CCLP - Earnings call transcript Q3 2020

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Operator

Good morning, and welcome to CSI Compressco LP's Third Quarter 2020 Earnings Conference Call. The speakers for today’s call are Brady Murphy, President of CSI Compressco; Elijio Serrano, Chief Financial Officer for CSI Compressco LP and also for TETRA Technologies, Inc which is the general partner of CSI Compressco LP; and Roy McNiven, Senior Vice President of Compression Services. Also in attendance is Michael Moscoso, Vice President of Finance for CSI Compressco LP. [Operator Instructions] Please note that this event is being recorded. I’d now like to turn the conference call over to Mr. remarks. opening for Serrano ahead. go Please

Elijio Serrano

and may you, Nick. CSI I you joining be conference and like may are be deemed Good third quarter morning to on which assumptions call to factors. of These this beyond Compressco’s that are call. These subject on statements remind made of thank CSI number are statements XXXX certain the based of Compressco that to a by number or for forward-looking. you uncertainties, of the control risks a analyses, are and Thank and many contain results would are based partnership. conference statements

forward-looking are that are that differ those may You of the future from not actual such statements. results performance, and statements materially cautioned in guarantees projected

the other we EBITDA, our call, for Please in financial addition, flow, of the These may free for a flow, the or of margins, refer gross within should this context nearest considered to coverage not press distributable financial course financial ratio non-GAAP reconciliations complete in to are distribution public GAAP leverage substitute cash release cash EBITDA, or adjusted morning’s measures. to backlog, refer ratio, measures to be of the for information with GAAP, period. measures. prepared the accordance and website results our financial non-GAAP reconciliation In

are Form that, over which out morning, With and this turn XX-Q it earlier with as this our went our In to that to on website, announcement will addition our release press the I posted Brady. morning. filed SEC

Brady Murphy

Adjusted provide a financial for CSI industry introduce compression Inc. over XXXX balance count and CSI delivered And since earnings the for acquisition highest Systems to third quarter it to of solid XX% flow performance difficult were Compressco's XX.X% US sequentially, some telemetry by quarter dropping Good Roy recap cash Elijio. Thank our margin very Compressco morning joining our everyone. you of land Elijio followed new EBITDA with on the to macro the of results. you, call. technology, liquidity. the our I'll get sheet, and turn Compressco Despite third environment rig of commentary thank

high of line with equipment declined with utilization. CSI new on the well of horsepower only customers' done reductions our and by availability the $XX.X X% operate decreased Adjusted to expenses the EBITDA costs. as at the business, to from the second $XXX,XXX operations. continue a from continued revenue The Gross revenues quarter. X% healthy management customers XXX amount reflecting our to by supporting has the expectations. to mechanical as the improved on that a lower units, team underutilized horsepower customers exit was rationalize XX% used our million they the operating equipment the of equipment services costs. they as benefit Despite second we've million Excluding sales improved sale up sequentially made and staff pricing decreasing and in points. our in and pressures, sequentially from to while reduction for operating and slight high, XX.X% standby be continues require. the XX.X% availability XX% exit decision Corporate the margins from and units. equipment to operations third XX.X% cost were Utilization held equipment quarter, adjusted we Mechanical the the pricing business the basis field EBITDA standby network great included our has Adjusted another in reduced $X our EBITDA rationalize by to of job team and smaller Compressco safely quarter. overhead pressures at support quarter Compression were fabrication margins and streamlining our SG&A fleet second of reducing of by over mitigated in remain with largely quarter

the low from severe to much one. currently utilization the are previous than We being point rapid the despite of above more XXXX and this XXXX downturn downturn,

those the now better and have are in capitalist larger, XX% and last team units low towards compared horsepower is and the in underperforming in as and XX% concentrating system above higher to ERP results, reports, The focus dashboards areas margins tools, has on XXXX. shift our couple a to remained of we quickly given our quickly Our can for developed been address. us point the using reflected downturn on have the KPIs years gross that customers the

in operating XX% reduced costs As XXXX. of quarter a have the by been peak result, first from the

of and We XX,XXX have horsepower been on our standby our out standby structure will come cost improved May, on at organization. back representing units with XX% fleet, efficient been of a leaner a customers Horsepower downturn approximately bringing as and production the our to representing X% much peaked almost of and XXX,XXX fleet more has September, online. of end in this at

artificial customers perform Our finding when and submersible working activity. pumps. lower to their on multi effectively long cost that more lift, of are electrical pads the efficiently given as drilling compared levels X,XXX with levels our well significantly maintain to forms are gas laterals They other production horsepower such of units

are on Texas. and year. and XXXX online of our is we particularly of outlook our a on seeing gas. gas period a off, In basin to as earlier drilled in or prices for deploy maximizing are enhance are in as a single wells lift, a As gas and With broader producers for more of to units to Midland big believe We basin into greater enhancement pressure opportunities production that returns production more this focus the and smaller to drop for improved last compression And and group wells of production on Delaware becoming are well also are the natural applications. in this demand on a solution seeing big free existing gas West from enhance now producers cash wells seeing production units transition flow. also basin smaller of Delaware production liquids and our base were decline performing The result, new centralized producers. the to and brought aging well low strategies priority environment, deck compressors cost increase year

expect wells. gas We take of and lift to shale lifting reduces to costs share, increases horizontal as it continue market reliability

a points as and Aftermarket security are capital free while a employees not and parts to beyond. again Our fleet increasing fleet their market new branding customer cash is to Helix. on on have expected another McNiven does for compression gross on to and services call I services generation are flow. aftermarket the expected require declined we basis the XX.X%. efficiently sequentially Aftermarket limit further turn safely runs services over improved focused margins generate our it to ROI. this gain of earnings well suited to revenue a I'll Aftermarket of to meet technology XX% compressors remains delivering us focus team demand. to and a good provide to XX XXXX recently major commend environment. and networks. work into period before this want our and to as on going Roy going to our our Overall, cash. year has secured can is be begins difficult an required customers' But improve services to one introduce stages management to momentum into maintenance equipment a This of service their services deferred our done to with are quarter impact XXXX time been and efficiently. their third our Roy deployments down for enhance provider a to compression as only our your incredibly and conserve business advanced shut on revenues meaningful We account large or less of limited they profitability midstream next that operate this service system

Roy McNiven

XX% of are compression. solution Having produce is completed incremental digital as enhanced meaningful delivers productions. our customers availability, comes driving theme it differentiating A Thanks, brand making value common measure the that In excited product and which industry. solution. and our very and integration, priorities to Today, runtime, the gathering updating call and Helix improvements, solution significant and availability availability. to third pretty unique we're contracts solutions is ERP XXxX customer of a fleet to a differentiation. and previously telemetry the looking good progression service and with Brady. highlighted means modernize mechanical name telemetry scoping our our We've Reliability our Brady amount creating base performance the customer maximizing services is office and of mechanical and a we reliability terms spent solution. of to today's for compression, that we're in mentioned for compression maintaining Helix quarter, out already and of competitive significant time mechanical to of across a new our XX% and when we reliability. a introduce customer in back operated to key between a implementation common it's large telemetry to now compression requirements XX% we is digitally effort is in investments sounds our guarantees

identifying availability, will conditions reward from data maintenance. runtime we fidelity failure. compression scheduled well more and an highly reactive rectifying However, failure in introduction high XX% advance constantly operating catastrophic modes failures. machine The and is are performance of only reduce to improve reliable, key can and of with expensive and runtime maintenance of receiving that Predictive not using production. along customers could engine big if the in predictive operated better is A data to addition costs with and imagine much you effective Helix, mechanical at maintenance maintenance do optimized of airline is This to better learning support cost part and really anticipating performance? than performance predictive that in

of years Azure a access forcing Lake, some supporting flow solution telemetry the leading connection XXX possess management system. advanced Helix? secure diagnostics, more hybrid end runtime availability metrics technicians Data analytics; who and reporting, This analytics. Using Compressco's to is remotely customers perform solution. performance time user reliability collectively our XXxX. and analysts compression through highly of to what interface and change Event in our an a addition the package step of With real compression front our team typical performing data our and troubleshooting that compression a seamless support user reliability. most CSI our and in-house enhanced custom real of time performance the skilled is packages information reliable Cloud, not team that customers, our the incorporates The a real a Helix robust Hub edge fidelity, will over to Azure our reliable center. sales experience technologies compressor of industry and box Helix in experience, So high from and application and a have is technicians higher is team reliability out telemetry from through time of creates and of in

XXXX. Rice our of University In Knowledge. the efficiency through Data Data us deliver solutions. the Helix learning allow compressor to to baseline and service to further reliability. gains numerous machine feel our Helix in and and our technology learning our has use The customers age, Helix DXK while leveraging cost DXK it with partnership our comes customers programs Big enhanced and application required In when programs, reductions mentioned automation is to to leverages have maintenance end team, analytics Big we and performance algorithms a acronym cost release, enabler in efforts facilitate value. and dedicated high by deliver accelerating Here, protection modern strategies. since predictive and Big is machine higher data, which and implementing data of into Compressco to the also and instrumental along collected with effectively addressing with our ERP decade compressor front effective Data as performance, creating more CSI summary, tying front and of its seamlessly and proactively integrated enhance we introduction Houston's required system, levels and end, predictive maintain their look program our is advance processes, will of for equipment. been customer maintenance to today's In press driving will fidelity the Data will

in the of leverage upgraded end front our XXXX. end live go enhance target our the the of solution the of our year. with the currently this application As further at of gateways our Starting upgrading IoT a Helix we're launching quarter technology communicating services to first date by our compression how We're and quarter of expect solution. we're timeline, also to have XX% deploying updated today we and of end the fleet approximately process fourth for

from We some this feedback we received super positive this to the have will The industry XX with previews the and have indicated now been initiatives. will has in I'll of through call very today. customers coming Elijio. do in have media out anything our major done weeks they over the we XX turn various to leapfrog

Elijio Serrano

that that Brady asset used of of count year million $X there third EBITDA of mentioned those the adjusted EBITDA $XX.X in adjusted associated revenues. cash EBITDA quarter the sale you, We in as the the Roy. benefit sale used assets, generated we sale and million $X no Thank assets. valuable with was given is Without costs current $XX.X of the used million quarter. included the million from and of third of

in continue end we not is of at At cash utilized. that the plus half and on to that the revolver, despite of $X the We real to the total reduction end amounts the from advisory this of reduction million unit in we in we a $X.X on XXXX and million we related up September year. sale million The are hand year $X.X million debt improvement million that maturities assets was beginning on in targeted assets $X.X revolver $XXX and $X from $XX.X almost Brady or is outstanding which very is beginning XXXX. of our estate debt, total reduction of sized represents are legal compressor market year. compared year, million, the of a beginning monetize $XX as year. Midland quarter, expect this of to the have this of conditions. million compete Cash there in a the resulted of increase of which which And the the million second outstanding this debt push in facility no that of of at into of used September, $XX mentioned outstanding paid adequately the the another swap under sold fees the amount our after sales and was the the of and of fabrication challenging June million fourth

margins either idle selling larger retire in investing or improving our we units. investing are in generate Roy smaller will older, operating We to debt, fleet, higher the units our mentioned, compressor that that to technology believe cash generate

higher to on horsepower continue We high-grading are and focused the fleet units. move towards the

down opportunities We growth targeted by to Our XXXX. funded notes unsecured free reduction. months of smaller objective next in amount. capital we of flow maturing towards the million cash generate early as expenditure $XX units. limited million $XX refinance in capital to quarter on $XX and by is see third XX going debt sale the the of the To remaining partially to going growth million are be the Growth focus of to forward pay

capital For the million expect expenditures year $X growth of million. $X we and XXXX, full between

We're able reflecting quarter and of XX% third the capital last million. in third a quarter $XX in level. expect from to activity of expenditures million by almost We reduce year the expenditures $XX maintenance slowdown between capital

first invest until and year, the technology million, notes spend continue million than expect greater are margins primarily XXXX, in We million $XXX of on are and due second enhanced we and the XXXX. XXXX This Helix as to million $X not to unsecured bonds $XX drive August of system between that mentioned $X lien earlier. the Other due to and returns.

we also, I've need This Xx any maintenance as net comply to with. $XX underutilized facility don't we Midland as of covenants the free mentioned this was downtrend. that which during cash. million have flow have the we million Our over September to of And of ratio at any leverage $XX approximately end prior a X.Xx. revolver. don't our smaller earlier, before, And sold drawn other on We as fabrication cash and quarter mentioned generated amounts we generated assets compares

basis, underutilized we distributable sale On Friday was was Distributable cash For operating annualized XX% smaller cash September million, business of of sale $XX.X cash flow Through a to third $XX.X from units. the million real total September from $XX.X close September, flow prices, fabrication an the common distributable of increased we of the million. cash in unit had unit. benefited would activities. from estate. assets good and generated flow of quarter, $XX the we the which was on year, in be improve monetize as This facility year-to-date sheet. flow for bad from balance liquidity $X.XX year-to-date per compares cash or our to and of total million. $X.Xs. cash we $XX.X quarter, anticipate sale million and assets those completed a by Overall, cash yield. Free of of sale and This $XX business our exited million used the our smaller, assets, not of fabrication a underutilized generate is generating

technology we margins good We natural gas pressures maintain continue big shale to our in production, And lift in to to to off our in go due if and production toward prices drop units applications are gas higher was smaller the across to invest smaller CSI enhance from seeing industry. reduce the despite gas headcount Compressco price deploy a wells. positioned that centralized unit

we how any are and out technology downturn a with reposition are concentrate fleet, with the our if Nick, questions We capitalized coming let's market. see through open we our to up that opportunities are managing will low larger; deploy With develop as customers this that it in there. pleased we there

Operator

comes DiRubbio from Baird. Brian of First Instructions] question [Operator

BrianDiRubbio

up service? will better operate, allow preventative charge in the an through but few running maintenance always believing. are Helix, it just questions customers and Or is just that to consistently? interesting you exactly more your What believe offering? of is for with Good maintenance morning. I seeing A starting Is up sound it you. sort Maybe

BradyMurphy

and good clarification. question That's a

make telemetry performance, our on that a failure as catastrophic an package. example, machine performance our is concession Helix it from the to And we an And is a looking points our front shut down. data application; the it analysts team. package. on providing actual to maintenance packages. and customers, that consists then that to information That our have would XX gateway gathers. the of solution to that or of data collects enhanced our And information So Working points our we through metrics, different solutions unit dashboard IoT at streamed predictive have multiple XXXX end compression, and who to of learning failure predict all management are prior with a by metrics, of continuously also it's available to will

And so as our [Tech that update something software well we've as with, our lot through and aftermarket visibility. it's a providing entire compressors service and compression. Difficulty] will it outfitted a fleet as of service of we a It's as offer

ElijioSerrano

Brian, also more add rather has make strong predictive us that downtime than us I'll customers, have our some in And with equipment. our very, mentioned, scheduled allow having and been cost maintenance of as with very positive. the any this more to preview as And we maintenance. effective will feedback be proactive Roy

BrianDiRubbio

Got it.

of is more correct? than you'll I a as the about rather is about think that summary, this So is forward, see this in that opportunity going savings revenue more this

RoyMcNiven

definitely because add your compressors it's we on perspective. a daily why is realize the to only the the But related pick runtime directly that, top -- I they on savings compression compression, reasons thing the mean companies of selection to one will some production. of of from reliability based maintenance customer their Yes, I would Brian,

our expect we deployed. and have market pricing Helix we gains would premium where So share

BrianDiRubbio

million said gears, growth these of mature some in call XX-months. And the you about you and I'm at in about company Elijio, current How to those the open property spending, balancing it unsecured CapEx it. of debt maybe I think are as you've for got in CapEx switching Understood, $XX we of looking sort investing maintenance, unsecured for projects? then it's million growth spending, you if $XX know -- got think sort versus another market the purchasing

ElijioSerrano

see unique to little top earnings. well the that majors not cash But got we've the might going this be is of growth capitalized right at specific we available. we idle very are two flow from that super up because that capital to given So, to Anything amounts fleet. month-to-month, point, our three customer. ahead We've be targeted And equipment do to generating in that going we've some have comes a have toward minimal been it's equipment us. our now quarter-to-quarter in Brian,

underutilized anywhere refinance assets. You've we're some now cash accumulate generating we and seen between of and August of $XX of less that next And We than million. older cash, from believe use next so. months. the that market to we $XX in also monetizing $XX $XX million that million between the expect can to million smaller, prepay of or year retire a to find some We'll XX or other fully the the

BrianDiRubbio

refinance, Got to you're year, late next that it aim assuming? for and going I'm

ElijioSerrano

intention our and call to is Yes, current improvement. refinance this it before to let not go it we have

BrianDiRubbio

that Okay, sense. makes

should Just final what in we as be else discussed you've already XX-months? potential there which about asset outside cash me, sales, the of that is question thinking terms about over next sources for of anything of

ElijioSerrano

Now, the return, combination those that into two will expense market. position to the us get to put in we'll that maintenance fashioned look the refinance cash cash prune good and cost earnings decent capital; drive the covering will $XX don't sell to we'll will anything any a a fleet, believe at We old continue do million. look those current generate we to us to have just cover aggressive, and we good and interest of period earnings management think

BrianDiRubbio

I actually, on that. environment more to thoughts like get one acting pricing competitors any the your or love rationally? Just on free; your and just final Got thoughts

BradyMurphy

to operations; the respond. let him with closer I'll we here Yes, day-to-day Roy Brian, since have who's our

RoyMcNiven

see of restraint this continue respect show the pricing. seeing region the pricing, some customers. market, majority with point so there, dependent pressure on time, on Brian, do highly in at we And and some the Sure. to competitors the our to we're out

their do expectations, players it to lowering when pricing. be Although continue seem to comes to of the some smaller

ElijioSerrano

on discounts lasted in that I'll last add, that we're industry also is three much And disciplined today. everybody cumulative a on expensive. discount swiveling a seen incredibly pricing over were the for seeing in and And price of what big significant for for other And a has provider single in it discipline their think own pretty out digits, sector. paying in and swap the been led which cost; one the service the little price and has customers. other swap the cost has out is a unit doesn't not that markets out stayed what make high the that's we downturn the to the level years, mirrors swapping economical the Brian, some And, remember of the energy

Operator

our session. question-and-answer concludes This

Murphy to Now Brady the turn for remarks. Mr. back I'd conference closing like over

Brady Murphy

you, We join thank interest concludes us everyone's This time appreciate to morning. for and Thank in this you Compressco the taking call. our CSI Nick.

Operator

concluded. Thank now presentation. for is attending conference you The today's

You may disconnect. now

CSI Compressco (CCLP) 2 Nov 202020 Q3 Earnings call transcript