USA Compression Partners LP

Three months ended June 30, 2024, compared to the three months ended June 30, 2023

The following table summarizes our results of operations for the periods presented (dollars in thousands):

*Not meaningful

Contract operations revenue. The $26.7 million increase in contract operations revenue for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to (i) an 8.8% 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 6.2% 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 $2.1 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 $1.7 million increase in parts and service revenue for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to an increase in maintenance work performed on units at customer locations that are outside the scope of our core maintenance activities and that are offered as a convenience, 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.

Cost of operations, exclusive of depreciation and amortization. The $8.2 million increase in cost of operations, exclusive of depreciation and amortization, for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to (i) a $4.9 million increase in direct labor costs due to increased headcount associated with increased revenue-generating horsepower and higher employee costs, (ii) a $2.1 million increase in direct expenses, primarily driven by increased spending on parts resulting from higher costs and increased usage associated with increased revenue-generating horsepower, and (iii) a $1.1 million increase in retail parts and service expenses, for which a corresponding increase in parts and service revenue also occurred, partially offset by (iv) a $1.0 million decrease in outside maintenance costs due to lower use of third-party labor during the current period.

Depreciation and amortization expense. The $5.3 million increase in depreciation and amortization expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to (i) overhauls and major improvements to compression units, (ii) new trucks in our vehicle fleet, and (iii) new compression units placed in service to meet incremental demand from customers.

Selling, general, and administrative expense. The $0.8 million decrease in selling, general, and administrative expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to (i) a $2.3 million decrease in unit-based compensation expense, attributable 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, 2024, partially offset by (ii) a $0.8 million increase in professional fees primarily related to an initiative to improve business performance.

Impairment of compression equipment. The $0.3 million and $10.3 million impairments of compression equipment for the three months ended June 30, 2024 and 2023, respectively, primarily resulted from our evaluation of the future deployment of our idle fleet under then-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 evaluation during the three months ended June 30, 2024 and 2023, respectively, we retiredtwo and 33 compression units, representing approximately 1,300 and 26,900 of aggregate horsepower, respectively, that previously were used to provide compression services in our business.

Interest expense, net. The $6.8 million increase in interest expense, net for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to increased aggregate borrowings and higher aggregate weighted-average interest rates under the Credit Agreement and refinanced senior notes.

The weighted-average interest rate applicable to borrowings under the Credit Agreement was 7.97% and 7.63% for the three months ended June 30, 2024 and 2023, respectively, and average outstanding borrowings under the Credit Agreement were $748.9 million and $745.1 million for the three months ended June 30, 2024 and 2023, respectively.

Gain on derivative instrument. The $3.1 million and $14.6 million gains on derivative instrument for the three months ended June 30, 2024 and 2023, respectively, resulted from the increase in fair value of the interest-rate swap due to an increase in the interest-rate forward curve and cash received.

Six months ended June 30, 2024, compared to the six months ended June 30, 2023

The following table summarizes our results of operations for the periods presented (dollars in thousands):

*Not meaningful

Contract operations revenue. The $56.2 million increase in contract operations revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to (i) a 9.3% 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 6.7% 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.

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 $3.3 million increase in parts and service revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to an increase in maintenance work performed on units at customer locations that are outside the scope of our core maintenance activities and that are offered as a convenience, 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 $1.0 million increase in related-party revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to an increase in revenues attributable to natural gas treating services driven by increased demand for these services from these entities.

Cost of operations, exclusive of depreciation and amortization. The $16.6 million increase in cost of operations, exclusive of depreciation and amortization, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to (i) a $9.9 million increase in direct labor costs due to increased headcount associated with increased revenue-generating horsepower and higher employee costs, (ii) a $6.3 million increase in direct expenses, primarily driven by fluids and parts due to increased usage associated with increased revenue-generating horsepower, and higher costs on parts, and (iii) a $1.9 million increase in retail parts and service expenses, for which a corresponding increase in parts and service revenue also occurred, partially offset by (iv) a $3.5 million decrease in outside maintenance costs due to lower use of third-party labor during the current period.

Depreciation and amortization expense. The $9.0 million increase in depreciation and amortization expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to (i) overhauls and major improvements to compression units, (ii) new trucks in our vehicle fleet, and (iii) new compression units placed in service to meet incremental demand from customers.

Selling, general, and administrative expense. The $2.9 million increase in selling, general, and administrative expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to (i) a $2.9 million increase in professional fees primarily related to an initiative to improve business performance and (ii) a $0.7 million increase in employee-related expenses driven by increased headcount, partially offset by (iii) a $1.3 million decrease in unit-based compensation expense, attributable 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, 2024.

Impairment of compression equipment. The $0.3 million and $11.5 million impairments of compression equipment for the six months ended June 30, 2024 and 2023, respectively, primarily resulted from our evaluation of the future deployment of idle fleet assets under then-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 thesix months ended June 30, 2024 and 2023, we retired two and 39 compression units, respectively, with approximately 1,300 and 35,600 aggregate horsepower, respectively, that previously were used to provide compression services in our business.

Interest expense, net. The $13.7 million increase in interest expense, net for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to increased aggregate borrowings and higher aggregate weighted-average interest rates under the Credit Agreement and refinanced senior notes.

The weighted-average interest rate applicable to borrowings under the Credit Agreement was 7.98% and 7.40% for the six months ended June 30, 2024 and 2023, respectively, and average outstanding borrowings under the Credit Agreement were $817.9 million and $707.7 million for the six months ended June 30, 2024 and 2023, respectively.

Loss on extinguishment of debt. The$5.0 million loss on extinguishment of debtfor 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. For additional information regarding the Defeasance of the Senior Notes 2026, see Note 8 to our unaudited condensed consolidated financial statements under Part I, Item 1 “Financial Statements” of this report.

Gain on derivative instrument. The $11.9 million and $14.6 million gains on derivative instrument for the six months ended June 30, 2024 and 2023, respectively, resulted from the increase in fair value of the interest-rate swap due to an increase in the interest-rate forward curve and cash received.

Other Financial Data

The following table summarizes other financial data for the periods presented (dollars in thousands):

(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 $14.9 million increase in gross margin for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was due to (i) a $28.4 million increase in revenues, offset by (ii) an $8.2 million increase in cost of operations, exclusive of depreciation and amortization, and (iii) a $5.3 million increase in depreciation and amortization.

The $34.9 million increase in gross margin for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was due to (i) a $60.5 million increase in revenues, offset by (ii) a $16.6 million increase in cost of operations, exclusive of depreciation and amortization, and (iii) a $9.0 million increase in depreciation and amortization.

Adjusted gross margin. The $20.2 million increase in Adjusted gross margin for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was due to a $28.4 million increase in revenues, offset by an $8.2 million increase in cost of operations, exclusive of depreciation and amortization.

The $43.9 million increase in Adjusted gross margin for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was due to a $60.5 million increase in revenues, offset by a $16.6 million increase in cost of operations, exclusive of depreciation and amortization.

The 0.6% and 0.8% increases in Adjusted gross margin percentage for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively, primarily were due to inflation-driven pressures easing within cost of operations, exclusive of depreciation and amortization, and CPI-based and other market-based price increases on customer contracts that occur as market conditions permit.

Adjusted EBITDA and Adjusted EBITDA percentage. The $18.7 million increase in Adjusted EBITDA for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to a $20.2 million increase in Adjusted gross margin, partially offset by a $1.4 million increase in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges.

The $39.9 million increase in Adjusted EBITDA for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to a $43.9 million increase in Adjusted gross margin, partially offset by a $4.1 million increase in selling, general and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges.

The 0.7% increases in Adjusted EBITDA percentage for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively, primarily were due to inflation-driven pressures easing within cost of operations, exclusive of depreciation and amortization, and CPI-based and other market-based price increases on customer contracts that occur as market conditions permit.

DCF. The $18.8 million increase in DCF for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily was due to (i) a $20.2 million increase in Adjusted gross margin, (ii) a $7.8 million decrease in distributions on Preferred Units following the conversion of 320,000 Preferred Units into 15,990,804 common units during

2024, and (iii) a $1.3 million increase in cash received on derivative instrument, partially offset by (iv) a $6.3 million increase in cash interest expense, net, (v) a $2.5 million increase in maintenance capital expenditures, and (vi) a $1.4 million increase in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges.

The $42.8 million increase in DCF for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily was due to (i) a $43.9 million increase in Adjusted gross margin, (ii) a $15.6 million decrease in distributions on Preferred Units following the conversion of 320,000 Preferred Units into 15,990,804 common units during 2024, and (iii) a $3.7 million increase in cash received on derivative instrument, partially offset by (iv) a $13.0 million increase in cash interest expense, net, (v) a $3.2 million increase in maintenance capital expenditures, and (vi) a $4.1 million increase in selling, general and administrative expenses, excluding unit-based compensation expense, severance charges, and transaction expenses.

For additional information regarding the conversion of the Preferred Units, see Note 9 to our unaudited condensed consolidated financial statements under Part I, Item 1 “Financial Statements” of this report.

DCF Coverage Ratio. The increases in DCF Coverage Ratio for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was due to the increase in DCF for each period, partially offset by increased distributions due to an increase in the number of common units, largely attributable to the conversion of 320,000 Preferred Units into 15,990,804 common units during 2024 and the conversion of warrants into 2,360,488 common units in November 2023.