USA Compression Partners LP

Good morning. Welcome to USA Compression Partners' fourth quarter 2024 earnings conference call. During today's call, all parties will be on listen-only mode. At the conclusion of management's prepared remarks, the call will be open for Q&A. To ask a question, you may press star, then 1 on your touchstone phone. To withdraw your question, please press star 1 again. This conference is being recorded today, February 11, 2025. I now would like to turn the call over to Chris Porter. Vice President, General Counsel, and Secretary.

Good morning, everyone, and thank you for joining us. This morning we released our operational and financial results for the quarter and year ending December 31, 2024. You can find a copy of our earnings release as well as recording of this call in the investor relations section of our website at usacompression.com. During this call, our management will reference certain non-GAAP measures. You will find definitions and reconciliations of these non-GAP measures to the most comparable U.S. GAP measures in our earnings release. As a reminder, our conference call will include forward-looking statements. These statements are based on management's current beliefs and include projections and expectations regarding our future performance and other forward-looking matters. Actual results may differ materially from these statements. Please review the risk factors included in this morning's earnings release and in our other public filings. Please note that information provided on this call speaks only to Manchin's views as of today, February 11th, 2025, and may no longer be accurate at the time of a replay. I'll now turn the call over to Clint Green, President and CEO of USA Compression.

Thank you, Chris. Good morning, everyone, and thank you for joining our call. Chris Porter and I are joined on the call by Chris Paulson, our CFO who is joining for the first USA Compression earnings call. but has already been quite active with investor conferences in December and January. First, I want to commend our team for their unwavering commitment to safety in all that they do, ensuring the safety of our employees, contractors, and customers' employees remain our top priority. Second, we released our fourth quarter and year-end 2024 results this morning. We are extremely pleased that we were able to deliver record revenues, adjusted gross margin, adjusted EBITDA, Distributable cash flow, distributable cash flow coverage, average revenue generating horsepower, and average revenue per revenue generating horsepower results for the quarter and full year. These results enable us to improve distribution coverage and decrease leverage, which is approaching four times. On the operational front, we benefit from a focus on converting idle units to active status. This results in a 94.6 average horsepower utilization for a full year, a record for the company and something we are dedicated to maintaining and hopefully improving from here. In 2025, we expect the majority of our growth capital will be spent on new unit deliveries and the remainder on fleet enhancements. On the personnel front, we embarked upon several organizational changes and are quickly adopting a shared service model with energy transfer involving various support functions. This will enable us to review the way in which we have worked in the past, optimize processes, and improve overall digitalization of the business as we begin the first phase of an ERP implementation this year. While the field staff will remain unchanged by this integration, we anticipate their digital resources and real-time management of the business will be improved and will benefit from economies of scale and processes that are found in larger enterprises. As part of these organizational changes, we have also moved our headquarters from Austin to Dallas. We anticipate the company will see significant savings over time as a result of these shared services. and we expect a minimum of $5 million in annualized savings with full implementation anticipated in January of 2026. While 2025 will yield an enhancement in our day-to-day business processes, it is also expected to reestablish a platform for growth in new compression units. While early 2024 benefited from the delivery of new compression ordered in prior years, the increase in utilization of existing units through idle to active conversions largely enabled an average year-over-year revenue generating increase in horsepower by approximately 200,000. The emphasis on internal utilization forced a lean inventory of new horsepower going into 2025. As a result, our new horsepower and capital spend is largely back-end loaded in 2025, but we anticipate it will provide a nice cash flow increase for 2026 And as it relates to 2026, we are already starting to discuss our new order book. While we are always looking to grow and diversify our customer base, our discipline rate of growth means that our new horsepower is primarily focused on existing large upstream and midstream customers. We remain bullish on the crude oil and natural gas macro backdrop and believe that the new administration will continue to support our country's development of crude oil and natural gas for the foreseeable future. In particular, continued crude oil and associated gas growth in the Permian will continue to support our near-term growth and business plans, as most of our new horsepower additions have come in this region over the years. Looking forward, we are excited to see the anticipated change in trajectory for natural gas demand, which is expected to grow by 15 BCF per day, or approximately 15% in overall U.S. natural gas demand over the next five years. As you may have seen, the new administration has lifted the freeze on LNG export permit applications implemented this time last year, and we believe LNG growth as well as increased power demand will comprise the majority of the natural gas growth in the country. While associated Permian gas will contribute to this growth, we think areas in the Mid-Continent and the Gulf Coast are also poised to increase gas production growth at prices higher than average in 2024. And USA compression is well-positioned in these markets to benefit, given our large market share in these areas. Additionally, growing natural gas demand is driving further infrastructure build-out and the construction of incremental 4.5 BCF a day of transportation capacity out of the Permian Basin, like the recently announced Hugh Brinson pipeline. These projects and the associated compression necessary will help feed current and future natural gas demand. And finally, just a word about electrification of oilfield compression, as it is a widely debated topic amongst our peer group. We remain very constructive and supportive of electric compression. Nonetheless, we also are mindful of our current customer needs, which remain largely focused on natural gas. Some of our largest customers have begun to set forth ambitious targets for electrification, but currently lack adequate infrastructure in many areas of the Permian and certainly elsewhere. Large and variable power needs present challenges for uptime, but it is not something that industry cannot overcome. In short, we will focus our capital deployment on the equipment that our customers need, whether that compression is driven by natural gas engines, an electric motor, or dual-drive product that has been developed by energy transfer over the last 15 years. With that, I will turn the call over to Chris Paulson, our Chief Financial Officer, to discuss our fourth quarter highlights and 2025 guidance in more detail.