USA pression Partners(US:USAC)2026-02-17 22:28Fleet and Operations - As of December 31, 2025, the company had a total compression fleet horsepower of 3.9 million, which increased to 4.9 million after the J-W Power Acquisition[21][41]. - The J-W Power Acquisition was completed on January 12, 2026, for approximately $860 million, adding 1.0 million total horsepower to the fleet[32][33]. - The company operates under fixed-fee contracts, with initial terms typically ranging from six months to five years, enhancing cash flow stability[27]. - The average age of the compression units in the fleet was approximately 13 years as of December 31, 2025, with a potential useful life extending decades[25]. - The company’s compression units are primarily powered by Caterpillar engines, with larger-horsepower units (≥400 HP) representing 87.6% of total fleet horsepower[38]. - The company has a modern fleet designed for operational flexibility, allowing for rapid deployment and adaptation to customer needs[29]. - The company’s compression units are equipped with remote monitoring capabilities to enhance operational efficiency and reduce downtime[42]. - The company shares certain services with Energy Transfer, which owns 32% of its common units, promoting operational efficiencies[34][35]. Financial Performance - Approximately 46% of total revenues for the year ended December 31, 2025, came from the ten largest customers[47]. - The company requires available cash of $76.1 million per quarter, or $304.4 million per year, to maintain its current distribution rate of $0.525 per common unit per quarter[90]. - The company had total debt of $2.5 billion as of December 31, 2025, net of amortized deferred financing costs[101]. - The Credit Agreement has an aggregate commitment of up to $1.75 billion, with outstanding borrowings of $795 million as of December 31, 2025[102]. - The company’s ten largest customers accounted for approximately 46%, 41%, and 39% of total revenues for the years ended December 31, 2025, 2024, and 2023, respectively[96]. - A one percent increase in the effective interest rate would result in an annual increase in interest expense of approximately $8 million[107]. - The company’s leverage ratio under the Credit Agreement was 4.00x as of December 31, 2025, with financial covenants requiring a maximum leverage ratio of 5.50 to 1.00[104]. - Approximately 19% of the company’s compression services revenue for the year ended December 31, 2025, was provided on a month-to-month basis[100]. Market and Competition - The compression services market is highly competitive, with numerous smaller companies able to adapt quickly and adopt aggressive pricing policies, impacting the company's market share and cash flow[50]. - The company may face significant competition that could adversely affect its market share and cash available for distribution[97]. - The company faces risks related to a reduction in demand for natural gas or crude oil, which could adversely affect service demand and revenue[86]. - The company has several key customers, and the loss of any of these customers would result in decreased revenue and cash available for distribution[86]. Environmental and Regulatory Risks - Compliance with stringent environmental regulations may expose the company to significant costs and liabilities, potentially impacting operations and financial position[53][54]. - The company is subject to new air emissions regulations, which could require additional expenditures for pollution control equipment, affecting customer operations and demand for services[59][60]. - The Inflation Reduction Act of 2022 imposed a methane emissions charge on certain facilities, but the company does not expect this to materially affect its financial position[63]. - The company actively pursues opportunities to reduce its environmental footprint, including dual-drive technology that allows switching between electric motors and natural gas engines to lower emissions[70]. - The company is subject to substantial environmental regulation, and changes in these regulations could increase costs or liabilities, impacting service demand[89]. - Environmental regulations may increase costs or liabilities for the company and its customers, leading to decreased demand for services[147]. - New regulations under the Clean Air Act could result in increased compliance costs, negatively impacting the company's financial condition and results of operations[152]. - The company faces potential penalties for noncompliance with environmental laws and regulations, which could adversely affect its operations[148]. - Legislative changes regarding hydraulic fracturing could lead to delays or restrictions on natural gas production, adversely impacting the company's revenue[166]. - Climate change legislation may impose increased compliance costs and operational restrictions, materially affecting cash flows and results of operations[156]. - Increased regulation of hydraulic fracturing could result in reduced natural gas production by customers, negatively impacting the company's revenue[166]. - The company may experience increased insurance costs or difficulty obtaining coverage due to climate-related weather events, adversely affecting financial condition[159]. - Focus on ESG matters may lead to increased costs and reduced demand for fossil fuels, negatively impacting the company's services and profits[163]. - The company could face operational delays and increased costs due to new regulations or interpretations of existing laws, adversely affecting revenue[168]. Employee and Operational Management - As of December 31, 2025, USA Compression Management Services had 885 full-time employees, with an additional 594 employees added from the J-W Power Acquisition[77]. - The company has a strong commitment to safety, with a culture that promotes employee empowerment and accountability in safety practices[82]. - The company’s operations are governed by the Occupational Safety and Health Act (OSHA) and similar state laws, ensuring employee health and safety[76]. Acquisition and Integration Risks - Integration of assets from past acquisitions, such as the J-W Power Acquisition, can be complex and may adversely affect business operations if not managed properly[89]. - The integration of assets from the J-W Power Acquisition may be complex and costly, potentially affecting financial performance if not executed timely[119]. - The shared services model implementation with Energy Transfer may disrupt operations and require significant management attention, potentially affecting financial reporting[140]. Financial and Tax Considerations - The company is subject to restrictive covenants in its Credit Agreement, which may limit operational flexibility and ability to capitalize on business opportunities[115]. - The company's tax treatment as a partnership is crucial; if treated as a corporation, cash available for distribution could be substantially reduced[198]. - Changes in state laws may impose additional entity-level taxation, negatively impacting cash available for distribution[199]. - The IRS is currently examining the company's federal income tax returns for 2019 and 2020, which could affect cash available for distribution if adjustments are made[207]. - Non-U.S. unitholders are subject to U.S. taxes and withholding on income and gains, with distributions potentially subject to a combined withholding tax rate[214]. - The company treats each purchaser of common units as having the same tax benefits, which could be challenged by the IRS, adversely affecting the value of common units[216]. - The company prorates items of income, gain, loss, and deduction for federal income tax purposes based on unit ownership on the first day of each month[217]. - The IRS may challenge the company's proration method, potentially altering the allocation of income, gain, loss, and deduction among unitholders[217]. - Certain deductions for depreciation, gain or loss on asset sales, and other extraordinary items are allocated based on ownership on the Allocation Date[217]. - A unitholder whose common units are subject to a securities loan may be considered to have disposed of those units[218]. Governance and Unitholder Rights - Common unitholders have limited voting rights, with only 32% of outstanding common units owned by Energy Transfer, making it difficult to remove the General Partner[170]. - The General Partner has the authority to make decisions that may not favor the interests of common unitholders, including the ability to incur nonrecourse obligations[173]. - The Partnership Agreement allows the General Partner to issue additional limited partner interests without unitholder approval, potentially diluting existing ownership interests[183]. - As of December 31, 2025, the General Partner and its affiliates own approximately 36% of the outstanding common units, which may affect the market price and trading dynamics[185]. - The Partnership Agreement limits the fiduciary duties of the General Partner, allowing it to prioritize its own interests over those of the unitholders[174]. - Unitholders may face liability for distributions that exceed the fair value of the company's assets, as per Delaware law[189]. - The General Partner can transfer its interest to a third party without unitholder consent, potentially altering control over the company[181]. - An increase in interest rates may negatively impact the market price of the common units, affecting investor interest and distribution capabilities[182]. - The General Partner has the right to call and purchase all common units not owned by it if it owns more than 80% of the units, which could force unitholders to sell at unfavorable times[185]. - The Partnership Agreement restricts the remedies available to unitholders for actions that may constitute breaches of fiduciary duty by the General Partner[177]. - The Partnership Agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain actions, potentially limiting unitholders' ability to choose their judicial forum[190]. - The exclusive forum provision does not apply to suits enforcing liabilities created by the Securities Act of 1933 or the Exchange Act, which have exclusive federal jurisdiction[191]. - The enforceability of the exclusive forum provision may be challenged, potentially incurring additional costs for the company if found inapplicable[192]. - The NYSE does not require the company to comply with certain corporate governance requirements, which may limit protections for unitholders[193].