Atlas Energy Solutions Q1 2025 Earnings Report

Atlas Energy Solutions EPS Results

• Actual EPS: $0.08
• Consensus EPS: $0.18
• Beat/Miss: Missed by -$0.10
• One Year Ago EPS: $0.26

Atlas Energy Solutions Revenue Results

• Actual Revenue: $297.59 million
• Expected Revenue: $291.13 million
• Beat/Miss: Beat by +$6.46 million
• YoY Revenue Growth: +54.50%

Atlas Energy Solutions Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 10:00AM ET

Atlas Energy Solutions (NYSE:AESI) engages in the production, processing, and sale of mesh and sand that are used as a proppant during the well completion process in the Permian Basin of Texas and New Mexico. The company provides transportation and logistics, storage solutions, and contract labor services. It sells its products and services to oil and natural gas exploration and production companies, and oilfield services companies. Atlas Energy Solutions Inc. was founded in 2017 and is headquartered in Austin, Texas.

Atlas Energy Solutions Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the Atlas Energy Solutions First Quarter twenty twenty five Financial and Operational Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kyle Turlington, Investor Relations.

[Operator]

Please go ahead, sir.

[Kyle Turlington, Vice President - IR at Atlas Energy Solutions]

Hello, and welcome to

[Kyle Turlington, Vice President - IR at Atlas Energy Solutions]

the Atlas Energy Solutions conference call and webcast for the first quarter of twenty twenty five. With us today are John Turner, President and CEO Blake McCarthy, CFO Chris Schola, COO and Bud Brigham, Executive Chair. John, Blake, Chris and Blug will be sharing their comments on the company's operational and financial performance for the first quarter of twenty twenty five, after which we will open the call for Q and A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward looking statements as defined under The U. S.

[Kyle Turlington, Vice President - IR at Atlas Energy Solutions]

Securities laws. Such statements are based on the current information and management's expectations as of this statement and are not guarantees of future performance. Forward looking statements involve certain risks and uncertainties and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially. You can learn more about these risks in the annual report on Form 10 ks we filed with the SEC on 02/25/2025, our quarterly reports on Form 10 Q and current reports on Form eight ks and other SEC filings.

[Kyle Turlington, Vice President - IR at Atlas Energy Solutions]

You should not place undue reliance on forward looking statements, and we undertake no obligation to update these forward looking statements. We will also make reference to certain non GAAP financial measures such as adjusted EBITDA, adjusted free cash flow and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in yesterday's press release. With that said, I will turn the call over to John Turner.

[John Turner, CEO at Atlas Energy Solutions]

Thank you, Kyle. For the first quarter of twenty twenty five, Atlas delivered revenues of $297,600,000 and adjusted EBITDA of $74,300,000 representing a margin of 25%. While results were modestly impacted by a few discrete items, primarily higher than expected commissioning costs related to the Dune Express, our core performance remains strong. Blake will speak to those items in more detail here shortly. Overall, Q1 was a milestone quarter for Atlas.

[John Turner, CEO at Atlas Energy Solutions]

We completed the acquisition of Moser Energy Systems, executed a successful equity raise, refinanced our debt, set production records at our core facilities and launched commercial operations for the Doon Express. Before diving into those accomplishments, I want to directly address the uncertainty currently facing the oilfield sector and how Atlas is uniquely positioned to navigate this environment with confidence. Recent volatility, largely driven by global trade concerns and macroeconomic uncertainty has pressured commodity prices. WTI's forward strip has declined approximately 20% since early April. These dynamics are influencing customer spending behavior and deferring some near term activity.

[John Turner, CEO at Atlas Energy Solutions]

That said, what management teams and markets dislike most is uncertainty, and we've structured Atlas from the outset to perform through both up cycles and downturns. We are not reacting from a position of weakness. We are executing from a position of strength. Atlas was built to lead through cycles, not follow them. In times like these, companies that control costs, prioritize capital discipline and innovate with purpose will be the ones that emerge stronger.

[John Turner, CEO at Atlas Energy Solutions]

On the Sand and Logistics side, our Kermit and Monahan's operations in combination with our Encore network and now the Dune Express position Atlas as the absolute low end of the Permian sand cost curve. On the power side, Mosier Energy's integrated manufacturing and field office platform allows us to offer lower cost, higher uptime solutions that create meaningful value for our customers. Moreover, our business model is designed for resilience. We operate with low sustaining capital requirements. Our annual maintenance CapEx is approximately 45,000,000 to $50,000,000 and we maintain the flexibility to scale this spending up or down in response to market conditions.

[John Turner, CEO at Atlas Energy Solutions]

Our recent refinancing consolidates our debt into a single facility with Eldridge, reducing our annual amortization to under $20,000,000 and enhancing liquidity and optionality. Unlike many oilfield service peers who struggle to breakeven in downturns, Atlas' structural advantages enable us to generate healthy free cash flow in weak markets while capturing outsized returns when conditions tighten. We're already seeing some customers pause growth plans that adopt a flat until further clarity stance. While this has delayed some second quarter volumes into the back half of the year, we entered 2025 with a strong allocation base of approximately 22,000,000 tons and continue to bid on meaningful new tenders. This pause is not a reset, it's a recalibration and we expect activity to resume as visibility improves.

[John Turner, CEO at Atlas Energy Solutions]

Turning to what gives us confidence. The Dune Express, while contributing minimally to Q1 financials is entering a critical phase. Volumes are stabilizing and we've begun routing deliveries through our end of line facility, optimizing last mile execution. We continue to expect Q2 to be the first period where the economic benefits of the New Express are reflected in our logistics margins. This is a long term infrastructure advantage and its early traction is already validating the strategy.

[John Turner, CEO at Atlas Energy Solutions]

Similarly, the integration of Mosier Energy Systems is progressing exceptionally well. The cultural alignment has been seamless and customer feedback has been overwhelmingly positive. Just as we disrupted the status quo in the sand and logistics business, we are taking a fresh approach in Distributed Power, exploring new business models and strategic partnerships to increase efficiency and lower customer costs. Mosher's spirit of innovation is evident with next generation offerings already in development that will further differentiate our Power platform. In closing, while short term uncertainty remains, our long term outlook is grounded in strategic clarity, operational discipline and structural advantage across our portfolio.

[John Turner, CEO at Atlas Energy Solutions]

We are confident in the platform we built and in the teams executing our vision every day. With that, I'll turn the call over to Chris Schola.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Thanks, John. At Atlas, we made a commitment to the communities of West Texas and New Mexico to enhance public safety by reducing truck traffic through the deployment of the Dune Express. Since its first delivery on January 12, the Dune Express has already eliminated an estimated 1,800,000 truck miles from our roads, and we're just getting started. The system continues to ramp steadily, setting new shipment records each month. This progress reflects the strength of our strategic execution and the long term vision that guides our business.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

The Dune Express is a powerful validation of our disruptive logistics model, one that simultaneously delivers cost savings to our customers, margin expansion for Atlas and meaningful improvements in public road safety. These achievements are rooted in our recommitment to the fundamentals of operational excellence. Over the past year, we've gone back to the basics and built around three core pillars: people, processes and technology, each reinforcing our long term ambition to create resilient, scalable and high performing operations. We've invested in people by strengthening leadership, restructuring teams for accountability and fostering a culture of ownership and cross functional collaboration. This alignment around common goals is driving operational discipline across the organization.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

We've optimized our processes through standardized workflows, improved visibility and the removal of bottlenecks. These efforts are translating directly into improved execution and cost efficiencies across the business. And on the technology front, we're enabling smarter data driven operations from implementing reliability based maintenance strategies to leveraging sensor data for predictive analytics. We're using technology to drive performance. Our autonomous trucking program has already completed over 500 deliveries to date, and we're poised to scale this significantly in the quarters ahead.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

In March, we set new monthly production records at our current facility and achieved a last mile volume record of 1,800,000 tons delivered. Encore continues to perform exceptionally well, maintaining strong volumes and demand. This operational momentum is a result of a focused transformation effort and a return to fundamentals. Before I hand the call over to Blake, I want to recognize and thank all of our teams across Atlas. It's your execution, dedication and teamwork that are delivering results today while positioning Atlas for long term sustainable success.

[Blake McCarthy, CFO at Atlas Energy Solutions]

Thanks, Chris. In Q1 twenty twenty five, Atlas generated revenues of $297,600,000 and adjusted EBITDA of $74,300,000 a 25% margin. EBITDA fell slightly below our guidance due to elevated costs from commissioning the Dune Express and incremental third party trucking bonuses to ensure deliveries during challenging winter road conditions. These factors reduced Q1 EBITDA by approximately $4,000,000 impacting service margins early in the quarter. January service margins dipped to the mid single digits, well below our historical 10% to 15% range, but rebounded by 1,100 basis points by March.

[Blake McCarthy, CFO at Atlas Energy Solutions]

We expect this recovery to accelerate in Q2 with service margins surpassing 20% as the Dune Express' benefits begin to materialize, though still below its full potential. Breaking down revenue, proppant sales totaled $139,700,000 logistics operations contributed 150,600,000.0 and Power Rentals added $7,300,000 Proppant volumes reached 5,700,000 tons, up sequentially despite weather related disruptions. Encore volumes more sensitive to freezing conditions were 1,700,000 tons, slightly down from Q4. Average revenue per ton was 24.71%, boosted by shortfall revenue from unmet customer pickups. Excluding this, the average price was $22.51 per ton.

[Blake McCarthy, CFO at Atlas Energy Solutions]

Total cost of sales, excluding DD and A, was $206,100,000 comprised of $65,200,000 in plant operating costs, dollars 133,500,000.0 in service costs, 2,300,000.0 in rental costs and 5,100,000 in royalties. Per ton plant operating costs fell to $11.53 excluding royalties, down from Q4 with further normalization expected in Q2 due to improved efficiencies. Cash SG and A was 26,600,000.0 including $8,200,000 in transaction costs tied to the Moser acquisition and the subsequent financing activities. Excluding these, SG and A was $18,500,000 up 6% from Q4. We anticipate SG and A rising above $20,000,000 per quarter starting in Q2 due to Moser's integration.

[Blake McCarthy, CFO at Atlas Energy Solutions]

DD and A was $37,000,000 Net income was $1,200,000 and earnings per share was $01 Adjusted free cash flow, which we define as adjusted EBITDA less maintenance CapEx, was $58,800,000 or 19.7% of revenue. Total incurred CapEx was $38,900,000 including $23,400,000 in growth CapEx and $2,100,000 for Power and $15,500,000 in maintenance CapEx. Q1 CapEx included Dune Express commissioning costs and we expect a sequential decline in Q2. For 2025, we're budgeting $115,000,000 in total CapEx with flexibility to adjust based on market conditions. As John noted, economic and commodity price uncertainty is prompting caution amongst our customers with several Q2 development plans deferred to the second half of twenty twenty five.

[Blake McCarthy, CFO at Atlas Energy Solutions]

Rather than play the game of death by 1,000 cuts, let's focus on what we know for Atlas in 2025. First, we have strong visibility on 22,000,000 tons with 3,000,000 tons of potential upside pending. Nearly all allocated volumes are tied to dedicated crews, minimizing exposure to volatile spot crews. Second, the Dune Express and our mobile mine network provide unmatched logistical cost advantages, facilitating high utilization even in softer markets. Assuming no additional opportunistic volumes this year and thus lower Dune Express throughput than previously forecast, we are currently projecting quarterly adjusted EBITDA run rate of 70,000,000 to $80,000,000 If deferred projects proceed, this could rise to 80,000,000 to 100,000,000 In either scenario, our financial obligations, including the current dividend are fully covered even without tapping our CapEx flexibility.

[Blake McCarthy, CFO at Atlas Energy Solutions]

Atlas' robust financial position allows us to keep investing for long term growth. Based on current market conditions and activity trends, we expect Q2 volumes and EBITDA to be flat to up from Q1. Before we open the call for Q and A, a few remarks from our Chairman, Bud Brigham.

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

Thank you, Blake.

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

I will be brief in general, given that the team has updated very well the current operational and financial aspects of our business. With over thirty five years of experience in the oil and gas industry, starting my first company in 1990 and now having managed three public companies, we've learned to not only navigate, but thrive in the industry's cyclical nature. The ability to transform challenges into opportunities has been a key driver of long term success. This approach defines Atlas, where our low cost structure and unique operational and logistical advantages, including the Dune Express, autonomous trucking and our distributed power systems set us distinctly apart. These strengths position us to build lasting value during market downturns as we did during the pandemic.

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

As prices and activity improve, I'm confident Atlas will emerge even stronger, solidifying our commanding leadership in the industry. That concludes our call. We would be happy to answer any questions.

[Operator]

Thank you. We'll now be conducting a question and answer session. Thank you. Our first question is from Derek Potheiser with Piper Sandler.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Hey, good morning guys. So I just wanted to ask if you can give us some additional color on what your guidance of flat to up sequentially is assuming. Thinking about the Dune Express ramping up full contribution from your power business. So what are you seeing on activity, pricing and cost per ton as we move through the year?

[John Turner, CEO at Atlas Energy Solutions]

Thanks, Eric. This is John. And I'll probably provide some preliminary comments and Blake and Chris will follow-up. Currently, we don't see any near term upside this market. You can see that by what you've been hearing, especially like last night.

[John Turner, CEO at Atlas Energy Solutions]

I mean, you look at Travis's letter to to shareholders. You know, we we put well, and and I said it in my comments, you know, what we've seen is, you know, kind of a wait and see attitude on on on what's happening. No no additions where there were some additions that were planned that have been postponed. However, and, you know, you're starting to see the news come out where some some operators are cutting activity, cutting crews because of what's going on in the markets. So, but, you know, so right now we don't necessarily see any near term upside, but obviously on the other side of that, we see, you know, there's a response.

[John Turner, CEO at Atlas Energy Solutions]

You're already starting to see production is probably going to we're starting to have a supply response out of the Permian Basin and obviously that near term could turn into a positive on the other side. Blake, do you want go ahead?

[Blake McCarthy, CFO at Atlas Energy Solutions]

Yes. Mean, Derek, it's Blake. For the second quarter, we're taking a conservative approach on volumes as we're not assuming any incremental uptake versus what customers have already spoken for. We would typically see customers begin to accelerate their development plans this time of year If they work through the CapEx budgets before seasonal drop off at the end of the year, but with the move in commodity prices, that certainly that urgency has evaporated. We are seeing larger volumes taken off the end of the Dune Express, which is beginning to positively impact our logistics margins, which are expected to be in the 20% range this quarter.

[Blake McCarthy, CFO at Atlas Energy Solutions]

That's so far cried from what we ultimately generate with the Dune Express. With respect to the rest of the year, I think it's anyone's guess, but if commodity prices remain around current levels, I'd expect activity to wane throughout the course of the year beginning particularly with the smaller players. Fortunately for Atlas, we're levered to the operators with the highest return assets in the Permian Basin and our whole business model is built around saving that money through both efficiencies and as low cost suppliers, which can become increasingly important as they look to cut well AFEs. As they look to reduce well costs, we're going look to gain incremental market share and enhance utilization just as we have in prior downturns.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Great. That's helpful. And maybe just to kind of dovetail off of that. Obviously, you've mentioned entering a period of softer activity and we hear it all over the place. But maybe I know you touched upon on your opening comments, but further expand on the 22,000,000 tons you have committed this year, confidence around those volumes for the remainder of the year.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

I know last call, talked about potentially getting to north of 25,000,000. So just maybe some additional color and comments as far as hitting those $22,000,000 and what we need to see to get up to that $25,000,000 number?

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Yes. Good morning. This is Chris Schola. I'll take that one. We remain confident in the demand for that 22,000,000 tons we have allocated for the remainder of the year.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

And I think this is really supported by strong fundamentals. I'll share some stats with you just to try to help put this in perspective, right? Approximately 75% of our allocated volumes are tied to simul or trimul completions, which are really the most efficient and cost effective frac methods out there. Right? Making those those completions much less likely to be impacted by any, you know, slowdown in activity.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Over 70% of our volumes are committed to large cap operators, and that number raises up to 85% when you add in those mid cap operators. We view this as really, you know, providing that stability through the larger long term products. And you look at it from a from a fully delivered low cost basis, right, the sand volumes off the Dune Express and Mobile Mini, it's really unlikely that we see those customers have a pullback from those most cost effective supply options out there. That said, we still recognize, you know, the market's exposed to to many macroeconomic and geopolitical uncertainties. But, you know, the market appears stable for now and we're in this kind of wait and see Goldilocks holding zone where really a $10 move in oil price either way could provide significant risk downward or significant opportunity upward in the back half of the year.

[Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies]

Great. Very helpful. I appreciate all the color guys. I'll turn it back.

[Operator]

Our next question is from Saurabh Pont with Bank of America.

[Saurabh Pant, Analyst at Bank of America]

Hi, good morning, John, Blake and Chris.

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

Good morning, Saurabh.

[Blake McCarthy, CFO at Atlas Energy Solutions]

Good morning,

[Saurabh Pant, Analyst at Bank of America]

John, Chris, maybe I want to start up more as a follow-up to what Derek was asking in terms of the guide, right? I want to specifically focus on the Dune Express. Maybe spend a little time talking about the ramp up, what you're seeing thus far both on the operational and the commercial side of things? And then just maybe help us think through the cost inefficiencies because I think, Blake, you were talking about how lower volumes are impacting your cost structure on the Dune Express rate. So maybe just spend a little time on that and help us think through the near term earnings power of the Dune Express?

[John Turner, CEO at Atlas Energy Solutions]

Yes. I'll just start off, Saurabh, and I'll hand it over to Chris. The first and second quarters, I mean, when you start looking at sand that's going down the Dune Express, we still have the cost associated with the Dune Express operating full operating, probably even higher cost because we're in a commissioning phase. Yet you're not really necessarily sending a whole lot of volume down to Dune Express. And until we maximum capacity of selling sand off the Dune Express is where you're going to obviously see the full impact to our margins.

[John Turner, CEO at Atlas Energy Solutions]

I think if you look at the million tons that have been sent down to Dune Express to date, I think a majority of that has happened in the second quarter. And we our plan is to continue to ramp this up. We're very excited about what we are seeing off the Dun and Express. Obviously more activity in the areas where the Dayton Express is located is going to and operations and as operators utilize it more, you're going to start seeing the full impact of our margins. Chris, you want go ahead and talk about that?

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Yes.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

I think just from a high level macro perspective, The Doom Express, just a reminder, delivers to the most prolific region in North America. And you look at the last downturn and that's really where all these rigs contracted to. So I think we are in a well positioned area on the Dune from a demand basis. Just on an update on commissioning of the Dune Express, right, we continue to progress well. We've addressed the most significant initial technical challenges with really the focus on the motor uptime and overall power performance.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

And it's already led to much stable much more stable operations and more consistent throughput. We're kind of in that typical phase of the commissioning process, working through control system refinements and supplier programming adjustments to really further optimize the operations. These type of refinements are really expected of a project of this scale and complexity, but we're confident in our team's ability to address those effectively. In late March, we completed our first scheduled maintenance cycle on time, no issues there. We completed those mechanical improvements, right, like the belt shortening and the transfer station optimizations.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

And they're already contributing to the overall consistency of the June. Just some numbers here, right. Since the launch, the tune express has shipped over a million tons and eliminated roughly 1,800,000 truck miles from public roads. So that to us is really tangible proof of the systems growing impact out there. You talked about the financial contribution of it along with that ramp, right?

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Q1 was a bit modest, I think, due to that upfront commissioning costs and volumes being on the front end of that commissioning ramp. But as operations normalize and the system efficiencies continue to build up, we expect those margins to expand meaningfully as we move towards that back half of our ramp in Q2. As well kind of some data points out there, right, over the last thirty days, our shipments down the Dune Express, they've been running at a clip around 6,000,000 ton a year run rate and we continue to push that upwards every month. Really, from our perspective, the Dune Express in summary kind of remains that cornerstone of our long term strategy. And we believe it will be that key driver of margin expansion as well as a lasting competitive advantage moving forward in the market.

[Blake McCarthy, CFO at Atlas Energy Solutions]

Yes. This is Rob. Blake here piggybacking

[Blake McCarthy, CFO at Atlas Energy Solutions]

off Chris here. Just to give you a little insight baseball on the numbers there. So in the prepared remarks, we talked about the logistics margins in January were compressed by severe weather that's all. But by March with the ramp in volumes down the Express, we saw 1,100 basis points in margin expansion in logistics business. With volumes continue to ramp off the DIN Express, our expectations of logistics margins to reach a two handle in the second quarter, we're still below what we ultimately can achieve with the system.

[Blake McCarthy, CFO at Atlas Energy Solutions]

So let me be clear, every incremental ton we deliver off the TuneXpress is highly accretive to Atlas' consolidated margin. They're flowing through the incremental margins over 50% right now. So we're just continuing to focus on pushing more and more volume there.

[Saurabh Pant, Analyst at Bank of America]

Okay. No, that's fantastic color. And Blake, maybe I'll stick with you and a follow-up question I had was on the free cash flow side of things. Free cash flow, the way we define it, the CFFO less CapEx was weaker than I was thinking at least. But lots of things going on, I know, capital CapEx.

[Saurabh Pant, Analyst at Bank of America]

So maybe just help us think through the free cash flow profile, maybe just walk us through what happened in 1Q? And then what should we expect the remainder of the year from a moving pieces standpoint to working capital CapEx you touched on in your prepared remarks, Maybe a little bit on cash interest, tax expenses, right? So just the moving pieces of free cash the remainder of the year, Blake?

[Blake McCarthy, CFO at Atlas Energy Solutions]

Yes. So there were a few moving pieces of cash flow in Q1 that are going to change moving forward. So first, Q1 was going be our largest spending quarter this year in terms of CapEx with the commissioning of the Dayton Express. So total CapEx incurred was $38,900,000 and that is currently expected to decline approximately $25,000,000 per quarter, stay aligned with our budget of $115,000,000 Additionally, we had a really big build in working capital during the quarter. Net working capital expanded from $18,000,000 at the end of the year to $109,000,000 at the March, with almost the entirety of that build coming in accounts receivable.

[Blake McCarthy, CFO at Atlas Energy Solutions]

The reason for that build is twofold. First, we had some large customers hold payments at the end of the quarter, likely to make their own working capital metrics look better. But we've already seen that begin to reverse at the start of this quarter with some big collection weeks. Second, we have a receivable with a pressure pumping customer that has been building due to shortfalls on take or pay contract. We have an enforceable contract there and expect to collect this receivable.

[Blake McCarthy, CFO at Atlas Energy Solutions]

So moving forward, we expect to see improved working capital efficiency and don't expect working capital to be a headwind to cash flow generation as we move through the year. With respect to cash taxes, we expect that to be a minimal impact this year. Right now estimates are pretty much 6,000,000 to 10,000,000 And so all in all, like we expect cash flow to improve moving forward as we head through the year.

[Saurabh Pant, Analyst at Bank of America]

Okay, perfect. And a very quick follow-up on what you just said, Blake, on the contract shortfall. How should we think about that if a customer, let's say, of that 22,000,000 tonnes for whatever reason does not pick up the contracted volume? How enforceable are these contracts? And how much do you think shortfall payments could be?

[Blake McCarthy, CFO at Atlas Energy Solutions]

We are very confident in the language in that contract and believe it is an enforceable contract and have every intention of collecting on that receivable.

[Saurabh Pant, Analyst at Bank of America]

Okay, perfect. Okay. I'll turn it back. Thank you.

[Operator]

Our next question is from Jim Rawlison with Raymond James.

[Jim Rollyson, Director & Equity Research Analyst at Raymond James Financial]

Hey, good morning guys. If I could maybe switch gears for a second here. Obviously, got the challenges going on in the oil and gas markets, but the peers you're kind of competing with to some degree on the power side of things have kind of been singing the praises and actually ramping up their CapEx based on outlooks opportunity, etcetera. Maybe I know it's early days because you've only had the business for a couple of months now, but maybe just expand a little bit on what you guys are seeing in terms of opportunity and maybe future growth upside to the $60,000,000 CapEx you guys talked about in the past?

[John Turner, CEO at Atlas Energy Solutions]

Yeah. Thanks, Jim. You're

[John Turner, CEO at Atlas Energy Solutions]

right.

[John Turner, CEO at Atlas Energy Solutions]

We've had we have on this business for just over sixty days now. And obviously, the integration is going well. Very excited about what we're seeing from the from the on the Merger side, from the Merger team. You know, the response that we've received from from from our customer base has been has been pretty overwhelming. You know, we're still working through what all that means is for Atlas as an as an organization.

[John Turner, CEO at Atlas Energy Solutions]

I mean, we're very very excited about the opportunity with power and and, you know, when we bought Mosier, you know, we did buy a a well established power company that's providing cash flow from from the start. So it it is a cash flowing business. You know, there's a some some, you know, obviously, some big opportunities out there for us and we're still trying to work we're still working through those opportunities. We are, you know, I think one thing is is that the market is very inefficient when it comes to from the power side of the business and and I think, you know, coming from the standpoint of, you know, what we did in the sand business and disruptive, and that's the reason why we got in the business is because we thought it was a there was an opportunity for us to operate efficiently and and and and and help our customers save money. But we're very excited about what we're seeing and, you know, we'll have more about that to say, Probably the reason we're still working through some things, but we don't have much of we don't have a lot of comments on it because it's just that we haven't owned it that long.

[John Turner, CEO at Atlas Energy Solutions]

But needless to say, it's a very exciting opportunity and we'll have more about that in the future.

[Jim Rollyson, Director & Equity Research Analyst at Raymond James Financial]

Appreciate that. And maybe as a follow-up, one of the things over the last few quarters, we've obviously you guys in the whole industry has endured some pretty soft sand pricing. Historically, after some period of time, that soft sand pricing at or in some cases below where other people's OpEx is, you tend to start seeing some supply impacts and you've had some consolidation in the space here recently. Just curious what you all are seeing on the sand supply side, if we're kind of headed towards some of your competitors dialing back output or closing mines or what have you like we saw through the last downturn?

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Yes. Maybe I'll start by addressing a little bit of thoughts on the supply side, then we can kind of walk into a little bit of the pricing side of it, right? So we look on the supply side, I think you hit the nail on the head. We believe that those capacity additions have really peaked out. Some customers that we've seen just driving by, right, have started to reduce shifts or idle those production excuse me, competitors have been idle on production, particularly with those high cost mines and disadvantaged operations that we've seen.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Approximately, call it 100,000,000 tons a year of nameplate capacity in the Permian and spot prices in mid teen, mid to high teens area, we do see additional rationalization really being forced into the market, right? You see the recent competitor consolidations that have gone out there with pricing at or below that breakeven pricing of their manufacturing price. We see this as long term, very constructive for the industry. I think we're really well positioned there. I mean, look, we've been we've been

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

through this down cycle before, right?

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

We know the playbook. We came out of the last downturn in a position of strength in the market. And we don't think this market is any different than that. So if you look at now, we have significant structural advantages on a total delivered cost basis by the additions of the mobile mini mines and the Dune Express as part of our ammo box there. You know, from the pricing side of things, right, right, we all know it.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

I mean, current low price environment, you know, the operators are under increased pressure to reduce costs all the way across their value chain. Right? They're focused on sand pricing and overall, you know, completion costs. You know, I think the Dunespress really and the Encore plants, we we gotta take a step back and look at that FOB pricing versus a total delivered cost pricing. I think you've heard us for a while now stress those total delivered cost solution, which accounts for logistics, transportation, infrastructure integration.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

And I think people are really looking for more than competitive pricing at the line from an FOB perspective. They're looking for that comprehensive cost effects and effective solution that delivers it all the way to the well site at the total lowest possible cost. And that's really where, again, right, DuneXpress and Encore come into play here with integrated logistics solutions that really provides that efficiency and total lowest cost to our customers. So look, from a value proposition basis, we've really stopped looking at FOB sand pricing and looked at that total delivered cost and efficiencies are the top priorities for the operators out there today.

[Jim Rollyson, Director & Equity Research Analyst at Raymond James Financial]

Thanks for the color, Chris.

[Operator]

Our next question is from Atiy Modak with Goldman Sachs.

[Atidrip Modak, Analyst at Goldman Sachs]

Hi, good morning team. I guess on the deferred volumes, it sounds like it's on the non contracted volumes. Can you give us any more color on what the nature of the conversation there is? It sounds like there might be some flexibility on ramping that up. Anything around that?

[Atidrip Modak, Analyst at Goldman Sachs]

And then could you divert these volumes to some other producers? How should we think about it?

[Blake McCarthy, CFO at Atlas Energy Solutions]

Yes. So I mean, really, project deferrals were

[Blake McCarthy, CFO at Atlas Energy Solutions]

mainly driven by macro uncertainty. So some of those new jobs have seen their start up dates pushed out the second half of the year from this quarter, at least that's the indication as of now. Operators just aren't willing to commit to more volumes until they have a better grasp of what their plans are going forward. Again, existing projects are moving along as planned. You know, it's a consistent theme that we've heard throughout this earnings season, but it's just new incremental work is on hold.

[Blake McCarthy, CFO at Atlas Energy Solutions]

You know, that's unfortunate is that the incremental EBITDA from standard logistics job utilizing the Express is rather significant. That's what's changing that is causing us to change guidance. There are opportunities out there and we expect for as people get their feet under them, figure out the lay of the land, we do expect big opportunities to surface. And as Chris alluded to, Atlas is in a position just a competitive advantage with our total delivered cost of sand is that there's really we are in the catbird seat when it comes from a competitive positioning standpoint. And so we expect to go out there and get those as they come around.

[Blake McCarthy, CFO at Atlas Energy Solutions]

But just for the time being, think advice is trying to figure out the new lay of land.

[Chris Scholla, EVP and President - Sand & Logistics Business Unit at Atlas Energy Solutions]

Yes. Think just to add on, right, our focus really there is to secure those long term commitments that aligns with our logistics infrastructure and structural advantages from those mobile menus that express.

[Atidrip Modak, Analyst at Goldman Sachs]

Got it. Appreciate that. And apologies if I missed this earlier. But but, Blake, could you talk about where the price is on the contracted volumes? And where what your perspective is on what happens to those price levels in the second half of the year in terms of the FOB price you were talking about?

[Blake McCarthy, CFO at Atlas Energy Solutions]

On the allocated tons, the 22,000,000 of allocated tons, those are that low 20s that we've been at over the last two quarters ex shortfall revenues. We'll continue to be at those levels with slight declines as just legacy contracts roll off. The spot price of staying right now is in the mid to high teens. So as we any incremental volumes that we do book would be diluted to that average sales price, but would be very accretive to the overall consolidated margin. Just point out like our variable costs and our legacy mines is $4 to $5 a ton.

[Blake McCarthy, CFO at Atlas Energy Solutions]

So anything that we can add on in terms of incremental volume is going to be used to our financials. Then you add on top of that the margins that we get off of our logistics. And so there's I would expect that price to continue to decline just with the current environment, but that's not necessarily negative from a financial standpoint.

[John Turner, CEO at Atlas Energy Solutions]

I I think it's really important to remember, I mean, we're talking about total delivery cost here and that's what our customers are looking at. They're not necessarily looking at a stand price or a logistics price, they're looking at a combined price. And when you compare that to what our OpEx and delivery cost is, that's where you start really seeing, you're going start seeing the benefits of the Dune Express. Once we start seeing more activity come off the Dune Express, which we expect to happen as we go through the year.

[Atidrip Modak, Analyst at Goldman Sachs]

That's very helpful guys. Thank you.

[Operator]

Our next question is from Eddie Kim with Barclays.

[Eddie Kim, Vice President - Equity Research at Barclays]

Hi, good morning. Just wanted to ask about some more color on the deferrals of the development projects. Were these concentrated to a few large customers or was this more kind of a broad based deferral of activity across your customer base? And I know you mentioned that these are being deferred into the latter half of this year. What's your confidence level at this point in that second half target and not potentially being deferred further out into 2026?

[Blake McCarthy, CFO at Atlas Energy Solutions]

No, I think it'd be quite a

[Blake McCarthy, CFO at Atlas Energy Solutions]

bit of hubris to say I know exactly what's going to happen in the market right now. But I think it's really customers are in the same boat that we're in right now, where the ground is shifting underneath them. So really, they're pulling back the reins on deploying incremental CapEx until they get a little bit more clarity on where things are headed from here. So it wasn't just one customer. Were several projects there that both on the MobileMind side and then on the Duty Express side, where it's just a kind of a general pause in the market.

[Blake McCarthy, CFO at Atlas Energy Solutions]

And I think that that's been pretty clear in the commentary you've seen from the public E and Ps recently where a lot of the news that came out last night was a news to us. We've been having those conversations with customers for a while. It's something that we're aware of, but we're having active dialogue with them where they're looking to save on their AFEs and Atlas is a way that they can start to harvest some of those savings. And so we're continuing to push there and show them the math. And I think that it's starting to catch some attention.

[Eddie Kim, Vice President - Equity Research at Barclays]

Got it.

[Eddie Kim, Vice President - Equity Research at Barclays]

Thanks, Blake. And apologies if I missed this, it sounds like your expectation for total volumes this year is now 22,000,000 tons, which represents that committed or contracted capacity. Just given current market conditions, is it possible that some of that 22,000,000 tons slips into 26,000,000 Or how confident can you that, that 22,000,000 tons will be delivered this year?

[Blake McCarthy, CFO at Atlas Energy Solutions]

So that $22,000,000 is what we have allocated currently. We did say in the prepared remarks, there's about 3,000,000 tons of pending opportunities. Just above that. More than 3,000,000 tons. There is a path to get back to that 25,000,000 tons.

[Blake McCarthy, CFO at Atlas Energy Solutions]

It's just we wanted to be transparent with the market where, hey, like the realities of the market is that oil prices have come off. It's a giant circular reference where operators are going to pull back on CapEx. And it just seemed a little foolhardy to say, hey, we're going to be able to go out there and generate volumes when people aren't spending money. So, I think we have a fair bit of confidence in that 22,000,000 tons and a bit of we're optimistic about some of those incremental volumes, but wanted to be very, very transparent with our investor base that that's really where sales sit right now.

[John Turner, CEO at Atlas Energy Solutions]

And I think it's important because we're listening to what our customers are telling us and that's why we're more conservative on our forecast for the second quarter. We said we don't really see any near term upside in this market. However, obviously if things change, you start to see an uptick in commodity prices, you get more clarity on what's happening with the tariffs. You know, I think there, you know, there's obviously some potential upside there for high for additional volumes to come on. You know, this is just what we're hearing from our customers and, you know, we sell to a lot of the a lot of most of the operators in the Permian.

[John Turner, CEO at Atlas Energy Solutions]

And and so we're not we're not we're not, I mean, so, you know, those 3,000,000 tons, know, they could come and it'd be it'd be it'd be great if they did. But at at this point in time, you know, we just don't have any clarity on that because we're just repeating what we've been heard, what we've been told.

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

I might just add just briefly to John's comments. I mean, right now we happen to have this call during peak uncertainty. I mean, and uncertainty is the biggest issue for our industry right now, not knowing where oil prices are going to be and that directly drives their activity. So once we get beyond this and wherever the we get beyond the tariffs and all this uncertainty in the market, I think that's when we'll start to see the benefits of this cycle. Atlas tends to benefit from this as a low cost producer that's logistically advantaged to boil the wellheads in the Permian.

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

And we're going to benefit on the other side of this because we're able to produce through the cycles and we're going to have more of the market share on the other

[Bud Brigham, Founder & Executive Chairman at Atlas Energy Solutions]

side of this and more pricing power.

[Eddie Kim, Vice President - Equity Research at Barclays]

Understood. Appreciate that clarification and all that color. I'll turn it

[Eddie Kim, Vice President - Equity Research at Barclays]

back.

[Operator]

Thank

[Operator]

you. There are no further questions at this time. I'd like to hand the floor back over to John Turner, CEO for any closing comments.

[John Turner, CEO at Atlas Energy Solutions]

Thank you guys. Thank you everybody for joining. Obviously very excited about what's going on with the company and the Gen Xpress. Obviously, there's a lot of uncertainty in the market, but Atlas is built as, like we said in our prepared remarks, Atlas is a company that was built to withstand and go through these ups and downs and these down cycles and then to come through stronger. We look forward to reporting our second our second quarter numbers in in August.

[John Turner, CEO at Atlas Energy Solutions]

Thanks.

Participants

Executives

• Kyle Turlington, Vice President - IR
• John Turner, CEO
• Chris Scholla, EVP and President - Sand & Logistics Business Unit
• Blake McCarthy, CFO
• Bud Brigham, Founder & Executive Chairman
• Bud Brigham, Founder & Executive Chairman

Analysts

• Derek Podhaizer, Senior Research Analyst at Piper Sandler Companies
• Saurabh Pant, Analyst at Bank of America
• Jim Rollyson, Director & Equity Research Analyst at Raymond James Financial
• Atidrip Modak, Analyst at Goldman Sachs
• Eddie Kim, Vice President - Equity Research at Barclays