Good day, and welcome to the USA Compression Partners Third Quarter Earnings Call. Today's conference is being recorded. We will have a question-and-answer session after the prepared remarks. At this time, I would like to turn the conference over to Greg Holloway, Vice President, General Counsel and Secretary. Please go ahead.

Thanks, Alicia. Good morning everyone and thanks for joining us. As you know this morning, we released our financial results for the quarter ended September 30, 2015. You can find our earnings release, as well as a recording of this conference, in the Investor Relations section of our website at usacpartners.com. The recording will be available through November 16, 2015. During this call, our management will discuss certain non-GAAP measures. You will find definitions and a reconciliation of these measures to GAAP measures in the earnings release. As a reminder, our conference call will include certain forward-looking statements. These statements include projections and expectations of our performance and represent our current beliefs. Actual results may differ materially. Please review the statements of risk included in this morning’s release and in our latest filings with the SEC. Please note that information provided on this call speaks only to management’s views as of today, November 5th, and may no longer be accurate at the time of a replay. I’ll now turn the call over to Eric Long, President and Chief Executive Officer of USA Compression.

Also with me is Matt Liuzzi, our CFO. USA Compression this morning released our third quarter financial and operational results that we believe demonstrate the stability of our business model, even in a challenging commodity price environment. We reported record revenues up 24%, record EBITDA up 35%, record adjusted distributable cash flow or DCF up 41%, all relative to Q3 2014 and we increased our adjusted DCF coverage ratio to 1.25 times. Based on our continued strong results, we have revised upwards our full year 2015 guidance range. We have executed extremely well in a difficult environment. Our operational excellence would not happen without our dedicated employees, our customer focused hard working men and women across 15 states throughout US who get up early, stay up late and do what it takes to get the job done, safely and efficiently in the wee hours of the morning, in the worst of weather and of course on holiday weekends, during the Super Bowl or the World series. A huge shout out and thank you to each and every USA Compression team member for all you safely do for USA Compression and our customers each and every day. I would like to set the table for our listeners on the evolution of the MLP vehicle over time and how the fundamental drivers of USA Compression’s business model fit in with that evolution. Since founding this company 17 years ago, we have operated and executed through many different business and commodity cycles, and throughout that period I can confidently say. This model works because we have fee-based and stable cash flows, we have relatively strong counterparties and most of all, because our infrastructure oriented services are critical to the movement of natural gas in this country. I therefore look ahead to our future…

Thanks, Eric. For the third quarter USA Compression reported record revenue of $70.5 million, record adjusted EBITDA of $39.5 million, and adjusted Bcf of $32.3 million. In late October, we announced a cash distribution to our unit holders of $0.525 per unit, which results in an adjusted distributable cash flow coverage ratio of 1.25 times, taking into account the weighted average effect of the 4 million units recently sold in our follow-on offering. The Q3 distribution represents a 4% increase year over year. Our goal of improving coverage continues. In fact, taking this distribution into account, this is our fourth quarter in a row with over 1 times coverage and the third in a row with over 1.2 times coverage. We believe investors desire a more acute focus on leverage and coverage metrics, and we are pleased with where we are on both these metrics this quarter. As it regards the distribution amount, our management team believes that the prudent course of action is to conserve cash until such time when the market rewards an increased distribution. We spent approximately $55 million in expansion capital in Q3, primarily focused in West Texas and our Northeast region. We added approximately 50,000 horsepower of new compression units to our fleet during the quarter, ending the quarter with approximately 1.7 million total fleet horsepower. Our revenue-generating horsepower increased slightly, to just over 1.4 million horsepower. So far this year we've spent $232 million in expansion capital, a majority of which was for large-horsepower compression units. As has been discussed previously, we deliberately front-end-loaded our spending this year to better align with the visibility we had entering the year. Based on current full-year capital spending estimate of approximately $245 million, we have now completed over 90% of our spend for the year. Our trend…

So to summarize, Q3 continued the strong first half of 2015 and constituted another record quarter in terms of EBITDA and distributable cash flow. The stability of our fee-based income, infrastructure oriented business model continues to be evident and we believe this will become even more important as we enter a period characterized by less clarity and certainty. We will continue to execute operationally to keep our existing assets highly utilized and out in the field working, and we are well positioned to meet new demand from customers in our key operating regions. Our fleet utilization and margins remain strong, leverage and coverage continue to improve and contracting activity for both gas lift and midstream applications in this market is encouraging. While the churn of our existing fleet has ticked up a bit higher recently, yet I know that it still remains right on track with our 2015 budget that we put together back in October of last year. We have positioned ourselves to manage future horsepower returns from customers given our relatively small build program in fourth quarter and into 2016. We have ongoing discussions with certain customers, including E&P operators, gathering and processing infrastructure players, as well as gas lift customers and we are seeing a focus on their compression optimization efforts that may lead to the possible reduction of idle, inefficient or oversized units whether customer owned or provided by third parties like USA Compression in the future. We have decided to take a cautious and conservative approach to our outlook through the end of 2015 and into 2016. We’re currently in the midst of our budget process, which involves a bottoms up, region-by-region build up. Given the number of our customers that have still not firmed up their own 2016 CapEx budgets, it's actually difficult to…

[Operator Instructions]. We’ll go first to Andrew Burd of JPMorgan.

Can you just talk about the strong top-line resiliency that you've seen this quarter and the last few quarters? Is that just the mix shift, or have you really not seen a heck of a lot of pricing pressure?

Interestingly, Andrew, there's not a glut of compression equipment lying around. I'd go back to the 2008-2009 time period where there were some capital constraints, but people continued to build lots of compression horsepower, and there tended to be kind of a glut of equipment. USA Compression, and when we look around at some publicly available data about our peers, we've determined that there's not an excess of equipment. So I think it's fair to say in a period of rising demand for natural gas, rising needs for compression, the units that have been deployed are staying out and active, and since we're not building a bunch of new equipment, probably not a heck of a lot of pricing pressure downward.

And perhaps you could provide some commentary into what I think is the best quarter ever in parts and service. It also looks like it was high a year ago in the third quarter. And what are the typical margins for that service? And then kind of longer term, as producers, or midstream operators, for that matter, thinking about cost cuts but don't necessarily want to sell their compression units, is there an opportunity within aftermarket to service those clients and add some cash flows without even having to invest anything and taking advantage of the scale that you already have with your techs in the field and things like that?

Yes, sure, Andrew. I mean, that's always an opportunity, to focus on providing retail services. Historically, and I think consistent with our business model, we utilize our service technicians and our support infrastructure to really maintain and service our own assets that we use to render compression services. We do offer that third-party service to a discrete few folks that we have a large concentration of units with who may actually have a few company-owned machines scattered about right in the middle of where we're providing our contract compression services. So I think when you look at the activities, there've been some pass-through retail jobs that we did in the quarter. We've done some additional work for some of our core customers. So I don't think we would want to extrapolate that as a large growth business going forward. I think we've got enough to do in the upcoming quarters to keep us busy without having to take on another line of business.

And I asked about six questions in one, so I apologize. And can you remind us what the rough range of margin for that business is on a…

Yes, the margins overall are not particularly large. I mean, it ranges from pass-through work to something in the 20% to 30% line. So, again, it's a small part of the business, so it doesn't have too much of an impact on it. And I think as we look at it going forward when the occasion presents itself, and, like Eric mentioned for major customers we'll do it, but it's not something out there that we're kind of hawking, because we don't love the economics with it.

That makes sense. And then I guess no questions are the best kinds of questions, but -- so I'll ask this one, recognizing that it's a little bit sensitive. But looking ahead, the subordinated units should probably convert early next year. Coverage seems to have stabilized nicely above 1 times even after the recent offering on a total-unit basis. So what's the latest view from the sponsors, and do they view themselves as more buyers or sellers of compression assets in this environment?

Andy, you might have to actually ask the sponsors that question. But you're right on the timing of the subordination conversion. We do expect everything to kind of flip really in February after that payment's made, but I think we've obviously been focused on total coverage and building that, so that from our standpoint whether it's a DRIP or a cash pay shouldn't matter to us, and obviously with that three, four good quarters of kind of along those lines. So in terms of their desire to either not DRIP or do something else with their units we can't really speak to.

I had figured as much, but it was worth a shot.

[Operator Instructions] We will go to TJ Schultz of Royal Bank of Canada Capital Markets.

This is Rahil Jiwan stepping in for TJ. Another strong quarter, guys. Just had a couple of questions. One is on the remaining 25,000 horses that are expected to be delivered in fourth quarter, any idea if any of these are contracted yet? And then, two, the second question is do you guys have any idea on, I guess, 2016 CapEx? I know you guys are still waiting for the E&P budgets, but just kind of just want to know your thoughts on how you try to balance coverage, distribution growth and your leverage. And that's it for me.

. Why don't I hit the second one first, coverage and leverage? I think as we've made the point over the last several quarters and even going further back than that, I mean, it is a delicate balance. We heard from a lot of people that leverage was a big focus, and so we backed it, backed our spending down a little bit this year from maybe where we thought it might end up. Recently we kept our distribution flat to conserve that cash. And so at 4.5 times, I mean, that is very comfortable for us to run the business at. The covenant, we've got a ton of room under our revolving credit facility, so that is a very comfortable area for us. 1.25 times coverage on the distribution is, I think, also a very comfortable area for us. And so I think as we look out, as the market kind of hopefully shakes out and sorts things out here, we'll obviously consider growing that distribution to the extent that we can balance the coverage and the leverage aspects of it.

As it pertains to contract execution activity, we have a pretty successful and aggressive sales team scattered across the US. What I can share with you is we continue to execute contracts. As we inferred in our text of our commentary, we expect to see fewer but larger types of projects, and that's consistent with our quoting activity and our leasing activity. We are seeing some multi-unit larger contracts that we have entered into agreements with. So we are very pleased in the current marketplace how our leasing or contracting activity is continuing to perform.

[Operator Instructions] We will go to Kurt Hoffman of Barclays.

Just a quick question on guidance. If I look last quarter it seems like you beat guidance, and then heading into the fourth quarter, if I'm just looking at the ranges offered it would kind of suggest fourth quarter is down a bit. I'm just wondering if you could provide some more colour on factors that could cause you to maybe beat guidance or stay within that range.

Your math is correct. Based on kind of where we have the ranges set now it would imply a slight tick down next quarter. I think, going back to Eric's comments, we're here kind of early November looking forward, taking a very cautious and conservative outlook. We have seen -- heard things, tick-ups about units and how our customers are looking at their compression needs and really the timing of things here as we kind of get toward the end of the year. So that basically is intended to be our best estimate of where we stand here what it'll look like. Obviously things are pretty fluid on a daily basis in our business, so things can move around a little bit. So we wanted to make sure that we kind of had it covered in a conservative fashion.

Yes, Kurt, we can't control the weather. We can't control some of the commodity-type plays. So now that we're seeing storage coming into the winter being chock-a-block full we know that there are some pipelines that are going to be brought on in the spring. We've got $2 spot pricing right now on natural gas. So if we have a very temperate winter, the mega El Nino year that some folks are forecasting where it's -- heating your degree days are less than they would be in a typical winter that might put some downward pressure on commodity pricing. To the extent we have a super cold winter and a lot of storage withdrawals go on and some flare-ups in the Mideast, which in either scenario could drive pricing a different direction, could have a different outlook for some of the coming quarters into 2016. So rather than speculate on which direction it might go, we prefer to be conservative and manage to the downside and hopefully we can be pleasantly surprised at the upside.

And then the final question would just be same on guidance but with maintenance CapEx. Is that ticking up in the fourth quarter because of seasonal issues or what's causing that to be so much higher in the fourth quarter?

Kurt, I think it's really just going to be timing and you look at timing throughout the year, based on that guidance that maintenance CapEx number is actually the same as it has been for a while. So I think it's just the shift in timing between quarters. There is nothing overly different. To the extent things come home we'll take advantage of that time to perform the maintenance and just be more efficient with the machines in that sense. But overall for the year it hasn't changed.

And at this time we have no further questions. I would like to turn the call back over to our speakers for any additional or closing comments.

Well, we appreciate everybody's continued interest in USA Compression. Happy holidays, safe travels and we'll chat with you coming up in the first quarter.

That does conclude our conference for today. We thank you for your participation.