Flowco Holdings (FLOC) Q3 2026 Earnings Call: Record EBITDA, Cash Flow and Q4 Guidance

Key Takeaways

• Flowco Holdings (FLOC) reported Q3 2026 revenue of $259 million, up 10% sequentially and 46% year over year.
• Adjusted EBITDA rose 11% sequentially to approximately $104 million, the company’s highest quarterly level since its IPO. Adjusted EBITDA margin remained at 40%.
• Free cash flow reached a quarterly record of approximately $72 million, representing 70% conversion from adjusted EBITDA. Operating cash flow was $103 million, while capital expenditures were $31 million.
• Production Solutions benefited from strong Surface Equipment activity and approximately $9 million of accelerated revenue related to the early return of high-pressure gas lift systems.
• Management guided Q4 2026 adjusted EBITDA to $93 million-$99 million, including a full-quarter contribution from Lifting Solutions and normal seasonal effects.
• Flowco completed the $112 million Lifting Solutions acquisition on October 2 and increased its share repurchase authorization to $200 million while maintaining leverage below 1x trailing 12-month EBITDA.

Core Financial Data

Over the four quarters through Q3 2026, Flowco generated nearly $250 million of free cash flow, equal to 65% of adjusted EBITDA.

Business and Operating Performance

Production Solutions growth was led by Surface Equipment. Flowco recognized approximately $9 million of accelerated rental revenue after a major customer returned part of its high-pressure gas lift fleet before contract expiration. The take-or-pay contracts allowed Flowco to recognize the remaining contract value while making the equipment available for redeployment.

Management said every returned unit has an identified prospective customer. The systems will require shop preparation and are expected to be placed with four to seven customers over several quarters, including private operators previously constrained by limited equipment availability.

Natural Gas Technologies recorded its highest quarterly adjusted EBITDA since Flowco’s IPO. Growth came from vapor recovery rental revenue and strong demand for conventional gas lift compression packages. The segment’s margin declined because lower-margin Natural Gas Systems represented a larger share of revenue.

Flowco plans to combine operating practices across more than 4,500 Surface Equipment and vapor recovery systems. The initiative will focus on maintenance schedules, technician development, monitoring software and data analytics rather than primarily on headcount reductions.

Cross-selling remains a central growth initiative. Flowco won a significant electric submersible pump contract from an existing gas lift and plunger lift customer that had not previously used Valiant’s ESP products. Management said the customer could become one of Flowco’s largest ESP accounts over time.

The October acquisition of Lifting Solutions added continuous rod and progressing cavity pump technologies. It also expanded Flowco into Canada, the Middle East and other international markets. Management expects revenue outside the United States to represent approximately 10% of total revenue following the transaction.

In Venezuela, Flowco expects to deliver 20 ESP systems during Q4 2026 and reported additional ESP demand extending into 2027. Through Lifting Solutions, the company expects to deliver roughly 250 progressing cavity pumps into Venezuela during 2026, including more than 100 currently ordered for Q4. Flowco also secured orders for 20 ESP systems from a multinational operator with operations in Iraq.

Management Guidance

Management expects Q4 2026 adjusted EBITDA of $93 million-$99 million. The range includes normal seasonal patterns across both operating segments and a full-quarter contribution from Lifting Solutions, which closed at the beginning of October.

Q4 capital expenditures are expected to be in line with Q3’s $31 million. For 2027, management currently anticipates capital spending at similar or slightly lower levels than in 2026, despite including a full year of Valiant and the addition of Lifting Solutions.

Lifting Solutions is expected to contribute approximately $23 million of adjusted EBITDA in 2027. The $112 million purchase price, excluding potential contingent consideration, represented approximately 5x expected 2027 adjusted EBITDA, according to the company.

Management expects free cash flow conversion to remain around 50% of adjusted EBITDA. It also expects 2027 vapor recovery unit capital spending to be similar to 2026 levels.

Risks and Watchpoints

• The early return of high-pressure gas lift systems pulled approximately one year of remaining contract revenue into Q3. Management estimated the Q4 financial impact at approximately $1 million-$3 million while the units are prepared and redeployed.
• Redeployment will take multiple quarters, although management expects the returned systems to earn rates comparable to their previous contracts.
• Natural Gas Technologies margins were pressured by a higher contribution from the lower-margin Natural Gas Systems business.
• Engine lead times are beginning to extend, although management said they generally remain below one year.
• International procurement can involve long, multiyear bidding processes. Management described Venezuela as a rapidly evolving and relatively fluid market.
• The integration of Valiant and Lifting Solutions, along with the planned combination of compression fleet operating practices, will require significant internal execution.

Analyst Q&A Highlights

High-pressure gas lift returns: Management said the customer remained satisfied with the technology but had reached its targeted Permian production level and did not want further acceleration. The customer continues to operate other Flowco units under term contracts.

Cross-selling strategy: Flowco does not plan to make specialists sell unfamiliar forms of artificial lift. Instead, it is coordinating technical teams and customer relationships across legacy Flowco, Valiant and Lifting Solutions while retaining each business’s specialized expertise.

Permian gas growth: Management believes rising associated gas volumes and gas-to-oil ratios support demand for high-pressure gas lift, conventional gas lift and vapor recovery applications. Flowco will also evaluate additional Natural Gas Technologies capabilities.

Capital allocation: As of October 30, Flowco had drawn approximately $356 million under a $722 million credit facility borrowing base, leaving about $365 million of capacity. Management will continue balancing organic investment, acquisitions, dividends and opportunistic repurchases under the expanded $200 million authorization.

M&A priorities: Management described the acquisition market as deep and active but said Flowco will remain selective. Target businesses must fit its production optimization strategy, add technology or geographic capabilities, and have management teams aligned with Flowco’s operating model.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good morning. Welcome to Flowco Holdings, Inc. Third Quarter 2026 Earnings Call. Today's call is being recorded. We have allocated 1 hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Andrew Leonpacher, Vice President, Finance, Corporate Development and Investor Relations at Flowco. Thank you. You may begin.

Andrew Leonpacher

Good morning, everyone, and thanks for joining us to discuss Flowco's third quarter results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are detailed in this morning's press release and in our filings with the SEC, which can be found on our website at ir.flowco-inc.com. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law.

During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures are available in this morning's press release and in our SEC filings. Joining me on the call today are our President and Chief Executive Officer, Joe Bob Edwards; and our Chief Financial Officer, Jon Byers. Following our prepared remarks, we'll open the call to your questions. With that, I'll turn the call over to Joe Bob.

Joseph Edwards

Thank you, Andrew. Good morning, everybody, and thank you for joining us today. I'll begin today's call with a review of our third quarter performance and key highlights as well as a review of the Lifting Solutions acquisition we closed in early October following the end of the quarter. Jon will then discuss our financial results, our segment performance, capital allocation and balance sheet in more detail. I'll conclude with our perspective on the current market environment and our outlook for the next quarter. Flowco delivered another solid quarter in Q3, generating approximately $104 million of adjusted EBITDA, our highest quarterly adjusted EBITDA since becoming a public company. Revenue increased 10% sequentially, while adjusted EBITDA grew 11%. Both segments, Production Solutions and Natural Gas Technologies had strong performance during the quarter.

Within Production Solutions, our Surface Equipment division was the primary driver of our outperformance, highlighting the durability of our rental model and the value embedded in our term contracts for compression units supporting gas lift applications. In addition to another solid quarter of underlying rental activity, we recognized accelerated rental revenue associated with the early release of several active high-pressure gas lift systems. Jon will go into detail on the numbers, but these releases represent only a small portion of our active fleet. The take-or-pay nature of our contracts enables us to realize the remaining value of a contract upon notice of return while freeing up those systems to capture additional demand without incremental investment in new equipment.

Turning to Natural Gas Technologies. The segment delivered its highest quarterly adjusted EBITDA since our IPO, supported by continued growth in vapor recovery and strong demand for conventional gas lift compression packages. Our vapor recovery rental business continues to expand as operators increasingly recognize the economic benefits of capturing and monetizing liquids-rich natural gas vapors. Additional takeaway capacity in the Permian and other key basins are enablers of this continued growth, providing the infrastructure necessary for operators to capture and commercialize these gas streams. Our third quarter results reinforce the value of our positioning as a pure-play production optimization provider, where consistent demand for our solutions is driven by the ongoing needs of producing wells rather than the more cyclical capital spending associated with drilling and completions. We delivered another strong quarter of free cash flow, generating a quarterly record of $72 million, representing 70% free cash flow conversion from adjusted EBITDA.

Our recurring highly visible rental revenue, combined with our capital-efficient sales businesses supports consistent free cash flow generation, giving us the flexibility to invest in strategic growth while also providing the ability to reduce debt and return capital to shareholders. As operators remain focused on maximizing returns from their existing assets, we see opportunities to expand our customer relationships through our broader suite of Production Optimization Solutions. Our ESP offering through Valiant once again exceeded our expectations this quarter. We recently secured a significant contract to provide ESPs to a large independent operator by leveraging legacy Flowco relationships across multiple business units. We expect this customer could become one of our largest ESP customers over time. This is a great example of how our expanding capabilities and established customer relationships, coupled with cross-selling through recently acquired businesses are translating into new commercial opportunities across our platform.

Subsequent to quarter end, in early October, we continued to round out our production optimization portfolio and expand our geographic reach through the acquisition of Lifting Solutions, a vertically integrated artificial lift provider headquartered in Edmonton with a footprint that spans across Canada, the United States, the Middle East and other international markets. The acquisition adds continuous rod and progressing cavity pump technologies, broadening our artificial lift offering and strengthening our position in later life well applications. We expect revenue generated outside the United States to be approximately 10% of our total revenue following the transaction, marking a meaningful step in our international expansion efforts. Similar to Valiant, with Lifting Solutions, we see opportunities to leverage our combined customer relationships, technologies and geographic footprints to drive growth across the broader Flowco platform.

I want to spend just a minute highlighting some of the significant steps we are taking in our international expansion efforts. Specifically, in Venezuela, we have secured multiple orders and expect to deliver 20 ESP systems during Q4 of 2026, and we have increased demand for more ESPs extending into 2027. Additionally, we have secured orders for multiple sets of gas lift equipment and associated digital gauges into the country. Finally, through Lifting Solutions existing presence in Venezuela, we expect to deliver roughly 250 progressing cavity pumps into Venezuela during 2026, including over 100 pumps, which are currently on order for delivery in Q4 2026. We're seeing similar momentum in the Middle East, where we have secured orders for 20 ESP systems from a major multinational operator with presence in Iraq. And Lifting Solutions existing operations in Oman are performing ahead of expectations.

More broadly, with Lifting Solutions providing its offerings across 16 countries, supported by 19 distributor relationships, we see a meaningful cross-selling opportunity and hope to accelerate international growth across the entire Flowco portfolio. Rounding out my thoughts on the quarter, I am very pleased with our performance and with the progress we've made advancing strategic priorities. Year-over-year, in the third quarter, we've grown revenue by 46%. Over the last 4 quarters, we've generated nearly $0.25 billion of free cash flow, representing 65% conversion of adjusted EBITDA into free cash flow. We believe our combination of strong margins and returns, consistent free cash flow generation and capital-efficient growth continues to differentiate Flowco within our sector. With that, I'll turn it over to Jon.

Jonathan Byers

Thanks, Joe Bob. Turning to our financials. Third quarter results exceeded our expectations with both operating segments contributing to sequential growth. Total revenue increased 10% to $259 million, while adjusted EBITDA grew 11% from the second quarter, all while maintaining our 40% adjusted EBITDA margin, reflecting the profitability of our business as we continue to scale. In our Production Solutions segment, third quarter revenue increased 5% sequentially to $179 million, while adjusted segment EBITDA grew approximately 10% to $78 million. Growth was driven primarily by surface equipment, where we benefited from consistent rental fleet performance and approximately $9 million of accelerated revenue recognized in connection with the notice of release of surface equipment systems. We're currently preparing these systems for redeployment against identified customer demand, including growing opportunities among private operators who are seeking innovative ways to accelerate production in the current operating environment.

Based on our outlook, we expect to return to current stack of Surface Equipment system levels by mid-2027. We expect to benefit in the fourth quarter from the associated near-term cash flow with a modest impact over the next several quarters as these systems are redeployed. Within Production Solutions, adjusted EBITDA margin increased 209 basis points sequentially, primarily reflecting a higher proportion of Surface Equipment revenue during the quarter. In our Natural Gas Technologies segment, third quarter revenue increased 23% sequentially to approximately $80 million, while adjusted segment EBITDA grew 11% to approximately $31 million. Performance was supported by continued growth in vapor recovery rental revenue alongside a particularly strong quarter in our Natural Gas Systems business. Adjusted segment EBITDA margin declined 413 basis points sequentially, primarily reflecting a higher contribution from Natural Gas Systems, which carries a lower margin profile relative to vapor recovery within the segment.

Turning to corporate. Third quarter corporate expenses were in line with the second quarter at $5 million. Overall, third quarter adjusted EBITDA was approximately $104 million, reflecting another quarter of consistent execution across the business. In the third quarter, we generated approximately $103 million of operating cash flow while investing $31 million in growth and maintenance CapEx, resulting in free cash flow of about $72 million. Our full year capital spending outlook remains unchanged, and we expect fourth quarter capital expenditures to be in line with the third quarter. We're still working through our 2027 capital budget, but currently anticipate capital expenditures at similar or slightly lower levels relative to 2026, even with the full year of Valiant and the addition of Lifting Solutions, which we believe will support meaningful free cash flow generation as we invest in our growth.

We're starting to see some extension of lead times on engines for our fleet, but they're still typically less than 1 year, providing flexibility to adjust capital spending in response to customer demand. On October 2, we completed the acquisition of Lifting Solutions for USD 112 million, excluding potential contingent consideration, representing an attractive purchase multiple of approximately 5x expected 2027 adjusted EBITDA. As outlined in our acquisition call, we expect Lifting Solutions to contribute approximately $23 million of adjusted EBITDA in 2027. Integration is underway with our teams focused on aligning operations, maintaining business momentum and identifying incremental revenue opportunities across the combined businesses. Turning to our balance sheet and capital allocation. We continue to manage our operations with a focus on maintaining financial strength while deploying capital where we see the most attractive returns. As of October 30, we had approximately $356 million drawn under our credit facility against the $722 million borrowing base, leaving approximately $365 million of available capacity. Even after the Lifting Solutions acquisition, our leverage still sits below 1x trailing 12 months EBITDA.

Separately, one additional item to note on our balance sheet. The elevated cash balance at quarter end on September 30 reflects funds drawn under our ABL facility in anticipation of the Lifting Solutions acquisition, which closed shortly after the quarter end. On capital allocation, our priorities remain consistent, investing in organic growth, evaluating acquisitions that complement our existing businesses and returning capital to shareholders through dividends and opportunistic share repurchases. We believe our cash generation and robust liquidity give us resources to pursue these priorities while maintaining conservative leverage. Looking ahead, we are well positioned to build on this quarter's momentum as we execute our strategic priorities, realize the benefits of our recent acquisitions and expanded platform and invest in opportunities that create value. Back to you, Joe Bob.

Joseph Edwards

Thanks, Jon. Let me spend a minute on the current market environment and our outlook for the fourth quarter. The United States continues to be the single largest producer of oil and natural gas in the world. Unconventional development activities in the U.S. remain robust and production remains strong. In fact, according to industry sources, oil production in the United States increased slightly during the quarter to 14 million barrels a day, while natural gas production also increased slightly to almost 114 Bcf a day. The U.S. onshore market will remain by far our largest single operating area, and we remain committed to helping our customers optimize their oil and gas production for the life of their wells.

Turning to Canada, continued production growth from the Montney and Duvernay, increasing multilateral drilling activity across heavy oil plays and a sustained production from the Canadian oil sands will enable our neighbors to the north to grow production substantially over the coming years. With increased access to pipeline egress and expanded export capacities, industry experts expect Canadian crude oil production could increase by up to 1 million to 2 million barrels a day over the next decade. Our recent acquisition of Lifting Solutions gives us an immediate footprint in this important market and an impressive roster of customers who look to the Lifting Solutions team for production optimization solutions. Canada immediately becomes our second largest geo market after the U.S., and we look forward to our prospects there over the coming quarters.

Considering this backdrop, we expect fourth quarter adjusted EBITDA to be in the range of $93 million to $99 million. Our outlook incorporates typical seasonal trends across both of our operating segments as well as our expanded geographic presence. This outlook also includes a full quarter contribution of Lifting Solutions, which we closed at the beginning of October. Looking beyond the fourth quarter, we continue to emphasize operational excellence in everything we do. And in our compression fleets, we see a clear path to operating more efficiently by applying best practices in unit maintenance, technician development and data analytics. We operate over 4,500 systems in our combined surface equipment and vapor recovery fleets. And by implementing consistent practices across both fleets, we believe we can drive operational improvements and potential margin enhancements. Stay tuned as we roll out this initiative in the coming quarters.

Speaking of best practices, we are actively collaborating across business units in the area of production optimization software development. Our ability to remotely monitor our ESP and plunger lift applications and adjust operating characteristics without deploying technicians on site will be the core capability that we use to develop a more comprehensive production optimization operating environment. Our internal expertise and production engineering capabilities like nodal analysis will join with this technology to produce a differentiated life of well management capability. This will be an ongoing area of focus for our technical teams as we move through 2027.

More immediately, we are well down the path of delivering on a key initiative that we've discussed repeatedly over the last several quarters. Our ability to cross-sell production optimization solutions acquired through our new partners at Valiant and Lifting Solutions is proving fruitful. We are seeing this play out in the Permian, the Bakken, Canada and Venezuela and are excited about our new footprint in the Middle East. Customers value our expertise and our focus on service quality, our innovative technologies and our commitment to providing the right solution in each well every time. We will continue to invest in organic growth opportunities across our portfolio, and we'll judge these investments through the lens of a strict ROCE analysis. We also expect to be active in the M&A markets, looking to expand our capabilities in adjacent technologies and geographies, all while staying true to our focus on helping customers manage their production.

Our commitment to capital discipline remains steadfast, and we will not sacrifice our strong balance sheet to chase speculative opportunities. We think this discipline will serve our shareholders well and allow us to continue generating significant levels of free cash flow. While we invest in our business, we have the flexibility to return capital to shareholders through dividends while also opportunistically assessing share repurchases. As many of you will undoubtedly have noticed, earlier this week, we announced that our Board authorized a substantial increase in our share buyback authorization to $200 million. We believe this approval reflects our shared confidence in our prospects and welcome the increased flexibility to repurchase Flowco shares when our valuation is attractive relative to other capital allocation opportunities.

As we conclude, I would be remiss if I did not also thank all members of the Flowco family for their relentless focus on service quality, innovation and operating safely, whether in the field, manufacturing operations or the office. We now have approximately 2,000 employee partners at Flowco. And from me to each of you, thank you for all you do for us. As a leading pure-play provider of production optimization solutions, we believe our differentiated portfolio, strong market position and expanding capabilities provide a solid foundation for sustainable growth, meaningful cash flow generation and long-term shareholder value creation. I am humbled by your support and truly honored to lead such an amazing group of people. With that, let's open it up to questions.

Operator

[Operator Instructions] Our first question is from Arun Jayaram with JPM.

Question-and-Answer Session

Arun Jayaram

Joe Bob, I was wondering if you could kind of elaborate on the cross-selling opportunities, commercial opportunities to take advantage of the recent acquisition of Valiant Lifting Solutions. And my specific question is, how are you evolving or adapting your sales organization to take advantage of putting the three companies together just to make sure you can get more of these commercial wins? And maybe you could elaborate on that ESP win with a large independent.

Joseph Edwards

Yes. Happy to do it, Arun. Look, as you well know, in the oilfield, operators like to buy from vendors like Flowco that have operational expertise in very specific areas, right? These are very technical sales that companies like Flowco are making to our customer base. Training an expert in one form of artificial lift to sell another form of artificial lift is not what we are doing, okay? We are leaning into the expertise that each of these acquired businesses brings to the table. And we are really bottom up and top down, forcing the internal dynamics to be much more seamless for our customers. So as an example, the big win that we had that we talked about with this independent operator.

This was a legacy gas lift and plunger lift customer for Flowco and Valiant pre-acquisition had never done any ESP work for them. So we brought all the experts in-house from the Flowco team together for a large series of presentations, not only to the senior executive team at that company, but also to the field operating personnel that are responsible for procurement. And it was really because of that full court press across multiple disciplines that we were able to explain how we go to market, able to explain our differentiated service quality and technology and ultimately win the bid. The oilfield is rife with integration efforts that have gone wrong, right? And this is a key differentiation that we're trying to lean into, Arun, and that is hold on to the entrepreneurial excellence and the technical focus that our acquired companies bring to the table while benefiting from the economies of scale that a larger company can bring to the table. It's a very important nuance with the way that we are embracing integration of recently acquired businesses.

Arun Jayaram

Great. And my follow-up, Joe Bob, I was wondering if you could compare and contrast how Artificial Lift Production Optimization Services are procured in North America versus international. Obviously, you highlighted some intriguing growth in Venezuela. But I was wondering if you could talk a little bit about how services procured. I know in parts of North America, we go through a little bit of an RFP season in the fall for 2027 work. I was wondering if you could talk a little bit about that dynamic.

Joseph Edwards

Yes, absolutely. And look, the North American market is very much a call-out market with very few exceptions. You'll have customers that approach things through both a technical procurement process as well as a very programmatic procurement process, and you've really got to pay attention to both and sell to both. You've got centralized procurement, which attempts to drive terms and pricing. And you've got the production engineers that are in the field actually wanting to partner with those vendors like Flowco that can actually deliver on what they say and help manage their production targets. So North America is quite dynamic, as we know. And I think that technology expertise in the specific form of lift that we bring to the table in each of our sales groups is really what differentiates us. Internationally, you're right, it's a little different.

Put Venezuela aside for a minute because that is a rapidly evolving situation. But a lot of times internationally, you will bid against a procurement process that will try to secure multiyear supply of any particular solution. The Middle East, in particular, has a multiyear procurement process that you have to commit to early and be patient with over time. But once you actually get an award, it's quite predictable. Venezuela is a little bit fluid at the moment, right? You have a lot of people scrambling to get production -- early production wins. We are benefiting from that right now, and I hope to continue to lean into that specifically there. So hopefully, that gives you a flavor for the compare and contrast, but quite different environments. The good news is we've got experience in both and we're trying to bring our expertise in North America to some of these international environments.

Operator

Our next question is from Derek Podhaizer with Piper Sandler.

Derek Podhaizer

I wanted to ask about the $9 million of revenue that was related to the accelerated releases. So you mentioned it was HPGL. So maybe just a little bit more on the reasoning behind this accelerated release from your customer. And then if you can also talk about what the impact is to the 4Q guide. You used guide range of $93 million to $99 million for EBITDA. And I think you mentioned that you expect for all these systems to be placed back into the market in mid-2027. So maybe just kind of talk a little more about the moving pieces and the reasons behind the release and then how we should think about the impact of the financials.

Joseph Edwards

Yes, Derek, let me talk about kind of what happened and why. So this is a major oil company who has embraced HPGL programmatically for their -- specifically their Permian production operations. These were multiyear contracts signed some time ago. And this operator has been extremely pleased with the performance of high-pressure gas lift and the associated production acceleration that it provides relative to the alternative methods out there. They've been quite open about their challenges that they face with production facilities engineering. So the production facilities were engineered for a certain targeted rate of daily production. They've hit it. They've been open about not wanting to accelerate production beyond their Permian targets that they have publicly disclosed. They're electing to rather not increase from here their Permian production. So as part of that, they decided to return a portion of the HPGL units that they had on contract with us.

Very importantly, they still remain a very happy customer with a number of units still remaining under term contract with them with no prospect of them wanting to return more. So this was telegraphed for a few quarters. It finally happened at the end of Q3. Jon explained the accounting, but just to nail it down, we recognized the accelerated revenue in Q3, but we will recognize the cash flow associated with the returns in Q4, okay? So our free cash flow performance in Q3 that exceeded expectations had nothing to do with the cash that we're going to receive in Q4 associated with these early returns, okay? The -- so what's the plan going forward? We have customers lined up for these units. Every unit has a name of a customer on it. These units have to go through the shop for a quick make ready.

It doesn't happen overnight. So we're expecting this to be a multi-quarter effort to get them back out. But we estimate, let's call it, four to seven customers for these units that have come back to us. And importantly, there are a number of private operators within those four to seven customers that have been clamoring for this method, and we just didn't have capacity. So we're happy to expand our customer roster. As you know, we have a series of customers that have embraced this technique quite openly, but they're chunky customers. So it's great that we have the ability to expand the customer roster with these new operators. and we're excited to do it. So it will take us a bit to get them back out. I think the rates on these units will be every bit as good as we had on them. And so I see just a transient cash flow impact over the next few quarters. Anything to add to that?

Jonathan Byers

No. I think we -- Derek, we pulled forward about a year's worth of revenue on these that was what was remaining on contract terms. So to your specific question about Q4, into the impact is going to be kind of in the $1 million to $3 million range.

Derek Podhaizer

Okay. Got it. That was incredibly helpful, guys. I really appreciate that, and it does sound pretty good as far as expanding the roster of customers. Joe Bob, bigger picture question for you. I know we've talked about this, but a big customer of yours dialed back their letter to shareholders, I found pretty interesting the other day. They pointed out it expects the Permian to be the largest gas play as well as oil in the 2030s, citing gas-to-oil ratios naturally continue to expand. Maybe can you just talk through how Flowco is positioned to really benefit from this increasing gas production out of the Permian and really what could it mean for the company as we move towards the end of the decade and beyond?

Joseph Edwards

Yes. Derek, it's happening as we speak. As you know, the associated gas coming out of the Permian is strong and growing. The high GORs, I think, play into high-pressure gas lift, conventional gas lift as well as the vapor recovery application just right in the fairway. So we're excited about the increased levels of gas production coming out of the Permian. I think that with that shift, I think we will look for additional ways to round out our portfolio on the NGT side of our house. We've done a great job on the -- I think, on the Artificial Lift side, which are mainly oil-directed technologies. But we're going to look for additional ways to lean into that increasing gas volume theme. So it's exciting, and I think it's just another testament to the power of the American engineer to continue to get more out of the resource that we know is there and start targeting increased gas production from the Permian.

Operator

Our next question is from Phillip Jungwirth with BMO Capital Markets.

Phillip Jungwirth

The private E&Ps have driven most of the increase in industry rig count this year. And I was just hoping you could talk about how Flowco is targeting this group and whether there tends to be any customer preference across HPGL or ESPs.

Joseph Edwards

Yes. No customer preference, Phil. Honestly, we are actively targeting everyone. I think what you're seeing is discipline among the public operators, which has been decades in the making in terms of managing their drilling and completion and ultimate production result within cash flow and the private operators tend to respond more quickly to changing market dynamics. So look, as a percentage of total revenue, had the privates increased within the Flowco system, my guess is yes, but I couldn't give you a number. But we definitely see more active -- activity levels coming out of private operators in the Lower 48.

Phillip Jungwirth

Okay. Great. And then I know you said to stay tuned here. I think it's too early to quantify anything, but I was just hoping you could give a little bit more specifics on what you're doing to drive greater operational efficiencies across your over 4,500 systems.

Joseph Edwards

Yes, great question. So we have -- at the legacy of how Flowco was formed, we had two different fleets of gas compression units. One is tailor-made for vapor recovery. That's our NGT business. And one is our gas lift operation between high-pressure gas lift and conventional gas lift. Each of those fleets was run separately with different levels of oversight, different maintenance schedules, different technicians, different technician hiring and training processes, different software associated with actually tracking, monitoring and ultimately helping to maintain, okay? So we're embarking upon an effort to combine those two fleets.

We think that there will be synergies in doing that, not necessarily directly related to headcount, much more specifically, it's going to be in just the way that these units are operated, the way they're maintained, the way that we planned preventative maintenance operations -- there's a lot there. And it's going to be a heavy lift for us internally. We hope to roll out some of the results as the next few quarters come about. But chalk this up to us not wanting to mess with two great operations immediately out of the gate post IPO, but we're now taking the step because we think there's real value there in combining the two fleets into one.

Operator

Our next question is from Keith Beckmann with Pickering Energy Partners.

Keith Beckmann

I kind of wanted to ask around free cash flow and maybe into next year and how you guys are thinking around working capital and maybe a little bit more expansion upon the release of equipment that you guys mentioned earlier. And does that have any effect into next year as well as do you guys think that you can continue to convert free cash flow at a really high clip of 50-plus percent of EBITDA? Just any thoughts around that?

Jonathan Byers

Yes. Keith, on the free cash flow question, this was definitely a stronger quarter than normal. That was driven by a little bit of a benefit on the working capital side, but more by just the timing of our CapEx over the course of the year. We're kind of winding down our CapEx spend into Q3 and Q4. So really not too much different from our expectations. And then in terms of your working capital question, we've managed to keep a pretty tight handle on working capital since we've gone public, and I don't really see that changing. I don't -- as we look at international opportunities, we don't see a need to significantly build our inventory to be able to deliver that. Our working capital, I think, is around $150 million, $200 adding $5 million, $10 million to that to be able to service international opportunities as they arise. I don't think it's going to have a significant impact on our overall free cash flow. So yes, to kind of answer your final question, I expect our free cash flow conversion from EBITDA to stay in that 50% neighborhood.

Keith Beckmann

Okay. Awesome. And then my follow-up is really around capital deployment and around that, which obviously, you guys kind of mentioned in commentary that M&A continue to be active there between different geographies and technologies, but we also saw the additional buyback authorization. Just trying to get a sense on how you guys are thinking about capital allocation heading into next year as well.

Joseph Edwards

Yes. Keith, we are very focused ROCE-driven capital allocation team, okay? So we literally look at every dollar of capital that goes out against a rigorous analysis. What sort of return are we getting on this investment, whether it's an investment in a new series of systems to help with high-pressure gas lift or VRU and the customer demand there to justify that sort of 6-month lead time on getting units built through our shop. And the M&A markets are dynamic, right? We've executed a couple since going public at expected rates of return that rise to the level of competitiveness against what we have internally. The reason for the increased buyback is because where we're trading today, in particular, based on the free cash flow metrics that we look at our company and just the more basic EV to EBITDA valuations of Flowco versus the alternatives out there for us to go invest in, it looks pretty compelling. So we'll obviously continue to monitor it. We're going to resist putting out a programmatic share repurchase guide. That's not, I think, in the cards for us in the intermediate period. But as a team, we love the additional flexibility that, that increased buyback authorization gives us because as we look at where we're trading, as we look at other places to deploy capital, it's nice to have the various opportunities in front of us.

Operator

Our next question is from Jeff LeBlanc with TPH Research.

Jeffrey LeBlanc

I think it's been somewhat alluded to thus far, but I'm just curious if you could share your early thoughts on VRU deployments over '27, given that it is more closely tied to pad build-out as well as overall basin egress.

Joseph Edwards

Yes, Jeff, it's been pretty consistent and really every month growing bit by bit. Sitting here today, I expect our CapEx for VRU next year to be similar to what it is this year. And it's really steady as she goes as new pads come on, more units are deployed. So that -- I would characterize it as consistent demand associated with the increased build-out of the natural gas infrastructure.

Operator

[Operator Instructions] Our next question is from Sean Mitchell with Daniel Energy Partners.

Sean Mitchell

Joe Bob, you guys have done a couple of acquisitions. But looking back, now that you've completed a couple, what are some of the biggest lessons learned here, good or bad on the acquisition front? And maybe just talk about where the M&A market is today a little more, any color?

Joseph Edwards

Yes. I actually said it the other day internally, Sean, buying a company is easy, running a company is hard. And then running the company really comes down to people, right? You got to make sure that you're investing in a company with like-minded founder entrepreneur management folks that are going to fit within the vision that we have here at Flowco. And we've been extremely fortunate with Valiant and Lifting Solutions to find management teams that are all in, teams that buy into what we're trying to offer our customers, which is a company that can offer solutions, right, a solutions-oriented commercial approach in partnership with a customer's production efforts. And so as we look at additional M&A, that's the most important thing, right? Of course, it's got to check the boxes on being in the production theme being complementary to either a geographic region where we'd like to expand or a technology that we'd like to add. But it really comes down to people. Is the team going to fit with what we have? Can they buy into the way that we go to market. And so that's really at the top of the list in terms of our M&A screening efforts. The market is deep and robust in terms of M&A, but we're highly selective. So we'll continue to look, hopefully add to the portfolio over time, but not buying companies just for acquisition's sake.

Operator

There are no further questions at this time. I would like to turn the conference back over to Joe Bob for closing remarks.

Joseph Edwards

Well, thank you all for tuning in and look forward to continued dialogue in the quarter to come. Thank you.

Operator

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.