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USA Compression Partners Beats Peers on Year-to-Date Returns

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Dec. 4 2020, Updated 10:52 a.m. ET

USA Compression Partners’ year-to-date returns

USA Compression Partners’ (USAC) YTD (year-to-date) total return as of September 21, 2015, is 13.8%. In comparison, Exterran Partners (EXLP) and CSI Compressco (CCLP) have generated -5.4% and 9.6% in YTD returns, respectively. During the same timeframe, the SPDR S&P 500 ETF (SPY), representing the broad market, was down 3%. The energy sector, represented by the Energy Select Sector SPDR ETF (XLE), is down 18%. The Alerian MLP Index (AMZ), constituting the energy MLP sector’s top 50 MLPs, is down 23%.

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The above graph shows the YTD returns for USAC, EXLP, CCLP, AMZ, and Cypress Energy Partners (CELP). While USAC, EXLP, and CCLP provide natural gas compression services, CELP provides saltwater disposal and other water and environmental services to onshore oil and gas producers. All these services fall into the broader oilfield services sector.

As the graph shows, USAC’s returns saw a steep fall on September 9, when the MLP announced a public offering of its common units. If it weren’t for this sharp drop, USAC’s YTD return would have been far higher. We’ll discuss the offering later in the series.

What’s driving compression services demand?

Demand for natural gas compression services continues to be strong, as it is tied to natural gas production volumes. The demand is not directly dependent on natural gas prices. Moreover, the increased contribution of shale gas to the total gas production translates into higher demand for compression. This is because shale plays typically have lower pressures compared to conventional plays, requiring significantly more compression to move gas. These factors have driven demand for compression services from providers like USAC.

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About USA Compression Partners

USA Compression Partners primarily provides natural gas compression services. Natural gas compression involves compressing natural gas to a smaller volume and a higher pressure. This is a necessary part of the natural gas production and transportation process. Read more about the industry in An Overview of the Natural Gas Compression Industry.

USAC designs and operates its compression units and maintains related support inventory and equipment. The MLP provides compression services in all the major shale plays throughout the US. Though USAC was listed in January 2013, it’s been providing compression services since 1998. USAC forms 2.5% of the Yorkville High Income MLP ETF (YMLP).

In this series

In this series, we’ll analyze USA Compression Partners’ performance since its listing. The series focuses on the MLP’s key metrics including distributable cash flow growth, distributions, coverage, leverage, yield, capital expenditure, and so on. We’ll also look at the prospects for USAC’s units going forward.

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