USA Compression Partners, LP 10-Q

ITEM 1. Financial Statements USA COMPRESSION PARTNERS, LP Unaudited Condensed Consolidated Balance Sheets (in thousands, except unit amounts) March 31, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 2 $ 14 Accounts receivable, net of allowances for credit losses of $ 1,474 and $ 1,474 , respectively 95,275 88,478 Related-party receivables 2,092 636 Inventories 134,332 133,901 Prepaid expenses and other assets 11,557 11,967 Total current assets 243,258 234,996 Property and equipment, net 2,237,783 2,273,376 Lease right-of-use assets 13,708 14,336 Identifiable intangible assets, net 208,928 216,273 Other assets 9,443 6,620 Total assets $ 2,713,120 $ 2,745,601 Liabilities, Preferred Units, and Partners’ Deficit Current liabilities: Accounts payable $ 30,102 $ 27,245 Related party payables 4,155 105 Accrued liabilities 67,959 99,428 Deferred revenue 63,790 63,900 Total current liabilities 166,006 190,678 Long-term debt, net 2,536,147 2,502,557 Operating lease liabilities 10,904 11,678 Other liabilities 11,965 12,930 Total liabilities 2,725,022 2,717,843 Commitments and contingencies Preferred Units 168,809 168,809 Partners’ deficit: Common units, 117,540,788 and 117,314,783 units issued and outstanding, respectively ( 180,711 ) ( 141,051 ) Total liabilities, Preferred Units, and partners’ deficit $ 2,713,120 $ 2,745,601 See accompanying notes to unaudited condensed consolidated financial statements. 1 Table of Contents USA COMPRESSION PARTNERS, LP Unaudited Condensed Consolidated Statements of Operations (in thousands, except per unit amounts) Three Months Ended March 31, 2025 2024 Revenues: Contract operations $ 224,975 $ 218,104 Parts and service 5,094 5,460 Related party 15,165 5,712 Total revenues 245,234 229,276 Costs and expenses: Cost of operations, exclusive of depreciation and amortization 81,618 75,072 Depreciation and amortization 70,393 63,251 Selling, general, and administrative 18,862 22,827 Loss on disposition of assets 1,325 1,254 Impairment of assets 3,645 — Total costs and expenses 175,843 162,404 Operating income 69,391 66,872 Other income (expense): Interest expense, net ( 47,369 ) ( 46,666 ) Loss on extinguishment of debt — ( 4,966 ) Gain on derivative instrument — 8,771 Other 25 34 Total other expense ( 47,344 ) ( 42,827 ) Net income before income tax expense 22,047 24,045 Income tax expense 1,535 472 Net income 20,512 23,573 Less: distributions on Preferred Units ( 4,388 ) ( 4,388 ) Net income attributable to common unitholders’ interests $ 16,124 $ 19,185 Weighted average common units outstanding – basic 117,513 102,535 Weighted average common units outstanding – diluted 118,254 103,606 Basic and diluted net income per common unit $ 0.14 $ 0.19 Distributions declared per common unit for respective periods $ 0.525 $ 0.525 See accompanying notes to unaudited condensed consolidated financial statements. 2 Table of Contents USA COMPRESSION PARTNERS, LP Unaudited Condensed Consolidated Statements of Changes in Partners’ Deficit (in thousands, except per unit amounts) Common units Partners’ deficit ending balance, December 31, 2024 $ ( 141,051 ) Vesting of phantom units 5,251 Distributions and DERs, $ 0.525 per unit ( 61,737 ) Issuance of common units under the DRIP 62 Unit-based compensation for equity-classified awards 640 Net income attributable to common unitholders’ interests 16,124 Partners’ deficit ending balance, March 31, 2025 $ ( 180,711 ) Common units Partners’ deficit ending balance, December 31, 2023 $ ( 293,285 ) Distributions and DERs, $ 0.525 per unit ( 54,098 ) Issuance of common units under the DRIP 440 Unit-based compensation for equity-classified awards 78 Exercise and conversion of Preferred Units into common units 38,108 Net income attributable to common unitholders’ interests 19,185 Partners’ deficit ending balance, March 31, 2024 $ ( 289,572 ) See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents USA COMPRESSION PARTNERS, LP Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 20,512 $ 23,573 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 70,393 63,251 Amortization of debt issuance costs 2,241 1,995 Unit-based compensation expense 3,384 7,769 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 assets 3,645 — Changes in assets and liabilities: Accounts receivable and related-party receivables, net ( 8,253 ) ( 6,257 ) Inventories ( 12,240 ) ( 30,979 ) Prepaid expenses and other current assets 410 8 Other assets ( 2,377 ) 1,100 Accounts payable 4,113 94 Accrued liabilities and deferred revenue ( 28,177 ) 3,792 Other liabilities ( 410 ) 1,640 Net cash provided by operating activities 54,651 65,917 Cash flows from investing activities: Capital expenditures, net ( 18,368 ) ( 98,613 ) Proceeds from disposition of property and equipment 259 40 Proceeds from insurance recovery 68 — Net cash used in investing activities ( 18,041 ) ( 98,573 ) Cash flows from financing activities: Proceeds from revolving credit facility 274,476 325,062 Proceeds from issuance of senior notes — 1,000,000 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 ) Cash distributions on Preferred Units ( 4,388 ) ( 11,212 ) Deferred financing costs ( 5 ) ( 16,863 ) Other ( 90 ) ( 156 ) 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 Cash and cash equivalents, end of period $ 2 $ 8 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents USA COMPRESSION PARTNERS, LP Unaudited Condensed Consolidated Statements of Cash Flows (continued) (in thousands) Three Months Ended March 31, 2025 2024 Supplemental cash flow information: Cash paid for interest, net of capitalized amounts $ 75,136 $ 44,739 Supplemental non-cash transactions: Non-cash distributions to certain common unitholders (DRIP) $ 62 $ 440 Transfers from inventories to property and equipment, net 11,214 16,010 Changes in capital expenditures included in accounts payable and accrued liabilities 2,724 ( 4,740 ) Changes in financing costs included in accounts payable and accrued liabilities 271 1,486 Exercise and conversion of Preferred Units into common units — 38,108 Government securities transferred in connection with the legal defeasance of the Senior Notes 2026 — 748,764 Legal defeasance of Senior Notes 2026 — 725,000 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents USA COMPRESSION PARTNERS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Organization and Description of Business Unless otherwise indicated, the terms “our,” “we,” “us,” “the Partnership,” and similar language refer to USA Compression Partners, LP, collectively with its consolidated subsidiaries. We are a Delaware limited partnership. Through our operating subsidiaries, we provide natural gas compression services to customers under fixed-term contracts in the natural gas and crude oil industries, using compression packages that we design, engineer, own, operate, and maintain. 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 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. The accompanying unaudited condensed consolidated financial statements include the accounts of the Partnership and its subsidiaries, all of which are wholly owned by us. (2) Basis of Presentation and Significant Accounting Policies Basis of Presentation Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to SEC rules and regulations. 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, 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. Therefore, these interim unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements contained in our annual report on Form 10-K for the year ended December 31, 2024, filed on February 11, 2025 (our “2024 Annual Report”). Use of Estimates Our unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions by management that affect the reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingent assets and liabilities that existed as of the date of the unaudited condensed consolidated financial statements. Although these estimates were based on management’s available knowledge of current and expected future events, actual results could differ from these estimates. Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents consist of all cash balances. We consider investments in highly liquid financial instruments purchased with an original maturity of 90 days or less to be cash equivalents. Trade Accounts Receivable Trade accounts receivable are recorded at their invoiced amounts. Allowance for Credit Losses We evaluate allowance for credit losses with reference to our trade accounts receivable balances, which are measured at amortized cost. Due to the short-term nature of our trade accounts receivable, we consider the amortized cost of trade accounts receivable to equal the receivable’s carrying amounts, excluding the allowance for credit losses. 6 Table of Contents Our determination of the allowance for credit losses requires us to make estimates and judgments regarding our customers’ ability to pay amounts due. We continuously evaluate the financial strength of our customers and the overall business climate in which our customers operate, and make adjustments to the allowance for credit losses as necessary. 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 other companies within their industry. Inventories Inventories consist of serialized and non-serialized parts primarily used on compression units. All inventories are stated at the lower of cost or net realizable value. Serialized parts inventories are determined using the specific-identification cost method, while non-serialized parts inventories are determined using the weighted-average cost method. Purchases of inventories are considered operating activities within the unaudited condensed consolidated statements of cash flows. Property and Equipment Property and equipment are carried at cost except for (i) certain acquired assets which are recorded at fair value on their respective acquisition dates and (ii) impaired assets which are recorded at fair value as of the last impairment evaluation date for which an adjustment was required. Overhauls and major improvements that increase the value or extend the life of compression equipment are capitalized and depreciated over three to five years . Ordinary maintenance and repairs are charged to cost of operations, exclusive of depreciation and amortization. When property and equipment is retired or sold, the associated carrying value and the related accumulated depreciation are removed from our accounts and any related gains or losses are recorded within the unaudited condensed consolidated statements of operations within the period of sale or disposition. 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 $ 39 thousand and $ 35 thousand for the three months ended March 31, 2025 and 2024 , respectively. Impairment of Long-Lived Assets The carrying value of long-lived assets that are not expected to be recovered from future cash flows are written down to estimated fair value. We test long-lived assets for impairment when events or circumstances indicate that a long-lived asset’s carrying value may not be recoverable or will no longer be utilized within the operating fleet. The most common circumstance requiring compression units to be evaluated for impairment involves idle units that do not meet the desired performance characteristics of our revenue-generating horsepower. The carrying value of a long-lived asset is not recoverable if the asset’s carrying value exceeds the sum of the undiscounted cash flows expected to be generated from the use and eventual disposition of the asset. If the carrying value of the long-lived asset exceeds the sum of the undiscounted cash flows associated with the asset, an impairment loss equal to the amount of the carrying value exceeding the fair value of the asset is recognized. 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, 2025 and 2024. Identifiable Intangible Assets Identifiable intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to our future cash flows. The estimated useful lives of our intangible assets range from 15 to 25 years. Revenue Recognition Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; 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. Incidental items, if any, that are immaterial in the context of the contract are recognized as expenses. 7 Table of Contents 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. Income Taxes USA Compression Partners, LP is organized as a partnership for U.S. federal and state income tax purposes. As a result, our partners are responsible for U.S. federal and state income taxes on their distributive share of our items of income, gain, loss, or deduction. Net earnings for financial statement purposes may differ significantly from taxable income reportable to unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities. Texas also imposes an entity-level income tax on partnerships that is based on Texas-sourced taxable margin (the “Texas Margin Tax”). Texas Margin Tax impacts are included within our unaudited condensed consolidated financial statements. Our wholly owned finance subsidiary, USA Compression Finance Corp. (“Finance Corp”), is a corporation for U.S. federal and state income tax purposes and any resulting tax impacts attributable to Finance Corp are included within our unaudited condensed consolidated financial statements. Pass-Through Taxes Sales taxes incurred on behalf of, and passed through to, customers are accounted for on a net basis. Fair-Value Measurements Accounting standards applicable to fair-value measurements establish a framework for measuring fair value and stipulate disclosures about fair-value measurements. The standards apply to recurring and non-recurring financial and non-financial assets and liabilities that require or permit fair-value measurements. Among the required disclosures is the fair-value hierarchy of inputs we use to value an asset or a liability. The three levels of the fair-value hierarchy are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. 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. Our revolving credit facility applies floating interest rates to amounts drawn under the facility; therefore, the carrying amount of our revolving credit facility approximates its fair value. 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): March 31, 2025 December 31, 2024 Senior Notes 2027, aggregate principal $ 750,000 $ 750,000 Fair value of Senior Notes 2027 750,938 750,938 Senior Notes 2029, aggregate principal 1,000,000 1,000,000 Fair value of Senior Notes 2029 1,012,500 1,007,500 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. 8 Table of Contents (3) Trade Accounts Receivable 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): March 31, 2025 December 31, 2024 Serialized parts $ 65,135 $ 66,631 Non-serialized parts 69,197 67,270 Total inventories $ 134,332 $ 133,901 (5) Property and Equipment and Identifiable Intangible Assets Property and Equipment Property and equipment consisted of the following (in thousands): March 31, 2025 December 31, 2024 Compression and treating equipment $ 4,151,063 $ 4,134,544 Automobiles and vehicles 57,811 53,301 Computer equipment 36,470 38,614 Leasehold improvements 10,071 9,807 Buildings 3,935 3,935 Furniture and fixtures 965 963 Land 77 77 Total property and equipment, gross 4,260,392 4,241,241 Less: accumulated depreciation and amortization ( 2,022,609 ) ( 1,967,865 ) Total property and equipment, net $ 2,237,783 $ 2,273,376 Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows: Compression and treating equipment, acquired new 25 years Compression and treating equipment, acquired used 5 - 25 years Furniture and fixtures 3 - 10 years Vehicles and computer equipment 1 - 10 years Buildings 5 years Leasehold improvements 5 years Depreciation expense on property and equipment and loss on disposition of assets were as follows (in thousands): Three Months Ended March 31, 2025 2024 Depreciation expense $ 63,048 $ 55,906 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 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. 9 Table of Contents The primary circumstances supporting these impairments were: (i) unmarketability of certain compression units into the foreseeable future, (ii) excessive maintenance costs associated with certain fleet assets, and (iii) prohibitive retrofitting costs that likely would prevent certain compression units from securing customer acceptance. These compression units were written down to their estimated salvage values, if any. Identifiable Intangible Assets Identifiable intangible assets, net consisted of the following (in thousands): Customer Relationships Trade Names Total Net balance as of December 31, 2024 $ 198,534 $ 17,739 $ 216,273 Amortization expense ( 6,526 ) ( 819 ) ( 7,345 ) 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): March 31, 2025 December 31, 2024 Accrued interest expense $ 9,349 $ 39,337 Accrued unit-based compensation liability 17,520 22,766 Accrued capital expenditures 7,365 4,641 Accrued payroll and benefits 12,801 10,656 (7) Derivative Instrument 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 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 amounts recognized related to our derivative instrument within our unaudited condensed consolidated statements of operations (in thousands): Three Months Ended March 31, Income Statement Classification 2025 2024 Gain on derivative instrument $ — $ 8,771 10 Table of Contents (8) Debt Obligations Our debt obligations, of which there is no current portion, consisted of the following (in thousands): March 31, 2025 December 31, 2024 Senior Notes 2027, aggregate principal $ 750,000 $ 750,000 Senior Notes 2029, aggregate principal 1,000,000 1,000,000 Less: deferred financing costs, net of amortization ( 18,419 ) ( 19,535 ) Total senior notes, net 1,731,581 1,730,465 Revolving credit facility 804,566 772,092 Total long-term debt, net $ 2,536,147 $ 2,502,557 Revolving Credit Facility The Credit Agreement matures on December 8, 2026. The Credit Agreement has an aggregate commitment of $ 1.6 billion (subject to availability under our borrowing base). The Partnership’s obligations under the Credit Agreement are guaranteed by the guarantors party to the Credit Agreement, which currently consists of all of the Partnership’s subsidiaries. In addition, under the Credit Agreement the Partnership’s Secured Obligations (as defined therein) are secured by: (i) substantially all of the Partnership’s assets and substantially all of the assets of the guarantors party to the Credit Agreement, excluding real property and other customary exclusions; and (ii) all of the equity interests of the Partnership’s U.S. restricted subsidiaries (subject to customary exceptions). 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. The Credit Agreement permits us to make distributions of available cash to unitholders so long as (i) no default under the facility has occurred, is continuing, or would result from the distribution; (ii) immediately prior to and after giving effect to such distribution, we are in compliance with the facility’s financial covenants; and (iii) immediately prior to and after giving effect to such distribution, we have availability under the Credit Agreement of at least $ 100 million. The Credit Agreement also contains various financial covenants, including covenants requiring us to maintain: • a minimum EBITDA to interest coverage ratio of 2.50 to 1.00, determined as of the last day of each fiscal quarter, with EBITDA and interest expense annualized for the most-recent fiscal quarter; • a ratio of total secured indebtedness to EBITDA not greater than 3.00 to 1.00 or less than 0.00 to 1.00, determined as of the last day of each fiscal quarter, with EBITDA annualized for the most-recent fiscal quarter; and • a maximum funded debt-to-EBITDA ratio, defined in the Credit Agreement as the Total Leverage Ratio, determined as of the last day of each fiscal quarter with EBITDA annualized for the most-recent fiscal quarter, of 5.25 to 1.00. 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, 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. The Credit Agreement is a “revolving credit facility” that includes a lockbox arrangement, whereby remittances from customers are made to a bank account controlled by the administrative agent. 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. 11 Table of Contents 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. 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, 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”). The Senior Notes 2029 and the 2029 Guarantees are general unsecured obligations and rank equally in right of payment with all of the Guarantors’, Finance Corp’s, and our existing and future senior indebtedness and senior to the Guarantors’, Finance Corp’s, and our future subordinated indebtedness, if any. 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. Senior Notes 2027 On March 7, 2019, the Partnership and Finance Corp co-issued the Senior Notes 2027. The Senior Notes 2027 mature on September 1, 2027, and accrue interest at the rate of 6.875 % per year. Interest on the Senior Notes 2027 is payable semi-annually in arrears on each of March 1 and September 1. 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, 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. The Senior Notes 2027 and the 2027 Guarantees are general unsecured obligations and rank equally in right of payment with all of the Guarantors’, Finance Corp’s, and our existing and future senior indebtedness and senior to the Guarantors’, Finance Corp’s, and our future subordinated indebtedness, if any. The Senior Notes 2027 and the 2027 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 2027. We have no assets or operations independent of our subsidiaries, and there are no significant restrictions on our ability to obtain funds from our subsidiaries by dividend or loan. Each of the Guarantors is 100 % owned by us. None of the assets of our subsidiaries represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended. (9) Preferred Units The Preferred Units have a face value of $ 1,000 and rank senior to our common units with respect to distributions and liquidation rights. The holders of the Preferred Units are entitled to receive cumulative quarterly cash distributions equal to $ 24.375 per Preferred Unit. The change in Preferred Units outstanding was as follows: Preferred Units Outstanding Number of Preferred Units outstanding, December 31, 2024 180,000 Number of Preferred Units outstanding, March 31, 2025 180,000 12 Table of Contents Redemption and Conversion Features The Preferred Units are convertible, at the option of the holder, into common units in accordance with the terms of our Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”). The conversion rate for the Preferred Units is the quotient of (i) the sum of (a) $ 1,000 , plus (b) any unpaid cash distributions on the applicable Preferred Unit, divided by (ii) $ 20.0115 for each Preferred Unit. We have the option to redeem all or any portion of the Preferred Units then outstanding, subject to certain minimum redemption threshold amounts, for a redemption price set forth in the Partnership Agreement. 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. Cash Distributions We have declared and paid per-unit quarterly cash distributions to the holders of the Preferred Units of record as follows: Payment Date Distribution per Preferred Unit February 2, 2024 $ 24.375 May 3, 2024 24.375 August 2, 2024 24.375 November 1, 2024 24.375 Total 2024 distributions $ 97.50 February 7, 2025 $ 24.375 Announced Quarterly Distribution 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): Preferred Units Balance as of December 31, 2024 $ 168,809 Cash distributions on Preferred Units ( 4,388 ) Net income allocated to Preferred Units 4,388 Balance as of March 31, 2025 $ 168,809 (10) Partners’ Deficit Common Units 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 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. 13 Table of Contents Cash Distributions We have declared and paid per-unit quarterly distributions to our limited partner unitholders of record, including holders of our common and phantom units, as follows (dollars in millions, except distribution per unit): Payment Date Distribution per Limited Partner Unit Amount Paid to Common Unitholders Amount Paid to Phantom Unitholders Total Distribution February 2, 2024 $ 0.525 $ 54.1 $ 1.0 $ 55.1 May 3, 2024 0.525 61.4 1.0 62.4 August 2, 2024 0.525 61.4 1.0 62.4 November 1, 2024 0.525 61.5 1.0 62.5 Total 2024 distributions $ 2.10 $ 238.4 $ 4.0 $ 242.4 February 7, 2025 $ 0.525 $ 61.7 $ 0.7 $ 62.4 Announced Quarterly Distribution 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. DRIP 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 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. 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 Disaggregation of Revenue The following table disaggregates our revenue by type of service (in thousands): Three Months Ended March 31, 2025 2024 Contract operations revenue $ 239,667 $ 223,780 Retail parts and services revenue 5,567 5,496 Total revenues $ 245,234 $ 229,276 14 Table of Contents The following table disaggregates our revenue by timing of provision of services or transfer of goods (in thousands): Three Months Ended March 31, 2025 2024 Services provided over time: Primary term $ 194,533 $ 190,433 Month-to-month 45,134 33,347 Total services provided over time 239,667 223,780 Services provided or goods transferred at a point in time 5,567 5,496 Total revenues $ 245,234 $ 229,276 Deferred Revenue We record deferred revenue when cash payments are received or due in advance of our performance. Components of deferred revenue were as follows (in thousands): Balance sheet location March 31, 2025 December 31, 2024 Current (1) Deferred revenue $ 63,790 $ 63,900 Noncurrent Other liabilities 6,075 6,616 Total $ 69,865 $ 70,516 ________________________________ (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 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): 2025 (remainder) 2026 2027 2028 Thereafter Total Remaining performance obligations $ 473,478 $ 396,154 $ 212,149 $ 82,367 $ 19,463 $ 1,183,611 (12) Transactions with Related Parties 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, 2025 2024 Related-party revenues $ 15,165 $ 5,712 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. 15 Table of Contents 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 11 % and 13 % of total revenues for the three months ended March 31, 2025 and 2024, respectively. (b) Litigation From time to time, we and our subsidiaries may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters is not expected to have a material adverse effect on our consolidated financial position, results of operations, or cash flows. (c) Tax Contingencies Our compliance with federal, state, and local 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 taxes. 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. Our U.S. 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, 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. 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. Our environmental policies and procedures are designed to achieve compliance with such applicable laws, rules, and regulations. 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. 16 Table of Contents (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 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. 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 ASU 2023-09 on our consolidated financial statements and related disclosures. 17 Table of Contents