CSI Compressco LP

Third-quarter 2023 adjusted EBITDA was $33.8 million versus $29.8 million in Q3 2022, up 14%. Contract services revenue was $71.5 million versus $67.5 million a year ago, up 6%, while AMS revenue grew 2% year over year and 12% sequentially. Contract services gross margin was 51%, up about 150 basis points sequentially, distributable cash flow was $14 million versus $11.1 million a year ago, and the quarterly distribution will be $0.01 per unit payable November 14, with coverage of 9.9x. Fleet utilization was 87.6% at quarter end; net leverage was 4.8x; total liquidity was $68.2 million. Full-year 2023 EBITDA guidance was reiterated at $125 million to $135 million, and capital spending guidance was raised to $49 million to $54 million, with the increase partly offset by Egypt sale proceeds. Management said it expects to exit 2023 around 4.8x net leverage and give 2024 guidance on the year-end call.

John Jackson framed the quarter as evidence that the compression market has become more stable and less cyclical, citing tight supply, improving pricing, CPI protection, longer contract durations, and strong natural gas demand. He said the company is seeing a prolonged up cycle and that CSI Compressco is focused on disciplined EBITDA growth, operational rigor, and deleveraging rather than chasing absolute growth. He also emphasized that the fleet is nearing full utilization and that the company is increasingly sold out on new-build activity for 2024 and moving into 2025.

Jonathan Byers highlighted the quarter’s hard numbers: adjusted EBITDA of $33.8 million, contract services revenue of $71.5 million, DCF of $14 million, and net leverage of 4.8x. He said liquidity ended at $68.2 million, up almost 50% from the beginning of the year, and noted the company’s first lien bonds mature in April 2025, with refinancing discussions underway with banks, lenders, and rating agencies. He also said capital spending guidance increased to $49 million to $54 million, mainly due to pulling maintenance work forward on units that will be redeployed, and said current capital lease options have been attractive, at or below ABL debt.

Analysts pressed management on how much pricing has improved on legacy contracts versus current market rates; Jackson said larger horsepower units are generally up 40% to 50%, while smaller units are up about 10% to 15%, with some nuance by customer and contract structure. Questions also focused on GasJack disposal strategy, CPI adoption, and supply-chain lead times; management said it has sold or disposed of about 450 GasJack units over 2.5 years, CPI protection is now in the mid-50% range of multiyear contracts versus about 5% a year ago, and new compressor packages remain roughly a year-plus out because the engine is the critical bottleneck. On financing, management said it is exploring capital leases and other options, but is still prioritizing deleveraging and staying close to cash flow until the balance sheet is refinanced.