Good day, and welcome to the CSI Compressco Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I will now turn the conference over to Jon Byers, Chief Financial Officer. Please go ahead, sir. Thank you. Good morning, and thank you for joining CSI Compressco Second Quarter 2022 Results Conference Call. I'd like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking. These statements are based on certain assumptions and analyses made by CSI Compressco and are based on a number of factors. These statements are subject to a number of risks and uncertainties, many of which are beyond the control of the partnership. You're cautioned that such statements are not guarantees of future performance and that actual results may differ materially from those projected in the forward-looking statements. In addition, in the course of the call, we may refer to EBITDA gross margins, adjusted EBITDA, free cash flow, distributable cash flow, distribution coverage ratio, leverage ratio, utilization, or other non-GAAP financial measures. Please refer to this morning's press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period. In addition to our press release announcement that went out earlier this morning and is posted on our website, our Form 10-Q will be filed later today. Please note that information provided on this call speaks only to management views as of today, August ninth, and may no longer be accurate at the time of replay. With that, I will now turn the call over to John Jackson. Thanks, John, and good morning. Appreciate everyone joining the call today. As we discuss the second quarter results and the outlook for the remainder of the year, there are two overarching themes that I wanna talk about at the beginning. The first is demand. The demand for our equipment is currently very high. It began last year with large horsepower, continued with demand for electric drive units, both conversions of existing units and new build electrics, and has continued to pick up in the medium and smaller horsepower units. This has led to more pricing strength as we attempt to maintain and ultimately improve our overall margins. As a result, our shops across the organization are full of make-ready activity related to our existing fleet, as well as AMS work on customer-owned units. We have visibility to see that this level of activity will be sustained through the rest of the year and into the early part of 2023, as we deploy a large portion of our remaining idle fleet over this timeframe. The second thing is cost, the inflation and the supply chain impact. During the second quarter, we saw significant increases quarter-over-quarter. As we noted in the earnings release, these were primarily associated with fluids, parts, and labor. We're all familiar with the gasoline prices. We saw the dramatic increase in prices this year, especially in the second quarter. Since the end of the second quarter, we've seen gasoline prices recede from their highs like the rest of you probably noticed. The impact on gasoline cost is immediate, and we are seeing lower gasoline costs in our financials as we begin the third quarter. The other and more significant part of fluids is lube oil. Lube oil prices change more slowly, and so while we expect reductions in the coming months, the effect may be more gradual than that of gasoline. In the parts area, we've had price increases from suppliers during Q1 and Q2, and with the more significant of those increases occurring in Q2. We've had some early Q3 price increases from suppliers. We hope to see some stability from here related to those costs on parts. Labor costs also increased in the second quarter as a result of increased hiring, raises, and increased overtime. Our people are fully utilized deploying our idle fleet and expect that will continue through the rest of the year. Overall, we're working very diligently to mitigate the impact of cost increases where we can, but it remains difficult to predict the effect in the short term as costs are changing rapidly. As we look ahead, we have a high degree of excitement and optimism. We still have a significant number of contracted idle units that are to be reactivated over the remainder of 2022 and into early 2023. We expect to see utilization continue to improve through the rest of this year as these units move from make-ready to revenue-generating assets. In addition, the current active fleet is seeing far fewer returns in the past few quarters. When customers do give notice and intend to return the unit, the unit is often recontracted before it is returned. In many instances, we're seeing that same unit deployed with a new customer at a higher price. This is a continuation of what we began to see late last year in the higher horsepower end of our fleet as availability began to tighten. Our current pricing for most of our fleet is at an all-time high. As we're able to raise prices across the contracted fleet to current market prices, we expect to recover the increase in costs we are currently experiencing. The second half of 2022 will be largely focused on deploying both idle fleet units and electric motor drive converted units while also completing, installing, and commissioning the final new builds we have committed for 2022. In addition, based on lead time and customer demand, we'll be making additional capital commitments for 2023 over the course of next quarter. As we think about capital allocation over the coming quarters. We continue to focus on spending our money to deploy our existing fleet first, that being compressors or coolers, amine plants, international opportunities for any product line, including the electric motor drive conversions of existing units. As we reach near full utilization levels, the shift in capital will move towards fleet additions. We have several new build opportunities in compression, both gas and electric, that we're currently evaluating and high grading. One of the effects of the inflation of the inflationary environment is the cost of new large horsepower units has increased significantly over the last six to nine months. In addition, lead times for delivery of major components continue to extend. Any new build units we commit to now will generally not come online until the second half of 2023. As always, we look to the most effective return on our capital as we commit to new projects. This return analysis is not just pricing, but includes improving the terms and conditions surrounding contracts related to spending this new capital. In summary, we continue to see a strong demand environment for our products and services throughout this year and well into 2023. The cost side of the equation will be the variable we are watching closely and working to mitigate the continuing inflationary pressures. All our product lines and geographic areas are experiencing growth in this environment. We believe in the long term demand for natural gas worldwide. This drives an ever increasing need for compression, and we look forward to growing the company, delivering exceptional service and improving shareholder returns. With that, I'll turn the call over to Jon Byers. Thanks, John. For the second quarter 2022, CSI reported revenue of $84 and a half million compared to $76 and a half million in the prior year. Our contract services revenue was up to $64 million from $58 million in the second quarter of 2021, a 10% increase. Year-on-year, our AMS revenue was up 9% to $16.2 million from $14.9 million in the second quarter of 2021. Second quarter adjusted EBITDA was $26.4 million compared to $26 and a half million in the second quarter of 2021, essentially flat. As John discussed, higher revenue was offset by cost inflation in our main cost areas, labor, fluids, and parts. Distributable cash flow was $10.3 million compared to $10.3 million in the second quarter of 2021, and we'll pay our second quarter distribution of $0.01 per unit on August 12 with a distribution coverage of 7.3 times. Moving on to the balance sheet, our total liquidity, cash on hand plus outstanding ABL or credit facility capacity, was $26.3 million at the end of the quarter. In July of 2022, we had significant collections from an international customer which improved our liquidity position substantially. As of August 5, our total liquidity was $35 million, which compares to $32.7 million at the end of the year 2021. Our net leverage ratio in the second quarter of 2022 is 6.1 times. This is down from our peak of 6.8x in Q3 of 2021. Our net leverage ratio is up slightly from Q1 of 2022 as we continue to balance deleveraging and investment in our fleet to drive EBITDA growth. We continue to expect a downward trend in our net leverage ratio through the rest of 2022. Finally, at the end of the second quarter of 2022, we extended one of our credit agreements that was set to mature in June of 2023. It was extended to 2025. June of 2025. We revised our capital spending guidance upwards slightly this year. Our new guidance is $55 million-$65 million, up from $50 million-$60 million provided in the prior quarter. This is mainly driven by high return projects, including reconfiguring large horsepower units to meet customer demand, as well as electrification of older large and medium horsepower units. As we said on prior calls, we aim to continue to reduce our leverage ratio over the remainder of 2022 while balancing liquidity and growth opportunities. Longer term, our goal is to reduce our overall debt level, simplify our capital structure, and position CSI to thrive in all phases of the energy cycle. We'll now open the call to questions. Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touchtone phone. If you are using a speaker phone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Once again, ladies and gentlemen, that's star then one if you have a question. We'll pause momentarily to assemble our roster. Today's first question comes from Brian DiRubbio with Baird. Please go ahead. Good morning, gentlemen. Good morning. Starting off just the comments you said about utilization rates. You know, I think you ended the quarter at just under 83%. You know, what does full utilization look like for CSI? Is it 90? Is it 95? I'd say we're probably looking at low 90s. We have really three main components of our fleet. We have our reciprocating fleet, and we have some screw compressors, and we have the GasJack fleet, which is the smaller horsepower, the way under our 100 horsepower fleet. In the reciprocating compression fleet, I think we're gonna end up in the mid-90s. You know, we have a chance for full utilization to end up in the mid- to upper 90s. The screw fleet and the GasJack fleet really is gonna reach those kind of levels. It's gonna be more in the 60%-70% range. There's much smaller components, so overall that blends, probably more detail than you want, but overall that blends you to a low 90s. No, that's actually very helpful. Appreciate it. You know, Jon Byers, how should we think about sort of how much of the fleet is contracted up, you know, and when could we start seeing that reset in rates as, you know, the existing fleet sort of rolls into newer contracts that are gonna be at much higher prices? We're pushing price increases now every opportunity we have. Referring back to John's comments, as we have total returns of units are dropping, but as we do have units come back, we're typically able to place those units out back at higher rates. As contracts come up for renewal, typically we see one-year terms on some of the larger horsepowers. Those come up for renewal, we're pushing rate increases where we can. John, do you wanna address a little bit. Yeah. You know, you think about our fleet and how it's contracted. About 85% of our fleet, give or take at any one time, is, has term of one year or less, but we have about 15% that's longer than one year. To capture what we would consider to be current market prices today, recognizing they've moved up a lot in the last six months, it's gonna take 9-12 months to get most of that pushed through without changes from here. If you were to go back a year ago, we're probably getting 2%, 3%, 4% price increases back in July of last year. You know, maybe on the 10% of the fleet we were chasing, 'cause things were just starting to tighten. You started moving to the upper single digits on changes, and now you're moving into potentially 10%-15% price changes. Someone who hasn't had a price change for a year and a half, may see a 15%-20% price change when their unit comes up. That takes time to push through because of the way these contracts come off term. I would say over the course of the next 12 months, we should have almost everything at what I would consider current market pricing, which current market pricing being July 1, 2022. I can't tell you what the current market price is gonna be a year from now, 'cause it still may go up from here. That's generally the timeframe it takes to flow through the price increases. You have a dialogue with your customer. Do you wanna stay month to month? Is this something you think you're gonna not need, or we're gonna resize your compression over the next 6-9 months? That may be one rate. You may say, "Well, no, I'll firm it up for a year or two." That may be a different rate. As I mentioned in my comments, some of the things we're trying to also address in this window of just besides just straight pricing is terms and conditions. That may include if you want a longer term, but we want an inflation index in the contract such that it has an automatic adjustment to inflation, so we don't have to go in and negotiate each time. What the standby rate may be. Instead of being 60% standby, maybe it's 75% standby. These are all the things we're trying to work on that underpin the floor of our performance, not just straight pricing. Long-winded answer again to your question, but the reality is it takes 9-12 months to push the whole fleet across. No, no. Much appreciate the detail there. Just, I guess, final question from me is, as we think about CapEx spending, you know, and given all the inflationary pressures that we've been seeing over the last 12 months or so, you know, you moved your CapEx number up for this year, but, are you buying more stuff? And obviously stuff in quotes. Or is it just whatever stuff you were buying just cost that, you know, 10% more? And how should we be thinking about sort of CapEx for 2023 conceptually, considering some of the comments you made earlier regarding, you know, the extended lead times for new equipment? To answer the first part of your question, the increase in CapEx is really driven by the reconfiguration of our fleet. We are not seeing price creep on, you know, what the guidance that we had provided previously. It's more electrification and reconfiguring units to, you know, more broadly used application. Did that answer your question? Yeah, it does. On that point, yeah. Okay. Yeah. Then the second part, we're not providing any capital guidance for 2023. You know, we've talked about it in all our calls, how we're focused on deleveraging. You know, we're high-grading opportunities now, but we haven't made a final decision or won't provide guidance at this point on our 2023 capital budget. Fair enough. I recognize it's early. Appreciate all the comments. Thank you. Thanks, Brian. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one. Today's next question comes from Selman Akyol with Stifel. Please go ahead. Thank you. Good morning. Just a couple quick ones for me. You talked about new builds and cost of large horsepower units increasing significantly. Can you quantify what you're just seeing out there for new builds and acquiring, horsepower? Sure. I would say, to put it in more percentage terms, if you're looking at what I call the larger horsepower, the 3,600 Caterpillar engine fleet sizes, so the G3606 and G3608, which is 1,875 horsepower and 2,500 horsepower. Those units from, let's call December 31 to today, are probably 25% higher to build in round numbers. That's a significant increase. Let's say a G3606 maybe cost $1.5 million. Six months ago, nine months ago, it cost $1.2 million, $1.2 million, depending on how you got it set up today. Same thing on the other. You're up significantly. To build the same number of units, you're gonna spend 25% more capital. The other side of that is, with that comes more pricing power, I think, with your existing fleet because to replace you with new build is gonna be a lot more expensive. Our op costs are up. We're lagging on covering our op costs, but we think there's a lot of price movement we can still capture over the course of next year with our existing fleet that are on older rates. Got it. That's helpful. Also on electric drives, can you just? Are you getting premium pricing for those? I'm sure it's very, very small, but can you just maybe give some horsepower in terms of how much is now electric and are there any goals or do you see demand supporting so much horsepower in electric? Yeah, I'd say we had probably coming into the last year or so, we probably had 1.5% of our fleet was electric and across the spectrum from small to medium size. We didn't really have any larger horsepower, higher voltage, horsepower electrics. We've been moving into that arena, converting some of our older, higher emission engines to that. I would say based on what we're deploying this year, it's probably 15,000-17,000 horsepower that we're converting to electric. Another 1-1.5% of our fleet will go from gas to electric by the end of 2022. That'll probably put us closer to the 3% range, if that's what you're looking for. That is. Does electric bring a premium pricing? Yeah, it does. It does bring a premium pricing. There's that, and you get a combination. You get a higher price. We get, at least at this point, we're getting longer term and you have lower op costs and you have minimal overhaul because you don't have a gas-fired combustible engine running. You get cost reduction, you get maintenance reduction, and you get term and you get rate. All that works pretty well. Got it. Okay. Thank you very much. You bet. Ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to John Jackson for closing remarks. Appreciate everyone joining today. We look forward to talking to you again next quarter. Thank you for your time. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.