USA pression Partners(US:USAC)2020-08-04 21:29Financial Data and Key Metrics Changes - Total revenues for Q2 2020 were $169 million, approximately 6% below Q1 2020 [8][41] - Adjusted EBITDA for Q2 was approximately $105 million, representing a decrease of less than 1% from Q1 [8][41] - Adjusted gross margin was 70.4% and adjusted EBITDA margin was 62.5% [8][43] - Average monthly revenue per horsepower was $16.79, down slightly from $16.89 in Q1 [10][42] - Net income for the quarter was $2.7 million, and operating income was $34.9 million [43] Business Line Data and Key Metrics Changes - Average utilization for the quarter was 88.0%, down from 92.5% in Q1 [9][42] - Revenue-generating horsepower decreased approximately 6% to over 3.1 million horsepower [41][42] - Growth capital expenditures were $22.8 million, while maintenance capital expenditures were $4.4 million [11][12] Market Data and Key Metrics Changes - Crude oil prices rallied to around $40 per barrel from approximately $20 [16][18] - Global petroleum and liquid fuels consumption in June increased by 10 million barrels per day compared to May [18] - Natural gas consumption is projected to decline by about 3% in 2020, with underlying demand remaining strong [25] Company Strategy and Development Direction - The company focuses on larger horsepower compression used in regional infrastructure-oriented facilities, which provides stability during downturns [33][34] - The strategy includes maintaining a diverse asset base to mitigate risks from specific regional declines [37][38] - The company plans to seek meaningful reductions in growth capital expenditures for the remainder of the year [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term demand for natural gas, viewing it as a clean fuel of choice [16][32] - The company believes it is well-positioned to weather market softness and benefit from eventual recovery [39][92] - Management noted that the current downturn is expected to be followed by a gradual recovery, with signs of stabilization in customer activity [60][91] Other Important Information - The Board decided to maintain the distribution at $0.525 per unit, resulting in a distributable cash flow coverage ratio of 1.1 times [13][41] - The company expects full-year adjusted EBITDA of between $395 million and $415 million [44] Q&A Session Summary Question: Can you provide more details on cost controls and expectations for future quarters? - Management indicated that they cut about 10% of labor costs and other SG&A expenses, leading to improved margins in Q2 [46][48] Question: What are the current activity trends in key basins? - Management reported a significant increase in quote activity and new set activity, with a slowdown in unit returns [55][60] Question: Regarding the GP contribution agreement, are there any time milestones? - The agreement allows Energy Transfer to unilaterally put the GP interest back to the partnership within one year of closing [87] Question: How does the company view the trend of operators reducing variable costs by taking compression in-house? - Management believes the trend toward outsourcing will continue, as operators will focus on their core competencies [77][78] Question: What was the rationale behind seeking a waiver on the covenant? - The company sought a waiver to provide a cushion for operating the business amid increased uncertainty in the market [79][82]