CCLP - Earnings call transcript Q4 2020

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Operator

Good morning and welcome to CSI Compressco LP's Fourth Quarter and Total Year 2020 Earnings Conference Call. The speakers for today's call are John Jackson, Chief Executive Officer of CSI Compressco LP; and Jon Byers, Chief Financial Officer of CSI Compressco LP. Also in attendance today are Robert Price, Chief Operating Officer; Roy McNiven, Senior Vice President of Operations; and Michael Moscoso, Vice President of Finance. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. turn over to Mr. like now the to conference I'd Byers remarks. for opening ahead. go Please

Jon Byers

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

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

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

that release February replay. over longer accurate only I now With on announcement the to at Jackson. will on management's in the our it today information went XXth may be In and posted no of XX-K speaks note be our morning John turn days. press addition this Form is that, will Please provided coming earlier our to that time out this to website, views and filed as call of

John Jackson

Jon believe in for going everyone to acquisition general end have Byers the of Thanks of turn first XXXX, it base less natural position significant of and Jon. with in US I'll cash volatile the commentary to prospects to employees. partner We a considering compression a Spartan gas I'm CSI strongly is on the balance solid and thanks at the global But over long-term to asset common a some unit fabrication and with demand. of pleased provide flow summary some liquidity. the and joining comments is the a has today. significant morning great after of us Good sheet January. give completed CSI CSI And Compressco business group growth opportunities. exit Compressco and business that

through done the company have overall navigating job challenging thank the employees gas year everyone environment. for to year want this help and this pandemic guide Our the I past to efforts and oil great their times. a such

press we provides cooling. business. Spartan to Spartan to the natural monthly in model primarily gas business business business similar to and for release, gas view fee. Spartan's The a compression treating services amine mentioned treating be complementary through is contract whereby As CSI model The Compressco's involves

turn now, joint seeing third together. significant opportunities as XX.X% If quarter also fourth same has now opportunities will we with declined time we compression as the seeing the in look team. to quarter-on-quarter. to are or industry Spartan. compared seeking in bid the doing revenues, and projects cash we're international, declines opportunities these Compressco distributable and And of right look CSI we the to have the prior quarter seeking Compressco join in to and successfully opportunities and joining US, We're to but from CSI for them to XX.X% type trends, as our projects CSI EBITDA specifically in XXXX that's and adjusted again XXXX, in of We've management flow of Spartan utilization work had forward results the operational so we experience. addition In as Compressco worked the modest past more these

give While about optimism oil $X.XX compression Compressco. is this signs trend and the specifically rising internationally. gas in bidding space prices in range, and may continue both in general CSI more into around that of we for are up early and $X us US natural $XX With picking XXXX, seeing WTI to to the activity activity the

at In to addition, decreased XX,XXX from on standby been today. year-end horsepower horsepower that's XX,XXX

adjusted base customer we relationships also We our be that of will in and to evident related oil CSI clearly a The during our expand with we in strength the to decline XXXX areas prices. unprecedented in can challenging free existing partnership's broaden believe cash resiliency is looking in of and core and operations. Compressco's the our base our areas asset EBITDA the very flow generation pandemic

to sales months unit has the Over the Compressco success. no long-term longer the generate The we liquidity. last One, decisions a equipment given nine some for sales key strategic ourselves business facility to strategic CSI environment. business made new and additional sold new position fit was manufacturing overall exited

XXXX notes second million $XXX with a notes we $XXX for of lien Second, million secured maturity maturity notes million $XX exchanged and with for the unsecured a XXXX XXXX maturity.

unsecured with also of XXXX. exchange million million $X notes debt eliminated leaving maturing in us We with of this of $XX August

a strong general And around commonalities provide services Spartan incremental been model, business a partnership the natural infrastructure. as changed while supportive Finally, and both We're partner, has that I ownership these opportunities earlier. the as TETRA provide has a will mentioned gas is company customer hopeful move general companies long similar for base we forward. have we

discipline on customer with Compressco CSI management. and cost operate will focus capital service, We a

mind, take business we're of when happens. Based to recovery, We but it prepared a betting this seeing on not one, on advantage we be now, what and if are we'll manage large right will of already And activity that with we are units optimistic increasing are in about order entered over contract. the XXXX course four under with horsepower on that and XXXX.

we energy fleet optimistic on and and delivering back forward future. efficiently excited Overall, idle on now. XXXX and incremental solid incredibly to expect to look a I environment. and a difficult that redeploying want over about in Jon it and the our the team going trends We're commend the capital turn again units. bright I'm We in safely to future to employees an space to any With management macro focus

Jon Byers

XX $X.X was represented down month, quarter a flow paid $XX.X million which third in Thanks, quarter earlier quarter. Jon. compared almost cash ratio coverage million Today prior fourth quarter $XX.X $XX.X from $XX.X distributable Compressco this and reported third of fourth million, distribution $XX.X CSI EBITDA $X.XX revenue to of the our We of Fourth the in was the million, to distribution million in quarter times. compared XXXX. million, quarter adjusted of

at Moving XXXX. beginning revolver at end on up of the of December on December, year. At the sheet. were was the Cash to balance our the million, $X.X there no outstanding on million $XX.X from of hand amounts the end was million compared just outstanding liquidity of our end of The at the was the That the agreement put credit at year-end $X.X year. available over total million base to that under $XX end at borrowing $XX.X million.

mentioned, we are approximately XXXX, notes $XX and John of due second of are bonds in and million due and in August that that As unsecured XXXX. $XXX XXXX of lien first have million

the compares prior over adjusted at few ratio EBITDA. of during the times with X.X seven end This a leverage years net December downturn Our was times ago.

and focus management delivering be improving to our on liquidity will customers As generating capital structure. a immediate our our team,

a for thank period, moment support we separate to shared want to I Finally, TETRA during take their work as transition to the services.

our we largest interest one appreciate direct in of a Compressco succeed As has that unitholders, support. and TETRA financial seeing CSI

to questions. the open now call will We

Operator

Thank you.

Baird. now Please will [Operator We Our begin is question-and-answer ahead. Dirubbio go question the first Brian session. from Instructions] from

Brian DiRubbio

Good then several second itself. mid-XXs. the cadence to you I'm of rebounding you're dropped the seeing in the over off Maybe half? as Utilization just start see to and trying on the declining Do a potential just that morning. near-term in business quarters. get next to sense rates what the

John Jackson

coming a environment, answer with slide I'd constructive we're Yes. seeing That's tough as little is forward into more moved we're But But months first a up and and let's bit. that with base say, say, now, the ahead time. active than accuracy. seeing we see planning, customer quarter, more our part this dynamics lot things demand least to of as far continue budgeting question a going March down. utilization where seeing we're and hopefully the ago, But lot are a early as than three at think out a Obviously, we of back I what pinpoint looking more being and right committing. there's COVID to at

guess. a lower bottoming bit I QX my from be that our moving would we'll positively will from be there So that expectation more But north point. or hopefully, out is probably and say, drift would

Brian DiRubbio

pandemic the we those see obviously revenue roll were depths w maybe last a fair. think fully That's do more. little another we made that during Are or or then could some quarter concessions price about horsepower were we the where of decline per two, And bit as there year. have concessions through, average just seeing pricing,

Robert Price

Yes. question. good It's This a is Price. Rob

pricing deploy We climb as the continue industry. see we robust and to fleet up environment. say higher, to picks I – idle industry continues to try as would would be people in more pricing But flat a the expect utilizations

John Jackson

price think be are that don't will things we from Is more I on out. concessions the there where that... But are

Robert Price

Right.

John Jackson

lot back point. from coming at be a equipment point, there's And of Rob's to this We'll there.

And at terrible working, what So equipment kind on out it's market not the today. to normal. begins I to rate more and opportunities then as we'll return see that but about think getting the shrink to availability, a is of at

think but in on companies also an than want -- we're say to different We US today we're we our side, international the presence. I and don't most of compression the that unique, have I

internationally to we're to probably put activity US seeing immediately now in little -- more put bit we than units the a are So work. right

tick it happen. the be one on that's we're couple may we country these to that another a of transfer but to from in But projects more what see bidding. next So see months, happens up, currently the utilization make if we'll case, of may

Brian DiRubbio

Okay.

Just switching what CapEx year? maybe this are thinking gears, for you

John Jackson

to around So looking $XX overall million at million. CapEx, we're $XX

capital that units be million. the million to around side, alluded that $XX to Jon earlier $XX Some expect is to to of growth related the on maintenance we

Brian DiRubbio

used Perfect. thinking side, maturity investors guess better allocation the the just between could from And capital now credit how dividend cash and 'XX a the are then you number, specifically that elsewhere. small the is is And be obviously notes? about but I of

thoughts maybe how on 'XXs? dividend thoughts possibly So intend on addressing you and the the

John Jackson

any don't changes the at changes point on or We this on dividend. have thoughts

highly now, we're focused right XXXX on the maturity. So

it's number initiatives that, whether cash a discipline. CapEx have your We flow of generation, to around free on point

care August. think got and is take we think it's a making get to really can't go to at six options the further on there they comments do. just year while of that right that's current, that the now eight forefront next have we with moment might we'll dynamic I around our some a We lot crisis XXXXs do deal to the in not mind. they the on something that doing the what But current this, be available. And didn't to and We've we the see early XXXXs. got looking say had next are into to to Otherwise, the I we go of balancing the plan into point markets we different maybe wouldn't certainly a we to come work even year. if full months do at think have priority we've to this we side. a and moment. get because think of where CapEx think And pretty I'd in But we what's

that So need make the we that significant up to of think to we're out. bit play on But a free but cash, itself dividend difference what let little would doesn't do. I going a

Brian DiRubbio

then a one fair. Okay. And That's just me. for final

on, do As How Just years age you. get major refresh inflation how Thank you about fleet, of feel done fleet your other? impacting there to the you and or on a was about the feel look the thoughts one you know way of thoughts the couple business do a just today? composition the ago. the

John Jackson

on to we've itself, got the assets think good I work of with. Well, a fleet core

towards moving years. seen is and I that migration horsepower. over We've think world XX the last larger larger the

horsepower from units horsepower XXX to units moved You was the main XXXX driver.

progression to moving Now from XXXX are of and XXXX the gas standpoint, horsepower units standpoint, emission being people And XXXX using gathered you're natural horsepower to to occurring sent the volume a just locations the compression. units. an that's way outsourced that's footprint

But be we -- we some significant to we front XXXX So we're have off XXXX we which to have and of core the that that. while get take to XXXX, our do us. think have care of in timing need over stay a to good XXXX, need a units care time the issues plan that and to up to we I need need coming And in taking of runway invest maturities we larger of going forefront, the horsepower horsepower-type radar XXXX where to to the that to work no one maturity. nice is of with in we being

to the and continue and I say to overall cash to our latest probably cash a and up horsepower returns either generation some returns unit time, move just those the on better fleet. that horsepower newest U.S. end we while you I'd can normal of fleet Is helpful? asset to So reinvesting then so we or shrink of average will characteristics Again, larger U.S. you horsepower go our nice want continue is the pruning per streams forward. opportunities sales invest the cash that that think get in through on smaller flow largest than flow see horsepower in one cash and overseas the would has generate nice and over the in size from through

Brian DiRubbio

Extremely. Thank you.

Operator

question next Please is go from Spencer The from ahead. Jay Stifel.

Jay Spencer

morning. good Yes,

John Jackson

morning. Good

Jay Spencer

CSI the is company kind the the makes If Is right get Spartan what release elaborate general is own nature international you of wanted on it the you could What mean Is to a say it that Spartan on to complementary view the Compressco. elaborate that? kind of I is here. it to the level else? I just business something business of you that press Can higher please? in partner? complementary opportunities? just

John Jackson

they're assets business the the type the way Spartan up compression income or contracts set just and has the Well is the we have stream of like be assets most contracts. MLP-qualifying would

of that what you that run-off do interact when as but that could do we'll then with look know part works. do have not, at you we I -- that don't it have of you people people someday qualifying same the and we come So CCLP. that income if compression or we interact we with. But where the potentially

purchasing the the people. So people operations it's whether field

So the assets of business or oftentimes where our downstream upstream model we of fee-based is income our and place plants. compression

there. right it's So

the paid So where get both along some chain. it, fee-based the in to it sits of way style usually commodity two terms it's the term complementary one we three no year with on year, and year, contracts risk in value these

we've that we let -- -- if are I'll internationally on think I you top too. of but Rob expand, got

we in the other -- outside a three operate U.S. as have We countries partner.

project through So we just have.¦ taking our that Egypt real quick the fact

Robert Price

saw well mean opportunities a we I compression, or treating required Yes. lot the as as that of processing. internationally

opportunity assets have and and single what the was the operate contracting the at So efficiently same a to point preferred. customer site deploy the with a customer

United difficult effectively that multiple internationally required the it think both asset in and equipment lower jobs States or those in deploy So opportunities bases can be we where would more we've we deploy identified rate. it to

customers some some are larger sourcing invest provide to demand United the utilization for and CCLP point time generate at at So cash to we're the in single flow the that opportunity optimistic and horsepower in same units about drive very in a more States. the

So that's…

John Jackson

it that right to now treating. we're all. jobs two we've part bidding been a one would that for and have turning bid two that -- become bids provide there now of now amine before single for CSI we're compression in one We And have where we're

have out. So the won neither us one that won only that right missed us maybe the of and there maybe [indiscernible] would is would other one one complementary of and or have have would bid

we And Egypt have Rob we as for provider. a where amine Egypt we're compression said treating. actually have Now project a and in going in in single example

compression, to work place necessary the and we course long-term in worked, didn't turnkey buy but US, was enough to didn't have had but that. us do opportunities big actually basis have and a fleet have on rent but normal it many scale to -- compression. a it to acquire we that's site as do for actually compression. the compression, we and did we only So whole the the with We We that

Jay Spencer

Okay. helps. that definitely Well,

units, is overseas or like stuff smaller land, the associated how region, what you it assets you it the so -- federal a compression specific idle or operations it would horsepower that's move that -- is is that or or if assets? is there moving would that And are the may what make -- do international What or the just is consider arose, or yet? to that know opportunity you with

Robert Price

idle another that identifying emissions are or one reason in opportunities opportunities the our the the that's or Well, US we're it's or there hard and deploy whatever. whether size to fleet for

a deploy us on avenue time of idle of the out those drive units. opens opportunity compression to us week having source up. units utilization a internationally XX the to with for to And lead allows up to quickly availability So XX fleet inventory of the to instead respond new

John Jackson

And these were larger. Larger one.

Robert Price

job let's horsepower. -- typically, Yes, the one referencing X,XXX and was -- the one that -- that was say, earlier John we the

in jobs at So are currently bidding XX,XXX looking we're to X,XXX horsepower. that and the

internationally. move So them easily ability assets we horsepower to that the deployed in you ready have deploy the can in capital of units cost a conversion make chunks significant is large and United as weren't States multiple deploy without

Jay Spencer

Okay. you it me. Great. for very much. Thank That's

Robert Price

Thank you.

Operator

from Stifel. Akyol The from Selman question next is

Selman Akyol

morning. Good you. Thank

John Jackson

Good morning.

Selman Akyol

previous guess, I on there. follow-up just So, questions to

would reinvest referenced You opening guys in flows you your higher also horsepower cash in buying that then higher comments.

in about talk US? maybe of see margins the you you that the deploying versus between can difference would sort So overseas

John Jackson

What Rob? do think you

Robert Price

in Differences margin?

John Jackson

Yes.

Selman Akyol

we That cash should thinking we from… or be increased how the see, about might flow coming

Robert Price

it you in could on and the a area. or a depends how XX% it would on in opportunity straight uplift incorporated straight that of job neighborhood space the higher, people a if job margin other compression and compression the to a on operational of -- probably XX% somewhere compression, assets just it number really mean, a capabilities, large on I of much you and -- have substantially Yes. there one the of be be because that revenue in large concentration facilities same with amount operational same --

our way, if concentration So, increase drive that you that is or gross the way can GP higher. obviously, lot margin and a contribution

to would job uplift. if That's was compression XX% I'd compression more amine that you -- it XX% on job you a be XX% how uplift to said it. and an look be on a So plant on the required it if XX% -- pipe that at straight type of kind would a

Selman Akyol

think this a of opportunity, how have overseas -- it then of you you. larger? deployed as just the should X% think XX%, as in you we of about Got to you'd versus do much have Is And overseas it the U.S.? like goalpost like fleet

John Jackson

I it to there don't think that -- be number a because Rob really think overseas the about be idle. either longer significant will have a have would because I deploy said, would we move way as we time we fleet think more them things that we if assets

XX,XXX really change where but not we're much. So, quickly. percentage just If therefore, anything grow to or that XX,XXX And, turn would flow up if horsepower it more move horsepower, then it's with that your not generate the XX,XXX might on crimping could might we U.S. really more we therefore, we horsepower larger even and end immediate the doing cash here. overseas fleet it we -- X,XXX around here,

We we're to a cash optimize to it. become and at at here. or don't goal don't a want have we this international XX% of we want window We're So Really at goalpost but we're a trying XX% looking -- company, lot set utilization. do horsepower flows really have to or point. we returns

lot could experience all this that internationally. world. flow I for and our worked we than significantly return in more the more of the lot Ariel exposing has are we Hanover And from think make the any cash things company days do us generation compression a in already without past a decent been would we free over a and

exposures standpoint that pretty I paid, and and from do the how past. manage to think able that of to get risks effectively understanding I and think So been we've in the

getting think So the we incremental uplift. reward for don't beyond we're risk on the we're taking

Jon Byers

operating in. returns risk-adjusted for definitely The companies are the we're

Selman Akyol

back And enough. we next we there really terms in months, of should this then mean, XXXX? half thought -- see guys I the Is is Fair see like in the you or should three of…? expect in this any to

John Jackson

talking about work? You're international

Selman Akyol

Yeah.

John Jackson

a but and to be it'd in might a the half them I and them see right get the I have XXrd you this whatever, But you months trying at of give time running. happened in trying awarded moment up it. give couple what think, and optimism more units the you by and think install and this we're internationally. of the And last on XXXX because so are snapshot seeing? we're we'd for XXth. back for of measure, time snapshot of February a are we in reason get here get we really both or flavor U.S. ship And them to what's in we something, We just now

book bid up. is Our

And Now building freeze here's days bid being feels up are of momentum quarter. -- then the some it's XX course, for have down. a bill or to fourth people the light about But the thinking started like And for then, activity beginning same budgets Texas book it big XXXX. was in slows spend decisions putting capital. and people third pretty to as here it provided, where of services kind together the and quarter started not but days in we eight in the things weather make is

going four, go late Internationally, I mid-QX, they these thing mean, on little good are whether bigger to these we're we they're awarded in a our So because scale. a because a to saw bit a earlier. that the see look projects saw happens they're term. three, And and projects, international little get the it in year. start to at get internationally on off to that signed processes bit typically about get not five longer one takes people think expectations little projects bit are up for that I We to them longer QX, pickup.

So it it put you away. put you when away,

a that and So job we good sure to we make contract. a on do get want good

say, some that. you half, the see in right updated we're to results we that all that's saying – are you wouldn't I'm if give of keep financial saw last a to successful win or in we'll we probably But the little and a So two, if activity couple the of we're flavor why of compared quarters optimistic you now. winning more we're on bit to maybe trying that second

Selman Akyol

much Compressco. it? And Very takes other Spartan said, talked bit level guys about as on Can of that that CSI a think maybe just combined the color. people about you you with appreciate some and as the have little you talk about the high puts

John Jackson

Well, of but said in I've about complementary happen. on plans. said, we immediate asked I which qualifying. to is mentioned that, was is we the have now that possible, income get the think we lot we it's what something It's for call that and a that earnings that something release, right it's on our being nothing no a certainly worked business. There's

ground three the we're being into and half here on now three right think weeks. weeks I

any for from capital, equipment from we'll Spartan. which sense to common idle best earnings strategic filed or done could know M&A-type execute exactly around Ks a and we're side while, and the the really of we we sure, get So make trying and the committing where at then for CSI to looking hands the maturity, from from business and activity any XXXX calls operational include evaluate makes sense putting our other what are and work, get

we any of if Spartan because now, not at the and can't that But imminent is the point was that's semi-control, and you own we we we're least can at than I give that. one that item other more the ever GP on than to really we so color nothing sense. that make right CSI, transaction, entertain So own

Selman Akyol

a maybe just expect a services into a the that little shared up sequentially here, XXXX? that And little we more granular as SG&A we'll go going $X pressure good run see million we million. on or $X going line rate, should Is declined good. away Very the that over

Michael Moscoso

Moscoso. This is Mike Yeah.

business. exit this of the we had decline the year, fabrication the So

decline SG&A. permanent So that's a in

So it the services, a good adding will executive shared coming then rate. the with run change now is little a It of Spartan bit off us TETRA team. and

to change had So, it's what a closer than historically. but slightly, rate it we will run

Selman Akyol

And last To your then on recent just the there? the Awesome. down – Any from assets impact for weather one the me.

Robert Price

minor impact. out two And We hasn't our the There leaks large-sized at the I fleet – shop it. an damage was there done there's a would say, to minor general, had knowledge. our been major a very that no in two any that most. then, to best water facilities had to engine some damage impact inside maybe had of But or

Selman Akyol

very Thank Okay. much. you

Robert Price

You bet.

Operator

concludes… This

Jon Byers

ahead. yeah -- point, this go At ahead. Go

Operator

session. concludes I'd turn the This for remarks. our question-and-answer like back to closing conference any John Jackson over to

John Jackson

there. into everyone And getting you to and report forward look future. appreciate going QX listening to today the what's joining much. the we here We We forward Thanks questions. and thank on back in look we get couple together in, for a short and of months, as

Operator

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

now may disconnect. You

CSI Compressco (CCLP) 24 Feb 212020 Q4 Earnings call transcript