CSI Compressco (CCLP) 4 May 232023 Q1 Earnings call transcript

Good morning and welcome to CSI Compressco LP's First Quarter 2023 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. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. this being note Please Instructions] event recorded. is [Operator

turn over Please, to would ahead, now Byers conference to like remarks. I Mr. the for sir. go opening

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

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

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

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

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

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

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

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

quarter the results XXXX. Let's start of with the for first off

utilization, multi-quarter excluding revenue, higher continues EBITDA asset leverage and metrics. trend services sales contract of increasing the net improving growth quarter effective This fleet

from holidays, weather -- people This workmen in leads the each catch up which the from QX the from to increased lower the QX, was quarter results our a being quarter winter bit usually return slight activity in QX, work in first as catch-up holidays. year. slowest cost and typically despite from EBITDA improvement a AMS spending usually of

we representing has fleet to our horsepower is our XX% of Our continued XX.X%. our over reciprocating utilization over higher, as The utilization around horsepower XX% that, large horsepower, are reached of XX.X% under our X,XXX defined fleet, climb being nuances fleet, a horsepower as just utilized. and all utilization as

We do numbers. contracted that horsepower not include utilization not is deployed our but in

total equipment, occurring color deployed, work, additional We have unit. the customer timing, That additional meant to fleet. horsepower on yet utilization not contracted is when our of on This to full that on, would because deployed, utilization as increase some that reciprocating we is near make-ready give approximately so our XX%. our is utilization to fleet

goes, coming seeing see compression units the overall As that gas far we're those two we're and XXX as larger to five-year our the continuing category horsepower market terms the up in that's contracts. to horsepower term, large on and longer the generally horsepower new that multi-year natural we're -- existing

as a contracts, renewal. flows more and we to providing contracts opportunities We extensions market come protection periods time. fleet move The to predictable result terms while as our longer term for of cash in pricing, increase value with inflation, has and market continued to horsepower for longer continue large pursuing to from for our price up rate pursue current along stable

units. that acquire contract moved thoughts or compared without and yet XX for nine for this engines unable past. home slots offer in on far cycle companies engines we have contract service have advance delivery months those I fabrication significant a to past want some to usually the therefore as to cycles, In general longer, to seen times units and as the

little in not from speculative a a slowdown prior very this In there the We that's There there significant service will units space. contract cycle, as home is a should built building the result, a that in And be be believe future. change case. number occurring cycles. large is not without a being orphaned the of

producers portion eager less to In further own generally willing are related are cycles in of addition, past the as compression compression to that their larger has as been contract the future into and case. contract needs to

environment, out quarter part, orders gas the CSI compression of the the as price XXXX. activity. lower large and some oil for build signed in the The fully units, of continued increased to number supply compression despite as meeting for delivered horsepower the demand which as is be utilized having right Compressco due market gas for a of example, associated will has new third of now For side almost for far price driver and

price Finally, XX% of to rise XX% the least a unit, at the category, build has in the large pressures two-plus and OEMs cost on from horsepower new increased approximately fabricators. years and to in continues based last

much that two has exhibited discipline most cost this units expansion equipment of can the ago. built. cost forced how sector only additional compression contract capital of being is governor of fabricating new recent the two-thirds The you While you in during horsepower increase an of the could new increase of build the years build means, is horsepower that significant

worth that three same be ago, should asset for more compression two ago. the the base XX% today to two the especially it was of to worth horsepower lot a compression today, market flip assets compression than years compression than XX% The rates ago contract that in and more market years installed that equipment exist space support is large premise. side the contract The years was the is in

we conversations. customer to few and of and on EBITDA million XXXX, over year guidance $XXX As seen based expect to million to of $XXX remainder like guidance to tight of the year-end leverage increasing still X.X%. demand are our continue we've we net the trends quarters look our last supply The we full X.X% on

they remainder fabrication. from the the of build our throughout adjustments year are and pricing units delivered deploy to positive additional have will continue We as new

we to business expect up addition, levels activity ramp as our typical. QX is from AMS In

work have award a and and we We short pipeline pursuing. completion three-month to work timing in two awarded have to are as backlog backlog. is The hard term we and both far duration robust usually of so of work as a a bids

that of with gives The confidence will reasonable the us consistent be margins macro the cycle. remain quote about work we longevity bullish backlog there Overall, environment throughout and year. the

deleveraging focus growth. continue returns and absolute We to on versus

gas. to in the Compressco. will maintain CSI This this a stronger longer creation value the increased the will returns allocation to improving by best We options and continue lead value to we believe will for believe in for market and cycle creation. fundamentals approach of long-term natural to We adapting options the pursuing focused capital stakeholders and for all continue long-term as

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

Thanks, John.

first XX% quarter Compressco reported XXXX, increase. the of of quarter million For adjusted $XX.X the EBITDA first to XXXX, of million, CSI compared in $XX.X

year-over-year our from services pricing contract XX% first in utilization horsepower. large of grew revenue the million $XX.X quarter $XX, continued particularly to and Our XXXX in among by driven improvement

Year-over-year XX.X%, first in to XX.X% from our XXXX. utilization increased the quarter of

grew revenue for typical below year-over-year seasonality AMS fairly John of prior with as line quarter a the Our XX% this was explained. business XX% and

$X.XX XXXX. of distribution compared the cash -- with was million of on channel. distribution first Distributable pay May in to million, $XX.X first We'll our XXth quarter $XX.X the flow quarter

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

at year-end our was liquidity And we that million April. million Xnd $XX.X compares the which $XX.X May interest of to our XXXX. As semiannual note payment $XX.X total bond on million made

reduce leverage of John the As for overall growing our spending ratio year XXXX a on with and to capital business. We X.X anticipate noted, net times. our executing X.X exiting EBITDA guidance We're while remain the plan leverage unchanged. our to

continues XXXX. as the leverage step times to of QX from net peak our X.X QX Our of X.X to end down times of XXXX

our we X.X XXXX leverage ratio have annualize QX you EBITDA, If net times. a of

minimal interest emphasize cash Most of us to resulting is and capital years In debt overall to impact debt and spend in overall environment expense. free plan rising interest reduction a has liquidity XXXX, to This on relative we fixed our flow. generate helped reduce growth prior rate our in rate.

to We'll the now call open questions.

you. Thank

Instructions] question our from first the We go will Selman comes Akyol now session. ahead. Stifel. with begin question-and-answer Please [Operator

you. Thank morning. Good

Good morning.

just can me your you at it had long look got you've Let contract out will. And start fleet, how if of sort say tenor for? to with you deployed overall you if

to a little out of can had -- look Well, me you years. I It's it segmented about contracts let be or XX% term two to some If we at were tell level way. this under just of it we you our three XX% give on what bit. and is kind much XX, month-to-month months of December how

and a has was over month-to-month. have our years had fleet year about two And less of X% And XX% about of than at is two and term one that, X% that about longer little one-year XX% on over longer. was remaining fleet had is or term over we of XX% X% Today we years. time, a is little our and

So lot on it's just our larger longer we have and more a portion of fleet. a visibility

about I were term years back, of under XX% on So and and have we some six -- or if XX%, to ago we under revenue probably had XX% think our we ago XX% we of -- term. X.X probably a probably go basis, kind had today longer months fleet years two

or when seeing on coming years always a in contract one-year flights you up the a get is renewal. we're And we're term look multiyear up to CPI different units two-year want it at just for had there's we And two how longer we contract we're have time what every we ago but later. So to trying then adding term. from

two years our on on inflator that an We has of So inflator fleet the XX% we had an of have big base that's didn't. had it that revenue our X% today one it differences today. ago of probably

-- about of you talk just would that's time then for then And to ready could I'm wondering if correctly how idle. maybe make you like it that If be XXX,XXX horsepower that large think very much about helpful. I as well? That's horsepower. it. thinking Got about looks have and that about And I'm

jacks it screws. $XXX the I'd and say of gas million $XXX rotary So of million, is

niche ready based that on probably the depending of be to and what those to movement So and do demand more of there nuanced lot on need won't unit we make are cost there. in and/or a just

consider unit that change. to But range XX% sit and will and would it the pay and say been deals band utilizations it. for that in to those within come last sign consistently XX% to work put want can pretty have we if the for years. multiyear cost make-ready that the we to XX% fairly So Obviously, three people back in

or leaves approaching that earlier that's XX% XX% our XX,XXX reciprocating utilization. you So so quoting was to of the XXX%, I of fleet horsepower we're

of that leaves a that that is larger XX,XXX And you So of probably horsepower. horsepower. a-third

need to some spend that application spend and However, ready right to to make money. it where the would dollars want require find we that we to

unit single-stage two-stage unit -- maybe be a it it's maybe whatever. recylinder put engine is mean and it's need I need to different what to So would on that would a a have it

and at spend So the those would contract get look and/or options look conversion money. we opportunities electric for if on we are to right we that long-term that

we new way I those we'll probably So reconfigure say, come want it's XX% those the them to opportunities along. and would those of as evaluate

-- I'll have you tell We this.

We and or themselves -- paid in contract. to have X.X do where almost invest that terms the different what that out We're of those it spend all see in jobs. get waiting we environment manifest And would are in we'll in the if those if an jobs they money. times quoted we jobs

seeing you out electric, of Got you are helpful. Very Since it. electric? what mentioned there for kind demand

one say I'd -- horsepower want about and talking talk I to about it's XXX type us I'm here units. up don't two that. there. For

want we've still now we're And what right think is free as can a units quote in where build. commentary, little to compression seeing of to they up are one of to on my than a I conflicted source XX generally, new type -- had just capital capital. opportunity on as less today the mentioned -- I that's So customers customers used XX, own bit they

new of or I very us is clear stringent electric my to people And build or sure we think it given less outsource We discipline it less debating do that want allocation -- on. the on to for nice we're terms us requires diverse and it. long or not, own to get term for return want in long re-applicability on of do is but us the So electric the given a a term. I it's something execute contract the to capital I are contract. nature producer Therefore, high want for interested make initial side

it's for across make going I to it. think sense seeing trying a As result me the customers, does it think customers XX and I to we're years. decide the own that be to If are industry there

on. So going that's one phase

think longer huge electric The of and I more are a second frame done grid phase going into time get complex commitment. get on, on to for running this availability an this is frame done to time a producers uncertain the side big

one ask. can five one on, but put I'm big is to go going You a electrify XXX,XXX to two on say, horsepower

think I people so are And not just pausing.

speed reevaluating this. I the think do at can which they're they

So they're let dipping toe I lot running. me water less a up of They're not are that I if water, say their the or the say get dipping way. a one let's some producers producers in try in toes like just of producers. it midsized are midsized lot the that might and

let XX. let try Let me me two, five, me try try

rate okay, better years. great to on their want So three decide to in can to don't stuck on with be I producers or may existing renew a year like, gas-fired four a get their next it's electrify creating I as much the long two engines I deal, that term. some terms complexity try too

So more wanted, for than electrify. know you good term? a the for That's not you, Those but it's that's do When I are are. but we I lot myself probably just complexities. far answer for every pay very I've a I've so to set where shorter deadline, up missed

Got it. little talk about on what front? the bit seeing inflation helpful Can you Got That's just you're it. a

It's moderated bit. quite a

bump. We huge haven't seen a

be midyear. parts our we've to in I range. have see that's think frames guessing about we this probably usually based year providers, But from that's heard X% catenarial. where price that on and we'll we'll somewhere increase expect on conversations I'm we'll with and X% that OEMs

see So, in the so we'll I'd XX or expect next days that.

X% I fluids think price -- labor of couple just the have about but there's that increases the cost market the of more issue increases, living the do pressure end in but mean is have over or up side merit the supply you going X%, some over going talk quarters. beyond cost I a year of cost Labor also. and than labor up from I'd from up last increases X%, stabilized -- of normal as time you But rate it's is say going it's dearth of people.

you're in to are services a People and outsourcing to having have fill way. you're using don't with be get having or So, more positive people done are pushed outside the what to more you that doing to mean things gaps.

probably market X% that larger generally US X%, of quoted say seeing that So, inflation's the I'd X%, in check you're with broader

and Got there? on it. from them me. well? be capital seeing are create from just pretty Last you or seeing you one What and seeing lever additional you Are are the to bring private disciplined up well as out units them trying capacity, companies

very as or you're being disciplined they're choice I disciplined pretty across think a go think that's far can right compression they seeing I because they're and I as sector environment capital consciously whether that's as whether don't but levered now. the well

of things really some mentioned from but thing I think the a didn't There's cycles in a big number one entrant. thing seen from mention you've I new of in my past commentary new I is no past entrants. past that's cycles. And up one cycles

going you've horsepower spend nobody a and $X.X going operation. billion to get the some XXX,XXX mom-and-pop to work this to to to unless making XX,XXX -- scale There's try business space in you're of a run start to as just got

from and large either. or allocated horsepower being a say I just to not from capital private there. large it So, create to competitor investors new see expect come seeing don't out in you're equity let's firms hey

the side has as discipline say there well guys I'd side smaller been private new the on So, the the capital as both

so you much. it. Got Thank

bet. You

Brian comes ahead. go DiRubbio Please next The question from Baird. from

today? gentlemen. are Morning How you

Brian? you are How Good.

Good.

can for Byers to low you what happen should Jon we you on? move us guide just to end of to help What that EBITDA understand be sort end. the high needs range focusing from the dynamics So, to

reciprocating on I how horsepower. John the be utilization price side. mean going there to got on about I increases the the are larger to for revenue of range is given bit said much grow what the room push to responsible on really we think What's able little we've a

much But the side said the the of on as on see bit tight still we're continue parts cost would side, it's the moderate. significant most moderation probably a I to pressure we John then and do inflationary say side. We've seen pressures And how more little on fluid

of some price to think to -- our I increase we're issues trying give they work customers them our what with want.

So, for to and one-year contract don't trying want I in they to out while. some as on or electrify a sign to electric are contract side people the They cases three-year to want sign a they month-to-month a mentioned contract. want a figure

we what pretty that. to where as their long But on willing them, is visibility need three-year a to have to we're as contract from plans month-to-month can And that delta price wide. get work a some for they do

where So, course rest to of of because wide fairly for customer the going pricing us outcome the selection. predict is has our to be over year of the a it the

going to contracts more have Let's of off in year. that's I and eight for coming select of of want drive it's to someone when lot that else. and going more say a a a volatility month-to-month over lot drive we timing lot up last little comes people we the stay to a the of it move month-to-month to this if when And revenue if months renewal EBITDA,

out But if it they visibility stability multi-years there. increase but longer a us little bit mitigate term, price and it will give will select the for

piece that's us trying of they about with that's work pricing. deliver customers John to There's that by it nuance of our what want. to talks a So, when driven lot a too in

capacity to growth the CapEx. we of I absolute about as growing the your disciplined And this of additions, in horsepower as That going it. fleet Got the the do at But fairly that well today, number year? you're how think on look you see be helps end by lot. a year just we know

have on the a side, to I units up hesitating to a growth. why side. kind I'm And may of the our XX,XXX That's January. couple show would on of say gross in fleet think XX,XXX got bit. order bit I basis in then XX,XXX a We've we up little probably pruning little But that on add see XX,XXX in we December horsepower horsepower. denominator in on on smaller probably December that a show a may it's about in been

end So XXXX if XX,XXX here has you horsepower our grown about look and smallers. but XX,XXX over at large the we've got today, XX,XXX fleet added to only about the from of we -- when last about to horsepower pruned -- to XX,XXX XX,XXX XX,XXX

not you world That’s actually comment, today where smaller we equipment. new weigh new interest constrained really questions see prior cost higher out? to surviving higher helpful given about acquire John, the entrants. just anymore of But rates, may Great. capital made to may need there. Do be opportunities The a sort or large players where you are

to to given restructure Yes. conservative re-lever themselves a It's that less cap question -- standpoint, I in cap would structure, in more general, hard so say, to structure. think being you're that relever in they're answer trying let's say, just the like us, But just no I all levered. their visibility by a different the

borrowing to a have. today, you used need paying X% you're to you're If rate the paying less to same before variable flow have that you cash X% leverage have on base,

heart. let's that environment say, taking that long-term it's in get a to down for think can great And build structure people to more that I And sustainable range. any back much cap survive for X% everyone are and think frankly I the

people of trying I towards a So that. lot to are drive think

to selection and thing Some lender do that's I will do of saying self-selection you of that, that's want that. some

But in somebody. ready want think market that's remains of ready living healthy. want year chasing after to have growth, from to, now in units to think think is all just the therefore beast good happened of That have less like the just leading less and to and are right a the to customer units horsepower year. where tight. Nobody I it's to people take we're -- away So factors hasn't nature continues I a I it and the building, I

we capital Not had medium provider their to a has capital -- reason large customer current get can't new we I'm it small the only supply cheaper, like if to everywhere. it. up, The free because is them. from come or because who going oh, have And units available you're you. to that's the It's some

a makes it. sense. then Got And question. maybe final just That

thoughts You've years had just can you're controlled on the Any at that improve for you things could see a little as of you upon. over that company still forward looking two this sort point.

to there. love Just thoughts your get

ready. just industry, to all we've a a have of through improve rapidly. lot in start of look I change we're lot personnel. on as but make make But we doing The business. made equipment activity, I turnover. should think we we're getting when early enormous our had time We're can lot look a lot -- you was We're of we think and And that putting out experiencing abating. people spent an We've that, world across I we progress, a lot normal of XX% the ready seeing XX% on. around think things a the changing hands from of probably

of people attention attention before we're we're containment. have more turning we cost attention, that a So but on towards turning not it lot our didn't

operate of the only inflation, positive as course can think efficiently, equipment operate and let's cost to think drive And down Let's and efficient. structure room make go it continues but so able the hopefully capture everything cost margins. to more up I those year, next we'll there's let's we're with we see side the And our really do that contain that to I efficiently, hopefully that over there. revenue on go to not also

lot think that. do to work there's on I of a

still will. board fix a have to the that we we're and structure that we opportunity think capital environment on not totally have I with

we're little took levered ago, we've low-Xs out moved were a if walked when we in, years seven from you over two the and effective low-Xs you now. sales, But times asset

big off, want still leverage we next that's think the two we saying our years do two mind towards. a not continue a to and taken to to to of over in that. move and have be goal half two that's can inside years So in and what get we I that's we the And but turns drive for where we've year

continuing -- delever on and that's cost those two I contain So and areas, to improve operating our us are for and big think structure.

Appreciate Thank all Excellent. the color. you.

bet. You

You bet.

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

Thanks the shareholders. continue We look to next to it. and build talking Appreciate you to for forward quarter joining call today. value the for all

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

all disconnect. may You now