- Earnings call transcript Q3 2022

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Operator

Good morning. Welcome to USA Compression Partners of Third Quarter 2021 Earnings Conference Call. Today's conference call, all parties will be in listen-only mute and following the conference will be open for questions. This conference is being recorded today, November 1st, 2022. I would now like to turn the call over to Chris Porter - Vice President, General Counsel & Secretary

Chris Porter

thank joining and everyone, morning, you us. for Good financial the quarter morning, we September for our released This ended results XX, XXXX.

earnings in section You of available through usacompression.com. find release XXXX. as quarter-on- well can XX, a They this were call our the of Relations November Investor website at as recording

management discuss non-GAAP measures. this During will call, our certain

measures comparable GAAP most You definitions will the and find in reconciliations earnings. to of these non-GAAP measure

of longer replay. Eric the include Long, our this the Please speaks call Compression. conference will forward-looking today, projections our views to our only be that current and statements Actual this materially. I'll expectations risk and call the over CEO managed reminder, may and no a As of active of time in in now beliefs. performance statements. include release provided filings. at our note statements represent differ turn These and a included on morning's results USA Please of of call as President may information November review

Eric Long

Chris. of you, joined I XX thanks and call for Midstream today's executive finance USA a begin spent recently to serving approximately most Partners, new wealth brings Anadarko Petroleum everyone, Mike CFO. Good years Compression. August finance a introducing Western and call. our to like early as in experience at Mike by Pearl. would and us as CFO, joining Western's Mike our morning, Thank

supply-constrained we as we CFO. believe that aboard, demand Compression welcome and to Matt USA highlighted during happy are in natural We we gas increased driving industry Last to our thank valuable tenure a for for Mike environment. sincerely are his quarter, his dynamics contributions

to an energy we're and market approach we Director, on investment believe in IEA, believe [indiscernible] have tightness the that global drive commodity cutting cycle. stated innings to focuses world further flow markets in underpins price price macro major We last changed, and early oil Executive first generation and natural energy not existing demand continued tightness put environment and have the into returns-based for will the a free of commodity supportive the truly of to expect backdrop that views super in Our LNG which tightening over markets remain worldwide cash middle the also producers growth, that on energy capital gas crisis. week future. industry's gas the the turn investing for and compression in the contribute of production significantly foreseeable disciplined increased the continue XWe will our services. the

active largest continued to growth close primary operating remain our to all from customers' have in modest ranging of pace have digit to The our proximity across regions. and basins ample have single regions our percentages expanding and registered takeaway mid-teen transportation customers natural production availability. our from increasing Our these operating year-over-year areas regions increases with levels activities. activity these export kept to benefited Generally, in gas levels production, production and markets leading

will dependent compression persist likely capacity capacity region to due more Permian modest services. challenge in challenge continue natural gas been operators demand and on cost-effective declines occur is and alternative adequate believe XXXX, is additional important capacity late recognize industry, operational USA a a pipeline production has and correlates tightness to regulatory natural growth the means has production Compression the on increased performance used for and in as USA that that roadblocks. it by the to an is wells. cycle, believe additional the prices. anticipated several early Compression's several gas of through future in XXXX of deliver Compression's to drilling drilling cycle Permian to However, we will Northeast more that U.S. to gas next necessitating necessary more continues customers growth, the arrest the We currently processing Based for medium-term work and facilities short, compression services market and closely we from takeaway the as a that Delaware centers. within provide takeaway ultimately vital into years. natural the significant gas to the for production In we component commodity onshore the and to In Delaware as basins, natural wellhead been near- believe Northeast, with most to this serve financial a as in

our trajectory the to financial and current believe provide levels optionality and readily stream optionality. USA distribution the achievable deploy operational continue to contracts will there expected the reduction, of significantly We generate financial ability investment, view drilling and of efficiencies, debt a current strategy secure cycle. of Given of free increases with existing we Achieving the as as at ultimately to our deployed through the thereof. cash opportunities reliable rates. in drive a incremental basins allow our to durable contribute attractive flow capital to grow irrespective compression current and that ability will drilling believe that growth Compression compression meaningful to production compression contracting serve organically cash We flow organically well the commodity support we combination production from observed increases or supportive price to us a grow new as

equipment cash from status. focus status therefore, and idle flow-generating to to remains converting owned current Our already active

During our continued fleet the we position increase improved service through with our major to quarter, third utilization. customers

and quarter for from XX% on Our basis third rate comparable up and up exit a was period. from XX.X% year XX.X% ago sequential the quarter utilization

met. During quarter, the idle of currently we third XX,XXX over redeployed horsepower and owned

period revenue also month sequential a per we addition comparable on average realized basis. horsepower increased year-over-year and In utilization, generating to per revenue increasing

to our center tenor tenors flow are attracting market volatile We for well redeployment contract meaningful as CPI-based deployed from units the in contract customers of XX-month Isle are our rate and with and Current protecting through equipment on as average we contract manage resets. our increases currently periods desirable XX new of of average witnessing demand so inflationary also positioned tenors satisfy excess renewal margins in with during contract and from deployments cash service returns negotiations renewals that We units. months. portfolio equipment,

seen the that market have to mitigate tends around our a margins to to margins fuel precede able adjustments. fluids are levels And to contract-based in from cost prices date cost us did XX%. inflation the at of modest the CPI and pressures decline we rate that adjusted or although input and inflation, inflationary We contract our abate execute see normalizing expect we resulting in eventually this adjustments gross Notwithstanding, near we historic remain to labor. allow increases

fleet, our our by delivery for and made our for secure this we locking will year-end approach production bring improve In committed through operate major horsepower unit planned which addition customers the and we from basins units our that slots market XXX,XXX in a to to a services deployment for additional new year. for key of horsepower. with full XXXX customers in in compression XXXX. XX By our share units of additional multiyear commitment to to September compression expect the station increased our this year's purchases that of an time, utilization additional now expect driven in contracts demand recently These large current were by unit order of compression we XX total for we pronounced to lead

of dual as publicly that working expands on a to gradual advantage drive and out. compressor previously have have discussed As gets country's electric and been unit design takes we a grid transition ultimately the the announced we location built

in commenced units to sites last out first our multiyear and signed week I the field. installed mentioned been the Petroleum have operations contracts that quarter's dual of deploy at During call, drive we August. These units have Callon

electric-driven redundancy natural units dual be and and electricity drive compression gas in is gas lower economic decreased from Compression's motor when and concept constraints We depending continue technology engine to centered manner. compress a excited pragmatic, gas dual reliable retrofitting make gas-powered switch to service to combines our in weather about Economically, reliably operating allows offering the from preferable. The customers and demand compression as This to natural or reliability, gas This to initiative capability. ESG-friendly interconnect to our substantially conditions mitigate greenhouse switch emissions delays. for will further natural times, that and makes around on a existing increased gas dual for flexibility lower a the greenhouse XX% drive USA results gas-driven emissions of run grid lot maintaining and while natural emissions mitigation of to quickly benefit an financial the it customers expenses operating initiative sense drive conditions.

per number seeking flexibility, customers gas October this continue get units operational we reliability our performance, an believe these and Board at - ratio reliability distributable as running XXth increase flow redundancy quarter This we third believe will deploy field We to quarter the interest gas. X.XXx. offering a and cost-efficient demand from coverage X. advantage prime we service source of environmentally to driver realize anticipate natural to and for backup dual on their consistent corresponds customers compressing expected will On distribution November the consecutive a up ever based offering indications of migration be distribution natural which and of power to drive As a represents are time. friendly as electrification our results, demonstrate $X.XXX continue that multi-decade the to quarter's with and provides a this electricity be that will to this XX, solution over and distribution payments unit, increasing Friday, maintained that of will the and the the more this that of cash paid and of

equipment time remain supply reduce such disruptions geopolitical active major healthy reduced meaningful contract events, stakeholders, commitment on maintaining both quarter leverage unexpected our X.XXx that from contract leverage we will all to a ratio and deployments improve. In as over to bank to metrics consistent or renewals to with of ratio to providing our new further sequential encouraged assets events, leverage basis, with addition X.Xx we of covenant coverage tenders lengthening returns coverage continue for -- Absent a and existing while our chain

results, a like make to regarding Mike discusses our Finally, comments quarter before few third safety. would I

company, employees most that do home safely return we the ensure important As a day. our thing can is each

adherence each a proud in incidents our thank for million every commitment last safety strict that recordable to turn is accomplishment, employee over XXXX focus USA results. X and -- Mike and the policies this resulted extremely I that, Compression procedures. for and quarter has our X.X our year-to-date worked our safety hours are discuss With third I to and will We call to their of relentless significant on

Mike Pearl

morning. good and Eric, Thanks,

predictable and walking Compression. the was currently opportunity What unique to flows that onshore thank production provides Board for the quarter significant assets results, third cash Compression at our our of plays. opportunity are of about U.S. intrigued positioning through this cycle, would situated in within which this and most stable Eric Before compression I from USA deployed like the most me USA

per and We trajectory decline that pricing did for on largely Pricing demand remains foreseeable contracted onshore improving sequential and quarter increases and With vehicle support third by driven we clear improved gross price third ramp compressor escalators compression of into X.X% while its investments attributable USA quarter U.S. pricing organic sequential increases dynamics discuss which utilized in driven current third -- improvements our inflation improved from I up, results. which And our generating will adjusted price our CPI that increasing harvesting see As horsepower that and the while fuel, to X% utilization modest terms quarter were margin revenue a in Compression's in rate will per lubrication with to continues services financial revenue approximately of EBITDA. in nearly revenue incremental Today, allowed featured flow reported that, Compression capital fleet results, positioned fluids cash $XX.XX. exit continue adjusted services. quarter primarily newly future. compression by and X% making improving quarter to USA maintaining fleet. percentage for existing a month, production by currently strategic average highly down growth visibility supply returns-based and to our basis, increased contracted for again ticked labor. maintaining

resets. for we historic have contracts averages. allow expect our rate rates, our over margins to our effective lag a near we time, there at input pressures with Nevertheless, inflation these rate abate While and resets inflationary or effect maintained CPI adjusted is still these where associated cost predates

result was Finally, -- of is of by rates just remained a the at spending and our debt rate total quarter facility. quarter the capital of to our third December XX, is costs million, declined debt X.X of associated our although for X% not reconfiguration $X.X and XXXX of associated Compression's expansion and floating until expenditures of a components basis previous compressor the units our IO And the XXXX. maturity Delaware on nearest delivery under higher unit of the the The horsepower. on our end The Notably, fixed quarter fleet rate debt. flow interest capital makeready flat station Expansion orders. X quarter our and quarter approximately interest at horsepower persist, distributable credit payments most down at for capital $XX.X borrowings under large Basin horsepower as third million cash in spending million were a sequential units higher maintenance USA new consisted with XXXX.

a attributable spending sequential capital quarter a basis, level activities. of higher higher maintenance million $X maintenance to Our was on approximately

rates operating was million. was Operating expense relatively ratio a $X by was flat of net million. floating coverage credit $X.X on million by at higher in basis was came $X.XXX per facility. kept Net expense million, interest $XX.X income Board that quarter again, distribution the to flat on cash sequential as rate increased and our result net borrowings X.XXx. interest at approximately a provided interest quarter, outstanding third quarterly $XX.X activities on our a the income cash based For unit Notwithstanding $XX.X applicable million.

ratio Our X.XXx, sequential quarter yet leverage decline. was covenant bank another representing

circumstances believe capital Compression ideal over an for the and for all with conditions, improved and to for should continue stakeholders. an continue set returns anticipated We our improved metrics USA previously that industry, continued market of reliable delivering discussed provide outlook improvements predictable, to with coupled operational discipline, durable the time. improve

Finally, narrowed XXXX year we guidance. full have our

and adjusted million. million expect We and EBITDA cash $XXX and $XXX between million distributable between $XXX million $XXX flow

our for We expect as Eric to call with XX-Q remarks. with turn early the the that, Form And SEC this file I'll to as back concluding afternoon.

Eric Long

Mike. Thanks,

Industry to its class XXXX we conducive demonstrated close we proving in term re compression through quality position XX returns quarterly and encouraged customers the and look service, distributions, best along our with our build high tenor. price to factors, of very improvements provision to track to stakeholders, meaningful customers. contract continue record to of out our investment we to what are dynamics services XXXX, contributes deliver would see resilience our to a consecutive and delivering strengthening that As in forward long by to to with market and discovery of emphasize we relationships are These in compression USA like continuing expectations our ability

maintaining Our ability several with our questions. to us from the quarter with to capital to that discipline to We'll financial XXXX increases, look performance To that, our results combination the with [Operator driving reduction, extremely further over in or a from to deliver you we Selman of third will will leverage we quarter that high are afford and flexibility results improvements featured full debt year expect quality future in quarter XXXX conclude, performance, service Please flows to our should open our pleased distribution the Instructions] we customers investment, items. forward cash in Outlook capital call while financial foregoing continue metrics. time. take ahead. first months We question operational Stifel. Akyol discussing go utilization results and And our dedicate

Selman Akyol

terms and a able of I Good of improve terms now to should morning we you. mean, being to what in fleet push or at expect pricing of here .In rate, accelerate run through. exiting XX% you're from Thank utilization sort

Eric Long

everything XXX,XXX look know, deploy continue is XX% still horsepower. and and costs equipment, as at And pressures, op demand When Clearly new our our is being the now. when largest in in of acquisitions. of the smaller on CapEx Selman, that's the you think this say Eric, both about percentages, as then horsepower inflationary x right to we well with we of fleet but idle, mix greater you horsepower. unit several and

service allows technological provides that we reprice, you perform market the assets XX our that We the compression years this a of asset in says business continue to years us old same or obsolescence new book, which a we beauty compressor, existing to is continue to reprice. is one service our does know, brand new have XX can this a same don't like so, old older the

separate do a units, to which them a each up. And has been when turning we unlike turn five we large some large reprice three contract. XXXX company assets have LNG we that's So have month do are tankers, individual over up we with that LNG LNG, month we got of have here tankers

of over kind methodical by it's So a time. it look class. we repricing And horsepower at

say, horsepower anticipate in will long a which we capacity things by contract will way a the in it's year, and various pricing So upcoming upward our over continued it off movement roll to winded type, time. vary

Selman Akyol

of deployed And dual you. those getting in chain putting in drives and supply there more thank any then Understood, more any for getting in there, is calls, of out your field? the terms anticipate limitations more

Eric Long

are you know, to motors have commitments into of time, which various So, lead ago have year components waited of know, these Gearman got in for supply years excess time. things, know, you excess have, around that But just haven't some start you we you source in that that a there chain. a to mechanisms making we've a the year's go lead electric

do the quoting for continued units that course the will XXXX. that completed over be components dual some have coming we We of deployment drive that we So field. do we recently in have are

drive be in of somewhere be in XX the know, range So out we'll the to over completed to of deployed XXXX, XX have field. machines will dual able the you the course between probably that

Selman Akyol

forward? curious business. you the And ride go then your in the one of you I'm ratio is the would it, you just kind the noted me. for for of business you And In the a cycle? last like of sort giving for leverage through kind Great. leverage rate in up? environment your eyes appropriate go to end now Where And what as improvement

Matt Liuzzi

what in it, is story the look you the This I equity of sheet question. a the I'm think we overall enthusiast, if debt the close and do X.X opportunity get be let's terms let's grow I then think to thinking it's, we terms set we to I to the you metric, think, as what included. it'll etc, do very foremost, and about contributes leverage, think first to I leverage what of and balance metric, we assess for a obviously, to secure new first, manageable of Thanks strong and that, to terms ahead sheet one said know, reduce numerator, to a is Having combination, that from a of stage there. at want it's, a us denominator, look strong in the units, terms Mike, that's mean, know, we in forward, can make decision I as EBITDA, a of we balance opportunity have - consider leverage in

much you discipline in to the think I capital the over industry see services EMP the that bleeding sector. is very

going grow discipline. not to that grow money, know, growth's spend I to capital we're for you sake, so mean, committed we're And

we, we one to so visit to think X.X I opportunities once other. the And about someone once for we'll closer type additional get neighborhood, think

Eric Long

tranches are of When there, debt, we've capital structure, about fixed out preferred got a that you you our two pretty large know, think tranche fixed. our of is notes rate

under today. So of north ABL. floating And you down rate know, just taken that we've under million got $XXX we're facility debt our

point increase a would to debt. interest an take under can you floating one every in rate at what do that - look percentage So every

world So living manageable the today. we're in it's, in it's pretty that

Selman Akyol

very much. you Thank

Operator

is Please Mizuho, question Moreen our from open. take next ahead. from go We'll line your Gabe

Gabe Moreen

by that start units guys. you good could here. about I Maybe you Hey, ordered new morning, off the asking

XX there actually these this about Can this RSI guess CapEx deployment. see units CapEx, ordering. units going redeploying trade talk you in between year? where versus Is For idle a I kind of off? you're idle you just new versus

consider I of that going mentioned part and and So overall multi pre is when sorry, significant? you there. should So some cutbacks with ‘XX we Mike, that also, this take to question we deposits Is paying that into then think, account be kind a of

Eric Long

the guess in fleet. deployed XXXX largest, largest our we I units not question Eric, that the part first typically if we call largest, is, the what is the of of one we the today. XXXX world this these cat fleet have the the in It's Hey, the are product,

leading that our So offer that's kind of we with. product

our and clearly, than we cost so brand If when you fleet, capital look spend today, zero existing idle program, is at the generally look assets make at ready to a have our we're less basis. asset. redeploy we capital the these strong a That customers. said, new little significantly buying a on, are highly, capacity highly These from are these new of assets And long not term accretive. existing demand large signals got to a that we've opportunistic being are on extremely assets things build there's of lot

contracts, multi long, in So multi extremely able we're with worthy year year credit strong to lock significantly customers. contracts

into we continue idle you to may year, idle think XXXX, these be redeployed. you we So year, out want to to of year biggest then of we've said, and that the things look where trajectory from we're to for out at on look But ones after the coverage. know, this us this into the committed that, reason balance and the what close our at do next we flow our our carryover is, are to activity. does of improve the to continue assets that And we cash year, of when can deploy got unbelievably bang created, you was for next the some and help we sheet creative. deploy. That basically years are these a new long our buck. what fleet And I kinds be get XX and XXXX be deliver we'll little past capital, continuing is add And this going from stuff once deploy running can

Gabe Moreen

if we sounds real talk Eric. customer guess, can high. about demand then Thanks, and like I And Great, maybe is

customer versus that you this where trade basically, I those actually these kind pushing sign as Just meeting guess are things much between much slots stand units to balance there of within get you're I manufacturing point? offs, you fabrication the demand, guess, is it built, customer out think at demand, how as feel and you

Eric Long

say would remains as well us I industry, from the capacity manufacturers. there deployed that fleets in or can that assets as of between demand is there various than be more in redeployed existing all

continues So have implications bottlenecks flywheels than everything an it's chain is you some various components there's bottlenecks. supply engine some more and and things. got from to demand you've there wiring to some attach weird available to that product It's sub labor know, to harnesses, bolts

still supply it's of chain So kind we're seeing bottlenecks and limitations out there.

think of we're we're leverage, little want we in storm, indicated, to as I coverage to to to improve want don't commit deliver sheet, the you capital, balance So Mike a continue additional actually bit know, continue our clearly, can a we're And get know, to perfect metrics. coverage. skis, spend we to balancing you but we balancing

last going we know, to hydrate where are a again, know, from rather only of sake opportunity perspective. grow believe. sense we're growth, apply this Eric Focus creative of you Thanks, you just it I some most growth than as actually and don't the the using for read highly makes the for So to kind an opportunities profitable our one. list, chasing on customer committee, that

far cost, trajectory costs, vehicle is your deceleration gears any labor, sign out as the as bit I say which starting little bit. far flatten of of fuel quarters. last for Yeah, is things seen things control, as side but of would change me, to you're there's of in some or a seeing of no you at like like clear, kind example, a For little what this the stuff couple just point, as shifting of the terms stuff

make an volume hour technicians, here oil know, buck to our cents creative transportation hour there. obviously, moderation things some We're higher higher a on costs. to perspective. differential field from in You know, purchasing in lube supply chase XX you service some to programs, commit some we're basis of not the take large seeing seeing moves advantage doing or We're fuel an

we food commitment managing chain. of we did advantage was chain. get of that order frankly, the ahead reasons we XX the So relationships. of supply some so that's we're Take actively with And that the unit of our one made the could our

as impending supply. we some, what And see XXXX was in bottlenecks

we a feel inflationary that very while we've into lack of the in done controlling job So good supply of of compression to coming capitalize capacity, we pretty good can CAPEX pressures, as managing as of continue we out kind on there. exist variables that many topics and now costs on XXXX, and assets our about lack locking and the of end, that

Gabe Moreen

Great. Appreciate it. Thanks, Eric.

Operator

take Jeremy question from our your is JPMorgan, line We'll next open. [ph] from Tonin

Q –Unidentified Analyst

just start macro for you commentary off thank a question. of you've level higher And to Jeremy, the that want kind on provided. all

how wondering be just market So historically, trended? us large if And you frame might in do that's USA sees. see I where for cap guess, forward? compression been large able where to has share you that going

Eric Long

losing? question in on, talk You to a is gaming I think, my know, gauge supply. people know, more there's company, demand about interesting you is as because shares there question, company be It's market than head

that customer have we our one mix, I when are mix, guys core. our customer of as some look So private customer customers kind mix, different of think publicly and competitors, us you all at traded and

of customers, continue competitors continue So meet the core to meet and and demands to we the supply demands our needs of our needs and their and customers.

So market other. of say one I gaining wouldn't that expense the share at is company the

the pie gas go been back, compression talking pie. you we've you and natural years, If about know,

you we can exponential know, volumes today, day You day. and decline, bigger, and in amount been of it business we're volume. XXXX same an low somewhere And increase a a we getting produced, move over BCF know, know, you as takes in range BCF XX got the the compression the to XXX horsepower the pressures in

And fields needed. compressions more better, getting pies the continue So to down. there's and come then pressures

need compression more even of you know, top on it. You

just pie who continue is feed And pie. getting few the folks bigger. So to a the there's

all us around share market to So for here. there's of enough go

Q –Unidentified Analyst

there. leave I'll Got much.\ Q&A\ very Thank it of End you it.

Operator

are Instructions] further no [Operator the line. There questions today's everyone joining on for call. Thank you

now may disconnect. + You

USA Compression Partners (USAC) 1 Nov 222022 Q3 Earnings call transcript