USAC — USA Compression Partners, LP

Summary of USA Compression Partners Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Q4 2025 Adjusted EBITDA: $613.8 million (record for the company).
• Distributable Cash Flow (DCF): $385.7 million (also a record).
• Net Income: $27.8 million; Operating Income: $76.6 million.
• Average Utilization Rate: 94.5%.
• Average Pricing: $21.69 per horsepower, a 1% sequential increase and 4% year-over-year increase.
• Total Fleet Horsepower: Approximately 3.9 million, with an increase of 21,000 horsepower from the previous quarter.
• Leverage Ratio: 4.0x at the end of Q4.
• Expansion and Maintenance Capital Expenditures: $40 million and $7.8 million, respectively.

2. Strategic Updates and Business Highlights:

• Successfully closed the acquisition of J-W Power on January 12, 2026, enhancing USA Compression's market presence and service reputation across major U.S. oil and gas basins.
• Safety performance improved with a Total Recordable Incident Rate (TRIR) of 0.39, significantly below the industry average.
• Plans to integrate J-W assets in 2026, targeting $10 million to $20 million in annual run-rate synergies by the end of 2027.
• The company is focusing on customer retention and contract extensions, moving contracts under USA Compression MSAs.

3. Forward Guidance and Outlook:

• 2026 Forecasted Adjusted EBITDA: $770 million to $800 million.
• Forecasted DCF: $480 million to $510 million.
• Capital Expenditures: Maintenance capital expected to be $60 million to $70 million; expansion capital projected at $230 million to $250 million, with plans to add approximately 105,000 new horsepower.
• Targeting a reduction in leverage ratio to 3.75x over the next 12 months.

4. Bad News, Challenges, or Points of Concern:

• The acquisition of J-W Power is expected to initially reduce aggregate gross margins for the contract compression business.
• The energy macro environment showed signs of stabilization, but the development pace in the Permian Basin slowed due to lower oil prices.
• Lead times for new equipment have increased to over 2 years, posing challenges for future growth and pricing strategies.
• The company is cautious about the potential need for future price increases in equipment costs due to extended lead times.

5. Notable Q&A Insights:

• The breakdown of the $250 million growth capital budget indicates that about $205 million is tied to typical compression business activities, with $150 million dedicated to new units.
• Management is optimistic about contracting the remaining horsepower for 2026, primarily focused on Tier 1 customers.
• Discussions regarding distribution coverage indicate a normalized coverage ratio of 1.55x, with aspirations to increase this to 1.6x or higher, potentially allowing for future distribution growth.
• The company is evaluating opportunities in the distributed power space but has yet to find a suitable acquisition that meets their criteria.

Overall, USA Compression Partners demonstrated strong operational performance in 2025, with strategic growth through the J-W Power acquisition, while also navigating challenges related to equipment lead times and market conditions.