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Item 1. Financial Statements

2025-05-06 compared with 2024-11-05 · 126 added, 198 removed, 396 unchanged (45% of the section changed)

3 unchanged sentences

(in thousands, except unit amounts)

September 30,

2025 December 31,

5 unchanged sentences

Inventories 134,332 133,901

Derivative instrument — 5,670

Prepaid expenses and other assets 11,557 11,967

8 unchanged sentences

Accounts payable $ 30,102 $ 27,245

Related party payables 4,155 105

Accrued liabilities 67,959 99,428

3 unchanged sentences

Operating lease liabilities 10,904 11,678

Derivative instrument, long term — 4,466

Other liabilities 11,965 12,930

10 unchanged sentences

(in thousands, except per unit amounts)

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Contract operations $ 224,975 $ 218,104

6 unchanged sentences

Selling, general, and administrative 18,862 22,827

Loss (gain) on disposition of assets ( 123 ) ( 3,865 ) 1,113 ( 3,932 )

Impairment of compression equipment — 882 311 12,346

Loss on disposition of assets 1,325 1,254

Impairment of assets 3,645 —

Total costs and expenses 175,843 162,404

3 unchanged sentences

Loss on extinguishment of debt — ( 4,966 )

Gain (loss) on derivative instrument ( 6,218 ) 3,437 5,684 17,987

Other 23 23 83 104

Gain on derivative instrument — 8,771

Total other expense ( 47,344 ) ( 42,827 )

10 unchanged sentences

USA COMPRESSION PARTNERS, LP

Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital (Deficit)

Unaudited Condensed Consolidated Statements of Changes in Partners’ Deficit

(in thousands, except per unit amounts)

1 unchanged sentence

$ ( 141,051 )

Vesting of phantom units 5,251

Distributions and DERs, $ 0.525 per unit

1 unchanged sentence

Unit-based compensation for equity-classified awards 640

Exercise and conversion of Preferred Units into common units 38,108

Net income attributable to common unitholders’ interests 16,124

Partners’ deficit ending balance, March 31, 2025 $ ( 180,711 )

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 )

Distributions and DERs, $ 0.525 per unit

Issuance of common units under the DRIP 354

Unit-based compensation for equity classified awards 83

Net income attributable to common unitholders’ interests 14,939

Partners’ deficit ending balance, September 30, 2024

$ ( 107,254 )

Common units Warrants Total

Partners’ capital (deficit) ending balance, December 31, 2022

$ ( 125,111 ) $ 8,812 $ ( 116,299 )

Distributions and DERs, $ 0.525 per unit

( 51,602 ) — ( 51,602 )

Issuance of common units under the DRIP

Unit-based compensation for equity-classified awards

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

Partners’ deficit ending balance, December 31, 2023

$ ( 293,285 )

Distributions and DERs, $ 0.525 per unit

( 51,628 ) — ( 51,628 )

Issuance of common units under the DRIP

Unit-based compensation for equity-classified awards

Exercise and conversion of Preferred Units into common units 38,108

Net income attributable to common unitholders’ interests

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

Partners’ deficit ending balance, March 31, 2024

$ ( 289,572 )

3 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

4 unchanged sentences

Unit-based compensation expense 3,384 7,769

Deferred income tax expense (benefit) 427 ( 46 )

Loss (gain) on disposition of assets 1,113 ( 3,932 )

Deferred income tax expense 85 60

Loss on disposition of assets 1,325 1,254

Loss on extinguishment of debt — 4,966

Change in fair value of derivative instrument — ( 6,349 )

Impairment of compression equipment 311 12,346

Impairment of assets 3,645 —

Changes in assets and liabilities:

13 unchanged sentences

Cash flows from financing activities:

Proceeds from long-term borrowings 879,613 798,424

Proceeds from revolving credit facility 274,476 325,062

Proceeds from issuance of senior notes — 1,000,000

Repayments of long-term borrowings ( 948,215 ) ( 631,305 )

Repayments of revolving credit facility ( 242,002 ) ( 460,770 )

Investments in government securities in connection with legal defeasance of the Senior Notes 2026 — ( 748,764 )

Cash paid related to net settlement of unit-based awards ( 2,227 ) —

Cash distributions on common units ( 62,386 ) ( 54,644 )

2 unchanged sentences

Other ( 90 ) ( 156 )

Net cash used in financing activities ( 35,977 ) ( 26,919 )

Increase (decrease) in cash and cash equivalents 68 ( 29 )

Net cash provided by (used in) financing activities ( 36,622 ) 32,653

Decrease in cash and cash equivalents ( 12 ) ( 3 )

Cash and cash equivalents, beginning of period 14 11

4 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental cash flow information:

Cash paid for interest, net of capitalized amounts $ 75,136 $ 44,739

Cash paid for income taxes 1,461 1,146

Supplemental non-cash transactions:

14 unchanged sentences

We also own and operate a fleet of equipment used to provide natural gas treating services, such as carbon dioxide and hydrogen sulfide removal, cooling, and dehydration.

We provide compression services in shale plays throughout the U.S., including the Utica, Marcellus, Permian Basin, Delaware Basin, Eagle Ford, Mississippi Lime, Granite Wash, Woodford, Barnett, Haynesville, Niobrara, and Fayetteville shales.

We provide compression services in unconventional resource plays throughout the U.S., including the Utica, Marcellus, Permian, Denver-Julesburg, Eagle Ford, Mississippi Lime, Granite Wash, Woodford, Barnett, and Haynesville.

USA Compression GP, LLC, a Delaware limited liability company, serves as our general partner and is referred to herein as the “General Partner.” The General Partner is wholly owned by Energy Transfer.

4 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 and nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Operating results for the three months ended March 31, 2025, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

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.

15 unchanged sentences

We evaluate the financial strength of our customers by reviewing the aging of their receivables owed to us, our collection experiences with the customer, correspondence, financial information, and third-party credit ratings.

We evaluate the business climate in which our customers operate by reviewing various publicly available materials regarding our customers’ industry, including the solvency of various companies in the industry.

Inventories consist of serialized and non-serialized parts primarily used on compression units.

8 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 $ 0.1 million and $ 0.1 million for the three and nine months ended September 30, 2024, respectively, and $ 0.2 million and $ 0.8 million for the three and nine months ended September 30, 2023 , respectively.

Capitalized interest was $ 39 thousand and $ 35 thousand for the three months ended March 31, 2025 and 2024 , 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 and nine months ended September 30, 2024 and 2023.

Refer to Note 5 for more detailed information about impairment charges during the three months ended March 31, 2025 and 2024.

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.

Unit-Based Compensation

Our unit-based compensation awards include phantom units, restricted units, and cash restricted units.

The fair values of phantom units granted to employees and cash restricted units are estimated at the end of each reporting period and are accounted for as liabilities.

The fair value of phantom units granted to directors and restricted units are determined at grant date and amortized using the straight-line method over the vesting period.

USA Compression Partners, LP is organized as a partnership for U.S.

18 unchanged sentences

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

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

As of December 31, 2023, our financial instruments also consisted of a derivative instrument.

As of March 31, 2025 and December 31, 2024, our financial instruments primarily consisted of cash and cash equivalents, trade accounts receivable, trade accounts payable, 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.

1 unchanged sentence

therefore, the carrying amount of our revolving credit facility approximates its fair value.

The fair value of our Senior Notes 2026, Senior Notes 2027, and Senior Notes 2029 were estimated using quoted prices in inactive markets and are considered Level 2 measurements.

The following table summarizes the aggregate principal amount and fair value of our Senior Notes 2026, Senior Notes 2027, and Senior Notes 2029 (in thousands):

September 30,

The fair value of our Senior Notes 2027 and Senior Notes 2029 were estimated using quoted prices in inactive markets and are considered Level 2 measurements.

The following table summarizes the aggregate principal amount and fair value of our Senior Notes 2027 and Senior Notes 2029 (in thousands):

2025 December 31,

3 unchanged sentences

Fair value of Senior Notes 2029 1,012,500 1,007,500

Senior Notes 2029, aggregate principal 1,000,000 —

Fair value of Senior Notes 2029 1,027,500 —

The fair value of our derivative instrument, which was an interest-rate swap and is no longer outstanding as of September 30, 2024, was estimated based on inputs from actively quoted public markets, including interest-rate forward curves, and is considered a Level 2 measurement.

We consider counterparty credit risk and our own credit risk in the determination of the estimated fair value.

The following table summarizes the gross fair value of our interest-rate swap (in thousands):

September 30,

2024 December 31,

Interest-rate swap $ — $ 1,204

Refer to Note 7 below for additional information on the interest-rate swap.

Operating Segment

We operate in a single business segment, the compression services business.

Refer to Note 14 for more detailed information about our compression services segment.

(3) Trade Accounts Receivable

The allowance for credit losses, which was $ 2.3 million at both September 30, 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 $ 1.5 million at both March 31, 2025 and December 31, 2024, represents our best estimate of the amount of probable credit losses included within our existing accounts receivable balance.

(4) Inventories

Components of inventories are as follows (in thousands):

September 30,

2025 December 31,

5 unchanged sentences

Property and equipment consisted of the following (in thousands):

September 30,

2025 December 31,

14 unchanged sentences

Leasehold improvements 5 years

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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

Three Months Ended March 31,

Depreciation expense $ 63,048 $ 55,906

Loss (gain) on disposition of assets ( 123 ) ( 3,865 ) 1,113 ( 3,932 )

Loss on disposition of assets 1,325 1,254

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

For the nine months ended September 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 nine months ended September 30, 2024.

No impairment of compression equipment was recorded for the three months ended September 30, 2024.

For the three and nine months ended September 30, 2023, we retired three and 42 compression units, respectively, representing approximately 2,100 and 37,700 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 $ 0.9 million and $ 12.3 million for the three and nine months ended September 30, 2023, respectively.

For the three months ended March 31, 2025, we retired 17 compression units representing approximately 10,200 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 $ 3.6 million for the three months ended March 31, 2025.

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

The primary circumstances supporting these impairments were:

6 unchanged sentences

Amortization expense ( 6,526 ) ( 819 ) ( 7,345 )

Net balance as of September 30, 2024 $ 205,061 $ 18,557 $ 223,618

Accumulated amortization of intangible assets was $ 327.0 million and $ 305.0 million as of September 30, 2024 and December 31, 2023, respectively.

(6) Other Current Liabilities

Net balance as of March 31, 2025 $ 192,008 $ 16,920 $ 208,928

Accumulated amortization of intangible assets was $ 341.7 million and $ 334.4 million as of March 31, 2025 and December 31, 2024, respectively.

(6) Current Liabilities

Components of other current liabilities included the following (in thousands):

September 30,

2025 December 31,

3 unchanged sentences

Accrued payroll and benefits 12,801 10,656

Accrued property taxes 9,441 3,729

(7) Derivative Instrument

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

In August 2024, we elected to terminate the outstanding interest-rate swap.

The interest-rate swap’s notional principal amount was $ 700 million and had an original termination date of December 31, 2025.

In August 2024, we elected to terminate an interest-rate swap we previously used to manage interest-rate risk associated with the floating-rate Credit Agreement.

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

Under the interest-rate swap, we paid a fixed interest rate of 3.9725 % and received floating interest-rate payments that were indexed to the one-month SOFR.

We did not apply hedge accounting to our previously outstanding derivative.

Our derivative was carried on the unaudited condensed consolidated balance sheets at fair value and was classified as current or long-term depending on the expected timing of settlement, and gains and losses associated with the derivative instrument were recognized currently in gain (loss) on derivative instrument within the unaudited condensed consolidated statements of operations.

Our derivative was carried on the unaudited condensed consolidated balance sheets at fair value and was classified as current or long-term depending on the expected timing of settlement, and gains and losses associated with the derivative instrument were recognized currently in gain on derivative instrument within the unaudited condensed consolidated statements of operations.

Cash flows related to cash settlements for the periods presented were classified as operating activities within the unaudited condensed consolidated statements of cash flows.

The following table summarizes the location and fair value of our derivative instrument on our unaudited condensed consolidated balance sheets (in thousands):

Assets Liabilities

Balance Sheet Classification September 30,

2024 December 31,

2023 September 30,

2024 December 31,

Derivative instrument $ — $ 5,670 $ — $ —

Derivative instrument, long term — — — 4,466

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Income Statement Classification 2025 2024

Gain (loss) on derivative instrument $ ( 6,218 ) $ 3,437 $ 5,684 $ 17,987

Gain on derivative instrument $ — $ 8,771

(8) Debt Obligations

Our debt obligations, of which there is no current portion, consisted of the following (in thousands):

September 30,

2025 December 31,

1 unchanged sentence

Senior Notes 2029, aggregate principal 1,000,000 1,000,000

Senior Notes 2029, aggregate principal 1,000,000 —

deferred financing costs, net of amortization ( 18,419 ) ( 19,535 )

10 unchanged sentences

restricted subsidiaries (subject to customary exceptions).

As of September 30, 2024, we had outstanding borrowings under the Credit Agreement of $ 803.2 million and, after accounting for outstanding letters of credit in the amount of $ 0.5 million, $ 796.3 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $ 641.8 million was available to be drawn.

Our weighted-average interest rate in effect for all borrowings under the Credit Agreement for the nine months ended September 30, 2024, was 7.98 %, and our weighted-average interest rate under the Credit Agreement as of September 30, 2024, was 7.50 %.

As of March 31, 2025, we had outstanding borrowings under the Credit Agreement of $ 804.6 million and, after accounting for outstanding letters of credit in the amount of $ 0.8 million, $ 794.6 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $ 739.8 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, 2025, was 6.97 %, and our weighted-average interest rate under the Credit Agreement as of March 31, 2025, was 6.96 %.

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

As of March 31, 2025, 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.

1 unchanged sentence

While we are not required by the terms of the Credit Agreement to use these customer remittances to reduce borrowings under the facility unless certain events of default occur under the Credit Agreement or unused availability under the facility is reduced below $ 70 million, we have in the past routinely applied such remittances to reduce borrowings under the facility.

Issuance of Senior Notes 2029

Senior Notes 2029

On March 18, 2024, the Partnership and Finance Corp co-issued the Senior Notes 2029, a $ 1.0 billion aggregate principal amount of senior notes that will mature on March 15, 2029.

The Senior Notes 2029 accrue interest from March 18, 2024 at the rate of 7.125 % per year.

Interest on the Senior Notes 2029 is payable semi-annually in arrears on each of March 15 and September 15, commencing on September 15, 2024.

At any time prior to March 15, 2026, we may redeem up to 40 % of the aggregate principal amount of the Senior Notes 2029 at a redemption price equal to 107.125 % of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, in an amount not greater than the net cash proceeds from one or more equity offerings, provided that at least 60 % of the aggregate principal amount of the Senior Notes 2029 remains outstanding immediately after the occurrence of such redemption (excluding Senior Notes 2029 held by us and our subsidiaries) and redemption occurs within 180 days of the date of the closing of such equity offering.

Prior to March 15, 2026, we may redeem all or a part of the Senior Notes 2029 at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) a make-whole premium at the redemption date and accrued and unpaid interest, if any, to the redemption date.

On or after March 15, 2026, we may redeem all or a part of the Senior Notes 2029 at redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:

Year Percentages

2026 103.563 %

2027 101.781 %

2028 and thereafter 100.000 %

If we experience a change of control followed by a ratings decline, which ratings decline is caused by the applicable change of control event, unless we have previously exercised, or concurrently exercise, our right to redeem the Senior Notes 2029 (as described above), we may be required to offer to repurchase the Senior Notes 2029 at a purchase price equal to 101 % of the principal amount repurchased, plus accrued and unpaid interest, if any, to the repurchase date.

In connection with issuing the Senior Notes 2029, we incurred certain issuance costs in the amount of $ 18.2 million, which are amortized over the expected term of the Senior Notes 2029.

Interest on the Senior Notes 2029 is payable semi-annually in arrears on each of March 15 and September 15.

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

As of March 31, 2025, 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”).

1 unchanged sentence

The Senior Notes 2029 and the 2029 Guarantees effectively are subordinated in right of payment to all of the Guarantors’, Finance Corp’s, and our existing and future secured debt, including debt under the Credit Agreement and guarantees thereof, to the extent of the value of the assets securing such debt, and are structurally subordinate to all indebtedness of any of our subsidiaries that do not guarantee the Senior Notes 2029.

Redemption of Senior Notes 2026

On March 18, 2024, in connection with the issuance of the Senior Notes 2029, the Senior Notes 2026, which had a maturity date of April 1, 2026, and an aggregate outstanding principal balance of $ 725.0 million at such time, were satisfied and discharged under the Indenture governing the Senior Notes 2026, which constituted a legal defeasance under GAAP (the “Defeasance”).

The Defeasance required a cash outlay in the net amount of $ 748.8 million, which was used to purchase U.S.

government securities.

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 nine months ended September 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.

Senior Notes 2027

3 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 September 30, 2024, we were in compliance with such financial covenants under the 2027 Indenture.

As of March 31, 2025, 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.

10 unchanged sentences

Number of Preferred Units outstanding, December 31, 2024 180,000

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

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

Number of Preferred Units outstanding, March 31, 2025 180,000

Redemption and Conversion Features

3 unchanged sentences

On or after April 2, 2028, each holder of the Preferred Units will have the right to require us to redeem all or a portion of their Preferred Units, subject to certain minimum redemption threshold amounts, for a redemption price set forth in the Partnership Agreement, which we may elect to pay up to 50 % in common units, subject to certain additional limits.

January 2024 Conversion

On January 12, 2024, the holders of the Preferred Units elected to convert 40,000 Preferred Units into 1,998,850 common units.

These Preferred Units were converted into common units and, for our fourth-quarter 2023 distribution, the holders received the common unit distribution of $ 0.525 on the 1,998,850 common units in lieu of the Preferred Unit distribution of $ 24.375 on the converted 40,000 Preferred Units.

April 2024 Conversion

On April 1, 2024, the holders of the Preferred Units elected to convert 280,000 Preferred Units into 13,991,954 common units.

These Preferred Units were converted into common units and, for our first-quarter 2024 distribution, the holders received the common unit distribution of $ 0.525 on the 13,991,954 common units in lieu of the Preferred Unit distribution of $ 24.375 on the converted 280,000 Preferred Units.

Cash Distributions

7 unchanged sentences

February 7, 2025 $ 24.375

May 3, 2024 24.375

August 2, 2024 24.375

Total 2024 distributions

Announced Quarterly Distribution

On October 10, 2024, we declared a cash distribution of $ 24.375 per unit on our Preferred Units.

The distribution was paid on November 1, 2024, to the holders of the Preferred Units of record as of the close of business on October 21, 2024.

On April 17, 2025, we declared a cash distribution of $ 24.375 per unit on our Preferred Units.

The distribution will be paid on May 9, 2025, to the holders of the Preferred Units of record as of the close of business on April 28, 2025.

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

2 unchanged sentences

Cash distributions on Preferred Units ( 4,388 )

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

Net income allocated to Preferred Units 4,388

Balance as of September 30, 2024 $ 168,809

Balance as of March 31, 2025 $ 168,809

(10) Partners’ Deficit

The changes in common units outstanding were as follows:

The change in common units outstanding were as follows:

Common Units Outstanding

Number of common units outstanding, December 31, 2024 117,314,783

Vesting of phantom units 223,761

Issuance of common units under the DRIP 2,244

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

Number of common units outstanding, September 30, 2024 117,022,833

As of September 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.

Number of common units outstanding, March 31, 2025 117,540,788

As of March 31, 2025, 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 7, 2025 $ 0.525 $ 61.7 $ 0.7 $ 62.4

May 3, 2024 0.525 61.4 1.0 62.4

August 2, 2024 0.525 61.4 1.0 62.4

Total 2024 distributions

$ 1.575 $ 176.9 $ 3.0 $ 179.9

Announced Quarterly Distribution

On October 10, 2024, we announced a cash distribution of $ 0.525 per unit on our common units.

The distribution was paid on November 1, 2024, to common unitholders of record as of the close of business on October 21, 2024.

During the nine months ended September 30, 2024, distributions of $ 1.1 million were reinvested under the DRIP resulting in the issuance of 46,018 common units.

On April 17, 2025, we announced a cash distribution of $ 0.525 per unit on our common units.

The distribution will be paid on May 9, 2025, to common unitholders of record as of the close of business on April 28, 2025.

During the three months ended March 31, 2025, distributions of $ 0.1 million were reinvested under the DRIP resulting in the issuance of 2,244 common units.

Income Per Unit

3 unchanged sentences

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 nine months ended September 30, 2024, approximately 1,239,000 and 1,145,000 incremental unvested phantom units, respectively, represent the difference between our basic and diluted weighted-average common units outstanding.

For the three months ended September 30, 2023, approximately 1,316,000 and 655,000 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 nine months ended September 30, 2023, approximately 1,185,000 and 460,000 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.

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.

Unvested phantom and restricted units 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.

For the three months ended March 31, 2025, approximately 741,000 incremental unvested phantom and restricted units represent the difference between our basic and diluted weighted-average common units outstanding.

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.

(11) Revenue Recognition

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Contract operations revenue $ 239,667 $ 223,780

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Services provided over time:

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

Balance sheet location September 30,

Balance sheet location March 31,

2025 December 31,

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________________________________

(1) We recognized $ 1.3 million and $ 60.4 million of revenue during the three and nine months ended September 30, 2024, respectively, related to our deferred revenue balance as of December 31, 2023.

(1) We recognized $ 60.7 million of revenue during the three months ended March 31, 2025 related to our deferred revenue balance as of December 31, 2024.

Performance Obligations

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

As of March 31, 2025, 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):

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(12) Transactions with Related Parties

We provide natural gas compression and treating services to entities affiliated with Energy Transfer, which as of September 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 September 30, Nine Months Ended September 30,

2024 2023 2024 2023

We provide natural gas compression and treating services to entities affiliated with Energy Transfer, which as of March 31, 2025, owned approximately 39 % of our limited partner interests and 100 % of the General Partner.

Transactions with related parties 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,

Related-party revenues $ 15,165 $ 5,712

We had approximately $ 7.2 million and $ 0 of related-party receivables on our unaudited condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively, from those entities affiliated with Energy Transfer.

Additionally, under our partnership agreement, our General Partner does not receive a management fee or other compensation for its role as our general partner.

However, our General Partner is reimbursed for expenses incurred on our behalf.

These expenses include costs allocable to us under the shared services model with Energy Transfer, as well as all other expenses necessary or appropriate to the conduct of our business that are allocable to us, as provided for in our partnership agreement.

There is no cap on the amount that may be paid or reimbursed to our General Partner.

For the three months ended March 31, 2025, we recognized shared service costs of $ 0.3 million within selling, general, and administrative expense and capitalized shared service costs of $ 0.5 million to other assets related to cloud computing arrangement ERP implementation costs.

During the three months ended March 31, 2025, we recognized a $ 0.6 million loss on disposition of assets related to the exchange of compression units with an entity affiliated with Energy Transfer.

Balances on our unaudited condensed consolidated balance sheets with those entities affiliated with Energy Transfer were as follows:

• Related-party receivables of $ 2.1 million and $ 0.6 million as of March 31, 2025 and December 31, 2024, respectively.

• Related-party payables of $ 4.2 million and $ 0.1 million as of March 31, 2025 and December 31, 2024, respectively.

We have binding commitments under purchase orders for new compression units ordered but not received with an entity affiliated with Energy Transfer.

The commitments as of March 31, 2025 , were $ 44.7 million.

(13) Commitments and Contingencies

(a) Major Customers

One customer accounted for approximately 12 % of total revenues for the three and nine months ended September 30, 2024, respectively, and 11 % of total revenues for the three and nine months ended September 30, 2023, respectively.

One customer accounted for approximately 11 % and 13 % of total revenues for the three months ended March 31, 2025 and 2024, respectively.

(b) Litigation

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Our compliance with state and local sales tax regulations is subject to audit by various taxing authorities.

Certain taxing authorities have either claimed or issued an assessment that specific operational processes, which we and others in our industry regularly conduct, result in transactions that are subject to state sales taxes.

Our compliance with federal, state, and local tax regulations is subject to audit by various taxing authorities.

We and others in our industry have disputed these claims and assessments based on either existing tax statutes or published guidance by the taxing authorities.

We currently are protesting certain assessments made by the Oklahoma Tax Commission (“OTC”).

In August 2024, the administrative law judge (“ALJ”) assigned by the OTC accepted our position that the transactions are not taxable.

The OTC subsequently requested a motion for reconsideration, which was denied by the ALJ.

The OTC has requested an “en banc” hearing from the OTC Commissioners, which request is pending.

The OTC also has other legal options to challenge this decision, accordingly a final resolution remains pending.

If we ultimately lose the current and all subsequent legal challenges, we estimate that the range of losses we could incur is from $ 0 to approximately $ 30.3 million, including penalties and interest.

federal income tax returns for the years 2019 and 2020 currently are under examination by the Internal Revenue Service (“IRS”).

The IRS has issued preliminary partnership examination changes, along with imputed underpayment computations, for the 2019 and 2020 tax years.

Under the Bipartisan Budget Act of 2015, there are several procedural steps, including an appeals process, to complete before a final imputed underpayment, if any, is determined.

Based on discussions with the IRS, we estimate a potential range of loss from a final imputed underpayment of $ 0 to approximately $ 28.0 million, including interest, for potential adjustments resulting from the IRS examinations.

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) Environmental

The IRS has issued preliminary partnership examination changes, resulting in imputed underpayment computations of approximately $ 28.8 million, including interest, for the 2019 and 2020 tax years.

Under the Bipartisan Budget Act of 2015, there are several procedural steps to complete before a final imputed underpayment, if any, is determined.

Based on discussions with the IRS, we recognized a charge of $ 1.0 million, which we believe is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the years 2019 and 2020.

This $ 1.0 million estimated amount was recognized within income tax expense for the three months ended March 31, 2025.

However, the final partnership imputed underpayment, if any, has not been determined.

Once determined, our General Partner may elect to either pay the imputed underpayment, if any, (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, 2025, were $ 44.7 million, all of which is expected to be settled within the next 12 months.

(e) 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.

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These evolving laws, rules, and regulations, and claims for damages to property, employees, other persons, and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future.

(14) Reportable Segments

We manage our business through one operating and reportable segment:

compression services.

The compression services segment provides natural gas compression and treating services to customers, using a fleet of equipment that we design, engineer, own, operate, and maintain.

Our services are primarily provided under fixed-fee contracts, and all revenue is derived from within the U.S.

The accounting policies of the compression services segment are the same as those described in the summary of significant accounting policies.

We do not have intra-entity sales or transfers.

Our chief operating decision maker (“CODM”) is the Chief Executive Officer.

The CODM assesses segment performance and allocates resources based on consolidated net income, a U.S.

GAAP measure, and Adjusted EBITDA, a non-GAAP measure.

Although we use Adjusted EBITDA to assess segment performance and allocate resources, our primary measure is consolidated net income.

All expense categories on the Consolidated Statements of Operations are significant and there are no other significant segment expenses that would require disclosure.

The CODM uses consolidated net income to assess operating performance as compared to historical results, budget and forecast amounts, expected return on capital investment, and our competitors.

The CODM uses this information to allocate future operating and capital expenditures.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

(15) Recent Accounting Pronouncements

In December 2023, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

In November 2024, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) .

ASU 2024-03 requires disclosure of specified information about certain costs and expenses in the notes to the consolidated financial statements.

ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027, with early adoption permitted.

ASU 2024-03 is to be applied on a prospective basis, with retrospective application permitted.

We are currently evaluating the impact of ASU 2024-03 on our consolidated financial statements and related disclosures.

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 improves and enhances income tax disclosure requirements, including new disclosures related to tax rate reconciliation and income taxes paid.

The amendments in this update are effective for annual periods beginning after December 15, 2024, and interim periods within annual periods beginning after December 15, 2025, with early adoption permitted.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and interim periods within annual periods beginning after December 15, 2025, with early adoption permitted.

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 and related disclosures.

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

Improvements to Reportable Segment Disclosures.

ASU 2023-07 improves and enhances reportable segment disclosure requirements, including new disclosures related to significant segment expenses.

The amendments in this update are effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024, with early adoption permitted.

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

ASU 2023-07 will require additional disclosures in the notes to our consolidated financial statements.

We are currently evaluating the impact, if any, of ASU 2023-09 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