CSI Compressco (CCLP) 17 May 222022 Q1 Earnings call transcript

Good morning, and welcome to CSI Compressco LP's First Quarter 2022 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 the attendance today is 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

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

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

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

that to and announcement addition our In our this press went morning website. earlier out release is posted on

to note as accurate provided on turn of information be over John only views time With Monday. this that no management's May of today, I'll Our replay. Please Form XX, filed Jackson. now the will XX-Q speaks to and it at be that, longer call may

joining our you thank today. call and for morning, Good

remainder the today's to I bit want my expand outlook results for in quarter As we year, first discuss and release. comments of on a the press also the the

utilization. our are quarter in through positive number a an to of first and beginning is results. factors revenue that reflects result This a flow of increase First, our

from come year-over-year. sequentially continued idle has utilization as well as units improve reactivating The quarter-on-quarter, increase deploying has to new both utilization units. and build Our

augmented the increase along by to addition been price We has with pricing. also price QX, increased In a QX increase. had utilization a increase, revenue in

many our contracts. term may units of are you As know, under

these of term contracts contracts. Some are multiyear

So can fleet. affect our portion a price of increase only at our time, any one

margins and been increases units off in costs but price term. each growing in on levels. price effect are begin systematically rising have We rapidly our enacting we the year-over-year with as increases effects come our of sequentially lagged pre-pandemic improving to impact XXXX XXXX maintaining margins quarter The EBITDA, QX in or to of the This both for of us into translated has increases, to price 'XX. allowing return revenue 'XX,

cost focused effectively continued as in on drive as 'XX, the these cost to margin had pressures we've improvements. possible, managing environment we trying while While are

over number a remainder and we've look contracted of for units we ahead, redeployment early into XXXX As the idle of 'XX.

We to of expect current on to the improve through the rest demand and see utilization levels. continue based activity the year,

time years. a at And that unit in are have of in additionally, now expiring higher for a in effects contract. place a a in that price that And the first the our are increase of mean is put we price is the already from redeploy able what customer, by seeing to unit generally we as the QX. We than couple I returned churn fleet positive

rates were of has years, this of replaced couple going units EBITDA or are slightly been basis, contrast, with it units fleet opposite the is prior While builds over being to as this in net and churn is to the idle. of the contracts new small higher-priced the dollars monthly stream the a effect on direction, course fleet the were lower the positive customers. an individual moved In the

loss revenue where tightened, we now of has from prior has supply levels to returned recapture pricing years. So that can some

that about two expand having has to compression. As quarters are drive interest update in and we XX to on and contracts with generally older, motor These between to A That to options. to their year want conversations higher emission for units contracts to of units three electric drive units their signed to XXXX. they convert customers ago, and customers how electric. were somewhere third expanded add motor who some where, in we exploring an rental fourth the continued have XX have now activity, or execute electric when will deploy electric

as customers electric We this units compression continues next are business hurdles that there expect a will of and the in to market. more of transition large capacity cooler well. There number to existing 'XX electric options. supply are pace but to positioned as electric in Gas chain determine and we transition and big and size to scale market years, on over stability the amine the few grid to remain well number to in resolve, to drive grow a to the convert adding plan to issues a a be our participant fleet problems, perform continue of electric participate of to and

is cooler utilized, the beyond moment. significant essentially demand the Specifically, capacity our portion we have incremental of XXX% and at the business

the strong have of weeks an year of so quarters. XX-plus coolers We piece to one XXXX imbalance coolers, the and inquiries market expect seen last couple on in We as to the supply are have visibility this over long the we The continue international for rest business. also demand into uptick lead out. the on year contracts generally through has two of items

markets incrementally have more once placed of international and and deploy to We expect equipment 'XX. the 'XX equipment The customer. some but pursue these the continue as contract, of take convert they to stickiness We'll that we course to international longer will the the markets over opportunities develop. with to inquiries these into orders existing

amine any making product unit being or or This over think we few on those first. drive the plants to coolers, can deploy allocation electric opportunities fleet will we converting to be compressors, focus to for ready As spending quarters, next lines. existing continue unit. capital it about international motor money our That style of

of redeploy plants years. throughout coolers amine the will We couple compression to and opportunities course the have build next and of additional

As always, the the an to employees our of to year to of our a 'XX. will return the environment opportunities the company, to and of to Jon these for variety expect now equipment improving turn on functioning of course growth executing and thank call all look In on with we throughout a the deploy effective to profitability. our stand-alone transition work over hard this want options most over I'll we forward Byers. fully summary, rest look I improve capital. on

John. Thanks,

I'd a items few our to highlight business. into the numbers, like related getting to Before

we realized times. April full we quarter over rather the and than in the XXXX with that over issued this As mentioned, the pay able team X.X as of was times. since the tremendous our interests were trend pay HP times, the utilization last CSI notes downturn, X, in our ratio is months. ratio we XXXX, to a to December the horsepower On leverage elected should have Last of the Today, expect XXXX in November last our thing fleet downward of March rest in utilization John all with the the of deployed were refinancing reduced improved the year. This continue did of of of XXXX, second cash XXXX, leverage -- that we at our June over XX.X%, proud and kind. to XX, bottomed on service. strides we net the that lien XXX,XXX. X.X in Today, leverage like note what first XXXX. net I'd impact time In utilization year, service to in grown bonds X.X to of third we total have be do our on made was After XXX,XXX is has in to significantly XX was XX.X% ratio accomplished. has

first XXXX, CSI $XX.X compared revenue quarter to million $XX million the first of Compressco reported the On XXXX. quarter in of

from services for million about revenue quarter million to increase. business our was $XX up year-on-year, a $XX XX% First contract

of in XXXX. in pay first compared and distribution cash have X.X coverage and million QX of first a of the ratio EBITDA first $X.X of $XX.X quarter quarter the $XX.X adjusted quarter million We $X.XX, was times. was in First our to we compared distributable today $XX.X distribution million million quarter XXXX, with flow

million, quarter at on $XX.X year-end $X.X to XXXX, of XXXX. our facilities XX of the Moving which balance XXXX. first at under the available end total and total the March up was sheet. $XX.X credit at end liquidity Cash million, $XX.X was compares from million, hand quarter as liquidity on end the million of of of base million $XX.X borrowing to our was our At

reduce while XXXX, position simplify continue the to leverage term, our and is We'll opportunities. remainder our call, overall questions. CSI our structure in phases open of thrive energy growth to balancing capital the year-end aim mentioned all ratio debt we our liquidity level, As goal to now of to to the cycle. call Longer for in reduce and we our

Thank you.

will [Operator question. Go ahead. session. first Instructions] the Our We begin now question-and-answer

on? Brian, you

Yes. call How guys I’m on. I are this name. morning? you didn’t her hear my doing

are you? Good. How

Good.

So just a couple of questions.

lien, overall. longer Just a cash good a but no point paying that's that can ask thing second I about

want mid pertains help low your as we a get to prices just horsepower dynamics demand business, As sense versus of supply-demand ability core about units? us raise what the a to get it can pricing. you what and Just is think compression high the and sense the of versus are the to

Sure. Yes.

and X,XXX upper -- Our well let's say, in is horsepower range XXs utilization up our now. the in

let's round So call -- it, numbers. in we're XX%

come end go than horsepower power that and of So XXX we up if have on fleet, month-to-month, to pricing they down. extent the to on that the more you there

over slowly time. migrated that's Now

our Over four and horsepower, down to the to now the get tight or getting over move the seeing tight, three started staying first horsepower ago XX just find is last Then horsepower, middle tight to or for up to beginning the people. X,XXX. X,XXX or where XXX was That large thing the X,XXX started tight months. the of and is X,XXX, to getting that it's got units months now get And so, more what to the we're six horsepower and tight. months it's XXX, hard you last

then I'd move the layers aggressively back. because came where those in was to And those And in that we're price you off the as a have That's But horsepower all better, probably that putting and and say and lot up the there. We've -- bit them range, getting of categories. the the been at we're those reflects I pricing starting pandemic more above speaking. we've attack look units stronger, able aggressively large think going out, this and larger XXX-horsepower just that range, steam middle vague during in or point-wise units So point, of the at were are And out able to still pricing but price also horsepower them are the now pick pandemic. utilization increases at but we say pre-pandemic. the that been we're low very downturn. driving a been I'd behind, we're little up all horsepower the analogy, of getting on probably generally to

No, use I today? where the the helpful. in, your the put What baseball analogy. fleet increase do in into let's And it. in -- to appreciate amount horsepower that's horsepower capacity move we yourself of you high relative terms are the of total inning

Are you large not you our --? putting what's adding the fleet when to say or I’m it a out? relative talking --- about horsepower

horsepower increase to to high about fleet that like spoken would the You've the amount else. in relative of in past everything units you the

what terms that? it on of get we early that We Or on still sort days so done? inning of likely just And in are process?

we are. are. Yes, we Yes

money X,XXX which year, spent in this order last last book XX think or year -- been builds of from year. and new or horsepower I of spending units. we have July is this those probably we've through X,XXX XX or X,XXX-horsepower year And up some committed we've early larger, all year-end put the to

to doing get we're what trying out. Now those through drive and those is the system

is has to finite to dollar take those CapEx motor amount electric. emission to picked older, have efficient drive higher spend spend, we and convert a our now units of to world dollars As the up, electric

conversion, doing use our we're what math that's electric balance dollars. the make on is year the most of are to that assuming to we're going that So efficient to works incremental capital over the this of still spend dollars going be

be as higher baseball But we're dollar, growth would our say next the some going environment lower horsepower, going on drive converting slow far few optimize on we're that we're optimize now cost to I higher next -- electric So units fleet horsepower analogy, large but to structure over large a on the is probably going by down over to to years. to to returning as this a few yes, the months. the going large

early say innings. So the very we're in I'd

Okay. a are. get That's where we good sense just to of

hot a love of your company the thoughts related also to that's just How you Just sort Would with how today with drive situation some obviously, is Just inflation. looking impacting every that's like to your lately? labor company to topic pricing? what's that, business? allowing the get on

had of QX happened pricing, last A that cost got inflation QX we fair I say had. and bit we year. to in pressures

the three As more you on $XXX crude at a everyone saw you, fluids last only oil as into your give that months. we all four oil, we've ran bit gasoline move so last probably And been your crude or year. for XXXX, cost, up or been and move on because that's up, us stable take, cost,

-- been but been a that's Not the you price in of want that that's in so the flat price area. at look the trends, we function our just crude market fairly -- cost market. the them, they've when where of And

labor be as the side, pay because On find a more can't standpoint people. more having many from people. that's Certainly, of cost you're overtime it continued time, to just over challenging finding you to

cycle, are back same to industry. which strong a they the rates in turnover where probably would be Our is normal across the

try a You whether other as And lot what put out the and through making move of to from other are a people because moving this that of institutes effort a quite whether of bit. we've sources, lot have space recruit had and in to companies be people that's technical workforce larger people that's to aged on. technical a go in space military, colleges, create a lot the out, -- whether retire, may we're

is workforce that moment. replacing our the biggest so challenge And probably at

But it in that, sits have months, point So positions the probably is Those tech it both we on time think been fairly in this stabilized pressure day parts. from every we've is the up. right XX any our last perspective. have field probably probably biggest but I field now, over cost at that's a six as that gone open in that,

people we're more So for always there. looking

question just Then, a me. Great. for final

that customers, love their Obviously, turmoil tone there prospects Thank going optimism any what's getting today, is a As just to Or sense, activity equipment? to on still shift been over needing you speak the to obviously, a going is especially your all bit be more are any in with the relative in for tighter. in Ukraine, current there things world with has But new viewing you. everybody forward? of get lot sense a there will situation caution? of the

Sure.

I certainly equipment prosecute. structure, probably we and cost have than can just there's we from standpoint opportunities more But caution of the think availability.

to we is So we It's do what we're million capital how trying allocate like not decide our dollars? have $XXX go to spend.

standpoint, So our an is situation. from it optimization really

right of deploy. at we pretty XXXX now of customer side think looking things the need I as have a to from their as optimism far They're growth and lot strongly.

mid-May. the if maybe a weeks, to go built of range. today going line you were sitting X take, be Here to maybe in or new, XX get to XX somewhere the that we to back give it's XX, are compressor in weeks, now, And

you're already really the So today. motor. to you XXXX, about want give Same if talking electric thing something on

that get new perspective If still and you out convert want build you're one done. having to go to supply a chain or to

They're I trying is really have. think what of do to people they are a trying couple to what things. optimize

put fast on do things? spectrum have do that and that for to And bit they more and the their that unstable the to may going across want to and to effectively own is, Can side Permian, or their that electric in of plans the out how So may wherever an certain secondly, can grid be? work disrupt little What are grid's and do next themselves? year? want the that? how grid and Delaware there. while electric the equipment not when And stable? a they Basin, online large So play And to amount they they prosecute production? by try lay where enough units do they they how go they the they that the Is out do mean the is enormous handle you I Delaware that of

grid the lot, your moves a efficient. you shut may around production you units on your if down. a shut It So lot less you down, becomes

rental So do in five be want they want you an to the from for have strong. their lot think Or units for unit? trying navigate now overall and to I to of three think there's where units from I next years I a electric that both years? gas be? an unit myself internally people five how position it's where So say, But standpoint, do and demand capital, they I and own allocate to how to very do a

basin U.S. some projections, and projected most basins is going I independence this in That's of think to if a Russia at output fair forth, gas next look and three have bit. I trying of think energy people, you compression. gas is the by go up production prolific forward-looking and of to five from production lead the is years, to lot and I the of an over the to think, to Ukraine so of somewhat basin gas a

make a matter are people out make in. it's think can figuring money can staging and I pretty money doing that, of they that, doing good they just

it's what's disrupts from question. the and effectively a how answer optimistic standpoint in. cautious you say, that world on it's but the the your can of how to also with play and and industry, But going things I'd So long-winded generally, it's order

So I'll stop there.

you Thank so appreciate great. No, all I much. color. that that was really

Selman Instructions] Akyol Stifel. comes [Operator from The with question next

of morning. quick you. ones couple A for me. Thank Good

you older bit the XX%, unit little to back to way you converted bring when that? XX% a getting over electric, in an X%, sort pricing? and in discuss talk it you're Are pricing about just you you put and can seeing out? you of So Any uplift

I dynamic give some the tighter can as you large on Yes. that. units. horsepower it's pretty perspective Obviously, market the on gets

X,XXX call sort our the So segments of in I'd of is about the horsepower of probably fleet. three what XX% there's to which fleet XX% range,

the that, emission that emission you in that engine the XXXX of say sort so were higher units. been And then bit higher It's XXXX ones frame a built. was that built there's time if was of Js. the them have are little style built that so there to and they're call engines look they And units, the a at the and you'd Bs

and Bs to the to So people those. what out, want, fully we're utilized pretty the are go first things on Js the close and that's that

older go command a units slower and So are the out price. to lower

lot you replace you and rate plugs operating depends move to price So that's if or go on out decrement equivalent put take a only four, the those a what put you're going get higher. would oil five that a those away. longer situation -- decrement. To a to you three, or out, XX% even out out of possibly move XX%, go It get not drops engine emission lube to the ago, higher XX% cost it op you you your down costs with electric, spark to changes, a electric, because probably for, to can price months that you going those out, and for maybe J of J save your B unit term

have pretty don't mechanics time there. much Your

So you end. that save money on

a to XX% decrement XX%, So X% from you premium. go maybe a

cost you your that So cost go overhaul costs also your but some down. change sense, op your gives maintenance and and

and thing idle. units other those So still sitting some idle the sit are is of

a say to price work. So it putting putting XX%, not you but to XX% work, you're versus getting also increase, can it you're

you to into So of play want there's economics. those the both however it look at on factors

numbers. roundhouse that's So

to it. unit refurbish gas to to much Got it How does a go from electric? cost

factors It motor to engine you a that going say cost in simple putting $XXX,XXX a depends about just talking million it to VFD you're electric new the goes brand-new to in be that range, on stages $XXX,XXX convert. the can forth, range. But on the putting drive $X.X off probably $XXX,XXX on related it's take, million lot give going might taking it, but to size and control and and with horsepower building cylinders of on that various and and a to different. the They're so build all electric $X.X cost or or a versus you X,XXX

terms center And demand is clearly, talk the it. largest rank demand? there, Maybe other get could totally then you Permian about just what in increased you're of basins the probably that. Got and out seeing

Yes. Okay.

spectrum, across think every I increased just demand. basin is about the

that's the are Mid-Continent, smaller up, that's We Texas, that's but East in ramped horsepower. Oklahoma,

the going to XXX, range So But generally. XXX XXX, XXX, be picked demand horsepower has that's XXX, that up.

It's We're saying power now. of see have bit our on starting there. that I as was we to much most So just been equipment to generally harder of pricing get a out little that. earlier earlier

South pretty DJ the then strong, Bakken. Texas, we have and is in

and But But basins I'd seeing first like Permian and I flat. in Bakken, all all lot minor So smaller and of in, a other Vernon they're a relatively I we Texas, of don't those in places think biggest. those movement. it very are Permian is and the utilizations and -- the those area, play some think is certainly, that's that all are kind East Texas, Oklahoma, all surged improvement. South horsepower and but they're which Farmington well And doing say we're moving DJ, up. that, California in have

Okay, that so does for me. you Thank much. it

Selman. thanks Thanks,

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

and All Thanks everyone to right. forward the year in forward we'll over dialing improving talking to next and quarter. with to in us, results We rest look and the appreciate in checking calling much. and you look of

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

disconnect. now may You