TO OUR SHAKEHOLDERS
Archrock maintained a strong focus on sustainability initiatives during 2021. With continued market volatility and uncertainty, our core objectives remain the protection of our people, our financial health and our responsiveness to our stakeholders. We are especially proud of achieving our best ever safety performance during 2021: a total recordable incident rate of 0.10 and a preventable vehicle incident rate of 0.13. This performance demonstrates our collective commitment to operating safely, through top-down support of safety training, provision of the appropriate procedures and equipment and empowerment of our employees’ ability to stop any job to ensure safe operations.
With 2021 growth capital spending reduced by 53% compared to 2020, we met the needs of our customers through selective capital spending and the redeployment of existing assets. In addition, we continued to high grade our operations through the divestiture of non-core assets, and the proceeds from these assets sales were used to pay down debt.
At year end 2021, we completed several major phases of our process and technology transformation project, which are focused on the automation of workflows through cloud-based technology, integration of digital and mobile tools for our field service technicians and expanded remote monitoring capabilities of our vehicle and compression fleets. We expect this technology commitment will result in improved operating efficiencies, reduced internal costs and improved profitability. We also believe it will facilitate emissions intensity reductions and inform and direct our future goals for environmental performance and sustainability.
In the face of market challenges and the transitional pressure faced by the energy industry, we continue to believe that natural gas plays a vital role in meeting clean energy demands. In the U.S., natural gas serves as an “essential backstop and partner for growth of intermittent renewable energy from wind and solar.”1 Importantly, natural gas is also used in the manufacturing of wind and solar energy components. According to the U.S. International Energy Agency (“IEA”), as of 2019, “coal-to-gas switching ha[d] been responsible for nearly one-fifth of total U.S. emissions savings since 2010.”2 Conversely, an energy review conducted by the IEA in 2022 shows that emissions from coal-fired plants increased by 17% in 2021 due to a reversal in this trend, i.e., gas-to-coal switching.3
Along with the impact of severe weather incidents over the past two years, the tragic events in Europe have also highlighted the importance of a diversified approach to achieving energy security. Cleaner burning natural gas is abundant and affordable in the U.S. and is expected to play a key role in meeting global demand through LNG exports.
Despite these trends, we acknowledge that significantly more progress must be made to address methane and C02 emissions resulting from the production and transportation of natural gas. We devoted significant internal resources during 2021 to review the science and technology that is developing in this area. In addition, we continue to evaluate and develop partnerships with companies that are focused on developing commercially viable solutions to decarbonize natural gas production.
We are excited to report that in April 2022, Archrock agreed to acquire a 25% equity stake in Ecotec International Holdings, LLC (“ECOTEC”), a global leader in methane emissions monitoring and management. Archrock also has the opportunity to offer ECOTEC’s suite of solutions to our customers in support of their sustainability goals and efforts to reduce emissions. And this is just the beginning. Our internal team tasked with reviewing technology and new ventures continues to examine improvements in equipment operation and design as well as potential partnerships with third parties with the goal of assisting our customers to achieve improvements in emissions performance. And finally, along with our long-standing annual safety performance metric, our 2022 short-term incentive program includes a performance metric for reductions in miles driven by our field service technicians, which we expect to positively impact our Scope 1 emissions. We see challenging, yet exciting opportunities to ensure natural gas continues to play an environmentally, economically and strategically sound role in America’s energy future.
WE POWER A CLEANER AMERICA™
Our mission is more critical than ever: To help our customers deliver natural gas — an affordable and cleaner energy source — to a variety of critical industries, to generate electricity and to directly heat and power our homes. To demonstrate our commitment to continual improvement in our role as the leading provider of natural gas compression services, additional quantifiable ESG-focused metrics have been included in our 2022 short-term incentive program. These metrics include safety targets, the development of a diversity and inclusion policy and a targeted reduction in miles driven per operating
horsepower. Further, the weight of these metrics has been doubled to comprise 20% of the total 2022 incentive program.
With the ultimate goal of a zero carbon footprint for Scope 1 and 2 emissions, our journey is guided by the principles of doing what’s right for our people: operating safely, maintaining our focus on powering a cleaner America and meeting the expectations of our stakeholders.
Brad Childers
President and Chief Executive Officer
1 American Petroleum Institute, 2022. State of American Energy. https://events.api.org/reports/soae-2022/
2 IEA, March 2019. The Role of Gas in Today’s Energy Transitions. https://iea.blob.core.windows.net/assets/cc35f20f-7a94-44dc-a750-41c117517e93/TheRoleofGas.pdf
3 IEA, March 2022. Global Energy Review: CO2 Emissions in 2021. https://www.iea.org/reports/global-energy-review-co2-emissions-in-2021-2
ECOTEC
ECOTEC provides a comprehensive ecosystem of methane solutions for its customers, helping them identify, quantify and manage their emissions. The combination of cutting-edge instrumentation and software provides accurate and directly-measured emissions data, which is auditable by third-party organizations. ECOTEC management has more than thirty years of expertise in the natural gas, biogas, carbon credits and air quality industries. Archrock's investment is expected to be used to accelerate ECOTEC’S recent expansion into the oil and gas industry.
Our Official HSE Policy
Learn in greater detail about Archrock's respect for the health and safety of our employees, customers, and communities, and what we're committed to do to preserve it all.
