SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

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

For the quarterly period ended~~September~~June 30, ~~2020~~2021

☐ 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

(Registrant’s Telephone Number, Including Area Code)

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, a 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.

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 ~~October 30, 2020,~~July 28, 2021, there were ~~47,352,291~~47,971,240 Common Units outstanding.

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.~~LLC. References to “Spartan” refer to Spartan Energy Partners LP and its controlled subsidiaries. References to “TETRA” refer to TETRA Technologies, Inc. and TETRA’s controlled subsidiaries, other than us.

FINANCIAL INFORMATION

Consolidated Statements of Operations

(In Thousands, Except Unit and Per Unit Amounts)

See Notes to Consolidated Financial Statements

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Balance Sheets

(In Thousands, Except Unit Amounts)

Trade accounts receivable, net of allowances for doubtful accounts of $1,040

as of June 30, 2021 and $1,333 as of December 31, 2020

Trade accounts receivable, net of allowances for doubtful accounts of $1,040

as of June 30, 2021 and $1,333 as of December 31, 2020

Intangible assets, net of accumulated amortization of $32,192 as of

June 30, 2021 and $30,711 as of December 31, 2020

Intangible assets, net of accumulated amortization of $32,192 as of

June 30, 2021 and $30,711 as of December 31, 2020

LIABILITIES AND PARTNERS’ CAPITAL

Consolidated Statements of Partners’ Capital


	Partners’ Capital					Accumulated Other Comprehensive Income (Loss)		Total Partners’ Capital

			Limited Partners
	General Partner		Common Unitholders
	Amount		Units	Amount

Balance at December 31, 2019	$	180	47,079	$	63,384	$	(14,573)	$	48,991
Net loss	(192)		—	(13,438)		—		(13,630)
Distributions ($0.01 per unit)	(7)		—	(471)		—		(478)
Equity compensation, net	—		—	229		—		229
Vesting of Phantom Units	—		213	—		—		—
Translation adjustment, net of taxes of $0	—		—	—		(353)		(353)

Balance at March 31, 2020	$	(19)	47,292	$	49,704	$	(14,926)	$	34,759
Net loss	(345)		—	(24,233)		—		(24,578)
Distributions ($0.01 per unit)	(7)		—	(473)		—		(480)
Equity compensation, net	—		—	452		—		452
Vesting of Phantom Units	—		52	—		—		—
Translation adjustment, net of taxes of $0	—		—	—		177		177

Balance at June 30, 2020	$	(371)	47,344	$	25,450	$	(14,749)	$	10,330

Consolidated Statements of ~~Partners’ Capital~~Cash Flows

Gain on sale of property, plant, and equipment

Effect of exchange rate changes on cash

~~CSI Compressco LP~~

~~Consolidated Statements of Cash Flows~~

Gain on sale of property, plant, and equipment

Net cash provided by (used in) investing activities

Effect of exchange rate changes on cash

Notes to Consolidated Financial Statements

NOTE 1 –— ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

CSI Compressco LP, a Delaware limited partnership, is a provider of compression services and equipment for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage. We ~~sell standard and custom-designed, engineered compressor packages and~~also 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~~international locations, including the countries of Mexico, Canada, and Argentina. ~~We design and fabricate a majority~~Previously, our equipment sales business included our new unit sales business that consisted of the fabrication and sale of new standard and custom-designed, engineered compressor packages fabricated primarily at our facility in Midland, Texas that ~~we use~~were used to provide compression services or sold to our customers. In the fourth quarter of 2020, we fully exited the new unit sales business and ~~sell~~we have reflected these operations as discontinued operations for all periods presented. See Note 2 – “Discontinued Operations.” Used equipment sales revenue continues to ~~customers. Going forward,~~be included in equipment sales revenue. Unless the context requires otherwise, when we ~~plan~~refer to ~~have such compressor packages fabricated through one or more third party packagers.~~“the Partnership,” “we,” “us,” and “our,” we are describing CSI Compressco LP and its wholly owned subsidiaries.

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~~June 30, ~~2020,~~2021, and for the three and ~~nine month~~six-month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, 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~~six-month period ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of results that may be expected for the twelve months ended December 31, ~~2020.~~2021.

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, ~~2019~~2020 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March ~~16, 2020.~~4, 2021.

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

Significant Accounting Policies

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, ~~2019~~2020 included in our Annual Report on Form 10-K. There have been no significant changes in our accounting policies or the application thereof during the ~~nine~~three months ended ~~September~~June 30, ~~2020.~~2021.

The preparation of financial statements in conformity with U.S. ~~GAAP~~generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Certain previously reported financial information has been reclassified to present our new unit sales business as discontinued operations. See Note 2 – “Discontinued Operations” for further information. In addition, certain previously reported financial information has been reclassified to conform to the current year’s presentation. ~~The~~Other than the discontinued operations presentation, the impact of ~~such~~ reclassifications was not significant to the prior year's overall presentation. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations.

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 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.

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. Our risk management activities include the use of foreign currency forward purchase and sale derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected international operations.

~~We have 0 outstanding balance under our variable rate revolving credit facility as of September 30, 2020 and face market risk exposure related to changes in applicable interest rates.~~

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 ~~$(0.4) million and $1.0 millionduring the three and ninemonth periods endedSeptember 30, 2020~~, ~~respectively, and~~ $(0.5) million and ~~$(1.5)~~$(0.1) million during the three and ~~nine~~six-month periods ended June 30, 2021, respectively, and $(0.3) million and $1.4 million during the three and six- month periods ended ~~September~~June 30, ~~2019~~2020, respectively.

Inventories consist primarily of compressor package parts and supplies and work in ~~progress~~process and are stated at the lower of cost or net realizable value. For parts and supplies, cost is determined using the weighted average cost method. The cost of work in progress is determined using the specific identification method.

Impairments and Other Charges

Impairments of long-lived assets, including identified intangible assets, are determined periodically, when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our ~~judgment~~judgments as to the future undiscounted operating cash flows to be generated from the relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related ~~assets,~~asset, an impairment is recognized for the excess of the carrying value over its fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. There were no impairments attributed to continuing operations recorded during the three and six-month periods ended June 30, 2021 . See Note 34 - ~~“Impairments~~"Impairments and Other ~~Charges”~~Charges" for additional discussion of recorded ~~impairments.~~impairments during the three and six-month periods ended June 30, 2020.

Our operations are not subject to U.S. federal income tax other than the operations that are conducted through taxable subsidiaries. We incur state and local income taxes in certain areas of the U.S. in which we conduct business. We incur income taxes and are subject to withholding requirements related to certain of our operations in Latin America, Canada, and other foreign countries in which we operate. Furthermore, we also incur Texas Margin Tax, which, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, is classified as an income tax for reporting purposes. A portion of the carrying value of certain deferred tax assets is subject to a valuation allowance.

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~~six-month periods ended ~~September~~June 30, ~~2020~~2021 and ~~September~~June 30, ~~2019,~~2020, 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, 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 period ended September 30, 2019 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~~0Fair 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). ~~See~~Refer to Note ~~9 -~~8 –

“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).

On January ~~20, 2020,~~19, 2021, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended December 31, 2019 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 was paid on February 14, 2020, to each of the holders of common units of record as of the close of business on February 1, 2020.

~~On April 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended 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 was paid on ~~May 15, 2020,~~February 12, 2021, to each of the holders of common units of record as of the close of business on ~~May 1, 2020.~~January 29, 2021.

On ~~July 20, 2020,~~April 19, 2021, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended ~~June 30, 2020~~March 31, 2021 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 was paid on ~~August~~May 14, ~~2020,~~2021 to each of the holders of common units of record as of the close of business on ~~August 1, 2020.~~April 30, 2021.

New Accounting Pronouncements

Standards adopted in ~~2020~~2021

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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.” ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for us the first quarter of fiscal 2020. The adoption of this standard did not have a material impact on 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 impairments will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 is effective for us the first quarter of fiscal 2023. We continue to assess the potential effects of these changes to our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 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 transactions that results in a step-up in the tax basis of goodwill. On January 1, 2021, we adopted ASU ~~2019-12 is~~2019-12. The adoption of this standard did not have a material impact on our consolidated financial statements.

Standards not yet adopted

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 impairments will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 will be effective for us in the first quarter of ~~fiscal 2021.~~2023. We 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 USU.S. 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~~were effective for all entities as of March 12, 2020 through December 31, 2022. Entities may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. As of June 30, 2021, we have not modified our credit agreements to remove references to LIBOR. We are currently evaluating the impact of the provisions of ASU 2020-04 on our consolidated financial statements.

NOTE 2— DISCONTINUED OPERATIONS

On July 2, 2020, we completed the sale of our Midland manufacturing facility. The Midland facility was used to design, fabricate and assemble new standard and customized compressor packages for our new unit sales business. In connection with the Midland manufacturing facility sale, we entered into an agreement with the buyer to continue to operate a portion of the facility, which allowed us to close out the remaining backlog for the new unit sales business and to continue to operate our aftermarket services business at that location for an interim period. Following completion of the last unit in October 2020, we ceased fabricating new compressor packages for sales to third parties or for our own service fleet. The operations associated with the new unit sales business were previously reported in equipment sales revenues and are now reflected as discontinued operations in our financial statements for all periods presented. Used equipment sales revenue continues to be included in equipment sales revenue. A summary of financial information related to our discontinued operations for the new unit sales business is as follows:

Reconciliation of the Line Items Constituting Pretax Loss from Discontinued Operations to the After-Tax Income (Loss) from Discontinued Operations


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue	$	0	$	23,643	$	0	$	28,487
Cost of revenues	(13)		23,711		9		28,528
Depreciation, amortization, and accretion	0		237		0		475
Impairments of long-lived assets	0		103		0		5,474
General and administrative expense	304		931		344		2,097

Total pretax loss from discontinued operations	(291)		(1,339)		(353)		(8,087)
Income tax provision	0		55		0		71
Total loss from discontinued operations	$	(291)	$	(1,394)	$	(353)	$	(8,158)

Reconciliation of Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Statement of Financial Position


	June 30, 2021		December 31, 2020
Carrying amounts of major classes of assets included as part of discontinued operations
Inventories	$	1	$	32
Other Current Assets	0		7
Current assets of discontinued operations	$	1	$	39

Carrying amounts of major classes of liabilities included as part of discontinued operations
Accrued liabilities	$	164	$	345
Current liabilities of discontinued operations	$	164	$	345

NOTE ~~2 –~~3 — REVENUE FROM CONTRACTS WITH CUSTOMERS

As of ~~September~~June 30, ~~2020~~2021, we had ~~$47.1~~$43.7 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 ~~September~~June 30, ~~2020~~2021 for completion of performance obligations of compression service contracts are as follows:

2020 2021 2022 2023 Thereafter Total
(In Thousands)
Compression service contracts remaining performance obligations $ 13,939 $ 26,608 $ 5,785 $ 703 $ 56 $ 47,091


	2021		2022		2023		2024		Thereafter		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	20,926	$	18,012	$	4,571	$	130	$	14	$	43,653

Our contract asset balances included in trade accounts receivable in our consolidated balance sheets, primarily associated with ~~customer documentation requirements~~revenue accruals prior to invoicing, were ~~$8.8~~$11.0 million and ~~$9.6~~$6.8 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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:

Nine Months Ended
September 30,
2020 2019
(In Thousands)
Unearned income, beginning of period $ 9,505 $ 24,898
Additional unearned income 38,581 105,104
Revenue recognized (41,623) (104,871)
Unearned income, end of period $ 6,463 $ 25,131

During the nine months ended September 30, 2020, we recognized in equipment sales revenue $9.2 million from unearned income that was deferred as of December 31, 2019. During the nine months ended September 30, 2019, we recognized in equipment sales revenue of $21.8 million from unearned income that was deferred as of December 31, 2018.


	Six Months Ended June 30,
	2021		2020
	(In Thousands)
Unearned income, beginning of period	$	269	$	283
Additional unearned income	398		4,345
Revenue recognized	(248)		(1,472)
Unearned income, end of period	$	419	$	3,156

Unearned income is included in accrued liabilities and other on the consolidated balance sheets. As of ~~September~~June 30, ~~2020~~2021 and ~~September 30, 2019,~~December 31, 2020, contract costs were immaterial.

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

NOTE ~~3 –~~4 — IMPAIRMENTS AND OTHER CHARGES

~~Impairments of Long-Lived Assets~~

During the first nine months of 2020, the COVID-19 pandemic and decline in oil and gas prices had a significant impact on our customers and industry, resulting in a decrease in demand in certain of our service lines.

During the first quarter of 2020, 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. 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 related to these assets. Fair value was estimated based on a market approach.

During the second quarter of 2020, primarily as a result of continued negative impacts on our compression fleet associated with the COVID-19 pandemic and declines in oil and gas prices, we recorded impairments and other charges of approximately $9.0 million associated with non-core used compressor equipment that we ~~have~~

had held for sale, the ~~low-horsepower~~low horsepower class of our compression fleet, and field inventory for compression and related services. Fair value used to determine impairments was estimated based on a market approach. Given the dynamic nature of the events, we are not able to reasonably estimate how long our operations will be impacted and the full impact these events will have on our operations. As a result, we could have indicators of impairment againThere were no such impairments in ~~future periods resulting in additional asset impairments. During the third quarter of 2020, no further impairments were recorded.~~2021.

NOTE 45 –— INVENTORIES

Components of inventories as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, are as follows:

Inventories consist primarily of compressor package parts and supplies. Work in progress inventories consist of ~~new compressor packages located at our manufacturing facility in Midland, Texas as well as~~ work in progress ~~on certain compression services jobs.~~for our aftermarket business that has not been invoiced.

~~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 commenced upon the completion of the fabrication of the compressor packages. During the first quarter, we took delivery of eight compressor packages. During the second quarter, we took delivery of the remaining six compressor packages. 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 $3.5 million and~~$10.2 million for the three and nine month period ended September 30, 2020, respectively, of which, $0.8 millionand $2.4 million respectively, related to short-term leases. Variable rent expense was not material.~~

~~Operating lease supplemental cash flow information:~~

Nine Months Ended September 30,
2020 2019
(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases $ 7,437 $ 3,645
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 19,127 $ 3,035

~~Supplemental balance sheet information:~~

September 30, 2020 December 31, 2019
(In Thousands)
Operating leases:
     Operating right-of-use asset $ 34,680 $ 21,006
     Accrued liabilities and other $ 8,186 $ 6,706
     Operating lease liabilities 25,896 13,822
     Total operating lease liabilities $ 34,082 $ 20,528

~~Additional operating lease information:~~

September 30, 2020 December 31, 2019
Weighted average remaining lease term:
Operating leases 4.89 years 4.51 years
Weighted average discount rate:
Operating leases 8.89 % 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 September 30, 2020:~~

Operating Leases
(In Thousands)
Remainder of 2020 $ 2,663
2021 10,450
2022 8,676
2023 7,062
2024 4,812
Thereafter 8,819
Total lease payments 42,482
Less imputed interest (8,400)
Total lease liabilities $ 34,082

NOTE 6 –— LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:

September 30, 2020 December 31, 2019
Scheduled Maturity (In Thousands)
Credit Agreement (presented net of the unamortized deferred financing costs of $0 million as of September 30, 2020 and $0.9 million as of December 31, 2019) June 29, 2023 $ 0 $ 2,622
7.25% Senior Notes (presented net of the unamortized discount of $0.3 million as of September 30, 2020 and $1.7 million as of December 31, 2019 and unamortized deferred financing costs of $0.5 million as of September 30, 2020 and $2.8 million as of December 31, 2019) August 15, 2022 79,893 291,444
7.50% First Lien Notes (presented net of the unamortized deferred financing costs of $5.4 million as of September 30, 2020 and $5.8 million as of December 31, 2019, net of the unamortized discount of $0.2 million as of September 30, 2020, and net of deferred restructuring gain of $5.3 million as of September 30, 2020) April 1, 2025 399,640 344,172
10.00%/10.75% Second Lien Notes (presented net of the unamortized discount of $0.8 million as of September 30, 2020, and net of unamortized deferred financing costs of $1.2 million as of September 30, 2020, and net of deferred restructuring gain of $3.9 million as of September 30, 2020) April 1, 2026 157,410 0
Total long-term debt $ 636,943 $ 638,238


	Scheduled Maturity	June 30, 2021		December 31, 2020
		(In Thousands)
Credit Agreement (1)	June 29, 2023	$	0	$	0
7.25% Senior Notes (2)	August 15, 2022	80,220		80,001
7.50% First Lien Notes (3)	April 2025	399,658		399,655
10.00%/10.75% Second Lien Notes (4)	April 2026	161,593		158,975
Total long-term debt		$	641,471	$	638,631

(1)~~$2.5 million in letters of creditissued under the Credit Agreement.~~ Because there was no outstanding balance on the ~~CCLP~~ Credit Agreement, associated deferred financing costs of ~~$0.7~~$0.5 million as of June 30, 2021 and $0.6 million as of December 31, 2020 were classified as other long-term assets on the accompanying consolidated balance sheet. As

(2) Net of ~~September~~the unamortized discount of $0.2 million as of June 30, 2021 and $0.3 million as of December 31, 2020 and ~~subject to compliance with the covenants, borrowing base,~~unamortized deferred financing costs of $0.3 million as of June 30, 2021 and ~~other provisions~~$0.4 million as of December 31, 2020.

(3) Net of the ~~agreements that may limit borrowings under~~unamortized deferred financing costs of $4.6 million as of June 30, 2021 and $5.2 million as of December 31, 2020, net of the unamortized discount of $0.2 million as of June 30, 2021 and $0.2 million as of December 31, 2020, and net of deferred restructuring gain of $4.5 million as of June 30, 2021 and $5.0 million as of December 31, 2020.

(4) Net of the unamortized discount of $0.7 million as of June 30, 2021 and $0.7 million as of December 31, 2020, and net of unamortized deferred financing costs of $1.1 million as of June 30, 2021 and $1.2 million as of December 31, 2020, and net of deferred restructuring gain of $3.4 million as of June 30, 2021 and $3.7 million as of December 31, 2020.

Our Credit Agreement ~~we had availability of $14.5 million.~~

~~Our credit~~ and ~~senior note~~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~~June 30, ~~2020.~~2021.

See Note 7 -– “Related Party Transactions,” for a discussion of our amounts payable to affiliates and long-term affiliate payable to ~~TETRA.~~Spartan Energy Partners LP (“Spartan”).

~~Second Amendment to~~ Credit Agreement

On In June ~~11,~~ 2020, ~~CSI Compressco, LP and CSI Compressco Sub Inc (the “Borrowers”) entered into~~ the~~Second Amendment to Loan and Security Agreement (the “Amendment”) amending~~ Partnership amended the Loan and Security Agreement dated June 29, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) ~~with Bank~~. The Credit Agreement provides for maximum revolving credit commitments of ~~America, N.A.,~~$35.0 million and includes a $5.0 million reserve, which results in ~~its capacity as administrative agent, issuing bank and swing line issuer (“Administrative Agent”), and~~reduced borrowing availability. The Credit Agreement includes a $25.0 million sublimit for letters of credit. Additionally, on January 29, 2021, the ~~other lenders and loan parties party thereto. The Amendment provided for changes and modifications to~~Partnership further amended the Credit Agreement ~~which include, among other things, changes~~ to ~~certain terms~~temporarily increase the size of the reserve to $10.0 million and also required that Spartan backstop all of the Partnership’s outstanding letters of credit. These temporary restrictions expired on April 30, 2021. On April 30, 2021, the required reserve on our Credit Agreement ~~as follows: (i) resizing~~was reduced to $5.0 million and Spartan’s backstop for the Partnership’s outstanding letters of ~~the maximum credit commitment~~credits was released. As of June 30, 2021, we had 0 balance outstanding under the Credit Agreement ~~from $50,000,000~~and $2.1 million of letters of credit against our Credit Agreement. Subject to ~~$35,000,000; (ii)~~compliance with the ~~inclusion~~covenants, borrowing base, and other provisions of ~~a $5,000,000 reserve with respect to~~ the ~~Borrowing Base (as defined in~~agreements that may limit borrowings under the Credit ~~Agreement) thereunder, which would result in reduced borrowing availability; (iii)~~Agreement, we had availability of $17.1 million as of June 30, 2021.

Borrowings under the ~~removal of the financial covenant compliance test with respect~~credit facility are subject to ~~the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement); (iv) an increase in~~ the applicable margin related to ~~(x)~~(i) LIBOR Rate Loans (as defined in the Credit Agreement) ~~to a range~~ between 3.00% and 3.50% and ~~(y)~~(ii) Base Rate Loans (as defined in the Credit Agreement) ~~to a range~~ between 2.00% and 2.50%~~, in each case, which shall be determined according to average daily excess availability under the Credit Agreement; and (v) an~~

~~increase in the rate used to calculate the~~. The commitment fee in respect of the unutilized commitments under the Credit Agreement tois 0.50%. In connection to this amendment, $0.2 million of financing costs were incurred, and deferred against the carrying value of the amount outstanding, if any. Additionally, $0.2 million of financing fees were charged to other (income) expense, net during the nine month period ended September 30, 2020.

~~First Supplemental Indenture for the Old~~ Notes

OnWe may from time to time seek to retire or purchase certain amounts of our outstanding senior 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.

7.25% Senior Notes due 2022

As of June ~~11, 2020, CSI Compressco, LP and CSI Compressco Finance Inc. (the “Issuers”) announced that they had accepted for exchange $215,208,000, or approximately 72.7%, of their outstanding~~30, 2021, our 7.25% Senior Notes due 2022 (the ~~“Old~~“Senior Notes”) had $80.2 million outstanding net of unamortized discounts and unamortized deferred financing costs. Interest on these notes is payable on February 15 and August 15 of each year. The Senior Notes are unsecured obligations, and are guaranteed on an unsecured basis by the Partnership’s subsidiaries that ~~were validly tendered (and not validly withdrawn)~~guarantee the Credit Agreement.

Our Senior Notes are jointly and severally, and fully and unconditionally, guaranteed by ~~11:59 p.m., New York City time, on June 10, 2020, for (i) $50,000,000~~each of the ~~Issuers’ 7.50%~~Partnership’s domestic restricted subsidiaries (other than CSI Compressco Finance Inc. “Finance Corp”) that guarantee the Partnership’s other indebtedness (collectively, the "Guarantor Subsidiaries”). The Senior ~~Secured~~Notes indenture includes customary provisions for the release of the guarantees by the Guarantor Subsidiaries upon the occurrence of certain allowed events including the release of a guarantor under our revolving credit facility.

7.50% First Lien Notes due 2025 ~~(the “7.50%~~

As of June 30, 2021, our First Lien ~~Notes”)~~Notes had $399.7 million outstanding net of unamortized discounts, unamortized deferred financing costs and ~~(ii) $155,529,000 aggregate principal amount~~deferred restructuring gains. Interest on these notes is payable on April 1 and October 1 of ~~new 10.00%~~each year. The First Lien Notes are secured by a first-priority security interest in substantially all of the Partnership’s and its subsidiaries assets, subject to certain permitted encumbrances and exceptions, and are guaranteed on a senior secured basis by each of the Partnership’s U.S. restricted subsidiaries (other than Finance Corp, certain immaterial subsidiaries and certain other excluded U.S. subsidiaries).

10.000%/~~10.75% Senior Secured~~10.750% Second Lien Notes due 2026 (the “10.00%/10.75% Second Lien Notes” and, together with the 7.50% First Lien Notes, the “New Notes”), pursuant to its previously announced exchange offer and consent solicitation (the “Exchange Offer”), which commenced on April 17, 2020. In connection with the exchange offer, we incurred financing fees of $4.6 million which were charged to other (income) expense, net during the nine month period ended September 30, 2020.

OnAs of June ~~12, 2020, following receipt~~30, 2021, our Second Lien Notes had $161.6 million outstanding, net of unamortized discounts, unamortized deferred financing costs and deferred restructuring gains. Interest on the ~~requisite consents~~Second Lien Notes is payable on April 1 and October 1 of ~~the holders of the Old~~each year. The Second Lien Notes ~~the Issuers entered into the First Supplemental Indenture (the “First Supplemental Indenture”),~~are secured by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, to the Indenture, dated as of August 4, 2014 (the “Unsecured Indenture”), by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee.

~~The First Supplemental Indenture eliminated~~a second-priority security interest in substantially all of the ~~restrictive covenants~~Partnership’s and its subsidiaries assets, subject to certain permitted encumbrances and exceptions, and are guaranteed on a senior secured basis by each of the Partnership’s U.S. restricted subsidiaries (other than Finance Corp and certain ~~of the default provisions in the Unsecured Indenture and became operative upon the consummation by the Issuers of the Exchange Offer.~~

On June 12, 2020, the Issuers issued $50,000,000 in aggregate principal amount of New First Lien Notes to certain holders of the Old Notes pursuant to the terms of the Exchange Offer. In March 2018, the Issuers had issued $350,000,000 in aggregate principal amount of 7.50% Senior Secured Notes due 2025 (the “Existing First Lien Notes” and, together with the New First Lien Notes, the “7.50% First Lien Notes”) pursuant to the First Lien Base Indenture. The New First Lien Notes were issued as “additional notes” under the First Lien Base

~~Indenture and will be treated as a single class with such notes but will not trade fungibly with the Existing First~~

~~Second Lien Notes Indenture~~

On June 12, 2020, the Issuers issued $155,529,000 in aggregate principal amount of the 10.00%/10.75% Second Lien Notes to certain holders of the Old Notes pursuant to the terms of the Exchange Offer. The Issuers issued the 10.00%/10.75% Second Lien Notes pursuant to an indenture, dated June 12, 2020 (the “Second Lien Notes Indenture”), by and among the Issuers, the subsidiary guarantors named therein andother excluded U.S. ~~Bank National Association, as trustee (the “Second Lien Trustee”)~~subsidiaries). In connection with the payment of PIK Interest (as defined below), if any, in respect of the ~~10.00%/10.75%~~ Second Lien Notes, the ~~Issuers~~issuers will be entitled ~~without the consent of the Holders,~~ to increase the outstanding aggregate principal amount of the ~~10.00%/10.75%~~ Second Lien Notes or issue additional notes (“PIK notes”) under the Second Lien Notes ~~Indenture~~indenture on the same terms and conditions as the ~~10.00%/10.75%~~already outstanding Second Lien Notes offered hereby (each such increase or issuance, a “PIK Payment”). The Issuers may issue additional 10.00%/10.75% Second Lien Notes under the Second Lien Notes Indenture from time to time. Any issuance of additional 10.00%/10.75% Second Lien Notes (including PIK notes) is subject to all of the covenants in the Second Lien Notes Indenture. The 10.00%/10.75% Second Lien Notes and any additional 10.00%/10.75% Second Lien Notes subsequently issued under the indenture, will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Subject to the making of PIK Payments, the Issuers will issue 10.00%/10.75% Second Lien Notes in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000; provided that PIK Payments may result in 10.00%/10.75% Second Lien Notes being issued in denominations of $1.00 and integral multiples of $1.00. The 10.00%/10.75% Second Lien Notes will mature on April 1, 2026. Interest on the 10.00%/10.75% Second Lien Notes will be payable semi-annually in arrears on April 1 and October 1, commencing on October 1, 2020. The Issuers will make each interest payment to the holders of record on March 15 and September 15 immediately

~~preceding each interest payment date.~~Notes. Interest will accrue at (1) the annual rate of 7.250% payable in cash, plus (2) at the election of the Issuers (made by delivering a notice to the Second Lien Trustee not less than five business days prior to the record date), the annual rate of (i) 2.750% payable in cash (together with the annual rate set forth in clause (1), the “Cash Interest Rate”) or (ii) 3.500% payable by increasing the principal amount of the outstanding ~~10.00%/10.75%~~ Second Lien Notes or by issuing additional PIK notes, in each case rounding up to the nearest $1.00 (such increased principal amount or additional PIK notes, the “PIK Interest”). In the absence of an interest payment election made by the Issuers as set forth above, interest on the notes will be payable as if the Issuers had elected to pay PIK Interest with respect to the portion of interest payable pursuant to clause (2) above.

The ~~10.00%/10.75%~~indentures governing our First Lien Notes and Second Lien Notes are jointly and severally, and fully and unconditionally, guaranteed (the “Guarantees”) on a senior secured basis initially by each of the Partnership’s domestic restricted subsidiaries (other than Finance Corp, certain immaterial subsidiaries and certain other excluded domestic subsidiaries, the “Guarantors”) and will be secured by a second-priority security interest in substantially all of the Issuers’ and the Guarantors’ assets (other than certain excluded assets) (the “Collateral”) as collateral security for their obligations under the 10.00%/10.75% Second Lien Notes, subject to certain permitted encumbrances and exceptions. At any time prior to April 1, 2023, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 10.00%/10.75% Second Lien Notes issued under the Second Lien Notes Indenture at a redemption price of 110.000% of the principal amount of the 10.00%/10.75% Second Lien Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings. On or after April 1, 2023, the Issuers may redeem all or part of the 10.00%/10.75% Second Lien Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 107.500% for the twelve month period beginning on April 1, 2023; (ii) 105.000% for the twelve-month period beginning on April 1, 2024 and (iii) 100.000% at any time thereafter, plus accrued and unpaid interest up to, but not including, the redemption date. In addition, at any time prior to April 1, 2023, the Company may redeem all or a part of the 10.00%/10.75% Second Lien Notes at a redemption price equal to 100% of the principal amount of the 10.00%/10.75% Second Lien Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date.

~~The Second Lien Notes Indenture contains~~contain customary covenants restricting ~~the Partnership’s~~our ability and the ability of ~~its~~our restricted subsidiaries to: (i) pay distributions on, purchase, or redeem ~~its~~our common units, make certain investments and other restricted payments, or purchase or redeem ~~its~~any subordinated debt; (ii) incur or guarantee additional indebtedness or issue certain kinds of preferred equity securities; (iii) create or incur certain liens securing indebtedness; (iv) sell assets, including dispositions of the ~~Collateral;~~collateral securing our First Lien Notes and Second Lien Notes; (v) consolidate, merge, or transfer all or substantially all of ~~its~~our assets; (vi) enter into transactions with affiliates; and (vii) enter into agreements that restrict distributions or other payments from ~~its~~our restricted subsidiaries to ~~the Partnership.~~us. Our Second Lien Notes indenture further restricts our ability to make distributions in respect of our common units in any amount exceeding $0.04 per common unit per year, unless such increased distribution is funded by proceeds from an equity offering. These covenants are subject to a number of important limitations and exceptions, including certain provisions permitting ~~the Partnership,~~us, subject to the satisfaction of certain conditions, to transfer assets to certain of ~~its~~our unrestricted subsidiaries. Moreover, if the 10.00%/10.75% Second Lien Notes receive an investment grade rating from at least two rating agencies and no default has occurred and is continuing under the 10.00%/10.75% Second Lien Notes Indenture, many of the restrictive covenants in the Second Lien Notes Indenture will be terminated. The ~~Second Lien Notes Indenture~~indentures also ~~contains~~contain customary events of default and acceleration provisions relating to ~~such~~ events of default, which provide that upon an event of default under the ~~Second Lien Notes Indenture,~~indentures, the ~~Second Lien~~ Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding ~~10.00%/10.75%~~First Lien Notes and Second Lien Notes may declare all of the ~~10.00%/10.75%~~First Lien Notes and Second Lien Notes to be due and payable immediately.

~~Table~~During the fourth quarter of ~~Contents~~2020 and the second quarter of 2021, the Partnership elected to increase the principal amount outstanding through the issuance of PIK notes. As of June 30, 2021, our principal amount outstanding included $4.4 million of PIK notes.

NOTE 7 –— RELATED PARTY TRANSACTIONS

On January 29, 2021, Spartan acquired from TETRA the Partnership’s General Partner, IDRs and 10.95 million common units in the Partnership (the “GP Sale”). The Partnership did not issue any common units or incur any debt as a result of the transaction. TETRA retained 5.2 million common units of the Partnership.

Omnibus Agreement

Under the terms of the Omnibus Agreement, our GeneralPartner~~provides~~ provided 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~~provided personnel and services necessary for the conduct of certain of our Latin American-based businesses. In addition, under the Omnibus Agreement, TETRA ~~provides~~provided 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

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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~~reimbursed our General Partner and TETRA for services they provide to us. Upon the closing of the GP Sale, the Omnibus Agreement terminated in accordance with its terms. Beginning in February 2021, we reimburse our General Partner under the terms of our partnership agreement for any expenses and expenditures incurred or payments made on our behalf, including, operating expenses related to our operations and for the provision of various general and administrative services for our benefit.

Transition Services Agreement

TETRA will continue to provide back-office support to the Partnership under a Transition Services Agreement for a period of time until the Partnership has completed a full separation from TETRA’s back-office support functions.

Spartan and General Partner Ownership

As of ~~September~~June 30, ~~2020, TETRA’s~~2021, Spartan’s ownership interest in us was approximately ~~34% of~~23%, with the ~~outstanding~~ common units ~~and~~held by the public representing an approximate ~~1.4% general partner~~65% interest ~~through which it holds incentive distribution rights.~~in us.

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 of up to $15.0 million of new compression services equipment and to subsequently lease the equipment back to us in exchange for a monthly rental fee. As of ~~September~~November 30, 2020, pursuant to this arrangement, $14.8 million ~~has~~had been funded by TETRA for the construction of new ~~compression~~compressor services equipment and all ~~such equipment was~~compression units were completed and deployed under this agreement. For accounting purposes, the inclusion of an option that 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 compression services equipment is included in property, plant,In December 2020, TETRA sold these compressors and ~~equipment and~~assigned the corresponding leases to Spartan. As of June 30, 2021, the financing ~~obligations are~~obligation owed to Spartan was $10.6 million and is included in amounts payable to affiliates and long-term affiliate payable in our consolidated balance ~~sheet. As~~sheet as of ~~September~~June 30, ~~2020, the financing obligation was $14.9 million.~~2021. The balances were included in accrued liabilities and other and other long-term liabilities in our consolidated balance sheet as of December 31, 2020. Imputed interest expense recognized for the three and ~~nine month~~six-month period ended ~~September~~June 30, ~~2020~~2021 was $0.6 million and ~~$1.8~~$1.2 million, ~~respectively.~~

respectively .

~~NOTE 8 – COMMITMENTSAND CONTINGENCIES~~

Mexico Payroll Affiliate

~~From time~~

In January 2021, the Partnership entered into an agreement to ~~time, we are involved~~purchase a TETRA-owned entity, which administers payroll in ~~litigation relating to claims arising out~~Mexico, for consideration of ~~our operations~~approximately $0.4 million. The difference between the fair value of the affiliate and TETRA’s historic carrying value of the affiliates’ net assets was recorded as a capital distribution. The associated liability was paid 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 isexpected~~to~~have a material adverse effect on our financialcondition, results of operations,or cash flows.~~ April 2021.

NOTE ~~9 –~~8 — FAIR VALUE MEASUREMENTS

Fair value is defined by ASC Topic 820 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.

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Financial Instruments

Derivative Contracts

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 ~~September~~June 30, ~~2020,~~2021, 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

Derivative contracts

US Dollar Notional Amount

Traded Exchange Rate

Settlement Date

(In Thousands)

Forward sale Mexican peso

5,464

21.87

October 1, 2020

Forward sale Mexican peso

5,984

19.97

July 2, 2021

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 September 30, 2020 and December 31, 2019, are as follows:~~

Foreign currency derivative contracts Balance Sheet Location Fair Value at
September 30, 2020 December 31, 2019
(In Thousands)
Forward sale contracts Current assets $ 59 $ 0
Forward sale contracts Current liabilities 0 (53)
Net asset (liability) $ 59 $ (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 and ~~nine month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021, we recognized ~~$0.3~~$0.2 million and ~~$(0.8)~~$0.1 million, respectively, of net (gains) losses associated with our foreign currency derivatives program. During the three and ~~nine month~~six-month periods ended ~~September~~June 30, ~~2019,~~2020, we recognized ~~$(0.1)~~$0.3 million and ~~$0.2~~$(1.1) million, respectively, of net (gains) losses associated with our foreign currency ~~derivative program.~~derivatives programs. These amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations.

~~During the nine months ended September 30, 2020, we recorded impairments~~Fair Value of ~~approximately $9.0 million, reflecting the decreased~~Debt

The fair value ~~for certain assets. The fair values used in these impairment calculations were~~of our debt has been estimated ~~based on a market approach, which is based on significant unobservable inputs (Level 3)~~ in accordance with the accounting standard regarding fair value. The fair value ~~hierarchy. See Note 3 - “Impairments~~of our fixed rate long-term debt is estimated based on recent trades for these notes. The carrying and ~~Other Charges” for further discussion.~~fair value of our debt, excluding unamortized debt issuance costs, are as follows (in thousands):


	June 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In Thousands)
7.25% Senior Notes	$	80,722	$	80,117	$	80,722	$	67,274
7.50% First Lien Notes	400,000		407,200		400,000		369,680
10.000%/10.750% Second Lien Notes	159,919		147,125		157,162		114,728
	$	640,641	$	634,442	$	637,884	$	551,682

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Other

~~Recurring and nonrecurring fair value measurements by valuation hierarchy as of September 30, 2020 and December 31, 2019 are as follows:~~

Fair Value Measurements Using
Description Total as of
September 30, 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)
Asset for foreign currency derivative contracts $ 59 $ 0 $ 59 $ 0
$ 59

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
(In Thousands)
Liability for foreign currency derivative contracts $ (53) $ 0 $ (53) $ 0
$ (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~~revolving credit facility approximate their carrying ~~amounts. The fair values~~amounts due to the short-term nature of our publicly traded long-term 7.25% Senior Notes at September 30, 2020 and December 31, 2019 were approximately $59.7 million and $266.0 million, respectively. Those fair values compare to aggregate principal amountsthese items.

Table of such notes at September 30, 2020 and December 31, 2019 of $80.7 million and $295.9 million, respectively. The fair values of our long-term 7.50% Senior Secured Notes at September 30, 2020 and December 31, 2019 were approximately $360.0 million and $344.8 million, respectively. These fair values compare to an aggregate principal amount of such notes at September 30, 2020 and December 31, 2019 of $400.0 million and $350.0 million, respectively. The fair value of the CCLP 10.00%/10.75% Second Lien Notes at September 30, 2020 was approximately $115.5 million. This fair value compares to aggregate principal amount of such notes at September 30, 2020 of $155.5 million. We based the fair values of our 7.25% Senior Notes, our 7.50% Senior Secured Notes, and our 10.00%/10.75% Second Lien Notes as of September 30, 2020 on recent trades for these notes. See Note 6 - “Long-Term Debt and Other Borrowings” for further discussion.Contents

NOTE ~~10 –~~9 — 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 month~~six-month period ended ~~September~~June 30, ~~2020,~~2021, was negative ~~3.9%~~10.7% 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. 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 10 — COMMITMENTSAND CONTINGENCIES

~~Table~~From time to time, we are involved in litigation relating to claims arising out of ~~Contents~~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 11 ~~– SALE OF ASSETS~~

In April 2020, we entered into a purchase and sale agreement for the sale of our Midland manufacturing facility. During the nine months ended September 30, 2020, we recorded an impairment of $3.1 million to reduce this asset to its approximate fair market value based on a market approach and expected net proceeds. The impairment charges are reflected in impairment and other charges in our statement of operations.

On July 2, 2020, we completed the previously announced sale of our Midland manufacturing facility for a total sale price of $17.0 million. The Midland facility was used to design, fabricate and assemble new standard and customized compressor packages. The sale of the Midland facility resulted in a gain of $0.3 million during the three and nine months ended September 30, 2020, which is reflected in other (income) expense, net in our statement of operations.

Additionally, in the third quarter of 2020, we sold the remaining inventory and equipment related to the fabrication of new compressors for a gain of $0.5 million, which is reflected in other (income) expense, net in our statement of operations for the three and nine months ended September 30, 2020. During the nine months ended September 30, 2020, we recorded an impairment of $2.3 million to reduce the carrying value of the new unit sales inventory to its approximate fair market value based on a market approach. The impairment charges are reflected in impairment and other charges in our statement of operations.

During the third quarter ended September 30, 2020, we completed the sale of 58 low-horsepower units to one of our customers for $2.6 million. During the nine months ended September 30, 2020, we recorded an impairment of $3.7 million to reduce these assets to their approximate fair market value based on a market approach and expected net proceeds. The impairment charges are reflected in impairment and other charges in our statement of operations.

~~NOTE 12 –~~— SUBSEQUENT EVENTS

In connection with the Midland manufacturing facility sale discussed in Note 11, we entered into an agreement with the buyer to continue to operate a portion of the facility, which allowed us to close out remaining backlog for the New Unit Sale business and to continue to operate our AMS business at that location for an interim period. Following the shipment of the last unit in October, we are no longer fabricating new compressor packages for sales to third parties or for our own service fleet. The operations associated with fabricating new compressor packages will be reported as a discontinued operation in the fourth quarter of 2020.

InOn July 2020, we received a purchase order to sell $6.7 million of idle large horsepower compressor units to one of our significant customers. During the third quarter of 2020, we received proceeds and recognized $1.7 million relating to this order. In October 2020, we received the remaining $5.0 million of proceeds and started to deliver the additional compressor units to the customer. We have and will continue to evaluate the sale of other non-core assets, including our low-horsepower compression fleet. We can provide no assurance that we will consummate a future sale of our low-horsepower compression fleet or any other non-core asset.

~~On October~~ 19, ~~2020,~~2021, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended ~~September~~June 30, ~~2020~~2021 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~~August 13, ~~2020~~2021 to each of the holders of common units of record as of the close of business on ~~November 1, 2020.~~

~~Item~~2.~~Management’s Discussion and Analysis of Financial Conditionand 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, 2019 filed with the SECon March 16, 2020 (~~“~~2019 Annual Report~~”~~). Thisdiscussion includes forward-looking statements that involve certain risks and uncertainties.~~July 30, 2021.

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Business Overview

We provide compression services ~~and equipment~~ for natural gas and oil production, gathering, artificial lift, production enhancement, transmission, processing, and storage. Our compression and related services business includes a fleet of ~~more than~~approximately 4,900 compressor packages providing approximately 1.2 million in aggregate horsepower, utilizing a full spectrum of low-, medium-, and high-horsepower engines. Our ~~equipment sales business includes the design, and sale of both standard and custom-designed, engineered compressor packages. Our~~ aftermarket business provides compressor package overhaul, repair, engineering and design, 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 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.

~~Our operations are significantly dependent upon~~Demand for our services is directly driven by the ~~demand for, and~~ production of crude oil and ~~the~~ associated natural gas from unconventional ~~oil and~~shale plays, natural gas production in conventional plays along with transmission of natural gas to and within sales pipelines. Our fleet of compressors, ranging from 20 to 2,500 horsepower per unit, allows us to provide our customers compression solutions ranging from low horsepower production enhancement needs at the ~~domestic~~wellhead through large horsepower at centralized gathering and ~~international markets in which we operate.~~ gas lift facilities.

During ~~the third quarter of~~ 2020, macroeconomic uncertainty in the oil and natural gas industry ~~continued to drive~~drove steep declines in spending by ~~the~~ oil and gas operators ~~but as oil prices stabilized around $40, the pace~~which led to a number of ~~horsepower~~our units being released ~~slowed in comparison to the second quarter. In addition, the unprecedented drop in U.S. onshore oil and natural gas activity in the second quarter led to~~with some of our customers temporarily shutting in wells and requesting that compression units be placed on standby. ~~Customers continued bringing production back online~~Oil prices began to stabilize during the third and fourth quarters of 2020 and gained strength throughout the ~~third quarter and we ended the third quarter with approximately 8%~~first half of ~~our US domestic fleet on standby as compared to 15%~~2021, reaching an average of $66 per barrel in the second ~~quarter.~~quarter of 2021. This improvement in commodity prices has resulted in an increase in activity levels from our compression services and aftermarket services customers. Although customers remain focused on capital discipline, we continue to see gains in quote activity and awards. As the market environment evolves, competition for field employees may increase and inflationary pressures may drive costs higher. In addition, supply chain disruptions may impact the the availability of parts and supplies. We will continue to monitor these risks as the year progresses.

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Throughout the year, we have seen our customers revise their capital budgets substantially downward and adjust their operations accordingly which we believe will continue for the foreseeable future. Given the decline in orders for new compression equipment to be fabricated and sold to third parties, in early April 2020, we announced our plan to shut down our Midland manufacturing facility. On July 2, 2020, we completed the previously announced sale of our Midland manufacturing facility for a total sale price of $17.0 million. We continued to operate the facility until the completion and sale of our remaining backlog, which was completed in October 2020. Following the completion of the backlog, we are no longer fabricating new compressor packages for sales to third parties or for our own service fleet.

The COVID-19 pandemic and decline in oil prices had a significant impact on our customers and industry. During the first quarter of 2020, 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. During the second quarter of 2020, primarily as a result of continued negative impacts on our compression fleet associated with the COVID-19 pandemic and declines in oil and gas prices, we recorded impairments and other charges of approximately $9.0 million associated with non-core used compressor equipment that we have held for sale, the low-horsepower class of our compression fleet, and field inventory for compression and related services. During the third quarter of 2020, no further impairments were recorded. Given the dynamic nature of the events, we are not able to reasonably estimate how long our operations will be impacted and the full impact 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. We have and will continue to evaluate the sale of ~~non-core~~ assets, including our low-horsepower compression fleet. We can provide no assurance that we will consummate a future sale of our low-horsepower compression fleet or any other ~~non-core asset.~~assets.

~~We have taken~~In 2020, we took an aggressive approach towards cost ~~reduction initiatives~~management to improve our financial performance and liquidity. In addition, during the second quarter of 2020, we completed a debt exchange that resulted in a permanent reduction in outstanding long-term debt of $9.6 million and the extension of maturity dates of certain of our remaining long-term debt balances.

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We actively managed our flexible cost structure as a proactive response to the changing market conditions throughout the second and third quarters of 2020, taking necessary actions to manage through these conditions, some of which could result in impairments or restructuring charges in future periods. Temporaryimplemented temporary and permanent cost reductions, ~~we have implemented include~~including reductions in ~~2020~~ capital expenditures, workforce ~~reductions, salary reductions,~~and salaries. We also implemented furloughs, 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~~selling, general and administrative expenses, rationalization of our real estate facilities, ~~including potential exit of leases and facility closures,~~ and negotiated reductions in expenditures with many of our suppliers. ~~We plan~~In the current year, we continue to ~~continue executing these strategies for the remainder of the year.~~ monitor our operations and proactively manage our expenses and our financial performance.

While we are not able to predict how long market disruptions resulting from the COVID-19 pandemic and diminished demand for oil will continue, or what impact they will ultimately have on our business, we ~~have seen~~saw activity ~~leveling out at~~levels increase in the ~~end of the third quarter. During the third~~second quarter of ~~2020, completions activity~~2021. We are encouraged by improvements in oil and gas prices throughout the ~~US onshore regions has improved modestly.~~quarter and projections for demand recovery, driven by COVID-19 vaccinations as they are administered on a wider scale. However, the risk of additional ~~waves~~strains of COVID-19, increases in the number of cases, that developed vaccines may not be successful in preventing COVID-19 or its spread or the potential outbreak of a new or mutated virus, and the possibility of future lockdowns makes any forecast for improvement uncertain. In addition, continued capital discipline throughout the energy sector may limit production growth when the economy recovers from the pandemic. Despite challenging market conditions, we will continue to maintain our commitment to safety and service quality for our customers.

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Results of Operations

Three months ended June 30, 2021 compared to three months ended June 30, 2020


	Three Months Ended June 30,
					Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2021		2020		2021 vs. 2020		2021		2020		2021 vs. 2020
	(In Thousands)
Revenues:
Compression and related services	$	55,329	$	56,284	$	(955)	79.3	%	77.3	%	(1.7)	%
Aftermarket services	14,289		15,737		(1,448)		20.5	%	21.6	%	(9.2)	%
Equipment sales	140		749		(609)		0.2	%	1.0	%	(81.3)	%
Total revenues	69,758		72,770		(3,012)		100.0	%	100.0	%	(4.1)	%
Cost of revenues:
Cost of compression and related services	26,597		25,395		1,202		38.1	%	34.9	%	4.7	%
Cost of aftermarket services	11,959		13,433		(1,474)		17.1	%	18.5	%	(11.0)	%
Cost of equipment sales	29		704		(675)		—	%	1.0	%	(95.9)	%
Total cost of revenues	38,585		39,532		(947)		55.3	%	54.3	%	(2.4)	%
Depreciation and amortization	18,997		19,880		(883)		27.2	%	27.3	%	(4.4)	%
Impairments and other charges	—		8,874		(8,874)		—	%	12.2	%	(100.0)	%
Insurance recoveries	—		(517)		517		—	%	(0.7)	%	(100.0)	%
Selling, general, and administrative expense	9,116		9,241		(125)		13.1	%	12.7	%	(1.4)	%

Interest expense, net	13,932		13,580		352		20.0	%	18.7	%	2.6	%

Other income (expense), net	(97)		4,403		(4,500)		(0.1)	%	6.1	%	(102.2)	%
Loss before taxes and discontinued operations	(10,775)		(22,223)		11,448		(15.4)	%	(30.5)	%	(51.5)	%
Provision for income taxes	1,019		961		58		1.5	%	1.3	%	6.0	%
Loss from continuing operations	(11,794)		(23,184)		11,390		(16.9)	%	(31.9)	%	(49.1)	%
Loss from discontinued operations, net of taxes	(291)		(1,394)		1,103		(0.4)	%	(1.9)	%	(79.1)	%
Net loss	$	(12,085)	$	(24,578)	$	12,493	(17.3)	%	(33.8)	%	(50.8)	%

Revenues

Compression and related services revenues decreased $1.0 million or 1.7%, in the current year quarter compared to the prior year quarter due to the COVID-19 pandemic’s impact on demand for oil and natural gas which had a significant effect on the demand for compression services. During the current quarter, with the stabilization of oil prices, most of the compressors which were placed on standby in the second quarter 2020 have been returned to service. The increase in revenue from compression fleet placed in service at full rates coming off standby rates was more than offset by the decrease in fleet utilization compared to the prior year period.

Aftermarket services revenues decreased $1.4 million during the current year quarter compared to the prior year quarter due to decreased demand for aftermarket services as a result of the impact of the COVID-19 pandemic on the global economy including the energy sector.

Equipment sales revenues decreased $0.6 million during the current year quarter compared to the prior year quarter due to a decrease in used unit sales.

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Cost of revenues

Cost of compression and related services revenue increased 4.7% compared to the prior year quarter, partially due to compressors that came off of standby rates since since the prior year period. Compressors on standby rates have revenues but very low associated costs. In 2021, most of the compressors that were on standby rates have returned to service and associated costs of service have returned to normal levels. As activity levels increase, make-ready expenses associated with the redeployment of compressors have also increased. We expect these expenses to contribute to increased revenues in the second half of 2021. In addition, inflation also impacted certain cost categories in the second quarter of 2021.

Cost of aftermarket services and cost of equipment sales decreased during the current year quarter consistent with decreased revenues.

Depreciation and amortization

Depreciation and amortization expense consists primarily 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 decreased compared to the prior year quarter primarily due to impairments recorded during 2020, reducing the cost basis for our compression fleet.

Impairments and other charges

During the prior year quarter, we recorded impairments and other charges of $9.0 million primarily on non-core used compressor equipment, the low-horsepower class of our compression fleet, and field inventory for compression and related services.

Selling, general, and administrative expense

Selling,general, and administrativeexpenses were consistent during the current year quarter compared to the prior year quarter.

Interest expense, net

Interest expense, net, increased $0.4 million compared to the prior year quarter primarily due to higher interest rates associated with our Second Lien Notes following the June 2020 debt exchange transaction.

Other (income) expense, net

Other (income) expense, net, was $0.1 million of income, net, during the current year quarter compared to $4.4 million of expense, net, during the prior yearquarter.The decrease in other expense is primarily due to $4.8 million of fees associated primarily with the debt exchange transaction in the prior year period.

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.

Our effective tax rate for the current year quarter was negative 9.5% 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. 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.

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Loss from discontinued operations, net of tax

Loss from discontinued operations, net of tax changed from a $1.4 million loss for the prior year quarter to a $0.3 million loss for current year quarter. The Partnership exited the new unit sales business during 2020, with final completions in October. The prior year loss includes $23.6 million of new unit sales revenues, offset by $23.7 million of costs of sales, $0.1 million of impairments and $0.9 million of selling, general, and administrative expenses.

Results of Operations

Six months ended June 30, 2021 compared to six months ended June 30, 2020.


	Six Months Ended June 30,
					Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2021		2020		2021 vs. 2020		2021		2020		2021 vs. 2020
	(In Thousands)
Revenues:
Compression and related services	$	109,568	$	122,049	$	(12,481)	80.9	%	77.1	%	(10.2)	%
Aftermarket services	25,290		33,707		(8,417)		18.7	%	21.3	%	(25.0)	%
Equipment sales	610		2,449		(1,839)		0.5	%	1.5	%	(75.1)	%
Total revenues	135,468		158,205		(22,737)		100.0	%	100.0	%	(14.4)	%
Cost of revenues:
Cost of compression and related services	53,023		57,003		(3,980)		39.1	%	36.0	%	(7.0)	%
Cost of aftermarket services	21,476		29,678		(8,202)		15.9	%	18.8	%	(27.6)	%
Cost of equipment sales	346		2,587		(2,241)		0.3	%	1.6	%	(86.6)	%
Total cost of revenues	74,845		89,268		(14,423)		55.2	%	56.4	%	(16.2)	%
Depreciation and amortization	37,527		39,550		(2,023)		27.7	%	25.0	%	(5.1)	%
Impairments and other charges	—		8,874		(8,874)		—	%	5.6	%	(100.0)	%
Insurance recoveries	—		(517)		517		—	%	(0.3)	%	(100.0)	%
Selling, general, and administrative expense	18,710		18,331		379		13.8	%	11.6	%	2.1	%

Interest expense, net	27,830		26,749		1,081		20.5	%	16.9	%	4.0	%

Other income expense, net	227		4,843		(4,616)		0.2	%	3.1	%	(95.3)	%
Loss before taxes and discontinued operations	(23,671)		(28,893)		5,222		(17.5)	%	(18.3)	%	(18.1)	%
Provision for income taxes	2,526		1,157		1,369		1.9	%	0.7	%	118.3	%
Loss from continuing operations	$	(26,197)	$	(30,050)	$	3,853	(19.3)	%	(19.0)	%	(12.8)	%
Loss from discontinued operations, net of taxes	$	(353)	$	(8,158)	$	7,805	(0.3)	%	(5.2)	%	(95.7)	%
Net loss	$	(26,550)	$	(38,208)	$	11,658	(19.6)	%	(24.2)	%	(30.5)	%

Revenues

Compression and related services revenues decreased by $12.5 million, or 10.2%, in the current year period compared to the prior year period due to the COVID-19 pandemic’s impact on demand for oil and natural gas which continued to affect demand for compression services. In the second quarter of 2020, we experienced returned compressors, compressors placed on standby rates, and made some pricing concessions, all contributing to a decrease in revenues. With the recent stabilization of oil prices, most of the compressors previously placed on standby have now been returned to service, however, fleet utilization and pricing are still lower in the current year compared to 2020.

Aftermarket services revenues decreased $8.4 million, or 25.0%, during the current year period compared to the prior year period resulting from decreased demand for parts and services as a result of the impact of the COVID-19 pandemic on the global economy including the energy sector.

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Equipment sales revenues decreased $1.8 million, or 75.1%, during the current year period compared to the prior year period due to a decrease in used unit sales. In 2020, the Partnership increased efforts to sell non-core used compressors to shore up liquidity in anticipation of the market downturn.

Cost of revenues

Cost of compression and related services decreased compared to the prior year period consistent with decreased revenues. Cost of compression and related services as a percentage of compression and related services revenues increased from 46.7% during the prior year period to 48.4% during the current year period. The increase was due to higher make-ready expenses in the current year which we expect will contribute to higher revenues in the second half of 2021, an increase in operating expenses resulting from a lower percentage of our fleet on standby rates compared to the prior year period, and due to certain cost categories impacted by inflation in the current year.

Cost of aftermarket services and cost of equipment sales decreased during the current year consistent with decreased revenues.

Depreciation and amortization

Depreciation and amortization expense consists primarily 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 decreased compared to the prior year period primarily due to impairments recorded in 2020, reducing the cost basis for our compression fleet.

Impairments and other charges

During the six-month period ended June 30, 2020, we recorded impairments and other charges of $9.0 million primarily on non-core used compressor equipment, the low-horsepower class of our compression fleet, and field inventory for compression and related services. There were no impairments recorded in the current year.

Selling, general, and administrative expense

Selling,general, and administrativeexpenses were consistent during the current year period compared to the prior year period.

Interest expense, net

Interest expense, net, increased $1.1 million compared to the prior year period due to higher interest rates associated with our Second Lien Notes following the June 2020 debt exchange transaction.

Other (income) expense, net

Other (income) expense, net, was $0.2 million of expense during the current year period, compared to $4.8 million of expense during the prior year period. The decrease in other expense is primarily due to $4.8 million of fees associated primarily with the debt exchange transaction in the prior year period.

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.

Our effective tax rate for the six-month period ended June 30, 2021, was negative 10.7% 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. Included in our deferred tax assets are net operating

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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.

Loss from discontinued operations, net of tax

Loss from discontinued operations, net of tax changed from an $8.2 million loss for the prior year quarter to a $0.4 million loss for the current year quarter. The Partnership exited the new unit sales business during 2020, with final deliveries made in October. The prior year loss includes $28.5 million of new unit sales revenues, offset by $28.5 million of costs of sales, $5.5 million of impairments and $2.1 million of selling, general, and administrative expenses.

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, vehicle leases 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~~six-month periods ended ~~September~~June 30, ~~2020,~~2021, is provided within the Results of Operations sections ~~below.~~above.

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 charges, including impairments, bad debt expense attributable to bankruptcy of customers, 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, ~~Preferred Units redemption premium,~~ severance and 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.

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
(In Thousands)
Net loss $ (12,607) $ (3,613) $ (50,815) $ (19,016)
Provision (benefit from) for income taxes 695 (363) 1,923 3,306
Depreciation and amortization 19,947 18,459 59,972 56,045
Impairments and other charges — 849 14,348 3,313
Bad debt expense attributable to bankruptcy of customer — 1,768 — 1,768
Interest expense, net 13,886 13,533 40,635 39,877
Equity compensation 232 (211) 1,044 744
Series A Preferred redemption premium — 399 — 1,468
Series A Preferred fair value adjustments — — — 1,470
Debt exchange expenses 22 — 4,777 —
Severance 484 118 1,840 118
Non-cash cost of compressors sold 4,804 2,803 7,244 3,841
Other 306 254 1,610 630
Adjusted EBITDA $ 27,769 $ 33,996 $ 82,578 $ 93,564

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

Nine Months Ended
September 30,
2020 2019
(In Thousands)
Net cash provided by operating activities $ 13,729 $ 67,461
Changes in current assets and current liabilities 17,317 (18,351)
Deferred income taxes (587) (550)
Other non-cash charges (1,650) (3,738)
Bad debt expense attributable to bankruptcy of customer — 1,768
Interest expense, net 40,635 39,877
Series A Preferred accrued paid in kind distributions — (1,123)
Insurance recoveries 517 325
Provision for income taxes 1,923 3,306
Severance 1,840 118
Non-cash cost of compressors sold 7,244 3,841
Other 1,610 630
Adjusted EBITDA $ 82,578 $ 93,564

2422

Table of Contents


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In Thousands)
Net loss	$	(12,085)	$	(24,578)	$	(26,550)	$	(38,208)
Provision for income taxes	1,019		961		2,526		1,157
Depreciation and amortization	18,997		19,880		37,527		39,550
Impairments and other charges	—		8,874		—		8,874


Interest expense, net	13,932		13,580		27,830		26,749
Equity compensation	477		488		1,310		812





Debt exchange expenses	—		4,755		—		4,755
Prior year sales tax accrual adjustment	367		0		367		0
Manufacturing engine order cancellation charge	300		0		300		0
Severance	—		1,084		114		1,356
Non-cash cost of compressors sold	78		631		438		2,440

Provision for income taxes, depreciation, amortization and impairments attributed to discontinued operations	—		395		—		6,020
Other	—		977		308		1,304
Adjusted EBITDA	$	23,085	$	27,047	$	44,170	$	54,809

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 June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(In Thousands)				(In Thousands)					(In Thousands)				(In Thousands)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	$	(4,451)	$	27,119	$	13,729	$	67,461	Net cash (used in) provided by operating activities	$	(9,686)	$	4,823	$	(72)	$	18,180
Capital expenditures, net of sales proceeds	Capital expenditures, net of sales proceeds	1,550		(20,867)		(6,058)		(60,453)		Capital expenditures, net of sales proceeds	(5,370)		(1,125)		(9,849)		(7,608)
Midland proceeds		17,000		—		17,000		—

Free cash flow	Free cash flow	$	14,099	$	6,252	$	24,671	$	7,008	Free cash flow	$	(15,056)	$	3,698	$	(9,921)	$	10,572

Net cash ~~(used in) provided by~~used in operating activities infor the ~~third quarter of 2020 consists of $8.0~~three months ended June 30, 2021 includes $7.9 million of revenues in excess of cash ~~provided by~~expenses and decreases of $17.6 million in working capital changes. Net cash used in operating activities ~~offset by $12.4~~for the six months ended June 30, 2021 includes $13.4 million of revenues in excess of cash expenses and decreases of $13.4 million in working capital changes.

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 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 across 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.

Table of Contents

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,
2020 2019
Horsepower
Total horsepower in fleet 1,172,307 1,157,938
Total horsepower in service 941,747 1,043,384
Total horsepower utilization rate 80.3 % 90.1 %

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


		September 30,					June 30,
		2020		2019			2021		2020
Horsepower utilization rate by class
Horsepower						Horsepower
Total horsepower in fleet						Total horsepower in fleet	1,181,485		1,178,721
Total horsepower in service						Total horsepower in service	908,614		967,505

Horsepower utilization						Horsepower utilization
Low-horsepower (0-100)	Low-horsepower (0-100)	61.7	%	72.1	%	Low-horsepower (0-100)	56.4	%	63.6	%
Medium-horsepower (101-1,000)	Medium-horsepower (101-1,000)	76.5	%	87.0	%	Medium-horsepower (101-1,000)	77.2	%	79.4	%
High-horsepower (1,001 and over)	High-horsepower (1,001 and over)	87.3	%	97.4	%	High-horsepower (1,001 and over)	81.3	%	88.2	%
Total horsepower utilization rate						Total horsepower utilization rate	76.9	%	82.1	%

The total horsepower utilization rate and the utilization rate by each horsepower class ~~have each~~ decreased this quarter compared to the prior year period due to significantly lower customer activity levels. ~~The third quarter of 2020 continued to be impacted~~This was driven by a low commodity price environment for oil and gas driven by the COVID-19 pandemic and ~~we believe our utilization rates for the fourth quarter will also continue to be negatively impacted by the COVID-19 pandemic and related market conditions~~reduced investment in the oil and gas industry. In October, natural gas prices increased to $3.40. With improvements in the outlook for natural gas prices, we anticipate demand for our small and medium-horsepower compression to increase.energy sector.

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 fabricated at authorized packaging facilities in Texas. 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 dates have been established based on customer requirements. Earlier this year, we disclosed our plan to shut down our Midland manufacturing facility as a result of a decline in orders for new equipment from third parties. On July 2, 2020, we completed the previously announced sale of the manufacturing facility for a total sale price of $17.0 million. In connection with the sale, we entered into an agreement with the buyer that permits us to continue to operate the facility until the completion and sale of our remaining backlog, which was completed during October 2020. New equipment sales backlog was $1.4 million as of September 30, 2020 compared to $8.3 million and~~$35.5 million~~as of June 30, 2020 and December 31, 2019, respectively. 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. All our September 30, 2020 new equipment sales backlog will be recognized during the fourth quarter of 2020 since our remaining backlog was completed in October. After the fourth quarter of 2020, we will no longer be fabricating new compressor packages for sales to third parties or for our own service fleet.

~~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 ~~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, 2020 compared to three months ended September 30, 2019~~

Compression and related services revenues decreased $11.6 million, a 17.9% decrease, in the current year quarter compared to the prior year quarter. The COVID-19 pandemic’s impact on demand for oil and natural gas and the resulting decline in oil prices continued to affect demand for compression services. We experienced returned compressors, compressors placed on standby rates, and have made some pricing concessions, all contributing to a decrease in revenues. During the current quarter, with the stabilization of oil prices, some of the compressors previously placed on standby have now been returned to service.

Aftermarket services revenues decreased $6.6 million during the current year quarter compared to the prior year quarter due to decreased demand for parts and services as a result of lower customer activity levels.

Equipment sales revenues decreased $16.4 million during the current year quarter compared to the prior year quarter, as we continued to close out remaining backlog and prepared to shut down our Midland manufacturing facility and exit the new equipment sales business.

~~Cost of revenues~~


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

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


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


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


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			2116
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3427
Item 4. Controls and Procedures			3427

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			3528
Item 1A. Risk Factors			3528
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3628
Item 3. Defaults Upon Senior Securities			3628
Item 4. Mine Safety Disclosures			3628
Item 5. Other Information			3628
Item 6. Exhibits			3729
SIGNATURES			3830


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	16,699	$	2,370	Cash and cash equivalents	$	8,305	$	16,577

Trade accounts receivable, net of allowances for doubtful accounts of $1,228 as of September 30, 2020 and $3,350 as of December 31, 2019		56,521		64,724
Trade accounts receivable, net of allowances for doubtful accounts of $1,040 as of June 30, 2021 and $1,333 as of December 31, 2020						Trade accounts receivable, net of allowances for doubtful accounts of $1,040 as of June 30, 2021 and $1,333 as of December 31, 2020	52,173		43,837
Inventories	Inventories	33,981		56,037		Inventories	32,418		31,188

Prepaid expenses and other current assets	Prepaid expenses and other current assets	6,303		4,162		Prepaid expenses and other current assets	7,556		5,184
Current assets associated with discontinued operations						Current assets associated with discontinued operations	1		39
Total current assets	Total current assets	113,504		127,293		Total current assets	100,453		96,825
Property, plant, and equipment:	Property, plant, and equipment:					Property, plant, and equipment:
Land and building	Land and building	13,259		35,125		Land and building	13,246		13,259
Compressors and equipment	Compressors and equipment	978,422		976,469		Compressors and equipment	989,475		975,375
Vehicles	Vehicles	7,904		9,205		Vehicles	7,611		7,692
Construction in progress	Construction in progress	8,817		26,985		Construction in progress	8,407		12,763
Total property, plant, and equipment	Total property, plant, and equipment	1,008,402		1,047,784		Total property, plant, and equipment	1,018,739		1,009,089
Less accumulated depreciation	Less accumulated depreciation	(435,902)		(405,417)		Less accumulated depreciation	(490,212)		(457,688)
Net property, plant, and equipment	Net property, plant, and equipment	572,500		642,367		Net property, plant, and equipment	528,527		551,401
Other assets:	Other assets:					Other assets:

Intangible assets, net of accumulated amortization of $32,192 as of June 30, 2021 and $30,711 as of December 31, 2020						Intangible assets, net of accumulated amortization of $32,192 as of June 30, 2021 and $30,711 as of December 31, 2020	23,576		25,057
Operating lease right-of-use assets						Operating lease right-of-use assets	28,730		32,637
Deferred tax asset	Deferred tax asset	24		24		Deferred tax asset	10		10
Intangible assets, net of accumulated amortization of $29,971 as of September 30, 2020 and $27,751 as of December 31, 2019		25,797		28,017
Operating lease right-of-use assets		34,680		21,006
Other assets	Other assets	4,300		3,539		Other assets	3,710		4,036
Total other assets	Total other assets	64,801		52,586		Total other assets	56,026		61,740
Total assets	Total assets	$	750,805	$	822,246	Total assets	$	685,006	$	709,966
LIABILITIES AND PARTNERS’ CAPITAL	LIABILITIES AND PARTNERS’ CAPITAL					LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	19,404	$	47,837	Accounts payable	$	20,382	$	19,766
Unearned income		6,463		9,505

Accrued liabilities and other	Accrued liabilities and other	41,600		42,581		Accrued liabilities and other	36,705		36,070
Amounts payable to affiliates	Amounts payable to affiliates	9,428		7,704		Amounts payable to affiliates	3,274		3,234

Current liabilities associated with discontinued operations						Current liabilities associated with discontinued operations	164		345
Total current liabilities	Total current liabilities	76,895		107,627		Total current liabilities	60,525		59,415
Other liabilities:	Other liabilities:					Other liabilities:
Long-term debt, net	Long-term debt, net	636,943		638,238		Long-term debt, net	641,471		638,631

Deferred tax liabilities	Deferred tax liabilities	1,620		1,211		Deferred tax liabilities	2,535		1,478
Long-term affiliate payable	Long-term affiliate payable	11,858		12,324		Long-term affiliate payable	11,296		0
Operating lease liabilities	Operating lease liabilities	25,896		13,822		Operating lease liabilities	20,529		24,059
Other long-term liabilities	Other long-term liabilities	17		33		Other long-term liabilities	558		11,716
Total other liabilities	Total other liabilities	676,334		665,628		Total other liabilities	676,389		675,884
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0
Partners’ capital:	Partners’ capital:					Partners’ capital:
General partner interest	General partner interest	(555)		180		General partner interest	(1,269)		(885)
Common units (47,344,351 units issued and outstanding at September 30, 2020 and 47,078,529 units issued and outstanding at December 31, 2019)		12,776		63,384
Common units (47,971,240 units issued and outstanding at June 30, 2021 and 47,352,291 units issued and outstanding at December 31, 2020)						Common units (47,971,240 units issued and outstanding at June 30, 2021 and 47,352,291 units issued and outstanding at December 31, 2020)	(36,384)		(10,055)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(14,645)		(14,573)		Accumulated other comprehensive loss	(14,255)		(14,393)
Total partners’ capital	Total partners’ capital	(2,424)		48,991		Total partners’ capital	(51,908)		(25,333)
Total liabilities and partners’ capital	Total liabilities and partners’ capital	$	750,805	$	822,246	Total liabilities and partners’ capital	$	685,006	$	709,966


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(In Thousands)					(In Thousands)
Parts and supplies	Parts and supplies	$	29,125	$	42,814	Parts and supplies	$	29,314	$	28,483
Work in progress	Work in progress	4,856		13,223		Work in progress	3,104		2,705
Total inventories	Total inventories	$	33,981	$	56,037	Total inventories	$	32,418	$	31,188


	Nine Months Ended September 30,
	2020		2019

	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	7,437	$	3,645

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	19,127	$	3,035


	September 30, 2020		December 31, 2019
Weighted average remaining lease term:
Operating leases	4.89 years		4.51 years

Weighted average discount rate:
Operating leases	8.89	%	8.73	%


	Operating Leases
	(In Thousands)

Remainder of 2020	$	2,663
2021	10,450
2022	8,676
2023	7,062
2024	4,812
Thereafter	8,819
Total lease payments	42,482
Less imputed interest	(8,400)
Total lease liabilities	$	34,082


Foreign currency derivative contracts	Balance Sheet Location	Fair Value at
		September 30, 2020		December 31, 2019
		(In Thousands)
Forward sale contracts	Current assets	$	59	$	0
Forward sale contracts	Current liabilities	0		(53)
Net asset (liability)		$	59	$	(53)


			Fair Value Measurements Using
Description	Total as of September 30, 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)


Asset for foreign currency derivative contracts	$	59	$	0	$	59	$	0

	$	59


	Three Months Ended September 30,
					Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2020		2019		2020 vs. 2019		2020		2019		2020 vs. 2019
	(In Thousands)
Revenues:
Compression and related services	$	53,419	$	65,037	$	(11,618)	67.5	%	57.2	%	(17.9)	%
Aftermarket services	13,862		20,426		(6,564)		17.5	%	18.0	%	(32.1)	%
Equipment sales	11,877		28,284		(16,407)		15.0	%	24.9	%	(58.0)	%
Total revenues	79,158		113,747		(34,589)		100.0	%	100.0	%	(30.4)	%
Cost of revenues:
Cost of compression and related services	25,133		30,395		(5,262)		31.8	%	26.7	%	(17.3)	%
Cost of aftermarket services	11,815		17,163		(5,348)		14.9	%	15.1	%	(31.2)	%
Cost of equipment sales	12,465		26,518		(14,053)		15.7	%	23.3	%	(53.0)	%
Total cost of revenues	49,413		74,076		(24,663)		62.4	%	65.1	%	(33.3)	%
Depreciation and amortization	19,947		18,459		1,488		25.2	%	16.2	%	8.1	%
Impairments and other charges	—		849		(849)		—	%	0.7	%	(100.0)	%
Insurance recoveries	—		(325)		325		—	%	(0.3)	%	(100.0)	%
Selling, general, and administrative expense	9,150		11,336		(2,186)		11.6	%	10.0	%	(19.3)	%

Interest expense, net	13,886		13,533		353		17.5	%	11.9	%	2.6	%

Other income, net	(1,326)		(205)		(1,121)		(1.7)	%	(0.2)	%	546.8	%
Loss before income taxes	(11,912)		(3,976)		(7,936)		(15.0)	%	(3.5)	%	199.6	%
Provision (benefit from) for income taxes	695		(363)		1,058		0.9	%	(0.3)	%	(291.5)	%
Net loss	$	(12,607)	$	(3,613)	$	(8,994)	(15.9)	%	(3.2)	%	248.9	%


	Payments Due
	Total		2020		2021		2022		2023		2024		Thereafter
	(In Thousands)
Long-term debt	$	636,249	$	—	$	—	$	80,720	$	—	$	—	$	555,529
Interest on debt	241,409		22,503		51,405		49,454		45,553		45,553		26,941
Operating leases	42,482		2,663		10,450		8,676		7,062		4,812		8,819
Affiliate financing obligation	12,111		754		3,015		3,015		3,015		2,312		—
Total contractual cash obligations	$	932,251	$	25,920	$	64,870	$	141,865	$	55,630	$	52,677	$	591,289












10.1*			~~Form of Cash Retention Award 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
104*			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document


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

Date:	~~November 2, 2020~~July 30, 2021	By:	/s/~~Brady M. Murphy~~John E. Jackson
			~~Brady M. Murphy~~John E. Jackson
			~~President~~Chief Executive Officer
			Principal Executive Officer

Date:	~~November 2, 2020~~July 30, 2021	By:	/s/~~Elijio V. Serrano~~Jonathan W. Byers
			~~Elijio V. Serrano~~Jonathan W. Byers
			Chief Financial Officer
			Principal Financial Officer

Date:	~~November 2, 2020~~July 30, 2021	By:	/s/Michael E. Moscoso
			Michael E. Moscoso
			Vice President - Finance
			Principal Accounting Officer