USA Compression Partners LP Aktie

Hello, everyone. Thank you for joining us, and welcome to the USA Compression Partners 2026 Third Quarter Earnings Call. [Operator Instructions] This conference is being recorded today, November 3, 2026. I now would like to turn the call over to Clint Green, President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us. With me today is Chris Paulson, Senior Vice President and CFO; Chris Wauson, Senior Vice President and COO; and other members of our leadership team. Earlier today, we released our operational and financial results for quarter ending September 30, 2026. Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations and definitions of non-GAAP measures and related risk factors. Moving to the quarter. performance reflects the resilience of our business and strong execution from our team.

We delivered sequential growth in revenue, adjusted EBITDA and distributable cash flow while average revenue-generating horsepower revenue per horsepower, total revenue and adjusted EBITDA each reached record levels. Distribution coverage remains strong and leverage stayed near our stated target. We are tightening our full year DCF guidance to a new range of $495 million to $505 million, reflecting 2026 cash flows in line with our overall expectations entering the year.

We are also updating adjusted EBITDA guidance $770 million to $780 million, reflecting higher commodity-linked operating costs lower overall retail parts and service activity and some strategic shifts related to manufacturing cash sales. Importantly, our core contract operations business remains strong, and our guidance update does not reflect a downward shift in this demand. Putting performance in the context of the broader market, higher oil prices over the past 9 months have strengthened customer balance sheets but have not led to a broad increase in oil-directed drilling activity. At the same time, domestic consumption and natural gas, excluding LNG, is still waiting on material data center growth to ramp in the Northeast and Texas. Put simply, our 2026 results have been driven by execution.

From here, we expect near-term growth to remain in system but measured Higher oil prices remain constructive, but uncertainty persists around duration. While incremental natural gas demand continues to build with a greater impact expected in late 2027. Overall, macro fundamentals remain healthy, while the underlying demand drivers build toward more meaningful acceleration in 2028. In compression supply remains tight contracting activity remains healthy and growing natural gas infrastructure needs provide a compelling long-term growth opportunity. Our approximately $500 million aggregate new unit order book through 2029 reflects our confidence in the durability of the opportunity and our ability to capitalize on.

As we enter 2027, we believe our newly integrated platform will be in an even stronger position to execute. We have a broader customer base, more opportunities to high-grade the portfolio and greater flexibility to direct equipment and capital toward the most attractive returns, including the ability to ship manufactured units between cash sales and our contract compression fleet as opportunities evolve. Combined with the execution we have demonstrated this year, we believe that scale and flexibility position us to win across market cycles.

With that, I will turn the call over to Chris Watson.

Good morning, everyone. To start, through a period of significant organizational and operational change. Safety has remained our top priority. Our safety metrics continue to compare favorably with industry benchmarks reflecting the continued focus of our teams on the processes and standards that support safe, reliable service for our employees and customers. That commitment is fundamental to how we operate. Next, Commercial execution was strong during the third quarter. Customer demand remained consistent while unit stops moderated, contributing to a 30 basis point increase in utilization since the end of the prior quarter. More than 60% of our new horsepower scheduled for delivery in 2027 is now contracted, including approximately 90% of first half deliveries.

Importantly, we have built this order book while maintaining our commercial discipline, engaging our Tier 1 customers and continuing to improve the credit profile of our cash flows. Our pending contract and quote pipeline remains robust, and we continue to see opportunities progress toward executed contracts. Pricing across the broader portfolio also remains constructive, as we delivered solid 1% sequential rate growth during the third quarter despite increased competition from smaller operators in certain markets. We continue to take a disciplined approach to pricing while working to maintain a healthy commercial pipeline.

Customers continue to prioritize dependable equipment, strong field service and a compression provider with the scale and capabilities to support multiyear development plans. To better serve those needs, we will continue to enhance our ERP platform business applications and analytics capabilities. A significant step forward came on October [indiscernible] First, when we completed the integration of the legacy JW compression units into SAP, this brings our operational teams on to a more consistent framework from maintenance activities, inventory management and performance reporting while providing greater data and performance visibility across the fleet.

With most core integration work behind us, we are increasingly focused on operating as 1 organization in strengthening the capabilities of the combined company. That includes greater use of analytics and intelligence tools as well as a planned investment in larger, more standardized training facility in the Dallas-Fort Worth area. By moving our facility from San Angelo to Dallas, we will have a more centralized location to train and upskill our people, promote greater consistency across the organization and create additional opportunities for employee development. We continue to navigate higher fluids, fuel and other commodity linked costs, monthly lube oil costs exited the quarter approximately 25% higher than in the first half of the year. While diesel prices reached an all-time high in September.

These increases weighed on our second and third quarter results but were largely offset by strong synergy capture. Nonetheless, they present a near-term headwind that is not currently reflected in pricing to our customers. Additionally, labor costs across the industry have increased at a faster rate than anticipated with the higher cost base is largely incorporated into our third quarter results. Despite these pressures, we remain focused on disciplined execution in the areas we can control. and continue to look for opportunities to get the most out of the combined platform.

With that, I'll turn the call over to Chris Paulson.

Thanks, Chris. For the third quarter, total revenues were $357.2 million compared to $250.3 million in the prior year period, an increase of approximately 43%. Contract operations revenue was approximately $308 million, driven primarily by the addition of the barn horsepower and higher average revenue per revenue generating horsepower Retail parts and service revenue was approximately $30 million, including sales to affiliate parties and benefited from the timing of certain manufacturing unit sales that occurred in September rather than the fourth quarter.

Third quarter net income was $47.3 million, operating income was $102.2 million. Net cash provided by operating activities was $117.7 million and cash interest expense net was $47.3 million. Adjusted gross margin percentage was 62.2%, down modestly from the second quarter, primarily reflecting the commodity like cost pressures and a higher mix of parts and service revenue during the quarter. Turning to our operating metrics. Total fleet horsepower at quarter end was approximately 5 million-horsepower. Average revenue per revenue generating horsepower per month was $23.14 up approximately 1% sequentially and 8% from the prior year period.

Average revenue-generating horsepower was approximately $4.48 million and average utilization was 92.1%, slightly higher versus the prior quarter. Third quarter expansion capital expenditures were $87.7 million and maintenance capital expenditures were $18.5 million, Expansion capital primarily reflected the new units and reconfiguration supporting the growth of our contract compression fleet, while maintenance capital remained consistent with the needs of our larger fleet. Turning to guidance. As Clint discussed earlier, we are tightening our full year distributable cash flow guidance to $495 million to $505 million.

Lower cash interest expense and cash taxes are helping offset a portion of the pressure reflected in our cost outlook, leaving our cash flow outlook in line with expectations entering the year. We are narrowing our full year adjusted EBITDA range to $770 million to $780 million from $770 million to $800 million. The revised range reflects the higher operating costs Chris discussed as well as softer retail parts and service revenue than previously expected. We continue to expect maintenance capital expenditures of $60 million to $70 million and expansion capital expenditures of $230 million to $250 million inclusive of the modest deposits tied to limited 2027 new unit orders for third parties.

Leverage for the quarter was 3.78x and remained in line with our 3.75x target during the quarter, even as we accelerated capital spend and certain financing costs. In September, we issued $600 million of 6.75% senior notes due to 2035 and used the proceeds to reduce the borrowings under our ABL. This issuance at near historically tight energy spreads and a 10-year treasury rate much lower than today, enables us to remain patient in addressing our March 22 maturities. At quarter end, we had approximately $1.06 billion of available capacity under the ABL facility, providing meaningful liquidity and financial flexibility to execute against our longer-term capital allocation priorities. Those priorities remain consistent, supported sustainable distribution, invest in attractive organic growth opportunities that grow our underlying net asset value and maintain a prudent leverage profile, while preserving the flexibility to pursue compelling inorganic opportunities within that framework.

And with that, I'll turn the call back to Clint for concluding remarks.

Thank you, Chris. Before we open the call for questions, I want to thank our employees for their continued hard work and dedication throughout a year of significant progress and for their willingness to embrace and elevate USA Compression's culture of safety, and putting our customers first. Their efforts and execution are what continue to drive our success, and I'm thankful for our entire team. With that, I will open the call up for questions.

[Operator Instructions] Your first question comes from the line of Douglas Irwin with Citi. Doug.

Thanks for the question. I wanted to start with some of the contracting activity you talked about during the quarter. Could you maybe just provide a bit more context here about kind of how your customer conversations are progressing? Are you maybe seeing a little more of a sense of an urgency from your customer base here now that we're a bit deeper in a longer time environment and the demand outlook here seems to keep expanding pretty quickly.

Doug, this is Clint. I'll start off, and then Chris Wauson may chime in here. we're seeing customers with the long lead times, customers are working to get their contracting done sooner. There's they -- when you're talking about 4 years to get a compressor 185 to 200 weeks, somewhere in there to get an engine, there's definitely an urgency to make sure they have equipment for what's going -- what's coming down the pipe. When you're talking about demand growth between now and 2029, 2030. So yes, I would say we feel like there's an improvement there. Chris, you want to add?

To add a little bit to that, maybe said a different way, too. So with the tight supply and long-term planning cycles, customers are securing horsepower further out, but not for specific locations. It's more of a they're running off a forecasted growth curve, so they're trying to get horsepower to meet those curves just not 100% sure where it's going to end up.

Got it. That's helpful. And maybe a follow-up. It sounds like JW synergies were maybe a nice tailwind on the quarter, helping offset some of the cost inflation -- just curious now that integration is complete, if you could maybe just provide an update on where you might be trending versus some of the initial synergy guidance you laid out and if that could keep you any kind of a nice uplift on gross margin here in the next year.

Yes, Doug, I think you said it well. I think many of these synergies were captured in our Q3 numbers that remain opaque and will probably show up when commodity driven input costs fall. Right now, given where we were with our fuel cost, with our lube cost and those relative increases you're not able to see those synergies take effect and then the way in which a lower commodity price environment, you may see it. As it relates to 2027 synergy guidance, we don't have anything at this stage other than as we've noted within 1 of our filings this quarter, we did invoke some DCS synergies that we anticipate for next year associated with moving contract compression to MLP status and the related cost savings there on the DCF front.

Your next question comes from the line of Jim Rollyson with Raymond James.

Just kind of circling back on the margin question. I guess, Glen, if you think about where costs are today for fuel and new oil and things like that and some of the JW integration impacts. I think it was mentioned on the call in the prepared remarks that your contract pricing today is not really reflecting the higher costs? Like how do you think through this, if oil prices look to say, remain elevated through next year, how long does it take to actually start seeing your ability to capture that in rates and actually show margin improvement?

That's a good question. We start off and talk about margin. We knew when we brought in the JW acquisition that we were going to see a little bit of margin degradation from our normal contract business. With that said, it was a very small percentage. And then if you look at our contract compression, those margins remain very well. But when you have the higher inputs of third-party sales and AMS that we had for this quarter, that pulls our margin down. Now when you're looking at going through next year with higher commodity prices, we will start to push some of that out with escalators as we move forward into next year. But I don't -- I mean you hit the nail on the head. It's -- it's really hard to know where oil prices are going to be through next year, crude oil prices driving blue boil prices. there's a volatility there that we're doing the best we can to prepare for.

I don't know, do you want to add anything to that?

Yes. No, just to maybe add a little bit more around just keep in mind, our core contract services business is slightly above Q1. So despite increases from our commodity line costs, operations is executing very well, and we're super pleased with where we're at, that we have horsepower coming month-to-month. So there's our ability to grab some more rate increase. We're doing that as those contracts come and we renew new contracts. So that -- there is a little time delay. So keep in mind, it's not immediate. So there's 2 or 3 months there where there's -- we want it sooner, but sometimes it's just the nature of the beast.

Understood. No complaints just waiting for that kind of coiled spring effect that seems to be building. And maybe for Chris, I know you're not giving guidance for next year, but as I think about growth CapEx for 2017. I guess we should be just thinking about the kind of 2.5% annual fleet growth that you kind of laid out a quarter ago and maybe would ever pick your price on cost per horsepower is kind of the right place to triangulate. .

That's right. I think ultimately, we'll provide that guidance in a few months, and that guidance will be predicated to some extent on timing of deliveries and those timing of deliveries are still fluid. But as we laid out, Jim, 2% to 3% is the right number. And we'll also look at the respective cash sales that we'll consider with manufacturing as well. We're talking to our customers, both on the cash fell front, the contract compression front and then ultimately, we'll decide on the final contract compression numbers that will go on to the growth capital.

Your next question comes from the line of Elias Jossen with JPMorgan.

Maybe if we just think about the optionality to extend term a customers. Are you guys kind of seeing that? Are they looking to sign longer contracts? And how do you kind of balance that with elevated spot prices? And how have those conversations kind of evolved in the past year or so?

Yes. Thanks for the question. It's Chris Wauson. To address that, our customer conversations, we're targeting anywhere from a 2 to 6, 7-year term, right? So it just depends on how things are looking from a customer standpoint, there where they're at in their cycle and that couples with ours as well. So we are still having great contract term lengths. I'm not going to say that it's all 5-year terms, but there are some 2- and 3-year terms out there that we are taking. So it's still very positive. The commercial team is doing a great job with keeping our term secured.

Awesome. And then I know that kind of leverage continues to trend positively in coverage as well. So -- can you just remind us kind of what the bogey is if you were to start to think about a distribution hike and how that fits into your kind of broader capital allocation framework heading into next year.

We don't have a bogey per se in terms of the distribution hike. As we look at our capital allocation framework, we look at our opportunities to invest within the core business. The core business remains extremely strong. we've been able to increase that relative growth in the anticipation of a 2% to 3% annualized look, not only next year, but going out a little bit further. So if through 2029 into 2030, our opportunities to invest in the business allow for us to have returns that are far in excess of our cost of capital. We're going to look very strongly in investing in those.

Our near-term leverage target is around 3.75x. We're there. We need to continue to evaluate whether or not that's the appropriate target through cycle as our business grows in size and capacity. And then we need to have those discussions in concert with our Board as to our distribution. We've been very pleased to see that distribution coverage continue to increase. It's increased quite a bit since I walked in the door in November 2024. That's largely through the efforts of the team here and the team in the field. And so to see our numbers and the move from the [indiscernible] range is a terrific outcome for the company, and we're really pleased at where we are -- the other thing I'd point to is we are delivering and returning capital to our unitholders in a way in which other companies within the space just are not -- and plainly, we're not only derisking the business and doing it in the way in which we do it today, but we're also realizing the excess returns associated with growing the business as well.

So we keep all that in mind as we try to triangulate around the right answer. I think it's a great question. It's 1 that's a fair 1 to continue asking. And we continue asking ourselves the appropriate way in which to allocate capital over the next many years, and some of that is somewhat dependent upon where you think you are in the cycle of the compression business within the lower 48.

Your next question comes from the line of Nate Pendleton with Texas Capital Bank.

With the improved geographic outlook and really the depth that JW has provided. Can you talk about how margins compare when we look at the Permian versus other areas such as Gulf Coast and Northeast.

Yes, Nate, it's Chris. Good question. I will say that our margins are actually pretty consistent across the company. So there's not really 1 region way ahead of the other. We do a great job. Operations has our culture across the company. That message is the same and consistent across the entire organization. So our operating philosophies are much aligned across the entire U.S. So I'm super proud that our margins are very consistent across this business.

Got it. And then staying on the additional capabilities you guys brought in-house with -- specifically on the parts and services side, can you talk about the growth outlook there and how margins are trending, given some of the shop space that you alluded to in your prepared remarks? .

Yes. So growing that business does affect our historical contract services margins. So -- we look at it as a positive. The more we do there, that's more EBITDA contribution in DCO. So we look at it as very meaningful and impactful to the business.

It's an area where, overall, there is a focus on growth going forward. As others in our space of experience, the ability to ramp up through this year has been a little bit slower going, and we noted that within the quarter. As we look towards next year, it continues to be a focus. And I think that focus will really be somewhat dependent on commodities to people continue to defer some maintenance that's out there. Do folks ultimately ramp up the parts side of the business, which we very much have a focus on. I think it's a natural area and taking in JW that we felt like we ultimately could start to move the needle on.

So that will be a part of focus for next year. But ultimately, we're seeing companies at $95, $100 oil continue to run equipment harder for longer. And at some point, I think that will start to bear out in terms of more consistent parts and service revenue on a go-forward basis. But again, it's a lumpier side of the business, as Chris alluded to, dependent upon the manufacturing contribution of the business, the parts and service contribution in the business our ultimate operating margin may vary from quarter-to-quarter, and we're still appreciating that difference in terms of how the complexity of that difference relative to our legacy USA business pre JW.

There are no further questions at this time. I will now turn the call back to Clint Green for closing remarks.

SP.

Yes. As always, we really appreciate everyone joining our call. We're super proud of the execution that we've accomplished this year with lots of change. and integration and moving to a new ERP platform. So we're really happy with where we're at, and we're happy about there. We're excited about the future for -- through 27, 28 years beyond. -- today, today, we get to exercise our right of Americans to go vote. So if you haven't done that, go vote, and thank you for joining our call.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning. Welcome to USA Compression Partners Second Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, August 4, 2026. I now would like to turn the call over to Clint Green, President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us. With me today is Chris Paulsen, Senior Vice President and CFO; Chris Wauson, Senior Vice President and COO; and other members of our leadership team. This morning, we released our operational and financial results for the quarter ending June 30, 2026. Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations and definitions of non-GAAP measures and related risk factors. I am excited about the progress we continue to make as a leading contract compression provider across the U.S.

In the second quarter, we strengthened our foundation as a larger combined company and hit several key milestones that position us to take advantage of the expected demand growth over the next several years. This outlook supports the deliberate investments we accelerated in Q2 in horsepower in the combined organization and the technology that will redefine how we operate. Most notable are the horsepower investments.

Building on what we announced during the Q1 call, we have continued to engage in long-term business planning and in addition to the approximately 850,000 active horsepower we acquired from J-W. We currently expect approximately 2.5% average annual new horsepower growth through 2029. This plan to add over 500,000 horsepower by 2030 highlights our internal confidence in natural gas demand growth and our ability to maintain market share, but it's also a key pillar of our capital allocation framework and long-term DCF growth formula.

Importantly, this investment changes the nature of the conversations we are having with customers. When you show up a specific multiyear deployment plan, customers can grow with you. In an environment where certain new engine lead times continue to be as high as 200 weeks or nearly 4 years, customers want to know that their compression provider is both committed and capitalized to deliver. Chris Wauson will share more on these commercial results.

Second, we're investing in the combined USA Compression growth platform. We went live with SAP in February and are in the middle innings of the J-W integration, and it's obvious to me that we are building a fundamentally stronger company. The sophistication of our new ERP system and the enhanced data reporting we have access to is allowing us to better manage our activity, both in the field and at home office. With J-W, the activity is happening across multiple levels. Operationally, we are capturing labor and cost synergies as we standardize how we run the combined fleet.

Commercially, we are integrating best practices across both organizations, how we price, how we contract and how we serve a customer base that is now significantly broader than it was a year ago. And through the manufacturing business, J-W's specialized facilities gives us the ability to package our own compression and optionality that is particularly valuable in an extended lead time environment and one that differentiates us from peers. As a reminder, to the extent the compression market changes, we can be nimble and reduce our capital exposure in the out years.

Finally, we are investing in enhanced telemetry and real-time data capabilities across our fleet, including AI. Our goal is to get the right information to the right people faster so we can make better decisions on maintenance, deployment and efficiency. We expect to reach a critical mass of connected assets with telemetry in 2027, at which point we can begin to meaningfully change how we operate, better predictive maintenance, more efficient field service routing and fewer unplanned downtime events. The investments are happening now, and it's positioning us for a more efficient future. I will now turn the call over to Chris Wauson to walk through our operational and commercial results in more detail.

Good morning, everyone. To start, I am proud of the resilience of our safety culture during a period of rapid organizational growth. Our total incident rate has remained low despite a large influx of new personnel, demonstrating both the strength of our safety management processes and the buy-in from our operations team. In addition to our safety programs, we have recently launched new leadership training programs for multiple levels of our operations field leadership.

Our goal is to accelerate development to help enhance business processes and empower our team to better serve our customers. These continued investments in safety, training and development will ensure we continue to attract and retain the talent needed to execute our future growth plans. As Clint mentioned, our growth plans now include low single-digit new horsepower growth through 2029. This has unlocked a different kind of customer conversation. One that is not only about what we can deliver this year, but also about how we can support in the future years. We have made excellent progress in new customer discussions and already contracted approximately 50% of new units scheduled for delivery in 2027 and mid-teens percentage of new units planned for 2028. To put that in broader context, contracting capacity 2 years out is not typical and has rarely been seen in my career. It reflects the level of customer conviction and long-term production growth that we share and reflects their confidence in USA Compression as their partner of choice.

New large horsepower lead times remain extended, and that reality is driving customers to make compression decisions further out than they historically have. While we did see elevated stops in Q2, RFP activity remains healthy and our pipeline of customer contracts heading into the back half of the year gives us confidence in continued forward progress. While we remain focused on the long-term earnings potential of our business, we also want to highlight short-term cost movements and recontracting efforts. In that way, we expect incremental lube oil cost of approximately $1 million per month in the second half of the year as our contracts are updated to reflect higher oil prices.

Additionally, J-W contract migration is underway and progressing with a focus on standardized terms, tenure and pricing, all while assessing unit optimization. I will now turn it over to Chris Paulsen to discuss our financial results in detail.

Thanks, Chris. For the second quarter, total revenues were $342.1 million compared to $250.1 million in the prior year period, an increase of 37%. Contract operations revenue was $304.9 million, up 34% year-over-year, driven primarily by the addition of J-W's horsepower and average revenue per revenue-generating horsepower. Parts and service revenue was $22.1 million, reflecting the manufacturing and aftermarket services activity that J-W brought to the platform.

Our second quarter 2026 net income was $45.7 million. Operating income was $100.4 million. Net cash provided by operating activities was $145.7 million and cash interest expense net was $47.4 million.

Our second quarter adjusted gross margin percentage came in at 63.5%. Our leverage ratio at the end of the second quarter was 3.72x. Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 4.95 million horsepower. Average revenue per revenue-generating horsepower per month was $22.84 for the quarter, a 0.5% increase in sequential quarters and a 7% increase compared to a year ago period. Average active horsepower for the second quarter was approximately $4.45 million. Our average utilization for the second quarter was 92% and continues to reflect the blended impact of incorporating J-W's fleet.

Second quarter 2026 expansion capital expenditures were $46.8 million and our maintenance capital expenditures were $16.9 million. Expansion capital spending in Q2 primarily consisted of new units, while maintenance capital activity accelerated versus Q1 as we ramped up activity. For the remainder of the year, we expect most growth capital will be focused on new horsepower and reconfigurations, while maintenance capital is expected to trend towards our full year projections.

We continue to maintain our full year adjusted EBITDA range of $770 million to $800 million, distributable cash flow range of $480 million to $510 million, maintenance capital range of $60 million to $70 million and expansion capital range of $230 million to $250 million. Leverage maintained consistency in Q2 even as we ramped up on capital spending, remaining just below our near-term target of 3.75x debt to EBITDA. While debt markets have pulled back, we will continue to opportunistically explore accessing later this year in order to add consistency to our tranche sizing and duration.

We have ample liquidity under our ABL at a low interest rate and therefore remain patient. As we enter what we believe will be a period of sustained natural gas demand growth, we have deliberately positioned the business to deliver against our 3 core capital allocation priorities simultaneously, growing the fleet, sustaining and ultimately growing the distribution and maintaining a prudent leverage profile.

We believe 2% to 3% annual new horsepower growth, a distribution yield approaching 8% and an improving sub-4x leverage ratio represent a compelling and differentiated value proposition. One that we believe positions USA Compression competitively in the MLP valuation landscape, and we anticipate will continue to improve as we move through the back half of 2026 and into 2027. And with that, I'll turn it back over to Clint Green.

Thank you, Chris. We are making deliberate investments in the business because we are bullish on the future demand, and we want to be positioned to capture it when it arrives. The work happening inside the organization right now in the field, in our commercial organization and across our integration teams is what makes this possible. I am proud of what our people are building, and I'm excited about the progress we continue to make. With that, I will open up the call for questions.

[Operator Instructions] And your first question comes from the line of Doug Irwin with Citi.

Chris, you mentioned potential distribution growth in your remarks there at the close. You obviously have the balance sheet in a much better position today than it has been in the past, and you just outlined some pretty strong line of sight to growth here. So just trying to get your thoughts on kind of how you're thinking about that distribution, what the right yields you're thinking about might be and what kind of potential timing could look like for a decision?

Doug, I appreciate the question. The question highlights the transformative change we've seen in cash flow through a very accretive transaction. So the year-over-year change has really been material, and we've seen a change in coverage and in turn, have reduced debt. As I've noted before, any change in distribution policy would be in consultation with and approved by our Board of Directors. That being said, given the unprecedented visibility for multiyear growth, strong returns and commitments required to meet our customer needs, the current priority for excess cash flow is to prioritize that 2.5% of growth per annum in new horsepower.

Balanced long-term growth should continue to elevate underlying value of the units and positions the company to have more flexibility as it relates to distribution discussions in the future. Additionally, we intend to maintain a competitive and prudent leverage profile that sustains us through distribution cycles and provides flexibility for future growth opportunities.

And finally, as you noted, our current yield is competitively positioned with the broader Alerian index and should be considered an attractive entry point for any prospective unitholder given the aforementioned growth. It also clearly differentiates us from our peers. So that's how we're thinking about it right now, Doug. We ultimately want to see a distribution that is supportive of the underlying value of the business and clearly enumerates the underlying value of the business. Today, we see that being the case, and we'll continue to evaluate that in the future.

Got it. That's helpful color. And maybe as a follow-up, I just wanted to touch on the lube oil costs that you also mentioned in the prepared remarks, helpful detail on the expected kind of monthly impact. Just curious how you're thinking about your ability to potentially pass those costs on within your contracts if they prove to be more durable? And then just in general, kind of what your latest pricing expectations are here over the medium term, just given what lead times are and how tight the market is today?

So in regards to lube oil, as contracts expire and renew, we're doing our best to cover the increased cost inputs, but we do -- we don't have a direct pass-through in our contract related to increases or decreases in lube oil prices. So as those contracts renew, we're doing our best to renegotiate terms and try to cover those costs as we renew.

In regards to pricing trends, our new units, we're still contracting units at a healthy rate of return. In regards to more of an idle unit set, we're seeing -- we're not seeing the price increases that we once have experienced. So -- but RFPs are high. There's a lot of demand. We're super excited about the future. We've got a healthy backlog of contracted units. So we're really excited about the back half of '26.

Doug, this is Clint, also want to add that we still have CPIU escalators to offset the inflation piece of it going forward as well.

Your next question comes from the line of Jim Rollyson with Raymond James.

Clint or Chris or whoever, if you kind of look at margins and the relative decline, obviously, you stepped down in 1Q, just kind of mix related to J-W and you came down a bit in 2Q. Maybe help me understand a little bit the drivers of the sequential margin degradation between lube oil, you talked about, between the ERP system implementation and just kind of integration of J-W and how we should think about that kind of progression going forward?

It's Chris Wauson. We expected margins to drop with the J-W acquisition. We had a full operating quarter combined now. So manufacturing and AMS do lower contract services historical average. But the next part of that is where do margins go from here? So with our investment in telemetry, remote monitoring and driving efficiencies, I expect to see the results later this year into '27 and beyond. So this will enable us to get super-efficient in regards to route management, predictive failures and all we'll see margins improve slightly quarter-over-quarter.

Got it. Appreciate that color. And Clint, when you talk to customers with where lead times have stretched out to now, how are they adapting to planning horizons that have changed dramatically? I mean just a couple of years ago, that was starting to kind of normalize at about a year. And then I mean it's literally gone from 1 year to 4-plus years. And I imagine those guys aren't accustomed to formally planning that far out. But I'd just love to kind of hear how that all goes for you and your ability to serve those customers.

And one of the reasons we've committed to a portion of the cost of 500,000 horsepower. And when I say that a portion of that cost, I want to explain it by having the J-W facility, that gives us flexibility that we wouldn't have elsewhere because we only have to commit to the engine cost in the out years. But when you get back to the conversation about -- we've all had to adapt 40 we ran 40- to 60-week delivery lead time on equipment for years and years and years. And then in the last few years with the generator market growing like it has, it has driven out to 200 weeks. And it caught a lot of us by surprise. It caught us by surprise earlier this year for orders for '27. That's the main reason we jumped on it and we're able to order equipment for '28 and '29, and we'll be looking at 30 here pretty quick. Everyone is learning how to operate in that market. Customers, hopefully, they have a good line of sight on demand, and they have a good line of sight on the compression that we can provide them. And so we seem to all be getting along pretty well right now, Jim.

Your next question comes from the line of Nate Pendleton with Texas Capital.

Clint, in your prepared remarks, you talked about advancing through integration this year. As you're going through that process, are there any additional efficiencies you're uncovering with the combined business? And perhaps any thoughts on any fleet optimization or high-grading potential?

So as far as deficiencies, no, I think we're really happy with what we were able to acquire. It fits really well with us. The footprint puts us where we want to be in all the basins with all the different horsepower ranges like we've talked about before. We're extremely happy with where we are. We are continuing to evaluate the idle horsepower that came over. We knew some of it wouldn't be -- may not be redeployable immediately. We'll continue to evaluate that through the rest of this year.

We've also talked about looking at third -- secondary markets maybe outside the country to deploy some of this equipment. But we're extremely happy with the J-W acquisition. And like I said on the announcement call back in December, we like the whole [indiscernible] when it came to that acquisition.

Got it. I appreciate that. And then perhaps just staying on the integration of J-W. With that well underway and the leverage already below target, how is your team thinking about potential M&A going forward? Is that really something you guys could do in the near term? And if so, what are the key considerations right now given the environment we're in?

We're absolutely always looking at M&A. We evaluate those. We're going to remain disciplined, focused. It has to be accretive. It has to make sense for us to be able to do it. But we are definitely in the M&A market and looking for opportunities to make that work.

The one other thing I would note, Nate, is the energy high-yield market has really remained resilient. The midstream portion of that, in particular, has remained resilient. I noted to the extent we can be opportunistic, we will be. Yields have moved away from us here recently at 10 years around 4.7%. So we continue to watch. We continue to look for opportunities to add consistency to our debt tranche sizing to the duration or tenor, if you will, for that. And so to the extent we find an M&A opportunity that makes sense, I think the capital markets are available for that.

Your next question comes from the line of Eli Jason from JPMorgan.

Just want to think about J-W's manufacturing or fabrication capabilities in the context of the guidance you provided today. So how -- can you remind us what J-W offers to you as you look to add 0.5 million horsepower through the decade and how critical that is to meeting that order book?

Absolutely. So the manufacturing facility today, the way it sits can build about 100,000 to 125,000 horsepower in that facility. And then we'll supplement the additional 20,000 to 60,000 horsepower a year over -- through other facilities or other shops. But the flexibility that it provides is that we can order the engine and then we can wait until 30 weeks to 40 weeks to order the compressor or the -- all the other parts and components, and we can build it right in-house. And then we always have to think about what could happen if things change. And if things change, we wouldn't be on the hook for the entire package cost from now until '29. So we really like that flexibility that it provides.

Got it. And then maybe building on the prior question regarding M&A. You guys obviously have a pretty diversified footprint across different basins. Recognize that compression is tight. I would imagine that price on asset packages are pretty high. But how would you think about sort of geographic preference for any type of M&A? Do you feel that other basins might have more realistic price tags on them? Or how should we think about that?

There's certainly some standout basins overall in terms of the growth profile for the U.S. or at least as it stands today. The Permian and associated gas basins, but certainly, the Permian leads that way. Through 2031, those associated gas basins are probably 11 Bcf a day of growth. The Permian is about 8 of that. Then the drier gas basins like the Northeast and the Haynesville will make up about 12 Bcf of growth. Both of those about 6 Bcf, respectively. So you go where the growth is. There's no doubt that's probably the first place that you look. And then additionally, there's opportunities in basins that are underserved. I'd say the Rockies overall has been an underserved basin from a lot of the larger competitors out there. And we saw that with the J-W deal.

And we saw the underlying value. We saw the amount of long-term gas growth that could come out of the Rockies and certainly come out of the Rockies at a 4.25 profile. So without giving away all of our cards, you go towards growth, you go towards underserved basins and you make sure that they're durable in the long term. And when we see 140-plus Bcf a day of growth by early 2030 in the U.S. to serve the LNG demand that's out there, to serve the burgeoning growth in terms of data centers, the 4 Bcf to 6 Bcf a day plus associated with data centers coming on in the next several years. there's excellent opportunities out there in the compression space.

[Operator Instructions] And your next question comes from the line of Gabe Moreen with Mizuho.

This is [ Ryan ] on the line for Gabe. So my first question is around how are you thinking about refinancing or terming out the amounts currently drawn on the revolver, particularly given the current interest rate environment?

Ryan, as it relates to returning presently, our rate for ABL is sub-6%. So the SOFR rate really has remained relatively unchanged over the past 6 months at around 3.65% and our number comes in a little north of 200 basis points when you factor in the underutilized capacity on top of that. So we're still well below 6%. When you look at the ability to go out longer term at 8 years, 8.5 years, the numbers are probably 50 basis points north of that today. So those are the things that you ultimately weigh in terms of that decision. But we also want to have the flexibility longer term for our business. And so to the degree we can get that 50 basis points to tighten and we see the longer out and tenor to an 8-year to 10-year opportunity set, then we'll strongly look at the public market opportunities in the near future.

Got it. So for my follow-up, how are customers thinking about compression demand and capital requirements in 2027 and 2028? And then also, is growth more likely to be constrained by available compression equipment or by the level of customer demand?

It's Chris Wauson. So in regards to how customers are thinking to their growth, as I mentioned earlier, it's a different way of business, right? When you have to think out not only next year, but 2 years and 3 years and even beyond that because that 4 years is right around the corner with lead times doing what they're doing. But our customers -- our Tier 1 customers are definitely planning well in advance. Their demand and their growth trajectories are definitely out there, and we're working with them hand in hand. We're having conversations with them every week. We're working hand-in-hand to meet their needs. So it is a challenge, right? And the challenging part for us is what the world is going to do in 3 years and 4 years, but it's actually quite promising how everybody is working together. So looking forward to that and just see where the future goes.

That concludes our question-and-answer session. I will now turn the conference back over to Mr. Clint Green for closing remarks.

Thank you all for joining the call this afternoon. I want to touch on a few more points and reiterate. The amount of RFQs we're seeing is very strong. The state seems to be set for large amounts of demand growth over the next 4 years to 5 years. The demand is expected to be about 140 Bcf by the end of 2031. That's up over 30 Bcf from 2025 averages.

The majority of that is LNG demand growth between 18 Bcf to 20 Bcf a day of growth there. We -- we sit just below our target leverage ratio of 3.75x. We have equipment secured through 2029. Our in-house manufacturing capabilities tied with demand growth gives us huge flexibility. We believe we're well positioned to grow in the future with great flexibility. But we really appreciate you all joining our call. Thank you very much, and have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good morning. Welcome to USA Compression Partners First Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, May 5, 2026.

I would now like to turn the call over to Clint Green, President and CEO. You may begin.

Good morning, everyone, and thank you for joining us. With me today is Chris Paulsen, Senior Vice President and CFO; Chris Wauson, Senior Vice President and COO; and other members of our leadership team. This morning, we released our operational and financial results for quarter ending March 31, 2026.

Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations and definitions of non-GAAP measures and related risk factors. As we discuss performance, please note that JW acquisition closed on January 12. And therefore, Q1 earnings excludes the impact of revenues and expenses for JW Power for the first 11 days of the quarter.

Before we get into the quarter, I want to take a moment to recognize our team on safety. Our people go to work in the field every day, working around complex equipment, driving millions of miles a month, and the way they return to their family matters more than any financial metric we report. In 2025, our combined TRIR finished at 0.39, a 50% reduction from 2024 and well below the BLS industry average of 0.70, a benchmark, we have now beaten for 12 consecutive years. We are proud of these results, and we remain committed to continuous improvement.

Moving to the quarter, which included 2 integrations that established upward momentum for the company. First, we kicked off the integration of J-W Power at the time when horsepower lead times continue to extend. Customer discussions commenced immediately upon closing, starting the process of onboarding new customers to the U.S. compression platform. As of early March, we have integrated the combined operations organization and established a new reporting structure.

Second, on February 1, our integration of legacy USA Compression data into a new ERP systems completed. Our respective integration teams work long hours to enable a smooth transition of both, and I can't be more appreciative of their efforts. Throughout it all, we have maintained our operational momentum while delivering DCF and leverage metrics that show meaningful year-over-year improvement to our unitholders. The company is now broadly diversified across every major basin, horsepower class and customer type. In the last few months, we have contracted over 90% of our 2026-horsepower we will more than double the new horsepower deployed in 2025.

Additionally, we have continued the momentum in our small horsepower class with utilization up nearly 10% year-over-year. The introduction of J-W Power's manufacturing capabilities is enabling us to manage a dynamic compression market differently than the past. Certain new engine lead times have recently tripled from 50 weeks to approximately 150 weeks. And while historically, we might hesitate to commit to the full horsepower cost that far in advance, we are now able to directly acquire highly marketable engines with optionality to package for our own internal contract compress needs or future resale to third parties.

Engine costs represent approximately 25% to 40% of the total skid costs with just a fraction of that cost provided as the deposits. In the event of an unexpected contract compression market shift over the next several years, we believe we could also divest those engines for other use cases, further reducing any unlikely downside exposure. Additionally, the diversity of manufactured compression products, including midsized large horsepower electric and high-pressure gas lift supports more competitive pricing for our customers. while enabling us to adapt to the ever-changing marketplace.

So far, the oil-directed rig count remains flat this year, but producers are showing more optimism looking out over a 12-month horizon than we have seen for some time. reflecting a much improved commodity backdrop. The 12-month oil strip has significantly lagged physical spot prices and arguably is underpriced for an immediate and permanent ceasefire, much less a long-term conflict. We believe spot natural gas prices do not reflect the LNG risk associated with the [indiscernible]. Finally, [indiscernible] pricing is anticipated to materially improve with export capacities increasing in Q4 of 2026.

I will now turn the call over to Chris Wauson, our Chief Operating Officer, who will provide additional insights to our current operations and our out-year growth plan.

Thanks, Clint. As of today, the operations and commercial organizations have been integrated with both J-W employees and legacy USA employees under new reporting structures, consistent with the best-in-class approach. The longer-term result will be streamlined route optimization, customer contracts, vendors, inventory, safety protocols and systems debt. As discussed in the prior quarter, we expect approximately $10 million to $20 million of annual run rate synergies by year-end 2027, and we are still tracking towards those estimates.

The current new compression lead times have presented a new challenge for near-term business continuity and long-term planning for both contract compression and manufacturing. As a result, we have already placed orders for engines and package components for 2027 and engines for 2028 and a portion of 2029. Package component lead times remain well inside of engine lead times will continue to monitor and place these orders when needed. These advanced planning efforts should enable new contract compression growth to stay largely consistent with 2026, in excess of 100,000 horsepower each year.

As far as our manufacturing book is concerned, we have some specialty horsepower slate for resale, but the vast majority is expected to go into our fleet. Our 2028 orders are nearly entirely weighted to large 3600 series engines which are the most desired by our compression customers while also having substantial optionality for sale [indiscernible]. We continue to have robust conversations across our diverse customer portfolio, and as Clint mentioned, we have contracted more than 90% of nearly 110,000 new horsepower expected to be added to the fleet in 2026. And are presently in the middle of multiyear strategic planning discussions with some of our strongest customers to shore up our 2027 book.

Notably, we experienced lower churn rates than expected in Q1, and which is a reflection of the tightness in the current market. This backdrop, coupled with the idle units acquired from J-W positions us for outsized horsepower growth in the back half of the year and into early 2027. Finally, while oil prices have moved up significantly in the last month, we are focused on minimizing cost increases tied to lubricants. If oil prices were to remain at current levels, we would expect much of that increase to show up in the second half of the year as our lubricant contracts renewed.

I will now turn the call over to Chris Paulsen to discuss our financial results in detail.

Thanks, Chris. For basis in comparison, our quarter and year ago financials exclude the benefit of J-W that closed on January 12. For Q1 2026, our income statement reflects the results of JW's contributions for 79 days in the quarter and therefore, are non-GAAP financial numbers, including EBITDA and DCF reflect the same. By contrast, our non-GAAP operating metrics tied to horsepower, including utilization, average revenue per horsepower per month, an average active horsepower calculated based on month end, and therefore, fully reflect J-W's horsepower contribution for the quarter.

As we highlighted in our December 1 deal announcement, while J-W provides meaningful near-term accretion and immediate deleveraging, the company in aggregate also has lower gross margin than our legacy asset base, in part due to the manufacturing and AMS operations that contributed approximately 10% of legacy EBITDA.

Turning the page to Q1 results. We increased pricing to an all-time high, averaging $22.73 per horsepower, a 5% increase in sequential quarters and an 8% increase compared to a year ago. Average active horsepower ended at 4.438 million. Our first quarter adjusted gross margins came in at 64.4%. Regarding the consolidated financial results, our first quarter 2026 net income was $38.3 million, operating income was $91.4 million. Net cash provided by operating activities was $86.1 million and cash interest expense net was $47.1 million. Our leverage ratio at the end of the fourth quarter was 3.74x.

Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 4.931 million horsepower, adding approximately 1.037 million horsepower as compared to the prior quarter, largely tied to the J-W acquisition. Our average utilization for the first quarter was 91.9%, a decrease compared to the prior quarter after incorporating J-W. First quarter 2026 expansion capital expenditures were $26.4 million and our maintenance capital expenditures were $9.2 million.

Expansion capital spending in Q1 primarily consisted of new units, while maintenance capital activity was deferred for a few weeks in February due to the implementation of SAP on February 1. For the remainder of the year, most growth capital will be focused on new horsepower and reconfigurations while maintenance capital will normalize towards our full year projections. We continue to maintain our full year adjusted EBITDA range of $770 million to $800 million, distributable cash flow range of $480 million to $510 million, maintenance capital range of $60 million to $70 million and expansion capital range of $230 million to $250 million.

As Chris Wauson noted, we are nearly fully contracted for 2026 and replacing advanced orders to maintain full utilization of our manufacturing complex for several years. As stated in February, our near-term target is to maintain a 3.75x debt-to-EBITDA and we made significant progress towards this goal in Q1. While we hit this target for the quarter, we anticipate it will tick higher in Q2 as we take delivery of new horsepower that trend back lower by year-end. Energy high-yield market has remained open and very resilient throughout the Iran conflict. Our improved leverage metrics put the company in a strong position to access capital markets later this year to the extent we want to provide more consistency in our debt tranche sizing and duration.

This quarter was the world end of activity for our operations and finance teams as we implement new systems with new assets and new faces. The execution was nothing short of exceptional as we laid the foundation for more acquisition opportunities to come. We will stay disciplined and evaluate opportunities that fit with our financial goals and core competencies. In the near term, our business will be improved through a gross margin push, working to improve structural cost and the efficiency of the J-W organization in the face of an inflationary oil environment.

And with that, I'll turn the call back to Clint for concluding remarks.

Thanks, Chris. This business demands that we stay close to our customers every single day, understanding their needs, anticipating where they're headed and making sure we're ready when they call. The discipline doesn't change with the commodity cycle. What is changing is the opportunity in front of us, the demand for natural gas, both to move it and to power the infrastructure around it. continues to grow, and we feel very good about our position in that story. The relationships we've built with our suppliers, combined with our manufacturing capabilities, gives us a real advantage in an environment where equipment lead times remain extended. We intend to use that advantage. We're bullish on contract compression overall, and I'm excited about where we're headed.

I will now open up the call to questions.

[Operator Instructions] Your first question comes from the line of Nate Pendleton with Texas Capital.

Congrats on the record results. You had a really strong quarter across the board. Can you talk for a moment how this compared to your internal expectations following the J-W integration? And then maybe your decision to keep the guidance the same here in low those results.

Yes, Nate, thank you for that. Yes. I mean I feel like we're in line with where we thought we would be as we put this model together late last year and decided to move forward with the acquisition. We're working through -- we've already worked through some of the operational changes in the structure. We're working hard on our routing and ways to save going forward, but we're -- overall, we're really happy with where we're at in the process and excited about where we're headed by year-end and then through the future.

Got it. And as my follow-up maybe for Chris. I believe last call, you talked about looking for distribution coverage expanding beyond the 1.6x marker as sparking some conversations. With coverage now over 1.7x, can you talk about how you weigh adding to an already strong distribution versus other uses of capital?

Sure, Nate. Just before that, just to add a little bit to Glen's comments as it relates to JW transaction as well. I think we mentioned this before, but I think we've been generally very pleased with the sophistication of their operations. as we start to embark upon another SAP implementation for their operations in particular, we're seeing some things that we want to adopt in our own, which is fantastic and which is probably expected from a company that's been doing it for 60 years.

So there are areas of manufacturing that are done exceptionally well areas as it relates to customer interaction and outreach that have been done exceptionally well, the retail side of the business. So I'll just point to that as well. But as it relates to your distribution question, we were pleased to see that number tick up to 1.72x. The part of that relates to the fact that we kind of had a bit of a partial quarter. We ultimately had lower maintenance expenditures that was part -- that was due to the SAP implementation itself.

We did a couple of weeks of paper stacking as it related to the transition. We really had kind of a quiet period for about 1.5 weeks where we really told our folks to limit their maintenance expenditures. And so as a result, our maintenance expenditures were down, and therefore, DCF ticked up. But that being said, we also did not account for the DCF over those 11 days, while fully accounting for maintenance capital.

So I think net-net, we feel really good about setting up for a durable and really a disciplined approach to our distribution over time in our distribution policy. We want to see something sustained for a period of time and continue to hit both our financial metrics in terms of leverage, but also continue to see and repeat kind of these type of numbers, before I think we would begin to approach the conversation about any change in distribution policy.

Understood. I really appreciate all the detail.

The next question comes from the line of Jim Rosen with Raymond James.

Clint, you talked about lead times stretching out. Again, it's pretty remarkable to see how quickly that is spread to numbers we've never seen before. And it seems to be you guys are pretty well ahead of the game by placing orders for engines out multiple years. I'm curious how you're seeing your customers and maybe even competitors in terms of how they are set for planning out this far in advance because it wasn't long ago that customers were kind of caught by surprise when a couple of years ago, lead times were beyond a year, and now we're almost 3 years. And so I'm just kind of curious how do you think the customer base and the industry is set for planning on these extended time horizons?

Yes. It was a little bit of a surprise at one point of the lead times. We were running around 55 to 70 weeks, just depending on the day. And then overnight, cat went to 100 weeks or 108 weeks. And that's when we got a gear pretty quickly to try and figure out how we were going to cover that. So we got creative for '27, and we're able to pull some stuff in. And then '28, we decided to go ahead and make that engine order for '28. The customers, I think they're dealing with it just like we are. Thankfully, we're able to provide for our customers with our plans for the future. And competition, I haven't really heard what they're doing on any front.

I'm sure they're trying to figure it out just like we are. I think our capital program has gone from a 1-year program to probably a 3-year outlook and taking pieces of it at a time as we have to order engines. Now a lot of it is driven by the generation. It's the generator orders because you see that aerial and cooler manufacturers, those lead times are still at 25 to 30 weeks. They're not stretched way out. So I think everybody is taking it in stride and -- and we're trying to make sure our customers are taking care of.

Yes. Well, kudos for being ahead of the game. And then I guess as a follow-up, maybe you guys -- Chris, you talked about OpEx or mainly higher oil prices that will drive lube oil and fuel costs up to some extent in the second half if oil prices stay up here, Curious how you think about your ability to pass that on given how tight the market is and maybe the lag effect of being able to price that on. Obviously, you didn't change your guidance, so it's not impacting your margins at this point. But just kind of curious how you're all thinking about that.

Yes. No, thanks for that. It's Chris Wauson. One thing with inflation with oil prices everything -- every -- all of our costs are going up. So we're continuing to drive efficiencies in the organization to protect that margin. And as contracts expire and renewals come up, we do plan to address that accordingly. So it's kind of twofold. So we're going to manage it as best we can and continue to drive for efficiencies. That's the biggest win there.

The next question comes from the line of Elias Jossen with JPMorgan.

Just wanted to start on the outlook for new unit procurement. It seems like you've got orders placed for the next several years. So how should we think about the cadence of unit additions over these next couple of years? I know some of your peers have given an outlook through the decade. But just curious how we should think about new units in the fleet.

One thing we're trying to do is stick to that 100,000-ish horsepower of growth year-over-year. So with maybe even up to 125, just depending on how things shake out. But -- that's the beauty of our manufacturing business. So we can control that a whole lot better now. It's a lot more optionality. It enables us to really make those decisions and do what's best for our customers and the organization.

This is Clint. I want to add on that. I talked about a 3-year capital program and we're really only talking about the cost of the engine for that 3 years. we have the in order, but we will wait until -- and we'll monitor lead times on compressors and coolers. And that way, we can order those at 40 weeks or something like that to have them in time for the engines to arrive. So I want to make sure we're not commit -- everybody understands we're not committed to the full compressor cost going out 3 years. It's just the deposit on engine so far.

Got it. That's a helpful clarification. And then maybe shifting over to some of the stronger pricing we saw this quarter as well as the utilization noise from the J-W integration. Can we help frame run rate levels on both of those metrics going forward? Should we expect continued pricing growth? And how will fleet utilization, do you think ultimately shake out once you're fully integrated?

Chris Paulsen. So as it relates to the first part of that question on the utilization front, the utilization is reflective of the fact that we brought in over 1 million-horsepower and essentially got that optionality, I think, on the chip. As we mentioned in our acquisition call, we noted that we felt like there were 900,000-plus really deployable. We've taken the initial pass through on that fleet, and that's why you see in the over 1 million-horsepower that's within our total count. We'll continue to review that and look more deeply into that total [indiscernible].

And part of that will be, as we continue to increase orders, increase our small horsepower utilization, as we noted, we increased it over 10% year-over-year we see that potential to potentially improve from here. And those are some of those units that we'll evaluate. So presently, the horsepower utilization that you see, I think, is a baseline for a new run rate. And I think it can only improve from here, both in terms of small horsepower utilization, but also as we dig deeper into some of that capacity. We may ultimately decide that, that capacity is no longer deployable within our operations but can be used on other operations elsewhere.

As it relates to the revenue side of the question, the revenue has continued to improve, as we noted, 5% and 8% in terms of revenue relative improvement. We see that continuing to improve consistent kind of with the way in which we've approached in the past. I think as we see cost increase, many of our contracts, and I should say most are CPIU based, we've seen CPIU tick up almost 100 bps from not very long ago. So one, we'll have the CPIU support as it relates to revenue. But two, we are partnering with our with our upstream and midstream companies. We always do just that.

And so they understand through any cycle that there's a give and take, and we recognize that, too. And it's partnered as it relates to the business and would anticipate that as our cost increase, that there will be some relative cost increase on the other side of that and just need to have constructive conversations. And that's a big part of having great relationships within the business and being around since '98 and having nearly 2 decades of relationships with our top 10 customers.

[Operator Instructions] The next question comes from the line of Doug Irwin with Citi.

On J-W Power here. It sounds like the manufacturing business is already maybe changing the way you approach your growth backlog a little bit. Just curious now that you've had a bit more time with these assets under your belt, if there maybe been any other opportunities or surprises you've been able to uncover with regard to synergy opportunities that maybe you hadn't fully appreciated beforehand.

Yes. This is Clint. Doug, thanks for your question. Yes. I mean we fully expect to -- or we hope to find some diamonds in or up that we weren't expecting. Definitely, the manufacturing business, the capacity there is between 100,000 and 125,000 horsepower in that facility, which is kind of what we expect to grow or plan to grow and maybe a little north of that over the next few years. But -- so we feel like that will give us a lot of flexibility. The operations side of it being in every basin now and having facilities that are that are across the road from each other in several spots. There may be some synergy opportunity there. We think there's more to come. We're just trying to dig through the -- all the opportunities and figure out which ones really come to life.

Got it. That makes sense. And then maybe just a higher level 1 as a follow-up. -- looking at Slide 4 here in your slide deck. You call up a need for over $10 million incremental horsepower by 2030, which is obviously a huge number. Just curious what you see is your role in meeting that demand here moving forward? Do you potentially see any delay even further into growth kind of relative to what you already messaged here over the next couple of years? And if you can maybe talk about maybe what basins on that map, you see yourselves as having the biggest advantage in.

Yes. This is Chris. Great question. So as it relates to that, part of it is what is that right forecast. And so we are always -- we are actively reviewing kind of the overall forecast for natural gas understanding the LNG markets, the data center markets, they're exceptionally fluid, as you all know. I think ultimately, we feel really good about kind of the forecast that was put forth on that particular slide. and the forecast as it relates to those basins. And I think it's all related to the relative natural gas price as well. Ultimately, I think the Rockies for instance, is an area that we would say at a higher gas price, that would probably most certainly be kind of a flattish range, whereas I think those rest of those areas are well established in terms of their growth trajectories at current pricing if not above.

And so ultimately, as we think about our place in this trajectory, I mean we want to be in a position to maintain our current standing and our current market share, if you will. We know that in areas like the Northeast, we have an outsized market share and it's an area that has returned to growth. And there's really fundamentally sound measures that support that 5 to 7 Bcf. I think if we see cold gas switching that number increases from here, and that's really based on announced projects. I mean -- and there's still probably more to come there.

As it relates to the Gulf Coast and the Permian that are going to make up more than half of that. We're well situated there. We have -- we're a big player in the Permian. We're a huge player in the Gulf Coast and Mid-Con and we want to maintain our market share, if not grow it in those respective areas as well.

And the next question comes from the line of Selman Akyol with Stifel.

I just kind of wanted to follow up on that last question. And listening to the energy transfer call, they're certainly talking about the U.S. when everything settles out from at least the U.S. becomes certainly a preferred supplier to the global outlook. And so as you think about that, should we expect to see an acceleration of your business?

We fully expect so, this is Clint. I'm sorry. We -- if you look at the whole -- the market, there's 15% to 20% of the LNG capacity locked in the [indiscernible] locked in because of the [indiscernible] right now. JKM prices are yesterday, they were at $16 and U.S. gas prices were at $2.80 to $3. If you back up to March -- January -- January and February of this year, JKM was $9 to $10, and U.S. -- Henry up pricing was $280 to $320. So we haven't -- even though JKM has gone up, we haven't seen the pricing increase here in the U.S. Part of that is takeaway capacity, right?

The -- I guess the major driver of it is -- but by the end of the year, we're going to have a lot more capacity coming out of the Permian. There are several LNG facilities either expanding now under construction or completely being built under construction. But if you look at the U.S. Department of Energy's website, they show 5 of those facilities will be online within the next 24 months. So with all that said, if gas takeaway is able to get out of the Permian and to the facilities on the Gulf Coast or -- and are able to get on boats and go across the ocean, the demand for U.S. natural gas is going to go up. We couldn't be more excited about the natural gas story right now, whether it's drop Basin or the Permian or wherever. And any of that growth with us being in all the basins means that we have to grow with it. So we're super excited about the prospects of the future here.

All right. I appreciate that. And then let me just ask you about the extended lead times. And I guess when you look at the 3600s and you're talking, I believe, 2,500 horsepower and up. Is that all just being driven by, I guess, sort of AI backup power or primary power, and so you're competing against that? Is that what's really taking the lead times up? Or is it something else?

Well, it's both. It's natural gas-driven engines or generators that are driving -- that market is increased extremely, right? So a lot of people order in generation and then you have folks ordering natural gas compression engines that -- to supply the gas to the generators. And cat is -- really doesn't have a lot of big plans to expand their manufacturing facility in the near future for the 3,600 series, which is the 2,000, 2,500 up to 5,000 horsepower. So those are the drivers behind it. I mean, I think we're to the point now where we're starting to look at other engine manufacturers as options, whether it's domestic or international, because I believe there's a hole that we've got to start filling in the future. If this is going to continue out.

There are no further questions at this time. I would like to turn it back to Clint Green for closing remarks.

Yes. Thank you all for joining our call today. As always, we're deeply appreciative of our employees and the stakeholders that enable us to conduct our business every day. With that, we want you all to have a great day. Thank you for joining, and see you next time.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Good morning. Welcome to USA Compression Partners Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, February 17, 2026. I now would like to turn the call over to Clint Green, President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us. With me today is Chris Paulsen, Senior Vice President and Chief Financial Officer; Chris Wauson, Senior Vice President and Chief Operating Officer; and other members of our leadership team. This morning, we released our operational and financial results for the year and quarter ending December 31, 2025. Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations, definitions of non-GAAP measures and related risk factors.

Please note that the historical information presented excludes the results of J-W Power acquisition, which closed on January 12.

With that, I would like to congratulate the team for closing the J-W transaction. With this transaction, we are leaning into the USA Compression name with broader reach all across this great country. The transaction makes us a clear choice for operators who want a provider with a reputation of high-quality reliable service in every major oil and gas basin in the U.S. and across all horsepower classes.

I want to highlight the tremendous year we had across our operations, commercial and finance organizations. On the safety front, we recorded a TRIR of 0.39, which is approximately half of the industry average. We delivered full year adjusted EBITDA of $613.8 million. and DCF of $385.7 million, both are records for the company.

We maintained high average utilization in excess of 94% throughout the year and ended the year at 94.5%. Finally, we refinanced our ABL in 1 of our senior notes, significantly reducing our weighted average borrowing cost and improving strategic flexibility. These accomplishments occurred as the company embraced a new leadership team, a change in headquarters, a new shared services model and new ERP platform.

The resilience and grit showcased across our organization in 2025 gave us confidence to pursue and now integrate the J-W acquisition in 2026. Last year, the energy macro environment stabilized following early tariff discussions, but the development pace slowed in the Permian as rigs continue to reduce throughout the year in response to lower oil prices. Of note, while oil production flattened in the last half of the year, natural gas continued to move upward, ending approximately 9% higher year-over-year.

We continue to be bullish on the Permian longer term. With the acquisition of J-W, we maintain a large presence and have increased our active horsepower in the Permian to around 1.7 million. We have also increased our horsepower in oil and liquids-rich basins as well as major gas basins like the Marcellus, Utica and Haynesville, which returned to growth in 2025. This growth was tied to increased local demand, additional infrastructure debottlenecking and a higher average natural gas price of $3.52 per MMBtu. This is a 56% increase from the prior year.

We are encouraged by these fundamentals and believe the acquisition of J-W strengthens our leadership within these natural gas basins. The broader compression industry continues to forge ahead with strong margins and a disciplined approach to new compression capital and USA Compression is no different. Of note, lead times for new equipment have increased to over 2 years, which presents a new set of opportunities and challenges that our team continues to work through.

In 2026, we have budgeted approximately 105,000 new horsepower, representing a 2% increase in active horsepower with half of that new horsepower under contract. We also have new units contracted for the first half of 2027 and are in active discussions to procure additional horsepower in 2027.

With that, I will turn the call over to Chris Wauson, our Chief Operating Officer.

Thanks, Clint. Since the close of the transaction on January 12, we have begun planning to optimize route management, inventory, contracts and operational structures to begin to realize synergies as early as this year. As we have previously noted, we moved forward with the go-live of a new ERP system in Q1 of 2026 for the legacy USA Compression assets and now plan to integrate the J-W assets during 2026.

We will have modest onetime cost associated with the transaction in 2026, but expect to lay the groundwork for substantial synergy capture by 2027. Our assessment is still ongoing, but at this time, we anticipate approximately $10 million to $20 million in annual run rate synergies that will be achieved by the end of 2027. We expect these synergies to create improvements in both operating margins and G&A with the additional potential for commercial synergies as we better serve our combined customer base.

As we discussed in our announcement we are excited about increasing the extent and depth of our asset offering and customer base. Customer retention and review of existing contracts are top of mind and we have already begun moving contracts under USA Compression MSAs, and we'll work to extend average contract duration throughout this year. We hope our customers will realize the best of both organizations. I am personally excited to see the strength of our organization growth, especially across the mid-Continent, The Rockies and Northeast with the addition of the J-W assets. We will focus on continuing to be the operator of choice across these basins and others providing customers commercial and operational consistency across the U.S.

No other contract compression company in the market can support its customers' diverse horsepower and geographic needs like USA Compression can to date. Finally, with the acquisition of J-W, we acquired approximately 200,000 idle horsepower that will undergo significant review over the course of the next year. As we indicated in December's J-W acquisition call, we believe approximately 50,000 horsepower is readily deployable with limited capital spend. As it relates to the remainder, we will analyze the best path, including potential monetization of a portion of the horsepower.

We also acquired a manufacturing business that provides strong optionality for third-party sales and internal reconfigurations. I will now turn it over to Chris Paulsen to discuss our 2025 financial results in detail and our 2026 guidance.

Thanks, Chris. In Q4, we increased pricing to an all-time high, averaging $21.69 per horsepower, a 1% increase in sequential quarters and a 4% increase compared to the year ago period. Average active horsepower increased approximately 1% relative to Q3 to $3.579 million. Our fourth quarter adjusted gross margins came in at 66.8%, right on historical trend. Regarding the consolidated financial results, our fourth quarter 2025 net income was $27.8 million, operating income was $76.6 million, net cash provided by operating activities was $139.5 million and cash interest expense net was $43.4 million. Our leverage ratio at the end of the fourth quarter was 4.0x.

Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 3.9 million horsepower, adding approximately 21,000 horsepower as compared to the prior quarter. Our average utilization for the fourth quarter was 94.5%, a slight increase compared to the prior quarter. Fourth quarter 2025 expansion capital expenditures were $40 million and our maintenance capital expenditures were $7.8 million. Expansion capital spending in Q4 primarily consisted of new units.

Turning to 2025 full year results. We ended the year with adjusted EBITDA of $613.8 million. We also ended the year with distributable cash flow of $385.7 million, above the recently increased guidance, in part due to the final preferred unit conversion in December. Maintenance capital ended at $39.4 million and expansion capital was $117.6 million, both towards the lower end of previously provided guidance.

Looking ahead and with the contribution full year of J-W, we are forecasting adjusted EBITDA of $770 million to $800 million and distributable cash flow of $480 million to $510 million. Maintenance capital range is forecasted to be $60 million to $70 million, allowing for consistent preventative maintenance intervals across our combined fleet. Expansion capital range is $230 million to $250 million, which includes just over 100,000 new horsepower or over 2% of our active fleet being added and panel upgrade for improved telemetry practices.

The expansion capital range also includes approximately $40 million of other capital, including vehicles, tools, investments in technology and other items. This expanded growth capital budget relative to prior years will enable us to better respond to the needs of our broader customer base and enable us to get new horsepower in both the Permian and the Northeast. The net result of our budget should enable us to improve upon our debt metrics with our near-term targets at 3.75x debt-to-EBITDA, a quarter-turn improvement over the next 12 months.

We remain committed to managing debt levels and will remain open to transactions that can further delever the balance sheet and are accretive to unitholders. We also continue to evaluate our capital structure in its fixed versus floating proportion as it relates to DCF and business certainty. Today, at current Fed rates, our borrowing costs are improved by approximately 50 basis points by utilizing our ABL relative to our most recent notes refinance. We also have approximately $0.5 billion of capacity, not including the $300 million of additional accordion.

Overall, I'm very pleased with the operational momentum we carry into the 2026 with the legacy USA Compression business and the J-W Power assets. In the near term, the addition of J-W assets will reduce our aggregate gross margin for the contract compression business. Our clear goal is to more closely align those margins with our own over the next 2 years, contributing to the synergies Chris Wauson spoke of earlier. And with that, I will turn the call back to Clint for concluding remarks.

Thank you, Chris. I want to thank all of our employees for the advanced planning and early integration efforts that have taken place across the 2 companies. We are honored to be part of the J-W Power legacy and are confident it will be improved going forward given the broader reach and resources of USA Compression. It is our goal to provide the same level of excellence throughout every region in the U.S., something that continues to set us apart. I will now open the call up to questions.

[Operator Instructions] Your first question comes from the line of Doug Irwin with Citi Group.

I just wanted to start with the growth CapEx guidance here. Could you maybe just help dissect a bit how much of that $250 million growth budget is tied to kind of organic base growth versus maybe the backlog inherited from J-W Power and then just curious if this level is kind of the right way to think about your run rate moving forward for CapEx, particularly as we kind of think about the potential impact of 2-year lead times here?

Yes, great question. Appreciate that. So just to break down the growth capital this year a little bit, about $205 million of growth capital is tied in with the typical compression business, both new units, make ready and reconfigurations. Approximately $150 million of that $205 million is tied to new units. So as we mentioned in the call, approximately 105,000 new units overall.

And we have another just less than $40 million in other capital tied to vehicles, IT tools, et cetera. We're really trying to add consistency across our fleet as it relates to the other capital. We think there is a scenario by which that can come in lower but hopefully, overall, that kind of breaks down what we call growth and expansion capital.

Yes, that is helpful and then...

And as it relates to your other question and apologies, as it relates to your other question in terms of percentage growth going forward, as we mentioned, this year is approximately around 2% growth overall relative to our active horsepower. As it relates to 2027, those long lead times do make for difficult planning. The beauty of our manufacturing entity is that it does allow us to start to dissect some of that a little bit differently than we have in the past as we've kind of been beholden to packagers.

Today, we do have manufacturing capacity in 2027. We're trying to load up that relative capacity. We have about 10,000 horsepower already contracted for that capacity. We're looking to utilize probably the remainder of that capacity for our own compression just next year.

And certainly, as it relates to smaller horsepower, and I say smaller, it's still around 1,500 horsepower or so, the lead times are less. It's really some of those really large 2,500 horsepower plus packages that have the long lead times. So we do have some flexibility as it relates to that. And frankly, this year, we've even packaged smaller horsepower than 1,000 horsepower. So we'll continue to listen to our customers talk about their needs and be responsive as it relates to kind of the horsepower for 2027 and decide whether or not that number is kind of 1.5% to 2% range that we've been in over the last several years.

Got it. That's helpful detail. I just wanted to follow up on some of the comments made in the prepared remarks about just some of the actions you've taken to improve the balance sheet and then J-W Power is obviously accretive from a leverage perspective as well. Just curious if these actions kind of impact the way you think about the right level of distribution coverage moving forward and whether they might give you some runway to start thinking about potentially growing the distribution from here.

Yes, great question. So last year was really about, as you noted, kind of making sure that our balance sheet trajectory we set along the right path. We were able to do that transaction and able to put the cash forward because we did go through the process of a notes refinance beforehand. We went through an ABL restructuring and grew that relative ABL and as I mentioned, we also have capacity to even expand it further with our accordion feature of around $300 million. So we're on the right track as it relates to our balance sheet and the relative improvement there. 3.75x, I think is a worthy goal in the near term.

The question is, do we move down further from there to 3.5x. I ultimately would like to be there, but we also need to balance. As you noted, the fact that our distribution coverage has continued to improve. And net of the dividends that were -- or distribution, excuse me, that were paid a week ago, our number on a normalized basis is 1.55x. We did pay the Westerman Family, some units associated with Q4 that was factored into that 1.36x and those units were ultimately repaid.

So our normalized number is about 1.55x on Q4. We're looking for that number to be in the 1.6x plus range next year or this coming year that is. And as that number starts to expand beyond 1.6x and grow beyond there, we need to continue to have conversations with all of our unitholders as to what the right answer is in terms of distribution growth.

Your next question comes from the line of James Rollyson with Raymond James.

Just to circle back to the capacity adds of 105,000, it's in the budget for this year. Maybe just kind of give this can really sway how things lay out across the quarters? If you could talk about the timing of delivery and when you expect that capacity to actually be in the field.

Yes. I'll start and then Chris Wauson will probably add into that. I think most of what's coming on this year is in the back half of the year, July forward. Chris, do you have anything to add to that?

Yes. So thanks, Clint. So majority of the horsepower, there's a little bit that triples in Q3, but mainly the bulk of the horsepower comes in late Q3 into Q4. So we'll see good numbers of growth in the back half of the year.

Got you. And maybe just kind of following up Clint on your comments. It seems like every call I hear on compression lately, the lead times getting longer and longer. Wondering if that's showing up, you go back 2, 3, 4 years, and obviously, you guys like Cat had really ramped up the cost of equipment which was translating into higher pricing for everybody on new orders. And then it seems like as we were originally kind of late last year, prices were just more inflationary like typical annual Cat increases. But I'm curious, as lead times continue to stretch out. Are you seeing that? Or do you expect to see that translate at some point into higher equipment costs again like a bigger stepup?

I don't think that any manufacturer ever misses the opportunity to increase prices. But yes, we -- the main driver in the lead times is Caterpillar engines and the data center demand for generation has driven that lead time out. We still have some other options with some other manufacturers out there. They're not as sought after, what have you. I expect we'll see some type of increase at some point this year. I haven't heard of one yet. But I'm sure 1 will come down later on this year.

Your next question comes from the line of Gabe Moreen with Mizuho.

Obviously, one of your competitors recently announced a pretty big step out into the distributed power space. Just wondering kind of your latest thinking on potentially evaluating that space, whether it's something you're looking at or reconsider?

Yes. Gabe, it's Clint. Yes, absolutely. We believe those business -- that -- the distributed power business and the compression business are a lot alike. They -- we have -- you have mechanical equipment that has to run or hasn't guaranteed run time, several synergies with the type of folks you need to work on it. So we've definitely evaluated several of those over the last 18 months or 12 months, what have you.

We put them into our model. The ones we've looked at haven't quite met the requirements that we wanted for whether -- to make our model like we wanted it to be. And so we haven't jumped out there yet, but we are always evaluating that. It's a business we think that we could drive the same type of margins out of that we do in the compression business.

Got you. Thanks Clint. And then maybe if I can pivot a little bit to the 50% of the new HP for '26 being placed. Can you just talk about what expectations for placing the rest of it? And sorry, if I missed it. Is that going to be next quarter, quarter after kind of what you're hearing from customers about demand from that HP which you haven't signed up customers yet for?

It's Chris Wauson. I'll take that one. We strive for kind of consistent margins and our new unit growth has primarily been focused on our Tier 1 customers. So I'm pretty confident that the remaining balance of what we have available will get contracted up here in the near future. So we look forward to working through that for our customers.

Your next question comes from the line of Nate Pendleton with Texas Capital Bank.

Congrats on the strong year. I wanted to go back for a moment to the new unit time lines. How do those time lines impact your longer-term horsepower growth strategy, organic or inorganic? And could we see the time lines impact contract compression pricing with customers in the near term?

It's Chris Wauson. With the lead times pushing out for a new package at 120-plus weeks, it gets challenging, right? It's not going to affect our 2026 growth, but in 2027, we are working to secure that and figure that out, picking up the manufacturing business with J-W that gives us a lot of optionality that Chris Paulsen spoke to earlier. We do have around 10,000 horsepower already contracted into '27. So we are looking at every angle to work through that and add growth.

So we're going to continue to push for that as well.

I want to add that the size of the J-W manufacturing business is it's almost the exact same size as our expected growth over the next couple of years. We're not looking to expand that manufacturing facility or go out and try to sell a huge amount of packages, but we want to be able to fund some of our own growth internally. And give us that flexibility that we need to, when packages move out to 100 weeks that we can still provide for our customers.

Got it. Appreciate that detail. And then as my follow-up, in the prepared remarks, Chris Paulsen mentioned expansion CapEx, including the new telemetry being added to units. Can you get any more detail on what that can entail for customers?

Yes, I'll take that. It's Chris Wauson. One thing we're looking at is always looking for efficiencies, to drive efficiencies. And with that, we have to invest in our units. So panel upgrades, unit upgrades is huge. So it allows us to have some dashboards to really see what's going on without having employees out there on site 24/7. So that gives you a little color as to what that looks like, but it's our eyes and ears basically without folks on the ground.

I'm going to add to that, too. It also gives us the ability to manage how our folks -- when they leave to go work on a piece of equipment that's down, maybe got called out in the middle of the night, they can have the right parts. That's where we're trying to get to with this with some form of AI going forward. And this is the first step in our business to move that direction.

[Operator Instructions] I will turn the call back over to Clint Green, President and Chief Executive Officer, for closing remarks.

Yes. Just to add a little bit there. I want to explain how happy we are with the J-W acquisition, how excited we are to be able to get into all those basins. And then the excitement that we have for the overall gas industry. And the way that the demand from data centers and LNG, and it's real. It's coming online. And those -- we're excited to be in this business at this time and look forward to creating unitholder value as we move forward. Thank you for all for joining our call, and good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, and welcome to USA Compression Partners December 2025 Investor Conference Call. [Operator Instructions] This conference is being recorded today, December 1, 2025.

I would now like to turn the call over to Clint Green, President and CEO. Please go ahead.

Thank you, operator, and thank you all for joining us today. During this call, we will reference certain non-GAAP measures -- forward-looking statements. Please review the related legends included in our presentation discussing this transaction found on our website.

As you all have seen -- now have seen, we are excited to discuss our acquisition of J-W Power Company, a largely private-held provider of compression services with a storied history dating back to the 1960s. This represents an exciting opportunity to increase our geographic footprint across the U.S. and expand our existing customer relationships while acquiring new ones. We especially want to thank the Westerman family for entrusting us with the assets and for their commitment to the combined company going forward as owners of common units. Together, our two companies bring decades of experience in contract compression and a shared focus on exceptional people, a strong culture, reliable equipment and superior service, consistent with our four pillars.

With that, I will turn the call over to Chris Paulsen to discuss the merits of the transaction in further detail.

Thanks, Clint. I'll start on Page 2 of the presentation. The transaction will be funded with $430 million in cash initially via the existing credit facility and approximately 18.3 million USAC common units issued to the seller. This represents an attractive valuation of approximately 5.8x 2026 estimated adjusted EBITDA. Notably, while we anticipate meaningful synergies associated with the combined business in the fullness of time, we have assumed no synergies upon announcement. The majority of J-W's adjusted EBITDA is tied to its 800,000-plus active contract compression horsepower, which is primarily mid to large and will increase our active fleet to roughly 4.4 million horsepower on a pro forma basis. Noncontract compression adjusted EBITDA is approximately 10% of the total and is attributable to the AMS and manufacturing businesses. The transaction is expected to close in the first quarter of 2026 and will be subject to customary closing conditions, including regulatory approval.

Turning to Page 3. J-W allows us to increase the scale and product offering, expand long-term customer relationships and improved geographic presence, all while priced at an attractive valuation. J-W's assets are complementary to our own with over 300 customers across the U.S. In the near term, we expect this asset will deliver meaningful accretion in 2026 on a DCF basis, and will move us below 4x leverage on a pro forma basis. J-W also provides a strong pipeline for continued organic growth. We expect active horsepower to grow roughly 2% by year-end 2026 driven by newly contracted horsepower and dependent upon our post-close finalized capital budget.

Turning to Slide 4. In Slide 4, you can see that J-W provides 70% of the contract compression fleet that is mid- to large horsepower with 46% of the HP greater than 1,000 horsepower. The fleet historically serviced both gas lift and gathering with a slightly higher proportion tied to the wellhead. The fleet is relatively evenly spread across our existing operations in the U.S. and provides us new access to the Bakken. Total acquired horsepower is approximately 1.05 million, of which we anticipate over 900,000 horsepower is readily deployable with limited additional capital to make ready idle units. Approximately 90% of the expected adjusted EBITDA in 2026 is tied to the contract compression business with expected gross margins nearing 60% for contract compression in AMS. While this is lower than our baseline average, we are confident that through combined best practices, we can streamline operations and incrementally improve our operating margins over time.

Finally, Page 5 shows our pro forma active fleet mix by basin and unit size. The hatched areas represent basins where we currently have an operating presence whereas the blue areas are new, including portions of the Bakken, Uinta and Arkoma Basins. In each hashed area, we expect to meaningfully enhance operational efficiencies through improved materials and fluids cost and route management.

We cannot be more excited about the addition of J-W Power to the USAC portfolio. Its field operations are well respected throughout the industry and horsepower offerings complement our own. As mentioned, we anticipate closing the transaction early Q1, and we'll look to provide pro forma adjusted EBITDA and capital numbers at that time.

I will now open up to Q&A.

[Operator Instructions] Our first question will come from the line of Jim Rollyson with Raymond James.

Congrats on the deal. Chris, maybe starting with you, just can you give us a little bit of kind of trailing 12-month context on kind of revenues, EBITDA and I think the 10% mix was related to EBITDA, but just maybe a little bit of history kind of we know where we're coming from to then project where we're going.

Yes. Good question, Jim. So as we look forward into 2026, we mentioned that we're looking to grow new horsepower approximately 2%, that horsepower number in terms of what's currently contemplated within the J-W legacy assets is about 40,000 new horsepower, of which over 60% of that's contracted at the moment. Looking back historically and relatively, the last 12 months, the number has been just south of $140 million on an adjusted EBITDA basis. And again, most of that increase on a relative basis for 2026 is tied to that new horsepower.

Got it. That's helpful. And then, Clint, obviously, J-W has been around for a long time. Would love to just hear your thoughts on kind of how you got this transaction? And as you think about it, you mentioned geographic diversity, but love to hear beyond just kind of geographic footprint?

And what's your thoughts that this brings to the table? Does it bring a lot of new customers of the 300? I imagine there's a lot of overlap there. Is it more tied to new growth opportunities? Is there any technologies or the manufacturing and AMS business that you kind of wanted to grow into and this helps you? Or is this more of a kind of gets you more scale, gives you some growth opportunity and helps deleveraging with a bunch of synergies? Just kind of curious your approach there.

Yes. Thank you, Jim. That -- it's really all of that, right? If you -- at investor conferences and over the last year, we've talked about if we were going to do a deal, it would need to be deleveraging, it would need to be accretive. It would need to be DCF -- improved DCF. We feel like that this does all of that. We also like being the footprint in the basins that it gives us opportunities to work in. With the AMS business, we've been pushing to grow that business here over the last year, and this helps us with that. It gives us opportunity there as well. So I think the best way to sum it up is we like the whole enchilada.

Our next question comes from the line of Eli Jossen with JPMorgan.

Just wanted to start on the kind of age and utilization of the horsepower versus your existing fleet. Can you just kind of provide some high-level color on how these assets from a utilization and uptime perspective compare to what you already have?

Sure, Eli. Yes. In terms of utilization, I think in the context of historical utilization, we have to decide what is that appropriate count of total horsepower. As we indicated in the slide deck, we're about -- the total horsepower being delivered associated with the transaction is about 1.05 million. We also distinguish between that and indicate that in excess of 900,000, we believe is readily deployable with some limited capital tied to it.

So if you tag that in and look at kind of where that number is, if you just simply look at 850,000 into 900,000 that would kind of be the relative utilization on what we would say is a comparable basis. Ultimately, we will get in with the assets and determine whether or not that number is 900,000 or 950,000 or whatever the case may be.

In terms of service offerings and the comparable service offerings, their uptime requirements are no different than our own, no different than many of our peers at the same time. The assets themselves are on average kind of similar age as our existing. The contract terms, I would draw a distinction there. They have tended towards shorter contract terms on average, whereas our average contract term nears 30 months, theirs is probably half that.

And so that is something that we're going to look towards as we go about recontracting in the next 12 months. And with that, we'll also be moving towards MLP qualified income with the recontracting. So there's some synergies that we would hope to achieve as it relates to that. Obviously, some additional tax synergies in time as we move to MLP qualified income. So hopefully, that addresses your questions. If you have anything that I did not address, please let me know.

No, that's super helpful color. And then maybe just one more. So if you -- I think there's some helpful splits and pie charts in the deck, but if we think about the upstream versus midstream exposure for the acquired assets, if you can provide a little bit of color on that and also just how that tied into the acquisition decision as well?

Yes. I'll just say this. We think that the gas gathering versus the -- what I would call gas lift or upstream component is somewhat similar with our own with a little bit heavier weight towards the gas lift side. I mean when we looked at this acquisition, what was exciting to us, frankly, was its geographic presence across the U.S. And while it incremented our Permian presence and continue to increase our Permian presence, in fact, on a pro forma basis, moved that just below 40%. These other areas are areas that are really going to be necessary to see the gas growth into the second half of this decade.

And so as we look forward to 2028, 2029, 2030, various third-party reports really show the growth in wells drilled in some of these other basins within the greater Rockies, within the Greater Mid-Continent, within the greater Northeast. And so that in and of itself is exciting. But certainly, having a little bit smaller proportion of what we would call small horsepower relative to our own fleet creates some more horsepower nearer to the wellhead.

Our next question will come from the line of Nate Pendleton with Texas Capital.

Congrats on a great acquisition. Following this acquisition and the improving distributable cash flow, can you talk about how you're looking at balancing further growth, accelerated deleveraging and the distribution? I know it's early, but any thoughts there would be helpful.

Yes. One of the things that we need to do is combine both assets once this deal closes and the expectations, hopefully, well before February time frame. And then in February, come out with our combined capital budget in the same way and timing that we normally do. As we do that, our capital priorities remain the same. I mean, we want to draw leverage below 4x sustainably.

And then we want to look at opportunistic growth with that. And so we had a horsepower number in mind, separate and distinct from this asset. As I mentioned, this asset has 40,000 horsepower that will be deployed and could be deployed to these particular -- to the contract compression space tied to the manufacturing business. We anticipate utilizing all of that. And then we need to decide what the pro forma numbers will be for USAC sub total. But again, we're looking at keeping leverage at or below 4x and then finding ways to continue to grow that relative coverage. And then at a point in time, decide what the priorities are beyond that.

And Nate, just to add to that, we're going to maintain our capital discipline we've been talking about it.

Got it. I really appreciate the detail there. And then maybe just a quick follow-up. Just drilling down a bit on the fleet. Can you talk about the composition, specifically electric motor drive? And are the others mostly cat aerial or any color there?

The vast majority is cat aerial. We will improve our relative electric components. Part of the manufacturing business has been retrofitting electric on smaller units, 690 horsepower units and below in some cases, so mid- to small horsepower. So we will improve that. I would expect for that to continue. We'll kind of provide some more fulsome numbers on electric.

But again, within our capital budget for 2026, and we haven't arrived at the final proportion for that. But I would tell you that, that electric would be extremely limited. And so as needed and as required by our customers, we're delivering electric. But overall, for 2026, the electric appetite was not immense.

Our next question will come from the line of Gabe Moreen with Mizuho.

Just had a couple of quick follow-ups. One is any divestitures, whether basins or HP types contemplated after this acquisition? I'm just curious.

Not at this time, Gabe. We'll continue to evaluate that as we move through it, but not at this time.

And then I was just curious, you mentioned a lot of new customers here, but as far as your existing basins where there is overlap with J-W Power, any shared customers here where you think they're 1 on 1 [ could ] equal 3 here in terms of more market share with some of those producer customers given this acquisition?

What was interesting about it, one, is the contract tenor of the customers. When we look at the top 10, it's real similar to our own in terms of the time frame. But what was interesting was as it relates to top 10, the relative limited overlap. So 300 customers amongst the top 10, limited overlap, really limited overlap in many of the top 20 customers. And so to your point, I think the calculus is actually a very positive one and not one where we necessarily have a great intensity -- customer intensity rate for any one customer.

Our next question comes from the line of Elvira Scotto with RBC Capital Markets.

Can you talk about -- I know you gave the acquisition multiple kind of without synergies. But can you talk about some of the potential synergies or cost savings that you expect over time from this acquisition?

Sure. Elvira, I'll take that one. The synergies -- we're pretty reasonably excited about the potential for synergies. I think we'll be more apt to be able to speak to those upon close. I'll tell you, we'll look across the landscape and find out where we can improve in terms of the gross margin side. I think some of that improvement is going to come from simple things like we had a lot of contract labor throughout a good portion of this year, had some open positions through a portion of this year. We would -- we had budgeted for some open positions next year. And I think through this process, we'll be able to fill those with J-W employees. So we're excited about that. And in turn, I think margins will improve.

There are things that, again, in the fullness of time as we move MLP qualified contracts over, I think there will be some ability to minimize some of the cash taxes associated with the assets that were historically tied to them. When I say minimize and defer some of those cash taxes, that probably is better said. And then between the 2 companies, we really made some meaningful impact in terms of our shared services offering with ET. I think we'll have some immediate impacts with some things like HR, IT platforms and so forth. Keep in mind, as we mentioned on that last call, our health care costs have come in and improved quite substantially. Our 401(k) and benefits package, I think, is a really strong offering. And so I think once we integrate some of the J-W platform into the shared services offering, I think we'll have some improvements to talk about. I think we'll be, again, better positioned to discuss that upon the transaction close and maybe be able to put forward some synergy numbers over the next 6 months or so.

[Operator Instructions] And our next question will come from the line of Selman Akyol with Stifel.

Just a couple of quick ones. Just to confirm, there was no debt acquired with this transaction?

Yes. So this will be -- this is kind of what we would call a cash -- a debt-free, cash-free transaction. They -- the legacy J-W asset did have an ABL tied to it. That ABL will go away with the transaction. And again, we'll fund a portion of this initially through our ABL and then decision whether or not we want to approach anything different with more of a fixed proportion going forward.

Understood. And then -- and I know this is small, but I'm just curious more than anything else. They had some enhanced oil recovery compression. And I'm just wondering, is there any difference in terms of margins, growth outlook, pricing, anything different there that we should be aware of?

No. I think CNG, EOR are part of the specialized manufacturing business. I think they are different and exciting packages for J-W relative to some other manufacturers. Ultimately, EOR is the better way to probably say that is really big, big units. And so that's a lot of horsepower on location and on site. And so they take some reasonable time to build. But the long and short of that is they're just big, big units.

And that concludes the question-and-answer session. With that, I would like to turn the call back to Clint Green for closing comments.

Yes. Thank you all for dialing in. As you can see, we're extremely excited about this opportunity. And just to close it out, we'd really like to thank the Westerman family for entrusting us for this. We're excited about carrying on the legacy and the history. And we'll be back with more updates later on. Thank you all very much.

This does conclude our call today. Thank you all for joining. You may now disconnect.

Good morning. Welcome to the USA Compression Partners Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, November 5, 2025.

I now would like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary. Mr. Porter, you may begin.

Good morning, everyone, and thank you for joining us. With me today is Clint Green, President and CEO; Chris Paulsen, Vice President and CFO; and Chris Wauson, Vice President and COO. This morning, we released our operational and financial results for the quarter ending September 30, 2025. You can find a copy of our earnings release as well as a recording of this call in the Investor Relations section of our website at usacompression.com.

During this call, our management will reference certain non-GAAP measures. You will find definitions and reconciliations of these non-GAAP measures to the most comparable U.S. GAAP measures in our earnings release. As a reminder, our conference call will include forward-looking statements. These statements are based on management's current beliefs and include projections and expectations regarding our future performance and other forward-looking matters. Actual results may differ materially from these statements. Please review the risk factors included in this morning's earnings release and in our other public filings. Please note that information provided on this call speaks only to management's views as of today, November 5, 2025, and may no longer be accurate at the time of a replay.

I will now turn the call over to Clint Green, President and CEO of USA Compression.

Thanks, Chris, and good morning. Thank you all for joining our call. We are pleased to deliver another solid quarter with revenues of over $250 million, adjusted EBITDA over $160 million and DCF approaching $104 million, with strong margins and consistent utilization resulting in improved leverage ratio of 3.9x and DCF coverage ratio of 1.6x. Based on year-to-date performance, we have increased our 2025 ranges for EBITDA and DCF guidance. This increase in guidance is a result of management's commitment to effective cost management and operational discipline. This includes certain onetime impacts that Chris Paulsen will discuss later in the call.

Additionally, we will deploy most of our 2025 new unit horsepower in Q4, setting the foundation for continued momentum in 2026. We are in the process of finalizing our 2026 capital budget, which we anticipate releasing in February. We expect that new horsepower will exceed 2025 levels given continued natural gas demand and new projects, both expanding takeaway capacity and increased localized demand in the Permian and Northeast. We have already committed to several deliveries in Q2 and Q3 of 2026.

Notably, we have recently seen lead times increase to more than 60 weeks for larger orders. Although U.S. producers are still evaluating macro market conditions to arrive at their appropriate capital budgets for 2026, we continue to see growth opportunities in the markets we operate. We expect our active horsepower in the Northeast and Central regions to grow by more than 40,000 horsepower before the end of 2025 relative to Q2. This is partially due to contracting 300 small horsepower units that will draw from idle capacity and increase small horsepower utilization to nearly 80% over the coming months.

These contracts include a 36-month initial term. This deployment, coupled with Q4 new unit deliveries to the Permian will bring our projected year-end active fleet to roughly 3.6 million horsepower. Turning to SG&A. We now expect to realize the majority of the $5 million of shared services annualized savings in 2025, ahead of the 2026 time line shared on our last call. These savings have and will continue to come from cost improvements seen through centralized IT efforts and other savings due to economies of scale. For example, Q3 benefited from a onetime health care cost true-up, reflecting a lower monthly per employee health care cost than previously estimated.

We expect 2026 G&A to grow modestly off of our new baseline, reflecting typical wage inflation and modest investments in new commercial and financial capabilities. Finally, we are pleased that both our bank syndicate and long-term investors continue to recognize the quality of the compression market. In Q3, we refinanced our ABL and our 2027 senior notes, significantly reducing our weighted average borrowing cost and improved strategic flexibility.

With that, I will turn the call over to Chris Paulsen, our Chief Financial Officer, for a detailed financial update.

Thanks, Clint. In Q3, our sales team continued to build upon pricing improvements, up to an all-time high, averaging $21.46 per horsepower for the third quarter, a 1% increase in sequential quarters and a 4% increase compared to a year ago. Average active horsepower remained flattish compared to Q2 at $3.55 million. Our third quarter adjusted gross margins were higher at 69.3%, in large part due to the realization of both onetime and ongoing cost savings tied to our centralized procurement processes, employee health care savings and onetime sales tax refund recognized at the completion of a prior year sales tax audit.

While Q3 gross margins were partially elevated due to onetime true-up and cost savings, going forward, we expect margins to stay consistent with our trailing 12-month rate. Regarding the consolidated financial results, our third quarter 2025 net income was $34.5 million. Operating income was $83.9 million. Net cash provided by operating activities was $75.9 million and cash interest expense net was $44.9 million. Our leverage ratio at the end of the third quarter was 3.9x.

As you may recall, our leverage ratio is determined in accordance with our ABL definition, which remained consistent with our latest refinancing and is calculated as funded debt divided by the latest quarter annualized adjusted EBITDA.

Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 3.9 million horsepower, essentially flat versus the prior quarter. Our average utilization for the third quarter was 94%, consistent with the prior quarter. Third quarter 2025 expansion capital expenditures were $37.3 million, and our maintenance capital expenditures were $9 million. Expansion capital spending in Q3 primarily consisted of new units, and we expect that to be the same in Q4.

Turning to 2025 guidance. We have increased and tightened our adjusted EBITDA range to $610 million to $620 million, increasing the midpoint of the range by approximately $15 million. We have also increased our DCF range to $370 million to $380 million, reduced our expansion capital range to $115 million to $125 million, and maintained our maintenance capital between $38 million and $42 million.

Approximately $11 million of expansion capital tied to late December deliveries is now expected to be realized in 2025 instead of January 2026, as stated in our Q2 call and therefore, is factored into our 2025 capital range. As previously discussed, we continue to maintain our leverage ratio and expect it to marginally increase at the end of the year as we fund new growth projects that are back-end loaded. Our target remains at or below 4x debt to EBITDA.

Finally, as Clint mentioned earlier, Q3 was characterized by 2 major refinancings. First, we extended and expanded our ABL from $1.6 billion to $1.75 billion, reducing our drawn cost by approximately 25 basis points. Second, we called our $750 million 2027 notes at par in favor of the 2033 notes of the same quantum, reducing our interest rate 62.5 basis points. All in all, we are on track to realize over $10 million annualized interest savings given these efforts and based on forecasted rate cuts, all while increasing overall liquidity and extending tenor.

And with that, I will turn the call back to Clint for concluding remarks.

Thanks, Chris. I want to thank our employees that have worked diligently towards our ERP implementation in early 2026. The collaboration across the organization has been significant and has brought regions and departments closer together. At the same time, we are realizing cost synergies from our new shared services model. The combination of both is improving our control, sophistication, data integrity and profitability. Therefore, I am excited about the path forward.

[Operator Instructions] Your first question comes from Nate Pendleton with Texas Capital.

Congrats on the record quarter. In a sustained slowdown in oil-directed activity, can you speak to your willingness to lean further into compression and dry gas plays in this environment based on the success you just highlighted in your prepared remarks?

And then also, would there be any investment in in-basin facilities required to support any significant increase in gas-directed compression?

Yes. So Nate, thank you for that question. We're already established in the dry gas markets. We -- while we have the majority of our operations is in the Permian, we're still very large in the Northeast, up in Oklahoma, down in the Gulf Coast. And we see with these demands coming online and these pipelines being built out of West Texas or out of the Permian, we see those plays as a place to -- as a growth where we expect to see drilling for gas instead of drilling for gas and -- associated gas and oil. And I missed the second part of your question there, Nate, what was that?

Just to add, would there be any incremental investment needed in the in-basin facility to support any increase in assets deployed there?

Well, I mean, we have active horsepower running in those basins, in the other dry gas basins. And so we can move equipment from anywhere that may slow down to those basins or we can buy new equipment and install there for operating. I hope that answers your question.

Yes, it does. I was just trying to get your geographic diversification. It does sound like you're already established there, so it would just be a matter of moving the horsepower in. So definitely positive.

That's exactly right. Thank you.

And then, Clint, if I may, one more. With the strong pricing trends that you guys noted during the quarter, can you speak to recent pricing dynamics and how spot prices are comparing to your fleet average here?

Yes. It's Chris Wauson. I'll take that one. Our market has definitely picked up since Q2. So our pricing trends from a dollar per horsepower basis is going to be consistent into the back half of 2025 into 2026. We feel like our dollar per horsepower revenue is going to be consistent. So we'll just see how everything works out, but that's our feeling right now.

[Operator Instructions] There are no further questions at this time. I'll now turn the conference back over to Clint Green for closing remarks.

Yes. Thank you all for joining our call. We appreciate the interest in our company, and have a good day.

This concludes today's conference call. You may now disconnect.