The following discussion and analysis of the Partnership's financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in "Item 1. Financial Statements" contained herein. In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 14, 2022 (" 2021 Annual Report "). This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview

We provide services including natural gas compression and treating services. Natural gas compression equipment is used for natural gas and oil production, gathering, artificial lift, production enhancement, transmission, processing, and storage. We also provide a variety of natural gas treating services. Our compression business includes a fleet of approximately 4,800 compressor packages providing approximately 1.2 million in aggregate horsepower, utilizing a full spectrum of low-, medium-, and high-horsepower engines. Our treating fleet includes amine units, gas coolers, and related equipment. Our aftermarket business provides compressor package overhaul, repair, engineering and design, reconfiguration and maintenance services, as well as the sale of compressor package parts and components manufactured by third-party suppliers. Our customers operate throughout many of the onshore producing regions of the United States, as well as in a number of international locations, including Mexico, Canada, Argentina, Egypt and Chile.

Demand for our services is directly driven by the production of crude oil and associated natural gas from unconventional shale plays, production of natural gas from conventional plays and the transmission of natural gas to and within sales pipelines. Our fleet of compressors, ranging from 20 to 2,500 horsepower per unit, allows us to service our customers compression needs at the wellhead through high-horsepower compression needs at centralized gathering and gas lift facilities.

During 2021, our financial results were affected by the economic impact of the COVID-19 pandemic. Reduced spending by oil and gas operators led to a decline in our compression fleet utilization which impacted revenues and pricing. Oil and natural gas commodity prices gained strength throughout 2021 and remained strong in the first half of 2022. West Texas Intermediate oil prices reached an average of $109 per barrel in the second quarter of 2022, a $13 per barrel increase from the first quarter. This increase in commodity prices, coupled with the waning impact of the COVID-19 pandemic on the economy, resulted in an increase in the demand for our contract services, aftermarket services and equipment rentals. Our compression fleet utilization increased to 82.8% as of June 30, 2022 compared to 76.9% as of June 30, 2021. In addition, as a result of the increased customer demand, we implemented price increases on many of our compression contracts in the first and second quarters of 2022. Revenue from contract services increased each quarter in 2021 and this trend has continued through the first half of 2022. We secured orders from key customers for high-horsepower and electric compressors that started generating revenues in the fourth quarter of 2021 and continue to be deployed throughout 2022. Our customers remain focused on capital discipline; however, the levels of quote activity and awards remain strong. As the market environment continues to evolve, competition for field employees continues to increase and inflationary pressures continue to drive certain costs higher. In addition, supply chain disruptions have impacted the availability of parts and supplies. External factors such as war and other armed conflicts, including Russia's invasion of Ukraine, and any resulting economic downturn, could adversely affect our results of operations, impair our ability to raise capital or otherwise adversely impact our ability to realize certain business strategies. We continue to monitor these risks and take the necessary actions to mitigate them. We have and will continue to evaluate the sale of non-core assets, including our low-horsepower compression fleet. We can provide no assurance that we will consummate a future sale of our low-horsepower compression fleet.

With the rapidly changing market environment, we will continue to proactively manage our capital allocation strategies, our liquidity requirements and monitor our expenses and financial performance.


                                       20

--------------------------------------------------------------------------------

Table of Contents While we are not able to predict how long the COVID-19 pandemic, the conflict between Russia and Ukraine, inflation and other factors will continue to impact overall market conditions, the demand for oil and gas, and the effect they will ultimately have on our business, we continued to see activity levels increase in the first half of 2022. Strong oil and gas commodity prices and the increase in demand for our services have positively impacted our results of operations in 2022. Although we have seen favorable trends in the first half of 2022, the risk of additional strains of COVID-19 or the potential outbreak of a new or mutated virus, the possibility of future lockdowns, the impact of continued inflationary pressures, and the impact of continued political conflicts, makes any forecast uncertain. In addition, continued capital discipline throughout the energy sector may limit production growth even as the economy recovers from these external factors. Despite challenging and changing market conditions, we will continue to maintain our commitment to safety and service quality for our customers.

Results of Operations

The following data should be read in conjunction with the Consolidated Financial Statements and the associated Notes contained elsewhere in this document. On November 10, 2021, Spartan contributed Spartan Treating to the Partnership. As the Partnership and Spartan Treating were under common control at the time of the Spartan Acquisition, the results of operations have been combined for the Partnership and Spartan Treating from the date common control began which was January 29, 2021. See Note 4 - "Common Control Acquisition" in the Notes to Consolidated Financial Statements for further information. Previously, our equipment sales business included our new unit sales business that consisted of the fabrication and sale of new standard and custom-designed, engineered compressor packages fabricated primarily at our facility in Midland, Texas. We sold the Midland facility in July 2020. In the fourth quarter of 2020, we fully exited the new unit sales business and we have reflected these operations as discontinued operations for all periods presented. See Note 2 - "Discontinued Operations" in the Notes to Consolidated Financial Statements for further information. Used equipment sales revenue continues to be included in equipment sales revenue.

Three months ended June 30, 2022 compared to three months ended June 30, 2021

© Edgar Online, source Glimpses