usac-20240630

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 June 30, 2024


☐			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 August 1, 2024, there were 117,007,411 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			6
Note 1 – Organization and Description of Business			6
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies			6
Note 3 – Trade Accounts Receivable			9
Note 4 – Inventories			9
Note 5 – Property and Equipment and Identifiable Intangible Assets			9
Note 6 – Other Current Liabilities			10
Note 7 – Derivative Instrument			10
Note 8 – Debt Obligations			11
Note 9 – Preferred Units			13
Note 10 – Partners’ Deficit			15
Note 11 – Revenue Recognition			16
Note 12 – Transactions with Related Parties			17
Note 13 – Commitments and Contingencies			17
Note 14 – Recent Accounting Pronouncements			18

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Operating Highlights			20
Financial Results of Operations			21
Liquidity and Capital Resources			26
Non-GAAP Financial Measures			28
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			34
ITEM 4. Controls and Procedures			35

PART II. OTHER INFORMATION			36
ITEM 1. Legal Proceedings			36
ITEM 1A. Risk Factors			36

ITEM 6. Exhibits			36

SIGNATURES			37

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
Senior Notes 2029						$1.0 billion aggregate principal amount of senior notes due on March 15, 2029
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)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	9	$	11

Accounts receivable, net of allowances for credit losses of $2,260 and $2,260, respectively	106,045		95,421

Related-party receivables	140		—
Inventories	131,283		114,728
Derivative instrument	7,178		5,670
Prepaid expenses and other assets	11,120		10,617
Total current assets	255,775		226,447
Property and equipment, net	2,308,587		2,237,625
Lease right-of-use assets	16,252		17,290
Derivative instrument, long term	1,040		—
Identifiable intangible assets, net	230,962		245,652
Other assets	8,989		9,746
Total assets	$	2,821,605	$	2,736,760
Liabilities, Preferred Units, and Partners’ Deficit
Current liabilities:
Accounts payable	$	35,654	$	39,781

Accrued liabilities	103,179		85,132
Deferred revenue	65,746		62,589
Total current liabilities	204,579		187,502
Long-term debt, net	2,484,053		2,336,088
Operating lease liabilities	13,401		14,731
Derivative instrument, long term	—		4,466
Other liabilities	11,931		10,924
Total liabilities	2,713,964		2,553,711
Commitments and contingencies
Preferred Units	168,809		476,334
Partners’ deficit:
Common units, 117,007,411 and 100,986,011 units issued and outstanding, respectively	(61,168)		(293,285)


Total liabilities, Preferred Units, and partners’ deficit	$	2,821,605	$	2,736,760

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Contract operations	$	223,643	$	196,982	$	441,747	$	385,521
Parts and service	5,827		4,102		11,287		7,980
Related party	5,843		5,836		11,555		10,543
Total revenues	235,313		206,920		464,589		404,044
Costs and expenses:
Cost of operations, exclusive of depreciation and amortization	78,162		69,922		153,234		136,587
Depreciation and amortization	65,313		60,039		128,564		119,525
Selling, general, and administrative	14,173		14,950		37,000		34,051
Loss (gain) on disposition of assets	(18)		309		1,236		(67)
Impairment of compression equipment	311		10,273		311		11,464

Total costs and expenses	157,941		155,493		320,345		301,560
Operating income	77,372		51,427		144,244		102,484
Other income (expense):
Interest expense, net	(48,828)		(42,045)		(95,494)		(81,835)
Loss on extinguishment of debt	—		—		(4,966)		—
Gain on derivative instrument	3,131		14,550		11,902		14,550
Other	26		57		60		81
Total other expense	(45,671)		(27,438)		(88,498)		(67,204)
Net income before income tax expense	31,701		23,989		55,746		35,280
Income tax expense	463		405		935		755
Net income	31,238		23,584		54,811		34,525
Less: distributions on Preferred Units	(4,387)		(12,188)		(8,775)		(24,375)
Net income attributable to common unitholders’ interests	$	26,851	$	11,396	$	46,036	$	10,150




Weighted-average common units outstanding – basic	116,849		98,271		109,692		98,259

Weighted-average common units outstanding – diluted	117,972		99,694		110,789		99,738

Basic net income per common unit	$	0.23	$	0.12	$	0.42	$	0.10

Diluted net income per common unit	$	0.23	$	0.11	$	0.42	$	0.10

Distributions declared per common unit for respective periods	$	0.525	$	0.525	$	1.05	$	1.05

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)



	Common units
Partners’ deficit ending balance, December 31, 2023	$	(293,285)

Distributions and DERs, $0.525 per unit	(54,098)
Issuance of common units under the DRIP	440
Unit-based compensation for equity-classified awards	78
Exercise and conversion of Preferred Units into common units	38,108
Net income attributable to common unitholders’ interests	19,185
Partners’ deficit ending balance, March 31, 2024	(289,572)

Distributions and DERs, $0.525 per unit	(61,453)
Issuance of common units under the DRIP	331
Unit-based compensation for equity-classified awards	83
Exercise and conversion of Preferred Units into common units	262,592
Net income attributable to common unitholders’ interests	26,851
Partners’ deficit ending balance, June 30, 2024	$	(61,168)



	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)

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)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	54,811	$	34,525
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	128,564		119,525

Amortization of debt issuance costs	4,252		3,641
Unit-based compensation expense	8,331		9,628
Deferred income tax expense	97		19
Loss (gain) on disposition of assets	1,236		(67)
Loss on extinguishment of debt	4,966		—
Change in fair value of derivative instrument	(7,014)		(13,334)
Impairment of compression equipment	311		11,464

Changes in assets and liabilities:
Accounts receivable and related-party receivables, net	(10,764)		(5,811)
Inventories	(59,941)		(31,818)
Prepaid expenses and other current assets	(503)		(1,364)
Other assets	1,503		2,148
Accounts payable	557		583
Accrued liabilities and deferred revenue	35,022		1,070
Other liabilities	1,230		—
Net cash provided by operating activities	162,658		130,209
Cash flows from investing activities:
Capital expenditures, net	(147,150)		(106,402)
Proceeds from disposition of property and equipment	435		1,093

Net cash used in investing activities	(146,715)		(105,309)
Cash flows from financing activities:
Proceeds from long-term borrowings	582,530		511,766
Proceeds from issuance of senior notes	1,000,000		—
Repayments of long-term borrowings	(698,102)		(407,283)
Investments in government securities in connection with legal defeasance of the Senior Notes 2026	(748,764)		—

Cash distributions on common units	(116,748)		(104,407)
Cash distributions on Preferred Units	(15,600)		(24,375)
Deferred financing costs	(18,579)		(379)
Other	(682)		(226)
Net cash used in financing activities	(15,945)		(24,904)
Decrease in cash and cash equivalents	(2)		(4)
Cash and cash equivalents, beginning of period	11		35
Cash and cash equivalents, end of period	$	9	$	31

See accompanying notes to unaudited condensed consolidated financial statements.

SEC Form 10-Q filed by USA Compression Partners LP