Gas growth increasing compression demand
Gas requirements are growing. Liquified natural gas (LNG) exports alone are set to create a 15% surge in demand for natural gas over the next decade, according to Archrock. Alongside other forms of demand, such as data centers, that adds up to good news for the Houston-based company, which provides compression services to the energy industry.
Compression is critical to the operations of Archrock’s midstream production customers. It provides the energy to move natural gas through pipelines. It is also used to inject gas down the wellbore for oil production. “As natural gas production grows, compression has to grow with it – it’s a very linear relationship,” says President and CEO, Brad Childers.
Investments push emissions progress
With growth comes a requirement to decarbonize. Archrock is working to reduce emissions on multiple fronts, not least through M&A.
In 2022 the company acquired a minority stake in ECOTEC, a leader in methane emissions monitoring and management. Archrock is now marketing ECOTEC’s handheld devices, which detect ‘fugitive’ leaks, as well as a separate device to capture emissions released in the normal course of compression.
“The combination of these two technologies could generate for our customers a methane-free system at the compression site,” says Childers.
To target CO2 emissions, Archrock has led a funding round for carbon capture company Ionada. At the same time it is electrifying its own fleets, acquiring combustion-free electric motor drive compressors.
“Adaptation has become not just something we need to do, but a core competency.”
Brad Childers, President and CEO, Archrock
Data flows from the fields
Archrock is also deploying tech to make its business more efficient. Telemetry installed across its entire fleet allows for data collection from every compression unit in the field. This is connected to a powerful data engine to allow monitoring and analysis from remote locations.
“It allows us to apply predictive and preventative maintenance practices in a more systematic way, all of which is going to give a better level of uptime to our customers, and candidly, a more efficient lifestyle to our workforce,” says Childers.
As a 70-year-old company, he says, Archrock is accustomed to such evolution: “Adaptation has become not just something we need to do, but a core competency.”
“We’re seeing everybody focus on managing their capital to generate free cash flow, to generate better returns, and not to overbuild the sector...”
Brad Childers, President and CEO, Archrock
Capital discipline bodes well for sector
Archrock is in a strong financial position, says Childers, having raised its dividend three times over the past 18 months. It has a stock buyback program in place and will be funding growth capex from cashflow.
Childers is heartened by the similar levels of capital discipline he sees being exerted across the sector as a whole.
“We’re seeing everybody focus on managing their capital to generate free cash flow, to generate better returns, and not to overbuild the sector in the way that the cyclical nature of the energy space has shown in the past,” he says. “That level of capital discipline we think bodes really well for investor returns.”
