DEFA14A

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Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

DEFA14A 1 d787670ddefa14a.htm DEFA14A DEFA14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

☐	Preliminary Proxy Statement

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☐	Definitive Proxy Statement

☒	Definitive Additional Materials

☐	Soliciting Material under § 240.14a-12

CSI Compressco LP

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

☒	No fee required.

☐	Fee paid previously with preliminary materials.

☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

SUPPLEMENT NO. 2, DATED MARCH 8, 2024

(to the Consent Statement/Prospectus dated February 21, 2024)

This Supplement No. 2, dated March 8, 2024 (this “Supplement”), updates and supplements the definitive consent statement/prospectus dated February 21, 2024, as supplemented by Supplement No. 1 thereto, dated March 4, 2024 (the “Consent Statement/Prospectus”) filed by CSI Compressco LP (the “Partnership”) with the Securities and Exchange Commission (“SEC”) as a definitive proxy statement on Schedule 14A on February 21, 2024, and initially mailed to the Partnership’s unitholders on or about February 21, 2024.

This Supplement is being filed by the Partnership with the SEC to supplement certain information contained in the Consent Statement/Prospectus. Except as otherwise set forth below, the information set forth in the Consent Statement/Prospectus remains unchanged. Capitalized terms used but not defined herein have the meanings ascribed to them in the Consent Statement/Prospectus.

This Supplement should be read in conjunction with the Consent Statement/Prospectus. The information in this Supplement modifies and supersedes, in part, the information in the Consent Statement/Prospectus. If there is any inconsistency between any information in the Consent Statement/Prospectus and this Supplement, you should rely on the information in this Supplement.

This Supplement is not complete without, and may not be utilized except in connection with, the Consent Statement/Prospectus, including any supplements and amendments thereto.

You should read carefully and in their entirety this Supplement and the Consent Statement/Prospectus and all accompanying annexes and exhibits. In particular, you should review and consider carefully the matters discussed under the heading “Risk Factors” beginning on page 29 of the Consent Statement/Prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the Consent Statement/Prospectus or determined if the Consent Statement/Prospectus or this Supplement is accurate or complete. Any representation to the contrary is a criminal offense.

This supplement to the Consent Statement/Prospectus is dated March 8, 2024.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 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 number 001-04321

Kodiak Gas Services, Inc.

(Exact name of registrant as specified in its charter)


Delaware		83-3013440
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9950 Woodloch Forest Drive, Suite 1900 The Woodlands, Texas		77380
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (936) 539-3300

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 Stock, par value $0.01 per share

KGS

New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant on June 30, 2023 based on the closing price of $16.24 for shares of the Registrant’s common stock as reported by the New York Stock Exchange, was approximately $259.0 million. Shares of common stock beneficially owned by each executive officer, director, and holder of more than 10% of our common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The registrant had outstanding 77,434,577 shares of common stock as of March 4, 2024.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference to the registrant’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2023.

Table of Contents


		Page
Commonly Used Defined Terms			3

Disclosure regarding forward-looking statements			5

Part I			9

	Item 1. Business		9

	Item 1A. Risk Factors		21

	Item 1B. Unresolved Staff Comments		44

	Item 1C. Cybersecurity		44

	Item 2. Properties		45

	Item 3. Legal Proceedings		45

	Item 4. Mine Safety Disclosures		45

Part II			46

	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		46

	Item 6. [ Reserved ]		47

	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		47

	Item 7A. Quantitative and Qualitative Disclosures About Market Risk		63

	Item 8. Financial Statements and Supplementary Data		65

	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures		66

	Item 9A. Controls and Procedures		66

	Item 9B. Other Information		67

	Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.		67

Part III			68

	Item 10. Directors, Executive Officers and Corporate Governance		68

	Item 11. Executive Compensation		68

	Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters		68

	Item 13. Certain Relationships and Related Transactions, and Director Independence		69

	Item 14. Principal Accounting Fees and Services		69

Part IV			70

	Item 15. Exhibits and Financial Statement Schedules		70

Signatures			72

Commonly Used Defined Terms

As used in this Annual Report on Form 10-K (this “Annual Report”), unless the context indicates or otherwise requires, the terms listed below have the following meanings:

•

“ABL Credit Agreement” means that certain Fourth Amended and Restated Credit Agreement, dated as of March 22, 2023, among Frontier Intermediate Holding, LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as amended by the First Amendment thereto, the Second Amendment thereto and the Third Amendment thereto;

•

“ABL Facility” means our senior secured asset-based revolving credit facility provided under and governed by the ABL Credit Agreement;

•

“Annual Financial Statements” means the audited consolidated financial statements for the years ended December 31, 2023, 2022 and 2021;

•

“Company,” “Kodiak,” “we,” “our,” or “us” means Kodiak Gas Services, Inc. and its consolidated subsidiaries;

•

“CSI Compressco” means CSI Compressco LP, a Delaware limited partnership with which the Company entered into an agreement and plan of Merger on December 19, 2023;

•

“EQT” or “EQT AB Group” means, as the context may require, EQT AB or EQT AB and its direct and indirect subsidiaries including, for the avoidance of doubt, investment vehicles managed and/or operated by affiliates of EQT AB and their respective portfolio companies;

•

“EQT AB” means EQT AB (publ), a Swedish public limited liability company registered with the Swedish Companies Registration Office (Reg. No. 556849-4180) and whose ordinary shares are listed on Nasdaq Stockholm stock exchange;

•

“Holdco Term Loan” means the Term Loan after the consummation of the Term Loan Transaction as described below;

•

“Indenture” means Kodiak Gas Services, Inc. senior notes due 2029, pursuant to an indenture, dated February 2, 2024, by and among Kodiak Services, Kodiak, certain other subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee;

•

“IPO” means the initial public offering of Kodiak Gas Services, Inc., completed on July 3, 2023;

•

“Frontier Holdings” means the limited partnership that holds the profit sharing units of common shares of Kodiak Gas Services, Inc;

•

“Kodiak Common Stock” means the common stock of Kodiak Gas Services, Inc.;

•

“Kodiak Holdings” means Frontier TopCo Partnership, L.P., an affiliate of EQT AB and holder of record of Kodiak Gas Services, Inc. common stock;

•

“Kodiak Holdings Term Loan” means the Term Loan after the Term Loan Transaction;

•

“Merger Agreement” means the agreement and plan of merger, dated as of December 19, 2023, by and among Kodiak Gas Services, Inc., Kodiak Gas Services, LLC, certain of our other indirect subsidiaries, CSI Compressco LP and CSI Compressco GP LLC;

•

“Merger” means each of the merger, collectively, contemplated by the Merger Agreement;

•

“Term Loan” means the term loan facility governed by the Term Loan Credit Agreement;

•

“Term Loan Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of May 19, 2022, as amended by that certain First Amendment, dated March 31, 2023, among Kodiak Gas Services, LLC, Frontier Intermediate Holding, LLC, Wells Fargo Bank, N.A. as Administrative Agent, and the lenders party thereto;

•

“Term Loan Derivative Settlement” means the termination of the Company’s interest rate swaps and collars attributable to the Term Loan in connection with the Term Loan Transaction;

•

“Term Loan Transaction” means the assumption of all of the Company’s and its subsidiaries’ remaining obligations under the Term Loan (after the application of the proceeds of the IPO) by a parent entity of Kodiak Holdings, and pursuant to which the Company’s obligations thereunder were terminated. Following the consummation of the Term Loan Transaction, the Company is no longer a borrower or guarantor under, nor otherwise obligated with respect to the debt outstanding under the Term Loan; and

•

“Third Amendment” that certain Third Amendment to the ABL Credit Agreement, dated January 22, 2024, by and among Kodiak Gas Services, Inc. (as successor borrower to Frontier Intermediate Holding, LLC), Kodiak Gas Services, LLC, the other obligors party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding:

•

Expected operating results, such as revenue growth and earnings, including upon consummation of the CSI Acquisition (as defined herein), and our ability to service our indebtedness;

•

Anticipated levels of capital expenditures and uses of capital;

•

Current or future volatility in the credit markets and future market conditions;

•

Potential or pending acquisition transactions, including the CSI Acquisition, or other strategic transactions, the timing thereof, the receipt of necessary approvals to close such acquisitions, our ability to finance such acquisitions, and our ability to achieve the intended operational, financial, and strategic benefits from any such transactions;

•

Expected synergies and efficiencies to be achieved as a result of the CSI Acquisition;

•

Expectations regarding the leverage and dividend profile upon consummation of the CSI Acquisition, including the amount and timing of future dividend payments;

•

Expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings;

•

Production and capacity forecasts for the natural gas and oil industry;

•

Strategy for customer retention, growth, fleet maintenance, market position and financial results;

•

Our interest rate hedges; and

•

Strategy for risk management.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•

A reduction in the demand for natural gas and oil;

•

The loss of, or the deterioration of the financial condition of, any of our key customers;

•

Nonpayment and nonperformance by our customers, suppliers or vendors;

•

Competitive pressures that may cause us to lose market share;

•

The structure of our Compression Operations contracts and the failure of our customers to continue to contract for services after expiration of the primary term;

•

Our ability to consummate the CSI Acquisition on a timely basis or at all;

•

Our ability to successfully integrate any acquired businesses, including CSI Compressco, and realize the expected benefits thereof;

•

Difficulties and delays in meeting the conditions required for the closing of the CSI Acquisition;

•

Our ability to fund purchases of additional compression equipment;

•

A deterioration in general economic, business, geopolitical or industry conditions, including as a result of the conflict between Russia and Ukraine and the Israel-Hamas war, inflation, and slow economic growth in the United States;

•

A downturn in the economic environment, as well as inflationary pressures;

•

Tax legislation and administrative initiatives or challenges to our tax positions;

•

The loss of key management, operational personnel or qualified technical personnel;

•

Our dependence on a limited number of suppliers;

•

The cost of compliance with existing and new governmental regulations, including climate change legislation;

•

The cost of compliance with regulatory initiatives and stakeholder pressures, including environmental, social, & governance (“ESG”) scrutiny;

•

The inherent risks associated with our operations, such as equipment defects and malfunctions;

•

Our reliance on third-party components for use in our information technology (“IT”) systems;

•

Legal and reputational risks and expenses relating to the privacy, use and security of employee and client information;

•

Threats of cyber-attacks or terrorism;

•

Agreements that govern our debt contain features that may limit our ability to operate our business and fund future growth and also increase our exposure to risk during adverse economic conditions;

•

Volatility in interest rates;

•

Our ability to access the capital and credit markets or borrow on affordable terms to obtain additional capital that we may require;

•

The effectiveness of our disclosure controls and procedures; and

•

Such other factors as discussed throughout the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Annual Report.

Any forward-looking statement made by us in this Annual Report is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future developments or otherwise.

SUMMARY RISK FACTORS

Risks Related to Our Business and Our Industry

•

A long-term reduction in the demand for, or production of, natural gas or oil could result in a decrease in Kodiak’s revenues.

•

Kodiak has several key customers. The loss of one or more of these customers would result in a decrease in Kodiak’s revenues and could adversely affect its financial results.

•

The deterioration of the financial condition of Kodiak’s customers could adversely affect Kodiak’s business.

•

Kodiak faces significant competition that may cause it to lose market share and adversely affect Kodiak’s financial condition.

•

Kodiak’s customers may choose to vertically integrate their operations by purchasing and operating their own compression fleet or using alternative technologies for enhancing oil production, which may have a material adverse effect on Kodiak’s business.

•

After the primary term of Kodiak’s contracts, such contracts are cancellable on 30 to 90 days’ notice, and Kodiak cannot be sure that such contracts will be extended or renewed and could adversely impact Kodiak’s financial results.

•

The majority of Kodiak’s operations are located in the Permian Basin and Eagle Ford Shale, making Kodiak vulnerable to risks associated with operating in limited geographic areas, which could have an impact on its revenues.

•

Kodiak may be unable to effectively integrate the businesses it may acquire, such as the pending Merger, which may impact its operations and limit its growth.

•

Kodiak may be unable to access the capital and credit markets or borrow on affordable terms to obtain additional capital, which could have a material adverse effect on its business, results of operations and financial conditions.

•

Kodiak’s fleet may require additional operating or capital expenses to maintain over time, which could adversely impact its financial results.

•

Impairment in the carrying value of long-lived assets could reduce Kodiak’s earnings.

•

A prolonged downturn in the economic environment could cause an impairment of goodwill or other intangible assets and reduce Kodiak’s earnings.

•

Kodiak has in the past been, and may in the future be, subject to sales tax audits in jurisdictions where Kodiak operates. As a result, Kodiak may incur material unanticipated sales tax liabilities.

•

Kodiak’s ability to manage and grow its business effectively may be adversely affected if Kodiak loses key members of its management.

•

Kodiak might be unable to employ or retain qualified technical personnel, which could hamper its present operations, limits its ability to grow or increase its costs.

•

Any unionization efforts or labor regulation changes in certain jurisdictions in which Kodiak operates could divert management’s attention and could have a materially adverse effect on Kodiak’s operating results or limit Kodiak’s operational flexibility.

•

Kodiak depends on a limited number of suppliers, and is vulnerable to product shortages, long lead times and price increases, which could have a negative impact on Kodiak’s results of operations.

•

Nonperformance by Kodiak’s suppliers or vendors could impact its revenues, increase its expenses and otherwise have a negative impact on Kodiak’s ability to conduct its business, operating results and cash flows.

•

Kodiak’s operations entail inherent risks that may result in interruption of Kodiak’s operations and/or substantial liability.

Risks Related to Regulatory Matters

•

Kodiak’s operations are subject to stringent environmental, health and safety regulations, and changes in these regulations could increase Kodiak’s costs or liabilities.

•

A climate-related decrease in demand for natural gas and oil could negatively affect Kodiak’s business.

•

Kodiak’s business is subject to climate-related transitional risks, which could result in increased operating expenses and capital costs, financial risks and potential reduction in demand for Kodiak’s services.

•

Increased regulation of hydraulic fracturing could result in reductions of, or delays in, natural gas and oil production by Kodiak’s customers, which could adversely impact Kodiak’s revenue.

•

Increasing scrutiny and changing stakeholder expectations in respect of ESG and sustainability practices may impose additional costs or risks.

Risks Related to Intellectual Property, Information Technology and Cybersecurity

•

Kodiak may be sued by third parties for infringement, misappropriation, dilution or other violation of their intellectual property or proprietary rights, any of which could adversely affect Kodiak’s business and results of operations.

•

Kodiak’s reliance on third-party components for use in its IT systems could result in delays in service or disrupt its business.

•

Kodiak is subject to significant legal and reputational risks and expenses relating to the privacy, use and security of employee and customer information.

•

Kodiak has experienced cybersecurity incidents or IT system disruptions in the past, and cybersecurity breaches or IT system disruptions may adversely affect Kodiak’s business in the future.

•

Kodiak’s ability to manage its business and monitor its results is highly dependent upon information and communication systems, and a failure of these systems or its enterprise resource planning (“ERP”) system could disrupt its business.

•

Kodiak may not realize the intended benefits of its process and technology transformation projects, which could have an adverse effect on its business.

Risks Related to Kodiak’s Relationship with EQT

•

EQT controls a significant percentage of Kodiak’s voting power, and it is subject to contractual restrictions that may affect Kodiak Holdings’ exercise of its rights to approve corporate actions.

•

EQT may have interests that conflict with the interests of Kodiak’s other stockholders and the resolution of these conflicts of interest may not be in Kodiak’s or your best interests.

•

EQT is not limited in its ability to compete with Kodiak, and the corporate opportunity provisions in the Kodiak Charter could enable EQT to benefit from corporate opportunities that may otherwise be available to Kodiak.

Risks Related to Kodiak’s Indebtedness

•

Kodiak’s substantial indebtedness could adversely affect its financial condition and impair Kodiak’s ability to operate its business.

•

The terms of the ABL Credit Agreement and the Indenture will restrict Kodiak’s current and future operations, particularly Kodiak’s ability to respond to changes or to take certain actions.

•

Kodiak’s variable rate indebtedness subjects it to interest rate risk, which could cause its debt service obligations to increase significantly.

•

Kodiak may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness.

Risks Related to Owning Kodiak Common Stock

•

Kodiak is a “controlled company” within the meaning of the rules of the NYSE and, as a result, qualifies for, but does not currently rely on, exemptions from certain corporate governance requirements.

SEC Form DEFA14A filed by CSI Compressco LP