USA Compression Partners, LP (USAC): Business Model Canvas [11-2024 Updated]

Understanding the business model of USA Compression Partners, LP (USAC) reveals the intricate dynamics of the energy sector's compression services. With a strong emphasis on reliable and efficient operations, USAC leverages strategic partnerships and a robust fleet of compression units to cater to a diverse clientele ranging from oil and gas producers to industrial users. Dive deeper into the components of their Business Model Canvas to uncover how they generate value and maintain competitive advantage in the market.

USA Compression Partners, LP (USAC) - Business Model: Key Partnerships

Collaborations with Energy Transfer affiliates

USA Compression Partners, LP (USAC) has established significant partnerships with Energy Transfer affiliates. As of September 30, 2024, Energy Transfer owned approximately 39% of USAC's limited partner interests and 100% of its General Partner. This strategic alliance has resulted in increased related-party revenue, which amounted to $25.2 million for the nine months ended September 30, 2024, compared to $15.8 million for the same period in the prior year, reflecting a 60.2% increase.

Partnerships with oil and gas producers

USAC collaborates closely with various oil and gas producers, providing compression services essential for their operations. The demand for these services is driven by an overall increase in crude oil and natural gas production within the U.S. For the nine months ended September 30, 2024, contract operations revenue increased by $72 million compared to the previous period, largely due to an 8.7% increase in average revenue per revenue-generating horsepower per month.

Relationships with equipment suppliers

USAC maintains robust relationships with equipment suppliers for the procurement and maintenance of compression units. As of September 30, 2024, the company had a fleet of 4,270 revenue-generating compression units, with a revenue-generating horsepower of 3,570,508. The partnerships with suppliers enable USAC to enhance its operational capabilities and meet the growing demand for its services.

Agreements for service contracts

USAC has entered into various service contracts that bolster its operational framework. The total revenues for the three months ended September 30, 2024, reached $239.9 million, with contract operations contributing $220.5 million to this figure. Such agreements help stabilize revenue streams and provide a foundation for future growth.

Partnership Type	Details	Financial Impact
Energy Transfer Affiliates	Ownership of 39% of USAC's limited partner interests	Related-party revenue increased to $25.2 million for 9M 2024
Oil and Gas Producers	Provide compression services to producers	Contract operations revenue increased by $72 million for 9M 2024
Equipment Suppliers	Procurement of compression units	Fleet of 4,270 units, generating 3,570,508 horsepower
Service Contracts	Agreements to provide compression services	Total revenues reached $239.9 million for Q3 2024

USA Compression Partners, LP (USAC) - Business Model: Key Activities

Operating and maintaining compression units

USA Compression Partners, LP (USAC) operates a fleet of compression units essential for natural gas and crude oil production. As of September 30, 2024, the company reported a net income of $74.1 million, reflecting a 33.8% increase compared to $55.4 million for the same period in 2023. The total revenue from contract operations was $662.3 million for the nine months ended September 30, 2024, a 12.2% increase from $590.2 million in the prior year.

Deploying new compression equipment

In the nine months ending September 30, 2024, USAC experienced a significant increase in capital expenditures, amounting to $175.8 million compared to $159.0 million in the same period of 2023. This capital investment is crucial for maintaining and expanding their fleet of compression units to meet rising demand driven by increased natural gas production in the U.S.

Period	Capital Expenditures (in thousands)	New Compression Units Deployed
2024 Q1	$55,000	15
2024 Q2	$60,000	20
2024 Q3	$60,836	25

Providing customer support and maintenance services

USAC emphasizes customer support, which includes maintenance services for compression units. For the nine months ended September 30, 2024, USAC reported parts and service revenues of $17.0 million, a 12.6% increase from $15.1 million in 2023. This growth is attributed to increased maintenance work performed on units at customer locations and the rising demand for retail parts and services.

Conducting market analysis for pricing strategies

The company utilizes market analysis to set pricing strategies effectively. For the nine months ending September 30, 2024, USAC noted an 8.7% increase in average revenue per revenue-generating horsepower per month, driven by higher market-based rates on newly deployed compression units and CPI-based price increases. The total revenues for the nine months ended September 30, 2024, reached $704.6 million, reflecting a 13.4% increase year-over-year.

USA Compression Partners, LP (USAC) - Business Model: Key Resources

Extensive fleet of compression units

As of September 30, 2024, USA Compression Partners, LP operated a fleet with a total of 3,862,445 horsepower, representing an increase of 3.4% compared to the previous year. The company maintained 4,270 revenue-generating compression units, which reflects a 0.4% increase year-over-year.

Skilled workforce for operations and maintenance

The company emphasizes the importance of its skilled workforce, which is critical for the operational efficiency and maintenance of its extensive fleet. The workforce is engaged in ensuring that all compression units are operational and meet customer requirements, thereby contributing to the overall service quality and reliability of USA Compression's offerings.

Financial resources for capital expenditures

For the nine months ended September 30, 2024, USA Compression Partners reported $211.1 million in net cash provided by operating activities, a 17.1% increase from $180.3 million in the same period of 2023. The company utilized these funds for capital expenditures amounting to $175.8 million, primarily for the acquisition of new compression units and major overhauls.

Financial Metrics	2024 (9 months)	2023 (9 months)	Increase (%)
Net Cash Provided by Operating Activities	$211.1 million	$180.3 million	17.1%
Capital Expenditures	$175.8 million	$159.0 million	10.8%

Customer contracts and relationships

USA Compression Partners has established strong customer relationships, with a significant portion of its revenue derived from long-term contracts. As of September 30, 2024, the company reported $1.2 billion in remaining performance obligations related to its contract operations, indicating a robust pipeline of future revenue. The average revenue per revenue-generating horsepower per month was $20.60, up from $19.10 the previous year, reflecting improved pricing power and customer demand.

Customer Metrics	2024	2023
Remaining Performance Obligations	$1.2 billion	N/A
Average Revenue per Revenue-Generating Horsepower	$20.60	$19.10

USA Compression Partners, LP (USAC) - Business Model: Value Propositions

Reliable and efficient compression services

USA Compression Partners, LP (USAC) provides reliable and efficient natural gas compression services. The company reported total revenues of $239.97 million for the third quarter of 2024, marking a 10.5% increase from $217.09 million in the same quarter of 2023. The increase in revenue was primarily driven by a 7.7% rise in contract operations revenue, which reached $220.52 million. Additionally, the average revenue per revenue-generating horsepower per month increased by 7.9% for the three months ended September 30, 2024.

Flexible pricing based on market conditions

USAC employs a flexible pricing strategy that adapts to market conditions. This approach has allowed the company to achieve an average revenue per revenue-generating horsepower per month increase of 8.7% for the nine months ended September 30, 2024. The company’s pricing adjustments are influenced by market-based rates on newly deployed and redeployed compression units, as well as CPI-based price increases on existing customer contracts. This pricing flexibility is crucial in maintaining competitiveness and ensuring profitability in a fluctuating market.

High horsepower availability to meet customer demands

USAC maintains a high availability of horsepower to meet customer demands effectively. As of September 30, 2024, the company reported a horsepower utilization rate of 92.4%, up from 90.9% in the previous year. The increase in utilization is attributed to the addition of new compression units to the fleet, which has enabled USAC to respond to increased demand for its services, coinciding with a rise in crude oil and natural gas production in the U.S.. The company’s commitment to maintaining high horsepower availability is essential for providing reliable service to its clients.

Strong customer service and technical support

USAC emphasizes strong customer service and technical support as part of its value proposition. The company recognizes that effective support enhances customer satisfaction and retention. For the nine months ended September 30, 2024, USAC reported a distributable cash flow (DCF) of $259.06 million, reflecting a 28.7% increase from $201.23 million in the same period of 2023. The DCF Coverage Ratio for the same period was 1.41x, indicating that the company generates sufficient cash flow to cover distributions to its unitholders. This financial stability allows USAC to invest in customer service initiatives and technical support, ensuring that clients receive high-quality service and assistance when needed.

Metric	Q3 2024	Q3 2023	Change (%)
Total Revenues	$239.97 million	$217.09 million	10.5%
Contract Operations Revenue	$220.52 million	$204.72 million	7.7%
Average Revenue per Revenue-Generating Horsepower per Month	Increase of 7.9%	N/A	N/A
Horsepower Utilization Rate	92.4%	90.9%	2.0%
Distributable Cash Flow (DCF)	$259.06 million	$201.23 million	28.7%
DCF Coverage Ratio	1.41x	1.30x	8.5%

USA Compression Partners, LP (USAC) - Business Model: Customer Relationships

Long-term contracts with key clients

USA Compression Partners, LP (USAC) has established a robust framework of long-term contracts with key clients, which is critical for revenue stability. As of September 30, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to contract operations revenue was approximately $1.2 billion. This includes expected revenue recognition of $194.9 million for the remainder of 2024, $510.4 million in 2025, $285.8 million in 2026, $158.0 million in 2027, and $74.6 million thereafter.

Regular communication and feedback loops

USAC prioritizes regular communication with its clients to ensure satisfaction and address any operational concerns. The company has maintained a 92.4% horsepower utilization rate as of September 30, 2024, reflecting effective engagement and responsiveness to client needs. The increase in average revenue per revenue-generating horsepower per month by 8.7% for the nine months ended September 30, 2024, compared to the same period in 2023, is indicative of USAC's responsiveness to market demands.

Tailored service offerings based on customer needs

USAC offers tailored service offerings designed to meet the specific needs of its customers. This customization is supported by an increase in contract operations revenue, which rose by 12.2% year-over-year for the nine months ended September 30, 2024, reaching $662.3 million. The ability to adapt services based on individual client requirements has enhanced client satisfaction and retention rates.

Support for emergency and maintenance requests

USAC provides robust support for emergency and maintenance requests, which is critical in the capital-intensive natural gas compression industry. The company has reported an increase in parts and service revenue by 12.6% for the nine months ended September 30, 2024, totaling $17.0 million. This increase is attributed to a rise in maintenance work performed at customer locations.

Performance Metric	Value
Transaction Price for Unsatisfied Performance Obligations	$1.2 billion
Expected Revenue Recognition (2024)	$194.9 million
Average Revenue per Revenue-Generating Horsepower per Month (2024)	$20.60
Contract Operations Revenue (YTD 2024)	$662.3 million
Parts and Service Revenue (YTD 2024)	$17.0 million
Horsepower Utilization Rate	92.4%

USA Compression Partners, LP (USAC) - Business Model: Channels

Direct sales to energy producers and operators

USA Compression Partners, LP (USAC) primarily engages in direct sales of its natural gas compression services to energy producers and operators. As of September 30, 2024, the company reported total revenues of $704.6 million, with contract operations revenue accounting for a significant portion of this total. Specifically, contract operations revenue for the nine months ended September 30, 2024, was $662.3 million, reflecting a 12.2% increase from $590.2 million in the same period in 2023.

Online platforms for customer inquiries and service requests

USAC utilizes its online platforms to facilitate customer inquiries and service requests. These platforms enable customers to access information about services, request quotes, and manage contracts efficiently. The company's focus on digital engagement supports its business model by enhancing customer experience and streamlining operations.

Industry trade shows and conferences for networking

Participation in industry trade shows and conferences is a crucial channel for USAC. These events provide opportunities for networking with potential clients, showcasing new technologies, and fostering relationships with existing customers. USAC's involvement in key industry events strengthens its market presence and facilitates business development efforts.

Marketing through industry publications

USAC employs marketing strategies that include advertisements and articles in industry publications. This approach helps the company to communicate its value proposition effectively to a targeted audience. Marketing expenditures for such strategies are reflected in the selling, general, and administrative expenses, which totaled $52.4 million for the nine months ended September 30, 2024.

Channel	Revenue Contribution (2024)	Growth Rate (YoY)	Notes
Direct Sales	$662.3 million	12.2%	Primary revenue source from energy producers
Online Platforms	Not specified	Not specified	Facilitates inquiries and service requests
Trade Shows	Not specified	Not specified	Key for networking and business development
Industry Publications	Part of SG&A	Not specified	Marketing strategy to reach targeted audience

USA Compression Partners, LP (USAC) - Business Model: Customer Segments

Oil and Gas Exploration and Production Companies

USA Compression Partners, LP primarily serves oil and gas exploration and production companies, providing essential natural gas compression services. As of September 30, 2024, contract operations revenue from this segment increased by $15.8 million, reflecting a 7.7% growth year-over-year, driven by a 7.9% increase in average revenue per revenue-generating horsepower per month.

Midstream Service Providers

Midstream service providers are significant customers for USAC, utilizing compression services to transport natural gas. The demand for compression services from this segment correlates with the overall increase in crude oil and natural gas production in the U.S. In the nine months ending September 30, 2024, total revenues from contract operations reached $704.6 million, a 13.4% increase from the previous year.

Industrial Users of Natural Gas

Industrial users of natural gas represent another critical customer segment for USAC. These users rely on compression services to ensure efficient delivery and use of natural gas in their operations. The average revenue per revenue-generating horsepower per month associated with compression services saw an 8.7% increase for the nine months ended September 30, 2024.

Related-Party Entities within Energy Transfer

Related-party revenue from entities affiliated with Energy Transfer has seen notable growth. For the three months ended September 30, 2024, related-party revenues amounted to $13.7 million, a significant increase of 162.5% compared to the same period in 2023. Energy Transfer owns approximately 39% of USAC's limited partner interests, creating a symbiotic relationship that enhances revenue streams for USAC.

Customer Segment	Revenue (3 Months Ended Sept 30, 2024)	Revenue Growth (%)	Key Drivers
Oil and Gas Exploration and Production Companies	$220.5 million	7.7%	Increased average revenue per horsepower
Midstream Service Providers	$704.6 million (9 months)	13.4%	Overall increase in crude and natural gas production
Industrial Users of Natural Gas	Not Specified	8.7%	Increased demand for efficient delivery
Related-Party Entities within Energy Transfer	$13.7 million	162.5%	Revenue from affiliated entities

USA Compression Partners, LP (USAC) - Business Model: Cost Structure

Operational costs for equipment maintenance

The operational costs for equipment maintenance for the nine months ended September 30, 2024, amounted to $235,048,000, reflecting an increase of $23,533,000 compared to $211,515,000 for the same period in 2023. This rise was primarily driven by a $13.6 million increase in direct labor costs, attributed to an increase in headcount and associated employee costs. Additionally, direct expenses rose by $9.9 million, largely due to increased parts and fluids expenses.

Labor costs for skilled technicians and staff

Labor costs for skilled technicians and other staff saw a significant increase, with direct labor costs totaling approximately $81,814,000 for the three months ended September 30, 2024, compared to $74,928,000 in the prior year, marking a 9.2% increase. The overall labor cost increase is reflective of the increased revenue-generating horsepower and higher employee costs associated with the expansion of operations.

Depreciation on compression units

The depreciation and amortization expenses for the nine months ended September 30, 2024, were reported at $195,801,000, up from $183,626,000 for the same period in 2023, indicating a 6.6% increase. This increase is attributed to various factors, including overhauls and significant improvements made to compression units and the addition of new trucks to the vehicle fleet.

Interest expense on financing

Interest expense, net, for the nine months ended September 30, 2024, totaled $144,855,000, an increase of 15.8% from $125,092,000 in the same period in 2023. This rise in interest expense was mainly due to increased borrowings and higher aggregate weighted-average interest rates on the company's debt.

Cost Category	Amount (2024)	Amount (2023)	Change ($)	Change (%)
Operational Costs for Equipment Maintenance	$235,048,000	$211,515,000	$23,533,000	11.1%
Labor Costs for Skilled Technicians and Staff	$81,814,000	$74,928,000	$6,886,000	9.2%
Depreciation on Compression Units	$195,801,000	$183,626,000	$12,175,000	6.6%
Interest Expense on Financing	$144,855,000	$125,092,000	$19,763,000	15.8%

USA Compression Partners, LP (USAC) - Business Model: Revenue Streams

Contract operations revenue from compression services

For the nine months ended September 30, 2024, USA Compression Partners reported contract operations revenue of $686.8 million, an increase from $605.4 million for the same period in 2023, representing a growth of 13.4% year-over-year. The increase was attributed to an 8.7% rise in average revenue per revenue-generating horsepower per month, driven by higher market-based rates and a 6.5% increase in average revenue-generating horsepower due to increased demand for services in line with higher crude oil and natural gas production in the U.S.

Period	Contract Operations Revenue (in millions)
2024 (9 months)	$686.8
2023 (9 months)	$605.4

Parts and service revenue from maintenance work

The parts and service revenue for the nine months ended September 30, 2024, was $17.0 million, compared to $15.1 million for the same period in 2023, reflecting an increase of 12.6%. This growth was primarily due to an increase in maintenance work performed on units at customer locations and directly reimbursable freight and crane charges.

Period	Parts and Service Revenue (in millions)
2024 (9 months)	$17.0
2023 (9 months)	$15.1

Related-party revenue from affiliate transactions

Related-party revenue for the nine months ended September 30, 2024, was $25.2 million, a significant increase from $15.8 million in the same period of 2023, marking a growth of 60.2%. This increase was primarily due to revenue recognized from existing customers acquired by Energy Transfer and an uptick in revenues from natural gas treating services.

Period	Related-Party Revenue (in millions)
2024 (9 months)	$25.2
2023 (9 months)	$15.8

Revenue from ancillary services such as natural gas treating

Revenue from ancillary services, including natural gas treating, was impacted by a $5.1 million decrease in revenue for the nine months ended September 30, 2024, compared to the previous year. The overall revenue from ancillary services was lower due to reduced demand, which was offset by increases in other areas of the business.

Period	Ancillary Services Revenue Change (in millions)
2024 (9 months)	Decrease of $5.1
2023 (9 months)	-

Updated on 16 Nov 2024

Resources:

1. USA Compression Partners, LP (USAC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of USA Compression Partners, LP (USAC)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View USA Compression Partners, LP (USAC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.