(CSI Compressco, 13.May.2022) — CSI Compressco LP (NASDAQ: CCLP) announced first quarter 2022 results.
The operating results presented throughout this document include the operating results of Spartan Treating (as defined in our 10-K filed 14 Mar. 2022) due to the previously reported acquisition on 10 November 2021. As the Partnership and Spartan Treating were under common control at the time of Spartan’s acquisition of the Partnership’s general partner, the results of operations have been combined for the Partnership and Spartan Treating from the date of common control, which was 29 January 2021. As a result, operating results and certain financial metrics for the first quarter 2021 vary from what we previously reported.
First Quarter 2022 Results:
- Total revenues were $80mn compared to $69.8mn in the first quarter 2021.
- Contract services revenue increased to $62.8mn in the first quarter 2022 compared to $56.2mn in the first quarter 2021.
- Net loss was $6.6mn compared to a net loss of $12.9mn in the first quarter 2021.
- Adjusted EBITDA was $26.9mn compared to $23.3mn in the first quarter 2021.
- Compression fleet utilization increased to 81.4% compared to 76.2% in the first quarter 2021.
- Operating horsepower increased to 973,428 compared to 900,328 in the first quarter 2021.
- Distributable cash flow was $10.3mn compared to $6.6mn in the first quarter 2021.
- Distribution coverage ratio was 7.3x in the first quarter 2022 compared to 13.6x in the first quarter 2021.
- First quarter of 2022 distribution of $0.01 per common unit will be paid on 13 May 2022.
“During the first quarter of 2022, we began to see the positive effects of the increase in activity levels from our customers. This improvement has led to revenue growth from both higher utilization and improved pricing. This revenue growth, along with our proactive management of costs, resulted in an increase in Adjusted EBITDA compared to both the fourth quarter of 2021 and the first quarter of 2021. We have orders to redeploy a significant percentage of our idle fleet over the balance of the year. In addition, while we have existing orders for additional new high horsepower units to be delivered over the remainder of this year, our incremental capital expenditure focus for the near term will be deploying our available fleet as efficiently as possible, which includes converting existing units to electric motor-drive” commented John Jackson, Chief Executive Officer of CSI Compressco.
“Supply chain issues continue to persist across many industries, including the compression sector, but we have been able to be nimble and navigate these issues with our suppliers and our people. This has allowed us to redeploy equipment in a cost-effective manner this year. We expect the remainder of 2022 to be very active and expect utilization to continue to improve throughout the year. We set our first 1,250 horsepower elective motor-drive unit in the first quarter of 2022. Our inquiry level for electric motor-drive units continues to expand. In addition to our existing orders, we have numerous customers exploring the amount, timing and size of their plans for deploying electric motor-drive units. To date, we have been able to convert older existing units to electric drive and expect to continue these efforts throughout this year and into 2023”.
“We implemented our new ERP system effective January 1, 2022. While these conversions are never easy, we have completed our first quarter using the new system. I am very thankful to all of our employees who put an enormous amount of effort into the transition to a new system while still executing their normal workload. We expect to optimize our use of this system over the next couple of quarters and expect to be proficient and efficient in the 2nd half of the year”.
Net cash provided by operating activities was $11.8mn in the first quarter, compared to net cash provided by operating activities of $11.5mn in the first quarter of 2021. Distributable cash flow in the first quarter was $10.3mn, resulting in a distribution coverage ratio of 7.3x.
This press release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”): Adjusted EBITDA, distributable cash flow, distribution coverage ratio, free cash flow, and net leverage ratio. Please see Schedules B-E for reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures.
Unaudited results of operations for the quarter ended 31 March 2022 compared to the prior quarter and the corresponding prior year quarter are presented in the table below.
|Three Months Ended|
|(In Thousands, except percentage changes)|
|Net loss||$ (6,570)||$ (17,236)||$ (12,895)||62 %||49 %|
|Adjusted EBITDA||$ 26,885||$ 26,381||$ 23,268||2 %||16 %|
|Distributable cash flow||$ 10,332||$ 9,254||$ 6,589||12 %||57 %|
|Net cash provided by operating activities||$ 11,770||$ 4,155||$ 11,544||183 %||(2) %|
|Free cash flow||$ 5,835||$ (21,287)||$ 7,136||— %||(18) %|
As of 31 March 2022, total compressor fleet horsepower was 1,195,755 and fleet horsepower in service was 973,428 for an overall fleet utilization rate of 81.4% (we define the overall service fleet utilization rate as the service compressor fleet horsepower in service divided by the total compressor fleet horsepower). Idle horsepower equipment under repair is not considered utilized, but we do count units on standby as utilized when the client is being billed a standby service rate.
Cash on hand at the end of the first quarter was $17.3mn. At the end of the first quarter, $58.5mn was outstanding on the Partnership’s credit facilities. Our debt consists of $400mn of first lien secured bonds due in 2025 and $172.7mn of second lien secured bonds due in 2026. Net leverage ratio at the end of the quarter was 5.9X.
Capital Expenditures – 2022 Expectations
We expect capital expenditures for 2022 to be between $50mn and $60mn. These capital expenditures include approximately $18mn and $22mn of maintenance capital expenditures, approximately $24mn and $28mn of capital expenditures primarily associated with the expansion of our contract services fleet, and $8mn and $10mn of capital expenditures related to investments in technology, primarily software and systems.
First Quarter 2022 Cash Distribution on Common Units
On 19 April 2022, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended 31 March 2022 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This distribution will be paid on 13 May 2022 to each of the holders of common units of record as of the close of business on 30 April 2022. The distribution coverage ratio for the first quarter of 2022 was 7.3x.
CSI will host a conference call to discuss first quarter results today, 13 May 2022, at 10:30 a.m. Eastern Time. The phone number for the call is 1-866-374-8397. The conference call will also be available by live audio webcast and may be accessed through CSI’s website at www.csicompressco.com. An audio replay of the conference call will be available at 1-877-344-7529, conference number 10167271, for one week following the conference call and the archived webcast will be available through CSI’s website for thirty days following the conference call.