Archrock, Inc. (NYSE:AROC) today announced that its Board of Directors has declared a dividend of $0.12 per share of common stock. The dividend to be paid in November 2016 is approximately 25% higher than the second-quarter 2016 dividend of $0.095 per share. The dividend will be paid on November 17, 2016, to stockholders of record at the close of business on November 10, 2016.

For the third quarter of 2016 net loss from continuing operations was $10.0 million compared to $2.4 million in the second quarter of 2016 and $17.9 million in the third quarter of 2015. Net loss was $10.0 million in the third quarter of 2016 as compared to a net loss of $2.4 million in the second quarter of 2016. EBITDA, as adjusted (as defined below), was $80.4 million in the third quarter of 2016, as compared to $83.5 million in the second quarter of 2016. Other income was $2.5 million in the third quarter of 2016 compared to $0.2 million in the second quarter of 2016.

Contract operations revenue was $156.6 million in the third quarter of 2016, compared to $163.0 million in the second quarter of 2016 and $191.7 million in the third quarter of 2015. Contract operations gross margin was $96.8 million, or 62% of revenue, in the third quarter of 2016, compared to $104.1 million, or 64% of revenue, in the second quarter of 2016 and $113.8 million, or 59% of revenue, in the third quarter of 2015.

Aftermarket services revenue was $39.3 million in the third quarter of 2016 compared to $41.2 million in the second quarter of 2016 and $57.2 million in the third quarter of 2015. Aftermarket services gross margin was $6.5 million, or 17% of revenue, in the third quarter of 2016 compared to $6.8 million, or 17% of revenue, in the second quarter of 2016 and $11.7 million, or 21% of revenue, in the third quarter of 2015.

Selling, general and administrative expenses were $25.9 million in the third quarter of 2016 compared to $28.1 million in the second quarter of 2016.

“Compared to the first half of 2016, improved market conditions in the third quarter contributed to increased stability in our business and lower net operating horsepower returns,” said Brad Childers, Archrock’s President and Chief Executive Officer. “Additionally, we delivered strong cost management with solid contract operations gross margins, further SG&A reductions, and lower capital expenditures. These actions, combined with the proceeds we received from Exterran related to the sale of Exterran’s previously nationalized Venezuelan assets, enabled us to reduce consolidated debt by over $90 million in the third quarter. Finally, third quarter 2016 results were impacted by approximately $21 million in impairment and restructuring charges as we continued to modernize our fleet and reduce our cost structure.”

“Today we also announced an all equity financed drop-down of approximately 150,000 horsepower to Archrock Partners for total consideration of approximately $85 million to Archrock, which is expected to close in the fourth quarter of 2016,” continued Childers. “We are increasing the third quarter 2016 dividend payment by an amount approximately equal to the incremental distributions Archrock expects to receive, beginning with Archrock Partners fourth quarter 2016 distribution, from the limited and general partner units to be received as consideration in the transaction.”

Looking into 2017, we see indications of the market stabilizing. As a result of the work we have done to lower our cost structure and enhance our credit profile, we will be well positioned to capitalize on growth opportunities as and when the predicted growth in U.S. natural gas production occurs. We continue to expect to benefit from the increased demand for natural gas from LNG and pipeline exports, petrochemical feedstock and power generation,” concluded Childers.

Cash available for dividend was $16.8 million in the third quarter of 2016 compared to $17.2 million in the second quarter of 2016. Cash available for dividend coverage was 1.98x in the third quarter of 2016 compared to 2.56x in the second quarter of 2016.

Total capital expenditures in the third-quarter of 2016 were $24.8 million, including $5.2 million of maintenance capital and $19.5 million of growth capital.

The cash distribution to be received by Archrock based on its limited partner and general partner interests in Archrock Partners, L.P. is $7.1 million for the third quarter of 2016, compared to $7.1 million for the second quarter of 2016.

Archrock’s management and the Audit Committee of its Board of Directors are continuing the process of determining to what extent Archrock’s pre-Spin-off historical financial statements may be impacted by the previously disclosed identification by Exterran of errors relating to the application of percentage-of-completion accounting principles to specific engineering, procurement and construction projects in the Middle East by its Belleli subsidiary. To date, based on the information provided by Exterran, Archrock does not believe the matters identified relate to Archrock’s ongoing operations. Exterran’s results of operations have been reported as discontinued operations, net of tax, in Archrock’s consolidated statement of operations for all periods presented in Archrock’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Because the process of determining the impact to Archrock’s pre-Spin-off historical financial statements is ongoing, Archrock is not providing full third-quarter earnings information at this time.

Conference Call Details

Archrock, Inc. and Archrock Partners, L.P. will host a joint conference call on Tuesday, November 1, 2016, to discuss their third-quarter 2016 operational results. The call will begin at 11:00 a.m. Eastern Time.

To listen to the call via a live webcast, please visit Archrock’s website at www.archrock.com. The call will also be available by dialing 1-888-771-4371 in the United States and Canada, or +1-847-585-4405 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference Archrock conference call number 43614259.

A replay of the conference call will be available on Archrock’s website for approximately seven days. Also, a replay may be accessed by dialing 1-888-843-7419 in the United States and Canada, or +1-630-652-3042 for international calls. The access code is 4361 4259#.

EBITDA, as adjusted, a non-GAAP measure, is defined as net income (loss) excluding income (loss) from discontinued operations (net of tax), cumulative effect of accounting changes (net of tax), income taxes, interest expense (including debt extinguishment costs and gain or loss on termination of interest rate swaps), depreciation and amortization expense, impairment charges, restructuring charges, expensed acquisition costs and other items. A reconciliation of EBITDA, as adjusted, to net income (loss), the most directly comparable GAAP measure, appears below.

Gross Margin, a non-GAAP measure, is defined as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin percentage is defined as gross margin divided by revenue. A reconciliation of gross margin to income (loss) from continuing operations, the most directly comparable GAAP measure, appears below.

Cash available for dividend, a non-GAAP measure, is defined as distributions received by us from Archrock Partners, L.P., plus our deconsolidated gross margin, less the following deconsolidated items: maintenance and other capital expenditures, cash selling, general and administrative expense, cash interest expense associated with our debt, cash tax and (gain) loss on sale of property, plant and equipment. Cash available for dividend coverage is defined as cash available for dividend divided by total dividends. A reconciliation of cash available for dividend to income (loss) from continuing operations, the most directly comparable GAAP measure, appears below.

About Archrock

Archrock, Inc. (NYSE:AROC) is a pure-play U.S. natural gas contract compression services business and a leading supplier of aftermarket services to customers that own compression equipment in the United States. Archrock, Inc. holds interests in Archrock Partners, L.P. (NASDAQ:APLP), a master limited partnership and the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the United States. Archrock is headquartered in Houston, Texas, operating in the major oil and gas producing regions in the United States, with approximately 1,700 employees. For more information, visit www.archrock.com.