usac-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(MARK ONE)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-35779

USA Compression Partners, LP

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)			75-2771546 (I.R.S. Employer Identification No.)


111 Congress Avenue, Suite 2400 Austin, Texas (Address of principal executive offices)			78701 (Zip Code)

(512) 473-2662

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common units representing limited partner interests

USAC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒			Accelerated filer ☐

Non-accelerated filer ☐			Smaller reporting company ☐

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2023, there were 98,299,245 common units outstanding.

Table of Contents

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION			1
ITEM 1. Financial Statements			1
Unaudited Condensed Consolidated Balance Sheets			1
Unaudited Condensed Consolidated Statements of Operations			2
Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital (Deficit)			3
Unaudited Condensed Consolidated Statements of Cash Flows			4
Notes to Unaudited Condensed Consolidated Financial Statements			5
Note 1 – Organization and Description of Business			5
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies			5
Note 3 – Trade Accounts Receivable			8
Note 4 – Inventories			8
Note 5 – Property and Equipment and Identifiable Intangible Assets			8
Note 6 – Other Current Liabilities			9
Note 7 – Derivative Instrument			10
Note 8 – Long-Term Debt			10
Note 9 – Preferred Units			12
Note 10 – Partners’ Deficit			13
Note 11 – Revenue Recognition			14
Note 12 – Transactions with Related Parties			15
Note 13 – Commitments and Contingencies			15
Note 14 – Subsequent Events			16
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Operating Highlights			18
Financial Results of Operations			19
Liquidity and Capital Resources			25
Non-GAAP Financial Measures			27
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			32
ITEM 4. Controls and Procedures			33

PART II. OTHER INFORMATION			34
ITEM 1. Legal Proceedings			34
ITEM 1A. Risk Factors			34

ITEM 6. Exhibits			34

SIGNATURES			35

Table of Contents

GLOSSARY

The abbreviations, acronyms and industry terminology used in this Quarterly Report on Form 10-Q are defined as follows:



Credit Agreement						Seventh Amended and Restated Credit Agreement, dated as of December 8, 2021, by and among USA Compression Partners, LP, as borrower, the guarantors party thereto from time to time, the lenders party thereto from time to time, as may be amended from time to time, and any predecessor thereto if the context so dictates
CPI						Consumer Price Index for all Urban Consumers
DERs						distribution equivalent rights
DRIP						distribution reinvestment plan

Energy Transfer						Energy Transfer LP
Exchange Act						Securities Exchange Act of 1934, as amended
GAAP						generally accepted accounting principles of the United States of America
Preferred Units						Series A Preferred Units representing limited partner interests in USA Compression Partners, LP
SEC						United States Securities and Exchange Commission
Senior Notes 2026						$725.0 million aggregate principal amount of senior notes due on April 1, 2026
Senior Notes 2027						$750.0 million aggregate principal amount of senior notes due on September 1, 2027
SOFR						Secured Overnight Financing Rate
U.S.						United States of America

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

USA COMPRESSION PARTNERS, LP

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except unit amounts)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	6	$	35

Accounts receivable, net of allowances for credit losses of $784 and $1,164, respectively	96,888		83,822

Related-party receivables	449		52
Inventories	106,457		93,754
Derivative instrument	10,730		—
Prepaid expenses and other assets	9,157		8,784
Total current assets	223,687		186,447
Property and equipment, net	2,198,137		2,172,924
Lease right-of-use assets	17,538		18,195
Derivative instrument, long term	3,513		—
Identifiable intangible assets, net	252,997		275,032
Other assets	10,542		13,126
Total assets	$	2,706,414	$	2,665,724
Liabilities, Preferred Units, and Partners’ Deficit
Current liabilities:
Accounts payable	$	37,030	$	35,303

Accrued liabilities	77,593		76,016
Deferred revenue	63,053		62,345
Total current liabilities	177,676		173,664
Long-term debt, net	2,276,449		2,106,649
Operating lease liabilities	15,119		16,146
Other liabilities	10,482		8,255
Total liabilities	2,479,726		2,304,714
Commitments and contingencies
Preferred Units	477,309		477,309
Partners’ deficit:
Common units, 98,299,245 and 98,227,656 units issued and outstanding, respectively	(259,433)		(125,111)
Warrants	8,812		8,812
Total partners’ deficit	(250,621)		(116,299)
Total liabilities, Preferred Units, and partners’ deficit	$	2,706,414	$	2,665,724

See accompanying notes to unaudited condensed consolidated financial statements.

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USA COMPRESSION PARTNERS, LP

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per unit amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Contract operations	$	204,716	$	171,019	$	590,237	$	492,656
Parts and service	7,153		4,901		15,133		10,432
Related party	5,216		3,693		15,759		11,398
Total revenues	217,085		179,613		621,129		514,486
Costs and expenses:
Cost of operations, exclusive of depreciation and amortization	74,928		59,453		211,515		168,343
Depreciation and amortization	64,101		58,772		183,626		176,795
Selling, general, and administrative	20,085		14,663		54,136		43,842
Loss (gain) on disposition of assets	(3,865)		1,118		(3,932)		1,970
Impairment of compression equipment	882		504		12,346		936

Total costs and expenses	156,131		134,510		457,691		391,886
Operating income	60,954		45,103		163,438		122,600
Other income (expense):
Interest expense, net	(43,257)		(35,142)		(125,092)		(100,059)
Gain on derivative instrument	3,437		—		17,987		—
Other	23		27		104		68
Total other expense	(39,797)		(35,115)		(107,001)		(99,991)
Net income before income tax expense	21,157		9,988		56,437		22,609
Income tax expense	255		376		1,010		657
Net income	20,902		9,612		55,427		21,952
Less: distributions on Preferred Units	(12,188)		(12,188)		(36,563)		(36,563)
Net income (loss) attributable to common unitholders’ interests	$	8,714	$	(2,576)	$	18,864	$	(14,611)




Weighted-average common units outstanding – basic	98,292		97,968		98,270		97,689

Weighted-average common units outstanding – diluted	100,263		97,968		99,915		97,689

Basic net income (loss) per common unit	$	0.09	$	(0.03)	$	0.19	$	(0.15)

Diluted net income (loss) per common unit	$	0.09	$	(0.03)	$	0.19	$	(0.15)

Distributions declared per common unit for respective periods	$	0.525	$	0.525	$	1.575	$	1.575

See accompanying notes to unaudited condensed consolidated financial statements.

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USA COMPRESSION PARTNERS, LP

Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital (Deficit)

(in thousands, except per unit amounts)


	For the Nine Months Ended September 30, 2023
	Common units		Warrants		Total
Partners’ capital (deficit) ending balance, December 31, 2022	$	(125,111)	$	8,812	$	(116,299)

Distributions and DERs, $0.525 per unit	(51,602)		—		(51,602)
Issuance of common units under the DRIP	617		—		617
Unit-based compensation for equity-classified awards	69		—		69
Net loss attributable to common unitholders’ interests	(1,246)		—		(1,246)
Partners’ capital (deficit) ending balance, March 31, 2023	(177,273)		8,812		(168,461)

Distributions and DERs, $0.525 per unit	(51,617)		—		(51,617)
Issuance of common units under the DRIP	423		—		423
Unit-based compensation for equity-classified awards	69		—		69

Net income attributable to common unitholders’ interests	11,396		—		11,396
Partners’ capital (deficit) ending balance, June 30, 2023	(217,002)		8,812		(208,190)

Distributions and DERs, $0.525 per unit	(51,628)		—		(51,628)
Issuance of common units under the DRIP	414		—		414
Unit-based compensation for equity classified awards	69		—		69
Net income attributable to common unitholders’ interests	8,714		—		8,714
Partners’ capital (deficit) ending balance, September 30, 2023	$	(259,433)	$	8,812	$	(250,621)


	For the Nine Months Ended September 30, 2022
	Common units		Warrants		Total
Partners’ capital ending balance, December 31, 2021	$	87,129	$	13,979	$	101,108

Distributions and DERs, $0.525 per unit	(51,137)		—		(51,137)
Issuance of common units under the DRIP	516		—		516
Unit-based compensation for equity-classified awards	64		—		64
Net loss attributable to common unitholders’ interests	(8,933)		—		(8,933)
Partners’ capital ending balance, March 31, 2022	27,639		13,979		41,618

Distributions and DERs, $0.525 per unit	(51,154)		—		(51,154)
Issuance of common units under the DRIP	508		—		508
Unit-based compensation for equity-classified awards	65		—		65
Exercise and conversion of warrants into common units	5,167		(5,167)		—
Net loss attributable to common unitholders’ interests	(3,102)		—		(3,102)
Partners’ capital (deficit) ending balance, June 30, 2022	(20,877)		8,812		(12,065)
Vesting of phantom units	408		—		408
Distributions and DERs, $0.525 per unit	(51,450)		—		(51,450)
Issuance of common units under the DRIP	553		—		553
Unit-based compensation for equity classified awards	64		—		64
Net loss attributable to common unitholders’ interests	(2,576)		—		(2,576)
Partners’ capital (deficit) ending balance, September 30, 2022	$	(73,878)	$	8,812	$	(65,066)

See accompanying notes to unaudited condensed consolidated financial statements.

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USA COMPRESSION PARTNERS, LP

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Nine Months Ended September 30,
	2023	2022
Cash flows from operating activities:

SEC Form 10-Q filed by USA Compression Partners LP