UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): March 5, 2018

USA Compression Partners, LP

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (512) 473-2662

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  x

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.  x

Item 7.01.                Regulation FD Disclosure.

On March 5, 2018, USA Compression Partners, LP (the “Partnership”) announced its intent, subject to market conditions, to offer, with its wholly-owned subsidiary USA Compression Finance Corp., a Delaware corporation, $725 million in aggregate principal amount of senior unsecured notes due 2026 (the “Notes”) in a private placement to eligible purchasers. In connection with the Notes offering, the Partnership is providing the following information to prospective investors in a preliminary offering memorandum dated March 5, 2018: (i) the audited combined financial statements and related notes of CDM Resource Management LLC, a Delaware limited liability company, and CDM Environmental & Technical Services LLC, a Delaware limited liability company (collectively, “CDM”), as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015, which is furnished as Exhibit 99.1 to this Current Report on Form 8-K,  (ii) unaudited pro forma condensed consolidated financial information of the Partnership as of and for the year ended December 31, 2017, which is furnished as Exhibit 99.2 to this Current Report on Form 8-K, and (iii) certain other information, which is furnished as Exhibit 99.3 to this Current Report on Form 8-K. The Partnership intends to use the net proceeds from the offering of the Notes to fund a portion of the cash purchase price of its pending CDM Acquisition. The CDM Acquisition is expected to close on April 2, 2018, subject to customary closing conditions.

The information in this Item 7.01, including Exhibits 99.1, 99.2 and 99.3, of this Current Report on Form 8-K is being “furnished” and shall not be deemed to be “filed” by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

This Current Report on Form 8-K includes “forward-looking statements” within the meaning of federal securities laws. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Partnership’s control. All statements, other than historical facts included in this Current Report on Form 8-K, are forward-looking statements. All forward-looking statements speak only as of the date of this Current Report on Form 8-K. Although the Partnership believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.

Item 8.01                   Other Information.

On March 5, 2018, the Partnership issued a press release, a copy of which is attached hereto as Exhibit 99.4 and incorporated herein by reference, announcing the offering of the Notes.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which the offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. The Notes will not initially be registered under the Securities Act or any state securities law and may not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act and applicable state securities laws.

Item 9.01.                Financial Statements and Exhibits.

(d) Exhibits

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SIGNATURES

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

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Exhibit 99.1

CDM Compression Business

Combined Financial Statements

With Report of Independent Certified Public Accountants Thereon

Index to Financial Statements

Report of independent certified public accountants

Board of Directors

Energy Transfer Partners, L.L.C.

We have audited the accompanying combined financial statements of CDM Compression Business (as defined in Note 1), which comprise the combined balance sheets as of December 31, 2017 and 2016, and the related combined statements of operations, member’s equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes to the financial statements.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of CDM Compression Business as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the

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period ended December 31, 2017 in accordance with accounting principles generally accepted in the United States of America.

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CDM Compression Business

Combined balance sheets

(in thousands)

See accompanying notes to combined financial statements.

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CDM Compression Business

Combined statements of operations

(in thousands)

See accompanying notes to combined financial statements.

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CDM Compression Business

Combined statements of member’s equity

(in thousands)

See accompanying notes to combined financial statements.

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CDM Compression Business

Combined Cash Flow Statements

(in thousands)

See accompanying notes to combined financial statements.

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CDM Compression Business

Notes to combined financial statements

(Tabular dollar amounts are in thousands)

1.                                      Organization and basis of presentation

Organization.  These combined financial statements and related notes represent the natural gas contract compression and treating operations of CDM Resource Management LLC, a Delaware limited liability company formed in 2007 as a wholly-owned subsidiary of Regency Energy Partners LP (“Regency”), and CDM Environmental & Technical Services LLC, a Delaware limited liability company formed in 2016 as a wholly-owned subsidiary of ETC Compression, LLC (“ETC Compression”). Both Regency and ETC Compression are wholly-owned subsidiaries of Energy Transfer Partners L.P. (“ETP”). CDM Resource Management LLC and CDM Environmental & Technical Services LLC are referred to collectively herein as the “CDM Compression Business” or the “Company”.

The Company owns and operates a fleet of compressors used to provide turn-key natural gas compression services for customer specific systems. The Company also owns and operates a fleet of equipment used to provide treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, and dehydration.

The Company’s services can be divided into contract compression services and treating services. The natural gas contract compression services include designing, sourcing, owning, installing, operating, servicing, repairing and maintaining compressors and related equipment for which the Company guarantees its customers 98% mechanical availability for land installations and 96% mechanical availability for over-water installations. The Company focuses on meeting the complex requirements of field-wide compression applications, as opposed to targeting the compression needs of individual wells within a field. These field-wide applications include compression for natural gas gathering and natural gas processing. The Company believes that it improves the stability of cash flows by focusing on field-wide compression applications because such applications generally involve long-term installations of multiple large horsepower compression units. The Company has operations located in Texas, Oklahoma, Louisiana, Arkansas, Pennsylvania, New Mexico, Colorado, Ohio, and West Virginia. The treating business owns and operates a fleet of equipment used to provide treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration and BTU management to natural gas producers and midstream pipeline companies and operations are primarily located in Texas, Louisiana and Arkansas.

Basis of presentation.  The accompanying audited combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Certain expenses incurred by ETP are only indirectly attributable to the Company. As a result, certain assumptions and estimates are made in order to allocate a reasonable share of such expenses to the Company, so that the accompanying financial statements reflect substantially all costs of doing business. The allocations and related estimates and assumptions are described more fully in Note 3.

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ETP allocated various corporate overhead expenses to the Company based on a percentage of assets, net income, or adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). These allocations are not necessarily indicative of the cost that the Company would have incurred had it operated as an independent stand-alone entity. The Company has also relied upon ETP and its affiliates as a participant in ETP’s credit facility. As a result, the historical financial statements may not fully reflect or be necessarily indicative of what the Company’s financial position, results of operations and cash flows would have been or will be in the future.

A material amount of the Company’s revenues are derived from related party transactions, as described more fully in Note 3. While these related party transactions are conducted in the ordinary course of business, the economics and profitability of these transactions may not be indicative of amounts that would normally be received had these transactions been executed with non-affiliated entities.

2.                                      Summary of significant accounting policies

Use of estimates.  These financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.

Cash and cash equivalents.  Cash and cash equivalents include temporary cash investments with original maturities of three months or less. The Company participates in a centralized cash management function which ETP manages. Balances payable to or due from ETP generated under this arrangement are reflected as equity on the books and records of the Company. As of December 31, 2017 and 2016, the Company held cash in amounts greater than federally insured limits.

Materials and supplies.  Materials and supplies are mainly comprised of spare parts including compressor and engine parts, and lube oil, and are valued at the lower of average cost or market.

Property, plant and equipment.  Property, plant and equipment is recorded at the actual cost of construction. Gains or losses on sales or retirements of assets are included in operating income unless the disposition is treated as discontinued operations. The costs of maintenance and repairs, which are not significant improvements, are expensed when incurred. Expenditures to extend the useful lives of the assets are capitalized.

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Property, plant and equipment consist of the following:

Depreciation expense related to property, plant and equipment was $146.0 million, $134.6 million, and $128.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Intangible assets.  As of December 31, 2017, intangible assets consisted of trade names and customer relations, and are amortized on a straight line basis over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The estimated useful lives range from 8 to 30 years.

The Company assesses long-lived assets, including property, plant and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is assessed by comparing the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amounts exceed the fair value of the assets. The Company did not record any impairment in 2017, 2016 or 2015.

Goodwill.  Goodwill is not amortized, but is tested for impairment annually during the fourth quarter, or more frequently if impairment indicators arise that suggest the carrying value of goodwill may not be recovered. The entire Company has been determined to be a single reporting unit. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether further impairment testing is necessary. Impairment is indicated when the carrying amount of a reporting unit exceeds its fair value. At the time it is determined that an impairment has occurred, the carrying value of the goodwill is written down to its fair value.

In order to determine fair value, management makes certain estimates and assumptions, including, among other things, changes in general economic conditions in regions in which the assets are located, the availability and prices of natural gas, management’s ability to negotiate favorable sales agreements, the risks that natural gas exploration and production activities will not occur or be successful, dependence on certain significant customers and producers of natural gas, and competition from other companies. While management believes it has made reasonable assumptions to calculate the fair value, if future results are not consistent with estimates, we could be exposed to future impairment losses that could be material to the Company’s results of operations.

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For 2015 and 2016, the Company did not record any goodwill impairment based on the qualitative assessment utilized in the annual goodwill impairment test.

For 2017, the Company performed a quantitative assessment for its annual goodwill impairment test and determined its fair value using a weighted combination of the discounted cash flow method and the guideline company method. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating margins, weighted average costs of capital and future market conditions, among others. The Company believes the estimates and assumptions used in the impairment assessment are reasonable and based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the discounted cash flow method, the Company determined fair value based on estimated future cash flows including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflects the overall level of inherent risk of the Company. Cash flow projections are derived from one year budgeted amounts and five year operating forecasts plus an estimate of later period cash flows, all of which are developed by management. Subsequent period cash flows are developed using growth rates that management believes are reasonably likely to occur. Under the guideline company method, the Company determined its estimated fair value by applying valuation multiples of comparable publicly-traded companies to the projected EBITDA of the Company and then averaging that estimate with similar historical calculations using a three year average. In addition, the Company estimated a reasonable control premium representing the incremental value that accrues to the majority owner from the opportunity to dictate the strategic and operational actions of the business. Additionally, the Company has considered the presence and probability of subsequent events on market transactions in estimating the fair value of the Company.

One key assumption for the measurement of goodwill impairment is management’s estimate of future cash flows and EBITDA. These estimates are based on the annual budget for the upcoming year and forecasted amounts for multiple subsequent years. The annual budget process is typically completed near the annual goodwill impairment testing date, and management uses the most recent information for the annual impairment tests. The forecast is also subjected to a comprehensive update annually in conjunction with the annual budget process and is revised periodically to reflect new information and/or revised expectations.

Based on the completion of the annual goodwill impairment testing as described above, the Company recorded a $223.0 million impairment for the year ended December 31, 2017.

Subsequent to the $223.0 million impairment in 2017, the Company’s goodwill balance is $253.4 million. Upon the announcement in January 2018 of the contribution transaction discussed in Note 9, management considered whether the fair value implied by the contribution transaction potentially indicated a further impairment of the Company’s goodwill; management concluded that no further impairment was indicated. However, the Company’s remaining goodwill balance could be subject to further impairment as a result of one or more events in future periods, including (i) changes in any of the assumptions discussed above, (ii) changes in the contribution transaction prior to closing, or (iii) changes within the combined entity subsequent to the closing of the contribution transaction.

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Revenue recognition.  The Company earns revenue from contract compression and treating services. An allowance for doubtful accounts is determined based on historical write-off experience and specific identification of unrecoverable amounts.

Revenues from natural gas contract compression and treating services are recognized under either a fixed fee contract or a throughput contract. Services under fixed fee contracts are billed and revenue is recorded monthly as the services are provided. Services under throughput contracts are billed based upon a rate per thousand cubic feet (“Mcf”) applied to the volume of natural gas compressed as determined by gas flow meter readings.

Installation services revenue and expense consist of certain expenses incurred by the Company while contracting with third-party vendors during the installation of a compression unit, and the Company subsequently bills the customers for the cost of the installation as costs are incurred and recognizes revenue on a percentage of completion basis. Accordingly, the amount of these expenses are reflected both as a revenue and as an expense in the Company’s statements of operations in accordance with FASB Accounting Standards Codification (“FASB ASC”) 605, “Revenue Recognition.” The excess of amounts billed over revenue recognized is recorded as deferred revenue.

Income taxes.  The Company is generally not subject to income taxes, except as discussed below. The Company is subject to the gross margins tax enacted by the state of Texas. The Company follows the guidance for uncertainties in income taxes where a liability for an unrecognized tax benefit is recorded for a tax position that does not meet the “more likely than not” criteria. The Company has not recorded any uncertain tax positions meeting the more likely than not criteria as of December 31, 2017, 2016 and 2015. The Company recognized current state income tax expense of $42.1 thousand and $15.4 thousand for the years ended December 31, 2017 and 2015 and current state income tax benefit of $7.4 thousand for the year ended December 31, 2016. The Company recognized deferred state income tax benefit $155.2 thousand and $1.5 million for the years ended December 31, 2016 and 2015, respectively, and a deferred state income tax expense of $1.8 million for the year ended December 31, 2017.

Equity based compensation.  The Company accounts for equity-based compensation by recognizing the grant-date fair value of awards into expense as they are earned, using an estimated forfeiture rate. The forfeiture rate assumption is reviewed annually to determine whether any adjustments to expense are required. Equity-based compensation reflected in these combined financial statements reflects the fair value of unit awards granted by ETP to management of the CDM Compression Business, as described in Note 8.

Fair value measures.  The Company measures the fair value of financial assets and liabilities, as well as non-financial assets and liabilities using a three-tiered fair value hierarchy. This hierarchy prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

·             Level 1—unadjusted quoted prices for identical assets or liabilities in active markets;

·             Level 2—inputs that are observable in the marketplace other than those classified as Level 1; and

·             Level 3—inputs that are unobservable in the marketplace and significant to the valuation.

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The Company attempts to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

As of December 31, 2017 and 2016, the Company did not have financial instruments whose fair value was determined using available market information and valuation methodologies. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to their short-term maturities.

Recent accounting pronouncements.

ASU 2017-04

In January 2017, the FASB issued ASU No. 2017-04 “Intangibles-Goodwill and other (Topic 350), Simplifying the test for goodwill impairment. (“ASU 2017-04”). The amendments in this update remove the second step of the two-step test currently required by Topic 350. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This ASU is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company expects that adoption of this standard will change the approach for testing goodwill for impairment; however, this standard requires prospective application and therefore will only impact periods subsequent to adoption. The Company adopted this ASU for its annual goodwill impairment test in the fourth quarter of 2017.

ASU 2014-09

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which clarifies the principles for recognizing revenue based on the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company expects to adopt ASU 2014-09 in the first quarter of 2018 and will apply the cumulative catchup transition method, which requires recognition, upon the date of initial application, of the cumulative effect of the retrospective application of the standard.

The Company is continuing the process of evaluating its revenue contracts to determine the potential impact of adopting the new standard. At this point in the evaluation process, the Company has determined that the timing and/or amount of revenue that it recognizes on certain contracts may be impacted by the adoption of the new standard; however, the Company does not believe any impact would be material to the combined financial statements.

The Company continues to assess the impact of the disclosure requirements under the new standard and is evaluating the manner in which it will disaggregate revenue into categories that show how economic factors affect the nature, timing and uncertainty of revenue and cash flows generated from contracts with customers. In addition, the Company is in the process of implementing appropriate changes to its business processes, systems and controls to support

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recognition and disclosure under the new standard. The Company continues to monitor additional authoritative or interpretive guidance related to the new standard as it becomes available, as well as comparing its conclusions on specific interpretative issues to other peers in its industry, to the extent that such information is available to the Company.

ASU 2016-02

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which establishes the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that adopting this new standard will have on the combined financial statements and related disclosures.

3.                            Related party transactions

In the ordinary course of business, the Company conducts business with various affiliated entities of ETP including Regency Intrastate Gas, LP (“RIGS”), Edwards Lime Gathering LLC (“ELG”), SEC Energy Products & Services, L.P. (“SEC”) and certain wholly-owned subsidiaries of ETP. As of December 31, 2017 and 2016, details of the Company’s related party receivables and payables were as follows:

Accounts receivable and payable that relate to revenues and expenses between the Company and ETP have been reclassified to member’s equity as there is no expectation that these amounts will be settled in cash.

Cost allocation.  Expenses of employees whose work directly impacts the assets of the Company are charged directly to the Company and recorded as part of operation and maintenance and general and administrative expenses, as applicable. In addition, ETP has allocated certain overhead costs associated with general and administrative services, including salaries and benefits, facilities, insurance, information services, human resources and other support departments to the Company. Where costs incurred on the Company’s behalf cannot be determined by specific identification, the costs are primarily allocated to the Company based on an average percentage of fixed assets, net income and adjusted EBITDA. The Company believes these allocations are a reasonable reflection of the utilization of services provided. However, the allocations may not fully reflect the expenses that would have been incurred had the Company been a stand-alone company during the periods presented. During

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the years ended December 31, 2017, 2016, and 2015, ETP allocated general and administrative expenses of $3.6 million, $4.7 million, and $5.1 million, respectively, to the Company.

4.                            Concentration risk

The following table provides information about the extent of reliance on major customers and suppliers. No external customer amounted to 10% or more of revenue transactions for the years ended December 31, 2017, 2016, or 2015. Total cost of sales from transactions with an external supplier amounting to 10% or more of cost of sales are disclosed below:

5.                            Intangible assets

Activity related to intangible assets, net consisted of the following:

The average remaining amortization periods for customer relations and trade names are 9 and 12 years, respectively. The expected amortization of the intangible assets for each of the five succeeding years is $20.5 million.

6.                            Commitments and contingencies

Environmental.  The Company’s operations are subject to federal, state and local laws and rules and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters. These laws, rules and regulations require the Company to conduct its operations in a specified manner and to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with applicable environmental laws, rules and regulations may expose the Company to significant fines, penalties and/or interruptions in operations. The Company’s environmental policies and procedures are designed to achieve compliance with such applicable laws and regulations. These evolving laws and regulations and claims for damages to property, employees, other persons and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future.

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Leases.  The Company maintains both capital leases, primarily related to office space, and operating leases primarily related to certain equipment leased by the Company. For the capital leases, the Company held $7.6 million and $7.6 million, in property, plant and equipment as of December 31, 2017 and 2016, respectively, representing the present value of the future minimum lease payments to be made during the term of the lease determined at the inception of the lease. The Company recorded $1.2 million and $1.0 million as of December 31, 2017 and 2016, respectively, as the current portion of the lease obligation, which is included in other current liabilities, and $3.2 million and $4.0 million as of December 31, 2017 and 2016, respectively, as the long-term portion of the lease obligation, included in other non-current liabilities on the balance sheet.

The following table is a schedule of future minimum lease payments for office space and certain equipment leased by the Company that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2017:

Total rent expense for operating leases, including those leases with terms of less than one year, was $3.6 million, $4.0 million and $3.8 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Sales tax audit.  The Company has historically claimed the manufacturing exemption from sales tax in Texas, as is common in the industry. The exemption is based on the fact that the Company’s natural gas compression equipment is used in the process of treating natural gas for ultimate use and sale. In a recent audit by the Texas Comptroller’s office, the Comptroller has challenged the applicability of the manufacturing exemption to the Company. The period being audited is from August 2006 to August 2007, and liability for that period is potentially covered by an indemnity obligation from the Company’s prior owners. The Company may also have liability for periods since 2008, and prospectively, if the Comptroller’s challenge is ultimately successful. An audit of the 2008 period has commenced. In April 2013, an independent audit review agreed with the Comptroller’s position. While the Company continues to disagree with this position and intends to seek redetermination and other relief, the Company is unable to predict the final outcome of this matter.

In addition to the matters discussed above, the Company is involved in legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business, none of which are believed to be potentially material to the Company at this time.

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7.                                      Benefits

ETP provides medical, dental, and other healthcare benefits to employees. The total amount incurred by ETP for the benefit of employees of the Company for the years ended December 31, 2017, 2016, and 2015, was $7.4 million, $5.8 million and $4.9 million, respectively, which was allocated to the Company and recorded in operation and maintenance and general and administrative expenses, as appropriate. ETP also provides a matching contribution to its employees’ 401(k) accounts. The total amount of matching contributions incurred for the benefit of employees of the Company for the years ended December 31, 2017, 2016, and 2015 was $3.0 million, $2.7 million and $2.7 million, respectively, which was allocated to the Company and recorded in operation and maintenance and general and administrative expenses as appropriate. ETP also provides a 3% profit sharing contribution to employee 401(k) accounts for all employees with base compensation below a specified threshold. The contribution is in addition to the 401(k) matching contribution and employees become vested in the profit sharing contribution based on years of service.

8.                                      Equity-based compensation

ETP has long-term incentive plans for its employees, officers and directors, which provide for various types of awards, including options to purchase ETP common units, restricted units, phantom units, distribution equivalent rights (“DERs”), ETP common unit appreciation rights, and other unit-based awards. ETP has granted restricted unit awards to employees that vest over a specified time period, typically a five-year service vesting requirement, with vesting based on continued employment as of each applicable vesting date. Upon vesting, ETP common units are issued. These unit awards entitle the recipients of the unit awards to receive, with respect to each ETP common unit subject to such award that has not either vested or been forfeited, a cash payment equal to each cash distribution per ETP common unit made by ETP on its common units promptly following each such distribution by ETP to its unitholders. All unit based compensation awards are treated as equity within these financial statements.

Employees of the Company have been granted awards under these long-term incentive plans, and therefore the Company has recognized unit-based compensation expense of $4.0 million, $3.5 million, and $4.0 million, recorded in general and administrative expense in the statements of operations of the Company for the years ended December 31, 2017, 2016, and 2015, respectively.

The unit and per-unit amounts disclosed in the remainder of this note reflect amounts related to ETP. These amounts have been retrospectively adjusted to reflect a 1.5 to one unit-for-unit exchange related to the merger of Energy Transfer Partners, L.P. and Sunoco Logistics Partners L.P. in April 2017.

The restricted units granted are valued at the market price as of the date issued. The weighted average fair value of the units granted during the years ended December 31, 2017, 2016, and 2015 was $18.75, $24.25 and $28.48, respectively. These awards are service condition (time-based) grants that generally vest 60% at the end of the third year of service and 40% at the end of the fifth year of service. ETP recognizes compensation expense on a straight-line

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basis over the requisite service period for the restricted unit grants. Distributions on the restricted units will be paid concurrent with ETP’s distribution for its common units.

The Company expects to recognize $4.5 million of unit-based compensation expense related to non-vested phantom units over a period of 1.2 years.

9.                                      Subsequent events

USA compression transactions.  In January 2018, USA Compression Partners, LP (“USAC”), ETP and Energy Transfer Equity, L.P. (“ETE”) announced they have entered into an agreement, providing for the contribution of the Company to USAC for $1.225 billion in cash, approximately 19.2 million USAC common units, and approximately 6.4 million USAC Class B units.

In addition to this contribution, USA Compression Holdings, LLC and ETE announced that they have entered into a purchase agreement whereby ETE will acquire the ownership interests in USAC’s general partner and approximately 12.5 million USAC common units for $250 million in cash.

These transactions are expected to close in the first half of 2018, subject to certain closing conditions.

For the outstanding restricted unit awards granted to the Company’s employees, the vesting of the award is not automatically accelerated upon the closing of the contribution transaction with USAC. The contribution agreement provides for replacement awards to be issued by USAC for certain of the outstanding awards, and such replacement awards may impact the amount of compensation expense to be recognized by the Company in future periods. For any other awards, any modifications to the vesting terms of those awards, prior to or upon closing, would be accounted for an award modification; accordingly, additional compensation expense may be recognized prior to or upon closing.

Subsequent events have been evaluated through February 28, 2018, the date the financial statements were available to be issued.

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Exhibit 99.2

Unaudited pro forma condensed consolidated financial information of USA Compression Partners, LP

Introduction

The following unaudited pro forma condensed consolidated financial statements have been prepared to reflect (1) the acquisition by ETE of the ownership interests in the Partnership’s general partner and 12,466,912 of the Partnership’s common units from USA Compression Holdings, (2) the contribution by ETP of CDM to the Partnership, (3) the cancellation of the IDRs in the Partnership and conversion of the general partner interest in the Partnership into a non-economic general partner interest and (4) the issuance of the notes and other transactions relating to the closing of the Transactions, as described more fully below.

The following unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of the Partnership and CDM. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2017 is presented as if the Transactions had occurred on December 31, 2017. The unaudited pro forma condensed consolidated statement of operations is presented as if the Transactions occurred on January 1, 2017.

The pro forma adjustments, which were prepared applying the rules established by the Securities and Exchange Commission in Article 11 of Regulation S-X, except for the impact of items excluded from pro forma adjustments as described below, have been applied to the unaudited pro forma condensed consolidated financial statements.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) the audited historical consolidated financial statements and related notes thereto of the Partnership, included elsewhere in this offering memorandum, (ii) the audited historical combined financial statements of CDM and related notes thereto, included elsewhere in this offering memorandum, and (iii) “Summary historical and pro forma financial and operating data of the Partnership,” “Summary historical financial and operating data of CDM,” “Capitalization,” “Selected historical financial and operating data of the Partnership,” “Selected historical financial and operating data of CDM,” “Management’s discussion and analysis of financial condition and results of operations of the Partnership” and “Management’s discussion and analysis of financial condition and results of operations of CDM.” The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position that would have been obtained or the financial results that would have occurred if the Transactions had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations of the Partnership in the future. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed consolidated financial statements, are based upon currently available information and certain assumptions that the Partnership’s management believes are reasonable. The actual adjustments will differ from the pro forma adjustments, and the differences may be material. The adjustments reflected herein are limited to amounts that are directly attributable to the Transactions, factually supportable, and with respect to the pro forma condensed consolidated statement of operations, are expected to have a continuing impact.

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Common control accounting

In connection with the closing of the GP Purchase, ETE will acquire control of the general partner of the Partnership and will thereafter continue to control CDM. As a result, the Partnership intends to account for the CDM Acquisition as a combination of entities under common control.

As a combination of entities under common control, the Partnership will record the CDM assets and liabilities at historical cost. Thus, the difference between consideration paid for the CDM Acquisition and CDM’s historical cost (net book value) at the closing date will be recorded to partners’ capital. The unaudited pro forma condensed consolidated financial statements reflects the CDM assets and liabilities at historical values.

Push-down accounting

ETE will record the Partnership’s assets acquired and liabilities assumed at fair value in accordance with the Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”). The Partnership’s assets and liabilities will be recorded at their fair values measured as of the date the GP Purchase is consummated by application of “push-down” accounting. The fair values of the assets and liabilities of the Partnership will be reflected in the Partnership’s consolidated financial statements. The residual between the fair value of partners’ capital and the fair value of identifiable assets and liabilities will be recorded as goodwill.

As of the date of this offering memorandum, the total consideration paid for the CDM Acquisition cannot be determined, because the equity portion of the consideration will be valued at the closing date. A sensitivity of changes in unit prices is described in notes (f) and (g) to these pro forma condensed consolidated financial statements.

Additionally, as of the date of this offering memorandum, the Partnership cannot finalize the estimates of the fair values of the Partnership’s assets and liabilities to be pushed-down to the Partnership. As such, the unaudited pro forma condensed consolidated financial statements do not include any push-down adjustments. The application of the push-down adjustments could change the value of the Partnership’s assets, such as inventory, property and equipment, intangible assets and goodwill and its liabilities, such as deferred revenue. An increase, for example, to property and equipment or intangible assets, would increase the book value and increase the pro forma depreciation and amortization, resulting in a decrease in pro forma net income. Such changes could be material.

However, the Partnership does not expect the application of push-down adjustments to result in a material decrease to pro forma Adjusted EBITDA. An increase in the value of property and equipment and intangible assets would increase depreciation and amortization expense but these expenses are excluded from the Adjusted EBITDA calculation. Additionally, a change in inventory or deferred revenue would be considered a non-cash adjustment and also excluded from the Adjusted EBITDA calculation.

Predecessor for accounting purposes

As of the date of this offering memorandum, management has preliminarily concluded that the Partnership will be the predecessor for accounting purposes for periods prior to the date on which the CDM Acquisition is consummated. However, management may ultimately conclude, or may be required to conclude, that CDM is the appropriate accounting predecessor

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and account for the CDM Acquisition as a “reverse acquisition”. If management changes its conclusion after the closing of the CDM Acquisition and accounts for the CDM Acquisition as a “reverse acquisition,” the Partnership would report CDM’s financial results for periods prior to the closing as the Partnership’s financial results. The Partnership does not expect that accounting for the CDM Acquisition as a reverse acquisition would result in any material changes to the unaudited pro forma condensed consolidated financial statements for the following reasons: (i) ETE would still be treated as controlling the Partnership as of the closing of the Transactions, which is similar to the accounting for combinations of entities under common control and (ii) with ETE controlling the Partnership, CDM would be considered the accounting acquirer and its assets and liabilities would remain at net book value and the Partnership’s assets and liabilities would be recorded at fair value in accordance with ASC 805, similar to the accounting for combinations of entities under common control.

Accounting policy conformity and other considerations

The Partnership also has not identified the adjustments necessary, if any, to conform the CDM accounting policies to those of the Partnership.

The actual adjustments to the Partnership’s consolidated financial statements upon the closing of the Transactions will depend on a number of factors, including the completion of the valuation studies, the availability of additional information and the Partnership’s net assets on the closing date of the Transactions and any necessary conforming accounting changes for the CDM business.

The unaudited pro forma condensed consolidated financial statements do not give effect to any anticipated cost savings or other synergy benefits expected to result from the CDM Acquisition. In addition, the unaudited pro forma condensed consolidated statement of operations does not give effect to the impact of one-time non-recurring costs or gains relating to the Transactions or any costs or charges that we expect to incur in connection with the consolidation of the operations of the Partnership and CDM and the realization of the anticipated cost synergies, which costs and charges may be material.

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USA Compression Partners, LP

Pro forma condensed consolidated balance sheet

As of December 31, 2017

(unaudited, in thousands)

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USA Compression Partners, LP

Pro forma condensed consolidated statement of operations

Year ended December 31, 2017

(unaudited, in thousands)

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USA Compression Partners, LP

Notes to pro forma condensed consolidated financial information

(unaudited)

Note 1:        Description of the transactions

CDM Acquisition

On January 15, 2018, the Partnership entered into the Contribution Agreement pursuant to which, among other things, ETP will contribute to the Partnership, and the Partnership will acquire from ETP, all of the issued and outstanding membership interests of CDM.

The unaudited pro forma condensed consolidated financial statements presented herein reflect the estimated purchase price of $1.7 billion for the CDM Acquisition, comprised of $1.225 billion in cash, 19,191,351 common units representing limited partner interests in the Partnership and 6,397,965 of Class B units representing limited partner interests in the Partnership. Class B units do not receive quarterly distributions until and upon conversion, approximately one year after the quarter during which the CDM Acquisition is consummated.

Financing for the CDM Acquisition

To finance a portion of the cash purchase price for the CDM Acquisition, the Partnership expects to issue $725.0 million of notes offered hereby. Upon the issuance of the notes, the Partnership will begin to recognize the related interest expense, even though the CDM Acquisition may not have closed.

Funds for a portion of the cash purchase price for the CDM Acquisition will be provided through the issuance and sale by the Partnership in a private placement $500 million in the aggregate of (i) newly authorized and established Series A Perpetual Preferred Units representing limited partner interests in the Partnership and (ii) warrants to purchase common units pursuant to a Series A Preferred Unit and Warrant Purchase Agreement entered into with certain investment funds managed or sub-advised by EIG and other investment vehicles unaffiliated with EIG. The Partnership will issue 500,000 Preferred Units with a face value of $1,000 per Preferred Unit and issue two tranches of Warrants to the preferred unitholders, which will include Warrants to purchase 5,000,000 common units with a strike price of $17.03 per unit and 10,000,000 common units with a strike price of $19.59 per unit. The Warrants may be exercised by the holders thereof at any time beginning on the one year anniversary of the closing date and before the tenth anniversary of the closing date.

GP Purchase

On January 15, 2018, and in connection with the execution of the Contribution Agreement, the GP Purchasers entered into the GP Purchase Agreement pursuant to which the GP Purchasers will acquire from USAC Compression Holdings (i) all of the outstanding limited liability company interests in the Partnership’s general partner and (ii) 12,466,912 common units for cash consideration paid by the GP Purchasers to USAC Compression Holdings equal to $250 million.

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Restructuring

On January 15, 2018, and in connection with the execution of the Contribution Agreement, the Partnership entered into the Equity Restructuring Agreement pursuant to which, among other things, the Partnership, its general partner and ETE have agreed to cancel the Partnership’s IDRs and convert the General Partner Interest (as defined in the Equity Restructuring Agreement) into a non-economic general partner interest, in exchange for the Partnership’s issuance of 8,000,000 common units to its general partner, effective at the Closing.

ABL Facility

The Partnership has received commitments on a best-efforts basis for and intends to enter into an amendment and restatement of the ABL Facility to, among other things, (a) increase the commitments under the ABL Facility to $1.6 billion from $1.1 billion, (b) extend the maturity thereof and (c) make certain changes to the covenants under the ABL Facility. The advance rates in respect of the borrowing base under the ABL Facility are expected to remain unchanged. The commitments to the amendment and restatement of the ABL Facility are conditioned on customary closing conditions, and there is no assurance that such conditions will be met.

The Partnership expects to borrow $70.4 million under the ABL Facility to fund estimated fees and expenses related to the Transactions. As part of the $70.4 million, $18.7 million is estimated to be incurred for expenses relating to the expected upsizing of our ABL Facility to $1.6 billion from $1.1 billion.

The table below summarizes the expected sources and uses of funds in connection with the Transactions:

(1)                                 The total consideration for the CDM Acquisition consists of (i) $1,225.0 million of cash, (ii) 19,191,351 common units and (iii) 6,397,965 Class B units. See “Summary—Recent developments.”

(2)                                 Consists of fees and expenses associated with the Transactions, including commitment fees and other financing costs. An increase in actual fees and expenses will result in a corresponding increase in cash required to fund the Transactions.

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Note 2:        Adjustments to the unaudited pro forma condensed consolidated balance sheet

a.                                      The pro forma adjustments to cash consists of the net effect of the following (in thousands):

The pro forma adjustment to cash includes the effect of (i) the issuance of a $725.0 million aggregate principal amount of notes, net of $14.5 million of estimated debt issuance costs, which will be amortized over the life of the notes, (ii) the issuance of $500.0 million of Preferred Units, net of $20.0 million of issuance costs, and (iii) $70.4 million of borrowings under the ABL Facility, $18.7 million of which constitutes debt issuance costs relating to the expected upsizing of the ABL Facility and is expected to be capitalized and amortized over the life of the amended ABL Facility and $17.3 million of estimated cash transaction expenses that would be incurred if the CDM Acquisition took place as of December 31, 2017. No original issue discount is assumed in the pro forma financial statements.

In addition, the pro forma adjustment to cash reflects the use of net proceeds from the notes and Preferred Units and the borrowings under the ABL Facility to fund the $1.225 billion cash portion of the purchase price for the CDM Acquisition and the estimated cash transaction expenses.

b.                                      Reflects capitalized debt issuance costs of $18.7 million related to the expected upsizing of our ABL Facility.

c.                                       Reflects a $4.9 million reduction in unit-based compensation liability due to the immediate vesting of outstanding time and performance based phantom units granted to certain employees as a result of the change in control of the General Partner due to the GP Purchase.

d.                                      Reflects the debt expected to be incurred to finance the CDM Acquisition and fees and expenses related to the Transactions, consisting of (i) $710.5 million aggregate principal amount of notes, net of related debt issuance costs, and (ii) $70.4 million of borrowings under our ABL facility.

e.                                       Reflects $472.0 million of Preferred Units, reduced by an estimated Warrant value of $8.0 million shown in Partners’ Capital as noted in (i) below and by estimated issuance costs.

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f.                                        The pro forma adjustment to common units is comprised of:

(i)                                     19,191,351 common units issued to finance a portion of the CDM Acquisition;

(ii)                                  8,000,000 common units issued in exchange for the cancellation of the IDRs and conversion of the general partner interest into a non-economic general partner interest;

(iii)                               the immediate vesting of outstanding time and performance based phantom units granted to certain employees based on the change in control of the General Partner due to the GP Purchase;

(iv)                              reflects the reduction in partners’ capital by (1) the difference between (x) the amount of general partner interest being converted into non-economic interest and (y) the amount of common units issued in exchange therefor (and for the cancellation of the IDRs) and (2) the difference between (x) CDM member’s equity at $1.66 billion and (y) the total estimated consideration to be paid for the CDM Acquisition of $1.68 billion; and

(v)                                 transaction expenses.

The common units are valued at $17.78 per unit, based on the closing price of common units on the New York Stock Exchange on February 28, 2018. A 10% increase in the February 28, 2018 closing price of common units will increase the purchase price acquisition for the units noted in (i) and (ii) above by $34.1 million and $14.2 million, respectively.

g.                                       Reflects 6,397,965 of Class B units representing limited partner interests in the Partnership issued to finance a portion of the CDM Acquisition valued at $17.78 per unit, based on the closing price of common units on the New York Stock Exchange on February 28, 2018. Class B units do not receive quarterly distributions until and upon conversion, approximately one year after the quarter during which the CDM Acquisition is consummated. A 10% increase in the February 28, 2018 closing price of common units will increase the purchase price acquisition for these Class B units by $11.4 million.

h.                                      Reflects the conversion of the general partner interest into a non-economic general partner interest in connection with the Equity Restructuring.

i.                                          Reflects an estimated value of $8.0 million for Warrants to purchase 5,000,000 common units with a strike price of $17.03 per unit and 10,000,000 common units with a strike price of $19.59 per unit issued in connection with the issuance of Preferred Units to finance a portion of the CDM Acquisition.

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Note 3:        Adjustments to the unaudited pro forma condensed consolidated statement of operations

j.                                         Reflects adjustment to remove historical direct and incremental transaction expenses related to the CDM Acquisition.

k.                                      Reflects the estimated interest expense associated with the debt expected to be incurred to fund the CDM Acquisition and the fees and expenses related to the Transactions. To the extent the actual interest rates are higher than estimated, additional interest expense will be incurred and such expense could be material. A 0.125% increase in the interest rate associated with the notes and the ABL Facility would increase interest expense $2.0 million for the year ended December 31, 2017.

(1)                                 Cash interest expense was calculated using a 4.86% weighted average interest rate.

l.                                          Reflects $48.8 million of distributions for Preferred Units for the year ended December 31, 2017. The Preferred Units have a face value of $1,000 per Preferred Unit and accrue distributions at a rate of 9.75% per annum, which dividend rate may increase if the weighted average all-in-yield on the notes exceeds a specified rate. The distributions are payable quarterly.

m.                                  One time adjustments that are not included in the pro forma condensed consolidated statement of operations include transaction-related expenses totaling $22.2 million. These transaction expenses include: (i) $4.9 million for non-cash unit-based compensation expenses for the change in control of the General Partner which results in immediate vesting of outstanding time and performance based phantom units granted to certain employees and (ii) $17.3 million of legal, accounting and other fees related to the Transactions.

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Exhibit 99.3

Summary historical financial and operating data of CDM

In the table below, we have presented summary historical financial and operating data of CDM for the periods and as of the dates presented. The summary historical financial data as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 has been derived from the audited combined financial statements of CDM, included elsewhere in this offering memorandum. The audited combined financial statements of CDM do not reflect the impact of the Transactions. The summary historical data presented below is not indicative of the results to be expected for any future period.

The following information should be read together with “Unaudited pro forma condensed consolidated financial information,” “Selected historical financial and operating data of CDM,” “Management’s discussion and analysis of financial condition and results of operations of CDM” and the audited combined financial statements of CDM included elsewhere in this offering memorandum.

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