USAC - Archrock Will Be An Industry Leader In Natural Gas Compression

2024-05-09 15:41:14 ET

Summary

• The natural gas compression industry comprises three main players. I believe Archrock is fundamentally advantaged over peers to outperform as the build-out in natural gas infrastructure continues.
• Archrock has the lowest debt expenses compared to peers and is using the excess free cash flow to heavily invest into the compression market that is nearly fully utilized.
• The company projects to generate 17% EBITDA growth in 2024 while also growing the dividend and having the largest growth CAPEX budget in the industry.
• The continued growth in demand for natural gas compression throughout this decade makes Archrock a compelling dividend growth opportunity.

Thesis

The US natural gas industry has been in growth mode for over a decade. Accommodating this growth requires extensive infrastructure and capital investment. The most discussed infrastructure topics for natural gas are pipelines or export terminals. What does not get discussed, is the compression equipment market that supplies the equipment necessary to send the molecules down the pipe.

This is a niche market with only three significant suppliers, all of which are nearly maxed out in terms of excess capacity. This presents both a problem and an opportunity....

For further details see: