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CSI Compressco Stock: Creditors Take One More Chunk Of Flesh

Dec. 01, 2021 6:53 AM ETCSI Compressco LP (CCLP)24 Comments


  • CSI Compressco has continued to scrape by. The 2020 Debt Exchange and recent secondary offering removed the maturity wall - but at a high price.
  • The recent swap of the general partner had many hoping for a bailout, but private equity has made sure it gave itself a solid deal and seized more control.
  • Don't expect a bumped distribution for a while, even with a mild compression rebound.
  • This idea was discussed in more depth with members of my private investing community, Energy Income Authority. Learn More »

Fire on gas stove with dark background

Edwin Tan /E+ via Getty Images

CSI Compressco (NASDAQ:CCLP) has been in a rough situation for quite some time. The 2020 Debt Exchange apparently only kicked the can down the road on balance sheet repair, and the compression market recovery has

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This article was written by

Michael Boyd profile picture

Michael Boyd is an energy specialist with a decade of experience in both the investment advisory and investment banking spaces, with stints in portfolio management, residential mortgage-backed securities, derivatives, and internal audit at various firms. Today, he is a full-time investor and "independent analyst for hire.”

Michael leads the Investing Group Energy Investing Authority. The service focuses on finding total return opportunities within the energy sector, ranging from upstream producers to pipelines to refineries. Features include: model portfolios, real time trade alerts, high quality research, and an active and vibrant chatroom of professional investors. Learn More.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (24)

@Michael Boyd I appreciate your matter-of-fact informed opinions. Keep it up.

Given it's been nearly 2 years since you wrote this what are your thoughts on CCLP today?

The recent earnings report showed lots of discipline.

As you mention no new debt until 2025 and in the mean time:

Net leverage is down to 5.3x
Distribution coverage is up to 8.8x
They have 87% of their compressors online etc.

Of particular importance is buried in the earnings call amongst the question answers was that 70% of their units are now in longer-term contracts and 30% on month-to-month contracts.

So what's the long term prospects for CCLP. Will they eventually increase their dividend to 8+% typically found with MLPs or is compression just an awful industry to be in?
PipelineDancer profile picture
@GuyRien1 they have to refinance all the debt first. Have you looked at how the debt is trading? If we’ll under par there are headwinds.
@PipelineDancer Ah good point about using Bonds as a barometer.

I have USAC as another compression play. Is that best in breed now or is AROC preferable. I'm trying to cover all bases associated with NG: Upstream, pipelines, mid-streams, compression etc.
PipelineDancer profile picture
I don't study compression enough anymore to give you a good answer, sorry. If you own a big chunk of ET, you get some compression exposure already from your ownership. Personally I don't see any real reason for compression to be even a moderately significant % of a balanced portfolio, given it's now proven margin, profits, pricing power, and risks over the last couple decades. It's about as "junky" of an asset class as I follow in oil and gas. I deeply regret the time and money I poured into it over the last decade of my life.

I looked at the bonds. They are trading pretty decent, all things considered with other junk bonds and interest rates.


Still, I'd think I'd rather own the 17% yield to maturing on that bond than the underlying common CCLP.
Allocation Alpha profile picture
$CCLP Q3'22 conference call: "Organizationally, we're also considering does it make sense to convert from the MLP structure." Anyone have thoughts on implications of C-Corp conversion for unitholders?
@ggidley and @pip@PipelineDancer @@Michael Boyd

Any suggestions on how way to play the proposed (as per Biden's announcement yesterday) US LNG production to EU to reduce EU dependence on Russian gas.

I'm already long in all the up-stream providers old (LNG) and new (TELL and NEXT). But LNG is priced very highly now and TELL/NEXT are still along way off. Also hold many mid-streams (MPLX, DCP, ENLC, EPD etc) but am reluctant to buy more due to their high price.

That leaves compression and shipping. After the HMLP "manufactured" debacle I'm wary of shipping. So that leaves compression which is just USAC and CCLP. Can compression significantly benefit from Biden's plan?
PipelineDancer profile picture
@GuyRien1 - Not a big fan of compression. I'm playing this with an oversized ET position given their ownership of the texas gas transmission system plus the optionality they hold with a shovel ready LNG export facility is they get the long-term contracts.
Biological profile picture
@GuyRien1 FLNG and TNP (has 2 LNG cariers)
@PipelineDancer Sure and I recall ET owns a huge chunk of USAC? I hold a mid sized position in ET (at under $8) but Mr Warren prevents me from buying more. If it goes below $9 again I'll consider it.

Also they keep on going back and forward on restoring the dividend. Previously they said they were eager to reinstate the full pre-covid dividend. But last earnings call they were talking about a 3 year horizon ...
Allocation Alpha profile picture
thanks for writing this and sharing publicly. Feeling good as my first take aligned with your view.

also notable that one month later the investors are 10% underwater! the investor list is also interesting, particularly Peter Kamin's involvement
Greg_Maryland profile picture
Nice note, thanks for sharing. I'm long the unsecured bonds.
Pablomike profile picture
@Michael Boyd
Is the $55M run rate of interest before paying off the stub notes?? Carried on the 10-Q as current debt implies some savings to be had when they get paid off.
Thanks for another excellent piece of analysis!!
Michael Boyd profile picture
@Pablomike Correcto, before. If you're thinking about this from the perspective on what cash they can generate from 2022 - 2026 with these 2022s gone, should be a bit of improvement in that respect.

Bit of a moving target since they have some growth capex that they intend to do as well, not considered in here.
ggidley profile picture
Thanks for the update on CCLP. I am a long time holder of 1600 shares and feeling the pain with an average cost of $15. The wait for the turn around with this company has been excruciating and I have almost written them off. I'm still waiting for Godot to show up. I'm surprised Pipeline Dancer has not commented on this post since at one time he was a big promoter of this disaster.
PipelineDancer profile picture
@ggidley - Just saw your comment. Yeah, I think I've made almost more comments on CCLP over the years than any other holding, or at least it feels like it. I believed the prior management team's outlook and that they could overcome the debt problem, and so missed an opportunity to sell at a nice profit in 2019 and isntead walked into the debt reorganization/tax firewall in 2020, ultimately forcing me to exit my position rather than face CODI at a massive loss, with a ton of comments to that effect on the boards, although I did keep a lot of the unsecured debt and rolled a ton of the proceeds into TTI, which ended up doing well and came close to making the whole investment a wash.

With regards to the outlook here moving forward including today's earnings release which gives a long-term perspective of the combined entity from the moment of their control, I don't see a lot to argue against M Boyd's outlook from this article. It's a long road ahead, and my gut, with no real evidence behind it (and I certainly don't have a crystal ball), says that unit holders might face another round of CODI when the next round of debt comes due.

I've soured... substantially... on compression as an investment. I've soured even further on CCLP as a way to play the industry.

I just don't like the industry, pricing power, or the way it's performs across the cycles. I wish I'd listened to Michael Boyd's take on the sector years ago. He would have saved me a lot of grief. Good luck to all remaining longs.
I'm not familiar with Michael Boyd's analysis but very impressed with this well-researched & informative article on Compressco. I own a small oil & gas company in east Texas. We have 46 Woodbine stripper wells and rented equipment (GasJack) from Compressco several years ago. They were great to deal with back then so I bought Compressco's hi-yielding units for $10 and sold them when they doubled plus received the dividends. Lucky I did, for sure! That was a long time ago and the company has gone through a lot of trials and tribulations. Some self-imposed, but the majority of Compressco's problems are the result of deteriorating oil & gas prices. Being a small independent, I can relate to the problems faced by energy concerns since 2014.
Michael Boyd profile picture
@Mark Carpenter2894 Much appreciated, and always good to have actual O&G owners in the comments here on SA. I try to get out in the field rather than being behind a desk when I can - much harder to do nowadays - but no replacement for the knowledge it comes from working in this business 24/7/365. I've found O&G owners to be pretty savvy investors in energy, and that's not always the case for people that invest in the same circles that they work in.

Great trade by the way.
LostinShalimar profile picture
Thanks Michael. Good stuff, as always.
SeattliteTrader profile picture
@Michael Boyd thanks for the article on $CCLP. As an unsecured bond holder, I appreciate the relative safety that this instrument provided over the past 18 months. The smart money in this case lives with the folks who own the debt vs. the equity. Everyone had a chance to own these bonds for a fraction of their par value. It was a fantastic opportunity.
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