Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Oct. 26, 2022 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Commission File Number | 001-33666 | |
Entity Registrant Name | Archrock, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 74-3204509 | |
Entity Street Address | 9807 Katy Freeway | |
Entity Suite Number | Suite 100 | |
Entity City | Houston | |
Entity State | TX | |
Entity Postal Zip Code | 77024 | |
City Area Code | 281 | |
Local Phone Number | 836-8000 | |
Title of each class | Common stock, $0.01 par value per share | |
Trading Symbol | AROC | |
Name of exchange on which registered | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 155,611,630 | |
Entity Central Index Key | 0001389050 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 2,042 | $ 1,569 |
Accounts receivable, net of allowance of $1,487 and $2,152, respectively | 127,334 | 104,931 |
Inventory | 84,091 | 72,869 |
Other current assets | 6,817 | 7,201 |
Total current assets | 220,284 | 186,570 |
Property, plant and equipment, net | 2,214,666 | 2,226,526 |
Operating lease right-of-use assets | 16,089 | 17,491 |
Intangible assets, net | 39,019 | 47,887 |
Contract costs, net | 32,598 | 25,418 |
Deferred tax assets | 37,001 | 47,879 |
Other assets | 37,051 | 28,384 |
Assets of discontinued operations | 8,893 | 9,811 |
Total assets | 2,605,601 | 2,589,966 |
Current liabilities: | ||
Accounts payable | 89,602 | 38,920 |
Accrued liabilities | 97,021 | 82,517 |
Deferred revenue | 7,707 | 3,817 |
Total current liabilities | 194,330 | 125,254 |
Long-term debt | 1,498,895 | 1,530,825 |
Operating lease liabilities | 14,286 | 15,940 |
Deferred tax liabilities | 1,076 | 1,136 |
Other liabilities | 19,330 | 17,505 |
Liabilities of discontinued operations | 7,868 | 7,868 |
Total liabilities | 1,735,785 | 1,698,528 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity: | ||
Preferred stock - $0.01 par value per share, 50,000,000 shares authorized, zero issued | ||
Common stock - $0.01 par value per share, 250,000,000 shares authorized, 163,412,780 and 161,482,852 shares issued, respectively | 1,633 | 1,615 |
Additional paid-in capital | 3,453,720 | 3,440,059 |
Accumulated deficit | (2,497,002) | (2,463,114) |
Accumulated other comprehensive loss | (984) | |
Treasury stock, 7,801,150 and 7,417,401 common shares, at cost, respectively | (88,535) | (86,138) |
Total stockholders' equity | 869,816 | 891,438 |
Total liabilities and stockholders' equity | $ 2,605,601 | $ 2,589,966 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Unaudited Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowance | $ 1,487 | $ 2,152 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
Common stock, shares issued (in shares) | 163,412,780 | 161,482,852 |
Treasury stock, common shares (in shares) | 7,801,150 | 7,417,401 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues | $ 213,668 | $ 195,166 | $ 626,697 | $ 586,212 |
Total cost of sales (excluding depreciation and amortization) | 107,527 | 91,932 | 310,731 | 267,957 |
Selling, general and administrative | 30,500 | 28,839 | 85,964 | 80,000 |
Depreciation and amortization | 39,953 | 45,280 | 124,348 | 135,185 |
Long-lived and other asset impairment | 4,154 | 5,121 | 16,217 | 15,154 |
Restructuring charges | 313 | 1,953 | ||
Interest expense | 25,177 | 25,508 | 74,879 | 82,711 |
Gain on sale of assets, net | (12,695) | (15,393) | (33,755) | (29,549) |
Other (income) expense, net | (585) | 337 | (52) | (1,634) |
Income before income taxes | 19,637 | 13,229 | 48,365 | 34,435 |
Provision for income taxes | 4,266 | 3,925 | 14,527 | 12,210 |
Net income | $ 15,371 | $ 9,304 | $ 33,838 | $ 22,225 |
Basic earnings per common share (in dollars per share) | $ 0.10 | $ 0.06 | $ 0.21 | $ 0.14 |
Diluted earnings per common share(in dollars per share) | $ 0.10 | $ 0.06 | $ 0.21 | $ 0.14 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 153,550 | 152,158 | 153,168 | 151,615 |
Diluted (in shares) | 153,687 | 152,297 | 153,297 | 151,769 |
Contract Operations | ||||
Revenues | $ 170,497 | $ 158,911 | $ 500,451 | $ 488,810 |
Total cost of sales (excluding depreciation and amortization) | 71,694 | 61,280 | 204,550 | 184,032 |
Aftermarket Services | ||||
Revenues | 43,171 | 36,255 | 126,246 | 97,402 |
Total cost of sales (excluding depreciation and amortization) | $ 35,833 | $ 30,652 | $ 106,181 | $ 83,925 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Unaudited Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 15,371 | $ 9,304 | $ 33,838 | $ 22,225 |
Other comprehensive income, net of tax: | ||||
Interest rate swap gain, net of reclassifications to earnings | 585 | 574 | 2,547 | |
Amortization of dedesignated interest rate swap | 431 | 410 | 431 | |
Total other comprehensive income, net of tax | 1,016 | 984 | 2,978 | |
Comprehensive income | $ 15,371 | $ 10,320 | $ 34,822 | $ 25,203 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock, Common | Total |
Beginning balance at Dec. 31, 2020 | $ 1,600 | $ 3,424,624 | $ (2,401,988) | $ (5,006) | $ (83,673) | $ 935,557 |
Beginning balance (in shares) at Dec. 31, 2020 | 160,014,960 | |||||
Treasury stock, common shares, Beginning balance (in shares) at Dec. 31, 2020 | (7,052,769) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Treasury stock purchased | $ (2,409) | (2,409) | ||||
Treasury stock purchased (in shares) | (277,316) | |||||
Cash dividends | (66,992) | (66,992) | ||||
Shares issued under employee stock purchase plan ("ESPP") | 546 | 546 | ||||
Shares issued under employee stock purchase plan ("ESPP") (in shares) | 66,541 | |||||
Stock-based compensation, net of forfeitures | $ 10 | 8,731 | 8,741 | |||
Stock-based compensation, net of forfeitures (in shares) | 1,020,756 | (72,103) | ||||
Net proceeds from issuance of common stock | $ 4 | 3,397 | 3,401 | |||
Net proceeds from issuance of common stock (in shares) | 357,148 | |||||
Comprehensive income (loss) | ||||||
Net income | 22,225 | 22,225 | ||||
Other comprehensive income | 2,978 | 2,978 | ||||
Ending balance at Sep. 30, 2021 | $ 1,614 | 3,437,298 | (2,446,755) | (2,028) | $ (86,082) | 904,047 |
Ending balance (in shares) at Sep. 30, 2021 | 161,459,405 | |||||
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2021 | (7,402,188) | |||||
Beginning balance at Jun. 30, 2021 | $ 1,613 | 3,434,224 | (2,433,553) | (3,044) | $ (85,419) | 913,821 |
Beginning balance (in shares) at Jun. 30, 2021 | 161,339,554 | |||||
Treasury stock, common shares, Beginning balance (in shares) at Jun. 30, 2021 | (7,278,449) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Treasury stock purchased | $ (663) | (663) | ||||
Treasury stock purchased (in shares) | (92,540) | |||||
Cash dividends | (22,506) | (22,506) | ||||
Shares issued under employee stock purchase plan ("ESPP") | 175 | 175 | ||||
Shares issued under employee stock purchase plan ("ESPP") (in shares) | 22,425 | |||||
Stock-based compensation, net of forfeitures | $ 1 | 2,899 | 2,900 | |||
Stock-based compensation, net of forfeitures (in shares) | 97,426 | (31,199) | ||||
Comprehensive income (loss) | ||||||
Net income | 9,304 | 9,304 | ||||
Other comprehensive income | 1,016 | 1,016 | ||||
Ending balance at Sep. 30, 2021 | $ 1,614 | 3,437,298 | (2,446,755) | (2,028) | $ (86,082) | 904,047 |
Ending balance (in shares) at Sep. 30, 2021 | 161,459,405 | |||||
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2021 | (7,402,188) | |||||
Beginning balance at Dec. 31, 2021 | $ 1,615 | 3,440,059 | (2,463,114) | (984) | $ (86,138) | $ 891,438 |
Beginning balance (in shares) at Dec. 31, 2021 | 161,482,852 | |||||
Treasury stock, common shares, Beginning balance (in shares) at Dec. 31, 2021 | (7,417,401) | (7,417,401) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Treasury stock purchased | $ (2,397) | $ (2,397) | ||||
Treasury stock purchased (in shares) | (276,342) | |||||
Cash dividends | (67,726) | (67,726) | ||||
Shares issued under employee stock purchase plan ("ESPP") | 462 | 462 | ||||
Shares issued under employee stock purchase plan ("ESPP") (in shares) | 66,236 | |||||
Stock-based compensation, net of forfeitures | $ 14 | 9,021 | 9,035 | |||
Stock-based compensation, net of forfeitures (in shares) | 1,416,672 | (107,407) | ||||
Net proceeds from issuance of common stock | $ 4 | 4,178 | 4,182 | |||
Net proceeds from issuance of common stock (in shares) | 447,020 | |||||
Comprehensive income (loss) | ||||||
Net income | 33,838 | 33,838 | ||||
Other comprehensive income | $ 984 | 984 | ||||
Ending balance at Sep. 30, 2022 | $ 1,633 | 3,453,720 | (2,497,002) | $ (88,535) | $ 869,816 | |
Ending balance (in shares) at Sep. 30, 2022 | 163,412,780 | |||||
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2022 | (7,801,150) | (7,801,150) | ||||
Beginning balance at Jun. 30, 2022 | $ 1,633 | 3,450,603 | (2,489,814) | $ (88,504) | $ 873,918 | |
Beginning balance (in shares) at Jun. 30, 2022 | 163,385,390 | |||||
Treasury stock, common shares, Beginning balance (in shares) at Jun. 30, 2022 | (7,740,919) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Treasury stock purchased | $ (31) | (31) | ||||
Treasury stock purchased (in shares) | (3,636) | |||||
Cash dividends | (22,559) | (22,559) | ||||
Shares issued under employee stock purchase plan ("ESPP") | 167 | 167 | ||||
Shares issued under employee stock purchase plan ("ESPP") (in shares) | 27,390 | |||||
Stock-based compensation, net of forfeitures | 2,998 | 2,998 | ||||
Stock-based compensation, net of forfeitures (in shares) | (56,595) | |||||
Net proceeds from issuance of common stock | (48) | (48) | ||||
Comprehensive income (loss) | ||||||
Net income | 15,371 | 15,371 | ||||
Ending balance at Sep. 30, 2022 | $ 1,633 | $ 3,453,720 | $ (2,497,002) | $ (88,535) | $ 869,816 | |
Ending balance (in shares) at Sep. 30, 2022 | 163,412,780 | |||||
Treasury stock, common shares, Ending balance (in shares) at Sep. 30, 2022 | (7,801,150) | (7,801,150) |
Unaudited Condensed Consolida_6
Unaudited Condensed Consolidated Statements of Equity (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Unaudited Condensed Consolidated Statements of Equity | |||||||||
Dividend declared per common stock (in dollars per share) | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.435 | $ 0.435 |
Unaudited Condensed Consolida_7
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | ||
Net income | $ 33,838 | $ 22,225 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 124,348 | 135,185 |
Long-lived and other asset impairment | 16,217 | 15,154 |
Inventory write-downs | 1,040 | 621 |
Amortization of operating lease right-of-use assets | 2,407 | 2,922 |
Amortization of debt issuance costs | 3,864 | 8,839 |
Amortization of debt premium | (1,504) | (1,504) |
Amortization of dedesignated interest rate swap | 410 | 431 |
Interest rate swaps | 631 | 2,866 |
Stock-based compensation expense | 9,035 | 8,741 |
Provision for credit losses | (28) | 151 |
Gain on sale of assets, net | (5,535) | (10,604) |
Gain on sale of business | (28,220) | (18,945) |
Deferred income tax provision | 13,624 | 11,778 |
Amortization of contract costs | 14,211 | 15,523 |
Deferred revenue recognized in earnings | (15,709) | (8,081) |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (29,130) | (2,133) |
Inventory | (8,339) | (5,994) |
Other assets | 697 | 1,326 |
Contract costs | (22,486) | (11,481) |
Accounts payable and other liabilities | 37,251 | 33,626 |
Deferred revenue recognized in earnings | 19,614 | 8,167 |
Other | 96 | (88) |
Net cash provided by operating activities | 166,332 | 208,725 |
Cash flows from investing activities: | ||
Capital expenditures | (171,032) | (70,881) |
Proceeds from sale of property, equipment and other assets | 13,348 | 24,683 |
Proceeds from sale of business | 99,785 | 83,075 |
Proceeds from insurance and other settlements | 3,353 | 977 |
Investments in unconsolidated entities | (12,000) | |
Net cash (used in) provided by investing activities | (66,546) | 37,854 |
Cash flows from financing activities: | ||
Borrowings of long-term debt | 579,483 | 522,751 |
Repayments of long-term debt | (611,983) | (695,751) |
Payments of debt issuance costs | (2,451) | |
Payments for settlement of interest rate swaps that include financing elements | (1,334) | (3,283) |
Dividends paid to stockholders | (67,726) | (66,992) |
Net proceeds from issuance of common stock | 4,182 | 3,401 |
Proceeds from stock issued under ESPP | 462 | 546 |
Purchases of treasury stock | (2,397) | (2,409) |
Net cash used in financing activities | (99,313) | (244,188) |
Net increase in cash and cash equivalents | 473 | 2,391 |
Cash and cash equivalents, beginning of period | 1,569 | 1,097 |
Cash and cash equivalents, end of period | $ 2,042 | $ 3,488 |
GENERAL
GENERAL | 9 Months Ended |
Sep. 30, 2022 | |
GENERAL | |
GENERAL | NOTE 1. GENERAL Description of Business Archrock, Inc. (individually and together with its wholly owned subsidiaries, “we,” “our” or us”) is an energy infrastructure company with a primary focus on midstream natural gas compression. We are the leading provider of natural gas compression services to customers in the energy industry throughout the United States (the “U.S.”) and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. We operate in two business segments: contract operations and aftermarket services. Our predominant segment, contract operations, primarily includes designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. In our aftermarket services business, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression equipment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. Generally Accepted Accounting Policies (“GAAP”) and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished reflects all normal recurring adjustments necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our Form 10–K, which contains a more comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. All intercompany accounts and transactions have been eliminated in consolidation. In the Notes to Unaudited Condensed Consolidated Financial Statements, all dollar and share amounts in tabulations are in thousands of dollars and shares, respectively, unless otherwise indicated. |
DISPOSITIONS
DISPOSITIONS | 9 Months Ended |
Sep. 30, 2022 | |
DISPOSITIONS | |
DISPOSITIONS | NOTE 2. DISPOSITIONS In September 2022, we completed the sale of certain contract operations customer service agreements and approximately 390 compressors, comprising approximately 100,000 horsepower, used to provide compression services under those agreements, as well as other assets used to support the operations. We allocated customer–related and contract–based intangible assets based on a ratio of the horsepower sold relative to the total horsepower of the asset group. We received cash consideration of In May 2022, we completed the sale of certain contract operations customer service agreements and approximately 380 compressors, comprising approximately 70,000 horsepower, used to provide compression services under those agreements, as well as other assets used to support the operations. We allocated customer–related and contract–based intangible assets based on a ratio of the horsepower sold relative to the total horsepower of the asset group. We received cash consideration of $55.5 million for the sale and recorded a gain on the sale of $16.7 million during the nine months ended September 30, 2022. |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2022 | |
INVENTORY | |
INVENTORY | NOTE 3. INVENTORY Inventory is comprised of the following: September 30, 2022 December 31, 2021 Parts and supplies $ 67,459 $ 63,628 Work in progress 16,632 9,241 Inventory $ 84,091 $ 72,869 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is comprised of the following: September 30, 2022 December 31, 2021 Compression equipment, facilities and other fleet assets $ 3,243,488 $ 3,273,770 Land and buildings 44,056 43,540 Transportation and shop equipment 90,116 92,490 Computer hardware and software 77,357 76,908 Other 5,518 6,229 Property, plant and equipment 3,460,535 3,492,937 Accumulated depreciation (1,245,869) (1,266,411) Property, plant and equipment, net $ 2,214,666 $ 2,226,526 |
EQUITY INVESTMENTS
EQUITY INVESTMENTS | 9 Months Ended |
Sep. 30, 2022 | |
EQUITY INVESTMENTS | |
EQUITY INVESTMENTS | NOTE 5. EQUITY INVESTMENTS Investments in which we are deemed to exert significant influence, but not control, are accounted for using the equity method of accounting, except in cases where the fair value option is elected. For such investments where we have elected the fair value option, the election is irrevocable and is applied on an investment–by–investment basis at initial recognition. In April 2022, we agreed to acquire for cash a 25% equity interest in Ecotec International Holdings, LLC. (“ECOTEC”), a company specializing in methane emissions detection, monitoring and management. We have elected the fair value option to account for this investment (see Note 16). As of September 30, 2022, our ownership interest in ECOTEC is Changes in the fair value of this investment are recognized in Other (income) expense, net in our unaudited condensed consolidated statements of operations. |
HOSTING ARRANGEMENTS
HOSTING ARRANGEMENTS | 9 Months Ended |
Sep. 30, 2022 | |
HOSTING ARRANGEMENTS | |
Hosting Arrangements | NOTE 6. HOSTING ARRANGEMENTS We have hosting arrangements that are service contracts related to the cloud migration of our Enterprise Resource Planning (“ERP”) system and cloud services for our mobile workforce, telematics and inventory management tools. As of September 30, 2022 and December 31, 2021, we had $15.1 million and $12.7 million, respectively, of capitalized implementation costs related to these hosting arrangements included in Other assets in our unaudited condensed consolidated balance sheets. Accumulated amortization was $2.1 million and $0.7 million as of September 30, 2022 and December 31, 2021, respectively. Included in Selling, general and administrative in our unaudited condensed consolidated statements of operations is amortization of $0.6 million and $0.1 million during the three months ended September 30, 2022 and 2021, respectively, and $1.5 million and $0.3 million during the nine months ended September 30, 2022 and 2021, respectively. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2022 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE 7. LONG–TERM DEBT Long–term debt is comprised of the following: September 30, 2022 December 31, 2021 Credit Facility $ 202,000 $ 234,500 6.25% senior notes due April 2028 Principal outstanding 800,000 800,000 Unamortized debt premium 11,031 12,536 Unamortized debt issuance costs (9,158) (10,406) 801,873 802,130 6.875% senior notes due April 2027 Principal outstanding 500,000 500,000 Unamortized debt issuance costs (4,978) (5,805) 495,022 494,195 Long-term debt $ 1,498,895 $ 1,530,825 Our $750.0 million asset–based revolving Credit Facility, as amended (the “Credit Facility”), matures in November 2024. As of September 30, 2022, there were . The weighted average annual interest rate on the outstanding balance under our Credit Facility, excluding the effect of interest rate swaps, was As of September 30, 2022, we were in compliance with all covenants under our Credit Facility agreement. As a result of the Credit Facility’s financial ratio requirements, million of undrawn capacity was available for additional borrowings as of September 30, 2022. In February 2021, we amended our Credit Facility to, among other things, reduce the aggregate revolving commitment from $1.25 billion to $750.0 million and adjust certain financial ratios. We wrote off $4.9 million of unamortized deferred financing costs as a result of the amendment, which was recorded to interest expense in our unaudited condensed consolidated statements of operations during the nine months ended September 30, 2021. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 Insurance Matters Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business, however, losses and liabilities not covered by insurance would increase our costs. Additionally, we are substantially self–insured for workers’ compensation and employee group health claims in view of the relatively high per–incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. We are also self–insured for property damage to our offshore assets. In August 2021, Hurricane Ida caused operational disruptions, damage to compressors and a temporary shutdown of facilities in Louisiana that negatively impacted our financial performance. At December 31, 2021, we had an insurance recovery receivable of $2.8 million related to the facility and compressor damages, which we received in cash Tax Matters We are subject to a number of state and local taxes that are not income–based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of September 30, 2022 and December 31, 2021, we had million, respectively, accrued for the outcomes of non–income–based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non–income–based tax audits could be material to our consolidated financial position, but it is possible that the resolution of future audits could be material to our consolidated results of operations or cash flows. In 2021, one of our sales and use tax audits advanced from the audit review phase to the contested hearing phase. As of both September 30, 2022 and December 31, 2021, we had Litigation and Claims In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to pay dividends. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2022 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 9. STOCKHOLDERS’ EQUITY Equity Distribution Agreement During the nine months ended September 30, 2022, we sold 447,020 shares of common stock for net proceeds of $4.2 million pursuant to an Equity Distribution agreement, dated February 23, 2021, entered into with Wells Fargo Securities, LLC and BofA Securities, Inc., as sales agents, relating to the at–the–market offer and sale of shares of our common stock from time to time (the “Equity Distribution Agreement”). During the nine months ended September 30, 2021, we sold 357,148 shares of common stock under this program for net proceeds of $3.4 million. Cash Dividends The following table summarizes our dividends declared and paid in each of the quarterly periods of 2022 and 2021: Dividends per Common Share Dividends Paid 2022 Q3 $ 0.145 $ 22,559 Q2 0.145 22,494 Q1 0.145 22,673 2021 Q4 $ 0.145 $ 22,351 Q3 0.145 22,506 Q2 0.145 22,331 Q1 0.145 22,155 On October 27, 2022, our Board of Directors declared a quarterly dividend of $0.145 per share of common stock to be paid on November 15, 2022 to stockholders of record at the close of business on November 8, 2022. Accumulated Other Comprehensive Loss Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with owners. Our accumulated other comprehensive loss consists of changes in the fair value of our interest rate swap derivative instruments, net of tax. See Note 15 for further details on our interest rate swap derivative instruments. The following table presents the changes in accumulated other comprehensive loss, net of tax: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Beginning accumulated other comprehensive loss $ — $ (3,044) $ (984) $ (5,006) Other comprehensive income, net of tax: Loss recognized in other comprehensive — (458) (405) (529) Loss reclassified from accumulated other — 1,474 1,389 3,507 Total other comprehensive income — 1,016 984 2,978 Ending accumulated other comprehensive loss $ — $ (2,028) $ — $ (2,028) |
REVENUE FROM CONTRACTS WITH CUS
REVENUE FROM CONTRACTS WITH CUSTOMERS | 9 Months Ended |
Sep. 30, 2022 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | NOTE 10. REVENUE FROM CONTRACTS WITH CUSTOMERS The following table presents our revenue from contracts with customers by segment (see Note 18) and disaggregated by revenue source: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Contract operations: 0 ― 1,000 horsepower per unit $ 38,967 $ 41,576 $ 121,298 $ 134,413 1,001 ― 1,500 horsepower per unit 72,463 66,138 208,161 201,454 Over 1,500 horsepower per unit 58,818 51,018 170,297 152,360 Other (1) 249 179 695 583 Total contract operations revenue (2) 170,497 158,911 500,451 488,810 Aftermarket services: Services 23,528 19,249 66,666 53,149 Over–the–counter (“OTC”) parts and components sales 19,643 17,006 59,580 44,253 Total aftermarket services revenue (3) 43,171 36,255 126,246 97,402 Total revenue $ 213,668 $ 195,166 $ 626,697 $ 586,212 (1) Primarily relates to fees associated with owned non-compression equipment. (2) Includes $0.7 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $1.8 million and $3.1 million for the nine months ended September 30, 2022 and 2021, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time. (3) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue is recognized at a point in time. Performance Obligations As of September 30, 2022, we had $282.3 million of remaining performance obligations related to our contract operations segment, which will be recognized through 2027 as follows: 2022 2023 2024 2025 2026 2027 Total Remaining performance obligations $ 99,377 $ 122,031 $ 46,882 $ 12,870 $ 919 $ 192 $ 282,271 We do not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year. Contract Assets and Liabilities Contract Assets As of September 30, 2022 and December 31, 2021, our receivables from contracts with customers, net of allowance for credit losses, were $118.9 million and $84.7 million, respectively. Allowance for Credit Losses Trade accounts receivable are due from companies of varying size engaged principally in oil and natural gas activities throughout the U.S. We review the financial condition of customers prior to extending credit and generally do not obtain collateral for trade receivables. Payment terms are on a short-term basis and in accordance with industry practice. We consider this credit risk to be limited due to these companies’ financial resources, the nature of the products and services we provide and the terms of our customer agreements. Due to the short-term nature of our trade receivables, we consider the amortized cost to be the same as the carrying amount of the receivable, excluding the allowance for credit losses. We recognize an allowance for credit losses when a receivable is recorded, even when the risk of loss is remote. We utilize an aging schedule to determine our allowance for credit losses and measure expected credit losses on a collective (pool) basis when similar risk characteristics exist. We rely primarily on ratings assigned by external rating agencies and credit monitoring services to assess credit risk and aggregate customers first by low, medium or high risk asset pools, and then by delinquency status. We also consider the internal risk associated with geographic location and the services we provide to the customer when determining asset pools. If a customer does not share similar risk characteristics with other customers, we evaluate the customer’s outstanding trade receivables for expected credit losses on an individual basis. Trade receivables evaluated individually are not included in our collective assessment. Each reporting period, we reassess our customers’ risk profiles and determine the appropriate asset pool classification, or perform individual assessments of expected credit losses, based on the customers’ risk characteristics at the reporting date. The contractual life of our trade receivables is primarily 30 days based on the payment terms specified in the contract. Contract operations services are generally billed monthly at the beginning of the month in which service is being provided. Aftermarket services billings typically occur when parts are delivered or service is completed. Loss rates are separately determined for each asset pool based on the length of time a trade receivable has been outstanding. We analyze two years of internal historical loss data, including the effects of prepayments, write-offs and subsequent recoveries, to determine our historical loss experience. Our historical loss information is a relevant data point for estimating credit losses, as the data closely aligns with trade receivables due from our customers. Ratings assigned by external rating agencies and credit monitoring services consider past performance and forecasts of future economic conditions in assessing credit risk. We routinely update our historical loss data to reflect our customers’ current risk profile, to ensure the historical data and loss rates are relevant to the pool of assets for which we are estimating expected credit losses. Our allowance for credit losses balance changed as follows during the nine months ended September 30, 2022: Balance at December 31, 2021 $ 2,152 Provision for credit losses (28) Write-offs charged against allowance (637) Balance at September 30, 2022 $ 1,487 Contract Liabilities Freight billings to customers for the transport of compression assets, customer–specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. As of September 30, 2022 and December 31, 2021, our contract liabilities were $8.3 million and $4.4 million, respectively. During the nine months ended September 30, 2022, we deferred revenue of $19.6 million and recognized deferred revenue of $15.7 million. The revenue recognized during the period primarily related to freight billings and milestone billings on aftermarket services. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2022 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 11. STOCK–BASED COMPENSATION We grant various forms of stock–based compensation to our employees and non–employee directors. These stock–based awards can consist of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance–based RSUs, other stock–based awards and dividend equivalent rights. We recognize stock–based compensation expense related to restricted stock awards, RSUs, performance–based RSUs and shares issued under our ESPP. The following table presents the stock–based compensation expense recognized in our unaudited condensed consolidated statements of operations: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Equity award expense $ 2,998 $ 2,900 $ 9,035 $ 8,741 Liability award expense 24 127 904 1,121 Total stock-based compensation expense $ 3,022 $ 3,027 $ 9,939 $ 9,862 The following table presents our restricted stock activity in the nine months ended September 30, 2022: Weighted Average Grant Date Shares Fair Value (in thousands) Per Share Non-vested restricted stock, December 31, 2021 2,578 $ 10.35 Granted 1,861 9.03 Vested (1,152) 10.25 Canceled (244) 9.28 Non-vested restricted stock, September 30, 2022 (1) 3,043 $ 9.67 (1) Comprised of 508 cash-settled units and 2,534 stock–settled awards and units. As of September 30, 2022, there was $17.1 million of unrecognized stock–based compensation expense which is expected to be recognized over a weighted average period of 1.9 years. |
LONG-LIVED AND OTHER ASSET IMPA
LONG-LIVED AND OTHER ASSET IMPAIRMENT | 9 Months Ended |
Sep. 30, 2022 | |
LONG-LIVED AND OTHER ASSET IMPAIRMENT | |
Long-Lived and Other Asset Impairment | NOTE 12. LONG–LIVED AND OTHER ASSET IMPAIRMENT We review long–lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressors from our active fleet, indicate that the carrying amount of an asset may not be recoverable. We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use. In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value. The following table presents the results of our compression fleet impairment review as recorded in our contract operations segment: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Idle compressors retired from the active fleet 25 60 100 175 Horsepower of idle compressors retired from the active 23,000 24,000 80,000 61,000 Impairment recorded on idle compressors retired from the active fleet $ 4,149 $ 5,120 $ 16,205 $ 14,964 See Note 16 for additional information. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2022 | |
INCOME TAXES | |
INCOME TAXES | NOTE 13. INCOME TAXES Valuation Allowance The amount of our deferred tax assets considered realizable could be adjusted if projections of future taxable income are reduced or objective negative evidence in the form of a three–year cumulative loss is present or both. Should we no longer have a level of sustained profitability, excluding nonrecurring charges, we will have to rely more on our future projections of taxable income to determine if we have an adequate source of taxable income for the realization of our deferred tax assets, namely net operating loss, interest limitation and tax credit carryforwards. This may result in the need to record a valuation allowance against all or a portion of our deferred tax assets. Effective Tax Rate The year-to-date effective tax rate for the nine months ended September 30, 2022 differed significantly from our statutory rate primarily due to unrecognized tax benefits and the limitation on executive compensation. Unrecognized Tax Benefits As of September 30, 2022, we believe it is reasonably possible that $2.7 million of our unrecognized tax benefits, including penalties, interest and discontinued operations, will be reduced prior to September 30, 2023 due to the settlement of audits or the expiration of statutes of limitations or both. However, due to the uncertain and complex application of the tax regulations, it is possible that the ultimate resolution of these matters may result in liabilities that could materially differ from this estimate. Impact of New Legislation On August 16, 2022, President Biden signed into law the Inflation Reduction Act (Public Law Number 117–169). This legislation is expected to have an immaterial impact to our unaudited condensed consolidated financial statements. |
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2022 | |
EARNINGS PER COMMON SHARE | |
EARNINGS PER COMMON SHARE | NOTE Basic net income (loss) per common share is computed using the two–class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two–class method, basic net income (loss) per common share is determined by dividing net income (loss), after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock–settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, only distributed earnings (dividends) are allocated to participating securities, as participating securities do not have a contractual obligation to participate in our undistributed losses. Diluted net income (loss) per common share is computed using the weighted average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options, performance–based RSUs and stock to be issued pursuant to our ESPP unless their effect would have been anti–dilutive. The following table shows the calculation of net income attributable to common stockholders, which is used in the calculation of basic and diluted earnings per common share, potential shares of common stock that were included in computing diluted earnings per common share and the potential shares of common stock issuable that were excluded from computing diluted earnings per common share as their inclusion would have been anti–dilutive: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income $ 15,371 $ 9,304 $ 33,838 $ 22,225 Allocation of earnings to participating securities (294) (456) (1,114) (909) Net income attributable to common stockholders $ 15,077 $ 8,848 $ 32,724 $ 21,316 Weighted average common shares outstanding used in 153,550 152,158 153,168 151,615 Effect of dilutive securities: Restricted stock units 131 138 125 152 ESPP shares 6 1 4 2 Weighted average common shares outstanding used in 153,687 152,297 153,297 151,769 On exercise of options where exercise price is greater than average market price for the period — 15 — 27 |
DERIVATIVES AND HEDGING
DERIVATIVES AND HEDGING | 9 Months Ended |
Sep. 30, 2022 | |
DERIVATIVES AND HEDGING | |
DERIVATIVES AND HEDGING | NOTE 15. DERIVATIVES AND HEDGING We are exposed to market risks associated with changes in the variable interest rate of our Credit Facility. We have used derivative instruments, in the form of interest rate swaps, to manage our exposure to fluctuations in this variable interest rate and thereby minimize the risks and costs associated with financial activities. We do not use derivative instruments for trading or other speculative purposes. In March 2022, our $300.0 million notional value of interest rate swaps expired. We previously entered into these swaps to offset changes in expected cash flows due to fluctuations in the associated variable interest rates and designated them as cash flow hedges. There was no nonperformance by any counterparty during the terms of the interest rate swaps and no collateral was posted for the instruments. Prior to expiration, during the third quarter of 2021, we dedesignated $125.0 million notional value of our interest rate swaps. The fair value of this interest rate swap immediately prior to dedesignation was a liability of $1.6 million. The associated amount in accumulated other comprehensive loss related to this interest rate swap was amortized into interest expense over the remaining term of the swap through March 2022. Changes in the fair value of the dedesignated interest rate swap after dedesignation and prior to expiration were recorded in interest expense. The remaining $175.0 million notional value of our interest rate swaps were designated as (highly effective) cash flow hedging instruments until their expiration. Changes in the fair value of cash flow hedging instruments are recognized as a component of other comprehensive income (loss) until the hedged transaction affects earnings. At that time, amounts are reclassified into earnings to interest expense, the same statement of operations line item to which the earnings effect of the hedged item is recorded. Cash flows from derivatives designated as hedges are classified in our unaudited condensed consolidated statements of cash flows under the same category as the cash flows from the underlying assets, liabilities or anticipated transactions unless the derivative contract contains a significant financing element, in which case, the cash settlements for those derivatives are classified as cash flows from financing activities. The following table presents the effect of our derivative instruments on our unaudited condensed consolidated statements of operations: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded $ 25,177 $ 25,508 $ 74,879 $ 82,711 Interest rate swaps designated as cash flow hedging instruments: Pre-tax loss recognized in other comprehensive $ — $ (581) $ (512) $ (670) Pre-tax loss reclassified from accumulated other — (1,867) (1,758) (4,440) Interest rate swaps not designated as hedging instruments: Gain recognized in interest expense $ — $ 532 $ 523 $ 532 The following table presents the effect of our derivative instruments on our unaudited condensed consolidated balance sheets: September 30, 2022 December 31, 2021 Interest rate swaps designated as cash flow hedging instruments Accrued liabilities $ — $ 727 Interest rate swaps not designated as hedging instruments Accrued liabilities — 523 Total derivative liabilities $ — $ 1,250 Please see Note 9 and Note 16 for additional details on our derivative instruments. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2022 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 16. FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis Investment in ECOTEC During the nine months ended September 30, 2022, we acquired a 19% equity interest in ECOTEC. We have elected the fair value option to account for this investment. The investment is valued at its transaction price, unless and until there is a significant change in the investment, such as an impairment or an additional investment. The investment’s fair value is reviewed periodically and is classified as a Level 3 measurement. As of September 30, 2022, the fair value of our investment in ECOTEC was as follows: September 30, 2022 Investment in ECOTEC $ 12,000 Interest Rate Swaps Prior to their expiration in the first quarter of 2022, our interest rate swap derivative instruments were valued quarterly based on the income approach (discounted cash flows) using market observable inputs, including LIBOR forward curves. These fair value measurements were classified as Level 2. The following table presents our derivative position measured at fair value on a recurring basis, with pricing levels as of the date of valuation: September 30, 2022 December 31, 2021 Derivative liabilities $ — $ 1,250 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis During the three months and nine months ended September 30, 2022, we recorded nonrecurring fair value measurements of $4.1 million and $16.2 million, respectively, related to our idle compressors (see Note 12). Our estimate of the compressors’ fair value was primarily based on the expected net sale proceeds compared with other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of years. The fair value of our compressors impaired in 2022 and 2021 was as follows: September 30, 2022 December 31, 2021 Impaired compressors $ 1,548 $ 4,380 These fair value measurements are classified as Level 3. The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compressors being measured. Additional quantitative information related to our significant unobservable inputs follows: Range Weighted Average (1) Estimated net sale proceeds: As of September 30, 2022 $0 - $621 per horsepower $44 per horsepower As of December 31, 2021 $0 - $621 per horsepower $35 per horsepower (1) Calculated based on an estimated discount for market liquidity of 56% and 64% as of September 30, 2022 and December 31, 2021, respectively. Other Financial Instruments The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short–term nature of these instruments. The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to the variable interest rate. The measurement of the fair value of these outstanding borrowings is a Level 3 measurement. The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows: September 30, 2022 December 31, 2021 Carrying amount of fixed rate debt (1) $ 1,296,895 $ 1,296,325 Fair value of fixed rate debt 1,155,760 1,361,000 (1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2022 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 17. RELATED PARTY TRANSACTIONS Old Ocean Reserves, LP (“Old Ocean Reserves”), formerly JDH Capital Holdings, L.P., an affiliate of our customer Hilcorp Energy Company (“Hilcorp”), has the right to designate one director to serve on our board of directors as long as Old Ocean Reserves or its successors (together with its affiliates) owns at least 7.5% of our outstanding common stock. As of September 30, 2022, Old Ocean Reserves owned of our outstanding common stock. Jason C. Rebrook, Chief Executive Officer and Director of Harvest Midstream Company, a Hilcorp affiliate, has served as Old Ocean Reserves’ representative director since July 2020. Revenue from Hilcorp was $9.2 million and $9.5 million during the three months ended September 30, 2022 and 2021, respectively, a nd $27.8 million and $28.6 million during the nine months ended September 30, 2022 and 2021, respectively |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2022 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | NOTE 18. SEGMENT INFORMATION We manage our business segments primarily based on the type of product or service provided. We have two segments: contract operations and aftermarket services. Our contract operations segment primarily provides natural gas compression services to meet specific customer requirements. Our aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets. All of our operations are located in the U.S. We evaluate the performance of our segments based on gross margin, defined as revenue less cost of sales (excluding depreciation and amortization) for each segment. Segment revenue includes only sales to external customers. Summarized financial information for our reporting segments is shown below: Contract Aftermarket Operations Services Total Three months ended September 30, 2022 Revenue $ 170,497 $ 43,171 $ 213,668 Gross margin 98,803 7,338 106,141 Three months ended September 30, 2021 Revenue $ 158,911 $ 36,255 $ 195,166 Gross margin 97,631 5,603 103,234 Nine months ended September 30, 2022 Revenue $ 500,451 $ 126,246 $ 626,697 Gross margin 295,901 20,065 315,966 Nine months ended September 30, 2021 Revenue $ 488,810 $ 97,402 $ 586,212 Gross margin 304,778 13,477 318,255 The following table reconciles total gross margin to income before income taxes: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Total gross margin $ 106,141 $ 103,234 $ 315,966 $ 318,255 Less: Selling, general and administrative 30,500 28,839 85,964 80,000 Depreciation and amortization 39,953 45,280 124,348 135,185 Long-lived and other asset impairment 4,154 5,121 16,217 15,154 Restructuring charges — 313 — 1,953 Interest expense 25,177 25,508 74,879 82,711 Gain on sale of assets, net (12,695) (15,393) (33,755) (29,549) Other (income) expense, net (585) 337 (52) (1,634) Income before income taxes $ 19,637 $ 13,229 $ 48,365 $ 34,435 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 19. SUBSEQUENT EVENTS On October 3, 2022, we acquired an additional equity interest in ECOTEC, which increased our total ownership interest to 23%. |
GENERAL (Policies)
GENERAL (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
GENERAL | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. Generally Accepted Accounting Policies (“GAAP”) and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished reflects all normal recurring adjustments necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our Form 10–K, which contains a more comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. All intercompany accounts and transactions have been eliminated in consolidation. In the Notes to Unaudited Condensed Consolidated Financial Statements, all dollar and share amounts in tabulations are in thousands of dollars and shares, respectively, unless otherwise indicated. |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
INVENTORY | |
Schedule of inventory, net of reserves | September 30, 2022 December 31, 2021 Parts and supplies $ 67,459 $ 63,628 Work in progress 16,632 9,241 Inventory $ 84,091 $ 72,869 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | |
Schedule of property, plant and equipment, net | September 30, 2022 December 31, 2021 Compression equipment, facilities and other fleet assets $ 3,243,488 $ 3,273,770 Land and buildings 44,056 43,540 Transportation and shop equipment 90,116 92,490 Computer hardware and software 77,357 76,908 Other 5,518 6,229 Property, plant and equipment 3,460,535 3,492,937 Accumulated depreciation (1,245,869) (1,266,411) Property, plant and equipment, net $ 2,214,666 $ 2,226,526 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
LONG-TERM DEBT | |
Schedule of long-term debt | September 30, 2022 December 31, 2021 Credit Facility $ 202,000 $ 234,500 6.25% senior notes due April 2028 Principal outstanding 800,000 800,000 Unamortized debt premium 11,031 12,536 Unamortized debt issuance costs (9,158) (10,406) 801,873 802,130 6.875% senior notes due April 2027 Principal outstanding 500,000 500,000 Unamortized debt issuance costs (4,978) (5,805) 495,022 494,195 Long-term debt $ 1,498,895 $ 1,530,825 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
STOCKHOLDERS' EQUITY | |
Summary of entity's dividends per common share | Dividends per Common Share Dividends Paid 2022 Q3 $ 0.145 $ 22,559 Q2 0.145 22,494 Q1 0.145 22,673 2021 Q4 $ 0.145 $ 22,351 Q3 0.145 22,506 Q2 0.145 22,331 Q1 0.145 22,155 |
Schedule of Accumulated Other Comprehensive Loss | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Beginning accumulated other comprehensive loss $ — $ (3,044) $ (984) $ (5,006) Other comprehensive income, net of tax: Loss recognized in other comprehensive — (458) (405) (529) Loss reclassified from accumulated other — 1,474 1,389 3,507 Total other comprehensive income — 1,016 984 2,978 Ending accumulated other comprehensive loss $ — $ (2,028) $ — $ (2,028) |
REVENUE FROM CONTRACTS WITH C_2
REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | |
Schedule of disaggregation of revenue | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Contract operations: 0 ― 1,000 horsepower per unit $ 38,967 $ 41,576 $ 121,298 $ 134,413 1,001 ― 1,500 horsepower per unit 72,463 66,138 208,161 201,454 Over 1,500 horsepower per unit 58,818 51,018 170,297 152,360 Other (1) 249 179 695 583 Total contract operations revenue (2) 170,497 158,911 500,451 488,810 Aftermarket services: Services 23,528 19,249 66,666 53,149 Over–the–counter (“OTC”) parts and components sales 19,643 17,006 59,580 44,253 Total aftermarket services revenue (3) 43,171 36,255 126,246 97,402 Total revenue $ 213,668 $ 195,166 $ 626,697 $ 586,212 (1) Primarily relates to fees associated with owned non-compression equipment. (2) Includes $0.7 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $1.8 million and $3.1 million for the nine months ended September 30, 2022 and 2021, respectively, related to billable maintenance on owned compressors that was recognized at a point in time. All other contract operations revenue is recognized over time. (3) Services revenue within aftermarket services is recognized over time. OTC parts and components sales revenue is recognized at a point in time. |
Schedule of remaining Performance Obligation | 2022 2023 2024 2025 2026 2027 Total Remaining performance obligations $ 99,377 $ 122,031 $ 46,882 $ 12,870 $ 919 $ 192 $ 282,271 |
Summary of changes in allowance for credit losses | Balance at December 31, 2021 $ 2,152 Provision for credit losses (28) Write-offs charged against allowance (637) Balance at September 30, 2022 $ 1,487 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
STOCK-BASED COMPENSATION | |
Schedule of allocated stock-based compensation | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Equity award expense $ 2,998 $ 2,900 $ 9,035 $ 8,741 Liability award expense 24 127 904 1,121 Total stock-based compensation expense $ 3,022 $ 3,027 $ 9,939 $ 9,862 |
Schedule of restricted stock activity | Weighted Average Grant Date Shares Fair Value (in thousands) Per Share Non-vested restricted stock, December 31, 2021 2,578 $ 10.35 Granted 1,861 9.03 Vested (1,152) 10.25 Canceled (244) 9.28 Non-vested restricted stock, September 30, 2022 (1) 3,043 $ 9.67 |
LONG-LIVED AND OTHER ASSET IM_2
LONG-LIVED AND OTHER ASSET IMPAIRMENT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
LONG-LIVED AND OTHER ASSET IMPAIRMENT | |
Schedule of impairment of long-lived assets | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Idle compressors retired from the active fleet 25 60 100 175 Horsepower of idle compressors retired from the active 23,000 24,000 80,000 61,000 Impairment recorded on idle compressors retired from the active fleet $ 4,149 $ 5,120 $ 16,205 $ 14,964 |
EARNINGS PER COMMON SHARE (Tabl
EARNINGS PER COMMON SHARE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
EARNINGS PER COMMON SHARE | |
Schedule of calculation of basic and diluted earnings per common share | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income $ 15,371 $ 9,304 $ 33,838 $ 22,225 Allocation of earnings to participating securities (294) (456) (1,114) (909) Net income attributable to common stockholders $ 15,077 $ 8,848 $ 32,724 $ 21,316 Weighted average common shares outstanding used in 153,550 152,158 153,168 151,615 Effect of dilutive securities: Restricted stock units 131 138 125 152 ESPP shares 6 1 4 2 Weighted average common shares outstanding used in 153,687 152,297 153,297 151,769 On exercise of options where exercise price is greater than average market price for the period — 15 — 27 |
DERIVATIVES AND HEDGING (Tables
DERIVATIVES AND HEDGING (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
DERIVATIVES AND HEDGING | |
Schedule of effect of derivative instruments on results of operations | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded $ 25,177 $ 25,508 $ 74,879 $ 82,711 Interest rate swaps designated as cash flow hedging instruments: Pre-tax loss recognized in other comprehensive $ — $ (581) $ (512) $ (670) Pre-tax loss reclassified from accumulated other — (1,867) (1,758) (4,440) Interest rate swaps not designated as hedging instruments: Gain recognized in interest expense $ — $ 532 $ 523 $ 532 |
Schedule of effect of derivative instruments on consolidated financial position | September 30, 2022 December 31, 2021 Interest rate swaps designated as cash flow hedging instruments Accrued liabilities $ — $ 727 Interest rate swaps not designated as hedging instruments Accrued liabilities — 523 Total derivative liabilities $ — $ 1,250 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair value | |
Schedule of fair value of equity interest | September 30, 2022 Investment in ECOTEC $ 12,000 |
Schedule of fair value of derivative liabilities | September 30, 2022 December 31, 2021 Derivative liabilities $ — $ 1,250 |
Schedule of carrying value and estimated fair value of debt instruments | September 30, 2022 December 31, 2021 Carrying amount of fixed rate debt (1) $ 1,296,895 $ 1,296,325 Fair value of fixed rate debt 1,155,760 1,361,000 (1) Carrying amounts are shown net of unamortized premium and deferred financing costs. See Note 7. |
Compressors | |
Fair value | |
Schedule of non-recurring fair value assets | September 30, 2022 December 31, 2021 Impaired compressors $ 1,548 $ 4,380 |
Schedule of significant unobservable inputs | Range Weighted Average (1) Estimated net sale proceeds: As of September 30, 2022 $0 - $621 per horsepower $44 per horsepower As of December 31, 2021 $0 - $621 per horsepower $35 per horsepower (1) Calculated based on an estimated discount for market liquidity of 56% and 64% as of September 30, 2022 and December 31, 2021, respectively. |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
SEGMENT INFORMATION | |
Summary of revenue and other financial information by reportable segment | Contract Aftermarket Operations Services Total Three months ended September 30, 2022 Revenue $ 170,497 $ 43,171 $ 213,668 Gross margin 98,803 7,338 106,141 Three months ended September 30, 2021 Revenue $ 158,911 $ 36,255 $ 195,166 Gross margin 97,631 5,603 103,234 Nine months ended September 30, 2022 Revenue $ 500,451 $ 126,246 $ 626,697 Gross margin 295,901 20,065 315,966 Nine months ended September 30, 2021 Revenue $ 488,810 $ 97,402 $ 586,212 Gross margin 304,778 13,477 318,255 |
Reconciliation of total gross margin to income before taxes | Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Total gross margin $ 106,141 $ 103,234 $ 315,966 $ 318,255 Less: Selling, general and administrative 30,500 28,839 85,964 80,000 Depreciation and amortization 39,953 45,280 124,348 135,185 Long-lived and other asset impairment 4,154 5,121 16,217 15,154 Restructuring charges — 313 — 1,953 Interest expense 25,177 25,508 74,879 82,711 Gain on sale of assets, net (12,695) (15,393) (33,755) (29,549) Other (income) expense, net (585) 337 (52) (1,634) Income before income taxes $ 19,637 $ 13,229 $ 48,365 $ 34,435 |
GENERAL (Details)
GENERAL (Details) | 9 Months Ended |
Sep. 30, 2022 segment | |
GENERAL | |
Number of reportable segments | 2 |
DISPOSITIONS (Details)
DISPOSITIONS (Details) hp in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 USD ($) CompressorUnit hp | May 31, 2022 CompressorUnit hp | Sep. 30, 2022 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | |
Transactions | |||||
Gain on disposition | $ 28,220 | $ 18,945 | |||
Disposed of by Sale | May 2022 Disposition | |||||
Transactions | |||||
Number of compressors | CompressorUnit | 380 | ||||
Compressor horsepower | hp | 70 | ||||
Cash consideration | $ 55,500 | $ 55,500 | $ 55,500 | ||
Disposal Group, Not Discontinued Operation, Name of Segment | Contract Operations | Contract Operations | |||
Gain on disposition | $ 16,700 | ||||
Disposed of by Sale | September 2022 Disposition | |||||
Transactions | |||||
Number of compressors | CompressorUnit | 390 | ||||
Compressor horsepower | hp | 100 | ||||
Cash consideration | $ 44,300 | $ 44,300 | $ 44,300 | ||
Disposal Group, Not Discontinued Operation, Name of Segment | Contract Operations | Contract Operations | Contract Operations | ||
Gain on disposition | $ 11,500 | $ 11,500 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Composition of Inventory net of reserves | ||
Parts and supplies | $ 67,459 | $ 63,628 |
Work in progress | 16,632 | 9,241 |
Inventory | $ 84,091 | $ 72,869 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 3,460,535 | $ 3,492,937 |
Accumulated depreciation | (1,245,869) | (1,266,411) |
Property, plant and equipment, net | 2,214,666 | 2,226,526 |
Compression equipment, facilities and other fleet assets | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 3,243,488 | 3,273,770 |
Land and buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 44,056 | 43,540 |
Transportation and shop equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 90,116 | 92,490 |
Computer hardware and software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 77,357 | 76,908 |
Other | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 5,518 | $ 6,229 |
EQUITY INVESTMENTS (Details)
EQUITY INVESTMENTS (Details) - Ecotec | 1 Months Ended | |
Apr. 30, 2022 | Sep. 30, 2022 | |
Investments | ||
Equity interest agreed to acquire (as a percent) | 25% | |
Ownership interest (as a percent) | 19% |
HOSTING ARRANGEMENTS (Details)
HOSTING ARRANGEMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
HOSTING ARRANGEMENTS | |||||
Hosting arrangements, Capitalized costs | $ 15.1 | $ 15.1 | $ 12.7 | ||
Hosting arrangements, Accumulated amortization | 2.1 | 2.1 | $ 0.7 | ||
Hosting arrangements, Amortization | $ 0.6 | $ 0.1 | $ 1.5 | $ 0.3 |
LONG-TERM DEBT - Schedule of Lo
LONG-TERM DEBT - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Instruments | ||
Long-term debt | $ 1,498,895 | $ 1,530,825 |
Credit facility | ||
Debt Instruments | ||
Long-term debt | 202,000 | 234,500 |
6.25% senior notes due April 2028 | ||
Debt Instruments | ||
Principal outstanding | 800,000 | 800,000 |
Unamortized debt premium | 11,031 | 12,536 |
Unamortized debt issuance costs | (9,158) | (10,406) |
Long-term debt | $ 801,873 | $ 802,130 |
Interest rate (as a percent) | 6.25% | 6.25% |
6.875% senior notes due April 2027 | ||
Debt Instruments | ||
Principal outstanding | $ 500,000 | $ 500,000 |
Unamortized debt issuance costs | (4,978) | (5,805) |
Long-term debt | $ 495,022 | $ 494,195 |
Interest rate (as a percent) | 6.875% | 6.875% |
LONG-TERM DEBT - Credit Facilit
LONG-TERM DEBT - Credit Facility (Details) - Credit facility - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Feb. 28, 2021 | Dec. 31, 2020 | |
Line of Credit Facility | |||||||
Maximum borrowing capacity | $ 750 | $ 750 | $ 750 | $ 1,250 | |||
Letter of credit outstanding | $ 5.8 | $ 5.8 | |||||
Debt instrument, variable rate (percentage) | 2.40% | ||||||
Debt instrument weighted average interest rate (percent) | 5.50% | 5.50% | 2.60% | ||||
Commitment fee amount | $ 0.5 | $ 0.5 | $ 1.5 | $ 1.5 | |||
Current borrowing capacity | 486.4 | 486.4 | |||||
Undrawn capacity | $ 542.2 | $ 542.2 | |||||
Debt issuance cost written off | $ 4.9 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Insurance Matters (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Natural disaster | |||||
Proceeds from insurance and other settlements | $ 3,353 | $ 977 | |||
Hurricane Ida | |||||
Natural disaster | |||||
Insurance recovery receivable | $ 2,800 | ||||
Proceeds from insurance and other settlements | $ 400 | $ 2,800 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Tax Matters - Loss contingencies (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Non-income based tax audits | ||
Loss Contingencies | ||
Accrued liability for the outcomes of non-income based tax audits | $ 3.9 | $ 5.8 |
Non-income based tax audits in contested hearing phase | ||
Loss Contingencies | ||
Accrued liability for the outcomes of non-income based tax audits | $ 0.6 | $ 0.6 |
STOCKHOLDERS' EQUITY - Equity D
STOCKHOLDERS' EQUITY - Equity Distribution Agreement (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Equity offering | ||
Net proceeds from issuance of common stock | $ 4,182 | $ 3,401 |
Equity Distribution Agreement | ||
Equity offering | ||
Stock issued (in shares) | 447,020 | 357,148 |
Net proceeds from issuance of common stock | $ 4,200 | $ 3,400 |
STOCKHOLDERS' EQUITY - Cash Div
STOCKHOLDERS' EQUITY - Cash Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||||
Oct. 27, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Distributions | ||||||||||
Declared Dividends per Common Share (in dollars per share) | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.145 | $ 0.435 | $ 0.435 | |
Dividends Paid (in dollars) | $ 22,559 | $ 22,494 | $ 22,673 | $ 22,351 | $ 22,506 | $ 22,331 | $ 22,155 | $ 67,726 | $ 66,992 | |
Subsequent Event. | ||||||||||
Distributions | ||||||||||
Declared Dividends per Common Share (in dollars per share) | $ 0.145 |
STOCKHOLDERS' EQUITY - Accumula
STOCKHOLDERS' EQUITY - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Increase (Decrease) in Stockholders' Equity | |||
Beginning balance | $ 913,821 | $ 891,438 | $ 935,557 |
Other comprehensive income, net of tax: | |||
Total other comprehensive income, net of tax | 1,016 | 984 | 2,978 |
Ending balance | 904,047 | 869,816 | 904,047 |
Accumulated Other Comprehensive Loss | |||
Increase (Decrease) in Stockholders' Equity | |||
Beginning balance | (3,044) | (984) | (5,006) |
Other comprehensive income, net of tax: | |||
Loss recognized in other comprehensive income | (458) | (405) | (529) |
Loss reclassified from accumulated other comprehensive loss to interest expense | 1,474 | 1,389 | 3,507 |
Total other comprehensive income, net of tax | 1,016 | $ 984 | 2,978 |
Ending balance | $ (2,028) | $ (2,028) |
REVENUE FROM CONTRACTS WITH C_3
REVENUE FROM CONTRACTS WITH CUSTOMERS - Disaggregate Revenue (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 USD ($) hp | Sep. 30, 2021 USD ($) hp | Sep. 30, 2022 USD ($) hp | Sep. 30, 2021 USD ($) hp | |
Disaggregation of Revenue | ||||
Revenue | $ 213,668 | $ 195,166 | $ 626,697 | $ 586,212 |
Contract Operations | ||||
Disaggregation of Revenue | ||||
Revenue | 170,497 | 158,911 | 500,451 | 488,810 |
Contract Operations | Transferred at Point in Time | ||||
Disaggregation of Revenue | ||||
Revenue | 700 | 700 | 1,800 | 3,100 |
Contract Operations | 0 - 1,000 horsepower per unit | ||||
Disaggregation of Revenue | ||||
Revenue | $ 38,967 | $ 41,576 | $ 121,298 | $ 134,413 |
Contract Operations | 0 - 1,000 horsepower per unit | Minimum | ||||
Disaggregation of Revenue | ||||
Compressor unit horsepower (horsepower) | hp | 0 | 0 | 0 | 0 |
Contract Operations | 0 - 1,000 horsepower per unit | Maximum | ||||
Disaggregation of Revenue | ||||
Compressor unit horsepower (horsepower) | hp | 1,000 | 1,000 | 1,000 | 1,000 |
Contract Operations | 1,001 - 1,500 horsepower per unit | ||||
Disaggregation of Revenue | ||||
Revenue | $ 72,463 | $ 66,138 | $ 208,161 | $ 201,454 |
Contract Operations | 1,001 - 1,500 horsepower per unit | Minimum | ||||
Disaggregation of Revenue | ||||
Compressor unit horsepower (horsepower) | hp | 1,001 | 1,001 | 1,001 | 1,001 |
Contract Operations | 1,001 - 1,500 horsepower per unit | Maximum | ||||
Disaggregation of Revenue | ||||
Compressor unit horsepower (horsepower) | hp | 1,500 | 1,500 | 1,500 | 1,500 |
Contract Operations | Over 1,500 horsepower per unit | ||||
Disaggregation of Revenue | ||||
Revenue | $ 58,818 | $ 51,018 | $ 170,297 | $ 152,360 |
Contract Operations | Over 1,500 horsepower per unit | Minimum | ||||
Disaggregation of Revenue | ||||
Compressor unit horsepower (horsepower) | hp | 1,500 | 1,500 | 1,500 | 1,500 |
Contract Operations | Other | ||||
Disaggregation of Revenue | ||||
Revenue | $ 249 | $ 179 | $ 695 | $ 583 |
Aftermarket Services | ||||
Disaggregation of Revenue | ||||
Revenue | 43,171 | 36,255 | 126,246 | 97,402 |
Aftermarket Services | Services | ||||
Disaggregation of Revenue | ||||
Revenue | 23,528 | 19,249 | 66,666 | 53,149 |
Aftermarket Services | Over-the-counter ("OTC") parts and components sales | ||||
Disaggregation of Revenue | ||||
Revenue | $ 19,643 | $ 17,006 | $ 59,580 | $ 44,253 |
REVENUE FROM CONTRACTS WITH C_4
REVENUE FROM CONTRACTS WITH CUSTOMERS - Performance Obligations (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 282,271 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 99,377 |
Performance obligations expected to be satisfied, expected timing | 3 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 122,031 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 46,882 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 12,870 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 919 |
Performance obligations expected to be satisfied, expected timing | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Remaining performance obligations | $ 192 |
Performance obligations expected to be satisfied, expected timing | 1 year |
REVENUE FROM CONTRACTS WITH C_5
REVENUE FROM CONTRACTS WITH CUSTOMERS - Contract Assets (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Contract with Customers | ||
Receivables | ||
Accounts receivable, trade, net of allowance | $ 118.9 | $ 84.7 |
REVENUE FROM CONTRACTS WITH C_6
REVENUE FROM CONTRACTS WITH CUSTOMERS - Credit Losses (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | ||
Contractual life of accounts receivable | 30 days | |
Period for analyzing historical loss data to determine loss experience | 2 years | |
Changes in the allowance for credit losses balance | ||
Balance at beginning of period | $ 2,152 | |
Provision for credit losses | (28) | $ 151 |
Write-offs charged against the allowance | (637) | |
Balance at end of period | $ 1,487 |
REVENUE FROM CONTRACTS WITH C_7
REVENUE FROM CONTRACTS WITH CUSTOMERS - Contract Liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | |||
Contract liability with customer | $ 8,300 | $ 4,400 | |
Deferred revenue recognized in earnings | 19,614 | $ 8,167 | |
Deferred revenue recognized in earnings | $ 15,709 | $ 8,081 |
STOCK-BASED COMPENSATION - Comp
STOCK-BASED COMPENSATION - Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||||
Total stock-based compensation expense | $ 3,022 | $ 3,027 | $ 9,939 | $ 9,862 |
Equity awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||||
Total stock-based compensation expense | 2,998 | 2,900 | 9,035 | 8,741 |
Liability awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||||
Total stock-based compensation expense | $ 24 | $ 127 | $ 904 | $ 1,121 |
STOCK-BASED COMPENSATION - Acti
STOCK-BASED COMPENSATION - Activity (Details) shares in Thousands | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Restricted stock awards | |
Shares | |
Non-vested awards at beginning of period (in shares) | 2,578 |
Granted (in shares) | 1,861 |
Vested (in shares) | (1,152) |
Canceled (in shares) | (244) |
Non-vested awards at end of period (in shares) | 3,043 |
Weighted Average Grant Date Fair Value Per Share | |
Non-vested awards at beginning of period (in dollars per share) | $ / shares | $ 10.35 |
Granted (in dollars per share) | $ / shares | 9.03 |
Vested (in dollars per share) | $ / shares | 10.25 |
Canceled (in dollars per share) | $ / shares | 9.28 |
Non-vested awards at end of period (in dollars per share) | $ / shares | $ 9.67 |
Cash-settled units | |
Shares | |
Non-vested awards at end of period (in shares) | 508 |
Stock-settled awards and units | |
Shares | |
Non-vested awards at end of period (in shares) | 2,534 |
STOCK-BASED COMPENSATION - Unre
STOCK-BASED COMPENSATION - Unrecognized expense (Details) - Restricted stock and restricted stock units $ in Millions | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Unrecognized compensation | |
Unrecognized stock-based compensation expenses (in dollars) | $ 17.1 |
Weighted-average period over which the expected unrecognized compensation cost is expected to be recognized | 1 year 10 months 24 days |
LONG-LIVED AND OTHER ASSET IM_3
LONG-LIVED AND OTHER ASSET IMPAIRMENT (Details) - Idle Compressor Units hp in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 USD ($) CompressorUnit hp | Sep. 30, 2021 USD ($) CompressorUnit hp | Sep. 30, 2022 USD ($) CompressorUnit hp | Sep. 30, 2021 USD ($) CompressorUnit hp | |
Impaired Long-Lived Assets Held and Used | ||||
Idle compressors retired from the active fleet | CompressorUnit | 25 | 60 | 100 | 175 |
Horsepower of idle compressors retired from the active fleet | hp | 23 | 24 | 80 | 61 |
Impairment recorded on idle compressors retired from the active fleet | $ | $ 4,149 | $ 5,120 | $ 16,205 | $ 14,964 |
Impairment, Long-Lived Asset, Held-for-Use, Statement of Income or Comprehensive Income | Long-lived and other asset impairment | Long-lived and other asset impairment | Long-lived and other asset impairment | Long-lived and other asset impairment |
INCOME TAXES (Details)
INCOME TAXES (Details) $ in Millions | Sep. 30, 2022 USD ($) |
INCOME TAXES | |
Potential decrease in unrecognized tax benefit in next twelve months | $ 2.7 |
EARNINGS PER COMMON SHARE (Deta
EARNINGS PER COMMON SHARE (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Earnings Per Common Share | ||||
Net income | $ 15,371 | $ 9,304 | $ 33,838 | $ 22,225 |
Allocation of earnings to participating securities | (294) | (456) | (1,114) | (909) |
Net income attributable to common stockholders, basic | 15,077 | 8,848 | 32,724 | 21,316 |
Net income attributable to common stockholders, diluted | $ 15,077 | $ 8,848 | $ 32,724 | $ 21,316 |
Weighted average common shares outstanding used in basic earnings per common share (in shares) | 153,550 | 152,158 | 153,168 | 151,615 |
Effect of dilutive securities: | ||||
Restricted stock units (in shares) | 131 | 138 | 125 | 152 |
ESPP shares (in shares) | 6 | 1 | 4 | 2 |
Weighted average common shares outstanding used in diluted net income per common share (in shares) | 153,687 | 152,297 | 153,297 | 151,769 |
On exercise of options where exercise price is greater than average market value for the period | ||||
Effect of dilutive securities: | ||||
Net dilutive potential common shares issuable (shares) | 15 | 27 |
DERIVATIVES AND HEDGING - Inter
DERIVATIVES AND HEDGING - Interest Rate Swaps (Details) - Interest rate swap, March 2022 expiration - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |
Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | |
Notional Disclosures | |||
Notional value of interest rate swaps that expired | $ 300 | ||
Collateral posted prior to expiration | 0 | ||
Notional value dedesignated | $ 125 | ||
Fair value of derivative prior to dedesignation | $ 1.6 | ||
Derivatives Designated as Hedging Instruments | |||
Notional Disclosures | |||
Notional value of interest rate swaps that expired | $ 175 |
DERIVATIVES AND HEDGING - Effec
DERIVATIVES AND HEDGING - Effect of Derivative Instruments on Statements of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Effect of derivative instruments on results of operations | ||||
Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded | $ 25,177 | $ 25,508 | $ 74,879 | $ 82,711 |
Derivatives Designated as Hedging Instruments | Interest Rate Swaps | ||||
Effect of derivative instruments on results of operations | ||||
Pre-tax gain (loss) recognized in other comprehensive income (loss) | (581) | (512) | (670) | |
Derivatives Designated as Hedging Instruments | Interest Rate Swaps | Interest expense | ||||
Effect of derivative instruments on results of operations | ||||
Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense | (1,867) | (1,758) | (4,440) | |
Derivatives Not Designated as Hedging Instruments | Interest Rate Swaps | ||||
Effect of derivative instruments on results of operations | ||||
Gain recognized in interest expense | $ 532 | $ 523 | $ 532 | |
Derivative, Gain (Loss), Statement of Income or Comprehensive Income | Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded | Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded | Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded | Total amount of interest expense in which the effects of cash flow hedges and undesignated interest rate swaps are recorded |
DERIVATIVES AND HEDGING - Eff_2
DERIVATIVES AND HEDGING - Effect of Derivative Instruments on Balance Sheets (Details) - Interest Rate Swaps $ in Thousands | Dec. 31, 2021 USD ($) |
Derivatives | |
Derivative liabilities | $ 1,250 |
Derivative Liability, Statement of Financial Position | Accrued liabilities |
Derivatives Designated as Hedging Instruments | |
Derivatives | |
Derivative liabilities | $ 727 |
Derivative Liability, Statement of Financial Position | Accrued liabilities |
Derivatives Not Designated as Hedging Instruments | |
Derivatives | |
Derivative liabilities | $ 523 |
Derivative Liability, Statement of Financial Position | Accrued liabilities |
FAIR VALUE MEASUREMENTS - Measu
FAIR VALUE MEASUREMENTS - Measured on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Ecotec | ||
Fair value measurement of assets and liabilities | ||
Ownership interest (as a percent) | 19% | |
Recurring Basis | ||
Fair value measurement of assets and liabilities | ||
Investment in ECOTEC | $ 12,000 | |
Equity Securities, FV-NI, Fair Value by Fair Value Hierarchy Level | Level 3 | |
Derivative liabilities | $ 1,250 | |
Derivative Liability, Fair Value by Fair Value Hierarchy Level | us-gaap:FairValueInputsLevel2Member | us-gaap:FairValueInputsLevel2Member |
FAIR VALUE MEASUREMENTS - Mea_2
FAIR VALUE MEASUREMENTS - Measured on Nonrecurring Basis (Details) - Level 3 $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 USD ($) Y $ / hp | Sep. 30, 2022 USD ($) Y $ / hp | Dec. 31, 2021 USD ($) $ / hp | |
Impaired Long-Lived Assets | Compressors | Measurement Input, Weighted average disposal period | |||
Fair value | |||
Measurement input | Y | 4 | 4 | |
Impaired Long-Lived Assets | Compressors | Measurement Input, Sale proceeds | Minimum | |||
Fair value | |||
Measurement input | 0 | 0 | 0 |
Impaired Long-Lived Assets | Compressors | Measurement Input, Sale proceeds | Maximum | |||
Fair value | |||
Measurement input | 621 | 621 | 621 |
Impaired Long-Lived Assets | Compressors | Measurement Input, Sale proceeds | Weighted average | |||
Fair value | |||
Measurement input | 44 | 44 | 35 |
Impaired Long-Lived Assets | Compressors | Measurement Input, Discount for market liquidity | |||
Fair value | |||
Measurement input | 0.56 | 0.56 | 0.64 |
Nonrecurring Basis | Idle Compressor Units | |||
Fair value | |||
Impairment recorded on idle compressors retired from the active fleet | $ | $ 4,100 | $ 16,200 | |
Nonrecurring Basis | Impaired Long-Lived Assets | Compressors | |||
Fair value | |||
Impaired assets | $ | $ 1,548 | $ 1,548 | $ 4,380 |
FAIR VALUE MEASUREMENTS - Other
FAIR VALUE MEASUREMENTS - Other Financial Instruments (Details) - Fixed Rate Debt - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Long-term debt, fair value | $ 1,155,760 | $ 1,361,000 |
Long-Term Debt, Fair Value by Fair Value Hierarchy Level | us-gaap:FairValueInputsLevel2Member | us-gaap:FairValueInputsLevel2Member |
Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Long-term debt, fair value | $ 1,296,895 | $ 1,296,325 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - Affiliated Entity $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) director | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Old Ocean Reserves | Archrock, Inc. | |||||
Related Party Transaction | |||||
Ownership interest (percent) | 10.80% | 10.80% | |||
Old Ocean Reserves | |||||
Related Party Transaction | |||||
Number of directors shareholders have right to designate | director | 1 | ||||
Minimum ownership interest of outstanding shares required to elect a board of director (percent) | 7.50% | 7.50% | |||
Hilcorp and affiliates | |||||
Related Party Transaction | |||||
Revenue from related party transactions | $ 9.2 | $ 9.5 | $ 27.8 | $ 28.6 | |
Due from related party | $ 3.2 | $ 3.2 | $ 3.7 |
SEGMENT INFORMATION - Number (D
SEGMENT INFORMATION - Number (Details) | 9 Months Ended |
Sep. 30, 2022 segment | |
SEGMENT INFORMATION | |
Number of reportable segments | 2 |
SEGMENT INFORMATION - Revenue a
SEGMENT INFORMATION - Revenue and Gross Margin by Reportable Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue and other financial information by reportable segment | ||||
Revenue | $ 213,668 | $ 195,166 | $ 626,697 | $ 586,212 |
Gross margin | 106,141 | 103,234 | 315,966 | 318,255 |
Contract Operations | ||||
Revenue and other financial information by reportable segment | ||||
Revenue | 170,497 | 158,911 | 500,451 | 488,810 |
Gross margin | 98,803 | 97,631 | 295,901 | 304,778 |
Aftermarket Services | ||||
Revenue and other financial information by reportable segment | ||||
Revenue | 43,171 | 36,255 | 126,246 | 97,402 |
Gross margin | $ 7,338 | $ 5,603 | $ 20,065 | $ 13,477 |
SEGMENT INFORMATION - Reconcili
SEGMENT INFORMATION - Reconciliation of Net Income to Gross Margin (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Reconciliation Net Income (Loss) to Gross Margin | ||||
Total gross margin | $ 106,141 | $ 103,234 | $ 315,966 | $ 318,255 |
Less: | ||||
Selling, general and administrative | 30,500 | 28,839 | 85,964 | 80,000 |
Depreciation and amortization | 39,953 | 45,280 | 124,348 | 135,185 |
Long-lived and other asset impairment | 4,154 | 5,121 | 16,217 | 15,154 |
Restructuring charges | 313 | 1,953 | ||
Interest expense | 25,177 | 25,508 | 74,879 | 82,711 |
Gain on sale of assets, net | (12,695) | (15,393) | (33,755) | (29,549) |
Other (income) expense, net | (585) | 337 | (52) | (1,634) |
Income before income taxes | $ 19,637 | $ 13,229 | $ 48,365 | $ 34,435 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - Ecotec | Oct. 03, 2022 | Sep. 30, 2022 |
Subsequent Event | ||
Ownership interest (as a percent) | 19% | |
Subsequent Event. | ||
Subsequent Event | ||
Ownership interest (as a percent) | 23% |