Atlas Energy Solutions Inc. Q4 FY2025 earnings call

• Fourth quarter results exceeded initial expectations with volumes flat sequentially and muted end-of-year seasonality. The Dune Express had the highest utilization to date. Atlas announced the order of 240 megawatts of power generation equipment for behind-the-meter power solutions. Actively transitioning the power business from short-term rental to power-as-a-service, having deployed the first microgrid and the initial hybrid battery solution. In the sand and logistics business, plant operating expense per ton declined in the fourth quarter though the market remained challenging. The Dune Express eliminated over 21 million miles of truck traffic in the Delaware Basin, and Atlas introduced the first last mile storage pile system.

For the fourth quarter, Atlas generated $36.7 million of adjusted EBITDA on $249 million of revenue, with a 15% adjusted EBITDA margin. For the full year 2025, adjusted EBITDA was $221.7 million on $1.1 billion of revenue, achieving a 20% adjusted EBITDA margin. In the fourth quarter, proppant sales totaled $105.2 million with volumes of 5.3 million tons, logistics contributed $126.1 million, and power rentals added $18.1 million. The Dune Express achieved record shipments in the fourth quarter of approximately 2.1 million tons, including a monthly record of 760,000 tons in November. It is expected to deliver north of 10 million tons via the Dune Express in 2026.

• First quarter volumes are expected to be up approximately 10% sequentially with an average sales price of sand around $18 per ton. The winter storm in January is expected to negatively impact Q1 EBITDA by approximately $6 million. Logistics margins in Q1 are likely to be similar to Q4 levels, with Q2 expected to show improvement. The power business is expected to contribute more sequentially. Atlas is targeting more than 50% of its existing power fleet under long-term contracts by year-end and expects to provide greater visibility on behind-the-meter power equipment placement and economic impact in the near term.

• Logistics pricing in the Permian has fallen to unsustainable levels with some competitors subsidizing customers. The winter storm in January impacted production and deliveries. There are delays in grid interconnection for power projects, and the pricing environment remains challenging for the sand and logistics business.

• Q: Update on power customer line of sight and strategy.

A: John Turner stated there is strong visibility on customers for the 240 MW equipment, with the strategy focused on behind-the-meter power solutions and bridge to permanent.

Q: Economics of power projects.

A: John and Blake discussed targeting high teens unlevered IRR for power projects.

Q: Lead times for additional power equipment.

A: John Turner said lead times for 4-megawatt recips are extending into late 2027 and there is line of sight to more equipment.

Q: Internal expertise for power projects.

A: Blake and Tim Ondrak discussed experience in building infrastructure, having acquired Moser with an experienced team and added talent.

Q: Grid interconnection delays impact on power planning.

A: Tim Ondrak said utilities are not meeting timelines, requiring bridge solutions.

Q: Sand and logistics volume growth.

A: Blake said first half volumes are good, but second half is dependent on the commodity tape.

Q: Logistics margin outlook.

A: Blake said Q1 margins are likely similar to Q4, with Q2 expected to improve.

Q: Power microgrid volumes from E&P and sand tying.

A: Tim Ondrak said half of new E&P requests for well site generators are in microgrid systems, but sand and power teams are separate currently.

Q: Volumes from new customers in first quarter.

A: John Turner said new customer wins are not fully reflected in first quarter volumes.

Q: Oil price impact on E&P operations.

A: Blake said E&P budgets are based on $50 - $55 oil and they are comfortable with current activity.

Q: Last mile storage system for dry sand.

A: John Turner said testing is ongoing with promising results.

Q: Hybrid power system differentiation.

A: Tim Ondrak said the hybrid power system hybridizes generators with battery, extending maintenance cycles and lowering fuel costs.