SEC Info - Cypress Environmental Partners, L.P.

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		Alternative Formats (Word, et al.) Controls and Procedures Defaults upon Senior Securities Exhibits Financial Information Item 1 Item 1A Item 2 Item 3 Item 4 Item 5 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to the Unaudited Condensed Consolidated Financial Statements Other Information Part I -- Financial Information Part Ii -- Other Information Quantitative and Qualitative Disclosures about Market Risk Risk Factors Signatures Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 Unaudited Condensed Consolidated Financial Statements Unaudited Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2021 and 2020 Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020 Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 Unaudited Condensed Consolidated Statements of Owners' Equity Three and Six Months Ended June 30, 2021 and 2020 Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Part I -- Financial Information
"	Item 1
"	Unaudited Condensed Consolidated Financial Statements
"	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020
"	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020
"	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020
"	Unaudited Condensed Consolidated Statements of Owners' Equity Three and Six Months Ended June 30, 2021 and 2020
"	Unaudited Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2021 and 2020
"	Notes to the Unaudited Condensed Consolidated Financial Statements
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures about Market Risk
"	Item 4
"	Controls and Procedures
"	Part Ii -- Other Information
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults upon Senior Securities
"	Mine Safety Disclosures
"	Item 5
"	Item 6
"	Exhibits
"	Signatures

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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. i 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). i Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☐ i Non-accelerated filer ☒ Smaller reporting company i ☒ Emerging growth company i ☐

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 ☐ i No ☒

Unless the context otherwise requires, references in this Form 10-Q to “Cypress Environmental Partners, L.P.,” “the partnership,” “we,” “our,” “us,” or like terms, refer to Cypress Environmental Partners, L.P. and its subsidiaries.

The information discussed in this Quarterly Report on Form 10-Q includes “forward-looking statements.” These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks, and uncertainties, and we can give no assurance that such expectations or assumptions will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements are described under “Item 1A – Risk Factors” and “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 23, 2021, and in this report. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Quarterly Report on Form 10-Q and speak only as of the date of this Quarterly Report on Form 10-Q. Other than as required under the securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control, including, among other things, the risk factors discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 and this Quarterly Report on Form 10-Q. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil and natural gas, production volumes, capital expenditures, weather, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2020 and this Quarterly Report on Form 10-Q, all of which are difficult to predict. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed may or may not occur. See “Cautionary Remarks Regarding Forward-Looking Statements” in the front of this Quarterly Report on Form 10-Q.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a discussion of our business, including a general overview of our properties, our results of operations, our liquidity and capital resources, and our quantitative and qualitative disclosures about market risk broken down into three segments: (1) our Inspection Services (“Inspection Services”) segment comprises the TIR Entities; (2) our Pipeline & Process Services (“Pipeline & Process Services”) segment comprises our 51% ownership in Cypress Brown Integrity, LLC and; (3) our Water and Environmental Services (“Environmental Services”) segment comprises our water treatment facilities. The financial information for the Inspection Services, Pipeline & Process Services and Environmental Services segments is included in “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the interim financial statements and related notes included elsewhere in this report and prepared in accordance with accounting principles generally accepted in the United States of America and in our Consolidated Financial Statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020.

We are a growth-oriented master limited partnership formed in September 2013. We offer essential services that help protect the environment and ensure sustainability. We provide a wide range of environmental services including independent inspection, integrity, and support services for pipeline and energy infrastructure owners and operators and public utilities. We also provide water pipelines, hydrocarbon recovery, disposal, and water treatment services. The Inspection Services segment comprises the operations of our TIR Entities and the Pipeline & Process Services segment comprises the operations of CBI. We also provide water treatment and other water and environmental services to U.S. onshore oil and natural gas producers and trucking companies through our Environmental Services segment.

As of June 30, 2021, Holdings and its affiliates own 64% of our common units. Holdings’ ownership group also owns 100% of the General Partner and certain incentive distribution rights (although no such incentive distributions have been paid to date), and an affiliate of Holdings owns 100% of the preferred units.

We are party to an omnibus agreement with Holdings and other related parties. The omnibus agreement provides for, among other things, our right of first offer on Holdings’ and its subsidiaries’ assets used in, and entities primarily engaged in, providing water treatment and other water and environmental services. So long as Holdings controls our General Partner, the omnibus agreement will remain in full force and effect, unless we and Holdings agree to terminate it sooner. If Holdings ceases to control our General Partner, either party may terminate the omnibus agreement. We and Holdings may agree to further amend the omnibus agreement; however, amendments that the General Partner determines are adverse to our unitholders will also require the approval of the Conflicts Committee of our Board of Directors.

The Inspection Services segment generates revenue primarily by providing essential environmental services, including inspection and integrity services on a variety of infrastructure assets, such as midstream pipelines, gathering systems, and distribution systems. Services include nondestructive examination, in-line inspection support, pig tracking, survey, data gathering, and supervision of third-party contractors. Our revenues in this segment are driven primarily by the number of inspectors who perform services for our customers and the fees that we charge for those services, which depend on the type, skills, technology, equipment, and number of inspectors used on a particular project, the nature of the project, and the duration of the project. The number of inspectors engaged on projects is driven by the type of project, the age and condition of customers’ assets including pipelines, gas plants, compression stations, storage facilities, and gathering and distribution systems including the legal and regulatory requirements relating to the inspection and maintenance of those assets. We also bill our customers for per diem charges, mileage, and other reimbursement items. Revenue and costs in this segment are subject to seasonal variations and interim activity may not be indicative of yearly activity, considering many of our customers develop yearly operating budgets and enter into contracts with us during the winter season for work to be performed during the remainder of the year. Additionally, inspection work throughout the United States during the winter months (especially in the northern states) may be hampered or delayed due to inclement weather. The first and fourth quarters of each year are typically slower than the second and third quarters, due to weather conditions and customers’ budgeting cycles.

The Pipeline & Process Services segment generates revenue primarily by providing essential environmental services including hydrostatic testing, chemical cleaning, water transfer and recycling, pumping, pigging, flushing, filling, dehydration, caliper runs, in-line inspection tool run support, nitrogen purging, and drying services to energy companies and pipeline construction companies. We perform services on newly-constructed and existing pipelines and related infrastructure. We generally charge our customers in this segment on a fixed-bid basis, depending on the size and length of the pipeline being tested, the complexity of services provided, and the utilization of our work force and equipment. Our results in this segment are driven primarily by the number of projects we are awarded and the nature and duration of the projects. Revenue and costs in this segment may be subject to seasonal variations and interim activity may not be indicative of yearly activity, considering that many of our customers develop yearly operating budgets and enter into contracts with us during the winter season for work to be performed during the remainder of the year. Additionally, field work during the winter months may be hampered or delayed due to inclement weather. The first and fourth quarters of each year are typically slower than the second and third quarters, due to weather conditions and customers’ budgeting cycles.

The Environmental Services segment owns and operates nine water treatment facilities with ten EPA Class II injection wells in the Bakken shale region of the Williston Basin in North Dakota. We wholly-own eight of these water treatment facilities and we own a 25% interest in the other facility. These water treatment facilities are connected to thirteen pipeline gathering systems, including two that we developed and own. We specialize in the treatment, recovery, separation, and disposal of waste byproducts generated during the lifecycle of an oil and natural gas well to protect the environment and our drinking water. All of the water treatment facilities utilize specialized equipment and remote monitoring to minimize the facilities’ downtime and increase the facilities’ efficiency for peak utilization. Revenue is generated on a fixed-fee per barrel basis for receiving, separating, filtering, recovering, processing, and injecting produced and flowback water. We also sell recovered oil, receive fees for pipeline transportation of water, and receive fees from a partially-owned water treatment facility for management and staffing services.

Our 2020 results were the worst in our short history following our best year in 2019. The financial results in 2020 were adversely affected by a significant decline in oil prices, which was driven in part by increased supply from Russia, Saudi Arabia, and other oil-producing nations as a result of a price war and in part by a significant decrease in demand as a result of the COVID-19 pandemic. The combination of these events led many of our customers to cancel planned construction projects and to defer regular maintenance projects whenever possible. The effects of these events placed significant financial pressures on the vast majority of our customers to reduce costs, which led some of our customers to aggressively pursue pricing concessions. We value our long-term customer relationships and worked closely with them to address this reality, which in turn required us to modify what pay we could offer to our valued inspectors. Despite the COVID-19 pandemic, we continued our field operations without any significant disruption in our service to our customers.

Previously, OPEC started a price war for market share in November 2014 that led to a downturn that lasted through 2017. The industry, our customers, and we benefitted from a rebound in 2018 and 2019. In the years leading into 2020, many companies had been active in constructing new energy infrastructure, such as pipelines, gas plants, compression stations, pumping stations, and storage facilities, which afforded us the opportunity to provide our inspection and integrity services on these projects. The commodity price decline in 2020 led our customers to change their budgets and plans, and to decrease their spending on capital expenditures. This, in turn, had an impact on regular maintenance work and the construction of new pipelines, gathering systems, and related energy infrastructure. Lower exploration and production activity also affected the midstream industry and led to delays and cancellations of projects. The volatility in crude oil prices is illustrated in the chart below, which shows the average monthly spot price for West Texas Intermediate crude oil from 2018 through June 2021:

Recognizing the impact of the COVID-19 pandemic, we took swift and decisive actions in 2020 to reduce overhead and other costs through a combination of salary reductions, reductions in workforce, and other cost-cutting measures. We elected to defer some discretionary capital expenditures and we remain focused on opportunities to reduce our working capital needs. In early 2021, we took additional actions to further reduce our costs with some additional reductions in workforce and furloughs. These actions have significantly lowered our general and administrative costs. While reducing certain costs, we have also made investments in personnel in our account management and business development teams, to position ourselves to take advantage of the market’s eventual recovery. In addition, the challenging market conditions notwithstanding, in May 2021 we prospectively restored the salaries of certain key employees that had accepted temporary salary reductions in 2020.

In light of the adverse market conditions, we made the difficult decision in July 2020 to temporarily suspend payment of common unit distributions. This has enabled us to retain more cash to manage our working capital and financing requirements during these challenging market conditions. Our credit facility, as amended in 2021, contains significant restrictions on our ability to pay cash distributions to common and preferred unitholders. As a result, we expect to use cash generated from operations for working capital to support revenue growth and to pay down debt.

The vaccination process for COVID-19 has progressed, which has likely been a leading factor in the recent recovery in demand for crude oil. The price of crude oil has increased in 2021, with the average daily spot price for West Texas Intermediate crude oil increasing from $48.35 per barrel at December 31, 2020 to $66.56 per barrel at August 9, 2021. We expect that a sustained increase in crude oil prices will lead customers to increase their maintenance and capital spending plans, although some of our customers have recently decreased their maintenance and capital spending plans. We continue to focus on winning new customers while supporting our existing customers.

Sales and business development remain one of our top priorities, and we are bidding on many projects with both existing and prospective new customers. The near-term recovery remains fragile, as market participants evaluate the risks associated with new variants of the coronavirus. Our customers continue to evaluate these changing circumstances. Historically, as commodity prices increase, customers begin to increase their spending, which increases our opportunities to provide services. Although higher commodity prices typically benefit our business, we typically experience a lag between when commodity prices increase and when our customers begin to increase their spending for inspection, integrity, and water treatment services. We believe there will be significant long-term demand for our services, and we continue our efforts to diversify our customer base. We have continued to invest in talent in the areas of account management and business development. We strive to position ourselves as a stable and reliable provider of high-quality services to our customer base.

In 2020 we made the strategic decision to pursue new inspection markets to diversify our inspection business to markets not tied to commodity prices. We have the expertise and systems to offer inspection services into new markets such as municipal water, sewer, bridges, electrical transmission, marine coatings, wind, solar, and hydroelectric. We have been bidding inspection jobs in these new markets and many of our inspectors and employees have the skills to offer services to these new markets. Over the long term, we hope to have the majority of our inspection revenue coming from these new services.

We believe government regulation under the new administration will continue to grow with a focus on protecting the environment. The U.S. Pipeline and Hazardous Materials Safety Administration (“PHMSA”) recently issued new rules that impose several new requirements on operators of onshore gas transmission systems and hazardous liquids pipelines. The new rules expand requirements to address risks to pipelines outside of environmentally sensitive and populated areas. In addition, the rules make changes to integrity management requirements, including emphasizing the use of in-line inspection technology. The new rules took effect on July 1, 2020 with various implementation phases over a period of years. We remain optimistic about the long-term demand for environmental services such as inspection services, integrity services, and water solutions, due to our nation’s aging pipeline infrastructure, and we believe we continue to be well-positioned to capitalize on these opportunities. The following charts summarize the age of pipelines in the United States, as developed from independent research and government data:

In 2018, Holdings completed an acquisition to further broaden our collective suite of environmental services. This acquisition provided entry into the municipal water industry, whereby we can offer our traditional inspection services, including corrosion and nondestructive testing services, as well as in-line inspection (“ILI”). Holdings’ next generation 5G ultra high-resolution magnetic flux leakage (“MFL”) ILI technology called EcoVision™ UHD, is capable of helping pipeline owners and operators better manage the integrity of their pipeline assets in both the municipal water and energy industries. We believe Holdings is the only technology provider today capable of offering this service to the large and diverse municipal water industry that provides drinking water to our communities. Holdings has been investing in building tools to serve different size pipelines. At some point in the future, this business may be offered to the Partnership when appropriate. We do not expect to acquire this business in the near term, although we continue to use our affiliation with this business as a cross-selling opportunity for our services.

Our parent company’s ownership interests continue to remain fully aligned with our unitholders, as our General Partner and insiders collectively own 76% of our total common and preferred units.

In March 2021, we entered into an amendment to our existing credit facility that extended the maturity date of the facility to May 2022, reduced the total borrowing capacity under the facility from $110.0 million to $75.0 million, and made the leverage ratio covenant temporarily less restrictive. In August 2021, we entered into another amendment to the credit facility that, among other things, removed certain financial statement ratio covenants for the remaining term of the facility and reduced the total capacity under the facility from $75.0 million to $70.0 million. We continue to have discussions with our lenders regarding our financing options beyond the May 2022 maturity date of our credit facility. It is possible that any future amendments, extensions, or replacements of the credit facility could further reduce the borrowing capacity under the credit facility, further limit our payment of distributions or add other new restrictions, which could further limit our ability to borrow for working capital to fund revenue growth and could also restrict our ability to borrow to fund capital expenditures. Future amendments, extensions, or replacements of the credit facility could also result in increased interest rates and bank fees. We expect to incur additional advisory fees in developing our financing plans. Further, we can make no assurances that we will be able to successfully extend the credit facility beyond the May 2022 maturity date. As part of our efforts to reduce our outstanding debt and working capital needs, we will consider asset sales and discontinuing certain service lines, which could result in impairments to long-lived assets in future periods.

Revenues of our Inspection Services segment decreased from $43.3 million during the three months ended June 30, 2020 to $29.4 million during the three months ended June 30, 2021, a decrease of 32%. At the end of the first quarter of 2020, the outbreak of the COVID-19 pandemic, combined with a significant decrease in crude oil prices resulting from reduced demand and an anticipated increase in supply from Saudi Arabia and Russia, led many of our customers to reduce their spending on capital expenditures and maintenance projects. Most projects that were already in process continued, despite the COVID-19 pandemic. However, many customers announced reductions in their capital expansion budgets and deferrals of planned construction projects, which significantly reduced our opportunities to generate revenue from inspection services. The lower level of activity continued into 2021, and many of our customers have not yet resumed significant spending on capital expansion. In 2021, a large majority of our revenues have been generated from services to utility customers and maintenance services to our customers in the energy industry, rather than from new construction projects. Services to public utility customers have represented over 50% of the Inspection Services segment’s revenues in 2021. We have seen slow and steady improvement in 2021, as our average monthly inspector headcount increased from 436 in January 2021 to 479 in June 2021. Gross margins in this segment decreased from $4.4 million during the three months ended June 30, 2020 to $3.4 million during the three months ended June 30, 2021, a decrease of 24%. This decrease resulted from lower revenues, partially offset by a higher gross margin percentage.

We expect customers to continue to conduct maintenance activities, many of which are government-mandated. However, many clients are deferring maintenance work whenever possible if they have the option. We believe our reputation developed over 18 years will give us a competitive advantage during this challenging industry downturn when some of our competitors may not survive.

We continue to bid on new inspection opportunities. We operate in a very large market, with more than 3,000 customer prospects who require federally and/or state-mandated inspection and integrity services. Our focus remains on maintenance and integrity work on existing pipelines, as well as work on new projects. The majority of our clients are large public companies with long planning cycles that lead to healthy backlogs of new long-term projects when market conditions warrant and existing pipeline networks that also require inspection and integrity services. We believe that regulatory requirements, coupled with the aging pipeline infrastructure, mean that our customers will require our inspection services regardless of commodity prices. However, any prolonged downturn in oil and natural gas prices could lead to reduced demand for our services.

Revenues of our Pipeline & Process Services segment decreased from $7.2 million during the three months ended June 30, 2020 to $1.4 million during the three months ended June 30, 2021, a decrease of 81%. Our Pipeline & Process Services segment remained busy during most of 2020, as hydrotesting is one of the last steps to be completed before a pipeline is placed into service, and a number of pipeline construction projects that began prior to the COVID-19 pandemic continued. However, the pandemic and the volatility in oil prices led to a significant reduction in the launch of new construction projects, and as a result there have been fewer hydrotesting projects to bid on than in the past. In early 2021, we implemented a cost reduction plan that included salary reductions, furloughs, and a reduction in workforce. Revenues reached a low of less than $0.1 million in January and February 2021 and increased in the following months. Our backlog of committed work remains weak.

Revenues of our Environmental Services segment decreased from $1.3 million during the three months ended June 30, 2020 to $1.1 million during the three months ended June 30, 2021, a decrease of 11%. Beginning in March 2020, volatility in commodity prices and market uncertainty due to the COVID-19 pandemic led to a significant reduction in activity by producers in North Dakota. Gross margins decreased from $0.8 million during the three months ended June 30, 2020 to $0.7 million during the three months ended June 30, 2021, a decrease of 14%.

Bakken Clearbrook oil pricing was under intense pressure during 2020, along with WTI oil prices. WTI oil prices decreased throughout the first half of 2020 before gradually increasing in the second half of the year. Pipeline capacity and storage constraints also adversely affected this market. Several prominent exploration and production customers elected to shut in their production instead of selling oil at the low market prices. According to a published rig count as of December 31, 2020, the Williston basin of the Bakken totaled 11 rigs, down 82% from its peak in 2019 of 61 rigs. During late 2020, the largest customer of one of our highest-volume facilities notified us of its decision to build its own facility and began sending most of its water to that facility in February 2021.

WTI oil prices began increasing in December 2020 and continued to increase in 2021, reaching $73.52 per barrel at June 30, 2021. According to a published rig count, the number of rigs in the Williston basin increased modestly from 11 rigs at December 31, 2020 to 18 rigs at June 30, 2021. We expect this increase in oil prices in the first half of 2021 to lead to an increase in exploration and production activity in the Bakken, although producers have been slow to increase production. We recently completed a new contract with a public energy company to connect its pipeline to one of our water treatment facilities, and we began receiving water from the pipeline in October 2020. Our monthly volume reached a low in February 2021 and increased in the following months. Although market conditions have been adverse, we continue to benefit from the fact that 99% of our water in 2021 was produced water from existing wells (rather than flowback water from new wells) and 61% of our water in 2021 was from pipelines. We also took steps to reduce our operating costs. We generate a portion of our revenue from a contract to operate a facility that we own a 25% interest in. The majority owner of the facility has notified us of its intention to reopen negotiations over the pricing of this contract once the contract expires in November 2022.

In July 2020, in relation to an ongoing lawsuit challenging various federal authorizations for the Dakota Access Pipeline (“DAPL”), a federal court ordered that the DAPL be shut down and drained of oil by August 5, 2020. The owners of the pipeline appealed the decision, and a federal appeals court stayed the July 2020 order to close the pipeline and ordered further briefing on the issue. The DAPL is allowed to continue operating until the United States Army Corps of Engineers completes its environmental assessment, which is planned to be completed by March 2022. The DAPL transports approximately 40% of the crude oil that is produced in the Bakken region. The closure of the pipeline would likely have an adverse effect on overall production in the Bakken, which would likely reduce the volume of water delivered to our facilities. In addition, the uncertainty associated with this litigation may reduce E&P companies’ incentive to invest in new production in the Bakken.

The following table summarizes our Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020:

See the detailed discussion of revenues, costs of services, gross margin, general and administrative expense and depreciation, amortization and accretion by reportable segment below. The following is a discussion of significant changes in the non-segment related corporate other income and expenses during the respective periods.

General and administrative – corporate. General and administrative expense – corporate includes equity-based compensation expense for certain employees and certain administrative expenses not directly attributable to the operating segments.

Interest expense. Interest expense primarily consists of interest on borrowings under our Credit Agreement, as well as amortization of debt issuance costs and unused commitment fees. Interest expense decreased from the six months ended June 30, 2020 to the six months ended June 30, 2021 due to a lower average debt balance outstanding, which was partially offset by an increase in average interest rate. Average debt outstanding was $55.3 million for the six months ended June 30, 2021, compared to $89.6 million for the six months ended June 30, 2020. The average interest rate was 4.43% for the six months ended June 30, 2021, compared to 4.25% for the six months ended June 30, 2020.

Foreign currency gains (losses). Our Canadian subsidiary has certain intercompany payables to our U.S.-based subsidiaries. Such intercompany payables and receivables among our consolidated subsidiaries are eliminated on our Unaudited Condensed Consolidated Balance Sheets. We report currency translation adjustments on these intercompany payables and receivables within foreign currency gains (losses) in our Unaudited Condensed Consolidated Statements of Operations. The net foreign currency gains during the six months ended June 30, 2021 resulted from the appreciation of the Canadian dollar relative to the U.S. dollar (the value of the Canadian dollar increased 3% relative to the U.S. dollar during the six months ended June 30, 2021). The net foreign currency losses during the six months ended June 30, 2020 resulted from the depreciation of the Canadian dollar relative to the U.S. dollar (the value of the Canadian dollar decreased 4% relative to the U.S. dollar during the six months ended June 30, 2020).

Other, net. Other income includes income associated with our 25% interest in a water treatment facility, which we account for under the equity method.

Income tax expense (benefit). Our income tax provision relates primarily to (1) our U.S. corporate subsidiaries that provide services to public utility customers, which do not appear to fit within the definition of qualified income as it is defined in the Internal Revenue Code, Regulations, and other guidance, which subjects this income to U.S. federal and state income taxes, (2) our Canadian subsidiary, which is subject to Canadian federal and provincial income taxes, and (3) certain other state income taxes, including the Texas franchise tax. Income tax expense (benefit) was ($0.1) million and $0.3 million, respectively, for the six months ended June 30, 2021 and 2020. The decrease in income tax expense from the six months ended June 30, 2020 to the six months ended June 30, 2021 was primarily due to a pre-tax loss during the six months ended June 30, 2021 for our corporate subsidiary that provides services to public utility customers.

As a publicly-traded partnership, we are subject to a statutory requirement that 90% of our total gross income represents “qualifying income” (as defined by the Internal Revenue Code, related Treasury Regulations, and Internal Revenue Service pronouncements), determined on a calendar-year basis. Income generated by taxable corporate subsidiaries is excluded from this calculation. During the six months ended June 30, 2021, substantially all of our gross income, which consisted of approximately $29.3 million of revenue (exclusive of the income generated by our taxable corporate subsidiaries), represented “qualifying income”.

Net loss attributable to noncontrolling interests. We own a 51% interest in CBI and a 49% interest in CF Inspection. The accounts of these subsidiaries are included within our consolidated financial statements. The portion of the net (loss) income of these entities that is attributable to outside owners is reported in net (loss) income attributable to noncontrolling interests in our Unaudited Condensed Consolidated Statements of Operations.

Net income attributable to preferred unitholder. In 2018, we issued and sold $43.5 million of preferred equity. The holder of the preferred units is entitled to an annual return of 9.5% on this investment. The earnings attributable to the preferred unitholder reflects this return.

The following table summarizes the operating results of the Inspection Services segment for the three months ended June 30, 2021 and 2020.

Revenue. Revenue decreased $13.9 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due to a decrease in the average number of inspectors engaged (a decrease of 227 inspectors accounting for $14.1 million of the revenue decrease) partially offset by an increase in the average revenue billed per inspector (offsetting $0.2 million of the revenue decrease). In March 2020, the outbreak of the COVID-19 pandemic, combined with a significant decrease in crude oil prices resulting from reduced demand and an anticipated increase in supply from Saudi Arabia and Russia, led many of our customers to change their budgets and plans. Many customers significantly reduced their capital expansion plans, which reduced their need for inspection services. Although oil prices have since recovered to pre-pandemic levels, customers have been slow to resume spending on capital expansion projects. As a result, a large majority of our revenues in 2021 have been generated from services to utility customers and maintenance services to our customers in the energy industry, rather than from new construction projects. Revenues of our subsidiary that serves public utility customers were $3.4 million higher in second quarter 2021 than in second quarter 2020, due primarily to an increase in the number of inspectors serving our two largest utility customers. For our other service lines, revenues in second quarter 2021 were significantly lower than revenues in second quarter 2020, including revenues of our nondestructive examination service line, which decreased by $1.2 million. The increase in average revenue per inspector is due to changes in customer mix. Fluctuations in the average revenue per inspector are expected, given that we charge different rates for different types of inspectors and different types of inspection services.

Costs of services. Costs of services decreased $12.8 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily related to a decrease in the average number of inspectors employed during the period.

Gross margin. Gross margin decreased $1.1 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The gross margin percentage was 11.5% in 2021, compared to 10.2% in 2020. The increase in gross margin percentage is due to changes in the mix of services provided. During the second quarter of 2021, we generated a larger percentage of our revenue from higher-margin service lines, such as services to public utility customers and in-line inspection support.

General and administrative. General and administrative expenses decreased by $0.4 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due primarily to a decrease of $0.4 million in employee compensation expense through a combination of salary reductions and reductions in workforce. The decrease in general and administrative expenses was also due to a decrease of $0.1 million in allocated corporate overhead costs and a decrease of $0.1 million in various other expenses. These decreases were partially offset by an increase of $0.2 million in legal expense, due primarily to costs associated with Fair Labor Standards Act employment litigation and certain other employment-related lawsuits and claims.

Depreciation, amortization and accretion. Depreciation, amortization and accretion expense during the three months ended June 30, 2021 was not significantly different from depreciation, amortization and accretion expense during the three months ended June 30, 2020.

Operating (loss) income. Operating (loss) income decreased by $0.7 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due primarily to a decrease in gross margin, which was partially offset by a decrease in general and administrative expense.

The following table summarizes the operating results of the Inspection Services segment for the six months ended June 30, 2021 and 2020.

Revenue. Revenue decreased $52.4 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due to a decrease in the average number of inspectors engaged (a decrease of 398 inspectors accounting for $47.4 million of the revenue decrease) and a decrease in the average revenue billed per inspector (accounting for $4.9 million of the revenue decrease). In March 2020, the outbreak of the COVID-19 pandemic, combined with a significant decrease in crude oil prices resulting from reduced demand and an anticipated increase in supply from Saudi Arabia and Russia, led many of our customers to change their budgets and plans. Many customers significantly reduced their capital expansion plans, which reduced their need for inspection services. Although oil prices have since recovered to pre-pandemic levels, customers have been slow to resume spending on capital expansion projects. As a result, a large majority of our revenues in 2021 have been generated from services to utility customers and maintenance services to our customers in the energy industry, rather than from new construction projects. Revenues of our subsidiary that serves public utility customers were $3.3 million higher during the six months ended June 30, 2021 than in the six months ended June 30, 2020, due primarily to an increase in the number of inspectors serving our two largest utility customers. For our other service lines, revenues during the six months ended June 30, 2021 were significantly lower than revenues during the six months ended June 30, 2020, including revenues of our nondestructive examination service line, which decreased by $3.1 million. The decrease in average revenue per inspector is due to changes in customer mix. Fluctuations in the average revenue per inspector are expected, given that we charge different rates for different types of inspectors and different types of inspection services.

Costs of services. Costs of services decreased $47.5 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily related to a decrease in the average number of inspectors employed during the period.

Gross margin. Gross margin decreased $4.8 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The gross margin percentage was 10.9% in 2021, compared to 10.1% in 2020. The increase in gross margin percentage is due to changes in the mix of services provided. During the six months ended June 30, 2021, we generated a larger percentage of our revenue from higher-margin service lines, such as services to public utility customers and in-line inspection support.

General and administrative. General and administrative expenses decreased by $1.7 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due primarily to a decrease of $1.3 million in employee compensation expense through a combination of salary reductions and reductions in workforce. The decrease in general and administrative expenses was also due to a decrease in travel and advertising expense of $0.1 million, a decrease of $0.3 million in allocated corporate overhead costs, and a decrease of $0.2 million in various other expenses. These decreases were partially offset by an increase of $0.3 million in legal expense, due primarily to costs associated with Fair Labor Standards Act employment litigation and certain other employment-related lawsuits and claims.

Depreciation, amortization and accretion. Depreciation, amortization and accretion expense during the six months ended June 30, 2021 was not significantly different from depreciation, amortization and accretion expense during the six months ended June 30, 2020.

Operating (loss) income. Operating (loss) income decreased by $3.1 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due primarily to a decrease in gross margin, which was partially offset by a decrease in general and administrative expense.

The following table summarizes the results of the Pipeline & Process Services segment for the three months ended June 30, 2021 and 2020.

Revenue. Revenues of our Pipeline & Process Services segment decreased $5.8 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The Pipeline & Process Services segment remained busy during 2020, as hydrotesting is one of the last steps to be completed before a pipeline is placed into service, and a number of pipeline construction projects that began prior to the COVID-19 pandemic continued. However, the pandemic and the volatility in oil prices led to a significant reduction in the launch of new construction projects, and as a result, there have been fewer hydrotesting projects to bid on in 2021 than in the past. Revenues reached a low of less than $0.1 million in each of January and February 2021 and increased in the following months. Our backlog of committed projects remains weak.

Costs of services. Cost of services decreased by $4.0 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to decreased revenues.

Gross margin. Gross margin decreased by $1.8 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, as a result of a decrease in revenue. The employees of the Pipeline & Process Services segment are full-time employees, and therefore represent fixed costs (in contrast to the employees of the Inspection Services segment who perform work in the field, most of whom only earn wages when they are performing work for a customer and whose wages are therefore primarily variable costs). Because these employees were less fully utilized during the three months ended June 30, 2021 than during the three months ended June 30, 2020, the gross margin percentage was lower. In first quarter 2021, we implemented a cost reduction plan that included a combination of salary reductions, furloughs, and a reduction in workforce.

General and administrative. General and administrative expenses primarily include compensation expense for office employees and general office expenses. General and administrative expenses remained relatively consistent during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due primarily to a decrease of $0.1 million in employee compensation expense through a combination of salary reductions and a reduction in workforce partially offset by an increase of $0.1 million in various other expenses.

Depreciation, amortization and accretion. Depreciation, amortization and accretion expense includes depreciation of property and equipment and amortization of intangible assets associated with customer relationships, trade names, and noncompete agreements. Depreciation, amortization and accretion expense during the three months ended June 30, 2021 was not significantly different from depreciation, amortization and accretion expense during the three months ended June 30, 2020.

Operating (loss) income. Operating (loss) income decreased by $1.8 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease in operating (loss) income was due primarily to a decrease in gross margin.

The following table summarizes the results of the Pipeline & Process Services segment for the six months ended June 30, 2021 and 2020.

Revenue. Revenues of our Pipeline & Process Services segment decreased $8.4 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The Pipeline & Process Services segment remained busy during 2020, as hydrotesting is one of the last steps to be completed before a pipeline is placed into service, and a number of pipeline construction projects that began prior to the COVID-19 pandemic continued. However, the pandemic and the resultant low oil prices led to a significant reduction in the launch of new construction projects, and as a result, there have been fewer hydrotesting projects to bid on than in the past. Revenues reached a low of less than $0.1 million in each of January and February 2021 and increased in the following months. Our backlog of committed projects remains weak.

Costs of services. Cost of services decreased by $5.5 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to decreased revenues.

Gross margin. Gross margin decreased by $2.9 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, as a result of a decrease in revenue. The employees of the Pipeline & Process Services segment are full-time employees, and therefore represent fixed costs (in contrast to the employees of the Inspection Services segment who perform work in the field, most of whom only earn wages when they are performing work for a customer and whose wages are therefore primarily variable costs). Because these employees were less fully utilized during the six months ended June 30, 2021 than during the six months ended June 30, 2020, the gross margin percentage was lower. In first quarter 2021, we implemented a cost reduction plan that included a combination of salary reductions, furloughs, and a reduction in workforce.

General and administrative. General and administrative expenses primarily include compensation expense for office employees and general office expenses. General and administrative expenses decreased by $0.2 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due primarily to a decrease of $0.3 million in employee compensation expense through a combination of salary reductions and a reduction in workforce, partially offset by an increase of $0.1 million in various other expenses.

Depreciation, amortization and accretion. Depreciation, amortization and accretion expense includes depreciation of property and equipment and amortization of intangible assets associated with customer relationships, trade names, and noncompete agreements. Depreciation, amortization and accretion expense during the six months ended June 30, 2021 was not significantly different from depreciation, amortization and accretion expense during the six months ended June 30, 2020.

Operating (loss) income. Operating (loss) income decreased by $2.6 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease in operating (loss) income was due primarily to a decrease in gross margin, which was partially offset by a decrease in general and administrative expense.

The following table summarizes the operating results of the Environmental Services segment for the three months ended June 30, 2021 and 2020.

Revenue. Revenue decreased by $0.1 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease in revenues was due primarily to a decrease of 0.3 million barrels in the volume of water processed. In February 2021, the largest customer of one of our highest-volume facilities completed construction of its own facility and began sending most of its water to that facility. This customer accounted for 20% of the Environmental Services revenue in 2020. The resultant decrease in volumes was partially offset by the completion of a new contract with a public energy company to connect its pipeline to one of our water treatment facilities. We began receiving water from this pipeline in the 4th quarter of 2020. Although oil prices have increased significantly in 2021, producers in North Dakota have been slow to increase production.

Costs of services. Costs of services remained relatively consistent during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Gross margin. Gross margin decreased by $0.1 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due primarily to a $0.1 million decrease in revenue.

General and administrative. General and administrative expenses include general overhead expenses such as salary costs, insurance, property taxes, royalty expenses, and other miscellaneous expenses. These expenses decreased by $0.1 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, due to a decrease in employee compensation expense, as a result of a combination of salary reductions, and reductions in workforce, and a decrease in allocated corporate overhead costs.

Operating (loss) income. Operating (loss) income decreased by $0.1 million during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease in operating (loss) income was primarily due to lower revenues, partially offset by decreases in cost of services and general and administrative expense.

The following table summarizes the operating results of the Environmental Services segment for the six months ended June 30, 2021 and 2020.

Revenue. Revenue decreased by $0.6 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease in revenues was due primarily to a decrease of 1.3 million barrels in the volume of water processed, which was partially offset by an increase of $0.1 million in residual oil sales. In addition, in February 2021, the largest customer of one of our highest-volume facilities completed construction of its own facility and began sending most of its water to that facility. This customer accounted for 20% of the Environmental Services revenue in 2020. The resultant decrease in volumes was partially offset by the completion of a new contract with a public energy company to connect its pipeline to one of our water treatment facilities. We began receiving water from this pipeline in 4th quarter 2020.

Costs of services. Costs of services decreased by $0.3 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due to a decrease of approximately $0.1 million in variable costs (such as chemical and utility expense) resulting from a decrease in volumes, a decrease of $0.1 million in repairs and maintenance expense, and a decrease of $0.1 million in compensation expense as a result of salary reductions and a reduction in force.

Gross margin. Gross margin decreased by $0.4 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due primarily to a $0.6 million decrease in revenue, partially offset by a $0.3 million decrease in cost of services.

General and administrative. General and administrative expenses include general overhead expenses such as salary costs, insurance, property taxes, royalty expenses, and other miscellaneous expenses. These expenses decreased by $0.2 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, due to a decrease of $0.1 million in employee compensation expense, as a result of a combination of salary reductions and a reduction in workforce, and to a decrease of $0.1 million in allocated corporate overhead costs.

Operating (loss) income. Operating (loss) income decreased by $0.2 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease in operating (loss) income was primarily due to lower revenues, partially offset by decreases in cost of services and general and administrative expense.

We define adjusted EBITDA as net income or loss exclusive of (i) interest expense, (ii) depreciation, amortization, and accretion expense, (iii) income tax expense or benefit, (iv) equity-based compensation expense, and (v) certain other unusual or nonrecurring items. We define adjusted EBITDA attributable to limited partners as adjusted EBITDA exclusive of amounts attributable to the general partner and to noncontrolling interests. We define distributable cash flow as adjusted EBITDA attributable to limited partners less cash interest paid, cash income taxes paid, maintenance capital expenditures, and distributions paid or accrued on preferred equity. We believe these measures provide investors meaningful insight into results from ongoing operations.

These non-GAAP financial measures are used as supplemental liquidity and performance measures by our management and by external users of our financial statements, such as investors, commercial banks, research analysts, and others to assess:

We believe that the presentation of these non-GAAP measures provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA, Adjusted EBITDA attributable to limited partners, and Distributable Cash Flow are net income (loss) and cash flow from operating activities. These non-GAAP measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP measures excludes some, but not all, of the items that affect the most directly comparable GAAP financial measures. Adjusted EBITDA, Adjusted EBITDA attributable to limited partners, and Distributable Cash Flow should not be considered alternatives to net (loss) income, (loss) income before income taxes, net (loss) income attributable to limited partners, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity, or the ability to service debt obligations.

Because Adjusted EBITDA, Adjusted EBITDA attributable to limited partners, and Distributable Cash Flow may be defined differently by other companies, our definitions of Adjusted EBITDA, Adjusted EBITDA attributable to limited partners, and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following tables present a reconciliation of net (loss) income to Adjusted EBITDA and to Distributable Cash Flow, a reconciliation of net (loss) income attributable to limited partners to Adjusted EBITDA attributable to limited partners and to Distributable Cash Flow, and a reconciliation of net cash (used in) provided by operating activities to Adjusted EBITDA and to Distributable Cash Flow for each of the periods indicated.

Reconciliation of Net (Loss) Income to Adjusted EBITDA and to Distributable Cash Flow

Reconciliation of Net Loss Attributable to Limited Partners to Adjusted EBITDA Attributable to Limited Partners and Distributable Cash Flow

Reconciliation of Net Cash (Used in) Provided by Operating Activities to Adjusted EBITDA and to Distributable Cash Flow

The working capital needs of the Inspection Services segment are substantial, driven by payroll costs and reimbursable expenses paid to our inspectors on a weekly basis. Please read “Risk Factors — Risks Related to Our Business — The working capital needs of the Inspection Services segment are substantial”, which could require us to seek additional financing that we may not be able to obtain on satisfactory terms, or at all. Consequently, our ability to develop and maintain sources of funds to meet our capital requirements is critical to our ability to meet our growth objectives. We expect that our future capital needs will be funded by future borrowings. However, we may not be able to raise additional funds on desired or favorable terms or at all.

We had outstanding borrowings of $55.3 million at June 30, 2021. As amended in August 2021, the Credit Agreement has a maximum borrowing capacity of $70.0 million, and any borrowings in excess of $60.0 million may only be used to fund working capital needs. The Credit Agreement requires that we maintain liquidity in excess of $7.0 million at all times, with liquidity defined as cash and cash equivalents plus unused capacity on the credit facility.

The Credit Agreement matures on May 31, 2022. See further discussion below in the “Our Credit Agreement” section.

In April 2019, we established an at-the-market equity program (“ATM Program”), which allows us to offer and sell common units from time to time, to or through the sales agent under the ATM Program. The maximum amount we may sell is $10.0 million. We are under no obligation to sell any common units under this program. As of the date of this filing, we have not sold any common units under the ATM Program and, as such, have not received any net proceeds or paid any compensation to the sales agent under the ATM Program.

In November 2019, we established an employee unit purchase plan (“EUPP”), which will allow us to offer and sell up to 500,000 common units. Employees can elect to have up to 10 percent of their annual base pay withheld to purchase common units, subject to terms and limitations of the EUPP. The purchase price of the common units is 95% of the volume weighted average of the closing sales prices of our common units on the ten immediately preceding trading days at the end of each offering period. There have been no common unit offerings or issuances under the EUPP.

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to unitholders of record on the applicable record date.

Available cash, for any quarter, consists of all cash and cash equivalents on hand at the end of that quarter:

We paid common unit distributions of $2.5 million in February 2020 and $2.6 million in May 2020. In July 2020, in light of the challenging market conditions, we made the difficult decision to temporarily suspend payment of common unit distributions. As described above, our Credit Agreement, as amended in 2021, contains significant restrictions on our ability to pay cash distributions on common units.

In 2018 we issued and sold in a private placement 5,769,231 Series A Preferred Units representing limited partner interests in the Partnership (the “Preferred Units”) for a cash purchase price of $7.54 per Preferred Unit, resulting in gross proceeds of $43.5 million. The purchaser of the Preferred Units is entitled to receive quarterly distributions that represent an annual return of 9.5% (which amounts to $4.1 million per year). The Preferred Units rank senior to our common units, and we must pay distributions on the Preferred Units (including any arrearages) before paying distributions on our common units. In addition, the Preferred Units rank senior to the common units with respect to rights upon liquidation.

We paid four preferred unit distributions of $1.0 million each in 2020. As described above, our Credit Agreement, as amended in 2021, contains significant restrictions on our ability to pay cash distributions on preferred units. We have not paid any preferred distributions thus far in 2021.

We are party to a credit agreement (the “Credit Agreement”) with a syndicate of seven banks (collectively, the “Lenders”), with Deutsche Bank Trust Company Americas (“DB”) serving as the Administrative Agent. DB has served as the agent since 2013. The obligations under the Credit Agreement are secured by a first priority lien on substantially all of our assets. The Credit Agreement has been amended several times since inception, including in May 2018, March 2021, and August 2021. Each of these amendments reduced the borrowing capacity following two industry downturns. After the August 2021 amendment, the Credit Agreement has a total capacity of $70.0 million, subject to customary covenants and restrictions, and matures on May 31, 2022. Any borrowings in excess of $60.0 million may only be used to fund working capital needs.

Outstanding borrowings at June 30, 2021 and December 31, 2020 were $55.3 million and $62.0 million, respectively, and are reflected as current portion of long-term debt and long-term debt, respectively, on the Unaudited Condensed Consolidated Balance Sheets. The average debt balance outstanding was $55.3 million and $89.6 million during the six months ended June 30, 2021 and 2020, respectively.

All borrowings under the Credit Agreement bear interest, at our option, on a leveraged based grid pricing at (i) a base rate plus a margin of 2.00% to 3.75% per annum (“Base Rate Borrowing”) or (ii) an adjusted LIBOR rate plus a margin of 3.00% to 4.75% per annum (“LIBOR Borrowings”). The applicable margin is determined based on our leverage ratio, as defined in the Credit Agreement. The interest rate on our borrowings ranged between 3.61% and 4.89% for the six months ended June 30, 2021 and 3.33% and 4.80% for the six months ended June 30, 2020. As of June 30, 2021, the interest rate in effect on our outstanding borrowings was 4.89%. Interest on Base Rate Borrowings is payable monthly. Interest on LIBOR Borrowings is paid upon maturity of the underlying LIBOR contract, but no less often than quarterly. Commitment fees are charged at a rate of 0.50% on any unused credit and are payable quarterly. Interest paid, including commitment fees, was $0.4 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively. Interest paid, including commitment fees, was $1.1 million and $1.9 million for the six months ended June 30, 2021 and 2020, respectively.

The Credit Agreement contains various customary covenants and restrictive provisions. Prior to the August 2021 amendment, the Credit Agreement also required us to maintain certain financial covenants, including a leverage ratio and an interest coverage ratio. After the August 2021 amendment, these financial ratio covenant requirements have been removed. As amended in August 2021, the Credit Agreement requires that we maintain liquidity in excess of $7.0 million at all times, with liquidity defined as cash and cash equivalents plus unused capacity on the credit facility.

As amended in August 2021, the Credit Agreement contains significant limitations on our ability to pay cash distributions. We may only pay the following cash distributions:

In addition, the Credit Agreement restricts our ability to redeem or repurchase our equity interests and requires us to use the proceeds from any asset sales to repay debt.

The Credit Agreement requires us to make payments to reduce the outstanding balance if, for any consecutive period of five business days, our cash on hand (less amounts expected to be paid in the following five business days) exceeds $7.5 million.

Debt issuance costs are reported as debt issuance costs, net on the Unaudited Condensed Consolidated Balance Sheets and total $0.8 million and $0.2 million at June 30, 2021 and December 31, 2020, respectively. These debt issuance costs are being amortized on a straight-line basis over the term of the Credit Agreement. We incurred $1.0 million of debt issuance costs related to the March 2021 amendment to the Credit Agreement.

The following table sets forth a summary of the net cash provided by (used in) operating, investing, and financing activities for six months ended June 30, 2021 and 2020.

Net cash (used in) provided by operating activities. Net operating cash outflows for the six months ended June 30, 2021 were $2.8 million, consisting of a net loss of $5.2 million plus non-cash expenses of $3.6 million and net changes in working capital of $(1.3) million. Non-cash expenses included depreciation, amortization, and accretion and equity-based compensation expense, among others.

Net operating cash inflows for the six months ended June 30, 2020 were $15.4 million, consisting of a net loss of $0.5 million plus non-cash expenses of $4.0 million and net changes in working capital of $11.9 million. Non-cash expenses included depreciation, amortization, and accretion and equity-based compensation expense, among others. During periods of revenue growth, changes in working capital typically reduce operating cash flows, based on the fact that we pay our employees before we collect our accounts receivable from our customers. During the six months ended June 30, 2020, we experienced a decrease in inspectors in our Pipeline Inspection segment, which reduced the need to expend cash for working capital.

Net cash used in investing activities. Net cash outflows from investing activities for the six months ended June 30, 2020 were $1.3 million, consisting primarily of costs associated with a new software system for payroll and human resources management.

Net cash used in financing activities. Financing cash outflows for the six months ended June 30, 2021 primarily consisted of $6.7 million of net payments on our revolving credit facility, $1.0 million of debt issuance costs, and $2.0 million of distributions to the noncontrolling interest owners of CBI.

Financing cash inflows for the six months ended June 30, 2020 primarily consisted of $6.1 million of net borrowings on our revolving credit facility. In March and April 2020, in an abundance of caution, we borrowed a combined $39.1 million on the Credit Agreement to provide substantial liquidity to manage our business in light of the COVID-19 outbreak and a significant decline in the price of crude oil. In January, May, and June 2020, we repaid a combined $33.0 million on the Credit Agreement. Financing cash outflows for the six months ended June 30, 2020 primarily consisted of $5.1 million of common unit distributions and $2.1 million of preferred unit distributions.

Our working capital (defined as net current assets less net current liabilities) was ($36.9) million at June 30, 2021, which included $4.6 million of cash and cash equivalents and $55.3 million of borrowings under our revolving credit facility. As described above under “Our Credit Agreement”, our revolving credit facility contains limitations on borrowing capacity, which may limit our ability to fund working capital needed to support revenue growth.

Our Inspection Services and Pipeline & Process Services segments have substantial working capital needs, as they generally pay their personnel on a weekly basis, but typically receive payment from their customers 45 to 90 days after the services have been performed. Please read “Risk Factors — Risks Related to Our Business — The working capital needs of the Inspection Services segment are substantial, and will continue to be substantial. This will reduce our borrowing capacity for other purposes and reduce our cash available for distribution,” and “Risk Factors – Risks Related to Our Business – Our existing and future debt levels may limit our flexibility to obtain financing and to pursue other business opportunities” in our Annual Report on Form 10-K for the year ended December 31, 2020.

Our Inspection Services segment does not generally require significant capital expenditures, other than the purchase of nondestructive examination technology. Our inspectors provide their own four wheel drive vehicles and receive mileage reimbursements. Our Pipeline & Process Services segment has both maintenance and expansion capital needs for equipment and vehicles in order to perform hydrostatic testing and other integrity procedures. Our Environmental Services Segment has certain limited capital expenditure requirements for the maintenance of existing water treatment facilities. We do not plan to invest significant expansion capital in the Environmental Services or Pipeline & Process Services segments. Our partnership agreement requires that we categorize our capital expenditures as either maintenance capital expenditures or expansion capital expenditures.

We expect to fund future capital expenditures from cash flows generated from our operations or borrowings under our Credit Agreement. As we expand into new inspection markets such as municipal water, municipal sewer, electrical transmission, bridges, among others, we should be able to use a lot of our nondestructive examination equipment. However, we will need to invest in additional growth capital to enter these new markets. As described above under “Our Credit Agreement”, our revolving credit facility contains limitations on borrowing capacity, which will place limitations on our ability to fund capital expenditures.

We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Certain of these accounting policies and estimates involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. For more information, please see “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” to our Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q and our disclosure of critical accounting policies in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10- K for the year ended December 31, 2020.

Accounting guidance proposed by the FASB that may impact our Unaudited Condensed Consolidated Financial Statements, which we have not yet adopted, includes:

The FASB issued ASU 2016-13 – Financial Instruments – Credit Losses in June 2016, which replaces the current “incurred loss” methodology for recognizing credit losses with an “expected loss” methodology. This guidance affects trade receivables, financial assets and certain other instruments that are not measured at fair value through net income. In November 2019, the FASB issued final guidance to delay the implementation of this new guidance for smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the impact this ASU will have on our Unaudited Condensed Consolidated Financial Statements.

The FASB issued ASU 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity’s Own Equity in August 2020. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods for smaller reporting companies beginning after December 15, 2023, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. We are currently evaluating the impact this ASU will have on our Unaudited Condensed Consolidated Financial Statements.

Less than 1% of our consolidated revenues during the three months ended June 30, 2021 were derived from sales of recovered crude oil. A hypothetical change in crude oil prices of 10% would result in an increase or decrease of our revenues derived from sales of commodities by less than $0.1 million. Increases or decreases in commodity prices can also result in changes in demand for our water treatment, inspection services, and pipeline and process services, resulting in an increase or decrease of our revenues and gross margins.

Crude oil prices decreased significantly in 2020, due in part to decreased demand as a result of the worldwide COVID-19 pandemic, and due in part to the oil price war started by Russia and Saudi Arabia with a focus on slowing down U.S. oil production. This decline in oil prices led many of our customers to change their budgets and plans and to decrease their spending on drilling, completions, and exploration. This had an adverse impact on construction of new pipelines, gathering systems, and related energy infrastructure. Lower exploration and production activity also impacted the midstream industry and led to delays and cancellations of projects. It is also possible that our customers may elect to defer maintenance activities on their infrastructure. These developments have reduced our opportunities to generate revenues. It is impossible at this time to determine how customer plans will evolve over time. It is possible that the cumulative nature of these events could have a material adverse effect on our results of operations and financial position. For further discussion of the volatility of crude oil prices, please read “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

The interest rate on our Credit Agreement floats based on LIBOR, and as a result we have exposure to changes in interest rates on this indebtedness, which was $55.3 million as of June 30, 2021. Based on the debt balance outstanding at June 30, 2021, a hypothetical change in interest rates of 1% would result in an increase or decrease in our annual interest expense of approximately $0.6 million.

The credit markets have recently experienced historical lows in interest rates. It is possible that monetary policy will tighten, resulting in higher interest rates to counter possible inflation. Interest rates in the future could be higher than current levels, causing our financing costs to increase accordingly.

Our credit exposure generally relates to receivables for services provided. If significant customers were to have credit or financial problems resulting in a delay or failure to repay the amounts they owe to us, this could have a material adverse effect on our business, financial condition, results of operations or cash flows. The current adverse market conditions, which include the COVID-19 pandemic, could have a material adverse effect on the financial position of our customers, which could increase the risk that we are unable to collect accounts receivable for services we have provided. We would aggressively act to protect our rights in any such event, as we have done in the past.

As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer, and others involved in the accounting and reporting functions.

Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that financial information was processed, recorded and reported accurately.

There was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We are and may in the future be subject to litigation and binding arbitration involving allegations of violations of the Fair Labor Standards Act and state wage and hour laws. In addition, we generally indemnify our customers for claims related to the services we provide and actions we take under our contracts, including claims regarding the Fair Labor Standards Act and state wage and hour laws, and have received indemnification demands from some of our customers in regard to such claims and, in some instances, we may be allocated risk through our contract terms for actions by our customers or other third parties. Claims related to the Fair Labor Standards Act are generally not covered by insurance. From time to time, we are subject to various claims, lawsuits and other legal proceedings brought or threatened against us in the ordinary course of our business. These actions and proceedings may seek, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination and other employment-related damages, breach of contract, property damage, environmental liabilities, multiemployer pension plan withdrawal liabilities, punitive damages and civil penalties or other losses, liquidated damages, consequential damages, or injunctive or declaratory relief. The outcome of related litigation is unknown at this time but could be material to our financial statements in future periods.

There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, except for the following risk factors which have been updated since the filing of our Annual Report on Form 10-K.

As described in the notes to our unaudited condensed consolidated financial statements, there is substantial doubt about our ability to continue as a going concern.

Our Credit Agreement matures on May 31, 2022. Because of this, management has concluded that there is substantial doubt about the Partnership’s ability to continue as a going concern beyond the May 31, 2022 maturity date. We continue to have discussions with our lenders regarding our financing options beyond the May 2022 maturity date of our Credit Agreement. Our Credit Agreement was amended twice in 2021, and both amendments reduced the borrowing capacity, added new restrictions on the payment of distributions, and added other new restrictions. It is possible that any future amendments, extensions, or replacements of the Credit Agreement could include additional limitations and restrictions, which could further limit our ability to borrow for working capital to fund revenue growth and could also further limit our ability to borrow to fund capital expenditures. Future amendments, extensions, or replacements of the Credit Agreement could also result in increased bank fees. We expect to incur additional advisory fees in developing our financing plans. Further, we can make no assurances that we will be able to successfully extend the Credit Agreement beyond the May 2022 maturity date on favorable terms, if at all. In addition, it would be an event of default under our Credit Agreement if the audit report from our independent registered public accounting firm on our annual financial statements were to contain a “going concern” qualification. Our 2021 annual financial statements will be due on March 31, 2022. Upon the occurrence and during the continuation of an event of default, subject to the terms and conditions of the Credit Agreement, the lenders may declare any outstanding principal, together with any accrued and unpaid interest, to be immediately due and payable and may exercise the other remedies set forth or referred to in the Credit Agreement.

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Tulsa, State of Oklahoma, on August 16, 2021.

i Delaware	i 61-1721523
(State of or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

i 5727 South Lewis Avenue, i Suite 300
i Tulsa, i Oklahoma	i 74105
(Address of principal executive offices)	(Zip code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
i Common Units		i CELP		i New York Stock Exchange

		Page

PART I – FINANCIAL INFORMATION		5

ITEM 1.	Unaudited Condensed Consolidated Financial Statements	5

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	5

	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020	6

	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020	7

	Unaudited Condensed Consolidated Statements of Owners’ Equity Three and Six Months Ended June 30, 2021 and 2020	8

	Unaudited Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2021 and 2020	9

	Notes to the Unaudited Condensed Consolidated Financial Statements	10

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	37

ITEM 4.	Controls and Procedures	37

PART II – OTHER INFORMATION		38

ITEM 1.	Legal Proceedings	38

ITEM 1A.	Risk Factors	38

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

ITEM 3.	Defaults upon Senior Securities	38

ITEM 4.	Mine Safety Disclosures	38

ITEM 5.	Other Information	38

ITEM 6.	Exhibits	38

SIGNATURES		40

	June 30,			December 31,
	2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	i 4,570		$	i 17,893
Trade accounts receivable, net		i 21,419			i 18,420
Prepaid expenses and other		i 2,084			i 2,033
Total current assets		i 28,073			i 38,346
Property and equipment:
Property and equipment, at cost		i 26,912			i 26,929
Less: Accumulated depreciation		i 17,713			i 16,470
Total property and equipment, net		i 9,199			i 10,459
Intangible assets, net		i 16,051			i 17,386
Goodwill		i 50,428			i 50,389
Finance lease right-of-use assets, net		i 467			i 607
Operating lease right-of-use assets		i 1,733			i 1,987
Debt issuance costs, net		i 848			i 242
Other assets		i 671			i 570
Total assets	$	i 107,470		$	i 119,986

LIABILITIES AND OWNERS’ EQUITY
Current liabilities:
Accounts payable	$	i 1,270		$	i 2,070
Accounts payable - affiliates		i 29			i 58
Accrued payroll and other		i 7,675			i 4,876
Income taxes payable		i 32			i 328
Finance lease obligations		i 239			i 250
Operating lease obligations		i 415			i 439
Current portion of long-term debt		i 55,329			—
Total current liabilities		i 64,989			i 8,021
Long-term debt		—			i 62,029
Finance lease obligations		i 187			i 300
Operating lease obligations		i 1,306			i 1,549
Other noncurrent liabilities		i 380			i 182
Total liabilities		i 66,862			i 72,081

Commitments and contingencies - Note 7

Owners’ equity:
Partners’ capital:
Common units ( i 12,339 and i 12,213 units outstanding at June 30, 2021 and December 31, 2020, respectively)		i 20,875			i 27,507
Preferred units ( i i 5,769 / units outstanding at June 30, 2021 and December 31, 2020)		i 46,357			i 44,291
General partner		( i 25,876	)		( i 25,876	)
Accumulated other comprehensive loss		( i 2,766	)		( i 2,655	)
Total partners’ capital		i 38,590			i 43,267
Noncontrolling interests		i 2,018			i 4,638
Total owners’ equity		i 40,608			i 47,905
Total liabilities and owners’ equity	$	i 107,470		$	i 119,986


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net (loss) income	$	( i 2,027	)	$	i 381		$	( i 5,174	)	$	( i 496	)
Other comprehensive (loss) income foreign currency translation		( i 58	)		( i 139	)		( i 111	)		i 209
Comprehensive (loss) income	$	( i 2,085	)	$	i 242		$	( i 5,285	)	$	( i 287	)

Comprehensive income attributable to preferred unitholders		i 1,033			i 1,033			i 2,066			i 2,066
Comprehensive (loss) income attributable to noncontrolling interests		( i 161	)		i 697			( i 655	)		i 609
Comprehensive loss attributable to common unitholders	$	( i 2,957	)	$	( i 1,488	)	$	( i 6,696	)	$	( i 2,962	)

Cypress Environmental Partners, L.P. – ‘10-Q’ for 6/30/21

On: Monday, 8/16/21, at 4:23pm ET · For: 6/30/21 · Accession #: 1387131-21-8611 · File #: 1-36260

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	Six Months Ended June 30,
	2021			2020
Operating activities:
Net loss	$	( i 5,174	)	$	( i 496	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion		i 2,853			i 2,927
Gain on asset disposals, net		( i 38	)		( i 23	)
Interest expense from debt issuance cost amortization		i 412			i 289
Equity-based compensation expense		i 529			i 518
Equity in earnings of investee		( i 140	)		( i 103	)
Distributions from investee		i 150			i 125
Foreign currency (gains) losses		( i 145	)		i 273
Changes in assets and liabilities:
Trade accounts receivable		( i 2,999	)		i 17,516
Prepaid expenses and other		i 226			( i 734	)
Accounts payable and accounts payable - affiliates		( i 845	)		( i 115	)
Accrued payroll and other		i 2,647			( i 5,037	)
Income taxes payable		( i 296	)		i 292
Net cash (used in) provided by operating activities		( i 2,820	)		i 15,432

Investing activities:
Proceeds from fixed asset disposals		i 42			i 37
Purchases of property and equipment, excluding finance leases		( i 108	)		( i 1,371	)
Net cash used in investing activities		( i 66	)		( i 1,334	)

Financing activities:
Borrowings on credit facility		i 13,500			i 39,100
Repayments on credit facility		( i 20,200	)		( i 33,000	)
Repayments on finance lease obligations		( i 119	)		( i 126	)
Debt issuance cost payments		( i 1,018	)		( i 19	)
Taxes paid related to net share settlement of equity-based compensation		( i 238	)		( i 138	)
Distributions		( i 1,965	)		( i 7,849	)
Net cash used in financing activities		( i 10,040	)		( i 2,032	)

Effect of exchange rates on cash		i 3			( i 5	)

Net increase (decrease) in cash and cash equivalents		( i 12,923	)		i 12,061
Cash and cash equivalents, beginning of period (includes restricted cash equivalents of $ i 651 and $ i 551 at December 31, 2020 and December 31, 2019, respectively)		i 18,544			i 16,251
Cash and cash equivalents, end of period (includes restricted cash equivalents of $ i 1,051 and $ i 751 at June 30, 2021 and June 30, 2020, respectively)	$	i 5,621		$	i 28,312

Non-cash items:
Accounts payable and accrued liabilities excluded from capital expenditures	$	i 10		$	i 285
Acquisitions of finance leases included in liabilities	$	—		$	i 247

	June 30, 2021		December 31, 2020
		(in thousands)
Accrued payroll	$	i 4,534	$	i 1,799
Customer deposits and accruals		i 1,962		i 2,118
Other		i 1,179		i 959
Total	$	i 7,675	$	i 4,876

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in thousands)

Revenue	$	31,856		$	51,688		$	58,802		$	120,171
Costs of services		27,453			44,307			51,503			104,835
Gross margin		4,403			7,381			7,299			15,336

Operating costs and expense:
General and administrative - segment		4,288			4,757			8,358			10,472
General and administrative - corporate		190			169			446			394
Depreciation, amortization and accretion		1,236			1,211			2,475			2,419
Gain on asset disposals, net		(1	)		(11	)		(38	)		(23	)
Operating income		(1,310	)		1,255			(3,942	)		2,074

Other (expense) income:
Interest expense		(888	)		(1,152	)		(1,690	)		(2,276	)
Foreign currency gains (losses)		76			184			145			(273	)
Other, net		121			165			237			270
Net (loss) income before income tax expense		(2,001	)		452			(5,250	)		(205	)
Income tax expense (benefit)		26			71			(76	)		291
Net (loss) income		(2,027	)		381			(5,174	)		(496	)

Net (loss) income attributable to noncontrolling interests		(161	)		697			(655	)		609
Net loss attributable to partners / controlling interests		(1,866	)		(316	)		(4,519	)		(1,105	)

Net income attributable to preferred unitholder		1,033			1,033			2,066			2,066
Net loss attributable to common unitholders	$	(2,899	)	$	(1,349	)	$	(6,585	)	$	(3,171	)

	Three Months Ended June 30,
	2021			% of Revenue			2020		% of Revenue			Change			% Change
	(in thousands, except average revenue and inspector data)
Revenue	$	29,353					$	43,260				$	(13,907	)		(32.1	)%
Costs of services		25,989						38,836					(12,847	)		(33.1	)%
Gross margin		3,364			11.5	%		4,424		10.2	%		(1,060	)		(24.0	)%

General and administrative		3,392			11.6	%		3,771		8.7	%		(379	)		(10.1	)%
Depreciation, amortization and accretion		553			1.9	%		555		1.3	%		(2	)		(0.4	)%
Operating (loss) income	$	(581	)		(2.0	)%	$	98		0.2	%	$	(679	)		(692.9	)%

Operating Data
Average number of inspectors		473						700					(227	)		(32.4	)%
Average revenue per inspector per week	$	4,774					$	4,754				$	20			0.4	%
Revenue variance due to number of inspectors												$	(14,087	)
Revenue variance due to average revenue per inspector												$	180

	Six Months Ended June 30,
	2021			% of Revenue			2020		% of Revenue			Change			% Change
	(in thousands, except per barrel data)
Revenue	$	2,309					$	2,941				$	(632	)		(21.5	)%
Costs of services		814						1,074					(260	)		(24.2	)%
Gross margin		1,495			64.7	%		1,867		63.5	%		(372	)		(19.9	)%

General and administrative		824			35.7	%		1,012		34.4	%		(188	)		(18.6	)%
Depreciation, amortization and accretion		848			36.7	%		794		27.0	%		54			6.8	%
Gain on asset disposals, net		—			0.0	%		7		0.2	%		(7	)		(100.0	)%
Operating (loss) income	$	(177	)		(7.7	)%	$	54		1.8	%	$	(231	)		(427.8	)%

Operating Data
Total barrels of water processed		2,819						4,091					(1,272	)		(31.1	)%
Average revenue per barrel processed (a)	$	0.82					$	0.72				$	0.10			13.9	%
Revenue variance due to barrels processed												$	(914	)
Revenue variance due to revenue per barrel												$	282

	3.9	First Amendment to the Certificate of Formation of Cypress Energy Partners GP, LLC, dated as of February 27, 2020 (incorporated by reference to Exhibit 3.4 of our Current Report on Form 8-K filed on March 6, 2020)

	10.1 *	Amendment No. 2 to Credit Agreement dated August 13, 2021, by and among Cypress Environmental Partners, L.P., certain of its affiliates as co-borrowers and guarantors, Deutsche Bank AG, New York Branch, as lender, issuing bank, swing line lender and collateral agent and other lenders from time to time party thereto, and Deutsche Bank Trust Company Americas, as the administrative agent

Cypress Environmental Partners, L.P.

By:	Cypress Environmental Partners GP, LLC, its general partner

/s/ *Peter C. Boylan III*
By:	Peter C. Boylan III
Title:	Chief Executive Officer

/s/ *Jeffrey A. Herbers*
By:	Jeffrey A. Herbers
Title:	Chief Financial Officer and Principal Accounting Officer

This ‘10-Q’ Filing	Date	Other Filings

	12/15/23
	12/15/22
	5/31/22
	3/31/22
	12/31/21	10-K, NT 10-K
Filed on:	8/16/21	8-K
	8/9/21
For Period end:	6/30/21
	4/1/21	4
	3/31/21	10-Q
	3/23/21	10-K, 8-K
	1/1/21
	12/31/20	10-K
	12/15/20
	8/5/20
	7/1/20
	6/30/20	10-Q, UPLOAD
	4/1/20	4, 8-K
	3/31/20	10-Q, 10-Q/A
	1/1/20	8-K
	12/31/19	10-K
	5/29/18	4, 8-K
	1/15/14	3, 424B4, CERTNYS, EFFECT
		List all Filings