CSI COMPRESSCO LP ANNOUNCES THIRD QUARTER 2023 RESULTS; ACHIEVES 14% YEAR-ON-YEAR QUARTERLY ADJUSTED EBITDA GROWTH; CONTINUES LEVERAGE REDUCTION
- None.
- None.
Third Quarter 2023 Results:
- Total revenues were
$99.7 million $94.9 million - Contract services revenue increased to
$71.5 million $67.5 million - Net loss was
$0.9 million $4.5 million - Adjusted EBITDA was
$33.8 million $29.8 million - Trailing Twelve Months Adjusted EBITDA was
$129.5 million - Compression fleet utilization increased to
87.6% compared to85.1% in the third quarter 2022. - Operating horsepower increased to 1,026,918 compared to 1,022,106 in the third quarter 2022.
- Distributable cash flow was
$14.0 million $11.1 million - Distribution coverage ratio was 9.9x compared to 7.8x in the third quarter 2022.
- Third quarter of 2023 distribution of
$0.01 - Net Leverage Ratio was 4.8x compared to 5.7x in the third quarter 2022.
- CSI has no significant credit facility or debt maturities until 2025.
Management Commentary
John Jackson, CEO of CSI Compressco commented, "Our third quarter results reflect the continuing improvements in operational execution amid the backdrop of a strong, resilient natural gas compression market. The operating results reflect continued improvement in our contract services gross profit percentage, increased quarterly EBITDA, improving leverage metrics, and another sequential increase in utilization. Our outlook continues to be upbeat as the visibility of demand continues to be robust and longer in duration.
Demand for medium and large HP (400 HP+) remains strong as we exit 2023 and look to 2024 and beyond. This is evidenced by utilization rates across the industry, the tight available supply, and the sustained incremental demand from customers. Our overall fleet utilization continued to improve, up to
Our net leverage metric continues to improve, currently at 4.8x and down from 5.1x at June 30, 2023. We remain committed to limiting our capital spending during 2023 such that CSI Compressco will generate free cash flow during the year and our current net debt metrics reflect that free cash flow generation during 2023.
The long-term outlook continues to have a very constructive & positive tone. Our current known demand from our customers for 2024 horsepower exceeds what we can supply from our existing fleet. We are entering the final budget phase for many of our customers and the request for 2025 capital commitments is ramping up considerably. Over the fourth quarter of 2023 and the first quarter of 2024 we will begin the allocation of CSI Compressco's capital for 2025. This strength in the demand allows us to pursue organic growth with strong returns while continuing to improve the terms related to our existing fleet. We still have significant opportunities for improvements to our rates, contracts to convert to CPI inflation protection and length of terms on our existing fleet. This occurs as our contracts come up for renewal and 2024 will be another active year to continue moving our contract services fleet to market.
This current cycle is like no other that we have experienced. It is strong, growing and disciplined. As a result, we continue to have confidence in a lengthy cycle. We are very optimistic about the future of natural gas, the compression space, and in particular in CSI Compressco's position to thrive in this environment."
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 September 30, 2023 compared to the prior quarter and the corresponding prior year quarter are presented in the table below.
Three Months Ended | |||||||||
Sep 30, 2023 | Jun 30, 2023 | Sep 30, 2022 | Q3-2023 v | Q3-2023 v | |||||
(In Thousands, except percentage changes) | |||||||||
Net loss | $ (947) | $ (2,573) | $ (4,451) | 63 % | 79 % | ||||
Adjusted EBITDA | $ 33,839 | $ 32,530 | $ 29,782 | 4 % | 14 % | ||||
Distributable cash flow | $ 13,959 | $ 11,390 | $ 11,075 | 23 % | 26 % | ||||
Net cash provided by (used in) operating activities | $ 35,162 | $ 4,772 | $ 42,395 | 637 % | 17 % | ||||
Free cash flow | $ 22,949 | $ (2,872) | $ 24,983 | (899) % | 8 % | ||||
As of September 30, 2023, total compressor fleet horsepower was 1,171,628, fleet horsepower in service was 1,026,918, for an overall fleet utilization rate of
Balance Sheet
Cash on hand at the end of the third quarter was
As of September 30, 2023, our borrowing base availability under our credit facilities was
Capital Expenditures - 2023 Expectations
We expect capital expenditures for 2023 to be between
Third Quarter 2023 Cash Distribution on Common Units
On October 19, 2023, the board of directors of our general partner declared a cash distribution attributable to the quarter ended September 30, 2023 of
Conference Call
CSI will host a conference call to discuss third quarter results today, November 2, 2023, at 10:30 a.m. Eastern Time. The phone number for the call is 1-866-374-8397. The conference call will also be available by live audio webcast and may be accessed through CSI's website at www.csicompressco.com. An audio replay of the conference call will be available at 1-877-344-7529, conference number 10183761, replay code 5672618, for one week following the conference call and the archived webcast will be available through CSI's website for thirty days following the conference call.
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 4,500 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 and the general partner interest.
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 | Nine Months Ended | ||||||||
Sep 30, 2023 | Jun 30, 2023 | Sep 30, 2022 | Sep 30, 2023 | Sep 30, 2022 | |||||
(In Thousands, Except per Unit Amounts) | |||||||||
Revenues: | |||||||||
Contract services | $ 71,457 | $ 70,521 | $ 67,492 | $ 211,625 | $ 194,647 | ||||
Aftermarket services | 23,686 | 21,209 | 23,192 | 62,246 | 52,273 | ||||
Equipment rentals | 4,197 | 4,773 | 3,869 | 13,084 | 10,987 | ||||
Equipment sales | 367 | 276 | 342 | 902 | 1,522 | ||||
Total revenues | $ 99,707 | $ 96,779 | $ 94,895 | $ 287,857 | $ 259,429 | ||||
Cost of revenues (excluding depreciation and amortization expense): | |||||||||
Cost of contract services | $ 35,153 | $ 35,767 | $ 34,793 | $ 107,747 | $ 99,418 | ||||
Cost of aftermarket services | 18,202 | 16,924 | 18,056 | 49,340 | 42,051 | ||||
Cost of equipment rentals | 555 | 555 | 563 | 1,665 | 1,530 | ||||
Cost of equipment sales | 411 | 249 | 66 | 867 | 683 | ||||
Total cost of revenues | $ 54,321 | $ 53,495 | $ 53,478 | $ 159,619 | $ 143,682 | ||||
Depreciation and amortization | 19,256 | 19,086 | 19,867 | 57,193 | 58,572 | ||||
Impairments of long-lived assets | — | — | 135 | — | 135 | ||||
Selling, general, and administrative expense | 11,686 | 12,291 | 10,731 | 33,956 | 32,483 | ||||
Interest expense, net | 13,410 | 13,747 | 12,615 | 40,472 | 37,552 | ||||
Other (income) expense, net | 1,772 | (191) | 1,661 | 1,065 | 2,530 | ||||
Loss before taxes and discontinued operations | $ (738) | $ (1,649) | $ (3,592) | $ (4,448) | $ (15,525) | ||||
Provision for income taxes | 209 | 924 | 940 | 1,685 | 2,497 | ||||
Loss from continuing operations | $ (947) | $ (2,573) | $ (4,532) | $ (6,133) | $ (18,022) | ||||
Loss from discontinued operations, net of taxes | $ — | — | 81 | — | 173 | ||||
Net loss | $ (947) | (2,573) | (4,451) | (6,133) | (17,849) | ||||
Net loss per basic and diluted common unit | $ (0.01) | $ (0.02) | $ (0.03) | $ (0.04) | $ (0.13) | ||||
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 and nine month periods ended September 30, 2023, June 30, 2023 and September 30, 2022:
Results of Operations (unaudited) | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
Sep 30, 2023 | Jun 30, 2023 | Sep 30, 2022 | Sep 30, 2023 | Sep 30, 2022 | |||||
(In Thousands, except Ratios) | |||||||||
Net loss | $ (947) | $ (2,573) | $ (4,451) | $ (6,133) | $ (17,849) | ||||
Interest expense, net | 13,410 | 13,747 | 12,615 | 40,472 | 37,552 | ||||
Provision for income taxes | 209 | 924 | 940 | 1,685 | 2,497 | ||||
Depreciation and amortization | 19,256 | 19,086 | 19,867 | 57,193 | 58,572 | ||||
Impairments of fixed assets and inventory | — | — | 135 | — | 135 | ||||
Non-cash cost of compressors sold | 411 | 249 | 66 | 867 | 683 | ||||
Equity compensation | 457 | 516 | 458 | 1,334 | 1,232 | ||||
Outside services costs related to unit disposals | — | 155 | — | 155 | — | ||||
Severance | 88 | 58 | 233 | 213 | 233 | ||||
Fire Damaged Unit | 893 | — | — | 893 | — | ||||
Provision for income taxes, depreciation, | — | — | (81) | — | (173) | ||||
Other | 62 | 368 | — | 430 | — | ||||
Transaction Costs | — | — | — | — | 210 | ||||
Adjusted EBITDA | $ 33,839 | $ 32,530 | $ 29,782 | $ 97,109 | $ 83,092 | ||||
Less: | |||||||||
Current income tax expense | 352 | 1,146 | 784 | 2,058 | 2,286 | ||||
Maintenance capital expenditures | 6,105 | 6,005 | 5,121 | 16,408 | 13,723 | ||||
Interest expense | 13,410 | 13,747 | 12,615 | 40,472 | 37,552 | ||||
Severance and other | 88 | 309 | 233 | 464 | 443 | ||||
Plus: | |||||||||
Non-cash items included in interest expense | 75 | 67 | 46 | 104 | 308 | ||||
Distributable cash flow | $ 13,959 | $ 11,390 | $ 11,075 | $ 37,811 | $ 29,396 | ||||
Cash distribution attributable to period | $ 1,412 | $ 1,412 | $ 1,412 | $ 4,236 | $ 4,236 | ||||
Distribution coverage ratio | 9.9x | 8.1x | 7.8 x | 8.9x | 6.9x | ||||
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 September 30, 2023, June 30, 2023 and September 30, 2022:
Results of Operations (unaudited) | |||||
Three Months Ended | |||||
Sep 30, 2023 | Jun 30, 2023 | Sep 30, 2022 | |||
(In Thousands) | |||||
Net cash provided by (used in) operating activities | $ 35,162 | $ 4,772 | $ 42,395 | ||
Capital expenditures, net of sales proceeds | (12,213) | (7,644) | (17,412) | ||
Free cash flow | $ 22,949 | $ (2,872) | $ 24,983 | ||
Schedule D – Reconciliation to Adjusted EBITDA Margin (unaudited)
Three Months Ended | |||||
Sep 30, 2023 | Jun 30, 2023 | Sep 30, 2022 | |||
Consolidated | (In Thousands, except Margin %) | ||||
Revenue | $ 99,707 | $ 96,779 | $ 94,895 | ||
Loss before taxes and discontinued operations | $ (738) | $ (1,649) | $ (3,592) | ||
Adjusted loss margin before taxes and discontinued operations | (0.7) % | (1.7) % | (3.8) % | ||
Adjusted EBITDA (Schedule B) | $ 33,839 | $ 32,530 | $ 29,782 | ||
Adjusted EBITDA Margin | 33.9 % | 33.6 % | 31.4 % | ||
Schedule E – Reconciliation of Net Loss to Adjusted EBITDA for Net Leverage Ratio Calculation (unaudited)
(In thousands, except ratios) | |
Twelve Months | |
Sep 30, 2023 | |
Net loss | $ (10,379) |
Interest expense, net | 53,423 |
Provision for income taxes | 3,974 |
Depreciation and amortization | 76,852 |
Impairments and other charges | — |
Non-cash cost of compressors sold | 1,566 |
Equity Compensation | 1,724 |
Outside services costs related to unit disposals | 155 |
Provision for income taxes, depreciation, amortization and impairments attributed to discontinued operations | — |
Severance | 412 |
Other | 870 |
Adjusted EBITDA | $ 129,490 |
Debt Schedule | Sep 30, 2023 |
$ 400,000 | |
172,717 | |
Asset Based Loan | 47,200 |
Finance Lease | 14,869 |
Cash on Hand | (15,502) |
Net Debt | $ 619,284 |
Net Leverage Ratio (Net Debt/Adjusted EBITDA for Net Leverage Calculation) | 4.8x |
Schedule F – Balance Sheet
September 30, | December 31, | ||
(In thousands) | (Unaudited) | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 15,502 | $ 8,475 | |
Trade accounts receivable, net of allowances for doubtful accounts of | 54,864 | 65,085 | |
Trade receivable - affiliate | 608 | 948 | |
Inventories | 46,715 | 45,902 | |
Prepaid expenses and other current assets | 7,123 | 7,905 | |
Total current assets | 124,812 | 128,315 | |
Property, plant, and equipment: | |||
Land and building | 7,227 | 7,227 | |
Compressors and equipment | 1,126,515 | 1,103,657 | |
Vehicles | 8,749 | 8,640 | |
Construction in progress | 31,410 | 37,183 | |
Total property, plant, and equipment | 1,173,901 | 1,156,707 | |
Less accumulated depreciation | (651,838) | (611,734) | |
Net property, plant, and equipment | 522,063 | 544,973 | |
Other assets: | |||
Intangible assets, net of accumulated amortization of | 16,921 | 19,140 | |
Operating lease right-of-use assets | 25,028 | 27,205 | |
Deferred tax asset | 3 | 3 | |
Other assets | 3,412 | 2,767 | |
Total other assets | 45,364 | 49,115 | |
Total assets | $ 692,239 | $ 722,403 | |
LIABILITIES AND PARTNERS' CAPITAL | |||
Current liabilities: | |||
Accounts payable | $ 22,408 | $ 34,589 | |
Accrued liabilities and other | 60,067 | 49,666 | |
Total current liabilities | 82,475 | 84,255 | |
Other liabilities: | |||
Long-term debt, net | 619,341 | 634,016 | |
Deferred tax liabilities | 1,034 | 1,245 | |
Operating lease liabilities | 16,504 | 19,419 | |
Other long-term liabilities | 7,532 | 8,742 | |
Total other liabilities | 644,411 | 663,422 | |
Commitments and contingencies | |||
Partners' capital: | |||
General partner interest | (1,667) | (1,618) | |
Common units (141,995,028 units issued and outstanding at September 30, | (18,563) | (9,250) | |
Accumulated other comprehensive income (loss) | (14,417) | (14,406) | |
Total partners' capital | (34,647) | (25,274) | |
Total liabilities and partners' capital | $ 692,239 | $ 722,403 |
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SOURCE CSI Compressco LP
FAQ
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What was the compression fleet utilization in the third quarter of 2023?
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What is the net leverage ratio for CSI Compressco in the third quarter of 2023?
