Archrock Inc (AROC) 2017 Q2 法說會逐字稿

Good morning. Welcome to the Archrock, Inc. and Archrock Partners L.P. Second Quarter 2017 Conference Call. Your host for this morning's call is David Skipper, Director of Investor Relations and Treasurer of Archrock. I will now turn the call over to Mr. Skipper. You may begin.

Thank you, operator. Good morning, everyone. With me today are Brad Childers, President and CEO of Archrock, and David Miller, CFO of Archrock.

Today, Archrock and Archrock Partners released the results for the second quarter of 2017. If you have not received the copy, you can find the information on the company's website at www.archrock.com.

During today's call, Archrock, Inc. may be referred to as Archrock or AROC, and Archrock Partners as either Archrock Partners or APLP. Because APLP's financial results and position are consolidated into Archrock, any discussion of Archrock's financial results will include Archrock Partners unless otherwise noted.

I want to remind listeners that the news releases issued today by Archrock and Archrock Partners, the company's prepared remarks on this conference call and the related question-and-answer session include forward-looking statements. These forward-looking statements include projections and expectations of the company's performance and represent the company's current beliefs. Various factors could cause results to differ materially from those projected in the forward-looking statements. Information concerning the risk factors, challenges and uncertainties that could cause actual results to differ materially from those in the forward-looking statements can be found in the company's press release as well as in Archrock's annual report on Form 10-K for the year ended December 31, 2016 and Archrock Partners' annual report on Form 10-K for the year ended December 31, 2016 and those set forth from time to time in Archrock's and Archrock Partners' filings with the Securities and Exchange Commission, which are currently available at www.archrock.com. Except as otherwise required by law, the company expressly disclaims any intention or obligation to revise or update any forward-looking statements.

In addition, our discussion today will include non-GAAP financial measures, including EBITDA as adjusted, gross margin, gross margin percentage, cash available for dividend, distributable cash flow and net loss from continuing operations attributable to Archrock stockholders excluding items. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see today's press releases and our Form 8-Ks furnished to the SEC.

I'll now turn the call over to Brad to discuss Archrock's second quarter results.

Thank you, David. Archrock delivered excellent performance in the second quarter as we executed at a high level on multiple fronts. We are now seeing the positive results for the actions we took in 2016 to set up the company for growth.

Over the past 9 months, we've communicated that 2017 will be a transition year with the prior cyclical downturn giving way to the expansion we expected for the second half of 2017. We're confident that expansion is now under way. And we expect our financial performance to improve starting in the back half of 2017 and carrying into 2018.

Let me touch on some of the highlights of our Q2 performance. In the quarter, we generated EBITDA as adjusted of $72 million, up $7 million sequentially. We increased our operating horsepower by 40,000, and I was pleased to see this return to operating horsepower growth and expect this trend to continue.

Our total revenue increased by 4% sequentially to $198 million. New horsepower order levels exceeded even robust first quarter levels. We are driving new horsepower orders at levels similar to 2014 providing us greater visibility into new starts through the remainder of 2017 and into 2018.

Contract operations cost of sales was down $2 million sequentially, resulting in about a 200 basis point increase in gross margin percentage to 59%. SG&A expenses were down about $2 million sequentially, primarily due to lower compensation and legal expenses. And our distributable cash flow coverage ratio at Archrock Partners was robust at 2x, and allowed us to invest additional cash flow into high demand, large horsepower units.

Turning to our operations. New orders during the quarter continue to be impressive. Our sales team capitalized on surging customer activity levels and delivered a strong book of orders that should enable us to drive top line growth for the remainder of 2017 and into 2018. From a play perspective, new orders were especially strong for the Permian, Eagle Ford and the SCOOP STACK.

During 2017, demand for large horsepower units has strengthened, and utilization across the industry has tightened for these units. Additionally, lead times for new large horsepower units are currently stretched due to OEM available manufacturing capacity.

Given this tightening, we were able to move prices higher in horsepower booked in the second quarter compared to prices of horsepower booked in the first quarter.

In addition, due to this robust demand and our outlook for the business overall, we're increasing our newbuild CapEx budget by $50 million and now expect to spend between $175 million and $195 million in 2017. Our decision to increase our capital budget has allowed us to secure new compression units for customers at a time when lead times can exceed a year as well as expand the largest fleet of high-demand large horsepower units in the industry.

On the cost front, our operation's team maintained cost discipline in the quarter while providing outstanding service to our customers. Sequentially, contract operations cost of sales was down about $2 million on higher revenue. About half of the decrease was due to lower make-ready expenses and the other half was due to lower field maintenance costs.

In aftermarket services, revenues were up about $7 million or about 17% from first quarter levels. The AMS business is also beginning to experience a recovery, and we now expect year-over-year revenue growth for 2017. We're seeing an increase in overall and maintenance work as customers catch up on some deferred maintenance.

Turning to the partnership. In the second quarter, operating horsepower grew by 34,000 horsepower, and gross margin percentage increased about 200 basis points to 61% from 59% in the first quarter. APLP continues to benefit from our disciplined cost management and the elevated level of new orders that we're experiencing.

SG&A was $18 million at the partnership, down $2 million from the first quarter. Leverage to the partnership increased slightly at 5.1x debt to EBITDA from 4.9x debt to EBITDA in the first quarter and APLP deleverage continues to be a primary focus for Archrock. We're committed to bringing it down over time.

Now I'd like to turn to the market and outlook for our businesses. Archrock returned to growth in the second quarter, and we expect this trend to continue. In our contract operations business, we saw solid demand from our customers, and new order activity continued at the same elevated pace we saw in the first quarter.

While we recognize that WTI and Henry Hub prices are down year-to-date, we have seen no meaningful slowdown in customer activity levels, and we expect to see year-over-year operating horsepower growth at year-end 2017.

In addition, we expect our robust backlog to carry our momentum into next year.

On the outlook for 2018, we'll be working with our customers as they develop their 2018 capital plans over the coming months, and we'll gain increased visibility through that process. But considering market expectations for natural gas production, we note that the EIA forecasts U.S. 2018 natural gas production growth of 3 Bcf a day compared to the 1 Bcf a day forecasted for 2017.

As we have stated consistently, we believe our business is in an excellent position to participate in and capitalize on the secular growth drivers that are expected to increase natural gas production by between 15% to 20% through 2021 and likely more beyond that.

In the coming years, we believe the significantly improved quantities, accessibility and price stability of natural gas in the U.S. will continue to drive higher levels of demand for LNG export, pipeline exports to Mexico, power generation and use as a petrochemical feedstock. We believe that growth in natural gas production to meet this demand growth will lead to significant increases in demand for compression services.

Our strategy is and will continue to be to provide exceptional service to our customers with high-quality compression assets in growing natural gas producing basins across the United States. Over the past few years, we've worked to build a platform that will support our growth. We've modernized our fleet, invested in technology to improve our service delivery model, implemented systematic improvements to our field maintenance practices and standardized processes across the organization.

In anticipation of this growth, which we are now seeing, we increased our investment in our fleet so that we will have equipment available in configurations desired by customers to meet this emerging demand. The impact of the structural and operational improvements we've made to our company through the downturn are contributing to our enhanced performance.

Archrock is leaner, more efficient, capable of delivering high-quality services to the growing compression services market. We intend to leverage our access to capital, solid customer relationships, our unmatched service presence in every growing U.S. natural gas producing basin and our excellent service teams to drive shareholder returns.

Finally, let me turn to our financial strategy. As we stated for the last year, in order to begin growing our dividend and distribution, we need to see a path to achieving a debt-to-EBITDA ratio at Archrock Partners trending toward 4x or lower. Although I am not providing guidance on the timing of a dividend or distribution increase, we do expect that in the first quarter of 2018, our trailing 12-month EBITDA will begin to increase and contribute to deleveraging at Archrock Partners.

Now, I'd like to turn the call over to David for a review of both companies' financial results.

Thanks, Brad. Let's look at second quarter results and then cover guidance for the third quarter. Archrock generated EBITDA as adjusted of $72 million for the quarter, up $7 million compared to $65 million in the first quarter. Revenues were $198 million for the second quarter, up from $190 million in the first quarter. We also reported net loss from continuing operations attributable to Archrock stockholders excluding items of $0.03 per share in the second quarter compared to a net loss of $0.11 per share in the first quarter.

Turning to our segments. In contract operations, revenue came in at $151 million in the second quarter, up from $150 million in the first quarter, primarily due to an increase in freight revenue. Gross margin percentage increased to 59% from 57% in the first quarter as our cost of sales was down $2 million quarter-over-quarter.

As Brad discussed, about half of this decrease was due to lower make-ready and mobilization costs and half due to lower maintenance expenses. We also had a small contribution from lube oil consumption in the quarter.

In aftermarket services, revenues of $47 million for the second quarter increased $7 million sequentially from $40 million in the first quarter. AMS benefited from both customers catching up on some deferred maintenance work and an uptick due to seasonal demand. Gross margin percentage was flat sequentially at 15%. SG&A expenses were $25 million in the second quarter, down about $2 million compared to first quarter 2017 levels, primarily due to lower compensation and legal expenses. About $1 million of the decrease was nonrecurring in nature.

During the second quarter, on a consolidated basis, we determined that approximately 60 idle compressor units totaling about 23,000 horsepower would be retired from the active fleet. As a result of the retirement of these units, we recorded a $6 million long-lived asset impairment charge. 40 units or approximately 13,000 horsepower were owned by the partnership and impairment charge of $3 million was recorded at Archrock Partners.

In the second quarter, Archrock's growth capital expenditures were $56 million, up $34 million from Q1 levels as we invest in large horsepower equipment to meet customer demand. Maintenance CapEx for the quarter was $9 million, up $2 million from first quarter levels but remaining at overall low levels due to well-managed maintenance practices.

In April 2017, pursuant to the separation agreement entered into in connection with the spinoff of Exterran Corporation, Exterran transferred to us $25 million, an amount equal to the contingent financing payment as defined in the separation agreement upon Exterran's successful qualify capital raise in the second quarter of 2017.

Second quarter ending debt on a consolidated basis was $1.44 billion, up approximately $6 million from first quarter levels. On a deconsolidated basis, Archrock's second quarter 2017 debt balance was $66 million, down $24 million versus first quarter levels.

Archrock's parent-level leverage ratio, which is debt to adjusted EBITDA as defined in our credit agreement, was 1.1x at June 30, 2017 and available but undrawn capacity on Archrock's revolving credit facility was approximately $180 million.

Cash distributions to be received by Archrock based on its L.P. and GP interests in Archrock Partners were approximately $8.7 million for the second quarter 2017 and for the prior quarter.

Archrock's second quarter dividend was $0.12 per share, unchanged from the first quarter. The second quarter dividend amount of $8.5 million will be paid on August 15. Archrock's cash available for dividend coverage was 1x for the second quarter. As a reminder, cash available for dividend was impacted in the quarter by increased spending on other CapEx, which is primarily trucks. We also expect to see lower dividend coverage in Q3 of '17 as we make additional investments in trucks.

Turning to the financial results for the partnership. Archrock Partners second quarter EBITDA as adjusted was $67 million, up 10% as compared to $61 million in the first quarter of 2017, primarily driven by lower make-ready and maintenance expenses and lower SG&A. Net income was $5 million in the second quarter compared to a net loss of $4 million in the first quarter.

Revenue for the second quarter was $138 million, up about $1 million from first quarter levels. Revenue per average operating horsepower was $48.63 for the second quarter, up modestly compared to $47.99 in the first quarter. Cost of sales per average operating horsepower was $18.99 in the second quarter, down 3% compared to $19.67 in the first quarter. Gross margin percentage was 61% in the second quarter, up about 200 basis points compared to the first quarter.

Again, this was primarily due to lower make-ready and maintenance expenses. SG&A expenses for the second quarter were $18 million, down $2 million from the first quarter, primarily due to lower compensation and legal expenses, as we discussed earlier.

Distributable cash flow was a strong $39 million in the second quarter, up from $34 million in the first quarter, primarily due to higher EBITDA in the second quarter. Our distributable cash flow coverage was solid, at just above 2x. APLP's capital expenditures for the second quarter were approximately $58 million, consisting of $51 million for fleet growth capital and $7 million for maintenance activities.

On the balance sheet, at Archrock Partners, total debt increased $30 million sequentially and stood at $1.38 billion as of June 30, 2017. At quarter end, available but undrawn debt capacity under Archrock Partners' debt facilities was $217 million, and Archrock Partners had a total leverage ratio, which is covenant debt to EBITDA as adjusted, of 5.1x as compared to 4.9x at the end of the first quarter. Archrock Partners' senior secured leverage ratio, which is senior secured debt to EBITDA as adjusted, was 2.6x at June 30, 2017, as compared to 2.4x at the end of the first quarter. Leverage at the partnership continues to be a primary focus for Archrock management.

Now let's discuss guidance for the third quarter of '17, which includes the consolidation of Archrock Partners' results.

In contract operations, we expect revenue of $150 million to $154 million as we begin to benefit from increasing operating horsepower. We expect gross margins in the 57% to 60% range as we continue to invest in startup activities in the business.

For AMS, we expect revenues of $45 million to $50 million with gross margins between 16% and 18%. We expect SG&A expenses to be $27 million to $28 million for the third quarter as the onetime benefits in Q2 are not repeated and we incur a slightly higher cost in Q3 related to the move of our headquarters this month.

Depreciation and amortization expenses are expected to be in the high $40 million range with interest expense in the low $20 million range.

For the full year, we're increasing our CapEx guidance to $230 million to $250 million. Maintenance capital spending for the year is now expected to be in the $35 million to $40 million range, down $5 million from previous guidance. Newbuild capital expenditures are expected to be in the $175 million to $195 million range for the full year 2017 as we purchase high-demand large horsepower units to meet growing customer needs.

At Archrock, we do expect continued increase spending in other capital in the third quarter as a result of continued expenditures on trucks in the quarter. At Archrock Partners, we now expect newbuild capital expenditures to be in the $155 million to $170 million range and maintenance capital expenditures to range between $30 million and $35 million, down $5 million from previous guidance.

I'll now turn the call back over to the operator to open it up for questions.

(Operator Instructions) And we do have our first question from Andrew Burd from JPMorgan.

It seems clear from you and others that backlogs are long and growing for large compression equipment. It's good to hear that that's boosting pricing for those units but at what point does the availability of those large units maybe prompt the redeployment of smaller units, you know 2 or 3 smaller units that may add up to one of the larger units? Are you seeing any of this happening? Or do you expect some of this could happen if market tightness continues?

Thanks, Andy. Actually, yes. We see that already but the availability in the larger horsepower ranges is already putting pressure on what would be maybe an incremental -- incrementally lower horsepower capability in I think in the businesses across the industry already. But it's not going to deploy from changing a close to 2,000 horsepower unit down to several 200 horsepower units. It's really just on the increment. But we're seeing that pressure already, and that is causing the redeployment of the fleets, I think, across the industry. I know for us, for example, when we think about our start activity in the quarter, about 20% to 25% only of our starts was from newbuild horsepower. By far the bulk, 75% to almost 80%, of our start activity was from our existing equipment. And so we're seeing a good deployment of the existing fleet where we can. And some of that is due to tightness in large horsepower.

Great. And second and final question just on AMS. It's good to hear that revenues are poised to grow into year-end. And then I think, Brad, you had mentioned that, that's deferred maintenance by some customers and getting units ready to redeploy. Do you see the higher revenues at year end as kind of temporary phenomenon? Or is it a readjustment and step-up and then we may operate it at those levels going forward? Just trying to get a sense of the impact and timing.

Yes. So I do think that as the focus of the business of our customers is turning back to growth and running their operations on a more normalized basis without deferring as much activity as everybody tried to defer just based upon cost management that some of the revenue gains we're seeing are improvements to the market and AMS, and I expect that to continue. And as that continues, we also expect the margin to follow at some point. And so pressure -- we're putting pressure there when we can. On the other hand, I will point out that we do have a bit of touch of seasonality in our business, and we see some upturns, primarily Q2 and Q3, our busiest quarters, and Q4 and Q1 tend to be a bit little lower for weather-related reasons and budget reasons and just the way the business operates. So while I believe that the market is recovering, I do know that there will be a chance of a step-down in revenue in some of the later quarters ahead of us.

And we have our next question from TJ Schultz from RBC Capital Markets.

The $60 million increase in CapEx, is there a specific operating region that you're getting the demand to drive that? And then what's your line of sight on contracts for that additional horsepower just given some of the tightness on the large horsepower's tenure on contracts lengthening?

So on the regional, we see the biggest demand, like many others in the space, the biggest demand right now is for growth in the Permian. Although, we're seeing growth in other regions, too. That's followed by the Eagle Ford and SCOOP STACK midcontinent area as well as some of the Northern Rockies. So we see growth across multiple areas. But admittedly, like everybody else, half of the focus right now for our investment is more directed toward the Permian. So that's the growth play, and that's the one that is getting all the attention. As far as contracting, I'll point out that ours is the business where our horsepower has gone to work very rapidly following completion and adding it to the fleet. But we're also at a point without talking on a percentage basis, or numbers where we see more longer -- more commitments earlier from our customers because they need horsepower then we've seen in a while due to that tightness. So we believe we have a good visibility into that horsepower going to work whether it's from a contract or whether it's on good intel and good flow of information and commitments with long-term customers.

Okay, thanks. What are your current thoughts on dropping parent-level contracted horsepower into the MLP?

As you know, we've dropped down assets kind of once a year for the past -- since we started the MLP pretty much with the exception of a few years when we had other things going on. And we -- we don't give specific guidance but we don't see that changing dramatically going forward.

Okay. And when you think about the distribution, optimally, where do you want your business to operate from a coverage standpoint longer term?

Well, right now what we've said is we're focused on the leverage down at the partnership, and we want to see that our leverage is moving towards 4x. And then once we see that happening then we'll start to focus on coverage and where we want that to be. We've said in the past, we want coverage to be in the 1.2x range, and we're looking at whether or not that's the right level or whether it needs to be a little bit higher, but we're still looking at it. We want to see leverage start to drop down.

Okay, thanks. Just lastly, can you just provide a little more color on what's driving the decrease in your maintenance CapEx guidance?

Yes, so its guidance. For the most part, it's very disciplined activity in the field. While we're focused on providing excellent customer service to our customers and keeping our run times and reducing it, we've also put in place very good controls and management systems on how we manage our major equipment maintenance schedules and the CapEx associated with it. So for the most part, short answer is it's from very disciplined management of what we spend and how we overall maintain our equipment with the overall objective of making sure we deliver excellent customer service.

And we have our next question from Blake Hutchinson from Howard Weil.

Just a quick question on your opening comments, Brad. Could you -- was the increase in growth CapEx part and parcel to finding an opportunity to actually pull forward kind of purchase this minute. It sounds like you might've run into an opportunity to do so, which might help you front-load deployment a bit. Or are we mischaracterizing your commentary?

Let me rephrase and see if I get it. Like it's okay -- What we are seeing is -- what we expected was a recovery in the back half of '17, and that's turned out to be as accurate as we really could have hoped based on how we approach the business. But we're seeing an acceleration of demand. So we're seeing a higher demand move forward from the overall growth curve we projected for natural gas demand as well as for compression needed to support it. That's really pulled forward, and so we're seeing an increase in demand earlier and higher in the end of '17 and into the early parts of '18 then we had expected. Coupling that with the longer lead times coming out of the manufacturers has really driven us to go ahead and get more CapEx in the system so that we have units when they're needed.

Yes, I guess and maybe the way you're characterizing or if we take it as a continuum from the last reporting period, maybe -- perhaps you were buying ahead a little bit in terms of compressor units 3 months ago into a market you have analyzed as improving but maybe your confidence interval is up that you'll move from purchase to placement a little more seamlessly.

I think that's fair. I really do. I also just think that the demand is higher than we -- we've seen a higher demand over the last 3 months than we saw up to that first -- at the end of the first quarter when we last spoke.

Sure. And I guess your pricing commentary around what you had put in backlog, I guess does that apply similarly to what you're redeploying within your incumbent fleet as that what's your pricing for newbuild?

Yes, that comment was driven to bookings we saw in the quarter overall, some 75% to 80% of which were from the existing fleet. Only a little over 20% was newbuilds in that period.

Okay, so that's fixed for that commentary, I appreciate it. And then just I want to make sure, David, I caught maybe the most important part for most. What was the gross margin guidance for 3Q for North American contract ops?

57% to 60%.

And we have our next question from John Watson from Simmons & Company.

Brad, regarding the elongating lead times, do you think that's primarily due to engine availability or is it something else?

No, it's primarily engine availability. And more specifically, it's for large horsepower coming out of Caterpillar.

Right. Okay, great. And what do you think the lead times might mean for percentage utilization of larger horsepower units industrywide in the near term? If demand improves like you think it might, could we be above 85% for that class of horsepower at some point next year?

Short answer is yes, and we're already there. For the larger horsepower units, I believe, industry utilization is already in excess of -- I don't have this -- the data flow for this is not clear, but I believe based on what we're seeing in our own business and what we're seeing in other businesses that utilization for the largest high demand units in the space is already above that 85% level and moving higher. So it's a market that has gotten tighter more rapidly, I think, than sort of we expected and clearly, more quickly than the manufacturing teams expected because we're seeing these lead times stretch out very -- pretty far. And the good news front on that I just want to emphasize it, for us, what I feel good about in this is number one; we got ahead of the curve from a order perspective already in Q1 and we're stepping it up in Q2 because we see that demand being solid and continuing. And as the provider with the largest -- large fleets of these units -- large horsepower units, we believe we're going to be in a good position to capture that market.

Right, that makes sense. And one last one from me. Could you share any color regarding the term of some the contracts for the new units that you're putting to work? Are customers trying to lock you in for longer contracts? And I'm speaking specifically to the larger horsepower unit.

Yes, the answer is yes. It's interesting it's a tug of war. And so typically in the past, it's better to enter into very long-term contracts for that large horsepower. But in the current market environment, there's a little bit of reluctance on the service provider side and on our side to do so. So we're entering contracts terms that range from right now 2 to 5 years on the largest horsepower units. It's all going to be in that kind of a range subject to us being able to be satisfied with pricing in those contracts overall. But the more important part of this is, remember for those large horsepower units when they go out, they typically stay on location longer because they are needed in a more centralized gathering and midstream location longer than small horsepower units. So more than contract term, what we're looking at is putting out our large horsepower into locations that are with -- in growth plays with growth customers that are going to be there.

And our last question comes from James West from Evercore.

Thanks for taking my question. This is actually Samantha. Brad, thanks for that color about half of you growth CapEx going towards the Permian. Is there any way that you can break out maybe just the distribution of the fleet actually right now that's in the Permian and then maybe rank them for me in terms of like where the next largest markets are?

Well for us, we don't really provide that level of detail. And I would tell you that may be a good follow-up discussion if you want to follow up with the finance team. But we don't typically break out by our horsepower range in the basin or by basin exactly what all of the -- where our horsepower resides. So you may be able to talk to the team to get a little bit more. But I would tell you is that while we're seeing that growth in the Permian, it's not our largest horsepower location. We have substantial presence in the Eagle Ford, in the Barnett as well as in the Permian to pick out the what I think are the top 3 locations for our overall fleet locations.

Okay, great. And then there was actually a transaction recently at the end of June, and I was kind of surprised that pricing kind of equivalent was pretty high on a horsepower basis. I think it was an all-cash deal, kind of translates to about like $950 per horsepower. I was wondering if, for example, you guys are looking at -- or seeing similar types of pricing for some of these private companies that are looking to maybe monetize their assets and just how competitive the market is for potential M&A.

Well couple of thoughts. I do think this is a market that, as I've said in the past, is ripe for some consolidation. However that consolidation occurs, I think it's better for the market. It imposes more discipline. So I like to see the consolidation. Whether we do it or others do it, it's a good thing. We've been a primary consolidator in the past. We're definitely going to be looking for strategic opportunities to do more of that in the future. And the transaction you're referring to, that was pretty one-off and of a smaller business. And so I can't speak to the dynamics of how that got priced overall. But we haven't -- you haven't seen another deal consummated in a while, which means that there are either pricing expectations that may be very high in the space, may be a lot of debt in the space, which impedes some of the consolidation activity. But I do think it's space that is going to be ripe for some consolidation and we intend to make sure we're also working on those opportunities. And we have seen an uptick in a few opportunities, including customer fleets that were locations where they want to have us come in and take over and provide full service. But as I said in the past, even if we see an increase in those opportunities they are very challenging deals to get across the finish line given the overall operating dynamics that we see in the field.

Okay, thanks for that. And David just since I am waiting for the transcript, but as -- can you go over the information on the impairments that you had in your prepared remarks?

Sure. And what impairments information specifically you like?

Just in terms of the number of units and horsepower on the...

At the partnership or at Archrock?

Both would be great.

Okay. So we impaired 60 units for about 23,000 horsepower overall at Archrock. And of that, 40 units or about 13,000 horsepower were at the partnership.

And we have no further questions at this time. I would now like to turn the call over to Brad Childers for closing remarks.

Great. Thanks, operator. Thank you, everyone, for participating in our second quarter call. As we noted, we continue to drive strong new order levels in the second quarter and expect to grow here in 2017 operating horsepower. I look forward to updating everyone in our third quarter call later this year. Thanks very much, guys.

Thank you, ladies and gentleman, this concludes today's conference. Thank you for participating. You may now disconnect.