USA pression Partners(USAC)2025-02-11 21:30Fleet and Operations - As of December 31, 2024, the total horsepower in the compression fleet was 3,862,102, with large-horsepower units (≥400 horsepower) representing 87.2% of the total fleet horsepower[34]. - The average age of the compression units in the fleet is approximately 12 years, with a useful life that could extend for decades when properly maintained[22]. - The compression units are designed for multiple compression stages, allowing operation across a broad range of conditions, which supports long-term contracts and reduces redeployment risk[22]. - The company has ordered 4 large-horsepower units, consisting of 10,000 horsepower, for expected delivery during 2025[35]. - The company’s compression services are critical for enhancing oil production from horizontal wells operating in tight shale plays[21]. - The company utilizes advanced monitoring systems for its compression units, which are designed to automatically shut down if operating conditions deviate from a pre-determined range[36]. - The company has not experienced any material supply problems to date, although lead-times for new engines and frames have varied between six months to over one year[43]. - Approximately 14% of the company's compression services on a revenue basis were provided on a month-to-month basis as of December 31, 2024[101]. Financial Performance and Capital Structure - The company requires available cash of 246.8 million per year, to maintain its current distribution rate of 4.4 million quarterly, or 2.5 billion, with 1.6 billion, with 7.7 million[107]. Customer Base and Revenue Concentration - Major customers include approximately 275 companies in the energy industry, with the top ten customers accounting for 41% of total revenues in 2024[41]. - The company's ten largest customers accounted for approximately 41%, 39%, and 38% of total revenues for the years ended December 31, 2024, 2023, and 2022, respectively[94]. - As of December 31, 2024, two customers accounted for 12% and 11% of the company's trade accounts receivable, indicating significant counterparty credit risk[123]. Environmental Regulations and Compliance - The company is subject to stringent federal, state, and local environmental regulations, which may lead to significant costs and liabilities[47]. - Compliance with the Clean Air Act and state laws imposes monitoring and reporting requirements for air emissions, potentially increasing project costs for customers[49]. - The company has implemented dual-drive technology in its natural gas compression services to reduce emissions of nitrogen oxides, carbon monoxide, carbon dioxide, and VOCs[63]. - The Inflation Reduction Act of 2022 imposes a methane emissions charge on facilities emitting 25,000 metric tons or more of carbon dioxide equivalent gas per year, but the company does not expect a material adverse effect on its operations[56]. - The company believes it is in substantial compliance with environmental laws, but future changes in regulations could increase compliance costs[48]. - The company has faced increased obligations to reduce air emissions, including new regulations from the EPA affecting internal combustion engines[50]. - Environmental regulations may increase costs and liabilities for the company and its customers, potentially decreasing demand for services[145]. - The company operates under stringent federal, state, and local environmental laws, which may impose significant compliance costs and operational restrictions[146]. - New regulations under the Clean Air Act could lead to increased compliance costs and negatively impact the company's financial condition[151]. Competition and Market Risks - The company faces significant competition that may cause it to lose market share and reduce cash available for distribution[80]. - The company relies on a limited number of suppliers for its natural gas compression equipment, which poses risks of product shortages and price increases[108]. - Stricter regulations on hydraulic fracturing could reduce natural gas production by customers, adversely affecting the company's revenue[165]. - Increased attention to ESG matters may lead to reduced demand for fossil fuels and negatively impact the company's services and profits[162]. Employee Relations and Safety - The company has 854 full-time employees as of December 31, 2024, and has begun utilizing services from Energy Transfer employees in certain departments[71]. - The company’s safety culture includes continuous training opportunities and a comprehensive program to promote operational excellence[75]. - The company’s employee relations are considered good, with no employees subject to collective bargaining agreements[71]. Legal and Tax Considerations - The company is subject to various claims, tax audits, and litigation that could materially affect its financial condition and results of operations[144]. - The IRS is currently examining the Partnership's U.S. Federal income tax returns for the years 2019 and 2020, which may impact cash available for distribution[208]. - Changes in state laws could subject the Partnership to additional entity-level taxation, potentially reducing cash available for distribution[200]. - If treated as a corporation for federal income tax purposes, the Partnership would face significant reductions in cash available for distribution[198]. - Unitholders are required to pay federal income taxes on their share of taxable income, regardless of cash distributions received[203]. Governance and Partnership Structure - Energy Transfer owns over 33.3% of the outstanding common units, limiting common unitholders' ability to remove the General Partner[170]. - The Partnership Agreement allows the General Partner to limit its liability, which may result in unitholders having reduced recourse against the General Partner[175]. - The General Partner has the authority to conduct business without unitholder approval, affecting cash distributions and capital expenditures[173]. - The Partnership Agreement permits the issuance of additional limited partner interests without unitholder approval, potentially diluting existing ownership[185]. - The NYSE does not require the Partnership to comply with certain corporate governance requirements, which may limit unitholder protections[195].