(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
PARTNERSHIP INTERESTS |
Large accelerated filer | ☐ | ☒ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
CSI Compressco LP | |
Table of Contents | |
Page | |
PART I—FINANCIAL INFORMATION | |
PART II—OTHER INFORMATION | |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Compression and related services | $ | $ | $ | $ | |||||||||||
Aftermarket services | |||||||||||||||
Equipment sales | |||||||||||||||
Total revenues | |||||||||||||||
Cost of revenues (excluding depreciation and amortization expense): | |||||||||||||||
Cost of compression and related services | |||||||||||||||
Cost of aftermarket services | |||||||||||||||
Cost of equipment sales | |||||||||||||||
Total cost of revenues | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Impairments and other charges | |||||||||||||||
Insurance recoveries | ( | ) | ( | ) | |||||||||||
Selling, general, and administrative expense | |||||||||||||||
Interest expense, net | |||||||||||||||
Series A Preferred fair value adjustment (income) expense | |||||||||||||||
Other (income) expense, net | |||||||||||||||
Loss before income tax provision | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Provision (benefit) for income taxes | ( | ) | |||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
General partner interest in net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Common units interest in net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Net loss per common unit: | |||||||||||||||
Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Weighted average common units outstanding: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Foreign currency translation adjustment, net of tax of $0 in 2020 and 2019 | ( | ) | |||||||||||||
Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
June 30, 2020 | December 31, 2019 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Trade accounts receivable, net of allowances for doubtful accounts of $3,441 as of June 30, 2020 and $3,350 as of December 31, 2019 | |||||||
Inventories | |||||||
Prepaid expenses and other current assets | |||||||
Total current assets | |||||||
Property, plant, and equipment: | |||||||
Land and building | |||||||
Compressors and equipment | |||||||
Vehicles | |||||||
Construction in progress | |||||||
Total property, plant, and equipment | |||||||
Less accumulated depreciation | ( | ) | ( | ) | |||
Net property, plant, and equipment | |||||||
Other assets: | |||||||
Deferred tax asset | |||||||
Intangible assets, net of accumulated amortization of $29,231 as of June 30, 2020 and $27,751 as of December 31, 2019 | |||||||
Operating lease right-of-use assets | |||||||
Other assets | |||||||
Total other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND PARTNERS' CAPITAL | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Unearned income | |||||||
Accrued liabilities and other | |||||||
Amounts payable to affiliates | |||||||
Total current liabilities | |||||||
Other liabilities: | |||||||
Long-term debt, net | |||||||
Deferred tax liabilities | |||||||
Long-term affiliate payable | |||||||
Operating lease liabilities | |||||||
Other long-term liabilities | |||||||
Total other liabilities | |||||||
Commitments and contingencies | |||||||
Partners' capital: | |||||||
General partner interest | ( | ) | |||||
Common units (47,344,351 units issued and outstanding at June 30, 2020 and 47,078,529 units issued and outstanding at December 31, 2019) | |||||||
Accumulated other comprehensive income (loss) | ( | ) | ( | ) | |||
Total partners' capital | |||||||
Total liabilities and partners' capital | $ | $ |
Partners' Capital | Accumulated Other Comprehensive Income (Loss) | Total Partners' Capital | ||||||||||||||||
Limited Partners | ||||||||||||||||||
General Partner | Common Unitholders | |||||||||||||||||
Amount | Units | Amount | ||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||||
Net Loss | ( | ) | — | ( | ) | $ | ( | ) | ||||||||||
Distributions ($0.01 per unit) | ( | ) | — | ( | ) | $ | ( | ) | ||||||||||
Equity compensation | — | $ | ||||||||||||||||
Vesting of Phantom Units | — | — | — | $ | — | |||||||||||||
Translation adjustment, net of taxes of $0 | — | ( | ) | $ | ( | ) | ||||||||||||
Balance at March 31, 2020 | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||
Net Loss | $ | ( | ) | — | $ | ( | ) | $ | $ | ( | ) | |||||||
Distributions ($0.01 per unit) | ( | ) | — | ( | ) | ( | ) | |||||||||||
Equity compensation | — | |||||||||||||||||
Vesting of Phantom Units | — | — | — | — | ||||||||||||||
Translation adjustment, net of taxes of $0 | — | |||||||||||||||||
Balance at June 30, 2020 | $ | ( | ) | $ | $ | ( | ) | $ |
Partners' Capital | Accumulated Other Comprehensive Income (Loss) | Total Partners' Capital | ||||||||||||||||
Limited Partners | ||||||||||||||||||
General Partner | Common Unitholders | |||||||||||||||||
Amount | Units | Amount | ||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | ( | ) | $ | ||||||||||||
Net loss | ( | ) | — | ( | ) | $ | — | $ | ( | ) | ||||||||
Distributions ($0.01 per unit) | ( | ) | — | ( | ) | — | ( | ) | ||||||||||
Equity compensation, net | — | — | — | |||||||||||||||
Vesting of Phantom Units | — | — | — | — | ||||||||||||||
Conversions of Series A Preferred | — | — | ||||||||||||||||
Translation adjustment, net of taxes of $0 | — | — | — | |||||||||||||||
Other | — | — | ( | ) | ( | ) | ||||||||||||
Balance at March 31, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||||
Net loss | ( | ) | — | ( | ) | — | ( | ) | ||||||||||
Distributions ($0.01 per unit) | ( | ) | — | ( | ) | — | ( | ) | ||||||||||
Equity compensation, net | — | — | — | |||||||||||||||
Vesting of Phantom Units | — | — | — | — | ||||||||||||||
Conversions of Series A Preferred | — | — | ||||||||||||||||
Translation adjustment, net of taxes of $0 | — | — | — | |||||||||||||||
Other | — | — | ( | ) | ( | ) | ||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | ) | $ |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Operating activities: | |||||||
Net loss | $ | ( | ) | $ | ( | ) | |
Reconciliation of net loss to cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Impairments and other charges | |||||||
Provision for deferred income taxes | |||||||
Insurance recoveries associated with damaged equipment | ( | ) | |||||
Series A Preferred Unit distributions and adjustments | |||||||
Equity compensation expense | |||||||
Provision for doubtful accounts | |||||||
Amortization of deferred financing costs | |||||||
Equipment received in lieu of cash | |||||||
Debt exchange expenses | |||||||
Other non-cash charges and credits | ( | ) | |||||
(Gain) loss on sale of property, plant, and equipment | ( | ) | ( | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | ( | ) | |||||
Inventories | ( | ) | |||||
Prepaid expenses and other current assets | ( | ) | |||||
Accounts payable and accrued expenses | ( | ) | |||||
Other | ( | ) | ( | ) | |||
Net cash provided by operating activities | |||||||
Investing activities: | |||||||
Purchases of property, plant, and equipment, net | ( | ) | ( | ) | |||
Proceeds from sale of property, plant, and equipment | |||||||
Insurance recoveries associated with damaged equipment | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Financing activities: | |||||||
Proceeds from long-term debt | |||||||
Payments of long-term debt | ( | ) | ( | ) | |||
Cash redemptions of Preferred Units | ( | ) | |||||
Distributions | ( | ) | ( | ) | |||
Other financing activities | ( | ) | |||||
Payments to affiliate | ( | ) | |||||
Advances from affiliate | |||||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Effect of exchange rate changes on cash | ( | ) | |||||
Increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ | |||||
Supplemental cash flow information: | |||||||
Interest paid | $ | $ | |||||
Income taxes paid | $ | $ |
2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||||||||||||||
(In Thousands) | |||||||||||||||||||||||
Compression service contracts remaining performance obligations | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
(In Thousands) | |||||||
Unearned income, beginning of period | $ | $ | |||||
Additional unearned income | |||||||
Revenue recognized | ( | ) | ( | ) | |||
Unearned income, end of period | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In Thousands) | |||||||||||||||
Compression and related services | |||||||||||||||
U.S. | $ | $ | $ | $ | |||||||||||
International | |||||||||||||||
Aftermarket services | |||||||||||||||
U.S. | |||||||||||||||
International | |||||||||||||||
Equipment sales | |||||||||||||||
U.S. | |||||||||||||||
International | |||||||||||||||
Total Revenue | |||||||||||||||
U.S. | |||||||||||||||
International | |||||||||||||||
$ | $ | $ | $ |
June 30, 2020 | December 31, 2019 | ||||||
(In Thousands) | |||||||
Parts and supplies | $ | $ | |||||
Work in progress | |||||||
Total inventories | $ | $ |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
(In Thousands) | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows - operating leases | $ | $ | |||||
Right-of-use assets obtained in exchange for lease obligations: | |||||||
Operating leases | $ | $ |
June 30, 2020 | December 31, 2019 | ||||||
(In Thousands) | |||||||
Operating leases: | |||||||
Operating right-of-use asset | $ | $ | |||||
Accrued liabilities and other | $ | $ | |||||
Operating lease liabilities | |||||||
Total operating lease liabilities | $ | $ | |||||
June 30, 2020 | December 31, 2019 | ||||
Weighted average remaining lease term: | |||||
Operating leases | |||||
Weighted average discount rate: | |||||
Operating leases | % | % |
Operating Leases | |||
(In Thousands) | |||
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total lease payments | |||
Less imputed interest | ( | ) | |
Total lease liabilities | $ |
June 30, 2020 | December 31, 2019 | |||||||||
Scheduled Maturity | (In Thousands) | |||||||||
Credit Agreement (presented net of the unamortized deferred financing costs of $0.7 million as of June 30, 2020 and $0.9 million as of December 31, 2019) | June 2023 | $ | $ | |||||||
7.25% Senior Notes (presented net of the unamortized discount of $0.4 million as of June 30, 2020 and $1.7 million as of December 31, 2019 and unamortized deferred financing costs of $0.6 million as of June 30, 2020 and $2.8 million as of December 31, 2019) | August 2022 | |||||||||
7.50% First Lien Notes (presented net of the unamortized deferred financing costs of $5.7 million as of June 30, 2020 and $5.8 million as of December 31, 2019, net of the unamortized discount of $0.2 million as of June 30, 2020, and net of deferred restructuring gain of $5.6 million as of June 30, 2020) | April 2025 | |||||||||
10.00%/10.75% Second Lien Notes (presented net of the unamortized discount of $0.8 million as of June 30, 2020, and net of unamortized deferred financing costs of $1.3 million as of June 30, 2020, and net of deferred restructuring gain of $4 million as of June 30, 2020) | April 2026 | |||||||||
Less current portion | ||||||||||
Total long-term debt | $ | $ |
US Dollar Notional Amount | Traded Exchange Rate | Settlement Date | ||||||
(In Thousands) | ||||||||
Forward sale Mexican peso | $ |
Foreign currency derivative contracts | Balance Sheet | Fair Value at | ||||||||
Location | June 30, 2020 | December 31, 2019 | ||||||||
(In Thousands) | ||||||||||
Forward sale contracts | Current assets | $ | $ | |||||||
Forward sale contracts | Current liabilities | ( | ) | |||||||
Net asset (liability) | $ | $ | ( | ) |
Fair Value Measurements Using | |||||||||||||||
Description | Total as of June 30, 2020 | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
(In Thousands) | |||||||||||||||
Midland manufacturing facility and related assets | $ | $ | $ | $ | |||||||||||
Non-core used compressor equipment held for sale | $ | 2,600 | $ | — | $ | — | $ | 2,600 | |||||||
Asset for foreign currency derivative contracts | $ | $ | $ | $ | |||||||||||
$ |
Fair Value Measurements Using | ||||||||||||
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Description | Total as of December 31, 2019 | |||||||||||
(In Thousands) | ||||||||||||
Liability for foreign currency derivative contracts | ( | ) | ( | ) | ||||||||
$ | ( | ) |
• | assess our ability to generate available cash sufficient to make distributions to our common unitholders and general partner; |
• | evaluate the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis; |
• | measure operating performance and return on capital as compared to those of our competitors; and |
• | determine our ability to incur and service debt and fund capital expenditures. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In Thousands) | |||||||||||||||
Net loss | $ | (24,578 | ) | $ | (2,947 | ) | $ | (38,208 | ) | $ | (15,403 | ) | |||
Provision (benefit) for income taxes | 1,016 | (704 | ) | 1,228 | 3,669 | ||||||||||
Depreciation and amortization | 20,117 | 19,054 | 40,025 | 37,586 | |||||||||||
Impairments and other charges | 8,977 | 2,464 | 14,348 | 2,464 | |||||||||||
Interest expense, net | 13,580 | 13,045 | 26,749 | 26,344 | |||||||||||
Equity compensation | 488 | 590 | 812 | 955 | |||||||||||
Series A Preferred redemption premium | — | 621 | — | 1,069 | |||||||||||
Series A Preferred fair value adjustments | — | 166 | — | 1,470 | |||||||||||
Debt exchange expenses | 4,755 | 4,755 | |||||||||||||
Severance | 1,084 | — | 1,356 | — | |||||||||||
Non-cash cost of compressors sold | 631 | 98 | 2,440 | 1,038 | |||||||||||
Other | 977 | 376 | 1,304 | 376 | |||||||||||
Adjusted EBITDA | $ | 27,047 | $ | 32,763 | $ | 54,809 | $ | 59,568 |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
(In Thousands) | |||||||
Net cash provided by operating activities | $ | 18,180 | $ | 40,342 | |||
Changes in current assets and current liabilities | 5,518 | (8,783 | ) | ||||
Deferred income taxes | (409 | ) | (946 | ) | |||
Other non-cash charges | (2,074 | ) | (1,411 | ) | |||
Interest expense, net | 26,749 | 26,344 | |||||
Series A Preferred accrued paid in kind distributions | — | (1,061 | ) | ||||
Insurance recoveries | 517 | ||||||
Provision for income taxes | 1,228 | 3,669 | |||||
Severance | 1,356 | — | |||||
Non-cash cost of compressors sold | 2,440 | 1,038 | |||||
Other | 1,304 | 376 | |||||
Adjusted EBITDA | $ | 54,809 | $ | 59,568 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In Thousands) | (In Thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 4,823 | $ | 8,710 | $ | 18,180 | $ | 40,342 | |||||||
Capital expenditures, net of sales proceeds | (1,125 | ) | (16,434 | ) | (7,608 | ) | (39,586 | ) | |||||||
Free cash flow | $ | 3,698 | $ | (7,724 | ) | $ | 10,572 | $ | 756 |
June 30, | |||||
2020 | 2019 | ||||
Horsepower | |||||
Total horsepower in fleet | 1,178,721 | 1,155,440 | |||
Total horsepower in service | 967,505 | 1,029,045 | |||
Total horsepower utilization rate | 82.1 | % | 89.1 | % |
June 30, | |||||
2020 | 2019 | ||||
Horsepower utilization rate by class | |||||
Low-horsepower (0-100) | 63.6 | % | 73.7 | % | |
Medium-horsepower (101-1,000) | 79.4 | % | 84.4 | % | |
High-horsepower (1,001 and over) | 88.2 | % | 97.1 | % |
Three Months Ended June 30, | ||||||||||||||||||||
Period-to-Period Change | Percentage of Total Revenues | Period-to-Period Change | ||||||||||||||||||
Consolidated Results of Operations | 2020 | 2019 | 2020 vs. 2019 | 2020 | 2019 | 2020 vs. 2019 | ||||||||||||||
(In Thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Compression and related services | $ | 56,336 | $ | 64,876 | $ | (8,540 | ) | 58.4 | % | 47.8 | % | (13.2 | )% | |||||||
Aftermarket services | 15,737 | 18,156 | (2,419 | ) | 16.3 | % | 13.4 | % | (13.3 | )% | ||||||||||
Equipment sales | 24,340 | 52,824 | (28,484 | ) | 25.2 | % | 38.9 | % | (53.9 | )% | ||||||||||
Total revenues | 96,413 | 135,856 | (39,443 | ) | 100.0 | % | 100.0 | % | (29.0 | )% | ||||||||||
Cost of revenues: | ||||||||||||||||||||
Cost of compression and related services | 25,395 | 30,520 | (5,125 | ) | 26.3 | % | 22.5 | % | (16.8 | )% | ||||||||||
Cost of aftermarket services | 13,433 | 15,418 | (1,985 | ) | 13.9 | % | 11.3 | % | (12.9 | )% | ||||||||||
Cost of equipment sales | 24,415 | 47,412 | (22,997 | ) | 25.3 | % | 34.9 | % | (48.5 | )% | ||||||||||
Total cost of revenues | 63,243 | 93,350 | (30,107 | ) | 65.6 | % | 68.7 | % | (32.3 | )% | ||||||||||
Depreciation and amortization | 20,117 | 19,054 | 1,063 | 20.9 | % | 14.0 | % | 5.6 | % | |||||||||||
Impairments and other charges | 8,977 | 2,311 | 6,666 | 9.3 | % | 1.7 | % | 288.4 | % | |||||||||||
Insurance recoveries | (517 | ) | — | (517 | ) | (0.5 | )% | — | % | 100.0 | % | |||||||||
Selling, general, and administrative expense | 10,172 | 10,974 | (802 | ) | 10.6 | % | 8.1 | % | (7.3 | )% | ||||||||||
Interest expense, net | 13,580 | 13,045 | 535 | 14.1 | % | 9.6 | % | 4.1 | % | |||||||||||
Series A Preferred fair value adjustment (income) expense | — | 166 | (166 | ) | — | % | 0.1 | % | (100.0 | )% | ||||||||||
Other (income) expense, net | 4,403 | 607 | 3,796 | 4.6 | % | 0.4 | % | 625.4 | % | |||||||||||
Income (loss) before income taxes | (23,562 | ) | (3,651 | ) | (19,911 | ) | (24.4 | )% | (2.7 | )% | 545.4 | % | ||||||||
Provision (benefit) for income taxes | 1,016 | (704 | ) | 1,720 | 1.1 | % | (0.5 | )% | (244.3 | )% | ||||||||||
Net income (loss) | $ | (24,578 | ) | $ | (2,947 | ) | $ | (21,631 | ) | (25.5 | )% | (2.2 | )% | 734.0 | % |
Six Months Ended June 30, | ||||||||||||||||||||
Period-to-Period Change | Percentage of Total Revenues | Period-to-Period Change | ||||||||||||||||||
Consolidated Results of Operations | 2020 | 2019 | 2020 vs. 2019 | 2020 | 2019 | 2020 vs. 2019 | ||||||||||||||
(In Thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Compression and related services | $ | 122,101 | $ | 127,578 | $ | (5,477 | ) | 65.4 | % | 53.3 | % | (4.3 | )% | |||||||
Aftermarket services | 33,707 | 31,770 | 1,937 | 18.1 | % | 13.3 | % | 6.1 | % | |||||||||||
Equipment sales | 30,884 | 79,944 | (49,060 | ) | 16.5 | % | 33.4 | % | (61.4 | )% | ||||||||||
Total revenues | 186,693 | 239,292 | (52,600 | ) | 100.0 | % | 100.0 | % | (22.0 | )% | ||||||||||
Cost of revenues: | ||||||||||||||||||||
Cost of compression and related services | 57,003 | 63,141 | (6,138 | ) | 30.5 | % | 26.4 | % | (9.7 | )% | ||||||||||
Cost of aftermarket services | 29,678 | 26,678 | 3,000 | 15.9 | % | 11.1 | % | 11.2 | % | |||||||||||
Cost of equipment sales | 31,115 | 71,631 | (40,516 | ) | 16.7 | % | 29.9 | % | (56.6 | )% | ||||||||||
Total cost of revenues | 117,796 | 161,450 | (43,654 | ) | 63.1 | % | 67.5 | % | (27.0 | )% | ||||||||||
Depreciation and amortization | 40,025 | 37,586 | 2,439 | 21.4 | % | 15.7 | % | 6.5 | % | |||||||||||
Impairments and other charges | 14,348 | 2,311 | 12,037 | 7.7 | % | 1.0 | % | 520.9 | % | |||||||||||
Insurance recoveries | (517 | ) | — | (517 | ) | (0.3 | )% | — | % | 100.0 | % | |||||||||
Selling, general, and administrative expense | 20,428 | 21,639 | (1,211 | ) | 10.9 | % | 9.0 | % | (5.6 | )% | ||||||||||
Interest expense, net | 26,749 | 26,344 | 405 | 14.3 | % | 11.0 | % | 1.5 | % | |||||||||||
Series A Preferred fair value adjustment (income) expense | — | 1,470 | (1,470 | ) | — | % | 0.6 | % | (100.0 | )% | ||||||||||
Other (income) expense, net | 4,843 | 226 | 4,617 | 2.6 | % | 0.1 | % | 2,042.9 | % | |||||||||||
Loss before income taxes | (36,980 | ) | (11,734 | ) | (25,246 | ) | (19.8 | )% | (4.9 | )% | 215.2 | % | ||||||||
Provision for income taxes | 1,228 | 3,669 | (2,441 | ) | 0.7 | % | 1.5 | % | (66.5 | )% | ||||||||||
Net loss | $ | (38,208 | ) | $ | (15,403 | ) | $ | (22,805 | ) | (20.5 | )% | (6.4 | )% | 148.1 | % |
Six Months Ended June 30, | |||||||
(In Thousands) | |||||||
2020 | 2019 | ||||||
Operating activities | $ | 18,180 | $ | 40,342 | |||
Investing activities | (7,091 | ) | (39,586 | ) | |||
Financing activities | (6,694 | ) | (12,329 | ) |
Payments Due | ||||||||||||||||||||||||||||
Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Long-term debt | $ | 637,728 | $ | — | $ | — | $ | 80,722 | $ | 1,477 | $ | — | $ | 555,529 | ||||||||||||||
Interest on debt | $ | 244,842 | $ | 25,741 | $ | 51,483 | $ | 49,532 | $ | 45,592 | $ | 45,553 | $ | 26,941 | ||||||||||||||
Operating leases | $ | 37,926 | 5,192 | 8,768 | 6,575 | 4,322 | 4,250 | 8,819 | ||||||||||||||||||||
Affiliate financing obligation | $ | 12,865 | 1,508 | 3,015 | 3,015 | 3,015 | 2,312 | — | ||||||||||||||||||||
Total contractual cash obligations | $ | 933,361 | $ | 32,441 | $ | 63,266 | $ | 139,844 | $ | 54,406 | $ | 52,115 | $ | 591,289 |
• | demand for our products and services is declining as our customers continue to revise their budgets downward and adjust their operations in response to lower oil and gas prices; |
• | actions undertaken by national, state and local governments and health officials to contain COVID-19 or treat its effects. In response to various governmental directives, at points we have required most office-based employees, including most employees based at our headquarters in The Woodlands, Texas, to work remotely. We may experience reductions in productivity and disruptions to our business routines while work-from-home arrangements remain in place; |
• | We could encounter logistical complications and increased costs adapting our disclosure controls and procedures and our internal control over financial reporting in a changing environment that includes work-from-home arrangements and furloughs. In the future we may encounter operational challenges or disruptions stemming from the pandemic that require us to implement new or enhanced internal controls to mitigate the risks of operating in a remote environment or increased risks of material misstatements resulting from changes to the business and other uncertainties; |
• | restrictions on importing and exporting products; |
• | claims from customers and suppliers that their non-performance under our contracts is permitted as a result of force majeure or other reasons; |
• | impacts related to late customer payments and contractual defaults associated with customer and supplier bankruptcies; |
• | a credit rating downgrade of our corporate debt and potentially higher borrowing costs in the future; |
• | cybersecurity issues, as our network may become more vulnerable to cyberattacks due to increased remote access associated with work-from-home arrangements; |
• | increased costs associated with possible facility closures to meet expected customer activity levels; and |
• | we may be required to record significant impairment charges with respect to assets, whose fair values may be negatively affected by the effects of the COVID-19 pandemic on our operations. Also, we may be required to write off obsolete inventory, and such charges may be significant. |
Period | Total Number of Units Purchased | Average Price Paid per Unit | Total Number of Units Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Publicly Announced Plans or Programs | |||||||
April 1 – April 30, 2020 | — | $ | — | N/A | N/A | ||||||
May 1 – May 31, 2020 | — | — | N/A | N/A | |||||||
June 1 – June 30, 2020 | — | — | N/A | N/A | |||||||
Total | — | N/A | N/A |
4.1 | |
4.2 | |
4.3 | |
4.4 | |
10.1 | |
10.2 | |
31.1* | |
31.2* | |
32.1** | |
32.2** | |
101.SCH+ | XBRL Taxonomy Extension Schema Document |
101.CAL+ | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF+ | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB+ | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE+ | XBRL Taxonomy Extension Presentation Linkbase Document |
104* | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
* | Filed with this report. |
** | Furnished with this report. |
+ | Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019; (ii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2020 and 2019; (iii) Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019; (iv) Consolidated Statement of Partners’ Capital for the six month period ended June 30, 2020; (v) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019; and (iv) Notes to Consolidated Financial Statements for the six months ended June 30, 2020. |
CSI COMPRESSCO LP | |||
By: | CSI Compressco GP Inc., | ||
its General Partner | |||
Date: | August 3, 2020 | By: | /s/Brady M. Murphy |
Brady M. Murphy | |||
President | |||
Principal Executive Officer | |||
Date: | August 3, 2020 | By: | /s/Elijio V. Serrano |
Elijio V. Serrano | |||
Chief Financial Officer | |||
Principal Financial Officer | |||
Date: | August 3, 2020 | By: | /s/Michael E. Moscoso |
Michael E. Moscoso | |||
Vice President - Finance | |||
Principal Accounting Officer | |||
1. | I have reviewed this report on Form 10-Q for the fiscal quarter ended June 30, 2020, of CSI Compressco LP; |
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 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 function): |
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 controls over financial reporting. |
Date: | August 3, 2020 | /s/Brady Murphy |
Brady M. Murphy | ||
President of CSI Compressco GP Inc., | ||
General Partner of CSI Compressco LP | ||
(Principal Executive Officer) |
1. | I have reviewed this report on Form 10-Q for the fiscal quarter ended June 30, 2020, of CSI Compressco LP; |
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 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 function): |
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 controls over financial reporting. |
Date: | August 3, 2020 | /s/Elijio V. Serrano |
Elijio V. Serrano | ||
Chief Financial Officer of CSI Compressco GP Inc., | ||
General Partner of CSI Compressco LP | ||
(Principal Financial Officer) |
Dated: | August 3, 2020 | /s/Brady M. Murphy |
Brady M. Murphy | ||
President of CSI Compressco GP Inc., | ||
General Partner of CSI Compressco LP | ||
(Principal Executive Officer) |
Dated: | August 3, 2020 | /s/Elijio V. Serrano |
Elijio V. Serrano | ||
Chief Financial Officer of CSI Compressco GP Inc., | ||
General Partner of CSI Compressco LP | ||
(Principal Financial Officer) |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (24,578) | $ (2,947) | $ (38,208) | $ (15,403) |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | 177 | 128 | (176) | 400 |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 |
Comprehensive income (loss) | $ (24,401) | $ (2,819) | $ (38,384) | $ (15,003) |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Current assets: | ||
Trade accounts receivable, allowances for doubtful accounts | $ 3,441 | $ 3,350 |
Patents, trademarks, and other intangible assets, accumulated amortization | $ 29,231 | $ 27,751 |
Partners' capital: | ||
Common units issued and outstanding | 47,344,351 | 47,078,529 |
Consolidated Statements of Partners' Capital (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Partners' Capital [Abstract] | ||||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Gain (Loss) Arising During Period, Net of Tax | $ 0 | $ 0 | $ 0 | $ 0 |
Distributions | $ 0.0000 | $ 0.0100 | $ 0.0000 | $ 0.0100 |
Basis of Presentation and Significant Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES Organization CSI Compressco LP, a Delaware limited partnership, is a provider of compression services and equipment for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage. We sell standard and custom-designed, engineered compressor packages and provide aftermarket services and compressor package parts and components manufactured by third-party suppliers. We provide these compression services and equipment to a broad base of natural gas and oil exploration and production, midstream, and transmission companies operating throughout many of the onshore producing regions of the United States as well as in a number of foreign locations, including the countries of Mexico, Canada, and Argentina. We design and fabricate a majority of the compressor packages that we use to provide compression services and sell to customers. Going forward, we plan to have such compressor packages fabricated through one or more third party packagers. Presentation Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. In the opinion of our management, our unaudited consolidated financial statements as of June 30, 2020, and for the three and six month periods ended June 30, 2020 and 2019, include all normal recurring adjustments that are necessary to provide a fair statement of our results for these interim periods. Operating results for the three and six month periods ended June 30, 2020 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2020. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2019 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 16, 2020. Segments Our General Partner has concluded that we operate in one business segment. Significant Accounting Policies Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K. There have been no significant changes in our accounting policies or the application thereof during the second quarter of 2020. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material. Reclassifications Certain previously reported financial information has been reclassified to conform to the current year's presentation. The impact of such reclassifications was not significant to the prior year's overall presentation. Cash Equivalents We consider all highly liquid cash investments with maturities of three months or less when purchased to be cash equivalents. Financial Instruments Financial instruments that subject us to concentrations of credit risk consist principally of trade accounts receivable, which are primarily due from customers of varying size engaged in oil and gas activities in the United States, Canada, Mexico, and Argentina. Our policy is to review the financial condition of potential customers before extending credit and periodically update their credit information. Payment terms are on a short-term basis. The risk of loss from the inability to collect trade receivables is heightened during prolonged periods of low oil and natural gas commodity prices. We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. Our risk management activities include the use of foreign currency forward purchase and sale derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected international operations. We have a $1.5 million outstanding balance under our variable rate revolving credit facility as of June 30, 2020 and face market risk exposure related to changes in applicable interest rates. Foreign Currencies Accumulated other comprehensive income (loss) is included in partners’ capital in the accompanying consolidated balance sheets and consists of the cumulative currency translation adjustments associated with our international operations. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled $(0.3) million and $1.4 million during the three and six month periods ended June 30, 2020, respectively, and $(0.04) million and $(1.0) million during the three and six month periods ended June 30, 2019, respectively. Inventories Inventories consist primarily of compressor package parts and supplies and work in progress and are stated at the lower of cost or net realizable value. For parts and supplies, cost is determined using the weighted average cost method. The cost of work in progress is determined using the specific identification method. Assets Held for Sale As of June 30, 2020, we had $2.6 million in net book value of compressor equipment classified as held for sale within net property, plant, and equipment on our consolidated balance sheets. For further details of the impairment recorded to adjust the net book value to fair value upon this classification, see Note 3 - Impairments and Other Charges below. Impairments and Other Charges Impairments of long-lived assets, including identified intangible assets, are determined periodically, when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgment as to the future undiscounted operating cash flows to be generated from the relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related assets, an impairment is recognized for the excess of the carrying value over fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. See Note 3 - "Impairments and Other Charges" for additional discussion of recorded impairments. Earnings Per Common Unit Our computations of earnings per common unit are based on the weighted average number of common units outstanding during the applicable period. Basic earnings per common unit are determined by dividing net income (loss) allocated to the common units after deducting the amount allocated to our General Partner (including any distributions to our General Partner on its incentive distribution rights) by the weighted average number of outstanding common units during the period. When computing earnings per common unit under the two class method in periods when distributions are greater than earnings, the amount of the distribution is deducted from net income (loss) and the excess of distributions over earnings is allocated between the General Partner and common units based on how our Partnership Agreement allocates net losses. Diluted earnings per common unit are computed using the treasury stock method, which considers the potential future issuance of limited partner common units. Unvested phantom units are not included in basic earnings per common unit, as they are not considered to be participating securities, but are included in the calculation of diluted earnings per common unit. For the three and six month periods ended June 30, 2020 and June 30, 2019, all unvested phantom units were excluded from the calculation of diluted common units because the impact was anti-dilutive. Diluted earnings per common unit are computed using the "if converted" method, whereby the amount of net income (loss) and the number of common units issuable are each adjusted as if the Preferred Units, had been converted as of the beginning of the period presented. The calculation of diluted earnings per common unit for the three and six month period ended June 30, 2019 excludes the impact of the Preferred Units, as the inclusion of the impact from the conversion of the Preferred Units into common units would have been anti-dilutive. All remaining outstanding Preferred Units were redeemed for cash on August 8, 2019. Revenue Recognition Performance Obligations. Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Revenue is generally recognized when we transfer control of our products or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services to our customers. We receive cash equal to the invoice price for most product sales and services and payment terms typically range from 30 to 60 days from the date we invoice our customer. With the exception of the initial terms of our compression services contracts of our medium- and high-horsepower compressor packages, our customer contracts are generally for terms of one year or less. Since the period between when we deliver products or services and when the customer pays for products or services is not to exceed one year, we have elected not to calculate or disclose a financing component for our customer contracts. Depending on the terms of the arrangement, we may also defer the recognition of revenue for a portion of the consideration received because we have to satisfy a future performance obligation. For example, consideration received from customers during the fabrication of new compressor packages is typically deferred until control of the compressor package is transferred to our customer. For revenue associated with mobilization of service equipment as part of a service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period. Compression and related services. For compression services revenues recognized over time, our customer contracts typically provide agreed upon monthly service rates and we recognize service revenue based upon the number of days that services have been performed. The majority of our compression services are provided pursuant to contract terms ranging from one month to twenty-four months. Monthly agreements are generally cancellable with 30 days written notice by the customer. Sales taxes, value added taxes, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We recognize the cost for freight and shipping costs when control over our products (i.e. delivery) has transferred to the customer as part of cost of product sales. Use of Estimates. Our revenues do not include material amounts of variable consideration, as our revenues typically do not require significant estimates or judgments. The transaction price on a majority of our arrangements are fixed and product returns are immaterial. Additionally, our arrangements typically do not include multiple performance obligations that require estimates of the stand-alone purchase price for each performance obligation. Revenue on certain aftermarket service arrangements that include time as a component of the transaction price is not recognized until the performance obligation is complete. Contract Assets and Liabilities. We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing, our invoicing of the customer is delayed until certain documentation requirements are met. In those cases, we recognize a contract asset rather than a billed trade accounts receivable until we are able to invoice the customer. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets. We classify contract liabilities as unearned income in our consolidated balance sheets. Such unearned income typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. New equipment sales orders generally take less than twelve months to build and deliver. Bill-and-Hold Arrangements. We design compressor packages based on our customer’s specifications. In some cases, the customer will request us to hold the equipment, upon completion of the unit, until the job site is ready to receive the equipment. When this occurs, we along with the customer sign a bill-and-hold agreement, which outlines that the customer has title to the equipment, the equipment is ready for delivery, we cannot use the equipment or direct it to another customer, and we have a present right to payment. When those criteria have been met and the agreement is executed, we recognize the revenue on the equipment because control of the equipment has passed to our customer and our performance obligations are complete. Entering into these arrangements is something we have done as a courtesy for certain customers for many years. The equipment subject to the bill-and-hold agreements have generally been invoiced and paid for through progressive billings such that at the time the bill-and-hold agreement is executed, the majority of the contractual cash obligation of the customer has been received by us. Fair Value Measurements We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements were utilized in the determination of the carrying value of our Series A Preferred Units (a Level 3 fair value measurement). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value (a Level 2 fair value measurement). Refer to Note 9 - "Fair Value Measurements" for further discussion. Fair value measurements are also utilized on a nonrecurring basis, such as in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets (a Level 3 fair value measurement) and for the impairment of long-lived assets (a Level 3 fair value measurement). Distributions On January 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended December 31, 2019 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This distribution was paid on February 14, 2020, to each of the holders of common units of record as of the close of business on February 1, 2020. On April 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended March 31, 2020 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This distribution was paid on May 15, 2020, to each of the holders of common units of record as of the close of business on May 1, 2020. New Accounting Pronouncements Standards adopted in 2020 In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for us the first quarter of fiscal 2020. The adoption of this standard did not have a material impact on our consolidated financial statements. Standards not yet adopted In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit impairments will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 is effective for us the first quarter of fiscal 2023. We continue to assess the potential effects of these changes to our consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the recognition of deferred tax liabilities for outside basis differences. It also simplifies certain aspects of accounting for franchise taxes and clarifies the accounting for transactions that results in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for us the first quarter of fiscal 2021. We continue to assess the potential effects of these changes to our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements.
|
Impairment and Other Charges (Notes) |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Asset Impairment Charges [Abstract] | |
Asset Impairment Charges [Text Block] | IMPAIRMENTS AND OTHER CHARGES Impairments of Long-Lived Assets During the first half of 2020, the COVID-19 pandemic and decline in oil and gas prices had a significant impact on our customers and industry, resulting in a decrease in demand in certain of our service lines. During the first quarter of 2020, we started to see our customers revise their capital budgets downwards and adjust their operations accordingly, which led to a decline in orders for new compression equipment to be fabricated and sold to third parties. We concluded that these events were indicators of impairment for all our asset groups. We performed a recoverability analysis on all our long-lived asset groups and we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory exceeded their respective fair values. Therefore, we recorded impairments of approximately $5.4 million related to these assets. Fair value was estimated based on a market approach. During the second quarter of 2020, primarily as a result of continued negative impacts on our compression fleet associated with the COVID-19 pandemic and declines in oil and gas prices, we recorded impairments and other charges of approximately $9.0 million associated with non-core used compressor equipment that we have held for sale, the low-horsepower class of our compression fleet, and field inventory for compression and related services. Fair value used to determine impairments was estimated based on a market approach. Given the dynamic nature of the events, we are not able to reasonably estimate how long our operations will be impacted and the full impact these events will have on our operations. As a result, we could have indicators of impairment again in future periods resulting in additional asset impairments.
|
Inventories Inventories (Notes) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Text Block] | INVENTORIES Components of inventories as of June 30, 2020 and December 31, 2019, are as follows:
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Long-Term Debt and Other Borrowings |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Other Borrowings | LONG-TERM DEBT AND OTHER BORROWINGS Long-term debt consists of the following:
There was a $1.5 million balance outstanding and $2.8 million in letters of credit issued under the Credit Agreement as of June 30, 2020. As of June 30, 2020, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement, we had availability of $12.3 million. Our credit and senior note agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. We are in compliance with all covenants of our credit and senior note agreements as of June 30, 2020. Refer to Note 7 - "Related Party Transactions," for a discussion of our amounts payable to affiliates and long-term affiliate payable to TETRA. Second Amendment to Credit Agreement On June 11, 2020, CSI Compressco, LP and CSI Compressco Sub Inc (the “Borrowers”) entered into the Second Amendment to Loan and Security Agreement (the “Amendment”) amending the Loan and Security Agreement dated June 29, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) with Bank of America, N.A., in its capacity as administrative agent, issuing bank and swing line issuer (“Administrative Agent”), and the other lenders and loan parties party thereto. The Amendment provided for changes and modifications to the Credit Agreement which include, among other things, changes to certain terms of the Credit Agreement as follows: (i) resizing of the maximum credit commitment under the Credit Agreement from $50,000,000 to $35,000,000; (ii) the inclusion of a $5,000,000 reserve with respect to the Borrowing Base (as defined in the Credit Agreement) thereunder, which would result in reduced borrowing availability; (iii) the removal of the financial covenant compliance test with respect to the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement); (iv) an increase in the applicable margin related to (x) LIBOR Rate Loans (as defined in the Credit Agreement) to a range between 3.00% and 3.50% and (y) Base Rate Loans (as defined in the Credit Agreement) to a range between 2.00% and 2.50%, in each case, which shall be determined according to average daily excess availability under the Credit Agreement; and (v) an increase in the rate used to calculate the commitment fee in respect of the unutilized commitments under the Credit Agreement to 0.50%. In connection to this amendment, $0.2 million of financing costs were incurred, and deferred against the carrying value of the amount outstanding, if any. Additionally, $0.2 million of financing fees were charged to other (income) expense, net during the three month period ended June 30, 2020. First Supplemental Indenture for the Old Notes On June 11, 2020, CSI Compressco, LP and CSI Compressco Finance Inc. (the "Issuers") announced that they had accepted for exchange $215,208,000, or approximately 72.7%, of their outstanding 7.25% Senior Notes due 2022 (the "Old Notes") that were validly tendered (and not validly withdrawn) by 11:59 p.m., New York City time, on June 10, 2020, for (i) $50,000,000 of the Issuers' 7.50% Senior Secured First Lien Notes due 2025 (the "7.50% First Lien Notes") and (ii) $155,529,000 aggregate principal amount of new 10.00%/10.75% Senior Secured Second Lien Notes due 2026 (the "10.00%/10.75% Second Lien Notes" and, together with the 7.50% First Lien Notes, the "New Notes"), pursuant to its previously announced exchange offer and consent solicitation (the "Exchange Offer"), which commenced on April 17, 2020. In connection with the exchange offer, we incurred financing fees of $4.8 million which were charged to other (income) expense, net during the three month period ended June 30, 2020. On June 12, 2020, following receipt of the requisite consents of the holders of the Old Notes, the Issuers entered into the First Supplemental Indenture (the "First Supplemental Indenture"), by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, to the Indenture, dated as of August 4, 2014 (the "Unsecured Indenture"), by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee. The First Supplemental Indenture eliminated substantially all of the restrictive covenants and certain of the default provisions in the Unsecured Indenture and became operative upon the consummation by the Issuers of the Exchange Offer. On June 12, 2020, the Issuers issued $50,000,000 in aggregate principal amount of New First Lien Notes to certain holders of the Old Notes pursuant to the terms of the Exchange Offer. In March 2018, the Issuers had issued $350,000,000 in aggregate principal amount of 7.50% Senior Secured Notes due 2025 (the "Existing First Lien Notes" and, together with the New First Lien Notes, the "7.50% First Lien Notes") pursuant to the First Lien Base Indenture. The New First Lien Notes were issued as "additional notes" under the First Lien Base Indenture and will be treated as a single class with such notes but will not trade fungibly with the Existing First Lien Notes. Second Lien Notes Indenture On June 12, 2020, the Issuers issued $155,529,000 in aggregate principal amount of the 10.00%/10.75% Second Lien Notes to certain holders of the Old Notes pursuant to the terms of the Exchange Offer. The Issuers issued the 10.00%/10.75% Second Lien Notes pursuant to an indenture, dated June 12, 2020 (the "Second Lien Notes Indenture"),by and among the Issuers, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (the "Second Lien Trustee"). In connection with the payment of PIK Interest (as defined below), if any, in respect of the 10.00%/10.75% Second Lien Notes, the Issuers will be entitled, without the consent of the Holders, to increase the outstanding aggregate principal amount of the 10.00%/10.75% Second Lien Notes or issue additional notes ("PIK notes") under the Second Lien Notes Indenture on the same terms and conditions as the 10.00%/10.75% Second Lien Notes offered hereby (each such increase or issuance, a "PIK Payment"). The Issuers may issue additional 10.00%/10.75% Second Lien Notes under the Second Lien Notes Indenture from time to time. Any issuance of additional 10.00%/10.75% Second Lien Notes (including PIK notes) is subject to all of the covenants in the Second Lien Notes Indenture. The 10.00%/10.75% Second Lien Notes and any additional 10.00%/10.75% Second Lien Notes subsequently issued under the indenture, will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Subject to the making of PIK Payments, the Issuers will issue 10.00%/10.75% Second Lien Notes in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000; provided that PIK Payments may result in 10.00%/10.75% Second Lien Notes being issued in denominations of $1.00 and integral multiples of $1.00. The 10.00%/10.75% Second Lien Notes will mature on April 1, 2026. Interest on the 10.00%/10.75% Second Lien Notes will be payable semi-annually in arrears on April 1 and October 1, commencing on October 1, 2020. The Issuers will make each interest payment to the holders of record on March 15 and September 15 immediately preceding each interest payment date. Interest will accrue at (1) the annual rate of 7.250% payable in cash, plus (2) at the election of the Issuers (made by delivering a notice to the Second Lien Trustee not less than five business days prior to the record date), the annual rate of (i) 2.750% payable in cash (together with the annual rate set forth in clause (1), the "Cash Interest Rate") or (ii) 3.500% payable by increasing the principal amount of the outstanding 10.00%/10.75% Second Lien Notes or by issuing additional PIK notes, in each case rounding up to the nearest $1.00 (such increased principal amount or additional PIK notes, the "PIK Interest"). In the absence of an interest payment election made by the Issuers as set forth above, interest on the notes will be payable as if the Issuers had elected to pay PIK Interest with respect to the portion of interest payable pursuant to clause (2) above. The 10.00%/10.75% Second Lien Notes are jointly and severally, and fully and unconditionally, guaranteed (the "Guarantees") on a senior secured basis initially by each of the Partnership's domestic restricted subsidiaries (other than Finance Corp, certain immaterial subsidiaries and certain other excluded domestic subsidiaries, the "Guarantors") and will be secured by a second-priority security interest in substantially all of the Issuers' and the Guarantors' assets (other than certain excluded assets) (the "Collateral") as collateral security for their obligations under the 10.00%/10.75% Second Lien Notes, subject to certain permitted encumbrances and exceptions. At any time prior to April 1, 2023, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 10.00%/10.75% Second Lien Notes issued under the Second Lien Notes Indenture at a redemption price of 110.000% of the principal amount of the 10.00%/10.75% Second Lien Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings. On or after April 1, 2023, the Issuers may redeem all or part of the 10.00%/10.75% Second Lien Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 107.500% for the twelve month period beginning on April 1, 2023; (ii) 105.000% for the twelve-month period beginning on April 1, 2024 and (iii) 100.000% at any time thereafter, plus accrued and unpaid interest up to, but not including, the redemption date. In addition, at any time prior to April 1, 2023, the Company may redeem all or a part of the 10.00%/10.75% Second Lien Notes at a redemption price equal to 100% of the principal amount of the 10.00%/10.75% Second Lien Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date. The Second Lien Notes Indenture contains customary covenants restricting the Partnership's ability and the ability of its restricted subsidiaries to: (i) pay distributions on, purchase or redeem its common units or purchase or redeem its subordinated debt; (ii) incur or guarantee additional indebtedness or issue certain kinds of preferred equity securities; (iii) create or incur certain liens securing indebtedness; (iv) sell assets, including dispositions of the Collateral; (v) consolidate, merge or transfer all or substantially all of its assets; (vi) enter into transactions with affiliates; and (vii) enter into agreements that restrict distributions or other payments from its restricted subsidiaries to the Partnership. These covenants are subject to a number of important limitations and exceptions, including certain provisions permitting the Partnership, subject to the satisfaction of certain conditions, to transfer assets to certain of its unrestricted subsidiaries. Moreover, if the 10.00%/10.75% Second Lien Notes receive an investment grade rating from at least two rating agencies and no default has occurred and is continuing under the 10.00%/10.75% Second Lien Notes Indenture, many of the restrictive covenants in the Second Lien Notes Indenture will be terminated. The Second Lien Notes Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the Second Lien Notes Indenture, the Second Lien Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 10.00%/10.75% Second Lien Notes may declare all of the 10.00%/10.75% Second Lien Notes to be due and payable immediately.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market Risks and Derivative Contracts | AIR VALUE MEASUREMENTS Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability. Under U.S. GAAP, the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability. We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. We enter into 30-day foreign currency forward derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries. As of June 30, 2020, we had the following foreign currency derivative contract outstanding relating to a portion of our foreign operations:
Under a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries, we may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as economic hedges of the cash flow of our currency exchange risk exposure, they will not be formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period. The fair values of our foreign currency derivative contracts are based on quoted market values (a Level 2 fair value measurement). The fair values of our foreign currency derivative instruments as of June 30, 2020 and December 31, 2019, are as follows:
None of our foreign currency derivative instruments contains credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three and six month periods ended June 30, 2020 we recognized $0.3 million and $(1.1) million, respectively, of net (gains) losses associated with our foreign currency derivatives program, and such amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations. During the three and six month periods ended June 30, 2019, we recognized $0.2 million and $0.3 million, respectively, of net (gains) losses associated with our foreign currency derivative program, and such amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations. During the six months ended June 30, 2020, we recorded impairments of approximately $9.0 million, reflecting the decreased fair value for certain assets. The fair values used in these impairment calculations were estimated based on a market approach, which is based on significant unobservable inputs (Level 3) in accordance with the fair value hierarchy. Recurring and nonrecurring fair value measurements by valuation hierarchy as of June 30, 2020 and December 31, 2019 are as follows:
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS Omnibus Agreement Under the terms of the Omnibus Agreement, our General Partner provides all personnel and services reasonably necessary to manage our operations and conduct our business (other than in Mexico, Canada, and Argentina), and certain of TETRA’s Latin American-based subsidiaries provide personnel and services necessary for the conduct of certain of our Latin American-based businesses. In addition, under the Omnibus Agreement, TETRA provides certain corporate and general and administrative services as requested by our General Partner, including, without limitation, legal, accounting and financial reporting, treasury, insurance administration, claims processing and risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, and tax services. Pursuant to the Omnibus Agreement, we reimburse our General Partner and TETRA for services they provide to us. TETRA and General Partner Ownership As of June 30, 2020, TETRA's ownership interest in us was approximately 34% of the outstanding common units and an approximate 1.4% general partner interest, through which it holds incentive distribution rights. Other Sources of Financing In February 2019, we entered into a transaction with TETRA whereby TETRA agreed to fund the construction of and purchase from us up to $15.0 million of new compression services equipment and to subsequently lease the equipment back to us in exchange for a monthly rental fee. As of June 30, 2020, pursuant to this arrangement, $14.8 million has been funded by TETRA for the construction of new compression services equipment and all such equipment was completed and deployed under this agreement. For accounting purposes, the inclusion of an option that allows us to repurchase the equipment at a fixed price during certain periods of the agreement caused the transaction to be accounted for as a financing transaction, as opposed to a sale-leaseback, resulting in the funded amount being recorded as a financing obligation. Accordingly, the compression services equipment is included in property, plant, and equipment and the corresponding financing obligations are included in amounts payable to affiliates and long-term affiliate payable in our consolidated balance sheet. As of June 30, 2020, the financing obligation was $15.0 million. Imputed interest expense recognized for the three and six month period ended June 30, 2020 was $0.6 million and $1.2 million, respectively.
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Income Taxes |
6 Months Ended |
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Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. Certain of our operations are located outside of the U.S., and the Partnership, through its foreign subsidiaries, is responsible for income taxes in these countries. Our effective tax rate for the six month period ended June 30, 2020, was negative 3.3% primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes combined with losses generated in entities for which no related tax benefit has been recorded. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.
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Commitments and Contingencies |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES |
Revenue from Contract with Customers Revenue from Contract with Customers (Notes) |
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Revenue from Contract with Customer [Text Block] | EVENUE FROM CONTRACTS WITH CUSTOMERS As of June 30, 2020, we had $50.0 million of remaining contractual performance obligations for compression services. As a practical expedient, this amount does not include revenue for compression service contracts whose original expected duration is less than twelve months and does not consider the effects of the time value of money. Expected revenue to be recognized in the future as of June 30, 2020 for completion of performance obligations of compression service contracts are as follows:
Our contract asset balances included in trade accounts receivable in our consolidated balance sheets, primarily associated with customer documentation requirements prior to invoicing, were $8.2 million and $9.6 million as of June 30, 2020 and December 31, 2019, respectively. Collections associated with progressive billings to customers for the construction of compression equipment is included in unearned income in the consolidated balance sheets. The following table reflects the changes in unearned income in our consolidated balance sheets for the periods indicated:
During the six months ended June 30, 2020, we recognized in equipment sales revenue $5.7 million from unearned income that was deferred as of December 31, 2019. During the six months ended June 30, 2019, we recognized in equipment sales revenue of $18.7 million from unearned income that was deferred as of December 31, 2018. As of June 30, 2020 and June 30, 2019, contract costs were immaterial. Disaggregated revenue from contracts with customers by geography is as follows:
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Leases (Notes) |
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Lessee, Operating Leases [Text Block] | LEASES We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms ranging from 1 to 10 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. During the fourth quarter of 2019, we entered into a lease agreement commitment for 14 compressor packages. The leases are for an initial term of seven years and commence upon the completion of the fabrication of the compressor packages. During the first quarter, we took delivery of eight compressor packages. During the second quarter, we took delivery of the remaining six compressor packages. We have no other lease agreement commitments that have not yet commenced that create significant rights and obligations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. In November 2019, we entered into a sale and leaseback transaction with a third-party lessor whereby we received $9.8 million of proceeds from the sale of certain of our compression equipment in service and entered into an associated lease of the same equipment having an initial lease term of seven years. Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $3.5 million and $6.7 million for the three and six month period ended June 30, 2020, respectively, of which, $0.6 million and $1.5 million respectively, related to short-term leases. Variable rent expense was not material. Operating lease supplemental cash flow information:
Supplemental balance sheet information:
Additional operating lease information:
Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2020:
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Lessee, Finance Leases [Text Block] | LEASES We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms ranging from 1 to 10 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. During the fourth quarter of 2019, we entered into a lease agreement commitment for 14 compressor packages. The leases are for an initial term of seven years and commence upon the completion of the fabrication of the compressor packages. During the first quarter, we took delivery of eight compressor packages. During the second quarter, we took delivery of the remaining six compressor packages. We have no other lease agreement commitments that have not yet commenced that create significant rights and obligations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. In November 2019, we entered into a sale and leaseback transaction with a third-party lessor whereby we received $9.8 million of proceeds from the sale of certain of our compression equipment in service and entered into an associated lease of the same equipment having an initial lease term of seven years. Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $3.5 million and $6.7 million for the three and six month period ended June 30, 2020, respectively, of which, $0.6 million and $1.5 million respectively, related to short-term leases. Variable rent expense was not material. Operating lease supplemental cash flow information:
Supplemental balance sheet information:
Additional operating lease information:
Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2020:
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Subsequent Events |
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Subsequent Events [Abstract] | |
Schedule of Subsequent Events [Table Text Block] | SUBSEQUENT EVENTS On July 2, 2020, we completed the previously announced sale of our Midland manufacturing facility for a total sale price of $17.0 million. In connection with the sale, we have entered into an agreement with the buyer that permits us to continue to operate the facility until the completion and sale of our remaining backlog, which we anticipate will be completed during the third quarter of 2020. While we will continue to operate the facility until the completion and sale of our remaining backlog, we no longer intend to fabricate new compressor packages for sales to third parties or for our own service fleet. During the second quarter of 2020, we entered into an agreement to sell 58 low-horsepower units to one of our customers for $2.6 million. We received the proceeds prior to June 30, 2020, however, the assets were not transferred to the customer until after June 30,2020. Therefore, they are classified as held for sale at June 30, 2020 in our financial statements. In addition, in late July, we received a purchase order to sell $6.7 million of idle large horsepower compressor units to one of our significant customers. We expect this sale to be completed and proceeds received by the end of the third quarter. We have and will continue to evaluate the sale of other non-core assets, including our low-horsepower compression fleet. We can provide no assurance that we will consummate a future sale of our low-horsepower compression fleet or any other non-core asset. On July 20, 2020, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended June 30, 2020 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit, on an annualized basis. This distribution will be paid on August 14, 2020 to each of the holders of common units of record as of the close of business on August 1, 2020.
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Basis of Presentation and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||
Nature of Operations [Text Block] | Organization |
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Inventory, Policy [Policy Text Block] | Inventories Inventories consist primarily of compressor package parts and supplies and work in progress and are stated at the lower of cost or net realizable value. For parts and supplies, cost is determined using the weighted average cost method. The cost of work in progress is determined using the specific identification method.
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Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block] | Impairments and Other Charges Impairments of long-lived assets, including identified intangible assets, are determined periodically, when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgment as to the future undiscounted operating cash flows to be generated from the relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related assets, an impairment is recognized for the excess of the carrying value over fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. See Note 3 - "Impairments and Other Charges" for additional discussion of recorded impairments. |
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Consolidation policy | Presentation Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. In the opinion of our management, our unaudited consolidated financial statements as of June 30, 2020, and for the three and six month periods ended June 30, 2020 and 2019, include all normal recurring adjustments that are necessary to provide a fair statement of our results for these interim periods. Operating results for the three and six month periods ended June 30, 2020 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2020. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2019 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 16, 2020.
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Use of estimates policy | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material.
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Foreign currencies policy | Foreign Currencies Accumulated other comprehensive income (loss) is included in partners’ capital in the accompanying consolidated balance sheets and consists of the cumulative currency translation adjustments associated with our international operations. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled $(0.3) million and $1.4 million during the three and six month periods ended June 30, 2020, respectively, and $(0.04) million and $(1.0) million during the three and six month periods ended June 30, 2019, respectively. |
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Earnings per common unit policy | Earnings Per Common Unit Our computations of earnings per common unit are based on the weighted average number of common units outstanding during the applicable period. Basic earnings per common unit are determined by dividing net income (loss) allocated to the common units after deducting the amount allocated to our General Partner (including any distributions to our General Partner on its incentive distribution rights) by the weighted average number of outstanding common units during the period. When computing earnings per common unit under the two class method in periods when distributions are greater than earnings, the amount of the distribution is deducted from net income (loss) and the excess of distributions over earnings is allocated between the General Partner and common units based on how our Partnership Agreement allocates net losses. Diluted earnings per common unit are computed using the treasury stock method, which considers the potential future issuance of limited partner common units. Unvested phantom units are not included in basic earnings per common unit, as they are not considered to be participating securities, but are included in the calculation of diluted earnings per common unit. For the three and six month periods ended June 30, 2020 and June 30, 2019, all unvested phantom units were excluded from the calculation of diluted common units because the impact was anti-dilutive. Diluted earnings per common unit are computed using the "if converted" method, whereby the amount of net income (loss) and the number of common units issuable are each adjusted as if the Preferred Units, had been converted as of the beginning of the period presented. The calculation of diluted earnings per common unit for the three and six month period ended June 30, 2019 excludes the impact of the Preferred Units, as the inclusion of the impact from the conversion of the Preferred Units into common units would have been anti-dilutive. All remaining outstanding Preferred Units were redeemed for cash on August 8, 2019.
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Revenue [Policy Text Block] | Revenue Recognition Performance Obligations. Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Revenue is generally recognized when we transfer control of our products or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services to our customers. We receive cash equal to the invoice price for most product sales and services and payment terms typically range from 30 to 60 days from the date we invoice our customer. With the exception of the initial terms of our compression services contracts of our medium- and high-horsepower compressor packages, our customer contracts are generally for terms of one year or less. Since the period between when we deliver products or services and when the customer pays for products or services is not to exceed one year, we have elected not to calculate or disclose a financing component for our customer contracts. Depending on the terms of the arrangement, we may also defer the recognition of revenue for a portion of the consideration received because we have to satisfy a future performance obligation. For example, consideration received from customers during the fabrication of new compressor packages is typically deferred until control of the compressor package is transferred to our customer. For revenue associated with mobilization of service equipment as part of a service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period. Compression and related services. For compression services revenues recognized over time, our customer contracts typically provide agreed upon monthly service rates and we recognize service revenue based upon the number of days that services have been performed. The majority of our compression services are provided pursuant to contract terms ranging from one month to twenty-four months. Monthly agreements are generally cancellable with 30 days written notice by the customer. Sales taxes, value added taxes, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We recognize the cost for freight and shipping costs when control over our products (i.e. delivery) has transferred to the customer as part of cost of product sales. Use of Estimates. Our revenues do not include material amounts of variable consideration, as our revenues typically do not require significant estimates or judgments. The transaction price on a majority of our arrangements are fixed and product returns are immaterial. Additionally, our arrangements typically do not include multiple performance obligations that require estimates of the stand-alone purchase price for each performance obligation. Revenue on certain aftermarket service arrangements that include time as a component of the transaction price is not recognized until the performance obligation is complete. Contract Assets and Liabilities. We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing, our invoicing of the customer is delayed until certain documentation requirements are met. In those cases, we recognize a contract asset rather than a billed trade accounts receivable until we are able to invoice the customer. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets. We classify contract liabilities as unearned income in our consolidated balance sheets. Such unearned income typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. New equipment sales orders generally take less than twelve months to build and deliver. Bill-and-Hold Arrangements. We design compressor packages based on our customer’s specifications. In some cases, the customer will request us to hold the equipment, upon completion of the unit, until the job site is ready to receive the equipment. When this occurs, we along with the customer sign a bill-and-hold agreement, which outlines that the customer has title to the equipment, the equipment is ready for delivery, we cannot use the equipment or direct it to another customer, and we have a present right to payment. When those criteria have been met and the agreement is executed, we recognize the revenue on the equipment because control of the equipment has passed to our customer and our performance obligations are complete. Entering into these arrangements is something we have done as a courtesy for certain customers for many years. The equipment subject to the bill-and-hold agreements have generally been invoiced and paid for through progressive billings such that at the time the bill-and-hold agreement is executed, the majority of the contractual cash obligation of the customer has been received by us.
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Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value Measurements We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements were utilized in the determination of the carrying value of our Series A Preferred Units (a Level 3 fair value measurement). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value (a Level 2 fair value measurement). Refer to Note 9 - "Fair Value Measurements" for further discussion. Fair value measurements are also utilized on a nonrecurring basis, such as in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets (a Level 3 fair value measurement) and for the impairment of long-lived assets (a Level 3 fair value measurement).
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Distributions policy | Distributions On January 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended December 31, 2019 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This distribution was paid on February 14, 2020, to each of the holders of common units of record as of the close of business on February 1, 2020.
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New accounting pronouncements policy | New Accounting Pronouncements Standards adopted in 2020 In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for us the first quarter of fiscal 2020. The adoption of this standard did not have a material impact on our consolidated financial statements. Standards not yet adopted In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit impairments will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. Updates at each reporting date after initial adoption will be recorded through selling, general, and administrative expense. ASU 2016-13 is effective for us the first quarter of fiscal 2023. We continue to assess the potential effects of these changes to our consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the recognition of deferred tax liabilities for outside basis differences. It also simplifies certain aspects of accounting for franchise taxes and clarifies the accounting for transactions that results in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for us the first quarter of fiscal 2021. We continue to assess the potential effects of these changes to our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements.
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Reclassifications [Text Block] | Reclassifications Certain previously reported financial information has been reclassified to conform to the current year's presentation. The impact of such reclassifications was not significant to the prior year's overall presentation. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | Cash Equivalents We consider all highly liquid cash investments with maturities of three months or less when purchased to be cash equivalents.
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Inventories Inventories (Tables) |
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Schedule of Inventory, Current [Table Text Block] | Components of inventories as of June 30, 2020 and December 31, 2019, are as follows:
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Long-Term Debt and Other Borrowings Long-Term Debt and Other Borrowings (Tables) |
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Schedule of Notional Amounts of Outstanding Derivative Positions Table |
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Finance Lease, Liability, Maturity | Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2020:
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Revenue from Contract with Customers Revenue from Contract with Customers (Tables) |
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Contract with Customer, Asset and Liability [Table Text Block] |
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Table Text Block] |
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Revenue from Contract with Customers Disaggregation of Revenue (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost [Table Text Block] | Operating lease supplemental cash flow information:
Additional operating lease information:
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Finance Lease, Liability, Maturity | Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2020:
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Assets And Liabilities, Lessee [Table Text Block] | Supplemental balance sheet information:
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Lessee, Operating Leases [Text Block] | LEASES We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms ranging from 1 to 10 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. During the fourth quarter of 2019, we entered into a lease agreement commitment for 14 compressor packages. The leases are for an initial term of seven years and commence upon the completion of the fabrication of the compressor packages. During the first quarter, we took delivery of eight compressor packages. During the second quarter, we took delivery of the remaining six compressor packages. We have no other lease agreement commitments that have not yet commenced that create significant rights and obligations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. In November 2019, we entered into a sale and leaseback transaction with a third-party lessor whereby we received $9.8 million of proceeds from the sale of certain of our compression equipment in service and entered into an associated lease of the same equipment having an initial lease term of seven years. Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $3.5 million and $6.7 million for the three and six month period ended June 30, 2020, respectively, of which, $0.6 million and $1.5 million respectively, related to short-term leases. Variable rent expense was not material. Operating lease supplemental cash flow information:
Supplemental balance sheet information:
Additional operating lease information:
Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2020:
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Basis of Presentation and Significant Accounting Policies (Details 1) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2020
USD ($)
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Mar. 31, 2020
USD ($)
$ / shares
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
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Debt Instrument [Line Items] | ||||||
Number of Reportable Segments | 1 | |||||
Impairment of Long-Lived Assets Held-for-use | $ 8,977 | $ 5,400 | $ 2,311 | $ 14,348 | $ 2,311 | |
Foreign currency exchange gains (losses) | (300) | $ (40) | 1,400 | $ (1,000) | ||
Distribution Made to Limited Partner, Distributions Declared, Per Unit | $ / shares | $ 0.01 | |||||
Amount of declared distribution on an annualized basis | $ / shares | $ 0.04 | |||||
Operating Lease, Right-of-Use Asset | 29,936 | 29,936 | $ 21,006 | |||
Operating Lease, Liability, Current | 8,216 | 8,216 | 6,706 | |||
Operating Lease, Liability, Noncurrent | 21,140 | 21,140 | $ 13,822 | |||
Credit Agreement [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Line of Credit Facility, Fair Value of Amount Outstanding | $ 1,500 | $ 1,500 |
Basis of Presentation and Significant Accounting Policies Assets Held for Sale (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Long Lived Assets Held-for-sale [Line Items] | ||
Financial and Nonfinancial Liabilities, Fair Value Disclosure | $ 22,341 | $ (53) |
Non-core used compressor equipment held for sale [Member] | ||
Long Lived Assets Held-for-sale [Line Items] | ||
Financial and Nonfinancial Liabilities, Fair Value Disclosure | $ (2,600) |
Impairment and Other Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Mar. 31, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Impairment of Long-Lived Assets Held-for-use | $ 8,977 | $ 5,400 | $ 2,311 | $ 14,348 | $ 2,311 |
Asset Impairment Charges | $ 9,000 | ||||
compressor equipment held for sale, low-horsepower class of our compression fleet, and field inventory [Member] | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Impairment of Long-Lived Assets Held-for-use | $ 9,000 |
Inventories Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventory [Line Items] | ||
Other Inventory, Supplies, Gross | $ 30,270 | $ 42,814 |
Inventory, Work in Process, Gross | 9,922 | 13,223 |
Inventory, Net | $ 40,192 | $ 56,037 |
Related Party Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|
Related Party Transaction [Line Items] | |||
Finance Lease, Interest Expense | $ 600 | $ 1,200 | |
Due to Related Parties, Noncurrent | 12,019 | 12,019 | $ 12,324 |
Due from Related Parties, Current | 14,800 | ||
Finance Lease, Liability | 15,000 | 15,000 | |
Maximum [Member] | |||
Related Party Transaction [Line Items] | |||
Due to Related Parties, Noncurrent | $ 15,000 | $ 15,000 | |
Common Unitholders [Member] | |||
Related Party Transaction [Line Items] | |||
Limited Liability Company or Limited Partnership, Members or Limited Partners, Ownership Interest | 34.00% | ||
General Partner [Member] | |||
Related Party Transaction [Line Items] | |||
Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest | 1.40% |
Income Taxes Income Tax (Details) |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Income Statement [Abstract] | |
Effective Income Tax Rate Reconciliation, Percent | (3.30%) |
Revenue from Contract with Customers Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||||
Contract with Customer, Liability, Revenue Recognized | $ 5,700 | $ 18,700 | ||
Contract with Customer, Asset, before Allowance for Credit Loss | 8,200 | $ 9,600 | ||
Revenue, Remaining Performance Obligation, Amount | 50,035 | |||
Deferred Revenue | 11,164 | 30,830 | $ 9,505 | $ 24,898 |
Deferred Revenue, Additions | 31,619 | 83,640 | ||
Deferred Revenue, Revenue Recognized | $ (29,960) | $ (77,708) |
Subsequent Events (Details) |
3 Months Ended |
---|---|
Mar. 31, 2020
$ / shares
| |
Subsequent Event [Line Items] | |
Amount of declared distribution | $ 0.01 |
Amount of declared distribution on an annualized basis | $ 0.04 |
Label | Element | Value |
---|---|---|
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 2,370,000 |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 15,858,000 |
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