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USA Compression (USAC) Reports Improved Utilization in Q2

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USA Compression Partners (USAC - Free Report) reported second-quarter 2023 net profit of 11 cents per common unit, turning around from the year-ago quarter’s reported loss of 3 cents. The partnership reported a net income of $23.6 million in the reported quarter compared with $9.1 million in the year-ago period. This was due to improved pricing and utilization.

Revenues of $206.9 million were up 20.7% from the year-ago quarter’s level. The top line beat the Zacks Consensus Estimate of $199 million.

Adjusted EBITDA increased 18.6% to $125 million. The figure, however, missed our estimate of $126.3 million. Distributable cash flow rose from $55.6 million in the prior-year quarter to $67 million.

The partnership reported operating cash flow of $87.9 million in the second quarter, down from the prior-year quarter’s reported number of $94.2 million. The gross operating margin of 66.2% marked a decrease from the year-ago period’s 67.8%.

USAC’s revenue-generating capacity increased 9.3% to 3,309.6 horsepower year over year. The figure also beat our estimate of 3,205.1 horsepower. Further, the average monthly revenue per horsepower rose to $18.65 from $17.20 in the second quarter of 2023.

Meanwhile, USA Compression’s average quarterly horsepower utilization rate came in at 93.4%, up from 87.9% in the year-ago period.

DCF, Cost, Capex & Balance Sheet

USAC’s Discounted cash flow (DCF) available to limited partners for the second quarter totaled $67 million (providing 1.30x distribution coverage), up 20.6% from the year-ago quarter’s level.

Notably, on Jul 14, the partnership announced second-quarter cash distribution of 52.50 cents per unit ($2.10 on an annualized basis). The distribution was paid out on Aug 4, 2023, to common unitholders of record as of Jul 24, 2023.

It reported $155.5 million in costs and expenses, up 30.4% from the year-ago quarter’s recorded figure of $129.1 million.

It spent $71.6 million on growth capex. Maintenance capex amounted to $6.4 million.

As of Jun 30, 2023, USA Compression had net long-term debt of about $2.2 billion.

Guidance

For 2023, USAC anticipates distributable cash flow in the $260-$280 million range. The partnership also expects adjusted EBITDA in the band of $490-510 million.

The company anticipates 2023 net income in the $75-$95 million range.

Zacks Rank and Key Picks

Currently, USACcarries a Zacks Rank #3 (Hold).

Some better-ranked stocks for investors interested in the energy sector are Murphy USA (MUSA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Evolution Petroleum (EPM - Free Report) and Archrock (AROC - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA is valued at around $6.55 billion. In the past year, its shares have risen 5.6%

MUSA currently pays a dividend of $1.52 per share, or 0.51% on an annual basis. Its payout ratio currently sits at 6% of earnings.

Evolution Petroleum is worth approximately $319.05 million. EPM currently pays a dividend of 48 cents per share, or 5.20% on an annual basis.

The company currently has a forward P/E ratio of 8.88. In comparison, its industry has an average forward P/E of 13.60, which means EPM is trading at a discount to the group.

Archrock is valued at around $2.01 billion. It delivered an average earnings surprise of 15.08% for the last four quarters and its current dividend yield is 4.67%.

Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.

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