10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(MARK ONE)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2017

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                TO                

Commission File No. 001-33078

Archrock Partners, L.P.

(Exact name of registrant as specified in its charter)

Delaware	22-3935108
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

9807 Katy Freeway, Suite 100
Houston, Texas	77024
(Address of principal executive offices)	(Zip Code)

(281) 836-8000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer x
Non-accelerated filer o	(Do not check if a smaller reporting company)
		Smaller reporting company o
		Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 26, 2017, there were 70,186,146common units outstanding.

TABLE OF CONTENTS

	Page
Glossary	3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	4
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statements of Comprehensive Income	6
Condensed Consolidated Statements of Partners’ Capital	7
Condensed Consolidated Statements of Cash Flows	8
Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	39
Item 4. Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	41
SIGNATURES	42

2

GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.

2006 LTIP	The Archrock Partners, L.P. Long Term Incentive Plan, adopted in October 2006
2016 Form 10-K	Archrock Partners, L.P.’s Annual Report on Form 10-K for the year ended December 31, 2016
2017 LTIP	The Archrock Partners, L.P. Long Term Incentive Plan, adopted in April 2017
51st District Court	51st Judicial District Court of Irion County, Texas
Archrock	Archrock, Inc., individually and together with its wholly-owned subsidiaries
Bcf	Billion cubic feet
Credit Facility	$1.1 billion asset-based revolving credit facility
EES Leasing	Archrock Services Leasing LLC, formerly known as EES Leasing LLC
EIA	U.S. Energy Information Administration
Exchange Act	Securities Exchange Act of 1934, as amended
EXLP Leasing	Archrock Partners Leasing LLC, formerly known as EXLP Leasing LLC
FASB	Financial Accounting Standards Board
Financial Statements	The Partnership’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q
Former Credit Facility	$825.0 million revolving credit facility and $150.0 million term loan, terminated in March 2017
GAAP	Accounting principles generally accepted in the U.S.
Heavy Equipment Statutes	Texas Tax Code §§ 23.1241, 23.1242
LIBOR	London Interbank Offered Rate
March 2016 Acquisition	The Partnership’s March 1, 2016 acquisition of contract operations customer service agreements with four customers and a fleet of 19 compressor units
MMBtu	Million British thermal unit
Notes	6% senior notes due April 2021 and 6% senior notes due October 2022
November 2016 Contract Operations Acquisition	The November 2016 acquisition of contract operations customer service agreements and compressor units from Archrock
Omnibus Agreement	The Partnership’s omnibus agreement with Archrock, the Partnership’s general partner and others, as amended and/or restated
Partnership, we, our, us	Archrock Partners, L.P.
Plan Administrator	The compensation committee of Archrock Partners, L.P.‘s board of directors who serve as administrator to the long term incentive plans
Revenue Recognition Update	Accounting Standards Update No. 2014-09 and additional related standards updates
SEC	U.S. Securities and Exchange Commission
SG&A	Selling, general and administrative
Tcf	Trillion cubic feet
Update 2016-02	Accounting Standards Update No. 2016-02
Update 2016-09	Accounting Standards Update No. 2016-09
Update 2016-13	Accounting Standards Update No. 2016-13
Update 2016-15	Accounting Standards Update No. 2016-15
Update 2017-12	Accounting Standards Update No. 2017-12
U.S.	United States of America

3

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

ARCHROCK PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit amounts)

(unaudited)

	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	448		$	217
Accounts receivable, trade, net of allowance of $2,123 and $1,398, respectively	78,731			69,974
Total current assets	79,179			70,191
Property, plant and equipment	2,691,661			2,655,780
Accumulated depreciation	(938,373		)	(903,556		)
Property, plant and equipment, net	1,753,288			1,752,224
Intangible assets, net	64,732			76,663
Other long-term assets	17,637			4,296
Total assets	$	1,914,836		$	1,903,374
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable, trade	$	12,698		$	14
Accrued liabilities	10,731			7,386
Accrued interest	23,329			12,337
Due to affiliates, net	11,452			8,012
Current portion of interest rate swaps	1,297			3,226
Total current liabilities	59,507			30,975
Long-term debt	1,317,447			1,342,724
Deferred income taxes	—			2,500
Other long-term liabilities	9,093			5,002
Total liabilities	1,386,047			1,381,201
Commitments and contingencies (Note 13)
Partners’ capital:
Common units, 70,295,918 and 65,606,655 issued, respectively	518,531			516,208
General partner units, 2% interest with 1,421,471 and 1,326,965 equivalent units issued and outstanding, respectively	12,015			12,027
Accumulated other comprehensive income (loss)	539			(4,170		)
Treasury units, 109,772 and 86,795 common units, respectively	(2,296		)	(1,892		)
Total partners’ capital	528,789			522,173
Total liabilities and partners’ capital	$	1,914,836		$	1,903,374

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

ARCHROCK PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	140,191		$	135,478		$	415,741		$	426,954
Costs and expenses:
Cost of sales (excluding depreciation and amortization expense) — affiliates	62,584			50,854			172,856			158,024
Depreciation and amortization	35,787			38,087			108,947			115,951
Long-lived asset impairment	5,368			7,909			14,659			22,507
Restructuring charges	—			1,946			—			7,293
Selling, general and administrative — affiliates	20,711			17,917			59,325			61,337
Interest expense	21,839			20,034			63,361			58,089
Debt extinguishment costs	—			—			291			—
Other (income) loss, net	(2,793		)	(890		)	(3,614		)	20
Total costs and expenses	143,496			135,857			415,825			423,221
Income (loss) before income taxes	(3,305		)	(379		)	(84		)	3,733
Provision for income taxes	708			188			2,970			469
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
General partner interest in net income (loss)	$	(82	)	$	(11	)	$	(63	)	$	65
Common unitholder interest in net income (loss)	$	(3,931	)	$	(556	)	$	(2,991	)	$	3,199
Weighted average common units outstanding used in income (loss) per common unit:
Basic and diluted	68,101			59,837			66,298			59,805
Income (loss) per common unit:
Basic and diluted	$	(0.06	)	$	(0.01	)	$	(0.05	)	$	0.05
Distributions declared and paid per common unit	$	0.2850		$	0.2850		$	0.8550		$	1.1425

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

ARCHROCK PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
Other comprehensive income (loss):
Interest rate swap gain (loss), net of reclassifications to earnings	2,314			3,201			4,452			(4,116		)
Amortization of terminated interest rate swaps	257			—			257			—
Total other comprehensive income (loss)	2,571			3,201			4,709			(4,116		)
Comprehensive income (loss)	$	(1,442	)	$	2,634		$	1,655		$	(852	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

ARCHROCK PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(In thousands, except for unit amounts)

(unaudited)

														Accumulated Other Comprehensive Income (loss)
	Partners’ Capital								Treasury Units
	Common Units				General Partner Units
	$			Units	$			Units	$			Units					Total
Balance, January 1, 2016	$	538,197		59,796,514	$	17,151		1,209,562	$	(1,794	)	(74,888	)	$	(5,558	)	$	547,996
Issuance of common units for vesting of phantom units				68,548													—
Treasury units purchased									(89		)	(11,356	)				(89		)
March 2016 Acquisition	1,799			257,000	37			5,205									1,836
Issuance of general partner units					8			1,158									8
Contribution of capital, net	3,086				118												3,204
Cash distributions	(68,569		)		(6,137		)										(74,706		)
Unit-based compensation expense	803																803
Comprehensive income (loss)	3,199				65									(4,116		)	(852		)
Balance, September 30, 2016	$	478,515		60,122,062	$	11,242		1,215,925	$	(1,883	)	(86,244	)	$	(9,674	)	$	478,200
Balance, January 1, 2017	$	516,208		65,606,655	$	12,027		1,326,965	$	(1,892	)	(86,795	)	$	(4,170	)	$	522,173
Issuance of common units for vesting of phantom units				89,263													—
Treasury units purchased									(404		)	(22,977	)				(404		)
Issuance of common units	60,291			4,600,000													60,291
Issuance of general partner units					1,305			94,506									1,305
Contribution (distribution) of capital, net	1,798				(92		)										1,706
Cash distributions	(57,528		)		(1,162		)										(58,690		)
Unit-based compensation expense	753																753
Comprehensive income (loss)	(2,991		)		(63		)							4,709			1,655
Balance, September 30, 2017	$	518,531		70,295,918	$	12,015		1,421,471	$	(2,296	)	(109,772	)	$	539		$	528,789

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

ARCHROCK PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	(3,054	)	$	3,264
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	108,947			115,951
Long-lived asset impairment	14,659			22,507
Amortization of deferred financing costs	4,320			3,397
Amortization of debt discount	986			927
Amortization of terminated interest rate swaps	257			—
Debt extinguishment costs	291			—
Interest rate swaps	2,028			1,115
Unit-based compensation expense	753			803
Provision for doubtful accounts	2,287			2,277
Gain on sale of property, plant and equipment	(3,518		)	(639		)
Loss on non-cash consideration in March 2016 Acquisition	—			635
Deferred income tax provision	2,918			471
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, trade	(10,255		)	11,602
Other assets and liabilities	16,553			11,391
Net cash provided by operating activities	137,172			173,701
Cash flows from investing activities:
Capital expenditures	(115,939		)	(50,945		)
Payment for March 2016 Acquisition	—			(13,779		)
Proceeds from sale of property, plant and equipment	17,316			15,414
Net cash used in investing activities	(98,623		)	(49,310		)
Cash flows from financing activities:
Proceeds from borrowings of long-term debt	818,500			181,000
Repayments of long-term debt	(846,500		)	(223,500		)
Distributions to unitholders	(58,690		)	(74,706		)
Net proceeds from issuance of common units	60,291			—
Net proceeds from sale of general partner units	1,305			45
Payments for debt issuance costs	(14,855		)	(1,721		)
Payments for settlement of interest rate swaps that include financing elements	(1,405		)	(2,344		)
Purchases of treasury units	(404		)	(89		)
Increase (decrease) in amounts due to affiliates, net	3,440			(3,150		)
Net cash used in financing activities	(38,318		)	(124,465		)
Net increase (decrease) in cash and cash equivalents	231			(74		)
Cash and cash equivalents at beginning of period	217			472
Cash and cash equivalents at end of period	$	448		$	398
Supplemental disclosure of non-cash transactions:
Non-cash capital contribution from limited and general partner	$	3,855		$	793
Contract operations equipment acquired/exchanged, net	$	(2,149	)	$	2,411
Common units issued in March 2016 Acquisition	$	—		$	1,799
Non-cash consideration in March 2016 Acquisition	$	—		$	3,165

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

ARCHROCK PARTNERS, L.P.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Partnership included herein have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our 2016 Form 10-K, which contains a more comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. Certain prior year amounts have been reclassified to conform to the current year presentation.

Organization

We provide natural gas contract operations services to customers throughout the U.S. Our contract operations services primarily include designing, sourcing, owning, installing, operating, servicing, repairing and maintaining equipment to provide natural gas compression services to our customers.

Archrock General Partner, L.P. is our general partner and an indirect wholly-owned subsidiary of Archrock. As Archrock General Partner, L.P. is a limited partnership, its general partner, Archrock GP LLC, conducts our business and operations, and the board of directors and officers of Archrock GP LLC, which we refer to herein as our board of directors and our officers, make decisions on our behalf.

Comprehensive Income (Loss)

Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with our limited partners or general partner. Our accumulated other comprehensive income (loss) consists only of derivative instruments. Changes in accumulated other comprehensive income (loss) represent changes in the fair value of derivative instruments that are designated as cash flow hedges to the extent the hedge is effective and amortization of terminated interest rate swaps. See Note 8(“Derivatives”) for additional disclosures related to comprehensive income (loss).

Income (Loss) Per Common Unit

Income (loss) per common unit is computed using the two-class method. Under the two-class method, basic income (loss) per common unit is determined by dividing net income (loss) allocated to the common units after deducting the amounts allocated to our general partner (including distributions to our general partner on its incentive distribution rights) and participating securities, by the weighted average number of outstanding common units excluding the weighted average number of outstanding participating securities during the period. Participating securities include unvested phantom units with nonforfeitable tandem distribution equivalent rights to receive cash distributions in the quarter in which distributions are paid on common units. During periods of net loss, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses.

When computing income (loss) per common unit in periods when distributions are greater than income (loss), the amount of the actual incentive distribution rights, if any, is deducted from net income (loss) and allocated to our general partner for the corresponding period. The remaining amount of net income (loss), after deducting distributions to participating securities, is allocated between the general partner and common units based on how our partnership agreement allocates net losses.

When computing income per common unit in periods when income is greater than distributions, income is allocated to the general partner, participating securities and common units based on how our partnership agreement would allocate income if the full amount of income for the period had been distributed. This allocation of net income does not impact our total net income, consolidated results of operations or total cash distributions (including actual incentive distribution rights); however, it may result in our general partner being allocated additional incentive distributions for purposes of our income per unit calculation, which could reduce net income per common unit. However, as required by our partnership agreement, we determine cash distributions based on available cash and determine the actual incentive distributions allocable to our general partner based on actual distributions.

9

The following table reconciles net income (loss) used in the calculation of basic and diluted income (loss) per common unit (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
Less: General partner 2% ownership interest	82			11			63			(65		)
Common unitholder interest in net income (loss)	(3,931		)	(556		)	(2,991		)	3,199
Less: Net loss attributable to participating securities	(51		)	(56		)	(160		)	(170		)
Net income (loss) used in basic and diluted income (loss) per common unit	$	(3,982	)	$	(612	)	$	(3,151	)	$	3,029

The following table shows the potential common units that were included in computing diluted income (loss) per common unit (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Weighted average common units outstanding including participating securities	68,282		60,036		66,475		59,966
Less: Weighted average participating securities outstanding	(181	)	(199	)	(177	)	(161	)
Weighted average common units outstanding — used in basic income (loss) per common unit	68,101		59,837		66,298		59,805
Net dilutive potential common units issuable:
Phantom units	—		—		—		—
Weighted average common units and dilutive potential common units — used in diluted income (loss) per common unit	68,101		59,837		66,298		59,805

2. Recent Accounting Developments

Accounting Standards Updates Implemented

On January 1, 2017 we adopted Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions. Update 2016-09 allows companies to make an accounting policy election to either estimate forfeitures or account for forfeitures as they occur. We have elected to account for forfeitures as they occur. There was no material impact to the condensed consolidated financial statements as a result of the adoption of this standard.

Accounting Standards Updates Not Yet Implemented

In August 2017, the FASB issued Update 2017-12 which expands and refines hedge accounting for both nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements and makes certain targeted improvements to simplify the application of hedge accounting guidance. Update 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Entities will apply Update 2017-12 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted; amended presentation and disclosure guidance will be required only prospectively. Early adoption is permitted. We are currently evaluating the impact of Update 2017-12 on our consolidated financial statements including the impact of an early adoption as permitted in the guidance.

In August 2016, the FASB issued Update 2016-15 which addresses diversity in practice and simplifies several elements of cash flow classification including how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Update 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Update 2016-15 will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. Early adoption is permitted. We have evaluated Update 2016-15 and do not expect a material impact on our consolidated financial statements.

10

In June 2016, the FASB issued Update 2016-13 that changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. Update 2016-13 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. Entities will apply Update 2016-13 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We are currently evaluating the impact of Update 2016-13 on our consolidated financial statements.

In February 2016, the FASB issued Update 2016-02 that establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new guidance, lessor accounting is largely unchanged. Update 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of Update 2016-02 on our consolidated financial statements.

From May 2014 through May 2016, the FASB issued the Revenue Recognition Update that outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. The core principle of the Revenue Recognition Update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Revenue Recognition Update also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Revenue Recognition Update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted for reporting periods beginning after December 15, 2016. Companies may use either a full retrospective or a modified retrospective approach.

We intend to adopt the Revenue Recognition Update on January 1, 2018, using the modified retrospective transition method applied to those contracts which are not complete as of that date. Upon adoption, we will recognize the cumulative effect of adoption as an adjustment to the opening balance of our retained earnings.

Under current guidance, contract operations revenue is recognized when earned, which generally occurs monthly when the service is provided under our customer contracts. We anticipate the timing of revenue recognized will be impacted by contractual provisions for service availability guarantees of our compressor assets, re-billable costs associated with moving our compressor assets to a customer site, as well as delayed billings for new agreements. At this time we do not expect these changes to result in a material difference from current practice.

The Revenue Recognition Update provides guidance on contract costs that should be recognized as assets and amortized over the period that the related goods or services transfer to the customer. Certain costs such as sales commissions and freight charges to transport compressor assets, currently expensed as incurred, will be deferred and amortized. 

The impacts noted are not all-inclusive, but reflect our current expectations. We are still determining the materiality of the impact for certain of these changes on our consolidated financial statements. We anticipate significant changes to our disclosures based on the requirements prescribed by the Revenue Recognition Update.

In preparation for the adoption of the Revenue Recognition Update on January 1, 2018, we have established a transition team, with representation from all functional areas of our businesses that will be impacted, to implement the required changes. Processes to capture and verify the quality of information needed, including identifying and implementing changes to our information technology systems, are being developed. We are also in the process of evaluating changes to our internal control structure to address risks associated with recognizing revenue under the new guidance. We have modified certain controls effective in the fourth quarter of 2017 to take into consideration the new criteria for recognizing revenue, specifically identifying promises within the contract that give rise to performance obligations, and evaluating the impact of variable consideration on the transaction price. We will continue to evaluate our business processes, systems and controls to ensure the accuracy and timeliness of the recognition and disclosure requirements under the new revenue guidance.

11

3. Business Acquisitions

November 2016 Contract Operations Acquisition

On November 19, 2016, we completed the November 2016 Contract Operations Acquisition, whereby we acquired from Archrock contract operations customer service agreements with 63 customers and a fleet of 262 compressor units used to provide compression services under those agreements, comprising approximately 147,000 horsepower, or approximately 4% (of then available horsepower) of the combined U.S. contract operations business of Archrock and us. At the acquisition date, the acquired fleet assets had a net book value of $66.6 million, net of accumulated depreciation of $55.6 million. Total consideration for the transaction was $85 million, excluding transaction costs. In connection with the acquisition, we issued approximately 5.5 million common units to Archrock and approximately 111,000 general partner units to our general partner.

In connection with this acquisition, we were allocated $1.1 million finite life intangible assets associated with customer relationships of Archrock’s contract operations segment. The amounts allocated were based on the ratio of fair value of the net assets transferred to us to the total fair value of Archrock’s contract operations segment. These intangible assets are being amortized through 2024, based on the present value of income expected to be realized from these intangible assets.

Because Archrock and we are considered entities under common control, GAAP requires that we record the assets acquired and liabilities assumed from Archrock in connection with the November 2016 Contract Operations Acquisition using Archrock’s historical cost basis in the assets and liabilities. The difference between the historical cost basis of the assets acquired and liabilities assumed and the purchase price is treated as either a capital contribution or distribution.

An acquisition of a business from an entity under common control is generally accounted for under GAAP by the acquirer with retroactive application as if the acquisition date was the beginning of the earliest period included in the financial statements. Retroactive effect to the November 2016 Contract Operations Acquisition was impracticable because such retroactive application would have required significant assumptions in a prior period that cannot be substantiated. Accordingly, our financial statements include the assets acquired, liabilities assumed, revenue and direct operating expenses associated with the acquisition beginning on the date of such acquisition. However, the preparation of pro forma financial information allows for certain assumptions that do not meet the standards of financial statements prepared in accordance with GAAP.

March 2016 Acquisition

On March 1, 2016, we completed the March 2016 Acquisition, whereby we acquired contract operations customer service agreements with four customers and a fleet of 19 compressor units used to provide compression services under those agreements comprising approximately 23,000 horsepower. The $18.8 million purchase price was funded with $13.8 million in borrowings under our Former Credit Facility, a non-cash exchange of 24 compressor units for $3.2 million, and the issuance of 257,000 common units for $1.8 million. In connection with this acquisition, we issued and sold 5,205 general partner units to our general partner so it could maintain its approximate 2% general partner interest in us. During the nine months ended September 30, 2016, we incurred transaction costs of $0.2 million related to the March2016 Acquisition, which is reflected in other (income) loss, net, in our condensed consolidated statement of operations.

We accounted for the March2016 Acquisition using the acquisition method, which requires, among other things, assets acquired to be recorded at their fair value on the acquisition date. The following table summarizes the purchase price allocation based on estimated fair values of the acquired assets as of the acquisition date (in thousands):

	Fair Value
Property, plant and equipment	$	14,929
Intangible assets	3,839
Purchase price	$	18,768

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Property, Plant and Equipment and Intangible Assets Acquired

Property, plant and equipment is comprised of compressor units that will be depreciated on a straight-line basis over an estimated average remaining useful life of 15 years.

The amount of finite life intangible assets, and their associated average useful lives, was determined based on the period which the assets are expected to contribute directly or indirectly to our future cash flows, and consisted of the following:

	Amount (in thousands)		Average Useful Life
Contract based	$	3,839	2.3 years

The results of operations attributable to the assets acquired in the March2016 Acquisition have been included in our condensed consolidated financial statements since the date of acquisition.

Pro Forma Financial Information

Pro forma financial information is not presented for the March2016 Acquisition as it is immaterial to our reported results.

Pro forma financial information for the three and nine months ended September 30, 2016 has been included to give effect to the additional assets acquired in the November 2016 Contract Operations Acquisition. The November 2016 Contract Operations Acquisition is presented in the pro forma financial information as though this transaction occurred as of January 1, 2016. The pro forma financial information reflects the following transactions related to the November 2016 Contract Operations Acquisition:

• our acquisition of certain contract operations customer service agreements, compression equipment and identifiable intangible assets from Archrock; and

• our issuance of approximately 5.5 million common units to Archrock and approximately 111,000 general partner units to our general partner.

The pro forma financial information below is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results. The pro forma financial information below was derived by adjusting our historical financial statements.

The following table shows pro forma financial information for the three and nine months ended September 30, 2016 (in thousands, except per unit amounts):

	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016
Revenue	$	143,026	$	450,103
Net income	$	1,541	$	10,823
Basic and diluted income per common unit	$	0.02	$	0.16

Pro forma net income per common unit is determined by dividing the pro forma net income that would have been allocated to our common unitholders by the weighted average number of common units outstanding after the completion of the transactions included in the pro forma financial information. Pursuant to our partnership agreement, to the extent that the quarterly distributions exceed certain targets, our general partner is entitled to receive certain incentive distributions that will result in more net income proportionately being allocated to our general partner than to our common unitholders. No pro forma incentive distributions to our general partner nor a reduction to net income (loss) allocable to our common unitholders was included in our pro forma net income (loss) per common unit calculations for the three and nine months ended September 30, 2016, as there were no incentive distributions issued related to that period.

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4. Related Party Transactions

Our Omnibus Agreement with Archrock, our general partner and others includes, among other things:

• certain agreements not to compete between Archrock and its affiliates, on the one hand, and us and our affiliates, on the other hand;

• Archrock’s obligation to provide all operational staff, corporate staff and support services reasonably necessary to operate our business and our obligation to reimburse Archrock for such services;

• the terms under which we, Archrock, and our respective affiliates may transfer, exchange or lease compression equipment among one another;

• Archrock’s grant to us of a license to use certain intellectual property, including our logo; and

• Archrock’s and our obligations to indemnify each other for certain liabilities.

The Omnibus Agreement will terminate upon a change of control of Archrock GP LLC, our general partner or us, and certain provisions of the Omnibus Agreement will terminate upon a change of control of Archrock.

Transfer, Exchange or Lease of Compression Equipment with Archrock

Transactions between us and Archrock and its affiliates are transactions between entities under common control. Under GAAP, transfers of assets and liabilities between entities under common control are to be initially recorded on the books of the receiving entity at the carrying value of the transferor. Any difference between consideration given and the carrying value of the assets or liabilities is treated as a capital distribution or contribution. During the nine months ended September 30, 2017 and 2016, Archrock contributed to us $3.9 million and $0.8 million, respectively, primarily related to the completion of overhauls on compression equipment that was exchanged with us or contributed to us and where overhauls were in progress on the date of exchange or contribution.

If Archrock determines in good faith that we or Archrock’s contract operations services business need to transfer, exchange or lease compression equipment between Archrock and us, the Omnibus Agreement permits such equipment to be transferred, exchanged or leased if it will not cause us to breach any existing contracts, suffer a loss of revenue under an existing compression services contract or incur any unreimbursed costs. In consideration for such transfer, exchange or lease of compression equipment, the transferee will either (1) transfer to the transferor compression equipment equal in value to the appraised value of the compression equipment transferred to it, (2) agree to lease such compression equipment from the transferor or (3) pay the transferor an amount in cash equal to the appraised value of the compression equipment transferred to it.

The following table summarizes the transfer activity between Archrock and us:

	Transferred to Archrock				Transferred from Archrock
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Compressor units	199		354		170		259
Horsepower	109,800		168,600		99,500		121,600
Net book value (millions)	$	47.8	$	75.4	$	45.7	$	77.8

During the nine months ended September 30, 2017 and 2016, we recorded capital distributions of $2.1 million and capital contributions of $2.4 million, respectively, related to the differences in net book value on the exchanged compression equipment. No customer contracts were included in the transfers. Under the terms of the Omnibus Agreement, such transfers must be of equal appraised value, as defined in the Omnibus Agreement, with any difference being settled in cash.

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The following table summarizes the aggregate cost and accumulated depreciation of equipment on lease to Archrock (in millions):

	September 30, 2017		December 31, 2016
Aggregate cost	$	24.1	$	4.3
Accumulated depreciation	0.2		0.7

The following table summarizes the revenue from Archrock related to the lease of our compression equipment and the cost of sales related to the lease of Archrock compression equipment (in millions):

	Nine Months Ended September 30,
	2017		2016
Revenue	$	0.4	$	0.1
Cost of sales	0.7		0.2

Reimbursement of Operating and SG&A Expense

Archrock provides all operational staff, corporate staff and support services reasonably necessary to run our business. These services may include, without limitation, operations, marketing, maintenance and repair, periodic overhauls of compression equipment, inventory management, legal, accounting, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, taxes, facilities management, investor relations, enterprise resource planning system, training, executive, sales, business development and engineering.

Archrock charges us for costs that are directly attributable to us. Costs that are indirectly attributable to us and Archrock’s other operations are allocated among Archrock’s other operations and us. The allocation methodologies vary based on the nature of the charge and have historically included, among other things, headcount and horsepower. We believe that the allocation methodologies used to allocate indirect costs to us are reasonable.

5. Long-Term Debt

Long-term debt consisted of the following (in thousands):

	September 30, 2017			December 31, 2016
Revolving credit facility due March 2022	$	631,500		$	—
Revolving credit facility due May 2018	—			509,500
Term loan facility due May 2018	—			150,000
Less: Deferred financing costs, net of amortization	—			(353		)
	—			149,647
6% senior notes due April 2021	350,000			350,000
Less: Debt discount, net of amortization	(2,700		)	(3,213		)
Less: Deferred financing costs, net of amortization	(3,595		)	(4,366		)
	343,705			342,421
6% senior notes due October 2022	350,000			350,000
Less: Debt discount, net of amortization	(3,603		)	(4,076		)
Less: Deferred financing costs, net of amortization	(4,155		)	(4,768		)
	342,242			341,156
Long-term debt	$	1,317,447		$	1,342,724

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Revolving Credit Facility

On March 30, 2017, we entered into the Credit Facility, a five-year, $1.1 billion asset-based revolving credit facility. The Credit Facility will mature on March 30, 2022, except that if any portion of our 6% senior notes due April 2021 are outstanding as of December 2, 2020, then the Credit Facility will instead mature on December 2, 2020. We incurred $14.9 million in transaction costs related to the Credit Facility, which were included in other long-term assets in our condensed consolidated balance sheets and will be amortized over the term of the Credit Facility. Concurrent with entering into the Credit Facility, we terminated our Former Credit Facility and repaid $648.4 million in borrowings and accrued and unpaid interest and fees outstanding. All commitments under the Former Credit Facility have been terminated. As a result of the termination, we expensed $0.6 million of unamortized deferred financing costs associated with the $825.0 million revolving credit facility, which was included in interest expense in our condensed consolidated statements of operations. Additionally, we recorded a loss of $0.3 million related to the extinguishment of the $150.0 million term loan.

As of September 30, 2017, we had $631.5 million in outstanding borrowings and no outstanding letters of credit under the Credit Facility.

Subject to certain conditions, including the approval by the lenders, we are able to increase the aggregate commitments under the Credit Facility by up to an additional $250.0 million. Portions of the Credit Facility up to $25.0 million and $50.0 million will be available for the issuance of letters of credit and swing line loans, respectively.

The Credit Facility bears interest at a base rate or LIBOR, at our option, plus an applicable margin. Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from 2.00% to 3.25% and (ii) in the case of base rate loans, from 1.00% to 2.25%. The base rate is the highest of (i) the prime rate announced by JPMorgan Chase Bank, (ii) the Federal Funds Effective Rate plus 0.50% and (iii) one-month LIBOR plus 1.00%. At September 30, 2017, the applicable margin on amounts outstanding was 3.24%.

Additionally, we are required to pay commitment fees based on the daily unused amount of the Credit Facility in an amount, depending on our leverage ratio, ranging from 0.375% to 0.50%. We incurred $0.6 million and $0.3 million in commitment fees on the daily unused amount of the Credit Facility and the former $825.0 million revolving credit facility during the three months ended September 30, 2017 and 2016, respectively, and $1.5 million and $1.0 million during the nine months ended September 30, 2017 and 2016, respectively.

The Credit Facility borrowing base consists of eligible accounts receivable, inventory and compressor units. The largest component is eligible compressor units.

Borrowings under the Credit Facility are secured by substantially all of the personal property assets of us and our Significant Domestic Subsidiaries (as defined in the Credit Facility agreement), including all of the membership interests of our Domestic Subsidiaries (as defined in the Credit Facility agreement).

The Credit Facility agreement contains various covenants including, but not limited to, restrictions on the use of proceeds from borrowings and limitations on our ability to incur additional indebtedness, engage in transactions with affiliates, merge or consolidate, sell assets, make certain investments and acquisitions, make loans, grant liens, repurchase equity and pay distributions. The Credit Facility agreement also contains various covenants requiring mandatory prepayments from the net cash proceeds of certain asset transfers. In addition, if as of any date we have cash and cash equivalents (other than proceeds from a debt or equity issuance received in the 30 days prior to such date reasonably expected to be used to fund an acquisition permitted under the Credit Facility agreement) in excess of $50.0 million, then such excess amount will be used to pay down outstanding borrowings of a corresponding amount under the Credit Facility.

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We must maintain the following consolidated financial ratios, as defined in the Credit Facility agreement:

EBITDA to Interest Expense	2.5 to 1.0
Senior Secured Debt to EBITDA	3.5 to 1.0
Total Debt to EBITDA
Through fiscal year 2017	5.95 to 1.0
Through fiscal year 2018	5.75 to 1.0
Through second quarter of 2019	5.50 to 1.0
Thereafter (1)	5.25 to 1.0

⁽¹⁾  Subject to a temporary increase to 5.5 to 1.0 for any quarter during which an acquisition meeting certain thresholds is completed and for the following two quarters after the quarter in which the acquisition closes.

As of September 30, 2017, we had undrawn capacity of $468.5 million under the Credit Facility. As a result of the financial ratio requirements discussed above, $213.6 million of the $468.5 million of undrawn capacity was available for additional borrowings as of September 30, 2017.

A material adverse effect on our assets, liabilities, financial condition, business or operations that, taken as a whole, impacts our ability to perform our obligations under the Credit Facility agreement, could lead to a default under that agreement. A default under one of our debt agreements would trigger cross-default provisions under our other debt agreements, which would accelerate our obligation to repay our indebtedness under those agreements. As of September 30, 2017, we were in compliance with all financial covenants under the Credit Facility agreement.

6% Senior Notes Due April 2021 and 6% Senior Notes Due October2022

The Notes are guaranteed on a senior unsecured basis by all of our existing subsidiaries (other than Archrock Partners Finance Corp., which is a co-issuer of the Notes) and certain of our future subsidiaries. The Notes and the guarantees, respectively, are our and the guarantors’ general unsecured senior obligations, rank equally in right of payment with all of our and the guarantors’ other senior obligations, and are effectively subordinated to all of our and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such indebtedness. In addition, the Notes and guarantees are effectively subordinated to all existing and future indebtedness and other liabilities of any future non-guarantor subsidiaries. All of our subsidiaries are 100% owned, directly or indirectly, by us and guarantees by our subsidiaries are full and unconditional (subject to customary release provisions which are discussed in our 2016 Form 10-K) and constitute joint and several obligations. We have no assets or operations independent of our subsidiaries, and there are no significant restrictions upon our subsidiaries’ ability to distribute funds to us. Archrock Partners Finance Corp. has no operations and does not have revenue other than as may be incidental as co-issuer of the Notes. Because we have no independent operations, the guarantees are full and unconditional (subject to customary release provisions) and constitute joint and several obligations of our subsidiaries other than Archrock Partners Finance Corp., and as a result we have not included consolidated financial information of our subsidiaries.

6. Partners' Capital

Unit Transactions

In August 2017, we sold, pursuant to a public underwritten offering, 4,600,000 common units, including 600,000 common units pursuant to an over-allotment option. We received net proceeds of $60.3 million, after deducting underwriting discounts, commissions and offering expenses, which we used to repay borrowings outstanding under the Credit Facility. In connection with this sale and as permitted under our partnership agreement, we sold 93,163 general partner units to our general partner so it could maintain its approximate 2% general partner interest in us. We received net proceeds of $1.3 million from the general partner contribution.

During the nine months ended September 30, 2017, we issued and sold 94,506 general partner units, including the 93,163 units sold in the offering discussed above, to our general partner so it could maintain its approximate 2% general partner interest in us.

As of September 30, 2017, Archrock owned 29,064,637 common units and 1,421,471 general partner units, collectively representing an approximate 43% interest in us.

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Cash Distributions

We make distributions of available cash (as defined in our partnership agreement) from operating surplus in the following manner:

• first, 98% to all common unitholders, pro rata, and 2% to our general partner, until each unit has received a distribution of $0.4025;

• second, 85% to all common unitholders, pro rata, and 15% to our general partner, until each unit has received a distribution of $0.4375;

• third, 75% to all common unitholders, pro rata, and 25% to our general partner, until each unit has received a total of $0.5250; and

• thereafter, 50% to all common unitholders, pro rata, and 50% to our general partner.

The following table summarizes our distributions per unit for 2017 and 2016:

Period Covering	Payment Date	Distribution per Common Unit		Total Distribution
1/1/2016 — 3/31/2016	May 13, 2016	$	0.2850	$	17.5	million
4/1/2016 — 6/30/2016	August 15, 2016	0.2850		17.5		million
7/1/2016 — 9/30/2016	November 14, 2016	0.2850		17.5		million
10/1/2016 — 12/31/2016	February 14, 2017	0.2850		19.1		million
1/1/2017 — 3/31/2017	May 15, 2017	0.2850		19.1		million
4/1/2017 — 6/30/2017	August 14, 2017	0.2850		20.5		million

On October 20, 2017, our board of directors approved a cash distribution of $0.2850 per common unit, or approximately $20.5 million. The distribution covers the period from July 1, 2017 through September 30, 2017. The record date for this distribution is November 8, 2017 and payment is expected to occur on November 14, 2017.

7. Unit-Based Compensation

Long-Term Incentive Plan

In April 2017, we adopted the 2017 LTIP to provide for the benefit of the employees, directors and consultants of us, Archrock and our respective affiliates. Two million common units have been authorized for issuance with respect to awards under the 2017 LTIP. The 2017 LTIP provides for the issuance of unit options, unit appreciation rights, restricted units, phantom units, performance awards, bonus awards, distribution equivalent rights, cash awards and other unit-based awards. The 2017 LTIP will be administered by the compensation committee of our board of directors. The 2006 LTIP expired in 2016 and, as such, no further grants can be made under that plan. Previous grants made under the 2006 LTIP will continue to be governed by the 2006 LTIP and the applicable award agreements.

Phantom units are notional units that entitle the grantee to receive common units upon the vesting of such phantom units or, at the discretion of the Plan Administrator, cash equal to the fair market value of the underlying common units. Because we grant phantom units to non-employees, we are required to remeasure the fair value of these phantom units, which is based on the fair value of our common units, each period and record a cumulative adjustment of the expense previously recognized. Phantom units granted under the 2017 LTIP may include nonforfeitable tandem distribution equivalent rights to receive cash distributions on unvested phantom units in the quarter in which distributions are paid on common units. Phantom units granted generally vest one-third per year on dates as specified in the applicable award agreements subject to continued service through the applicable vesting date.

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Phantom Units

The following table presents phantom unit activity during the nine months ended September 30, 2017:

	Phantom Units (in thousands)		Weighted Average Grant Date Fair Value per Unit
Phantom units outstanding, January 1, 2017	197		$	11.60
Granted	81		16.28
Vested	(89	)	14.86
Canceled	(11	)	7.84
Phantom units outstanding, September 30, 2017	178		12.32

As of September 30, 2017, we expect $1.9 million of unrecognized compensation cost related to unvested phantom units to be recognized over the weighted-average period of 2.0 years.

8. Derivatives

We are exposed to market risks associated with changes in interest rates. We use derivative instruments to minimize the risks and/or costs associated with financial activities by managing our exposure to interest rate fluctuations on a portion of our debt obligations. We do not use derivative instruments for trading or other speculative purposes.

Interest Rate Risk

At September 30, 2017, we were a party to the following interest rate swaps, which were entered into to offset changes in expected cash flows due to fluctuations in the associated variable interest rates:

Expiration Date	Notional Value (in millions)
May 2019	$	100
May 2020	100
March 2022	300
	$	500

As of September 30, 2017, the weighted average effective fixed interest rate on our interest rate swaps was 1.8%. We have designated these interest rate swaps as cash flow hedging instruments so that any change in their fair values is recognized as a component of comprehensive income (loss) and is included in accumulated other comprehensive income (loss) to the extent the hedge is effective. As the swap terms substantially coincide with the hedged item and are expected to offset changes in expected cash flows due to fluctuations in the variable rate, we currently do not expect a significant amount of ineffectiveness on these hedges. We perform quarterly calculations to determine whether the swap agreements are still effective and to calculate any ineffectiveness. We recorded $0.7 million of interest expense during the nine months ended September 30, 2017 as compared to an immaterial amount of interest expense during the nine months ended September 30, 2016 due to ineffectiveness related to interest rate swaps. We estimate that $1.0 million of deferred losses attributable to interest rate swaps and included in our accumulated other comprehensive income (loss) at September 30, 2017, will be reclassified into earnings as interest expense at then-current values during the next twelve months as the underlying hedged transactions occur. Cash flows from derivatives designated as hedges are classified in our condensed consolidated statements of cash flows under the same category as the cash flows from the underlying assets, liabilities or anticipated transactions, unless the derivative contract contains a significant financing element; in this case, the cash settlements for these derivatives are classified as cash flows from financing activities in our condensed consolidated statements of cash flows.

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In August 2017, we amended the terms of certain of our interest rate swap agreements, designated as cash flow hedges against the variability of future interest payments due under the Credit Facility, with a notional value of $300.0 million. The amended terms adjusted the fixed interest rate and extended the maturity dates to March 2022. These amendments effectively created new derivative contracts and terminated the old derivative contracts. As a result, as of the amendment date, we discontinued the original cash flow hedge relationships on a prospective basis and designated the amended interest rate swaps under new cash flow hedge relationships based on the amended terms. The fair value of the interest rate swaps immediately prior to the execution of the amendments was a liability of $0.7 million. The associated amount in accumulated other comprehensive income (loss) is being amortized into interest expense over the original terms of the interest rate swaps through May 2018.

The following tables present the effect of derivative instruments on our consolidated financial position and results of operations (in thousands):

		Fair Value Asset (Liability)
	Balance Sheet Location	September 30, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Other long-term assets	$	1,884		$	413
Interest rate swaps	Current portion of interest rate swaps	(1,297		)	(3,226		)
Interest rate swaps	Other long-term liabilities	—			(377		)
Total derivatives		$	587		$	(3,190	)

	Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives			Location of Loss  Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)
Derivatives designated as cash flow hedges:
Interest rate swaps
Three months ended September 30, 2017	$	1,919		Interest expense	$	(652	)
Three months ended September 30, 2016	2,049			Interest expense	1,152
Nine months ended September 30, 2017	2,282			Interest expense	(2,427		)
Nine months ended September 30, 2016	(7,401		)	Interest expense	3,285

The counterparties to our derivative agreements are major financial institutions. We monitor the credit quality of these financial institutions and do not expect non-performance by any counterparty, although such non-performance could have a material adverse effect on us. We have no specific collateral posted for our derivative instruments.

9. Fair Value Measurements

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:

• Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.

• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.

• Level 3 — Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.

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Asset and Liabilities Measured at Fair Value on a Recurring Basis

On a quarterly basis, our interest rate swaps are valued based on the income approach (discounted cash flow) using market observable inputs, including forward LIBOR curves. These fair value measurements are classified as Level 2.

The following table presents our interest rate swaps asset and liability measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, with pricing levels as of the date of valuation (in thousands):

	September 30, 2017			December 31, 2016
Interest rate swaps asset	$	1,884		$	413
Interest rate swaps liability	(1,297		)	(3,603		)

Asset and Liabilities Measured at Fair Value on a Nonrecurring Basis

During the nine months ended September 30, 2017, we recorded non-recurring fair value measurements related to our idle and previously-culled compressor units. Our estimate of the compressor units’ fair value was primarily based on either the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years. These fair value measurements are classified as Level 3. The fair value of our impaired compressor units was $0.7 million and $3.6 million at September 30, 2017 and December 31, 2016, respectively. See Note 10(“Long-Lived Asset Impairment”) for further details.

Other Financial Instruments

The carrying amounts of our cash, receivables and payables approximate fair value due to the short-term nature of those instruments.

The carrying amounts of borrowings outstanding under our Credit Facility and Partnership Credit Facility approximate fair value due to their variable interest rates. The fair value of these outstanding borrowings was estimated using a discounted cash flow analysis based on interest rates offered on loans with similar terms to borrowers of similar credit quality, which are Level 3 inputs.

The fair value of our fixed rate debt was estimated based on quoted prices in inactive markets and is considered a Level 2 measurement. The following table summarizes the carrying amount and fair value of our fixed rate debt as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017		December 31, 2016
Carrying amount of fixed rate debt (1)	$	685,947	$	683,577
Fair value of fixed rate debt	687,000		686,000

⁽¹⁾  Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 5(“Long-Term Debt”) for further details.

10. Long-Lived Asset Impairment

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

During the three and nine months ended September 30, 2017 and 2016, we reviewed the future deployment of our idle compression assets for units that were not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determined that certain idle compressor units would be retired from the active fleet. The retirement of these units from the active fleet triggered a review of these assets for impairment, and as a result of our review, we recorded an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on either the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use.

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In connection with our review of our idle compression assets during the three and nine months ended September 30, 2017 and 2016, we evaluated for impairment idle units that had been culled from our fleet in prior years and were available for sale. Based upon that review, we reduced the expected proceeds from disposition for certain of the remaining units and recorded additional impairment to reduce the book value of each unit to its estimated fair value.

The following table presents the results of our impairment review for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Idle compressor units retired from the active fleet	45		45		150		205
Horsepower of idle compressor units retired from the active fleet	18,000		14,000		53,000		67,000
Impairment recorded on idle compressor units retired from the active fleet	$	5,368	$	4,693	$	14,659	$	18,742
Additional impairment recorded on available-for-sale compressor units previously culled	$	—	$	3,216	$	—	$	3,765

11. Restructuring Charges

In the first quarter of 2016, Archrock determined to undertake a cost reduction program to reduce its on-going operating expenses, including workforce reductions and closure of certain make-ready shops. These actions were the result of Archrock’s review of its business and efforts to efficiently manage cost and maintain its business in line with current and expected activity levels and anticipated make-ready demand in the U.S. market. During the three and nine months ended September 30, 2016, we incurred $1.9 million and $7.3 million, respectively, of restructuring charges comprised of an allocation of expenses related to severance benefits and consulting fees associated with this cost reduction plan from Archrock to us pursuant to the terms of the Omnibus Agreement based on horsepower and other factors. These charges are reflected as restructuring charges in our condensed consolidated statements of operations. Archrock’s cost reduction program under this plan was completed during the fourth quarter of 2016.

12. Income Taxes

Recent appellate court decisions have required us to remeasure certain of our uncertain tax positions. Consequently, we increased our unrecognized tax benefit for these positions during the nine months ended September 30, 2017. We had $6.5 million and $1.9 million of unrecognized tax benefits at September 30, 2017 and December 31, 2016, respectively, of which $3.4 million and $1.9 million, respectively, would affect the effective tax rate if recognized. We also recorded $0.9 million and $0.1 million of potential interest expense and penalties related to unrecognized tax benefits associated with uncertain tax positions as of September 30, 2017 and December 31, 2016, respectively. In addition, for the nine months ended September 30, 2017, our income tax provision reflects a deferred state release of $2.5 million related to the increase in our unrecognized tax benefit.

13. Commitments and Contingencies

Insurance Matters

Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. Archrock insures our property and operations against many, but not all, of these risks. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs.

In addition, Archrock is substantially self-insured for worker’s compensation, employer’s liability, property, auto liability, general liability and employee group health claims in view of the relatively high per-incident deductibles it absorbs under its insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.

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Tax Matters

We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of September 30, 2017 and December 31, 2016, we accrued $1.6 million and $1.5 million, respectively, for the outcomes of non-income based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non-income based tax audits could be material to our consolidated financial position, but it is possible that the resolution of future audits could be material to our consolidated results of operations or cash flows for the period in which the resolution occurs.

Litigation and Claims

In 2011, the Texas Legislature enacted changes related to the appraisal of natural gas compressors for ad valorem tax purposes by expanding the definitions of “Heavy Equipment Dealer” and “Heavy Equipment” effective from the beginning of 2012. Under the revised Heavy Equipment Statutes, we believe we are a Heavy Equipment Dealer, that our natural gas compressors are Heavy Equipment and that we, therefore, are required to file our ad valorem taxes under this new methodology. We further believe that our natural gas compressors are taxable under the Heavy Equipment Statutes in the counties where we maintain a business location and keep natural gas compressors instead of where the compressors may be located on January 1 of a tax year. As a result of this new methodology, our ad valorem tax expense (which is reflected in our condensed consolidated statements of operations as a component of cost of sales (excluding depreciation and amortization expense)) includes a benefit of $12.0 million during the nine months ended September 30, 2017. Since the change in methodology became effective in 2012, we have recorded an aggregate benefit of $62.1 million as of September 30, 2017, of which approximately $13.2 million has been agreed to by a number of appraisal review boards and county appraisal districts and $48.9 million has been disputed and is currently in litigation. A large number of appraisal review boards denied our position, although some accepted it, and we filed 82 petitions for review in the appropriate district courts with respect to the 2012 tax year, 93 petitions for review in the appropriate district courts with respect to the 2013 tax year, 103 petitions for review in the appropriate district courts with respect to the 2014 tax year, 111 petitions for review in the appropriate district courts with respect to the 2015 tax year, 105 petitions for review in the appropriate district courts with respect to the 2016 tax year and 77 petitions for review in the appropriate district courts with respect to the 2017 tax year.

To date, only five cases have advanced to the point of trial or submission of summary judgment motions on the merits, and only three cases have been decided, with two of the decisions having been rendered by the same presiding judge. All three of those decisions were appealed, and all three of the appeals have been decided by intermediate appellate courts.

On October 17, 2013, the 143rd Judicial District Court of Loving County, Texas ruled in EXLP Leasing LLC & EES Leasing LLC v. Loving County Appraisal District that our wholly-owned subsidiary, Archrock Partners Leasing LLC, formerly known as EXLP Leasing, and Archrock’s subsidiary, Archrock Services Leasing LLC, formerly known as EES Leasing, are Heavy Equipment Dealers and that their compressors qualify as Heavy Equipment, but the district court further held that the Heavy Equipment Statutes were unconstitutional as applied to EXLP Leasing’s and EES Leasing’s compressors. EXLP Leasing and EES Leasing appealed the district court’s constitutionality holding to the Eighth Court of Appeals in El Paso, Texas. On September 23, 2015, the Eighth Court of Appeals ruled in EXLP Leasing’s and EES Leasing’s favor by overruling the 143rd District Court’s constitutionality ruling. The Eighth Court of Appeals also ruled, however, that EXLP Leasing’s and EES Leasing’s natural gas compressors are taxable in the counties where they were located on January 1 of the tax year at issue.

On October 28, 2013, the 143rd Judicial District Court of Ward County, Texas ruled in EES Leasing LLC & EXLP Leasing LLC v. Ward County Appraisal District that EXLP Leasing and EES Leasing are Heavy Equipment Dealers and that their compressors qualify as Heavy Equipment, but the court held that the Heavy Equipment Statutes were unconstitutional as applied to their compressors. EXLP Leasing and EES Leasing appealed the district court’s constitutionality holding to the Eighth Court of Appeals in El Paso, Texas, and the Ward County Appraisal District cross-appealed the district court’s rulings that EXLP Leasing’s and EES Leasing’s compressors qualify as Heavy Equipment. On September 23, 2015, the Eighth Court of Appeals ruled in EXLP Leasing’s and EES Leasing’s favor by overruling the 143rd District Court’s constitutionality ruling and affirming its ruling that EXLP Leasing’s and EES Leasing’s compressors qualify as Heavy Equipment. The Eighth Court of Appeals also ruled, however, that EXLP Leasing’s and EES Leasing’s natural gas compressors are taxable in the counties where they were located on January 1 of the tax year at issue.

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The Ward County Appraisal District and Loving County Appraisal District each filed (on January 27, 2016 and February 10, 2016, respectively) a petition asking the Texas Supreme Court to review its respective Eighth Court of Appeals decision. On March 11, 2016, EXLP Leasing and EES Leasing filed responses to the appraisal districts’ petitions and cross-petitions for review in each case asking the Texas Supreme Court to also review the Eighth Court of Appeals’ determination that natural gas compressors are taxable in the counties where they were located on January 1 of the tax year at issue. The Ward County Appraisal District filed its response to EXLP Leasing’s and EES Leasing’s cross-petition on June 6, 2016, and EXLP Leasing and EES Leasing filed their reply on June 21, 2016. The Loving County Appraisal District filed its response to EXLP Leasing’s and EES Leasing’s cross-petition on May 27, 2016, and EXLP Leasing and EES Leasing filed their reply on June 10, 2016.

On March 18, 2014, the 10th Judicial District Court of Galveston, Texas ruled in EXLP Leasing LLC & EES Leasing LLC v. Galveston Central Appraisal District that EXLP Leasing and EES Leasing are Heavy Equipment Dealers and that their compressors qualify as Heavy Equipment, but the court held the Heavy Equipment Statutes unconstitutional as applied to their compressors. EXLP Leasing and EES Leasing appealed the district court’s constitutionality holding to the Fourteenth Court of Appeals in Houston, Texas. On August 25, 2015, the Fourteenth Court of Appeals issued a ruling stating that EXLP Leasing’s and EES Leasing’s compressors are taxable in the counties where they were located on January 1 of the tax year at issue, and it remanded the case to the district court for further evidence on the issue of whether the Heavy Equipment Statutes are constitutional as applied to EXLP Leasing’s and EES Leasing’s compressors. On November 24, 2015, EXLP Leasing and EES Leasing filed a petition asking the Texas Supreme Court to review this decision. On March 21, 2016, the Galveston Central Appraisal District filed a response to EXLP Leasing’s and EES Leasing’s petition for review, and EXLP Leasing and EES Leasing filed their reply on April 26, 2016.

In EES Leasing v. Irion County Appraisal District, EES Leasing and the appraisal district each filed motions for summary judgment in the 51st District Court concerning the applicability and constitutionality of the Heavy Equipment Statutes. On May 20, 2014, the district court entered an order denying both motions for summary judgment, holding that a fact issue existed as to the applicability of the Heavy Equipment Statutes to the one compressor at issue. The presiding judge for the 51st District Court has since consolidated the 2012 tax year case with EES Leasing’s 2013 tax year case, which also included EXLP Leasing as a party. On August 27, 2015, the presiding judge abated the combined case, EES Leasing LLC and EXLP Leasing LLC v. Irion County Appraisal District, until the final resolution of the appellate cases considering the constitutionality of the Heavy Equipment Statutes, or further order of the court.

EXLP Leasing and EES Leasing also filed a motion for summary judgment in EES Leasing LLC & EXLP Leasing LLC v. Harris County Appraisal District, pending in the 189th Judicial District Court of Harris County, Texas. The court heard arguments on the motion on December 6, 2013 but has yet to rule. No trial date has been set.

On June 3, 2015, the Fourth Court of Appeals in San Antonio, Texas issued a decision reversing the 406th District Court’s dismissal of EXLP Leasing’s and EES Leasing’s tax appeals for want of jurisdiction. In EXLP Leasing LLC et. al v. Webb County Appraisal District, United Independent School District (“United ISD”) intervened as a party in interest and sought to dismiss the lawsuit arguing that the district court was without jurisdiction to hear the appeal. Under Section 42.08(b) of the Texas Tax Code, a property owner must pay before the delinquency date the lesser of (1) the amount of taxes due on the portion of the taxable value of the property that is not in dispute or (2) the amount of taxes due on the property under the order from which the appeal is taken. EXLP Leasing and EES Leasing paid zero taxes to Webb County because the entire amount of tax assessed by Webb County was in dispute. Instead, as required by the Heavy Equipment Statutes and Texas Comptroller forms, EXLP Leasing and EES Leasing paid taxes on the compressors at issue to Victoria County, where they maintain their place of business and keep natural gas compressors. The Webb County Appraisal District and United ISD contested EXLP Leasing’s and EES Leasing’s position that the Heavy Equipment Statutes contain situs provisions requiring that taxes be paid where the dealer has a business location and keeps its natural gas compressors, instead arguing that taxes are payable to the county where each compressor is located as of January 1 of the tax year at issue. The district court granted United ISD’s motion to dismiss on April 1, 2014 and declined EXLP Leasing’s and EES Leasing’s motion to reconsider. The Fourth Court of Appeals reversed, holding that, based on the plain meaning of Section 42.08(b)(1), and because the entire amount was in dispute, EXLP Leasing and EES Leasing were not required to prepay disputed taxes to invoke the trial court’s jurisdiction. The Fourth Court of Appeals denied United ISD’s request for a rehearing. On September 29, 2015, United ISD filed a petition for review in the Texas Supreme Court. On December 4, 2015, the Texas Supreme Court denied United ISD’s petition for review.

United ISD has four delinquency lawsuits pending against EXLP Leasing and EES Leasing in the 49th District Court of Webb County, Texas. The cases have been abated pending the resolution of EXLP Leasing’s and EES Leasing’s 2012 tax year case pending in the 406th Judicial District Court of Webb County, Texas.

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On September 2, 2016, the Texas Supreme Court requested that consolidated merits briefs be filed in EXLP Leasing’s and EES Leasing’s cases against the Loving County Appraisal District, Ward County Appraisal District, and Galveston Central Appraisal District, as well as two similar cases involving different taxpayers. On September 19, 2016, the Supreme Court entered a consolidated briefing schedule for the five cases. Consolidated briefing was completed on February 7, 2017.

On March 10, 2017, the Texas Supreme Court granted EXLP Leasing’s and EES Leasing’s petition for review in EXLP Leasing LLC & EES Leasing LLC v. Galveston Central Appraisal District. Oral argument before the Texas Supreme Court was held on October 10, 2017.

We continue to believe that the revised statutes are constitutional as applied to natural gas compressors and that under the revised statutes our natural gas compressors are taxable in the counties where we maintain a business location and keep natural gas compressors. Recognizing the similarity of the issues and that these cases will ultimately be resolved by the Texas appellate courts, most of the remaining 2012-2017 district court cases have been formally or effectively abated pending a decision from the Texas Supreme Court.

If we are unsuccessful in our litigation, we would be required to pay ad valorem taxes up to the aggregate benefit we have recorded, and the additional ad valorem tax payments may also be subject to substantial penalties and interest. In addition, while we do not expect the ultimate determination of the issue of where the natural gas compressors are taxable under the Heavy Equipment Statutes would have an impact on the amount of taxes due, we could be subject to substantial penalties if we are unsuccessful on this issue. Also, if we are unsuccessful in our litigation, or if legislation is enacted in Texas that repeals or alters the Heavy Equipment Statutes such that in the future we do not qualify as a Heavy Equipment Dealer or our compressors do not qualify as Heavy Equipment, then we would likely be required to pay these ad valorem taxes under the old methodology going forward, which would increase our quarterly cost of sales expense up to approximately the amount of our then most recent quarterly benefit recorded. If this litigation is resolved against us in whole or in part, or if in the future we do not qualify as a Heavy Equipment Dealer or our compressors do not qualify as Heavy Equipment because of new or revised Texas statutes, we will incur additional taxes and could be subject to substantial penalties and interest, which would impact our future results of operations, financial position and cash flows, including our cash available for distribution.

In the ordinary course of business, we are also involved in various other pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from any of these other actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to make cash distributions to our unitholders. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to make cash distributions to our unitholders.

14. Subsequent Events

On October 4, 2017, we received cash proceeds of $4.7 million from the sale of approximately 675 compressor units previously retired from the active fleet.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Financial Statements of this Quarterly Report on Form 10-Q and in conjunction with our 2016 Form 10-K.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements, including, without limitation, statements regarding the Partnership’s business growth strategy and projected costs; future financial position; the sufficiency of available cash flows to fund continuing operations and make cash distributions; the expected amount of our capital expenditures; anticipated cost savings; future revenue, gross margin and other financial or operational measures related to our business; the future value of our equipment; and plans and objectives of our management for our future operations. You can identify many of these statements by looking for words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “will continue” or similar words or the negative thereof.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this Quarterly Report on Form 10-Q. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Known material factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include the risk factors described in our 2016 10-K, and those set forth from time to time in our filings with the SEC, which are available through our website at www.archrock.com and through the SEC’s website at www.sec.gov, as well as the following risks and uncertainties:

• conditions in the oil and natural gas industry, including a sustained decrease in the level of supply or demand for oil or natural gas or a sustained low price of oil or natural gas;

• our reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies;

• our dependence on Archrock to provide personnel and services, including its ability to hire, train and retain key employees and to cost-effectively perform the services necessary to conduct our business;

• changes in economic or political conditions, including terrorism and legislative changes;

• the inherent risks associated with our operations, such as equipment defects, impairments, malfunctions and natural disasters;

• loss of our status as a partnership for U.S. federal income tax purposes;

• the risk that counterparties will not perform their obligations under our financial instruments;

• the financial condition of our customers;

• our ability to implement certain business and financial objectives, such as:

• growing our asset base and asset utilization;

• winning profitable new business;

• integrating acquired businesses;

• generating sufficient cash; and

• accessing the capital markets at an acceptable cost;

• liability related to the provision of our services;

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• changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures; and

• our level of indebtedness and ability to fund our business.

All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Quarterly Report on Form 10-Q.

Overview

We are a Delaware limited partnership formed in June 2006 and are the market leader in the U.S. full-service natural gas compression industry. Our contract operations services primarily include designing, sourcing, owning, installing, operating, servicing, repairing and maintaining equipment to provide natural gas compression services to our customers.

Omnibus Agreement

Our Omnibus Agreement with Archrock, our general partner and others includes, among other things:

• certain agreements not to compete between Archrock and its affiliates, on the one hand, and us and our affiliates, on the other hand;

• Archrock’s obligation to provide all operational staff, corporate staff and support services reasonably necessary to operate our business and our obligation to reimburse Archrock for such services;

• the terms under which we, Archrock, and our respective affiliates may transfer, exchange or lease compression equipment among one another;

• Archrock’s grant to us of a license to use certain intellectual property, including our logo; and

• Archrock’s and our obligations to indemnify each other for certain liabilities.

The Omnibus Agreement will terminate upon a change of control of Archrock GP LLC, our general partner or us, and certain provisions of the Omnibus Agreement will terminate upon a change of control of Archrock. For further discussion of the Omnibus Agreement, see Note 4 (“Related Party Transactions”) to our Financial Statements.

Trends and Outlook

Our business environment and corresponding operating results are affected by the level of energy industry spending for the exploration, development and production of oil and natural gas reserves in the U.S. Spending by oil and natural gas exploration and production companies is dependent upon these companies’ forecasts regarding the expected future supply, demand and pricing of oil and natural gas products as well as their estimates of risk-adjusted costs to find, develop and produce reserves. For example, oil and natural gas exploration and development activity and the number of well completions typically decline when there is a significant reduction in oil and natural gas prices or significant instability in energy markets. Our revenue, earnings and financial position are affected by, among other things, market conditions that impact demand and pricing for natural gas compression, our customers’ decisions between using our services or our competitors’ services, our customers’ decisions regarding whether to own and operate the equipment themselves and the timing and consummation of any acquisition of additional contract operations customer service agreements and equipment from third parties. Although we believe our contract operations business is typically less impacted by commodity prices than certain other oil and natural gas service providers, changes in oil and natural gas exploration and production spending normally result in changes in demand for our services.

Natural gas consumption in the U.S. for the twelve months ended July 31, 2017decreased2% to 26,653 Bcf compared to 27,139 Bcf for the twelve months ended July 31, 2016. The EIA forecasts that total U.S. natural gas consumption will decrease3% in 2017 compared to 2016. The EIA estimates that the U.S. natural gas consumption level will be approximately 30 Tcf in 2040, or 15% of the projected worldwide total of approximately 203 Tcf.

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Natural gas marketed production in the U.S. for the twelve months ended July 31, 2017decreased3% to 28,102 Bcf compared to 28,817 Bcf for the twelve months ended July 31, 2016. The EIA forecasts that total U.S. natural gas marketed production will increase1% in 2017 compared to 2016. The EIA estimates that the U.S. natural gas production level will be approximately 35 Tcf in 2040, or 17% of the projected worldwide total of approximately 202 Tcf.

Historically, oil and natural gas prices and the level of drilling and exploration activity in the U.S. have been volatile. For example, the Henry Hub spot price for natural gas was $2.94 per MMBtu at September 29, 2017, which was 21%lower and 4%higher than prices at December 30, 2016 and September 30, 2016, respectively, and the U.S. natural gas liquid composite price was $6.27 per MMBtu for the month of July 2017, which was 6%lower and 19%higher than prices for the months of December 2016 and September 2016, respectively. In addition, the West Texas Intermediate crude oil spot price was $51.67 per barrel at September 29, 2017, which was 4%lower and 8%higher than prices at December 30, 2016 and September 30, 2016, respectively.

Increased stability of oil and natural gas prices in the second half of 2016 and thus far in 2017, compared to the declines experienced in 2015 and the first half of 2016, contributed to increased new orders for our compression services in 2017 compared to 2016, as well as a stabilization of our revenue in the three and nine months ended September 30, 2017, which increased 3% and decreased 3% compared to our revenue recorded during the three and nine months ended September 30, 2016, respectively.

Year to date 2017 operating horsepower increased compared to the decline in operating horsepower we experienced in 2016. We have invested more capital in new fleet units in 2017 than we did in 2016 to take advantage of improved market conditions during 2017. Although new orders for compression services have been strong in 2017, given the operating horsepower declines and pricing pressure experienced in 2016, we expect an overall decline in our full-year 2017 revenue compared to 2016.

Operating Highlights

The following table summarizes our total available horsepower, total operating horsepower, average operating horsepower and horsepower utilization percentages (in thousands, except percentages):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Total Available Horsepower (at period end)(1)(2)	3,296		3,221		3,296		3,221
Total Operating Horsepower (at period end)(1)(3)	2,910		2,762		2,910		2,762
Average Operating Horsepower	2,890		2,751		2,865		2,842
Horsepower Utilization:
Spot (at period end)	88	%	86	%	88	%	86	%
Average	88	%	84	%	87	%	86	%

⁽¹⁾  Includes compressor units comprising approximately 28,000 and 6,000 horsepower leased from Archrock as of September 30, 2017 and 2016, respectively. Excludes compressor units comprising approximately 33,000 and 100 horsepower leased to Archrock as of September 30, 2017 and 2016, respectively (see Note 4(“Related Party Transactions”) to our Financial Statements).

⁽²⁾  Defined as idle and operating horsepower. New compressor units completed by a third party manufacturer that have been delivered to us are included in the fleet.

⁽³⁾  Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue.

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Non-GAAP Financial Measures

Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measures of gross margin and distributable cash flow.

Gross Margin

We define gross margin as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations. We believe gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, the impact of our financing methods and income taxes. Depreciation and amortization expense may not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs of current operating activity. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.

Gross margin has certain material limitations associated with its use as compared to net income (loss). These limitations are primarily due to the exclusion of interest expense, depreciation and amortization expense, SG&A expense, impairments, restructuring charges, debt extinguishment costs, provision for (benefit from) income taxes and other (income) loss, net. Because we intend to finance a portion of our operations through borrowings, interest expense is a necessary element of our costs and our ability to generate revenue. Additionally, because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue and SG&A expense is necessary to support our operations and required partnership activities. To compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.

The following table reconciles net income (loss) to gross margin (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
Depreciation and amortization	35,787			38,087			108,947			115,951
Long-lived asset impairment	5,368			7,909			14,659			22,507
Restructuring charges	—			1,946			—			7,293
Selling, general and administrative — affiliates	20,711			17,917			59,325			61,337
Interest expense	21,839			20,034			63,361			58,089
Debt extinguishment costs	—			—			291			—
Other (income) loss, net	(2,793		)	(890		)	(3,614		)	20
Provision for income taxes	708			188			2,970			469
Gross margin	$	77,607		$	84,624		$	242,885		$	268,930

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Distributable cash flow

We define distributable cash flow as net income (loss) (a) plus depreciation and amortization expense, impairment charges, restructuring charges, non-cash SG&A costs, interest expense, expensed acquisition costs and debt extinguishment costs, (b) less cash interest expense (excluding amortization of deferred financing fees, amortization of debt discount and non-cash transactions related to interest rate swaps) and maintenance capital expenditures and (c) excluding gains or losses on asset sales and other items. Distributable cash flow is a supplemental financial measure that management and, we believe, external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships without regard to historical cost basis. We also believe distributable cash flow is an important liquidity measure because it allows management and external users of our financial statements the ability to compute the ratio of distributable cash flow to the cash distributions declared to all unitholders, including incentive distribution rights, to determine the rate at which the distributable cash flow covers the distribution. Our distributable cash flow may not be comparable to a similarly titled measure of another company because other entities may not calculate distributable cash flow in the same manner.

Distributable cash flow is not a measure of financial performance under GAAP and should not be considered in isolation or as an alternative to net income (loss), cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from distributable cash flow are significant and necessary components to the operations of our business, and, therefore, distributable cash flow should only be used as a supplemental measure of our operating performance.

The following table reconciles our net income (loss) to distributable cash flow (in thousands, except ratios):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
Depreciation and amortization	35,787			38,087			108,947			115,951
Long-lived asset impairment	5,368			7,909			14,659			22,507
Restructuring charges	—			1,946			—			7,293
Non-cash selling, general and administrative — affiliates	196			323			753			803
Interest expense	21,839			20,034			63,361			58,089
Expensed acquisition costs	—			—			—			172
Debt extinguishment costs	—			—			291			—
Less: Gain on sale of property, plant and equipment	(2,759		)	(795		)	(3,518		)	(639		)
Less: Loss on non-cash consideration in March 2016 Acquisition	—			—			—			635
Less: Cash interest expense	(19,262		)	(18,449		)	(57,175		)	(54,994		)
Less: Maintenance capital expenditures	(7,347		)	(4,785		)	(20,942		)	(18,710		)
Distributable cash flow	$	29,809		$	43,703		$	103,322		$	134,371
Distributions declared to all unitholders for the period	$	20,459		$	17,513		$	60,042		$	52,539
Distributable cash flow coverage(1)	1.46x			2.50x			1.72x			2.56x

⁽¹⁾  Defined as distributable cash flow for the period divided by distributions declared to all unitholders for the period.

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The following table reconciles our net cash provided by operating activities to distributable cash flow (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net cash provided by operating activities	$	38,414		$	64,813		$	137,172		$	173,701
Provision for doubtful accounts	(1,346		)	(705		)	(2,287		)	(2,277		)
Restructuring charges	—			1,946			—			7,293
Expensed acquisition costs	—			—			—			172
Deferred income tax provision	(686		)	(188		)	(2,918		)	(471		)
Payments for settlement of interest rate swaps that include financing elements	(364		)	(754		)	(1,405		)	(2,344		)
Maintenance capital expenditures	(7,347		)	(4,785		)	(20,942		)	(18,710		)
Changes in assets and liabilities	1,138			(16,624		)	(6,298		)	(22,993		)
Distributable cash flow	$	29,809		$	43,703		$	103,322		$	134,371

Financial Results of Operations

Summary of Results

Net income (loss). We generated a net loss of $4.0 million and $0.6 million during the three months ended September 30, 2017 and 2016, respectively. The increase in net loss was primarily due to the decrease in gross margin and increases in SG&A and interest expense, partially offset by decreases in long-lived asset impairment, depreciation and amortization and restructuring charges and an increase in other income, net.

We generated a net loss of $3.1 million and net income of $3.3 million during the nine months ended September 30, 2017 and 2016, respectively. The change in net income (loss) was primarily due to the decrease in gross margin and an increase in interest expense, partially offset by decreases in long-lived asset impairment, restructuring charges and depreciation and amortization and the change in other (income) loss, net.

Distributable cash flow. Our distributable cash flow was $29.8 million and $43.7 million and our distributable cash flow coverage (distributable cash flow for the period divided by distributions declared to all unitholders for the period) was 1.46x and 2.50x during the three months ended September 30, 2017 and 2016, respectively. The decrease in distributable cash flow was primarily due to the decrease in gross margin discussed above and increases in cash SG&A expense and maintenance capital expenditures.

Our distributable cash flow was $103.3 million and $134.4 million and our distributable cash flow coverage was 1.72x and 2.56x during the nine months ended September 30, 2017 and 2016, respectively. The decrease in distributable cash flow was primarily due to the decrease in gross margin discussed above and increases in maintenance capital expenditures and cash interest expense, partially offset by a decrease in cash SG&A expense.

For a reconciliation of distributable cash flow to net income (loss) and net cash provided by operating activities, its most directly comparable financial measures calculated and presented in accordance with GAAP, see “Non-GAAP Financial Measures” above.

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Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

The following table summarizes our revenue, gross margin, gross margin percentage, expenses and net loss (dollars in thousands):

	Three Months Ended September 30,
	2017			2016
Revenue	$	140,191		$	135,478
Gross margin(1)	77,607			84,624
Gross margin percentage(2)	55		%	62		%
Expenses:
Depreciation and amortization	35,787			38,087
Long-lived asset impairment	5,368			7,909
Restructuring charges	—			1,946
Selling, general and administrative — affiliates	20,711			17,917
Interest expense	21,839			20,034
Other income, net	(2,793		)	(890		)
Provision for income taxes	708			188
Net loss	$	(4,013	)	$	(567	)

⁽¹⁾  For a reconciliation of gross margin to net loss, its most directly comparable financial measure calculated and presented in accordance with GAAP, see “Non-GAAP Financial Measures.”

⁽²⁾  Defined as gross margin divided by revenue.

Revenue. The increase in revenue during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to a $6.4 million increase in revenue due to the November 2016 Contract Operations Acquisition, partially offset by lower rates and a decline in average operating horsepower (excluding the horsepower acquired in the November 2016 Contract Operations Acquisition) driven by a decrease in customer demand due to 2016 market conditions.

Gross margin. The decrease in gross margin during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to the increase in cost of sales mainly driven by increased expense associated with the November 2016 Contract Operations Acquisition and increases in lube oil expense and other operating costs. The increase in cost of sales was partially offset by the increase in revenue mentioned above. Gross margin percentage decreased during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 primarily due to the increase in cost of sales mentioned above and lower rates.

Depreciation and amortization. Depreciation and amortization expense decreased during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 due to a decrease in depreciation expense resulting from certain assets reaching the end of their depreciable lives as well as the impact of asset impairments during 2016 and early 2017, partially offset by an increase in depreciation expense associated with fixed asset additions including depreciation on compressor units acquired in connection with the November 2016 Contract Operations Acquisition.

Long-lived asset impairment. During the three months ended September 30, 2017 and 2016, we reviewed the future deployment of our idle compression assets for units that were not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. In addition, we evaluated for impairment idle units that had been culled from our fleet in prior years and were available for sale. See Note 10(“Long-Lived Asset Impairment”) to our Financial Statements for further details.

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The following table presents the results of our impairment review for the three months ended September 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended September 30,
	2017		2016
Idle compressor units retired from the active fleet	45		45
Horsepower of idle compressor units retired from the active fleet	18,000		14,000
Impairment recorded on idle compressor units retired from the active fleet	$	5,368	$	4,693
Additional impairment recorded on available-for-sale compressor units previously culled	$	—	$	3,216

Restructuring charges. In the first quarter of 2016, Archrock determined to undertake a cost reduction program to reduce its on-going operating expenses, including workforce reductions and closure of certain make ready shops. These actions were the result of Archrock’s review of its business and efforts to efficiently manage cost and maintain its business in line with current and expected activity levels and anticipated make ready demand in the U.S. market. The decrease in restructuring charges during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was due to the completion of Archrock’s cost reduction program in the fourth quarter of 2016. See Note 11 (“Restructuring Charges”) to our Financial Statements for further discussion of these charges.

SG&A — affiliates. SG&A expense is primarily comprised of an allocation of expenses, including costs for personnel support and related expenditures, from Archrock to us pursuant to the terms of the Omnibus Agreement. The increase in SG&A expense was due to a $2.1 million increase in costs allocated to us by Archrock and $0.6 million increase in bad debt expense. The increase in costs allocated to us by Archrock was driven by the overall increase in SG&A expense incurred by Archrock and an increase in costs allocated to us as a result of an increase in our available horsepower as compared to the combined available horsepower of Archrock and us which was largely driven by the November 2016 Contract Operations Acquisition.

Interest expense. The increase in interest expense during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to an increase in the weighted average effective interest rate, partially offset by a decrease in the average outstanding balance of long-term debt.

Other income, net. The increase in other income, net during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to a $2.0 million increase in gain on sale of property, plant and equipment.

Provision for income taxes. The increase in provision for income taxes during the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to an inability to fully benefit the loss subject to state level taxation in the three months ended September 30, 2017.

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Nine Months EndedSeptember 30, 2017 Compared to Nine Months EndedSeptember 30, 2016

The following table summarizes our revenue, gross margin, gross margin percentage, expenses and net income (loss) (dollars in thousands):

	Nine Months Ended September 30,
	2017			2016
Revenue	$	415,741		$	426,954
Gross margin(1)	242,885			268,930
Gross margin percentage(2)	58		%	63		%
Expenses:
Depreciation and amortization	108,947			115,951
Long-lived asset impairment	14,659			22,507
Restructuring charges	—			7,293
Selling, general and administrative — affiliates	59,325			61,337
Interest expense	63,361			58,089
Debt extinguishment costs	291			—
Other (income) expense, net	(3,614		)	20
Provision for income taxes	2,970			469
Net income (loss)	$	(3,054	)	$	3,264

⁽¹⁾  For a reconciliation of gross margin to net income (loss), its most directly comparable financial measure calculated and presented in accordance with GAAP, see “Non-GAAP Financial Measures” above.

⁽²⁾  Defined as gross margin divided by revenue.

Revenue. The decrease in revenue during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to lower rates and a decline in average operating horsepower (excluding the horsepower acquired in the November 2016 Contract Operations Acquisition) driven by a decrease in customer demand due to 2016 market conditions, partially offset by a $20.5 million increase in revenue due to the November 2016 Contract Operations Acquisition.

Gross margin. The decrease in gross margin during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to the decrease in revenue mentioned above and an increase in cost of sales mainly driven by increased expense associated with the November 2016 Contract Operations Acquisition and increases in lube oil expense and other operating costs. The increase in cost of sales was partially offset by the decrease in costs associated with the decline in average operating horsepower mentioned above. Gross margin percentage decreased during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to the increases in cost of sales mentioned above and lower rates.

Depreciation and amortization. The decrease in depreciation and amortization expense during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to a decrease in depreciation expense resulting from certain assets reaching the end of their depreciable lives as well as the impact of asset impairments during 2016 and early 2017, partially offset by an increase in depreciation expense associated with fixed asset additions including depreciation on compressor units acquired in connection with the November 2016 Contract Operations Acquisition.

Long-lived asset impairment. During the nine months ended September 30, 2017 and 2016, we reviewed the future deployment of our idle compression assets for units that were not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. In addition, we evaluated for impairment idle units that had been culled from our fleet in prior years and were available for sale. See Note 10(“Long-Lived Asset Impairment”) to our Financial Statements for further details.

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The following table presents the results of our impairment review for the nine months ended September 30, 2017 and 2016 (dollars in thousands):

	Nine Months Ended September 30,
	2017		2016
Idle compressor units retired from the active fleet	150		205
Horsepower of idle compressor units retired from the active fleet	53,000		67,000
Impairment recorded on idle compressor units retired from the active fleet	$	14,659	$	18,742
Additional impairment recorded on available-for-sale compressor units previously culled	$	—	$	3,765

Restructuring charges. In the first quarter of 2016, Archrock determined to undertake a cost reduction program to reduce its on-going operating expenses, including workforce reductions and closure of certain make ready shops. These actions were the result of Archrock’s review of its business and efforts to efficiently manage cost and maintain its business in line with current and expected activity levels and anticipated make ready demand in the U.S. market. The decrease in restructuring charges during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was due to the completion of Archrock’s cost reduction program in the fourth quarter of 2016. See Note 11 (“Restructuring Charges”) to our Financial Statements for further discussion of these charges.

SG&A — affiliates. SG&A expense is primarily comprised of an allocation of expenses, including costs for personnel support and related expenditures, from Archrock to us pursuant to the terms of the Omnibus Agreement. The decrease in SG&A expense was primarily due to a $2.9 million decrease in costs allocated to us by Archrock mainly driven by the overall decrease in SG&A expense incurred by Archrock. This decrease was partially offset by an increase in costs allocated to us as a result of an increase in our available horsepower as compared to the combined available horsepower of Archrock and us which was largely driven by the November 2016 Contract Operations Acquisition.

Interest expense. The increase in interest expense during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to an increase in the weighted average effective interest rate and a $0.6 million write-off of deferred financing costs associated with the termination of our former $825.0 million revolving credit facility, partially offset by a decrease in the average outstanding balance of long-term debt.

Other (income) loss, net. The change in other (income) loss, net, was primarily driven by a $3.5 million gain on the sale of property, plant and equipment during the nine months ended September 30, 2017 compared to a $0.6 million gain on the sale of property, plant and equipment during the nine months ended September 30, 2016, and a $0.6 million loss on non-cash consideration and $0.2 million of expensed acquisition costs, both of which were associated with the March 2016 Acquisition and incurred during the nine months ended September 30, 2016.

Provision for income taxes. The increase in provision for income taxes during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to an increase in an unrecognized tax benefit resulting from recent appellate court decisions which impacted certain of our uncertain tax positions, partially offset by the deferred state release related to the increase in our unrecognized tax benefit.

Liquidity and Capital Resources

Overview

Our ability to fund operations, finance capital expenditures and make distributions to our unitholders depends on the levels of our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under the Credit Facility.

Our cash flow is affected by numerous factors including prices and demand for our services, volatility in commodity prices and their effect on oil and natural gas exploration and production spending, conditions in the financial markets and other factors. The reduction in capital spending and drilling activity by our customers in 2016 has resulted in decreased cash flow from operations thus far in 2017. Although new orders for compression services have been strong in 2017, given the operating horsepower declines and pricing pressure experienced in 2016 (see “Trends and Outlook” above), we expect our cash flow from operations in 2017 to decrease as compared to 2016. Despite this expected decrease, we believe that our operating cash flows and borrowings under the Credit Facility will be sufficient to meet our liquidity needs through at least September 30,2018.

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We intend to distribute all of our available cash to our unitholders. Available cash is reduced by cash reserves established by our general partner to provide for the proper conduct of our business, including future capital expenditures. To the extent we are unable to finance growth externally and we are unwilling to establish cash reserves to fund future acquisitions, our cash distribution policy will significantly impair our ability to grow. Because we distribute all of our available cash, we may not grow as quickly as businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or growth capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain our per unit distribution level, which in turn may impact the available cash that we have to distribute for each unit. There are no limitations in our partnership agreement or in the terms of the Credit Facility on our ability to issue additional units, including units ranking senior to our common units.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Capital Requirements

The natural gas compression business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is dependent on the demand for our services and the availability of the type of compression equipment required for us to render those services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:

• growth capital expenditures, which are made to expand or to replace partially or fully depreciated assets or to expand the operating capacity or revenue generating capabilities of existing or new assets, whether through construction, acquisition or modification; and

• maintenance capital expenditures, which are made to maintain the existing operating capacity of our assets and related cash flows further extending the useful lives of the assets.

The majority of our growth capital expenditures are related to the acquisition cost of new compressor units that we add to our fleet. In addition to the cost of newly acquired compressor units, growth capital expenditures can also include the upgrading of major components on an existing compressor unit where the current configuration of the compressor unit is no longer in demand and the compressor is not likely to return to an operating status without the capital expenditures. These latter expenditures substantially modify the operating parameters of the compressor unit such that it can be used in applications for which it previously was not suited. Maintenance capital expenditures are related to major overhauls of significant components of a compressor unit, such as the engine, compressor and cooler, which return the components to a like new condition, but do not modify the applications for which the compressor unit was designed.

Without giving effect to any equipment we may acquire pursuant to any future acquisitions, we currently plan to spend approximately $180 million in capital expenditures during 2017, including approximately $150 million on growth capital expenditures and approximately $30 million on equipment maintenance capital expenditures. Archrock manages its and our respective fleets as one pool of compression equipment from which we can each readily fulfill our respective customers’ service needs. When we or Archrock are advised of a contract operations services opportunity, Archrock reviews both our and its fleet for an available and appropriate compressor unit. The majority of the idle compression equipment required for servicing these contract operations services has been and is currently held by Archrock. The owner of the equipment being transferred is required to pay the costs associated with making the idle equipment suitable for the proposed customer and then has generally leased the equipment to the recipient of the equipment or exchanged the equipment for other equipment of the recipient. Because Archrock has owned the majority of such equipment, Archrock has generally had to bear a larger portion of the maintenance capital expenditures associated with making transferred equipment ready for service. For equipment that is then leased, the maintenance capital cost is a component of the lease rate that is paid under the lease. If we acquire more compression equipment, we expect that more of our equipment will be available to satisfy our or Archrock’s customer requirements. As a result, we expect that our maintenance capital expenditures will continue to increase and that our lease expense will decrease.

In addition, our capital requirements include funding distributions to our unitholders. Given our objective of long-term growth through acquisitions, growth capital expenditure projects and other internal growth projects, we anticipate that over time we will continue to invest capital to grow and acquire assets. We expect to actively consider a variety of assets for potential acquisitions and growth projects. We expect to fund these future capital expenditures with borrowings under our senior secured credit facility and the issuance of additional debt and equity securities, as appropriate, given market conditions. The timing of future capital expenditures will be based on the economic environment, including the availability of debt and equity capital.

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Financial Resources

Credit Facility

The following table presents the weighted average annual interest rate and average daily debt balance of the Credit Facility for the nine months ended September 30, 2017 and September 30, 2016:

	Nine Months Ended September 30,
	2017			2016
Weighted average annual interest rate (1) (2)	4.6		%	3.6		%
Average daily debt balance (in millions) (2)	$	616.6		$	733.7

⁽¹⁾  Excludes the effect of interest rate swaps.

⁽²⁾  The amounts for the nine months ended September 30, 2017 pertain to the Credit Facility. The amounts for the nine months ended September 30, 2016 pertain to our former $825.0 million revolving credit facility and $150.0 million term loan.

The Credit Facility matures on March 30, 2022, except that if any portion of our 6% senior notes due April 2021 are outstanding as of December 2, 2020, then the Credit Facility will instead mature on December 2, 2020. Portions of the Credit Facility up to $25.0 million and $50.0 million are available for the issuance of letters of credit and swing line loans, respectively. Subject to certain conditions, including approval by the lenders, we are able to increase the aggregate commitments under the Credit Facility by up to an additional $250.0 million. The Credit Facility borrowing base consists of eligible accounts receivable, inventory and compressor units.

Concurrent with entering into the Credit Facility in March 2017, we terminated our former $825.0 million revolving credit facility and $150.0 million term loan. All commitments under the former revolving credit facility and term loan have been terminated.

We must maintain the following consolidated financial ratios, as defined in the Credit Facility agreement:

EBITDA to Interest Expense	2.5 to 1.0
Senior Secured Debt to EBITDA	3.5 to 1.0
Total Debt to EBITDA
Through fiscal year 2017	5.95 to 1.0
Through fiscal year 2018	5.75 to 1.0
Through second quarter of 2019	5.50 to 1.0
Thereafter (1)	5.25 to 1.0

⁽¹⁾  Subject to a temporary increase to 5.50 to 1.0 for any quarter during which an acquisition meeting certain thresholds is completed and for the following two quarters after the quarter in which the acquisition closes.

As a result of the Total Debt to EBITDA ratio limitation above, $213.6 million of the $468.5 million undrawn capacity under the Credit Facility was available for additional borrowings as of September 30, 2017.

The Credit Facility agreement also contains various additional covenants including, but not limited to, mandatory prepayments from the net cash proceeds of certain asset transfers, restrictions on the use of proceeds from borrowings and limitations on our ability to incur additional indebtedness, engage in transactions with affiliates, merge or consolidate, sell assets, make certain investments and acquisitions, make loans, grant liens, repurchase equity and pay distributions. In addition, if as of any date we have cash and cash equivalents (other than proceeds from a debt or equity issuance received in the 30 days prior to such date reasonably expected to be used to fund an acquisition permitted under the Credit Facility agreement) in excess of $50.0 million, then such excess amount will be used to pay down outstanding borrowings of a corresponding amount under the Credit Facility. As of September 30, 2017, we were in compliance with all covenants under the Credit Facility.

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Capital Offering

In August 2017, we sold, pursuant to a public underwritten offering, 4,600,000 common units, including 600,000 common units pursuant to an over-allotment option. We received net proceeds of $60.3 million, after deducting underwriting discounts, commissions and offering expenses, which we used to repay borrowings outstanding under the Credit Facility. In connection with this sale and as permitted under our partnership agreement, we issued and sold 93,163 general partner units to our general partner so it could maintain its approximate 2% general partner interest in us. We received net proceeds of $1.3 million from the general partner contribution.

Cash Flows

The following table summarizes our sources and uses of cash during the nine months ended September 30, 2017 and 2016 (in thousands):

	Nine Months Ended September 30,
	2017			2016
Net cash provided by (used in):
Operating activities	$	137,172		$	173,701
Investing activities	(98,623		)	(49,310		)
Financing activities	(38,318		)	(124,465		)
Net change in cash and cash equivalents	$	231		$	(74	)

Operating Activities. The decrease in net cash provided by operating activities during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to a decrease in gross margin, partially offset by a decrease in restructuring charges.

Investing Activities. The increase in net cash used in investing activities during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to a $65.0 million increase in capital expenditures, partially offset by a $13.8 million payment for the March 2016 Acquisition (as discussed in Note 3(“Business Acquisitions”) to our Financial Statements) and a $1.9 million increase in proceeds from sale of property, plant and equipment.

Financing Activities. The decrease in net cash used in financing activities during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was due to net proceeds of $60.3 million received from a public offering of our common units during nine months ended September 30, 2017, a $16.0 million decrease in distributions to unitholders, and a $14.5 million decrease in net repayments of long-term debt. These changes were partially offset by a $13.1 million increase in payments for debt issuance costs and a $6.6 million net increase in amounts due to affiliates.

Distributions to Unitholders

Our partnership agreement requires us to distribute all of our “available cash” quarterly. Under our partnership agreement, available cash is defined generally to mean, for each fiscal quarter, (i) our cash on hand at the end of the quarter in excess of the amount of reserves our general partner determines is necessary or appropriate to provide for the conduct of our business, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our unitholders for any one or more of the upcoming four quarters, plus, (ii) if our general partner so determines, all or a portion of our cash on hand on the date of determination of available cash for the quarter.

On October 20, 2017, our board of directors approved a cash distribution of $0.2850 per common unit, or approximately $20.5 million. The distribution covers the period from July 1, 2017 through September 30, 2017. The record date for this distribution is November 8, 2017 and payment is expected to occur on November 14, 2017. The amount of our cash distributions will be determined by our board of directors on a quarterly basis, taking into account a number of factors. Therefore, there is no guarantee that we will continue to pay cash distributions to our unitholders at the current level, or at all.

Off-Balance Sheet Arrangements

For information on our obligations with respect to letters of credit see Note 5(“Long-Term Debt”) to our Financial Statements.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk primarily associated with changes in interest rates under our financing arrangements. We use derivative instruments to minimize the risks and/or costs associated with financial activities by managing our exposure to interest rate fluctuations on a portion of our debt obligations. We do not use derivative instruments for trading or other speculative purposes.

As of September 30, 2017, after taking into consideration interest rate swaps, we had $131.5 million of outstanding indebtedness that was effectively subject to floating interest rates. A 1% increase in the effective interest rate on our outstanding debt subject to floating interest rates at September 30, 2017 would result in an annual increase in our interest expense of $1.3 million.

For further information regarding our use of interest rate swap agreements to manage our exposure to interest rate fluctuations on a portion of our debt obligations, see Note 8(“Derivatives”) to our Financial Statements.

Item 4. Controls and Procedures

This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Quarterly Report as Exhibits 31.1 and 31.2.

Management’s Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in the rules and forms of the SEC. Based on the evaluation, as of September 30, 2017, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

See Note 13(“Commitments and Contingencies”) to our Financial Statements for a discussion of litigation related to the Heavy Equipment Statutes, which is incorporated by reference into this Item 1.

In the ordinary course of business, we are also involved in various other pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from any of these other actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to make cash distributions to our unitholders. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to make cash distributions to our unitholders.

Item 1A. Risk Factors

There have been no material changes or updates to our risk factors that were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit No.	Description
2.1	Contribution, Conveyance and Assumption Agreement, dated April 17, 2015, by and among Exterran Holdings, Inc., Exterran Energy Solutions, L.P., EES Leasing LLC, EXH GP LP LLC, Exterran GP LLC, EXH MLP LP LLC, Exterran General Partner, L.P., EXLP Operating LLC, EXLP Leasing LLC and Exterran Partners, L.P., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on April 20, 2015
2.2	Contribution, Conveyance and Assumption Agreement, dated October 31, 2016, by and among Archrock, Inc., Archrock Services, L.P., Archrock Services Leasing LLC, Archrock GP LP LLC, Archrock GP LLC, Archrock MLP LP LLC, Archrock General Partner, L.P., Archrock Partners Operating LLC, Archrock Partners Leasing LLC and Archrock Partners, L.P., incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 3, 2016
3.1	Certificate of Limited Partnership of Universal Compression Partners, L.P. (now Archrock Partners, L.P), incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 filed on June 27, 2006
3.2	Certificate of Amendment to Certificate of Limited Partnership of Universal Compression Partners, L.P. (now Archrock Partners, L.P.), dated as of August 20, 2007, incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 24, 2007
3.3	Certificate of Amendment of Certificate of Limited Partnership of Exterran Partners, L.P. (now Archrock Partners, L.P.), incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
3.4	Composite Certificate of Limited Partnership of Archrock Partners, L.P., incorporated by reference to Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K filed on February 29, 2016
3.5	First Amended and Restated Agreement of Limited Partnership of Archrock Partners, L.P., as amended, incorporated by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008
3.6	Certificate of Limited Partnership of UCO General Partner, LP (now Archrock General Partner, L.P.), incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1 filed on June 27, 2006
3.7	Amended and Restated Limited Partnership Agreement of UCO General Partner, LP (now Archrock General Partner, L.P.), incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 26, 2006
3.8	Certificate of Formation of UCO GP, LLC (now Archrock GP, LLC), incorporated by reference to Exhibit 3.5 to the Registrant’s Registration Statement on Form S-1 filed June 27, 2006
3.9	Amended and Restated Limited Liability Company Agreement of UCO GP, LLC (now Archrock GP, LLC), incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed on October 26, 2006
4.1	Indenture, dated as of March 27, 2013, by and among Exterran Partners, L.P., EXLP Finance Corp., the Guarantors named therein and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 28, 2013
4.2	Registration Rights Agreement, dated as of March 27, 2013, by and among Exterran Partners, L.P., EXLP Finance Corp., the Guarantors named therein and Wells Fargo Securities, LLC, as representative of the Initial Purchasers, incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on March 28, 2013
4.3	Indenture, dated as of April 7, 2014, by and among Exterran Partners, L.P., EXLP Finance Corp., the Guarantors named therein and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on April 11, 2014
4.4	Registration Rights Agreement, dated as of April 7, 2014, by and among Exterran Partners, L.P., EXLP Finance Corp., the Guarantors named therein and Wells Fargo Securities, LLC, as representative of the Initial Purchasers, incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 11, 2014
31.1 *	Certification of the Principal Executive Officer of Archrock GP LLC (as general partner of the general partner of Archrock Partners, L.P.) pursuant to Rule 13a-14 under the Securities Exchange Act of 1934
31.2 *	Certification of the Principal Financial Officer of Archrock GP LLC (as general partner of the general partner of Archrock Partners, L.P.) pursuant to Rule 13a-14 under the Securities Exchange Act of 1934
32.1 **	Certification of the Chief Executive Officer of Archrock GP LLC (as general partner of the general partner of Archrock Partners, L.P.) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 **	Certification of the Chief Financial Officer of Archrock GP LLC (as general partner of the general partner of Archrock Partners, L.P.) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1*	Interactive data files pursuant to Rule 405 of Regulation S-T

* Filed herewith.

** Furnished, not filed.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ARCHROCK PARTNERS, L.P.
November 2, 2017	By:	ARCHROCK GENERAL PARTNER, L.P.
		its General Partner
	By:	ARCHROCK GP LLC
		its General Partner
	By:	/s/ David S. Miller
		David S. Miller
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)
	By:	/s/ Donna A. Henderson
		Donna A. Henderson
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

42

EX-31.1

Exhibit 31.1

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, D. Bradley Childers, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Archrock Partners, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2017

/s/ D. Bradley Childers
Name:	D. Bradley Childers
Title:	Chief Executive Officer, Archrock GP LLC
	(Principal Executive Officer)
	As General Partner of Archrock General Partner, L.P.
	As General Partner of Archrock Partners, L.P.

EX-31.2

Exhibit 31.2

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David S. Miller, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Archrock Partners, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2017

/s/ David S. Miller
Name:	David S. Miller
Title:	Chief Financial Officer, Archrock GP LLC
	(Principal Financial Officer)
	As General Partner of Archrock General Partner, L.P.
	As General Partner of Archrock Partners, L.P.

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Archrock Partners, L.P. (the “Partnership”) for the quarter ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), D. Bradley Childers, as Chief Executive Officer of Archrock GP LLC, the general partner of the Partnership’s general partner, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ D. Bradley Childers
Name:	D. Bradley Childers
Title:	Chief Executive Officer, Archrock GP LLC
	As General Partner of Archrock General Partner, L.P.
	As General Partner of Archrock Partners, L.P.

Date: November 2, 2017

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Archrock Partners, L.P. (the “Partnership”) for the quarter ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), David S. Miller, as Chief Financial Officer of Archrock GP LLC, the general partner of the Partnership’s general partner, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ David S. Miller
Name:	David S. Miller
Title:	Chief Financial Officer, Archrock GP LLC
	As General Partner of Archrock General Partner, L.P.
	As General Partner of Archrock Partners, L.P.

Date: November 2, 2017

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 26, 2017
Document and Entity Information
Entity Registrant Name	Archrock Partners, L.P.
Entity Central Index Key	0001367064
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		70,186,146
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 448	$ 217
Accounts receivable, trade, net of allowance of $2,123 and $1,398, respectively	78,731	69,974
Total current assets	79,179	70,191
Property, plant and equipment	2,691,661	2,655,780
Accumulated depreciation	(938,373)	(903,556)
Property, plant and equipment, net	1,753,288	1,752,224
Intangible assets, net	64,732	76,663
Other long-term assets	17,637	4,296
Total assets	1,914,836	1,903,374
Current liabilities:
Accounts payable, trade	12,698	14
Accrued liabilities	10,731	7,386
Accrued interest	23,329	12,337
Due to affiliates, net	11,452	8,012
Current portion of interest rate swaps	1,297	3,226
Total current liabilities	59,507	30,975
Long-term debt	1,317,447	1,342,724
Deferred income taxes	0	2,500
Other long-term liabilities	9,093	5,002
Total liabilities	1,386,047	1,381,201
Commitments and contingencies (Note 13)
Partners’ capital:
Common units, 70,295,918 and 65,606,655 issued, respectively	518,531	516,208
General partner units, 2% interest with 1,421,471 and 1,326,965 equivalent units issued and outstanding, respectively	12,015	12,027
Accumulated other comprehensive income (loss)	539	(4,170)
Treasury units, 109,772 and 86,795 common units, respectively	(2,296)	(1,892)
Total partners’ capital	528,789	522,173
Total liabilities and partners’ capital	$ 1,914,836	$ 1,903,374

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Accounts receivable, trade, allowance (in dollars)	$ 2,123	$ 1,398
Common units, units issued (in units)	70,295,918	65,606,655
General partner units, interest (as a percent)	2.00%	2.00%
General partner units, equivalent units issued (in units)	1,421,471	1,326,965
General partner units, equivalent units outstanding (in units)	1,421,471	1,326,965
Treasury units, common units (in units)	109,772	86,795

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Revenue	$ 140,191	$ 135,478	$ 415,741	$ 426,954
Costs and expenses:
Cost of sales (excluding depreciation and amortization expense) — affiliates	62,584	50,854	172,856	158,024
Depreciation and amortization	35,787	38,087	108,947	115,951
Long-lived asset impairment	5,368	7,909	14,659	22,507
Restructuring charges	0	1,946	0	7,293
Selling, general and administrative — affiliates	20,711	17,917	59,325	61,337
Interest expense	21,839	20,034	63,361	58,089
Debt extinguishment costs	0	0	291	0
Other (income) loss, net	(2,793)	(890)	(3,614)	20
Total costs and expenses	143,496	135,857	415,825	423,221
Income (loss) before income taxes	(3,305)	(379)	(84)	3,733
Provision for income taxes	708	188	2,970	469
Net income (loss)	(4,013)	(567)	(3,054)	3,264
General partner interest in net income (loss)	(82)	(11)	(63)	65
Common unitholder interest in net income (loss)	$ (3,931)	$ (556)	$ (2,991)	$ 3,199
Weighted average common units outstanding used in income (loss) per common unit:
Basic and diluted (in units)	68,101	59,837	66,298	59,805
Income (loss) per common unit:
Basic and diluted (in dollars per unit)	$ (0.06)	$ (0.01)	$ (0.05)	$ 0.05
Distributions declared and paid per limited partner unit in respective periods (in dollars per unit)	$ 0.285	$ 0.2850	$ 0.855	$ 1.1425

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (4,013)	$ (567)	$ (3,054)	$ 3,264
Other comprehensive income (loss):
Interest rate swap gain (loss), net of reclassifications to earnings	2,314	3,201	4,452	(4,116)
Amortization of terminated interest rate swaps	257	0	257	0
Total other comprehensive income (loss)	2,571	3,201	4,709	(4,116)
Comprehensive income (loss)	$ (1,442)	$ 2,634	$ 1,655	$ (852)

XML

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL - USD ($) $ in Thousands	Total	Treasury Units	Accumulated Other Comprehensive Income (loss)	Partners' Capital Common Units	Partners' Capital General Partner Units
Beginning balance at Dec. 31, 2015	$ 547,996	$ (1,794)	$ (5,558)	$ 538,197	$ 17,151
Beginning balance (in units) at Dec. 31, 2015		(74,888)		59,796,514	1,209,562
Increase (Decrease) in Partners' Capital
Issuance of common units for vesting of phantom units (in units)				68,548
Treasury units purchased	(89)	$ (89)
Treasury units purchased (in units)		(11,356)
March 2016 Acquisition (value)	1,836			$ 1,799	$ 37
March 2016 Acquisition (in units)				257,000	5,205
Issuance of units (value)					$ 8
Issuance of units (in units)					1,158
Contribution of capital, net	3,204			$ 3,086	$ 118
Cash distributions	(74,706)			(68,569)	(6,137)
Unit-based compensation expense	803			803
Comprehensive income (loss)	(852)		(4,116)	3,199	65
Ending balance at Sep. 30, 2016	478,200	$ (1,883)	(9,674)	$ 478,515	$ 11,242
Ending balance (in units) at Sep. 30, 2016		(86,244)		60,122,062	1,215,925
Beginning balance at Dec. 31, 2016	522,173	$ (1,892)	(4,170)	$ 516,208	$ 12,027
Beginning balance (in units) at Dec. 31, 2016		(86,795)		65,606,655	1,326,965
Increase (Decrease) in Partners' Capital
Issuance of common units for vesting of phantom units (in units)				89,263
Treasury units purchased	(404)	$ (404)
Treasury units purchased (in units)		(22,977)
March 2016 Acquisition (in units)					1,421,471
Issuance of units (value)				$ 60,291	$ 1,305
Issuance of units (in units)				4,600,000	94,506
Contribution of capital, net	1,706			$ 1,798	$ (92)
Cash distributions	(58,690)			(57,528)	(1,162)
Unit-based compensation expense	753			753
Comprehensive income (loss)	1,655		4,709	(2,991)	(63)
Ending balance at Sep. 30, 2017	$ 528,789	$ (2,296)	$ 539	$ 518,531	$ 12,015
Ending balance (in units) at Sep. 30, 2017		(109,772)		70,295,918	1,421,471

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net income (loss)	$ (3,054)	$ 3,264
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	108,947	115,951
Long-lived asset impairment	14,659	22,507
Amortization of deferred financing costs	4,320	3,397
Amortization of debt discount	986	927
Amortization of terminated interest rate swaps	257	0
Debt extinguishment costs	291	0
Interest rate swaps	2,028	1,115
Unit-based compensation expense	753	803
Provision for doubtful accounts	2,287	2,277
Gain on sale of property, plant and equipment	(3,518)	(639)
Loss on non-cash consideration in March 2016 Acquisition	0	635
Deferred income tax provision	2,918	471
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, trade	(10,255)	11,602
Other assets and liabilities	16,553	11,391
Net cash provided by operating activities	137,172	173,701
Cash flows from investing activities:
Capital expenditures	(115,939)	(50,945)
Payment for March 2016 Acquisition	0	(13,779)
Proceeds from sale of property, plant and equipment	17,316	15,414
Net cash used in investing activities	(98,623)	(49,310)
Cash flows from financing activities:
Proceeds from borrowings of long-term debt	818,500	181,000
Repayments of long-term debt	(846,500)	(223,500)
Distributions to unitholders	(58,690)	(74,706)
Net proceeds from issuance of common units	60,291	0
Net proceeds from sale of general partner units	1,305	45
Payments for debt issuance costs	(14,855)	(1,721)
Payments for settlement of interest rate swaps that include financing elements	(1,405)	(2,344)
Purchases of treasury units	(404)	(89)
Increase (decrease) in amounts due to affiliates, net	3,440	(3,150)
Net cash used in financing activities	(38,318)	(124,465)
Net increase (decrease) in cash and cash equivalents	231	(74)
Cash and cash equivalents at beginning of period	217	472
Cash and cash equivalents at end of period	448	398
Supplemental disclosure of non-cash transactions:
Non-cash capital contribution from limited and general partner	3,855	793
Contract operations equipment acquired/exchanged, net	(2,149)	2,411
Common units issued in March 2016 Acquisition	0	1,799
Non-cash consideration in March 2016 Acquisition	$ 0	$ 3,165

XML

Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Partnership included herein have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our 2016 Form 10-K, which contains a more comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. Certain prior year amounts have been reclassified to conform to the current year presentation.

Organization

We provide natural gas contract operations services to customers throughout the U.S. Our contract operations services primarily include designing, sourcing, owning, installing, operating, servicing, repairing and maintaining equipment to provide natural gas compression services to our customers.

Archrock General Partner, L.P. is our general partner and an indirect wholly-owned subsidiary of Archrock. As Archrock General Partner, L.P. is a limited partnership, its general partner, Archrock GP LLC, conducts our business and operations, and the board of directors and officers of Archrock GP LLC, which we refer to herein as our board of directors and our officers, make decisions on our behalf.

Comprehensive Income (Loss)

Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with our limited partners or general partner. Our accumulated other comprehensive income (loss) consists only of derivative instruments. Changes in accumulated other comprehensive income (loss) represent changes in the fair value of derivative instruments that are designated as cash flow hedges to the extent the hedge is effective and amortization of terminated interest rate swaps. See Note 8(“Derivatives”) for additional disclosures related to comprehensive income (loss).

Income (Loss) Per Common Unit

Income (loss) per common unit is computed using the two-class method. Under the two-class method, basic income (loss) per common unit is determined by dividing net income (loss) allocated to the common units after deducting the amounts allocated to our general partner (including distributions to our general partner on its incentive distribution rights) and participating securities, by the weighted average number of outstanding common units excluding the weighted average number of outstanding participating securities during the period. Participating securities include unvested phantom units with nonforfeitable tandem distribution equivalent rights to receive cash distributions in the quarter in which distributions are paid on common units. During periods of net loss, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses.

When computing income (loss) per common unit in periods when distributions are greater than income (loss), the amount of the actual incentive distribution rights, if any, is deducted from net income (loss) and allocated to our general partner for the corresponding period. The remaining amount of net income (loss), after deducting distributions to participating securities, is allocated between the general partner and common units based on how our partnership agreement allocates net losses.

When computing income per common unit in periods when income is greater than distributions, income is allocated to the general partner, participating securities and common units based on how our partnership agreement would allocate income if the full amount of income for the period had been distributed. This allocation of net income does not impact our total net income, consolidated results of operations or total cash distributions (including actual incentive distribution rights); however, it may result in our general partner being allocated additional incentive distributions for purposes of our income per unit calculation, which could reduce net income per common unit. However, as required by our partnership agreement, we determine cash distributions based on available cash and determine the actual incentive distributions allocable to our general partner based on actual distributions.

The following table reconciles net income (loss) used in the calculation of basic and diluted income (loss) per common unit (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
Less: General partner 2% ownership interest	82			11			63			(65		)
Common unitholder interest in net income (loss)	(3,931		)	(556		)	(2,991		)	3,199
Less: Net loss attributable to participating securities	(51		)	(56		)	(160		)	(170		)
Net income (loss) used in basic and diluted income (loss) per common unit	$	(3,982	)	$	(612	)	$	(3,151	)	$	3,029

The following table shows the potential common units that were included in computing diluted income (loss) per common unit (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Weighted average common units outstanding including participating securities	68,282		60,036		66,475		59,966
Less: Weighted average participating securities outstanding	(181	)	(199	)	(177	)	(161	)
Weighted average common units outstanding — used in basic income (loss) per common unit	68,101		59,837		66,298		59,805
Net dilutive potential common units issuable:
Phantom units	—		—		—		—
Weighted average common units and dilutive potential common units — used in diluted income (loss) per common unit	68,101		59,837		66,298		59,805

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Recent Accounting Developments

9 Months Ended

Sep. 30, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Developments

2. Recent Accounting Developments

Accounting Standards Updates Implemented

On January 1, 2017 we adopted Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions. Update 2016-09 allows companies to make an accounting policy election to either estimate forfeitures or account for forfeitures as they occur. We have elected to account for forfeitures as they occur. There was no material impact to the condensed consolidated financial statements as a result of the adoption of this standard.

Accounting Standards Updates Not Yet Implemented

In August 2017, the FASB issued Update 2017-12 which expands and refines hedge accounting for both nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements and makes certain targeted improvements to simplify the application of hedge accounting guidance. Update 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Entities will apply Update 2017-12 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted; amended presentation and disclosure guidance will be required only prospectively. Early adoption is permitted. We are currently evaluating the impact of Update 2017-12 on our consolidated financial statements including the impact of an early adoption as permitted in the guidance.

In August 2016, the FASB issued Update 2016-15 which addresses diversity in practice and simplifies several elements of cash flow classification including how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Update 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Update 2016-15 will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. Early adoption is permitted. We have evaluated Update 2016-15 and do not expect a material impact on our consolidated financial statements.

In June 2016, the FASB issued Update 2016-13 that changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. Update 2016-13 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. Entities will apply Update 2016-13 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We are currently evaluating the impact of Update 2016-13 on our consolidated financial statements.

In February 2016, the FASB issued Update 2016-02 that establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new guidance, lessor accounting is largely unchanged. Update 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of Update 2016-02 on our consolidated financial statements.

From May 2014 through May 2016, the FASB issued the Revenue Recognition Update that outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. The core principle of the Revenue Recognition Update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Revenue Recognition Update also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Revenue Recognition Update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted for reporting periods beginning after December 15, 2016. Companies may use either a full retrospective or a modified retrospective approach.

We intend to adopt the Revenue Recognition Update on January 1, 2018, using the modified retrospective transition method applied to those contracts which are not complete as of that date. Upon adoption, we will recognize the cumulative effect of adoption as an adjustment to the opening balance of our retained earnings.

Under current guidance, contract operations revenue is recognized when earned, which generally occurs monthly when the service is provided under our customer contracts. We anticipate the timing of revenue recognized will be impacted by contractual provisions for service availability guarantees of our compressor assets, re-billable costs associated with moving our compressor assets to a customer site, as well as delayed billings for new agreements. At this time we do not expect these changes to result in a material difference from current practice.

The Revenue Recognition Update provides guidance on contract costs that should be recognized as assets and amortized over the period that the related goods or services transfer to the customer. Certain costs such as sales commissions and freight charges to transport compressor assets, currently expensed as incurred, will be deferred and amortized. 

The impacts noted are not all-inclusive, but reflect our current expectations. We are still determining the materiality of the impact for certain of these changes on our consolidated financial statements. We anticipate significant changes to our disclosures based on the requirements prescribed by the Revenue Recognition Update.

In preparation for the adoption of the Revenue Recognition Update on January 1, 2018, we have established a transition team, with representation from all functional areas of our businesses that will be impacted, to implement the required changes. Processes to capture and verify the quality of information needed, including identifying and implementing changes to our information technology systems, are being developed. We are also in the process of evaluating changes to our internal control structure to address risks associated with recognizing revenue under the new guidance. We have modified certain controls effective in the fourth quarter of 2017 to take into consideration the new criteria for recognizing revenue, specifically identifying promises within the contract that give rise to performance obligations, and evaluating the impact of variable consideration on the transaction price. We will continue to evaluate our business processes, systems and controls to ensure the accuracy and timeliness of the recognition and disclosure requirements under the new revenue guidance.

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Business Acquisitions

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Business Acquisitions

3. Business Acquisitions

November 2016 Contract Operations Acquisition

On November 19, 2016, we completed the November 2016 Contract Operations Acquisition, whereby we acquired from Archrock contract operations customer service agreements with 63 customers and a fleet of 262 compressor units used to provide compression services under those agreements, comprising approximately 147,000 horsepower, or approximately 4% (of then available horsepower) of the combined U.S. contract operations business of Archrock and us. At the acquisition date, the acquired fleet assets had a net book value of $66.6 million, net of accumulated depreciation of $55.6 million. Total consideration for the transaction was $85 million, excluding transaction costs. In connection with the acquisition, we issued approximately 5.5 million common units to Archrock and approximately 111,000 general partner units to our general partner.

In connection with this acquisition, we were allocated $1.1 million finite life intangible assets associated with customer relationships of Archrock’s contract operations segment. The amounts allocated were based on the ratio of fair value of the net assets transferred to us to the total fair value of Archrock’s contract operations segment. These intangible assets are being amortized through 2024, based on the present value of income expected to be realized from these intangible assets.

Because Archrock and we are considered entities under common control, GAAP requires that we record the assets acquired and liabilities assumed from Archrock in connection with the November 2016 Contract Operations Acquisition using Archrock’s historical cost basis in the assets and liabilities. The difference between the historical cost basis of the assets acquired and liabilities assumed and the purchase price is treated as either a capital contribution or distribution.

An acquisition of a business from an entity under common control is generally accounted for under GAAP by the acquirer with retroactive application as if the acquisition date was the beginning of the earliest period included in the financial statements. Retroactive effect to the November 2016 Contract Operations Acquisition was impracticable because such retroactive application would have required significant assumptions in a prior period that cannot be substantiated. Accordingly, our financial statements include the assets acquired, liabilities assumed, revenue and direct operating expenses associated with the acquisition beginning on the date of such acquisition. However, the preparation of pro forma financial information allows for certain assumptions that do not meet the standards of financial statements prepared in accordance with GAAP.

March 2016 Acquisition

On March 1, 2016, we completed the March 2016 Acquisition, whereby we acquired contract operations customer service agreements with four customers and a fleet of 19 compressor units used to provide compression services under those agreements comprising approximately 23,000 horsepower. The $18.8 million purchase price was funded with $13.8 million in borrowings under our Former Credit Facility, a non-cash exchange of 24 compressor units for $3.2 million, and the issuance of 257,000 common units for $1.8 million. In connection with this acquisition, we issued and sold 5,205 general partner units to our general partner so it could maintain its approximate 2% general partner interest in us. During the nine months ended September 30, 2016, we incurred transaction costs of $0.2 million related to the March2016 Acquisition, which is reflected in other (income) loss, net, in our condensed consolidated statement of operations.

We accounted for the March2016 Acquisition using the acquisition method, which requires, among other things, assets acquired to be recorded at their fair value on the acquisition date. The following table summarizes the purchase price allocation based on estimated fair values of the acquired assets as of the acquisition date (in thousands):

	Fair Value
Property, plant and equipment	$	14,929
Intangible assets	3,839
Purchase price	$	18,768

Property, Plant and Equipment and Intangible Assets Acquired

Property, plant and equipment is comprised of compressor units that will be depreciated on a straight-line basis over an estimated average remaining useful life of 15 years.

The amount of finite life intangible assets, and their associated average useful lives, was determined based on the period which the assets are expected to contribute directly or indirectly to our future cash flows, and consisted of the following:

	Amount (in thousands)		Average Useful Life
Contract based	$	3,839	2.3 years

The results of operations attributable to the assets acquired in the March2016 Acquisition have been included in our condensed consolidated financial statements since the date of acquisition.

Pro Forma Financial Information

Pro forma financial information is not presented for the March2016 Acquisition as it is immaterial to our reported results.

Pro forma financial information for the three and nine months ended September 30, 2016 has been included to give effect to the additional assets acquired in the November 2016 Contract Operations Acquisition. The November 2016 Contract Operations Acquisition is presented in the pro forma financial information as though this transaction occurred as of January 1, 2016. The pro forma financial information reflects the following transactions related to the November 2016 Contract Operations Acquisition:

• our acquisition of certain contract operations customer service agreements, compression equipment and identifiable intangible assets from Archrock; and

• our issuance of approximately 5.5 million common units to Archrock and approximately 111,000 general partner units to our general partner.

The pro forma financial information below is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results. The pro forma financial information below was derived by adjusting our historical financial statements.

The following table shows pro forma financial information for the three and nine months ended September 30, 2016 (in thousands, except per unit amounts):

	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016
Revenue	$	143,026	$	450,103
Net income	$	1,541	$	10,823
Basic and diluted income per common unit	$	0.02	$	0.16

Pro forma net income per common unit is determined by dividing the pro forma net income that would have been allocated to our common unitholders by the weighted average number of common units outstanding after the completion of the transactions included in the pro forma financial information. Pursuant to our partnership agreement, to the extent that the quarterly distributions exceed certain targets, our general partner is entitled to receive certain incentive distributions that will result in more net income proportionately being allocated to our general partner than to our common unitholders. No pro forma incentive distributions to our general partner nor a reduction to net income (loss) allocable to our common unitholders was included in our pro forma net income (loss) per common unit calculations for the three and nine months ended September 30, 2016, as there were no incentive distributions issued related to that period.

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

4. Related Party Transactions

Our Omnibus Agreement with Archrock, our general partner and others includes, among other things:

• certain agreements not to compete between Archrock and its affiliates, on the one hand, and us and our affiliates, on the other hand;

• Archrock’s obligation to provide all operational staff, corporate staff and support services reasonably necessary to operate our business and our obligation to reimburse Archrock for such services;

• the terms under which we, Archrock, and our respective affiliates may transfer, exchange or lease compression equipment among one another;

• Archrock’s grant to us of a license to use certain intellectual property, including our logo; and

• Archrock’s and our obligations to indemnify each other for certain liabilities.

The Omnibus Agreement will terminate upon a change of control of Archrock GP LLC, our general partner or us, and certain provisions of the Omnibus Agreement will terminate upon a change of control of Archrock.

Transfer, Exchange or Lease of Compression Equipment with Archrock

Transactions between us and Archrock and its affiliates are transactions between entities under common control. Under GAAP, transfers of assets and liabilities between entities under common control are to be initially recorded on the books of the receiving entity at the carrying value of the transferor. Any difference between consideration given and the carrying value of the assets or liabilities is treated as a capital distribution or contribution. During the nine months ended September 30, 2017 and 2016, Archrock contributed to us $3.9 million and $0.8 million, respectively, primarily related to the completion of overhauls on compression equipment that was exchanged with us or contributed to us and where overhauls were in progress on the date of exchange or contribution.

If Archrock determines in good faith that we or Archrock’s contract operations services business need to transfer, exchange or lease compression equipment between Archrock and us, the Omnibus Agreement permits such equipment to be transferred, exchanged or leased if it will not cause us to breach any existing contracts, suffer a loss of revenue under an existing compression services contract or incur any unreimbursed costs. In consideration for such transfer, exchange or lease of compression equipment, the transferee will either (1) transfer to the transferor compression equipment equal in value to the appraised value of the compression equipment transferred to it, (2) agree to lease such compression equipment from the transferor or (3) pay the transferor an amount in cash equal to the appraised value of the compression equipment transferred to it.

The following table summarizes the transfer activity between Archrock and us:

	Transferred to Archrock				Transferred from Archrock
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Compressor units	199		354		170		259
Horsepower	109,800		168,600		99,500		121,600
Net book value (millions)	$	47.8	$	75.4	$	45.7	$	77.8

During the nine months ended September 30, 2017 and 2016, we recorded capital distributions of $2.1 million and capital contributions of $2.4 million, respectively, related to the differences in net book value on the exchanged compression equipment. No customer contracts were included in the transfers. Under the terms of the Omnibus Agreement, such transfers must be of equal appraised value, as defined in the Omnibus Agreement, with any difference being settled in cash.

The following table summarizes the aggregate cost and accumulated depreciation of equipment on lease to Archrock (in millions):

	September 30, 2017		December 31, 2016
Aggregate cost	$	24.1	$	4.3
Accumulated depreciation	0.2		0.7

The following table summarizes the revenue from Archrock related to the lease of our compression equipment and the cost of sales related to the lease of Archrock compression equipment (in millions):

	Nine Months Ended September 30,
	2017		2016
Revenue	$	0.4	$	0.1
Cost of sales	0.7		0.2

Reimbursement of Operating and SG&A Expense

Archrock provides all operational staff, corporate staff and support services reasonably necessary to run our business. These services may include, without limitation, operations, marketing, maintenance and repair, periodic overhauls of compression equipment, inventory management, legal, accounting, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, taxes, facilities management, investor relations, enterprise resource planning system, training, executive, sales, business development and engineering.

Archrock charges us for costs that are directly attributable to us. Costs that are indirectly attributable to us and Archrock’s other operations are allocated among Archrock’s other operations and us. The allocation methodologies vary based on the nature of the charge and have historically included, among other things, headcount and horsepower. We believe that the allocation methodologies used to allocate indirect costs to us are reasonable.

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Long-Term Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Long-Term Debt

5. Long-Term Debt

Long-term debt consisted of the following (in thousands):

	September 30, 2017			December 31, 2016
Revolving credit facility due March 2022	$	631,500		$	—
Revolving credit facility due May 2018	—			509,500
Term loan facility due May 2018	—			150,000
Less: Deferred financing costs, net of amortization	—			(353		)
	—			149,647
6% senior notes due April 2021	350,000			350,000
Less: Debt discount, net of amortization	(2,700		)	(3,213		)
Less: Deferred financing costs, net of amortization	(3,595		)	(4,366		)
	343,705			342,421
6% senior notes due October 2022	350,000			350,000
Less: Debt discount, net of amortization	(3,603		)	(4,076		)
Less: Deferred financing costs, net of amortization	(4,155		)	(4,768		)
	342,242			341,156
Long-term debt	$	1,317,447		$	1,342,724

Revolving Credit Facility

On March 30, 2017, we entered into the Credit Facility, a five-year, $1.1 billion asset-based revolving credit facility. The Credit Facility will mature on March 30, 2022, except that if any portion of our 6% senior notes due April 2021 are outstanding as of December 2, 2020, then the Credit Facility will instead mature on December 2, 2020. We incurred $14.9 million in transaction costs related to the Credit Facility, which were included in other long-term assets in our condensed consolidated balance sheets and will be amortized over the term of the Credit Facility. Concurrent with entering into the Credit Facility, we terminated our Former Credit Facility and repaid $648.4 million in borrowings and accrued and unpaid interest and fees outstanding. All commitments under the Former Credit Facility have been terminated. As a result of the termination, we expensed $0.6 million of unamortized deferred financing costs associated with the $825.0 million revolving credit facility, which was included in interest expense in our condensed consolidated statements of operations. Additionally, we recorded a loss of $0.3 million related to the extinguishment of the $150.0 million term loan.

As of September 30, 2017, we had $631.5 million in outstanding borrowings and no outstanding letters of credit under the Credit Facility.

Subject to certain conditions, including the approval by the lenders, we are able to increase the aggregate commitments under the Credit Facility by up to an additional $250.0 million. Portions of the Credit Facility up to $25.0 million and $50.0 million will be available for the issuance of letters of credit and swing line loans, respectively.

The Credit Facility bears interest at a base rate or LIBOR, at our option, plus an applicable margin. Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from 2.00% to 3.25% and (ii) in the case of base rate loans, from 1.00% to 2.25%. The base rate is the highest of (i) the prime rate announced by JPMorgan Chase Bank, (ii) the Federal Funds Effective Rate plus 0.50% and (iii) one-month LIBOR plus 1.00%. At September 30, 2017, the applicable margin on amounts outstanding was 3.24%.

Additionally, we are required to pay commitment fees based on the daily unused amount of the Credit Facility in an amount, depending on our leverage ratio, ranging from 0.375% to 0.50%. We incurred $0.6 million and $0.3 million in commitment fees on the daily unused amount of the Credit Facility and the former $825.0 million revolving credit facility during the three months ended September 30, 2017 and 2016, respectively, and $1.5 million and $1.0 million during the nine months ended September 30, 2017 and 2016, respectively.

The Credit Facility borrowing base consists of eligible accounts receivable, inventory and compressor units. The largest component is eligible compressor units.

Borrowings under the Credit Facility are secured by substantially all of the personal property assets of us and our Significant Domestic Subsidiaries (as defined in the Credit Facility agreement), including all of the membership interests of our Domestic Subsidiaries (as defined in the Credit Facility agreement).

The Credit Facility agreement contains various covenants including, but not limited to, restrictions on the use of proceeds from borrowings and limitations on our ability to incur additional indebtedness, engage in transactions with affiliates, merge or consolidate, sell assets, make certain investments and acquisitions, make loans, grant liens, repurchase equity and pay distributions. The Credit Facility agreement also contains various covenants requiring mandatory prepayments from the net cash proceeds of certain asset transfers. In addition, if as of any date we have cash and cash equivalents (other than proceeds from a debt or equity issuance received in the 30 days prior to such date reasonably expected to be used to fund an acquisition permitted under the Credit Facility agreement) in excess of $50.0 million, then such excess amount will be used to pay down outstanding borrowings of a corresponding amount under the Credit Facility.

We must maintain the following consolidated financial ratios, as defined in the Credit Facility agreement:

EBITDA to Interest Expense	2.5 to 1.0
Senior Secured Debt to EBITDA	3.5 to 1.0
Total Debt to EBITDA
Through fiscal year 2017	5.95 to 1.0
Through fiscal year 2018	5.75 to 1.0
Through second quarter of 2019	5.50 to 1.0
Thereafter (1)	5.25 to 1.0

⁽¹⁾  Subject to a temporary increase to 5.5 to 1.0 for any quarter during which an acquisition meeting certain thresholds is completed and for the following two quarters after the quarter in which the acquisition closes.

As of September 30, 2017, we had undrawn capacity of $468.5 million under the Credit Facility. As a result of the financial ratio requirements discussed above, $213.6 million of the $468.5 million of undrawn capacity was available for additional borrowings as of September 30, 2017.

A material adverse effect on our assets, liabilities, financial condition, business or operations that, taken as a whole, impacts our ability to perform our obligations under the Credit Facility agreement, could lead to a default under that agreement. A default under one of our debt agreements would trigger cross-default provisions under our other debt agreements, which would accelerate our obligation to repay our indebtedness under those agreements. As of September 30, 2017, we were in compliance with all financial covenants under the Credit Facility agreement.

6% Senior Notes Due April 2021 and 6% Senior Notes Due October2022

The Notes are guaranteed on a senior unsecured basis by all of our existing subsidiaries (other than Archrock Partners Finance Corp., which is a co-issuer of the Notes) and certain of our future subsidiaries. The Notes and the guarantees, respectively, are our and the guarantors’ general unsecured senior obligations, rank equally in right of payment with all of our and the guarantors’ other senior obligations, and are effectively subordinated to all of our and the guarantors’ existing and future secured debt to the extent of the value of the collateral securing such indebtedness. In addition, the Notes and guarantees are effectively subordinated to all existing and future indebtedness and other liabilities of any future non-guarantor subsidiaries. All of our subsidiaries are 100% owned, directly or indirectly, by us and guarantees by our subsidiaries are full and unconditional (subject to customary release provisions which are discussed in our 2016 Form 10-K) and constitute joint and several obligations. We have no assets or operations independent of our subsidiaries, and there are no significant restrictions upon our subsidiaries’ ability to distribute funds to us. Archrock Partners Finance Corp. has no operations and does not have revenue other than as may be incidental as co-issuer of the Notes. Because we have no independent operations, the guarantees are full and unconditional (subject to customary release provisions) and constitute joint and several obligations of our subsidiaries other than Archrock Partners Finance Corp., and as a result we have not included consolidated financial information of our subsidiaries.

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Partners' Capital

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Partners' Capital

6. Partners' Capital

Unit Transactions

In August 2017, we sold, pursuant to a public underwritten offering, 4,600,000 common units, including 600,000 common units pursuant to an over-allotment option. We received net proceeds of $60.3 million, after deducting underwriting discounts, commissions and offering expenses, which we used to repay borrowings outstanding under the Credit Facility. In connection with this sale and as permitted under our partnership agreement, we sold 93,163 general partner units to our general partner so it could maintain its approximate 2% general partner interest in us. We received net proceeds of $1.3 million from the general partner contribution.

During the nine months ended September 30, 2017, we issued and sold 94,506 general partner units, including the 93,163 units sold in the offering discussed above, to our general partner so it could maintain its approximate 2% general partner interest in us.

As of September 30, 2017, Archrock owned 29,064,637 common units and 1,421,471 general partner units, collectively representing an approximate 43% interest in us.

Cash Distributions

We make distributions of available cash (as defined in our partnership agreement) from operating surplus in the following manner:

• first, 98% to all common unitholders, pro rata, and 2% to our general partner, until each unit has received a distribution of $0.4025;

• second, 85% to all common unitholders, pro rata, and 15% to our general partner, until each unit has received a distribution of $0.4375;

• third, 75% to all common unitholders, pro rata, and 25% to our general partner, until each unit has received a total of $0.5250; and

• thereafter, 50% to all common unitholders, pro rata, and 50% to our general partner.

The following table summarizes our distributions per unit for 2017 and 2016:

Period Covering	Payment Date	Distribution per Common Unit		Total Distribution
1/1/2016 — 3/31/2016	May 13, 2016	$	0.2850	$	17.5	million
4/1/2016 — 6/30/2016	August 15, 2016	0.2850		17.5		million
7/1/2016 — 9/30/2016	November 14, 2016	0.2850		17.5		million
10/1/2016 — 12/31/2016	February 14, 2017	0.2850		19.1		million
1/1/2017 — 3/31/2017	May 15, 2017	0.2850		19.1		million
4/1/2017 — 6/30/2017	August 14, 2017	0.2850		20.5		million

On October 20, 2017, our board of directors approved a cash distribution of $0.2850 per common unit, or approximately $20.5 million. The distribution covers the period from July 1, 2017 through September 30, 2017. The record date for this distribution is November 8, 2017 and payment is expected to occur on November 14, 2017.

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Unit-Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Unit-Based Compensation

7. Unit-Based Compensation

Long-Term Incentive Plan

In April 2017, we adopted the 2017 LTIP to provide for the benefit of the employees, directors and consultants of us, Archrock and our respective affiliates. Two million common units have been authorized for issuance with respect to awards under the 2017 LTIP. The 2017 LTIP provides for the issuance of unit options, unit appreciation rights, restricted units, phantom units, performance awards, bonus awards, distribution equivalent rights, cash awards and other unit-based awards. The 2017 LTIP will be administered by the compensation committee of our board of directors. The 2006 LTIP expired in 2016 and, as such, no further grants can be made under that plan. Previous grants made under the 2006 LTIP will continue to be governed by the 2006 LTIP and the applicable award agreements.

Phantom units are notional units that entitle the grantee to receive common units upon the vesting of such phantom units or, at the discretion of the Plan Administrator, cash equal to the fair market value of the underlying common units. Because we grant phantom units to non-employees, we are required to remeasure the fair value of these phantom units, which is based on the fair value of our common units, each period and record a cumulative adjustment of the expense previously recognized. Phantom units granted under the 2017 LTIP may include nonforfeitable tandem distribution equivalent rights to receive cash distributions on unvested phantom units in the quarter in which distributions are paid on common units. Phantom units granted generally vest one-third per year on dates as specified in the applicable award agreements subject to continued service through the applicable vesting date.

Phantom Units

The following table presents phantom unit activity during the nine months ended September 30, 2017:

	Phantom Units (in thousands)		Weighted Average Grant Date Fair Value per Unit
Phantom units outstanding, January 1, 2017	197		$	11.60
Granted	81		16.28
Vested	(89	)	14.86
Canceled	(11	)	7.84
Phantom units outstanding, September 30, 2017	178		12.32

As of September 30, 2017, we expect $1.9 million of unrecognized compensation cost related to unvested phantom units to be recognized over the weighted-average period of 2.0 years.

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Derivatives

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

8. Derivatives

We are exposed to market risks associated with changes in interest rates. We use derivative instruments to minimize the risks and/or costs associated with financial activities by managing our exposure to interest rate fluctuations on a portion of our debt obligations. We do not use derivative instruments for trading or other speculative purposes.

Interest Rate Risk

At September 30, 2017, we were a party to the following interest rate swaps, which were entered into to offset changes in expected cash flows due to fluctuations in the associated variable interest rates:

Expiration Date	Notional Value (in millions)
May 2019	$	100
May 2020	100
March 2022	300
	$	500

As of September 30, 2017, the weighted average effective fixed interest rate on our interest rate swaps was 1.8%. We have designated these interest rate swaps as cash flow hedging instruments so that any change in their fair values is recognized as a component of comprehensive income (loss) and is included in accumulated other comprehensive income (loss) to the extent the hedge is effective. As the swap terms substantially coincide with the hedged item and are expected to offset changes in expected cash flows due to fluctuations in the variable rate, we currently do not expect a significant amount of ineffectiveness on these hedges. We perform quarterly calculations to determine whether the swap agreements are still effective and to calculate any ineffectiveness. We recorded $0.7 million of interest expense during the nine months ended September 30, 2017 as compared to an immaterial amount of interest expense during the nine months ended September 30, 2016 due to ineffectiveness related to interest rate swaps. We estimate that $1.0 million of deferred losses attributable to interest rate swaps and included in our accumulated other comprehensive income (loss) at September 30, 2017, will be reclassified into earnings as interest expense at then-current values during the next twelve months as the underlying hedged transactions occur. Cash flows from derivatives designated as hedges are classified in our condensed consolidated statements of cash flows under the same category as the cash flows from the underlying assets, liabilities or anticipated transactions, unless the derivative contract contains a significant financing element; in this case, the cash settlements for these derivatives are classified as cash flows from financing activities in our condensed consolidated statements of cash flows.

In August 2017, we amended the terms of certain of our interest rate swap agreements, designated as cash flow hedges against the variability of future interest payments due under the Credit Facility, with a notional value of $300.0 million. The amended terms adjusted the fixed interest rate and extended the maturity dates to March 2022. These amendments effectively created new derivative contracts and terminated the old derivative contracts. As a result, as of the amendment date, we discontinued the original cash flow hedge relationships on a prospective basis and designated the amended interest rate swaps under new cash flow hedge relationships based on the amended terms. The fair value of the interest rate swaps immediately prior to the execution of the amendments was a liability of $0.7 million. The associated amount in accumulated other comprehensive income (loss) is being amortized into interest expense over the original terms of the interest rate swaps through May 2018.

The following tables present the effect of derivative instruments on our consolidated financial position and results of operations (in thousands):

		Fair Value Asset (Liability)
	Balance Sheet Location	September 30, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Other long-term assets	$	1,884		$	413
Interest rate swaps	Current portion of interest rate swaps	(1,297		)	(3,226		)
Interest rate swaps	Other long-term liabilities	—			(377		)
Total derivatives		$	587		$	(3,190	)

	Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives			Location of Loss  Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)
Derivatives designated as cash flow hedges:
Interest rate swaps
Three months ended September 30, 2017	$	1,919		Interest expense	$	(652	)
Three months ended September 30, 2016	2,049			Interest expense	1,152
Nine months ended September 30, 2017	2,282			Interest expense	(2,427		)
Nine months ended September 30, 2016	(7,401		)	Interest expense	3,285

The counterparties to our derivative agreements are major financial institutions. We monitor the credit quality of these financial institutions and do not expect non-performance by any counterparty, although such non-performance could have a material adverse effect on us. We have no specific collateral posted for our derivative instruments.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

9. Fair Value Measurements

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:

• Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.

• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.

• Level 3 — Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.

Asset and Liabilities Measured at Fair Value on a Recurring Basis

On a quarterly basis, our interest rate swaps are valued based on the income approach (discounted cash flow) using market observable inputs, including forward LIBOR curves. These fair value measurements are classified as Level 2.

The following table presents our interest rate swaps asset and liability measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, with pricing levels as of the date of valuation (in thousands):

	September 30, 2017			December 31, 2016
Interest rate swaps asset	$	1,884		$	413
Interest rate swaps liability	(1,297		)	(3,603		)

Asset and Liabilities Measured at Fair Value on a Nonrecurring Basis

During the nine months ended September 30, 2017, we recorded non-recurring fair value measurements related to our idle and previously-culled compressor units. Our estimate of the compressor units’ fair value was primarily based on either the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years. These fair value measurements are classified as Level 3. The fair value of our impaired compressor units was $0.7 million and $3.6 million at September 30, 2017 and December 31, 2016, respectively. See Note 10(“Long-Lived Asset Impairment”) for further details.

Other Financial Instruments

The carrying amounts of our cash, receivables and payables approximate fair value due to the short-term nature of those instruments.

The carrying amounts of borrowings outstanding under our Credit Facility and Partnership Credit Facility approximate fair value due to their variable interest rates. The fair value of these outstanding borrowings was estimated using a discounted cash flow analysis based on interest rates offered on loans with similar terms to borrowers of similar credit quality, which are Level 3 inputs.

The fair value of our fixed rate debt was estimated based on quoted prices in inactive markets and is considered a Level 2 measurement. The following table summarizes the carrying amount and fair value of our fixed rate debt as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017		December 31, 2016
Carrying amount of fixed rate debt (1)	$	685,947	$	683,577
Fair value of fixed rate debt	687,000		686,000

⁽¹⁾  Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 5(“Long-Term Debt”) for further details.

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Long-Lived Asset Impairment

9 Months Ended

Sep. 30, 2017

Asset Impairment Charges [Abstract]

Long-Lived Asset Impairment

10. Long-Lived Asset Impairment

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

During the three and nine months ended September 30, 2017 and 2016, we reviewed the future deployment of our idle compression assets for units that were not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determined that certain idle compressor units would be retired from the active fleet. The retirement of these units from the active fleet triggered a review of these assets for impairment, and as a result of our review, we recorded an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on either the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use.

In connection with our review of our idle compression assets during the three and nine months ended September 30, 2017 and 2016, we evaluated for impairment idle units that had been culled from our fleet in prior years and were available for sale. Based upon that review, we reduced the expected proceeds from disposition for certain of the remaining units and recorded additional impairment to reduce the book value of each unit to its estimated fair value.

The following table presents the results of our impairment review for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Idle compressor units retired from the active fleet	45		45		150		205
Horsepower of idle compressor units retired from the active fleet	18,000		14,000		53,000		67,000
Impairment recorded on idle compressor units retired from the active fleet	$	5,368	$	4,693	$	14,659	$	18,742
Additional impairment recorded on available-for-sale compressor units previously culled	$	—	$	3,216	$	—	$	3,765

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Restructuring Charges

9 Months Ended

Sep. 30, 2017

Restructuring and Related Activities [Abstract]

Restructuring Charges

11. Restructuring Charges

In the first quarter of 2016, Archrock determined to undertake a cost reduction program to reduce its on-going operating expenses, including workforce reductions and closure of certain make-ready shops. These actions were the result of Archrock’s review of its business and efforts to efficiently manage cost and maintain its business in line with current and expected activity levels and anticipated make-ready demand in the U.S. market. During the three and nine months ended September 30, 2016, we incurred $1.9 million and $7.3 million, respectively, of restructuring charges comprised of an allocation of expenses related to severance benefits and consulting fees associated with this cost reduction plan from Archrock to us pursuant to the terms of the Omnibus Agreement based on horsepower and other factors. These charges are reflected as restructuring charges in our condensed consolidated statements of operations. Archrock’s cost reduction program under this plan was completed during the fourth quarter of 2016.

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

Recent appellate court decisions have required us to remeasure certain of our uncertain tax positions. Consequently, we increased our unrecognized tax benefit for these positions during the nine months ended September 30, 2017. We had $6.5 million and $1.9 million of unrecognized tax benefits at September 30, 2017 and December 31, 2016, respectively, of which $3.4 million and $1.9 million, respectively, would affect the effective tax rate if recognized. We also recorded $0.9 million and $0.1 million of potential interest expense and penalties related to unrecognized tax benefits associated with uncertain tax positions as of September 30, 2017 and December 31, 2016, respectively. In addition, for the nine months ended September 30, 2017, our income tax provision reflects a deferred state release of $2.5 million related to the increase in our unrecognized tax benefit.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

Insurance Matters

Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. Archrock insures our property and operations against many, but not all, of these risks. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs.

In addition, Archrock is substantially self-insured for worker’s compensation, employer’s liability, property, auto liability, general liability and employee group health claims in view of the relatively high per-incident deductibles it absorbs under its insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.

Tax Matters

We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of September 30, 2017 and December 31, 2016, we accrued $1.6 million and $1.5 million, respectively, for the outcomes of non-income based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non-income based tax audits could be material to our consolidated financial position, but it is possible that the resolution of future audits could be material to our consolidated results of operations or cash flows for the period in which the resolution occurs.

Litigation and Claims

In 2011, the Texas Legislature enacted changes related to the appraisal of natural gas compressors for ad valorem tax purposes by expanding the definitions of “Heavy Equipment Dealer” and “Heavy Equipment” effective from the beginning of 2012. Under the revised Heavy Equipment Statutes, we believe we are a Heavy Equipment Dealer, that our natural gas compressors are Heavy Equipment and that we, therefore, are required to file our ad valorem taxes under this new methodology. We further believe that our natural gas compressors are taxable under the Heavy Equipment Statutes in the counties where we maintain a business location and keep natural gas compressors instead of where the compressors may be located on January 1 of a tax year. As a result of this new methodology, our ad valorem tax expense (which is reflected in our condensed consolidated statements of operations as a component of cost of sales (excluding depreciation and amortization expense)) includes a benefit of $12.0 million during the nine months ended September 30, 2017. Since the change in methodology became effective in 2012, we have recorded an aggregate benefit of $62.1 million as of September 30, 2017, of which approximately $13.2 million has been agreed to by a number of appraisal review boards and county appraisal districts and $48.9 million has been disputed and is currently in litigation. A large number of appraisal review boards denied our position, although some accepted it, and we filed 82 petitions for review in the appropriate district courts with respect to the 2012 tax year, 93 petitions for review in the appropriate district courts with respect to the 2013 tax year, 103 petitions for review in the appropriate district courts with respect to the 2014 tax year, 111 petitions for review in the appropriate district courts with respect to the 2015 tax year, 105 petitions for review in the appropriate district courts with respect to the 2016 tax year and 77 petitions for review in the appropriate district courts with respect to the 2017 tax year.

To date, only five cases have advanced to the point of trial or submission of summary judgment motions on the merits, and only three cases have been decided, with two of the decisions having been rendered by the same presiding judge. All three of those decisions were appealed, and all three of the appeals have been decided by intermediate appellate courts.

On October 17, 2013, the 143rd Judicial District Court of Loving County, Texas ruled in EXLP Leasing LLC & EES Leasing LLC v. Loving County Appraisal District that our wholly-owned subsidiary, Archrock Partners Leasing LLC, formerly known as EXLP Leasing, and Archrock’s subsidiary, Archrock Services Leasing LLC, formerly known as EES Leasing, are Heavy Equipment Dealers and that their compressors qualify as Heavy Equipment, but the district court further held that the Heavy Equipment Statutes were unconstitutional as applied to EXLP Leasing’s and EES Leasing’s compressors. EXLP Leasing and EES Leasing appealed the district court’s constitutionality holding to the Eighth Court of Appeals in El Paso, Texas. On September 23, 2015, the Eighth Court of Appeals ruled in EXLP Leasing’s and EES Leasing’s favor by overruling the 143rd District Court’s constitutionality ruling. The Eighth Court of Appeals also ruled, however, that EXLP Leasing’s and EES Leasing’s natural gas compressors are taxable in the counties where they were located on January 1 of the tax year at issue.

On October 28, 2013, the 143rd Judicial District Court of Ward County, Texas ruled in EES Leasing LLC & EXLP Leasing LLC v. Ward County Appraisal District that EXLP Leasing and EES Leasing are Heavy Equipment Dealers and that their compressors qualify as Heavy Equipment, but the court held that the Heavy Equipment Statutes were unconstitutional as applied to their compressors. EXLP Leasing and EES Leasing appealed the district court’s constitutionality holding to the Eighth Court of Appeals in El Paso, Texas, and the Ward County Appraisal District cross-appealed the district court’s rulings that EXLP Leasing’s and EES Leasing’s compressors qualify as Heavy Equipment. On September 23, 2015, the Eighth Court of Appeals ruled in EXLP Leasing’s and EES Leasing’s favor by overruling the 143rd District Court’s constitutionality ruling and affirming its ruling that EXLP Leasing’s and EES Leasing’s compressors qualify as Heavy Equipment. The Eighth Court of Appeals also ruled, however, that EXLP Leasing’s and EES Leasing’s natural gas compressors are taxable in the counties where they were located on January 1 of the tax year at issue.

The Ward County Appraisal District and Loving County Appraisal District each filed (on January 27, 2016 and February 10, 2016, respectively) a petition asking the Texas Supreme Court to review its respective Eighth Court of Appeals decision. On March 11, 2016, EXLP Leasing and EES Leasing filed responses to the appraisal districts’ petitions and cross-petitions for review in each case asking the Texas Supreme Court to also review the Eighth Court of Appeals’ determination that natural gas compressors are taxable in the counties where they were located on January 1 of the tax year at issue. The Ward County Appraisal District filed its response to EXLP Leasing’s and EES Leasing’s cross-petition on June 6, 2016, and EXLP Leasing and EES Leasing filed their reply on June 21, 2016. The Loving County Appraisal District filed its response to EXLP Leasing’s and EES Leasing’s cross-petition on May 27, 2016, and EXLP Leasing and EES Leasing filed their reply on June 10, 2016.

On March 18, 2014, the 10th Judicial District Court of Galveston, Texas ruled in EXLP Leasing LLC & EES Leasing LLC v. Galveston Central Appraisal District that EXLP Leasing and EES Leasing are Heavy Equipment Dealers and that their compressors qualify as Heavy Equipment, but the court held the Heavy Equipment Statutes unconstitutional as applied to their compressors. EXLP Leasing and EES Leasing appealed the district court’s constitutionality holding to the Fourteenth Court of Appeals in Houston, Texas. On August 25, 2015, the Fourteenth Court of Appeals issued a ruling stating that EXLP Leasing’s and EES Leasing’s compressors are taxable in the counties where they were located on January 1 of the tax year at issue, and it remanded the case to the district court for further evidence on the issue of whether the Heavy Equipment Statutes are constitutional as applied to EXLP Leasing’s and EES Leasing’s compressors. On November 24, 2015, EXLP Leasing and EES Leasing filed a petition asking the Texas Supreme Court to review this decision. On March 21, 2016, the Galveston Central Appraisal District filed a response to EXLP Leasing’s and EES Leasing’s petition for review, and EXLP Leasing and EES Leasing filed their reply on April 26, 2016.

In EES Leasing v. Irion County Appraisal District, EES Leasing and the appraisal district each filed motions for summary judgment in the 51st District Court concerning the applicability and constitutionality of the Heavy Equipment Statutes. On May 20, 2014, the district court entered an order denying both motions for summary judgment, holding that a fact issue existed as to the applicability of the Heavy Equipment Statutes to the one compressor at issue. The presiding judge for the 51st District Court has since consolidated the 2012 tax year case with EES Leasing’s 2013 tax year case, which also included EXLP Leasing as a party. On August 27, 2015, the presiding judge abated the combined case, EES Leasing LLC and EXLP Leasing LLC v. Irion County Appraisal District, until the final resolution of the appellate cases considering the constitutionality of the Heavy Equipment Statutes, or further order of the court.

EXLP Leasing and EES Leasing also filed a motion for summary judgment in EES Leasing LLC & EXLP Leasing LLC v. Harris County Appraisal District, pending in the 189th Judicial District Court of Harris County, Texas. The court heard arguments on the motion on December 6, 2013 but has yet to rule. No trial date has been set.

On June 3, 2015, the Fourth Court of Appeals in San Antonio, Texas issued a decision reversing the 406th District Court’s dismissal of EXLP Leasing’s and EES Leasing’s tax appeals for want of jurisdiction. In EXLP Leasing LLC et. al v. Webb County Appraisal District, United Independent School District (“United ISD”) intervened as a party in interest and sought to dismiss the lawsuit arguing that the district court was without jurisdiction to hear the appeal. Under Section 42.08(b) of the Texas Tax Code, a property owner must pay before the delinquency date the lesser of (1) the amount of taxes due on the portion of the taxable value of the property that is not in dispute or (2) the amount of taxes due on the property under the order from which the appeal is taken. EXLP Leasing and EES Leasing paid zero taxes to Webb County because the entire amount of tax assessed by Webb County was in dispute. Instead, as required by the Heavy Equipment Statutes and Texas Comptroller forms, EXLP Leasing and EES Leasing paid taxes on the compressors at issue to Victoria County, where they maintain their place of business and keep natural gas compressors. The Webb County Appraisal District and United ISD contested EXLP Leasing’s and EES Leasing’s position that the Heavy Equipment Statutes contain situs provisions requiring that taxes be paid where the dealer has a business location and keeps its natural gas compressors, instead arguing that taxes are payable to the county where each compressor is located as of January 1 of the tax year at issue. The district court granted United ISD’s motion to dismiss on April 1, 2014 and declined EXLP Leasing’s and EES Leasing’s motion to reconsider. The Fourth Court of Appeals reversed, holding that, based on the plain meaning of Section 42.08(b)(1), and because the entire amount was in dispute, EXLP Leasing and EES Leasing were not required to prepay disputed taxes to invoke the trial court’s jurisdiction. The Fourth Court of Appeals denied United ISD’s request for a rehearing. On September 29, 2015, United ISD filed a petition for review in the Texas Supreme Court. On December 4, 2015, the Texas Supreme Court denied United ISD’s petition for review.

United ISD has four delinquency lawsuits pending against EXLP Leasing and EES Leasing in the 49th District Court of Webb County, Texas. The cases have been abated pending the resolution of EXLP Leasing’s and EES Leasing’s 2012 tax year case pending in the 406th Judicial District Court of Webb County, Texas.

On September 2, 2016, the Texas Supreme Court requested that consolidated merits briefs be filed in EXLP Leasing’s and EES Leasing’s cases against the Loving County Appraisal District, Ward County Appraisal District, and Galveston Central Appraisal District, as well as two similar cases involving different taxpayers. On September 19, 2016, the Supreme Court entered a consolidated briefing schedule for the five cases. Consolidated briefing was completed on February 7, 2017.

On March 10, 2017, the Texas Supreme Court granted EXLP Leasing’s and EES Leasing’s petition for review in EXLP Leasing LLC & EES Leasing LLC v. Galveston Central Appraisal District. Oral argument before the Texas Supreme Court was held on October 10, 2017.

We continue to believe that the revised statutes are constitutional as applied to natural gas compressors and that under the revised statutes our natural gas compressors are taxable in the counties where we maintain a business location and keep natural gas compressors. Recognizing the similarity of the issues and that these cases will ultimately be resolved by the Texas appellate courts, most of the remaining 2012-2017 district court cases have been formally or effectively abated pending a decision from the Texas Supreme Court.

If we are unsuccessful in our litigation, we would be required to pay ad valorem taxes up to the aggregate benefit we have recorded, and the additional ad valorem tax payments may also be subject to substantial penalties and interest. In addition, while we do not expect the ultimate determination of the issue of where the natural gas compressors are taxable under the Heavy Equipment Statutes would have an impact on the amount of taxes due, we could be subject to substantial penalties if we are unsuccessful on this issue. Also, if we are unsuccessful in our litigation, or if legislation is enacted in Texas that repeals or alters the Heavy Equipment Statutes such that in the future we do not qualify as a Heavy Equipment Dealer or our compressors do not qualify as Heavy Equipment, then we would likely be required to pay these ad valorem taxes under the old methodology going forward, which would increase our quarterly cost of sales expense up to approximately the amount of our then most recent quarterly benefit recorded. If this litigation is resolved against us in whole or in part, or if in the future we do not qualify as a Heavy Equipment Dealer or our compressors do not qualify as Heavy Equipment because of new or revised Texas statutes, we will incur additional taxes and could be subject to substantial penalties and interest, which would impact our future results of operations, financial position and cash flows, including our cash available for distribution.

In the ordinary course of business, we are also involved in various other pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from any of these other actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to make cash distributions to our unitholders. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows, including our ability to make cash distributions to our unitholders.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent Events

On October 4, 2017, we received cash proceeds of $4.7 million from the sale of approximately 675 compressor units previously retired from the active fleet.

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Organization and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with our limited partners or general partner. Our accumulated other comprehensive income (loss) consists only of derivative instruments. Changes in accumulated other comprehensive income (loss) represent changes in the fair value of derivative instruments that are designated as cash flow hedges to the extent the hedge is effective and amortization of terminated interest rate swaps. See Note 8(“Derivatives”) for additional disclosures related to comprehensive income (loss).

Income (Loss) Per Common Unit

Income (Loss) Per Common Unit

Income (loss) per common unit is computed using the two-class method. Under the two-class method, basic income (loss) per common unit is determined by dividing net income (loss) allocated to the common units after deducting the amounts allocated to our general partner (including distributions to our general partner on its incentive distribution rights) and participating securities, by the weighted average number of outstanding common units excluding the weighted average number of outstanding participating securities during the period. Participating securities include unvested phantom units with nonforfeitable tandem distribution equivalent rights to receive cash distributions in the quarter in which distributions are paid on common units. During periods of net loss, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses.

When computing income (loss) per common unit in periods when distributions are greater than income (loss), the amount of the actual incentive distribution rights, if any, is deducted from net income (loss) and allocated to our general partner for the corresponding period. The remaining amount of net income (loss), after deducting distributions to participating securities, is allocated between the general partner and common units based on how our partnership agreement allocates net losses.

When computing income per common unit in periods when income is greater than distributions, income is allocated to the general partner, participating securities and common units based on how our partnership agreement would allocate income if the full amount of income for the period had been distributed. This allocation of net income does not impact our total net income, consolidated results of operations or total cash distributions (including actual incentive distribution rights); however, it may result in our general partner being allocated additional incentive distributions for purposes of our income per unit calculation, which could reduce net income per common unit. However, as required by our partnership agreement, we determine cash distributions based on available cash and determine the actual incentive distributions allocable to our general partner based on actual distributions.

Accounting Standards Updates

Accounting Standards Updates Implemented

On January 1, 2017 we adopted Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions. Update 2016-09 allows companies to make an accounting policy election to either estimate forfeitures or account for forfeitures as they occur. We have elected to account for forfeitures as they occur. There was no material impact to the condensed consolidated financial statements as a result of the adoption of this standard.

Accounting Standards Updates Not Yet Implemented

In August 2017, the FASB issued Update 2017-12 which expands and refines hedge accounting for both nonfinancial and financial risk components, aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements and makes certain targeted improvements to simplify the application of hedge accounting guidance. Update 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Entities will apply Update 2017-12 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted; amended presentation and disclosure guidance will be required only prospectively. Early adoption is permitted. We are currently evaluating the impact of Update 2017-12 on our consolidated financial statements including the impact of an early adoption as permitted in the guidance.

In August 2016, the FASB issued Update 2016-15 which addresses diversity in practice and simplifies several elements of cash flow classification including how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Update 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Update 2016-15 will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. Early adoption is permitted. We have evaluated Update 2016-15 and do not expect a material impact on our consolidated financial statements.

In June 2016, the FASB issued Update 2016-13 that changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. Update 2016-13 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. Entities will apply Update 2016-13 provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We are currently evaluating the impact of Update 2016-13 on our consolidated financial statements.

In February 2016, the FASB issued Update 2016-02 that establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new guidance, lessor accounting is largely unchanged. Update 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of Update 2016-02 on our consolidated financial statements.

From May 2014 through May 2016, the FASB issued the Revenue Recognition Update that outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. The core principle of the Revenue Recognition Update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Revenue Recognition Update also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Revenue Recognition Update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted for reporting periods beginning after December 15, 2016. Companies may use either a full retrospective or a modified retrospective approach.

We intend to adopt the Revenue Recognition Update on January 1, 2018, using the modified retrospective transition method applied to those contracts which are not complete as of that date. Upon adoption, we will recognize the cumulative effect of adoption as an adjustment to the opening balance of our retained earnings.

Under current guidance, contract operations revenue is recognized when earned, which generally occurs monthly when the service is provided under our customer contracts. We anticipate the timing of revenue recognized will be impacted by contractual provisions for service availability guarantees of our compressor assets, re-billable costs associated with moving our compressor assets to a customer site, as well as delayed billings for new agreements. At this time we do not expect these changes to result in a material difference from current practice.

The Revenue Recognition Update provides guidance on contract costs that should be recognized as assets and amortized over the period that the related goods or services transfer to the customer. Certain costs such as sales commissions and freight charges to transport compressor assets, currently expensed as incurred, will be deferred and amortized. 

The impacts noted are not all-inclusive, but reflect our current expectations. We are still determining the materiality of the impact for certain of these changes on our consolidated financial statements. We anticipate significant changes to our disclosures based on the requirements prescribed by the Revenue Recognition Update.

In preparation for the adoption of the Revenue Recognition Update on January 1, 2018, we have established a transition team, with representation from all functional areas of our businesses that will be impacted, to implement the required changes. Processes to capture and verify the quality of information needed, including identifying and implementing changes to our information technology systems, are being developed. We are also in the process of evaluating changes to our internal control structure to address risks associated with recognizing revenue under the new guidance. We have modified certain controls effective in the fourth quarter of 2017 to take into consideration the new criteria for recognizing revenue, specifically identifying promises within the contract that give rise to performance obligations, and evaluating the impact of variable consideration on the transaction price. We will continue to evaluate our business processes, systems and controls to ensure the accuracy and timeliness of the recognition and disclosure requirements under the new revenue guidance.

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Organization and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Schedule of reconciliation of net income used in calculation of basic and diluted earnings per common unit

The following table reconciles net income (loss) used in the calculation of basic and diluted income (loss) per common unit (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(4,013	)	$	(567	)	$	(3,054	)	$	3,264
Less: General partner 2% ownership interest	82			11			63			(65		)
Common unitholder interest in net income (loss)	(3,931		)	(556		)	(2,991		)	3,199
Less: Net loss attributable to participating securities	(51		)	(56		)	(160		)	(170		)
Net income (loss) used in basic and diluted income (loss) per common unit	$	(3,982	)	$	(612	)	$	(3,151	)	$	3,029

Schedule of potential common units included in computing diluted earnings per common unit

The following table shows the potential common units that were included in computing diluted income (loss) per common unit (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Weighted average common units outstanding including participating securities	68,282		60,036		66,475		59,966
Less: Weighted average participating securities outstanding	(181	)	(199	)	(177	)	(161	)
Weighted average common units outstanding — used in basic income (loss) per common unit	68,101		59,837		66,298		59,805
Net dilutive potential common units issuable:
Phantom units	—		—		—		—
Weighted average common units and dilutive potential common units — used in diluted income (loss) per common unit	68,101		59,837		66,298		59,805

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Business Acquisitions (Tables)

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Summary of purchase price allocation based on estimated fair values of acquired assets and liabilities as of the acquisition date

The following table summarizes the purchase price allocation based on estimated fair values of the acquired assets as of the acquisition date (in thousands):

	Fair Value
Property, plant and equipment	$	14,929
Intangible assets	3,839
Purchase price	$	18,768

Schedule of amounts of finite-lived intangible assets, and their associated average useful lives

The amount of finite life intangible assets, and their associated average useful lives, was determined based on the period which the assets are expected to contribute directly or indirectly to our future cash flows, and consisted of the following:

	Amount (in thousands)		Average Useful Life
Contract based	$	3,839	2.3 years

Schedule of pro forma financial information

The following table shows pro forma financial information for the three and nine months ended September 30, 2016 (in thousands, except per unit amounts):

	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016
Revenue	$	143,026	$	450,103
Net income	$	1,541	$	10,823
Basic and diluted income per common unit	$	0.02	$	0.16

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The following table summarizes the transfer activity between Archrock and us:

	Transferred to Archrock				Transferred from Archrock
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Compressor units	199		354		170		259
Horsepower	109,800		168,600		99,500		121,600
Net book value (millions)	$	47.8	$	75.4	$	45.7	$	77.8

The following table summarizes the aggregate cost and accumulated depreciation of equipment on lease to Archrock (in millions):

	September 30, 2017		December 31, 2016
Aggregate cost	$	24.1	$	4.3
Accumulated depreciation	0.2		0.7

The following table summarizes the revenue from Archrock related to the lease of our compression equipment and the cost of sales related to the lease of Archrock compression equipment (in millions):

	Nine Months Ended September 30,
	2017		2016
Revenue	$	0.4	$	0.1
Cost of sales	0.7		0.2

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of long-term debt

Long-term debt consisted of the following (in thousands):

	September 30, 2017			December 31, 2016
Revolving credit facility due March 2022	$	631,500		$	—
Revolving credit facility due May 2018	—			509,500
Term loan facility due May 2018	—			150,000
Less: Deferred financing costs, net of amortization	—			(353		)
	—			149,647
6% senior notes due April 2021	350,000			350,000
Less: Debt discount, net of amortization	(2,700		)	(3,213		)
Less: Deferred financing costs, net of amortization	(3,595		)	(4,366		)
	343,705			342,421
6% senior notes due October 2022	350,000			350,000
Less: Debt discount, net of amortization	(3,603		)	(4,076		)
Less: Deferred financing costs, net of amortization	(4,155		)	(4,768		)
	342,242			341,156
Long-term debt	$	1,317,447		$	1,342,724

We must maintain the following consolidated financial ratios, as defined in the Credit Facility agreement:

EBITDA to Interest Expense	2.5 to 1.0
Senior Secured Debt to EBITDA	3.5 to 1.0
Total Debt to EBITDA
Through fiscal year 2017	5.95 to 1.0
Through fiscal year 2018	5.75 to 1.0
Through second quarter of 2019	5.50 to 1.0
Thereafter (1)	5.25 to 1.0

⁽¹⁾  Subject to a temporary increase to 5.5 to 1.0 for any quarter during which an acquisition meeting certain thresholds is completed and for the following two quarters after the quarter in which the acquisition closes.

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Partners' Capital (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Summary of distributions per unit

The following table summarizes our distributions per unit for 2017 and 2016:

Period Covering	Payment Date	Distribution per Common Unit		Total Distribution
1/1/2016 — 3/31/2016	May 13, 2016	$	0.2850	$	17.5	million
4/1/2016 — 6/30/2016	August 15, 2016	0.2850		17.5		million
7/1/2016 — 9/30/2016	November 14, 2016	0.2850		17.5		million
10/1/2016 — 12/31/2016	February 14, 2017	0.2850		19.1		million
1/1/2017 — 3/31/2017	May 15, 2017	0.2850		19.1		million
4/1/2017 — 6/30/2017	August 14, 2017	0.2850		20.5		million

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Unit-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of phantom unit activity

The following table presents phantom unit activity during the nine months ended September 30, 2017:

	Phantom Units (in thousands)		Weighted Average Grant Date Fair Value per Unit
Phantom units outstanding, January 1, 2017	197		$	11.60
Granted	81		16.28
Vested	(89	)	14.86
Canceled	(11	)	7.84
Phantom units outstanding, September 30, 2017	178		12.32

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Derivatives (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

At September 30, 2017, we were a party to the following interest rate swaps, which were entered into to offset changes in expected cash flows due to fluctuations in the associated variable interest rates:

Expiration Date	Notional Value (in millions)
May 2019	$	100
May 2020	100
March 2022	300
	$	500

Effect of derivative instruments on consolidated financial position

The following tables present the effect of derivative instruments on our consolidated financial position and results of operations (in thousands):

		Fair Value Asset (Liability)
	Balance Sheet Location	September 30, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Other long-term assets	$	1,884		$	413
Interest rate swaps	Current portion of interest rate swaps	(1,297		)	(3,226		)
Interest rate swaps	Other long-term liabilities	—			(377		)
Total derivatives		$	587		$	(3,190	)

Effect of derivative instruments on results of operations

	Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives			Location of Loss  Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)
Derivatives designated as cash flow hedges:
Interest rate swaps
Three months ended September 30, 2017	$	1,919		Interest expense	$	(652	)
Three months ended September 30, 2016	2,049			Interest expense	1,152
Nine months ended September 30, 2017	2,282			Interest expense	(2,427		)
Nine months ended September 30, 2016	(7,401		)	Interest expense	3,285

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value on a recurring basis with pricing levels as of the date of valuation

The following table presents our interest rate swaps asset and liability measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, with pricing levels as of the date of valuation (in thousands):

	September 30, 2017			December 31, 2016
Interest rate swaps asset	$	1,884		$	413
Interest rate swaps liability	(1,297		)	(3,603		)

Schedule of carrying value and estimated fair value of debt instruments

The following table summarizes the carrying amount and fair value of our fixed rate debt as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017		December 31, 2016
Carrying amount of fixed rate debt (1)	$	685,947	$	683,577
Fair value of fixed rate debt	687,000		686,000

⁽¹⁾  Carrying amounts are shown net of unamortized debt discounts and unamortized deferred financing costs. See Note 5(“Long-Term Debt”) for further details.

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Long-Lived Asset Impairment (Tables)

9 Months Ended

Sep. 30, 2017

Asset Impairment Charges [Abstract]

Details of Impairment of Long-Lived Assets Held and Used by Asset

The following table presents the results of our impairment review for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Idle compressor units retired from the active fleet	45		45		150		205
Horsepower of idle compressor units retired from the active fleet	18,000		14,000		53,000		67,000
Impairment recorded on idle compressor units retired from the active fleet	$	5,368	$	4,693	$	14,659	$	18,742
Additional impairment recorded on available-for-sale compressor units previously culled	$	—	$	3,216	$	—	$	3,765

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Organization and Summary of Significant Accounting Policies - Income (Loss) Per Common Unit (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Earnings (Loss) Per Common Unit
Net income (loss)	$ (4,013)	$ (567)	$ (3,054)	$ 3,264
Less: General partner 2% ownership interest	82	11	63	(65)
Common unitholder interest in net income (loss)	(3,931)	(556)	(2,991)	3,199
Less: Net loss attributable to participating securities	(51)	(56)	(160)	(170)
Net income (loss) used in basic and diluted income (loss) per common unit	$ (3,982)	$ (612)	$ (3,151)	$ 3,029
General partner units, interest (as a percent)	2.00%		2.00%		2.00%
Potential common units included in computing the dilutive potential common units used in dilutive earnings per common unit
Weighted average common units outstanding including participating securities (in units)	68,282	60,036	66,475	59,966
Less: Weighted average participating securities outstanding (in units)	(181)	(199)	(177)	(161)
Weighted average common units outstanding - used in basic earnings per common unit (in units)	68,101	59,837	66,298	59,805
Net dilutive potential common units issuable:
Phantom units (in units)	0	0	0	0
Weighted average common units and dilutive potential common units - used in diluted earnings per common unit (in units)	68,101	59,837	66,298	59,805

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Business Acquisitions - November 2016 Contract Operations Acquisitions (Narratives) (Details) hp in Thousands, $ in Thousands		1 Months Ended	9 Months Ended
	Nov. 19, 2016 USD ($) customer compressor_unit hp shares	Aug. 31, 2017 shares	Sep. 30, 2017 USD ($) shares	Sep. 30, 2016 shares	Dec. 31, 2016 USD ($)
Business Acquisitions
Accumulated depreciation of leased equipment			$ 938,373		$ 903,556
Partners' Capital General Partner Units
Business Acquisitions
Units issued in connection with acquisition (in units) | shares		93,163	1,421,471	5,205
Archrock
Business Acquisitions
Number of customers with service agreements | customer	63
Number of compressor units used to provide compression services | compressor_unit	262
Horsepower of compressor units used to provide compression services | hp	147
Business combination, percentage of available horsepower provided	4.00%
Business combination, net book value of assets acquired	$ 66,600
Accumulated depreciation of leased equipment	55,600
Business combination, consideration transferred	$ 85,000
Units issued in connection with acquisition (in units) | shares	5,500,000
Finite lived assets acquired	$ 1,100
Archrock | Partners' Capital General Partner Units
Business Acquisitions
Units issued in connection with acquisition (in units) | shares	111,000

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Business Acquisitions - March 2016 Acquisition (Narratives) (Details) hp in Thousands, $ in Thousands		1 Months Ended	9 Months Ended
	Mar. 01, 2016 USD ($) customer compressor_unit hp shares	Aug. 31, 2017 shares	Sep. 30, 2017 USD ($) shares	Sep. 30, 2016 USD ($) shares	Dec. 31, 2016
Business Acquisitions
Payments to acquire business			$ 0	$ 13,779
Units issued in connection with acquisition (value)				$ 1,836
General partner units, interest (as a percent)			2.00%		2.00%
Partners' Capital Common Units
Business Acquisitions
Units issued in connection with acquisition (in units) | shares				257,000
Units issued in connection with acquisition (value)				$ 1,799
Partners' Capital General Partner Units
Business Acquisitions
Units issued in connection with acquisition (in units) | shares		93,163	1,421,471	5,205
Units issued in connection with acquisition (value)				$ 37
General partner units, interest (as a percent)			2.00%
March 2016 Acquisition
Business Acquisitions
Number of customers with service agreements | customer	4
Number of compressor units used to provide compression services | compressor_unit	19
Horsepower of compressor units used to provide compression services | hp	23
Payments to acquire business	$ 18,800
Line of credit outstanding	$ 13,800
Number of like kind exchanged compressor units | compressor_unit	24
Like kind exchanged compressor units, value	$ 3,200
Transaction costs incurred				$ 200
Property, plant and equipment, useful life	15 years
March 2016 Acquisition | Partners' Capital Common Units
Business Acquisitions
Units issued in connection with acquisition (in units) | shares	257,000
Units issued in connection with acquisition (value)	$ 1,800
March 2016 Acquisition | Partners' Capital General Partner Units
Business Acquisitions
Units issued in connection with acquisition (in units) | shares	5,205
General partner units, interest (as a percent)	2.00%

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Business Acquisitions - Net Assets Acquired (Details) - March 2016 Acquisition $ in Thousands	Mar. 01, 2016 USD ($)
Net Assets Acquired
Property, plant and equipment	$ 14,929
Intangible assets	3,839
Purchase price	$ 18,768

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Business Acquisitions - Finite Lived Assets Acquired (Details) - March 2016 Acquisition - Contract based $ in Thousands	Mar. 01, 2016 USD ($)
Business Acquisitions
Total acquired identifiable intangible assets	$ 3,839
Weighted average useful life	2 years 3 months 18 days

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Business Acquisitions - Pro Forma Financial Information (Narratives) (Details) - shares		1 Months Ended	9 Months Ended
	Nov. 19, 2016	Aug. 31, 2017	Sep. 30, 2017	Sep. 30, 2016
Partners' Capital General Partner Units
Business Acquisitions
Units issued in connection with acquisition (in units)		93,163	1,421,471	5,205
Archrock
Business Acquisitions
Units issued in connection with acquisition (in units)	5,500,000
Archrock | Partners' Capital General Partner Units
Business Acquisitions
Units issued in connection with acquisition (in units)	111,000

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Business Acquisitions - Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016
Pro forma financial information
Revenue	$ 143,026	$ 450,103
Net income	$ 1,541	$ 10,823
Basic and diluted income per common unit (in dollars per unit)	$ 0.02	$ 0.16

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Related Party Transactions (Narratives) (Details) - Archrock $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($) contract	Sep. 30, 2016 USD ($)
Related party transactions
Amount contributed by related party related to completion of overhauls on compression equipment	$ 3.9	$ 0.8
(Distributions) contributions recorded related to differences in net book value of compressor units exchanged to our assets transferred to related party	$ (2.1)	$ 2.4
Number of customer contracts included in transfers | contract	0

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Related Party Transactions - Transfers (Details) - Archrock $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($) compressor_unit hp	Sep. 30, 2016 USD ($) compressor_unit hp
Related party transactions
Number of compressor units transferred to a related party | compressor_unit	199	354
Horsepower of compressor units transferred to related party | hp	109,800	168,600
Net book value of compressor units transferred to related party | $	$ 47.8	$ 75.4
Number of compressor units transferred by related party | compressor_unit	170	259
Horsepower of compressor units transferred by related party | hp	99,500	121,600
Net book value of compressor units transferred by related party | $	$ 45.7	$ 77.8

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Related Party Transactions - Aggregate Cost and Accumulated Depreciation (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Related party transactions
Accumulated depreciation	$ 938,373	$ 903,556
Archrock | Equipment Leased to Other Party
Related party transactions
Aggregate cost	24,100	4,300
Accumulated depreciation	$ 200	$ 700

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Related Party Transactions - Revenue From Related Party (Details) - Archrock - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Related party transactions
Revenue	$ 0.4	$ 0.1
Cost of sales	$ 0.7	$ 0.2

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Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Mar. 30, 2017	Dec. 31, 2016
Long-Term Debt
Long-term debt	$ 1,317,447		$ 1,342,724
6% senior notes due April 2021
Long-Term Debt
Long-term debt, gross	350,000		350,000
Less: Debt discount, net of amortization	(2,700)		(3,213)
Less: Deferred financing costs, net of amortization	(3,595)		(4,366)
Long-term debt	$ 343,705		342,421
Interest rate (as a percent)	6.00%
6% senior notes due October 2022
Long-Term Debt
Long-term debt, gross	$ 350,000		350,000
Less: Debt discount, net of amortization	(3,603)		(4,076)
Less: Deferred financing costs, net of amortization	(4,155)		(4,768)
Long-term debt	$ 342,242		341,156
Interest rate (as a percent)	6.00%
Revolving Credit Facility | Revolving credit facility due March 2022
Long-Term Debt
Long-term debt	$ 631,500		0
Interest rate (as a percent)		6.00%
Revolving Credit Facility | Revolving credit facility due May 2018
Long-Term Debt
Long-term debt	0		509,500
Revolving Credit Facility | Term loan facility due May 2018
Long-Term Debt
Long-term debt, gross	0		150,000
Less: Deferred financing costs, net of amortization	0		(353)
Long-term debt	$ 0		$ 149,647

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Long-Term Debt - Revolving Credit Facility and Term Loan (Details)		3 Months Ended		9 Months Ended
	Mar. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Long-Term Debt
Repayments of long-term debt				$ 846,500,000	$ 223,500,000
Finance cost	$ 600,000
Loss on extinguishment of debt	300,000
Long-term debt		$ 1,317,447,000		1,317,447,000		$ 1,342,724,000
Change in maximum borrowing amount	250,000,000
Commitment fees		600,000	$ 300,000	1,500,000	$ 1,000,000
Revolving Credit Facility
Long-Term Debt
Repayments of long-term debt	648,400,000
Change in maximum borrowing amount	$ 25,000,000
Cash equivalent threshold		50,000,000.0		$ 50,000,000.0
Revolving Credit Facility | Minimum
Long-Term Debt
Commitment fees (percentage)				0.375%
Revolving Credit Facility | Maximum
Long-Term Debt
Commitment fees (percentage)				0.50%
Revolving Credit Facility | Revolving credit facility due March 2022
Long-Term Debt
Line of credit facility, period	5 years
Maximum borrowing capacity	$ 1,100,000,000.0
Interest rate (as a percent)	6.00%
Transaction costs	$ 14,900,000
Long-term debt		631,500,000		$ 631,500,000
Long-term debt		631,500,000		631,500,000		0
Revolving Credit Facility | Revolving credit facility due May 2018
Long-Term Debt
Repayments of long-term debt	825,000,000
Long-term debt		0		0		509,500,000
Revolving Credit Facility | Term loan facility due May 2018
Long-Term Debt
Repayments of long-term debt	150,000,000
Long-term debt		0		0		$ 149,647,000
Line of credit remaining borrowing capacity		468,500,000		468,500,000
Revolving Credit Facility | Term loan facility due May 2018 | Maximum
Long-Term Debt
Line of credit remaining borrowing capacity		$ 213,600,000		$ 213,600,000
Swing Line
Long-Term Debt
Change in maximum borrowing amount	$ 50,000,000
Line of Credit | LIBOR | Minimum
Long-Term Debt
Spread on variable rate				2.00%
Line of Credit | LIBOR | Maximum
Long-Term Debt
Spread on variable rate				3.25%
Line of Credit | Base Rate
Long-Term Debt
Spread on variable rate				3.24%
Line of Credit | Base Rate | Minimum
Long-Term Debt
Spread on variable rate				1.00%
Line of Credit | Base Rate | Maximum
Long-Term Debt
Spread on variable rate				2.25%
Line of Credit | Federal Funds Rate
Long-Term Debt
Interest margin on variable rate				0.005
Line of Credit | One-month LIBOR
Long-Term Debt
Interest margin on variable rate				0.01

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Long-Term Debt - Debt Ratios (Details) - Revolving Credit Facility	6 Months Ended	9 Months Ended	12 Months Ended		33 Months Ended
	Jun. 30, 2019	Sep. 30, 2017	Dec. 31, 2018	Dec. 31, 2017	Mar. 20, 2022
Line of Credit Facility [Line Items]
EBITDA to total interest expenses ratio		2.5
Senior secured debt to EBITDA ratio		3.5
Forecasted
Line of Credit Facility [Line Items]
Total debt to EBITDA ratio	5.5		5.75	5.95	5.25
Forecasted | Conditional Event
Line of Credit Facility [Line Items]
Total debt to EBITDA ratio					5.5

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Long-Term Debt - Senior Notes (Details)	Sep. 30, 2017 USD ($)
Debt Disclosure [Abstract]
Ownership percentage (as a percent)	100.00%
Amount of independent assets or operations	$ 0

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Partners' Capital (Narratives) (Details) - USD ($) $ / shares in Units, $ in Thousands								1 Months Ended	3 Months Ended		9 Months Ended
	Oct. 20, 2017	Aug. 14, 2017	May 15, 2017	Feb. 14, 2017	Nov. 14, 2016	Aug. 15, 2016	May 13, 2016	Aug. 31, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Partners' Equity, Allocations and Cash Distributions
Common units issued in March 2016 Acquisition											$ 0	$ 1,799
General partner units, interest (as a percent)									2.00%		2.00%		2.00%
General partner units owned (in units)									1,421,471		1,421,471		1,326,965
Distribution per common unit (in dollars per unit)		$ 0.2850	$ 0.2850	$ 0.2850	$ 0.2850	$ 0.2850	$ 0.2850		$ 0.285	$ 0.2850	$ 0.855	$ 1.1425
Subsequent Event
Partners' Equity, Allocations and Cash Distributions
Dividends paid (in dollars per unit)	$ 0.2850
Subsequent Event | Archrock GP LLC
Partners' Equity, Allocations and Cash Distributions
Authorized distributions to limited partnership, amount	$ 20,500
Archrock
Partners' Equity, Allocations and Cash Distributions
Common units owned (in units)									29,064,637		29,064,637
Archrock | Archrock Partners, L.P
Partners' Equity, Allocations and Cash Distributions
General partner's ownership interest in partnership (as a percent)									43.00%		43.00%
Partners' Capital Common Units
Partners' Equity, Allocations and Cash Distributions
Partnership units sold (in units)								4,600,000
Common units issued in March 2016 Acquisition								$ 60,300
Units issued in connection with acquisition (in units)												257,000
Partners' Capital Common Units | First order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											98.00%
Partners' Capital Common Units | Second order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											85.00%
Partners' Capital Common Units | Third order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											75.00%
Partners' Capital Common Units | Thereafter order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											50.00%
Partners' Capital Common Units | Archrock GP LLC
Partners' Equity, Allocations and Cash Distributions
Partnership units sold (in units)											94,506
Common units issued in March 2016 Acquisition								$ 1,300
Partners' Capital Common Units | Options
Partners' Equity, Allocations and Cash Distributions
Partnership units sold (in units)								600,000
Partners' Capital General Partner Units
Partners' Equity, Allocations and Cash Distributions
Units issued in connection with acquisition (in units)								93,163			1,421,471	5,205
General partner units, interest (as a percent)									2.00%		2.00%
Partners' Capital General Partner Units | First order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											2.00%
Partners' Capital General Partner Units | Second order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											15.00%
Partners' Capital General Partner Units | Third order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											25.00%
Partners' Capital General Partner Units | Thereafter order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Percentage of operating surplus distributed to unitholders											50.00%
Partners' Capital General Partner and Common Units | First order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Distribution per common unit (in dollars per unit)											$ 0.4025
Partners' Capital General Partner and Common Units | Second order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Distribution per common unit (in dollars per unit)											0.4375
Partners' Capital General Partner and Common Units | Third order of cash distribution
Partners' Equity, Allocations and Cash Distributions
Distribution per common unit (in dollars per unit)											$ 0.5250

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Partners' Capital Partners' Capital (Details) - USD ($) $ / shares in Units, $ in Thousands							3 Months Ended		9 Months Ended
	Aug. 14, 2017	May 15, 2017	Feb. 14, 2017	Nov. 14, 2016	Aug. 15, 2016	May 13, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Summary of distributions per unit
Distribution per common unit (in dollars per unit)	$ 0.2850	$ 0.2850	$ 0.2850	$ 0.2850	$ 0.2850	$ 0.2850	$ 0.285	$ 0.2850	$ 0.855	$ 1.1425
Total Distribution	$ 20,500	$ 19,100	$ 19,100	$ 17,500	$ 17,500	$ 17,500			$ 58,690	$ 74,706

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Unit-Based Compensation - Long-term Incentive Plan (Details)	Apr. 30, 2017 shares
Long-Term Incentive Plan
Unit-Based Compensation
Maximum number of shares available under the Plan	2,000,000

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Unit-Based Compensation - Phantom Units (Details) - Phantom Units $ / shares in Units, shares in Thousands, $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Unit-Based Compensation
Vesting period	3 years
Phantom Units (in thousands)
Beginning balance (in units) | shares	197
Granted (in units) | shares	81
Vested (in units) | shares	(89)
Canceled (in units) | shares	(11)
Ending balance (in units) | shares	178
Weighted Average Grant Date Fair Value per Unit
Beginning balance (in dollars per unit) | $ / shares	$ 11.60
Granted (in dollars per unit) | $ / shares	16.28
Vested (in dollars per unit) | $ / shares	14.86
Canceled (in dollars per unit) | $ / shares	7.84
Ending balance (in dollars per unit) | $ / shares	$ 12.32
Unrecognized compensation cost
Expected unrecognized compensation cost related to unvested phantom units (in dollars) | $	$ 1.9
Weighted-average period during which the expected unrecognized compensation cost related to unvested phantom units to be recognized	2 years
First anniversary vesting
Unit-Based Compensation
Vesting percentage	33.33%
Second anniversary vesting
Unit-Based Compensation
Vesting percentage	33.33%
Third anniversary vesting
Unit-Based Compensation
Vesting percentage	33.33%

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Derivatives - Interest Rate Risk (Details) - Derivatives designated as hedging instruments - USD ($)	Sep. 30, 2017	Aug. 31, 2017
Interest rate swaps
Accounting for Derivatives
Notional amount of interest rate swaps	$ 500,000,000
May 2019
Accounting for Derivatives
Notional amount of interest rate swaps	100,000,000
May 2020
Accounting for Derivatives
Notional amount of interest rate swaps	100,000,000
March 2022
Accounting for Derivatives
Notional amount of interest rate swaps	$ 300,000,000	$ 300,000,000.0

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Derivatives - Interest Rate Risk (Narratives) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Aug. 31, 2017
Accounting for Derivatives
Interest expense	$ 21,839,000	$ 20,034,000	$ 63,361,000	$ 58,089,000
Deferred losses to be reclassified during next 12 months	$ 1,000,000		$ 1,000,000
Interest rate swaps | Derivatives designated as hedging instruments
Accounting for Derivatives
Weighted average effective fixed interest rate on interest rate swaps (as a percent)	1.80%		1.80%
Interest expense			$ 700,000
Notional amount of interest rate swaps	$ 500,000,000		500,000,000
March 2022 | Derivatives designated as hedging instruments
Accounting for Derivatives
Notional amount of interest rate swaps	$ 300,000,000		$ 300,000,000		$ 300,000,000.0
Derivative liability, fair value					$ 700,000

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Derivatives - Effect on Derivative Instruments on the Balance Sheet (Details) - Derivatives designated as hedging instruments - Interest rate swaps - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Accounting for Derivatives
Derivative asset, net	$ 587	$ (3,190)
Other long-term assets
Accounting for Derivatives
Derivative asset	1,884	413
Current portion of interest rate swaps
Accounting for Derivatives
Derivative liability	(1,297)	(3,226)
Other long-term liabilities
Accounting for Derivatives
Derivative liability	$ 0	$ (377)

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Derivatives - Effect on Derivative Instruments on the Income Statement (Details) - Derivatives designated as cash flow hedges - Interest rate swaps - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Effect of derivative instruments on results of operations
Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives	$ 1,919	$ 2,049	$ 2,282	$ (7,401)
Interest expense
Effect of derivative instruments on results of operations
Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	$ (652)	$ 1,152	$ (2,427)	$ 3,285

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Fair Value Measurements (Details) - Recurring basis - Level 2 - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair value measurements
Interest rate swaps asset	$ 1,884	$ 413
Interest rate swaps liability		$ (3,603)

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Fair Value Measurements (Narratives) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Nonrecurring basis | Level 3
Fair value measurements
Impaired long-lived assets	$ 0.7	$ 3.6
Impaired long-lived assets
Fair value measurements
Weighted average disposal period used in estimation of the fair value of the impaired long-lived assets	4 years

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Fair Value Measurements - Fair Value of Debt (Details) - Fixed Rate Debt [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt	$ 685,947	$ 683,577
Estimate of Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt	$ 687,000	$ 686,000

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Long-Lived Asset Impairment (Details) hp in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) compressor_unit hp	Sep. 30, 2016 USD ($) compressor_unit hp	Sep. 30, 2017 USD ($) compressor_unit hp	Sep. 30, 2016 USD ($) compressor_unit hp
Long-lived asset impairment
Impairment recorded on idle compressor units retired from the active fleet	$ 5,368	$ 7,909	$ 14,659	$ 22,507
Idle compressor units
Long-lived asset impairment
Idle compressor units retired from the active fleet (compressors) | compressor_unit	45	45	150	205
Horsepower of idle compressor units retired from the active fleet (horsepower) | hp	18	14	53	67
Impairment recorded on idle compressor units retired from the active fleet	$ 5,368	$ 4,693	$ 14,659	$ 18,742
Additional impairment recorded on available-for-sale compressor units previously culled	$ 0	$ 3,216	$ 0	$ 3,765

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Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Restructuring and Related Activities [Abstract]
Restructuring charges	$ 0	$ 1,946	$ 0	$ 7,293

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Income Taxes (Narratives) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 6.5	$ 1.9
Unrecognized tax benefits that would impact effective tax rate	3.4	1.9
Unrecognized tax benefits, potential interest expense and penalties	0.9	$ 0.1
Deferred state tax benefit	$ 2.5

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Commitments and Contingencies (Details) $ in Millions	9 Months Ended	69 Months Ended
	Sep. 30, 2017 USD ($) petition claim	Sep. 30, 2017 USD ($) petition claim	Dec. 31, 2016 USD ($) petition	Sep. 19, 2016 claim	Dec. 31, 2015 petition	Dec. 31, 2014 petition	Dec. 31, 2013 petition	Dec. 31, 2012 petition
Loss Contingencies [Line Items]
Accrual for income tax liability | $	$ 1.6	$ 1.6	$ 1.5
Ad valorem tax benefit | $	12.0	62.1
Ad valorem tax benefit agreed to by a number of appraisal review boards and county appraisal districts | $	13.2	13.2
Ad valorem tax benefit in litigation | $	$ 48.9	$ 48.9
Number of petitions | petition	77	77	105		111	103	93	82
Pending claims	5	5
Claims settled	3
Claims appealed	3	3
Judge
Loss Contingencies [Line Items]
Claims settled	2
United ISD
Loss Contingencies [Line Items]
Pending claims	4	4		5

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Subsequent Events (Details) - Subsequent Event $ in Millions	Oct. 04, 2017 USD ($) compressor_unit
Subsequent Event [Line Items]
Proceeds from assets sold | $	$ 4.7
Business disposition, compression units sold | compressor_unit	675