CSI Compressco (CCLP) 3 Nov 222022 Q3 Earnings call transcript

Good morning, and welcome to the CSI Compressco LP's Third 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. Rob Price, Chief Operating Officer, is also in attendance. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Byers. ahead. go Please

that morning, certain Third Good a to you joining CSI statements are contain for you to and be Thank forward-looking. Compressco and be XXXX and of analysis Results number Compressco's These statements may call Quarter this based like on or Conference CSI factors. may that deemed on you. are conference thank are assumptions Call. based remind by I'd made

and subject uncertainties, the are a to are partnership. of risks of statements beyond many These control number which the of

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 ratio, In non-GAAP cash flow, refer we distributable may gross utilization distribution free addition, course to ratio, coverage or cash in flow, of other leverage call, margins, the EBITDA, adjusted EBITDA,

Difficulty] [Technical

a Please our our to reconciliations measures the release results within nearest refer GAAP non-GAAP of should the prepared be GAAP public for considered and financial website not for press this These financial to reconciliations of in accordance period. to substitute context or measures. the with complete financial information morning's for are

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

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

the quarters. financial joining last to to results space occurring to thank We're this Good reflect improvement quarter's pleased few in been begin for the you compression today. -- call that's in and morning, some of our reflect see

currency point aftermarket worldwide. contract foreign been show all the have the up service largely this to strong strengthening activity. Our effect to by of offset The amidst and dollar revenue positives inflation and continued services businesses

time first for of of increases are quarters. improvement is outpace now cost activity core have EBITDA. in not the in This inflation we but This some to effect the have business cycle, the seen entire we pushing say our we a in this quarter, costs few the through progress making recouped

contract for it sixth continued fleet utilization straight or quarter. to the our improve quarter-over-quarter business, to services As relates

the revenue fleet inflation. begun gap quarter-over-quarter Price increases on increasing have of into close of fleet consecutive the X deployed is existing to for effects translated This the quarters.

continue with oil picture, fluids cost costs oil challenging as remain declines supply. crude Our costs as people remain remains the their to recent in from summer and even levels however, elevated short such lube highs. rise Parts at

we result, cost a effect As expect continue cost believe management cost through can the we pricing the in into the 'XX. We quarter increases and mitigate to efforts. pressures fourth early of

are the increasing idle services and business that In well have performed addition our price contracted with business fleet, we fourth revenues has increases to several and on margins. parts 'XX 'XX. or and this for into units redeployment quarter over year further the improving The aftermarket AMS

bids strong proposals. a contracted in customer current We of have both current pipeline work, activity, outstanding and AMS requested

based And XXXX. XXXX. what execute constraint on primary activity business incremental is year, the The would the AMS to quarter to first we people on finding business expect the work. through through in quality growing elevated seen visibility us AMS provides stay we've pipeline the This this qualified levels

business services people, AMS short is of industry and affects business. as our well overall as this Our our contract

they units and are remainder gas-driven units, to from will spending converting year capital units incremental XXXX additional units engines the deploying completed. for half this the of idle Our electric build natural of motor spent new drive and the be fleet deploying first as

the will customers a U.S. be us reciprocating over of to do utilization release, couple the our in significant amount mentioned if we we of next horsepower press our fleet. of quarters, return not nearing As full

in will to that are our half XXXX. build new to fleet as currently units deployment some in 'XX second continue contracted on have order large We the grow horsepower we of

While the pace question on lead the the excess significant customers acquiring dynamics deployment electric as a attempting current we with long ultimately includes mark determining of And supply. motor different items, drive capacity amounts of units. local groups of available units opportunities, reliability the see continue motor available bidding that determine many to work electrical grid through capacity. to remains the customers overall then that's remain This drive of the interesting planning and installing electric of accessing to

drive We evolve plan across our motor gas their and basins. natural to continue various of engines electric be both distribution compression customers of and as provider units a to their

As growth our capital. to year-end about it call, XXXX be guidance provide for levels we growth on we reduced expect we plan from specific capital of and our think to XXXX,

flow have year. our horsepower modestly generate additional building and CSI during liquidity we are as While into positioning customers the continued future, interest cash express Compressco to in the to increase large for we're free XXXX

Inflation see products strong to environment continue and for the we the 'XX. 'XX summary, services quarter our be to beginning unknown a major fourth the continues into of heading In and demand of variable.

flexible We ourselves navigate and the we changing rapidly for environment success. position as will remain

critical much So reliable to future. the world. power in as of only we're year, but the the excited U.S. we to conclude The energy natural this space be not gas for continues about supply

an part a effort look of XXXX. exciting excited and We to forward be to are that

Byers. I'll now call turn over the to Jon

Thank you, John.

from in quarter third XXXX CSI of XX.X%. reported increase to XX.X% of the QX For XXXX, utilization Compressco

million increased XXXX. revenue $XX.X million in quarter to reported the Our third compared $XX.X

XX% $XX million of of Our was $XX.X XXXX. million increase. XXXX, to third million Year-on-year, in the compared AMS revenue $XX.X our XX% from contract services was to $XX.X to up million up in revenue third quarter a the quarter

with $XX.X XX, in a November X.Xx. million third in Distributable adjusted of We'll was $XX.X $XX.X EBITDA third compared third XXXX, quarter $XX.X a million quarter to XXXX. distribution quarter million compared $X.XX of the million quarter to cash Third the pay increase. of of flow ratio coverage was XX% distribution on our

Moving on sheet. to the balance

million outstanding $XX.X XXXX. was plus XX, cash Our on capacity ABL on September total liquidity, hand

X, of $XX.X which was our liquidity As November $XX.X year-end. to at compares total million, million

X.Xx X.Xx, from our quarter down peak leverage in of XXXX net of Our of in ratio the QX is XXXX. third

expect to continue October the significant of a our trend On our January to maturities we XX, of a 'XX, credit ABL leverage maturity in extended We of October through rest CSI until no 'XX from of 'XX. Spartan net ratio XXXX. with leaving downward

remains Our capital $XX to 'XX for spending guidance million. $XX million

high-return customer including medium mainly some As electrification John horsepower meet large horsepower to builds. horsepower and this and said, units is by projects, older, demand; of large new units driven reconfiguring large

Difficulty] [Technical

while our reduce leverage the business. to growing plan overall …our

to we sit at from year-end XXXX. now stepped ratio leverage year about net And at Our down X.Xx X.Xx X.Xx. ago a

third us EBITDA, annualize a resulting of our our environment, you a interest interest a rate rate. we fixed impact If has helped Most of expense. net X.Xx. quarter This minimal on overall rising in is 'XX in have leverage our ratio debt

in leverage and liquidity growth. while has 'XX focus reducing balancing been Our

'XX, energy overall and to plan of structure we to Longer and John remain mentioned, focused all phases on year relative term, to capital forward Looking CSI emphasize our spend the debt simplifying growth as cycle. thrive we reduction capital this liquidity. reduce and in and positioning to organizational

the open We'll call now questions. to

will Instructions] our Brian Baird. [Operator DiRubbio come question from first with And

me. So first for question

to without the at able results, deploy look given degradation horsepower nice in you're more any see I it to that costs. margins those As the was extra

and better what that's how that? help us the Just is -- pricing to environment can understand current offset helped you just you

Sure.

last over -- not seen year, thoughts cost we've transitory, customer our think a seen inflation all base. environment, different I we've being increasing the continually these transitory, from

into $XX that hit. minor parts very increases QX in last front a was let's level, XX%, really take into us with $XXX. So to up from our the off we took to the to that's getting going going half push there to cost customer QX QX, the tight, able increases X% cost you but year. been in on -- second was off at really oil And that's really really supply of invading absorbed and half year, ability Ukraine, and moved us an to saw year and the increases because X%, Russian this perhaps. drive parts you to QX, the price say, And allowed Everything is everything then price crude of latter immediate

are trying increase digits, So is now that customer recoup our double different. price generally. really Every increases that cost we're to the in getting

more as they out. now put just market the are recently were towards Some

been X- rates. much on or for coming off have X-year lower Some at terms, and they're

that is effect half of overall getting now the cost price the increases reflecting are the from the So we're the first environment year.

oil, running them Obviously, to up. on significant each prices Parts my said lube we Like to lube which month. comments, a use amount I oil units, continue our continue of in rise. go

quarter, fourth a running average gallon, If oil back was year $XX.XX. -- you a to were it's say, and quarter, running running lube let's ago, it's and $X.XX in on going between $XX.XX in the the third go

additional oil whole a you so every oil us million month, that's month lube when a costing And in cost year $X lube ago. use from of lot a

long-winded the we see with So pressures to say, cost are months at rising of year. catch lag on the the year. rate the of down. half up saw now, a us They're significant to these earlier is in answer, the kind I'd this It's but that flatter. saw, a not starting we're hit are still increases just that but first They're and very point X the They rising, cost we're not we now.

at isn't the there of yet. to moment. increases price more increases But our generally, have We all price go double-digit fleet because

And current in within much still it. this, maybe how sort -- prices you -- I'm you range sure of but market not your and versus want current Got of service of do How to those helpful. to very that is think that's have reasonable answer reset? a if horsepower

-- of kind the we're might I'm fleet to at about there price you what mean let's we on market QX and say, maybe what thinking in XX% our QX is X those QX kind working I increases. last consider I -- say say would of are still would maybe months XX%, I'd have already today. already of I

of at lot to it have off. term. come our look under to layers got too. is you've a in We fleet It And still has

first. large You horsepower. at the large look The got horsepower tight

large, earlier to and the And so X,XXX or QX. back up raise we on in horsepower able the X,XXX were horsepower up say, let's and prices

gone end about from excess capacity the lot horsepower capacity. XXX up. The of horsepower and a smaller the now fleet everywhere of had has just excess and XXX That

raise horsepower to on smaller able we're so now. And the price

dollar pricing there. have a end way from smaller probably fleet just -- more units probably X a XX% has to to touch the the because say months. in of a From we lot we're magnitude, of fleet tighter X the I'd magnitude, the last gotten So on

lot of to do still work So next there's a year.

managing really, And in. we're the it's really environment

that push other on our it on about in term, really flat thing we think people's that to talk calls, price and you've I want to to with inflators, out price price do commentary, to And it I I inflators we're the just annual think, commentary we to year seen, that of price have And we increase, got but protect visibility. in. with trying we're term, and didn't on last a addition pushback. tried lot think tied trying are

do this to But sales us it's as it for we into on our year, moved mandatory force.

horsepower have necessarily to go getting think anything I those on on So unit, even time price have deals, that single they inflators X,XXX back and multiyear term. and are every up don't them that renegotiate so every because single it's at we

we're Price inflators, layer then multitude the in and ways. layer it by So do rate to trying of to fleet. a term,

I'd not have that, question don't I but XX%. your answering I'm specifically say because it's around So

is extremely color that useful. Got extra it. But

the know long. what's that new times help compression? Is the issue still terms all? look really -- Just Has quarters couple understand out? at a changed the compression us of of months an lead are get like that the XX was I new XX that to to market ability ago in

today, size it's going to the be -- you're engines But get weeks. I that to going The say, Yes. of around. out And the to from out have Caterpillar would that a want the the has you're build if the it depending today a today. and move order go line be going you might XX it few in you to engines distributor and you of back and XX further. case may the or order, large, XXXXs That's XX whatever XXXXs or to on if

engine. So to the get that's

engines a engine, have done you." manufacturer on done, still engine waiting the fabrication, be at give out Caterpillar sitting to a it They X delivery XX say, to of X may they're units to of mean, ago. say, don't slot, completed timing "We or they ship a And like I got there's it "I've back to recently cars go I've It missing a because lot the months think weeks, you got of engine was come I'm I components gets because completed. a or saying, in but you'll the So on couple the of an things. XX have So the of it's car it." fabricator yet. you a today lot here XX X and when or engine done just get some they except that's X while

up. it's all back So the way

schedule And wants. really that's or Producers variability trying not so X jumping bids within there's your in maybe so, the know to quite not deliveries clear real but because is producer get delivery XX and now out into wide. 'XX, delivery they're weeks what for 'XX are to

going second is attack think Just the final in XXXX guys. helpful more off to And and a really those the get about repaying of Byers, to Are love liens to me. on trading sort you that. attractive as you, That's of around of some market focus ABLs? where for the as Great. question Or given it your we Jon open are thought process opportunistically? today, the pick just debt.

attack say first I a in we Yes. are may and it'd our There would second indentures -- able to from us some to pure the that. that have finance bond from doing be limitations standpoint, prevent a just great be liens. from

So of through we're right some now. working that

the then is be to drawn ABL here make last we build on that I Generally, will will which months. and been hopefully over as -- down CSI our then payments drawing is following semiannual months. expect pay interest And that the we down we've very Historically, Paying the on that our liquidity. less we've over easy. our Spartan ABL, ABL XX

[Technical Difficulty]

we've now. drawn got a on million ballpark of $XX that

rate first really, are well. and interest versus now in is rate Our the an lien goal second ABL interest really the the underlying mid-XXs. first fact There's indices as than And down significant in second buying has standpoint pay to lien between continue the a not increased. to that vis-à-vis other from differentiation and that that trading

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

'XX is you expenditures a look year? be technology? we and your taking Or intend going commentary you So around some of completed way your be -- at Have of guys lower. capital to related another should CapEx just that is, your next there for to it it, to asking

our fairly implementation. minimal. It's to We've be going to fairly pretty going much finished minimal. It's be ERP

incurred. to to we actually million -- have of some We think $X I have about pay, although $X.X million are that left

So say the would down we are technology I winding

[Technical Difficulty]

from like in it. And Got listening, then just repricing it seems of to be are terms sort -- most torque coming of contracts. on out units X- X-year that may those there your of

just I the sort X how And thinking left. the with to that with fleet as is ones those that are about on much increases. am so years of X curious I'm correctly greatest of price And then your

we term? price saying units or for go guess, X that they increases? that have up All basically years, about the -- on are right. coming you X you are sorry, Yes, are you're candidates I asking mean ahead. I -- you of contracts Are asking are

Yes.

that Those and units off or significantly going they're you them are some I X-year going higher. and to X- coming up are the to have, they're reprice, of presume of So contracts. reprice right, coming

So exposed trying to to I'm your be that? how just might understand or subject fleet much

to month-to-month. we've are of term short to the our be it now, duration. some when less. within call at or about simple. the generally be always Well, got smaller And going And a that's end remaining be year XXX on XX% it, X fleet So they're going repriced end, look fleet, right able horsepower I'd we keep just say our let's of XX% okay? smaller fairly the down, to fleet has have you about of to and it Those deals on

more larger fleet, the have on XX% today. has So than we its end of about left as term X of currently the of our year fleet

door, price that's are side increases. take So the you those -- not -- and have an -- getting an you million give revenue units deployed just But walked being unit I that come each about to example because different significant of million to that $X.X was yes, do ago, X we off, -- X,XXX on build cost coming excuse years those larger cost the off producer. side them. when we're the them, here, $X.X to more are $X.X for million a build me, And one, thinking in we just maybe I'll I'll to that horsepower they're and today, $X.X million.

were up they XX%. So

to the going the it call on economics, about -- lot ability think in just at get you of a pricing have they're to today market, fleet building move and you into when same get, the it a new price to what to have demand. the or existing you're high cost in the So and very that's your just move market to let's that one it's

So that can some quite move will a bit. of give of you a sense these units

move So you might it.

you So might as for might get unit that have of maybe an at years. XX,XXX, XX,XXX, a running move XX,XXX, that just of now for couple out can example simply, you it XX,XXX been was a that's something

a to X-year on units But X ago back the of deployed getting necessarily think go for year were XX you've these units, X months year X -- midsize X,XXX, We some you're weren't we about got ago. was getting year and ago, X,XXX what and terms X- getting maybe year being terms ago.

and to are going term a the off moved markets on bit also. So too, quite come those those

lot X,XXX again going entire up, last up because torque the horsepower get year, weren't have reprice think now. come in inflators that's that fleet and we're year, year we to X able able X,XXX terms. you last we're let's year, We're year of we horsepower So also able to inflators X-year to a this get getting to across to this I still those. say And on spectrum And getting to X- X,XXX terms contractually. the fleet were take to

I XXXX move think that So up. to we'll continue see in

for But your to the structure then the to in simplify your what on basis. it. comments, referring company? as being curious structure Is And one go-forward a Got me. of capital you're last as your goals of And one to? that referenced trying you I'm exactly

the It's Spartan been in acquired that definitely talking We've about of structure CSI the company. capital since

[Technical Difficulty]

considering convert we're it to does MLP make structure. sense Organizationally, from also the

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

quarter. We you joining appreciate and excited talking the the 'XX and but this I for forward call we're we opening about finished year how how our joining everyone year-end look on to thanks to future, is us. and up,

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

You may now disconnect.