CSI COMPRESSCO LP ANNOUNCES FOURTH QUARTER 2023 RESULTS; PROVIDES 2024 GUIDANCE
- Revenue for fourth quarter 2023 was $98.3 million, up from $94.0 million in 2022.
- Adjusted EBITDA for fourth quarter 2023 was $34.7 million, a growth from $31.4 million in 2022.
- Total revenues for 2023 were $386.1 million compared to $353.4 million in 2022.
- Adjusted EBITDA for 2023 was $131.8 million, an increase from $114.5 million in 2022.
- Distribution coverage ratio for fourth quarter 2023 was 9.7x, higher than 9.2x in 2022.
- CSI Compressco's compressor fleet horsepower was 1,175,917 as of December 31, 2023.
- Debt maturity schedule includes $400.0 million of first lien secured bonds due in April 2025 and $172.7 million of second lien secured bonds due in April 2026.
- CSI expects capital expenditures in 2024 to range from $52.0 million to $69.0 million, including maintenance and growth capital expenditures.
- The fourth quarter 2023 cash distribution on common units was $0.01 per unit, with a distribution coverage ratio of 9.7x.
- CSI Compressco will not host a conference call due to the pending merger with Kodiak Gas, Inc.
- None.
Insights
The reported increase in total revenues and Adjusted EBITDA for CSI Compressco LP in both the fourth quarter and full year 2023 indicates a positive trajectory for the company's financial performance. The year-over-year revenue growth of 5% and EBITDA growth of 11% in Q4, alongside a reduced net loss from $22.1 million in 2022 to $9.5 million in 2023, reflect operational improvements and potential cost management efficiencies. However, the net leverage ratio of 4.8x, although improved from 5.5x, still suggests a considerable debt load relative to EBITDA, which can be a concern for debt servicing and financial flexibility.
The disclosed distribution coverage ratio of 9.7x is exceptionally high, which typically indicates that the company is generating ample cash to cover its distributions to unitholders. This can be seen as a strong signal of financial health, provided that it is sustainable. Investors should also note the expected capital expenditures for 2024, which are targeted towards fleet expansion and technology investments, indicating a focus on growth and potential future revenue streams.
CSI Compressco's operational metrics, such as the slight increase in utilization rates from 86.8% to 87.1%, suggest stable demand for their services in the natural gas compression and treating services sector. This is a positive indicator in the context of the broader energy industry, where efficient gas compression is crucial for maintaining production and transportation processes. The company's focus on expanding its contract services fleet with a portion of the 2024 capital expenditures could capture greater market share as the demand for natural gas persists or grows.
It is also important to consider the company's international presence in regions such as Mexico, Canada, Argentina and Chile, which diversifies its revenue sources and could mitigate region-specific risks. The maintenance of a broad customer base across various onshore producing regions can provide stability against localized industry downturns.
The absence of a conference call or webcast to discuss Q4 and year-end results, due to the pending merger with Kodiak Gas, Inc., is a significant event that could influence investor sentiment. Mergers can lead to operational synergies and cost savings but also come with integration risks. Stakeholders should closely monitor the progress of this merger as it could have substantial implications for the company's market position and financial performance.
The capital expenditure guidance for 2024 suggests a strategic investment in both maintenance and growth, which could enhance CSI Compressco's competitive edge in technology and expand its service capabilities. This strategic allocation of capital towards growth and maintenance is indicative of a balanced approach to sustaining current operations while seeking to expand market share.
Fourth Quarter 2023 Summary
- Total revenues for fourth quarter 2023 were
$98.3 million $94.0 million - Net loss for fourth quarter 2023 was
$3.3 million $4.2 million - Adjusted EBITDA for fourth quarter 2023 was
$34.7 million $31.4 million - Distributable cash flow for fourth quarter was
$13.7 million $13.0 million - Net leverage ratio was 4.8x at the end of the fourth quarter of 2023 compared to 5.5x for fourth quarter 2022.
- Utilization at the end of the fourth quarter 2023 was
87.1% compared to86.8% in the fourth quarter 2022. - Distribution coverage ratio for fourth quarter 2023 was 9.7x compared to 9.2x in the fourth quarter 2022.
- Fourth quarter distribution of
$0.01
Total Year 2023 Summary
- Total revenues for 2023 were
$386.1 million $353.4 million - Net loss was
$9.5 million $22.1 million - Adjusted EBITDA was
$131.8 million $114.5 million - Distributable cash flow was
$51.5 million $42.4 million - Long-term debt, net as of December 31, 2023 totals
$628.6 million $634.0 million
Fourth Quarter 2023 and Full Year 2023 Results
CSI Compressco's fourth quarter results 2023 represent a continued improvement in the business. Fourth quarter 2023 revenue grew
Net cash used in operating activities was
This press release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in
Unaudited results of operations for the quarter ended December 31, 2023 compared to the prior quarter and the corresponding prior year quarter are presented in the table below.
Three Months Ended | |||||
December 31, | September 30, | December 31, | |||
(In Thousands) | |||||
Net loss | $ (3,347) | $ (947) | $ (4,246) | ||
Adjusted EBITDA | $ 34,667 | $ 33,839 | $ 31,359 | ||
Distributable cash flow | $ 13,680 | $ 13,959 | $ 13,020 | ||
Net cash provided by (used in) operating activities | $ 2,382 | $ 35,162 | $ (8,420) | ||
Free cash flow | $ (14,909) | $ 22,949 | $ (17,182) | ||
As of December 31, 2023, our compressor fleet horsepower was 1,175,917 and fleet horsepower in service was 1,024,530 (we define the overall service fleet utilization rate as the service compressor fleet horsepower in service divided by the total compressor fleet horsepower). Idle horsepower equipment under repair is not considered utilized, but we do count units on standby as utilized when the client is being billed a standby service rate.
Balance Sheet
Cash on hand at December 31, 2023 was
Capital Expenditures
We expect capital expenditures in 2024 to range from
Fourth Quarter 2023 Cash Distribution on Common Units
On January 18, 2024, CSI Compressco announced that the board of directors of its general partner declared a cash distribution attributable to the fourth quarter of 2023 of
2024 Annual Guidance
CSI is providing annual guidance as detailed below:
2024 Guidance | ||||
Low | High | |||
(In thousands, except ratios) | ||||
Adjusted EBITDA | $ 135,000 | $ 145,000 | ||
Capital Expenditures: | ||||
Growth Capital Expenditures | $ 30,000 | $ 37,500 | ||
Growth - Other Capital Expenditures(1) | 2,000 | 4,000 | ||
Maintenance Capital Expenditures | 20,000 | 27,500 | ||
Total Capital Expenditures | $ 52,000 | $ 69,000 | ||
(1) "Growth - Other Capital Expenditures" includes investments in technology and facilities |
Conference Call
Due to the pending merger with Kodiak Gas, Inc., CSI Compressco will not host a conference call or webcast to discuss its results for the fourth quarter and year ended December 31, 2023.
CSI Compressco Overview
CSI Compressco is a provider of contract services including natural gas compression services and treating services. Natural gas compression is used for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage. Treating services include removal of contaminants from a natural gas stream and cooling to reduce the temperature of produced gas and liquids. CSI Compressco's compression and related services business includes a fleet of approximately 4,300 compressor packages providing approximately 1.2 million in aggregate horsepower, utilizing a full spectrum of low-, medium- and high-horsepower engines. Our treating fleet includes amine units, gas coolers, and related equipment. CSI Compressco's aftermarket business provides compressor package overhaul, repair, reconfiguration, and maintenance services as well as the sale of compressor package parts and components manufactured by third-party suppliers. Our customers comprise a broad base of natural gas and oil exploration and production, midstream, transmission, and storage companies operating throughout many of the onshore producing regions of
Forward-Looking Statements
This news release contains "forward-looking statements" and information based on our beliefs and those of our general partner, CSI Compressco GP LLC. Forward-looking statements in this news release are identifiable by the use of the following words and other similar words: "anticipates," "assumes," "believes," "budgets," "could," "estimates," "expectations," "expects," "forecasts," "goal," "intends," "may," "might," "plans," "predicts," "projects," "schedules," "seeks," "should," "targets," "will," and "would." These forward-looking statements include statements, other than statements of historical fact, including anticipated return of standby equipment to in service, the redeployment of idle fleet compressors, joint-bidding on potential projects with Spartan, commodity prices and demand for CSI Compressco's equipment and services and other statements regarding CSI Compressco's beliefs, expectations, plans, prospects and other future events, performance, and other statements that are not purely historical. Such forward-looking statements reflect our current views with respect to future events and financial performance, and are based on assumptions that we believe to be reasonable, but such forward-looking statements are subject to numerous risks and uncertainties, including but not limited to: economic and operating conditions that are outside of our control, including the trading price of our common units, and the supply, demand, and price of oil and natural gas; the levels of competition we encounter; our dependence upon a limited number of customers and the activity levels of our customers; the levels of competition we encounter; our ability to renew our contracts with our customers, which are generally short-term contracts; the availability of adequate sources of capital to us, including changes to interest rates; our existing debt levels and our ability to obtain additional financing; our ability to continue to make cash distributions, or increase cash distributions from current levels, after the establishment of reserves, payment of debt service and other contractual obligations; the restrictions on our business that are imposed under our long-term debt agreements; the credit and risk profile of Spartan Energy Partners; risks related to acquisitions and our growth strategy; the availability of raw materials and labor at reasonable prices; risks related to our foreign operations; the effect and results of litigation, regulatory matters, environmental laws and regulations, settlements, audits, assessments, and contingencies; information technology risks, including the risk from cyberattack; acts of terrorism, war or political or civil unrest in
Reconciliation of Non-GAAP Financial Measures
The Partnership includes in this release the non-GAAP financial measures Adjusted EBITDA, distributable cash flow, distribution coverage ratio, free cash flow, and net leverage ratio. Adjusted EBITDA is used as a supplemental financial measure by the Partnership's management to:
- assess the Partnership's ability to generate available cash sufficient to make distributions to the Partnership's unitholders and general partner;
- evaluate the financial performance of its assets without regard to financing methods, capital structure or historical cost basis;
- measure operating performance and return on capital as compared to those of our competitors; and
- determine the Partnership's ability to incur and service debt and fund capital expenditures.
The Partnership defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, and before certain charges, including impairments, bad debt expense attributable to bankruptcy of customers, equity compensation, non-cash costs of compressors sold, gain on extinguishment of debt, write-off of unamortized financing costs, and excluding, severance and other non-recurring or unusual expenses or charges.
Distributable cash flow is used as a supplemental financial measure by the Partnership's management, as it provides important information relating to the relationship between our financial operating performance and our cash distribution capability. Additionally, the Partnership uses distributable cash flow in setting forward expectations and in communications with the board of directors of our general partner. The Partnership defines distributable cash flow as Adjusted EBITDA less current income tax expense, maintenance capital expenditures, interest expense, and severance expense, plus non-cash interest expense.
The Partnership believes that the distribution coverage ratio provides important information relating to the relationship between the Partnership's financial operating performance and its cash distribution capability. The Partnership defines the distribution coverage ratio as the ratio of distributable cash flow to the total quarterly distribution payable, which includes, as applicable, distributions payable on all outstanding common units, the general partner interest and the general partner's incentive distribution rights.
The Partnership defines free cash flow as net cash provided by operating activities less capital expenditures, net of sales proceeds. Management primarily uses this metric to assess our ability to retire debt, evaluate our capacity to further invest and grow, and measure our performance as compared to our peer group of companies.
The Partnership defines net leverage ratio as net debt (the sum of the carrying value of long-term and short-term debt on its consolidated balance sheet, less cash, excluding restricted cash on the consolidated balance sheet and excluding outstanding letters of credit) divided by Adjusted EBITDA for calculating net leverage (Adjusted EBITDA as reported externally adjusted for certain items to comply with its credit agreement) for the trailing twelve month period. Management primarily uses this metric to assess the Partnership's ability to borrow, reduce debt, add to cash balances, pay distributions, and fund investing and financing activities.
These non-GAAP financial measures should not be considered an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with
Schedule A - Income Statement | |||||||||
Results of Operations (unaudited) | |||||||||
Three Months Ended | Twelve Months Ended | ||||||||
December | September | December | December | December | |||||
(In Thousands, Except per Unit Amounts) | |||||||||
Revenues: | |||||||||
Contract services | $ 72,424 | $ 71,457 | $ 68,594 | $ 284,049 | $ 263,241 | ||||
Aftermarket services | 21,375 | 23,686 | 20,655 | 83,621 | 72,928 | ||||
Equipment rentals | 4,125 | 4,197 | 3,878 | 17,209 | 14,865 | ||||
Equipment sales | 347 | 367 | 842 | 1,249 | 2,364 | ||||
Total revenues | 98,271 | 99,707 | 93,969 | 386,128 | 353,398 | ||||
Cost of revenues (excluding depreciation and amortization expense): | |||||||||
Cost of contract services | 32,916 | 35,153 | 36,221 | 140,663 | 135,639 | ||||
Cost of aftermarket services | 17,015 | 18,202 | 16,148 | 66,355 | 58,199 | ||||
Cost of equipment rentals | 429 | 555 | 816 | 2,094 | 2,346 | ||||
Cost of equipment sales | 477 | 411 | 699 | 1,344 | 1,382 | ||||
Total cost of revenues | 50,837 | 54,321 | 53,884 | 210,456 | 197,566 | ||||
Depreciation and amortization | 20,216 | 19,256 | 19,659 | 77,409 | 78,231 | ||||
Impairments and other charges | — | — | — | — | 135 | ||||
Selling, general, and administrative expense | 13,596 | 11,686 | 10,080 | 47,552 | 42,563 | ||||
Interest expense, net of capitalized interest | 13,427 | 13,410 | 11,929 | 53,899 | 49,481 | ||||
Other (income) expense, net | 1,454 | 1,772 | 374 | 2,519 | 2,904 | ||||
Loss before taxes and discontinued operations | (1,259) | (738) | (1,957) | (5,707) | (17,482) | ||||
Provision for income taxes | 2,088 | 209 | 2,289 | 3,773 | 4,786 | ||||
Loss from continuing operations | (3,347) | (947) | (4,246) | (9,480) | (22,268) | ||||
Income (loss) from discontinued operations, net of taxes | — | — | — | — | 173 | ||||
Net loss | $ (3,347) | $ (947) | $ (4,246) | $ (9,480) | $ (22,095) | ||||
Net loss per basic and diluted common unit | $ (0.02) | $ (0.01) | $ (0.03) | $ (0.07) | $ (0.16) | ||||
Schedule B - Reconciliation of Net Loss to Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio | |||||||||
The following table reconciles net loss to Adjusted EBITDA, distributable cash flow and distribution coverage ratio for the three month periods ended December 31, 2023, September 30, 2023 and December 31, 2022 and the twelve month periods ended December 31, 2023 and December 31, 2022: | |||||||||
Results of Operations (unaudited) | |||||||||
Three Months Ended | Twelve Months Ended | ||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||
(In Thousands, except Ratios) | |||||||||
Net loss | $ (3,347) | $ (947) | $ (4,246) | $ (9,480) | $ (22,095) | ||||
Interest expense, net | 13,427 | 13,410 | 11,929 | 53,899 | 49,481 | ||||
Provision for income taxes | 2,088 | 209 | 2,289 | 3,773 | 4,786 | ||||
Depreciation and amortization | 20,216 | 19,256 | 19,659 | 77,409 | 78,231 | ||||
Impairments and other charges | — | — | — | — | 135 | ||||
Non-cash cost of compressors sold | 478 | 411 | 699 | 1,345 | 1,382 | ||||
Equity compensation | 463 | 457 | 390 | 1,798 | 1,622 | ||||
Transaction costs | 1,278 | — | — | 1,278 | 210 | ||||
Outside services costs related to unit disposals | — | — | — | 155 | — | ||||
Severance | 64 | 88 | 199 | 277 | 432 | ||||
Fire Damaged Unit | — | 893 | — | 893 | — | ||||
Provision for income taxes, depreciation, amortization and impairments attributed to discontinued operations | — | — | — | — | (173) | ||||
Other | — | 62 | 440 | 430 | 440 | ||||
Adjusted EBITDA | $ 34,667 | $ 33,839 | $ 31,359 | $ 131,777 | $ 114,451 | ||||
Less: | |||||||||
Current income tax expense | 1,373 | 352 | 2,124 | 3,431 | 4,410 | ||||
Maintenance capital expenditures | 4,905 | 6,105 | 4,305 | 21,313 | 18,028 | ||||
Interest expense | 13,427 | 13,410 | 11,929 | 53,899 | 49,481 | ||||
Severance and other | 1,342 | 88 | 199 | 1,806 | 642 | ||||
Plus: | |||||||||
Non-cash items included in interest expense (1) | 60 | 75 | 218 | 164 | 526 | ||||
Distributable cash flow | $ 13,680 | $ 13,959 | $ 13,020 | $ 51,492 | $ 42,416 | ||||
Cash distribution attributable to period | $ 1,412 | $ 1,412 | $ 1,412 | $ 5,648 | $ 5,648 | ||||
Distribution coverage ratio | 9.69x | 9.89x | 9.22x | 9.12x | 7.51x | ||||
(1) Non-cash interest expense previously reported for 2022 included |
Schedule C - Reconciliation of Net Cash Provided by Operating Activities Operations to Free Cash Flow | |||||||||
The following table reconciles net cash provided by operating activities to free cash flow for the three month periods ended December 31, 2023, September 30, 2023 and December 31, 2022 and the twelve month periods ended on December 31, 2023 and December 31, 2022: | |||||||||
Results of Operations (unaudited) | |||||||||
Three Months Ended | Twelve Months Ended | ||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||
(In Thousands) | |||||||||
Net cash provided by (used in) operating activities | $ 2,382 | $ 35,162 | $ (8,420) | $ 62,170 | $ 35,544 | ||||
Capital expenditures, net of sales proceeds | (17,291) | (12,213) | (8,762) | (51,459) | (43,939) | ||||
Free cash flow | $ (14,909) | $ 22,949 | $ (17,182) | $ 10,711 | $ (8,395) | ||||
Schedule D – Reconciliation of Net Loss to Adjusted EBITDA for Net Leverage Ratio Calculation (unaudited) | |
(in thousands, except ratios) | |
Twelve Months | |
December 31, 2023 | |
Net loss | $ (9,480) |
Interest expense, net | 53,899 |
Provision for income taxes | 3,773 |
Depreciation and amortization | 77,409 |
Impairments and other charges | — |
Non-cash cost of compressors sold | 1,345 |
Equity compensation | 1,797 |
Benefit for income taxes, depreciation, amortization and impairments attributed to discontinued operations | — |
Transaction costs | 1,278 |
Severance | 277 |
Other | 430 |
Adjusted EBITDA | $ 131,776 |
Debt Schedule | December 31, 2023 |
$ 400,000 | |
172,717 | |
Credit Facilities | 56,765 |
Finance leases | 13,092 |
Cash on Hand | (7,012) |
Net Debt | $ 635,562 |
Net Leverage Ratio (Net Debt/Adjusted EBITDA for Net Leverage Calculation) | 4.8x |
Schedule E – Balance Sheet | |||
December 31, | December 31, | ||
(In Thousands) | (Unaudited) | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 7,012 | $ 8,475 | |
Trade accounts receivable, net of allowance for credit losses of | 58,648 | 65,085 | |
Trade receivable - affiliate | 780 | 948 | |
Inventories | 44,932 | 45,902 | |
Prepaid expenses and other current assets | 8,651 | 7,905 | |
Total current assets | 120,023 | 128,315 | |
Property, plant, and equipment: | |||
Land and building | 7,241 | 7,227 | |
Compressors and equipment | 1,134,451 | 1,103,657 | |
Vehicles | 8,783 | 8,640 | |
Construction in progress | 34,880 | 37,183 | |
Total property, plant, and equipment | 1,185,355 | 1,156,707 | |
Less accumulated depreciation | (666,075) | (611,734) | |
Net property, plant, and equipment | 519,280 | 544,973 | |
Other assets: | |||
Deferred tax asset | 17 | 3 | |
Intangible assets, net of accumulated amortization of | 16,181 | 19,140 | |
Operating lease right-of-use assets | 28,244 | 27,205 | |
Other assets | 3,291 | 2,767 | |
Total other assets | 47,733 | 49,115 | |
Total assets | $ 687,036 | $ 722,403 | |
LIABILITIES AND PARTNERS' CAPITAL | |||
Current liabilities: | |||
Accounts payable | $ 21,996 | $ 34,589 | |
Unearned income | 2,525 | 2,590 | |
Accrued liabilities and other | 45,851 | 47,076 | |
Current liabilities associated with discontinued operations | — | — | |
Total current liabilities | 70,372 | 84,255 | |
Other liabilities: | |||
Long-term debt, net | 628,587 | 634,016 | |
Deferred tax liabilities | 1,768 | 1,245 | |
Operating lease liabilities | 19,526 | 19,419 | |
Other long-term liabilities | 5,642 | 8,742 | |
Total other liabilities | 655,523 | 663,422 | |
Commitments and contingencies | |||
Partners' capital: | |||
General partner interest | (1,690) | (1,618) | |
Common units (141,995,028 units issued and outstanding at December 31, 2023 and 141,237,462 units issued and outstanding at December 31, 2022) | (22,855) | (9,250) | |
Accumulated other comprehensive loss | (14,314) | (14,406) | |
Total partners' capital (deficit) | (38,859) | (25,274) | |
Total liabilities and partners' capital | $ 687,036 | $ 722,403 | |
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SOURCE CSI Compressco LP
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