Kodiak Gas Services, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of December 31, 2024, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2024. As disclosed in Note 3. Acquisitions and Divestitures to the consolidated financial statements included elsewhere in this Annual Report, Kodiak acquired CSI Compressco on April 1, 2024. Following the close of the CSI Acquisition, we integrated a portion of CSI Compressco into our existing systems and internal control over financial reporting and related processes. Consistent with interpretive guidance issued by the Staff of the SEC for newly acquired businesses, management has excluded a portion of CSI Compressco from our assessment of internal control over financial reporting as of December 31, 2024. In accordance with such guidance, an assessment of recent business combinations may be omitted from management’s assessment of internal control over financial reporting for one year following the acquisition. The excluded elements represent controls over approximately 22% of consolidated assets and approximately 22% of consolidated revenues as shown on our consolidated financial statements as of and for the year ended December 31, 2024. Inherent Limitations on Effectiveness of Controls A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all control issues or misstatements. Accordingly, our controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our control system are met. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become adequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting On April 1, 2024, we completed the CSI Acquisition. As part of the ongoing integration, we are in the process of incorporating the controls and related procedures of CSI Compressco. Other than incorporating CSI Compressco’s controls there have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 63 Table of Contents Item 9B. Other Information. Securities Trading Plans of Directors and Executive Officers During the three months ended December 31, 2024, none of our directors or “officers” (as such term is defined in Rule16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a) of Regulation S-K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 64 Table of Contents Part III Item 10. Directors, Executive Officers and Corporate Governance The information required by Item 10 is incorporated herein by reference from our definitive proxy statement, which will be filed no later than 120 days after December 31, 2024. Item 11. Executive Compensation The information required by Item 11 is incorporated herein by reference from our definitive proxy statement, which will be filed no later than 120 days after December 31, 2024. Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters Equity Compensation Plan Information as of December 31, 2024 Our equity compensation plans approved by our shareholders provide for the issuance of common stock to officers, employees, directors and consultants. The following table sets forth information regarding outstanding RSUs and PSUs, and shares available for future issuance under these plans as of December 31, 2024: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (1) (b) (2) (c) (3) Equity compensation plans approved by security holders 1,945,134 $ — 5,703,962 Equity compensation plans not approved by security holders — — — Total 1,945,134 $ — 5,703,962 (1) This column reflects all shares of common stock subject to outstanding RSUs and PSUs, in each case, granted under the Omnibus Plan. The PSUs included in this column represent the number of shares that may be issued upon vesting if the target performance goal is achieved during the three-year performance period. See Note 14. Stockholders’ Equity to our consolidated financial statements for further details of our Omnibus Plan. Because the number of shares of common stock to be issued upon settlement of outstanding PSUs is subject to performance conditions, the number of shares of common stock actually issued may be substantially more or less than the number reflected in this column. (2) Only RSUs and PSUs are reflected in column (a); there is no weighted-average exercise price associated with these awards. (3) This column reflects the total number of shares of common stock remaining available for issuance under the Omnibus Plan as of December 31, 2024, excluding shares subject to outstanding awards reflected in column (a). The additional information required by this Item 12 will be incorporated herein by reference from our definitive proxy statement, which will be filed no later than 120 days after December 31, 2024 Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by Item 13 is incorporated herein by reference from our definitive proxy statement, which will be filed no later than 120 days after December 31, 2024. Item 14. Principal Accounting Fees and Services Our independent registered public accounting firm is BDO USA, P.C. (PCAOB ID No.243). The information required by Item 14 is incorporated herein by reference from our definitive proxy statement, which will be filed no later than 120 days after December 31, 2024. 65 Table of Contents Part IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as a part of this report. 1. Financial Statements. See “Index to Consolidated Financial Statements” set forth on Page F-1. 2. Financial Statement Schedule 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 The following documents are filed as exhibits to this Annual Report: Exhibit Number Description 2.1 Agreement and Plan of Merger, dated as of December 19, 2023, by and among Kodiak Gas Services, Inc., Kick Stock Merger Sub, LLC, Kick LP Merger Sub, LLC, Kick GP Merger Sub, LLC, CSI Compressco LP and CSI Compressco GP (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2023). 3.1 Amended and Restated Certificate of Incorporation of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023). 3.2 Certificate of Designations of Series A Preferred Stock of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 1, 2024). 3.3* Second Amended and Restated Bylaws of Kodiak Gas Services, Inc. 4.1 Registration Rights Agreement, dated as of July 3, 2023, by and among Kodiak Gas Services, Inc., Frontier TopCo Partnership, L.P. and each of the other signatories from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023). 4.2 Stockholders’ Agreement, dated as of July 3, 2023, by and among Kodiak Gas Services, Inc. and Frontier TopCo Partnership, L.P. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023). 4.3 Indenture, dated as of February 2, 2024, by and among Kodiak Gas Services, LLC, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (including Form of Note (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on February 2, 2024). 4.4* Description of Capital Stock of Kodiak Gas Services, Inc. 10.1† Kodiak Gas Services, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023). 10.2† Form of Restricted Stock Unit Grant Notice for Executives (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-8 (File No. 333-273118) filed with the SEC on July 5, 2023). 10.3† Form of Restricted Stock Unit Grant Notice for Non-Employee Directors (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 (File No. 333-273118) filed with the SEC on July 5, 2023). 10.4† Form of Performance Stock Unit Grant Notice for Executives (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-8 (File No. 333-273118) filed with the SEC on July 5, 2023). 66 Table of Contents 10.5 Novation, Assignment and Assumption Agreement, dated as of July 3, 2023, by and among Kodiak Gas Services, LLC, Frontier Intermediate Holding, LLC, Frontier TopCo Partnership, L.P., as the new borrower the other parties thereto, and Wells Fargo Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023). 10.6 Fourth Amended and Restated ABL Credit Agreement, dated as of March 22, 2023, among Frontier Intermediate Holding, LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-271050) filed with the SEC on June 20, 2023). 10.7 First Amendment to Fourth Amended and Restated ABL Credit Agreement, dated as of May 31, 2023, among Frontier Intermediate Holding, LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-271050) filed with the SEC on June 20, 2023). 10.8 Second Amendment to Fourth Amended and Restated ABL Credit Agreement, dated as of June 27, 2023, among Frontier Intermediate Holding, LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-41732) filed with the SEC on August 10, 2023). 10.9 Third Amendment to Fourth Amended and Restated ABL Credit Agreement, dated as of January 22, 2024 among Frontier Intermediate Holding, LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 23, 2024). 10.10† Form of Indemnification Agreement between Kodiak Gas Services, Inc. and each of the directors and officers thereof (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 (File No. 333-271050) filed with the SEC on March 31, 2023). 10.11† Executive Severance Plan of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2024). 10.12† Form of Executive Severance Plan Participation Agreement of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 10.18 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023). 10.13 Assumption, Ratification and Confirmation Agreement, dated as of June 29, 2023, by and among Kodiak Gas Services, Inc., Frontier Intermediate Holding, LLC, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2023). 10.14 Registration Rights Agreement, dated as of April 1, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 1, 2024). 10.15 Sixth Amended and Restated Limited Liability Company Agreement of Kodiak Gas Services, LLC, dated as of April 1, 2024 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 1, 2024). 14.1 Code of Business Conduct, as amended May 2024 (incorporated by reference to Exhibit 14.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2024). 19.1* Kodiak Gas Services, Inc. Insider Trading Policy 21.1* List of Subsidiaries 23.1* Consent of BDO USA, P.C. 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 67 Table of Contents 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal 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 Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1 Clawback Policy of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 99.7 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2024). 101.INS* Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (embedded within the Inline XBRL document) __________ * Filed herewith. ** Furnished herewith. † Management compensatory plan or contract. 68 Table of Contents SIGNATURES Pursuant to the requirements 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. Kodiak Gas Services, Inc. Date: March 6, 2025 By: /s/ Robert M. McKee Robert M. McKee President, Chief Executive Officer and Director (Principal Executive Officer) 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 March 6, 2025. Signature Title /s/ Robert M. McKee President, Chief Executive Officer and Director Robert M. McKee (Principal Executive Officer) /s/ John B. Griggs Executive Vice President and Chief Financial Officer John B. Griggs (Principal Financial Officer) /s/ Ewan W. Hamilton Executive Vice President and Chief Accounting Officer Ewan W. Hamilton (Principal Accounting Officer) /s/ Alex Darden Director Alex Darden /s/ Christopher Drumgoole Director Christopher Drumgoole /s/ Gretchen Holloway Director Gretchen Holloway /s/ Jon-Al Duplantier Director Jon-Al Duplantier /s/ Margaret C. Montana Director Margaret C. Montana /s/ Nirav Shah Director Nirav Shah /s/ Randall Hogan Director Randall Hogan /s/ Terry Bonno Director Terry Bonno 69 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID Number 243 ) F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 3 Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022 F- 4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2024, 2023, and 2022 F- 5 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 F- 6 Notes to Consolidated Financial Statements F- 7 Note 1 – Organization and Description of Business F- 7 Note 2 – Summary of Significant Accounting Policies F- 7 Note 3 – Acquisitions and Divestitures F- 12 Note 4 – Revenue Recognition F- 15 Note 5 – Accounts Receivable, net F- 16 Note 6 – Inventories, net F- 17 Note 7 – Property, Plant and Equipment, net F- 17 Note 8 – Goodwill and Identifiable Intangible Assets, net F- 18 Note 9 – Leases F- 18 Note 10 – Long-Lived and Other Asset Impairment F- 20 Note 11 – Debt and Credit Facilities F- 21 Note 1 2 – Derivative Instruments F- 24 Note 1 3 – Fair Value Measurements F- 24 Note 1 4 – Stockholders’ Equity F- 25 Note 1 5 – Commitments and Contingencies F- 27 Note 1 6 – Accrued Liabilities F- 28 Note 1 7 – Income Taxes F- 29 Note 1 8 – Defined Contribution Plan F- 31 Note 19 – L ong-Term Incentive Plan F- 31 Note 2 0 – Segments F- 31 Note 2 1 – Earnings Per Share of Common S t ock F- 32 N ote 2 2 - Related Party Transactions F- 33 F-1 Table of Contents Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Kodiak Gas Services, Inc. The Woodlands, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Kodiak Gas Services, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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 consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, P.C. We have served as the Company's auditor since 2020. Houston, Texas March 6, 2025 F-2 Table of Contents KODIAK GAS SERVICES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) As of December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 4,750 $ 5,562 Accounts receivable, net of allowance of $ 12,629 and $ 8,050 , respectively 253,637 113,192 Inventories, net 103,341 76,238 Fair value of derivative instruments 3,672 8,194 Contract assets 7,575 17,424 Prepaid expenses and other current assets 10,686 10,353 Total current assets 383,661 230,963 Property, plant and equipment, net 3,395,022 2,536,091 Operating lease right-of-use assets, net 53,754 33,716 Finance lease right-of-use assets, net 5,696 — Goodwill 415,213 305,553 Identifiable intangible assets, net 162,747 122,888 Fair value of derivative instruments 17,544 14,256 Other assets 1,486 639 Total assets $ 4,435,123 $ 3,244,106 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 57,562 $ 49,842 Accrued liabilities 188,732 97,078 Contract liabilities 73,075 63,709 Total current liabilities 319,369 210,629 Long-term debt, net of unamortized debt issuance cost 2,581,909 1,791,460 Operating lease liabilities 49,748 34,468 Finance lease liabilities 3,514 — Deferred tax liabilities 103,826 62,748 Other liabilities 3,150 2,148 Total liabilities 3,061,516 2,101,453 Commitments and contingencies (Note 15) Stockholders’ equity: Preferred stock, ( 50.0 million authorized, $ 0.01 par value) 0.8 million and zero shares issued and outstanding as of December 31, 2024 and 2023, respectively 9 — Common stock, ( 750.0 million shares authorized, $ 0.01 par value) 89.2 million and 77.4 million issued and 87.8 million and 77.4 million outstanding as of December 31, 2024 and 2023, respectively 892 774 Additional paid-in capital 1,305,375 963,760 Treasury stock, at cost ( 1.4 million and zero shares held as of December 31, 2024 and 2023, respectively) ( 40,000 ) — Noncontrolling interest 13,694 — Retained earnings 93,637 178,119 Total stockholders’ equity 1,373,607 1,142,653 Total liabilities and stockholders’ equity $ 4,435,123 $ 3,244,106 See accompanying notes to the consolidated financial statements. F-3 Table of Contents KODIAK GAS SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2024 2023 2022 Revenues: Contract Services $ 1,034,173 $ 735,605 $ 654,957 Other Services 125,138 114,776 52,956 Total revenues 1,159,311 850,381 707,913 Operating expenses: Cost of operations (exclusive of depreciation and amortization shown below): Contract Services 355,016 257,092 225,715 Other Services 103,360 93,779 41,636 Depreciation and amortization 260,272 182,869 174,463 Selling, general and administrative 151,680 73,308 44,882 Long-lived asset impairment 9,921 — — Loss (gain) on sale of assets 29,612 ( 777 ) ( 874 ) Total operating expenses 909,861 606,271 485,822 Income from operations 249,450 244,110 222,091 Other income (expenses): Interest expense ( 197,144 ) ( 222,514 ) ( 165,867 ) Loss on extinguishment of debt — ( 6,757 ) — Gain on derivatives 24,017 20,266 83,116 Other (expense) income, net ( 415 ) 31 17 Total other expenses ( 173,542 ) ( 208,974 ) ( 82,734 ) Income before income taxes 75,908 35,136 139,357 Income tax expense 25,574 15,070 33,092 Net income 50,334 20,066 106,265 Less: Net income attributable to noncontrolling interests 439 — — Net income attributable to common shareholders $ 49,895 $ 20,066 $ 106,265 Earnings per share: Basic earnings per share $ 0.58 $ 0.29 $ 1.80 Diluted earnings per share $ 0.56 $ 0.29 $ 1.80 Basic weighted average shares of common stock outstanding 83,094 68,059 59,000 Diluted weighted average shares of common stock outstanding 85,170 68,327 59,000 See accompanying notes to the consolidated financial statements. F-4 Table of Contents KODIAK GAS SERVICES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Common Shares Preferred Shares Additional Paid- In Capital Treasury Shares Noncontrolling Interest Retained Earnings Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount Balance, January 1, 2022 59,000 $ 590 — $ — $ 871,403 — $ — $ — $ 88,078 $ 960,071 Equity compensation - profits interests — — — — ( 214 ) — — — 971 757 Distribution to parent — — — — ( 838,000 ) — — — — ( 838,000 ) Net income — — — — — — — — 106,265 106,265 Balance, December 31, 2022 59,000 $ 590 — $ — $ 33,189 — $ — $ — $ 195,314 $ 229,093 Distribution to parent — — — — ( 33,189 ) — — — ( 9,111 ) ( 42,300 ) Proceeds from initial public offering, net of underwriter discounts 18,400 184 — — 277,656 — — — — 277,840 Offering costs — — — — ( 10,848 ) — — — — ( 10,848 ) Debt novation — — — — 692,099 — — — — 692,099 Equity compensation — — — — 4,271 — — — 1,643 5,914 Incentive award conversion — — — — 582 — — — — 582 Dividends paid to stockholders — — — — — — — — ( 29,793 ) ( 29,793 ) Net income — — — — — — — — 20,066 20,066 Balance, December 31, 2023 77,400 $ 774 — $ — $ 963,760 — $ — $ — $ 178,119 $ 1,142,653 Issuance of common shares for business acquisition 6,786 68 — — 188,099 — — — — 188,167 Issuance of preferred shares and noncontrolling interest for business acquisition — — 5,562 56 ( 124 ) — — 154,186 — 154,118 Preferred shares and noncontrolling interest converted to common shares 4,730 47 ( 4,730 ) ( 47 ) 136,088 — — ( 136,088 ) — — Equity compensation — — — — 17,008 — — 650 — 17,658 Offering costs — — — — ( 1,162 ) — — — — ( 1,162 ) Dividends and dividends equivalents paid to stockholders — — — — — — — — ( 134,803 ) ( 134,803 ) Restricted stock units vested under the Omnibus Plan, net of 107 shares withheld for taxes 324 3 — — ( 2,769 ) — — — — ( 2,766 ) Taxes withheld on issuance of stock-based awards and conversion of preferred shares — — — — 4,540 — — — — 4,540 Repurchase of common shares — — — — — 1,435 ( 40,000 ) — — ( 40,000 ) Distributions to noncontrolling interest — — — — — — — ( 5,529 ) — ( 5,529 ) Net income — — — — — — — 439 49,895 50,334 Other — — — — ( 65 ) — — 36 426 397 Balance, December 31, 2024 89,240 $ 892 832 $ 9 $ 1,305,375 1,435 $ ( 40,000 ) $ 13,694 $ 93,637 $ 1,373,607 See accompanying notes to the consolidated financial statements. F-5 Table of Contents KODIAK GAS SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income $ 50,334 $ 20,066 $ 106,265 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 260,272 182,869 174,463 Long-lived asset impairment 9,921 — — Equity compensation expense 17,658 5,914 971 Amortization of debt issuance costs 11,969 13,556 13,727 Non-cash lease expense 4,730 4,465 2,817 Provision for credit losses 4,664 7,101 86 Inventory reserve 559 500 500 Loss (gain) on sale of assets 29,612 ( 777 ) ( 874 ) Change in fair value of derivatives 1,234 42,890 ( 87,363 ) Deferred tax provision 15,429 7,863 27,301 Loss on extinguishment of debt — 4,359 — Changes in operating assets and liabilities, exclusive of effects of business acquisition: Accounts receivable ( 102,887 ) ( 22,742 ) ( 16,887 ) Inventories ( 1,336 ) ( 4,583 ) ( 24,302 ) Contract assets 9,849 ( 13,869 ) ( 3,555 ) Prepaid expenses and other current assets 4,434 ( 833 ) ( 3,269 ) Accounts payable 4,967 10,166 ( 1,518 ) Accrued and other liabilities ( 2,097 ) 2,781 25,579 Contract liabilities 9,366 6,600 5,905 Other assets ( 691 ) — — Net cash provided by operating activities 327,987 266,326 219,846 Cash flows from investing activities: Net cash acquired in acquisition of CSI Compressco LP 9,458 — — Purchase of property, plant and equipment ( 336,956 ) ( 219,795 ) ( 259,349 ) Proceeds from sale of assets 35,030 1,449 8,082 Other — ( 75 ) ( 115 ) Net cash used in investing activities ( 292,468 ) ( 218,421 ) ( 251,382 ) Cash flows from financing activities: Borrowings on debt instruments 2,642,370 1,020,102 1,613,886 Payments on debt instruments ( 2,475,572 ) ( 1,243,981 ) ( 724,895 ) Principal payments on other borrowings ( 5,634 ) — — Payment of debt issuance cost ( 16,271 ) ( 32,768 ) ( 27,819 ) Principal payments on finance leases ( 2,421 ) — — Proceeds from initial public offering, net of underwriter discounts — 277,840 — Offering costs ( 1,162 ) ( 10,039 ) — Loss on extinguishment of debt — ( 1,835 ) — Dividends paid to stockholders ( 133,886 ) ( 29,793 ) — Repurchase of common shares ( 40,000 ) — — Cash paid for shares withheld to cover taxes ( 2,766 ) — — Taxes withheld on issuance of stock-based awards and conversion of preferred shares 4,540 — — Distribution to parent — ( 42,300 ) ( 838,000 ) Distribution to noncontrolling interest ( 5,529 ) — — Net cash (used in) provided by financing activities ( 36,331 ) ( 62,774 ) 23,172 Net decrease in cash and cash equivalents ( 812 ) ( 14,869 ) ( 8,364 ) Cash and cash equivalents - beginning of period 5,562 20,431 28,795 Cash and cash equivalents - end of period $ 4,750 $ 5,562 $ 20,431 Supplemental cash disclosures: Cash paid for interest $ 147,144 $ 216,648 $ 143,441 Cash paid for taxes $ 14,662 $ 9,762 $ 2,177 Supplemental disclosure of non-cash investing activities: Increase in accrued capital expenditures $ ( 8,125 ) $ ( 1,682 ) $ ( 1,918 ) Purchase of property, plant and equipment through exchange of lease ROU asset $ — $ 3,227 $ — Supplemental disclosure of non-cash financing activities: Dividends equivalent $ ( 917 ) $ — $ — Non-cash debt novation $ — $ ( 689,829 ) $ — See accompanying notes to the consolidated financial statements. F-6 Table of Contents KODIAK GAS SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Description of Business Kodiak Gas Services, Inc. (the “Company” or “Kodiak”) is an operator of contract compression infrastructure and related services primarily in the U.S. The Company operates compression units under fixed-revenue contracts with upstream and midstream customers. Kodiak operates its business and the majority of the Company’s assets and liabilities under its subsidiary Kodiak Gas Services, LLC (“Kodiak Services”). Kodiak is the primary beneficiary of Kodiak Services, which is a variable interest entity, since the Company has the power to direct the activities that most significantly impact Kodiak Services’ economic performance and the Company has the right (and obligation) to receive benefits (and absorb losses) of Kodiak Services that could be potentially significant to the Company. 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying consolidated financial statements of the Company have been prepared on the accrual basis using accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. These consolidated financial statements include the accounts of Kodiak and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions that impact these consolidated financial statements relate to, among other things, fair value of derivative instruments, estimates of cost to complete on revenue contracts with customers, grant date fair value for the share-based equity awards, forecasting of our income tax (provision) benefit and the valuation of deferred taxes, useful lives of and salvage value of property, plant and equipment, fair value of assets acquired and liabilities assumed in business combinations, and sales tax liabilities. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Revenue Recognition The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services to our customers. See Note 4. Revenue Recognition for more detailed information about revenue recognition. Accounts Receivable and Allowance for Credit Losses Accounts receivables are recorded at their outstanding balances, net of any allowances for credit losses, if determined necessary. Accounts deemed uncollectible are applied against the allowance for credit losses. Recoveries of accounts receivable previously written off are recorded when received. 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. The risk characteristics are assessed based on the financial strength of the customer and overall business climate in which customer operates. 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. 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. F-7 Table of Contents Inventories Inventories consist of (i) non-serialized spare parts, fluids and other supplies consumed in the performance of revenue-generating services and parts and supplies inventory for the repair and maintenance of the Company’s equipment fleet; and (ii) serialized parts consisting of components inventory to support the Company’s equipment fleet. Inventories are measured at the lower of cost or net realizable value. Non-serialized inventories' cost is determined using weighted-average cost. Serialized inventories' cost is determined using the specific-identification cost method. The Company recognizes decreases in inventory values through reductions of carrying values to lower of cost or net realizable value on an as needed basis. Periodically, obsolescence reviews are performed on slow-moving inventories and reserves are established based on estimated shrinkage between physical inventory counts, changes in customer demand, technological developments, or other economic factors. Property, Plant and Equipment, net Property, plant and equipment acquired in connection with business combinations are recorded at fair value as of the date of acquisition. All other additions of property, plant and equipment, which primarily consist of compression equipment, are recorded at cost. The Company depreciates the cost of property, plant and equipment using the straight-line method over their estimated useful lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss are reflected in the accompanying consolidated statements of operations for the period. The cost of additions and improvements that extend the useful lives of property, plant and equipment beyond its original life are capitalized. Routine maintenance and repair items are charged to current operations. The Company uses estimates to capitalize installation costs associated with the transport, installation, and commissioning of each compressor unit. Costs associated with these estimates include all direct costs required to get the unit in service for its intended use such as labor, parts, materials, and any other services that are unique in nature to each individual compressor unit. Capitalized installation costs are depreciated over the life of the agreement with the customer. Impairment of Long-Lived Assets Long-lived assets, including property, plant, and equipment, and other finite-lived identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances, including the removal of compressors from the active fleet, indicate that the carrying amount of an asset may not be recoverable. Such events may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in the Company’s business strategy, among others. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to estimated future undiscounted net cash flows expected to be generated by the asset. Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its estimated future discounted cash flows. Leases The Company determines if an arrangement is a lease at commencement date and the leases are included in either operating or financing lease right-of-use assets ("ROU"), and operating or finance lease liabilities in the Company’s consolidated balance sheets. ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. ROU lease assets also include any lease payments made and exclude lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Short-term leases (those with an initial term of twelve months or less upon commencement)are not recorded on our consolidated balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable costs such as the Company’s 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. For finance leases, we amortize our right-of-use assets on a straight-line basis over the shorter of the asset’s useful life or the lease term. Additionally, interest expense is recognized each period related to the accretion of our lease liabilities over their respective lease terms. F-8 Table of Contents Identifiable Intangible Assets, net Identifiable intangible assets acquired in connection with business combinations are recorded at fair value as of the date of acquisition. The cost of identifiable intangible assets with finite lives are amortized using the straight-line method over their estimated useful lives, generally ranging from 5 to 20 years, which is the period over which the assets are expected to contribute directly or indirectly to future cash flows. The Company’s identifiable intangible assets consist of trade name and customer relationships. Goodwill Goodwill represents the excess of acquisition consideration paid over the fair value of net assets and liabilities acquired. Goodwill is not amortized, but rather is reviewed for impairment on an annual basis (or more frequently if impairment indicators exist). The Company tests goodwill at the reporting unit level, which is the level for which there are distinct cash flows, products, capabilities and available financial information by first performing a qualitative assessment to determine if it is more likely than not that the carrying value of the entity exceeds its fair value. As of December 31, 2024 and 2023, the Company had two reporting units; however, the entire goodwill balance was allocated to the Company’s Contract Services reporting unit. The Company conducts an annual impairment test during the fourth quarter or more frequently if there are indicators that goodwill may be impaired. The Company first performs a qualitative assessment, and, if based on this assessment, it may be more likely than not that goodwill may be impaired then the Company must determine the fair value of the reporting unit and compare it to the reporting unit’s carrying value. Factors utilized in the qualitative assessment include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and Company specific events. Fair value of the reporting unit is determined based on the present value of estimated cash flows using available information regarding expected cash flows of each reporting unit, discount rates and the expected long-term cash flow growth rates. If the fair value of the reporting unit exceeds the carrying value, goodwill is not impaired, and no further testing is performed. The Company records impairment when the carrying value exceeds the fair value and to the extent there is remaining goodwill in the reporting unit. The Company performed a qualitative test during its fourth quarter and concluded that there were no events or circumstances that occurred indicating it was more likely than not that the fair value of the Contract Services reporting unit was below its carrying amount. No goodwill impairment was recorded for the years ended December 31, 2024, 2023, or 2022. Application of the goodwill impairment test requires judgments, including a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of the reporting unit if an impairment indicator is present. A number of significant assumptions and estimates are involved in the application of the income approach to forecast future cash flows, including revenue and operating income growth rates, discount rates and other factors. While we believe that our estimates of current fair value are reasonable, if actual results differ from the estimates and judgments used including such items as future cash flows and the volatility inherent in markets which we serve, impairment charges against the carrying value of those assets could be required in the future. Stock-based Compensation Stock-based compensation expense is measured at the grant date of the share-based awards based on their fair value. Stock-based compensation expense is recognized on a straight-line basis over the vesting period and is included in selling, general and administrative expenses in the consolidated statements of operations. We do not estimate expected forfeitures, but recognize them as they occur. See Note 14. Stockholders’ Equity for additional information related to stock-based compensation. Earnings Per Share Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the Basic Weighted Average Shares Outstanding plus all potential dilutive common shares outstanding during the period. See Note 21. Earnings Per Share of Common Stock for additional information related to earnings per share. F-9 Table of Contents Debt Issuance Costs Costs incurred related to debt issuance are deferred and amortized over the term of the related debt using a method that approximates the effective interest rate method. Unamortized debt issuance costs are recorded as a direct deduction from the carrying amount of the related loans on the consolidated balance sheets. Derivative Instruments The Company recognizes derivative instruments on the consolidated balance sheets at fair value and classifies them as current or long-term depending on the maturity of the derivative instrument and whether the net carrying value is in a net liability position. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and whether the Company has elected to designate the derivative as being in a hedging relationship. Currently, the Company’s interest rate swaps are intended to economically hedge certain risks (“economic hedges”). The Company has elected not to apply hedge accounting to these instruments and does not enter into such instruments for speculative purposes; accordingly, all realized and unrealized gains and losses on derivative instruments have been recognized in the accompanying consolidated statements of operations as gain on derivatives. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and deferred tax liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and deferred tax liabilities is recognized in income in the period that includes the enactment date. Management is not aware of any changes in tax laws or rates that would have a material impact on our financial position, results of operations or cash flows. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to 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, carryback potential if permitted under the tax law, and results of recent operations. If we determine that 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 valuation allowance against deferred tax assets, which would reduce the provision for income taxes. The Company applies a “more-likely-than-not” recognition threshold for all tax uncertainties. This approach only allows the recognition of those tax benefits that have a greater than 50% percent likelihood of being sustained upon examination by the taxing authorities. As a result of implementing this approach, the Company has reviewed its tax positions and determined there were no outstanding or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities. The Company believes that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within the next twelve months. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. None of the Company’s federal or state tax income tax returns are currently under examination by the Internal Revenue Service (“IRS”) or state authorities. However, fiscal years 2020 and later remain subject to examination by the IRS and respective states in the U.S. On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law. The IRA contains significant tax law changes, including a corporate alternative minimum tax (“CAMT”) of 15% on adjusted financial statement income for applicable corporations, and a 1% excise tax on stock repurchases after December 31, 2022. The IRA also extends certain federal tax credits and creates new tax credits to promote sustainability initiatives. The Company examined the IRA and determined that it does not have a material impact on the consolidated financial statements. The Company will continue to monitor this legislation as additional guidance is issued by the U.S. Treasury Department. In December 2021, the Organization for Economic Co-operation and Development ("OECD") published Model Global Anti-Base Erosion rules under Pillar Two. The model rules seek to ensure that multinational corporations pay tax at a minimum rate of 15% in each jurisdiction in which they do business. Various countries in which we operate have implemented Pillar Two rules which became effective starting in 2024. The Company analyzed the enacted legislation and determined that it did not have a material impact on our financial statements. The Company will continue to evaluate Pillar Two legislation as it is enacted to determine its impact on the tax provision. F-10 Table of Contents Fair Value Measurements The Company records certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These fair value measurements incorporate nonperformance risk (i.e., the risk that an obligation will not be fulfilled) and credit risk. In the absence of active markets for identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. The three levels of the valuation hierarchy are defined as follows: • Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities. • Level 2 – Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. • Level 3 – Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. See Note 13. Fair Value Measurements for more details. Concentrations of Credit Risk The Company’s assets that are potentially subject to concentrations of credit risk are cash and cash equivalents, trade accounts receivable and contract assets. Cash balances are maintained in financial institutions which at times exceed federally insured limits. The Company monitors the financial condition of the financial institutions in which accounts are maintained and has not experienced any losses in such accounts. The accounts receivable and contract assets of the Company are spread over a number of customers, a majority of which are operators and suppliers to the natural gas and oil industries. Major customers are defined as those individually comprising more than 10% of our revenues or accounts receivable, net balance. For the year ended December 31, 2024, one customer comprised approximately 13 % of total revenues. For each of the years ended December 31, 2023 and 2022, one customer comprised approximately 12 % of total revenues. All of these revenues were related to the Contract Services segment. As of December 31, 2024 and 2023, one customer comprised 12 % and 14 %, respectively, of the Company's accounts receivable, net balance. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendment requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. The guidance is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. We are currently evaluating the impact of this standard on our disclosures. In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (DISE) , which requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions and the total amount of selling expenses. This guidance is effective for annual periods beginning after December 15, 2026, and interim periods within F-11 Table of Contents fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures. Recently Adopted Accounting Pronouncements In November 2023, FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures , which requires a public business entity to disclose its significant segment expense categories and amounts for each reportable segment. A significant segment expense is an expense that is significant to the segment, regularly provided to or easily computes from information regularly provided to the chief operating decision maker ("CODM"), and included in the reported measure of segment profit or loss. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. The adoption of this ASU did not have a material effect on our consolidated financial statements, other than the newly required disclosures. See Note 20. Segments for the inclusion of the new required disclosures. 3. Acquisitions and Divestitures Merger with CSI Compressco On April 1, 2024, the Company completed the acquisition of 100 % of the issued and outstanding partnership interests of CSI Compressco pursuant to the terms of the Merger Agreement, dated December 19, 2023 (the “Merger Agreement”), for total consideration of $ 342.3 million, consisting of the issuance of the equity shares in the CSI Acquisition. CSI Compressco provides contract services related to the exploration and production of oil and natural gas, including natural gas compression services and treating services, aftermarket services, and the sale of compressor package parts and components manufactured by third-party suppliers. Strategically, the CSI Acquisition is expected to afford us the opportunity to capture significant synergies associated with our product and service offerings, further penetrate new and existing markets, and achieve administrative efficiencies and other strategic benefits. Under the Merger Agreement, CSI Compressco unitholders received 0.086 shares of common stock, par value $ 0.01 per share, of Kodiak (“common stock”) for each CSI Compressco common unit owned, and certain CSI Compressco unitholders meeting specified requirements (the “Electing Unitholders”) elected to receive limited liability company units (“OpCo Units”) representing economic interests in Kodiak Services (along with an equal number of shares of Kodiak’s non-economic voting preferred stock), for each CSI Compressco common unit they held. Each OpCo Unit is redeemable at the option of the holder for (i) one share of common stock (along with cancellation of a corresponding share of preferred stock) or (ii) cash at Kodiak Services’ election, following a 180 days post-closing lock-up and subject to certain conditions. On or after April 1, 2029, Kodiak shall have the right to effect redemption of such OpCo Units. The OpCo Units represent and will be accounted for as noncontrolling interests in Kodiak Services. Each share of preferred stock entitles the holder to one vote per share, voting proportionally with holders of common stock. The preferred stock lacks economic benefits beyond its par value of $ 0.01 per share (with a maximum value of $ 50,000 ), as it does not participate in earnings or cash dividends of Kodiak. Rather, it solely represents a voting share. Pursuant to the Merger Agreement, the Company issued 6,785,712 shares of common stock and 5,562,273 shares of preferred stock (with an equal number of OpCo Units) with an estimated fair value of $ 342.3 million based on the Company’s stock price on April 1, 2024 of $ 27.72 . Additionally, subsequent to the close of the CSI Acquisition, the Company used additional draws on the ABL Facility of $ 651.8 million to repay, terminate and/or redeem all of CSI Compressco’s existing outstanding indebtedness, except for certain equipment financing obligations, and pay fees and expenses related to the 2029 Senior Notes offering and the CSI Acquisition. See Note 11. Debt and Credit Facilities for further description. F-12 Table of Contents Our preliminary allocation of the purchase price to the estimated fair value of the CSI Compressco net assets is as follows ( in thousands ): Fair value of consideration transferred $ 342,285 Recognized amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents $ 9,458 Receivables 48,890 Inventory 40,738 Prepaid expenses & other current assets 8,638 Intangible assets (1) 47,503 Property, plant and equipment 813,783 Right of use assets 26,044 Deferred tax assets 17 Other non-current assets 3,110 Total assets acquired 998,181 Deferred tax liabilities 29,695 Long term debt 627,953 Other current liabilities 86,267 Other non-current liabilities 21,870 Total liabilities assumed 765,785 Total identifiable assets acquired less liabilities assumed $ 232,396 Goodwill acquired $ 109,889 (1) Identifiable intangibles acquired include customer relationships and trade names with a fair value of $ 41.1 million and $ 6.4 million, respectively. Estimated useful lives are 15 and 5 years, respectively. The weighted average amortization period for identifiable intangible assets recognized is 13.2 years. The purchase price was allocated to the assets acquired and liabilities assumed based on our estimates of fair value estimated as of the acquisition date. The methodologies used, and key assumptions made, were based on a combination of the income approach, market approach, and cost approach. The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition. As of December 31, 2024, we have substantially completed the allocation of the consideration. The primary areas in which the preliminary purchase price allocation is not yet finalized relate to the deferred income taxes and residual goodwill. We will complete the purchase price allocation and valuation during the first quarter of 2025. During the year ended December 31, 2024, we recognized measurement period adjustments of $ 12.1 million, primarily related to updated valuations of property, plant and equipment, intangible assets, and deferred tax liabilities. The measurement period adjustment increased goodwill acquired from $ 97.8 million to $ 109.9 million. The fair value of the assets acquired and liabilities assumed are categorized in the following levels: Level 1 - Cash and cash equivalents; based on observable inputs such as quoted prices in active markets at the measurement date for identical assets or liabilities. Level 2 - Receivables, inventory, right of use assets, prepaid expenses and other current assets, other non-current assets, long term debt and other current and non-current liabilities; based on inputs that are observable such as quoted prices in markets that are not active (e.g. quoted pricing on CSI Compressco’s debt), or inputs which are observable, for substantially the full term of the asset or liability. F-13 Table of Contents Level 3 - Intangible assets, property, plant and equipment, and sales tax liability; based on unobservable inputs for which there is little or no market data and which assumption are made about how market participants would price the assets or liabilities. The Company used a combination of the income, cost and market approaches based on various assumptions and inputs. Goodwill of $ 109.9 million arising from the CSI Acquisition is supported by the strategic benefits and expected synergies to be generated from the CSI Acquisition. Goodwill is not deductible for tax purposes and has been allocated to our Contract Services reportable segment. The acquired property, plant and equipment is stated at fair value, and depreciation on the acquired property, plant and equipment is computed using the straight-line method over the estimated remaining useful lives of each asset in line with the Company’s policies. It is impracticable to determine the revenue and earnings recorded in the consolidated statements of operations for the year ended December 31, 2024 as we initiated the integration of a substantial portion of CSI Compressco into our ongoing operations following the close of the CSI Acquisition. In addition, acquisition-related costs of approximately $ 26.3 million were incurred during the year ended December 31, 2024 related to external legal fees, transaction consulting fees, and due diligence costs. These costs have been recognized in selling, general and administrative expenses in the consolidated statements of operations. Unaudited Supplemental Pro Forma Financial Information The following unaudited supplemental pro forma information has been prepared as though the CSI Acquisition had occurred on January 1, 2023. The pro forma information is presented for illustrative purposes only and is based on estimates and assumptions we deemed appropriate. The following pro forma information is not necessarily indicative of the historical results that would have been achieved if the acquisition had occurred in the past, and our operating results may have been different from those reflected in the pro forma information below. Therefore, the pro forma information should not be relied upon as an indication of the operating results that we would have achieved if the transaction had occurred on January 1, 2023 or the future results that we will achieve after the transactions. The pro forma results include certain adjustments, primarily due to increases in interest expense due to additional borrowings incurred to finance the acquisition and amortization of debt issuance costs and depreciation and amortization expense. Non-recurring acquisition related costs including transaction costs, such as legal, accounting, valuation and other professional services as well as integration costs such as severance are included within the pro forma revenue and net income below. Year Ended December 31, 2024 2023 Revenue $ 1,256,421 $ 1,236,509 Net income $ 59,945 $ 17,968 Sale of Assets On September 12, 2024, the Company sold certain property, plant and equipment and other assets in the U.S. as well as our legal entity in Canada to a third-party buyer. The majority of the operations were included in the Contract Services segment through the date of sale. Total net assets sold were approximately $ 18.0 million, consisting primarily of compression equipment, inventory, and other assets. Upon disposition, we incurred a loss of approximately $ 7.0 million included in loss (gain) on sale of assets in our consolidated statements of operations for the year ended December 31, 2024. On December 9, 2024, we sold certain assets and our legal entity in Argentina. The majority of the operations were included in the Contract Services segment through the date of sale. The transaction constituted the sale of a business for accounting purposes. Total assets sold primarily consisted of approximately $ 10.8 million in property, plant and equipment, $ 2.7 million in accounts receivable, and $ 2.2 million in inventory. We recognized a loss of $ 13.6 million, which is included in loss (gain) on sale of assets in our consolidated statements of operations for the year ended December 31, 2024. F-14 Table of Contents 4. Revenue Recognition The following table disaggregates the Company’s revenue by type and timing of provision of services or transfer of goods (in thousands) : Year Ended December 31, 2024 2023 2022 Services provided over time: Contract Services $ 1,032,493 $ 728,032 $ 646,281 Other Services 56,512 89,402 46,971 Total services provided over time 1,089,005 817,434 693,252 Services provided or goods transferred at a point in time: Contract Services 1,680 7,573 8,676 Other Services 68,626 25,374 5,985 Total services provided or goods transferred at a point in time 70,306 32,947 14,661 Total revenues $ 1,159,311 $ 850,381 $ 707,913 The Company derives its revenue from contracts with customers, which comprise the following revenue streams: Contract Services Contract Services consists of operating Company-owned compression, customer-owned compression and gas treating and cooling infrastructure for the Company's customers, pursuant to primarily fixed-revenue contracts enabling the production, gathering and transportation of natural gas and oil. Contract Services for Kodiak-owned compressors, customer-owned compressors, as well as gas treating equipment, are generally satisfied over time, as services are rendered for selected customer locations on a monthly basis and based upon specific performance criteria set forth in the applicable contract. Terms are typically one to seven years and at the end of the term, transition to a month-to-month term if not cancelled by either party. The monthly service for each location is substantially the same service month to month and is promised consecutively over the contract term. The progress and performance of the service are measured consistently using a straight-line, time-based method; the performance obligations are satisfied evenly over the contract term as the customer simultaneously receives and consumes the benefits provided by the service. Consistent with the Company's satisfaction of its performance obligations, the customer renders payment for services over time in accordance with the terms of the contract. If variable consideration exists, it is allocated to the distinct monthly service within the series to which such variable consideration relates. The Company has elected to apply the right to invoice practical expedient to recognize revenue for such variable consideration, as the invoice corresponds to the value transferred to the customer based on the Company's performance completed to date. There are typically no material obligations for returns, refunds, or warranties. The Company’s standard contracts do not usually include non-cash consideration. Other Services Other Services consists of a full range of services to support any ancillary needs of customers, including station construction, customer-owned compression maintenance and overhaul, freight and crane charges, and other time and material-based offerings. For most of the Company’s station construction contracts, the customer contracts with the Company to provide a service of integrating a significant set of tasks and components into a single contract. Hence, the entire contract is accounted for as one performance obligation. The Company recognizes revenue over time as the Company's performance creates or enhances an asset that the customer, in turn, controls. For construction contracts, revenue is recognized using an input method. Measure of the progress towards satisfaction of the performance obligation is 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 construction services. Payment terms and conditions vary by contract, but contract terms generally include a requirement of payment upon completion of a milestone. Judgment is involved in the estimation of the progress to completion. Any F-15 Table of Contents adjustments to the measure of the progress to completion is accounted for on a prospective basis. Changes to the scope of service are recognized as an adjustment to the transaction price in the period in which the change order is agreed upon and executed. Losses on construction contracts, if any, are recognized in the period when the estimated loss is determined. There have been no losses recognized in the years ended December 31, 2024, 2023 and 2022, respectively. Services provided based on time spent, parts and/or materials are generally short-term in nature and labor rates and parts pricing are agreed upon prior to commencing the service. Since revenue is recognized when time is incurred, this revenue is recognized at a point in time when the service is rendered. Service revenue earned primarily on freight and crane charges that are directly reimbursable by our customers are recognized at the point in time the service is provided and control is transferred to the customer. At such time, the customer has the ability to direct the use of the benefits of such service after the performance obligation is satisfied. The amount of consideration we receive and revenue we recognize is based upon the invoice amount. Contract Assets and Liabilities The Company recognizes a contract asset when the Company has the right to consideration in exchange for goods or services transferred to a customer. Contract assets are transferred to trade receivables when the Company has the right to bill. The Company had contract assets of $ 7.6 million and $ 17.4 million as of December 31, 2024 and 2023, respectively. The Company records contract liabilities when cash payments are received or due in advance of performance. The Company’s contract liabilities were $ 73.1 million as of December 31, 2024. As of January 1, 2024 and 2023, the beginning balances for contract liabilities were $ 63.7 million and $ 57.1 million, respectively, all of which was recognized as revenue in the years ended December 31, 2024 and 2023, respectively. Performance Obligations As of December 31, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to the Company’s revenue for the Contract Services segment is $ 1.5 billion. The Company expects to recognize these remaining performance obligations as follows (in thousands) : 2025 2026 2027 2028 2029 and thereafter Total Remaining performance obligations $ 763,965 $ 431,133 $ 198,932 $ 53,116 $ 26,180 $ 1,473,326 As of December 31, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to the Company’s revenue for the Other Services segment is $ 10.2 million, all of which is expected to be recognized by December 31, 2025. 5. Accounts Receivable, net The allowance for credit losses were $ 12.6 million and $ 8.0 million as of December 31, 2024 and 2023, respectively, which represents our best estimate of the amount of probable credit losses included within our existing accounts receivable balance. The changes in our allowance for credit losses are as follows (in thousands) : Allowances for Credit Losses Balance at January 1, 2022 $ 959 Write-offs charged against allowance ( 10 ) Balance at December 31, 2022 949 Current-period provision for expected credit losses 7,101 Balance at December 31, 2023 8,050 Current-period provision for expected credit losses 4,664 Write-offs charged against allowance ( 85 ) Balance at December 31, 2024 $ 12,629 F-16 Table of Contents 6. Inventories, net Inventories, net consisted of the following ( in thousands ): As of December 31, 2024 2023 Non-serialized parts $ 93,060 $ 62,784 Serialized parts 12,167 13,454 Inventory reserve ( 1,886 ) — Inventories, net $ 103,341 $ 76,238 7. Property, Plant and Equipment, net Property, plant and equipment, net consisted of the following ( in thousands ): As of December 31, 2024 2023 Compression equipment $ 4,175,804 $ 3,166,214 Field equipment 92,077 19,286 Buildings and shipping containers 13,656 11,942 Technology hardware and software 14,960 11,161 Trailers and vehicles 13,506 9,885 Leasehold improvements 11,942 8,093 Furniture and fixtures 2,650 2,053 Land 1,000 743 Other — 374 Total property, plant and equipment, gross 4,325,595 3,229,751 Less: accumulated depreciation ( 930,573 ) ( 693,660 ) Property, plant and equipment, net $ 3,395,022 $ 2,536,091 Depreciation expense was $ 245.8 million, $ 173.4 million, and $ 165.0 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is recorded within depreciation and amortization on the accompanying consolidated statements of operations. The estimated useful lives of assets are as follows: Estimated Useful Life Compression equipment 4 - 25 years Field equipment 1 - 5 years Buildings 25 - 40 years Shipping containers 4 years Technology hardware and software 3 years Trailers and vehicles 5 years Leasehold improvements Remaining lease term, no less than 1 year Furniture and fixtures 7 years Other Estimated useful life or 1 year F-17 Table of Contents 8. Goodwill and Identifiable Intangible Assets, net Goodwill The carrying amount of goodwill, including changes therein is shown below ( in thousands ): Goodwill Balance as of December 31, 2023 $ 305,553 Acquisition of CSI Compressco 97,837 Measurement period adjustment (1) 12,052 Allocated to disposal group (2) ( 229 ) Balance as of December 31, 2024 $ 415,213 (1) See Note 3. Acquisitions and Divestitures for additional information related to the CSI acquisition. (2) See Note 3. Acquisitions and Divestitures for additional information related to the sale of assets. Intangible Assets The Company’s identifiable intangible assets were as follows ( in thousands ): As of December 31, 2024 As of December 31, 2023 Original Cost Accumulated Amortization Net Amount Original Cost Accumulated Amortization Net Amount Trade name $ 19,400 $ ( 4,791 ) $ 14,609 $ 13,000 $ ( 3,181 ) $ 9,819 Customer relationships 191,100 ( 47,809 ) 143,291 150,000 ( 36,931 ) 113,069 Internal use software 4,847 — 4,847 — — — Total identifiable intangible assets $ 215,347 $ ( 52,600 ) $ 162,747 $ 163,000 $ ( 40,112 ) $ 122,888 Amortization expense was $ 12.5 million, $ 9.5 million and $ 9.5 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is recorded within depreciation and amortization on the consolidated statements of operations. As of December 31, 2024 and 2023, the remaining weighted average amortization period for identifiable intangible assets recognized is 12.4 and 13.0 years, respectively. Estimated future amortization expense related to intangible assets as of December 31, 2024, is as follows ( in thousands ): Amount Years ending December 31, 2025 $ 13,561 2026 13,494 2027 13,494 2028 13,494 2029 12,534 Thereafter 91,323 9. Leases The Company maintains operating and finance leases that grant us the right to use compression equipment, office spaces and certain corporate equipment. The Company’s leases have remaining lease terms of up to 15 years, some of which include options that permit renewals for additional periods. We are not, however, reasonably certain to exercise any F-18 Table of Contents renewal options and accordingly have not included those renewal periods in the remaining lease terms. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases are presented in our consolidated balance sheet as follows (in thousands) : As of December 31, Classification 2024 2023 Right-of-use Assets: Operating leases Operating lease right-of-use assets, net $ 53,754 $ 33,716 Finance leases Finance lease right-of-use assets, net $ 5,696 $ — Lease liabilities: Operating lease liabilities: Current Accrued liabilities $ 9,930 $ — Noncurrent Operating lease liabilities 49,748 34,468 Total operating lease liabilities $ 59,678 $ 34,468 Finance lease liabilities: Current Accrued liabilities $ 1,928 $ — Noncurrent Finance lease liabilities 3,514 — Total finance lease liabilities $ 5,442 $ — The components of total lease cost were as follows (in thousands) : For the Year Ended December 31, 2024 2023 2022 Operating lease expense: Operating lease expense $ 14,993 $ 6,536 $ 3,349 Short-term lease expense 4,287 1,132 337 Total operating lease expense 19,280 7,668 3,686 Finance lease expense: Amortization of leased assets 1,421 — — Interest on lease liabilities 202 — — Total finance lease expense 1,623 — — Total lease expense $ 20,903 $ 7,668 $ 3,686 The short-term lease cost disclosed above reasonably reflects the Company’s ongoing short-term lease commitments. These lease costs are primarily recorded within cost of operations. F-19 Table of Contents Supplemental information related to the Company’s operating and finance leases were as follows: For the Year Ended December 31, (in thousands, except years and percentages) 2024 2023 2022 Other supplemental information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows - operating leases $ 16,879 $ 5,800 $ 3,332 Operating cash flows - finance leases $ 319 $ — $ — Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 12,894 $ 28,353 $ 1,203 Finance leases $ 7,111 $ — $ — Weighted-average remaining lease term: Operating leases 6.56 years 7.50 years 3.55 years Finance leases 3.07 years — — Weighted-average discount rate: Operating leases 9.5 % 9.5 % 5.3 % Finance leases 6.1 % — % — % Future minimum lease payments, under non-cancelable operating and finance leases with terms in excess of one year, as of December 31, 2024 are as follows ( in thousands): Operating leases Finance leases Year ended December 31, 2025 $ 14,999 $ 1,853 2026 13,833 1,975 2027 10,737 1,704 2028 9,157 491 2029 8,754 — Thereafter 25,472 — Total lease payments 82,952 6,023 Less: imputed interest ( 23,274 ) ( 581 ) Total lease liabilities $ 59,678 $ 5,442 As of December 31, 2024, we had an additional operating lease that has not yet commenced for office space with lease obligations of $ 8.1 million. The operating lease will commence starting in 2029 with a lease term of approximately 7 years. 10. Long-Lived and Other Asset Impairment For the year ended December 31, 2024, we determined that certain events occurred to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of assets may not be recoverable. As a result, we recorded an impairment of compression equipment of $ 9.9 million. No impairment was recorded, and no triggering events were identified for the years ended December 31, 2023 and 2022. F-20 Table of Contents 11. Debt and Credit Facilities Long-term debt consisted of the following (in thousands) : As of December 31, 2024 2023 ABL Facility $ 1,875,097 $ 1,830,346 2029 Senior Notes 750,000 — Total debt outstanding 2,625,097 1,830,346 Less: unamortized debt issuance costs ( 43,188 ) ( 38,886 ) Long-term debt, net of unamortized debt issuance cost 2,581,909 1,791,460 Other borrowings 5,739 — Total long-term debt and other borrowings $ 2,587,648 $ 1,791,460 ABL Facility Kodiak and its subsidiary, Kodiak Services, are borrowers under a revolving asset-based loan credit facility (the “ABL Facility”) with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent. On March 22, 2023, Kodiak and Kodiak Services entered into the Fourth Amended and Restated Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement”) which mainly served to extend the maturity date to March 2028. The total commitments under the facility are $ 2.2 billion. As of December 31, 2024, there was $ 2.4 million in letters of credit outstanding under the ABL Facility. Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5 x and a maximum Leverage Ratio (calculated based on the ratio of Total Indebtedness to EBITDA, each as defined in the ABL Credit Agreement), and beginning for the quarter ended June 30, 2024, a Secured Leverage Ratio (calculated based on the ratio of Senior Secured Debt to EBITDA). The maximum Leverage Ratio is (i) 5.75 to 1.00 through the fiscal quarter ending March 31, 2025 and (ii) 5.25 to 1.00 for each fiscal quarter thereafter. The maximum Secured Leverage Ratio is (i) 3.75 to 1.00 through the fiscal quarter ending March 31, 2025 and (ii) 3.25 to 1.00 for each fiscal quarter thereafter. The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay certain dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets. The ABL Facility is a “revolving credit facility” that includes a lockbox arrangement whereby, under certain events, remittances from customers are forwarded to a bank account controlled by the administrative agent and are applied to reduce borrowings under the facility. One such event occurs if availability under the ABL Credit Agreement falls below a specified threshold (i.e., $ 125 million for five ( 5 ) consecutive days until such time availability is greater than $ 125 million for twenty ( 20 ) consecutive days). As of December 31, 2024 and 2023, availability under the ABL Facility was in excess of the specified threshold and as such the entire balance was classified as long-term in accordance with its maturity. Third Amendment to Fourth Amended and Restated Credit Agreement On January 22, 2024, Kodiak entered into the Third Amendment to the ABL Credit Agreement (the “Third Amendment”). The Third Amendment, among other things, amended certain provisions of the ABL Facility (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement (see Note 3. Acquisitions and Divestitures) and (ii) to account for the Company’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement. Lender fees and costs totaling $ 2.9 million were incurred related to the Third Amendment and will be amortized over the life of the ABL Credit Agreement to interest expense. F-21 Table of Contents In addition, the Third Amendment amended the ABL Facility to (i) update the maximum secured leverage ratio to (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter, (ii) modify the triggers for commencing a “cash dominion” period (i.e., a period when the administrative agent applies proceeds in the deposit accounts to reduce borrowings under the ABL Credit Agreement) (iii) include customary provisions relating to the designation of “unrestricted subsidiaries” (i.e., subsidiaries that are not required to become loan parties or be bound by the covenants contained in the ABL Credit Agreement), (iv) provide that only material domestic restricted subsidiaries are required to become guarantors and collateral grantors under the ABL Facility, and (v) permit the Company and its restricted subsidiaries to incur additional indebtedness and liens and to make additional investments, dividends, distributions, redemptions and dispositions. Interest is payable monthly. Depending on the loan type elected by the Company, interest accrues based on variable rates of SOFR plus an applicable rate ranging from 2 % to 3 % or prime rate plus an applicable rate ranging from 1 % to 2 % depending on the type of loan and the leverage ratio. The weighted average interest rate as of December 31, 2024 and 2023, was 6.8 % and 8.8 %, respectively, excluding the effect of interest rate swaps. The Company pays an annualized commitment fee of 0.25 % on the unused portion of its ABL Facility if borrowings are greater than 50 % of total commitments and 0.50 % on the unused portion of the ABL Facility if borrowings are less than 50 % of total commitments . All obligations under the ABL Facility are collateralized by essentially all the assets of the Company. We were in compliance with all covenants as of December 31, 2024 and 2023. 2029 Senior Notes On February 2, 2024, Kodiak Services issued $ 750.0 million aggregate principal amount of 7.25 % senior notes due 2029 (the “2029 Senior Notes”), pursuant to an indenture, by and among the Company as guarantor and certain other subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. Prior to February 15, 2026, the Company may redeem all or part of the 2029 Senior Notes at a redemption price equal to 100 % of the principal amount of the 2029 Senior Notes plus a make-whole premium, plus accrued and unpaid interest. This make-whole premium is determined as the excess, if any, of (a) the present value at such time of (i) the redemption price of the 2029 Senior Notes at February 15, 2026 plus (ii) any required interest payments due through February 15, 2026, computed using a discount rate equal to the applicable treasury rate plus 0.50 %, discounted to the redemption date on a semi-annual basis, over (b) the principal amount of the 2029 Senior Notes. Prior to February 15, 2026, the Company may also redeem up to 40 % of the aggregate principal amount of the 2029 Senior Notes, limited to the net cash proceeds of one or more equity offerings, at a redemption price of 107.25 % of the principal amount of the 2029 Senior Notes to be redeemed, plus any accrued and unpaid interest, as long as at least 50 % of the aggregate principal amount of the 2029 Senior Notes originally issued remains outstanding after each such redemption and the redemption occurs within 180 days after the date of the closing of such equity offering. On and after February 15, 2026, the Company may redeem all or a portion of the 2029 Senior Notes, along with accrued and unpaid interest at the redemption prices (expressed as percentages of principal amount) as follows, if redeemed during the twelve-month period beginning on February 15 of the years indicated below: Percentage 2026 103.625 % 2027 101.813 % 2028 and thereafter 100.000 % If the Company or Kodiak Services experiences certain kinds of changes of control and Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”) or Fitch Ratings, Inc. (“Fitch”) decreases their rating of the 2029 Senior Notes as a result thereof within 60 days, holders of the 2029 Senior Notes will be entitled to require Kodiak Services to repurchase all or any part of that holder’s notes at a price of 101 % of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, if any, on the notes repurchased to the date of settlement. The Indenture contains certain covenants that limit the ability of the Company and its restricted subsidiaries, including Kodiak Services, to make distributions on, purchase or redeem the Company’s equity interests or repurchase or redeem contractually subordinated indebtedness; make certain investments; incur or guarantee additional indebtedness, issue any disqualified stock, or issue other preferred securities (other than non-economic preferred securities); create or incur certain liens to secure indebtedness; sell or otherwise dispose of assets; consolidate with or merge with or into another person; enter into transactions with affiliates; and create unrestricted subsidiaries. If the 2029 Senior Notes achieve an investment grade rating from any two of Moody’s, S&P and Fitch and no default under the Indenture exists, many of the foregoing covenants will terminate. The Indenture also contains customary events of default. F-22 Table of Contents Fees and costs totaling $ 13.4 million were incurred related to the 2029 Senior Notes and will be amortized over the life of the 2029 Senior Notes to interest expense. The proceeds from the 2029 Senior Notes were used to repay a portion of the outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the 2029 Senior Notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds from additional draws on the ABL Facility to repay, terminate and/or redeem all of CSI Compressco’s existing outstanding indebtedness, except for certain equipment financing obligations, and pay fees and expenses related to the notes offering and the CSI Acquisition. Term Loan A wholly owned subsidiary of Kodiak had a term loan (the “Term Loan”), pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent. On June 29, 2023, the Company terminated all interest rate swaps and collars attributable to the Term Loan and recognized a gain on derivatives and received cash of $ 25.8 million (the “Term Loan Derivative Settlement”). On July 3, 2023, in connection with the initial public offering (“IPO”), the Company used the net proceeds from the IPO, together with the proceeds resulting from the Term Loan Derivative Settlement and borrowings under the ABL Facility, to repay $ 300 million of borrowings outstanding under the Term Loan. Additionally, a subsidiary of Kodiak entered into a Novation, Assignment, and Assumption Agreement (“Novation Agreement”) with Frontier TopCo Partnership, L.P. (“Kodiak Holdings”), an affiliate of EQT and holder of record of Kodiak Gas Services, Inc. common stock, pursuant to which all of the Company’s remaining obligations under the Term Loan were assumed by Kodiak Holdings, and the Company’s obligations thereunder were terminated. The Company is no longer a borrower or guarantor and is not otherwise obligated with respect to the debt outstanding under the Term Loan. As part of the $ 300 million repayment of the Term Loan, unamortized debt issuance costs of $ 4.4 million and fees of $ 2.4 million were recorded to loss on extinguishment for the year ended December 31, 2023. The carrying value of the Term Loan novated under the Novation Agreement of $ 689.8 million (comprised of $ 700.0 million of principal balance less $ 10.2 million of unamortized debt issuance costs) was considered an equity transaction with the parent and recorded to additional paid-in capital in the consolidated statement of stockholder's equity. As of December 31, 2024, the scheduled maturities, without consideration of potential mandatory prepayments, of the Company's long-term debt were as follows ( in thousands ): Amount Year ended December 31, 2025 $ 5,344 2026 395 2027 — 2028 1,875,097 2029 750,000 Thereafter — Total $ 2,630,836 Debt Issuance Costs The total remaining unamortized debt issuance costs of $ 43.2 million, as of December 31, 2024, are being amortized over the respective terms of the ABL Facility and 2029 Senior Notes. As of December 31, 2023, debt issuance costs of $ 38.9 million were being amortized over the term of the ABL Facility. Amortization expense related to these costs of $ 12.0 million, $ 13.6 million and $ 13.7 million for year ended December 31, 2024, 2023 and 2022, respectively, are included in interest expense in the accompanying consolidated statements of operations. Other Borrowings Upon the completion of the CSI Acquisition, the Company has finance agreements with a third-party in the amount of $ 11.4 million to finance certain compression equipment. The notes were payable in monthly installments totaling $ 0.7 million for 36 months. As of December 31, 2024, amounts due under the finance agreements totaled $ 5.7 million. The current portion of this amount, $ 5.3 million, is classified in accrued liabilities and the long-term portion, $ 0.4 million, is classified in other long-term liabilities on the accompanying consolidated balance sheet. F-23 Table of Contents 12. Derivative Instruments The Company has entered into interest rate swaps exchanging variable interest rates for fixed interest rates. In prior periods, the Company entered into interest rate collars that fixed interest rates within a range through the simultaneous purchase of an interest rate cap and sale of an interest rate floor. The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative or trading purposes. The Company’s derivative instruments are recognized on the consolidated balance sheets at fair value and classified as current or long-term depending on the maturity date of the derivative instrument and whether the net carrying value is in a net asset or net liability position. Realized and unrealized gains and losses associated with the derivative instruments are recognized in gain on derivatives within the consolidated statements of operations. On June 29, 2023, the Company terminated $ 750 million of notional amounts related to interest rate swaps and collars attributable to the Term Loan and recognized a gain on derivatives of $ 25.8 million during the year ended December 31, 2023. The table below summarizes information related to the notional amount and maturity dates for interest rate swaps at December 31, 2024: Notional Amount Effective Date Maturity Date $ 200,000,000 6/16/2022 6/14/2025 $ 125,000,000 5/2/2024 9/2/2025 $ 125,000,000 12/6/2024 12/6/2025 $ 75,000,000 6/15/2022 6/14/2026 $ 125,000,000 6/22/2022 6/22/2026 $ 125,000,000 12/1/2024 12/6/2026 $ 100,000,000 5/2/2024 3/2/2027 $ 75,000,000 6/14/2022 5/18/2027 $ 100,000,000 6/21/2022 5/19/2027 $ 200,000,000 7/8/2022 5/29/2027 $ 125,000,000 12/1/2024 12/6/2027 The following table summarizes the effects of the Company’s derivative instruments in the consolidated statements of operations ( in thousands ): Location December 31, 2024 2023 2022 Interest rate collars Gain on derivatives $ — $ — $ 59,591 Interest rate swaps Gain on derivatives 24,017 20,266 23,525 Total gain on derivatives $ 24,017 $ 20,266 $ 83,116 13. Fair Value Measurements The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, derivative instruments and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable are representative of their respective Level 1 fair values due to the short-term maturity of these instruments. The Company’s ABL Facility applies floating interest rates to outstanding amounts; therefore, the carrying amount of the ABL Facility approximates its Level 3 fair value. The fair value of the 2029 Senior Notes is determined using Level 2 inputs, relying on quoted prices in less active markets. The Company records derivative instruments at fair value using Level 2 inputs of the fair value hierarchy. The interest rate swaps are valued using a discounted cash flow analysis based on available market data on the expected cash flows of each derivative using observable inputs, including interest rate curves and credit spreads. See Note 12. Derivative Instruments for more details. F-24 Table of Contents The contingent consideration liability from a prior year acquisition is measured at fair value each reporting period, using Level 3 unobservable inputs (such as probability assessments of future cash flows), and changes in estimates of fair value are recognized in earnings. We consider the inputs for our long-lived asset impairment calculations to be Level 3 inputs in the fair value hierarchy. See Note 10. Long-Lived and Other Asset Impairment for additional information. The following table summarizes the fair value of the Company's interest rate swaps, contingent consideration, the ABL Facility, and the 2029 Senior Notes ( in thousands ): Carrying Value As of December 31, 2024 Level 1 Level 2 Level 3 Total Interest rate swap- current $ 3,672 $ — $ 3,672 $ — $ 3,672 Interest rate swap- non-current 17,544 — 17,544 — 17,544 Contingent consideration 3,651 — — 3,651 3,651 2029 Senior Notes 750,000 — 765,483 — 765,483 ABL Facility 1,875,097 — — 1,875,097 1,875,097 Carrying Value As of December 31, 2023 Level 1 Level 2 Level 3 Total Interest rate swap- current $ 8,194 $ — $ 8,194 $ — $ 8,194 Interest rate swap- non-current 14,256 — 14,256 — 14,256 Contingent consideration 3,673 — — 3,673 3,673 ABL Facility 1,830,346 — — 1,830,346 1,830,346 14. Stockholders’ Equity On July 3, 2023, 16.0 million shares of common stock were issued and sold as part of the closing of the IPO, resulting in net proceeds of $ 230.8 million, after deducting expenses and underwriting discounts and commissions payable by us. On July 13, 2023, the underwriters exercised in full their option to purchase additional shares of common stock pursuant to the underwriting agreement relating to the IPO. On July 13, 2023, the Company issued and sold an additional 2.4 million shares of common stock at a price to the public of $ 16.00 per share. The Company received net proceeds of approximately $ 36.2 million, after deducting underwriting discounts and commissions payable. The net proceeds were used for repayment of existing indebtedness and general corporate purposes. After giving effect to these transactions, Kodiak had 77.4 million shares of common stock issued and outstanding as of December 31, 2023. On April 1, 2024, 6.8 million shares of common stock and 5.6 million of preferred shares were issued in connection with the CSI Acquisition. Share Repurchases On September 11, 2024, the Company repurchased 1.0 million shares of common stock from Kodiak Holdings in a private transaction at a price of $ 25.00 per share for an aggregate purchase price of $ 25.0 million. In November 2024, the Kodiak’s board of directors (“Board”) approved a share repurchase program to buy up to an aggregate of $ 50.0 million of our outstanding common stock (the “Share Repurchase Program”), which expires on December 31, 2025. On November 14, the Company repurchased shares of common stock from Kodiak Holdings in a private transaction, pursuant to the Share Repurchase Program, at an average price of $ 34.50 for an aggregate purchase price of $ 15.0 million. As of December 31, 2024, $ 35.0 million remains available for repurchase. The following table summarizes repurchases of our common stock for the year ended December 31, 2024: (in thousands, except per share amounts) Year ended December 31, 2024 Total cost of shares repurchased $ 40,000 Average price per share $ 27.88 Total number of shares repurchased 1,435 F-25 Table of Contents The above shares are currently held in treasury stock. Treasury stock purchases are accounted for under the cost method whereby the cost of the acquired stock is recorded as treasury stock. Gains and losses on the subsequent reissuance of shares are credited or charged to additional paid-in capital using the average-cost method. Preferred stock Holders of the Company’s preferred stock are entitled to one vote for each share, voting proportionally with holders of common stock. The preferred stock lacks economic benefits beyond its par value of $ 0.01 per share (with a maximum value of $ 50,000 ), as it does not participate in earnings or cash dividends of Kodiak. Rather, it solely represents a voting share. Each preferred stock holds an equal number of OpCo Units, representing economic interests in Kodiak’s subsidiary, Kodiak Services. Each OpCo Unit is redeemable at the option of the holder for (i) one share of common stock (along with cancellation of a corresponding share of preferred stock) or (ii) cash at Kodiak Services’ election, following a 180 days post-closing lock-up and subject to certain conditions. On or after April 1, 2029, Kodiak shall have the right to effect redemption of such OpCo Units (along with corresponding share of preferred stock). The OpCo Units represent and will be accounted for as noncontrolling interests in Kodiak Services. As of December 31, 2024, a total of 4.7 million shares of preferred stock and OpCo Units had been converted into an equivalent number of common stock shares. No such conversions had occurred as of December 31, 2023. 2023 Omnibus Incentive Plan On June 20, 2023, Kodiak’s Board authorized and adopted the Kodiak Gas Services, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) for employees, consultants and directors. The Omnibus Plan enables Kodiak’s Board (or a committee authorized by Kodiak’s Board) to award incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of service providers, including the Company’s named executive officers, with those of the Company’s stockholders. A total of 6.4 million shares of common stock have been reserved for issuance pursuant to awards under the Omnibus Plan. Restricted Stock Units Restricted stock units (“RSUs”) are time-based units that vest ratably over a three-year period, subject to continuous service through each vesting date. Stock-based compensation for RSUs is recognized on a straight-line basis over the requisite service period. Performance Stock Units Performance stock units (“PSUs”) cliff vest at the end of a three-year performance period, with the ultimate number of shares earned and issued ranging from 0 - 190 % of the number of shares subject to the PSU award based on the Company's achievement of certain predefined internal targets and the Company's performance relative to its peers as described in the underlying performance share unit agreement, subject to continuous service through the end of the performance period. With respect to each PSU, each PSU holder is granted associated dividend equivalents rights. In the event that the Company declares and pays a regular cash dividend, on the record date for such dividend, the Company will accrue a dividend equivalent based on the number of PSUs expected to vest. The fair value of the market condition within the PSUs is determined using a Monte Carlo valuation model. Stock-based compensation for PSUs is recognized on a straight-line basis over the vesting period based on the probable performance outcome. The Company reassesses the probability of achieving the performance targets each reporting period and adjusts compensation expense accordingly. CSI Compressco Long Term Incentive Plan In connection with the CSI Acquisition, we assumed the CSI Compressco LP Third Amended and Restated 2011 Long Term Incentive Plan (“2011 Plan”) and outstanding unvested RSU awards originally granted by CSI Compressco under 2011 Plan that were held by former CSI Compressco employees continuing their employment with Kodiak post-acquisition. These assumed awards were converted into 145,302 RSU awards under the Omnibus Plan and will vest in accordance with their original terms, generally over 3 years. Awards cancelled or forfeited, and shares withheld to satisfy tax withholding obligations, become available for future issuance. F-26 Table of Contents The following table summarizes award activity under the Omnibus Plan for the years ended December 31, 2024 and 2023: RSUs PSUs Number of RSUs Weighted- Average Price Number of PSUs Weighted- Average Price Outstanding at December 31, 2023 1,079,082 $ 16.30 311,875 $ 16.99 Granted 513,659 25.29 261,767 28.88 Converted awards (1) 145,302 20.40 — — Vested or exercised ( 317,766 ) 18.50 ( 6,285 ) 18.70 Forfeited ( 231,168 ) 17.74 ( 18,522 ) 19.51 Performance adjustment (2) — — 207,190 21.11 Outstanding at December 31, 2024 1,189,109 $ 19.81 756,025 $ 22.16 Stock awards expected to vest 1,189,109 $ 19.81 756,025 $ 22.16 (1) Represents awards originally granted under CSI Compressco's 2011 Plan, which were subsequently converted into RSU awards under the Omnibus Plan. (2) Represents additional shares expected to vest based on the probability of the performance conditions exceeding the target level. As of December 31, 2024, the total future compensation cost related to non-vested equity awards was approximately $ 26.2 million assuming the performance-based restricted stock units vest at 138 % per the terms of the applicable award. During the years ended December 31, 2024 and 2023, approximately $ 17.7 million and $ 5.9 million in stock compensation expense was recognized in selling, general and administrative expenses, respectively. There was no such expense under the Omnibus Plan recorded for the year ended December 31, 2022. The total tax benefit related to stock-based compensation recorded as deferred tax assets was $ 3.3 million, $ 0.9 million and zero for the years ended December 31, 2024, 2023 and 2022, respectively. Dividends The following table summarizes dividends declared and paid in each of the quarterly periods shown of 2024 and 2023: Dividends per Common Share Dividends Paid (in thousands) 2024 Q1 $ 0.38 $ 29,815 Q2 $ 0.38 $ 32,578 Q3 $ 0.41 $ 35,113 Q4 $ 0.41 $ 36,380 2023 Q4 $ 0.38 $ 29,793 On February 3, 2025, the Company’s Board declared a cash dividend of $ 0.41 per share for the quarterly period ended December 31, 2024, which is payable on February 21, 2025, to shareholders of record as of the close of business on February 14, 2025 (the “Common Stock Dividend”) and, in conjunction with the Common Stock Dividend, Kodiak Services declared a distribution on its units of $ 0.41 per unit payable on February 21, 2025 to all unitholders of record of Kodiak Services as of the close of business on February 14, 2025. 15. Commitments and Contingencies Accrued Capital Expenditures As of December 31, 2024, 2023 and 2022, the Company has accrued capital expenditures of $ 12.5 million, $ 30.5 million and $ 28.8 million, respectively. These amounts were included in accounts payable or accrued liabilities on the consolidated balance sheets. F-27 Table of Contents Purchase Commitments Purchase commitments primarily consist of future commitments to purchase new compression units ordered but not received. The commitments as of December 31, 2024, were $ 168.8 million, all of which is expected to be settled within the next twelve months. Contingent Consideration The Company agreed to pay, as contingent consideration in a prior year acquisition, up to $ 3.7 million of certain past due accounts receivable acquired in connection with a prior acquisition in 2019, if collected, to the seller. The Company records contingent consideration at the acquisition and end of reporting periods at fair value in accrued liabilities. As of December 31, 2024 and December 31, 2023, none of the outstanding receivables had been collected. Sales Tax Contingency Between October 2019 and April 2023, the Company received notices from the Texas Comptroller’s office in regards to audits for periods ranging from December 2015 through November 2023. The audits pertain to whether the Company may owe sales and use tax on certain of its compression equipment and parts that it had purchased and used during that time period. During the year ended December 31, 2023, the Company accrued a total amount of $ 28.8 million. During the year ended December 31, 2024, based on current information Company accrued an additional $ 42.1 million and as of December 31, 2024, of which $ 15.0 million is related to fair value adjustments associated with purchase price allocation of the CSI Acquisition. As of December 31, 2024, the Company had accrued a total of $ 70.9 million included as accrued liabilities on the consolidated balance sheet for all compression equipment and parts purchased and used as of the balance sheet date. Legal Matters From time to time, the Company may become involved in various legal matters. Management believes that there are no legal matters as of December 31, 2024 whose resolution could have a material adverse effect on the consolidated financial statements. Letters of Credit As of December 31, 2024, there was $ 2.4 million of letters of credit outstanding under the ABL Facility mainly to support the Company's obligations to construct a gas compression station on behalf of a customer. 16. Accrued Liabilities Accrued liabilities consisted of the following ( in thousands ): As of December 31, 2024 2023 Sales tax liability $ 70,927 $ 28,847 Accrued interest 48,561 8,313 Accrued compensation 22,403 16,580 Lease liabilities - current portion 11,858 — Station project accrual 9,385 7,797 Equipment financing - current portion 5,344 — Accrued accounts payable 1,104 15,506 Other 19,150 20,035 Total accrued liabilities $ 188,732 $ 97,078 F-28 Table of Contents 17. Income Taxes Income before income taxes consists of the following ( in thousands ): Year Ended December 31, 2024 2023 2022 Income before income taxes: United States $ 74,650 $ 35,136 $ 139,357 Foreign 1,258 — — Total income before income taxes $ 75,908 $ 35,136 $ 139,357 Income tax expense consisted of the following ( in thousands ): Year Ended December 31, 2024 2023 2022 Current income taxes: Federal $ 4,482 $ 4,668 $ 2,746 State and local 4,085 2,539 3,045 Foreign 1,578 — — Total current tax 10,145 7,207 5,791 Deferred income taxes: Federal 14,344 1,980 25,704 State and local 1,499 5,883 1,597 Foreign ( 414 ) — — Total deferred tax 15,429 7,863 27,301 Income tax expense $ 25,574 $ 15,070 $ 33,092 The effective tax rates on continuing operations for the years ended December 31, 2024, 2023 and 2022 were 33.7 %, 42.9 %, and 23.8 %, respectively. The table below reconciles these effective tax rates with the U.S. federal statutory income tax rate as follows ( in thousands ): Year Ended December 31, 2024 2023 2022 Income before income taxes $ 75,908 $ 35,136 $ 139,357 Tax at federal statutory rate $ 15,944 $ 7,379 $ 29,265 State, net of federal benefit 5,135 — — Nondeductible expenses 2,251 6,135 3,664 Stock based compensation windfall ( 896 ) — — Nondeductible loss on sale of receivables 2,979 925 163 Valuation allowance 546 519 — Impact of operating in foreign jurisdictions 1,749 — — Tax related to basis difference in investment in subsidiaries ( 2,658 ) — — Other 524 112 — Income tax expense $ 25,574 $ 15,070 $ 33,092 The Company's effective tax rate for the year ended December 31, 2024 differs from the statutory rate primarily due to state tax expense, a non-deductible loss on the sale of receivables related to the disposition of our Argentina business and deferred tax recorded on the Company's investment in Kodiak Services. During the year ended December 31, 2023, the F-29 Table of Contents Company's effective tax rate differs from the statutory rate primarily due to state tax expense which increased in part due to the revaluation of deferred taxes due to increased investment in various states. The Company’s deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant components of the deferred tax assets and liabilities are as follows ( in thousands ): Year Ended December 31, 2024 2023 Deferred tax assets: Net operating losses $ 392,585 $ 410,734 Interest expense carryforward 87,039 66,547 Deferred compensation 2,169 — Other assets 2,869 971 Total gross deferred tax assets 484,662 478,252 Valuation allowance ( 745 ) ( 519 ) Total deferred tax assets, net of valuation allowance 483,917 477,733 Deferred tax liabilities: Investment in subsidiaries ( 549,819 ) ( 540,481 ) Property, plant and equipment ( 34,157 ) — Other liabilities ( 3,767 ) — Total gross deferred tax liabilities ( 587,743 ) ( 540,481 ) Net deferred tax liabilities $ ( 103,826 ) $ ( 62,748 ) Deferred Tax Assets and Liabilities The Company regularly reviews its deferred tax assets, including net operating loss carryovers, for recoverability, and a valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset may not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences are deductible. In assessing the need for a valuation allowance, the Company makes estimates and assumptions regarding projected future taxable income, its ability to carry back operating losses to prior periods, the reversal of deferred tax liabilities and the implementation of tax planning strategies. As the Company reassesses these assumptions in the future, changes in forecasted taxable income may alter this expectation and may result in an increase to the valuation allowance and an increase in the effective tax rate. The Company’s ability to utilize its net operating loss carryforwards and other tax attributes to reduce future taxable income is subject to potential annual limitations under Internal Revenue Code Section 382 and Section 383 and similar state provisions. These limitations are applicable to the extent certain ownership changes by 5% shareholders and stock issuances by the Company during any three-year period result in a cumulative change of more than 50% in the beneficial ownership of the Company. The Company has assessed the provisions of Section 382 and Section 383 and determined there to be no impact to the expected realization of Company’s federal deferred tax balances. As of December 31, 2024 and 2023 a valuation allowance of $ 0.7 million and $ 0.5 million, respectively, has been placed on state tax deferred tax assets that have a limited life and may not be used due to limitations on annual use. Federal and State Net Operating Losses As of December 31, 2024, we have gross federal tax net operating loss carryforwards of $ 1.8 billion and IRC Section 163(j) interest carryforwards of $ 376.0 million which have an indefinite useful life. We have gross post-apportionment state net operating loss carryforwards of $ 437.0 million which have various useful lives. Uncertain Tax Benefits The Company evaluates its tax positions and recognizes only tax benefits that, more likely than not, will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax position is measured at the largest amount of benefit that has a greater than 50% likelihood of being realized upon settlement. The Company did not have any uncertain tax benefits as of December 31, 2024 and 2023. As of F-30 Table of Contents December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the consolidated statements of operations. As of December 31, 2024, tax years 2021 and forward are subject to examination by the tax authorities in the U.S. No income tax returns are currently under examination. 18. Defined Contribution Plan The Company maintains a defined contribution savings plan for its employees. The Company contributed $ 4.5 million, $ 3.0 million, and $ 2.9 million to the plan for the years ended December 31, 2024, 2023 and 2022, respectively. 19. Long-Term Incentive Plan In prior years, the Company contributed to a plan that was established to offer added cash basis incentives for the retention of key employees established under the Company’s 2020 Long-Term Incentive Plan (the “LTIP Plan”). On December 8, 2023, the Company provided employees who were eligible to receive these cash payments of long-term incentive awards granted in January 2023 the opportunity to make an election to receive a grant of RSUs that vest ratably over a three-year period in lieu of cash payments. Upon exercising the employees’ elections to convert the cash payments into RSUs, 138,430 RSUs were granted. As a result of the conversion, the Company had no obligations related to the LTIP Plan and no non-current liability as of December 31, 2024. Based on an expected probability of future payments, the Company’s obligations related to the LTIP Plan totaled $ 4.4 million as of December 31, 2023. The non-current liability was $ 2.1 million as of December 31, 2023. 20. Segments The Company manages its business through two operating segments: Contract Services and Other Services. Contract Services consists of operating Company-owned and customer-owned compression, and gas treating and cooling infrastructure, pursuant to primarily fixed-revenue contracts to enable the production and gathering of natural gas and oil. Other Services consists of a full range of contract services to support ancillary needs of customers, including station construction, maintenance and overhaul, freight and crane charges and other time and material-based offerings. Our Chief Executive Officer, also our CODM, assesses the performance of each segment based on adjusted gross margin. This metric is calculated by subtracting specific costs of service, such as cost of operations, from revenues directly attributable to the segment. Adjusted gross margin is a key tool used by the CODM for annual budgeting, monthly forecasting, and determining how to allocate capital and resources across the segments. Revenue includes only sales to external customers. F-31 Table of Contents The following table represents financial metrics by segment ( in thousands ): Contract Services Other Services Total Year Ended December 31, 2024 Revenues $ 1,034,173 $ 125,138 $ 1,159,311 Cost of operations (exclusive of depreciation and amortization) 355,016 103,360 458,376 Adjusted gross margin 679,157 21,778 700,935 Total assets 4,398,127 36,996 4,435,123 Capital expenditures 336,956 — 336,956 Year Ended December 31, 2023 Revenues $ 735,605 $ 114,776 $ 850,381 Cost of operations (exclusive of depreciation and amortization) 257,092 93,779 350,871 Adjusted gross margin 478,513 20,997 499,510 Total assets 3,211,801 32,305 3,244,106 Capital expenditures 219,795 — 219,795 Year Ended December 31, 2022 Revenues $ 654,957 $ 52,956 $ 707,913 Cost of operations (exclusive of depreciation and amortization) 225,715 41,636 267,351 Adjusted gross margin 429,242 11,320 440,562 Total assets 3,184,286 21,254 3,205,540 Capital expenditures 259,349 — 259,349 The following table reconciles adjusted gross margin to income before income taxes ( in thousands ): Year Ended December 31, 2024 2023 2022 Adjusted gross margin: Contract Services $ 679,157 $ 478,513 $ 429,242 Other Services 21,778 20,997 11,320 Depreciation and amortization (1) ( 260,272 ) ( 182,869 ) ( 174,463 ) Long-lived asset impairment ( 9,921 ) — — Selling, general and administrative expenses ( 151,680 ) ( 73,308 ) ( 44,882 ) (Loss) gain on sale of assets ( 29,612 ) 777 874 Interest expense ( 197,144 ) ( 222,514 ) ( 165,867 ) Loss on extinguishment of debt — ( 6,757 ) — Gain on derivatives 24,017 20,266 83,116 Other income (expense) ( 415 ) 31 17 Income before income taxes $ 75,908 $ 35,136 $ 139,357 (1) All depreciation and amortization is related to the Contract Services segment. 21. Earnings Per Share of Common Stock Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is computed by using the weighted average shares of common stock outstanding, including the dilutive effect of restricted stock units and performance stock units based on an average F-32 Table of Contents share price during the period. For the purpose of calculating basic and diluted earnings per share, net income attributed to noncontrolling interest and the corresponding preferred shares outstanding are excluded from the calculations. For the year ended December 31, 2024, 98.0 thousand unvested PSUs were excluded from the calculation of the potential dilutive common shares because their inclusion would be anti-dilutive. For the year ended December 31, 2023, and 2022 there were no anti-dilutive shares, respectively. The computations of basic and diluted earnings per share were as follows: Year Ended December 31, (in thousands, except per share data) 2024 2023 2022 Net income attributable to common shareholders $ 49,895 $ 20,066 $ 106,265 Less: expense attributable to non-forfeitable RSUs ( 1,812 ) — — Net income used in basic and diluted earnings per share $ 48,083 $ 20,066 $ 106,265 Basic weighted average shares of common stock 83,094 68,059 59,000 Effect of dilutive securities (1) 2,076 268 — Diluted weighted average shares of common stock 85,170 68,327 59,000 Basic earnings per share $ 0.58 $ 0.29 $ 1.80 Diluted earnings per share $ 0.56 $ 0.29 $ 1.80 (1) For the year ended December 31, 2024, the effect of dilutive securities includes 0.9 million, 0.3 million and 0.8 million RSUs, PSUs and OpCo Units held by noncontrolling interest, respectively. For the year ended December 31, 2023, the effect of dilutive securities includes 0.2 million and 21.0 thousand of RSUs and PSUs, respectively. 22. Related Party Transactions During March 2022, the Company entered into a master services agreement with IFS North America, Inc., a related party controlled by EQT AB, for a system license subscription and accompanying cloud hosting service to facilitate the implementation of the Company’s enterprise resource planning system. Subsequent to closing the CSI Acquisition, the Company terminated the initial contract and entered into a new master services agreement for the combined company. As of December 31, 2024, total purchases under this agreement since inception were approximately $ 9.4 million, inclusive of contract termination costs. Total cost during the years ended December 31, 2024 and 2023 were approximately $ 7.4 million and $ 1.2 million, respectively. A portion of these costs were capitalized as internal-use software within intangible asset in the consolidated balance sheets, see Note 8. Goodwill and Identifiable Intangible Assets, net. The remaining costs incurred were recognized in selling, general and administrative expenses in the consolidated statements of operations. Additionally, the Company incurred a cost of operations expense related to Contract Services of $ 0.1 million during the year ended December 31, 2023. F-33