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Based in Austin, Texas, USA Compression Partners, LP (NYSE:USAC) scheduled a $200 million IPO with a market capitalization of $572 million at a price range mid-point of $20, for Tuesday, January 15, 2013.

Four other IPOs are scheduled for the week of January 14, 2013. The full IPO calendar is available here.

S-1 filed January 7, 2013.

Manager, Joint Managers: Barclays Capital/ Goldman, Sachs/ J.P. Morgan/ Wells Fargo Securities.

Co Managers: Raymond James/ RBC Capital Markets/ UBS Investment Bank/ Evercore Partners.

SUMMARY

USAC is a service company providing gas compression equipment on a rental basis in shale oil plays. The minimum estimated payout is 8.5% for 2013.

A competitor , Exterran Partners, L..P. (EXLP_ currently pays out 9.2%. USAC, however, is priced at a book value discount.

VALUATION

USAC is priced at a premium regarding payout percentages, and at a discount regarding price-to-book and price-to-tangible book values.

CONCLUSION

IPOdesktop expects USAC to trade around its offering price and is therefore neutral on USAC.

The upside appears to be limited because general partner incentive distribution rights kick in after limited partners receive 15% more than the minimum expected distribution rate, see below.

INCENTIVE DISTRIBUTION RIGHTS

Low threshold. Starts when limited partners receive only 15% more than the minimum distribution.

The general partner currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50.0%, of the cash distributed from operating surplus in excess of $0.4888 per unit per quarter.

The maximum distribution of 50.0% includes distributions paid to the general partner on its 2.0% general partner interest and assumes that the general partner maintains its general partner interest at 2.0%. The maximum distribution of 50.0% does not include any distributions that the general partner may receive on limited partner units that it owns.

PROFORMA SHORTFALL in 2011 and 2012.

See below

PROFORMA SURPLUS in 2013

See below

Proformas

Dec '11

Dec '12

Dec '13

Distributions

$48.7

$48.7

$48.7

(shortfall) overage

-$15.2

-$13.7

$7.3

PRIMARY ASSUMPTIONS FOR 2013

USAC estimates that contract operations revenue will be $144.1 million for the year ending December 31, 2013, compared to $110.4 million for the twelve months ended September 30, 2012 on a pro forma basis. The anticipated increase in our revenue is based upon the following assumptions:

USAC expects to add significant new compression unit horsepower from September 30, 2012 through December 31, 2013, substantially all of which will be comprised of units greater than 1,000 horsepower, as USAC believes it will have strong demand for compression services in shale plays in the U.S.;

PRIVATE EQUITY

USAC was set up and is managed by private equity firms, including Riverstone; Carlyle Global Energy and Power Fund IV, L.P., and affiliated entities, including Riverstone Holdings LLC

DISTRIBUTIONS

$0.425 per unit per complete quarter, or $1.70 per unit per year, to be paid no later than 45 days after the end of each fiscal quarter beginning with the quarter ending March 31, 2013. The annual rate at the price range mid-point is 8.5%

This equates to an aggregate cash distribution of $12.2 million per quarter, or $48.7 million per year, based on the number of common and subordinated units and the 2.0% general partner interest to be outstanding immediately after the completion of this offering

BUSINESS

USAC is one of the largest independent providers of compression services in the U.S. in terms of total compression unit horsepower.

As of September 30, 2012, USAC had 889,099 horsepower in its fleet and 31,630 horsepower on order for delivery, of which 23,135 horsepower has been delivered as of November 30, 2012 and 8,495 horsepower is expected to be delivered in December 2012.

In October 2012, USAC ordered 35,880 of additional horsepower which is expected to be delivered between January 2013 and April 2013.

In December 2012, USAC ordered 50,915 of additional horsepower which is expected to be delivered between April 2013 and July 2013.

From 2003 through the third quarter of 2012, USAC's average horsepower utilization was over 90%. USAC has been providing compression services since 1998.

FOCUS

USAC focuses primarily on large-horsepower infrastructure applications.

As of September 30, 2012, over 90% of revenue generating horsepower was deployed in large-volume gathering systems, processing facilities and transportation applications.

SHALE PLAYS

USAC provides compression services primarily in shale plays, including the Fayetteville, Marcellus, Woodford, Barnett, Eagle Ford and Haynesville shales.

USAC believes compression services for shale production will increase in the future.

GROWTH PLAN

Between 2003 and 2011, USAC grew the horsepower in its fleet of compression units at a compound annual growth rate of 23% and grew compression revenues at a compound annual growth rate of 24%, primarily through organic growth. USAC believes organic growth opportunities will continue to be the most attractive source of near-term growth.

40% OF REVENUE IS month-to-month

As of September 30, 2012, 33% of compression services on a horsepower basis (and 40% on a revenue basis for the nine months ended September 30, 2012) were provided on a month-to-month basis to customers who continue to utilize services following expiration of the primary term of their contracts with USAC.

These customers can generally terminate their month-to-month compression services contracts on 30-days' written notice.

CUSTOMER CONCENTRATION

The ten largest customers accounted for 53% and 54% of revenues for the year ended December 31, 2011 and for the nine months ended September 30, 2012, respectively.

FEW SUPPLIERS

USAC depends on a limited number of suppliers and are vulnerable to product shortages and price increases, which could have a negative impact on our results of operations.

USE OF PROCEEDS

USAC expects to net $183 million from its IPO. The proceeds are allocated to repay debt.

Source: IPO Preview: USA Compression Partners, LP