Good morning. Welcome to the U.S.A. Compression Partners, LP's First Quarter 2021 Earnings Conference Call. [Operator Instructions]. This conference is being recorded today, May 4, 2021. I would now like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary. Please go ahead.

Good morning, everyone, and thank you for joining us. This morning, we released our financial results for the quarter ended March 31, 2021. You can find our earnings release as well as a recording of this call in the Investor Relations section of our website at usacompression.com. The recording will be available through May 14, 2021. During this call, our management will discuss certain non-GAAP measures. You will find definitions and reconciliations of these non-GAAP measures to the most comparable GAAP measures in the earnings release. As a reminder, our conference call will include 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 SEC filings. Please note that information provided on this call speaks only to management's views as of today, May 4, and may no longer be accurate at the time of a replay. I'll now turn the call over to Eric Long, President and CEO of USA Compression.

Thank you, Chris. Good morning, everyone, and thanks for joining our call. Also with me is Matt Liuzzi, our CFO. This morning, we released our financial and operational results for the first quarter of 2021 and with results largely consistent with the fourth quarter of 2020, yet just a little better than we had expected as we started off the year. Coming out of a year that was marked by unprecedented volatility in the energy markets and considerable uncertainty throughout the broader economy, the first quarter reflected continued stability and improvement in crude oil and natural gas prices as well as the anticipation of broader economic growth coming out of pandemic induced lockdowns. We saw a tick up in utilization this quarter reflecting the approximately 70,000 horsepower deployed to customers starting in January, and we continue to see improving demand signals from our customers for the back half of the year. While this stability has allowed our customers to begin to have better clarity around budgets and capital spending programs, there remains a fair amount of uncertainty around potential regulatory and legislative changes that may impact the broader energy industry. That said, based on current indications of demand and projects in the works from our customers, we expect to see a continuing pickup in activity in the back half of 2021. We expect that we will be able to meet the bulk of this demand from modern vintage, high-quality assets from our idle fleet, requiring little incremental capital cost. The demand for natural gas in this country continues to be robust and operators in both the upstream and midstream sectors will continue to meet that demand. In the past, I have described how we manage our business model during alternating periods of stability and growth. USA Compression is focused on…

Thanks, Eric, and good morning, everyone. Today, USA Compression reported first quarter results, including quarterly revenue of $158 million, adjusted EBITDA of $100 million and DCF to limited partners of $53 million, all of which were either flat or slightly up from last quarter. In April, we announced a cash distribution to our unitholders of $0.525 per LP common unit, consistent with the previous quarter, which resulted in improved coverage of 1.03x. And our total fleet horsepower at the end of the quarter remained largely consistent with the previous quarter at approximately 3.7 million horsepower. Our revenue-generating horsepower at period end was also essentially flat at just under 3 million horsepower. Our average horsepower utilization for the first quarter was 83.1%, ever so slightly up from the fourth quarter. Pricing, as measured by average revenue per revenue-generating horsepower per month, was $16.60 for Q1, which was also a slight increase from the previous quarter's level of $16.55. Of the total revenue for the first quarter of $157.5 million, approximately $155.5 million reflected our core contract operations revenues, while parts and service revenue contributed roughly $2 million. Adjusted gross margin as a percentage of revenue was 69.1% in Q1, in line with USA Compression's historical levels and slightly above the Q4 number. Net income for the quarter was $0.4 million and operating income was $32.8 million. Net cash provided by operating activities was $39.6 million in the quarter. Maintenance capital totaled $4.5 million in the quarter. And lastly, cash interest expense net was $30 million. And at this point, we are not making any revisions to our previously communicated guidance for 2021. Last, we expect to file our Form 10-Q with the SEC as early as this afternoon. And with that, we'll open the call to questions.

[Operator Instructions]. Our first question comes from Brian Reynolds, UBS.

Given 1Q '21 EBITDA annualized kind of implies the high end of your guidance range, could you provide some color on the upper end of your current guidance range, just given expected strength and compression over the balance of the year?

Yes, Brian, I would just say at this point in the year, it's May. There's still, I think Eric hit on some of the uncertainty that's kind of lingering out there. So we thought the prudent thing was to kind of keep it where it was until we had a little more clarity kind of throughout the year. I think it's probably -- last year aside, but pretty consistent with how we've treated it in years past. And so I would just say, stay tuned. And as soon as we have better clarity and more information, we'll be sure to update everybody.

Great. Just as a follow-up, some midstream peers with in-house compression. I continue to talk about investing in electric or hybrid compression. Just kind of curious as to where you stack stands on that? And are you seeing some interest in electric or hybrid compression sources? And are you factoring that into your '22 capital spend?

Yes, Brian, it's a great question. What's interesting, electric compression isn't the panacea that a lot of people think that it is. You've got reliability, the electric grid that may or may not actually exist. You've got the ability to start an electric motor requires copious amounts of electricity in rush current and surge. The concept of hybrid compression is intriguing. Our parent company energy transfer does have some technology that they call dual drive, which is essentially a hybrid compressor, combines electric as well as natural gas. That is something that we are exploring and are actively taking a look at as far as applicability to the potential retrofit of our fleet. So it's something on our radar screen and maybe a fair way to say is more to come on that in the future.

Great. Super helpful. And I guess, just quick as a follow-up based on the energy transfer comments and the recent acquisition of Enable. Is there any interest in a potential drop-down of enable compression units to USAC? Or is that something not discussed at this time?

Yes. I think, Brian, right now, we don't know. Obviously, they do have -- given Enable's business footprint. They do have compression. Obviously, et has not closed on that deal yet. So I think we'd have to wait until all that stuff kind of got cleared and then take it from there.

There are no further questions in the queue at this time. I would now like to turn the call over to Eric Long for closing comments.

Well, the start to 2021 has been relatively quiet. We've experienced the stability in our business that we have become accustomed to over USA Compression's history, stability driven by our focus on large horsepower and the resilient global natural gas demand. Natural gas prices have remained constructive, and the outlook for production is positive, which bodes well for our business. Our business remains the same, and we believe natural gas will continue to be important to this country and many others around the world. We have a great asset base from which to be involved in the transition to cleaner energy, of which natural gas will clearly play an important part. We believe that the underlying stability of our large horsepower, infrastructure focused contract compression services business model, coupled with the science between the need for compression, driven by the interplay between pressures and volumes will be a key point of positive differentiation for USA Compression. We continue to be well-positioned to benefit as the domestic and global recovery takes place. Thanks for joining us, and please be safe. We look forward to speaking with everyone on our next call.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.