Usa Compression Partners, Lp · NYSE:USAC
Usa Compression Partners, Lp — J.P. Morgan Energy Conference 2019
36 slides from Usa Compression Partners, Lp's conference presentation, Jun 18, 2019
Slide 1: USA Compression Partners, LP – J.P. Morgan Energy Conference
USA Compression Partners, LP J.P. Morgan Energy Conference June 18, 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 ETP, and o
Slide 4: Q1 2019 Update & Market Commentary
Q1 2019 Update & Market Commentary
Slide 5: Q1 2019 Recap
Q1 2019 Recap Solid Start to 2019; Continued Attractive Marketplace; Successful Integration ■ Q1 2019 fleet HP of 3.6 million / average revenue generating HP of 3.3 million Operational ■ Average horsepower utilization of 94.2% (vs. 93.8% in Q4 2018) Update ■ Upward rate movement & continued strong d
Slide 6: Marketplace Commentary
Marketplace Commentary Solid Underlying Fundamentals Leading to Attractive Outlook • Crude oil price up meaningfully from 2018 lows Supply / – OPEC supply cut working as planned; global inventories remain tight Demand • Crude economics in key basins attractive for continued exploration & production
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 • Natural gas “noise” aside, production volumes out of Permian / Delaware continuing to increase • Gas production volumes up ~30% year-over-year, per EIA, to over 14 Bcf/d as of May 2019 • Takeaway capacity on its
Slide 10: 2019 Priorities
2019 Priorities Capex Program Remains Conservative; Commercial Initiatives Continuing Capex Commercial Balance Sheet • Currently have ~103,000 of • New deliveries committed • Current leverage levels large HP on order for to large, existing appropriate for business remainder of 2019 customers stabili
Slide 11: 2019 Capex Program
2019 Capex Program 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) – These units are in greatest demand and as a result, achieve the most attractive economic retur
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 hy—— 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) $1.7 billion – Focused primarily on large horsepower (1,000 HP+) applications Preferred Equity 0
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, which was impacted $ /MMBTU by lower CDM fleet utilization, 100.0% has now returned to higher levels $14 90.0% $12 Horsepower 80.
Slide 25: USAC Customer Overview
USAC Customer Overview Top 20 Customers: Diverse Counterparties & Long-Term Relationships % of Length of Total % of Length of Total Customer Rev(1) relationship HP Customer Rev(1) relationship HP Independent Public E&P 8% 17 Years 289K Independent Public E&P 2% 10 Years 64K Large Private E&P 4% 20 Y
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 $1.50 Q2 2016
Slide 28: Operational and Financial Performance
Operational and Financial Performance Avg. Revenue Generating HP (000s) Revenue ($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 3,281 3,000 2,760 $584 $600 2,000 $400 1,409 1,378 1,506 1,201 $271
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 hy—— 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 Three Months Ended March 31, 2019 2018 Net income (loss) $ 6,587 $ (23,370) Interest expense, net 28,857 — Depreciation and amortization 58,924 44,672 Income tax expense (benefit) 104 (435) EBITDA $ 94,472 $ 20,867 Impairment of compression equipment 3,234 — Interest income
Slide 33: Non-GAAP Reconciliations, cont'd.
Non-GAAP Reconciliations, cont’d. Years Ended December 31, ($ in 000's) 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Net income (loss) $ (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 78,377 25,129 21,087
Slide 34: Non-GAAP Reconciliations, cont'd.
Non-GAAP Reconciliations, cont’d. Three Months Ended March 31, 2019 2018 Net income (loss) $ 6,587 $ (23,370) Non-cash interest expense 1,680 — Non-cash income tax expense (benefit) 14 (435) Depreciation and amortization 58,924 44,672 Unit-based compensation expense 3,134 435 Impairment of compressi
Slide 35: Non-GAAP Reconciliations, cont'd.
Non-GAAP Reconciliations, cont’d. ($ in 000's) Guidance Net income $20.0 million to $60.0 million Plus: Interest expense, net $127.5 million Plus: Depreciation and amortization $222.0 million Plus: Income tax expense $0.5 million EBITDA $370.0 million to $410.0 million Plus: Interest income on capit
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, Distributable Cash Flow, Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio, as well as horsepower utilizati
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