USA pression Partners(USAC) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2021, the company reported quarterly revenue of $160 million, adjusted EBIT of $99 million, and distributable cash flow (DCF) to limited partners of $52 million, all consistent with the previous quarter [37][39] - The adjusted gross margin as a percentage of revenue was 68%, and adjusted EBITDA margin was 62%, both consistent with historical averages [39] - The total fleet horsepower at the end of the quarter was approximately 3.7 million horsepower, flat compared to the third quarter, with average utilization up to 82.9% [40] Business Line Data and Key Metrics Changes - Approximately $157 million of total revenues reflected core contract operations, while parts and service revenue contributed roughly $3 million [37] - Capital spending guidance was maintained with total expansion capital of $14 million, primarily for reconfiguration of idle units [41] Market Data and Key Metrics Changes - Crude oil prices in Q4 were up over 80% from the previous year, while natural gas prices were up almost 100% [18][20] - U.S. crude oil inventories were reported to be 13% below last year and 9% below the five-year average, indicating a tight supply situation [25] Company Strategy and Development Direction - The company aims to continue providing natural gas compression services, focusing on long-term and strategic infrastructure-oriented customers [12] - The dual drive concept is expected to be a significant offering, allowing customers to switch between natural gas and electricity, thus reducing emissions [35] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment is characterized by high commodity prices and a tight supply-demand balance, which is expected to drive investment actions from customers [17][24] - The company anticipates continued demand for compression services as natural gas remains a critical energy source [33][36] Other Important Information - The company maintained its distribution at $0.525 per unit, resulting in a distributable cash flow ratio of 1.02 times [43] - The company has returned over $1.3 billion to unitholders since its IPO in 2013, demonstrating stability in cash flow generation [36] Q&A Session Summary Question: Current activity levels versus expectations - Management indicated that activity levels are consistent with expectations for 2022, significantly ahead of 2021, driven by increased CapEx from major players [48][49] Question: Capital allocation and distribution versus debt reduction - Management emphasized that the market has not fully recognized the stability of the business, and they plan to focus on accretive projects while maintaining distributions [51][52] Question: Growth areas and basin shifts - The Permian Delaware basin is currently leading in activity, with notable increases in rig counts and demand also seen in the Haynesville Shale and midcontinent areas [58][59] Question: Long-term debt leverage perspective - Management stated that their perspective on debt leverage remains unchanged, with plans to continue reducing debt as cash flows increase [62] Question: Pricing assumptions and inflationary pressures - Management noted that pricing assumptions in guidance are conservative, with expectations of moderate inflation in labor costs and effective management of parts pricing [68][71] Question: Supply chain constraints for large horsepower - Management confirmed that there are significant lead times for sourcing large horsepower equipment, which could impact the ability to meet customer demands if not ordered in advance [74][75]