What changed in this filing

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Item 1A. Risk Factors

2024-02-13 compared with 2023-02-14 · 83 added, 82 removed, 598 unchanged (22% of the section changed)

7 unchanged sentences

• An extended reduction in the demand for, or production of, natural gas or crude oil could adversely affect the demand for our services or the prices we charge for our services, which could result in a decrease in our revenues and cash available for distribution to unitholders.

• Pandemics and other public health crises, including the ongoing global COVID-19 pandemic, may have an adverse effect on our business and results of operations.

• We have several key customers.

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• We may be unable to grow our cash flows if we are unable to expand our business, which could limit our ability to maintain or increase the level of distributions to our common unitholders.

• We may be unable to grow successfully through acquisitions, which may negatively impact our operations and limit our ability to maintain or increase the level of distributions on our common units.

• Our ability to fund purchases of additional compression units and expansion capital expenditures in the future is dependent on our ability to access external capital, and if we are unable to access this external capital, we may be limited in our ability to grow our operations or maintain or increase our distributions.

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• Energy Transfer owns and controls the General Partner, and the General Partner has sole responsibility for conducting our business and managing our operations.

The General Partner and its affiliates, including Energy Transfer, have

conflicts of interest with us and limited fiduciary duties, and they may favor their own interests to the detriment of us and our unitholders.

The General Partner and its affiliates, including Energy Transfer, have conflicts of interest with us and limited fiduciary duties, and they may favor their own interests to the detriment of us and our unitholders.

• The Partnership Agreement limits the General Partner’s fiduciary duties to our unitholders.

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• We may issue additional limited partner interests without the approval of unitholders, subject to certain Preferred Unit approval rights, which would dilute unitholders’ existing ownership interests and may increase the risk that we will not have sufficient available cash to maintain or increase our per-common-unit distribution level.

• Energy Transfer may sell, and the holders of the Preferred Units have sold and may continue to sell, our common units in the public or private markets, and such sales could have an adverse impact on the trading price of our common units.

• The General Partner has a call right that may require holders of our common units to sell their common units at an undesirable time or price.

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• Our unitholders’ share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.

Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due from them with respect to that income.

• If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.

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Furthermore, our Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) prohibits us from paying distributions on our common units unless we have first paid the quarterly distribution on the Preferred Units, including any previously accrued but unpaid distributions on the Preferred Units.

The Preferred Unit distributions require $12.2 million quarterly, or $48.8 million annually, based on the number of Preferred Units outstanding and the distribution rate of $24.375 per Preferred Unit per quarter, or $97.50 per Preferred Unit per year.

The Preferred Unit distributions require $11.2 million quarterly, or $44.9 million annually, based on the number of Preferred Units outstanding as of February 8, 2024 and the distribution rate of $24.375 per Preferred Unit per quarter, or $97.50 per Preferred Unit per year.

Under our cash distribution policy, the amount of cash we can distribute to our unitholders principally depends on the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

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The demand for our compression services depends on the continued demand for, and production of, natural gas and crude oil.

Demand may be affected by, among other factors, natural gas prices, crude oil prices, weather, availability of alternative energy sources, global health pandemics (such as COVID-19), governmental regulation, geopolitical events, and the overall demand for energy.

Demand may be affected by, among other factors, natural gas prices, crude oil prices, weather, availability of alternative energy sources, governmental regulation, geopolitical events, global health pandemics, and the overall demand for energy.

Any extended reduction in the demand for natural gas or crude oil could depress the level of production activity and result in a decline in the demand for our compression services, which could result in a reduction in our revenues and our cash available for distribution.

In particular, lower natural gas or crude oil prices over the long term could result in a decline in the production of natural gas or crude oil, respectively, resulting in reduced demand for our compression services.

For example, the North American rig count, as measured by Baker Hughes, hit a 2014 peak of 1,931 rigs on September 12, 2014, and at that time, Henry Hub natural gas spot prices were $3.82 per one million British thermal units (“MMBtu”), and West Texas Intermediate (“WTI”) crude oil spot prices were $92.18 per barrel.

By contrast, the North American rig count had decreased to 404 rigs on May 20, 2016, and at that time, Henry Hub natural gas spot prices were $1.81 per MMBtu, and WTI crude oil spot prices were $47.67 per barrel.

This slowdown in new drilling activity caused some pressure on service rates for new and existing services and contributed to a decline in our fleet utilization rates during 2015 and into 2016.

Following disputes between the members of OPEC+ about production levels and the price of crude oil, and amid the outbreak of COVID-19, the price of crude oil declined rapidly beginning in March 2020.

At the end of December 2020, the North American rig count was 351 rigs, the price of WTI crude oil was $48.35 per barrel, and Henry Hub natural gas spot prices were $2.36 per MMBtu.

The decline in commodity prices and the demand for and production of crude oil and natural gas resulted in a decline in the demand for our compression services, which caused in a reduction of our revenues and our cash available for distribution in 2020 and 2021.

For example, in 2020, following disputes between the members of OPEC+ about production levels and the price of crude oil, and amid the outbreak of COVID-19, the price of crude oil declined rapidly beginning in March of that year.

During 2020, the North American rig count reached a low of 247 rigs in August of 2020, down from 790 rigs at the end of January of that year, the price of WTI crude oil briefly went negative in April 2020, down from $51.58 per barrel at the end of January of that year, and Henry Hub natural gas spot reached a low of $1.33 per MMBtu in September 2020, down from $1.91 per MMBtu at the end of January of that year.

The decline in commodity prices and the demand for and production of crude oil and natural gas resulted in a decline in the demand for our compression services, which caused a reduction of our revenues and our cash available for distribution in 2020 and 2021.

In addition, a small portion of our fleet is used in gas lift applications in connection with crude oil production using horizontal drilling techniques.

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Additionally, unconventional sources, such as shales, tight sands, and coalbeds, can be less economically feasible to produce in low commodity price environments, in part due to costs related to compression requirements, and a reduction in demand for natural gas or gas lift for crude oil may cause such sources of natural gas or crude oil to become uneconomic to drill and produce, which has negatively impacted, and may again in the future negatively impact, the demand for our services.

Further, if demand for our services decreases going forward, we may be asked to renegotiate our service contracts at lower rates.

Pandemics and other public health crises, including the ongoing global COVID-19 pandemic, may have an adverse effect on our business and results of operations.

Pandemics, such as the COVID-19 pandemic, or other public health crises could significantly reduce the demand for, price of, and level of production of natural gas and crude oil, which could have an adverse impact on our business and results of operations.

The COVID-19 pandemic that began in early 2020 caused volatility in the capital markets and negatively impacted the worldwide economy, including the oil and gas industry.

Demand for crude oil and natural gas declined in 2020 due in part to the COVID-19 pandemic and associated government-imposed restrictions and decreased consumer demand.

This reduced demand also contributed to a decline in commodity prices and production.

These declines had, and may again in the future have, a negative impact on many of our customers involved in the domestic exploration and production of crude oil and natural gas, which in turn had and may again have, an adverse effect on our business and results of operations.

A reduction in the demand for, price of, and level of production of natural gas and crude oil in the regions where we provide compression services potentially could cause:

• a negative impact on our results of operations and financial condition;

• the deterioration of the financial condition of our customers, suppliers, and vendors;

• a hindrance on our ability to pay distributions, service our debt and other liabilities, and comply with certain restrictive financial covenants in the Credit Agreement and the Indentures;

• renegotiations of our service contracts at lower rates;

• additional costs to us, which could be significant, in connection with litigation and bankruptcies resulting from customer financial deterioration.

Furthermore, market volatility could increase our cost of capital and block our access to the equity and debt capital markets, which could eventually impede our ability to grow, make distributions to our unitholders at current levels, and comply with the terms of our debt agreements.

Additionally, if COVID-19 or other pandemics were to significantly spread into our workforce, this could hinder our ability to provide services and otherwise perform our contractual obligations to our customers.

The duration of any pandemic, including COVID-19, and the magnitude of its repercussions cannot be reasonably estimated at this time, and depending on the duration and severity of the pandemic, it could materially adversely affect our financial condition and results of operations.

Further, if demand for our services decreases, we may be asked to renegotiate our service contracts at lower rates.

We have several key customers.

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As of December 31, 2023, we had $2.3 billion of total debt, net of amortized deferred financing costs, outstanding under our Credit Agreement and Senior Notes.

The Credit Agreement has an aggregate commitment of $1.6 billion (subject to availability under our borrowing base), with a further potential increase of up to $200 million.

The Credit Agreement has an aggregate commitment of $1.6 billion (subject to availability under our borrowing base).

The Credit Agreement matures on December 8, 2026, except that if any portion of the Senior Notes 2026 are outstanding on December 31, 2025, the Credit Agreement will mature on December 31, 2025.

As of December 31, 2022, we had outstanding borrowings under the Credit Agreement of $646.0 million, $954.0 million

of availability and, subject to compliance with the applicable financial covenants, available borrowing capacity of $333.1 million.

As of December 31, 2023, we had outstanding borrowings under the Credit Agreement of $871.8 million and $728.2 million of remaining unused availability of which, due to restrictions related to compliance with the applicable financial covenants, $529.1 million was available to be drawn.

As of December 31, 2023, we had $725.0 million and $750.0 million aggregate principal amount outstanding on our Senior Notes 2026 and Senior Notes 2027, respectively.

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As of December 31, 2023, our leverage ratio under the Credit Agreement was 4.10x.

Financial covenants in the Credit Agreement permit a maximum leverage ratio of not greater than 5.50 to 1.00 through the third fiscal quarter of 2023 and 5.25 to 1.00 thereafter (except that we may increase the applicable Total Leverage Ratio by 0.25 for any fiscal quarter during which a Specified Acquisition (as defined in the Credit Agreement) occurs and the following two fiscal quarters, but in no event shall the maximum Total Leverage Ratio exceed 5.50 to 1.00 for any fiscal quarter as a result of such increase);

Financial covenants in the Credit Agreement permit a maximum leverage ratio of 5.25 to 1.00 (except that we may increase the applicable Total Leverage Ratio by 0.25 for any fiscal quarter during which a Specified Acquisition (as defined in the Credit Agreement) occurs and the following two fiscal quarters, but in no event shall the maximum Total Leverage Ratio exceed 5.50 to 1.00 for any fiscal quarter as a result of such increase);

an Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 2.50 to 1.00;

and a Secured Leverage Ratio (as defined in the Credit Agreement) of not greater than 3.00 to 1.00 or less than 0.00 to 1.00.

As of February 9, 2023, we had outstanding borrowings under the Credit Agreement of $677.0 million.

As of February 8, 2024, we had outstanding borrowings under the Credit Agreement of $927.5 million and outstanding letters of credit of $0.5 million.

Our level of debt could have important consequences to us, including the following:

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Based on our December 31, 2023, variable-rate indebtedness outstanding, a one percent increase in the effective interest rate would result in an annual increase in our interest expense of approximately $8.7 million.

If our operating results are not sufficient to service our current or future indebtedness, we could be forced to take actions such as reducing the level of distributions on our common units, curtailing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital.

We may be unable to effect any of these actions on terms satisfactory to us or at all.

delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital.

We may be unable to affect any of these actions on terms satisfactory to us or at all.

We depend on a limited number of suppliers and are vulnerable to product shortages and price increases, which could have a negative impact on our results of operations.

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If we do not achieve our expected growth, we may not be able to maintain or increase the level of distributions on our common units, likely causing the market price of our common units to decline.

We may be unable to grow successfully through acquisitions, which may negatively impact our operations and limit our ability to maintain or increase the level of distributions on our common units.

From time to time, we may choose to make business acquisitions, such as the CDM Acquisition, to pursue market opportunities, increase our existing capabilities, and expand into new geographic areas of operations.

While we have reviewed acquisition opportunities in the past and will continue to do so in the future, we may not be able to identify attractive acquisition opportunities or successfully acquire identified targets.

Any acquisitions we do complete may require us to issue a substantial amount of equity or incur a substantial amount of indebtedness.

If we consummate any future material acquisitions, our capitalization may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial, and other relevant information that we will consider in connection with any future acquisition.

Furthermore, competition for acquisition opportunities may escalate, increasing our costs of pursuing acquisitions or causing us to refrain from making acquisitions.

Also, our reviews of proposed business or asset acquisitions are inherently imperfect because generally it is not feasible to perform an in-depth review of each such proposal given time constraints imposed by sellers.

Even if performed, a detailed review of assets and businesses may not reveal existing or potential problems, and may not provide sufficient familiarity with such business or assets to fully assess their deficiencies and potential.

Inspections may not be performed on every asset, and environmental problems, such as groundwater contamination, may not be observable even when an inspection is undertaken.

Pandemics and other public health crises may have an adverse effect on our business and results of operations.

Pandemics and other public health crises could significantly reduce the demand for, price of, and level of production of natural gas and crude oil, which could have an adverse impact on our business and results of operations.

For example, the COVID-19 pandemic that began in early 2020 caused volatility in the capital markets and negatively impacted the worldwide economy, including the oil and gas industry.

Demand for crude oil and natural gas declined in 2020 due in part to the COVID-19 pandemic and associated government-imposed restrictions and decreased consumer demand.

This reduced demand also contributed to a decline in commodity prices and production.

These declines had a negative impact on many of our customers involved in the domestic exploration and production of crude oil and natural gas, which in turn had an adverse effect on our business and results of operations.

A resurgence of COVD-19, or the emergence of a different pandemic, could once again reduce the demand for, price of, and level of production of natural gas and crude oil in the regions where we provide compression services, which potentially could cause:

• a negative impact on our results of operations and financial condition;

• the deterioration of the financial condition of our customers, suppliers, and vendors;

• a hindrance on our ability to pay distributions, service our debt and other liabilities, and comply with certain restrictive financial covenants in the Credit Agreement and the Indentures;

• renegotiations of our service contracts at lower rates;

• additional costs to us, which could be significant, in connection with litigation and bankruptcies resulting from customer financial deterioration.

Additionally, if any pandemic were to significantly spread into our workforce, this could hinder our ability to provide services and otherwise perform our contractual obligations to our customers.

The duration of any pandemic and the magnitude of its repercussions cannot be reasonably estimated, and depending on the duration and severity of the pandemic, it could materially adversely affect our financial condition and results of operations.

Our ability to fund purchases of additional compression units and expansion capital expenditures in the future is dependent on our ability to access external capital, and if we are unable to access this external capital, we may be limited in our ability to grow our operations or maintain or increase our distributions.

The Partnership Agreement requires us to distribute all of our available cash to our unitholders (excluding prudent operating reserves).

We expect that we will rely primarily on cash generated by operating activities and, where necessary, borrowings under the Credit Agreement, and the issuance of debt and equity securities, to fund expansion capital expenditures.

We expect that we will rely primarily on cash generated by operating activities and, where necessary, borrowings under the Credit Agreement, to fund operating costs and working capital requirements.

We expect to fund expansion capital expenditures through borrowings under the Credit Agreement and the issuance of debt and equity securities.

However, we may not be able to obtain equity or debt financing on terms favorable to us or at all.

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There are no limitations in the Partnership Agreement on our ability to issue additional equity securities, including securities ranking senior to the common units, subject to certain restrictions in the Partnership Agreement limiting our ability to issue units senior to or pari passu with the Preferred Units.

To the extent we issue additional equity securities, including common units and preferred units, the payment of distributions on those additional securities may increase the risk that we will

be unable to maintain or increase our per-common-unit distribution level.

To the extent we issue additional equity securities, including common units and preferred units, the payment of distributions on those additional securities may increase the risk that we will be unable to maintain or increase our per-common-unit distribution level.

Similarly, our incurrence of borrowings or other debt to finance our growth strategy would increase our interest expense, which in turn would decrease our cash available for distribution.

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During times when the natural gas or crude oil markets weaken, such as during the COVID-19 pandemic, our customers are more likely to experience financial difficulties, including being unable to access debt or equity financing, which could result in a reduction in our customers’ spending for our services.

For example, our customers could seek to preserve capital by using lower-cost providers, not renewing month-to-month contracts, or determining not to enter into any new compression service contracts.

For example, our customers could seek to preserve capital or reduce expenses by using lower-cost providers of compression services, not renewing month-to-month contracts, determining not to enter into any new compression service contracts, or seeking lower contract prices for our services.

A significant decline in commodity prices may cause certain of our customers to reconsider their near-term capital budgets, which may impact large-scale natural gas infrastructure and crude oil production activities.

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Nonpayment and nonperformance by our customers, suppliers, or vendors could reduce our revenues, increase our expenses, and otherwise have a negative impact on our ability to conduct our business, operating results, cash flows, and ability to make distributions to our unitholders.

Weak economic conditions and widespread financial distress, including as a result of the COVID-19 pandemic, did and could again reduce the liquidity of our customers, suppliers, or vendors, making it more difficult for them to meet their obligations to us.

Weak economic conditions and widespread financial distress, such as what resulted from the COVID-19 pandemic, did and could again reduce the liquidity of our customers, suppliers, or vendors, making it more difficult for them to meet their obligations to us.

We therefore are subject to heightened risks of loss resulting from nonpayment or nonperformance by our customers, suppliers, and vendors.

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In addition, nonperformance by suppliers or vendors who have committed to provide us with critical products or services could raise our costs or interfere with our ability to successfully conduct our business.

All of the above may be exacerbated in the future by the COVID-19 pandemic and the governmental responses thereto.

The Preferred Units have rights, preferences, and privileges that are not held by, and are preferential to the rights of, holders of our common units.

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• incur Indebtedness (as defined in the Credit Agreement) if, after giving pro forma effect to such incurrence, the Leverage Ratio (as defined in the Credit Agreement) determined as of the last day of the most recently ended fiscal quarter would exceed 6.5x, subject to certain exceptions.

A prolonged or severe sudden downturn in the economic environment, such as the severe impact of the COVID-19 pandemic, could cause an impairment of identifiable intangible assets and reduce our earnings.

A prolonged or severe sudden downturn in the economic environment could cause an impairment of identifiable intangible assets and reduce our earnings.

We have recorded $245.7 million of identifiable intangible assets, net, as of December 31, 2023.

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These events could cause us to record impairments of identifiable intangible assets.

For example, for the year ended December 31, 2020, we recognized a $619.4 million impairment of goodwill as a result of the economic downturn caused by the response to COVID-19.

If we determine that any of our identifiable intangible assets are impaired, we will be required to take an immediate charge to earnings with a corresponding reduction of partners’ capital resulting in an increase in balance sheet leverage as measured by debt to total capitalization.

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Events and conditions that could result in impairment in the value of our long-lived assets include changes in the industry in which we operate, competition, advances in technology, adverse changes in the regulatory environment, or other factors leading to a reduction in our expected long-term profitability.

For example, for the years ended December 31, 2022, 2021, and 2020, we evaluated the future deployment of our idle fleet assets under then-existing market conditions and retired 15, 26, and 37 compressor units, respectively, for a total of approximately 3,200, 11,000, and 15,000 aggregate horsepower, respectively, that previously were used to provide compression services in our business.

For example, for the years ended December 31, 2023, 2022, and 2021, we evaluated the future deployment of our idle fleet assets under then-current market conditions and retired 42, 15, and 26 compression units, respectively, representing approximately 37,700, 3,200, and 11,000 of aggregate horsepower, respectively, that previously were used to provide compression services in our business.

As a result, we recorded impairments of compression equipment of $12.3 million, $1.5 million, and $5.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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Our ability to grow or even to continue our current level of service to our current customers could be adversely impacted if we are unable to successfully hire, train, and retain these important personnel.

We may be unable to grow successfully through acquisitions, which may negatively impact our operations and limit our ability to maintain or increase the level of distributions on our common units.

Any acquisitions we do complete may require us to issue a substantial amount of equity or incur a substantial amount of indebtedness.

Furthermore, competition for acquisition opportunities may escalate, increasing our costs of pursuing acquisitions or causing us to refrain from making acquisitions.

Inspections may not be performed on every asset, and environmental problems, such as groundwater contamination, may not be observable even when an inspection is undertaken.

Integration of assets acquired in past acquisitions or future acquisitions with our existing business can be complex, time-consuming, and costly, particularly in the case of material acquisitions such as the CDM Acquisition, which significantly increased our size and expanded the geographic areas in which we operate.

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If any of these risks or other unanticipated liabilities or costs were to materialize, we may not realize the desired benefits from past and future acquisitions, resulting in a negative impact on our results of operations.

For example, subsequent to the CDM Acquisition the attrition rate of specialized field technicians exceeded our projections and, as a result, we incurred unanticipated costs in 2018 to utilize third-party contractors to service our compression units at a greater cost than we would have incurred to compensate employees to perform the same work.

For example, subsequent to the CDM Acquisition the attrition rate of specialized field technicians exceeded our projections and, as a result, we incurred

unanticipated costs in 2018 to utilize third-party contractors to service our compression units at a greater cost than we would have incurred to compensate employees to perform the same work.

We may not be successful in integrating acquisitions into our existing operations within our anticipated time frame, which may result in unforeseen operational difficulties, diminished financial performance, or require a disproportionate amount of our management’s attention.

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federal, state, or local environmental permits or other authorizations.

Our operations may require new or amended facility permits or

licenses from time to time with respect to storm water discharges, waste handling, or air emissions relating to equipment operations, which subject us to new or revised permitting conditions that may be onerous or costly to comply with.

Our operations may require new or amended facility permits or licenses from time to time with respect to storm water discharges, waste handling, or air emissions relating to equipment operations, which subject us to new or revised permitting conditions that may be onerous or costly to comply with.

Additionally, the operation of compression units may require individual air permits or general authorizations to operate under various air regulatory programs established by rule or regulation.

These permits and authorizations frequently contain numerous compliance requirements, including monitoring and reporting obligations and operational restrictions, such as emissions limits.

Given the wide variety of locations in which we operate, and the numerous environmental permits and other authorizations that are applicable to our operations, we may occasionally identify or be notified of technical violations of certain requirements existing under various permits or other authorizations.

Given the wide variety of locations in which we operate, and the numerous environmental permits and other authorizations that

are applicable to our operations, we may occasionally identify or be notified of technical violations of certain requirements existing under various permits or other authorizations.

We could be subject to penalties for any noncompliance in the future.

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These Subpart OOOOa standards expanded the 2012 NSPS by mandating certain equipment-specific emissions control practices, requiring additional controls for pneumatic controllers and pumps as well as compressors, and imposing leak detection and repair requirements for natural gas compressor and booster stations.

In addition, in November 2021, the EPA proposed a rule to further reduce methane and VOC emissions from new and existing sources in the oil and gas sector.

In November 2022, the EPA issued a supplemental proposal to expand its November 2021 proposed rule.

In addition, in December 2023, the EPA issued rules to further reduce methane and VOC emissions from new and existing sources in the oil and gas sector.

Any additional regulation of air emissions from the oil and gas sector could result in increased expenditures for pollution control equipment, which could impact our customers’ operations and negatively impact our business.

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Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas, are examples of greenhouse gases (“GHGs”).

In recent years, the U.S.

Congress has considered legislation to reduce GHG emissions.

In August 2022, the IRA 2022 was passed, which imposes a methane emissions charge on certain oil and gas facilities, including onshore petroleum and natural gas production facilities, that emit 25,000 metric tons or more of carbon dioxide equivalent gas per year and exceed certain emissions thresholds.

Congress, from time to time, has considered legislation to reduce GHG emissions.

emissions thresholds.

In January 2024, the EPA issued a proposed rule to impose and collect the methane emissions charge authorized under the IRA 2022.

In addition, federal or state governmental agencies could seek to pursue legislative, regulatory, or executive initiatives that restrict GHG emissions.

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Although it is not currently possible to predict with specificity how the IRA 2022 or any proposed or future GHG legislation, regulation, agreements, or initiatives will impact our business, any legislation or regulation of GHG emissions that may be imposed in areas in which we conduct business or on the assets we operate, including a carbon tax or cap-and-trade program, could result in increased compliance or operating costs, additional operating restrictions, or reduced demand for our services, and could have a material adverse effect on our business, financial condition, and results of operations.

Additionally, in March 2022, the SEC announced its intention to promulgate rules requiring climate disclosures.

In March 2022, the SEC announced its intention to promulgate rules requiring climate disclosures.

Although the form and substance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements.

In January 2024, the Biden administration announced a moratorium on approvals of applications for LNG export authorizations by the United States Department of Energy (“DOE”) while the DOE conducts studies related to the cumulative impact of LNG exports on domestic natural gas prices, climate change, and other matters.

The moratorium on these approvals is expected to continue for several months and it is uncertain as to timing or conclusions of these studies and the resulting effect on the DOE approval process related to applications for LNG export authorizations.

As a result, it is difficult to predict whether changes to the DOE’s approval process will have a negative effect on the prospects for future LNG export projects and on demand for domestic natural gas production that would be supported by these new LNG projects.

Climate change may increase the frequency and severity of weather events that could result in severe personal injury, property damage, and environmental damage, which could curtail our or our customers’ operations and otherwise materially adversely affect our cash flows.

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Supply and demand for crude oil and natural gas is dependent on a variety of factors, many of which are beyond our control.

These factors include, among others, the potential adoption of new government regulations, including those related to

fuel conservation measures and climate change regulations, technological advances in fuel economy, and energy generation devices.

These factors include, among others, the potential adoption of new government regulations, including those related to fuel conservation measures and climate change regulations, technological advances in fuel economy, and energy generation

For example, legislative, regulatory, or executive actions intended to reduce emissions of GHGs, such as the IRA 2022, could increase the cost of consuming crude oil and natural gas, or provide incentives to encourage alternative forms of energy, thereby potentially causing a reduction in the demand for crude oil and natural gas.

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• the market price of our common units may decline.

Energy Transfer and the holders of the Preferred Units may sell our common units in the public or private markets, and such sales could have an adverse impact on the trading price of our common units.

As of December 31, 2022, Energy Transfer beneficially owns an aggregate of 46,056,228 common units in us.

We have granted certain registration rights to Energy Transfer and its affiliates with respect to any common units they own, and have filed a registration statement with the SEC for the benefit of the holders of the Preferred Units with respect to any common units they may receive upon conversion of the Preferred Units or exercise of the Warrants, some of which have already been exercised in exchange for common units.

Energy Transfer may sell, and the holders of the Preferred Units have sold and may continue to sell, our common units in the public or private markets, and such sales could have an adverse impact on the trading price of our common units.

As of February 8, 2024, Energy Transfer beneficially owns an aggregate of 46,056,228 common units in us.

As of February 8, 2024, the holders of our Preferred Units (the “Preferred Unitholders”) have converted a portion of their Preferred Units into 1,998,850 common units, in accordance with the formula set forth in our Partnership Agreement.

Additionally, the warrants held by the Preferred Unitholders have been exercised and net settled in full for 2,894,796 common units, all of which have been sold by the Preferred Unitholders.

We have granted certain registration rights to Energy Transfer and its affiliates with respect to any common units they own, and have filed a registration statement with the SEC for the benefit of the Preferred Unitholders with respect to any common units they may receive upon conversion of the Preferred Units or exercise of the warrants.

Energy Transfer may, and the Preferred Unitholders may continue to, sell such common units.

Any sales of these common units in the public or private markets could have an adverse impact on the price of our common units.

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Under Delaware law, unitholders could be held liable for our obligations to the same extent as a general partner if a court determined that the right of limited partners to remove our General Partner or to take other action under the Partnership Agreement constituted participation in the “control” of our business.

Additionally, under Delaware law, the General Partner has unlimited liability for the obligations of the Partnership, such as our debts and environmental liabilities, except for those contractual obligations of the Partnership that are expressly made without recourse to the General Partner.

Additionally, under Delaware law, the General Partner has

unlimited liability for the obligations of the Partnership, such as our debts and environmental liabilities, except for those contractual obligations of the Partnership that are expressly made without recourse to the General Partner.

The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the states in which we do business.

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Our unitholders’ share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.

Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due from them with respect to that income.

Our unitholders will be treated as partners to whom we will allocate taxable income.

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For example, if we sell assets and use the proceeds to repay existing debt or fund capital expenditures, you may be allocated taxable income and gain resulting from the sale.

Further, taking advantage of opportunities to reduce our existing debt, such as debt exchanges, debt repurchases, or modifications of our existing debt could result in “cancellation of indebtedness income” (also referred to as “COD income”) being allocated to our unitholders as taxable income.

may be allocated COD income, and income tax liabilities arising therefrom may exceed cash distributions.

The ultimate effect of any such allocations will depend on the unitholder’s individual tax position with respect to its units.

Unitholders are encouraged to consult their tax advisors with respect to the consequences of potential COD income or other transactions that may result in income and gain to unitholders.

The ultimate effect of any such allocations will depend on the

unitholder’s individual tax position with respect to its units.

Unitholders are encouraged to consult their tax advisors with respect to the consequences of transactions that may result in income and gain to unitholders.

If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution.

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If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, and interest, our cash available for distribution to our unitholders may be reduced.

See Note 17 to our consolidated financial statements in Part II, Item 8 “Financial Statements and Supplementary Data” for additional information regarding the current IRS examination.

Tax gain or loss on the disposition of our common units could be more or less than expected.

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Generally, our deduction for business interest is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and for taxable years beginning on or after January 1, 2022, shall be reduced by depreciation and amortization to the extent such depreciation or amortization is not capitalized into cost of goods sold with respect to inventory.

We expect that beginning in 2022, the limitation on our ability to deduct business interest will significantly increase.

As a result of this limitation, the amount of taxable income allocated to our

unitholders in the taxable year in which the limitation is in effect will increase, and any future limitations on our ability to deduct business interest may similarly increase taxable income allocated to our unitholders.

As a result of this limitation, the amount of taxable income allocated to our unitholders in the taxable year in which the limitation is in effect will increase, which was $95.1 million for tax year 2022, and any future limitations on our ability to deduct business interest may similarly increase taxable income allocated

to our unitholders.

In certain circumstances, a unitholder may be able to utilize a portion of a business interest deduction subject to this limitation in future taxable years.

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unitholder also will be subject to a 10% withholding tax on the amount of any distribution in excess of our cumulative net income.

As we do not compute our cumulative net income for such purposes due to the complexity of the calculation and lack of clarity in how it would apply to us, we intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to such 10% withholding tax.

We intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to such 10% withholding tax.

Accordingly, distributions to a non-U.S.

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We rely on our information technology infrastructure to process, transmit, and store electronic information critical to our business activities.

In recent years, there has been a rise in the number of cyberattacks on other companies’ network and information systems by state-sponsored and other criminal organizations, and as a result, the risks associated with such an event continue to increase.

A significant failure, compromise, breach, or interruption of our information systems could result in a disruption of our operations, customer dissatisfaction, damage to our reputation, a loss of customers or revenues, and potential regulatory fines.

In recent years, there has been a rise in the number of cyberattacks on other companies’ network and information systems by state-sponsored and other criminal organizations, as well as data security incidents caused by human error, vulnerabilities in software and other technologies, or vendor and supply chain incidents.

As a result, the risks associated with such an event continue to increase and we frequently detect, respond to and mitigate security incidents.

A significant failure, compromise, breach, or interruption of our information systems or inadequacies in our incident response processes could result in loss of confidential information, a disruption of our operations, customer dissatisfaction, damage to our reputation, a loss of customers or revenues, privacy or cybersecurity related litigation, and potential regulatory fines.

If any such failure, interruption, or similar event results in improper disclosure of information maintained in our information systems and networks or those of our customers, suppliers, or vendors, including personnel, customer, pricing, and other sensitive information, we also could be subject to liability under relevant contractual obligations and laws and regulations protecting personal data and privacy.

Our financial results also could be adversely affected if our information systems are breached or an employee causes our information systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating such systems.

Our financial results also could be adversely affected if our or our vendors’ information systems are breached or an employee causes our information systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating such systems.

Terrorist attacks, the threat of terrorist attacks, or other sustained military campaigns may adversely impact our results of operations.

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Instability in the financial markets resulting from terrorism or war also could negatively affect our ability to raise capital.

Unresolved Staff Comments

We do not currently own or lease any material facilities or properties for storage or maintenance of our compression units.

As of December 31, 2022, our headquarters consisted of 19,225 square feet of leased office space located at 111 Congress Avenue, Austin, Texas 78701.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors