UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~SEPTEMBER 30, 2019~~March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to______

Commission File Number 001-35195

CSI Compressco LP

(Exact name of registrant as specified in its charter)



Delaware	94-3450907
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

24955 Interstate 45 North
The Woodlands,
~~Texas~~TX	77380
(Address of Principal Executive Offices)	(Zip Code)

(281) 364-2244

(Registrant’s Telephone Number, Including Area Code)

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
COMMON UNITS REPRESENTING LIMITED PARTNERSHIP INTERESTS	CCLP	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~May 5, ~~2019,~~2020, there were ~~47,078,529~~47,344,351 Common Units outstanding.



CSI Compressco LP
Table of Contents
	Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations	1
Consolidated Statements of Comprehensive Income (Loss)	2
Consolidated Balance Sheets	3
Consolidated Statements of Partners’ Capital	4
Consolidated Statements of Cash Flows	65
Notes to Consolidated Financial Statements	76
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2317
Item 3. Quantitative and Qualitative Disclosures about Market Risk	3527
Item 4. Controls and Procedures	3527

PART II—OTHER INFORMATION
Item 1. Legal Proceedings	3628
Item 1A. Risk Factors	3628
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3630
Item 3. Defaults Upon Senior Securities	3630
Item 4. Mine Safety Disclosures	3630
Item 5. Other Information	3630
Item 6. Exhibits	3731
SIGNATURES	3832

CERTAIN REFERENCES IN THIS QUARTERLY REPORT

References in this Quarterly Report to “CSI Compressco,” “we,” “our,” “us,” “the Partnership” or like terms refer to CSI Compressco LP and its wholly owned subsidiaries. References to “CSI Compressco GP” or “our General Partner” refer to our general partner, CSI Compressco GP Inc. References to “TETRA” refer to TETRA Technologies, Inc. and TETRA’s controlled subsidiaries, other than us.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

CSI Compressco LP

Consolidated Statements of Operations

(In Thousands, Except Unit and Per Unit Amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Revenues:
Compression and related services	$	64,957		$	58,869		$	192,535		$	169,313		$	65,765		$	63,060
Aftermarket services	20,426			19,869			52,196			48,979			17,970			13,614
Equipment sales	28,364			36,518			108,308			82,303			6,544			26,762
Total revenues	113,747			115,256			353,039			300,595			90,279			103,436
Cost of revenues (excluding depreciation and amortization expense):
Cost of compression and related services	30,395			31,074			93,536			92,963			31,608			32,621
Cost of aftermarket services	17,163			16,165			43,841			40,163			16,245			11,260
Cost of equipment sales	26,518			33,458			98,149			73,065			6,700			24,219
Total cost of revenues	74,076			80,697			235,526			206,191			54,553			68,100
Depreciation and amortization	18,459			17,681			56,045			52,496			19,908			18,532
Impairments and other charges	849			—			3,160			—			5,371			—
Insurance recoveries	(325		)	—			(325		)	—
Selling, general, and administrative expense	11,336			10,592			32,975			29,738			10,256			10,665
Interest expense, net	13,533			13,847			39,877			39,103			13,169			13,299
Series A Preferred fair value adjustment (income) expense	—			570			1,470			1,537			—			1,304
Other (income) expense, net	(205		)	(78		)	21			2,748			440			(381		)
Loss before income tax provision	(3,976		)	(8,053		)	(15,710		)	(31,218		)	(13,418		)	(8,083		)
Provision (benefit) for income taxes	(363		)	(106		)	3,306			2,058			212			4,373
Net loss	$	(3,613	)	$	(7,947	)	$	(19,016	)	$	(33,276	)	$	(13,630	)	$	(12,456	)
General partner interest in net loss	$	(51	)	$	(134	)	$	(270	)	$	(552	)	$	(192	)	$	(177	)
Common units interest in net loss	$	(3,562	)	$	(7,813	)	$	(18,746	)	$	(32,724	)	$	(13,438	)	$	(12,279	)

Net loss per common unit:
Basic	$	(0.08	)	$	(0.18	)	$	(0.40	)	$	(0.81	)	$	(0.28	)	$	(0.26	)
Diluted	$	(0.08	)	$	(0.18	)	$	(0.40	)	$	(0.81	)	$	(0.28	)	$	(0.26	)
Weighted average common units outstanding:
Basic	47,072,943			42,372,996			46,982,309			40,510,603			47,176,640			46,830,605
Diluted	47,072,943			42,372,996			46,982,309			40,510,603			47,176,640			46,830,605

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Net loss	$	(3,613	)	$	(7,947	)	$	(19,016	)	$	(33,276	)	$	(13,630	)	$	(12,456	)
Foreign currency translation adjustment, net of tax of $0 in 2019 and 2018	31			152			431			(3,370		)
Foreign currency translation adjustment, net of tax of $0 in 2020 and 2019													(353		)	272
Comprehensive loss	$	(3,582	)	$	(7,795	)	$	(18,585	)	$	(36,646	)	$	(13,983	)	$	(12,184	)

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Balance Sheets

(In Thousands, Except Unit Amounts)


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,276		$	15,858		$	7,416		$	2,370
Trade accounts receivable, net of allowances for doubtful accounts of $3,285 as of September 30, 2019 and $1,229 as of December 31, 2018	68,653			65,067
Trade accounts receivable, net of allowances for doubtful accounts of $3,237 as of March 31, 2020 and $3,350 as of December 31, 2019							71,774			64,724
Inventories	63,941			65,222			63,288			56,037
Prepaid expenses and other current assets	4,830			5,600			5,153			4,162
Total current assets	152,700			151,747			147,631			127,293
Property, plant, and equipment:
Land and building	35,098			35,024			32,058			35,125
Compressors and equipment	957,975			913,488			989,493			976,469
Vehicles	9,603			10,354			8,875			9,205
Construction in progress	42,624			41,086			18,788			26,985
Total property, plant, and equipment	1,045,300			999,952			1,049,214			1,047,784
Less accumulated depreciation	(390,508		)	(358,633		)	(421,062		)	(405,417		)
Net property, plant, and equipment	654,792			641,319			628,152			642,367
Other assets:
Deferred tax asset	13			13			24			24
Intangible assets, net of accumulated amortization of $27,010 as of September 30, 2019 and $24,790 as of December 31, 2018	28,758			30,978
Intangible assets, net of accumulated amortization of $28,491 as of March 31, 2020 and $27,751 as of December 31, 2019							27,277			28,017
Operating lease right-of-use assets	10,209			—			27,374			21,006
Other assets	3,457			2,687			3,844			3,539
Total other assets	42,437			33,678			58,519			52,586
Total assets	$	849,929		$	826,744		$	834,302		$	822,246
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable	$	55,105		$	33,408		$	48,362		$	47,837
Unearned income	25,131			24,898			27,426			9,505
Accrued liabilities and other	41,116			32,530			38,832			42,581
Amounts payable to affiliates	11,659			3,517			14,964			7,704
Total current liabilities	133,011			94,353			129,584			107,627
Other liabilities:
Long-term debt, net	645,575			633,013			638,429			638,238
Series A Preferred Units	—			30,900
Deferred tax liabilities	1,572			1,012			986			1,211
Long-term affiliate payable	13,270			—			11,618			12,324
Operating lease liabilities	5,442			—			18,903			13,822
Other long-term liabilities	35			63			23			33
Total other liabilities	665,894			664,988			669,959			665,628
Commitments and contingencies
Partners' capital:
General partner interest	215			505			(19		)	180
Common units (47,071,696 units issued and outstanding at September 30, 2019 and 45,769,019 units issued and outstanding at December 31, 2018)	65,464			81,984
Common units (47,292,095 units issued and outstanding at March 31, 2020 and 47,078,529 units issued and outstanding at December 31, 2019)							49,704			63,384
Accumulated other comprehensive income (loss)	(14,655		)	(15,086		)	(14,926		)	(14,573		)
Total partners' capital	51,024			67,403			34,759			48,991
Total liabilities and partners' capital	$	849,929		$	826,744		$	834,302		$	822,246

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Statements of Partners’ Capital

(In Thousands)

(Unaudited)


	Partners' Capital							Accumulated Other Comprehensive Income (Loss)				Total Partners' Capital			Partners' Capital							Accumulated Other Comprehensive Income (Loss)			Total Partners' Capital
	Partners' Capital														Partners' Capital
				Limited Partners												Limited Partners
	General Partner			Common Unitholders							General Partner					Common Unitholders
	Amount			Units	Amount						Amount					Units		Amount

Balance at December 31, 2018	$	505		45,769	$	81,984			$	(15,086	)				$	67,403
Net Loss	(177		)	—	(12,279		)		—						$	(12,456	)
Distributions ($0.01 per unit)	(6		)	—	(470		)		—					$	(476	)
Equity compensation	—			—	312			—				$	312
Vesting of Phantom Units	—			117	—			—				$	—
Conversions of Series A Preferred	—			1,113	3,048			—				$	3,048
Translation adjustment, net of taxes of $0	—			—	—			272				$	272
Other	—			—	(69		)	—				$	(69	)
Balance at March 31, 2019	$	322		46,999	$	72,526		$	(14,814	)		$	58,034
Balance at December 31, 2019															$	180		47,079	$	63,384		$	(14,573	)	$	48,991
Net Loss	$	(42	)	—	$	(2,905	)	$	—			$	(2,947	)	(192		)	—	(13,438		)	—			$	(13,630	)
Distributions ($0.01 per unit)	(7		)	—	(469		)	—				(476		)	(7		)	—	(471		)	—			$	(478	)
Equity compensation	—			—	568			—				568			—			—	229			—			$	229
Vesting of Phantom Units	—			66	—			—				—			—			213	—			—			$	—
Translation adjustment, net of taxes of $0	—			—	—			128				128			—			—	—			(353		)	$	(353	)
Other	—			—	(12		)	—				(12		)	—			—	—			—			$	—
Balance at June 30, 2019	$	273		47,065	$	69,708		$	(14,686	)		$	55,295
Net Loss	$	(51	)	—	$	(3,562	)	$	—			$	(3,613	)
Distributions ($0.01 per unit)	(7		)	—	(471		)	—				(478		)
Equity compensation	—			—	(211		)	—				(211		)
Vesting of Phantom Units	—			7	—			—				—
Translation adjustment, net of taxes of $0	—			—	—			31				31
Balance at September 30, 2019	$	215		47,072	$	65,464		$	(14,655	)		$	51,024
Balance at March 31, 2020															$	(19	)	47,292	$	49,704		$	(14,926	)	$	34,759


	Partners' Capital							Accumulated Other Comprehensive Income (Loss)				Total Partners' Capital			Partners' Capital										Accumulated Other Comprehensive Income (Loss)				Total Partners' Capital
	Partners' Capital														Partners' Capital
				Limited Partners												Limited Partners
	General Partner			Common Unitholders							General Partner					Common Unitholders
	Amount			Units	Amount						Amount					Units			Amount

Balance at December 31, 2017	$	1,618		37,618	$	104,898			$	(11,489	)				$	95,027
Balance at December 31, 2018															$	505			45,769		$	81,984			$	(15,086	)		$	67,403
Net loss	(264		)	—	(15,473		)		$	—					$	(15,737	)	(177		)	—			(12,279		)		$	—			$	(12,456	)
Distributions ($0.1875 per unit)	(126		)	—	(7,186		)		—					(7,312		)
Distributions ($0.01 per unit)															(6		)		—		(470		)		—				(476		)
Equity compensation, net	—			—	(655		)	—				(655		)	—				—		312				—				312
Vesting of Phantom Units	—			32	—			—				—			—				117		—				—				—
Conversions of Series A Preferred	—			1,778	11,555			—				11,555			—				1,113		3,048				—				3,048
Translation adjustment, net of taxes of $0	—			—	—			(649		)		(649		)	—				—		—				272				272
Other	—			—	—			—				—			—				—		(69		)		—				(69		)
Balance at March 31, 2018	$	1,228		39,428	$	93,139		$	(12,138	)		$	82,229
Net loss	(154		)	—	(9,438		)	—				(9,592		)
Distributions ($0.3750 per unit)	(127		)	—	(7,489		)	—				(7,616		)
Equity compensation, net	—			—	356			—				356
Vesting of Phantom Units	—			96	—			—				—
Conversions of Series A Preferred	—			1,663	10,602			—				10,602
Translation adjustment, net of taxes of $0	—			—	—			(2,873		)		(2,873		)
Balance at June 30, 2018	$	947		41,187	$	87,170		$	(15,011	)		$	73,106
Net loss	(134		)	—	(7,813		)	—				(7,947		)
Distributions ($0.5625 per unit)	(126		)	—	(7,857		)	—				(7,983		)
Equity compensation, net	—			—	368			—				368
Vesting of Phantom Units	—			1	—			—				—
Conversions of Series A Preferred	—			2,081	11,772			—				11,772
Omnibus agreement charges settled with common units	—			—	—			(3,370		)		(3,370		)
Translation adjustment, net of taxes of $0	—			—	—			3,522				3,522
Balance at September 30, 2018	$	687		43,269	$	83,640		$	(14,859	)		$	69,468
Balance at March 31, 2019															$	322			46,999		$	72,526			$	(14,814	)		$	58,034

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
Operating activities:
Net income (loss)	$	(19,016	)	$	(33,276	)	$	(13,630	)	$	(12,456	)
Reconciliation of net income (loss) to cash provided by operating activities:
Depreciation and amortization	56,045			52,496			19,908			18,532
Impairments and other charges	3,160			—			5,371			—
Provision for deferred income taxes	550			(277		)	8			1,466
Series A Preferred redemption premium	1,468			—
Series A Preferred paid in kind distributions in interest expense	1,123			4,498
Series A Preferred fair value adjustments	1,470			1,537
Series A Preferred Unit distributions and adjustments							—			2,437
Equity compensation expense	744			259			324			365
Provision for doubtful accounts	2,201			772			222			56
Amortization of deferred financing costs	1,788			1,935			670			600
Expense for unamortized finance costs	—			3,539
Other non-cash charges and credits	378			439			(85		)	54
(Gain) loss on sale of property, plant, and equipment	(476		)	(75		)	7			(26		)
Changes in operating assets and liabilities:
Accounts receivable	(5,800		)	(24,941		)	(7,364		)	5,992
Inventories	(5,808		)	(33,260		)	(12,102		)	(11,990		)
Prepaid expenses and other current assets	860			(1,453		)	(1,160		)	(567		)
Accounts payable and accrued expenses	30,641			35,723			21,625			27,442
Other	(1,542		)	(1,400		)	(437		)	(273		)
Net cash provided by operating activities	67,786			6,516			13,357			31,632
Investing activities:
Purchases of property, plant, and equipment, net	(60,453		)	(78,164		)	(6,483		)	(23,152		)
Advances and other investing activities	—			(1		)
Net cash used in investing activities	(60,453		)	(78,165		)	(6,483		)	(23,152		)
Financing activities:
Proceeds from long-term debt	33,500			380,000			15,501			—
Payments of long-term debt	(22,068		)	(258,000		)	(16,000		)	(2		)
Cash redemptions of Preferred Units	(31,913		)	—			—			(9,399		)
Distributions	(1,430		)	(22,911		)	(478		)	(476		)
Debt issuance costs	12			(8,801		)
Other financing activities							(886		)	—
Advances from affiliate	13,972			—			—			2,402
Net cash provided by (used in) financing activities	(7,927		)	90,288
Net cash used in financing activities							(1,863		)	(7,475		)
Effect of exchange rate changes on cash	12			(54		)	35			7
Increase (decrease) in cash and cash equivalents	(582		)	18,585			5,046			1,012
Cash and cash equivalents at beginning of period	15,858			7,601			2,370			15,858
Cash and cash equivalents at end of period	$	15,276		$	26,186		$	7,416		$	16,870
Supplemental cash flow information:
Interest paid	$	34,580		$	14,042		$	10,823		$	10,727
Income taxes paid	$	2,763		$	2,106		$	36		$	648

See Notes to Consolidated Financial Statements

CSI Compressco LP

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A1 – ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

Organization

CSI Compressco LP, a Delaware limited partnership, is a provider of compression services and equipment for natural gas and oil production, gathering, ~~transportation,~~artificial lift, transmission, processing, and storage. We sell standard and custom-designed, engineered compressor packages and provide aftermarket services and compressor package parts and components manufactured by third-party suppliers. We provide these compression services and equipment to a broad base of natural gas and oil exploration and production, midstream, and transmission companies operating throughout many of the onshore producing regions of the United States as well as in a number of foreign locations, including the countries ~~including~~of Mexico, Canada, and Argentina. We design and fabricate a majority of the compressor packages that we use to provide compression services ~~or that we~~and sell to customers.

Presentation

Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. In the opinion of our management, our unaudited consolidated financial statements as of ~~September 30, 2019~~March 31, 2020, and for the three ~~and nine~~ month periods ended ~~September 30, 2019~~March 31, 2020 and ~~2018,~~2019, include all normal recurring adjustments that are necessary to provide a fair statement of our results for these interim periods. Operating results for the three ~~and nine~~ month periods ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of results that may be expected for the twelve months ended December 31, ~~2019.~~2020.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, ~~2018~~2019 and notes thereto included in our ~~2018~~ Annual Report on Form 10-K, which we filed with the SEC on March ~~4, 2019.~~16, 2020.

Segments

Our General Partner has concluded that we operate in 1 business segment.

Significant Accounting Policies

~~We have added~~Our significant accounting policies are described in the notes to our consolidated financial statements for the ~~recording of leases in conjunction with the adoption of the new lease standard discussed~~year ended December 31, 2019 included in our ~~"Leases" and "New Accounting Pronouncements" sections below. Other than the additional lease policies described herein, there~~Annual Report on Form 10-K. There have been no significant changes in our accounting policies or the application thereof during the first quarter of ~~these policies.~~2020.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and ~~disclosures of~~disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material.

~~Impairments~~Reclassifications

Certain previously reported financial information has been reclassified to conform to the current year's presentation. The impact of such reclassifications was not significant to the prior year's overall presentation.

Cash Equivalents

We consider all highly liquid cash investments with maturities of three months or less when purchased to be cash equivalents.

Financial Instruments

Financial instruments that subject us to concentrations of credit risk consist principally of trade accounts receivable, which are primarily due from customers of varying size engaged in oil and ~~Other Charges~~ gas activities in the United States, Canada, Mexico, and Argentina. Our policy is to review the financial condition of potential customers before extending credit and periodically update their credit information. Payment terms are on a short-term basis. The risk of loss from the inability to collect trade receivables is heightened during prolonged periods of low oil and natural gas commodity prices.

~~During the second quarter of 2019, we recorded impairments of $2.3 million on~~We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain ~~units~~ of our ~~low-horsepower compression fleet, reflecting our decision to dispose~~international operations. Our risk management activities include the use of ~~these units upon management's determination that refurbishing this equipment was not economic given limited current~~foreign currency forward purchase and ~~forecasted demand for such equipment. A recoverability analysis was performed on the remaining low-horsepower fleet and we concluded that~~

~~the remaining fleet was recoverable from estimated future cash flows. During the third quarter of 2019, we recorded a charge of $0.8 million for the carrying value~~sale derivative contracts as part of a ~~certain compressor package that was written off due~~program designed to ~~being destroyed by fire.~~mitigate the currency exchange rate risk exposure on selected international operations.

We have a $3.0 million outstanding balance under our variable rate revolving credit facility as of March 31, 2020 and face market risk exposure related to changes in applicable interest rates.

Foreign Currencies

Accumulated other comprehensive income (loss) is included in partners’ capital in the accompanying consolidated balance sheets and consists of the cumulative currency translation adjustments associated with our international operations. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled ~~$(0.5) million and $(1.5) million during the three and nine month periods ended September 30, 2019, respectively, and $(0.4)~~$1.7 million and $(1.0) million during the three ~~and nine~~ month periods ended ~~September 30, 2018~~March 31, 2020and March 31, 2019, respectively.

~~Leases~~Inventories

~~As a lessee, unless~~Inventoriesconsist primarily of compressor package parts and supplies and work in process and are stated at the ~~lease meets~~lower of cost ornet realizable value. For parts and supplies, cost is determined using the ~~criteria~~weighted averagecostmethod. The cost of ~~short-term and~~work in progress is ~~excluded per our policy election described below, we initially recognize a lease liability and related right-of-use asset on~~determined using the ~~commencement date. The right-of-use asset represents our right to use an underlying asset and the lease liability represents our obligation to make lease payments to the lessor over the lease term.~~ specific identification method.

~~All of our long-term leases are operating leases~~Impairments and are included in operating lease right-of-use assets, accrued liabilities and other, and operating lease liabilities in our consolidated balance sheet as of September 30, 2019. We determine whether a contract is or contains a lease at inception of the contract. Where we are a lessee in a contract that includes an option to extend or terminate the lease, we include the extension period or exclude the period covered by the termination option in our lease term, if it is reasonably certain that we would exercise the option.Other Charges

~~As an accounting policy election, we do not include short-term leases on our balance sheet. Short-term leases include leases with a term~~Impairments of ~~12 months or less, inclusive~~long-lived assets, including identified intangible assets, are determined periodically, when indicators of ~~renewal options we~~impairment are ~~reasonably certain to exercise. The lease payments for short-term leases~~present. If such indicators are included as operating lease costs on a straight-line basis over the lease term in cost of revenues or selling, general, and administrative expense based on the use of the underlying asset. We recognize lease costs for variable lease payments not included inpresent, the determination of ~~a lease liability in~~ the ~~period in which an obligation~~amount of impairment is ~~incurred.~~

~~As allowed by U.S. GAAP, we do not separate nonlease components~~based on our judgment as to the future undiscounted operating cash flows to be generated from the ~~associated lease component for our compression services contracts and instead account for those components as a single component based on~~relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the ~~accounting treatment~~carrying amount of the ~~predominant component. In our evaluation~~related assets, an impairment is recognized for the excess of ~~whether Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 842 "Leases" or ASC 606 "Revenue from Contracts with Customers"~~the carrying value over fair value. Fair value of intangible assets is ~~applicable to~~generally determined using the combined component based on the predominant component, we determined the services nonlease component is predominant, resulting in the ongoing recognition of our compression services contracts following ASC 606.

~~Our operating leases are recognized at the~~discounted present value of ~~lease payments over~~future cash flows using discount rates commensurate with the ~~lease term. When~~risks inherent with the ~~implicit discount rate is not readily determinable, we use our incremental borrowing rate to calculate~~specific assets. Assets held for disposal are recorded at the ~~discount rate used to determine the present~~lower of carrying value or estimated fair value less estimated selling costs. See Note 3 - "Impairments and Other Charges" for additional discussion of ~~lease payments. Consistent with other long-lived assets or asset groups that are held and used, we test for impairment of our right-of-use assets when impairment indicators are present.~~recorded impairments.

Earnings Per Common Unit

Our computations of earnings per common unit are based on the weighted average number of common units outstanding during the applicable period. Basic earnings per common unit are determined by dividing net income (loss) allocated to the common units after deducting the amount allocated to our General Partner (including any distributions to our General Partner on its incentive distribution rights) by the weighted average number of outstanding common units during the period.

When computing earnings per common unit under the two class method in periods when distributions are greater than earnings, the amount of the distribution is deducted from net income (loss) and the excess of

distributions over earnings is allocated between the General Partner and common units based on how our Partnership Agreement allocates net losses.

Diluted earnings per common unit are computed using the treasury stock method, which considers the potential future issuance of limited partner common units. Unvested phantom units are not included in basic earnings per common unit, as they are not considered to be participating securities, but are included in the calculation of diluted earnings per common unit. For the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2020 and March 31, 2019, ~~and September 30, 2018,~~ all unvested phantom units were excluded from the calculation of diluted common units because the impact was anti-dilutive. Diluted earnings per common unit are computed using the "if converted" method, whereby the amount of net income (loss) and the number of common units issuable are each adjusted as if the Preferred Units, ~~discussed in Note D - "Series A Convertible Preferred Units",~~ had been converted as of the beginning of the period presented. The calculation of diluted earnings per common unit for the three ~~and nine~~ month ~~periods~~period ended ~~September 30,~~March 31, 2019 ~~and 2018~~ excludes the impact of the Preferred Units, as the inclusion of the impact from the conversion of the Preferred Units into common units would have been anti-dilutive. All remaining outstanding Preferred Units were redeemed for cash on August 8, 2019.

Revenue Recognition

Performance Obligations. Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Revenue is generally recognized when we transfer control of our products or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services to our customers. We receive cash equal to the invoice price for most product sales and services and payment terms typically range from 30 to 60 days from the date we invoice our customer. With the exception of the initial terms of our compression services contracts of our medium- and high-horsepower compressor packages, our customer contracts are generally for terms of one year or less. Since the period between when we deliver products or services and when the customer pays for products or services is not to exceed one year, we have elected not to calculate or disclose a financing component for our customer contracts.

Depending on the terms of the arrangement, we may also defer the recognition of revenue for a portion of the consideration received because we have to satisfy a future performance obligation. For example, consideration received from customers during the fabrication of new compressor packages is typically deferred until control of the compressor package is transferred to our customer.

For revenue associated with mobilization of service equipment as part of a service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period.

Compression and related services. For compression services revenues recognized over time, our customer contracts typically provide agreed upon monthly service rates and we recognize service revenue based upon the number of days that services have been performed. The majority of our compression services are provided pursuant to contract terms ranging from one month to twenty-four months. Monthly agreements are generally cancellable with 30 days written notice by the customer.

Sales taxes, value added taxes, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We recognize the cost for freight and shipping costs when control over our products (i.e. delivery) has transferred to the customer as part of cost of product sales.

Use of Estimates. Our revenues do not include material amounts of variable consideration, as our revenues typically do not require significant estimates or judgments. The transaction price on a majority of our arrangements are fixed and product returns are immaterial. Additionally, our arrangements typically do not include multiple performance obligations that require estimates of the stand-alone purchase price for each performance obligation. Revenue on certain aftermarket service arrangements that include time as a component of the transaction price is not recognized until the performance obligation is complete.

Contract Assets and Liabilities. We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing, our invoicing of the customer is delayed until certain documentation requirements are met. In those cases, we recognize a contract asset rather than a billed trade accounts receivable until we are able to invoice the customer. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.

We classify contract liabilities as unearned income in our consolidated balance sheets. Such unearned income typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. New equipment sales orders generally take less than twelve months to build and deliver.

Bill-and-Hold Arrangements. We design compressor packages based on our customer’s specifications.In some cases, the customer will request us to hold the equipment, upon completion of the unit, until the job site is ready to receive the equipment. When this occurs, we along with the customer sign a bill-and-hold agreement, which outlines that the customer has title to the equipment, the equipment is ready for delivery, we cannot use the equipment or direct it to another customer, and we have a present right to payment. When those criteria have been met and the agreement is executed, we recognize the revenue on the equipment because control of the equipment has passed to our customer and our performance obligations are complete. Entering into these arrangements is something we have done as a courtesy for certain customers for many years. The equipment subject to the bill-and-hold agreements have generally been invoiced and paid for through progressive billings such that at the time the bill-and-hold agreement is executed, the majority of the contractual cash obligation of the customer has been received by us.

Fair Value Measurements

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements were utilized in the determination of the carrying value of our Series A Preferred Units (a Level 3 fair value measurement). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value (a Level 2 fair value measurement). Refer to Note 9 - "Fair Value Measurements" for further discussion.

Fair value measurements are also utilized on a nonrecurring basis, such as in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets (a Level 3 fair value measurement) and for the impairment of long-lived assets (a Level 3 fair value measurement).

Distributions

On January ~~22, 2019,~~20, 2020, our General Partner declared a cash distribution attributable to the quarter ended December 31, 2018 of $0.01 per common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. Also on January 22, 2019, our General Partner approved the paid in kind distribution of 85,565 Preferred Units attributable to the quarter ended December 31, 2018 in accordance with the provisions of our partnership agreement, as amended. These distributions were paid on February 14, 2019, to each of the holders of common units and the holders of the Preferred Units in the aggregate, respectively, of record as of the close of business on February 1, 2019.

~~On April 18, 2019, our General Partner declared a cash distribution attributable to the quarter ended March 31,~~ 2019 of $0.01 per ~~common unit. This distribution equates to a distribution of $0.04 per~~ outstanding common unit on an annualized basis. Also on April 18, 2019, our General Partner approved the paid in kind distribution of 59,953 Preferred Units attributable to the quarter ended March 31, 2019 in accordance with the provisions of our partnership agreement, as amended. These distributions were paid on May 15, 2019, to each of the holders of common units and the holders of the Preferred Units in the aggregate, respectively, of record as of the close of business on May 1, 2019.

~~On July 19, 2019, our General Partner declared a cash distribution attributable to the quarter ended June 30, 2019 of $0.01 per~~ common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This distribution was paid on ~~August~~February 14, ~~2019,~~2020, to each of the holders of common units of record as of the close of business on ~~August~~February 1, 2019. Also on July 19, 2019, our General Partner approved the paid in kind distribution of 32,872 Preferred Units attributable to the quarter ended June 30, 2019 in accordance with the provisions of our partnership agreement, as amended. The final cash payment made in lieu of paid in kind units occurred on August 8, 2019.2020.

New Accounting Pronouncements

Standards adopted in ~~2019~~2020

In ~~February 2016,~~August 2018, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2016-02, "Leases (Topic 842)~~2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ~~to increase comparability and transparency among different organizations. Organizations are required to recognize right-of-use lease assets and lease liabilities~~ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for us the ~~balance sheet related to the right to use the underlying asset for the lease term. In addition, through improved disclosure requirements, ASC 842 will enable users~~first quarter of ~~financial statements to further understand the amount, timing, and uncertainty~~fiscal 2020. The adoption of ~~cash flows arising from leases. We adopted the~~this standard ~~effective January 1, 2019. The standard had~~did not have a material impact on ~~our consolidated balance sheet, specifically, the reporting of our operating leases.~~

We chose to transition using a modified retrospective approach which allows for the recognition of a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented. Comparative information is reported under the accounting standards that were in effect for those periods. In addition, upon transition, we elected the package of practical expedients, which allows us to continue to apply historical lease classifications to existing contracts. Upon adoption, we recognized $8.3 million in operating right-of-use assets, $3.5 million in accrued liabilities, and $4.8 million in operating lease liabilities. Refer to Note J - “Leases” for further information on our leases.

In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220)" that gives entities the option to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. This was effective for us on January 1, 2019, however, as we do not have associated tax effects in accumulated other comprehensive income, there was no impact.

In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” to align the measurement and classification guidance for share-based payments to nonemployees with the guidance currently applied to employees, with certain exceptions. We adopted this ASU during the three months ended March 31, 2019, with no material impact to our consolidated financial statements.

Standards not yet adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit ~~impairment~~impairments will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. We are continuing to work through our implementation plan which includes evaluating the impact on our allowance for doubtful accounts methodology, identifying new reporting requirements, and implementing changes to business processes, systems, and controls to support adoption of the standard. Upon adoption, the allowance for doubtful accounts is expected to increase with an offsetting adjustment to retained earnings. Updates at each reporting date after initial adoption will be recorded through selling, general, and

administrative expense. ASU 2016-13 ~~has an~~is effective ~~date of~~for us the first quarter of fiscal ~~2020.~~2023. We continue to assess the potential effects of these changes to our consolidated financial statements.

In ~~August 2018,~~December 2019, the FASB issued ASU ~~2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)~~2019-12, "Income Taxes (Topic 740): ~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.~~Income Taxes." ASU ~~2018-15~~2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the recognition of deferred tax liabilities for outside basis differences. It also simplifies certain aspects of accounting for franchise taxes and clarifies the accounting for ~~implementation costs~~transactions that results in ~~cloud computing arrangements.~~a step-up in the tax basis of goodwill. ASU ~~2018-15~~2019-12 is effective for ~~interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted.~~us the first quarter of fiscal 2021. We ~~are currently assessing~~continue to assess the potential effects of these changes to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements.

NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERS

As of March 31, 2020, we had $56.7 million of remaining contractual performance obligations for compression services. As a practical expedient, this amount does not include revenue for compression service contracts whose original expected duration is less than twelve months and does not consider the effects of the time value of money. Expected revenue to be recognized in the future as of March 31, 2020 for completion of performance obligations of compression service contracts are as follows:



	2020		2021		2022		2023		2024		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	38,720	$	15,941	$	2,026	$	54	$	—	$	56,741

Our contract asset balances included in trade accounts receivable in our consolidated balance sheets, primarily associated with customer documentation requirements prior to invoicing, were $8.0 million and $9.6 million as of March 31, 2020 and December 31, 2019, respectively.

Collections associated with progressive billings to customers for the construction of compression equipment is included in unearned income in the consolidated balance sheets. The following table reflects the changes in unearned income in our consolidated balance sheets for the periods indicated:



	Three Months Ended March 31,
	2020			2019
	(In Thousands)
Unearned income, beginning of period	$	9,505		$	24,898
Additional unearned income	23,545			48,955
Revenue recognized	(5,624		)	(24,557		)
Unearned income, end of period	$	27,426		$	49,296

During the three months ended March 31, 2020, we recognized in equipment sales revenue $2.7 million from unearned income that was deferred as of December 31, 2019. During the three months ended March 31, 2019, we recognized in equipment sales revenue of $10.5 million from unearned income that was deferred as of December 31, 2018.

As of March 31, 2020 and March 31, 2019, contract costs were immaterial.

Disaggregated revenue from contracts with customers by geography is as follows:



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Compression and related services
U.S.	$	57,275	$	54,018
International	8,490		9,042
	65,765		63,060
Aftermarket services
U.S.	17,285		13,332
International	685		282
	17,970		13,614
Equipment sales
U.S.	6,038		26,166
International	506		596
	6,544		26,762
Total Revenue
U.S.	80,598		93,516
International	9,681		9,920
	$	90,279	$	103,436

NOTE B3 –IMPAIRMENTS AND OTHER CHARGES

Impairments of Long-Lived Assets

During the first quarter of 2020, the COVID-19 pandemic and decline in oil prices had a significant impact on our customers and industry. We started to see our customers revise their capital budgets downwards and adjust their operations accordingly, which led to a decline in orders for new compression equipment to be fabricated and sold to third parties. We concluded that these events were indicators of impairment for all our asset groups. As a result, we performed a recoverability analysis on all our long-lived asset groups and we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory exceeded their respective fair values. Therefore, we recorded impairments of approximately $5.4 million during the first quarter of 2020 related to these assets. Fair value was estimated based on a market approach. Our recoverability analysis for all our compression services asset groups indicated no impairments as of March 31, 2020. Given the dynamic nature of the events beginning in the first quarter of 2020, we are not able to reasonably estimate how long our operations will be impacted and the full extent these events will have on our operations. As a result, we could have indicators of impairment again in future periods resulting in additional asset impairments.

NOTE 4 – INVENTORIES

Components of inventories as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, are as follows:


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(In Thousands)				(In Thousands)
Parts and supplies	$	42,011	$	43,538	$	33,388	$	42,814
Work in progress	21,930		21,684		29,900		13,223
Total inventories	$	63,941	$	65,222	$	63,288	$	56,037

Inventories consist primarily of compressor package parts and supplies. Work in progress inventories consist primarily of new compressor packages located at our ~~fabrication~~manufacturing facility in Midland, Texas.

NOTE 5 – LEASES

We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms ranging from 1 to 10 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. During the fourth quarter of 2019, we entered into a lease agreement commitment for 14 compressor packages. The leases are for an initial term of seven years and commence upon the completion of the fabrication of the compressor packages. During the first quarter, we took delivery of eight compressor packages. We anticipate taking delivery of the remaining six compressor packages when the compression units are completed, which is expected to occur during the second quarter of 2020. We have no other lease agreement commitments that have not yet commenced that create significant rights and obligations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In November 2019, we entered into a sale and leaseback transaction with a third-party lessor whereby we received $9.8 million of proceeds from the sale of certain of our compression equipment in service and entered into an associated lease of the same equipment having an initial lease term of seven years.

Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $3.2 million for the three month period ended March 31, 2020, of which, $0.9 million related to short-term leases. Variable rent expense was not material.

Operating lease supplemental cash flow information:



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	2,216	$	1,174

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	7,626	$	2,487

Supplemental balance sheet information:



	March 31, 2020		December 31, 2019
	(In Thousands)
Operating leases:
Operating right-of-use asset	$	27,374	$	21,006

Accrued liabilities and other	$	7,667	$	6,706
Operating lease liabilities	18,903		13,822
Total operating lease liabilities	$	26,570	$	20,528

Additional operating lease information:



	March 31, 2020		December 31, 2019
Weighted average remaining lease term:
Operating leases	4.90 Years		4.51 Years

Weighted average discount rate:
Operating leases	9.05	%	8.73	%

Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at March 31, 2020:



	Operating Leases
	(In Thousands)

Remainder of 2019	$	7,160
2020	7,622
2021	5,499
2022	3,295
2023	3,257
Thereafter	6,503
Total lease payments	33,336
Less imputed interest	(6,766		)
Total lease liabilities	$	26,570

NOTE C6 – LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:

September 30, 2019 December 31, 2018
Scheduled Maturity (In Thousands)
Credit Agreement (presented net of the unamortized deferred financing costs of $0.9 million as of September 30, 2019) June 2023 $ 10,559
$ —
7.25% Senior Notes (presented net of the unamortized discount of $1.8 million as of September 30, 2019 and $2.2 million as of December 31, 2018 and unamortized deferred financing costs of $3.1 million as of September 30, 2019 and $3.9 million as of December 31, 2018) August 2022 291,028
289,797
7.50% Senior Secured Notes (presented net of the unamortized deferred financing costs of $6 million as of September 30, 2019 and $6.8 million as of December 31, 2018) April 2025 343,988
343,216
645,575
633,013
Less current portion —
—
Total long-term debt $ 645,575
$ 633,013



		March 31, 2020		December 31, 2019
	Scheduled Maturity	(In Thousands)
Credit Agreement (presented net of the unamortized deferred financing costs of $0.8 million as of March 31, 2020 and $0.9 million as of December 31, 2019)	June 2023	$	2,184	$	2,622
7.25% Senior Notes (presented net of the unamortized discount of $1.5 million as of March 31, 2020 and $1.7 million as of December 31, 2019 and unamortized deferred financing costs of $2.6 million as of March 31, 2020 and $2.8 million as of December 31, 2019)	August 2022	291,863		291,444
7.50% Senior Secured Notes (presented net of the unamortized deferred financing costs of $5.6 million as of March 31, 2020 and $5.8 million as of December 31, 2019)	April 2025	344,382		344,172
		638,429		638,238
Less current portion		—		—
Total long-term debt		$	638,429	$	638,238

There was ~~an $11.5~~a $3.0 million balance outstanding and $3.0 million in letters of credit ~~against~~issued under the Credit Agreement as of ~~September 30, 2019.~~March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement, we had availability of ~~$7.8~~$20.4 million.

On June 26, 2019, we entered into an amendment of the Credit Agreement that, among other things, revised and increased the borrowing base, including adding the value of certain inventory in the determination of the borrowing base.

Our credit and senior note agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. We are in compliance with all covenants of our credit and senior note agreements as of ~~September 30, 2019.~~March 31, 2020.

Refer to Note F7 - "Related Party Transactions," for a discussion of our amounts payable to affiliates and long-term affiliate payable to TETRA.

~~NOTE D – SERIES A CONVERTIBLE PREFERRED UNITS~~

In January 2019 we began redeeming Preferred Units for cash, resulting in 2,660,569 Preferred Units being redeemed during the nine months ended September 30, 2019 for $31.9 million, which includes approximately $1.5 million of redemption premium that was paid and charged to other (income) expense, net in the accompanying consolidated statements of operations. The last redemption of the remaining 375,868 Preferred Units, along with a final cash payment made in lieu of paid in kind units, for an aggregate cash payment of $5.0 million, occurred on August 8, 2019.

~~NOTE E – FAIR VALUE MEASUREMENTS~~

~~Financial Instruments~~

~~Derivative Contracts~~

~~As of September 30, 2019, we had the following foreign currency derivative contract outstanding relating to a portion of our foreign operations:~~

Derivative Contracts US Dollar Notional Amount Traded Exchange Rate Settlement Date

(In Thousands)

Forward sale Mexican peso $ 8,844
19.56 10/18/2019

Under a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries, we may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as economic hedges of the cash flow of our currency exchange risk exposure, they will not be formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative contracts during a period will be included in the determination of earnings for that period.

The fair values of our foreign currency derivative contracts are based on quoted market values (a Level 2 fair value measurement). The fair values of our foreign currency derivative contracts as of September 30, 2019 and December 31, 2018, are as follows:

Foreign currency derivative contracts Balance Sheet Fair Value at
Location September 30, 2019 December 31, 2018
(In Thousands)
Forward sale contracts Current assets $ 101
$ —
Forward sale contracts Current liabilities —
(98 )
Net asset (liability) $ 101
$ (98 )

None of our foreign currency derivative contracts contains credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three and nine month periods ended September 30, 2019 we recognized $(0.1) million and $0.2 million, respectively, of ~~net (gains) losses~~ associated with our foreign currency derivative program, and such amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations. During the three and nine month periods ended September 30, 2018, we recognized $0.4 million and $0.2 million, respectively, of ~~net (gains) losses~~ ~~associated with our foreign currency derivative program, and such amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations.~~

~~Recurring fair value measurements by valuation hierarchy as of September 30, 2019 and December 31, 2018 are as follows:~~

Fair Value Measurements Using
Description Total as of
September 30, 2019 Quoted Prices
in Active
Markets for
Identical
Assets
or Liabilities
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
(In Thousands)
Asset for foreign currency derivative contracts $ 101
$ —
$ 101
$ —
$ 101

Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical
Assets
or Liabilities
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Description Total as of
December 31, 2018
(In Thousands)
Series A Preferred Units $ (30,900 ) $ —
$ —
$ (30,900 )
Liability for foreign currency derivative contracts (98 ) —
(98 ) —
$ (30,998 )

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings, and variable-rate long-term debt pursuant to our Credit Agreement approximate their carrying amounts. The fair values of our publicly traded long-term 7.25% Senior Notes at September 30, 2019 and December 31, 2018 were approximately $269.2 million and $266.3 million, respectively. Those fair values compare to aggregate principal amounts of such notes at September 30, 2019 and December 31, 2018 of $295.9 million. The fair values of our long-term 7.50% Senior Secured Notes at September 30, 2019 and December 31, 2018 were approximately $344.8 million and $332.5 million, respectively. These fair values compare to an aggregate principal amount of such notes at September 30, 2019 and December 31, 2018 of $350.0 million. We based the fair values of our 7.25% Senior Notes and our 7.50% Senior Secured Notes as of September 30, 2019 on recent trades for these notes.

NOTE F7 – RELATED PARTY TRANSACTIONS

Omnibus Agreement

Under the terms of the Omnibus Agreement, our General Partner provides all personnel and services reasonably necessary to manage our operations and conduct our business (other than in Mexico, Canada, and Argentina), and certain of TETRA’s Latin American-based subsidiaries provide personnel and services necessary for

the conduct of certain of our Latin American-based businesses. In addition, under the Omnibus Agreement, TETRA provides certain corporate and general and administrative services as requested by our General Partner, including, without limitation, legal, accounting and financial reporting, treasury, insurance administration, claims processing and risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, and tax services. Pursuant to the Omnibus Agreement, we reimburse our General Partner and TETRA for services they provide to us.

TETRA and General Partner Ownership

As of ~~September 30, 2019,~~March 31, 2020, TETRA's ownership interest in us was approximately 34% of the outstanding common units and an ~~approximately~~approximate 1.4% general partner interest, through which it holds incentive distribution rights.

Other Sources of Financing

In February 2019, we entered into a transaction with TETRA whereby TETRA agreed to fund the construction of and purchase from us up to $15.0 million of new ~~compressor~~compression services equipment and to subsequently lease the equipment back to us in exchange for a monthly rental fee. As of ~~September 30, 2019,~~March 31, 2020, pursuant to this arrangement, ~~$14.6~~$14.8 million has been funded by TETRA for the construction of new ~~compressor~~compression services ~~equipment.~~equipment and all such equipment was completed and deployed under this agreement. For accounting purposes, the inclusion of ~~a repurchase~~an option that ~~allowed~~allows us to repurchase the equipment at a fixed price during certain periods of the agreement caused the transaction to be accounted for as a financing transaction, as opposed to a sale-leaseback, resulting in the funded amount being recorded as a financing obligation. Accordingly, the ~~compressor~~compression services equipment is included in property, plant, and equipment and the corresponding financing obligations are included in amounts payable to affiliates and long-term affiliate payable in our consolidated balance sheet. As of ~~September 30, 2019,~~March 31, 2020, the financing obligation was ~~$15.1~~$14.6 million. Imputed

interest expense recognized for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2019~~March 31, 2020 was ~~$0.5 million and $0.7 million, respectively.~~$0.6 million.

~~The following table summarizes future financing obligation payments by fiscal year:~~NOTE 8 – COMMITMENTSAND CONTINGENCIES

Year As of September 30, 2019
(In Thousands)
Remainder of 2019 $ 703
2020 3,015
2021 3,015
2022 3,015
2023 3,015
After 2023 2,144
Total financing obligation payments $ 14,907

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. While the outcome of any lawsuitsor other proceedingsagainst us cannot be predicted with certainty, management does notconsider it reasonably possible that a loss resulting from such lawsuits or proceedings in excess of any amounts accrued has been incurred that isexpectedtohave a material adverse effect on our financialcondition, results of operations,or cash flows.

NOTE G9 – FAIR VALUE MEASUREMENTS

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability.

Under U.S. GAAP, the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability.

We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. We enter into 30-day foreign currency forward derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries. As of March 31, 2020, we had the following foreign currency derivative contract outstanding relating to a portion of our foreign operations:



	US Dollar Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward sale Mexican peso	$	4,974	24.40	4/21/2020

Under a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries, we may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as economic hedges of the cash flow of our currency exchange risk exposure, they will not be formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period.

The fair values of our foreign currency derivative contracts are based on quoted market values (a Level 2 fair value measurement). The fair values of our foreign currency derivative instruments as of March 31, 2020 and December 31, 2019, are as follows:



Foreign currency derivative contracts	Balance Sheet	Fair Value at
Foreign currency derivative contracts	Location	March 31, 2020			December 31, 2019
		(In Thousands)
Forward sale contracts	Current liabilities	(155		)	(53		)
Net asset (liability)		$	(155	)	$	(53	)

None of our foreign currency derivative instruments contains credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three month periods ended March 31, 2020 and March 31, 2019, we recognized $(1.4) million and $0.1 million, respectively, of net (gains) losses associated with our foreign currency derivative program, and such amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations.

During the first quarter of 2020, we recorded impairments of approximately $5.4 million, reflecting the decreased fair value for certain assets. The fair values used in these impairment calculations were estimated based on a market approach, which is based on significant unobservable inputs (Level 3) in accordance with the fair value hierarchy.

Recurring and nonrecurring fair value measurements by valuation hierarchy as of March 31, 2020 and December 31, 2019 are as follows:



				Fair Value Measurements Using
Description	Total as of March 31, 2020			Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In Thousands)
Midland manufacturing facility and related assets	$	19,646		$	—	$	—		$	19,646
Liability for foreign currency derivative contracts	(155		)	—		(155		)	—
	$	19,491



				Fair Value Measurements Using
				Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description	Total as of December 31, 2019				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Liability for foreign currency derivative contracts	(53		)	—	(53	)	—
	$	(53	)

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings, and variable-rate long-term debt pursuant to our Credit Agreement approximate their carrying amounts. The fair values of our publicly traded long-term 7.25% Senior Notes at March 31, 2020 and December 31, 2019 were approximately $148.0 million and $266.0 million, respectively. Those fair values compare to aggregate principal amounts of such notes at March 31, 2020 and December 31, 2019 of $295.9 million. The fair values of our long-term 7.50% Senior Secured Notes at March 31, 2020 and December 31, 2019 were approximately $239.8 million and $344.8 million, respectively. These fair values compare to an aggregate principal amount of such notes at March 31, 2020 and December 31, 2019 of $350.0 million. We based the fair values of our 7.25% Senior Notes and our 7.50% Senior Secured Notes as of March 31, 2020 on recent trades for these notes.

NOTE 10 – INCOME TAXES

As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. Certain of our operations are located outside of the U.S., and the Partnership, through its foreign subsidiaries, is responsible for income taxes in these countries.

Our effective tax rate for the ~~nine~~three month period ended ~~September 30, 2019,~~March 31, 2020, was negative ~~21.0%~~1.6% primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes combined with losses generated in entities for which no related tax benefit has been recorded. In addition, the application of ASC 740-270 "Income Taxes - Interim Reporting," resulted in an accrual of current income taxes for the nine month period ended September 30, 2019 equal to approximately the full year estimate. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.

NOTE H11 – ~~COMMITMENTSAND CONTINGENCIES~~SUBSEQUENT EVENTS

~~From time~~In April 2020, we announced our plan to ~~time, we are involved~~shutdown our Midland manufacturing facility as a result of a decline in ~~litigation relating to claims arising out of~~orders for new equipment from third parties and the expectation that no incremental equipment will be fabricated for our ~~operations~~fleet in the ~~normal course~~second half of ~~business. While the outcome of any lawsuitsor other proceedingsagainst us cannot be predicted with certainty, management does notconsider it reasonably possible that~~2020. As a ~~loss resulting from such lawsuits or proceedings in excess of any amounts accrued has been incurred that isexpected~~to~~have a material adverse effect on our financialcondition, results of operations,or cash flows.~~

~~NOTE I – REVENUE FROM CONTRACTS WITH CUSTOMERS~~

~~Performance Obligations.~~Revenue is generally recognized when we transfer control of our products or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services to our customers. We receive cash equal to the invoice price for most product sales and services and payment terms typically range from 30 to 60 days from the date we invoice our customer. ~~With the exception~~result of the ~~initial terms of our compression services contracts of our medium-~~decision to close this facility and high-horsepower compressor packages, our customer contracts are generally for terms of one year or less. Since the period between when we deliver products or services and when the customer pays for such products or services is not expected to exceed one year, we have elected not to calculate or disclose a financing component for our customer contracts.

~~received from customers during the fabrication of new compressor packages is typically deferred until control of the compressor package is transferred to our customer.~~

~~For revenue associated with mobilization of service equipment as part of a service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period.~~

~~Compression and related services.~~ For compression services revenues recognized over time, our customer contracts typically provide agreed upon monthly service rates and we recognize service revenue based upon the number of days that services have been performed.

~~As of~~ ~~September 30, 2019, we had~~ ~~$69.9 million of remaining contractual performance obligations for compression services. As a practical expedient, this amount does not reflect revenue for compression service contracts whose original expected duration is less than twelve months and does not consider the effects of the time value of money. Expected revenue to be recognized~~solely utilize third party fabricators in the future for our own service fleet, we are pursuing the sale of the Midland facility in an effort to further improve our balance sheet, and have entered into an agreement with a third party purchaser, which is subject to numerous conditions. While we will continue to operate the facility until the completion ~~of performance obligations of compression service contracts are as follows:~~

2019 2020 2021 2022 2023 Total
(In Thousands)
Compression service contracts remaining performance obligations $ 18,830
$ 37,710
$ 11,834
$ 1,551
$ —
$ 69,925

~~Sales taxes, value added taxes,~~ and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We recognize the cost for freight and shipping costs when control over our products (i.e. delivery) has transferred to the customer as part of cost of product sales.

~~Use of Estimates.Our revenues do not include material amounts of variable consideration, as our revenues typically do not require significant estimates or judgments. The transaction price on a majority~~sale of our ~~arrangements are fixed~~remaining backlog, we no longer intend to fabricate new compressor packages for sales to third parties. We have and ~~product returns are immaterial. Additionally,~~will continue to evaluate the sale of other non-core assets, including our ~~arrangements typically do not include multiple performance obligations~~low-horsepower compression fleet. We can provide no assurance that ~~require estimates~~we will consummate a sale of the stand-alone purchase price for each performance obligation. Revenue on certain aftermarket service arrangements that include time as a component of the transaction price is not recognized until the performance obligation is complete.

~~Contract Assets and Liabilities.~~We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing,Midland manufacturing facility, our invoicing of the customer is delayed until certain documentation requirements are met. In those cases, we recognize a contract asset rather than a billed trade accounts receivable until we are able to invoice the customer. Our contract asset balances, primarily associated with these documentation requirements, were $9.4 million and $5.9 million as of September 30, 2019 ~~and~~ ~~December 31, 2018, respectively. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.~~

We classify contract liabilities as unearned income in our consolidated balance sheets. Such unearned income typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. ~~New equipment sales orders generally take less than twelve months to build and deliver.~~

~~The following table reflects changes in our contract liabilities for the periods indicated:~~

Nine Months Ended
September 30,
2019 2018
(In Thousands)
Unearned income, beginning of period $ 24,898
$ 15,526
Additional unearned income 105,104
99,862
Revenue recognized (104,871 ) (79,062 )
Unearned income, end of period $ 25,131
$ 36,326

During the nine months ended September 30, 2019, we recognized in product sales revenue $24.2 million from unearned income that was deferred as of December 31, 2018. During the nine months ended September 30, 2018, we recognized in product sales revenue of $14.7 million from unearned income that was deferred as of our adoption of ASC 606 on January 1, 2018.

~~Contract Costs.~~ ~~As of~~ ~~September 30, 2019, contract costs are immaterial.~~

~~Disaggregation of Revenue.~~ ~~We disaggregate revenue from contracts with customers by geography based on the following table.~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
(In Thousands)
Compression and related services
U.S. $ 56,676
$ 50,735
$ 166,313
$ 145,859
International 8,281
8,134
26,222
23,454
64,957
58,869
192,535
169,313
Aftermarket services
U.S. 19,605
18,636
50,682
46,374
International 821
1,233
1,514
2,605
20,426
19,869
52,196
48,979
Equipment sales
U.S. 28,872
36,283
107,797
81,329
International (508 ) 235
511
974
28,364
36,518
108,308
82,303
Total Revenue
U.S. 105,153
105,654
324,792
273,562
International 8,594
9,602
28,247
27,033
$ 113,747
$ 115,256
$ 353,039
$ 300,595

~~NOTE J – LEASES~~

~~Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying~~other non-core asset. Components of lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), were $1.9 million and $5.6 million for the three and nine month periods ended September 30, 2019, respectively, of which, $0.4 million and $1.4 million respectively, related to short-term leases. Variable rent expense was not material.

~~Operating lease supplemental cash flow information:~~

Nine Months Ended September 30, 2019
(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases $ 3,645

Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 3,035

~~Supplemental balance sheet information:~~

September 30, 2019
(In Thousands)
Operating leases:
     Operating right-of-use asset $ 10,209

     Accrued liabilities and other $ 4,877
     Operating lease liabilities 5,442
     Total operating lease liabilities $ 10,319

~~Additional operating lease information:~~



	~~September 30, 2019~~
~~Weighted average remaining lease term:~~
~~Operating leases~~	~~3.30 Years~~

~~Weighted average discount rate:~~
~~Operating leases~~	~~6.77~~	%

~~Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at September 30, 2019:~~

Operating Leases
(In Thousands)

Remainder of 2019 $ 1,312
2020 4,874
2021 2,824
2022 925
2023 297
Thereafter 1,390
Total lease payments 11,622
Less imputed interest (1,303 )
Total lease liabilities $ 10,319

~~NOTE K – SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION~~

The $295.9 million and $350.0 million in aggregate principal amounts outstanding of the 7.25% Senior Notes and 7.50% Senior Secured Notes, respectively, as of September 30, 2019 are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several senior unsecured and secured basis, respectively, by certain of our domestic restricted subsidiaries.

~~Condensed Consolidating Balance Sheet~~

~~September 30, 2019~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
ASSETS
Current assets $ —
$ 122,255
$ 30,445
$ —
$ 152,700
Property, plant, and equipment, net —
626,717
28,075
—
654,792
Investments in subsidiaries 169,754
25,684
—
(195,438 ) —
Operating lease right-of-use assets —
9,753
456
—
10,209
Intangible and other assets, net —
29,175
3,053
—
32,228
Intercompany receivables 533,851
—
—
(533,851 ) —
Total non-current assets 703,605
691,329
31,584
(729,289 ) 697,229
Total assets $ 703,605
$ 813,584
$ 62,029
$ (729,289 ) $ 849,929

LIABILITIES AND PARTNERS' CAPITAL
Amounts payable to affiliates $ —
$ 8,152
$ 3,507
$ —
$ 11,659
Other current liabilities 17,565
99,917
3,870
—
121,352
Long-term debt, net 635,016
10,559
—
—
645,575
Operating lease liabilities —
5,101
341
—
5,442
Intercompany payables —
506,218
27,633
(533,851 ) —
Long-term affiliate payable and other liabilities —
13,883
994
—
14,877
Total liabilities 652,581
643,830
36,345
(533,851 ) 798,905
Total partners' capital 51,024
169,754
25,684
(195,438 ) 51,024
Total liabilities and partners' capital $ 703,605
$ 813,584
$ 62,029
$ (729,289 ) $ 849,929

~~Condensed Consolidating Balance Sheet~~

~~December 31, 2018~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
ASSETS
Current assets $ —
$ 128,084
$ 23,663
$ —
$ 151,747
Property, plant, and equipment, net —
614,982
26,337
—
641,319
Investments in subsidiaries 146,852
21,330
—
(168,182 ) —
Intangible and other assets, net —
31,874
1,804
—
33,678
Intercompany receivables 599,145
—
—
(599,145 ) —
Total non-current assets 745,997
668,186
28,141
(767,327 ) 674,997
Total assets $ 745,997
$ 796,270
$ 51,804
$ (767,327 ) $ 826,744

LIABILITIES AND PARTNERS' CAPITAL
Amounts payable to affiliates $ —
$ —
$ 3,517
$ —
$ 3,517
Other current liabilities 14,681
72,985
3,170
—
90,836
Long-term debt, net 633,013
—
—
—
633,013
Series A Preferred Units 30,900
—
—
—
30,900
Intercompany payables —
576,242
22,903
(599,145 ) —
Other long-term liabilities —
191
884
—
1,075
Total liabilities 678,594
649,418
30,474
(599,145 ) 759,341
Total partners' capital 67,403
146,852
21,330
(168,182 ) 67,403
Total liabilities and partners' capital $ 745,997
$ 796,270
$ 51,804
$ (767,327 ) $ 826,744

~~Condensed Consolidating Statement of Operations and Comprehensive Income~~

~~Three Months Ended September 30, 2019~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues $ —
$ 107,395
$ 8,319
$ (1,967 ) $ 113,747
Cost of revenues (excluding depreciation and amortization expense) —
70,501
5,542
(1,967 ) 74,076
Selling, general, and administrative expense 94
10,658
584
—
11,336
Depreciation and amortization —
17,453
1,006
—
18,459
Impairment and other charges —
849
—
—
849
Insurance recoveries —
(325 ) —
—
(325 )
Interest expense, net 12,676
857
—
—
13,533
Series A Preferred FV Adjustment expense —
—
—
—
—
Other (income) expense, net 398
(156 ) (447 ) —
(205 )
Equity in net income (loss) of subsidiaries (9,555 ) (1,134 ) —
10,689
—
Income (loss) before income tax provision (3,613 ) 8,692
1,634
(10,689 ) (3,976 )
Provision (benefit) for income taxes —
(863 ) 500
—
(363 )
Net income (loss) (3,613 ) 9,555
1,134
(10,689 ) (3,613 )
Other comprehensive income (loss) 31
31
—
(31 ) 31
Comprehensive income (loss) $ (3,582 ) $ 9,586
$ 1,134
$ (10,720 ) $ (3,582 )

~~Condensed Consolidating Statement of Operations and Comprehensive Income~~

~~Nine Months Ended September 30, 2019~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues $ —
$ 334,066
$ 26,690
$ (7,717 ) $ 353,039
Cost of revenues (excluding depreciation and amortization expense) —
225,515
17,728
(7,717 ) 235,526
Selling, general, and administrative expense 1,049
30,219
1,707
—
32,975
Depreciation and amortization —
53,052
2,993
—
56,045
Impairment and other charges —
3,160
—
—
3,160
Insurance recoveries —
(325 ) —
—
(325 )
Interest expense, net 38,931
946
—
—
39,877
Series A Preferred FV Adjustment expense 1,470
—
—
—
1,470
Other (income) expense, net 1,467
13
(1,459 ) —
21
Equity in net income (loss) of subsidiaries (23,901 ) (4,324 ) —
28,225
—
Income (loss) before income tax provision (19,016 ) 25,810
5,721
(28,225 ) (15,710 )
Provision (benefit) for income taxes —
1,909
1,397
—
3,306
Net income (loss) (19,016 ) 23,901
4,324
(28,225 ) (19,016 )
Other comprehensive income (loss) 431
431
—
(431 ) 431
Comprehensive income (loss) $ (18,585 ) $ 24,332
$ 4,324
$ (28,656 ) $ (18,585 )

~~Condensed Consolidating Statement of Operations and Comprehensive Income~~

~~Three Months Ended September 30, 2018~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues $ —
$ 109,615
$ 8,418
$ (2,777 ) $ 115,256
Cost of revenues (excluding depreciation and amortization expense) —
77,995
5,479
(2,777 ) 80,697
Selling, general, and administrative expense 367
9,669
556
—
10,592
Depreciation and amortization —
16,711
970
—
17,681
Interest expense, net 13,942
(95 ) —
—
13,847
Series A Preferred FV Adjustment (income) 570
—
—
—
570
Other (income) expense, net —
550
(628 ) —
(78 )
Equity in net income (loss) of subsidiaries (6,932 ) (1,461 ) —
8,393
—
Income (loss) before income tax provision (7,947 ) 6,246
2,041
(8,393 ) (8,053 )
Provision (benefit) for income taxes —
(686 ) 580
—
(106 )
Net income (loss) (7,947 ) 6,932
1,461
(8,393 ) (7,947 )
Other comprehensive income (loss) 152
152
—
(152 ) 152
Comprehensive income (loss) $ (7,795 ) $ 7,084
$ 1,461
$ (8,545 ) $ (7,795 )

~~Condensed Consolidating Statement of Operations and Comprehensive Income~~

~~Nine Months Ended September 30, 2018~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues $ —
$ 283,151
$ 23,884
$ (6,440 ) $ 300,595
Cost of revenues (excluding depreciation and amortization expense) —
196,817
15,814
(6,440 ) 206,191
Selling, general, and administrative expense 259
27,830
1,649
—
29,738
Depreciation and amortization —
50,029
2,467
—
52,496
Interest expense, net 36,083
3,020
—
—
39,103
Series A Preferred FV Adjustment expense 1,537
—
—
—
1,537
Other (income) expense, net —
4,260
(1,512 ) —
2,748
Equity in net income (loss) of subsidiaries (4,603 ) (4,393 ) —
8,996
—
Income (loss)before income tax provision (33,276 ) 5,588
5,466
(8,996 ) (31,218 )
Provision (benefit) for income taxes —
985
1,073
—
2,058
Net income (loss) (33,276 ) 4,603
4,393
(8,996 ) (33,276 )
Other comprehensive income (loss) (3,370 ) (3,370 ) —
3,370
(3,370 )
Comprehensive income (loss) $ (36,646 ) $ 1,233
$ 4,393
$ (5,626 ) $ (36,646 )

~~Condensed Consolidating Statement of Cash Flows~~

~~Nine Months Ended September 30, 2019~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Net cash provided by (used in) operating activities $ —
$ 64,610
$ 3,176
$ —
$ 67,786
Investing activities:
Purchases of property, plant, and equipment, net —
(57,005 ) (3,448 ) —
(60,453 )
Advances and other investing activities —
—
—
—
—
Net cash provided by (used in) investing activities —
(57,005 ) (3,448 ) —
(60,453 )
Financing activities:
Proceeds from long-term debt —
33,500
—
—
33,500
Payments of long-term debt —
(22,068 ) —
—
(22,068 )
Cash redemptions of Preferred Units (31,913 ) —
—
—
(31,913 )
Distributions (1,430 ) —
—
—
(1,430 )
Other financing activities 12
—
—
—
12
Intercompany contribution (distribution) 33,331
(33,331 ) —
—
—
Advances from affiliate —
13,972
—
—
13,972
Net cash provided by (used in) financing activities —
(7,927 ) —
—
(7,927 )
Effect of exchange rate changes on cash —
—
12
—
12
Increase (decrease) in cash and cash equivalents —
(322 ) (260 ) —
(582 )
Cash and cash equivalents at beginning of period —
14,148
1,710
—
15,858
Cash and cash equivalents at end of period $ —
$ 13,826
$ 1,450
$ —
$ 15,276

~~Condensed Consolidating Statement of Cash Flows~~

~~Nine Months Ended September 30, 2018~~

~~(In Thousands)~~

Issuers Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Net cash provided by (used in) operating activities $ —
$ 2,234
$ 4,282
$ —
$ 6,516
Investing activities:
Purchases of property, plant, and equipment, net —
(74,045 ) (4,119 ) —
(78,164 )
Advances and other investing activities —
(1 ) —
—
(1 )
Net cash provided by (used in) investing activities —
(74,046 ) (4,119 ) —
(78,165 )
Financing activities:
Proceeds from long-term debt 343,800
36,200
—
—
380,000
Payments of long-term debt —
(258,000 ) —
—
(258,000 )
Distributions (22,911 ) —
—
—
(22,911 )
Other financing activities (8,801 ) —
—
—
(8,801 )
Intercompany contribution (distribution) (312,088 ) 312,088
—
—
—
Net cash provided by (used in) financing activities —
90,288
—
—
90,288
Effect of exchange rate changes on cash —
—
(54 ) —
(54 )
Increase (decrease) in cash and cash equivalents —
18,476
109
—
18,585
Cash and cash equivalents at beginning of period —
4,197
3,404
—
7,601
Cash and cash equivalents at end of period $ —
$ 22,673
$ 3,513
$ —
$ 26,186

~~NOTE L – SUBSEQUENT EVENTS~~

On ~~October 21, 2019,~~April 20, 2020, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended ~~September 30, 2019~~March 31, 2020 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit, on an annualized basis. This distribution will be paid on ~~November 14, 2019~~May 15, 2020 to each of the holders of common units of record as of the close of business on ~~November~~May 1, ~~2019.~~2020.

Second Lien Notes due 2027. In conjunction with the offer, consents are being solicited from Eligible Holders to eliminate substantially all restrictive covenants and certain of the default provisions in the indenture governing the Unsecured Notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this Quarterly Report. In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC on March ~~4, 2019~~16, 2020 ("~~2018~~2019 Annual Report"). This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview

We provide compression services and equipment for natural gas and oil production, gathering, ~~transportation,~~artificial lift, transmission, processing, and storage. Our compression and related services business includes a fleet of more than ~~5,300~~5,200 compressor packages providing approximately ~~1.16~~1.2 million ~~capacity~~ in aggregate horsepower, utilizing a full spectrum of low-, medium-, and high-horsepower engines. Our equipment sales business includes the ~~fabrication~~design, and sale of both standard ~~compressor packages~~ and custom-designed, engineered compressor packages. Our aftermarket business provides compressor package reconfiguration and maintenance services, as well as the sale of compressor package parts and components manufactured by third-party suppliers. Our customers operate throughout many of the onshore producing regions of the United States, as well as in a number of foreign locations, including the countries ~~including~~of Mexico, Canada and Argentina. We design and fabricate a majority of the compressor packages that we use to provide compression services and sell to customers. Going forward, we plan to have such compressor packages fabricated through one or more third party packagers.

~~The construction~~Our operations are significantly dependent upon the demand for, and production of, ~~infrastructure to alleviate current takeaway capacity constraints that are limiting~~oil and the associated natural gas from unconventional oil and natural gas production ~~and new drilling~~ in the ~~Permian Basin has~~domestic and international markets in which we operate. During the first part of the first quarter, we continued to ~~contribute to~~see increased demand for our products and services, with the exception of a declining backlog for new unit sales. However, during the latter part of the quarter, as the macroeconomic uncertainty resulting from declining oil and natural gas prices and the COVID-19 pandemic continued and the Organization of Petroleum Exporting Countries and other oil producing nations (collectively, “OPEC+”) price war events, we started to see our customers revise their capital budgets substantially downward and adjust their operations accordingly which we believe will continue for an indefinite period. In response to both market uncertainty and the lower levels of spending by our customers, we withdrew our previously issued guidance for the full year 2020 and lowered our projected growth and maintenance capital expenditures. In addition, given the decline in orders for new compression equipment to be fabricated and sold to third parties, we announced our plan to shut down our Midland manufacturing facility in early April. We have retained our new equipment design and engineering personnel and plan to outsource the fabrication of new service fleet equipment but no longer plan to fabricate new compressor packages for sales to third parties. Due to excess compression equipment in the industry, we have started to and ~~services. This growth in demand continues~~expect to ~~drive increases in our compression services revenues, through increased activity and customer contract pricing. This has resulted in increased~~continue to see lower utilization of our compression ~~equipment~~ fleet, requests from our customers for stand-by service rates, and service pricing pressures as customers try to reduce their costs. We expect a significant decline in activity, particularly in North America, coupled with ~~over 1.0 million horsepower~~downward pricing pressure and corresponding reductions in revenue and profitability for the remainder of 2020.

The COVID-19 pandemic and decline in oil prices had a significant impact on our customers and industry. We concluded that these events were indicators of impairment for all our asset groups. As a result, we performed a recoverability analysis on all our long-lived asset groups and we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory exceeded their respective fair values. Therefore, we recorded impairments of approximately $5.4 million during the first quarter of 2020 related to these assets. Our recoverability analysis for all our compression ~~equipment in service~~services asset groups indicated no impairments as of ~~September 30, 2019,~~March 31, 2020. Given the dynamic nature of the events beginning in the first quarter of 2020, we are not able to reasonably estimate how long our operations will be impacted and ~~with overall utilization being~~ the ~~highest since the acquisition~~full extent these events will have on our operations. As a result, we could have indicators of ~~Compressor Systems, Inc. ("CSI")~~impairment again in 2014. As overall industry utilization of high-horsepower compressor equipment approaches maximum levels, customer demand for aftermarket services and parts has increased for maintenance and overhaul of customer-owned compression fleets.future periods resulting in additional asset impairments.

~~Given~~We are continuing to monitor the ~~current high demand for compression services and the high utilization~~2020 spending plans of our ~~compression equipment fleet, we continue to focus on~~customers and are aggressively managing our ~~ability to appropriately expand~~working capital and ~~maintain our compression equipment fleet~~capital expenditures in order to ~~serve~~maximize our ~~customers. To fund~~liquidity in the ~~growth~~current oil and gas industry environment. As obtaining additional financing is challenging in the current debt and equity markets, capital expenditures are expected to ~~expand our compression equipment fleet, during 2019 we supplemented~~be primarily funded by available cash and ~~operating~~ cash ~~flows~~expected to be provided by operating

activities. We plan to manage our flexible cost structure to proactively respond to changing market conditions and take actions necessary to manage through these conditions, some of which could result in impairments or restructuring charges in future periods.

Cost reductions we have recently implemented or are in the process of implementing include reductions in 2020 capital expenditures, workforce reductions, salary reductions, a reduction in the cash retainers for the directors of our general partner, the suspension of 401(k) matching contributions for our employees, targeted reduction in SG&A expenses, and negotiated reductions in expenditures with many of our ~~February 2019 agreement with TETRA, which provided funding~~suppliers. Absent a meaningful recovery in oil and natural gas prices and a material improvement in demand for ~~additional compressor equipment~~oil and gas, we expect our operations to ~~add 20,700 of horsepower to our fleet by the end of 2019. While the current industry market for traditional debt and equity financing is difficult, we~~ continue to ~~review other financing options available~~be negatively impacted, particularly in our onshore producing regions of the United States. We are not able to ~~fund~~predict how long market disruptions resulting from the COVID-19 pandemic and oversupply of oil and gas will continue, or what impact they will ultimately have on our ~~growth.~~business. Despite that, we will continue to maintain our commitment to safety and service quality for our customers.

How We Evaluate Our Operations

Operating Expenses. We use operating expenses as a performance measure for our business. We track our operating expenses using month-to-month, quarter-to-quarter, year-to-date, and year-to-year comparisons and as compared to budget. This analysis is useful in identifying adverse cost trends and allows us to investigate the cause of these trends and implement remedial measures if possible. The most significant portions of our operating expenses are for our field labor, repair and maintenance of our equipment, and for the fuel and other supplies consumed while providing our services. The costs of other materials consumed while performing our services, ad valorem taxes, other labor costs, truck maintenance, rent on storage facilities, and insurance expenses comprise the significant remainder of our operating expenses. Our operating expenses generally fluctuate with our level of activity.

Our labor costs consist primarily of wages and benefits for our field and fabrication personnel, as well as expenses related to their training and safety. Additional information regarding our operating expenses for the three ~~and nine~~ month period ended ~~September 30, 2019,~~March 31, 2020, is provided within the Results of Operations sections below.

Adjusted EBITDA. We view Adjusted EBITDA as one of our primary management tools, and we track it on a monthly basis, both in dollars and as a percentage of revenues (typically compared to the prior month, prior year period, and to budget). We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, and before certain non-cash charges, ~~consisting of~~including impairments, bad debt expense attributable to

bankruptcy of customer, equity compensation, non-cash costs of compressors sold, fair value adjustments of our Preferred Units that were issued in late 2016 and redeemed for cash on August 8, 2019, gain on extinguishment of debt, write-off of unamortized financing costs, and excluding ~~Series A~~ Preferred Units redemption ~~premiums,~~premium, severance and ~~severance.~~other non-recurring or unusual expenses or charges. Adjusted EBITDA is used as a supplemental financial measure by our management to:


•	assess our ability to generate available cash sufficient to make distributions to our common unitholders and general partner;

evaluate the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;

measure operating performance and return on capital as compared to those of our competitors; and

determine our ability to incur and service debt and fund capital expenditures.

The following table reconciles net income (loss) to Adjusted EBITDA for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
	(In Thousands)												(In Thousands)
Net loss	$	(3,613	)	$	(7,947	)	$	(19,016	)	$	(33,276	)	$	(13,630	)	$	(12,456	)
Provision (benefit) for income taxes	(363		)	(106		)	3,306			2,058			212			4,373
Depreciation and amortization	18,459			17,681			56,045			52,496			19,908			18,532
Impairments and other charges	849			—			3,313			—			5,371			—
Bad debt expense attributable to bankruptcy of customer	1,768			—			1,768			—
Interest expense, net	13,533			13,847			39,877			39,103			13,169			13,299
Equity compensation	(211		)	367			744			259			324			365
Expense for unamortized finance costs	—			—			—			3,539
Series A Preferred redemption premium	399			—			1,468			—			—			448
Series A Preferred fair value adjustments	—			570			1,470			1,537			—			1,304
Severance	118			—			118			12			272			—
Non-cash cost of compressors sold	2,803			1,951			3,841			3,086			1,809			940
Other	254			176			630			176			327			—
Adjusted EBITDA	$	33,996		$	26,539		$	93,564		$	68,990		$	27,762		$	26,805

The following table reconciles cash flow from operating activities to Adjusted EBITDA:


	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
	(In Thousands)						(In Thousands)
Cash flow from operating activities	$	67,786		$	6,516		$	13,357		$	31,632
Changes in current assets and current liabilities	(18,351		)	25,331			(562		)	(20,604		)
Deferred income taxes	(550		)	277			(8		)	(1,466		)
Other non-cash charges	(3,738		)	(3,071		)	(814		)	(684		)
Bad debt expense attributable to bankruptcy of customer	1,768			—
Interest expense, net	39,877			39,103			13,169			13,299
Series A Preferred accrued paid in kind distributions	(1,123		)	(4,498		)	—			(685		)
Provision for income taxes	3,306			2,058			212			4,373
Severance	118			12			272			—
Non-cash cost of compressors sold	3,841			3,086			1,809			940
Other	630			176			327			—
Adjusted EBITDA	$	93,564		$	68,990		$	27,762		$	26,805

Free Cash Flow. We define Free Cash Flow as cash from operations less capital expenditures, net of sales proceeds. Management primarily uses this metric to assess our ability to retire debt, evaluate our capacity to further

invest and grow, and measure our performance as compared to our peers. The following table reconciles cash provided by operations, net, to Free Cash Flow for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
	(In Thousands)						(In Thousands)						(In Thousands)
Cash from operations	$	27,444		$	10,789		$	67,786		$	6,516		$	13,357		$	31,632
Capital expenditures, net of sales proceeds	(20,867		)	(30,902		)	(60,453		)	(78,164		)	(6,483		)	(23,152		)
Free cash flow	$	6,577		$	(20,113	)	$	7,333		$	(71,648	)	$	6,874		$	8,480

Adjusted EBITDA and Free Cash Flow are financial measures that are not in accordance with U.S. GAAP and should not be considered an alternative to net income, operating income, cash ~~flows~~ from operating activities, or any other measure of financial performance presented in accordance with U.S. GAAP. These measures may not be

comparable to similarly titled financial metrics of other entities, as other entities may not calculate Adjusted EBITDA or Free Cash Flow in the same manner as we do. Management compensates for the limitations of Adjusted EBITDA and Free Cash Flow as analytical tools by reviewing the comparable U.S. GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making processes. Adjusted EBITDA and Free Cash Flow should not be viewed as indicative of the actual amount of cash we have available for distributions or that we plan to distribute for a given period, nor should it be equated with “available cash” as defined in our partnership agreement.

Horsepower Utilization Rate of our Compressor Packages. We measure the horsepower utilization rate of our fleet of compressor packages as the amount of horsepower of compressor packages used to provide services as of a particular date, divided by the amount of horsepower of compressor packages in our services fleet as of such date. Management primarily uses this metric to determine our future need for additional compressor packages for our service fleet and to measure marketing effectiveness.

The following table sets forth the total horsepower in our compression fleet, our total horsepower in service, and our horsepower utilization rate as of the dates shown.


	September 30,				March 31,
	2019		2018		2020		2019
Horsepower
Total horsepower in fleet	1,157,938		1,116,600		1,195,186		1,167,164
Total horsepower in service	1,043,384		963,714		1,033,256		1,017,452
Total horsepower utilization rate	90.1	%	86.3	%	86.5	%	87.2	%

The following table sets forth our horsepower utilization rates by each horsepower class of our compression fleet as of the dates shown.


	September 30,				March 31,
	2019		2018		2020		2019
Horsepower utilization rate by class
Low-horsepower (0-100)	72.1	%	66.3	%	66.4	%	65.7	%
Medium-horsepower (101-1,000)	87.0	%	82.7	%	83.6	%	85.4	%
High-horsepower (1,001 and over)	97.4	%	96.6	%	93.5	%	95.6	%

The utilization figures for September 30, 2019 above reflect the impairment of certain low-horsepower class compressor packages and removal of 20,286 horsepower from the compression fleet during the second quarter of 2019. Through new equipment fabrication, we added ~~18,540 and 70,923~~22,160 of horsepower to our fleet during the three ~~and nine~~ months ended ~~September 30, 2019.~~

March 31, 2020.

Net Increases/Decreases in Compression Fleet Horsepower. We measure the net increase (or decrease) in our compression fleet horsepower during a given period by taking the difference between the aggregate horsepower of compressor packages added to the fleet during the period, less the aggregate horsepower of compressor packages removed from the fleet during the period. We measure the net increase (or decrease) in our compression fleet horsepower in service during a given period by taking the difference between the aggregate horsepower of compressor packages placed into service during the period, less the aggregate horsepower of compressor packages removed from service during the period.

New Equipment Sales Backlog. Our new equipment sales business includes the engineering, design, fabrication, assembly, project management, and sale of both standard and custom-designed compressor packages ~~primarily~~fabricated at authorized packaging facilities in Texas. We recently announced our plan to shutdown our Midland manufacturing facility as a result of a decline in orders for new equipment from third parties, in addition to our expectation that no incremental equipment will be fabricated for our fleet in the second half of 2020. We have entered into an agreement for the sale of the Midland ~~Texas. The equipment~~facility, which is ~~fabricated~~subject to ~~customer~~numerous conditions. Going forward, we plan to continue to design and ~~standard specifications, as applicable. Our custom~~engineer compressor packages for our own service fleet while outsourcing the fabrication ~~projects are typically greater in size and scope than standard fabrication projects, requiring more labor, materials, and overhead resources. Our fabrication~~of our service fleet to third parties with whom we have existing business ~~requires diligent planning of those resources and project and backlog management in order to meet the customer delivery dates and performance criteria.~~relationships. New equipment sales backlog was ~~$62.9~~$30.3 million as of ~~September 30, 2019~~March 31, 2020 compared to ~~$105.2~~$35.5 million as of December 31, ~~2018.~~2019. Changes in our new equipment sales backlog are a function of additional customer orders less completed orders that result in equipment sales revenues for the period. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31,

2020, we received cumulative orders of ~~$59.3~~$2.0 million for new ~~compressor packages. The majority of~~equipment. All our ~~September 30, 2019~~March 31, 2020 new equipment sales backlog is expected to be recognized during the second quarter of 2020. Our new equipment sales backlog consists of firm customer orders for which a purchase or work order has been received, satisfactory credit or financing arrangements exist, and target delivery ~~has~~dates have been ~~scheduled. Our~~established based on customer requirements. Following sale of the new equipment orders in our current backlog, we do not plan to design, engineer and sell compressor packages to third parties and the new equipment sales ~~backlog is~~business will not constitute a ~~measure~~material part of ~~marketing effectiveness that allows us to plan future labor and raw material needs and measure~~ our ~~success in winning bids from our customers.~~business.

Critical Accounting Policies and Estimates

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our ~~2018~~2019 Annual Report. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. These judgments and estimates may change as new events occur, as new information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material.

Results of Operations

Three months ended ~~September 30, 2019~~March 31, 2020 compared to three months ended ~~September 30, 2018~~March 31, 2019.


	Three Months Ended September 30,															Three Months Ended March 31,
							Period-to-Period Change			Percentage of Total Revenues				Period-to-Period Change								Period-to-Period Change			Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2019			2018			2019 vs. 2018			2019		2018		2019 vs. 2018		2020			2019			2020 vs. 2019			2020		2019		2020 vs. 2019
	(In Thousands)															(In Thousands)
Revenues:
Compression and related services	$	64,957		$	58,869		$	6,088		57.1	%	51.1	%	10.3	%	$	65,765		$	63,060		$	2,705		72.8	%	61.0	%	4.3	%
Aftermarket services	20,426			19,869			557			18.0	%	17.2	%	2.8	%	17,970			13,614			4,356			19.9	%	13.2	%	32.0	%
Equipment sales	28,364			36,518			(8,154		)	24.9	%	31.7	%	(22.3	)%	6,544			26,762			(20,218		)	7.2	%	25.9	%	(75.5	)%
Total revenues	113,747			115,256			(1,509		)	100.0	%	100.0	%	(1.3	)%	90,280			103,436			(13,157		)	100.0	%	100.0	%	(12.7	)%
Cost of revenues:
Cost of compression and related services	30,395			31,074			(679		)	26.7	%	27.0	%	(2.2	)%	31,608			32,621			(1,013		)	35.0	%	31.5	%	(3.1	)%
Cost of aftermarket services	17,163			16,165			998			15.1	%	14.0	%	6.2	%	16,245			11,260			4,985			18.0	%	10.9	%	44.3	%
Cost of equipment sales	26,518			33,458			(6,940		)	23.3	%	29.0	%	(20.7	)%	6,700			24,219			(17,519		)	7.4	%	23.4	%	(72.3	)%
Total cost of revenues	74,076			80,697			(6,621		)	65.1	%	70.0	%	(8.2	)%	54,553			68,100			(13,547		)	60.4	%	65.8	%	(19.9	)%
Depreciation and amortization	18,459			17,681			778			16.2	%	15.3	%	4.4	%	19,908			18,532			1,376			22.1	%	17.9	%	7.4	%
Impairments and other charges	849			—			849			0.7	%	—	%	100.0	%	5,371			—			5,371			5.9	%	—	%	100.0	%
Selling, general, and administrative expense	11,336			10,592			744			10.0	%	9.2	%	7.0	%	10,256			10,665			(409		)	11.4	%	10.3	%	(3.8	)%
Interest expense, net	13,533			13,847			(314		)	11.9	%	12.0	%	(2.3	)%	13,169			13,299			(130		)	14.6	%	12.9	%	(1.0	)%
Series A Preferred fair value adjustment (income) expense	—			570			(570		)	—	%	0.5	%	(100.0	)%	—			1,304			(1,304		)	—	%	1.3	%	(100.0	)%
Other (income) expense, net	(205		)	(78		)	(127		)	(0.2	)%	(0.1	)%	162.8	%	440			(381		)	821			0.5	%	(0.4	)%	(215.5	)%
Income (loss) before income taxes	(3,976		)	(8,053		)	4,077			(3.5	)%	(7.0	)%	(50.6	)%
Provision (benefit) for income taxes	(363		)	(106		)	(257		)	(0.3	)%	(0.1	)%	242.5	%
Net income (loss)	$	(3,613	)	$	(7,947	)	$	4,334		(3.2	)%	(6.9	)%	(54.5	)%
Loss before income taxes																(13,418		)	(8,083		)	(5,335		)	(14.9	)%	(7.8	)%	66.0	%
Provision for income taxes																212			4,373			(4,161		)	0.2	%	4.2	%	(95.2	)%
Net loss																$	(13,630	)	$	(12,456	)	$	(1,174	)	(15.1	)%	(12.0	)%	9.4	%

Revenues

Compression and related services revenues increased ~~$6.1~~by $2.7 million, ~~a 10.3% increase,~~or 4.3%, in the current year ~~quarter~~period compared to the prior year ~~quarter. Growth~~period due to increases in ~~demand for compression services positively impacted~~ our ~~compression~~high-horsepower fleet ~~utilization rates. The overall compression fleet~~during 2019 and resulting increased horsepower ~~utilization rate as of September 30, 2019 increased to 90.1%~~in service during the current year period compared to ~~86.3% as~~the prior year period and pricing secured in 2019 that was realized during the first quarter of September 30, 2018. In addition, increased demand has led to improved customer contract pricing. In response to the overall improving demand for compression services, we continue to invest in growth capital projects to increase certain horsepower categories of our compression fleet.2020.

Aftermarket services revenues increased ~~$0.6~~$4.4 million, or 32.0%, during the current year ~~quarter~~period compared to the prior year ~~quarter~~period resulting ~~primarily~~ from increased customer demand for aftermarket services and parts ~~sales to existing customers.~~for maintenance and overhauls of customer-owned compressor equipment.

Equipment sales revenues decreased ~~$8.2~~$20.2 million, or 75.5%, during the current year ~~quarter~~period compared to the prior year ~~quarter,~~period, primarily due to a decrease in deliveries of new compressors compared to the ~~timing~~prior year. Overall, new unit sale booking levels declined in first quarter of ~~when customer projects were completed.~~2020 as customers slowed down spending on infrastructure projects. The level of revenues from equipment sales is typically volatile and difficult to forecast, as these revenues are tied to specific customer projects that vary in scope, design, complexity, and customer needs.

Cost of revenues

~~The cost~~Cost of compression and related services ~~revenue~~ decreased, compared to the prior year quarter, despite the increased overall utilization of compressor packages. Cost of compression and related services as a percent of associated revenues decreased from 52.8% during the prior year quarter to 46.8% in the current year quarter due to improved customer contract pricing, labor efficiencies, and reduced maintenance costs.

~~Cost of aftermarket services increased during the current year quarter due to increased part sales that have slightly lower margins compared to other aftermarket services.~~

~~Cost of equipment sales revenues decreased consistent~~period, even with the ~~decrease in associated revenues.~~

~~Depreciation and amortization~~

~~Depreciation and amortization expense primarily consists of the depreciation of compressor packages in our service fleet. In addition,~~itincludes the depreciation of other operating equipment and facilities and the amortization of intangibles. Depreciation and amortization expense increased compared to the prior year quarter due to increases in the compression fleet.

~~Impairments and other charges~~

~~During the current quarter, we recorded a charge of $0.8 million due to a certain compressor package written off due to being destroyed by fire.~~

~~Selling, general, and administrative expense~~

~~Selling,general, and administrative~~expenses increased during the current year quarter compared to the prior year quarter primarily due to increased bad debt expense of $1.5 million mainly associated with the bankruptcy of a single customer, partially offset by decreased employee expenses of $0.9 million.

~~Interest expense, net~~

Interest expense, net, decreased compared to the prior year quarter primarily due to the conversion and redemption of the Preferred Units resulting in lower paid in kind distributions of Preferred Units during the current year quarter, and despite imputed interest on related party financing. Interest expense, net, during the current and prior year quarters also includes $0.8 million and $0.7 million, respectively, of non-cash finance cost amortization.

~~Series A Preferred fair value adjustment~~

~~All remaining outstanding Preferred Units were redeemed for cash on August 8, 2019.~~

~~Other (income) expense, net~~

~~Other (income) expense, net, was $0.2 million of income, net, during the current year quarter compared to $0.1 million of income, net, during the prior yearquarter.The~~ increase in ~~other income is primarily due to~~corresponding revenues resulting from added horsepower and overall increased ~~foreign currency gains of $0.5 million offset by $0.4 million of redemption premium incurred during the current year period in connection with the redemption of Preferred Units for cash.~~

~~Provision for income taxes~~

As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. Certain of our operations are located outside of the U.S. and the Partnership, through its foreign subsidiaries, is responsible for income taxes in these countries.

~~Results of Operations~~

~~Nine months ended September 30, 2019 compared to nine months ended September 30, 2018.~~

Nine Months Ended September 30,
Period-to-Period Change Percentage of Total Revenues Period-to-Period Change
Consolidated Results of Operations 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
(In Thousands)
Revenues:

Compression and related services $ 192,535
$ 169,313
$ 23,222
54.5 % 56.3 % 13.7 %
Aftermarket services 52,196
48,979
3,217
14.8 % 16.3 % 6.6 %
Equipment sales 108,308
82,303
26,005
30.7 % 27.4 % 31.6 %
Total revenues 353,039
300,595
52,444
100.0 % 100.0 % 17.4 %
Cost of revenues:

Cost of compression and related services 93,536
92,963
573
26.5 % 30.9 % 0.6 %
Cost of aftermarket services 43,841
40,163
3,678
12.4 % 13.4 % 9.2 %
Cost of equipment sales 98,149
73,065
25,084
27.8 % 24.3 % 34.3 %
Total cost of revenues 235,526
206,191
29,335
66.7 % 68.6 % 14.2 %
Depreciation and amortization 56,045
52,496
3,549
15.9 % 17.5 % 6.8 %
Impairments and other charges 3,160
—
3,160
0.9 % — % 100.0 %
Selling, general, and administrative expense 32,975
29,738
3,237
9.3 % 9.9 % 10.9 %
Interest expense, net 39,877
39,103
774
11.3 % 13.0 % 2.0 %
Series A Preferred fair value adjustment (income) expense 1,470
1,537
(67 ) 0.4 % 0.5 % (4.4 )%
Other (income) expense, net 21
2,748
(2,727 ) — % 0.9 % (99.2 )%
Income (loss) before income taxes (15,710 ) (31,218 ) 15,508
(4.4 )% (10.4 )% (49.7 )%
Provision (benefit) for income taxes 3,306
2,058
1,248
0.9 % 0.7 % 60.6 %
Net income (loss) $ (19,016 ) $ (33,276 ) $ 14,260
(5.4 )% (11.1 )% (42.9 )%

~~Revenues~~

Compression and related services revenues increased by $23.2 million, or 13.7%, in the current year period compared to the prior year period. Growth in demand for compression services positively impacted our compression fleet utilization rates. The overall compression fleet horsepower utilization rate as of September 30, 2019 increased to 90.1% compared to 86.3% as of September 30, 2018. In addition, increased demand has led to improved customer contract pricing for compression services. In response to the overall improving demand for compression services, we continue to invest in growth capital projects to increase certain horsepower categories of our compression fleet.

Aftermarket services revenues increased $3.2 million, or 6.6%, during the current year period compared to the prior year period. As overall industry utilization of high-horsepower compression approaches maximum levels, customer demand for aftermarket services and parts has increased for maintenance and overhauls of customer-owned compressor equipment.

Equipment sales revenues increased $26.0 million, or 31.6%, during the current year period compared to the prior year period, primarily due to increased sales during the prior quarters in 2019. The level of revenues from equipment sales is typically volatile and difficult to forecast, as these revenues are tied to specific customer projects that vary in scope, design, complexity, and customer needs.

~~Cost of revenues~~

The increase in the cost of compression and related services revenues, compared to the prior year period, was negligible in light of our slight increase in horsepower and overall utilization of our compressor package fleet.

Cost of compression and related services as a percentage of compression and related services revenues decreased from ~~54.9%~~51.7% during the prior year period to ~~48.6%~~48.1% during the current year period due to improved customer contract pricing, higher margins on new compressor equipment, labor efficiencies, and reduced maintenance costs.

Cost of aftermarket services increased compared to the prior year period consistent with the increased activity and ~~part sales.~~lower margins due to a highly competitive landscape.

Cost of equipment sales ~~revenues increased as a result of~~decreased in accordance with the ~~increase~~decrease in associated revenues. Cost of equipment sales as a percentage of equipment sales revenues increased primarily due to pricing on equipment sales orders placed in ~~2018.~~2019.

Depreciation and amortization

Depreciation and amortization expense primarily consists of the depreciation of compressor packages in our service fleet. In addition, it includes the depreciation of other operating equipment and facilities and the amortization of intangibles. Depreciation and amortization expense increased compared to the prior year period due to increases in the compression fleet.

Impairments and other charges

During the ~~nine~~three month period ended ~~September 30, 2019,~~March 31, 2020, we recorded ~~impairments~~an impairment of ~~$2.3~~$5.4 million ~~on certain units of~~associated with our ~~GasJack~~^(R) ~~fleet, reflecting our decision to dispose of these units upon management's determination that refurbishing this equipment was not economic given limited current~~Midland manufacturing facility and forecasted demand for such equipment. There were 441 GasJack units impaired, representing 20,286 of total horsepower. Following the impairment there remains in excess of 500 GasJack units currently unutilized and available for redeployment. ~~In addition, a certain compressor package was written off due to being destroyed by fire, resulting in an additional charge of $0.8 million.~~related assets.

Selling, general, and administrative expense

Selling, general, and administrative expenses ~~increased~~decreased during the current year period compared to the prior year period largely due to decreased employee expenses of $0.6 million and decreased other general expenses of $0.3 million. These decreases were offset by increased professional services of $0.4 million and increased bad debt expense of $1.5 million primarily associated with the bankruptcy of a single customer, increased employee expenses of $1.3 million, and increased professional services of $0.3 million. These increases were offset by decreased other general expenses of $0.2 million. Despite ~~increased~~decreased expenses, as a percentage of revenues, selling, general, and administrative expense ~~decreased~~increased due to ~~increased~~lower revenues compared to the prior year period.

~~Interest expense, net~~

Interest expense, net, increased compared to the prior year period due to higher outstanding debt balances and higher interest rates associated with the issuance of our 7.50% Senior Secured Notes in March 2018 and due to imputed interest on related party financing. This increase was despite the reduction in interest expense from the conversion and redemption of the Preferred Units resulting in lower paid in kind distributions compared to the prior year period. Interest expense, net, during the current and prior year periods includes $2.2 million and $2.3 million, respectively, of finance cost amortization and other non-cash charges.

Series A Preferred fair value adjustment

The Series A Preferred Units fair value adjustment was ~~$1.5 million charged to earnings during the current year period compared to $1.5~~$1.3 million charged to earnings during the prior year period. All the remaining outstanding Preferred Units were redeemed for cash on August 8, 2019.

Other (income) expense, net

Other (income) expense, net, was ~~$0.02~~$0.4 million of expense during the current year period, compared to ~~$2.7~~$0.4 million of ~~expense~~income during the prior year period. ~~This decrease in~~The change from income to expense is primarily due to ~~$3.5~~$1.2 million of ~~unamortized deferred financing costs charged to other expense as a result of the termination of the previous credit agreement in the prior year period and~~ increased foreign currency ~~gains of $0.6 million. These decreases in~~

~~expense were~~losses offset by ~~increased~~decreased expense of ~~$1.5~~$0.4 million ofassociated with the redemption premium incurred during the ~~current~~prior year period in connection with the redemption of Preferred Units for cash.

Provision for income taxes

As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. Certain of our operations are located outside of the U.S. and the Partnership, through its foreign subsidiaries, is responsible for income taxes in these countries.

Liquidity and Capital Resources

Our primary cash requirements are for distributions, working capital requirements, debt service payments, normal operating expenses, and capital expenditures. Our potential sources of funds are our existing cash balances, cash generated from our operations, and long-term and short-term borrowings, ~~sale-leaseback transactions, financing transactions with TETRA, and issuances of debt and equity securities,~~ which we believe will be sufficient to meet our working capital and ~~planned~~reduced growth capital requirements during ~~2019. Though demand for compression services and equipment is currently high, we~~2020. We are monitoring the spending plans of our customers due to the macroeconomic uncertainties resulting from the recent substantial declines in prices of oil and natural gas ~~price volatility~~ and ~~its impact on~~the ongoing COVID-19 pandemic. These uncertainties have negatively impacted our ~~customer's demand~~customers' demands for our products and ~~services.~~services, which has negatively impacted our businesses. If oil and gas prices remain at current levels or decrease further, our businesses could be further negatively impacted. In addition, current conditions in the market for debt and equity securities in the energy sector have increased the difficulty of obtaining equity and debt financing and we expect this to continue in the ~~extent necessary to grow our business.~~near future. Despite these challenges, we remain committed to a long-term growth strategy. Our near-term focus is to maintain ~~and selectively expand~~ our compression fleet, ~~to serve the growing demand for compression services,~~ while continuing to preserve and enhance liquidity through strategic operating and financial measures.

We ~~expect~~periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such transactions are in the best interests of our business, such as the agreement we have entered into with a third party purchaser for the sale of the Midland facility, which is subject to fund any future capital expenditures, along with potential acquisitions, if any, with existing cash balances, cash flow generated from our operations, financing transactions with TETRA and funds received from the issuance of additional debt and equity securities.numerous conditions. We ~~may also seek to expand our compression fleet through finance or operating leases with third parties. However, we~~ are subject to business and operational risks that could materially adversely affect our cash flows and together with risks associated with current debt and equity market conditions, our ability or desire to issue such securities. Please read Part I, Item 1A "Risk Factors" included in our ~~2018~~2019 Annual Report.

~~Meeting increased demand for~~We have adjusted our ~~compression services will requireongoingcapital expenditure~~investment, which could be significant. The level of future growth capital expenditures depends on demand for compression services, the level of cash available to fund these expenditures, and our decisions whether to utilize available cash to fund increases in our quarterly common unit distribution, retire debt, or make capital expenditures. We anticipateexpected capital expenditures in ~~2019~~2020 to range from ~~$65.0~~$28.0 million to ~~$70.0~~$35.0 million. These capital expenditures include approximately ~~$19.0~~$20.0 million to ~~$21.0~~$22.0 million of maintenance capital expenditures and approximately ~~$46~~$5.0 million to ~~$49~~$8.0 million of capital expenditures primarily associated with the expansion of our compression services ~~fleet. We~~fleet, and $3.0 million to $5.0 million of capital expenditures related to investments in technology, primarily software and systems. The foregoing estimates are based on assumptions regarding the ongoing impact of the decline of oil and gas prices and the COVID-19 pandemic. While we will continue to monitor developments in the oil and gas industry, as well as the impact of the COVID-19 pandemic, we expect that the combination of cash on hand and operating cash flows ~~expected to be~~ generated during ~~the remainder of~~ the year will be sufficient to fund ~~the remainder of these~~ capital expenditures without having to incur additional long-term debt and without having to access the equity or debt ~~and equity~~ markets. In addition to these capital expenditures, pursuant to agreements executed in February 2019, TETRA agreed to fund the construction of and purchase up to $15.0 million of new compression services equipment and subsequently lease the equipment back to us in exchange for a monthly rental fee. During the nine months ended September 30, 2019, $14.6 million of the $15.0 million has been funded by TETRA for the construction of new compressor equipment and corresponding financing obligations are included in amounts payable to affiliates and long-term affiliate payable in

our consolidated balance sheet. As of September 30, 2019, nine compression units were completed and deployed under this agreement. The remaining six units are expected to be completed and deployed in the fourth quarter of 2019.

On ~~October 21, 2019,~~April 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended ~~September 30, 2019~~March 31, 2020 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This quarterly distribution will be paid on ~~November 14, 2019~~May 15, 2020 to each of the holders of common units of record as of the close of business on ~~November~~May 1, ~~2019.~~2020.

Cash Flows

A summary of our sources (uses) of cash during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Nine Months Ended September 30,						Three Months Ended March 31,
	(In Thousands)						(In Thousands)
	2019			2018			2020			2019
Operating activities	$	67,786		$	6,516		$	13,357		$	31,632
Investing activities	(60,453		)	(78,165		)	(6,483		)	(23,152		)
Financing activities	(7,927		)	90,288			(1,863		)	(7,475		)

Operating Activities

Net cash provided by operating activities ~~increased~~decreased by ~~$61.3~~$18.3 million compared to the prior year period. Our cash provided from operating activities is primarily generated from the provision of compression and related services and the sale of new compressor packages. The ~~increase~~decrease in cash provided by operating activities was ~~due to increased cash earnings and~~primarily due to working capital ~~management,~~movements, particularly related to collections of accounts receivable, ~~management of inventory levels,~~ and timing of payments of accounts payable.

Cash provided from our foreign operations is subject to various uncertainties, including the volatility associated with interruptions caused by customer budgetary decisions, uncertainties regarding the renewal of our existing customer contracts and other changes in contract arrangements, the timing of collection of our receivables, and the repatriation of cash generated by our international operations.

Investing Activities

Capital expenditures during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, decreased by ~~$17.7~~$16.7 million compared to the same period in ~~2018~~2019 primarily due to the reduction in ~~total~~ capital ~~expenditure plans~~expenditures to grow ~~and maintain~~ the capacity of our compression fleet compared to the prior year. As a result of overall improving demand for compression services, beginning in late 2017 we began growth capital expenditure projects to increase certain horsepower categories of our compression fleet. Maintenance capital expenditures increased during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the prior year period. Total capital expenditures, net of disposals and proceeds, during the current year period of ~~$60.5~~$6.5 million include ~~$16.4~~$6.5 million of maintenance capital expenditures and are net of ~~$3.8~~$1.8 million of non-cash cost of fleet compression units ~~sold.~~ sold and proceeds of $0.2 million from the sale of property, plant and equipment.

The level of growth capital expenditures depends on forecasted demand for compression services. If the forecasted demand for compression services increases or decreases, the amount of planned expenditures on growth and expansion will be adjusted, subject to the availability of funds. We continue to review all capital expenditure plans carefully in an effort to conserve cash and fund our liquidity needs.

Financing Activities

Distributions

Beginning with the distribution to common unitholders during February 2019, we reduced our common unit distributions from $0.75 per unit per year (or $0.1875 per quarter) to $0.04 per unit per year (or $0.01 per quarter). We have used the cash savings from the reduced distribution to redeem the remaining Preferred Units for cash and avoid the further dilution to our common unitholders that would occur if the Preferred Units were converted into common units. Accordingly, duringDuring the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we distributed ~~$1.4~~$0.5 million of cash distributions to our common unitholders and General Partner.

Series A Convertible Preferred Units.

In January 2019 we began redeeming Preferred Units for cash, resulting in 2,660,569 Preferred Units being redeemed during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 for ~~$31.9~~$9.4 million, which includes approximately ~~$1.5~~$0.4 million of redemption premium that was paid. The last redemption of the remaining Preferred Units, along with a final cash payment made in lieu of paid in kind units occurred on August 8, ~~2019 for an aggregate cash payment of $5.0 million.~~2019.

Bank Credit Facilities. The Credit Agreement, as amended, includes a maximum credit commitment of $50.0 million available for loans, letters of credit (with a sublimit of $25.0 million) and swingline loans (with a sublimit of $5.0 million), subject to a borrowing base to be determined by reference to the value of the ~~Partnership’s and any other Borrowers’~~ accounts receivable and certain ~~inventory.~~inventory of the Partnership and certain subsidiaries (collectively, the “Borrowers”). Such maximum credit commitment may be increased by $25.0 million in accordance with the terms and conditions of the Credit Agreement. As of ~~September 30, 2019,~~March 31, 2020, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement, we had availability of ~~$7.8~~$20.4 million.

The Borrowers may borrow funds under the Credit Agreement to pay fees and expenses related to the Credit Agreement and for the Borrower's ongoing working capital needs and for general partnership purposes. The revolving loans under the Credit Agreement may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs. The maturity date of the Credit Agreement is June 29, 2023. As of ~~September 30, 2019,~~March 31, 2020, we had ~~$11.5~~a $3.0 million outstanding balance and had $3.0 million in letters of credit against our Credit Agreement. As of ~~November~~May 5, ~~2019,~~2020, we have ~~$5.5~~$6.7 million outstanding under our Credit Agreement and ~~$3.1~~$2.7 million in letters of credit, leaving availability under the CCLP Credit Agreement of ~~$14.4~~$16.1 million. The amounts the Partnership may borrow under the Credit Agreement are based on the amounts of CCLP’s accounts receivables and the value of certain inventory. Decreases in the amount of CCLP’s accounts receivable and the value of its inventory would result in reduced borrowing availability under the Credit Agreement. The Borrowers are in discussions with the lenders under the Credit Agreement regarding a potential amendment that would permit the Borrowers to incur second-priority liens on collateral pledged under our 7.50% Senior Secured Notes. This amendment will be entered into if the exchange offer discussed below is completed. We anticipate the terms of the amendment to the Credit Agreement may include, among other items, the inclusion of a $5.0 million reserve which would result in reduced borrowing availability. We can provide no assurance the amendment will be entered into or what its final terms might be.

7.50% Senior Secured Notes. As of ~~November~~May 5, ~~2019,~~2020, $350.0 million in aggregate principal amount of our 7.50% Senior Secured Notes are outstanding. The 7.50% Senior Secured Notes accrue interest at a rate of 7.50% per annum and are scheduled to mature on April 1, 2025.

7.25% Senior Notes. As of ~~November~~May 5, ~~2019,~~2020, $295.9 million in aggregate principal amount of our 7.25% Senior Notes are outstanding. The 7.25% Senior Notes accrue interest at a rate of 7.25% per annum and are scheduled to mature on August 15, 2022.

We may from time to time seek to retire or purchase certain amounts of our outstanding 7.25% Senior Notes and 7.50% Senior Secured Notes through cash purchases, in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

On April 17, 2020, we announced the commencement of an offer (the "Exchange Offer") to certain eligible noteholders ("Eligible Holders") to exchange any and all of their outstanding 7.25% Senior Notes due 2022 (the “Unsecured Notes”) for newly issued 7.50% Senior Secured First Lien Notes due 2025 and 7.25% Senior Secured Second Lien Notes due 2027. In conjunction with the offer, consents are being solicited from Eligible Holders to eliminate substantially all restrictive covenants and certain of the default provisions in the indenture governing the Unsecured Notes. On May 1, 2020, we extended the early tender time for the Exchange Offer from 5:00 p.m., New York City time, on April 30, 2020 to 11:59 p.m., New York City time, on May 14, 2020 (which is the expiration time of the Exchange Offer), unless extended or earlier terminated by us. Eligible Holders that validly tender and do not validly withdraw their Unsecured Notes in the Exchange Offer prior to the “Expiration Time”) will receive $700 in principal amount of new 7.50% Senior Secured First Lien Notes or, as applicable and subject to proration, $750 principal amount of 7.25% Senior Secured Second Lien Notes for each $1,000 principal amount of Unsecured Notes tendered. We can terminate, withdraw, amend or extend the Exchange Offer at any time, subject to applicable law. In connection with the Exchange Offer, we are negotiating an amendment to the Credit Agreement, which would permit us to incur certain liens required to complete the Exchange Offer. There can be no assurance that the Exchange Offer or amendment to the Credit Agreement will be completed.

Other Financing

In February 2019, we entered into an arrangement with TETRA under which a subsidiary of TETRA entered into an agreement with one of our subsidiaries for the purchase up to $15.0 million of compression services

equipment and to subsequently lease the equipment back to us in exchange for monthly rental fees. As of March 31, 2020, pursuant to this arrangement, $14.8 million has been funded by TETRA for the construction of new compressor services equipment and all compression units were completed and deployed under this agreement.

Off Balance Sheet Arrangements

As of ~~September 30, 2019,~~March 31, 2020, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

~~Recently Adopted Accounting Guidance~~

We adopted the new lease accounting standard on January 1, 2019. The new lease standard had a material impact to our consolidated financial statements, resulting from the inclusion of operating lease right-of-use assets and operating lease liabilities in our consolidated balance sheet. Refer to Part I, Item 1. Financial Statements- Note A - "Organization, Basis of Presentation and Significant Accounting Policies" and Note J - “Leases” for further discussion.

Commitments and Contingencies

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. While the outcome of these lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations, or cash flows.

Contractual Obligations

Our contractual obligations and commitments principally include obligations associated with our outstanding indebtedness and obligations under operating leases.

The table below summarizes our contractual cash obligations as of ~~September 30, 2019:~~March 31, 2020:

Payments Due
Total 2019 2020 2021 2022 2023 Thereafter
(In Thousands)
Long-term debt $ 657,430
$ —
$ —
$ —
$ 295,930
$ 11,500
$ 350,000
Interest on debt $ 209,158
$ 12,066
$ 48,264
$ 48,264
$ 41,156
$ 26,595
$ 32,813
Operating leases $ 11,622
1,312
4,874
2,824
925
297
1,390
Affiliate financing obligation $ 14,907
703
3,015
3,015
3,015
3,015
2,144
Total contractual cash obligations $ 893,117
$ 14,081
$ 56,153
$ 54,103
$ 341,026
$ 41,407
$ 386,347



	Payments Due
	Total		2020		2021		2022		2023		2024		Thereafter
	(In Thousands)
Long-term debt	$	649,430	$	—	$	—	$	295,930	$	3,500	$	—	$	350,000
Interest on debt	$	185,387	$	35,779	$	47,705	$	40,593	$	26,310	$	26,250	$	8,750
Operating leases	$	33,336	7,160		7,622		5,499		3,295		3,257		6,503
Affiliate financing obligation	$	13,618	2,261		3,015		3,015		3,015		2,312		—
Total contractual cash obligations	$	881,771	$	45,200	$	58,342	$	345,037	$	36,120	$	31,819	$	365,253

Cautionary Statement for Purposes of Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” and information based on our beliefs and those of our general partner. Forward-looking statements in this Quarterly Report are identifiable by the use of the following words, the negative of such words, and other similar words: “anticipates”, “assumes”, “believes”, “budgets”, “could”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “may”, “might”, “plans”, “predicts”, “projects”, “schedules”, “seeks”, “should, “targets”, “will” and “would”.

Such forward-looking statements reflect our current views with respect to future events and financial performance and are based on assumptions that we believe to be reasonable but such forward-looking statements

are subject to numerous risks, and uncertainties, including, but not limited to:

economic and operating conditions that are outside of our control, including the trading price of our common units;

the current significant surplus in the supply ~~demand, and prices~~ of oil and ~~natural gas;~~the ability of the OPEC + to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently, which is negatively impacting our business;

the availability of adequate sources of capital to us;

our existing debt levels and our flexibility to obtain additional financing;

our ability to continue to make cash distributions, or increase cash distributions from current levels, after the establishment of reserves, payment of debt service and other contractual obligations;

the restrictions on our business that are imposed under our long-term debt agreements;

our dependence upon a limited number of customers and the activity levels of our customers;

the levels of competition we encounter;

our ability to replace our contracts with customers, which are generally short-term contracts;

the availability of raw materials and labor at reasonable prices;

risks related to acquisitions and our growth strategy;

our operational performance;

risks related to our foreign operations;

the credit and risk profile of TETRA;

the ability of our general partner to retain key personnel;

information technology risks including the risk from cyberattack;

the severity and duration of the COVID-19 pandemic and related economic repercussions and the resulting negative impact on the demand for oil and gas;


•	operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts, and supply chain disruptions;

other global or national health concerns;

risks associated with a material weakness in our internal control over financial reporting and the consequences we may encounter if we are unable to remediate the material weakness in our internal control over financial reporting or if we identify other material weaknesses in the future;

the effect and results of litigation, regulatory matters, settlements, audits, assessments, and contingencies, and


•	other risks and uncertainties under “Item 1A. Risk Factors” in our ~~2018~~2019 Annual Report, and as included in our other filings with the U.S. Securities and Exchange Commission ("SEC"), which are available free of charge on the SEC website at www.sec.gov.

The risks and uncertainties referred to above are generally beyond our ability to control and we cannot predict all the risks and uncertainties that could cause our actual results to differ from those indicated by the forward-looking statements. If any of these risks or uncertainties materialize, or if any of the underlying assumptions prove incorrect, actual results may vary from those indicated by the forward-looking statements, and such variances may be material.

All subsequent written and oral forward-looking statements made by or attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any forward-looking statements we may make, except as may be required by law.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk~~

~~Market risk is the risk of loss arising from adverse changes in market rates and prices. We do not take title to any natural gas or oilin connection with our services and, accordingly, have no direct exposure to fluctuatingcommodityprices. Fora discussion of our indirect exposure to fluctuatingcommodityprices, please read “Risk Factors —CertainBusinessRisks” in our~~ ~~2018 Annual Report. We depend on domestic and international demand for and production ofnatural gas and oil and a reduction in this demand or production could adversely affect the demand or the prices we charge for our services, which could impact our revenuesand cash available for distribution to our common unitholdersin thefuture.We do notcurrently hedge, and do notintend to hedge,our indirect exposure to fluctuating commodity prices.~~Risk.

~~Interest Rate Risk~~

~~As of September 30, 2019, we had a balance outstanding under the Credit Agreement that bears interest at a variable rate.~~

Expected Maturity Date Fair Market
Value
($ amounts in thousands) 2019 2020 2021 2022 2023 Thereafter Total
September 30, 2019
U.S. dollar variable rate - CCLP $ —
$ —
$ —
$ —
$ 11,500
$ —
$ 11,500
$ 11,500
Weighted average interest rate (variable) — % — % — % — % 6.00 % — %
U.S. dollar fixed rate - CCLP $ —
$ —
$ —
$ 295,930
$— $ 350,000
$ 645,930
$ 614,000
Weighted average interest rate (fixed) — % — % — % 7.25 % — % 7.50 %

~~Exchange Rate Risk~~

~~As of September 30, 2019, there have been no material changes pertaining to our exchange rate exposures as disclosed in our~~ ~~2018 Annual Report~~.Not Applicable.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer of our general partner, to allow timely decisions regarding such required disclosure. In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. It is necessary for management to use judgment in evaluating controls and procedures.

Under the supervision and with the participationof our management, including thePrincipal Executive Officer and PrincipalFinancial Officerof our~~GeneralPartner,~~ general partner, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under ~~Rule~~Rules 13a-15(e) and 15d-15(e) promulgated under the ~~Securities~~ Exchange Act, as of ~~1934, as amended.~~the quarter ended March 31, 2020. Based on this evaluation, thePrincipalExecutive Officer andPrincipalFinancial Officerof our~~GeneralPartner~~ general partner concluded that our disclosure controls and procedures were ~~effective~~ineffective as of ~~September 30, 2019,~~March 31, 2020, the end of the period covered by this ~~quarterly report.~~Quarterly Report, due to a material weakness in our internal

control over financial reporting related to the revenue recognition for certain new unit sales where revenue recognition criteria had not been met.

~~There~~We determined that the material weakness was the result of operating deficiencies and not the design of the controls supporting revenue recognition. In response to the material weakness, we are developing a remediation plan that will include more supervision and review of the performance of bill-and-hold controls to ensure adequate documentation is obtained and conclusions are reached prior to recognition of these revenues. We expect that the remediation of this material weakness will be completed during the second quarter of 2020; however, we will not be able to confirm the effectiveness of our enhanced internal controls until we have conducted sufficient testing. Accordingly, we will continue to monitor vigorously the effectiveness of these processes, procedures, and controls, and will make any further changes management determines appropriate. After identifying the material weakness, we examined all transactions potentially impacted, and adjusted the consolidated financial statements and disclosures accordingly. The impact to the financial results for the quarter ended March 31, 2020, was a reduction to new unit sales revenues of approximately $6.0 million and a reduction to gross profit of approximately $0.5 million.

Additional review, evaluation, and oversight has been undertaken to ensure our consolidated financial statements and disclosures included in this Quarterly Report were prepared in accordance with generally accepted accounting principles and as a result, our management, including the Principal Executive Officer and Principal Financial Officer of our general partner, have concluded that the consolidated financial statements and disclosures in this Quarterly Report on Form 10-Q fairly present in all material respects our financial position, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Except as noted above, there has been no ~~changes~~change in ~~our~~the internal control over financial reporting as of March 31, 2020, that ~~occurred during the fiscal quarter ended September 30, 2019 that have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

~~There~~ The statements in this section describe the known material risks to our business and should be considered carefully. We have ~~been no material changes~~described in the ~~information pertaining~~2019 Annual Report significant risk factors and periodically update those risks for material developments. The risk factor below updates our risk factors previously discussed in our 2019 Annual Report.

The COVID-19 pandemic and oversupply of oil from OPEC+ materially reduced demand for our products and services, and has had, and may continue to have, a significant adverse impact on our financial condition and results of operations.

The COVID-19 pandemic, subsequent mitigation efforts, and disagreements between OPEC+ regarding limits on production of oil have added significant volatility and uncertainty in the oil and gas industry. At the outset of the pandemic, OPEC and the other oil producing nations were unable to reach an agreement on production levels for crude oil, which led both Russia and Saudi Arabia to substantially increase production. This, combined with an unprecedently decline in oil demand due to the COVID-19 pandemic, resulted in global oil markets being oversupplied. On April 12^th, OPEC and the other oil producing nations reached an agreement to limit production through the end of June, although there still appears to be a large demand / supply imbalance. Despite the agreement to cut production, downward pressure on oil and natural gas prices have remained and could continue

for the foreseeable future. The collapse in the demand for oil caused by this unprecedented global health and economic crisis has had, and is reasonably likely to continue to have, a negative impact on the demand for our products and services. The decline in our customers’ demand for our products and services has had, and is likely to continue to have, a negative impact on our financial condition and results of operations.

While the full impact of the COVID-19 pandemic is not yet known, we are closely monitoring the effects of the pandemic on our customers, on our suppliers, on our operations, and on our employees. These effects have included, and may continue to include, declining revenue; disruptions to our ~~Risk Factors~~operations, including customers canceling orders and returning our equipment early; customer shutdowns of oil and gas production activities; employee impacts from illness, school closures and other community response measures; and temporary closures of our facilities or the facilities of our customers and suppliers.

The extent to which our financial and operating results are negatively impacted by the COVID-19 pandemic and oversupplied oil markets will depend on various factors beyond our control, such as the duration and severity of the pandemic; additional measures taken by governments and our customers and suppliers in response to the pandemic; and the speed and effectiveness of mitigation efforts taken to combat the virus. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

If we cannot meet the Nasdaq’s continued listing requirements, the Nasdaq may delist our common units.

On April 24, 2020, the Partnership was notified by the Nasdaq that the closing price of the CCLP’s common units (the “Common Units”), over the prior 30 consecutive trading day period was below $1.00 per unit, which is the minimum closing price per unit required to maintain listing on the Nasdaq under Rule 5450 (“Rule 5450”).

On April 16, 2020, the Nasdaq announced a rule change providing relief to listed companies that, due to market conditions resulting from the impact of COVID-19, have fallen out of compliance with certain of the Nasdaq’s continued listing standards. As a result of the relief announced by Nasdaq, the compliance period has been tolled with the effect that the days between April 17, 2020 and June 30, 2020 will not be counted toward the normal six-month compliance period. Starting on July 1, 2020, the Partnership will have a period of six months to regain compliance with Rule 5450, during which time our common units continue to be listed and traded on the Nasdaq, subject to our compliance with other continued listing standards. If we fail to regain compliance with Rule 5450 by the end of the cure period, the common units will be subject to the Nasdaq’s suspension and delisting procedures. If necessary, to regain compliance with Nasdaq listing standards, we may, subject to approval of the board of directors of our general partner, implement a reverse split of our common units. A delisting of our common units from the Nasdaq could negatively impact us by, among other things, reducing the liquidity and market price of our common units, reducing the number of investors willing to hold or acquire our common units, limiting our ability to issue securities or obtain financing in the future, and limiting our ability to use a registration statement to offer and sell freely tradable securities, thereby restricting our ability to access the public capital markets.

On April 21, 2020, the Nasdaq adopted a new rule the Partnership is at risk of violating. If the closing price for the Partnership’s common units is at or below $0.10 per unit for ten consecutive trading days, the Partnership will receive a delisting determination from the Nasdaq, which would terminate the opportunity to cure under Rule 5450. The Partnership could, however, request review of that determination by the Nasdaq hearings panel, which could grant the Partnership additional time to complete a reverse split of our common units or otherwise regain compliance. However, there is no assurance such relief would be granted. On May 5, 2020, the trading price of our common units closed at $0.45 per unit.

We disclosed a material weakness in our internal control over financial reporting as of March 31, 2020 and if we have other material weaknesses or significant deficiencies in our internal control over financial reporting our business may be adversely affected.

As disclosed in Item 4 of this Quarterly Report, as of March 31, 2020, management identified certain deficiencies in our ~~2018 Annual Report~~.internal control over financial reporting relating to accounting for the recognition of equipment sales revenues which were determined to constitute a material weakness. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. As a result of this material weakness, our management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of March 31, 2020. A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and

accurate information. Our general partner's management is undertaking steps to fully evaluate and remediate the material weakness and to enhance our internal control over financial reporting. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting occur in the future, we may not be able to timely or accurately report our results of operations or maintain effective disclosure controls and procedures. If we are unable to report financial information timely or accurately, or to maintain effective disclosure controls and procedures, we could be required to restate our financial statements and be subject to, among other things, regulatory or enforcement actions, securities litigation, limitations on our ability to access capital markets, debt rating agency downgrades or rating withdrawals, or loss in confidence of our investors, any one of which could adversely affect the valuation of our common units and our business prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) None.



Period	Total Number of Units Purchased	Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Publicly Announced Plans or Programs
~~July~~January 1 – ~~July~~January 31, ~~2019~~2020	—	$	—	N/A	N/A
~~August~~February 1 – ~~August 31, 2019~~February 29, 2020	—	—		N/A	N/A
~~September~~March 1 – ~~September 30, 2019~~March 31, 2020	—	—		N/A	N/A
Total	—			N/A	N/A

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits:



10.1*	Separation and Release Agreement, dated January 10, 2020 between CSI Compressco GP Inc. and Levent Caglar.
10.2*	Form of Performance Phantom Unit Agreement under the CSI Compressco LP Second Amended and Restated 2011 Long Term Incentive Plan.
31.1*	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed with this report.


**	Furnished with this report.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three ~~and nine~~ month periods ended ~~September 30, 2019~~March 31, 2020 and ~~2018;~~2019; (ii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ month periods ended ~~September 30, 2019~~March 31, 2020 and ~~2018;~~2019; (iii) Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018;~~2019; (iv) Consolidated Statement of Partners’ Capital for the ~~nine~~three month period ended ~~September 30, 2019;~~March 31, 2020; (v) Consolidated Statements of Cash Flows for the ~~nine~~three month periods ended ~~September 30, 2019~~March 31, 2020 and ~~2018;~~2019; and (iv) Notes to Consolidated Financial Statements for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		CSI COMPRESSCO LP
		By:	CSI Compressco GP Inc.,
			its General Partner

Date:	~~November 6, 2019~~May 7, 2020	By:	/s/Brady M. Murphy
			Brady M. Murphy
			President
			Principal Executive Officer

Date:	~~November 6, 2019~~May 7, 2020	By:	/s/Elijio V. Serrano
			Elijio V. Serrano
			Chief Financial Officer
			Principal Financial Officer

Date:	~~November 6, 2019~~May 7, 2020	By:	/s/Michael E. Moscoso
			Michael E. Moscoso
			Vice President - Finance
			Principal Accounting Officer

3832



Derivative Contracts	US Dollar Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward sale Mexican peso	$	8,844	19.56	10/18/2019



			Fair Value Measurements Using
Description	Total as of September 30, 2019		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Asset for foreign currency derivative contracts	$	101	$	—	$	101	$	—
	$	101



Year	As of September 30, 2019
	(In Thousands)
Remainder of 2019	$	703
2020	3,015
2021	3,015
2022	3,015
2023	3,015
After 2023	2,144
Total financing obligation payments	$	14,907



	Nine Months Ended September 30, 2019
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	3,645

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	3,035



	Issuers		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets	$	—	$	122,255	$	30,445	$	—		$	152,700
Property, plant, and equipment, net	—		626,717		28,075		—			654,792
Investments in subsidiaries	169,754		25,684		—		(195,438		)	—
Operating lease right-of-use assets	—		9,753		456		—			10,209
Intangible and other assets, net	—		29,175		3,053		—			32,228
Intercompany receivables	533,851		—		—		(533,851		)	—
Total non-current assets	703,605		691,329		31,584		(729,289		)	697,229
Total assets	$	703,605	$	813,584	$	62,029	$	(729,289	)	$	849,929

LIABILITIES AND PARTNERS' CAPITAL
Amounts payable to affiliates	$	—	$	8,152	$	3,507	$	—		$	11,659
Other current liabilities	17,565		99,917		3,870		—			121,352
Long-term debt, net	635,016		10,559		—		—			645,575
Operating lease liabilities	—		5,101		341		—			5,442
Intercompany payables	—		506,218		27,633		(533,851		)	—
Long-term affiliate payable and other liabilities	—		13,883		994		—			14,877
Total liabilities	652,581		643,830		36,345		(533,851		)	798,905
Total partners' capital	51,024		169,754		25,684		(195,438		)	51,024
Total liabilities and partners' capital	$	703,605	$	813,584	$	62,029	$	(729,289	)	$	849,929



	Expected Maturity Date																				Fair Market Value
($ amounts in thousands)	2019			2020			2021			2022			2023			Thereafter			Total		Fair Market Value
September 30, 2019
U.S. dollar variable rate - CCLP	$	—		$	—		$	—		$	—		$	11,500		$	—		$	11,500	$	11,500
Weighted average interest rate (variable)	—		%	—		%	—		%	—		%	6.00		%	—		%
U.S. dollar fixed rate - CCLP	$	—		$	—		$	—		$	295,930		$—			$	350,000		$	645,930	$	614,000
Weighted average interest rate (fixed)	—		%	—		%	—		%	7.25		%	—		%	7.50		%