USA pression Partners(US:USAC)2021-02-16 18:56Financial Data and Key Metrics Changes - Total revenues for Q4 2020 were $158 million, approximately 2% below Q3 2020 levels [10][23] - Adjusted EBITDA for Q4 2020 was approximately $98 million, with adjusted gross margin percentage at 68.4% and adjusted EBITDA margin at 62.1%, consistent with historical performance [10][25] - Average utilization for the quarter was 83%, down slightly from 83.9% in Q3 2020 [10][24] - Average monthly revenue per horsepower was $16.55, a slight decrease from $16.62 in Q3 2020 [11][25] - The net loss for the quarter was $1.5 million, with operating income at $31.2 million [25] Business Line Data and Key Metrics Changes - The active horsepower in the field fell by less than 1% from the previous quarter, ending Q4 with approximately 3 million active horsepower [10][12] - The total fleet remained consistent at about 3.7 million horsepower [12][23] - Parts and service revenue for Q4 was $3 million, with core contract operations revenues accounting for approximately $155 million [25] Market Data and Key Metrics Changes - The price of crude oil averaged about $40 for the entire year 2020, with fluctuations between highs of $63 and lows of negative $37 [13] - Natural gas prices at the end of 2020 were around $2.40 per MMBTU, with recent increases pushing prices to approximately $3 per MMBTU [14] - The EIA reported that total US production of natural gas in 2020 was down less than 2% from 2019 levels [14] Company Strategy and Development Direction - The company remains focused on large horsepower natural gas compression services, which have proven resilient during market volatility [4][5] - Management emphasized the importance of natural gas in the economy and its critical role in power generation and industrial manufacturing [8] - The company plans to leverage its existing assets to maintain production levels without significant capital expenditures [19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery of the natural gas market, citing positive customer sentiment and signs of activity [5][22] - The company believes that the worst of the downturn is behind them, with expectations for improved utilization and revenue as market conditions stabilize [22][36] - Management highlighted the importance of maintaining a stable production profile and the potential for increased demand for compression services as natural gas volumes stabilize [17][19] Other Important Information - The board decided to maintain the distribution at $0.525 per unit, resulting in a distributable cash flow coverage ratio of 0.99 times [12][25] - The company expects 2021 adjusted EBITDA to be between $385 million and $405 million, with DCF between $193 million and $213 million [25] Q&A Session Summary Question: Can you break down utilization trends for large and small horsepower units? - Management noted that large horsepower units have maintained higher utilization rates compared to small horsepower units, particularly in processing plants and central delivery points [28] Question: What is the M&A appetite for compression assets? - Management stated they are highly selective regarding M&A opportunities, focusing on large horsepower applications that are accretive to cash flows and leverage neutral [32] Question: Is the fourth quarter likely the cycle bottom? - Management indicated that the fourth quarter results may represent the cycle bottom, with expectations for improved activity and pricing in the coming months [36] Question: How does the company view electric compression in relation to ESG goals? - Management acknowledged the potential for electric compression but emphasized the need for clarity on regulatory and legislative fronts before making significant investments [44][46]