USA pression Partners(US:USAC)2021-11-02 21:27Financial Data and Key Metrics Changes - The company reported quarterly revenue of $159 million, adjusted EBITDA of $100 million, and distributable cash flow (DCF) to limited partners of $52 million, all consistent with the previous quarter [24][30] - Adjusted gross margin as a percentage of revenue was 69%, and adjusted EBITDA margin was 62.8%, both consistent with historical averages [26] - Net income for the quarter was $4 million, and operating income was $37 million [30] Business Line Data and Key Metrics Changes - Total revenues of $159 million included approximately $156 million from core contract operations and $3 million from parts and service revenue [24] - Pricing for compression services increased to $16.62 per horsepower per month, up from $16.55 in the previous quarter, reflecting contractual price escalators and tight supply/demand [25] Market Data and Key Metrics Changes - Natural gas prices surged globally, with average spot prices for LNG in September at $25.45, a 40% increase from the prior month, and trading at $34 per MMBtu in October [12] - Dutch natural gas for December delivery reached $187 per MMBtu, indicating significant price spikes in the energy market [13] Company Strategy and Development Direction - The company plans to continue focusing on providing natural gas compression services to long-term infrastructure-oriented customers amid regulatory uncertainties [7] - Development of proprietary technology, Dual Drive, aims to offer a cost-effective solution for customers transitioning from natural gas to electricity [21][22] Management's Comments on Operating Environment and Future Outlook - Management noted that demand for energy is increasing while supplies of conventional energy sources are declining due to underinvestment [20] - The company expects continued demand for compression services as economies recover and energy needs grow [20][68] Other Important Information - The company has achieved 35 quarters of distributions, returning over $1.2 billion to unitholders since its IPO in 2013 [23] - The stability of the business model has allowed the company to navigate downturns effectively and position itself for future growth [24] Q&A Session Summary Question: What is different about the current compression recovery compared to previous cycles? - Management indicated that there is a lot of discipline from E&Ps, with major oils slashing CapEx budgets, leading to a slower recovery [36][38] Question: How does the company view its current MLP tax structure? - Management noted that there is ongoing discussion about MLPs being treated as corporations, but they cannot comment on future implications [41][42] Question: What are the demand signals and pricing outlook for large horsepower compressors? - Management confirmed that demand is tight for large horsepower units, and they plan to utilize idle equipment to meet customer demands [44][45] Question: What is the production outlook across different basins? - Management expects increased activity in the Permian, Delaware, Eagle Ford, Haynesville, and Appalachia basins, driven by both private and major E&P companies [48][49] Question: What are the lead times for new orders and capital needed for reconfiguration? - Lead times for new orders are currently in the 4- to 6-month range, with specific capital numbers to be provided in future guidance [64][66]