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Exterran Partners’ recent successful performance and major trends

Ingrid Pan, CFA

Exterran Partners overview: Recent success and key trends (Part 5 of 6)

(Continued from Part 4)


Over the past few years, Exterran Partners has been successful in growing its EBITDA and distributable cash flow.


In large part, growth has come from acquisitions from parent company Exterran Holdings (EXH). Since 2006, EXLP has made eight acquisitions from EXH.

EXH currently still owns 1,000,000 of HP that EXLP could potentially acquire, which would help drive growth. Aside from acquisitions, EXLP has grown its bottom line through margin improvement due to certain profitability initiatives that the company has taken to reduce costs, as well as the implementation of price increases. EXLP also has experienced some organic top line growth recently, as demand for natural gas compression in certain liquids-rich shale plays has grown. This somewhat offset the fall in demand for compression services in more mature and dry gas plays. Given the short-term nature of most of the company’s contracts, it’s possible that a sharp fall in natural gas prices could affect EXLP’s sales within a few months or less.

EXLP’s contracts are generally structured with an initial minimum term (~six to 12 months), after which services are contracted on a fixed-fee monthly basis, regardless of the volume of natural gas that’s compressed. While EXLP doesn’t have direct short-term exposure to commodity prices, it is subject to longer-term natural gas supply and demand dynamics. Prolonged depressed natural gas prices could cause producers to scale back natural gas drilling, which would result in reduced demand for natural gas compression.

Over the next few years, EXLP could perform better than expected if natural gas prices rally and remain elevated. Plus, other positives would include being able to identify and execute acquisitions at accretive prices.

Exterran Partners represents a pure-play natural gas compression name that provides contract natural gas compression services and is the largest independent provider of compression in the U.S. EXLP has a special relationship with its general partner, Exterran Holdings (EXH). Several other midstream companies, such as Access Midstream (ACMP) and Regency Energy (RGP), perform natural gas compression among a suite of other services. Several other midstream companies, such as Access Midstream (ACMP) and Regency Energy (RGP), perform natural gas compression among a suite of other services. Exterran’s closest comp is USA Compression Partners (USAC), another pure-play natural gas compression company. These companies affect the Oppenheimer SteelPath MLP Funds Trust (AMLP).

Please read on to the next part of this series for an overview of how EXLP is trading and for a comparison versus other MLPs.

Continue to Part 6

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