USAC

Analyst Note: USAC (USA Compression Partners, LP)

Date: June 20, 2026 Event Date: 2026-06-20

1. Structural Readiness

• Conservative Entry: $30.19
• Breakout Level: $30.19 (Conservative entry acts as the breakout confirmation level).
• Current Price: $25.06
• Extension: -17.0% vs. Conservative Entry.

2. Thesis Layer

As of June 20, 2026, USAC is classified as a TACTICAL, setup-led name. There is no named secular macro thesis attached to this specific setup at this date. The conviction must be derived strictly from the quality of the structural setup (the Coil formation) and the underlying business fundamentals provided in the evidence base. No external macro narratives should be invented to support the trade; the thesis is the setup itself combined with the operational data.

3. Business Overview

USA Compression Partners, LP operates as a midstream energy infrastructure provider, offering compression services primarily for natural gas processing and transportation, as well as artificial lift for crude oil production. The company serves a diversified customer base of approximately 260 companies, including major integrated oil companies, independent E&P firms, and midstream entities.

Key Operational Metrics (as of source dates ≤ 2026-06-20):

• Fleet Size: As of December 31, 2025, the company operated a fleet of 3.9 million horsepower.
• Recent Expansion: The acquisition of J-W Power added approximately 0.8 million active horsepower and 1.0 million total horsepower to the fleet, expanding presence across the Northeast, Mid-Con, Rockies, Gulf Coast, Bakken, and Permian Basin.
• Backlog & Visibility: As of March 31, 2026, the aggregate transaction price allocated to unsatisfied performance obligations was $1.2 billion.
• Order Book: As of March 31, 2026, the company had 61,350 large horsepower units on order for delivery, all expected within the next 12 months.
• Contracting Velocity: In the months leading up to the May 5, 2026 earnings call, the company contracted over 90% of its 2026 horsepower, a volume that more than doubles the new horsepower deployed in 2025.
• Future Planning: Management has placed orders for engines and components for 2027, 2028, and a portion of 2029.
• Financial Guidance (Management Expectations): Management maintains a full-year adjusted EBITDA range of $770 million to $800 million and a distributable cash flow range of $480 million to $510 million. Capital expenditure plans for 2026 include $60–$70 million in maintenance capex and $230–$250 million in expansion capex.

4. Archetype and Conviction

• Archetype: Cyclical Recovery. The setup aligns with a cyclical recovery profile driven by a tightening supply of compression equipment and a surge in contracted horsepower.
• Conviction Stack:
• Thesis Strength: Moderate. The name is tactical, but the operational data is robust.
• Evidence Quality: High. The evidence base (E1–E22) provides a clear picture of supply constraints (lead times) and demand strength (contracting velocity).
• Structural Quality: The ATR at breakout (3.1%) is in the "productive" bucket, indicating healthy volatility without excessive noise. Current ATR (3.7%) remains in the productive range, suitable for position sizing.
• Rerating Potential: The combination of extended lead times (150 weeks for certain engines) and a locked-in backlog ($1.2B) suggests a structural supply constraint that could support multiple expansion if the breakout occurs.

5. Invalidations, Strengtheners, and Gaps

• Strengtheners: A daily close above the conservative entry of $30.19 would confirm the breakout and transition the coil to "Confirmed-Active." Continued evidence of lead times extending beyond 150 weeks or further acceleration in contracted horsepower would strengthen the case.
• Gaps in Evidence:
• Customer Concentration: While the company is diversified, the top 10 customers accounted for 46% of revenues in 2025. The specific impact of any single large customer's potential capex reduction is not detailed in the provided evidence.
• Acquisition Integration: The J-W Power acquisition is noted as adding horsepower, but specific details on the integration timeline or immediate margin impact of the manufacturing facilities are not quantified in the provided text.
• LNG Exposure: While management notes 15-20% of LNG capacity is locked due to the Strait of Hormuz, the direct revenue exposure of USAC to this specific geopolitical constraint is qualitative rather than quantitative in the evidence.

PRIVATE ANALYST CALL Judgment: Speculative Confidence: medium Key evidence: 90% of 2026 horsepower contracted in recent months; $1.2 billion in unsatisfied performance obligations as of March 31, 2026; lead times for engines extended to 150 weeks; 61,350 large horsepower units on order for delivery within 12 months. Key risks: Price remains -17% below breakout entry; customer concentration (top 10 customers = 46% of revenue); potential for capex delays if supply chain bottlenecks persist beyond 2026; geopolitical volatility affecting LNG demand. Sizing hint: Position size should reflect the "forming" status; treat as a partial position until breakout confirmation. Expected path: Management expects new contract compression growth to stay consistent with 2026 levels (exceeding 100k hp/year); supply constraints should support pricing power if demand holds. Expected horizon: 3 to 6 months for the setup to resolve (breakout or invalidation).