THE WOODLANDS, Texas,
Nov. 8, 2017 /PRNewswire/ -- CSI
Compressco LP ("CSI Compressco") (NASDAQ: CCLP) announced third
quarter 2017 consolidated financial results and provided fourth
quarter guidance.
The compression services market is demonstrating signs of an
accelerated recovery as indicated by several key third quarter
operations and sales related metrics for CSI Compressco:
- Deployed service fleet horsepower increased sequentially by
2.7%, to 886,971
- Overall service fleet utilization increased 250 bps compared to
the end of the second quarter, to 81.4%
- All horsepower categories (small, medium, large) achieved
increased utilization compared to Q2-17
- Orders to build additional high horsepower compression
equipment for the service fleet were initiated with the expectation
of being placed in service beginning in Q4-17
- Compression service price increase efforts in place that are
expected to result in additional revenue contribution beginning in
Q4-17
- Orders for new equipment sales were $37
million compared to $12
million in Q2-17
- The book-to-bill ratio was 4.9X(1)
- Backlog for equipment orders increased from $24 million in Q2-17 to $53.6 million in Q3-17
As a result of the improving operations and sales related
performance, CSI Compressco experienced stronger third quarter
financial results, as highlighted below with the following key
financial metrics:
- Net cash provided from operating activities was $13.2 million, up $3.7
million from Q2-2017
- Free cash flow(1) was $11.0
million, up $5.7 million from
Q2-17
- Net loss of $7.8 million,
compared to $6.4 million loss in in
Q2-17
- Adjusted EBITDA(1) was $23.3
million, compared to $19.5
million in Q2-17
- Distributable cash flow(1) was $10.8 million, resulting in a distribution
coverage ratio of 1.56X
- Maintenance capital expenditures declined to $3.8 million from $5.7
million in Q2-17 as equipment previously idle has been
deployed
(1) Non-GAAP financial measures reconciled to the nearest GAAP
number on Schedules B, C and D.
Consolidated revenues for the quarter ended September 30, 2017, were $71.6 million compared to $75.3 million for the second quarter of 2017 and
$70.7 million for the third quarter
of 2016. Sequentially, compression services revenues
increased 2.8%, reflecting the improvements in utilization and the
impact of recent price increases. Equipment sales declined
$4 million compared to the second
quarter reflecting the timing of new equipment shipments.
Pre-tax loss for the quarter ended September
30, 2017 was $7.0 million
(inclusive of a favorable $1.3
million non-cash adjustment to the fair market value of the
Series A Preferred and a $3.0 million
favorable insurance settlement for equipment previously damaged)
compared to a $5.8 million loss for
the second quarter of 2017 (which included $5.5 million favorable impact from a fair market
value adjustment of the Series A Preferred) and $15.8 million loss for the third quarter of
2016.
As of September 30, 2017,
aggregate compression services fleet horsepower totaled 1,090,103
and the fleet utilization rate was 81.4%. Utilization of our
highest horsepower category, equipment of 801 and higher
horsepower, was 90.1% at the end of September 2017. We
define the fleet utilization rate as the aggregate compressor
package horsepower in service divided by the aggregate compressor
package fleet horsepower as of a given date. We do not
exclude idle horsepower under repair or horsepower that is
otherwise impaired from our calculation of utilization rate.
CSI Compressco is experiencing strong customer demands in
West Texas, South Texas and the Oklahoma area markets, in part to meet
increasing demand resulting from the higher gas content from new
oil wells.
Unaudited results of operations for the quarter ended
September 30, 2017 compared to the
prior quarter and the corresponding prior year quarter are
presented in the accompanying financial tables.
|
Three Months
Ended
|
|
|
|
|
|
Sep 30,
2017
|
|
Jun 30,
2017
|
|
Sep 30,
2016
|
|
Q3-17 vs.
Q2-17
|
|
Q3-17 vs.
Q3-16
|
|
(In Thousands, Except
Ratios, and Percentages)
|
Net loss
|
$
(7,821)
|
|
$
(6,372)
|
|
$
(15,971)
|
|
(23)%
|
|
51 %
|
Adjusted
EBITDA(1)
|
$
23,341
|
|
$
19,505
|
|
$
23,967
|
|
20 %
|
|
(3)%
|
Distributable cash
flow(1)
|
$
10,778
|
|
$
5,769
|
|
$
12,715
|
|
87 %
|
|
(15)%
|
Quarterly cash
distribution per unit
|
$
0.1875
|
|
$
0.1875
|
|
$
0.3775
|
|
—
|
|
(50)%
|
Distribution coverage
ratio(1)
|
1.56x
|
|
0.85x
|
|
0.99x
|
|
—
|
|
—
|
Net cash provided by
operating activities
|
$
13,218
|
|
$
9,533
|
|
$
9,958
|
|
39 %
|
|
33 %
|
Free cash
flow(1)
|
$
10,982
|
|
$
5,271
|
|
$
6,162
|
|
108 %
|
|
78 %
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-GAAP
financial measures reconciled to the nearest GAAP number on
Schedules B and C.
|
Stuart M. Brightman, President
and Chairman of the Board of CSI Compressco, commented, "We are
seeing positive momentum from several areas, including demand for
more compression equipment to address field gathering system
requirements, gas lift opportunities, GasJack® units to
address late life wells, new orders for the fabrication and
purchase of equipment by midstream companies and operators, and
stronger demands for aftermarket parts and services. This
momentum has accelerated in recent months and has allowed us to
deploy equipment that was previously idle. Customers are
changing their focus from acreage acquisition to increased
production from their existing fields, requiring additional
compression capacity for their gathering systems, with many
incremental wells coming online with a higher gas to oil ratio
(GOR). We are also seeing increased demand for gas lift
applications. This impacts our smaller and midsized
compression equipment that is utilized primarily in enhanced oil
recovery applications at the well site, with particular areas of
strength being the SCOOP/STACK and Permian Basin areas.
"Additionally we have placed orders for compressors and engines
to fabricate and deploy larger horsepower equipment to meet the
increasing demands primarily from our exisiting customers,
particularly in West and South
Texas, as we have more visibility into their compression
services needs for 2018. Our fabrication operations in Midland have added resources to address the
increasing backlog for third party sales (backlog up to
$53.6 million) and demands to deploy
new equipment for our fleet of compression equipment. We also
expect that field related make ready costs and catch up maintenance
capital expenditures will continue to decline as medium to large
horsepower equipment that was previously idle is expected to be
deployed by the end of 2017. We also anticipate that our efforts to
increase footprint of our compression services in Latin America will accelerate in 2018.
"On August 1, we successfully
launched our fully integrated ERP system that automates our quote
to cash process and streamlines our business processes. Our
sales team and field technicians are now connected with real time
visibility to all resources, with automated resource scheduling and
improved parts management providing us real time metrics to support
us in managing our business in a rapidly changing
environment. We have started to receive the benefit of lower
costs and increased efficiencies from this new system and expect to
generate more than $4.0 million of
annualized cost savings by mid-2018. We also expect to see
the benefits to working capital by accelerating our invoicing and
reducing inventory levels."
Forward-Looking Guidance
Our total capital expenditure forecast for 2017 remains at
$25 million to $30 million, which is
inclusive of maintenance capital expenditures that are projected to
be $16 million to $18 million for the
year.
The momentum from improved utilization, better pricing and new
equipment orders is expected to continue into the coming
quarters. As a result, we expect fourth quarter 2017 net loss
and adjusted EBITDA to be sequentially better than the third
quarter when excluding the benefit of the $3
million insurance proceeds received in the third
quarter.
Conference Call
CSI Compressco will host a conference call to discuss third
quarter 2017 results today, November 8, 2017, at
10:30 a.m. Eastern Time. The phone number for the call is
866-374-8397. The conference will also be available by live audio
webcast and may be accessed through CSI Compressco's website at
www.csicompressco.com.
Third Quarter 2017 Cash Distribution on Common Units
On October 20, 2017, CSI
Compressco announced that the board of directors of its general
partner declared a cash distribution attributable to the third
quarter of 2017 of $0.1875 per
outstanding common unit, which will be paid on November 14, 2017 to common unitholders of record
as of the close of business on November 1, 2017. The
distribution coverage ratio (which is a Non-GAAP Financial Measure
defined and reconciled to the closest GAAP financial measure below)
for the third quarter of 2017 was 1.56X.
CSI Compressco Overview
CSI Compressco is a provider of compression services and
equipment for natural gas and oil production, gathering,
transportation, processing, and storage. CSI Compressco's
compression and related services business includes a fleet of more
than 5,800 compressor packages providing approximately 1.1 million
in aggregate horsepower, utilizing a full spectrum of low, medium
and high horsepower engines. CSI Compressco also provides well
monitoring and automated sand separation services in conjunction
with compression services in Mexico. CSI Compressco's equipment sales
business includes the fabrication and sale of standard compressor
packages, custom-designed compressor packages and oilfield fluid
pump systems designed and fabricated primarily at our facility in
Midland, Texas. CSI Compressco's
aftermarket business provides compressor package reconfiguration
and maintenance services, as well as the sale of compressor package
parts and components manufactured by third-party suppliers. CSI
Compressco's customers comprise a broad base of natural gas and oil
exploration and production, mid-stream, transmission, and storage
companies operating throughout many of the onshore producing
regions of the United States, as
well as in a number of foreign countries, including Mexico, Canada and Argentina. CSI Compressco is managed by CSI
Compressco GP Inc., which is an indirect, wholly owned subsidiary
of TETRA Technologies, Inc. (NYSE: TTI).
Forward-Looking Statements
This news release contains "forward-looking statements" and
information based on our beliefs and those of our general partner,
CSI Compressco GP Inc. Forward-looking statements in this news
release are identifiable by the use of the following words and
other similar words: "anticipates," "assumes," "believes,"
"budgets," "could," "estimates," "expects," "forecasts," "goal,"
"intends," "may," "might," "plans," "predicts," "projects,"
"schedules," "seeks," "should," "targets," "will," and
"would." These forward-looking statements include statements,
other than statements of historical fact, concerning the recovery
of the oil and gas industry and CSI Compressco's strategy, future
operations, financial position, estimated revenues, negotiations
with our bank lenders, projected costs, and other statements
regarding CSI Compressco's beliefs, expectations, plans, prospects
and other future events and performance. Such forward-looking
statements reflect our current views with respect to future events
and financial performance, and are based on assumptions that we
believe to be reasonable, but such forward-looking statements are
subject to numerous risks and uncertainties, including but not
limited to: economic and operating conditions that are outside of
our control, including the supply, demand and prices of crude oil
and natural gas; the levels of competition we encounter; the
activity levels of our customers; the availability of adequate
sources of capital to us; our ability to comply with contractual
obligations, including those under our financing arrangements; our
operational performance; the loss of our management; risks related
to acquisitions and our growth strategy, including our 2014
acquisition of Compressor Systems, Inc.; the availability of raw
materials and labor at reasonable prices; risks related to our
foreign operations; the effect and results of litigation,
regulatory matters, settlements, audits, assessments, and
contingencies; or potential material weaknesses in the future;
information technology risks, including the risk of cyberattack;
and other risks and uncertainties contained in our Annual Report on
Form 10-K and our other filings with the U.S. Securities and
Exchange Commission ("SEC"), which are available free of charge on
the SEC website at www.sec.gov. The risks and uncertainties
referred to above are generally beyond our ability to control and
we cannot predict all the risks and uncertainties that could cause
our actual results to differ from those indicated by the
forward-looking statements. If any of these risks or uncertainties
materialize, or if any of the underlying assumptions prove
incorrect, actual results may vary from those indicated by the
forward-looking statements, and such variances may be material. All
subsequent written and verbal forward-looking statements made by or
attributable to us or to persons acting on our behalf are expressly
qualified in their entirety by reference to these risks and
uncertainties. You should not place undue reliance on
forward-looking statements. Each forward-looking statement speaks
only as of the date of the particular statement, and we undertake
no obligation to update or revise any forward-looking statements we
may make, except as may be required by law.
Schedule A -
Income Statement
|
|
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Sep 30,
2017
|
|
Jun 30,
2017
|
|
Sep 30,
2016
|
|
Sep 30,
2017
|
|
Sep 30,
2016
|
|
(in Thousands, Except per Unit
Amounts)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Compression and
related services
|
$
51,662
|
|
$
50,256
|
|
$
53,103
|
|
$
152,415
|
|
$
173,341
|
Aftermarket
services
|
9,517
|
|
10,529
|
|
8,286
|
|
29,433
|
|
26,403
|
Equipment
sales
|
10,419
|
|
14,530
|
|
9,325
|
|
30,617
|
|
28,751
|
Total
revenues
|
71,598
|
|
75,315
|
|
70,714
|
|
212,465
|
|
228,495
|
Cost of revenues
(excluding depreciation and amortization expense):
|
|
|
|
|
|
|
|
|
|
Cost of compression
and related services
|
28,347
|
|
28,803
|
|
26,961
|
|
86,193
|
|
88,526
|
Cost of aftermarket
services
|
7,733
|
|
8,461
|
|
5,735
|
|
23,816
|
|
19,632
|
Cost of equipment
sales
|
9,424
|
|
13,321
|
|
7,830
|
|
28,141
|
|
24,407
|
Total cost of
revenues
|
45,504
|
|
50,585
|
|
40,526
|
|
138,150
|
|
132,565
|
Depreciation and
amortization
|
17,361
|
|
17,204
|
|
17,822
|
|
51,860
|
|
55,016
|
Impairments of
long-lived assets
|
—
|
|
—
|
|
—
|
|
—
|
|
7,866
|
Insurance
recoveries
|
(2,352)
|
|
—
|
|
—
|
|
(2,352)
|
|
—
|
Selling, general, and
administrative expense
|
8,682
|
|
8,230
|
|
9,279
|
|
25,678
|
|
27,692
|
Goodwill
Impairment
|
—
|
|
—
|
|
—
|
|
—
|
|
92,334
|
Interest expense,
net
|
11,071
|
|
10,449
|
|
9,762
|
|
31,903
|
|
27,434
|
Series A Preferred
fair value adjustment
|
(1,300)
|
|
(5,528)
|
|
7,198
|
|
(4,963)
|
|
7,198
|
Other (income)
expense, net
|
(319)
|
|
141
|
|
1,898
|
|
(216)
|
|
2,893
|
Loss before income
tax provision
|
(7,049)
|
|
(5,766)
|
|
(15,771)
|
|
(27,595)
|
|
(124,503)
|
Provision (benefit)
for income taxes
|
772
|
|
606
|
|
200
|
|
2,191
|
|
1,497
|
Net loss
|
$
(7,821)
|
|
$
(6,372)
|
|
$
(15,971)
|
|
$
(29,786)
|
|
$
(126,000)
|
|
|
|
|
|
|
|
|
|
|
Net income per
diluted common unit
|
$
(0.22)
|
|
$
(0.21)
|
|
$
(0.47)
|
|
$
(0.85)
|
|
$
(3.72)
|
Reconciliation of Non-GAAP Financial Measures
The Partnership includes in this release the non-GAAP financial
measures Adjusted EBITDA, distributable cash flow, distribution
coverage ratio, and free cash flow. Adjusted EBITDA is used as a
supplemental financial measure by the Partnership's management
to:
- assess the Partnership's ability to generate available cash
sufficient to make distributions to the Partnership's unitholders
and general partner;
- evaluate the financial performance of its assets without regard
to financing methods, capital structure or historical cost
basis;
- measure operating performance and return on capital as compared
to those of our competitors;
- determine the Partnership's ability to incur and service debt
and fund capital expenditures; and
- monitor the financial performance measure used in the
Partnership's bank credit facility financial covenant.
The Partnership defines Adjusted EBITDA as earnings before
interest, taxes, depreciation, and amortization, and before certain
non-cash charges consisting of impairments, bad debt expense
attributable to bankruptcy of customer, non-cash costs of
compressors sold, equity compensation, fair value adjustments of
our Preferred Units, administrative expenses under the Omnibus
Agreement paid in equity using common units, severance expense, and
software implementation expense.
Distributable cash flow is used as a supplemental financial
measure by the Partnership's management, as it provides important
information relating to the relationship between our financial
operating performance and our cash distribution capability.
Additionally, the Partnership uses distributable cash flow in
setting forward expectations and in communications with the board
of directors of our general partner. The Partnership defines
distributable cash flow as Adjusted EBITDA less current income tax
expense, maintenance capital expenditures, interest expense, and
severance expense, plus non-cash interest expense.
The Partnership believes that the distribution coverage ratio
provides important information relating to the relationship between
the Partnership's financial operating performance and its cash
distribution capability. The Partnership defines the distribution
coverage ratio as the ratio of distributable cash flow to the total
quarterly distribution payable, which includes, as applicable,
distributions payable on all outstanding common units, the general
partner interest and the general partner's incentive distribution
rights.
The Partnership defines free cash flow as net cash provided by
operating activities less capital expenditures, net of sales
proceeds. Management primarily uses this metric to assess our
ability to retire debt, evaluate our capacity to further invest and
grow, and measure our performance as compared to our peer group of
companies.
These non-GAAP financial measures should not be considered an
alternative to net income, operating income, cash flows from
operating activities or any other measure of financial performance
presented in accordance with GAAP. These non-GAAP financial
measures may not be comparable to Adjusted EBITDA, distributable
cash flow, free cash flow or other similarly titled measures of
other entities, as other entities may not calculate these non-GAAP
financial measures in the same manner as CSI Compressco. Management
compensates for the limitation of these non-GAAP financial measures
as an analytical tool by reviewing the comparable GAAP measures,
understanding the differences between the measures and
incorporating this knowledge into management's decision making
process. Furthermore, these non-GAAP measures should not be viewed
as indicative of the actual amount of cash that CSI Compressco has
available for distributions or that the Partnership plans to
distribute for a given period, nor should they be equated to
available cash as defined in the Partnership's partnership
agreement.
The following table reconciles net income (loss) to Adjusted
EBITDA, distributable cash flow and distribution coverage ratio for
the three month periods ended September
30 2017, June 30, 2017,
Septmber 30, 2016, and the nine-month periods ended September 30, 2017 and 2016:
Schedule B -
Reconciliation of Net Income to Adjusted EBITDA, Distributable Cash
Flow and Distribution Coverage Ratio
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Sep 30,
2017
|
|
Jun 30,
2017
|
|
Sep 30,
2016
|
|
Sep 30,
2017
|
|
Sep 30,
2016
|
|
(In
Thousands)
|
|
|
|
|
Net loss
|
$
(7,821)
|
|
$
(6,372)
|
|
$
(15,971)
|
|
$
(29,786)
|
|
$
(126,000)
|
Interest expense,
net
|
11,071
|
|
10,449
|
|
9,762
|
|
31,903
|
|
27,434
|
Provision for income
taxes
|
772
|
|
606
|
|
200
|
|
2,191
|
|
1,497
|
Depreciation and
amortization
|
17,361
|
|
17,204
|
|
17,822
|
|
51,860
|
|
55,016
|
Impairments of
long-lived assets
|
—
|
|
—
|
|
—
|
|
—
|
|
7,866
|
Goodwill
Impairment
|
—
|
|
—
|
|
—
|
|
—
|
|
92,334
|
Bad debt expense
attributable to bankruptcy of customer
|
—
|
|
—
|
|
728
|
|
—
|
|
728
|
Non-cash cost of
compressors sold
|
2,406
|
|
2,015
|
|
890
|
|
6,737
|
|
2,831
|
Equity
Compensation
|
261
|
|
935
|
|
775
|
|
2,152
|
|
2,236
|
Series A Preferred
transaction costs
|
—
|
|
—
|
|
3,046
|
|
37
|
|
3,046
|
Series A Preferred
fair value adjustments
|
(1,300)
|
|
(5,528)
|
|
7,198
|
|
(4,963)
|
|
7,198
|
Gain on
extinguishment of debt
|
—
|
|
—
|
|
(540)
|
|
—
|
|
(540)
|
Omnibus expense paid
in equity
|
—
|
|
—
|
|
—
|
|
1,746
|
|
—
|
Severance
|
8
|
|
—
|
|
57
|
|
63
|
|
562
|
Other
|
583
|
|
196
|
|
—
|
|
779
|
|
—
|
Adjusted
EBITDA
|
$
23,341
|
|
$
19,505
|
|
$
23,967
|
|
$
62,719
|
|
$
74,208
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Current income tax
expense
|
545
|
|
479
|
|
258
|
|
1,715
|
|
1,227
|
Maintenance capital
expenditures
|
3,841
|
|
5,698
|
|
2,771
|
|
14,119
|
|
6,519
|
Interest
Expense
|
11,071
|
|
10,449
|
|
9,762
|
|
31,903
|
|
27,434
|
Severance
|
8
|
|
—
|
|
57
|
|
63
|
|
562
|
Plus:
|
|
|
|
|
|
|
|
|
|
Non-cash interest
expense
|
2,902
|
|
2,890
|
|
1,596
|
|
8,721
|
|
3,688
|
Distributable cash
flow
|
$
10,778
|
|
$
5,769
|
|
$
12,715
|
|
$
23,640
|
|
$
42,154
|
|
|
|
|
|
|
|
|
|
|
Cash distribution
attributable to period
|
$
6,916
|
|
$
6,765
|
|
$
12,799
|
|
$
20,774
|
|
$
38,367
|
|
|
|
|
|
|
|
|
|
|
Distribution coverage
ratio
|
1.56x
|
|
0.85x
|
|
0.99x
|
|
1.14x
|
|
1.1x
|
The following table reconciles net cash provided by operating
activities to free cash flow for the three month periods ended
September 30 2017, June 30, 2017, September
30, 2016, and the nine-month periods ended September 30, 2017 and 2016:
Schedule C -
Reconciliation of Net Cash Provided by Operating Activities to Free
Cash Flow
|
|
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Sep 30,
2017
|
|
Jun 30,
2017
|
|
Sep 30,
2016
|
|
Sep 30,
2017
|
|
Sep 30,
2016
|
|
(In
Thousands)
|
Cash from
operations
|
$
13,218
|
|
$
9,533
|
|
$
9,958
|
|
$
24,572
|
|
$
45,522
|
Capital expenditures,
net of sales proceeds
|
(2,236)
|
|
(4,262)
|
|
(3,796)
|
|
(13,713)
|
|
(7,602)
|
Free cash
flow
|
$
10,982
|
|
$
5,271
|
|
$
6,162
|
|
$
10,859
|
|
$
37,920
|
Schedule D – Third
Quarter 2017 Book to Bill Ratio
|
|
|
New orders
received
|
$37.0
million
|
|
New equipment
sales
|
$7.5
million
|
|
Book to bill
ratio
|
4.9x
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/csi-compressco-lp-announces-third-quarter-2017-results-and-fourth-quarter-guidance-300551580.html
SOURCE CSI Compressco LP