Usa Compression Partners, Lp · NYSE:USAC
Usa Compression Partners, Lp — Citi One-on-One Midstream / Energy Infrastructure Conference 2019
36 slides from Usa Compression Partners, Lp's conference presentation, Aug 14, 2019
Slide 1: USA Compression Partners, LP
USA Compression Partners, LP Citi One-on-One Midstream / Energy Infrastructure Conference August 14, 2019
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements relating to the Partnership’s operations that are based on management’s current expectations, estimates and projections about its operations. You can identify many of these forward-looking statements by words such as “believe,” “expect
Slide 3: Important Note Regarding Non-Predecessor Information
Important Note Regarding Non-Predecessor Information On April 2, 2018, the Partnership consummated the acquisition of CDM Resource Management LLC and CDM Environmental & Technical Services LLC, which together represent the CDM Compression Business (the “USA Compression Predecessor”), from ETO, and o
Slide 4: Q2 2019 Update & Market Commentary
Q2 2019 Update & Market Commentary
Slide 5: Q2 2019 Recap
Q2 2019 Recap Solid 1st Half of 2019; Steady Utilization and Improved Pricing ■ Q2 2019 fleet HP of 3.7 million / average revenue generating HP of 3.3 million Operational ■ Average horsepower utilization of 94.6% (vs. 94.2% in Q1 2019) Update ■ Upward rate movement & continued strong demand for larg
Slide 6: Marketplace Commentary
Marketplace Commentary Demand-Driven Business Model: Fleet Remains Highly Utilized • Crude oil price volatility impacted by global, geopolitical factors Supply / – Economic growth, trade wars, etc. affecting sentiment Demand • Domestic natural gas production continues to satisfy growing demand – Mac
Slide 7: Infrastructure Development Will Require Compression (Permian)
Infrastructure Development Will Require Compression Permian Gas Pipeline Supply & Demand 24 Bcf/d 22 20 PGAP 18 Permian-to-Katy (P2K) Pecos Trail 16 Bluebonnet Whistler 14 Permian Highway Gulf Coast Express 12 WesTex Expansion ~ 5 Bcf/D Old Ocean Incremental 10 Compression Base Takeaway Requirements
Slide 8: Infrastructure Development Will Require Compression (Marcellus/Utica)
Infrastructure Development Will Require Compression Marcellus / Utica Gas Pipeline Supply & Demand: Constraints Removed 50 Bcf/d 45 Southeastern Trail Project Buckeye Xpress 40 Northeast Supply Enhancement Atlantic Coast Pipeline ~ 15 Bcf/D Incremental 35 Mountain Valley Pipeline Compression Riverva
Slide 9: Permian / Delaware Basin Dynamics
Permian / Delaware Basin Dynamics Gas Production Continues; Compression Demand Strong • Low natural gas prices aside, production volumes out of Permian / Delaware continue to increase • Gas production volumes up ~30% year-over-year, per EIA, to over 14 Bcf/d as of July 2019 • Takeaway capacity on it
Slide 10: 2019 Priorities Remain Unchanged
2019 Priorities Remain Unchanged Capex Program Remains Conservative; Commercial Initiatives Continuing Capex Commercial Balance Sheet • Currently have ~47,000 of • New deliveries committed • Current leverage levels large HP on order for to large, existing appropriate for business remainder of 2019 c
Slide 11: 2019 Capex Program; Initial 2020 Order
2019 Capex Program; Initial 2020 Order Scaled Back Capex Program for 2019 • Moderated capex spend in 2019 & allocating capital to the highest-return projects – Primarily 3600-series large horsepower units (2,500 HP & above) – Lead times have shortened (~30 weeks) • 2019 growth capital plan remains u
Slide 12: Macro Overview & Demand Drivers
Macro Overview & Demand Drivers
Slide 13: Large HP Compression is NOT an Oil Field Service
Large HP Compression is NOT an Oil Field Service Large HP Strategy Has Proven Itself More Stable Over Cycles Large HP Small HP Nature of Application Gathering Systems, Central Delivery Well-head service Points, Processing Facilities Asset Churn Large infrastructure applications Commodity sensitivity
Slide 14: Domestic Natural Gas Supply & Demand Growth
Domestic Natural Gas Supply & Demand Growth Natural Gas Supply & Demand Continues to Grow… as does the need for midstream infrastructure to move it through the pipeline system EIA projects significant increase in natural gas demand by 2050 Projected Natural Gas Demand (Bcf/d)(1) Exports to Mexico: -
Slide 15: Macro Thesis: The Shift to Shale
Macro Thesis: The “Shift to Shale” Shale Gas Expected to be the Primary Source in Future ■ Shale Ramp: Production from shale has now pulled ■ Shale gas is typically produced at lower wellhead even with all other sources pressures (0-50 PSIG) in contrast to conventional gas – 2017 est. ~ 15 Tcfe of s
Slide 16: Key Industry Drivers for Compression Services
Key Industry Drivers for Compression Services Compression is Critical Midstream Infrastructure for Producing & Transporting Hydrocarbons ■ ~85% of USAC’s business (by HP) is installed in natural gas-based infrastructure applications Overall Gas (“Midstream”) Demand & ■ Projected increasing natural g
Slide 17: Customer Activity
Customer Activity E&P Activity Benefitting from Efficiencies; Compression Demand Follows ■ Growth in drilling activity has moderated ■ Producers continue to be active in attractive areas, but takeaway bottlenecks have had an impact ■ Recent crude oil stability helping; gas demand/supply increase con
Slide 18: USAC Overview
USAC Overview Sy COMPRESSION
Slide 19: USAC Overview
USAC Overview Large Horsepower Strategy at Core of USAC Business Business Overview USAC Market Statistics ■ Geographically diversified provider of ($ in billions) compression services LP Equity Value $1.6 billion – Focused primarily on large horsepower (1,000 HP+) applications Preferred Equity 0.5 b
Slide 20: Geographic Presence
Geographic Presence CDM Acquisition Expanded Geographic Footprint Northeast Mid-Con Region ~ 23% Region (OK) ~ 17% Permian Southeast Region ~ 29% Region (ArkLa, Rockies, NE Texas) ~ 15% Gulf Coast Region (LA, TX Coast, TX South) ~ 16% CDM USAC Note: Regional % breakdowns represent active fleet horse
Slide 21: Organizational Chart
Organizational Chart Energy Transfer Combined, the Energy Family Transfer family owns ~48% of USAC Public Unitholders USA Compression GP, LLC (our general partner) 52.3% 39.4% LP LP Non-econ Preferred GP; Unitholders 8.3% LP Preferred Units USA Compression Partners, LP Note: Percentages reflect USAC
Slide 22: Key Strategic Priorities
Key Strategic Priorities Consistent • Further strengthen the USAC “Southwest Airlines” standardized business model Business • Continue focus on large HP class units Model • Implement best practices across the combined business Prudent • With capital scarcity, emphasizing highest-return opportunities
Slide 23: Business Model Allows for Prudent Capital Spending
Business Model Allows for Prudent Capital Spending….. ■ Large HP focus ideally suited for growth and stability ■ Shale production has changed the industry: demand for larger, more flexible assets ■ Assets provide growth when marketplace demands (and willing to pay) ■ Ability to rein in spending and
Slide 24: Leading to Cash Flow and Asset Stability Through Cycles
…..Leading to Cash Flow and Asset Stability Through Cycles Post-CDM Pre-CDM Acquisition Non-Predecessor (1) Acquisition (2) Horsepower Utilization HH Nat Gas Utilization, impacted by lower $ /MMBTU CDM fleet, has now returned to 100.0% higher, fully-utilized levels $14 90.0% $12 Horsepower 80.0% uti
Slide 25: USAC Customer Overview
USAC Customer Overview Top 20 Customers: Diverse Counterparties & Long-Term Relationships % of Length of % of Length of Customer Rev(1) relationship Total HP Customer Rev(1) relationship Total HP Independent Public E&P 8% > 10 years 288K Independent Public E&P 2% > 10 Years 64K Large Private E&P 4%
Slide 26: Large Horsepower Gas Applications Drive Stability
Large Horsepower Gas Applications Drive Stability Compression Unit Size Matters USAC Focus: Gas Compression Industry: Key Characteristics by Size Small - Large X Large XX Large XXX Large Commentary Medium Compression 400 – 1,000 – 1,500 – 2,300 – More Unit 0 – 400 HP horsepower HP Range 1,000 HP 1,5
Slide 27: Balancing Distribution Stability and Leverage
Balancing Distribution Stability and Leverage Annualized Distributions per Common Unit Stability in Distribution through the cycle Post-CDM $2.50 Pre-CDM Acquisition Non-Predecessor (1)(2) Acquisition (2)(4) $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.00 $1.50 Q3 2016
Slide 28: Operational and Financial Performance
Operational and Financial Performance Avg. Revenue Generating HP (000s) Revenue ($MM) Post-CDM Post-CDM 4,000 Pre-CDM Acquisition Non-Predecessor (1) Acquisition (1)(2) Pre-CDM Acquisition Non-Predecessor (1) Acquisition (1)(2) $800 3,270 3,000 2,760 $584 $600 2,000 $400 $344 1,409 1,378 1,506 1,201
Slide 29: USAC Investment Highlights
USAC Investment Highlights USAC’s Business Prospects Driven By Positive Macro Drivers in the Midstream Industry ■ Continued focus on infrastructure-oriented compression applications; compression is critical to Critical transporting natural gas to end markets Midstream ■ Shale gas continues to reward
Slide 30: Appendix
Appendix Sy COMPRESSION
Slide 31: Compression Throughout the Value Chain
Compression Throughout the Value Chain Midstream Compression Offers Cash Flow & Customer Stability Lower (Sm. Volumes) Pressure Regime Higher (Lg. Volumes) Crude Oil Wells Rate-Base Applications • Gas Lift Midstream Applications • Interstate Pipeline • Gas Reinjection • Regional Gathering • Trunklin
Slide 32: Non-GAAP Reconciliations
Non-GAAP Reconciliations 31 © 2019 USA COMPRESSION PARTNERS, LP | CONFIDENTIAL
Slide 33: Non-GAAP Reconciliations, cont’d.
Non-GAAP Reconciliations, cont’d. Notes: Represents the results of operations of the USA Compression Predecessor only for the three months ended March 31, 2018 and the results of operations of the Partnership, which includes the USA Compression Predecessor, for the nine months ended December 31, 201
Slide 34: Non-GAAP Reconciliations, cont’d.
Non-GAAP Reconciliations, cont’d. 33 © 2019 USA COMPRESSION PARTNERS, LP | CONFIDENTIAL
Slide 35: Non-GAAP Reconciliations, cont’d.
Non-GAAP Reconciliations, cont’d. 34 © 2019 USA COMPRESSION PARTNERS, LP | CONFIDENTIAL
Slide 36: Basis of Presentation; Explanation of Non-GAAP Financial Measures
Basis of Presentation; Explanation of Non-GAAP Financial Measures This presentation includes the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin Percentage, gross operating margin, Distributable Cash Flow, Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio, as well
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