CSI Compressco (CCLP) 11 Nov 212021 Q3 Earnings call transcript

Good morning, and welcome to CSI Compressco LP's Third Quarter 2021 Earnings Conference Call.

The speakers for today's call are John Jackson, Chief Executive Officer of CSI Compressco LP; and Jon 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] Please note, this event is being recorded.

I will now turn the conference over to Mr. remarks. opening for Byers ahead. go Please

you, Chad. CSI you joining and Good Third Quarter morning, Compressco's Call. thank XXXX for Thank Results Conference

uncertainties, to of statements a factors. the subject by are CSI this beyond number that on certain that of be remind and risks are analysis may a many based to the to like made and deemed These statements of may are are are conference forward-looking. These of be Compressco and statements assumptions contain which number or I'd call you control based on partnership.

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

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

our longer this replay. time on views and may XX-Q be provided XX, filed will only at went to be out Please on Form our the of accurate the yesterday speaks press information as that addition release announcement November to posted on In website, evening no and of today, our is call note management's Friday.

to over it turn Jackson. John now I'll that, With

want open on some that comments announced the call you today. thank Thanks, Jon. with and Good for today. to we transactions I joining morning, our

improvement today. excited extremely once but structure only To through elimination, near-term maturity increased transactions financial release afford accomplish CSI leverage The to grow. improvements we we XXXX flexibility So not all press liquidity, transactions and CSI the thrive to Compressco into reduction, transformational complete capital the of at and these in move survive the of position transactions to these the outlined to the in Compressco nature. are series positioned are well

On the well Compressco, new in management. private shareholders Spartan from CSI of current participation number we investors current investors, a placement, as equity had as

thankful are come We ownership alongside help a broader We who of having success for CSI going to all in positive for a have CSI believe position all is unitholders. base for forward.

some and operating back make Spartan one interest stated would As in their GP thought in it when sense acquired point we at XXXX January combine LP platform. to the partnership, we of X into the companies

being We first accomplish step are pleased today. of with that the able to

was belief Spartan commitment critical and in and new equity shareholders making ownership balance CSI. financial flexibility. combination CSI's Spartan and placement CSI their This strengthening was that by equity reflected both made by Spartan it with in to The the new existing and the sheet unitholders as in investment participate of alongside private in in the from the consistent desire existing

it treating by the grow the and continue more acquisition. redeploy to timing allow operational our to the horsepower, to gas and us transactions units structure, improvements. the additional accelerate opportunities While these there improve existing will responsibly, company improve and new are performance ahead to Spartan looking economic afforded CSI these processing build be capital today sense pursue where of makes opportunities

the a this CSI entire sheet as motor excited to an the stronger rental to participate opportunities. motor will energy integral to transition. electric part an be balance horsepower to be part add part electric growing customers allows We conversion to transition clean of to electric a begun -- drive the see CSI these integral units A driver beginning portfolios. are of demand cleaner in some are of the energy world. spectrum their addition, for We've of In and of

results. and continued on we third to I'll significant comments the on chain the a And issues opportunity brief business Labor supply perspective. with few to continue make remain utilization, daily deal improve a that Now quarter basis. revenue from and a

have price of fourth effect price through additional increases X, increases and XXXX We have put the taking some in January XXXX. quarter

We increases expect offset business. than price increases cost the these anticipated to slightly current more in

this The note primary areas. make in unusual effects to quarter X are on of EBITDA

secondly, second the we make-ready surge of early onetime quarter We The of transition of with associated service over idle for fleet. being costs the now are first mobilization orders half which compression beginning cost. second deployed in had had is and the XXXX. our a the some And units XXXX

make we up we costs, of normally was we ready abnormally have in because were quarter on high incur units increment make-ready XXXX. always our in one any significantly what in volume of the While the the half over second working

benefits, in million part costs onetime not In is a as to that of we cost. additional addition, items health our services of of of agreement from the combined related series our employee transition with $X reoccur. about will The had TETRA X effect separation these quarter

continue While then, and we are even quarter to normalize it redeployed of XXXX behind perhaps benefit the the run see us. higher early rate to the begin get fleet by and make-ready into costs will our fourth costs

outcome. to the part in integrated everyone this who everyone in -- transaction. the with I'm The is I our who a equity series includes participated This turn I completing of the advisers their management, these associated required want transaction debt transactions lean before transactions. the to of and of call Byers, banks transactions today. over to the employees, to into this Jon Committee, be belief of on Conflicts piece proud all thank the with aspect and the everyone finally, And investors, transaction

With that, Jon. I'll to turn it over

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

$XX.X EBITDA in million $XX.X quarter second to million adjusted Third compared the was quarter.

a We'll coverage pay quarter of ratio third our distribution XX, on XXXX. XX.Xx. million was of flow of which million $X.X the $X.X cash in $X.XX Distributable compared to quarter distribution represents second November

to the million of were that prior end place on discussed August of sheet. million. On availability end September notes on solution amounts to to the was the no liquidity. yesterday under up said base At The was to notes end The ratios, second second XXXX. the of Cash quarter. of of and million. at of move the hand XXXX of agreement check in due at $XX unsecured September was interest to a these this quarter intent additional transactions take long-term at our out a our million the cash XXXX, end $XX We the we have boxes. $XX.X September to balance from costs and overall the end with all $XX.X structure was million, CSI Moving announced revolver. capital lower less our leverage closer credit our year on XX quarter outstanding lower debt, are liquidity there Total call, borrowing $X.X conference

Our net overall been leverage dropped pro reduced with X.Xx But of ratio about moderately. addition the has X.Xx our forma the from transaction third debt burden for to quarter Spartan's business, X.Xx.

stride. but yet Our leverage not them, metrics big we we've made a are where want

decrease incremental XX% on This now leads X% to prepayable is year eliminating $X.X the XXXX partially in million second that of By overall that's basis. the interest of of about on an the lien by Spartan an and in This interest. per issued expense interest we're notes we notes, capital ABL redeeming structure. part offset $XX annualized the million the CCLP

$X Finally, of of offering ABL liquidity our incremental provides is about pro million as provide and forma And liquidity additional the million. balance the XXXX liquidity million for QX cash Pro $XX quarter. improved. The an third debt $XX total of of Spartan equity end the sheet. on the forma

While on our sheet what firmer capital structure big footing appears we putting don't CSI be strong place the we've that a we to participate have taken towards step to and a in simplifying up-cycle. balance want, in

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

the questions. We'll to call now open

Instructions] question the today [Operator will Baird. from DiRubbio come Brian And from first

Just a questions. of couple

results are filing? separate or off, Q going in the to historic in Spartan First either financial for a you X-K provide

the after the SEC announcement of at Yes. We'll X-K. to file requirement an file XX There's an transaction. days

will come early next that year. So

Okay. And in separate to a reporting its just perspective? be Spartan own from is going segment

this through that complementary working We're very at point. businesses. They're

on made haven't it. decision we a So

sort of combined entity? new obviously, all you how that Okay. do leveraging now under house, for you're about Spartan's of And business sort into And the joint results projects. talked just see one you've overall better

but I savings some a be you and One there's actually couple by efficient think cost synergies, be there's will Spartan, probably don't be on costs will have people will things. when some we offices, there putting in of then is separate there. audits, cost some separate these even inside eliminate there structure together, -- a huge that not X

between cross-sell some by do success and starting through far But different had the on force. in to X company, than integrating front early always we've operates force, trying one from that see U.S. benefit platform, the the together CCLP in today the we're one able opportunity real to been said far. the sets success being modest sales X. and X the that of really putting to start being had signs in basins one the companies We've the sales is so to We've and some international so But the Spartan come

sell. will and available one one of that really We to division operate as sales, now. the accelerate products That sales understand can just head are

smattering in basins. Right products more of think Louisiana. Texas I provided to Spartan our operates we now, as 'XX and assets can generally Northern a opportunities So other But the couple of basins. you'll on you have the in scattered see see Spartan multiple for generally -- across website, information of we be from South up in

deployed we have CSI think lot those Spartan, there I more because have the just there. a salespeople lot and in with over asset forces we sales didn't penetrate does a more can there

the think I but get to both. and generating EBITDA of versus set it's we're opportunity some side, cost revenue a going So

what And CapEx? probably do thinking we then any have it. 'XX know in combined XXXX? but it's start I be And on about CapEx Got how thoughts you could early, -- should

through I But not tell will the on next be spending yet -- -- for combined We is was our transactions our CSI, predicated and if capital is really think with what year on it these and the somewhat Spartan extensive I haven't on this the can at series happening, of budget XXXX look not. Board CapEx where moment. is at gotten Spartan the transaction you side, you

popped exciting, budget. our We have capital have opportunities pretty that be wouldn't a but of up could there recently right that now, number core in be

contracted they think, as to actually much, will so Spartan pop business, right But if CCLP it I just require as and on a add that idle the have, we some side, happen, any, would on equipment nominal make-ready. now, the make-ready, do we side, If equation. we doesn't be up that the very

year. a capital Our the is less on than million maintenance side Spartan $X.X

the to have on X CapEx a acquisition, of Spartan $X from at going percolating. those or have a most million of X it's to or million And $X we $X So million significant unless probably be we additive, project.

a I'm million, lot that projects So basis, it's here, but come except around probably CapEx is the $X one-off rambling ongoing on an up. than core reality the spend less business,

it. prioritize capital allocation asking helpful. reason Got And sense -- the get to is you're trying a and going That's that forward. just at to of then how I'm I'm least going

some modestly of expense. reducing your You're interest

getting EBITDA going entity? to year? though refresh from cash still grow the in is you a thought to that Spartan. Is obviously You're looking process Or combined and the are generation XXXX maximize a the be

certainly our to high thing. foremost want the returns. first grade we Well, That's and

XX% can that at this we're of rate do have optimized and something utilized get do a But fully have not we of point. that we XX%, first. return to can that, equipment and XX%, fleet a that's if going we So

high on So redeploying equipment to asset be asset CCLP base. base the Spartan and a idle priority both the is going

new both units opportunities would that the trying units a CapEx to out. to sure we and we new the I said The of using of on as if makes new chance going far efficiency earlier I capital. to think we're capital As like enterprises units. And build sense, that density are deployment, to But and orders deploy have today lot customers take for lot putting a we're scale new when have now right make units. for build a

the units So where We'd be X go same like or at units build to we X location. we stations. or have to want to We site. X are. build want a that into like We'd to one lot of

X drive more efficient you site gets or sites put can of horsepower to XX,XXX day. structure having on much cost X XX,XXX every when different one Your on you instead units that

really So we're good one decisions opportunities. of way working see what and set our like opportunities through then that one we look as by making

both. some do aiming going going work, large end, but So and compression it's going we're the build to business be fleets either back to We're now, new, I put think to the right on only going existing business. to we're our or to the

units, than build and implants. type X,XXX type mean units compression sense. We're today, going XXX aiming up to makes XXX, portfolio larger I than build larger if the our And more horsepower GP fleet we'll and it

lot as building a of really, our possible redeploying through of there, new. trying to channels as high returns focused that's So and on but we're detail drive both

you we anybody. the we without efficiently market you take competitor. today But is in taking a way in growing, don't having say convert you we your think build to we units capital today. and we're can and electric have spend The in the That's The can market market And have, need moving focused some that the right share to a not deploy being disciplined is of displace -- and motor, we trying what to now want can from new. on can older market to not issue is deliver execute and market capital issue returns. the the to all we to

Got helpful. it. That's

have just Jon availability Byers, the forma borrowing is Spartan part? revolvers you now X that pro your what's on final Just ones. combined

capacity So The on ABL looking be million forma quarter actually sorry, going million. the million CCLP redemption ended and bond $XX $XX the QX, year the the ABL. do we of we to with everything $XX at Spartan our transaction, on about -- with once so is the for ended pro

me. And then for question last just Great.

help just of actually the new issues sense the build all we're compressor throughout ability get activities multiple supply the a me just you what and get is, can environment with industries? hearing Just to chain

bit? little Can you a clarify just that

time... What's the lead

the are So time? talking lead about you

Yes, exactly.

said -- the year. any I've get this end that of So you new can't units through

we time at next Just now half. quarter a second year sense looking the first the want are is lead get to of into or

get Just a trying to there. sense

Yes.

now, was it's move think got times from If past it the out moves lead happens XX that weeks. it time. or weeks. right now, we our But been I If to time, back with at of though, indication lead to XX week going look right suppliers their are rumors suppliers the XX cycles change -- last There's kind they further. it what a is we doesn't at X to may component XX move. their of as shift a

It's going to double.

could double. could Yes, It it get substantially longer.

we're dilemma you our to what XX lead need waiting XX half the for if you the move looking we and is order time compression space So even That's right that's it to the of days, now, customer weeks. XX, be next face second now. at need transaction. next from But if year, ordering the may XX in you the

you're then September, you going get in were what And thought so get to to you in October. July going

So of it's window a very uncertain time.

of can focus basis people them to sure think, very new instead lead building on they out difficult that fleet a we can for to up why being think it get get done. bridge something making can alternative That's Those effectively. when more I be to plan continue redeploying out. may on they end and options going our where it to want time how built lay they everybody, for It's I in, to

So you because can't bringing compression. but production may you're you're on, you think on

not longer, XX right to XX to I'd it's but now, say only shorter. -- get going So weeks, I'd it's say.

that So create what pricing that terms I guess environment is for your the in power. natural of kind follow-up of to guys does you

that. that cost increases. to cost at raising Well, in covering our we're there's We're structure trying pricing elements said, make I of Like sure January. we're looking our

out. now U.S. of it but XX% is fleet have about We XX% our on month-to-month, termed right is about of

power fleet the but pricing So segment month-to-month, into your components. you have got to also different you've on

So horsepower to we're the get. -- the price high ability has and move excuse higher end have up it, larger you horsepower much there the on very hard some me, to or is larger very tighter, -- and that utilization doing move

of there's end smaller there's more On more the your available. competition, fleet,

it's pricing or you same our just But give out a So X%. it's and ahead going X% at that We're generally, to to power. X% cost increase there's say, to to stay move be structure lay trying just or of going the oh, price difficult time.

idle trying we're this equipment redeploy get and are But trying still too. to We're -- that that So of at moment. out attractive we're not out to equipment, back price at and term. we where and get rates

[Operator next The Selman Instructions] will from question Stifel. come Akyol from

if asked you'd be kind. was lot A couple more, just answered, but a and so

maybe talk projects, a is million come? the about to those talked significant Spartan just gestation I or you of more couple what Can level, period at think. about You $X for the

domestic international X- cycle. they're say, International Well, is to X- the on if it domestic. or X-month would probably probably cycle. to in depends I is XX-month

to it just lubricants? which the can is cost it Okay. it then relates about moving the people? structure talk just it most? rising of And as Is part costs, you Is Is fuel?

gain definitely segments, largest is largest highest is the our cost We're other component but in fuel Fuel most. structure the that's right definitely the increases now. seeing the -- in percentage increased

what's hurting labor would to we us hurting fact running. think increased for demand we labor what, more upwards... causing the run, I with that is be side, XX%, us than the a like services XX% lot shortages overtime Normally, are on

to XX% XX%.

some above well equipment this that out. all we're there. running cases, to get turning in Somewhere In

So...

would the cost I say would labor more of -- say of it was the serving labor. scarcity I sorry, is versus

or was salaries. really technicians where you over the of is the because increase hourly is people basins time, the the wages cost So of the John of growth you occurring, to hire -- availability it's the support it it's saying. like more activity of than driving enough can't in the But

just about putting within increases CPI? or contract know Understood. there price said your ability PPI but as adjust through, is to then any, you're structures, And either the I to that, you I think

don't of we in have contracts those at time. this the No, our majority

it's We a -- that discussed trying something everything what have where we've it's put in do, to in happen where basis trying we there we gives and just some are that are. to to that's And contract, and subject go-forward But those can. like can. negotiation, on we're internally certainly and all takes all make a

do and based of some on Spartan we've the in made have contracts, that. inflators We some adjustments

what And at? right. guys about as was you All acquired it, Spartan think then multiple

was about of of what We it think as the a really it's cash it streams more of so way. flow don't viewed -- relative the X enterprises. We more a value that merger, the

through there Committee, long So and Conflicts negotiation we a was went exhaustive that. around

don't because way of it we is So using, deal. percentage it think constructed CCLP what that about a and It should XX-day we Spartan VWAP you of the enterprise and varies even stock be. was what percentage what are be should what the enterprise how price or the

people So the calculation on companies it's can more if your assumptions. own our your this from do of is of was how are X XX% the how to a perspective, own own was X going -- to and using when merging announced said together it about going that's it's XX% company so done, and shareholders and think company you constructed. of all percentage these companies you it But own

for question-and-answer to this Ladies remarks. our back turn to John Jackson the session. conference like and any concludes over gentlemen, would closing I

everyone joining appreciate call today. I Well, the

I am incredibly but excited thank for can't I everyone I also grateful are about think express And once how I to everybody's really work work, for where now. their on we these am want transactions. I again,

that we on potential. the from and fundamentals industry sheet deal to then and this into bit good. got business of of like the lot bought unlock And a the we in need we why felt balance is work a just because beginning were This the the

go really and we're could here. about so where this excited from 'XX And company

forward Thanks. talking and So we look we and quarter. next your to interest to appreciate you support,

now Thank And thank today's you presentation. conference you, has The sir. for attending concluded.

You may now disconnect.