Usa Compression Partners, Lp · NYSE:USAC
Usa Compression Partners, Lp — 2016 Baird Industrial Conference
34 slides from Usa Compression Partners, Lp's conference presentation, Nov 10, 2016
Slide 1: USA Compression Partners, LP 2016 Baird Industrial Conference
USA Compression Partners, LP 2016 Baird Industrial Conference November 10, 2016
Slide 2: Disclaimers
Disclaimers 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”, “expec
Slide 3: Outlook For Compression and Macro Drivers
Outlook For Compression and Macro Drivers
Slide 4: Compression Basics and the Need for Compression
Compression Basics and the Need for Compression Critical Infrastructure for US Natural Gas ■ Compression is a mechanical process where natural gas from a lower pressure is “smashed What is down” (compressed) to a smaller volume which results in a higher pressure Compression? ■ In a nutshell, compres
Slide 5: Strategic Focus on Infrastructure Applications
Strategic Focus on Infrastructure Applications ■ Compression is a critical service across a range of applications in the production, processing and transportation of oil and natural gas: ompression is a must run service and is required in a – Enhances oil and natural gas production – Pressurizes nat
Slide 6: Long-Life Deployment Cycle – Early to Mid-Innings
Long-Life Deployment Cycle – “Early to Mid-Innings” Horsepower Available for Redeployment Horsepower Variable Horsepower Baseload Horsepower 1 3 5 7 9 11 13 15 17 19 21 23 25 Time (years) USAC meets changing contract compression requirements during all phases of the life of a developing natural gas
Slide 7: Production Stabilizes in ~3 Years then has a LONG life
Production Stabilizes in ~ 3 Years then has a LONG life . . . Representative Marcellus Shale Type Curve Steep Hyperbolic Initial decline: 70-90% first year…. Shallow exponential decline (15% declining to 1% next 20+ years) creates long-lived, stable ‘tail’ production Source: EQT Corporation. © 2016
Slide 8: USAC Business Drivers
USAC Business Drivers Compression is Critical Infrastructure for Producing & Transporting Hydrocarbons ▪ ~85% of USAC’s business (by HP) installed in natural gas-based applications Overall Gas Demand ▪ Projected increasing demand / steady production of natural gas & Production ▪ LNG exports, Mexico
Slide 9: Macro Thesis: The Shift to Shale
Macro Thesis: The “Shift to Shale” Shale Gas Piece of the Growing Pie Continues to Increase Tcfe 45 42 Tcfe ■ Overall natural gas production expected to increase from ~74 Bcf/d in 2015 to ~115 Bcf/d through 2040, an 40 increase of 55% ■ Volume projections continue to be revised upwards 35 – In 2013,
Slide 10: Growing Shale Compression Requirements
Growing Shale Compression Requirements Shale Production Drives Increasing Compression Requirements (1) (HP) ■ Shale gas is typically produced at lower wellhead pressures (0-50 PSIG) in contrast to conventional 350,000 gas wells (100-300 PSIG) ■ Pipeline specifications remain constant – 300,000 Compr
Slide 11: Changing, But Still Growing, Natural Gas Market
Changing, But Still Growing, Natural Gas Market Marcellus/Utica Production Continues to Drive Growth; Expected to Offset 2016 Associated Gas Decline ■ Due to lowered liquids-focused activity since the decline in crude prices in late 2014, associated gas production projected to decrease in 2016 ■ How
Slide 12: Natural Gas Demand Poised to Surge
Natural Gas Demand Poised to Surge “Big Four” Demand Sources Driving Majority of Expected 38 Bcf/d of New Natural Gas Demand Thru 2040 ■ EIA expects 40 – 45 gigawatts (GW) of coal-plant retirements in 2016 alone, with 55 GW of Coal Plant expected retirements beyond 2016 Retirements ■ >6 Bcf/d of dem
Slide 13: Natural Gas Demand Poised to Surge, Cont'd.
Natural Gas Demand Poised to Surge, Cont’d. Industrial Sector, LNG and Pipeline Exports to Mexico Drive Demand Growth Projected Natural Gas Demand LNG Export Capacity Thru 2020 Bcf/d Bcf/d 12.0 140.0 120.0 116.4 Almost 13 Bcf/d of LNG 105.2 9.0 projects approved by FERC – 100.0 86.8 78.2 1 in-servic
Slide 14: USAC: Story of Stability and Growth
USAC: Story of Stability and Growth
Slide 15: USAC History
USAC History 18-year History of Growth and Differentiated Business Model September 1998: USAC 1998 – 2010: Dec 2010: Jan 2013: Aug 2013: USAC May 2014: USAC 2015: USAC founded by USAC grows Riverstone USAC completes completes $169mm completes CEO Eric Long through organic completes $198mm $182mm S&R
Slide 16: Geographical Presence
Geographical Presence Diversified Presence in Key Geographical Regions Key Customer Profile • Oil and Gas Majors • Independent E&Ps • Large Midstreams & Processors • Regional Gathering Systems Marcellus / Utica Shale Anadarko and Hugoton Basins Fayetteville & Woodford Shales Permian and Delaware Bar
Slide 17: Business Model Underpinned by Stability
Business Model Underpinned by Stability Stability Through Multiple Commodity Price Cycles ■ Commodity price levels do Horsepower HH Nat Gas not directly affect USAC’s Utilization $ / MMBTU business prospects 100% $14.00 ■ Rather, natural gas 90% compression is impacted by $12.00 the level of natural
Slide 18: Large Horsepower Gas Applications Drives Stability
Large Horsepower Gas Applications Drives Stability Gas Compression Industry Varies By Size of Compression Unit Gas Compression Industry: Key Characteristics by Size Small Medium Large Extra Large Commentary Compression Unit 400 – 1,000 1,000 – More horsepower 0 – 400 HP 1,500+ HP HP Range HP 1,500 H
Slide 19: Nature of USA Compression's Contracts
Nature of USA Compression’s Contracts Compression Services Contract Profile ■ USA Compression’s service contract rates are billed monthly (typically 30 days in advance) and Contract are 100% fixed fee (i.e. contract stipulates a specific $ / month) Service Rate ► Structured similar to take-or-pay co
Slide 20: Strong, Large-Cap Customer Base Able to Weather the Storm
Strong, Large-Cap Customer Base Able to Weather the Storm Diverse Customer Base Includes O&G Majors, Independent E&Ps, Large Midstream Operators and Regional Gatherers Length of Rank Top Customers Relationship Top 10 customers 1 Pipeline Subsidiary of Utility 3 years represent over 42% of 2 Large Pu
Slide 21: Fundamentals Result in Cash Flow Stability
Fundamentals Result in Cash Flow Stability “Infrastructure-Nature” of USAC Assets Provide Cash Flow Stability ■ Long asset life complements gathering systems and processing facilities served Long-lived Asset ■ Compression units typically last for 40+ years, when properly maintained Base ■ 60% of the
Slide 22: Financial Overview and Investment Highlights
Financial Overview and Investment Highlights
Slide 23: Recent Developments: Q3 2016 Review
Recent Developments: Q3 2016 Review USAC Delivers Strong Q3 2016 Results in a Tough Market; Updates 2016 Guidance ■ Q3 2016 fleet HP of 1.7 million and average revenue generating HP of 1.4 million ■ Average horsepower utilization of 87.3% for Q3 2016 – up from 86.1% in sequential quarters ► Utilizat
Slide 24: Addressing the Market Backdrop: USAC's Strategy
Addressing the Market Backdrop: USAC’s Strategy USA Compression has pulled multiple levers to help navigate this difficult environment Market Backdrop and USA Compression’s Strategy the Effect on the Compression Industry Significantly Reduce Focus on Utilization Expense Control Capital Spending • Lo
Slide 25: USAC Distributions and Leverage Since IPO
USAC Distributions and Leverage Since IPO Prudent Balance Between Distribution Growth, Coverage and Leverage Annualized Distributions per LP Unit USAC Historical Leverage(2) $2.20 8.0x $2.10 $2.10 $2.10 $2.10 $2.10 $2.10 $2.06 7.5x $2.04 $2.02 $2.10 $2.00 $1.96 7.0x 1 $1.92 $2.00 $1.84 $1.90 6.0x $1
Slide 26: Operational and Financial Performance
Operational and Financial Performance Avg. Revenue Generating HP (000s) Revenue ($MM) HP $mm 1,600 300 $271 2006 – 2015 1,409 1,405 1,382 1,400 19% CAGR 250 2006 – 2015 1,201 $222 1,200 21% CAGR $202 $191 902 200 1,000 750 $153 800 150 $119 517 571 $99 600 489 $92 371 456 100 $70 $91 $95 400 289 $50
Slide 27: 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 hydrocarbons to end markets Midstream ■ Shale gas continues to rewar
Slide 28: Appendix
Appendix COMPRESSION
Slide 29: Updated 2016 Guidance Ranges
Updated 2016 Guidance Ranges Guidance Net income $9.3 million to $14.3 million Plus: Interest expense, net $21.2 million Plus: Depreciation and amortization $91.6 million Plus: Income tax expense $0.4 million EBITDA $122.5 million to $127.5 million Plus: Interest income on capital lease $1.5 million
Slide 30: USA Compression Ownership Structure
USA Compression Ownership Structure USAC is a Pure-play Compression MLP Backed by Experienced Energy Investors Riverstone Holdings & Management 100.0% Membership Interest Public George B. Unitholders Kaiser Affiliates 23.1mm USA Compression Holdings, LLC 8.4mm Common Common Units 23.7mm Common Units
Slide 31: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Nine Months Ended September 30, Ended September 30, 2016 2015 2016 2015 Net income (loss) $ (2,146) $ 9,805 $ 9,666 $ 5,357 Interest expense, net 5,275 4,665 15,476 13,074 Depreciation and amortization 23,195 21,360 68,701 63,598 Income taxes 74 1,083 402 1,304
Slide 32: Non-GAAP Reconciliations, Cont'd.
Non-GAAP Reconciliations, Cont’d. Year Ended December 31, 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Net income (loss) $ (154,273) $ 24,946 $ 11,071 $ 4,503 $ 69 $ 10,479 $ 21,228 $ 20,911 $ 7,122 $ 9,829 Interest expense, net 17,605 12,529 12,488 15,905 12,970 12,279 10,043 14,003 16,468 13,
Slide 33: Non-GAAP Reconciliations, Cont'd.
Non-GAAP Reconciliations, Cont’d. Three m onths ended Septem ber 30, June 30, Septem ber 30, 2016 2016 2015 Net income (loss) $ (2,146) $ 3,274 $ 9,805 Plus: Non-cash interest expense 546 548 416 Plus: Non-cash income tax expense 74 32 1,076 Plus: Depreciation and amortization 23,195 23,412 21,360 P
Slide 34: 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 ,LTM Adjusted EBITDA, Adjusted EBITDA Margin Percentage, Distributable Cash Flow, Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio, as well as
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