USA Compression Partners, LP 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations USA Compression Partners, LP (the “Partnership”) is a Delaware limited partnership that operates as one of the nation’s largest independent providers of natural gas compression services in terms of total compression fleet horsepower. We are managed by our general partner, USA Compression GP, LLC (the “General Partner”), which is wholly owned by Energy Transfer. All references in this section to the Partnership, as well as the terms “our,” “we,” “us,” and “its” refer to USA Compression Partners, LP, together with its consolidated subsidiaries, unless the context otherwise requires or where otherwise indicated. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This report contains “forward-looking statements.” All statements other than statements of historical fact contained in this report are forward-looking statements, including, without limitation, statements regarding our plans, strategies, prospects, and expectations concerning our business, results of operations, and financial condition. Many of these statements can be identified by words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “continue,” “if,” “outlook,” “will,” “could,” “should,” or similar words or the negatives thereof. Known material factors that could cause our actual results to differ from those represented within these forward-looking statements are described in Part I, Item 1A “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2024, filed on February 11, 2025 (our “2024 Annual Report”), Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, as well as our subsequent filings with the SEC. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among other things: • changes in economic conditions of the crude oil and natural gas industries, including any impact from the ongoing military conflict involving Russia and Ukraine or the conflict in the Middle East; • changes in general economic conditions, including inflation, supply chain disruptions, or tariff impacts; • changes in the long-term supply of and demand for crude oil and natural gas; • competitive conditions in our industry, including competition for employees in a tight labor market; • our ability to realize the anticipated benefits of the shared services integration with Energy Transfer; • changes in the availability and cost of capital, including changes to interest rates; • renegotiation of material terms of customer contracts; • actions taken by our customers, competitors, and third-party operators; • operating hazards, natural disasters, epidemics, pandemics, weather-related impacts, casualty losses, and other matters beyond our control; • the deterioration of the financial condition of our customers, which may result in the initiation of bankruptcy proceedings with respect to certain customers; • the restrictions on our business that are imposed under our long-term debt agreements; • information technology risks including the risk from cyberattacks, cybersecurity breaches, and other disruptions to our information systems; • the effects of existing and future laws and governmental regulations; and • the effects of future litigation. New factors emerge from time to time, and it is not possible for us to predict or anticipate all factors that could affect results reflected in the forward-looking statements contained herein. Should one or more of the risks or uncertainties described in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements included in this report are based on information available to us as of the date of this report and speak only as of the date of this report. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. 18 Table of Contents Operating Highlights The following table summarizes certain horsepower and horsepower-utilization percentages for the periods presented and excludes certain gas-treating assets for which horsepower is not a relevant metric. Three Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) 2025 2024 2025 2024 Fleet horsepower (at period end) (1) 3,858,508 3,851,970 0.2 % 3,858,508 3,851,970 0.2 % Total available horsepower (at period end) (2) 3,885,808 3,866,312 0.5 % 3,885,808 3,866,312 0.5 % Revenue-generating horsepower (at period end) (3) 3,538,668 3,538,683 0.0 % 3,538,668 3,538,683 0.0 % Average revenue-generating horsepower (4) 3,551,446 3,515,483 1.0 % 3,554,305 3,494,245 1.7 % Average revenue per revenue-generating horsepower per month (5) $ 21.31 $ 20.29 5.0 % $ 21.19 $ 20.13 5.3 % Revenue-generating compression units (at period end) 4,190 4,251 (1.4) % 4,190 4,251 (1.4) % Average horsepower per revenue-generating compression unit (6) 845 828 2.1 % 843 823 2.4 % Horsepower utilization (7): At period end 94.2 % 95.0 % (0.8) % 94.2 % 95.0 % (0.8) % Average for the period (8) 94.4 % 94.7 % (0.3) % 94.4 % 94.7 % (0.3) % ________________________________ (1) Fleet horsepower is horsepower for compression units that have been delivered to us and excludes 14,985 and 19,915 of non-marketable horsepower as of June 30, 2025 and 2024, respectively. As of June 30, 2025, we had 39,800 large horsepower on order for delivery, all of which is expected to be delivered within the next 12 months. (2) Total available horsepower is revenue-generating horsepower under contract for which we are billing a customer, horsepower in our fleet that is under contract but is not yet generating revenue, horsepower not yet in our fleet that is under contract but not yet generating revenue and that is expected to be delivered, and idle horsepower. Total available horsepower excludes new horsepower expected to be delivered for which we do not have an executed compression services contract. (3) Revenue-generating horsepower is horsepower under contract for which we are billing a customer. (4) Calculated as the average of the month-end revenue-generating horsepower for each of the months in the period. (5) Calculated as the average of the result of dividing the contractual monthly rate, excluding standby or other temporary rates, for all units at the end of each month in the period by the sum of the revenue-generating horsepower at the end of each month in the period. (6) Calculated as the average of the month-end revenue-generating horsepower per revenue-generating compression unit for each of the months in the period. (7) Horsepower utilization is calculated as (i) the sum of (a) revenue-generating horsepower, (b) horsepower in our fleet that is under contract but is not yet generating revenue, and (c) horsepower not yet in our fleet that is under contract but not yet generating revenue and that is expected to be delivered, divided by (ii) total available horsepower less idle horsepower that is under repair. Horsepower utilization based on revenue-generating horsepower and fleet horsepower as of June 30, 2025 and 2024, was 91.7% and 91.9%, respectively. (8) Calculated as the average utilization for the months in the period based on utilization at the end of each month in the period. Average horsepower utilization based on revenue-generating horsepower and fleet horsepower for the three months ended June 30, 2025 and 2024, was 91.9% and 91.2%, respectively. Average horsepower utilization based on revenue-generating horsepower and fleet horsepower for the six months ended June 30, 2025 and 2024, was 91.9% and 91.1%, respectively. The 5.0% and 5.3% increases in average revenue per revenue-generating horsepower per month for the three and six months ended June 30, 2025, respectively, compared to the three and six months ended June 30, 2024, primarily was due to higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit. The 2.1% and 2.4% increases in average horsepower per revenue-generating compression unit for the three and six months ended June 30, 2025, respectively, compared to the three and six months ended June 30, 2024, primarily was due to an increase in large-horsepower compression units deployed. 19 Table of Contents Financial Results of Operations Three months ended June 30, 2025, compared to the three months ended June 30, 2024 The following table summarizes our results of operations for the periods presented (dollars in thousands): Three Months Ended June 30, Increase (Decrease) 2025 2024 Revenues: Contract operations $ 227,277 $ 223,643 1.6 % Parts and service 6,507 5,827 11.7 % Related party 16,341 5,843 179.7 % Total revenues 250,125 235,313 6.3 % Costs and expenses: Cost of operations, exclusive of depreciation and amortization 86,499 78,162 10.7 % Depreciation and amortization 70,841 65,313 8.5 % Selling, general, and administrative 12,896 14,173 (9.0) % Loss (gain) on disposition of assets 39 (18) * Impairment of assets 3,242 311 * Total costs and expenses 173,517 157,941 9.9 % Operating income 76,608 77,372 (1.0) % Other income (expense): Interest expense, net (47,674) (48,828) (2.4) % Gain on derivative instrument — 3,131 * Other 16 26 (38.5) % Total other expense (47,658) (45,671) 4.4 % Net income before income tax expense 28,950 31,701 (8.7) % Income tax expense 391 463 (15.6) % Net income $ 28,559 $ 31,238 (8.6) % ________________________________ * Not meaningful Contract operations revenue . The $3.6 million increase in contract operations revenue for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a 5.0% increase in average revenue per revenue-generating horsepower per month as a result of higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit and (ii) a 1.0% increase in average revenue-generating horsepower as a result of increased demand for our services, commensurate with an overall increase in crude oil and natural gas production in the onshore U.S., partially offset by (iii) a $9.1 million decrease in contract operations revenue from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period and (iv) a $2.5 million decrease in revenue attributable to natural gas treating services. Average revenue per revenue-generating horsepower per month associated with our compression services provided on a month-to-month basis did not differ significantly from the average revenue per revenue-generating horsepower per month associated with our compression services provided under contracts in their primary term during the period. Parts and service revenue . The $0.7 million increase in parts and service revenue for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to an increase in maintenance work performed on units outside the scope of our core maintenance activities and in directly reimbursable freight and crane charges that are the financial responsibility of the customers. Demand for retail parts and services fluctuates from period to period based on varying customer needs. Related-party revenue . Related-party revenue was earned through related-party transactions that occur in the ordinary course of business with various affiliated entities of Energy Transfer. The $10.5 million increase in related-party revenue for the 20 Table of Contents three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to revenue recognized from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period. Cost of operations, exclusive of depreciation and amortization . The $8.3 million increase in cost of operations, exclusive of depreciation and amortization, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a $3.5 million increase in direct expenses, primarily driven by increased spending on parts resulting from higher costs and increased usage associated with increased average revenue-generating horsepower, (ii) a $3.2 million increase in direct labor costs due to increased operating headcount associated with increased average revenue-generating horsepower and higher employee costs, and (iii) a $0.9 million increase in retail parts and service expenses. Depreciation and amortization expense . The $5.5 million increase in depreciation and amortization expense for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to overhauls and major improvements to compression units. Selling, general, and administrative expense . The $1.3 million decrease in selling, general, and administrative expense for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a $2.2 million decrease in unit-based compensation expense attributable to a reversal of unit-based compensation expense resulting from the forfeiture of certain awards by certain former senior management and to mark-to-market changes to our unit-based compensation liability that occurred as a result of changes to our per-unit trading price as of June 30, 2025 and (ii) a $0.8 million decrease in employee related expenses due to decreased administrative headcount and lower employee costs, partially offset by (iii) a $0.9 million increase in insurance and other administrative expenses, (iv) a $0.4 million increase in severance charges and other employee costs primarily related to the departure of certain senior management as well as retention and relocation payments related to the shared services integration during the current period, and (v) a $0.2 million increase in outside services and professional fees. Impairment of assets . The $3.2 million and $0.3 million impairments of assets for the three months ended June 30, 2025 and 2024, respectively, primarily resulted from our evaluation of the future deployment of our idle fleet under current market conditions. The primary circumstances supporting this impairment 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. As a result of our evaluation during the three months ended June 30, 2025 and 2024, we retired four and two compression units, respectively, with approximately 5,900 and 1,300 of aggregate horsepower, respectively, that previously were used to provide compression services in our business. Interest expense, net . The $1.2 million decrease in interest expense, net for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to lower weighted-average interest rates under the Credit Agreement, partially offset by increased aggregate borrowings. Gain on derivative instrument. The $3.1 million gain on derivative instrument for the three months ended June 30, 2024, resulted from the change in fair value of the interest-rate swap due to changes in the interest-rate forward curve and cash received during the period. This interest-rate swap was terminated in August 2024; see Note 7 to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this report for additional information on this interest-rate swap and termination. 21 Table of Contents Six months ended June 30, 2025, compared to the six months ended June 30, 2024 The following table summarizes our results of operations for the periods presented (dollars in thousands): Six Months Ended June 30, Increase (Decrease) 2025 2024 Revenues: Contract operations $ 452,252 $ 441,747 2.4 % Parts and service 11,601 11,287 2.8 % Related party 31,506 11,555 172.7 % Total revenues 495,359 464,589 6.6 % Costs and expenses: Cost of operations, exclusive of depreciation and amortization 168,117 153,234 9.7 % Depreciation and amortization 141,234 128,564 9.9 % Selling, general, and administrative 31,758 37,000 (14.2) % Loss on disposition of assets 1,364 1,236 * Impairment of assets 6,887 311 * Total costs and expenses 349,360 320,345 9.1 % Operating income 145,999 144,244 1.2 % Other income (expense): Interest expense, net (95,043) (95,494) (0.5) % Loss on debt extinguishment — (4,966) * Gain on derivative instrument — 11,902 * Other 41 60 (31.7) % Total other expense (95,002) (88,498) 7.3 % Net income before income tax expense 50,997 55,746 (8.5) % Income tax expense 1,926 935 106.0 % Net income $ 49,071 $ 54,811 (10.5) % ________________________________ * Not meaningful Contract operations revenue. The $10.5 million increase in contract operations revenue for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a 5.3% increase in average revenue per revenue-generating horsepower per month, as a result of higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit and (ii) a 1.7% increase in average revenue-generating horsepower as a result of increased demand for our services, commensurate with an overall increase in crude oil and natural gas produced within the U.S., partially offset by (iii) a $17.1 million decrease in contract operations revenue from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period and (iv) a $5.2 million decrease in revenue attributable to natural gas treating services. Average revenue per revenue-generating horsepower per month associated with our compression services provided on a month-to-month basis did not differ significantly from the average revenue per revenue-generating horsepower per month associated with our compression services provided under contracts in their primary term during the period. Parts and service revenue . The $0.3 million increase in parts and service revenue for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to an increase in maintenance work performed on units outside the scope of our core maintenance activities and in directly reimbursable freight and crane charges that are the financial responsibility of the customers. Demand for retail parts and services fluctuates from period to period based on varying customer needs. Related-party revenue . Related-party revenue was earned through related-party transactions that occur in the ordinary course of business with various affiliated entities of Energy Transfer. The $20.0 million increase in related-party revenue for the 22 Table of Contents six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to revenue recognized from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period. Cost of operations, exclusive of depreciation and amortization . The $14.9 million increase in cost of operations, exclusive of depreciation and amortization, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $6.5 million increase in direct labor costs due to increased operating headcount associated with increased average revenue-generating horsepower and higher employee costs, (ii) a $6.0 million increase in direct expenses, primarily driven by increased spending on parts resulting from higher costs and increased usage associated with increased average revenue-generating horsepower, (iii) a $1.5 million increase in retail parts and service expenses, for which a corresponding increase in parts and service revenue also occurred, and (iv) a $0.4 million increase in outside maintenance costs due to increased use of third-party labor during the current period. Depreciation and amortization expense . The $12.7 million increase in depreciation and amortization expense for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to overhauls and major improvements to compression units. Selling, general, and administrative expense . The $5.2 million decrease in selling, general, and administrative expense for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $6.3 million decrease in unit-based compensation expense attributable to a reversal of unit-based compensation expense resulting from the forfeiture of certain awards by certain former senior management and to mark-to-market changes to our unit-based compensation liability that occurred as a result of changes to our per-unit trading price as of June 30, 2025, (ii) a $1.4 million decrease in employee related expenses due to decreased administrative headcount and lower employee costs, and (iii) a $0.9 million decrease in professional fees primarily related to an initiative to improve business performance, partially offset by (iv) a $1.8 million increase in severance charges and other employee costs primarily related to the departure of certain senior management as well as retention and relocation payments related to the shared services integration during the current period and (v) a $1.7 million increase in insurance and other administrative expenses. Impairment of assets. The $6.9 million and $0.3 million impairments of assets for the six months ended June 30, 2025 and 2024, respectively, primarily resulted from our evaluation of the future deployment of idle fleet under current market conditions. 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. As a result of our evaluations during the six months ended June 30, 2025 and 2024, we retired 21 and two compression units, respectively, with approximately 16,100 and 1,300 aggregate horsepower, respectively, that previously were used to provide compression services in our business. Interest expense, net . The $0.5 million decrease in interest expense, net for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to lower weighted-average interest rates under the Credit Agreement, partially offset by increased aggregate borrowings. Lo ss on extinguishment of debt. The $5.0 million loss on extinguishment of debt for the six months ended June 30, 2024 resulted from the satisfaction and discharge of the Senior Notes 2026, which constituted a legal defeasance under GAAP (the “Defeasance”). This loss consists of 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, which were used for the Defeasance, and (ii) the aggregate outstanding principal balance and accrued interest of the Senior Notes 2026 of $748.1 million at the time of Defeasance. Gain on derivative instrument. The $11.9 million gain on derivative instrument for the six months ended June 30, 2024 resulted from the change in fair value of the interest-rate swap due to changes in the interest-rate forward curve and cash received during the period. This interest-rate swap was terminated in August 2024; see Note 7 to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this report for additional information on this interest-rate swap and termination. Income tax expense. The $1.0 million increase in income tax expense for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was related to 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 with the IRS, see Note 13 to our unaudited condensed consolidated financial statements under Part I, Item 1 “Financial Statements” of this report. 23 Table of Contents Other Financial Data The following table summarizes other financial data for the periods presented (dollars in thousands): Other Financial Data: (1) Three Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) 2025 2024 2025 2024 Gross margin $ 92,785 $ 91,838 1.0 % $ 186,008 $ 182,791 1.8 % Adjusted gross margin $ 163,626 $ 157,151 4.1 % $ 327,242 $ 311,355 5.1 % Adjusted gross margin percentage (2) 65.4 % 66.8 % (1.4) % 66.1 % 67.0 % (0.9) % Adjusted EBITDA $ 149,482 $ 143,673 4.0 % $ 298,996 $ 283,068 5.6 % Adjusted EBITDA percentage (2) 59.8 % 61.1 % (1.3) % 60.4 % 60.9 % (0.5) % DCF $ 89,926 $ 85,863 4.7 % $ 178,621 $ 172,452 3.6 % DCF Coverage Ratio 1.40 x 1.40 x 0.0 % 1.42 x 1.40 x 1.4 % ________________________________ (1) Adjusted gross margin, Adjusted EBITDA, Distributable Cash Flow (“DCF”), and DCF Coverage Ratio are all non-GAAP financial measures. Definitions of each measure, as well as reconciliations of each measure to its most directly comparable financial measure(s) calculated and presented in accordance with GAAP, can be found below under the caption “Non-GAAP Financial Measures”. (2) Adjusted gross margin percentage and Adjusted EBITDA percentage are calculated as a percentage of revenue. Gross margin. The $0.9 million increase in gross margin for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was due to (i) a $14.8 million increase in revenues, offset by (ii) an $8.3 million increase in cost of operations, exclusive of depreciation and amortization, and (iii) a $5.5 million increase in depreciation and amortization. The $3.2 million increase in gross margin for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was due to (i) a $30.8 million increase in revenues, offset by (ii) a $14.9 million increase in cost of operations, exclusive of depreciation and amortization, and (iii) a $12.7 million increase in depreciation and amortization. Adjusted gross margin. The $6.5 million increase in Adjusted gross margin for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was due to a $14.8 million increase in revenues, offset by an $8.3 million increase in cost of operations, exclusive of depreciation and amortization. The $15.9 million increase in Adjusted gross margin for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was due to a $30.8 million increase in revenues, offset by a $14.9 million increase in cost of operations, exclusive of depreciation and amortization. Adjusted EBITDA . The $5.8 million increase in Adjusted EBITDA for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to a $6.5 million increase in Adjusted gross margin, offset by a $0.7 million increase in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges and other employee costs. The $15.9 million increase in Adjusted EBITDA for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to a $15.9 million increase in Adjusted gross margin. DCF . The $4.1 million increase in DCF for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a $6.5 million increase in Adjusted gross margin, (ii) a $2.4 million decrease in distributions on Preferred Units due to the conversion of 100,000 Preferred Units to 4,997,126 common units, and (iii) a $1.1 million decrease in cash interest expense, net, offset by (iv) a $2.8 million increase in maintenance capital expenditures, (v) a $2.5 million decrease in cash received on derivative instrument, and (vi) a $0.7 million increase in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges and other employee costs. The $6.2 million increase in DCF for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $15.9 million increase in Adjusted gross margin, (ii) a $2.4 million decrease in distributions on Preferred Units due to the conversion of 100,000 preferred units to 4,997,126 common units, and (iii) a $0.7 million decrease in cash interest expense, net, offset by (iv) a $7.9 million increase in maintenance capital expenditures and (v) a $4.9 million decrease in cash received on derivative instrument. DCF Coverage Ratio . The DCF Coverage Ratio for the three months ended June 30, 2025 equaled the DCF Coverage Ratio for the three months ended June 30, 2024, as the increase in DCF for the period was offset by increased distributions due 24 Table of Contents to an increase in the number of common units. The increase in DCF Coverage Ratio for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was due to the increase in DCF for the period, partially offset by increased distributions due to an increase in the number of common units. Liquidity and Capital Resources Overview We operate in a capital-intensive industry, and our primary liquidity needs include financing the purchase of additional compression units, making other capital expenditures, servicing our debt, funding working capital, and paying cash distributions on our outstanding preferred and common equity. Our principal sources of liquidity include cash generated by operating activities, borrowings under the Credit Agreement, and issuances of debt and equity securities, including common units under the DRIP. We believe cash generated by operating activities and, where necessary, borrowings under the Credit Agreement will be sufficient to service our debt, fund working capital, fund our estimated expansion capital expenditures, fund our maintenance capital expenditures, and pay distributions to our unitholders for the next 12 months. Because we distribute all of our available cash, which excludes prudent operating reserves, we expect to fund any future expansion capital expenditures or acquisitions primarily with capital from external financing sources, such as borrowings under the Credit Agreement and issuances of debt and equity securities, including under the DRIP. Capital Expenditures The compression services business is capital intensive, requiring significant investment to maintain, expand, and upgrade existing operations. Our capital requirements primarily have consisted of, and we anticipate that our capital requirements will continue primarily to consist of, the following: • maintenance capital expenditures, which are capital expenditures made to maintain the operating capacity of our assets and extend their useful lives, to replace partially or fully depreciated assets, or other capital expenditures that are incurred in maintaining our existing business and related operating income; and • expansion capital expenditures, which are capital expenditures made to expand the operating capacity or operating-income capacity of assets, including by acquisition of compression units or through modification of existing compression units to increase their capacity, or to replace certain partially or fully depreciated assets that at the time of replacement were not generating operating income. We classify capital expenditures as maintenance or expansion on an individual-asset basis. Over the long term, we expect that our maintenance capital expenditure requirements will continue to increase as the overall size and age of our fleet increases. Our aggregate maintenance capital expenditures for the six months ended June 30, 2025 and 2024, were $22.6 million and $14.6 million, respectively. We currently plan to spend between $38.0 million and $42.0 million in maintenance capital expenditures for the year 2025, including parts consumed from inventory. Without giving effect to any equipment that we may acquire pursuant to any future acquisitions, we currently plan to spend between $120.0 million and $140.0 million in expansion capital expenditures for the year 2025. Our expansion capital expenditures for the six months ended June 30, 2025 and 2024, were $40.3 million and $171.8 million, respectively. As of June 30, 2025, we had binding commitments to purchase $44.9 million worth of additional compression units and serialized parts, all of which is expected to be settled within the next 12 months. Cash Flows The following table summarizes our sources and uses of cash for the six months ended June 30, 2025 and 2024 (in thousands): Six Months Ended June 30, 2025 2024 Net cash provided by operating activities $ 178,895 $ 162,658 Net cash used in investing activities (40,395) (146,715) Net cash used in financing activities (138,512) (15,945) 25 Table of Contents Net cash provided by operating activities . The $16.2 million increase in net cash provided by operating activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $35.8 million decrease in inventory purchases and (ii) a $9.2 million increase in net income excluding non-cash charges, partially offset by (iii) a $29.4 million increase in interest payments due to the timing of payments related to our refinance of our Senior Notes 2026. Net cash used in investing activities . The $106.3 million decrease in net cash used in investing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to a $105.6 million decrease in capital expenditures for purchases of new compression units, overhauls and major improvements, and purchases of other equipment. Net cash used in financing activities . The $122.6 million increase in net cash used in financing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $1.0 billion decrease in proceeds from the issuance of the Senior Notes 2029 and (ii) a $7.9 million increase in common unit distributions, partially offset by (iii) a $748.8 million decrease in investments in government securities purchased in connection with the Defeasance of the Senior Notes 2026, (iv) a $114.1 million increase in net borrowings under the Credit Agreement, (v) an $18.4 million decrease in deferred financing costs driven by the issuance of the Senior Notes 2029 in the prior period, and (vi) a $6.8 million decrease in Preferred Unit distributions. Revolving Credit Facility As of June 30, 2025, we had outstanding borrowings under the Credit Agreement of $770.6 million and, after accounting for outstanding letters of credit in the amount of $0.8 million, $828.6 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $735.1 million was available to be drawn. As of June 30, 2025, we were in compliance with all of our covenants under the Credit Agreement. As of August 1, 2025, we had outstanding borrowings under the Credit Agreement of $730.7 million and outstanding letters of credit of $0.8 million. For a more detailed description of the Credit Agreement, see Note 8 to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this report and Note 10 to the consolidated financial statements in Part II, Item 8 “Financial Statements and Supplementary Data” included in our 2024 Annual Report. Senior Notes As of June 30, 2025, we had $750.0 million and $1.0 billion aggregate principal amount outstanding on our Senior Notes 2027 and Senior Notes 2029, respectively. The Senior Notes 2027 are due 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 Senior Notes 2029 are due on March 15, 2029, and accrue interest 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. For more detailed descriptions of the Senior Notes 2027 and Senior Notes 2029, see Note 8 to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this report and Note 10 to the consolidated financial statements in Part II, Item 8 “Financial Statements and Supplementary Data” included in our 2024 Annual Report. DRIP During the six months ended June 30, 2025, distributions of $0.1 million were reinvested under the DRIP resulting in the issuance of 4,706 common units. Such distributions are treated as non-cash transactions in the accompanying unaudited condensed consolidated statements of cash flows included under Part I, Item 1 “Financial Statements” of this report. Non-GAAP Financial Measures Adjusted Gross Margin Adjusted gross margin is a non-GAAP financial measure. We define Adjusted gross margin as revenue less cost of operations, exclusive of depreciation and amortization expense. We believe Adjusted gross margin is useful to investors as a supplemental measure of our operating profitability. Management uses adjusted gross margin to assess operating performance as compared to historical results, budget and forecast amounts, expected return on capital investment, and our competitors. 26 Table of Contents Adjusted gross margin primarily is impacted by the pricing trends for service operations and cost of operations, including labor rates for service technicians, volume, and per-unit costs for lubricant oils, quantity and pricing of routine preventative maintenance on compression units, and property tax rates on compression units. Adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin or any other measure presented in accordance with GAAP. Moreover, our Adjusted gross margin, as presented, may not be comparable to similarly titled measures of other companies. Because we capitalize assets, depreciation and amortization of equipment is a necessary element of our cost structure. To compensate for the limitations of Adjusted gross margin as a measure of our performance, we believe it is important to consider gross margin determined under GAAP, as well as Adjusted gross margin, to evaluate our operating profitability. The following table reconciles Adjusted gross margin to gross margin, its most directly comparable GAAP financial measure, for each of the periods presented (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Total revenues $ 250,125 $ 235,313 $ 495,359 $ 464,589 Cost of operations, exclusive of depreciation and amortization (86,499) (78,162) (168,117) (153,234) Depreciation and amortization (70,841) (65,313) (141,234) (128,564) Gross margin $ 92,785 $ 91,838 $ 186,008 $ 182,791 Depreciation and amortization 70,841 65,313 141,234 128,564 Adjusted gross margin $ 163,626 $ 157,151 $ 327,242 $ 311,355 Adjusted EBITDA We define EBITDA as net income (loss) before net interest expense, depreciation and amortization expense, and income tax expense (benefit). We define Adjusted EBITDA as EBITDA plus impairment of assets, impairment of goodwill, interest income on capital leases, unit-based compensation expense (benefit), severance charges and other employee costs, certain transaction expenses, loss (gain) on disposition of assets, loss on extinguishment of debt, loss (gain) on derivative instrument, and other. We view Adjusted EBITDA as one of management’s primary tools for evaluating our results of operations, and we track this item on a monthly basis as an absolute amount and as a percentage of revenue compared to the prior month, year-to-date, prior year, and budget. Adjusted EBITDA is used as a supplemental financial measure by our management and external users of our financial statements, such as investors and commercial banks, to assess: • the financial performance of our assets without regard to the impact of financing methods, capital structure, or the historical cost basis of our assets; • the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; • the ability of our assets to generate cash sufficient to make debt payments and pay distributions; and • our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods and capital structure. We believe Adjusted EBITDA provides useful information to investors because, when viewed in conjunction with our GAAP results and the accompanying reconciliations, it may provide a more complete assessment of our performance as compared to considering solely GAAP results. We also believe that external users of our financial statements benefit from having access to the same financial measures that management uses to evaluate the results of our business. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss), operating income (loss), cash flows from operating activities, or any other measure presented in accordance with GAAP. Moreover, our Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. Because we use capital assets, depreciation, impairment of assets, loss (gain) on disposition of assets, and the interest cost of acquiring compression equipment also are necessary elements of our aggregate costs. Unit-based compensation expense related to equity awards granted to employees also is a meaningful business expense. Therefore, measures that exclude these cost elements have material limitations. To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by operating activities as determined under GAAP, as well as Adjusted EBITDA, to evaluate our financial performance and liquidity. Our Adjusted EBITDA excludes some, but not all, items that affect net income (loss) and net cash provided by operating activities, and these excluded items may vary among companies. Management 27 Table of Contents compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing comparable GAAP measures, understanding the differences between the measures, and incorporating this knowledge into their decision making. The following table reconciles Adjusted EBITDA to net income and net cash provided by operating activities, its most directly comparable GAAP financial measures, for each of the periods presented (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net income $ 28,559 $ 31,238 $ 49,071 $ 54,811 Interest expense, net 47,674 48,828 95,043 95,494 Depreciation and amortization 70,841 65,313 141,234 128,564 Income tax expense 391 463 1,926 935 EBITDA $ 147,465 $ 145,842 $ 287,274 $ 279,804 Unit-based compensation expense (benefit) (1) (1,736) 562 1,648 8,331 Transaction expenses (2) — 63 — 171 Severance charges and other employee costs (3) 472 44 1,823 151 Loss (gain) on disposition of assets 39 (18) 1,364 1,236 Loss on extinguishment of debt (4) — — — 4,966 Gain on derivative instrument — (3,131) — (11,902) Impairment of assets (5) 3,242 311 6,887 311 Adjusted EBITDA $ 149,482 $ 143,673 $ 298,996 $ 283,068 Interest expense, net (47,674) (48,828) (95,043) (95,494) Non-cash interest expense 2,231 2,257 4,472 4,252 Income tax expense (391) (463) (1,926) (935) Transaction expenses — (63) — (171) Severance charges and other employee costs (472) (44) (1,823) (151) Cash received on derivative instrument — 2,466 — 4,888 Other (39) 37 46 97 Changes in operating assets and liabilities 21,107 (2,294) (25,827) (32,896) Net cash provided by operating activities $ 124,244 $ 96,741 $ 178,895 $ 162,658 ________________________________ (1) For the three and six months ended June 30, 2025, unit-based compensation expense (benefit) included $0.5 million and $1.2 million, respectively, of cash payments related to quarterly payments of DERs on outstanding phantom and restricted unit awards. For the three and six months ended June 30, 2024, unit-based compensation expense (benefit) included $1.0 million and $2.0 million, respectively, of cash payments related to quarterly payments of DERs on outstanding phantom unit awards. The three and six months ended June 30, 2025 also reflected a $2.1 million reversal of unit-based compensation expense resulting from the forfeiture of certain awards by certain former senior management. For the three and six months ended June 30, 2025, unit-based compensation included $1.0 million and $3.2 million, respectively, related to the cash portion of the settlement of phantom unit awards upon vesting. The remainder of unit-based compensation expense for all periods was related to non-cash adjustments to the unit-based compensation liability and other non-cash unit-based compensation expense. (2) Represents certain expenses related to potential and completed transactions and other items. We believe it is useful to investors to exclude these expenses. (3) Severance charges and other employee costs includes (i) severance payments to former employees of the Partnership, (ii) retention payments to employees of the Partnership that have executed agreements to maintain operations during the shared services integration but do not intend to remain employed with the Partnership after their retention period, and (iii) relocation payments to employees of the Partnership for relocation resulting from the shared services integration and the relocation of the Partnership’s headquarters to Dallas, Texas. These retention payments are incremental to the affected employees’ base pay. For the three and six months ended June 30, 2025, severance charges and other employee costs included $0.0 million and $0.4 million related to retention payments, respectively, and $0.2 million and $0.3 million related to relocation payments, respectively. 28 Table of Contents (4) This loss on extinguishment of debt is a result of the Defeasance of the Senior Notes 2026. This amount 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 the Defeasance. (5) Represents non-cash charges incurred to decrease the carrying value of long-lived assets with recorded values that are not expected to be recovered through future cash flows. Distributable Cash Flow We define DCF as net income (loss) plus non-cash interest expense, non-cash income tax expense (benefit), depreciation and amortization expense, unit-based compensation expense (benefit), impairment of assets, impairment of goodwill, certain transaction expenses, severance charges and other employee costs, loss (gain) on disposition of assets, loss on extinguishment of debt, change in fair value of derivative instrument, proceeds from insurance recovery, and other, less distributions on Preferred Units and maintenance capital expenditures. We believe DCF is an important measure of operating performance because it allows management, investors, and others to compare the cash flows that we generate (after distributions on the Preferred Units but prior to any retained cash reserves established by the General Partner and the effect of the DRIP) to the cash distributions that we expect to pay our common unitholders. DCF should not be considered an alternative to, or more meaningful than, net income (loss), operating income (loss), cash flows from operating activities, or any other measure presented in accordance with GAAP. Moreover, our DCF, as presented, may not be comparable to similarly titled measures of other companies. Because we use capital assets, depreciation, impairment of assets, loss (gain) on disposition of assets, the interest cost of acquiring compression equipment, and maintenance capital expenditures are necessary components of our aggregate costs. Unit-based compensation expense related to equity awards granted to employees also is a meaningful business expense. Therefore, measures that exclude these cost elements have material limitations. To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by operating activities as determined under GAAP, as well as DCF, to evaluate our financial performance and liquidity. Our DCF excludes some, but not all, items that affect net income (loss) and net cash provided by operating activities, and these excluded items may vary among companies. Management compensates for the limitations of DCF as an analytical tool by reviewing comparable GAAP measures, understanding the differences between the measures, and incorporating this knowledge into their decision making. 29 Table of Contents The following table reconciles DCF to net income and net cash provided by operating activities, its most directly comparable GAAP financial measures, for each of the periods presented (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net income $ 28,559 $ 31,238 $ 49,071 $ 54,811 Non-cash interest expense 2,231 2,257 4,472 4,252 Depreciation and amortization 70,841 65,313 141,234 128,564 Non-cash income tax expense (benefit) (39) 37 46 97 Unit-based compensation expense (benefit) (1) (1,736) 562 1,648 8,331 Transaction expenses (2) — 63 — 171 Severance charges and other employee costs (3) 472 44 1,823 151 Other (4) — — 1,000 — Loss (gain) on disposition of assets 39 (18) 1,364 1,236 Loss on extinguishment of debt (5) — — — 4,966 Change in fair value of derivative instrument — (665) — (7,014) Impairment of assets (6) 3,242 311 6,887 311 Distributions on Preferred Units (1,950) (4,387) (6,338) (8,775) Maintenance capital expenditures (7) (11,733) (8,892) (22,586) (14,649) DCF $ 89,926 $ 85,863 $ 178,621 $ 172,452 Maintenance capital expenditures 11,733 8,892 22,586 14,649 Transaction expenses — (63) — (171) Severance charges and other employee costs (472) (44) (1,823) (151) Distributions on Preferred Units 1,950 4,387 6,338 8,775 Other — — (1,000) — Changes in operating assets and liabilities 21,107 (2,294) (25,827) (32,896) Net cash provided by operating activities $ 124,244 $ 96,741 $ 178,895 $ 162,658 ________________________________ (1) For the three and six months ended June 30, 2025, unit-based compensation expense (benefit) included $0.5 million and $1.2 million, respectively, of cash payments related to quarterly payments of DERs on outstanding phantom and restricted unit awards. For the three and six months ended June 30, 2024, unit-based compensation expense (benefit) included $1.0 million and $2.0 million, respectively, of cash payments related to quarterly payments of DERs on outstanding phantom unit awards. The three and six months ended June 30, 2025 also reflected a $2.1 million reversal of unit-based compensation expense resulting from the forfeiture of certain awards by certain former senior management. For the three and six months ended June 30, 2025, unit-based compensation included $1.0 million and $3.2 million, respectively, related to the cash portion of the settlement of phantom unit awards upon vesting. The remainder of unit-based compensation expense for all periods was related to non-cash adjustments to the unit-based compensation liability and other non-cash unit-based compensation expense. (2) Represents certain expenses related to potential and completed transactions and other items. We believe it is useful to investors to exclude these expenses. (3) Severance charges and other employee costs includes (i) severance payments to former employees of the Partnership, (ii) retention payments to employees of the Partnership that have executed agreements to maintain operations during the shared services integration but do not intend to remain employed with the Partnership after their retention period, and (iii) relocation payments to employees of the Partnership for relocation resulting from the shared services integration and the relocation of the Partnership’s headquarters to Dallas, Texas. These retention payments are incremental to the affected employees’ base pay. For the three and six months ended June 30, 2025, severance charges and other employee costs included $0.0 million and $0.4 million related to retention payments, respectively, and $0.2 million and $0.3 million related to relocation payments, respectively. (4) Represents cash income tax expense accrued for the six months ended June 30, 2025, which we believe is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the federal tax years 2019 and 2020. 30 Table of Contents (5) This loss on extinguishment of debt is a result of the Defeasance of the Senior Notes 2026. This amount 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 the Defeasance. (6) Represents non-cash charges incurred to decrease the carrying value of long-lived assets with recorded values that are not expected to be recovered through future cash flows. (7) Reflects actual maintenance capital expenditures for the period presented. Maintenance capital expenditures are capital expenditures made to maintain the operating capacity of our assets and extend their useful lives, replace partially or fully depreciated assets, or other capital expenditures that are incurred in maintaining our existing business and related cash flow. DCF Coverage Ratio DCF Coverage Ratio is defined as the period’s DCF divided by distributions declared to common unitholders in respect of such period. We believe DCF Coverage Ratio is an important measure of operating performance because it permits management, investors, and others to assess our ability to pay distributions to common unitholders out of the cash flows that we generate. Our DCF Coverage Ratio, as presented, may not be comparable to similarly titled measures of other companies. The following table summarizes our DCF Coverage Ratio for the periods presented (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 DCF $ 89,926 $ 85,863 $ 178,621 $ 172,452 Distributions for DCF Coverage Ratio (1) $ 64,409 $ 61,429 $ 126,140 $ 122,851 DCF Coverage Ratio 1.40 x 1.40 x 1.42 x 1.40 x ________________________________ (1) Represents distributions to the holders of our common units as of the record date. Critical Accounting Estimates The Partnership’s critical accounting estimates are described in Part II, Item 7 “Critical Accounting Estimates” of our 2024 Annual Report. There have been no material changes to our critical accounting estimates since the date of our 2024 Annual Report. 31 Table of Contents