Q3 2020 USA Compression Partners LP Earnings Call
The recording will be available through November 13, 2020.
During this call our management will discuss certain non-GAAP measures you will find definitions and reconciliations of these non-GAAP measures to the most comparable GAAP measures in the earnings release that.
As a reminder, our conference call will include forward looking statements. These statements include projections and expectations of our performance and represent our current beliefs actual results may differ materially. Please.
Please review the statements of risk included in this morning's release energy funds.
Please note that information provided on this call speaks only to management's views as of today November 3rd and May no longer be accurate at the time, it really well.
Now I'll turn the call over to Eric long, President and CEO of USA compression.
Thank you Chris Good morning, everyone and thanks for joining our call.
With me is Matt.
Our CFO.
This morning, we released our financial and operational results.
2020, which reflect a fair amount of stability.
Usually can financially.
Coming out of the second there was still good.
Good deal of uncertainty in the marketplace and as we manage through the third.
We're encouraged by the resiliency demonstrated by both the natural gas market as well as USA compressions business.
Well, we are no means once just yet.
Despite the relatively attractive macro environment for natural gas should continue to support our business as we get through the remainder of the year and into the beginning of 2021.
Over the course of USA compressions existence, weve experienced multiple site.
[noise] throughout all of them, we've never changed our primary focus on large horsepower compression used in larger regional infrastructure oriented facilities as we've come out of each of those previous downturns. The business model has been proven out.
Our customers and the demand driven applications, which are assets are very large amounts of natural gas.
These facilities are constantly operating 24 hours a day seven days a week 365 days a year.
Barriers to exit two de mobilized in return on equipment the cost of living is borne by our customers can be substantial.
We believe this creates relative stability in our business, which differentiate USA compression from other service providers, whether compression oilfield service providers are you getting some midstream operators, we continue to be encouraged by the relative stability of our business model and look forward to managing the business through the rest of the year into 2020.
<unk> and beyond.
Our employees continue to work hard within the current environment to deliver the excellent service. The USA compression has been known for.
Despite the challenges that come with 19 has brought to the businesses throughout the country I am proud of the dedication by our entire team to do their job safely and efficiently.
Turning to the third quarter, we saw a modest decrease in revenues and distributable cash flow versus the second quarter as we felt the impact of unit returns during the second quarter as well as some continued pricing concessions.
Total revenues were 162 million or approximately 4% below Q2.
Similar to last quarter, we were able to continue to managing expense side aggressively resulting in adjusted EBITDA for the third quarter of approximately 104 million representing less than a 2% decrease from Q2.
We delivered strong operating margins political risk adjusted gross margin adjusted <unk>, adjusted EBITDA margin of 71.1% and 64.3% respectively.
Results point to the stability of our business model in times when many others in the energy industry are struggling.
Average utilization throughout the quarter was 83.9% down as expected from the Q2 level of 88%.
As we mentioned in the prior quarter barring any major events. We expect in Q3 would be the trough in terms of utilization and we continue to believe that wouldnt be the case at this time.
While we did experience some utilization degradation the rate returns was much less than what we experienced in the second quarter.
Customers continue to evaluate the business is essentially just things headed into the budget season, we saw some units return which was not unexpected.
We ended the third quarter was approximately 3 million active horsepower, which was off a little less than 4% from the end of Q2, while the total fleet remained consistent at about 3.7 million horsepower.
Just to add eight perspective to this by comparing it to the end of the first quarter back in March the utilization is down about eight and a half percentage points, which is similar to what we saw during the 2014 through 2016 downturn.
Average inflation across the fleet decreased about 1% during the third quarter, which reflected both unit returns and the continued impact of selected temporary service rate decreases.
Portions of these rate concessions have run their course and in many of these cases pricing is returned to the contractual levels in place before the pandemic and commodity up people started in the first quarter.
Mobile revenues of $60 or 62 cents per horsepower was down slightly from $16.79 in the second quarter.
Capital spending continued to moderate during the quarter with growth capex of $15.3 million and maintenance Capex of 4.7 million the growth Capex included delivery of approximately 11000 new horsepower.
All of which was in the mid to large horsepower range.
This capital was consistent with the prior quarter as we continue to limit spending awaiting an up tick in activity.
For the year, we expect expansion capital spending to total between 90 and $100 million.
Based on the third quarter results the board decided to keep the distribution consistent at 52, and a half cents per unit, which resulted in distributable cash flow coverage ratio of 1.12 times, which was largely consistent with Q2.
Our bank Covenant leverage ratio was 4.76 times for the quarter.
As we've mentioned previously our board of directors determines the quarterly distribution on a quarterly basis and the board can opt to maintain reduce or suspend the distribution as it seems most appropriate.
Let's turn to the overall marketplace.
I'd like to make a few general observations about the energy markets and where we are watching and ultimately how we think that could impact our business going forward.
It's hard to believe but just eight months ago. We were also pleased with the unprecedented one two punch covenant of any emerging worldwide pandemic, coupled with the crude oil price war.
As you recall, there were dire predictions of tremendous global and domestic demand destruction, both with regards to crude oil as well as natural gas, which were both predicted to last well into next year.
As regions around the world and throughout our country began to close down and definitely along with substantially weak commodity prices and cost related to demand, which forced many in our industry to take decisive action.
Budgets were slashed drilling was slowed or stopped and in some cases, even existing production was curtailed.
It is remarkable when you look back at how quickly we found the bottom of commodity prices as well as the relative speed with which crude and natural gas prices rebounded and ultimately stabilize.
Crude oil traded at an average price of about $40 per barrel during the third quarter.
Actual gas spot prices averaged about $2 per MB to you and the 12 month forward Nymex strip now averages over $3 per ton and B to you.
Part of the reason for the rebound in subsequent stability is due to the more positive demand outlook today than we experienced back in March and April.
Overall, the expectations for demand destruction in 2020 have been meaningfully reduced driven by the reopening of economies and their growing economic activity.
In a recent report estimated total U.S. consumption of natural gas in 2020, we down only about 1.8% from 2019 levels.
We've talked about this in the past the stability of USA Compressions business model is driven by the resiliency of demand for natural gas in this country and that resiliency is contributing to our operational and financial results through the first nine months of this year.
While USA compressions demand as natural gas driven we have been impacted somewhat by reduced oil drilling and production activities predominantly in the mid continent, and Permian and Delaware Basin regions.
Associated gas production has been impacted however, there are signs of two points improving longer term oil fundamentals and improving oil market will help support associated gas production, which is positive for our business.
Important facet of the oil industry that is often overlooked in this regard has to do with the global inventory levels and the ever changing crude oil inventory dynamics.
Let me spend a minute and share a few statistics with you.
First the U.S. is one of 37, OEE CD countries not quite 3% of the total yet our oil storage is estimated to comprise 45% of the total.
What goes on in the US is what tends to drive global inventories.
Next we see North America in OE CD Pacific comprised approximately two thirds of global storage. So.
So the demand in China, and the US are the two dominant markets driving inventories with the economy in China already picking up demand has as well.
Third and this is hard to believe but number one us crude oil storage, including the strategic Petroleum reserve is within spitting distance of the five year average to us GAAP gasoline stocks are already at year ago, pre cobot and normal levels and three.
You asked jet fuel inventories are now below a year ago and back to their normal five year average.
Finally, the loyalty features market now as open interest over 30 times, the world demand, which appears to be trading lock step with cobot news the Lotto majors in Europe over the past weekend's said crude prices tumbling, the trading of Paypal barrels somewhat disconnected from the fundamentals of the physical market driven.
In no small part by market psychology.
So remember barely six months ago headlines were focused on domestic oil storage overflowing and now inventories are back at fairly normalized levels. So now that weve apparently worked off some of the excess inventory what happens going forward.
Well using the I'd eight Q4 demand projections and assuming that OPEC production remains at a similar level during the last two months of the year you.
The applied global oil inventory draw could approach 5 million barrels a day.
Would equate to over 400 million barrels for the quarter those.
Those are dramatic numbers and could have meaningful implications for the overall oil market.
What's more apart from the projected Q4 inventory decline being multiple times larger than the five year average.
If those Q4 demand figure holds up during the quarter. It could work off the remaining excess stockpiles built from the second quarter with all the cobot induced demand reduction.
No we're not out of the woods, yet the pace of the demand recovery is still critical for covering in the energy sector.
But there have only been four instances in the last 36 years with inventories Didnt decline in the final quarter of the year and even if the demand forecast completely misses the mark we.
We expect to see meaningful inventory decline a major step forward for the sector.
So what I see coming up is it supply and demand fundamentals appear to be coming into equilibrium and setting up a much improved scenario in the future.
For the past several quarters most in the industry to maintain capital discipline as we all wanted to see what the rest of the year would bring posted cobot into slowdown.
Or seeing some very modest uptick in rig counts currently around 280 total onshore rigs down more than 70, 75% from recent peak levels.
Oil rigs have seen a greater percentage decrease well guess gas rigs are down but less severely.
We expect to see this decreased level of rig activity to continue for some time with can lift.
With continued scarcity of capital for S&P companies. This will coincide with the continuing decline of shale well production curves.
When coupled with both crude oil storage and natural gas demand statistics I previously cited the production side of the equation may cost very tight supply demand balance as we get to the end of 2020 and into 2021.
In fact, with the regional curtailments and Capex reductions, there's a sense that the U.S. could find itself in an undersupplied natural gas situation in 2021, and certainly the natural gas futures prices would indicate such recently getting up to the near $3.50 per mmbtu area for certain near term month.
Sun 2021.
As it always does the market will balance itself out and higher prices will spur additional production.
The more gas is moving around the country the more compression you will need.
As I mentioned earlier capital budgets from the USA compression throughout the broader energy industry remain very much in focus and we expect this will TV continued to be the case as everyone works through their 2021 budgets. This.
This has already impacted and we believe we will continue to impact production growth will also highlight the nature of production curves and shale wells. After the flush production of the initial years. These wells will move into more of a steady state environment as the curves flatten now this lens stability to the need for compression and such.
Situations, where our equipment is required to keep those gas volumes moving.
Assuming the Capex moderation and disciplined we witnessed the last few quarters hold we expect to see a higher proportion of overall production in that flat steady state part of the curve were declines has meaningfully slow.
Noted this is a favorable situation for USA compression because our business is focused on the infrastructure applications to support these steady state operations as the wells age the natural gas volumes in exhibit a very stable profile remember as long as gas is being produced and moved throughout the system.
Pipelines processing plants et cetera compression is required.
Other critical dynamics in our business is a relationship between compression horsepower and declining reservoir pressure.
Its pressures decline to move the sales volume of gas requires an exponential increase in compression horsepower. We expect to continue to witness this dynamic, especially as new well drilling activity to substantially reduce in the coming years.
In this instance compression stays around for a long time and requires more effort.
Horsepower to move that gas so all types of applications, even though gas volumes may be declining the compressed require may actually increase as pressures also declined.
The dynamics I mentioned above along with relatively resilient demand have historically made large horsepower compression a less volatile business the.
The business model that USA compression is based on is a business model that can easily adapt to current markets. One that doesn't require multi year capital projects and commitments. It is one that is able to move between growth mode and stability mode with relative ease and.
Required we grow with our customers during periods of reduced activity and even production declines are large horsepower compression services are required horsepower have remained relatively resilient.
So turning to the customers in terms of customer behavior on the whole our customers continue to take a cautious approach to the remainder of 2020.
Quote activity as well as unit deployment has picked up during the quarter as well as conversations regarding 2021 compression needs as we've seen in the past given the infrastructure nature of the large horsepower equipment, our customers place a lot of value on the reliability and customer service, we provide but as I mentioned.
We are all in the middle of budget season, and so there's naturally some uncertainty out there that will get worked through over the next few months.
Our geographic diversity has been an advantage in this time of somewhat disconnected energy markets.
Through our customers, we have exposure to different producing regions and depending on the customer varying motivations are driving different behaviors.
We have seen the trajectory of returning underutilized assets experienced in Q2 early Q3 decreased significantly our.
Our customers have moderated their drilling completion and development activities following the market dynamics earlier in the year.
And while there remains a fair amount of a fair amount of uncertainty out there the stability in the marketplace of late combined with the continued strong demand has a lot of people working to figure out how to meet that demand in 2021.
The vast majority of our assets serving their dry gas activities and natural gas handling activities. So.
Such as those connected to gas processing plant or large volume centralized gas lift applications beyond the flush production stage and then the stable shallow decline steady state mode.
The geographical diversity of our asset base, we have exposure to different producing regions and as such have a balanced throughout the fleet events in one particular area like associated gas declines in the Permian and Delaware basins, while they affect us have been partially offset by increased activity and other regions like Appalachian.
In the Haynesville.
Our contract structure and portfolio continue to benefit the business can enhance good stability on this.
Shortly we would typically have between 40 and 50% of our assets on a month to month basis. We have brought that number down meaningfully and we are currently below 30%, reducing our month to months exposure significantly.
While we are no means out of the woods things certainly feel better than three months ago. When we last communicated with all of you.
Discussed the slowing level of unit returns combined with some steady recent redeployment activity.
This is a bit of cautious optimism.
We have taken the necessary actions with regards to cost cutting and capital spending to weather the storm and expect to see an eventual recovery, although the exact timing and extent is difficult to predict.
We have purposely focused on large horsepower multi unit centralized compressor stations over the recent years.
Applications served that resilient natural gas demand discussed earlier.
We expect that demand to continue as it has proven over the last several months and as the physics of natural gas production kick in we expect to see aging wells and declining reservoir pressures all of which is beneficial for our compression services business.
Now I'll turn the call over to Matt to walk through some of the financial highlights of the quarter Matt.
Thanks, Eric and good morning, everyone today, USA compression reported third quarter results, including quarterly revenue of $162 million adjusted EBITDA of $104 million in DCF to limited partners of $57 million I would note during the quarter we had approximately.
The $5 million of nonrecurring benefits, primarily certain tax refunds from previous periods, which positively impacted adjusted gross margin and adjusted EBITDA.
In October we announced a cash distribution to our unit holders of 52, and a half cents per LP common unit consistent with the previous quarter, which resulted in coverage of 1.12 times.
Our total fleet horsepower at the end of the quarter was largely consistent with where we ended the second quarter at approximately 3.7 million horsepower.
Our revenue generating horsepower at period end decreased approximately 4% to a little over 3 million horsepower, reflecting the impact of the return of units, although as Eric mentioned the rate of units returned has considerably slowed since Q2.
Our average horsepower utilization for the third quarter was 83.9% about 4% down from the end of Q2.
Pricing as measured by average revenue per revenue generating horsepower per month was $16.62 for Q3, which was a slight decrease from the previous quarter's level of $16.79.
Of the total revenue for the third quarter of 162 million approximately $116 million reflected our core contract operations revenues, while parts and service revenue was about $2 million.
Adjusted gross margin as a percentage of revenue was 71.1% in Q3 helped in part by those nonrecurring benefits already mentioned net.
Net income for the quarter was 6.5 million and operating income was $38.8 million net cash provided by operating activities was $48.2 million in the quarter maintenance capital totaled $4.7 million in the quarter and last cash interest expense net was 29.8 million.
Dollars.
As it regards full year guidance for 2020, we are increasing the midpoint for adjusted EBITDA due to the nonrecurring benefits I mentioned earlier, we currently expect 2020, adjusted EBITDA between $405 million in $415 million in DCF between 210 and $220 million.
Last we expect to file our form 10-Q with the FCC as early as this afternoon and with that we'll open the call to questions.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad if anything.
Speaker phone. Please thank you.
She is turned off to allow your signal to reach our equipment again that is star one to ask an audio question.
Pause for just a moment to allow everyone the opportunity to signal.
Our first question comes from Jeremy Tonet from JP.
Morgan.
Hi, Good morning, guys I, just wanted to quickly touch up on capital allocation.
Just thinking about DCF for DCR or keeping it stable for next two at a time.
Thank you being on must stay really hot.
Just wanted to understand give any shift in how the view has changed at the back end loaded.
We can outlook.
No I understand how you guys think about cutting.
Cutting down distribution odd if any potential asset sales per.
The deliberate quickly.
Audit auto what do you think it becomes like a bundle of basically saying God, how should we think about capital allocation.
Sure, It's Matt I'll I'll jump in first.
I think first of all to address the question about the key obviously, we are a separate company with a separate board.
So you know decisions that are made at the T. level, obviously, our board looks at our business and we'll make those decisions.
Appropriately so I don't I don't know that I would connect the two in any way shape or form our board will make those distribution decisions kind of in due course every quarter like they always have.
But in terms of capital allocation, you know leverage wise.
We've always.
Obviously pointed towards a.
Prior to lower leverage work on the leverage over time.
Obviously, we were we were headed in the right direction before.
March of this year happened and we.
We took some actions to make sure we didn't run into any trouble, but there.
Theres really I don't think Theres any difference in our view of.
Overtime working down leverage so I think just with the events of the last couple of quarters, It's obviously going to take a little bit longer, but I think as we talk about capital spending and new unit delivery obviously.
The new unit delivery this quarter was down significantly from earlier in the year, we kind of locked in a bunch of stuff earlier in the year. We spent the money that was committed for this quarter, but significantly decrease from earlier in the year and then I think in the fourth quarter you are going to you'll see a continued much much lower spending level. So.
We havent given out anything in terms of spending for next year, but.
I think right now we're sort of in a minute.
Stability mode, and I'd be surprised if the capital spending on new units next year is anything.
Super meaningful or significant so I think with that without a whole lot of new units spending.
We will continue to assuming that distribution stays where it is you will continue to chip away at that leverage over time, because we obviously won't be borrowing as much as we have in the past to fund those new units.
Got it. Thanks. So is it fair to assume you guys are comfortable with this leverage and you okay going to slow us is that correct.
Don distribution side I'm flipping it that's a that's a way to think about it.
Yeah, I think when we look at it and we've been through this before you know we saw back in 14 15 16.
Where I think a lot of a lot of folks looked at it and said you know your revenues are going to be cut in half and your cash flows can be cut in half and in our view is obviously the business is probably a lot more stable than than a lot of people give us credit for so.
We've.
Obviously, the board makes that distribution decision every quarter and so we look at the results every quarter and you can see even this quarter I think we were probably.
A little bit ahead of what most people expected. So I think the stability as you know as long as the stability continues and we see in the future you know an ability to kind of chip away at that leverage I don't know that we see a burning need to either sell assets.
Or do something with the distribution, but you're like Eric said, the timing and sort of duration of sort of the recovery is I think you know uncertain for all of US. These days and so I think our view is we'll take it will take it one day at a time one quarter at a time and we.
We will cross that bridge is if we get to a point, where we think it's it's unsustainable but for right. Now we have been I think we've been pretty pleased with how the business has held up and and how we've been able to manage through the last couple of quarters.
Got it thanks, that's very helpful and.
Just wanted to quickly touch up on now is your side I mean, there's a lot of nice award in the market right now and some of the large sum. It seems I wonder you talked about than it is the case and those companies. So fluid that ended using ambitions I just wanted to understand if you guys have talked to any opportunity set for you I think see huh.
Yes. This is this is Eric and obviously.
Having one of the newest fleets in the industry one of the most emissions efficient fleet kind of gives us a competitive leg up.
There are lots of things that we're exploring and looking at and maybe a fair way to say it is it's premature for us to comment but.
She is front and foremost on our radar screen and something that.
You'll hear more from us in the future going forward.
Got it that's it for me thanks.
Thank you.
TJ Schultz with RBC capital markets.
Hey, guys good morning.
So on utilization if that bottom this last quarter and.
As you redeploy assets back into the field is your mix.
Shifting anymore to gas directed basins or if you can just speak a bit more geographically, where you see some more opportunities and then on the cost side I understand.
Maybe new unit orders, probably are fairly limited, but are there more maintenance capital cost or opex, we need to consider to bring back some of those idle units. Thanks.
Yes, TJ, Linda let me touch on kind of what we're seeing with basal activity and then Matt can chat a little bit or somebody.
Some of the other good news there.
[music].
It's fair to say that the dry gas areas, the haynesville and Appalachian in particular, we're seeing a lot of incremental demand increases.
We've seen softness of the mid con and in particular because of the Scoop stack merger area has been hit pretty pretty hard with reductions in rig count.
The completion activity and development of the do you see.
The Permian and Delaware has slowed down but it hasn't completely stop.
And with increasing Geo ours, and more importantly, I think with some potential new takeaway capacity, that's coming on stream here very very quickly.
Basis differential will start to improve in the Permian. So on the associated gas side. It will start to see some tick up in activity there. So.
I don't think you'll see an environment, where USA wholesale relocates hundreds of thousands of horsepower out of one basin into another.
I think a fair way to say is that as activity has has bottomed activity starts to tick up.
The combination of stability in the decline curves.
If new activity moderates in the ever decreasing pressures will have just a natural increase in requirements for compression horsepower. So.
Probably the best way to say it TJ is rather than building new horsepower will work off excess idle capacity out of our fleet very similar to what we and our peers did back in the 2014 15 16 range and.
Even in prior periods.
As a private company, which we have done in the past so I don't see wholesale relocation of equipment, but what I do see is the ability to meet.
Improving demand and improving requirements out of our existing.
Basically horsepower that.
Has become idled over the course of the last few quarters.
And hey, TJ its Matt on that on the capital spending question.
I think you are sort of on the right track in terms of new unit deliveries for the for the fourth quarter right. Now we have three three of the large units scheduled for delivery during the quarter. So.
The total is 7500 horsepower and that is it.
And so I think what you will see not that not that maintenance capital is really going to bump up but what you will see.
You know towards the end of this year, but then as we think about next year is we'll have more growth capital, but spent on NAV more growth capital than this year, but a higher proportion of the growth capital will be spent on what we would call reconfigurations.
Which is kinda altering a unit to put it into service in a different area at a different application et cetera. So yeah, you're going to see I think the balance flip from new units majority of new unit capital to the majority of that being this reconfiguration capital and again Thats to Eric's point of putting these units back out and in it.
Sending the life of a minute maybe in a different area. So.
Yes, you will see that trend I think continue.
Okay makes sense, that's all I had I appreciate it guys. Okay. Thanks, TJ CJ. Thank.
Thank you. Our next question comes sooner if any.
Yes.
Hi, everyone. This is Brian rentals on Commissioner I'm, just following up on the previous capital allocation question is there an updated long term view.
Leverage is it four times or is it kind of as you said a quarter by quarter basis.
Yes, Brian it's Matt I don't know that there is a I don't know that we've changed our view on it.
No. We've always said kinda, we would like to trend down towards something in the low loader for.
Low for us to four range and so I just think the timing of its gotten pushed out a little bit obviously and so that's why we made the.
The amendment to the credit facility earlier in the summer just to kind of give us a little bit of cushion as we continue to work down towards that level.
But really that's just allowed us a little bit of time cushion. It does and I don't think it should be interpreted as changing our our view of where we want to ultimately get leverage down to but in terms of you know, it's a constant sorta chipping away at that leverage but I.
I think thats, probably what I'd say, probably nothing nothing more specific than that.
Great Thanks, and as a quick follow ons as good then.
Pcs recent distribution cost as a long term view.
Its ownership in USAC changed at all.
In other words would have distribution cut support usecs equity values in the event that they like to divest the SEC to support de leveraging just kind of any color around that would be helpful.
No I.
I don't I don't think their view has changed they will tell you that they are content with the investment I think they've obviously have a sense of value that they associate with the investment and I would say, probably given where the markets been bouncing around the last several several quarters, it's probably not quite there, but they've been.
They're happy with the investment, but I think like everything. They said look this is not a long term holding for them. So but I think for there it's going to come down to value transaction structure et cetera in terms of whether they do anything but I don't think there in any rush to I don't think that has changed their view.
On their ultimate timing and I don't think there in any rush to get rid of it just yet.
Great. Thanks, if I could just have one quick follow up on pricing, how should we think about that kind.
Kind of going forward typically rig pricing lags rig count.
By a few months just given the dramatic drop off in March from OPEC and coated.
Should we assume that the price bottoms and at this point or should we kind of see that in early 2021, given rig count Dolphins in August.
Yeah right is it.
Right now it's interesting and obviously, we've got the two kind of the two parts of the business. The small horsepower in the large horsepower interestingly the large on the really large stuff the 3600 series.
We do not have many of those units laying around and I don't think others.
Who do what we do.
Much laying around either and so I think for those large horsepower units that you know that we've all kind of been investing in it we have not seen.
Any real degradation in the pricing I think we found the top you know over the last couple of years.
And so I wouldn't expect it to go up a bunch, but in terms of that large large horsepower class I think it's it's probably likely to stay stable.
On the Middle you know what I would say is that the 3500 class that's about a 13 1400 horsepower unit that's where.
I think overall the industry there is theres a higher number of those units out there in the industry and there's probably a higher number of units that came home over the last couple quarters. So.
I think that has.
That part of it again units weren't really you didnt have tons and tons of units going out over the last couple of quarters that has started up again and so you know in terms of the pricing, it's a little hard to to look at it and base. It on what you've seen in the last couple of quarters, because we hadn't had tons of new stuff gets signed but but stuff is getting signed.
And again, we've been I think like in past.
Past downturn, most recently 14 through 16, we Didnt, we purposely Didnt chase.
Uneconomic deals and so we had competitors that were out there may be putting stuff out at relatively lower prices, we were happy to kind of sit back a little bit and wait for the for the market to tighten up and then put our stuff out. So I don't think you're going to see anything different out of us this year because again you.
Just in our view you know we look at as Eric mentioned kind of the macro gas market in the futures prices and in some of the activity on the gas side, which I think is all pretty positive. So again, if you told me I had to take a deal.
This quarter or wait a couple of quarters and get something that was you know 10, 15% higher I think I'd, rather wait so I think we're gonna be try to be as disciplined as we possibly can be in terms of reading the demand that's out there so that we can get X.
Economic attractive.
Prices on those units when we do put them out but you.
I think you know.
You'll have I mean, you saw our pricing went down just a little bit over the quarter over quarter.
I think you'll probably see you know.
I mean, I don't want to give specific guidance on pricing for the quarter, but I think you're going to see probably similar type similar type feel in the fourth quarter as we had in the third quarter and then you know I.
I think next year sort of hopefully.
Hopefully a new a new ball game, but obviously, we'll give you some more color is that its a.
The quarter goes through.
Great. Thanks for all the answer I'm going to take it.
Thanks, Brian. Thank you I'm showing no further questions at this time I'd like to turn it back over to our speakers for closing comments.
Thanks, Kerry I think it's fair to say that Q3 came in better than many expected, especially six months ago. When the world was turned upside down.
We previously said that we expected to see the impact of commodity price volatility and the global pandemic really show up during the second half of this year.
Well that was true in Q3, I think the commodity rebound has taken place more quickly than many had expected.
There's still a fair amount of uncertainty only extend in duration of the current cycle. We encouraged by how things will settle down as well as the encouraging signs we began to see from our customers. We have not changed how we approach the business for the present uncertainty.
Business is a business built on natural gas demand, whose long term importance to this country in the world. We continue to be optimistic about we believe the underlying stability of our large horsepower infrastructure focus contract compression services business model and the science behind the need for compression and the interplay between press.
Sales and volumes.
Be a key point of positive differentiation for USA compression.
We have continued to focus on what we can influence a strong focus on cost restraining spending and making sure. Our customers are receiving the excellent customer service they have come to know from USA compression.
Thanks for joining us and please be safe, we look forward to speaking with everyone on our next call.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
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