THE WOODLANDS, Texas,
May 7, 2018 /PRNewswire/ -- CSI
Compressco LP ("CSI Compressco") (NASDAQ: CCLP) today announced
first quarter 2018 consolidated financial results.
Consolidated revenues for the quarter ended March 31, 2018, were $85.4
million compared to $83.1
million for the fourth quarter of 2017 and $65.6 million for the first quarter of
2017. Compared to the fourth quarter of 2017, total revenues
increased 3% driven by a 29% increase in Aftermarket
Services. Net loss for the quarter ended March 31, 2018 was $15.7
million compared to a net loss of $10.7 million in the fourth quarter of 2017 and a
net loss of $15.6 million in first
quarter of 2017.
Selected key operational and financial metrics are as
follows:
- Orders for new equipment sales in the first quarter of 2018
were $71.5 million, which included a
previously announced $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 new equipment sales was $102.5 million as of March
31, 2018.
- Overall, service fleet utilization increased 100 basis points
(bps) compared to the end of the fourth quarter, to 84.2%.
Utilization for large horsepower equipment, greater than 1000 hp
per unit, increased to 92.9%, up 60 bps sequentially.
- Distributable cash flow(1) for the quarter was
$4.9 million, resulting in a
distribution coverage ratio of 0.64X
- Completed a $350 million private
offering of senior secured notes due 2025 to retire existing bank
revolver debt and increase liquidity to fund growth capital
opportunities and for general partnership purposes.
- Adjusted EBITDA(1) was $19.2
million compared to $21.0
million in the fourth quarter.
(1) Non-GAAP financial measures reconciled to the nearest GAAP
number on Schedules B, and C
As of March 31, 2018, aggregate
compression services fleet horsepower totaled 1,085,088 and the
fleet utilization rate was 84.2%. Utilization of our highest
horsepower category, equipment of greater than 1000 horsepower per
unit, was 92.9% 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
March 31, 2018 compared to the prior
quarter and the corresponding prior year quarter are presented in
the accompanying financial tables.
|
Three Months
Ended
|
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
Q1-18 vs.
Q4-17
|
|
Q1-18 vs.
Q1-17
|
|
(In Thousands, Except
Ratios, and Percentages)
|
Net loss
|
$
(15,737)
|
|
$
(10,673)
|
|
$
(15,593)
|
|
(47)%
|
|
(1)%
|
Adjusted
EBITDA(1)
|
$
19,190
|
|
$
21,022
|
|
$
19,873
|
|
(9)%
|
|
(3)%
|
Distributable cash
flow(1)
|
$
4,886
|
|
$
5,368
|
|
$
7,093
|
|
(9)%
|
|
(31)%
|
Quarterly cash
distribution per unit
|
$
0.1875
|
|
$
0.1875
|
|
$
0.1875
|
|
—
|
|
—
|
Distribution coverage
ratio(1)
|
0.64x
|
|
0.73x
|
|
1.09x
|
|
—
|
|
—
|
Fleet capital
expenditures
|
$
15,245
|
|
$
6,886
|
|
$
—
|
|
121%
|
|
—
|
Net cash
provided/(used) by operating activities
|
$
(365)
|
|
$
14,496
|
|
$
1,821
|
|
(103)%
|
|
(120)%
|
Free cash
flow(1)
|
$
(17,404)
|
|
$
3,083
|
|
$
(5,394)
|
|
—
|
|
—
|
|
(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 continues to be in the midst of a robust
recovery as each of our operations continue to see an increase in
inquiries and demand for equipment. The Compression Services
business continues to see growing demand for higher horsepower
equipment for major oil plays in North
America to compress and move millions of cubic feet of
associated gas. The areas with the most activity and demand
include the Permian and Eagle Ford Basins as well as the
SCOOP/STACK areas in Oklahoma. CSI Compressco is well
positioned in those basins with over 60% of our operating
horsepower deployed in these territories. To better support
market demand for our products, we now expect to invest in 2018
between $90 and $110 million in growth and maintenance
capital. We expect all growth capital to be supported by
contracts before they are built. Given the growing demand for
large horsepower equipment, we expect our growth capital to
primarily focus on units of over 1,000 horsepower with our core
customers in the basins we have the most penetration. This
allows for maximum operational efficiencies in areas where
customers need additional horsepower for either gas lift and/or gas
gathering operations."
"Compression Services revenue was $53.7
million in the first quarter. Compression services
margins of 41.6% included approximately $1
million of labor and parts costs to restart equipment in the
Texas region following unusually
cold freezing weather conditions in January. Additionally,
the first quarter included approximately $1
million of other non-recurring field related costs."
"As demand continues to grow and lead times extend, we have been
reviewing pricing with our customers and have increased our
compression services rates up to 15% as opportunities come up and
contracts roll over. These increases will begin to be
reflected in our second quarter 2018 results. We are working
closely with our customers on this to ensure we satisfy their
capacity and equipment reliability needs as well as reflect today's
pricing, which has been trending up within this industry."
"Complementing our Compression Services business is our new unit
sales activities. After record bookings in the first quarter of
2018, our backlog ended the quarter at $102.5 million. We are able to fabricate
this equipment in our facility in Midland, Texas assuring competitive lead times
and pricing. Activity in this business continues to remain
strong with increasing quotation activities for North America and Latin America."
"Our Aftermarket Services business continues to excite and
delivered exceptional growth year over year. We have been able to
leverage our Compression Services footprint, resources and
operational competencies to deliver high levels of Aftermarket
Services to our customers in areas such as spare parts, overhauls,
reapplication engineering and site technical support. As we
focus on this business and invest in it in terms of resources on a
focused basis, we expect to see this growth to continue well into
2018 and 2019."
"Finally, we estimate that the overall compression fleet size in
North America is greater than 10
million horsepower today and expect approximately another one
million horsepower will be added through 2018 and 2019. We
expect to fabricate and deploy approximately 115,000 horsepower to
our fleet in 2018, which would put our fleet at approximately 1.2
million horsepower. We remain the only vertically integrated
company in this space which gives us a competitive advantage on
building and deploying the new build equipment faster and more cost
effectively. With the recent successful completion of the
$350 million secured bond offering,
we have the capital available to respond to these
opportunities. We expect our returns will continue to improve
with the price increases that we are successfully attaining."
Forward-Looking Guidance
Projected 2018 total capital expenditures are expected to be
between $90 million and $110 million, inclusive of $15 million to $20
million for maintenance capital expenditures. We expect to
fund these capital expenditures from the recently completed bond
offering. We are also expecting to have in place an asset
based revolver of $50 million to
provide incremental liquidity. Our new debt structure without
maintenance covenants allows us to better respond to investment
opportunities.
As a result of the service price increases that we are
attaining, which will gain traction in the second quarter of 2018,
and the new equipment sales backlog that we will start delivering
in the second quarter of 2018, and when combined with the new
equipment being deployed to our fleet, we expect to see a material
improvement in Adjusted EBITDA from our first quarter, 2018 run
rate. We expect total year adjusted EBITDA to be between
$95 million and $100 million. We expect total year revenue
to be between $385 million and
$400 million. A reconciliation
of expected Adjusted EBITDA to the nearest GAAP financial measure
is included on Schedule D.
Conference Call
CSI Compressco will host a conference call to discuss first
quarter 2018 results today, May 7,
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.
First Quarter 2018 Cash Distribution on Common Units
On April 20, 2018, CSI Compressco
announced that the board of directors of its general partner
declared a cash distribution attributable to the first quarter of
2018 of $0.1875 per outstanding
common unit, which will be paid on May 15,
2018 to common unitholders of record as of the close of
business on May 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 first quarter of 2018 was 0.64X.
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
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
(In Thousands, Except
per Unit Amounts)
|
Revenues:
|
|
|
|
|
|
Compression and
related services
|
53,735
|
|
53,359
|
|
50,497
|
Aftermarket
services
|
14,016
|
|
10,854
|
|
9,387
|
Equipment
sales
|
17,666
|
|
18,888
|
|
5,668
|
Total
revenues
|
85,417
|
|
83,101
|
|
65,552
|
Cost of revenues
(excluding depreciation and amortization expense):
|
|
|
|
|
|
Cost of compression
and related services
|
31,380
|
|
30,763
|
|
29,043
|
Cost of aftermarket
services
|
11,157
|
|
8,440
|
|
7,622
|
Cost of equipment
sales
|
15,449
|
|
16,145
|
|
5,396
|
Total cost of
revenues
|
57,986
|
|
55,348
|
|
42,061
|
Depreciation and
amortization
|
17,367
|
|
17,280
|
|
17,295
|
Selling, general, and
administrative expense
|
8,297
|
|
7,760
|
|
8,766
|
Interest expense,
net
|
11,433
|
|
11,232
|
|
10,383
|
Series A Preferred
fair value adjustment
|
1,553
|
|
1,561
|
|
1,865
|
Other (income)
expense, net
|
3,204
|
|
—
|
|
(38)
|
Income (loss) before
income tax provision
|
(14,423)
|
|
(10,080)
|
|
(14,780)
|
Provision (benefit)
for income taxes
|
1,314
|
|
593
|
|
813
|
Net income
(loss)
|
$
(15,737)
|
|
$
(10,673)
|
|
$
(15,593)
|
|
|
|
|
|
|
Net income per
diluted common unit
|
$
(0.40)
|
|
$
(0.29)
|
|
$
(0.46)
|
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; and
- determine the Partnership's ability to incur and service debt
and fund capital expenditures.
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,
write-off of unamortized financing costs, 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.
Schedule B -
Reconciliation of Net Income/(Loss) to Adjusted EBITDA,
Distributable Cash Flow and Distribution Coverage Ratio
(unaudited)
|
|
The following table
reconciles net income (loss) to Adjusted EBITDA, distributable cash
flow and distribution coverage ratio for the three month periods
ended March 31, 2018, December 31, 2017 and March 31,
2017:
|
|
|
Three Months
Ended
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
(In Thousands, Except
Ratios)
|
Net
income/(loss)
|
$
(15,737)
|
|
$
(10,673)
|
|
$
(15,593)
|
Interest expense,
net
|
11,433
|
|
11,232
|
|
10,383
|
Provision for income
taxes
|
1,314
|
|
593
|
|
813
|
Depreciation and
amortization
|
17,367
|
|
17,280
|
|
17,295
|
Non-cash cost of
compressors sold
|
324
|
|
1,768
|
|
2,316
|
Equity
compensation
|
(604)
|
|
(933)
|
|
956
|
Series A Preferred
transaction costs
|
—
|
|
—
|
|
37
|
Series A Preferred
fair value adjustments
|
1,552
|
|
1,561
|
|
1,865
|
Un-amortized
financing costs charged to expense
|
3,541
|
|
—
|
|
—
|
Omnibus expense paid
in equity
|
—
|
|
—
|
|
1,746
|
Severance
|
—
|
|
—
|
|
55
|
Software
implementation
|
—
|
|
194
|
|
—
|
Adjusted
EBITDA
|
$
19,190
|
|
$
21,022
|
|
$
19,873
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
Current income tax
expense
|
1,218
|
|
311
|
|
691
|
Maintenance capital
expenditures
|
4,337
|
|
6,936
|
|
4,580
|
Interest
expense
|
11,433
|
|
11,232
|
|
10,383
|
Severance
|
—
|
|
—
|
|
55
|
Plus:
|
|
|
|
|
|
Non-cash interest
expense
|
2,684
|
|
2,955
|
|
3,053
|
Distributable cash
flow
|
4,886
|
|
5,498
|
|
7,217
|
|
|
|
|
|
|
Cash distribution
attributable to period
|
7,616
|
|
7,389
|
|
6,512
|
|
|
|
|
|
|
Distribution coverage
ratio
|
0.64x
|
|
0.74x
|
|
1.11x
|
Schedule C -
Reconciliation of Net Cash Provided by Operating Activities to Free
Cash Flow (unaudited)
|
|
The following table
reconciles net cash provided by operating activities to free cash
flow for the three month periods ended March 31, 2018, December 31,
2017 and March 31, 2017:
|
|
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
|
(In
Thousands)
|
|
Cash from
operations
|
(365)
|
|
14,496
|
|
1,821
|
|
Capital expenditures,
net of sales proceeds
|
(17,039)
|
|
(11,413)
|
|
(7,215)
|
|
Free cash
flow
|
(17,404)
|
|
3,083
|
|
(5,394)
|
|
Schedule D -
Reconciliation of Expected Adjusted EBITDA To Income/(Loss) Before
Income Taxes
|
|
The following table
reconciles projected total year 2018 Adjusted EBITDA to
income/(loss) before income taxes.
|
|
|
Full Year 2018
Guidance
|
|
Low
Range
|
|
High
Range
|
|
(In
Thousands)
|
Adjusted
EBITDA
|
$
95,000
|
|
$
100,000
|
Un-amortized
financing costs charged to expense
|
3,600
|
|
3,500
|
Series A Preferred
fair value adjustments
|
1,600
|
|
1,500
|
Equity
compensation
|
2,200
|
|
2,600
|
Non-cash cost of
compressors sold
|
2,500
|
|
1,800
|
Depreciation and
amortization
|
70,000
|
|
74,000
|
Interest expense,
net
|
52,000
|
|
54,000
|
Income (loss) before
income taxes
|
$
(36,900)
|
|
$
(37,400)
|
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SOURCE CSI Compressco LP