CSI Compressco (CCLP) 7 Aug 232023 Q2 Earnings call transcript

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

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

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

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

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

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

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

for We've bullish to think call why some for of we so in comments. everyone, about past, Good are future repeating Jon. I with the Compressco. today these to they're overall some CSI want out and morning, Thanks, macro worth the but reflect joining start I mentioned you our thank today.

that market the remains First future. over beyond will through are for the need horsepower. Customers the way and they compression for tight, is especially out horsepower XXX available. remain foreseeable XXXX capital ensure to Utilization off, to looks high, be committing

capital-disciplined. are been compression and in of In addition, continues entrant reducing a growth, be new their space. compression interested has the capital may market, be EBITDA significant players industry leverage. amount been significant to there absolute Also, or deploying a in paydown, Generally, not has This the the into the through both. new debt

percentage their producers the flow This cash Also, equipment. qualified capital the a of less cash to needs. many including to labor overall finding and factors, is around as a compression result allocation want underspending compression of shareholders, own to own decisions returning maintain their

it further of to deliveries making capital. build speculative prior committing occurred plan contract well to cycles companies in year is equipment able The Deliveries as engine extend, beyond for new to build happening units continue new as ahead. new the customers are this stretching cycle, before a compression are out necessary has not that

contracts, of have industry compression those and Also, has is a underlying This protection Compressco inflation reflected contracts, as for near-term risk terms. whole. the duration terms the de-risked in of contracts better This the and redeployment the CSI improved. on greatly

to unit new compression. prolonged multiple new years. coming All as market build described no the This and to years. is into cycle the for argue supply excess for the to new all required for units, for is have There contracted three market. compression build It up cost existing The has as reflect I units, that rates. to changes is a a generally horsepower contract last over to well large adjustment two up XX% pricing XX% continual

of for construction time. bright our potentially to continue with compression well natural export gas and capacity company production the gas perform grow. should increase, to believe over for gases needs pending dry also future few associated doubling next basins Overall, over and the facilities is macro industry. years, The LNG this and the continue the we The with backdrop,

beginning had goals has this of efficient, of manner, a cost improving to while significantly. our operational in cycle, CSI execution growing our the leverage reducing Since net be Compressco disciplined EBITDA improving

approach flow, has be our to allocate relative thereby to materially spending Our flow, leaving with to capital to achieving gross cash cash line these discretionary goals, in been debt our flat.

flows flows debt relative XXXX, pay going trend and spending into slightly are of our shift down. those to second it, relative to far we begun do cash with some for what cash the over down to have XXXX We expected as half modest as absolute

the of making building our side available existing makes broader units large capital, financial fleet and have applications and ready been where horsepower our sense. fleet it On for we

for portion business, on Additionally, and our reflect to renewal. market the current and contracts revenue are fleet conclude continually repricing our up terming of their we primary term as out are conditions

our In focus rigor on it improving relates compression lot the of as operational addition, costs a have on to business. we contract the

focusing for return AMS appropriate we portion to the on pursuing labor have we business, On have reflect of returns, improving and expertise, management. where projects, on projects increasing been project attention the higher the pricing

financial results As of these we look quarter of results the XXXX, reflect at the the we second efforts. our for believe impact

the revenue, continues improving net leverage EBITDA multi-quarter increasing metrics. trend services quarter growth contract of This and

operation operating utilization the flat Egyptian our sold the during we via our as horsepower was quarter, reduced This which sale. quarter, essentially our

with term, in look where fleet to labor best large reflect tight contracts come we assets. lower our a market we renewals contracts areas. pursue the This is to for price market As fleets those of may but slightly lower renewal We possible achieve a on the up our rate or reprice contract. The the a our basin term, highest longer return. of idea multi-year optimize as to cost end the to to return horsepower, duration mean continue in off rates to higher

charge will to rate contract, option reflect work shorter requesting. with customer term the means by customer term desires, a higher we desires the key customer customer the is value offering This if a but the a the

a to ways also fleet, asset installations. of the lot a core we've opportunity density This the using with our improve where but our made units are progress and recontracting years X,XXX continue looking possible improve last performance. long for in is closer over over We process units unit to two to by operational

Our defined customers. fleet of horsepower over utilization the up horsepower, from as of locations quarter at our in sale utilization calculation. slight a some X.X% which operations are and at X,XXX, units that XX%, contraction represents are in last in our over the primarily of between include We and [indiscernible] has end that our XX% from not is quarter utilized, the large generating and CSI's utilized transition fleet, not is XX% second a that of reflecting XX% the our contracted, being quarter, revenue of about but horsepower our 'XX. horsepower QX fleet as do Egyptian

contracted that not additional because of horsepower unit customer work have being make-ready We deployed. is deployed timing of the yet before on

slowed the experiencing Finally, being people. more see to of modest to last a we bit quite have that say a down of not any and is come all cost fluids seen as relates inflation not structure, are has rate it to our phases pace. primarily We this parts but cost, from it This inflation, in we year.

of to and guidance As EBITDA for times. full times our to we of XXXX, leverage million guidance net remainder of look we $XXX $XXX year-end X.X to the reiterate year X.X million our

of are and trailing leverage. We on XX-month a currently inside net basis XX-month EBITDA quarter ranges those both for in -- a

positioned CSI macro of is we the Overall, to perform and cycle the remain environment, how bullish quarters. coming about longevity over the the

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

to focused creation. the for by our continue We pursuing the capital adapting best market and will approach long-term allocation options value

long-term area, be We of on this stronger the focused some We a high progress our would coming believe made level and ability significant have perform and will we operational especially cycle have as we longer we fundamentals of at go as execution months. gas in to on believe natural a continue forward. in and lot the this

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

Thank you, John.

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

million contract services XX% $XX.X second XXXX. grew XXXX revenue of of Our in the quarter to from in million the $XX.X year-over-year quarter second

utilization quarter large equipment. XX.X% XX% our by pricing, horsepower the Year-over-year, utilization to continued driven in XXXX. from our and second was This particularly in among increased improvement

grew Our AMS was XX% revenue year-over-year and quarter. the than XX% prior higher

a contract coverage gross were points business little from of second quarter with the quarter a to was $X.XX [ph] Distributable second ratio XXXX, continues over pay QX. $XX.X also profitability; XX basis $X.X services just compared about we'll distribution points XX%, over with XX, margins million distribution million XX%, our our of of in times. on basis our of and August cash on up to and XXX over flow up gross well margins XXX to Moving AMS QX perform

on of August hand outstanding plus $XX.X as cash $XX.X million XX, liquidity million, end total ABL was is $XX.X of the and million our on XXXX. liquidity, to which XX, compares at capacity XXXX Total June

Our leverage our our of the down exiting of as to times. times QX our while net anticipate leverage times the XXXX leverage year continues remains to million, net from we X.X X.X capital XXXX. step XXXX two with spending of our on down guidance reduce $XX and executing overall growing for business, $XX to million ratio a peak plan We're to QX

for our net within So year-end we're already range leverage XXXX. guidance

times. Most impact now we leverage interest a of net this environment, overall debt rate, is have in EBITDA, resulting X.X XXXX and QX rate annualize our in expense. on you our helped interest of a has ratio If the rising us fixed minimal

relative years free and we plan spend debt As flow. in reduce and growth John XXXX, liquidity prior our to to cash capital overall said, emphasize to generating reduction,

XXXX is for guidance Our unchanged.

call We'll to questions. the now open

first of from Go question ahead. Grampp Alliance. comes Jeff Our

Thank the guys. Good you morning, time. for

however continuing have amount want of have percent inflation? to the on estimate commentary what increase you inflation. are define the an indexed contracts the that you indexed longer-term Do [ph] just curious was contracts, that, to So within to to of kind

at to that little further So that times of got horsepower our your CPI, but terms, a contract in rough in just I'd or overall quarter if in look dissect lot smaller subject you've a about that's year revenue, of we less, you got you've compression contract is have fleet terms. it of revenue probably say, one a your bit to

And XX% give revenue point any that, your term third to only at of in of take probably it. about have you or year XX%, less. or of that a to has stream So time, one is probably XX% that any

I'm quarter of -- these third last we're revenue only to that year. CPI numbers, half rough late about institute because XX% revenue. our of the in is third about multiyear round beginning quarter, very were multiyear probably fourth of our So able just probably quarter, we overall are And under

I year, we off, So roll up. them off up that If they for, that we been CPI there we've them don't and up them know the we where since lot with instituting any term have you still as started rolling CPI, inflator, case but them achieve you that's term have asked go. a we term of to of term not we up able a both we CPI. contracts

want fixed that as And bit pushing predetermined not reason to or to No, there new to I why you inflation. that. there that going every any acquiesce the in it contract to request escalator you'd are business details. your indexed something would there's appreciate be customers for new opinion Or are there? guys that a guys to of that be Is willing contract the made maybe extent a a case more is a to is that kind you to want be maybe that's to have

you could to is. standby rates that to to all on Well, and and pushing where variety be subject other it kinds putting things going terms Cs conditions recognize holds, all of And Ts are all whether contract that for a it the gives and all got of are either takes, and standby it. and we're be are and

a case a cap CPI I So in or sort where some that to want way. like doesn't some don't other be says, -- that I exposes that guess us someone there of modified could we really

is but in way generally too, a that or but there generally a could easiest get our on contract. but reduce in we we're to to structure mind exposure of can inflation ways, primary not a get reflects Our real and the working the our or be multitude eliminate to that CPI And aware on a is goal cost case, the that changes, guess, multiyear of. I

Understood. Yes.

front. a about absolute of sense. remarks side, a just the than for X guys the kind on shifting Okay. towards rather hit capital kind lot makes times EBITDA me, of And in debt allocation accelerating That the of paydown last of the you couple on focus prepared

coming it's maturities structural the and of to of up the How you those debt to that maybe levels? much would yourself these capital? reduce say and change tackle that Or a more of and in you attribute would debt view kind wanting maybe allocating industry's overall

a in we one, structural return at maturities trades also up, wouldn't it's debt at. But of the allocation so I change everything coming to have do and something say that's what have look is. where than capital some look to other take best we a

on our where trade just they we've bonds rising a at interest ago. relative environment been And moment, that to in, based were the off trading year rate

so year committed primarily. ago of all year And we capital this a our into

but cash We and of under have then a little into committed. of a next committed capital year flow left next bit mostly we free year, this little bit for our year, go we've

buy right commit either a XX% if importantly, as now, a now of off that more the build at about left return liquidity, to to to it's much to XX% wedge return. more we So think bonds XX% rig market but available, attractive delta what's

get of XX% -- at hard a at XX% if looking So that to I you we're building to return, new unit. a take look think going can relative or rate a

So capital it's efficiency. really

Absolutely. time the guys. appreciate That of sense. I lot makes a

question comes from Akyol go Stifel. Please next Our ahead. Selman from

Thank you.

index for one step is just the is sort to much of of CPI. moment I to back back going fleet should be then about? you under to a we fleet thinking your how XX% less and or multiyear So your inflation. heard wanted guess year I say And of

term is year of fleet our less? of much has How -- one

Correct.

over XX% about about -- of over -- term probably its has year -- XX% we on basis, have we XX% dollar revenue probably XX%-XX%, it's fleet little have left a revenue one now, a on our Right basis.

of the how a spot if over on only XX% has fleet is revenue-wise its of our one But left, but turned you context basis, XX% term that in under year. at of look -- over much

coming tackle to the course lot a over of got to. months we've what So getting is the XX I'm

be Got talk talking clear you then And units? fleet, terms about to horsepower about just it. of it. are Got when it in your or you

terms Units small. jacks the so in because gas this have would we that about of talking wildly are I'm horsepower. different be many

it. Got

So more there? margin there go is on nice wondering, and gross much I'm to improvement the

our think fleet we Well, continue to we'll of market. see to repricing

a is in on not that spending variable there's operational been last So really where little to as we've been comments, electrifying busy And I that, terminal kind focused people. over and of of year the putting equipment time levels been bit just half, haven't execution but a the lot yet. -- the alluded turnover that lot it's of very, of very coming building a a new COVID, out, units, of new out retraining high we equipment,

all execution smooth, And executing interesting, way time what our or on, we of of land. metrics internally, have operational at or the track Nirvana We're doing but say five dividends, there to is all work. months I far the we're that across what begun last a the able don't focus PMs I'd not promised we've all going the really improvement as our day-to-day monthly upsets been all we're think months, seeing lot on the yet. or of kinds yet over is now some we So at very reap few on board. last not planning and four whether that We've as we're it's over and in kind what's to has got but but

but more can't way we're but I number. operating say to give on just all come and I of if to I not me and that ask them, step That's pressing but say to on quantification believe give going it to I that. more a there's you come, to guys is, my hard that, they're the there's So was a

nice also in and longer cycle. this it. then And sequential the I know Got for stronger you growth characterize services, aftermarket very as and

continue continue should So to to we to services expect increase? aftermarket

I Yes, so. believe

Price. This Rob is

set It's to jobs lesser our from expertise, Rob. jobs, our rate. trying project chasing in within as focused execution really the on Yes, run fit business, performing that we're skill extremely service referenced, John appropriately and eliminate

So of lot efficiently. focus jobs chasing profitable we executing a on have and

the is the continues what think backlog least isn't be backlog, to seeing pretty -- robust, I we're quote it? at And

does. It

contract As own to John in of tend space manpower manpower. customers lack to because not of referenced that the services units trying to want their identify

us overhauls opportunity do services gives they that perform units to units and to maintenance the in an and perform So and restaging. own those activities

So generally, managing a that are on margin and those little we're jobs bit higher focused project chased better. and

sort from had about of that we of I'm of people guys Got manpower, parts? talked it. trend, other bit seeing a weeks labor bringing heard two Are Since weeks curious, on, bringing you anything in little off. two you just

that basins horsepower, a and the local population growing from. are more growth In not absolutely. to are there's draw Yes, that deploy

the two absolutely of two off, week rotators week mandatory. on, off use So for weeks is on, schedules type week

it's is Got the on technology. know of that $X $X early I directionally we sort this the expect see in XXXX, but of And other to from then was as million that you and flat? about to of have it. year, I it. curious being to just dollars 'XX still here, just question related be Got Should talking we -- terms kind allocated sort to well? just down there more million CapEx, should in of

with $X as Yes, well, technology some consolidation. is could telemetry move million in be costs and million lumped it that guess as I $X some shop to well there

that So come. I to would expect

be of in I think range where growth our for are we will the capital XXXX.

That me. it does Thank for Got much. so All right. you it.

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

Good you. morning, gentlemen. for questions Few

sale the what just units. Can the those of some business think were? size responsive two us you a and in impact fleet you service, had maybe the quantify horsepower you of movements or give of idea of terms change general you change, Just the horsepower about said the the of had and in of when the obviously, we in Egyptian

three, X,XXX it Well, horsepower and sale a the over it one, we was bit call of Egyptian shy smaller. horsepower just and was horsepower, X,XXX large what was units would little

customer just early their option an exit exercised the of there. there, a we negotiated bit So purchase little and

and horsepower So that just grow large were came fleet, we able out our of still in. to that

as that's the want and in As conscious right we we've way the the they with made and get right the to horsepower moving effort the place, them far way our customers a horsepower them. want try

contract renewal. I is year. in want a what want for will I that stay up just duration the density. And month-to-month by we customers and just renew have want I other it's horsepower -- to for to and come to that mean we chase to larger we want side, if chase this And market,

and So where to we want closer we it can. longer get

So they the way term. to determine customer this our we but the I they forces to a if we've want if very months, conscious it more six made and for long as just And customer, effort mean need price to need negative that don't know. a try in product to a that

out a one-year three-year the And and rate, here's we the by we out two-year rate, is more so a way a are than rate. they much here's price here's we rate. find a saying, or one where find and month-to-month three-year attractive

or XXX-horsepower X,XXX say, need they're or coming we've unit really let's so building customers up. a electric Maybe they're resized "Well, saying, a had maybe I some need I And XXX-horsepower horsepower. fleet. their don't

transition last six With then we've duration we'll been that, work higher doing over I'm of pay months. going the this you out and plan. actively that So and do and fairly to short

unit back It off we've off or the the of take customer. just in side, a so. for ship bit we it, the not revenue our to else's With shop, to goes site contracted. just had some through month. get it fleet it for that's little three months not of the that, churn it of someone a out a it's revenue on come work side to to not We or do may really It have

horsepower more transition got another any of quantification that's a XX, give on time in to I'm but we've at quantification. one easily our the that horsepower than XX,XXX So a you have to not one trying to spot off fleet, know, we June we're side point moment at XX,XXX a good time look I horsepower sit revenue. again, lot a but probably where large probably to that's at another, when don't at moving large want we in that's in you

months the out that expect We the but settle right numbers over now, disruptive our not call these in six years, and the all next churn this months so able that really mind positive helpful. to to next be or out is -- we're who positive months. kind next to wants of termed eight for less utilization all to things to someone we six seeing to them three three It's with the five we're because churn. Hopefully, that's get it

No, terms basically because customers of you're that's shows region. the extremely in in the it helpful that upgrading fleet

Yes. Indeed.

in one make the to margin, Longer back gets the spot raising which plan to ready. operational in gives more, term, short-term work ability disruption

parts, this People, helpful. just dealing really use knowing trying to inventory, staffing, very what we're that to you're with out customers. be with going figure environment And is to

you Do No, horsepower we to during it. time but to I to XX,XXX experiencing -- got costs these eight-month this is going just temporary, know make-ready some period? six three then Are this be it. to XX,XXX Got transition. say

to I come we some continue are, this this last year we year yes. abate still bit, down I done. to but compared would little make think We get that to a And ready's as expect

large going always really fleet moving our to have on to to your units largely that coming away. up horsepower midsize trying and we're put but around are You're horsepower, smaller

so where a year, the year, trying of to that's I taken lot is, this it with And enormous out to and and when them of X.X you years and make status say to get I'd -- out next normal, set for ready year X.X an years, end dollars. or But is around of early to about who over horsepower all get you state. towards steady that that coming a now it and optimize or expect had of so, of think then COVID amount --

that's No, it. helpful very Got there.

and to of of the some thinking XX% said as back before, So term of the today one with then the greater than you we're the on comments that XX% fleet only just going fleet year. about

fleet numbers, do last the what in months? think of three last of total rough -- percent your terms in price the card a is Just horsepower on generated you within

up the I over months last? mean next or three coming

the fleet The your months? repriced three over been last -- how last much of

units we probably have we a fleet. so effective our our of come some of so probably not lot up or just July it's think revenue, our in all in, XX% our XX% that have I for had customers XX% last say, renewal got XX I Well, that renewed revenue, that XX%, fleet just of -- had would quarter. got to when we put had fleet significant -- you We revenue, and when of the about repriced

Okay.

in we revenue maybe should start per deployed So acceleration seeing horsepower? theory, of

Correct.

for was that's for that I Perfect up then year-over-year. just cost final me, just XX% looking question notable? and Okay. SG&A a Anything there

the No, really I It between don't timing of think costs was quarters. so.

couple hundred year last to pretty half this at dollars. in line. up of half we're year, a much look first thousand first We're you If

I So don't think there. anything notable there's

Perfect. all Thank always. the you. Appreciate color

Our next ahead. Stifel. Jay from Go comes question Spencer from

congrats good a quarter. Thanks guys and on

questions your fleet, in just step it revenue-generating and like going looking my that's not part of to some contracted addressed. have Some naturally, have But a taking transition. you're always but at sounds back of been

generating, would what look achievable, that Is not utilization of were rate is but that over we not think revenue XX%? about to you rate, XX% if utilization utilization that just include contracted when XXX% like? but So

it I close. gets think

of right it because a but around horsepower we XX% other gets the yet. not think I fair that's out thing, contracted, have bit

I screw we or think almost think utilization XXX,XXX the us XX%, the have take. to with about you that's in give have to that's of about thing XXs. competitors horsepower other relative is rotary that our the

we unit. are about have that less have X,XXX units XX-horsepower V or of and Jacks that are And horsepower GasJack that's per those XX,XXX -- we

So XXs two come low quarters in has near really and the down utilization from sits last that the XX. over

So little our bit. that a probably drags utilization

maybe you XX%. $XXX,XXX that million, XX% to when So bit take a fleet always components or factor full going up numbers, in make those out of the in what, utilization little $X.X versus our for round us of to two it's drag give you

and of reciprocating from line fleet, which well is at with large you what X,XXX public XX%, horsepower right XX% in now, look When the over company up, you other our our -- we're is horsepower kind over over would we're peers. see

there a want just utilization because color of is or is we screws that's the hit as of give view to utilization. the little that So the bit jack just full around going the reason you why I not XXX% to XX% XX and gas rotary

Great. what some to X.X of lead about comes either of the your Thank of to when on to that you. And year leverage the the company finishing with that it would X.X, side are guidance? guidance variables of key you think be

that's one the focused the is is key of probably but think I of EBITDA managing Obviously, number. a big areas we're to component to going variable be it, on. our working capital our net debt

Got you.

it Okay. That's Thank me. you. for

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

quarter and I to appreciate to grow on look forward speaking time. being call you. next everyone delever company profitably. the Thank ahead and march as today Appreciate we you and continue your the with

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

You may now disconnect.