Form 8-K/A - Current report: [Amend]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): July 22, 2024

Commission File Number 001-33666

Archrock, Inc.

(Exact name of registrant as specified in its charter)


Delaware		74-3204509
(State or other jurisdiction of incorporation)		(IRS. Employer Identification No.)

9807 Katy Freeway, Suite 100, Houston, TX 77024

(Address of principal executive offices, zip code)

(281) 836-8000

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common stock, $0.01 par value per share	AROC	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Introductory Note.

On August 30, 2024, Archrock, Inc., a Delaware corporation (“Archrock”), filed with the U.S. Securities and Exchange Commission a Current Report on Form 8-K (the “Original Form 8-K”) reporting, among other events, the completion of Archrock’s acquisition of all the issued and outstanding equity interests in Total Operations and Production Services, LLC (“TOPS” and such acquisition, the “Acquisition”), pursuant to the terms of that certain Purchase and Sale Agreement, dated July 22, 2024 (the “Purchase Agreement”), by and among Archrock, Archrock ELT LLC, TOPS Pledge1, LLC and TOPS Pledge2, LLC, and, solely with respect to Section 6.25 of the Purchase Agreement, TOPS Holdings, LLC.

This Current Report on Form 8-K/A amends the Original Form 8-K to include (i) the financial statements of TOPS required by Item 9.01(a) and (ii) the pro forma financial information of TOPS required by Item 9.01(b). Archrock had previously indicated in the Original Form 8-K that such financial statements and pro forma information would be provided no later than 71 days from the date on which the Original Form 8-K was required to be filed.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business or Funds Acquired.

The audited financial statements of TOPS as of and for the fiscal year ended December 31, 2023 are attached as Exhibit 99.1 to this Current Report on Form 8-K/A and incorporated by reference herein.

The unaudited financial statements of TOPS as of and for the six months ended June 30, 2024 are attached as Exhibit 99.2 to this Current Report on Form 8-K/A and incorporated by reference herein.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined balance sheet of Archrock as of June 30, 2024 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2024 and the year ended December 31, 2023, giving effect to the Acquisition, are filed as Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated by reference herein.

(d) Exhibits.

Exhibit Number		Description
23.1		Consent of Moss Adams LLP, independent auditors.
99.1		Audited financial statements of TOPS.
99.2		Unaudited financial statements of TOPS.
99.3		Unaudited pro forma condensed combined financial statements.
104		Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARCHROCK, INC.

November 15, 2024	By:	/s/ Stephanie C. Hildebrandt
		Stephanie C. Hildebrandt
		Senior Vice President, General Counsel and Secretary

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-267523) and Form S-8 (No. 333-217923 and No. 333-238264) of our report dated March 4, 2024, relating to the financial statements of Total Operations and Production Services, LLC, appearing in the Current Report on Form 8-K/A dated November 15, 2024 of Archrock, Inc.

/s/ Moss Adams LLP

Dallas, Texas

November 15, 2024

Exhibit 99.1

Table of Contents


	Page
Report of Independent Auditors	1
Financial Statements
Balance Sheets	3
Statements of Operations	4
Statements of Changes in Member’s Equity	5
Statements of Cash Flows	6
Notes to Financial Statements	7

Report of Independent Auditors

The Board of Directors and Member

Total Operations and Production Services, LLC

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of Total Operations and Production Services, LLC, which comprise the balance sheets as of December 31, 2023 and 2022, and the related statements of operations, changes in member’s equity, and cash flows for the years ended December 31, 2023 and 2022, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Total Operation and Production Services, LLC as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Total Operations and Production Services, LLC and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Total Operations and Production Services, LLC’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

●	Exercise professional judgment and maintain professional skepticism throughout the audit.

●

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

●

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Total Operations and Production Services, LLC’s internal control. Accordingly, no such opinion is expressed.

●	Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

●	Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Total Operations and Production Services, LLC’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

/s/ Moss Adams

Dallas, Texas

March 4, 2024

Financial Statements

Total Operations and Production Services, LLC

Balance Sheets

December 31, 2023 and 2022


	2023		2022

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	74,125	$	90,845
Accounts receivable, net		8,374,076		4,874,643
Inventory		195,957		214,002
Prepaid expenses and other current assets		552,625		344,113

Total current assets		9,196,783		5,523,603

PROPERTY AND EQUIPMENT, net		547,364,424		286,606,350
GOODWILL		60,087,759		60,087,759
INTANGIBLES, net		10,962,774		11,673,958
DEBT ISSUANCE COSTS, net		5,368,185		2,508,554
RIGHT-OF-USE ASSET, net		1,267,169		754,157
OTHER ASSETS		2,588,554		951,511

TOTAL ASSETS	$	636,835,648	$	368,105,892

LIABILITIES AND MEMBER'S EQUITY

CURRENT LIABILITIES
Accounts payable	$	54,142,753	$	29,932,968
Accrued liabilities		2,524,644		1,808,034
Deferred revenue		1,273,776		38,394
Current portion of lease liability		469,119		468,556
Current portion of debt		1,984,344		1,446,151

Total current liabilities		60,394,636		33,694,103

LONG-TERM LEASE LIABILITY, net of current portion		798,050		285,601
LONG-TERM DEBT, net of current portion		419,968,395		188,018,818

Total liabilities		481,161,081		221,998,522

COMMITMENTS AND CONTINGENCIES (Note 7)

MEMBER'S EQUITY		155,674,567		146,107,370

TOTAL LIABILITIES AND MEMBER'S EQUITY	$	636,835,648	$	368,105,892

See accompanying notes.

Total Operations and Production Services, LLC

Statements of Operations

Years Ended December 31, 2023 and 2022


	2023		2022
REVENUES
Compression rentals	$	105,701,868	$	56,839,638
Field equipment sales		37,516		276,809
Field services fees		3,002,909		2,336,421

Total revenues		108,742,293		59,452,868

EXPENSES
Cost of operations, exclusive of depreciation and amortization		30,526,417		20,270,624
Selling, general, and administrative		10,773,723		8,000,626
Depreciation and amortization		27,923,524		15,074,339

Total expenses		69,223,664		43,345,589

OPERATING INCOME		39,518,629		16,107,279

OTHER INCOME (EXPENSE)
Interest expense		(29,989,551)		(9,159,509)
Other income		38,119		42,824

Total other expenses		(29,951,432)		(9,116,685)

NET INCOME	$	9,567,197	$	6,990,594

See accompanying notes.

Total Operations and Production Services, LLC

Statements of Changes in Member’s Equity

Years Ended December 31, 2023 and 2022


				Retained
	Units	Amount		Earnings		Total

BALANCE, December 31, 2021	119,500,000	$	119,500,000	$	(433,224)	$	119,066,776

Contributions	20,050,000		20,050,000		-		20,050,000

Net income	-		-		6,990,594		6,990,594

BALANCE, December 31, 2022	139,550,000		139,550,000		6,557,370		146,107,370

Net income	-		-		9,567,197		9,567,197

BALANCE, December 31, 2023	139,550,000	$	139,550,000	$	16,124,567	$	155,674,567

See accompanying notes.

Total Operations and Production Services, LLC

Statements of Cash Flows

Years Ended December 31, 2023 and 2022


	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,567,197	$	6,990,594
Adjustments to reconcile net income to net cash from operating activities
Depreciation		26,114,433		13,890,507
Amortization of intangible and other assets		1,809,091		1,183,832
Amortization of debt issuance costs		1,450,862		575,635
Change in operating assets and liabilities
Accounts receivable		(3,499,433)		(676,199)
Inventory		18,045		(158,683)
Prepaid expenses and other current assets		(208,507)		269,213
Other non-current assets		(2,734,950)		(1,179,790)
Accounts payable and accrued liabilities		2,800,937		2,886,201
Deferred revenue		1,235,382		29,321

Net cash from operating activities		36,553,057		23,810,631

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(264,747,054)		(142,841,957)

Net from investing activities		(264,747,054)		(142,841,957)

CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions		-		20,050,000
Proceeds from borrowings		344,725,900		180,619,551
Repayments of borrowings		(112,238,130)		(80,098,793)
Debt issuance costs		(4,310,493)		(1,572,087)

Net cash from financing activities		228,177,277		118,998,671

NET CHANGE IN CASH AND CASH EQUIVALENTS		(16,720)		(32,655)

CASH AND CASH EQUIVALENTS, beginning of year		90,845		123,500

CASH AND CASH EQUIVALENTS, end of year	$	74,125	$	90,845

SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES
Capital expenditures in accounts payable	$	49,959,667	$	27,834,214

See accompanying notes.

Total Operations and Production Services, LLC

Notes to Financial Statements

Note 1 – Organization and Description of Business

Total Operations and Production Services, LLC, (the Company, we, or our) a Delaware Corporation headquartered in Midland, Texas, is a natural gas compression leasing, sales, and fabrication company. The Company was formed with a perpetual life and entered into its limited liability company (LLC) agreement on July 31, 2019.

As an LLC, the amount of loss at risk for each individual member is limited to the amount of capital contributed to the LLC and, unless otherwise noted, the individual member’s liability for indebtedness is limited to the member’s actual capital contribution.

Note 2 – Summary of Significant Accounting Policies

Basis of presentation – The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and all activity takes place within Total Operations and Production Services, LLC.

Use of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during each reporting period.

The most significant estimates include: (i) depreciable lives and impairment assessment of the property and equipment, and (ii) allowance for doubtful accounts. Management evaluates estimates on an ongoing basis using historical experience and other methods considered reasonable under the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, changes in facts and circumstances or discovery of new facts or circumstances may cause actual results to differ materially from management’s estimates.

Revenue recognition

Field equipment sales and field services fees – The Company generates revenue from sales of compressors and maintenance services. Our revenue is recognized when all five of the following steps are complete (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied. Should changes in conditions cause the Company to determine revenue recognition criteria are not met for certain transactions, revenue recognition would be delayed until such time that the transactions become realizable and fully earned.

Compression rentals – The Company generates revenue from renting compressors to our customers. Our rental contracts typically range from one to 36 months. Our revenue is recognized over time, with equal monthly payments over the term of the contract. After the terms of the contract have expired, a customer may renew their contract or continue renting on a monthly basis thereafter.

Total Operations and Production Services, LLC

Notes to Financial Statements

Deferred revenue – For compressor rental revenue, customers are billed monthly in advance of the month for which the unit is rented. Revenues from equipment sales are billed on an agreed upon schedule, with revenue not being considered earned until the unit has been delivered. Payments received in advance of meeting the above revenue recognition criteria are recorded as “Deferred revenue” on the balance sheets.

Contract costs – During 2023 and 2022, the Company recognized an other non-current asset totaling $2,653,582 and $1,188,190, respectively, for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company expects to recover those costs through future fees for the consulting services. The Company amortizes the asset over one to three years because the asset relates to the services transferred to the customer during the contract term. During the years ended December 31, 2023 and 2022, the Company amortized $1,101,909 and $483,777, respectively, related to sales commissions.

Cash and cash equivalents – We consider all highly-liquid instruments purchased with an original maturity of three months or less to be cash equivalents. We maintain cash in bank deposits with a major financial institution. These accounts, at times, may exceed federally insured limits. Deposits in the United States currently are guaranteed by the Federal Deposit Insurance Corporation up to $250,000. We monitor the financial condition of the financial institution and have not experienced any losses on such accounts.

Concentration of credit risk – Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable.

Virtually all of our accounts receivable are from customers of varying sizes in the oil and natural gas industry. Two customers accounted for 60% of accounts receivable at December 31, 2023. Three customers accounted for 51% of revenues for the year ended December 31, 2023. Two customers accounted for 57% of accounts receivable at December 31, 2022. Three customers accounted for 52% of revenues for the year ended December 31, 2022. Although diversified among many companies, collectability is dependent on the financial condition of each individual company as well as the general economic conditions of the industry. We review the financial condition of customers prior to extending credit and generally do not require collateral in support of our trade receivables.

Accounts receivable are stated at the historical carrying amount net of an allowance for doubtful accounts. The allowance for doubtful accounts is estimated by considering specific customer collection issues, the aging of accounts receivable, supplementary customer data, and future estimated losses in relation to revenues for the year. Accounts receivable are written off only when management has exhausted all efforts to collect such receivables, including efforts of third-party collection agencies. As of December 31, 2023 and 2022, the Company determined no allowance was deemed necessary. Accounts receivable under revenue contracts was $4,198,444, $4,874,643, and $8,374,076 as of January 1, 2022, December 31, 2022, and December 31, 2023, respectively.

Fair value measurements and financial instruments – Financial instruments include cash and cash equivalents, receivables, payables, and long-term debt. The carrying value of cash and cash equivalents, receivables and payables is considered to be representative of fair value because of their short maturity. The book value of the long-term bank debt approximates fair value because of its floating rate structure.

Total Operations and Production Services, LLC

Notes to Financial Statements

Certain non-financial assets and liabilities are measured at fair value on a non-recurring basis, including property, plant, and equipment. These assets are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Inventory – Inventory consists primarily of parts used for fabrication or maintenance of natural gas compression equipment, compression units that are held for sale, and oilfield equipment. Inventories are stated at the lower of cost or net realizable value using the standard cost method. The inventory balances are reduced to net realizable value for estimated obsolescence based on specific identification and historical experience.

Property and equipment – Property and equipment are carried at cost and depreciated over the estimated useful lives of the assets primarily using the straight-line method. Normal maintenance and repairs are charged to expense, whereas significant replacements and improvements are capitalized and depreciated over the remaining economic life.

We assess impairment of natural gas compressors, and other long-lived assets using cash flow estimates, recent sales of comparable assets, current value estimates, and other qualitative factors such as idleness or lack of usage. No impairment charge related to natural gas compressors was recognized by the Company for years ended December 31, 2023 and 2022.

Goodwill – Goodwill represents the difference between the fair value of the consideration transferred (purchase price) for the acquired business and the fair value of the identifiable tangible and intangible net assets recognized in the acquisition. A goodwill impairment loss is recognized to the extent the carrying amount of the Company, including goodwill exceeds its fair value. No impairment of goodwill was determined at December 31, 2023 and 2022.

Intangible assets – Intangible assets primarily consist of customer relationships which are amortized to expense over their estimated useful lives. The estimated useful lives of the amortizable intangible asset is based on an evaluation of the circumstances surrounding the asset, including an evaluation of events that may have occurred that would cause the useful life to be decreased. The carrying values of intangible asset is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may be impaired. The carrying value is compared to the undiscounted anticipated future cash flows related to the asset. If the carrying value of the intangible asset exceeds the future undiscounted cash flow, an impairment charge is recorded in the period in which such review is performed to the extent that the carrying value exceeds fair value. No impairment of intangible assets was determined at December 31, 2023 and 2022. Amortization of intangible assets will result in an expense of $711,184 per year until the end of useful life.

Debt issuance costs – Debt issuance costs are capitalized and amortized over the related term of the debt on a straight-line basis (which approximates the effective interest method) as a component of interest expense. If the debt is retired before its scheduled maturity, any remaining unamortized issuance costs associated with the debt are expensed in the same period. The Company incurred $4,310,493 and $1,572,087 of debt issuance costs related to long-term debt during 2023 and 2022, respectively. Debt issuance costs are being amortized through June 2026. Amortization of debt issuance costs of $1,450,862 and $575,635 was expensed by the Company during 2023 and 2022, respectively.

Income taxes – The Company is not subject to federal or state income taxes; instead, any taxable income or loss is passed through to the member and is included on its own respective income tax returns.

Total Operations and Production Services, LLC

Notes to Financial Statements

During 2023, the Company has concluded that there are no significant uncertain tax positions that would require recognition or disclosure in the financial statements. The Company’s policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and to recognize tax penalties in operating expense.

Lease arrangements – In the ordinary course of business, the Company enters into a variety of lease arrangements, including operating and short-term leases.

Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. The operating lease right-of-use (ROU) assets are included within the Company’s non-current assets and lease liabilities are included in current or non-current liabilities on the Company’s balance sheets.

ROU assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments continues to be recognized on a straight-line basis over the lease term.

Reclassifications – Certain amounts from prior periods have been reclassified to conform to the current year’s presentation.

New accounting standards – The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326), which requires companies to use a more forward-looking approach to estimate credit losses on financial instruments, including trade receivables.

ASC 326 provides guidance on the measurement of expected credit losses for financial instruments. Under ASC 326, companies are required to estimate expected credit losses over the life of the asset and recognize those losses in the financial statements. Companies must consider a range of factors, including macroeconomic conditions, industry trends, and the creditworthiness of their customers, when estimating expected credit losses.

Based on management's evaluation of future events, the Company expects credit losses to not be material. Therefore, the Company has determined that the impact of ASC 326 on the allowance for doubtful accounts related to trade receivables is not material.

Total Operations and Production Services, LLC

Notes to Financial Statements

Note 3 – Property and Equipment

Property and equipment consisted of the following as of December 31:


	Useful Life	2023		2022

Natural gas compressors	15 years	$	483,304,788	$	257,470,632
Natural gas compressors - work in process	N/A		97,453,611		40,443,885
Autos and trucks	4 years		8,749,261		5,509,518
Furniture, fixtures, and equipment	5 years		2,349,467		1,660,733

Total property and equipment			591,857,127		305,084,768
Total accumulated depreciation			(44,492,703)		(18,478,418)

Property and equipment, net		$	547,364,424	$	286,606,350

Depreciation expense on the property and equipment was $26,114,433 and $13,890,507 for the Company during 2023 and 2022, respectively.

Note 4 – Long-Term Debt

Credit facility – Effective June 4, 2021, the Company entered into a four-year credit agreement with JPMorgan Chase Bank, N.A. for an initial commitment of $75,000,000.

Amounts borrowed under the credit agreement are limited to the lesser of the borrowing base or the credit commitment amount based on accounts receivable and compressor fleet. The Company has the option of paying interest on borrowing based on either the prime rate (ABR Loans) or the secured overnight financing (SOFR) rate (Eurodollar Loans), plus an applicable margin that varies depending on the Leverage Ratio. Effective May 5, 2022, the Company entered into an amendment that increased the borrowing base to $200,000,000, extended the maturity date to May 5, 2026, and changed the terms of the Eurodollar Loan to be defined as term benchmark borrowings, which carry interest at secured overnight financing rate (SOFR). Effective December 16, 2022, the Company entered into another amendment that increased the borrowing base to $213,000,000. Throughout 2023, the Company entered into three additional amendments to the credit agreement which resulted in a borrowing base of $565,000,000 as of December 31, 2023.

The margin for ABR Loans was 3.00%, and the margin for term benchmark borrowings was 4.00%. As of December 31, 2023, the total interest rate for term benchmark borrowings and ABR loans was 9.09% and 11.50%, respectively. As of December 31, 2022, the total interest rate for term benchmark borrowings and ABR loans was 8.06% and 10.50%, respectively. Interest payments are generally due every 30 days, and all unpaid principal and interest is due at maturity on May 5, 2026.

Total Operations and Production Services, LLC

Notes to Financial Statements

Commencing September 30, 2021, the Company is also required to comply with financial covenants, including a leverage ratio that is no greater than 4.50 to 1.00 and a fixed charge coverage ratio to be no less than 1.25 to 1.00. Commencing with the May 5, 2022 amendment, the leverage ratio requirement was amended to be no greater than 4.75 to 1.00, and the fixed charge coverage ratio requirement was amended to be no less than 1.10 to 1.00. The credit agreement underwent multiple amendments in 2023 to expand the credit facility and adjust the financial covenants. Effective December 31, 2023, the fixed charge ratio was replaced by an interest coverage ratio that carried a requirement to be no less than 2.00 to 1.00. Additionally, the leverage ratio was amended to be no greater than 5.00 to 1.00. The Company was in compliance with their financial covenants as of December 31, 2023 and 2022.

Under the credit agreement, the Company had borrowings of $417,791,598 and $186,547,007 as of December 31, 2023 and 2022, respectively.

Vehicle loans – As of December 31, 2023, the Company held 104 vehicle loans to finance vehicle purchases. As of December 31, 2023, total borrowings related to these loans was $4,161,141, and they carry interest rates that range from 4.35% to 10.53%. As of December 31, 2022, the Company held 84 vehicle loans to finance vehicle purchases. As of December 31, 2022, total borrowings related to these loans was $2,917,963, and they carry interest rates that range from 4.35% to 8.15%. Maturity for the vehicle loans ranges from January 2024 to July 2028.

Required principal payments of the loans are as follows:


Years Ending
December 31,

2024	$	1,984,344
2025		1,421,068
2026		418,465,970
2027		52,858
2028		28,499

Total	$	421,952,739

Note 5 – Members’ Equity

Upon formation, the Company authorized one series of member units. The Company has authority to issue an unlimited number of member units. Profits and losses are allocated to members in accordance with the terms of the LLC Agreement.

Note 6 – Employee Profit Sharing Plans

The Company has a defined contribution retirement plan which is a qualified 401(k) Employee Profit Sharing Plan (the Plan) subject to the Employee Retirement Income Security Act of 1974. The Plan is available to all employees on the first of the first month of the calendar quarter following six months of service. The Company provides for employer matching contributions of 100% of the first 4% of an employee’s contribution. The Company’s contributions were $390,860 and $222,371 for the years ended December 31, 2023 and 2022.

Total Operations and Production Services, LLC

Notes to Financial Statements

Effective October 3, 2019, the Plan elected safe harbor status whereby the Company makes discretionary profit sharing contributions. Participants are immediately vested in their contributions, Company contributions, and actual earnings thereon.

The Company may make an additional discretionary profit sharing contribution to the Plan as determined by Company management. This discretionary contribution may not exceed the limits prescribed by the Internal Revenue Code (IRC).

Note 7 – Commitments and Contingencies

Litigation and contingencies – The Company is involved in litigation on various matters and may be subject to certain claims and contingent liabilities which arise in the normal course of business. We do not believe the outcome of pending or possible litigation, claims, or contingent liabilities will have a material effect on the financial statements.

Note 8 – Leases

The Company has operating leases primarily for office space. The Company’s leases expire at various times, and many have certain renewal options and lease payment escalation provisions. For those contracts where renewal options are reasonably certain to be exercised, the Company recognizes renewal option periods in the determinations of ROU assets and lease liabilities.

The following summarizes the operating lease for office space under ASC 842 as of December 31:


	2023			2022

Operating lease expenses	$	559,600		$	498,160
Short-term lease expense		691,769			422,236
Lease expense paid to related parties		180,000			244,000
Cash paid for operating lease liabilities		559,600			498,160
Right-of-use assets obtained in exchange for operating lease liabilities		498,858			295,563
Amortization of right-of-use assets		37,859			43,300
Right-of-use assets balance		1,267,169			754,157
Lease liabilities balance		1,267,169			754,157
Weighted-average discount rate		5.62	%		5.00	%
Weighted-average remaining lease term		2.81			1.74

Total Operations and Production Services, LLC

Notes to Financial Statements

As of December 31, 2023, the future lease payments under noncancelable leases by year ending December 31 were as follows:


Years Ending
December 31,
2024	$	538,800
2025		475,800
2026		266,700
2027		105,000

Total lease payments	$	1,386,300

Less imputed interest		(119,131)

Total present value of lease payments	$	1,267,169

Note 9 – Subsequent Events

The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through March 4, 2024, the date these financial statements were available for issuance.

Exhibit 99.2

Table of Contents



	Page
Financial Statements
Balance Sheets	1
Statements of Operations	2
Statements of Changes in Member’s Equity	3
Statements of Cash Flows	4
Notes to Financial Statements	5

Financial Statements

Total Operations and Production Services, LLC

Balance Sheets (Unaudited)

As of June 30, 2024 and December 31, 2023


	June 30, 2024		December 31, 2023

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	284,673	$	74,125
Accounts receivable, net		13,822,465		8,374,076
Inventory		499,057		195,957
Prepaid expenses and other current assets		446,097		552,625

Total current assets		15,052,292		9,196,783

PROPERTY AND EQUIPMENT, net		693,567,572		547,364,424
GOODWILL		60,087,759		60,087,759
INTANGIBLES, net		10,607,182		10,962,774
DEBT ISSUANCE COSTS, net		6,831,300		5,368,185
RIGHT-OF-USE ASSET, net		1,692,582		1,267,169
OTHER ASSETS		3,424,040		2,588,554

TOTAL ASSETS	$	791,262,727	$	636,835,648

LIABILITIES AND MEMBER'S EQUITY

CURRENT LIABILITIES
Accounts payable	$	57,905,476	$	54,142,753
Accrued liabilities		2,763,060		2,524,644
Deferred revenue		812,770		1,273,776
Current portion of lease liability		704,903		469,119
Current portion of debt		1,633,899		1,984,344

Total current liabilities		63,820,108		60,394,636

LONG-TERM LEASE LIABILITY, net of current portion		987,679		798,050
LONG-TERM DEBT, net of current portion		563,238,903		419,968,395

Total liabilities		628,046,690		481,161,081

COMMITMENTS AND CONTINGENCIES (Note 7)

MEMBER'S EQUITY		163,216,037		155,674,567

TOTAL LIABILITIES AND MEMBER'S EQUITY	$	791,262,727	$	636,835,648

See accompanying notes.

Total Operations and Production Services, LLC

Statements of Operations (Unaudited)

For the Six Months Ended June 30, 2024 and 2023


	For the six months ended
	June 30, 2024		June 30, 2023
REVENUES
Compression rentals	$	77,643,228	$	44,858,905
Field equipment sales		56,988		4,159
Field services fees		1,755,023		1,346,398

Total revenues		79,455,239		46,209,462

EXPENSES
Cost of operations, exclusive of depreciation and amortization		19,512,786		13,807,368
Selling, general, and administrative		6,584,286		4,975,028
Depreciation and amortization		20,726,273		11,635,867

Total expenses		46,823,345		30,418,263

OPERATING INCOME		32,631,894		15,791,199

OTHER INCOME (EXPENSE)
Interest expense		(25,221,154)		(11,324,352)
Other income		130,730		26,124

Total other expenses		(25,090,424)		(11,298,228)

NET INCOME	$	7,541,470	$	4,492,971

See accompanying notes.

Total Operations and Production Services, LLC

Statements of Changes in Member’s Equity (Unaudited)

For the Six Months Ended June 30, 2024 and 2023


				Retained
	Units	Amount		Earnings		Total

BALANCE, December 31, 2022	139,550,000	$	139,550,000	$	6,557,370	$	146,107,370

Net income	-		-		4,492,971		4,492,971

BALANCE, June 30, 2023	139,550,000	$	139,550,000	$	11,050,341	$	150,600,341

BALANCE, December 31, 2023	139,550,000		139,550,000		16,124,567		155,674,567

Net income	-		-		7,541,470		7,541,470

BALANCE, June 30, 2024	139,550,000	$	139,550,000	$	23,666,037	$	163,216,037

See accompanying notes.

Total Operations and Production Services, LLC

Statements of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2024 and 2023


	For the six months ended
	June 30, 2024		June 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,541,470	$	4,492,971
Adjustments to reconcile net income to net cash from operating activities
Depreciation		19,507,874		10,861,518
Amortization of intangible and other assets		1,218,399		774,349
Amortization of debt issuance costs		1,381,779		519,995
Change in operating assets and liabilities
Accounts receivable		(5,448,389)		(3,731,217)
Inventory		(303,100)		-
Prepaid expenses and other current assets		106,528		25,395
Other non-current assets		(1,698,298)		(864,625)
Accounts payable and accrued liabilities		4,001,144		23,076,378
Deferred revenue		(461,006)		39,974

Net cash from operating activities		25,846,401		35,194,738

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(165,711,022)		(122,516,835)

Net from investing activities		(165,711,022)		(122,516,835)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings		221,149,611		133,673,952
Repayments of borrowings		(78,229,548)		(44,919,492)
Debt issuance costs		(2,844,894)		(1,374,102)

Net cash from financing activities		140,075,169		87,380,358

NET CHANGE IN CASH AND CASH EQUIVALENTS		210,548		58,261

CASH AND CASH EQUIVALENTS, beginning of year		74,125		90,845

CASH AND CASH EQUIVALENTS, end of year	$	284,673	$	149,106

SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES
Capital expenditures in accounts payable	$	56,980,259	$	52,498,564

See accompanying notes.

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Note 1 – Organization and Description of Business

Note 2 – Summary of Significant Accounting Policies

Basis of presentation – The condensed financial data at December 31, 2023 is derived from audited financial statements. The accompanying unaudited condensed financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information. They do not include all information and footnotes necessary for a fair presentation of financial position, operating results, and cash flows in conformity with GAAP for complete financial statements. These condensed financial statements should be read in conjunction with the financial statements and related notes. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the operating results for the period presented have been included in the interim period. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2024.

The most significant estimates include: (i) depreciable lives and impairment assessment of the property and equipment, and (ii) credit losses. Management evaluates estimates on an ongoing basis using historical experience and other methods considered reasonable under the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, changes in facts and circumstances or discovery of new facts or circumstances may cause actual results to differ materially from management’s estimates.

Revenue recognition

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Contract costs – During the six months ended June 30, 2024 and 2023, the Company recognized an other non-current asset totaling $1,706,568 and $1,179,747, respectively, for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company expects to recover those costs through future fees. The Company amortizes the asset over one to three years because the asset relates to the services transferred to the customer during the contract term. During the six months ended June 30, 2024 and 2023, the Company amortized $862,807 and $418,757 respectively, related to sales commissions.

Concentration of credit risk – Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable.

Virtually all of our accounts receivable are from customers of varying sizes in the oil and natural gas industry. Two customers accounted for 58% of accounts receivable at June 30, 2024. Three customers accounted for 48% of revenues for the six months ended June 30, 2024. Two customers accounted for 60% of accounts receivable at December 31, 2023. Three customers accounted for 51% of revenues for the six months ended June 30, 2023. Although diversified among many companies, collectability is dependent on the financial condition of each individual company as well as the general economic conditions of the industry. We review the financial condition of customers prior to extending credit and generally do not require collateral in support of our trade receivables.

Accounts receivable are stated at the historical carrying amount net of an allowance for credit losses. The allowance for credit losses is estimated by considering specific customer collection issues, the aging of accounts receivable, supplementary customer data, and future estimated losses in relation to revenues for the year. Accounts receivable are written off only when management has exhausted all efforts to collect such receivables, including efforts of third-party collection agencies. As of June 30, 2024 and December 31, 2023, the Company determined no allowance was deemed necessary. Accounts receivable under revenue contracts was $4,874,643, $8,374,076 and $13,822,465 as of January 1, 2023, December 31, 2023 and June 30, 2024 respectively.

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Intangible assets – Intangible assets primarily consist of customer relationships which are amortized to expense over their estimated useful lives. The estimated useful lives of the amortizable intangible asset is based on an evaluation of the circumstances surrounding the asset, including an evaluation of events that may have occurred that would cause the useful life to be decreased. The carrying values of intangible asset is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may be impaired. The carrying value is compared to the undiscounted anticipated future cash flows related to the asset. If the carrying value of the intangible asset exceeds the future undiscounted cash flow, an impairment charge is recorded in the period in which such review is performed to the extent that the carrying value exceeds fair value. No impairment of intangible assets was determined at June 30, 2024 and December 31, 2023. Amortization of intangible assets of $355,592 was expensed by the Company for the six months ended June 30, 2024 and 2023.

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Debt issuance costs – Debt issuance costs are capitalized and amortized over the related term of the debt on a straight-line basis (which approximates the effective interest method) as a component of interest expense. If the debt is retired before its scheduled maturity, any remaining unamortized issuance costs associated with the debt are expensed in the same period. The Company incurred $2,844,894 and $1,374,102 of debt issuance costs related to long-term debt during the six months ended June 30, 2024 and 2023, respectively. Debt issuance costs are being amortized through June 2026. Amortization of debt issuance costs of $1,381,779 and $519,995 was expensed by the Company during the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the Company has concluded that there are no significant uncertain tax positions that would require recognition or disclosure in the financial statements. The Company’s policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and to recognize tax penalties in operating expense.

Lease arrangements – In the ordinary course of business, the Company enters into a variety of lease arrangements, including operating and short-term leases.

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Note 3 – Property and Equipment

Property and equipment consisted of the following at June 30, 2024 and December 31, 2023:


	Useful Life	June 30, 2024		December 31, 2023

Natural gas compressors	15 years	$	593,462,862	$	483,304,788
Natural gas compressors - work in process	N/A		149,742,080		97,453,611
Autos and trucks	4 years		11,112,972		8,749,261
Furniture, fixtures, and equipment	5 years		2,658,107		2,349,467

Total property and equipment			756,976,021		591,857,127
Total accumulated depreciation			(63,408,449)		(44,492,703)

Property and equipment, net		$	693,567,572	$	547,364,424

Depreciation expense on the property and equipment was $19,507,874 and $10,861,518 for the Company during six months ended June 30, 2024 and 2023, respectively.

Note 4 – Long-Term Debt

Credit facility – Effective June 4, 2021, the Company entered into a four-year credit agreement with JPMorgan Chase Bank, N.A. for an initial commitment of $75,000,000.

Effective May 5, 2022, the Company entered into an amendment that increased the borrowing base to $200,000,000, extended the maturity date to May 5, 2026, and changed the terms of the Eurodollar Loan to be defined as term benchmark borrowings, which carry interest at SOFR plus an applicable margin. Effective December 16, 2022, the Company entered into another amendment that increased the borrowing base to $213,000,000. Throughout 2023, the Company entered into three additional amendments to the credit agreement which resulted in a borrowing base of $565,000,000 as of June 30, 2024.

The margin for ABR Loans was 3.00%, and the margin for term benchmark borrowings was 4.00%. As of June 30, 2024, the total interest rate for term benchmark borrowings and ABR loans was 9.33% and 11.50%, respectively. Interest payments are generally due every 30 days, and all unpaid principal and interest is due at maturity on May 5, 2026.

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Under the credit agreement, the Company had borrowings of $559,349,820 and $417,791,598 as of June 30, 2024 and December 31, 2023, respectively.

Vehicle loans – As of June 30, 2024, the Company held 122 vehicle loans to finance vehicle purchases with a total outstanding balance of $5,522,982. The vehicle loans carry interest rates that range from 5.23% to 10.53%. As of December 31, 2023, the Company held 104 vehicle loans to finance vehicle purchases with a total outstanding balance of $4,161,141. The vehicle loans carry interest rates that range from 4.35% to 10.53% and mature from January 2024 to July 2028.

Required principal payments of the loans are as follows:


Years Ending December 31,

2024	$	1,633,899
2025		2,157,564
2026		560,828,214
2027		224,626
2028		28,499

Total	$	564,872,802

Note 5 – Members’ Equity

Note 6 – Employee Profit Sharing Plans

The Company has a defined contribution retirement plan which is a qualified 401(k) Employee Profit Sharing Plan (the Plan) subject to the Employee Retirement Income Security Act of 1974. The Plan is available to all employees on the first of the first month of the calendar quarter following six months of service. The Company provides for employer matching contributions of 100% of the first 4% of an employee’s contribution. The Company’s contributions were $359,622 and $181,102 for the six months ended June 30, 2024 and 2023.

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

Note 7 – Commitments and Contingencies

Note 8 – Leases

The following summarizes the operating lease for office space under ASC 842 as of June 30, 2024 and December 31, 2023:


	June 30, 2024			December 31, 2023

Right-of-use assets balance	$	1,692,582		$	1,267,169
Lease liabilities balance		1,692,582			1,267,169
Weighted-average discount rate		6.79	%		5.62	%
Weighted-average remaining lease term		1.99			2.81

For the six months ending June 30, 2024 and 2023, lease expense consisted of the following:


	June 30, 2024		June 30, 2023

Operating lease expenses	$	273,795	$	224,400
Short-term lease expense		552,639		353,990
Lease expense paid to related parties		90,000		90,000
Cash paid for operating lease liabilities		273,795		224,400
Right-of-use assets obtained in exchange for operating lease liabilities		655,893		358,707
Amortization of right-of-use assets		43,225		37,975

Total Operations and Production Services, LLC

Notes to Unaudited Financial Statements

As of June 30, 2024, the future lease payments under noncancelable leases by year ending December 31 were as follows:


Years Ending December 31,

2024	$	381,725
2025		745,380
2026		536,580
2027		172,395

Total lease payments	$	1,836,080

Less imputed interest		(143,498)

Total present value of lease payments	$	1,692,582

Note 9 – Subsequent Events

On August 30, 2024, Archrock, Inc. (“Archrock”) completed the acquisition of all of the issued and outstanding equity interests in the Company pursuant to the terms of the Purchase Agreement, dated July 22, 2024. The aggregate consideration in exchange for the Company consisted of $869.1 million in cash and 6,873,650 shares of Archrock common stock with an acquisition date fair value of $139.1 million. No adjustments have been made herein as a result of the transaction

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

On August 30, 2024, Archrock completed the previously announced acquisition of all the issued and outstanding equity interests in TOPS (the “TOPS Interests” and such acquisition, the “Acquisition” or “TOPS Acquisition”) pursuant to the terms of the Purchase Agreement. The aggregate consideration in exchange for the TOPS Interests consists of $869.1 million in cash, and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. The cash portion of the purchase price was funded with proceeds from the July 2024 Equity Offering and the 2032 Notes offering and borrowings under the Credit Facility. The purchase price is subject to customary post-closing adjustments in accordance with the terms of the Purchase Agreement. Defined terms included below have the same meaning as terms defined and included elsewhere in the Current Report on Form 8-K/A, to which this unaudited pro forma condensed combined financial information is attached, the Original Form 8-K, or our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, as applicable.

The following unaudited pro forma condensed combined financial information is derived from our historical consolidated financial statements and the historical consolidated financial statements of TOPS and reflects the Acquisition and other transactions contemplated by the Acquisition, including the impacts of our recently completed capital markets and financing transactions, as further described below.

The Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet combines our historical consolidated balance sheet and the historical consolidated balance sheet of TOPS, giving effect to the Acquisition as if it had been completed on June 30, 2024. The Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations combines our historical condensed consolidated statement of operations and the historical statement of operations of TOPS for the six months ended June 30, 2024 and for the year ended December 31, 2023, giving effect to the Acquisition as if it had occurred on January 1, 2023. The historical consolidated financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined operating results, unless otherwise disclosed.

The Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet and Unaudited Pro Forma Condensed Combined Consolidated Statements of Operations (together, the “Pro Forma Financial Statements”) are derived from, and should be read in conjunction with our unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q as of and for the six months ended June 30, 2024, our audited consolidated financial statements in our Annual Report on Form 10-K as of and for the year ended December 31, 2023, the unaudited financial statements of TOPS as of and for the six months ended June 30, 2024, and the audited financial statements of TOPS for the year ended December 31, 2023 included elsewhere within, and incorporated by reference into, this Current Report on Form 8-K/A. The Pro Forma Financial Statements should not be relied upon as being indicative of our results of operations or financial condition had the Acquisition and the other transactions contemplated by the Acquisition occurred on the dates indicated.

The Pro Forma Financial Statements have been prepared using the acquisition method of accounting in accordance with GAAP. The valuations of the identifiable assets acquired, and liabilities assumed, and therefore the purchase price allocations, are preliminary and have not yet been finalized as of the date of this filing. As a result of the foregoing, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma combined financial information. There can be no assurance that the final determination will not differ materially from the information presented in these Pro Forma Financial Statements.

The pro forma adjustments are based on available information and upon assumptions that management believes are reasonable to reflect on a pro forma basis, the effect of the Acquisition and the other transactions contemplated by the Acquisition on our historical financial information. The adjustments are described in the notes to the Pro Forma Financial Statements and do not project our results of operations or financial position for any future period or date, and do not reflect the costs of any integration activities or benefits that may result from realization of future revenue growth or operational synergies expected to result from the Acquisition.

Archrock, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

At June 30, 2024

(in thousands, except par value and per share amounts)


			Transaction
			Accounting		Financing		Archrock, Inc.
	Archrock, Inc.	TOPS LLC	Adjustments		Adjustments		Pro Forma
Assets
Current assets:
Cash and cash equivalents	919	285	(869,067)	(e)	255,747	(c)	1,204
			(8,732)	(g)	690,270	(d)	—
					(205,425)	(d)	—
					128,475	(f)	—
					8,732	(g)	—
Accounts receivable, net of allowance	115,351	13,822					129,173
Inventory	79,233	499	6,445	(a)			86,177
Other current assets	8,671	446	(212)	(a)			9,146
			241	(h)			—
Total currents assets	204,174	15,052	(871,325)		877,799		225,700

Long-term assets:
Property, plant, and equipment, net	2,372,069	693,567	178,486	(a)			3,244,122
Operating lease right of use asset	14,481	1,693	(269)	(a)			15,905
Goodwill	—	60,088	(60,088)	(a)			125,131
			116,937	(a)			—
			8,194	(a)			—
Intangible assets, net	27,293	10,607	42,168	(a)			80,068
Contract costs, net	35,674	—					35,674
Debt issuance costs	—	6,831	(6,831)	(e)			—
Deferred tax asset	2,445						2,445
Other assets	46,643	3,424	(3,424)	(a)	2,579	(f)	53,204
			3,982	(h)			—
Non-current assets of discontinued operations	7,868	—					7,868
Total assets	2,710,647	791,262	(592,170)		880,378		3,790,117

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade	43,976	57,905					101,881
Accrued liabilities	83,555	2,763	(14)	(a)	(3,438)	(d)	85,359
			1,657	(a)			—
			595	(a)			—
			241	(h)			—
Deferred revenue	5,661	812					6,473
Current portion of lease liability	—	705	(705)	(a)			—
Current portion of debt	—	1,634	(1,634)	(e)			—
Total current liabilities	133,192	63,819	140		(3,438)		193,713

Long-term liabilities:
Long-term debt	1,608,956	563,239	(563,239)	(e)	690,270	(d)	2,240,226
					(198,786)	(d)	—
					131,054	(f)	—
					8,732	(g)	—
Operating lease liabilities	12,391	988	(159)	(a)			13,220
Deferred tax liabilities	27,310	—					27,310
Other liabilities	26,434	—	3,982	(h)			30,416
Non-current liabilities of discontinued operations	7,868	—					7,868
Total liabilities	1,816,151	628,046	(559,276)		627,832		2,512,753

Equity:
Members equity	—	163,216	(161,641)	(a)			—
			(1,575)	(b)			—
Preferred stock: $0.01 par value per share, 50,000,000 shares authorized, zero issued	—	—					—
Common stock: $0.01 par value per share, 250,000,000 shares authorized, 165,793,798 shares issued	1,658	—	69	(a)	127	(c)	1,854
Additional paid-in capital	3,478,597	—	138,985	(a)	255,620	(c)	3,873,202
Accumulated deficit	(2,476,793)	—	(8,732)	(g)	(3,201)	(d)	(2,488,726)
Treasury stock: 9,493,262 common shares, at cost	(108,966)	—					(108,966)
Total equity	894,496	163,216	(32,894)		252,546		1,277,364
Total liabilities and equity	2,710,647	791,262	(592,170)		880,378		3,790,117

Archrock, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the six months ended June 30, 2024

(in thousands, except per share amounts)


					Transaction
					Accounting			Financing			Archrock, Inc.
	Archrock, Inc.		TOPS LLC		Adjustments			Adjustments			Pro Forma
Revenues:
Contract operations	$	448,519	$	79,455							$	527,974
Aftermarket services		90,495		—								90,495
Total revenue		539,014		79,455		—			—			618,469

Cost of sales, exclusive of depreciation and amortization
Contract operations		157,021		19,513		856	(dd)					178,370
						980	(mm)					—
Aftermarket services		70,158										70,158
Total cost of sales, exclusive of depreciation and amortization		227,179		19,513		1,836			—			248,528
Selling, general and administrative		62,828		6,584		943	(bb)					70,520
						158	(cc)					—
						863	(dd)					—
						(856)	(dd)					—
Depreciation and amortization		86,688		20,726		(863)	(dd)					105,922
						(3,324)	(ee)					—
						2,695	(ee)					—
Long-lived and other asset impairment		6,969		—								6,969
Restructuring charges		—		—								—
Interest expense		55,193		25,221					(25,221)	(ff)		77,029
									5,003	(hh)		—
									23,188	(ii)		—
									(6,875)	(ii)		—
									503	(jj)
									(221)	(jj)		—
									238	(jj)		—
Transaction-related costs		1,782		—								1,782
Gain on sale of assets, net		(2,957)		—								(2,957)
Other expense (income), net		267		(131)								136
Income before income taxes		101,065		7,542		(1,452)			3,385			110,540
Provision for income taxes		26,108				1,401	(ll)		779	(ll)		28,288
Net income	$	74,957	$	7,542	$	(2,853)		$	2,606		$	82,252

Basic earnings per common share	$	0.48									$	0.47
Diluted earnings per common share	$	0.48									$	0.46

Weighted average common shares outstanding:
Basic		154,342				6,875	(gg)		12,650	(gg)		173,867

Diluted		154,648				6,921	(gg)		12,650	(gg)		174,219

Archrock, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2023

(in thousands, except per share amounts)


					Transaction
					Accounting			Financing			Archrock, Inc.
	Archrock, Inc.		TOPS LLC		Adjustments			Adjustments			Pro Forma
Revenues:
Contract operations	$	809,439	$	108,742							$	918,181
Aftermarket services		180,898		—								180,898
Total revenue		990,337		108,742		—			—			1,099,079

Cost of sales, exclusive of depreciation and amortization
Contract operations		306,748		30,526		1,272	(dd)					339,494
						948	(mm)					—
Aftermarket services		142,271		—								142,271
Total cost of sales, exclusive of depreciation and amortization		449,019		30,526		2,220			—			481,765
Selling, general and administrative		116,639		10,774		1,575	(aa)					133,505
						4,345	(bb)					—
						342	(cc)					—
						1,102	(dd)					—
						(1,272)	(dd)					—
Depreciation and amortization		166,241		27,924		(1,102)	(dd)					196,582
						(1,870)	(ee)					—
						5,389	(ee)					—
Long-lived and other asset impairment		12,041		—								12,041
Restructuring charges		1,775		—								1,775
Interest expense		111,488		29,989					(29,989)	(ff)		155,169
									10,016	(hh)		—
									46,375	(ii)		—
									(13,750)	(ii)		—
									1,007	(jj)		—
									(443)	(jj)		—
									476	(jj)		—
Debt extinguishment loss		—		—					3,868	(ii)		3,868

Transaction-related costs		—		—		8,732	(kk)					8,732
Gain on sale of assets, net		(10,199)		—								(10,199)
Other expense (income), net		1,086		(38)								1,048
Income before income taxes		142,247		9,567		(19,461)			(17,560)			114,793
Provision for income taxes		37,249				(2,276)	(ll)		(4,039)	(ll)		30,934
Net income	$	104,998	$	9,567	$	(17,185)		$	(13,521)		$	83,859

Basic earnings per common share	$	0.67									$	0.47
Diluted earnings per common share	$	0.67									$	0.47

Weighted average common shares outstanding:
Basic		154,126				6,855	(gg)		12,615	(gg)		173,596

Diluted		154,344				6,902	(gg)		12,615	(gg)		173,861

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

1.	Description of the Business Transactions

TOPS Acquisition

On August 30, 2024, we completed the TOPS Acquisition, whereby we acquired all of the issued and outstanding equity interests in TOPS, including a fleet of approximately 580,000 horsepower, including approximately 530,000 operating horsepower, for aggregate consideration consisting of $869.1 million in cash and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. The cash portion of the purchase price was funded with proceeds from the July 2024 Equity Offering and the 2032 Notes offering and borrowings under the Credit Facility. The purchase price is subject to customary post-closing adjustments in accordance with the terms of the Purchase Agreement.

July 2024 Equity Offering

On July 24, 2024, we completed a public underwriting offering to sell 12,650,000 shares of common stock, including 1,650,000 shares pursuant to an over-allotment option, at $21 dollars per share. We received net proceeds of $255.7 million, after deducting $0.6 million of fees related to underwriting discounts, commissions and offering expenses. Proceeds from this equity offering were used to fund a portion of the cash consideration for the TOPS Acquisition.

2032 Notes

On August 26, 2024, we completed a private offering of $700 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.3 million after deducting issuance costs. The $9.7 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. A portion of the net proceeds were used to fund a portion of the cash consideration for the TOPS Acquisition, the 2027 Notes Tender Offer and to repay borrowings under our Credit Facility.

The 2032 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2032 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act.

The 2032 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us, and all by all of our existing subsidiaries, other than Archrock Partners Finance Corp., which is the issuer of the 2032 Notes. The 2032 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness.

We may, at our option, redeem all of part of the 2032 Notes at any time on or after September 1, 2027, at specified redemption prices, plus any accrued and unpaid interest. In addition, prior to September 1, 2027, we may redeem up to 40% of the 2032 Notes at specified redemption prices and make-whole premiums, plus any accrued and unpaid interest.

2027 Notes Tender Offer

In connection with the offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million, which reflects approximately 101% of the aggregate principal amount of the tendered 2027 Notes and $0.2 million of agent and legal fees.

First Amendment to the Amended and Restated Credit Agreement

On August 28, 2024, we amended our Amended and Restated Credit Agreement to, among other things,

●

increase the borrowing capacity of the Credit Facility from $750.0 million to $1.1 billion;

●

increase the portion of the Credit Facility available for the issuance of swing line loans from $75.0 million to $110.0 million;

●

increase the cash dominion trigger threshold amount from $75.0 million to $110.0 million;

●

add certain financial institutions as lenders under the Credit Facility;

●

join a newly formed wholly owned subsidiary of Archrock Services, L.P. as a guarantor and grantor under the Credit Facility; and

●

modify certain other covenants to which we are subject to.

We incurred $2.6 million in transaction costs related to the First Amendment to the Amended and Restated Credit Agreement, which were deferred and are being amortized over the remaining term of the Credit Facility.

2.	Basis of Pro Forma Presentation

The Pro Forma Financial Statements have been prepared in accordance with Article 11 of Regulation S-X, and combine our historical financial information and the historical financial information of TOPS, giving effect to the TOPS Acquisition and other transactions contemplated by the TOPS Acquisition, the July 2024 Equity Offering, the 2032 Notes, the 2027 Notes Tender Offer, the First Amendment to the Amended and Restated Credit Agreement, and related adjustments described in the notes thereto as if the transactions had been completed on June 30, 2024 with respect to the Unaudited Pro Forma Condensed Combined Balance Sheet, and on January 1, 2023 with respect to the Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2024 and for the year ended December 31, 2023.

Reclassification adjustments have been made to certain financial statement line items included in the historical presentation of TOPS to conform to our historical financial statement presentation for the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2024 and the Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2024, and for the year ended December 31, 2023. These reclassifications have no effect on our reported historical operating income, net income, total assets, total liabilities or stockholders’ equity, or the historical operating income, net income, total assets, total liabilities or stockholders’ equity reported by TOPS.

The accounting policies used in preparation of the Pro Forma Financial Statements are those described in our Annual Report on Form 10-K for the year ended December 31, 2023. Based on our preliminary review of TOPS accounting policies, the nature and amount of any adjustments to the historical financial statements of TOPS to conform its accounting policies to ours are not expected to be material and would not continue to exist subsequent to the TOPS Acquisition closing. Further review of TOPS accounting policies and consolidated financial statements may result in revisions to accounting policies and financial statement classifications.

Accounting for the TOPS Acquisition

The TOPS Acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations, which requires, among other things, the purchase price of TOPS to be allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill.

3. Preliminary Purchase Price Allocation

The aggregate consideration was comprised of cash consideration of $869.1 million, subject to customary post-closing adjustments in accordance with the terms of the Purchase Agreement, and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. The following table summarizes the consideration transferred for the TOPS Acquisition for purposes of presenting the Pro Forma Financial Statements:


(in thousands, except per share amounts)
Cash purchase price	$	820,000
Purchase price adjustments:
Working capital and other adjustments	$	2,532
Net capital expenditures	$	46,535
Cash paid, net	$	869,067

Total cash consideration	$	869,067

Shares issued for TOPS Acquisition		6,873,650
Closing price of common stock on August 30, 2024		20.23
Stock consideration	$	139,054
Total consideration, net	$	1,008,121

The preliminary allocation of the purchase price was based upon preliminary valuations, and our estimates and assumptions are subject to change upon the completion of management’s review of the final valuations. We are in the process of finalizing valuations related to property, plant and equipment, identifiable intangible assets and goodwill. Post-closing adjustments to the purchase price could impact future depreciation and amortization as well as income tax expense. The final valuation of net assets acquired is expected to be completed as soon as practicable, but no later than one year from the acquisition date.

The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


(in thousands)
Cash	$	2,498
Accounts receivable		9,694
Inventory		6,944
Other current assets		495
Property, plant and equipment		872,053
Operating lease right-of-use assets		1,424
Goodwill		116,937
Intangible assets		52,775
Other assets		4,032
Accounts payable, trade		(48,609)
Accrued liabilities		(4,666)
Operating lease liabilities		(1,424)
Other liabilities		(4,032)
Purchase price	$	1,008,121

The valuation methodologies and significant inputs for fair value measurements are detailed by asset class below. The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and therefore represent Level 3 measurements.

Property, Plant and Equipment

The preliminary amount of property, plant and equipment is primarily comprised of electric motor drive compression equipment that will depreciate on a straight-line basis over an estimated average remaining useful life of 25 years. The preliminary fair value of the property, plant and equipment was determined using both the cost and market approach. Under the cost approach, we estimated the replacement cost of the assets by evaluating recent purchases of similar assets or published data, then adjusted replacement cost for physical deterioration and functional and economic obsolescence, as applicable. We then considered the market approach by comparing our estimated dollar per horsepower to market comparables and market participant assumptions and adjusted as necessary.

Other fixed assets were valued using the indirect cost method, whereby we applied asset-specific trend information using published indexes to calculate the estimated replacement cost of assets that were identified to be reflected at historical cost. Other assets were depreciated based on published normal useful life estimates and prior experience with similar assets.

Intangible Assets

The intangible assets consist of customer relationships and trade names that have estimated useful lives of 12 years and five years, respectively. The preliminary amount of intangible assets and their associated useful life were determined based on the period over which the assets are expected to contribute directly or indirectly to our future cash flows.

The fair value of the identifiable intangible assets related to customer relationships was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired. Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets. To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our weighted average cost of capital to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired.

It is generally accepted that the fair market value of a trade name is best measured by the relief-from-royalty method under the income approach, whereby we calculated the royalty savings by estimating a reasonable royalty rate that a third party would negotiate in a licensing agreement expressed as a percentage of total revenue involving a trade name. The revenue related to the trade name was multiplied by the selected royalty rate over the estimated expected useful life of the trade name to arrive at the royalty savings. The royalty savings were tax effected and discounted to present value using a discount rate commensurate with the risk profile of the trade name relative to our WACC and the return on the other acquired assets of TOPS.

Goodwill

Goodwill is calculated as the difference between the preliminary estimate of fair value of the consideration transferred and the preliminary estimates of fair value assigned to the assets acquired and liabilities assumed. The preliminary amount of goodwill resulting from the TOPS Acquisition is attributable to the expansion of our services in the Permian Basin where we currently operate and was allocated to our contract operations segment. The goodwill recorded is considered to have an indefinite life and will be reviewed annually for impairment or more frequently if indicators of potential impairment exist. All of the goodwill recorded for the TOPS Acquisition is expected to be deductible for U.S. federal income tax purposes.

Indemnification Asset

In connection with the TOPS Acquisition, we recorded a non-income, tax-based contingency of $4.2 million and a corresponding indemnification asset of $4.2 million based on facts existing on the date of the TOPS Acquisition. The tax contingency arose from pre-acquisition activities of TOPS. As part of the TOPS Acquisition, the sellers agreed to indemnify us for certain tax contingencies up to $21.6 million as of the acquisition date. Dependent upon facts and circumstances, the sellers’ indemnification obligation may be reduced over a period of five years from the acquisition date but may be extended until the resolution of any claims timely submitted to the sellers.

4. Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

The following pro forma adjustments are included in the Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet as of June 30, 2024, and should be read in conjunction with Note 5 (Notes to Unaudited Pro Forma Condensed Combined Statements of Operations):

(a)

Reflects the preliminary purchase price allocation adjustments to record the estimated fair values of TOPS assets acquired and liabilities assumed based on the adjusted cash consideration transferred of $869.1 million, which includes $820.0 million unadjusted cash consideration plus $49.1 million of purchase price adjustments, and 6,873,650 shares of common stock with an acquisition date fair value of $139.1 million. See Note 3 (“Preliminary Purchase Price Allocation”) for further details. The adjustment to common stock is based on the stock consideration par value of $0.001 per share and the adjustment to additional paid-in-capital is based on the stock consideration closing price of $20.23. The pro forma adjustment to goodwill of $8.2 million reflects the net change in cash, accounts receivable, accounts payable, and accrued liabilities from the June 30, 2024 pro forma transaction closing date to the actual closing date of the TOPS Acquisition. The estimates of fair value are based upon preliminary valuation assumptions believed to be reasonable, but which are inherently uncertain and unpredictable; and, as a result, actual results may differ from estimates.

(b)	Reflects $1.6 million of non-recurring compensation expense pursuant and subject to the terms and conditions of severance agreements entered into between TOPS and certain employees of TOPS in connection with the TOPS Acquisition.

(c)

Reflects $255.7 million net proceeds from the July 2024 Equity Offering, which was used to fund a portion of the cash consideration. The adjustment to common stock is based on the July 2024 Equity Offering par value of $0.001 per share and the adjustment to additional paid-in-capital is based on the July 2024 Equity Offering closing price of $21.00. We estimate that the total transaction costs, including registration, filing, listing, printing, and legal and accounting fees, but excluding the underwriting discounts and commissions, will be approximately $0.6 million.

(d)

Reflects $690.3 million net proceeds from the 2032 Notes, after deducting debt issuance costs of $9.7 million, and the 2027 Notes Tender Offer of $202.0 million, which reflects approximately 101% of the aggregate principal amount of the tendered 2027 Notes and $0.2 million of agent and legal fees, plus $3.4 million of accrued and paid interest. We recorded a debt extinguishment loss of $3.2 million as a result of the 2027 Notes Tender Offer. See Note 1 (“Description of the Business Transactions”) for further details.

(e)

Reflects the adjusted cash consideration of $869.1 million, of which $564.9 million was used to extinguish the outstanding debt of TOPS, consisting of $559.4 million in borrowings under TOPS credit agreement and $5.5 million of vehicle notes, and the removal of $6.8 million of unamortized debt issuance costs associated with the extinguished debt.

(f)	Reflects $128.5 million of borrowings under the Credit Facility to finance a portion of the cash consideration presented as pro forma adjustment (e), and $2.6 million of deferred financing costs associated with increasing our borrowing capacity under the Credit Facility to $1.1 billion.

(g)

Reflects $8.7 million of nonrecurring professional fees including legal, advisory, consulting and other transaction costs incurred by us subsequent to the pro forma period presented. $1.8 million of nonrecurring transaction costs related to legal, accounting and consulting fees were previously recognized and included in accumulated deficit in our condensed consolidated balance sheets as of June 30, 2024.

(h)	Reflects an indemnification asset and corresponding liability of $4.2 million related to a non-income, tax-based contingency resulting from facts existing on the date of the TOPS Acquisition. See Note 3 (“Purchase Price Allocation”) for further details.

5. Notes to Unaudited Pro Forma Condensed Combined Statements of Operations

The following pro forma adjustments are included in the Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2024 and for the year ended December 31, 2023 and should be read in conjunction with Note 4 (Notes to Unaudited Pro Forma Condensed Combined Balance Sheet):

(aa)

Reflects $1.6 million nonrecurring payment of compensation expense associated with pro forma adjustment (b), pursuant and subject to the terms and conditions of severance agreements entered into between TOPS and certain employees of TOPS in connection with the TOPS Acquisition. This expense is not expected to recur in the twelve months following closing.

(bb)

Reflects $0.9 million and $4.3 million of compensation expense for the six months ended June 30, 2024, and for the year ended December 31, 2023, respectively, related to employee retention and other compensation related arrangements associated with the TOPS Acquisition. Payments are due and payable at various times up to and including the two-year anniversary of the TOPS Acquisition.

(cc)

Reflects $0.2 million and $0.3 million of share-based compensation expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, resulting from restricted stock awards and performance–based restricted stock units granted under the 2020 Plan pursuant and subject to the terms and conditions of compensation arrangements associated with the TOPS Acquisition. For purposes of this adjustment, we have assumed the performance conditions associated with the performance–based restricted stock units are probable of being met.

(dd)

Reflects $0.9 million and $1.1 million reclassification of TOPS historical sales commissions amortization expense from depreciation and amortization to selling, general and administrative expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, offset by $0.9 million and $1.3 million reclassification of certain TOPS historical cost of sales expenses from selling, general and administrative expense to contract operations cost of goods sold for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, to conform to our historical financial statement presentation.

(ee)

Reflects $3.3 million and $1.9 million reversal of depreciation expense related to property, plant and equipment, and $2.7 million and $5.4 million of intangible asset amortization expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, as a result of the fair value adjustments of such assets that were acquired through the TOPS Acquisition. See Note 3 (“Preliminary Purchase Price Allocation”) for further details. The depreciation and amortization expense were calculated on a straight-line basis using the estimated remaining useful lives of the respective assets.

(ff)

Reflects the reversal of $25.2 million and $30 million of historical interest expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, associated with TOPS outstanding debt which was fully repaid at the closing of the TOPS Acquisition as presented as pro forma adjustment (e).

(gg)

Reflects the adjustment to basic and diluted weighted average number of shares of common stock outstanding for the six months ended June 30, 2024 and for the year ended December 31, 2023 as a result of the stock consideration presented as pro forma adjustment (a), the July 2024 Equity Offering presented as pro forma adjustment (e), and the restricted stock awards and performance-based restricted stock units presented as pro forma adjustment (cc). See Note 6 (“Unaudited Pro Forma Earnings per Common Share”) for further details.

(hh)

Reflects $5.0 million and $10.0 million of interest expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, related to borrowings under the Credit Facility, as presented as pro forma adjustment (f), calculated using an estimated weighted average 1-month SOFR reference rate plus applicable margin of 7.7% and 7.6% for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively. A 1% increase in the weighted average interest rate would have resulted in an increase to interest expense of $0.7 million and $1.3 million for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively.

(ii)

Reflects $23.2 million and $46.4 million of interest expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, related to the 2032 Notes and the elimination of $6.9 million and $13.8 million historical interest expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, associated with the 2027 Notes Tender Offer, both presented as pro forma adjustment (d). We recorded a debt extinguishment loss of $3.9 million for the year ended December 31, 2023 as a result of the 2027 Notes Tender Offer.

(jj)

Reflects deferred financing cost amortization of $0.5 million and $1.0 million for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, as a result of the 2032 Notes, and the elimination of $0.2 million and $0.4 million of deferred financing cost amortization previously recognized as interest expense for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, as a result of the 2027 Notes Tender Offer, both presented as pro forma adjustment (d), and deferred financing cost amortization of $0.2 million and $0.5 million for the six months ended June 30, 2024 and for the year ended December 31, 2023, respectively, as a result of increasing our borrowing capacity under the Credit Facility to $1.1 billion, as presented as pro forma adjustment (f).

(kk)	Reflects $8.7 million of non-recurring transaction expense related to the TOPS Acquisition for the year ended December 31, 2023, as presented as pro forma adjustment (g). This expense is not expected to recur in the twelve months following closing.

(ll)

Reflects the income tax impact of the pro forma adjustments included in the Unaudited Pro Forma Condensed Combined Statements of Operations based on the estimated blended statutory rate of 23%. The estimated blended statutory rate is preliminary and could change depending on changes to the preliminary pro forma adjustments and the geographical mix of income.

(mm)	Reflects $1.0 and 0.9 million of non-income, tax-based expense for the six months ended June 30, 2024, and for the year ended December 31, 2023, respectively, associated with the assets acquired in the TOPS Acquisition.

6. Unaudited Pro Forma Earnings per Common Share

The pro forma weighted average number of basic shares outstanding was calculated by adding our weighted average number of basic shares of common stock outstanding for the six months ended June 30, 2024 and for the year ended December 31, 2023, the pro forma number of shares of common stock issued in connection with the July 2024 Equity Offering, the stock consideration for the TOPS Acquisition, and participating shares granted as a result of the TOPS Acquisition and expected to be issued upon vesting. The pro forma weighted average number of diluted shares outstanding is adjusted for the incremental common stock equivalents attributed to the performance–based restricted stock units granted as a result of the TOPS Acquisition and expected to be issued upon vesting. The calculation of the pro forma weighted average shares outstanding for basic and diluted net income per share assumes the shares issued in connection with the TOPS Acquisition and the July 2024 Equity Offering have been outstanding for the entire periods presented.

Unaudited basic pro forma earnings per common share is determined by dividing pro forma net income, after deducting pro forma amounts allocated to participating securities, by the pro forma weighted average number of basic shares outstanding for the period. Unaudited diluted pro forma earnings per common share is computed using the pro forma weighted average number of common shares outstanding during the period after adjusting for the impact of common stock equivalents that would have a dilutive effect on pro forma earnings per common share.

The following table shows the calculation of pro forma net income attributable to common stockholders used in the calculation of pro forma basic and diluted earnings per common share, and potential shares of common stock that were included in computing diluted pro forma earnings per common share. There were no potential shares of common stock issuable excluded from computing diluted pro forma earnings per common share because their inclusion would have been anti–dilutive:


	Six Months Ended		Year Ended
(in thousands)	June 30, 2024		December 31, 2023
Net income	$	82,252	$	83,859
Less: Allocation of earnings to participating securities		(1,216)		(1,776)
Net income attributable to common stockholders	$	81,036	$	82,083

Less: Allocation of earnings to cash or share settled restricted stock units		(223)		—
Diluted net income attributable to common stockholders	$	80,813	$	88,083

Weighted average common shares outstanding used in basic earnings per common share		173,867		173,596
Effect of dilutive securities:
Performance-based restricted stock units		347		254
ESPP shares		5		11
Weighted average common shares outstanding used in diluted earnings per common share	$	174,219	$	173,861

Document and Entity Information	Jul. 22, 2024
Cover [Abstract]
Document Type	8-K/A
Document Period End Date	Jul. 22, 2024
Entity File Number	001-33666
Entity Registrant Name	Archrock, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	74-3204509
Entity Address, Address Line One	9807 Katy Freeway
Entity Address, Adress Line Two	Suite 100
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77024
City Area Code	281
Local Phone Number	836-8000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, $0.01 par value per share
Trading Symbol	AROC
Security Exchange Name	NYSE
Entity Emerging Growth Company	false
Entity Central Index Key	0001389050
Amendment Flag	false