CSI Continues Leverage Reduction

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(CSI, 7.Aug.2023) — CSI Compressco LP (NASDAQ: CCLP) announced second quarter 2023 results.

Second Quarter 2023 Results:

  • Total revenues were $96.8mn compared to $84.5mn in the second quarter 2022.
  • Contract services revenue increased to $70.5mn compared to $64.3mn in the second quarter 2022.
  • Net loss was $2.6mn compared to a net loss of $6.8mn in the second quarter 2022.
  • Adjusted EBITDA was $32.5mn compared to $26.4mn in the second quarter 2022.
  • Trailing Twelve Months Adjusted EBITDA was $125.4mn.
  • Compression fleet utilization increased to 87.0% compared to 82.8% in the second quarter 2022.
  • Operating horsepower increased to 1,025,586 compared to 992,597 in the second quarter 2022.
  • Distributable cash flow was $11.4mn compared to $8.4mn in the second quarter 2022.
  • Distribution coverage ratio was 8.1x compared to 5.9x in the second quarter 2022.
  • Second quarter of 2023 distribution of $0.01 per common unit will be paid on 14 August 2023.
  • Net Leverage Ratio was 5.1x compared to 6.1x in the second quarter 2022.
  • CSI has no significant credit facility or debt maturities until 2025.

Management Commentary

John Jackson, CEO of CSI Compressco commented, “Our second quarter results reflect the strength of the natural gas compression market and the improving operational execution by CSI Compressco. The operating results reflect continued improvement in EBITDA and leverage while maintaining an essentially flat utilization from the 1st quarter to the second quarter of 2023. The forward outlook is encouraging as the visibility and sustainability of these results continues to improve.

Demand for medium and large HP (600 HP+) remains strong as evidenced by utilization rates across the industry, the tight available supply, long lead times for new build units, the sustained incremental demand from customers and lack of speculative new build large horsepower units. Our overall fleet utilization remained relatively flat at 87.0% as did the reciprocating fleet at 93.2%.  Our reciprocating fleet represents approximately 83% of our total horsepower. Regarding the incremental new build demand, we have committed capital for 2023 and 2024 with signed contracts for large HP units for delivery beginning in the fourth quarter 2023 and continuing into the third quarter of 2024.

Our net leverage metric continues to improve, currently at 5.1x, with our full year guidance range of 4.8x – 5.2x remaining unchanged. We remain committed to limiting our capital spending during 2023 such that CSI Compressco will generate free cash flow.

The long-term outlook has continued to improve with longer-term contracts and improving returns.  The visibility and dollar value of future revenue under contract is multiples higher compared to any prior cycle in our history.  In addition to longer tenor contracts, we continue to increase the percentage of multi-year contracts that have inflation protection as existing contracts are renewed and new build contracts are executed. We view the future with a high degree optimism as the visibility of strong results and activity lengthens which strengthens our earnings capability and accelerates the improvement in CSI Compressco’s financial metrics.”

Distributable cash flow in the second quarter was $11.4mn compared to $8.4mn in the second quarter 2022. Our distribution coverage ratio was 8.1x for the second quarter of 2023.

Unaudited results of operations for the quarter ended 30 June 2023 compared to the prior quarter and the corresponding prior year quarter are presented in the table below.

Three Months Ended
30 Jun
31 Mar
30 Jun
Q2-2023 v
Q2-2023 v
(In Thousands, except percentage changes)
Net loss$         (2,573)$         (2,613)$         (6,828)2 %62 %
Adjusted EBITDA$        32,530$        30,740$        26,4256 %23 %
Distributable cash flow$        11,390$        12,462$           8,357(9) %36 %
Net cash provided by (used in) operating activities$           4,772$        19,854$       (10,201)(76) %147 %
Free cash flow$         (2,872)$           5,543$       (22,031)(152) %87 %

As of 30 June 2023, total compressor fleet horsepower was 1,178,427, fleet horsepower in service was 1,025,586, for an overall fleet utilization rate of 87.0% (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.

Balance Sheet

Cash on hand at the end of the second quarter was $12.3mn. At the end of the second quarter, $63.8mn was outstanding on the Partnership’s credit facilities. Our debt also includes $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 5.1x.

As of 30 June 2023, our borrowing base availability under our credit facilities was $32.5mn. Total liquidity at quarter-end was $44.8mn. As of 3 August 2023, our borrowing base availability under our credit facilities totaled $41.9mn, and total liquidity was approximately $51.6mn. This compares to total liquidity of $46.4mn at year end 2022.

Capital Expenditures – 2023 Expectations

We expect capital expenditures for 2023 to be between $43mn and $48mn. These capital expenditures include approximately $17mn and $19mn of maintenance capital expenditures, approximately $23mn and $25mn of capital expenditures primarily associated with the expansion of our contract services fleet, and $3mn and $4mn of capital expenditures related to investments in technology, primarily software and systems.

Second Quarter 2023 Cash Distribution on Common Units

On 17 July 2023, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended 30 June 2023 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 14 August 2023 to each of the holders of common units of record as of the close of business on 28 July 2023. The distribution coverage ratio for the second quarter of 2023 was 8.1x.

Conference Call

CSI will host a conference call to discuss second quarter results today, 7 August 2023, 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 10181167, replay code 1276488, 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.


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