Archrock Partners Announces First-Quarter 2016 Cash Distribution, Financial Results and Credit Facility Amendment

May 2, 2016

May 2, 2016 - 11:26 PM EDT

Archrock Partners Announces First-Quarter 2016 Cash Distribution, Financial Results and Credit Facility Amendment

First-quarter distribution of $0.285 per limited partner unit, a 50
percent reduction from the prior quarter
EBITDA, as further adjusted, of $69.4 million for the quarter
Distributable Cash Flow coverage of 2.51x for the first quarter of 2016
Maximum Total Leverage Ratio raised to 5.95x through the fourth
quarter of 2017

Archrock Partners, L.P. (NASDAQ:APLP) today announced a cash
distribution of $0.285 per limited partner unit, which corresponds to
$1.14 per limited partner unit on an annualized basis, payable on May
13, 2016, to unitholders of record at the close of business on May 12,
2016. The first-quarter 2016 distribution covers the period from January
1, 2016, through March 31, 2016. The distribution to be paid in May 2016
is approximately 50 percent lower than the fourth-quarter 2015
distribution.

In conjunction with the distribution adjustment, Archrock Partners has
entered into an amendment to its senior secured credit agreement, which
among other things, increases the maximum Total Leverage Ratio, as
defined in the credit agreement, to 5.95x through the fourth quarter of
2017.

“With the challenging industry conditions and limited visibility on the
timing of a recovery, Archrock Partners is taking proactive steps to
address leverage concerns while avoiding the issuance of dilutive
equity,” said Brad Childers, Chairman, President and Chief Executive
Officer of Archrock Partners’ managing general partner. “While the
decision to reduce the distribution was difficult, we believe that it is
the right step to take at this time to improve our credit profile and
position Archrock Partners to take advantage of growth opportunities
when market conditions improve.”

Additionally, Archrock Partners reported EBITDA, as further adjusted (as
defined below), of $69.4 million for the first quarter of 2016, compared
to $75.3 million for the fourth quarter of 2015 and $78.7 million for
the first quarter of 2015. Distributable cash flow (as defined below)
was $43.9 million for the first quarter of 2016, compared to $46.3
million for the fourth quarter of 2015 and $51.0 million for the first
quarter of 2015.

Revenue was $151.4 million for the first quarter of 2016, compared to
$161.4 million for the fourth quarter of 2015 and $164.3 million for the
first quarter of 2015.

Net income, excluding certain items, for the first quarter of 2016 was
$11.1 million, or $0.18 per diluted limited partner unit, compared to
net income, excluding certain items, of $16.3 million, or $0.19 per
diluted limited partner unit, for the fourth quarter of 2015, and $23.6
million, or $0.35 per diluted limited partner unit, for the first
quarter of 2015. In the first quarter of 2016, excluded items primarily
included non-cash long-lived asset impairments of $6.3 million and $4.1
million of restructuring charges.

Net income for the first quarter of 2016 was $0.5 million, or $0.01 per
diluted limited partner unit, compared to net loss of $137.9 million, or
$2.34 per diluted limited partner unit, for the fourth quarter of 2015
and net income of $20.1 million, or $0.28 per diluted limited partner
unit, for the first quarter of 2015.

In addition to increasing the Total Leverage Ratio as described above,
the credit agreement amendment includes, among other things, a reduction
in aggregate revolving commitments by $75 million; a maximum Total
Leverage Ratio of 5.75x in the first quarter of 2018 and 5.25x
thereafter; and a maximum Senior Secured Leverage ratio, as defined in
the agreement, of 3.5x through the fourth quarter of 2017, 3.75x in the
first quarter of 2018, and 4.0x thereafter.

Conference Call Details

Archrock, Inc. and Archrock Partners, L.P. will host a joint conference
call on Tuesday, May 3, 2016, to discuss their first-quarter 2016
results. The call will begin at 11:00 a.m. Eastern Time.

To listen to the call via a live webcast, please visit Archrock’s
website at www.archrock.com.
The call will also be available by dialing 800-446-2782 in the United
States and Canada, or +1-847-413-3235 for international calls. Please
call approximately 15 minutes prior to the scheduled start time and
reference Archrock conference call number 42398716.

A replay of the conference call will be available on Archrock’s website
for approximately seven days. Also, a replay may be accessed by dialing
888-843-7419 in the United States and Canada, or +1-630-652-3042 for
international calls. The access code is 42398716#.

EBITDA, as further adjusted, a non-GAAP measure, is defined as net
income (loss) excluding income taxes, interest expense (including debt
extinguishment costs and gain or loss on termination of interest rate
swaps), depreciation and amortization expense, impairment charges,
restructuring charges, expensed acquisition costs, other items and
non-cash selling, general and administrative (“SG&A”) costs.

Distributable cash flow, a non-GAAP measure, is defined as net income
(loss) (a) plus depreciation and amortization expense, impairment
charges, restructuring charges, expensed acquisition costs, non-cash
SG&A costs and interest expense (b) less cash interest expense
(excluding amortization of deferred financing fees, amortization of debt
discount and non-cash transactions related to interest rate swaps) and
maintenance capital expenditures, and (c) excluding gains or losses on
asset sales and other items.

Gross margin, a non-GAAP measure, is defined as total revenue less cost
of sales (excluding depreciation and amortization expense). Gross margin
percentage is defined as gross margin divided by revenue.

About Archrock Partners

Archrock Partners, L.P., a master limited partnership, is the leading
provider of natural gas contract compression services to customers
throughout the United States. Archrock, Inc. (NYSE:AROC) owns an equity
interest in Archrock Partners, including all of the general partner
interest. For more information, visit www.archrock.com.

Forward-Looking Statements

All statements in this release (and oral statements made regarding the
subjects of this release) other than historical facts are
forward-looking statements. These forward-looking statements rely on a
number of assumptions concerning future events and are subject to a
number of uncertainties and factors, many of which are outside Archrock
Partners’ control, which could cause actual results to differ materially
from such statements. Forward-looking information includes, but is not
limited to: Archrock Partners’ financial and operational strategies and
ability to successfully effect those strategies; Archrock Partners’
expectations regarding future economic and market conditions; Archrock
Partners’ financial and operational outlook and ability to fulfill that
outlook; demand for Archrock Partners’ services; Archrock Partners’ cost
reduction plans; and statements about Archrock Partners’ distributions,
the anticipated impact of the distribution rate on its business and the
anticipated impact of Archrock Partners’ actions on its balance sheet,
liquidity position and need for future equity capital.

While Archrock Partners believes that the assumptions concerning future
events are reasonable, it cautions that there are inherent difficulties
in predicting certain important factors that could impact the future
performance or results of its business. Among the factors that could
cause results to differ materially from those indicated by such
forward-looking statements are: local, regional and national economic
conditions and the impact they may have on Archrock Partners and its
customers; changes in tax laws that impact master limited partnerships;
conditions in the oil and gas industry, including a sustained decrease
in the level of supply or demand for oil or natural gas or a sustained
decrease in the price of oil or natural gas; changes in safety, health,
environmental and other regulations; the financial condition of Archrock
Partners’ customers; the failure of any customer to perform its
contractual obligations; and the performance of Archrock, Inc.

These forward-looking statements are also affected by the risk factors,
forward-looking statements and challenges and uncertainties described in
Archrock Partners Annual Report on Form 10-K for the year ended December
31, 2015, and those set forth from time to time in Archrock Partners’
filings with the Securities and Exchange Commission, which are available
at www.archrock.com.
Except as required by law, Archrock Partners expressly disclaims any
intention or obligation to revise or update any forward-looking
statements whether as a result of new information, future events or
otherwise.


ARCHROCK PARTNERS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)


	Three Months Ended
	March 31,		December 31,			March 31,
	2016		2015			2015

Revenue	$	151,424	$	161,419		$	164,295

Costs and expenses:
Cost of sales (excluding depreciation and amortization)		57,860		63,505			65,168
Depreciation and amortization		39,237		39,932			36,105
Long-lived asset impairment		6,315		26,514			3,484
Restructuring charges		4,139		—			—
Goodwill impairment		—		127,757			—
Selling, general and administrative		23,679		22,967			21,169
Interest expense		18,742		18,619			17,832
Other (income) loss, net		838		(273	)		(191	)
Total costs and expenses		150,810		299,021			143,567
Income (loss) before income taxes		614		(137,602	)		20,728
Provision for income taxes		94		333			643
Net income (loss)	$	520	$	(137,935	)	$	20,085

General partner interest in net income (loss)	$	14	$	1,924		$	4,209

Limited partner interest in net income (loss)	$	506	$	(139,859	)	$	15,876

Weighted average common units outstanding used in income (loss) per limited partner unit (1):
Basic		59,740		59,718			55,678

Diluted		59,740		59,718			55,678

Income (loss) per limited partner unit (1):
Basic	$	0.01	$	(2.34	)	$	0.28

Diluted	$	0.01	$	(2.34	)	$	0.28

⁽¹⁾ Basic and diluted income per limited partner unit is
computed using the two-class method. Under the two-class method,
basic and diluted income per limited partner unit is determined by
dividing income allocated to the limited partner units after
deducting the amounts allocated to our general partner (including
distributions to our general partner on its incentive distribution
rights) and participating securities (phantom units with
nonforfeitable tandem distribution equivalent rights to receive cash
distributions), by the weighted average number of outstanding
limited partner units excluding the weighted average number of
outstanding participating securities during the period.


ARCHROCK PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per unit amounts, percentages and ratios)


	Three Months Ended
	March 31,			December 31,			March 31,
	2016			2015			2015

Revenue	$	151,424		$	161,419		$	164,295

Gross margin⁽¹⁾	$	93,564		$	97,914		$	99,127
Gross margin percentage		62	%		61	%		60	%

EBITDA, as further adjusted ⁽¹⁾	$	69,418		$	75,342		$	78,741
% of revenue		46	%		47	%		48	%

Capital expenditures	$	22,542		$	35,888		$	68,239
Less: Proceeds from sale of property, plant and equipment		(149	)		(1,711	)		(4,624	)
Net capital expenditures	$	22,393		$	34,177		$	63,615

Distributable cash flow ⁽²⁾	$	43,947		$	46,253		$	50,971

Distributions declared for the period per limited partner unit	$	0.2850		$	0.5725		$	0.5625
Distributions declared to all unitholders for the period, including incentive distribution rights	$	17,517		$	39,680		$	35,903
Distributable cash flow coverage ⁽³⁾	2.51x			1.17x			1.42x

	March 31,			December 31,			March 31,
	2016			2015			2015

Debt ⁽⁴⁾	$	1,428,710		$	1,410,382		$	1,329,393
Total partners' capital		507,369			547,996			656,035

⁽¹⁾Management believes EBITDA, as further adjusted, and
gross margin provide useful information to investors because these
non-GAAP measures, when viewed with our GAAP results and
accompanying reconciliations, provide a more complete understanding
of our performance than GAAP results alone. Management uses these
non-GAAP measures as supplemental measures to review current period
operating performance, comparability measures and performance
measures for period to period comparisons. In addition, management
uses EBITDA, as further adjusted, as a valuation measure.

⁽²⁾ Management uses distributable cash flow, a non-GAAP
measure, as a supplemental performance and liquidity measure. Using
this metric, management can quickly compute the coverage ratio of
estimated cash flows to planned cash distributions.

⁽³⁾ Defined as distributable cash flow for the period
divided by distributions declared to all unitholders for the period,
including incentive distribution rights.

⁽⁴⁾ Carrying values are shown net of unamortized debt
discounts and unamortized deferred financing costs.


ARCHROCK PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per unit amounts)


	Three Months Ended
	March 31,			December 31,			March 31,
	2016			2015			2015

Reconciliation of GAAP to Non-GAAP Financial Information:

Net income (loss)	$	520		$	(137,935	)	$	20,085
Depreciation and amortization		39,237			39,932			36,105
Long-lived asset impairment		6,315			26,514			3,484
Restructuring charges		4,139			—			—
Goodwill impairment		—			127,757			—
Selling, general and administrative		23,679			22,967			21,169
Interest expense		18,742			18,619			17,832
Other (income) loss, net		838			(273	)		(191	)
Provision for income taxes		94			333			643
Gross margin (1)		93,564			97,914			99,127
Expensed acquisition costs (in Other (income) loss, net)		172			—			—
Non-cash selling, general and administrative		199			122			592
Less: Selling, general and administrative		(23,679	)		(22,967	)		(21,169	)
Less: Other income (loss), net		(838	)		273			191
EBITDA, as further adjusted (1)		69,418			75,342			78,741
Less: Provision for income taxes		(94	)		(333	)		(643	)
Less: (Gain) loss on sale of property, plant and equipment (in Other (income) loss, net)		53			(251	)		(280	)
Less: Loss on non-cash consideration in March 2016 Acquisition		635			—			—
Less: Cash interest expense		(18,018	)		(17,740	)		(16,768	)
Less: Maintenance capital expenditures		(8,047	)		(10,765	)		(10,079	)
Distributable cash flow (2)	$	43,947		$	46,253		$	50,971

Cash flows from operating activities	$	66,003		$	42,884		$	78,068
Provision for doubtful accounts		(1,025	)		(1,065	)		(390	)
Restructuring charges		4,139			—			—
Expensed acquisition costs		172			—			—
Payments for settlement of interest rate swaps that include financing elements		(812	)		(913	)		(942	)
Maintenance capital expenditures		(8,047	)		(10,765	)		(10,079	)
Change in assets and liabilities		(16,483	)		16,112			(15,686	)
Distributable cash flow (2)	$	43,947		$	46,253		$	50,971

Net income (loss)	$	520		$	(137,935	)	$	20,085
Items:
Long-lived asset impairment		6,315			26,514			3,484
Restructuring charges		4,139			—			—
Goodwill impairment		—			127,757			—
Expensed acquisition costs		172			—			—
Net income, excluding items	$	11,146		$	16,336		$	23,569

Diluted income (loss) per limited partner unit	$	0.01		$	(2.34	)	$	0.28
Adjustment for items per limited partner unit		0.17			2.53			0.07
Diluted income per limited partner unit, excluding items (1)	$	0.18		$	0.19		$	0.35

⁽¹⁾ Management believes EBITDA, as further adjusted,
diluted income per limited partner unit, excluding items, and gross
margin provide useful information to investors because these
non-GAAP measures, when viewed with our GAAP results and
accompanying reconciliations, provide a more complete understanding
of our performance than GAAP results alone. Management uses these
non-GAAP measures as supplemental measures to review current period
operating performance, comparability measures and performance
measures for period to period comparisons. In addition, management
uses EBITDA, as further adjusted, as a valuation measure.


ARCHROCK PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except percentages)


	Three Months Ended
	March 31,		December 31,		March 31,
	2016		2015		2015

Total available horsepower (at period end) ^{(1) (2)}	3,301		3,320		3,177

Total operating horsepower (at period end) ^{(1) (3)}	2,891		3,030		3,032

Average operating horsepower	2,961		3,065		3,034

Horsepower Utilization:
Spot (at period end)	88	%	91	%	95	%
Average	89	%	91	%	96	%

Total available contract operations horsepower of Archrock, Inc. and Archrock Partners (at period end) ⁽²⁾	4,044		4,011		4,246

Total operating contract operations horsepower of Archrock, Inc. and Archrock Partners (at period end)⁽³⁾	3,325		3,493		3,689

⁽¹⁾Includes compressor units leased from Archrock, Inc.
with an aggregate horsepower of approximately 400, 17,000, and
70,000 at March 31, 2016, December 31, 2015 and March 31, 2015,
respectively. Excludes compressor units leased to Archrock, Inc.
with an aggregate horsepower of approximately 100, 12,000, and 1,000
at March 31, 2016, December 31, 2015 and March 31, 2015,
respectively.

⁽²⁾ Available horsepower is defined as idle and operating
horsepower. New units completed by a third party manufacturer that
have been delivered to us are included in the fleet.

⁽³⁾ Operating horsepower is defined as horsepower that is
operating under contract and horsepower that is idle but under
contract and generating revenue such as standby revenue.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160502006421/en/

Archrock Partners, L.P.
Media
Lisa Walsh, 281-836-8602
or
Investors
David
Miller, 281-836-8895

Source: Business Wire
(May 2, 2016 - 11:26 PM EDT)

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