CSI Compressco (CCLP) 10 Mar 232022 Q4 Earnings call transcript

Good morning, and welcome to CSI Compressco LP's Fourth Quarter and Year-End 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, CSI Compressco LP. Ravi Kuske, Vice President of Operations, is also in attendance. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

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

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

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

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

gross flow, release In GAAP flow, our measures. free the for addition, the non-GAAP coverage or this distribution nearest call, morning's in press or measures to of adjusted EBITDA, distributable margins, cash course cash to leverage refer the to measures. financial we reconciliations other financial to ratio, ratio, Please of utilization non-GAAP website EBITDA, refer public may

period. not reconciliations complete information with accordance financial in of be for for the and substitute should results the These prepared GAAP considered our financial within a are context

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

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

speak XXXX. call we today the our for XXXX optimistic for to outlook morning about excited results Thanks, and quarter John. Good you We're and joining thank our have fourth today.

the the start results of fourth let's XXXX. So with quarter off for

inflation EBITDA revenue continues the effective experienced EBITDA. marginal quarters, incremental We've revenue, led and activity increased activity quarter quarter into fall-through. but for improving in the to trend increasing earlier the but several improving This translating cycle of last from

has stabilized, half environment results cost over the the the XXXX. financial improve we've As seen of second

to Our contract activity services, aftermarket EBITDA and services continue and improvement. sales show strong all parts

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

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

are trends forward improving our Three visibility.

our ability First, third, up and expiring large existing deployment horsepower equipment; on to newbuild customers. of our term multiyear on secondly, contracts; equipment units with idle marquee contracts redeploying

with protection our improve on duration, sales building specifically team equal inflation hard to customers, placed it Our has using but than turns contract inflators contract cost for worked with importance XX improving contracts months. longer terms

pursuing pricing. We our we as move market continue to are fleet to price improvements

result changing the in the segment Pricing are in the idle the over to the compression units has This of of market has rapidly year. been owned horsepower of large remaining by the have last contracted. mid- been the mid- that and large ranges been companies that last course horsepower contract

rates builds term takes units many horsepower additional are very returned by market The transition are from has all customers. being now time as new under come in Almost categories few contracts. to to these as units

in expire, terms and term and to This to occur continue market. we contract these As it pricing throughout move will out to the like unit will did look XXXX, XXXX.

will While second continue cost the to we of see the environment have half seen part over and inflation cost of increases. our labor stabilize effect to we XXXX,

improvements be to we exist annual related than increases. early to much time, make-ready costs Opportunity with related expect those and those this At for in line -- in XXXX modest our our normal more fleet.

and of on our revenues of in XXXX, that to parts increasing the performed fleet out our and well improving aftermarket will margins. AMS with the we would business first we XXXX our expect bulk or most units idle supricating services reduce remaining in be fleet As of cost deployed make-ready business half reciprocating contract. given The

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

While and awards a the have and of be with strong out sales the pipeline of AMS is a holidays, another year. we typically parts coming XXXX bit first slower activity strong expect to seen quarter

fleet the transfer creating over We of for have expect business over potentially the year-over-year. making course of our and CSI deployment more that for to been growth shop into XXXX people some AMS space ready owned opportunity units

additional are will to that fleet gas XXXX natural converting deploying horsepower driven order. units newbuild funding Our units focused large be capital from motor units currently some and idle on spending for units electric on drive

flow shift will Most goal planning balances liquidity. to of their ability constraint to in lead to customers amount times begun oil. generate modest compression to natural remain our long XXXX has needs CapEx and gas well growth a capital and as crude overall avoid to advance being after a are produce to be reduce Our surrounding discussions and customer improve cash to our debt of free absolute

guidance opportunities of firm a Our on additional building combination our units, remainder of the pricing significant the fleet, comes improving cost a reducing and cost This response inflation as structure. make-ready from our the financial a new for improvement. remaining reflects deploying without

in when December to had natural we its international through at contract is course. item One in our keep guidance 'XX, for expire mind looking XXXX an that

XXXX, XX, has contract the of renewed. As December not

guidance the If in our or with update renewal having terms to guidance. that extension part, we no customer warranted is reflects contract a time in or this contract conversations that and our whole guidance at Currently, of would ongoing the management revision renewal if renewed is contract. our over

is prices, the the and the recent evident both about into of the 'XX. of on cycle. gas gas. lower consumption a on focus course in in 'XX for across This the gas the natural bullish We've long-term we spectrum. increasing Overall, the we're and this returns throughout U.S. need production environment Despite seen consistent the believe cycle longevity in of natural macro and

will overall results about the and improving believe, this in we levels result activity industry year overall macro contracted forward our given expect the to in continually have longer, cycle. that we excited remains multiyear XXXX. a As stable discipline, a improving the returns, backdrop are more focused We're on

be continue we and we to for a strong and we and as cycle heading stronger exciting what demand flexible our into products environment success summary, believe XX Compressco. navigate years remain environment. for forward for and an for to rapidly longer to industry CSI we the services Position looking in In ourselves will XXXX, a We're for the our changing see ahead. specifically

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

Thanks, John.

quarter was CSI utilization and with quarter increase. fourth fourth the by 'XX, compared Compressco For reported million of of driven in XXXX, particularly increased our contract EBITDA equipment, a $XX.X in million increase. $XX.X segment, our million horsepower the the among of to a was Services pricing $XX.X up XX% large in This $XX our million quarter Contract of adjusted services, fourth XX% XXXX, revenue from

at from XX.X% Year-over-year of compared to XX.X% XX.X% the XXXX. end or two utilization increased

very to XXXX, performed of to in AMS quarter business up million $XX.X $XX.X AMS revenue full the was Our well million. and year to fourth XX% for fourth the compared quarter XXXX. Compared

XX, distribution fourth million XXXX, Full a revenue cash year quarter $XX AMS was of from February XXXX. paid ratio $X.XX our XX% of $XX to in We compared million coverage quarter flow million was X.Xx. $XX.X the with of distribution fourth on in $X.X a up Distributable increase. to million

ABL XXXX per December liquidity, total DCF to At was outstanding $X.XX. year unit increase year-end, cash liquidity. end of in of million, our hand approximately a cash at $XX.X XXXX XXXX, $XX.X which Full distributable a plus million flow on compares million XX, $XX.X capacity implying is XX% on the

while overall growing reduce executing leverage our the plan on to We're business.

at Our net leverage in peaked quarter we XXXX to at now at X.Xx third the XXXX, ratio sit year-end dropping X.Xx X.Xx. and of

you the annualize X.Xx. net half If have of EBITDA, leverage XXXX second a we ratio

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

guidance XXXX, range we spend John $XXX $XXX million with reduction XXXX Today, overall growth we plan liquidity. Looking and as announced emphasize to mentioned, an adjusted EBITDA forward to reduce in relative of million. to debt to capital XXXX

decline net exiting capital to leverage anticipate between our as $XX on increase to strengthening -- of X.Xx our the and of Growth million we the X.Xx. year sheet. XXXX, will million and balance ratio exiting focus We with a year-over-year range $XX

two organizational our growth towards liquidity Since thrive the our position to CSI of mission balancing joining work and CSI on and will phases simplifying we hasn't cycle. energy which ago, focused all changed. capital structure, in We're years as

call the open to now questions. We'll

from now will begin session. DiRubbio with We come the Brian question-and-answer Baird. Our will first [Operator question Instructions]

may You ahead. now go

couple I spent you of much for can guess, on Byers, A you. questions first all, just how of help costs. last make-ready year understand Jon you us

capital or the make-ready on on -- the cost just asking you side? or about expense expense Are side

On expense side. the

it. fact in spot how a went I'd we the of, to right say let's started that with things lot given can year and so we understand conversion system the the say, understanding people a put to

between somewhere and quarter. it's is belief Our million a million $X $X

Okay as general guide. a that just helps

going but it's you're varies of it work, Yes. and how in ballpark. doing And what's on that much on widely expense capital based worker what

it. we Got utilization rates, you think think what that is over effective rate And the the utilization hit you two as can do years? next about

Rotary before of I fleet and about -- and consists calls Well, Screws. so our if that's think you talked GasJacks little a believe we've on I this reciprocating bit buckets, three our big

in percent the reciprocating the back, represents and equipment XXs. upper if that's this all don't much contracted XXs the rest which upper if our get we'll we our XX%, XX-plus going of on approaching year, to put of the fleet, -- fleet, XX%, be we're So, out be we

GasJack XX% GasJack Rotary and the and me, range. our to Our fleet Screw in reciprocating excuse XX% is

it get all when you reciprocating component, you composite XXs. that fleet. will compare you blend XX-ish when be upper the together, But a So as

And new then backlog hearing helpful. I additional color still with long of there's on some the Okay. horsepower a just at fabrication know equipment Any delivered. taking shops. little bit. That's mentioned really color would it be get you to that. on Caterpillar there you're with helpful some how some seeing backlogs high their Any

the of been remains I talking about. we've think in it general same categories kind

to in engines. that for Caterpillar You're sort XX-week category XX- of

shortened have I think a aerial from the bit. up frames

You itself, if think might can maybe on XX, you how XX in frequency weeks. motor get be depending able maybe XX that you the two, want one half or but XX, get them drive electric And the time. you're when you them VFD, drive variable then units, the ordering, many weeks, about to in

as you XX them want you. it's get get them, we XX, or to If we'll

that experiencing now that's we're be the it the date So it then it electric two we've of weeks, XX could and and given some months. be units a on were VFD right we could slides weeks, delivery -- installed, XX

you waiting have have installed you VFD. to unit go, you're So everything the ready the on

kind that's for I'd close VFD, what give a but of unknown to even that may not you or it say the So come may biggest target is date that.

are different side, So the and their bit a on Caterpillar that's than quoted on tighter electric it's the lot area deliveries. a

Understood. Final for question me.

you describe pricing or your on rate would old? is Just case fleet much as current how card versus of your current rate market

The rapidly market's moving month. pretty every

I So of in was 'XX would now say quarter XXXX. we probably the market. in fourth out thought market what is X% of

perspective, I'd if take that say So very our you little that fleet market. of is

to to been able this about Now talking I'm get it move to The how price pricing probably up close horsepower. now, I'm to cost to horsepower about -- market? some within our here reflect -- mid- is and we large and when maybe smaller talking can We've I'm It's structure. going really there.

as available that. really, to I the market. is is market nothing up pricing reflect think enough. idle And the result, of really, there really the in out There's the tight But segment moving just XXX-horsepower a

the in So has lot would a the I last six months. say market moved

little mind, in market. be that move the talking turned three this year, what we'll existing we're extend throughout "at in months that contracts with up as new So is and market. would we to what about market." moving we've very at last But in

Understood

want they're -- we're of moving really our think, fleet down, times, a move no mean optimize is but month they're six needed I in, weeks -- slow there's I Oh, it horsepower change well, unit, don't you got -- working I as of environment with say customers. the declining. we're A lot rush. people production and X,XXX but to but to I've changing they're given like, It's you a frankly, their it's our or every -- lot to

over to with about think But optimizing time, so forcing And it pricing changes, sooner. happens. it's people

But positive and six back So or while moving there's in more three-year to that's to the to a little the to they've months that term got find rightsized two-year that's the because going on a unit you're taking come bit customer equipment. a churn way to WIS. you're that gets in counter fleet, a now off is that equipment rightsize their in

equipment. rightsizing unit, the need this -- with but out push it's They going large are So a maybe a terming on there's don't need on where as some something. they pull people of quite

to I may think with move increases out ago this unit or the out, to market the down figure trying we in and unit else the frankly, oversized, averaged the unit. have, we it price year. year smaller we're to that unit. that we you put even our units we're probably And but for customers optimize that saying to last a larger try wants that And be So also a work is while someone price size things we'll

On we touched, about averaged price the units probably XX% a we increase.

units XX, were were change to we units probably the Some averaged the this see XX, touched. year we same on expect the I kind we some but would XX% X, on of touch.

color. the very I appreciate That's really helpful. all

Selman will Our from come next Akyol Stifel. with question

may You go now ahead.

you you how coming and thinking. questioning above, up much for year? up following this re-contracting Just and of that have on Can XXX-horsepower line say

was can sliced that last fleet U.S. some right have has now, we have in head, fleet month-to-month this year, year, you you that, tell at term term fleet has I'll Of on was we at is I it This my -- tell XX% I XX-XX. What our some our it than we that time, versus of weight but turned of year-end, don't XX% -- that year. longer on entire have it's a our it. had had

large So you year. with fleet basis, take our XX% fleet And we a probably that's it's would given have. I say too, of on be touched what if this in our proportional line that, can horsepower

of say fleet can I'd XX% touched horsepower range. our be on somewhere because are in large multiyear it's they year maybe contracts, that this So

you're And you having there. Or you the our do through it helpful. That's pass variables in that contracts caps, strong going inflation et environment Okay. renewing no assume then adjusters just we're when subject your I you're saying to to to enough and Are continue is and those have just to cap? cetera.

what specific and It's we're doing. customer by customer

totality, it -- So on some situation that. look -- what's the in got capped have What's into term? had factor you and the rate? right? it's the rate, to depends some -- what really and the What's everything just CPI -- What's standby at

and and but we lot with a So, of take, there's a give have combination caps. without of

And of it. Got how is fleet in electric right much your now?

percent, about like X.X%, X-plus It's something that.

Got it.

was meaningful. would Because highlighted how say be in to You its guidance if called entirety, because it did, would out of you It's it contract. guidance. if XXXX? it you I be it an Can not international incremental just it would it assume much in be it -- came back

So I'm to. just trying

it's of we'd guidance, and but rather country, it's rather the not not numbers if not about really in our it, is It millions think it of -- yet. in could in back year be came in in course and over our its of meaningful how that the talk operations in entirety we all not given the it changed dollars. embedded other also. since the really nature But That's I it

Okay.

strong -- there talked aftermarket I you can you or help you backlog the if a is we a thinking services, you a how about don't then can talked And there? that? know about way pipeline. and should quantify Is Okay. there about be maybe

It's come I -- don't that's good or this have business, going XX takes work, say numeric days backlog the I that's maybe way. think have is that days. long. Maybe because And it a Yes. contracting backlog AMS XX work XX for that XX We this maybe you're of I And typical days. contracts don't in, backlog you duration it have. takes in we days to these about a business. question. do time, do at would a

over -- our to seen time that fleet four of as on months we've much or of have with focused So you to reciprocating the we've QX a and can where we're the largely driven reach maybe this the work the at on The available, last have what take, don't -- space think that done. lack early filling space we've whether whether work. end use shop AMS six labor labor, that's or going work get reality good get utilization, or spent I to that quality it our really you just by or XX% give we're possible, business fleet QX very have shop is been AMS on up is going

all generally, shop You can can get the space get parts, don't the you a but if waste you potentially, of labor it's time. have

shifting the we that first as shop and focus fleet AMS second, So, have now primarily we're space. on our we and

see quoted we'll right duration. more of activity. can relatively now, about we in to be pipeline We've some get you a it's on like QX, more by But short a numbers So still backlog visibility backlog. if thought going to

have I'll there's and quote that a direct existing directly has backlog we what quoted book, we're hard we out or of waiting in then we're source have there's things on lot response So RFPs activity. the call that a backlog a a then to a on that working customer with

we that busy? kind So that. much seeing and in open is in Or pieces space gaps gaps not shop think out right we're about and the open really segmenting activity level is of now, there seeing there's of bidding it, our how it those and is

at on on we're and we the certain Right of certain choosing we're jobs of pretty types work. to seeing bid jobs where work. We're executing be now, can not that not selective actually as kind good where

we're still bit for level. that answering the a QX probably I doing something you working a that's so but not for ourselves. think have and I'm number we're on high-graded don't try I on that but execute to so high continuing And So of your building I'll question, chance we're by rambling around numerics, at work have and better you, have but we've we a a the backlog much

color. really, you be say to I maybe you the But all segment But can I going it of do. and heard amount -- the one also it. it's by you that people move and like some really get, trying ultimately limited to Got I other. were appreciate sounded to labor from

That's in points four 'XX, I our right. if much about up mean, move going just it little -- utilization how 'XX. moved two like as points going moves in Largely up bit 'XX. about hope talked call another think so you this points It's to in or we things three six or move in up it's 'XX, because we've more if to go a up

So you're yard. were you've your were units fleet in going to move up that sitting that idle touched

have churn. always You

back, work comes have do it, unit it to out. Your maybe may overhaul you back on it, do ship some on reconfigure an it,

the But repositioning, years it in that the organization. out, taking through and for you This running, COVID that's couple it's so sitting shops was shop. the major fleet effort you're shop. your getting in and on your the running be more out, a all out than is yard through Once our not to in termed going field in last getting have across working it of less

space, to that think what bit, through bodies we from center that's call by them center. our work So using shop a already and AMS up people cost driven a same is we profit more just which why shifting we those payroll and a their now drive to to opportunity just is have largely freeing shifting have on I'll

that why combination creates make that's of think and a profit And opportunity AMS year. for business this us we ready our

not you'll do one you think that AMS able new you, capacity use people customers existing got to listening to have? you've be Got reach will customers? this, to Or actually and other just because I'm as on it. you just the last then may out and And in bring service

lot servicing, we our I that We're fleet with have of think call, that. we not just -- have customers. -- long-standing relationships people I'd existing servicing we're a yes,

people and is we That's on. are. We quote business we're to people well there have that's So trust good a think us working that I certainly, their working it relationship on first with other. first, are what asking know each we're that to our coming that off, work we way expectations who that but additional

visibility customer expand think, our I expand of space availability. there, customer as shop can we our yes, the segment So we

Stoltz Jason from come Millennium. will with question next Our

may go now ahead. You

I questions. two have

great a reversal activities, The quarter cash that in but terms in cash first from one of adjusted generation operating is, net provided EBITDA, by was a very I and noticed large in was that's what some in utilization QX a small a late Or accounts in to if receivable, I is result inventory? is it QX. wondering of pay the… building cash on

a interest The build these of working of bit as the issues. biggest a little bond that in on basis. through work some semiannual we supply particularly a it's pay capital we inventory No, fact difference chain is our

a a in we X, October payment outflow. resulted cash relieved had million net which payable interest So and $XX

they're the natural market that's is the And whether about I want units you're capture. the wondering unit when then do talking carbon AMS processing amine to amine plants to Okay. planning question business. second your And business, was that to gas

for those actually -- the two have -- the We the is business an us. for service. amine actually AMS just distinct business aftermarket Well, are do acronym businesses

where it's work we So on third-party fleets.

So question business, a AMS on we to but idle good. that that some amine We seen we're equipment we've is quoting. on amine pickup grow, the your activity do have the in have trying

plants definition, where is now, after the atmosphere, equipment, it. it. does by of And are do vent capture carbon type do of customer they do has right to customer reinject most invent our -- that a plan on they then piece that the with to sites amine it's chosen And the what the

atmosphere. ways sent engage customers it's would not we way, flare or in However, the our that to up to dispose to in a of with the love not so on --

we does more and opportunity to that talk exist, a lot now. customers that So do about

XXQ economically makes capture So more the Act of basically generate to to credit. to the it the inflation dispose and COX viable tax Reduction it much

more them reduction the act are hit last that So units? contacting though -- passed hasn't are cash -- you see was plans can it inflation market yet, you if these is even amine summer? Or to you deliver processing the

XXXX, just COX and us time. hard this a Act had whether in have for seen half amine XXXX, inquiries to seen of But a we function that's speculate uptick an that of in that's at We on plants, gas in bit areas. or second pickup have high Reduction function in area. of quite of It's a quotes inflation the

the think sites, electric compression I taking has electric drivers. drive brownfield driven with RA And gas-fired replacing and removing engines more in it interest

I on impact business side impact standpoint, we're side say in of amine would the So more from probably business. the compression an the seeing of

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

Again, forward you going some joining great like us. we optimistic your XX. thank about to We we're look where for We We what's in very delivering remain interest 'XX. headed. like and on. We appreciate results for you

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

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