CSI Compressco (CCLP) 30 Jul 212021 Q2 Earnings call transcript

Good morning, and welcome to CSI Compressco LP's Second Quarter 2021 Earnings Conference Call. The speakers for today's call are John Jackson, Chief Executive Officer of CSI Compressco LP; and John Byers, Chief Financial Officer of CSI Compressco LP. Also in attendance today are Robert Price, Chief Operating Officer; and Michael Moscoso, Vice President of Finance. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Instructions]. [Operator event this being is note, recorded. Please now will turn the Mr. to over conference I remarks. for Byers opening ahead. go Please

Thank you, call. morning, may to Second remind Jordan. be Good that contain Quarter CSI for you and statements or XXXX Compressco's statements These are joining forward-looking. that uncertainties, Results may the conference These Conference number on this a based I'd Compressco are to and like and call thank deem based on are are a which certain of partnership. to assumptions of many and statements factors. beyond analyses of of subject risks made by CSI control are you number the

statements. not actual cautioned such materially projected differ You're future forward-looking performance those guarantees results statements may and that are from that the of in

the public flow, release morning's distribution non-GAAP ratio, or In may adjusted financial refer course we measures. margin, financial our our reconciliations the substitute the be of of a gross within utilization, this to in results refer coverage cash measures financial free accordance press not are EBITDA, measures. financial the cash for distributable Please or nearest considered non-GAAP GAAP period. prepared GAAP other EBITDA, the and to of call, These in context with should leverage for ratio, flow, to addition, for complete to information website reconciliations

to turn Jackson. at the that, replay. and as today, be Form provided will XX, accurate out no morning to information John I it and this XX-Q earlier later may longer With as views note our went our In only be of management's that to over on website, announcement this of addition our speaks release press today. will now call on time posted that filed Please July

it overall flows, to liquidity. sheet, XXXX At Jon. Call. pace turn number going was second Good up and into continues trend the on financial comments, cash quarter sequentially Byers a some has this of and I'm give third Earnings Quarter picked The CSI you operating really Second from an macro balance improvement and morning, some improve quarter. I'll level, the over the to in joining provide back to commentary a the activity summary Thanks, to of for metrics, Compressco's Jon thank and quarter.

industry. slower are in takes play. see based the is exist slower late-cycle second of industry the optimistic second to term-based so and We the does activity fee months hopeful the When show a contracts number half on be to financial and when as The 'XX. about up half to in quarters. XXXX, to it reduce results expect the does Historically, It's activity it's in results. the increase reflected to pick operating we up, begin this in to of conversion the begin compression up, always activity several fleet a contracts of firm to deployment that compression consecutive bids to for activity of picks activity,

trends in will is we of today that see suggest second and hopefully current into 'XX. this of same occur. begin on year to are the out that expect play to We half what The trend kind seeing would

So, results revenues. had services increase operational aftermarket CSI sequential in and compression trends, turning Compressco to a in and

quarter 'XX. XX.X% in of adjusted to first the addition, cash both EBITDA, compared improved XX.X%, of than were slightly distributable In higher Fleet flow first to 'XX. the utilization quarter

month second during XX,XXX at the quarter at the on second of horsepower improvements the each had EMS standby the services Both compression decreased year-end from quarter. business month-on-month to end Additionally, XX,XXX 'XX. and

way the customers back and discussed first are The have picked for the activity orders up second conversion of the supply see begun of chains to and as at pick firming through of least bidding tighten, of activity into The all to quarter everywhere up appear other continue stretching We quarter the quarter realizing to specific plans, XXXX. July. to be we and general, the to this on on supply need Customers fleet. the month idle to large that segment previous a critical of to give equipment. second fleet builds redeploying to space as quarter continued in up These specifically, these significantly quarters, of contracted lock CSI as optimism us existing call compared up bids some new activity of about combination signs are orders in equipment, well horsepower compression the Compressco. our more earnings the most

quarter. last on these impact but of half at expenditures have a of international reflected finalizing As revenue are our beginning capital late new orders to with this activity these if operating still through still XXXX. impact from we we contracts of expect call year stage XXXX, bid in and plans a begin the have an remains last The point, our year. and first increased earnings be this international results as and active, should would on The in mentioned guidance We early these in that result of the working are any EBITDA we this QX build customers beginning orders, to capital awarded. their

or usually may issues time in past. of done be resupplied chain the immediately a of and number The we be -- consumables, fuel of variety cost availability be unavailable in are on pressures. typical -- suddenly a to we've of days, These is and This supply parts inventory. cost in revenues, as increase an the normal upstream supply on the proactively, this parts The problems the other somewhere able the for staffing will manage and potential the available side short pressures of that up and supplies. because availability activity revenue weeks, and is and include The believe we from impact chain notice, chain. component can unusual this impact normal supply labor, cycle, on items are

to minimize downturn as may as even separate day-to-day. employees employees to work we're far, effectively actions an very people disruption finally, from it work shared change progress. and some to and safely to challenge, appreciative and this the I but operations have of company well the us but want through navigating on been in the remains shortages procurement or to I'm so work some it but are bottlenecks, Our the through ongoing TETRA adaptable underway, Overall, the And much and week-to-week again our those near-term our making perform possible. or coming done be We'll lead the supply of services, as commend disruption. to upturn. positioning chain issue efficiently and remains are very can working the

to year and on of and the turn I'll So this we into the rest remain excited 'XX. call and Byers. over industry forward Jon optimistic about the look now to

million second Thanks, John. in Compressco million, Today, reported the CSI revenue first XXXX. compared of quarter to of $XX.X $XX.X quarter

million EBITDA $X.X was quarter cash $X.X Second represents million August $XX.X ratio distribution from quarter million, up We'll $X.XX adjusted coverage a the the quarter quarter of compared $XX.X with distribution of of flow million was which second pay XXXX. XX, to in first XXXX. Distributable of in on first our XX.Xx.

the at was outstanding under quarter. Total credit down borrowing $X.X Moving amounts the no $XX base our $XX.X balance million. was our June million, cash was agreement At end million approximately end the the on availability June the $XX.X at million. were end there of of revolver. liquidity quarter XXXX, The the 'XX first XX the to on June from end on of at hand sheet, of

million August notes and first- $XX second-lien million have not until XXXX respectively. bonds of that approximately XXXX, We unsecured of are of are and due and $XXX that due XXXX

X.Xx XXXX at EBITDA. leverage was end adjusted ratio net the June with compares the of Our in over Xx prior downturn. This

sheet CSI needs the the balance of look Compressco be to we what of notes. million unsecured we to address at the near done term, and in As need $XX

with upcoming the alternatives solutions these to XXXX. maturity. We a to place identified prior number We in complete have hope the this year-end bonds takeout deal have of to of to

transaction liquidity. this capital put our additional lower is and to less cash lower goals Our costs, to structure desire leverage long-term CSI metrics, debt, closer Compressco overall of interest in

the is have to view to an completion structure of expected than capital goal closer the opportunity today. will at $XX move in long-term we the the place but are We maturity upcoming where not million, of that takeout

our focus our to improving delivering a will management and to liquidity, generating team, our structure. As continue customers, capital on be

call now We open to questions. the will

Instructions]. [Operator

comes from question Selman Stifel. First from Akyol

think to international see some at could capital ahead you need in guess, putting would would involved let's of into all, -- upturn I of about with? you that just order and So, working as participate, in And capital you do 'XX. 'XX first talked you you things capital start I the field? in how guess, but the coming, late side, be looking on this So, fleets increase right? actually impact much early on, still much How are

Yes.

be minimal. the question existing off use to capital On side, the about the And just intent on be we to the me meant 'XX, our year. already just end we the intend debt getting We of the that to that, we is before comments larger we're then address much we're would much year-end to by so that on impact need debt $X said thinking would to about related let year-end the new jump We're our maturity -- participate, we million. intend so correct capital in by so opening thing international units on about 'XX. It but address the one 'XXs, maturity this we 'XX. and

to of going stations need themselves, Caterpillar X,XXX-horsepower clear. that's put to to we grow. think how it's new to want going a and in hard Like just opportunities there's just as bit follow-on of to contracts fair capital to I fleet. But engines booked those that our for we grow, the So in said, much those we sure and say. And expand relative we're last I quarter, in make be

be it's and -- balancing dealing seeing have and are opportunity with us, liquidity side other that. available and where we matter going the the really is to on we a exceed leverage, think going I that So refinancing so this to of capital to of the is us

we have we'll think financially. It's how a just I handle a to of matter bit. grow can much So chance a quite

out giving lot us, that and an clarity liquidity. more Caterpillar turning to We're the delivery. really but will answer really us move you and anything can't we because on redeploying near that So builds, on refinancing you I'm because the are I capturing capturing this starting in year equipment. need not idle on work. get say new built a not give term, else put will are to do behind we away We're engines work

we're but months, X of we done end clearer months, this capital really X Perhaps -- unit have has. of there's us some picture so two an year, you there, capital specifics. have solution, or until to optimistic 'XX. probably So we John pretty QX that all now as take somebody to get in the hopefully, participate so said, we the But the can robust and incremental and of months, move this able that then can't that pretty by And Spartan X a engine 'XX. get with the as we'll think can GP facilitate provide we we growth. through out there cycle we the you have early participate as availability will that about solutions how a that fairly of in give we'll early new the we have sponsor. to And We're the in couldn't a lot in said, we But, near and do see identified, part manner. refinancing be to where until we part are really of term this

subject, And again, lot that. are appreciate sure evaluated. we're being since I moving that things of on and I'm pieces, Understood, a

thinking dilution guys you you're examples to Spartan, either of up I there how just offer? to deal any but thought there going could any going you financing, this presume in with going just it's to equity is involve and maybe of to terms terms or is guys how is In this assurances the offer of could way happen?

talking that's about don't to said the this -- to or and of because on have have at be lot working we'd we put past, seen some Board with Spartan of not point, and on bankers. our entity. we the things like in table. remains That remains part in We've a Whether we're transaction this

key identified what have seeing got debt We've our so, they about help of bankers to and in. are we've We've what be talk and equity they'd we with talked to where lot and to interested people And a of they're us. holders about. solutions met some

a lot it think so the around what that's have I'll I we name, of leave So, enthusiasm at.

name, there's the the enthusiasm around With options. lot of a

of we're those the think I to find trying solution. with options optimal in us, front

what of So what some to happens. it's don't -- based we examples want give end because we I may do, really examples, on those may up of not using

I'm productive Hopefully, say and my we're very but able be this that hopefully, over I being want we're we'll from getting cost. to it. hopefully, interest pretty John optimistic tackle to in vague this So intentionally we're closer because away is I our is, I'll here, that We're think as get goal, don't our out all year, a the reducing said, to reducing which manner, overall not overall leverage. further skis

So at point. about this that's we probably can really say all

I And that. Okay. appreciate all

the to places. through bit inflation Let to get you me of a to go -- pressures some you might different think about and over look as of cycle? of alluded terms in any sort couple of when a pricing I and it you to be you guess be sort just you talk to sort push able Can out little able of

of been don't Rob, -- kind what been We've we've pricing, talk about -- you why

back Yes, the during general, price market to of we've go capture from we some equipment increases -- able and in in the as gave the some tighter downturn. and been discounts recoup gets

So the revenue given of recoup, to the deploy as been new during was some we've forward. side, power we the going some able downturn of seeing pricing that equipment and on some revenue the

side, sites increase where and our to parts some and in consumables, are that, -- and on the get obviously, like the trucks fuel. to fleet then things using cost on and inflation an we've gasoline there's side, guys the been On seen our

But some it's counted across utilization actually as so we billed, until contract in incremental to there's number it's revenue. on Maybe I said, under generating. some think contract. it's and Yes. our get are work utilization doesn't pricing we count sign we gotten bid, because back revenue units peak the give you a it's going contract, it get It revamp not to go utilization a units. that's seeing the we're into I've we that as be of Maybe we get is fleet. point the or the out whatever get bit two, be it tight, that until a there's back our to look you field, it. not overhaul month is But in to we're may so some at -- done don't the far perspective, entire little make-ready, quite maybe -- able had if There was I'd in it to on as work, aren't yet. being a that say ready not a segments back to our pandemic where that for customer the or at

out, or know X out. maybe we So but X months before it goes it's going

we April, than call, were specific If today, are giving without you where we of the this unset of has look at amount doubled. the had we when numbers, more horsepower where at end and

and coming of still can in the out utilization because our So, the going bit moved kept -- kind of quarter, see, kind first had we you of sideways. sideways a fair churn as in it and units units fleet back

pricing we know should going less you a you this a used more years units getting -- to fleet. -- the so a units ago. be that on incremental in about fleet that's will And kind go has most unit, the with very an it's the on start it of get where of yack, we're can X.X now, last what's the yack, your what about will where out in an up. to of and And -- but just got lot to right incremental and move than on of on start that lot availability looking gaining thing pricing the of to and lot X happened the It's we utilization, have the of is. A net out, out that's But tight and most to anyway, we X utilization slow moment, X have encouraged And what market yack, at reactivating machine. -- power know months. we power it's figure contract, come coming to you got or get that we forward gaining say, Now back, rates going, happened. years,

pricing So able we be be the second to quarter, quarter to see pushed should by to next of expect first maybe end the year, through?

continue things are, absolutely. like If they

Okay. That's helpful.

going mean, we're fleet, we're just much. certain have in have of going pockets to I -- not to not our just

be have tight as if not same to somebody tight no different going XXX, than we're of that's The somebody our else, So, to our going for that's for out XXX be of us out you X competitors. for same not else. fleet segment XX fleet of the and versus of is is our segment tight

pricing the is So power classic issue. a really demand-supply

is lot pretty and to I where really for all mean, out where building and come so -- to and behind that that's can go more fleet. new locations, top trying of deploy going of we're build new get incredibly So -- and to spending build only an contract of money our equipment we on that we disciplined density a have trying have we And think incremental opportunity horsepower, versus it it on it multiyear to be be things. scale we're lot to a just what efficient. we're growth, so we revamping and I deploy

All right. Understood.

me one so this and And will wrap last let up, for just me. be

good seeing guess, of forward strengthen, than, sort what XXX gas other that? talk can seeing because constructive basins with presumably you're I and Permian, the you about strip, everyone is So pretty at

the -- seen relatively in been Well, months, were it's we've primarily, opportunities we and but South here continue that I that VJ. the X the would in Permian, in we've to in from past new say, time see the some Texas

great. in activity the But out is branching what's time say those Permian couple customers a South and us a firm Texas. customers this anchor lot larger from we've been for for had is I'd our a of of good that's Yes. long for

right new existing customers in both in this here and portfolio bit upturn our diversifying build of a now, equipment. we're So in

So the But -- regular now. Niobrara equipment -- growth, still that's real the and our stuff. is those area have real we two the that our right strong of in basins soaking the activity, idle of activity we're happening kind in up

comes with Brian question from DiRubbio next Our Baird.

a you me today medium, fleet question. units? help Can is what Let start terms high off low, just with understand in horsepower of the me breakdown

Yes. We that. -- can We'll do

back get to that? on want you Do me to

look you got it But we up? else here. while got I've what that

Spartan. on Okay. first talking traction one joint on bids came were that about those the you with board, with That's opportunities fine. you was When efforts? projects seeing of international you any Are

kind got bids is effort have integrated renting of developing of for more domestically we've a invest call outstanding are compressor project, of and international. we between gestation negotiating or bidding lot are we'll And a We're substantially you aggressively your There activity are, we've an just and larger going cost have the The couple of a take domestically versus substantially they unit, we as seen opportunities. lot -- things. opportunities in ex-compression multiple projects and to definitely. so as not so a a compression those uptick what because facility, it's we're because those longer to so Yes, the on pursuing there They opportunities well, -- for prior an couple and well, also project cycle together, seen that longer. the -- area. in

small, the whatever. differently, right? round everybody segments in fleet fleet large, side, breaks our their just percentage -- medium, if numbers, you look The So, at fleet on

it and of we're So to about X,XXX that's our up, fleet. call going XX%

our And is up. below XX%, X,XXX from and to is X,XXX of XX% XX%. XXX XXX and fleet's Just under about then about

as XX So of XX, as XX, it's far sort that.

long and business, ago, so are XXX-horsepower under units. -- company have GasJack we historically, as -- this those XXX Now GasJack VJack, a all largely started

historical if CSI the of the business in are they're the fleet, X,XXX a, there's the was you we average we some beginning of this And GasJacks that and almost was in have XXX, what, numbers, That XXX other legacy and out, under units that fleet. Then horsepower because so our genesis VJack, made, per when But X,XXX company. XXX. our built. fleet, units GasJack acquisition VJacks all us so, round gives a and on of the look the our was them, take about at

If XXX averages of unit. out, take that a you fleet the the rest almost horsepower

are those segments. different and So kind two of two different markets

horsepower. spent unit, growth, the about averages we're as far is fleet, So, and dollars, as energy blended our whole far larger is of end, bulk redeploying we're a time XXX all and of -- but where most GasJacks as the which new but spending certainly as on effort XXX time, our the fleet our dollars about

it's a but lot a your of that hopefully, So, of answers question. data, numbers, lot

forma guess No, should we but what it's going That's that's that, and next question, would before small, the going mix about forget mix maybe mix? older for perfect. thinking the I to move mentioned right really it's to still forward as, just logical And of actually higher? about the about you and take hey, think going the Or but helpful. the years, GasJacks sort pro be

I see into just horsepower on market. dollars the what large and is migrate into you'll capital fleet incremental think new the us continue to international

the midcontinent You're see active we horsepower lot -- a It going lot a a for very us that include Oklahoma. would Texas, East EBITDA. us. of in so to It's region, generates of basin have

and in so, got GasJacks, and And got horsepower horsepower, you've that region. got large midsized you've you've

the going and if XXX. to that's going we're I X, just and large we're to only And so, horsepower, don't place region X versus abandon say, think that's

going cash think, and to on for incremental strategy then that that in So what harvest maintain that, deploy and horsepower. the to efficiency is running, large at our our and optimize I be we've got the keep it and least now, on

year? you the going Switching to gears, in CapEx. to growth for disclose you that is could to much willing of Are be that, it. kick Got mentioned how some Spartan facilitate this some capital that

the is, backstop. saying I'm we're What

So to them. the because we're projects committing projects -- if cash that want to they're great of timing flow, do we depending on CCOPs, and

and money had loaning cycle or if committed And be. or CCLP liquidity that yesterday. those the some buying that our or up face to mean, to would there's get Spartan's -- may through get we whatever the that Spartan's I stepping Board units so, of issue to near-term a done, meeting

even you I and you number I give -- can't you me that be, if don't a number, wanted So any. you could don't to know I -- need what give I a I can't if give because a would number,

capacity of that a use, have lot we can Spartan So inside we as undrawn and will, we needed.

clarification. in That's Understood. that helpful

for Just more me. two

hour think that of in to as been the the when the of I shortage hard $XX extra to paying about really that much talk hoping As my a not Domino's companies, out in labor labor seeing gets September? compete. is my lot an -- deal. pizza, some are are benefits one industries, labor? of it guy, coverage big What sort availability saying I in you for get shortage. a has to across guess and things both And so pricing better you once disparate went really terms And one firm deliver you was and

extra -- the Once

Once the unemployment --

Yes, extra unemployment benefits, that's --

we've with active in to in active, competing areas. and everybody basins, tight. labor about those else tried And gotten think has address are we've wages we're basins, those extremely been that how specific I in basins the strategic in

We fill. don't remain tight is improving going doubt that the in do we for, see active, segment continue looking if to the -- it. the we're and characteristics specific I of you're expire? those after to supply to basins Because for benefits the it labor that looking be skills

in or lot rotate Yes. there, people We're people challenging, Delaware, far west areas Texas if so challenge there's the in New are geographically just Mexico and of same out. not you're and a eastern it's and for that some in --

and You want going Everybody can company. same people is with and our the same to they I move and it I our think challenge. as And team is there get using and with actually, has think stay we've now, as over out before team all HR -- -- the the to pandemic was there. to out and it to far things year, was it's but looked operations is think creates got more every done anybody it our so solve entire much ideas anything. And I problems. across it got coming, growing those, is than just -- last try We've not turnover growth and doing a basin-by-basin it put really and on tool in we place obviously, same at as our it or low we've far, we've the

I levels this is our at keep at that trying and for to cycle turnover or monitoring near We've a normal point. been think closely up.

the add not people gotten challenge really to to It's you a bad is, lot an a continue is of hasn't as back. we be to where left like, few places. work it electrician some jobs That's you other people industry. lot but trying can It's yet, thing. do. Domino's. the that's Because going So There's grow, of can a the and

You can lot just mechanic places be a can that space. be to have of don't compression work a the in

there's trade demand these So have in it's demand these for people skills. that -- They're high everywhere.

some So it. challenge it's going plans got to we've be a for think us, I on but

that I XL not notes about XL for to is frequently the but dividend, -- the no, and -- me, I'm get notes this on going one question Final the ask Okay. on

I was ready.

you assuming to addressing again. going pick You to note point cash of go But to going declared are coupon, XL the not the on it, end go this that the that notes 'XX does to there senior so part before pay continue year, successful I'm at of that you're in or time?

desire We're interest. leverage, pay cash desire is overall would and the but reduce to to growth capital, a to move Our liquidity, balancing be not pick our it. overall

it's senior That's do goal. we We goals, of goal, our but Yes. that. rid We that. want can't promise financing Board's get our definitely our anything management's get second-lien the redone, that's to until

our session. closing any Mr. would Jackson This to like to remarks. now for concludes question-and-answer back I turn the conference over

the at second appreciate joining looking to We catching on forward a right. we Thanks. up the to look everyone forward in All we're Appreciate half. quarter, and it. end third and call, the of good

you The Thank today's conference concluded. attending has now for presentation.

You now disconnect. may