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Compressco Partners, L.P. – ‘424B5’ on 7/28/14

On:  Monday, 7/28/14, at 5:08pm ET   ·   Accession #:  1193125-14-282531   ·   File #:  333-195438

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/28/14  Compressco Partners, L.P.         424B5                  1:2.9M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus                                          HTML   2.04M 

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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-195438

PROSPECTUS    SUPPLEMENT

(To Prospectus dated May 9, 2014)

15,280,000 Common Units

Representing Limited Partner Interests

We are offering 15,280,000 common units representing limited partner interests.

Our general partner has informed us that its affiliate is purchasing 1,391,113 common units in this offering pursuant to its preemptive rights. The underwriters will not receive any underwriting discounts or commissions on the 1,391,113 common units sold to our general partner’s affiliate. The number of common units available for sale to the general public has been reduced to 13,888,887 common units, after subtracting the 1,391,113 common units that our general partner’s affiliate is purchasing in this offering.

Our common units are listed on the NASDAQ Global Market, or “NASDAQ,” under the symbol “GSJK.” The last reported sale price of our common units on July 24, 2014 was $23.70 per common unit.

Investing in our common units involves a high degree of risk. You should carefully consider the risks relating to investing in our common units and each of the other risk factors described under “Risk Factors” beginning on page S-19 of this prospectus supplement and on page 5 of the accompanying base prospectus.

We have granted the underwriters a 30-day option to purchase up to an additional 2,292,000 common units from us on the same terms and conditions as set forth above if the underwriters sell more than 15,280,000 common units in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying base prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common units on or about July 30, 2014.

Joint Book-Running Managers

Co-Managers

Prospectus Supplement dated July 24, 2014

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Prospectus Supplement

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This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering of common units. The second part is the accompanying base prospectus, which gives more general information, some of which may not apply to this offering of common units. Generally, when we refer only to the “prospectus,” we are referring to both this prospectus supplement and the accompanying base prospectus combined. If the information relating to the offering varies between this prospectus supplement and the accompanying base prospectus, you should rely on the information in this prospectus supplement.

Any statement made in this prospectus or in a document incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus supplement or in any other subsequently filed document that is also incorporated by reference into this prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Please read “Incorporation of Documents by Reference” on page S-107 of this prospectus supplement.

You should rely only on the information contained in or incorporated by reference in this prospectus supplement, the accompanying base prospectus and any free writing prospectus prepared by or on behalf of us relating to this offering of common units. We have not, and the underwriters have not, authorized anyone to provide you with additional or different information. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should not assume that the information contained in this prospectus supplement, the accompanying base prospectus or any free writing prospectus is accurate as of any date other than the dates on the front of these documents or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference. Our business, financial condition, results of operations or prospects may have changed since such dates.

Please read “Forward-Looking Statements” on page S-108 of this prospectus supplement.

NON-GAAP FINANCIAL MEASURES

The SEC has adopted rules to regulate the use of “non-GAAP financial measures” such as EBITDA, that are derived on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“GAAP”). EBITDA is a non-GAAP financial measure that complies with Securities Act regulations when it is defined as net income (the most directly comparable GAAP financial measure) before interest, taxes, depreciation and amortization. We define EBITDA in this prospectus supplement accordingly. We define Adjusted EBITDA as EBITDA excluding transaction-related expenses and non-recurring items.

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EBITDA and Adjusted EBITDA each have limitations as an analytical tool and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. For example, these measures:

EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, operating income, cash flows from operating activities, or any other measure of financial performance presented in accordance with GAAP. Our EBITDA and Adjusted EBITDA and CSI’s EBITDA may not be comparable to EBITDA and Adjusted EBITDA or similarly titled financial metrics of other entities, as other entities may not calculate EBITDA and Adjusted EBITDA in the same manner as we do. Our management compensates for the limitations of EBITDA and Adjusted EBITDA and CSI’s management accounts for the limitations of EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management’s decision-making processes. For the Partnership, EBITDA and Adjusted EBITDA should not be viewed as indicative of the actual amount 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 First Amended and Restated Agreement of Limited Partnership, dated June 20, 2011 (our “Partnership Agreement”). See “Summary—Our Summary Consolidated Historical and Pro Forma Financial Information” and “Summary—CSI’s Summary Consolidated Historical Financial Information” for a reconciliation of EBITDA and see “Summary—Recent Developments” for a reconciliation of Adjusted EBITDA to its most directly comparable GAAP financial measures.

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RISK FACTORS

This offering involves a high degree of risk. Before deciding to invest in the common units offered hereby, you should consider carefully the risks and uncertainties described below with all of the other information included or incorporated by reference in this prospectus supplement, including the risk factors contained in the sections titled “Risk Factors” included in our 2013 Annual Report and to the extent applicable, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014. While these are the risks and uncertainties we believe are most important for you to consider, you should know that they are not the only risks or uncertainties facing us or which may adversely affect our business. If any of these risks actually occur, our business, financial condition or results of operations could be materially adversely affected.

References to “Existing Credit Agreement” refer to our existing asset-based revolving credit agreement entered into on October 15, 2013, among us and a syndicate of lenders including JPMorgan Chase Bank, N.A., as administrative agent. References to “New Credit Agreement” refer our new revolving credit agreement to be entered into as of the closing date of this offering, among us and a syndicate of lenders including Bank of America, N.A., as administrative agent.

Risks Relating to Our and CSI’s Combined Business

We depend on domestic and international demand for and production of natural gas and, to a lesser extent, oil and natural gas liquids, and a reduction in this demand or production could adversely affect the demand or the prices we charge for our services and products, which could cause our revenue and cash available for distribution to our unitholders to decrease.

Demand for our services and products are significantly dependent upon the demand for, and production of, natural gas, natural gas liquids and oil in the various domestic and international locations in which we operate. Natural gas, natural gas liquid and oil production and consumption may be affected by, among other factors, prices for such commodities, weather, demand for energy and availability of alternative energy sources. U.S. natural gas prices were volatile in 2013, with Henry Hub prices ranging from a high of $4.52 per million British thermal units (“MMBtu”) in December 2013 to a low of $3.08 per MMBtu in January 2013. The Henry Hub price for natural gas as of June 30, 2014 was $4.39 per MMBtu. Seasonality and the amount of natural gas in storage play a prominent role in natural gas prices. From time to time, in certain of our domestic operating regions, wellhead prices are substantially lower than Henry Hub prices. A substantial reduction in natural gas prices could result in a decline in the demand for our products and services, which would reduce our cash available for distribution. In addition, natural gas production from newly developed shale plays in the U.S. continues to increase the amount of natural gas in storage, which tends to depress natural gas prices in the U.S. While foreign prices of natural gas have historically been higher than domestic prices, foreign prices are also subject to volatility.

We anticipate that our pending CSI Acquisition will substantially change the scope and size of our operations and business.

We anticipate that our pending CSI Acquisition will substantially expand the scope and size of our business, with larger manufacturing, unit sales and after-market service operations. Prior to our pending CSI Acquisition, we fabricated and provided services utilizing small horsepower wellhead compression packages, with total fleet horsepower of approximately 187,000 as of June 30, 2014. We and CSI operate in many of the same regions; however, CSI covers a broader range of compression services and as of June 30, 2014 had total fleet horsepower of approximately 858,000. CSI’s business also includes a substantial international sales operation, including large sales in 2013 to two customers in Mexico and Southeast Asia. Additionally, CSI’s business includes operations and equipment that we have not historically provided. Consequently, we may not be able to integrate CSI’s operations into our operations or to realize the expected economic benefits of the pending CSI Acquisition.

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Restrictions in our New Credit Agreement and the indenture governing the notes could adversely affect our business, financial condition, results of operations, ability to make distributions to unitholders and value of our units.

As of July 17, 2014, the outstanding borrowings, including $0.1 million of letters of credit, under our Existing Credit Agreement were approximately $37.9 million. Our New Credit Agreement will have a borrowing capacity of up to $400 million, and we expect to have initial borrowings thereunder of approximately $201.6 million as of the closing of this offering and the pending CSI Acquisition. We depend on the earnings and cash flow generated by our operations to meet our debt service obligations. Payments of principal and interest on our debt reduce cash available for distribution on our units. The operating and financial restrictions and covenants applicable to the New Credit Agreement and the indenture governing the notes restrict, or will restrict, as applicable, our ability to take certain actions. Violations of these restrictions may result in our inability to borrow under the New Credit Agreement, including to fund distributions (if we elected to do so). For example, the New Credit Agreement and the indenture governing the notes restricts, or will restrict, as applicable, our ability to, among others:

The New Credit Agreement restricts or will restrict, as applicable, our ability to pay distributions upon the occurrence of the following events, among others:

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Furthermore, the New Credit Agreements will contain covenants requiring us to maintain (i) a consolidated interest coverage ratio (ratio of consolidated EBITDA to consolidated interest charges) of not less than 3.0 to 1.0, (ii) a consolidated total leverage ratio (ratio of consolidated total indebtedness to consolidated EBTIDA) of not more than 5.5 to 1.0 (with step downs to 5.0 to 1.0), and (iii) consolidated secured leverage ratio (consolidated secured indebtedness to consolidated EBITDA) of not more than 4.0 to 1.0, in each case calculated on a quarterly basis for the trailing four-quarters. Our New Credit Agreement provides that we may make distributions to holders of our common units and subordinated units, but only if there is no default under the facility. Our ability to comply with the covenants and restrictions contained in the New Credit Agreement may be affected by events beyond our control, including prevailing economic, financial, and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired.

A failure to comply with the provisions of the New Credit Agreement could result in a default or an event of default. Upon an event of default, unless waived, the lender under the revolving credit facility would have all remedies available to a secured lender and could elect to terminate its commitments, cease making further loans, require cash collateralization of letters of credit, cause its loans to become due and payable in full, institute foreclosure proceedings against our or our subsidiaries’ assets, and force us and our subsidiaries into bankruptcy or liquidation. If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and the holders of our units could experience a partial or total loss of their investment.

We and CSI each have customers that collectively accounted for significant percentages of our respective 2013 fiscal year revenues. The loss of any of these significant customers would result in a decline in our revenue and cash available to pay distributions to our unitholders.

Our five most significant customers collectively accounted for approximately 42.5% of our 2013 revenues. Our five largest customers for the year ended December 31, 2013, were Petróleos Mexicano (“PEMEX”), BP, Yacimientos Petroliferos Fiscales (“YPF”), Anadarko Petroleum Corporation and Apache Corporation. These five customers accounted for approximately 21.7%, 10.0%, 4.0%, 3.4%, and 3.4% of our revenues, respectively, for the year ended December 31, 2013. For the year ended September 30, 2013, CSI had revenues from five major customers, DCP Midstream, South-East Asian Crude Oil Pipeline Ltd., ConocoPhillips, Cimarex Energy Company and Devon Energy, representing approximately 17.8%, 13.6%, 7.8%, 3.9% and 3.0% of its revenues, respectively. The loss of all or even a portion of the revenues CSI derives from these customers, as a result of competition or otherwise, could have a material adverse effect on our combined business, results of operations, financial condition, and our ability to make cash distributions to our unitholders.

We may be unable to negotiate extensions or replacements of our contracts with our customers, which could adversely affect our results of operations and cash available for distribution to our unitholders.

We generally provide our services to our customers under “evergreen” contracts that are cancellable on thirty days’ notice after the initial term. We may be unable to negotiate extensions or replacements of our contracts on favorable terms, if at all, which could adversely affect our results of operations and cash available for distribution.

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Our future growth and success will depend upon a number of factors, some of which we cannot control.

Our growth strategy includes both internal growth and growth through acquisitions. Our future growth and success will depend upon a number of factors that are outside of our control. These factors include our ability to:

Failure in any of these areas could adversely affect our ability to execute our growth strategy.

We are exposed to interest rate risk with regard to our indebtedness.

Our Existing Credit Agreement does and the New Credit Agreement will consist of floating rate borrowings that bear interest at an agreed upon percentage rate spread above LIBOR or a base rate. As of July 17, 2014, we had approximately $37.9 million of borrowings outstanding, including $0.1 million of letters of credit, under the Existing Credit Agreement. We will repay any outstanding borrowings under our Existing Credit Agreement upon closing of this offering and, after giving effect to the borrowings under the New Credit Agreement on the closing of this offering, total borrowings under the New Credit Agreement shall be no more than $250 million and the remaining availability may not be less than $150.0 million. Accordingly, our cash flows and results of operations could be subject to interest rate risk exposure associated with the level of the variable rate debt balance outstanding. We currently are not a party to an interest rate swap contract or other derivative instrument designed to hedge our exposure to interest rate fluctuation risk, therefore if interest rates increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our cash available for servicing our indebtedness would decrease. A 1.0% increase in interest rates on the estimated $201.6 million of pro forma debt outstanding under our New Credit Agreement as of March 31, 2014 would have cost us approximately $2.0 million in additional annual interest expense.

Changes in the global economic environment could adversely affect our business.

Although the overall global economy has largely recovered from the 2008 recession, significant economic uncertainty remains. If current economic conditions worsen, there may be constraints on oil and natural gas industry spending levels. Such a stagnation of economic activity would negatively affect both the demand for many of our services and products and the prices we charge for these services and products, which would negatively affect our revenues and future growth.

We face competition that may cause us to lose market share and harm our financial performance.

Our business is highly competitive. Competition for our services business includes various local and regional companies that utilize packages consisting of a screw compressor with a separate engine driver or a reciprocating compressor with a separate engine driver. These local and regional competitors tend to compete with us on the basis of price rather than equipment specifications. We also face competition from large national and multinational companies with greater financial resources than ours. These companies have traditionally

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focused on higher-horsepower natural gas gathering and transportation equipment and services similar to the business of CSI. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain current revenue and cash flows could be adversely affected by the activities of our competitors and our customers. Our competitors could substantially increase the resources they devote to the development and marketing of competitive services, develop more efficient equipment, or decrease the price at which they offer their services. In addition, our customers may elect to purchase their own equipment in lieu of using our services. Any of these competitive pressures could have a material adverse effect on our business, results of operations, financial condition, and ability to make cash distributions to our unitholders.

We may not have sufficient cash from operations following the establishment of cash reserves and payment of any debt service and other contractual obligations, fees and expenses, including cost reimbursements to our general partner, to enable us to make cash distributions to holders of our common units at the current quarterly distribution rate.

Under the terms of our Partnership Agreement, the amount of cash otherwise available for distribution will be reduced by our operating expenses and the amount of cash reserves that our general partner establishes to provide for future operations, future capital expenditures, future debt service requirements, and future cash distributions to our unitholders. Further, our debt instruments contain restrictions on our ability to pay distributions. We may not have sufficient available cash each quarter to enable us to make cash distributions at the current quarterly distribution rate under our cash distribution policy, or any distribution at all. The amount of cash we can distribute to our unitholders principally depends upon the amount of cash we generate from our operations, which fluctuates from quarter-to-quarter based on, among other things, the risks described in this section and also upon:

During 2013, costs of fuel, labor, maintenance, repair, and refurbishment increased. Many of those costs have been volatile and may continue to be volatile or increase in the future. To the extent our efforts to contain these costs are not successful, our generation of operating cash flows to fund our quarterly distributions will be negatively affected.

We depend on particular suppliers and are vulnerable to engine and compressor component shortages and price increases, which could have a negative impact on our results of operations and cash available for distribution to our unitholders.

We fabricate most of our compressor packages and pump systems. We obtain some of the components used in our compressor packages and pump systems from a single source or a limited group of suppliers. Our reliance on these suppliers involves several risks, including our potential inability to obtain an adequate supply of required components in a timely manner. We do not have long-term contracts with these sources and the partial or complete loss of certain of these sources could have a negative impact on our results of operations and could damage our customer relationships. Further, since any increase in component prices for compressor packages and pump systems fabricated by us could decrease our margins, a significant increase in the price of one or more of these components could have a negative impact on our results of operations and cash available for distribution to our unitholders.

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Operating cash flows from the sale of compressor packages and pumps are volatile due to the limited circumstances in which we sell our compressor packages and pumps.

In certain prior years, a significant portion of our revenues was derived from the sales of compressor packages and pumps, as applicable. During 2013, the Partnership reported revenues of approximately $8.4 million from the sale of compressor packages and parts. During 2012, the Partnership’s revenues from the sales of compressors and parts were $6.3 million, primarily related to compressor unit sales to two customers. We expect an increased amount of our revenues will be derived from sales of compressor packages and pumps following the consummation of the CSI Acquisition. During CSI’s fiscal year ended September 30, 2013 and its six months ended March 31, 2014, unit sales of compressor packages and pumps were $144.6 million and $60.8 million, respectively. As of June 30, 2014, CSI had unit sales order backlog of approximately $147.9 million, of which $60.2 million is forecast through CSI’s fiscal year ending September 30, 2014. Unlike compression-based services, sales of compressor packages and pumps are generally nonrecurring. Demand to purchase our compressor packages is also affected by numerous factors, including the price of natural gas and the level of capital spending by our customers. A change in our business strategy or any of these factors could cause cash flows from the sale of compressor packages and pumps to decrease materially.

The credit and risk profile of TETRA could adversely affect our business and our ability to make distributions to our unitholders.

The credit and business risk profile of TETRA could adversely affect our ability to incur indebtedness in the future or our credit rating, as credit rating agencies may consider the leverage and credit profile of TETRA and its affiliates in assigning a rating because of their control of us, their performance of administrative functions for us, our close operational links, and our contractual relationships. Furthermore, the trading price of our common units may be adversely affected by financial or operational difficulties or excessive debt levels at TETRA. In addition, if TETRA’s ownership of our general partner is pledged to TETRA’s lenders, then there is a risk that control over our general partner could be transferred to TETRA’s lenders in the event of a default.

TETRA and its affiliates are not limited in their ability to compete with us, which could cause conflicts of interest and limit our ability to acquire additional assets or businesses, which in turn could adversely affect our results of operations and cash available for distribution to our unitholders.

Neither our Partnership Agreement nor the Omnibus Agreement, dated June 20, 2011, as amended by the First Amendment to the Omnibus Agreement, dated June 20, 2014, among us, our general partner and TETRA (the “Omnibus Agreement”) prohibits TETRA and its affiliates from owning assets or engaging in businesses that compete directly or indirectly with us. TETRA currently provides some services for PEMEX in Mexico and could choose to further compete with us for certain services for PEMEX in Mexico. In addition, TETRA and its affiliates may acquire compression-based services businesses or assets in the future, without any obligation to offer us the opportunity to purchase any of that business or those assets. TETRA has greater financial resources than we do, which may make it more difficult for us to compete with TETRA with respect to commercial activities as well as for acquisitions candidates. As a result, competition from TETRA could adversely affect our results of operations and cash available for distribution.

The majority of our business in Mexico is performed for PEMEX and any cutbacks in PEMEX’s annual spending budget or our failure to renew our contracts or renew them on favorable terms could adversely affect our business, financial condition, results of operations, and cash flows.

The majority of our business in Mexico is performed for PEMEX. For the three months ended March 31, 2014 and the years ended December 31, 2013 and 2012, PEMEX accounted for approximately 17.5%, 21.7% and 26.0% of our revenues, respectively, and substantial portions of our cash flows. No work or services are required to be ordered by PEMEX under our contracts with PEMEX. PEMEX is a decentralized public entity of the Mexican government, and, therefore, the Mexican Government controls PEMEX, as well as its annual

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budget. The Mexican government may cut spending in the future. These cuts could adversely affect PEMEX’s annual budget and, thus, its ability to engage us or compensate us for our services. As a result, our business, financial condition, results of operations, and cash flows could be negatively affected.

Our contracts with PEMEX generally have initial terms of two years and, when they expire, we may be required to participate in an open auction to renew them. Revenues in our operations in Mexico are generated under our contracts with PEMEX. Most of our 2014 revenues are derived from four contracts which cover compression services, well monitoring services and automated sand separation services. Approximately 20% of our 2014 revenues are estimated to be derived from our Mexican operations. Any failure by us to renew our existing contracts with PEMEX or renew them on favorable terms could adversely affect our business, financial condition, results of operations, and cash flows.

Escalating security disruptions in regions of Mexico served by us could adversely affect our Mexican operations, and, as a result, the levels of revenue and operating cash flow from our Mexican operations could be reduced.

During the past several years, incidents of security disruptions throughout many regions of Mexico have increased. Drug-related gang activity has grown in Mexico. Certain incidents of violence have occurred in regions served by us and have resulted in the interruption of our operations, and these interruptions could continue or increase in the future. To the extent that such security disruptions continue or increase, our operations will continue to be affected, and the levels of revenue and operating cash flow from our Mexican operations could be reduced.

Our sales to and operations in foreign countries expose us to additional risks and uncertainties, including with respect to U.S. trade and economic sanctions, export control laws and the Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws. If we are not in compliance with applicable legal requirements, we may be subject to civil or criminal penalties and other remedial measures that could have a material impact on our business.

We have significant operations in Mexico and Canada and a growing presence in certain countries in South America, Eastern Europe, and the Asia-Pacific region. A portion of our expected future growth includes expansion in certain countries in these regions. Foreign operations carry special risks. Our operations in the countries in which we currently operate and those countries in which we may operate in the future, could be adversely affected by:

In particular, our sales and operations are subject to laws and regulations restricting activities involving certain countries that are subject to U.S. sanctions imposed by the Office of Foreign Assets Control (“OFAC”). We are also subject to the FCPA, which prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment, and other

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laws concerning our international operations. The FCPA’s foreign counterparts contain similar prohibitions, although varying in both scope and jurisdiction. We operate in parts of the world that have experienced governmental corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.

We have a system of formal controls and procedures to maintain our compliance with the FCPA, OFAC sanctions, export controls, and similar laws and regulations. We are currently in the process of planning to implement that system with respect to CSI. While we do not believe that CSI was in violation of any of the aforementioned laws or regulations, including with respect to historic sales to customers in Mexico and the Republic of the Union of Myanmar (also referred to as Myanmar or Burma), it is possible that we could discover such violations in the process of our integration. The implementation of such procedures may be time consuming and expensive, and could result in the discovery of issues or violations with respect to the foregoing by us or our, or CSI’s, employees, independent contractors, subcontractors or agents of which we were previously unaware.

If we violate, or discover that CSI has violated, any of these regulations, significant administrative, civil, and criminal penalties could be assessed on us. In addition, foreign governments and agencies often establish permit and regulatory standards different from those in the U.S. If we cannot obtain foreign regulatory approvals or cannot obtain them when we expect, our growth and profitability from international operations could be adversely affected.

We may be unable to grow successfully through future acquisitions or to successfully manage future growth and we may not be able to achieve the expected benefits of and integrate the businesses we may acquire effectively, which may impact our operations and limit our ability to increase distributions to our unitholders.

From time to time, we may choose to make business acquisitions to pursue market opportunities, increase our existing capabilities and expand into new areas of operations. We may not be able to identify attractive acquisition opportunities or successfully acquire identified targets. In addition, we may not achieve the expected benefits of or be successful in integrating any future acquisitions into our existing operations, which may result in unforeseen operational difficulties or diminished financial performance or require a disproportionate amount of attention from our general partner’s personnel. Even if we are successful in integrating future acquisitions into our existing operations, we may not derive the benefits, such as operational or administrative synergies, that we expect from such acquisitions, which may result in the commitment of our capital resources without the expected returns on such capital. Furthermore, competition for acquisition opportunities may escalate, increasing our cost of making acquisitions or causing us to refrain from making acquisitions. Our inability to make acquisitions or to achieve the expected results of and integrate successfully future acquisitions into our existing operations may impact our operations and limit our ability to increase distributions to our unitholders.

Our ability to manage and grow our business effectively and provide quality services and products to our customers may be adversely affected if our general partner loses its management or is unable to retain trained personnel.

We rely primarily on the executive officers and other senior management of our general partner to manage our operations and make decisions on our behalf. Our ability to provide quality services and products depends upon our general partner’s ability to hire, train, and retain an adequate number of trained personnel. The departure of any of our general partner’s executive officers or other senior management could have a significant negative effect on our business, operating results, financial condition, and our ability to compete effectively in the marketplace. We operate in an industry characterized by highly competitive labor markets, and, similar to many of our competitors, we have experienced high employee turnover in certain regions. It is possible that our labor expenses could increase if there is a shortage in the supply of skilled supervisors, engineers and other professionals. Our general partner may be unable to maintain an adequate skilled labor force necessary for us to operate efficiently and to support our growth strategy. Failure to do so could impair our ability to operate efficiently and to retain current customers and attract prospective customers, which could cause our business to

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suffer materially. Additionally, increases in labor expenses may have an adverse impact on our operating results and may reduce the amount of cash available for distribution to our unitholders.

The employees conducting our operations in Mexico and Argentina are party to collective labor agreements, and a prolonged work stoppage of our operations in Mexico or Argentina could adversely impact our revenues, cash flows and net income.

The personnel conducting our operations in Mexico are currently subject to ten collective labor agreements. These ten collective labor agreements consist of “evergreen” contracts that have no expiration date and whose terms remain in full force and effect from year-to-year, unless the parties agree to negotiate new terms. The employees subject to these “evergreen” agreements may, however, request a renegotiation of their employee compensation terms on an annual basis or a renegotiation of the entire agreement on a biannual basis, although we are not required to honor any such request. The personnel conducting operations in Argentina are also subject to collective labor agreements. We have not experienced work stoppages in Mexico or Argentina in the past, but cannot guarantee that we will not experience work stoppages in the future. A prolonged work stoppage could adversely impact our revenues, cash flows and net income.

Our growing operations in Argentina expose us to the changing economic and political environment in that country, including changing regulations governing the repatriation of cash generated from our operations in Argentina.

The current economic and political environment in Argentina and the recent devaluation of the Argentine peso have created increased economic instability for foreign investment in Argentina. Additional currency adjustment may be necessary to help boost the current Argentina economy, but may be accompanied by fiscal and monetary tightening, including restrictions on the purchase of U.S. dollars in Argentina.

As a result of our expanding operations in Argentina, consolidated revenues from Argentina have increased over the past three years. As of June 30, 2014, approximately $2.1 million of our consolidated cash balance was in bank accounts in Argentina, and the process of repatriating this cash to the U.S. is growing increasingly complex and uncertain. There can be no assurances that our growing Argentina operations will not expose us to the loss of liquidity, foreign exchange losses, and other potential financial impacts.

Our ability to grow in the future may be dependent on our ability to access external expansion capital.

We distribute to our unitholders all of our available cash after paying expenses and establishing prudent operating reserves. As of March 31, 2014, pro forma to give effect to the Transactions, our cash and cash equivalents was approximately $37.0 million. If our cash balances are insufficient to fund future growth opportunities, we expect that we will rely primarily upon external financing sources, including borrowings under our New Credit Agreement and the issuance of debt and equity securities, to fund such growth. To the extent we are unable to efficiently finance growth externally, our cash distribution policy will significantly impair our ability to grow. To the extent we issue additional partnership units in connection with our growth, the payment of distributions on those additional partnership units may increase the risk that we will be unable to maintain or increase our per unit distribution. There are no limitations in our Partnership Agreement or our Existing Credit Agreement, and there will be no limitations in our New Credit Agreement, on our ability to issue additional partnership units, including partnership units ranking senior to the common units.

An impairment of goodwill could reduce our earnings.

In connection with the IPO, our Predecessor contributed approximately $72.2 million of goodwill to us. We expect to acquire approximately $166.1 million of additional goodwill in connection with the pending CSI Acquisition. Goodwill is recorded when the purchase price of a business exceeds the fair market value of the tangible and separately measurable intangible net assets. GAAP requires us to test goodwill for impairment on an

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annual basis or when events or circumstances occur indicating that goodwill might be impaired. Any event that causes a reduction in demand for our services or products could result in a reduction of our estimates of future cash flows and growth rates in our business. These events could cause us to record impairments of goodwill. If we determine that any of our goodwill is impaired, we will be required to take an immediate charge to earnings with a corresponding reduction of partners’ capital and increase in balance sheet leverage as measured by debt to total capitalization.

Our exposure to currency exchange rate fluctuations may result in fluctuations in our cash flows and could have an adverse effect on our results of operations.

Because we have international operations a portion of our business is conducted in foreign currencies. We are exposed to currency exchange rate fluctuations that could have an adverse effect on our results of operations. If a foreign currency weakened significantly, we would be required to convert more of that foreign currency to U.S. dollars to satisfy our obligations, which would cause us to have less cash available for distribution. A significant strengthening of the U.S. dollar could result in an increase in our financing expenses and could materially affect our financial results under GAAP. Because we report our operating results in U.S. dollars, changes in the value of the U.S. dollar also result in fluctuations in our reported revenues and earnings. A material increase in the value of these foreign currencies relative to the U.S. dollar would adversely affect our cash flows and net income.

An increase in interest rates may cause the market price of our common units to decline.

Like all equity investments, an investment in our common units is subject to certain risks. Borrowings under our New Credit Agreement will bear interest at variable rates. If market interest rates increase, such variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow and ability to make cash distributions. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.

We are subject to environmental regulation, and changes in these regulations could increase our costs or liabilities.

We are subject to federal, state, local, and foreign laws and regulatory standards, including laws and regulations regarding the discharge of materials into the environment, emission controls, and other environmental protection and occupational health and safety concerns. Environmental laws and regulations may, in certain circumstances, impose strict and joint and several liability for environmental contamination, rendering us liable for remediation costs, natural resource damages, and other damages resulting from our ownership of property or conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners or operators or other third parties. In addition, where contamination may be present, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury, property damage, and recovery of response costs. Remediation costs and other damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing environmental laws and regulations or the adoption of new environmental laws and regulations could be substantial and could adversely affect our financial condition or results of operations. Moreover, failure to comply with these environmental laws and regulations, may result in the imposition of administrative, civil and criminal penalties, and the issuance of injunctions delaying or prohibiting operations.

The U.S. Environmental Protection Agency (the “EPA”) is performing a study of the environmental impact of hydraulic fracturing, a process used by the oil and natural gas industry in the development of certain oil

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and natural gas reservoirs. Specifically, the EPA is reviewing the impact of hydraulic fracturing on drinking water resources and has published proposed guidance for the permitting of hydraulic fracturing using diesel fuels. Certain environmental and other groups have suggested that additional federal, state and local laws and regulations may be needed to more closely regulate the hydraulic fracturing process. We cannot predict whether any federal, state, or local laws or regulations will be enacted regarding hydraulic fracturing, and, if so, what actions any such laws or regulations would require or prohibit. If additional levels of regulation or permitting requirements were imposed on oil and natural gas operators through the adoption of new laws and regulations, the domestic demand for our services in areas in shale reservoir markets could be decreased.

We routinely deal with natural gas, oil, and other petroleum products. Hydrocarbons or other hazardous wastes may have been released during our operations or by third parties on wellhead sites where we provide services or store our equipment or on or under other locations where wastes have been taken for disposal. These properties may be subject to investigatory, remediation, and monitoring requirements under foreign, federal, state, and local environmental laws and regulations.

The EPA has adopted regulations under the Clean Air Act to control emissions of hazardous air pollutants from reciprocal internal combustion engines and more recently the EPA adopted regulations that establish air emission controls for natural gas and natural gas liquids production, processing and transportation activities, including New Source Performance Standards as well as emission standards to address hazardous air pollutants. Certain CSI compressors are subject to these new requirements and additional control equipment and maintenance operations are required. While we do not believe that compliance with current regulatory requirements will have a material adverse effect on the business, additional regulations could impose new air permitting or pollution control requirements on our equipment that could require us to incur material costs.

The modification or interpretation of existing environmental laws or regulations, the more vigorous enforcement of existing environmental laws or regulations, or the adoption of new environmental laws or regulations may also adversely affect oil and natural gas exploration and production, which in turn could have an adverse effect on us.

Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in increased operating costs and reduced demand for the oil and natural gas our customers produce, while the physical effects of climate change could disrupt production and cause us to incur costs in preparing for or responding to those effects.

The EPA has determined that greenhouse gases (“GHGs”) present an endangerment to public health and the environment because, according to the EPA, they contribute to global warming and climate change. As a result, the EPA has begun to regulate certain sources of greenhouse gases, including air emissions associated with oil and natural gas production particularly as they relate to the hydraulic fracturing of natural gas wells. In addition, the EPA has issued regulations requiring the reporting of greenhouse gas emissions from certain sources, including petroleum refineries and certain oil and natural gas production facilities, on an annual basis.

In March 2014, the Obama Administration announced a strategy to address methane emissions, including through reduction of methane emissions from the oil and gas industry. Pursuant to the strategy, in April 2014, the EPA released white papers evaluating potentially significant sources of methane, including compressors, as well as possible control technologies. Based on these white papers and public comments, the EPA may develop additional regulations that could be implemented by the end of 2016. At this time we cannot predict the impact of any laws or regulations relating to methane emissions on our equipment, our operations or our customers’ operations, but such laws or regulations could require us to incur material costs, or result in reduced demand for our services.

The adoption and implementation of any regulations imposing reporting obligations on, or limiting emissions of greenhouse gases from, our equipment and operations could require us to incur costs to reduce

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emissions of GHGs associated with our operations. Further, U.S. Congress has considered and almost one-half of the states have adopted legislation that seeks to control or reduce emissions of GHGs from a wide range of sources. Any such legislation could adversely affect demand for the oil and natural gas our customers produce and, in turn, demand for our services. Finally, it should be noted that some scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods, and other climatic events; if any such effects were to occur, they could have an adverse effect on our operations and cause us to incur costs in preparing for or responding to those effects.

We do not insure against all potential losses and could be seriously harmed by unexpected liabilities.

Our operations are subject to inherent risks such as vehicle accidents, equipment defects, malfunctions and failures, as well as other incidents that result in releases or uncontrolled flows of gas, oil, well fluids, fires, or explosions. These risks could expose us to substantial liability for personal injury, death, property damage, pollution, and other environmental damages. Our insurance may be inadequate to cover our liabilities. Further, insurance covering the risks we face or in the amounts we desire may not be available in the future, or, if available, the premiums may not be commercially justifiable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur liability at a time when we did not maintain liability insurance, our business, results of operations, and financial condition could be adversely affected. In addition, we do not maintain business interruption insurance.

We face risks related to certain information technology projects.

During 2013, we began certain software system conversion projects designed to improve our operational and financial system efficiencies. The success of these projects is important to our ability to grow our business in the future. These information technology projects have involved a significant use of our internal resources as well as consulting expertise. We expect these system conversion projects will be completed during 2014. There can be no assurance that these project efforts will achieve all of our objectives. In addition, the cost and time necessary to complete these projects may be greater than what we estimate.

Additional Risks Related to the CSI Acquisition

We may not have accurately estimated the benefits to be realized from the CSI Acquisition.

The expected benefits from the pending CSI Acquisition may not be realized if our estimates of the potential net cash flows associated with the assets are materially inaccurate or if we fail to identify operating problems or liabilities prior to closing. We have performed an inspection of assets to be acquired, which we believe to be generally consistent with industry practices. However, the accuracy of our assessments of the assets and our estimates are inherently uncertain. There could also be environmental or other problems that are not necessarily observable even when the inspection is undertaken. If problems are identified after closing of the CSI Acquisition, the stock purchase agreement provides for limited recourse against the seller.

In addition, our estimate of the required working capital for the CSI business and targeted working capital set forth in the stock purchase agreement may not be sufficient for actual working capital needs of the CSI business. If our estimate and the targeted working capital was lower than the actual needs of the acquired business, we may be required to fund such additional working capital needs out of other operating cash flows or borrowings under our New Credit Agreement.

The CSI Acquisition could result in unexpected disruptions on the combined business.

In response to the announcement of the CSI Acquisition, either our customers or CSI’s customers may delay or defer purchasing decisions. Any delay or deferral of purchasing decisions by customers could negatively

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affect our combined business operations. Similarly, current or prospective employees of us or of CSI may experience uncertainty about their future roles with the combined entity until after the CSI Acquisition is completed. This may adversely affect our ability to attract and retain key management, marketing and technical personnel. In addition, the diversion of the attention of our respective management teams away from day-to-day operations during the negotiation and pendency of the CSI Acquisition could have an adverse effect on the financial condition and operating results of either us or CSI.

If CSI or we fail to obtain all required consents and waivers, third parties may terminate or alter existing contracts.

Certain agreements with suppliers, customers, licensors or other business partners may require CSI or us to obtain the consent, approval, waiver or authorization of these other parties in connection with the CSI Acquisition. We and the selling stockholder of CSI have agreed to use commercially reasonable, good faith efforts to obtain all required consents, waivers, approvals and authorizations. However, we cannot assure you that we will be able to obtain all of the required consents, waivers, approvals and authorizations, and the failure to do so could have a material adverse effect on the business of the combined company after the CSI Acquisition.

Even if this offering is completed, the CSI Acquisition may not be consummated, which could have an adverse impact on our cash available for distribution.

The CSI Acquisition is expected to close on or about August 4, 2014, but is subject to a number of closing conditions. Satisfaction of many of these conditions is beyond our control. If these conditions are not satisfied or waived, the CSI Acquisition will not be completed. Certain of the conditions that remain to be satisfied include, but are not limited to:

As a result, the CSI Acquisition may not close as scheduled, or at all, or close without material adjustment to the purchase price. The closing of this offering is not conditioned on, and is expected to be consummated before, the closing of the CSI Acquisition. Accordingly, if you decide to purchase common units in the offering, you should be willing to do so whether or not we complete the CSI Acquisition.

Failure to complete the CSI Acquisition or any delays in completing the CSI Acquisition could have an adverse impact on our future business and operations and our cash available for distribution and could negatively impact the price of our common units.

Failure to successfully combine our business with the CSI business may adversely affect our future results:

The consummation of the CSI Acquisition involved potential risks, including:

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If we consummate the CSI Acquisition and if these risks or other anticipated or unanticipated liabilities were to materialize, any desired benefits of the CSI Acquisition may not be fully realized, if at all, and our future business operations and our cash available for distribution could be negatively impacted.

We may not be able to obtain debt financing for the CSI Acquisition on expected or acceptable terms, which could make the CSI Acquisition less accretive.

We intend to finance the CSI Acquisition and related fees and expenses predominantly with the proceeds of this offering and the Notes Offering, and to the extent necessary or desirable, with borrowings under our New Credit Agreement, borrowings under the GP Term Loans, borrowings under the LP Bridge Loans and/or cash on hand. The assumptions underlying our estimate that the CSI Acquisition will be accretive to our distributable cash flow per common unit includes assumptions about the interest rate we will be able to obtain in connection with the issuance of the Senior Notes in the Notes Offering. We may not be able to issue the Senior Notes on expected or acceptable terms, in which case we would fund a portion of the CSI Acquisition with the through the Backstop Commitments, which would make the CSI Acquisition less accretive.

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USE OF PROCEEDS

We estimate that the net proceeds from this offering, after deducting the underwriters’ discounts and estimated offering expenses payable by us, will be approximately $352.8 million, including our general partner’s proportionate capital contribution of approximately $7.3 million to maintain its approximate 2.0% general partner interest in us. We intend to use the gross proceeds of this offering, along with estimated gross proceeds of approximately $350.0 million from the Notes Offering and initial borrowings under the New Credit Agreement as set forth in the estimated sources and uses of proceeds table below (in thousands):

Affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC are lenders under our Existing Credit Agreement and, accordingly, will receive a portion of the net proceeds from this offering. See “Underwriting.” The amount of borrowings outstanding under our Existing Credit Agreement, including $0.1 million of letters of credit, was approximately $37.9 million, as of July 17, 2014. Our outstanding borrowings under our Existing Credit Agreement were incurred in connection with working capital needs, letters of credit, capital expenditures and for general partnership purposes, including the repayment of the indebtedness under the Previous Credit Agreement.

Our Existing Credit Agreement matures on October 19, 2017. Our Existing Credit Agreement bears interest at a rate per annum equal to, at our option, either (a) LIBOR (adjusted to reflect any required bank reserves) for an interest period equal to one, two, three or six months (as we select) plus a margin of 2.25% per annum or (b) a base rate determined by reference to the highest of (1) the prime rate of interest announced from time to time by JPMorgan Chase Bank, N.A. or (2) LIBOR (adjusted to reflect any required bank reserves) for a one-month interest period on such day, plus 2.5% per annum. The weighted average interest rate on borrowings outstanding as of December 31, 2013, was 2.5625% per annum.

Our Existing Credit Agreement will be terminated in connection with our entry into the New Credit Agreement and initial borrowings thereunder. Each of the joint book-running managers and Capital One Securities Inc. or their affiliates, who are underwriters, will also be lenders under the New Credit Agreement. Bank of America, N.A. will also serve as administrative and collateral agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated (or one of its affiliates) will act as arranger under the New Credit Agreement, and receive customary fees in connection therewith. See “Underwriting.”

The consummation of this offering of common units is not contingent upon the closing of our pending CSI Acquisition. Concurrent with this offering of common units, we are conducting the Notes Offering. Please read “Summary—The Transactions.”

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CAPITALIZATION

The following table sets forth our unaudited capitalization and cash and cash equivalents as of March 31, 2014:

This information is unaudited and should be read in conjunction with, and is qualified in its entirety by reference to, “Use of Proceeds,” “Our Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “CSI’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the pro forma and historical financial statements and the accompanying notes included elsewhere in this prospectus supplement. The following table does not reflect any common units that may be sold to the underwriters upon the exercise of their option to purchase additional common units.

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UNAUDITED PRO FORMA, AS ADJUSTED CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

Our unaudited pro forma condensed combined balance sheet as of March 31, 2014 and our unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2014 and the year ended December 31, 2013 and the twelve months ended March 31, 2014, reflect the following transactions:

We expect to incur approximately $8.0 million of acquisition costs in connection with the pending CSI Acquisition.

Adjustments for the above-listed transactions on an individual basis are presented in the notes to the unaudited pro forma financial statements. Certain information normally included in the financial statements prepared in accordance with GAAP has been condensed or omitted in accordance with the rules and regulations of the SEC. The unaudited pro forma financial statements and accompanying notes should be read in conjunction with the historical financial statements and related notes thereto appearing elsewhere herein. The unaudited last twelve months financial data for the twelve months ended March 31, 2014 has been calculated by subtracting the data for the three months ended March 31, 2013 from the data for the year ended December 31, 2013, and adding the data for the three months ended March 31, 2014.

The unaudited pro forma, as adjusted, condensed combined financial statements do not purport to be indicative of the results of operations or financial position that we actually would have achieved if the transactions had been consummated on the dates indicated, nor do they project our results of operations or financial position for any future period or date.

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COMPRESSCO PARTNERS, L.P.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 31, 2014

(in thousands)