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USA Compression Doubling Horsepower, Onshore Reach in $1.8B Energy Transfer Deal

USA Compression Partners LP (USAC), which treats and transports natural gas in the U.S. onshore, is expanding its reach and doubling its horsepower in an estimated $1.8 billion deal with Energy Transfer Partners LP.

Once completed, USAC, which now has 1.6 million hp, would control an estimated 3.4 million hp in operating areas that include the Permian Basin, Eagle Ford Shale, Rocky Mountains and Gulf Coast.

Under terms of the transaction, USAC is acquiring CDM Resource Management LLC and CDM Environmental & Technical Services LLC. CDM’s average unit size is 700 hp, with an average age of seven years and a current operating utilization rate of 87%.

Energy Transfer Equity LP (ETE) in turn agreed to acquire ownership stakes in USAC.

“This is an exciting day for USA Compression to be able to announce this strategic transaction with Energy Transfer,” said USAC CEO Eric Long. “USAC’s acquisition of CDM is a logical combination of two leading compression service providers, each with nearly two decades of delivering exemplary levels of customer service...This transaction gives USAC the geographic reach to compete in all the active producing regions.”

USAC primarily provides infrastructure applications for high volume natural gas gathering systems, processing facilities and transportation. CDM’s horsepower is focused primarily on large applications. CDM also provides a full range of gas treating and emissions testing services, and its treating activities would complement USAC’s station services offerings, in which it provides turnkey gas handling solutions.

USAC, which has offered jobs to CDM’s workforce, expects the transaction to be accretive to distributable cash flow this year.

Under terms of the transaction, the CDM businesses would be exchanged for $1.225 billion cash, 19.2 million USAC common units and 6.4 million USAC Class B units. ETE in turn is acquiring all of the equity interests in USA Compression Partners GP LLC, along with 12.5 million USAC common units from USA Compression Holdings for $250 million. Once the transaction is completed, USA Compression Holdings would continue to own about 12.5 million USAC common units.

For the cash portion of the deal, USAC has obtained $500 million from funds managed by EIG Global Energy Partners and $725 million in committed debt financing from JPMorgan and Barclays.

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