Usa Compression Partners, Lp · NYSE:USAC
Usa Compression Partners, Lp — UBS Midstream, MLP & Utilities Conference 2019
35 slides from Usa Compression Partners, Lp's conference presentation, Jan 15, 2019
Slide 1: USA Compression Partners, LP
USA Compression Partners, LP UBS Midstream, MLP & Utilities Conference January 15-16, 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: Current Market Perspectives
Current Market Perspectives
Slide 4: USAC Unit Price
USAC Unit Price No Meaningful Correlation with Commodity Prices…or Is There? 180.0% USAC unit price appears to be more 160.0% correlated with downward crude oil moves…but for no apparent reason… 140.0% 120.0% 100.0% 80.0% 60.0% 12/30/2016 3/30/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018
Slide 5: 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 6: USAC View of Current Marketplace
USAC View of Current Marketplace Expect Present Cycle to be Shorter than Previous Cycles • Global crude inventories remain tight; demand stronger than reported?; waiver Supply / impact softening; IMO 2020 impact Demand • OPEC supply cut expected to be meaningful – in hopes of balancing the market; l
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: Compression Sector in 2019 vs 2014
Compression Sector in 2019 vs 2014 Cyclical Pullbacks are Not New, but Sector is Better Positioned in 2019 Current - 2019 Previous - 2014 Customer Balance Stronger; living within cash More constrained Sheets flow E&P Efficiencies Strong: 4+ years of innovations Evolving, but limited Compression Util
Slide 10: Macro Drivers Still Attractive
Macro Drivers Still Attractive The “Big Four” Natural Gas Demand Drivers Not Slowing Down LNG Exports PetChem/Industrial Demand • ~50mtpa (~30 Bcf/d) of projects in US currently • Readily available natgas feedstock driving petchem under construction; estimated ~35mtpa (~4.6 Bcf/d) investment to be s
Slide 11: 2019 Priorities & Opportunities
2019 Priorities & Opportunities Conservative Approach Coming into Year; Positioned to Benefit from Market Strength Capex Balance Sheet Commercial • Currently have ~120,000 of • Leverage remains a focus; • New deliveries committed large HP on order for 2019 expect manageable levels to large, existing
Slide 12: Macro Overview & Demand Drivers
Macro Overview & Demand Drivers
Slide 13: 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 14: 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 15: 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 16: 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 volatility causing some pause; gas demand/supply
Slide 17: USAC Overview
USAC Overview Tk—— COMPRESSION
Slide 18: USAC Overview
USAC Overview Large Horsepower Strategy at Core of USAC Business Business Overview USAC Market Statistics ■ Geographically diversified provider of compression ($ in billions) services LP Equity Value $1.4 billion – Focused primarily on large horsepower (1,000 HP+) applications Preferred Equity 0.5 b
Slide 19: 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 20: 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) 52.2% 39.5% LP LP Non-econ Preferred GP; Unitholders 8.3% LP Preferred Units USA Compression Partners, LP Note: Percentages reflect USAC
Slide 21: Key Strategic Priorities
Key Strategic Priorities • Continued focus on integrating all aspects of CDM into USAC Successful CDM • Back office migration substantially complete Integration • Alignment of strategy / policies / procedures is critical; build a single culture • Synergies on target, expect full run-rate during 2019
Slide 22: 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 23: Leading to Cash Flow and Asset Stability Through Cycles
…..Leading to Cash Flow and Asset Stability Through Cycles Utilization, which was impacted by lower CDM fleet utilization, Horsepower Utilization has now returned to higher levels HH Nat Gas $ /MMBTU 100.0% $14 90.0% $12 Horsepower 80.0% utilization average: ~93% for over a decade $10 70.0% Even whe
Slide 24: USAC Customer Overview
USAC Customer Overview Top 20 Customers: Diverse Counterparties & Long-Term Relationships % of Length of Total % of Length of Total Customer Rev(1) relationship HP Customer Rev(1) relationship HP Independent Public E&P 8% 17 Years 283K Major O&G 2% 4 Years 69K Large Private E&P 4% 20 Years 115K Priv
Slide 25: Large Horsepower Gas Applications Drives Stability
Large Horsepower Gas Applications Drives Stability Compression Unit Size Matters USAC Focus: Gas Compression Industry: Key Characteristics by Size Small Medium Large Ex. Large XX Large Commentary Compression More 400 – 1,000 – 1,500 – 2,300 – Unit 0 – 400 HP horsepower HP Range 1,000 HP 1,500 HP 2,3
Slide 26: Balancing Distribution Stability and Leverage
Balancing Distribution Stability and Leverage Annualized Distributions per Common Unit Stability in Distribution through the cycle USAC Historical Leverage(1) Note: Reflects USAC standalone for all periods prior to April 1, 2018. Q2 2018 and Q3 2018 reflect USAC and CDM combined. 1. Historical lever
Slide 27: USAC Standalone Operational and Financial Performance
USAC Standalone Operational and Financial Performance Avg. Revenue Generating HP (000s) Revenue ($MM) HP $mm 3,500 500 2007 – 2017 3,212 2007 – 2017 15% CAGR $412 3,000 15% CAGR 400 2,500 $280 300 $271 $266 2,000 $222 1,409 1,378 1,506 1,500 1,201 200 $153 902 $119 1,000 750 $91 $95 $92 $99 489 517
Slide 28: 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 29: Appendix
Appendix Tk—— COMPRESSION
Slide 30: 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 31: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three m onths ended Septem ber 30, June 30, March 30, 2018 2018 2018 Net income (loss) (563) $ 3,197 $ (23,370) Interest expense, net 25,443 25,682 - Depreciation and amortization 59,403 52,868 44,672 Income tax expense (benefit) (918) (271) (435) EBITDA $ 83,365 $ 81,476 $
Slide 32: Non-GAAP Reconciliations, cont’d.
Non-GAAP Reconciliations, cont’d. Years Ended December 31, ($ in 000's) 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Net income (loss) $ 11,440 $ 12,935 $ (154,273) $ 24,946 $ 11,071 $ 4,503 $ 69 $ 10,479 $ 21,228 $ 20,911 $ 7,122 Interest expense, net 25,129 21,087 17,605 12,529 12,488 15
Slide 33: Non-GAAP Reconciliations, cont’d.
Non-GAAP Reconciliations, cont’d. Three m onths ended Septem ber 30, June 30, March 30, 2018 2018 2018 Net income (loss) $ (563) $ 3,197 $ (23,370) Plus: Non-cash interest expense 1,516 2,039 - Plus: Non-cash income tax expense (benefit) (1,038) (390) (435) Plus: Depreciation and amortization 59,403
Slide 34: Non-GAAP Reconciliations, cont’d.
Non-GAAP Reconciliations, cont’d. Guidance Net loss $(18.0) million to $(8.0) million Plus: Interest expense, net $78.3 million Plus: Depreciation and amortization $216.3 million Plus: Income tax expense $(1.6) million EBITDA $275.0 million to $285.0 million Plus: Interest income on capital lease $0
Slide 35: 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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