Archrock, Inc. 10-K

Item 9A. Controls and Procedures Management’s Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this 2021 Form 10-K, our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in the rules and forms of the SEC. Based on the evaluation, as of December 31, 2021, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Management’s Annual Report on Internal Control Over Financial Reporting As required by Exchange Act Rules 13a-15(c) and 15d-15(c), our management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness as to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on the results of management’s evaluation described above, management concluded that our internal control over financial reporting was effective as of December 31, 2021. The effectiveness of internal control over financial reporting as of December 31, 2021 was audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report found within this 2021 Form 10-K. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ​ 50 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Archrock, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Archrock, Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Houston, Texas February 23, 2022 51 Table of Contents Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required in Part III Item 10 of this 2021 Form 10-K is incorporated by reference to the sections entitled “Election of Directors,” “Governance” and “Stock Ownership” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year. Item 11. Executive Compensation The information required in Part III Item 11 of this 2021 Form 10-K is incorporated by reference to the sections entitled “Governance” and “Compensation Discussion and Analysis” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Portions of the information required in Part III Item 12 of this 2021 Form 10-K are incorporated by reference to the section entitled “Stock Ownership” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year. Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information as of December 31, 2021, with respect to the Archrock compensation plans under which our common stock is authorized for issuance, aggregated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ to be Issued Upon ​ ​ Weighted Average ​ ​ Number of Securities ​ ​ ​ Exercise of ​ ​ Exercise Price of ​ ​ Remaining Available for ​ ​ ​ Outstanding Options, ​ ​ Outstanding Options, ​ ​ Future Issuance Under ​ ​ ​ Warrants and Rights ​ ​ Warrants and Rights ​ ​ Equity Compensation Plans ​ ​ (a) ​ (b) ​ (c) Equity compensation plans approved by security holders (1) ​ 357,187 (2) ​ ​ $ — (3) ​ ​ 7,768,344 (4) ​ Equity compensation plans not approved by security holders (5) ​ — ​ ​ — ​ 37,771 ​ Total ​ 357,187 ​ ​ — ​ 7,806,115 ​ (1) Comprised of the 2013 Plan, 2020 Plan and ESPP. No additional grants may be made under the 2013 Plan. (2) Comprised of unvested performance-based restricted stock units payable in common stock upon vesting at target performance. (3) Performance-based restricted stock units do not have an exercise price. (4) Includes 7,246,625 shares of common stock under the 2020 Plan and 521,719 shares of common stock under the ESPP. In addition, as of December 31, 2021, 1,698,150 restricted shares were outstanding, which are not included in column (c). (5) Comprised of our DSDP. See Note 24 (“Stock-Based Compensation”) to our Financial Statements for further details of our DSDP. Item 13. Certain Relationships and Related Transactions and Director Independence The information required in Part III Item 13 of this 2021 Form 10-K is incorporated by reference to the section entitled “Governance” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year. 52 Table of Contents Item 14. Principal Accountant Fees and Services The information required in Part III Item 14 of this 2021 Form 10-K is incorporated by reference to the section entitled “Ratification of the Appointment of the Independent Registered Public Accounting Firm” in our definitive proxy statement to be filed with the SEC within 120 days of the end of our fiscal year. PART IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as a part of this 2021 Form 10-K 1. Financial Statements. The following financial statements are filed as a part of this 2021 Form 10-K. Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) F- Error! Bookmark not defined. Consolidated Balance Sheets ​ F-3 ​ Consolidated Statements of Operations ​ F-4 ​ Consolidated Statements of Comprehensive Income ​ F-5 ​ Consolidated Statements of Equity ​ F-6 ​ Consolidated Statements of Cash Flows ​ F-7 ​ Notes to Consolidated Financial Statements ​ F-9 ​ ​ 2. Financial Statement Schedules All financial statement schedules are omitted because they are not applicable or the information is set forth in the consolidated financial statements or notes thereto within Item 8 “Financial Statements and Supplementary Data.” 3. Exhibits Exhibit No. Description 2.1 ​ Separation and Distribution Agreement, dated as of November 3, 2015, by and among Exterran Holdings, Inc., Exterran General Holdings LLC, Exterran Energy Solutions, L.P., Exterran Corporation, AROC Corp., EESLP LP LLC, AROC Services GP LLC, AROC Services LP LLC and Archrock Services, L.P., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 2.2 ​ Amendment No. 1 to Separation and Distribution Agreement, dated as of December 15, 2015, by and among Archrock, Inc., formerly named Exterran Holdings, Inc., Exterran General Holdings LLC, Exterran Energy Solutions, L.P., Exterran Corporation, AROC Corp., EESLP LP LLC, AROC Services GP LLC, AROC Services LP LLC and Archrock Services, L.P., incorporated by reference to Exhibit 2.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 2.3 ​ Agreement and Plan of Merger, dated as of January 1, 2018, by and among Archrock, Inc., Archrock GP LLC, Archrock General Partner, L.P. and Archrock Partners, L.P., incorporated by reference to Exhibit 2.1 of Archrock’s Current Report on Form 8-K filed on January 2, 2018 2.4 ​ Amendment No. 1 to Agreement and Plan of Merger, dated as of January 11, 2018, by and among Archrock, Inc., Archrock GP LLC, Archrock General Partner, L.P., Archrock Partners, L.P. and Amethyst Merger Sub LLC, incorporated by reference to Exhibit 2.2 of Archrock’s Current Report on Form 8-K filed on January 16, 2018 2.5 ​ Asset Purchase Agreement, dated as of June 23, 2019, by and among Archrock Services, L.P., Archrock, Inc. and Elite Compression Services, LLC, incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on June 24, 2019 53 Table of Contents Exhibit No. Description 2.6 ​ Asset Purchase Agreement, dated as of June 23, 2019, by and between Archrock Services, L.P. and Harvest Four Corners, LLC, incorporated by reference to Exhibit 2.2 of the Registrant’s Current Report on Form 8-K filed on June 24, 2019 3.1 ​ Composite Restated Certificate of Incorporation of Archrock, Inc., incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 3.2 ​ Third Amended and Restated Bylaws of Exterran Holdings, Inc. (now Archrock, Inc.), incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on March 20, 2013 3.3 ​ Amendment No. 1 to Third Amended and Restated Bylaws of Archrock, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on May 5, 2020 4.1 ​ Indenture, dated as of March 21, 2019, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on March 21, 2019 4.2 ​ Indenture, dated as of December 20, 2019, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on December 20, 2019 4.3 ​ Description of Common Stock 10.1 ​ Credit Agreement, dated as of July 10, 2015, by and among Exterran Holdings, Inc. (now Archrock, Inc.), Archrock Services, L.P., the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 16, 2015 10.2 ​ First Amendment to Credit Agreement, dated as of October 5, 2015, by and among Exterran Holdings, Inc. (now Archrock, Inc.), Archrock Services, L.P., the lenders signatory thereto and Wells Fargo Bank, National Association, as administrative agent, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on October 6, 2015 10.3 ​ Amended and Restated Senior Secured Credit Agreement, dated as of November 3, 2010, by and among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, Barclays Bank plc and The Royal Bank of Scotland plc, as Co-Documentation Agents, and the lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners L.P.’s Current Report on Form 8-K filed on November 9, 2010 10.4 ​ First Amendment to Amended and Restated Senior Secured Credit Agreement, dated March 7, 2012, among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender, and the other lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners, L.P.’s Current Report on Form 8-K filed on March 13, 2012 10.5 ​ Third Amendment to Amended and Restated Senior Secured Credit Agreement, dated March 27, 2013, among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners, L.P.’s Current Report on Form 8-K filed on March 28, 2013 10.6 ​ Fourth Amendment to Amended and Restated Senior Secured Credit Agreement, dated February 4, 2015, among EXLP Operating LLC, as Borrower, Exterran Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders signatory thereto, incorporated by reference to Exhibit 10.1 to Exterran Partners, L.P.’s Current Report on Form 8-K filed on February 5, 2015 10.7 ​ Fifth Amendment to Amended and Restated Senior Secured Credit Agreement and First Amendment to Amended and Restated Collateral Agreement, dated May 2, 2016, among Archrock Partners Operating LLC, as Borrower, Archrock Partners, L.P., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to Archrock Partners, L.P.’s Current Report on Form 8-K filed on May 6, 2016 54 Table of Contents Exhibit No. Description 10.8 ​ Amended and Restated Guaranty Agreement, dated as of November 3, 2010, made by Exterran Partners, L.P. and EXLP Leasing LLC in favor of Wells Fargo Bank, National Association, as Administrative Agent, incorporated by reference to Exhibit 10.2 to Archrock Partner’s L.P.’s Current Report on Form 8-K filed on November 9, 2010 10.9 ​ Amended and Restated Collateral Agreement, dated as of November 3, 2010, made by EXLP Operating LLC, Exterran Partners, L.P. and EXLP Leasing LLC in favor of Wells Fargo Bank, National Association, as Administrative Agent, incorporated by reference to Exhibit 10.3 to Archrock Partner’s L.P.’s Current Report on Form 8-K filed on November 9, 2010 10.10 ​ Second Amendment, Consent and Waiver to Credit Agreement, dated as of May 10, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 11, 2016 10.11 ​ Third Amendment, Consent and Waiver to Credit Agreement, dated as of July 21, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 26, 2016 10.12 ​ Fourth Amendment, Consent and Waiver to Credit Agreement, dated as of September 21, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 22, 2016 10.13 ​ Fifth Amendment, Consent and Waiver to Credit Agreement, dated as of December 9, 2016, among Archrock Services, L.P., as Borrower, Archrock, Inc., as Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto. incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 12, 2016 10.14 ​ Fourth Amended and Restated Omnibus Agreement, dated November 3, 2015, by and among Archrock, Inc. (formerly named Exterran Holdings, Inc.), Archrock Services, L.P. (formerly named Exterran US Services OpCo, L.P.), Archrock GP LLC (formerly named Exterran GP, LLC), Archrock General Partner, L.P. (formerly named Exterran General Partner, L.P.), Archrock Partners, L. P. (formerly named Exterran Partners, L.P.) and Archrock Partners Operating LLC, incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text) and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) 10.15 ​ First Amendment to Fourth Amended and Restated Omnibus Agreement, dated November 19, 2016, by and among Archrock, Inc., Archrock Services, L.P., Archrock GP LLC, Archrock General Partner, L.P., Archrock Partners, L.P., and Archrock Partners Operating LLC incorporated by reference to the Registrant’s Current Report on Form 8-K filed on November 23, 2016 (portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text) and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) 10.16† ​ Exterran Holdings, Inc. (now Archrock, Inc.) 2013 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 19, 2013 10.17† ​ First Amendment to the Exterran Holdings, Inc. (now Archrock, Inc.) 2013 Stock Incentive Plan, incorporated by reference to Exhibit 10.13 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.18† ​ Exterran Holdings, Inc. (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 26, 2009 10.19† ​ Amendment No. 1 to Exterran Holdings, Inc. (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 26, 2009 55 Table of Contents Exhibit No. Description 10.20† ​ Amendment No. 2 to Exterran Holdings, Inc. (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 10.21† ​ Amendment No. 3 to the Exterran Holdings, Inc. (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 29, 2010 10.22† ​ Amendment No. 4 to the Exterran Holdings, Inc. (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed March 29, 2011 10.23† ​ Amendment No. 5 to the Exterran Holdings, Inc. (now Archrock, Inc.) Amended and Restated 2007 Stock Incentive Plan, incorporated by reference to Exhibit 10.14 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.24† ​ Exterran Holdings, Inc. 2011 (now Archrock, Inc.) Employment Inducement Long-Term Equity Plan, incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8, filed November 4, 2011 10.25† ​ Exterran Holdings, Inc. (now Archrock, Inc.) Directors’ Stock and Deferral Plan, incorporated by reference to Exhibit 10.16 of the Registrant’s Current Report on Form 8-K filed on August 23, 2007 10.26† ​ First Amendment to Exterran Holdings, Inc. (now Archrock, Inc.) Directors’ Stock and Deferral Plan, incorporated by reference to Exhibit 10.22 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 10.27† ​ Second Amendment to Exterran Holdings, Inc. (now Archrock, Inc.) Directors’ Stock and Deferral Plan, incorporated by reference to Exhibit 10.16 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.28† ​ Exterran Holdings, Inc. (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on August 23, 2007 10.29† ​ Amendment No. 1 to the Exterran Holdings, Inc. (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Annex D to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 29, 2011 10.30† ​ Amendment No. 2 to the Exterran Holdings, Inc. (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Annex C to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed on March 29, 2011 10.31† ​ Amendment No. 3 to the Exterran Holdings, Inc. (now Archrock, Inc.) Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.15 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.32† ​ Archrock Deferred Compensation Plan, incorporated by reference to Exhibit 10.17 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.33† ​ Exterran (now Archrock, Inc.) Employees’ Supplemental Savings Plan, incorporated by reference to Exhibit 10.30 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 10.34† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice for Time-Vested Incentive Stock Option, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 10.35† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 10.36† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice for Time-Vested Stock Option for Officers, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 10.37† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 56 Table of Contents Exhibit No. Description 10.38† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice for Time-Vested Stock Option for Officers, incorporated by reference to Exhibit 10.63 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 10.39† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.64 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 10.40† ​ Form of Indemnification Agreement, incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on August 23, 2007 10.41† ​ Form of Amendment to Indemnification Agreement, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 10.42† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Incentive Stock Option for Officers, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.43† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Non-Qualified Stock Option, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.44† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Restricted Stock, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.45† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Cash-Settled Restricted Stock Units, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.46† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Time-Vested Stock-Settled Restricted Stock Units, incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.47† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Performance Units, incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.48† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Common Stock Award for Non-Employee Directors, incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on March 10, 2014 10.49† ​ Form of Exterran Holdings, Inc. (now Archrock, Inc.) Award Notice and Agreement for Performance Units incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 25, 2015 10.50† ​ Summary of Donna A. Henderson Compensation Arrangement, incorporated by reference to Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 10.51† ​ Summary of Jason Ingersoll Compensation Arrangement, incorporated by reference to Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 10.52† ​ Form of Compensation Letter applicable to Messrs. Childers, Miller, Rice and Wayne, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 4, 2016. 10.53† ​ Form of Indemnification Agreement, incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.54† ​ Form of Employment Letter applicable to Messrs. Childers, Miller, Rice, Wayne and Ingersoll, incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.55† ​ Form of Severance Benefit Agreement applicable to Messrs. Childers, Miller, Rice, Wayne and Ingersoll, incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.56† ​ Form of Change of Control Agreement applicable to Messrs. Childers, Miller, Rice, Wayne and Ingersoll, incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 57 Table of Contents Exhibit No. Description 10.57† ​ Form of Award Notice and Agreement for Restricted Stock pursuant to the 2013 Stock Incentive Plan, incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.58† ​ Form of Award Notice and Agreement for Common Stock Award for Non-Employee Directors pursuant to the 2013 Stock Incentive Plan, incorporated by reference to Exhibit 10.12 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.59† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016 10.60† ​ Form of Archrock, Inc. Award Notice and Agreement for Time-Vested Restricted Stock, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016 10.61† ​ Form of Archrock, Inc. Award Notice and Agreement for Time-Vested Stock-Settled Restricted Stock Units, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016 10.62† ​ Form of Archrock, Inc. Award Notice and Agreement for Common Stock Award for Non-Employee Directors, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 24, 2016 10.63 ​ Employee Matters Agreement, dated as of November 3, 2015, by and between Exterran Holdings, Inc. (now Archrock, Inc.) and Exterran Corporation, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.64 ​ Tax Matters Agreement, dated as of November 3, 2015, by and between Exterran Holdings, Inc. (now Archrock, Inc.) and Exterran Corporation, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.65 ​ Transition Services Agreement, dated as of November 3, 2015, by and between Exterran Holdings, Inc. (now Archrock, Inc.) and Exterran Corporation, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.66 ​ Supply Agreement, dated as of November 3, 2015, by and among Archrock Services, L.P., EXLP Operating LLC and Exterran Energy Solutions, L.P., incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015 10.67† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 23, 2017 10.68† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock for Non-Employee Directors, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 23, 2017 10.69† ​ Archrock, Inc. 2017 Employee Stock Purchase Plan, incorporated by reference to Annex A to Archrock’s Definitive Proxy Statement filed March 16, 2017 10.70 ​ Sixth Amendment and Consent to Credit Agreement and Second Amendment to Guaranty and Collateral Agreement, dated as of March 30, 2017, by and among Archrock Services, L.P., Archrock, Inc., the Guarantors party thereto, the Lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the Lenders incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 10.71 ​ Consulting Agreement between Archrock, Inc. and Donald C. Wayne dated May 11, 2017 incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 10.72† ​ Form of Amendment to Severance Benefit Agreement incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 10.73† ​ Form of Second Amendment to Severance Benefit Agreement 10.74† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units (Cash-Settled), incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018 10.75† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units (Stock-Settled), incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018 58 Table of Contents Exhibit No. Description 10.76† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock Units, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018 10.77† ​ Form of Letter Agreement Amending the Award Notice and Agreement for 2017 Performance Units, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 21, 2018 10.78† ​ Form of Second Amendment to Severance Benefit Agreement, incorporated by reference to Exhibit 10.73 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017 10.79† ​ Form of Letter Agreement, dated as of March 19, 2018, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 21, 2018 10.80 ​ Amendment No. 1 to Credit Agreement, dated as of February 23, 2018, by and among Archrock Partners, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as the Administrative Agent, incorporated by reference to Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed on February 28, 2018. 10.81 ​ Omnibus Joinder Agreement, dated as of April 26, 2018, by and among Archrock, Inc., Archrock Services, L.P., AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, and Archrock MLP LP LLC and acknowledged and accepted by JPMorgan Chase Bank, N.A., as the Administrative Agent, incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed on April 26, 2018 10.82 ​ Amendment and Supplement to Pledge and Security Agreement dated as of April 26, 2018, by and among Archrock Partners Operating LLC, Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock Partners Leasing LLC, Archrock, Inc., Archrock Services, L.P., AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, Archrock MLP LP LLC and JPMorgan Chase Bank, N.A., as the Administrative Agent, incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed on April 26, 2018 10.83† ​ Form of Employment Letter applicable to Mr. Douglas S. Aron, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 12, 2018 10.84† ​ Form of Change of Control Agreement applicable to Mr. Douglas S. Aron, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 12, 2018 10.85† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock, incorporated by reference to Exhibit 10.85 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 10.86† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock for Non-Employee Directors, incorporated by reference to Exhibit 10.86 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 10.87† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units (Cash-Settled), incorporated by reference to Exhibit 10.87 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 10.88† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units (Stock-Settled), incorporated by reference to Exhibit 10.88 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 10.89 ​ Purchase Agreement, dated as of March 7, 2019, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and J.P. Morgan Securities LLC, as representative of the initial purchasers named therein, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 8, 2019 10.90 ​ Omnibus Joinder Agreement, dated as of March 21, 2019, by and among Archrock GP LLC, Archrock Partners Corp., Archrock General Partner, L.P. and JPMorgan Chase Bank, N.A., incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 21, 2019 10.91 ​ Board Representation Agreement, dated as of August 1, 2019, by and between Archrock, Inc. and JDH Capital Holdings, L.P., incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on August 1, 2019 59 Table of Contents Exhibit No. Description 10.92 ​ Registration Rights Agreement, dated as of August 1, 2019, by and between Archrock, Inc. and JDH Capital Holdings, L.P., incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on August 1, 2019 10.93 ​ Amendment No. 2 to Credit Agreement, dated as of November 8, 2019, by and among Archrock, Inc., Archrock Partners Operating LLC, Archrock Services, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on November 12, 2019 10.94 ​ Purchase Agreement, dated as of December 16, 2019, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and RBC Capital Markets, LLC, as representative of the initial purchasers named therein, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 17, 2019 10.95 ​ Separation Agreement, dated effective as of January 31, 2020 between Archrock, Inc. and Sean K. Clawges, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on February 11, 2020 10.96† ​ Form of Compensation Letter applicable to Messrs. Childers, Aron, Ingersoll and Thode and Mme. Hildebrandt, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on April 30, 2020 10.97 ​ Purchase Agreement, dated as of December 14, 2020, by and among Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock, Inc., the other guarantors party thereto and RBC Capital Markets, LLC, as representative of the initial purchasers named therein, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on December 15, 2020 10.98 ​ Amendment No. 3 to Credit Agreement, dated as of February 22, 2021, by and among Archrock Inc., Archrock Partners Operating LLC, Archrock Services, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on February 23, 2021 10.99† ​ Form of Letter Agreement 10.100† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock 10.101† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock for Non-Employee Directors 10.102† ​ Form of Archrock, Inc. Award Notice and Agreement for Restricted Stock Units for Non-Employee Directors 10.103† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units (Cash-Settled) 10.104† ​ Form of Archrock, Inc. Award Notice and Agreement for Performance Units (Stock-Settled) 10.105† ​ Form of Compensation Letter (incorporated by reference and filed as Exhibit 10.1 to Form 8-K filed on April 30, 2020), incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on June 21, 2021 21.1* ​ List of Subsidiaries of Archrock, Inc. 23.1* ​ Consent of Deloitte & Touche LLP 31.1* ​ Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* ​ Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** ​ Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** ​ Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.1* ​ Interactive data files pursuant to Rule 405 of Regulation S-T 104.1* ​ Cover page interactive data files pursuant to Rule 406 of Regulation S-T ​ † Management contract or compensatory plan or arrangement. * Filed herewith. ** Furnished, not filed . 60 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ ​ ​ ​ Archrock, Inc. ​ ​ ​ /s/ D. Bradley Childers ​ D. Bradley Childers ​ President and Chief Executive Officer ​ ​ ​ February 23, 2022 ​ ​ ​ ​ 61 Table of Contents POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints D. Bradley Childers, Douglas S. Aron, Donna A. Henderson and Stephanie C. Hildebrandt, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 23, 2022. ​ ​ ​ Signature ​ Title ​ ​ ​ /s/ D. Bradley Childers ​ President, Chief Executive Officer and Director D. Bradley Childers ​ (Principal Executive Officer) ​ ​ ​ /s/ Douglas S. Aron ​ Senior Vice President and Chief Financial Officer Douglas S. Aron ​ (Principal Financial Officer) ​ ​ ​ /s/ Donna A. Henderson ​ Vice President and Chief Accounting Officer Donna A. Henderson ​ (Principal Accounting Officer) ​ ​ ​ /s/ Anne-Marie N. Ainsworth ​ Director Anne-Marie N. Ainsworth ​ ​ ​ ​ ​ /s/ Gordon T. Hall ​ Director Gordon T. Hall ​ ​ ​ ​ ​ /s/ Frances Powell Hawes ​ Director Frances Powell Hawes ​ ​ ​ ​ ​ /s/ J.W.G. Honeybourne ​ Director J.W.G. Honeybourne ​ ​ ​ ​ ​ /s/ James H. Lytal ​ Director James H. Lytal ​ ​ ​ ​ ​ /s/ Leonard W. Mallett ​ Director Leonard W. Mallett ​ ​ ​ ​ ​ /s/ Jason C. Rebrook ​ Director Jason C. Rebrook ​ ​ ​ ​ ​ /s/ Edmund P. Segner, III ​ Director Edmund P. Segner, III ​ ​ ​ ​ 62 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Archrock, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Archrock, Inc. and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2022 expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Long-Lived Asset Impairment - Refer to Note 18 to the financial statements . Critical Audit Matter Description Management’s evaluation of whether to retire compressor units from its active fleet takes into consideration the future deployment of the units that were not of the type, configuration, condition, make, or model that are cost efficient to maintain or operate. Once a compressor unit is retired from the active fleet, it is tested for impairment. As such, the timing of the identification of compressor units for removal could have a significant impact on the amount of any impairment charge. During the year ended December 31, 2021, the Company retired 230 units from the active fleet resulting in an F-1 Table of Contents asset impairment charge of $21.2 million. The determination of impairment requires management to make significant estimates and assumptions related to the timing of the identification of compressor units for removal. Changes in these assumptions could have a significant impact on the amount of impairment charged. Auditing the decisions on when compressor units are retired from the active fleet required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s determination of whether to retire compressor unit from the Company’s active fleet included the following, among others: • We tested the operating effectiveness of internal controls over long-lived asset impairment process, including those over the identification of units to be retired and assessed for impairment, which includes the type, configuration, condition, make, or model that are cost efficient to maintain or operate. • We tested the completeness and accuracy of the compressor units identified for retirement by performing the following procedures: – Comparing the final listing of retired compressor units to the list evaluated and approved by management. – For a sample of compressor units, determining whether those units were (1) properly segregated from the active fleet, (2) identified appropriately in the system, and (3) no longer operating. • We evaluated the reasonableness of Fair Market Value assigned by management on impaired units by using Internal Fair Value Specialists. • We evaluated the reasonableness of management’s identification of the compressor units for removal, including assessments of type, configuration, condition, make, or model that are cost efficient to maintain or operate, by performing the following procedures: – Comparing the rationale for compression units identified with historical rationales made for compression units of a similar type, configuration, make, or model. – For a sample of compression units not retired, making inquiries of management and others within the Company with knowledge of the type, configuration, condition, make, or model and operating costs of the specific compressor units to identify if any units not retired exhibit characteristics indicating that they should be retired. – Comparing the compression units identified to internal communications to management and the Board of Directors. – Reading available peer company data and other external sources for information supporting or contradicting management’s conclusions. /s/ DELOITTE & TOUCHE LLP Houston, Texas February 23, 2022 We have served as the Company’s auditor since 2007. ​ ​ F-2 Table of Contents Archrock, Inc. Consolidated Balance Sheets (in thousands, except par value and share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 2020 Assets ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 1,569 ​ $ 1,097 Accounts receivable, trade, net of allowance of $ 2,152 and $ 3,370 , respectively ​ 104,931 ​ 104,425 Inventory ​ 72,869 ​ 63,670 Other current assets ​ 7,201 ​ 12,819 Total current assets ​ 186,570 ​ 182,011 Property, plant and equipment, net ​ 2,226,526 ​ 2,389,674 Operating lease ROU assets ​ 17,491 ​ 19,236 Intangible assets, net ​ 47,887 ​ 61,531 Contract costs, net ​ 25,418 ​ 29,216 Deferred tax assets ​ 47,879 ​ 56,934 Other assets ​ 28,384 ​ 30,084 Noncurrent assets associated with discontinued operations ​ 9,811 ​ 11,036 Total assets ​ $ 2,589,966 ​ $ 2,779,722 ​ ​ ​ ​ ​ ​ ​ Liabilities and Equity ​ ​ Current liabilities: ​ ​ Accounts payable, trade ​ $ 38,920 ​ $ 30,819 Accrued liabilities ​ 82,517 ​ 76,993 Deferred revenue ​ 3,817 ​ 3,880 Total current liabilities ​ 125,254 ​ 111,692 Long-term debt ​ 1,530,825 ​ 1,688,867 Operating lease liabilities ​ 15,940 ​ 16,925 Deferred tax liabilities ​ 1,136 ​ 725 Other liabilities ​ 17,505 ​ 18,088 Noncurrent liabilities associated with discontinued operations ​ 7,868 ​ 7,868 Total liabilities ​ 1,698,528 ​ 1,844,165 Commitments and contingencies (Note 26) ​ ​ Equity: ​ ​ Preferred stock: $ 0.01 par value per share, 50,000,000 shares authorized, zero issued ​ — ​ — Common stock: $ 0.01 par value per share, 250,000,000 shares authorized, 161,482,852 and 160,014,960 shares issued, respectively ​ 1,615 ​ 1,600 Additional paid-in capital ​ 3,440,059 ​ 3,424,624 Accumulated other comprehensive loss ​ ( 984 ) ​ ( 5,006 ) Accumulated deficit ​ ( 2,463,114 ) ​ ( 2,401,988 ) Treasury stock: 7,417,401 and 7,052,769 common shares, at cost, respectively ​ ( 86,138 ) ​ ( 83,673 ) Total equity ​ 891,438 ​ 935,557 Total liabilities and equity ​ $ 2,589,966 ​ $ 2,779,722 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-3 Table of Contents Archrock, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 Revenue: ​ ​ ​ ​ Contract operations ​ $ 648,311 ​ $ 738,918 ​ $ 771,539 Aftermarket services ​ 133,150 ​ 136,052 ​ 193,946 Total revenue ​ 781,461 ​ 874,970 ​ 965,485 Cost of sales (excluding depreciation and amortization): ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract operations ​ 244,486 ​ 261,087 ​ 297,260 Aftermarket services ​ 114,431 ​ 116,106 ​ 158,978 Total cost of sales (excluding depreciation and amortization) ​ 358,917 ​ 377,193 ​ 456,238 Selling, general and administrative ​ 107,167 ​ 105,100 ​ 117,727 Depreciation and amortization ​ 178,946 ​ 193,138 ​ 188,084 Long-lived and other asset impairment ​ 21,397 ​ 79,556 ​ 44,663 Goodwill impairment ​ ​ — ​ ​ 99,830 ​ ​ — Restatement and other charges ​ ​ — ​ ​ — ​ ​ 445 Restructuring charges ​ ​ 2,903 ​ ​ 8,450 ​ ​ — Interest expense ​ 108,135 ​ 105,716 ​ 104,681 Debt extinguishment loss ​ — ​ 3,971 ​ 3,653 Transaction-related costs ​ ​ — ​ ​ — ​ ​ 8,213 Gain on sale of assets, net ​ ​ ( 30,258 ) ​ ​ ( 10,643 ) ​ ​ ( 16,016 ) Other income, net ​ ( 4,707 ) ​ ( 1,359 ) ​ ( 661 ) Income (loss) before income taxes ​ 38,961 ​ ( 85,982 ) ​ 58,458 Provision for (benefit from) income taxes ​ 10,744 ​ ( 17,537 ) ​ ( 39,145 ) Income (loss) from continuing operations ​ ​ 28,217 ​ ​ ( 68,445 ) ​ ​ 97,603 Loss from discontinued operations, net of tax ​ — ​ — ​ ( 273 ) Net income (loss) ​ $ 28,217 ​ $ ( 68,445 ) ​ $ 97,330 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted net income (loss) per common share ​ $ 0.18 ​ $ ( 0.46 ) ​ $ 0.70 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding: ​ ​ ​ Basic ​ 151,684 ​ 150,828 ​ 137,492 Diluted ​ 151,830 ​ 150,828 ​ 137,528 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-4 Table of Contents Archrock, Inc. Consolidated Statements of Comprehensive Income (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 Net income (loss) ​ $ 28,217 $ ( 68,445 ) $ 97,330 Other comprehensive income (loss), net of tax: ​ ​ ​ Interest rate swap gain (loss), net of reclassifications to earnings ​ 3,159 ​ ( 3,619 ) ​ ( 7,160 ) Amortization of dedesignated interest rate swap ​ 863 ​ — ​ — Total other comprehensive income (loss), net of tax ​ 4,022 ​ ( 3,619 ) ​ ( 7,160 ) Comprehensive income (loss) ​ $ 32,239 ​ $ ( 72,064 ) ​ $ 90,170 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-5 Table of Contents Archrock, Inc. Consolidated Statements of Equity (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Archrock Stockholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common ​ Additional ​ Other ​ ​ ​ ​ Treasury ​ ​ ​ ​ ​ Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stock ​ ​ ​ ​ Amount ​ Shares Capital Income (Loss) Deficit Amount Shares Total Balance at December 31, 2018 ​ $ 1,358 ​ 135,787,509 $ 3,177,982 ​ $ 5,773 $ ( 2,263,677 ) ​ $ ( 79,862 ) ​ ( 6,381,605 ) ​ $ 841,574 Treasury stock purchased ​ ​ ​ ​ ( 2,007 ) ​ ( 212,080 ) ​ ( 2,007 ) Cash dividends ($ 0.554 per common share) ​ ​ ​ ( 78,530 ) ​ ​ ​ ( 78,530 ) Shares issued in ESPP ​ 1 ​ 87,933 770 ​ ​ ​ ​ 771 Stock-based compensation, net of forfeitures ​ 11 ​ 1,104,793 8,094 ​ ​ ​ ( 108,917 ) ​ 8,105 Shares issued for Elite Acquisition ​ 217 ​ 21,656,683 ​ ​ 225,663 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 225,880 Comprehensive income ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ 97,330 ​ ​ ​ 97,330 Interest rate swap loss, net of reclassifications to earnings ​ ​ ​ ( 7,160 ) ​ ​ ​ ( 7,160 ) Balance at December 31, 2019 ​ $ 1,587 ​ 158,636,918 $ 3,412,509 ​ $ ( 1,387 ) $ ( 2,244,877 ) ​ $ ( 81,869 ) ​ ( 6,702,602 ) ​ $ 1,085,963 Treasury stock purchased ​ ​ ​ ​ ( 1,804 ) ​ ( 236,752 ) ​ ( 1,804 ) Cash dividends ($ 0.580 per common share) ​ ​ ​ ( 88,832 ) ​ ​ ​ ( 88,832 ) Shares issued in ESPP ​ 2 ​ 171,563 681 ​ ​ ​ ​ ​ 683 Stock-based compensation, net of forfeitures ​ 11 ​ 1,206,479 10,756 ​ ​ ​ ( 113,415 ) ​ ​ 10,767 Contribution from Exterran Corporation ​ ​ ​ ​ ​ ​ ​ 678 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 678 Impact of ASU 2016-13 adoption ​ ​ ​ ​ ​ ​ 166 ​ ​ ​ 166 Comprehensive loss ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ​ ( 68,445 ) ​ ​ ​ ( 68,445 ) Interest rate swap loss, net of reclassifications to earnings ​ ​ ​ ( 3,619 ) ​ ​ ​ ( 3,619 ) Balance at December 31, 2020 ​ $ 1,600 ​ 160,014,960 $ 3,424,624 ​ $ ( 5,006 ) $ ( 2,401,988 ) ​ $ ( 83,673 ) ​ ( 7,052,769 ) ​ $ 935,557 Treasury stock purchased ​ ​ ​ ​ ​ ( 2,465 ) ( 283,972 ) ​ ( 2,465 ) Cash dividends ($ 0.580 per common share) ​ ​ ​ ​ ( 89,343 ) ​ ​ ( 89,343 ) Shares issued under ESPP ​ 1 ​ 89,988 ​ 712 ​ ​ ​ ​ 713 Stock-based compensation, net of forfeitures ​ 10 1,020,756 ​ 11,326 ​ ​ ​ ( 80,660 ) ​ 11,336 Net proceeds from issuance of common stock ​ ​ 4 ​ 357,148 ​ ​ 3,397 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,401 Comprehensive income ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ ​ 28,217 ​ ​ 28,217 Interest rate swap gain, net of reclassifications to earnings ​ ​ ​ 3,159 ​ ​ ​ 3,159 Amortization of dedesignated interest rate swap ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 863 ​ ​ ​ ​ ​ ​ ​ ​ ​ 863 Balance at December 31, 2021 ​ $ 1,615 ​ 161,482,852 $ 3,440,059 ​ $ ( 984 ) $ ( 2,463,114 ) ​ $ ( 86,138 ) ​ ( 7,417,401 ) ​ $ 891,438 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-6 Table of Contents Archrock, Inc. Consolidated Statements of Cash Flows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 28,217 ​ $ ( 68,445 ) ​ $ 97,330 Adjustments to reconcile net income (loss) to net cash provided by operating activities: ​ ​ ​ Loss from discontinued operations, net of tax ​ — ​ — ​ 273 Depreciation and amortization ​ 178,946 ​ 193,138 ​ 188,084 Long-lived and other asset impairment ​ 21,397 ​ 79,556 ​ 44,663 Goodwill impairment ​ ​ — ​ ​ 99,830 ​ ​ — Inventory write-downs ​ 997 ​ 1,349 ​ 944 Amortization of operating lease ROU assets ​ 3,880 ​ 3,477 ​ 2,931 Amortization of deferred financing costs ​ 10,127 ​ 5,554 ​ 6,211 Amortization of debt discount ​ — ​ 187 ​ 910 Amortization of debt premium ​ ​ ( 2,006 ) ​ ​ ( 84 ) ​ ​ — Amortization of dedesignated interest rate swap ​ ​ 863 ​ ​ — ​ ​ — Debt extinguishment loss ​ — ​ 3,971 ​ 3,653 Interest rate swaps ​ 3,539 ​ 3,178 ​ ( 1,071 ) Stock-based compensation expense ​ 11,336 ​ 10,551 ​ 8,105 Non-cash restructuring charges ​ ​ — ​ ​ 1,660 ​ ​ — Provision for credit losses ​ ( 90 ) ​ 3,525 ​ 2,567 (Gain) loss on sale of assets, net ​ ( 11,313 ) ​ 1,832 ​ ( 16,016 ) Gain on sale of business ​ ​ ( 18,945 ) ​ ​ ( 12,475 ) ​ ​ — Deferred income tax provision (benefit) ​ 10,379 ​ ( 17,764 ) ​ ( 39,597 ) Amortization of contract costs ​ 19,990 ​ 26,629 ​ 23,330 Deferred revenue recognized in earnings ​ ( 10,382 ) ​ ( 19,489 ) ​ ( 42,268 ) Change in assets and liabilities, net of acquisition: ​ ​ ​ ​ ​ Accounts receivable, trade ​ 4,445 ​ 36,395 ​ 3,248 Inventory ​ ( 12,989 ) ​ 3,972 ​ 6,036 Other assets ​ 635 ​ ( 5,797 ) ​ 4,458 Contract costs, net ​ ( 16,991 ) ​ ( 13,262 ) ​ ( 27,237 ) Accounts payable and other liabilities ​ 5,269 ​ ( 15,089 ) ​ ( 12,728 ) Deferred revenue ​ 10,217 ​ 12,732 ​ 36,578 Other ​ ( 121 ) ​ 147 ​ 12 Net cash provided by continuing operations ​ 237,400 ​ 335,278 ​ 290,416 Net cash used in discontinued operations ​ ​ — ​ ​ — ​ ​ ( 269 ) Net cash provided by operating activities ​ 237,400 ​ 335,278 ​ 290,147 Cash flows from investing activities: ​ ​ ​ Capital expenditures ​ ( 97,885 ) ​ ( 140,302 ) ​ ( 385,198 ) Proceeds from sale of business ​ 83,345 ​ 33,651 ​ — Proceeds from sale of property, plant and equipment and other assets ​ 29,562 ​ 18,911 ​ 80,961 Proceeds from insurance and other settlements ​ ​ 1,085 ​ ​ 2,709 ​ ​ 3,696 Cash paid in Elite Acquisition ​ — ​ — ​ ( 214,019 ) Net cash provided by (used in) investing activities ​ 16,107 ​ ( 85,031 ) ​ ( 514,560 ) Cash flows from financing activities: ​ ​ ​ Borrowings of long-term debt ​ 704,751 ​ 1,049,000 ​ 2,395,250 Repayments of long-term debt ​ ( 863,251 ) ​ ( 1,204,375 ) ​ ( 2,071,750 ) Payments for debt issuance costs ​ ( 2,451 ) ​ ( 5,269 ) ​ ( 22,426 ) F-7 Table of Contents Proceeds from (payments for) settlement of interest rate swaps that include financing elements ​ ( 4,390 ) ​ ( 2,916 ) ​ 1,180 Dividends paid to stockholders ​ ( 89,343 ) ​ ( 88,832 ) ​ ( 78,530 ) Net proceeds from issuance of common stock ​ ​ 3,401 ​ ​ — ​ ​ — Proceeds from stock issued under ESPP ​ 713 ​ 683 ​ 771 Purchases of treasury stock ​ ( 2,465 ) ​ ( 1,804 ) ​ ( 2,007 ) Contribution from Exterran Corporation ​ — ​ 678 ​ — Net cash provided by (used in) financing activities ​ ( 253,035 ) ​ ( 252,835 ) ​ 222,488 Net increase (decrease) in cash and cash equivalents ​ 472 ​ ( 2,588 ) ​ ( 1,925 ) Cash and cash equivalents, beginning of period ​ 1,097 ​ 3,685 ​ 5,610 Cash and cash equivalents, end of period ​ $ 1,569 ​ $ 1,097 ​ $ 3,685 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ Interest paid ​ $ ( 100,002 ) ​ $ ( 99,797 ) ​ $ ( 97,451 ) Income taxes refunded (paid), net ​ ​ ( 247 ) ​ ​ ( 94 ) ​ ​ 1,973 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing transactions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accrued capital expenditures ​ $ 7,641 ​ $ 1,624 ​ $ 11,767 Non-cash consideration received in July 2020 Disposition ​ ​ — ​ ​ 5,762 ​ ​ — Issuance of Archrock common stock pursuant to Elite Acquisition, net of tax ​ ​ — ​ ​ — ​ ​ 225,880 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-8 Table of Contents ARCHROCK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business We are an energy infrastructure company with a pure-play focus on midstream natural gas compression. We are the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. We operate in two business segments: contract operations and aftermarket services. Our predominant segment, contract operations, primarily includes designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment. 2. Basis of Presentation and Significant Accounting Policies Basis of Presentation Our Financial Statements include Archrock and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated in consolidation. Our Financial Statements are prepared in accordance with GAAP and the rules and regulations of the SEC. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. Because of the inherent uncertainties in this process, actual future results could differ from those expected as of the reporting date. Management believes that the estimates and assumptions used are reasonable. Significant Accounting Policies Cash and Cash Equivalents We consider all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. Revenue Recognition We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we are entitled to receive in exchange for those goods or services. Sales and usage-based taxes that are collected from the customer are excluded from revenue. Contract Operations Natural gas compression services. Natural gas compression services are generally satisfied over time, as the customer simultaneously receives and consumes the benefits provided by these services. Our performance obligation is a series in which the unit of service is one month, as the customer receives substantially the same benefit each month from the services regardless of the type of service activity performed, which may vary. If the transaction price is based on a fixed fee, revenue is recognized monthly on a straight-line basis over the period that we are providing services to the customer. Amounts invoiced to customers for costs associated with moving our compression assets to a customer site are also included in the transaction price and are amortized over the initial contract term. We do not consider the effects of the time value of money, as the expected time between the transfer of services and payment for such services is less than one year. F-9 Table of Contents Variable consideration exists if customers are billed at a lesser standby rate when a unit is not running. We recognize revenue for such variable consideration monthly, as the invoice corresponds directly to the value transferred to the customer based on our performance completed to date. The rate for standby service is lower to reflect the decrease in costs and effort required to provide standby service when a unit is not running. Billable Maintenance Service . We perform billable maintenance service on our natural gas compression equipment at the customer’s request on an as-needed basis. The performance obligation is satisfied and revenue is recognized at the agreed-upon transaction price at the point in time when service is complete and the customer has accepted the work performed and can obtain the remaining benefits of the service that the unit will provide. Aftermarket Services OTC Parts and Components Sales . For sales of OTC parts and components, the performance obligation is generally satisfied at the point in time when delivery takes place and the customer obtains control of the part or component. The transaction price is the fixed sales price for the part stated in the contract. Revenue is recognized upon delivery, as we have a present right to payment and the customer has legal title. Maintenance, Overhaul and Reconfiguration Services . For our service activities, the performance obligation is satisfied over time, as the work performed enhances the customer-controlled asset and another entity would not have to substantially re-perform the work we completed if they were to fulfill the remaining performance obligation. The transaction price may be a fixed monthly service fee, a fixed quoted fee or entirely variable, calculated on a time and materials basis. For service provided based on a fixed monthly fee, the performance obligation is a series in which the unit of service is one month. The customer receives substantially the same benefit each month from the service, regardless of the type of service activity performed, which may vary. As the progress towards satisfaction of the performance obligation is measured based on the passage of time, revenue is recognized monthly based on the fixed fee provided for in the contract. For service provided based on a quoted fixed fee, progress towards satisfaction of the performance obligation is measured using an input method based on the actual amount of labor and material costs incurred. The amount of the transaction price recognized as revenue each reporting period is determined by multiplying the transaction price by the ratio of actual costs incurred to date to total estimated costs expected for the service. Significant judgment is involved in the estimation of the progress to completion. Any adjustments to the measure of the progress to completion is accounted for on a prospective basis. Changes to the scope of service is recognized as an adjustment to the transaction price in the period in which the change occurs. Service provided based on time and materials is generally short-term in nature and labor rates and parts pricing is agreed upon prior to commencing the service. We apply an estimated gross margin percentage, which is fixed based on historical time and materials-based service, to actual costs incurred. We evaluate the estimated gross margin percentage at the end of each reporting period and adjust the transaction price as appropriate. Contract Assets and Liabilities We recognize a contract asset when we have the right to consideration in exchange for goods or services transferred to a customer when the right is conditioned on something other than the passage of time. We recognize a contract liability when we have an obligation to transfer goods or services to a customer for which we have already received consideration. F-10 Table of Contents Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents and trade accounts receivable. Our temporary cash investments have a zero-loss expectation because we maintain minimal balances in our cash investment accounts and have no history of loss. Trade accounts receivable are due from companies of varying size engaged principally in oil and natural gas activities throughout the U.S. We review the financial condition of customers prior to extending credit and generally do not obtain collateral for trade receivables. Payment terms are on a short-term basis and in accordance with industry practice. We consider this credit risk to be limited due to these companies’ financial resources, the nature of the products and services we provide and the terms of our customer agreements. Due to the short-term nature of our trade receivables, we consider the amortized cost to be the same as the carrying amount of the receivable, excluding the allowance for credit losses. We recognize an allowance for credit losses when a receivable is recorded, even when the risk of loss is remote. We utilize an aging schedule to determine our allowance for credit losses, and measure expected credit losses on a collective (pool) basis when similar risk characteristics exist. We rely primarily on ratings assigned by external rating agencies and credit monitoring services to assess credit risk and aggregate customers first by low, medium or high risk asset pools, and then by delinquency status. We also consider the internal risk associated with geographic location and the services we provide to the customer when determining asset pools. If a customer does not share similar risk characteristics with other customers, we evaluate the customer’s outstanding trade receivables for expected credit losses on an individual basis. Trade receivables evaluated individually are not included in our collective assessment. Each reporting period, we reassess our customers’ risk profiles and determine the appropriate asset pool classification, or perform individual assessments of expected credit losses, based on the customers’ risk characteristics at the reporting date. The contractual life of our trade receivables is primarily 30 days based on the payment terms specified in the contract. Contract operations services are generally billed monthly at the beginning of the month in which service is being provided. Aftermarket services billings typically occur when parts are delivered or service is completed. Loss rates are separately determined for each asset pool based on the length of time a trade receivable has been outstanding. We analyze two years of internal historical loss data, including the effects of prepayments, write-offs and subsequent recoveries, to determine our historical loss experience. Our historical loss information is a relevant data point for estimating credit losses, as the data closely aligns with trade receivables due from our customers. Ratings assigned by external rating agencies and credit monitoring services consider past performance and forecasts of future economic conditions in assessing credit risk. We routinely update our historical loss data to reflect our customers’ current risk profile, to ensure the historical data and loss rates are relevant to the pool of assets for which we are estimating expected credit losses. At both December 31, 2021 and 2020, Chevron U.S.A. Inc. and Williams Partners accounted for 14 %and 10 % of our trade accounts receivable balance, respectively. The following table summarizes the activity in our allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Balance at beginning of period $ 3,370 $ 2,210 $ 1,452 Impact of adoption of ASU 2016-13 on January 1, 2020 ​ ​ — ​ ​ ( 216 ) ​ ​ — Provision for credit losses ​ ​ ( 90 ) ​ ​ 3,525 ​ ​ 2,567 Write-offs charged against allowance ​ ​ ( 1,128 ) ​ ​ ( 2,149 ) ​ ​ ( 1,809 ) Balance at end of period ​ $ 2,152 ​ $ 3,370 ​ $ 2,210 ​ Inventory Inventory consists of parts used for maintenance of natural gas compression equipment. Inventory is stated at the lower of cost and net realizable value using the average cost method. F-11 Table of Contents Property, Plant and Equipment Property, plant and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives as follows: ​ ​ ​ ​ Compression equipment, facilities and other fleet assets 3 to 30 years Buildings ​ 20 to 35 years Transportation and shop equipment ​ 3 to 10 years Computer hardware and software ​ 3 to 5 years Other ​ 3 to 10 years ​ Major improvements that extend the useful life of an asset are capitalized and depreciated over the estimated useful life of the major improvement, up to seven years . Repairs and maintenance are expensed as incurred. Long-Lived Assets We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted cash flows expected from the use of the asset and its eventual disposition are less than its carrying amount. Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its fair value. Identifiable intangibles are amortized over the estimated useful life of the asset. Leases We determine if an arrangement is a lease at inception and determine lease classification and recognize ROU assets and liabilities on the lease commencement date based on the present value of lease payments over the lease term. As the discount rate implicit in the lease is rarely readily determinable, we estimate our incremental borrowing rate using information available at commencement date in determining the present value of the lease payments. The lease term includes options to extend when we are reasonably certain to exercise the option. Short-term leases, those with an initial term of 12 months or less, are not recorded on the balance sheet. Variable costs such as our proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Operating lease expense for lease payments is recognized on a straight-line basis over the term of the lease. Our facility leases, of which we are the lessee, contain lease and nonlease components, which we have elected to account for as a single lease component, as the nonlease components are not significant to the total consideration of the contract and separating the nonlease component would have no effect on lease classification. As it relates to our contract operations service agreements in which we are a lessor, the services nonlease component is predominant over the compression package lease component and therefore recognition of these agreements follows the Accounting Standards Codification Topic 606 Revenue from Contracts with Customers guidance. Goodwill The goodwill acquired in connection with the Elite Acquisition represented the excess of consideration transferred over the fair value of the assets and liabilities acquired. We review the carrying amount of our goodwill in the fourth quarter of every year, or whenever indicators of potential impairment exist, to determine if the carrying amount of a reporting unit exceeds its fair value, including the applicable goodwill. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is impaired. If the fair value is more likely than not impaired, we perform a quantitative impairment test to identify impairment and measure the amount of impairment loss to be recognized, if any. F-12 Table of Contents Our qualitative assessment includes consideration of various events and circumstances and their potential impact to a reporting unit’s fair value, including macroeconomic and industry conditions such as a deterioration in our operating environment and limitations on access to capital and other developments in the equity and credit markets, cost factors that could have a negative effect on earnings and cash flows, relevant entity-specific and reporting unit-specific events and overall financial performance such as declining earnings or cash flows or a sustained decrease in share price. The quantitative impairment test (i) allocates goodwill and our other assets and liabilities to our reporting units, contract operations and aftermarket services, (ii) calculates the fair value of the reporting units and (iii) determines the impairment loss, if any, as the amount by which the carrying amount of the reporting unit exceeds its fair value (limited to the total amount of goodwill allocated to that reporting unit). All of the goodwill recognized in the Elite Acquisition was allocated to our contract operations reporting unit. The fair value of the contract operations reporting unit is calculated using the expected present value of future cash flows method. Significant estimates are made to determine future cash flows including future revenues, costs and capital requirements and the appropriate risk-adjusted discount rate by which to discount the estimated future cash flows. In the first quarter of 2020, the global response to the COVID-19 pandemic significantly impacted our market capitalization and estimates of future revenues and cash flows, which triggered the need to perform a quantitative test of the fair value of our contract operations reporting unit as of March 31, 2020. The quantitative test determined that the carrying amount of our contract operations reporting unit exceeded its fair value and we recorded a full impairment loss on goodwill as a result. Internal-Use Software Certain of our contracts have been deemed to be hosting arrangements that are service contracts, including those related to the cloud migration of our ERP system and cloud services for our new mobile workforce, telematics and inventory management tools. Certain costs incurred for the implementation of a hosting arrangement that is a service contract are capitalized and amortized on a straight-line basis over the term of the respective contract. Amortization begins for each component of the hosting arrangement when the component becomes ready for its intended use. Capitalized implementation costs are presented in other assets, the same line item in our consolidated balance sheets that a prepayment of the fees for the associated hosting arrangement would be presented. Amortization expense of the capitalized implementation costs is presented in SG&A, the same line item in our consolidated statements of operations as the expense for fees for the associated hosting arrangement. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rate on deferred tax assets and liabilities is recognized in income in the period of the enactment date. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If a valuation allowance was previously recorded and we subsequently determined we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax assets’ valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with the accounting standard on income taxes under a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority. F-13 Table of Contents Hedging and Use of Derivative Instruments We use derivative instruments to manage our exposure to fluctuations in the variable interest rate of our Credit Facility and thereby minimize the risks and costs associated with financial activities. We do not use derivative instruments for trading or other speculative purposes. We record interest rate swaps on the balance sheet as either derivative assets or derivative liabilities measured at their fair value. The fair value of our derivatives is based on the income approach (discounted cash flow) using market observable inputs, including LIBOR forward curves. Changes in the fair value of the derivatives designated as cash flow hedges are recognized as a component of other comprehensive income (loss) until the hedged transaction affects earnings. At that time, amounts are reclassified into earnings to interest expense, the same statement of operations line item to which the earnings effect of the hedged item is recorded. Cash flows from derivatives designated as hedges are classified in our consolidated statements of cash flows under the same category as the cash flows from the underlying assets, liabilities or anticipated transactions unless the derivative contract contains a significant financing element, in which case, the cash settlements for these derivatives are classified as cash flows from financing activities. To qualify for hedge accounting treatment, we must formally document, designate and assess the effectiveness of the transactions. We perform quarterly qualitative prospective and retrospective hedge effectiveness assessments unless facts and circumstances related to the hedging relationships change such that we can no longer assert qualitatively that the cash flow hedge relationships were and continue to be highly effective. If the necessary correlation ceases to exist or if the anticipated transaction is no longer probable, we would discontinue hedge accounting and apply mark-to-market accounting. Amounts paid or received from interest rate swap agreements are recorded in interest expense and matched with the cash flows and interest expense of the debt being hedged, resulting in an adjustment to the effective interest rate. 3. Recent Accounting Developments Accounting Standards Updates Implemented Reference Rate Reform In June 2021, we prospectively adopted ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. On June 10, 2021, we amended one of our interest rate swap agreements and determined that the modifications meet the criteria for the optional expedients and exceptions, which allow us to forego dedesignation of the hedging relationship and to subsequently assess effectiveness on a qualitative basis. The adoption of ASU 2020-04 did not have a material impact on our consolidated financial statements. In the first quarter, we evaluated Amendment No. 3 to our Credit Facility and determined that ASU 2020-04 was not applicable. We will continue to assess any modifications to our interest rate swap and Credit Facility agreements during the effective period of this update and will apply the amendments as applicable. 4. Business Transactions July 2021 Dispositions In July 2021, we completed sales of certain contract operations customer service agreements and approximately 575 compressors, comprising approximately 100,000 horsepower, used to provide compression services under those agreements, as well as other assets used to support the operations. We allocated customer-related and contract-based intangible assets based on a ratio of the horsepower sold relative to the total horsepower of the asset group. We received cash consideration of $ 60.3 million for the sales and recorded gains on the sales of $ 13.0 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2021. F-14 Table of Contents February 2021 Disposition In February 2021, we completed the sale of certain contract operations customer service agreements and approximately 300 compressors, comprising approximately 40,000 horsepower, used to provide compression services under those agreements as well as other assets used to support the operations. We allocated customer-related and contract-based intangible assets based on a ratio of the horsepower sold relative to the total horsepower of the asset group. We recorded a gain on the sale of $ 6.0 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2021. July 2020 Disposition In July 2020, we completed the sale of the turbocharger business included within our aftermarket services segment . In connection with the sale, we entered into a supply agreement to purchase a minimum amount of turbocharger goods and services over a two-year term. In addition to cash of $ 9.5 million received upon closing, an additional $ 3.0 million was received on the first anniversary of the closing date in July 2021, and $ 3.5 million was received through the purchase of turbocharger goods and services under the supply agreement, including $ 2.8 million that was received during the year ended December 31, 2021. We recognized a gain on the sale of $ 9.3 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2020. March 2020 Disposition In March 2020, we completed the sale of certain contract operations customer service agreements and approximately 200 compressors, comprising approximately 35,000 horsepower, used to provide compression services under those agreements as well as other assets used to support the operations. We allocated customer-related and contract-based intangible assets and goodwill based on a ratio of the horsepower sold relative to the total horsepower of the asset group. We recognized a gain on the sale of $ 3.2 million in gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2020. Elite Acquisition In August 2019, we completed the Elite Acquisition whereby we acquired from Elite Compression substantially all of its assets, including a fleet of predominantly large compressors comprising approximately 430,000 horsepower, vehicles, real property and inventory, and certain liabilities for aggregate consideration consisting of $ 214.0 million in cash and 21.7 million shares of common stock with an acquisition date fair value of $ 225.9 million. The cash portion of the acquisition was funded with borrowings under the Credit Facility. The Elite Acquisition was accounted for using the acquisition method, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date. The excess of the consideration transferred over those fair values was recorded as goodwill. Our valuation methodology and significant inputs for fair value measurements are detailed by asset class below. The fair value measurements for property, plant and equipment and intangible assets were based on significant inputs that are not observable in the market and therefore represent Level 3 measurements. Goodwill The goodwill resulting from the acquisition was attributable to the expansion of our services in various regions in which we currently operate and was allocated to our contract operations segment. The goodwill had an indefinite life that was to be reviewed annually for impairment or more frequently if indicators of potential impairment existed. All of the goodwill recorded for this acquisition is expected to be deductible for U.S. federal income tax purposes. See Note 9 (“Goodwill”) for details on the 2020 impairment of our goodwill. F-15 Table of Contents Property, Plant and Equipment The property, plant and equipment is primarily comprised of compression equipment that will be depreciated on a straight-line basis over an estimated average remaining useful life of 15 years. The fair value of the property, plant and equipment was determined using the cost approach, whereby we estimated the replacement cost of the assets by evaluating recent purchases of similar assets or published data, and then adjusted replacement cost for physical deterioration and functional and economic obsolescence, as applicable. Intangible Assets The intangible assets consist of customer relationships that have an estimated useful life of 15 years. The amount of intangible assets and their associated useful life were determined based on the period over which the assets are expected to contribute directly or indirectly to our future cash flows. The fair value of the identifiable intangible assets was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired. Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets. To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our weighted average cost of capital to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired. Unaudited Pro Forma Financial Information Unaudited pro forma financial information for the year ended December 31, 2019 was derived by adjusting our historical financial statements in order to give effect to the assets and liabilities acquired in the Elite Acquisition. The Elite Acquisition is presented in this unaudited pro forma financial information as though the acquisition occurred as of January 1, 2018, and reflects the following: • the acquisition of substantially all of Elite Compression’s assets, including a compression fleet of approximately 430,000 horsepower, vehicles, real property and inventory, and certain liabilities; • borrowings of $ 214.0 million under the Credit Facility for cash consideration exchanged in the acquisition; and • the exclusion of $ 7.8 million of financial advisory, legal and other professional fees incurred related to the acquisition and recorded to transaction-related costs in our consolidated statements of operations during the year ended December 31, 2019. The unaudited pro forma financial information below is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results. ​ ​ ​ ​ ​ ​ ​ Year Ended (in thousands) December 31, 2019 Revenue ​ $ 1,009,763 Net income attributable to Archrock stockholders ​ 106,521 ​ The results of operations attributable to the assets and liabilities acquired in the Elite Acquisition have been included in our consolidated financial statements as part of our contract operations segment since the date of acquisition. Revenue attributable to the assets acquired from the date of acquisition, August 1, 2019, through December 31, 2019 was $ 33.2 million. We are unable to provide earnings attributable to the assets and liabilities acquired since the date of acquisition as we do not prepare full stand-alone earnings reports for those assets and liabilities. F-16 Table of Contents Harvest Sale In August 2019, we completed an asset sale in which Harvest acquired from us approximately 80,000 active and idle compression horsepower, vehicles and parts inventory for cash consideration of $ 30.0 million. We recorded a $ 6.6 million gain on this sale to gain on sale of assets, net in our consolidated statements of operations during the year ended December 31, 2019. The assets were previously reported under our contract operations segment. 5. Discontinued Operations We completed the Spin-off in 2015. In order to effect the Spin-off and govern our relationship with Exterran Corporation after the Spin-off, we entered into several agreements with Exterran Corporation, including a tax matters agreement, which governs the respective rights, responsibilities and obligations of Exterran Corporation and us with respect to certain tax matters. As of both December 31, 2021 and 2020, we had $ 7.9 million of unrecognized tax benefits (including interest and penalties) related to Exterran Corporation operations prior to the Spin-off recorded to noncurrent liabilities associated with discontinued operations in our consolidated balance sheets. We had an offsetting indemnification asset of $ 7.9 million related to these unrecognized tax benefits recorded to noncurrent assets associated with discontinued operations as of both December 31, 2021 and 2020. The following table presents the balance sheets for our discontinued operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 Other assets ​ $ 7,868 ​ $ 7,868 Deferred tax assets ​ ​ 1,943 ​ ​ 3,168 Total assets associated with discontinued operations ​ $ 9,811 ​ $ 11,036 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities ​ $ 7,868 ​ $ 7,868 Total liabilities associated with discontinued operations ​ $ 7,868 ​ $ 7,868 ​ ​ The following table presents the statements of operations for our discontinued operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Other (income) expense, net ​ $ — $ 640 $ ( 1,473 ) Provision for (benefit from) income taxes ​ — ​ ( 640 ) ​ 1,746 Loss from discontinued operations, net of tax ​ $ — ​ $ — ​ $ ( 273 ) ​ ​ 6. Inventory ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 2020 Parts and supplies ​ $ 63,628 ​ $ 57,433 Work in progress ​ 9,241 ​ 6,237 Inventory ​ $ 72,869 ​ $ 63,670 ​ During the years ended December 31, 2021, 2020 and 2019, we recorded write-downs to inventory of $ 1.0 million, $ 1.3 million and $ 0.9 million, respectively, for inventory considered to be excess, obsolete or carried at an amount in excess of net realizable value. 7. Property, Plant and Equipment, net ​ F-17 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 Compression equipment, facilities and other fleet assets ​ $ 3,273,770 ​ $ 3,439,432 Land and buildings ​ 43,540 ​ 45,167 Transportation and shop equipment ​ 92,490 ​ 106,868 Computer hardware and software ​ 76,908 ​ 84,680 Other ​ 6,229 ​ 14,457 Property, plant and equipment ​ 3,492,937 ​ 3,690,604 Accumulated depreciation ​ ( 1,266,411 ) ​ ( 1,300,930 ) Property, plant and equipment, net ​ $ 2,226,526 ​ $ 2,389,674 ​ Depreciation expense was $ 167.6 million, $ 177.5 million and $ 172.8 million during the years ended December 31, 2021, 2020 and 2019, respectively. Assets under construction of $ 30.1 million and $ 17.6 million at December 31, 2021 and 2020, respectively, primarily consisted of compression equipment, facilities and other fleet assets . 8. Leases We have operating leases and subleases for office space, temporary housing, storage and shops. Our leases have remaining lease terms of less than one year to approximately nine years and most include options to extend the lease term, at our discretion, for an additional six months to ten years . We are not, however, reasonably certain that we will exercise any of the options to extend and as such, they have not been included in the remaining lease terms. Financial and other supplemental information related to our operating leases follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) Classification 2021 2020 ROU assets Operating lease ROU assets ​ $ 17,491 ​ $ 19,236 ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease liabilities ​ ​ Current Accrued liabilities ​ $ 2,940 ​ $ 3,564 Noncurrent Operating lease liabilities ​ 15,940 ​ 16,925 Total lease liabilities ​ $ 18,880 ​ $ 20,489 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 ​ 2020 ​ 2019 Operating lease cost ​ $ 4,836 ​ $ 4,508 ​ $ 3,966 Short-term lease cost ​ 169 ​ 52 ​ 348 Variable lease cost ​ 2,123 ​ 1,652 ​ 1,607 Total lease cost ​ $ 7,128 ​ $ 6,212 ​ $ 5,921 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 ​ 2020 ​ 2019 Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities ​ $ 6,568 ​ $ 5,885 ​ $ 5,420 Operating lease ROU assets obtained in exchange for lease liabilities, net (1) ​ 2,135 ​ 4,812 ​ 2,247 (1) Includes decreases to our ROU assets of $ 0.3 million and $ 0.1 million related to lease amendments and terminations during the years ended December 31, 2021 and 2020, respectively. ​ F-18 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ Weighted average remaining lease term (in years) ​ 7.2 ​ 7.9 ​ 8.2 ​ Weighted average discount rate ​ 4.6 % 4.8 % 5.3 % ​ Remaining maturities of our lease liabilities as of December 31, 2021 were as follows: ​ ​ ​ ​ ​ (in thousands) ​ ​ 2022 ​ $ 3,454 2023 ​ ​ 3,453 2024 ​ 2,998 2025 ​ 2,575 2026 ​ 2,321 Thereafter ​ 7,628 Total lease payments ​ 22,429 Less: Interest ​ ( 3,549 ) Total lease liabilities ​ $ 18,880 ​ 9. Goodwill We recognized goodwill in connection with the Elite Acquisition, which represented the excess of consideration transferred over the fair value of the assets and liabilities acquired. All of the goodwill was allocated to our contract operations reporting unit. Beginning in the first quarter of 2020, the COVID-19 pandemic caused a significant deterioration in global macroeconomic conditions, which commenced substantial spending cuts by our customers and a decline in production. This global response to the pandemic significantly impacted our market capitalization and estimates of future revenues and cash flows, which triggered the need to perform a quantitative test of the fair value of our contract operations reporting unit as of March 31, 2020. The quantitative test determined that the carrying amount of our contract operations reporting unit exceeded its fair value and we recorded a goodwill impairment loss of $ 99.8 million during the first quarter of 2020. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions, which have a significant impact on the fair value determined. We determined the fair value of our reporting unit using an equal weighting of both the expected present value of future cash flows and a market approach. The present value of future cash flows was estimated using our most recent forecast and the weighted average cost of capital. The market approach used a market multiple on the earnings before interest expense, provision for income taxes and depreciation and amortization expense of comparable peer companies. Significant estimates for our reporting unit included in our impairment analysis were our cash flow forecasts, our estimate of the market’s weighted average cost of capital and market multiples. ​ ​ 10. Intangible Assets, net Intangible assets include customer relationships and contracts associated with various business and asset acquisitions. These acquired intangible assets were recorded at fair value determined as of the acquisition date and are being amortized over the period we expect to benefit from the assets. Intangible assets, net consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Carrying ​ Accumulated ​ Carrying ​ Accumulated (in thousands) Amount Amortization Amount Amortization Customer-related ( 15 ― 25 year life) ​ $ 144,322 ​ $ ( 96,435 ) ​ $ 147,169 ​ $ ( 86,512 ) Contract-based ( 5 ― 7 year life) ​ — ​ — ​ 37,730 ​ ( 36,856 ) Intangible assets ​ $ 144,322 ​ $ ( 96,435 ) ​ $ 184,899 ​ $ ( 123,368 ) ​ F-19 Table of Contents Amortization expense of these intangible assets totaled $ 11.3 million, $ 15.6 million and $ 15.3 million during the years ended December 31, 2021, 2020 and 2019, respectively. Estimated future intangible assets amortization expense as of December 31, 2021 was as follows: ​ ​ ​ ​ ​ (in thousands) ​ ​ 2022 ​ $ 8,913 2023 ​ 7,060 2024 ​ 5,895 2025 ​ 3,763 2026 ​ 3,179 Thereafter ​ 19,077 Total ​ $ 47,887 ​ ​ 11. Contract Costs We capitalize incremental costs to obtain a contract with a customer if we expect to recover those costs. Capitalized costs include commissions paid to our sales force to obtain contract operations contracts. We expense commissions paid for sales of service contracts and OTC parts and components within our aftermarket services segment, as the amortization period is less than one year. We had contract costs of $ 2.6 million and $ 3.2 million associated with sales commissions recorded in our consolidated balance sheets at December 31, 2021 and 2020, respectively. We capitalize costs incurred to fulfill a contract if those costs relate directly to a contract, enhance resources that we will use in satisfying performance obligations and if we expect to recover those costs. Capitalized costs incurred to fulfill our customer contracts include freight charges to transport compression assets before transferring services to the customer and mobilization activities associated with our contract operations services. Aftermarket services fulfillment costs are recognized based on the percentage-of-completion method applicable to the customer contract and do not typically result in the recognition of contract costs. We had contract costs of $ 22.8 million and $ 26.0 million associated with freight and mobilization recorded in our consolidated balance sheets at December 31, 2021 and 2020, respectively. Contract operations obtainment and fulfillment costs are amortized based on the transfer of service to which the assets relate, which is estimated to be 38 months based on average contract term, including anticipated renewals. We assess periodically whether the 38 -month estimate fairly represents the average contract term and adjust as appropriate. Contract costs associated with commissions are amortized to SG&A. Contract costs associated with freight and mobilization are amortized to cost of sales (excluding depreciation and amortization). During the years ended December 31, 2021, 2020 and 2019, we amortized $ 2.2 million, $ 3.0 million and $ 2.6 million, respectively, related to sales commissions and $ 17.8 million, $ 23.6 million and $ 20.7 million, respectively, related to freight and mobilization. 12. Hosting Arrangements In the fourth quarter of 2018, we began a process and technology transformation project that has, among other things, replaced our existing ERP, supply chain and inventory management systems and expanded the remote monitoring capabilities of our compression fleet. Included in this project are hosting arrangements that are service contracts related to the cloud migration of our ERP system and cloud services for our new mobile workforce, telematics and inventory management tools. As of December 31, 2021 and 2020, we had $ 12.7 million and $ 7.7 million, respectively, of capitalized implementation costs related to our hosting arrangements that are service contracts included in other assets in our consolidated balance sheets. Accumulated amortization was $ 0.7 million and $ 0.3 million at December 31, 2021 and 2020, respectively. We recorded $ 0.3 million of amortization expense to SG&A in our consolidated statements of operations during each of the years ended December 31, 2021 and 2020. F-20 Table of Contents During the year ended December 31, 2020, we impaired $ 1.6 million of capitalized implementation costs related to the hosting arrangements of the mobile workforce component of our project due to the termination of the agreement, which was included in long-lived and other asset impairment in our consolidated statements of operations. 13. Accrued Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Accrued salaries and other benefits ​ $ 20,891 ​ $ 16,332 Accrued income and other taxes ​ 9,957 ​ 11,414 Accrued interest ​ 22,368 ​ 22,693 Derivative liability - current ​ 1,250 ​ 4,809 Other accrued liabilities ​ 28,051 ​ 21,745 Accrued liabilities ​ $ 82,517 ​ $ 76,993 ​ ​ 14. Long-Term Debt ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 ​ 2020 Credit Facility ​ $ 234,500 ​ $ 393,000 ​ ​ ​ ​ ​ ​ ​ 2028 Notes ​ ​ ​ ​ ​ ​ Principal ​ 800,000 ​ 800,000 Debt premium, net of amortization ​ ​ 12,536 ​ 14,541 Deferred financing costs, net of amortization ​ ( 10,406 ) ​ ( 11,766 ) ​ ​ 802,130 ​ 802,775 ​ ​ ​ ​ ​ ​ ​ 2027 Notes ​ ​ ​ ​ ​ ​ Principal ​ ​ 500,000 ​ 500,000 Deferred financing costs, net of amortization ​ ​ ( 5,805 ) ​ ( 6,908 ) ​ ​ ​ 494,195 ​ 493,092 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ $ 1,530,825 ​ $ 1,688,867 ​ Credit Facility As of December 31, 2021, there were $ 8.9 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 2.4 %. The weighted average annual interest rate on the outstanding balance under the Credit Facility, excluding the effect of interest rate swaps, was 2.6 % and 2.7 % at December 31, 2021 and 2020, respectively. As a result of the facility’s ratio requirements (see below), $ 502.5 million of the $ 506.6 million of undrawn capacity was available for additional borrowings as of December 31, 2021. We were in compliance with all other covenants under our Credit Facility agreement. Amendments to the Credit Facility Amendment No. 3 In February 2021, we amended our Credit Facility to, among other things, reduce the aggregate revolving commitment from $ 1.25 billion to $ 750.0 million and adjust the maximum Senior Secured Debt to EBITDA and Total Debt to EBITDA ratios, as defined in the Credit Facility agreement, to those listed in the table below. F-21 Table of Contents We incurred $ 1.8 million in transaction costs related to Amendment No. 3, which were included in other assets in our consolidated balance sheets and are being amortized over the remaining term of the Credit Facility. In addition, we wrote off $ 4.9 million of unamortized deferred financing costs as a result of the amendment, which was recorded to interest expense in our consolidated statements of operations during the year ended December 31, 2021. Amendment No. 2 In November 2019, we amended the Credit Facility to, among other things, extend the maturity date of the Credit Facility from March 30, 2022 to November 8, 2024 and change the applicable margin for borrowings to those discussed in “Other Facility Terms” below. We incurred $ 6.4 million in transaction costs related to Amendment No. 2, which were included in other assets in our consolidated balance sheets and are being amortized over the remaining term of the Credit Facility. Other Facility Terms Subject to certain conditions, including approval by the lenders, we are able to increase the aggregate commitments under the Credit Facility by up to an additional $ 250.0 million. Portions of the Credit Facility up to $ 50.0 million are available for the issuance of swing line loans and $ 50.0 million is available for the issuance of letters of credit. The Credit Facility bears interest at a base rate or LIBOR, at our option, plus an applicable margin. Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from 2.00 % to 2.75 % and (ii) in the case of base rate loans, from 1.00 % to 1.75 %. The base rate is the highest of (i) the prime rate announced by JPMorgan Chase Bank, (ii) the Federal Funds Effective Rate plus 0.50 % and (iii) one-month LIBOR plus 1.00 %. Additionally, we are required to pay commitment fees based on the daily unused amount of the Credit Facility at a rate of 0.375 %. We incurred $ 2.0 million, $ 2.0 million and $ 1.9 million in commitment fees during the years ended December 31, 2021, 2020 and 2019, respectively. The Credit Facility borrowing base consists of eligible accounts receivable, inventory and compressors, the largest of which is compressors. Borrowings under the Credit Facility are secured by substantially all of our personal property assets and our Significant Domestic Subsidiaries (as defined in the Credit Facility agreement), including all of the membership interests of our Domestic Subsidiaries (as defined in the Credit Facility agreement). The Credit Facility agreement contains various covenants including, but not limited to, restrictions on the use of proceeds from borrowings and limitations on our ability to incur additional indebtedness, engage in transactions with affiliates, merge or consolidate, sell assets, make certain investments and acquisitions, make loans, grant liens, repurchase equity and pay distributions. The Credit Facility agreement also contains various covenants requiring mandatory prepayments from the net cash proceeds of certain asset transfers. As of December 31, 2021, the following consolidated financial ratios, as defined in our Credit Facility agreement, were required: ​ ​ ​ ​ EBITDA to Interest Expense 2.5 to 1.0 Senior Secured Debt to EBITDA 3.0 to 1.0 Total Debt to EBITDA Through fiscal year 2022 ​ 5.75 to 1.0 January 1, 2023 through September 30, 2023 5.50 to 1.0 Thereafter (1) 5.25 to 1.0 (1) Subject to a temporary increase to 5.50 to 1.0 for any quarter during which an acquisition satisfying certain thresholds is completed and for the two quarters immediately following such quarter. F-22 Table of Contents 2028 Notes and 2027 Notes In December 2020, we completed a private offering of $ 300.0 million aggregate principal amount of 6.25 % senior notes due April 2028, which were issued pursuant to the indenture under which we completed a private offering of $ 500.0 million aggregate principal amount of 6.25 % senior notes in December 2019. The notes of the two offerings have identical terms and are treated as a single class of securities. The $ 300.0 million of notes were issued at 104.875 % of their face value and have an effective interest rate of 5.6 %. The $ 500.0 million of notes were issued at 100 % of their face value and have an effective interest rate of 6.8 %. We received net proceeds of $ 309.9 million, after deducting issuance costs of $ 4.7 million, from our December 2020 offering and net proceeds of $ 491.8 million, after deducting issuance costs of $ 8.2 million, from our December 2019 offering. In March 2019, we completed a private offering of $ 500.0 million aggregate principal amount of 6.875 % senior notes due April 2027 and received net proceeds of $ 491.2 million after deducting issuance costs of $ 8.8 million. The $ 500.0 million of notes were issued at 100 % of their face value and have an effective interest rate of 7.9 %. The net proceeds from the 2027 Notes and 2028 Notes were used to repay borrowings outstanding under our Credit Facility. Issuance costs related to the 2027 Notes and 2028 Notes are considered deferred financing costs, and together with the issue premium of the December 2020 offering of 2028 Notes, are recorded within long-term debt in our consolidated balance sheets and are being amortized to interest expense in our consolidated statements of operations over the terms of the notes. The 2027 Notes and 2028 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us and all of our existing subsidiaries, other than Archrock Partners, L.P. and Archrock Partners Finance Corp., which are co-issuers of both offerings, and certain of our future subsidiaries. The 2027 Notes and 2028 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness. The 2027 Notes and 2028 Notes may be redeemed at any time, in whole or in part, at specified redemption prices and make-whole premiums, plus any accrued and unpaid interest. 2022 Notes In April 2020, the 2022 Notes were redeemed at 100 % of their $ 350.0 million aggregate principal amount plus accrued and unpaid interest of $ 10.5 million with borrowings under the Credit Facility. A debt extinguishment loss of $ 4.0 million related to the redemption was recognized during the year ended December 31, 2020. 2021 Notes In April 2019, the 2021 Notes were redeemed at 100 % of their $ 350.0 million aggregate principal amount plus accrued and unpaid interest of $ 0.2 million with borrowings under the Credit Facility. We recorded a debt extinguishment loss of $ 3.7 million related to the redemption during the year ended December 31, 2019. Long-Term Debt Maturity Contractual maturities of long-term debt over the next five years, excluding interest to be accrued, as of December 31, 2021, were as follows: ​ ​ ​ ​ ​ (in thousands) ​ ​ 2022 ​ $ — 2023 ​ — 2024 ​ 234,500 2025 ​ — 2026 ​ — Long-term debt maturities through 2026 ​ $ 234,500 ​ F-23 Table of Contents ​ 15. Accumulated Other Comprehensive Income (Loss) Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with owners. Our accumulated other comprehensive income (loss) consists of changes in the fair value of our interest rate swap derivative instruments, net of tax. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Beginning accumulated other comprehensive income (loss) ​ $ ( 5,006 ) ​ $ ( 1,387 ) ​ $ 5,773 Other comprehensive income (loss), net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss recognized in other comprehensive income (loss), net of tax benefit of $ 257 , $ 1,776 and $ 1,425 , respectively ​ ( 962 ) ​ ( 6,683 ) ​ ( 5,360 ) (Gain) loss reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax provision (benefit) of $( 1,324 ), $( 814 ) and $ 478 , respectively ​ 4,984 ​ 3,064 ​ ( 1,800 ) Total other comprehensive income (loss) ​ 4,022 ​ ( 3,619 ) ​ ( 7,160 ) Ending accumulated other comprehensive loss ​ $ ( 984 ) ​ $ ( 5,006 ) ​ $ ( 1,387 ) ​ See Note 22 (“Derivatives”) for further details on our interest rate swap derivative instruments. 16. Equity At-the-Market Continuous Equity Offering Program In February 2021, we entered into the ATM Agreement, pursuant to which we may offer and sell shares of our common stock from time to time for an aggregate offering price of up to $ 50.0 million. We use the net proceeds of these offerings, after deducting sales agent fees and offering expenses, for general corporate purposes. Offerings of common stock pursuant to the ATM Agreement will terminate upon the earlier of (i) the sale of all shares of common stock subject to the ATM Agreement or (ii) the termination of the ATM Agreement by us or by each of the sales agents. Any sales agent may also terminate the ATM Agreement but only with respect to itself. During the year ended December 31, 2021, we sold 357,148 shares of common stock for net proceeds of $ 3.4 million pursuant to the ATM Agreement. Elite Acquisition In August 2019, we completed the Elite Acquisition. A portion of the acquisition’s purchase price was funded through the issuance of 21.7 million shares of common stock with an acquisition date fair value of $ 225.9 million, which was recorded to common stock and additional paid-in capital in our consolidated statements of equity. See Note 4 (“Business Transactions”) for further details of this acquisition. F-24 Table of Contents Cash Dividends The following table summarizes our dividends declared and paid in each of the quarterly periods of 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ Declared Dividends Dividends Paid ​ per Common Share (in thousands) 2021 ​ ​ Q4 ​ $ 0.145 ​ $ 22,351 Q3 ​ ​ 0.145 ​ ​ 22,506 Q2 ​ ​ 0.145 ​ ​ 22,331 Q1 ​ ​ 0.145 ​ ​ 22,155 ​ ​ ​ ​ ​ ​ ​ 2020 ​ ​ Q4 ​ $ 0.145 ​ $ 22,177 Q3 ​ 0.145 ​ 22,308 Q2 ​ 0.145 ​ 22,176 Q1 ​ 0.145 ​ 22,171 ​ ​ ​ ​ ​ ​ ​ 2019 ​ ​ Q4 ​ $ 0.145 ​ $ 22,031 Q3 ​ 0.145 ​ 22,062 Q2 ​ 0.132 ​ 17,206 Q1 ​ 0.132 ​ 17,231 ​ On January 27, 2022, our Board of Directors declared a quarterly dividend of $ 0.145 per share of common stock, or approximately $ 22.6 million, which was paid on February 15, 2022 to stockholders of record at the close of business on February 8, 2022. F-25 Table of Contents 17. Revenue from Contracts with Customers The following table presents our revenue from contracts with customers by segment (see Note 22 (“Segments”)) and disaggregated by revenue source: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Contract operations: ​ ​ ​ ​ ​ ​ 0 ― 1,000 horsepower per unit ​ $ 175,457 ​ $ 224,702 ​ $ 259,985 1,001 ― 1,500 horsepower per unit ​ 267,191 ​ 305,185 ​ 316,082 Over 1,500 horsepower per unit ​ 204,893 ​ 206,749 ​ 191,510 Other (1) ​ 770 ​ 2,282 ​ 3,962 Total contract operations revenue (2) ​ 648,311 ​ 738,918 ​ 771,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aftermarket services: ​ ​ ​ Services (3) ​ 69,876 ​ 79,012 ​ 122,076 OTC parts and components sales ​ 63,274 ​ 57,040 ​ 71,870 Total aftermarket services revenue (4) ​ 133,150 ​ 136,052 ​ 193,946 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 781,461 ​ $ 874,970 ​ $ 965,485 (1) Primarily relates to fees associated with owned non-compression equipment. (2) Includes $ 4.0 million, $ 5.6 million and $ 7.9 million during the years ended December 31, 2021, 2020 and 2019, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time. (3) Includes a reversal of $ 0.9 million of revenue during the year ended December 31, 2019 related to changes in estimates of performance obligations partially satisfied in prior periods. (4) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue is recognized at a point in time. Performance Obligations As of December 31, 2021, we had $ 264.6 million of remaining performance obligations related to our contract operations segment, which will be recognized through 2026 as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2023 2024 2025 2026 Total Remaining performance obligations ​ $ 209,241 ​ $ 42,367 ​ $ 11,747 ​ $ 771 ​ $ 471 ​ $ 264,597 ​ We do not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year. Contract Assets and Liabilities Contract Assets As of December 31, 2021 and 2020, our receivables from contracts with customers, net of allowance for credit losses, were $ 84.7 million and $ 95.6 million, respectively. F-26 Table of Contents Contract Liabilities Freight billings to customers for the transport of compression assets, customer-specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. Our contract liabilities were $ 4.4 million and $ 4.6 million as of December 31, 2021 and 2020, respectively, and were included in deferred revenue and other liabilities in our consolidated balance sheets. During the year ended December 31, 2021, we deferred revenue of $ 10.2 million and recognized $ 10.4 million as revenue. The revenue recognized and deferred during the period primarily related to freight billings and milestone billings on aftermarket services. 18. Long-Lived and Other Asset Impairment We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable. In the first quarter of 2020, we determined that the impairment of our contract operations reporting unit’s goodwill was an indicator of potential impairment of the carrying amount of our long-lived assets, including our compressor fleet and associated customer and contract-based intangible assets. Accordingly, we performed a quantitative impairment test of our long-lived assets, by which we determined that they were not also impaired. No similar impairment has been indicated subsequent to the first quarter of 2020. Compression Fleet We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use. In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value. The following table presents the results of our compression fleet impairment review as recorded to our contract operations segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) ​ 2021 2020 2019 Idle compressors retired from the active fleet ​ ​ 230 ​ 730 ​ 975 Horsepower of idle compressors retired from the active fleet ​ 85,000 ​ 261,000 ​ 170,000 Impairment recorded on idle compressors retired from the active fleet ​ $ 21,208 ​ $ 77,590 ​ $ 44,663 ​ Other Impairment During the year ended December 31, 2020, $ 1.7 million of capitalized implementation and unamortized prepaid costs related to the mobile workforce component of our process and technology transformation project was impaired. See Note 12 (“Hosting Arrangements”) for further details. F-27 Table of Contents 19. Restructuring Charges During the first quarter of 2020, we completed restructuring activities to further streamline our organization and more fully align our teams to improve our customer service and profitability. We incurred severance costs of $ 1.7 million related to these activities during the first quarter of 2020. No additional costs will be incurred for this organizational restructuring. In response to the decreased activity level of our customers that resulted from the COVID-19 pandemic beginning in the second quarter of 2020, we incurred severance costs of $ 7.0 million to right-size our business. No additional costs will be incurred under this restructuring plan. During the third quarter of 2020, a plan to dispose of certain non-core properties was approved by management. We have incurred $ 1.5 million of costs as a result of these property disposals. No additional costs will be incurred under this restructuring plan. During the third quarter of 2021, management approved and initiated a plan to exit a facility no longer deemed economical for our business, and in the fourth quarter, we incurred $ 0.9 million of costs to complete the exit of this facility. We do not expect to incur additional material costs under this restructuring plan. The severance and property disposal costs incurred under the above restructuring plans were recorded to restructuring charges in our consolidated statements of operations. The following table presents the changes to our accrued liability balance related to restructuring charges during the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ 2021 ​ ​ ​ ​ ​ ​ Pandemic ​ Property ​ Property ​ Other ​ ​ ​ (in thousands) ​ Restructuring ​ Restructuring ​ Restructuring ​ Restructuring ​ Total Balance at December 31, 2020 $ 201 $ — $ — $ — $ 201 Charges incurred ​ 1,717 ​ 35 ​ 929 ​ 222 ​ 2,903 Payments ​ ​ ( 1,918 ) ​ ​ ( 35 ) ​ ​ ( 929 ) ​ ​ ( 222 ) ​ ​ ( 3,104 ) Balance at December 31, 2021 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ The following table presents restructuring charges incurred by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract ​ Aftermarket ​ ​ ​ ​ ​ ​ (in thousands) ​ Operations ​ Services ​ Other (1) ​ Total Year ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pandemic restructuring ​ $ 616 ​ $ 145 ​ $ 956 ​ $ 1,717 2020 Property restructuring - other exit costs ​ ​ — ​ ​ — ​ ​ 35 ​ ​ 35 2021 Property restructuring - other exit costs ​ ​ 929 ​ ​ — ​ ​ — ​ ​ 929 Other restructuring ​ ​ — ​ ​ — ​ ​ 222 ​ ​ 222 Total restructuring charges ​ $ 1,545 ​ $ 145 ​ $ 1,213 ​ $ 2,903 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Organizational restructuring ​ $ 458 ​ $ 625 ​ $ 612 ​ $ 1,695 Pandemic restructuring ​ ​ 2,505 ​ ​ 1,218 ​ ​ 1,534 ​ ​ 5,257 2020 Property restructuring ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss on sale ​ ​ — ​ ​ — ​ ​ 915 ​ ​ 915 Impairment loss ​ ​ — ​ ​ — ​ ​ 583 ​ ​ 583 Total 2020 Property restructuring ​ ​ — ​ ​ — ​ ​ 1,498 ​ ​ 1,498 Total restructuring charges ​ $ 2,963 ​ $ 1,843 ​ $ 3,644 ​ $ 8,450 (1) Represents expense incurred within our corporate function and not directly attributable to our segments. F-28 Table of Contents The following table presents restructuring charges incurred by cost type: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (in thousands) ​ 2021 2020 Severance costs ​ ​ ​ ​ ​ ​ Organizational restructuring ​ $ — ​ $ 1,695 Pandemic restructuring ​ ​ 1,717 ​ ​ 5,257 Total severance costs ​ ​ 1,717 ​ ​ 6,952 Property disposal costs ​ ​ ​ ​ ​ ​ Loss on sale ​ ​ — ​ ​ 915 Impairment loss ​ ​ — ​ ​ 583 Other exit costs ​ ​ 964 ​ ​ — Total property disposal costs ​ 964 ​ 1,498 Other restructuring costs ​ ​ 222 ​ ​ — Total restructuring charges ​ $ 2,903 ​ $ 8,450 ​ ​ 20. Income Taxes Current and Deferred Tax Provision Our provision for (benefit from) income taxes consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2021 2020 2019 Current tax provision (benefit): ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. federal ​ $ ( 1 ) ​ $ ( 99 ) ​ $ 75 State ​ 366 ​ 326 ​ 377 Total current ​ ​ 365 ​ ​ 227 ​ ​ 452 Deferred tax provision (benefit): ​ ​ ​ ​ ​ ​ U.S. federal ​ ​ 8,800 ​ ​ ( 17,246 ) ​ ​ ( 35,597 ) State ​ 1,579 ​ ( 518 ) ​ ( 4,000 ) Total deferred ​ ​ 10,379 ​ ​ ( 17,764 ) ​ ​ ( 39,597 ) Provision for (benefit from) income taxes ​ $ 10,744 ​ $ ( 17,537 ) ​ $ ( 39,145 ) ​ The provision for (benefit from) income taxes for the years ended December 31, 2021, 2020 and 2019 resulted in effective tax rates on continuing operations of 28 %, 20 % and ( 67 )%, respectively. The following table reconciles these effective tax rates to the U.S. statutory rate of 21 %, the rate in effect during the years ended December 31, 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Income taxes at U.S. federal statutory rate $ 8,182 $ ( 18,056 ) $ 12,276 Net state income taxes ​ 1,374 ​ ( 817 ) ​ 1,634 Tax credits ​ ( 720 ) ​ ( 1,256 ) ​ ( 1,757 ) Unrecognized tax benefits (1) ​ 598 ​ 772 ​ ( 1,958 ) Valuation allowances and write off of tax attributes (2) ​ ( 167 ) ​ 236 ​ ( 50,219 ) Executive compensation limitation ​ 1,559 ​ 1,159 ​ 1,102 Stock ​ 162 ​ 538 ​ 66 Other ​ ( 244 ) ​ ( 113 ) ​ ( 289 ) Provision for (benefit from) income taxes ​ $ 10,744 ​ $ ( 17,537 ) ​ $ ( 39,145 ) (1) Includes the expiration of statute of limitations and in 2019, also reflects a decrease in our uncertain tax benefit, net of federal benefit, due to settlements of tax audits. See “Unrecognized Tax Benefits” below for further details. (2) See “Tax Attributes and Valuation Allowances” below for further details. F-29 Table of Contents Deferred income tax balances are the direct effect of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the taxes are actually paid or recovered. The tax effects of temporary differences that gave rise to deferred tax assets and deferred tax liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 Deferred tax assets: ​ ​ Net operating loss carryforwards ​ $ 196,654 ​ $ 158,916 Accrued liabilities ​ 4,527 ​ 3,133 Other ​ 12,503 ​ 12,124 ​ ​ 213,684 ​ 174,173 Valuation allowances (1) ​ ( 735 ) ​ ( 1,027 ) Total deferred tax assets ​ ​ 212,949 ​ ​ 173,146 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ Property, plant and equipment ​ ​ ( 7,762 ) ​ ​ ( 6,066 ) Basis difference in the Partnership ​ ( 151,469 ) ​ ( 103,721 ) Other ​ ( 6,975 ) ​ ( 7,150 ) Total deferred tax liabilities ​ ( 166,206 ) ​ ( 116,937 ) Net deferred tax asset (2) ​ $ 46,743 ​ $ 56,209 (1) See “Tax Attributes and Valuation Allowances” below for further details. (2) The 2021 and 2020 net deferred tax assets are reflected in our consolidated balance sheets as deferred tax assets of $ 47.9 million and $ 56.9 million, respectively, and deferred tax liabilities of $ 1.1 million and $ 0.7 million, respectively. Both the 2021 and 2020 balances are based on a U.S. federal tax rate of 21 %. Tax Attributes and Valuation Allowances ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Balance at beginning of period (1) $ ( 1,027 ) $ ( 822 ) $ ( 45,439 ) Additions to valuation allowance ​ ​ - ​ ​ ( 205 ) ​ ​ ( 580 ) Reductions to valuation allowance (1) ​ ​ 292 ​ ​ - ​ ​ 45,197 Balance at end of period ​ $ ( 735 ) ​ $ ( 1,027 ) ​ $ ( 822 ) (1) In 2019, excludes $ 5.6 million related to discontinued operations . Pursuant to Sections 382 and 383 of the Code, utilization of loss and credit carryforwards are subject to annual limitations due to any ownership changes of 5% stockholders. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a rolling three-year period. We do not currently expect that any loss carryforwards or credit carryforwards will expire as a result of any 382 or 383 limitations. Our ability to utilize loss carryforwards and credit carryforwards against future U.S. federal taxable income and future U.S. federal income tax may be limited in the future if we have a 50% or more ownership change in our 5% stockholders. We record valuation allowances when it is more likely than not that some portion or all of our deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character and in the appropriate taxing jurisdictions in the future. If we do not meet our expectations with respect to taxable income, we may not realize the full benefit from our deferred tax assets, which would require us to record a valuation allowance in our tax provision in future years. As of each reporting date, we consider new evidence to evaluate the realizability of our net deferred tax asset position by assessing the available positive and negative evidence. Changes to the valuation allowance are reflected in the statement of operations. F-30 Table of Contents As of December 31, 2019, we achieved a three-year cumulative book income, and together with other positive and negative evidence, we concluded that there was sufficient positive evidence of projected future taxable income to release the $ 50.8 million valuation allowance previously required for our overall net deferred tax asset position. This release was offset by a $ 0.6 million increase in the valuation allowance on our state NOL deferred tax asset. The overall impact of the change in the valuation allowance was recorded as a $ 50.2 million benefit from income taxes in our consolidated statements of operations and a $ 50.2 million increase in deferred tax assets in our consolidated balance sheets, of which $ 44.6 million and $ 5.6 million were recorded to continuing operations and discontinued operations, respectively. The amount of our deferred tax assets considered realizable could be adjusted if projections of future taxable income are reduced or objective negative evidence in the form of a three-year cumulative loss is present or both. Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely NOL carryforwards and tax credit carryforwards. This may result in the need to record a valuation allowance against all or a portion of our deferred tax assets. At December 31, 2021, we had U.S. federal and state NOL carryforwards of $ 868.5 million and $ 317.1 million, respectively, included in our NOL deferred tax asset that are available to offset future taxable income. If not used, the federal and state NOL carryforwards will begin to expire in 2025 and 2022, respectively, though $ 629.5 million of the U.S. federal and $ 167.7 million of the state NOL carryforwards have no expiration date. In connection with the state NOL deferred tax asset, we recorded a valuation allowance of $ 0.7 million and $ 1.0 million as of December 31, 2021 and 2020, respectively. At December 31, 2021, we had U.S. federal and state tax credit carryforwards of $ 3.0 million and $ 0.1 million, respectively. If not used, the federal and state tax credit carryforwards will begin to expire in 2037 and 2041, respectively. Unrecognized Tax Benefits A reconciliation of the unrecognized tax benefit (including discontinued operations) activity is shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Beginning balance $ 18,892 $ 18,453 $ 19,560 Additions based on tax positions related to current year ​ 2,246 ​ 2,397 ​ 2,227 Additions based on tax positions related to prior years ​ 632 ​ — ​ 2,047 Reductions based on settlement refunds from government authorities ​ — ​ — ​ ( 4,414 ) Reductions based on tax positions related to prior years ​ ( 138 ) ​ ( 73 ) ​ ( 51 ) Reductions based on lapse of statute of limitations ​ ( 2,038 ) ​ ( 1,885 ) ​ ( 916 ) Ending balance ​ $ 19,594 ​ $ 18,892 ​ $ 18,453 ​ We had $ 19.6 million, $ 18.9 million and $ 18.5 million of unrecognized tax benefits at December 31, 2021, 2020 and 2019, respectively, of which $ 2.1 million, $ 2.9 million and $ 3.2 million, respectively, would affect the effective tax rate if recognized and $ 7.9 million, $ 7.9 million and $ 8.3 million, respectively, would be reflected in income from discontinued operations, net of tax if recognized. We recorded $ 2.2 million, $ 2.1 million and $ 2.1 million of potential interest expense and penalties related to unrecognized tax benefits associated with uncertain tax positions (including discontinued operations) in our consolidated balance sheets as of the years ended December 31, 2021, 2020 and 2019, respectively. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as reductions in income tax expense. We recorded $ 0.1 million of potential interest expense and penalties in our consolidated statements of operations during the year ended December 31, 2021, and releases of $ 0.1 million during each of the years ended December 31, 2020 and 2019. F-31 Table of Contents Subject to the provisions of our tax matters agreement with Exterran Corporation, both parties agreed to indemnify the primary obligor of any return for tax periods beginning before and ending before or after the Spin-off (including any ongoing or future amendments and audits for these returns) for the portion of the tax liability (including interest and penalties) that relates to their respective operations reported in the filing. As of both December 31, 2021 and 2020, we recorded an indemnification asset (including penalties and interest) of $ 7.9 million, which is related to unrecognized tax benefits in our consolidated balance sheets. We and our subsidiaries file consolidated and separate income tax returns in the U.S. federal jurisdiction and in numerous state jurisdictions. U.S. federal income tax returns are generally subject to examination for up to three years after filing the returns. Due to our NOL carryforwards, our U.S. federal income tax returns can be examined back to the inception of our NOL carryforwards; therefore, expanding our examination period beyond 20 years. In 2020, the IRS completed their examination of our 2014 and 2015 tax years. Due to this audit being related to tax periods that commenced prior to the Spin-off, Exterran Corporation was also involved in the audit. The tax adjustments recorded from this audit did not have a material impact on our consolidated financial position or results of operations. State income tax returns are generally subject to examination for a period of three to five years after filing the returns. However, the state impact of any U.S. federal audit adjustments and amendments remains subject to examination by various states for up to one year after formal notification to the states. We are not currently involved in any state audits. During the year ended December 31, 2019, we settled certain state audits, which resulted in a refund of $ 2.4 million and a reduction in previously-accrued uncertain tax benefits of $ 4.4 million. As of December 31, 2021, we believe it is reasonably possible that $ 2.6 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to December 31, 2022 due to the settlement of audits or the expiration of statutes of limitations or both. However, due to the uncertain and complex application of the tax regulations, it is possible that the ultimate resolution of these matters may result in liabilities that could materially differ from this estimate. CARES Act In March 2020, President Trump signed into law the CARES Act, which includes, among other things, refundable payroll tax credits, deferment of employer-side social security payments, NOL carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act provisions did not have a material impact on our consolidated financial statements. Future regulatory guidance under the CARES Act or additional legislation enacted by Congress in connection with the COVID-19 pandemic could impact our tax provision in future periods. 21. Earnings per Share Basic net income (loss) per common share is computed using the two-class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic net income (loss) per common share is determined by dividing net income (loss), after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock-settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, only distributed earnings (dividends) are allocated to participating securities, as participating securities do not have a contractual obligation to participate in our undistributed losses. Diluted net income (loss) per common share is computed using the weighted average number of shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options, performance-based restricted stock units and stock to be issued pursuant to our ESPP unless their effect would be anti-dilutive. F-32 Table of Contents The following table shows the calculation for net income (loss) attributable to common stockholders, which is used in the calculation of basic and diluted net income (loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Income (loss) from continuing operations ​ $ 28,217 ​ $ ( 68,445 ) ​ $ 97,603 Loss from discontinued operations, net of tax ​ — ​ — ​ ( 273 ) Net income (loss) ​ 28,217 ​ ( 68,445 ) ​ 97,330 Less: Earnings attributable to participating securities ​ ( 1,172 ) ​ ( 1,338 ) ​ ( 1,348 ) Net income (loss) attributable to common stockholders ​ $ 27,045 ​ $ ( 69,783 ) ​ $ 95,982 ​ The following table shows the potential shares of common stock that were included in computing diluted net income (loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Weighted average common shares outstanding including participating securities ​ 153,484 ​ 152,827 ​ 139,317 Less: Weighted average participating securities outstanding ​ ( 1,800 ) ( 1,999 ) ( 1,825 ) Weighted average common shares outstanding used in basic net income (loss) per common share 151,684 150,828 137,492 Net dilutive potential common shares issuable: On exercise of options and vesting of performance-based restricted stock units 144 — 34 On settlement of ESPP shares 2 — 2 Weighted average common shares outstanding used in diluted net income (loss) per common share 151,830 150,828 137,528 ​ The following table shows the potential shares of common stock issuable that were excluded from computing diluted net income (loss) per common share as their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 On exercise of options where exercise price is greater than average market value for the period ​ 31 96 154 On exercise of options and vesting of performance-based restricted stock units ​ — ​ 54 ​ — On settlement of ESPP shares ​ — ​ 17 ​ — Net dilutive potential common shares issuable ​ 31 ​ 167 ​ 154 ​ ​ 22. Derivatives We use derivative instruments to manage our exposure to fluctuations in the variable interest rate of our Credit Facility. As of December 31, 2021, we had $ 300.0 million notional value of interest rate swaps outstanding, which expire in March 2022. We entered into these swaps to offset changes in expected cash flows due to fluctuations in the associated variable interest rates and designated them as cash flow hedges. The counterparties to these derivative agreements are major financial institutions. We monitor the credit quality of these financial institutions and do not expect nonperformance by any counterparty, although such nonperformance could have an adverse effect on us. We have no collateral posted for our derivative instruments. F-33 Table of Contents During the year ended December 31, 2021, we dedesignated $ 125.0 million notional value of our interest rate swaps. The fair value of this interest rate swap immediately prior to dedesignation was a liability of $ 1.6 million. The associated amount in accumulated other comprehensive loss related to this interest rate swap is being amortized into interest expense over the remaining term of the swap through March 2022. Changes in the fair value of the dedesignated interest rate swap subsequent to dedesignation are recorded in interest expense. The remaining $ 175.0 million notional value of our interest rate swaps continue to be designated as cash flow hedging instruments. We expect the hedging relationship to be highly effective as the interest rate swap terms substantially coincide with the hedged item and are expected to offset changes in expected cash flows due to fluctuations in the variable rate. We estimate that $ 1.2 million of the deferred pre-tax loss attributable to interest rate swaps included in accumulated other comprehensive loss at December 31, 2021 will be reclassified into earnings as interest expense at then-current values during the next 12 months as the underlying hedged transactions occur. As of December 31, 2021, the weighted average effective fixed interest rate of our interest rate swaps was 1.8 %. The following table presents the effect of our derivative instruments on our consolidated balance sheets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ ​ 2020 Interest rate swaps designated as cash flow hedging instruments ​ ​ ​ ​ ​ ​ Accrued liabilities ​ $ 727 ​ $ 4,810 Other liabilities ​ — ​ 1,527 Total derivatives designated as cash flow hedging instruments ​ ​ 727 ​ ​ 6,337 ​ ​ ​ ​ ​ ​ ​ Interest rate swaps not designated as hedging instruments ​ ​ ​ ​ ​ ​ Accrued liabilities ​ ​ 523 ​ ​ — ​ ​ ​ ​ ​ ​ ​ Total derivative liabilities ​ $ 1,250 ​ $ 6,337 ​ The following table presents the effect of our derivative instruments on our consolidated statements of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded ​ $ 108,135 ​ $ 105,716 ​ $ 104,681 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swaps designated as cash flow hedging instruments ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-tax loss recognized in other comprehensive income (loss) ​ $ ( 1,219 ) ​ $ ( 8,459 ) ​ $ ( 6,785 ) Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense ​ ( 6,308 ) ​ ( 3,878 ) ​ 2,278 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swaps not designated as hedging instruments ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain recognized in interest expense ​ $ 1,088 ​ $ — ​ $ — ​ See Note 2 (“Basis of Presentation and Significant Accounting Policies”), Note 15 (“Accumulated Other Comprehensive Income (Loss)”) and Note 23 (“Fair Value Measurements”) for further details on our derivative instruments. F-34 Table of Contents 23. Fair Value Measurements The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories: • Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement. • Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers. • Level 3 — Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information. Assets and Liabilities Measured at Fair Value on a Recurring Basis On a quarterly basis, our interest rate swap derivative instruments are valued based on the income approach (discounted cash flow) using market observable inputs, including LIBOR forward curves. These fair value measurements are classified as Level 2. The following table presents our derivative position measured at fair value on a recurring basis, with pricing levels as of the date of valuation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 Derivative liabilities ​ $ 1,250 ​ $ 6,337 ​ Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Goodwill In the first quarter of 2020, we determined that the significant deterioration in global macroeconomic conditions caused by the COVID-19 pandemic was an indicator of potential impairment of our goodwill, and we performed a quantitative impairment test as of March 31, 2020 that resulted in a $ 99.8 million impairment of our goodwill. Significant estimates used in our impairment analysis included cash flow forecasts, our estimate of the market’s weighted average cost of capital and market multiples, which are Level 3 inputs. See Note 9 (“Goodwill”) for further details of the valuation methodology used in connection with the goodwill impairment. F-35 Table of Contents Compressors During the years ended December 31, 2021 and 2020, we recorded nonrecurring fair value measurements related to our idle compressors. Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years. These fair value measurements are classified as Level 3. The fair value of our compressors impaired during the years ended December 31, 2021 and 2020 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 2020 Impaired compressors ​ $ 4,380 ​ $ 19,046 ​ The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compressors being measured. Additional quantitative information related to our significant unobservable inputs follows: ​ ​ ​ ​ ​ ​ ​ Range Weighted Average (1) Estimated net sale proceeds: ​ ​ ​ ​ As of December 31, 2021 ​ $ 0 - $ 621 per horsepower ​ $ 35 per horsepower As of December 31, 2020 ​ $ 0 - $ 289 per horsepower ​ $ 20 per horsepower (1) Calculated based on an estimated discount for market liquidity of 64 % and 81 % as of December 31, 2021 and 2020, respectively . See Note 18 (“Long-Lived and Other Asset Impairment”) for further details. Other Financial Instruments The carrying amounts of our cash, receivables and payables approximate fair value due to the short-term nature of those instruments. The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to its variable interest rate. The fair value of these outstanding borrowings is a Level 3 measurement. The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 Carrying amount of fixed rate debt (1) ​ $ 1,296,325 ​ $ 1,295,867 Fair value of fixed rate debt ​ 1,361,000 ​ 1,371,000 (1) Carrying amounts are shown net of unamortized debt premium and deferred financing costs. See Note 14 (“Long-Term Debt”). ​ ​ F-36 Table of Contents 24. Stock-Based Compensation We recognize stock-based compensation expense related to restricted stock awards, restricted stock units, performance-based restricted stock units and shares issued under our ESPP. We account for forfeitures as they occur. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Equity award expense ​ $ 11,336 ​ $ 10,551 ​ $ 8,105 Liability award (benefit) expense (1) ​ ( 816 ) ​ 1,521 ​ 2,336 Total stock-based compensation expense ​ $ 10,520 ​ $ 12,072 ​ $ 10,441 (1) In 2021, includes a reversal of prior period expense of $ 2.1 million during the fourth quarter as the result of revised estimates of performance achievement of our 2019 and 2020 cash-settled performance-based restricted stock units. Stock Incentive Plans The 2020 Plan was adopted in April 2020 and provides for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock-based awards and dividend equivalent rights to employees, directors and consultants of Archrock. The 2020 Plan is administered by the compensation committee of our Board of Directors. Under the 2020 Plan, the maximum number of shares of common stock available for issuance is 8,500,000 . Each stock-settled award granted under the 2020 Plan reduces the number of shares available for issuance by one share. Cash-settled awards are not counted against the aggregate share limit. Shares subject to awards granted under the 2020 Plan that are subsequently canceled, terminated, settled in cash or forfeited, excluding shares withheld to satisfy tax withholding obligations or to pay the exercise price of an option, are available for future grant under the 2020 Plan. No additional grants may be made under the 2013 Plan following the adoption of the 2020 Plan. Previous grants made under the 2013 Plan continue to be governed by that plan and the applicable award agreements. The 2020 Plan and 2013 Plan allow us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date. During the years ended December 31, 2021, 2020 and 2019, we withheld 283,972 shares valued at $ 2.5 million, 236,752 shares valued at $ 1.8 million and 212,080 shares valued at $ 2.0 million, respectively, to cover tax withholding. The compensation committee of our Board of Directors generally establishes its schedule for making annual long-term incentive awards, consisting of a combination of restricted shares and performance units vesting over multiple years, several months in advance and does not make such awards based on knowledge of material nonpublic information. Although the compensation committee of our Board of Directors has historically granted awards on a regular, predictable cycle, such awards may be granted at other times during the year, as determined in the sole discretion of the compensation committee. Restricted Stock Our outstanding restricted stock generally consists of stock-settled restricted stock awards and performance-based restricted stock units, and cash-settled performance-based restricted stock units. For grants of restricted stock, we recognize compensation expense over the vesting period equal to the fair value of our common stock at the grant date. Our restricted stock includes rights to receive dividends or dividend equivalents. We periodically remeasure the fair value of our cash-settled units and record a cumulative adjustment of the expense previously recognized. Our obligation related to the cash-settled units is reflected as a liability in our consolidated balance sheets. Restricted stock awards generally vest one-third per year , subject to continued service through the applicable vesting date. Performance-based restricted stock units generally vest in their entirety at the end of a three-year vesting period, also subject to continued service through the applicable vesting date. F-37 Table of Contents Some of our performance-based restricted stock units have a market-based condition that determines the number of restricted stock units and dividend equivalents earned. The market condition is based on our total shareholder return ranked against that of a predetermined peer group over a three-year performance period. The awards vest in their entirety on the date specified in the award agreement following the conclusion of the performance period. The fair value of the performance-based restricted stock units, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model. Expected volatilities for us and each peer company utilized in the model are estimated using a historical period consistent with the awards’ remaining performance period as of the grant date. The risk-free interest rate is based on the yield on U.S. Treasury Separate Trading of Registered Interest and Principal Securities for a term consistent with the remaining performance period. The dividend yield used is 0.0 % to approximate accumulation of earnings. The following table presents the inputs used and the grant date fair value calculated in the Monte Carlo simulation model for the performance-based restricted stock units awarded during the years ended December 31, 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ Remaining performance period as of grant date (in years) ​ 2.8 ​ 2.9 ​ 2.9 Risk-free interest rate used ​ 0.3 % ​ 1.4 % ​ 2.6 % Grant-date fair value ​ $ 14.30 ​ $ 11.33 ​ $ 12.91 ​ ​ The following table presents our restricted stock activity during the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Grant Date ​ ​ Shares ​ Fair Value ​ (in thousands) Per Share Non-vested restricted stock, December 31, 2020 2,446 ​ $ 9.69 Granted (1) 1,288 ​ 11.20 Vested (2) ( 1,075 ) ​ 9.91 Canceled ( 81 ) ​ 9.85 Non-vested restricted stock, December 31, 2021 (3) 2,578 ​ 10.35 (1) The weighted average grant date fair value of shares granted during the years ended December 31, 2021, 2020 and 2019 was $ 11.20 , $ 9.37 and $ 10.01 , respectively. (2) The total fair value of all awards vested during the years ended December 31, 2021, 2020 and 2019 was $ 9.1 million, $ 7.1 million and $ 9.0 million, respectively. (3) Non-vested awards as of December 31, 2021 were comprised of 523 cash-settled units and 2,055 stock-settled awards and units. As of December 31, 2021, we expect $ 12.6 million of unrecognized compensation cost related to our non-vested awards and units to be recognized over the weighted-average period of 1.8 years. Cash paid upon vesting of cash-settled restricted stock units during the years ended December 31, 2021, 2020 and 2019 was $ 0.6 million, $ 0.5 million and $ 1.3 million, respectively. F-38 Table of Contents Employee Stock Purchase Plan Adopted in 2017, our ESPP provides employees with an opportunity to participate in our long-term performance and success through the purchase of shares of common stock at a price that may be less than fair market value. Each quarter, eligible employees may elect to withhold a portion of their salary up to the lesser of $ 25,000 per year or 10 % of their eligible pay to purchase shares of our common stock at a price equal to 85 % to 100 % of the fair market value of the stock as defined by the plan. The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, unless it is extended. The maximum number of shares of common stock available for purchase under the ESPP is 1,000,000 . As of December 31, 2021, 521,719 shares remained available for purchase under the ESPP. Our ESPP is compensatory and, as a result, we record an expense in our consolidated statements of operations related to the ESPP. The purchase discount under the ESPP is 5 % of the fair market value of our common stock on the first or last trading day of the quarter, whichever is lower. Directors’ Stock and Deferral Plan Adopted in 2007, our DSDP provides non-employee members of the Board of Directors with an opportunity to elect to receive our common stock as payment for a portion or all of their retainer. The number of shares paid each quarter is determined by dividing the dollar amount of fees elected to be paid in common stock by the closing sales price per share of the common stock on the last day of the quarter. In addition, directors who elect to receive a portion or all of their fees in the form of common stock may also elect to defer, until a later date, the receipt of a portion or all of their fees to be received in common stock. There are 100,000 shares reserved under the DSDP and, as of December 31, 2021, 37,771 shares remained available to be issued under the plan. 25. Retirement Benefit Plan Our 401(k) retirement plan provides for optional employee contributions up to the applicable IRS annual limit and discretionary employer matching contributions. We make discretionary matching contributions to each participant’s account at a rate of 100 % of each participant’s contributions up to 5 % of eligible compensation. We recorded matching contributions of $ 4.4 million, $ 5.6 million and $ 6.8 million during the years ended December 31, 2021, 2020 and 2019, respectively. 26. Commitments and Contingencies Insurance Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business, however, losses and liabilities not covered by insurance would increase our costs. Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. We are also self-insured for property damage to our offshore assets. F-39 Table of Contents Tax Matters We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of December 31, 2021 and 2020, we accrued $ 5.8 million and $ 5.6 million, respectively, for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our consolidated financial position, but it is possible that the resolution of future audits could be material to our consolidated results of operations or cash flows. In 2021, one of our sales and use tax audits advanced from the audit review phase to the contested hearing phase. We accrued $ 0.6 million and $ 0.9 million for this audit as of December 31, 2021 and 2020, respectively. In 2020, we settled a certain sales and use tax audit for which we recorded a $ 12.4 million net benefit in our consolidated statements of operations. This net benefit was primarily reflected as decreases of $ 4.4 million and $ 7.9 million to cost of sales (excluding depreciation and amortization) and SG&A, respectively. We received a cash refund of $ 17.3 million in the fourth quarter of 2020 related to this settlement and have a $ 2.0 million accrued liability recorded as of December 31, 2021, which is included in our accrual for non-income-based tax audits discussed above. Subject to the provisions of the tax matters agreement between Exterran Corporation and us, both parties agreed to indemnify the primary obligor of any return for tax periods beginning before and ending before or after the Spin-off (including any ongoing or future amendments and audits for these returns) for the portion of the tax liability (including interest and penalties) that relates to their respective operations reported in the filing. The tax contingencies mentioned above relate to tax matters for which we are responsible in managing the audit. As of December 31, 2020, we had an indemnification liability (including penalties and interest), in addition to the tax contingency above, of $ 1.6 million for our share of non-income-based tax contingencies related to audits being managed by Exterran Corporation. During the year ended December 31, 2021, these audits were settled and our indemnification liability was reduced to zero . Litigation and Claims In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. 27. Related Party Transactions In connection with the closing of the Elite Acquisition, we issued 21.7 million shares of our common stock to JDH Capital, an affiliate of our customer Hilcorp. As long as JDH Capital, together with affiliates of Hilcorp, owns at least 7.5 % of our outstanding common stock, it will have the right to designate one director to our Board of Directors. As of December 31, 2021, JDH Capital owned 11.1 % of our outstanding common stock. Jeffery D. Hildebrand, founder and executive chairman of Hilcorp, was appointed Director in August 2019 and served until his resignation on July 29, 2020, at which time Jason C. Rebrook, President of Hilcorp, was appointed Director to fill the resulting vacancy. Mr. Hildebrand did no t receive compensation in his role as Director and Mr. Rebrook received no compensation in his role as Director in 2020. In December 2020, the Board of Directors voted to approve the payment of Director cash and equity compensation to Mr. Rebrook beginning in 2021. F-40 Table of Contents Revenue from Hilcorp and affiliates was $ 38.2 million, $ 40.3 million and $ 31.4 million during the years ended December 31, 2021, 2020 and 2019, respectively. Accounts receivable, net due from Hilcorp and affiliates was $ 3.7 million and $ 3.9 million as of December 31, 2021 and 2020, respectively. 28. Segments We manage our business segments primarily based on the type of product or service provided. We have two segments which we operate within the U.S.: contract operations and aftermarket services. The contract operations segment primarily provides natural gas compression services to meet specific customer requirements. The aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets. We evaluate the performance of our segments based on gross margin for each segment. Revenue includes only sales to external customers. No single customer accounted for 10% or more of our revenue during the years ended December 31, 2021, 2020 and 2019. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract Aftermarket ​ ​ ​ (in thousands) Operations Services Other (1) Total 2021 ​ ​ ​ ​ Revenue ​ $ 648,311 ​ $ 133,150 ​ $ — ​ $ 781,461 Gross margin ​ 403,825 ​ 18,719 ​ — ​ 422,544 Capital expenditures ​ ​ 94,863 ​ 2,675 ​ 347 ​ 97,885 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ Revenue ​ $ 738,918 ​ $ 136,052 ​ $ — ​ $ 874,970 Gross margin ​ 477,831 ​ 19,946 ​ — ​ 497,777 Capital expenditures ​ 133,492 ​ 5,308 ​ 1,502 ​ 140,302 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ Revenue ​ $ 771,539 ​ $ 193,946 ​ $ — ​ $ 965,485 Gross margin ​ 474,279 ​ 34,968 ​ — ​ 509,247 Capital expenditures ​ 374,650 ​ 8,714 ​ 1,834 ​ 385,198 (1) Corporate-related items. ​ The following table presents assets by segment reconciled to total assets per the consolidated balance sheets: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2021 ​ 2020 Contract operations assets ​ $ 2,429,805 ​ $ 2,593,864 Aftermarket services assets ​ 49,420 ​ 45,985 Segment assets ​ ​ 2,479,225 ​ ​ 2,639,849 Other assets (1) ​ ​ 100,930 ​ ​ 128,837 Assets associated with discontinued operations ​ ​ 9,811 ​ ​ 11,036 Total assets ​ $ 2,589,966 ​ $ 2,779,722 (1) Corporate-related items. F-41 Table of Contents The following table reconciles total gross margin to income (loss) before income taxes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2021 2020 2019 Total gross margin ​ $ 422,544 ​ $ 497,777 ​ $ 509,247 Less: ​ ​ ​ Selling, general and administrative ​ 107,167 ​ 105,100 ​ 117,727 Depreciation and amortization ​ 178,946 ​ 193,138 ​ 188,084 Long-lived and other asset impairment ​ 21,397 ​ 79,556 ​ 44,663 Goodwill impairment ​ ​ — ​ ​ 99,830 ​ ​ — Restatement and other charges ​ ​ — ​ ​ — ​ ​ 445 Restructuring charges ​ ​ 2,903 ​ ​ 8,450 ​ ​ — Interest expense ​ 108,135 ​ 105,716 ​ 104,681 Debt extinguishment loss ​ — ​ 3,971 ​ 3,653 Transaction-related costs ​ ​ — ​ ​ — ​ ​ 8,213 Gain on sale of assets, net ​ ​ ( 30,258 ) ​ ​ ( 10,643 ) ​ ​ ( 16,016 ) Other income, net ​ ( 4,707 ) ​ ( 1,359 ) ​ ( 661 ) Income (loss) before income taxes ​ $ 38,961 ​ $ ( 85,982 ) ​ $ 58,458 ​ ​ ​ 29. Impact of Hurricane Hurricane Ida made landfall in Louisiana on August 29, 2021, causing operational disruptions, damage to compressors and a temporary shutdown of facilities in Louisiana that negatively impacted our financial performance in the quarter. In the third quarter of 2021, we recorded $ 2.0 million in depreciation expense associated with the damaged assets, and in the fourth quarter, we recognized an insurance recovery of $ 2.8 million related to the facility and compressor damages in other income, net in our consolidated statements of operations, after a deductible of $ 0.9 million. A corresponding receivable for $ 2.8 million was recorded to our consolidated balance sheet as of December 31, 2021. The remaining portion of our insurance claim pertaining to business interruption is in process. We are currently unable to estimate the expected amount to be recovered, however, any amount recovered will not be subject to an additional deductible. ​ ​ ​ ​ ​ F-42