USA Compression Partners LP

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 nine months ended September 30, 2024 and 2023, were $23.8 million and $18.6 million, respectively. We currently plan to spend between $27.0 million and $30.0 million in maintenance capital expenditures for the year 2024, 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 $240.0 million and $250.0 million in expansion capital expenditures for the year 2024. Our expansion capital expenditures for the nine months ended September 30, 2024 and 2023, were $205.9 million and $185.3 million, respectively.

Cash Flows

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2024 and 2023 (in thousands):

Net cash provided by operating activities. The $30.9 million increase in net cash provided by operating activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily was due to (i) an increase in cash flows from a $59.9 million increase in Adjusted gross margin and (ii) a $7.6 million decrease in cash paid for interest, net of capitalized amounts, driven by the Defeasance of the Senior Notes 2026, partially offset by (iii) a $39.0 million increase in inventory purchases.

Net cash used in investing activities. The $21.7 million increase in net cash used in investing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was due to (i) a $16.8 million increase in capital expenditures, for purchases of new compression units, overhauls and major improvements, and purchases of other equipment, (ii) a $4.4 million decrease in proceeds from disposition of property and equipment, and (iii) a $0.5 million decrease in proceeds from insurance recovery.

Net cash used in financing activities. The $9.1 million increase in net cash used in financing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily was due to (i) a $748.8 million increase in investments in government securities purchased in connection with the Defeasance of the Senior Notes 2026, (ii) a $235.7 million decrease in net borrowings under the Credit Agreement, (iii) an $18.2 million increase in deferred financing costs driven by the issuance of the Senior Notes 2029, and (iv) a $22.1 million increase in common unit distributions, partially offset by (v) a $1.0 billion increase in proceeds from issuance of the Senior Notes 2029 and (vi) a $16.6 million decrease in Preferred Unit distributions.

Revolving Credit Facility

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

As of October 31, 2024, we had outstanding borrowings under the Credit Agreement of $831.8 million and outstanding letters of credit of $0.5 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 2023 Annual Report.

Senior Notes

As of September 30, 2024, we had $750.0 million and $1.0 billion aggregate principal amount outstanding on our Senior Notes 2027 and Senior Notes 2029, respectively.

On March 5, 2024, we provided notice to the holders of our Senior Notes 2026 that, contingent on receipt of the proceeds from the Senior Notes 2029, the Senior Notes 2026 would be redeemed at par on April 4, 2024. On March 18, 2024, utilizing a portion of the proceeds from the Senior Notes 2029, we deposited government securities with the trustee to satisfy and discharge the Senior Notes 2026 under the Indenture governing the notes. This satisfaction and discharge constituted a legal defeasance, or the Defeasance, under GAAP as of March 18, 2024 of the full outstanding principal balance of $725.0 million. The Senior Notes 2026 were redeemed in full at par on April 4, 2024.

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, commencing on September 15, 2024. Net proceeds from the Senior Notes 2029 were used for the Defeasance, with the remainder used to reduce outstanding borrowings under our Credit Agreement.

For more detailed descriptions of the Defeasance, 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, for the Senior Notes 2027, Note 10 to the consolidated financial statements in Part II, Item 8 “Financial Statements and Supplementary Data” included in our 2023 Annual Report.

Derivative Instrument

During the three months ended September 30, 2024, we elected to terminate an interest-rate swap we previously used to manage interest-rate risk associated with the floating-rate Credit Agreement, 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.

DRIP

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