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Delaware | 1389 | 94-3450907 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
David P. Oelman Jeffery K. Malonson Vinson & Elkins L.L.P. 1001 Fannin Street, Suite 2500 Houston, Texas 77002 (713) 758-2222 | Bass C. Wallace, Jr. TETRA Technologies, Inc. 24955 Interstate 45 North The Woodlands, Texas 77380 (281) 367-1983 | Laura Lanza Tyson Baker Botts L.L.P. 98 San Jacinto Boulevard, Suite 1500 Austin, Texas 78701 (512) 322-2500 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company o |
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The information in this preliminary prospectus is not complete and may not be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
• | We may not have sufficient cash from operations following the establishment of cash reserves and payment of debt service and other contractual obligations, fees and expenses, including cost reimbursements to our general partner, to enable us to make cash distributions to holders of our common units at the minimum quarterly distribution rate under our cash distribution policy. |
• | On a pro forma basis we would not have had sufficient cash available for distribution to pay the full minimum quarterly distribution on all units for the twelve months ended March 31, 2011. | |
• | We may be unable to achieve our expected growth and market penetration. | |
• | Our ability to manage and grow our business effectively and provide adequate production enhancement services to our customers may be adversely affected if our general partner loses its management or is unable to retain trained personnel. | |
• | Our general partner and its affiliates own a controlling interest in us and will have conflicts of interest with us. Our partnership agreement limits the fiduciary duties that our general partner owes to us, which may permit it to favor the interests of TETRA to our unitholders’ detriment and limits the circumstances under which our unitholders may make a claim relating to conflicts of interest, as well as the remedies available to our unitholders in that event. | |
• | Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors. | |
• | Our unitholders will experience immediate and substantial dilution of $12.21 in tangible net book value per common unit. | |
• | Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes, as well as our not being subject to a material amount of additional entity-level taxation by individual states ornon-U.S. jurisdictions. If the Internal Revenue Service treats us as a corporation or we become subject to a material amount of entity-level taxation by individual states or bynon-U.S. jurisdictions, it would substantially reduce the amount of cash available for distribution to our unitholders. | |
• | Unitholders may be required to pay taxes on income from us even if they do not receive any cash distributions from us. |
Per | ||||||||
Common Unit | Total | |||||||
Initial public offering price | $ | $ | ||||||
Underwriting discount(1) | $ | $ | ||||||
Proceeds to Compressco Partners, L.P. (before expenses) | $ | $ |
(1) | Excludes aggregate fees of $ million payable to Raymond James and J.P. Morgan in consideration of advice rendered by them regarding the structure of this offering and our partnership. |
RAYMOND JAMES | J.P. MORGAN |
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Trailing Twelve-Month | ||||||||
Average Henry Hub | ||||||||
Time Period | Predecessor Revenues | Gas Price | ||||||
(in millions) | ($/MMBtu) | |||||||
First Quarter 2008 | $ | 23.83 | $ | 7.30 | ||||
Second Quarter 2008 | $ | 24.37 | $ | 8.24 | ||||
Third Quarter 2008 | $ | 25.43 | $ | 8.98 | ||||
Fourth Quarter 2008 | $ | 26.32 | $ | 8.85 | ||||
First Quarter 2009 | $ | 26.33 | $ | 7.86 | ||||
Second Quarter 2009 | $ | 22.12 | $ | 5.96 | ||||
Third Quarter 2009 | $ | 21.65 | $ | 4.47 | ||||
Fourth Quarter 2009 | $ | 20.48 | $ | 3.93 | ||||
First Quarter 2010 | $ | 20.33 | $ | 4.07 | ||||
Second Quarter 2010 | $ | 20.05 | $ | 4.22 | ||||
Third Quarter 2010 | $ | 20.11 | $ | 4.50 | ||||
Fourth Quarter 2010 | $ | 20.92 | $ | 4.37 | ||||
First Quarter 2011 | $ | 21.88 | $ | 4.15 |
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• | Most of the wells that would benefit from our production enhancement services do not currently utilize those services; | |
• | Aging natural gas and oil wells will require more of our production enhancement services; |
• | Natural gas production from unconventional sources, including tight sands, shales and coalbeds, is expected to continue to increase, according to the AEO 2011, and, over time, production from these unconventional sources could benefit substantially from our production enhancement services due to the relatively fast production decline rates of wells drilled to these formations; and |
• | Natural gas and oil producers continue to outsource their requirements for the production enhancement services we provide. |
• | Increase service coverage within our current domestic and international markets; | |
• | Pursue additional domestic and international growth opportunities; | |
• | Improve our service offerings; | |
• | Promote our additional service applications, including vapor recovery, well monitoring, automated sand separation and production enhancement services for use on pumping oil wells; | |
• | Leverage our relationships with TETRA and its customers; and | |
• | Take advantage of selective acquisition opportunities. |
• | Our ability to increase the value of natural gas wells; | |
• | Our superior customer service and highly trained field personnel; | |
• | Our proactive, engineered approach to marketing and service; | |
• | Our GasJack® units and VJacktm units; | |
• | Our broad geographic presence in domestic markets and growing international presence; | |
• | Our experienced management team with proven ability to deliver strong, long-term, organic growth; and | |
• | Our record of maintaining established customer relationships. |
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• | TETRA will cause Compressco, TETRA International and their controlled affiliates to contribute to us a portion of our predecessor’s business, operations and related assets and liabilities, as previously described in “Summary — Our Relationship with TETRA and Compressco”; |
• | we will issue to affiliates of TETRA, including our general partner, 6,597,257 common units representing an aggregate 42.1% limited partner interest in us1, and 6,273,970 subordinated units representing an aggregate 40.0% limited partner interest in us; | |
• | we will issue to our general partner a 2.0% general partner interest in us; |
• | we will issue to our general partner the incentive distribution rights, which entitle the holder to increasing percentages, up to a maximum of 48.0%, of the cash we distribute to our unitholders in excess of $0.445625 per unit per quarter, as described under “Provisions of Our Partnership Agreement Relating to Cash Distributions — General Partner Interest and Incentive Distribution Rights”; |
• | we will enter into an omnibus agreement with TETRA and our general partner, as previously described in “Summary — Our Relationship with TETRA and Compressco”; |
• | we will issue 2,500,000 common units to the public in this offering, representing an aggregate 15.9% limited partner interest in us; | |
• | simultaneously with the completion of this offering, we will issue restricted units to certain directors, executive officers and other employees of our general partner, Compressco and TETRA; |
• | we will assume approximately $28.9 million of intercompany indebtedness owed by our predecessor to TETRA (as partial consideration for the assets we acquire from TETRA in connection with this |
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offering), which will be repaid in full from the net proceeds received from this offering, and the balance of the intercompany indebtedness will be repaid by our predecessor prior to this offering; |
• | we will enter into a new $20.0 million revolving credit facility (which will be undrawn at closing of this offering) and use approximately $375,000 of the net proceeds received from this offering to pay financing fees and transaction costs in connection therewith; and |
• | the balance of the net proceeds received from this offering will be used as described in “Use of Proceeds.” |
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Publicly held common units | 2,500,000 | 15.9 | % | |||||
Common units held by affiliates of TETRA | 6,597,257 | 42.1 | % | |||||
Subordinated units held by affiliates of TETRA | 6,273,970 | 40.0 | % | |||||
General partner interest held by Compressco Partners GP | — | 2.0 | % | |||||
Total | 15,371,227 | 100.0 | % | |||||
(1) | Assuming no exercise of the underwriters’ overallotment option. |
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Common units offered to the public | 2,500,000 common units, representing a 15.9% limited partner interest in us, or 2,875,000 common units, if the underwriters exercise in full their option to purchase additional common units, representing a 18.3% limited partner interest in us. | |
Common units and subordinated units outstanding after this offering | 9,097,257 common units, representing a 58.0% limited partner interest in us, and 6,273,970 subordinated units, representing a 40.0% limited partner interest in us. If the underwriters do not exercise their option to purchase additional common units, we will issue to our general partner 375,000 common units at the expiration of the30-day option period. If, and to the extent, the underwriters exercise their option to purchase additional common units, the number of units purchased by the underwriters pursuant to such exercise will be issued to the public, and the remainder of any of the 375,000 common units not purchased by the underwriters pursuant to the option will be issued to our general partner. Accordingly, the exercise of the underwriters’ option will not affect the total number of units outstanding after the option period. | |
General partner interest outstanding after this offering | Our general partner will own a 2.0% general partner interest in us. | |
Use of proceeds | We expect to receive net proceeds from this offering of approximately $39.2 million, after deducting the underwriting discount, structuring fees and offering expenses. | |
We will use approximately $28.9 million of the net proceeds received from this offering to retire intercompany indebtedness owed by our predecessor to TETRA, which we will assume as partial consideration for the assets we acquire from TETRA in connection with this offering. We will also use approximately $375,000 of the net proceeds to pay financing fees and transaction costs in connection with the closing of the revolving credit facility. The balance of the net proceeds (approximately $9.9 million) will be available for general partnership purposes, which include funding the manufacturing of compressor units and the acquisition of field trucks and other equipment, as needed, and otherwise investing in short-term interest bearing securities. The following table summarizes our intended use of proceeds: |
Compressco | ||||
Partners, L.P. | ||||
(in thousands) | ||||
Gross proceeds from this offering (2,500,000 common units at $20.00 per unit) | $ | 50,000 | ||
Less: Underwriting discount, structuring fees and offering expenses | (10,769 | ) | ||
Net proceeds from this offering | $ | 39,231 | ||
Less: Repayment on intercompany indebtedness to TETRA | (28,931 | ) | ||
Less: Payment of financing fees and transaction costs incurred in connection with closing the revolving credit facility | (375 | ) | ||
Balance of net proceeds from this offering available for general partnership purposes | $ | 9,925 | ||
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Net proceeds to us will not change if the underwriters exercise their option to purchase additional common units because the net proceeds from any exercise of the underwriters’ option to purchase additional common units (approximately $7.5 million based on an assumed initial offering price of $20.00 per common unit, if exercised in full) will be used to make a distribution to our general partner. |
An affiliate of one of the underwriters is the lender under our revolving credit facility and, in that respect, will receive a portion of the proceeds from this offering through the payment of fees to establish our revolving credit facility. Please read “Underwriting.” |
Please read “Underwriting” and “Use of Proceeds.” |
Cash distributions | We will pay the minimum quarterly distribution of $0.3875 per common unit ($1.55 per common unit on an annualized basis) to the extent we have sufficient cash from operations after establishment of cash reserves and payment of debt service and other contractual obligations, fees and expenses, including payments to our general partner and its affiliates. We will adjust the minimum quarterly distribution for the period from the completion of this offering through June 30, 2011, based on the actual number of days that the units were outstanding during the quarterly period. Our ability to pay our minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption “Our Cash Distribution Policy and Restrictions on Distributions.” |
Our partnership agreement requires us to distribute all of our cash on hand at the end of each quarter, less reserves established by our general partner. We refer to this cash as “available cash,” and we define its meaning in our partnership agreement attached as Appendix A. | ||
Our partnership agreement requires us to distribute all of our available cash each quarter in the following manner: |
• first, 98.0% to the holders of common units and 2.0% to our general partner, until each common unit has received the minimum quarterly distribution of $0.3875 plus any arrearages from prior quarters; |
• second, 98.0% to the holders of subordinated units and 2.0% to our general partner, until each subordinated unit has received the minimum quarterly distribution of $0.3875; and |
• third, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unit has received a distribution of $0.445625. |
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If cash distributions to our unitholders exceed $0.445625 per unit in any quarter, our unitholders and our general partner will receive distributions according to the following percentage allocations: |
Marginal Percentage | ||||||||||||||||
Interest in Distributions | ||||||||||||||||
Total Quarterly Distribution Target | General | |||||||||||||||
Amount per Unit | Unitholders | Partner | ||||||||||||||
above $0.445625 up to $0.484375 | 85.0 | % | 15.0 | % | ||||||||||||
above $0.484375 up to $0.581250 | 75.0 | % | 25.0 | % | ||||||||||||
above $0.581250 | 50.0 | % | 50.0 | % |
The percentage interests shown for our general partner include its 2.0% general partner interest. We refer to the additional increasing distributions to our general partner as “incentive distributions.” | ||
Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — Distributions of Available Cash — General Partner Interest and Incentive Distribution Rights.” |
We must generate approximately $24.3 million (or approximately $6.1 million per quarter) of available cash to pay the aggregate quarterly distribution for four quarters on all of our common units and subordinated units that will be outstanding immediately after this offering and the corresponding distribution on the general partner interest. If we had completed the transaction contemplated in this prospectus on January 1, 2010 and April 1, 2010, our pro forma cash available for distribution for the twelve months ended December 31, 2010 and March 31, 2011 would have been approximately $24.7 million and $23.9 million, respectively. This amount would not have been sufficient to pay the aggregate minimum quarterly distribution on our common units and subordinated units and the corresponding distribution on the general partner interest for the twelve months ended March 31, 2011. The shortfall in available cash for distributions for the twelve months ended March 31, 2011 would have resulted in distributions representing approximately 100.0% of the aggregate minimum quarterly distribution on our common units, but only 95.7% of the aggregate minimum quarterly distribution on our subordinated units. For a calculation of our ability to make distributions to our unitholders based on our pro forma results for the twelve months ended December 31, 2010 and March 31, 2011, please read “Our Cash Distribution Policy and Restrictions on Distributions — Pro Forma Cash Available for Distribution for the Twelve Months Ended December 31, 2010 and March 31, 2011.” |
We believe that, based on the estimates contained in our financial forecast and related assumptions listed under the caption “Our Cash Distribution Policy and Restrictions on Distributions — Estimated Cash Available for Distribution for the Twelve Months Ending June 30, 2012,” we will have sufficient cash available to pay the aggregate minimum quarterly distribution on our common units and subordinated units and the corresponding distribution on the general partner interest for each quarter in the twelve months ending June 30, 2012. Please read “Cash Distribution Policy and Restrictions on Distributions — Estimated Cash Available for Distribution for the Twelve Months Ending June 30, 2012.” |
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Subordinated units | Affiliates of TETRA will initially own all of our subordinated units. The principal difference between our common and subordinated units is that in any quarter during the subordination period, the subordinated units will not be entitled to receive any distribution until the common units have received the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages. | |
Conversion of subordinated units | The subordination period will end on the first business day after we have earned and paid at least (1) $1.55 (the minimum quarterly distribution on an annualized basis) on each outstanding common and subordinated unit and the corresponding distribution on the general partner interest for each of three consecutive, non-overlapping four quarter periods ending on or after June 30, 2014 or (2) $2.325 (150.0% of the annualized minimum quarterly distribution) on each outstanding common and subordinated unit and the corresponding distributions on the general partner interest and the incentive distribution rights for the four-quarter period immediately preceding that date. | |
The subordination period also will end upon the removal of our general partner other than for cause if no subordinated units or common units held by the holders of subordinated units or their affiliates are voted in favor of that removal. | ||
When the subordination period ends, all subordinated units will convert into common units on aone-for-one basis, and, thereafter, all common units will no longer be entitled to arrearages. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — Subordination Period.” | ||
General partner’s right to reset the target distribution levels | Our general partner, as the initial holder of our incentive distribution rights, has the right, at any time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0%, in addition to distributions paid on the general partner interest) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our cash distributions at the time of the exercise of the reset election. If our general partner transfers all or a portion of our incentive distribution rights in the future, then the holder or holders of a majority of our incentive distribution rights will be entitled to exercise this right. Assuming that our general partner holds all of the incentive distribution rights at the time that a reset election is made, following a reset election, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution, and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution. | |
If our general partner elects to reset the target distribution levels, it will be entitled to receive common units and to retain its then-current general partner interest. The number of common units to be |
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issued to our general partner will equal the number of common units that would have entitled the holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to our general partner on the incentive distribution rights in the prior two quarters. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — General Partner’s Right to Reset Incentive Distribution Levels.” | ||
Issuance of additional partnership units | We can issue an unlimited number of partnership units in the future, including units that are senior in right of distributions, liquidation and voting to the common units, without the approval of our unitholders. Please read “Units Eligible for Future Sale” and “The Partnership Agreement — Issuance of Additional Securities.” | |
Limited voting rights | Our general partner will manage and operate us. Unlike the holders of common stock in a corporation, our unitholders will have only limited voting rights on matters affecting our business. Unitholders will have no right to elect our general partner or its directors. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding common and subordinated units, including any units owned by our general partner and its affiliates, voting together as a single class. Upon consummation of this offering, our general partner and its affiliates will own an aggregate of 83.7% of our common and subordinated units (assuming the underwriters do not exercise their option to purchase additional common units). This will give our general partner the ability to prevent its involuntary removal. Please read “The Partnership Agreement — Voting Rights.” | |
Limited call right | If at any time our general partner and its affiliates own more than 90% of the outstanding common units, our general partner will have the right, but not the obligation, to purchase all of the remaining common units at a price not less than the then-current market price of the common units. | |
Estimated ratio of taxable income to distributions | We estimate that a purchaser of common units in this offering who owns these common units from the date of closing of this offering through the record date for distributions for the period ending on December 31, 2013, will be allocated, on a cumulative basis, an amount of U.S. federal taxable income for that period that will be less than 20% of the cash distributed with respect to that period. For example, if our unitholders receive an annual distribution of $1.55 per unit, we estimate that our unitholders’ average allocable U.S. federal taxable income per year will be no more than $0.31 per unit. Please read “Material Tax Consequences — Tax Consequences of Unit Ownership — Ratio of Taxable Income to Distributions.” | |
Material tax consequences | For a discussion of other material federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read “Material Tax Consequences.” |
Exchange listing | We have been approved to list our common units on the NASDAQ Stock Market LLC under the symbol “GSJK.” |
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• | the contribution to us of a portion of our predecessor’s business, as further described in “Summary — Our Relationship with TETRA and Compressco;” | |
• | our issuance of common units to the public and affiliates of TETRA, subordinated units to affiliates of TETRA, a 2.0% general partner interest and incentive distribution rights to Compressco Partners GP and restricted units to certain directors, executive officers and other employees of our general partner, TETRA and ours, as further described in “Summary — Formation Transactions and Partnership Structure;” and | |
• | our use of the proceeds received from the offering, as further described in “Use of Proceeds.” |
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Compressco Partners | ||||||||||||||||||||||||||||||||||||||
Pro Forma | Pro Forma | |||||||||||||||||||||||||||||||||||||
Compressco Partners Predecessor | Year Ended | Three Months | ||||||||||||||||||||||||||||||||||||
Year Ended December 31, | Three Months Ended March 31, | December 31, | Ended March 31, | |||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | 2010 | 2011 | ||||||||||||||||||||||||||||||
(dollars in | (dollars in thousands) | (dollars in thousands, | ||||||||||||||||||||||||||||||||||||
thousands) | except per unit amount) | |||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||
Revenue | $ | 67,133 | $ | 85,985 | $ | 99,944 | $ | 90,573 | $ | 81,412 | $ | 20,334 | $ | 21,884 | $ | 80,932 | $ | 21,766 | ||||||||||||||||||||
Cost of revenue | 30,265 | 38,179 | 44,189 | 40,959 | 37,977 | 9,153 | 12,086 | 37,759 | 12,036 | |||||||||||||||||||||||||||||
Selling, general and administrative expenses | 10,612 | 12,964 | 14,352 | 13,193 | 14,328 | 3,328 | 3,299 | 14,295 | 3,286 | |||||||||||||||||||||||||||||
Depreciation and amortization expense | 6,436 | 9,433 | 12,112 | 13,823 | 13,112 | 3,336 | 3,179 | 13,070 | 3,163 | |||||||||||||||||||||||||||||
Interest expense | 9,250 | 10,083 | 10,990 | 11,980 | 13,096 | 3,299 | 2,723 | 38 | 2 | |||||||||||||||||||||||||||||
Other (income) expense, net | 59 | (31 | ) | 174 | (82 | ) | 113 | (14 | ) | 89 | 113 | 89 | ||||||||||||||||||||||||||
Income before income tax provision | 10,511 | 15,357 | 18,127 | 10,700 | 2,786 | 1,232 | 508 | 15,657 | 3,190 | |||||||||||||||||||||||||||||
Provision for income taxes | 4,100 | 5,803 | 6,846 | 4,161 | 1,169 | 513 | 218 | 1,705 | 456 | |||||||||||||||||||||||||||||
Net income | $ | 6,411 | $ | 9,554 | $ | 11,281 | $ | 6,539 | $ | 1,617 | $ | 719 | $ | 290 | $ | 13,952 | $ | 2,734 | ||||||||||||||||||||
General partner interest in net income | $ | 279 | $ | 55 | ||||||||||||||||||||||||||||||||||
Common unitholders’ interest in net income | $ | 8,092 | $ | 2,125 | ||||||||||||||||||||||||||||||||||
Subordinated unitholders’ interest in net income | $ | 5,581 | $ | 554 | ||||||||||||||||||||||||||||||||||
Net income per common unit (basic and diluted) | $ | 0.89 | $ | 0.23 | ||||||||||||||||||||||||||||||||||
Balance Sheet Data (at Period End): | ||||||||||||||||||||||||||||||||||||||
Working capital(1) | $ | 19,761 | $ | 27,565 | $ | 31,308 | $ | 32,983 | $ | 28,943 | $ | 26,965 | $ | 27,539 | $ | 39,724 | ||||||||||||||||||||||
Total assets | $ | 163,981 | $ | 186,675 | $ | 212,167 | $ | 202,497 | $ | 196,566 | $ | 196,479 | $ | 193,642 | $ | 202,948 | ||||||||||||||||||||||
Total debt including current portion | $ | 112,032 | $ | 122,115 | $ | 133,105 | $ | 145,085 | $ | 145,085 | $ | 145,085 | $ | 145,100 | $ | — | ||||||||||||||||||||||
Partners’ capital/net parent equity | $ | 40,048 | $ | 48,713 | $ | 56,792 | $ | 33,900 | $ | 25,953 | $ | 25,172 | $ | 22,700 | $ | 194,900 | ||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||||||||||||
EBITDA(2) | $ | 26,197 | $ | 34,873 | $ | 41,229 | $ | 36,503 | $ | 28,944 | $ | 7,867 | $ | 6,410 | $ | 28,765 | $ | 6,355 | ||||||||||||||||||||
Capital expenditures(3) | $ | 25,917 | $ | 23,929 | $ | 33,036 | $ | 2,997 | $ | 8,715 | $ | 745 | $ | 928 | ||||||||||||||||||||||||
Cash flows provided by (used in): | ||||||||||||||||||||||||||||||||||||||
Operating activities | $ | 12,251 | $ | 15,737 | $ | 25,569 | $ | 23,936 | $ | 20,391 | $ | 6,399 | $ | 4,182 | ||||||||||||||||||||||||
Investing activities | $ | (25,862 | ) | $ | (23,930 | ) | $ | (32,997 | ) | $ | (2,882 | ) | $ | (8,613 | ) | $ | (650 | ) | $ | (919 | ) | |||||||||||||||||
Financing activities | $ | 14,378 | $ | 7,991 | $ | 7,607 | $ | (17,854 | ) | $ | (9,735 | ) | $ | (9,558 | ) | $ | (3,894 | ) | ||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||||||||||||
Total compressor units in fleet (at period end) | 2,595 | 3,108 | 3,603 | 3,627 | 3,647 | 3,637 | 3,655 | |||||||||||||||||||||||||||||||
Total compressor units in service (at period end) | 2,297 | 2,763 | 3,064 | 2,660 | 2,711 | 2,682 | 2,753 | |||||||||||||||||||||||||||||||
Average number of compressor units in service (during period)(4) | 2,054 | 2,530 | 2,913 | 2,862 | 2,686 | 2,671 | 2,732 | |||||||||||||||||||||||||||||||
Average compressor unit utilization (during period)(5) | 89.6 | % | 88.7 | % | 86.8 | % | 79.2 | % | 73.8 | % | 73.5 | % | 74.8 | % |
(1) | Working capital is defined as current assets minus current liabilities. | |
(2) | Please read “Summary — Non-GAAP Financial Measures” for more information regarding EBITDA. We define EBITDA as earnings before interest, taxes, depreciation and amortization. | |
(3) | Capital expenditures primarily consist of capital expenditures to expand the operating capacity or revenue of existing or new assets. | |
(4) | “Average number of compressor units in service” for each period shown is determined by calculating an average of two numbers, the first of which is the number of compressor units being used to provide |
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services on customer well sites at the beginning of the period and the second of which is the number of compressor units being used to provide services on customer well sites at the end of the period. | ||
(5) | “Average compressor unit utilization” for each period shown is determined by dividing the average number of compressor units in service during such period by the average of two numbers, the first of which is the total number of compressors units in our fleet at the beginning of such period and the second of which is the total number of compressor units in our fleet at the end of such period. |
• | the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; | |
• | our operating performance and return on capital as compared to those of other companies in the production enhancement business, without regard to financing or capital structure; |
• | our ability to incur and service debt and fund capital expenditures; |
• | the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; and | |
• | our ability to generate available cash sufficient to make distributions to our unitholders and our general partner. |
Compressco Partners Predecessor | Compressco Partners Pro Forma | ||||||||||||||||||||||||||||||||||||
Three Months | Year Ended | Three Months | |||||||||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | December 31, | Ended March 31, | ||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | 2010 | 2011 | |||||||||||||||||||||||||||||
(In thousands) | (In thousands) | ||||||||||||||||||||||||||||||||||||
Net Income | $ | 6,411 | $ | 9,554 | $ | 11,281 | $ | 6,539 | $ | 1,617 | $ | 719 | $ | 290 | $ | 13,952 | $ | 2,734 | |||||||||||||||||||
Provision for income taxes | 4,100 | 5,803 | 6,846 | 4,161 | 1,169 | 513 | 218 | 1,705 | 456 | ||||||||||||||||||||||||||||
Depreciation and amortization | 6,436 | 9,433 | 12,112 | 13,823 | 13,112 | 3,336 | 3,179 | 13,070 | 3,163 | ||||||||||||||||||||||||||||
Interest | 9,250 | 10,083 | 10,990 | 11,980 | 13,096 | 3,299 | 2,723 | 38 | 2 | ||||||||||||||||||||||||||||
EBITDA | $ | 26,197 | $ | 34,873 | $ | 41,229 | $ | 36,503 | $ | 28,994 | $ | 7,867 | $ | 6,410 | $ | 28,765 | $ | 6,355 | |||||||||||||||||||
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Compressco Partners Predecessor | ||||||||||||||||||||||||||||
Three Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Cash flow from operating activities | $ | 12,251 | $ | 15,737 | $ | 25,569 | $ | 23,936 | $ | 20,391 | $ | 6,399 | $ | 4,182 | ||||||||||||||
Changes in current assets and current liabilities | 3,963 | 6,951 | 5,029 | (1,217 | ) | (5,834 | ) | (2,375 | ) | (758 | ) | |||||||||||||||||
Deferred income taxes | (2,825 | ) | (2,828 | ) | (6,281 | ) | (1,243 | ) | 895 | 157 | 210 | |||||||||||||||||
Other non-cash charges | (542 | ) | (873 | ) | (924 | ) | (1,114 | ) | (723 | ) | (126 | ) | (165 | ) | ||||||||||||||
Interest expense | 9,250 | 10,083 | 10,990 | 11,980 | 13,096 | 3,299 | 2,723 | |||||||||||||||||||||
Provision for income taxes | 4,100 | 5,803 | 6,846 | 4,161 | 1,169 | 513 | 218 | |||||||||||||||||||||
EBITDA | $ | 26,197 | $ | 34,873 | $ | 41,229 | $ | 36,503 | $ | 28,994 | $ | 7,867 | $ | 6,410 | ||||||||||||||
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• | the level of capital expenditures we make; | |
• | the cost of achieving organic growth in current and new markets; | |
• | the cost of any acquisitions; | |
• | fluctuations in our working capital requirements; | |
• | our ability to borrow funds and access capital markets; | |
• | the amount of cash reserves established by our general partner; | |
• | the fees we charge and the margins we realize from our production enhancement services operations; | |
• | the level of our operating costs and expenses; | |
• | the prices of, levels of production of, and demand for, natural gas; | |
• | the level of competition from other companies; | |
• | the impact of prevailing economic conditions on our customer’s operating budgets; and |
• | our debt service requirements and other liabilities. |
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• | attract new customers; | |
• | maintain our existing customers and maintain or expand the level of production enhancement services we provide to them; | |
• | recruit and train qualified field services personnel and retain valued employees; | |
• | increase the scale of our compressor unit manufacturing operations; | |
• | allocate our human resources optimally; | |
• | consummate accretive acquisitions; | |
• | expand our domestic and international presence; and | |
• | obtain required financing for our future operations. |
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• | government controls and actions, such as expropriation of assets and changes in legal and regulatory environments; | |
• | import and export license requirements; | |
• | political, social, or economic instability; | |
• | trade restrictions; | |
• | changes in tariffs and taxes; | |
• | restrictions on repatriating foreign profits back to the United States; and | |
• | the impact of anti-corruption laws. |
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• | incur additional debt or issue guarantees; |
• | incur or permit certain liens to exist; |
• | make negative pledges; |
• | pay dividends or make other distributions; |
• | make certain loans, investments, acquisitions or other restricted payments; |
• | modify certain material agreements; |
• | dispose of assets outside the ordinary course of business, including the issuance and sale of capital stock of our subsidiaries; |
• | enter into sale-leaseback transactions; |
• | enter into swap agreements; |
• | engage in certain types of transactions with affiliates; |
• | merge, consolidate or transfer all or substantially all of our assets; and |
• | prepay certain indebtedness. |
• | failure to pay principal, interest or any other amount when due; |
• | breach of the representations or warranties in the revolving credit facility; |
• | failure to comply with the covenants in the revolving credit facility; |
• | cross-default to other indebtedness; |
• | bankruptcy or insolvency; |
• | certain Employee Retirement Income Security Act of 1974, or ERISA, events; |
• | material court judgments ordered against us; and |
• | a change of control. |
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• | our ability to obtain additional financing, if necessary, for working capital, capital expenditures (including acquisitions) or other purposes may be impaired or such financing may not be available on favorable terms; |
• | covenants contained in our existing and future credit and debt arrangements will require us to meet financial tests that may affect our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities; |
• | we will need a portion of our cash flow to make principal and interest payments on our indebtedness, reducing the funds that would otherwise be available for operations, distributions to unitholders and future business opportunities; |
• | we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and |
• | our flexibility in responding to changing business and economic conditions. |
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• | neither our partnership agreement nor any other agreement requires TETRA or Compressco to pursue a business strategy that favors us. Compressco’s directors and officers have a fiduciary duty to make these decisions in the best interests of TETRA, the owner of Compressco, which may be contrary to our interests; | |
• | our general partner controls the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and TETRA, on the other hand, including provisions governing administrative services, acquisitions and non-competition provisions; | |
• | our general partner is allowed to take into account the interests of parties other than us, including TETRA and its affiliates, in resolving conflicts of interest; | |
• | our general partner has limited its liability and reduced its fiduciary duties to our unitholders and us, and has also restricted the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; |
• | our general partner will determine the amount and timing of asset purchases and sales, capital expenditures, borrowings, repayment of indebtedness and issuances of additional partnership interests, each of which can affect the amount of cash that is available for distribution to our common unitholders; |
• | our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure is a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus, and this determination can affect the amount of cash that is distributed to our unitholders, which, in turn, may affect the ability of the subordinated units to convert. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — Subordination Period”; | |
• | our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period; | |
• | our partnership agreement permits us to distribute up to $15 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or the incentive distribution rights; | |
• | our general partner determines which costs incurred by it and its affiliates are reimbursable by us and TETRA and will determine the allocation of shared overhead expenses; | |
• | our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf; |
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• | our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us; | |
• | our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 90% of the common units; | |
• | our general partner decides whether to retain separate counsel, accountants or others to perform services for us; and | |
• | our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner’s incentive distribution rights without the approval of the conflicts committee of the board of directors of our general partner or the unitholders. This election may result in lower distributions to the common unitholders in certain situations. |
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• | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to consider any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include the exercise of its limited call right, the exercise of its rights to transfer or vote the partnership units it owns, the exercise of its registration rights and its determination whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement; | |
• | provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning it believed the decision was in the best interests of our partnership; | |
• | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our general partner acting in good faith and not involving a vote of our unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or must be “fair and reasonable” to us, as determined by our general partner in good faith and that, in determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; | |
• | provides that our general partner and its executive officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and | |
• | provides that in resolving conflicts of interest, it will be presumed that in making its decision our general partner acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. |
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• | our previously existing unitholders’ proportionate ownership interests in us will decrease; | |
• | the amount of cash available for distribution on each common unit may decrease; | |
• | because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase; | |
• | the ratio of taxable income to distributions may increase; | |
• | the relative voting strength of each previously outstanding common unit may be diminished; and | |
• | the market price of the common units may decline. |
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• | a court or government agency determined that we were conducting business in a state but had not complied with that particular state’s partnership statute; or | |
• | our unitholders’ right to act with other unitholders to remove or replace our general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitutes “control” of our business. |
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• | the level of our distributions and our earnings or those of other companies in our industry; | |
• | announcements by us or our competitors of significant contracts, acquisitions or other business developments; | |
• | changes in accounting standards, policies, guidance, interpretations or principles; | |
• | general economic conditions; | |
• | the failure of securities analysts to cover our common units after this offering or changes in financial estimates by analysts; and | |
• | the other factors described in these “Risk Factors.” |
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Compressco | ||||
Partners, L.P. | ||||
(in thousands) | ||||
Gross proceeds from this offering (2,500,000 common units at $20.00 per unit) | $ | 50,000 | ||
Less: Underwriting discount, structuring fees and offering expenses | (10,769 | ) | ||
Net proceeds from this offering | $ | 39,231 | ||
Less: Repayment on intercompany indebtedness to TETRA | (28,931 | ) | ||
Less: Payment of financing fees and transaction costs incurred in connection with the closing of the revolving credit facility | (375 | ) | ||
Balance of net proceeds from this offering available for general partnership purposes | $ | 9,925 | ||
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• | the cash and the capitalization of our predecessor as of March 31, 2011; and |
• | our pro forma cash and capitalization as of March 31, 2011, as adjusted to reflect this offering, the other transactions described under “Summary — Formation Transactions and Partnership Structure — General” and the application of the net proceeds from this offering as described under “Use of Proceeds.” |
As of March 31, 2011 | |||||||||
Compressco | Compressco | ||||||||
Partners | Partners Pro | ||||||||
Predecessor | Forma | ||||||||
(In thousands) | (In thousands) | ||||||||
Cash | $ | 6,140 | $ | 16,065 | |||||
Long-term debt | 145,100 | (3) | — | ||||||
Partners’ equity/owners’ equity: | |||||||||
Partners’ equity | 22,700 | — | |||||||
Common unitholders — public interest(1)(2) | — | 39,231 | |||||||
Common unitholders — parent interest(2) | — | 77,892 | |||||||
Subordinated unitholders | — | 74,073 | |||||||
General partner interest | — | 3,704 | |||||||
Total capitalization | $ | 167,800 | $ | 194,900 | |||||
(1) | Each $1.00 increase or decrease in the assumed initial public offering price of $20.00 per common unit would increase or decrease, respectively, each of total partners’ equity and total capitalization by approximately $2.3 million, after deducting the estimated underwriting discount, structuring fee and offering expenses payable by us. We may also increase or decrease the number of common units we are offering. Each increase of 1.0 million common units offered by us, together with a concomitant $1.00 increase in the assumed offering price to $21.00 per common unit, would increase total partners’ equity and total capitalization by approximately $21.9 million. Similarly, each decrease of 1.0 million common units offered by us, together with a concomitant $1.00 decrease in the assumed offering price to $19.00 per common unit, would decrease total partners’ equity and total capitalization by approximately $21.9 million. The pro forma information set forth above is illustrative only and, following the completion of this offering, will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. | |
(2) | This table does not reflect the issuance of common units that will be issued to the underwriters and/or affiliates of TETRA upon exercise or expiration of the underwriters’ option to purchase additional common units. |
(3) | At the closing of this offering, we will assume approximately $28.9 million of this intercompany indebtedness owed by our predecessor to TETRA (as partial consideration for the assets we acquire from TETRA in connection with this offering), which $28.9 million will be repaid in full from the proceeds of this offering. The balance of this indebtedness will be repaid by our predecessor prior to this offering. |
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Assumed initial public offering price per common unit | $ | 20.00 | ||||||
Net tangible book value per common unit before the offering(1) | $ | 9.27 | ||||||
Decrease in net tangible book value per common unit attributable to purchasers in | ||||||||
the offering | (1.48 | ) | ||||||
Less: Pro forma net tangible book value per common unit after the offering(2) | 7.79 | |||||||
Immediate dilution in net tangible book value per common unit to new investors(3) | $ | 12.21 | ||||||
(1) | Determined by dividing the net tangible book value of the contributed assets and liabilities by the number of units (6,597,257 common units (assuming the underwriters do not exercise their option to purchase additional common units) and 6,273,970 subordinated units) and 2.0% general partner interest to be issued to our general partner and its affiliates for their contribution of assets and liabilities to us. | |
(2) | Determined by dividing our pro forma net tangible book value, after giving effect to the use of the net proceeds of the offering by the total number of units (9,097,257 common units and 6,273,970 subordinated units) and the 2.0% general partner interest. |
(3) | For each increase or decrease in the initial public offering price of $1.00 per common unit, then dilution in net tangible book value per common unit would increase or decrease by $0.93 per common unit. |
Units Acquired | Total Consideration | |||||||||||||||
Number | Percent | Amount | Percent | |||||||||||||
(dollars in millions) | ||||||||||||||||
General partner and affiliates(1)(2) | 12,871,227 | 83.7 | % | $ | 155.7 | 79.9 | % | |||||||||
New investors | 2,500,000 | 16.3 | % | $ | 39.2 | 20.1 | % | |||||||||
Total | 15,371,227 | 100.0 | % | $ | 194.9 | 100.0 | % | |||||||||
(1) | Upon the consummation of the transactions contemplated by this prospectus, our general partner and its affiliates will own 6,597,257 common units (if the underwriters do not exercise their option to purchase additional common units), 6,273,970 subordinated units and a 2.0% general partner interest. |
(2) | The contribution by TETRA of a portion of our predecessor’s business was recorded at historical cost in accordance with GAAP. The pro forma book value of the consideration provided by TETRA as of March 31, 2011 would have been approximately $155.7 million. |
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• | less the amount of cash reserves established by our general partner to: |
• | provide for the proper conduct of our business after the end of the quarter; | |
• | comply with applicable law, any of our future debt instruments or other agreements; or | |
• | provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for future distributions unless it determines that the establishment of reserves will not prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages for such quarter); |
• | plus, if our general partner so determines, all additional cash and cash equivalents on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. |
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• | We may lack sufficient cash to pay distributions to our unitholders due to a number of factors, including reduced demand for our production enhancement services, loss of a key customer, increases in our general and administrative expense, principal and interest payments on any future borrowings, tax expenses, working capital requirements and anticipated cash needs. Our cash available for distribution to our unitholders is directly impacted by our cash expenses necessary to run our business and will be reduceddollar-for-dollar to the extent that such expenses increase. See “Risk Factors” for information regarding these factors. |
• | Our general partner will have the authority to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders. The establishment of those reserves could result in a reduction in cash distributions to our unitholders from the levels currently anticipated pursuant to our stated cash distribution policy. Our partnership agreement does not set a limit on the amount of cash reserves that our general partner may establish. | |
• | Prior to making any distribution on the common units, we will reimburse our general partner and its affiliates for all expenses they incur and payments they make on our behalf. Our partnership agreement does not set a limit on the amount of expenses for which our general partner and its affiliates may be reimbursed. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our general partner by its affiliates. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us. The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates will reduce the amount of available cash to pay cash distributions to our unitholders. | |
• | While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions requiring us to make cash distributions contained therein, may be amended. Our partnership agreement generally may not be amended during the subordination period without the approval of our general partner and our public common unitholders. However, our partnership agreement can be amended with the consent of our general partner and the approval of a majority of the outstanding common units (including common units held by TETRA) after the subordination period has ended. At the closing of this offering, TETRA and its affiliates will own an aggregate of 83.7% of our common and subordinated units (assuming the underwriters do not exercise their option to purchase additional common units). Please read “The Partnership Agreement — Amendment of the Partnership Agreement.” | |
• | Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement. | |
• | Any determination by our general partner of the amount of cash to be reserved and the amount of cash to be distributed to our unitholders made in good faith will be binding on all of our unitholders. Our partnership agreement provides that in order for a determination by our general partner to be made in good faith, our general partner must believe that such determination is in our best interests. | |
• | UnderSection 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. |
• | The amount of distributions we pay under our cash distribution policy will be subject to restrictions under the revolving credit facility that we intend to enter into upon the closing of this offering. The revolving credit facility will provide that we can make distributions to holders of our common units only if there is no default or event of default under the facility. Should we be unable to satisfy such restrictions under the revolving credit facility, we will be prohibited from making cash distributions to unitholders. |
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• | If we make distributions out of capital surplus, as opposed to operating surplus, such distributions will result in a reduction in the minimum quarterly distribution and the target distribution levels. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels.” We do not anticipate that we will make any distributions from capital surplus. | |
• | Our ability to make distributions to our unitholders depends on the performance of our subsidiaries and their ability to distribute cash to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, the provisions of future indebtedness, applicable state partnership and limited liability company laws and other laws and regulations. |
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Number of | Distributions | |||||||||||
Units | One Quarter | Annualized | ||||||||||
Common units | 9,097,257 | $ | 3,525,187 | $ | 14,100,748 | |||||||
Subordinated units | 6,273,970 | 2,431,163 | 9,724,654 | |||||||||
2.0% general partner interest | — | 121,558 | 486,233 | |||||||||
Total | 15,371,227 | $ | 6,077,908 | $ | 24,311,635 | |||||||
• | “Unaudited Pro Forma Cash Available for Distribution,” in which we present the amount of cash we would have had available for distribution on a pro forma basis for the twelve months ended December 31, 2010 and March 31, 2011; and |
• | “Estimated Cash Available for Distribution,” in which we present how we calculate the estimated EBITDA necessary for us to have sufficient cash available to pay the annualized minimum quarterly distribution on our common units and subordinated units and the corresponding distribution on the general partner interest for the twelve months ending June 30, 2012. In “— Assumptions and Considerations” below, we also present the assumptions supporting this calculation. |
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Twelve Months Ended | ||||||||
December 31, | March 31, | |||||||
2010(a) | 2011(a) | |||||||
(In thousands, except per unit amounts) | ||||||||
Revenue | ||||||||
Compression and other services | $ | 76,915 | $ | 77,114 | ||||
Sales of compressors and parts | 4,017 | 5,441 | ||||||
Total revenues | 80,932 | 82,555 | ||||||
Cost of revenues (excluding depreciation and amortization expense) | ||||||||
Cost of compression and other services(b) | 35,205 | 37,056 | ||||||
Cost of sales of compressors and parts | 2,554 | 3,659 | ||||||
Total cost of revenues | 37,759 | 40,715 | ||||||
Selling, general and administrative expense | 14,295 | 14,274 | ||||||
Depreciation and amortization | 13,070 | 12,923 | ||||||
Interest expense | 38 | 5 | ||||||
Other (income) expense | 113 | 216 | ||||||
Income before income tax expense | 15,657 | 14,422 | ||||||
Provision for income taxes(c) | 1,705 | 1,647 | ||||||
Pro forma net income | $ | 13,952 | $ | 12,775 | ||||
Adjustments to reconcile pro forma net income to pro forma EBITDA: | ||||||||
Add: | ||||||||
Provision for income taxes(c) | 1,705 | 1,647 | ||||||
Interest expense | 38 | 5 | ||||||
Depreciation and amortization | 13,070 | 12,923 | ||||||
Pro forma EBITDA(d) | $ | 28,765 | $ | 27,350 | ||||
Adjustments to reconcile pro forma EBITDA to pro forma cash available for distribution: | ||||||||
Less: | ||||||||
Current income tax expense and withholding(c) | 1,879 | 1,850 | ||||||
Expansion capital expenditures(e) | 8,127 | 8,853 | ||||||
Maintenance capital expenditures(f) | 1,794 | 2,100 | ||||||
Incremental general and administrative expense associated with | ||||||||
being a publicly traded limited partnership(g) | 2,000 | 2,000 | ||||||
Plus: | �� | |||||||
Non-cash cost of sales of compressors(h) | 1,206 | 2,055 | ||||||
Equity compensation(i) | 392 | 436 | ||||||
Cash from parent to fund expansion capital expenditures(e) | 8,127 | 8,853 | ||||||
Pro forma cash available for distribution by Compressco | ||||||||
Partners | $ | 24,690 | $ | 23,891 | ||||
Implied cash distributions based on the minimum quarterly distribution per unit: | ||||||||
Annualized minimum quarterly distribution per unit | $ | 1.55 | $ | 1.55 | ||||
Distribution to common unitholders | $ | 14,101 | $ | 14,101 | ||||
Distribution to subordinated unitholder | $ | 9,725 | $ | 9,725 | ||||
Distribution to general partner | $ | 486 | $ | 486 | ||||
Total distributions(j) | $ | 24,312 | $ | 24,312 | ||||
Excess (Deficit) | $ | 378 | $ | (421 | ) | |||
(a) | Unaudited pro forma cash available for distribution for the twelve months ended December 31, 2010 was derived from the unaudited pro forma financial statements included elsewhere in this prospectus. Unaudited pro forma cash available for distribution for the twelve months ended March 31, 2011 was |
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derived by combining pro forma amounts for the nine months ended December 31, 2010 (not included in this prospectus) and the three months ended March 31, 2011 (included in this prospectus). |
(b) | Includes maintenance, repair and refurbishment expense for our compressor units. These expenses were $32.3 million and $34.3 million for the twelve months ended December 31, 2010 and March 31, 2011, respectively. These amounts are not included in maintenance capital expenditures as noted in (f) below. |
(c) | Reflects income taxes for our Operating Corp and from our operations in Canada, Mexico and Argentina, as well as Texas franchise tax, which, in accordance with generally accepted accounting principles, was classified as an income tax for reporting purposes. | |
(d) | Please read “Summary — Non-GAAP Financial Measures” for more information regarding EBITDA. We define EBITDA as earnings before interest, taxes, depreciation and amortization. |
(e) | Reflects actual expansion capital expenditures for the period presented. The increase in expansion capital expenditures for the twelve months ended March 31, 2011 as compared to the twelve months ended December 31, 2010 is primarily due to the expansion of our VJacktm unit fleet and the expansion of our operations into Argentina, Indonesia and Romania. Expansion capital expenditures are expenditures that result in the expansion of our assets and operations. These expansion capital expenditures are primarily related to the manufacture of new compressor units added to our service fleet that are not replacements for sold units, as well as the purchase of vehicles, well monitoring assets, automated sand separation assets and other related assets that expand our asset base. For historical periods we have assumed that expansion capital expenditures were funded by TETRA. |
(f) | Maintenance capital expenditures are generally capital expenditures that maintain the operating capacity of our business. Maintenance capital expenditures include capital expenditures made to replace partially or fully depreciated assets, disposed and/or sold assets, including our compressor units, vehicles, well monitoring assets and automated sand separation assets. For a compressor unit sold from our active service fleet, maintenance capital expenditures reflect the cost of the newly manufactured replacement unit. The book value of the sold service unit is recognized above as a non-cash charge to cost of sales of compressors and parts. The cost of refurbishing our compressor units is included in our cost of compression and other services as noted in (b) above. |
(g) | Reflects an adjustment for estimated incremental cash expenses associated with being a publicly traded limited partnership, including costs associated with annual and quarterly reports to unitholders, financial statement audits, tax return andSchedule K-1 preparation and distribution, investor relations activities, registrar and transfer agent fees, incremental director and executive officer liability insurance costs and director compensation. | |
(h) | Reflects the non-cash cost of sales of compressors related to units sold from our service fleet. Since these units were already in our service fleet, capital expenditures related to these units were incurred during prior periods. |
(i) | Reflects non-cash equity compensation in accordance with TETRA’s equity compensation plan within our pro forma selling, general and administrative expense. | |
(j) | Represents the amount that would be required to pay the minimum quarterly distribution for four quarters on all of the common and subordinated units that will be outstanding immediately following this offering and the corresponding distribution on the general partner interest. |
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Estimated Cash Available for Distribution
Twelve Months | ||||
Ending June 30, | ||||
2012 | ||||
(In thousands, except | ||||
per unit amounts) | ||||
Revenue | ||||
Compression and other services | $ | 84,394 | ||
Sales of compressors and parts | 9,363 | |||
Total revenues | 93,757 | |||
Cost of revenues (excluding depreciation and amortization expense) | ||||
Cost of compression and other services(a) | 37,990 | |||
Cost of sales of compressors and parts | 7,193 | |||
Total cost of revenues | 45,183 | |||
Selling, general and administrative expense(b) | 17,622 | |||
Depreciation and amortization | 13,027 | |||
Interest expense (income)(c) | (331 | ) | ||
Income before income tax expense | 18,256 | |||
Provision for income taxes(d) | 2,455 | |||
Estimated net income | $ | 15,801 | ||
Adjustments to reconcile estimated net income to estimated EBITDA: | ||||
Add: | ||||
Interest expense (income)(c) | $ | (331 | ) | |
Provision for income taxes(d) | 2,455 | |||
Depreciation and amortization | 13,027 | |||
Estimated EBITDA | $ | 30,952 | ||
Adjustments to reconcile estimated EBITDA to estimated cash available for distribution: | ||||
Less: | ||||
Interest expense (income)(c) | $ | (331 | ) | |
Current income tax expense and withholding | 2,455 | |||
Expansion capital expenditures(e) | 1,950 | |||
Maintenance capital expenditures(f) | 2,470 | |||
Plus: | ||||
Non-cash cost of sales of compressors | 570 | |||
Equity compensation(g) | 1,600 | |||
Use of offering net proceeds to fund expansion capital expenditures(e) | 1,950 | |||
Estimated cash available for distribution by Compressco Partners | $ | 28,528 | ||
Implied cash distributions based on the minimum quarterly distribution per unit: | ||||
Annualized minimum quarterly distribution per unit | $ | 1.55 | ||
Distribution to common unitholders | $ | 14,101 | ||
Distribution to subordinated unitholder | $ | 9,725 | ||
Distribution to general partner | $ | 486 | ||
Total distributions(h) | $ | 24,312 | ||
Excess | $ | 4,216 | ||
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(a) | Includes maintenance, repair and refurbishment expense for our compressor units. We estimate these expenses to be $34.9 million for the twelve months ending June 30, 2012. This amount is not included in estimated maintenance capital expenditures as noted in (f) below. | |
(b) | Includes estimated incremental expenses of approximately $2.0 million associated with being a publicly traded limited partnership, including costs associated with annual and quarterly reports to unitholders, financial statement audits, tax return andSchedule K-1 preparation and distribution, investor relations activities, registrar and transfer agent fees, incremental director and executive officer liability insurance costs and director compensation. |
(c) | We estimate that interest income will be earned on the net proceeds of the offering at a 2.0% interest rate. We will retain approximately $9.9 million of the net proceeds of the offering for general partnership purposes. Please read “Use of Proceeds.” For purposes of our forecast for the twelve months ending June 30, 2012, we have assumed that our revolving credit facility remains undrawn during the forecast period and that our expansion capital expenditures are financed with cash on hand. Because we are assuming that our revolving credit facility remains undrawn during the forecast period, our interest expense for the twelve months ending June 30, 2012 results solely from the commitment fee of 0.425% that we expect to pay on the undrawn portion of our revolving credit facility. |
(d) | We will not be subject to U.S. federal income tax, except with respect to operations conducted by our Operating Corp. We will incur state and local income taxes in certain of the states in which we conduct business. Moreover, we will incur income taxes and will be subject to withholding requirements related to our operations in Canada, Mexico, Argentina and in other foreign countries in which we operate. Furthermore, we will also incur Texas franchise tax, which, in accordance with Financial Accounting Standards Board, or “FASB,” Accounting Standards Codification, or “ASC,” 710, is classified as an income tax for reporting purposes. The current income tax shown in the calculation of cash available for distribution includes only the cash portion of such taxes and is net of any deferred income tax expense. | |
(e) | Reflects estimated expansion capital expenditures for the period presented. Expansion capital expenditures are expenditures that result in the expansion of our assets and operations. These expenditures are primarily related to the manufacture of new compressor units that we expect to add to our service fleet that are not replacements for sold units, as well as our expected purchase of vehicles, well monitoring assets, automated sand separation assets and other related assets to expand our asset base. | |
(f) | Maintenance capital expenditures are generally capital expenditures that maintain the operating capacity of our business. Maintenance capital expenditures include capital expenditures made to replace partially or fully depreciated assets, disposed and/or sold assets, including our compressor units, vehicles, well monitoring assets and automated sand separation assets. The cost of refurbishing our compressor units is included in our estimated cost of wellhead compression and other services, as noted in (a) above. | |
(g) | Reflects non-cash equity compensation in accordance with TETRA’s and the Partnership’s equity compensation plans within our estimated selling, general and administrative expense. | |
(h) | Represents the amount that would be required to pay distributions for four quarters at our minimum quarterly distribution rate of $0.3875 per unit on all of the common and subordinated units that will be outstanding immediately following this offering, and the corresponding distribution on the general partner interest. |
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• | Revenue is estimated to be $93.8 million for the twelve months ending June 30, 2012, as compared to $82.6 million for the twelve months ended March 31, 2011 on a pro forma basis. The reasons for the anticipated increase in our revenue are presented below. |
• | Our predecessor’s pro forma revenue from wellhead compression and other services is estimated to be $84.4 million for the twelve months ending June 30, 2012, as compared to $77.1 million for the twelve months ended March 31, 2011. The main component of this category of pro forma revenue is from production enhancement and related services, which is approximately $75.0 million for the twelve months ending June 30, 2012, as compared to $69.8 million for the twelve months ended March 31, 2011. We expect the majority of this increase to result from increased market demand for our production enhancement and related services, which market demand we believe is shown by the total number of our compressor units being used to provide services on customer well sites (or, “compressor units in service”). |
• | We believe that market demand for our predecessor’s services reached a cyclical low point during the period of December 2009 to February 2010, largely due to the effect of the recent domestic and foreign economic downturn on the production enhancement services market, as our predecessor experienced a 13.2%year-over-year decrease in the total number of compressor units in service during 2009 (from 3,064 compressor units to 2,660 compressor units). This economic downturn led to a significant decrease in the industrial consumption of natural gas, lower natural gas prices compared to those of recent years, cost cutting by our predecessor’s customers and, consequently, lower demand for our predecessor’s wellhead compression services and lower compressor utilization rates. Since that period, our predecessor experienced a modest recovery in market demand for its services, as our predecessor experienced increases in the total number of compressor units in service during 2010 (from 2,660 compressor units to 2,711 compressor units) and 2011 (from 2,711 compressor units to 2,753 compressor units through March 31, 2011). We estimate the total number of compressor units in service will grow from 2,753 compressor units in service as of March 31, 2011 to 3,056 compressor units in service as of June 30, 2012, and we estimate a 1.3% increase in our service fee rates. We believe this anticipated growth is reasonable based on 2010 and 2011 growth rates in the total number of compressor units in service and current and expected demand for our services. |
• | We expect the remainder of the increase in our annual revenue from wellhead compression and other services during the twelve months ending June 30, 2012 will result from our further expansion into foreign markets, expansion into unconventional resources markets and introduction of new service applications of our compressor units. |
• | Revenue from sales of our compressor units and parts are estimated to increase from $5.4 million for the twelve months ended March 31, 2011 on a pro forma basis to $9.4 million for the twelve months ending June 30, 2012 due to several anticipated large purchase orders from one customer who has recently purchased compressor units from us and is interested in purchasing additional compressor units from us as part of an ongoing program. These amounts include $3.4 million in sales of compressors for the twelve months ended March 31, 2011, and an estimated $7.3 million in sales of compressors for the twelve months ending June 30, 2012. Parts sales are estimated to decrease from approximately $2.1 million during the twelve months ended March 31, 2011 to approximately $2.0 million for the twelve months ending June 30, 2012. |
• | Cost of revenues (excluding depreciation and amortization expenses) is projected to be $45.2 million for the twelve months ending June 30, 2012, as compared to $40.7 million for the twelve months ended March 31, 2011 on a pro forma basis. The reasons for the anticipated increase in our cost of revenues are presented below. |
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• | Cost of wellhead compression and other services is estimated to be $38.0 million for the twelve months ending June 30, 2012, as compared to $37.1 million for the twelve months ended March 31, 2011 on a pro forma basis. These costs include personnel and various other field service costs that are added mostly in proportion to the addition of compressor units both domestically and globally. This increase in expense is primarily attributable to the growth of wellhead compression and other service revenue described above. Our ongoing cost of refurbishing our units is reflected within our maintenance and repair expense within cost of wellhead compression and other services. Maintenance, repair and refurbishment expense is estimated to be $34.9 million for the twelve months ending June 30, 2012, compared to $34.3 million for the twelve months ended March 31, 2011. |
• | We are estimating that cost of sales of compressors and parts will increase from $3.7 million for the twelve months ended March 31, 2011 on a pro forma basis to $7.2 million for the twelve months ending June 30, 2012, as a result of the higher number of compressor units sold and higher average sales prices as described above. |
• | We estimate that selling, general and administrative expense will be $17.6 million for the twelve months ending June 30, 2012, as compared to $14.3 million for the twelve months ended March 31, 2011 on a pro forma basis. This $3.3 million increase in estimated selling, general and administrative expense includes $2.0 million in incremental expenses associated with being a publicly traded limited partnership and $1.6 million in additional compensation expense associated with grants expected to be made under our Long-Term Incentive Plan. Additional expected increases in selling, general and administrative expense associated with our growth during the twelve months ending June 30, 2012 are largely offset by decreased allocated costs from TETRA, which were more significant during the twelve months ended March 31, 2011 due to efforts associated with the offering. |
• | We estimate that depreciation and amortization expense will be $13.0 million for the twelve months ending June 30, 2012, as compared to $12.9 million for the twelve months ended March 31, 2011 on a pro forma basis. Depreciation expense is assumed to continue to be based on consistent average depreciable asset lives and depreciation methodologies, taking into account estimated capital expenditures primarily for our fleet of compressor units and other assets as described below. |
• | Interest income will be earned on the net proceeds of the offering at an assumed 2.0% interest rate. We will retain approximately $9.9 million of the net proceeds of the offering for general partnership purposes. Please read “Use of Proceeds.” Net proceeds from this offering will be used, over time, for general partnership purposes, which include funding the manufacturing of compressor units and the acquisition of field trucks and other equipment, as needed, and otherwise investing in short-term interest bearing securities. For purposes of our forecast for the twelve months ending June 30, 2012, we have assumed that our revolving credit facility remains undrawn during the forecast period and that our expansion capital expenditures are financed with cash on hand. Because we are assuming that our revolving credit facility remains undrawn during the forecast period, our interest expense for the twelve months ending June 30, 2012 results solely from the commitment fee of 0.425% that we expect to pay on the undrawn portion of our revolving credit facility. |
• | We will not be subject to U.S. federal income tax other than with respect to operations conducted by our Operating Corp. We will incur state and local income taxes in certain of the states in which we conduct business. Moreover, we will incur income taxes and will be subject to withholding requirements related to our operations in Canada, Mexico, Argentina and in the other foreign countries |
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in which we operate. Furthermore, we will also incur Texas franchise tax, which, in accordance with FASB ASC 710, is classified as an income tax for reporting purposes. The current income tax shown in the calculation of cash available for distribution includes only the cash portion of such taxes and is net of any deferred income tax expense. |
• | We project that maintenance capital expenditures will be $2.5 million for the twelve months ending June 30, 2012 compared to $2.1 million for the twelve months ended March 31, 2011 on a pro forma basis. This increase in maintenance capital expenditures during the twelve months ended June 30, 2012 is primarily due to the postponement of major maintenance capital expenditure replacement projects during 2010. Maintenance capital expenditures during the twelve months ended June 30, 2012 primarily relate to the replacement of field service trucks and expansion of our sand separator fleet. | |
• | We project that expansion capital expenditures will be $2.0 million for the twelve months ending June 30, 2012 compared to $8.9 million for the twelve months ended March 31, 2011 on a pro forma basis. This decrease is primarily due to a decrease in the expansion of our compressor unit fleet during the twelve months ended June 30, 2012, when compared to the significant expansion of our compressor unit fleet and the expansion of our operations into Argentina, Indonesia and Romania during 2010. | |
• | Based on our current growth expectations, we believe the net proceeds of this offering, cash generated from our operations and borrowings under our revolving credit facility will be sufficient to fund our working capital requirements for approximately the next 18 months. Accordingly, for the twelve months ending June 30, 2012 we do not assume any borrowings from TETRA or third-party lenders. |
• | Our ability to make distributions could be affected if we do not remain in compliance with the financial and other covenants that will be included in our revolving credit facility. Our revolving credit facility will require us to maintain a minimum interest coverage ratio (ratio of earnings before interest and taxes to interest) of 2.5 to 1.0, calculated on a quarterly basis for the trailing twelve month period whenever availability is less than $5 million. We have assumed we will be in compliance with such covenants. |
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RELATING TO CASH DISTRIBUTIONS
• | less the amount of cash reserves established by our general partner to: |
• | provide for the proper conduct of our business after the end of the quarter; | |
• | comply with applicable law, any of our future debt instruments or other agreements; or | |
• | provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for future distributions unless it determines that the establishment of reserves will not prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages for such quarter); |
• | plus, if our general partner so determines, all additional cash and cash equivalents on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. |
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• | $15 million (as described below); plus | |
• | all of our cash receipts after the closing of this offering, excluding cash from interim capital transactions, which include the following: |
• | borrowings that are not working capital borrowings; | |
• | sales of equity and debt securities; | |
• | sales or other dispositions of assets outside the ordinary course of business; and | |
• | capital contributions received; plus |
• | working capital borrowings made after the end of a period but on or before the date of determination of operating surplus for the period; plus | |
• | cash distributions paid on equity issued (including incremental distributions on incentive distribution rights) to finance all or a portion of expansion capital expenditures in respect of the period from such financing until the earlier to occur of the date the capital asset commences commercial service and the date that it is abandoned or disposed of; plus | |
• | cash distributions paid on equity issued by us (including incremental distributions on incentive distribution rights) to pay the construction period interest on debt incurred, or to pay construction period distributions on equity issued, to finance the expansion capital expenditures referred to above; less | |
• | all of our operating expenditures (as defined below) after the closing of this offering; less | |
• | the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less | |
• | all working capital borrowings not repaid within twelve months after having been incurred or repaid within such twelve-month period with the proceeds of additional working capital borrowings; less | |
• | any loss realized on disposition of an investment capital expenditure. |
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• | repayment of working capital borrowings deducted from operating surplus pursuant to the penultimate bullet point of the definition of operating surplus above when such repayment actually occurs; | |
• | payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness, other than working capital borrowings; | |
• | expansion capital expenditures; | |
• | actual maintenance capital expenditures (as discussed in further detail below); | |
• | investment capital expenditures; | |
• | payment of transaction expenses relating to interim capital transactions; | |
• | distributions to our partners (including distributions in respect of our incentive distribution rights); or | |
• | repurchases of equity interests except to fund obligations under employee benefit plans. |
• | borrowings other than working capital borrowings; | |
• | sales of our equity and debt securities; and | |
• | sales or other dispositions of assets for cash, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of normal retirement or replacement of assets. |
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• | distributions of available cash from operating surplus on each of the outstanding common and subordinated units and the general partner interest equaled or exceeded the minimum quarterly distribution for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date; | |
• | the “adjusted operating surplus” (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distribution on all of the outstanding common and subordinated units and the general partner interest during those periods on a fully diluted weighted average basis; and | |
• | there are no arrearages in payment of the minimum quarterly distribution on the common units. |
• | distributions of available cash from operating surplus on each of the outstanding common and subordinated units and the general partner interest equaled or exceeded $2.325 (150.0% of the annualized minimum quarterly distribution) for the four-quarter period immediately preceding that date; | |
• | the “adjusted operating surplus” (as defined below) generated during the four-quarter period immediately preceding that date equaled or exceeded $2.325 (150% of the annualized minimum quarterly distribution) on all of the outstanding common and subordinated units and the general partner interest during those periods on a fully diluted weighted average basis and the related distribution on the incentive distribution rights; and | |
• | there are no arrearages in payment of the minimum quarterly distributions on the common units. |
• | the subordinated units held by any person will immediately and automatically convert into common units on aone-for-one basis, provided (1) neither such person nor any of its affiliates voted any of its units in favor of the removal and (2) such person is not an affiliate of the successor general partner; and | |
• | if all of the subordinated units convert pursuant to the foregoing, all cumulative common unit arrearages on the common units will be extinguished and the subordination period will end. |
• | operating surplus generated with respect to that period (excluding any amounts attributable to the items described in the first bullet point under “— Operating Surplus and Capital Surplus — Operating Surplus” above); less | |
• | any net increase in working capital borrowings with respect to that period; less |
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• | any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to that period; plus | |
• | any net decrease in working capital borrowings with respect to that period; plus | |
• | any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of principal, interest or premium; plus | |
• | any net decrease made in subsequent periods in cash reserves for operating expenditures initially established with respect to such period to the extent such decrease results in a reduction of adjusted operating surplus in subsequent periods pursuant to the third bullet point above. |
• | first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit an amount equal to the minimum quarterly distribution for that quarter; | |
• | second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; | |
• | third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and | |
• | thereafter, in the manner described in “— General Partner Interest and Incentive Distribution Rights” below. |
• | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we distribute for each unit an amount equal to the minimum quarterly distribution for that quarter; and | |
• | thereafter, in the manner described in “— General Partner Interest and Incentive Distribution Rights” below. |
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• | we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and | |
• | we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution; |
• | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives a total of $0.445625 per unit for that quarter (the “first target distribution”); | |
• | second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives a total of $0.484375 per unit for that quarter (the “second target distribution”); | |
• | third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives a total of $0.581250 per unit for that quarter (the “third target distribution”); and | |
• | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
Marginal Percentage | ||||||||||
Interest in Distributions | ||||||||||
Total Quarterly | General | |||||||||
Distribution per Unit | Unitholders | Partner | ||||||||
Minimum Quarterly Distribution | $0.3875 | 98.0 | % | 2.0 | % | |||||
First Target Distribution | up to $0.445625 | 98.0 | % | 2.0 | % | |||||
Second Target Distribution | above $0.445625 up to $0.484375 | 85.0 | % | 15.0 | % | |||||
Third Target Distribution | above $0.484375 up to $0.58125 | 75.0 | % | 25.0 | % | |||||
Thereafter | above $0.58125 | 50.0 | % | 50.0 | % |
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• | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives an amount per unit equal to 115.0% of the reset minimum quarterly distribution for that quarter; | |
• | second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives an amount per unit equal to 125.0% of the reset minimum quarterly distribution for the quarter; | |
• | third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives an amount per unit equal to 150.0% of the reset minimum quarterly distribution for the quarter; and | |
• | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
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Marginal | ||||||||||||
Percentage | ||||||||||||
Interest in | ||||||||||||
Quarterly | Distribution | Quarterly | ||||||||||
Distribution per | 2.0% | Distribution | ||||||||||
Unit Prior to | General | per Unit | ||||||||||
Hypothetical | Common | Partner | Following | |||||||||
Reset | Unitholders | Interest | Hypothetical Reset | |||||||||
Minimum Quarterly Distribution | $0.3875 | 98.0 | % | 2.0 | % | $0.70 | ||||||
First Target Distribution | up to $0.445625 | 98.0 | % | 2.0 | % | up to $0.805(1) | ||||||
Second Target Distribution | above $0.445625 up to $0.484375 | 85.0 | % | 15.0 | % | above $0.805(1) up to $0.875(2) | ||||||
Third Target Distribution | above $0.484375 up to $0.581250 | 75.0 | % | 25.0 | % | above $0.875(2) up to $1.05(3) | ||||||
Thereafter | above $0.581250 | 50.0 | % | 50.0 | % | above $1.05(3) |
(1) | This amount is 115.0% of the hypothetical reset minimum quarterly distribution. | |
(2) | This amount is 125.0% of the hypothetical reset minimum quarterly distribution. | |
(3) | This amount is 150.0% of the hypothetical reset minimum quarterly distribution. |
Cash | ||||||||||||||||||||||
Distributions | Cash Distributions to | |||||||||||||||||||||
to all Common | General Partner Prior to | |||||||||||||||||||||
Quarterly | and Subordinated | Hypothetical Reset | ||||||||||||||||||||
Distribution | Unitholders | 2.0% | ||||||||||||||||||||
per Unit | Prior to | General | Incentive | |||||||||||||||||||
Prior to | Hypothetical | Partner | Distribution | Total | ||||||||||||||||||
Hypothetical Reset | Reset | Interest | Rights | Total | Distributions | |||||||||||||||||
Minimum Quarterly Distribution | $0.3875 | $ | 5,956,350 | $ | 121,558 | $ | — | $ | 121,558 | $ | 6,077,908 | |||||||||||
First Target Distribution | up to $0.445625 | 893,453 | 18,234 | — | 18,234 | 911,687 | ||||||||||||||||
Second Target Distribution | above $0.445625 up to $0.484375 | 595,635 | 14,015 | 91,097 | 105,112 | 700,747 | ||||||||||||||||
Third Target Distribution | above $0.484375 up to $0.581250 | 1,489,088 | 39,709 | 456,654 | 496,363 | 1,985,451 | ||||||||||||||||
Thereafter | above $0.581250 | 1,825,333 | 73,013 | 1,752,320 | 1,825,333 | 3,650,666 | ||||||||||||||||
$ | 10,759,859 | $ | 266,529 | $ | 2,300,071 | $ | 2,566,600 | $ | 13,326,459 | |||||||||||||
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Cash | ||||||||||||||||||||||||||
Distributions to | Cash Distributions to | |||||||||||||||||||||||||
Previously Issued | General Partner Following | |||||||||||||||||||||||||
Quarterly | Common and | Hypothetical Reset | ||||||||||||||||||||||||
Distribution | Subordinated Units | Newly | 2.0% | |||||||||||||||||||||||
per Unit | Following | Issued | General | Incentive | ||||||||||||||||||||||
Following | Hypothetical | Common | Partner | Distribution | Total | |||||||||||||||||||||
Hypothetical Reset | Reset | Units | Interest | Rights | Total | Distributions | ||||||||||||||||||||
Minimum Quarterly Distribution | $0.70 | $ | 10,759,859 | $ | 2,300,071 | $ | 266,529 | $ | — | $ | 2,566,600 | $ | 13,326,459 | |||||||||||||
First Target Distribution | up to $0.805(1) | — | — | — | — | — | — | |||||||||||||||||||
Second Target Distribution | above $0.805(1) up to $0.875(2) | — | — | — | — | — | — | |||||||||||||||||||
Third Target Distribution | above $0.875(2) up to $1.05(3) | — | — | — | — | — | — | |||||||||||||||||||
Thereafter | above $1.05(3) | — | — | — | — | — | — | |||||||||||||||||||
$ | 10,759,859 | $ | 2,300,071 | $ | 266,529 | $ | — | $ | 2,566,600 | $ | 13,326,459 | |||||||||||||||
(1) | This amount is 115.0% of the hypothetical reset minimum quarterly distribution. | |
(2) | This amount is 125.0% of the hypothetical reset minimum quarterly distribution. | |
(3) | This amount is 150.0% of the hypothetical reset minimum quarterly distribution. |
• | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until the minimum quarterly distribution is reduced to zero, as described below; | |
• | second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and | |
• | thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus. |
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• | the minimum quarterly distribution; | |
• | the target distribution levels; | |
• | the unrecovered initial unit price; and | |
• | the per unit amount of any outstanding arrearages in payment of the minimum quarterly distribution on the common units. |
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• | first, to our general partner to the extent of certain prior losses specially allocated to our general partner; | |
• | second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until the capital account for each common unit is equal to the sum of: (1) the unrecovered initial unit price; (2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; and (3) any unpaid arrearages in payment of the minimum quarterly distribution; | |
• | third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until the capital account for each subordinated unit is equal to the sum of: (1) the unrecovered initial unit price; and (2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; | |
• | fourth, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed 98.0% to the unitholders, pro rata, and 2.0% to our general partner, for each quarter of our existence; | |
• | fifth, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85.0% to the unitholders, pro rata, and 15.0% to our general partner for each quarter of our existence; | |
• | sixth, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed 75.0% to the unitholders, pro rata, and 25.0% to our general partner for each quarter of our existence; and | |
• | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
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• | first, 98.0% to holders of subordinated units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the subordinated unitholders have been reduced to zero; | |
• | second, 98.0% to the holders of common units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the common unitholders have been reduced to zero; and | |
• | thereafter, 100.0% to our general partner. |
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• | the contribution to us of a portion of our predecessor’s business, as further described in “Business — Our Relationship with TETRA and Compressco;” | |
• | our issuance of common units to the public and affiliates of TETRA, subordinated units to affiliates of TETRA, a 2.0% general partner interest and incentive distribution rights to Compressco Partners GP and restricted units to certain directors, executive officers and other employees of our general partner, TETRA and ours, as further described in “Summary — Formation Transactions and Partnership Structure;” and | |
• | our use of the proceeds received from the offering, as further described in “Use of Proceeds.” |
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Compressco Partners | |||||||||||||||||||||||||||||||||||||||||||||
Pro Forma | |||||||||||||||||||||||||||||||||||||||||||||
Three | |||||||||||||||||||||||||||||||||||||||||||||
Compressco Partners Predecessor | Pro Forma | Months | |||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Year Ended | Ended | |||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | December 31, | March 31, | ||||||||||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | 2010 | 2011 | |||||||||||||||||||||||||||||||||||||
(dollars in | (dollars in thousands) | (dollars in | |||||||||||||||||||||||||||||||||||||||||||
thousands) | thousands, | ||||||||||||||||||||||||||||||||||||||||||||
except per unit | |||||||||||||||||||||||||||||||||||||||||||||
amount) | |||||||||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 67,133 | $ | 85,985 | $ | 99,944 | $ | 90,573 | $ | 81,412 | $ | 20,334 | $ | 21,884 | $ | 80,932 | $ | 21,766 | |||||||||||||||||||||||||||
Cost of revenue | 30,265 | 38,179 | 44,189 | 40,959 | 37,977 | 9,153 | 12,086 | 37,759 | 12,036 | ||||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 10,612 | 12,964 | 14,352 | 13,193 | 14,328 | 3,328 | 3,299 | 14,295 | 3,286 | ||||||||||||||||||||||||||||||||||||
Depreciation and amortization expense | 6,436 | 9,433 | 12,112 | 13,823 | 13,112 | 3,336 | 3,179 | 13,070 | 3,163 | ||||||||||||||||||||||||||||||||||||
Interest expense | 9,250 | 10,083 | 10,990 | 11,980 | 13,096 | 3,299 | 2,723 | 38 | 2 | ||||||||||||||||||||||||||||||||||||
Other (income) expense, net | 59 | (31 | ) | 174 | (82 | ) | 113 | (14 | ) | 89 | 113 | 89 | |||||||||||||||||||||||||||||||||
Income before income tax provision | 10,511 | 15,357 | 18,127 | 10,700 | 2,786 | 1,232 | 508 | 15,657 | 3,190 | ||||||||||||||||||||||||||||||||||||
Provision for income taxes | 4,100 | 5,803 | 6,846 | 4,161 | 1,169 | 513 | 218 | 1,705 | 456 | ||||||||||||||||||||||||||||||||||||
Net income | $ | 6,411 | $ | 9,554 | $ | 11,281 | $ | 6,539 | $ | 1,617 | $ | 719 | $ | 290 | $ | 13,952 | $ | 2,734 | |||||||||||||||||||||||||||
General partner interest in net income | $ | 279 | $ | 55 | |||||||||||||||||||||||||||||||||||||||||
Common unitholders’ interest in net income | $ | 8,092 | $ | 2,125 | |||||||||||||||||||||||||||||||||||||||||
Subordinated unitholders’ interest in net income | $ | 5,581 | $ | 554 | |||||||||||||||||||||||||||||||||||||||||
Net income per common unit (basic and diluted) | $ | 0.89 | $ | 0.23 | |||||||||||||||||||||||||||||||||||||||||
Balance Sheet Data (at Period End): | |||||||||||||||||||||||||||||||||||||||||||||
Working capital(1) | $ | 19,761 | $ | 27,565 | $ | 31,308 | $ | 32,983 | $ | 28,943 | $ | 26,965 | $ | 27,539 | $ | 39,724 | |||||||||||||||||||||||||||||
Total assets | $ | 163,981 | $ | 186,675 | $ | 212,167 | $ | 202,497 | $ | 196,566 | $ | 196,479 | $ | 193,642 | $ | 202,948 | |||||||||||||||||||||||||||||
Total debt including current portion | $ | 112,032 | $ | 122,115 | $ | 133,105 | $ | 145,085 | $ | 145,085 | $ | 145,085 | $ | 145,100 | $ | — | |||||||||||||||||||||||||||||
Partners’ capital/net parent equity | $ | 40,048 | $ | 48,713 | $ | 56,792 | $ | 33,900 | $ | 25,953 | $ | 25,172 | $ | 22,700 | $ | 194,900 | |||||||||||||||||||||||||||||
Other Financial Data: | |||||||||||||||||||||||||||||||||||||||||||||
EBITDA(2) | $ | 26,197 | $ | 34,873 | $ | 41,229 | $ | 36,503 | $ | 28,944 | $ | 7,867 | $ | 6,410 | $ | 28,765 | $ | 6,355 | |||||||||||||||||||||||||||
Capital expenditures(3) | $ | 25,917 | $ | 23,929 | $ | 33,036 | $ | 2,997 | $ | 8,715 | $ | 745 | $ | 928 | |||||||||||||||||||||||||||||||
Cash flows provided by (used in): | |||||||||||||||||||||||||||||||||||||||||||||
Operating activities | $ | 12,251 | $ | 15,737 | $ | 25,569 | $ | 23,936 | $ | 20,391 | $ | 6,399 | $ | 4,182 | |||||||||||||||||||||||||||||||
Investing activities | $ | (25,862 | ) | $ | (23,930 | ) | $ | (32,997 | ) | $ | (2,882 | ) | $ | (8,613 | ) | $ | (650 | ) | $ | (919 | ) | ||||||||||||||||||||||||
Financing activities | $ | 14,378 | $ | 7,991 | $ | 7,607 | $ | (17,854 | ) | $ | (9,735 | ) | $ | (9,558 | ) | $ | (3,894 | ) | |||||||||||||||||||||||||||
Operating Data: | |||||||||||||||||||||||||||||||||||||||||||||
Total compressor units in fleet (at period end) | 2,595 | 3,108 | 3,603 | 3,627 | 3,647 | 3,637 | 3,655 | ||||||||||||||||||||||||||||||||||||||
Total compressor units in service (at period end) | 2,297 | 2,763 | 3,064 | 2,660 | 2,711 | 2,682 | 2,753 | ||||||||||||||||||||||||||||||||||||||
Average number of compressor units in service (during period)(4) | 2,054 | 2,530 | 2,913 | 2,862 | 2,686 | 2,671 | 2,732 | ||||||||||||||||||||||||||||||||||||||
Average compressor unit utilization (during period)(5) | 89.6 | % | 88.7 | % | 86.8 | % | 79.2 | % | 73.8 | % | 73.5 | % | 74.8 | % |
(1) | Working capital is defined as current assets minus current liabilities. |
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(2) | Please read “Summary — Non-GAAP Financial Measures” for more information regarding EBITDA. We define EBITDA as earnings before interest, taxes, depreciation and amortization. | |
(3) | Capital expenditures primarily consist of capital expenditures to expand the operating capacity or revenue of existing or new assets. | |
(4) | “Average number of compressor units in service” for each period shown is determined by calculating an average of two numbers, the first of which is the number of compressor units being used to provide services on customer well sites at the beginning of the period and the second of which is the number of compressor units being used to provide services on customer well sites at the end of the period. | |
(5) | “Average compressor unit utilization” for each period shown is determined by dividing the average number of compressor units in service during such period by the average of two numbers, the first of which is the total number of compressors units in our fleet at the beginning of such period and the second of which is the total number of compressor units in our fleet at the end of such period. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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• | the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; | |
• | our operating performance and return on capital as compared to those of other companies in the production enhancement business, without regard to financing or capital structure; |
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• | the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; and | |
• | our ability to generate available cash sufficient to make distributions to our unitholders. |
Compressco Partners Predecessor | ||||||||||||||||||||||||||||
Three Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||||||||
Total compressor units in fleet (at period end) | 2,595 | 3,108 | 3,603 | 3,627 | 3,647 | 3,637 | 3,655 | |||||||||||||||||||||
Total compressor units in service (at period end) | 2,297 | 2,763 | 3,064 | 2,660 | 2,711 | 2,682 | 2,753 | |||||||||||||||||||||
Average number of compressor units in service (during period)(1) | 2,054 | 2,530 | 2,913 | 2,862 | 2,686 | 2,671 | 2,732 | |||||||||||||||||||||
Average compressor unit utilization (during period)(2) | 89.6 | % | 88.7 | % | 86.8 | % | 79.2 | % | 73.8 | % | 73.5 | % | 74.8 | % |
(1) | “Average number of compressor units in service” for each period shown is determined by calculating an average of two numbers, the first of which is the number of compressor units being used to provide services on customer well sites at the beginning of the period and the second of which is the number of compressor units being used to provide services on customer well sites at the end of the period. | |
(2) | “Average compressor unit utilization” for each period shown is determined by dividing the average number of compressor units in service during such period by the average of two numbers, the first of which is the total number of compressors units in our fleet at the beginning of such period and the second of which is the total number of compressor units in our fleet at the end of such period. |
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• | Most of the wells that would benefit from our production enhancement services do not currently utilize those services; | |
• | Aging natural gas and oil wells will require more of our production enhancement services; | |
• | Natural gas production from unconventional sources, including tight sands, shales and coalbeds, is expected to continue to increase, according to the Energy Information Administration, and, over time, production from these unconventional sources could benefit substantially from our production enhancement services due to the relatively fast production decline rates of wells drilled to these formations; and | |
• | Natural gas and oil producers continue to outsource their requirements for the production enhancement services we provide. |
• | Following TETRA’s contribution to us, a significant majority of our production enhancement services will be performed by our Operating LLC pursuant to contracts that our counsel has concluded will generate qualifying income under Section 7704 of the Internal Revenue Code, or “qualifying income.” We will not pay federal income taxes on the portion of our business conducted by Operating LLC. For a detailed discussion of Section 7704 of the Internal Revenue Code, please read “Material Tax Consequences — Partnership Status” and, for a summary of certain of the relevant terms of these contracts, please read “Business — Our Operations — Our Production Enhancement Services Contract Terms.” Our Operating Corp will conduct substantially all of our operations that our counsel has not concluded will generate qualifying income and it will pay federal income tax with respect to such operations. Approximately 81.9% and 80.4% of our pro forma revenues for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively, is attributable to the portion of our operations that will be conducted by our Operating LLC, and approximately 18.1% and 19.6% of our pro forma revenues for the year December 31, 2010 and the three months ended March 31, 2011, respectively, is attributable to the portion of our operations that will be conducted by our Operating Corp. Going forward, we intend to conduct substantially all of our new production |
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enhancement service business pursuant to contracts that our counsel concludes will generate qualifying income and such business will be conducted through our Operating LLC. |
• | The contracts pursuant to which we provide production enhancement services that our counsel has concluded will generate qualifying income generally require us to pay certain ad valorem taxes and insurance expenses. |
• | The results of our predecessor’s operations include an allocation of certain selling, general and administrative expenses from TETRA. Upon completion of this offering, we will be charged for certain selling, general and administrative costs in accordance with an omnibus agreement between TETRA, our general partner and us, and the amount of such charges could vary from the amounts presented in our predecessor’s results of operations. |
• | The results of our predecessor’s operations include interest expense associated with revolving credit indebtedness owed to an affiliate of TETRA. Under this indebtedness, which originated in August 2004, our predecessor could borrow up to $150 million at an interest rate of 9.0% per annum. This indebtedness was originally scheduled to mature on December 31, 2010 and the outstanding principal balance as of March 31, 2011 was $145.1 million. In December 2010, this indebtedness was refinanced to increase the maximum borrowings to $250 million, accrue interest at 7.5% and extend the maturity date to December 31, 2020. We will assume approximately $28.9 million of this indebtedness (as partial consideration for the assets we acquire from TETRA in connection with this offering), which $28.9 million will be repaid in full from the proceeds of this offering, and we will not reflect interest on this indebtedness in our future results of operations. The balance of this intercompany indebtedness will be repaid by our predecessor prior to this offering. |
• | At the closing of this offering, we will enter into a new $20.0 million revolving credit facility (which will be undrawn at closing of this offering) and use approximately $375,000 of the net proceeds received from this offering to pay financing fees and transaction costs in connection with the closing of the revolving credit facility. As of March 31, 2011, on a pro forma basis after giving effect to this offering and the use of the estimated proceeds hereof, we would have had borrowing capacity equal to the full $20 million commitment under the revolving credit facility, less $3.0 million that we are required to set aside as a reserve that cannot be borrowed. Borrowings under the revolving credit facility will bear interest at our option at either one, two, three, or six month LIBOR (adjusted to reflect any required bank reserves) plus 2.25% per annum or the lender’s prime rate. |
• | Upon completion of this offering, we anticipate that we will incur additional selling, general and administrative expenses of approximately $2.0 million per year as a result of being a publicly traded limited partnership, including costs associated with annual and quarterly reports to our unitholders, annual financial audits,Schedule K-1 preparation and distribution, investor relations activities, registrar and transfer agent fees, attorney fees, incremental director and executive officer liability insurance costs and director compensation. | |
• | Given our partnership structure and cash distribution policy, we will distribute all of our available cash from operating surplus at the end of each quarter (excluding cash reserved to operate our business). |
• | We will use approximately $28.9 million of the net proceeds received from this offering to retire the intercompany indebtedness owed by our predecessor to TETRA, which we will assume as partial consideration for the assets we acquire from TETRA in connection with this offering. We will also use approximately $375,000 of the net proceeds to pay financing fees and transaction costs in connection with the closing of the revolving credit facility. The balance of the net proceeds of this offering (approximately $9.9 million) will be available for general partnership purposes, which include funding the manufacturing of compressor units and the acquisition of field trucks and other equipment, as needed, and otherwise investing in short-term interest bearing securities. Please read “Use of Proceeds.” |
• | We are not a restricted subsidiary of TETRA for purposes of TETRA’s credit facility with J.P. Morgan Chase Bank, N.A., as Administrative Agent, which we refer to as the “TETRA Credit Facility,” or under several series of notes which TETRA has issued pursuant to certain note purchase agreements in |
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September 2004, April 2006, April 2008 and October 2010 (which included Series A and Series B notes) and which we collectively refer to as the “TETRA Senior Notes.” As such, our ability to take certain actions, including incurring indebtedness, granting liens on our assets and making acquisitions and capital expenditures, will not be restricted by the TETRA Credit Facility and the TETRA Senior Notes. |
Period-to-Period Change | ||||||||||||||||||||||||||||||||
Three Months | ||||||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||||||
Three Months Ended | Year Ended | March 31, 2011 | ||||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | 2009 vs. | 2010 vs. | vs. | ||||||||||||||||||||||||||||
Combined Results of Operations | 2008 | 2009 | 2010 | 2010 | 2011 | 2008 | 2009 | March 31, 2010 | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Compression and other services | $ | 91,925 | $ | 86,105 | $ | 77,395 | $ | 19,268 | $ | 19,394 | $ | (5,820 | ) | $ | (8,710 | ) | $ | 126 | ||||||||||||||
Sales of compressors and parts | 8,019 | 4,468 | 4,017 | 1,066 | 2,490 | (3,551 | ) | (451 | ) | 1,424 | ||||||||||||||||||||||
Total revenues | $ | 99,944 | $ | 90,573 | $ | 81,412 | $ | 20,334 | $ | 21,884 | $ | (9,371 | ) | $ | (9,161 | ) | $ | 1,550 | ||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||||||
Cost of compression and other services | 38,736 | 38,108 | 35,423 | 8,449 | 10,277 | (628 | ) | (2,685 | ) | 1,828 | ||||||||||||||||||||||
Cost of compressors and parts sales | 5,453 | 2,851 | 2,554 | 704 | 1,809 | (2,602 | ) | (297 | ) | 1,105 | ||||||||||||||||||||||
Total cost of revenues | $ | 44,189 | $ | 40,959 | $ | 37,977 | $ | 9,153 | $ | 12,086 | $ | (3,230 | ) | $ | (2,982 | ) | $ | 2,933 | ||||||||||||||
Selling, general and administrative expense | 14,352 | 13,193 | 14,328 | 3,328 | 3,299 | (1,159 | ) | 1,135 | (29 | ) | ||||||||||||||||||||||
Depreciation and amortization | 12,112 | 13,823 | 13,112 | 3,336 | 3,179 | 1,711 | (711 | ) | (157 | ) | ||||||||||||||||||||||
Interest expense | 10,990 | 11,980 | 13,096 | 3,299 | 2,723 | 990 | 1,116 | (576 | ) | |||||||||||||||||||||||
Other (income) expense, net | 174 | (82 | ) | 113 | (14 | ) | 89 | (256 | ) | 195 | 103 | |||||||||||||||||||||
Income before income taxes | $ | 18,127 | $ | 10,700 | $ | 2,786 | $ | 1,232 | $ | 508 | $ | (7,427 | ) | $ | (7,914 | ) | $ | (724 | ) | |||||||||||||
Provision for income taxes | 6,846 | 4,161 | 1,169 | 513 | 218 | (2,685 | ) | (2,992 | ) | (295 | ) | |||||||||||||||||||||
Net income | $ | 11,281 | $ | 6,539 | $ | 1,617 | $ | 719 | $ | 290 | $ | (4,742 | ) | $ | (4,922 | ) | $ | (429 | ) | |||||||||||||
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Period-to-Period Change | ||||||||||||||||||||||||||||||||
Three Months | ||||||||||||||||||||||||||||||||
Percentage of Total Revenues | Ended | |||||||||||||||||||||||||||||||
Three Months Ended | Year Ended | March 31, 2011 | ||||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | 2009 | 2010 | vs. | ||||||||||||||||||||||||||||
Combined Results of Operations | 2008 | 2009 | 2010 | 2010 | 2011 | vs. 2008 | vs. 2009 | March 31, 2010 | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Compression and other services | 92.0 | % | 95.1 | % | 95.1 | % | 94.8 | % | 88.6 | % | (6.3 | )% | (10.1 | )% | 0.7 | % | ||||||||||||||||
Sales of compressors and parts | 8.0 | % | 4.9 | % | 4.9 | % | 5.2 | % | 11.4 | % | (44.3 | )% | (10.1 | )% | 133.6 | % | ||||||||||||||||
Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | (9.4 | )% | (10.1 | )% | 7.6 | % | ||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||||||
Cost of compression and other services | 38.8 | % | 42.1 | % | 43.5 | % | 41.6 | % | 47.0 | % | (1.6 | )% | (7.0 | )% | 21.6 | % | ||||||||||||||||
Cost of compressors and parts sales | 5.5 | % | 3.1 | % | 3.1 | % | 3.5 | % | 8.3 | % | (47.7 | )% | (10.4 | )% | 157.0 | % | ||||||||||||||||
Total cost of revenues | 44.2 | % | 45.2 | % | 46.6 | % | 45.0 | % | 55.2 | % | (7.3 | )% | (7.3 | )% | 32.0 | % | ||||||||||||||||
Selling, general and administrative expense | 14.4 | % | 14.6 | % | 17.6 | % | 16.4 | % | 15.1 | % | (8.1 | )% | 8.6 | % | (0.9 | )% | ||||||||||||||||
Depreciation and amortization | 12.1 | % | 15.3 | % | 16.1 | % | 16.4 | % | 14.5 | % | 14.1 | % | (5.1 | )% | (4.7 | )% | ||||||||||||||||
Interest expense | 11.0 | % | 13.2 | % | 16.1 | % | 16.2 | % | 12.4 | % | 9.0 | % | 9.3 | % | (17.5 | )% | ||||||||||||||||
Other (income) expense, net | 0.2 | % | (0.1 | )% | 0.1 | % | (0.1 | )% | 0.4 | % | (147.1 | )% | 237.8 | % | 735.7 | % | ||||||||||||||||
Income before income taxes | 18.1 | % | 11.8 | % | 3.4 | % | 6.1 | % | 2.3 | % | (41.0 | )% | (74.0 | )% | (58.8 | )% | ||||||||||||||||
Net income | 11.3 | % | 7.2 | % | 2.0 | % | 3.5 | % | 1.3 | % | (42.0 | )% | (75.3 | )% | (59.7 | )% | ||||||||||||||||
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• | incur additional debt or issue guarantees; |
• | incur or permit certain liens to exist; |
• | make negative pledges; |
• | pay dividends or make other distributions; |
• | make certain loans, investments, acquisitions or other restricted payments; |
• | modify certain material agreements; |
• | dispose of assets outside the ordinary course of business, including the issuance and sale of capital stock of our subsidiaries; |
• | enter into sale-leaseback transactions; |
• | enter into swap agreements; |
• | engage in certain types of transactions with affiliates; |
• | merge, consolidate or transfer all or substantially all of our assets; and |
• | prepay certain indebtedness. |
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Compressco Partners Predecessor | ||||||||||||||||||||||||||||
Payments Due | ||||||||||||||||||||||||||||
More than | ||||||||||||||||||||||||||||
Less than | 5 Years | |||||||||||||||||||||||||||
1 Year | 2 Years | 3 Years | 4 Years | 5 Years | (Beyond | |||||||||||||||||||||||
Total | (2011) | (2012) | (2013) | (2014) | (2015) | 2015) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Long-term debt(a) | $ | 145,100 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 145,100 | ||||||||||||||
Interest on debt | 108,810 | 10,881 | 10,881 | 10,881 | 10,881 | 10,881 | 54,405 | |||||||||||||||||||||
Operating leases obligations | 1,354 | 506 | 405 | 342 | 81 | 20 | — | |||||||||||||||||||||
Total contractual cash obligations | $ | 255,264 | $ | 11,387 | $ | 11,286 | $ | 11,223 | $ | 10,962 | $ | 10,901 | $ | 199,505 | ||||||||||||||
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(a) | Reflects the December 2010 refinancing of our predecessor’s revolving credit promissory note to an affiliate of TETRA whereby the maturity date was extended from December 2010 to December 2020. At the closing of this offering, we will assume approximately $28.9 million of this indebtedness (as partial consideration for the assets we acquire from TETRA in connection with this offering), which $28.9 million will be repaid in full from the proceeds of this offering. The balance of this indebtedness will be repaid by our predecessor prior to this offering. |
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• | removal of liquids in natural gas well production tubing, which reduces surface pressure and allows natural gas to flow more freely, resulting in increased production and total recoverable reserves; | |
• | separation of oil, condensates and water from natural gas; | |
• | metering of natural gas, liquids, and oil; and | |
• | various other applications, including the capture of vapors and corresponding reduction of pressures in natural gas condensate holding tanks, and the reduction of pressures caused by well casing head gas in oil wells. |
• | increased cash flow from producing higher volumes of natural gas and oil; | |
• | reduced operating, maintenance and equipment costs; and | |
• | the ability to more efficiently meet changing wellhead compression needs over time, while limiting capital investments in wellhead compression equipment. |
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• | Increase service coverage within our current domestic and international markets. We provide services to more than 400 natural gas and oil exploration and production companies operating throughout most of the onshore producing regions of the United States. Most of our services are performed in the Ark-La-Tex region (encompassing east Texas, north Louisiana and southwest Arkansas), San Juan Basin and Mid-Continent region of the United States. Internationally we have significant operations in Canada and Mexico and a growing presence in certain countries in South America, Eastern Europe and the Asia-Pacific region. We believe that our long-term growth opportunities are strong, based on the small size of most of our competitors and the significant number of wells that may be candidates for our service. To realize the potential of this market opportunity, we intend to expand our highly trained service staffs as well as utilize our in-house manufacturing capabilities to increase our fleet of compressor units. | |
• | Pursue additional domestic and international growth opportunities. Along with focusing on our existing markets, we also intend to expand our service coverage into other natural gas producing areas of the United States, Mexico, Canada and Argentina, as well as other select international markets in South America, Eastern Europe and the Asia-Pacific region. | |
• | Improve our service offerings. We are constantly seeking to improve our services by increasing the efficiency and capabilities of our compressor units, as well as expanding the expertise of our field service personnel through enhanced training and education. For example, utilizing our ePumper® system, astate-of-the-art SCADA satellite telemetry-based reporting system, we remotely monitor, in |
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real time, whether our services are being continuously provided at each well site. The ePumper® system has been instrumental in improving the response time of our field personnel and, consequently, reducing well downtime and increasing production for our customers. We believe that the value, breadth and quality of services that we provide to natural gas and oil producers gives us an advantage over our competitors who primarily provide only equipment and maintenance services, without ongoing monitoring and modification services. |
• | Promote our additional service applications. While our production enhancement services improve the value of customers’ natural gas wells by increasing daily production and total recoverable reserves, they also have other applications, such as vapor recovery and solids removal. Certain types of natural gas wells produce substantial amounts of condensate, which are stored in closed tanks after production. Due to evaporation, the condensate in these tanks emits vapors, resulting in a loss of condensate and the creation of undue pressure within these tanks. Our compressor units capture such vapors and reduce tank pressures. Our production enhancement services can also be used to reduce pressures caused by casing head gas in oil wells with pumping units, which results in an increased flowing bottom hole pressure and typically results in increased oil and natural gas production for our customers. Our automated sand separation services are utilized at the well to remove and discharge solids that would otherwise cause abrasive wear damage to production enhancement and other equipment that is installed downstream and inhibit the production from the well. | |
• | Leverage our relationships with TETRA and its customers. We intend to leverage our relationships with TETRA and its customers in the natural gas industry to grow our production enhancement services business. As our coverage grows, we believe that we will have opportunities to offer our production enhancement services to some of TETRA’s customers that are not currently using them. For example, the production enhancement services that we provide in Mexico resulted, in large part, from TETRA’s relationship with Pemex. We expect to continue to work with TETRA to identify opportunities for us to provide our production enhancement services to TETRA’s existing and future customers. | |
• | Take advantage of selective acquisition opportunities. From time to time we may choose to make business acquisitions to pursue market opportunities, increase our existing capabilities and expand into new areas of operations. This may involve the acquisition of a competing business or a business that is complementary to ours. We will consider acquisitions that (i) are compatible with our operating philosophy and long-term business objectives, (ii) represent opportunities in existing geographic areas of operations or new geographic areas identified to represent high growth potential, (iii) meet certain economic thresholds and (iv) for which financing is available. While there are no pending acquisitions under current consideration, we will continually consider acquisitions. |
• | Our ability to increase the value of natural gas wells. Our customers retain our services because of our ability to identify their underperforming natural gas wells and, through our production enhancement services, increase their production rates. We typically increase hydrocarbon production by more than 120 Mcfd of natural gas, while consuming approximately only 8 to 10 Mcfd of natural gas as fuel. This increase in production extends the well’s productive life and, ultimately, increases total recoverable reserves and cash flows. | |
• | Our superior customer service and highly trained field personnel. We provide our services through our staffs of regional service supervisors, optimization specialists and field mechanics. Regional service supervisors manage the field mechanics that install, operate, monitor and maintain the compressor units we use to provide our standard production enhancement services, while optimization specialists spend extra time on particular wells to optimize their production, thereby providing an additional level of service at no further cost to the customer. Each member of our staffs has completed a rigorous, customer-focused training program and continues to receive ongoing technical and safety training. |
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• | Our proactive, engineered approach to marketing and service. Central to our marketing efforts is our emphasis on performing well data analyses at our petroleum engineering office in Houston, Texas. Our engineering staff focuses on geologic basins with reservoir characteristics that are known to be responsive to our technology and analyzes publicly available production data to identify wells within those basins that we believe could benefit from our production enhancement services. We proactively market to producers in these basins and our marketing services range from a low cost two-week trial of our production enhancement services up to a comprehensive well-test project that allows our customers to confirm the effectiveness of our services prior to entering into a service contract. We believe this proactive strategy of performing well data analyses and approaching producers with targeted solutions increases our marketing and application success rates and further differentiates us from our competitors. | |
• | Our GasJack®units and VJacktmunits. We believe that our 46-horsepower natural gas powered GasJack® unit is more fuel-efficient, produces lower emissions, and handles variable liquid conditions encountered in natural gas and oil wells more effectively, than the higher horsepower screw and reciprocating compressors utilized by many of our competitors. Our compact GasJack® unit allows us to perform wellhead compression, liquids separation and optional gas metering services all from one skid, thereby providing services that otherwise would generally require the use of multiple, more costly pieces of equipment from our competitors. We also believe that our 40-horsepower electric VJacktm unit provides production uplift with zero engine-driven emissions and requires significantly less maintenance than a natural gas powered compressor. Our VJacktm unit is primarily designed for vapor recovery applications (to capture natural gas vapors emitting from closed storage tanks after production and to reduce storage tank pressures) and backside pumping applications on oil wells (to reduce pressures caused by casing head gas in oil wells with pumping units). Centered on GasJack® unit technology, the VJacktm unit is capable of full wellbore stream production, and can handle up to 50 barrels per day, or “bpd,” of liquids on a standard skid package. Each of these compressor platforms provides a reliable, compact and low emission package that is easy to transport and install on our customer’s well site. | |
• | Our broad geographic presence in domestic markets and growing international presence. Our domestic service area covers most of the onshore producing regions of the United States. While most of our services are performed in the Ark-La-Tex region, San Juan Basin and Mid-Continent region of the United States, we have a substantial presence in other U.S. producing regions, including the Permian Basin, North Texas, Gulf Coast, Central and Northern Rockies, and California. Our services have historically focused on customers with conventional production in mature fields, but we also service customers in some of the largest and fastest growing unconventional gas resource markets in the United States, including the Cotton Valley Trend, Barnett Shale, Fayetteville Shale, Woodford Shale, Piceance Basin, and Marcellus Shale. We are also well positioned to eventually serve the Jonah Field/Pinedale Anticline and emerging Haynesville Shale. Internationally, we have significant operations in Western Canada and Northern and Southern Mexico (revenues from these countries represented approximately 6.1% and 13.8% of our predecessor’s 2010 revenues, respectively) and a growing presence in certain countries in South America, Eastern Europe and the Asia-Pacific region. |
• | Our experienced management team with proven ability to deliver strong, long-term, growth. The management team of our general partner, which averages 26.5 years of oil and gas industry experience, is led by Ronald J. Foster (President), who has over 32 years of experience in the oil and gas industry, Gary L. McBride (Chief Financial Officer and Secretary), Kevin W. Book (Vice President of International Operations), Larry W. Brickman (Vice President of Field Services), Ted D. Garner (Vice President of Engineering), Sheri J. Vanhooser (Vice President of Marketing and Business Development) and Kenneth R. Sylvester (Vice President of Production Operations). Most of this team has been involved in the management of our predecessor over the past eight years and was integral to its strong growth during that period. |
• | Our record of maintaining established customer relationships. We currently have over 400 customers, including BP, Pemex, Devon Energy Corporation, EXCO Resources and Conoco Phillips. Although we enter into short-term contracts and have added a significant number of new customers over the last few |
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years, many of our largest customers have been with us for over five years. Because of the value, quality and breadth of our services, we typically have enjoyed long-term relationships with our customers, despite the short-term nature of our contracts. |
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Number of | ||||
Country | Compressor Units | |||
United States | 2,537 | |||
Mexico | 114 | |||
Canada | 59 | |||
Argentina | 19 | |||
Indonesia | 19 | |||
Other | 5 | |||
Total | 2,753 | |||
• | Operation and Maintenance. As owner and operator, we are responsible for operating and maintaining the equipment we use to provide production enhancement services. |
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• | Term and Termination. Our domestic production enhancement services contracts typically have an initial term of one month and, unless terminated by us or our customers with30-days notice, our production enhancement services contracts continue on amonth-to-month basis thereafter. | |
• | Fees and Expenses. We charge our customers a fixed monthly fee for the production enhancement services specified in each service order. The fees we charge are based, in large part, on the operating conditions at the particular service site. | |
• | Service Availability. If the level of production enhancement services we provide falls below certain contractually specified percentages, other than as a result of factors beyond our control, our customers are generally entitled, upon request, to limited credits against our service fees. To date, we have not issued material credits as a result of these provisions. | |
• | Service Standards and Specifications. Under our services contracts, we are responsible for providing production enhancement services in accordance with the particular specifications of a job. | |
• | Title; Risk of Loss. We retain title to the equipment used to provide services to our customers, and we bear the risk of loss for our equipment to the extent not caused by (i) a breach of certain customer obligations primarily involving the service site and the fuel gas being supplied to us, or (ii) an uncontrollable well condition. | |
• | Ad Valorem Taxes and Insurance. As owner of the equipment, we are obligated to pay ad valorem taxes levied on the equipment we use to provide production enhancement services and certain insurance expenses and cannot seek reimbursement for such taxes and expenses from our customers. |
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• | the Clean Air Act and comparable state laws, and regulations thereunder, which regulate air emissions; | |
• | the Clean Water Act and comparable state laws, and regulations thereunder, which regulate the discharge of pollutants into regulated waters, including industrial wastewater discharges and storm water runoff; | |
• | the Resource Conservation and Recovery Act, or “RCRA,” and comparable state laws, and regulations, thereunder, which regulate the management and disposal of solid and hazardous waste; and | |
• | the federal Comprehensive Environmental Response, Compensation, and Liability Act, or “CERCLA,” and comparable state laws and regulations thereunder, known more commonly as “Superfund,” which impose liability for the cleanup of releases of hazardous substances in the environment. |
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Name | Age | Position with Compressco Partners GP | ||||
Geoffrey M. Hertel | 66 | Chairman of the Board of Directors | ||||
Stuart M. Brightman | 54 | Director | ||||
William D. Sullivan | 54 | Independent Director | ||||
Ronald J. Foster | 54 | President and Director | ||||
Gary L. McBride | 58 | Chief Financial Officer, Treasurer and Secretary | ||||
Kevin W. Book | 36 | Vice President of International Operations | ||||
Larry W. Brickman | 46 | Vice President of Field Services |
Name | Age | Position with Compressco Partners GP | ||||
Ted D. Garner | 66 | Vice President of Engineering | ||||
Sheri J. Vanhooser | 51 | Vice President of Marketing and Business Development | ||||
Kenneth R. Sylvester | 45 | Vice President of Production Operations |
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• | Ronald J. Foster — President | |
• | Gary L. McBride — Chief Financial Officer | |
• | Kevin W. Book — Vice President — International Operations | |
• | Larry W. Brickman — Vice President — Field Services |
• | to design competitive total compensation programs to enhance our general partner’s ability to attract and retain knowledgeable and experienced senior management employees; | |
• | to motivate employees to meet or exceed applicable financial, operational, heath, safety, and environmental and individual performance goals; | |
• | to target salary and annual cash incentive levels that reflect competitive market conditions and that are generally within the median range for the relevant peer group; |
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• | to provide long-term incentive compensation opportunities that are consistent with our general partner’s overall compensation philosophy; | |
• | to provide a significant percentage of total compensation that is contingent on satisfying predetermined performance criteria; and | |
• | to ensure that a significant portion of the total compensation package for employees is determined by increases in equity value, thus assuring an alignment of senior management level employees and TETRA and Compressco’s equity holders. |
Carbo Ceramics | Newpark Resources | Superior Energy Services | ||
Lufkin Industries | Basic Energy Services | Oceaneering International | ||
Core Laboratories | Global Industries | Oil States International | ||
RPC Inc. | Key Energy Services | Helix Energy Solutions Group | ||
Cal Dive International | Complete Productions Services | Exterran Holdings |
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• | a summary of such officers’ historical compensation, including base salaries, cash incentive bonuses and equity awards in a tally sheet format; | |
• | the current equity ownership position of such officers; | |
• | an analysis of our annual performance relative to budgeted expectations for the year; and | |
• | an assessment of such officers’ individual performances for the year. |
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Executive | Threshold | Target | Stretch | |||||||||
Mr. Foster | 9 | % | 45 | % | 72 | % | ||||||
Mr. McBride | 5 | % | 25 | % | 40 | % | ||||||
Mr. Book | 5 | % | 25 | % | 40 | % | ||||||
Mr. Brickman | 5 | % | 25 | % | 40 | % |
TETRA | Compressco | |||||||||||||||||||||||||||
Consolidated | Profit | Compressco | ||||||||||||||||||||||||||
Earnings | Before Tax | PBT | Compressco | Personal | ||||||||||||||||||||||||
per Share | (“PBT”) | Margin | Safety | Net Sets | Goals | Total | ||||||||||||||||||||||
Name | (%)(1) | (%) | (%)(2) | (%) | (%) | (%) | (%) | |||||||||||||||||||||
Mr. Foster | 10 | 30 | 10 | 20 | 10 | 20 | 100 | |||||||||||||||||||||
Mr. McBride | 10 | 30 | 10 | 20 | 10 | 20 | 100 | |||||||||||||||||||||
Mr. Brickman | 10 | 30 | 10 | 20 | 10 | 20 | 100 | |||||||||||||||||||||
Mr. Book | 10 | 30 | 10 | 20 | 10 | 20 | 100 |
(1) | TETRA’s consolidated earnings per share are calculated on a fully diluted basis. | |
(2) | Compressco’s profit before tax margin is calculated by dividing Compressco’s profit before tax by Compressco’s revenues, excluding the financial results of Compressco’s Latin American operations. |
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Executive | Threshold | Target | Stretch | |||||||||
Mr. Foster | 9 | % | 45 | % | 72 | % | ||||||
Mr. McBride | 5 | % | 25 | % | 40 | % | ||||||
Mr. Book | 5 | % | 25 | % | 40 | % | ||||||
Mr. Brickman | 5 | % | 25 | % | 40 | % |
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Non-Equity | ||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||||
Name and | Fiscal | Bonus | Awards | Awards | Compensation | Compensation | ||||||||||||||||||||||||||
Principal Position | Year | Salary ($) | ($)(1) | ($)(2) | ($)(2) | ($)(3) | ($)(4) | Total ($)(5) | ||||||||||||||||||||||||
Ronald J. Foster — President | 2010 | 250,000 | — | 87,210 | 86,565 | 25,763 | 8,228 | 457,766 | ||||||||||||||||||||||||
2009 | 233,654 | 56,250 | — | 78,120 | — | 1,817 | 369,841 | |||||||||||||||||||||||||
Gary L. McBride — Chief Financial Officer | 2010 | 162,700 | — | 19,584 | 19,403 | 9,315 | 6,216 | 218,218 | ||||||||||||||||||||||||
2009 | 168,958 | 12,000 | — | 17,360 | — | 1,314 | 199,632 | |||||||||||||||||||||||||
Kevin W. Book — Vice President of International Operations | 2010 | 199,081 | — | 19,584 | 19,403 | 11,481 | 19,239 | 268,788 | ||||||||||||||||||||||||
2009 | 198,346 | 18,000 | — | 14,880 | — | 21,250 | 252,476 | |||||||||||||||||||||||||
Larry W. Brickman — Vice President of Field Services | 2010 | 130,875 | — | 12,648 | 12,537 | 8,588 | 16,668 | 181,316 | ||||||||||||||||||||||||
2009 | 124,731 | 10,000 | — | 14,880 | — | 10,974 | 160,585 |
(1) | We did not grant discretionary bonuses for the 2010 year. | |
(2) | The amounts included in the “Stock Awards” and “Option Awards” columns reflect the aggregate grant date fair value of awards granted during the fiscal years 2010 and 2009 in accordance with FASB ASC |
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Topic 718. A discussion of the assumptions used in valuation of stock and option awards may be found in “Note L — Equity-Based Compensation” in the Notes to Consolidated Financial Statements of TETRA’s Annual Report onForm 10-K for the year ended December 31, 2010, as filed with the SEC on March 1, 2011. |
(3) | The amount included in the “Non-Equity Incentive Plan Compensation” column reflect the actual amount of the annual cash incentive award earned for 2010 performance and paid in March 2011 under the Cash Incentive Compensation Plan. | |
(4) | The amounts included in the “All Other Compensation” column are comprised of the following amounts: |
Long and | ||||||||||||||||||||
Short Term | ||||||||||||||||||||
Executive | Car Allowance | 401(k) Match | Basic Life | Disability | Health | |||||||||||||||
Ronald J. Foster | — | 4,615 | 1,860 | 925 | 828 | |||||||||||||||
Gary L. McBride | — | 3,567 | 1,210 | 611 | 828 | |||||||||||||||
Kevin W. Book | 10,200 | 5,972 | 1,492 | 747 | 828 | |||||||||||||||
Larry W. Brickman | 10,200 | 3,926 | 1,116 | 565 | 861 |
All Other | ||||||||||||||||||||||||||||||||||||
All Other | Option | |||||||||||||||||||||||||||||||||||
Stock | Awards: | Grant Date | ||||||||||||||||||||||||||||||||||
Date of | Estimated Future Payouts | Awards: | Number of | Exercise | Fair Value | |||||||||||||||||||||||||||||||
Comp. | Under Non-Equity | Number of | Securities | Price of | of Stock | |||||||||||||||||||||||||||||||
Grant | Committee | Incentive Plan Awards(2) | Shares of | Underlying | Option | and Option | ||||||||||||||||||||||||||||||
Name | Date | Action(1) | Threshold | Target | Maximum | Stock | Options | Awards | Awards(3) | |||||||||||||||||||||||||||
Ronald J. Foster | 3/8/10 | 3/8/10 | $ | 25,763 | — | — | — | — | ||||||||||||||||||||||||||||
5/20/10 | 5/18/10 | $ | 11,118 | $ | 55,591 | $ | 111,182 | 8,550 | 14,500 | $ | 10.20 | $ | 173,775 | |||||||||||||||||||||||
Gary L. McBride | 3/8/10 | 3/8/10 | $ | 9,315 | — | — | — | — | ||||||||||||||||||||||||||||
5/20/10 | 5/18/10 | — | — | — | 1,920 | 3,250 | $ | 10.20 | $ | 38,987 | ||||||||||||||||||||||||||
Kevin W. Book | 3/8/10 | 3/8/10 | $ | 11,481 | — | — | — | — | ||||||||||||||||||||||||||||
5/20/10 | 5/18/10 | — | — | — | 1,920 | 3,250 | $ | 10.20 | $ | 38,987 | ||||||||||||||||||||||||||
Larry W. Brickman | 3/8/10 | 3/8/10 | $ | 8,588 | — | — | — | — | ||||||||||||||||||||||||||||
5/20/10 | 5/18/10 | — | — | — | 1,240 | 2,100 | $ | 10.20 | $ | 25,185 |
(1) | Under TETRA’s Grant Procedures, TETRA may designate effective grant dates following the date of its compensation committee’s action. | |
(2) | The non-equity incentive plan awards granted on March 8, 2010 are actual amounts paid to the executives in March 2011 with respect to the annual cash incentive award under the Cash Incentive Compensation Plan. The non-equity incentive plan award granted on May 20, 2010 to Mr. Foster is the threshold, target and maximum amounts of the long-term cash incentive granted for the January 1, 2010 through December 31, 2012 performance period that may be paid, to the extent earned and at the discretion of TETRA’s compensation committee, in February 2013; the remaining Named Executive Officers did not receive a long-term cash incentive award during the 2010 year. |
(3) | The FASB ASC Topic 718 value of the stock options granted on May 20, 2010 was $5.97 per option. A discussion of the assumptions used in valuation of stock and option awards may be found in “Note L — Equity-Based Compensation” in the Notes to Consolidated Financial Statements of TETRA’s Annual Report onForm 10-K for the year ended December 31, 2010, as filed with the SEC on March 1, 2011. |
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Percentage to | ||||||||
Total Compensation | ||||||||
Name | Salary ($) | (%) | ||||||
Ronald J. Foster | 250,000 | 55 | % | |||||
Gary L. McBride | 162,700 | 75 | % | |||||
Kevin W. Book | 199,081 | 74 | % | |||||
Larry W. Brickman | 130,875 | 72 | % |
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Stock Awards | ||||||||||||||||||||||||
Market Value | ||||||||||||||||||||||||
Option Awards | Number of | of Shares | ||||||||||||||||||||||
Option | Option | Shares of Stock | of Stock | |||||||||||||||||||||
Exercise | Expiration | That Have | That Have Not | |||||||||||||||||||||
Name | Exercisable | Unexercisable | Price(1) | Date | Not Vested | Vested(2) | ||||||||||||||||||
Ronald J. Foster | 8,334 | 0 | $ | 8.30 | 7/15/2014 | |||||||||||||||||||
10,201 | 0 | $ | 9.2067 | 12/28/2014 | ||||||||||||||||||||
3,733 | 267 | (3) | $ | 23.055 | 4/12/2016 | |||||||||||||||||||
3,666 | 334 | (4) | $ | 28.075 | 5/12/2016 | |||||||||||||||||||
4,133 | 3,867 | (5) | $ | 21.10 | 5/20/2018 | |||||||||||||||||||
17,500 | 14,000 | (6) | $ | 4.17 | 4/9/2019 | |||||||||||||||||||
0 | 14,500 | (10) | $ | 10.20 | 5/20/2020 | |||||||||||||||||||
600 | (7) | $ | 7,122 | |||||||||||||||||||||
8,550 | (11) | $ | 101,489 | |||||||||||||||||||||
Gary L. McBride | 30,000 | 0 | $ | 8.30 | 7/15/2014 | |||||||||||||||||||
10,500 | 0 | $ | 9.2067 | 12/28/2014 | ||||||||||||||||||||
1,866 | 134 | (3) | $ | 23.055 | 4/12/2016 | |||||||||||||||||||
2,583 | 2,417 | (5) | $ | 21.10 | 5/20/2018 | |||||||||||||||||||
3,888 | 3,112 | (6) | $ | 4.17 | 4/9/2019 | |||||||||||||||||||
0 | 3,250 | (10) | $ | 10.20 | 5/20/2020 | |||||||||||||||||||
100 | (8) | $ | 1,187 | |||||||||||||||||||||
600 | (7) | $ | 7,122 | |||||||||||||||||||||
1,920 | (11) | $ | 22,790 | |||||||||||||||||||||
Kevin W. Book | 10,500 | 0 | $ | 9.2667 | 12/9/2014 | |||||||||||||||||||
1,866 | 134 | (3) | $ | 23.055 | 4/12/2016 | |||||||||||||||||||
1,833 | 167 | (4) | $ | 28.075 | 5/12/2016 | |||||||||||||||||||
2,583 | 2,417 | (5) | $ | 21.10 | 5/20/2018 | |||||||||||||||||||
3,333 | 2,667 | (6) | $ | 4.17 | 4/9/2019 | |||||||||||||||||||
0 | 3,250 | (10) | $ | 10.20 | 5/20/2020 | |||||||||||||||||||
300 | (7) | $ | 3,561 | |||||||||||||||||||||
1,920 | (11) | $ | 22,790 | |||||||||||||||||||||
Larry W. Brickman | 6,999 | 501 | (9) | $ | 18.80 | 3/1/2016 | ||||||||||||||||||
3,100 | 2,900 | (5) | $ | 21.10 | 5/20/2018 | |||||||||||||||||||
3,333 | 2,667 | (6) | $ | 4.17 | 4/9/2019 | |||||||||||||||||||
0 | 2,100 | (10) | $ | 10.20 | 5/20/2020 | |||||||||||||||||||
450 | (7) | $ | 5,342 | |||||||||||||||||||||
1,240 | (11) | $ | 14,719 |
(1) | Each of the awards in this table relates to shares of TETRA’s common stock and has been granted under one of the equity compensation plans maintained by TETRA. Under the terms of each plan, the option exercise price must be greater than or equal to 100% of the closing market price of the common stock on the date of grant. |
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(2) | Market value is determined by multiplying the number of shares of stock that had not vested on December 31, 2010 by $11.87, the closing price of the common stock on December 31, 2010. | |
(3) | The stock option award vested 20% on April 12, 2007, vests an additional 1.6667% of the award each month, and will become fully vested on April 12, 2011. | |
(4) | The stock option award vested 20% on May 12, 2007, vests an additional 1.6667% of the award each month and will become fully vested on May 12, 2011. | |
(5) | The stock option award vested 20% on May 20, 2009, vests an additional 1.6667% of the award each month and will become fully vested on May 20, 2013. | |
(6) | The stock option award vested 33.33% on April 9, 2010, vests an additional 2.7778% of the award each month and will become fully vested on April 9, 2012. | |
(7) | The restricted stock award vested 20% on May 20, 2008, vests an additional 10% of the award once every six months and will become fully vested on May 20, 2012. | |
(8) | The restricted stock award vested 20% on May 12, 2007, vests an additional 10% of the award once every six months and will become fully vested on May 12, 2011. | |
(9) | The stock option award vested 20% on March 1, 2007, vests an additional 1.6667% of the award each month and will become fully vested on March 1, 2011. | |
(10) | The stock option award will vest 33.33% on May 20, 2011, will vest an additional 2.7778% of the award each month thereafter, and will become fully vested on May 20, 2013. | |
(11) | The restricted stock award will vest 33.33% on May 20, 2011, will vest an additional 16.6667% of the award once every six months thereafter, and will become fully vested on May 20, 2013. |
Stock Awards | ||||||||
Number of | ||||||||
Shares | Value Realized | |||||||
Acquired on | on Vesting | |||||||
Vesting | (1) | |||||||
Ronald J. Foster | 400 | $ | 4,126 | |||||
Gary L. McBride | 600 | $ | 6,382 | |||||
Kevin W. Book | 200 | $ | 2,063 | |||||
Larry W. Brickman | 300 | $ | 3,095 |
(1) | Calculated by multiplying the number of restricted shares by the market value of the underlying shares on the vesting date. |
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• | each person who then will beneficially own 5% or more of the then outstanding common units; | |
• | all of the directors and director nominees of our general partner; | |
• | each executive officer of our general partner; and | |
• | all directors and executive officers of our general partner as a group. |
Percentage | Percentage of | Percentage of | ||||||||||||||||||
Common | of Common | Subordinated | Subordinated | Common and | ||||||||||||||||
Units to be | Units to be | Units | Units | Subordinated Units | ||||||||||||||||
Beneficially | Beneficially | Beneficially | Beneficially | to be Beneficially | ||||||||||||||||
Name of Beneficial Owner | Owned(1)(2) | Owned(1) | Owned | Owned | Owned(2) | |||||||||||||||
TETRA Technologies, Inc.(3) | 6,597,257 | 72.5 | % | 6,273,970 | 100 | % | 83.7 | % | ||||||||||||
Ronald J. Foster | — | * | — | — | * | |||||||||||||||
Gary L. McBride | — | * | — | — | * | |||||||||||||||
Kevin W. Book | — | * | — | — | * | |||||||||||||||
Larry W. Brickman | — | * | — | — | * | |||||||||||||||
Geoffrey M. Hertel | — | * | — | — | * | |||||||||||||||
Stuart M. Brightman | — | * | — | — | * | |||||||||||||||
William D. Sullivan | — | * | — | — | * | |||||||||||||||
All directors and executive officers as a group (persons) | * | — | — | * | ||||||||||||||||
Total | 6,597,257 | 72.5 | % | 6,273,970 | 100 | % | 83.7 | % | ||||||||||||
* | Less than 1%. |
(1) | Includes common units as to which such person has the right to acquire beneficial ownership within 60 days. | |
(2) | Assuming no exercise of the underwriters’ overallotment option. |
(3) | The common units and subordinated units beneficially owned by TETRA Technologies, Inc. are directly held of record by our general partner and TETRA International, each a wholly owned subsidiary of TETRA Technologies, Inc. Each of our general partner and TETRA International has sole voting and investment power over the common units and subordinated units held by them. Our general partner is a direct, wholly owned subsidiary of CFSI, CFSI is a direct, wholly owned subsidiary of Compressco, and Compressco and TETRA International are direct, wholly owned subsidiaries of TETRA Technologies, Inc. As a result TETRA Technologies, Inc. has indirect, sole voting and investment power over the common units and subordinated units directly held by our general partner and TETRA International. |
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The consideration received by TETRA and its subsidiaries for the contribution to us of a portion of our predecessor’s business | • 6,597,257 common units (6,222,257 common units if the underwriters exercise their option to purchase additional common units in full); |
• 6,273,970 subordinated units; |
• a 2.0% general partner interest; and |
• the incentive distribution rights. |
Distributions of available cash to our general partner and its affiliates | We will generally make cash distributions 98.0% to our unitholders, including our general partner and its affiliates, as the holders of an aggregate of 6,597,257 common units (6,222,257 common units if the underwriters exercise their option to purchase additional common units in full) and all of the subordinated units, and 2.0% to our general partner. In addition, if distributions exceed the minimum quarterly distribution and other higher target levels, our general partner will be entitled to increasing percentages of the distributions, up to 48.0% of the distributions above the highest target level. | |
Assuming we have sufficient available cash to pay the minimum quarterly distribution on all of our outstanding common and subordinated units for four quarters, our general partner and its affiliates would receive an annual distribution of approximately $0.5 million on their 2.0% general partner interest and approximately $20.0 million on their common units and subordinated units. |
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Payments to our general partner and its affiliates | We will reimburse our general partner and its affiliates for the payment of all direct and indirect expenses incurred on our behalf. For further information regarding the reimbursement of these expenses, please read “— Omnibus Agreement.” | |
Withdrawal or removal of our general partner | If our general partner withdraws or is removed, its general partner interest and its incentive distribution rights will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests. Please read “The Partnership Agreement — Withdrawal or Removal of Our General Partner.” |
Liquidation | Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their respective capital account balances. |
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• | approved by the conflicts committee in good faith, although our general partner is not obligated to seek such approval; or | |
• | approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates; or | |
• | on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or | |
• | fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. |
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• | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Actions of our general partner, which are made in its individual capacity, will be made by its sole shareholder, Compressco, which, in turn, is a |
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wholly owned subsidiary of and controlled by TETRA. Examples include the exercise of its limited call right, the exercise of its rights to transfer or vote the units it owns, the exercise of its registration rights and its determination whether or not to consent to any sale, merger or consolidation of the partnership or amendment to the partnership agreement; |
• | provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith; | |
• | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our general partner acting in good faith and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or must be “fair and reasonable” to us, as determined by our general partner in good faith and that, in determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; | |
• | provides that our general partner and its executive officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and | |
• | provides that in resolving conflicts of interest, it will be presumed that in making its decision our general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. |
• | the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into our securities, and the incurring of any other obligations; | |
• | the purchase, sale or other acquisition or disposition of our securities, or the issuance of additional options, rights, warrants and appreciation rights relating to our securities; | |
• | the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of our assets or the merger or other combination of the partnership with or into another person; | |
• | the negotiation, execution and performance of any contracts, conveyances or other instruments; | |
• | the distribution of our cash; | |
• | the selection, employment, retention and dismissal of employees and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; | |
• | the maintenance of insurance for our benefit and the benefit of our partners and indemnitees; |
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• | the formation of, or acquisition of an interest in, the contribution of property to, and the making of loans to, any limited or general partnerships, joint ventures, corporations, limited liability companies or other relationships; | |
• | the control of any matters affecting our rights and obligations, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense and the settlement of claims and litigation; | |
• | the indemnification of any person against liabilities and contingencies to the extent permitted by law; | |
• | the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over our business or assets; and | |
• | the entering into of agreements with any of its affiliates to render services to us or to itself in the discharge of its duties as our general partner. |
• | the manner in which our business is operated; | |
• | the amount of our borrowings; | |
• | the amount, nature and timing of our capital expenditures; | |
• | our issuance of additional partnership units; | |
• | asset purchases, transfers and sales and other acquisitions and dispositions; and | |
• | the amount of cash reserves necessary or appropriate to satisfy general, administrative and other expenses and debt service requirements, and otherwise provide for the proper conduct of our business. |
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State-law fiduciary duty standards | Fiduciary duties are generally considered to include an obligation to act in good faith and with due care and loyalty. The duty of care, in the absence of a provision in a partnership agreement providing otherwise, would generally require a general partner to act for the partnership in the same manner as a prudent person would act on his own behalf. The duty of loyalty, in the absence of a provision in a partnership agreement providing otherwise, would require a general partner to act in good faith and would generally prohibit a general partner of a Delaware limited partnership from taking any action or engaging in any transaction where a conflict of interest is present. | |
The Delaware Act generally provides that a limited partner may institute legal action on behalf of the partnership to recover damages from a third party where a general partner has refused to institute the action or where an effort to cause a general partner to do so is not likely to succeed. In addition, the statutory or case law of some jurisdictions may permit a limited partner to institute legal action on behalf of himself and all other similarly situated limited partners to recover damages from a general partner for violations of its fiduciary duties to the limited partners. | ||
Partnership agreement modified standards | Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in “good faith” and will not be subject to any other standard under applicable law. “Good faith” requires that the person or persons making such determination or taking or declining to take such other action believe that the determination or other action is in the best interests of the Partnership or the holders of the common units, as the case may be. Therefore, the only claim available to us or our unitholders based on a breach of fiduciary duty by our general partner is a claim that our general partner did not act in “good faith.” In any such action, our general partner |
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will be presumed to have acted in “good faith,” and the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or our unitholders whatsoever. These standards reduce the obligations to which our general partner would otherwise be held. | ||
In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its executive officers and directors will not be liable for monetary damages to us, our limited partners or assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that our general partner or its executive officers and directors acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal. | ||
Special provisions regarding affiliated transactions | Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not involving a vote of our unitholders and that are not approved by the conflicts committee of the board of directors of our general partner must be: | |
• on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or | ||
• “fair and reasonable” to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). |
If our general partner does not seek approval from the conflicts committee and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held. | ||
Our partnership agreement provides for the allocation of overhead costs to us by our general partner and its affiliates in such amounts deemed to be fair and reasonable to us. |
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• | surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges; | |
• | special charges for services requested by a common unitholder; and | |
• | other similar fees or charges. |
• | becomes the record holder of the common units and is entitled to be admitted into our partnership as a substituted limited partner; | |
• | automatically requests admission as a substituted limited partner in our partnership; | |
• | executes and agrees to be bound by the terms and conditions of our partnership agreement; | |
• | represents that the transferee has the capacity, power and authority to become bound by our partnership agreement; and | |
• | gives the consents, waivers and approvals contained in our partnership agreement, such as the approval of all transactions and agreements that we are entering into in connection with our formation and this offering. |
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• | the right to assign the common unit to a purchaser or other transferee; and | |
• | the right to transfer the right to seek admission as a substituted limited partner in our partnership for the transferred common units. |
• | will not receive cash distributions; | |
• | will not be allocated any of our income, gain, deduction, losses or credits for federal income tax or other tax purposes; and | |
• | may not receive some federal income tax information or reports furnished to record holders of common units; |
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• | with regard to distributions of available cash, please read “Provisions of Our Partnership Agreement Relating to Cash Distributions”; | |
• | with regard to the fiduciary duties of our general partner, please read “Conflicts of Interest and Fiduciary Duties”; | |
• | with regard to the transfer of common units, please read “Description of the Common Units — Transfer of Common Units”; and | |
• | with regard to allocations of taxable income and taxable loss, please read “Material Tax Consequences.” |
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• | during the subordination period, the approval of a majority of the common units, excluding those common units held by our general partner and its affiliates, and a majority of the subordinated units, voting as separate classes; and | |
• | after the subordination period, the approval of a majority of the common units. |
Issuance of additional partnership units | No approval right. | |
Amendment of the partnership agreement | Certain amendments may be made by our general partner without the approval of our unitholders. Other amendments generally require the approval of a unit majority. Please read “— Amendment of the Partnership Agreement.” | |
Merger of our partnership or the sale of all or substantially all of our assets | Unit majority in certain circumstances. Please read “— Merger, Consolidation, Conversion, Sale or Other Disposition of Assets.” | |
Dissolution of our partnership | Unit majority. Please read “— Termination and Dissolution.” | |
Continuation of our business upon dissolution | Unit majority. Please read “— Termination and Dissolution.” |
Withdrawal of our general partner | Under most circumstances, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required for the withdrawal of our general partner prior to June 30, 2021 in a manner that would cause a dissolution of our partnership. Please read “— Withdrawal or Removal of our General Partner.” |
Removal of our general partner | Not less than 662/3% of the outstanding partnership units, including partnership units held by our general partner and its affiliates. Please read “— Withdrawal or Removal of our General Partner.” |
Transfer of the general partner interest | Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or another person in connection with its merger or consolidation with or into, or sale of all or substantially all of its assets, to such person. The approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required in other circumstances for a transfer of the general partner interest to a third party prior to June 30, 2021. Please read “— Transfer of General Partner Interest.” |
Transfer of incentive distribution rights | No approval right. Please read “— Transfer of Incentive Distribution Rights.” | |
Transfer of ownership interests in our general partner | No approval required at any time. Please read “— Transfer of Ownership Interests in our General Partner.” |
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• | arising out of or relating in any way to the partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of the partnership agreement or the duties, obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or restrictions on, the limited partners or us); | |
• | brought in a derivative manner on our behalf; | |
• | asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners; | |
• | asserting a claim arising pursuant to any provision of the Delaware Act; and | |
• | asserting a claim governed by the internal affairs doctrine; |
• | to remove or replace our general partner; | |
• | to approve some amendments to the partnership agreement; or | |
• | to take other action under the partnership agreement; |
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• | enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or | |
• | enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which consent may be given or withheld at its option. |
• | a change in our name, the location of our principal place of our business, our registered agent or our registered office; | |
• | the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement; | |
• | a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor the operating limited liability company nor any of its subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for U.S. federal income tax purposes; | |
• | an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors, executive officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed by the U.S. Department of Labor; | |
• | an amendment that our general partner determines to be necessary or appropriate in connection with the creation, authorization or issuance of additional partnership interests or the right to acquire partnership interests; |
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• | any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone; | |
• | an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our partnership agreement; | |
• | any amendment that our general partner determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our partnership agreement; | |
• | a change in our fiscal year or taxable year and related changes; | |
•�� | an amendment necessary to require limited partners to provide a statement, certification or other evidence to us regarding whether such limited partner is subject to United States federal income taxation on the income generated by us; | |
• | conversions into, mergers with or conveyances to another limited liability entity that is newly formed and has no assets, liabilities or operations at the time of the conversion, merger or conveyance other than those it receives by way of the conversion, merger or conveyance; or | |
• | any other amendments substantially similar to any of the matters described in the clauses above. |
• | do not adversely affect the limited partners (or any particular class of limited partners) in any material respect; | |
• | are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; | |
• | are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading; | |
• | are necessary or appropriate for any action taken by our general partner relating to splits or combinations of partnership units under the provisions of our partnership agreement; or | |
• | are required to effect the intent expressed in this prospectus or the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement. |
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• | the election of our general partner to dissolve us, if approved by the holders of partnership units representing a unit majority; | |
• | there being no limited partners, unless we are continued without dissolution in accordance with applicable Delaware law; | |
• | the entry of a decree of judicial dissolution of our partnership; or | |
• | the withdrawal or removal of our general partner or any other event that results in it ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or withdrawal or removal following approval and admission of a successor. |
• | the action would not result in the loss of limited liability of any limited partner; and |
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• | neither our partnership, our operating limited liability company nor any of our other subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity for U.S. federal income tax purposes upon the exercise of that right to continue. |
• | all subordinated units held by any person who did not, and whose affiliates did not, vote any units in favor of the removal of our general partner, will immediately and automatically convert into common units on aone-for-one basis; and | |
• | if all of the subordinated units convert pursuant to the foregoing, all cumulative common unit arrearages on the common units will be extinguished and the subordination period will end. |
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• | an affiliate of our general partner (other than an individual); or | |
• | another entity as part of the merger or consolidation of our general partner with or into another entity or the transfer by our general partner of all or substantially all of its assets to another entity, |
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• | represents that the transferee has the capacity, power and authority to become bound by our partnership agreement; | |
• | automatically becomes bound by the terms and conditions of our partnership agreement; and | |
• | gives the consents, waivers and approvals contained in our partnership agreement, such as the approval of all transactions and agreements we are entering into in connection with our formation and this offering. |
• | the highest price paid by our general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests; and | |
• | the current market price as of the date three days before the date the notice is mailed. |
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• | our general partner; | |
• | any departing general partner; | |
• | any person who is or was an affiliate of our general partner or any departing general partner; | |
• | any person who is or was a manager, managing member, director, officer, employee, agent, fiduciary or trustee of our partnership, our subsidiaries, our general partner, any departing general partner or any of their affiliates; | |
• | any person who is or was serving as a manager, managing member, director, officer, employee, agent, fiduciary or trustee of another person owing a fiduciary duty to us or our subsidiaries; | |
• | any person who controls our general partner or any departing general partner; and | |
• | any person designated by our general partner. |
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• | a current list of the name and last known address of each partner; | |
• | a copy of our tax returns; | |
• | information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each partner became a partner; | |
• | copies of our partnership agreement, our certificate of limited partnership, related amendments and powers of attorney under which they have been executed; | |
• | information regarding the status of our business and financial condition; and | |
• | any other information regarding our affairs as is just and reasonable. |
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• | 1% of the total number of the securities outstanding; or | |
• | the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. |
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• | gross income from operations exceeds the amount required to make minimum quarterly distributions on all units, yet we only distribute the minimum quarterly distributions on all units; or | |
• | we make a future offering of common units and use the net proceeds of the offering in a manner that does not produce substantial additional deductions during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire property that is not eligible for depreciation or amortization for U.S. federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate applicable to our assets at the time of this offering. |
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• | interest on indebtedness properly allocable to property held for investment; | |
• | our interest expense attributed to portfolio income; and | |
• | the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income. |
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• | his relative contributions to us; | |
• | the interests of all the partners in profits and losses; | |
• | the interest of all the partners in cash flow; and | |
• | the rights of all the partners to distributions of capital upon liquidation. |
• | any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder; | |
• | any cash distributions received by the unitholder as to those units would be fully taxable; and | |
• | all of these distributions would appear to be ordinary income. |
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• | a short sale; | |
• | an offsetting notional principal contract; or | |
• | a futures or forward contract with respect to the partnership interest or substantially identical property. |
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• | accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at “— Accuracy-Related Penalties;” | |
• | for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability; and | |
• | in the case of a listed transaction, an extended statute of limitations. |
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BY EMPLOYEE BENEFIT PLANS
• | whether the investment is prudent under Section 404(a)(1)(B) of ERISA and any other applicable Similar Laws; |
• | whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA and any other applicable Similar Laws; |
• | whether making the investment will comply with the delegation of control and prohibited transaction provisions under Section 406 of ERISA, Section 4975 of the Internal Revenue Code and any other applicable Similar Laws; and |
• | whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return. Please read “Material Tax Consequences — Tax-Exempt Organizations and Other Investors.” |
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Underwriter | Number of Common Units | |||
Raymond James & Associates, Inc. | ||||
J.P. Morgan Securities LLC | ||||
RBC Capital Markets, LLC | ||||
• | the representations and warranties made by us to the underwriters are true; | |
• | there is no material adverse change in the financial market; and | |
• | we deliver customary closing documents and legal opinions to the underwriters. |
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Total without | Total with | |||||||||||
Over-Allotment | Over-Allotment | |||||||||||
Per Unit | Exercise | Exercise | ||||||||||
Public Offering Price | $ | $ | $ | |||||||||
Underwriting discount and commissions | $ | $ | $ | |||||||||
Proceeds to us (before offering expenses) | $ | $ | $ |
• | not to offer, sell, contract to sell, announce the intention to sell or pledge any of the common units; | |
• | not to grant or sell any option or contract to purchase any of the common units; | |
• | not to enter into any swap or other agreement that transfers any of the economic consequences of ownership of or otherwise transfer or dispose of, directly or indirectly, any of the common units; and | |
• | not to enter into any hedging, collar or other transaction or arrangement that is designed or reasonably expected to lead to or result in a transfer, in whole or in part, of any of the economic consequences of ownership of the common units, whether or not such transfer would be for any consideration. |
• | during the last 17 days of the180-day period, we issue an earnings release or release concerning distributable cash or announce material news or a material event relating to us occurs; or | |
• | prior to the expiration of the180-day period, we announce that we will release earnings results or distributable cash results during the16-day period beginning on the last day of the180-day period, in which case the restrictions described in the preceding paragraphs will continue to apply until the |
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expiration of the180-day period beginning on the date of issuance of the earnings release, the announcement of the material news or the occurrence of the material event. |
• | short sales, | |
• | syndicate covering transactions, | |
• | imposition of penalty bids, and | |
• | purchases to cover positions created by short sales. |
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• | estimates of distributions to our unitholders; | |
• | overall quality of our properties and operations; | |
• | industry and market conditions prevalent in the energy industry; | |
• | the information set forth in this prospectus and otherwise available to the representatives; and | |
• | the general conditions of the securities markets at the time of this offering. |
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• | to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
• | to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant dealer or dealers nominated by the issuer for any such offer; or |
• | in any other circumstances falling within Article 3(2) of the Prospectus Directive, |
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188
COMPRESSCO PARTNERS PREDECESSOR COMBINED FINANCIAL STATEMENTS: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
COMPRESSCO PARTNERS, L.P. UNAUDITED PRO FORMA FINANCIAL STATEMENTS: | ||||
F-16 | ||||
F-17 | ||||
F-18 | ||||
F-19 | ||||
F-20 | ||||
COMPRESSCO PARTNERS, L.P. FINANCIAL STATEMENTS | ||||
F-23 | ||||
F-24 | ||||
F-25 |
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December 31, | March 31, | |||||||||||
2009 | 2010 | 2011 | ||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 4,578 | $ | 6,629 | $ | 6,140 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $615 and $304 as of December 31, 2009 and 2010 and $241 as of March 31, 2011 | 12,617 | 9,241 | 10,338 | |||||||||
Inventories | 18,505 | 17,731 | 16,743 | |||||||||
Deferred tax assets | 543 | 580 | 388 | |||||||||
Prepaid expenses and other current assets | 608 | 1,361 | 1,234 | |||||||||
Total current assets | 36,851 | 35,542 | 34,843 | |||||||||
Property, plant and equipment | ||||||||||||
Land and building | 2,165 | 2,143 | 2,143 | |||||||||
Compressors and other equipment | 122,360 | 128,939 | 129,530 | |||||||||
Vehicles | 12,944 | 13,152 | 13,356 | |||||||||
137,469 | 144,234 | 145,029 | ||||||||||
Less accumulated depreciation | (44,635 | ) | (55,892 | ) | (58,914 | ) | ||||||
Net property, plant and equipment | 92,834 | 88,342 | 86,115 | |||||||||
Other assets: | ||||||||||||
Goodwill | 72,161 | 72,161 | 72,161 | |||||||||
Patents, trademarks and other intangible assets, net of accumulated amortization of $478, and $566 as of December 31, 2009 and 2010 and $566 as of March 31, 2011 | 190 | 102 | 102 | |||||||||
Deferred tax assets | 38 | — | — | |||||||||
Other assets | 423 | 419 | 421 | |||||||||
Total other assets | 72,812 | 72,682 | 72,684 | |||||||||
TOTAL ASSETS | $ | 202,497 | $ | 196,566 | $ | 193,642 | ||||||
LIABILITIES AND NET PARENT EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 1,607 | $ | 1,939 | $ | 1,683 | ||||||
Interest on affiliate note payable | — | — | 2,721 | |||||||||
Accrued liabilities and other | 2,261 | 4,660 | 2,900 | |||||||||
Total current liabilities | 3,868 | 6,599 | 7,304 | |||||||||
Other liabilities: | ||||||||||||
Affiliate note payable | 145,085 | 145,085 | 145,100 | |||||||||
Deferred tax liabilities | 19,560 | 18,881 | 18,490 | |||||||||
Other long-term liabilities | 84 | 48 | 48 | |||||||||
Total other liabilities | 164,729 | 164,014 | 163,638 | |||||||||
Commitment and contingencies | ||||||||||||
Net parent equity | 33,900 | 25,953 | 22,700 | |||||||||
TOTAL LIABILITIES AND NET PARENT EQUITY | $ | 202,497 | $ | 196,566 | $ | 193,642 | ||||||
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AND CHANGES IN NET PARENT EQUITY
Three Months Ended | ||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Revenue: | ||||||||||||||||||||
Compression and other services | $ | 91,925 | $ | 86,105 | $ | 77,395 | $ | 19,268 | $ | 19,394 | ||||||||||
Sales of compressors and parts | 8,019 | 4,468 | 4,017 | 1,066 | 2,490 | |||||||||||||||
Total revenues | 99,944 | 90,573 | 81,412 | 20,334 | 21,884 | |||||||||||||||
Cost of revenues (excluding depreciation and amortization expense) | ||||||||||||||||||||
Cost of compression and other services | 38,736 | 38,108 | 35,423 | 8,449 | 10,277 | |||||||||||||||
Cost of compressors and parts sales | 5,453 | 2,851 | 2,554 | 704 | 1,809 | |||||||||||||||
Total cost of revenues | 44,189 | 40,959 | 37,977 | 9,153 | 12,086 | |||||||||||||||
Selling, general and administrative expense | 14,352 | 13,193 | 14,328 | 3,328 | 3,299 | |||||||||||||||
Depreciation and amortization | 12,112 | 13,823 | 13,112 | 3,336 | 3,179 | |||||||||||||||
Interest expense | 10,990 | 11,980 | 13,096 | 3,299 | 2,723 | |||||||||||||||
Other (income) expense, net | 174 | (82 | ) | 113 | (14 | ) | 89 | |||||||||||||
Income before income tax provision | 18,127 | 10,700 | 2,786 | 1,232 | 508 | |||||||||||||||
Provision for income taxes | 6,846 | 4,161 | 1,169 | 513 | 218 | |||||||||||||||
Net income | 11,281 | 6,539 | 1,617 | 719 | 290 | |||||||||||||||
Foreign currency translation adjustment | (619 | ) | 417 | (42 | ) | 139 | 264 | |||||||||||||
Comprehensive income | $ | 10,662 | $ | 6,956 | $ | 1,575 | $ | 858 | $ | 554 | ||||||||||
Combined changes in net parent equity: | ||||||||||||||||||||
Balance at beginning of period | $ | 48,713 | $ | 56,792 | $ | 33,900 | $ | 33,900 | $ | 25,953 | ||||||||||
Comprehensive income | 10,662 | 6,956 | 1,575 | 858 | 554 | |||||||||||||||
Net contributions from (distributions to) parent | (2,583 | ) | (29,848 | ) | (9,522 | ) | (9,586 | ) | (3,807 | ) | ||||||||||
Balance at end of period | $ | 56,792 | $ | 33,900 | $ | 25,953 | $ | 25,172 | $ | 22,700 | ||||||||||
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Three Months Ended | ||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income | $ | 11,281 | $ | 6,539 | $ | 1,617 | $ | 719 | $ | 290 | ||||||||||
Reconciliation of net income to cash provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 12,112 | 13,823 | 13,112 | 3,336 | 3,179 | |||||||||||||||
Stock compensation expense | 722 | 360 | 392 | 70 | 113 | |||||||||||||||
Deferred taxes | 6,281 | 1,243 | (895 | ) | (157 | ) | (210 | ) | ||||||||||||
Other non-cash charges and credits | 202 | 754 | 331 | 56 | 52 | |||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Accounts receivable | (1,410 | ) | 734 | 3,159 | 696 | (1,089 | ) | |||||||||||||
Inventories | (3,312 | ) | 567 | 775 | (722 | ) | 1,017 | |||||||||||||
Prepaid expenses and other current assets | (277 | ) | 109 | (982 | ) | (515 | ) | 133 | ||||||||||||
Accounts payable and accrued liabilities | 397 | (308 | ) | 2,840 | 2,873 | 699 | ||||||||||||||
Other | (427 | ) | 115 | 42 | 43 | (2 | ) | |||||||||||||
Net cash provided by operating activities | 25,569 | 23,936 | 20,391 | 6,399 | 4,182 | |||||||||||||||
Investing activities: | ||||||||||||||||||||
Purchases of property, plant and equipment, net | (33,036 | ) | (2,997 | ) | (8,715 | ) | (745 | ) | (928 | ) | ||||||||||
Other investing activities | 39 | 115 | 102 | 95 | 9 | |||||||||||||||
Net cash used in investing activities | (32,997 | ) | (2,882 | ) | (8,613 | ) | (650 | ) | (919 | ) | ||||||||||
Financing activities: | ||||||||||||||||||||
Net contributions from (distributions to) parent | 7,607 | (17,854 | ) | (9,735 | ) | (9,558 | ) | (3,894 | ) | |||||||||||
Net cash provided by (used in) financing activities | 7,607 | (17,854 | ) | (9,735 | ) | (9,558 | ) | (3,894 | ) | |||||||||||
Effect of exchange rate changes on cash | (479 | ) | 402 | 8 | 38 | 142 | ||||||||||||||
Increase (decrease) in cash and cash equivalents | (300 | ) | 3,602 | 2,051 | (3,771 | ) | (489 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 1,276 | 976 | 4,578 | 4,578 | 6,629 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 976 | $ | 4,578 | $ | 6,629 | $ | 807 | $ | 6,140 | ||||||||||
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NOTE A — | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-6
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Compressors | 12 years | |
Equipment and other property | 5 to 8 years | |
Vehicles | 3 years | |
Information systems | 3 years |
F-7
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Year Ending | ||||
December 31, | ||||
(In thousands) | ||||
2011 | $ | 88 | ||
2012 | 14 | |||
2013 | — | |||
2014 | — | |||
2015 | — | |||
Thereafter | — | |||
Total | $ | 102 | ||
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Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In thousands) | ||||||||||||
Balance, beginning of year | $ | 739 | $ | 120 | $ | 537 | ||||||
Foreign currency translation adjustment, net of taxes of $(323) in 2008, $224 in 2009 and $(201) in 2010 | (619 | ) | 417 | (42 | ) | |||||||
Balance, end of year | $ | 120 | $ | 537 | $ | 495 | ||||||
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NOTE B — | RELATED-PARTY TRANSACTIONS |
NOTE C — | LONG-TERM DEBT |
December 31, | ||||||||
2009 | 2010 | |||||||
(In thousands) | ||||||||
9.0% Affiliate Note | $ | 145,085 | $ | 145,085 | ||||
Less current portion | — | — | ||||||
Balance, end of year | $ | 145,085 | $ | 145,085 | ||||
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NOTE D — | INCOME TAXES |
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In thousands) | ||||||||||||
Current | ||||||||||||
Federal | $ | (1,446 | ) | $ | 606 | $ | 648 | |||||
State | (44 | ) | 269 | 162 | ||||||||
Foreign | 2,055 | 2,043 | 1,254 | |||||||||
565 | 2,918 | 2,064 | ||||||||||
Deferred | ||||||||||||
Federal | $ | 5,787 | $ | 1,123 | $ | (829 | ) | |||||
State | 573 | 80 | (88 | ) | ||||||||
Foreign | (79 | ) | 40 | 22 | ||||||||
6,281 | 1,243 | (895 | ) | |||||||||
Total tax provision | $ | 6,846 | $ | 4,161 | $ | 1,169 | ||||||
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Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In thousands) | ||||||||||||
Income tax provision computed at statutory federal income tax rates | $ | 6,344 | $ | 3,745 | $ | 975 | ||||||
State income taxes (net of federal benefit) | 344 | 227 | 48 | |||||||||
Nondeductible expenses | 158 | 189 | 146 | |||||||||
Total tax provision | $ | 6,846 | $ | 4,161 | $ | 1,169 | ||||||
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In thousands) | ||||||||||||
Domestic | $ | 12,653 | $ | 5,333 | $ | 4,550 | ||||||
International | 5,474 | 5,367 | (1,764 | ) | ||||||||
Total | $ | 18,127 | $ | 10,700 | $ | 2,786 | ||||||
Earliest Open | ||||
Jurisdiction | Tax Period | |||
United States — Federal | 2008 | |||
United States — State and Local | 2002 | |||
Non-U.S. jurisdictions | 2006 |
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Year Ended December 31, | ||||||||
Deferred Tax Assets | 2009 | 2010 | ||||||
(In thousands) | ||||||||
Accruals | $ | 86 | $ | 326 | ||||
Net operating losses | 281 | 269 | ||||||
Tax credits | 323 | 0 | ||||||
Equity-based compensation | 504 | 504 | ||||||
Bad debt reserve | 178 | 57 | ||||||
All other | 471 | 441 | ||||||
Total deferred tax assets | 1,843 | 1,597 | ||||||
Valuation allowance | (51 | ) | (62 | ) | ||||
Net deferred tax assets | $ | 1,792 | $ | 1,535 | ||||
Year Ended December 31, | ||||||||
Deferred Tax Liabilities | 2009 | 2010 | ||||||
(In thousands) | ||||||||
Excess book over tax basis in property, plant and equipment | $ | 19,189 | $ | 18,468 | ||||
All other | 1,582 | 1,368 | ||||||
Total deferred tax liability | 20,771 | 19,836 | ||||||
Net deferred tax liability | $ | 18,979 | $ | 18,301 | ||||
NOTE E — | LEASES |
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NOTE F — | COMMITMENTS AND CONTINGENCIES |
NOTE G — | EQUITY-BASED COMPENSATION |
Year Ended December 31, | ||||||
2008 | 2009 | 2010 | ||||
Expected stock price volatility | 32% to 57% | 65% to 73% | 72% to 73% | |||
Expected life of options | 4.4 to 4.8 years | 4.7 years | 4.7 years | |||
Risk free interest rate | 1.5% to 3.9% | 1.9% to 2.6% | 1.3% to 2.8% | |||
Expected dividend yield | — | — | — |
NOTE H — | BUSINESS SEGMENTS |
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Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In thousands) | ||||||||||||
Revenues from external customers: | ||||||||||||
U.S. | $ | 77,135 | $ | 68,233 | $ | 62,257 | ||||||
Canada | 7,165 | 6,008 | 4,926 | |||||||||
Mexico | 15,494 | 15,145 | 11,251 | |||||||||
Other | 150 | 1,187 | 2,978 | |||||||||
Total | $ | 99,944 | $ | 90,573 | $ | 81,412 | ||||||
Total assets: | ||||||||||||
U.S. | $ | 196,311 | $ | 186,166 | $ | 176,506 | ||||||
Canada | 4,412 | 2,868 | 6,564 | |||||||||
Mexico | 10,721 | 11,575 | 10,162 | |||||||||
Other | 723 | 1,889 | 3,334 | |||||||||
Total | $ | 212,167 | $ | 202,498 | $ | 196,566 | ||||||
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• | The contribution to the Partnership of substantially all of the predecessor’s business and operations, including (1) all of Compressco’s business, operations and related assets and liabilities and (2) substantially all of the wellhead compression-based and certain other production enhancement services performed in Mexico by certain other subsidiaries of TETRA and the related equipment and other assets utilized to provide those services; | |
• | The issuance by the Partnership of common units to the public, Compressco Partners GP Inc. and TETRA International Incorporated, subordinated units to Compressco Partners GP Inc. and TETRA International Incorporated, a 2.0% general partner interest and incentive distribution rights to Compressco Partners GP Inc., and restricted units to certain directors, executive officers and other employees of Compressco Partners GP Inc., TETRA and the Partnership; and |
• | The use of proceeds of the offering by the Partnership to pay underwriting commissions and other expenses of the offering, to retire indebtedness owed to TETRA, to pay financing fees and transaction costs associated with the Partnership’s new revolving credit facility and to fund the Partnership’s working capital requirements. |
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Partnership | ||||||||||||
Predecessor | Adjustments | Pro Forma | ||||||||||
(In thousands) | ||||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash | $ | 6,140 | $ | 50,000 | (a) | $ | 16,065 | |||||
(10,769 | )(b) | |||||||||||
(375 | )(b) | |||||||||||
(28,931 | )(c) | |||||||||||
Accounts receivable, net of allowance for doubtful accounts | 10,338 | (144 | )(d) | 10,194 | ||||||||
Inventories | 16,743 | 16,743 | ||||||||||
Deferred tax asset | 388 | (317 | )(e) | 71 | ||||||||
Prepaid expenses and other current assets | 1,234 | 1,234 | ||||||||||
Total current assets | 34,843 | 44,307 | ||||||||||
Property, plant and equipment: | ||||||||||||
Land and building | 2,143 | 2,143 | ||||||||||
Compressors and other equipment | 142,886 | (265 | )(d) | 142,621 | ||||||||
Less accumulated depreciation | (58,914 | ) | 107 | (d) | (58,807 | ) | ||||||
Net property, plant and equipment | 86,115 | 85,957 | ||||||||||
Other assets: | ||||||||||||
Goodwill | 72,161 | 72,161 | ||||||||||
Intangibles and other assets | 523 | 523 | ||||||||||
Total other assets | 72,684 | 72,684 | ||||||||||
Total assets | $ | 193,642 | $ | 202,948 | ||||||||
LIABILITIES AND PARTNERS’ CAPITAL/NET PARENT EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 1,683 | $ | 1,683 | ||||||||
Interest on affiliate note payable | 2,721 | (2,721 | )(f) | — | ||||||||
Accrued liabilities and other | 2,900 | 2,900 | ||||||||||
Total current liabilities | 7,304 | 4,583 | ||||||||||
Note payable to TETRA | 145,100 | (116,169 | )(f) | — | ||||||||
(28,931 | )(c) | |||||||||||
Deferred tax liabilities | 18,490 | (15,073 | )(e) | 3,417 | ||||||||
Other long-term liabilities | 48 | 48 | ||||||||||
Net parent equity | 22,700 | (375 | )(b) | — | ||||||||
(302 | )(d) | |||||||||||
14,756 | (e) | |||||||||||
118,890 | (f) | |||||||||||
(155,669 | )(g) | |||||||||||
Common unitholders — public | 50,000 | (a) | 39,231 | |||||||||
(10,769 | )(b) | |||||||||||
Common unitholders — TETRA affiliates | 77,892 | (g) | 77,892 | |||||||||
Subordinated unitholders — TETRA affiliates | 74,073 | (g) | 74,073 | |||||||||
General partner interest | 3,704 | (g) | 3,704 | |||||||||
Total liabilities and partners’ capital/net parent equity | $ | 193,642 | $ | 202,948 | ||||||||
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Partnership | ||||||||||||
Predecessor | Adjustments | Pro Forma | ||||||||||
(In thousands, except unit and per unit data) | ||||||||||||
Revenue: | ||||||||||||
Compression and other services | $ | 77,395 | (480 | )(h) | $ | 76,915 | ||||||
Sales of compressors and parts | 4,017 | 4,017 | ||||||||||
Total revenues | 81,412 | 80,932 | ||||||||||
Cost of revenues (excluding depreciation and amortization expense): | ||||||||||||
Cost of compression and other services | 35,423 | (218 | )(h) | 35,205 | ||||||||
Cost of compressors and parts sales | 2,554 | 2,554 | ||||||||||
Total cost of revenues | 37,977 | 37,759 | ||||||||||
Selling, general and administrative expense | 14,328 | (33 | )(h) | 14,295 | ||||||||
Depreciation and amortization expense | 13,112 | (42 | )(i) | 13,070 | ||||||||
Interest expense | 13,096 | (13,058 | )(j) | 38 | ||||||||
Other (income) expense, net | 113 | 113 | ||||||||||
Income before income tax provision | 2,786 | 15,657 | ||||||||||
Provision for income taxes | 1,169 | 536 | (k) | 1,705 | ||||||||
Net income | $ | 1,617 | $ | 13,952 | ||||||||
General partner interest in net income | $ | 279 | ||||||||||
Common unitholders’ interest in net income | $ | 8,092 | ||||||||||
Subordinated unitholders’ interest in net income | $ | 5,581 | ||||||||||
Weighted average common units outstanding (basic and diluted) | 9,097,257 | |||||||||||
Weighted average subordinated units outstanding (basic and diluted) | 6,273,970 | |||||||||||
Net income per common unit (basic and diluted) | $ | 0.89 | ||||||||||
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Partnership | ||||||||||||
Predecessor | Adjustments | Pro Forma | ||||||||||
(In thousands, except unit and per unit data) | ||||||||||||
Revenue: | ||||||||||||
Compression and other services | $ | 19,394 | (118 | )(h) | $ | 19,276 | ||||||
Sales of compressors and parts | 2,490 | 2,490 | ||||||||||
Total revenues | 21,884 | 21,766 | ||||||||||
Cost of revenues (excluding depreciation and amortization expense): | ||||||||||||
Cost of compression and other services | 10,277 | (50 | )(h) | 10,227 | ||||||||
Cost of compressors and parts sales | 1,809 | 1,809 | ||||||||||
Total cost of revenues | 12,086 | 12,036 | ||||||||||
Selling, general and administrative expense | 3,299 | (13 | )(h) | 3,286 | ||||||||
Depreciation and amortization expense | 3,179 | (16 | )(i) | 3,163 | ||||||||
Interest expense | 2,723 | (2,721 | )(j) | 2 | ||||||||
Other (income) expense, net | 89 | 89 | ||||||||||
Income before income tax provision | 508 | 3,190 | ||||||||||
Provision for income taxes | 218 | 238 | (k) | 456 | ||||||||
Net income | $ | 290 | $ | 2,734 | ||||||||
General partner interest in net income | $ | 55 | ||||||||||
Common unitholders’ interest in net income | $ | 2,125 | ||||||||||
Subordinated unitholders’ interest in net income | $ | 554 | ||||||||||
Weighted average common units outstanding (basic and diluted) | 9,097,257 | |||||||||||
Weighted average subordinated units outstanding (basic and diluted) | 6,273,970 | |||||||||||
Net income per common unit (basic and diluted) | $ | 0.23 | ||||||||||
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A. | Basis of Presentation, the Offering and Other Transactions |
• | The contribution to the Partnership of substantially all of the predecessor’s business and operations, including (1) all of Compressco’s business, operations and related assets and liabilities and (2) substantially all of the wellhead compression-based and certain other production enhancement services performed in Mexico by certain other subsidiaries of TETRA and the related equipment and other assets utilized to provide those services; | |
• | The issuance by the Partnership of common units to the public, Compressco Partners GP Inc. and TETRA International Incorporated, subordinated units to Compressco Partners GP Inc. and TETRA International Incorporated, a 2.0% general partner interest and incentive distribution rights to Compressco Partners GP Inc., and restricted units to certain directors, executive officers and other employees of Compressco Partners GP Inc., TETRA and the Partnership; and | |
• | The use of proceeds of the offering by the Partnership to pay underwriting commissions and other expenses of the offering, to retire indebtedness owed to TETRA and to fund the Partnership’s working capital requirements. |
B. | Pro Forma Adjustments and Assumptions |
• | certain assets and operations of the Partnership which will be contributed into and conducted through a taxable U.S. corporation; and | |
• | the Partnership’s taxable international operations. |
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• | $81.6 million for 6,597,257 parent common units and a 2.0% general partner interest |
• | $74.1 million for 6,273,970 parent subordinated units |
• | Selling, general and administrative expenses associated with the non-transferrable Mexican contracts were calculated based on the selling, general and administrative expenses of our predecessor’s Mexican operations as a percentage of predecessor’s Mexican revenues multiplied by the amount of excluded Mexican revenues. |
C. | Pro Forma Net Income Per Limited Partner Unit |
D. | Pro Forma Taxable Income Per Limited Partner Unit |
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December 31, | March 31, | |||||||||||
2009 | 2010 | 2011 | ||||||||||
(Unaudited) | ||||||||||||
Total assets | $ | — | $ | — | $ | — | ||||||
Partners’ Equity | ||||||||||||
Limited partner’s interest | $ | 999 | $ | 999 | $ | 999 | ||||||
General partner interest | 1 | 1 | 1 | |||||||||
Receivable from partners | (1,000 | ) | (1,000 | ) | (1,000 | ) | ||||||
$ | — | $ | — | $ | — | |||||||
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NOTE A — | NATURE OF OPERATIONS |
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AGREEMENT OF LIMITED PARTNERSHIP
OF
COMPRESSCO PARTNERS, L.P.
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ARTICLE I DEFINITIONS | ||||||
Section 1.1 | Definitions | A-1 | ||||
Section 1.2 | Construction | A-18 | ||||
ARTICLE II ORGANIZATION | ||||||
Section 2.1 | Formation | A-18 | ||||
Section 2.2 | Name | A-18 | ||||
Section 2.3 | Registered Office; Registered Agent; Principal Office; Other Offices | A-19 | ||||
Section 2.4 | Purpose and Business | A-19 | ||||
Section 2.5 | Powers | A-19 | ||||
Section 2.6 | Term | A-19 | ||||
Section 2.7 | Title to Partnership Assets | A-19 | ||||
ARTICLE III RIGHTS OF LIMITED PARTNERS | ||||||
Section 3.1 | Limitation of Liability | A-20 | ||||
Section 3.2 | Management of Business | A-20 | ||||
Section 3.3 | Outside Activities of the Limited Partners | A-20 | ||||
Section 3.4 | Rights of Limited Partners | A-20 | ||||
ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS | ||||||
Section 4.1 | Certificates | A-21 | ||||
Section 4.2 | Mutilated, Destroyed, Lost or Stolen Certificates | A-21 | ||||
Section 4.3 | Record Holders | A-22 | ||||
Section 4.4 | Transfer Generally | A-22 | ||||
Section 4.5 | Registration and Transfer of Limited Partner Interests | A-22 | ||||
Section 4.6 | Transfer of the General Partner’s General Partner Interest | A-23 | ||||
Section 4.7 | Restrictions on Transfers | A-24 | ||||
ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS | ||||||
Section 5.1 | Organizational Contributions | A-25 | ||||
Section 5.2 | Contributions by the General Partner and its Affiliates | A-25 | ||||
Section 5.3 | Contributions by Initial Limited Partners | A-25 | ||||
Section 5.4 | Interest and Withdrawal | A-25 | ||||
Section 5.5 | Capital Accounts | A-26 | ||||
Section 5.6 | Issuances of Additional Partnership Interests | A-28 | ||||
Section 5.7 | Conversion of Subordinated Units | A-28 | ||||
Section 5.8 | Limited Preemptive Right | A-29 | ||||
Section 5.9 | Splits and Combinations | A-29 | ||||
Section 5.10 | Fully Paid and Non-Assessable Nature of Limited Partner Interests | A-29 | ||||
Section 5.11 | Issuance of Common Units in Connection with Reset of Incentive Distribution Rights | A-29 |
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ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS | ||||||
Section 6.1 | Allocations for Capital Account Purposes | A-31 | ||||
Section 6.2 | Allocations for Tax Purposes | A-38 | ||||
Section 6.3 | Requirement and Characterization of Distributions; Distributions to Record Holders | A-39 | ||||
Section 6.4 | Distributions of Available Cash from Operating Surplus | A-39 | ||||
Section 6.5 | Distributions of Available Cash from Capital Surplus | A-41 | ||||
Section 6.6 | Adjustment of Minimum Quarterly Distribution and Target Distribution Levels | A-41 | ||||
Section 6.7 | Special Provisions Relating to the Holders of Subordinated Units | A-41 | ||||
Section 6.8 | Special Provisions Relating to the Holders of Incentive Distribution Rights | A-42 | ||||
Section 6.9 | Entity-Level Taxation | A-42 | ||||
ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS | ||||||
Section 7.1 | Management | A-42 | ||||
Section 7.2 | Certificate of Limited Partnership | A-44 | ||||
Section 7.3 | Restrictions on the General Partner’s Authority | A-44 | ||||
Section 7.4 | Reimbursement of the General Partner | A-44 | ||||
Section 7.5 | Outside Activities | A-45 | ||||
Section 7.6 | Loans from the General Partner; Loans or Contributions from the Partnership or Group Members | A-46 | ||||
Section 7.7 | Indemnification | A-47 | ||||
Section 7.8 | Liability of Indemnitees | A-48 | ||||
Section 7.9 | Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties | A-48 | ||||
Section 7.10 | Other Matters Concerning the General Partner | A-50 | ||||
Section 7.11 | Purchase or Sale of Partnership Interests | A-50 | ||||
Section 7.12 | Registration Rights of the General Partner and its Affiliates | A-50 | ||||
Section 7.13 | Reliance by Third Parties | A-52 | ||||
ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS | ||||||
Section 8.1 | Records and Accounting | A-52 | ||||
Section 8.2 | Fiscal Year | A-53 | ||||
Section 8.3 | Reports | A-53 | ||||
ARTICLE IX TAX MATTERS | ||||||
Section 9.1 | Tax Returns and Information | A-53 | ||||
Section 9.2 | Tax Elections | A-53 | ||||
Section 9.3 | Tax Controversies | A-54 | ||||
Section 9.4 | Withholding; Tax Payments | A-54 | ||||
ARTICLE X ADMISSION OF PARTNERS | ||||||
Section 10.1 | Admission of Limited Partners | A-54 | ||||
Section 10.2 | Admission of Substituted Limited Partners | A-55 | ||||
Section 10.3 | Admission of Successor General Partner | A-55 | ||||
Section 10.4 | Amendment of Agreement and Certificate of Limited Partnership | A-55 |
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ARTICLE XI WITHDRAWAL OR REMOVAL OF PARTNERS | ||||||
Section 11.1 | Withdrawal of the General Partner | A-56 | ||||
Section 11.2 | Removal of the General Partner | A-57 | ||||
Section 11.3 | Interest of Departing General Partner and Successor General Partner | A-57 | ||||
Section 11.4 | Termination of Subordination Period, Conversion of Subordinated Units and Extinguishment of Cumulative Common Unit Arrearages | A-58 | ||||
Section 11.5 | Withdrawal of Limited Partners | A-59 | ||||
ARTICLE XII DISSOLUTION AND LIQUIDATION | ||||||
Section 12.1 | Dissolution | A-59 | ||||
Section 12.2 | Continuation of the Business of the Partnership After Dissolution | A-59 | ||||
Section 12.3 | Liquidator | A-60 | ||||
Section 12.4 | Liquidation | A-60 | ||||
Section 12.5 | Cancellation of Certificate of Limited Partnership | A-61 | ||||
Section 12.6 | Return of Contributions | A-61 | ||||
Section 12.7 | Waiver of Partition | A-61 | ||||
Section 12.8 | Capital Account Restoration | A-61 | ||||
ARTICLE XIII AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE | ||||||
Section 13.1 | Amendments to be Adopted Solely by the General Partner | A-61 | ||||
Section 13.2 | Amendment Procedures | A-62 | ||||
Section 13.3 | Amendment Requirements | A-62 | ||||
Section 13.4 | Special Meetings | A-63 | ||||
Section 13.5 | Notice of a Meeting | A-63 | ||||
Section 13.6 | Record Date | A-63 | ||||
Section 13.7 | Adjournment | A-64 | ||||
Section 13.8 | Waiver of Notice; Approval of Meeting; Approval of Minutes | A-64 | ||||
Section 13.9 | Quorum and Voting | A-64 | ||||
Section 13.10 | Conduct of a Meeting | A-64 | ||||
Section 13.11 | Action Without a Meeting | A-65 | ||||
Section 13.12 | Right to Vote and Related Matters | A-65 | ||||
Section 13.13 | Voting of Incentive Distribution Rights | A-65 | ||||
ARTICLE XIV MERGER, CONSOLIDATION OR CONVERSION | ||||||
Section 14.1 | Authority | A-66 | ||||
Section 14.2 | Procedure for Merger, Consolidation or Conversion | A-66 | ||||
Section 14.3 | Approval by Limited Partners | A-67 | ||||
Section 14.4 | Certificate of Merger | A-68 | ||||
Section 14.5 | Effect of Merger, Consolidation or Conversion | A-68 | ||||
ARTICLE XV RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS | ||||||
Section 15.1 | Right to Acquire Limited Partner Interests | A-69 |
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ARTICLE XVI GENERAL PROVISIONS | ||||||
Section 16.1 | Addresses and Notices; Written Communications | A-70 | ||||
Section 16.2 | Further Action | A-71 | ||||
Section 16.3 | Binding Effect | A-71 | ||||
Section 16.4 | Integration | A-71 | ||||
Section 16.5 | Creditors | A-71 | ||||
Section 16.6 | Waiver | A-71 | ||||
Section 16.7 | Third-Party Beneficiaries | A-71 | ||||
Section 16.8 | Counterparts | A-71 | ||||
Section 16.9 | Applicable Law; Forum, Venue and Jurisdiction | A-71 | ||||
Section 16.10 | Invalidity of Provisions | A-72 | ||||
Section 16.11 | Consent of Partners | A-72 | ||||
Section 16.12 | Facsimile Signatures | A-72 | ||||
Exhibit A | Certificate Evidencing Common Units Representing Limited Partner Interests in Compressco Partners, L.P. | A-74 |
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OF LIMITED PARTNERSHIP OF COMPRESSCO PARTNERS, L.P.
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By: |
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to the First Amended and Restated
Agreement of Limited Partnership of
Compressco Partners, L.P.
Representing Limited Partner Interests in
Compressco Partners, L.P.
No. Common Units
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Dated: | Compressco Partners, L.P. | |
Countersigned and Registered by: | By: Compressco Partners GP Inc. | |
Computershare Trust Company, N.A., As Transfer Agent and Registrar | By: Name: | |
Title: | ||
By: | ||
Name: | ||
Title: |
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TEN COM — as tenants in common | UNIF GIFT/TRANSFERS MIN ACT | |
TEN ENT — as tenants by the entireties | __________ Custodian _________ | |
JT TEN — as joint tenants with right of | (Cust) (Minor) | |
survivorship and not as tenants in common | Under Uniform Gifts/Transfers to CD Minors Act (State) |
COMPRESSCO PARTNERS, L.P.
| | |
(Please print or typewrite name and address of assignee) | (Please insert Social Security or other identifying number of assignee) |
Date: | NOTE: The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change. | |
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C.RULE 17Ad-15 | (Signature) (Signature) |
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Date: | ||
Social Security or other identifying number | Signature of Assignee | |
Purchase Price including commissions, if any | Name and Address of Assignee |
o Individual | o Partnership | o Corporation |
o Trust | o Other (specify) |
o U.S. Citizen, Resident or Domestic Entity | o Non-resident Alien |
A. | Individual Interestholder |
B. | Partnership, Corporation or Other Interestholder |
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Item 13. | Other Expenses of Issuance and Distribution. |
SEC registration fee | $ | 2,161.50 | ||
FINRA filing fee | $ | 6,538 | ||
NASDAQ Stock Market LLC listing fee | $ | 125,000 | ||
Printing and engraving expenses | $ | 283,417 | ||
Accounting fees and expenses | $ | 3,390,153 | ||
Legal fees and expenses | $ | 3,296,395 | ||
Transfer agent and registrar fees | $ | 8,000 | ||
Miscellaneous | $ | 200,903 | ||
Total | $ | 7,312,567.50 | ||
Item 14. | Indemnification of Directors, Executive Officers and other Persons. |
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Item 15. | Recent Sales of Unregistered Securities. |
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Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement | ||
3 | .1** | Certificate of Limited Partnership of Compressco Partners, L.P. | ||
3 | .2** | First Amended and Restated Agreement of Limited Partnership of Compressco Partners, L.P. (included as Appendix A to the Prospectus) | ||
3 | .3** | Certificate of Incorporation of Compressco Partners GP Inc. | ||
3 | .4** | Bylaws of Compressco Partners GP Inc. | ||
3 | .5** | Certificate of Correction of the Certificate of Limited Partnership of Compressco Partners, L.P. | ||
4 | .1** | Specimen Unit Certificate representing Common Units | ||
5 | .1** | Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered | ||
8 | .1 | Opinion of Vinson & Elkins L.L.P. relating to tax matters | ||
10 | .1 | Form of Contribution, Conveyance and Assumption Agreement | ||
10 | .2 | Form of Omnibus Agreement | ||
10 | .3** | Form of Long-Term Incentive Plan of Compressco Partners, L.P. | ||
10 | .4** | Form of Restricted Unit Agreement | ||
10 | .5** | Form of Indemnification Agreement | ||
10 | .6 | Form of Credit Agreement | ||
21 | .1 | List of subsidiaries of Compressco Partners, L.P. | ||
23 | .1** | Consent of Ernst & Young LLP | ||
23 | .2** | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1) | ||
23 | .3 | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1) | ||
24 | .1** | Powers of Attorney (included on the signature page to the Registration Statement onForm S-1 filed with the SEC on November 10, 2008) |
* | To be filed by amendment. | |
** | Previously filed. |
Item 17. | Undertakings. |
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By: | Compressco Partners GP Inc., |
By: | /s/ Ronald J. Foster |
Signature | Title | |||
/s/ Ronald J. Foster Ronald J. Foster | President (Principal Executive Officer) and Director | |||
* Gary McBride | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Secretary | |||
* Geoffrey M. Hertel | Director | |||
* Stuart M. Brightman | Director | |||
* William D. Sullivan | Director | |||
*By: /s/ Ronald J. Foster Ronald J. Foster Attorney-in-fact |
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Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement | ||
3 | .1** | Certificate of Limited Partnership of Compressco Partners, L.P. | ||
3 | .2** | First Amended and Restated Agreement of Limited Partnership of Compressco Partners, L.P. (included as Appendix A to the Prospectus) | ||
3 | .3** | Certificate of Incorporation of Compressco Partners GP Inc. | ||
3 | .4** | Bylaws of Compressco Partners GP Inc. | ||
3 | .5** | Certificate of Correction of the Certificate of Limited Partnership of Compressco Partners, L.P. | ||
4 | .1** | Specimen Unit Certificate representing Common Units | ||
5 | .1** | Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered | ||
8 | .1 | Opinion of Vinson & Elkins L.L.P. relating to tax matters | ||
10 | .1 | Form of Contribution, Conveyance and Assumption Agreement | ||
10 | .2 | Form of Omnibus Agreement | ||
10 | .3** | Form of Long-Term Incentive Plan of Compressco Partners, L.P. | ||
10 | .4** | Form of Restricted Unit Agreement | ||
10 | .5** | Form of Indemnification Agreement | ||
10 | .6 | Form of Credit Agreement | ||
21 | .1 | List of subsidiaries of Compressco Partners, L.P. | ||
23 | .1** | Consent of Ernst & Young LLP | ||
23 | .2** | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1) | ||
23 | .3 | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1) | ||
24 | .1** | Powers of Attorney (included on the signature page to the Registration Statement onForm S-1 filed with the SEC on November 10, 2008) |
* | To be filed by amendment. | |
** | Previously filed. |