Good day. And welcome to the USA Compression Partners’ Fourth Quarter and Full Year 2014 Earnings Call. Today's conference is being recorded. At this time, I’d like to turn the conference over to Greg Holloway, Vice President, General Counsel and Secretary. Please go ahead, sir.

Well thank you, Jamie and good morning, everybody. Thanks for joining us. This morning as you know, we released our financial results for the quarter ended December 31, 2014 and full year 2014. You can find our earnings release and later a recording of this conference in the Investor Relations section of our website at usacpartners.com. The recording will be available through February 28. During this call, our management will discuss certain non-GAAP measures. You will find definitions and a reconciliation of these measures to GAAP measures in the earnings release. As a reminder, our conference call will include certain forward-looking statements. These statements include projections and expectations of our performance and represent our current beliefs. Actual results may differ materially. Please review the statements of risk included in this morning's release and in our latest filings with the SEC. Please note that information provided on this call speaks only to management's views as of today, February 17, and may no longer be accurate at the time of a replay. I’ll now turn the call over to Eric Long, President and Chief Executive Officer of USA Compression.

Thank you, Greg, and good morning, everyone. Also with me is Matt Liuzzi, our CFO. I am pleased to report that we finished 2014 on a strong note. This morning, we reported record levels of revenue, adjusted EBITDA, and adjusted distributable cash flow for both the fourth quarter as well as the full year. During 2014, USA Compression deployed a record amount of capital, over $370 million, taking advantage of market conditions to grow our business and further strengthen customer relationships, all while maintaining our business strategy, providing compression services on a take or pay basis without taking on direct commodity risk. I'll get into the details of 2014 in a moment, but first let me address head-on the elephant in the room, just what impact has the volatility in oil prices had on USA Compression's business. While the headlines in the news are focused on oil price volatility and the reaction to lower oil prices by producers, the midstream natural gas industry has so far been weathering the storm. As our long-time investors and business partners understand, our business depends primarily on the domestic production of natural gas, which drives the bulk of our business. We like the intermediate and longer term outlook for natural gas, both on a global basis as well as closer to home in the domestic market, where it has a more direct impact on our business. I'll discuss this further in just a moment. As we get going into 2015 like many of our peers and customers, we're exercising a great deal of caution in terms of capital spending and how we pursue business opportunities. We will respond to customer demand for compression, but we expect to proceed through the year at a major pace and one that allows us the greatest flexibility to…

Thanks Eric and good morning everyone. As Eric mentioned, today USA Compression reported record levels of revenue, adjusted EBITDA and adjusted distributable cash flow for the fourth quarter of 2014. Touching on fourth quarter operational highlights, we added approximately 100,000 horsepower of new compression units to our fleet during the quarter and ended the year with approximately 1.5 million total fleet horsepower. As we've discussed on previous calls, during 2014 we took advantage of market opportunities and took delivery of approximately 350,000 horsepower of new compression units as compared to our initial expectations of 220,000 horsepower going into 2014. We spent over $370 million in growth CapEx for the year. Reflecting the cautious approach to the coming year, we've ordered approximately 230,000 horsepower for delivery in 2015, which we expect to be delivered primarily over the first three quarters of 2015. Our revenue generating horsepower increased from $1.3 million at the end of the third quarter of 2014 to $1.4 million at the end of the fourth quarter of 2014 due to the additional units we placed into service. We continue to see initial contract terms of six months to five years depending on applications. Turning to the financial performance for the fourth quarter of 2014, revenue increased 25% compared to the fourth quarter of 2013 primarily driven by an increase in our contract operations revenue as a result of adding revenue generating horsepower. Contract operation's revenue in the fourth quarter of 2014 increased 27% to $60 million as compared to $47.4 million in the fourth quarter of 2013. The fourth quarter of 2014, increase in our contract operations revenues was driven almost exclusively by the organic growth in our revenue generating horsepower. Average revenue per revenue generating horsepower per month increased 3% to $15.82 for the fourth quarter of…

[Operator Instructions] Now we’ll take our first question from Praveen Narra with Raymond James.

Hi good morning. You talked a bit in your comments and obviously it’s a much smaller piece of your business, but how do you think about the outlook for utilization in the gas lift and well side compression part of the business? Does it actually start to decrease in this environment or how should we think about it?

Yeah, Praveen, I guess we look at it in a couple different ways. One, we anticipate that incremental new growth activities will slow. Obviously, deployment of new gas lift equipment is tied to new drilling activity, which is going to have somewhat of a slowdown. That said, it’s a fairly large universe and the opportunity set is somewhat large. I think one of the reasons we’re backing off on the new CapEx for 2015 on gas lift is to make sure that we can maintain our historical high utilization rates that we’ve seen. So, clearly producers are not going to be removing gas lift equipment from wells that are making 50 or 100 or 250 barrels a day that need lift energy, provides the source of energy to get the oil out of the ground and obviously provide the cash flow that the producers need. So, I think we’re going to be somewhat guarded coming into the year, but our view is if we back off on the new unit deploys, that will allow us to maintain a high degree of utilization that we have in the existing base fleet.

Okay, that’s helpful. And then could you give us a sense on both you guys and the industry in terms of the horsepower build-out and the prevalence of building on spec versus building on contract? You had mentioned what it was for your current orders, but is that about right for the industry or do you see your book is a little bit more contracted for the industry, and this on all compression, not just gas lift?

I obviously can’t comment on others. We spend time visiting with our packagers, some of our competitors package or own equipment and I don’t believe that – a couple of these guys haven’t made their -- haven’t presented their quarterly calls yet. So, I do have a sense from visiting with the manufacturers on the engine and the compressor frame side of the equation that lead times are still long. We’re looking at 30 to 40 week lead time right now for the major components and visiting with a couple of our fabricators. Their contract book is strong for 2015 and in some cases on into 2016. So the demand is still high. Clearly, some of that would be for owner-operator, some of the major gatherers and processors, who purchase equipment for the projects that have very long cycle times. Our sense is in looking at what we’ve seen coming through the end of the years that the utilization of the domestic fleet, for guys like us is still very high. So, I think I would contrast that to the 2008 and 2009 time period, where there seem to be a fairly large, I’ll call it glut of large horsepower equipment, and our discussions with our packagers and what we’re hearing from customers out in the field is that is not the case today. That we’re highly utilized and it seems like our peers are highly utilized, and that we’ll wait to hear with some of the commentaries from some of our other public peers after they announce.

Okay. And if I could just sneak in one follow-up. In terms of the pace of newbuild orders in horsepower going forward, and obviously you can only speak for yourself, but I guess if you had to guess on the industry, would you think that the pace from here continues at a 2014 pace or would it moderate in terms of ordering?

Well, I think clearly in our case, we came into 2013 looking to deploy 220,000, and we did you know 350,000, 370,000. This year, we came into it looking to do about what we did coming into 2013, again 220,000; 230,000; 250,000 horsepower range. So I think maybe this year, people are looking at the back half of the year, probably have a little bit less visibility for the second half of this year than we did last year at this time looking at the back half of the year. So, I think it’s premature to conject what the back half of the year is going to look like for the industry based on current pricing and current signals, probably a little more conservative than last year.

That’s very helpful and thank you. Sorry.

Praveen, its Matt, I’ll just add one other thing you mentioned speck builds, when we go through our budget, when we’re developing our capital plan, we don’t think about it like a spec unit. We go out and when we come up with that range of capital that we think we’re going to spend for the year, what we’re basing that on is detailed conversations with customers throughout all the regions about their needs for the remainder of the year, and so we don’t think about it as we’re going to get a 100,000 horsepower in the back half of the year, and we better find somebody to use it. These numbers are based on continual conversations with customers. So I just wanted to draw that distinction that it’s not quite spec ordering I think like other industries may have.

That’s helpful. Thanks and congratulations on the strong contract -- on the strong coverage.

Thank you.

Next question comes from TJ Schultz with RBC Capital.

Hey guys good morning. I guess just kind of staying there first on some of the utilization, and it sounds like you're discussing kind of defending utilization as you have in the past, but just any more specific color on utilization and pricing changes year-over-year in 2015 as it relates specifically to your 2015 EBITDA guidance? I’m just trying to see how we should think about some of the puts and takes between utilization and pricing near-term to get there?

Sure TJ its Matt. When we look at the utilization, I mean pricing obviously was up year-over-year in the quarter, and so we continue to see out there attractive -- we continue to sign up deals at attractive rates. And so when we project out, we don’t really show a big decrease in rates where we’re looking at flat rates with -- if there’s upside to raise that's going to be a little bit additional on top of that. In terms of utilization, I think as Eric mentioned, when we look out there, we see that there's still demand on both sides of the business. People are still spending money on these big infrastructure projects. And so, with our CapEx at the level where it is and we think when we kind of look around across the industry, we think the demand for equipment is going to remain fairly solid and fairly tight throughout the rest of the year, which should support both continued utilization and pricing trends.

And TJ, along that line, having the focus that we do on infrastructure equipment, we continue to move up and up and up in the size of the compression assets that we're adding to our fleet. When you look at what we're adding this year, it's a large component of equipment being deployed in the 3600 series, 3606, 3608, even 3616-type compression equipment. That last one, the 3616 is just disclose under 5,000 horsepower per gizmo. So, not everybody can do this. There's just a couple of us in the industry who have the wear with all, both financially and operationally to be able to deploy this type of iron. That type of equipment typically goes out under much longer term contract, intends to be less, call it, price sensitive than some of the other lower horsepower, more commodity oriented, more well ahead oriented type of equipment. So, I think that's a big differentiator this year when you look at the amount of horsepower that we'll add. The average size of the fleet this year that's being added will be significantly larger than what we added last year on an average basis, bigger stuff.

Okay. Thanks. I guess just lastly, you have a 3.5 to four times I guess kind of target leverage ratio, and given the 2015 CapEx and cash flow guidance, it seems not surprisingly that equity funding will need to be part of the funding mix longer term. But maybe if you could just discuss how you think about that given where your yield is right now. And then, in the past, you've talked about looking at strategic acquisitions as a way to improve liquidity in your stock maybe and hopefully the yield. So maybe just touching on that lever as well as a way to get to where you want to be.

Sure TJ, you certainly hit it on the head. I mean, in terms of kind of the current yield as we sit here today, it's not super attractive to be out there issuing equity. The amendment that we did to the credit facility back of the beginning of this year obviously gives us some flexibility to kind of let things sort themselves out in the market. Equity is obviously an important part of kind of the overall capital structure. And we realize that and really getting from kind of that 4.5 times level down to kind of 3.5 to four target range is going to require a balance between the leverage and the distribution growth and coverage et cetera. So we are definitely still kind of keeping an eye on everything, but understand that it's got to be a balance of capital.

In terms of strategic M&A, we continue to look at things regularly. Last year there were the value expectations I think amongst all subsectors in the MLP land intended to get pretty high. And so, I think this year is sort of remains to be seen kind of where those trends move. But certainly, we continue to look at things and to the extent that it would accelerate that us getting into a more manageable leverage scenario, we would absolutely look at things.

Okay. Thanks Matt.

Next go to Shneur Gershuni with UBS.

Hi. Good morning, guys.

Hi, Shneur.

Good morning.

Hi, morning. Just a couple of quick questions and some of them I guess are follow-up. In your prepared remarks you'd sort of emphasized how you really have to pay attention to natural gas production rather than crude production, and everybody is announcing production cuts or CapEx cuts and so forth. But I guess so I was wondering if you can kind of square peg for me here. There are lot of gathering and processors who tend to focus more on the gas and on the NGL side of the equation. That seems to be cutting CapEx and headcount aggressively. We saw Noble this morning; we've seen DCP Midstream and so forth. Some of them are in some of the basins that you deal I think so forth. Is it a scenario now where things are flat for you now because of kind of the producer plans for the next year or so, and more the lag nature of your business? I was just sort of wondering if you can sort of help us a little bit here. Because it's one thing to see the crude CapEx cuts and being able to say that's differentiated from your business, but when we look at the gathering and processors and they are sort of taking strategic cuts sort of how does that fit with your business? Do we see that later on? Is it just growth slowing? I was wondering if you can just sort of comment about that.

Sure. One of things we see in an environment like this and we've seen this historically through multiple cycles, we tend to be kind of avoiding capital gain at this stage. So when folks cut their CapEx budgets, they look at their incremental needs and say, you know, is compression really a core competency. Is that something that we want to take our precious amount of CapEx dollars and truly deploy? So, I think you'll see a balancing act. You'll see some folks who are -- may have some company-owned equipment that they'll deploy in the short-term. Some of the folks will look at it and say, you know, I've got $100 million worth of compression that needs to be deployed over the course of the next year or two. And I got to buy the whole thing? Am I going to outsource part of it to U.S.A. or outsource at all? So I think historically again what we've seen in marketplaces like this is a little bit more of a shift to the outsourcing model, we avoided capital type of gains. I also think it's specific to certain G&P companies. So the drivers in the Utica, the Marcellus are very different than the drivers in the Mid-Continent or very different than the drivers in the Delaware in the Midland basin right now. So I don't think it’s, Shneur, one that you can paint with a broad brush and paint the entire industry. There are areas that are what we call Tier one high quality properties in the Permian, in the Delaware which are being developed where you don't have sufficient pipeline and processing capacity to handle either the very high BTU-rich gas or the common sand or oil that's coming out from the Wolfcamp and the Wolfberry in that area. So, very different drivers in the SCOOP; very different drivers in the Utica and the Marcellus. So could have some potential impact, but that's I think why we're coming into 2015 being a little more cautious and guarded just to see what the visibility for the back of the year truly looks like.

If I can paraphrase a little bit, is it fair to say that while everybody is looking at their budgets and looking and reviewing their business models it’s fair to say that we're more likely to see them act towards preservation of capital and outsourcing the CapEx really on to you rather than them trying to in-source compression to try and lower variable cost.

Generically yes.

Okay. Cool. A follow-up question to that. Just lot of the good questions have been asked already, but kind of curious if you can sort of talk about capital cost at all. Are your dealers cutting cost at all for equipment and so forth? We've seen some of the major machinery companies report disappointing earnings and so forth. I'm just wondering if you're starting to see some of the benefits in terms of lower cost for equipment that you'd be purchasing or looking to purchase over the next year or so.

I wish we can tell you today we're seeing that Caterpillar historically has not been receptive to reducing their first cost. I think they view the marketplace similar to Ferrari. They've never been the low cost provider. They have been bearing kind of the perfect storm where they've had reductions in mining equipment. They've had the strong dollar implications. The energy sector has been one of their big drivers for the past few years. That said Caterpillar is not the only game in town and that there are other providers of compression equipment at the driver side who are aggressively looking to make some inroads in this marketplace. So, I think it's one that at this stage of the game unlike what you're seeing in some of the other service industries where there's some fairly major reductions in equipment cost and then hence the ability to reduce some of those service fees. We've not seen that yet in our industry, but that's something that obviously we're going to spend some time on this year.

Okay. Great. Thank you very much, guys.

Thank you.

Our next question comes from Sharon Lui with Wells Fargo.

Hi. Good afternoon. Just to raise a follow-up on TJ's question about guidance, on annualized basis the fourth quarter numbers was about $132 million in EBITDA. Looking to, I guess, your guidance for 2015, it was $130 million to $140 million. It just seems very conservative given where the current run rate is. You indicated I guess that utilization should remain pretty solid as well as the rates. Just wondering, were there unusual items in the fourth quarter perhaps, or maybe we should be thinking about the margin going forward.

Sure, Sharon, it's Matt. A couple of things. In the fourth quarter we did have a few benefits just from some timing items that boosted that up a little bit. And when we look at the next year, again I think we are taking a cautious approach. As Eric mentioned, we don't have as much visibility in the later part of the year. And so, we understand that when you look at the fourth quarter and you annualize it, you get to levels where you had mentioned, but basically are what we put out there for our range on both EBITDA and DCF just reflects kind of an uncertain market as we said here today. And certainly, throughout the remainder of the year, we hope to be able to update that and provide updates to our investors. But right now, we're taking that cautious approach to the year.

Okay. And I guess may be if you could provide some color on any recent conversations you've had with your customers. They seem I guess discussing more in terms of pricing or deferring their commitments to walk in contracts at this point in time. Just trying to think about what type of conversations you've been having.

So again, Sharon, we can't sort of generalize and put the broad brush across the entire U.S. I would say that there are pockets of strengths and there are pockets of little softness. There are certain companies that are highly levered with limited hedge capacity on the E&P side. They're having a more difficult time than some of the larger folks who might have a stronger balance sheet and had a much more actively hedged program. Even with that although CapEx budgets have been cut with the E&Ps, in some cases -- most of the cases fairly dramatically, we are continuing to se and we're hearing from our customers both Midstream and E&P that their overall production for 2015 will be increased over 2014. And when we then look at how they are going to get their gas into and through the pipelines, compression is needed. I think the reason we're being a little more cautious and conservative and why we set little bit larger guidance range this year is looking at the back half of the year just there's a little less clarity than there was this time last year due to the volatility and commodity prices. Prices remain soft or slip further, probably a different scenario then if prices tend to tick up a little bit. We are seeing, particularly when you look at the Marcellus and the Utica, there's a lot of volumes, there's a lot of gas that's been developed that does still need to get to the marketplace. So again, I think we're cautiously optimistic is to what the back half of the year will look like. But my crystal ball and I don't think anybody on the call has the ability to accurately forecast what's going to go on with instability in Middle-Eastern countries and the other things that we can't control. So I think we're all taking somewhat guarded view for the back half of the year and just make sure that we don't over-commit and that we actually are able to deliver with what our forecast projects are going to look like.

Okay. No that’s helpful. And I guess the last question is just in terms of the Drift program, any update on that front?

Sharon, no change in the Drift program. Obviously this quarter Riverstone and Argonaut both elected to participate. They have committed through the first quarter payment, which will happen in May and so at this point there’ve been no decisions made further out than that.

Okay. Great. Thank you.

Our next question comes from Jeremy Tonet with JPMorgan.

Hi, all of our questions have been answered.

Thanks Jeremy.

We will next go to Jerren Holder with Goldman Sachs.

Hi, good morning, appreciate the guidance for 2015, any thoughts on distribution growth though?

Jerren, no. We don’t provide actual distribution growth guidance, but obviously that's something that the Board will review on a quarterly basis and make the determination based on that quarter as well as kind of the outlook for the rest of the year.

Is it fair to see in every quarter you guys have increased the distribution that that trend should continue in 2015?

I would have to leave that to the Board to make that decision.

Okay. And on the covenants, no there were some amendments to the credit facility. Can you talk about some of the key metrics, any sort of debt to EBITDA sort of limits that you guys need to be aware of as you go about financing the CapEx program here?

Sure, so we closed the deal in early January of this year. The convenient relief that -- flexibility that I had mentioned basically gives us the ability to go to up 5.95 times coverage for the first and second quarters of this year and then it steps down to 5.5 times basically through the second quarter of 2016. And so that basically we bump it up and gave us a little more breathing room really to let the market sort itself out and continue to execute on the capital program. So again right now we were at 4.5 times at the end of the year versus leverage convent of 5.5 times.

And those metrics are -- they're going to be I guess trailing three months annualize like you used the 4.5 times.

Yes. Trailing three months annualized that’s right.

Okay. All right, thank you.

We will next go to Andy Gupta with HITE Hedge.

Hi. Good morning guys. I just want to follow-up on Sharon’s question on potential customer behavior. We had one mid-stream company on Friday suggest that they were going to do more owned compression equipment like leased equipment, do you have any thoughts, are you hearing some more comments from your customers?

I am actually -- I've said on that same call on Friday -- that particular company has a propensity to purchase equipment because it tends to have 20 year to 30 year applications for that type of product. Again we don’t see a wholesale move toward -- we want to own everything versus we want to outsource everything. A fair number of our midstream customers approach kind of a balance where they outsource some and then they own some and we're not seeing a radical wholesale shit one way or the other from that historical philosophy.

Got it and sorry to go back to the gas because I know that's a smaller percentage of your business, but just to understand a little bit better. You mentioned you may see some pricing softness on that front of the business. Can you elaborate a little bit more and so a related question on the utilization, I am not sure if you break out utilization for this business. But what are you sort of seeing for the gas and some of the utilization as well?

Yes, so I think part of the reason we're being a little more conservative with our future growth outlook is we acquired the gas lift assets couple of years ago. This is the first super cycle or first softness in the oil price side that we're coming into. So we're approaching it probably more cautiously maybe than others. If this stage of the game we are not seeing a wholesale change in utilization, utilization of the gas-lift fleet is still strong. So I think we're proactively contemplating that utilization and/or pricing might soften a little bit and so we're trying to kind of hunker down before the storm hits so to speak and at this stage of the game, that we've not seen wholesale return or much degradation all frankly in the utilization of the gas-lift fleet.

Understood. And just to think about what the softness could be, is a 10% range reasonable or plus minus?

Again too early at this stage to contemplate one way or the other. It may be no degradation in utilization, no degradation in pricing. It could be some and at this stage, we're not seeing it. I can't really conject.

Understood. Well, thank you guys. Congratulations on the quarter.

Thank you.

And it appears, there are no further questions at this time. So I'll turn the conference back over to our host for any additional or closing remarks.

Thank you, everybody for your time today. I know it was kind of a long-winded call. A lot going on in the industry and as you heard me say before the story at USA Compression has been and will continue to be a story of growth and stability. We had a very good year in 2014. We're having the makings of a good year for 2015. We'll balance the growth and we'll continue to focus on the stability side. So we'll update you with press releases every now and then if they're germane for an operational update and we'll continue to update you as to the performance of the business on our next quarterly call. Appreciate your continued support and everybody have a great day.

Thank you for your participation. This does conclude today's call.