Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- USA Compression Partners LP (USAC, Financial) reported record results in revenue, adjusted gross margin, adjusted EBITDA, distributable cash flow, and average revenue-generating horsepower for the third quarter of 2024.
- The company experienced a supportive environment in the compression service space, allowing for increased pricing and strong demand for compression services.
- USAC's revenue increased by 11% compared to the same period last year, driven by pricing improvements and high utilization rates.
- The company successfully reduced its leverage ratio to 4.2 times, continuing a downward trend.
- USAC reaffirmed its financial guidance for the full year 2024, indicating confidence in its financial performance and strategic direction.
Negative Points
- Cash interest expenses increased by approximately $0.5 million sequentially due to higher average outstanding borrowings.
- The company faced increased costs associated with the conversion of idle units to active status, impacting capital expenditures.
- Expansion capital expenditures for the full year 2024 were increased due to higher costs related to preparing active compression units for redeployment.
- The company is nearing the end of available large horsepower units, indicating potential limitations in meeting future demand without additional investments.
- There is uncertainty regarding the impact of the Energy Transfer Shared Services Model on future operations and costs, with more details expected in future quarters.
Q & A Highlights
Q: Can you provide insights on the increased CapEx and its implications for 2025?
A: Clint Green, President and CEO, explained that the 2025 capital plan will be detailed in the fourth quarter earnings. The company aims to be more capital disciplined while seeking opportunities that benefit the company and its investors.
Q: With strong pricing in the compression market, is there potential for further upside?
A: Eric Scheller, COO, noted that the compression market remains robust, driven by strong gas flow demand. He does not foresee any significant changes in revenue trends, as demand for horsepower continues.
Q: How do increased costs affect the strategy of converting idle units versus new builds?
A: Eric Scheller, COO, stated that high utilization rates mean limited available large horsepower units. The company is optimizing its fleet by enhancing units for redeployment, despite increased costs, to meet customer demand.
Q: What excites you most about the business moving forward?
A: Clint Green, President and CEO, expressed excitement about the potential for dual-fuel technology and electrification, as well as opportunities arising from potential changes in LNG export permits.
Q: Can you elaborate on the Energy Transfer Shared Services Agreement?
A: Clint Green, President and CEO, mentioned that the shared services agreement is still being evaluated, but it will involve Energy Transfer's support while maintaining USA Compression as a separately run company. More details will be provided in the first quarter guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
