USA Compression Partners: 20% Upside Ahead for 8%-Yielder?
July 24, 2025
USA Compression Partners Reports Another Solid Quarter
The last number of months have shown just how volatile oil and gas stocks can be. Oil and gas prices can rise and fall on everything from supply and demand, to where we are in the economic cycle, to black swan events and geopolitical tensions.
Since early May, West Texas Intermediate (WTI) crude has soared from a low of $56.06 to a June high of $78.40, and back down to $67.00 in early July. This big rise and fall comes on the heels of Israel striking Iran and Iran retaliating. The U.S. joined in briefly, striking three Iranian nuclear sites.
But, since the two countries have announced a truce and a proposed truce between Israel and Gaza, oil prices have come down. Where oil and gas prices will be in a month or two is anyone’s guess.
What isn’t open for debate is the fact that oil and gas companies need their infrastructure to be serviced regardless of what’s going on. And one great oil and gas equipment and services company worth watching is USA Compression Partners LP (NYSE:USAC).
The Dallas-Texas-based company is one of the country’s largest independent providers of natural gas compression services. It has a major operating presence in each of the gas growth basins in the U.S., including the Marcellus/Utica, DJ, Gulf Coast, Permian, and Barnett/Haynesville Basins. (Source: “Investor Presentation J.P. Morgan Energy, Power, Renewables & Mining, June 2025,” USA Compression Partners LP, last accessed July 8, 2025.)
USA Compression provides its services under fixed-term contracts to oil and gas companies, including independent producers, processors, gatherers, and transporters of natural gas and crude oil.
The best part is, regardless of where oil and gas prices are, natural gas companies always need their infrastructure serviced.
Due to distance and friction, natural gas loses pressure as it moves through pipelines. Compression ensures that the gas continues to move smoothly. Compressors are also used at above-ground and underground natural gas storage facilities.
USA Compression has fixed-fee, take-or-pay contracts that provide it with consistent cash flows. On top of that, the majority of its contract terms are for three to five years. This essential service has helped the company generate stable cash flows during all commodity cycles.
Another Strong Quarter
In 2024, USA Compression Partners reported record results. That strong momentum has carried into 2025.
For the first quarter ended March 31, the company announced that total revenue grew seven percent to $245.2 million. (Source: “USA Compression Partners Reports First-Quarter 2025 Results; Confirms 2025 Outlook,” USA Compression Partners LP, May 6, 2025.)
First-quarter net income was $20.5 million, compared to $23.6 million in the same prior-year period. Net cash provided by operating activities was $54.7 million, versus $65.9 million for the first quarter of 2024.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 7.2% to $149.5 million, compared with $139.4 million for the first quarter of 2024. Distributable cash flow inched up to $88.7 million from $86.6 million during the first quarter of last year.
During the first quarter of 2025, the company reported record average revenue per revenue-generating horsepower per month of $21.06, compared to $19.96 for the first quarter of 2024. USA Compression also reported average horsepower utilization of 94.4% for the first quarter of this year, compared to first-quarter-2024 results of 94.8%.
Commenting on the results, Clint Green, the company’s president and chief executive officer, said, ““USA Compression’s first-quarter results represented another quarter of solid financial and operational performance. The contract compression service market remains strong as evidenced by another record average revenue per-horsepower of $21.06, which drove year-over-year increases in revenues, Adjusted EBITDA, and Distributable Cash Flow.”
USA Compression Partners’ Business Outlook
Looking ahead, management confirmed its 2025 guidance, expecting to report:
- Adjusted EBITDA in the range of $590.0 million to $610.0 million
- Distributable cash flow of $350.0 million to $370.0 million
Quarterly Dividend of $0.525/Share
Investors love limited partnerships like USA Compression because they has to generate 90% of their income through activities or interest and dividend payments related to natural resources. This results in some of the biggest, most reliable dividends on Wall Street.
Since its initial public offering in 2023, USA Compression has never missed or lowered its dividend payout. The company has also returned in excess of $1.6 billion in cash to unitholders. (Source: “Distributions & Splits,” USA Compression Partners LP, last accessed July 8, 2025.)
In the first quarter, the partnership reported distributable cash flow of $88.7 million, with coverage of 1.44 times. This was a slight improvement over its first-quarter 2024 coverage of 1.41 times. Regardless, USA Compression makes more than enough money to cover its distribution payments.
USAC stock currently pays a dividend of $0.525 per unit, or $2.10 on an annual basis, for a yield of 8.65%.
20% Upside Potential with USAC Stock?
Despite market volatility and ongoing uncertainty about a global trade war, USAC units have had a pretty solid year. At least so far. On February 10, USACs hit a record high of $29.47.
The stock took a big dive in early April, along with the rest of the markets, after President Donald Trump unveiled his global tariffs. The president subsequently announced a 90-day pause on those tariffs, and again just recently paused them until early August.
USAC units, along with the rest of the markets, have been trending higher since early April. As of this July 8 writing, the stock is up:
- 15% over the last three months
- 10% year to date
- 15% over the last year
Solid gains, but Wall Street expects USAC units to climb considerably higher over the coming year. Analysts have provided a 12-month unit target of $26.67 to $30.00 per share. This points to potential upside of 6.5% to 20%.
Chart courtesy of StockCharts.com
The Lowdown on USA Compression Partners LP
USA Compression Partners LP is a great energy stock that provides essential natural gas compression services in each of the gas growth basins in the U.S. This helps provide it with secure, stable cash flows, which results in durable returns on invested capital.
The company reported record 2023 and 2024 results and expects 2025 to be another great year. This should help energize its units and maintain a reliable, high yield distribution.
