USA Compression Partners LP - $USAC - Earnings Analysis: Record revenues, Adjusted EBITDA, and Distributable Cash Flow in Q4 2024.

Business Model

USA Compression Partners generates revenue primarily through contract operations, parts and service, and related party transactions. The majority of revenue comes from providing midstream natural gas compression services to infrastructure applications.

Revenue Sources

• Contract operations: Largest portion of revenue, derived from compression services provided under contract.
• Parts and service: Revenue from providing parts and maintenance services to customers.
• Related party: Revenue from transactions with related parties, particularly Energy Transfer.

Income Statement Analysis

• Total revenues increased by 2.46% from Q3 2024 to Q4 2024 and 6.63% from Q4 2023 to Q3 2024, indicating continued growth in the company's operations.
• Operating income decreased slightly by 1.51% from Q3 2024 to Q4 2024 but increased 1.41% from Q4 2023 to Q3 2024, suggesting stable operational efficiency.
• Net income increased significantly by 31.61% from Q3 2024 to Q4 2024 and 50.51% from Q4 2023 to Q3 2024, driven by improved operational performance and other factors.
• Basic net income per common unit increased significantly by 38.46% from Q3 2024 to Q4 2024 and 550% from Q4 2023 to Q3 2024, reflecting higher profitability per unit outstanding.

Balance Sheet Analysis

• Total assets stood at $2,745.601 million as of December 31, 2024.
• Total equity was a deficit of $141.051 million as of December 31, 2024.
• Total liabilities (calculated as Total Assets - Total Equity) amounted to $2,886.652 million as of December 31, 2024.

Cash Flow Analysis

• Net cash provided by operating activities was $130.195 million in Q4 2024, a significant increase compared to $48.481 million in Q3 2024 and $91.604 million in Q4 2023. The huge increase indicates improved operational cash generation.
• Net cash used in investing activities was $26.920 million in Q4 2024, a decrease compared to $28.379 million in Q3 2024 and $79.262 million in Q4 2023. Decrease indicates reduced capital expenditure or increased asset sales.
• Net cash used in financing activities was $103.340 million in Q4 2024, a considerable increase compared to $20.032 million in Q3 2024 and $12.337 million in Q4 2023. The increase could be due to increased debt repayments or increased distribution payments.

Capital Allocation

The company's capital allocation strategy includes expansion capital expenditures, primarily focused on contracted new horsepower unit additions, and maintenance capital expenditures. The company also considers strategic growth opportunities outside current expectations and adjacent to business activities, such as acquiring existing compression power tied to immediate revenue generation. The focus is on maintaining a strong balance sheet and steadily reducing leverage ratios.

Management Commentary

Our fourth-quarter financial results included another consecutive quarter of record-setting revenues and Adjusted EBITDA, as well as record-setting Distributable Cash Flow and Distributable Cash Flow Coverage.

We believe the macro backdrop continues to be favorable in the near- and medium-term.

We expect the price of oil to remain constructive and continue to drive growth in associated gas volumes, particularly in the Permian.

Overall Sentiment: Positive. Management expresses confidence in the company's performance, the macro environment, and future growth prospects, particularly in the Permian Basin and along the Gulf Coast.

Recommendation

Rating: Buy

Reason for Rating: Based on strong financial performance, positive industry outlook, and strategic capital allocation.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/12/2025, 4:05:38 AM