Archrock, Inc., an energy infrastructure company, focuses on midstream natural gas compression and a commitment to helping its customers produce, compress and transport natural gas in a safe and environmentally responsible way.
The company is a premier provider of natural gas compression services to customers in the energy industry throughout the U.S., and a supplier of aftermarket services to customers that own compression equipment in the U.S. The company’s business supports a must–run servic...
Archrock, Inc., an energy infrastructure company, focuses on midstream natural gas compression and a commitment to helping its customers produce, compress and transport natural gas in a safe and environmentally responsible way.
The company is a premier provider of natural gas compression services to customers in the energy industry throughout the U.S., and a supplier of aftermarket services to customers that own compression equipment in the U.S. The company’s business supports a must–run service that is essential to the production, processing, transportation, and storage of natural gas.
The company operates in two business segments:
Contract Operations – The company’s contract operations business consists of its owned fleet of natural gas compression equipment that it uses to provide compression services to its customers.
Aftermarket Services – The company’s aftermarket services business provides a full range of services to support the compression needs of its customers that own compression equipment, including operations, maintenance, overhaul, and reconfiguration services, as well as sales of parts and components.
Contract Operations
Compression Services
The company provides comprehensive contract operations services, including the personnel, equipment, tools, materials, and supplies to meet its customers’ natural gas compression needs. Based on the operating specifications at the customer location and each customer’s unique needs, these services include designing, sourcing, owning, installing, operating, servicing, repairing, and maintaining the equipment. The company works closely with its customers’ field service personnel so that compression services can be adjusted to efficiently match changing characteristics of the reservoir and the natural gas produced, and may repackage or reconfigure its existing fleet to adapt to its customers’ compression needs.
Compression Fleet
The compressors that the company owns and uses to provide contract operations services are predominantly large horsepower, which it defines as greater than 1,000 horsepower per unit, and consist primarily of reciprocating compressors driven by natural gas–powered or electric motor drive engines. The company’s fleet is largely standardized around major components and key suppliers, which minimizes its fleet operating costs and maintenance capital requirements, reduces inventory costs, facilitates low–cost compressor resizing, and improves technical proficiency in its maintenance and overhaul operations, which in turn allows it to achieve higher uptime while maintaining lower operating costs.
All of the company’s compressors are designed to automatically shut down if operating conditions deviate from a pre–determined range, and substantially all are also equipped with telematic devices that enable it to remotely monitor the units. The company maintains field service locations from which it services and overhauls its fleet. The company’s equipment undergoes routine and preventive maintenance in accordance with its established maintenance schedules, standards, and procedures, which it updates as technology changes and as its operations group develops new techniques and procedures to better service its equipment. In the company’s experience, these maintenance practices maximize equipment life and unit availability, minimize emissions and avoidable downtime, while reducing the overall maintenance expenditures over the equipment life. As of December 31, 2024, the average age of the company’s operating fleet was 10 years.
General Terms of the Company’s Contract Operations Service Agreements
The company typically enters into a master service agreement with each customer that sets forth the general terms and conditions of its services, and then enters into a separate supplemental service agreement for each distinct site at which it provides contract operations services. The following describes select material terms common to its standard contract operations service agreements.
Term and Termination: The company’s customers typically contract for its contract operations services on a site–by–site basis that is generally reduced if it fails to operate in accordance with the contract requirements. Following the initial minimum term, which generally ranges from 12 to 36 months, or up to 60 months for the largest horsepower units in its fleet, contract operations services generally continue on a month–to–month basis until terminated by either party with 30 days’ advance notice.
Fees and Expenses: The company’s customers pay a fixed monthly fee for its contract operations services, which generally is based on the amount of horsepower associated with a specific application. In certain circumstances, such as limited or disrupted natural gas flows, the company’s customers may be provided a reduced monthly fee. The company is typically responsible for the costs and expenses associated with its compression equipment except for fuel gas or electricity, which is provided by its customers.
Service Standards and Specifications: The company provides contract operations services according to the particular specifications of each job, as set forth in the applicable contract. These are typically turn–key service contracts under which the company supplies all services and support and uses its compression equipment to provide the contract operations services necessary for a particular application. In certain circumstances, if the availability of its services does not meet certain percentages specified in its contracts, the company’s customers are generally entitled, upon request, to specified credits against its service fees.
Title and Risk of Loss: The company owns and retains title to or has an exclusive possessory interest in all compression equipment used to provide contract operations services, and it generally bears risk of loss for such equipment to the extent the loss is not caused by gas conditions, the company’s customers’ acts or omissions, or the failure or collapse of the customer’s over–water job site upon which it provides the contract operations services.
Insurance: Typically, both the company and its customers are required to carry general liability, workers’ compensation, employer’s liability, automobile, and excess liability insurance. Additionally, the company is substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles it absorbs under its insurance arrangements for these risks. The company is also self-insured for property damage to its offshore assets.
Aftermarket Services Overview
The company’s aftermarket services business sells parts and components and provides operations, major and routine maintenance, overhaul, and reconfiguration services to customers who own compression equipment. In addition, the company’s aftermarket services business provides opportunities to cross–sell its contract operations services.
The company has strong relationships with a deep base of midstream companies and natural gas and crude oil producers. The company’s contract operations revenue base is sourced from approximately 280 customers operating throughout all major U.S. natural gas and crude oil producing regions.
The company operates in substantially all major natural gas and crude oil producing regions in the U.S. It has a meaningful presence in associated gas plays, including the Permian and Eagle Ford shales, which, combined, account for approximately three-fourths of its operating horsepower.
Business Strategies
The company’s key strategies are to capitalize on the long–term fundamentals for the U.S. natural gas compression industry; focus on increasing productivity and optimizing the company’s processes; and continue to invest in strategically growing the company’s business both organically and through third–party acquisitions.
Sales and Marketing
The company’s marketing and client service functions are coordinated and performed by its sales and field service personnel. Salespeople, application engineers, and field service personnel qualify, analyze, and scope new compression applications, as well as regularly visit its customers to ensure customer satisfaction, determine customer needs as to services currently being provided, and ascertain potential future compression services requirements. This ongoing communication allows the company to respond swiftly to customer requests.
Customers
The company’s customer base consists primarily of companies engaged in all aspects of the oil and natural gas industry, including large integrated and independent oil and natural gas processors, gatherers, and transporters. The company has entered into preferred vendor arrangements with some of its customers that give it preferential consideration for their compression needs. In exchange, the company provides these customers with enhanced product availability, product support, and favorable pricing. During the year ended December 31, 2024, the company’s five most significant customers collectively accounted for 35% of its contract operations and aftermarket services revenue. During the year ended December 31, 2024, one customer accounted for more than 10% of the company’s consolidated revenue, and another customer accounted for more than 13% of its consolidated trade accounts receivable, both primarily related to its contract operations segment.
Governmental Regulation
The primary U.S. federal environmental laws to which the company’s operations are subject include the Clean Air Act (CAA) and regulations thereunder, which regulate air emissions; the Clean Water Act (CWA) and regulations thereunder, which regulate the discharge of pollutants in industrial wastewater and storm water runoff; the Resource Conservation and Recovery Act (RCRA) and regulations thereunder, which regulate the management and disposal of hazardous and non–hazardous solid wastes; and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and regulations thereunder, known more commonly as ‘Superfund,’ which impose liability for the remediation of releases of hazardous substances in the environment. The company is also subject to regulation under the Occupational Safety and Health Act (OSHA) and regulations thereunder, which regulate the protection of the safety and health of workers.
During the course of the company’s operations, it generates wastes (including, but not limited to, used oil, antifreeze, used oil filters, sludges, paints, solvents, and abrasive blasting materials) in quantities regulated under RCRA.
The company is subject to the requirements of the OSHA and comparable state statutes. These laws and the implementing regulations strictly govern the protection of the safety and health of employees. The OSHA’s hazard communication standard, the U.S. Environmental Protection Agency’s (EPA’s) community right–to–know regulations under Title III of CERCLA, and similar state statutes require that the company organize and/or disclose information about hazardous materials used or produced in its operations.
History
The company was founded in 1990. It was incorporated in 2007. The company was formerly known as Exterran Holdings, Inc. and changed its name to Archrock, Inc. in 2015.