Usa Compression Partners, Lp · NYSE:USAC
Usa Compression Partners, Lp — J.P. Morgan High Yield and Leveraged Finance Conference 2020
32 slides from Usa Compression Partners, Lp's conference presentation, Feb 25, 2020
Slide 1: USA Compression Partners, LP
USA Compression Partners, LP J.P. Morgan High Yield and Leveraged Finance Conference February 25, 2020
Slide 2: Disclaimer
Disclaimer This presentation contains forward‐looking statements relating to the operations of USA Compression Partners, LP (the “Partnership”) that are based on management’s current expectations, estimates and projections about its operations. You can identify many of these forward‐looking statemen
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 Energy Tra
Slide 4: Agenda
Agenda I. Introduction II. Q4 Review and 2020 Outlook III. Natural Gas: Not Going Away IV. Q&A V. Appendix 3 © 2020 USA COMPRESSION PARTNERS, LP | CONFIDENTIAL
Slide 5: Introduction
Introduction —— SEES
Slide 6: USAC Overview
USAC Overview Large Horsepower Strategy Critical for Domestic Natural Gas Infrastructure Business Snapshot USAC Market Statistics ■ USAC provides compression services across a ■ Public since 1/2013 (NYSE: USAC) geographically–diversified operating area ■ Avg. Daily Trading Volume: ~230,000 units ■ 2
Slide 7: Why Focus on Midstream Compression?
Why Focus on Midstream Compression? Operational / Cash Flow Stability with Strong Counterparties Wellhead (Gas & Oil) Midstream Downstream Uses Gas Lift Regional Gathering Interstate Pipelines Gas Reinjection Central Delivery Point Trunkline Gathering Processing Plants Gas Storage Customer Base Broa
Slide 8: Business Model Allows for Prudent Capital Spending
Business Model Allows for Prudent Capital Spending….. Historical Balance Between Capital Spending and Cash Flow Stability ■ Large HP focus ideally suited for growth and stability ■ Assets provide growth based on marketplace demands ■ Ability to rein in spending and operate for stable cash flow when
Slide 9: 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 has remained at $ /MMBTU higher, fully‐utilized levels 100.0% $14 90.0% $12 Horsepower 80.0% utilization average: ~93% for over a
Slide 10: Leverage Reduction Over Time
Leverage Reduction Over Time Cash Flow Stability Has Allowed USAC to Reduce Leverage ■ USAC has decreased leverage meaningfully since the 2013 IPO ■ Continued prudent management of leverage to suit business stability USAC Historical Leverage(1) Post‐CDM Pre‐CDM Acquisition Non‐Predecessor (2) Acquis
Slide 11: Diversification – The "Right" Operating Regions
Diversification – The “Right” Operating Regions Rockies = Northeast = ~5% ~23% Mid‐ Continent = ~15% Permian/ Louisiana / Delaware Basin = East TX = ~34% ~8% Gulf Coast = ~16% Note: Regional % breakdowns represent active fleet horsepower at 12/31/19; excludes non‐compression equipment. 10 © 2020 USA
Slide 12: Organizational Chart
Organizational Chart Energy Transfer L.P. 100% Energy Transfer Operating, L.P. Public 100% 39.4% LP Preferred Common Interest Unitholders Unitholders USA Compression GP, LLC 52.3% LP Preferred Interest (our general partner) Units Non‐economic GP, 8.3% LP Interest USA Compression Partners, LP Issuer
Slide 13: Key Credit Highlights
Key Credit Highlights ■ 20+ year history focused on large HP applications using standardized, flexible equipment Focused ■ Compression services is substantially all we do; geographic diversity enhances business stability Business Model ■ Fully‐integrated CDM acquisition further strengthened asset ba
Slide 14: Q4 Review and 2020 Outlook
Q4 Review and 2020 Outlook COMPRESSION
Slide 15: Q4 2019 Recap
Q4 2019 Recap Infrastructure Business Strategy Has Resulted in Continued Stable Performance ■ Q4 2019 fleet HP of 3.7 million / average revenue generating HP of 3.3 million Operational ■ Q4 2019 average horsepower utilization of 93.9% Update ■ Upward pricing movement & continued demand for large HP
Slide 16: 2020 Outlook & Focus
2020 Outlook & Focus Capex Program Scaled Back vs 2019 ■ Customers finalizing 2020 budgets; anticipate spending reductions – positive for compression outsourcing ■ USAC high‐grading customers – longer term contracts with strong counterparties ■ Highest‐return customer projects will get completed, re
Slide 17: Natural Gas: Not Going Away!
Natural Gas: Not Going Away! COMPRESSION
Slide 18: Moderating Rig Count but Production Increases Expected
Moderating Rig Count….but Production Increases Expected Slowing Rig Count / Production in Face of Strong Demand Should Bode Well for Nat Gas ■ Overall domestic rig counts are down (~60% off recent highs) (1) – Gas‐directed rigs are down >90% off 2008 highs, aided by economics of gassy oil plays (i.e
Slide 19: Global Natural Gas Demand
Global Natural Gas Demand Natural Gas Is Not Going Away ■ World energy usage expected to grow with growing GDP – Total energy usage expected to grow by ~50% by 2050 (1) – Renewables growing quickly, but gas will still be critical ■ Natural gas and petroleum still expected to meet much of energy need
Slide 20: Domestic Natural Gas Demand
Domestic Natural Gas Demand Rising Baseload Natural Gas Demand ■ Natural gas domestic consumption is up 10.5 Bcf/day (~14%) since 2014 to 83.3 Bcf/d in 2018 (1) – Majority of increase (~6.4 Bcf/d) took place in 2018 ■ 1H 2019 increased over 1H 2018 by 2.2 Bcf/d to 84.2 Bcf/d (1) ■ Largest driver has
Slide 21: LNG Baseload Demand
LNG Baseload Demand LNG Growing Annually: Large Increases Are Coming ■ LNG export capacity has increased substantially in last twelve months – to >7 Bcf/d (2) – Sustained demand for feedgas is creating “baseload”‐type demand dynamics – Positive for compression as baseload gas demand is steady and re
Slide 22: Domestic Natural Gas Demand Growth
Domestic Natural Gas Demand Growth ■ Natural Demand Continues to Grow…with Large Increases from… Projected Natural Gas Demand (Bcf/d)(1) Exports to Mexico: 140 ~23% growth ‐ Growing power needs to be met by US over 30 years! 118 shale gas 120 113 109 ‐ ~6 Bcf/d to Mexico by 2020 100 96 88 LNG Export
Slide 23: Appendix
Appendix k—— COMPRESSION
Slide 24: 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 297K Independent Public E&P 2% > 10 Years 62K Large Private E&P 4%
Slide 25: 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 More 400 – 1,000 – 1,500 – 2,300 – Unit 0 – 400 HP horsepower HP Range 1,000 HP 1,5
Slide 26: 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 – 2019 est. ~ 26 Tcfe of s
Slide 27: 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 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 3,279 $698 3,000 2,760 $584 $600 2,000 $400 1,409 1,378 1,506 1,201
Slide 29: Non-GAAP Reconciliations
Non‐GAAP Reconciliations Three Months Ended Year Ended December 31, December 31, ($ in 000's) 2019 2019 Net income $ 9,281 $ 39,132 Interest expense, net 32,984 127,146 Depreciation and amortization 58,227 231,447 Income tax expense 1,563 2,186 EBITDA $ 102,055 $ 399,911 Interest income on capital l
Slide 30: Non-GAAP Reconciliations, cont'd.
Non‐GAAP Reconciliations, cont’d. Years Ended December 31, ($ in 000's) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Net income (loss) $ 39,132 $ (10,551) $ 11,440 $ 12,935 $ (154,273) $ 24,946 $ 11,071 $ 4,503 $ 69 $ 10,479 $ 21,228 $ 20,911 $ 7,122 Interest expense, net 127,146
Slide 31: Non-GAAP Reconciliations, cont'd.
Non‐GAAP Reconciliations, cont’d. Three Months Ended Year Ended December 31, December 31, ($ in 000's) 2019 2019 Net income $ 9,281 $ 39,132 Non‐cash interest expense 1,987 7,607 Depreciation and amortization 58,227 231,447 Non‐cash income tax expense 1,024 1,376 Unit‐based compensation expense 2,88
Slide 32: 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 gross operating margin, Adjusted EBITDA, Distributable Cash Flow and Distributable Cash Flow Coverage Ratio. EBITDA, a measure not defined under U.S. generally accepted acc
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