Kodiak Gas Services (KGS) risk factors, FY2024 10-K

Risks Related to Our Business and Our Industry

1. 01A long-term reduction in the demand for, or production of, natural gas or oil could adversely affect the demand for Kodiak’s business and services or the prices Kodiak charges for Kodiak’s business and services, which could result in a decrease in Kodiak’s revenues
2. 02The loss of one or more of Kodiak's key customers and/or the deterioration of the financial condition of any of its customers would result in a decrease in Kodiak’s revenues and could adversely affect its financial results and may have a material adverse effect on Kodiak’s financial condition
3. 03Kodiak faces significant competition that may cause it to lose market share and have a material adverse effect on its financial condition
4. 04Kodiak’s customers may choose to vertically integrate their operations by purchasing and operating their own compression fleet, increasing the number of compression units they currently own, or using alternative technologies for enhancing oil production, which may have a material adverse effect on Kodiak’s business
5. 05The majority of Kodiak’s operations are located in the Permian Basin and Eagle Ford Shale, making Kodiak vulnerable to risks associated with operating in limited geographic areas, which could have an impact on its revenues
6. 06Kodiak may be unable to access the capital and credit markets or borrow on affordable terms to obtain additional capital that Kodiak may require, which could have a material adverse effect on its business, results of operations and financial conditions
7. 07Kodiak’s fleet may require additional operating or capital expenses to maintain over time, which could adversely impact its financial results
8. 08Impairment in the carrying value of long-lived assets, including impairment of goodwill and other intangible assets, could reduce Kodiak’s earnings
9. 09Kodiak has in the past been, and may in the future be, subject to sales tax audits in jurisdictions where Kodiak operates. As a result, Kodiak may incur material unanticipated sales tax liabilities
10. 10Kodiak might be unable to employ or retain qualified technical personnel, which could hamper its present operations, limit its ability to grow or increase its costs
11. 11Any unionization efforts or labor regulation changes in certain jurisdictions in which Kodiak operates could divert management’s attention and could have a materially adverse effect on Kodiak’s operating results or limit Kodiak’s operational flexibility
12. 12have a materially adverse effect on Kodiak’s operating results or limit its operational flexibility. Further, our response to any union organizing efforts could negatively impact how our brand is perceived by our employees and customers and have material adverse effects on our business and future results
13. 13Kodiak’s operations entail inherent risks that may result in interruption of Kodiak’s operations and/or substantial liability. Kodiak does not insure against all potential losses and could be seriously harmed by unexpected liabilities
14. 14If Kodiak does not satisfy its mechanical availability guarantee, a customer has the ability to terminate its contracts
15. 15Acts or threats of terrorism, acts of war, social unrest, cyber or physical security attacks, and other malicious acts of individuals or groups seeking to disrupt Kodiak's operations could adversely impact Kodiak’s business, financial condition, and results of operations

Risks Related to Regulatory Matters

1. 16Kodiak’s operations are subject to stringent environmental, health and safety regulations and changing expectations of other stakeholders with respect to sustainability practices, and changes in these regulations and/or expectations could increase Kodiak’s costs or liabilities
2. 17New regulations or proposed modifications to existing regulations under the CAA may lead to adverse impacts on Kodiak’s business, financial condition and results of operations
3. 18A climate-related decrease in demand for natural gas and oil could negatively affect Kodiak’s business
4. 19Kodiak’s business is subject to climate-related transitional risks, including evolving climate change legislation, regulatory initiatives and stakeholder pressures, which could result in increased operating expenses and capital costs, financial risks and potential reduction in demand for Kodiak’s services
5. 20financial markets, whether impacting Kodiak’s customers and/or Kodiak’s business, may further adversely affect the demand for and price of Kodiak’s securities
6. 21An unfavorable ruling in any such case could significantly impact Kodiak’s operations and could have an adverse impact on its financial condition
7. 22Regulatory initiatives relating to the protection of endangered or threatened species in the United States could have an adverse impact on Kodiak’s and its customers’ ability to expand operations
8. 23Kodiak may be involved in legal proceedings that could result in substantial liabilities

Risks Related to Intellectual Property, Information Technology and Cybersecurity

1. 24Kodiak may be sued by third parties for infringement, misappropriation, dilution or other violation of their intellectual property or proprietary rights, any of which could adversely affect Kodiak's business and results of operations
2. 25Kodiak’s reliance on third-party components for use in its IT systems could result in delays in service or disrupt its business
3. 26Kodiak is subject to significant legal and reputational risks and expenses relating to the privacy, use and security of employee and customer information, which could negatively affect Kodiak's business, financial condition and results of operations
4. 27Kodiak has experienced cybersecurity incidents or IT system disruptions in the past, and cybersecurity breaches or IT system disruptions may adversely affect Kodiak’s business in the future
5. 28Kodiak is subject to risks associated with disruptive technologies, including artificial intelligence

Risks Related to Kodiak’s Relationship with EQT

1. 29EQT controls a significant percentage of Kodiak’s voting power, and it is subject to contractual restrictions that may affect Kodiak Holdings’ exercise of its rights to approve corporate actions under the Kodiak Stockholders’ Agreement
2. 30EQT may invest in other companies in the future that may compete with Kodiak. Conflicts of interest could arise in the future between Kodiak, on the one hand, and EQT, on the other hand, concerning among other things, potential competitive business activities or business opportunities
3. 31A significant reduction by Kodiak Holdings of its ownership interests in Kodiak could adversely affect Kodiak
4. 32Kodiak, it may have less incentive to assist in Kodiak’s success and its affiliates serving as members of Kodiak’s Board may resign

Risks Related to Kodiak’s Indebtedness

1. 33Kodiak’s substantial indebtedness could adversely affect its financial condition and impair Kodiak’s ability to operate its business
2. 34Kodiak has a significant amount of indebtedness. As of December 31, 2024, Kodiak’s total long-term debt was approximately $2.6 billion in aggregate principal amount, including $750 million principal amount of senior notes due 2029 which were issued February 2, 2024
3. 35Kodiak may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful. Kodiak’s ability to generate cash depends on many factors beyond Kodiak’s control
4. 36The terms of the ABL Credit Agreement and the Indenture restrict Kodiak’s current and future operations, particularly Kodiak's ability to respond to changes or to take certain actions
5. 37Kodiak’s variable rate indebtedness subjects it to interest rate risk, which could cause its debt service obligations to increase significantly
6. 38Despite Kodiak’s current level of indebtedness, Kodiak and its subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to Kodiak’s financial condition described above

Risks Related to Owning Kodiak Common Stock

1. 39If securities or industry analysts do not publish research reports or publish unfavorable research about Kodiak’s business, the trading volume of Kodiak Common Stock could be negatively impacted and the price could decline resulting in decreased demand for Kodiak Common Stock by investors
2. 40The Kodiak Charter and Kodiak Bylaws contain provisions that could delay, discourage or prevent a takeover attempt even if a takeover might be beneficial to Kodiak’s stockholders, and such provisions may adversely affect the market price of Kodiak Common Stock
3. 41Kodiak cannot assure you that it will be able to pay dividends on the Kodiak Common Stock
4. 42Due to the foregoing, Kodiak cannot assure you that it will be able to pay a dividend in the future or continue to pay a dividend after it commences paying dividends
5. 43Terms of subsequent financings may adversely impact stockholder equity
6. 44Taking advantage of the reduced disclosure requirements applicable to “emerging growth companies” may make Kodiak Common Stock less attractive to investors
7. 45Kodiak is no longer an emerging growth company. If Kodiak were to subsequently elect instead to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act

General Risks

1. 46A financial crisis or deterioration in general economic, business or industry conditions could materially adversely affect Kodiak’s results of operations, financial condition and ability to pay dividends on Kodiak Common Stock
2. 47Events outside of Kodiak’s control, including an epidemic or outbreak of an infectious disease or the threat thereof, could have a material adverse effect on Kodiak’s business, liquidity, financial condition, results of operations, cash flows and ability to pay dividends on Kodiak Common Stock
3. 48Inflation may adversely affect Kodiak by increasing costs beyond what it can recover through price increases and limit its ability to enter into future traditional debt financing
4. 49Kodiak’s ability to use net operating losses (“NOLs”) to offset future income may be limited
5. 50Tax legislation and administrative initiatives or challenges to Kodiak’s tax positions could adversely affect its results of operations and financial condition