What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 94 added, 65 removed, 472 unchanged (25% of the section changed)

41 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Contract operations $ 223,643 $ 196,982 $ 441,747 $ 385,521

14 unchanged sentences

Gain on derivative instrument 3,131 14,550 11,902 14,550

Other 26 57 60 81

Total other expense ( 45,671 ) ( 27,438 ) ( 88,498 ) ( 67,204 )

3 unchanged sentences

distributions on Preferred Units ( 4,387 ) ( 12,188 ) ( 8,775 ) ( 24,375 )

Net income (loss) attributable to common unitholders’ interests $ 19,185 $ ( 1,246 )

Net income attributable to common unitholders’ interests $ 26,851 $ 11,396 $ 46,036 $ 10,150

Weighted-average common units outstanding – basic 116,849 98,271 109,692 98,259

Weighted-average common units outstanding – diluted 117,972 99,694 110,789 99,738

Basic and diluted net income (loss) per common unit $ 0.19 $ ( 0.01 )

Basic net income per common unit $ 0.23 $ 0.12 $ 0.42 $ 0.10

Diluted net income per common unit $ 0.23 $ 0.11 $ 0.42 $ 0.10

Distributions declared per common unit for respective periods $ 0.525 $ 0.525 $ 1.05 $ 1.05

11 unchanged sentences

Partners’ deficit ending balance, March 31, 2024 ( 289,572 )

Distributions and DERs, $ 0.525 per unit

Issuance of common units under the DRIP 331

Unit-based compensation for equity-classified awards 83

Exercise and conversion of Preferred Units into common units 262,592

Net income attributable to common unitholders’ interests 26,851

Partners’ deficit ending balance, June 30, 2024 $ ( 61,168 )

Common units Warrants Total

6 unchanged sentences

Net loss attributable to common unitholders’ interests

( 1,246 ) — ( 1,246 )

Partners’ capital (deficit) ending balance, March 31, 2023

( 177,273 ) 8,812 ( 168,461 )

Distributions and DERs, $ 0.525 per unit

( 51,617 ) — ( 51,617 )

Issuance of common units under the DRIP

Unit-based compensation for equity-classified awards

Net income attributable to common unitholders’ interests

11,396 — 11,396

Partners’ capital (deficit) ending balance, June 30, 2023

$ ( 217,002 ) $ 8,812 $ ( 208,190 )

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Unit-based compensation expense 8,331 9,628

Deferred income tax expense (benefit) 60 ( 15 )

Deferred income tax expense 97 19

Loss (gain) on disposition of assets 1,236 ( 67 )

24 unchanged sentences

Other ( 682 ) ( 226 )

Net cash provided by (used in) financing activities 32,653 ( 1,506 )

Net cash used in financing activities ( 15,945 ) ( 24,904 )

Decrease in cash and cash equivalents ( 2 ) ( 4 )

7 unchanged sentences

Cash paid for interest, net of capitalized amounts $ 60,860 $ 78,181

Cash paid for income taxes 1,152 887

Supplemental non-cash transactions:

21 unchanged sentences

In the opinion of our management, financial information presented herein reflects all normal recurring adjustments necessary for the fair presentation of these interim unaudited condensed consolidated financial statements in accordance with GAAP.

Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with SEC rules and regulations.

26 unchanged sentences

Capitalized interest is calculated by multiplying our monthly effective interest rate on outstanding variable-rate indebtedness by the amount of qualifying costs, which include upfront payments to acquire certain compression units.

Capitalized interest was $ 35 thousand and $ 0.3 million for the three months ended March 31, 2024 and 2023 , respectively.

Capitalized interest was $ 21 thousand and $ 56 thousand for the three and six months ended June 30, 2024, respectively, and $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2023 , respectively.

Impairment of Long-Lived Assets

5 unchanged sentences

The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, based on an estimate of discounted cash flows, the expected net sale proceeds compared to the other similarly configured fleet units that we recently sold or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to continue using.

Refer to Note 5 for more detailed information about impairment charges during the three months ended March 31, 2024 and 2023.

Refer to Note 5 for more detailed information about impairment charges during the three and six months ended June 30, 2024 and 2023.

Identifiable Intangible Assets

4 unchanged sentences

generally, this occurs with the provision of services or the transfer of goods.

Revenue is measured at the amount of consideration we expect to receive in exchange for providing services or transferring goods.

Revenue is measured at the amount of consideration we expect to receive

in exchange for providing services or transferring goods.

Incidental items, if any, that are immaterial in the context of the contract are recognized as expenses.

19 unchanged sentences

Level 3 inputs are unobservable inputs for the asset or liability.

As of March 31, 2024, and December 31, 2023, our financial instruments primarily consisted of cash and cash equivalents, trade accounts receivable, trade accounts payable, a derivative instrument, and long-term debt.

As of June 30, 2024, and December 31, 2023, our financial instruments primarily consisted of cash and cash equivalents, trade accounts receivable, trade accounts payable, a derivative instrument, and long-term debt.

The book values of cash and cash equivalents, trade accounts receivable, and trade accounts payable are representative of fair value due to their short-term maturities.

19 unchanged sentences

(3) Trade Accounts Receivable

The allowance for credit losses, which was $ 2.3 million at both March 31, 2024 and December 31, 2023, represents our best estimate of the amount of probable credit losses included within our existing accounts receivable balance.

The allowance for credit losses, which was $ 2.3 million at both June 30, 2024 and December 31, 2023, represents our best estimate of the amount of probable credit losses included within our existing accounts receivable balance.

(4) Inventories

9 unchanged sentences

Compression and treating equipment $ 4,061,436 $ 3,902,115

Computer equipment 34,125 33,456

Automobiles and vehicles 52,934 46,395

Computer equipment 34,946 33,456

Leasehold improvements 9,450 9,414

11 unchanged sentences

Depreciation expense on property and equipment and loss (gain) on disposition of assets were as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Depreciation expense $ 57,968 $ 52,694 $ 113,874 $ 104,835

1 unchanged sentence

On a quarterly basis, we evaluate the future deployment of our idle fleet assets under current market conditions.

For the three months ended March 31, 2023, we retired six compression units representing approximately 8,700 of aggregate horsepower that previously were used to provide compression services in our business.

As a result, we recorded an impairment of compression equipment of $ 1.2 million for the three months ended March 31, 2023.

For the three and six months ended June 30, 2024, we retired two compression units representing approximately 1,300 of aggregate horsepower that previously were used to provide compression services in our business.

As a result, we recorded an impairment of compression equipment of $ 0.3 million for the three and six months ended June 30, 2024.

For the three and six months ended June 30, 2023, we retired 33 and 39 compression units, respectively, representing approximately 26,900 and 35,600 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 $ 10.3 million and $ 11.5 million for the three and six months ended June 30, 2023, respectively.

The primary circumstances supporting these impairments were:

1 unchanged sentence

These compression units were written down to their estimated salvage values, if any.

No impairment of compression equipment was recorded for the three months ended March 31, 2024.

Identifiable Intangible Assets

3 unchanged sentences

Amortization expense ( 13,052 ) ( 1,638 ) ( 14,690 )

Net balance as of March 31, 2024 $ 218,113 $ 20,194 $ 238,307

Accumulated amortization of intangible assets was $ 312.4 million and $ 305.0 million as of March 31, 2024 and December 31, 2023, respectively.

Net balance as of June 30, 2024 $ 211,587 $ 19,375 $ 230,962

Accumulated amortization of intangible assets was $ 319.7 million and $ 305.0 million as of June 30, 2024 and December 31, 2023, respectively.

(6) Other Current Liabilities

5 unchanged sentences

(7) Derivative Instrument

As of March 31, 2024 and December 31, 2023, we had an interest-rate swap outstanding to manage interest-rate risk associated with the floating-rate Credit Agreement.

As of June 30, 2024 and December 31, 2023, we had an interest-rate swap outstanding to manage interest-rate risk associated with the floating-rate Credit Agreement.

The interest-rate swap’s notional principal amount is $ 700 million and has a termination date of December 31, 2025.

5 unchanged sentences

Assets Liabilities

Balance Sheet Classification March 31,

Balance Sheet Classification June 30,

2024 December 31,

2023 March 31,

2023 June 30,

2024 December 31,

2 unchanged sentences

The following table summarizes the location and amounts recognized related to our derivative instrument within our unaudited condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Income Statement Classification 2024 2023 2024 2023

18 unchanged sentences

restricted subsidiaries (subject to customary exceptions).

As of March 31, 2024, we had outstanding borrowings under the Credit Agreement of $ 736.1 million and, after accounting for outstanding letters of credit in the amount of $ 0.5 million, $ 863.4 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $ 429.3 million was available to be drawn.

Our weighted-average interest rate in effect for all borrowings under the Credit Agreement for the three months ended March 31, 2024, was 7.99 %, and our weighted-average interest rate under the Credit Agreement as of March 31, 2024, was 8.00 %.

As of June 30, 2024, we had outstanding borrowings under the Credit Agreement of $ 756.2 million and, after accounting for outstanding letters of credit in the amount of $ 0.5 million, $ 843.3 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $ 424.4 million was available to be drawn.

Our weighted-average interest rate in effect for all borrowings under the Credit Agreement for the six months ended June 30, 2024, was 7.98 %, and our weighted-average interest rate under the Credit Agreement as of June 30, 2024, was 8.10 %.

We pay an annualized commitment fee of 0.375 % on the unused portion of the aggregate commitment.

7 unchanged sentences

In addition, the Partnership may increase the applicable ratio by 0.25 for any fiscal quarter during which a Specified Acquisition (as defined in the Credit Agreement) occurs and for the following two fiscal quarters, but in no event shall the maximum ratio exceed 5.50 to 1.00 for any fiscal quarter as a result of such increase.

As of March 31, 2024, we were in compliance with all of our covenants under the Credit Agreement.

As of June 30, 2024, we were in compliance with all of our covenants under the Credit Agreement.

For purposes of the above covenants, EBITDA is calculated as set forth in the Credit Agreement.

15 unchanged sentences

The indenture governing the Senior Notes 2029 (the “2029 Indenture”) contains certain financial covenants that we must comply with in order to make certain restricted payments as described in the 2029 Indenture.

As of March 31, 2024, we were in compliance with such financial covenants under the 2029 Indenture.

As of June 30, 2024, we were in compliance with such financial covenants under the 2029 Indenture.

The Senior Notes 2029 are fully and unconditionally guaranteed (the “2029 Guarantees”), jointly and severally, on a senior unsecured basis by all of our existing subsidiaries (other than Finance Corp), and will be fully and unconditionally guaranteed, jointly and severally, by each of our future restricted subsidiaries that either borrows under, or guarantees, the Credit Agreement or guarantees certain of our other indebtedness (collectively, the “Guarantors”).

7 unchanged sentences

These securities generated sufficient cash upon maturity to fund interest payments on the Senior Notes 2026 occurring between the effective date of the Defeasance through April 4, 2024, when the Senior Notes 2026 were redeemed at par, as well as fund the redemption of the Senior Notes 2026 in full.

As a result of the Defeasance, we recognized a loss on early extinguishment of debt of $ 5.0 million for the three months ended March 31, 2024, which represents the write-off of deferred financing costs of $ 4.3 million and the difference between (i) the purchase price of U.S.

As a result of the Defeasance, we recognized a loss on early extinguishment of debt of $ 5.0 million for the six months ended June 30, 2024, which represents the write-off of deferred financing costs of $ 4.3 million and the difference between (i) the purchase price of U.S.

government securities of $ 748.8 million and (ii) the aggregate outstanding principal balance and accrued interest of the Senior Notes 2026 of $ 748.1 million at the time of Defeasance.

4 unchanged sentences

The indenture governing the Senior Notes 2027 (the “2027 Indenture”) contains certain financial covenants that we must comply with in order to make certain restricted payments as described in the 2027 Indenture.

As of March 31, 2024, we were in compliance with such financial covenants under the 2027 Indenture.

As of June 30, 2024, we were in compliance with such financial covenants under the 2027 Indenture.

The Senior Notes 2027 are fully and unconditionally guaranteed (the “2027 Guarantees”), jointly and severally, on a senior unsecured basis by the Guarantors.

11 unchanged sentences

Exercise and conversion of Preferred Units into common units ( 320,000 )

Number of Preferred Units outstanding, March 31, 2024 460,000

Number of Preferred Units outstanding, June 30, 2024 180,000

Redemption and Conversion Features

18 unchanged sentences

February 2, 2024 $ 24.375

May 3, 2024 24.375

Total 2024 distributions

Announced Quarterly Distribution

On April 11, 2024, we declared a cash distribution of $ 24.375 per unit on our Preferred Units.

The distribution was paid on May 3, 2024, to the holders of the Preferred Units of record as of the close of business on April 22, 2024.

On July 11, 2024, we declared a cash distribution of $ 24.375 per unit on our Preferred Units.

The distribution was paid on August 2, 2024, to the holders of the Preferred Units of record as of the close of business on July 22, 2024.

Changes in the Preferred Units’ balance are as follows (in thousands):

1 unchanged sentence

Balance as of December 31, 2023 $ 476,334

Net income allocated to Preferred Units 4,388

Cash distributions on Preferred Units ( 15,600 )

Exercise and conversion of Preferred Units into common units ( 300,700 )

Balance as of March 31, 2024 $ 431,402

Net income allocated to Preferred Units 8,775

Balance as of June 30, 2024 $ 168,809

(10) Partners’ Deficit

4 unchanged sentences

Exercise and conversion of Preferred Units into common units 15,990,804

Number of common units outstanding, March 31, 2024 103,001,911

As of March 31, 2024, Energy Transfer held 46,056,228 common units, including 8,000,000 common units held by the General Partner and controlled by Energy Transfer.

Number of common units outstanding, June 30, 2024 117,007,411

As of June 30, 2024, Energy Transfer held 46,056,228 common units, including 8,000,000 common units held by the General Partner and controlled by Energy Transfer.

Cash Distributions

8 unchanged sentences

February 2, 2024 $ 0.525 $ 54.1 $ 1.0 $ 55.1

May 3, 2024 0.525 61.4 1.0 62.4

Total 2024 distributions

$ 1.05 $ 115.5 $ 2.0 $ 117.5

Announced Quarterly Distribution

On April 11, 2024, we announced a cash distribution of $ 0.525 per unit on our common units.

The distribution was paid on May 3, 2024, to common unitholders of record as of the close of business on April 22, 2024.

During the three months ended March 31, 2024, distributions of $ 0.4 million were reinvested under the DRIP resulting in the issuance of 17,050 common units.

Income (Loss) Per Unit

The computation of income (loss) per unit is based on the weighted-average number of participating securities, which includes our common units and certain equity-based awards outstanding during the applicable period.

Basic income (loss) per unit is determined by dividing net income (loss) allocated to participating securities after deducting the amount distributed on Preferred Units, by the weighted-average number of participating securities outstanding during the period.

Income (loss) attributable to unitholders is allocated to participating securities based on their respective shares of the distributed and undistributed earnings for the period.

To the extent cash distributions exceed net income (loss) attributable to unitholders for the period, the excess distributions are allocated to all participating securities outstanding based on their respective ownership percentages.

Diluted income (loss) per unit is computed using the treasury stock method, which considers the potential issuance of limited partner units associated with our long-term incentive plan and warrants.

Unvested phantom units and unexercised warrants are not included in basic income (loss) per unit, as they are not considered to be participating securities, but are included in the calculation of diluted income (loss) per unit to the extent they are dilutive, and in the case of warrants to the extent they are considered “in the money.”

For the three months ended March 31, 2024, approximately 1,071,000 incremental unvested phantom units represent the difference between our basic and diluted weighted-average common units outstanding.

For the three months ended March 31, 2023, approximately 1,058,000 and 477,000 incremental unvested phantom units and “in the money” then-outstanding warrants, respectively, were excluded from the calculation of diluted income (loss) per unit because the impact was anti-dilutive.

On July 11, 2024, we announced a cash distribution of $ 0.525 per unit on our common units.

The distribution was paid on August 2, 2024, to common unitholders of record as of the close of business on July 22, 2024.

During the six months ended June 30, 2024, distributions of $ 0.8 million were reinvested under the DRIP resulting in the issuance of 30,596 common units.

Income Per Unit

The computation of income per unit is based on the weighted-average number of participating securities, which includes our common units and certain equity-based awards outstanding during the applicable period.

Basic income per unit is determined by dividing net income allocated to participating securities after deducting the amount distributed on Preferred Units, by the weighted-average number of participating securities outstanding during the period.

Income attributable to unitholders is allocated to participating securities based on their respective shares of the distributed and undistributed earnings for the period.

To the extent cash distributions exceed net income attributable to unitholders for the period, the excess distributions are allocated to all participating securities outstanding based on their respective ownership percentages.

Diluted income per unit is computed using the treasury stock method, which considers the potential issuance of limited partner units associated with our long-term incentive plan and warrants.

Unvested phantom units and unexercised warrants are not included in basic income per unit, as they are not considered to be participating securities, but are included in the calculation

of diluted income per unit to the extent they are dilutive, and in the case of warrants to the extent they are considered “in the money.”

For the three and six months ended June 30, 2024, approximately 1,123,000 and 1,097,000 incremental unvested phantom units, respectively, represent the difference between our basic and diluted weighted-average common units outstanding.

For the three months ended June 30, 2023, approximately 1,177,000 and 246,000 incremental unvested phantom units and “in the money” then-outstanding warrants, respectively, represent the difference between our basic and diluted weighted-average common units outstanding.

For the six months ended June 30, 2023, approximately 1,118,000 and 361,000 incremental unvested phantom units and “in the money” then-outstanding warrants, respectively, represent the difference between our basic and diluted weighted-average common units outstanding.

(11) Revenue Recognition

1 unchanged sentence

The following table disaggregates our revenue by type of service (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Contract operations revenue $ 229,091 $ 202,403 $ 452,871 $ 395,545

2 unchanged sentences

The following table disaggregates our revenue by timing of provision of services or transfer of goods (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Services provided over time:

7 unchanged sentences

Components of deferred revenue were as follows (in thousands):

Balance sheet location March 31,

Balance sheet location June 30,

2024 December 31,

3 unchanged sentences

________________________________

(1) We recognized $ 57.3 million of revenue during the three months ended March 31, 2024 related to our deferred revenue balance as of December 31, 2023.

(1) We recognized $ 1.7 million and $ 59.0 million of revenue during the three and six months ended June 30, 2024, respectively, related to our deferred revenue balance as of December 31, 2023.

Performance Obligations

As of March 31, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to our contract operations revenue was $ 1.1 billion.

As of June 30, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to our contract operations revenue was $ 1.2 billion.

We expect to recognize these remaining performance obligations as follows (in thousands):

3 unchanged sentences

(12) Transactions with Related Parties

We provide natural gas compression and treating services to entities affiliated with Energy Transfer, which as of March 31, 2024, owned approximately 45 % of our limited partner interests and 100 % of the General Partner.

We provide natural gas compression and treating services to entities affiliated with Energy Transfer, which as of June 30, 2024, owned approximately 39 % of our limited partner interests and 100 % of the General Partner.

Revenue recognized from those entities affiliated with Energy Transfer on our unaudited condensed consolidated statements of operations were as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Related-party revenues $ 5,843 $ 5,836 $ 11,555 $ 10,543

We had approximately $ 1.0 million and $ 0 of related-party receivables on our unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively, from those entities affiliated with Energy Transfer.

We had approximately $ 0.1 million and $ 0 of related-party receivables on our unaudited condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively, from those entities affiliated with Energy Transfer.

(13) Commitments and Contingencies

(a) Major Customers

One customer accounted for approximately 13 % of total revenues for the three months ended March 31, 2024.

No customer accounted for 10% or more of total revenues for the three months ended March 31, 2023.

One customer accounted for approximately 12 % and 10 % of total revenues for the three and six months ended June 30, 2024 and 2023, respectively.

(b) Litigation

14 unchanged sentences

Once a final partnership imputed underpayment, if any, is determined, our General Partner may elect to either pay the imputed underpayment (including any applicable penalties and interest) directly to the IRS or, if eligible, issue a revised information statement to each unitholder, and former unitholder, with respect to an audited and adjusted return.

(d) Equipment Purchase Commitments

Our future capital commitments are comprised of binding commitments under purchase orders for new compression units ordered but not received.

The commitments as of March 31, 2024, were $ 5.9 million, all of which is expected to be settled within the second quarter of 2024.

(e) Environmental

(d) Environmental

Our operations are subject to federal, state, and local laws, rules, and regulations regarding water quality, hazardous and solid waste management, air quality control, and other environmental matters.

These laws, rules, and regulations require that we conduct our operations in a specified manner and to obtain and comply with a wide variety of environmental registrations,

licenses, permits, inspections, and other approvals.

These laws, rules, and regulations require that we conduct our operations in a specified manner and to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections, and other approvals.

Failure to comply with applicable environmental laws, rules, and regulations may expose us to significant fines, penalties, and/or interruptions in operations.

7 unchanged sentences

ASU 2023-09 is to be applied on a prospective basis, with retrospective application permitted.

We are currently evaluating the impact, if any, of the amendments to ASU 2023-09 on our consolidated financial statements.

We are currently evaluating the impact, if any, of the amendments to ASU 2023-09 on our consolidated financial statements and related disclosures.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280):

3 unchanged sentences

ASU 2023-07 is to be applied on a retrospective basis.

We are currently evaluating the impact, if any, of the amendments to ASU 2023-07 on our consolidated financial statements.

We are currently evaluating the impact of the amendments to ASU 2023-07 on our consolidated financial statements and related disclosures.

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-Q

Item 1. Financial Statements