CSI Compressco To Curtail 2020 Spending

28 February 2020

CSI Compressco LP said it will cut its growth capital expenditures in half and its horsepower additions by two thirds this year, citing a softer natural gas market.

Its growth capex will drop from US$47.8 million last year to about US$22.5 million in 2020. Compression additions will fall from 98,000 hp (73 MW) to about 29,900 hp (22 MW).

In a fourth quarter 2019 earnings report, the partnership noted continued success with higher horsepower units dedicated for centralized gas lift. Since the end of 2016, its large horsepower fleet gas grown 37%, from 470,000 hp (350 MW) to 645,000 hp (481 MW), and is running at 97.9% utilization.

“Operators have increasingly moved towards utilizing larger horsepower units to perform gas lift on multiple wells, which is very efficient and cost effective, something that has benefited our business tremendously,” President Brady Murphy said.

“In the fourth quarter of 2019, 89% of our total horsepower deployments were directed towards centralized gas lift for liquids or single well artificial lift for the growing inventory of late-life horizontal wells. While customer drilling activity and new well capital expenditures are expected to decrease in 2020, we see these applications continuing to grow.”

Murphy said 53% of the partnership’s fleet is now larger horsepower, up from 42% at the end of 2016. The 1000 hp (0.75 MW) and larger equipment is generating 20% returns on capital. As of Dec. 31, the partnership’s overall fleet was 1,177,745 hp (878 MW) with a utilization of 90%.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were US$34.7 million in the fourth quarter, the highest since the acquisition of Compressor Systems Inc. in 2014. Adjusted EBITDA was US$128 million for 2019, up from US$99 million in 2018. The partnership forecast adjusted EBITDA of US$125-140 million in 2020.

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