CSI Compressco LP Announces Second Quarter 2017 Results
THE WOODLANDS, Texas, Aug. 8, 2017 /PRNewswire/ -- CSI Compressco LP ("CSI Compressco" or the "Partnership") (NASDAQ: CCLP) announced second quarter 2017 consolidated financial results.
Second Quarter highlights include:
-- Revenue increased 15% to $75 million on stronger equipment and
aftermarket sales
-- Compression fleet utilization improved 190 basis points to 78.9% at June
30, 2017 compared to March 31, 2017
-- Aftermarket services revenue of $10.5 million increased by 12% compared
to Q1-2017
-- New equipment sales orders of $12 million with a quarter-end backlog of
$24 million
-- Net loss of $6.4 million, which includes a $5.5 million favorable
non-cash fair market value adjustment to the Series A Preferred
-- Adjusted EBITDA((1)) was $19.5 million, which compares to Q1-2017
adjusted EBITDA of $19.9 million (first quarter adjusted EBITDA was
benefitted by the settlement of $1.7 million of certain G&A expenses
using common units, while similar second quarter G&A expenses were
settled in cash).
-- Net cash provided from operating activities of $9.5 million, up $7.7
million from Q1-2017
-- Cash distribution of $0.1875 per common unit
Three Months Ended
------------------
June 30, 2017 March 31, 2017 June 30, Q2-17 Q2-17
2016 vs. vs.
Q1-17 Q2-16
----- -----
(In Thousands, Except Ratios, and Percentages)
Net income (loss) $(6,372) $(15,593) $(4,680) 59 % (36)%
Adjusted
EBITDA(1) $19,505 $19,873 $24,799 (2)% (21)%
Distributable
cash flow(1) $5,768 $7,093 $15,207 (19)% (62)%
Quarterly cash
distribution per
unit $0.1875 $0.1875 $0.3775 - (50)%
Distribution
coverage
ratio(1) 0.85x 1.09x 1.19x - -
Fleet capital
expenditures $ - $ - $8 - (100)%
Net cash provided
by operating
activities $9,533 $1,821 $20,469 424 % (53)%
Free cash flow(1) $5,271 $(5,394) $18,016 198 % (71)%
(1) Non-GAAP financial measures reconciled to the nearest GAAP number on Schedules B and C.
Consolidated revenues for the quarter ended June 30, 2017, were $75.3 million compared to $65.6 million for the first quarter of 2017 and $76.1 million for the second quarter of 2016, with equipment sales increasing $8.9 million sequentially and $5.8 million year-over-year. Pre-tax loss for the quarter ended June 30, 2017 was $5.8 million, inclusive of a favorable $5.5 million non-cash adjustment to the fair market value of the Series A Preferred, compared to $14.8 million loss for the first quarter of 2017 and $4.1 million loss for the second quarter of 2016.
As of June 30, 2017, aggregate compression services fleet horsepower totaled 1,094,739 horsepower and the fleet utilization rate was 78.9%. Utilization of our highest horsepower segment, equipment of 801 and higher horsepower, was 89.6% at the end of June 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.
Unaudited results of operations for the quarter ended June 30, 2017 compared to the prior quarter and the corresponding prior year quarter are presented in the accompanying financial tables.
Stuart M. Brightman, President and Chairman of the Board of CSI Compressco, commented, "Utilization of our fleet continued the positive trend from earlier this year, especially with the larger horsepower equipment for gathering systems in West Texas, South Texas and the Mid-Con markets. Demand for large horsepower equipment is strong and is affording us the opportunity to redeploy idle equipment and begin discussions on higher pricing. We are also seeing an increased demand for aftermarket services as our customers are responding to the higher associated gas volumes by catching up maintenance on their equipment and rebuilding parts inventory levels.
"As of June 30, 863,557 horsepower of our total compression services fleet was generating revenue, an increase of 10,357 horsepower compared to prior quarter end. This marks the third consecutive quarter of improvement in both horsepower generating revenue and fleet utilization, and is the largest increase in the past three quarters. Aftermarket services revenues remained strong in the second quarter at $10.5 million. During the second quarter we received new equipment sales orders totaling $12 million, bringing our total backlog to $24 million at the end of June, all of which we expect to deliver in the second half of 2017. Subsequent to the end of the second quarter, we have received another $7 million of purchase orders for new equipment that is not included in the stated backlog, with very encouraging indications of additional quoted opportunities.
"On August 1, we 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 all electronically connected with real time visibility to all resources, automated resource scheduling and improved parts management. We expect this new system to generate more than $4.0 million of annualized cost savings in addition to making significant improvements in working capital management through visibility throughout the organization of all parts and supplies. Additionally, our invoicing to customers will occur automatically on a daily basis and is expected to improve days sales outstanding."
Forward-Looking Guidance
Our total capital expenditure forecast for 2017 is $25 million to $30 million compared to our prior guidance of $15 million to $30 million, which is inclusive of maintenance capital expenditures that are projected to be $15 million to $20 million for the year.
Conference Call
CSI Compressco will host a conference call to discuss second quarter 2017 results today, August 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.
Second Quarter 2017 Cash Distribution on Common Units
On July 21, 2017, CSI Compressco announced that the board of directors of its general partner declared a cash distribution attributable to the second quarter of 2017 of $0.1875 per outstanding common unit, which will be paid on August 14, 2017 to common unitholders of record as of the close of business on August 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 second quarter of 2017 was .85X.
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 Six Months Ended
--------------------- ------------------ ----------------
June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- -------------- ------------- ------------- -------------
(in Thousands, Except per Unit Amounts)
Revenues:
Compression and related
services $50,256 $50,497 $57,827 $100,753 $120,238
Aftermarket services 10,529 9,387 9,530 19,916 18,117
Equipment sales 14,530 5,668 8,732 20,198 19,426
------ ----- ----- ------ ------
Total revenues 75,315 65,552 76,089 140,867 157,781
Cost of revenues (excluding depreciation and amortization
expense):
Cost of compression and
related services 28,803 29,043 29,760 57,846 61,565
Cost of aftermarket
services 8,461 7,622 7,279 16,083 13,897
Cost of equipment sales 13,321 5,396 6,624 18,717 16,577
------ ----- ----- ------ ------
Total cost of revenues 50,585 42,061 43,663 92,646 92,039
Depreciation and
amortization 17,204 17,295 18,742 34,499 37,194
Impairments of long-
lived assets - - - - 7,866
Selling, general, and
administrative expense 8,230 8,766 8,183 16,996 18,413
Goodwill Impairment - - - - 92,334
Interest expense, net 10,449 10,383 8,870 20,832 17,672
Series A Preferred fair
value adjustment (5,528) 1,865 - (3,663) -
Other expense, net 141 (38) 707 103 995
--- --- --- --- ---
Income (loss) before
income tax provision (5,766) (14,780) (4,076) (20,546) (108,732)
Provision (benefit) for
income taxes 606 813 604 1,419 1,297
--- --- --- -----
Net income (loss) $(6,372) $(15,593) $(4,680) $(21,965) $(110,029)
======= ======== ======= ======== =========
Net income per diluted
common unit $(0.21) $(0.46) $(0.14) $(0.63) $(3.25)
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 June 30, 2017, March 31, 2017, June 30, 2016, and the six-month periods ended June 30, 2017 and 2016:
Schedule B - Reconciliation of Net Income to Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio
---------------------------------------------------------------------------------------------------------------------
Results of Operations
(unaudited) Three Months Ended Six Months Ended
--------------------- ------------------ ----------------
June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- -------------- ------------- ------------- -------------
(In Thousands)
Net income (loss) $(6,372) $(15,593) $(4,680) $(21,965) $(110,029)
Interest expense, net 10,449 10,383 8,870 20,832 17,672
Provision for income
taxes 606 813 604 1,419 1,297
Depreciation and
amortization 17,204 17,295 18,742 34,499 37,194
Impairments of long-
lived assets - - - - 7,866
Goodwill Impairment - - - - 92,334
Non-cash cost of
compressors sold 2,015 2,316 176 4,331 1,941
Equity Compensation 935 956 825 1,891 1,461
Series A Preferred
transaction costs - 37 - 37 -
Series A Preferred fair
value adjustments (5,528) 1,865 - (3,663) -
Omnibus expense paid in
equity - 1,746 - 1,746 -
Severance - 55 262 55 505
Software implementation 196 - - 196 -
Adjusted EBITDA $19,505 $19,873 $24,799 $39,378 $50,241
======= ======= ======= ======= =======
Less:
Current income tax
expense 479 691 421 1,170 969
Maintenance capital
expenditures 5,698 4,580 1,435 10,278 3,748
Interest Expense 10,449 10,383 8,870 20,832 17,672
Severance - 55 262 55 505
Plus:
Non-cash interest
expense 2,890 2,929 1,396 5,819 2,092
----- ----- ----- ----- -----
Distributable cash flow $5,769 $7,093 $15,207 $12,862 $29,439
====== ====== ======= ======= =======
Cash distribution
attributable to period $6,765 $6,512 $12,784 $13,858 $25,568
====== ====== ======= ======= =======
Distribution coverage
ratio 0.85x 1.09x 1.19x 0.93x 1.15x
The following table reconciles net cash provided by operating activities to free cash flow for the three month periods ended June 30, 2017, March 31, 2017, June 30, 2017, and the six-month periods ended June 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 Six Months Ended
------------ ------------------ ----------------
June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- -------------- ------------- ------------- -------------
(In Thousands)
Cash from
operations 9,533 1,821 20,469 11,354 35,564
Capital
expenditures, net
of sales proceeds (4,262) (7,215) (2,453) (11,477) (3,806)
Free cash flow 5,271 (5,394) 18,016 (123) 31,758
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SOURCE CSI Compressco LP
