Q2 2021 USA Compression Partners LP Earnings Call
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Good morning, and welcome to the USA compression partners L. P second quarter 2021 earnings conference call during.
During today's call all parties will be in a listen only mode and following the call on the conference will be opened for questions.
To ask a question. Please press star 1 on your telephone keypad.
Thanks for speaking recorded today August 3rd 2021 I would now like to turn the conference over to Chris Porter, Vice President General Counsel and Secretary.
Good morning, everyone and thank you for joining US. This morning, we released our financial results for the quarter ended June 32021.
You can find our earnings release as well as recorded on this call in the Investor Relations section of our website at USA compression Dot com and a recording will be available through August 13.2021.
During this call I imagine, we'll discuss certain non-GAAP measures you will find definitions and reconciliations of these non-GAAP measures for the most comparable GAAP measures in the earnings release 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 review the statements of risk included in this mornings release and in our SEC filings.
Please note that information provided on this call speaks only to the matches views as of today August 3rd and 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.
Morning, We released our financial and operational results for the second quarter of 2020.1 for.
Afflicting continued stability in our infrastructure driven business with results that were largely consistent with the prior quarter and in line with what we expected.
I would categorize this quarter as 1 of foundation building with continuing overall improvement in our base business fundamentals.
Commodity prices for both oil and natural gas have dramatically improved over the past year.
Worldwide storage levels have declined dramatically setting the stage for supply demand equilibrium. The specter of short term pressure on demand due to the emerging COVID-19 Delta variant exist with.
With continued disciplined by OPEC, plus the ultimate reopening and strengthening of global economies continued reduction of oil and gas and storage worldwide.
And insufficient additions to new sources of supplies due to low levels of capital expenditures for drilling.
The stage is being set for expanding activities in the back half of 2021 and 2022.
We are seeing the tension beginning Yang.
Between managing to free cash flow and ESG drivers.
Coupled with potential emerging COVID-19 demand applications, and OPEC plus discipline, all of which are gaining better clarity on the coming quarters.
Before I get into the specifics of the quarter I want to highlight a special achievement by USA compression is operating team.
We recently achieved a significant milestone having worked over 3 million hours without a lost time injury, which represents a multiyear safe work working time frame or.
Our HSE vision zero incidents in all we do and I am proud of the working on safety culture that the men and women of USA compression embrace each and every day.
Turning to the second quarter results total revenues were $157 million essentially flat with Q1, we achieved adjusted EBITDA for the second quarter of approximately 100 million also flat to Q1's 100 million, which.
Which translated to an adjusted EBITDA margin of 63, 9% up from Q1.63, 2%.
Average utilization throughout the second quarter was 82, 4% down slightly from the Q1 level of 83, 1%.
This reduction was due in part to the sale of approximately 30000 horsepower to.
To a current customer under a long term capital lease contracts that came to term as well as from optimization of compression by our customers.
Total fleet horsepower was down during the quarter by approximately 34000 horsepower due primarily to the capital lease sales.
Consistent with the previous quarter, we do not have any new units on order for delivery for the remainder of 2021 or 2022 at this point.
We continued to exercise restraint on growth spending.
Q2 saw spending of $8.2 million.
Primarily for reconfiguration of idle equipment and minor equipment purchases and first time startup cost.
Maintenance capex of $5 million was consistent with expectations.
We are seeing firming demand signals from our customers with increased quote activity increased contracting activity, while pushing through some rate increases.
Lead times for new engines from Caterpillar and our horsepower ranges of interest have lengthened during the quarter, indicating that in certain horsepower ranges available equipment is beginning to disappear.
This is consistent with past downturns, where compression utilization has historically lagged for to 6 quarters behind improved drilling and completion activities.
We're focused on redeploying our idle horsepower, but unlike some of our smaller peers with less financial flexibility, we are being prudent in our commercial approach maintaining attractive contract economics for their customers and not just dumping equipment on the market.
With continued capital discipline throughout our sector limiting new build activity for a few of US who have newer vintage high quality fleets that customers prefer coming into the upcoming quarters, we will be uniquely positioned to meet increasing compression demand from our existing fleet with nominal capital required to deploy the horsepower.
Sure.
Average pricing across the fleet ticked down slightly during the second quarter with average monthly revenue of $16.55 per horsepower down slightly from $16.60 in the first quarter, but consistent with where we ended up in 2020.
The decline was due primarily to the mix of horsepower of the active fleet.
Based on the second quarter's results the board decided to keep the distribution consistent at 52, and a half cents per unit, which resulted in a distributable cash flow coverage ratio of 1.3 times consistent with the Q1 level.
Our bank Covenant leverage ratio was 495 times, a modest improvement from the previous quarter <unk>.
Consistent with prior quarters, our board of directors determines a quarterly distribution on a quarterly basis and the board can opt to maintain reduce or suspend the distribution as it deems most appropriate.
We've been able to maintain our distribution at the current level now for 34 quarters, returning nearly $1.2 billion to unit holders since our IPO back in 2013.
Accounting for the distribution payment scheduled for this coming Friday for.
Further when comparing USA compression to some of our industry peers. Our most recent 3 year CSR total shareholder return places us yet again in the top quartile of performance.
So turning to market commentary on how we have come to our positive outlook for coming quarters took.
To quote the Amort awards of Walter Gretzky is passed on to the world through some Wayne skate to where the puck is going not where it has been we.
We see the compression <unk>, so to speak going to positive places in the upcoming quarters, while improved commodity pricing in both crude oil and natural gas has allowed many of the industry to strengthen their financial positions during the first half of 2021 or.
Our customers and operators across the industry continued to exhibit a strong sense of financial discipline, particularly around capital spending.
Some of this is being driven by investor in capital market sentiments, our E&P customers tell us that they are managing to free cash flow metrics and then 2022 suggested 3 fundamental drivers are lining up for them to potentially increase drilling activity and bring new production on line.
First is continued levels of relatively strong commodity pricing with.
With attractive oil about $70 W. T I and natural gas about $4 for M. M Btu prices, while maintaining these levels into 2022 should stimulate activity.
While storage levels of oil and gas worldwide have been dramatically reduced over the past year. There is some potential short term pressure on demand due to the emerging COVID-19 Delta variant.
As global economies open back up and continue to strengthen we believe the stage is being set for continued strength in commodity prices.
Second is the roll off of past hedges of both oil and natural gas.
For many producers last year, Lockton sales, but oil prices rose about $40 a barrel following a catastrophic first half of 2020, including W. T I briefly trading below zero.
However, as crude has since jumped to $70 a barrel and natural gas for $4 an M. N V to use this year. These same producers are now facing some some substantial losses on hedges for the quarter, which negatively impacts free cash flow due to the required cash derivative payments.
Once these past hedges have rolled off substantial incremental cash flows will occur.
And third is maintaining and controlling LOE lease operating expense cost.
There are some natural tension between customers and suppliers and while there are current supply chain bottlenecks and inflationary pressure on steel fluids and supporting inventory. So far these have been manageable and are being absorbed by customers.
As I mentioned last quarter, there remains a fair amount of uncertainty around potential regulatory and legislative changes post. The recent election day may impact the broader energy industry. Our sense is that many ourselves included are waiting for some additional clarity before making substantial changes.
To how they've been operating in the past, we're committing to major additional capital expenditures we.
We do see a continued move especially by the major oil companies to embrace elements of the Paris accord and the growing focus on ESG issues.
Say compression is exclusively and proactively exploring the use of patented and proprietary technology developed by energy transfer.
It will drive as a potential cost effective offering to utilize both a natural gas engine and an electric motor on a single skid with a single compressor frame to quickly and reliably switch from natural gas to electricity as a fuel source, we hope to share more with you about this exciting.
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In the future.
It is hard to imagine a world without natural gas and the polar vortex in February made that very clear, especially for us down here in Texas. We all understand that you can't just shut down the natural gas grid overnight and economically switch to renewable sources of energy at.
At USA compression, we believe that we are part of the solution. Both in terms of providing critical compression services to allow gas to move around the country to where it is needed but also on developing creative and cost efficient ways to be part of the longer term ESG driven electrification of everything mandates coming.
To our industry and the broader economy.
As the country moves to cleaner more environmentally friendly sources of energy, we expect that in the future both natural gas and the potential use of USA compression dual drive compression assets will play a critical role in that transition.
We continue to believe in the long term outlook for natural gas for power generation industrial manufacturing, Patrick petrochemical feedstocks as well as a critical source of fuel in many parts of the world now more than ever folks are acknowledging that we can cost effectively rely exclusively on renewable forms of <unk>.
<unk> and simply shut down the natural gas grid overnight or.
Our compression assets today and in the future. We will continue to play a critical role in moving natural gas from areas of production to areas of consumption over the long term transition to a hydrocarbon lighter society.
So some macro considerations on the natural gas portion of the industry, we have witnessed relatively more stability and some recent strength.
And both prices and volumes with more certainty on the demand side.
This is not a new phenomenon natural gas has historically not experienced the level of volatility that crude oil assets.
For projections for domestic natural gas production has remained attractive. The most recent EIA short term energy outlook estimates U S dry gas production to rise 1.3% in 2021 to about 92, 6 Bcf per day, and then more than 2% in 2022 to $94.7 Bcf.
Per day.
These data points underscore the critical nature of natural gas the industrial manufacturing and export drivers that are in part driving these projected increases in volumes over time are not easily or economically replaced there is a reason that natural gas has grown over time into the powerhouse fuel that it is it is abundant economical.
<unk> easy to transport and store.
When you consider that these drivers will not go away anytime soon you'll get a better understanding of why we like our position and the future long term prospects for natural gas and demand for compression.
We are seeing varying levels of activity across the basins in which we operate looking at the prolific gas producing region to the northeast, which for US includes both the Marcellus and Utica basins operators continue to use compression to enhance their production and preserve capital, which otherwise would be deployed to drilling new wells were.
Seeing demand for well pad compression as well as upsizing compression to account for declining wall pressures when we looked at the oil driven Permian Delaware basins. They continue to lead the new drilling activity with over 50% of the active domestic rig count rig count at the end of the second quarter, having added over 60 rigs.
Since year end.
This growth in new drilling activity has been primarily driven by private and generally smaller operators.
We're hearing from the majors and large independents that 'twenty 'twenty, 2 will most likely see a pickup in their drilling activities.
For the remainder of 2021, they are continuing their associated natural gas production with ever increasing gas oil ratios G ours with large volume heading to the Gulf Coast region for LNG exports as well as exports to Mexico.
The infrastructure to move that gas is generally in place and so it is not a matter of pipeline our plant capacity we.
We anticipate continued M&A activities between operators.
Scale matters now more than ever.
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In South, Texas, the Eagle Ford shale and I've seen a lot of recent quote activity for additional compression horsepower.
Producers are getting back to pre COVID-19 production levels in part due to increased rig activity year to date in 2021 on the Eagle Ford.
Close proximity of the export facilities in the abundance of pipeline options for transportation should help generate some growth opportunities for compression during the remainder of the year.
The Haynesville is seeing heavy drilling activity as well as some well over performance as you May know these wells typically begin life with tremendous initial pressures.
And so we would expect over time for these <unk>.
Activity levels to translate into business opportunities for compression once pressures decline in the Rockies, we've seen an increase in DJ basin activity with electric compression, becoming a more frequent topic as well, which has numerous complexities and is not just a simple just go do it solution to.
ESG considerations there.
<unk> also expanded drilling activity in the Bakken shale, but that is not an area of focus for us outs.
Outside of the U S. Non OPEC oil production is expected to maintain to remain subdued.
Some analysts are also predicting a massive and accelerating oil inventory draw worldwide by the end of this year multiple times larger than historical averages.
This suggests that the OPEC plus discipline lack of drilling activity elsewhere, and increasing demand are all impacting available crude oil supplies.
Both air traffic and general economic activity have continued to improve across the globe, which is expected to drive demand for crude oil and products made from crude oil.
This is expected to continue and many believe that OPEC plus will continue to manage the global inventory levels appropriately to result in an increase in the price of crude oil across the board.
And for a sustained period of time.
While there is some potential short term pressure on demand due to the emerging COVID-19 Delta variant, we believe that will be transitory in nature.
As global economies open back up and continue to strengthen we believe the stage is being set for continued strength in commodity prices.
Regarding natural gas strength in the domestic natural gas markets has continued with natural gas futures currently near or slightly above $4 per M. Btu for the remainder of 2021.
As we worked our way through the COVID-19, OPEC plus hiccups.
Low natural gas demand not only did not decrease nearly as much as some expected but activity cuts have resulted in tight supply demand for natural gas today the.
The Prognosticators were way too pessimistic on this dynamic.
Remember 1 of the key principles I have often mentioned relates to the decline dynamics of shale oil production the.
The hyperbolic decline of production from shale wells results, an initial decline rates that are dramatically steeper than those of conventional wells.
All else being equal without the wells being drilled and brought online in order to offset this decline you would expect to see production decreases while the rig count is up the natural gas rig count isn't up nearly as much as the oil directed rig count.
In today's environment, you continue to witness financial or physical discipline on the part of E&P companies and that discipline has significantly changed the landscape and the outlook for the industry.
Capital has become much scarcer across the entire energy sector, but more so for the upstream participants than other subsectors capital budgets were paired back meaningfully coming into 2021 and operators have stuck to those budgets with a focus on free cash flow and strengthening balance sheets. This step change and investment.
It's difficult to turn around in a short period of time, which is why many predict an attractive macro environment for both crude oil and natural gas for the coming future.
As existing producing wells age decline profile decline profiles flatten and natural gas volumes exhibit a shallow and very stable profile without meaningful new production coming on line operators have in many cases chosen to use wells that are drilled but uncompleted do you seize to <unk>.
Additional production online to make up for volumes lost due to declines.
However, this can only last so long the data for June from the EIA indicates that overall do you see were reduced by 4% month over month per Mac.
Over the last 12 months the EIA reports that the numbers of do you see is down 30%.
This is an astonishing data point and reflects the desire by producers to work off what they have rather than drilling new wells. I think you were likely to see this pattern continue which should keep the supply demand balance manageable, but likely at higher prices than we've historically seen.
Additional compression is another way for operators to maybe maintain production and offset both pressure and volume declines and a low cost way.
As we have discussed on past calls compression is a critical part of the value chain as we witness wells age and pressures decline to move the same volume of gas requires an exponential increase in compression horsepower.
In order to maintain production will likely take more work I E horsepower to move the gas so even though gas volumes may be declining the compression required may actually increase as pressures also decline.
Given the current state of play in the industry, 1 characterized by reduced and more precise capital spending we continue to think our business model is 1 easily adaptable to the changes going on in the industry.
We already own a lot of new vintage equipment that will be used to help our customers keep their gas volume from moving just like in the past we can easily shift from periods of growth 2 periods of stability all while maintaining strong operating margins. So to summarize we continue to be in a phase of relative relative stability.
<unk> with clear indications of improving fundamentals in the energy industry.
We are being proactive to position USA compression and our fleet of assets for the potential use of dual drive technology for what we believe will be a long term focus on ESG driven considerations on the more general economic front. The rebound has begun but the full extent will depend in part on the impact from additional.
COVID-19 delta various measures and the resolution of some of the issues affecting economic recovery, such as supply chain delays and temporary inflationary pressures.
Over the past several quarters.
Our business has stabilized and we see improving fundamentals developing over the next few quarters.
We once again achieved attractive operating margins consistent with our past performance.
We have managed our capital spending appropriately and are positioned well for what we see as an accelerating recovery.
We continue to believe that large horsepower multi unit centralized compressor stations is the right strategy and that our services will be in demand as things pick up on the back half of this year and into 2022.
This will further bolster USA compression has long history of stability through multiple economic cycles.
Natural gas demand has proven to be resilient and some indications are for some meaningful growth in the intermediate term, we expect that demand to require continued natural gas compression services.
Now I'll turn the call over to Matt to walk through some of the financial highlights for the quarter Matt.
Thanks, Eric and good morning, everyone today, USA compression reported second quarter results, including quarterly revenue of $157 million adjusted EBITDA of $100 million and DCF to limited partners of $53 million, all of which were consistent from last quarter.
In July 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 consistent coverage of 1.03 times to avoid any confusion that distribution level has been consistent for 25 straight quarters now for 34.
For us in Eric's comments earlier that related to our total quarters of distribution since our IPO.
Our total fleet horsepower at approximately $3.7 million horsepower at the end of the quarter was down slightly as Eric mentioned due primarily to the sale of certain compression units to our customer.
Our revenue generating horsepower at period end was also down slightly due in part to the same reason.
Our average horsepower utilization for the second quarter was 82, 4% slightly down from the first quarter.
Pricing as measured by average revenue per revenue generating horsepower per month was $16.55 for second quarter, which was also a slight decrease from the previous quarter's level of $16.60.
Of the total revenue for the second quarter of $157 million approximately $155 million reflected our core contract operations revenues, while parts and service revenue contributed roughly $2 million.
Adjusted gross margin as a percentage of revenue was 79% in the second quarter slightly above the Q1 number and consistent with USA compression historical levels net income for the quarter was $3 million and operating income was $35 million net.
Net cash provided by operating activities was $99 million in the quarter.
Maintenance capital totaled $5 million for the quarter and lastly, cash interest expense net was $30 million at this point, we are not making any revisions to our previously communicated guidance for 2021 and.
And last we expect to file our form 10-Q with the SEC as early as this afternoon and with that we'll open the call to questions.
Thank you as a reminder, if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad, if youre using a speaker phone. Please make sure. Your mute function is turned off July youre sitting on to reach our equipment again that is star 1 to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal.
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Yeah.
Yeah.
Our first question comes from Shneur <unk>.
Chris <unk> with UBS.
Hey, good morning, guys.
Maybe to start off.
Sort of set at the end of your guidance is unchanged.
I was wondering if you guys can sort of square a couple of things for me here.
You know it sort of seems like the midpoint of your guidance was basically based on kind of the annualized what you did in <unk> has been better.
Pretty much the same and you kind of annualize on towards the top end your for your guidance and then when they sort of listen to you.
The discussion in your prepared remarks.
You certainly signaled a more optimistic tone as well too.
Is there a seasonal issue in <unk> or <unk> that we should be aware of that sort of brings you.
Squarely into your guidance range is there a sense of conservatism.
Especially when you talk about how equipments disappearing.
Back in your maintaining even better contracts and being disciplined I'm, just trying to sort of square debt that whole conversation there with respect to your outlook and guidance.
Hey, Shneur, it's Matt I think it's probably more the latter than the former in terms of the conservative in this.
I think as Eric mentioned, we're starting to see a lot of a lot of positive signs in kind of the market seems like it's setting up for that for a good back half, which I think is consistent with what other folks in the space more broadly are pointing to as well but.
I think at this point in time, we felt the prudent thing to do is keep it where it was it didn't we didn't decrease that we didnt increase do we just kind of kept it where it was and as things play out.
Over the course of the rest of the summer and the fall.
We should be in a position to update that if if appropriate.
Okay that makes perfect sense on me.
Debt to pivot a little bit.
Eric can you in your remarks from sort of talked about the dual fuel compressors and I'm trying to separate water.
Energy transfers talked about them as well too in terms of its patented technologies.
And then I think it was last week Trans Canada, sorry, TC energy I guess is what they're called now talked about day, we're adding it to their system.
Can you sort of talk about the opportunity set that you see.
Is this an advantaged compression unit that you have are you potentially selling them to or leasing them out to Tc energy and others are starting to talk about this.
Whats the good discussion with which potentially customers.
And how does this all work with your relationship with energy transfer on how that could be deployed.
Yeah sure you've got multiple questions there.
I think there's that age for.
For competitive reasons.
We're not going to get into any specifics on today's call.
It's clear that energy transfer and USA compression both.
Believe that dual drive technology offers a competitive advantage both for midstream players as well as USA compression vis vis our peers.
I think simplistically the dual drive concept offers some redundancy that a straight electric compressor would not.
<unk> electric compression Ah is viewed as good as I mentioned, where the puck may be going but you've got substantial grid limitations, you got lack of infrastructure.
We saw in Texas during the polar vortex, what happened when electricity gets shut off the major processing facilities.
No electricity no electric compression would be able to drive.
Would be able to work so.
I think there are some unique aspects of dual drive in our preliminary discussions that we're having with different targeted.
Targeted customers are.
They also see the benefits are in the form of.
Reduce C O 2 emissions substantial improvement in redundancy theres a lot of efficiencies that can be brought to the table. So theres a lot of features and benefits of this has so I think we just wanted to mention too on the investor call. Today that this is something that is.
Right down the fairway for us we're not planning as I mentioned, they add any new equipment in the back half of 2021, and we've made no commitments for new equipment into 2022.
On the dual drive will become a greater and greater focus as we move.
Into 2022 and beyond with our core fleet and it's something that we can retrofit cost effectively and economically and something that we think provides us with significant.
Opportunity sets as well as significant.
Alternatives to any offerings that are that our competitors may be able to bring to the table.
Yes.
The color I, just to clarify just to respond for little bit there.
And you said, there's no plans to order new equipment now or into next year. At this stage does that mean your existing assets can be upgraded to the dual fuel or.
Once you make a decision then you'll be making some acquisitions.
Placing some orders.
Our view Shneur is that we can cost effectively retrofit our equipment and accordingly, there is no need for us to go out and add as an example, either new conventional compression type of equipment.
Or to add just standalone electric equipment.
Brand New electric equipment doesn't give you the dual fuel capacity, where you can run on electricity or can run on natural gas. So we believe that.
The cost effect of retrofit or of our of our existing fleet. Indeed is the way to go.
Perfect I appreciate the color today, thank you very much.
Thanks Shneur.
Our next question comes from Vinay <unk> with J P. Morgan.
Hi, Good morning, guys I just wanted to look on.
Wanted some clarification on the EBIT look out so.
That's up on.
Doing better than what was budgeted and it is here.
When you think about it it looks like you're getting more benefit from the board.
Let's say Sunday Utilizations I, just wanted to understand your thoughts how big that end activities funding what does what you buy.
Good day, ladies here.
And then.
And that is sending through channel.
Channel global how that could translate to utilization Nick already over the next few quarters.
They need to.
If you have any this is Eric and I think a fair way to say it.
You noticed that we've had margin improvement, while we've had a little bit of degradation in utilization predominantly driven by that capital lease which was we knew that was going to occur for a long period of time.
Our approach and we've done this in the past when we've seen downturns in the cycle as I mentioned earlier, we see a 4% to 6 quarter lag between new activity and then when demand for compression starts to tick up so since we have opted not to add any new equipment to the fleet, we will be focusing on.
Rising our existing idle assets to redeploy.
Rather than redeploy those assets when pricing is soft or contract tenders are somewhat shortened.
We have chosen to maintain and improve our operating margins our gross margins.
Rather than.
I think our quote was in her prepared remarks to dump equipment on the marketplace. So.
As we see demand continue to tick up we see.
No new equipment being built or limited new equipment being built.
We see competitors.
Dumping equipment into the marketplace just to grab any kind of incremental revenues.
Our sense is that some other balance sheets are strained and some bank covenants that they may be dealing with so we've got to create revenue with any and all.
He at all cost so we're maintaining some discipline out there associated with it. So our view is that in the upcoming quarters, we will be 1 of the.
The last man standing so to speak have high quality larger horsepower assets that we can readily redeploy and lock in longer term contracts at premium pricing.
Okay that makes sense I guess.
That also talks about deal on very comfortably the way you are in terms of limit each analyst for bank covenants.
But you're also talking about distribution within the debt whatever quarter.
Maybe if you can share any thoughts on what do you think about leverage from here on the long term on what factors could be on your distribution.
Outlook.
I think that is doing well on you.
Operating leverage will pick up later this year. So just wanted to understand that.
Yes, it's Matt Yeah in terms of leverage I think you probably noted.
Basically from the first quarter.
Where we are we're still under kind of 5 times and sort of well within our covenant levels on the bank deal. So.
Overall, I would say, it's not too much of a concern.
As Eric mentioned as things pick up you know if this is the.
The kind of the trough of things as you know, we do have a lot of operating leverage and so as things pick up.
We should be able to generate cash flow that falls to the bottom line and then impacts on a positive way that leverage so.
The board looks at it like we mentioned on a quarterly basis in <unk>.
Obviously, we've had.
Strong quarterly results this year, so far with sort of an improving positive outlook and so.
Again, they look at that every quarter. So we will revisit it with the board next quarter, but it would certainly seem like we're kind of through the AD are through the trough in.
Positive that things are looking up for the rest of the year and into next year.
Got it that's it for me guys. Thanks, a lot.
Okay. Thanks for that.
And that does conclude today's question and answer session I'd like to turn the conference back to Eric long for any additional or closing remarks.
We were pleased with our results during Q2 and believe that the balance of 2021 and on into 2022 will show continued improvement in our overall business. We continue to experience the stability in our business that we have become accustomed of our USA compression history.
Stability driven by our focus on large horsepower and the resilient global demand for natural gas natural gas prices have moved to recent record highs and the outlook for production is positive, which bodes well for the demand for compression and for our business for <unk>.
On the minerals of our business remains the same driven by the demand for natural gas, which we see increasing in the U S from throughout the World, We have a great asset base from which to be involved in the longer term transition to cleaner energy.
Natural gas will clearly play an important part.
We believe that the underlying stability of our large horsepower infrastructure focused contract compression services business model, coupled with the science behind the need for compression driven by the interplay between pressures on volumes will be a key point of positive differentiation for USA compression.
We continue to be well positioned to benefit as the domestic and global recovery takes place.
Thanks for joining us on please be safe and we look forward to speaking with everyone on our next call.
Okay.
That does conclude today's conference. We thank you for your participation you may now disconnect.
[music].
Yes.
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