USA Compression Partners (USAC) risk factors, FY2024 10-K

Other

1. 01instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss, and deduction among our unitholders

Risks Related to Our Business

1. 02We may not generate sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to the General Partner, to enable us to make cash distributions on our common units at the current level
2. 03To make cash distributions at our current distribution rate of $0.525 per common unit per quarter, or $2.10 per common unit per year, we will require available cash of $61.7 million per quarter, or $246.8 million per year, based on the number of common units outstanding as of February 6, 2025
3. 04An extended reduction in the demand for, or production of, natural gas or crude oil could adversely affect the demand for our services or the prices we charge for our services, which could result in a decrease in our revenues and cash available for distribution to unitholders
4. 05We have several key customers. The loss of any of these customers would result in a decrease in our revenues and cash available for distribution
5. 06We face significant competition that may cause us to lose market share and reduce our cash available for distribution
6. 07Implementing the shared services model with Energy Transfer will be a complex and time-consuming process. Disruptions to our systems or operations caused by the implementation may have a material adverse impact on us
7. 08As of December 31, 2024, we had $2.5 billion of total debt, net of amortized deferred financing costs, outstanding under our Credit Agreement and Senior Notes
8. 09As of December 31, 2024, we had $750.0 million and $1.0 billion aggregate principal amount outstanding on our Senior Notes 2027 and Senior Notes 2029, respectively. The Senior Notes 2027 and Senior Notes 2029 accrue interest at the rate of 6.875% and 7.125% per year, respectively
9. 10We depend on a limited number of suppliers and are vulnerable to product shortages and price increases, which could have a negative impact on our results of operations
10. 11We may be unable to grow our cash flows if we are unable to expand our business, which could limit our ability to maintain or increase the level of distributions to our common unitholders
11. 12Our ability to fund purchases of additional compression units and expansion capital expenditures in the future is dependent on our ability to access external capital, and if we are unable to access this external capital, we may be limited in our ability to grow our operations or maintain or increase our distributions
12. 13The terms of the Credit Agreement and the Indentures restrict our current and future operations, particularly our ability to respond to changes or to take certain actions, may limit our ability to pay distributions and may limit our ability to capitalize on acquisitions and other business opportunities
13. 14The deterioration of the financial condition of our customers could adversely affect our business
14. 15The Preferred Units rank senior to our common units with respect to distribution rights and rights upon liquidation. These preferences could adversely affect the market price for our common units, or could make it more difficult for us to sell our common units in the future
15. 16common unitholders will not be entitled to receive distributions covering any prior periods if we later recommence paying distributions on our common units
16. 17Restrictions in the Partnership Agreement related to the Preferred Units may limit our ability to make distributions to our common unitholders and our ability to capitalize on acquisition and other business opportunities
17. 18A prolonged or severe sudden downturn in the economic environment could cause an impairment of identifiable intangible assets and reduce our earnings
18. 19Impairment to the carrying value of long-lived assets could reduce our earnings
19. 20We depend on the continuing efforts of our executive officers and the departure of any of our executive officers could have a significant negative effect on our business, operating results, financial condition, and on our ability to compete effectively in the marketplace
20. 21We may be unable to grow successfully through acquisitions, which may negatively impact our operations and limit our ability to maintain or increase the level of distributions on our common units
21. 22unanticipated costs in 2018 to utilize third-party contractors to service our compression units at a greater cost than we would have incurred to compensate employees to perform the same work
22. 23The CDM Acquisition could expose us to additional unknown and contingent liabilities, which liabilities could materially adversely affect our business, results of operations, and cash flow
23. 24From time to time, we are subject to various claims, tax audits, litigation, and other proceedings that could ultimately be resolved against us and require material future cash payments or charges, which could impair our financial condition or results of operations

Risks Related to Governmental Legislation and Regulation

1. 25We and our customers are subject to substantial environmental regulation, and changes in these regulations could increase our and their costs or liabilities and result in decreased demand for our services
2. 26are applicable to our operations, we may occasionally identify or be notified of technical violations of certain requirements existing under various permits or other authorizations. We could be subject to penalties for any noncompliance in the future
3. 27New regulations, proposed regulations, and proposed modifications to existing regulations under the Clean Air Act, if implemented, could result in increased compliance costs
4. 28Climate change legislation, regulatory initiatives, and litigation could result in increased compliance costs and restrictions on our customers’ operations, which could materially adversely affect our cash flows and results of operations
5. 29Climate change may increase the frequency and severity of weather events that could result in severe personal injury, property damage, and environmental damage, which could curtail our or our customers’ operations and otherwise materially adversely affect our cash flows
6. 30A climate-related decrease in demand for crude oil and natural gas could negatively affect our business
7. 31Increased attention to ESG matters and conservation measures may adversely impact our business
8. 32Increased regulation of hydraulic fracturing could result in reductions of, or delays in, natural gas production by our customers, which could adversely impact our revenue
9. 33Holders of our common units have limited voting rights and are not entitled to elect the General Partner or its directors
10. 34Furthermore, the Partnership Agreement contains provisions limiting the ability of common unitholders to call meetings or to obtain information about our operations, as well as other provisions limiting our common unitholders’ ability to influence the manner or direction of management
11. 35The General Partner’s liability for our obligations is limited
12. 36The Partnership Agreement limits the General Partner’s fiduciary duties to our unitholders
13. 37The Partnership Agreement restricts the remedies available to our unitholders for actions taken by the General Partner that otherwise might constitute breaches of fiduciary duty
14. 38The Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units
15. 39The general partner interest or the control of the General Partner may be transferred to a third party without unitholder consent
16. 40An increase in interest rates may cause the market price of our common units to decline
17. 41Energy Transfer may sell, and the holders of the Preferred Units have sold and may continue to sell, our common units in the public or private markets, and such sales could have an adverse impact on the trading price of our common units
18. 42The General Partner has a call right that may require holders of our common units to sell their common units at an undesirable time or price
19. 43Unitholders may not have limited liability if a court finds that limited partner actions constitute control of our business
20. 44Unitholders may have liability to repay distributions that were wrongfully distributed to them
21. 45The NYSE does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements
22. 46Tax Risks to Common Unitholders
23. 47The anticipated after-tax economic benefit of an investment in our common units largely depends on us being treated as a partnership for federal income tax purposes. We have not requested a ruling from the IRS on this or any other tax matter affecting us
24. 48The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial, or administrative changes or differing interpretations, possibly applied on a retroactive basis
25. 49We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter affecting us. The IRS may adopt positions that differ from the positions we take, and the IRS’s positions may ultimately be sustained
26. 50adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced
27. 51Tax gain or loss on the disposition of our common units could be more or less than expected
28. 52Unitholders will be subject to limitation on their ability to deduct interest expense incurred by us
29. 53Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them
30. 54We treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units
31. 55We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss, and deduction. The IRS may challenge these methodologies or the resulting allocations, and such a challenge could adversely affect the value of our common units
32. 56matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our assets. The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss, and deduction
33. 57As a result of investing in our common units, you likely will become subject to state and local taxes and income tax return filing requirements in jurisdictions where we operate or own or acquire properties
34. 58If we fail to develop or maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud, which likely would have a negative impact on the market price of our common units
35. 59We do not insure against all potential losses and could be seriously harmed by unexpected liabilities
36. 60Cybersecurity breaches and other disruptions of our information systems could compromise our information and operations and expose us to liability, which would cause our business and reputation to suffer
37. 61Terrorist attacks, the threat of terrorist attacks, or other sustained military campaigns may adversely impact our results of operations