USA pression Partners(US:USAC)2020-11-03 21:14Financial Data and Key Metrics Changes - Total revenues for Q3 2020 were $162 million, approximately 4% below Q2 2020 [13] - Adjusted EBITDA for Q3 was approximately $104 million, representing less than a 2% decrease from Q2 [13] - Average utilization for the quarter was 83.9%, down from 88% in Q2 [14] - Average monthly revenue per horsepower was $16.62, slightly down from $16.79 in Q2 [19][54] - The distribution remained consistent at $0.052 per unit, resulting in a distributable cash flow coverage ratio of 1.12 times [20] Business Line Data and Key Metrics Changes - The total fleet horsepower remained consistent at approximately 3.7 million horsepower, while active horsepower increased slightly to about 3 million horsepower, reflecting a 4% decrease [16][53] - Adjusted gross margin was 71.1% for Q3, aided by nonrecurring benefits [55] Market Data and Key Metrics Changes - Crude oil traded at an average price of about $40 per barrel during Q3, while natural gas spot prices averaged about $2 per MMBTU [25] - The EIA estimates total U.S. consumption of natural gas in 2020 will be down only about 1.8% from 2019 levels [26] Company Strategy and Development Direction - The company focuses on large horsepower compression used in large regional infrastructure-oriented facilities, which has proven resilient through various cycles [9][10] - The management emphasizes maintaining capital discipline and focusing on large horsepower multiunit centralized compressor stations to support stable natural gas demand [40][51] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery in the natural gas market and the stability of the business model despite ongoing uncertainties [8][12] - The company anticipates a tight supply-demand balance for natural gas as production declines and capital spending remains moderated [39][41] Other Important Information - The company expects full-year adjusted EBITDA to be between $405 million and $415 million, and DCF between $210 million and $220 million [56] - The company has reduced its month-to-month exposure significantly, currently below 30% [49] Q&A Session Summary Question: Capital allocation and distribution outlook - Management indicated that the Board will make distribution decisions quarterly and emphasized a desire to lower leverage over time, but the timing may be extended due to recent events [60][61] Question: ESG opportunities - Management acknowledged the importance of ESG and mentioned that the company is exploring opportunities related to emissions efficiency [67] Question: Utilization and geographic opportunities - Management noted increased demand in dry gas areas like Haynesville and Appalachia, while the Permian and Delaware basins are showing signs of activity recovery [72][73] Question: Long-term leverage view - Management reiterated a long-term goal to trend down leverage towards the low 4s, but the timeline has been pushed out [81] Question: Pricing outlook - Management expects pricing to remain stable for large horsepower units, with a cautious approach to new contracts [88][92]