$15.80
$35.00
bear $15.80
base $28.00
bull $35.00
margin of safety $15.00
market price* $47.21
Kodiak Gas Services rents and operates natural gas compression equipment, mostly for producers and midstream companies in the Permian Basin and Eagle Ford Shale. Customers sign contracts for individual compression units. Large units are typically contracted for three to five years, and after that term contracts roll month to month until renewed. The fleet was 97.7% utilized at the end of 2025, and the four largest customers, all investment grade, produced about 32% of revenue. Revenue reached $1.31 billion in 2025, up from $1.16 billion in 2024, helped by the April 2024 acquisition of CSI Compressco. How we measured earnings. We start from operating cash flow, remove swings in receivables and other working capital, and subtract stock compensation and the capital spending needed to keep the existing fleet running. Growth spending on new units is not charged, because it buys new capacity rather than maintaining the old. Kodiak's own filing reports lower maintenance spending than our method, which infers maintenance from the historical spending-to-revenue ratio, so our figures are deliberately conservative. On this basis, earnings per share were $0.90 in 2021, $0.13 in 2022, $1.54 in 2023, $1.69 in 2024 and $2.45 in 2025. Large non-cash charges, including depreciation of $276 million and a $62 million loss on selling older equipment in 2025, are already reflected in cash flow. Because the fleet wears out, the cases below assume the earning power eventually fades rather than lasting forever. Starting level. The 2024 acquisition changed the company, so we use only 2024 and 2025 and take the middle, about $2.07 per share. It sits below 2025 because 2024 included only part of a year of the acquired business. Earnings per share rose about 45% in 2025; we assume no growth from the starting level, so no reversal of any slowdown is needed. In the first half of 2026, revenue rose about 13% to $737 million while net income was flat at about $70 million and capital spending doubled to $319 million. Those results are not enough to move the starting level, and we did not credit the extra spending with future earnings. Base case, about $28 per share. Earnings hold at about $2.07 per share for 20 years, supported by high utilization, investment-grade customers and a fleet that is regularly overhauled to like-new condition, then fade to zero over the following 20 years. No growth is credited. Kodiak spent about $200 million on growth equipment in 2025 and says it may fund such spending with borrowings, and it has reported results only since its 2023 listing, so we do not count growth as secured. Bear case, about $16 per share. Earnings fall back to the 2023 level of $1.54 for 10 years and then fade to zero over 15 years. The named pressures are the 9% of horsepower already on month-to-month terms that can be cancelled on 30 to 90 days notice, one third of revenue tied to four customers, and $2.6 billion of debt that raises the cost of a weak stretch. Bull case, about $35 per share. Earnings stay at the 2025 level of $2.45 for 25 years, then fade to zero over 20 years. This needs only that the fleet keeps performing as it did with the acquired business in place for a full year. What could make this wrong. If customers hand back units when contracts end, or the $2.6 billion of debt has to be refinanced on worse terms, results could land below the bear case. If the actual maintenance need is closer to the $76 million Kodiak reports than to our estimate, the shares are worth more than shown. Margin-of-safety price. The margin-of-safety price is about $15, a little below the bear case, allowing for the debt, the exposure to oil and gas activity in the Permian and the gradual wear of the fleet.