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What changed in NATURAL GAS SERVICES GROUP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of NATURAL GAS SERVICES GROUP 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.

+289 added−275 removedSource: 10-K (2026-03-16) vs 10-K (2025-03-17)

Top changes in NATURAL GAS SERVICES GROUP INC's 2025 10-K

289 paragraphs added · 275 removed · 226 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

58 edited+24 added−28 removed87 unchanged
Biggest changeThe Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes and their implementing regulations, regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and solid (non-hazardous) wastes. Under a delegation of authority from the EPA, most states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements.
Biggest changeUnder a delegation of authority from the EPA, most states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Federal and state regulatory agencies can seek to impose administrative, civil, and criminal penalties for alleged non-compliance with RCRA and analogous state requirements.
Natural Gas . We believe the market outlook for natural gas production in the U.S. remains steady while short term price volatility remains a factor due to geopolitical influences and shifts in LNG exports.
We believe the market outlook for natural gas production in the U.S. remains steady while short term price volatility remains a factor due to geopolitical influences and shifts in LNG exports.
Compliance with these laws may constitute a significant cost and effort for us. No specific accounting for environmental compliance has been maintained or projected by us at this time.
Compliance with these laws may constitute a significant cost and effort for us. No specific accounting for environmental compliance has been maintained or projected by us at this time.
Human Capital Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees into our company.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees into our company.
The new administration has signaled its interest in rescinding or nullifying regulations which financially adversely impact the oil and gas industry, although the extent of any such changes is unclear at this time. We cannot determine to what extent our future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations.
The current administration has signaled its interest in rescinding or nullifying regulations which financially adversely impact the oil and gas industry, although the extent of any such changes is unclear at this time. We cannot determine to what extent our future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations.
The size, type and geographic diversity of our rental fleet enable us to provide customers with a range of compression units that can serve a wide variety of applications. We are able to select the correct equipment for the job, rather than the customer trying to fit its application to our equipment. 3 • Availability of new units.
The size, type and geographic diversity of our rental fleet enable us to provide customers with a range of compression units that can serve a wide variety of applications. We are able to select the correct equipment for the job, rather than the customer trying to fit its application to our equipment. • Availability of new units.
We also make available through our website other reports filed with or furnished to the Securities and Exchange Commission (“SEC”) under the Exchange Act including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code of Business Ethics and the charters to our various Committees of our Board of Directors.
We also make available through our website other reports filed with or furnished to the Securities and Exchange Commission (“SEC”) under the Exchange Act including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code of Ethics and Business Conduct and the charters to our various Committees of our Board of Directors.
We perform engine and compressor overhauls on a condition-based interval or a time-based schedule or at our customers’ request. 2 Business Strategy Our long-term intentions to grow our revenue and profitability are based on the following business strategies: • Optimize existing utilized fleet.
We perform engine and compressor overhauls on a condition-based interval or a time-based schedule or at our customers’ request. Business Strategy Our long-term intentions to grow our revenue and profitability are based on the following business strategies: • Optimize existing utilized fleet.
However, the operations of our customers may generate such wastewaters subject to the CWA. While it is the responsibility of our customers to follow CWA regulations and obtain proper permits, violations of the CWA may indirectly impact our operations in a negative manner. Safe Drinking Water Act .
However, the operations of our customers may generate such wastewaters subject to the CWA. While it is the responsibility of our customers to follow CWA regulations and obtain proper permits, violations of the CWA may indirectly impact our operations in a negative manner. 8 Safe Drinking Water Act .
The Inflation Reduction Act of 2022 (the “IRA 2022”) imposes a methane emissions charge on certain oil and gas facilities, including onshore petroleum and natural gas production facilities, which emit 25,000 metric tons or more of carbon dioxide equivalent gas per year and exceed certain emissions thresholds. We do not operate any facilities that are subject to this emissions charge.
The Inflation Reduction Act of 2022 (the “IRA 2022”) imposed a methane emissions charge on certain oil and gas facilities, including onshore petroleum and natural gas production facilities, which emit 25,000 metric tons or more of carbon dioxide equivalent gas per year and exceed certain emissions thresholds. We do not operate any facilities that are subject to this emissions charge.
Expansion by the TCEQ of this type of program and the adoption of similar regulations in other states may increase our compliance costs. 9 Water Discharge Clean Water Act .
Expansion by the TCEQ of this type of program and the adoption of similar regulations in other states may increase our compliance costs. Water Discharge Clean Water Act .
However, the occurrence of such an event could have a material adverse effect on our results of operations, financial condition and cash flows, particularly if we are unable to increase our rental rates and sale prices proportionate to any such component price increases. 5 Government Regulation All of our operations and facilities are subject to numerous federal, state, foreign and local laws, rules and regulations related to various aspects of our business, including containment and disposal of hazardous materials, water quality and wastewater discharges, oilfield waste and other waste materials and protection of human health.
However, the occurrence of such an event could have a material adverse effect on our results of operations, financial condition and cash flows, particularly if we are unable to increase our rental rates and sale prices proportionate to any such component price increases. 4 Government Regulation Our operations and facilities are subject to numerous federal, state, foreign and local laws, rules and regulations related to various aspects of our business, including containment and disposal of hazardous materials, water quality and wastewater discharges, oilfield waste and other waste materials and protection of human health.
As new employees join us, they learn more about our policies and culture through orientation and onboarding, our Employee Handbook, Code of Conduct, and compliance trainings. 10 We are committed to maintaining a healthy, safe and secure work environment that protects our employees, contractors, business partners, customers and visitors to our facilities.
As new employees join us, they learn more about our policies and culture through orientation and onboarding, our Employee Handbook, Code of Ethics and Business Conduct, and compliance trainings. We are committed to maintaining a healthy, safe and secure work environment that protects our employees, contractors, business partners, customers and visitors to our facilities.
We also have a significant amount of capital tied up in non-cash assets (including accounts receivable, inventory and other fixed assets, primarily real property) that we believe can be monetized and invested back in the fleet at or above target levels of return on invested capital. • Expand rental fleet .
We also have a significant amount of capital tied up in non-cash assets (including inventory and other fixed assets, primarily real property) that we believe can be monetized and invested back in the fleet at or above target levels of return on invested capital. • Expand rental fleet .
We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and Marcellus Shale. We will continue to evaluate our business and operating strategy and we will continue to remain prudent in both our allocation of capital and our capital structure.
We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and the Utica and Marcellus Shales. We will continue to evaluate our business and operating strategy and we will continue to remain prudent in both our allocation of capital and our capital structure.
We believe that we compete effectively on the basis of price, compression unit availability, customer service, flexibility in meeting customer needs, and quality and reliability of our compressors and related services. Compressor industry participants can achieve significant advantages through increased size and geographic breadth.
We believe that we compete effectively on the basis of compression unit availability, customer service, flexibility in meeting customer needs, and quality and reliability of our compressors and related services as well as price. Compressor industry participants can achieve significant advantages through increased size and geographic breadth.
We offer competitive and comprehensive compensation and benefits including: (i) a 401(k) plan with employer matching contributions, (ii) medical, dental and eye care insurance benefits, (iii) health savings and flexible spending accounts and (iv) paid time off, among others.
We offer competitive and comprehensive compensation and benefits including: (i) a 401(k) plan with employer matching contributions, (ii) medical, dental and vision care insurance benefits, (iii) health savings and flexible spending accounts and (iv) paid time off, among others.
Our rental compression units provide large, medium and small horsepower applications for conventional and unconventional oil and gas production. Our rental contracts generally provide for initial terms ranging from six to 60 months and generally extend on a month-to-month basis thereafter.
Our rental compression units provide large, medium and small horsepower applications for conventional and unconventional oil and gas production. Our rental contracts generally provide for initial terms ranging from 12 to 60 months and generally extend on a month-to-month basis thereafter.
We believe our future growth in this part of our strategy will be primarily driven through our placement of larger horsepower, centralized wellhead natural gas compressors for unconventional oil production, with select increases in medium horsepower units to meet customer demand beyond our inventory. • Execute accretive mergers and acquisitions.
We believe our future growth in this part of our strategy will be primarily driven through our placement of larger horsepower, centralized wellhead natural gas compressors for unconventional oil production, with select increases in medium horsepower units to meet customer demand beyond our inventory. • Execute accretive mergers and acquisitions. We believe there are opportunities in mergers and acquisitions.
We believe we can improve the overall cash flow of the business by increasing utilization of the existing fleet as well as monetizing non-cash assets. We have a significant number of unutilized units—we will review these assets to determine where relatively low-cost capital expenditures can improve the marketability and cash flow potential of the units.
We believe we can improve the overall cash flow of the business by increasing utilization of the existing fleet as well as monetizing non-cash assets. We have unutilized units—we will review these assets to determine where relatively low-cost capital expenditures can improve the marketability and cash flow potential of the units.
Our overall sales and marketing efforts concentrate on demonstrating our commitment to enhancing our customers’ cash flows through enhanced product design, assembly, installation, operations, customer service and support. 4 Competition The compression services business is highly competitive. We have several competitors in the natural gas compression industry, some of which have greater financial resources.
Our overall sales and marketing efforts concentrate on demonstrating our commitment to enhancing our customers’ cash flows through superior customer service and support, installation, operations assembly and enhanced product design. Competition The compression services business is highly competitive. We have several competitors in the compression industry, some of which have greater financial resources.
The loss of this key customer would have a material adverse effect on our business, results of operations, financial condition and cash flows, depending upon the demand for our compressors at the time of such loss and our ability to attract new customers.
The loss of these key customers would have a material adverse effect on our business, results of operations, financial condition and cash flows, depending upon the demand for our compressors at the time of such loss and our ability to attract new customers.
We also provide aftermarket services in the form of call-out services on customer-owned equipment as well as commissioning of new units for customers. We are headquartered in Midland, Texas, with an assembly facility located in Tulsa, Oklahoma and service facilities located in several major oil and gas producing basins in the U.S.
We also provide aftermarket services in the form of call-out services on customer-owned equipment as well as commissioning of new units for customers. We are headquartered in Southlake, Texas, with administrative offices in Midland, Texas, an engineering facility located in Tulsa, Oklahoma and service facilities located in several major oil and gas producing basins in the U.S.
Our primary business and source of revenue and gross profit is derived from the rental of natural gas compressor units for applications associated with oil and gas production with a focus on large and medium horsepower applications.
Our primary business and source of revenue and gross profit is derived from the rental of natural gas engine and electric motor drive compressor units for applications associated with oil and gas production with a focus on large and medium horsepower applications.
The market for compression equipment and services is highly dependent on the production levels and pricing of oil and gas. Crude Oil .
The market for compression equipment and services is highly dependent on the production levels of E&P companies and pricing of oil and gas. Crude Oil .
Although it is not currently possible to predict how any proposed or future GHG legislation, regulation, agreements or initiatives will impact our business, any such legislation or regulation of GHG emissions could result in increased compliance or operating costs, additional operating restrictions or reduced demand for our compressor services, and could have a material adverse effect on our business, financial condition and results of operations. 6 Other energy legislation and initiatives could include a carbon tax, methane fee or cap and trade program.
Although it is not currently possible to predict how any proposed or future GHG legislation, regulation, agreements or initiatives will impact our business, any such legislation or regulation of GHG emissions could result in increased compliance or operating costs, additional operating restrictions or reduced demand for our compressor services, and could have a material adverse effect on our business, financial condition and results of operations.
Among other things, the proposed rule expands the emissions events that are subject to reporting requirements to include “other large release events” and applies reporting requirements to certain new sources and sectors.
Among other things, the final rule (the “Subpart W Revisions Rule”) expands the emissions events that are subject to reporting requirements to include “other large release events” and applies reporting requirements to certain new sources and sectors.
Please see Part II, Item 7. “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations” for further information regarding our operations. Our Operating Units We identify our operating units based upon major revenue sources as (i) Rental, (ii) Sales and (iii) Aftermarket Services. Rental.
“Management ’ s Discussion and Analysis of Financial Condition and Results of Operations” for further information regarding our operations. 1 Our Operating Units We identify our operating units based upon major revenue sources as (i) Rental, (ii) Sales and (iii) Aftermarket Services. Rental.
Our largest rental area is the Permian Basin (75 percent of rental revenues in 2024), with the majority of our remaining rental revenue generated in other oil and gas producing regions and basins in Texas, New Mexico and Oklahoma, including the San Juan Basin, the Texas Panhandle/western Oklahoma, the Barnett Shale, the Eagle Ford Shale and central Oklahoma.
Our largest rental area is the Permian Basin (78 percent of rental revenues in 2025), with the majority of our remaining rental revenue generated in other oil and gas producing regions and basins in Texas, New Mexico and Ohio, including the San Juan Basin, the Utica and Marcellus Shales in Ohio, the Texas Panhandle, the Barnett Shale, and the Eagle Ford Shale.
Oxy amounted to 52 percent of our accounts receivable as of December 31, 2024, and 64 percent of our accounts receivable as of December 31, 2023. No other customers amounted to more than 10 percent of our accounts receivable as of December 31, 2024 or 2023.
Oxy and Devon amounted to 62 percent of our accounts receivable as of December 31, 2025, and 60 percent of our accounts receivable as of December 31, 2024. No other customers amounted to more than 10 percent of our accounts receivable as of December 31, 2025 or 2024.
These laws and regulations impose limits on the levels of various substances that may be emitted into the atmosphere from our compressor units and required us to meet more stringent air emission standards and install new emission control equipment on all of our engines built after July 1, 2008.
These laws and regulations impose limits on the levels of various substances that may be emitted into the atmosphere from our compressor units and required us to meet more stringent air emission standards and install new emission control equipment on all of our engines built after July 1, 2008. 7 In recent years, the EPA has lowered the National Ambient Air Quality Standard (“NAAQS”) for several air pollutants.
Suppliers and Raw Materials Preparing our rental compressors for service involves the purchase by us of engines, compressors, coolers, frames and other components, and the assembly, primarily by third-party service providers, of these OEM components on skids for delivery to customer locations.
We maintain confidentiality and proprietary information agreements with our executive officers and certain key, senior employees. Suppliers and Raw Materials Preparing our rental compressors for service involves the purchase by us of engines, compressors, coolers, frames and other components, and the assembly, primarily by third-party service providers, of these OEM components on skids for delivery to customer locations.
At the state level, many states, including the states in which we or our customers conduct operations, have adopted legal requirements that have imposed new or more stringent permitting, disclosure or well construction requirements on oil and gas activities.
Other energy legislation and initiatives could include a carbon tax, methane fee or cap and trade program. At the state level, many states, including the states in which we or our customers conduct operations, have adopted legal requirements that have imposed new or more stringent permitting, disclosure or well construction requirements on oil and gas activities.
Paper copies of our filings are also available, without charge upon written request. Please mail requests to Natural Gas Services Group, Inc., 404 Veterans Airpark Lane, Suite 300, Midland, TX 79705. The information contained on our website is not part of this Report. 11
Paper copies of our filings are also available, without charge upon written request. Please mail requests to Natural Gas Services Group, Inc., 601 State Street, Suite 400, Southlake, TX 79701. The information contained on our website is not part of this Report. 9
Other regions and plays in which we provide services include the Utica and Marcellus Shales in Ohio, and the Antrim Shale in Michigan.
Other regions and plays in which we provide services include central and western Oklahoma and the Antrim Shale in Michigan.
The extent to which the U.S. will maintain climate change-related pledges is currently unknown, but any future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, our compressors could require us to incur costs to reduce emissions associated with our operations.
Any future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, our compressors could require us to incur costs to reduce emissions associated with our operations.
As the number of rental compressors in our rental fleet increases, the number of sales, support, and maintenance personnel required and the minimum level of inventory may not increase proportionately. Backlog As of December 31, 2024, we had no sales backlog compared to $0.8 million as of December 31, 2023.
As the number of rental compressors in our rental fleet increases, the number of sales, support, and maintenance personnel required and the minimum level of inventory may not increase proportionately.
We feel that the current crude oil market production outlook is favorable, with current prices creating strong incentives for our customers to maximize their production levels. While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels.
While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels. Natural Gas .
Some risk of environmental liability and other costs are inherent in the nature of our business; however, and there can be no assurance that environmental costs will not rise. 7 To the extent that new laws or other governmental actions restrict the energy industry or impose additional environmental protection requirements that result in increased costs to the oil and gas industry, we could be adversely affected.
To the extent that new laws or other governmental actions restrict the energy industry or impose additional environmental protection requirements that result in increased costs to the oil and gas industry, we could be adversely affected.
Today, we are a premier provider of natural gas compression equipment and services to the energy industry. We rent, operate and maintain natural gas compressors for oil and gas production and processing facilities. In addition, we design and assemble compressor units for rental to our customers.
Today, we are a premier provider of natural gas and electric compression equipment, technology and services to the energy industry. We rent, design, install, service and maintain natural gas engine and electric motor drive compressors for oil and gas production and processing facilities.
We service and maintain compressors owned by our customers on an “as needed” and contract basis, as well as providing services related to the installation and start-up of new compressor units.
In order to provide customer support, we also stock varying levels of replacement parts at our Tulsa, Oklahoma facility and our field service locations. Aftermarket Services. We service and maintain compressors owned by our customers on an “as needed” and contract basis, as well as providing services related to the installation and start-up of new compressor units.
Mechanical availability is defined as the percentage of time that our units are capable of operating as designed and is a measure of reliability. The cost of rental compression is an appreciable operating expense for a producer and the improved productivity delivers material incremental profitability to customers.
The cost of rental compression is an appreciable operating expense for a producer and the improved productivity delivers material incremental profitability to customers.
In 2015, the EPA published the final rule strengthening the standards for ground level ozone, and the states are expected to establish revised attainment/non-attainment regions.
For example, in 2013, the EPA lowered the annual standard for fine particulate matter from 15 to 12 micrograms per cubic meter. In 2015, the EPA published the final rule strengthening the standards for ground level ozone, and the states are expected to establish revised attainment/non-attainment regions.
We are not presently aware of any material environmental demands, claims, or adverse actions, litigation or administrative proceedings in which either we or our acquired properties are involved in or subject to or arising out of any predecessor. 8 Furthermore, the modification of existing laws or regulations or the adoption of new laws or regulations that result in the curtailment of exploratory or developmental drilling for oil and gas could materially and adversely affect our operations by discouraging our customers from drilling for hydrocarbons, disrupting revenue through permitting or similar delays.
Furthermore, the modification of existing laws or regulations or the adoption of new laws or regulations that result in the curtailment of exploratory or developmental drilling for oil and gas could materially and adversely affect our operations by discouraging our customers from drilling for hydrocarbons, disrupting revenue through permitting or similar delays.
In conjunction with these pacts, the United States committed to an economy-wide target of reducing net greenhouse gas emissions by 50-52 percent below 2005 levels by 2030. In January 2025, however, President Trump issued an executive order withdrawing the U.S. from the Paris Agreement, and froze federal funds relating to the Agreement.
In conjunction with these pacts, the United States committed to an economy-wide target of reducing net greenhouse gas 5 emissions by 50-52 percent below 2005 levels by 2030.
At the international level, there is an agreement, the United Nations-sponsored “Paris Agreement,” for nations to limit their GHG emissions through non-binding, individually determined reduction goals every five years after 2020. President Biden pledged the renewed participation of the United States on his first day in office.
Likewise, the New Mexico Environment Department has adopted regulations to restrict the venting or flaring of methane. At the international level, there is an agreement, the United Nations-sponsored “Paris Agreement,” for nations to limit their GHG emissions through non-binding, individually determined reduction goals every five years after 2020.
We believe there are opportunities in mergers with or acquisitions of competitive rental compression companies or related businesses providing similar services. While there is no certainty as to the probability of any particular deal, we will continue to evaluate potential acquisitions, joint ventures and other opportunities that could enhance value for our shareholders.
While there is no certainty as to the probability of any particular deal, we will continue to evaluate potential acquisitions, joint ventures and other opportunities that could enhance value for our shareholders. All of the above strategies are subject to revisions and adjustments as a result of several factors discussed in Item 1A.
In addition to statutory liability under CERCLA, common law claims for personal injury or property damage can also be brought by neighboring landowners and other third parties related to contaminated sites.
In addition to statutory liability under CERCLA, common law claims for personal injury or property damage can also be brought by neighboring landowners and other third parties related to contaminated sites. 6 The Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes and their implementing regulations, regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and solid (non-hazardous) wastes.
Nevertheless, if any of these circumstances change significantly, our business could be adversely affected. Please read Item 1A . , “ Risk Factors, ” in this report. Major Customers Rental and sales activity with Occidental Permian, LTD.
Nevertheless, if any of these circumstances change significantly, our business could be adversely affected. Please read Item 1A., “Risk Factors,” in this report. 3 Customers As of December 31, 2025, we had approximately 60 customers for our compressor rental fleet.
(“Oxy”) for the years ended December 31, 2024, 2023 and 2022 amounted to 54 percent, 50 percent and 42 percent of our revenue, respectively. No other single customer accounted for more than 10 percent of our revenues in 2024, 2023 or 2022.
(“Oxy”) and Devon Energy Corporation (“Devon”) amounted to 59 percent, 59 percent and 52 percent of our revenue on a combined basis, respectively. No other single customer accounted for more than 10 percent of our revenues during 2025, 2024 or 2023.
The current administration has shown its willingness to reduce the number of regulations that increase compliance costs on companies such as ours, but the extent of changes are, as of yet, unclear. Further, the new administration has signed an executive order declaring a national energy emergency in the hopes of reducing regulatory costs in the oil and gas industry.
Further, the current administration signed an executive order declaring a national energy emergency in the hopes of reducing regulatory costs in the oil and gas industry.
A total of 54 employees were based at our Midland, Texas headquarters location while the remaining 191 employees were deployed to our operating facilities throughout our operating regions. We believe that we have good relations with our employees. Available Information We use our website as a channel of distribution for Company information.
A total of 63 corporate and operations employees were based at our Midland, Texas and Southlake, Texas administrative and executive office locations while the remaining 196 employees were deployed to our operating facilities throughout our operating regions in five states. We believe that we have good relations with our employees.
All of the above strategies are subject to revisions and adjustments as a result of several factors discussed in Item 1A . “ Risk Factors. ” Competitive Strengths We believe our competitive strengths include: • Strong operational performance. We deliver very high levels of mechanical availability to our customers.
“Risk Factors.” 2 Competitive Strengths We believe our competitive strengths include: • Strong operational performance. We deliver very high levels of mechanical availability to our customers. Mechanical availability is defined as the percentage of time that our units are capable of operating as designed and is a measure of reliability.
We cannot predict the final regulatory requirements or the future costs to comply with such requirements with any certainty. We are also subject to air regulation at the state level. For example, sources of air emissions within Texas are controlled by the Texas Commission on Environmental Quality (“TCEQ”).
As a result, there remains considerable uncertainty surrounding regulation of GHG and methane emissions from oil and gas operations. We are also subject to air regulation at the state level. For example, sources of air emissions within Texas are controlled by the Texas Commission on Environmental Quality (“TCEQ”).
We actively promote the highest standards of safety behavior and environmental awareness and strive to meet or exceed all applicable local, state and federal regulations. As of December 31, 2024, we had 245 total employees, none of which are represented by a labor union.
We actively promote high standards of safety behavior and environmental awareness and strive to meet or exceed all applicable local, state and federal regulations. Available Information We use our website as a channel of distribution for Company information.
Federal and state regulatory agencies can seek to impose administrative, civil, and criminal penalties for alleged non-compliance with RCRA and analogous state requirements. In general, hazardous waste is waste with properties that can potentially endanger human health or the environment.
In general, hazardous waste is waste with properties that can potentially endanger human health or the environment.
As of December 31, 2024, we had 1,912 natural gas compressors in our rental fleet totaling 598,840 horsepower. Of this total, we had 1,208 natural gas compressors totaling 491,756 horsepower rented to 68 customers.
In addition, certain of our contracts include surcharges for oil and filters as well as insurance where applicable. As of December 31, 2025, we had 1,914 compressors in our rental fleet totaling 662,542 horsepower. Of this total, we had 1,245 compressors totaling 562,676 horsepower rented to customers.
The unit utilization rate of our rental fleet as of December 31, 2024, was 63.2 percent, while our horsepower utilization for the same period was 82.1 percent. During 2024, we placed into service 220 unit sets, including 198 from our existing fleet and 22 new units, with a total of 154,909 horsepower.
During 2025, we placed into service 434 unit sets, including 364 from our existing fleet and 70 new units, with a total of 172,428 horsepower. A total of 126 of those units, including 70 new units, were 400 horsepower or larger, representing approximately 68.7 percent of the total horsepower set.
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Recent Developments For the past several years, we have been undergoing a deliberate and strategic shift by (i) focusing our business development efforts on expanding our rental revenue sources primarily in large (400 horsepower or greater) compressor units and crude oil artificial lift applications and (ii) de-emphasizing internal assembly of compressor units and the related support of extensive facilities associated with such activities.
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Recent Developments In April 2025, we secured an amendment to our senior secured revolving credit agreement, as amended (the “Credit Facility”) to (i) increase our total commitment to $400.0 million, (ii) expand the accordion feature to $100.0 million, (iii) reduce interest rates at comparable leverage levels and (iv) provide for a more flexible leverage covenant.
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Regarding the shift in revenue sourcing, we are continuing to invest in our larger compression units (400 horsepower or greater) which provide for greater revenues and more scalable costs resulting in higher overall profitability.
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See Note 1 0 (“ Long-Term Debt ”) to our Consolidated Financial Statements. Throughout 2025, we expanded our fleet horsepower by approximately 11 percent to approximately 663,000 horsepower primarily from the addition of 70 new large (over 400 horsepower) compressor units. This increase in fleet horsepower contributed substantially to a 14 percent increase in rental revenues to approximately $164 million.
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In addition, the emphasis on the larger units is consistent with a focus on supporting our customers’ crude oil production efforts primarily through artificial lift applications which generally require larger units as opposed to natural gas production which generally requires our low and medium compression units.
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We initiated a common stock dividend during the third quarter of 2025 for $0.10 per share and increased it to $0.11 per share for the fourth quarter of 2025 and first quarter of 2026. See N ote 14 ( “ Stockholders ’ Equity ”) and Note 19 (“Subsequent Events”) to our Consolidated Financial Statements.
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Due primarily to more favorable pricing for crude oil production vis-à-vis natural gas, our customers are continuing to dedicate their investments in favor of crude oil production which supports a growing demand for our larger horsepower units and services.
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We initiated efforts to market certain non-essential real estate properties including our former assembly facility in Midland, Texas (the “Midland Facility”) in the second quarter of 2025 and our former corporate headquarters facility, also in Midland, Texas (the “Former Headquarters Property”), in February 2026.
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With respect to our assembly of compressor units for lease or sale to our customers, we have been transitioning from assembling a majority of our compressor units in-house to contracting with third-party fabricators who assemble the units to our specifications, utilizing parts and components from OEM.
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See Note 5 (“Assets Held for Sale and Restructuring Activities”) , N o te 7 ( “ Property and Equipment ” ) and N ote 19 (“ Subsequent Events ”) to our Consolidated Financial Statements.
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We continue to design and engineer our compressors and under this arrangement, we procure and pay for the components of our compressor packages which are delivered to one of our third-party fabricators, who then assemble the components and test the compressor units prior to our receiving them.
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In January 2026, we received over $12 million, including interest, representing a substantial portion of federal income tax refunds that were due to us since 2020. See Note 11 ( “ Income Taxes ”) to our Consolidated Financial Statements. Please see Part II, Item 7.
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During the assembly process, we hold title to the compressors and related components. 1 In connection with the transition to third-party fabrication, we initiated the termination of fabrication and assembly activities at our Midland, Texas facility during the fourth quarter of 2023 and began to wind down activities throughout 2024.
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Approximately three percent of our compressor fleet, representing approximately four percent of our available horsepower is electric powered. The unit utilization rate of our rental fleet as of December 31, 2025, was 65.0 percent, while our horsepower utilization for the same period was 84.9 percent.
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On January 28, 2025, we announced our intent to close this facility and cease operations by April 1, 2025. In addition, we have initiated efforts to market the facility and the underlying real property. In connection with this action, we have transferred all inventory from this facility to our regional district locations and our Tulsa, Oklahoma facility.
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This activity resulted in a 280 basis point increase in our horsepower utilization from 82.1 percent at the end of 2024 to 84.9 percent at the end of 2025. Sales. We design and engineer compressor components manufactured by OEM suppliers.
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We continue to maintain new unit assembly capability at our Tulsa, Oklahoma facility.
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Our customer base includes oil and gas E&P and operating companies of various sizes ranging from domestic affiliates of certain of the internationally-recognized majors to domestic and regional operators. During the years ended December 31, 2025, 2024 and 2023 our revenues from Occidental Permian, LTD.
Removed
We are committed to this transition for a number of reasons, including (i) we feel that the cost advantage of fabricating and assembling new units at the Midland facility has declined substantially in recent years; (ii) our assembly facilities are not capable of producing large horsepower units as efficiently as certain third-party service providers; (iii) third-party service providers have improved in quality and cost competitiveness; and (iv) use of third-party fabricators relieves us of issues related to efficiency, inventory and labor scarcity.
Added
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (the “OBBBA”) into law which, among other things, postpones the EPA’s imposition of the recent methane waste emissions charge to 2034. In May 2024, the U.S. Environmental Protection Agency (“EPA”) finalized revisions to the Greenhouse Gas Reporting Program for petroleum and natural gas systems.
Removed
A total of 111 of those units, including 22 new units, were 400 horsepower or larger, representing approximately 87.4 percent of the total horsepower set. This activity resulted in a 360 basis point increase in our average annual horsepower utilization from 78.2 percent during to 81.8 percent for 2024. Sales.
Added
The emissions reported under the Greenhouse Gas Reporting Program will be the basis for any payments under the Methane Emissions and Waste Reduction Incentive Program in the IRA 2022, and the Subpart W Revisions Rule may result in an increase in reported methane and other GHG emissions under Subpart W for many operators.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+8 added−3 removed101 unchanged
Biggest changeIn addition, we employ a number of key employees in connection with our business, including in connection with the design and engineering of our compressors. While we do have employment agreements with our three executive officers, the loss of any of our executive officers or other key employees could have an adverse impact on our business.
Biggest changeWhile we do have employment agreements with our two executive officers, the loss of any of our executive officers or other key employees could have an adverse impact on our business. We do not carry any key-person insurance on any of our officers or directors. The erosion of the financial condition of our customers could adversely affect our business.
This could have an adverse impact on our operations, our free cash flow and our ability to invest in future growth. If we fail to acquire or successfully integrate additional businesses, our growth may be limited and our results of operations may suffer. As part of our business strategy, we evaluate potential acquisitions of other businesses or assets.
This could have an adverse impact on our operations, our free cash flow and our ability to invest in future growth. If we fail to acquire or successfully integrate additional businesses, our growth may be limited and our results of operations may suffer. As part of our business strategy, we evaluate potential acquisitions of other businesses and assets.
Many factors affect the supply and demand for oil and gas and, therefore, influence oil and gas prices, including: • the level of oil and gas production; • the level of oil and gas inventories; • domestic and worldwide demand for oil and gas; • the expected cost of developing new reserves; • the cost of producing oil and gas; • the level of drilling and completions activity; • inclement weather; • domestic and worldwide economic activity; • regulatory and other federal and state requirements in the U.S.; • the ability of OPEC, national oil companies and other large producers to set and maintain production levels and prices for crude oil; • political conditions in or affecting oil and gas producing countries; • terrorist activities affecting traditional supply routes and other possible terrorist activities in the U.S. and elsewhere; • the cost of developing alternative energy sources; • environmental regulation; and • tax policies.
Many factors affect the supply and demand for oil and gas and, therefore, influence oil and gas prices, including: • the level of oil and gas production; • the level of oil and gas inventories; • domestic and worldwide demand for oil and gas; • the expected cost of developing new reserves; • the cost of producing oil and gas; • the level of drilling and completions activity; • inclement weather; • domestic and worldwide economic activity; • regulatory and other federal and state requirements in the U.S.; • the ability of OPEC, Russia, national oil companies and other large producers to set and maintain production levels and prices for crude oil; • political conditions in or affecting oil and gas producing countries; • terrorist activities affecting traditional supply routes and other possible terrorist activities in the U.S. and elsewhere; • the cost of developing alternative energy sources; • environmental regulation; and • tax policies.
The rental contracts of many of our operating compressor units have a short-term duration, and oil and gas companies tend to respond quickly to upward or downward changes in prices. Any prolonged reduction in drilling and production activities has historically eroded both rental pricing and utilization rates for our compression equipment and services and adversely affected our financial results.
The rental contracts of many of our compressor units have a short-term duration, and oil and gas companies tend to respond quickly to upward or downward changes in prices. Any prolonged reduction in drilling and production activities has historically eroded both rental pricing and utilization rates for our compression equipment and services and adversely affected our financial results.
Due to the short-term nature of most of our rental contracts, changes in market conditions can quickly affect our business. As a result of the cyclicality of our industry, we anticipate our results of operations will be volatile in the future. 13 Increased regulation or ban of current fracturing techniques could reduce demand for our compressors.
Due to the short-term nature of most of our rental contracts, changes in market conditions can quickly affect our business. As a result of the cyclicality of our industry, we anticipate our results of operations will be volatile in the future. Increased regulation or ban of current fracturing techniques could reduce demand for our compressors.
This would make it difficult for other minority shareholders to effect a change in control or otherwise extend any significant control over our management. This may adversely affect the market price and interfere with the voting and other rights of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
This would make it difficult for other minority shareholders to effect a change in control or otherwise extend any significant control over our management. This may adversely affect the market price and interfere with the voting and other rights of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 19
The inability to timely renegotiate or re-rent a substantial portion of our compressor rental fleet could have a material adverse effect upon our business, financial condition, results of operations and cash flows. 15 We depend on particular suppliers and are vulnerable to product shortages and price increases.
The inability to timely renegotiate or re-rent a substantial portion of our compressor rental fleet could have a material adverse effect upon our business, financial condition, results of operations and cash flows. We depend on particular suppliers and are vulnerable to product shortages and price increases.
These companies may also be better positioned than us to successfully endure downturns in the oil and gas industry. 12 Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better prices, features, performance or other competitive characteristics than our products and services.
These companies may also be better positioned than us to successfully endure downturns in the oil and gas industry. Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better prices, features, performance or other competitive characteristics than our products and services.
These activities include increasing attention and demands for action related to climate change and energy transition matters, such as promoting the use of substitutes to fossil fuel products 14 and encouraging the divestment of fossil fuel equities, as well as pressuring lenders and other financial services companies to limit or curtail activities with fossil fuel companies.
These activities include increasing attention and demands for action related to climate change and energy transition matters, such as promoting the use of substitutes to fossil fuel products and encouraging the divestment of fossil fuel equities, as well as pressuring lenders and other financial services companies to limit or curtail activities with fossil fuel companies.
The interest expense charged on our outstanding borrowings under the Credit Facility agreement is based upon a variable rate which fluctuates as interest rates change. Changes in macroeconomic conditions outside of our control could result in a higher interest rate being charged on our outstanding borrowings and an increase in the overall interest costs charged.
The interest expense charged on our outstanding borrowings under the Credit Facility is based upon a variable rate which fluctuates as interest rates change. Changes in macroeconomic conditions outside of our control could result in a higher interest rate being charged on our outstanding borrowings and an increase in the overall interest costs charged.
In addition, although a significant portion of the value of a new compressor increases our borrowing base under our Credit Facility once it has been fully constructed and put into service, we generally have an approximate lag of 9 to 12 months between borrowing money under the Credit Facility to fund progress payments to build a compressor unit and the time it becomes eligible for inclusion in our borrowing base.
In addition, although a significant portion of the value of a new compressor increases our borrowing base under our Credit Facility once it has been fully constructed and put into service, we generally have an approximate lag of nine to 12 months between borrowing money under the Credit Facility to fund progress payments to build a compressor unit and the time it becomes eligible for inclusion in our borrowing base.
If we are unable to meet the demands of our customers, our existing customers may terminate their contractual relationships with us or curtail future orders, or we may not be able to compete for business from new customers, which, in either case, could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to meet the demands of our customers, our existing customers may terminate their contractual relationships with us or curtail future orders, or we may not be able to compete for business from new customers, which, in either case, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our ability to raise additional capital 17 will depend on the results of our operations and the status of various capital and industry markets at the time we seek such capital.
Our ability to raise additional capital will depend on the results of our operations and the status of various capital and industry markets at the time we seek such capital.
Although we believe that cash on hand, cash flows from operating activities and borrowing under our Credit Facility will provide us with sufficient cash to fund our planned capital expenditures for 2025, we cannot provide assurance that these sources will be sufficient considering the factors and limitations noted above.
Although we believe that cash on hand, cash flows from operating activities and borrowing under our Credit Facility will provide us with sufficient cash to fund our planned capital expenditures for 2026, we cannot provide assurance that these sources will be sufficient considering the factors and limitations noted above.
If one or more of these analysts cease coverage, we could lose visibility in the market, which in turn could cause our stock price to decline. 21 Provisions contained in our governing documents could hinder a change in control.
If one or more of these analysts cease coverage, we could lose visibility in the market, which in turn could cause our stock price to decline. 18 Provisions contained in our governing documents could hinder a change in control.
Future sales of our common stock could adversely affect our stock price. Substantial sales of our common stock in the public market, or the perception by the market that those sales could occur, may lower our stock price or make it difficult for us to raise additional equity capital in the future.
Substantial sales of our common stock in the public market, or the perception by the market that those sales could occur, may lower our stock price or make it difficult for us to raise additional equity capital in the future.
Under some of our rental and sales contracts, liability with respect to personnel and property is customarily assigned on a “knock-for-knock” basis, which means that we and our customers assume liability for our respective personnel and property.
Under some of our rental and sales agreements, liability with respect to personnel and property is customarily assigned on a “knock-for-knock” basis, which means that we and our customers assume liability for our respective personnel and property.
However, in certain rental and sales contracts we assume liability for damage to our customer’s property as well as the property of certain other third parties on the site resulting from our negligence.
However, in certain rental and sales agreements we assume liability for damage to our customer’s property as well as the property of certain other third parties on the site resulting from our negligence.
If we are unable to repay any outstanding amounts, the lender could proceed against and foreclose on the assets we pledged as collateral to secure payment of our indebtedness. 18 Our current Credit Facility agreement contains a variable interest rate and increases to such rate may increase our borrowing cost.
If we are unable to repay any outstanding amounts, the lender could proceed against and foreclose on the assets we pledged as collateral to secure payment of our indebtedness. Our Credit Facility contains a variable interest rate and increases to such rate may increase our borrowing cost.
To the extent that we incur substantial warranty claims in any period, our reputation, our ability to obtain future business and our results of operations, financial condition and cash flows could be materially and adversely affected. 19 Our rental and sales contracts provide for varying forms of indemnification from our customers and in most cases may require us to indemnify our customers.
To the extent that we incur substantial warranty claims in any period, our reputation, our ability to obtain future business and our results of operations, financial condition and cash flows could be materially and adversely affected. 16 Our rental and sales agreements provide for varying forms of indemnification from our customers and in most cases may require us to indemnify our customers.
Our current Credit Facility agreement contains covenants that limit our operating and financial flexibility and, if breached, could expose us to severe remedial provisions.
Our Credit Facility contains covenants that limit our operating and financial flexibility and, if breached, could expose us to severe remedial provisions.
While such levels of inflation have moderated somewhat, inflation pressure continues and uncertainty remains regarding expectations of inflation during 2025. Should inflationary pressures continue or increase, the result will be an increase in our cost structure, including labor costs, parts costs, lubricants and other items used in our operations.
While such levels of inflation have moderated somewhat, inflation pressure continues and uncertainty remains regarding expectations of inflation into the future. Should inflationary pressures continue or increase, the result will be an increase in our cost structure, including labor costs, parts costs, lubricants and other items used in our operations.
A significant amount of our revenues and accounts receivable are related to one customer and a loss of this customer or other current customers could adversely affect our results of operations. Our business is dependent not only on securing new customers but also on maintaining current customers.
A significant amount of our revenues and accounts receivable are related to two customers and a loss of these customers or other current customers could adversely affect our results of operations. Our business is dependent not only on securing new customers but also on maintaining current customers.
The trading price of our common stock and the price at which we may sell securities in the future are subject to substantial fluctuations in response to various factors, including our ability to successfully accomplish our business strategy, the trading volume of our stock, changes in governmental regulations, actual or anticipated variations in our quarterly or annual financial results, our involvement in litigation, general market conditions, the prices of oil and gas, announcements by us and our competitors, our liquidity, our ability to raise additional funds, and other events such as those discussed in the factors above.
The trading price of our common stock and the price at which we may sell securities in the future are subject to substantial fluctuations in response to various factors, including our ability to successfully accomplish our business strategy, changes in our dividend policy or share repurchase program, the trading volume of our stock, changes in governmental regulations, actual or anticipated variations in our quarterly or annual financial results, our involvement in litigation, general market conditions, the prices of oil and gas, announcements by us and our competitors, our liquidity, our ability to raise additional funds, and other events such as those discussed in the factors above. 17 Future sales of our common stock could adversely affect our stock price.
As of December 31, 2024, our borrowing base under the Credit Facility was approximately $300.0 million, with $170 million outstanding, leaving approximately $130.0 million available for future borrowing. During 2025, the amount we will spend on capital expenditures related to compression equipment will be determined primarily by the activity of our customers, our financial resources and access to capital.
As of December 31, 2025, our borrowing base under the Credit Facility was approximately $400.0 million, with $230.0 million of borrowings outstanding leaving approximately $170.0 million available for future borrowing. 14 During 2026, the amount we will spend on capital expenditures related to compression equipment will be determined primarily by the activity of our customers, our financial resources and access to capital.
While we maintain insurance coverage, we face the following risks: • we may not be able to continue to obtain insurance on commercially reasonable terms; • we may be faced with types of liabilities that will not be covered by our insurance, such as damages from significant product liabilities and from environmental contamination; • the dollar amount of any liabilities may exceed our policy limits; and • we do not maintain coverage against the risk of interruption of our business.
While we maintain insurance coverage, we face the following risks: • we may not be able to continue to obtain insurance on commercially reasonable terms; • we may be faced with types of liabilities that will not be covered by our insurance, such as damages from significant product liabilities and from environmental contamination; • the dollar amount of any liabilities may exceed our policy limits; and • we do not maintain coverage against the risk of interruption of our business. 13 Any claims made under our policies will likely cause our premiums to increase.
In addition, potential sales of our common stock by our directors and officers, who beneficially own approximately 6 percent of the outstanding shares of our common stock as of March 14, 2025, and because of the negative perception of sales by insiders, could also have a negative impact on our stock price.
In addition, potential sales of our common stock by our directors and officers, who beneficially own approximately three percent of the outstanding shares of our common stock as of March 13, 2026, and because of the negative perception of sales by insiders, could also have a negative impact on our stock price.
As of December 31, 2024, we had $170 million of borrowings outstanding under the Credit Facility and anticipate additional borrowing under the Credit Facility through 2025. Should we utilize our full debt capacity, growth beyond that point could be impacted.
As of December 31, 2025, we had $230 million of borrowings outstanding under the Credit Facility and anticipate additional borrowing under the Credit Facility during 2026. Should we utilize our full debt capacity, growth beyond that point could be impacted.
Competitive pressures or other factors also may result in significant price competition that could harm our revenue and our business. In addition, our customers may purchase and operate their own compression fleets in lieu of renting compressors and using our compression services. Additionally, we may face competition in our efforts to acquire other businesses.
Competitive pressures or other factors also may result in significant price competition that could harm our revenue and our business. In addition, our customers may purchase and operate their own compression fleets in lieu of renting compressors and using our compression services.
In 2024, we had significant growth in our revenue and operations. Our strategy envisions the continued expansion and growth of our business, subject to the demand for oil and gas and the impact of the other risks set forth in this risk factor section and elsewhere in this Report.
In 2025, we had significant growth in our revenue and operations. Our strategy envisions the continued expansion and growth of our business, subject to the demand for oil and gas and the impact of the other risks set forth in this risk factor section and elsewhere in this Annual Report on Form 10-K.
During 2024, we increased the borrowing commitment of the Credit Facility from $225 million to $300 million and we have the right to request an increase in the potential commitment by $50 million (subject to borrowing base limitation and customary covenants).
During 2025, we increased the borrowing commitment of the Credit Facility from $300 million to $400 million and we have the right to request an increase in the potential commitment by $100 million (subject to borrowing base limitation and customary covenants).
According to filings made with the SEC through March 14, 2025, an aggregate of approximately 35 percent of the outstanding shares of our common stock are owned by five institutional investors, each of which owns more than 5 percent of our outstanding shares as of the date of their respective filings.
According to filings made with the SEC through March 13, 2026, an aggregate of approximately 23 percent of the outstanding shares of our common stock are owned by four institutional investors, each of which owns more than five percent of our outstanding shares as of the date of their respective filings.
Our ability to utilize net operating loss (“NOL”) carryforwards to reduce future taxable income is subject to limitations under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (“IRC”). As disclosed in N o te 1 1 (“ Income Taxes ”) to our Consolidated Financial Statements, we have substantial NOL carryforwards.
Our ability to utilize net operating loss (“NOL”) carryforwards to reduce future taxable income is subject to limitations under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (“IRC”). As disclosed in Note 11 (“Income Taxes”) to our Consolidated Financial Statements, we have substantial NOL carryforwards.
Adverse macroeconomic and business conditions may significantly and negatively affect our results of operations. As a result of the COVID-19 outbreak and other economic conditions in the United States and abroad, our revenue and profitability were adversely affected in the ensuing years.
Additionally, we may face competition in our efforts to acquire other businesses. 10 Adverse macroeconomic and business conditions may significantly and negatively affect our results of operations. As a result of the COVID-19 outbreak and other economic conditions in the United States and abroad, our revenue and profitability were adversely affected in the ensuing years.
If either of these events were to occur, our cost structure could increase and our operations and growth potential could be impaired. We may require a substantial amount of capital to expand our compressor rental fleet and grow our business.
If either of these events were to occur, our cost structure could increase and our operations and growth potential could be impaired. We may require a substantial amount of capital to expand our compressor rental fleet and grow our business. We have a Credit Facility, with a total commitment of $400.0 million.
Any claims made under our policies will likely cause our premiums to increase. Any future damages caused by our products or services that are not covered by insurance, are in excess of policy limits or are subject to substantial deductibles, would reduce our earnings and our cash available for operations.
Any future damages caused by our products or services that are not covered by insurance, are in excess of policy limits or are subject to substantial deductibles, would reduce our earnings and our cash available for operations.
Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our customers’ hydrocarbon products which will likely translate to reduced demand for compression services, reduced profits, increased investigations and litigation, increased governmental regulations and negative impacts on our stock price and access to capital markets.
Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our customers’ hydrocarbon products which will likely translate to reduced demand for compression services, reduced profits, increased investigations and litigation, increased governmental regulations and negative impacts on our stock price and access to capital markets. 12 Federal and state governments and agencies continue to evaluate and promulgate legislation and regulations that are focused on restricting GHG emissions.
In addition, our common stock price is subject to fluctuations in response to variations in quarterly operating results, changes in management, future announcements concerning us, general trends in the industry and other events or factors such as those described above. If we issue debt or equity securities, you may lose certain rights and your ownership may be diluted.
In addition, our common stock price is subject to fluctuations in response to variations in quarterly operating results, changes in management, future announcements concerning us, general trends in the industry and other events or factors such as those described above.
During times when the oil and gas markets are weak, our customers are more likely to experience a deterioration in their financial condition. Many of our customers’ equity values and liquidity substantially decline during declines in oil and gas prices, and in some cases access to capital markets may be an unreliable source of financing for some customers.
Many of our customers’ equity values and liquidity substantially decline during declines in oil and gas prices, and in some cases access to capital markets may be an unreliable source of financing for some customers.
Several states and local jurisdictions also have adopted or are considering adopting regulations that could restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids. While we do not perform hydraulic fracturing, many of our customers do and their activity level drives demand for our products.
Several states and local jurisdictions also have adopted or are considering adopting regulations that could restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids.
On a unit basis, of the 1,208 compressors rented at December 31, 2024, 573 were rented on a month-to-month basis. On a horsepower basis, of the 491,756 total rented horsepower, we had 115,071 of that total rented on a month-to-month basis, with the remainder on contracts expiring between 2025 and 2029.
On a unit basis, of the 1,245 compressors rented at December 31, 2025, 491 were rented on a month-to-month basis. On a horsepower basis, of the 562,676 total rented horsepower, we had 98,539 of that total rented on a month-to-month basis, with the remainder on contracts expiring between 2026 and 2030.
Under the terms of our current Credit Facility agreement, we must: • comply with various leverage, commitment coverage and other customary financial ratios; • not exceed specified levels of debt; • comply with limits on asset sales; • comply with limits on cash dividends; and • other customary financial and operational limitations.
Under the terms of our current Credit Facility, we must: • comply with various leverage, commitment coverage and other customary financial ratios; • not exceed specified levels of debt; • comply with limits on asset sales; • comply with limits on cash dividends; and • other customary financial and operational limitations. 15 Our ability to meet the financial ratios and tests under the Credit Facility can be affected by events beyond our control, and we may not be able to satisfy those ratios and tests.
As we continue to expand, we will need to promote or hire additional staff, and, as a result of increased compensation and benefit packages in our industry, as well as inflationary pressures, it may be difficult to attract or retain such individuals without incurring significant additional costs. 16 In keeping with our streamlined approach to our business, our executive management team consists of three officers: our (i) Chief Executive Officer, (ii) President and Chief Operating Officer and (iii) Chief Financial Officer.
As we continue to expand, we will need to promote or hire additional staff, and, as a result of increased compensation and benefit packages in our industry, as well as inflationary pressures, it may be difficult to attract or retain such individuals without incurring significant additional costs.
In these operations, we generate and manage hazardous wastes such as solvents, thinner, waste paint, waste oil, wash down wastes, and sandblast material. We attempt to use generally accepted operating and disposal practices and, with respect to acquisitions, will attempt to identify and assess whether there is any environmental risk before completing an acquisition.
We attempt to use generally accepted operating and disposal practices and, with respect to acquisitions, will attempt to identify and assess whether there is any environmental risk before completing an acquisition.
We have a five-year senior secured revolving credit agreement, as amended (the “Credit Facility”), with a total commitment of $300.0 million. We also have a right to request from the lender, an increase to the potential aggregate commitment of up to $50.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $350.0 million.
We also have a right to request from the lender, an increase to the potential aggregate commitment of up to $100.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $500.0 million.
Our ability to meet the financial ratios and tests under the Credit Facility can be affected by events beyond our control, and we may not be able to satisfy those ratios and tests. A breach of any one of these covenants or requirements could permit the lending organization to accelerate outstanding amounts so that it is immediately due and payable.
A breach of any one of these covenants or requirements could permit the lending organization to accelerate outstanding amounts so that it is immediately due and payable. If a breach occurs, no further borrowings would be available under our Credit Facility.
In addition, the default on payments by our significant customer or other important customers would negatively impact our cash flows and current assets. Loss of key members of our management could adversely affect our business. Our success depends on our ability to attract, retain and motivate a highly-skilled management team and workforce.
Loss of key members of our management could adversely affect our business. Our success depends on our ability to attract, retain and motivate a highly-skilled management team and workforce.
However, we cannot assure that our efforts to prevent such an attack or, that if an attack were to occur, that we would be able to access our data in a timely fashion. 20 Risks Associated With Our Common Stock The price of our common stock may fluctuate.
Additionally, we have employed data backup and storage measures that could allow for recovery of our data. However, we cannot assure that our efforts to prevent such an attack or, that if an attack were to occur, that we would be able to access our data in a timely fashion.
We had one customer that accounted for an aggregate of approximately 54 percent of our revenue for the year ended December 31, 2024, and the same customer accounted for an aggregate of approximately 50 percent of our revenue for the year ended December 31, 2023.
We had two customers that accounted for an aggregate of approximately 59 percent of our revenue for each of the years ended December 31, 2025 and 2024. As of December 31, 2025, these same customers accounted for an aggregate of 62 percent of our accounts receivable.
A ban of hydraulic fracturing would likely halt some projects, including unconventional projects, at least temporarily. Expanded regulations are likely to introduce a period of uncertainty as companies determine ways to proceed. Any curtailment could result in a reduction in demand for our compressors, potentially affecting both rentals and sales of our units.
The results of these studies could lead federal and state governments and agencies to develop and implement additional regulations. A ban of hydraulic fracturing would likely halt some projects, including unconventional projects, at least temporarily. Expanded regulations are likely to introduce a period of uncertainty as companies determine ways to proceed.
More recently, federal and state governments have begun investigating whether the disposal of produced water into underground injection wells has caused increased seismic activity in certain areas. The results of these studies could lead federal and state governments and agencies to develop and implement additional regulations.
While we do not perform hydraulic fracturing, many of our customers do and their activity level drives demand for our products. 11 More recently, federal and state governments have begun investigating whether the disposal of produced water into underground injection wells has caused increased seismic activity in certain areas.
As of December 31, 2024, this same customer accounted for an aggregate of 52 percent of our accounts receivable. Unless we are able to retain our existing customers, or secure new customers if we lose one or more of our significant customers, our revenue and results of operations would be adversely affected.
Unless we are able to retain our existing customers, or secure new customers if we lose one or more of our significant customers, our revenue and results of operations would be adversely affected. In addition, the default on payments by our significant customer or other important customers would negatively impact our cash flows and current assets.
We are subject to extensive environmental laws and regulations that could require us to take costly compliance actions that could harm our financial condition. Our fabrication and maintenance operations are significantly affected by stringent and complex federal, state and local laws and regulations governing the discharge of substances into the environment or otherwise relating to environmental protection.
Our assembly and maintenance operations are significantly affected by stringent and complex federal, state and local laws and regulations governing the discharge of substances into the environment or otherwise relating to environmental protection. In these operations, we generate and manage hazardous wastes such as solvents, thinner, waste paint, waste oil, wash down wastes, and sandblast material.
We do not carry any key-person insurance on any of our officers or directors. The erosion of the financial condition of our customers could adversely affect our business. Many of our customers finance their exploration and development activities through cash flows from operating activities, the incurrence of debt or the issuance of equity.
Many of our customers finance their exploration and development activities through cash flows from operating activities, the incurrence of debt or the issuance of equity. During times when the oil and gas markets are weak, our customers are more likely to experience a deterioration in their financial condition.
Removed
International, national and state governments and agencies continue to evaluate and promulgate legislation and regulations that are focused on restricting GHG emissions.
Added
Any curtailment could result in a reduction in demand for our compressors, potentially affecting both rentals and sales of our units. We are subject to extensive environmental laws and regulations that could require us to take costly compliance actions that could harm our financial condition.
Removed
If a breach occurs, no further borrowings would be available under our Credit Facility.
Added
In keeping with our streamlined approach to our business, our executive management team consists of two executive officers: our (i) Chief Executive Officer and (ii) Chief Financial Officer. In addition, we employ three vice presidents on our management team to lead and direct (i) operations, (ii) technical services and (iii) safety and maintenance, respectively.
Removed
Additionally, we have employed data backup and storage measures that could allow for recovery of our data.
Added
Risks Associated With Our Common Stock The price of our common stock may fluctuate.
Added
The declaration of dividends and any repurchases of our common stock are each within the discretion of our Board of Directors based upon a review of relevant considerations, and there is no guarantee that we will pay any dividends on or repurchase shares of our common stock in the future or at levels anticipated by our stockholders.
Added
Dividends, whether fixed or variable, and stock repurchases are authorized and determined by our Board of Directors in its sole discretion and depend upon a number of factors, including the Company’s financial results, cash requirements and future prospects, restrictions in our Credit Facility, as well as such other factors deemed relevant by our Board of Directors.
Added
In 2025, our Board of Directors authorized a stock repurchase program of $6 million of our outstanding common stock. However, this stock repurchase program may be suspended from time to time, modified, extended or discontinued by our Board of Directors at any time.
Added
Similarly, any dividends, whether fixed or variable, we may declare in the future will be determined by our Board of Directors in its sole discretion. Any elimination of, or downward revision in, our stock repurchase program or dividend policy could have an adverse effect on the market price of our common stock.
Added
If we issue debt or equity securities, you may lose certain rights and your ownership may be diluted.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+5 added−0 removed0 unchanged
Biggest changeThere can be no assurance that our efforts will prevent or mitigate all cybersecurity events, which, if realized, could have a material impact on our operations and financial results. See Part I, Item 1A “Risk Factors” of this Report for additional information.
Biggest changeSimilar to other companies in the energy services industry, we are exposed to cybersecurity risks, including unauthorized access, phishing attempts, malware, ransomware and other incidents that could disrupt our operations. There can be no assurance that our efforts will prevent or mitigate all cybersecurity events, which, if realized, could have a material impact on our operations and financial results.
The Cybersecurity Plan contains the following elements: • Incident Identification and Reporting – outlines the steps used to promptly identify cybersecurity risks and report those through appropriate means; • Incident Assessment – after collecting information about a potential risk or threat, a protocol has been developed and outlined that will allow a cross-functional team to assess the threat; • Incident Containment – provides for action to be taken to isolate and attempt to contain and minimize any potential threat; • Resolution and Recovery – outlines the steps to be taken, based upon the incident and the systems potentially impacted, to mitigate the potential impact of the threat and restore system access and functionality in the minimum amount of time; • Training and Awareness – development of training and awareness programs to allow employees to understand how to promptly respond in the event of a perceived threat.
The Incident Response Plan contains the following elements: • Incident Identification and Reporting – outlines the steps used to promptly identify cybersecurity risks and incidents and report those through appropriate means; • Incident Assessment – after collecting information about a potential risk, threat or incident, a protocol has been developed and outlined that will allow a cross-functional team to complete an assessment; • Incident Containment – provides for actions to be taken to isolate and attempt to contain and minimize any potential threat; • Resolution and Recovery – outlines the steps to be taken, based upon the incident and the systems potentially impacted, to mitigate the potential impact of the threat and restore system access and functionality in the minimum amount of time; • Training and Awareness – development of training and awareness programs to allow employees to understand how to promptly respond in the event of a perceived threat.
ITEM 1C. CYBERSECURITY Information Technology and Cybersecurity Risks. Our IT systems and digital technology has been an important part of our operations and our ability to compete successfully. We continue to invest in technology solutions to improve inefficient systems, to streamline and automate workflows and to provide digital and mobile applications for our field service personnel.
ITEM 1C. CYBERSECURITY Information Technology and Cybersecurity Risks. Our IT systems and digital technology has been an important part of our operations and our ability to compete successfully. We rely on IT systems, cloud-based enterprise resource planning (“ERP”) platforms and mobile applications to support our operations, including financial systems and field service tools in support of compression services.
Cybersecurity Incidents We have not experienced any material cybersecurity incidents nor have we identified risks from known threats that could likely materially impact our operations or financial results. 22 Management of Cybersecurity Risk We maintain a Cybersecurity Event Plan (“Cybersecurity Plan”) which outlines how we identify and manage our cybersecurity risk.
See Part I, Item 1A “Risk Factors” of this Report for additional information. Cybersecurity Incidents We have not experienced any material cybersecurity incidents nor have we identified risks from known threats that could likely materially impact our operations or financial results.
We are committed to maintaining robust cybersecurity measures, continuously evaluating and updating our cybersecurity practices, and being prepared to respond to and recover from cybersecurity incidents. We face ongoing risk from cybersecurity threats.
We continue to invest in technology solutions to improve inefficient systems, to streamline and automate workflows and to provide digital and mobile applications for our field service personnel. We are committed to maintaining robust cybersecurity measures, continuously evaluating and updating our cybersecurity practices, and being prepared to respond to and recover from cybersecurity incidents.
Our IT Manager is responsible for assessing and managing risks from cybersecurity threats and carrying out our formal cybersecurity event plan. Our IT Manager is also responsible for reporting material incidents to our Chief Executive Officer, who in turn will report to the Lead Independent Director. Our IT Manager has over 20 years of IT experience in the energy industry.
Our VP-IT is responsible for reporting material incidents to our Chief Executive Officer, who in turn will report to the Chairman of the Board of Directors. Our VP-IT has over 25 years of experience spanning programming, architecture, applications development and IT management.
Governance Our Board of Directors has an active role in oversight of our risks and is assisted by our management in the exercise of these responsibilities. Our Manager of Information Technology (“IT Manager”) prepares and provides a presentation to the Board of Directors at each of its quarterly meetings, which includes updates on cybersecurity.
Our Board of Directors provides oversight of our risks and is assisted by our senior leadership in the exercise of these responsibilities. 20
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Management of Cybersecurity Risk To manage these risks, we maintain a cybersecurity program designed to help identify, assess and respond to cybersecurity threats. The program includes monitoring of information systems, access controls, endpoint protection, vulnerability management and specific incident procedures as described below. We utilize artificial intelligence-driven cybersecurity technologies to monitor and detect potential threats across our systems.
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These tools include email security and threat detection capabilities designed to identify phishing and other malicious email activity. In addition, we have mobile device management controls for company-issued mobile devices. We also maintain policies and procedures intended to address cybersecurity risks associated with third-party service providers and vendors that support our operations.
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These processes include evaluating security practices when onboarding certain vendors and monitoring technology environments used by the Company. Furthermore, our employees participate in mandatory cybersecurity awareness and training activities intended to reduce risks associated with phishing and other forms of social engineering.
Added
As referenced above, we also maintain a Cybersecurity Incident Response Plan (“Incident Response Plan”) which outlines how we identify, manage and respond to cybersecurity risks and incidents.
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Governance Cybersecurity risk management is overseen by our senior leadership as part of its broader enterprise risk management processes. Our Vice President, Information Technology (“VP-IT”) is responsible for overseeing cybersecurity operations, including monitoring security risks, maintaining security technologies and coordinating responses to cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The table below describes the material facilities that we owned or leased as of December 31, 2024: Location Status Square Feet Uses Tulsa, Oklahoma Owned and Leased 91,780 Compressor fabrication, rental and services Midland, Texas Owned 70,000 Compressor repair and overhaul, services Lewiston, Michigan Owned 15,360 Compressor fabrication, rental and services Midland, Texas Owned 45,000 Corporate office Pecos, Texas Leased 7,500 Office and parts and services Bloomfield, New Mexico Owned 7,000 Office and parts and services Godley, Texas Leased 5,000 Parts and services Bridgeport, Texas Leased 4,500 Office and parts and services Midland, Texas Owned 4,100 Parts and services Carlsbad, New Mexico Leased 4,000 Office and parts and services Carrollton, Ohio Leased 2,600 Parts and services Wheeler, Texas Leased 2,160 Parts and services We believe that our properties are generally well maintained and in good condition and adequate for our purposes.
Biggest changePROPERTIES The table below describes the material facilities that we owned or leased as of December 31, 2025: Location (1) Status Square Feet Uses Tulsa, Oklahoma Owned and Leased 91,780 Compressor assembly, rental and services Lewiston, Michigan Owned 15,360 Parts and service center Midland, Texas Leased 12,800 Administrative office Midland, Texas Leased 9,340 Parts and service center Pecos, Texas Leased 7,500 Parts and service center Bloomfield, New Mexico Owned 7,000 Parts and service center Southlake, Texas Leased 6,940 Headquarters and Executive office Godley, Texas Leased 5,000 Parts and service center Bridgeport, Texas Leased 4,500 Parts and service center Odessa, Texas Owned 4,100 Parts and service center Carlsbad, New Mexico Leased 4,000 Parts and service center Carrollton, Ohio Leased 2,600 Parts and service center Wheeler, Texas Leased 2,160 Parts and service center Our corporate headquarters and executive office is located at 601 State Street, Suite 400, Southlake, Texas 76092 and our main office telephone number is (432) 262-2700.
Removed
As discussed in Part I, Item 1. “ Business , ” we announced our intent to close our repair and overhaul services facility in Midland, Texas and cease operations by April 1, 2025. In addition, we have initiated efforts to market the facility and the underlying real property. 23
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(1) The above table excludes our former fabrication and corporate headquarters facilities in Midland, Texas for which we began efforts to market for sale in the second quarter of 2025 and first quarter of 2026, respectively.
Added
See Note 5 (“Assets Held for Sale and Restructuring Activities”) , Note 7 (“Property and Equipment”) and Note 19 (“Subsequent Events”) to our Consolidated Financial Statements. Also excludes certain properties that are leased for temporary housing of our operations personnel in certain of our more remote operating regions.
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We believe that our properties are generally well maintained and in good condition and adequate for our operating and administrative purposes.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation.
Biggest changeWe are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 21 PART II
While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from these actions will not have a material effect on our financial position, results of operations or cash flow.
While management is unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from these actions will not have a material 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

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Biggest change“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Form 10–K. Sale of Unregistered Securities and Issuer Repurchases None. Purchases of Equity Securities by Issuer and Affiliated Purchasers None. ITEM 6. RESERVED 25
Biggest change“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Form 10–K. Sale of Unregistered Securities and Issuer Repurchases None. Purchases of Equity Securities by Issuer and Affiliated Purchasers On August 8, 2025, our Board of Directors approved a share repurchase program (the “Repurchase Plan”).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock currently trades on the New York Stock Exchange under the symbol “NGS.” As of December 31, 2024, as reflected by our transfer agent records, we had 7 record holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock currently trades on the New York Stock Exchange under the symbol “NGS.” As of December 31, 2025, as reflected by our transfer agent records, we had seven record holders of our common stock.
This number does not include any beneficial owners for whom shares of common stock may be held in “nominee” or “street” name. On March 14, 2025, the last reported sale price of our common stock as reported by the New York Stock Exchange was $22.64 per share.
This number does not include any beneficial owners for whom shares of common stock may be held in “nominee” or “street” name. On March 13, 2026, the last reported sale price of our common stock as reported by the New York Stock Exchange was $35.59 per share.
Removed
Dividends To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying a cash dividend on our common stock. Although we intend to retain our earnings, if any, to finance the growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
Added
Dividends On February 9, 2026, we announced that our Board of Directors declared a cash dividend of $0.11 per share to stockholders of record as of February 18, 2026. The dividend was paid on March 4, 2026 for a total of $1.4 million. We currently anticipate continuing the payment of quarterly cash dividends.
Added
The Repurchase Plan provides for the repurchase of shares of our common stock from time to time in the open market as conditions, cash reserves, cash flows and the evaluation of uses of cash for operations, growth and share repurchase may allow. The Repurchase Plan is limited to $6 million and expires on August 6, 2027.
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There were no share repurchases during 2025. ITEM 6. RESERVED 22

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe absolute dollar increase was primarily impacted by (i) higher salaries, benefits and commissions of $3.3 million reflecting new executive leadership and support staff growth as well and higher commissions attributable to higher revenues, (ii) higher consulting expenses of $1.2 million primarily attributable to recruiting charges and interim staffing for certain senior and executive roles, (iii) higher public company compliance-related costs of $1.0 million consistent with our change in SEC filer status and (iv) higher information technology support costs of $0.4 million in support of our growth.
Biggest changeThe increase in primary SG&A expenses during 2025 as compared to 2024 was impacted by (i) higher IT support costs of $1.0 million in support of our growth initiatives and noncapitalizable costs associated with certain IT system conversion projects, (ii) higher salaries and benefits of $0.8 million reflecting support staff growth and (iii) higher occupancy and office costs of $0.2 million.
Natural Gas . We believe the market outlook for natural gas production in the U.S. remains steady while short term price volatility remains a factor due to geopolitical influences and shifts in LNG exports.
We believe the market outlook for natural gas production in the U.S. remains steady while short term price volatility remains a factor due to geopolitical influences and shifts in LNG exports.
The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and employees that are geographically dispersed throughout our operating regions.
The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and service employees that are geographically dispersed throughout our operating regions.
With this shift towards oil production the demand for overall compression services and products is driven by two general factors; (i) an increased focus by producers on artificial lift applications, e.g., production enhancement with compression assisted gas lift; 26 and (ii) declining reservoir pressure in maturing natural gas producing fields, especially non-conventional production.
With this shift towards oil production the demand for overall compression services and products is driven by two general factors; (i) an increased focus by producers on artificial lift applications, e.g., production enhancement with compression assisted gas lift; and (ii) declining reservoir pressure in maturing natural gas producing fields, especially non-conventional production.
Based upon existing economic and market conditions, we believe that cash on hand, cash flows from operating activities and borrowings under the Credit Facility will be sufficient to satisfy our capital and liquidity requirements for at least the twelve months subsequent to the date that this Annual Report on Form 10-K was filed.
Based upon existing economic and market conditions, we believe that cash on hand, cash flows from operating activities and borrowings under the Credit Facility will be sufficient to satisfy our capital, dividend and liquidity requirements for at least the twelve months subsequent to the date that this Annual Report on Form 10-K was filed.
We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others. For additional information and an analysis of or historical proceeds from sales of assets, see the “Cash Flows” discussion that follows. Capital Markets Transactions .
Proceeds from Sales and Monetization of Assets . We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others. For additional information and an analysis of or historical proceeds from sales of assets, see the “Cash Flows” discussion that follows. Capital Markets Transactions .
Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.
Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.
The increase in revenue reflects a continuing trend of growing demand for our higher horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins.
The increase in revenue reflects a continuing trend of growing demand for our large horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins.
Generally, increased capital expenditures result in greater revenues and profits for service and equipment companies. Generally, higher commodity prices lead to higher capital expenditures by oil and gas producers and higher levels of production.
Generally, increased capital expenditures result in greater revenues and profits for service and equipment companies. Generally, sustained higher commodity prices lead to higher capital expenditures by oil and gas producers and higher levels of production.
For a discussion and analysis of changes from 2022 to 2023 and other financial information related to prior periods, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K. The following discussion contains forward-looking statements that include risks and uncertainties.
For a discussion and analysis of changes from 2023 to 2024 and other financial information related to prior periods, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report on Form 10-K. The following discussion contains forward-looking statements that include risks and uncertainties.
We also believe we have flexibility with respect to our financing alternatives and adjustments to our capital expenditure plans if circumstances warrant. We do not have any material continuing commitments related to our current operations that cannot be met with our cash on hand, cash from operating activities and borrowings under our Credit Facility.
We also believe we have flexibility with respect to our financing alternatives and can make adjustments to our capital expenditure plans if circumstances warrant. We do not have any material continuing commitments related to our current operations that cannot be met with our cash on hand, cash from operating activities and borrowings under our Credit Facility.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion and analysis of our financial condition and results of operations for each of the years ended December 31, 2024 and 2023 are based on, and should be read in conjunction with, our audited Consolidated Financial Statements and the related notes included elsewhere in this 2024 Annual Report on Form 10-K.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion and analysis of our financial condition and results of operations for each of the years ended December 31, 2025 and 2024 are based on, and should be read in conjunction with, our audited Consolidated Financial Statements and the related notes included elsewhere in this 2025 Annual Report on Form 10-K.
Please read the table below to see how Adjusted EBITDA reconciles to our net income (loss), the most directly comparable GAAP financial measure.
Please read the table below to see how Adjusted EBITDA reconciles to our net income, the most directly comparable GAAP financial measure.
In this process, we consider all available positive and negative evidence including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. As of December 31, 2024, we have no valuation allowance and fully expect to utilize all of our deferred tax assets.
In this process, we consider all available positive and negative evidence including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. As of December 31, 2025, we have no valuation allowance and fully expect to utilize all of our deferred tax assets.
As demand and prices increase, oil and gas producers typically increase their capital expenditures for drilling, development and production activities, although recent equity capital constraints and demands from institutional investors to keep spending within operating cash flow have meaningfully restrained capital expenditure budgets of domestic exploration and production companies.
As demand and prices increase, oil and gas producers typically increase their capital expenditures for drilling, development and production activities, although recent equity capital constraints and demands from institutional investors to keep spending within operating cash flow have meaningfully restrained capital expenditure budgets of domestic E&P companies.
We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and Marcellus Shale. 27 Non-GAAP Financial Measures We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitably and liquidity.
We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and the Utica and Marcellus Shales. 24 Non-GAAP Financial Measures We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitably and liquidity.
After the terms of the contract have expired, a customer may renew its contract or continue renting on a monthly basis thereafter.
After the terms of the agreement have expired, a customer may renew its agreement or continue renting on a monthly basis thereafter.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP.
Our Credit Facility is subject to: (i) a borrowing base calculation, (ii) variable rates of interest on borrowings that are determined, in part, upon our actual leverage ratio, as defined in the Credit Facility, (iii) commitment fees, (iv) certain financial and other covenants and (v) events of default and acceleration, among other terms and conditions that are customary for such credit instruments.
The maturity date of the Credit Facility is February 28, 2028. 34 Our Credit Facility is subject to: (i) a borrowing base calculation, (ii) variable rates of interest on borrowings that are determined, in part, upon our actual leverage ratio, as defined in the Credit Facility, (iii) commitment fees, (iv) certain financial and other covenants and (v) events of default and acceleration, among other terms and conditions that are customary for such credit instruments.
For a description of limitations inherent in forward-looking statements, see “Special Note Regarding Forward-Looking Statements” on page i and Part I, Item 1A. “ Risk Factors ” in this Report. All dollar amounts included in the tables that follow are presented in thousands unless otherwise indicated.
For a description of limitations inherent in forward-looking statements, see “Special Note Regarding Forward-Looking Statements” on page i and Part I, Item 1A. “Risk Factors” in this Report. All dollar amounts included in the tables that follow are presented in thousands unless otherwise indicated.
As of December 31, 2024, we had approximately $130.0 million available for borrowing under the Credit Facility, subject to borrowing base determination. As of December 31, 2024, we were in compliance with all financial covenants in our Credit Facility.
As of December 31, 2025, we had approximately $170.0 million available for borrowing under the Credit Facility, subject to borrowing base determination. As of December 31, 2025, we were in compliance with all financial covenants in our Credit Facility.
Gain on the Sale of Property and Equipment As circumstances warrant, we will market certain property and equipment, primarily trucks, when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets. Gains and losses are recognized accordingly upon the completion of such transactions.
Such retirements were minimal during 2024. 30 Gain on Disposition of Assets As circumstances warrant, we will market certain property and equipment, primarily trucks, when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets. Gains and losses are recognized accordingly upon the completion of such transactions.
Please see Note 1 2 ( “ Deferred Compensation Plan ” ) to our Consolidated Financial Statements for additional information regarding the plan.
Please see Note 12 ( “ Deferred Compensation Plan ” ) to our Consolidated Financial Statements for additional information regarding the deferred compensation plan.
Our rental contracts generally provide for initial terms of six to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units. After the initial term of our rental contracts, most of our customers have continued to rent our compressors on a month-to-month basis.
Our rental agreements generally provide for initial terms of 12 to 60 months, with our large horsepower units having longer initial terms than our small and medium horsepower units. After the initial term of our rental agreements, most of our customers have continued to rent our compressors on a month-to-month basis.
The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.
The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units.
Certain variances presented as changes in year over year amounts that represent results that are not meaningful are indicated as “NM.” Overview We rent, design, sell, service, operate and maintain natural gas compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers along with limited in-house assembly.
Certain variances presented as changes in year over year amounts that represent results that are not meaningful are indicated as “NM.” Overview We rent, design, install, service and maintain natural gas and electric compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers.
Please see Note 1 1 ( “ Income Taxes ”) for a more thorough discussion of our income taxes. 39 Off-Balance Sheet Arrangements From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of December 31, 2024, we did not have any material off-balance sheet arrangements.
Please see Note 11 (“Income Taxes”) for a more thorough discussion of our income taxes. Off-Balance Sheet Arrangements From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of December 31, 2025, we did not have any material off-balance sheet arrangements.
In recent years we have increased our rental and sales in unconventional oil shale plays, which are more dependent on crude oil prices.
In recent years we have increased our rentals in unconventional oil shale plays, which are more dependent on crude oil prices.
For the year ended December 31, 2024, our provision for excess and obsolete inventory totaled $1.9 million which increased our allowance for obsolescence to $5.9 million as described more fully in the discussion of our Results of Operations above and Note 4 ( “ Inventory ”) to our Consolidated Financial Statements.
For the year ended December 31, 2025, our provision for excess and obsolete inventory totaled $1.1 million which increased our allowance for obsolescence to $3.6 million as described more fully in the discussion of our Results of Operations above and Note 4 (“Inventory”) to our Consolidated Financial Statements.
We also have a right to request from the Lender, an increase to the potential aggregate commitment of up to $50.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $350.0 million.
We also have a right to request from the Lenders, an increase to the potential aggregate commitment of up to $100.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $500.0 million.
For additional information and an analysis of or historical cash flows from operating activities, see the “Cash Flows” discussion that follows. Credit Facility Borrowings . During 2024, we borrowed $6.0 million, net of repayments, under the Credit Facility. Through March 14, 2025, we repaid $2.0 million, net of borrowings under the Credit Facility.
For additional information and an analysis of or historical cash flows from operating activities, see the “Cash Flows” discussion that follows. Credit Facility Borrowings . During 2025, we borrowed $60.0 million, net of repayments, under the Credit Facility.
The oil and gas equipment rental and services industry is cyclical in nature. The most critical factor in assessing the outlook for the industry is the worldwide supply and demand for oil and gas and the corresponding changes in commodity prices.
The most critical factor in assessing the outlook for the industry is the worldwide supply and demand for oil and gas and the corresponding changes in commodity prices.
Aftermarket Services We provide routine or call-out services on customer-owned equipment as well as commissioning of new units for customers. Revenue is recognized after services in the contract are rendered. The primary costs associated with our aftermarket services are labor, support costs, materials and supplies.
Sales represented an insignificant portion of our overall gross margins in 2025 and 2024. Aftermarket Services We provide routine or call-out services on customer-owned equipment as well as commissioning of new units for customers. Revenue is recognized after services in the contract are rendered. The primary costs associated with our aftermarket services are labor, support costs, materials and supplies.
The following table calculates our gross margin, the most directly comparable GAAP financial measure, and reconciles it to Adjusted gross margin with further detail by revenue classification for the periods presented: Year Ended December 31, 2024 2023 2022 Total revenue $ 156,742 $ 121,167 $ 84,825 Cost of revenue, exclusive of depreciation and amortization (68,756) (62,454) (46,357) Depreciation allocable to cost of revenues (30,813) (25,856) (23,551) Gross margin 57,173 32,857 14,917 Depreciation allocable to cost of revenues 30,813 25,856 23,551 Adjusted gross margin $ 87,986 $ 58,713 $ 38,468 Adjusted gross margin by revenue classification: Rental $ 87,333 $ 57,282 $ 36,715 Sales (290) 2 918 Aftermarket services 943 1,429 835 Total adjusted gross margin $ 87,986 $ 58,713 $ 38,468 28 Adjusted EBITDA “Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses.
The following table calculates our gross margin, the most directly comparable GAAP financial measure, and reconciles it to Adjusted gross margin with further detail by revenue classification for the periods presented: Year Ended December 31, 2025 2024 2023 Total revenue $ 172,315 $ 156,742 $ 121,167 Cost of revenue, exclusive of depreciation and amortization (71,778) (68,756) (62,454) Depreciation allocable to cost of revenues (36,298) (30,813) (25,856) Gross margin 64,239 57,173 32,857 Depreciation allocable to cost of revenues 36,298 30,813 25,856 Adjusted gross margin $ 100,537 $ 87,986 $ 58,713 Adjusted gross margin by revenue classification: Rental $ 99,594 $ 87,333 $ 57,282 Sales (241) (290) 2 Aftermarket services 1,184 943 1,429 Total adjusted gross margin $ 100,537 $ 87,986 $ 58,713 25 Adjusted EBITDA “Adjusted EBITDA” is a non-GAAP financial measure that we define as net income before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses.
Of the 1,208 compressors utilized as of December 31, 2024, 573 were being rented on a month-to-month basis. Our Performance Trends and Outlook The oil and gas industry has historically been cyclical and production levels of oil and gas are dependent upon numerous factors.
Of the 1,245 compressors utilized as of December 31, 2025, 754 were being rented under multi-year contracts and 491 were being rented on a month-to-month basis. Our Performance Trends and Outlook The oil and gas industry has historically been cyclical and production levels of oil and gas are dependent upon numerous factors.
Please see Note 10 ( “ L o ng-Term Debt ” ) to our Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility. As of December 31, 2024, we had $170.0 million outstanding under our Credit Facility with a weighted average interest rate of 8.12%.
Please see Note 10 ( “ Long-Term Debt ” ) to our Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility. As of December 31, 2025, we had $230.0 million outstanding under our Credit Facility with a weighted average interest rate of 6.59%.
We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our results of operations, financial condition and cash flows and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. 38 Inventories We value our total inventory (current and long-term) at the lower of the actual cost and net realizable value.
We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our results of operations, financial condition and cash flows and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Rental amounts are billed monthly in advance and include maintenance of the rented compressor units. We conduct our operations in several oil and gas producing basins throughout the United States including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale.
Rental amounts are billed monthly in advance and include maintenance of the rented compressor units. We conduct our operations in several oil and gas producing basins throughout the U.S. including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale. We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio.
In addition, our financing capacity could be negatively impacted by other economic factors. Please see Part I, Item 1A, “Risk Factors” , of this Report. For a detailed analysis of our historical capital expenditures, see the “Cash Flows” discussion that follows. Cash From Operating Activitie s. As of December 31, 2024, we had $2.1 million of cash on hand.
In addition, our financing capacity could be negatively impacted by other economic factors. Please see Part I, Item 1A, “Risk Factors” , of this Report. For a detailed analysis of our historical capital expenditures, see the “Cash Flows” discussion that follows. Cash From Operating Activitie s. Our cash provided by operating activities was $62.9 million.
Please see Note 1 1 ( “ I ncome Taxes ” ) to our Consolidated Financial Statements for additional information.
Please see Note 11 ( “ Income Taxes ” ) to our Consolidated Financial Statements for additional information.
Other amounts include certain vendor rebates and other miscellaneous non-operating income. Income Tax Expense Income tax expense represents our income tax provision as determined in accordance with GAAP. It considers taxes attributable to our obligations for federal taxes under the IRC as well as to various states in which we operate, primarily Texas.
Provision for Income Taxes Provision for income taxes represents our income taxes as determined in accordance with GAAP. It considers taxes attributable to our obligations for federal taxes under the IRC as well as to various states in which we operate, primarily Texas.
The following table reconciles our net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented: Year Ended December 31, 2024 2023 2022 Net income (loss) $ 17,227 $ 4,747 $ (569) Interest expense 11,927 4,082 364 Income tax expense 4,439 1,873 528 Depreciation and amortization 31,347 26,550 24,116 Impairments 841 779 — Inventory allowance 1,863 3,965 83 Retirement of rental equipment 28 505 196 Severance and restructuring charges 33 1,224 2,537 Stock-based compensation 1,821 2,054 1,910 Adjusted EBITDA $ 69,526 $ 45,779 $ 29,165 29 Results of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Rentals We generate revenue from renting compressors to our customers.
The following table reconciles our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented: Year Ended December 31, 2025 2024 2023 Net income $ 19,928 $ 17,227 $ 4,747 Interest expense 13,565 11,927 4,082 Interest income (2,444) — — Income tax expense 6,603 4,439 1,873 Depreciation and amortization 36,656 31,347 26,550 Impairments 2,600 841 779 Inventory allowance 1,114 1,863 3,965 Retirement of rental equipment 728 28 505 Severance and restructuring charges 89 33 1,224 Stock-based compensation 2,126 1,821 2,054 Adjusted EBITDA $ 80,965 $ 69,526 $ 45,779 26 Results of Operations Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024 Rental We generate revenue from renting, maintaining and servicing compressors to our customers under contractual arrangements.
The following table presents the gains recognized upon the sale of property and equipment for the periods presented: Year Ended December 31, 2024 2023 Change % Change Gain on the sale of property and equipment, net $ 430 $ 481 $ (51) (10.6) % Gains recognized during the years ended December 31, 2024 and 2023 are primarily attributable to the sales of trucks after the completion of their useful lives.
The following table presents the gains recognized upon the disposition of assets for the periods presented: Year Ended December 31, 2025 2024 Change % Gain on the disposition of assets, net $ 270 $ 430 $ (160) (37.2) % Gains recognized during the years ended December 31, 2025 and 2024 are primarily attributable to the sales of trucks after the completion of their useful lives.
Generally, we feel that the level of demand for our compressor services is more closely tied to production activities, which are likely to fare better than drilling activity in periods of declining commodity prices.
In recent years, our level of activity has become more largely driven by the price of crude oil as opposed to natural gas. Generally, we feel that the level of demand for our compressor services is more closely tied to production activities, which are likely to fare better than drilling activity in periods of declining commodity prices.
These contracts, which all qualify as operating leases under GAAP, may also include a fee for servicing the compressor unit during the rental contract. Our rental contracts typically range from six to 60 months. Our revenue is recognized over time, with monthly payments over the term of the contract.
The underlying rental service agreements, which all qualify as operating leases under GAAP, generally include a fee for servicing the compressor unit as well as surcharges for fluids during the rental term. Our rental agreement terms typically range from 12 to 60 months. Our revenue is recognized over time, with monthly payments over the term of the agreement.
In addition, amounts are included during both years for sales scrap materials. Interest Expense Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our Credit Facility, net of amounts capitalized attributable to certain capital projects. Also included is interest expense on our financing leases.
Interest Expense Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our Credit Facility, net of amounts capitalized attributable to certain capital projects. Also included is interest expense on our financing leases during 2024 as all were settled before 2025.
Operating Highlights The following table summarizes our key operating statistics as of the dates or for the periods presented, as applicable: December 31, 2024 2023 2022 Rented horsepower (at period end) 491,756 420,432 318,350 Average rented horsepower 457,302 369,484 308,065 Fleet horsepower available (at period end): 598,840 520,365 425,340 Fleet horsepower available - average 558,752 472,360 423,054 Horsepower utilization (at period end) 82.1 % 80.8 % 74.8 % Average horsepower utilization 81.8 % 78.2 % 72.8 % Units utilized (at period end) 1,208 1,247 1,221 Fleet units (at period end): 1,912 1,876 1,869 Unit utilization (at period end) 63.2 % 66.5 % 65.3 % Rental revenues $ 144,236 $ 106,159 $ 74,465 Total revenues $ 156,742 $ 121,167 $ 84,825 Rental revenues as a percent of total revenues 92.0 % 87.6 % 87.8 % Of the total horsepower utilized as of December 31, 2024, 376,685 of horsepower was being rented under contracts expiring between 2025 and 2029 and 115,071 of that horsepower was being rented on a month-to-month basis.
Operating Highlights The following table summarizes our key operating statistics as of the dates or for the periods presented, as applicable: December 31, 2025 2024 2023 Rented horsepower (at period end) 562,676 491,756 420,432 Average rented horsepower 510,648 457,302 369,484 Fleet horsepower available (at period end) 662,542 598,840 520,365 Fleet horsepower available - average 610,580 558,752 472,360 Horsepower utilization (at period end) 84.9 % 82.1 % 80.8 % Average horsepower utilization 83.6 % 81.8 % 78.2 % Units utilized (at period end) 1,245 1,208 1,247 Fleet units (at period end): 1,914 1,912 1,876 Unit utilization (at period end) 65.0 % 63.2 % 66.5 % Rental revenues $ 164,326 $ 144,236 $ 106,159 Total revenues $ 172,315 $ 156,742 $ 121,167 Rental revenues as a percent of total revenues 95.4 % 92.0 % 87.6 % Of the total horsepower utilized as of December 31, 2025, 464,137 of horsepower was being rented under contracts expiring between 2026 and 2030 and 98,539 of that horsepower was being rented on a month-to-month basis.
Aftermarket services only represented 3.1 percent of our revenue in 2024, providing minimal impact on our overall adjusted gross margin. 31 Selling, General and Administrative Expenses Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, human resources, information technology, health, safety and environmental and investor relations.
Aftermarket services represented an insignificant portion of our overall gross margins in 2025 and 2024. 28 Selling, General and Administrative Expenses Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, procurement, logistics and supply chain, human resources, information technology (“IT”), health, safety and environmental and investor relations.
We have a five-year senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association (the “Lender”) as administrative agent, TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with a total commitment of $300.0 million.
We have a senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association as administrative agent (the “Administrative Agent”), and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners, and the lenders party thereto (the “Lenders”), with a total commitment of $400.0 million.
Impairments We assess our long-lived assets, including rental equipment, other property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate that the net carrying values may not be recoverable.
We regularly review the appropriateness of the estimated useful lives of our long-lived assets and may shorten or extend such lives as appropriate based on business circumstances. 35 Impairments We assess our long-lived assets, including rental equipment, other property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate that the net carrying values may not be recoverable.
State of the Industry and Outlook Our strategy for growth is focused on our compressor rental business. Gross margins, exclusive of depreciation and amortization, for our rental business have historically been in the mid-40 percent to low-60 percent range, while margins for the compressor sales business tend to be substantially lower.
Gross margins, exclusive of depreciation and amortization, for our rental business have historically been in the mid-50 percent to low-60 percent range, while margins for the compressor sales and aftermarket services businesses tend to be substantially lower. The oil and gas equipment rental and services industry is cyclical in nature.
Impairments We assess our long-lived assets for impairment on an annual basis or when indicators of impairment are present. An impairment loss is recognized if the future undiscounted cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s carrying value.
An impairment loss is recognized if the future undiscounted cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s carrying value.
In addition, SG&A includes non-personnel costs, such as occupancy costs, IT support costs, professional fees and other supporting corporate expenses including public company compliance costs. When applicable, SG&A expenses also includes severance benefits and related costs associated with exit activities and restructuring actions.
In addition, SG&A includes non-personnel costs, such as rent and occupancy, IT support, professional fees and other supporting corporate expenses including public company compliance costs.
The following table summarizes our borrowing activity under the Credit facility for the periods presented: Borrowings Outstanding End of Period Weighted-average Maximum Weighted-average Rate Three months ended December 31, 2024 $ 170,000 $ 172,230 $ 180,000 8.47 % Year ended December 31. 2024 $ 170,000 $ 169,008 $ 180,000 8.83 % For additional information regarding the terms and covenants under the Credit Facility, see the “Capitalization” discussion that follows. 36 Proceeds from Sales and Monetization of Assets .
The following table summarizes our borrowing activity under the Credit facility for the periods presented: Borrowings Outstanding End of Period Weighted-average Maximum Weighted-average Rate Three months ended December 31, 2025 $ 230,000 $ 220,600 $ 230,000 6.82 % Year ended December 31. 2025 $ 230,000 $ 192,921 $ 230,000 7.31 % For additional information regarding the terms and covenants under the Credit Facility, see the “Capitalization” discussion that follows.
We feel that the current crude oil market production outlook is favorable, with current prices creating strong incentives for our customers to maximize their production levels. While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels.
While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels. Natural Gas .
The following table indicates the charges incurred for inventory allowance for the periods presented: Year Ended December 31, 2024 2023 Change % Change Inventory allowance $ 1,863 $ 3,965 $ (2,102) (53.0) % Due primarily to the slow-moving nature, obsolescence of a portion of our long-term inventory and inventory related to the retirement of certain rental equipment, we recorded an increase of $1.9 million to the inventory allowance reserve for the year ended December 31, 2024.
Due primarily to the slow-moving nature, obsolescence of our long-term inventory and inventory related to the retirement of certain rental equipment, we recorded an increase of $1.9 million to the inventory allowance reserve for the year ended December 31, 2024. We ended 2025 with an inventory allowance balance of $3.6 million.
We regularly review inventory quantities on hand and record an allowance for excess and obsolete inventory based primarily on current and anticipated customer demand and production requirements.
Inventories We value our total inventory (current and long-term) at the lower of the actual cost and net realizable value. We regularly review inventory quantities on hand and record an allowance for excess and obsolete inventory based primarily on current and anticipated customer demand and production requirements.
The decrease in net borrowings is due primarily to the substantial investment in large horsepower units during the prior year consistent with our strategy of directing our business to these larger, higher margin applications.
During 2025, we had net borrowings of $60.0 million under the Credit Facility while 2024 included net borrowings of $6.0 million. The increase in net borrowings is due primarily to the substantial investment in large horsepower units during the prior year consistent with our expanding fleet and strategy of directing our business to these larger, higher margin applications.
Depreciation and Amortization Depreciation and amortization expenses reflect the depreciation of our rental compressor fleet as well as the depreciation and amortization of our operating and corporate facilities, vehicles and other equipment, and the amortization of finance leases and intangible assets.
PSUs generally have a higher grant-date fair value than traditional restricted stock and restricted stock unit awards. Depreciation and Amortization Depreciation and amortization expenses reflect the depreciation of our rental compressor fleet as well as the depreciation and amortization of our operating and corporate facilities, vehicles and other equipment, and the amortization of finance leases and intangible assets.
While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the gross margin declined to a negative value due primarily to indirect labor and fixed overhead costs that are not otherwise subject to capitalization at our assembly, repair and overhaul facilities.
While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the adjusted gross margin improved marginally due primarily to the absence of indirect labor and fixed overhead costs that are not otherwise subject to capitalization subsequent to the closure of the former facility in Midland, Texas which we closed at the end of March 2025.
From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities. We maintain an effective shelf registration statement with the SEC for up to $200 million for a variety of securities to provide financing optionality.
From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities.
The following table summarizes the revenues, costs and adjusted gross margin with respect to our aftermarket services for the periods presented: Year Ended December 31, 2024 2023 Change % Change Aftermarket services revenue $ 4,893 $ 6,087 $ (1,194) (19.6) % Cost of aftermarket services (excluding depreciation and amortization) 3,950 4,658 (708) (15.2) % Aftermarket services adjusted gross margin $ 943 $ 1,429 $ (486) (34.0) % Aftermarket services adjusted gross margin percentage 19.3 % 23.5 % (4.2) % Percent of total company revenues 3.1 % 5.0 % (1.9) % Third party aftermarket services revenues, costs and margin declined for the year ended December 31, 2024, compared to 2023.
The following table summarizes the revenues, costs and adjusted gross margin with respect to our aftermarket services for the periods presented: Year Ended December 31, 2025 2024 Change % Aftermarket services revenue $ 3,997 $ 4,893 $ (896) (18.3) % Cost of aftermarket services (excluding depreciation and amortization) 2,813 3,950 (1,137) (28.8) % Aftermarket services adjusted gross margin $ 1,184 $ 943 $ 241 25.6 % Aftermarket services adjusted gross margin percentage 29.6 % 19.3 % 10.3 % Percent of total company revenues 2.3 % 3.1 % (0.8) % Aftermarket services revenues and costs declined for the year ended December 31, 2025, compared to 2024; however, the absolute gross margin and percentage both improved as compared to 2024.
The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressors, parts and equipment and repair/overhaul services for the periods presented: Year Ended December 31, 2024 2023 Change % Change Sales revenue $ 7,613 $ 8,921 $ (1,308) (14.7) % Cost of sales (excluding depreciation and amortization) 7,903 8,919 (1,016) (11.4) % Sales adjusted gross margin $ (290) $ 2 $ (292) NM Sales adjusted gross margin percentage (3.8) % — % (3.8) % Percent of total company revenues 4.9 % 7.4 % (2.5) % Sales revenue declined for the year ended December 31, 2024, compared to 2023.
The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressors, parts and equipment and repair/overhaul services for the periods presented: Year Ended December 31, 2025 2024 Change % Sales revenue $ 3,992 $ 7,613 $ (3,621) (47.6) % Cost of sales (excluding depreciation and amortization) 4,233 7,903 (3,670) (46.4) % Sales adjusted gross margin $ (241) $ (290) $ 49 NM Sales adjusted gross margin percentage (6.0) % (3.8) % (2.2) % Percent of total company revenues 2.3 % 4.9 % (2.6) % Sales revenue declined for the year ended December 31, 2025, as compared to 2024 due primarily to the phasing out of direct sales of compressors and rebuild work which was the primary focus of the former Midland Facility.
The following table summarizes our income tax provision for the periods presented: Year Ended December 31, 2024 2023 Change % Change Income tax expense $ 4,439 $ 1,873 $ 2,566 NM Effective tax rate 20.5 % 28.3 % (7.80) % Income tax expense increased for the year ended December 31, 2024, compared to 2023 due primarily to substantially higher pre-tax income during 2024 despite a lower effective tax rate.
The following table summarizes our income tax provision for the periods presented: Year Ended December 31, 2025 2024 Change % Income tax expense $ 6,603 $ 4,439 $ 2,164 48.7 % Effective tax rate 24.9 % 20.5 % 4.40 % Income tax expense increased for the year ended December 31, 2025, compared to 2024 due primarily to substantially higher pre-tax income during 2025 and the impact of a higher effective tax rate attributable to state and local income taxes.
As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the year ended December 31, 2024, compared to the year ended December 31, 2023. 30 Sales We generate revenue by the sale of custom/assembled compressors and parts, as well as exchange/rebuilding customer owned compressors and sale of used rental equipment.
As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the year ended December 31, 2025, compared to the year ended December 31, 2024. 27 Sales We generate revenue primarily from the sale of compressor parts. Costs of sales include purchases of component materials.
The following table summarizes the components of our SG&A expenses for the periods presented: Year Ended December 31, 2024 2023 Change % Change Primary selling, general and administrative expenses $ 19,158 $ 13,660 $ 5,498 40.2 % Stock-based compensation 1,821 2,054 (233) (11.3) % Severance and restructuring charges 33 1,224 (1,191) NM Total $ 21,012 $ 16,938 $ 4,074 24.1 % SG&A expenses as a percent of total revenues 13.4 % 14.0 % (0.6) % SG&A expenses increased for the year ended December 31, 2024, as compared to 2023 on an absolute dollar basis while continuing a steady decline as a percent of revenues.
The following table summarizes the components of our SG&A expenses for the periods presented: Year Ended December 31, 2025 2024 Change % Primary selling, general and administrative expenses $ 20,285 $ 19,191 $ 1,094 5.7 % Stock-based compensation - equity classified 2,126 1,821 305 16.7 % Total $ 22,411 $ 21,012 $ 1,399 6.7 % SG&A expenses as a percent of total revenues 13.0 % 13.4 % (0.4) % SG&A expenses increased for the year ended December 31, 2025, as compared to 2024 on an absolute dollar basis and declined marginally as a percent of total revenues.
Please see Note 4 ( “ Inventory ” ) to our Consolidated Financial Statements for additional information regarding the inventory allowance. 33 Retirement of Rental Equipment We routinely review the rental fleet to determine which units are no longer of the type, configuration, make or model that our customers are demanding or that are not cost efficient to refurbish, maintain and/or operate.
Retirement of Rental Equipment We routinely review the rental fleet to determine which units are no longer of the type, configuration, make or model that our customers are demanding or that are not cost efficient to refurbish, maintain and/or operate. When appropriate, we retire such units from the fleet and write-off any remaining carrying value.
While we incurred and paid debt issuance costs during both years, the amounts paid during 2023 were $1.7 million higher as the Credit Facility was substantially upsized with the amendment and restatement in February 2023.
While we incurred and paid debt issuance costs during both years, the amounts paid during 2024 were $0.3 million higher in connection with the Fourth Amendment during 2025 as compared to the costs for amendments to the Credit Facility in 2024.
The use of different estimates and assumptions in the determination of depreciation, particularly with respect to useful lives, could result in significant differences to our results of operations. We regularly review the appropriateness of the estimated useful lives of our long-lived assets and may shorten or extend such lives as appropriate based on business circumstances.
The use of different estimates and assumptions in the determination of depreciation, particularly with respect to useful lives, could result in significant differences to our results of operations.
When the carrying value exceeds the net realizable value, a charge is recorded to operating income.
Inventory Allowance We routinely review our stock of inventory for obsolescence and realizability. When the carrying value exceeds the net realizable value, a charge is recorded to operating income.
The level of our capital expenditures will vary in future periods depending on energy market conditions and other related economic factors.
Our forecasted capital expenditures for 2026 will continue to be directly dependent upon our customers’ compression requirements and our capital availability, while maintaining prudent levels of debt. The level of our capital expenditures will vary in future periods depending on energy market conditions and other related economic factors.
We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio. A total of 75 percent of our rental revenue is generated from the Permian Basin and approximately 75 percent of our rental revenue supports oil production primarily in the form of gas lift operations. We operate in one reporting segment.
A total of 78 percent of our rental revenue is generated from the Permian Basin and approximately 90 percent of our rental revenue supports oil production primarily in the form of gas lift operations. We operate in one reporting segment. State of the Industry and Outlook Our strategy for growth is focused on our compressor rental business.
The following table summarizes the revenues, costs, adjusted gross margin and related operating statistics with respect to our rentals of compressors for the periods presented: Year Ended December 31, 2024 2023 Change % Change Rental revenue $ 144,236 $ 106,159 $ 38,077 35.9 % Cost of rentals (excluding depreciation and amortization) 56,903 48,877 8,026 16.4 % Rental adjusted gross margin $ 87,333 $ 57,282 $ 30,051 52.5 % Rental adjusted gross margin percentage 60.5 % 54.0 % 6.5 % Percent of total company revenues 92.0 % 87.6 % 4.4 % Rented horsepower 491,756 420,432 71,324 17.0 % Percent of fleet horsepower utilized 82.1 % 80.8 % 1.3 % Units utilized 1,208 1,247 (39) (3.1) % Percent of fleet units utilized 63.2 % 66.5 % (3.3) % Customers under contract 68 84 (16) (19.0) % Rental revenue increased for the year ended December 31, 2024, compared to 2023 due primarily to an increase in rented horsepower despite a nominal decrease in the number of units rented and a decrease in total customers.
The following table summarizes the revenues, costs, adjusted gross margin and related operating statistics with respect to our rentals of compressors for the periods presented: Year Ended December 31, 2025 2024 Change % Rental revenue $ 164,326 $ 144,236 $ 20,090 13.9 % Cost of rentals (excluding depreciation and amortization) 64,732 56,903 7,829 13.8 % Rental adjusted gross margin $ 99,594 $ 87,333 $ 12,261 14.0 % Rental adjusted gross margin percentage 60.6 % 60.5 % 0.1 % Percent of total company revenues 95.4 % 92.0 % 3.4 % Rented horsepower (at period end) 562,676 491,756 70,920 14.4 % Horsepower utilization (at period end) 84.9 % 82.1 % 2.8 % Units utilized (at period end) 1,245 1,208 37 3.1 % Units utilization 65.0 % 63.2 % 1.8 % Rental revenue increased for the year ended December 31, 2025, as compared to 2024 due primarily to an increase in rented horsepower and units utilized.
Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the year. Our rental work-in-progress increased by $0.8 million and $13.8 million during 2024 and 2023, respectively. We paid $0.2 million and $0.4 million for COLI policy purchases during 2024 and 2023.
Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the year.
The following table summarizes the components of our depreciation and amortization expenses for the periods presented: Year Ended December 31, 2024 2023 Change % Change Depreciation and amortization allocable to cost of revenues: Rental $ 30,453 $ 25,507 $ 4,946 19.4 % Sales 296 260 36 13.8 % Aftermarket services 64 89 (25) (28.1) % 30,813 25,856 4,957 19.2 % Corporate depreciation 413 569 (156) (27.4) % Intangible asset amortization 121 125 (4) (3.2) % Total $ 31,347 $ 26,550 $ 4,797 18.1 % Depreciation and amortization as a percent of total revenues 20.0 % 21.9 % (1.9) % 32 Depreciation and amortization expense increased on an absolute basis and declined as a percent of revenues during the year ended December 31, 2024, compared to 2023.
The following table summarizes the components of our depreciation and amortization expenses for the periods presented: Year Ended December 31, 2025 2024 Change % Depreciation and amortization allocable to cost of revenues: Rental $ 35,812 $ 30,453 $ 5,359 17.6 % Sales 403 296 107 36.1 % Aftermarket services 83 64 19 29.7 % 36,298 30,813 5,485 17.8 % Corporate depreciation 358 413 (55) (13.3) % Intangible asset amortization — 121 (121) NM Total $ 36,656 $ 31,347 $ 5,309 16.9 % Depreciation and amortization as a percent of total revenues 21.3 % 20.0 % 1.3 % Depreciation and amortization expense increased on an absolute basis during the year ended December 31, 2025, compared to 2024, due primarily to depreciation expense associated with the large horsepower units placed in service during the second half of 2024 continuing through the end of 2025.
The cost of rentals increased on an absolute basis due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs.
The cost of rentals increased on an absolute basis, consistent with revenues, due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs. An expanding portion of our rented compressor units utilize our proprietary System Management and Recovery Technology (“SMART”) and telemetry software which reduces unplanned shutdowns and increases productivity.
The following table summarizes the components of our interest expense for the periods presented: Year Ended December 31, 2024 2023 Change % Change Interest on borrowings, finance leases and related fees $ 15,904 $ 9,156 $ 6,748 73.7 % Amortization of debt issue costs 746 425 321 75.5 % Capitalized interest (4,723) (5,499) 776 (14.1) % Total $ 11,927 $ 4,082 $ 7,845 NM Weighted-average interest rates on borrowings 8.82 % 8.88 % (0.06) % Weighted-average outstanding borrowings $ 169,008 $ 120,558 $ 48,450 Interest expense increased during the year ended December 31, 2024 as compared to 2023 due primarily to over $48 million of higher average borrowings outstanding under our Credit Facility during 2024.
The following table presents the components of our interest expense for the periods presented: Year Ended December 31, 2025 2024 Change % Interest on borrowings, finance leases and related fees $ 14,869 $ 15,904 $ (1,035) (6.5) % Amortization of debt issue costs 1,168 746 422 56.6 % Capitalized interest (2,472) (4,723) 2,251 (47.7) % Total $ 13,565 $ 11,927 $ 1,638 13.7 % Weighted-average interest rates on borrowings 7.31 % 8.82 % (1.51) % Weighted-average outstanding borrowings $ 192,921 $ 169,008 $ 23,913 Interest expense increased during the year ended December 31, 2025, as compared to 2024 due primarily to the effect of $2.3 million lower capitalized interest as a result of the volume and timing of the completion of certain compressor assembly projects during 2025.
The decline is primarily attributable to a lower volume of service call-out work performed during 2024 compared to 2023.
The decline in revenues and costs is primarily attributable to a lower volume of unit commissioning work performed during 2025 compared to 2024 as well as the effects of lower freight costs.
Consistent with our shift in focus away from the sales of compressor and related technology, we determined that we will no longer market the technology associated with the trade name. Please see Note 8 ( “ I n tangible Assets ” ) to our Consolidated Financial Statements for additional information.
Consistent with our shift in focus away from the sales of compressor and related technology, we determined that we will no longer market the technology associated with the trade name. In addition, we fully impaired certain IT assets in the amount of $0.2 million for which we terminated plans to develop and utilize the associated applications.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 66,463 $ 18,033 Net cash used in investing activities (71,440) (153,888) Net cash provided by financing activities 4,373 135,229 Net decrease in cash and cash equivalents $ (604) $ (626) Cash Flows from Operating Activities.
We maintain an effective shelf registration statement with the SEC for up to $200 million for a variety of securities to provide financing optionality. 33 Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2025 2024 Net cash provided by operating activities $ 62,927 $ 66,463 Net cash used in investing activities (121,297) (71,440) Net cash provided by financing activities 56,228 4,373 Net decrease in cash and cash equivalents $ (2,142) $ (604) Cash Flows from Operating Activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2024, we had borrowings of $170.0 million under the Credit Facility at a weighted average interest rate of 8.12%.
Biggest changeAs of December 31, 2025, we had borrowings of $230.0 million under the Credit Facility at a weighted average interest rate of 6.59%.
Assuming a constant borrowing level under the Credit Facility and excluding any changes in other financial metrics that would impact the applicable margin applied to Credit Facility borrowings, an increase (decrease) in the interest rate of one percent would result in an increase (decrease) in interest expense of $1.7 million on an annual basis.
Assuming a constant borrowing level under the Credit Facility and excluding any changes in other financial metrics that would impact the applicable margin applied to Credit Facility borrowings, an increase (decrease) in the interest rate of one percent would result in an increase (decrease) in interest expense of $2.3 million on an annual basis.

Other NGS 10-K year-over-year comparisons