Striving for success: CSI Compressco LP (NASDAQ: CCLP)

On 08 Jan 2020, CSI Compressco LP (NASDAQ: CCLP) spotted trading -35.93% off 52-week high price. On the other end, the stock has been noted 18.06% away from the low price over the last 52-weeks. The stock changed -1.92% to recent value of $2.55. The stock transacted 99872 shares during most recent day however it has an average volume of 98.03K shares.

CSI Compressco LP (CCLP) reported third quarter 2019 revenue of $114M and a net loss of $3.6M.  Distributable cash flow improved 1% sequentially to $15.8M while Adjusted EBITDA increased 4% sequentially to $34.0M as lower new equipment sales Because of timing of shipments were over offset by stronger compression services earnings.  Adjusted EBITDA was the highest since the fourth quarter of 2014 as a result of achieving another quarter of record high compression service gross margins and equipment utilization.

Compression and Related Services

As of September 30, 2019, aggregate service compressor fleet horsepower totaled 1,157,938 and the overall service fleet utilization rate was 90.1%, up 100 basis points from our exit utilization of 89.1% at June 30, 2019.  During the third quarter we increased active operating service fleet horsepower by over 14,300 horsepower. Total aggregate operating service fleet horsepower was 1,043,384 as of September 30, 2019 (we define the overall service fleet utilization rate as the aggregate service compressor fleet horsepower in service divided by the aggregate service compressor fleet horsepower as of such date).  We do not exclude idle horsepower under repair from our calculation of these utilization rates.  Since the starting of the year we have added 70,923 horsepower at pricing that is generating about 20% returns on capital. We calculate returns on capital with regard to individual new compressor units by dividing estimated yearly operating income generated by such compressor units by the initial cost of such compressor units.

Aftermarket Services and Equipment Sales

Aftermarket services revenue of $20.4M increased $2.3M sequentially as consumer demand remains strong.  We expect this business to end the year strong.

Given the timing of shipments and consistent with our expectations mentioned on our last earnings call, equipment sales in the third quarter were $28.4M, down from $53.1M in the second quarter of this year.  Third quarter orders for new equipment sales were $29.0M (net of cancellations), a raise over the $18.9M in the second quarter of 2019.  We received a large international order in the third quarter and expect to have one to two more large orders in the fourth quarter of 2019, or early in 2020.  The pipeline of identified new unit sales opportunities remains in excess of $250M, and while some of our consumers have delayed committing to new orders this year, we continue to see a healthy outlook for this business.

2019 Guidance

Our full year 2019 guidance for revenue and Adjusted EBITDA remains unchanged at between $475M and $490M and between $125M and $130M, respectively.  We now expect 2019 net loss to be between $19.5M and $21.5M, our average distribution coverage ratio for 2019 to be between 29X and 31X and 2019 distributable cash flow to be between $55M and $59M.  Reconciliations of predictable Adjusted EBITDA, distributable cash flow and distribution coverage ratio to the nearest GAAP financial measures are included on Schedule D.

We estimate 2019 capital expenditures to remain between $65M to $70M, which we expect to fund from cash on hand and cash flow from operations.  This range includes $19M to $21M for maintenance capital expenditures and $46M to $49M of growth capital expenditures that are predictable to add about 81,000 horsepower to the compression service fleet in 2019, all with client commitments.  The range of growth capital expenditures excludes $14.6M of compressor packages, with 20,700 horsepower, that TETRA Technologies, Inc. (“TETRA”) agreed to purchase and lease to CSI Compressco.  Year-to-date through September 2019, we invested about $53M of capital expenditures, including maintenance capital expenditure and not including the $14.6M funded by TETRA.  For financial reporting purposes, the $14.6M of fleet additions funded by TETRA is reflected as CSI Compressco’s capital expenditures.  CSI Compressco has the right to buy the equipment from TETRA any time over the next five years in accordance with the terms of the contracts with TETRA and has no obligation to buy the equipment at the end of the five-year term.  This support from TETRA will allow us to meet certain current client demands without having to further borrow under our asset-based revolver or access debt or equity markets.

Its earnings per share (EPS) expected to touch remained 22.70% for this year while earning per share for the next 5-years is expected to reach at 3.70%. CCLP has a gross margin of 31.20% and an operating margin of 6.80% while its profit margin remained -4.60% for the last 12 months.  According to the most recent quarter its current ratio was 1.1 that represents company’s ability to meet its current financial obligations. The price moved ahead of 1.85% from the mean of 20 days, 1.79% from mean of 50 days SMA and performed -15.50% from mean of 200 days price. Company’s performance for the week was -6.07%, 11.95% for month and YTD performance remained -6.07%.

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