Atlas Energy Solutions Second Quarter 2026 Earnings Call - Deliberate Sand Pricing Discipline Meets Accelerating Behind-the-Meter Power Contracts

Operator: Welcome to Atlas Energy Solutions Incorporated second quarter 2026 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Kyle Turlington, investor relations. Thank you. You may begin.

Kyle Turlington, Investor Relations, Atlas Energy Solutions Incorporated: Hello, welcome to the Atlas Energy Solutions conference call and webcast for the second quarter of 2026. With us today are John Turner, President and CEO, Blake McCarthy, CFO, Tim Ondrak, President of Power, and Bud Brigham, Executive Chair. John, Blake, and Bud will be sharing their comments on the company’s operational and financial performance for the second quarter of 2026, after which we will open the call for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined under the U.S. security laws. Such statements are based on the current information and management’s expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. Our actual outcomes and results could differ materially.

You can learn more about these risks in the annual report on Form 10-K filed with the SEC on February 24, 2026 and our quarterly report on Form 10-Q for the first quarter and current reports on Form 8-K and other SEC filings. You should not place undue reliance on forward-looking statements. We undertake no obligation to update these forward-looking statements. We will also make reference to certain non-GAAP financial measures such as adjusted EBITDA, adjusted free cash flow, and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in yesterday’s press release. With that said, I will turn the call over to John Turner.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Thanks, Kyle. For the second quarter, Atlas generated revenue of $293.2 million and adjusted EBITDA of $49.5 million, which represents an EBITDA margin of approximately 17%. Blake will cover the financial detail later on the call. Before I get into the quarter, let me lay out how our power business is organized, because we get a lot of questions about it. We have two divisions. Oilfield power sells generation to oil and gas operators across many basins, and we expect that fleet to exit this year with 180-200 megawatts deployed, the majority of which are under long-term agreements. Long-term behind-the-meter power sells primary, permanent power to large-scale users, principally data centers. We signed our first contract in that division this quarter, and our Global Framework Agreement with Caterpillar supports its growth.

The second quarter was highlighted by the execution of our first behind the meter contract, a 120-megawatt power purchase agreement with a subsidiary of an investment-grade technology infrastructure provider. The economics are as follows. Total project capital is approximately $190 million. We expect the contract to generate approximately $55 million of adjusted free cash flow on an annualized basis once the permanent facility is operating. This is a cash-on-cash payback of less than three and a half years. These economics are specific to this contract, this counterparty, and this site and should not be applied to future projects. Just as important, the capital required to build this facility sits inside the capital guidance we gave you last quarter. We are not raising our previously announced capital budget to fund this growth. The site is in Socorro, Texas, and here is the full sequence.

We have completed construction of a 26-megawatt facility that is powering the site today through the customer’s construction and testing phase. We begin installing Atlas equipment for the permanent plant in the third quarter. Commissioning begins in the fourth quarter. The 120-megawatt facility electrifies at the end of the first quarter of 2027, and we begin recognizing revenue on this new system in the second quarter of 2027. That sequence is the whole point. This project demonstrates Atlas’ full solution approach to the behind the meter market, providing customers with a one-call option to solving their power procurement issues in every phase of a project’s life cycle, from powering the pivotal early-stage ramp-up to providing power through the life of the facility. The commercial opportunity set for the permanent behind the meter power continues to expand rapidly.

As demand for compute capacity explodes with the evolution of AI, we have seen the urgency of our commercial negotiations rise. As the frontier models grow in complexity and ability, the need to accelerate access to token generation rises. The priority placed on access to power is best exemplified by the hyperscalers continuing to build out their internal procurement teams, where they have added seasoned power professionals that have accelerated and focused contract negotiations. Over the past few months, we have seen the nature of the power deals we are pursuing evolve from both a size and duration perspective. When we entered into our framework agreement with Caterpillar, we assumed it would take eight to 10 projects to fully contract the capacity we placed on order. We were very confident we could do so. We expected it would require significant commercial effort.

As our commercial capabilities have become more apparent with prospective customers, we have found the scale of the projects on which we are engaged has grown significantly in magnitude. Thus, it is becoming increasingly more likely that two to four projects could contract our remaining uncommitted capacity compared with our previous assumption of eight to 10 projects. Additionally, we have seen an increasing appetite, even need, from our prospective customers for longer tenure contracts. With grid access becoming increasingly difficult to secure on any predictable timeline, prospective customers are embracing island power as a long-term solution for their sites. Initially, we were looking at 10-year contracts as a sweet spot. We are increasingly seeing a desire for 15 to 20-year terms from our prospective customers as they look to de-risk power supply to their facilities for the long term.

With potential customers looking to execute on the prerogative of procuring long-term island power quickly, we are finding that our strategy of providing a full service solution from early engineering through full life cycle maintenance and operations is gaining traction. Prospective data center customers are looking to us to solve the entirety of the power problem. They don’t want to provide specifics on engineering or equipment. They want to provide a load quantum with productive load swings and a reliability metric. They want us to provide a system that achieves their goals in the shortest amount of time and with a partner they can trust to operate for the long term. Lastly, we are not seeing potential deals shifting to the right. There is a sense of urgency to get projects moving forward.

We expect the industry to see additional contract activity over the coming weeks and months. We believe Atlas is well positioned to compete for those opportunities. Outside of the 120 megawatts attached to our recently announced project, we have an additional 120 megawatts arriving at the end of this year and another 350 megawatts scheduled for delivery over the course of 2027. The availability of this 470 megawatts for deployment in 2027 with a clear line of sight on a steady ramp phase lines up well with the request we are seeing from our prospective customers, putting Atlas in a strong competitive position. We believe our contracted backlog has the potential to evolve meaningfully in the second half of this year. We will announce new contracts when they are signed.

A question we often get is, "What are the competitive advantages for Atlas in power? Why is Atlas the right partner in long-term private power solutions?" Atlas has built over $1 billion worth of infrastructure projects, which includes many of the lowest cost mining facilities in West Texas, along with a first of its kind 42-mile conveyor with the Dune Express. We designed, engineered, constructed, powered, and now operate these projects. Large, complex construction projects are in our DNA. That significant expertise is being called on in the markets today as our power customers are facing new challenges that demand precise execution. As customers like data center operators increasingly look to private power, they demand confidence that their power provider has the depth and experience to deliver on time and on budget.

As our power business grows, you will see how our engineering and execution expertise transforms the way companies obtain the critical power they need. The equipment you choose and the construction partners you pick will matter. Innovation is the core to the Atlas culture. We’re the only company to dredge mine in the Permian, the first to deliver frac sand autonomously in the Permian, the only company offering multi-trailer sand deliveries. We built the longest sand conveyor system in North America to change the way sand is delivered into the Northern Delaware Basin. We plan to bring that same outside of the box mentality to the private power market. In our oilfield power assets, we continue to see strong contracting momentum.

This quarter, we signed additional contracts and agreements for current and future megawatt placements and now expect total oilfield megawatts deployed to exit the year between 180 and 200 megawatts, the majority of which will be under long-term agreements. We are being very deliberate about the placement of our current oilfield fleet, prioritizing longer tenure agreements over near-term deployments. We anticipate continued desire from our customer base to sign agreements to secure their power needs as traditional utility power timelines continue to slip. We are also seeing growing interest in microgrid systems utilizing Atlas’s battery technology. With this technology, we can hybridize customer locations to increase reliability. Our hybrid technology combines our portable generators, a robust battery system, and a control software that manages site loads and power availability, which leads to a more robust service for our customers and our operating efficiencies for Atlas.

Demand for private power is robust. We believe we are still in the early stages of a major infrastructure growth cycle. We have the right equipment, the right strategy, and most importantly, the right people. I will turn the call over to our CFO, Blake McCarthy, to expand on what we are seeing in our sand and logistics segments.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Thanks, John. If I were to pick a word to describe the current West Texas sand and logistics market, it would be nuanced. Macro conditions have improved significantly over the first half of the year. While geopolitical events continue to drive volatility, we believe that the supply-demand balance for crude oil has been dramatically altered and the fundamental floor for oil prices has been lifted. We are obviously not the only ones to share this view, as the Permian rig count has grown 17% since the start of the Iran conflict. This growth has been led by the private operators who are the most apt to respond to changes in the commodity price backdrop. Assuming our view is correct, we would not be surprised to see the public E&Ps ramp activity next year once they have refreshed their capital budgets.

Despite the growth in rig activity, completion activity has merely remained static, which is what drives demand for our business. This is due to a number of factors. For one, operator DUC inventories were already thin entering 2026, with well placement activity highly aligned with completion schedules. As pad sizes have grown, even with today’s efficient drilling operations, it takes extended time and planning for new pads to be constructed and well bores to be placed to enable simultaneous frac operations. In addition, gas takeaway capacity in the Permian remains an issue. While this will be partially alleviated as more than 4.5 Bcf of incremental pipeline capacity comes on in the back half of this year, it has certainly put a cap on the activity of a few operators year to date, particularly in the Delaware Basin.

As we mentioned on our last call, we don’t expect frac fleet additions beyond the marginal few we saw in April until later this year, as operators attempt to gain comfort with the strip amidst the volatility. However, based on recent customer conversations, we expect activity levels to begin ramping moderately in Q4 in a counterseasonal way as customers look to hit 2027 running. Pressure pumpers are displaying discipline and not bringing incremental equipment to market until pricing improves on their current utilized fleets. With the lack of readily available equipment and crews on the sidelines, there’s a significant lag, approximately two months, between when a customer can contract a fleet and when completion operations actually begin. Touching on the supply-demand balance of the actual sand market, it is our view that the market is much tighter than current pricing and market sentiment would suggest.

Sand is the ultimate commodity in that a little bit of oversupply quickly leads to the price falling to the marginal cost of production for the industry. Inversely, just a little undersupply can lead to a rapid spike in prices. While nameplate capacity would suggest that there’s still quite a way to go before the industry comes into balance, we believe these figures dramatically overstate the true productive capacity of the industry. Over the past three years, maintenance CapEx has been an afterthought to a broad swath of the market. Based on recent spot sales to customers experiencing non-productive time due to waiting on sand, it appears incremental production in the Permian is still limited. This trend is likely to become more apparent as the broader industry moves closer to full utilization.

We’re beginning to hear more anecdotes of competitor facilities struggling operationally as they attempt to ramp production, and it’s causing us to reconsider our earlier math that it’s going to take four to six net completion crew additions for the market to reach tight conditions. We believe the market is rapidly approaching a period of true capacity discovery. We think it’s time to force the issue. Non-productive time, or NPT, is likely to become a hot button issue for the industry before that point is reached, driven not by sand supply, but by truck availability. Trucking rates have stabilized at much higher levels, and with continued price increases in the national over-the-road freight market, driver shortages in the Permian have become more acute. To add on top of the higher hauling rates, the spike in diesel prices has dramatically increased the overall cost of hauling sand.

While Atlas is partially insulated from some of this inflation due to the advantages of the Dune Express and our use of autonomous trucks, we are beginning to see our competitors who have been slow to raise logistics pricing negatively impacted operationally from these developments. In June alone, we took over two well site jobs mid-completion as competitors simply could not secure drivers at the rates they were offering. We expect this trend to become more common in the back half of the year. With oil prices where they are, delays in monetizing resources in the ground become significantly more punitive to operators. To be blunt, we expect operators will need to pay higher rates to avoid NPT related to both sand and trucking beginning in Q3 and accelerating in Q4, which we expect to benefit Atlas. This commercial strategy is intended to reinforce the value of execution reliability.

Atlas provides a superior level of execution reliability to our clientele, enabled by the investments we have made in our plants, our logistics infrastructure, and most importantly, our people. At times we can become victims of our own success. When we do our jobs well enough, customers can begin to take that level of service for granted. For more than a year, we’ve been willing to price our services at levels where our customer base can enjoy the operational efficiencies of the Atlas network and realize price savings, a strategy that has resulted in us gaining market share. We believe we have done what was needed to rationalize the market. It is our belief that many of our competitors’ minds have been severely impaired operationally, and the market needs a period of true capacity discovery.

At this point, we are choosing to hold the line on pricing on certain tenders in the market. Some customers may prioritize the lowest cost option on paper, which in our opinion will highlight the difference between the service providers who can deliver and those who simply cannot. We expect this will test both the industry’s true productive capacity and operators’ tolerance for non-productive time. Second quarter sand volumes were approximately 5.6 million tons, which was below our expectations as rig moves and completion schedule changes negatively impacted volumes in late June. July volumes recovered nicely to approximately 2 million tons. Full third quarter volume expectations remain a bit up in the air due to our aforementioned commercial strategy, as well as some scheduled breaks in customer completion schedules. The current expectations range from approximately 5.3 million-6 million tons, which is admittedly a wide range.

We believe this near-term uncertainty is necessary to properly set the stage for the more important contracting season at year-end. It’s worth noting that our completion schedule for Q4 is already positioned for a strong close to the year, representing the highest volume quarter of the year on an already allocated tons basis, as some key customers are positioning themselves to close the year with gathering momentum. Our last mile team set a quarterly record for shipments at 6 million tons. During the second quarter, we made more than 4,600 autonomous deliveries, up 70% from the first quarter. Our partnership with Kodiak has begun to result in significant productivity gains, which we expect to accelerate as new operational milestones are reached that will expand the operational footprint trucks are able to reach.

We are targeting operations on public roads by the middle of next year, subject to regulatory and operational milestones. We set quarterly volume records down the Dune Express. Moving to our financials. Second quarter 2026 revenue was approximately $293.2 million. Total proppant sales volume was flat sequentially at 5.6 million tons. Our average sales price for proppant for the second quarter was approximately $17.70 per ton. Second quarter cost of sales, excluding DD&A, were $221.3 million, consisting of $66.1 million in proppant plant and logistics equipment operating costs, $1.4 million from power equipment costs, $140.7 million of service costs, $8.8 million in rental costs, and $4.3 million in royalties. For the second quarter, our per ton proppant plant operating costs were approximately $12.39, including royalties, down from the first quarter.

OPEX per ton for the third quarter is expected to be flat to down, depending on total volumes, as our plant operational efficiency initiatives continue to bear fruit. Our logistics business posted strong sequential improvement in the second quarter on the back of record volumes, an improving rate environment, and strong utilization of the Dune Express. Q2 logistics margins were 14%. For the third quarter, margins are expected to stay solidly in the double digits. Our power business also reported strong sequential growth, with improved utilization in our oilfield power fleet and the startup of operations at our new facility in Socorro, Texas. Q3 contribution from this business is expected to display continued improvement as we deploy larger portions of that fleet under long-term agreements. Q2 adjusted cash SG&A, excluding extraordinary litigation expenses and other non-recurring items, was $24.3 million.

SG&A is expected to average approximately $22 million-$24 million for the third quarter, excluding legal fees from litigation and contracting activities. Growth CapEx for the quarter was approximately $131.5 million, the majority of which was tied to our initial Cat power generation equipment order. Maintenance CapEx was $14.6 million. CapEx for the second half of the year is budgeted to be approximately $200 million, which keeps our full-year capital spending inside our full-year 2026 guidance range of $350 million-$375 million. The vast majority of that, approximately $175 million-$190 million, is attached to the build-out of our private grid power business. It’s worth noting that approximately $110 million of second-half growth CapEx is connected to the build-out of our already contracted facility in Socorro that will begin generating meaningful cash flow in Q2 of 2027.

As a reminder, we expect this to generate approximately $55 million of adjusted free cash flow per annum. The remainder relates to purchase obligations under our Caterpillar Global Framework Agreement, which we announced in March. This is not new spending. It is the fulfillment of an order already on the books. Maintenance spending for our legacy business is expected to take a step down, as we have completed the majority of our larger initiatives at the plants. Maintenance capital spending for our standard logistics business is expected to average approximately $5 million-$7.5 million per quarter in the second half of the year, supporting the free cash flow generation ability of that business. On the heels of our successful convertible issuance in April, the combination of Atlas’ available liquidity and the positive free cash flow from our standard logistics business is more than enough to satisfy our upcoming capital needs.

Looking ahead to the third quarter, overall sand and logistics sales volume remain the biggest variable. While we expect continued improvement in our production costs at power plants, the combination of planned customer breaks and exercising more discipline on outstanding tenders is expected to result in a temporary step back in overall volumes in order to drive longer-term price improvement. For Q3, we currently expect EBITDA in the range of $30 million-$45 million. As mentioned earlier, we expect the fourth quarter to show meaningful sequential improvement based on already allocated volumes and customer completion schedules that have been communicated to us, with current expectations matching or exceeding Q2 results. I will now hand the call back to John.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Thanks, Blake. I want to reiterate Blake’s comments about the shift in our commercial strategy. This is an intentional strategic decision. We are holding price on certain sand tenders rather than chasing volume, and we are willing to trade near-term volumes to do it. We believe this will drive the market to realize the rationalization in productive capacity and logistics capability that has transpired across the West Texas sand industry and serve as a catalyst for a pricing recovery. I will now hand the call off to our Executive Chairman, Fred Brigham, for some closing remarks before we turn the call over to Q&A.

Bud Brigham, Executive Chairman, Atlas Energy Solutions Incorporated: Thank you, John. In late July and early August, across most of the country, everyone gets excited about the upcoming football season. At this point in the year, every football team is still undefeated. I call it the talking season. In the case of power, it seems the market hasn’t appreciated the fact that Atlas has moved beyond the talking season. We’ve already begun putting points up on the scoreboard. It reminds me a bit of the cynicism surrounding our first company, Brigham Exploration, when we were pioneering horizontal drilling and multi-stage fracking in the Bakken nearly 20 years ago. Most people did not believe horizontal fracking would work in oil. Over the next five years, we not only proved them wrong, we led the way, delivering superior production and economic performance. About five years later, we did it again with Brigham Resources in the Permian.

Eight years ago, we faced the same skepticism about the viability of local sand when we started Atlas. We went on to build the largest state-of-the-art frac sand plants in the country and meaningfully improved economics for Permian operators. Just three years ago, many said we couldn’t build North America’s largest conveyor system to move proppant 42 miles into the heart of the Delaware Basin. Of course, we did. We love these challenges. We’re very, very good at them. Nobody builds large-scale energy infrastructure as successfully as Atlas. Here we are again, this time with an extraordinary opportunity in private power. Even with our first contract, the skeptics are once more out in force. That’s fine. We’ve been here before. I have complete confidence in our team, our strategy, and the partners we’ve chosen. We look forward and are excited to changing the narrative.

Thank you for joining us today. I’ll now turn the call over to operator for Q&A.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit to one question and one follow-up question. Our first question is from Jim Rollyson with Raymond James. Please proceed.

Jim Rollyson, Analyst, Raymond James: Hey, good morning, guys. John, your commentary kind of around the pace of data center deals was interesting and maybe stands out a little bit from at least the color we’ve heard so far this quarter. Can you just maybe expand about what you’re seeing in terms of project size, scope, timing, all those kinds of things? I thought it was interesting the placing that capacity with two or three or four customers is a departure. But I’d love to just get a little more color there on what we can expect coming through the second half.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Yeah, sure, Jim. Thanks for the question. Obviously we’re not seeing every deal that’s out there, but what we are seeing is that there’s an intense urgency from our potential customers to get contracts signed, and things are moving on. I guess things are moving in order to get those projects de-risked and those timelines de-risked. The counterparties we’re negotiating with are looking to move as quickly as they can, and obviously that’s in months and not years. Obviously these deals don’t happen overnight. They’re billion-dollar deals with very long durations that takes a long time to negotiate. And they are also running these deals, or for the power deals, they’re also running those in parallel with these data center lease negotiations, which are pretty complicated as well, if not more complicated.

When you get all these contracts together and once we get our contract negotiated, there’s multiple things that have to happen before a contract can be signed. So there’s a lot of moving parts there. But what we have been seeing is we have been seeing an urgency to get deals signed. We’ve been seeing the size of these deals increase. We’ve been seeing the tenor of these deals increase from what I’m talking about what we were seeing, say, six months ago. So obviously very positive on our standpoint. We won’t be announcing any deals until we have a contract signed, but we are working on those.

Jim Rollyson, Analyst, Raymond James: Got it. Appreciate that. As a follow-up, maybe for Blake, can you expand a little bit, Blake, on the volume guidance, like pretty wide range obviously for 3Q, and I guess just trying to understand how much of that is the customer breaks versus kind of you electing to maybe hold the line on volumes to get better pricing going into next year, and kind of tied to that is how comfortable you are with the 4Q implied ramp.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Yeah. That’s a great question. I was expecting that one. I think it’s completely fair characterization that it’s quite a bit of variability there. Yeah, as pointed out, there’s a number of moving pieces in Q3. First, we do have some key customers that are taking short crew breaks during the quarter as they prepare to ramp up in Q4. That probably represents, say, 50% of the variance. That includes some customers that are transitioning pumping providers as they secure new equipment and they move to bigger frac designs. With the ramp in activity for some of these key customers, we are on course for a very strong Q4, and that’s without incremental volume wins.

However, the other impact is gonna come from our shift in our commercial strategy, and that’s the one where there is a bit of question mark, and that’s why you have that wide range. For more than a year, we’ve been following the playbook, which is, say, you’re the low-cost provider of a commodity and a service. When the market is oversupplied, you got to price it at the marginal price of production for the industry or slightly below in order to gain market share and force the market to rationalize. We’ve done that, and we’ve caused a lot of pain in the market. Much of our competition, they’ve laid off crews, they’ve cut maintenance spending to zero, and to the point where some of them even have padlocks on front gates.

However, just because a mine is kind of limping along, doesn’t mean that it’s theoretical sand. It isn’t being bid in the projects. All of this theoretical nameplate capacity, what I call zombie mines, is being bid into customer tenders for sand. It’s creating this perception that there’s still an ample oversupply of sand in the market.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: We just simply don’t think that’s the case. We think that doesn’t really matter until our customer base thinks it too. As long as Atlas is willing to match the competing bids in the market, customers can continue to hammer on price while still enjoying access to our service and our execution reliability. It’s not until we got to draw a line in the sand and let them go test the waters elsewhere, you kind of shine a light on the market and what’s reality. We have to create a catalyst for that light to get shown on what these mines can actually produce, what competing haulers really have to charge to deliver the sand, and who can really orchestrate all the different moving pieces to get sand on site. We make it an afterthought, and we’ve made it easy.

It’s a little bit of victim of our own success. When you do your job well, sometimes it gets taken for granted. Our expectations are that NPT, which we have tried to make a thing of the past in West Texas, it’s about to become a pretty big issue for some operators. At the end of the day, this is going to allow us to obtain more value for our products and services. We think that it’s going to set us up very well for RFP season for 2027. The execution of the strategy, it’s going to give us a hammer when it comes to negotiations.

Operator: Our next question is from Stephen Gengaro with Stifel. Please proceed.

Stephen Gengaro, Analyst, Stifel: Thank you. Good morning, everybody.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Morning, Stephen. Morning, Stephen.

Stephen Gengaro, Analyst, Stifel: Can I start with sort of the CapEx question? We hear a lot from companies this quarter as far as kind of CapEx per megawatt deployed in the power business. I think we hear numbers like around $1 million for the generating equipment per megawatt and maybe like $1.6 million-$1.7 million for sort of all-in balance of plant. What are you guys seeing, and are you seeing kind of inflation in those numbers?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Thanks, Stephen. I’m going to let Tim jump in with all the details because he’s the guy at the coal face. Just to lead, this is something that we’ve been pretty vocal about for some time, in that it’s really customer and project dependent. Hey, answer for me these questions. What’s the load profile the customer requires for their objectives? What type of system resiliency and reliability metrics do they insist on? Those all have knock-on impacts to the overall cost of the system, and therefore the price, which is why we’ve always said from the beginning that the best lens through which to review these projects is unlevered project IRR. Because the variables on the front end are apt to change, and thus the cash flow stream has to change, too. Tim, you want to jump into the deets?

Tim Ondrak, President of Power, Atlas Energy Solutions Incorporated: Yeah. I think Blake gave some good color and to answer that question, the CapEx ranges we’re seeing on projects can be anywhere from $1.5 million a megawatt to $2.5 million a megawatt. Again, those are really informed by what is the system intended to do versus cost inflation. It’s really scope inflation. I think we’re seeing hyperscaler teams getting a little more in the weeds on what is engineering asking for versus what is procurement willing to put forward. There’s a lot of difference in a system that’s designed to five nines versus three nines. We’re seeing a little bit more thought go into what actually works, what’s deliverable, and what’s cost efficient in that case.

As they build out those teams, we’re getting better answers from them on what they’re willing to live with from reliability, availability, and what they need on load steps.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah.

Stephen Gengaro, Analyst, Stifel: Okay.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: I think the key thing, Stephen, is that we’re not necessarily seeing cost inflation as much as we’re seeing that scope expansion. I think the hyperscalers have gotten more sophisticated, as Tim pointed out. They’ve added significant deal/procurement talent which is they are getting smarter about the dollars they’re spending, where they’re like very much the, "Hey, what do we need versus what do we want?

Stephen Gengaro, Analyst, Stifel: Got it. Okay. That makes sense. You talked a little bit about sort of your balance sheet liquidity and kind of how you fund the growth. Just remind us your planned deployments of power over the next couple of years and how you think about paying for that. Obviously, given the dynamics you just mentioned, it’s going to vary a little bit by which projects are signed, but how do we think about that?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah. During Q2, we did make some large payments for the initial order of CAT generators we’re receiving this year. As I said in the prepared remarks, we still have another $200 million of CapEx planned for the back half of the year, 90%+ of that is going to the rest of the CAT deliveries, also down payments on our 2027 orders and ancillary equipment for our currently under construction deployment in Socorro and some other longer lead time items for other projects. Thinking about the liquidity, following the convertible raise in April and the Q2 CAT payments, we currently have approximately $168 million of cash on the balance sheet and approximately $125 million of undrawn capacity on our ABL.

Additionally, I think it’s key to reiterate that the CapEx for standard logistics will now truly reflect the low capital intensity nature of that business. We’re effectively done with the major CapEx projects we had planned for that business this year. CapEx for that business steps down to that $5 million-$7.5 million range for that business moving forward. Additionally, the CapEx cycle for our oil field power business has also matured. Both of those businesses are going to start spitting off cash. We’re more than good when it comes to our near-term obligations. That’s not to say we won’t need incremental capital for the projects we are currently negotiating. We have already, in fact, made significant equity investments into those prospective projects.

Funding for those projects is most likely to come in the form of debt financing, which we won’t be putting on the balance sheet until we have hard contracts with great counterparties in hand.

Stephen Gengaro, Analyst, Stifel: Great. Okay. Thank you for the details.

Operator: Our next question is from Doug Becker with Capital One. Please proceed.

Doug Becker, Analyst, Capital One: Thank you. It seems like you’re having some good success in the oil field power side of the business. Just curious if there’s any consideration to deploy some more capacity into that. Presumably, higher shorter-term returns. The power contracts, the longer-term data center related contracts can take long-term, take a while to finalize. Just wanted to get your thoughts on that balancing data center versus maybe some shorter-term oil field work.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah, go ahead, Tim.

Tim Ondrak, President of Power, Atlas Energy Solutions Incorporated: Yeah. I think we’ll continue to deploy assets into the oil field power space. We’ve become a lot more selective about that over the last six months. We want to deploy those with some tenor. We want to deploy them where we’ve got some density. That’s how we pick up efficiencies and continue to operate that business. It’s a great business. The levers to scale that business up are much shorter than the levers to scale a business that’s supporting industrial power data centers. To answer your question, it really continues to be opportunity driven. When we’ve got good relationships with good customers that have an outlook for needing those assets for a period of time that we like, we’ll continue to deploy into that space.

Doug Becker, Analyst, Capital One: That sounds good. Maybe switching gears to the logistics business. Margins in March were kind of the mid-teens, finished below 13% for the full second quarter. Everything seems to be lining up to really favor the Dune Express. Kind of curious why we’re not seeing margins maybe improve more than just kind of solidly into double digit, going forward this year.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah. For the Q2 moving pieces, there is a lag in terms of as I talked about, third party carrier rates continue to march up. The over-the-road national freight market continues to strengthen and that starts to pull truck drivers out of West Texas. There’s a lag in your cost going up on the third party carrier rates and as you start to amend your own hauling rates. That actually is a tailwind on pricing. As you look ahead to the second half, it’s more a knock-on effect of that, again, there’s kind of some flex in that guidance, and that’s related more to, it’s tied to the volume guidance on the sand side, where obviously there’s a fixed cost absorption piece of that. Again, it’s loose guidance based around more like, "Hey, we’re drawing this line in the sand.

We’re starting to move rates." We think that there might be that order of kind of a, hey, like this kind of pushing the market and an initial reaction and then finishing off with a strong Q4.

Tim Ondrak, President of Power, Atlas Energy Solutions Incorporated: We are seeing tightening in the trucking market.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah, sure.

Doug Becker, Analyst, Capital One: Got it. Thank you.

Operator: Our next question is from Scott Gruber with Citigroup. Please proceed.

Scott Gruber, Analyst, Citigroup: Yes, good morning. I appreciate the pricing discipline here as demand improves. I’m trying to get a sense of what this could mean for your average pricing. There’s something like $4 a ton spread between some of the contracts you had coming into the year and more recent sales. Just thinking through, if the market comes to meet you at your line, does your average pricing as you head into 2027, does it kind of stay flat around the $18.50 you posted in Q2? Is it trending higher? Just trying to get a sense of kind of where the realized price could go given the dynamics you have in the book today.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Thinking about 2027 pricing? Obviously, not going to guide that yet, what we’re trying to do, as you touched on, we are positioning ourselves to strengthen our position come RFP season where it’s, like I said, shine a light on the true productive capacity of the market. We do have a significant portion of the book turning over for 2027. In the event that we are able to achieve the pricing move, the increases that we’re looking for, that would result in accretive pricing to the average price of sand.

Scott Gruber, Analyst, Citigroup: Got you. The simple way to put it, I’m not trying to pin you down on exact numbers around your strategy, but your strategy is successful if the market comes to meet you. That would be to move higher in your realized pricing heading into next year? Is that fair?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yes. 100%.

Scott Gruber, Analyst, Citigroup: Okay. Just wanted to clarify that. Appreciate it. The progress with Kodiak and autonomous trucking is good to see. Maybe you could just provide some more color. You mentioned 100 trucks on the road in a year or so. When does this start impacting the financials? What do we see in terms of your cost base with 100 trucks running, and then as you scale it up, ultimately, what could this mean for your financials?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: I guess, really the first thing that we need to do is for us to start seeing the benefit from that. Thanks, Scott, on that is we really need to start expanding the horizon for which these autonomous trucks serve. They’re serving in a couple of heat zones right now. Activity moves in and out of those heat zones. In order to maximize the benefit on autonomous delivery, we’re going to need to maximize the number of well sites we can serve with that. Number 1, the first thing we needed to do was we needed to be able to get those trucks into other heat zones-

Scott Gruber, Analyst, Citigroup: Broaden the-

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Broaden the area. The second thing we needed to do is obviously is to increase the number of trucks. It’s by the middle of next year. That’s a pretty lofty goal, but Atlas is planning on being on over the road. As far as what it’s going to mean for our margins. Yeah. Just as touching on Doug’s earlier question. There was that lag effect of the cost of drivers going up and then the actual accretion into your hauling rates. You basically eliminate that variability. As the trucking market tightens, you keep that cost stable, and it becomes actual pure accretion. It also de-risks our logistics operations in that as the number of crews expands, it’s just one of the bigger risks is, hey, can you get enough third-party drivers? Can you get enough trucks?

That becomes less and less of a smaller question mark when you’ve got more of the autonomous trucks on the road.

Scott Gruber, Analyst, Citigroup: Yeah. With all the initiatives coming around with commercial driver’s license and foreign CDLs, that’s going to make a big impact on the trucking market going forward.

Operator: Our next question is from Michael Scialla with Stephens Inc. Please proceed.

Michael Scialla, Analyst, Stephens Inc: Good morning. Blake, you said you wouldn’t bring debt on the balance sheet unless you have contracts to underpin the new power requirements. I guess I want to see how you’re thinking about absolute debt levels or net debt or leverage, however you want to look at it. What kind of targets are you looking to stay below as you build out the power business?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah. I think on the front end of this build-out, the leverage ratios do start to blow out before those first key projects start spitting off cash. I think that that’s pretty common across the space. Once you get these projects online, though, they significantly start to de-lever themselves very quickly. You’re looking at cash on cash payback on these projects in the five to six year range. You’re probably looking at standard project financing, like equity to debt ratios of anywhere from 30%-40% equity, 60%-70% debt. When you think about those cash on cash paybacks you quickly get three times. That’s the OFS guy in me is like, "Well, that’s too much debt." When you have these contracts that we’re talking 15, 20 years, like hard concrete terms, that’s actually a very strong leverage position.

Michael Scialla, Analyst, Stephens Inc: Yeah. Understood. Big trade-off there. I guess, also wanted to see on your third quarter EBITDA guidance. You obviously have a range in there, I assume most of that range is because of the range you talked about on sand production, having a pretty wide range with that. Can you break down the EBITDA, how much you’re anticipating from sand versus logistics versus power?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: If you think about it, 100% of that variance is going to be coming from the sand and logistics side. Power EBITDA will be up slightly as we get a full quarter of deployment of that small facility that we put in place for the construction phase of the Socorro project, and then continued gains on the oil field power side. The sand and logistics are really very closely correlated. Again, on that variance about say 40% of that is due to customers have communicated to us like, "Hey, we’re going to be taking a shorter sailing.

Operator: Our next question is from Chuck DeVore, private investor. Please proceed.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Hey, I’m going to go ahead and finish that question. Sorry, our system muted. About 40% of that is coming from those customer breaks. There’s 30 to 45-day breaks in the quarter, so in front of their ramps into Q4 into 2027. The rest of that delta is coming from the kind of unknown response that we’re planning for in terms of the shift in commercial strategy. That really sums that up. Sorry about the interruption.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Yeah, go ahead.

No, thanks.

Operator: Our next question is from Chuck DeVore, Private Investor. Please proceed.

Chuck DeVore, Private Investor: Yes, thank you very much. I know that we don’t often like to consider things like public policy and politics, but I noticed that, Texas Governor Greg Abbott, I think just yesterday, announced a pause for data center construction insofar as data centers that connect to the grid. There’s a lot of resentment in rural Texas. We got a midterm coming up. The other thing that happened this week was that the lieutenant governor and the key chairman of a senate committee, called on ERCOT and the PUC to delay the construction of the 765 kilovolt lines heading into the Permian. This would seem to demand additional thermal generation in the Permian if you’re not going to build those lines. Are things like this, could these two public policy changes increase the demand for your power services in the Permian?

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Yeah. Thanks, Chuck. Obviously, these are pretty new as far as policies go. Obviously, we don’t agree with them. Yes, this is a tailwind that could happen for Atlas and it’s really anybody, any company that has additional power or has power assets available that can be immediately deployed over the next two years. I think this is going to be a huge tailwind. We are already seeing companies, a lot of the hyperscalers have already come to grips with this and are already starting to provide or look for their own behind-the-meter power solutions. I think we’re just going to continue to see that. I think it’s also going to push a number of companies out into West Texas that are going to start locating data centers out there and their projects out there.

Yes, this is a very big tailwind, and we’ve been seeing this.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: I think you’re starting to see the urgency from a number of customers, a number of users or folks that are looking for power, that we really turn into those companies that have access to that power.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah. Chuck, just to follow up on what John said there. It’s like we’ve really seen this coming for about 12 months now. We’ve touched on it on a few prior calls of these kind of political headwinds with respect to the grid. I would say that our prospective customer base totally gets it, where they’re no longer thinking about these projects. I think that’s why you’ve seen this increase in the tenor of the contracts where, if you rewound 18, 24 months ago, people were talking about, hey, five, seven-year contracts. Now we’re talking 15 to 20 because they’re just, "Hey, Bud, we’re just not going to even think about the grid." You look at the backlog, you look at the requirements, the capital requirements that they have to post up on the front end of that with still question marks around it.

It’s just easier for them to just be like, "You know what? We’re going to take care of this ourselves." Eventually, on top of that, they get higher reliability. There’s significantly better resiliency, a system that’s designed for their usage. When you think about that, the combination of that, you’re not getting four or three nines from the grid, right? You’re lucky if you’re getting 98%. When you’re thinking about the applications that they’re going for, it was never the ideal solution for them. Now with these political headwinds, I think it’s gotten even more significant. We see them thinking about these more as the permanent solution.

John Turner, President and CEO, Atlas Energy Solutions Incorporated: Yeah. That’s precisely the reason why we signed the Global Framework Agreement with CAT. We realized that this power, the demand for power was coming behind the meter, and the winners are going to be the ones that have the power to deploy.

Operator: Our next question is from Alexa Brenero with Goldman Sachs. Please proceed.

Alexa Brenero, Analyst, Goldman Sachs: Hey, team, thanks for taking our question. We wanted to ask, as we think about the commercial pipeline of opportunities on the power side, can you just talk about what that split could look like in terms of the oil and gas and then some of those larger projects?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah. The majority of our pipeline is going to be larger projects. In oil and gas, we know that universe. We’ve got roughly 40 MW that we could deploy into that space. Those are MW that’s on the ground or in process. In the larger power space, our opportunity set, it’s roughly 8-10 GW, that’s where it was on our last quarterly call. There’s been projects that have kind of moved in and out. Keep in mind, that’s kind of pre Governor Abbott’s announcement yesterday. Those projects have grown in scale from the discussions that we had 6 months ago, 9 months ago. We’re seeing the nodes that customers are coming to us to solve in that kind of 500 MW and up range. That’s a start.

That’s kind of what they need to get off the ground, some of those campuses have designs on one, two, or even three gigawatts of behind-the-meter power, for all the reasons that John and Blake just talked about in the last question.

Alexa Brenero, Analyst, Goldman Sachs: Okay. That’s very helpful. Maybe just a follow-up. Can you talk a little bit more, this kind of pricing piece that you’re talking about on the logistics side? What type of margins are you targeting there? You kind of talked about a commercial strategy and part of the reason the three Q guide might be a little lower than we anticipated. How do we think about what you’re targeting and what four Q could potentially look like, assuming those numbers come to fruition?

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yeah. It’s more about, I think that it’s bigger than just, "Hey, we’re targeting this margin profile." It’s more that there is If you look at the nameplate capacity for the if you just add up all the mines out there and based on, "Hey, this is what this was built to for a nameplate capacity." It would point you to, "Hey, there is a lot of sand available." We know that, even at our own facilities where we’ve been spending significant maintenance CapEx, there’s a delta between our nameplate capacity and our effective productive capacity. We know for a fact that ours are the best maintained mines in the Permian Basin, bar none.

You look at all these other ones where they’ve just been running at anywhere from 0% to 20% utilization for the last two years, and they’re held together with duct tape and bailing wire. That nameplate capacity, it’s theoretical sand. It’s still being bid into these tenders and used by the operators as a hammer on pricing. We talk about this like, "Hey, you just need a few grains of sand of undersupply for pricing to really move." When you talk about the incremental on that, everybody understands that the pricing incremental margin is 100%. It starts to move very quickly and have huge impact on our income statement. It’s really like, this is a, "Okay, hey, we’ve got to" Until we actually just say, "Hey, you know what? Just go test it with those guys.

Let’s go see if it’s real." Until you shine that light on the fact that, hey, all of a sudden you’re starting to have well site NPT issues and things like that theoretical sand is always gonna be there. Then it becomes, you change that from, hey, it’s no longer a theory, a theoretical sand, it’s just non-existent sand, and you actually have hard data on what the productive capacity is of the entire industry. I think that there’s a pretty quick tightening, and it just changes the positioning when it comes to those negotiations quite a bit. On the logistics side, it’s very similar. It’s all tied together. In terms of traditional trucking, it’s a very tight market. We have been insulated from that by our advantages. The Dune Express, which reduces our reliance on third-party trucks significantly.

You move somebody else, and they’re doing it all through trucks. You’re gonna 3x the number of trucks you need to service your wells. That creates a big problem that I think that’s gonna result in even more inflation on trucker rates. If people are not willing to push the rates that they’re charging the operators, they’re just not gonna have the trucks. So this is kind of a grand experiment, but I think that it’s gonna result in quite some pretty strong findings.

Operator: Thank you. This will conclude our question and answer session. I would like to turn the floor back over to management for closing comments.

Blake McCarthy, CFO, Atlas Energy Solutions Incorporated: Yes. Thank you, everybody, for attending the call or sitting on the call. I’ll just close by saying, we like where we are, where we sit today with Atlas. We have two good businesses and real advantages in both, and a team that knows how to execute. There’s work in front of us, and we’re clear-eyed about it, and we’re going to keep our heads down, do the work, and let the results speak for themselves. We look forward to reporting our third quarter numbers. Thank you.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.