10q10k10q10k.net

What changed in Kodiak Gas Services, Inc.'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of Kodiak Gas Services, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+382 added−457 removedSource: 10-K (2026-02-26) vs 10-K (2025-03-07)

Top changes in Kodiak Gas Services, Inc.'s 2025 10-K

382 paragraphs added · 457 removed · 264 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

55 edited+22 added−65 removed65 unchanged
Biggest changeAs of December 31, 2024, approximately 82% of our compression assets were deployed in the Permian Basin and Eagle Ford Shale, which the United States Energy Information Administration (“EIA”) expects to maintain significant production volumes through at least 2050. We believe these two regions have some of the largest and lowest-cost unconventional resources in the U.S.
Biggest changeThe United States Energy Information Administration (“EIA”) expects continued growth in U.S. natural gas production through 2050, led by associated gas from the Permian Basin. We believe these two regions contain some of the largest and lowest-cost unconventional oil and natural gas resources in the U.S. Additionally, there are significant liquefied natural gas (“LNG”) export projects in development, and U.S.
The horsepower our fleet provides is characterized by a focus on large horsepower compression units, which aligns with the evolving industry demand for such units. Large compression units enable multi-well pad development, reduce downtime, improve overall unit economics and provide lower emissions per horsepower relative to small horsepower compression units.
The horsepower our fleet provides is characterized by a focus on large horsepower compression units, which aligns with the evolving industry demand for such units. Large horsepower compression units enable multi-well pad development, reduce downtime, improve overall unit economics and provide lower emissions per horsepower relative to small horsepower compression units.
Solid Waste The Resource Conservation and Recovery Act (“RCRA”) and comparable state laws control the management and disposal of hazardous and non-hazardous waste. These laws and regulations govern the generation, storage, treatment, transfer and disposal of wastes that we generate including, but not limited to, used oil, antifreeze, filters, sludges, paint, solvents and sandblast materials.
Solid and Hazardous Waste The Resource Conservation and Recovery Act (“RCRA”) and comparable state laws control the management and disposal of hazardous and non-hazardous waste. These laws and regulations govern the generation, storage, treatment, transfer and disposal of wastes that we generate including, but not limited to, used oil, antifreeze, filters, sludges, paint, solvents and sandblast materials.
We believe our customers will continue to outsource all or a portion of their compression infrastructure needs, allowing them to limit their capital investments in compression equipment and increase their free cash flow or deploy capital on projects directly related to their core businesses. By outsourcing compression infrastructure, customers can efficiently address their changing compression requirements over time.
We believe our customers will continue to outsource a portion of their compression infrastructure needs, allowing them to limit their capital investments in compression equipment and increase their free cash flow or deploy capital on projects directly related to their core businesses. By outsourcing compression infrastructure, customers can efficiently address their changing compression requirements over time.
We cannot provide any assurance that the costs and liabilities associated with the future imposition of such remedial obligations upon us would not have a material adverse effect on our operations or financial position. Endangered Species Act and Migratory Birds The Endangered Specifies Act (“ESA”) was established to protect endangered and threatened species.
We cannot provide any assurance that the costs and liabilities associated with the future imposition of such remedial obligations upon us would not have a material adverse effect on our operations or financial position. Endangered Species Act and Migratory Birds The Endangered Species Act (“ESA”) was established to protect endangered and threatened species.
Climate Change Climate change and greenhouse gas ("GHG") emissions reduction initiatives continue to attract considerable public and scientific attention. Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas, are examples of GHGs. In recent years, the U.S. Congress has considered legislation to restrict or regulate GHG emissions.
Climate Change Climate change and greenhouse gas (“GHG”) emissions reduction initiatives continue to attract considerable public and scientific attention. Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas, are examples of GHGs. In recent years, the U.S. Congress has considered legislation to restrict or regulate GHG emissions.
With the development of unconventional natural gas and oil resources, compression infrastructure becomes even more critical for the following reasons: • In unconventional resources, natural gas tends to be produced at lower pressures due to the geological nature of the resources, requiring compression infrastructure immediately upon initial production and throughout most of the life of the well. • Advancements in drilling, completion and production technologies have resulted in an increase in density of well locations and adoption of multi-well pads, allowing operators to achieve economies of scale with centralization of stations with more compression units and more horsepower per unit.
With the development of unconventional natural gas and oil resources, compression infrastructure becomes even more critical for the following reasons: • In unconventional resources, natural gas tends to be produced at lower pressures due to the geological nature of the resources, requiring compression infrastructure immediately upon initial production and throughout most of the life of the well. 10 Table of Contents • Advancements in drilling, completion and production technologies have resulted in an increase in density of well locations and adoption of multi-well pads, allowing operators to achieve economies of scale with centralization of stations with more compression units and more horsepower per unit.
We believe U.S. compression infrastructure industry growth will be supported by the following factors: • Continued, growing demand for U.S. natural gas driven principally by domestic natural gas consumption in the power sector, and exports of U.S.-produced natural gas and LNG. • Replacement of production from maturing and aging conventional basins with production from unconventional sources, which tend to require more compression infrastructure, to accommodate the increase in natural gas demand while offsetting declining production. • A continued emphasis by federal, state and local regulatory agencies as well as oil and gas producers on reducing the volume of natural gas that is flared during the production of crude oil, which will result in the need for additional field infrastructure to transport natural gas, which in turn will result in increased demand for compression infrastructure. • The prevalence of U.S. oil and gas producers in key unconventional basins like the Permian Basin and the Eagle Ford Shale to rely on centralized gas lift as one of the more effective and efficient artificial lift technologies for the production of crude oil.
We believe U.S. compression infrastructure industry growth will be supported by the following factors: • Continued, growing demand for U.S. natural gas driven principally by domestic natural gas consumption in the power sector, and exports of U.S.-produced natural gas and LNG. • Replacement of production from maturing and aging conventional basins with production from unconventional sources, which tend to require more compression infrastructure, to accommodate the increase in natural gas demand while offsetting declining production. • A continued emphasis by federal, state and local regulatory agencies as well as oil and gas producers on reducing the volume of natural gas that is flared during the production of crude oil, which will result in the need for additional field infrastructure to transport natural gas, which in turn will result in increased demand for compression infrastructure. • The use of centralized gas lift as one of the more effective and efficient artificial lift technologies for the production of crude oil and is widely used by U.S. oil and gas producers in key unconventional basins like the Permian Basin and the Eagle Ford Shale.
We believe our focus on customer service in top-tier regions, and the critical nature of our assets results in long-term customer relationships and enhanced financial stability for our business. Our preventative and predictive maintenance and overhaul programs are designed to maximize mechanical availability and extend the useful lives of our assets over multiple decades.
We believe our focus on customer service in top-tier regions, and the critical nature of our assets results in long-term customer relationships and enhanced financial stability for our business. 8 Table of Contents Our preventative and predictive maintenance and overhaul programs are designed to maximize mechanical availability and extend the useful lives of our assets over multiple decades.
Our Contract Services equipment is typically not mechanically available during all other instances of downtime including, without limitation, our scheduled and unscheduled maintenance. 12 Table of Contents We provide Kodiak-owned Contract Services under contracts that typically provide that we will supply all compression equipment, tools, parts and field service support to meet our customers’ requirements.
Our Contract Services equipment is typically not mechanically available during all other instances of downtime including, without limitation, our scheduled and unscheduled maintenance. We provide Kodiak-owned Contract Services under contracts that typically provide that we will supply all compression equipment, tools, parts and field service support to meet our customers’ requirements.
Seasonality Our results of operations have not historically been materially affected by seasonality, and we do not currently have reason to believe that seasonal fluctuations will have a material impact in the foreseeable future. 13 Table of Contents Operating Risks and Insurance We believe that our insurance coverage is customary for the industry and adequate for our business.
Seasonality Our results of operations have not historically been materially affected by seasonality, and we do not currently have reason to believe that seasonal fluctuations will have a material impact in the foreseeable future. Operating Risks and Insurance We believe that our insurance coverage is customary for the industry and adequate for our business.
We are generally responsible for the costs and expenses associated with operation and maintenance of our equipment, although certain fees and expenses are the responsibility of our customers under the terms of our contracts. For example, fuel gas necessary to operate our compression equipment is provided by our customers without cost to us.
We are generally responsible for the costs and expenses associated with operation and maintenance of our equipment, although 11 Table of Contents certain fees and expenses are the responsibility of our customers under the terms of our contracts. For example, fuel gas necessary to operate our compression equipment is provided by our customers without cost to us.
We focus on and are an industry leader in large horsepower compression. Approximately 78% of our 4.4 million overall fleet horsepower is categorized as large horsepower, which we define as horsepower in an amount greater than 1,000 arising from a single unit.
We focus on and are an industry leader in large horsepower compression. Approximately 80% of our 4.5 million overall fleet horsepower is categorized as large horsepower, which we define as horsepower in an amount greater than 1,000 arising from a single unit.
The combination of the reliability and critical nature of our assets, the strong capabilities of our work force, the strength of our customer relationships and contract structures, and our market leadership in the prolific Permian Basin have resulted in a historically high fleet utilization for our company.
The combination of the reliability and critical nature of our assets, the strong capabilities of our workforce, the strength of our customer relationships and contract structures, and our market leadership in the prolific Permian Basin have resulted in a historically high fleet utilization for our company.
The CWA and analogous state laws also require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. The Oil Pollution Act of 1990, as amended (the “OPA”), amends the CWA and establishes strict liability and natural resource damages liability for unauthorized discharges of oil into waters of the U.S.
Additionally, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. The Oil Pollution Act of 1990, as amended (the “OPA”), amended the CWA and established strict liability and natural resource damages liability for unauthorized discharges of oil into waters of the U.S.
Safety, Health and Wellness The success of our business is fundamentally connected to the well-being of our people, and so we are committed to the safety, health and wellness of our employees. Safety is a core value of our Company.
Safety, Health and Wellness Safety is a core value of our Company. The success of our business depends fundamentally on the well-being of our people, and so we are committed to the safety, health and wellness of our employees.
Term and Termination Our contracts typically have a primary term length between one and seven years, depending on the customer, application, location, and size of the compression unit, with large horsepower typically contracted for a primary term of three or more years.
Term and Termination Our contracts typically have a primary term length between one and seven years, depending on the customer, application, location, and size of the compression unit, with large horsepower typically contracted for a primary term of three to five years.
Air Emissions The Clean Air Act (“CAA ” ) and comparable state laws regulate emissions of air pollutants from various industrial sources, including natural gas compressors, and impose certain monitoring and reporting requirements. Such emissions are regulated by air emissions permits, which are applied for and obtained through various state or federal regulatory agencies.
Air Emissions The CAA and comparable state laws regulate emissions of air pollutants from various industrial sources, including natural gas compressors, and impose certain monitoring and reporting requirements. Such emissions are regulated by air emissions permits, which are applied for and obtained through various state or federal regulatory agencies.
Consequently, we cannot predict whether these pledges made during these international climate change meetings will result in any particular new regulatory requirements or initiatives or whether such requirements or initiatives will cause us to incur material costs should the U.S.'s participation in the Paris Agreement again change in the future.
Consequently, we cannot predict whether these pledges made during these international climate change meetings will lead to new regulatory requirements or initiatives or whether such requirements or initiatives will cause us to incur material costs should the U.S.’s participation in the Paris Agreement again change in the future. Additionally, the U.S.
Additionally, our assets are designed to serve a wide variety of large horsepower applications, such as gathering, processing and transportation of natural gas and centralized gas lift of oil. 10 Table of Contents Our Key Areas of Operation We strategically focus on deploying our compression assets in leading onshore U.S. regions with superior hydrocarbon well and long production horizons.
Additionally, our assets are designed to serve a wide variety of large horsepower applications, such as gathering, processing and transportation of natural gas and centralized gas lift of oil. Our Key Areas of Operation We strategically focus on deploying our compression assets in leading onshore U.S. regions with long production horizons.
At the international level, the U.S. joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France (“COP21”), which resulted in an agreement intended to nationally determine the participants’ contributions and set GHG emission reduction goals every five years beginning in 2020 (the “Paris Agreement”).
At the international level, the U.S. participated in the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France (“COP21”), resulting in an agreement intended to nationally determine the participants’ contributions and set GHG emission reduction goals every five years beginning in 2020 (the “Paris Agreement”).
After the expiration of the primary term, our contracts continue on a month-to-month basis until renewed or until the contract is terminated by us or our customer, upon written notice. As of December 31, 2024, approximately 11.3% of our revenue-generating horsepower was on a month-to-month contract term.
After the expiration of the primary term, our contracts continue on a month-to-month basis until renewed or until the contract is terminated by us or our customer, upon written notice. As of December 31, 2025, approximately 9.0% of our revenue-generating horsepower was on a month-to-month contract term.
We 9 Table of Contents are focused on being a resilient and sustainable enterprise and we seek to be a responsible operator that provides safe, reliable and efficient energy solutions.
We are focused on being a resilient and sustainable enterprise and we seek to be a responsible operator that provides safe, reliable and efficient energy solutions.
Other OSHA standards regulate specific worker safety aspects of our operations. Human Capital Employees As of December 31, 2024, we had approximately 1,300 full-time employees. Some employees in Mexico are subject to collective bargaining agreements.
Other OSHA standards regulate specific worker safety aspects of our operations. Human Capital Employees As of December 31, 2025, we had approximately 1,300 full-time employees. None of our employees are subject to collective bargaining agreements.
We are not currently responsible for any remedial activities at any properties we use; however, there is always the possibility that our future use of those properties may result in spills or releases of petroleum hydrocarbons, wastes or other regulated substances into the environment that may cause us to become subject to remediation costs and liabilities under CERCLA, RCRA or other environmental laws.
However, there is always the possibility that our future use of those properties may result in spills or releases of petroleum hydrocarbons, wastes or other regulated substances into the environment that may cause us to become subject to remediation costs and liabilities under CERCLA, RCRA or other environmental laws.
Our Contract Services and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil. We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S.
Our business is managed through the following two operating segments: Contract Services and Other Services. Our Contract Services and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil. We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S.
The SEC maintains a website that contains these reports at http://www.sec.gov. 20 Table of Contents
The SEC maintains a website that contains these reports at http://www.sec.gov.
In addition to the Permian Basin and Eagle Ford Shale, we have assets located in the Powder River Basin, Mid-Continent Region, DJ Basin, Appalachian Basin, Barnett Shale / East Texas Region and Black Warrior Basin. Customers We have developed long-term commercial relationships with premier upstream and midstream customers in our key areas of operations.
In addition to the Permian Basin and Eagle Ford Shale, we have compression assets in other key U.S. producing regions, including the Powder River Basin, Mid-Continent Region, DJ Basin, Appalachian Basin, Barnett Shale / East Texas Region and Black Warrior Basin. Customers We have established long-term commercial relationships with leading upstream and midstream customers in our key areas of operations.
Although we generate materials in the course of our 17 Table of Contents operations that may be regulated as hazardous substances, we have not received notification that we may be potentially responsible for cleanup costs under CERCLA at any site.
Although we generate materials in the course of our operations that may be regulated as hazardous substances, we have not received notification that we may be potentially responsible for cleanup costs under CERCLA at any site and we are not currently responsible for any remedial activities at any properties we use.
While the Paris Agreement does not impose direct requirements on emitters, national plans to meet its pledge could result in new regulatory requirements or initiatives. However, in January 2025, President Trump withdrew the United States from the Paris Agreement.
While the Paris Agreement does not impose direct requirements on emitters, national plans to meet its pledge could result in new regulatory requirements or initiatives. Various state and local governments have also publicly committed to furthering the goals of the Paris Agreement. However, in January 2025, President Trump withdrew the United States from the Paris Agreement.
We believe the U.S. will play an increasingly important role in global energy security, as the world continues to require reliable and growing natural gas and oil production to support increasing global energy demand.
We believe the U.S. will remain a significant net exporter of natural gas over the coming decades and therefore play an increasingly important role in global energy security, as the world continues to 9 Table of Contents require reliable and growing natural gas and oil production to support increasing global energy demand.
Although it is not currently possible to predict with specificity how any proposed or future GHG legislation, regulation, agreements or initiatives will impact our business, any legislation or regulation of GHG emissions that may be imposed in areas in which we conduct business or on the assets we operate could result in increased compliance or operating costs, additional operating restrictions or reduced demand for our services, and could have a material adverse effect on our business, financial condition and results of operations.
Thus, the ultimate scope, timing, and impact on our business remain uncertain, but compliance, if required, may result in increased legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place strain on our personnel, systems and resources. 14 Table of Contents Although it is not currently possible to predict with specificity how any proposed or future GHG legislation, regulation, agreements or initiatives will impact our business, any legislation or regulation of GHG emissions that may be imposed in areas in which we conduct business or on the assets we operate could result in increased compliance or operating costs, additional operating restrictions or reduced demand for our services, and could have a material adverse effect on our business, financial condition and results of operations.
As noted in the risk factors below (see “Risk Factors—Risks Related to Our Business and Our Industry—New regulations, proposed regulations and proposed modifications to existing regulations under the CAA, if implemented, could result in increased compliance costs and changes in customers’ demand and desired suppliers”).
For additional information and associated risks, see the section titled “Risk Factors—Risks Related to Our Business and Our Industry—New regulations, proposed regulations and proposed modifications to existing regulations under the CAA, if implemented, could result in increased compliance costs and changes in customers’ demand and desired suppliers” of this Annual Report.
Any such determinations could have the effect of making projects more costly than our customers expected and could require the installation of more costly emissions controls, which could cause some of our customers not to pursue certain projects. 14 Table of Contents There can be no assurance that future requirements compelling the installation of more costly emission control equipment would not have a material adverse impact on our business, financial condition, results of operations and cash available for distribution.
Our standard natural gas Contract Services contract provides that the customer is responsible for obtaining air emissions permits and assuming the environmental risks related to site operations, but new regulatory requirements could have the effect of making projects more costly than our customers expected and could require the installation of more costly emissions controls, which could cause some of our customers not to pursue certain projects. 13 Table of Contents There can be no assurance that future requirements compelling the installation of more costly emission control equipment would not have a material adverse impact on our business, financial condition, results of operations and cash available for distribution.
Site Remediation The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and comparable state laws impose strict, joint and several liability without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release of a hazardous substance into the environment.
However, any change in classification could result in an increase in the costs to manage and dispose of wastes, which could increase the costs of our customers’ operations. 15 Table of Contents Site Remediation The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and comparable state laws impose strict, joint and several liability without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release of a hazardous substance into the environment.
We believe partnering with top-tier customers in regions with multi-decade resource life will support continued strong utilization and recontracting of our assets through energy industry and broader macroeconomic cycles.
We believe partnering with top-tier customers in regions with multi-decade resource life will support continued strong utilization and recontracting of our assets through energy industry and broader macroeconomic cycles. As of December 31, 2025, approximately 82.8% of our compression assets were deployed in the Permian Basin and Eagle Ford Shale.
Governmental Regulation We are subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to protection of human health, safety and the environment.
No accidents or incidents have occurred that have caused us to experience a material adverse effect. 12 Table of Contents Governmental Regulation We are subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to protection of human health, safety and the environment.
Our comprehensive training program emphasizes safety, improving technical skills and professional development for employees across functional areas. This program is further bolstered through a virtual training program to better prepare our employees to safely address situations in the field. We created the Kodiak Cares Foundation to support employees and charitable causes in the communities in which we live and operate.
We maintain a robust safety culture that permeates all aspects of our business. Our comprehensive training program emphasizes safety, improving technical skills and professional development for employees across functional areas. This program is further bolstered through a virtual training program to better prepare our employees to safely address situations in the field.
Below is a tabular overview of our fleet by horsepower as of December 31, 2024: Fleet Horsepower Percent of Total Horsepower Number of Units Percent of Units Large horsepower >1,000 horsepower 3,428,062 78% 2,100 41% Medium & small horsepower 974,685 22% 2,969 59% Total 4,402,747 100% 5,069 100% We have standardized our fleet and operational processes, creating an effective fleet maintenance program and spare parts inventory, and efficient and resilient supply chain.
Below is a tabular overview of our fleet by horsepower as of December 31, 2025: (in thousands, except percentages) Fleet Horsepower Percent of Total Horsepower Number of Units Percent of Units Large horsepower >1,000 horsepower 3,553 80% 2,163 46% Medium & small horsepower 903 20% 2,573 54% Total 4,456 100% 4,736 100% We have standardized our fleet and operational processes, creating an effective fleet maintenance program and spare parts inventory, and efficient and resilient supply chain.
The OPA requires owners or operators of certain onshore facilities to prepare facility response plans for a discharge of oil into waters of the United States. Our Contract Services do not currently generate process waste waters that are discharged into waters of the United States and we do not foresee this occurring in the future.
Our Contract Services do not currently generate process waste waters that are discharged into waters of the United States and we do not foresee this occurring in the future.
Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations.
The OPA requires owners or operators of certain onshore facilities to prepare facility response plans for a discharge of oil into waters of the United States. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the CWA, OPA, and analogous state laws and regulations.
We maintain an intense focus on being one of the most sustainable and responsible operators of contract compression infrastructure. Furthermore, we strive to provide a safe, inclusive and supportive environment for the communities in which we live and the customers and employees with whom we work.
Furthermore, we strive to provide a safe and supportive environment for the communities in which we live and the customers and employees with whom we work. We seek to continuously improve our operations, relationships with our stakeholders and ultimately maintain our position as a sustainable and responsible operator of contract compression infrastructure.
This process is critical for the production, gathering, and transportation of natural gas is a core component of one of the leading artificial lift technologies utilized in oil production. Without the increased pressure, gas cannot flow from the wellhead to end-markets.
Compression Industry Compression is a mechanical process whereby natural gas is compressed to a smaller volume resulting in higher pressures. This process is critical for the production, gathering, and transportation of natural gas. Without the increased pressure, gas cannot flow from the wellhead to end-markets.
For the years ended December 31, 2024, 2023 and 2022, our four largest customers accounted for approximately 32%, 33%, and 36%, respectively, of our total revenues. Each of these customers is a S&P 500 constituent and investment grade-rated upstream or midstream company active in the Permian Basin.
Each of these customers is a S&P 500 constituent and investment grade-rated upstream or midstream company active in the Permian Basin. There was one customer accounting for more than 10% of total revenues in each of 2025, 2024 and 2023.
Electric motor driven compression is also part of our long-term strategy to reduce emissions intensity across our fleet. We have begun deploying electric motor driven compression with select customers and have additional assets that we will deploy in the near future under long-term fixed-revenue contracts.
We have begun deploying electric motor driven compression with select customers and have additional assets that we will deploy in the near future under long-term fixed-revenue contracts. In addition, in select geographic areas where electric infrastructure exists, we assist our customers in building out their electric compression infrastructure. Our employees are central to our success.
Under the terms of our standard Contract Services contract, we are responsible for maintaining insurance coverage on our compression equipment. No accidents or incidents have occurred that have caused us to experience a material adverse effect.
Under the terms of our standard Contract Services contract, we are responsible for maintaining insurance coverage on our compression equipment.
The Inflation Reduction Act also amends the CAA to include a Methane Emissions Waste Reduction Incentive Program for petroleum and natural gas systems, which requires the EPA to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under the EPA's Greenhouse Gas Reporting Program.
The Inflation Reduction Act of 2022 also amended the CAA to require the Environmental Protection Agency (the “EPA”) to impose a “waste emissions charge” on certain oil and gas sources that are already required to report under the EPA's Greenhouse Gas Reporting Program. In November 2024, the EPA finalized a rule implementing the Inflation Reduction Act’s methane emissions requirements.
Additionally, there are significant liquefied natural gas (“LNG”) export projects in development, and overall U.S. LNG export capacity is expected to double by 2030, according to the EIA. We expect this to translate into continued Permian Basin and Eagle Ford Shale natural gas production growth, requiring substantial additional compression horsepower.
LNG export capacity is expected to continue to expand as additional projects are deployed, constructed and placed into service, according to the EIA. We expect this to translate into continued Permian Basin and Eagle Ford Shale natural gas production growth, and, in turn, ongoing demand for additional compression horsepower in these basins.
While some of our facilities are in areas that may be designated as a habitat for endangered species, we believe that we are in substantial compliance with the ESA. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (“MBTA”) and to bald and golden eagles under the Bald and Golden Eagle Protection Act (“BGEPA”).
Pursuant to the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species or its habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (“MBTA”) and to bald and golden eagles under the Bald and Golden Eagle Protection Act (“BGEPA”).
Item 1. Business Overview We are a leading provider and operator of large horsepower contract compression infrastructure in the U.S. Our wholly-owned subsidiary Kodiak Services was formed in 2011, and we have been operating compression infrastructure since that time.
Item 1. Business Overview We are a leading provider and operator of large horsepower contract compression infrastructure in the U.S, supporting the critical movement and processing of natural gas across key production regions. Through our wholly-owned subsidiary, Kodiak Services, formed in 2011, we have built and operated a substantial fleet of high-reliability compression assets for more than a decade.
We believe alignment with our customers’ goals is a key differentiator to our business, and we have built a reputation backed by our mechanical availability to earn and strengthen customer loyalty. We believe mechanical availability is a critical consideration for a customer in making its contract compression decisions.
We believe alignment with our customers’ operational objectives is a key differentiator to our business, and our reputation for high mechanical availability has been central to earning and maintaining customer loyalty.
For example, the EPA has undertaken efforts to regulate emissions of methane (considered a GHG) in the natural gas and oil sector, with the adoption of additional, more stringent rules. In 2015, the EPA finalized a performance standard that sets limits for stationary natural gas combustion turbines based on the use of natural gas combined cycle technology.
The EPA has undertaken efforts to regulate emissions of methane (considered a GHG) in the natural gas and oil sector, with the adoption of additional, more stringent rules. It is currently unclear whether or to what extent the Trump Administration may reconsider these standards.
On July 3, 2023, we completed our IPO and our common stock is currently trading on the New York Stock Exchange ("NYSE") under the ticker symbol "KGS." On April 1, 2024, we completed the acquisition of CSI Compressco, pursuant to the terms of the Merger Agreement.
On July 3, 2023, we completed our IPO and our common stock is currently trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “KGS.” Our business is centered on long‑term customer relationships, operational excellence, and disciplined capital deployment, positioning us to deliver stable performance while supporting the essential infrastructure needs of the domestic energy industry.
Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, other reports and amendments to those reports with the SEC. Our website address is http://www.kodiakgas.com.
Dividends On January 28, 2026, our Board declared a quarterly dividend of $0.49 per share of common stock, or approximately $43.1 million, which was paid on February 20, 2026 to stockholders of record at the close of business on February 13, 2026 17 Table of Contents Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, other reports and amendments to those reports with the SEC.
We believe it is imperative that we continue to develop and implement innovative strategies and technologies that further reduce emissions intensity and improve the operational reliability of our business. Many of our upstream and midstream customers have significantly increased their commitments to reduce emissions and rely on us to help them achieve their reduction goals.
As part of our long-term strategy, we invest in modern compression equipment designed to meet stringent U.S. air-quality regulatory standards in challenging operating regions. It is important that we continue to develop and implement innovative strategies and technologies that further reduce emissions intensity and improve the operational reliability of our business.
Removed
CSI Compressco unitholders received 0.086 shares of common stock for each CSI Compressco common unit owned.
Added
We believe mechanical availability is a critical consideration for a customer in making its contract compression decisions, and we prioritize maintaining a consistently high level of mechanical availability to support customer uptime and contribute to stable revenue generation. We believe these factors position us as a preferred provider of large-horsepower contract compression services.
Removed
CSI Compressco unitholders that met certain criteria and that so elected (the “Electing Unitholders”) received 0.086 limited liability company common units (“OpCo Units”) representing economic interests in Kodiak Services (along with an equal number of shares of non-economic voting preferred stock of Kodiak) for each CSI Compressco common unit they held.
Added
We employ a systematic and selective customer evaluation process that considers factors such as customers’ creditworthiness, size, and geological asset quality. For the years ended December 31, 2025, 2024 and 2023, our four largest customers accounted for approximately 32%, 32%, and 33%, respectively, of our total revenues.
Removed
At the option of the holder, each such Opco Unit is redeemable for one share of our common stock (along with cancellation of a corresponding share of preferred stock of Kodiak), following a 180 day post-closing lock-up period and subject to certain conditions. In connection with the CSI Acquisition, we re-evaluated our reportable segments.
Added
Our Sustainability Leadership The energy industry continues to evolve as operators balance the need for reliable, affordable energy with changing regulatory and operational expectations. Our focus remains on being one of the most sustainable and responsible operators of contract compression infrastructure.
Removed
Our determination of reportable segments was made on the basis of our strategic priorities within each segment and corresponds to the manner in which our chief operating decision maker reviews and evaluates operating performance to make decisions about resources to be allocated to the segment.
Added
Many of our upstream and midstream customers have established operational or environmental objectives, and we work with them to provide compression solutions that align with their requirements. Electric motor driven compression is also part of our long-term strategy to reduce emissions intensity across our fleet.
Removed
As a result, our business is managed through the following two operating segments: Contract Services and Other Services. The results of operations of CSI Compressco are reflected in our accompanying consolidated financial statements from the closing date of the acquisition through December 31, 2024.
Added
We created the Kodiak Cares Foundation to support employees and charitable causes in the communities in which we live and operate. We also remain committed to supporting veterans through targeted recruiting and hiring efforts and partnerships with organizations that assist veterans and active-duty military.
Removed
Results for the periods prior to April 1, 2024 do not include the financial and operating results of CSI Compressco. As such, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods.
Added
However, in March 2025, the Trump Administration implemented a Congressional Review Act disapproval of the methane charge regulatory provisions. Independent of Congress, the EPA has promulgated regulations controlling GHG emissions under its existing CAA authority.
Removed
We prioritize maintaining a high level of mechanical availability, which maximizes total customer operational uptime and revenue stability. We believe these factors make us a leading choice for our customers. We have developed a systematic and selective customer evaluation methodology, based on key criteria that include customers' credit rating, size, and geological asset quality.
Added
Securities and Exchange Commission (“SEC”) adopted a final rule in March 2024 requiring disclosures on climate-related risks and impacts, governance, targets and Scope 1 and Scope 2 greenhouse gas emissions, but not Scope 3 emissions. Litigation in the U.S.
Removed
There was one customer accounting for more than 10% of total revenues in each of 2024, 2023 and 2022. Our Sustainability Leadership The energy industry is in a pivotal time as the world moves toward ambitious emissions reduction targets while maintaining affordable and reliable sources of energy.
Added
Court of Appeals for the Eighth Circuit is ongoing, but as of early 2026, the SEC has withdrawn its defense of the rule.
Removed
We seek to continuously improve our operations, relationships with our stakeholders and ultimately maintain our position as a sustainable and responsible operator of contract compression infrastructure. Part of our strategy includes owning a lower-emissions fleet capable of operating in regions with the most stringent U.S. regulatory requirements (emissions of 0.5g NOx or less).
Added
Our comprehensive safety program emphasizes education, training, standard operating procedures, policies, and reporting to empower employees to perform tasks using best safety practices. 16 Table of Contents Talent Development We invest significant resources in developing the skilled workforce required to deliver our industry‑leading Contract Services.
Removed
In addition, in select geographic areas where electric infrastructure exists, we assist our customers in building out their electric compression infrastructure. Our people are vital to the success of our business. As a result, we have developed a robust safety culture that permeates all aspects of our business.
Added
Our talent development programs combine technical training, professional development, and leadership readiness to support employee growth and ensure consistent, high‑quality service. A core component of our technical training platform is our Technician Fundamentals program taught at our dedicated hands-on training facility, BEARS Academy.
Removed
We are also committed to supporting veterans and do so through our recruiting and hiring efforts, as well as supporting several causes that assist veterans and active-duty military. 11 Table of Contents Compression Industry Compression is a mechanical process whereby natural gas is compressed to a smaller volume resulting in higher pressures.
Added
The Technician Fundamentals program provides a structured hands-on learning opportunity for both new and experienced technicians when they join Kodiak.
Removed
Our standard natural gas Contract Services contract provides that the customer is responsible for obtaining air emissions permits and assuming the environmental risks related to site operations. In some instances, our customers may be required to aggregate emissions from a number of different sources on the theory that the different sources should be considered a single source.
Added
The curriculum covers natural gas compression fundamentals, safety procedures, engine and compressor components and systems, electrical systems and panel boards, preventative maintenance, and troubleshooting, supplemented by virtual-reality scenarios for key standard operating procedures such as LOTO (lockout/tagout) and startup and shutdown. In 2025, over 270 employees graduated from the three-week Technicians Fundamentals program.
Removed
The $1 trillion legislative infrastructure package passed by Congress in November 2021 includes a number of climate-focused spending initiatives targeted at climate resilience, enhanced response and preparation for extreme weather events and clean energy and transportation investments.

… 62 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

91 edited+26 added−83 removed159 unchanged
Biggest changeThere can be no assurance that Kodiak’s tax positions will not be challenged by relevant tax authorities or that it would be successful in any such challenge. Kodiak is also subject to non-US tax laws that are significantly different from Kodiak’s current U.S. tax treatment. Item 1B. Unresolved Staff Comments None
Biggest changeIn addition, U.S. federal, state and local tax laws and regulations, including the One Big Beautiful Bill Act that was enacted in 2025, are extremely complex and subject to varying interpretations. There can be no assurance that Kodiak’s tax positions will not be challenged by relevant tax authorities or that it would be successful in any such challenge. Item 1B.
Similar to other companies, Kodiak’s systems and networks, and those of third parties with whom Kodiak does business, may be subject to cybersecurity breaches caused by, among other things, illegal hacking, insider threats, computer viruses, phishing, malware, ransomware, or acts of vandalism or terrorism, or those perpetrated by criminals or nation-state actors.
Similar to other companies, Kodiak’s systems and networks, and those of third parties with whom Kodiak does business, may be subject to cybersecurity breaches caused by, among other things, illegal hacking, insider threats, computer viruses, phishing, malware, ransomware, extortion, or acts of vandalism or terrorism, or those perpetrated by criminals or nation-state actors.
Furthermore, Kodiak may also experience increased cybersecurity risk as some of its personnel work remotely. Kodiak has experienced cyber incidents in the past, although none have been material or had a material adverse effect on Kodiak’s business or financial condition. Kodiak may experience cybersecurity incidents and security breaches in the future.
Furthermore, Kodiak also faces increased cybersecurity risk as some of its personnel work remotely. Kodiak has experienced cyber incidents in the past, although none have been material or had a material adverse effect on Kodiak’s business or financial condition. Kodiak may experience cybersecurity incidents and security breaches in the future.
Due to the foregoing, Kodiak cannot assure you that it will be able to pay a dividend in the future or continue to pay a dividend after it commences paying dividends. 37 Table of Contents The U.S. federal income tax treatment of distributions on common stock to a U.S. holder will depend upon Kodiak’s tax attributes and the U.S. holder’s tax basis in the common stock, which are not necessarily predictable and can change over time.
Due to the foregoing, Kodiak cannot assure you that it will be able to pay a dividend in the future or continue to pay a dividend after it commences paying dividends. 31 Table of Contents The U.S. federal income tax treatment of distributions on common stock to a U.S. holder will depend upon Kodiak’s tax attributes and the U.S. holder’s tax basis in the common stock, which are not necessarily predictable and can change over time.
Despite Kodiak’s best efforts, a cyberattack or security breach could go undetected for an extended period of time, and the ensuing investigation of the incident would take time to complete.
Despite Kodiak’s efforts, a cyberattack or security breach could go undetected for an extended period of time, and the ensuing investigation of the incident would take time to complete.
From October 2019 through April 2023, Kodiak received notices of audits from the State of Texas Comptroller’s office for the periods covering December 2015 through November 2023 (the “Sales Tax Audit”).
For example, from October 2019 through April 2023, Kodiak received notices of audits from the State of Texas Comptroller’s office for the periods covering December 2015 through November 2023 (the “Sales Tax Audit”).
Despite Kodiak’s efforts to continually refine its procedures, educate its employees, and implement tools and security measures to protect against such cybersecurity risks, there can be no assurance that these current or future measures will prevent unauthorized access or detect every type of attempt or attack.
Despite Kodiak’s efforts to refine its procedures, educate its employees, and implement tools and security measures designed to protect against such cybersecurity risks, there can be no assurance that these current or future measures will prevent unauthorized access or detect every type of attempt or attack.
Kodiak may experience fluctuations in operating results as a result of the reactions of Kodiak’s customers to changes in natural gas and oil prices. Demand may be affected by, among other factors, natural gas prices, oil prices, weather, availability of alternative energy sources, governmental regulation and the overall demand for energy.
Kodiak may experience fluctuations in operating results as a result of the reactions of Kodiak’s customers to changes in natural gas and oil prices. Demand may be affected by, among other factors, natural gas prices, oil prices, weather, availability of alternative energy sources and the overall demand for energy.
Kodiak and its suppliers and vendors have been subject to, and will likely continue to be subject to, attempts to disrupt operations, any of which could result in a material decrease in revenues and which increase costs to protect, repair, and insure Kodiak’s assets and operate its infrastructure, systems, and business.
Kodiak and its suppliers and vendors have been subject to, and will likely continue to be subject to, attempts to disrupt operations, any of which could result in a material decrease in revenues and which increase costs to protect, repair, and ensure Kodiak’s assets and operate its infrastructure, systems, and business.
Borrowings under the ABL Credit Agreement are at variable rates of interest and expose Kodiak to interest rate risk. Despite the interest rate reductions from the Federal Reserve's reduction in the target Fed Funds Rate in the third and fourth quarters of 2024, interest rates could be increased again in the future.
Borrowings under the ABL Credit Agreement are at variable rates of interest and expose Kodiak to interest rate risk. Despite the interest rate reductions from the Federal Reserve’s reduction in the target Fed Funds Rate in the third and fourth quarters of 2025, interest rates could be increased again in the future.
The substantial majority of the components for Kodiak’s natural gas compression equipment are supplied by a limited number of key vendors. Kodiak’s reliance on these suppliers involves several risks, including price increases and a potential inability to obtain an adequate supply of required components in a timely manner on account of supplier nonperformance or otherwise.
The substantial majority of the components for Kodiak’s natural gas compression equipment are supplied by a limited number of key vendors. Kodiak’s reliance on these suppliers involves several risks, including price increases and a potential inability to obtain an adequate supply of required components in a timely manner on account of supplier nonperformance, extended lead times or otherwise.
Further, if there is a financial crisis or the economic climate in the United States or abroad deteriorates, worldwide demand for natural gas or oil could materially decrease, which would likely depress the level of production activity and result in a decline in the demand for Kodiak’s business and services and ultimately materially adversely impact its results of operations and financial condition.
Further, if there is a financial crisis or the economic climate in the United States or abroad deteriorates, worldwide demand for natural gas or oil could materially decrease, which would likely depress the level of production activity and result in a decline in the demand for Kodiak’s business and services and ultimately materially adversely impact its results of 32 Table of Contents operations and financial condition.
As a result, Kodiak may be disproportionately exposed to the impact of regional supply and demand factors in the Permian Basin or Eagle Ford Shale caused by changed governmental regulations, curtailment of production or interruption of the processing or transportation of natural gas and oil produced from the wells in these geographic areas.
As a result, Kodiak may be disproportionately exposed to the impact of regional supply and demand factors in the Permian Basin or Eagle Ford Shale caused by changed governmental regulations, curtailment of production or interruption of the processing or 19 Table of Contents transportation of natural gas and oil produced from the wells in these geographic areas.
Litigation risks also are increasing as a number of parties have sought to bring suit against various natural gas and oil companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to climate change or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts.
Litigation risks also are increasing as a number of parties have sought to sue various natural gas and oil companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to climate change or that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts.
A significant increase in the price of such equipment, materials and services and the resulting supply chain and logistics disruptions, or otherwise, could have a negative impact on Kodiak’s business, results of operations, financial condition and cash flows. Kodiak’s operations entail inherent risks that may result in interruption of Kodiak’s operations and/or substantial liability.
A significant increase in the price of such equipment, materials and services and the resulting supply chain and logistics disruptions, or otherwise, could have a negative impact on Kodiak’s business, results of operations, financial condition and cash flows. 21 Table of Contents Kodiak’s operations entail inherent risks that may result in interruption of Kodiak’s operations and/or substantial liability.
The ABL Credit Agreement and the Indenture contain restrictive covenants (which contain a number of exceptions and qualifications that may be material) that impose significant operating and financial restrictions on Kodiak and may limit Kodiak’s ability to engage in acts that may be in Kodiak’s long-term best interest, including restrictions on Kodiak’s ability to: • incur additional indebtedness and guarantee indebtedness; • pay dividends or make other distributions or repurchase or redeem equity interests; • prepay, redeem or repurchase certain debt; • issue certain preferred units or similar equity securities; • make loans and investments; 35 Table of Contents • sell, transfer or otherwise dispose of assets; • incur liens; • enter into transactions with affiliates; • enter into agreements restricting Kodiak’s restricted subsidiaries’ ability to pay dividends; • enter into certain swap agreements; • amend certain organizational documents; • create certain subsidiaries; • enter into sale and leaseback transactions; • consolidate, merge or sell all or substantially all of Kodiak’s assets; and • engage in certain other transactions without the prior consent of the lenders.
The ABL Credit Agreement and the indentures governing Kodiak’s senior notes contain restrictive covenants (which contain a number of exceptions and qualifications that may be material) that impose significant operating and financial restrictions on Kodiak and may limit Kodiak’s ability to engage in acts that may be in Kodiak’s long-term best interest, including restrictions on Kodiak’s ability to: 29 Table of Contents • incur additional indebtedness and guarantee indebtedness; • pay dividends or make other distributions or repurchase or redeem equity interests; • prepay, redeem or repurchase certain debt; • issue certain preferred units or similar equity securities; • make loans and investments; • sell, transfer or otherwise dispose of assets; • incur liens; • enter into transactions with affiliates; • enter into agreements restricting Kodiak’s restricted subsidiaries’ ability to pay dividends; • enter into certain swap agreements; • amend certain organizational documents; • create certain subsidiaries; • enter into sale and leaseback transactions; • consolidate, merge or sell all or substantially all of Kodiak’s assets; and • engage in certain other transactions without the prior consent of the lenders.
Payments and penalties related to sales taxes could have a material adverse effect on Kodiak’s business, financial condition and results of operations. Kodiak might be unable to employ or retain qualified technical personnel, which could hamper its present operations, limit its ability to grow or increase its costs.
Payments and penalties related to sales taxes could have a material adverse effect on Kodiak’s business, financial condition and results of operations. 20 Table of Contents Kodiak might be unable to employ or retain qualified technical personnel, which could hamper its present operations, limit its ability to grow or increase its costs.
Kodiak’s customers that are significant producers, processors, gatherers and transporters of natural gas and oil may choose to vertically integrate their operations by purchasing and operating their own compression fleets in lieu of using Kodiak’s business and services for a variety of reasons, including customer reactions to changes in the pricing of our services, failure to meet certain customer safety standards or any other reason.
Kodiak’s customers that are significant producers, processors, gatherers and transporters of natural gas and oil may choose to vertically integrate their operations by purchasing and operating their own compression fleets in lieu of using Kodiak’s business and services for a variety of reasons, including customer reactions to changes in the pricing of our services, revised customer capital allocation strategies, failure to meet certain customer safety standards or any other reason.
Moreover, failure by Kodiak or its customers to comply with these environmental laws and regulations could result in the imposition of administrative, civil and criminal penalties and the issuance of injunctions delaying or prohibiting operations, which could in turn have an adverse impact on Kodiak’s customers and its business.
Moreover, failure by Kodiak or its customers to comply with these environmental laws and regulations could result in the imposition of 22 Table of Contents administrative, civil and criminal penalties and the issuance of injunctions delaying or prohibiting operations, which could in turn have an adverse impact on Kodiak’s customers and its business.
Current, as well as potential future, laws and regulations that limit emissions of GHGs or that otherwise promote the use of renewable energy over fossil fuel energy sources could increase the cost of Kodiak’s services and, thereby, further reduce demand and adversely affect Kodiak’s sales volumes, revenues and margins.
Current, as well as potential future, laws and regulations that limit emissions of 24 Table of Contents GHGs or that otherwise promote the use of renewable energy over fossil fuel energy sources could increase the cost of Kodiak’s services and, thereby, further reduce demand and adversely affect Kodiak’s sales volumes, revenues and margins.
In addition, the techniques and sophistication used to conduct cyberattacks frequently change and the deployment of evolving artificial intelligence tools could be used to identify vulnerabilities and create more deceptive phishing attempts.
In addition, the techniques and sophistication used to conduct cyberattacks frequently change and the deployment of evolving artificial intelligence tools could be used to identify vulnerabilities and create more effective phishing attempts.
During that period, Kodiak would not necessarily know the impact to its IT systems, or the costs and actions required to fully remediate, and Kodiak’s initial remediation efforts may not be successful. Additionally, a cyberattack or security breach could be repeated before they are fully contained and remediated.
During that period, Kodiak would not necessarily know the impact to its IT systems, or the costs and actions required to fully remediate, and Kodiak’s initial remediation efforts may not be successful. Additionally, a cyberattack or security breach could be repeated before it is fully contained and remediated.
If Kodiak does not satisfy its mechanical availability guarantee, a customer has the ability to terminate its contracts. Kodiak’s gas compression contracts provide a guarantee of specified mechanical availability of 98.0% to 98.5%.
If Kodiak does not satisfy its mechanical availability guarantee, a customer has the ability to terminate its contracts. Kodiak’s gas compression contracts provide a guarantee of specified mechanical availability of 95.0% to 98.0%.
Environmental laws and regulations, such as CERCLA and comparable state laws, may impose strict, as well as joint and several, liability for environmental contamination, which could render Kodiak potentially liable for remediation costs, natural resource damages, the costs of certain health studies and other damages, regardless of whether Kodiak was responsible for the release or contamination, and even if Kodiak’s operations were lawful at the time of the release or if contamination was caused by third parties.
Environmental laws and regulations, such as CERCLA and comparable state laws, may impose strict, as well as joint and several, liability for environmental contamination, which could render Kodiak potentially liable for remediation costs, natural resource damages, the costs of certain health studies and other damages, regardless of whether Kodiak was responsible for the release or contamination, and even if Kodiak’s operations were lawful at the time of the release.
In addition, Kodiak’s ability to refinance Kodiak’s indebtedness prior to maturity is dependent on the condition of the capital and credit markets and Kodiak’s financial condition. Kodiak can provide no assurance that it will be able to refinance its indebtedness or that any indebtedness incurred to refinance Kodiak’s indebtedness will be on comparable terms.
In addition, Kodiak’s ability to refinance Kodiak’s indebtedness prior to maturity is dependent on the condition of the capital and credit markets and Kodiak’s financial condition. Kodiak can provide no assurance that it will be able to refinance its indebtedness or that any indebtedness incurred to refinance Kodiak’s indebtedness will be on comparable 28 Table of Contents terms.
Kodiak’s ability to generate cash depends on many factors beyond Kodiak’s control. Kodiak’s ability to make scheduled payments on or refinance its debt obligations depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond its control.
Kodiak’s ability to make scheduled payments on or refinance its debt obligations depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond its control.
Any unionization efforts, collective bargaining agreements or work stoppages could 23 Table of Contents have a materially adverse effect on Kodiak’s operating results or limit its operational flexibility. Further, our response to any union organizing efforts could negatively impact how our brand is perceived by our employees and customers and have material adverse effects on our business and future results.
Any unionization efforts, collective bargaining agreements or work stoppages could have a materially adverse effect on Kodiak’s operating results or limit its operational flexibility. Further, our response to any union organizing efforts could negatively impact how our brand is perceived by our employees and customers and have material adverse effects on our business and future results.
The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our common stock could decline, and stockholders could lose all or part of their investment.
Kodiak cannot predict how the EPA and states will implement the final rule; however, Subpart OOOO regulation of air emissions from the natural gas and oil sector could result in increased expenditures for pollution control equipment, which could impact Kodiak’s customers’ operations and negatively impact Kodiak’s business.
If finalized, Kodiak cannot predict how the EPA and states will implement the final rule; regardless, Subpart OOOO regulation of air emissions from the natural gas and oil sector could result in increased expenditures for pollution control equipment, which could impact Kodiak’s customers’ operations and negatively impact Kodiak’s business.
There are many technologies available for the artificial enhancement of oil production, and Kodiak’s customers may elect to use these alternative technologies instead of the gas 21 Table of Contents lift compression Kodiak provides.
There are many technologies available for the artificial enhancement of oil production, and Kodiak’s customers may elect to use these alternative technologies instead of the gas lift compression Kodiak provides.
Kodiak has in the past entered into, and in the future may enter into, interest rate swaps that involve the exchange of floating for fixed rate interest payments to reduce interest rate volatility.
Kodiak has in the past entered into, and in the future may enter into, interest rate swaps that 30 Table of Contents involve the exchange of floating for fixed rate interest payments to reduce interest rate volatility.
Such higher interest rates may affect Kodiak’s ability to enter into future debt financing, as high inflation may result in an increase in cost to borrow. 39 Table of Contents Kodiak’s ability to use net operating losses (“NOLs”) to offset future income may be limited.
Such higher interest rates may affect Kodiak’s ability to enter into future debt financing, as high inflation may result in an increase in cost to borrow. Kodiak’s ability to use net operating losses (“NOLs”) to offset future income may be limited.
In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in Kodiak’s business practices, which could materially and adversely affect Kodiak’s business, operating results and financial condition.
In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in Kodiak’s business practices, which could materially and adversely affect Kodiak’s business, operating results and financial condition. Accruals for such liability, penalties or sanctions may be insufficient.
Kodiak conducts operations in a wide variety of customer locations across the continental U.S. and internationally.
Kodiak conducts operations in a wide variety of customer locations across the continental U.S.
Furthermore, Kodiak might be forced to limit the features available in its IT system due to changes by its third-party software and service 30 Table of Contents providers, or due to price increases by such vendors.
Furthermore, Kodiak might be forced to limit the features available in its IT system due to changes by its third-party software and service providers, or due to price increases by such vendors.
For example, the SEC recently adopted rules requiring the disclosure of cybersecurity incidents that we determine to be “material,” to be made within four business days of such determination, 31 Table of Contents which can be complex, requiring a number of assumptions based on several factors.
For example, the SEC has adopted rules requiring the disclosure of cybersecurity incidents that we determine to be “material,” to be made within four business days of such determination, which can be complex, requiring a number of assumptions based on several factors.
Even if Kodiak detects misappropriation or infringement by a third-party, it cannot assure you that it will be able to enforce its rights at a reasonable cost, or at all.
Even if Kodiak detects 25 Table of Contents misappropriation or infringement by a third-party, it cannot assure you that it will be able to enforce its rights at a reasonable cost, or at all.
The ABL Credit Agreement and the Indenture restrict Kodiak’s ability to dispose of assets and use the proceeds from those dispositions and may also restrict Kodiak’s ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due.
The ABL Credit Agreement and the indentures governing Kodiak’s senior notes restrict Kodiak’s ability to dispose of assets and use the proceeds from those dispositions and may also restrict Kodiak’s ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due.
General Risks A financial crisis or deterioration in general economic, business or industry conditions could materially adversely affect Kodiak’s results of operations, financial condition and ability to pay dividends on Kodiak Common Stock. Concerns over global economic conditions, stock market volatility, energy costs, geopolitical issues, persistent inflationary pressures and uncertain U.S.
General Risks A financial crisis or deterioration in general economic, business or industry conditions could materially adversely affect Kodiak’s results of operations, financial condition and ability to pay dividends on Kodiak Common Stock. Concerns over global economic conditions, rapid changes in trade policy, stock market volatility, energy costs, heightened geopolitical tensions, persistent inflationary pressures and uncertain U.S.
While the ABL Credit Agreement and the Indenture limit the ability of Kodiak’s subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to Kodiak, these limitations are subject to qualifications and exceptions.
While the ABL Credit Agreement and the indentures governing Kodiak’s senior notes limit the ability of Kodiak’s subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to Kodiak, these limitations are subject to qualifications and exceptions.
As of December 31, 2024, approximately 11.3% of Kodiak’s revenue-generating horsepower was on a month-to-month basis with customers who continue to utilize Kodiak’s services following expiration of the primary term of their contracts. These customers can generally terminate their month-to-month Contract Services contracts on 30 to 90 days’ notice.
As of December 31, 2025, approximately 9.0% of Kodiak’s revenue-generating horsepower was on a month-to-month basis with customers who continue to utilize Kodiak’s services following expiration of the primary term of their contracts. These customers can generally terminate their month-to-month Contract Services contracts on 30 to 90 days’ notice.
A breach of the covenants or restrictions under the ABL Credit Agreement or the Indenture could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.
A breach of the covenants or restrictions under the ABL Credit Agreement or the indentures governing Kodiak’s senior notes could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.
Kodiak’s customers are required to hold certain U.S. federal, state or local or other jurisdictional environmental permits or other authorizations and may require new or amended facility permits or licenses from time to time with respect to storm water discharges, hydraulic fracturing, waste handling or air emissions relating to equipment operations, including compression units, which subject Kodiak’s customers to new or revised permitting conditions that may be onerous or with respect to which compliance may be costly.
Kodiak’s customers are required to hold certain environmental permits or other authorizations and may require new or amended authorizations from time to time with respect to storm water discharges, hydraulic fracturing, waste handling or air emissions relating to equipment operations, including compression units, which subject Kodiak’s customers to new or revised permitting conditions that may be onerous or with respect to which compliance may be costly.
In addition, California enacted, effective January 1, 2023, a privacy law, the California Privacy Rights Act (the “CPRA”), which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain PII and creating a new state agency to oversee implementation and enforcement efforts. There are more states considering similar privacy laws.
In addition, California enacted, effective January 1, 2023, a privacy law, the California Privacy Rights Act (the “CPRA”), which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain PII and creating a new state agency to oversee implementation and enforcement efforts.
Although Kodiak does not hold the permits, such noncompliance with required permits or the failure to obtain additional permits by Kodiak’s customers could subject its customers to future penalties, operating restrictions, or delays in obtaining new or amended permits which could in turn have a material adverse effect on Kodiak’s business, financial condition and results of operations.
Noncompliance by Kodiak’s customers with required permits or the failure to obtain additional permits could subject them to future penalties, operating restrictions, or delays in obtaining new or amended permits which could in turn have a material adverse effect on Kodiak’s business, financial condition and results of operations.
Any unionization efforts or labor regulation changes in certain jurisdictions in which Kodiak operates could divert management’s attention and could have a materially adverse effect on Kodiak’s operating results or limit Kodiak’s operational flexibility. Kodiak considers its relationship with its employees to be satisfactory, and certain of Kodiak’s employees are represented by a union in collective bargaining with Kodiak.
Any unionization efforts or labor regulation changes in certain jurisdictions in which Kodiak operates could divert management’s attention and could have a materially adverse effect on Kodiak’s operating results or limit Kodiak’s operational flexibility. No Kodiak employees are represented by a union in collective bargaining with Kodiak.
Kodiak continues to evaluate technology transformation projects and is dependent upon a variety of information and communication systems to operate its business, including its ERP system. Any disruptions, delays or deficiencies in these systems, or in the design or implementation of any new ERP system, could adversely affect Kodiak’s ability to effectively operate and manage information.
Kodiak continues to evaluate technology transformation projects and is dependent upon a variety of information and communication systems to operate its business, including its new ERP system that went live in August 2025. Any disruptions, delays or deficiencies in these systems, could adversely affect Kodiak’s ability to effectively operate and manage information.
This may have the effect of reducing the amount of proceeds paid to you. These restrictions also will not prevent Kodiak from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2024, the ABL Facility provided for unused commitments of $322.5 million.
This may have the effect of reducing the amount of proceeds paid to stockholders. These restrictions also will not prevent Kodiak from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2025, the ABL Facility provided for unused commitments of $1.5 billion.
The designation of previously unidentified endangered or threatened species or new critical or suitable habitat designations could indirectly cause Kodiak to incur additional costs, cause Kodiak’s or its customers’ operations to become subject to 28 Table of Contents operating restrictions or bans, and limit future development activity by Kodiak or its customers in affected areas.
The designation of previously unidentified endangered or threatened species or new critical or suitable habitat designations or additional interest in biodiversity and other nature-related matters could indirectly cause Kodiak to incur additional costs, cause Kodiak’s or its customers’ operations to become subject to operating restrictions or bans, and limit future development activity by Kodiak or its customers in affected areas.
The terms of the ABL Credit Agreement and the Indenture restrict Kodiak’s current and future operations, particularly Kodiak's ability to respond to changes or to take certain actions.
The terms of the ABL Credit Agreement and the indentures governing Kodiak’s senior notes restrict Kodiak’s current and future operations, particularly Kodiak's ability to respond to changes or to take certain actions.
Debt and Credit Facilities to Kodiak’s annual financial statements. Additionally, Kodiak’s ABL Facility contains restrictions on the payment of dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Description of Indebtedness” for more information regarding Kodiak’s restrictions under the ABL Facility.
Debt and Credit Facilities to the consolidated financial statements included in Part IV, Item 15 of this Annual Report. Additionally, Kodiak’s ABL Facility contains restrictions on the payment of dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Description of Indebtedness” for more information regarding Kodiak’s restrictions under the ABL Facility.
If Kodiak incurs any additional indebtedness that ranks equally to Kodiak’s outstanding debt obligations, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of Kodiak’s business.
If Kodiak incurs any additional indebtedness that ranks equally to Kodiak’s outstanding debt obligations, subject to collateral arrangements, the holders of that debt will have priority over stockholders with respect to any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of Kodiak’s business.
As of December 31, 2024, Kodiak’s total long-term debt was approximately $2.6 billion in aggregate principal amount, including $750 million principal amount of senior notes due 2029 which were issued February 2, 2024.
As of December 31, 2025, Kodiak’s total long-term debt was approximately $2.6 billion in aggregate principal amount, including $750.0 million principal amount of senior notes due 2029 which were issued February 2, 2024, $770.0 million principal amount of senior notes due 2033 which were issued September 5, 2025, and $630.0 million principal amount of senior notes due 2035 which were issued September 5, 2025.
This could further exacerbate the risks to Kodiak’s financial condition described above. Kodiak and its subsidiaries may be able to incur significant additional indebtedness in the future.
Despite Kodiak’s current level of indebtedness, Kodiak and its subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to Kodiak’s financial condition described above. Kodiak and its subsidiaries may be able to incur significant additional indebtedness in the future.
Although the ABL Credit Agreement and the Indenture contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions 36 Table of Contents could be substantial.
Although the ABL Credit Agreement and the indentures governing Kodiak’s senior notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under the EPA’s Greenhouse Gas Reporting Program. In order to implement the program, the Inflation Reduction Act required revisions to GHG reporting regulations for petroleum and natural gas systems (Subpart W) by 2024.
Additionally, a 2024 rule issued by the EPA under the Inflation Reduction Act imposed a “waste emissions charge” on certain natural gas and oil sources that are already required to report under the EPA’s Greenhouse Gas Reporting Program and revised GHG reporting regulations for petroleum and natural gas systems (Subpart W).
It is possible that Kodiak may not realize the anticipated benefits from these projects. Failure to properly or adequately address these issues could impact Kodiak’s ability to perform necessary business operations, which could adversely affect Kodiak’s reputation, competitive position, business, results of operations and financial condition. Kodiak is subject to risks associated with disruptive technologies, including artificial intelligence.
It is possible that Kodiak may not realize the anticipated benefits from these projects including the new ERP system. Failure to properly or adequately address these issues could impact Kodiak’s ability to perform necessary 27 Table of Contents business operations, which could adversely affect Kodiak’s reputation, competitive position, business, results of operations and financial condition.
Moreover, any such litigation targeting Kodiak’s customers could negatively impact their operation and, in turn, decrease demand for Kodiak’s operations. An unfavorable ruling in any such case could significantly impact Kodiak’s operations and could have an adverse impact on its financial condition.
Should Kodiak be targeted by any such litigation, it may incur liability, and any such litigation targeting Kodiak’s customers could negatively impact their operation and, in turn, decrease demand for Kodiak’s operations. An unfavorable ruling in any such case could significantly impact Kodiak’s operations and could have an adverse impact on its financial condition.
Accruals for such 29 Table of Contents liability, penalties or sanctions may be insufficient. Judgments and estimates to determine accruals or a range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material.
Judgments and estimates to determine accruals or a range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material.
Such legal proceedings are inherently uncertain and their results cannot be predicted. Regardless of the outcome, such proceedings could have an adverse impact on Kodiak because of legal costs, diversion of management and other personnel and other factors.
Regardless of the outcome, such proceedings could have an adverse impact on Kodiak because of legal costs, diversion of management and other personnel and other factors.
Future environmental health and safety laws and regulations (or changes to existing laws and regulations), and potentially future stakeholders' focus on sustainability (or changes to such focus), may additionally negatively impact natural gas and oil exploration, as well as production, gathering and pipeline companies, including Kodiak’s customers, which in turn could have a material adverse effect on Kodiak’s business, financial condition and results of Kodiak’s operations. 25 Table of Contents New regulations, proposed regulations and proposed modifications to existing regulations under the CAA, if implemented, could result in increased compliance costs and changes in customers’ demand and desired suppliers.
Future environmental health and safety laws and regulations (or changes to existing laws and regulations), and potentially future stakeholders’ focus on sustainability (or changes to such focus), may additionally negatively impact natural gas and oil exploration, as well as production, gathering and pipeline companies, including Kodiak’s customers, which in turn could have a material adverse effect on Kodiak’s business, financial condition and results of Kodiak’s operations.
The Kodiak Charter and Kodiak Bylaws contain provisions that could delay, discourage or prevent a takeover attempt even if a takeover might be beneficial to Kodiak’s stockholders, and such provisions may adversely affect the market price of Kodiak Common Stock. Provisions contained in the Kodiak Charter and Kodiak Bylaws could make it more difficult for a third-party to acquire Kodiak.
Risks Related to Owning Kodiak Common Stock The Kodiak Charter and Kodiak Bylaws contain provisions that could delay, discourage or prevent a takeover attempt even if a takeover might be beneficial to Kodiak’s stockholders, and such provisions may adversely affect the market price of Kodiak Common Stock.
A climate-related decrease in demand for natural gas and oil could negatively affect Kodiak’s business. Supply and demand for natural gas and oil is dependent upon a variety of factors, many of which are beyond Kodiak’s control.
Supply and demand for natural gas and oil is dependent upon a variety of factors, many of which are beyond Kodiak’s control.
Additionally, other unforeseen risks stemming from Kodiak’s use and development of artificial intelligence tools and technology may arise in the future that could adversely affect Kodiak’s business, financial condition and results of operations.
Failure or perceived failure by us to address these risks adequately may negatively impact Kodiak’s operations, reputation and financial performance. Additionally, other unforeseen risks stemming from Kodiak’s use and development of artificial intelligence tools and technology may arise in the future that could adversely affect Kodiak’s business, financial condition and results of operations.
In recent years, sustainability goals and programs, which typically include policies, practices and extralegal targets related to environmental stewardship, social responsibility, and corporate governance, have been a focus of investors and stakeholders across the industry.
In recent years, sustainability goals and programs, which typically include policies, practices and extralegal targets related to environmental stewardship, social responsibility, and corporate governance, have been a focus of investors and stakeholders across the industry. Limitation of investments in and financings for energy companies could result in the restriction, delay or cancellation of infrastructure projects and energy production activities.
GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. However, in January 2025, President Trump withdrew the United States from the Paris Agreement.
At the international level, the U.S. joined the international community at COP21, which resulted in the Paris Agreement and a subsequent “nationally determined contribution” for U.S. GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. However, in January 2025, President Trump withdrew the United States from the Paris Agreement.
From time to time, various legislative or administrative initiatives may be proposed that could adversely affect Kodiak’s tax positions. There can be no assurance that Kodiak’s tax provision or tax payments will not be adversely affected by these initiatives. In addition, U.S. federal, state and local tax laws and regulations are extremely complex and subject to varying interpretations.
From time to time, various legislative or administrative initiatives may be proposed that could adversely affect Kodiak’s tax positions. There can be no assurance that Kodiak’s tax provision or tax payments will not be adversely affected by these initiatives.
See the section titled “ Risk Factors—Risk Factors Related to Our Business and Our Industry—Kodiak may be unable to access the capital and credit markets or borrow on affordable terms to obtain additional capital that Kodiak may require” of this Annual Report for more information. 34 Table of Contents Kodiak may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful.
See the section titled “ Risk Factors—Risk Factors Related to Our Business and Our Industry—Kodiak may be unable to access the capital and credit markets or borrow on affordable terms to obtain additional capital that Kodiak may require” of this Annual Report for more information.
The Kodiak Charter and Kodiak Bylaws also impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, the Kodiak Charter authorizes the Kodiak Board to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock without any vote or action by Kodiak’s stockholders.
For example, the Kodiak Charter authorizes the Kodiak Board to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock without any vote or action by Kodiak’s stockholders.
Kodiak’s business is subject to climate-related transitional risks, including evolving climate change legislation, regulatory initiatives and stakeholder pressures, which could result in increased operating expenses and capital costs, financial risks and potential reduction in demand for Kodiak’s services.
Any decrease in demand for these products could consequently reduce demand for Kodiak’s services or impact Kodiak’s ability to obtain external financing and could have a negative effect on Kodiak’s business. 23 Table of Contents Kodiak’s business is subject to climate-related transitional risks, including evolving climate change legislation, regulatory initiatives and stakeholder pressures, which could result in increased operating expenses and capital costs, financial risks and potential reduction in demand for Kodiak’s services.
Although it is not currently possible to predict how any proposed or future executive orders, GHG or climate change legislation or regulation promulgated by Congress, the states or multi-state regions and their respective regulatory agencies will impact Kodiak’s business, any legislation or regulation of GHG emissions that may be imposed in areas in which Kodiak conducts business or on the assets Kodiak operates could result in increased compliance or operating costs, additional operating restrictions or reduced demand for Kodiak’s services, and could have a material adverse effect on Kodiak’s business, financial condition and results of operations.
Any legislation or regulation of GHG emissions that may be imposed in areas in which Kodiak conducts business or on the assets Kodiak operates could result in increased compliance or operating costs, additional operating restrictions or reduced demand for Kodiak’s services, and could have a material adverse effect on Kodiak’s business, financial condition and results of operations.
Efforts by governments, international bodies, businesses and consumers to reduce GHGs and otherwise mitigate the effects of climate change are ongoing. The nature of these efforts and their effects on Kodiak’s business are inherently unpredictable and subject to change.
The nature of these efforts and their effects on Kodiak’s business are inherently unpredictable and subject to change.
Consequently, Kodiak cannot predict whether these pledges by the previous administration made in connection with the Paris Agreement will result in any particular new regulatory requirements or initiatives or whether such requirements or initiatives will cause Kodiak to incur material costs should the U.S.'s participation in the Paris Agreement again change in the future.
Consequently, Kodiak cannot predict whether GHG initiatives will cause Kodiak to incur material costs should the U.S.'s participation in the Paris Agreement again change in the future.
Limitation of investments in and financings for energy companies could result in the restriction, delay or cancellation of infrastructure projects and energy production activities. This potential for reduced access to the capital and 27 Table of Contents financial markets, whether impacting Kodiak’s customers and/or Kodiak’s business, may further adversely affect the demand for and price of Kodiak’s securities.
This potential for reduced access to the capital and financial markets, whether impacting Kodiak’s customers and/or Kodiak’s business, may further adversely affect the demand for and price of Kodiak’s securities.
Federal Reserve interest rate increases, the availability and cost of credit, and slowing of economic growth in the United States and fears of a recession have contributed and may continue to contribute to economic uncertainty and diminished expectations for the global economy.
Federal Reserve monetary policy actions, the availability and cost of credit, and slowing of economic growth in the United States have contributed and may continue to contribute to economic uncertainty and diminished expectations for the global economy. Concerns about global economic growth can result in a significant adverse impact on global financial markets and commodity prices.
In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA.
In addition, regulatory changes require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. However, in July 2025, the EPA proposed extending Subpart OOOO deadlines for sources and states to January 2027.
A decrease in energy use due to weather changes may negatively affect Kodiak’s financial condition through decreased revenues. To the extent the frequency of extreme weather events increases, this could impact Kodiak’s operations in various ways, including damage to Kodiak’s facilities interruptions in service or supply chain, increased insurance premiums or increases to Kodiak’s cost of providing service.
Any increased frequency of extreme weather events could impact Kodiak’s operations in various ways, including increase or decrease in energy needs, damage to Kodiak’s facilities interruptions in service or supply chain, increased insurance premiums or increases to Kodiak’s cost of providing service. Such impacts may be proportionately more severe given the geographical concentration of Kodiak’s operations.
The nature, scale and scope of the above-described events, combined with the uncertain duration and extent of governmental actions, prevent Kodiak from identifying all potential risks to its business. Inflation may adversely affect Kodiak by increasing costs beyond what it can recover through price increases and limit its ability to enter into future traditional debt financing.
Inflation may adversely affect Kodiak by increasing costs beyond what it can recover through price increases and limit its ability to enter into future traditional debt financing.
A failure to satisfy mechanical availability requirements under a contract for three consecutive months could result in termination of the applicable contract by the customer, which could have an adverse effect on Kodiak’s financial results. 24 Table of Contents Acts or threats of terrorism, acts of war, social unrest, cyber or physical security attacks, and other malicious acts of individuals or groups seeking to disrupt Kodiak's operations could adversely impact Kodiak’s business, financial condition, and results of operations.
A failure to satisfy mechanical availability requirements under a contract for three consecutive months could result in termination of the applicable contract by the customer, which could have an adverse effect on Kodiak’s financial results.
Kodiak faces significant competition that may cause it to lose market share and have a material adverse effect on its financial condition. The compression business is competitive.
If we fail to successfully integrate DPS, Kodiak may not realize all or any of the anticipated benefits of the acquisition, and our future results of operations could be adversely affected. Kodiak faces significant competition that may cause it to lose market share and have a material adverse effect on its financial condition. The compression business is competitive.

… 120 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

14 edited+1 added−1 removed1 unchanged
Biggest changeKodiak engages with these partners to monitor and maintain the performance and effectiveness of products and services that are deployed in Kodiak’s operating environment. As a part of this strategy, Kodiak augments its internal cybersecurity team with an outsourced Cyber Security Operations Center providing monitoring of the cybersecurity environment and to coordinate the investigation and remediation of alerts.
Biggest changeAs a part of this strategy, we supplemental our 33 Table of Contents internal cybersecurity team with an outsourced Cyber Security Operations Center providing monitoring of the cybersecurity environment and to coordinate the investigation and remediation of alerts. We also maintain an incident response drill program that is designed to prepare our teams for responding to significant cybersecurity events.
See “Risk Factors – Risks Related to Intellectual Property, Information Technology and Cybersecurity—Kodiak has experienced cybersecurity incidents or IT system disruptions in the past, and cybersecurity breaches or IT system disruptions may adversely affect Kodiak’s business in the future.” Board Oversight Given the importance to our business and the heightened risk, the Audit & Risk Committee oversees the process of reviewing Kodiak’s cybersecurity risks, including cybersecurity exposures and the steps taken by management to monitor and control such exposures.
See “Risk Factors – Risks Related to Intellectual Property, Information Technology and Cybersecurity—Kodiak has experienced cybersecurity incidents or IT system disruptions in the past, and cybersecurity breaches or IT system disruptions may adversely affect Kodiak’s business in the future.” Board Oversight Given the importance to our business and the heightened risk, the Audit & Risk Committee oversees the process of reviewing our cybersecurity risks, including cybersecurity exposures and the steps taken by management to monitor and control such exposures.
However, as of the date hereof, we do not believe that any prior cybersecurity incidents have had, or that any risks from cybersecurity threats are reasonably likely to have, a material adverse effect on Kodiak’s business, financial condition, results of operations, or cash flows.
However, as of the date hereof, we do not believe that any prior cybersecurity incidents have had, or that any risks from cybersecurity threats are reasonably likely to have a material adverse effect on our business, financial condition, results of operations, or cash flows.
The cybersecurity team has decades of experience selecting, deploying, and operating cybersecurity technologies, initiatives, and processes around the world, and relies on threat intelligence as well as other information obtained from governmental, public or private sources, including external consultants engaged by Kodiak.
The cybersecurity team has decades of experience selecting, deploying, and operating cybersecurity technologies, initiatives, and processes around the world, and relies on threat intelligence as well as other information obtained from governmental, public or private sources, including external consultants engaged by us.
The CIO is supported by two internal full-time employees with backgrounds in cybersecurity, risk management and incident response. These individuals are both military veterans versed in forensic analysis and regulatory compliance and combined have 23 years of cybersecurity experience in the private and public sectors. They each have a Master’s degree in cybersecurity, extensive military training and several industry certifications.
The CIO is supported by two full-time internal employees with backgrounds in cybersecurity, risk management and incident response. These individuals are both military veterans versed in forensic analysis and regulatory compliance and combined have decades of cybersecurity experience in the private and public sectors. They each have a Master’s degree in cybersecurity, extensive military training and several industry certifications.
This program is integrated within the Company’s enterprise risk management process to ensure that cybersecurity considerations are an integral part of the Company’s decision-making process and the results of the risk assessment, which occurs at least annually, along with mitigation strategies, are discussed with the Kodiak Board and the Audit & Risk Committee.
This program is integrated within the our enterprise risk management process to ensure that cybersecurity considerations are an integral part of our decision-making process and the results of the risk assessment, which occurs at least annually, along with mitigation strategies, are discussed with our Board of Directors and the Audit & Risk Committee.
The Kodiak Board reviews any actions and mitigating strategies regarding any identified cybersecurity risks. The cybersecurity team provides periodic updates to the Audit & Risk Committee on the effectiveness of Kodiak’s cyber risk management program.
Our Board reviews any actions and mitigating strategies regarding any identified cybersecurity risks. The cybersecurity team provides periodic updates to the Audit & Risk Committee on the effectiveness of our cyber risk management program.
In addition, cybersecurity risks are reviewed by the Kodiak Board and the Audit & Risk Committee, at least annually, as part of the Company’s enterprise risk management program.
In addition, cybersecurity risks are reviewed by our Board of Directors and the Audit & Risk Committee, at least annually, as part of the Company’s enterprise risk management program.
Item 1C. Cybersecurity Strategy, Governance and Risk Management Kodiak maintains a cyber risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats, including the assessment of cybersecurity risks related to third-party vendors and suppliers.
Item 1C. Cybersecurity Strategy, Governance and Risk Management We maintain a cyber risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats, including the assessment of cybersecurity risks related to third-party vendors and suppliers.
Kodiak faces risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation. Kodiak has experienced, and despite our security measures will continue to experience, cyber incidents in the normal course of its business, some of which may be material.
We face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation. We have experienced, and despite our security measures will continue to experience, cyber incidents in the normal course of our business, some of which may be material.
The CIO, CISO and cybersecurity team are responsible for assessing and managing Kodiak’s cyber risk management program, informs senior 40 Table of Contents management regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents and supervises such efforts.
The CIO, CISO and cybersecurity team are responsible for assessing and managing our cyber risk management program, informs senior management regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents and supervises such efforts.
Kodiak further augments its cybersecurity team with an outsourced Chief Information Security Officer (the “CISO”) who reports to the CIO. The CISO is an information systems security professional with 24 years of cybersecurity leadership.
We further augment our cybersecurity team with an outsourced Chief Information Security Officer (the “CISO”) who reports to the CIO. The CISO is an information systems security professional with 25 years of cybersecurity leadership.
The CIO has managed cyber security programs at multiple private and public companies over the last 20 years, including roles as chief information officer and vice president of systems and technology. The CIO holds a Bachelor of Science degree in computer and information science.
Our cybersecurity team is led by our Chief Information Officer (the “CIO”), who has extensive experience overseeing cybersecurity functions at multiple private and public companies over the last 20 years, including roles as chief information officer and vice president of systems and technology. The CIO holds a Bachelor of Science degree in computer and information science.
Kodiak has an annual assessment of the Company’s cyber risk management program against the NIST CSF, which is performed by a third-party. Cyber vendors serve as partners and are a key part of Kodiak’s cybersecurity infrastructure. Kodiak engages with leading cybersecurity companies and organizations, leveraging third-party technology and expertise.
We undergo an annual third-party assessment of our cyber risk management program against the NIST CSF. Cyber vendors serve as partners and are a key part of our cybersecurity infrastructure. We engage leading cybersecurity firms and leverage third‑party technologies and expertise to help monitor and maintain the performance and effectiveness of the products and services deployed across our operating environment.
Removed
In addition, Kodiak has a program for staging incident response drills, which is in place to prepare support teams in the event of a significant incident. Kodiak maintains a cybersecurity team lead by our Chief Information Officer (the “CIO”).
Added
Cybersecurity attacks are constantly evolving, may be difficult to detect quickly, and often are not recognized until after they have been launched against a target. For example, the emergence of artificial intelligence has provided additional tools for those who perpetrate these attacks, including through social engineering, the development of customized malware, and an enhanced ability to evade detection.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeItem 2. Properties As of December 31, 2024, we own five service facilities in North Dakota and Texas. We lease additional service facilities in Alabama, Colorado, Louisiana, Mississippi, North Dakota, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming. We lease our corporate headquarters located at 9950 Woodloch Forest Drive, The Woodlands, Texas 77380.
Biggest changeItem 2. Properties As of December 31, 2025, we own three service facilities in North Dakota and Texas. We lease additional service facilities in Alabama, Colorado, Kansas, Louisiana, Mississippi, North Dakota, New Mexico, Ohio, Oklahoma, Texas, Utah, and Wyoming. We lease our corporate headquarters located at 9950 Woodloch Forest Drive, The Woodlands, Texas 77380.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed0 unchanged
Biggest changeCommitments and Contingencies to the consolidated financial statements included in Part IV, Item 15 of this Annual Report for a description of such proceedings. Item 4. Mine Safety Disclosures. Not applicable. 41 Table of Contents Part II
Biggest changeSee the subsection titled “Sales Tax Contingency” and “Legal Matters” in Note 15. Commitments and Contingencies to the consolidated financial statements included in Part IV, Item 15 of this Annual Report for a description of such proceedings. Item 4. Mine Safety Disclosures. Not applicable. 34 Table of Contents Part II
Item 3. Legal Proceedings. From time to time, we and our subsidiaries may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows. See Note 15.
Item 3. Legal Proceedings. From time to time, we and our subsidiaries may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−0 removed4 unchanged
Biggest change(3) On November 13, 2024, our Board authorized the repurchase of $15 million of shares of common stock from Kodiak Holdings. On November 18, 2024, we purchased from Kodiak Holdings in a private transaction pursuant to the Share Repurchase Program 434,783 shares of our common stock at a price per share of $34.50. Item 6. [ Reserved ]
Biggest changeIn August 2025, the Board approved a $100.0 million increase to the Share Repurchase Program and extended the expiration date to December 31, 2026. (3) On November 13, 2025, we repurchased from Kodiak Holdings 1.0 million shares of our common stock in a private transaction pursuant to the Share Repurchase Program at a price per share of $33.34.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under those Acts. 42 Table of Contents Unregistered Sales of Equity Securities None.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under those Acts. 35 Table of Contents Unregistered Sales of Equity Securities None.
The performance graph below compares total shareholder return on our common stock from the initial public offering date of June 29, 2023 to December 31, 2024, with the Standard & Poor’s 500 ® Index (“S&P 500”) and Alerian US Midstream Energy Index (“AMUSX”) over the same period.
The performance graph below compares total shareholder return on our common stock from the initial public offering date of June 29, 2023, to December 31, 2025, with the Standard & Poor’s 500 ® Index (“S&P 500”) and Alerian US Midstream Energy Index (“AMUSX”) over the same period.
Repurchases of Equity Securities by Issuer and Affiliated Purchasers The following table contains information about our purchases of our common stock during the three months ended December 31, 2024.
Repurchases of Equity Securities by Issuer and Affiliated Purchasers The following table contains information about our purchases of our common stock during the three months ended December 31, 2025 (in thousands).
Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of a Publicly Announced Program (2)(3) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (2) (in thousands) October 1-31, 2024 — — — — November 1-30, 2024 434,783 $ 34.50 434,783 $ 35,000 December 1-31, 2024 — — — — Total 434,783 $ 34.50 434,783 $ 35,000 (1) Excluding fees, commissions, and expenses associated with the share repurchases.
Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of a Publicly Announced Program (2) (3) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (2) October 1-31, 2025 — — — — November 1-30, 2025 1,000 $ 33.34 1,000 $ 31,699 December 1-31, 2025 — — — — Total 1,000 $ 33.34 1,000 $ 31,699 (1) Excluding fees, commissions, and expenses associated with the share repurchases.
(2) On November 14, 2024, the Company announced that our Board approved a share repurchase program to buy up to an aggregate of $50.0 million of our outstanding common stock (the “Share Repurchase Program”). The Share Repurchase Program expires on December 31, 2025.
(2) On November 14, 2024, the Company announced that our Board approved the Share Repurchase Program to buy up to an aggregate of $50.0 million of our outstanding common stock. The Share Repurchase Program was previously to expire on December 31, 2025.
Holders At the close of business on March 3, 2025, based on information received from the transfer agent of our common stock, we had 32 holders of record of our common stock.
Holders At the close of business on February 23, 2026, based on information received from the transfer agent of our common stock, we had 90 holders of record of our common stock.
Dividends On February 3, 2025, our Board declared a quarterly dividend of $0.41 per share of common stock, or approximately $36.0 million, which was paid on February 21, 2025 to stockholders of record at the close of business on February 14, 2025.
Dividends On January 28, 2026, our Board declared a quarterly dividend of $0.49 per share of common stock, or approximately $43.1 million, which was paid on February 20, 2026, to stockholders of record at the close of business on February 13, 2026.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

84 edited+68 added−44 removed56 unchanged
Biggest changeThe following table reconciles net cash provided by operating activities to discretionary cash flow, and free cash flow for each of the periods presented (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 327,987 $ 266,326 Maintenance capital expenditures (1) (66,200) (36,990) Loss on extinguishment of debt — 2,398 Severance expense (2) 10,500 — Transaction expenses (3) 32,552 6,001 Change in operating assets and liabilities 78,395 22,480 Other (4) (9,953) (12,066) Discretionary cash flow $ 373,281 $ 248,149 Growth capital expenditures (5)(6) (285,992) (184,487) Proceeds from sale of assets 35,030 1,449 Free cash flow $ 122,319 $ 65,111 For detailed footnote descriptions, refer to the annotations beneath the following table. 57 Table of Contents The following table reconciles net income to discretionary cash flow and free cash flow for each of the periods presented (in thousands): Year Ended December 31, 2024 2023 Net income $ 50,334 $ 20,066 Depreciation and amortization 260,272 182,869 Long-lived asset impairment 9,921 — Change in fair value of derivatives 1,234 42,890 Loss on extinguishment of debt — 6,757 Deferred tax provision 15,429 7,863 Amortization of debt issuance costs 11,969 13,556 Equity compensation expense 17,658 5,914 Severance expense (2) 10,500 — Transaction expenses (3) 32,552 6,001 (Gain) loss on sale of assets 29,612 (777) Maintenance capital expenditures (1) (66,200) (36,990) Discretionary cash flow $ 373,281 $ 248,149 Growth capital expenditures (5)(6) (285,992) (184,487) Proceeds from sale of assets 35,030 1,449 Free cash flow $ 122,319 $ 65,111 (1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources —Cash Requirements —Capital Expenditures” for information regarding amounts designated as maintenance capital expenditures.
Biggest changeFree Cash Flow as presented may not be comparable to similarly titled measures of other companies. 49 Table of Contents The following table reconciles net cash provided by operating activities to discretionary cash flow, and free cash flow for each of the periods presented : Year ended December 31, (in thousands) 2025 2024 Net cash provided by operating activities $ 599,740 $ 327,987 Maintenance capital expenditures (76,002) (66,200) Severance expense (1) 2,497 10,500 Transaction expenses (2) 4,102 32,552 Sales tax reserve (3) 27,968 — Change in operating assets and liabilities (87,049) 78,395 Other (4) (9,572) (9,953) Discretionary cash flow $ 461,684 $ 373,281 Growth capital expenditures (5)(6) (199,532) (227,193) Other capital expenditures (5) (62,753) (58,799) Proceeds from sale of assets 30,182 35,030 Free cash flow $ 229,581 $ 122,319 (1) Represents severance expense for the years ended December 31, 2025 and 2024.
The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets.
The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay certain dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets.
Adjusted EBITDA and adjusted EBITDA percentage should not be considered as alternatives to, or more meaningful than, revenues, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance and liquidity.
Adjusted EBITDA and adjusted EBITDA percentage should not be considered as alternatives to, or more meaningful than, revenues, net income (loss), operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance and liquidity.
To compensate for these items, we believe that it is important to consider both net income and net cash provided by operating activities determined under GAAP, as well as adjusted EBITDA and adjusted EBITDA percentage, to evaluate our financial performance and our liquidity.
To compensate for these items, we believe that it is important to consider both net income (loss) and net cash provided by operating activities determined under GAAP, as well as adjusted EBITDA and adjusted EBITDA percentage, to evaluate our financial performance and our liquidity.
Our adjusted EBITDA and adjusted EBITDA percentage exclude some, but not all, items that affect net income and net cash provided by operating activities, and these measures may vary among companies.
Our adjusted EBITDA and adjusted EBITDA percentage exclude some, but not all, items that affect net income (loss) and net cash provided by operating activities, and these measures may vary among companies.
Discussion and analysis of our operating highlights and financial results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 are included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations 2023 Operational Highlights, Financial Results of Operations, Liquidity and Capital Resources, and Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Discussion and analysis of our operating highlights and financial results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 are included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations 2024 Operational Highlights, Financial Results of Operations, Liquidity and Capital Resources, and Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 .
The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition. Actual results may differ from the projected results used to determine fair value.
The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgment and are based on industry, market, and economic conditions prevalent at the time of the acquisition. Actual results may differ from the projected results used to determine fair value.
No events or circumstances occurred that indicated that the fair value of the entity may be below its carrying amount; therefore, no goodwill impairment was recorded for the years ended December 31, 2024, 2023 and 2022.
No events or circumstances occurred that indicated that the fair value of the entity may be below its carrying amount; therefore, no goodwill impairment was recorded for the years ended December 31, 2025, 2024 and 2023.
We believe that many customers prefer to outsource their compression infrastructure needs in an effort to reduce capital expenditures outside of their core business and benefit from our technical skill and expertise.
We believe that many customers prefer to outsource their compression infrastructure needs in an effort to reduce capital expenditures outside of their core business and benefit from our technical skills and expertise.
Approximately 82% of our existing compression assets are strategically deployed in the Permian Basin and Eagle Ford Shale, which are two of the most significant crude oil and associated gas basins in the U.S. We believe these two regions possess some of the largest and lowest-cost unconventional resources bases in the U.S. Additionally, there are significant U.S.
Approximately 82.8% of our existing compression assets are strategically deployed in the Permian Basin and Eagle Ford Shale, which are two of the most significant crude oil and associated gas basins in the U.S. We believe these two regions possess some of the largest and lowest-cost unconventional resource bases in the U.S. Additionally, there are significant U.S.
We utilize a disciplined and systematic asset management program whereby we perform major unit overhauls and engine replacements on a defined schedule based on hours of operation. As a result, our maintenance capital expenditures may vary considerably from year to year based on when such assets were 49 Table of Contents added to the fleet.
We utilize a disciplined and systematic asset management program whereby we perform major unit overhauls and engine replacements on a defined schedule based on hours of operation. As a result, our maintenance capital expenditures may vary considerably from year to year based on when such assets were added to the fleet.
As of December 31, 2024 and 2023, there are no other legal matters for which resolution could have a material adverse effect on the consolidated financial statements.
As of December 31, 2025 and 2024, there are no other legal matters for which resolution could have a material adverse effect on the consolidated financial statements.
Maintenance capital expenditures along with regularly scheduled preventive maintenance expenses are typically sufficient to sustain the operating capacity of our assets over the full expected useful life of the compression units. Maintenance capital expenditures do not include expenditures to replace compression units when they reach the end of their useful lives.
Maintenance capital expenditures along with regularly scheduled preventive maintenance expenses are typically sufficient to sustain the operating capacity of our assets over the full expected useful life 42 Table of Contents of the compression units. Maintenance capital expenditures do not include expenditures to replace compression units when they reach the end of their useful lives.
Our compression assets have long useful lives consistent with the expected production lives of the key regions where we operate. We believe our customer-centric business model positions us as the preferred contract compression operator for our customers and creates long-standing relationships.
Our 36 Table of Contents compression assets have long useful lives consistent with the expected production lives of the key regions where we operate. We believe our customer-centric business model positions us as the preferred contract compression operator for our customers and creates long-standing relationships.
We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S. We 43 Table of Contents operate our large horsepower compression units primarily under fixed-revenue contracts with many upstream and midstream customers.
We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S. We operate our large horsepower compression units primarily under fixed-revenue contracts with many upstream and midstream customers.
(6) Growth capital expenditures includes a non-cash increase in the sales tax accrual on compression equipment purchases of $22.0 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively. These accrual amounts are estimated based on the best-known information as it relates to open audit periods with the state of Texas. See Note 15.
(6) Growth capital expenditures includes a non-cash increase in the sales tax accrual on compression equipment purchases of $3.1 million and $22.0 million for the years ended December 31, 2025 and 2024, respectively. These accrual amounts are estimated based on the best-known information as it relates to open audit periods with Texas Comptroller’s office. See Note 15.
We believe discretionary cash flow is a useful liquidity and performance measure and supplemental financial measure for 56 Table of Contents us in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance.
We believe discretionary cash flow is a useful liquidity and performance measure and supplemental financial measure for us in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance.
As of December 31, 2024 and 2023, the fair value of derivative instruments were $21.2 million and $22.5 million, respectively. Recently Adopted Accounting Pronouncement See Note 2. Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report.
As of December 31, 2025 and 2024, the fair value of derivative instruments were $4.7 million and $21.2 million, respectively. Recently Adopted Accounting Pronouncement See Note 2. Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report.
This section primarily discusses 2024 and 2023 items and comparisons between these years.
This section primarily discusses 2025 and 2024 items and comparisons between these years.
The increase in maintenance capital expenditures was primarily due to expenditures on the assets acquired in the CSI Acquisition since closing on April 1, 2024 and an increase in unit overhauls scheduled based on the age and operating hours of such units.
The increase in maintenance capital expenditures was primarily due to maintenance capital expenditures on the assets acquired in the CSI Acquisition and an increase in unit overhauls scheduled based on the age and operating hours of such units.
As of December 31, 2024 and 2023, based on the information currently available, we accrued a contingent liability of approximately $70.1 million and $28.8 million, respectively, relating to the Sales Tax Audit for the periods currently under audit classified in accrued liabilities on the consolidated balance sheets.
As of December 31, 2025 and 2024, based on the information currently available, we accrued a contingent liability of approximately $102.3 million and $70.1 million, respectively, relating to the Sales Tax Audits for the periods currently under audit classified in accrued liabilities on the consolidated balance sheets.
We define free cash flow as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) certain changes in operating assets and liabilities; (iii) certain other expenses; and (iv) growth capital expenditures; plus (w) cash loss on extinguishment of debt; (x) severance expenses; (y) transaction expenses; and (z) proceeds from sale of assets.
We define free cash flow as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) certain changes in operating assets and liabilities; (iii) certain other expenses; (iv) growth capital expenditures; and (v) other capital expenditures; plus (w) severance expenses; (x) transaction expenses; (y) sales tax reserve; and (z) proceeds from sale of assets.
Discretionary Cash Flow Discretionary cash flow is considered a non-GAAP measure. We define discretionary cash flow as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) certain changes in operating assets and liabilities; and (iii) certain other expenses; plus (w) cash loss on extinguishment of debt; (x) severance expenses; and (y) transaction expenses.
Discretionary Cash Flow Discretionary cash flow is considered a non-GAAP measure. We define discretionary cash flow as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) certain changes in operating assets and liabilities; and (iii) certain other expenses; plus (w) severance expenses; (x) transaction expenses; and (y) sales tax reserve.
Overview We are a leading provider and operator of large horsepower contract compression infrastructure in the U.S. Our Contract Services and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil.
Overview We are a leading provider and operator of large horsepower contract compression infrastructure in the U.S., supporting the critical movement and processing of natural gas across key production regions. Our Contract Services and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil.
(4) Includes non-cash lease expense, provision for credit losses and inventory reserve. (5) Growth capital expenditures includes an $8.1 million increase and a $1.7 million increase in accrued capital expenditures for the years ended December 31, 2024 and 2023, respectively.
(4) Includes non-cash lease expense, provision for credit losses and inventory reserve. (5) Growth and other capital expenditures includes a $19.6 million increase and a $8.1 million increase in accrued capital expenditures for the years ended December 31, 2025 and 2024, respectively.
For the year ended December 31, 2024, we determined that certain events occurred related to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of assets may not be recoverable.
For the year ended December 31, 2024, we determined that certain events occurred related to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of assets may not be recoverable. As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended December 31, 2024.
Approximately 5% of the Company’s revenue in 2024, 12% in 2023, and 7% in 2022, was recognized under this method.
Approximately 3% of the Company’s revenue in 2025, 5% in 2024, and 12% in 2023, was recognized under this method.
Free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income, operating income (loss) or cash flows from operating activities. Free Cash Flow as presented may not be comparable to similarly titled measures of other companies.
Free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income, operating income (loss) or cash flows from operating activities.
We define adjusted EBITDA as net income (loss) before interest expense; income tax expense; and depreciation and amortization; plus (i) loss on extinguishment of debt; (ii) loss (gain) on derivatives; (iii) equity compensation expense; (iv) severance expenses; (v) transaction expenses; (vi) loss (gain) on sale of assets; and (vii) impairment of compression equipment.
We define adjusted EBITDA as net income (loss) before interest expense; income tax expense; and depreciation and amortization; plus (i) impairment of long-lived assets; (ii) loss (gain) on derivatives; (iii) equity compensation expense; (iv) severance expenses; (v) transaction expenses; (vi) sales tax reserve; (vii) loss (gain) on disposal of business; and (viii) loss (gain) on sale of assets.
Fair Value of Derivative Instruments We use any of three valuation approaches to measure fair value: the market approach, the income approach, and the cost approach in determining the appropriate valuation methodologies based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value.
Fair Value of Derivative Instruments We use any of three valuation approaches to measure fair value: the market approach, the income approach, and the cost approach in determining the appropriate valuation methodologies based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value. 53 Table of Contents We use interest rate swap agreements to manage exposure to variability in our cash flows.
These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measures of adjusted gross margin, adjusted gross margin percentage, adjusted EBITDA, adjusted EBITDA percentage, discretionary cash flow, and free cash flow. 53 Table of Contents Adjusted Gross Margin and Adjusted Gross Margin Percentage Adjusted gross margin and adjusted gross margin percentage are considered non-GAAP financial measures.
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 measures of adjusted gross margin, adjusted gross margin percentage, adjusted EBITDA, adjusted EBITDA percentage, discretionary cash flow and free cash flow.
Investing Activities The $74.0 million increase in cash used in investing activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a $117.2 million increase in in capital expenditures, net of accrued capital expenditures.
Investing Activities The $7.2 million decrease in cash used in investing activities for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to a $21.5 million decrease in cash used for capital expenditures, net of accrued capital expenditures.
The Indenture also contains customary events of default. Derivatives and Hedging Activities To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility and the Term Loan, we have entered into various derivative instruments. Our interest rate swaps exchange variable interest rates for fixed interest rates.
Derivatives and Hedging Activities To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility, we have entered into various derivative instruments. Our interest rate swap exchanges variable interest rates for fixed interest rates.
In the event our Discretionary Cash Flow is insufficient for the purpose of funding any such dividends and our budgeted growth capital expenditures for such period, we may fund such shortfall (i) with additional borrowings under our ABL Facility, which as of December 31, 2024 had $322.5 million available (subject to the requirement that our availability, in the case of dividends, under the ABL Facility (calculated on a pro forma basis after giving effect to such Specified Transaction) is not less than $125,000,000) or (ii) reduce our growth capital expenditures for such period.
In the event our discretionary cash flow is insufficient to fund any such dividends and our budgeted growth capital expenditures for such period, we may fund our dividend or budgeted growth expenditures (i) with additional borrowings under our ABL Facility (subject to the requirement that our availability, in the case of dividends, under the ABL Facility calculated on a pro forma basis after giving effect to the payment of a dividend, is not less than $100,000,000) or (ii) by reducing our growth capital expenditures.
Other Services Other Services expenses increased $9.6 million, or 10.2%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase was primarily due to costs associated with increased parts sales, increased freight and crane charges related to mobilization of units, increased maintenance and overhaul services, and increased other field services.
Other Services Other Services expenses increased $3.1 million, or 3.0%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. This was primarily due to increased other field service expenses, parts sales expenses, and expenses associated with freight and crane charges related to mobilization of units.
Financing Activities The $26.4 million decrease in cash used in financing activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a $42.3 million decrease in distributions to parent, a $16.5 million decrease in payments of debt issuance costs, and a $8.9 million decrease in cash payments related to offering costs, offset by a $104.1 million increase in dividends paid to stockholders, a $40.0 million increase in share repurchases, a $5.6 million increase in principal payments on other borrowings, a $5.5 million increase in distributions to noncontrolling interests, and a $2.8 million increase in cash paid for shares withheld to cover taxes.
Net cash used for financing activities for the year ended December 31, 2024 was primarily the result of $133.9 million of dividends paid to stockholders, $40.0 million of share repurchases, $16.3 million of debt issuance costs, $5.5 million of distributions to noncontrolling interest, $5.6 million of cash paid on principal payments of other borrowings, $2.8 million of cash paid for shares withheld to cover taxes, $1.2 million of payments for offering costs, and $2.4 million of principal payments on finance leases.
As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended 59 Table of Contents December 31, 2024. No impairment was recorded, and no triggering events were identified, for the years ended December 31, 2023 and 2022. Estimated Useful Lives of Property, Plant and Equipment Property, plant and equipment is carried at cost.
No impairment was recorded, and no triggering events were identified, for the year ended December 31, 2023. 52 Table of Contents Estimated Useful Lives of Property, Plant and Equipment Property, plant and equipment is carried at cost.
As of December 31, % Change 2024 2023 Operating Data: Fleet horsepower (1) 4,402,747 3,261,661 35.0 % Revenue-generating horsepower (2) 4,250,499 3,258,951 30.4 % Fleet compression units 5,069 3,078 64.7 % Revenue-generating compression units 4,592 3,062 50.0 % Revenue-generating horsepower per revenue-generating compression unit (3) 926 1,064 (13.0) % Fleet utilization (4) 96.5 % 99.9 % (3.4) % (1) Fleet horsepower includes (x) revenue-generating horsepower and (y) idle horsepower, which is comprised of compression units that do not have a signed contract or are not subject to a firm commitment from our customer and therefore are not currently generating revenue.
As of December 31, % Change 2025 2024 Operating Data: Fleet horsepower (1) 4,456,285 4,402,747 1.2 % Revenue-generating horsepower (2) 4,354,724 4,250,499 2.5 % Fleet compression units 4,736 5,069 (6.6) % Revenue-generating compression units 4,490 4,592 (2.2) % Revenue-generating horsepower per revenue-generating compression unit (3) 970 926 4.7 % Fleet utilization (4) 97.7 % 96.5 % 1.2 % (1) Fleet horsepower includes (x) revenue-generating horsepower and (y) idle horsepower, which is comprised of compression units that do not have a signed contract or are not subject to a firm commitment from our customer and therefore are not currently generating revenue.
On February 3, 2025, our Board declared a quarterly dividend of $0.41 per share of common stock, or approximately $36.0 million, which was paid on February 21, 2025 to stockholders of record at the close of business on February 14, 2025.
On January 28, 2026, our Board declared a quarterly dividend of $0.49 per share of common stock, or approximately $43.1 million, which was paid on February 20, 2026, to stockholders of record at the close of business on February 13, 2026.
The weighted average interest rate as of December 31, 2024 and 2023, was 6.8% and 8.8%, respectively, excluding the effect of interest rate swaps.
The weighted average interest rate on the ABL Facility as of December 31, 2025, and December 31, 2024, was 5.72% and 6.80%, respectively, excluding the effect of interest rate swaps.
Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of Total Indebtedness to EBITDA, each as defined in the ABL Credit Agreement), and beginning for the quarter ended June 30, 2024, a Secured Leverage Ratio (calculated based on the ratio of Senior Secured Debt to EBITDA).
Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of (a) an amount equal to (i) Total Indebtedness minus (ii) the lesser of (A) unrestricted cash and certain cash equivalents and (B) $50.0 million to (b) EBITDA, each as defined in the ABL Credit Agreement), and a Secured Leverage Ratio (calculated based on the ratio of (a) an amount equal to (i) Senior Secured Debt minus (ii) the lesser of (A) unrestricted cash and certain cash equivalents and (B) $50.0 million to (b) EBITDA).
Depending on the loan type elected by the Company, interest accrues based on variable rates of SOFR plus an applicable rate ranging from 2% to 3% or prime rate plus an applicable rate ranging from 1% to 2% depending on the type of loan and the leverage ratio.
Depending on the loan type elected by the Company, interest accrues based on variable rates of the Secured Overnight Financing Rate (“SOFR”) plus an applicable rate ranging from 1.75% to 2.50% or prime rate plus an applicable rate ranging from 0.75% to 1.50% depending on the leverage ratio as of the most recently ended quarter.
Our capital requirements have consisted primarily of, and we anticipate that our capital requirements will continue to consist primarily of, the following: • Growth Capital Expenditures: (1) capital expenditures made to expand the operating capacity or operating income capacity of assets by acquisition of additional compression units, (2) capital expenditures made to maintain the operating capacity or operating income capacity of assets by acquisition of replacement compression units, (3) capital expenditures made to expand the operating capacity or operating income capacity of assets for existing compression units and (4) capital expenditures on assets required to operate the business but not including compression units—such as trucks, wash trailers, crane trucks, leasehold improvements, technology hardware and software and related implementation expenditures, furniture and fixtures, and other general items that are typically capitalized and that have a useful life beyond one year.
Our capital requirements have consisted primarily of, and we anticipate that our capital requirements will continue to consist primarily of, the following: • Growth Capital Expenditures: capital expenditures made to (1) expand the operating capacity or operating income capacity of assets including, but not limited to, the acquisition of additional compression units, upgrades to existing equipment, expansion of supporting infrastructure, and implementation of new technologies, (2) maintain the operating capacity or operating income capacity of assets by acquisition of replacement compression units and their supporting infrastructure, and (3) expand the operating capacity or operating income capacity of existing assets. • Other Capital Expenditures: capital expenditures made on assets required to support our operations—such as rolling stock, leasehold improvements, technology hardware and software and related implementation expenditures, safety enhancements to equipment, and other general items that are typically capitalized and that have a useful life beyond one year. • Maintenance Capital Expenditures: periodic capital expenditures incurred at predetermined operating intervals to maintain consistent and reliable operating capacity of our assets over the near term.
A number of our customers are implementing electric compression infrastructure and we are well positioned to support them in these strategic initiatives. As stakeholder sentiments and the regulatory environment evolve under the new U.S. presidential administration, the U.S. natural gas and oil industry will continue to face unpredictability.
A number of our customers are implementing electric compression infrastructure, and we are well positioned to support them in these efforts. As stakeholder priorities and the regulatory landscape continue to evolve under the current U.S. presidential administration, the U.S. natural gas and oil industry is expected to remain subject to varying levels of change and uncertainty.
Because the Company’s performance creates and enhances assets that are controlled by customers, the Company recognizes construction services revenue over time. The measure of progress used to recognize construction services revenue is a cost-to-cost measure of progress because it most faithfully depicts the Company’s performance on the contract.
The measure of progress used to recognize construction services revenue is a cost-to-cost measure of progress because it most faithfully depicts the Company’s performance on the contract.
Any such additional borrowings under our ABL Facility will result in an increase in our interest expense for such period. Any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods.
Any additional borrowings under our ABL Facility may result in an increase in our interest expense and any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods. As of December 31, 2025, we had $1.5 billion available under our ABL Facility.
Contractual Obligations Our material contractual obligations as of December 31, 2024 consisted of the following: • Long-term debt of $2.6 billion; and • Purchase commitments of $168.8 million, all of which are expected to be settled within the next twelve months; primarily consisting of future commitments to purchase new compression units ordered but not received. See Note 15.
Contractual Obligations Our material contractual obligations as of December 31, 2025, consisted of the following: • Long-term debt of $2.6 billion, of which $750.0 million matures in 2029, $464.6 million matures in 2030, $770.0 million matures in 2033, and $630.0 million matures in 2035; and • Purchase commitments of $211.2 million, of which $192.3 million is expected to be settled within the next twelve months; primarily consisting of future commitments to purchase new compression units ordered but not received.
Management compensates for the limitations of adjusted EBITDA and adjusted EBITDA percentage as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management’s decision-making processes. 55 Table of Contents The following table reconciles adjusted EBITDA to net income, the most directly comparable GAAP financial measure, for each of the periods presented (in thousands) : Year Ended December 31, 2024 2023 Net income $ 50,334 $ 20,066 Interest expense 197,144 222,514 Income tax expense 25,574 15,070 Depreciation and amortization 260,272 182,869 Long-lived asset impairment 9,921 — Loss on extinguishment of debt — 6,757 Gain on derivatives (24,017) (20,266) Equity compensation expense 17,658 5,914 Severance expense (1) 10,500 — Transaction expenses (2) 32,552 6,001 Loss (gain) on sale of assets 29,612 (777) Adjusted EBITDA $ 609,550 $ 438,148 Net income percentage 4.3 % 2.4 % Adjusted EBITDA percentage 52.6 % 51.5 % For detailed footnote descriptions, refer to the annotations beneath the following table.
Management compensates for the limitations of adjusted EBITDA and adjusted EBITDA percentage as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management’s decision-making processes. 48 Table of Contents The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, for each of the periods presented: Year ended December 31, (in thousands) 2025 2024 Net income $ 81,588 $ 50,334 Interest expense 198,370 197,144 Income tax expense 31,884 25,574 Depreciation and amortization 276,185 260,272 Long-lived asset impairment 6,344 9,921 Loss (gain) on derivatives — (24,017) Equity compensation expense 24,529 17,658 Severance expense (1) 2,497 10,500 Transaction expenses (2) 4,102 32,552 Sales tax reserve (3) 27,968 — Loss on disposal of business 33,349 20,598 Loss on sale of assets 28,217 9,014 Adjusted EBITDA $ 715,033 $ 609,550 Net income percentage 6.2 % 4.3 % Adjusted EBITDA percentage 54.7 % 52.6 % (1) Represents severance expense for the years ended December 31, 2025 and 2024.
(2) Represents severance expense related to the CSI acquisition for the year ended December 31, 2024. There were no such expenses for the year ended December 31, 2023. (3) Represents certain costs associated with non-recurring professional services and other costs, primarily related to the CSI Acquisition, for the year ended December 31, 2024.
(2) Represents certain costs associated with non-recurring professional services and other costs, primarily related to the secondary offerings and CSI Acquisition for the years ended December 31, 2025 and 2024.
This was partially offset by a $33.6 million increase in proceeds on sale of assets and by cash provided by investing activities related to a $9.5 million increase in cash acquired related to the CSI Acquisition.
This was partially offset by a $9.5 million decrease in cash acquired in connection with the CSI Acquisition in the prior year and a $4.8 million decrease in cash provided by proceeds on sale of assets.
Income Tax Expense Income tax expense increased by $10.5 million, or 69.7%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This was primarily due to an increase in pre-tax income of $40.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
This was primarily due to an increase in pre-tax income of $37.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
We believe cash generated by operating activities will be sufficient to service our debt, fund working capital, fund our estimated capital expenditures and, as our Board may determine from time to time in its discretion, pay dividends. Cash Requirements Capital Expenditures The compression infrastructure business is capital intensive, requiring significant investment to expand, maintain, and upgrade existing operations.
We believe cash generated by operating activities will be sufficient to service our debt, fund working capital, fund our estimated capital expenditures and, as our Board may determine from time to time in its discretion, pay dividends or repurchase shares pursuant to our Share Repurchase Program.
All obligations under the ABL Facility are collateralized by essentially all the assets of the Company. We were in compliance with all covenants as of December 31, 2024 and December 31, 2023.
The maximum Leverage Ratio is 5.25 to 1.00. The maximum Secured Leverage Ratio is 3.25 to 1.00 for each fiscal quarter. All obligations under the ABL Facility are collateralized by essentially all the assets of the Company. We were in compliance with all covenants as of December 31, 2025, and December 31, 2024.
Revenue Recognition over Time The Company enters into contracts to provide compressor station construction services to customers under its Other Services segment. Construction service contracts consist of a highly integrated set of tasks and components and accordingly are accounted for as a single performance obligation.
Construction service contracts consist of a highly integrated set of tasks and components and accordingly are accounted for as a single performance obligation. Because the Company’s performance creates and enhances assets that are controlled by customers, the Company recognizes construction services revenue over time.
We record derivative instruments at fair value using Level 2 inputs of the fair value hierarchy. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs from actively quoted public markets, including interest rate curves and credit spreads.
These derivatives are recorded at fair value on our consolidated balance sheet, with changes in fair value recognized in accumulated other comprehensive income. The interest rate swap is valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs from actively quoted public markets, including interest rate curves and credit spreads.
This is primarily related to $25.3 million in cash received on derivatives offset by a decrease in the fair value of derivatives of $1.2 million for the year ended December 31, 2024 due to a decrease in the long-term Secured Overnight Financing Rate (“SOFR”) yield curve, as compared to a $25.8 million settlement on the termination of derivatives attributable to the Term Loan and $37.4 million in cash received on derivative settlements on our interest rate collars, offset by a decrease in the change in fair value of the derivatives of $42.9 million for the year ended December 31, 2023 due to a decrease in the long-term SOFR and LIBOR yield curves.
The net gain on derivatives recognized during the year ended December 31, 2024 primarily related to $25.3 million in cash received on derivatives offset by a decrease in the fair value of derivatives of $1.2 million for the year ended December 31, 2024 due to a decrease in the long-term Secured Overnight Financing Rate (“SOFR”) yield curve.
(4) Fleet utilization is calculated as (i) revenue-generating horsepower divided by (ii) fleet horsepower. Horsepower The 35.0% and 30.4% increases in fleet horsepower and revenue-generating horsepower, respectively, were primarily attributable to the compression assets acquired in the CSI Acquisition and the purchase and deployment of new compression units.
(4) Fleet utilization is calculated as (i) revenue-generating horsepower divided by (ii) fleet horsepower. Horsepower The 1.2% and 2.5% increases in fleet horsepower and revenue-generating horsepower, respectively, were mainly driven by the strategic acquisition and deployment of new large horsepower compression units throughout the period.
The 13.0% decrease in revenue-generating horsepower per revenue-generating compression unit was due to units acquired as part of the CSI Acquisition having, on average, less horsepower. 46 Table of Contents Financial Results of Operations The following table presents selected financial and operating information for the periods presented (in thousands) : Year Ended December 31, % Change 2024 2023 Revenues: Contract Services $ 1,034,173 $ 735,605 40.6 % Other Services 125,138 114,776 9.0 % Total revenues 1,159,311 850,381 36.3 % Operating expenses: Cost of operations (exclusive of depreciation and amortization shown below): Contract Services 355,016 257,092 38.1 % Other Services 103,360 93,779 10.2 % Depreciation and amortization 260,272 182,869 42.3 % Long-lived asset impairment 9,921 — 100.0 % Selling, general and administrative 151,680 73,308 106.9 % Loss (gain) on sale of assets 29,612 (777) n/m Total operating expenses 909,861 606,271 50.1 % Income from operations 249,450 244,110 2.2 % Other income (expenses): Interest expense (197,144) (222,514) (11.4) % Loss on extinguishment of debt — (6,757) (100.0) % Gain on derivatives 24,017 20,266 18.5 % Other (expense) income, net (415) 31 n/m Total other expenses (173,542) (208,974) (17.0) % Income before income taxes 75,908 35,136 116.0 % Income tax expense 25,574 15,070 69.7 % Net income 50,334 20,066 150.8 % Less: Net income attributable to noncontrolling interests 439 — 100.0 % Net income attributable to common shareholders $ 49,895 $ 20,066 148.7 % Revenues and Sources of Income Contract Services Contract Services revenue increased $298.6 million, or 40.6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
The 4.7% increase in revenue-generating horsepower per revenue-generating compression unit was a result of deploying these new large horsepower units. 39 Table of Contents Financial Results of Operations The following table presents selected financial and operating information for the periods presented: Year Ended December 31, % Change (in thousands) 2025 2024 Revenues: Contract Services $ 1,181,270 $ 1,034,173 14.2 % Other Services 126,830 125,138 1.4 % Total revenues 1,308,100 1,159,311 12.8 % Operating expenses: Cost of operations (exclusive of depreciation and amortization shown below): Contract Services 373,493 355,016 5.2 % Other Services 106,432 103,360 3.0 % Depreciation and amortization 276,185 260,272 6.1 % Long-lived asset impairment 6,344 9,921 (36.1) % Selling, general and administrative 144,070 151,680 (5.0) % Loss on sale of assets 61,566 29,612 n/m Total operating expenses 968,090 909,861 6.4 % Income from operations 340,010 249,450 36.3 % Other income (expenses): Interest expense (198,370) (197,144) 0.6 % Gain on derivatives — 24,017 (100.0) % Other expense, net (28,168) (415) n/m Total other expenses, net (226,538) (173,542) 30.5 % Income before income taxes 113,472 75,908 49.5 % Income tax expense 31,884 25,574 24.7 % Net income 81,588 50,334 62.1 % Less: Net income attributable to noncontrolling interests 1,067 439 n/m Net income attributable to common shareholders $ 80,521 $ 49,895 61.4 % Revenues and Sources of Income Contract Services Contract Services revenue increased $147.1 million, or 14.2%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
We define adjusted gross margin as revenue less cost of operations, exclusive of depreciation and amortization expense. We define adjusted gross margin percentage as adjusted gross margin divided by total revenues. We believe that adjusted gross margin is useful as a supplemental measure of our operating profitability.
Adjusted Gross Margin and Adjusted Gross Margin Percentage Adjusted gross margin and adjusted gross margin percentage are considered non-GAAP financial measures. We define adjusted gross margin as revenue less cost of operations, exclusive of depreciation and amortization expense. We define adjusted gross margin percentage as adjusted gross margin divided by total revenues.
In recent years, the U.S natural gas and oil industry has faced uncertainties and pressures from regulators and shifting sentiments from investors and other stakeholders, primarily related to broader adoption of emission reduction targets and other sustainability initiatives. Many energy companies, including some of our customers, have announced significant GHG emission reduction initiatives.
In recent years, the U.S natural gas and oil industry has faced ongoing uncertainty and evolving expectations from regulators, investors, and other stakeholders related to sustainability and operational efficiency. Some energy companies, including some of our customers, have announced initiatives aimed at reducing GHG emissions and improving environmental performance.
However, we continue to believe in the long-term demand for our Contract Services given the necessity of compression in gathering, processing and production of natural gas and centralized gas lift of oil. Recent Developments CSI Acquisition On April 1, 2024, we completed the CSI Acquisition, pursuant to the terms of the Merger Agreement.
However, we continue to believe in the long-term demand for our Contract Services given the necessity of compression in gathering, processing and production of natural gas and centralized gas lift of oil. Recent Developments One Big Beautiful Bill Act of 2025 On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), was enacted into law in the United States.
For the year ended December 31, 2024, growth capital expenditures were $286.0 million and maintenance capital expenditures were $66.2 million. This compares to growth capital expenditures of $184.5 million and maintenance capital expenditures of $37.0 million for the year ended December 31, 2023.
For the year ended December 31, 2025, growth capital expenditures were $199.5 million, other capital expenditures were $62.8 million and maintenance capital expenditures were $76.0 million as compared to growth capital expenditures of $227.2 million, other capital expenditure of $58.8 million and maintenance capital expenditures of $66.2 million for the year ended December 31, 2024.
The assumptions and inputs incorporated within the fair value estimates are 58 Table of Contents subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition. Actual results may differ from the projected results used to determine fair value.
Goodwill represents the excess of acquisition purchase price over the estimated fair values of the net assets acquired. The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgment and are based on industry, market, and economic conditions prevalent at the time of the acquisition.
Other Services Other Services revenue increased $10.4 million, or 9.0%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Interest Expense Interest expense increased $1.2 million, or 0.6%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
This increase was primarily due to an $87.3 million increase in direct labor expenses related to increased headcount and salaries, a $13.0 million increase in lubricant oil and coolant, a $12.9 million increase in parts used in support of our operations, and a $2.5 million increase in gas treating expenses.
This was primarily due to a $33.8 million increase in direct labor expenses, a $0.2 million increase in lubricant oil and coolant expenses, and a $0.1 million increase in gas treating expenses.
There were no such expenses for the year ended December 31, 2023. (2) Represents certain costs associated with non-recurring professional services and other costs, primarily related to the CSI Acquisition, for the year ended December 31, 2024. (3) Includes amortization of debt issuance costs, non-cash lease expense, provision for credit losses and inventory reserve.
(2) Represents certain costs associated with non-recurring professional services and other costs, primarily related to the secondary offerings and CSI Acquisition, for the years ended December 31, 2025 and 2024.
These increases were offset by decreases in station construction service expenses. Depreciation and Amortization Depreciation and amortization increased $77.4 million, or 42.3%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
This was partially offset by decreased expenses from station construction services. Depreciation and Amortization Depreciation and amortization increased $15.9 million, or 6.1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Adjusted Gross Margin Contract Services Year Ended December 31, 2024 2023 (in thousands) Total revenues $ 1,034,173 $ 735,605 Cost of operations (exclusive of depreciation and amortization) (355,016) (257,092) Depreciation and amortization (260,272) (182,869) Gross margin $ 418,885 $ 295,644 Gross margin percentage 40.5% 40.2% Depreciation and amortization 260,272 182,869 Adjusted gross margin $ 679,157 $ 478,513 Adjusted gross margin percentage 65.7% 65.1% Other Services Year Ended December 31, 2024 2023 (in thousands) Total revenues $ 125,138 $ 114,776 Cost of operations (exclusive of depreciation and amortization) (103,360) (93,779) Depreciation and amortization — — Gross margin $ 21,778 $ 20,997 Gross margin percentage 17.4% 18.3% Depreciation and amortization — — Adjusted gross margin $ 21,778 $ 20,997 Adjusted gross margin percentage 17.4% 18.3% 54 Table of Contents Adjusted EBITDA and Adjusted EBITDA Percentage Adjusted EBITDA and adjusted EBITDA percentage are considered non-GAAP measures.
To compensate for the limitations of adjusted gross margin as a measure of our performance, we believe that it is important to consider gross margin determined under GAAP, as well as adjusted gross margin, to evaluate our operating profitability. 46 Table of Contents Adjusted Gross Margin Contract Services Year ended December 31, 2025 2024 (in thousands) Total revenues $ 1,181,270 $ 1,034,173 Cost of operations (exclusive of depreciation and amortization) (373,493) (355,016) Depreciation and amortization (276,185) (260,272) Gross margin $ 531,592 $ 418,885 Gross margin percentage 45.0% 40.5% Depreciation and amortization 276,185 260,272 Adjusted gross margin $ 807,777 $ 679,157 Adjusted gross margin percentage 68.4% 65.7% Other Services Year ended December 31, 2025 2024 (in thousands) Total revenues $ 126,830 $ 125,138 Cost of operations (exclusive of depreciation and amortization) (106,432) (103,360) Depreciation and amortization — — Gross margin $ 20,398 $ 21,778 Gross margin percentage 16.1% 17.4% Depreciation and amortization — — Adjusted gross margin $ 20,398 $ 21,778 Adjusted gross margin percentage 16.1% 17.4% 47 Table of Contents Adjusted EBITDA and Adjusted EBITDA Percentage Adjusted EBITDA and adjusted EBITDA percentage are considered non-GAAP measures.
Commitments and Contingencies to our consolidated financial statements for additional details.
Commitments and Contingencies to our consolidated financial statements for additional details. Adjusted Net Income (Loss) and Adjusted Diluted Earnings Per Share Adjusted net income and adjusted earnings per share are considered non-GAAP measures.
The majority of incremental costs were attributable to the CSI Acquisition. These increases were partially offset by a $17.2 million decrease in indirect expenses and a $0.8 million decrease in sales and use tax accrual related to parts purchases.
These increases were partially offset by a $6.9 million decrease in indirect expenses, a $5.5 million decrease in parts used in support of our operations, and a $3.3 million decrease related to sales and use tax imposed on the consumption of taxable materials in operations.
We recognized a loss of $13.6 million, which is included in loss (gain) on sale of assets in our consolidated statements of operations for the year ended December 31, 2024. 45 Table of Contents 2024 Operational Highlights The following table summarizes certain horsepower, unit count and fleet utilization percentages for our fleet for the periods presented.
As such, this amount has been recorded within other income (expense) in the consolidated statement of operations for the year ended December 31, 2025. 2025 Operational Highlights The following table summarizes certain horsepower, unit count and fleet utilization percentages for our fleet for the periods presented.
This was primarily due to a $29.0 million increase in professional fees mainly related to transactions costs associated with the CSI Acquisition, a $24.8 million increase in labor and benefits, mainly related to increased headcount and salaries, an $11.7 million increase in stock compensation expense related to equity compensation plans, an $8.9 million increase in software expense, and a $6.4 million increase in other overhead expenses, mostly consisting of insurance and facility expenses.
This decrease was due to a $13.8 million decrease in professional fees, primarily related to transaction costs associated with the CSI Acquisition in the prior year, a $3.6 million decrease in the provision for credit losses, a $2.1 million decrease in software expense, mainly related to the termination of an agreement as part of the CSI Acquisition, and a $0.8 million decrease in labor and benefits.
Commitments and Contingencies to the consolidated financial statements included elsewhere in this Annual Report.
See Note 15. Commitments and Contingencies to the consolidated financial statements included elsewhere in this Annual Report. Other Commitments As of December 31, 2025, other commitments include future operating and finance lease payments totaling $74.6 million.
This was primarily due to an increase in compression equipment and intangible assets acquired through the CSI Acquisition, which resulted in increased depreciation and amortization associated with those assets. Long-lived Asset Impairment Triggering events related to a group of non-operating compression units associated with a certain customer in bankruptcy indicated the carrying value of the assets may not be recoverable.
During the year ended December 31, 2024 certain events occurring to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of the assets may not be recoverable. As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended December 31, 2024.
Other Commitments As of December 31, 2024, other commitments include future operating and finance lease payments totaling $89.0 million. 50 Table of Contents Sources of Cash Cash Flows The following table summarizes our cash flows for the year ended December 31, 2024, and 2023 ( in thousands ): Year Ended December 31, 2024 2023 $ Variance Net cash provided by operating activities $ 327,987 $ 266,326 $ 61,661 Net cash used in investing activities (292,468) (218,421) (74,047) Net cash used in financing activities (36,331) (62,774) 26,443 Net decrease in cash and cash equivalents $ (812) $ (14,869) $ 14,057 Operating Activities The $61.7 million increase in cash provided by operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a $124.0 million increase in operating items, namely depreciation and amortization, taxes and equity compensation, and a $5.3 million increase in income from operations.
Sources of Cash Cash Flows The following table summarizes our cash flows: Year ended December 31, (in thousands) 2025 2024 $ Variance Net cash provided by operating activities $ 599,740 $ 327,987 $ 271,753 Net cash used for investing activities (285,290) (292,468) 7,178 Net cash used for financing activities (316,021) (36,331) (279,690) Net decrease in cash and cash equivalents $ (1,571) $ (812) $ (759) Operating Activities The $271.8 million increase in cash provided by operating activities for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to changes in working capital items provided cash of $87.0 million during the year ended December 31, 2025 compared to the use of cash of $78.4 million during the year ended December 31, 2024.
As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended December 31, 2024. No impairment was recorded for the year ended December 31, 2023. Selling, General and Administrative Selling, general and administrative expenses increased $78.4 million, or 106.9%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Selling, General and Administrative Selling, general and administrative expenses decreased $7.6 million, or 5.0%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Loss (Gain) on Sale of Assets For the year ended December 31, 2024, we recognized a $29.6 million net loss on the sale of certain property, plant and equipment and other assets in the U.S. and the sale of our Canada and Argentina entities to third-party buyers.
Loss on Sale of Assets Loss on sale of assets increased $32.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the sale of our Mexico operations to a third-party buyer and the write-off of certain scrapped assets.
This was primarily due to incremental revenues associated with the CSI Acquisition, which accounted for approximately 22% of consolidated revenue for the year ended December 31, 2024. The remainder of the increase in Contract Services is due to an increase in revenue-generating horsepower and an increase of $6.5 million related to gas treating and cooling services.
This was primarily related to a $145.2 million increase in contract compression services as a result of price increases and an increase in average revenue-generating horsepower, including revenue-generating horsepower acquired in the CSI Acquisition in 2024. Furthermore, there was also an increase of $1.9 million related to gas treating and cooling services.
Because we capitalize assets, depreciation and amortization of equipment is a necessary element of our costs. To compensate for the limitations of adjusted gross margin as a measure of our performance, we believe that it is important to consider gross margin determined under GAAP, as well as adjusted gross margin, to evaluate our operating profitability.
Because we capitalize assets, depreciation and amortization of equipment is a necessary element of our costs.
These increases were offset by a decrease in revenues from station construction services resulting from reduced scope of station projects during the year ended December 31, 2024. 47 Table of Contents Operating Costs and Other Expenses Contract Services Contract Services expenses increased $97.9 million, or 38.1%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
This increase was partially offset by decreases in other field services, parts sales, and freight and crane charges related to the mobilization of units. 40 Table of Contents Operating Costs and Other Expenses Contract Services Contract Services expenses increased $18.5 million, or 5.2%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

… 116 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−0 removed2 unchanged
Biggest changeCommodity Price Risk Market risk is the risk of loss arising from adverse changes in market rates and prices. We do not take title to any natural gas or oil in connection with our services and, accordingly, have no direct exposure to fluctuating commodity prices.
Biggest changeWe do not take title to any natural gas or oil in connection with our services and, accordingly, have no direct exposure to fluctuating commodity prices. However, the demand for our Contract Services depends upon the continued demand for, and production of, natural gas and oil.
If any significant customer of ours should have credit or financial problems resulting in a delay or failure to pay the amount it owes us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If any significant customer or derivative counterparty of ours should have credit or financial problems resulting in a delay or failure to pay the amount it owes us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
For the years ended December 31, 2024, 2023 and 2022, the Company recorded credit loss of $4.7 million, $7.1 million and $0.1 million, respectively related to the collectability of outstanding receivables. The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments.
For the years ended December 31, 2025, 2024 and 2023, the Company recorded credit loss of $1.0 million, $4.7 million and $7.1 million, respectively, related to the collectability of outstanding receivables. The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments.
Counterparty Risk Our credit exposure generally relates to receivables for services provided and a counterparty's failure to meet its obligations under a derivatives contract with the Company.
Counterparty Risk Our credit exposure generally relates to receivables for services provided, delays on services paid and a counterparty’s failure to meet its obligations under a derivatives contract with the Company.
However, the demand for our Contract Services depends upon the continued demand for, and production of, natural gas and oil. Sustained low natural gas or oil prices over the long term could result in a decline in the production of natural gas or oil, which could result in reduced demand for our Contract Services. 61 Table of Contents
Sustained low natural gas or oil prices over the long term could result in a decline in the production of natural gas or oil, which could result in reduced demand for our Contract Services. 54 Table of Contents
Excluding the effect of interest rate swaps, the average annualized interest rate incurred on the ABL Facility for borrowings during the year ended December 31, 2024 was approximately 6.77% and we estimate that a 1.0% increase in the applicable average interest rates for the year ended December 31, 2024 would have resulted in an estimated $16.7 million increase in ABL-related interest expense.
Excluding the effect of the interest rate swap, the average annualized interest rate incurred on the ABL Facility for borrowings during the year ended December 31, 2025 was approximately 5.72% and we estimate that a 1.0% increase in the applicable average interest rates for the year ended December 31, 2025 would have resulted in an estimated $13.4 million increase in ABL-related interest expense.
As of December 31, 2024 and 2023, we had $1.9 billion and $1.8 billion, respectively, outstanding under the ABL Facility and $1.4 billion and $1.2 billion, respectively, outstanding and effective notional amounts of floating to fixed interest rate 60 Table of Contents swaps which we attribute to our borrowings under our ABL Facility.
As of December 31, 2025 and 2024, we had $464.6 million and $1.9 billion, respectively, outstanding under the ABL Facility and $325.0 million and $1.4 billion, respectively, outstanding and effective notional amounts of floating to fixed interest rate swaps which we attribute to our borrowings under our ABL Facility.
Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company's risk management policies and procedures. Concentration Risk For the years ended December 31, 2024, 2023 and 2022, our four largest customers accounted for approximately 32%, 33%, and 36%, respectively, of our total revenues.
Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company’s risk management policies and procedures.
One customer accounted for 13.4%, 11.7% and 12.4% of total revenues in 2024, 2023 and 2022, respectively. If any significant customer of ours should discontinue their relationship with us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If any significant customer of ours should discontinue their relationship with us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Commodity Price Risk Market risk is the risk of loss arising from adverse changes in market rates and prices.
Added
Concentration Risk For the years ended December 31, 2025, 2024 and 2023, our four largest customers, which are all investment-grade counterparties, accounted for approximately 32%, 32%, and 33%, respectively, of our total revenues. One customer accounted for 14.1%, 13.4% and 11.7% of total revenues in 2025, 2024 and 2023, respectively.

Other KGS 10-K year-over-year comparisons