USAC: Low Gas Prices No Threat

USA Compression Partners LP (USAC) sees no particular threat from this year’s drop in U.S. natural gas prices.

Due to an abundance of supplies, prices at the bellwether Henry Hub in Louisiana fell from US$3.25/Mcfd at the end of 2018, to US$2.50 to $2.60 in May and then to US$2.10 to $2.15 in August.

Eric Long, president & CEO, said USAC’s contract-compression business is driven by throughput demand, not dependency on cyclical commodity prices.

“Remember that compression is not a onetime event for our customers but rather a service that is required throughout the life of a producing region,” Long said. “Generally, we’ll need more compression as reservoir pressures decline as oil and gas flows age.

“Demand for natural gas continues due to its relative abundance, attractive pricing for end users worldwide and environmentally friendly characteristics. We don’t see this changing anytime soon. And as we’ve said, the more gas moving through the system, the more demand for our compression services.”

Long said gas producers have slowed development in some regions until pipelines can be built and commissioned.  “As these important projects come online, we expect to see better pricing realizations for producers, which in turn will stimulate production and ultimately the volumes of flow through our midstream infrastructure.”

Austin, Texas-based USAC posted revenues of US$173.7 million for the second quarter compared to US$166.9 million for the same period last year.  Adjusted EBITDA was US$104.7 million versus to US$95.4 million a year ago.

Fleet horsepower was 3.7 million (2760 MW) and generating horsepower rose to 3.3 million (2460 MW).  Average utilization was 94.6%.  USAC added 47,000 hp (35 MW) in the second quarter, will take delivery a like amount in the second half of 2019, and the same amount again in the first half of 2020.  All orders are in the 2500 hp (1.8 MW) class and all are based on existing customer needs, the company said.