Natural Gas Services Group, Inc. (NGS) reported significant financial growth for the fiscal year ending December 31, 2024, with total revenues reaching $156.7 million, a 29.4% increase from $121.2 million in 2023. The company's rental revenue, which constitutes the majority of its income, surged by 35.9% to $144.2 million, driven by a rise in rented horsepower to 491,756, up from 420,432 in the previous year. The adjusted gross margin for rental services improved to 60.5%, reflecting a strategic focus on larger horsepower units that command higher rental rates.
In terms of profitability, NGS reported a net income of $17.2 million for 2024, compared to $4.7 million in 2023, marking a substantial increase attributed to higher rental revenues and improved operational efficiencies. The company’s total adjusted EBITDA also rose significantly to $69.5 million, up from $45.8 million the previous year. This growth is indicative of NGS's successful transition towards larger compressor units, which are increasingly in demand for oil production, particularly in the Permian Basin, where 75% of rental revenues are generated.
Operationally, NGS has made strategic shifts, including the decision to cease in-house fabrication of compressor units at its Midland, Texas facility, transitioning to third-party fabricators. This move is expected to enhance cost efficiency and focus on larger horsepower units, which are more profitable. As of December 31, 2024, the company had 1,912 compressors in its rental fleet, with a utilization rate of 63.2%. However, the number of customers under contract decreased to 68 from 84, reflecting industry consolidation rather than a decline in business activity.
Looking ahead, NGS anticipates continued growth driven by favorable crude oil prices and increased demand for its larger horsepower compressors. The company plans to expand its rental fleet prudently, focusing on pre-contracted agreements with customers. Despite the positive outlook, NGS acknowledges potential risks, including fluctuations in oil and gas prices, reliance on major customers, and the impact of regulatory changes on the oil and gas industry. The company remains committed to optimizing its operations and enhancing profitability while navigating these challenges.
About NATURAL GAS SERVICES GROUP INC
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