,000 | | | — | |
Total debt outstanding | 2,641,719 | | | 1,830,346 | |
Less: unamortized debt issuance cost | (46,321) | | | (38,886) | |
Long-term debt, net of unamortized debt issuance cost | 2,595,398 | | | 1,791,460 | |
Other borrowings | 7,652 | | | — | |
Total long-term debt and other borrowings | $ | 2,603,050 | | | $ | 1,791,460 | |
ABL Facility
On March 22, 2023, wholly owned subsidiaries of Kodiak entered into the Fourth Amended and Restated Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement” or “ABL Facility”), which mainly served to extend the maturity date from
June 2024 to March 2028. The total commitments under the facility are $2.2 billion. As of September 30, 2024, there were $2.4 million in letters of credit outstanding under the ABL Facility.
Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of Consolidated Total Debt to Consolidated EBITDA, each as defined in the ABL Credit Agreement). The maximum Leverage Ratio is (i) 5.75 to 1.00 for the fiscal quarters ending June 30, 2024, September 30, 2024, December 31, 2024 and March 31, 2025 and (ii) 5.25 to 1.00 for each fiscal quarter thereafter.
The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay certain dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets.
The ABL Facility is a “revolving credit facility” that includes a lockbox arrangement whereby, under certain events, remittances from customers are forwarded to a bank account controlled by the administrative agent and are applied to reduce borrowings under the facility. One such event occurs if availability under the ABL Credit Agreement falls below a specified threshold (i.e., the greater of $200 million or 10% of the aggregate commitments at the time of measurement). As of September 30, 2024, and December 31, 2023, availability under the ABL Facility was in excess of the specified threshold, and, as such, the entire balance was classified as long-term in accordance with its maturity.
Third Amendment to Fourth Amended and Restated Credit Agreement
On January 22, 2024, Kodiak entered into the Third Amendment to the ABL Credit Agreement (the “Third Amendment”). The Third Amendment, among other things, amended certain provisions of the ABL Facility (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement (see Note 2 - “Acquisitions and Divestitures”) and (ii) to account for the Company’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement. Lender fees and costs totaling $2.9 million were incurred related to the Third Amendment and will be amortized over the life of the loan to interest expense.
In addition, the Third Amendment amended the ABL Facility to (i) update the maximum secured leverage ratio to (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter, (ii) modify the triggers for commencing a “cash dominion” period (i.e., a period when the administrative agent applies proceeds in the deposit accounts to reduce borrowings under the ABL Credit Agreement), such that a “cash dominion” period will commence if availability under the ABL Credit Agreement is less than $125 million for more than five consecutive business days or if certain types of events of default occur, (iii) include customary provisions relating to the designation of “unrestricted subsidiaries” (i.e., subsidiaries that are not required to become loan parties or be bound by the covenants contained in the ABL Credit Agreement), (iv) provide that only material domestic restricted subsidiaries are required to become guarantors and collateral grantors under the ABL Facility, and (v) permit the Company and its restricted subsidiaries to incur additional indebtedness and liens and to make additional investments, dividends, distributions, redemptions and dispositions.
The weighted average interest rate as of September 30, 2024, and December 31, 2023, was 7.64% and 8.08%, respectively, excluding the effect of interest rate swaps. The Company pays an annualized commitment fee of 0.25% on the unused portion of its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion of the ABL Facility if borrowings are less than 50% of total commitments.
All obligations under the ABL Facility are collateralized by essentially all the assets of the Company. We were in compliance with all covenants as of September 30, 2024, and December 31, 2023.
2029 Senior Notes
On February 2, 2024, Kodiak Services issued $750,000,000 aggregate principal amount of 7.25% senior notes due 2029 (the “2029 Senior Notes”), pursuant to an indenture, by and among the Company and certain other subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. The Company’s 2029 Senior Notes are not subject to any mandatory redemption or sinking fund requirements. The 2029 Senior Notes are subject to redemption at a make-whole redemption price, inclusive of accrued and unpaid interest. This make-whole redemption price is determined
as the higher of 100% of the principal amount of the notes or the present value of remaining principal and interest payments discounted semi-annually to the redemption date using the applicable treasury rate plus 0.50%. Before February 15, 2026, the Company has the option to redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes issued under this indenture, limited to the net cash proceeds of one or more equity offerings. Following February 15, 2026, the Company retains the right to redeem all or a portion of the 2029 Senior Notes, with redemption prices expressed as percentages of the principal amount, along with accrued and unpaid interest.
The optional redemption percentages for the 2029 Senior Notes are as follows:
| | | | | | | | |
| | Percentage |
2026 | | 103.625% |
2027 | | 101.813% |
2028 and thereafter | | 100.000% |
The indenture governing the Company’s 2029 Senior Notes contain covenants that, among other things, limit the Company’s ability to create liens securing certain indebtedness, enter into certain sale-leaseback transactions, or consolidate, merge or transfer certain assets. The covenants are subject to a number of important exceptions and qualifications. The Company was in compliance with these covenants at September 30, 2024. Fees and costs totaling $13.4 million were incurred related to the 2029 Senior Notes and will be amortized over the life of the loan to interest expense.
The proceeds from the 2029 Senior Notes were used to repay a portion of the outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the 2029 Senior Notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds from additional draws on the ABL Facility to repay, terminate and/or redeem all of CSI Compressco’s existing outstanding indebtedness, except for certain equipment financing obligations, and pay fees and expenses related to the notes offering and the CSI Acquisition.
Term Loan
A wholly owned subsidiary of Kodiak had a term loan (the “Term Loan”), pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent.
On June 29, 2023, the Company terminated all interest rate swaps and collars attributable to the Term Loan, recognized a gain on derivatives and received cash of $25.8 million for the nine months ended September 30, 2023 (the “Term Loan Derivative Settlement”). On July 3, 2023, in connection with the IPO, the Company used the net proceeds from the IPO, together with the proceeds resulting from the Term Loan Derivative Settlement and borrowings under the ABL Facility, to repay $300 million of borrowings outstanding under the Term Loan. Additionally, a subsidiary of Kodiak entered into a Novation, Assignment and Assumption Agreement (“Novation Agreement”) with Frontier TopCo Partnership, L.P. (“Kodiak Holdings”), an affiliate of EQT AB and holder of record of Kodiak Gas Services, Inc. common stock, pursuant to which all of the Company’s remaining obligations under the Term Loan were assumed by Kodiak Holdings, and the Company’s obligations thereunder were terminated. The Company is no longer a borrower or guarantor and is not otherwise obligated with respect to the debt outstanding under the Term Loan. As part of the $300 million repayment of the Term Loan, unamortized debt issuance costs of $4.4 million and fees of $2.4 million were recorded to loss on extinguishment for the year ended December 31, 2023. The carrying value of the Term Loan novated under the Novation Agreement of $689.8 million (comprised of $700.0 million of principal balance less $10.2 million of unamortized debt issuance costs) was considered an equity transaction with the parent and recorded to additional paid-in capital in the consolidated statement of stockholder’s equity for the year ended December 31, 2023.
As of September 30, 2024, the scheduled maturities, without consideration of potential mandatory prepayments, of the Company’s long-term debt were as follows (in thousands):
| | | | | |
| Amount |
Years ended December 31, | |
Remainder of 2024 | $ | — | |
2025 | 5,106 | |
2026 | 2,546 | |
2027 | — | |
2028 | 1,891,719 | |
Thereafter | 750,000 | |
Total | $ | 2,649,371 | |
Debt Issuance Costs
Debt issuance costs of $46.3 million, as of September 30, 2024, are being amortized over the respective terms of the ABL Facility and 2029 Senior Notes. As of December 31, 2023, debt issuance costs of $38.9 million were being amortized over the term of the ABL Facility. Amortization expense related to these costs of $3.1 million and $8.1 million for the three and nine months ended September 30, 2024, respectively, are included in interest expense in the accompanying condensed consolidated statements of operations. Amortization expense was $0.2 million and $11.3 million for the three and nine months ended September 30, 2023, respectively, are included in interest expense in the accompanying condensed consolidated statement of operations.
Other Borrowings
Upon the completion of the CSI Acquisition, the Company has finance agreements with a third party in the amount of $11.4 million to finance certain compression equipment. The notes are payable in monthly installments totaling $0.7 million for 36 months. As of September 30, 2024, amounts due under the finance agreements totaled $7.7 million. The current portion of this amount, $6.6 million, is classified in accrued liabilities and the long-term portion, $1.1 million, is classified in other long-term liabilities on the accompanying condensed consolidated balance sheet.
11. Derivative Instruments
The Company has entered into interest rate swaps, exchanging variable interest rates for fixed interest rates. In prior periods, the Company entered into interest rate collars that fixed interest rates within a range through the simultaneous purchase of an interest rate cap and sale of an interest rate floor. The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative or trading purposes. The Company’s derivative instruments are recognized on the unaudited condensed consolidated balance sheets at fair value and classified as current or long-term depending on the maturity date of the derivative instrument and whether the net carrying value is in a net asset or net liability position. Realized and unrealized gains and losses associated with the derivative instruments are recognized in gain (loss) on derivatives within the unaudited condensed consolidated statements of operations.
The table below summarizes information related to the notional amount and maturity dates for interest rate swaps at September 30, 2024:
| | | | | | | | | | | | | | |
Notional Amount | | Effective date | | Maturities |
$175,000,000 | | 12/14/2022 | | 12/5/2024 |
$50,000,000 | | 12/14/2022 | | 12/5/2024 |
$200,000,000 | | 6/16/2022 | | 6/14/2025 |
$125,000,000 | | 5/2/2024 | | 9/2/2025 |
$125,000,000 | | 12/6/2024 | | 12/6/2025 |
$75,000,000 | | 6/15/2022 | | 6/14/2026 |
$125,000,000 | | 6/22/2022 | | 6/22/2026 |
$125,000,000 | | 12/6/2024 | | 12/6/2026 |
$100,000,000 | | 5/2/2024 | | 3/2/2027 |
$75,000,000 | | 6/14/2022 | | 5/18/2027 |
$100,000,000 | | 6/16/2022 | | 5/19/2027 |
$200,000,000 | | 7/8/2022 | | 5/19/2027 |
$125,000,000 | | 12/6/2024 | | 12/6/2027 |
The following tables summarize the effects of the Company’s derivative instruments in the condensed consolidated statements of operations (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Location | | Three Months Ended September 30, |
| 2024 | | 2023 |
| | | | | | |
Interest rate swaps | | Gain (loss) on derivatives | | $ | (20,327) | | | $ | 15,141 | |
Total gain (loss) on derivatives | | | | $ | (20,327) | | | $ | 15,141 | |
| | | | | | | | | | | | | | | | | | | | |
| | Location | | Nine Months Ended September 30, |
| 2024 | | 2023 |
Interest rate collars | | (Loss) on derivatives | | $ | — | | | $ | (569) | |
Interest rate swaps | | Gain on derivatives | | 6,227 | | | 42,649 | |
Total gain on derivatives | | | | $ | 6,227 | | | $ | 42,080 | |
12. Fair Value Measurements
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative instruments and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable are representative of their respective Level 1 fair values due to the short-term maturity of these instruments.
The Company’s ABL Facility applies floating interest rates to outstanding amounts; therefore, the carrying amount of the ABL Facility approximates its Level 3 fair value. The fair value of the 2029 Senior Notes is determined using Level 2 inputs, relying on quoted prices in less active markets.
The Company records derivative instruments at fair value using Level 2 inputs of the fair value hierarchy. The interest rate swaps are valued using a discounted cash flow analysis based on available market data on the expected cash flows of each derivative using observable inputs, including interest rate curves and credit spreads. See Note 11 (“Derivative Instruments”) for more details.
The contingent consideration liability from a prior year acquisition is measured at fair value each reporting period, using Level 3 unobservable inputs (such as probability assessments of future cash flows), and changes in estimates of fair value are recognized in earnings.
The following table summarizes the fair value of the Company’s interest rate swaps, contingent consideration and 2029 Senior Notes (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Value | | As of September 30, 2024 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Interest rate swap- current | $ | 4,110 | | | $ | — | | | $ | 4,110 | | | $ | — | | | $ | 4,110 | |
Interest rate swap- non-current | 5,121 | | | — | | | 5,121 | | | — | | | 5,121 | |
Contingent consideration | 3,071 | | | — | | | — | | | 3,071 | | | 3,071 | |
2029 Senior Notes (1) | 750,000 | | | — | | | 777,788 | | | — | | | 777,788 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Value | | As of December 31, 2023 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Interest rate swap- current | $ | 8,194 | | | $ | — | | | $ | 8,194 | | | $ | — | | | $ | 8,194 | |
Interest rate swap- non-current | 14,256 | | | — | | | 14,256 | | | — | | | 14,256 | |
Contingent consideration | 3,673 | | | — | | | — | | | 3,673 | | | 3,673 | |
(1) Carrying value and fair value exclude the deduction for the unamortized debt issuance costs, see Note 10 (“Debt and Credit Facilities”) for details.
13. Stockholders’ Equity
Holders of the Company’s common stock are entitled to one vote for each share. As of September 30, 2024, and December 31, 2023, there were 84,509,612 and 77,400,000 shares of common stock issued, respectively. In the event of a liquidation, dissolution or winding up, holders of common stock are entitled to receive, ratably, the assets available for distribution to the stockholders after payment of all liabilities.
On July 3, 2023, 16,000,000 shares of common stock were issued and sold as part of the closing of the Company’s Initial Public Offering (“IPO”), resulting in net proceeds of $230.8 million, after deducting expenses and underwriting discounts and commissions payable by the Company. On July 13, 2023, the underwriters exercised in full their option to purchase additional shares of common stock, pursuant to the underwriting agreement relating to the IPO, resulting in the issuance and sale of 2,400,000 shares of common stock. The Company received net proceeds of approximately $36.2 million, after deducting underwriting discounts and commissions payable. The net proceeds of each issuance and sale were used for repayment of existing indebtedness and general corporate purposes. After giving effect to these transactions, Kodiak had 77,400,000 shares of common stock issued and outstanding as of December 31, 2023. On April 1, 2024, 6,785,712 shares of common stock and 5,562,273 of preferred shares were issued in connection with the CSI Acquisition.
Share Repurchases
Pursuant to an agreement between the Company and Kodiak Holdings, on September 11, 2024, the Company repurchased 1,000,000 shares of common stock from Kodiak Holdings in a private transaction at a price of $25.00 per share for an aggregate purchase price of $25 million. The shares of common stock purchased in the Share Repurchase were recorded as treasury stock.
Class B and C Profits Interests
Prior to the IPO, Kodiak Holdings issued incentive awards to certain employees of Kodiak Services in the form of Class B incentive units (“Class B Units”). The Company records stock-based compensation expense associated with the Class B Units because of the employment relationship of the grantees with Kodiak Services.
On March 16, 2019, 61,098.4 Class B Units were authorized under the Kodiak Holdings 2019 Class B Unit Incentive Plan for grants to certain employees and non-employee board members. These Class B Units are intended to constitute “profits interests” for federal income tax purposes, but they constitute a substantive class of equity under GAAP. As of September 30, 2024, and December 31, 2023, there were 60,406.9 authorized Class B Units, and 57,058.5 were outstanding, respectively. There were no Class B Units granted in the nine months ended September 30, 2024 or 2023. Twenty-five percent (25%) of the Class B Units are subject to time vesting (the “Time-Vesting Units”), and the remaining seventy-five percent (75%) of the Class B Units are subject to performance vesting (the “Performance-Vesting Units”). Time-Vesting Units vest in equal annual installments on each of the five anniversaries of the applicable vesting commencement dates, subject to the Class B Unit holder’s continuous service through each of the applicable vesting dates. Performance-Vesting Units vest based on the achievement of certain investor return metrics, subject to the Class B Unit holder’s continuous service through the applicable vesting dates. Holders of Class B Units are entitled to distributions on vested awards in accordance with the Kodiak Holdings distribution waterfall. Class B Units are not subject to any conversion rights other than an automatic conversion to Class C incentive units (“Class C Units”) in connection with certain terminations of employment. Each Class C Unit holder is eligible to receive distributions up to an amount equal to the fair market value of the corresponding converted Class B Unit on the date of conversion. As of September 30, 2024, no material conversions had occurred.
There are no performance hurdles associated with the Time-Vesting Units. The fair value of each incentive award was estimated on its applicable grant date using an option pricing model.
Equity compensation expense is recognized ratably over the vesting period of the awards. During the nine months ended September 30, 2024, and 2023, approximately $0.2 million and $1.4 million, respectively, in equity compensation expense was recognized in selling, general and administrative expenses. During the three months ended September 30, 2024, and 2023, equity compensation expense was approximately $21 thousand and $502 thousand, respectively. As of September 30, 2024, there were 276 unvested Time-Vesting Units, representing $0.1 million in unrecognized equity compensation expense.
Preferred stock
Holders of the Company’s preferred stock are entitled to one vote for each share, voting proportionally with holders of common stock. Preferred stock consists of 50,000,000 authorized shares as of September 30, 2024 and December 31, 2023, of which 5,562,273 and zero were issued and outstanding, respectively. The preferred stock lacks economic benefits beyond its par value of $0.01 per share (with a maximum value of $50,000), as it does not participate in earnings or cash dividends of Kodiak. Rather, it solely represents a voting share. Each preferred stock holds an equal number of OpCo Units, representing economic interests in Kodiak’s subsidiary, Kodiak Services. Each OpCo Unit will be redeemable at the option of the holder for (i) one share of common stock (along with cancellation of a corresponding share of preferred stock) or (ii) cash at Kodiak Services’ election, following a 180 days post-closing lock-up and subject to certain conditions. On or after April 1, 2029, Kodiak shall have the right to effect redemption of such OpCo Units (along with corresponding share of preferred stock). The OpCo Units represent and will be accounted for as noncontrolling interests in Kodiak Services.
2023 Omnibus Incentive Plan
On June 20, 2023, Kodiak’s Board of Directors (the “Board”) authorized and adopted the Kodiak Gas Services, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) for employees, consultants and directors. The Omnibus Plan enables Kodiak’s Board (or a committee authorized by Kodiak’s Board) to award incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards to align the interests of service providers, including the Company’s named executive officers, with those of the Company’s stockholders. A total of 6,375,000 shares of common stock have been reserved for issuance pursuant to awards under the Omnibus Plan. As of September 30, 2024, 2,394,649 shares of common stock have been granted to certain employees, including Kodiak's named executive officers, pursuant to awards under the Omnibus Plan.
Restricted Stock Units
As of September 30, 2024, of the total shares of common stock equity awards granted under the Omnibus Plan, 1,821,007 shares were granted pursuant to awards of time-based restricted stock units (“RSUs”) that vest ratably over a three-year period, subject to continuous service through each vesting date. On May 1, 2024, an additional 33,114 RSUs were granted that vest ratably over a one-year period, subject to continuous service through the vesting date.
On December 8, 2023, the Company provided employees who were eligible to receive cash payments of long-term incentive awards granted in January 2023 under the Company’s 2020 Long-Term Incentive Plan the opportunity to make an election to receive a grant of RSUs that vest ratably over a three-year period in lieu of cash payments, resulting in the grant of 138,430 RSUs.
Performance Stock Units
As of September 30, 2024, 573,642 of the total shares of common stock equity awards granted under the Omnibus Plan were granted pursuant to awards of performance stock units (“PSUs”) that cliff vest at the end of a three-year performance period, with the ultimate number of shares earned and issued ranging from 0 - 190% of the number of shares subject to the PSU award, subject to continuous service through the end of the performance period and other conditions precedent. The performance criteria for the PSUs are a combination of: (1) Discretionary Cash Flow (as defined below, and, which we sometimes refer to as “DCF”) (30% weight); (2) Consolidated Net Leverage Ratio (“CNLR”) (