Kodiak Gas Services sees strong 2026 outlook on compression demand, power expansion

Kodiak Gas Services sees strong 2026 outlook on compression demand, power expansion.

Kodiak Gas Services is entering 2026 with what executives described as “stronger than ever” demand fundamentals for contract compression, supported by rising natural gas volumes, expanding LNG capacity and growing power needs in the Permian Basin.

The company expects 2026 revenue to range between $1.37 billion and $1.43 billion, with adjusted EBITDA projected at $750 million to $780 million—representing roughly 8% annual growth at the midpoint and in line with its long-term outlook for upper single-digit growth in its core compression business.

Executives emphasized that visibility into that growth is improving, with customers increasingly committing to long-term contracts and capacity well beyond the near term. Kodiak said its new unit horsepower is already fully contracted for 2026 and into 2027, and discussions are underway for capacity in 2028.

CEO Mickey McKee pointed to structural demand drivers underpinning the outlook, including rising gas production in the Permian Basin, increasing LNG feedgas requirements and expanding in-basin power demand. The company expects these trends to support sustained compression demand even in a flat oil production environment.

“Despite slowing oil production growth, the outlook for natural gas supply growth remains highly visible,” McKee said, citing increasing gas-to-oil ratios and new pipeline takeaway capacity as key factors.

Kodiak highlighted that approximately 4.5 Bcf/d of additional Permian takeaway capacity is expected to come online over the next three quarters, with another 7 Bcf/d anticipated by the end of the decade. At the same time, LNG export capacity is expected to continue expanding, following a roughly 3 Bcf/d increase in 2025 and an additional 2 Bcf/d expected in 2026.

The company also pointed to growing in-basin power demand—both from processing facilities and distributed generation—as an emerging driver of compression needs. Estimates suggest more than 2 Bcf/d of gas demand for power generation in the Permian by the end of the decade.

These combined trends are tightening the compression equipment market. Kodiak said lead times for new large horsepower units have extended beyond 100 weeks, prompting earlier customer commitments and longer-term planning.

“We’ve already begun receiving commitments from customers for new compression equipment in 2027 and 2028,” McKee said, adding that the company has secured engine supply and shop capacity into 2028 to support its growth plans.

For 2026, Kodiak expects to deploy approximately 150,000 horsepower of new compression equipment, with an average unit size of about 1,700 horsepower, continuing its strategy of focusing on large horsepower units. The company also expects fleet utilization and pricing to remain strong, supported by tight market conditions and limited available capacity.

Capital spending will remain elevated to support growth. Kodiak expects growth capital expenditures of $235 million to $265 million in 2026, primarily directed toward new equipment purchases, while maintenance capital is expected to remain relatively flat at $75 million to $85 million due to efficiency gains from technology investments.

Executives said investments in AI and machine learning are beginning to deliver operational benefits, including extended maintenance intervals and reduced repair costs, which are expected to support margin expansion in 2026.

Beyond compression, Kodiak is positioning distributed power as a key growth driver following its pending acquisition of Distributed Power Solutions (DPS). While not yet included in 2026 guidance, management said the addition of power generation capabilities could accelerate growth beyond the company’s traditional compression trajectory.

“We think the market will continue to move in our direction as large power consumers are increasingly looking to lock in long-term deals for base power,” McKee said.

The company also indicated it may take on slightly more risk in equipment procurement—such as ordering some units ahead of firm contracts—to secure capacity in a constrained supply environment, though it views this as a low-risk strategy given strong demand visibility and close coordination with customers.

Looking further ahead, Kodiak expects to deploy more than 750,000 horsepower of new compression capacity through 2030, supported by long-term trends in U.S. natural gas production and infrastructure development.

Executives said the combination of contracted cash flows, high utilization rates and favorable market fundamentals positions the company for continued growth and margin expansion in 2026 and beyond.