Unit-Based Compensation

12 Months Ended

Dec. 31, 2012

Unit-Based Compensation

Unit-Based Compensation

7.  Unit-Based Compensation

Long-Term Incentive Plan

We have a long-term incentive plan (the “Plan”) that was adopted by Exterran GP LLC, the general partner of our general partner, in October 2006 for employees, directors and consultants of us, Exterran Holdings or our respective affiliates. An aggregate of 1,035,378 common units, common unit options, restricted units and phantom units is available under the Plan. The Plan is administered by the board of directors of Exterran GP LLC or a committee thereof (the “Plan Administrator”).

Phantom units are notional units that entitle the grantee to receive a common unit upon the vesting of the phantom unit or, at the discretion of the Plan Administrator, cash equal to the fair market value of a common unit.

The following table presents the unit-based compensation expense included in our results of operations (in thousands):

	Years EndedDecember 31,
	2012		2011		2010
Phantom units	$	797	$	532	$	1,209
Total unit-based compensation expense(1)	$	797	$	532	$	1,209

(1) Excludes the chargeback of unit-based compensation expense to Exterran Holdings of $0.8 million, $0.6 million and $0.7 million for the years ended December 31, 2012, 2011 and 2010, respectively.

We have granted phantom units to officers and directors of Exterran GP LLC and to employees of Exterran Holdings and its subsidiaries. Because we grant phantom units to non-employees, we are required to remeasure the fair value of these phantom units each period and record a cumulative adjustment of the expense previously recognized. We recorded a reduction to SG&A expense of $0.1 million and $0.7 million for the years ended December 31, 2012 and 2011 related to the remeasurement of fair value of the phantom units. We recorded $0.3 million in SG&A expense related to the remeasurement of fair value of the phantom units for the year ended December 31, 2010.

Phantom Units

During the year ended December 31, 2012, we granted 29,717 phantom units to officers and directors of Exterran GP LLC and certain employees of Exterran Holdings and its subsidiaries, which vest 33 1/3% on each of the first three anniversaries of the grant date.

The following table presents phantom unit activity for the year ended December 31, 2012:

	PhantomUnits		WeightedAverageGrant-DateFair Valueper Unit
Phantom units outstanding, December 31, 2011	75,267		$	21.45
Granted	29,717		22.62
Vested	(40,329	)	18.73
Cancelled	(771	)	28.50
Phantom units outstanding, December 31, 2012	63,884		23.62

As of December 31, 2012, we expect $0.9 million of unrecognized compensation cost related to unvested phantom units to be recognized over the weighted-average period of 1.7 years.