Q4 2020 USA Compression Partners LP Earnings Call
Is being recorded at this time I would like from the presentation over to Mr. Chris border. Please go ahead Sir.
Good morning, everyone and thank you for joining US. This morning, we released our financial results for the quarter ended December 31 2020.
You can find our earnings release as well as recording of this call any of them.
Best of relations section of our website at USA compression Dot com.
The recording will be available through February of 'twenty, six 'twenty 'twenty one.
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 as.
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.
These review of the statements of risk included in this mornings release and in our SEC filings.
Please note the information provided on this call speaks only to management's views as of today February 16th of May no longer be accurate at the time of a replay.
I'll now 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 also with me is Matt Liuzzi, our CFO.
This morning, we released our financial and operational results for the fourth quarter of 2020, which wrapped up a year marked by unprecedented volatility in the energy markets and considerable uncertainty throughout the broader economy.
Almost 11 months ago, when the world was seemingly turned on its head overnight none of us knew what the rest of the year would look like.
On the next few days or weeks as we work through the summer and into the fall we started to see more stability in our marketplace and I'm pleased to report the USA compressions business model focused on large horsepower natural gas compression services as well as the natural gas demand in the U S showed resilience throughout the year.
Exports rebounded towards the end of the year.
This demonstrated the critical role of natural gas plays in our economy with some of the uncertainty from 2020 behind us, including the Covid vaccine development in the U S. Presidential election, we are cautiously optimistic that the worst is behind us as of the country in the world gets back to work.
We all hope are more normal times ahead.
The relative attractive macro environment for natural gas that started in the back half of 2020 has continued into the start of 2021 and sentiment from our customers is positive. While there is still work to do to gradually get our business back to where it was pre pandemic. We are encouraged by signs of activity and the overall risk.
Zillions of natural gas demand in this country and abroad.
While the current cycle is unlike any other with multiple macro factors affecting our industry and volatility in commodity prices, which had never.
<unk> been seen before we approached it with a similar mindset as previous cycles over.
Over the course of our 20 plus year existence, we've never changed our primary focus on large horsepower compression used on large regional infrastructure oriented facilities.
Our business model is powered through previous cycles, and as we start to see the green shoots of this cycle. We have again relying on the stability of natural gas demand, our customers and the demand driven critical applications, which our asset serve.
We believe our business is differentiated from other service providers, whether compression oilfield service service providers or even some midstream operators and while we have seen a modest decrease in utilization because of our focus on the large horsepower segment, we have fortunately been spared much of the pain that others have suffered over the past year.
As we get closer to what we all hope is the end of the Covid public health pandemic I'd like to recognize our dedicated and hard working employees as well as those across the energy industry.
Worked nonstop to ensure that our country has the energy it needs to get back going and prosper.
While Covid has presented some unique challenges some of most businesses throughout the country I am proud of the dedication by our entire team to do their job safely and efficiently.
Recently, the office of management and budget released the statements that indicated it expected the economy to grow at record levels and by mid 2021 to be at levels of growth greater than pre pandemic.
In order to make that happen natural gas will be required to generate power.
Fuel industrial feedstock and manufacturing as well as serve as a critical source of fuel in many parts of the world our views of the importance of natural gas is often understated and misunderstood by many and we believe the years to come we will prove that out.
Turning to the fourth quarter, we experienced a modest quarter over quarter decline in both revenue and average horsepower utilization.
As we worked through some unit returns for the quarter, our active horsepower out on the field of fell on a mere 1% from third quarter levels, while on an absolute dollar basis, adjusted gross margin and adjusted EBITDA reflected a decrease from the third quarter's levels, both adjusted gross margin percentage and adjusted EBITDA percentage.
And at levels consistent with our historical performance.
Keeping both adjusted gross margin and adjusted EBITDA percentages at our sales historical levels in this environment is not to be overlooked.
Total revenues were 158 million approximately 2% below Q3.
And keeping a close eye on costs, we achieved adjusted EBITDA for the fourth quarter of approximately $98 million as.
As I mentioned, we delivered attractive operating margins in line with historical USA compression averages with adjusted gross margin and adjusted EBITDA margin of 68, 4% of 62, 1% respectively.
Average utilization throughout the quarter was 83% down just slightly from the Q3 level of 83, 9%.
After living through the middle part of 2020 seen utilization essentially stay flat for the quarter was a positive sign and we're cautiously optimistic that the worst is behind us.
During the quarter with some continued uncertainty certain of our customers continue to evaluate the overall compression needs, especially as they worked through the primary budget season and look to add the 2021.
We ended the fourth quarter with approximately 3 million active horsepower, which is off less than 1% from the previous quarter and while the total fleet remained consistent at about $3 7 million horsepower.
The comparable where we sit today versus 12 months ago utilization is down about 11 percentage points, while the slightly larger magnitude than in the 2014 2016 downturn you have to remember and appreciate the condensed timeframe in which 2000 twenty's downturn played out.
Have chosen a different strategy than some of our peers, who have opted to maintain utilization while suffering margin degradation argue.
Which is consistent with what we did in the past downturns.
Of that in a capital constrained and leverage limit the environment equipment will be in short supply when commodity prices improve and customer activity picks up which will allow USA compression to deploy our idle assets with improved economics.
Average pricing across the fleet decreased about one half of 1% during the fourth quarter limited by very modest unit returns and working off the impact of temporary service rate adjustments.
We only have a few contracts still operating under those reduced temporary service rate adjustments average monthly revenue of $16 55 per horsepower is down slightly from $16.62 in the third quarter.
The end of the year is usually a slower time for capital expenditures and during the quarter our growth spending decreased approximately 30% from third quarter levels to $10 9 million maintenance Capex of $5 4 million was slightly above the third quarter, but as you can all appreciate maintenance capital tends to be ratable throughout the year and it is.
Important to keeping our fleet running the.
The small amount of growth capex for the quarter, primarily consisted of the delivery of three new large horsepower units, which were contracted for and began service in the west Texas upon completion.
Just on the fourth quarter's results the board decided to keep the distribution consistent at 52 five cents per unit, which resulted in a distributable cash flow coverage ratio of <unk> 99 times, our bank Covenant leverage ratio was five three times for the quarter.
Consistent with prior quarters, 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 deems most appropriate.
Turning now to the broader energy markets I think 2020 demonstrated not only the potential volatility of the energy markets, but also the importance of energy to our daily lives, while the price of crude oil averaged about $40 for the entire year in between we had highs of about $63 a barrel and never seen before.
Those of negative $37 of air and in between we heard dire predictions of tremendous global and domestic demand destruction both of those.
Regardless of crude oil as well as natural gas.
The industry took quick action to reduce capex budgets, and we gear business models for the environment potentially marked by low demand excess supply and uncertain recovery timing and duration drill.
Drilling was slowed or stopped in some cases existing production was curtailed in the industry weighted to see what was going to happen.
There is in all the thing in our industry that the best cure for low prices is low prices and what we witnessed throughout the back half of 2020 shows exactly how tightly while the supply and demand in the global energy industry is the demand came back much more quickly than many expected driven by the reopening of economies.
But also of the Baseload demand for particularly for natural gas never went away.
This helped get inventories back in check and pretty soon we saw stabilization in commodity prices, which we experienced over the course of the last few quarters as the impact of the slowdown in drilling activity began to show we saw commodity prices climb higher.
At the end of 2020 crude was nearing $50 a barrel natural gas was around $2 40 per <unk> to you.
Since that time, Nymex crude as of right around $60 a barrel of natural gas has reached $3 per M. Btu.
The latest numbers from the EIA estimate U S. Total U S production of natural gas in 2020 was down less than 2% from 2019 levels.
The resiliency of demand for natural gas in this country for power generation and industrial manufacturing lots of mentioned the demand for exports to other areas of the globe is driven USA compressions business throughout his entire existence in 2020 was no different with.
With the recent polar vortex and frigid temperatures across the Middle of America, and the East Coast 2021 demand for natural gas the starting off of the bags.
We clearly experienced the impact of the commodity volatility and demand uncertainty on our business.
See the asking our modest utilization impact as we keep a close eye on the activity levels from the various areas on which we operate we are seeing positive signs, which we expect will bode well for our business for example, take the associated gas production in the Permian Basin.
The last spring as E&P lay down rigs there was a lot of uncertainty over what the impact on gas volumes of the reason would look like well the EIA reported that between December 2019 in December 2020, natural gas volumes out of that region, we're actually up one 6%.
They represented of the low point, which was off 10% versus December 2019, before volumes pick back up to pre pandemic levels.
Youre seeing resilient demand drive these volumes and ample takeaway and processing capacity in the Permian and Delaware basins has a lot of producers to sell into a functioning natural gas market.
No longer are you entirely dependent on crude oil economics, which has helped many operators worked through 2020 and be in a decent position as 2021 has begun on.
Last quarter's call I spoke about global crude oil inventories in the ever changing dynamics. My point was that the U S is an important region for crude oil storage.
The statistics prove tightening supply demand and the inventories were close to getting back to pre COVID-19 levels remember it was the perceived the plot of oil supply and lack of storage than the park led to the negative crude oil prices. We continue to see draws of crude oil from storage and are approaching more normalized storage levels for <unk>.
Any worry global oil in storage actually declined by nearly 29 million barrels the six consecutive months of the ROE that storage is have fallen to put this inventory decline of perspective, we usually see a storage build in January of about 31 million barrels of supply and demand fundamentals appear to be cut.
The into equilibrium and setting up a much improved scenario on the future with demand coming back on OPEC, plus showing restraint and shale well production declining there should all add up to a positive environment for crude oil, which had which should have positive effects on the associated natural gas markets.
While we expect capital budgets continue to impact production growth across all of the basins of which we operate the steady move upward in commodity prices. This burn some additional activity is on that.
Another important.
<unk> market dynamic to watch as we move through 2021 will be the evolution of the decline curves and the shale wells as we've discussed previously after the flush production of the initial years. These wells moving to more of a steady state environment is the curve flatten out.
This level of stability to the need for compression as the situations, where our equipment is required to keep those gas volumes of moving with the rig count down significantly from recent highs and producers seemingly more focused on maintaining production levels rather than growing the meaningfully we would expect to see a higher proportion of overall.
And in that flat steady state part of the curve where decline has meaningfully slowed.
For USA compression. This plays right into our business strategy, because we are focused on infrastructure applications that support the steady state operations as the wells age the natural gas volume to exhibit a very stable profile.
We're also seeing the several of our customers are opting to maintain a flat production profile by installing additional compressor or compression rather than to drill additional wells or to complete the uses.
Main driver is to reduce capital expenditures and overall leverage that comes from additional drilling and compression as the low cost way for them to maintain production and offset decline.
As of the nature of the production is expected to exhibit much more stable characteristics and other critical dynamic in our business is the relationship between compression horsepower and declining reservoir pressure.
As well as agent pressures decline to moving the same volume of gas requires an exponential increase in compression horsepower. So you can see that in order to maintain production, we will likely take more work I E.
<unk> power to move the gas so on all types of applications, even though gas volumes may be declining the.
The compression required may actually increase as pressures also decline as.
As we look ahead to the phase in the industry marked by less capital spending we think our business model is one easily adaptable to the changes going on in the industry.
We don't require large capital commitments on multiyear projects, but instead of equipment that we already have on our fleet will be used to help our customers keep their gas volumes of moving we can easily shift from periods of growth to periods of stability, all while managing our balance sheet and maintaining strong operating margins.
So turning the customer activity.
As I've discussed on the path, we are a lagging indicator as it regards to activity levels. Our overall activity picks up we will typically lag activity further upstream by one or two quarters well the rig count in the U S. Bottomed out on August of last year and has begun to tick up since that time.
August of the total rig count on the U S. It was off about 70% from its highs at the beginning of the year by the end of 2020 that hinted rebounded more than 40% from the lows and currently the count has recovered about 60% off of the lows.
So while we are still at about half of the pre pandemic high of early 2020, where we stand today represents a solid improvement.
The total rig count more than half from the Permian, which is clearly supporting those gas volume numbers I mentioned earlier, the Arkansas, Louisiana East, Texas area of the second and rig count followed closely by the Appalachian region. These three areas account for almost 80% of the lower 48 rig count and we have a presence on all of the these areas.
During the quarter, we saw a very slight decrease in utilization driven by some unit returns from customers.
As we've discussed the last few quarters.
Customers continue to evaluate their compression needs and try to anticipate what their 'twenty 'twenty one needs might be as such some units will return, but overall, we considered utilization to be fairly flat quarter over quarter, which is what we expected looking forward. We are optimistic that because of the nature of applications for our <unk>.
It's dry gas activities of natural gas handling activities like those of gas processing plants are large volume centralized gas lift applications that our assets are likely to stay out of the field.
Adding to the stability our contract portfolio continues to lend stability to our operations with month to month contracts comprising only about 30% of the fleet.
So to summarize while we are no means out of the woods things are looking better on the business has stabilized with unit returns significantly slowing in customer dialogue picking up the.
The cost cutting actions, we took on early 2020 and restraint on capital spending of health throughout the year and so we feel positioned very well positioned as we enter 2021 and certainly not playing catch up in any way.
That said, we successfully powered through but frankly it was the worst downturn I have seen in my over 40 years in the energy industry.
We have emerged stronger leaner employees to ramp revenues of deploying our idle fleet over the upcoming quarters, while we wait for the market to turn upward again, we will continue to manage what we can what.
We can control we believe our focus on large horsepower multi unit centralized compressor stations over the recent years will further bolster the stability that we have seen as natural gas demand stayed resilient.
As it is expected to be we expect the demand to require continued investment and along with it continued natural gas compression services I will now 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 fourth quarter results, including quarterly revenue of $158 million adjusted EBITDA of $98 million and DCF to limited partners at $50 million.
While down from last quarter recall that during the third quarter, we had approximately $5 million of non recurring benefits, which positively impacted that periods reported adjusted gross margin and adjusted EBITDA.
In January we announced the 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 <unk> 99 times.
Our total fleet horsepower at the end of the quarter was largely consistent with the previous quarter at approximately three 7 million horsepower.
Our revenue generating horsepower at period end was essentially flat at a hair under 3 million horsepower.
Our average horsepower utilization for the fourth quarter was 83% less than one percentage point down from the third quarter.
Thing as measured by average revenue per revenue generating horsepower per month was $16 55 for the fourth quarter, which was the slight decrease from the previous quarter's level of $16 62 sets of.
Of the total revenue for the fourth quarter of $158 million approximately $155 million reflected our core contract operations revenues, while parts and service revenue was $3 million.
Adjusted gross margin as a percentage of revenue was 68, 4% in Q4 in line with USA compression historical levels.
Net loss for the quarter was $1 5 million and operating income was $31 $2 million net cash provided by operating activities was $97 $5 million for the quarter.
Maintenance capital totaled $5 $4 million in the quarter and for the year, We spent $23 3 million in maintenance capital in line with our guidance and lastly, cash interest expense net was $30 million.
With the release of our fourth quarter earnings. We are also releasing initial guidance for 2021. We currently expect 2021, adjusted EBITDA of between $385 million and $405 million in D. C. F between 100 of $93 million and $213 million.
Last we expect to file our form K 10-K, with the SEC as early as this afternoon.
That will open the call up the questions.
Yes.
Sam Please signal by pressing star one on your telephone keypad.
We are using a speaker phone. Please make sure you're on mute function is turned off from the liaison.
Military equipment.
Once again that is star one if you would like to ask the question.
We will take our first question from the day to county with J P. Morgan.
The mine life.
Wanted to ask on with laser huh.
What is the cause of both of you.
Ladies and extending the life product line.
While you're on it.
Also on the granular thing you need to take on debt and implementing the chat about how they can work on.
They will potentially the bottom bottom line.
Hey, Good day, it's Matt why don't I kick off on the I think the first one was with regard to utilization obviously.
Obviously, we don't break down and released publicly the the division, but I would say I think what we've seen and where we see things now or is consistent with kind of how we describe the business model historically, which is the large horsepower units.
Units tend to be obviously stay out in the field.
The the applications they are used in <unk>.
<unk> planned to get big gathering systems in the central delivery points things like that are you know continue to be used in and that's really kind of been the story even going back into.
March of last year, if you will when things kind of took a turn so I think that the business model of the large horsepower, obviously utilization staying.
Well, well up north of where we would typically see the small horsepower stuff.
You know operate I think that that's continued.
Really throughout 2020 and into the beginning of this year.
And I think as it regards the.
The second question I believe was with where unit returns are coming from and obviously in the quarter. I think you probably noticed those returns you really really slowed down meaningfully from kind of where we had been in the middle part of the year and I think we.
Mentioned, the the Permian volumes for instance, in and obviously the reason we talked about that was just too.
Think people assume that that everything kind of took a huge dip downwards in the interesting fact is that actually volumes were up in the Permian.
From December 19th of December 'twenty and so.
We continue you know that that has been a has has very much stabilized I think even the mid con where I think you've seen it seems like.
A lot of weakness at the at least up until the last couple of months.
The few days.
That has also stabilized and so we're seeing the.
A lot of that took place in the second and third quarters and everything is kind of stabilized. The now really as we think about the business and going forward is on.
Our focus is on getting that stuff back out and I think the the customer sentiment the level of quotes that we're seeing out there.
The month out you know all of that stuff is increasing so.
Yeah, I think our view is is that we've we've absolutely hit the sort of stabilization point and if you believe the macros. If you believe what's going on in the gas markets and the resilient demand, we would expect to see that utilization in all of the regions really start to tick back up the throughout the year.
Got it that makes sense, yeah, I mean, that's that's definitely a handful of Aetna humana and the effect of the slowdown.
The fourth floor of apparel.
The water.
Just a quick follow on.
On.
Appetite for the type of Hana.
Good day.
I think it's all of a small transaction.
I just want to understand the world.
I think we will outperform the state looking to cut off the cash like I said painful boulevard and none of them. This weekend.
On the market.
The well thanks a lot.
Okay.
Yeah. The M&A. This is Eric I think you know generally we publicly stated we don't generally comment on M&A opportunities.
What we have said in the past is that we're highly selective.
We focus on large horsepower applications.
We look at things, which would be accretive to our our cash flows and leverage neutral. So I think it's a fair way to say when we look at M&A opportunities on there being some things EBIT marketed you extensively.
In our industry.
Continuing to come back with the other being shop 345 times, we didn't like the first time, when we don't like of the second third or fourth or even the fifth time, So our view of the world.
Is that from an M&A perspective, you know on the history of the company in 20 years, we've made two acquisitions both were.
The leverage neutral both were accretive.
The most recent one was the acquisition of the C. D M assets, which was highly complementary to the USA compression.
Similar type of mix of equipment, a different customer mix in different geographic coverage. There were some significant synergies by combining the two companies together.
So if those opportunities were to exist. We were you know we would take a look at those.
But you know the the kind of the routine things that are being circulated around the bread and butter things.
Knockdown of fairway.
Okay. Thanks for the kind of metrics on that thanks.
Thank you.
We will now take our next question is from Cheniere personally with UBS.
Hi, Good morning, Eric and Matt how are you.
All of these things I read it right.
Good day.
Maybe to start off.
Your prepared remarks of pretty extensive.
In the sort of talked about sort of the buildup of the optimism I just wanted to focus on the beginning part.
You sort of remain cautiously optimistic that the bottom is kind of behind us at this day.
Right now.
Is it fair to say debt your fourth quarter.
With respect to both utilization and margins wise is likely the cycle bottom for the cycle at this stage right now and the the temporary reduce the price contracts are set to expire soon and so forth and just wondering if you can sort of.
Set the stage for us as to where is the bottom and when we can look forward to the positive outlook that you you outlined it in the second half of your prepared remarks.
Yeah, Shneur I mean, if you think about my comments were the only indicated we're kind of historically in.
And today I had been a lagging indicator.
A couple of quarters from what we see with the activities of the E&P guys.
So you can see the crude prices have firmed significantly.
Had a couple of major pipelines built coming out of the Permian Basin, which has provided for gas markets that didn't exist.
Three or four quarters ago.
The negative basis, you had literally zero price natural gas out of the Permian.
Fast forward to today.
And today, you know clearly as of anomaly with the the polar vortex going on where you're seeing natural gas prices in the mid continent north of $300 on M. N V to you.
Youre seeing spot gas prices extremely high in spite of electric prices high you've got crude oil pushing 60 Bucks. So I think it's fair to say shneur that being a two quarter lag.
The fourth quarter of your observation probably the bottom.
Pricing has continued to firm up.
<unk> seen the additional takeaway capacity.
I think now with the.
Blizzard that we're seeing here.
I think it is highlighting.
The perils of attempting to electrify everything.
So, there's probably bodes well for activity pick up and all of our geographic regions.
Yeah.
This blizzard highlights some of the problems that you have and just how critical natural gases to the infrastructure here in the United States. So yeah I think.
The worst is behind us and with the idle fleet that we have been selectively.
Deploying rather than buying market share we've seen this movie before we've got some competitors with extremely high leverage who need every form of cash flow. They deploy the equipment just to get it out at all cost and then all of a sudden they don't have the balance sheet, where they have the ability to build new equipment.
And here's the USA setting with assets it can be readily redeploy so I think your observations are spot on.
So I was wondering if you can it's Matt.
Just to add on one thing to what Eric mentioned I know you'd mentioned the the gross margin. Obviously, you know the the numerical amount versus the percentage I'd just point out we did we have hung on to on a percentage based on sort of level. It's really consistent with what are the USA has operated for the.
The 20 plus years and so I think that you know, we obviously took actions early last year to kind of deal with what was going on in and I think as Eric mentioned things pick up our expectation that those margins, which are about in line with everything we've done in years past that should all flow through which is obviously positive.
The company.
Yes.
That makes sense guidance and and I really do appreciate didn't do understand the historical like nature not lost on me as well.
But I guess I was wondering if you can sort of square the circle for me here when I sort of look at your fourth quarter numbers coming in at just under 100 million in EBITDA on that I look at your guidance. It sort of suggests that you're going to either maintain the fourth quarter level for the entire 21, where theres another dip and then the recovery.
I'm just trying to understand the sensitivities around your guidance or is there an extreme amount of conservatism baked into this.
I'm just wondering if you could sort of help us understand that because if that's the bottom then you would expect that your guidance the high.
Here.
And then where you are shaking out.
Yeah, Shneur, it's Matt again, I would say without obviously, we don't provide quarter by quarter numbers, but.
I think as we got into you know Eric mentioned that the lag of some kind of get into the fourth quarter. Some stuff does obviously need to kind of work its way through and I think what you'll see is obviously there can be a difference between utilization out of.
At a moment in time, and then as those revenues kind of ramp up from there. So I think you know as we look at it I think we have typically taken a conservative look this is.
Based on kind of our budget for the year, obviously coming into the year you know we're a month in the half in so I think we purposely wanted to.
Admittedly, we don't know exactly when things.
The tick up in exactly kind of what that trajectory looks like so.
Thank you.
As utilization stabilizes and ticks up I think youre going on you will see the the revenues follow at that point.
Okay.
To clarify the this was presented to the board of month in the half ago basically versus where we sit today.
Yes.
We do cover November one.
Yep Yep, Yeah that would have been with our budget season, and I think we obviously a few things of past now, but I think generally speaking you know that.
There were still a bit of uncertainty and we didn't want to you know obviously, we don't want to go out with the with the extremely aggressive number because I think theres still still of lot of uncertainty that seems to pop up.
Every week these days.
Yeah, No I just wanted to understand the context wasn't a challenge per se.
And then maybe as a quick follow up question.
You know as as companies are pivoting on the ESG side looking to reduce methane emissions in the sales force.
Electric compression has been cited as an opportunity per cent for for some companies.
How do you respond to it instead of it does that present, an opportunity for USA compression.
To help some of your customers achieve those goals.
When you do reenter the market to buy equipment do you start looking at electric compression is something that that could present, an opportunity for you in that respect or is that.
It's something more for them.
Yes sure.
The really good question on good observation in the.
I'll say first I think you know where the focus of the new administration on our major oil and large independent company customers on environmental issues.
Clearly USA compression is exploring multiple technologies.
And the opportunity to reduce our carbon footprint. So I'd say right now we're.
Waiting to get a little more clarity on both the regulatory and legislative free.
Once in the upcoming months.
And we won't be able to in a position of share some of these potential advancements in the benefits the customers with you.
As it pertains, particularly to electric compression.
And I think again focusing on this polar vortex.
When you start of a very large electric motor there is a lot of what we call inrush current huge amount of of surge capacity.
So you can envision a scenario, where you've got a bunch of of electric compression running the grid goes down all of a sudden you have to turn these electric.
Motors back on there's this big Big Big Inrush of current demand early on.
So the electrification makes some sense.
I think that it's you know as you think about where compression assets deployed further and further upstream away from areas, where you have the reliable electric grid.
You know of combination of electric and the or a gas driven compression in some form of combination might make some sense. So we see that there are some opportunities involving electrification.
But again I think we need a little bit better clarity on both the regulatory and legislative fronts.
On to get some some better delineation and definition of what the economic footprint kind of look like what the regulatory environment is going to look like and then we've got some things up our sleeve that we'll be able to talk to you of bad in the future.
Perfect.
Thank you very much guidance really appreciate the color today on a very safe day.
So in Houston or things of the sport.
And at that time, there are no further telephone questions I would like to turn the conference back over to Mr. Long for any additional or closing.
Okay.
I think everybody is glad that we've now turned the page on 2020 as the world begin to get back to work during the second half of 2020.
We saw relative stability in our business stability driven by our focus on large horsepower and the resilient natural gas demand both in the U S from abroad.
The commodity rebound both of natural gas from crude oil happened more quickly the many expected and the outlook is positive for both.
Yet there is still work to be done and we're not out of the woods, yet, but we continue to be encouraged by the discussions we're having with our customers.
Our business remains the same is built on the solid foundation of natural gas demand, whose long term importance to this country of the world was proven out over the last 12 months, we believe the underlying stability of our large horsepower infrastructure focused contract compression services business model and the science behind the knee per compression and the interplay between price.
And volume will be a key point of positive differentiation for USA compression.
<unk> 2020 represented a year when we focused on what we could control cost capital spending and excellent customer service as the market has begun to rebound we are well positioned to benefit as that recovery takes place. Thanks.
Thanks for joining us and please be safe and we look forward to speaking with everyone on the next call.
Once again that does conclude today's conference. We thank you all from your participation you may now disconnect.
Yeah.
Yeah.
[noise].
Okay.
Yeah.
Mhm.
[music].
Yeah.
Yeah.
[music].