USA Compression Partners, LP (USAC): what the price assumes

In the published model solve dated 2026-Q2, anchored at $25.80, USA Compression Partners, LP (USAC) is priced for +1.9% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/USAC

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8pp.

Reconcile: at the x-ray's 9.3% required return this reads ~17.2%/yr; the models below use their own rates.

How unusual the bet is: within-range

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.8%); the inversion above states its own rate.

Per-Model Detail (n=11)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• USA Compression Partners rents large-horsepower natural-gas compression equipment under contract, a fee-based service whose fleet ran at 92.4% horsepower utilization at the end of 2024, near practical capacity.
• The defining feature is leverage: the partnership carries about $3.0 billion of total debt, roughly nine times operating income, against which it pays a high distribution covered 1.72 times by distributable cash flow in Q1 2026.
• The J-W Power acquisition lifted scale: Q1 2026 revenue rose to $331.3 million from $245.2 million a year earlier, and the partnership reaffirmed full-year adjusted EBITDA guidance of $770 million to $800 million.

Bull Case

Start with the loudest objection, because it is the one that scares income investors away: USA Compression Partners carries about $3.0 billion of debt, roughly nine times operating income, and pays out essentially all its cash. On its face that is a fragile structure, the kind that snaps in a downturn. But look at what actually services that debt and funds the distribution, and the fear softens. The business is fee-based contract compression, not commodity-price exposure, and the fleet ran at 92.4% horsepower utilization at the end of 2024, near the practical ceiling. Compression is the unglamorous, essential equipment that keeps natural gas moving through pipelines and gathering systems; demand for it tracks gas throughput, which has been growing, not the gas price itself. High, stable utilization on fee contracts is exactly the cash-flow profile that can carry leverage.

The distribution coverage is the proof the structure is working. In Q1 2026 the partnership generated distributable cash flow of $130.8 million and declared a distribution of $0.525 per unit, for a coverage ratio of 1.72 times, up from 1.44 times a year earlier. Covering the payout 1.7 times means the distribution is funded with room to spare, and the coverage is improving, not deteriorating. For a high-yield MLP, rising coverage is the single best signal that the income is durable.

The J-W Power acquisition added scale to the same fee-based model. Q1 2026 revenue climbed to $331.3 million from $245.2 million a year earlier, net income rose to $38.3 million, and adjusted EBITDA reached $188.6 million, with the partnership reaffirming full-year adjusted EBITDA guidance of $770 million to $800 million and distributable cash flow of $480 million to $510 million. A larger fleet running at high utilization on contracts generates more fee cash to cover the distribution and service the debt. The bull case is that the leverage that frightens the casual observer is carried by stable, fee-based, highly-utilized cash flows, and the rising coverage ratio says the income stream is sturdier than the balance sheet looks in isolation.

Bear Case

The balance sheet is the bear case, and it is not a footnote. USA Compression Partners carries about $3.0 billion of total debt, roughly nine times operating income, with trailing interest coverage near 1.7 times. That is a structure with little margin between the cash the business generates and the interest it owes. The partnership operates under credit-agreement covenants requiring an interest coverage ratio of not less than 2.50 to 1.00 and a secured leverage ratio of not greater than 3.00 to 1.00. Covenants are the lender's tripwire, and a business operating with thin coverage lives closer to those tripwires than a conservatively financed one. A rise in interest rates on the $1.25 billion drawn under the revolving facility, or a dip in utilization that pressures cash flow, narrows the gap toward the covenant lines.

The distribution model compounds the rigidity. The partnership distributes essentially all of its available cash, and it states plainly that because it does so, it may not grow as quickly as businesses that are able to retain capital, and that if it cannot raise external capital efficiently, its ability to maintain or increase the level of distributions on our common units could be significantly impaired. That is the MLP's structural bind: it must keep tapping debt and equity markets to grow and to refinance, which leaves it exposed to the cost and availability of that capital. In a tight credit environment, a payout-everything model with high leverage has the least flexibility precisely when flexibility matters most.

The valuation reflects a business priced for stability that the balance sheet makes conditional. The earnings-power methods land far below the price, near $2 to $6, because there is little retained earnings power once the cash is distributed and the debt is serviced. Only the forward-growth and certain relative methods reach the price. The fleet is highly utilized today, but that is a strength that can only erode from here, not improve much, since 92.4% is near the ceiling. The peer comparison runs to other midstream and compression operators that share the same leverage-and-distribution dynamics. The bear is not that the distribution is about to be cut; the coverage is currently healthy. It is that a nine-times-levered, pay-everything structure is one downturn or one refinancing window away from the covenant math turning against it, and the price gives little credit for that fragility.

Valuation

The price is making a stability bet on a leveraged, fee-based cash flow stream. Inverting today's price near $25 (June 28, 2026) implies only modest operating growth, around 2% a year, on an operating margin near 9%, well below the 30% the partnership earns today. In plain terms, the price does not require growth heroics; it requires the fee cash flows to hold and the distribution to keep being covered. For a midstream MLP, that is a reasonable embedded assumption, but it rests entirely on the durability of utilization and the absence of a refinancing shock.

The methods are sparse and split, which is normal for a distribution-everything MLP. The earnings-power methods land far below the price, near $2 to $6, because the partnership retains almost nothing to capitalize after the payout and debt service. The relative and forward-growth methods reach toward the price, with the EV/EBITDA-relative approach near $36 on a sector multiple and the exit-multiple cash-flow method above the price at $45. The price-to-sales fallback, used because reported earnings per unit are negative after the partnership's capital structure, lands near $19. The honest read is that the standard equity methods are a poor fit here; the value of an MLP unit is the distribution stream and its coverage, and the relevant question is whether distributable cash flow keeps covering the $0.525 quarterly payout, which at 1.72 times it currently does.

Solvency is the entire story and must anchor the close. Net debt near $3.0 billion is roughly nine times operating income with interest coverage near 1.7 times, and the partnership runs against credit-agreement covenants of 2.50 times interest coverage and 3.00 times secured leverage. That leverage is the amplifier on both directions: it lifts the distribution yield in good times and tightens the covenant math in bad ones. The fleet's 92.4% utilization and the improving 1.72-times distribution coverage are the mitigants; the thin interest coverage and the pay-everything model are the risks. What the buyer is underwriting at this price is the durability of the fee-based cash flows that cover both the distribution and the debt, on a balance sheet that leaves little room if utilization slips or refinancing turns costly.

Catalysts

The Q1 2026 report and the J-W Power acquisition behind it are the key catalysts. Total revenue rose to $331.3 million from $245.2 million a year earlier, net income climbed to $38.3 million, and adjusted EBITDA reached $188.6 million, with much of the increase driven by the J-W Power acquisition that expanded the fleet. Distributable cash flow was $130.8 million, and the partnership declared a Q1 2026 distribution of $0.525 per unit, flat versus a year earlier, for a coverage ratio of 1.72 times, up from 1.44 times.

The partnership reaffirmed its full-year 2026 outlook of adjusted EBITDA of $770 million to $800 million and distributable cash flow of $480 million to $510 million, and disclosed total debt of $3.0 billion, including $1.25 billion drawn under the revolving credit facility and $1.75 billion of senior notes. The integration of J-W Power and its effect on fleet utilization and per-unit cash flow is the operating story to track.

The catalysts to watch are the quarterly distribution-coverage ratio, which is the cleanest signal of whether the income is durable, the horsepower-utilization trend, since the fleet is already near its ceiling, and any refinancing activity on the debt stack, because the cost of refinancing the revolver and senior notes feeds directly into coverage. The direction of natural-gas throughput and pipeline activity is the demand backdrop that determines whether utilization and contract pricing hold.

Peer Cohorts (Per Segment, With Filing Citations)

Compression services (sole reportable segment) (reported)

• AROC (Archrock, Inc.)
• FY2025 10-K: …to our customers. Our aftermarket services business provides a full range of services to support the compression needs of our customers that own compression equipment, including operations, maintenance, overhaul and reconfiguration services and sales of parts and components. 2. Basis of Presentation and Significant…
• FY2025 10-K: …our compression packages is supplied by our customers, further reducing our direct exposure to commodity price risk; • compression services are a necessary part of midstream energy infrastructure that facilitate the transportation of natural gas through gathering systems; • our contract operations business is tied…
• KGS (Kodiak Gas Services, Inc.)
• FY2025 10-K: …availability. We continue to implement advanced systems to proactively analyze and monitor the operating conditions of our equipment, with a focus on maximizing uptime. We believe our customers will continue to outsource a portion of their compression infrastructure needs, allowing them to limit their capital…
• FY2025 10-K: …equipment to and from their locations. Our contracts typically provide that both we and our customers are required to carry various types of insurance coverage including, but not limited to, general liability, workers' compensation, employers' liability, property, automobile and excess liability insurance. Marketing…
• NGL (NGL Energy Partners LP)
• FY2025 10-K: …with customers are presented within accounts receivable and accounts receivable-affiliates in our consolidated balance sheets. Under certain of our contracts, we may be entitled to receive payments in advance of satisfying our performance obligations under the contract. We recognize a liability for these payments in…
• FY2025 10-K: …of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to allow customers to secure the right to reserve the product or storage capacity to be received or used at a later…
• DTM (DT Midstream, Inc.)
• FY2025 10-K: …transportation and/or storage of natural gas. Gathering revenues consist of services related to the gathering, processing, and/or treating of natural gas. Revenue is measured based upon the pricing or consideration for such services specified in the contract with a customer. Consideration may consist of both fixed…
• FY2025 10-K: …to a revenue contract, would result in enhancing resources that will be used in satisfying performance obligations in the future, and are expected to be recovered. These capitalized costs are amortized on a systematic basis consistent with the pattern of transfer of the services to which such costs relate. As of…
• AM (ANTERO MIDSTREAM CORPORATION)
• FY2025 10-K: …​ (c) Disaggregation of Revenue In the following table, revenue is disaggregated by type of service and type of fee and is identified by the reportable segment to which such revenues relate. See Note 17-Reportable Segments for additional information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ (in…
• FY2025 10-K: …of $ 52 million. The growth incentive fee rebate program expired on December 31, 2023. Under the gathering and compression agreements, the Company receives, where applicable, a low pressure gathering fee, a high pressure gathering fee and a compression fee, substantially all of which are subject to annual CPI-based…
• WES (Western Midstream Partners, LP)
• FY2025 10-K: …Revenue from Contracts with Customers (Topic 606) . Segments. The Partnership's operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather, transport,…
• FY2025 10-K: …for fee-based contracts in the month of service based on the volumes delivered by the customer. Producers' wells or production facilities are connected to the Partnership's gathering systems for gathering, processing, treating, transportation, and disposal of natural gas, NGLs, condensate, crude oil, and produced…
• CTRI (Centuri Holdings, Inc.)
• FY2025 10-K: …relationships are governed by long-term master service agreements ("MSAs"), comprising approximately 78% of our total revenue during fiscal 2025. Additionally, of the remaining 22% of our total revenue that was generated from bid contracts, 8% was generated from existing MSA customers. We predominantly perform…
• FY2025 10-K: …of all contracts regardless of length and includes estimated future work over the contractual life of MSAs. Generally, customers are not contractually committed to specific volumes of work under MSAs, and MSAs may be terminated by either party upon notice. Revenue estimates for MSAs are based on historical customer…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.