UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, ~~2022~~2023

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

For the transition period from _____ to______

Commission File Number 001-35195

CSI Compressco LP

(Exact name of registrant as specified in its charter)


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

1735 Hughes Landing Boulevard, Suite 200
The Woodlands,
TX			77380
(Address of Principal Executive Offices)			(Zip Code)

(832) 365-2257

(Registrant’s Telephone Number, Including Area Code)

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

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


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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.


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

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

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

As of August ~~5, 2022,~~3, 2023, there were ~~141,213,944~~141,995,028 Common Units outstanding.


CSI Compressco LP
Table of Contents
			Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations			1
Consolidated Statements of Comprehensive Income (Loss)			2
Consolidated Balance Sheets			3
Consolidated Statements of Partners’ Capital			4
Consolidated Statements of Cash Flows			5
Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2018
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3127
Item 4. Controls and Procedures			3127

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			3128
Item 1A. Risk Factors			3128
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3128
Item 3. Defaults Upon Senior Securities			3228
Item 4. Mine Safety Disclosures			3228
Item 5. Other Information			3228
Item 6. Exhibits			3329
SIGNATURES			3430

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 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.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

CSI Compressco LP

Consolidated Statements of Operations

(In Thousands, Except Unit and Per Unit Amounts)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues:	Revenues:									Revenues:
Contract services	Contract services	$	64,348	$	58,394	$	127,155	$	114,631	Contract services	$	70,521	$	64,348	$	140,168	$	127,155
Aftermarket services	Aftermarket services	16,213		14,918		29,081		25,952		Aftermarket services	21,209		16,213		38,560		29,081
Equipment rentals	Equipment rentals	3,618		3,079		7,118		5,104		Equipment rentals	4,773		3,618		8,887		7,118
Equipment sales	Equipment sales	343		140		1,180		610		Equipment sales	276		343		535		1,180
Total revenues	Total revenues	84,522		76,531		164,534		146,297		Total revenues	96,779		84,522		188,150		164,534
Cost of revenues (excluding depreciation and amortization expense):	Cost of revenues (excluding depreciation and amortization expense):									Cost of revenues (excluding depreciation and amortization expense):
Cost of contract services	Cost of contract services	33,585		28,244		64,625		55,684		Cost of contract services	35,767		33,585		72,594		64,625
Cost of aftermarket services	Cost of aftermarket services	13,362		12,221		23,995		21,766		Cost of aftermarket services	16,924		13,362		31,138		23,995
Cost of equipment rentals	Cost of equipment rentals	451		209		967		362		Cost of equipment rentals	555		451		1,110		967
Cost of equipment sales	Cost of equipment sales	165		29		617		346		Cost of equipment sales	249		165		456		617
Total cost of revenues	Total cost of revenues	47,563		40,703		90,204		78,158		Total cost of revenues	53,495		47,563		105,298		90,204
Depreciation and amortization	Depreciation and amortization	19,346		19,901		38,705		39,035		Depreciation and amortization	19,086		19,346		37,937		38,705

Selling, general, and administrative expense	Selling, general, and administrative expense	10,911		10,502		21,752		20,803		Selling, general, and administrative expense	12,291		10,911		22,270		21,752

Interest expense, net of capitalized interest of $103 and $181 in 2022 and $0 and $34 in 2021		12,556		13,632		24,937		27,340
Interest expense, net of capitalized interest of $7 and $10 in 2023 and $103 and $181 in 2022										Interest expense, net of capitalized interest of $7 and $10 in 2023 and $103 and $181 in 2022	13,747		12,556		27,062		24,937

Other (income) expense, net	Other (income) expense, net	325		(226)		869		69		Other (income) expense, net	(191)		325		(707)		869
Loss before taxes and discontinued operations	Loss before taxes and discontinued operations	(6,179)		(7,981)		(11,933)		(19,108)		Loss before taxes and discontinued operations	(1,649)		(6,179)		(3,710)		(11,933)
Provision for income taxes	Provision for income taxes	741		1,348		1,557		3,053		Provision for income taxes	924		741		1,476		1,557
Loss from continuing operations	Loss from continuing operations	(6,920)		(9,329)		$	(13,490)	$	(22,161)	Loss from continuing operations	(2,573)		(6,920)		$	(5,186)	$	(13,490)
Loss from discontinued operations, net of taxes		92		(291)		$	92	$	(353)
Income (loss) from discontinued operations, net of taxes										Income (loss) from discontinued operations, net of taxes	—		92		$	—	$	92
Net loss	Net loss	$	(6,828)	$	(9,620)	$	(13,398)	$	(22,514)	Net loss	$	(2,573)	$	(6,828)	$	(5,186)	$	(13,398)

General partner interest in net loss	General partner interest in net loss	$	(32)	$	(132)	$	(63)	$	(312)	General partner interest in net loss	$	(12)	$	(32)	$	(24)	$	(63)
Common units interest in net loss	Common units interest in net loss	$	(6,796)	$	(9,488)	$	(13,335)	$	(22,202)	Common units interest in net loss	$	(2,561)	$	(6,796)	$	(5,162)	$	(13,335)


Basic and diluted net loss per common unit:	Basic and diluted net loss per common unit:									Basic and diluted net loss per common unit:	$	(0.02)	$	(0.05)	$	(0.04)	$	(0.09)
Loss from continuing operations per common unit		$	(0.05)	$	(0.19)	$	(0.09)	$	(0.46)
Loss from discontinued operations per common unit		—		(0.01)		$	—	$	(0.01)
Net loss per common unit		$	(0.05)	$	(0.20)	$	(0.09)	$	(0.47)

Weighted average common units outstanding:	Weighted average common units outstanding:									Weighted average common units outstanding:
Basic	Basic	141,213,944		47,971,240		140,993,400		47,848,240		Basic	141,995,028		141,213,944		141,804,367		140,993,400
Diluted	Diluted	141,213,944		47,971,240		140,993,400		47,848,240		Diluted	141,995,028		141,213,944		141,804,367		140,993,400

See Notes to Consolidated Financial Statements

Table of Contents

CSI Compressco LP

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net loss	Net loss	$	(6,828)	$	(9,620)	$	(13,398)	$	(22,514)	Net loss	$	(2,573)	$	(6,828)	$	(5,186)	$	(13,398)
Foreign currency translation adjustment, net of tax of $0 in 2022 and 2021		(97)		81		(85)		138
Foreign currency translation adjustment, net of tax of $0 in 2023 and 2022										Foreign currency translation adjustment, net of tax of $0 in 2023 and 2022	—		(97)		—		(85)
Comprehensive loss	Comprehensive loss	$	(6,925)	$	(9,539)	$	(13,483)	$	(22,376)	Comprehensive loss	$	(2,573)	$	(6,925)	$	(5,186)	$	(13,483)

See Notes to Consolidated Financial Statements

Table of Contents

CSI Compressco LP

Consolidated Balance Sheets

(In Thousands, Except Unit Amounts)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	8,364	$	6,598	Cash and cash equivalents	$	12,316	$	8,475

Trade accounts receivable, net of allowance for doubtful accounts of $1,274 as of June 30, 2022 and $1,223 as of December 31, 2021		67,206		53,520
Trade accounts receivable, net of allowance for credit losses of $389 as of June 30, 2023 and $736 as of December 31, 2022						Trade accounts receivable, net of allowance for credit losses of $389 as of June 30, 2023 and $736 as of December 31, 2022	55,641		65,085
Trade receivable - affiliate	Trade receivable - affiliate	3,283		—		Trade receivable - affiliate	698		948
Inventories	Inventories	43,358		33,271		Inventories	52,361		45,902

Prepaid expenses and other current assets	Prepaid expenses and other current assets	12,382		7,390		Prepaid expenses and other current assets	7,252		7,905

Total current assets	Total current assets	134,593		100,779		Total current assets	128,268		128,315
Property, plant, and equipment:	Property, plant, and equipment:					Property, plant, and equipment:
Land and building	Land and building	9,103		13,409		Land and building	7,227		7,227
Compressors and equipment	Compressors and equipment	1,098,878		1,072,927		Compressors and equipment	1,120,944		1,103,657
Vehicles	Vehicles	8,597		8,469		Vehicles	8,604		8,640
Construction in progress	Construction in progress	17,587		31,968		Construction in progress	30,906		37,183
Total property, plant, and equipment	Total property, plant, and equipment	1,134,165		1,126,773		Total property, plant, and equipment	1,167,681		1,156,707
Less accumulated depreciation	Less accumulated depreciation	(584,887)		(556,311)		Less accumulated depreciation	(638,814)		(611,734)
Net property, plant, and equipment	Net property, plant, and equipment	549,278		570,462		Net property, plant, and equipment	528,867		544,973
Other assets:	Other assets:					Other assets:

Intangible assets, net of accumulated amortization of $35,150 as of June 30, 2022 and $33,672 as of December 31, 2021		20,617		22,095
Intangible assets, net of accumulated amortization of $38,106 as of June 30, 2023 and $36,627 as of December 31, 2022						Intangible assets, net of accumulated amortization of $38,106 as of June 30, 2023 and $36,627 as of December 31, 2022	17,661		19,140
Operating lease right-of-use assets	Operating lease right-of-use assets	28,933		25,898		Operating lease right-of-use assets	27,841		27,205
Deferred tax asset		5		5
Deferred tax assets						Deferred tax assets	3		3
Other assets	Other assets	2,892		3,122		Other assets	2,959		2,767
Total other assets	Total other assets	52,447		51,120		Total other assets	48,464		49,115
Total assets	Total assets	$	736,318	$	722,361	Total assets	$	705,599	$	722,403
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES AND PARTNERS' CAPITAL						LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	38,250	$	28,958	Accounts payable	$	25,146	$	34,589

Unearned income						Unearned income	4,915		2,590
Accrued liabilities and other	Accrued liabilities and other	41,998		42,075		Accrued liabilities and other	43,931		47,076

Current liabilities associated with discontinued operations		81		262

Total current liabilities	Total current liabilities	80,329		71,295		Total current liabilities	73,992		84,255
Other liabilities:	Other liabilities:					Other liabilities:
Long-term debt, net	Long-term debt, net	644,942		631,141		Long-term debt, net	635,566		634,016
Deferred tax liabilities	Deferred tax liabilities	893		819		Deferred tax liabilities	1,174		1,245

Operating lease liabilities	Operating lease liabilities	19,657		17,648		Operating lease liabilities	18,194		19,419
Other long-term liabilities	Other long-term liabilities	5,168		299		Other long-term liabilities	9,392		8,742
Total other liabilities	Total other liabilities	670,660		649,907		Total other liabilities	664,326		663,422
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies
Partners’ capital:
Partners' capital:						Partners' capital:
General partner interest	General partner interest	(1,563)		(1,486)		General partner interest	(1,656)		(1,618)
Common units (141,213,944 units issued and outstanding at June 30, 2022 and 140,386,811 units issued and outstanding at December 31, 2021)		1,381		17,049
Common units (141,995,028 units issued and outstanding at June 30, 2023 and 141,237,462 units issued and outstanding at December 31, 2022)						Common units (141,995,028 units issued and outstanding at June 30, 2023 and 141,237,462 units issued and outstanding at December 31, 2022)	(16,657)		(9,250)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(14,489)		(14,404)		Accumulated other comprehensive loss	(14,406)		(14,406)
Total partners’ capital		(14,671)		1,159
Total liabilities and partners’ capital		$	736,318	$	722,361
Total partners' capital						Total partners' capital	(32,719)		(25,274)
Total liabilities and partners' capital						Total liabilities and partners' capital	$	705,599	$	722,403

See Notes to Consolidated Financial Statements

Table of Contents

CSI Compressco LP

Consolidated Statements of Partners’ Capital

(In Thousands)

(Unaudited)


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

															Limited Partners
		General Partner		Common Unitholders							General Partner					Common Unitholders
		Amount		Units	Amount						Amount					Units						Amount

Balance at December 31, 2021		$	(1,486)	140,386	$	17,049			$	(14,404)						$	1,159
Balance at December 31, 2022														Balance at December 31, 2022	$	(1,618)					141,237			$	(9,250)		$	(14,406)		$	(25,274)
Net loss	Net loss	(31)		—	(6,539)				—							(6,570)			Net loss		(12)			—			(2,601)			—			(2,613)
Distributions ($0.01 per unit)	Distributions ($0.01 per unit)	(7)		—	(1,404)				—						(1,411)			Distributions ($0.01 per unit)		(7)			—			(1,414)			—			(1,421)
Equity compensation, net	Equity compensation, net	—		—	52				—						52			Equity compensation, net		—			—			75			—			75
Vesting of Phantom Units	Vesting of Phantom Units	—		828	—		—					—		Vesting of Phantom Units	—						758			—			—			—
Translation adjustment, net of taxes of $0	Translation adjustment, net of taxes of $0	—		—	—		12					12		Translation adjustment, net of taxes of $0	—						—			—			—			—

Balance at March 31, 2022		$	(1,524)	141,214	$	9,158	$	(14,392)				$	(6,758)
Balance at March 31, 2023														Balance at March 31, 2023	$	(1,637)					141,995			$	(13,190)		$	(14,406)		$	(29,233)
Net loss	Net loss	(32)		—	(6,796)		—					(6,828)		Net loss	(12)						—			(2,561)			—			(2,573)
Distributions ($0.01 per unit)	Distributions ($0.01 per unit)	(7)		—	(1,412)		—					(1,419)		Distributions ($0.01 per unit)	(7)						—			(1,420)			—			(1,427)

Contribution of capital		—			—		—					—

Equity compensation, net	Equity compensation, net	—		—	431		—					431		Equity compensation, net	—						—			514			—			514
Vesting of Phantom Units														Vesting of Phantom Units	—						—			—			—			—

Translation adjustment, net of taxes of $0		—		—	—		(97)					(97)

Balance at June 30, 2022		$	(1,563)	141,214	$	1,381	$	(14,489)				$	(14,671)
Balance at June 30, 2023														Balance at June 30, 2023	$	(1,656)					141,995			$	(16,657)		$	(14,406)		$	(32,719)


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

				Limited Partners											Limited Partners
		General Partner		Common Unitholders							General Partner					Common Unitholders
		Amount		Units	Amount						Amount					Units						Amount

Balance at December 31, 2020		$	(885)	47,352	$	(10,055)			$	(14,393)						$	(25,333)
Balance at December 31, 2021														Balance at December 31, 2021	$	(1,486)					140,386			$	17,049		$	(14,404)		$	1,159
Net loss	Net loss	(179)		—	(12,716)				—							(12,895)			Net loss		(31)			—			(6,539)			—			(6,570)
Distributions ($0.01 per unit)	Distributions ($0.01 per unit)	(7)		—	(477)				—						(484)			Distributions ($0.01 per unit)		(7)			—			(1,404)			—			(1,411)
Equity compensation, net	Equity compensation, net	—		—	474				—						474			Equity compensation, net		—			—			52			—			52
Vesting of Phantom Units	Vesting of Phantom Units	—		619	—		—					—		Vesting of Phantom Units	—						828			—			—			—
Consideration for the Spartan acquisition		—		—	26,444		—					26,444
Translation adjustment, net of taxes of $0	Translation adjustment, net of taxes of $0	—		—	—		57					57		Translation adjustment, net of taxes of $0	—						—			—			12			12
Other		—		—	(141)		—					(141)
Balance at March 31, 2021		$	(1,071)	47,971	$	3,529	$	(14,336)				$	(11,878)

Balance at March 31, 2022														Balance at March 31, 2022	$	(1,524)					141,214			$	9,158		$	(14,392)		$	(6,758)
Net loss	Net loss	(133)		—	(9,487)		—					(9,620)		Net loss	(32)						—			(6,796)			—			(6,828)
Distributions ($0.01 per unit)	Distributions ($0.01 per unit)	(7)		—	(480)		—					(487)		Distributions ($0.01 per unit)	(7)						—			(1,412)			—			(1,419)
Equity compensation, net	Equity compensation, net	—		—	475		—					475		Equity compensation, net	—						—			431			—			431

Translation adjustment, net of taxes of $0	Translation adjustment, net of taxes of $0	—		—	—		81					81		Translation adjustment, net of taxes of $0	—						—			—			(97)			(97)
Consideration for the Spartan acquisition		—		—	41		—					41

Balance at June 30, 2021		$	(1,211)	47,971	$	(5,922)	$	(14,255)				$	(21,388)

Balance at June 30, 2022														Balance at June 30, 2022	$	(1,563)					141,214			$	1,381		$	(14,489)		$	(14,671)

See Notes to Consolidated Financial Statements

Table of Contents

CSI Compressco LP

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(13,398)	$	(22,514)	Net loss	$	(5,186)	$	(13,398)
Reconciliation of net loss to cash provided by operating activities:	Reconciliation of net loss to cash provided by operating activities:					Reconciliation of net loss to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	38,705		39,035		Depreciation and amortization	37,937		38,705

Provision for deferred income taxes		55		1,016
Provision (benefit) for deferred income taxes						Provision (benefit) for deferred income taxes	(229)		55

Equity compensation expense	Equity compensation expense	483		1,310		Equity compensation expense	589		483
Provision for doubtful accounts		65		514
Provision (recovery) for doubtful accounts						Provision (recovery) for doubtful accounts	(1)		65
Amortization of deferred financing costs	Amortization of deferred financing costs	262		395		Amortization of deferred financing costs	39		262

Other non-cash charges and credits	Other non-cash charges and credits	(264)		(40)		Other non-cash charges and credits	179		(264)
Loss (gain) on sale of property, plant, and equipment		216		(299)
Gain on sale of property, plant, and equipment						Gain on sale of property, plant, and equipment	664		216

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(17,220)		(8,373)		Accounts receivable	9,629		(17,220)
Inventories	Inventories	(13,897)		(4,145)		Inventories	(10,671)		(13,897)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(435)		(2,894)		Prepaid expenses and other current assets	343		(435)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	6,403		2,231		Accounts payable and accrued expenses	(8,778)		6,403
Other	Other	594		(502)		Other	111		594
Net cash provided by (used in) operating activities		1,569		5,734
Net cash provided by operating activities						Net cash provided by operating activities	24,626		1,569
Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant, and equipment, net	Purchases of property, plant, and equipment, net	(21,032)		(10,531)		Purchases of property, plant, and equipment, net	(27,707)		(21,032)
Proceeds from sale of property, plant, and equipment	Proceeds from sale of property, plant, and equipment	3,267		543		Proceeds from sale of property, plant, and equipment	5,752		3,267

Acquisition of affiliate from TETRA, net of cash acquired		—		420

Acquisition of business		—		1,057

Net cash used in investing activities	Net cash used in investing activities	(17,765)		(8,511)		Net cash used in investing activities	(21,955)		(17,765)
Financing activities:	Financing activities:					Financing activities:
Proceeds from long-term debt	Proceeds from long-term debt	20,595		4,916		Proceeds from long-term debt	217,245		20,595
Payments of long-term debt	Payments of long-term debt	(6,803)		(8,154)		Payments of long-term debt	(215,669)		(6,803)

Distributions	Distributions	(2,829)		(971)		Distributions	(2,848)		(2,829)

Equipment financing lease, net						Equipment financing lease, net	2,484		—
Other financing activities	Other financing activities	6,981		(149)		Other financing activities	(65)		6,981

Net cash provided by (used in) financing activities		17,944		(4,358)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	1,147		17,944
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	18		(33)		Effect of exchange rate changes on cash	23		18
Increase (decrease) in cash and cash equivalents and restricted cash		1,766		(7,168)
Cash and cash equivalents and restricted cash at beginning of period		6,598		16,577
Cash and cash equivalents and restricted cash at end of period		$	8,364	$	9,409
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	3,841		1,766
Cash and cash equivalents at beginning of period						Cash and cash equivalents at beginning of period	8,475		6,598
Cash and cash equivalents at end of period						Cash and cash equivalents at end of period	$	12,316	$	8,364
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest paid	Interest paid	$	23,636	$	23,624	Interest paid	$	26,262	$	23,636
Income taxes paid	Income taxes paid	$	4,170	$	2,478	Income taxes paid	$	2,539	$	4,170
Decrease (increase) in accrued capital expenditures	Decrease (increase) in accrued capital expenditures	$	(947)	$	208	Decrease (increase) in accrued capital expenditures	$	4,896	$	(947)
Paid-in-kind interest		$	—	$	2,750

See Notes to Consolidated Financial Statements

Table of Contents

CSI Compressco LP

Notes to Consolidated Financial Statements

(Unaudited)

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

Organization

CSI Compressco LP, a Delaware limited partnership, is a provider of compression and treating services. Natural gas compression is used for oil production, gathering, artificial lift, transmission, processing, and storage. Treating services include the removal of contaminants from a natural gas stream and cooling to reduce the temperature of produced gas and liquids. We also sell used standard compressor packages and provide aftermarket services and compressor package parts and components manufactured by third-party suppliers. We provide contract and treating services and compressor parts and component sales 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 international locations, including the countries of Mexico, Canada, Argentina ~~Egypt~~ and Chile. Previously, our equipment sales (new unit sales) business included the fabrication and sale of new standard and custom-designed, engineered compressor packages fabricated primarily at our facility in Midland, Texas. In the fourth quarter of 2020, we fully exited the new unit sales business and we have reflected these operations as discontinued operations for all periods presented. See Note 2 - “Discontinued Operations.” Used equipment sales revenue continues to be included in equipment sales revenue. Unless the context requires otherwise, when we refer to “the Partnership,” “we,” “us,” and “our,” we are describing CSI Compressco LP and its wholly owned subsidiaries.

Presentation

Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. In the opinion of our management, our unaudited consolidated financial statements as of June 30, ~~2022,~~2023, and for the three and six-month periods ended June 30, ~~2022~~2023 and ~~2021~~June 30, 2022 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 six-month period ended June 30, ~~2022~~2023 are not necessarily indicative of results that may be expected for the twelve months ended December 31, ~~2022.~~2023.

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, ~~2021~~2022 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March ~~14, 2022.~~13, 2023.

On November 10, 2021, the Partnership entered into a Contribution Agreement (the “Contribution Agreement”) by and among the Partnership, CSI Compressco GP LLC, a Delaware limited liability company (our “general partner”), Spartan Energy Partners, LP, a Delaware limited partnership (“Spartan”) and CSI Compressco Sub Inc., a Delaware corporation (“Compressco Sub”). Pursuant to the terms of the Contribution Agreement, Spartan contributed to the Partnership 100% of the limited liability company interest in Treating Holdco, LLC, a Delaware limited liability company (“Treating Holdco”), 100% of the common stock in Spartan Terminals Operating, Inc., a Delaware corporation (“Spartan Terminals”), and 99% of the limited liability company interests in Spartan Operating Company LLC, a Delaware limited liability company (“Spartan Operating” and together with Treating Holdco and Spartan Terminals, “Spartan Treating”) (such interests in Spartan Treating, the “Contributed Interests”) in exchange for 48.4 million common units in the Partnership. We refer to the acquisition of the contributed interests as the “Spartan Acquisition.” The Spartan Acquisition was accounted for as a change in reporting entity between entities under common control in accordance with ASC 250-10-45-21. A change in reporting entity requires retrospective application for all periods as if the Spartan Acquisition had been in effect since inception of common control. As a result, the consolidated financial statements and notes thereto for the Partnership reflected in this report have been prepared as if the change in reporting entity occurred on January 29, 2021. See Note 4 - “Common Control Acquisition,” for a description of the transaction.

~~Table of Contents~~

Segments

Our general partner has concluded that we operate in 1one reportable segment.

~~Business Combinations~~

When we acquire a business from an entity under common control, whereby the companies are ultimately controlled by the same party or parties both before and after the transaction, it is treated similar to the pooling of interests method of accounting. The assets and liabilities are recorded at the transferring entity’s historical cost instead of reflecting the fair value of assets and liabilities. Accordingly, the financial statements reflect the combined entities at historical carrying values from the date of common control for the periods ended June 30, 2022 and December 31, 2021.

Significant Accounting Policies

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, ~~2021~~2022 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 three and six-months ended June 30, ~~2022.~~2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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.

Cash Equivalents

We consider all highly liquid cash investments with maturities of three months or less when purchased to be cash equivalents. We have concentrated credit risk for cash by maintaining deposits in a major bank, which may at times exceed amounts covered by insurance provided by the United States Federal Deposit Insurance Corporation

Table of Contents

(“FDIC”). We monitor the financial health of the bank and have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk. Management believes the financial institutions are financially sound and risk of loss is minimal.

Financial Instruments

Financial instruments that subject us to concentrations of credit risk consist principally of trade accounts receivable, which are primarily due from companies of varying size engaged in oil and gas activities in the United States, Canada, Mexico, Argentina, Chile, and Egypt. Our policy is to review the financial condition of customers before extending credit and periodically updating customer 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 ~~$73.6~~$63.8 million outstanding under our variable rate revolving credit facilities as of June 30, ~~2022~~2023 and face market risk exposure related to changes in applicable interest rates.

Foreign Currencies

We have designated the Canadian dollar, Mexican peso, Egyptian pound, Chilean peso and the Euro as the functional currency for ~~our operations in Canada.~~Canada, Mexico, Egypt, Chile, and the Netherlands, respectively. We are exposed to fluctuations between the U.S. dollar and certain foreign currencies, including the Canadian dollar, the Mexican peso, the Argentine peso, the Egyptian pound, ~~and~~ the Chilean peso, and Euro as a result of our international operations. Foreign currency exchange (gains) losses are included in other (income) expense, net and totaled $0.8 million and $0.8 million during the three and six-month periods ended June 30, 2023, respectively, and $0.7

~~Table of Contents~~

million and $1.2 million during the three and six-month periods ended June 30, 2022 ~~respectively, and $(0.5) million and $(0.1) million during the three and six-month periods ended June 30, 2021~~, respectively.

Leases

Lessee

As a lessee, unless the lease meets the criteria of short-term and is excluded per our policy election described below, we initially recognize a lease liability and related right-of-use asset on the commencement date. The right-of-use asset represents our right to use an underlying asset and the lease liability represents our obligation to make lease payments to the lessor over the lease term.

All of our long-term leases are operating leases and are included in operating lease right-of-use assets, accrued liabilities and other, and operating lease liabilities in our consolidated balance sheet as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. We determine whether a contract is or contains a lease at inception of the contract. Where we are a lessee in a contract that includes an option to extend or terminate the lease, we include the extension period or exclude the period covered by the termination option in our lease term in determining the right-of-use asset and lease liability, if it is reasonably certain that we would exercise the option.

As an accounting policy election, we do not include short-term leases on our balance sheet. Short-term leases include leases with a term of 12 months or less, inclusive of renewal options we are reasonably certain to exercise. The lease payments for short-term leases are included as operating lease costs on a straight-line basis over the lease term in cost of revenues or selling, general, and administrative expense based on the use of the underlying asset. We recognize lease costs for variable lease payments not included in the determination of a lease liability in the period in which an obligation is incurred.

As allowed by U.S. GAAP, we do not separate nonlease components from the associated lease component for our contract services contracts and instead account for those components as a single component based on the accounting treatment of the predominant component. In our evaluation of whether Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842 “Leases” or ASC 606 “Revenue from Contracts with Customers” is applicable to the combined component based on the predominant component, we determined the

Table of Contents

services nonlease component is predominant, resulting in the ongoing recognition of our compression services contracts following ASC 606.

Our operating leases are recognized at the present value of lease payments over the lease term. When the implicit discount rate is not readily determinable, we use our incremental borrowing rate to calculate the discount rate used to determine the present value of lease payments. Consistent with other long-lived assets or asset groups that are held and used, we test for impairment of our right-of-use assets when impairment indicators are present.

Lessor

Our agreements for rental equipment contain an operating lease component under ASC 842 because we, as the lessor, retain substantial exposure to changes in the underlying asset’s value, unlike a sale or secured lending arrangement. Therefore, we do not derecognize the underlying asset, and recognize income associated with providing the lessee the right to control the use of the asset ratably over the lease term.

As a lessor, we recognize operating lease revenue on our statement of operations as equipment rentals. This revenue is recognized on a straight-line basis over the term of the lease based on the monthly rate in the agreement. The leased asset remains on the balance sheet consistent with other property, plant and equipment. Cash receipts associated with all leases are classified as cash flows from operating activities in the statement of cash flows.

The leased equipment primarily consists of the Spartan Treating amine plants, ~~cooling units~~gas coolers and production equipment. All of this equipment is modular and skid mounted. It can be moved between locations. Lease terms for this equipment vary in length. Amine plants range from one to five years while the ~~cooling units~~gas coolers range from six months to two years.

Allowance for Credit Losses

~~Table~~Trade accounts receivable are stated at their net realizable value. The allowance for credit losses against gross trade accounts receivable reflects the best estimate of ~~Contents~~expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type, and fixed reserve percentages are established for each pool of trade accounts receivables.

In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted. As of June 30, 2023, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements.

Inventories

Inventories consist primarily of compressor package spare parts and supplies and work in process, and ~~are stated at the lower of cost ornet 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

Table of Contents

is based on our 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 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.

We did not record any impairments of long-lived assets during the three and six-month periods ended June 30, ~~2022~~2023 and ~~2021.~~June 30, 2022.

Sale of Assets

During June 2023, we entered into a purchase and sale agreement for the sale of our equipment in Egypt for a total sale price of $5.8 million. The sale of the equipment resulted in a loss of $0.2 million during the three and six-months ended June 30, 2023, which is reflected in other (income) expense, net in our statement of operations. As of June 30, 2023, we no longer have operations in Egypt.

Income Taxes

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 partneron 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 six-month periods ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, all unvested phantom units were excluded from the calculation of diluted common units because the impact was anti-dilutive.

~~Table of Contents~~

Fair Value Measurements

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. We utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value (a Level 2 fair value measurement). Refer to Note 97 – “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).

Table of Contents

Distributions

On January ~~20, 2022~~19, 2023 and April ~~19, 2022,~~17, 2023, the board of directors of our general partner declared a cash distribution attributable to the respective quarter ~~end~~ended of $0.01 per outstanding common unit. ~~These distributions equate~~This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. ~~These~~This quarterly ~~distributions were~~distribution was paid on February 14, ~~2022~~2023 and May ~~13, 2022~~15, 2023 to each of the holders of common units of record as of the close of business on January 31, ~~2022~~2023 and April 30, ~~2022,~~2023, respectively.

~~New Accounting Pronouncements~~

~~Standards adopted in 2022~~

~~We did not adopt any new standards in 2022.~~

~~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 the 2023 fiscal year. We continue to assess the potential effects of these changes to our consolidated financial statements.

~~NOTE 2— DISCONTINUED OPERATIONS~~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~~Loss from discontinued operations, net of ~~financial information~~tax for the three and six-month periods ended June 30, 2022, was $0.1 million gain related to ~~our discontinued operations for~~ the ~~new unit sales business is as follows:~~warranty reserve not being utilized.

~~Table of Contents~~

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

~~(in thousands)~~New Accounting Pronouncements

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Revenue $ — $ — $ — $ —
Cost of revenues — (13) — 9
Depreciation and amortization — — — —
Impairments of long-lived assets — — — —
General and administrative expense — 304 — 344
Other (income) expense, net (92) — (92) —
Total pretax loss from discontinued operations 92 (291) 92 (353)
Income tax provision — — — —
Total loss from discontinued operations $ 92 $ (291) $ 92 $ (353)
Standards adopted in 2023

~~Reconciliation~~In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of ~~Major Classes of Assets and Liabilities~~Credit Losses on Financial Instruments.” ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the ~~Discontinued Operations to Amounts Presented Separately~~currently used incurred loss methodology, which will result in the ~~Statement~~more timely recognition of ~~Financial Position~~

~~(in thousands)~~

June 30, 2022 December 31, 2021
Carrying amounts of major classes of assets included as part of discontinued operations
Inventories $ — $ —
Other Current Assets — —
Current assets of discontinued operations $ — $ —
Carrying amounts of major classes of liabilities included as part of discontinued operations
Accrued liabilities $ 81 $ 262
Current liabilities of discontinued operations $ 81 $ 262
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. We adopted this new standard on January 1, 2023 and our adoption of this standard did not have a material impact on our consolidated financial statements.

NOTE 32 — REVENUE FROM CONTRACTS WITH CUSTOMERS

As of June 30, ~~2022~~2023, we had ~~$80.8~~$216.7 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 June 30, ~~2022~~2023 for completion of performance obligations of compression service contracts are as follows:

2022 2023 2024 2025 Thereafter Total
(In Thousands)
Compression service contracts remaining performance obligations $ 43,956 $ 26,341 $ 7,052 $ 941 $ 2,472 $ 80,762


	2023		2024		2025		2026		Thereafter		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	56,278	$	102,832	$	43,594	$	12,189	$	1,785	$	216,678

Our contract asset balances included in trade accounts receivable in our consolidated balance sheet, primarily associated with revenue accruals prior to invoicing, were ~~$6.9~~$2.2 million and ~~$4.1~~$4.2 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

1110

Table of Contents

The following table reflects the changes in unearned income in our consolidated balance sheets for the periods indicated:


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
		(In Thousands)					(In Thousands)
Unearned income, beginning of period	Unearned income, beginning of period	$	2,187	$	269	Unearned income, beginning of period	$	2,590	$	2,187
Additional unearned income	Additional unearned income	3,279		1,395		Additional unearned income	6,550		3,279
Revenue recognized	Revenue recognized	(3,246)		(476)		Revenue recognized	(4,225)		(3,246)
Unearned income, end of period	Unearned income, end of period	$	2,220	$	1,188	Unearned income, end of period	$	4,915	$	2,220

Unearned income is included in accrued liabilities and other on the consolidated balance sheets. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, contract costs were immaterial.

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In Thousands)									(In Thousands)
Contract services	Contract services									Contract services
United States	United States	$	53,935	$	49,539	$	106,861	$	97,417	United States	$	64,412	$	53,935	$	128,089	$	106,861
International	International	10,413		8,855		20,294		17,214		International	6,109		10,413		12,079		20,294
		64,348		58,394		127,155		114,631			70,521		64,348		140,168		127,155
Aftermarket services	Aftermarket services									Aftermarket services
United States	United States	15,860		14,072		28,550		24,915		United States	20,878		15,860		37,771		28,550
International	International	353		846		531		1,037		International	331		353		789		531
		16,213		14,918		29,081		25,952			21,209		16,213		38,560		29,081
Equipment rentals	Equipment rentals									Equipment rentals
United States	United States	2,105		1,730		4,071		2,869		United States	3,161		2,105		5,966		4,071
International	International	1,513		1,349		3,047		2,235		International	1,612		1,513		2,921		3,047
		3,618		3,079		7,118		5,104			4,773		3,618		8,887		7,118
Equipment sales	Equipment sales									Equipment sales
United States	United States	302		115		1,017		586		United States	180		302		264		1,017
International	International	41		25		163		24		International	96		41		271		163
		343		140		1,180		610			276		343		535		1,180
Total Revenue	Total Revenue									Total Revenue
United States	United States	72,202		65,456		140,499		125,787		United States	88,631		72,202		172,090		140,499
International	International	12,320		11,075		24,035		20,510		International	8,148		12,320		16,060		24,035
		$	84,522	$	76,531	$	164,534	$	146,297		$	96,779	$	84,522	$	188,150	$	164,534

~~NOTE 4 — COMMON CONTROL ACQUISITION~~

On November 10, 2021, the Partnership entered into the Contribution Agreement with the general partner, Spartan, and Compressco Sub. Pursuant to the terms of the Contribution Agreement, Spartan contributed Spartan Treating to the Partnership in exchange for the issuance of 48.4 million common units in the Partnership to Spartan. As the Partnership and Spartan Treating were under common control at the time of the Spartan Acquisition, the acquisition was deemed to be a transaction under common control under ASC 805, “Business Combinations.” Therefore, we accounted for this transaction at the carrying amount of the net assets acquired and the results of operations have been combined for the Partnership and Spartan Treating from the date of common control, which was January 29, 2021.

Assets acquired and liabilities assumed are reported at their historical carrying amounts. The balance sheet of Spartan Treating on November 10, 2021, the date of acquisition, consisted of (in thousands):

~~Table of Contents~~


~~Current assets~~	$	~~6,616~~
~~Property, plant, and equipment~~	~~112,972~~
~~Less accumulated depreciation~~	~~(53,039)~~
~~Net property, plant, and equipment~~	~~59,933~~
~~Other assets~~	~~1,245~~
~~Total assets~~	~~67,794~~

~~Current liabilities~~	~~7,597~~
~~Long-term debt, net~~	~~32,590~~
~~Other liabilities~~	~~239~~
~~Total liabilities~~	~~40,426~~
~~Net assets~~	$	~~27,368~~

The Partnership’s consolidated financial statements as of June 30, 2022 and December 31, 2021 include the assets and liabilities of Spartan Treating, including intercompany eliminations. As the results of operations for Spartan Treating were consolidated as of January 29, 2021, the date common control began, the Partnership’s balances for Partners’ capital as of January 29, 2021 were adjusted to include Spartan Treating’s equity balances as of that date. On November 10, 2021, Partners’ capital associated with Spartan Treating was $27.4 million. In consolidation, Partners’ capital associated with Spartan Treating is eliminated.

The consideration for the Spartan Treating acquisition was the issuance to Spartan of 48.4 million common units. The value of the common units was approximately $65.3 million. As the acquisition is accounted for as a transaction under common control and the transfer of assets and liabilities occurs at historical cost, the value of the common units has no impact on Partners’ capital. The difference between the consideration and the net assets acquired of $37.9 million is recognized as a deemed distribution as the book value of net assets as of November 10, 2021 was less than the consideration. As the Spartan Treating acquisition was accounted for retrospectively to the date of common control, the Partnership’s Consolidated Statement of Operations includes Spartan Treating’s net income of $4.0 million corresponding to the period from January 29, 2021 to June 30, 2021.

~~The following tables include unaudited pro-forma financial information and the effect of the Spartan Acquisition after elimination of intercompany transactions.~~

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
CSI
Compressco LP Spartan Treating Total CSI
Compressco LP Spartan Treating Total
(In Thousands, Unaudited)
Revenue $ 69,758 $ 6,773 $ 76,531 $ 135,468 $ 10,829 $ 146,297
Income (loss) from continuing operations $ (11,794) $ 2,465 $ (9,329) $ (26,197) $ 4,036 $ (22,161)
Net income (loss) $ (12,085) $ 2,465 $ (9,620) $ (26,550) $ 4,036 $ (22,514)

NOTE 53 — INVENTORIES

Components of inventories as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, are as follows:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In Thousands)					(In Thousands)
Parts and supplies	Parts and supplies	$	39,254	$	31,441	Parts and supplies	$	47,064	$	44,042
Work in progress	Work in progress	4,104		1,830		Work in progress	5,297		1,860
Total inventories	Total inventories	$	43,358	$	33,271	Total inventories	$	52,361	$	45,902

Inventories consist primarily of compressor package spare parts and supplies. Work in progress inventories consist of work in progress for our aftermarket business that has not been invoiced.

1311

Table of Contents

NOTE 64 — LEASES

Lessee Accounting

We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms up to ten 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. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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 $4.0 million and $7.9 million for the three and six month period ended June 30, 2023, respectively, of which $0.4 million and $0.6 million respectively, related to short-term leases. Total lease expense was $4.1 million and $8.3 million for the three and six month period ended June 30, 2022, respectively, of which $1.2 million and $2.6 million respectively, related to short-term leases. Variable rent expense was not material.

Operating lease supplemental cash flow information:


	Six Months Ended June 30,
	2023		2022
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	7,338	$	5,684

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	6,182	$	9,104

Supplemental balance sheet information:


	June 30, 2023		December 31, 2022
	(In Thousands)
Operating leases:
Operating right-of-use asset	$	27,841	$	27,205

Accrued liabilities and other	$	9,604	$	7,620
Operating lease liabilities	18,194		19,419
Total operating lease liabilities	$	27,798	$	27,039

Additional operating lease information:


	June 30, 2023		December 31, 2022
Weighted average remaining lease term:
Operating leases	3.79 years		4.51 years

Weighted average discount rate:
Operating leases	10.05	%	9.93	%

Table of Contents

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 June 30, 2023:


	Operating Leases
	(In Thousands)

Remainder of 2023	$	6,559
2024	9,695
2025	6,221
2026	5,390
2027	2,540
Thereafter	2,781
Total lease payments	33,186
Less imputed interest	(5,388)
Total lease liabilities	$	27,798

Lessor Accounting

Our leased equipment primarily consists of amine plants, ~~cooling units~~gas coolers, and other production equipment. Certain of our agreements with our customers for rental equipment contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use, and (iii) the customer directs the use of the identified assets throughout the period of use. We have elected to apply the practical expedient provided to lessors to combine the lease and non-lease component of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.

Our lease agreements generally have contract terms based on monthly rates. Lease revenue is recognized straight-line based on these monthly rates. We do not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets.

We recognized operating lease revenue, which is included in “Equipment rentals” on the consolidated statements of operations as follows:

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In Thousands) (In Thousands)
Equipment rentals 3,618 $ 3,079 7,118 5,104


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023	2022
	(In Thousands)				(In Thousands)
Equipment rentals	$	4,773	$	3,618	8,887	7,118

The following table presents the maturity of lease payments for operating lease agreements in effect as of June 30, ~~2022.~~2023. This presentation includes minimum fixed lease payments and does not include an estimate of variable lease consideration. These agreements have remaining lease terms ranging from ~~7 months~~1 month to 76 years. The following table presents the undiscounted cash flows expected to be received related to these agreements:

2022 2023 2024 2025 2026 Thereafter
(In Thousands)
Future minimum lease revenue $ 5,754 5,344 1,644 1,599 1,576 3,421


	2023		2024		2025		2026		2027		Thereafter
	(In Thousands)
Future minimum lease revenue	$	13,145	$	8,973	$	2,388	$	1,576	$	1,576	$	2,233

Table of Contents

NOTE 75 — LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:


		Scheduled Maturity	June 30, 2022		December 31, 2021				June 30, 2023		December 31, 2022
			(In Thousands)					Scheduled Maturity	(In Thousands)
Credit Agreement (1)	Credit Agreement (1)	June 29, 2025	$	13,230	$	330	Credit Agreement (1)	June 29, 2025	$	21,465	$	6,312
Spartan Credit Agreement (2)	Spartan Credit Agreement (2)	January 29, 2024	59,210		58,045		Spartan Credit Agreement (2)	October 17, 2025	41,335		54,912
7.50% First Lien Notes due 2025 (3)	7.50% First Lien Notes due 2025 (3)	April 1, 2025	399,992		399,767		7.50% First Lien Notes due 2025 (3)	April 1, 2025	400,187		400,293
10.00%/10.75% Second Lien Notes due 2026 (4)	10.00%/10.75% Second Lien Notes due 2026 (4)	April 1, 2026	172,510		172,999		10.00%/10.75% Second Lien Notes due 2026 (4)	April 1, 2026	172,579		172,499
Total long-term debt	Total long-term debt		$	644,942	$	631,141	Total long-term debt		635,566		634,016
Other borrowings (5)							Other borrowings (5)	Various	16,613		14,129
Total long-term debt and other borrowings							Total long-term debt and other borrowings		$	652,179	$	648,145

(1) Net of unamortized deferred financing costs of $0.3 million and ~~$0.5~~$0.4 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(2) Net of unamortized deferred financing costs of ~~$0.8~~$0.7 million and ~~$1.0~~$0.6 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(3) Net of unamortized deferred financing costs of ~~$3.2~~$1.8 million and ~~$3.9~~$2.3 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, unamortized discount of $0.1 million and ~~$0.2~~$0.1 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and deferred restructuring gain of ~~$3.3~~$2.1 million and ~~$3.9~~$2.7 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(4) Net of unamortized deferred financing costs of ~~$0.8~~$1.6 million and $1.9 million, unamortized discount of $0.6 million and $0.7 million, and deferred restructuring gain of $2.0 million and $2.4 million as of June 30, ~~2022~~2023 and December 31, ~~2021, respectively, unamortized discount of $2.2~~2022, respectively.

(5) Includes $7.2 million and ~~$0.9~~$5.4 million of current liability classified as Accrued liabilities and other, and $9.4 million and $8.7 million classified as Other long-term liabilities on the accompanying consolidated balance sheet as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively ~~and deferred restructuring gain of $2.8 million and $3.1 million as of June 30, 2022 and December 31, 2021, respectively.~~

~~Table of Contents~~

Our Credit Agreement and Senior Note agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. We are in compliance with all covenants of our credit and senior note agreements as of June 30, ~~2022.~~2023.

See Note 86 – “Related Party Transactions,” for a discussion of our amounts payable to affiliates and long-term affiliate payable to Spartan Energy Partners LP (“Spartan”).

Credit Agreement

On June 11, 2020, the 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”). The Credit Agreement provides for maximum revolving credit commitments of $35.0 million and includes a $5.0 million reserve, which results in reduced borrowing availability. The Credit Agreement includes a $25.0 million sublimit for letters of credit.

On January 29, 2021, the Partnership further amended the Credit Agreement to 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 was reduced to $5.0 million and Spartan’s backstop for the Partnership’s outstanding letters of credits was released.

On November 10, 2021, the Partnership and CSI Compressco Sub Inc., as borrowers, entered into the Fourth Amendment to Loan and Security Agreement (the “Amendment”) amending 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 of America, N.A., in its capacity as administrative agent, issuing bank and swing line issuer (“Administrative Agent”), and the other lenders and loan parties party thereto. The Amendment provided for changes and modifications to the Credit Agreement as set forth therein, which include, among other things, changes to certain terms of the Credit Agreement to permit: (i) the consummation of the Spartan Acquisition pursuant to the Contribution Agreement, and after giving effect to such Spartan Acquisition, for Spartan Terminals and Spartan Operating to become Immaterial Subsidiaries (as defined in the Credit Agreement) and Treating Holdco and its subsidiaries to become Unrestricted Subsidiaries (as defined in the Credit Agreement), in each case under the Credit Agreement and related loan documents; (ii) the sale by CSI Compressco Leasing LLC, a Delaware limited liability company and a subsidiary of the Partnership, and subsequent leaseback by CSI Compressco Operating LLC, a Delaware limited liability company and subsidiary of the Partnership, of certain compressor units with Treating Holdco and/or its subsidiaries occurring on or about the date of the Amendment (the “Spartan Sale/Leaseback”); and (iii) the consummation of the Redemption (as defined below) within 45 days following the date of the Amendment utilizing proceeds from the Spartan Sale/Leaseback, the Private Placement (as defined in our Annual Report on Form 10-K ) and the issuance of $10 million in aggregate principal amount of our 10.000%/10.750% Senior Secured Second Lien Notes due 2026 (the “New Second Lien Notes”. Refer to Note 8 - “Related Party Transactions,” for a discussion of the Spartan Acquisition and the Spartan Sale/Leaseback.

On June 30, 2022, the Partnership, CSI Compressco Sub Inc. and CSI Compressco Operating LLC (collectively with the Partnership and CSI Compressco Sub Inc., the “Borrowers”), and certain subsidiaries of the Partnership named therein as guarantors (the “Guarantors”), entered into that certain Fifth Amendment to Loan and Security Agreement (the “Fifth Amendment”) with the Lenders (as defined below) party thereto, and Bank of America, N.A., in its capacity as administrative agent (in such capacity, “Administrative Agent”), collateral agent, letter of credit issuer and swing line lender.

The Fifth Amendment amends and modifies that certain Loan and Security Agreement among the Borrowers, the Guarantors, the financial institutions from time to time party thereto as lenders (the “Lenders”) and the Administrative Agent dated as of June 29, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). The Fifth Amendment provided for changes and modifications to the Credit Agreement as set forth therein, which include, among other things, the reduction of the reserve to $3.5 million and the extension of the Termination Date (as defined in the Credit Agreement) from June 29, 2023 to June 29, 2025.

As of June 30, ~~2022,~~2023, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement, we had availability of ~~$10.6~~$4.7 million.

~~Table of Contents~~

The maturity date of the Credit Agreement is June 29, 2025. As of June 30, ~~2022~~2023 we had ~~an $13.6~~$21.8 million outstanding balance and ~~had $1.9~~$1.4 million in letters of credit against our Credit Agreement.

Table of Contents

Spartan Credit Agreement

On November 10, 2021, certain unrestricted subsidiaries of the Partnership, Spartan Energy Services LLC, as borrower, and Treating Holdco, as new guarantor, entered into the First Amendment to Loan, Security and Guaranty Agreement (the “Spartan Amendment”) amending the Loan, Security and Guaranty Agreement dated January 29, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Spartan Credit Agreement”) with Bank of America, N.A., in its capacity as agent, and the other lenders and loan parties party thereto. The Spartan Amendment provided for changes and modifications to the Spartan Credit Agreement as set forth therein, which include, among other things, changes to certain terms of the Spartan Credit Agreement as follows: (i) increase in Commitments (as defined in the Spartan Credit Agreement) from $55,000,000 to $70,000,000; (ii) permit the consummation of the Spartan Acquisition pursuant to the Contribution Agreement, and after giving effect to such Spartan Acquisition, the release of each of Spartan, Spartan Terminals and Spartan Operating as Obligors (as defined in the Spartan Credit Agreement) and the joinder of Spartan Treating as a Guarantor (as defined in the Spartan Credit Agreement), in each case under the Spartan Credit Agreement and related loan documents; (iii) revise Change of Control (as defined in the Spartan Credit Agreement) to allow for Control (as defined in the Spartan Credit Agreement) by the Partnership and the general partner; and (iv) permit the Spartan Sale/Leaseback. Refer to Note 8 - “Related Party Transactions,” for a discussion of the Spartan Acquisition and the Spartan Sale/Leaseback.

As of June 30, ~~2022,~~2023, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Spartan Credit Agreement, we had availability of ~~$7.3~~$27.8 million.

~~The maturity date of the Spartan Credit Agreement is January 29, 2024.~~ As of June 30, ~~2022,~~2023, we had ~~$60.0~~$42.0 million outstanding and no letters of credit against the Spartan Credit ~~Agreement.~~Agreement and the maturity date of the Spartan Credit Agreement is October 17, 2025.

7.50% First Lien Notes due 2025

As of June 30, ~~2022,~~2023, our 7.50% First Lien Notes due 2025 (the “First Lien Notes”) had ~~$400.0~~$400.2 million outstanding net of unamortized discounts, unamortized deferred financing costs and deferred restructuring gains. Interest on these notes is payable on April 1 and October 1 of 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%/10.750% Second Lien Notes due 2026

As of June 30, ~~2022,~~2023, our 10.000%/10.750% Second Lien Notes due 2026 (the “Second Lien Notes”) had ~~$172.5~~$172.6 million outstanding, net of unamortized discounts, unamortized deferred financing costs and deferred restructuring gains. Interest on the Second Lien Notes is payable on April 1 and October 1 of each year. The Second Lien Notes are secured by a second-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 and certain other excluded U.S. subsidiaries). In connection with the payment of PIK Interest (as defined below), if any, in respect of the Second Lien Notes, the issuers will be entitled, to increase the outstanding aggregate principal amount of the Second Lien Notes or issue additional notes (“PIK notes”) under the Second Lien Notes indenture on the same terms and conditions as the already outstanding Second Lien 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 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”).

~~Table of Contents~~

During the fourth quarter of ~~2021,~~2020, the second quarter of 2021, and the ~~second~~fourth quarter of ~~2020,~~2021, the Partnership elected to increase the principal amount outstanding through the issuance of PIK notes. As of June 30, ~~2022,~~2023, our principal amount outstanding included $7.2 million of PIK notes.

Finance ~~Agreement~~Agreements

During ~~the first quarter of~~ 2022, CSI Compressco Leasing LLC and CSI Compressco Operating LLC (individually and collectively as Debtor), with CSI Compressco LP (as Guarantor), entered into a Master Equipment Finance Agreement ~~(the “Finance Agreement”)~~ with a third party in the amount of ~~$7.8~~$14.1 million to finance certain compression equipment. The note is payable in monthly installments of ~~$0.2~~$0.4 million for 36 months. The current portion of this amount is classified in accrued liabilities and other and the long-term portion is classified in other long-term liabilities on the accompanying consolidated balance sheet.

During the first quarter of 2023, CSI Compressco Leasing LLC and CSI Compressco Operating LLC (individually and collectively as Debtor), with CSI Compressco LP (as Guarantor), entered into a Master Equipment Finance Agreements with a third party totaling $5.1 million to finance certain compression equipment. The notes are payable in monthly installments totaling $0.2 million for 36 months. The current portion of these amounts are classified in accrued liabilities and other and the long-term portion is classified in other long-term liabilities on the accompanying consolidated balance sheet.

Table of Contents

NOTE 86 — RELATED PARTY TRANSACTIONS

~~GP Sale~~

On January 29, 2021, Spartan acquired from TETRA Technologies, Inc. (“TETRA”) the Partnership’s general partner, its incentive distribution rights (the “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.

~~Acquisition of Spartan entities~~

On November 10, 2021, the Partnership entered into the Contribution Agreement by and among the Partnership, the general partner, Spartan, and Compressco Sub. Pursuant to the terms of the Contribution Agreement, Spartan contributed to the Partnership 100% of the limited liability company interest in Treating Holdco, 100% of the common stock in Spartan Terminals, and 99% of the limited liability company interests in Spartan Operating and the general partner agreed to cancel its IDRs in the Partnership in exchange for 48.4 million common units representing the limited partner interests in the Partnership. We refer to the acquisition of the Contributed Interests as the Spartan Acquisition. The general partner agreed to cancel its IDRs in the Partnership within 60 days of the Spartan Acquisition, and amended and restated its limited partnership agreement on January 6, 2022 to effect such cancellation. In connection with the Spartan Acquisition, we closed a private placement of common units to certain investors for gross proceeds of $52.7 million (the “Private Placement”).

Spartan and General Partner Ownership

As of June 30, ~~2022,~~2023, Spartan’s ownership interest in us was approximately ~~45.5%~~45.2%, with the common units held by the public representing an approximate 55% interest in us. As of June 30, ~~2022,~~2023, Spartan’s ownership was through various wholly owned subsidiaries and consisted of approximately ~~45.0%~~44.9% of the limited partner interests plus the approximate 0.5% general partner interest. As a result of its ownership of common units and its general partner interest in us, Spartan received distributions of $1.3 million during the six months ended June 30, ~~2022. Prior to the GP sale, as a result of its ownership of common units~~2023 and ~~its general partner interest in us, TETRA received distributions of $0.1 million during the six months ended June 30, 2021.~~2022.

Indemnification Agreement

We have entered into indemnification agreements with each of our current directors and officers with regard to their services as a director or officer, in order to enhance the indemnification rights provided under Delaware law and our Partnership Agreement. The individual indemnification agreements provide each such director or officer with the right to receive his or her costs of defense if he or she is made a party or witness to any proceeding other than a proceeding brought by or in the right of us, provided that such director or officer has not acted in bad faith or engaged in fraud with respect to the action that gave rise to his or her participation in the proceeding.

~~Other Sources of Financing~~

In February 2019, we entered into a transaction with TETRA whereby TETRA agreed to fund the construction of and purchase from us up to $15.0 million of new compression services equipment and to subsequently lease the equipment back to us in exchange for a monthly rental fee. Pursuant to this arrangement, $14.8 million was funded by TETRA for the construction of new compressor services equipment and all

~~Table of Contents~~

compression units were completed and deployed under this agreement. For accounting purposes, the inclusion of a repurchase option that allowed us to repurchase the equipment at a fixed price during certain periods of the agreement caused the transaction to be accounted for as a financing transaction, as opposed to a sale-leaseback, resulting in the funded amount being recorded as a financing obligation. Accordingly, the compressor services equipment was included in property, plant, and equipment and corresponding financing obligations were included in amounts payable to affiliates and long-term affiliate payable in our consolidated balance sheet as of December 31, 2020. In December 2020, TETRA sold these compressors and assigned the corresponding leases to Spartan Energy Partners LP (“Spartan”). In January 2021, TETRA sold the general partner, IDRs and a majority of its common units in the Partnership to Spartan who assumed the financing obligation. On November 10, 2021, the Partnership completed the Spartan Acquisition. See ‘~~Acquisition of Spartan entities’~~ for further description above. This resulted in the reassessment of the lease as an operating lease, thus the Partnership derecognized the assets and the related liabilities as of November 10, 2021. Additionally, all revenue and expenses were eliminated in consolidation.

~~Mexico Payroll Affiliate~~

In January 2021, the Partnership entered into an agreement to purchase a TETRA-owned entity, which administers payroll in Mexico, for consideration of 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 April 2021.

NOTE 97 — 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.

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 June 30, ~~2022,~~2023, 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

15,894

19.76

7/1/2022

Forward sale Mexican peso

2,286

17.50

7/12/2023

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

1816

Table of Contents

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). 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 six-month periods ended June 30, ~~2022,~~2023 we recognized ~~$0.3~~$0.1 million and ~~$1.4~~$0.4 million, respectively, of net (gains) losses associated with our foreign currency derivatives program. During the three and six-month periods ended June 30, ~~2021,~~2022, we recognized ~~$0.2~~and $0.3 million and ~~$0.1~~$1.4 million, respectively, of net (gains) losses associated with our foreign currency derivatives program. These amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations.

Fair Value of Debt

The fair value of our debt has been estimated in accordance with the accounting standard regarding fair value. The fair value of our fixed rate long-term debt is estimated based on recent trades for these notes. The carrying and fair value of our debt, excluding unamortized debt issuance costs, are as follows (in thousands):


		June 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value
		(In Thousands)									(In Thousands)

7.50% First Lien Notes	7.50% First Lien Notes	$	400,000	$	369,000	$	400,000	$	405,000	7.50% First Lien Notes	$	400,000	$	381,000	$	400,000	$	373,000
10.00%/10.75% Second Lien Notes	10.00%/10.75% Second Lien Notes	172,717		151,991		172,717		168,399		10.00%/10.75% Second Lien Notes	172,717		147,241		172,717		136,446
		$	572,717	$	520,991	$	572,717	$	573,399		$	572,717	$	528,241	$	572,717	$	509,446

Other

The fair values of cash, accounts receivable, accounts payable, accrued liabilities and variable-rate long-term debt pursuant to our revolving credit facility approximate their carrying amounts due to the short-term nature of these items.

NOTE 108 — 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. State tax expense relating to the Texas franchise tax liability is included in the provision for income taxes. 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 rates for the six-month periods ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 were negative ~~13.0%~~39.8% and negative ~~16.0%~~13.0%, respectively, 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 119 — COMMITMENTS AND CONTINGENCIES

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

1917

Table of Contents

NOTE 1210 — SUBSEQUENT EVENTS

On July ~~19, 2022,~~17, 2023, the board of directors of our general partner declared a cash distribution attributable to the quarter ended June 30, ~~2022~~2023 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 August ~~12, 2022~~14, 2023 to each of the holders of common units of record as of the close of business on July ~~29, 2022.~~28, 2023.

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

The following discussion and analysis of the Partnership’s financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in “Item 1. Financial Statements” contained herein. 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, ~~2021~~2022 filed with the SEC on March ~~14, 2022~~13, 2023 (“~~2021~~2022 Annual Report”). This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview

We provide services including natural gas compression and treating services. Natural gas compression equipment is used for natural gas and oil production, gathering, artificial lift, production enhancement, transmission, processing, and storage. We also provide a variety of natural gas treating services. Our compression business includes a fleet of approximately ~~4,800~~4,500 compressor packages providing approximately 1.2 million in aggregate horsepower, utilizing a full spectrum of low-, medium-, and high-horsepower engines. Our treating fleet includes amine units, gas coolers, and related equipment. 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 international locations, including Mexico, Canada, Argentina, ~~Egypt~~ and Chile.

Demand for our services is directly driven by the production of crude oil and associated natural gas from unconventional shale plays, production of natural gas from conventional plays, and the 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 service our ~~customers~~customers’ compression needs at the wellhead through high-horsepower compression needs at centralized gathering and gas lift facilities.

During 2021, our financial results were affected by the economic impact of the COVID-19 pandemic. Reduced spending by oil and gas operators led to a decline in our compression fleet utilization which impacted revenues and pricing. Oil and natural gas commodity prices gained strength ~~throughout 2021 and remained strong in~~through the first half of ~~2022.~~2022 before remaining relatively stable with a slight decline the remainder of 2022 and second quarter of 2023. West Texas Intermediate oil prices reached an average of ~~$109~~$74 per barrel in the second quarter of ~~2022,~~2023, a ~~$13~~$20 per barrel ~~increase~~decrease from the ~~first quarter.~~second quarter of 2022. This ~~increase~~decrease in commodity prices, ~~coupled with the waning~~did not have a negative impact ~~of the COVID-19 pandemic on the economy, resulted in an increase~~ in the demand for our contract services, aftermarket services and equipment rentals. Our compression fleet utilization increased to 87.0% as of June 30, 2023 compared to 82.8% as of June 30, ~~2022 compared to 76.9% as of June 30, 2021.~~2022. In addition, as a result of the increased customer demand, we ~~implemented~~were able to implement price increases on many of our compression ~~contracts in the first and second quarters of 2022.~~contracts. Revenue from contract services increased each quarter in ~~2021~~2023 and this trend has continued through the first half of 2022. We secured orders from key customers for high-horsepower and electric compressors that started generating revenues in the fourth quarter of 2021 and continue to be deployed throughout 2022. Our customers remain focused on capital discipline; however, the levels of quote activity and awards remain strong. As thecontinues. The strengthening market environment ~~continues to evolve,~~has increased competition for field ~~employees continues to increase~~and corporate employees. Supply chain issues, increased commodity prices, and inflationary pressures ~~continue to drive certain~~have increased costs ~~higher. In addition, supply chain disruptions have~~and impacted the availability of our parts and supplies. External factors ~~such as war and other armed conflicts,~~ including Russia’s invasion of Ukraine, inflationary pressures and ~~any resulting economic downturn,~~related monetary policy, such as Federal Reserve rate increases, could adversely affect our results of operations, impair our ability to raise capital, or otherwise adversely impact our ability to realize certain business strategies. We continue to monitor these risks and take the necessary actions to mitigate them. 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.

With the rapidly changing market environment, we will continue to proactively manage our capital allocation strategies, our liquidity requirements and monitor our expenses and financial performance.

~~Table of Contents~~

While we are not able to predict how long the COVID-19 pandemic, the conflict between Russia and Ukraine, inflation and other factors will continue to impact overall market conditions, the demand for oil and gas, and the effect they will ultimately have on our business, we continued to see activity levels increase in the first half of 2022. Strong oil and gas commodity prices and the increase in demand for our services have positively impacted our results of operations in 2022. Although we have seen favorable trends in the first half of 2022, the risk of additional strains of COVID-19 or the potential outbreak of a new or mutated virus, the possibility of future lockdowns, the impact of continued inflationary pressures, and the impact of continued political conflicts, makes any forecast uncertain. In addition, continued capital discipline throughout the energy sector may limit production growth even as the economy recovers from these external factors. Despite challenging and changing market conditions, we will continue to maintain our commitment to safety and service quality for our customers.

Table of Contents

Results of Operations

The following data should be read in conjunction with the Consolidated Financial Statements and the associated Notes contained elsewhere in this document. On November 10, 2021, Spartan contributed Spartan Treating to the Partnership. As the Partnership and Spartan Treating were under common control at the time of the Spartan Acquisition, the results of operations have been combined for the Partnership and Spartan Treating from the date common control began which was January 29, 2021. See Note 4 - “Common Control Acquisition” in the Notes to Consolidated Financial Statements for further information. 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. We sold the Midland facility in July 2020. In the fourth quarter of 2020, we fully exited the new unit sales business and we have reflected these operations as discontinued operations for all periods presented. See Note 2 - “Discontinued Operations” in the Notes to Consolidated Financial Statements for further information. Used equipment sales revenue continues to be included in equipment sales revenue.

Three months ended ~~June��~~June 30, ~~2022~~2023 compared to three months ended June 30, ~~2021~~2022


		Three Months Ended June 30,													Three Months Ended June 30,
						Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change							Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	Consolidated Results of Operations	2022		2021		2022 vs. 2021		2022		2021		2022 vs. 2021		Consolidated Results of Operations	2023		2022		2023 vs. 2022		2023		2022		2023 vs. 2022
		(In Thousands)													(In Thousands)
Revenues:	Revenues:													Revenues:
Contract services	Contract services	$	64,348	$	58,394	$	5,954	76.1	%	76.3	%	10.2	%	Contract services	$	70,521	$	64,348	$	6,173	72.9	%	76.1	%	9.6	%
Aftermarket services	Aftermarket services	16,213		14,918		1,295		19.2	%	19.5	%	8.7	%	Aftermarket services	21,209		16,213		4,996		21.9	%	19.2	%	30.8	%
Equipment rentals	Equipment rentals	3,618		3,079		539		4.3	%	4.0	%	17.5	%	Equipment rentals	4,773		3,618		1,155		4.9	%	4.3	%	31.9	%
Equipment sales	Equipment sales	343		140		203		0.4	%	0.2	%	145.0	%	Equipment sales	276		343		(67)		0.3	%	0.4	%	(19.5)	%
Total revenues	Total revenues	84,522		76,531		7,991		100.0	%	100.0	%	10.4	%	Total revenues	96,779		84,522		12,257		100.0	%	100.0	%	14.5	%
Cost of revenues:	Cost of revenues:													Cost of revenues:
Cost of contract services	Cost of contract services	33,585		28,244		5,341		39.7	%	36.9	%	18.9	%	Cost of contract services	35,767		33,585		2,182		37.0	%	39.7	%	6.5	%
Cost of aftermarket services	Cost of aftermarket services	13,362		12,221		1,141		15.8	%	16.0	%	9.3	%	Cost of aftermarket services	16,924		13,362		3,562		17.5	%	15.8	%	26.7	%
Cost of equipment rentals	Cost of equipment rentals	451		209		242		0.5	%	0.3	%	115.8	%	Cost of equipment rentals	555		451		104		0.6	%	0.5	%	23.1	%
Cost of equipment sales	Cost of equipment sales	165		29		136		0.2	%	—	%	469.0	%	Cost of equipment sales	249		165		84		0.3	%	0.2	%	50.9	%
Total cost of revenues	Total cost of revenues	47,563		40,703		6,860		56.3	%	53.2	%	16.9	%	Total cost of revenues	53,495		47,563		5,932		55.3	%	56.3	%	12.5	%
Depreciation and amortization	Depreciation and amortization	19,346		19,901		(555)		22.9	%	26.0	%	(2.8)	%	Depreciation and amortization	19,086		19,346		(260)		19.7	%	22.9	%	(1.3)	%

Selling, general, and administrative expense	Selling, general, and administrative expense	10,911		10,502		409		12.9	%	13.7	%	3.9	%	Selling, general, and administrative expense	12,291		10,911		1,380		12.7	%	12.9	%	12.6	%

Interest expense, net	Interest expense, net	12,556		13,632		(1,076)		14.9	%	17.8	%	(7.9)	%	Interest expense, net	13,747		12,556		1,191		14.2	%	14.9	%	9.5	%

Other (income) expense, net	Other (income) expense, net	325		(226)		551		0.4	%	(0.3)	%	—	%	Other (income) expense, net	(191)		325		(516)		(0.2)	%	0.4	%	(158.8)	%
Loss before taxes and discontinued operations	Loss before taxes and discontinued operations	(6,179)		(7,981)		1,802		(7.3)	%	(10.4)	%	(22.6)	%	Loss before taxes and discontinued operations	(1,649)		(6,179)		4,530		(1.7)	%	(7.3)	%	(73.3)	%
Provision for income taxes	Provision for income taxes	741		1,348		(607)		0.9	%	1.8	%	(45.0)	%	Provision for income taxes	924		741		183		1.0	%	0.9	%	24.7	%
Loss from continuing operations	Loss from continuing operations	(6,920)		(9,329)		2,409		(8.2)	%	(12.2)	%	(25.8)	%	Loss from continuing operations	(2,573)		(6,920)		4,347		(2.7)	%	(8.2)	%	(62.8)	%
Loss from discontinued operations, net of taxes		92		(291)		383		0.1	%	(0.4)	%	—	%
Income (loss) from discontinued operations, net of taxes														Income (loss) from discontinued operations, net of taxes	—		92		(92)		—	%	0.1	%	(100.0)	%
Net loss	Net loss	$	(6,828)	$	(9,620)	$	2,792	(8.1)	%	(12.6)	%	(29.0)	%	Net loss	$	(2,573)	$	(6,828)	$	4,255	(2.7)	%	(8.1)	%	(62.3)	%

~~Table of Contents~~

Revenues

Contract services revenues increased ~~$6.0~~$6.2 million or ~~10.2%~~9.6%, in the current year quarter compared to the prior year quarter. The increase in revenues is due to an increase in activity ~~levels driven by the increase in oil and gas commodity prices and the improved market conditions.~~levels. Compression fleet horsepower utilization and operating horsepower both increased in the second quarter of ~~2022~~2023 compared to the prior year quarter. In addition, due to the improved market conditions, we implemented price increases, ~~starting in the second half of 2021 and in the first half of 2022 resulting in increased revenues.~~while extending contract terms to protect against inflation. Operating horsepower increased compared to the prior year quarter due to the deployment of new compressor units in ~~the first half of 2022~~2023 and the redeployment of idle compressor units ~~in late 2021 and~~ throughout ~~the first half of 2022.~~2023.

Aftermarket services revenues increased ~~$1.3~~$5.0 million or ~~8.7%~~30.8% during the current year quarter compared to the prior year quarter due to increased demand for compression parts and services resulting from an increase in activity levels by our customers. With the ~~improvement~~stabilization in market conditions and the strong oil and gas commodity prices, customers have increased production of oil and gas which, in turn, increased the demand for parts and services needed to maintain their compression fleet.

Equipment rentals revenues increased ~~$0.5~~$1.2 million or ~~17.5%~~31.9% during the current year quarter compared to the prior year quarter due to an increase in the ~~demand for our~~number of revenue-generating gas coolers, asan increase in customer demand, and higher activity ~~levels increase.~~levels.

Equipment sales revenues ~~increased $0.2~~decreased $0.1 million during the current year quarter compared to the prior year quarter due to ~~an increase~~a decrease in used unit sales.

Table of Contents

Cost of revenues

Cost of contract services revenue increased compared to the prior year quarter consistent with increased revenues. ~~Cost of contract services as a percentage of contract services revenues increased from 48.4% in 2021 to 52.2% in 2022.~~ This increase is primarily due to inflationary pressures which have resulted in increased costs in certain operating cost categories ~~in the second quarter of 2022~~ including parts, field labor, and ~~fluids~~outside service costs.

Cost of aftermarket services revenues increased compared to the prior year quarter consistent with the increase in associated revenues.

Cost of equipment rentals increased during the current quarter due to the increase in the corresponding revenues. Additionally, to support the growth in the gas cooler rental business, equipment rental expense increased compared to the prior year period.

Cost of equipment sales increased during the current year quarter consistent with the ~~increase~~decrease in the corresponding revenues.

Depreciation and amortization

Depreciation and amortization expense consists primarily of the depreciation of compressor packages in our service fleet. In addition, it includes the depreciation of other operating equipment and facilities and the amortization of intangibles. Depreciation and amortization expense remained relatively consistent compared to the prior year quarter.

Selling, general, and administrative expense

Selling, general, and administrative expenses increased during the current year quarter compared to the prior year quarter due to ~~an increase in~~increased salaries and wages and ~~consulting services~~other sales expenses.

~~Table of Contents~~

Interest expense, net

Interest expense, net, ~~decreased~~increased during the current year quarter compared to the prior year quarter due primarily to increased expenses associated with the ~~redemption of~~balances associated with our ~~7.25% Senior Notes in the fourth quarter 2021.~~credit agreements.

Other (income) expense, net

Other (income) expense, net, was ~~$0.3~~$0.2 million of ~~expense,~~income, net, during the current year quarter compared to ~~$0.2~~$0.3 million of ~~income,~~expense, net, during the prior year quarter. The change in other (income) expense, net was driven by ~~higher foreign currency losses,~~increased investment income primarily from our operations in ~~Mexico.~~Mexico and Argentina offset by losses on the disposals of assets.

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 ~~12.0%~~56.0% 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.

~~Loss~~Income (Loss) from discontinued operations, net of tax

Loss from discontinued operations, net of tax ~~changed~~was $0.1 million gain from ~~a $0.3 million loss for~~ the prior year ~~period~~quarter related to ~~a $0.1 million gain for~~ the ~~current year period.~~warranty reserve not being utilized. The Partnership exited the new unit sales business during 2020, with final deliveries made in October 2020. ~~The prior year loss includes $0.3 million of selling, general, and administrative expenses.~~

2320

Table of Contents

Results of Operations

Six months ended June 30, ~~2022~~2023 compared to six months ended June 30, ~~2021.~~2022.


		Six Months Ended June 30,													Six Months Ended June 30,
						Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change							Period-to-Period Change		Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	Consolidated Results of Operations	2022		2021		2022 vs. 2020		2022		2021		2022 vs. 2020		Consolidated Results of Operations	2023		2022		2023 vs. 2022		2023		2022		2023 vs. 2022
		(In Thousands)													(In Thousands)
Revenues:	Revenues:													Revenues:
Contract services	Contract services	$	127,155	$	114,631	$	12,524	77.3	%	78.4	%	10.9	%	Contract services	$	140,168	$	127,155	$	13,013	74.5	%	77.3	%	10.2	%
Aftermarket services	Aftermarket services	29,081		25,952		3,129		17.7	%	17.7	%	12.1	%	Aftermarket services	38,560		29,081		9,479		20.5	%	17.7	%	32.6	%
Equipment rentals	Equipment rentals	7,118		5,104		2,014		4.3	%	3.5	%	39.5	%	Equipment rentals	8,887		7,118		1,769		4.7	%	4.3	%	24.9	%
Equipment sales	Equipment sales	1,180		610		570		0.7	%	0.4	%	93.4	%	Equipment sales	535		1,180		(645)		0.3	%	0.7	%	(54.7)	%
Total revenues	Total revenues	164,534		146,297		18,237		100.0	%	100.0	%	12.5	%	Total revenues	188,150		164,534		23,616		100.0	%	100.0	%	14.4	%
Cost of revenues:	Cost of revenues:													Cost of revenues:
Cost of contract services	Cost of contract services	64,625		55,684		8,941		39.3	%	38.1	%	16.1	%	Cost of contract services	72,594		64,625		7,969		38.6	%	39.3	%	12.3	%
Cost of aftermarket services	Cost of aftermarket services	23,995		21,766		2,229		14.6	%	14.9	%	10.2	%	Cost of aftermarket services	31,138		23,995		7,143		16.5	%	14.6	%	29.8	%
Cost of equipment rentals	Cost of equipment rentals	967		362		605		0.6	%	0.2	%	167.1	%	Cost of equipment rentals	1,110		967		143		0.6	%	0.6	%	14.8	%
Cost of equipment sales	Cost of equipment sales	617		346		271		0.4	%	0.2	%	78.3	%	Cost of equipment sales	456		617		(161)		0.2	%	0.4	%	(26.1)	%
Total cost of revenues	Total cost of revenues	90,204		78,158		12,046		54.8	%	53.4	%	15.4	%	Total cost of revenues	105,298		90,204		15,094		56.0	%	54.8	%	16.7	%
Depreciation and amortization	Depreciation and amortization	38,705		39,035		(330)		23.5	%	26.7	%	(0.8)	%	Depreciation and amortization	37,937		38,705		(768)		20.2	%	23.5	%	(2.0)	%

Impairments and other charges														Impairments and other charges	—		—		—		—	%	—	%	—	%

Selling, general, and administrative expense	Selling, general, and administrative expense	21,752		20,803		949		13.2	%	14.2	%	4.6	%	Selling, general, and administrative expense	22,270		21,752		518		11.8	%	13.2	%	2.4	%

Interest expense, net	Interest expense, net	24,937		27,340		(2,403)		15.2	%	18.7	%	(8.8)	%	Interest expense, net	27,062		24,937		2,125		14.4	%	15.2	%	8.5	%

Other income expense, net		869		69		800		0.5	%	—	%	1,159.4	%
Other (income) expense, net														Other (income) expense, net	(707)		869		(1,576)		(0.4)	%	0.5	%	(181.4)	%
Loss before taxes and discontinued operations	Loss before taxes and discontinued operations	(11,933)		(19,108)		7,175		(7.3)	%	(13.1)	%	(37.5)	%	Loss before taxes and discontinued operations	(3,710)		(11,933)		8,223		(2.0)	%	(7.3)	%	(68.9)	%
Provision for income taxes	Provision for income taxes	1,557		3,053		(1,496)		0.9	%	2.1	%	(49.0)	%	Provision for income taxes	1,476		1,557		(81)		0.8	%	0.9	%	(5.2)	%
Loss from continuing operations	Loss from continuing operations	$	(13,490)	$	(22,161)	$	8,671	(8.2)	%	(15.1)	%	(39.1)	%	Loss from continuing operations	$	(5,186)	$	(13,490)	$	8,304	(2.8)	%	(8.2)	%	(61.6)	%
Loss from discontinued operations, net of taxes		$	92	$	(353)	$	445	0.1	%	(0.2)	%	—	%
Income (loss) from discontinued operations, net of taxes														Income (loss) from discontinued operations, net of taxes	$	—	$	92	$	(92)	—	%	0.1	%	(100.0)	%
Net loss	Net loss	$	(13,398)	$	(22,514)	$	9,116	(8.1)	%	(15.4)	%	(40.5)	%	Net loss	$	(5,186)	$	(13,398)	$	8,212	(2.8)	%	(8.1)	%	(61.3)	%

Revenues

Contract services revenues increased by ~~$12.5~~$13.0 million, or ~~10.9%~~10.2%, in the current year period compared to the prior year ~~period. The increase in revenues is~~period due to an increase in activity ~~levels resulting from strong oil and natural gas commodity prices and the economic recovery as the impact of the COVID-19 pandemic diminishes.~~levels. Compression fleet utilization and operating horsepower both increased in ~~2022~~2023 compared to the prior year. In addition, due to the improved market conditions, we implemented price increases, while extending contract terms to protect against inflation resulting in ~~the second half of 2021 and in the first half of of 2022.~~increased revenues. Operating horsepower increased compared to the prior year period due to the deployment of new compressor units in ~~the first half of 2022~~2023 and the redeployment of idle compressor units ~~in late 2021 and~~ throughout ~~the first half of 2022.~~2023.

Aftermarket services revenues increased ~~$3.1~~$9.5 million, or ~~12.1%~~32.6%, during the current year period compared to the prior year period due to increased demand for compression parts and services resulting from an increase in activity levels by our customers. With the improvement in market conditions and the strong oil and gas commodity prices, customers have increased production of oil and gas which, in turn, increased the demand for parts and services needed to maintain their compression fleet.

Equipment rentals revenues increased ~~$2.0~~$1.8 million or ~~39.5%~~24.9% during the current year period compared to the prior year quarter due to ~~the addition of Spartan Treating revenues~~an increase in the consolidated financial statements of the Partnership effective January 29, 2021. The prior year period only includes approximately 5 months of revenues compared to 6 months in the current year period. Additionally, the number of revenue-generating gas coolers, ~~increased in 2022 due to~~ an increase in customer demand, and higher activity levels.

Table of Contents

Equipment sales revenues ~~increased~~decreased $0.6 million or ~~93.4%,~~54.7% during the current year period compared to the prior year period due to ~~an increase~~a decrease in used unit sales.

Cost of revenues

Cost of ~~compression and related~~contract services increased compared to the prior year period ~~primarily due to an increase in revenues from higher activity levels. Cost of contract services as a percentage of contract services revenues~~consistent with increased ~~from 48.6% during the prior year period to 50.8% during the current year period.~~revenues. The increase is primarily due to the effect of inflation ~~resulting~~which have resulted in increased costs in certain operating cost categories ~~in 2022~~ including parts, field labor, and ~~fluids~~outside service costs.

Cost of aftermarket services increased during the current year consistent with increased revenues.

Cost of equipment rentals increased during the current period due to the increase in the corresponding revenues. Additionally, to support the growth in the gas cooler rental business, equipment rental expense increased compared to the prior year period.

Cost of ~~aftermarket services and cost of~~ equipment sales ~~increased~~decreased during the current year ~~consistent~~as a result of selling aged units with ~~increased revenues.~~decreased book values.

Depreciation and amortization

Selling, general, and administrative expense

Selling, general, and administrative expenses increased during the current year period compared to the prior year period due to ~~an increase in~~increased salaries and wages and consulting services expenses ~~Additionally, the increase in expenses is due to non-recurring transaction costs incurred in 2022.~~and other sales expenses.

Interest expense, net

Interest expense, net, ~~decreased $2.4~~increased $2.1 million compared to the prior year period due primarily to the ~~redemption of~~increased expenses associated with the balances associated with our ~~7.25% Senior Notes in the fourth quarter 2021.~~credit agreements.

Other (income) expense, net

Other (income) expense, net, was ~~$0.9~~$0.7 million of ~~expense~~income during the current year period, compared to ~~$0.1~~$0.9 million of expense during the prior year period ~~due to higher foreign currency losses,~~was driven by increased investment income primarily from our operations in ~~Mexico.~~Mexico and Argentina and foreign currency gains offset by losses on the disposals of assets.

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, ~~2022,~~2023, was negative ~~13.0%~~39.8% 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.

2522

Table of Contents

~~Loss~~Income (Loss) from discontinued operations, net of tax

Loss from discontinued operations, net of tax ~~changed from a $0.4~~was $0.1 million ~~loss~~gain for the prior year period related to ~~a $0.1 million gain for~~ the ~~current year period.~~warranty reserve not being utilized. The Partnership exited the new unit sales business during 2020, with final deliveries made in October 2020. ~~The prior year loss includes $0.3 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 usmanagement to investigate the cause of these trends and ~~implement remedial~~put corrective measures ifin place where 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.~~fluids cost. The costs of other materials consumed while performing our services, ~~ad valorem taxes,~~ other labor costs, ~~truck~~vehicle leases and maintenance cost, 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 personnel, as well as expenses related to their training and safety. Additional information regarding our operating expenses for the three and six-month periods ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 is provided within the Results of Operations sections 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, gain on extinguishment of debt, write-off of unamortized financing costs, and excluding 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.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In Thousands)
Net loss	$	(2,573)	$	(6,828)	$	(5,186)	$	(13,398)
Provision for income taxes	924		741		1,476		1,557
Depreciation and amortization	19,086		19,346		37,937		38,705
Interest expense, net	13,747		12,556		27,062		24,937
Equity compensation	516		432		877		774
Transaction costs	—		105		—		210
Severance	58		—		125		—
Non-cash cost of compressors sold	249		165		456		617
Provision for income taxes, depreciation, amortization and impairments attributable to discontinued operations	—		(92)		—		(92)
Outside services costs related to unit disposals	155		—		155		—

Other	368		—		368		—
Adjusted EBITDA	$	32,530	$	26,425	$	63,270	$	53,310

Table of Contents

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(In Thousands)
Net loss $ (6,828) $ (9,620) $ (13,398) $ (22,514)
Provision for income taxes 741 1,348 1,557 3,053
Depreciation and amortization 19,346 19,901 38,705 39,035
Interest expense, net 12,556 13,632 24,937 27,340
Equity compensation 432 477 774 1,310
Prior year sales tax accrual adjustment — 367 — 367
Manufacturing engine order cancellation charge — 300 — 300
Severance — — — 114
Non-cash cost of compressors sold 165 78 617 438
Provision for income taxes, depreciation, amortization and
impairments attributed to discontinued operations (92) — (92) —
Transaction costs 105 — 210 308
Adjusted EBITDA $ 26,425 $ 26,483 $ 53,310 $ 49,751

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 net cash provided by operations ~~net,~~ to Free Cash Flow for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In Thousands)				(In Thousands)					(In Thousands)				(In Thousands)
Net cash provided by (used in) operating activities		$	(10,201)	$	(5,810)	$	1,569	$	5,734
Net cash provided by operating activities										Net cash provided by operating activities	$	4,772	$	(10,201)	$	24,626	$	1,569
Capital expenditures, net of sales proceeds	Capital expenditures, net of sales proceeds	(11,830)		(5,580)		(17,765)		(9,988)		Capital expenditures, net of sales proceeds	(7,644)		(11,830)		(21,955)		(17,765)

Free cash flow	Free cash flow	$	(22,031)	$	(11,390)	$	(16,196)	$	(4,254)	Free cash flow	$	(2,872)	$	(22,031)	$	2,671	$	(16,196)

Net cash provided by operating activities for the six months ended June 30, 2023 includes $34.0 million of revenues in excess of cash expenses offset by $9.4 million from working capital changes. Net cash provided by operating activities for the six months ended June 30, 2022 includes $26.1 million of ~~revenues~~revenue in excess of cash expenses offset by $24.6 ~~million from working capital changes. Net cash provided by operating activities for the six months ended June 30, 2021 includes $19.4 million of revenue in excess of cash expenses offset by $13.7~~ million from 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 by each horsepower class of our compression fleet as of the dates shown.


		June 30,					June 30,
		2022		2021			2023		2022
Horsepower	Horsepower					Horsepower
Total horsepower in fleet	Total horsepower in fleet	1,198,356		1,181,485		Total horsepower in fleet	1,178,427		1,198,356
Total horsepower in service	Total horsepower in service	992,597		908,614		Total horsepower in service	1,025,586		992,597

Horsepower utilization	Horsepower utilization					Horsepower utilization
Low-horsepower (0-100)	Low-horsepower (0-100)	58.9	%	56.4	%	Low-horsepower (0-100)	57.8	%	58.9	%
Medium-horsepower (101-1,000)	Medium-horsepower (101-1,000)	82.4	%	77.2	%	Medium-horsepower (101-1,000)	82.8	%	82.4	%
High-horsepower (1,001 and over)	High-horsepower (1,001 and over)	88.2	%	81.3	%	High-horsepower (1,001 and over)	95.1	%	88.2	%
Total horsepower utilization rate	Total horsepower utilization rate	82.8	%	76.9	%	Total horsepower utilization rate	87.0	%	82.8	%

The total horsepower utilization rate increased as of June 30, ~~2022~~2023 compared to the prior year period due to an increase in customer activity levels. This was driven by a high commodity price environment for oil and gas and the continued recovery from the impact of the COVID-19 pandemic on the global economy and the energy sector. Market conditions improved in the current year resulting in an increase in total utilization of ~~5.9%~~4.2% compared to the utilization rate as of June 30, ~~2021,~~2022, with meaningful gains in utilization in all horsepower categories. Operating

Table of Contents

horsepower increased by approximately ~~84,000~~33,000 horsepower which includes the redeployment of previously idle horsepower and new high-horsepower compressors placed in service resulting from our growth capital investments.

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.

Liquidity and Capital Resources

Our primary cash requirements are for distributions, working capital requirements, debt service, normal operating expenses, and capital expenditures. Our potential sources of funds are our existing cash balances, cash generated from our operations, asset sales, and long-term and short-term borrowings, which we believe will be sufficient to meet our working capital and growth capital requirements during ~~2022.~~2023. We have secured orders from key customers for high-horsepower and electric compressors which will drive our investment in growth capital and consume liquidity in ~~2022.~~2023.

During ~~the first half of 2022,~~2023, oil and gas commodity prices remained strong resulting in an increase in activity levels by our customers and higher demand for our products and services. Although uncertainty remains, the outlook for the energy sector continues to be favorable. ~~If oil and natural gas prices decrease from current levels, our businesses could be negatively impacted.~~ Despite these uncertainties, we remain committed to a long-term growth strategy. Our near-term focus is to ~~balance~~reduce our ~~investment in growth against our investment in maintaining our revenue-generating assets, while continuing to~~leverage, preserve and enhance liquidity, and grow our profitability through strategic operating and financial measures. We periodically evaluate engaging in strategic transactions and may consider divesting assets where our evaluation suggests such transactions are in the best interests of our business. We are subject to business and operational risks that could materially and adversely affect our cash flows and, when coupled with risks associated with current debt and equity market conditions, our ability or desire to issue securities. Please refer to Part I, Item 1A “Risk Factors” included in our ~~2021~~2022 Annual Report.

Following the redeployment of our idle assets, meeting increased demand for our contract services will require ongoing capital expenditure investment, which could be significant. We will determine appropriate funding of future capital expenditures, along with potential acquisitions, on a case-by-case basis. Funding sources may include existing cash balances, cash flow generated from our operations, borrowing against our Credit Facilities, finance leases with third parties, and issuance of equity.

The level of future growth capital expenditures depends on demand for our contract services, the level of cash available to fund these expenditures and our decisions whether to utilize available cash to fund increases in our quarterly common unit distribution, retire debt, or make capital expenditures. Capital expenditures in ~~2022~~2023 are expected to range from ~~$55.0~~$43.0 million to ~~$65.0~~$48.0 million. These capital expenditures include approximately ~~$18.0~~$17.0 million to ~~$22.0~~$19.0 million of maintenance capital expenditures and approximately ~~$29.0~~$23.0 million to ~~$33.0~~$25.0 million of capital expenditures primarily associated with the expansion of our ~~large horsepower compression~~contract services fleet and ~~$8.0~~$3.0 million to ~~$10.0~~$4.0 million of capital expenditures related to investments in technology ~~primarily software~~ and ~~systems. The foregoing estimates are based~~facilities. We expect cash on ~~assumptions regarding our assessment of the oil~~hand and ~~gas market.~~

~~Table of Contents~~

cash generated from operations will be sufficient to meet cash needs throughout 2023.

On July ~~19, 2022,~~17, 2023, the board of directors of our general partner declared a cash distribution attributable to the quarter ended June 30, ~~2022~~2023 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This quarterly distribution will be paid on August ~~12, 2022~~14, 2023 to each of the holders of common units of record as of the close of business on July ~~29, 2022.~~28, 2023.

Cash Flows

A summary of our sources (uses) of cash during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows:


		Six Months Ended June 30,					Six Months Ended June 30,
		(In Thousands)					(In Thousands)
		2022		2021			2023		2022
Operating activities	Operating activities	$	1,569	$	5,734	Operating activities	$	24,626	$	1,569
Investing activities	Investing activities	(17,765)		(8,511)		Investing activities	(21,955)		(17,765)
Financing activities	Financing activities	17,944		(4,358)		Financing activities	1,147		17,944

Table of Contents

Operating Activities

Net cash provided by operating activities ~~decreased~~increased by ~~$4.2~~$23.1 million compared to the prior year period. Our cash provided by operating activities is primarily generated from the provision of contract compression and treating services. The increase in cash provided by operating activities was primarily due to changes in working capital, particularly related to collections of accounts receivable, and timing of payments of accounts payable.

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

Investing Activities

Capital expenditures during the six months ended June 30, ~~2022~~2023 increased by ~~$10.5~~$6.7 million compared to the same period in ~~2021,~~2022, driven by an increase in investments in growth capital. Maintenance capital expenditures ~~decreased~~increased during the six months ended June 30, ~~2022~~2023 compared to the prior year period. ~~The cost of fleet~~Total capital expenditures during 2023 were $30.3 million, offset by $0.5 million from compression units ~~sold was $0.6 million.~~sold. Total capital expenditures for the current period include ~~$8.6~~$10.3 million of maintenance capital expenditures.

The level of growth capital expenditures depends on our ability to redeploy existing fleet equipment and demand for compression services. Improved market conditions have provided opportunities with our customer base to provide new compression horsepower, resulting in increased growth capital. If the demand for compression services increases or decreases, the amount of planned expenditures on growth and expansion will be adjusted. We continue to review all capital expenditure plans carefully in an effort to conserve cash and fund our liquidity needs.

Financing Activities

~~Distributions~~

Distributions.

During the six months ended June 30, ~~2022,~~2023, we distributed $2.8 million of cash distributions to our common unitholders and general partner.

Long-Term Debt

Credit ~~Agreement~~

Agreement.

Our Credit Agreement provides for maximum credit commitments of $35.0 million and includes a $3.5 million reserve which results in reduced borrowing availability. As of June 30, ~~2022,~~2023, we had ~~$13.6~~$21.8 million ~~balance~~ outstanding under the Credit Agreement and ~~$1.9~~$1.4 million in letters of credit against our Credit Agreement resulting in ~~$10.6~~$4.7 million available to borrow. As of August ~~5, 2022,~~3, 2023, we had ~~$2.8~~$8.0 million outstanding under our Credit Agreement and ~~$1.7~~$1.4 million in letters of credit, resulting in ~~$22.2~~$21.3 million of availability.

~~Table of Contents~~

Spartan Credit ~~Agreement~~

Agreement.

The Spartan Credit Agreement provides for maximum credit commitments of $70.0 million. As of June 30, ~~2022,~~2023, we had ~~$60.0~~$42.0 million outstanding, no letters of credit and ~~$7.3~~$27.8 million of availability. As of August ~~5, 2022,~~3, 2023, we had ~~$59.0~~$49.4 million outstanding, no letters of credit, and ~~$4.6~~$20.6 million of availability.

See Note 75 – “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements in this Quarterly Report for further information regarding our 7.50% First Lien Notes due 2025 and 10.000%/10.750% Second Lien Notes due 2026.

~~Leases~~Finance Agreements. During the year ended December 31, 2022, we entered into Master Finance Agreements with a third party in the amount of $16.6 million to finance certain compression equipment. The notes are payable in monthly installments totaling $0.5 million for 36 months. The current portion of this amount is classified in accrued liabilities and other and the long-term portion is classified in other long-term liabilities on the accompanying consolidated balance sheet.

Table of Contents

classified in accrued liabilities and other and the long-term portion is classified in other long-term liabilities on the accompanying consolidated balance sheet.

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~~up 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.

~~Other Financing~~

Off Balance Sheet Arrangements

As of June 30, ~~2022,~~2023, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

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 ~~2021~~2022 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.

For a discussion of new accounting pronouncements that may affect our consolidated financial statements, see Note 1 – “Organization, Basis of Presentation, and Significant Accounting Policies, New Accounting Pronouncements,” in the Notes to Consolidated Financial Statements in this Quarterly Report.

Commitments and Contingencies

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

Cautionary Statement for Purposes of Forward-Looking Statements

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

Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks

~~Table of Contents~~

and uncertainties include, but are not limited to, those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our ~~2021~~2022 Annual Report, and those described from time to time in our future reports filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer of our general partner, we conducted an evaluation of our disclosure controls

Table of Contents

and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, as of the quarter ended June 30, ~~2022.~~2023. Based on this evaluation, the Principal Executive Officer and Principal Financial Officer of our general partner concluded that our disclosure controls and procedures were effective as of June 30, ~~2022,~~2023, the end of the period covered by this Quarterly Report.

During the quarter ended June 30, 2022, we deployed a new Enterprise Resource Planning (“ERP”) system. In connection with this ERP system implementation, the Partnership updated its internal controls over financial reporting, as necessary, to accommodate modifications to its business processes and accounting procedures. We do not believe that this ERP system implementation will have an adverse effect on the Partnership’s internal control over financial reporting.

There were no other changes in the internal control over financial reporting that occurred during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

There have been no material changes in the information pertaining to our Risk Factors as disclosed in our ~~2021~~2022 Annual Report.

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

(a) None.

(b) None.

~~Table of Contents~~

Period

Total Number
of Units Purchased

Average
Price
Paid per Unit

Total Number of Units Purchased as Part of Publicly Announced Plans or Programs

Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Publicly Announced
Plans or Programs

April 1 – April 30, ~~2022~~2023

—

N/A

May 1 – May 31, ~~2022~~2023

—

N/A

June 1 – June 30, ~~2022~~2023

—

N/A

Total

—

N/A

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

3228

Table of Contents

Item 6. Exhibits.

Exhibits:


~~10.1~~			Fifth Amendment to Loan and Security Agreement dated as of June 30, 2022, by and among the Partnership, Compressco Sub and Operating LLC, as borrowers, certain subsidiaries of the Borrowers named as guarantors therein, the lenders party thereto, and Bank of America, N.A., as administrative agent, collateral agent, letter of credit issuer and swing line lender (incorporated by reference to Exhibit 10.1 to the Partnership’s Form 8-K filed on July 1, 2022 (SEC File No. 001-35195).
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

* Filed with this report.

** Furnished with this report.

+ Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six-month periods ended June 30, ~~2022~~2023 and ~~2021;~~2022; (ii) Consolidated Statements of Comprehensive Income for the three and six-month periods ended June 30, ~~2022~~2023 and ~~2021;~~2022; (iii) Consolidated Balance Sheets as of June 30, ~~2022~~2023 and December 31, ~~2021;~~2022; (iv) Consolidated Statement of Partners’ Capital for the six-month periods ended June 30, ~~2022~~2023 and ~~2021;~~2022; (v) Consolidated Statements of Cash Flows for the six-month periods ended June 30, ~~2022~~2023 and ~~2021;~~2022; and (iv) Notes to Consolidated Financial Statements for the six months ended June 30, ~~2022.~~2023.

3329

Table of Contents

SIGNATURES

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


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

Date:	August ~~9, 2022~~7, 2023	By:	/s/John E. Jackson
			John E. Jackson
			Chief Executive Officer
			Principal Executive Officer

Date:	August ~~9, 2022~~7, 2023	By:	/s/Jonathan W. Byers
			Jonathan W. Byers
			Chief Financial Officer
			Principal Financial Officer

Date:	August ~~9, 2022~~7, 2023	By:	/s/~~Michael E. Moscoso~~Riplee L. Parkening
			~~Michael E. Moscoso~~Riplee L. Parkening
			~~Vice President - Finance~~Controller
			Principal Accounting Officer

3430


	June 30, 2022		December 31, 2021
Carrying amounts of major classes of assets included as part of discontinued operations
Inventories	$	—	$	—
Other Current Assets	—		—
Current assets of discontinued operations	$	—	$	—

Carrying amounts of major classes of liabilities included as part of discontinued operations
Accrued liabilities	$	81	$	262
Current liabilities of discontinued operations	$	81	$	262


	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	CSI Compressco LP		Spartan Treating		Total		CSI Compressco LP		Spartan Treating		Total
	(In Thousands, Unaudited)
Revenue	$	69,758	$	6,773	$	76,531	$	135,468	$	10,829	$	146,297
Income (loss) from continuing operations	$	(11,794)	$	2,465	$	(9,329)	$	(26,197)	$	4,036	$	(22,161)
Net income (loss)	$	(12,085)	$	2,465	$	(9,620)	$	(26,550)	$	4,036	$	(22,514)