Q1 2024 Atlas Energy Solutions Inc Earnings Call

Participants

Kyle Turlington; VP, IR; Atlas Energy Solutions Inc

Ben Brigham; Executive Chairman; Atlas Energy Solutions Inc

John Turner; CEO, President, CFO; Atlas Energy Solutions Inc

Chris Scholla; Chief Supply Chain Officer; Atlas Energy Solutions Inc

Sean Mitchell; Analyst; Daniel Energy Partners

Jim Rollyson; Analyst; Raymond James

Scott Gruber; Analyst; Citi

Derek Podhaizer; Analyst; Barclays

Keith Mackey; Analyst; RBC Capital Markets

David Smith; Analyst; Pickering Energy Partners

Neil Mehta; Analyst; Goldman Sachs

Saurabh Pant; Analyst; BofA Global Research

Presentation

Operator

Greetings. Welcome to Atlas Energy Solutions, Inc., first-quarter 2024 financial and operational results conference call. (Operator instructions) Please note this conference is being recorded.
I will now turn the conference over to Kyle Turlington, Vice President, Investor Relations. Thank you. You may begin.

Kyle Turlington

Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the first quarter of 2024. With us today are Bud Brigham, Executive Chairman; and John Turner, CEO, President, and Chief Financial Officer. Brad and John will be sharing their comments on the company's operational and financial performance for the first quarter of 2024, after which we will open the call for Q&A.
Before we begin our prepared remarks, I would like to remind everyone that the call will include forward looking statements as defined under the US Securities laws. Such statements are based on the current information and management's expectations. As of this statement and are not guarantees of future performance are forward looking statements involve certain risks, uncertainties and assumptions that are difficult to predict. As such, our actual outcome and results could differ materially.
You can learn more about these risks in the annual report on Form 10 K we filed with the SEC on February 27th, 2024, our quarterly report on Form 10 Q and our other SEC filings. You should not place undue reliance on forward-looking forward-looking statements, and we undertake no obligation to update these forward.
Looking statements will also make reference to certain non-GAAP financial measures, such as adjusted EBITDA, adjusted free cash flow and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in this morning's press release.
With that said, I will turn the call over to Bud Brigham.

Ben Brigham

Thank you, Karl, and thanks to everyone for joining us today for our first quarter conference call. In addition to reviewing our first quarter results, I will spend some time this morning providing an update on the great progress we are making integrating Hi-Crush and Atlas since the closing of that acquisition in early March.
Additionally, we also need to discuss the recent fire at the Kermit facility and perhaps more importantly, the impressive response from our team to maintain both safety on-site and reliable supply of sand to our customers throughout the disruptive event, I will go ahead and state that no other problem producer could have possibly continued delivering profit to their customers the way Atlas has our differentiated scale recently enhanced by our acquisition of Hi-Crush note, and they're great people.
Our associated production redundancies and our geographically distributed production assets uniquely position Atlas to continue reliably serving our customers even through rare unexpected disruptions. And whether it's a fire, severe weather or traffic accidents, disruptions do occur. Atlas makes the Permian supply chain more reliable and sustainable.
Briefly reviewing the events around noon on Sunday, April 14, a fire broke out at our Atlas Kermit facility damaged equipment involved in our feed system, which takes sand from the separation and drying process to our silos due to the quick actions of our employees and quick response from the West Odessa, Kermit Monahans and Andrew's fire departments. The rest of the plant, including all production centers, was unscathed.
This incident was limited to affecting our ability to load trucks at Kermit and did not impact our ability to produce sand. Thankfully and most importantly, we quickly ascertained that all of our employees and vendors were safe and accounted for. I want to again thank the first responders and our team of wonderful employees here at Atlas for keeping everyone safe and limiting the damage to the plants within hours of the incident.
Our sales and supply chain teams began notifying our customers of the event and also began taking the steps to ensure their supply needs. We continue to be met, resulting in uninterrupted service and zero sand related nonproductive time that customer well sites through the incident. Again, I think it's obvious that no other company could have accomplished this. And under that 48 hours, mobile load-out equipment and mobile silos began showing up at our Kermit plant to lay the groundwork for a temporary load-out solution.
While we began conducting repairs within 11 days from the fire, we reopened the Kermit facility and began loading trucks with sand today, the Kermit facility is loading close to 6,000 tons of sand, which is about a third of our throughput prior to the incident. By the end of this month, we expect to receive all the necessary equipment to completely rebuild the damaged feed system. And we expect the damaged portion of the current plant to be fully restored by the end of June.
This quick turnaround is another clear demonstration of Atlas's unique culture. Our exceptional team collaborated across our entire platform of distributed assets, almost instantaneously pace at which that moved was almost shocking to think that we reopened the combat facility within just 11 days of the fire still seems unbelievable, but knowing the quality of our people, I know at this point that I shouldn't be surprised when you partner with Atlas, you can count on quality and reliability even under extreme circumstances.
Again, thanks to our great people, our innovative culture, our unmatched scale our relationships and our diverse distributed assets that we are uniquely able to perform through these disruptions. I cannot be prouder of how we have responded to this unexpected setback with respect to the incident at Carmen, we wanted to provide more information about what happened and the improvements we are making to address the risk of a repeat event in the future.
We see these advance as opportunities to make ATLAS better. First, now that we have completed the root cause analysis, there are a number of contributing factors that combined to result in a fire starting in the feed system between the plant and the silos. These factors included mechanical and process failures. We are responding by taking a number of actions to improve our systems and processes to protect us from the risk of reoccurrence.
For example, in the near term, we have enhanced and increased inspections and preventative maintenance procedures. In addition, some of the technological enhancements in the design and construction of the new NexPress, specifically, the multilayer belt detection system and more advanced auto lubricating systems will be installed in our feed systems at the plants this is important to spend a moment on the five years of design and the significant investments in technology we've made in planning the Dune Express, particularly in automation, around preventative maintenance events addresses the risk of an incident like this occurring on the doing Express.
For example, in addition to the Smart hours we've been discussing previously, we will have dual monitors on the pulley bearings for two separate systems, one for preventative maintenance and the other for real-time monitoring and prevention of catastrophic failures as well as dual monitors for belt detection and slippage with analogs to stop the conveyor. If the belt is loose or slipping, the system will be hardwired to shut down the conveyor if Apollo has detected further, all poly bearings will be auto lubricated, which will mitigate the risk of incidents.
Lastly, on the doing Express monitors, sensors and cameras will provide real-time data and security along the 42 mile conveyor route I believe they're doing Express is likely the most technologically advanced bulk material conveyor have ever built.
Wrapping up my section subsequent to the closing of the Hi-Crush acquisition, the Board of Directors named John Turner as Chief Executive Officer effective March sixth, 2024, as Executive Chairman. Our management will remain very active in the Company's operations, continuing to provide leadership ideas and vision to the Company's management team, and I will continue to focus on identifying innovative strategic opportunities. John and I were founders of Atlas back in 2017.
And as a proven oil and gas entrepreneur. John has been and will continue to lead our outstanding management team to successfully manage day-to-day operations while building Atlas into the premier proppant and logistics company. In our highly competitive industry. Atlas has a big future, and I believe John's leadership and executive experience working with the rest of our outstanding management team will result in continued innovation and growth to continue creating shareholder value.
In addition to the much deserved promotion of John Turner effective May 13th, Atlas is pleased to announce the appointment of Blake McCarthy as Chief Financial Officer of Atlas flight, most recently served as President of NOV Grant Prideco. We welcome Blake aboard and are excited to have his leadership and expertise to help guide outlets into the future.
With that, I will now pass the call over to John.

John Turner

Thank you, Bob, for those kind words, and I echo your comments regarding the addition of Blake. I look forward to working side-by-side with Blake as we navigate the road ahead for Atlas Blake's expertise and integration and acquisitions, along with his deep understanding of financial markets and the oil service industry will be a welcome addition, as we have just started, our journey as a public company.
First quarter was an exciting period for Atlas with the closure of the Hi-Crush acquisition the completion of the Kermit expansion and commissioning of the first of two new state of the art dredges. The acquisition of high-pressure is already off to a great start in March Hi-Crush set a monthly volume record for their current plans and Pronghorn, along with Atlas last mile set a monthly record for total loads.
We successfully floated our first new dredge in February and recently floated our second in late April, we expect the commissioning process for both dredges to be completed by the end of June, and we are well on our way to a fourth quarter 2020 for commercial in-service date for the Daily Express. This continues to evolve into a more integrated provider of diverse solutions for our customers.
As emphasized by our addition of Pronghorn Logistics footprint, which amplifies Atlas's offerings of the duty Express and expanded payload capacity logistics assets. It has been a remarkable 1st year as a public company. Our team has a lot to be proud of, I'm sure proud of them.
Regarding the Hybris acquisition, we are off to the races with our integration, and it is exciting to think about what the combination of these very talented and innovative workforces will be able to accomplish as we share resources and best practices. We are working through the identification of additional potential synergies beyond the $20 million that we initially announced at the time of the acquisitions, the tie-in of Hi-Crush's carve-out operation to the Express, the potential for dredge mining to be brought to Hi-Crush Kermit and the combination of our utilities, infrastructure and procurement programs are among some of the potentially impactful initiatives that we are currently working through.
We have received positive feedback from our customers on the acquisition and look forward to better serving our customers through the combined offering of The Daily Express, the Encore mines and the last-mile solutions. The addition of Hi-Crush truly provides Atlas with an unparalleled portfolio of proppant and logistics assets.
Regarding logistics, Atlas remains the market leader in Last Mile with 28 crews, of which 24 are in the Permian, we now deliver over 50% of our total sand volumes using our last-mile crews, not only at Atlas, leading with fully integrated solutions.
We are also leading with technology building on our digital platforms capability to monitor profit inventory at our customers' well sites, we released our automatic ordering feature, a seamless technology assisted sand offering feature based on live inventory and operational data feeds. Our off the order feature provides the foresight to keep our sand production optimized while also giving our customers confidence in meeting their operational targets.
On the hills of up to order. We also released Gen one of our off the dispatch feature, a first-of-its-kind digital functionality to autonomously schedule Optimiz and dispatch sand delivery without human intervention combined off the ordering and off the dispatch set, the Atlas's digital platform well ahead of the competition.
Our automation efficiency, scale and innovation continue to drive market differentiation while advancing the digital transformation of the Permian Basin operation of Encore number eight is currently underway, and we expect that unit to commence sales later this month under a long-term contract with an existing customer in the Midland Basin. This is the third Encore unit deployed with this customer further validating the value proposition.
The Encore solution delivers to operators and the leadership position. The Encore team has established within the infield Mobile Money Market. Of note, number eight is a larger unit with a production capacity, roughly double that of our seven other units that are currently deployed in the Permian regarding future Encore deployments. Beyond a we have placed orders with our vendors for the equipment that will compromise Unit nine.
We expect to take delivery of this equipment in the third quarter and have multiple mine sites secured under option agreements. We are in advanced discussions with a number of potential customers about the deployment of this unit construction of the Dune Express remains on time and on budget and was not impacted by the events last month at our Kermit facility, we have more than 200 personnel on the ground daily working on construction, and we continue to make great strides and remain confident on our fourth quarter delivery time line.
Notable construction milestones include as of the end of April, we have substantially completed both of our major highway crossings, 16 of our 20 lease road crossings and nine of our 19 cattle and wildlife crossings, the installation of the St. Pete system further due to Express, which we have described as the pant like design commits in April and will run through June.
The installation of the concrete sleepers will be completed by the end of this month. At the end of April, more than 60% of the Convera modules were completed and we expect to be 95% complete by the end of this month. And as of today, 95% of the belt has been flight. That is ready for installation. Thanks to our strong first quarter results, the heavily contracted and low cost nature of our business and the quick turnaround at the Kermit facility, we are going to increase our dividend 5% to $0.22 per share, up a penny when compared to our dividend last quarter.
Based on this dividend and our closing price on May third, we now have a current annualized dividend yield of 4% pro forma maintenance CapEx beyond 2024 is expected to be around $60 million annually, providing Atlas with multiple avenues for to further increase shareholder returns once the remaining growth CapEx associated with the Dune Express subsides and the overall SAN market remains steady. Recent improvements in oil prices have not led to a pickup in activity yet, but it has changed the conversation from how low.
The rig count can go, which was the dialogue in the fall to today's topic of when will the recovery occur? Frac efficiency remains a nice tailwind for Atlas and our peers, one of the main benefits of consolidation in the Permian as the increased mix of final and Trammell fracs, which today represents more than 20% of the Permian completions market Furthermore, we see continued year over year growth in drilling and completion efficiencies, which amplifies the effect of fleet additions resulting in increased levels of proppant consumption.
Atlas remains highly contracted for 2020 for derisking much of the sand price volatility for this year. For the first quarter of 2024, which includes a 27 day contribution from Hi-Crush, we reported total sales of $193 million. Our revenue from product sales was $113 million on volumes of 3.9 million tons. As expected, we saw the first quarter get off to a slow start in January from an activity standpoint, but return to a more normal cadence for February and March. Our average sales price for the first quarter was approximately $29 per ton.
Moving to service sales, which is revenue generated by our logistics operation, we report the $79 million in revenues for the quarter and total cost of sales, excluding DD. and A. for the quarter was $107 million, which consists of plant operating cost of $40 million and logistics operating costs of $67 million for the first quarter.
Our per ton plant operating costs were $10.88, which was negatively impacted by less tread sheet as we were commissioning a new dredge in March, and thus we were more dependent on traditional mining throughout the quarter. We expect the commencement of both of our new dredges to provide incremental improvements in operational performance and further reductions in our mining costs once the rebuild the Kermit facility is complete.
Royalty expense for the quarter was $3 million. Sg&a expense for the quarter was $29 million, which includes $11 million of nonrecurring transaction costs and $4 million of noncash stock-based compensation. Cash interest expense for the quarter was $6 million, which was offset by $2 million of interest income generated during the period.
We expect our interest income to decline in future quarters as we draw on our cash reserves to fund our growth projects. Dd&a for the quarter was $17 million, and we generated net income of $27 million, representing a net income margin of 14% and an earnings per share of $0.26 net cash provided by operating activities was $42 million.
Adjusted EBITDA for the period was $76 million, representing an adjusted EBITDA margin of 39%. We expect our adjusted EBITDA margin to decline in subsequent quarters as we ramp up revenue from our lower margin Logistics segment and incorporate the lower margin profile from the high pressure acquisition.
Adjusted EBITDA margins should improve in 2025 with the commencement of the day Express adjusted free cash flow, which we define as adjusted EBITDA less maintenance CapEx for the quarter was $71 million, yielding an adjusted free cash flow margin of 37%.
Lastly, we spent a total of $88 million on growth projects in the first quarter, $75 million of this spend was for doing Express with the majority of the remaining $13 million going towards the completion of the Kermit plant expansion in our new on four facilities, cash and equivalents at the end of the quarter stood at $187 million with total debt of $481 million for the second quarter.
We expect a $20 million to $40 million EBITDA impact from the fire that occurred on April 14th and subsequent 11 day plant closure, which implies our second quarter financial results will be in line with the results of our first quarter, the EBITDA impact from having to source meaningful amounts of lower margin, third party volumes, the loss of some spot sand sales and higher OpEx costs associated with a more manual, less-efficient temporary load-out implementation, which will be in place until the feed system is rebuild, which is expected to occur in late June.
As mentioned earlier, the fire had no impact on the plant's production centers and wants to rebuild that the fee system is complete. We expect the plant to resume normal operations in the third quarter after a normal ramp-up, we expect to rebuild cost to be fully covered by our insurance policies, minus a $250,000 deductible.
Once again, we do not expect the event to have any impact on the timing of the construction to the Express or cause any NPT. for our customers, although a modest financial impact, I could not be more proud of the quick collaboration, teamwork and resourcefulness of our employees to limit the impact and quickly reopen our facility so we can reliably serve our great customers to the extent the fire has any additional lingering impacts to our financials. We will update guidance when appropriate.
That concludes our prepared remarks, and we will now let the operator open the line for questions. Thank you all for joining in on our first quarter call.

Question and Answer Session

Operator

Thank you. (Operator instructions) Sean Mitchell, Daniel Energy Partners.

Sean Mitchell

Hey, good morning, guys. John, Bob, congrats on the hire. I think you are very lucky to have Blake McCarthy joined the team and a great hire. But moving on to kind of business, you guys were able to reopen the plant pretty quickly after the fire, which was quite impressive. Can you walk us through the steps taken in the collaboration? You talked about required to kind of reopen so quickly?

John Turner

Yes, sure. I'm going to I'll start, and I'll let Chris kind of walk into the details. But obviously, very, very I'm very proud of the team and the way they perform there. I mean it was a collaboration that came across, you know, with both Atlas and Hi-Crush employees coming together. And you have Chris Chris show a lender as lead those efforts out there and you know, obviously to get that to get the operation back up. But I'll let him run into the Doug go through what exactly we did?

Chris Scholla

Yes. Thanks, John. So first, we really had to take a step back to understand our post event process capabilities at the plant. So after that evaluation, we saw look our wet plants, dryers, screening, Tower and load-out equipment were essentially unaffected, so we can produce and the challenge was finding a creative way to load sand into the trucks.
We were able to modify the conveyors under our screening tolerance to enable a redundant flow sand through our new temporary load-out stations. These conveyors are bidirectional One Direction feeding haul trucks to transport sand to our temporary load out in the other direction, feeding a ground level, zipper conveyor that transports and load out in the last week or different conveyor has proven capability to handle the main feed with the haul trucks becoming a pure pure-play backup solution.
It was incredible to watch all the different teams come together across our newly combined organizations. It was an absolute combined effort involving leadership and functions from both companies, including manufacturing last mile, loadout, Encore construction and safety functions. But no formal integration process was required here.
It just occurred organically our teams and leadership naturally came together to develop a creative solution to get our Kermit facility back online and serving our customers. The fact that within two weeks, our Kermit facility was loading trucks. It was an accomplishment, nothing short of incredible and hats off to the entire team. I think this highlights our combined companies' strength, scale and adaptability as well as our deep relationships across the industry that will continue to differentiate Atlas in the future.

Ben Brigham

By Sean. And just last thing on that, as I mentioned on the call, I think this validates our view on the scale and the culture and high pressure that we had of innovation and collaboration and makes us more reliable. No other company could have done to work the way outlets has through this disruption. And I might just add it's making the Permian better.

John Turner

Got it. Thanks, guys. That's great response. Appreciate it.

Operator

Jim Rollyson, Raymond James.

Jim Rollyson

Hey, good morning, everyone. And obviously, again, great job on running the fire drill what you guys had to do, John, maybe for you just a couple of questions around the dredges. Everything seems to be on time from commissioning. Maybe a just a reminder of the cost impact on OpEx once those things are fully set up and running starting in the third quarter. And I noticed in the slides, you mentioned the trial of using one of the older dredges of the at the Hi-Crush's Kermit facility. Just how are you guys as you've had time to look at that? Maybe how are you thinking about that opportunity and odds that's up there?

John Turner

Yes. As far as the dredges go you know, we're looking at, Tom, you obviously once we get these two dredges commissioned up and running working together, you know, we're looking at potentially at probably around the $3 decrease in cost per ton out there, although on a monthly basis, that would just be a permit.
So, you know, back in 2021 when we were feeding all of our mining mining feed through the through our dredges. We are running at, I think about six 50 a tonne on our OpEx. But obviously we have you probably won't see that in that entire number hit our entire OpEx base because obviously we have a lot more assets in the system now as it relates to you got my hands and you've also got all the you've also got all done in four months, well view as far as what's going to happen with the Kermit dredge yet we're going to decommission a dredge or take a drug out. We're going to run that dredge over to over to Hi-Crush.
They have a pond over there that we're going to go out and we're going to put this. We're going to put this rental dredge out there. See if it works, that's probably not going to happen till later this year. We just want to make sure that what the team focused on getting these two new dredges up and running and commissioned and running together on the likely, I don't really know what the likelihood of success is.
We do know they have a bond that they can float that Dragon. I mean, I think part of that is yes, I don't think that they were willing to bring up to sign a long-term contract to bring a dredge down to see if it would work.
But given that we still have one on lease, we're going to run over there see how this works out if it it doesn't work out, is there any other ways that we could utilize that dredge feed of the other permit mines, if we're not able to dredge mine over there. I still think there's an opportunity to utilize dredge mining across the entire Kermit facility up there, which would be both the both the about the Hi-Crush and the Atlas mines. We're still we're still in the early early stages of figuring that out, Jim.

Jim Rollyson

Got it. That's helpful. And maybe one for Bud, but you had a one of your largest competitors recently, I get taken out by private equity. Just kind of curious your view on is that from both a valuation and strategic perspective and how you think that might impact the market.

Ben Brigham

Yes, thank you. And obviously, it's good to see a very sophisticated investor like Apollo recognize that US Silica has tried to get a really depressed value stand up and pay a premium for a good business with an excellent free cash flow. And so I mean, I would encourage investors to look at slide 17, and our debt is just a you know that that's obviously a very objective and a confirmation of what's shown on that slide that this company Atlas is really special in terms of our margins and our cash generation and our growth profile. And those attributes certainly mirror a much, much higher multiple than what we're seeing and probably more in line with the midstream or production and field services talk to enterprise. And so there's a lot of a lot of opportunity here for to see our multiple expand, particularly as our distribution to expand with it with the growing cash flows and I didn't express in 2025.

Jim Rollyson

Thanks for that. Thanks, guys.

Operator

Thank you. Scott Gruber, Citigroup.

Scott Gruber

Yes, good morning. One of the things that Congress see, John on of motion and Blake, I'm sure is listening on. When I come back to the OpEx question, you guys have along discussed the benefits of these dredges. I'm just curious just in terms of putting all together the new Hi-Crush assets as well as you get these dredges up and running and you kind of move into 2025, should we still be thinking around a $9 per tonne OpEx figure for next year? Is that the bogey?

John Turner

Yes, I think at $9 gas where we're kind of shooting for obviously hoping that we get some additional benefits from the from the integration and from the synergies in there. But I think nine, I think $9 range is probably a good number to look at which are used in it.

Scott Gruber

Great. I appreciate it. And then coming back to the do and express just wanted to get, does the updated color on contracting the associated loads anywhere. We're just now you have six months out or so from start up of what do you hear from customers around around the system and any additional color you can provide on the longer term contracts associated with this?

John Turner

Yes, you know, we don't necessarily have didn't express contracts, but what we do have contracts that will be taken sand, often expressors, basically sand and logistics contracts with a number of operators that are operating the digital Delaware Basin.
Yes, a lot of our customers that were that are there that are going to be taken standoff didn't express are very excited about it because they're obviously wanting to take trucks off the road and make it make it safer they also see the efficiencies that are going to come up with the data Express. They see, you know, the well site efficiencies, the ability to utilize fewer assets to deliver more sand to the wellsite.
So look, I feel very good about where our contracting sits as it relates to sand supply and logistics contracts or Delaware Basin customers. And we're also right now currently working with some customers, get them signed up some folks that we don't currently work with, get them signed up contracts, which takes it off the shelf and in Express and then one of the thing is right now we are running 13 Delaware Basin crude right now. And Chris, you may want to talk about that. I mean that's something that we've been working hard on to have to increase our exposure there.

Chris Scholla

But good idea from us and we know the Dune expresses coming on and continuing that build to be able to seamlessly integrate those customers and do an espresso thing. Years ago, we approached this as going after pure doing Express type of contracts.
And I think what we've seen come through that transition work. The best is just leveraging our current customer agreements, right, running those 13 crews and having them naturally come in and take all the mileage off the public roads see the efficiency of the gene Express and the multi trailer operations. We expect our current customers in the Delaware that that that customer set continue to grow and with current customers flowing seamlessly right into June Express upon on commissioning.

Scott Gruber

Great. I appreciate the color. I'll turn it back. Thank you.

Operator

Derek Podhaizer, Barclays.

Derek Podhaizer

Hey, good morning, guys. I was wondering if you could provide us an update on how you're looking at pricing moving through this year? I know it's come down quite a bit and so pricing volumes obviously have an impact to the current mine volumes rather siloed. And then just the amount of your volumes that are contract, just an update around those three items would be helpful for the rest of the year?

John Turner

Yes. So I'll first off, as I'll talk about pricing to some contracting that we've set. We are recently been we're still signing contracts, we're signing contracts probably somewhere in the mid 20s. And those are obviously a lot of that also includes logistics, which is different. So that's just the price, if that's just the price of sand right now, we have around 80% of our contract.
Our volumes for this year contracted. We are still there are still a number of contracts that we're currently working on the contracting season really runs from, I'd probably just say, the fourth quarter all the way into the end of this, probably middle to end of the third quarter, I mean, probably probably say August timeframe. That's kind of our that's kind of the time that we are contracted at this point.
We're really contracting volumes. We do have that we didn't lose the spot volumes on with it, with the events that happened at Kermit and the spot volumes, you know, we had we like those. We let this go. Obviously those we think those volumes will be coming back. And then there's also opportunity as some of our own core mines to the increase would say on core one of our Encore mice just coming on, we'll be able to do is going to be a lot of demand out there for taking additional volumes.
Got some spare capacity. You SAP in that mine that's coming on out there. So look and yes, I think that going through the year, I mean, there's still a number of the number of contracts out there to be had and obviously, we're looking at both sand and logistics contracts here, not just sand contracts.

Ben Brigham

So from Toyota, particularly by Christian will go to the call a little bit about the efficiencies I mean, we certainly have a tailwind with the continued improvement in efficiencies or the frac crews out there with more some of our contracts, et cetera. And so that's a tailwind for us.
And I will say, you know, I'm personally on I'm optimistic about the fundamentals of oil prices and the sand sales. Nobody knows. But the sense is that the private operators probably going to pick it up a little bit in the second half of the year. That should be constructive.

John Turner

And yes, I think we are internally. I mean, I think we're seeing sand demand probably 10% to 15% year over year. I mean that's there are some other forecasts that we've seen out there that are higher than that. But obviously, I think the frac efficiencies, you hadn't seen a significant increase in and the number of crews running. But you are seeing with the simul-frac and trauma fractures starting to see more sand pumped per se per well, I mean to firm our curve playing a four month lease up in India.

Chris Scholla

And one more thing to add real quick, the increased adoption of electric fleets is certainly helpful for that dumb, right? And completion efficiency. So those are a lot more efficient than them dual fuel and and where you are diesel fleets. So that's certainly helping drive that demand right now.

Derek Podhaizer

That's all very helpful. I appreciate the color. I just wanted to think about 2025 CapEx. I know you mentioned in the opening comments about $60 million being towards that maintenance. But could you help us with what potential growth projects that you'll see in 25, obviously small versus 24, but thinking about additional Encore units or additional logistics Pronghorn units.

John Turner

Obviously, we're going to have a big step-down in CapEx, free cash flow increases. You're raising the dividend. I'm sure you will have a more structured capital allocation return program in 25, but just to help us think about 2025 CapEx, any other moving pieces aside from that $60 million of maintenance would be helpful.
You know, we haven't laid that out. I mean, obviously, there's going to be some rollover from the didn't express. I mean, we didn't express will be commissioned by the end of the fourth quarter, but there's still going to be some CapEx next year, probably on the how much that's going to be, but we can, but there's other things we'll be looking at as we are looking at potentially deploying some additional Encore units.
The autonomous trucking, obviously is you will be hearing more about that here soon. And as we as we proceed on down the path of delivering sand autonomously. There's going to be some probably some CapEx related with probably some of the mobile load outs and things like that off the Delta Express there's going to be, but I don't we don't have any big projects, but I would say it's currently in like in our in our plants that could change but yes, in general, as you know, we've been through a period of very heavy CapEx.

Ben Brigham

When you look at our expansion that we are doing in Express and and work ramping down on that? And does it mean what's pretty remarkable in my view, the fact that we've been had these healthy distributions even through that, that high level of investment in our CapEx, but that it does it's ramping down here in the second half of the year and particularly as you point out in 2025.
So so we're going to be in a very, I think, a relatively luxurious position given our margins and our cash generation to be able to ramp up the distributions, but also to invest in some CapEx, some more moderate rate of return projects to drive efficiencies for the industry and drive up reliability. And of course, are doing Express is a big part of that. The high-capacity trucking and eventually autonomous delivery. So So is 2025 is like and really exciting in that regard.

Derek Podhaizer

Great. Good stuff. Thank you, guys. I'll turn it back. Thank you.

Operator

Keith Mackey, RBC Capital Markets. Please proceed.

Keith Mackey

Hi, good morning. I first started, I wanted to ask about your appetite for acquisitions from here. I know you certainly just closed on a sizable one in there and lots of organic growth opportunities within the company. But also the experience you've added to your C-suite today might suggest that inorganic opportunities are still a still a potential priority for you. Can you just sort of lay out how you think about acquisitions going forward?

John Turner

You know that you want to go for now so again, and as sorry as far as acquisitions go, obviously that the Hybris acquisition has been a big one. The integration has really kicked off on this, and we're in full you know, we're working on that integration. Obviously, things are going very well there. Bringing these two teams together. We don't have anything identified future as the future goes.
As far as acquisitions go. But I will tell you that that is something that we will continue to continue to evaluate. We've got we kind of look at acquisitions from the center, the same way as we look at any any sort of project here, any sort of large large project, you know, we've got return goals. We've got, you know, what does it do that you know, help us enhance our story with our with our and with our with our cash flow return story.
And so we're looking for high-margin businesses that meet our internal rate of return project hurdles. And there's obviously a number of things that we look at when we're making decent making these investments. But we do, like I said, as we did, we just say if we just take the Tigress acquisition down, you know, but we're going to get that integrated. But yet we are going to continue looking and opportunities to grow our node and create value for our investors through acquisition.

Ben Brigham

Yes. And I'll just add just a general comment. Obviously, given the right return on our projects, such as the Dune Express and the high-capacity trucking and our margins and our cash generation. It is a high bar. But as you can see from the high gross acquisition, that was an extremely accretive acquisition and I am optimistic that we will have more acquisitions in the future is just wrong. We don't have anything I can point to right now.

Keith Mackey

Okay. Appreciate that. And maybe if we just think about it a little bit from the customer standpoint, lots of customer consolidation happening in the Permian right now. Can you just talk about what that means for for you field services in general and your position within the market as well?

Ben Brigham

Yes. Thank you. I'll start and these guys may want to add to it and scale matters. And you know, as a former operator, we've had and we've appreciated that and recognize that. And you're seeing that execution by operators to to me to grow their scale that enables them to drive down costs and drive up their margins. And there's a lot of leverage associated with that versus the same thing is true on the oilfield service side and particularly for Atlas is the largest prop and producer, the largest logistic provider.
We saw through this recent disruption that at our scale and our culture, our innovative collaborative culture and great people enable us despite disruptions to be able to perform and deliver for our customers. So so I think we're benefiting from that.
And it's important that we we continue to have two to two some operate as efficiently as we can to reliably service to our customers. So I think Atlas is in a unique position. Nobody nobody could have performed the way that we have to that disruption, and we're going to continue to perform that way. I don't know if you want to add that.

John Turner

I made Gary, I think it said a lot of lot of customers are looking for diversification strategy and the accuracy of the diversification strategy. I mean, we have four dry mine locations. We get eight West, let's say, locations for the nine, obviously, with the large logistics offering. I mean, there's not there's no other company out there that can provide that, and we're going to continue to build on that to be a know to continue to serve our great company that we've done the team nobody can most of them.

Keith Mackey

Perfect. Thanks very much. That's it for me.

Operator

Thank you. David Smith, Pickering Energy Partners.

David Smith

Hey, good morning and thank you.

Ben Brigham

So good morning.

David Smith

I'll just Rick, I wanted to reiterate that congratulations on the incredible response to the buyer as well as the hiring of Blake McCarthy that was really impressive about over half of your Q1 volumes were delivered with your own logistics. And sorry, if I missed this detail. Have you talked about what you're seeing for your average delivery volumes and the areas to be served by going Express you're seeing a greater mix of double and triple trailer deliveries, but really how do average volumes per delivery compare to where you would expect them to be once again, express fully online?

Chris Scholla

Yes, I could see. I think from a from a total volume perspective, they didn't express capacity with current average volume monthly volumes per crew. Today, some will need to be up around that 20 to 21. Crews is what we're looking at. And as you've seen us rate our business, looking at the last mile side of things specifically in the Delaware, I mean, we've grown somewhere in that eight to 10 times range in the last 24 months. So our ability to achieve an additional seven crews, seven acres out there now we see as a highly highly probable as we as we continue down that that pathway.

David Smith

Yes, I absolutely appreciate it. And maybe I asked the question the wrong way, but when thinking about you've got 120 trucks, right?

Chris Scholla

And our total delivery capability is really going to be a function of unit turns per day and average volumes per per trip to the wellsite. So I was more thinking about that average volumes per trip to the wellsite, if customers are taking real advantage of the ability to deliver it, you are doing trailers start. I guess you're asking the multi trailer success?

David Smith

Yes.

Chris Scholla

Yes. So from a multiple from a multi trailer side of side of this, and we've recently opened up our additional depot up in Upton Polygon six, which will be the and where the end of the June Express lies opening up pretty significant volume for us there. We've now run double and triple trailers with five customers out there and we continue to see our average pay loads go up.
No, I believe with our first triple trailer start now April 5th of last year to where we are today with now two, those looking to open a third one here shortly. I think our customers that are utilizing them, we've even had customers look and modify their their completions program to optimize the use of double and triple trailers. So while two years ago people thought this was a was a very creative but would never have an idea. It was the same thing doing Express, right?
And once our customers see the efficiencies that they gain on location, minimizing the trucks and also getting those those trucks off the public road. And we've had nothing but success in there and also in recent conversations with folks to even optimize the pad layout and sizings around double trailers. So I think those those type of those type of actions and conversations for our customers really show where this is where this is headed with the with the multi trailer operations as great color.

John Turner

Thank you for the update.

Operator

Neil Mehta, Goldman Sachs.

Neil Mehta

Yes, thanks for this, and thanks for your comments, John. John, congrats on your promotion and Blake, you as well. And my first question is just around the didn't express. As we think about construction, we are we're getting really close to come into service. So what are the last kind of gating items and can you give us a sense of your confidence interval around executing some of the last now next to

John Turner

Mike, you know, I mean, obviously, the Delta Express construction is moving along, we have 200 over 200 people out there working on the construction of that, the fire itself, that is not going to impact that don't express construction at all and backup. I think it's going to enable our crews to install the tie into the plant more quickly on, you know, I have as far as the next bottleneck, I mean, I think the next milestone for us is going to be starting to omission this commission that start commissioning the part of the commissioning process, which is supposed to start at the end of the third quarter, early fourth quarter.
And then where we obviously won't be selling any sand often in Express for a while. But the commissioning of that process is going to take, you know, another on another three up until the end of the fourth quarter to end with automated John about, let's say, commissioning deals that will be run since the I mean, it's just in the commissioning process is just getting up to say you're not really running any sand down the belts.
But what you're doing is you're running those belts to make sure that they, you know, the belts tracking to make sure that they're working in order to make sure that you've got all the all the bugs worked out on that as far as the malls, I mean, as far as the kind of the gating items, we've ordered all the equipment, we've got all the folks out there on working on that working on the working on the construction.
We've already done our two major opening overhead road crossing some major overhead overhead crossings. We've still got some ways to us and some some cattle and wildlife crossing to-go at some leisure pricing to go. But everything is moving along as expected on the Express side.

Neil Mehta

Thanks, John. And then the you alluded to this free cash flow inflection, which we see in 2025 as well and the potential to return more capital to shareholders. Do you have a preference in terms of doing it through the dividend versus buybacks? Or is it is it price dependent? Or just talk about the framework of of how the Board is thinking about the return of capital?

John Turner

You know, right now, we're really focused on returning cash to our investors. We think that paying that dividend. This is obviously something that we're really focused on as an organization with SAFE stock buybacks is not something that we've really discussed. That's something that we will likely be putting into a formal our plan here in the next before we get to the end of this year. So right now on the what we're focused is really returning cash to our shareholders.

Neil Mehta

Thanks, Jeff.

Operator

Saurabh Pant, Bank of America.

Saurabh Pant

Hi, good morning, but and John, if I can just go back to the high-cost integration. I know there were a couple of questions early on, but if we come back to that. And as you move through the integration process, as you're going out and talking to the customers, looking at the assets, not just comment, but the Encore assets, can you share some feedback you have heard from the customers from the ops teams out there, both positive and negative, just that you have owned it, those assets are for sale. I think you're just around two months right now.

Ben Brigham

Maybe I'll just make a real quick general comment and then you guys may want to add to this. I mean, obviously, you've done Atlas prior to the high price acquisition. We had to have a really strong customer base in the Delaware Basin and our ITO are Jonathan Dunes and our our loads are high capacity tracking and our logistical business has been sort of an excitement over the Daily Express as a side track at a really strong customer base for Atlas in the Delaware Basin as the largest copper producer in the basin even prior to higher crushing.
And clearly, Hi-Crush did a great job with the Encore mine. So proximate and proximity of those mines to the operators in the Midland Basin was it gave them a very strong customer base in the Midland Basin. So and so it's obvious that the customers are really excited about that. Now we provide. We're logistically advantaged to both the Midland and the Delaware Basin to make it the benefit of Atlas Atlas's scale and reliability and quality and so on and very positive.

John Turner

But I don't know if you want to add that again out and done the math, but just draw that down. I mean, it's it's about locating our minds are sand proximal to everything every well thought out there, you know, and a lot of concerns that customers had about going with a single sand providers that couldn't make it.
And if they were in the Delaware Basin, then they need to stand in the Midland Basin that you're going to be able to provide that for today. And we're delivering sands, obviously to the to the to the back of the blender, um, you know, to all of our customers across whether they're in the met, whether our Midland Basin acquired Delaware place in face of weather, both in just adding to that scale to be a better fit our partner for our customers.

Saurabh Pant

Okay. Awesome from us. And just one more for me. Maybe just talk a little bit about your pricing strategy and thinking pricing strategy more broadly more broadly from a comment versus on quarter perspective, right, because Encore is a very different kind of asset. I'm assuming you would continue to have slightly lower price but longer duration contracts on those assets. But maybe you can talk to that a little bit. And just maybe remind us that is the $26 to $28 per ton pricing guidance that you gave for the full year, does that is that still the right place to be?

John Turner

We're not really talking about what our pricing strategy is out there. Obviously, that's that's a that's something that we and obviously, internally for gone here, we what I will say is we have a low cost to produce sand, and we're going to we're going to bring those costs down. And so we will we are very competitive when it comes to, you know, obviously sand sand delivery it's obviously both both sand sand price and delivery costs. I mean, it's really it's about lowest cost to the to the wellsite. And so that's really kind of where we focused ourselves.

Saurabh Pant

Okay, perfect. Okay, John, thanks for that. I'll turn it back.

Operator

Thank you. We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

John Turner

Yes. And with that, we'd like to thank everybody for joining us for our first-quarter call, and we look forward to reporting on our second quarter results on our next call. Thank you very much and thank you.

Ben Brigham

Thank you, everybody.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.