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Are Analysts Bullish on USA Compression Partners?

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Apr. 5 2018, Updated 8:25 p.m. ET

USA Compression Partners

USA Compression Partners (USAC) rose significantly in January 2018 following the news that it acquired Energy Transfer Partners’ (ETP) compression business. The transaction, valued at $1.8 billion, closed on April 2, 2018. The acquisition enhances USA Compression Partners’ geographic coverage and nearly doubles its fleet horsepower.

USA Compression Partners paid $1.2 billion in cash, ~19.2 million USAC common units, and ~6.4 million USAC Class B units for the acquisition.

USA Compression Partners simplified its structure by canceling its GP (general partner) incentive distribution rights and converting its economic GP interest into a non-economic GP interest. In exchange, USA Compression Partners issued 8 million common units to its GP.

Notably, Energy Transfer Equity (ETE) acquired USA Compression Partners’ GP and ~12.5 million USA Compression Partners common units from USA Compression Holdings for $250 million in cash.

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Analysts’ recommendations

The above graph shows the changes in analysts’ recommendations and the mean target price for USA Compression Partners in a year. As the graph shows, the number of “buy” recommendations and the mean target price for USA Compression Partners rose after the announcement of the acquisition of Energy Transfer Partners’ compression business.

Currently, 71% of the analysts surveyed by Reuters rate USA Compression Partners as a “buy” and 29% rate it as a “hold.” The mean target price of $21 implies an upside of 26% in a year from USA Compression Partners’ current price of $16.67.

In comparison, 29% of the analysts rated CSI Compressco (CCLP) as a “buy,” while 71% rated it as a “hold.”

To learn more about USA Compression Partners’ business, read What Compression Does and Where It’s Used.

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