Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-33666

Archrock, Inc.

(Exact name of registrant as specified in its charter)


Delaware	74-3204509
(State or other jurisdiction of incorporation or organization) or organization)	(I.R.S. Employer Identification No.)

9807 Katy Freeway, Suite 100, Houston, Texas 77024

(Address of principal executive offices, zip code)

(281) 836-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common stock, $0.01 par value per share	AROC	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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the common stock of the registrant outstanding as of November 5, 2024: 175,172,118 shares.

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TABLE OF CONTENTS



	Page
Glossary	3
Forward-Looking Statements	4

Part I. Financial Information
Item 1. Financial Statements (unaudited)	5
Condensed Consolidated Balance Sheets	5
Condensed Consolidated Statements of Operations	6
Condensed Consolidated Statements of Equity	7
Condensed Consolidated Statements of Cash Flows	9
Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	38

Part II. Other Information
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults Upon Senior Securities	41
Item 4. Mine Safety Disclosures	41
Item 5. Other Information	41
Item 6. Exhibits	42

Signatures	43

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GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.



2013 Plan	2013 Stock Incentive Plan
2020 Plan	2020 Stock Incentive Plan
2023 Form 10-K	Annual Report on Form 10-K for the year ended December 31, 2023
2027 Notes	$500.0 million of 6.875% senior notes due April 2027, issued in March 2019
2027 Notes Tender Offer	$200.0 million partial redemption of the 2027 Notes, completed in August 2024
2028 Notes	$800.0 million of 6.25% senior notes due April 2028, $500.0 million of which was issued in December 2019, $300.0 million of which was issued in December 2020
2032 Notes	$700.0 million of 6.625% senior notes due September 2032, issued in August 2024
Amended and Restated Credit Agreement	Amended and Restated Credit Agreement, dated May 16, 2023, which amended and restated that Credit Agreement, dated as of March 30, 2017, which governs the Credit Facility
Archrock, our, we, us	Archrock, Inc., individually and together with its wholly owned subsidiaries
Archrock ELT	Archrock ELT LLC, an indirect, wholly owned subsidiary of Archrock
ASU	Accounting Standards Update
Credit Facility	$1.1 billion asset-based revolving credit facility due May 2028, as governed by the Amended and Restated Credit Agreement, as amended
ECOTEC	Ecotec International Holdings, LLC
ESPP	Employee Stock Purchase Plan
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
First Amendment to the Amended and Restated Credit Agreement	First Amendment to the Amended and Restated Credit Agreement, dated August 28, 2024, which amended the Amended and Restated Credit Agreement
Financial Statements	Condensed consolidated financial statements included in Part I Item 1 of this Quarterly Report on Form 10-Q
GAAP	U.S. generally accepted accounting principles
GHG	Greenhouse gases (carbon dioxide, methane and water vapor for example)
Hilcorp	Hilcorp Energy Company
Ionada	Ionada PLC
July 2024 Equity Offering	Public underwriting offering whereby Archrock sold approximately 12.7 million shares of its common stock, completed in July 2024
LIBOR	London Interbank Offered Rate
OTC	Over-the-counter, as related to aftermarket services parts and components
SEC	U.S. Securities and Exchange Commission
SG&A	Selling, general and administrative
Share Repurchase Program	Share repurchase program approved by our Board of Directors on April 27, 2023 that allowed us to repurchase up to $50.0 million of outstanding common stock for a period of twelve months, which prior to its expiration was extended on April 25, 2024 for an additional 24-month period and a replenishment of the authorized share repurchase amount to $50.0 million
TOPS	Total Operations and Production Services, LLC, a portfolio company managed by certain affiliates of Apollo Global Management, Inc.
TOPS Acquisition	Transaction completed on August 30, 2024 (“acquisition date”) pursuant to that certain purchase and sale agreement, dated as of July 22, 2024, by and among Archrock, Archrock ELT, TOPS Pledge1, LLC, TOPS Pledge2, LLC and for limited purposes therein, TOPS Holdings, LLC, whereby Archrock acquired all of the issued and outstanding equity interests in TOPS
SOFR	Secured Overnight Financing Rate
U.S.	United States of America
WACC	Weighted-average cost of capital

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this Form 10-Q are forward-looking statements within the meaning of the Exchange Act, including, without limitation, our business growth strategy and projected costs; future financial position; the sufficiency of available cash flows to fund continuing operations and pay dividends; the expected amount of our capital expenditures; anticipated cost savings; future revenue, adjusted gross margin and other financial or operational measures related to our business; the future value of our equipment; and plans and objectives of our management for our future operations. You can identify many of these statements by words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “will continue” or similar words or the negative thereof.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this Form 10-Q. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Known material factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include the risk factors described in our 2023 Form 10-K and those set forth from time to time in our filings with the SEC, which are available through our website at www.archrock.com and through the SEC’s website at www.sec.gov. These risk factors include, but are not limited to, inability to achieve the expected benefits of the TOPS Acquisition and difficulties in integrating TOPS; risks of the acquisitions, including the TOPS Acquisition, to reduce our ability to make distributions to our common stockholders; risks related to pandemics and other public health crises; an increase in inflation; ongoing international conflicts and tensions; risks related to our operations; competitive pressures; inability to make acquisitions on economically acceptable terms; uncertainty to pay dividends in the future; risks related to a substantial amount of debt and our debt agreements; inability to access the capital and credit markets or borrow on affordable terms to obtain additional capital; inability to fund purchases of additional compression equipment; vulnerability to interest rate increases; uncertainty relating to the phasing out of LIBOR; erosion of the financial condition of our customers; risks related to the loss of our most significant customers; uncertainty of the renewals for our contract operations service agreements; risks related to losing management or operational personnel; dependence on particular suppliers and vulnerability to product shortages and price increases; information technology and cybersecurity risks; tax-related risks; legal and regulatory risks, including climate-related and environmental, social and governance risks.

All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Form 10-Q. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Form 10-Q.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Archrock, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

(unaudited)


	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	3,749	$	1,338
Accounts receivable, net of allowance of $638 and $587, respectively		149,019		124,069
Inventory		84,366		81,761
Other current assets		7,547		5,989
Total current assets		244,681		213,157
Property, plant and equipment, net		3,261,026		2,301,982
Operating lease right-of-use assets		15,222		14,097
Goodwill		116,937		—
Intangible assets, net		78,197		30,182
Contract costs, net		35,938		37,739
Deferred tax assets		2,138		3,192
Other assets		54,241		47,733
Non-current assets of discontinued operations		7,868		7,868
Total assets	$	3,816,248	$	2,655,950

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade	$	70,120	$	61,026
Accrued liabilities		119,303		85,381
Deferred revenue		5,238		5,736
Total current liabilities		194,661		152,143
Long-term debt		2,236,131		1,584,869
Operating lease liabilities		12,536		12,271
Deferred tax liabilities		41,394		4,921
Other liabilities		32,922		22,857
Non-current liabilities of discontinued operations		7,868		7,868
Total liabilities		2,525,512		1,784,929

Commitments and contingencies (Note 8)

Equity:
Preferred stock: $0.01 par value per share, 50,000,000 shares authorized, zero issued		—		—
Common stock: $0.01 par value per share, 250,000,000 shares authorized, 185,333,786 and 164,984,401 shares issued, respectively		1,854		1,650
Additional paid-in capital		3,877,203		3,470,576
Accumulated deficit		(2,467,142)		(2,499,931)
Treasury stock: 10,158,142 and 9,020,454 common shares, at cost, respectively		(121,179)		(101,274)
Total equity		1,290,736		871,021
Total liabilities and equity	$	3,816,248	$	2,655,950

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Archrock, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenue:
Contract operations	$	245,420	$	207,552	$	693,939	$	596,417
Aftermarket services		46,741		45,815		137,236		134,327
Total revenue		292,161		253,367		831,175		730,744
Cost of sales, exclusive of depreciation and amortization
Contract operations		79,810		75,273		236,831		230,788
Aftermarket services		34,395		36,688		104,553		105,939
Total cost of sales, exclusive of depreciation and amortization		114,205		111,961		341,384		336,727
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Income before income taxes		52,953		42,312		154,018		99,539
Provision for income taxes		15,437		11,454		41,545		27,543
Net income	$	37,516	$	30,858	$	112,473	$	71,996

Basic and diluted earnings per common share	$	0.22	$	0.20	$	0.70	$	0.46

Weighted-average common shares outstanding:
Basic		165,847		154,163		158,205		154,210
Diluted		166,173		154,401		158,518		154,398

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Archrock, Inc.

Condensed Consolidated Statements of Equity

(in thousands, except shares and per share amounts)

(unaudited)



				Additional
	Common Stock			Paid-in		Accumulated		Treasury Stock
		Amount	Shares	Capital		Deficit			Amount	Shares	Total
Balance at June 30, 2023	$	1,649	164,940,249	$	3,463,668	$	(2,515,351)	$	(94,433)	(8,440,673)	$	855,533
Shares repurchased		—	—		—		—		(4,422)	(354,012)		(4,422)
Shares withheld related to net settlement of equity awards		—	—		—		—		(9)	(717)		(9)
Cash dividends ($0.155 per common share)		—	—		—		(24,250)		—	—		(24,250)
Shares issued under ESPP		—	19,494		192		—		—	—		192
Stock-based compensation, net of forfeitures		—	—		3,191		—		—	(44,250)		3,191
Net income		—	—		—		30,858		—	—		30,858
Balance at September 30, 2023	$	1,649	164,959,743	$	3,467,051	$	(2,508,743)	$	(98,864)	(8,839,652)	$	861,093

Balance at June 30, 2024	$	1,658	165,793,798	$	3,478,597	$	(2,476,793)	$	(108,966)	(9,493,262)	$	894,496
Shares repurchased		—	—		—		—		(12,107)	(649,854)		(12,107)
Shares withheld related to net settlement of equity awards		—	—		—		—		(106)	(5,291)		(106)
Cash dividends ($0.165 per common share)		—	—		—		(27,865)		—	—		(27,865)
Shares issued under ESPP		—	14,485		263		—		—	—		263
Stock-based compensation, net of forfeitures		—	1,853		3,738		—		—	(9,735)		3,738
Net proceeds from issuance of common stock		127	12,650,000		255,620		—		—	—		255,747
Shares issued for TOPS Acquisition		69	6,873,650		138,985		—		—	—		139,054
Net income		—	—		—		37,516		—	—		37,516
Balance at September 30, 2024	$	1,854	185,333,786	$	3,877,203	$	(2,467,142)	$	(121,179)	(10,158,142)	$	1,290,736

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Archrock, Inc.

Condensed Consolidated Statements of Equity

(in thousands, except shares and per share amounts)

(unaudited)



				Additional
	Common Stock			Paid-in		Accumulated		Treasury Stock
		Amount	Shares	Capital		Deficit			Amount	Shares	Total
Balance at December 31, 2022	$	1,634	163,439,013	$	3,456,777	$	(2,509,133)	$	(88,585)	(7,810,548)	$	860,693
Shares repurchased		—	—		—		—		(6,495)	(576,262)		(6,495)
Shares withheld related to net settlement of equity awards		—	—		—		—		(3,784)	(384,684)		(3,784)
Cash dividends ($0.455 per common share)		—	—		—		(71,606)		—	—		(71,606)
Shares issued under ESPP		1	61,494		573		—		—	—		574
Stock-based compensation, net of forfeitures		14	1,459,236		9,701		—		—	(68,158)		9,715
Net income		—	—		—		71,996		—	—		71,996
Balance at September 30, 2023	$	1,649	164,959,743	$	3,467,051	$	(2,508,743)	$	(98,864)	(8,839,652)	$	861,093

Balance at December 31, 2023	$	1,650	164,984,401	$	3,470,576	$	(2,499,931)	$	(101,274)	(9,020,454)	$	871,021
Shares repurchased		—	—		—		—		(13,337)	(732,826)		(13,337)
Shares withheld related to net settlement of equity awards		—	—		—		—		(6,568)	(391,868)		(6,568)
Cash dividends ($0.495 per common share)		—	—		—		(79,684)		—	—		(79,684)
Shares issued under ESPP		—	49,602		815		—		—	—		815
Stock-based compensation, net of forfeitures		8	776,133		11,207		—		—	(12,994)		11,215
Net proceeds from issuance of common stock		127	12,650,000		255,620		—		—	—		255,747
Shares issued for TOPS Acquisition		69	6,873,650		138,985		—		—	—		139,054
Net income		—	—		—		112,473		—	—		112,473
Balance at September 30, 2024	$	1,854	185,333,786	$	3,877,203	$	(2,467,142)	$	(121,179)	(10,158,142)	$	1,290,736

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Archrock, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	112,473	$	71,996
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		135,065		123,546
Long-lived and other asset impairment		9,478		8,383
Non-cash restructuring charges		—		211
Unrealized change in fair value of investment in unconsolidated affiliate		—		1,996
Inventory write-downs		568		381
Amortization of operating lease right-of-use assets		2,789		2,488
Amortization of deferred financing costs		3,575		4,599
Amortization of debt premium		(1,504)		(1,504)
Amortization of capitalized implementation costs		2,259		1,841
Debt extinguishment loss		3,181		—
Stock-based compensation expense		11,215		9,715
Provision for (benefit from) credit losses		95		(234)
Gain on sale of assets, net		(5,175)		(8,018)
Deferred income tax provision		40,483		26,411
Amortization of contract costs		17,771		15,636
Deferred revenue recognized in earnings		(9,707)		(11,043)
Changes in operating assets and liabilities:
Accounts receivable, net		(4,883)		(7,315)
Inventory		3,449		(1,672)
Other assets		(3,303)		(1,635)
Contract costs		(15,970)		(18,854)
Accounts payable and other liabilities		(7,126)		10,745
Deferred revenue		10,598		10,733
Other		(78)		62
Net cash provided by operating activities		305,253		238,468

Cash flows from investing activities:
Capital expenditures		(261,044)		(261,977)
Proceeds from sale of property, equipment and other assets		24,204		54,663
Proceeds from insurance and other settlements		45		1,157
Cash paid in TOPS Acquisition, net of cash acquired		(866,568)		—
Investments in unconsolidated entities		(1,307)		(2,000)
Net cash used in investing activities		(1,104,670)		(208,157)

Cash flows from financing activities:
Borrowings of long-term debt		1,133,425		577,725
Repayments of long-term debt		(974,275)		(522,075)
Proceeds from 2032 Notes offering		700,000		—
Partial repayment of 2027 Notes		(201,987)		—
Payments of debt issuance costs		(12,308)		(5,734)
Dividends paid to stockholders		(79,684)		(71,606)
Repurchases of common stock		(13,337)		(6,495)
Taxes paid related to net share settlement of equity awards		(6,568)		(3,784)
Net proceeds from issuance of common stock		255,747		—
Proceeds from stock issued under ESPP		815		574
Net cash provided by (used in) financing activities		801,828		(31,395)
Net increase (decrease) in cash and cash equivalents		2,411		(1,084)
Cash and cash equivalents, beginning of period		1,338		1,566
Cash and cash equivalents, end of period	$	3,749	$	482

Supplemental disclosure of non-cash investing transactions:
Issuance of Archrock common stock pursuant to TOPS Acquisition	$	139,054	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements

1. Description of Business and Basis of Presentation

We are an energy infrastructure company with a primary focus on midstream natural gas compression. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. We operate in two business segments: contract operations and aftermarket services. Our predominant segment, contract operations, primarily includes designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by GAAP. Therefore, this information should be read in conjunction with our consolidated financial statements and notes contained in our 2023 Form 10-K. The information furnished herein reflects all adjustments that are, in the opinion of management, of a normal recurring nature and considered necessary for a fair statement of the results of the interim periods reported. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

2. Recent Accounting Developments

Accounting Standards Updates Not Yet Implemented

Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which will require significant additional disclosures, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, and should be applied on a prospective basis, with a retrospective option. Early adoption is permitted. We are evaluating the impact that the adoption of ASU 2023-09 will have on our consolidated financial statements and related disclosures.

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which will require disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the chief operating decision maker evaluates segment expenses and operating results. ASU 2023-07 will also allow disclosure of multiple measures of segment profitability if those measures are used to allocate resources and assess performance. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis, unless impracticable. Early adoption is permitted. We are evaluating the impact that the adoption of ASU 2023-07 will have on our segment disclosures. We expect that the adoption of ASU 2023-07 will not have a material impact on our consolidated financial statements.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Business Combinations – Joint Venture Formations

In August 2023, the FASB issued ASU 2023-05, to reduce diversity in practice and provide decision-useful information to a joint venture’s investors by requiring that a joint venture apply a new basis of accounting upon formation. By applying a new basis of accounting, a joint venture will recognize and initially measure its assets and liabilities at fair value, with exceptions to fair value measurement that are consistent with the business combinations guidance, on the date of formation. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025, may elect to apply the amendments retrospectively if it has sufficient information to do so. Early adoption is permitted in any interim or annual period in which financial statements have not been issued or been made available for issuance, either prospectively or retrospectively. We expect that the adoption of ASU 2023-05 will have no impact on our consolidated financial statements.

3. Business Transactions

TOPS Acquisition

On August 30, 2024, we completed the TOPS Acquisition, whereby we acquired all of the issued and outstanding equity interests in TOPS, including a fleet of approximately 580,000 horsepower, including approximately 530,000 operating horsepower, for aggregate consideration consisting of $869.1 million in cash and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. The cash portion of the purchase price was funded with proceeds from the July 2024 Equity Offering and the 2032 Notes offering and borrowings under the Credit Facility. The purchase price paid is subject to customary post-closing adjustments in accordance with the terms of the purchase and sale agreement.

The TOPS Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill. The preliminary allocation of the purchase price, which is subject to certain adjustments, was based upon preliminary valuations. Our estimates and assumptions are subject to change upon the completion of management’s review of the final valuations. We are in the process of finalizing valuations related to property, plant and equipment, identifiable intangible assets and goodwill. Post-closing adjustments to the purchase price could impact future depreciation and amortization as well as income tax expense. The final valuation of net assets acquired is expected to be completed as soon as practicable, but no later than one year from the acquisition date.

The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


(in thousands)
Cash	$	2,498
Accounts receivable		9,694
Inventory		6,944
Other current assets		495
Property, plant and equipment		872,053
Operating lease right-of-use assets		1,424
Goodwill		116,937
Intangible assets		52,775
Other assets		4,032
Accounts payable, trade		(48,609)
Accrued liabilities		(4,666)
Operating lease liabilities		(1,424)
Other liabilities		(4,032)
Purchase price	$	1,008,121

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

The valuation methodologies and significant inputs for fair value measurements are detailed by asset class below. The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and therefore represent Level 3 measurements.

Property, Plant and Equipment

The preliminary amount of property, plant and equipment is primarily comprised of electric motor drive compression equipment that will depreciate on a straight-line basis over an estimated average remaining useful life of 25 years. The preliminary fair value of the property, plant and equipment was determined using both the cost and market approach. Under the cost approach, we estimated the replacement cost of the assets by evaluating recent purchases of similar assets or published data, then adjusted replacement cost for physical deterioration and functional and economic obsolescence, as applicable. We then considered the market approach by comparing our estimated dollar per horsepower to market comparables and market participant assumptions and adjusted as necessary.

Other fixed assets were valued using the indirect cost method, whereby we applied asset-specific trend information using published indexes to calculate the estimated replacement cost of assets that were identified to be reflected at historical cost. Other assets were depreciated based on published normal useful life estimates and prior experience with similar assets.

Intangible Assets

The intangible assets consist of customer relationships and trade names that have estimated useful lives of 12 years and five years, respectively. The preliminary amount of intangible assets and their associated useful life were determined based on the period over which the assets are expected to contribute directly or indirectly to our future cash flows.

The fair value of the identifiable intangible assets related to customer relationships was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired. Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets. To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our WACC to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired.

It is generally accepted that the fair market value of a trade name is best measured by the relief-from-royalty method under the income approach, whereby we calculated the royalty savings by estimating a reasonable royalty rate that a third party would negotiate in a licensing agreement expressed as a percentage of total revenue involving a trade name. The revenue related to the trade name was multiplied by the selected royalty rate over the estimated expected useful life of the trade name to arrive at the royalty savings. The royalty savings were tax effected and discounted to present value using a discount rate commensurate with the risk profile of the trade name relative to our WACC and the return on the other acquired assets of TOPS.

Goodwill

The preliminary amount of goodwill resulting from the TOPS Acquisition is attributable to the expansion of our services in the Permian Basin where we currently operate and was allocated to our contract operations segment. The goodwill recorded is considered to have an indefinite life and will be reviewed annually for impairment or more frequently if indicators of potential impairment exist. All of the goodwill recorded for the TOPS Acquisition is expected to be deductible for U.S. federal income tax purposes.

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Notes to Condensed Consolidated Financial Statements (continued)

Tax Contingency and Indemnification Asset

In connection with the TOPS Acquisition, we recorded a non-income tax based contingency of $4.3 million and a corresponding indemnification asset of $4.3 million based on facts existing on the date of acquisition. The tax contingency arose from pre-acquisition activities of TOPS. As part of the acquisition, the sellers agreed to indemnify us for certain tax contingencies up to $21.6 million as of the acquisition date. Dependent upon facts and circumstances, the sellers’ indemnification obligation may be reduced over a period of five years from the acquisition date but may also be extended until the resolution of claims timely submitted to the sellers.

The results of operations attributable to the TOPS Acquisition have been included in our condensed consolidated financial statements as part of our contract operations segment since the date of acquisition. Revenue attributable to the assets acquired from the acquisition date through September 30, 2024 was $15.6 million. We are unable to provide earnings attributable to the assets and liabilities acquired since the acquisition date, as we do not prepare full stand-alone earnings reports for those assets and liabilities.

Transaction-Related Costs

In connection with the TOPS Acquisition, we recorded $9.2 million and $11.0 million of transaction-related costs in our condensed consolidated statements of operations during the three and nine months ended September 30, 2024, respectively.

The following table presents transaction-related cost incurred by cost type:


	Three months ended		Nine months ended
(in thousands)	September 30, 2024		September 30, 2024
Professional fees ⁽¹⁾	$	8,762	$	10,544
Compensation-related costs ⁽²⁾		363		363
Other costs		95		95
Total transaction-related costs	$	9,220	$	11,002

(1)	Professional fees include legal, advisory, consulting and other fees.

(2)	Compensation-related costs include amounts related to employee retention and other compensation related arrangements associated with the acquisition. Payments are due and payable at various times up to and including the two-year anniversary of the TOPS Acquisition.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information for the three and nine months ended September 30, 2024 and 2023 was derived by adjusting our historical financial statements in order to give effect to the assets and liabilities acquired in the TOPS Acquisition. The TOPS Acquisition is presented in this unaudited pro forma financial information as though the acquisition occurred as of January 1, 2023, and reflects the following:

●

the effects of the employee retention and other compensation-related arrangements associated with the TOPS Acquisition;

●

the application of our accounting policies and adjusting the results of TOPS to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant, and equipment, and intangible assets had been applied from January 1, 2023;

●

the interest expense resulting from the 2032 Notes, the 2027 Notes Tender Offer, and the First Amendment to the Amended and Restated Credit Agreement;

●

the exclusion of $8.8 million and $10.5 million of nonrecurring financial advisory, legal, audit and other professional fees incurred related to the acquisition and recorded to transaction-related costs in our condensed consolidated statements of operations during the three and nine months ended September 30, 2024, respectively. The nine months ended September 30, 2023 pro forma earnings were adjusted to reflect these charges; and

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

●

the income tax effects of the adjustments based on the estimated blended statutory tax rate of 23%.

The unaudited pro forma financial information below is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Revenue	$	321,775	$	282,657	$	940,244	$	806,243
Net income attributable to Archrock stockholders		49,494		29,318		133,164		50,791

4. Inventory

Inventory was comprised of the following as of September 30, 2024 and December 31, 2023:


	September 30,		December 31,
(in thousands)	2024		2023
Parts and supplies	$	70,824	$	70,759
Work in progress		13,542		11,002
Inventory	$	84,366	$	81,761

5. Property, Plant and Equipment, Net

Property, plant and equipment, net was comprised of the following as of September 30, 2024 and December 31, 2023:


	September 30,		December 31,
(in thousands)	2024		2023
Compression equipment, facilities and other fleet assets	$	4,301,892	$	3,326,919
Land and buildings		31,936		30,169
Transportation and shop equipment		117,296		100,474
Computer hardware and software		77,912		77,532
Other		6,106		5,678
Property, plant and equipment		4,535,142		3,540,772
Accumulated depreciation		(1,274,116)		(1,238,790)
Property, plant and equipment, net	$	3,261,026	$	2,301,982

6. Investments in Unconsolidated Affiliates

Investments in which we are deemed to exert significant influence, but not control, are accounted for using the equity method of accounting, except in cases where the fair value option is elected. For such investments where we have elected the fair value option, the election is irrevocable and is applied on an investment-by-investment basis at initial recognition.

In April 2022, we agreed to acquire for cash a 25% equity interest in ECOTEC, a company specializing in methane emissions detection, monitoring and management. We have elected the fair value option to account for this investment, and during the nine months ended September 30, 2023, we recognized unrealized losses of $2.0 million related to the change in fair value of our investment (see Note 15 (“Fair Value Measurements”)). Changes in the fair value of this investment are recognized in other expense, net in our condensed consolidated statements of operations. In August 2024, ECOTEC issued a pro-rata capital call to certain investors, including Archrock, which resulted in an additional investment of $1.3 million in ECOTEC. As of September 30, 2024, our ownership interest in ECOTEC was 25%, which is included in other assets in our condensed consolidated balance sheets.

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Notes to Condensed Consolidated Financial Statements (continued)

For ownership interests that are not accounted for under the equity method and that do not have readily determinable fair values, we have elected the fair value measurement alternative to record these investments at cost minus impairment, if any, including adjustments for observable price changes in orderly transactions for an identical or similar investment of the same issuer. Investments in equity securities measured using the fair value measurement alternative are reviewed for impairment or observable price changes in orderly transactions each reporting period.

In November 2023, we agreed to serve as the lead investor in a series A preferred financing round for Ionada, a global carbon capture technology company committed to reducing GHG emissions and creating a sustainable future. Ionada has developed a post-combustion carbon capture solution to reduce carbon dioxide emissions from various small- to mid-sized industrial emitters in the energy, marine and e-fuels industries, among others. We have elected the fair value measurement alternative to account for this investment (see Note 15 (“Fair Value Measurements”)). Adjustments to the carrying value are recognized in other expense, net in our condensed consolidated statements of operations. As of September 30, 2024, the carrying value of our investment in Ionada was $4.3 million, which includes our initial investment of $3.8 million; and our fully diluted ownership interest in Ionada was 10%, which is included in other assets in our condensed consolidated balance sheets. Subject to certain conditions, our ownership interest will increase to 24% over the next two years.

7. Long-Term Debt

Long-term debt was comprised of the following as of September 30, 2024, and December 31, 2023:


(in thousands)	September 30, 2024		December 31, 2023
Credit Facility	$	446,175	$	287,025

6.625% senior notes due September 2032:
Principal outstanding		700,000		—
Unamortized debt issuance costs		(9,629)		—
		690,371		—
6.25% senior notes due April 2028:
Principal outstanding		800,000		800,000
Unamortized debt premium		7,020		8,524
Unamortized debt issuance costs		(5,816)		(7,081)
		801,204		801,443
6.875% senior notes due April 2027:
Principal outstanding		300,000		500,000
Unamortized debt issuance costs		(1,619)		(3,599)
		298,381		496,401

Long-term debt	$	2,236,131	$	1,584,869

2032 Notes

On August 26, 2024, we completed a private offering of $700.0 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.3 million after deducting issuance costs. The $9.7 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. A portion of the net proceeds were used to fund a portion of the cash consideration for the TOPS Acquisition, the 2027 Notes Tender Offer and to repay borrowings outstanding under our Credit Facility.

The 2032 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2032 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act.

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Notes to Condensed Consolidated Financial Statements (continued)

The 2032 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us, and by all of our existing subsidiaries, other than Archrock Partners Finance Corp., which is the issuer of the 2032 Notes. The 2032 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness.

We may, at our option, redeem all of part of the 2032 Notes at any time on or after September 1, 2027, at specified redemption prices, plus any accrued and unpaid interest. In addition, prior to September 1, 2027, we may redeem up to 40% of the 2032 Notes at specified redemption prices and make-whole premiums, plus any accrued and unpaid interest.

2027 Notes Tender Offer

In connection with the offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million, which reflects approximately 101% of the aggregate principal amount of the tendered 2027 Notes and $0.2 million of agent and legal fees. On the date of tender, the net carrying value of the tendered 2027 Notes was $198.8 million and we recorded a debt extinguishment loss of $3.2 million in our condensed consolidated statements of operations.

First Amendment to the Amended and Restated Credit Agreement

On August 28, 2024, we amended our Amended and Restated Credit Agreement to, among other things:

●

increase the borrowing capacity of the Credit Facility from $750.0 million to $1.1 billion;

●

increase the portion of the Credit Facility available for the issuance of swing line loans from $75.0 million to $110.0 million;

●

increase the cash dominion trigger threshold amount from $75.0 million to $110.0 million;

●

add certain financial institutions as lenders under the Credit Facility;

●

join a newly formed wholly owned subsidiary of Archrock Services, L.P. as a guarantor and grantor under the Credit Facility; and

●

modify certain other covenants to which we are subject to.

During both the three and nine months ended September 30, 2024, we incurred $2.6 million in transaction costs related to the First Amendment to the Amended and Restated Credit Agreement, which were included in other assets in our condensed consolidated balance sheets and are being amortized over the remaining term of the Credit Facility.

Amended and Restated Credit Agreement

On May 16, 2023, we amended and restated our Credit Facility to, among other things:

●

extend the maturity date of the Credit Facility from November 8, 2024 to May 16, 2028 (or December 2, 2026 or December 3, 2027 if any portion of the 2027 Notes and 2028 Notes, respectively, remain outstanding at such date);

●

change the referenced rate from LIBOR to SOFR so that borrowings under the Credit Facility bear interest at, based on our election, either a base rate or SOFR, plus an applicable margin; and

●

increase the portion of the Credit Facility available for the issuance of swing line loans from $50.0 million to $75.0 million.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

During the second quarter of 2023, we incurred $6.0 million in transaction costs related to the Amended and Restated Credit Agreement, which were included in other assets in our condensed consolidated balance sheets and are being amortized over the remaining term of the Credit Facility. In addition, during the second quarter of 2023, we wrote off $1.0 million of unamortized deferred financing costs as a result of the Amended and Restated Credit Agreement, which was recorded to interest expense in our condensed consolidated statements of operations during the nine months ended September 30, 2023.

As of September 30, 2024, there were $4.1 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.1%. The weighted-average annual interest rate on the outstanding balance under the Credit Facility was 7.2% and 7.7% at September 30, 2024 and December 31, 2023, respectively. We incurred $0.6 million and $0.4 million of commitment fees on the daily unused amount of the Credit Facility during the three months ended September 30, 2024 and 2023, respectively, and $1.5 million and $1.3 million during the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we were in compliance with all covenants under our Credit Facility. Additionally, all undrawn capacity on our Credit Facility was available for borrowings as of September 30, 2024.

8. Commitments and Contingencies

Insurance Matters

Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business, however; losses and liabilities not covered by insurance would increase our costs.

Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. We are also self-insured for property damage to our offshore assets.

Tax Matters

We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of September 30, 2024 and December 31, 2023, we had $8.9 million and $3.9 million, respectively, accrued for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our consolidated financial position, but it is possible that the resolution of future audits could be material to our consolidated results of operations or cash flows.

As of both September 30, 2024 and December 31, 2023, $0.6 million of the tax contingencies mentioned above related to audits that have advanced from the audit review phase to the contested hearing phase. As of September 30, 2024, $4.3 million of the tax contingencies mentioned above had an offsetting indemnification asset. None were indemnified as of December 31, 2023.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Litigation and Claims

In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends.

9. Stockholders’ Equity

July 2024 Equity Offering

On July 24, 2024, Archrock sold, pursuant to a public underwriting offering, 12,650,000 shares, including 1,650,000 shares pursuant to an over-allotment option. Archrock received net proceeds of $255.7 million, after deducting underwriting discounts, commissions and offering expenses. Proceeds from this equity offering were used to fund a portion of the TOPS Acquisition.

TOPS Acquisition

On August 30, 2024, we completed the TOPS Acquisition and issued 6,873,650 shares of common stock to the sellers as part of the acquisition purchase price. The acquisition date fair value was $139.1 million and is reflected in common stock and additional paid-in capital in our condensed consolidated statements of equity. See Note 3 (“Business Transactions”) for further details.

Share Repurchases

Share Repurchase Program

On April 27, 2023, our Board of Directors authorized a share repurchase program that allowed us to repurchase up to $50.0 million of outstanding common stock. Under the Share Repurchase Program, shares of our common stock may be repurchased periodically, including in the open market, privately negotiated transactions, or otherwise in accordance with applicable federal securities laws, at any time. On April 25, 2024, our Board of Directors approved an extension of the Share Repurchase Program upon expiry of the current authorization on April 27, 2024, for an additional 24-month period. Through September 30, 2024, we had repurchased 1,483,200 common shares at an average price of $14.97 per share for an aggregate of $22.2 million. In connection with the extension, the Board of Directors replenished the amount of shares authorized for repurchase under the Share Repurchase Program, resulting in available capacity of $50.0 million. The actual timing, manner, number, and value of shares repurchased under the program will be determined by us at our discretion.

Shares Withheld to Cover

The 2020 Plan and 2013 Plan allow us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

The following table summarizes shares repurchased:


	Three Months Ended						Nine Months Ended
	September 30, 2024						September 30, 2024
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		649,854	$	18.63	$	12,107		732,826	$	18.20	$	13,337
Shares withheld related to net settlement of equity awards		5,291		20.05		106		391,868		16.76		6,568
Total		655,145	$	18.64	$	12,213		1,124,694	$	17.70	$	19,905

	Three Months Ended						Nine Months Ended
	September 30, 2023						September 30, 2023
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		354,012	$	12.49	$	4,422		576,262	$	11.27	$	6,495
Shares withheld related to net settlement of equity awards		717		12.75		9		384,684		9.84		3,784
Total		354,729	$	12.49	$	4,431		960,946	$	10.70	$	10,279

Cash Dividends

The following table summarizes our dividends declared and paid in each of the quarterly periods of 2024 and 2023:


	Dividends per
(dollars in thousands, except per share amounts)	Common Share		Dividends Paid
2024
Q3	$	0.165	$	27,865
Q2		0.165		25,819
Q1		0.165		26,000

2023
Q4	$	0.155	$	24,190
Q3		0.155		24,250
Q2		0.150		23,504
Q1		0.150		23,852

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

10. Revenue from Contracts with Customers

The following table presents our revenue from contracts with customers by segment and disaggregated by revenue source:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Contract operations:
0 ― 1,000 horsepower per unit	$	60,589	$	43,142	$	151,250	$	126,272
1,001 ― 1,500 horsepower per unit		96,160		90,016		286,517		259,830
Over 1,500 horsepower per unit		88,529		74,140		255,684		209,526
Other ⁽¹⁾		142		254		488		789
Total contract operations revenue ⁽²⁾		245,420		207,552		693,939		596,417

Aftermarket services:
Services		27,396		24,860		78,509		70,676
OTC parts and components sales		19,029		20,955		58,411		63,651
Other		316		—		316		—
Total aftermarket services revenue ⁽³⁾		46,741		45,815		137,236		134,327

Total revenue	$	292,161	$	253,367	$	831,175	$	730,744

(1) Primarily relates to fees associated with owned non-compression equipment.

(2) Includes $1.5 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively, and $3.8 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time.

(3) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue and other revenue is recognized at a point in time.

See Note 17 (“Segment Information”) for further details.

Performance Obligations

As of September 30, 2024, we had $828.3 million of remaining performance obligations related to our contract operations segment, which will be recognized through 2029 as follows:


(in thousands)	2024		2025		2026		2027		2028		2029		Total
Remaining performance obligations	$	175,887	$	387,950	$	208,119	$	41,617	$	12,350	$	2,403	$	828,326

We do not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year.

Contract Assets and Liabilities

Contract Assets

As September 30, 2024 and December 31, 2023, our receivables from contracts with customers, net of allowance for credit losses, were $141.1 million and $119.7 million, respectively.

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Notes to Condensed Consolidated Financial Statements (continued)

Allowance for Credit Losses

Our allowance for credit losses balance changed as follows during the nine months ended September 30, 2024:


(in thousands)
Balance at beginning of period	$	587
Provision for credit losses		95
Write-offs charged against allowance		(44)
Balance at end of period	$	638

Contract Liabilities

Freight billings to customers for the transport of compression assets, customer-specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. As of September 30, 2024 and December 31, 2023, our contract liabilities were $7.9 million and $7.0 million, respectively.

During the nine months ended September 30, 2024, we deferred revenue of $10.6 million and recognized $9.7 million as revenue. The revenue recognized during the period primarily related to freight billings and milestone billings on aftermarket services.

11. Long-Lived and Other Asset Impairment

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

Compression Fleet

We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment, and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use.

In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value.

The following table presents the results of our compression fleet impairment review as recorded in our contract operations segment:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2024		2023		2024		2023
Idle compressors retired from the active fleet		15		30		80		75
Horsepower of idle compressors retired from the active fleet		12,000		16,000		58,000		39,000
Impairment recorded on idle compressors retired from the active fleet	$	2,509	$	2,922	$	9,478	$	8,383

See Note 15 (“Fair Value Measurements”) for further details.

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Notes to Condensed Consolidated Financial Statements (continued)

12. Restructuring Charges

During the first quarter of 2023, a plan to further streamline our organization and more fully align our teams to improve our customer service and profitability was approved by management. We did not incur restructuring charges during the nine months ended September 30, 2024, and we do not expect to incur additional restructuring charges related to these restructuring activities.

The following table presents restructuring charges incurred by segment:


	Contract		Aftermarket
(in thousands)	Operations		Services		Other⁽¹⁾		Total
Three months ended September 30, 2023
Organizational restructuring	$	—	$	387	$	205	$	592
Total restructuring charges	$	—	$	387	$	205	$	592

Nine months ended September 30, 2023
Organizational restructuring	$	101	$	387	$	1,066	$	1,554
Total restructuring charges	$	101	$	387	$	1,066	$	1,554

(1)	Represents expense incurred within our corporate function and not directly attributable to our segments.

The following table presents restructuring charges incurred by cost type:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2023		2023
Organizational Restructuring
Severance costs	$	592	$	1,296
Consulting costs		—		258
Total restructuring costs	$	592	$	1,554

13. Income Taxes

Valuation Allowance

The amount of our deferred tax assets considered realizable could be adjusted if projections of future taxable income are reduced or objective negative evidence in the form of a three-year cumulative loss is present or both. Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely net operating loss, interest expense limitation and tax credit carryforwards. This may result in the need to record a valuation allowance against all or a portion of our deferred tax assets.

Effective Tax Rate

The year-to-date effective tax rate for the nine months ended September 30, 2024 differed significantly from our statutory rate primarily due to state taxes, unrecognized tax benefits and the limitation on executive compensation offset by the benefit from equity-settled long-term incentive compensation.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Unrecognized Tax Benefits

As of September 30, 2024, we believe it is reasonably possible that $3.5 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to September 30, 2025 due to the settlement of audits or the expiration of statutes of limitations or both. However, due to the uncertain and complex application of the tax regulations, it is possible that the ultimate resolution of these matters may result in liabilities that could materially differ from this estimate.

14. Earnings Per Common Share

Basic earnings per common share is computed using the two-class method, which is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic earnings per common share is determined by dividing net income, after deducting amounts allocated to participating securities, by the weighted-average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock-settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, only distributed earnings (dividends) are allocated to participating securities, as participating securities do not have a contractual obligation to participate in our undistributed losses.

Diluted earnings per common share is computed using the weighted-average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding performance-based restricted stock units and stock to be issued pursuant to our ESPP unless their effect would have been anti-dilutive.

The following table shows the calculation of net income attributable to common stockholders, which is used in the calculation of basic and diluted earnings per common share, potential shares of common stock that were included in computing diluted earnings per common share and the potential shares of common stock issuable that were excluded from computing diluted earnings per common share as their inclusion would have been anti-dilutive:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	37,516	$	30,858	$	112,473	$	71,996
Less: Allocation of earnings to participating securities		(430)		(434)		(1,607)		(1,418)
Net income attributable to common stockholders	$	37,086	$	30,424	$	110,866	$	70,578

Less: Allocation of earnings to cash or share settled restricted stock units		(129)		—		(352)		—
Diluted net income attributable to common stockholders	$	36,957	$	30,424	$	110,514	$	70,578

Weighted-average common shares outstanding used in basic earnings per common share		165,847		154,163		158,205		154,210
Effect of dilutive securities:
Performance-based restricted stock units		325		235		306		181
ESPP shares		1		3		7		7
Weighted-average common shares outstanding used in diluted earnings per common share		166,173		154,401		158,518		154,398

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

15. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment in ECOTEC

As of September 30, 2024, we owned a 25% equity interest in ECOTEC (see Note 6 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value option to account for this investment. As of September 30, 2024, the fair value of our investment in ECOTEC was $16.2 million and is classified as Level 3.

The fair value determination of this investment primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples. Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement.

Additional quantitative information related to the significant unobservable inputs are as follows:

Significant

Three Months Ended

Unobservable

September 30, 2024

September 30, 2023

Inputs

Range

Median

Range

Median

Valuation technique:

Discounted cash flow

WACC

0.4% - 20.0%

13.5%

0.0% - 17.4%

10.0%

Guideline public company

Revenue multiple

1.5x - 7.2x

3.8x

1.6x - 10.0x

4.0x

The reconciliation of changes in the fair value of our investment in ECOTEC is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)		2024		2023		2024		2023
Balance at beginning of period	$	14,905	$	12,807	$	14,905	$	12,803
Purchases of equity interests		1,250		—		1,250		2,000
Unrealized loss ⁽¹⁾		—		—		—		(1,996)
Balance at end of period	$	16,155	$	12,807	$	16,155	$	12,807

(1)	Included in other expense, net in our unaudited condensed consolidated statement of operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Investment in Ionada

As of September 30, 2024, we had a fully diluted ownership equity interest in Ionada of 10% (see Note 6 (“Investments in Unconsolidated Affiliates”)). We have elected the fair value measurement alternative to account for this investment. As of September 30, 2024, the carrying value of our investment in Ionada was $4.3 million, which includes our initial investment of $3.8 million and cumulative transaction costs of $0.5 million. There had been no upward adjustments, impairments or downward adjustments to the carrying value of the investment as of September 30, 2024. Subject to certain contractual conditions additional investments may be made on the same terms and conditions as the initial investment, $1.2 million in November 2024, $1.3 million in November 2025 and $4.8 million prior to July 2026, for a fully diluted ownership interest of 12%, 15% and 24%, respectively.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Compressors

During the nine months ended September 30, 2024, we recorded nonrecurring fair value measurements related to our idle compressors. Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared with other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted-average disposal period of four years. These fair value measurements are classified as Level 3. The fair value of our compressors impaired as of September 30, 2024 and December 31, 2023 was as follows:


(in thousands)	September 30, 2024		December 31, 2023
Impaired compressors	$	853	$	1,423

The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compressors being measured. Additional quantitative information related to our significant unobservable inputs follows:


	Range	Weighted Average ⁽¹⁾
Estimated net sale proceeds:
As of September 30, 2024	$0 - $211 per horsepower	$49 per horsepower
As of December 31, 2023	$0 - $294 per horsepower	$50 per horsepower

(1)	Calculated based on an estimated discount for market liquidity of 25% and 33% as of September 30, 2024 and December 31, 2023, respectively.

See Note 11 (“Long-Lived and Other Asset Impairments”) for further details.

Other Financial Instruments

The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.

The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to the variable interest rate. The measurement of the fair value of these outstanding borrowings is a Level 3 measurement.

The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:


(in thousands)	September 30, 2024		December 31, 2023
Carrying amount of fixed rate debt ⁽¹⁾	$	1,789,956	$	1,297,844
Fair value of fixed rate debt		1,823,000		1,289,000

(1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7 (“Long-Term Debt”).

16. Related Party Transactions

ECOTEC

During both the three and nine months ended September 30, 2024, we made purchases of $0.3 million from our unconsolidated affiliate ECOTEC for use in our operations.

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Archrock, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Hilcorp

From August 2019 to present, our Board of Directors has included a member affiliated with our customer Hilcorp or its subsidiaries or affiliates. Revenue from Hilcorp was $10.2 million and $8.9 million during the three months ended September 30, 2024 and 2023, respectively, and $30.6 million and $26.7 million during the nine months ended September 30, 2024 and 2023, respectively. Accounts receivable, net due from Hilcorp was $3.6 million and $3.8 million as of September 30, 2024 and December 31, 2023, respectively.

17. Segment Information

We manage our business segments primarily based on the type of product or service provided. We have two segments that we operate within the U.S.: contract operations and aftermarket services. Our contract operations segment primarily provides natural gas compression services to meet specific customer requirements. Our aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.

We evaluate the performance of our segments based on adjusted gross margin, defined as revenue less cost of sales, exclusive of depreciation and amortization, for each segment. Segment revenue includes only sales to external customers.

Summarized financial information for our reporting segments is shown below:


	Contract		Aftermarket
(in thousands)	Operations		Services		Total
Three months ended September 30, 2024
Revenue	$	245,420	$	46,741	$	292,161
Adjusted gross margin		165,610		12,346		177,956

Three months ended September 30, 2023
Revenue	$	207,552	$	45,815	$	253,367
Adjusted gross margin		132,279		9,127		141,406

Nine months ended September 30, 2024
Revenue	$	693,939	$	137,236	$	831,175
Adjusted gross margin		457,108		32,683		489,791

Nine months ended September 30, 2023
Revenue	$	596,417	$	134,327	$	730,744
Adjusted gross margin		365,629		28,388		394,017

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Notes to Condensed Consolidated Financial Statements (continued)

The following table reconciles total adjusted gross margin to income before income taxes:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Total adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017
Less:
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Income before income taxes	$	52,953	$	42,312	$	154,018	$	99,539

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q and in conjunction with our 2023 Form 10-K.

OVERVIEW

We are an energy infrastructure company with a pure-play focus on midstream natural gas compression. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. We operate in two business segments: contract operations and aftermarket services. Our contract operations services primarily include designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment.

Recent Business Developments

TOPS Acquisition

On August 30, 2024, we completed the TOPS Acquisition whereby we acquired all of the issued and outstanding equity interests in TOPS, including a fleet of approximately 580,000 horsepower for aggregate consideration consisting of $869.1 million in cash and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. The cash portion of the purchase price was funded with proceeds from the July 2024 Equity Offering, the 2032 Notes offering and borrowings under the Credit Facility. See Note 3 (“Business Transactions”) for further details.

2032 Notes

On August 26, 2024, we completed a private offering of $700.0 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.3 million after deducting issuance costs. The $9.7 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. A portion of the net proceeds was used to fund a portion of the cash consideration for the TOPS Acquisition, the 2027 Notes Tender Offer and to repay borrowings outstanding under our Credit Facility. See Note 7 (“Long-Term Debt”) for further details.

2027 Notes Tender Offer

In connection with the TOPS Acquisition and offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million, which reflects approximately 101% of the aggregate principal amount of the tendered 2027 Notes and $0.2 million of agent and legal fees. On the date of tender, the net carrying value of the tendered 2027 Notes was $198.8 million and we recorded a debt extinguishment loss of $3.2 million in our condensed consolidated statements of operations. See Note 7 (“Long-Term Debt”) for further details.

July 2024 Equity Offering

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Operating Highlights


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(horsepower in thousands)	2024		2023		2024		2023
Total available horsepower (at period end)⁽¹⁾	4,418		3,773		4,418		3,773
Total operating horsepower (at period end)⁽²⁾	4,179		3,608		4,179		3,608
Average operating horsepower⁽³⁾	3,757		3,593		3,668		3,539
Horsepower utilization:
Spot (at period end)	95	%	96	%	95	%	96	%
Average	95	%	95	%	95	%	94	%

(1)	Defined as idle and operating horsepower. Includes new compressors completed by third-party manufacturers that have been delivered to us.

(2)	Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue.

(3)	Includes operating horsepower as of September 30, 2024 for compressors acquired in the TOPS Acquisition.

Non-GAAP Financial Measures

Management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measure of adjusted gross margin.

We define adjusted gross margin as total revenue less cost of sales, exclusive of depreciation and amortization. Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales, exclusive of depreciation and amortization, which are key components of our operations. We believe adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. In addition, depreciation and amortization may not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs of current operating activity. As an indicator of our operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin, net income (loss) or any other measure presented in accordance with GAAP. Our adjusted gross margin may not be comparable to a similarly titled measure of other entities because other entities may not calculate adjusted gross margin in the same manner.

Adjusted gross margin has certain material limitations associated with its use as compared to net income. These limitations are primarily due to the exclusion of SG&A, depreciation and amortization, long-lived and other asset impairments, restructuring charges, debt extinguishment loss, interest expense, transaction-related costs, gain on sale of assets, net, other expense (income), net and provision for income taxes. Because we intend to finance a portion of our operations through borrowings, interest expense is a necessary element of our costs and our ability to generate revenue. Additionally, because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue and SG&A is necessary to support our operations and required corporate activities. To compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.

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The following table reconciles net income to adjusted gross margin:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	37,516	$	30,858	$	112,473	$	71,996
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Provision for income taxes		15,437		11,454		41,545		27,543
Adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017

The following table reconciles adjusted gross margin to gross margin, its most directly comparable GAAP measure:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Total revenues	$	292,161	$	253,367	$	831,175	$	730,744
Cost of sales, exclusive of depreciation and amortization		(114,205)		(111,961)		(341,384)		(336,727)
Depreciation and amortization		(48,377)		(42,155)		(135,065)		(123,546)
Gross margin		129,579		99,251		354,726		270,471
Depreciation and amortization		48,377		42,155		135,065		123,546
Adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017

RESULTS OF OPERATIONS

Summary of Results

Revenue was $292.2 million and $253.4 million during the three months ended September 30, 2024 and 2023, respectively, and $831.2 million and $730.7 million during the nine months ended September 30, 2024 and 2023, respectively. The increase in revenue was primarily due to increased revenue from our contract operations business during the three and nine months ended September 30, 2024. See “Contract Operations” and “Aftermarket Services” below for further details.

Net income was $37.5 million and $30.9 million during the three months ended September 30, 2024 and 2023, respectively. The increase was primarily driven by higher adjusted gross margin from both our contract operations business and aftermarket services business. These changes were partially offset by increases in transaction-related costs, depreciation and amortization, SG&A, provision for income taxes, debt extinguishment loss and interest expense, and a decrease in gain on sale of assets, net.

Net income was $112.5 million and $72.0 million during the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily driven by higher adjusted gross margin from both our contract operations business and aftermarket services business. These changes were partially offset by increases in provision for income taxes, SG&A, depreciation and amortization, transaction-related costs, debt extinguishment loss, interest expense, long-lived and other asset impairment, and decreases in the gain on sale of assets, net and the unrealized change in the fair value of our investment in an unconsolidated affiliate.

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Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Contract Operations


	Three Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	245,420		$	207,552		18	%
Cost of sales, exclusive of depreciation and amortization		79,810			75,273		6	%
Adjusted gross margin	$	165,610		$	132,279		25	%
Adjusted gross margin percentage ⁽¹⁾		67	%		64	%	4	%

(1)	Defined as adjusted gross margin divided by revenue.

Revenue in our contract operations business increased primarily due to $20.7 million in higher rates, an increase of $15.6 million due to the compression units acquired in the TOPS Acquisition and increase in average operating horsepower for contract compression.

The increase in cost of sales, exclusive of depreciation and amortization, was primarily due to a $3.9 million increase in total employee compensation expense and a $1.4 million increase in parts expense. This increase was partially offset by a decrease of $1.9 million in lube oil expenses as a result of lower prices.

Aftermarket Services


	Three Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	46,741		$	45,815		2	%
Cost of sales, exclusive of depreciation and amortization		34,395			36,688		(6)	%
Adjusted gross margin	$	12,346		$	9,127		35	%
Adjusted gross margin percentage ⁽¹⁾		26	%		20	%	6	%

(1) Defined as adjusted gross margin divided by revenue.

Revenue in our aftermarket services business increased primarily due to higher levels of service activities driven by an increase in customer demand, and maintenance service contracts, which was partially offset by a decrease in part sales.

Adjusted gross margin increased in our aftermarket services business as a result of increased revenue and decreased cost of sales, exclusive of depreciation and amortization, due to a difference in the scope, timing and type of services performed, including additional work associated with maintenance service contracts.

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Costs and Expenses


	Three Months Ended
	September 30,
(in thousands)	2024		2023
Selling, general and administrative	$	34,059	$	28,558
Depreciation and amortization		48,377		42,155
Long-lived and other asset impairment		2,509		2,922
Restructuring charges		—		592
Debt extinguishment loss		3,181		—
Interest expense		30,179		28,339
Transaction-related costs		9,220		—
Gain on sale of assets, net		(2,218)		(3,237)
Other income, net		(304)		(235)

Selling, general and administrative. The increase in SG&A primarily included a $3.6 million increase in employee incentive and other compensation expense, a $0.5 million increase in amortization of capitalized implementation costs and a $0.5 million increase in legal and other professional fees.

Depreciation and amortization. The increase in depreciation and amortization was primarily due to fixed assets additions, including $3.7 million depreciation and amortization associated with the compression units and intangible assets acquired in the TOPS Acquisition. These increases were partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives, the impact of compression and other asset sales, and long-lived and other asset impairments.

Long-lived and other asset impairment. We periodically review the future deployment of our idle compressors for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. We also evaluate for impairment our idle units that have been culled from our compression fleet in prior years and are available for sale. During the three months ended September 30, 2024 and 2023, we recognized $2.5 million and $2.9 million, respectively, of impairment charges to write down these compressors to their fair value. See Note 11 (“Long-Lived Asset and Other Impairments”) for further details. The following table presents the results of our compression fleet impairment review, as recorded in our contract operations segment:


	Three Months Ended
	September 30,
(dollars in thousands)	2024		2023
Idle compressors retired from the active fleet		15		30
Horsepower of idle compressors retired from the active fleet		12,000		16,000
Impairment recorded on idle compressors retired from the active fleet	$	2,509	$	2,922

Restructuring charges. Restructuring charges of $0.6 million during the three months ended September 30, 2023 consisted of severance and consulting costs related to our restructuring activities. See Note 12 (“Restructuring Charges”) for further details

Debt extinguishment loss. We incurred $3.2 million of debt extinguishment loss during the three months ended September 30, 2024 as a result of the 2027 Notes Tender Offer.

Transaction-related costs. We incurred $9.2 million of financial advisory, legal and other professional fees and retention and other employee compensation costs during the three months ended September 30, 2024 related to the TOPS Acquisition.

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Gain on sale of assets, net. The decrease in gain on sale of assets, net was primarily due to gains of $2.6 million on compression asset sales during the three months ended September 30, 2024, compared to gains of $3.2 million on compression asset sales during the three months ended September 30, 2023.

Provision for Income Taxes

The increase in provision for income taxes was primarily due to the tax effect of the increase in book income during the three months ended September 30, 2024 compared with the three months ended September 30, 2023.


	Three Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Provision for income taxes	$	15,437		$	11,454		35	%
Effective tax rate		29	%		27	%	2	%

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Contract Operations


	Nine Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	693,939		$	596,417		16	%
Cost of sales, exclusive of depreciation and amortization		236,831			230,788		3	%
Adjusted gross margin	$	457,108		$	365,629		25	%
Adjusted gross margin percentage ⁽¹⁾		66	%		61	%	5	%

(1)	Defined as adjusted gross margin divided by revenue.

Revenue in our contract operations business increased primarily due to $70.0 million in higher rates, an increase of $15.6 million due to the compression units acquired in the TOPS Acquisition and an increase in average operating horsepower for contract compression.

The increase in cost of sales, exclusive of depreciation and amortization, was primarily due to a $9.1 million increase in total employee compensation expense, a $3.2 million increase in parts expense and a $1.6 million increase in local and miscellaneous taxes. This increase was partially offset by a decrease of $6.7 million in startup expenses resulting from average horsepower utilization for the fleet at record levels as well as fewer unit stops and a decrease of $3.0 million in lube oil expenses as a result of lower prices.

Aftermarket Services


	Nine Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Revenue	$	137,236		$	134,327		2	%
Cost of sales, exclusive of depreciation and amortization		104,553			105,939		(1)	%
Adjusted gross margin	$	32,683		$	28,388		15	%
Adjusted gross margin percentage ⁽¹⁾		24	%		21	%	3	%

(1) Defined as adjusted gross margin divided by revenue.

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Adjusted gross margin increased in our aftermarket services business as a result of increased revenue and decreased cost of sales, exclusive of depreciation and amortization, due to differences in the scope, timing and type of services performed, including additional work associated with maintenance service contracts.

Costs and Expenses


	Nine Months Ended
	September 30,
(in thousands)	2024		2023
Selling, general and administrative	$	96,887	$	83,632
Depreciation and amortization		135,065		123,546
Long-lived and other asset impairment		9,478		8,383
Restructuring charges		—		1,554
Debt extinguishment loss		3,181		—
Interest expense		85,372		83,550
Transaction-related costs		11,002		—
Gain on sale of assets, net		(5,175)		(8,018)
Other expense (income), net		(37)		1,831

Selling, general and administrative. The increase in SG&A primarily included a $10.2 million increase in employee incentive and other compensation expense and a $0.9 million increase in network and computer-related costs, partially offset by a decrease of $0.5 million in professional fees.

Depreciation and amortization. The increase in depreciation and amortization was primarily due to fixed assets additions, including $3.7 million depreciation and amortization associated with the compression units and intangible assets acquired in the TOPS Acquisition, and accelerated depreciation associated with certain assets. The increase was partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives, the impact of compression and other asset sales, and long-lived asset impairments.

Long-lived and other asset impairment. We periodically review the future deployment of our idle compressors for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. We also evaluate for impairment our idle units that have been culled from our compression fleet in prior years and are available for sale. During the nine months ended September 30, 2024 and 2023, we recognized $9.5 million and $8.4 million, respectively, of impairment charges to write down these compressors to their fair value. See Note 11 (“Long-Lived Asset and Other Impairments”) for further details. The following table presents the results of our compression fleet impairment review, as recorded in our contract operations segment:


	Nine Months Ended
	September 30,
(dollars in thousands)	2024		2023
Idle compressors retired from the active fleet		80		75
Horsepower of idle compressors retired from the active fleet		58,000		39,000
Impairment recorded on idle compressors retired from the active fleet	$	9,478	$	8,383

Restructuring charges. Restructuring charges of $1.6 million during the nine months ended September 30, 2023 consisted of severance and consulting costs related to our restructuring activities. See Note 12 (“Restructuring Charges”) for further details.

Debt extinguishment loss. We incurred $3.2 million of debt extinguishment loss during the nine months ended September 30, 2024 as a result of the 2027 Notes Tender Offer.

Interest expense. The increase in interest expense was primarily related to a higher average outstanding balance of long-term debt due to the 2032 Notes offering, an increase in the outstanding balance on the Credit Facility and higher interest rates. These increases were partially offset by the 2027 Notes Tender Offer and the write-off of $1.0 million of unamortized deferred financing costs as a result of the Amended and Restated Credit Agreement during the nine months ended September 30, 2023.

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Transaction-related costs. We incurred $11.0 million of financial advisory, legal and other professional fees and retention and other employee compensation costs during the nine months ended September 30, 2024 related to the TOPS Acquisition.

Gain on sale of assets, net. The decrease in gain on sale of assets, net was primarily due to gains of $5.1 million on compression asset sales during the nine months ended September 30, 2024 compared to gains of $7.3 million on compression asset sales during the nine months ended September 30, 2023.

Other expense (income), net. The change from other expense, net to other income, net was primarily due to a $2.0 million unrealized change in the fair value of our investment in an unconsolidated affiliate recognized during the nine months ended September 30, 2023.

Provision for Income Taxes

The increase in provision for income taxes was primarily due to the tax effect of the increase in book income and the limitation on executive compensation offset by the benefit from equity-settled long-term incentive compensation and reduction in valuation allowance during the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023.


	Nine Months Ended
	September 30,						Increase
(dollars in thousands)	2024			2023			(Decrease)
Provision for income taxes	$	41,545		$	27,543		51	%
Effective tax rate		27	%		28	%	(1)	%

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our ability to fund operations, finance capital expenditures and pay dividends depends on the levels of our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under our Credit Facility. Our cash flow is affected by numerous factors, including prices and demand for our services, oil and natural gas exploration and production spending, conditions in the financial markets and other factors. We have no near-term maturities and believe that our operating cash flows and borrowings under the Credit Facility will be sufficient to meet our future liquidity needs.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, may be material, will be upon terms and prices as we may determine and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

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Cash Requirements

Our contract operations business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is primarily dependent on the demand for our contract operations services and the availability of the type of compression equipment required for us to provide those contract operations services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:

•

operating expenses, namely employee compensation and benefits, inventory and lube oil purchases;

•

growth capital expenditures;

•

maintenance capital expenditures;

•

interest on our outstanding debt obligations;

•

dividend payments to our stockholders; and

•

shares repurchased under the Share Repurchase Program and to cover taxes required to be withheld on the vesting date of long-term incentive grants to employees.

Capital Expenditures

Growth Capital Expenditures. The majority of our growth capital expenditures are related to the acquisition cost of new compressors when our idle equipment cannot be reconfigured to economically fulfill a project’s requirements and the new compressor is expected to generate economic returns that exceed our cost of capital over the compressor’s expected useful life. In addition to newly-acquired compressors, growth capital expenditures include the upgrading of major components on an existing compression package where the current configuration of the compression package is no longer in demand and the compressor is not likely to return to an operating status without the capital expenditures. These expenditures substantially modify the operating parameters of the compression package such that it can be used in applications for which it previously was not suited.

Maintenance Capital Expenditures. Maintenance capital expenditures are related to major overhauls of significant components of a compression package, such as the engine, electric motor, compressor and cooler, which return the components to a like-new condition, but do not modify the application for which the compression package was designed.

Projected Capital Expenditures. We expect approximately $260 million in growth capital expenditures in 2024, including $190 million for our pre-acquisition business. The $70 million increase is exclusively related to the addition of the TOPS’ backlog and the remaining payments to packagers at delivery. This backlog is substantially committed to customers.

Dividends

On October 24, 2024, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock to be paid on November 13, 2024 to stockholders of record at the close of business on November 6, 2024. Any future determinations to pay cash dividends to our stockholders will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations and credit and loan agreements in effect at that time and other factors deemed relevant by our Board of Directors.

Sources of Cash

Credit Facility

During the nine months ended September 30, 2024 and 2023, our Credit Facility had an average debt balance of $268.7 million and $294.5 million, respectively. The weighted-average annual interest rate on the outstanding balance under the Credit Facility was 7.2% and 7.7% at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, there were $4.1 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.1%.

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2032 Notes and 2027 Notes Tender Offer

On August 26, 2024, we completed a private offering of $700.0 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.3 million after deducting issuance costs. In connection with the offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million. See Note 7 (“Long-Term Debt”) for further details.

July 2024 Equity Offering

On July 24, 2024, Archrock sold, pursuant to a public underwriting offering, 12,650,000 shares, including 1,650,000 shares pursuant to an over-allotment option. Archrock received net proceeds of $255.7 million, after deducting underwriting discounts, commissions and offering expenses. See Note 9 (“Stockholders’ Equity”) for further details.

Cash Flows

Our cash flows, as reflected in our unaudited condensed consolidated statements of cash flows, are summarized below:


	Nine Months Ended
	September 30,
(in thousands)	2024		2023
Net cash provided by (used in):
Operating activities	$	305,253	$	238,468
Investing activities		(1,104,670)		(208,157)
Financing activities		801,828		(31,395)
Net increase (decrease) in cash and cash equivalents	$	2,411	$	(1,084)

Operating Activities

The increase in net cash provided by operating activities was primarily due to increased cash inflows of $99.0 million from adjusted gross margin, excluding deferred revenue recognized in earnings and amortization of freight and mobilization charges, changes of $5.1 million in inventory as a result of improvement in the lead time for parts and of $2.4 million in accounts receivable due to increased cash receipts from customers. These increases were partially offset by changes of $17.9 million in accounts payable and accrued liabilities due in part to accrued interest paid in connection with the 2027 Notes Tender Offer.

Investing Activities

The increase in net cash used in investing activities was primarily due to $869.1 million of cash paid in the TOPS Acquisition and a $30.5 million decrease in proceeds from the sale of property, plant and equipment.

Financing Activities

The change from net cash used in financing activities to net cash provided by financing activities was primarily due to $700.0 million of proceeds from the issuance of the 2032 Notes, $255.7 million of proceeds from the July 2024 Equity Offering and a $103.5 million increase in net borrowings of long-term debt, partially offset by $202.0 million for the 2027 Notes Tender Offer.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks associated with changes in the variable interest rate of our Credit Facility. A 1% increase in the effective interest rate on our Credit Facility’s outstanding balance at September 30, 2024 would have resulted in an annual increase in our interest expense of $4.5 million.

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ITEM 4. CONTROLS AND PROCEDURES

This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Form 10-Q as Exhibits 31.1 and 31.2.

Management’s Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in the rules and forms of the SEC. Based on the evaluation, as of September 30, 2024, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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ITEM 1A. RISK FACTORS

Other than the following items, there have been no material changes or updates to the risk factors previously disclosed in our 2023 Form 10-K.

Risks Related to the TOPS Acquisition

We may not be able to achieve the expected benefits of the TOPS Acquisition. We may also encounter significant difficulties in integrating TOPS.

We may not be able to achieve the expected benefits of the TOPS Acquisition and there can be no assurance that the TOPS Acquisition will be beneficial to us. We may not be able to integrate the assets acquired in the TOPS Acquisition without increases in costs or other difficulties. The integration of a business is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating our business practices and operations with the business practices and operations of TOPS. The integration process may disrupt our business and, if implemented ineffectively, would restrict the full realization of the anticipated benefits from the TOPS Acquisition. The failure to meet the challenges involved in integrating TOPS and to realize the anticipated benefits of the TOPS Acquisition could have an adverse effect on our business, results of operations, financial condition and prospects, as well as the market price of our common stock. The challenges of integrating the operations of acquired businesses include, among others:

●

difficulties with the integration of the business of TOPS and workforce following the TOPS Acquisition;

●

conditions in the oil and natural gas industry, including the level of production of, demand for or price of oil or natural gas;

●

our reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies;

●

changes in economic or political conditions, including terrorism and legislative changes;

●

the inherent risks associated with our operations, such as equipment defects, impairments, malfunctions and natural disasters;

●

the risk that counterparties will not perform their obligations under our financial instruments;

●

the financial condition of our customers;

●

our ability to timely and cost-effectively obtain components necessary to conduct our business;

●

employment and workforce factors, including our ability to hire, train and retain key employees;

●

our ability to implement certain business and financial objectives, such as:

●

winning profitable new business;

●

growing our asset base and enhancing asset utilization;

●

integrating acquired businesses;

●

generating sufficient cash; and

●

accessing the capital markets at an acceptable cost;

●

liability related to the use of our services;

●

changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures;

●

the effectiveness of our control environment, including the identification of control deficiencies; and

●

our level of indebtedness and ability to fund our business.

Many of these factors are outside of our control, and any one of them could result in increased costs and liabilities, decreases in the amount of expected revenue and earnings, and diversion of management’s time and energy, which could have a material adverse effect on our business, financial condition and results of operations. Further, additional unanticipated costs may be incurred in the integration of the acquired business.

The market price of our common stock may decline as a result of the TOPS Acquisition if, among other things, the integration of the properties to be acquired in the TOPS Acquisition is unsuccessful or transaction costs related to the TOPS Acquisition are greater than expected. The market price of our common stock may decline if we do not achieve the perceived benefits of the TOPS Acquisition as rapidly or to the extent anticipated by us or by securities market participants or if the effect of TOPS Acquisition on our business, results of operations or financial condition or prospects is not consistent with our expectations or those of securities market participants.

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Any acquisitions we complete, including the TOPS Acquisition, are subject to substantial risks that could reduce our ability to make distributions to our common stockholders.

Even if we do make acquisitions that we believe will increase the amount of cash available for distribution to our common stockholders, these acquisitions, including the TOPS Acquisition, may nevertheless result in a decrease in the amount of cash available for distribution to our common stockholders. Any acquisition, including the TOPS Acquisition, involves potential risks, including, among other things:

●

the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate;

●

our inability to obtain satisfactory title to the assets we acquire; and

●

the occurrence of other significant changes, such as impairment of long-lived assets, asset devaluation or restructuring charges.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES BY ISSUER AND USE OF PROCEEDS

Sales of Unregistered Securities

None.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes our share repurchase activity for the three months ended September 30, 2024:


					Approximate Dollar
					Value of Shares
				Total Number of	That May Yet be
		Average		Shares Purchased	Purchased Under
	Total Number	Price		as Part of Publicly	the Publicly
	of Shares	Paid per		Announced Plans	Announced Plans
(dollars in thousands, except per share amounts)	Purchased ⁽¹⁾	Share⁽²⁾		or Programs	or Programs
July 1, 2024 — July 31, 2024	4,575	$	20.13	—	$	50,000
August 1, 2024 — August 31, 2024	598,930		18.62	598,214		38,859
September 1, 2024 — September 30, 2024	51,640		18.70	51,640		37,893
Total	655,145	$	18.64	649,854

(1)	Represents shares of common stock purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards and shares repurchased under the 2023 Share Repurchase Program during the period. See Note 9 (“Stockholders Equity”) for further details.

(2)	Average price paid per share includes costs associated with the repurchase, as applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended September 30, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS

The exhibits listed below are filed or furnished as part of this report:



2.1#		Purchase and Sale Agreement, dated as of July 22, 2024, by and among Archrock ELT LLC, Archrock, Inc., TOPS Pledge1, LLC and TOPS Pledge2, LLC and, solely with respect to Section 6.25 of the Purchase and Sale Agreement, TOPS Holdings, LLC (incorporated by reference to Exhibit 2.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on July 22, 2024)
3.1		Composite Certificate of Incorporation of Archrock, Inc., as amended as of November 3, 2015, (incorporated by reference to Exhibit 3.3 to Archrock Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015)
3.2		Fourth Amended and Restated Bylaws of Exterran Holdings, Inc., now Archrock, Inc. (incorporated by reference to Exhibit 3.1 of Archrock Inc.’s Current Report on Form 8-K filed on July 27, 2023)
4.1		Indenture, dated as of August 26, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., the guarantors party thereto and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 26, 2024)
4.2		Supplemental Indenture, dated August 26, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and Computershare Trust Company (as successor in interest to Wells Fargo Bank, National Association), as trustee (incorporated by reference to Exhibit 4.2 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 26, 2024)
4.3		Supplemental Indenture, dated August 26, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and Computershare Trust Company (as successor in interest to Wells Fargo Bank, National Association), as trustee (incorporated by reference to Exhibit 4.3 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 26, 2024)
10.1		Purchase Agreement, dated as of August 12, 2024, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and Wells Fargo Securities, LLC, as representative of the initial purchasers named therein (incorporated by reference to Exhibit 10.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 13, 2024)
10.2		First Amendment to Amended and Restated Credit Agreement, dated as of August 28, 2024, by and among Archrock, Inc., Archrock Partners Operating LLC, Archrock Services, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as the Administrative Agent (incorporated by reference to Exhibit 10.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 28, 2024)
10.3		Registration Rights and Lock-Up Agreement, dated as of August 30, 2024, by and between Archrock, Inc., TOPS Pledge1, LLC, TOPS Pledge2, LLC and TOPS NewCo, LLC (incorporated by reference to Exhibit 10.1 to Archrock, Inc.’s Current Report on Form 8-K filed with the SEC on August 30, 2024)
31.1*		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1*		Interactive data files (formatted in Inline XBRL) pursuant to Rule 405 of Regulation S-T
104.1*		Cover page interactive data file (formatted in Inline XBRL) pursuant to Rule 406 of Regulation S-T

* Filed herewith

** Furnished, not filed

# Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5)The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Archrock, Inc.

	By:	/s/ Douglas S. Aron
		Douglas S. Aron
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

	By:	/s/ Donna A. Henderson
		Donna A. Henderson
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

		November 12, 2024

Exhibit 31.1

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, D. Bradley Childers, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Archrock, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2024


By:	/s/ D. Bradley Childers
	Name: D. Bradley Childers
	Title: President and Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Douglas S. Aron, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Archrock, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2024

By:	/s/ Douglas S. Aron
	Name: Douglas S. Aron
	Title: Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.1

Certification of CEO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Archrock, Inc. (the “Company”) for the quarter ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), D. Bradley Childers, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ D. Bradley Childers
Name: D. Bradley Childers
Title: President and Chief Executive Officer

Date: November 12, 2024

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification of CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Archrock, Inc. (the “Company”) for the quarter ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Douglas S. Aron, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Douglas S. Aron
Name: Douglas S. Aron
Title: Senior Vice President and Chief Financial Officer

Date: November 12, 2024

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2024	Nov. 05, 2024
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Commission File Number	001-33666
Entity Registrant Name	Archrock, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	74-3204509
Entity Street Address	9807 Katy Freeway
Entity Suite Number	Suite 100
Entity City	Houston
Entity State	TX
Entity Postal Zip Code	77024
City Area Code	281
Local Phone Number	836-8000
Title of each class	Common stock, $0.01 par value per share
Trading Symbol	AROC
Name of exchange on which registered	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		175,172,118
Entity Central Index Key	0001389050
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 3,749	$ 1,338
Accounts receivable, net of allowance of $638 and $587, respectively	149,019	124,069
Inventory	84,366	81,761
Other current assets	7,547	5,989
Total current assets	244,681	213,157
Property, plant and equipment, net	3,261,026	2,301,982
Operating lease right-of-use assets	15,222	14,097
Goodwill	116,937
Intangible assets, net	78,197	30,182
Contract costs, net	35,938	37,739
Deferred tax assets	2,138	3,192
Other assets	54,241	47,733
Non-current assets of discontinued operations	7,868	7,868
Total assets	3,816,248	2,655,950
Current liabilities:
Accounts payable, trade	70,120	61,026
Accrued liabilities	119,303	85,381
Deferred revenue	5,238	5,736
Total current liabilities	194,661	152,143
Long-term debt	2,236,131	1,584,869
Operating lease liabilities	12,536	12,271
Deferred tax liabilities	41,394	4,921
Other liabilities	32,922	22,857
Non-current liabilities of discontinued operations	7,868	7,868
Total liabilities	2,525,512	1,784,929
Commitments and contingencies (Note 8)
Equity:
Preferred stock: $0.01 par value per share, 50,000,000 shares authorized, zero issued
Common stock: $0.01 par value per share, 250,000,000 shares authorized, 185,333,786 and 164,984,401 shares issued, respectively	1,854	1,650
Additional paid-in capital	3,877,203	3,470,576
Accumulated deficit	(2,467,142)	(2,499,931)
Treasury stock: 10,158,142 and 9,020,454 common shares, at cost, respectively	(121,179)	(101,274)
Total equity	1,290,736	871,021
Total liabilities and equity	$ 3,816,248	$ 2,655,950

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Condensed Consolidated Balance Sheets
Accounts receivable, allowance	$ 638	$ 587
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	185,333,786	164,984,401
Treasury stock, common shares (in shares)	10,158,142	9,020,454

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue	$ 292,161	$ 253,367	$ 831,175	$ 730,744
Total cost of sales, exclusive of depreciation and amortization	114,205	111,961	341,384	336,727
Selling, general and administrative	34,059	28,558	96,887	83,632
Depreciation and amortization	48,377	42,155	135,065	123,546
Long-lived and other asset impairment	2,509	2,922	9,478	8,383
Restructuring charges		592	0	1,554
Debt extinguishment loss	3,181		3,181
Interest expense	30,179	28,339	85,372	83,550
Transaction-related costs	9,220		11,002
Gain on sale of assets, net	(2,218)	(3,237)	(5,175)	(8,018)
Other expense (income), net	(304)	(235)	(37)	1,831
Income before income taxes	52,953	42,312	154,018	99,539
Provision for income taxes	15,437	11,454	41,545	27,543
Net income	$ 37,516	$ 30,858	$ 112,473	$ 71,996
Basic earnings per common share (in dollars per share)	$ 0.22	$ 0.20	$ 0.70	$ 0.46
Diluted earnings per common share (in dollars per share)	$ 0.22	$ 0.20	$ 0.70	$ 0.46
Weighted average common shares outstanding:
Basic (in shares)	165,847	154,163	158,205	154,210
Diluted (in shares)	166,173	154,401	158,518	154,398
Contract operations
Revenue	$ 245,420	$ 207,552	$ 693,939	$ 596,417
Total cost of sales, exclusive of depreciation and amortization	79,810	75,273	236,831	230,788
Aftermarket services
Revenue	46,741	45,815	137,236	134,327
Total cost of sales, exclusive of depreciation and amortization	$ 34,395	$ 36,688	$ 104,553	$ 105,939

Condensed Consolidated Statements of Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock, Common	Total
Beginning balance at Dec. 31, 2022	$ 1,634	$ 3,456,777	$ (2,509,133)	$ (88,585)	$ 860,693
Beginning balance (in shares) at Dec. 31, 2022	163,439,013
Treasury stock, common shares, Beginning balance (in shares) at Dec. 31, 2022				7,810,548
Increase (Decrease) in Stockholders' Equity
Shares repurchased				$ (6,495)	(6,495)
Shares repurchased (in shares)				576,262
Shares withheld related to net settlement of equity awards				$ (3,784)	(3,784)
Shares withheld related to net settlement of equity awards (in shares)				384,684
Cash dividends			(71,606)		(71,606)
Shares issued in ESPP	$ 1	573			574
Shares issued in ESPP (in shares)	61,494
Stock-based compensation, net of forfeitures	$ 14	9,701			9,715
Stock-based compensation, net of forfeitures (in shares)	1,459,236			68,158
Net income			71,996		71,996
Ending balance at Sep. 30, 2023	$ 1,649	3,467,051	(2,508,743)	$ (98,864)	861,093
Ending balance (in shares) at Sep. 30, 2023	164,959,743
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2023				8,839,652
Beginning balance at Jun. 30, 2023	$ 1,649	3,463,668	(2,515,351)	$ (94,433)	855,533
Beginning balance (in shares) at Jun. 30, 2023	164,940,249
Treasury stock, common shares, Beginning balance (in shares) at Jun. 30, 2023				8,440,673
Increase (Decrease) in Stockholders' Equity
Shares repurchased				$ (4,422)	(4,422)
Shares repurchased (in shares)				354,012
Shares withheld related to net settlement of equity awards				$ (9)	(9)
Shares withheld related to net settlement of equity awards (in shares)				717
Cash dividends			(24,250)		(24,250)
Shares issued in ESPP		192			192
Shares issued in ESPP (in shares)	19,494
Stock-based compensation, net of forfeitures		3,191			3,191
Stock-based compensation, net of forfeitures (in shares)				44,250
Net income			30,858		30,858
Ending balance at Sep. 30, 2023	$ 1,649	3,467,051	(2,508,743)	$ (98,864)	861,093
Ending balance (in shares) at Sep. 30, 2023	164,959,743
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2023				8,839,652
Beginning balance at Dec. 31, 2023	$ 1,650	3,470,576	(2,499,931)	$ (101,274)	$ 871,021
Beginning balance (in shares) at Dec. 31, 2023	164,984,401
Treasury stock, common shares, Beginning balance (in shares) at Dec. 31, 2023				9,020,454	9,020,454
Increase (Decrease) in Stockholders' Equity
Shares repurchased				$ (13,337)	$ (13,337)
Shares repurchased (in shares)				732,826
Shares withheld related to net settlement of equity awards				$ (6,568)	(6,568)
Shares withheld related to net settlement of equity awards (in shares)				391,868
Cash dividends			(79,684)		(79,684)
Shares issued in ESPP		815			815
Shares issued in ESPP (in shares)	49,602
Stock-based compensation, net of forfeitures	$ 8	11,207			11,215
Stock-based compensation, net of forfeitures (in shares)	776,133			12,994
Net proceeds from issuance of common stock	$ 127	255,620			255,747
Net proceeds from issuance of common stock (in shares)	12,650,000
Shares issued for TOPS Acquisition	$ 69	138,985			139,054
Shares issued for TOPS Acquisition (in shares)	6,873,650
Net income			112,473		112,473
Ending balance at Sep. 30, 2024	$ 1,854	3,877,203	(2,467,142)	$ (121,179)	$ 1,290,736
Ending balance (in shares) at Sep. 30, 2024	185,333,786
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2024				10,158,142	10,158,142
Beginning balance at Jun. 30, 2024	$ 1,658	3,478,597	(2,476,793)	$ (108,966)	$ 894,496
Beginning balance (in shares) at Jun. 30, 2024	165,793,798
Treasury stock, common shares, Beginning balance (in shares) at Jun. 30, 2024				9,493,262
Increase (Decrease) in Stockholders' Equity
Shares repurchased				$ (12,107)	(12,107)
Shares repurchased (in shares)				649,854
Shares withheld related to net settlement of equity awards				$ (106)	(106)
Shares withheld related to net settlement of equity awards (in shares)				5,291
Cash dividends			(27,865)		(27,865)
Shares issued in ESPP		263			263
Shares issued in ESPP (in shares)	14,485
Stock-based compensation, net of forfeitures		3,738			3,738
Stock-based compensation, net of forfeitures (in shares)	1,853			9,735
Net proceeds from issuance of common stock	$ 127	255,620			255,747
Net proceeds from issuance of common stock (in shares)	12,650,000
Shares issued for TOPS Acquisition	$ 69	138,985			139,054
Shares issued for TOPS Acquisition (in shares)	6,873,650
Net income			37,516		37,516
Ending balance at Sep. 30, 2024	$ 1,854	$ 3,877,203	$ (2,467,142)	$ (121,179)	$ 1,290,736
Ending balance (in shares) at Sep. 30, 2024	185,333,786
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2024				10,158,142	10,158,142

Condensed Consolidated Statements of Equity (Parenthetical) - $ / shares	3 Months Ended							9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Condensed Consolidated Statements of Equity
Dividend declared per common stock (in dollars per share)	$ 0.165	$ 0.165	$ 0.165	$ 0.155	$ 0.155	$ 0.150	$ 0.150	$ 0.495	$ 0.455

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows from operating activities:
Net income	$ 112,473	$ 71,996
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	135,065	123,546
Long-lived and other asset impairment	9,478	8,383
Non-cash restructuring charges		211
Unrealized change in fair value of investment in unconsolidated affiliate		1,996
Inventory write-downs	568	381
Amortization of operating lease right-of-use assets	2,789	2,488
Amortization of deferred financing costs	3,575	4,599
Amortization of debt premium	(1,504)	(1,504)
Amortization of capitalized implementation costs	2,259	1,841
Debt extinguishment loss	3,181
Stock-based compensation expense	11,215	9,715
Provision for (benefit from) credit losses	95	(234)
Gain on sale of assets, net	(5,175)	(8,018)
Deferred income tax provision	40,483	26,411
Amortization of contract costs	17,771	15,636
Deferred revenue recognized in earnings	(9,707)	(11,043)
Changes in operating assets and liabilities:
Accounts receivable, net	(4,883)	(7,315)
Inventory	3,449	(1,672)
Other assets	(3,303)	(1,635)
Contract costs	(15,970)	(18,854)
Accounts payable and other liabilities	(7,126)	10,745
Deferred revenue	10,598	10,733
Other	(78)	62
Net cash provided by operating activities	305,253	238,468
Cash flows from investing activities:
Capital expenditures	(261,044)	(261,977)
Proceeds from sale of property, equipment and other assets	24,204	54,663
Proceeds from insurance and other settlements	45	1,157
Cash paid in TOPS Acquisition, net of cash acquired	(866,568)
Investments in unconsolidated entities	(1,307)	(2,000)
Net cash used in investing activities	(1,104,670)	(208,157)
Cash flows from financing activities:
Borrowings of long-term debt	1,133,425	577,725
Repayments of long-term debt	(974,275)	(522,075)
Proceeds from 2032 Notes offering	700,000
Partial repayment of 2027 Notes	(201,987)
Payments of debt issuance costs	(12,308)	(5,734)
Dividends paid to stockholders	(79,684)	(71,606)
Repurchases of common stock	(13,337)	(6,495)
Taxes paid related to net share settlement of equity awards	(6,568)	(3,784)
Net proceeds from issuance of common stock	255,747
Proceeds from stock issued under ESPP	815	574
Net cash provided by (used in) financing activities	801,828	(31,395)
Net increase (decrease) in cash and cash equivalents	2,411	(1,084)
Cash and cash equivalents, beginning of period	1,338	1,566
Cash and cash equivalents, end of period	3,749	$ 482
Supplemental disclosure of non-cash investing transactions:
Issuance of Archrock common stock pursuant to TOPS Acquisition	$ 139,054

Description of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2024

Basis of Presentation and Significant Accounting Policies

Description of Business and Basis of Presentation

1. Description of Business and Basis of Presentation

Recent Accounting Developments

9 Months Ended

Sep. 30, 2024

Recent Accounting Developments

Recent Accounting Developments

2. Recent Accounting Developments

Accounting Standards Updates Not Yet Implemented

Income Tax Disclosures

Segment Reporting

Business Combinations – Joint Venture Formations

Business Transactions

9 Months Ended

Sep. 30, 2024

Business Transactions

Business Transactions

3. Business Transactions

TOPS Acquisition

The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


(in thousands)
Cash	$	2,498
Accounts receivable		9,694
Inventory		6,944
Other current assets		495
Property, plant and equipment		872,053
Operating lease right-of-use assets		1,424
Goodwill		116,937
Intangible assets		52,775
Other assets		4,032
Accounts payable, trade		(48,609)
Accrued liabilities		(4,666)
Operating lease liabilities		(1,424)
Other liabilities		(4,032)
Purchase price	$	1,008,121

Property, Plant and Equipment

Intangible Assets

Goodwill

Tax Contingency and Indemnification Asset

Transaction-Related Costs

The following table presents transaction-related cost incurred by cost type:


	Three months ended		Nine months ended
(in thousands)	September 30, 2024		September 30, 2024
Professional fees ⁽¹⁾	$	8,762	$	10,544
Compensation-related costs ⁽²⁾		363		363
Other costs		95		95
Total transaction-related costs	$	9,220	$	11,002

(1)	Professional fees include legal, advisory, consulting and other fees.

(2)	Compensation-related costs include amounts related to employee retention and other compensation related arrangements associated with the acquisition. Payments are due and payable at various times up to and including the two-year anniversary of the TOPS Acquisition.

Unaudited Pro Forma Financial Information

●

the effects of the employee retention and other compensation-related arrangements associated with the TOPS Acquisition;

●

the interest expense resulting from the 2032 Notes, the 2027 Notes Tender Offer, and the First Amendment to the Amended and Restated Credit Agreement;

●

the income tax effects of the adjustments based on the estimated blended statutory tax rate of 23%.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Revenue	$	321,775	$	282,657	$	940,244	$	806,243
Net income attributable to Archrock stockholders		49,494		29,318		133,164		50,791

Inventory

9 Months Ended

Sep. 30, 2024

Inventory

Inventory

4. Inventory

Inventory was comprised of the following as of September 30, 2024 and December 31, 2023:


	September 30,		December 31,
(in thousands)	2024		2023
Parts and supplies	$	70,824	$	70,759
Work in progress		13,542		11,002
Inventory	$	84,366	$	81,761

Property, Plant and Equipment, Net

9 Months Ended

Sep. 30, 2024

Property, Plant and Equipment, Net

Property, Plant and Equipment, Net

5. Property, Plant and Equipment, Net

Property, plant and equipment, net was comprised of the following as of September 30, 2024 and December 31, 2023:


	September 30,		December 31,
(in thousands)	2024		2023
Compression equipment, facilities and other fleet assets	$	4,301,892	$	3,326,919
Land and buildings		31,936		30,169
Transportation and shop equipment		117,296		100,474
Computer hardware and software		77,912		77,532
Other		6,106		5,678
Property, plant and equipment		4,535,142		3,540,772
Accumulated depreciation		(1,274,116)		(1,238,790)
Property, plant and equipment, net	$	3,261,026	$	2,301,982

Investments in Unconsolidated Affiliates

9 Months Ended

Sep. 30, 2024

Investments in Unconsolidated Affiliates

Investment in Unconsolidated Affiliate

6. Investments in Unconsolidated Affiliates

Long-Term Debt

9 Months Ended

Sep. 30, 2024

Long-Term Debt

Long-Term Debt

7. Long-Term Debt

Long-term debt was comprised of the following as of September 30, 2024, and December 31, 2023:


(in thousands)	September 30, 2024		December 31, 2023
Credit Facility	$	446,175	$	287,025

6.625% senior notes due September 2032:
Principal outstanding		700,000		—
Unamortized debt issuance costs		(9,629)		—
		690,371		—
6.25% senior notes due April 2028:
Principal outstanding		800,000		800,000
Unamortized debt premium		7,020		8,524
Unamortized debt issuance costs		(5,816)		(7,081)
		801,204		801,443
6.875% senior notes due April 2027:
Principal outstanding		300,000		500,000
Unamortized debt issuance costs		(1,619)		(3,599)
		298,381		496,401

Long-term debt	$	2,236,131	$	1,584,869

2032 Notes

2027 Notes Tender Offer

First Amendment to the Amended and Restated Credit Agreement

On August 28, 2024, we amended our Amended and Restated Credit Agreement to, among other things:

●

increase the borrowing capacity of the Credit Facility from $750.0 million to $1.1 billion;

●

increase the portion of the Credit Facility available for the issuance of swing line loans from $75.0 million to $110.0 million;

●

increase the cash dominion trigger threshold amount from $75.0 million to $110.0 million;

●

add certain financial institutions as lenders under the Credit Facility;

●

join a newly formed wholly owned subsidiary of Archrock Services, L.P. as a guarantor and grantor under the Credit Facility; and

●

modify certain other covenants to which we are subject to.

Amended and Restated Credit Agreement

On May 16, 2023, we amended and restated our Credit Facility to, among other things:

●

change the referenced rate from LIBOR to SOFR so that borrowings under the Credit Facility bear interest at, based on our election, either a base rate or SOFR, plus an applicable margin; and

●

increase the portion of the Credit Facility available for the issuance of swing line loans from $50.0 million to $75.0 million.

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies

Commitments and Contingencies

8. Commitments and Contingencies

Insurance Matters

Tax Matters

Litigation and Claims

Stockholders' Equity

9 Months Ended

Sep. 30, 2024

Stockholders' Equity

Stockholders' Equity

9. Stockholders’ Equity

July 2024 Equity Offering

TOPS Acquisition

Share Repurchases

Share Repurchase Program

Shares Withheld to Cover

The 2020 Plan and 2013 Plan allow us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date.

The following table summarizes shares repurchased:


	Three Months Ended						Nine Months Ended
	September 30, 2024						September 30, 2024
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		649,854	$	18.63	$	12,107		732,826	$	18.20	$	13,337
Shares withheld related to net settlement of equity awards		5,291		20.05		106		391,868		16.76		6,568
Total		655,145	$	18.64	$	12,213		1,124,694	$	17.70	$	19,905

	Three Months Ended						Nine Months Ended
	September 30, 2023						September 30, 2023
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		354,012	$	12.49	$	4,422		576,262	$	11.27	$	6,495
Shares withheld related to net settlement of equity awards		717		12.75		9		384,684		9.84		3,784
Total		354,729	$	12.49	$	4,431		960,946	$	10.70	$	10,279

Cash Dividends

The following table summarizes our dividends declared and paid in each of the quarterly periods of 2024 and 2023:


	Dividends per
(dollars in thousands, except per share amounts)	Common Share		Dividends Paid
2024
Q3	$	0.165	$	27,865
Q2		0.165		25,819
Q1		0.165		26,000

2023
Q4	$	0.155	$	24,190
Q3		0.155		24,250
Q2		0.150		23,504
Q1		0.150		23,852

Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2024

Revenue from Contracts with Customers

Revenue from Contracts with Customers

10. Revenue from Contracts with Customers

The following table presents our revenue from contracts with customers by segment and disaggregated by revenue source:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Contract operations:
0 ― 1,000 horsepower per unit	$	60,589	$	43,142	$	151,250	$	126,272
1,001 ― 1,500 horsepower per unit		96,160		90,016		286,517		259,830
Over 1,500 horsepower per unit		88,529		74,140		255,684		209,526
Other ⁽¹⁾		142		254		488		789
Total contract operations revenue ⁽²⁾		245,420		207,552		693,939		596,417

Aftermarket services:
Services		27,396		24,860		78,509		70,676
OTC parts and components sales		19,029		20,955		58,411		63,651
Other		316		—		316		—
Total aftermarket services revenue ⁽³⁾		46,741		45,815		137,236		134,327

Total revenue	$	292,161	$	253,367	$	831,175	$	730,744

(1) Primarily relates to fees associated with owned non-compression equipment.

(3) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue and other revenue is recognized at a point in time.

See Note 17 (“Segment Information”) for further details.

Performance Obligations

As of September 30, 2024, we had $828.3 million of remaining performance obligations related to our contract operations segment, which will be recognized through 2029 as follows:


(in thousands)	2024		2025		2026		2027		2028		2029		Total
Remaining performance obligations	$	175,887	$	387,950	$	208,119	$	41,617	$	12,350	$	2,403	$	828,326

Contract Assets and Liabilities

Contract Assets

As September 30, 2024 and December 31, 2023, our receivables from contracts with customers, net of allowance for credit losses, were $141.1 million and $119.7 million, respectively.

Allowance for Credit Losses

Our allowance for credit losses balance changed as follows during the nine months ended September 30, 2024:


(in thousands)
Balance at beginning of period	$	587
Provision for credit losses		95
Write-offs charged against allowance		(44)
Balance at end of period	$	638

Contract Liabilities

Long-Lived and Other Asset Impairment

9 Months Ended

Sep. 30, 2024

Long-Lived and Other Asset Impairment

Long-Lived and Other Asset Impairment

11. Long-Lived and Other Asset Impairment

Compression Fleet

The following table presents the results of our compression fleet impairment review as recorded in our contract operations segment:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2024		2023		2024		2023
Idle compressors retired from the active fleet		15		30		80		75
Horsepower of idle compressors retired from the active fleet		12,000		16,000		58,000		39,000
Impairment recorded on idle compressors retired from the active fleet	$	2,509	$	2,922	$	9,478	$	8,383

See Note 15 (“Fair Value Measurements”) for further details.

Restructuring Charges

9 Months Ended

Sep. 30, 2024

Restructuring Charges

Restructuring Charges

12. Restructuring Charges

The following table presents restructuring charges incurred by segment:


	Contract		Aftermarket
(in thousands)	Operations		Services		Other⁽¹⁾		Total
Three months ended September 30, 2023
Organizational restructuring	$	—	$	387	$	205	$	592
Total restructuring charges	$	—	$	387	$	205	$	592

Nine months ended September 30, 2023
Organizational restructuring	$	101	$	387	$	1,066	$	1,554
Total restructuring charges	$	101	$	387	$	1,066	$	1,554

(1)	Represents expense incurred within our corporate function and not directly attributable to our segments.

The following table presents restructuring charges incurred by cost type:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2023		2023
Organizational Restructuring
Severance costs	$	592	$	1,296
Consulting costs		—		258
Total restructuring costs	$	592	$	1,554

Income Taxes

9 Months Ended

Sep. 30, 2024

Income Taxes

Income Taxes

13. Income Taxes

Valuation Allowance

Effective Tax Rate

Unrecognized Tax Benefits

Earnings per Common Share

9 Months Ended

Sep. 30, 2024

Earnings per Common Share

Net Income (Loss) per Common Share

14. Earnings Per Common Share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	37,516	$	30,858	$	112,473	$	71,996
Less: Allocation of earnings to participating securities		(430)		(434)		(1,607)		(1,418)
Net income attributable to common stockholders	$	37,086	$	30,424	$	110,866	$	70,578

Less: Allocation of earnings to cash or share settled restricted stock units		(129)		—		(352)		—
Diluted net income attributable to common stockholders	$	36,957	$	30,424	$	110,514	$	70,578

Weighted-average common shares outstanding used in basic earnings per common share		165,847		154,163		158,205		154,210
Effect of dilutive securities:
Performance-based restricted stock units		325		235		306		181
ESPP shares		1		3		7		7
Weighted-average common shares outstanding used in diluted earnings per common share		166,173		154,401		158,518		154,398

Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Measurements

Fair Value Measurements

15. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investment in ECOTEC

Additional quantitative information related to the significant unobservable inputs are as follows:

Significant

Three Months Ended

Unobservable

September 30, 2024

September 30, 2023

Inputs

Range

Median

Range

Median

Valuation technique:

Discounted cash flow

WACC

0.4% - 20.0%

13.5%

0.0% - 17.4%

10.0%

Guideline public company

Revenue multiple

1.5x - 7.2x

3.8x

1.6x - 10.0x

4.0x

The reconciliation of changes in the fair value of our investment in ECOTEC is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)		2024		2023		2024		2023
Balance at beginning of period	$	14,905	$	12,807	$	14,905	$	12,803
Purchases of equity interests		1,250		—		1,250		2,000
Unrealized loss ⁽¹⁾		—		—		—		(1,996)
Balance at end of period	$	16,155	$	12,807	$	16,155	$	12,807

(1)	Included in other expense, net in our unaudited condensed consolidated statement of operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Investment in Ionada

Compressors


(in thousands)	September 30, 2024		December 31, 2023
Impaired compressors	$	853	$	1,423


	Range	Weighted Average ⁽¹⁾
Estimated net sale proceeds:
As of September 30, 2024	$0 - $211 per horsepower	$49 per horsepower
As of December 31, 2023	$0 - $294 per horsepower	$50 per horsepower

(1)	Calculated based on an estimated discount for market liquidity of 25% and 33% as of September 30, 2024 and December 31, 2023, respectively.

See Note 11 (“Long-Lived and Other Asset Impairments”) for further details.

Other Financial Instruments

The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.

The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:


(in thousands)	September 30, 2024		December 31, 2023
Carrying amount of fixed rate debt ⁽¹⁾	$	1,789,956	$	1,297,844
Fair value of fixed rate debt		1,823,000		1,289,000

(1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7 (“Long-Term Debt”).

Related Party Transactions

9 Months Ended

Sep. 30, 2024

Related Party Transactions

Related Party Transactions

16. Related Party Transactions

ECOTEC

During both the three and nine months ended September 30, 2024, we made purchases of $0.3 million from our unconsolidated affiliate ECOTEC for use in our operations.

Hilcorp

Segment Information

9 Months Ended

Sep. 30, 2024

Segment Information

Segments

17. Segment Information

Summarized financial information for our reporting segments is shown below:


	Contract		Aftermarket
(in thousands)	Operations		Services		Total
Three months ended September 30, 2024
Revenue	$	245,420	$	46,741	$	292,161
Adjusted gross margin		165,610		12,346		177,956

Three months ended September 30, 2023
Revenue	$	207,552	$	45,815	$	253,367
Adjusted gross margin		132,279		9,127		141,406

Nine months ended September 30, 2024
Revenue	$	693,939	$	137,236	$	831,175
Adjusted gross margin		457,108		32,683		489,791

Nine months ended September 30, 2023
Revenue	$	596,417	$	134,327	$	730,744
Adjusted gross margin		365,629		28,388		394,017

The following table reconciles total adjusted gross margin to income before income taxes:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Total adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017
Less:
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Income before income taxes	$	52,953	$	42,312	$	154,018	$	99,539

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 37,516	$ 30,858	$ 112,473	$ 71,996

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Description of Business and Basis of Presentation (Policies)	9 Months Ended
	Sep. 30, 2024
Basis of Presentation and Significant Accounting Policies
Basis of Presentation	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by GAAP. Therefore, this information should be read in conjunction with our consolidated financial statements and notes contained in our 2023 Form 10-K. The information furnished herein reflects all adjustments that are, in the opinion of management, of a normal recurring nature and considered necessary for a fair statement of the results of the interim periods reported. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Accounting Standards Updates Implemented and Accounting Standards Updates Not Yet Implemented	Accounting Standards Updates Not Yet Implemented Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which will require significant additional disclosures, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, and should be applied on a prospective basis, with a retrospective option. Early adoption is permitted. We are evaluating the impact that the adoption of ASU 2023-09 will have on our consolidated financial statements and related disclosures. Segment Reporting In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which will require disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the chief operating decision maker evaluates segment expenses and operating results. ASU 2023-07 will also allow disclosure of multiple measures of segment profitability if those measures are used to allocate resources and assess performance. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis, unless impracticable. Early adoption is permitted. We are evaluating the impact that the adoption of ASU 2023-07 will have on our segment disclosures. We expect that the adoption of ASU 2023-07 will not have a material impact on our consolidated financial statements. Business Combinations – Joint Venture Formations In August 2023, the FASB issued ASU 2023-05, to reduce diversity in practice and provide decision-useful information to a joint venture’s investors by requiring that a joint venture apply a new basis of accounting upon formation. By applying a new basis of accounting, a joint venture will recognize and initially measure its assets and liabilities at fair value, with exceptions to fair value measurement that are consistent with the business combinations guidance, on the date of formation. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025, may elect to apply the amendments retrospectively if it has sufficient information to do so. Early adoption is permitted in any interim or annual period in which financial statements have not been issued or been made available for issuance, either prospectively or retrospectively. We expect that the adoption of ASU 2023-05 will have no impact on our consolidated financial statements.

Business Transactions (Tables)

9 Months Ended

Sep. 30, 2024

Business Transactions

Summary of fair values of assets acquired and liabilities assumed

The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


(in thousands)
Cash	$	2,498
Accounts receivable		9,694
Inventory		6,944
Other current assets		495
Property, plant and equipment		872,053
Operating lease right-of-use assets		1,424
Goodwill		116,937
Intangible assets		52,775
Other assets		4,032
Accounts payable, trade		(48,609)
Accrued liabilities		(4,666)
Operating lease liabilities		(1,424)
Other liabilities		(4,032)
Purchase price	$	1,008,121

Schedule of transaction-related costs incurred by cost type


	Three months ended		Nine months ended
(in thousands)	September 30, 2024		September 30, 2024
Professional fees ⁽¹⁾	$	8,762	$	10,544
Compensation-related costs ⁽²⁾		363		363
Other costs		95		95
Total transaction-related costs	$	9,220	$	11,002

(1)	Professional fees include legal, advisory, consulting and other fees.

(2)	Compensation-related costs include amounts related to employee retention and other compensation related arrangements associated with the acquisition. Payments are due and payable at various times up to and including the two-year anniversary of the TOPS Acquisition.

Schedule of pro forma financial information


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Revenue	$	321,775	$	282,657	$	940,244	$	806,243
Net income attributable to Archrock stockholders		49,494		29,318		133,164		50,791

Inventory (Tables)

9 Months Ended

Sep. 30, 2024

Inventory

Schedule of inventory


	September 30,		December 31,
(in thousands)	2024		2023
Parts and supplies	$	70,824	$	70,759
Work in progress		13,542		11,002
Inventory	$	84,366	$	81,761

Property, Plant and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2024

Property, Plant and Equipment, Net

Schedule of property, plant and equipment, net


	September 30,		December 31,
(in thousands)	2024		2023
Compression equipment, facilities and other fleet assets	$	4,301,892	$	3,326,919
Land and buildings		31,936		30,169
Transportation and shop equipment		117,296		100,474
Computer hardware and software		77,912		77,532
Other		6,106		5,678
Property, plant and equipment		4,535,142		3,540,772
Accumulated depreciation		(1,274,116)		(1,238,790)
Property, plant and equipment, net	$	3,261,026	$	2,301,982

Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2024

Long-Term Debt

Schedule of long-term debt


(in thousands)	September 30, 2024		December 31, 2023
Credit Facility	$	446,175	$	287,025

6.625% senior notes due September 2032:
Principal outstanding		700,000		—
Unamortized debt issuance costs		(9,629)		—
		690,371		—
6.25% senior notes due April 2028:
Principal outstanding		800,000		800,000
Unamortized debt premium		7,020		8,524
Unamortized debt issuance costs		(5,816)		(7,081)
		801,204		801,443
6.875% senior notes due April 2027:
Principal outstanding		300,000		500,000
Unamortized debt issuance costs		(1,619)		(3,599)
		298,381		496,401

Long-term debt	$	2,236,131	$	1,584,869

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2024

Stockholders' Equity

Summary of shares repurchased


	Three Months Ended						Nine Months Ended
	September 30, 2024						September 30, 2024
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		649,854	$	18.63	$	12,107		732,826	$	18.20	$	13,337
Shares withheld related to net settlement of equity awards		5,291		20.05		106		391,868		16.76		6,568
Total		655,145	$	18.64	$	12,213		1,124,694	$	17.70	$	19,905

	Three Months Ended						Nine Months Ended
	September 30, 2023						September 30, 2023
(dollars in thousands, except per share amounts)	Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased		Total Number of Shares Repurchased		Average Price per Share		Total Cost of Shares Repurchased
Shares repurchased under the Share Repurchase Program		354,012	$	12.49	$	4,422		576,262	$	11.27	$	6,495
Shares withheld related to net settlement of equity awards		717		12.75		9		384,684		9.84		3,784
Total		354,729	$	12.49	$	4,431		960,946	$	10.70	$	10,279

Summary of dividends declared and paid


	Dividends per
(dollars in thousands, except per share amounts)	Common Share		Dividends Paid
2024
Q3	$	0.165	$	27,865
Q2		0.165		25,819
Q1		0.165		26,000

2023
Q4	$	0.155	$	24,190
Q3		0.155		24,250
Q2		0.150		23,504
Q1		0.150		23,852

Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2024

Revenue from Contracts with Customers

Schedule of revenue from contracts with customers by segment


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Contract operations:
0 ― 1,000 horsepower per unit	$	60,589	$	43,142	$	151,250	$	126,272
1,001 ― 1,500 horsepower per unit		96,160		90,016		286,517		259,830
Over 1,500 horsepower per unit		88,529		74,140		255,684		209,526
Other ⁽¹⁾		142		254		488		789
Total contract operations revenue ⁽²⁾		245,420		207,552		693,939		596,417

Aftermarket services:
Services		27,396		24,860		78,509		70,676
OTC parts and components sales		19,029		20,955		58,411		63,651
Other		316		—		316		—
Total aftermarket services revenue ⁽³⁾		46,741		45,815		137,236		134,327

Total revenue	$	292,161	$	253,367	$	831,175	$	730,744

(1) Primarily relates to fees associated with owned non-compression equipment.

(3) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue and other revenue is recognized at a point in time.

Schedule of remaining performance obligations


(in thousands)	2024		2025		2026		2027		2028		2029		Total
Remaining performance obligations	$	175,887	$	387,950	$	208,119	$	41,617	$	12,350	$	2,403	$	828,326

Summary of changes in allowance for credit losses


(in thousands)
Balance at beginning of period	$	587
Provision for credit losses		95
Write-offs charged against allowance		(44)
Balance at end of period	$	638

Long-Lived and Other Asset Impairment (Tables)

9 Months Ended

Sep. 30, 2024

Long-Lived and Other Asset Impairment

Schedule of impairment of long-lived assets


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in thousands)	2024		2023		2024		2023
Idle compressors retired from the active fleet		15		30		80		75
Horsepower of idle compressors retired from the active fleet		12,000		16,000		58,000		39,000
Impairment recorded on idle compressors retired from the active fleet	$	2,509	$	2,922	$	9,478	$	8,383

Restructuring Charges (Tables)

9 Months Ended

Sep. 30, 2024

Restructuring Charges

Schedule of restructuring charges by segment


	Contract		Aftermarket
(in thousands)	Operations		Services		Other⁽¹⁾		Total
Three months ended September 30, 2023
Organizational restructuring	$	—	$	387	$	205	$	592
Total restructuring charges	$	—	$	387	$	205	$	592

Nine months ended September 30, 2023
Organizational restructuring	$	101	$	387	$	1,066	$	1,554
Total restructuring charges	$	101	$	387	$	1,066	$	1,554

(1)	Represents expense incurred within our corporate function and not directly attributable to our segments.

Schedule of restructuring charges by type


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2023		2023
Organizational Restructuring
Severance costs	$	592	$	1,296
Consulting costs		—		258
Total restructuring costs	$	592	$	1,554

Earnings per Common Share (Tables)

9 Months Ended

Sep. 30, 2024

Earnings per Common Share

Schedule of calculation of basic and diluted net income per common share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	37,516	$	30,858	$	112,473	$	71,996
Less: Allocation of earnings to participating securities		(430)		(434)		(1,607)		(1,418)
Net income attributable to common stockholders	$	37,086	$	30,424	$	110,866	$	70,578

Less: Allocation of earnings to cash or share settled restricted stock units		(129)		—		(352)		—
Diluted net income attributable to common stockholders	$	36,957	$	30,424	$	110,514	$	70,578

Weighted-average common shares outstanding used in basic earnings per common share		165,847		154,163		158,205		154,210
Effect of dilutive securities:
Performance-based restricted stock units		325		235		306		181
ESPP shares		1		3		7		7
Weighted-average common shares outstanding used in diluted earnings per common share		166,173		154,401		158,518		154,398

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2024

Fair value

Schedule of carrying value and estimated fair value of debt instruments


(in thousands)	September 30, 2024		December 31, 2023
Carrying amount of fixed rate debt ⁽¹⁾	$	1,789,956	$	1,297,844
Fair value of fixed rate debt		1,823,000		1,289,000

(1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7 (“Long-Term Debt”).

Compressors

Fair value

Schedule of significant unobservable inputs


	Range	Weighted Average ⁽¹⁾
Estimated net sale proceeds:
As of September 30, 2024	$0 - $211 per horsepower	$49 per horsepower
As of December 31, 2023	$0 - $294 per horsepower	$50 per horsepower

(1)	Calculated based on an estimated discount for market liquidity of 25% and 33% as of September 30, 2024 and December 31, 2023, respectively.

Schedule of non-recurring fair value assets


(in thousands)	September 30, 2024		December 31, 2023
Impaired compressors	$	853	$	1,423

ECOTEC | Equity investment

Fair value

Schedule of significant unobservable inputs

Significant

Three Months Ended

Unobservable

September 30, 2024

September 30, 2023

Inputs

Range

Median

Range

Median

Valuation technique:

Discounted cash flow

WACC

0.4% - 20.0%

13.5%

0.0% - 17.4%

10.0%

Guideline public company

Revenue multiple

1.5x - 7.2x

3.8x

1.6x - 10.0x

4.0x

Schedule of changes in assets measured at fair value on a recurring basis


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)		2024		2023		2024		2023
Balance at beginning of period	$	14,905	$	12,807	$	14,905	$	12,803
Purchases of equity interests		1,250		—		1,250		2,000
Unrealized loss ⁽¹⁾		—		—		—		(1,996)
Balance at end of period	$	16,155	$	12,807	$	16,155	$	12,807

(1)	Included in other expense, net in our unaudited condensed consolidated statement of operations.

Segments (Tables)

9 Months Ended

Sep. 30, 2024

Segment Information

Summary of revenue and other financial information by reportable segment


	Contract		Aftermarket
(in thousands)	Operations		Services		Total
Three months ended September 30, 2024
Revenue	$	245,420	$	46,741	$	292,161
Adjusted gross margin		165,610		12,346		177,956

Three months ended September 30, 2023
Revenue	$	207,552	$	45,815	$	253,367
Adjusted gross margin		132,279		9,127		141,406

Nine months ended September 30, 2024
Revenue	$	693,939	$	137,236	$	831,175
Adjusted gross margin		457,108		32,683		489,791

Nine months ended September 30, 2023
Revenue	$	596,417	$	134,327	$	730,744
Adjusted gross margin		365,629		28,388		394,017

Reconciliation of total gross margin to income before taxes


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Total adjusted gross margin	$	177,956	$	141,406	$	489,791	$	394,017
Less:
Selling, general and administrative		34,059		28,558		96,887		83,632
Depreciation and amortization		48,377		42,155		135,065		123,546
Long-lived and other asset impairment		2,509		2,922		9,478		8,383
Restructuring charges		—		592		—		1,554
Debt extinguishment loss		3,181		—		3,181		—
Interest expense		30,179		28,339		85,372		83,550
Transaction-related costs		9,220		—		11,002		—
Gain on sale of assets, net		(2,218)		(3,237)		(5,175)		(8,018)
Other expense (income), net		(304)		(235)		(37)		1,831
Income before income taxes	$	52,953	$	42,312	$	154,018	$	99,539

Description of Business and Basis of Presentation (Details)	9 Months Ended
	Sep. 30, 2024 segment
Basis of Presentation and Significant Accounting Policies
Number of reportable segments	2

Business Transactions - TOPS Acquisition (Details) hp in Thousands, $ in Thousands		3 Months Ended	9 Months Ended
	Aug. 30, 2024 USD ($) hp shares	Sep. 30, 2024 USD ($)	Sep. 30, 2024 USD ($)
Business Transactions
Cash consideration			$ 866,568
Shares issued for TOPS Acquisition		$ 139,054	139,054
Estimated fair values of assets acquired and liabilities assumed
Goodwill		$ 116,937	$ 116,937
Total Operations and Production Services, LLC ("TOPS")
Business Transactions
Horsepower of fleet acquired in the acquisition \| hp	580
Operating horsepower of fleet acquired in the acquisition \| hp	530
Cash consideration	$ 869,100
Shares issued as compensation for asset acquisition (shares) \| shares	6,873,650
Shares issued for TOPS Acquisition	$ 139,100
Estimated fair values of assets acquired and liabilities assumed
Cash	2,498
Accounts receivable	9,694
Inventory	6,944
Other current assets	495
Property, plant and equipment	872,053
Operating lease right-of-use assets	1,424
Goodwill	116,937
Intangible assets	52,775
Other assets	4,032
Accounts payable, trade	(48,609)
Accrued liabilities	(4,666)
Operating lease liabilities	(1,424)
Other liabilities	4,032
Purchase price	$ 1,008,121

Business Transactions - Assets Acquired (Details) - Total Operations and Production Services, LLC ("TOPS")	Aug. 30, 2024
Business Transactions
Property, plant and equipment, Estimated average remaining useful life	25 years
Customer relationships
Business Transactions
Intangible assets, Estimated useful life	12 years
Trade names
Business Transactions
Intangible assets, Estimated useful life	5 years

Business Transactions - Tax Contingency and Indemnification Asset (Details) - Total Operations and Production Services, LLC ("TOPS") - USD ($) $ in Millions		1 Months Ended
	Aug. 30, 2024	Sep. 30, 2024
Business Transactions
Revenue attributable to assets acquired from the date of acquisition		$ 15.6
Minimum
Business Transactions
Period over which seller's indemnity obligation reduces	5 years
Non-income tax based contingency
Business Transactions
Accrued liability	$ 4.3
Corresponding indemnification asset	4.3
Non-income tax based contingency \| Maximum
Business Transactions
Amount of seller's indemnification obligation	$ 21.6

Business Transactions - Transaction-Related Costs (Details) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended
	Aug. 30, 2024	Sep. 30, 2024	Sep. 30, 2024
Business Transactions
Total transaction-related costs		$ 9,220	$ 11,002
Total Operations and Production Services, LLC ("TOPS")
Business Transactions
Professional fees		8,762	10,544
Compensation related costs		363	363
Other costs		95	95
Total transaction-related costs		$ 9,220	$ 11,002
Compensation related costs, Payment period	2 years

Business Transactions - Pro forma (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Aug. 30, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pro forma financial information
Revenue		$ 321,775	$ 282,657	$ 940,244	$ 806,243
Net income attributable to Archrock stockholders		49,494	$ 29,318	133,164	$ 50,791
Estimated blended statutory tax rate (as a percent)	23.00%
Proforma adjustment, Financial advisory, legal, audit and other professional fees
Pro forma financial information
Net income attributable to Archrock stockholders		$ 8,800		$ 10,500

Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Composition of Inventory net of reserves
Parts and supplies	$ 70,824	$ 70,759
Work in progress	13,542	11,002
Inventory	$ 84,366	$ 81,761

Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Property, Plant and Equipment, Net
Property, plant and equipment	$ 4,535,142	$ 3,540,772
Accumulated depreciation	(1,274,116)	(1,238,790)
Property, plant and equipment, net	3,261,026	2,301,982
Compression equipment, facilities and other fleet assets
Property, Plant and Equipment, Net
Property, plant and equipment	4,301,892	3,326,919
Land and buildings
Property, Plant and Equipment, Net
Property, plant and equipment	31,936	30,169
Transportation and shop equipment
Property, Plant and Equipment, Net
Property, plant and equipment	117,296	100,474
Computer hardware and software
Property, Plant and Equipment, Net
Property, plant and equipment	77,912	77,532
Other
Property, Plant and Equipment, Net
Property, plant and equipment	$ 6,106	$ 5,678

Investment in Unconsolidated Affiliate (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	Aug. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Nov. 30, 2023	Apr. 30, 2022
Investments
Investments in unconsolidated entities		$ 1,307	$ 2,000
ECOTEC
Investments
Total potential equity interest to be acquired (as a percent)					25.00%
Ownership interest (as a percent)		25.00%
Unrealized loss recognized due to change in fair value			$ 2,000
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income			Other Nonoperating Income (Expense)
Investments in unconsolidated entities	$ 1,300
Ionada
Investments
Total potential equity interest to be acquired (as a percent)		24.00%
Ownership interest (as a percent)		10.00%
Carrying value of investment		$ 4,300
Amount of initial investment				$ 3,800
Period over which ownership interest will be acquired to reach agreed upon ownership percentage		2 years

Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Aug. 26, 2024	Dec. 31, 2023
Debt Instruments
Long-term debt	$ 2,236,131		$ 1,584,869
Credits Facility, Amended and Restated
Debt Instruments
Long-term debt	446,175		287,025
6.625% senior notes due September 2032
Debt Instruments
Principal outstanding	700,000
Unamortized debt issuance costs	(9,629)
Long-term debt	$ 690,371
Interest rate (as a percent)	6.625%	6.625%
6.25% senior notes due April 2028
Debt Instruments
Principal outstanding	$ 800,000		800,000
Unamortized debt premium	7,020		8,524
Unamortized debt issuance costs	(5,816)		(7,081)
Long-term debt	$ 801,204		$ 801,443
Interest rate (as a percent)	6.25%		6.25%
6.875% senior notes due April 2027
Debt Instruments
Principal outstanding	$ 300,000		$ 500,000
Unamortized debt issuance costs	(1,619)		(3,599)
Long-term debt	$ 298,381		$ 496,401
Interest rate (as a percent)	6.875%		6.875%

Long-Term Debt - Notes (Details) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended
Long-Term Debt - Notes (Details) - USD ($) $ in Thousands	Aug. 26, 2024	Sep. 30, 2024	Sep. 30, 2024	Dec. 31, 2023
Debt Instruments
Debt extinguishment loss		$ 3,181	$ 3,181
6.625% senior notes due September 2032
Debt Instruments
Aggregate principal amount	$ 700,000
Interest rate (as a percent)	6.625%	6.625%	6.625%
Proceeds from issuance of debt	$ 690,300
Issuance costs	$ 9,700
Maximum percentage of notes that may be redeemed at specified redemption prices	40.00%
6.875% senior notes due April 2027
Debt Instruments
Interest rate (as a percent)		6.875%	6.875%	6.875%
Amount of cash tender offer of notes	$ 202,000
Repurchase amount of debt as a percentage of aggregate principal amount	101.00%
Amount of agent and legal fees	$ 200
Net carrying amount	198,800
Debt extinguishment loss	$ 3,200
6.25% senior notes due April 2028
Debt Instruments
Interest rate (as a percent)		6.25%	6.25%	6.25%

Long-Term Debt - Amended and Restated Credit Agreement (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Jun. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Aug. 28, 2024	Jun. 30, 2024	Dec. 31, 2023	May 16, 2023	Mar. 31, 2023
Credits Facility, Amended and Restated
Line of Credit Facility
Maximum borrowing capacity						$ 1,100.0	$ 750.0
Cash dominion trigger threshold amount						110.0	75.0
Debt issuance cost written off			$ 1.0
Letter of credit outstanding	$ 4.1			$ 4.1
Debt instrument, variable rate (percentage)				2.10%
Debt instrument weighted average interest rate (percent)	7.20%			7.20%				7.70%
Commitment fee amount	$ 0.6	$ 0.4		$ 1.5	$ 1.3
Swing Line Loans, Credit Facility
Line of Credit Facility
Maximum borrowing capacity						$ 110.0	$ 75.0		$ 75.0	$ 50.0
Amended and Restated Credit Agreement, August 28, 2024
Line of Credit Facility
Transaction costs	$ 2.6			$ 2.6
Amended and Restated Credit Agreement, May 16, 2023
Line of Credit Facility
Transaction costs			$ 6.0

Commitments and Contingencies- Tax Matters - Loss contingencies (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Non-income based tax audits
Loss Contingencies
Accrued liability	$ 8.9	$ 3.9
Contingency with offsetting indemnification asset	4.3	0.0
Non-income based tax audits in contested hearing phase
Loss Contingencies
Accrued liability	$ 0.6	$ 0.6

Stockholders' Equity - Issuance of Shares (Details) - USD ($) $ in Thousands			3 Months Ended	9 Months Ended
	Aug. 30, 2024	Jul. 24, 2024	Sep. 30, 2024	Sep. 30, 2024
Equity
Net proceeds from issuance of common stock (in dollars)				$ 255,747
Shares issued for TOPS Acquisition (in dollars)			$ 139,054	$ 139,054
Total Operations and Production Services, LLC ("TOPS")
Equity
Shares issued as compensation for asset acquisition (shares)	6,873,650
Shares issued for TOPS Acquisition (in dollars)	$ 139,100
Underwriting Agreement
Equity
Stock issued (in shares)		12,650,000
Net proceeds from issuance of common stock (in dollars)		$ 255,700
Underwriters
Equity
Stock issued (in shares)		1,650,000

Stockholders' Equity - Share Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended		17 Months Ended
	Apr. 27, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Apr. 27, 2023
Treasury Stock
Total Number of Shares Repurchased (in shares)		655,145	354,729	1,124,694	960,946
Average Price per Share (in dollars per share)		$ 18.64	$ 12.49	$ 17.70	$ 10.70
Total Cost of Shares Repurchased (in dollars)		$ 12,213	$ 4,431	$ 19,905	$ 10,279
Share Repurchase Program
Treasury Stock
Shares authorized for repurchase (in dollars)							$ 50,000
Extension period	24 months
Total Number of Shares Repurchased (in shares)		649,854	354,012	732,826	576,262	1,483,200
Average Price per Share (in dollars per share)		$ 18.63	$ 12.49	$ 18.20	$ 11.27	$ 14.97
Total Cost of Shares Repurchased (in dollars)		$ 12,107	$ 4,422	$ 13,337	$ 6,495	$ 22,200
Available capacity for repurchase (in dollars)	$ 50,000
2020 and 2013 Stock Incentive Plans
Treasury Stock
Total Number of Shares Repurchased (in shares)		5,291	717	391,868	384,684
Average Price per Share (in dollars per share)		$ 20.05	$ 12.75	$ 16.76	$ 9.84
Total Cost of Shares Repurchased (in dollars)		$ 106	$ 9	$ 6,568	$ 3,784

Stockholders' Equity - Cash Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended							9 Months Ended
	Oct. 24, 2024	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Dec. 31, 2023	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Distributions
Declared Dividends per Common Share (in dollars per share)		$ 0.165	$ 0.165	$ 0.165	$ 0.155	$ 0.155	$ 0.150	$ 0.150	$ 0.495	$ 0.455
Dividends Paid (in dollars)		$ 27,865	$ 25,819	$ 26,000	$ 24,190	$ 24,250	$ 23,504	$ 23,852	$ 79,684	$ 71,606
Subsequent Event \| Q3 2024 quarterly dividend
Distributions
Declared Dividends per Common Share (in dollars per share)	$ 0.175
Dividends payable, date declared	Oct. 24, 2024
Dividends payable, date to be paid	Nov. 13, 2024
Dividends payable, date of record	Nov. 06, 2024

Revenue from Contracts with Customers - Disaggregate Revenue (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024 USD ($) hp	Sep. 30, 2023 USD ($) hp	Sep. 30, 2024 USD ($) hp	Sep. 30, 2023 USD ($) hp
Disaggregation of Revenue
Revenue	$ 292,161	$ 253,367	$ 831,175	$ 730,744
Contract operations
Disaggregation of Revenue
Revenue	245,420	207,552	693,939	596,417
Contract operations \| Transferred at Point in Time
Disaggregation of Revenue
Revenue	1,500	1,000	3,800	2,900
Contract operations \| 0 - 1,000 horsepower per unit
Disaggregation of Revenue
Revenue	$ 60,589	$ 43,142	$ 151,250	$ 126,272
Contract operations \| 0 - 1,000 horsepower per unit \| Minimum
Disaggregation of Revenue
Compressor unit horsepower (horsepower) \| hp	0	0	0	0
Contract operations \| 0 - 1,000 horsepower per unit \| Maximum
Disaggregation of Revenue
Compressor unit horsepower (horsepower) \| hp	1,000	1,000	1,000	1,000
Contract operations \| 1,001 - 1,500 horsepower per unit
Disaggregation of Revenue
Revenue	$ 96,160	$ 90,016	$ 286,517	$ 259,830
Contract operations \| 1,001 - 1,500 horsepower per unit \| Minimum
Disaggregation of Revenue
Compressor unit horsepower (horsepower) \| hp	1,001	1,001	1,001	1,001
Contract operations \| 1,001 - 1,500 horsepower per unit \| Maximum
Disaggregation of Revenue
Compressor unit horsepower (horsepower) \| hp	1,500	1,500	1,500	1,500
Contract operations \| Over 1,500 horsepower per unit
Disaggregation of Revenue
Revenue	$ 88,529	$ 74,140	$ 255,684	$ 209,526
Contract operations \| Over 1,500 horsepower per unit \| Minimum
Disaggregation of Revenue
Compressor unit horsepower (horsepower) \| hp	1,500	1,500	1,500	1,500
Contract operations \| Other
Disaggregation of Revenue
Revenue	$ 142	$ 254	$ 488	$ 789
Aftermarket services
Disaggregation of Revenue
Revenue	46,741	45,815	137,236	134,327
Aftermarket services \| OTC parts and components sales
Disaggregation of Revenue
Revenue	19,029	20,955	58,411	63,651
Aftermarket services \| Other
Disaggregation of Revenue
Revenue	316		316
Aftermarket services \| Service
Disaggregation of Revenue
Revenue	$ 27,396	$ 24,860	$ 78,509	$ 70,676

Revenue from Contracts with Customers - Performance Obligations (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 828,326
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 175,887
Performance obligations expected to be satisfied, expected timing	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 387,950
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 208,119
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 41,617
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2028-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 12,350
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2029-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Remaining performance obligations	$ 2,403
Performance obligations expected to be satisfied, expected timing	1 year

Revenue from Contracts with Customers - Contract Assets (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Revenue from Contracts with Customers
Accounts receivable, net of allowance - Customer related	$ 141.1	$ 119.7

Revenue from Contracts with Customers - Allowance for Credit Losses (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Changes in the allowance for credit losses balance
Balance at beginning of period	$ 587
Benefit from credit losses	95	$ (234)
Write-offs charged against the allowance	(44)
Balance at end of period	$ 638

Revenue from Contracts with Customers - Contract Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Revenue from Contracts with Customers
Contract liability	$ 7,900		$ 7,000
Deferred revenue	10,598	$ 10,733
Deferred revenue recognized in earnings	$ 9,707	$ 11,043

Long-Lived and Other Asset Impairment (Details) - Idle Compressor Units hp in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024 USD ($) CompressorUnit hp	Sep. 30, 2023 USD ($) CompressorUnit hp	Sep. 30, 2024 USD ($) CompressorUnit hp	Sep. 30, 2023 USD ($) CompressorUnit hp
Impaired Long-Lived Assets Held and Used
Idle compressors retired from the active fleet \| CompressorUnit	15	30	80	75
Horsepower of idle compressors retired from the active fleet \| hp	12	16	58	39
Impairment recorded on idle compressors retired from the active fleet \| $	$ 2,509	$ 2,922	$ 9,478	$ 8,383
Impairment, Long-Lived Asset, Held-for-Use, Statement of Income or Comprehensive Income	Long-lived and other asset impairment	Long-lived and other asset impairment	Long-lived and other asset impairment	Long-lived and other asset impairment

Restructuring Charges - By segment (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Restructuring charges
Restructuring charges	$ 592	$ 0	$ 1,554
Expected additional restructuring charges		$ 0
Organizational Restructuring
Restructuring charges
Restructuring charges	592		1,554
Corporate
Restructuring charges
Restructuring charges	205		1,066
Corporate \| Organizational Restructuring
Restructuring charges
Restructuring charges	205		1,066
Contract operations \| Operating
Restructuring charges
Restructuring charges			101
Contract operations \| Operating \| Organizational Restructuring
Restructuring charges
Restructuring charges			101
Aftermarket services \| Operating
Restructuring charges
Restructuring charges	387		387
Aftermarket services \| Operating \| Organizational Restructuring
Restructuring charges
Restructuring charges	$ 387		$ 387

Restructuring Charges - By type (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Restructuring charges
Restructuring charges	$ 592	$ 0	$ 1,554
Organizational Restructuring
Restructuring charges
Restructuring charges	592		1,554
Severance costs \| Organizational Restructuring
Restructuring charges
Restructuring charges	$ 592		1,296
Consulting costs \| Organizational Restructuring
Restructuring charges
Restructuring charges			$ 258

Income Taxes (Details) $ in Millions	Sep. 30, 2024 USD ($)
Income Taxes
Potential decrease in unrecognized tax benefit in next twelve months	$ 3.5

Earnings Per Common Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Earnings per Common Share
Net income	$ 37,516	$ 30,858	$ 112,473	$ 71,996
Less: Allocation of earnings to participating securities	(430)	(434)	(1,607)	(1,418)
Net income attributable to common stockholders, basic	37,086	30,424	110,866	70,578
Less: Allocation of earnings to cash or share settled restricted stock units	(129)		(352)
Diluted net income attributable to common stockholders	$ 36,957	$ 30,424	$ 110,514	$ 70,578
Weighted average common shares outstanding used in basic earnings per common share (in shares)	165,847	154,163	158,205	154,210
Effect of dilutive securities:
Performance-based restricted stock units (in shares)	325	235	306	181
ESPP shares (in shares)	1	3	7	7
Weighted average common shares outstanding used in diluted earnings per common share (in shares)	166,173	154,401	158,518	154,398

Fair Value Measurements - Recurring Basis - Investment in ECOTEC - Unobservable inputs (Details) - ECOTEC $ in Millions	Sep. 30, 2024 USD ($)	Sep. 30, 2023
Fair value measurement of assets and liabilities
Ownership interest (as a percent)	25.00%
Level 3
Fair value measurement of assets and liabilities
Investment	$ 16.2
Equity investment \| Discounted cash flow \| WACC \| Minimum
Significant unobservable inputs
Equity Securities, FV-NI, Measurement Input	0.004	0.000
Equity investment \| Discounted cash flow \| WACC \| Maximum
Significant unobservable inputs
Equity Securities, FV-NI, Measurement Input	0.200	0.174
Equity investment \| Discounted cash flow \| WACC \| Median
Significant unobservable inputs
Equity Securities, FV-NI, Measurement Input	0.135	0.100
Equity investment \| Guideline public company \| Revenue multiple \| Minimum
Significant unobservable inputs
Equity Securities, FV-NI, Measurement Input	1.5	1.6
Equity investment \| Guideline public company \| Revenue multiple \| Maximum
Significant unobservable inputs
Equity Securities, FV-NI, Measurement Input	7.2	10.0
Equity investment \| Guideline public company \| Revenue multiple \| Median
Significant unobservable inputs
Equity Securities, FV-NI, Measurement Input	3.8	4.0

Fair Value Measurements - Recurring Basis - Investment in ECOTEC - Changes in FV (Details) - ECOTEC - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Reconciliation of changes in fair value
Unrealized loss				$ (2,000)
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income				Other Nonoperating Income (Expense)
Equity investment
Reconciliation of changes in fair value
Balance, beginning of period	$ 14,905	$ 12,807	$ 14,905	$ 12,803
Purchases of equity interests	1,250		1,250	2,000
Unrealized loss				$ (1,996)
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income				Other Nonoperating Income (Expense)
Balance, end of period	$ 16,155	$ 12,807	$ 16,155	$ 12,807

Fair Value Measurements - Nonrecurring Basis - Investment in Ionada (Details) - USD ($) $ in Thousands	1 Months Ended		7 Months Ended	9 Months Ended
	Nov. 30, 2025	Nov. 30, 2024	Jun. 30, 2026	Sep. 30, 2024	Sep. 30, 2023	Nov. 30, 2023
Assets measured at fair value on a nonrecurring basis
Cash paid to acquire equity interest				$ 1,307	$ 2,000
Ionada
Assets measured at fair value on a nonrecurring basis
Ownership interest (as a percent)				10.00%
Amount of initial investment						$ 3,800
Ionada \| Equity investment
Assets measured at fair value on a nonrecurring basis
Carrying value of investment				$ 4,300
Amount of initial investment				3,800
Cumulative transaction costs				500
Upward adjustments				0
Impairments				0
Downward adjustments				$ 0
Ionada \| Equity investment \| Forecasted
Assets measured at fair value on a nonrecurring basis
Ownership interest (as a percent)	15.00%	12.00%	24.00%
Cash paid to acquire equity interest	$ 1,300	$ 1,200	$ 4,800

Fair Value Measurements - Nonrecurring Basis - Compressors (Details) - Level 3 - Impaired Long-Lived Assets - Compressors $ in Thousands	Sep. 30, 2024 USD ($) Y $ / hp	Dec. 31, 2023 USD ($) $ / hp Y
Measurement Input, Weighted average disposal period
Assets measured on nonrecurring basis
Measurement input \| Y	4	4
Measurement Input, Sale proceeds \| Minimum
Assets measured on nonrecurring basis
Measurement input	0	0
Measurement Input, Sale proceeds \| Maximum
Assets measured on nonrecurring basis
Measurement input	211	294
Measurement Input, Sale proceeds \| Weighted average
Assets measured on nonrecurring basis
Measurement input	49	50
Measurement Input, Discount for market liquidity
Assets measured on nonrecurring basis
Measurement input	0.25	0.33
Nonrecurring Basis
Assets measured on nonrecurring basis
Impaired assets \| $	$ 853	$ 1,423

Fair Value Measurements - Other Financial Instruments (Details) - Fixed Rate Debt - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Long-term debt, fair value	$ 1,789,956	$ 1,297,844
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Long-term debt, fair value	$ 1,823,000	$ 1,289,000
Long-Term Debt, Fair Value by Fair Value Hierarchy Level	us-gaap:FairValueInputsLevel2Member	us-gaap:FairValueInputsLevel2Member

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Related Party Transaction
Capital expenditures			$ 261,044	$ 261,977
Revenue	$ 292,161	$ 253,367	831,175	730,744
Accounts receivable, net of allowance - Customer related	141,100		141,100		$ 119,700
Related parties \| ECOTEC
Related Party Transaction
Capital expenditures	300		300
Related parties \| Hilcorp and affiliates
Related Party Transaction
Revenue	10,200	$ 8,900	30,600	$ 26,700
Accounts receivable - Customer related	$ 3,600		$ 3,600		$ 3,800

Segment Information - Number (Details)	9 Months Ended
Segment Information - Number (Details)	Sep. 30, 2024 segment
Segment Information
Number of reportable segments	2

Segment Information - Revenue and Gross Margin by Reportable Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue and other financial information by reportable segment
Revenue	$ 292,161	$ 253,367	$ 831,175	$ 730,744
Adjusted gross margin	177,956	141,406	489,791	394,017
Capital expenditures			261,044	261,977
Contract operations
Revenue and other financial information by reportable segment
Revenue	245,420	207,552	693,939	596,417
Adjusted gross margin	165,610	132,279	457,108	365,629
Aftermarket services
Revenue and other financial information by reportable segment
Revenue	46,741	45,815	137,236	134,327
Adjusted gross margin	$ 12,346	$ 9,127	$ 32,683	$ 28,388

Segment Information - Reconciliation of gross margin to income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Reconciliation of total gross margin to income
Total adjusted gross margin	$ 177,956	$ 141,406	$ 489,791	$ 394,017
Less:
Selling, general and administrative	34,059	28,558	96,887	83,632
Depreciation and amortization	48,377	42,155	135,065	123,546
Long-lived and other asset impairment	2,509	2,922	9,478	8,383
Restructuring charges		592	0	1,554
Debt extinguishment loss	3,181		3,181
Interest expense	30,179	28,339	85,372	83,550
Transaction-related costs	9,220		11,002
Gain on sale of assets, net	(2,218)	(3,237)	(5,175)	(8,018)
Other expense (income), net	(304)	(235)	(37)	1,831
Income before income taxes	$ 52,953	$ 42,312	$ 154,018	$ 99,539

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