THE WOODLANDS, Texas,
Feb. 27, 2018 /PRNewswire/
-- CSI Compressco LP ("CSI Compressco") (NASDAQ: CCLP) today
announced fourth quarter and full year 2017 consolidated financial
results. Consolidated revenues for the quarter ended
December 31, 2017, were $83.1 million compared to $71.6 million for the third quarter of 2017 and
$82.9 million for the fourth quarter
of 2016. Compared to the third quarter of 2017, compression
services revenues increased 3.3%, reflecting increases in fleet
utilization. Equipment sales increased by $8.5 million from the third quarter to
$18.9 million. Net loss for the
quarter ended December 31, 2017 was
$10.7 million compared to a
$7.8 million loss for the third
quarter of 2017 and $12.1 million
loss for the fourth quarter of 2016.
Selected key operational and financial metrics are as
follows:
- Orders for new equipment sales in the fourth quarter were
$16.7 million. In early
January, CSI Compressco received a $67
million order for large horsepower equipment to be
fabricated for a midstream operator in the Permian Basin.
This equipment is expected to ship during the second half of 2018
and the first half of 2019.
- Backlog for equipment sales was $47.5
million as of December 31,
2017. With the January order, backlog increased in January to
approximately $117 million.
- Overall service fleet utilization increased 180 basis points
(bps) compared to the end of the third quarter, to 83.2%.
Utilization for large horsepower equipment, greater than 800 hp per
unit, increased to 92.3%, up 220 bps sequentially.
- Distributable cash flow(1) for the quarter was
$5.4 million, resulting in a
distribution coverage ratio of 0.73X
- Maintenance capital expenditures were $6.9 million as additional previously idle
equipment was made ready for deployment to address the strong
demand for field gathering and gas lift.
- Adjusted EBITDA(1) was $21.0
million, compared to $23.3
million in the third quarter, as the third quarter included
a non-recurring gain of $3.0 million
from insurance proceeds.
(1) Non-GAAP financial measures reconciled to the nearest GAAP
number on Schedules A, B, and C
As of December 31, 2017, aggregate
compression services fleet horsepower totaled 1,081,919 horsepower
and the fleet utilization rate was 83.2%. Utilization of our
highest horsepower category, equipment of greater than 800
horsepower per unit, was 92.3% at the end of the quarter. We
define the fleet utilization rate as the aggregate compressor
package horsepower in service divided by the aggregate compressor
package fleet horsepower as of a given date. We do not
exclude idle horsepower under repair or horsepower that is
otherwise impaired from our calculation of utilization
rate.
Unaudited results of operations for the quarter ended
December 31, 2017 compared to the
prior quarter and the corresponding prior year quarter are
presented in the accompanying financial tables.
|
Three Months
Ended
|
|
|
|
|
|
Dec 31,
2017
|
|
Sep 30,
2017
|
|
Dec 31,
2016
|
|
Q4-17
vs.
Q3-17
|
|
Q4-17
vs.
Q4-16
|
|
(In Thousands, Except
Ratios, Per Unit Amounts and Percentages)
|
Net loss
|
$
(10,673)
|
|
$
(7,821)
|
|
$
(12,138)
|
|
(36)%
|
|
12%
|
Adjusted
EBITDA(1)
|
$
21,022
|
|
$
23,341
|
|
$
21,682
|
|
(10)%
|
|
(3)%
|
Distributable cash
flow(1)
|
$
5,368
|
|
$
10,778
|
|
$
8,798
|
|
(50)%
|
|
(39)%
|
Quarterly cash
distribution per unit
|
$
0.1875
|
|
$
0.1875
|
|
$
0.3775
|
|
—
|
|
—
|
Distribution coverage
ratio(1)
|
0.73x
|
|
1.56x
|
|
0.68x
|
|
—
|
|
—
|
Net cash provided by
operating activities
|
$
14,496
|
|
$
13,218
|
|
$
15,922
|
|
10 %
|
|
(9)%
|
Free cash
flow(1)
|
$
3,083
|
|
$
10,982
|
|
$
12,865
|
|
(72)%
|
|
(76)%
|
|
(1) Non-GAAP
financial measures reconciled to the nearest GAAP number on
Schedules B and C.
|
Owen Serjeant, President of CSI Compressco, commented, "The
compression market is in the midst of a robust recovery. In
the fall of 2017, we experienced an increasing demand for large
horsepower equipment to address gathering system requirements,
particularly throughout the West
Texas, South Texas and the
Oklahoma SCOOP/Stack markets as the rig count climbed to over
900 active rigs. The latest demand is now coming for mid- to
large horsepower equipment services as the industry is moving to
centralized surface gas lift as initial production rates on new
wells are not as strong as they were earlier in 2017. With
the migration toward pad drilling and tighter well spacing,
combined with large volumes of associated gas, operators have
started moving toward centralized gas lift using larger horsepower
compression equipment to perform surface lift simultaneously on
multiple wells."
"In addition to the stronger demand for gathering systems
equipment based on incremental infield drilling and stronger
Delaware Basin activity, plus
increased surface gas lift requirements, we are seeing an increase
in the request for pricing and proposals to fabricate and deliver
larger horsepower equipment. In the fourth quarter, we
received orders for $16.7 million of
new equipment to be delivered in 2017. In early January,
2018, we received a $67 million order
to deliver 45 new large horsepower units to a midstream operator in
West Texas. This recent order is the largest in the history
of CSI and Compressco and is scheduled for delivery in the second
half of 2018 and first half of 2019. Customers are
recognizing that the drilling program schedules into 2019 will
require more horsepower to enhance production, compress and move
associated gas through the gathering systems and build or expand
gas processing facilities. We are also seeing increasing
demand to build and deploy equipment in Latin America, primarily in Mexico and Argentina."
The increased activity has pushed utilization of our large
horsepower services equipment to more than 92%. We are now
also experiencing strong demand for equipment in the 101-800
horsepower range to address the gas lift opportunities. As a
result of this stronger demand and higher utilization levels, we
are starting to push pricing higher to recover discounts conceded
during the downturn of the past three years. Maintenance
capital expenditures increased in the fourth quarter as the
stronger demand is requiring us to make ready equipment that had
been idle for longer periods of time. We are also preparing
for deployment more of the GasJack and VJack service fleet to areas
including the Rockies and the Permian Basin.
This uptick in demand is also driving increases in aftermarket
services (AMS) as customers are catching up on maintenance and
deploying previously idle equipment. 2017 AMS orders
increased 76% year over year. We entered 2018 with
$10.5 million in AMS backlog.
Forward-Looking Guidance
Projected 2018 total capital expenditures are expected to be
between $55 million and $75 million. Maintenance capital
expenditures are expected to be between $15
million and $20 million. We
expect to fund these capital expenditures through a combination of
internally generated cash flow, as well as borrowings under our
credit facility, which we expect to extend or replace during 2018.
Capital market sources may also be utilized depending on market
conditions. We believe a combination of these sources should
position us to invest growth capital to take advantage of the
recovery occurring in multiple areas of our operations.
Conference Call
CSI Compressco will host a conference call to discuss fourth
quarter 2017 results today, February 27,
2018, at 10:30 a.m. Eastern Time. The phone number for
the call is 1-866-374-8397. The conference will also be available
by live audio webcast and may be accessed through CSI Compressco's
website at www.csicompressco.com.
Fourth Quarter 2017 Cash Distribution on Common Units
On January 22, 2018, CSI Compressco
announced that the board of directors of its general partner
declared a cash distribution attributable to the fourth quarter of
2017 of $0.1875 per outstanding
common unit, which was paid on February 14,
2018 to common unitholders of record as of the close of
business on February 1, 2018.
The distribution coverage ratio (which is a Non-GAAP
Financial Measure defined and reconciled to the closest GAAP
financial measure below) for the fourth quarter of 2017 was
0.73X.
CSI Compressco Overview
CSI Compressco is a provider of compression services and equipment
for natural gas and oil production, gathering, transportation,
processing, and storage. CSI Compressco's compression and
related services business includes a fleet of more than 5,700
compressor packages providing approximately 1.1 million in
aggregate horsepower, utilizing a full spectrum of low, medium and
high horsepower engines. CSI Compressco also provides well
monitoring and automated sand separation services in conjunction
with compression services in Mexico. CSI Compressco's equipment sales
business includes the fabrication and sale of standard compressor
packages, custom-designed compressor packages and oilfield fluid
pump systems designed and fabricated primarily at our facility in
Midland, Texas. CSI
Compressco's aftermarket business provides compressor package
reconfiguration and maintenance services, as well as the sale of
compressor package parts and components manufactured by third-party
suppliers. CSI Compressco's customers comprise a broad base of
natural gas and oil exploration and production, mid-stream,
transmission, and storage companies operating throughout many of
the onshore producing regions of the
United States, as well as in a number of foreign countries,
including Mexico, Canada and Argentina. CSI Compressco is managed by
CSI Compressco GP Inc., which is an indirect, wholly owned
subsidiary of TETRA Technologies, Inc. (NYSE: TTI).
Forward-Looking Statements
This news release contains "forward-looking statements" and
information based on our beliefs and those of our general partner,
CSI Compressco GP Inc. Forward-looking statements in this news
release are identifiable by the use of the following words and
other similar words: "anticipates," "assumes," "believes,"
"budgets," "could," "estimates," "expects," "forecasts," "goal,"
"intends," "may," "might," "plans," "predicts," "projects,"
"schedules," "seeks," "should," "targets," "will," and
"would." These forward-looking statements include statements,
other than statements of historical fact, concerning the recovery
of the oil and gas industry and CSI Compressco's strategy, future
operations, financial position, estimated revenues, negotiations
with our bank lenders, projected costs, and other statements
regarding CSI Compressco's beliefs, expectations, plans, prospects
and other future events and performance. Such forward-looking
statements reflect our current views with respect to future events
and financial performance, and are based on assumptions that we
believe to be reasonable, but such forward-looking statements are
subject to numerous risks and uncertainties, including but not
limited to: economic and operating conditions that are outside of
our control, including the supply, demand and prices of crude oil
and natural gas; the levels of competition we encounter; the
activity levels of our customers; the availability of adequate
sources of capital to us; our ability to comply with contractual
obligations, including those under our financing arrangements; our
operational performance; the loss of our management; risks related
to acquisitions and our growth strategy; the availability of raw
materials and labor at reasonable prices; risks related to our
foreign operations; the effect and results of litigation,
regulatory matters, settlements, audits, assessments, and
contingencies; or potential material weaknesses in the future;
information technology risks, including the risk of cyberattack;
and other risks and uncertainties contained in our Annual Report on
Form 10-K and our other filings with the U.S. Securities and
Exchange Commission ("SEC"), which are available free of charge on
the SEC website at www.sec.gov. The risks and uncertainties
referred to above are generally beyond our ability to control and
we cannot predict all the risks and uncertainties that could cause
our actual results to differ from those indicated by the
forward-looking statements. If any of these risks or uncertainties
materialize, or if any of the underlying assumptions prove
incorrect, actual results may vary from those indicated by the
forward-looking statements, and such variances may be material. All
subsequent written and verbal forward-looking statements made by or
attributable to us or to persons acting on our behalf are expressly
qualified in their entirety by reference to these risks and
uncertainties. You should not place undue reliance on
forward-looking statements. Each forward-looking statement speaks
only as of the date of the particular statement, and we undertake
no obligation to update or revise any forward-looking statements we
may make, except as may be required by law.
Schedule A -
Income Statement
|
|
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
Dec 31,
2017
|
|
Sep 30,
2017
|
|
Dec 31,
2016
|
|
Dec 31,
2017
|
|
Dec 31,
2016
|
|
(in Thousands, Except
per Unit Amounts
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Compression and
related services
|
$
53,359
|
|
$
51,662
|
|
$
51,395
|
|
$
205,774
|
|
$
224,736
|
Aftermarket
services
|
10,854
|
|
9,517
|
|
6,900
|
|
40,287
|
|
33,303
|
Equipment
sales
|
18,888
|
|
10,419
|
|
24,573
|
|
49,505
|
|
53,324
|
Total
revenues
|
83,101
|
|
71,598
|
|
82,868
|
|
295,566
|
|
311,363
|
Cost of revenues
(excluding depreciation and amortization expense):
|
|
|
|
|
|
|
|
|
|
Cost of compression
and related services
|
30,763
|
|
28,347
|
|
28,628
|
|
116,956
|
|
117,154
|
Cost of aftermarket
services
|
8,440
|
|
7,733
|
|
5,730
|
|
32,256
|
|
25,362
|
Cost of equipment
sales
|
16,145
|
|
9,424
|
|
24,337
|
|
44,286
|
|
48,744
|
Total cost of
revenues
|
55,348
|
|
45,504
|
|
58,695
|
|
193,498
|
|
191,260
|
Depreciation and
amortization
|
17,280
|
|
17,361
|
|
17,107
|
|
69,140
|
|
72,123
|
Impairments of
long-lived assets
|
—
|
|
—
|
|
2,357
|
|
—
|
|
10,223
|
Insurance
recoveries
|
—
|
|
(2,352)
|
|
—
|
|
(2,352)
|
|
—
|
Selling, general, and
administrative expense
|
7,760
|
|
8,682
|
|
8,530
|
|
33,438
|
|
36,222
|
Goodwill
Impairment
|
—
|
|
—
|
|
—
|
|
—
|
|
92,334
|
Interest expense,
net
|
11,232
|
|
11,071
|
|
10,621
|
|
43,135
|
|
38,055
|
Series A Preferred
fair value adjustment
|
1,561
|
|
(1,300)
|
|
(2,162)
|
|
(3,402)
|
|
5,036
|
Other expense,
net
|
—
|
|
(319)
|
|
(510)
|
|
(216)
|
|
2,383
|
Loss before income
tax provision
|
(10,080)
|
|
(7,049)
|
|
(11,770)
|
|
(37,675)
|
|
(136,273)
|
Provision (benefit)
for income taxes
|
593
|
|
772
|
|
368
|
|
2,784
|
|
1,865
|
Net loss
|
$
(10,673)
|
|
$
(7,821)
|
|
$
(12,138)
|
|
$
(40,459)
|
|
$
(138,138)
|
|
|
|
|
|
|
|
|
|
|
Net income per
diluted common unit
|
$
(0.29)
|
|
$
(0.22)
|
|
$
(0.36)
|
|
$
(1.13)
|
|
$
(4.07)
|
Reconciliation of Non-GAAP Financial Measures
The Partnership includes in this release the non-GAAP financial
measures Adjusted EBITDA, distributable cash flow, distribution
coverage ratio, and free cash flow. Adjusted EBITDA is used as a
supplemental financial measure by the Partnership's management
to:
- assess the Partnership's ability to generate available cash
sufficient to make distributions to the Partnership's unitholders
and general partner;
- evaluate the financial performance of its assets without regard
to financing methods, capital structure or historical cost
basis;
- measure operating performance and return on capital as compared
to those of our competitors;
- determine the Partnership's ability to incur and service debt
and fund capital expenditures; and
- monitor the financial performance measure used in the
Partnership's bank credit facility financial covenant.
The Partnership defines Adjusted EBITDA as earnings before
interest, taxes, depreciation, and amortization, and before certain
non-cash charges consisting of impairments, bad debt expense
attributable to bankruptcy of customer, non-cash costs of
compressors sold, equity compensation, fair value adjustments of
our Preferred Units, administrative expenses under the Omnibus
Agreement paid in equity using common units, severance expense, and
software implementation expense.
Distributable cash flow is used as a supplemental financial
measure by the Partnership's management, as it provides important
information relating to the relationship between our financial
operating performance and our cash distribution capability.
Additionally, the Partnership uses distributable cash flow in
setting forward expectations and in communications with the board
of directors of our general partner. The Partnership defines
distributable cash flow as Adjusted EBITDA less current income tax
expense, maintenance capital expenditures, interest expense, and
severance expense, plus non-cash interest expense.
The Partnership believes that the distribution coverage ratio
provides important information relating to the relationship between
the Partnership's financial operating performance and its cash
distribution capability. The Partnership defines the distribution
coverage ratio as the ratio of distributable cash flow to the total
quarterly distribution payable, which includes, as applicable,
distributions payable on all outstanding common units, the general
partner interest and the general partner's incentive distribution
rights.
The Partnership defines free cash flow as net cash provided by
operating activities less capital expenditures, net of sales
proceeds. Management primarily uses this metric to assess our
ability to retire debt, evaluate our capacity to further invest and
grow, and measure our performance as compared to our peer group of
companies.
These non-GAAP financial measures should not be considered an
alternative to net income, operating income, cash flows from
operating activities or any other measure of financial performance
presented in accordance with GAAP. These non-GAAP financial
measures may not be comparable to Adjusted EBITDA, distributable
cash flow, free cash flow or other similarly titled measures of
other entities, as other entities may not calculate these non-GAAP
financial measures in the same manner as CSI Compressco. Management
compensates for the limitation of these non-GAAP financial measures
as an analytical tool by reviewing the comparable GAAP measures,
understanding the differences between the measures and
incorporating this knowledge into management's decision making
process. Furthermore, these non-GAAP measures should not be viewed
as indicative of the actual amount of cash that CSI Compressco has
available for distributions or that the Partnership plans to
distribute for a given period, nor should they be equated to
available cash as defined in the Partnership's partnership
agreement.
The following table reconciles net income (loss) to Adjusted
EBITDA, distributable cash flow and distribution coverage ratio for
the three month periods ended December
31 2017, September 30, 2017,
December 31, 2016, and the
twelve-month periods ended December 31,
2017 and 2016:
Schedule B -
Reconciliation of Net Income/(Loss) to Adjusted EBITDA,
Distributable Cash Flow and Distribution Coverage
Ratio
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
Dec 31,
2017
|
|
Sep 30,
2017
|
|
Dec 31,
2016
|
|
Dec 31,
2017
|
|
Dec 31,
2016
|
|
(In
Thousands)
|
|
|
|
|
Net loss
|
$
(10,673)
|
|
$
(7,821)
|
|
$
(12,138)
|
|
$
(40,459)
|
|
$
(138,138)
|
Interest expense,
net
|
11,232
|
|
11,071
|
|
10,621
|
|
43,135
|
|
38,055
|
Provision for income
taxes
|
593
|
|
772
|
|
368
|
|
2,784
|
|
1,865
|
Depreciation and
amortization
|
17,280
|
|
17,361
|
|
17,107
|
|
69,140
|
|
72,123
|
Impairments of
long-lived assets
|
—
|
|
—
|
|
2,357
|
|
—
|
|
10,223
|
Goodwill
Impairment
|
—
|
|
—
|
|
—
|
|
—
|
|
92,334
|
Bad debt expense
attributable to bankruptcy of customer
|
—
|
|
—
|
|
—
|
|
—
|
|
728
|
Non-cash cost of
compressors sold
|
1,768
|
|
2,406
|
|
3,941
|
|
8,505
|
|
6,772
|
Equity
Compensation
|
(933)
|
|
261
|
|
792
|
|
1,219
|
|
3,028
|
Series A Preferred
transaction costs
|
—
|
|
—
|
|
85
|
|
37
|
|
3,131
|
Series A Preferred
fair value adjustments
|
1,561
|
|
(1,300)
|
|
(2,162)
|
|
(3,402)
|
|
5,036
|
Gain on
extinguishment of debt
|
—
|
|
—
|
|
(865)
|
|
—
|
|
(1,405)
|
Omnibus expense paid
in equity
|
—
|
|
—
|
|
1,576
|
|
1,746
|
|
1,576
|
Severance
|
—
|
|
8
|
|
—
|
|
63
|
|
562
|
Software
implementation
|
195
|
|
583
|
|
—
|
|
974
|
|
—
|
Adjusted
EBITDA
|
21,022
|
|
23,341
|
|
21,682
|
|
83,742
|
|
95,890
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Current income tax
expense
|
311
|
|
545
|
|
608
|
|
2,027
|
|
1,835
|
Maintenance capital
expenditures
|
6,936
|
|
3,841
|
|
4,840
|
|
21,055
|
|
11,359
|
Interest Expense,
net
|
11,232
|
|
11,071
|
|
10,621
|
|
43,135
|
|
38,055
|
Severance
|
—
|
|
8
|
|
—
|
|
63
|
|
562
|
Plus:
|
|
|
|
|
|
|
|
|
|
Non-cash items
included in interest expense
|
2,825
|
|
2,902
|
|
3,185
|
|
11,546
|
|
6,873
|
Distributable cash
flow
|
5,368
|
|
10,778
|
|
8,798
|
|
29,008
|
|
50,952
|
|
|
|
|
|
|
|
|
|
|
Cash distribution
attributable to period
|
7,389
|
|
6,916
|
|
12,870
|
|
27,582
|
|
51,237
|
|
|
|
|
|
|
|
|
|
|
Distribution coverage
ratio
|
0.73x
|
|
1.56x
|
|
0.68x
|
|
1.05x
|
|
0.99x
|
The following table reconciles net cash provided by operating
activities to free cash flow for the three month periods ended
December 31 2017, September 30, 2017, December 31 2016, and the twelve-month periods
ended December 31, 2017 and 2016:
Schedule C -
Reconciliation of Net Cash Provided by Operating Activities to Free
Cash Flow
|
|
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
Dec 31,
2017
|
|
Sep 30,
2017
|
|
Dec 31,
2016
|
|
Dec 31,
2017
|
|
Dec 31,
2016
|
|
(In
Thousands)
|
Cash from
operations
|
$
14,496
|
|
$
13,218
|
|
$
15,922
|
|
$
39,068
|
|
$
61,444
|
Capital expenditures,
net of sales proceeds
|
(11,413)
|
|
(2,236)
|
|
(3,057)
|
|
(25,126)
|
|
(10,659)
|
Free cash
flow
|
$
3,083
|
|
$
10,982
|
|
$
12,865
|
|
$
13,942
|
|
$
50,785
|
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SOURCE CSI Compressco LP