CSI Compressco LP (Form: 10-Q, Received: 05/07/2020 16:18:12)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to______

Commission File Number 001-35195

CSI Compressco LP

(Exact name of registrant as specified in its charter)



Delaware	94-3450907
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

24955 Interstate 45 North
The Woodlands,
TX	77380
(Address of Principal Executive Offices)	(Zip Code)

(281) 364-2244

(Registrant’s Telephone Number, Including Area Code)

_______________________________________________________________________

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
COMMON UNITS REPRESENTING LIMITED PARTNERSHIP INTERESTS	CCLP	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2020, there were 47,344,351 Common Units outstanding.



CSI Compressco LP
Table of Contents
	Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations	1
Consolidated Statements of Comprehensive Income (Loss)	2
Consolidated Balance Sheets	3
Consolidated Statements of Partners’ Capital	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures about Market Risk	27
Item 4. Controls and Procedures	27

PART II—OTHER INFORMATION
Item 1. Legal Proceedings	28
Item 1A. Risk Factors	28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	30
Item 4. Mine Safety Disclosures	30
Item 5. Other Information	30
Item 6. Exhibits	31
SIGNATURES	32

CERTAIN REFERENCES IN THIS QUARTERLY REPORT

References in this Quarterly Report to “CSI Compressco,” “we,” “our,” “us,” “the Partnership” or like terms refer to CSI Compressco LP and its wholly owned subsidiaries. References to “CSI Compressco GP” or “our General Partner” refer to our general partner, CSI Compressco GP Inc. References to “TETRA” refer to TETRA Technologies, Inc. and TETRA’s controlled subsidiaries, other than us.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

CSI Compressco LP

Consolidated Statements of Operations

(In Thousands, Except Unit and Per Unit Amounts)

(Unaudited)



	Three Months Ended March 31,
	2020			2019
Revenues:
Compression and related services	$	65,765		$	63,060
Aftermarket services	17,970			13,614
Equipment sales	6,544			26,762
Total revenues	90,279			103,436
Cost of revenues (excluding depreciation and amortization expense):
Cost of compression and related services	31,608			32,621
Cost of aftermarket services	16,245			11,260
Cost of equipment sales	6,700			24,219
Total cost of revenues	54,553			68,100
Depreciation and amortization	19,908			18,532
Impairments and other charges	5,371			—
Selling, general, and administrative expense	10,256			10,665
Interest expense, net	13,169			13,299
Series A Preferred fair value adjustment (income) expense	—			1,304
Other (income) expense, net	440			(381		)
Loss before income tax provision	(13,418		)	(8,083		)
Provision (benefit) for income taxes	212			4,373
Net loss	$	(13,630	)	$	(12,456	)
General partner interest in net loss	$	(192	)	$	(177	)
Common units interest in net loss	$	(13,438	)	$	(12,279	)

Net loss per common unit:
Basic	$	(0.28	)	$	(0.26	)
Diluted	$	(0.28	)	$	(0.26	)
Weighted average common units outstanding:
Basic	47,176,640			46,830,605
Diluted	47,176,640			46,830,605

See Notes to Consolidated Financial Statements

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CSI Compressco LP

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)



	Three Months Ended March 31,
	2020			2019
Net loss	$	(13,630	)	$	(12,456	)
Foreign currency translation adjustment, net of tax of $0 in 2020 and 2019	(353		)	272
Comprehensive loss	$	(13,983	)	$	(12,184	)

See Notes to Consolidated Financial Statements

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CSI Compressco LP

Consolidated Balance Sheets

(In Thousands, Except Unit Amounts)



	March 31, 2020			December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,416		$	2,370
Trade accounts receivable, net of allowances for doubtful accounts of $3,237 as of March 31, 2020 and $3,350 as of December 31, 2019	71,774			64,724
Inventories	63,288			56,037
Prepaid expenses and other current assets	5,153			4,162
Total current assets	147,631			127,293
Property, plant, and equipment:
Land and building	32,058			35,125
Compressors and equipment	989,493			976,469
Vehicles	8,875			9,205
Construction in progress	18,788			26,985
Total property, plant, and equipment	1,049,214			1,047,784
Less accumulated depreciation	(421,062		)	(405,417		)
Net property, plant, and equipment	628,152			642,367
Other assets:
Deferred tax asset	24			24
Intangible assets, net of accumulated amortization of $28,491 as of March 31, 2020 and $27,751 as of December 31, 2019	27,277			28,017
Operating lease right-of-use assets	27,374			21,006
Other assets	3,844			3,539
Total other assets	58,519			52,586
Total assets	$	834,302		$	822,246
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable	$	48,362		$	47,837
Unearned income	27,426			9,505
Accrued liabilities and other	38,832			42,581
Amounts payable to affiliates	14,964			7,704
Total current liabilities	129,584			107,627
Other liabilities:
Long-term debt, net	638,429			638,238
Deferred tax liabilities	986			1,211
Long-term affiliate payable	11,618			12,324
Operating lease liabilities	18,903			13,822
Other long-term liabilities	23			33
Total other liabilities	669,959			665,628
Commitments and contingencies
Partners' capital:
General partner interest	(19		)	180
Common units (47,292,095 units issued and outstanding at March 31, 2020 and 47,078,529 units issued and outstanding at December 31, 2019)	49,704			63,384
Accumulated other comprehensive income (loss)	(14,926		)	(14,573		)
Total partners' capital	34,759			48,991
Total liabilities and partners' capital	$	834,302		$	822,246

See Notes to Consolidated Financial Statements

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CSI Compressco LP

Consolidated Statements of Partners’ Capital

(In Thousands)

(Unaudited)



	Partners' Capital							Accumulated Other Comprehensive Income (Loss)			Total Partners' Capital
	Partners' Capital
				Limited Partners
	General Partner			Common Unitholders
	Amount			Units	Amount

Balance at December 31, 2019	$	180		47,079	$	63,384		$	(14,573	)	$	48,991
Net Loss	(192		)	—	(13,438		)	—			$	(13,630	)
Distributions ($0.01 per unit)	(7		)	—	(471		)	—			$	(478	)
Equity compensation	—			—	229			—			$	229
Vesting of Phantom Units	—			213	—			—			$	—
Translation adjustment, net of taxes of $0	—			—	—			(353		)	$	(353	)
Other	—			—	—			—			$	—
Balance at March 31, 2020	$	(19	)	47,292	$	49,704		$	(14,926	)	$	34,759



	Partners' Capital							Accumulated Other Comprehensive Income (Loss)			Total Partners' Capital
	Partners' Capital
				Limited Partners
	General Partner			Common Unitholders
	Amount			Units	Amount

Balance at December 31, 2018	$	505		45,769	$	81,984		$	(15,086	)	$	67,403
Net loss	(177		)	—	(12,279		)	$	—		$	(12,456	)
Distributions ($0.01 per unit)	(6		)	—	(470		)	—			(476		)
Equity compensation, net	—			—	312			—			312
Vesting of Phantom Units	—			117	—			—			—
Conversions of Series A Preferred	—			1,113	3,048			—			3,048
Translation adjustment, net of taxes of $0	—			—	—			272			272
Other	—			—	(69		)	—			(69		)
Balance at March 31, 2019	$	322		46,999	$	72,526		$	(14,814	)	$	58,034

See Notes to Consolidated Financial Statements

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CSI Compressco LP

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



	Three Months Ended March 31,
	2020			2019
Operating activities:
Net income (loss)	$	(13,630	)	$	(12,456	)
Reconciliation of net income (loss) to cash provided by operating activities:
Depreciation and amortization	19,908			18,532
Impairments and other charges	5,371			—
Provision for deferred income taxes	8			1,466
Series A Preferred Unit distributions and adjustments	—			2,437
Equity compensation expense	324			365
Provision for doubtful accounts	222			56
Amortization of deferred financing costs	670			600
Other non-cash charges and credits	(85		)	54
(Gain) loss on sale of property, plant, and equipment	7			(26		)
Changes in operating assets and liabilities:
Accounts receivable	(7,364		)	5,992
Inventories	(12,102		)	(11,990		)
Prepaid expenses and other current assets	(1,160		)	(567		)
Accounts payable and accrued expenses	21,625			27,442
Other	(437		)	(273		)
Net cash provided by operating activities	13,357			31,632
Investing activities:
Purchases of property, plant, and equipment, net	(6,483		)	(23,152		)
Net cash used in investing activities	(6,483		)	(23,152		)
Financing activities:
Proceeds from long-term debt	15,501			—
Payments of long-term debt	(16,000		)	(2		)
Cash redemptions of Preferred Units	—			(9,399		)
Distributions	(478		)	(476		)
Other financing activities	(886		)	—
Advances from affiliate	—			2,402
Net cash used in financing activities	(1,863		)	(7,475		)
Effect of exchange rate changes on cash	35			7
Increase (decrease) in cash and cash equivalents	5,046			1,012
Cash and cash equivalents at beginning of period	2,370			15,858
Cash and cash equivalents at end of period	$	7,416		$	16,870
Supplemental cash flow information:
Interest paid	$	10,823		$	10,727
Income taxes paid	$	36		$	648

See Notes to Consolidated Financial Statements

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CSI Compressco LP

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

Organization

CSI Compressco LP, a Delaware limited partnership, is a provider of compression services and equipment for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage. We sell standard and custom-designed, engineered compressor packages and provide aftermarket services and compressor package parts and components manufactured by third-party suppliers. We provide these compression services and equipment to a broad base of natural gas and oil exploration and production, midstream, and transmission companies operating throughout many of the onshore producing regions of the United States as well as in a number of foreign locations, including the countries of Mexico, Canada, and Argentina. We design and fabricate a majority of the compressor packages that we use to provide compression services and sell to customers.

Presentation

Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. In the opinion of our management, our unaudited consolidated financial statements as of March 31, 2020, and for the three month periods ended March 31, 2020 and 2019, include all normal recurring adjustments that are necessary to provide a fair statement of our results for these interim periods. Operating results for the three month periods ended March 31, 2020 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2020.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2019 and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 16, 2020.

Segments

Our General Partner has concluded that we operate in one business segment.

Significant Accounting Policies

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K. There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2020.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material.

Reclassifications

Certain previously reported financial information has been reclassified to conform to the current year's presentation. The impact of such reclassifications was not significant to the prior year's overall presentation.

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Cash Equivalents

We consider all highly liquid cash investments with maturities of three months or less when purchased to be cash equivalents.

Financial Instruments

Financial instruments that subject us to concentrations of credit risk consist principally of trade accounts receivable, which are primarily due from customers of varying size engaged in oil and gas activities in the United States, Canada, Mexico, and Argentina. Our policy is to review the financial condition of potential customers before extending credit and periodically update their credit information. Payment terms are on a short-term basis. The risk of loss from the inability to collect trade receivables is heightened during prolonged periods of low oil and natural gas commodity prices.

We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. Our risk management activities include the use of foreign currency forward purchase and sale derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected international operations.

We have a $3.0 million outstanding balance under our variable rate revolving credit facility as of March 31, 2020 and face market risk exposure related to changes in applicable interest rates.

Foreign Currencies

Accumulated other comprehensive income (loss) is included in partners’ capital in the accompanying consolidated balance sheets and consists of the cumulative currency translation adjustments associated with our international operations. Foreign currency exchange (gains) and losses are included in other (income) expense, net and totaled $1.7 million and $(1.0) million during the three month periods ended March 31, 2020 and March 31, 2019, respectively.

Inventories

Inventories consist primarily of compressor package parts and supplies and work in process and are stated at the lower of cost or net realizable value. For parts and supplies, cost is determined using the weighted average cost method. The cost of work in progress is determined using the specific identification method.

Impairments and Other Charges

Impairments of long-lived assets, including identified intangible assets, are determined periodically, when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgment as to the future undiscounted operating cash flows to be generated from the relevant assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related assets, an impairment is recognized for the excess of the carrying value over fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs. See Note 3 - "Impairments and Other Charges" for additional discussion of recorded impairments.

Earnings Per Common Unit

Our computations of earnings per common unit are based on the weighted average number of common units outstanding during the applicable period. Basic earnings per common unit are determined by dividing net income (loss) allocated to the common units after deducting the amount allocated to our General Partner (including any distributions to our General Partner on its incentive distribution rights) by the weighted average number of outstanding common units during the period.

When computing earnings per common unit under the two class method in periods when distributions are greater than earnings, the amount of the distribution is deducted from net income (loss) and the excess of

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distributions over earnings is allocated between the General Partner and common units based on how our Partnership Agreement allocates net losses.

Diluted earnings per common unit are computed using the treasury stock method, which considers the potential future issuance of limited partner common units. Unvested phantom units are not included in basic earnings per common unit, as they are not considered to be participating securities, but are included in the calculation of diluted earnings per common unit. For the three month periods ended March 31, 2020 and March 31, 2019, all unvested phantom units were excluded from the calculation of diluted common units because the impact was anti-dilutive. Diluted earnings per common unit are computed using the "if converted" method, whereby the amount of net income (loss) and the number of common units issuable are each adjusted as if the Preferred Units, had been converted as of the beginning of the period presented. The calculation of diluted earnings per common unit for the three month period ended March 31, 2019 excludes the impact of the Preferred Units, as the inclusion of the impact from the conversion of the Preferred Units into common units would have been anti-dilutive. All remaining outstanding Preferred Units were redeemed for cash on August 8, 2019.

Revenue Recognition

Performance Obligations. Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Revenue is generally recognized when we transfer control of our products or services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services to our customers. We receive cash equal to the invoice price for most product sales and services and payment terms typically range from 30 to 60 days from the date we invoice our customer. With the exception of the initial terms of our compression services contracts of our medium- and high-horsepower compressor packages, our customer contracts are generally for terms of one year or less. Since the period between when we deliver products or services and when the customer pays for products or services is not to exceed one year, we have elected not to calculate or disclose a financing component for our customer contracts.

Depending on the terms of the arrangement, we may also defer the recognition of revenue for a portion of the consideration received because we have to satisfy a future performance obligation. For example, consideration received from customers during the fabrication of new compressor packages is typically deferred until control of the compressor package is transferred to our customer.

For revenue associated with mobilization of service equipment as part of a service contract arrangement, such revenue, if significant, is deferred and amortized over the estimated service period.

Compression and related services. For compression services revenues recognized over time, our customer contracts typically provide agreed upon monthly service rates and we recognize service revenue based upon the number of days that services have been performed. The majority of our compression services are provided pursuant to contract terms ranging from one month to twenty-four months. Monthly agreements are generally cancellable with 30 days written notice by the customer.

Sales taxes, value added taxes, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We recognize the cost for freight and shipping costs when control over our products (i.e. delivery) has transferred to the customer as part of cost of product sales.

Use of Estimates. Our revenues do not include material amounts of variable consideration, as our revenues typically do not require significant estimates or judgments. The transaction price on a majority of our arrangements are fixed and product returns are immaterial. Additionally, our arrangements typically do not include multiple performance obligations that require estimates of the stand-alone purchase price for each performance obligation. Revenue on certain aftermarket service arrangements that include time as a component of the transaction price is not recognized until the performance obligation is complete.

Contract Assets and Liabilities. We consider contract assets to be trade accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain instances, particularly those requiring customer specific documentation prior to invoicing, our invoicing of the customer is delayed until certain documentation requirements are met. In those cases, we recognize a contract asset rather than a billed trade accounts receivable until we are able to invoice the customer. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets.

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We classify contract liabilities as unearned income in our consolidated balance sheets. Such unearned income typically results from advance payments received on orders for new compressor equipment prior to the time such equipment is completed and transferred to the customer in accordance with the customer contract. New equipment sales orders generally take less than twelve months to build and deliver.

Bill-and-Hold Arrangements. We design compressor packages based on our customer’s specifications. In some cases, the customer will request us to hold the equipment, upon completion of the unit, until the job site is ready to receive the equipment. When this occurs, we along with the customer sign a bill-and-hold agreement, which outlines that the customer has title to the equipment, the equipment is ready for delivery, we cannot use the equipment or direct it to another customer, and we have a present right to payment. When those criteria have been met and the agreement is executed, we recognize the revenue on the equipment because control of the equipment has passed to our customer and our performance obligations are complete. Entering into these arrangements is something we have done as a courtesy for certain customers for many years. The equipment subject to the bill-and-hold agreements have generally been invoiced and paid for through progressive billings such that at the time the bill-and-hold agreement is executed, the majority of the contractual cash obligation of the customer has been received by us.

Fair Value Measurements

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements were utilized in the determination of the carrying value of our Series A Preferred Units (a Level 3 fair value measurement). We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value (a Level 2 fair value measurement). Refer to Note 9 - "Fair Value Measurements" for further discussion.

Fair value measurements are also utilized on a nonrecurring basis, such as in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets (a Level 3 fair value measurement) and for the impairment of long-lived assets (a Level 3 fair value measurement).

Distributions

On January 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended December 31, 2019 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This distribution was paid on February 14, 2020, to each of the holders of common units of record as of the close of business on February 1, 2020.

New Accounting Pronouncements

Standards adopted in 2020

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for us the first quarter of fiscal 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

Standards not yet adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses on financial instruments not accounted for at fair value through net income. The provisions require credit impairments to be measured over the contractual life of an asset and developed with consideration for past events, current conditions, and forecasts of future economic information. Credit impairments will be accounted for as an allowance for credit losses deducted from the amortized cost basis at each reporting date. Updates at each reporting date after initial adoption will be recorded through selling, general, and

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administrative expense. ASU 2016-13 is effective for us the first quarter of fiscal 2023. We continue to assess the potential effects of these changes to our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to intraperiod tax allocation, interim period income tax calculation methodology, and the recognition of deferred tax liabilities for outside basis differences. It also simplifies certain aspects of accounting for franchise taxes and clarifies the accounting for transactions that results in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for us the first quarter of fiscal 2021. We continue to assess the potential effects of these changes to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements.

NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERS

As of March 31, 2020, we had $56.7 million of remaining contractual performance obligations for compression services. As a practical expedient, this amount does not include revenue for compression service contracts whose original expected duration is less than twelve months and does not consider the effects of the time value of money. Expected revenue to be recognized in the future as of March 31, 2020 for completion of performance obligations of compression service contracts are as follows:



	2020		2021		2022		2023		2024		Total
	(In Thousands)
Compression service contracts remaining performance obligations	$	38,720	$	15,941	$	2,026	$	54	$	—	$	56,741

Our contract asset balances included in trade accounts receivable in our consolidated balance sheets, primarily associated with customer documentation requirements prior to invoicing, were $8.0 million and $9.6 million as of March 31, 2020 and December 31, 2019, respectively.

Collections associated with progressive billings to customers for the construction of compression equipment is included in unearned income in the consolidated balance sheets. The following table reflects the changes in unearned income in our consolidated balance sheets for the periods indicated:



	Three Months Ended March 31,
	2020			2019
	(In Thousands)
Unearned income, beginning of period	$	9,505		$	24,898
Additional unearned income	23,545			48,955
Revenue recognized	(5,624		)	(24,557		)
Unearned income, end of period	$	27,426		$	49,296

During the three months ended March 31, 2020, we recognized in equipment sales revenue $2.7 million from unearned income that was deferred as of December 31, 2019. During the three months ended March 31, 2019, we recognized in equipment sales revenue of $10.5 million from unearned income that was deferred as of December 31, 2018.

As of March 31, 2020 and March 31, 2019, contract costs were immaterial.

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Disaggregated revenue from contracts with customers by geography is as follows:



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Compression and related services
U.S.	$	57,275	$	54,018
International	8,490		9,042
	65,765		63,060
Aftermarket services
U.S.	17,285		13,332
International	685		282
	17,970		13,614
Equipment sales
U.S.	6,038		26,166
International	506		596
	6,544		26,762
Total Revenue
U.S.	80,598		93,516
International	9,681		9,920
	$	90,279	$	103,436

NOTE 3 – IMPAIRMENTS AND OTHER CHARGES

Impairments of Long-Lived Assets

During the first quarter of 2020, the COVID-19 pandemic and decline in oil prices had a significant impact on our customers and industry. We started to see our customers revise their capital budgets downwards and adjust their operations accordingly, which led to a decline in orders for new compression equipment to be fabricated and sold to third parties. We concluded that these events were indicators of impairment for all our asset groups. As a result, we performed a recoverability analysis on all our long-lived asset groups and we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory exceeded their respective fair values. Therefore, we recorded impairments of approximately $5.4 million during the first quarter of 2020 related to these assets. Fair value was estimated based on a market approach. Our recoverability analysis for all our compression services asset groups indicated no impairments as of March 31, 2020. Given the dynamic nature of the events beginning in the first quarter of 2020, we are not able to reasonably estimate how long our operations will be impacted and the full extent these events will have on our operations. As a result, we could have indicators of impairment again in future periods resulting in additional asset impairments.

NOTE 4 – INVENTORIES

Components of inventories as of March 31, 2020 and December 31, 2019, are as follows:



	March 31, 2020		December 31, 2019
	(In Thousands)
Parts and supplies	$	33,388	$	42,814
Work in progress	29,900		13,223
Total inventories	$	63,288	$	56,037

Inventories consist primarily of compressor package parts and supplies. Work in progress inventories consist primarily of new compressor packages located at our manufacturing facility in Midland, Texas.

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NOTE 5 – LEASES

We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms ranging from 1 to 10 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. During the fourth quarter of 2019, we entered into a lease agreement commitment for 14 compressor packages. The leases are for an initial term of seven years and commence upon the completion of the fabrication of the compressor packages. During the first quarter, we took delivery of eight compressor packages. We anticipate taking delivery of the remaining six compressor packages when the compression units are completed, which is expected to occur during the second quarter of 2020. We have no other lease agreement commitments that have not yet commenced that create significant rights and obligations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In November 2019, we entered into a sale and leaseback transaction with a third-party lessor whereby we received $9.8 million of proceeds from the sale of certain of our compression equipment in service and entered into an associated lease of the same equipment having an initial lease term of seven years.

Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $3.2 million for the three month period ended March 31, 2020, of which, $0.9 million related to short-term leases. Variable rent expense was not material.

Operating lease supplemental cash flow information:



	Three Months Ended March 31,
	2020		2019
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	2,216	$	1,174

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	7,626	$	2,487

Supplemental balance sheet information:



	March 31, 2020		December 31, 2019
	(In Thousands)
Operating leases:
Operating right-of-use asset	$	27,374	$	21,006

Accrued liabilities and other	$	7,667	$	6,706
Operating lease liabilities	18,903		13,822
Total operating lease liabilities	$	26,570	$	20,528

Additional operating lease information:



	March 31, 2020		December 31, 2019
Weighted average remaining lease term:
Operating leases	4.90 Years		4.51 Years

Weighted average discount rate:
Operating leases	9.05	%	8.73	%

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Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at March 31, 2020:



	Operating Leases
	(In Thousands)

Remainder of 2019	$	7,160
2020	7,622
2021	5,499
2022	3,295
2023	3,257
Thereafter	6,503
Total lease payments	33,336
Less imputed interest	(6,766		)
Total lease liabilities	$	26,570

NOTE 6 – LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:



		March 31, 2020		December 31, 2019
	Scheduled Maturity	(In Thousands)
Credit Agreement (presented net of the unamortized deferred financing costs of $0.8 million as of March 31, 2020 and $0.9 million as of December 31, 2019)	June 2023	$	2,184	$	2,622
7.25% Senior Notes (presented net of the unamortized discount of $1.5 million as of March 31, 2020 and $1.7 million as of December 31, 2019 and unamortized deferred financing costs of $2.6 million as of March 31, 2020 and $2.8 million as of December 31, 2019)	August 2022	291,863		291,444
7.50% Senior Secured Notes (presented net of the unamortized deferred financing costs of $5.6 million as of March 31, 2020 and $5.8 million as of December 31, 2019)	April 2025	344,382		344,172
		638,429		638,238
Less current portion		—		—
Total long-term debt		$	638,429	$	638,238

There was a $3.0 million balance outstanding and $3.0 million in letters of credit issued under the Credit Agreement as of March 31, 2020. As of March 31, 2020, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement, we had availability of $20.4 million.

Our credit and senior note agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. We are in compliance with all covenants of our credit and senior note agreements as of March 31, 2020.

Refer to Note 7 - "Related Party Transactions," for a discussion of our amounts payable to affiliates and long-term affiliate payable to TETRA.

NOTE 7 – RELATED PARTY TRANSACTIONS

Omnibus Agreement

Under the terms of the Omnibus Agreement, our General Partner provides all personnel and services reasonably necessary to manage our operations and conduct our business (other than in Mexico, Canada, and Argentina), and certain of TETRA’s Latin American-based subsidiaries provide personnel and services necessary for

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the conduct of certain of our Latin American-based businesses. In addition, under the Omnibus Agreement, TETRA provides certain corporate and general and administrative services as requested by our General Partner, including, without limitation, legal, accounting and financial reporting, treasury, insurance administration, claims processing and risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, and tax services. Pursuant to the Omnibus Agreement, we reimburse our General Partner and TETRA for services they provide to us.

TETRA and General Partner Ownership

As of March 31, 2020, TETRA's ownership interest in us was approximately 34% of the outstanding common units and an approximate 1.4% general partner interest, through which it holds incentive distribution rights.

Other Sources of Financing

In February 2019, we entered into a transaction with TETRA whereby TETRA agreed to fund the construction of and purchase from us up to $15.0 million of new compression services equipment and to subsequently lease the equipment back to us in exchange for a monthly rental fee. As of March 31, 2020, pursuant to this arrangement, $14.8 million has been funded by TETRA for the construction of new compression services equipment and all such equipment was completed and deployed under this agreement. For accounting purposes, the inclusion of an option that allows us to repurchase the equipment at a fixed price during certain periods of the agreement caused the transaction to be accounted for as a financing transaction, as opposed to a sale-leaseback, resulting in the funded amount being recorded as a financing obligation. Accordingly, the compression services equipment is included in property, plant, and equipment and the corresponding financing obligations are included in amounts payable to affiliates and long-term affiliate payable in our consolidated balance sheet. As of March 31, 2020, the financing obligation was $14.6 million. Imputed interest expense recognized for the three month period ended March 31, 2020 was $0.6 million.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. While the outcome of any lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations, or cash flows.

NOTE 9 – FAIR VALUE MEASUREMENTS

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability.

Under U.S. GAAP, the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability.

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We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. We enter into 30-day foreign currency forward derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries. As of March 31, 2020, we had the following foreign currency derivative contract outstanding relating to a portion of our foreign operations:



	US Dollar Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward sale Mexican peso	$	4,974	24.40	4/21/2020

Under a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries, we may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as economic hedges of the cash flow of our currency exchange risk exposure, they will not be formally designated as hedge contracts or qualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period.

The fair values of our foreign currency derivative contracts are based on quoted market values (a Level 2 fair value measurement). The fair values of our foreign currency derivative instruments as of March 31, 2020 and December 31, 2019, are as follows:



Foreign currency derivative contracts	Balance Sheet	Fair Value at
Foreign currency derivative contracts	Location	March 31, 2020			December 31, 2019
		(In Thousands)
Forward sale contracts	Current liabilities	(155		)	(53		)
Net asset (liability)		$	(155	)	$	(53	)

None of our foreign currency derivative instruments contains credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three month periods ended March 31, 2020 and March 31, 2019, we recognized $(1.4) million and $0.1 million, respectively, of net (gains) losses associated with our foreign currency derivative program, and such amounts are included in other (income) expense, net, in the accompanying consolidated statement of operations.

During the first quarter of 2020, we recorded impairments of approximately $5.4 million, reflecting the decreased fair value for certain assets. The fair values used in these impairment calculations were estimated based on a market approach, which is based on significant unobservable inputs (Level 3) in accordance with the fair value hierarchy.

Recurring and nonrecurring fair value measurements by valuation hierarchy as of March 31, 2020 and December 31, 2019 are as follows:



				Fair Value Measurements Using
Description	Total as of March 31, 2020			Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In Thousands)
Midland manufacturing facility and related assets	$	19,646		$	—	$	—		$	19,646
Liability for foreign currency derivative contracts	(155		)	—		(155		)	—
	$	19,491

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				Fair Value Measurements Using
				Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description	Total as of December 31, 2019				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Liability for foreign currency derivative contracts	(53		)	—	(53	)	—
	$	(53	)

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings, and variable-rate long-term debt pursuant to our Credit Agreement approximate their carrying amounts. The fair values of our publicly traded long-term 7.25% Senior Notes at March 31, 2020 and December 31, 2019 were approximately $148.0 million and $266.0 million, respectively. Those fair values compare to aggregate principal amounts of such notes at March 31, 2020 and December 31, 2019 of $295.9 million. The fair values of our long-term 7.50% Senior Secured Notes at March 31, 2020 and December 31, 2019 were approximately $239.8 million and $344.8 million, respectively. These fair values compare to an aggregate principal amount of such notes at March 31, 2020 and December 31, 2019 of $350.0 million. We based the fair values of our 7.25% Senior Notes and our 7.50% Senior Secured Notes as of March 31, 2020 on recent trades for these notes.

NOTE 10 – INCOME TAXES

As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. Certain of our operations are located outside of the U.S., and the Partnership, through its foreign subsidiaries, is responsible for income taxes in these countries.

Our effective tax rate for the three month period ended March 31, 2020, was negative 1.6% primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes combined with losses generated in entities for which no related tax benefit has been recorded. Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the U.S. as well as in certain foreign jurisdictions.

NOTE 11 – SUBSEQUENT EVENTS

In April 2020, we announced our plan to shutdown our Midland manufacturing facility as a result of a decline in orders for new equipment from third parties and the expectation that no incremental equipment will be fabricated for our fleet in the second half of 2020. As a result of the decision to close this facility and solely utilize third party fabricators in the future for our own service fleet, we are pursuing the sale of the Midland facility in an effort to further improve our balance sheet, and have entered into an agreement with a third party purchaser, which is subject to numerous conditions. While we will continue to operate the facility until the completion and sale of our remaining backlog, we no longer intend to fabricate new compressor packages for sales to third parties. We have and will continue to evaluate the sale of other non-core assets, including our low-horsepower compression fleet. We can provide no assurance that we will consummate a sale of the Midland manufacturing facility, our low-horsepower compression fleet, or any other non-core asset.

On April 20, 2020, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended March 31, 2020 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit, on an annualized basis. This distribution will be paid on May 15, 2020 to each of the holders of common units of record as of the close of business on May 1, 2020.

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Second Lien Notes due 2027. In conjunction with the offer, consents are being solicited from Eligible Holders to eliminate substantially all restrictive covenants and certain of the default provisions in the indenture governing the Unsecured Notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this Quarterly Report. In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 16, 2020 ("2019 Annual Report"). This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview

We provide compression services and equipment for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage. Our compression and related services business includes a fleet of more than 5,200 compressor packages providing approximately 1.2 million in aggregate horsepower, utilizing a full spectrum of low-, medium-, and high-horsepower engines. Our equipment sales business includes the design, and sale of both standard and custom-designed, engineered compressor packages. Our aftermarket business provides compressor package reconfiguration and maintenance services, as well as the sale of compressor package parts and components manufactured by third-party suppliers. Our customers operate throughout many of the onshore producing regions of the United States, as well as in a number of foreign locations, including the countries of Mexico, Canada and Argentina. We design and fabricate a majority of the compressor packages that we use to provide compression services and sell to customers. Going forward, we plan to have such compressor packages fabricated through one or more third party packagers.

Our operations are significantly dependent upon the demand for, and production of, oil and the associated natural gas from unconventional oil and natural gas production in the domestic and international markets in which we operate. During the first part of the first quarter, we continued to see increased demand for our products and services, with the exception of a declining backlog for new unit sales. However, during the latter part of the quarter, as the macroeconomic uncertainty resulting from declining oil and natural gas prices and the COVID-19 pandemic continued and the Organization of Petroleum Exporting Countries and other oil producing nations (collectively, “OPEC+”) price war events, we started to see our customers revise their capital budgets substantially downward and adjust their operations accordingly which we believe will continue for an indefinite period. In response to both market uncertainty and the lower levels of spending by our customers, we withdrew our previously issued guidance for the full year 2020 and lowered our projected growth and maintenance capital expenditures. In addition, given the decline in orders for new compression equipment to be fabricated and sold to third parties, we announced our plan to shut down our Midland manufacturing facility in early April. We have retained our new equipment design and engineering personnel and plan to outsource the fabrication of new service fleet equipment but no longer plan to fabricate new compressor packages for sales to third parties. Due to excess compression equipment in the industry, we have started to and expect to continue to see lower utilization of our compression fleet, requests from our customers for stand-by service rates, and service pricing pressures as customers try to reduce their costs. We expect a significant decline in activity, particularly in North America, coupled with downward pricing pressure and corresponding reductions in revenue and profitability for the remainder of 2020.

The COVID-19 pandemic and decline in oil prices had a significant impact on our customers and industry. We concluded that these events were indicators of impairment for all our asset groups. As a result, we performed a recoverability analysis on all our long-lived asset groups and we determined that the carrying values of our Midland manufacturing facility and related new unit sales inventory exceeded their respective fair values. Therefore, we recorded impairments of approximately $5.4 million during the first quarter of 2020 related to these assets. Our recoverability analysis for all our compression services asset groups indicated no impairments as of March 31, 2020. Given the dynamic nature of the events beginning in the first quarter of 2020, we are not able to reasonably estimate how long our operations will be impacted and the full extent these events will have on our operations. As a result, we could have indicators of impairment again in future periods resulting in additional asset impairments.

We are continuing to monitor the 2020 spending plans of our customers and are aggressively managing our working capital and capital expenditures in order to maximize our liquidity in the current oil and gas industry environment. As obtaining additional financing is challenging in the current debt and equity markets, capital expenditures are expected to be primarily funded by available cash and cash expected to be provided by operating

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activities. We plan to manage our flexible cost structure to proactively respond to changing market conditions and take actions necessary to manage through these conditions, some of which could result in impairments or restructuring charges in future periods.

Cost reductions we have recently implemented or are in the process of implementing include reductions in 2020 capital expenditures, workforce reductions, salary reductions, a reduction in the cash retainers for the directors of our general partner, the suspension of 401(k) matching contributions for our employees, targeted reduction in SG&A expenses, and negotiated reductions in expenditures with many of our suppliers. Absent a meaningful recovery in oil and natural gas prices and a material improvement in demand for oil and gas, we expect our operations to continue to be negatively impacted, particularly in our onshore producing regions of the United States. We are not able to predict how long market disruptions resulting from the COVID-19 pandemic and oversupply of oil and gas will continue, or what impact they will ultimately have on our business. Despite that, we will continue to maintain our commitment to safety and service quality for our customers.

How We Evaluate Our Operations

Operating Expenses. We use operating expenses as a performance measure for our business. We track our operating expenses using month-to-month, quarter-to-quarter, year-to-date, and year-to-year comparisons and as compared to budget. This analysis is useful in identifying adverse cost trends and allows us to investigate the cause of these trends and implement remedial measures if possible. The most significant portions of our operating expenses are for our field labor, repair and maintenance of our equipment, and for the fuel and other supplies consumed while providing our services. The costs of other materials consumed while performing our services, ad valorem taxes, other labor costs, truck maintenance, rent on storage facilities, and insurance expenses comprise the significant remainder of our operating expenses. Our operating expenses generally fluctuate with our level of activity.

Our labor costs consist primarily of wages and benefits for our field and fabrication personnel, as well as expenses related to their training and safety. Additional information regarding our operating expenses for the three month period ended March 31, 2020, is provided within the Results of Operations sections below.

Adjusted EBITDA. We view Adjusted EBITDA as one of our primary management tools, and we track it on a monthly basis, both in dollars and as a percentage of revenues (typically compared to the prior month, prior year period, and to budget). We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, and before certain non-cash charges, including impairments, bad debt expense attributable to bankruptcy of customer, equity compensation, non-cash costs of compressors sold, fair value adjustments of our Preferred Units that were issued in late 2016 and redeemed for cash on August 8, 2019, gain on extinguishment of debt, write-off of unamortized financing costs, and excluding Preferred Units redemption premium, severance and other non-recurring or unusual expenses or charges. Adjusted EBITDA is used as a supplemental financial measure by our management to:


•	assess our ability to generate available cash sufficient to make distributions to our common unitholders and general partner;


•	evaluate the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;


•	measure operating performance and return on capital as compared to those of our competitors; and


•	determine our ability to incur and service debt and fund capital expenditures.

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The following table reconciles net income (loss) to Adjusted EBITDA for the periods indicated:



	Three Months Ended March 31,
	2020			2019
	(In Thousands)
Net loss	$	(13,630	)	$	(12,456	)
Provision (benefit) for income taxes	212			4,373
Depreciation and amortization	19,908			18,532
Impairments and other charges	5,371			—
Interest expense, net	13,169			13,299
Equity compensation	324			365
Series A Preferred redemption premium	—			448
Series A Preferred fair value adjustments	—			1,304
Severance	272			—
Non-cash cost of compressors sold	1,809			940
Other	327			—
Adjusted EBITDA	$	27,762		$	26,805

The following table reconciles cash flow from operating activities to Adjusted EBITDA:



	Three Months Ended March 31,
	2020			2019
	(In Thousands)
Cash flow from operating activities	$	13,357		$	31,632
Changes in current assets and current liabilities	(562		)	(20,604		)
Deferred income taxes	(8		)	(1,466		)
Other non-cash charges	(814		)	(684		)
Interest expense, net	13,169			13,299
Series A Preferred accrued paid in kind distributions	—			(685		)
Provision for income taxes	212			4,373
Severance	272			—
Non-cash cost of compressors sold	1,809			940
Other	327			—
Adjusted EBITDA	$	27,762		$	26,805

Free Cash Flow. We define Free Cash Flow as cash from operations less capital expenditures, net of sales proceeds. Management primarily uses this metric to assess our ability to retire debt, evaluate our capacity to further invest and grow, and measure our performance as compared to our peers. The following table reconciles cash provided by operations, net, to Free Cash Flow for the periods indicated:



	Three Months Ended March 31,
	2020			2019
	(In Thousands)
Cash from operations	$	13,357		$	31,632
Capital expenditures, net of sales proceeds	(6,483		)	(23,152		)
Free cash flow	$	6,874		$	8,480

Adjusted EBITDA and Free Cash Flow are financial measures that are not in accordance with U.S. GAAP and should not be considered an alternative to net income, operating income, cash from operating activities, or any other measure of financial performance presented in accordance with U.S. GAAP. These measures may not be

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comparable to similarly titled financial metrics of other entities, as other entities may not calculate Adjusted EBITDA or Free Cash Flow in the same manner as we do. Management compensates for the limitations of Adjusted EBITDA and Free Cash Flow as analytical tools by reviewing the comparable U.S. GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making processes. Adjusted EBITDA and Free Cash Flow should not be viewed as indicative of the actual amount of cash we have available for distributions or that we plan to distribute for a given period, nor should it be equated with “available cash” as defined in our partnership agreement.

Horsepower Utilization Rate of our Compressor Packages. We measure the horsepower utilization rate of our fleet of compressor packages as the amount of horsepower of compressor packages used to provide services as of a particular date, divided by the amount of horsepower of compressor packages in our services fleet as of such date. Management primarily uses this metric to determine our future need for additional compressor packages for our service fleet and to measure marketing effectiveness.

The following table sets forth the total horsepower in our compression fleet, our total horsepower in service, and our horsepower utilization rate as of the dates shown.



	March 31,
	2020		2019
Horsepower
Total horsepower in fleet	1,195,186		1,167,164
Total horsepower in service	1,033,256		1,017,452
Total horsepower utilization rate	86.5	%	87.2	%

The following table sets forth our horsepower utilization rates by each horsepower class of our compression fleet as of the dates shown.



	March 31,
	2020		2019
Horsepower utilization rate by class
Low-horsepower (0-100)	66.4	%	65.7	%
Medium-horsepower (101-1,000)	83.6	%	85.4	%
High-horsepower (1,001 and over)	93.5	%	95.6	%

Through new equipment fabrication, we added 22,160 of horsepower to our fleet during the three months ended March 31, 2020.

Net Increases/Decreases in Compression Fleet Horsepower. We measure the net increase (or decrease) in our compression fleet horsepower during a given period by taking the difference between the aggregate horsepower of compressor packages added to the fleet during the period, less the aggregate horsepower of compressor packages removed from the fleet during the period. We measure the net increase (or decrease) in our compression fleet horsepower in service during a given period by taking the difference between the aggregate horsepower of compressor packages placed into service during the period, less the aggregate horsepower of compressor packages removed from service during the period.

New Equipment Sales Backlog. Our new equipment sales business includes the engineering, design, fabrication, assembly, project management, and sale of both standard and custom-designed compressor packages fabricated at authorized packaging facilities in Texas. We recently announced our plan to shutdown our Midland manufacturing facility as a result of a decline in orders for new equipment from third parties, in addition to our expectation that no incremental equipment will be fabricated for our fleet in the second half of 2020. We have entered into an agreement for the sale of the Midland facility, which is subject to numerous conditions. Going forward, we plan to continue to design and engineer compressor packages for our own service fleet while outsourcing the fabrication of our service fleet to third parties with whom we have existing business relationships. New equipment sales backlog was $30.3 million as of March 31, 2020 compared to $35.5 million as of December 31, 2019. Changes in our new equipment sales backlog are a function of additional customer orders less completed orders that result in equipment sales revenues for the period. During the three months ended March 31,

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2020, we received cumulative orders of $2.0 million for new equipment. All our March 31, 2020 new equipment sales backlog is expected to be recognized during the second quarter of 2020. Our new equipment sales backlog consists of firm customer orders for which a purchase or work order has been received, satisfactory credit or financing arrangements exist, and target delivery dates have been established based on customer requirements. Following sale of the new equipment orders in our current backlog, we do not plan to design, engineer and sell compressor packages to third parties and the new equipment sales business will not constitute a material part of our business.

Critical Accounting Policies and Estimates

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our 2019 Annual Report. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. These judgments and estimates may change as new events occur, as new information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material.

Results of Operations

Three months ended March 31, 2020 compared to three months ended March 31, 2019.



	Three Months Ended March 31,
							Period-to-Period Change			Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2020			2019			2020 vs. 2019			2020		2019		2020 vs. 2019
	(In Thousands)
Revenues:
Compression and related services	$	65,765		$	63,060		$	2,705		72.8	%	61.0	%	4.3	%
Aftermarket services	17,970			13,614			4,356			19.9	%	13.2	%	32.0	%
Equipment sales	6,544			26,762			(20,218		)	7.2	%	25.9	%	(75.5	)%
Total revenues	90,280			103,436			(13,157		)	100.0	%	100.0	%	(12.7	)%
Cost of revenues:
Cost of compression and related services	31,608			32,621			(1,013		)	35.0	%	31.5	%	(3.1	)%
Cost of aftermarket services	16,245			11,260			4,985			18.0	%	10.9	%	44.3	%
Cost of equipment sales	6,700			24,219			(17,519		)	7.4	%	23.4	%	(72.3	)%
Total cost of revenues	54,553			68,100			(13,547		)	60.4	%	65.8	%	(19.9	)%
Depreciation and amortization	19,908			18,532			1,376			22.1	%	17.9	%	7.4	%
Impairments and other charges	5,371			—			5,371			5.9	%	—	%	100.0	%
Selling, general, and administrative expense	10,256			10,665			(409		)	11.4	%	10.3	%	(3.8	)%
Interest expense, net	13,169			13,299			(130		)	14.6	%	12.9	%	(1.0	)%
Series A Preferred fair value adjustment (income) expense	—			1,304			(1,304		)	—	%	1.3	%	(100.0	)%
Other (income) expense, net	440			(381		)	821			0.5	%	(0.4	)%	(215.5	)%
Loss before income taxes	(13,418		)	(8,083		)	(5,335		)	(14.9	)%	(7.8	)%	66.0	%
Provision for income taxes	212			4,373			(4,161		)	0.2	%	4.2	%	(95.2	)%
Net loss	$	(13,630	)	$	(12,456	)	$	(1,174	)	(15.1	)%	(12.0	)%	9.4	%

Revenues

Compression and related services revenues increased by $2.7 million, or 4.3%, in the current year period compared to the prior year period due to increases in our high-horsepower fleet during 2019 and resulting increased horsepower in service during the current year period compared to the prior year period and pricing secured in 2019 that was realized during the first quarter of 2020.

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Aftermarket services revenues increased $4.4 million, or 32.0%, during the current year period compared to the prior year period resulting from increased customer demand for aftermarket services and parts for maintenance and overhauls of customer-owned compressor equipment.

Equipment sales revenues decreased $20.2 million, or 75.5%, during the current year period compared to the prior year period, primarily due to a decrease in deliveries of new compressors compared to the prior year. Overall, new unit sale booking levels declined in first quarter of 2020 as customers slowed down spending on infrastructure projects. The level of revenues from equipment sales is typically volatile and difficult to forecast, as these revenues are tied to specific customer projects that vary in scope, design, complexity, and customer needs.

Cost of revenues

Cost of compression and related services decreased, compared to the prior year period, even with the increase in corresponding revenues resulting from added horsepower and overall increased utilization of our compression fleet. Cost of compression and related services as a percentage of compression and related services revenues decreased from 51.7% during the prior year period to 48.1% during the current year period due to improved customer contract pricing, higher margins on new compressor equipment, labor efficiencies, and reduced maintenance costs.

Cost of aftermarket services increased compared to the prior year period consistent with the increased activity and lower margins due to a highly competitive landscape.

Cost of equipment sales decreased in accordance with the decrease in associated revenues. Cost of equipment sales as a percentage of equipment sales revenues increased primarily due to pricing on equipment sales orders placed in 2019.

Depreciation and amortization

Depreciation and amortization expense primarily consists of the depreciation of compressor packages in our service fleet. In addition, it includes the depreciation of other operating equipment and facilities and the amortization of intangibles. Depreciation and amortization expense increased compared to the prior year period due to increases in the compression fleet.

Impairments and other charges

During the three month period ended March 31, 2020, we recorded an impairment of $5.4 million associated with our Midland manufacturing facility and related assets.

Selling, general, and administrative expense

Selling, general, and administrative expenses decreased during the current year period compared to the prior year period largely due to decreased employee expenses of $0.6 million and decreased other general expenses of $0.3 million. These decreases were offset by increased professional services of $0.4 million and increased bad debt expense of $0.2 million. Despite decreased expenses, as a percentage of revenues, selling, general, and administrative expense increased due to lower revenues compared to the prior year period.

Series A Preferred fair value adjustment

The Series A Preferred Units fair value adjustment was $1.3 million charged to earnings during the prior year period. All the remaining outstanding Preferred Units were redeemed for cash on August 8, 2019.

Other (income) expense, net

Other (income) expense, net, was $0.4 million of expense during the current year period, compared to $0.4 million of income during the prior year period. The change from income to expense is primarily due to $1.2 million of increased foreign currency losses offset by decreased expense of $0.4 million associated with the redemption premium incurred during the prior year period in connection with the redemption of Preferred Units for cash.

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Provision for income taxes

As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. Certain of our operations are located outside of the U.S. and the Partnership, through its foreign subsidiaries, is responsible for income taxes in these countries.

Liquidity and Capital Resources

Our primary cash requirements are for distributions, working capital requirements, debt service payments, normal operating expenses, and capital expenditures. Our potential sources of funds are our existing cash balances, cash generated from our operations, and long-term and short-term borrowings, which we believe will be sufficient to meet our working capital and reduced growth capital requirements during 2020. We are monitoring the spending plans of our customers due to the macroeconomic uncertainties resulting from the recent substantial declines in prices of oil and natural gas and the ongoing COVID-19 pandemic. These uncertainties have negatively impacted our customers' demands for our products and services, which has negatively impacted our businesses. If oil and gas prices remain at current levels or decrease further, our businesses could be further negatively impacted. In addition, current conditions in the market for debt and equity securities in the energy sector have increased the difficulty of obtaining equity and debt financing and we expect this to continue in the near future. Despite these challenges, we remain committed to a long-term growth strategy. Our near-term focus is to maintain our compression fleet, while continuing to preserve and enhance liquidity through strategic operating and financial measures. We periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such transactions are in the best interests of our business, such as the agreement we have entered into with a third party purchaser for the sale of the Midland facility, which is subject to numerous conditions. We are subject to business and operational risks that could materially adversely affect our cash flows and together with risks associated with current debt and equity market conditions, our ability or desire to issue such securities. Please read Part I, Item 1A "Risk Factors" included in our 2019 Annual Report.

We have adjusted our expected capital expenditures in 2020 to range from $28.0 million to $35.0 million. These capital expenditures include approximately $20.0 million to $22.0 million of maintenance capital expenditures and approximately $5.0 million to $8.0 million of capital expenditures primarily associated with the expansion of our compression services fleet, and $3.0 million to $5.0 million of capital expenditures related to investments in technology, primarily software and systems. The foregoing estimates are based on assumptions regarding the ongoing impact of the decline of oil and gas prices and the COVID-19 pandemic. While we will continue to monitor developments in the oil and gas industry, as well as the impact of the COVID-19 pandemic, we expect that the combination of cash on hand and operating cash flows generated during the year will be sufficient to fund capital expenditures without having to incur additional long-term debt and without having to access the equity or debt markets.

On April 20, 2020, our General Partner declared a cash distribution attributable to the quarter ended March 31, 2020 of $0.01 per outstanding common unit. This distribution equates to a distribution of $0.04 per outstanding common unit on an annualized basis. This quarterly distribution will be paid on May 15, 2020 to each of the holders of common units of record as of the close of business on May 1, 2020.

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Cash Flows

A summary of our sources (uses) of cash during the three months ended March 31, 2020 and 2019 is as follows:



	Three Months Ended March 31,
	(In Thousands)
	2020			2019
Operating activities	$	13,357		$	31,632
Investing activities	(6,483		)	(23,152		)
Financing activities	(1,863		)	(7,475		)

Operating Activities

Net cash provided by operating activities decreased by $18.3 million compared to the prior year period. Our cash provided from operating activities is primarily generated from the provision of compression and related services and the sale of new compressor packages. The decrease in cash provided by operating activities was primarily due to working capital movements, particularly related to collections of accounts receivable, and timing of payments of accounts payable.

Cash provided from our foreign operations is subject to various uncertainties, including the volatility associated with interruptions caused by customer budgetary decisions, uncertainties regarding the renewal of our existing customer contracts and other changes in contract arrangements, the timing of collection of our receivables, and the repatriation of cash generated by our international operations.

Investing Activities

Capital expenditures during the three months ended March 31, 2020, decreased by $16.7 million compared to the same period in 2019 primarily due to the reduction in capital expenditures to grow the capacity of our compression fleet compared to the prior year. Maintenance capital expenditures increased during the three months ended March 31, 2020 compared to the prior year period. Total capital expenditures, net of disposals and proceeds, during the current year period of $6.5 million include $6.5 million of maintenance capital expenditures and are net of $1.8 million of non-cash cost of fleet compression units sold and proceeds of $0.2 million from the sale of property, plant and equipment.

The level of growth capital expenditures depends on forecasted demand for compression services. If the forecasted demand for compression services increases or decreases, the amount of planned expenditures on growth and expansion will be adjusted, subject to the availability of funds. We continue to review all capital expenditure plans carefully in an effort to conserve cash and fund our liquidity needs.

Financing Activities

Distributions

Beginning with the distribution to common unitholders during February 2019, we reduced our common unit distributions from $0.75 per unit per year (or $0.1875 per quarter) to $0.04 per unit per year (or $0.01 per quarter). During the three months ended March 31, 2020, we distributed $0.5 million of cash distributions to our common unitholders and General Partner.

Series A Convertible Preferred Units.

In January 2019 we began redeeming Preferred Units for cash, resulting in 2,660,569 Preferred Units being redeemed during the three months ended March 31, 2019 for $9.4 million, which includes approximately $0.4 million of redemption premium that was paid. The last redemption of the remaining Preferred Units, along with a final cash payment made in lieu of paid in kind units occurred on August 8, 2019.

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Bank Credit Facilities. The Credit Agreement, as amended, includes a maximum credit commitment of $50.0 million available for loans, letters of credit (with a sublimit of $25.0 million) and swingline loans (with a sublimit of $5.0 million), subject to a borrowing base to be determined by reference to the value of the accounts receivable and certain inventory of the Partnership and certain subsidiaries (collectively, the “Borrowers”). Such maximum credit commitment may be increased by $25.0 million in accordance with the terms and conditions of the Credit Agreement. As of March 31, 2020, and subject to compliance with the covenants, borrowing base, and other provisions of the agreements that may limit borrowings under the Credit Agreement, we had availability of $20.4 million.

The Borrowers may borrow funds under the Credit Agreement to pay fees and expenses related to the Credit Agreement and for the Borrower's ongoing working capital needs and for general partnership purposes. The revolving loans under the Credit Agreement may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs. The maturity date of the Credit Agreement is June 29, 2023. As of March 31, 2020, we had a $3.0 million outstanding balance and had $3.0 million in letters of credit against our Credit Agreement. As of May 5, 2020, we have $6.7 million outstanding under our Credit Agreement and $2.7 million in letters of credit, leaving availability under the CCLP Credit Agreement of $16.1 million. The amounts the Partnership may borrow under the Credit Agreement are based on the amounts of CCLP’s accounts receivables and the value of certain inventory. Decreases in the amount of CCLP’s accounts receivable and the value of its inventory would result in reduced borrowing availability under the Credit Agreement. The Borrowers are in discussions with the lenders under the Credit Agreement regarding a potential amendment that would permit the Borrowers to incur second-priority liens on collateral pledged under our 7.50% Senior Secured Notes. This amendment will be entered into if the exchange offer discussed below is completed. We anticipate the terms of the amendment to the Credit Agreement may include, among other items, the inclusion of a $5.0 million reserve which would result in reduced borrowing availability. We can provide no assurance the amendment will be entered into or what its final terms might be.

7.50% Senior Secured Notes. As of May 5, 2020, $350.0 million in aggregate principal amount of our 7.50% Senior Secured Notes are outstanding. The 7.50% Senior Secured Notes accrue interest at a rate of 7.50% per annum and are scheduled to mature on April 1, 2025.

7.25% Senior Notes. As of May 5, 2020, $295.9 million in aggregate principal amount of our 7.25% Senior Notes are outstanding. The 7.25% Senior Notes accrue interest at a rate of 7.25% per annum and are scheduled to mature on August 15, 2022.

We may from time to time seek to retire or purchase certain amounts of our outstanding 7.25% Senior Notes and 7.50% Senior Secured Notes through cash purchases, in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

On April 17, 2020, we announced the commencement of an offer (the "Exchange Offer") to certain eligible noteholders ("Eligible Holders") to exchange any and all of their outstanding 7.25% Senior Notes due 2022 (the “Unsecured Notes”) for newly issued 7.50% Senior Secured First Lien Notes due 2025 and 7.25% Senior Secured Second Lien Notes due 2027. In conjunction with the offer, consents are being solicited from Eligible Holders to eliminate substantially all restrictive covenants and certain of the default provisions in the indenture governing the Unsecured Notes. On May 1, 2020, we extended the early tender time for the Exchange Offer from 5:00 p.m., New York City time, on April 30, 2020 to 11:59 p.m., New York City time, on May 14, 2020 (which is the expiration time of the Exchange Offer), unless extended or earlier terminated by us. Eligible Holders that validly tender and do not validly withdraw their Unsecured Notes in the Exchange Offer prior to the “Expiration Time”) will receive $700 in principal amount of new 7.50% Senior Secured First Lien Notes or, as applicable and subject to proration, $750 principal amount of 7.25% Senior Secured Second Lien Notes for each $1,000 principal amount of Unsecured Notes tendered. We can terminate, withdraw, amend or extend the Exchange Offer at any time, subject to applicable law. In connection with the Exchange Offer, we are negotiating an amendment to the Credit Agreement, which would permit us to incur certain liens required to complete the Exchange Offer. There can be no assurance that the Exchange Offer or amendment to the Credit Agreement will be completed.

Other Financing

In February 2019, we entered into an arrangement with TETRA under which a subsidiary of TETRA entered into an agreement with one of our subsidiaries for the purchase up to $15.0 million of compression services

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equipment and to subsequently lease the equipment back to us in exchange for monthly rental fees. As of March 31, 2020, pursuant to this arrangement, $14.8 million has been funded by TETRA for the construction of new compressor services equipment and all compression units were completed and deployed under this agreement.

Off Balance Sheet Arrangements

As of March 31, 2020, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

Commitments and Contingencies

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. While the outcome of these lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations, or cash flows.

Contractual Obligations

Our contractual obligations and commitments principally include obligations associated with our outstanding indebtedness and obligations under operating leases.

The table below summarizes our contractual cash obligations as of March 31, 2020:



	Payments Due
	Total		2020		2021		2022		2023		2024		Thereafter
	(In Thousands)
Long-term debt	$	649,430	$	—	$	—	$	295,930	$	3,500	$	—	$	350,000
Interest on debt	$	185,387	$	35,779	$	47,705	$	40,593	$	26,310	$	26,250	$	8,750
Operating leases	$	33,336	7,160		7,622		5,499		3,295		3,257		6,503
Affiliate financing obligation	$	13,618	2,261		3,015		3,015		3,015		2,312		—
Total contractual cash obligations	$	881,771	$	45,200	$	58,342	$	345,037	$	36,120	$	31,819	$	365,253

Cautionary Statement for Purposes of Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” and information based on our beliefs and those of our general partner. Forward-looking statements in this Quarterly Report are identifiable by the use of the following words, the negative of such words, and other similar words: “anticipates”, “assumes”, “believes”, “budgets”, “could”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “may”, “might”, “plans”, “predicts”, “projects”, “schedules”, “seeks”, “should, “targets”, “will” and “would”.

Such forward-looking statements reflect our current views with respect to future events and financial performance and are based on assumptions that we believe to be reasonable but such forward-looking statements

are subject to numerous risks, and uncertainties, including, but not limited to:


•	economic and operating conditions that are outside of our control, including the trading price of our common units;


•	the current significant surplus in the supply of oil and the ability of the OPEC + to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently, which is negatively impacting our business;


•	the availability of adequate sources of capital to us;


•	our existing debt levels and our flexibility to obtain additional financing;


•	our ability to continue to make cash distributions, or increase cash distributions from current levels, after the establishment of reserves, payment of debt service and other contractual obligations;


•	the restrictions on our business that are imposed under our long-term debt agreements;


•	our dependence upon a limited number of customers and the activity levels of our customers;


•	the levels of competition we encounter;

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•	our ability to replace our contracts with customers, which are generally short-term contracts;


•	the availability of raw materials and labor at reasonable prices;


•	risks related to acquisitions and our growth strategy;


•	our operational performance;


•	risks related to our foreign operations;


•	the credit and risk profile of TETRA;


•	the ability of our general partner to retain key personnel;


•	information technology risks including the risk from cyberattack;


•	the severity and duration of the COVID-19 pandemic and related economic repercussions and the resulting negative impact on the demand for oil and gas;


•	operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts, and supply chain disruptions;


•	other global or national health concerns;


•	risks associated with a material weakness in our internal control over financial reporting and the consequences we may encounter if we are unable to remediate the material weakness in our internal control over financial reporting or if we identify other material weaknesses in the future;


•	the effect and results of litigation, regulatory matters, settlements, audits, assessments, and contingencies, and


•	other risks and uncertainties under “Item 1A. Risk Factors” in our 2019 Annual Report, and as included in our other filings with the U.S. Securities and Exchange Commission ("SEC"), which are available free of charge on the SEC website at www.sec.gov.

The risks and uncertainties referred to above are generally beyond our ability to control and we cannot predict all the risks and uncertainties that could cause our actual results to differ from those indicated by the forward-looking statements. If any of these risks or uncertainties materialize, or if any of the underlying assumptions prove incorrect, actual results may vary from those indicated by the forward-looking statements, and such variances may be material.

All subsequent written and oral forward-looking statements made by or attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any forward-looking statements we may make, except as may be required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer of our general partner, to allow timely decisions regarding such required disclosure. In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. It is necessary for management to use judgment in evaluating controls and procedures.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer of our general partner, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, as of the quarter ended March 31, 2020. Based on this evaluation, the Principal Executive Officer and Principal Financial Officer of our general partner concluded that our disclosure controls and procedures were ineffective as of March 31, 2020, the end of the period covered by this Quarterly Report, due to a material weakness in our internal

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control over financial reporting related to the revenue recognition for certain new unit sales where revenue recognition criteria had not been met.

We determined that the material weakness was the result of operating deficiencies and not the design of the controls supporting revenue recognition. In response to the material weakness, we are developing a remediation plan that will include more supervision and review of the performance of bill-and-hold controls to ensure adequate documentation is obtained and conclusions are reached prior to recognition of these revenues. We expect that the remediation of this material weakness will be completed during the second quarter of 2020; however, we will not be able to confirm the effectiveness of our enhanced internal controls until we have conducted sufficient testing. Accordingly, we will continue to monitor vigorously the effectiveness of these processes, procedures, and controls, and will make any further changes management determines appropriate. After identifying the material weakness, we examined all transactions potentially impacted, and adjusted the consolidated financial statements and disclosures accordingly. The impact to the financial results for the quarter ended March 31, 2020, was a reduction to new unit sales revenues of approximately $6.0 million and a reduction to gross profit of approximately $0.5 million.

Additional review, evaluation, and oversight has been undertaken to ensure our consolidated financial statements and disclosures included in this Quarterly Report were prepared in accordance with generally accepted accounting principles and as a result, our management, including the Principal Executive Officer and Principal Financial Officer of our general partner, have concluded that the consolidated financial statements and disclosures in this Quarterly Report on Form 10-Q fairly present in all material respects our financial position, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Except as noted above, there has been no change in the internal control over financial reporting as of March 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

The statements in this section describe the known material risks to our business and should be considered carefully. We have described in the 2019 Annual Report significant risk factors and periodically update those risks for material developments. The risk factor below updates our risk factors previously discussed in our 2019 Annual Report.

The COVID-19 pandemic and oversupply of oil from OPEC+ materially reduced demand for our products and services, and has had, and may continue to have, a significant adverse impact on our financial condition and results of operations.

The COVID-19 pandemic, subsequent mitigation efforts, and disagreements between OPEC+ regarding limits on production of oil have added significant volatility and uncertainty in the oil and gas industry. At the outset of the pandemic, OPEC and the other oil producing nations were unable to reach an agreement on production levels for crude oil, which led both Russia and Saudi Arabia to substantially increase production. This, combined with an unprecedently decline in oil demand due to the COVID-19 pandemic, resulted in global oil markets being oversupplied. On April 12^th, OPEC and the other oil producing nations reached an agreement to limit production through the end of June, although there still appears to be a large demand / supply imbalance. Despite the agreement to cut production, downward pressure on oil and natural gas prices have remained and could continue

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for the foreseeable future. The collapse in the demand for oil caused by this unprecedented global health and economic crisis has had, and is reasonably likely to continue to have, a negative impact on the demand for our products and services. The decline in our customers’ demand for our products and services has had, and is likely to continue to have, a negative impact on our financial condition and results of operations.

While the full impact of the COVID-19 pandemic is not yet known, we are closely monitoring the effects of the pandemic on our customers, on our suppliers, on our operations, and on our employees. These effects have included, and may continue to include, declining revenue; disruptions to our operations, including customers canceling orders and returning our equipment early; customer shutdowns of oil and gas production activities; employee impacts from illness, school closures and other community response measures; and temporary closures of our facilities or the facilities of our customers and suppliers.

The extent to which our financial and operating results are negatively impacted by the COVID-19 pandemic and oversupplied oil markets will depend on various factors beyond our control, such as the duration and severity of the pandemic; additional measures taken by governments and our customers and suppliers in response to the pandemic; and the speed and effectiveness of mitigation efforts taken to combat the virus. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

If we cannot meet the Nasdaq’s continued listing requirements, the Nasdaq may delist our common units.

On April 24, 2020, the Partnership was notified by the Nasdaq that the closing price of the CCLP’s common units (the “Common Units”), over the prior 30 consecutive trading day period was below $1.00 per unit, which is the minimum closing price per unit required to maintain listing on the Nasdaq under Rule 5450 (“Rule 5450”).

On April 16, 2020, the Nasdaq announced a rule change providing relief to listed companies that, due to market conditions resulting from the impact of COVID-19, have fallen out of compliance with certain of the Nasdaq’s continued listing standards. As a result of the relief announced by Nasdaq, the compliance period has been tolled with the effect that the days between April 17, 2020 and June 30, 2020 will not be counted toward the normal six-month compliance period. Starting on July 1, 2020, the Partnership will have a period of six months to regain compliance with Rule 5450, during which time our common units continue to be listed and traded on the Nasdaq, subject to our compliance with other continued listing standards. If we fail to regain compliance with Rule 5450 by the end of the cure period, the common units will be subject to the Nasdaq’s suspension and delisting procedures. If necessary, to regain compliance with Nasdaq listing standards, we may, subject to approval of the board of directors of our general partner, implement a reverse split of our common units. A delisting of our common units from the Nasdaq could negatively impact us by, among other things, reducing the liquidity and market price of our common units, reducing the number of investors willing to hold or acquire our common units, limiting our ability to issue securities or obtain financing in the future, and limiting our ability to use a registration statement to offer and sell freely tradable securities, thereby restricting our ability to access the public capital markets.

On April 21, 2020, the Nasdaq adopted a new rule the Partnership is at risk of violating. If the closing price for the Partnership’s common units is at or below $0.10 per unit for ten consecutive trading days, the Partnership will receive a delisting determination from the Nasdaq, which would terminate the opportunity to cure under Rule 5450. The Partnership could, however, request review of that determination by the Nasdaq hearings panel, which could grant the Partnership additional time to complete a reverse split of our common units or otherwise regain compliance. However, there is no assurance such relief would be granted. On May 5, 2020, the trading price of our common units closed at $0.45 per unit.

We disclosed a material weakness in our internal control over financial reporting as of March 31, 2020 and if we have other material weaknesses or significant deficiencies in our internal control over financial reporting our business may be adversely affected.

As disclosed in Item 4 of this Quarterly Report, as of March 31, 2020, management identified certain deficiencies in our internal control over financial reporting relating to accounting for the recognition of equipment sales revenues which were determined to constitute a material weakness. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. As a result of this material weakness, our management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of March 31, 2020. A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and

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accurate information. Our general partner's management is undertaking steps to fully evaluate and remediate the material weakness and to enhance our internal control over financial reporting. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting occur in the future, we may not be able to timely or accurately report our results of operations or maintain effective disclosure controls and procedures. If we are unable to report financial information timely or accurately, or to maintain effective disclosure controls and procedures, we could be required to restate our financial statements and be subject to, among other things, regulatory or enforcement actions, securities litigation, limitations on our ability to access capital markets, debt rating agency downgrades or rating withdrawals, or loss in confidence of our investors, any one of which could adversely affect the valuation of our common units and our business prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) None.



Period	Total Number of Units Purchased	Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Publicly Announced Plans or Programs
January 1 – January 31, 2020	—	$	—	N/A	N/A
February 1 – February 29, 2020	—	—		N/A	N/A
March 1 – March 31, 2020	—	—		N/A	N/A
Total	—			N/A	N/A

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibits:



10.1*	Separation and Release Agreement, dated January 10, 2020 between CSI Compressco GP Inc. and Levent Caglar.
10.2*	Form of Performance Phantom Unit Agreement under the CSI Compressco LP Second Amended and Restated 2011 Long Term Incentive Plan.
31.1*	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed with this report.


**	Furnished with this report.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three month periods ended March 31, 2020 and 2019; (ii) Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2020 and 2019; (iii) Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019; (iv) Consolidated Statement of Partners’ Capital for the three month period ended March 31, 2020; (v) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2020 and 2019; and (iv) Notes to Consolidated Financial Statements for the three months ended March 31, 2020.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		CSI COMPRESSCO LP
		By:	CSI Compressco GP Inc.,
			its General Partner

Date:	May 7, 2020	By:	/s/Brady M. Murphy
			Brady M. Murphy
			President
			Principal Executive Officer

Date:	May 7, 2020	By:	/s/Elijio V. Serrano
			Elijio V. Serrano
			Chief Financial Officer
			Principal Financial Officer

Date:	May 7, 2020	By:	/s/Michael E. Moscoso
			Michael E. Moscoso
			Vice President - Finance
			Principal Accounting Officer

Exhibit 10.1

SEPARATION AND RELEASE AGREEMENT

This Separation and Release Agreement (“Agreement”) is entered into by and between CSI Compressco GP Inc., a Delaware corporation (“Company”) and LEVENT CAGLAR (“Employee”). The Company and the Employee may be individually referred to herein as the “Party” and collectively as the “Parties.”

WHEREAS, Employee is currently employed by the Company as Vice President, North America Sales, Compression Services;

WHEREAS, Employee has as of January 10, 2020 resigned from the position of Vice President, North America Sales, Compression Services and the Parties have mutually agreed to continue Employee’s employment with the Company to assist in the transition of duties and such other matters as the Company may reasonably request; and

WHEREAS, Employee and the Company desire to enter into this Agreement to set forth the terms and conditions of Employee’s continued employment by, and separation from, the Company.

NOW, THEREFORE, in consideration of the promises, conditions, and mutual covenants set forth in this Agreement, and for such other good and valuable consideration, the receipt and legal sufficiency of which the Parties acknowledge, the Parties hereby agree as follows:

1.Definitions. For purposes of this Agreement, the following definitions will apply:

a.“Affiliate” means (i) any entity in which the Company, directly or indirectly, owns 10% or more of the combined voting power, (ii) any “parent corporation” of the Company (as defined in Section 424(e) of the Code), (iii) any “subsidiary corporation” of any such parent corporation (as defined in Section 424(f) of the Code) of the Company and (iv) any trades or businesses, whether or not incorporated which are members of a controlled group or are under common control (as defined in Sections 414(b) or (c) of the Code) with the Company. For purposes of this Agreement, CSI Compressco LP (“CCLP”), TETRA Technologies, Inc. (“TETRA”) and their respective subsidiaries shall be considered an Affiliate of the Company.

b. “Cause” means, as determined in the reasonable sole discretion of the Company, Employee’s commission of fraud, embezzlement, theft, a material violation of law, a violation of Company policies, including the Code of Business Conduct (including but not limited to a conflict of interest) or breach of any obligation under this Agreement or any other agreement between the Parties.

c. “Code” means the Internal Revenue Code of 1986, as amended, and the Treasury regulations and administrative guidance promulgated thereunder.

d. “Confidential Information” means and includes all confidential and/or proprietary information, trade secrets and “know-how” and compilations of information of any kind, type or nature (tangible and intangible, written or oral, and including information contained, stored or transmitted through any electronic medium), whether owned by the Company or its Affiliates, disclosed to the Company or its Affiliates in confidence by third parties or licensed from any third parties, which, at any time during Employee’s employment by the Company or any Affiliate, is developed, designed or discovered or otherwise acquired or learned by Employee and which relates to the Company or its Affiliates, partners, business, services, products, processes, properties or assets, customers, clients, suppliers, vendors or markets or such third parties. Notwithstanding the foregoing, Confidential Information shall not include the terms of this Agreement or any information that becomes generally available to the public other than as a result of any disclosure or act of Employee in violation of the terms of this Agreement.

e. The “Effective Date” of this Agreement is the last date on which this Agreement is fully executed by the Parties.

f. “Released Parties” means (i) the Company, CCLP and TETRA; (ii) each of their respective predecessors, successors, parents, subsidiaries, divisions, affiliates, partners, and related companies; (iii) each of the present and former directors, officers, employees, managers, partners, owners, employee benefit committees, fiduciaries, agents, attorneys, representatives and assigns of the entities described in clauses (i) and (ii); and (iv) all persons and entities acting by, through, under, or in concert with any of the individuals or entities referenced in this definition.

g. “Releasing Parties” means Employee and Employee’s heirs, executors, administrators, representatives, attorneys, agents, successors, and assigns.

h. The “Termination Date” is February 24, 2020.

2. Employee Transition and Separation.


a.	Subject to the terms and conditions of this Agreement, from January 9, 2020 through the Termination Date, Employee shall remain employed by the Company and must be generally available to transition Employee’s job duties as requested by the Company.

b. The Company and Employee acknowledge and agree that unless otherwise terminated as set forth herein, Employee’s employment with the Company will terminate on the Termination Date, which shall be deemed to constitute a voluntary resignation of Employee’s employment without Good Reason (as defined in that certain letter agreement dated June 23, 2019, by and between the Company and Employee (as it may be amended, the “Letter Agreement”)). Subject to the terms of this Section 2, Employee shall receive payment of (i) Employee’s earned, but unpaid base salary through the Termination Date in accordance with the Company’s regular payroll practices, and (ii) reimbursement of all unpaid business expenses incurred prior to January 9, 2020 in accordance with the Company’s policies, in each case less applicable deductions.

c. Prior to the Termination Date, Employee may voluntarily resign Employee’s employment with Company upon not less than one day’s prior written notice to the Company, which resignation shall be deemed to be a termination of Employee’s employment without Good Reason. Employee will also be deemed to have voluntarily resigned Employee’s employment with the Company without Good Reason if Employee commences employment with any third party prior to the Termination Date. Upon any such termination, the Company shall not be obligated to continue to pay Employee any base salary after the termination of Employee’s employment with the Company. In addition, the Company may immediately terminate the employment of the Employee for Cause under this Agreement prior to the Termination Date by delivery of written notice to the Employee. Upon such termination, the Company shall not be obligated to continue to pay Employee any base salary after the termination of Employee’s employment with the Company and the Employee shall not be entitled to receive any Release Consideration (defined below), save and except for the Partial Release Consideration (defined below). The date of termination of Employee’s employment by either of the Parties pursuant to this Section 2(b), if any, shall be referred to herein as the “Early Termination Date.”

3. Release Consideration. Notwithstanding anything contained herein to the contrary, none of the Release Consideration shall be owed by Company unless and until this Agreement and a subsequent release in the form attached hereto as Schedule 1 (the “Subsequent Release”) have been executed, are no longer subject to revocation by Employee, and Employee has revoked no portion of either this Agreement or the Subsequent Release. In consideration for Employee’s agreements in this Agreement and the Subsequent Release, Employee’s releases of claims as set forth below and in the Subsequent Release and subject to the conditions herein, the Company will pay to Employee the following amounts (collectively, the “Release Consideration”):


a.	the gross amount of Thirty-One Thousand Dollars ($31,000), less lawful withholdings, in one lump sum payable no sooner than the eighth day after Employee executes this Agreement and no later than March 15, 2020;

b. the gross amount of Ninety-Three Thousand Dollars ($102,000), less lawful withholdings, in one lump sum payable no later than March 31, 2020;

c. the gross amount of Eighty-Seven Thousand Five Hundred Dollars ($87,500), less lawful withholdings, in one lump sum payable no later than July 3, 2020;

d. if Employee elects to receive continuation coverage for benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company will continue Employee’s and his dependents (if eligible) in its group health insurance plans, at Employee’s current plan rate at the Termination Date or, if applicable, any Early Termination Date, for a 2-month period following the Termination Date or, if applicable, any Early Termination Date. Thereafter, Employee will be given the opportunity to continue as a member of these plans for up to an additional 16-month period in accordance with COBRA and subject to the then existing plan rates, without Company subsidy; and

e. outplacement counseling services through a firm selected by and at a level to be determined by the Company, in its sole discretion.

The payment of the Release Consideration described in Section 3 is conditioned upon (i) Employee signing this Agreement and providing this Agreement signed by Employee to the Company on or before January 29, 2020, which the Parties agree is at least twenty-one (21) days after the date this Agreement was provided to Employee, (ii) Employee signing the Subsequent Release and providing the Subsequent Release to the Company on or after the Termination Date or, if applicable, any Early Termination Date, but on or before February 28, 2020, which the Parties agree is at least twenty-one (21) days after the date the Subsequent Release was provided to Employee; (iii) Employee not exercising Employee’s right to revoke the ADEA Release (defined below), (iv) Employee not exercising Employee’s right to revoke any portion of the Subsequent Release; and (v) Employee’s compliance with all of the terms of this Agreement and the Continuing Covenants (as herein defined). Employee’s receipt of the Release Consideration is further conditioned upon Employee’s compliance with all of Employee’s continuing obligations set forth in: (i) the Letter Agreement, including, without limitation, Exhibit A to the Letter Agreement; (ii) the Employment Agreement between Employee and the Company dated May 10, 2017 (the “Employment Agreement”); and (iii) this Agreement (collectively “Continuing Covenants”). If Employee breaches any of the Continuing Covenants, then the Release Consideration shall not be owed to Employee, save and except for a payment of $1,000.00, less lawful withholdings (“Partial Release Consideration”). To the extent that Employee breaches any of the Continuing Covenants, Employee shall repay the Company the Release

Consideration, except for the Partial Release Consideration, within thirty (30) days of Employee’s breach of any of the Continuing Covenants. To the extent no Release Consideration has been paid to Employee prior to Employee’s breach of any of the Continuing Covenants, the Partial Release Consideration shall be paid to Employee on or before March 15, 2020. Employee agrees that either the Release Consideration or the Partial Release Consideration is sufficient consideration for this Agreement and the Subsequent Release.

4. No Other Entitlement. The Parties agree that, apart from the amounts specified in this Agreement, Employee is entitled to no payments, reimbursements, or other consideration from the Company or its Affiliates including, without limitation, any amounts otherwise payable pursuant to the Letter Agreement or the TETRA Cash Incentive Compensation Plan (the “CICP”). Employee acknowledges and agrees that Employee is not otherwise entitled to receive, and Employee would not receive, the Release Consideration except in exchange for Employee’s promises and performance of Employee’s promises made in this Agreement.

5. No Further Obligation. Except as stated in this Agreement or as required by law, all other compensation, bonuses, commissions, paid time off, expense reimbursements, and other benefits which relate to Employee’s employment or separation from employment with the Company, except as memorialized in this Agreement, completely cease as of the Termination Date or, if applicable, any Early Termination Date.

6. Acknowledgments. Employee acknowledges that Employee has read and understands this Agreement, and specifically acknowledges the following:


a.	Employee has been advised and is again hereby advised in this Agreement to consult with an attorney and has had the opportunity to consult with an attorney, before signing this Agreement;

b. Employee understands it is Employee’s choice whether or not to enter into this Agreement and that Employee’s decision to do so is voluntary and is made knowingly; and

c. By signing this Agreement, Employee is not waiving or releasing any claims based on actions or omissions that occur after the date of Employee’s signing of this Agreement.

7. General Release of Claims. Based on the consideration provided to Employee in this Agreement, the Releasing Parties irrevocably and unconditionally release, waive, and forever discharge the Released Parties from any and all claims, demands, actions, causes of action, costs, expenses, attorneys’ fees, damages and liabilities of any kind or character, whether known or unknown, asserted or unasserted, fixed or contingent, or liquidated or unliquidated, which Employee has, had, or may ever have against any of the Released Parties arising out of, related to, or in connection with any facts or events occurring on or before the date that Employee executes this Agreement (collectively, the “Claims”)

including, but not limited to, any such Claims arising out of or in any way related to Employee’s employment with the Company or any of the other Released Parties or the termination of such employment.

This release includes, but is not limited to, the following Claims: (i) law or equity claims; (ii) contract (express or implied) claims; (iii) tort claims (including, without limitation, claims for defamation, battery, assault, intentional infliction of emotional distress, or negligence); (iv) claims arising under any federal, state, or local laws of any jurisdiction that prohibit age, sex, race, national origin, color, ancestry, disability, religion, veteran or military status, sexual orientation, or any other form of discrimination, harassment, hostile work environment, or retaliation (including, without limitation, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Americans with Disabilities Act Amendments Act of 2008, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Acts of 1866 and/or 1871, 42 U.S.C. Section 1981, the Rehabilitation Act, the Pregnancy Discrimination Act, the Family and Medical Leave Act, the Genetic Information and Nondiscrimination Act, the Sarbanes-Oxley Act, the Employee Polygraph Protection Act, the Worker Adjustment and Retraining Notification Act, the Equal Pay Act of 1963, the Lilly Ledbetter Fair Pay Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, Section 1558 of the Patient Protection and Affordable Care Act of 2010, the Consolidated Omnibus Budget Reconciliation Act of 1985, the National Labor Relations Act, the Fair Credit Reporting Act, the Labor Management Relations Act, Chapter 21 of the Texas Labor Code, or any other federal, state, or local laws or ordinances of any jurisdiction); (v) claims under any other federal, state, local, municipal, or common law whistleblower protection, discrimination, wrongful discharge, anti-harassment, or anti-retaliation statute or ordinance; (vi) claims arising under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), except such rights as may be vested under any retirement plan sponsored by the Company; (vii) claims for compensation pursuant to the Letter Agreement and/or the CICP; or (viii) any other statutory or common law claims related to Employee’s employment or separation from employment with the Company or any of the other Released Parties.

This Agreement is a full and final general release by Employee of all Claims that arise wholly or in part from any act or omission occurring before this Agreement is signed by Employee. Employee confirms that this Agreement was neither procured by fraud nor signed under duress or coercion. Further, Employee waives and releases the Company and each of the other Released Parties from any Claims that this Agreement was procured by fraud or signed under duress or coercion so as to make this Agreement not binding. Employee understands and agrees that (except as otherwise specified in this Agreement) by signing this Agreement, Employee is giving up the right to pursue any legal Claims released herein that Employee may currently have against the Company or any of the other Released Parties, whether or not Employee is aware of such Claims, and specifically agrees and covenants not to bring any legal action for any Claims released herein.

The only Claims that are excluded from this Agreement are (i) Claims arising after the date Employee signs this Agreement, if any, including any future Claims relating to the

Company’s performance of its obligations hereunder, (ii) any claim for unemployment compensation, (iii) any claim for workers’ compensation benefits, (iv) any vested, future benefits which Employee is entitled to receive under any Company “employee benefit plan,” within the meaning of Section 3(3) of ERISA, and the regulations promulgated thereunder; (v) indemnification or payment under any applicable directors and officers liability insurance policy, applicable state and federal law, and the Company’s by-laws, certificate of formation, or other agreement, (vi) any vested interest Employee may have in any 401(k) plan by virtue of Employee’s employment with the Company; and (vii) any rights Employee may have under any equity award agreement with respect to any vested equity awards thereunder.

8. Release of Claims under ADEA. Employee understands and acknowledges that Employee is waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers’ Benefit Protection Act, as amended (collectively, “ADEA”), and that this waiver and release (the “ADEA Release”) is knowing and voluntary. Employee understands and agrees that this ADEA Release does not apply to any rights or claims that may arise under the ADEA after the date this Agreement is executed by Employee. Employee understands and acknowledges that the consideration given for this ADEA Release is in addition to anything of value to which Employee was already entitled. Employee further understands and acknowledges that Employee has been advised by this writing that: (a) Employee should consult with an attorney prior to executing this Agreement, including this ADEA Release; (b) Employee has twenty-one (21) days (the “Review Period”) within which to consider the ADEA Release contained in this Agreement; (c) Employee has seven (7) days following Employee’s execution of this Agreement (the “Revocation Period”) to revoke this ADEA Release pursuant to written notice to the President or General Counsel of the Company on or before the seventh day after Employee signs this Agreement; (d) this ADEA Release shall not be effective until after the Revocation Period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this ADEA Release, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. The Company and Employee agree that any changes to this Agreement, whether material or immaterial, will not restart the running of the Review Period. In the event Employee signs this Agreement and returns it to the Company before the Review Period has concluded, Employee hereby acknowledges that Employee has freely and voluntarily chosen to waive the time period allotted for considering this Agreement and the ADEA Release contained herein.

9. Return of Property.

Employee acknowledges, represents and warrants that as of the date Employee signs this Agreement Employee has returned all property belonging to the Company or any of the other Released Parties gathered by virtue of Employee’s employment with the Company, including but not limited to: computers, computer equipment, and software; telephones or personal data assistants; other equipment; keys or access cards or devices; credit cards; books or other publications; board materials; current or

prospective client or customer lists or information; all company-related emails, files, or folders on Employee’s personal computers or communication devices; and other business records such as memoranda, letters, email communications, lists of fees, personnel data, employee lists, salary and benefits information (other than relating to Employee), lists of suppliers and vendors, financial data, training materials, marketing plans, notes, records, reports, manuals, handbooks, forms, formulas, contracts, catalogs, instructions, and all other documentation (whether in draft or final and electronic or hard copy form) relating to the Company’s business or the business of any of the other Released Parties, and any and all other documents containing Confidential Information furnished to Employee by any representative of the Company or its Affiliates or otherwise acquired or developed by Employee in connection with Employee’s employment with the Company, regardless of the manner in which Employee acquired possession of the documents or property (collectively, “Recipient Materials”) and, after return of the Recipient Materials to the Company, Employee immediately deleted any and all electronic or other versions of such Recipient Materials from any personal computers, phones or other devices in Employee’s possession, custody or control in a manner that such Recipient Materials cannot be retrieved. The Recipient Materials shall at all times be the property of the Company or its Affiliates. To the extent Employee discovers after the date that Employee signs this Agreement that Employee failed to return any Recipient Materials, Employee shall promptly return to the Company any Recipient Materials and any copies thereof and delete any electronic versions of any such Recipient Materials in a manner that such Recipient Materials cannot be retrieved.

b. Employee further represents and warrants that all Recipient Materials that are in electronic format are located on (or have been transferred to) the cloud data storage maintained by the Company and the Employee has not retained any such information on Employee’s personal computers, phones or other electronic data storage devices.

10. Confidentiality. The Parties agree to the following provisions:

Employee acknowledges that the Company and its Affiliates have previously provided Employee with Confidential Information. Employee further acknowledges and agrees that the Company and its Affiliates have put in place certain policies and practices to safeguard such Confidential Information, and that as a condition of Employee’s employment with the Company, Employee executed the Employment Agreement with the Company pursuant to which Employee agreed, both during and after Employee’s employment, not to disclose or use for Employee’s benefit or the benefit of others any Confidential Information and to comply with the Company’s and its Affiliates’ policies regarding Confidential Information.

Employee agrees that Employee is and will continue to be subject to the obligations contained in the Employment Agreement to the extent such obligations continue during and after Employee’s termination of employment, including the confidentiality provisions therein, as well as the Company’s and its Affiliates’ policies and limitations on disclosure of Confidential Information. Employee further agrees that Employee will not disclose or make available to any other person or entity, or use for Employee’s own personal gain or the gain of any third party, any Confidential Information, except as may otherwise be required by law or legal process (in which case Employee shall notify the Company of such legal or judicial proceeding as soon as practicable following Employee’s receipt of notice of such a proceeding, and permit the Company to seek, and cooperate with the Company in seeking, to protect its interests and information). Employee acknowledges and agrees that such Confidential Information is the exclusive property of the Company and its Affiliates and may only be used for the benefit of the Company and its Affiliates.

b. Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Employee will not be held criminally or civilly liable under any federal or state law for any disclosure of a trade secret that: (i) is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the Company’s trade secrets to Employee’s attorney and use the trade secret information in the court proceeding if Employee files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.

11. Non-Disparagement; Non-Solicitation.

Employee agrees that the Company’s and its Affiliate’s goodwill and reputation are assets of great value which were obtained through great costs, time and effort. Employee agrees not to, directly or indirectly communicate or publish any defamatory or disparaging remarks, comments or statements or any knowingly false information (written or oral) concerning the Company or any of the other Released Parties, or any of their officers, directors, employees, customers or clients, operations, business practices and/or products, or cause any other person to communicate or publish such information. Notwithstanding the foregoing, nothing in this Agreement shall be construed as prohibiting Employee from participating in any governmental proceeding.

b. During Employee’s employment with the Company and through the two-year period following the Termination Date, Employee shall not, directly or indirectly employ or contract with or seek to employ or contract with any person who is on the Termination Date, or was at any time within the six-month period preceding the Termination Date, an employee or contractor of the Company or any of its subsidiaries or affiliates or otherwise solicit, encourage, cause or induce any such employee or contractor of the Company or any of its subsidiaries or affiliates to terminate such employee's employment or contracting relationship with the Company or such subsidiary or affiliate or to enter into employment or a contracting relationship with another company without the prior written consent of the Company.

12. No Re-Hire. Employee understands and agrees that Employee will not seek employment with the Company or any of the other Released Parties at any time in the future, and that the Company and the other Released Parties have no obligation to employ, hire, rehire, or to consider Employee for hire. Employee understands that forbearance from seeking employment is purely contractual and voluntary and does not constitute discrimination or retaliation in any respect. Employee further acknowledges that if Employee seeks employment with the Company or any of the other Released Parties, the refusal to hire Employee based on this Section 12 will provide a complete defense to any claims arising from Employee’s attempt to obtain employment.

13. Cooperation. Employee agrees that, as requested by the Company, Employee will fully, reasonably, and promptly cooperate with the Company and any of the other Released Parties in effecting a smooth transition of Employee’s responsibilities to others. Employee further agrees that, as requested by the Company, Employee will cooperate fully and promptly with the Company and its Affiliates or any of their designees in any investigation, proceeding, meeting, deposition, administrative review, court hearing, or litigation brought against the Company or any of the other Released Parties by any government agency or private party pertaining to matters occurring during Employee’s employment with the Company with respect to business issues or claims and litigation of which Employee has personal or corporate knowledge, or that arose in Employee’s organization or chain of command. Only reasonable out-of-pocket expenses in assisting the Company, a Released Party, or any Affiliate at its request will be reimbursed. Such expenses will be paid within fifteen (15) days after the Company receives request for payment along with satisfactory written substantiation of the claimed expenses.

14. No Admission of Liability. Employee acknowledges and agrees that nothing in this Agreement shall be construed as an admission of any liability for any Claims Employee may have.

15. Authority to Execute. Employee represents and warrants that Employee has the authority to execute this Agreement; Employee has not assigned, sold, transferred, or otherwise granted to any person any right concerning any Claims or related to Employee’s

employment by, or Employee’s separation from employment with, the Company, including any claims or demands in respect thereof; and Employee has not as of the date that Employee signs this Agreement filed any claim of any sort against any of the Released Parties.

16. Assignment. This Agreement shall be binding upon and inure to the benefit of Employee, the Company and the other Released Parties, and any parents, subsidiaries, affiliated companies, successors, or assigns of the Company or the other Released Parties, but otherwise shall not be for the benefit of any third parties.

17. Execution. This Agreement may be executed in one or more counterparts, each of which, when executed and delivered, shall be an original, and all of which together shall constitute one and the same instrument. This Agreement may also be executed by facsimile or electronic signatures, which signatures shall be deemed as effective as original signatures

18. No Guarantee of Tax Consequences; Taxes.


a.	Company makes no commitment or guarantee to Employee that any federal, state, local or other tax treatment will (or will not) apply or be available to any person eligible for benefits under this Agreement and assumes no liability whatsoever for the tax consequences to Employee or to any other person eligible for benefits under this Agreement.

b. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. Notwithstanding any other provision of this Agreement, each Party hereto agrees to be responsible for and to pay the taxes imposed on it by applicable law without any contribution from the other.

19. Section 409A. This Agreement and the payments and benefits provided hereunder are intended to comply with or otherwise be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and shall be construed, interpreted, and administered in a manner consistent with such intent. Each payment made under this Agreement will be treated as a separate payment and the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments. If Employee is a “specified employee” (within the meaning of Section 409A), any payments or benefits that are treated as nonqualified deferred compensation for purposes of Section 409A and that are payable or provided as a result of Employee’s “separation from service” (within the meaning of Section 409A) that would otherwise be paid or provided prior to the earliest of the dates set forth in this sentence shall instead be deferred, accumulated, and paid in a lump sum or provided on the earliest of (i) the first day of the seventh month following Employee’s separation from service, (ii) the date of Employee’s death, or (iii) any date that otherwise complies with Section 409A.

20. No Prior Representations or Inducements and Disclaimer of Reliance. Employee represents and acknowledges that in executing this Agreement, Employee does not rely, and has not relied, on any prior oral or written communications, promises, agreements, statements, inducements, understandings, or representations by any of the Released Parties, except as expressly contained in this Agreement. Further, Employee expressly disclaims any reliance on any prior oral or written communications, promises, agreements, statements, inducements, understandings, or representations in entering into this Agreement. Therefore, Employee understands that Employee is precluded from bringing any fraud or similar claim against any of the Released Parties associated with any such communications, promises, agreements, statements, inducements, understandings, or representations. The Parties are freely entering into this Agreement based on their own judgment.

21. Governing Law/Venue. THIS AGREEMENT SHALL BE INTERPRETED UNDER AND GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND SUBJECT TO, THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED IN ANY WAY TO THIS AGREEMENT OR EMPLOYEE’S EMPLOYMENT SHALL BE BROUGHT SOLELY IN A COURT OF COMPETENT JURISDICTION SITTING IN MONTGOMERY COUNTY, TEXAS, AND EACH PARTY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT AND HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING IN ANY SUCH COURT, ANY OBJECTION TO VENUE WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING, AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF THE PLACE OF RESIDENCE OR DOMICILE OF ANY PARTY THERETO.

22. Injunctive Relief. Employee agrees and acknowledges that the Company or the other Released Parties would suffer irreparable harm, incur substantial damage, and would not have an adequate remedy at law for money damages if Employee breached this Agreement. Accordingly, Employee acknowledges that, without the necessity of proving actual damages or posting bond or other security, the Company and the other Released Parties are entitled to temporary restraining orders and temporary and permanent injunctions to prevent breaches of performance and to obtain specific enforcement of applicable covenants in addition to any other remedy to which the Company or the other Released Parties may be entitled, at law or in equity. The Company shall also be entitled to the recovery of all attorneys’ fees, witness’ fees, and costs incurred by the Company in obtaining such relief. In such a situation, the Company and the other Released Parties may pursue any remedy available, including declaratory relief or seeking damages, concurrently or consecutively in any order as to any breach, violation, or threatened breach or violation of any of the provisions set forth in this Agreement, and the pursuit of any particular remedy is not to be deemed an election of remedies or waiver of the right to pursue any other remedy.

23. Entire Agreement; Modification. This Agreement sets forth the entire agreement between the Parties concerning the subject matter in this Agreement, except as otherwise stated herein. No oral statements or other prior written material not specifically incorporated into this Agreement shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized, unless incorporated into this Agreement by written amendment, such amendment to become effective on the date stipulated in it. Any amendment to this Agreement must be signed by all Parties to this Agreement. This Agreement supersedes any prior oral or written agreements, understandings, promises, or inducements between Employee and the Company concerning the subject matter in this Agreement, with the exception of the Employment Agreement, Exhibit A to the Letter Agreement, or any other obligation of Employee which, by its terms or by operation of law, survives the termination of Employee’s employment. For the avoidance of doubt, the Parties agree that the Letter Agreement, save and except for Exhibit A to the Letter Agreement and Employee’s agreement to comply with the terms of Exhibit A to the Letter Agreement, is superseded by this Agreement. The Parties agree that the language of this Agreement shall, in all cases, be construed as a whole, according to its fair meaning, and not strictly for, or against, any of the Parties.

24. Severability and Reformation. The Parties agree that in the event any court of competent jurisdiction holds any provision of this Agreement to be invalid or unenforceable, such invalid or unenforceable portion(s) shall be limited or excluded from this Agreement to the minimum extent required, and the remaining provisions shall not be affected or invalidated and shall remain in full force and effect. Further, should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, such holding shall not affect the validity or enforceability of the remainder of this Agreement, the balance of which shall continue to be binding upon the Parties with such modification, if any, to become a part hereof and treated as though contained in this original Agreement, nor shall such holding affect the enforceability or validity of the offending provision in any other jurisdiction. The Parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety. The Parties expressly agree that this Agreement as so modified by any such court shall be binding upon and enforceable against each other.

25. Rights Not Waived; Participate in Investigations. Notwithstanding any other provision of this Agreement to the contrary, the Parties understand and agree that nothing in this Agreement is intended to interfere with Employee’s right to report possible violations of federal, state, or local law or regulation to any governmental or law enforcement agency or entity, or to make other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation. The Parties further acknowledge and agree that this Agreement and, in particular, Sections 7, 8, 10 and 11 are not intended to prevent Employee from filing a charge, complaint, or claim with any governmental agency or entity charged with enforcement of any law, including, but not limited to, the U.S. Equal Employment Opportunity Commission, any state or local human rights commission, or the National Labor Relations Board, or from participating in, cooperating with, or providing

truthful evidence in connection with an investigation, hearing, or proceeding being conducted by a governmental agency or entity, but agree that such filing or participation does not give Employee the right to recover any damages or equitable relief (including, but not limited to, reinstatement, back pay, front pay, damages, and attorneys’ fees) against any of the Released Parties, as Employee has waived such claims in this Agreement. Employee agrees that by executing this Agreement, Employee waives the right to personally recover against any of the Released Parties in any proceeding Employee may bring before any federal, state, or local governmental agency or in any proceeding brought by any governmental agency on Employee’s behalf.

26. Knowing and Voluntary. Employee further acknowledges and affirms that Employee has read and understands the foregoing Agreement and has agreed to its terms. Employee also hereby acknowledges and affirms the sufficiency of the payments recited herein. Employee hereby represents and warrants that, prior to signing below, Employee has had the opportunity to consult with independent legal counsel of Employee’s choice, has read this document in its entirety and fully or satisfactorily understands its content and effect, and that Employee has not been subject to any form of duress or coercion in connection with this Agreement, is completely satisfied with the terms reflected in this Agreement, and, accordingly, knowingly makes this Agreement and agrees to be bound as described in this Agreement.

27. Waiver. A waiver by a Party of any breach or violation of any provision of this Agreement shall not operate as, or be construed to be, a waiver of any later breach of the same or other provision by such Party.

EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS CAREFULLY READ THIS SEPARATION AND RELEASE AGREEMENT AND FULLY UNDERSTANDS ITS CONTENTS, AND VOLUNTARILY SIGNS IT OF EMPLOYEE’S OWN FREE WILL.

IN WITNESS WHEREOF, the Parties have signed this Agreement, on the dates indicated below, with the intent to be bound by its terms and conditions.

EMPLOYEE: CSI COMPRESSCO GP INC.:

/s/ Levent Caglar By: /s/Bass C. Wallace, Jr.

LEVENT CAGLAR Name: Bass C. Wallace, Jr.

Title: General Counsel

___________________________________ ______________________________

Date January 10, 2020 Date January 10, 2020

SCHEDULE 1
RELEASE AGREEMENT

[TO BE SIGNED AFTER TERMINATION DATE OR, IF APPLICABLE, ANY EARLY TERMINATION DATE]

This Release Agreement (this “Agreement”) is made this day of February 2020, by Levent Caglar (“Employee”) and CSI Compressco GP Inc. (the “Company”) (collectively “the Parties”).

Employee and the Company are parties to a Separation and Release Agreement (the “Separation Agreement”), dated as of January 10, 2020. Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have their respective meanings set forth in the Separation Agreement.

The Separation Agreement, among other things, provides that, subject to certain conditions in the Separation Agreement, the Company will provide the Employee specified payments and other consideration if, among other requirements, Employee executes and delivers this Agreement after the Employee’s Termination Date or, if applicable, any Early Termination Date but on or before February 28, 2020 and so long as Employee does not exercise Employee’s right to revoke as contained in Section 8 of the Separation Agreement or Section 2 of this Agreement. This Agreement does not modify or terminate any of the provisions of, or obligations or covenants arising under, the Separation Agreement. In consideration of the mutual agreements described in the Separation Agreement, the payments to Employee and other good and valuable consideration described in the Separation Agreement, the receipt and sufficiency of which the Parties acknowledge, the Parties agree as follows:

1. Employee Release. In exchange for the consideration set forth in the Separation Agreement, the Releasing Parties irrevocably and unconditionally release, waive, and forever discharge the Released Parties from any and all claims, demands, actions, causes of action, costs, expenses, attorneys’ fees, damages and liabilities of any kind or character, whether known or unknown, asserted or unasserted, fixed or contingent, or liquidated or unliquidated, which Employee has, had, or may ever have against any of the Released Parties arising out of, related to, or in connection with any facts or events occurring on or before the date that Employee executes this Agreement (collectively, the “Claims”) including, but not limited to, any such Claims arising out of or in any way related to Employee’s employment with the Company or any of the other Released Parties or the termination of such employment.

work environment, or retaliation (including, without limitation, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Americans with Disabilities Act Amendments Act of 2008, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Acts of 1866 and/or 1871, 42 U.S.C. Section 1981, the Rehabilitation Act, the Pregnancy Discrimination Act, the Family and Medical Leave Act, the Genetic Information and Nondiscrimination Act, the Sarbanes-Oxley Act, the Employee Polygraph Protection Act, the Worker Adjustment and Retraining Notification Act, the Equal Pay Act of 1963, the Lilly Ledbetter Fair Pay Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, Section 1558 of the Patient Protection and Affordable Care Act of 2010, the Consolidated Omnibus Budget Reconciliation Act of 1985, the National Labor Relations Act, the Fair Credit Reporting Act, the Labor Management Relations Act, Chapter 21 of the Texas Labor Code, or any other federal, state, or local laws or ordinances of any jurisdiction); (v) claims under any other federal, state, local, municipal, or common law whistleblower protection, discrimination, wrongful discharge, anti-harassment, or anti-retaliation statute or ordinance; (vi) claims arising under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), except such rights as may be vested under any retirement plan sponsored by the Company; (vii) claims for compensation pursuant to the Letter Agreement and/or the CICP; or (viii) any other statutory or common law claims related to Employee’s employment or separation from employment with the Company or any of the other Released Parties.

The only Claims that are excluded from this Agreement are (i) Claims arising after the date Employee signs this Agreement, if any, including any future Claims relating to the Company’s performance of its obligations hereunder, (ii) any claim for unemployment compensation, (iii) any claim for workers’ compensation benefits, (iv) any vested, future benefits which Employee is entitled to receive under any Company “employee benefit plan,” within the meaning of Section 3(3) of ERISA, and the regulations promulgated thereunder; (v) indemnification or payment under any applicable directors and officers liability insurance policy, applicable state and federal law, and the Company’s by-laws, certificate of formation, or other agreement, (vi) any vested interest Employee may have in any 401(k) plan by virtue of Employee’s employment with the Company; and (vii) any rights Employee may have under any equity award agreement with respect to any vested equity awards thereunder.

Employee additionally represents, warrants and agrees that Employee has received full and timely payment of all wages, salary, bonuses, other compensation, and benefits that may have been due and payable by the Released Parties as of the date of this Agreement. Employee expressly acknowledges and agrees that the Released Parties are entering into this Agreement in reliance upon these representations.

2. Release of Claims under ADEA. Employee understands and acknowledges that Employee is waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers’ Benefit Protection Act, as amended (collectively, “ADEA”), and that this waiver and release (the “ADEA Release”) is knowing and voluntary. Employee understands and agrees that this ADEA Release does not apply to any rights or claims that may arise under the ADEA after the date this Agreement is executed by Employee. Employee understands and acknowledges that the consideration given for this ADEA Release is in addition to anything of value to which Employee was already entitled. Employee further understands and acknowledges that Employee has been advised by this writing that: (a) Employee should consult with an attorney prior to executing this Agreement, including this ADEA Release; (b) Employee has twenty-one (21) days (the “Review Period”) within which to consider the ADEA Release contained in this Agreement; (c) Employee has seven (7) days following Employee’s execution of this Agreement (the “Revocation Period”) to revoke this ADEA Release pursuant to written notice to the President or General Counsel of the Company on or before the seventh day after Employee signs this Agreement; (d) this ADEA Release shall not be effective until after the Revocation Period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this ADEA Release, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. The Company and Employee agree that any changes to this Agreement, whether material or immaterial, will not restart the running of the Review Period. In the event Employee signs this Agreement and returns it to the Company before the Review Period has concluded, Employee hereby acknowledges that Employee has freely and voluntarily chosen to waive the time period allotted for considering this Agreement and the ADEA Release contained herein. The Parties acknowledge and agree that this Agreement and the Separation Agreement were negotiated at arm’s length and that this Agreement and the Separation Agreement are worded in a manner that Employee fully understands. Employee further acknowledges that Employee has read this Agreement, as signified by Employee’s signature hereto, and is voluntarily executing the same. Employee acknowledges that he has been provided with a period of at least twenty-one (21) days within which to consider, review and reflect upon the terms of this Agreement.

3. Return of Company Property. Employee represents and warrants that Employee has returned all Company information (confidential, proprietary or otherwise), including all related documents, reports, emails, files, memoranda and records, computer disks or other storage media, and all physical or personal property, including credit cards, card key passes, door and file keys, computers, pagers or Employee’s leased vehicle, which Employee was provided or obtained during Employee’s employment.

4. Employee’s Continuing Obligations. Nothing in this Agreement shall be deemed to affect or relieve Employee from any of the Continuing Covenants or any other obligation of Employee which, by its terms or by operation of law, survives the termination of Employee’s employment.

5. Choice of Law/Venue. This Agreement shall be interpreted under and governed by, construed and enforced in accordance with, and subject to, the laws of the State of Texas, without giving effect to any principles of conflicts of law. Venue for any dispute between the parties concerning Employee’s employment with the Company and/or this Agreement shall lie exclusively in a court of competent jurisdiction in Montgomery County, Texas.

6. Entire Agreement. This Agreement, combined with the Separation Agreement, sets forth the entire agreement between the Parties, and fully supersedes any and all prior agreements, understandings or representations between the Parties, whether oral or written, pertaining to Employee’s employment with Company, the subject matter of this Agreement, or any other term or condition of the relationship between Company and Employee, except as otherwise stated herein. No oral statements or other prior written material not specifically incorporated into this Agreement shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized, unless incorporated into this Agreement by written amendment, such amendment to become effective on the date stipulated in it. Any amendment to this Agreement must be signed by all Parties to this Agreement. This Agreement supersedes any prior oral or written agreements, understandings, promises, or inducements between Employee and the Company concerning the subject matter in this Agreement, with the exception of the Separation Agreement, the Employment Agreement, Exhibit A to the Letter Agreement, or any other obligation of Employee which, by its terms or by operation of law, survives the termination of Employee’s employment. For the avoidance of doubt, the Parties agree that the Letter Agreement, save and except for Exhibit A to the Letter Agreement and Employee’s agreement to comply with the terms of Exhibit A to the Letter Agreement, is superseded by this Agreement. Employee represents and acknowledges that in executing this Agreement, Employee does not rely, and has not relied, upon any representation(s) by Company or its agents except as expressly contained in this Agreement and the Separation Agreement. The Parties agree that the language of this Agreement shall, in all cases, be construed as a whole, according to its fair meaning, and not strictly for, or against, any of the Parties.

7. Invalid Provisions. If any provision contained in this Agreement is determined to be void, illegal or unenforceable, in whole or in part, then the other provisions contained herein shall remain in full force and effect as if the provision which was determined to be void, illegal or unenforceable had not been contained herein.

8. Fully Understood. By signing this Agreement, Employee acknowledges and affirms that Employee has read and understood the foregoing release, agreed to its terms, and acknowledges receipt of a copy of the same. Employee also hereby acknowledges and affirms the sufficiency of the consideration recited herein. Employee shall not be entitled

to any further payment, compensation or remuneration of any kind from any of the Released Parties.

AGREED TO AND ACCEPTED CSI COMPRESSCO GP INC.:

This day of _______, 2020: This day of , 2020

EMPLOYEE:

___________________________________

Levent Caglar Name:

Title:



Employee:			Date of Grant:

Number of Performance Phantom Units:			Performance Period:



Performance Level*	DCF per Unit 2020	DCF per Unit 2021	DCF per Unit 2022	Percentage of Each Applicable Year’s Target Phantom Units that become Earned Phantom Units*
Threshold	$0.94	$1.09	$1.28	30%
Target	$1.17	$1.37	$1.60	100%
Stretch	$1.46	$1.71	$2.00	150%
Over Achievement	$1.76	$2.05	$2.39	200%



Date:	May 7, 2020	/s/Brady Murphy
		Brady M. Murphy
		President of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Executive Officer)



Dated:	May 7, 2020	/s/Brady M. Murphy
		Brady M. Murphy
		President of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Executive Officer)



Dated:	May 7, 2020	/s/Elijio V. Serrano
		Elijio V. Serrano
		Chief Financial Officer of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Financial Officer)


1.	I have reviewed this report on Form 10-Q for the fiscal quarter ended March 31, 2020, of CSI Compressco LP;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.