MIDLAND, Texas, Nov. 4,
2016 /PRNewswire/ -- CSI Compressco LP (CSI Compressco or the
Partnership) (NASDAQ: CCLP) today announced financial results for
the quarter ended September 30, 2016.
Highlights of the third quarter 2016 results include:
- Third quarter net loss of $16.0
million, including $10.2
million in charges related to our recent Series A Preferred
equity offering
- Third quarter Adjusted EBITDA(1) of $24.0 million
- Third quarter net cash provided from operating activities of
$10.0 million
- Third quarter free cash flow(1) of $6.2 million
- Third quarter cash distribution of $0.3775 per common unit, unchanged from prior
quarter
- Third quarter distribution coverage ratio(1) of
0.99x
- Completed equity offerings totaling $80
million of Series A Preferred Units
- Improved the leverage ratio by 0.21x from prior quarter, to
4.83x
- Continued management of SGA expenditures
- Repurchased and retired $20.0
million principal amount of 7.25% Senior Notes at a 6%
discount, and an additional $34.1
million principal amount of 7.25% Senior Notes were
repurchased and retired in the first week subsequent to third
quarter close
- On November 3, 2016, we executed
an amendment to our existing secured credit facility. The
amendment, among other modifications, converted our credit facility
to an asset-based facility and increased our leverage ratio
covenant to 5.95x through the second quarter of 2018.
|
|
|
|
|
|
|
Sept 30,
2016 vs. June 30, 2016
|
|
Sept 30,
2016 vs. Sept 30, 2015
|
|
Three Months
Ended
|
|
|
|
Sept 30,
2016
|
|
June 30,
2016
|
|
Sept 30,
2015
|
|
|
|
(In Thousands, Except
Ratios, and Percentages)
|
Net income
(loss)
|
$
|
(15,971)
|
|
|
$
|
(4,680)
|
|
|
$
|
1,619
|
|
|
(241)%
|
|
|
(1,086)%
|
|
Adjusted
EBITDA(1)
|
$
|
23,967
|
|
|
$
|
24,799
|
|
|
$
|
32,419
|
|
|
(3)%
|
|
|
(26)%
|
|
Distributable cash
flow(1)
|
$
|
12,715
|
|
|
$
|
15,207
|
|
|
$
|
21,807
|
|
|
(16)%
|
|
|
(42)%
|
|
Cash distribution per
unit annualized
|
$
|
1.51
|
|
|
$
|
1.51
|
|
|
$
|
2.01
|
|
|
—%
|
|
|
(25)%
|
|
Distribution coverage
ratio(1)
|
0.99x
|
|
|
1.19x
|
|
|
1.25x
|
|
|
—
|
|
|
—
|
|
Fleet growth capital
expenditures
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
15,779
|
|
|
(100)%
|
|
|
(100)%
|
|
Net cash provided by
operating activities
|
$
|
9,958
|
|
|
$
|
20,469
|
|
|
$
|
11,340
|
|
|
(51)%
|
|
|
(12)%
|
|
Free cash
flow(1)
|
$
|
6,162
|
|
|
$
|
18,016
|
|
|
$
|
(7,566)
|
|
|
(66)%
|
|
|
181%
|
|
|
|
(1)
|
Adjusted EBITDA,
distributable cash flow, distribution coverage ratio, and free cash
flow are non-GAAP financial measures that are defined and
reconciled to the nearest GAAP financial measure on Schedules B and
C in this press release.
|
Consolidated revenues for the quarter ended September 30,
2016 were $70.7 million compared to
$76.1 million for the second quarter
of 2016 and $128.9 million for the
third quarter of 2015. Loss before tax for the quarter ended
September 30, 2016 was $15.8
million compared to loss before tax of $4.1 million for the second quarter of 2016 and
income before tax of $2.0 million for
the third quarter of 2015.
As of September 30, 2016 compression services fleet
horsepower totaled 1,128,329 horsepower and the fleet utilization
rate was 75.2%. 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.
Unaudited results of operations for the three month period ended
September 30, 2016 compared to the prior quarter and the prior
year period, and unaudited results of operations for the nine month
period ended September 30, 2016 compared to the prior year
period are presented in the accompanying financial tables.
Timothy A. Knox, President of CSI
Compressco, commented, "Cash flow from operations was positive in
the third quarter of 2016, continuing to demonstrate stability and
an effective control on costs even with an on-going downturn in the
greater energy and energy services business. In the third
quarter, we had free cash flow of $6
million prior to our quarterly distribution. SGA
expenditures for the quarter were $9.3
million, including $0.9
million in legal fees associated with our equity
issuance. With allowance for this special expense, we again
managed SGA below $8.5 million for
the quarter and about $2 million
below the spending level of the same period prior year.
Maintenance capital expenditures for the third quarter were
$2.8 million, an increase from the
second quarter of 2016 but $1 million
below the maintenance capital expenditures of the third quarter of
2015. Distributable cash flow for the third quarter of 2016
was $12.7 million, allowing us to
maintain the $0.3775 per unit
distribution with a 0.99x distribution coverage ratio.
"As of September 30, 2016, 848,365
horsepower of our compression services fleet was generating
revenue, an 8,783 horsepower decline from the prior quarter and the
smallest decline experienced in the past four quarters. This
continues a flattening of the curve from the declines experienced
in prior quarters, which when considered in the context of the
improvement in oil and gas prices as well as drilling activity in
the third quarter would seem to indicate that we may have reached
the bottom for demand in the compression services business.
During the third quarter, we received equipment sales orders
totaling $3.3 million, a modest
amount, however it was part of a discernable increase in firm
proposals issued that we hope is an indication of increased overall
activity by the end users in this business segment.
"In the third quarter of 2016 we completed the issuance, in the
aggregate, of $80 million of Series A
Preferred Units, resulting in net proceeds after certain expenses
of $77.3 million. With these
proceeds, in September 2016 we
repurchased and retired $20 million
aggregate principal amount of 7.25% Senior Notes at an average
repurchase price of 94% of the principal. Subsequent to the
close of the third quarter, we repurchased and retired an
additional $34.1 million aggregate
principal amount of 7.25% Senior Notes at a similar discount.
Following these purchases, we have $295.9
million in aggregate principal amount of our 7.25% Senior
Notes outstanding. Remaining proceeds were used to reduce the
balance of our revolving credit facility, where our outstanding
balance has been reduced to $214
million as of October 3,
2016. Our leverage ratio was reduced to 4.83x exiting the
third quarter, compared to 5.04x exiting the second quarter of
2016. Also subsequent to the close of the third quarter and
as we have previously disclosed, we executed an amendment to our
existing secured credit facility. The amendment, among other
modifications, converted our credit facility to an asset-based
facility and increased our leverage ratio covenant to 5.95x through
the second quarter of 2018, providing us with additional financial
flexibility.
"As we have continued to evaluate and reduce compression
services fleet additions, we have lowered our total capital
expenditure forecast for 2016 to $19 million
to $20 million, prior to offsets for disposals and
associated proceeds. Of this, $11
million to $12 million remains forecast for maintenance
capital in anticipation of comparatively higher fourth quarter
expenditures as we conduct necessary maintenance and prepare for
anticipated projects. $6
million is directed at our enterprise resource planning
system implementation, with the remaining $2
million directed at other growth activities. We will
stay focused on maximizing the utilization of existing compression
services assets, and will selectively invest in growth
opportunities that present appropriate financial return."
Conference Call
CSI Compressco will host a conference call to discuss third
quarter 2016 results today, November 4, 2016, at 10:30 am 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 the CSI Compressco
website at www.compressco.com.
Third Quarter 2016 Distribution
On October 21, 2016, CSI Compressco announced that the
board of directors of its general partner declared a cash
distribution attributable to the third quarter of 2016 of
$0.3775 per outstanding common unit,
which will be paid on November 14, 2016 to common unitholders
of record as of the close of business on November 1, 2016. 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 2016 was 0.99x.
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
approximately 6,000 compressor packages providing in excess of 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 press 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 press
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 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; risks associated with a material
weakness in our internal control over financial reporting and the
consequences we may encounter if we are unable to remediate that
material weakness or if we identify other 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 oral 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
|
|
Sept 30,
2016
|
|
June 30,
2016
|
|
Sept 30,
2015
|
|
Sept 30,
2016
|
|
Sept 30,
2015
|
|
(In Thousands, Except
per Unit Amounts)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Compression and
related services
|
$
|
53,103
|
|
|
$
|
57,827
|
|
|
$
|
72,766
|
|
|
$
|
173,341
|
|
|
$
|
220,880
|
|
Aftermarket
services
|
8,286
|
|
|
9,530
|
|
|
11,692
|
|
|
26,403
|
|
|
35,015
|
|
Equipment
sales
|
9,325
|
|
|
8,732
|
|
|
44,466
|
|
|
28,751
|
|
|
102,383
|
|
Total
revenues
|
$
|
70,714
|
|
|
$
|
76,089
|
|
|
$
|
128,924
|
|
|
$
|
228,495
|
|
|
$
|
358,278
|
|
Cost of revenues
(excluding
depreciation and amortization expense):
|
|
|
|
|
|
|
|
Cost of compression
and related services
|
$
|
26,961
|
|
|
$
|
29,760
|
|
|
$
|
35,104
|
|
|
$
|
88,526
|
|
|
$
|
109,572
|
|
Cost of aftermarket
services
|
5,735
|
|
|
7,279
|
|
|
10,188
|
|
|
19,632
|
|
|
29,251
|
|
Cost of equipment
sales
|
7,830
|
|
|
6,624
|
|
|
40,823
|
|
|
24,407
|
|
|
92,084
|
|
Total cost of
revenues
|
$
|
40,526
|
|
|
$
|
43,663
|
|
|
$
|
86,115
|
|
|
$
|
132,565
|
|
|
$
|
230,907
|
|
Depreciation and
amortization
|
17,822
|
|
|
18,742
|
|
|
20,610
|
|
|
55,016
|
|
|
61,227
|
|
Impairments of
long-lived assets
|
—
|
|
|
—
|
|
|
—
|
|
|
7,866
|
|
|
—
|
|
Selling, general, and
administrative expense
|
9,279
|
|
|
8,183
|
|
|
10,469
|
|
|
27,692
|
|
|
32,272
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
92,334
|
|
|
—
|
|
Interest expense,
net
|
9,762
|
|
|
8,870
|
|
|
8,897
|
|
|
27,434
|
|
|
26,157
|
|
Other expense,
net
|
9,096
|
|
|
707
|
|
|
818
|
|
|
10,091
|
|
|
1,834
|
|
Income (loss) before
income tax provision
|
$
|
(15,771)
|
|
|
$
|
(4,076)
|
|
|
$
|
2,015
|
|
|
$
|
(124,503)
|
|
|
$
|
5,881
|
|
Provision for income
taxes
|
200
|
|
|
604
|
|
|
396
|
|
|
1,497
|
|
|
1,291
|
|
Net income
(loss)
|
$
|
(15,971)
|
|
|
$
|
(4,680)
|
|
|
$
|
1,619
|
|
|
$
|
(126,000)
|
|
|
$
|
4,590
|
|
Net income (loss) per
diluted common unit
|
$
|
(0.47)
|
|
|
$
|
(0.14)
|
|
|
$
|
0.04
|
|
|
$
|
(3.72)
|
|
|
$
|
0.10
|
|
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 including impairments, bad debt expense
attributable to bankruptcy of customer, equity compensation, costs
of compressors sold, fair value adjustments of our Preferred Units,
and gain on extinguishment of debt, and excluding acquisition and
transaction costs, and severance 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, 2016, June 30, 2016 and September 30, 2015, and
nine month periods ended September 30, 2016 and
September 30, 2015:
Schedule B -
Reconciliation of Net Income to Adjusted EBITDA, Distributable Cash
Flow and Distribution Coverage Ratio
|
|
|
|
|
|
|
|
|
|
Results of
Operations (unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Sept 30,
2016
|
|
June 30,
2016
|
|
Sept 30,
2015
|
|
Sept 30,
2016
|
|
Sept 30,
2015
|
|
(In
Thousands)
|
Net income
(loss)
|
$
|
(15,971)
|
|
|
$
|
(4,680)
|
|
|
$
|
1,619
|
|
|
$
|
(126,000)
|
|
|
$
|
4,590
|
|
Interest expense,
net
|
9,762
|
|
|
8,870
|
|
|
8,897
|
|
|
27,434
|
|
|
26,157
|
|
Provision for income
taxes
|
200
|
|
|
604
|
|
|
396
|
|
|
1,497
|
|
|
1,291
|
|
Depreciation and
amortization
|
17,822
|
|
|
18,742
|
|
|
20,610
|
|
|
55,016
|
|
|
61,227
|
|
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
|
890
|
|
|
176
|
|
|
399
|
|
|
2,831
|
|
|
605
|
|
Equity
compensation
|
775
|
|
|
825
|
|
|
455
|
|
|
2,236
|
|
|
1,659
|
|
Series A Preferred
transaction costs
|
3,046
|
|
|
—
|
|
|
—
|
|
|
3,046
|
|
|
—
|
|
Series A Preferred
fair value adjustments
|
7,198
|
|
|
—
|
|
|
—
|
|
|
7,198
|
|
|
—
|
|
Gain on
extinguishment of debt
|
(540)
|
|
|
—
|
|
|
—
|
|
|
(540)
|
|
|
—
|
|
CSI acquisition
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
208
|
|
Severance
|
57
|
|
|
262
|
|
|
43
|
|
|
562
|
|
|
287
|
|
Adjusted
EBITDA(1)
|
$
|
23,967
|
|
|
$
|
24,799
|
|
|
$
|
32,419
|
|
|
$
|
74,208
|
|
|
$
|
96,024
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Current income tax
expense
|
258
|
|
|
421
|
|
|
(1,296)
|
|
|
1,227
|
|
|
33
|
|
Maintenance capital
expenditures
|
2,771
|
|
|
1,435
|
|
|
3,665
|
|
|
6,519
|
|
|
7,869
|
|
Interest
expense
|
9,762
|
|
|
8,870
|
|
|
8,897
|
|
|
27,434
|
|
|
26,157
|
|
Severance
|
57
|
|
|
262
|
|
|
43
|
|
|
562
|
|
|
287
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
Non-cash items
included in interest expense
|
1,596
|
|
|
1,396
|
|
|
697
|
|
|
3,688
|
|
|
2,089
|
|
Distributable cash
flow
|
$
|
12,715
|
|
|
$
|
15,207
|
|
|
$
|
21,807
|
|
|
$
|
42,154
|
|
|
$
|
63,767
|
|
|
|
|
|
|
|
|
|
|
|
Cash distribution
attributable to period
|
$
|
12,799
|
|
|
$
|
12,784
|
|
|
$
|
17,405
|
|
|
$
|
38,367
|
|
|
$
|
51,796
|
|
Distribution coverage
ratio
|
0.99x
|
|
|
1.19x
|
|
|
1.25x
|
|
|
1.10x
|
|
|
1.23x
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles cash from operations to free cash
flow for the three month periods ended September 30, 2016,
June 30, 2016 and September 30,
2015, and nine month periods ended September 30, 2016 and
September 30, 2015:
Schedule C -
Reconciliation of Net Cash Provided by Operating Activities
Operations to Free Cash Flow
|
|
Results of
Operations (unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Sept 30,
2016
|
|
June 30,
2016
|
|
Sept 30,
2015
|
|
Sept 30,
2016
|
|
Sept 30,
2015
|
|
(In
Thousands)
|
Net cash provided by
operating activities
|
$
|
9,958
|
|
|
$
|
20,469
|
|
|
$
|
11,340
|
|
|
$
|
45,522
|
|
|
$
|
63,542
|
|
Capital expenditures,
net of sales proceeds
|
(3,796)
|
|
|
(2,453)
|
|
|
(18,906)
|
|
|
(7,602)
|
|
|
(75,998)
|
|
Free cash
flow
|
$
|
6,162
|
|
|
$
|
18,016
|
|
|
$
|
(7,566)
|
|
|
$
|
37,920
|
|
|
$
|
(12,456)
|
|
Logo - http://photos.prnewswire.com/prnh/20161021/431423LOGO
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visit:http://www.prnewswire.com/news-releases/csi-compressco-lp-announces-third-quarter-2016-results-300357471.html
SOURCE CSI Compressco LP