know that. I'm gonna hit about six slides or so in the deck. I'm not gonna hit all of them. There's more detail on some of those. Wanted to really just hit the highlights, and then give people an opportunity to ask questions. So, we're a rental business in natural gas compression, which I'll talk about what that is in a second for those of you who don't know. Primarily, our business is renting this equipment to energy operators, oil and gas producers. We maintain a staff of very specialized mechanics to service this equipment, which I'll review the fleet, and our rental contracts are typically long-term, up to sixty months, where this equipment is sitting out in the field.
So this is a production-oriented asset, or business rather, and servicing companies out in the oil and the gas fields. A little bit of detail on the right side. We've actually been public for more than twenty years now. But the recent several years, the trajectory of the business has changed quite materially from historical performance. So what is natural gas compression? Very simply, and I'm not a technical person by background, so it's easy for me to explain it as a layman. Very simply, we're taking natural gas off of oil wells, which is in a what's called associated gas, compressing it to much higher pressures, pumping it back down into the well, which aids in production.
This has become a particularly important part of oil production with the rise of shale oil wells, which have much higher, steeper decline curves and require more, significantly more compression. Natural gas compression is used in midstream applications as well. We are servicing only at the wellhead. The right side of the page, why do our customers use this service? Why do they rent it versus owning it themselves? The answer is, as you look across the compression industry, there is a material amount of owned compression, meaning the operators, whether pipelines or production companies, own it. There is a good strategic logic for them to rent it. First, this requires very specialized personnel, which can actually be very difficult to get.
And when it comes to maintaining the facilities required for this specialized form of compression, it allows them to allocate capital to places other than the personnel and the facilities required to do this. So from a return on invested capital perspective, it's really looking at what is their core focus. And as you've seen the consolidation or the continuing consolidation among the operators, many of them have significant debt loads, and they're really looking where they can best allocate their capital. And, frequently, the larger companies will allocate capital towards drilling a new well and the production side versus compression. Just a quick overview of our fleet on the left side of the page and on the right side of the page, where we operate.
So on the fleet highlights overall, you see the unit utilization, 66%. The horsepower utilization is 82%, and I tend to focus more on the horsepower, 'cause that really is the driver of the economics of the business. What has changed about NGS over the past several years is really the move into large compression. And as you look at large, medium, and small, and this is literally measured by horsepower of the unit, our large horsepower is north of 400 horsepower, and most of the units in that size range are north of 1,000 horsepower. Just to give you a sense of kind of, you know, size of these pieces of equipment, our largest units, 2,500 horsepower, are as large as a tractor trailer.
These are very expensive, multimillion-dollar pieces of equipment, very expensive to move, and tend to go out and operate, on a wellhead or on location, for years. Large horsepower is north of 400. That is typically used in, almost always used on an oil well, and very frequently used in what's called centralized gas lift. And so, that process that I described earlier of pulling gas, off the well as crude oil is coming off, compressing it, and putting it back down in, that's gas lift. Centralized gas lift is one pad, operating multiple wells. That creates economies of scale for our customers, making it more profitable, but requiring larger equipment on the surface, and larger horsepower compression. Medium is 200-400.
Basically, that's typically still operated on an oil well, but typically a single well, so gas lift, but single well. And our small horsepower, which is really the older part of the business, is sub 200 horsepower, typically operated on a natural gas well. As you look on the horsepower, the total horsepower column, and this is across the fleet, you see we have just north of 300,000 horsepower in the large size. That is effectively 100% utilized at this point, as is most of the industry.
Over the past several years, due to a number of factors on capital constraints for larger companies, higher interest rates, the supply chain getting pushed out, typically getting a large horsepower unit takes nine to 12 months, and capacity utilization is running at a very high level, close to 100%. Our medium and small, a little bit more of the legacy side of the business, you see is less than 50% of the overall fleet. On a utilized basis, the roughly 100,000 horsepower unutilized is in that medium and small, and is really an opportunity for us going forward. Moving to the right side of the page, where do we operate?
As you see, about 75% of the business is in the Permian Basin, so roughly, a 150-mile radius from where I'm sitting here in Midland today. And that's been the growth area of the business, and where really all of our large horsepower has gone. And you've seen the significant rise of shale oil, and the Permian Basin has become the dominant basin for oil production in the U.S., which is the largest oil producer now in the world. A number of other basins, we still operate in a mix of oil and gas across those.
And a couple of growth areas for us going forward I would highlight are the Eagle Ford Shale, which is currently a very small percentage of our business, but will become larger over time, and the Utica-Marcellus, which for us is actually a mix of oil, oil liquids, and gas. You know, on the investment highlights side, just checking the time here, five points I would hit. First, attractive industry fundamentals. So, if you look at oil production, it's one of the reasons we at Mill Road initially invested in this business or led the investment, which is a relatively stable business, because it aids in production. So it's not exploration-driven, at least not directly.
Over long periods of time, it will be, but it's tied to production, and so it ends up being quite stable. We are operating in the low-cost extraction basin, in the Permian Basin, and so it reduces significantly the commodity price swings impact that you may typically see in an energy business, and if you look back to the pandemic, the performance of the business, it recovered quite quickly, really within a couple of quarters from very dramatic swings in oil prices. One note I didn't make on the previous page, but at this point, about 75%-80% of our business or our rental fleet is related to an oil well, so at this point, although the company is called Natural Gas Services, that really relates to what our service does technically.
But as you think about commodity drivers, we're much more tied to WTI, or crude oil, than we are to natural gas. Second point, it is a recurring rental business, so these units, particularly the large horsepower, tend to go out and operate for years on end in the same location. So these are long-term contracts, monthly fixed fees, which further provides a cushion against commodity price swings. Third point in the upper right here, the top right of the slide, the industry-leading technology was really something surprising for me to learn as a public shareholder, and then joining the board.
And that is, even though there are three large public players, which I'll hit on later, when you look at the technology of our units, we're at the forefront of the industry. There are a number of things we've done from engine selection to some of the innovations listed here, the Smart System, E-Com System, that really put us at the forefront from a technology perspective in the service that we deliver to our customers. And when we look at what are the customer decisions, why do they choose NGS or any other rental compression company? I think there are a number of drivers around that. First is service level. These units run twenty-four/seven, three sixty-five effectively, and downtime causes a material economic loss to the operator.
So it's very important that we have a very high runtime, and our availability of our units to run in the very high 90s, 98-99%. Second area they look at is the technology of the unit. What type of runtime do we actually deliver for them? Third is, at this point, just availability of equipment, because the supply-demand balance is really skewed, where there is more demand than supply. And the fourth is price. And so this industry-leading technology is actually quite an important point and was a surprising thing for me to learn, considering the size of NGS relative to three large players. Fourth point on the bottom, proven growth and conservative leverage.
I'm gonna hit on these numbers on a slide a little bit later in the presentation, but very simply, we're growing materially faster than any of the large public comps. We're less leveraged than they are, yet we trade at a lower multiple. So from an investment perspective, I would think that's quite attractive, and the fourth point, excuse me, fifth point at the bottom right, growth opportunities and value levers. You know, one of the major reasons that I came here is that I looked at the business strategically. Although we have great technology and services, and delivered great service to our customers, there are material opportunities in this business, both on the growth side and from a value perspective, and I'll hit on these in a little bit more detail.
I'm gonna slip, excuse me, flip forward a couple of pages here. These are really just backup points to those five investment thesis points, so I'll let you read those at your leisure, so proven growth with conservative leverage, so bottom left-hand side of the page, looking at our annualized EBITDA growth over the past three years. 2022, we did about $29 million of EBITDA. 2023, we did about $45 million, and if you look at 2024, the midpoint of our guidance is $66 million. So significant growth from an EBITDA perspective and if you look at our growth CapEx guidance, the midpoint of our guidance is $70 million.
This coming year, our target return on invested capital is at least 20%, and so we are continuing to put capital out at very attractive return levels. And in spite of that, as you look at the upper right-hand side of the page, we're less leveraged than any of the large competitors at 2.4x , so we still have further room to grow while maintaining a prudent capital structure. And as you look at the bottom right side of the page, we trade at a lower EBITDA multiple on this slide, about 6.5x , and this is based on the midpoint of our forward guidance.
I would also note that, the value investor in me would say that, we're trading at one times book, and you're seeing growth rates, and continued ability to deploy capital at, quite attractive return on invested capital, but we are still trading at book value. Final slide I'll hit is, the growth opportunities and value levers, and this is I want to create a framework for investors to think about: How will this enterprise grow, over the coming years? Four buckets here. First is fleet optimization. For a long period of time, both in this industry and, and look, generally, there was, you know, no inflation over the past 20 years. Well, that has obviously changed materially over the last several years.
The third quarter of last year was really the first time we did a material price increase, and we have continued to push prices up to the level that we believe are reflective of the service and technology that we deliver to our customers. So we've been continuing to look across the fleet for opportunities on the price side, also on the fleet optimization. When I say fleet optimization here, I'm referring to the utilized fleet. We have about 1,200 units that are out operating in the field.
Across that fleet of roughly 1,200, there is a tremendous amount of data, and that is a significant opportunity for us as we better capture that data, analyze it, create information out of it that is usable from an operational perspective within our business to improve both the efficiency of the business and the service levels that we deliver to our customer. I haven't quantified that publicly yet, but I believe over the coming years, that is a material opportunity. Second bucket is asset utilization. Two parts to that. So we have 1,200 units that are unutilized. We have about 600 units that are currently unutilized.
These are primarily small and medium horsepower, but there are opportunities for us that are relatively low investment into those units to upgrade them, to bring some of our technology, which is really on the larger horsepower, down into that small and medium, which creates a much more valuable asset and valuable service for our customers. We have an opportunity to convert a number of those units from a natural gas engine to an electric motor-driven. We already have electric units in the small and medium. In the growth that I announced in the most recent quarter, about 40% of our new horsepower, all of which is large, all of which is pre-contracted, is going into electric motor-driven units.
And so going forward, we will be agnostic to what our customer needs are, whether they want a natural gas engine or they want an electric motor, which at the end of the day provides the exact same service. It's just what type of drive does it have on it? And then the third opportunity is really just increased make-readies, which means we have more units available to go out in the field in a more timely basis. So opportunity asset utilization on the unutilized fleet, which will be... You know, that we're not gonna see that over the coming, you know, one to two quarters. That's a multi-year opportunity to drive cash flow from our existing assets.
On the balance sheet side for asset utilization, as you look across our assets, we have a material amount of opportunity to convert non-cash assets into cash, and that's accounts receivable, inventory. We have an income tax receivable of about $11 million, and we have significant amounts of owned real estate. All of these can be monetized and invested back into the rental fleet at a very attractive return on invested capital. Third point is fleet expansion. And there, we have grown materially over the last several years, and our 2024 guidance in terms of growth CapEx shows that growth continuing. Anytime we're expanding new units, or building new units or fabricating new units to go into the rental fleet, at this point, everything is pre-contracted.
These are long-term contracts for the large horsepower, typically four to five years, and they are meet or exceeding our return on invested capital target of at least 20%. Fourth point is accretive M&A. There are a number of private companies that are competitors of which I believe are targets over time for us to acquire and build into our company. We'll look at and are looking at a number of fleets, and we're looking at what is the composition of that fleet in terms of size of unit and the drive of the unit, natural gas versus electric? Who are their customers? What basins are they operating in, and then fourth point is obviously valuation. I have accretive M&A on there. We are not growing just to grow.
It needs to be accretive and drive value for our shareholders, but I believe that's a significant opportunity over time, so once again, as I would summarize, I think we are exceptionally well-positioned. We have grown faster than our large competitors. I believe we will continue to grow materially faster than them, and we have a number of opportunities, not just on the growth side, but in terms of driving value within the business, so with that, I'll take the presentation down and open it up for Q&A.
Great. Thanks so much, Justin. Covered a lot of ground this morning. Appreciate it. We're already getting questions in, but I do wanna ask about something you did touch on in the presentation, 'cause I know when we talk to investors a lot about this space, they look at natural gas prices and go, "Oh, this isn't the time to invest in this space." But you touched on this. How much of your fleet is tied to gas lift of oil wells, and how that has... And even over the years, is how much that's shifted for NGS. Can you talk a little bit more about that, explain why gas prices are maybe not the number one number to be looking at?
Sure. And that's just the very simple number that I quoted before of where are our units operating in production? And as we go across the fleet, you know, that number now is 75%-80% are operating on oil wells, as you look at from a horsepower perspective.
Right.
It is a bit of a misnomer. I even had this question a number of times in Mill Road, and I would keep going back, "Don't look at..." I mean, natural gas prices, yes, it's 20%-25%. But candidly, they've been- natural gas prices have largely been terrible for the last decade. Some view that it's going to go up more in the future. That's not baked into any growth projections that we have. But at this point, you know, it is really the key indicator I look at from a commodity perspective for our business is WTI.
Yeah. And is that... So I think about when I'm flying into West Texas, or used to fly into West Texas, and I see the line of pump jacks, right? Is that we're not gonna see that much anymore? Is that what we're talking about?
The pump jacks are operating on typically very old wells that may have been here.
Okay
... been operating for a long period of time. If you're going to look at, and you'll see this occasionally, although there are fewer of them at this point, where many of the large players are operating as a centralized gas lift, and that looks like more like a small, little outside plant. We'll have, you know, two, four, eight of these 1,600 or 2,500 horsepower units, which, as I described, are literally the size of a tractor trailer, and they're operating 10, 20 wells off of a single pad. You will see those, but the pump jacks are probably a little bit more iconic in terms of visibility when you come in.
Okay. Let me turn it over, 'cause we are-
Sure
... getting a bunch of questions now. We have a question about the use of excess cash flow. Obviously, there's so much demand right now, you wanna be investing in expanding your fleet. You may also want to consider at some point returning cash to shareholders. How do you balance those two efforts?
I'll go to the current state, the way I look at it, is if you look at the large players, they've made a number of commitments in terms of de-leveraging, getting to. Well, two of the three have made commitments around de-leveraging. Interest costs are obviously materially higher now. They've made commitments in terms of dividends and return of capital through share buybacks, and so they are constraining their growth. And as you look at across the large three, their 2024 growth CapEx as a percentage of their EBITDA, just to think about how fast are they growing relative to that cash flow, between 35%-40%. We're north of 100%. And, you know, we have the balance sheet flexibility right now to be able to grow at a much higher rate.
We have monetization opportunities on the balance sheet to further fuel that growth rate, and as you look at the pricing environment that, when a capital-intensive business hits 100% utilization, prices go up, and they have to go up materially, and because it's taking, at this point, nine to 12 months to get new large assets out in the field, you know, we're taking business for 2025 and even 2026 quarters, and so there's actually great discipline that's been imposed in some ways on the players in the space, and so my view is, you know, we're capturing market share. Now, granted, relative to the large players, it's a relatively small percentage, but for us, it's a material growth rate.
And so while we're in what I've described to the board as the window of opportunity, where we're having pricing that is allowing us to get these, you know, very attractive return on invested capital, we're gonna continue to grow until we hit that level that we view as a prudent leverage level, which is below where the large players are. And if the pricing changes during that period of time, we'll look to shift more towards a return of capital to shareholders. The board has talked about a dividend. Our general view is that's more of a when question, not an if.
It's just the timing of while the market conditions are so attractive, it's an opportunity for us to grow and scale materially, and then at some point in the future, move to that return on capital mode.
Great. You mentioned pricing, particularly with the larger horsepower being essentially 100% utilized in the nine to 12-month lead times. You also have initial contracts that can be 12 months or plus. Does that... Is it reasonable to assume that your current reported pricing does not match spot pricing, and particularly given that you have some compression you're waiting for delivery on, would say that at least now, pricing trends just mechanically should be higher?
That is generally correct. We have looked across the fleet, and even for some units that are in term, have increased pricing. And so I would say as we look across, we have brought them closer to the spot or new unit-
Okay
... pricing. But there are still further opportunities, which is why it's the first point in the fleet optimization bucket.
Gotcha. We have a couple of questions about your horsepower mix.
Okay.
Is most new compression you're adding at this point higher horsepower, and what would you expect your trend in mix?
100% of the new, the growth CapEx, both in 2024 and 2025, is going into large horsepower, primarily 800 horsepower and north, ranging up to 2,500 horsepower, and, I would expect that to be the case going forward. It is stickier equipment, longer contracts, and for all of the, the vast preponderance of the growth CapEx in 2024 and 2025, those are gonna be four- to five-year contracts. And so the larger horsepower typically has larger-
Mm
... longer contracts, and kind of an unappreciated portion of or driver of this is the mobilization cost, meaning getting the unit from the yard out into the field and back to us, if a customer chooses to send them back, is typically borne by the customer.
Right.
And so they have the economics of thinking about, "Do I want to send a unit back, or do I want to keep this existing unit there?" which creates good stickiness, is what I would say. But back to your question, yeah, we're focused in terms of growth in the large horsepower space.
Great. We have a couple questions about your customer base, and specifically, about how Oxy became so large and how tied you are to maybe a few larger customers.
Sure. So, we've disclosed, in 2023, Occidental was about 50% of our revenue, and we really grew with them in the large horsepower space. That was our first customer, where we were moving to really north of 1,000 horsepower in terms of size. Great customer, very focused on runtime as opposed to price. Not that they don't look at price, they clearly do, but they're focused on service levels and runtime, which from my perspective is thinking about value, and those are the types of customers we want to be at, 'cause if we deliver a higher value, they see that, and, and then price becomes an important determinant, but not the only determinant.
In terms of the risk profile around that, I think of that more as a medium-term risk, and that really has to do with both the contracted nature of the large horsepower, which is primarily what we have with them, and the utilization across the industry, in that, you know, we have units coming off contract, you know, where are you going to get that horsepower? You need that. It is a mission-critical part of production, so I view that less as a short term, more of a medium term, the risk that we need to address, and we are addressing. As we look at the growth CapEx in 2024 and 2025, the vast preponderance of that are going to customers other than Oxy.
In fact, we have a significant percentage of that growth is going to a long-standing customer who will become a second anchor customer, and will be disclosable by the end of 2025, being well above 10% of our revenue.
Great. Question about maintenance CapEx, when we think about your CapEx reported numbers?
Sure. So we disclose our 2024 range of guidance for maintenance CapEx of between $8 million-$11 million.
So very low, when we think about it?
Relatively low, yes. This is as you look across the fleet, I mean, this is a relatively new fleet on-
Right
... a weighted average, because so much of the large horsepower, in fact, all of it has been created since roughly 2017. And we're up several hundred thousand horsepower in terms of fleet over the last several years. So that's a relatively new mix.
Okay. We are running out of time. I do want to ask, you know, it's—you're talking about the new compression coming out with multi-year term. It sounds like we're still into, and your competitors say the same thing about a multi-year upcycle. What data should folks really focus on when they're trying to make that determination or have some sense of when, "Oh, maybe?
You know, it's. At this point, there's because it's a bit of a niche industry, there isn't great publicly available data. The best data that I would look at are really, because they've got great insight to it, is you look at the three large players, USA, Archrock, and Kodiak. They've been quite public in talking about, you know, they disclose what their utilization rates are. They're materially higher than they were a number of years ago.
Yeah.
Some of that is the fleet mix of things that they've done with their fleet, but they're primarily large horsepower that is, you know, effectively 100% utilized.
Yeah.
The lead times, as they've said as well, are 9 to 12 months. You know, we had a customer come to us literally yesterday and say, "Hey, can we have a large horsepower unit in the second quarter of 2025?" The answer is no. We literally can't get to them in that time. You know, we could get them-
Wow
... a third quarter, late third quarter. And so, from a demand perspective, I look at the production increases in the Permian, which requires, and other players have said this, three to four times more compression than other oil wells. And then I see kind of option value for growth in the future of what does LNG do, require in terms of-
Mm
... amounts of compression. Although we aren't playing directly in that, we would in the production side, that is going to further constrict, the available compression.
Excellent. We are just about out of time. Any closing comments before we wrap it up, Justin?
No, I think we hit the key points there. You know, I guess I would summarize in that I moved from Miami Beach to Midland for a reason. I think this is a phenomenal opportunity I saw from the board side as an investor, and then in the board saying, "This is a company that I don't think the market fully understands the growth potential in the future and the value.
Great. Justin Jacobs, CEO of Natural Gas Services Group. Justin, thanks so much, and thanks for everyone-
Thanks everyone for the time.
... for joining us.
Appreciate it. Thank you.