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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financialcondition and results of operations for each of the years ended December 31, 2024 and 2023 are based on, and should be read in conjunction with, our audited Consolidated Financial Statements and the related notes included elsewhere in this 2024 Annual Report on Form 10-K. For a discussion and analysis of changes from 2022 to 2023 and other financial information related to prior periods, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K. The following discussion contains forward-looking statements that include risks and uncertainties. For a description of limitations inherent in forward-looking statements, see “Special Note Regarding Forward-Looking Statements” on page i and Part I, Item 1A. “Risk Factors” in this Report.

All dollar amounts included in the tables that follow are presented in thousands unless otherwise indicated. Certain variances presented as changes in year over year amounts that represent results that are not meaningful are indicated as “NM.”

Overview

We rent, design, sell, service, operate and maintain natural gas compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers along with limited in-house assembly. A limited level of assembly work is done in-house and an increasing amount is done by third-party contractors. We also provide an exchange and rebuild program for compressors and maintain an inventory of new and used compressors to facilitate this business. Our primary focus is on the rental of natural gas compressors. Our rental contracts generally provide for initial terms of six to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units. After the initial term of our rental contracts, most of our customers have continued to rent our compressors on a month-to-month basis. Rental amounts are billed monthly in advance and include maintenance of the rented compressor units.

We conduct our operations in several oil and gas producing basins throughout the United States including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale. We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio. A total of 75 percent of our rental revenue is generated from the Permian Basin and approximately 75 percent of our rental revenue supports oil production primarily in the form of gas lift operations. We operate in one reporting segment.

In December 2023, we decided to cease fabrication of new compressor units for sale or rental to customers at our Midland, Texas facility. We continue to maintain new unit compressor fabrication capability at our Tulsa, Oklahoma facility as well as having relationships with multiple outsourced compressor fabrication providers.

State of the Industry and Outlook

Our strategy for growth is focused on our compressor rental business. Gross margins, exclusive of depreciation and amortization, for our rental business have historically been in the mid-40 percent to low-60 percent range, while margins for the compressor sales business tend to be substantially lower.

The oil and gas equipment rental and services industry is cyclical in nature. The most critical factor in assessing the outlook for the industry is the worldwide supply and demand for oil and gas and the corresponding changes in commodity prices. As demand and prices increase, oil and gas producers typically increase their capital expenditures for drilling, development and production activities, although recent equity capital constraints and demands from institutional investors to keep spending within operating cash flow have meaningfully restrained capital expenditure budgets of domestic exploration and production companies. Generally, increased capital expenditures result in greater revenues and profits for service and equipment companies.

Generally, higher commodity prices lead to higher capital expenditures by oil and gas producers and higher levels of production. In general, we expect our overall business activity and revenues to track the level of activity in the oil and gas industry, specifically production levels, with changes in crude oil and condensate production and consumption levels and prices affecting our business more than changes in domestic natural gas production and consumption levels and prices. In recent years we have increased our rental and sales in unconventional oil shale plays, which are more dependent on crude oil prices. With this shift towards oil production the demand for overall compression services and products is driven by two general factors; (i) an increased focus by producers on artificial lift applications, e.g., production enhancement with compression assisted gas lift;

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and (ii) declining reservoir pressure in maturing natural gas producing fields, especially non-conventional production. These latter types of applications have historically been serviced by wellhead size compressors, and continue to be, but there has also been an economic move by our customers towards centralized drilling and production facilities, which have increased the market need for single and multiple larger horsepower compressor packages. We recognized this need in recent years and have shifted our cash and fabrication resources towards renting gas compressor packages that range from 400 horsepower up to 2,500 horsepower. While this is a response to market conditions and trends, it also provides us with the opportunity to compete as a full-line compression service provider.

We typically experience a decline in demand during periods of low oil and gas prices. In recent years, our level of activity has become more largely driven by the price of crude oil as opposed to natural gas. Generally, we feel that the level of demand for our compressor services is more closely tied to production activities, which are likely to fare better than drilling activity in periods of declining commodity prices.

Operating Highlights

The following table summarizes our key operating statistics as of the dates or for the periods presented, as applicable:

December 31,

Horsepower utilization (at period end) 82.1 % 80.8 % 74.8 %

Average horsepower utilization 81.8 % 78.2 % 72.8 %

Unit utilization (at period end) 63.2 % 66.5 % 65.3 %

Rental revenues as a percent of total revenues 92.0 % 87.6 % 87.8 %

Of the total horsepower utilized as of December 31, 2024, 376,685 of horsepower was being rented under contracts expiring between 2025 and 2029 and 115,071 of that horsepower was being rented on a month-to-month basis. Of the 1,208 compressors utilized as of December 31, 2024, 573 were being rented on a month-to-month basis.

Our Performance Trends and Outlook

The oil and gas industry has historically been cyclical and production levels of oil and gas are dependent upon numerous factors. The market for compression equipment and services is highly dependent on the production levels and pricing of oil and gas.

Crude Oil. The level of production for crude oil activity and capital expenditures has generally been dependent upon the prevailing view of future crude oil prices, which are influenced by numerous supply and demand factors, including availability and cost of capital, well productivity and development costs, global and domestic economic conditions, environmental regulations, policies of OPEC and Russia, and other factors. We feel that the current crude oil market production outlook is favorable, with current prices creating strong incentives for our customers to maximize their production levels. While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels.

Natural Gas. We believe the market outlook for natural gas production in the U.S. remains steady while short term price volatility remains a factor due to geopolitical influences and shifts in LNG exports. We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and Marcellus Shale.

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Non-GAAP Financial Measures

We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitably and liquidity. The most significant of these measure are “Adjusted Gross Margin” and “Adjusted EBITDA” both of which are measurements that are not explicitly defined in accordance with generally accepted accounting principles in the United States of America (“GAAP”), or non-GAAP financial measures, and may vary among different industries and the participants therein.

Adjusted Gross Margin

We define “Adjusted Gross Margin” as total revenue less costs of revenues (excluding depreciation and amortization expense). Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and costs (excluding depreciation and amortization expense), which are key components of our operations. Adjusted gross margin differs from gross margin, in that gross margin includes depreciation and amortization expense. We believe Adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations. Depreciation and amortization expense does not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs from current operating activity. Rather, depreciation and amortization expense reflects the systematic allocation of historical property and equipment costs over their estimated useful lives.

Adjusted gross margin has certain material limitations associated with its use as compared to gross margin. These limitations are primarily due to the exclusion of depreciation and amortization expense, which is material to our results of operations. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and our ability to generate revenue. In order to compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.

As an indicator of our operating performance, Adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin as determined in accordance with GAAP. Our Adjusted gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate Adjusted gross margin in the same manner.

The following table calculates our gross margin, the most directly comparable GAAP financial measure, and reconciles it to Adjusted gross margin with further detail by revenue classification for the periods presented:

Year Ended December 31,

Adjusted gross margin by revenue classification:

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Adjusted EBITDA

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses. This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

•it is widely used by investors in the energy industry to measure a company’s operating performance without regard to items excluded from the calculation of Adjusted EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;

•it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating structure; and

•it is used by our management for various purposes, including as a measure of operating performance, in presentations to our Board of Directors, as a basis for strategic planning and forecasting, and as a component for setting incentive compensation.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•Adjusted EBITDA does not reflect all our cash expenditures, future requirements for capital expenditures, or contractual commitments;

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•Adjusted EBITDA does not reflect the cash requirements necessary to service interest or principal payments on our debts; and

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any capital expenditures for such replacements.

There are other material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of certain recurring items that materially affect our net income or loss, and the lack of comparability of results of operations of different companies. Please read the table below to see how Adjusted EBITDA reconciles to our net income (loss), the most directly comparable GAAP financial measure.

The following table reconciles our net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented:

Year Ended December 31,

Retirement of rental equipment 28 505 196

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Results of Operations

Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Rentals

We generate revenue from renting compressors to our customers. These contracts, which all qualify as operating leases under GAAP, may also include a fee for servicing the compressor unit during the rental contract. Our rental contracts typically range from six to 60 months. Our revenue is recognized over time, with monthly payments over the term of the contract. After the terms of the contract have expired, a customer may renew its contract or continue renting on a monthly basis thereafter. The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and employees that are geographically dispersed throughout our operating regions.

The following table summarizes the revenues, costs, adjusted gross margin and related operating statistics with respect to our rentals of compressors for the periods presented:

Year Ended December 31,

Rental adjusted gross margin percentage 60.5 % 54.0 % 6.5 %

Percent of total company revenues 92.0 % 87.6 % 4.4 %

Percent of fleet horsepower utilized 82.1 % 80.8 % 1.3 %

Percent of fleet units utilized 63.2 % 66.5 % (3.3) %

Rental revenue increased for the year ended December 31, 2024, compared to 2023 due primarily to an increase in rented horsepower despite a nominal decrease in the number of units rented and a decrease in total customers. The increase in revenue reflects a continuing trend of growing demand for our higher horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins. The increase in utilized horsepower reflects the continued addition of high horsepower compressor units to our fleet during 2024 consistent with our emphasis on larger units over the past two years. During the year ended December 31, 2024, we placed into service a total of 220 newly set units, including 198 from our existing fleet and 22 new units. Of those sets, a total of 111 were high horsepower units and 22 of those were new units to the fleet. The decline in customers is primarily attributable to E&P industry consolidation as well as the acquisition of existing producing oil and gas properties among E&P companies; however, it has not resulted in any meaningful decrease in our level of business activity. The cost of rentals increased on an absolute basis due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs. As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the year ended December 31, 2024, compared to the year ended December 31, 2023.

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Sales

We generate revenue by the sale of custom/assembled compressors and parts, as well as exchange/rebuilding customer owned compressors and sale of used rental equipment. Costs of sales include purchases of engines, compressors, coolers and other component materials as well as direct and indirect labor attributable to the assembly of equipment to meet the unique specifications of our customers. In addition, our costs of sales include overhead and related support costs attributable to our assembly, repair and overhaul facilities in Midland, Texas and Tulsa, Oklahoma.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressors, parts and equipment and repair/overhaul services for the periods presented:

Year Ended December 31,

Sales adjusted gross margin $ (290) $ 2 $ (292) NM

Sales adjusted gross margin percentage (3.8) % — % (3.8) %

Percent of total company revenues 4.9 % 7.4 % (2.5) %

Sales revenue declined for the year ended December 31, 2024, compared to 2023. Sales are subject to fluctuations in the timing of industry activity related to our customers’ capital projects and, as such, can vary substantially between periods. Due to these circumstances as well as the costs of maintaining support facilities relative to revenues, we continue to shift our business away from sales of new compressor packages to renting our owned units to our customers. While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the gross margin declined to a negative value due primarily to indirect labor and fixed overhead costs that are not otherwise subject to capitalization at our assembly, repair and overhaul facilities.

Aftermarket Services

We provide routine or call-out services on customer-owned equipment as well as commissioning of new units for customers. Revenue is recognized after services in the contract are rendered. The primary costs associated with our aftermarket services are labor, support costs, materials and supplies.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our aftermarket services for the periods presented:

Year Ended December 31,

Aftermarket services adjusted gross margin $ 943 $ 1,429 $ (486) (34.0) %

Aftermarket services adjusted gross margin percentage 19.3 % 23.5 % (4.2) %

Percent of total company revenues 3.1 % 5.0 % (1.9) %

Third party aftermarket services revenues, costs and margin declined for the year ended December 31, 2024, compared to 2023. The decline is primarily attributable to a lower volume of service call-out work performed during 2024 compared to 2023. Aftermarket services only represented 3.1 percent of our revenue in 2024, providing minimal impact on our overall adjusted gross margin.

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Selling, General and Administrative Expenses

Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, human resources, information technology, health, safety and environmental and investor relations. In addition, SG&A includes non-personnel costs, such as occupancy costs, IT support costs, professional fees and other supporting corporate expenses including public company compliance costs. When applicable, SG&A expenses also includes severance benefits and related costs associated with exit activities and restructuring actions.

The following table summarizes the components of our SG&A expenses for the periods presented:

Year Ended December 31,

Severance and restructuring charges 33 1,224 (1,191) NM

SG&A expenses as a percent of total revenues 13.4 % 14.0 % (0.6) %

SG&A expenses increased for the year ended December 31, 2024, as compared to 2023 on an absolute dollar basis while continuing a steady decline as a percent of revenues. As our revenues have increased commensurate with our growth, total SG&A expenses have consistently declined as a percent of revenues despite our incurring a higher level of costs to appropriately scale our administrative function. The absolute dollar increase was primarily impacted by (i) higher salaries, benefits and commissions of $3.3 million reflecting new executive leadership and support staff growth as well and higher commissions attributable to higher revenues, (ii) higher consulting expenses of $1.2 million primarily attributable to recruiting charges and interim staffing for certain senior and executive roles, (iii) higher public company compliance-related costs of $1.0 million consistent with our change in SEC filer status and (iv) higher information technology support costs of $0.4 million in support of our growth. These items were partially offset by lower stock-based compensation expense of $0.2 million as certain prior year awards were fully amortized and lower legal fees of $0.4 million. In addition, we incurred less than $0.1 million of severance charges in 2024 associated with certain restructuring activities at our assembly facilities. The 2023 period included a restructuring charge of $1.2 million associated with a previously disclosed compensation arrangement with our former CEO who served in an interim role from mid-November of 2022 through mid-February of 2024.

Depreciation and Amortization

Depreciation and amortization expenses reflect the depreciation of our rental compressor fleet as well as the depreciation and amortization of our operating and corporate facilities, vehicles and other equipment, and the amortization of finance leases and intangible assets.

The following table summarizes the components of our depreciation and amortization expenses for the periods presented:

Year Ended December 31,

Depreciation and amortization allocable to cost of revenues:

Intangible asset amortization 121 125 (4) (3.2) %

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Depreciation and amortization expense increased on an absolute basis and declined as a percent of revenues during the year ended December 31, 2024, compared to 2023. The increase is primarily the result of new units added to our rental fleet in 2024 and 2023. We placed into service 22 high horsepower units (approximately 28,740 horsepower) to our fleet in 2024 and 92 units (approximately 98,349 horsepower) in 2023. All 22 in 2024 and 73 of those units in 2023, were 400 horsepower or larger, representing a substantial portion of the total horsepower added during each year, respectively. These higher horsepower unit additions, which began in earnest during 2023, are reflective of our strategic plans to concentrate our business development on these higher margin applications.

Impairments

We assess our long-lived assets for impairment on an annual basis or when indicators of impairment are present. An impairment loss is recognized if the future undiscounted cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s carrying value.

The following table indicates the charges incurred for impairments for the periods presented:

Year Ended December 31,

During 2024, we fully impaired an intangible asset attributable to a trade name for $0.7 million. Consistent with our shift in focus away from the sales of compressor and related technology, we determined that we will no longer market the technology associated with the trade name. Please see Note 8 (“Intangible Assets”) to our Consolidated Financial Statements for additional information. In addition, we fully impaired certain information technology assets in the amount of $0.2 million for which we have terminated plans to develop and utilize the associated applications. During 2023, we fully impaired certain information technology assets in the amount of $0.8 million under similar circumstances.

Inventory Allowance

We routinely review our stock of inventory for obsolescence and realizability. When the carrying value exceeds the net realizable value, a charge is recorded to operating income.

The following table indicates the charges incurred for inventory allowance for the periods presented:

Year Ended December 31,

Due primarily to the slow-moving nature, obsolescence of a portion of our long-term inventory and inventory related to the retirement of certain rental equipment, we recorded an increase of $1.9 million to the inventory allowance reserve for the year ended December 31, 2024. During 2023, we recorded an increase of $4.0 million to the inventory allowance reserve under similar circumstances as well as our decision to cease further assembly activities at our facility in Midland, Texas. We ended 2024 with an inventory allowance balance of $5.9 million. Please see Note 4 (“Inventory”) to our Consolidated Financial Statements for additional information regarding the inventory allowance.

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Retirement of Rental Equipment

We routinely review the rental fleet to determine which units are no longer of the type, configuration, make or model that our customers are demanding or that are not cost efficient to refurbish, maintain and/or operate. When appropriate, we retire such units from the fleet and write-off any remaining carrying value.

The following table indicates the charges incurred for the retirement of rental equipment for the periods presented:

Year Ended December 31,

Retirement of rental equipment $ 28 $ 505 $ (477) NM

Retirements of compressor units during 2024 were minimal as compared to 2023 during which time we determined 95 units should be retired from our rental fleet for which we recorded loss on retirement of rental equipment during the year.

Gain on the Sale of Property and Equipment

As circumstances warrant, we will market certain property and equipment, primarily trucks, when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets. Gains and losses are recognized accordingly upon the completion of such transactions.

The following table presents the gains recognized upon the sale of property and equipment for the periods presented:

Year Ended December 31,

Gain on the sale of property and equipment, net $ 430 $ 481 $ (51) (10.6) %

Gains recognized during the years ended December 31, 2024 and 2023 are primarily attributable to the sales of trucks after the completion of their useful lives. In addition, amounts are included during both years for sales scrap materials.

Interest Expense

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our Credit Facility, net of amounts capitalized attributable to certain capital projects. Also included is interest expense on our financing leases.

The following table summarizes the components of our interest expense for the periods presented:

Year Ended December 31,

Weighted-average interest rates on borrowings 8.82 % 8.88 % (0.06) %

Interest expense increased during the year ended December 31, 2024 as compared to 2023 due primarily to over $48 million of higher average borrowings outstanding under our Credit Facility during 2024. In addition, we incurred higher debt issue cost amortization due primarily to costs associated with amendments to the Credit Facility and lower capitalized interest as a result of a smaller capital expenditures program in 2024 as compared to 2023. These increases were marginally offset by the effect of lower average interest rates which declined in the second half of 2024 consistent with Federal Reserve interest rate reductions.

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Other Income (Expense)

This caption primarily reflects non-operating items of income and loss including non-cash gains and losses attributable to our corporate-owned life insurance (“COLI”) policies related to our deferred compensation plan. Please see Note 12 (“Deferred Compensation Plan”) to our Consolidated Financial Statements for additional information regarding the plan.

The following table indicates our other income (expense) for the periods presented:

Year Ended December 31,

Other income was relatively consistent during the year ended December 31, 2024 as compared to 2023 with net gains from investments supporting our COLI policies comprising the majority of the amounts for each period. Other amounts include certain vendor rebates and other miscellaneous non-operating income.

Income Tax Expense

Income tax expense represents our income tax provision as determined in accordance with GAAP. It considers taxes attributable to our obligations for federal taxes under the IRC as well as to various states in which we operate, primarily Texas. Please see Note 11 (“Income Taxes”) to our Consolidated Financial Statements for additional information.

The following table summarizes our income tax provision for the periods presented:

Year Ended December 31,

Income tax expense increased for the year ended December 31, 2024, compared to 2023 due primarily to substantially higher pre-tax income during 2024 despite a lower effective tax rate. Our effective tax rate for both years differs from the U.S. federal statutory rate of 21%. The effective tax rate declined during 2024 from that during 2023 largely due to certain executive severance compensation expenses incurred during 2023 that were non-deductible for income tax purposes. Only a minimal portion of our total income tax expense is current while $4.2 million and $1.8 million is considered deferred for 2024 and 2023, respectively.

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Financial Condition

Liquidity and Capital Resources

Our primary sources of liquidity include cash on hand, cash provided by operating activities and borrowings under our Credit Facility. The Credit Facility provides us with up to $300 million in borrowing commitments with an additional $50 million at our request. The borrowing base under the Credit Facility was $300.0 million with $168.0 million of borrowings outstanding as of March 14, 2025, leaving $132.0 million of availability under the Credit Facility.

Our cash flows from operating and investing activities are subject to a degree of volatility due primarily to (i) the consistency of our customers in remitting amounts owed to us for our services in full and on a timely basis and (ii) the timing of payments to our vendors and suppliers for capital projects which are often made well in advance of placing new compressor equipment into service. In order to mitigate such volatility we employ disciplined efforts to monitor customer credit and maintain communications to support collection efforts when necessary. Furthermore, and in certain circumstances, we require deposits in advance of transactions that require substantial investment on our part. To the extent necessary, we rely on the availability of our Credit Facility to fund capital expenditures beyond that provided by our cash flows from operating activities.

Our forecasted capital expenditures for 2025 will continue to be directly dependent upon our customers’ compression requirements and our capital availability, while maintaining prudent levels of debt.

The level of our capital expenditures will vary in future periods depending on energy market conditions and other related economic factors. Based upon existing economic and market conditions, we believe that cash on hand, cash flows from operating activities and borrowings under the Credit Facility will be sufficient to satisfy our capital and liquidity requirements for at least the twelve months subsequent to the date that this Annual Report on Form 10-K was filed. We also believe we have flexibility with respect to our financing alternatives and adjustments to our capital expenditure plans if circumstances warrant. We do not have any material continuing commitments related to our current operations that cannot be met with our cash on hand, cash from operating activities and borrowings under our Credit Facility.

If we require additional capital to fund any significant unanticipated expenditures, including any material acquisitions of other businesses, joint ventures or other opportunities, this additional capital could exceed our current resources and might not be available to us when we need it, or might not be on acceptable terms. In addition, our financing capacity could be negatively impacted by other economic factors. Please see Part I, Item 1A, “Risk Factors”, of this Report.

For a detailed analysis of our historical capital expenditures, see the “Cash Flows” discussion that follows.

Cash From Operating Activities. As of December 31, 2024, we had $2.1 million of cash on hand. For additional information and an analysis of or historical cash flows from operating activities, see the “Cash Flows” discussion that follows.

Credit Facility Borrowings. During 2024, we borrowed $6.0 million, net of repayments, under the Credit Facility. Through March 14, 2025, we repaid $2.0 million, net of borrowings under the Credit Facility. The following table summarizes our borrowing activity under the Credit facility for the periods presented:

Borrowings Outstanding

End of Period Weighted-average Maximum Weighted-average Rate

For additional information regarding the terms and covenants under the Credit Facility, see the “Capitalization” discussion that follows.

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Proceeds from Sales and Monetization of Assets. We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others. For additional information and an analysis of or historical proceeds from sales of assets, see the “Cash Flows” discussion that follows.

Capital Markets Transactions. From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities. We maintain an effective shelf registration statement with the SEC for up to $200 million for a variety of securities to provide financing optionality.

Cash Flows

The following table summarizes our cash flows for the periods presented:

Year Ended December 31,

Net cash provided by operating activities $ 66,463 $ 18,033

Net cash used in investing activities (71,440) (153,888)

Net cash provided by financing activities 4,373 135,229

Net decrease in cash and cash equivalents $ (604) $ (626)

Cash Flows from Operating Activities. Our cash flows from operating activities increased by $48.4 million during 2024 from 2023. From a broad perspective, cash flows improved due to substantial growth in our high horsepower unit rentals which also provide for higher realized margins. In addition, we made substantial progress in improving our processes for billings and collections from certain customers and lowering our “days sales outstanding” statistics for accounts receivable. These efforts arose from the negative impact on working capital during 2023 as our rental activities began to grow significantly. We anticipate a continued focus on these efforts into 2025 as we concentrate on further improvements to our working capital performance statistics.

Cash Flows from Investing Activities. For the years ended December 31, 2024 and 2023, we invested approximately $71.9 million and $153.9 million, respectively, in rental equipment, property and other equipment. Included in these totals for 2024 and 2023 were $66.9 million and $152.5 million in new equipment to our rental fleet and $5.0 million and $1.4 million in other property and equipment, respectively. Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the year. Our rental work-in-progress increased by $0.8 million and $13.8 million during 2024 and 2023, respectively. We paid $0.2 million and $0.4 million for COLI policy purchases during 2024 and 2023. We also received proceeds from the sale of property and equipment of $0.5 million and $0.5 million during the same periods, respectively.

Cash Flows from Financing Activities. During 2024, we had net borrowings of $6.0 million under the Credit Facility while 2023 included net borrowings of $139.0 million. The decrease in net borrowings is due primarily to the substantial investment in large horsepower units during the prior year consistent with our strategy of directing our business to these larger, higher margin applications. While we incurred and paid debt issuance costs during both years, the amounts paid during 2023 were $1.7 million higher as the Credit Facility was substantially upsized with the amendment and restatement in February 2023. We received proceeds from the exercise of stock options of $0.3 million during 2024 while none were received during 2023 and taxes paid related to the net share settlements of equity awards were $0.2 million and $1.0 million for 2024 and 2023, respectively.

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Capitalization

The following table summarizes our total capitalization as of the dates presented:

December 31,

Debt as a percent of total capitalization 40.0 % 41.0 %

Credit Facility. We have a five-year senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association (the “Lender”) as administrative agent, TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with a total commitment of $300.0 million. We also have a right to request from the Lender, an increase to the potential aggregate commitment of up to $50.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $350.0 million. The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.

Our Credit Facility is subject to: (i) a borrowing base calculation, (ii) variable rates of interest on borrowings that are determined, in part, upon our actual leverage ratio, as defined in the Credit Facility, (iii) commitment fees, (iv) certain financial and other covenants and (v) events of default and acceleration, among other terms and conditions that are customary for such credit instruments. Please see Note 10 (“Long-Term Debt”) to our Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility.

As of December 31, 2024, we had $170.0 million outstanding under our Credit Facility with a weighted average interest rate of 8.12%. As of December 31, 2024, we had approximately $130.0 million available for borrowing under the Credit Facility, subject to borrowing base determination. As of December 31, 2024, we were in compliance with all financial covenants in our Credit Facility.

Critical Accounting Estimates

We describe our significant accounting policies in Note 2 (“Summary of Significant Accounting Policies”) to our Consolidated Financial Statements. We believe that the application of these policies on a consistent basis enables us to provide the users of our financial statements with useful and reliable information regarding our results of operations, financial condition and cash flows.

The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our Consolidated Financial Statements. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are generally based on historical experience and various other assumptions that we believe to be reasonable in consideration of our circumstances and expectations for the future based on available information. Our actual results could differ significantly from those estimates under different assumptions and conditions.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our results of operations, financial condition and cash flows and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

38

Inventories

We value our total inventory (current and long-term) at the lower of the actual cost and net realizable value. We regularly review inventory quantities on hand and record an allowance for excess and obsolete inventory based primarily on current and anticipated customer demand and production requirements. We assess anticipated customer demand based on current and upcoming capital expenditure budgets of our major customers as well as other significant participants in the industry, along with oil and gas price forecasts and other factors affecting the industry as a whole. Our estimates and assumptions regarding these factors are subject to significant variability and can result in provisions for valuation allowances of our inventory. For the year ended December 31, 2024, our provision for excess and obsolete inventory totaled $1.9 million which increased our allowance for obsolescence to $5.9 million as described more fully in the discussion of our Results of Operations above and Note 4 (“Inventory”) to our Consolidated Financial Statements.

Long-Lived Assets

Depreciation

Depreciation expense is computed using the straight-line method over the estimated useful lives of the underlying long-lived assets. Our rental equipment has estimated useful lives ranging from 15 to 25 years, while our property and equipment has estimated useful lives which range from 3 to 39 years. The estimated useful lives and salvage values of these long-lived assets are based on estimates and assumptions that reflect our historical experience and expectations regarding their future utilization, obsolescence, technical developments, market demand and geographic location. The use of different estimates and assumptions in the determination of depreciation, particularly with respect to useful lives, could result in significant differences to our results of operations. We regularly review the appropriateness of the estimated useful lives of our long-lived assets and may shorten or extend such lives as appropriate based on business circumstances.

Impairments

We assess our long-lived assets, including rental equipment, other property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate that the net carrying values may not be recoverable. The following factors could trigger an impairment review: significant underperformance relative to historical or projected future cash flows; significant adverse changes in the extent or manner in which an asset (or asset group) is being used or its condition, including a meaningful decline in fleet utilization over prior periods; significant negative industry or company-specific trends or actions, including meaningful capital expenditure budget reductions by our major customers or other sizable exploration and production or midstream organizations, as well as significant declines in oil and natural gas prices; legislative changes prohibiting us from leasing our units; or poor general economic conditions. After the assessments of such circumstances, an impairment loss is recognized if the future undiscounted net cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s (or asset group’s) carrying value. During the year ended December 31, 2024, we fully impaired our indefinite-lived intangible asset attributable to a trade name (see the discussion in “Results of Operations” above and Note 8. (“Intangible Assets”) to our Consolidated Financial Statements).

Income Taxes

In connection with the process of preparing our financial statements, we are required to estimate our federal income taxes as well as income taxes in each of the states in which we operate. This process involves us estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are reflected on our Consolidated Balance Sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not probable, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance during a period, we must include an expense in the tax provision in the Statement of Operations.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In this process, we consider all available positive and negative evidence including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. As of December 31, 2024, we have no valuation allowance and fully expect to utilize all of our deferred tax assets.

Please see Note 11 (“Income Taxes”) for a more thorough discussion of our income taxes.

39

Off-Balance Sheet Arrangements

From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of December 31, 2024, we did not have any material off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

Please see Note 2 (“Summary of Significant Accounting Policies”) to our Consolidated Financial statements for a discussion of recently issued accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risk to which we are exposed is interest rate risk.

Our interest rate risk is attributable to our borrowings under the Credit Facility, which are subject to variable interest rates. As of December 31, 2024, we had borrowings of $170.0 million under the Credit Facility at a weighted average interest rate of 8.12%. Assuming a constant borrowing level under the Credit Facility and excluding any changes in other financial metrics that would impact the applicable margin applied to Credit Facility borrowings, an increase (decrease) in the interest rate of one percent would result in an increase (decrease) in interest expense of $1.7 million on an annual basis.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is presented in Part IV, Item 15. “Exhibits and Financial Statement Schedules”of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based upon the evaluation, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our CEO and CFO, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management, including the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”), as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on the results of management’s evaluation described above, management concluded that our ICFR was effective as of December 31, 2024.

40

Remediation of Previously Identified Material Weakness

As previously reported in Part II, Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2023, we disclosed a material weakness related to inventory. Specifically, control activities related to year-end inventory count procedures and the process to review and approve inventory adjusting journal entries.

We have completed the execution of our remediation plan for this material weakness and, as of December 31, 2024, successfully remediated the material weakness by implementing and successfully testing the following actions:

•We updated and implemented new policies and procedures related to work in process inventory.

•We hired additional management with a focus on inventory control and inventory best practices.

•We relocated certain inventory to centralized warehouses.

•We improved and enforced our formalized inventory count and inventory adjustment procedures which were applied to our end-of-year inventory counts.

•We added additional inventory safeguards in our warehouses limiting physical access to our inventory.

•We limited the number of employees authorized to record adjustments in our accounting software through additional IT controls with respect to inventory transfers.

•We have enhanced efforts to ensure our employees understand the importance of internal controls and compliance with corporate policies and procedures.

Attestation Report of the Registered Public Accounting Firm

The effectiveness of ICFR as of December 31, 2024 was audited by Ham, Langston & Brezina LLP, an independent registered public accounting firm, as stated in its report included in Part IV, Item 15“Exhibits and Financial Statement Schedules”of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

During the year ended December 31, 2024, except as discussed above, there were no other changes in our ICFR during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our ICFR.

ITEM 9B. OTHER INFORMATION

Stephen C. Taylor, our Chairman of the Board of Directors, adopted a Rule 10b5-1 trading agreement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to an aggregate of 100,000 shares of the Company’s common stock, subject to various volume amounts and price thresholds. The plan became effective on August 21, 2024 and the plan provided that it would terminate on August 19, 2025, unless sooner terminated under its terms. The 10b5-1 Plan was entered into during an open insider trading window and no sales commenced under the plan until completion of the required cooling off period under Rule 10b5-1. The 10b5-1 Plan terminated pursuant to its terms on or about January 21, 2025, in connection with the final sale of shares covered by the plan.

No other director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, during the three months ended December 31, 2024.

ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

41

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated herein by reference to the sections “Election of Directors,” “Executive Officers,” “Corporate Governance” and “The Board of Directors and its Committees” in our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2024 or as such period may be extended by action of the SEC.

We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees. The Code of Business Conduct and Ethics is posted in the “Investor Relations” section of our website at www.ngsgi.com. The Code of Business Conduct and Ethics maybe obtained free of charge by writing before to Natural Gas Services Group, Inc., Attn: Investor Relations, 404 Veterans Airpark Lane, Ste 300, Midland, TX 79705.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the section “Executive Compensation” in our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2024 or as such period may be extended by action of the SEC.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to the section “Principal Shareholders and Security Ownership of Management” in our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2024 or as such period may be extended by action of the SEC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE

The information required by this item is incorporated herein by reference to the sections “Related Person Transactions” and “Corporate Governance” in our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2024 or as such period may be extended by action of the SEC.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the section “Principal Accountant Fees and Services” in our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2024 or as such period may be extended by action of the SEC.

42

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report on Form 10-K.

1.Consolidated Financial Statements. The following financial statements are filed as a part of this Annual Report on Form 10-K:

Reports of Independent Registered Public Accounting Firm (PCAOB ID 298) F-1

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-4

Consolidated Statements of Stockholders’ Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

2. Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable or the information is set forth in the Consolidated Financial Statements or Notes thereto.

3. Exhibits

A list of exhibits to this Annual Report on Form 10-K is set forth below:

Exhibit No.Description

43

19* Amended and Restated Insider Trading Policy.

21.1* Subsidiaries of the registrant.

23.1* Consent of Ham, Langston & Brezina L.L.P.

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

† Management contract or compensatory plan or arrangement.

* Filed herewith.

ITEM 16. FORM 10-K SUMMARY

None.

44

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATURAL GAS SERVICES GROUP, INC.

March 17, 2025 By: /s/ Justin C. Jacobs

Justin C. Jacobs

Chief Executive Officer

(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS,that each person whose signature appears below constitutes and appoints Justin C. Jacobs and Ian M. Eckert, jointly and severally, as his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature Title Date

Justin C. Jacobs

Ian M. Eckert

/s/ Stephen C. Taylor Chairman of the Board of Directors March 17, 2025

Stephen C. Taylor

/s/ Donald Tringali Director March 17, 2025

Donald Tringali

/s/ Nigel J. Jenvey Director March 17, 2025

Nigel J. Jenvey

/s/ Jean K. Holley Director March 17, 2025

Jean K. Holley

/s/ Georganne Hodges Director March 17, 2025

Georganne Hodges

45

NATURAL GAS SERVICES GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets as of December 31, 2024 and 2023 F-3

Notes to Consolidated Financial Statements:

1. Description of Business F-7

2. Summary of Significant Accounting Policies F-7

3. Trade Accounts Receivables F-11

4. Inventory F-12

5. Rental Equipment F-12

6. Property and Equipment F-13

8. Intangible Assets F-15

9. Supplemental Balance Sheet Disclosures F-15

10. Long-Term Debt F-15

11. Income Taxes F-17

12. Deferred Compensation Plan F-18

13. Commitments and Contingencies F-19

14. Stockholders’ Equity F-19

15. Revenues from Customers F-20

16. Stock-Based and Other Long-Term Incentive Compensations F-20

17. Restructuring Activities F-24

18. Related Party Transactions F-24

19. Earnings (Loss) per Share F-24

20. Subsequent Events F-25

46

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Natural Gas Services Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Natural Gas Services Group, Inc. (the “Company”) as of December 31, 2024 and 2023, and related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 17, 2025 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined that there are no critical audit matters.

/s/ Ham, Langston & Brezina LLP

Houston, Texas

March 17, 2025

We have served as the Company’s auditor since 2022.

F - 1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Natural Gas Services Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Natural Gas Services Group, Inc.'s (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2024 and 2023, and related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”) of the Company and our report dated March 17, 2025 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying “Item 9A, Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ham, Langston & Brezina LLP

Houston, Texas

March 17, 2025

We have served as the Company’s auditor since 2022.

F - 2

NATURAL GAS SERVICES GROUP, INC.CONSOLIDATED BALANCE SHEETS(in thousands)

December 31,

ASSETS

Current Assets:

Cash and cash equivalents $ 2,142 $ 2,746

Trade accounts receivable, net of provision for credit losses 15,626 39,186

Inventory, net of allowance for obsolescence 18,051 21,639

Long-term inventory, net of allowance for obsolescence — 701

Rental equipment, net of accumulated depreciation 415,021 373,649

Property and equipment, net of accumulated depreciation 22,989 20,550

Intangible assets, net of accumulated amortization — 775

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Commitments and contingencies (Note 13)

Stockholders’ Equity:

Preferred stock, 5,000 shares authorized, no shares issued or outstanding — —

Total liabilities and stockholders’ equity $ 492,528 $ 478,729

See accompanying notes to these consolidated financial statements.

F - 3

Year Ended December 31,

Revenue:

Cost of revenues (excluding depreciation and amortization)

Retirement of rental equipment 28 505 196

Gain on sale of property and equipment, net (430) (481) (250)

Other income (expense):

Earnings (loss) per share:

Weighted average shares outstanding:

See accompanying notes to these consolidated financial statements.

F - 4

NATURAL GAS SERVICES GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Shares Amount Shares Amount Shares Amount

Stock-based compensation — — — 1 1,909 — — — 1,910

Vesting of restricted stock — — 125 — — — — — —

Purchase of treasury shares — — — — — — 535 (6,660) (6,660)

Net loss — — — — — (569) — — (569)

Stock-based compensation — — — 2 2,052 — — — 2,054

Vesting of restricted stock — — 169 — — — — — —

Stock-based compensation — — — — 1,821 — — — 1,821

Vesting of restricted stock — — 51 1 (1) — — — —

Exercise of common stock options — — 23 — 293 — — — 293

Purchase of treasury shares — — — — — — — — —

See accompanying notes to these consolidated financial statements.

F - 5

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Retirement of rental equipment 28 505 196

Gain on the sale of property and equipment, net (430) (481) (250)

Amortization of debt issuance costs 746 425 48

Provision for credit losses 433 492 —

(Gain) loss on company owned life insurance (156) 235 389

Changes in operating assets and liabilities:

Prepaid expenses and prepaid income taxes 152 (7) (250)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of company owned life insurance, net (22) (422) (329)

Proceeds from sale of property and equipment 476 477 372

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of credit facility borrowings (22,000) — —

Payments of other long term liabilities (780) (95) (3)

Payments of debt issuance costs (962) (2,693) (77)

Proceeds from exercise of stock options 293 — —

Purchase of treasury shares — — (6,660)

Taxes paid related to net share settlement of equity awards (178) (983) (515)

NET CHANGE IN CASH AND CASH EQUIVALENTS (604) (626) (19,570)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,746 3,372 22,942

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,142 $ 2,746 $ 3,372

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Income taxes paid $ — — —

NON-CASH TRANSACTIONS:

Transfer of rental equipment to inventory $ 51 $ 665 $ —

Transfer of right of use assets to property and equipment $ 2,641 — —

Accrued purchases of property and equipment $ 2,687 — —

Right of use asset acquired through a finance lease $ 2,174 $ 1,146 $ —

Right of use asset acquired through an operating lease $ 563 $ 63 $ 229

See accompanying notes to these consolidated financial statements.

F - 6

NATURAL GAS SERVICES GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts or where otherwise indicated)

1. Description of Business

Natural Gas Services Group, Inc. (the “Company”, “NGS,” “Natural Gas Services Group,” “we,” “us” or “our”) (a Colorado corporation), is a leading provider of natural gas compression equipment, technology and services to the energy industry. We rent, design, sell, install, service and maintain natural gas compressors and related equipment for our customers’ oil and gas production and processing facilities, generally using equipment from OEM suppliers along with limited in-house assembly. We are headquartered in Midland, Texas, with an assembly facility located in Tulsa, Oklahoma, a repair and overhaul shop in Midland, Texas, and service facilities located in major oil and gas producing basins in the United States (“U.S.”).

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of the Company, its subsidiary, NGSG Properties, LLC, which owns our headquarters office building and the rabbi trust associated with our deferred compensation plan (see Note 12). All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation.

Certain reclassification have been made to prior periods to conform to the current presentation. In our Consolidated Statements of Operations, (gains) and losses on the sale of property equipment have been reclassified from selling, general and administrative expenses to a stand-alone caption included within total operating income.

Use of Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts reported in these Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include fixed asset lives, provision for credit losses and the allowance for inventory obsolescence. Additionally, we conduct an annual review of our long-lived assets for impairment. In connection with the review, determining factors are based on estimates that can significantly impact the carrying value of these assets. It is at least reasonably possible these estimates could be revised in the near term and the revisions could be material.

Cash and Cash Equivalents

For purposes of reporting cash flows, we consider all short-term investments with an original maturity of three months or less to be cash equivalents. At times, cash balances at banks and financial institutions may exceed federally insured amounts.

Accounts Receivable and Credit Losses

Our trade accounts receivables are not collateralized except as provided for under certain lease agreements.We perform ongoing credit evaluations of our customers and adjust credit limits based on management’s assessment of the customer’s financial condition and payment history, as well as industry and general economic conditions. We continuously monitor collections and payments from our customers, and maintain an allowance for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified as well as forecasts of future economic conditions. While such credit losses have historically been within our expectations and the allowance established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.

Revenue Recognition

The following is a description of principal activities from which we generate our revenue and the accounting policies that we apply for the recognition thereof:

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Rental Revenue. We generate revenue from renting compressor equipment to our customers for the right to control the use of the equipment ratably over the term of the underlying agreement. Our agreements for rental equipment qualify as operating leases under Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”) as we retain the primary exposure to changes in the underlying equipment’s value as the lessor unlike a sale or secured lending arrangement. Our agreements may also include a fee for servicing the equipment during the term of the rental contract. We have applied the practical expedient provided in ASC 842, which allows us to combine lease and non-lease components. Our rental contracts typically range from six to 60 months.

As a lessor, we recognize operating lease revenue on a straight-line basis with equal monthly payments over the term of the underlying agreements. After the terms of the agreement have expired, a customer may renew their contract or continue renting on a monthly basis thereafter. The leased equipment is generally skid-mounted and can be moved to different locations at the direction of our customers. The leased equipment assets remain on our Consolidated Balance Sheets consistent with other property and equipment. Cash receipts associated with our lease agreements are classified within cash flows from operating activities in our Consolidated Statements of Cash Flows.

Sales and Aftermarket Services Revenue. We generate revenue from the sale of custom/assembled compressors, flare systems and parts, as well as exchange/rebuilding customer owned compressors and sale of used rental equipment. We also provide routine aftermarket or call-out services on customer owned equipment.

Consistent with ASC Topic 606, Revenues from Contracts with Customers (“ASC 606”), revenue is measured and recognized based on a consideration specified in a customer’s contract, excluding any sale incentives and taxes collected on behalf of third parties (i.e. sales and property taxes). Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services. To recognize revenue, we (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy the performance obligation(s). Transaction prices are not subject to variable consideration constraints. Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our Consolidated Statements of Operations.

For sales, revenue is recognized when control has passed to the customer generally when the equipment is completed and shipped. We request some of our customers to make progressive payments as the product is being built; these payments are recorded as deferred revenue within Accrued liabilities on the Consolidated Balance Sheet until control has been transferred. These contracts also may include an assurance warranty clause to guarantee the product is free from defects in material and workmanship for a set duration of time; this is a standard industry practice and is not considered a performance obligation. The amount of revenue recognized is not adjusted for expected returns, as our historical part returns have been de minimis. Revenue for aftermarket and other services is recognized after the services in the contract are rendered.

Inventory Valuation

Inventory (current and long-term) is valued at the lower of cost or net realizable value. The cost of inventories is determined by the weighted average method. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on current and anticipated customer demand and production requirements. We routinely review our inventory allowance balance to account for slow moving or obsolete inventory costs that may not be recoverable in the future. We assess anticipated customer demand based on current and upcoming capital expenditure budgets of our major customers as well as other significant companies in the industry, along with oil and gas price forecasts and other factors affecting the industry. Our long-term inventory consisted of raw materials and replacement parts that remain useable but that we do not expect to sell or use within the next year.

Long-Lived Assets

Rental equipment and property and equipment are recorded at cost less accumulated depreciation, except for work-in-progress on new rental equipment which is recorded at cost until it’s complete and added to our fleet. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Our rental equipment has estimated useful lives between 15 and 25 years, while our property and equipment has estimated useful lives which range from 3 to 39 years. The majority of our property and equipment, including rental equipment, is a direct cost to generating revenue.

We assess our rental equipment and property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The following factors could trigger an impairment review: significant underperformance relative to historical or projected future cash flows; significant adverse changes in the

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extent or manner in which the asset (or asset group) is being used or its condition, including a meaningful drop in fleet utilization over the prior four quarters; significant negative industry or company-specific trends or actions, including meaningful capital expenditure budget reductions by our major customers or other sizable exploration and production or midstream companies, as well as significant declines in oil and gas prices; legislative changes prohibiting us from leasing our compressor units; or poor general economic conditions. An impairment loss is recognized if the future undiscounted cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s carrying value.

Sales of equipment out of the rental fleet are included with sales revenue and cost of sales, while retirements of units are presented as a separate operating expense. Maintenance and repairs are charged to cost of rentals as incurred.

Intangible Assets

We amortize intangible assets with definite lives over their useful lives and review for impairment when indicators of impairment are present. We review indefinite-lived intangible assets for impairment annually or when indicators of impairment are present. We review intangibles through an assessment of the estimated future cash flows related to such assets. In the event that assets are found to be carried at amounts in excess of estimated undiscounted future cash flows, then the assets will be adjusted for impairment to a level commensurate with a discounted cash flow analysis of the underlying assets. As of December 31, 2024, we no longer have any intangible assets (see Note 8).

Leases

We determine if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. GAAP requires all leases to be reported on the balance sheet as right-of-use (“ROU”) assets and lease obligations. We determine if an arrangement is a lease at inception and determine lease classification and recognize ROU assets and liabilities on the lease commencement date based on the present value of lease payments over the lease term. As the discount rate implicit in the lease is rarely readily determinable, we estimate our incremental borrowing rate using information available at the commencement date in determining the present value of the lease payments. We, as a lessee, apply the practical expedient to not separate non-lease components from lease components, therefore, accounting for each separate lease component and its associated non-lease component, as a single lease component. For each lease that (i) contains the same timing and pattern of transfer for lease and non-lease components and (ii) if the lease component, if accounted for separately, would be classified as an operating lease, we have elected to not separate non-lease components from lease components. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As substantially all of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is based on a fully collateralized loan over the lease term, to determine the present value of lease payments.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and net operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the statutory enactment date. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

With respect to uncertain tax positions, GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In order to record any financial statement benefit, we are required to determine, based on technical merits of the position, whether it is more likely than not (a likelihood of more than 50 percent) that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. If that step is satisfied, then we must measure the tax position to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of the benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We had no liabilities for uncertain tax positions as of December 31, 2024 and 2023.

Our policy regarding income tax interest and penalties is to charge those items as components of interest expense and other expense, respectively.

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Capitalized Interest

We capitalize interest from external borrowings on significant expenditures for the assembly of our natural gas compressor equipment until such projects are ready for their intended use. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. GAAP provides for a fair value hierarchy, which requires an entity to maximize the use of observable inputs when measuring fair value. These inputs are categorized as follows:

Level 1 - quoted prices in an active market for identical assets or liabilities;

Level 2 - quoted prices in an active market for similar assets or liabilities, inputs other than quoted prices that are observable for similar assets or liabilities, inputs derived principally from or corroborated by observable market data by correlation or other means; and

Level 3 - valuation methodology with unobservable inputs that are significant to the fair value measurement.

We believe that the fair value of our cash and cash equivalents, trade accounts receivables, and accounts payable as of December 31, 2024 and 2023 approximate their carrying values due to the short-term nature of the instruments or the use of prevailing market interest rates. We considered the borrowings under our credit facility to approximate fair value based upon variable interest rates currently available to us for loans with similar terms (level 2).

Segments and Related Information

GAAP defines the characteristics of an operating segment as (i) being engaged in business activity from which it may earn revenue and incur expenses, (ii) being reviewed by the Company’s chief operating decision maker (“CODM”) for decisions about resources to be allocated and assess its performance and (iii) having discrete financial information. Although we review our products to analyze the nature of our revenue, costs and expenses, the net income and non-GAAP financial measures including EBITDA and Adjusted gross margin are not captured or analyzed by these categories. Our chief executive officer (“CEO”) serves as the CODM and does not make resource allocation decisions or assess the performance of the business based on these categories, but rather on the entire entity in the aggregate. Accordingly, the measures of profit and loss and total assets are effectively those of the Company as a whole as reflected in these Consolidated Financial Statements. Based on these facts and underlying circumstances described further below, we have concluded that we operate in one business segment.

We are primarily engaged in the business of leasing natural gas compressors to our customers. In addition, we design, assemble and sell natural gas compressors and provide aftermarket services on compressors in our fleet and to third parties. These business activities are similar in all geographic areas in which we operate. Our customers primarily consist of entities in the business of producing oil and gas. The maintenance and service of our products is consistent across the entire Company and is performed by a dedicated group of employees via an internal fleet of vehicles. The regulatory environment is similar in every jurisdiction in that the most impacting regulations and practices are the result of federal energy policy.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”) to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. We elected to early adopt ASU 2023-09 effective with our financial reporting for the year ended December 31, 2024 and have applied the provisions on a retrospective basis for all periods presented in these Consolidated Financial Statements. Accordingly, the enhanced disclosures required of ASU 2023-09 are provided in Note 11.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”) which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We adopted ASU 2023-07 effective January 1, 2024 and the required disclosures are referenced above in our discussion of Segments and Related Information.

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Recently Issued Accounting Pronouncements Pending Adoption

In November 2024, the FASB issued ASU 2024-03 “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense” (“ASU 2024-03”) which expands annual and interim disclosures expenses for certain types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general & administrative expenses, and research and development). ASU 2024-03 is effective for annual periods beginning January 1, 2027, and for interim periods beginning January 1, 2028, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on our Consolidated Financial Statements or disclosures.

3. Trade Accounts Receivable

The following table summarizes our trade accounts receivable from customers as of the dates presented:

December 31,

Trade accounts receivable

Sales and aftermarket services 2,657 7,138

Less: Allowance for credit losses (1,249) (823)

Total trade accounts receivable, net $ 15,626 $ 39,186

Our trade accounts receivable consist of customer obligations due under normal trade terms for (i) operating leases for the use of our natural gas compressors, (ii) the sale of compressors and flare systems and (iii) the performance of aftermarket services.

Major Customers and Concentration of Credit Risk

Rental revenue and sales from Occidental Permian, LTD. (“Oxy”) in 2024, 2023 and 2022amounted to 54 percent, 50 percent and 42 percent of revenue, respectively. No other single customer accounted for more than 10 percent of our revenues in 2024, 2023 and 2022. Oxy’s accounts receivable balances amounted to 52 percent and 64 percent of our accounts receivable as of December 31, 2024 and 2023, respectively. No other customers amounted to more than 10 percent of our accounts receivable as of December 31, 2024 and 2023.

Allowance for Credit Losses

The following table summarizes the changes in our allowance for credit losses for the periods presented:

Year Ended December 31,

Provision for credit losses 433 492 —

Management believes that the allowance is adequate; however, actual write-offs may exceed the recorded allowance.

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4. Inventory

The following table summarizes our inventory, net of allowances for obsolescence as of the dates presented:

December 31,

Our long-term inventory, which is fully reserved as of December 31, 2024, consists of excess raw materials that remain viable but with limited market opportunities.

The following table summarizes the changes in our allowance for obsolescence for the periods presented:

Year Ended December 31,

Write-offs — (81) (27)

The allowance for 2023 was primarily related to our decision to cease future compressor assembly at our Midland, Texas facility, which reduced the expected future demand of certain inventory items held at this facility. In 2024, we continued actions in support of our strategy to further outsource assembly activities to third parties resulting in an additional allowance charge.

5. Rental Equipment

The following table summarizes our rental equipment and accumulated depreciation as of the dates presented:

December 31,

Rental equipment, net of accumulated depreciation $ 415,021 $ 373,649

We capitalized interest totaling approximately $4.7 million and $5.5 million in connection with the acquisition and assembly of compressor units for the years ended December 31, 2024 and 2023, respectively. No interest was capitalized during 2022. Depreciation expense for rental equipment was $28.2 million, $24.0 million and $21.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Retirement of Rental Equipment

We routinely review our rental fleet for retirement or obsolescence as well as an assessment to determine which units are not of the type, configuration, make or model that our customers are demanding or that are not cost efficient to refurbish, maintain and/or operate. As a result of these reviews, we recorded charges for the retirement of rental equipment of less than $0.1 million, $0.5 million and $0.2 million during the years ended December 31, 2024, 2023 and 2022, respectively.

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Rental Activity

Future minimum rent payments from our customers for contractual arrangements not on a month-to-month basis at December 31, 2024, are as follows:

Year Ending December 31,

6. Property and Equipment, net

The following table summarizes our property and equipment as of the dates presented:

December 31,

Depreciation expense for property and equipment was $2.4 million, $2.4 million and $2.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

7. Leases

Our operating leases are primarily related to property leases for field offices and office equipment. Our operating leases have remaining lease terms of one to five years. Renewal and termination options are included in the lease term when it is reasonably certain that we will exercise the option. Our finance leases were primarily related to vehicles used in our rental business; however, we terminated all such leases during 2024 and purchased the vehicles and recorded them in property and equipment. Prior to their termination, our finance leases generally had lease terms of three years. Our lease agreements do not contain any contingent rental payments, material residual guarantees or material restrictive covenants.

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The following table reflects the amounts related to leases that are recorded on our Consolidated Balance Sheets as of the dates presented:

Classification on Consolidated December 31,

Operating lease assets Other assets $ 607 $ 210

Finance lease assets Other assets — 1,045

Total right of use assets $ 607 $ 1,255

Current lease liabilities - operating Accrued liabilities $ 153 $ 58

Current lease liabilities - financing Accrued liabilities — 307

Total current lease liabilities 153 365

Noncurrent lease liabilities - operating Other long-term liabilities 454 173

Noncurrent lease liabilities - financing Other long-term liabilities — 723

Total noncurrent lease liabilities 454 896

Total lease liabilities $ 607 $ 1,261

Weighted average remaining lease term (in years) 3.8 3.1

Weighted average discount rate 8.3 % 9.1 %

Operating lease costs are recognized on a straight-line basis over the lease term. Total operating lease costs for the years ended December 31, 2024, 2023 and 2022 were approximately $0.7 million,$0.5 million and$0.4 million, respectively.

The following table summarizes the cash paid for amounts included in the measurement of liabilities included in our Consolidated Statements of Cash Flows for the periods presented:

Year Ended December 31,

Finance lease cost $ 622 $ 95 $ 3

(1)Lease costs are classified in the Consolidated Statements of Operations within cost of revenues and selling, general and administrative expenses.

(2) Includes costs of $0.1 million, $0.3 million and $0.2 million for leases with terms of 12 months or less and $0.6 million, $0.2 million and $0.2 million for leases with terms greater than 12 months for the years ended December 31, 2024, 2023 and 2022, respectively.

The following summarizes the future maturities of our lease liabilities for the periods presented:

Year Ending December 31,

Total lease payments 751

Less: Imputed interest (144)

Rent expense under such leases was $0.6 million, $0.2 million and $0.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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8. Intangible Assets

In connection with our acquisition of Screw Compression Systems (“SCS”) in January 2005, we acquired certain intangible assets attributable to developed technology and the SCS trade name. Amortization expense attributable to the developed technology recognized in each of the years ending December 31, 2024, 2023 and 2022 was $0.1 million and the asset is fully amortized as of December 31, 2024. During 2024, we fully impaired the trade name intangible asset as we are no longer marketing the associated technology. There were no impairments of these intangible assets during the years ended December 31, 2023 or 2022.

The following table summarizes our intangible assets by major asset class as of the dates presented:

Trade name Indefinite — — — 654 — 654

9. Supplemental Balance Sheet Disclosures

The following table summarizes the components of accrued liabilities as of the dates presented:

December 31

Right of use obligations 153 365

Deferred revenue — 418

10. Long-Term Debt

Our outstanding long-term debt consists of the following as of the dates presented:

December 31,

We have a five-year senior secured revolving credit agreement, as amended (the “Credit Facility”) with Texas Capital Bank, National Association (the “Lender”) as administrative agent, TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with a total commitment of $300.0 million. We also have a right to request from the Lender, an increase to the potential aggregate commitment of up to $50.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $350.0 million. The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.

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As of December 31, 2024, we had $170.0 million outstanding under our Credit Facility with a weighted average interest rate of 8.12%. As of December 31, 2024, we had approximately $130.0 million available for borrowing under the Credit Facility, subject to borrowing base determination. As of December 31, 2024, we were in compliance with all financial covenants in our Credit Facility.

Borrowing Base. At any time before the maturity of the Credit Facility, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above. Generally, the borrowing base equals the sum of (a) 85% of eligible accounts receivable owed to us, plus (b) 50% of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $2.5 million, plus (c) the lesser of (i) 95% of the net book value of the compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80% of the net liquidation value percentage of the net book value of the eligible compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (d) 80% of the net book value, valued at the lower of cost (excluding any costs for capitalized interest or other noncash capitalized costs) or market of the eligible new compressor fleet, minus (e) any required availability reserves determined by the Lender in its sole discretion. The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral.

Interest and Fees. Under the terms of the Credit Facility, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Term Secured Overnight Financing Rate (“SOFR”) Loan, the Adjusted Term SOFR rate plus the Applicable Margin. “Base Rate” means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day; (b) the sum of the federal funds rate for such day plus 0.50%; and (c) the Adjusted Term SOFR for such day plus 1.00%. The Applicable Margin is determined based upon the leverage ratio as set forth in the most recent compliance certificate received by the Lender for each fiscal quarter from time to time pursuant to the Credit Facility. Depending on the leverage ratio, the Applicable Margin can be 2.00% to 2.75% for Base Rate Loans (as defined in the Credit Facility) and 3.00% to 3.75% for Term SOFR Loans and for requested letters of credit. In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Credit Facility is in effect at an annual rate equal to 0.50% of the unused commitment amount. Accrued interest is payable monthly on outstanding principal amounts and unused commitment fee, provided that accrued interest on Term SOFR Loans is payable at the end of each interest period, but in no event less frequently than quarterly.

Covenants. The Credit Facility contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens; enter into transactions with affiliates; make acquisitions in excess of certain amounts; pay dividends; redeem or repurchase capital stock or senior notes; make investments or loans; make negative pledges; consolidate, merge or effect asset sales; or change the nature of our business. In addition, we are subject to certain financial covenants in the Credit Facility that require us to maintain (i) a leverage ratio, as defined, lesser than or equal to (a) 3.50 to 1.00 as of the last day of each fiscal quarter ending on or prior to December 31, 2024, (b) 3.75 to 1.00 for fiscal quarters ending on March 31, 2025 and June 30, 2025, (c) and 3.50 to 1.00 for the fiscal quarters ending September, 30, 2025, December 31, 2025 and March 31, 2026 and (d) 3.25 to 1.00 the fiscal quarter ended June 30, 2026 and for each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter.

Events of Default and Acceleration. The Credit Facility contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults; defaults in performance of covenants or other agreements contained in the Credit Facility and the other transaction documents; inaccuracies in representations and warranties; certain defaults, termination events or similar events; certain defaults with respect to any other Company indebtedness in excess of $1.0 million; certain bankruptcy or insolvency events; the rendering of certain judgments in excess of $1.0 million; certain ERISA events; certain change in control events and the defectiveness of any liens. Obligations outstanding under the Credit Facility may be accelerated upon the occurrence of an event of default.

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11. Income Taxes

The following table summarizes our provision for income taxes for the presented:

Year Ended December 31,

Current income tax expense:

Federal $ (88) $ — $ —

Total current income tax expense (202) (35) (17)

Deferred income tax (expense) benefit:

Total deferred income tax (expense) benefit (4,237) (1,838) (511)

The following table summarizes the effective tax rates for the periods presented:

Year Ended December 31,

We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal or state income tax examination by tax authorities for years before 2015.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic impact caused by the COVID-19 pandemic. The CARES Act, among other things, permits federal income tax net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes. We generated significant NOLs during 2018 and 2019 and filed carryback claims for these losses to the preceding five years.

In connection with the filing of these claims, we initially recorded a federal income tax receivable of approximately $15.0 million and an increase of approximately $10.1 million to our deferred tax liability as of March 31, 2020. During 2020, we received federal income tax refunds corresponding to the 2018 NOL carryback leaving approximately $11.3 million remaining to be refunded. In conjunction with the remaining $11.3 million income tax refund claim, we received a notice from the Internal Revenue Service (“IRS”) on March 8, 2023, stating that our income tax returns for 2015, 2016, 2017 and 2019 were selected for examination. Furthermore and as is customary for income tax refunds of this magnitude, the IRS is required to review the refund claim and provide a report to the Joint Committee on Taxation of the U.S. Congress (“JCT”).

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The following table summarizes the income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and (liabilities) as of the periods presented:

December 31,

Deferred income tax assets:

Research and development credits 1,011 1,313

Stock-based compensation 269 153

Deferred income tax liabilities:

Intangible assets — (143)

Total deferred income tax liabilities (73,198) (68,253)

Net deferred income tax liabilities $ (45,873) $ (41,636)

As of December 31, 2024, we had NOL carryforwards for federal income tax purposes of $89.5 million, which may be carried forward indefinitely and can offset up to 80% of future taxable income in any given year. Future changes in ownership, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”), could limit the amount of NOL carryforwards used in any one year. In general, under Section 382 and 383 of the IRC, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain tax credits, to offset future taxable income and tax. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders changes by more than 50 percentage points over such stockholders’ lowest percentage of ownership during the testing period (generally three years). We also had state NOL carryforwards of $46.6 million with carryforward periods similar to those of our federal NOLs.

We have no reserves for uncertain tax positions as of December 31, 2024 and 2023.

12. Deferred Compensation Plan