10-K: USA Compression Partners, LP Outlines Securities and Distribution Details in 10-K Filing

USA Compression Partners, LP details the characteristics of its common units, cash distribution methods, and partnership agreement in its latest 10-K filing.

Summary

• This document is a description of USA Compression Partners, LP's securities registered under the Securities Exchange Act of 1934.
• The common units represent limited partner interests, entitling holders to distributions and certain rights.
• Transfers of common units are recorded quarterly, and the partnership may treat the nominee holder as the absolute owner.
• Available cash is distributed within 45 days after each quarter end, with reserves established by the general partner.
• Available cash is categorized as either operating surplus or capital surplus, with operating surplus including a $36.6 million basket.
• Operating surplus includes cash receipts, working capital borrowings, and certain cash distributions on equity, less operating expenditures and reserves.
• Capital surplus is generated from borrowings, sales of securities, and asset sales outside the ordinary course of business.
• Distributions are first made to Series A preferred unit holders, then to common unit holders pro rata.
• The general partner owns a non-economic interest but receives distributions on any common units it holds.
• Upon liquidation, proceeds are distributed to creditors first, then to unitholders based on capital account balances, with preference to Series A preferred units.
• Unitholders are not obligated to make additional capital contributions, except as described under limited liability.
• The general partner has the right to purchase additional common units to maintain its percentage interest.
• Series A preferred units are convertible into common units at a rate of 1,000 divided by $20.0115, adjusted as required.
• Amendments to the partnership agreement require varying levels of unitholder approval, with certain amendments allowed by the general partner alone.
• The general partner can withdraw with 90 days' notice, and can transfer its interest without unitholder vote.
• The general partner can be removed by a 66 2/3% vote of outstanding units, excluding Series A preferred units.
• The partnership agreement is governed by Delaware law, with disputes to be resolved in Delaware courts.
• Limited liability is subject to certain conditions, and unitholders may be liable for distributions received in violation of the Delaware Act.
• The general partner has a call right to acquire all outstanding limited partner interests if it owns more than 80% of any class.
• The partnership may redeem units held by non-citizen assignees at market price to avoid forfeiture of property.
• Limited partners have the right to inspect books and records for purposes reasonably related to their interest.

Sentiment

Score: 6

Explanation: The document is neutral in tone, providing factual information about the partnership's structure and securities. There are some inherent risks associated with the structure, but the document does not express a positive or negative outlook.

Positives

• Common unit holders have rights to distributions and certain privileges.
• The partnership has a clear process for recording transfers of common units.
• The partnership has a defined process for distributing available cash.
• The partnership has a mechanism to distribute cash from non-operating sources as operating surplus.
• Series A preferred unit holders have a priority for distributions.
• The general partner has the right to maintain its percentage interest.
• The partnership agreement is governed by Delaware law, providing a clear legal framework.
• Limited partners have the right to inspect books and records.

Negatives

• The general partner has significant control over the partnership.
• Unitholders have limited voting rights and cannot elect the general partner or its directors.
• The general partner can withdraw with 90 days' notice, potentially disrupting operations.
• The general partner can transfer its interest without unitholder vote.
• The general partner has a call right to acquire all outstanding limited partner interests if it owns more than 80% of any class.
• Unitholders may be liable for distributions received in violation of the Delaware Act.

Risks

• The general partner has significant control over the partnership and may favor its own interests.
• Unitholders have limited voting rights and cannot elect the general partner or its directors.
• The general partner can withdraw with 90 days' notice, potentially disrupting operations.
• The general partner can transfer its interest without unitholder vote.
• The general partner has a call right to acquire all outstanding limited partner interests if it owns more than 80% of any class.
• Unitholders may be liable for distributions received in violation of the Delaware Act.
• The partnership may issue additional units, diluting existing ownership.
• The partnership may be subject to legal proceedings in Delaware courts.

Future Outlook

The document does not contain specific forward-looking statements about future performance or guidance.

Industry Context

This document provides details on the structure and governance of a master limited partnership in the energy sector, which is a common structure for companies in this industry. The focus on cash distributions and the distinction between operating and capital surplus are typical for MLPs.

Comparison to Industry Standards

• The structure of USA Compression Partners, LP as a master limited partnership (MLP) is common in the energy infrastructure sector, similar to companies like Enterprise Products Partners (EPD) and Energy Transfer (ET).
• The distribution of available cash, with priority to preferred unitholders, is a standard practice for MLPs.
• The use of operating surplus and capital surplus categories for cash distribution is also typical for MLPs.
• The general partner's control and limited fiduciary duties are common features of MLP structures, as seen in other partnerships like MPLX LP (MPLX).
• The call right provision, allowing the general partner to acquire outstanding units under certain conditions, is a feature that can be found in other MLP agreements, though the specific thresholds may vary.
• The governance structure, with a board appointed by the general partner, is similar to other MLPs where the general partner has significant control.
• The use of Delaware law as the governing law is standard for many MLPs due to its well-established corporate law framework.

Stakeholder Impact

• Common unitholders are entitled to receive partnership distributions and exercise rights available to limited partners.
• Series A preferred unit holders have a priority for distributions.
• The general partner has the right to purchase additional common units to maintain its percentage interest.
• The general partner can withdraw with 90 days' written notice, potentially disrupting operations.
• The general partner can transfer its interest without unitholder vote.
• The general partner has a call right to acquire all outstanding limited partner interests if it owns more than 80% of any class.
• Unitholders may be liable for distributions received in violation of the Delaware Act.

Key Dates

Keywords

common units, limited partnership, cash distributions, general partner, partnership agreement, preferred units, operating surplus, capital surplus, Delaware law, liquidation