Form 10-Q CSI Compressco LP For: Jun 30

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August 11, 2015 2:52 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____ TO______

COMMISSION FILE NUMBER 001-35195

CSI Compressco LP

(Exact name of registrant as specified in its charter)



Delaware	94-3450907
(State of incorporation)	(I.R.S. Employer Identification No.)

3809 S. FM 1788
Midland, Texas	79706
(Address of principal executive offices)	(zip code)

(432) 563-1170

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ] No [ ]

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



Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [X] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X ]

As of August 7, 2015, there were 33,183,294 Common Units outstanding.

CERTAIN REFERENCES IN THIS QUARTERLY REPORT

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

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

CSI Compressco LP

Consolidated Statements of Operations

(In Thousands, Except Unit and Per Unit Amounts)

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenues:
Compression and related services	72,826		30,043		148,114		57,970
Aftermarket services	4,671		—		14,121		—
Equipment and parts sales	48,968		2,065		67,119		3,948
Total revenues	126,465		32,108		229,354		61,918
Cost of revenues (excluding depreciation and amortization expense):
Cost of compression and related services	37,490		16,227		74,468		31,381
Cost of aftermarket services	4,195		—		12,367		—
Cost of equipment and parts sales	43,000		1,066		57,957		1,995
Total cost of revenues	84,685		17,293		144,792		33,376
Selling, general, and administrative expense	10,554		5,008		21,803		9,102
Depreciation and amortization	20,629		3,751		40,617		7,433
Interest expense, net	7,961		145		15,867		304
Other expense, net	1,170		498		2,409		1,037
Income before income tax provision	1,466		5,413		3,866		10,666
Provision for income taxes	303		534		895		1,168
Net income	$	1,163	$	4,879	$	2,971	$	9,498
General partner interest in net income	$	379	$	98	$	719	$	190
Common units interest in net income	$	784	$	2,853	$	2,252	$	5,554
Subordinated units interest in net income	$	—	$	1,928	$	—	$	3,754

Net income per common unit:
Basic	$	0.02	$	0.31	$	0.07	$	0.60
Diluted	$	0.02	$	0.30	$	0.07	$	0.59
Weighted average common units outstanding:
Basic	33,161,286		9,284,500		33,153,039		9,280,242
Diluted	33,161,286		9,370,041		33,153,039		9,343,188
Net income per subordinated unit:
Basic and diluted	$	—	$	0.31	$	—	$	0.60
Weighted average subordinated units outstanding:
Basic and diluted	—		6,273,970		—		6,273,970

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Statements of Comprehensive Income

(In Thousands)

(Unaudited)



	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
Net income	$	1,163		$	4,879	$	2,971		$	9,498
Foreign currency translation adjustment	(1,853		)	77		(1,677		)	(2,891		)
Comprehensive income (loss)	$	(690	)	$	4,956	$	1,294		$	6,607

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Balance Sheets

(In Thousands, Except Unit Amounts)



	June 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	33,279		$	34,066
Trade accounts receivable, net of allowances for doubtful accounts of $1,592 in 2015 and $1,496 in 2014	54,872			78,741
Inventories	113,528			113,343
Deferred tax asset	182			124
Prepaid expenses and other current assets	6,628			5,516
Total current assets	208,489			231,790
Property, plant, and equipment:
Land and building	34,947			34,312
Compressors and equipment	812,208			756,113
Vehicles	14,069			15,915
Construction in progress	241			298
Total property, plant, and equipment	861,465			806,638
Less accumulated depreciation	(155,894		)	(120,642		)
Net property, plant, and equipment	705,571			685,996
Other assets:
Goodwill	233,386			233,548
Deferred tax asset	1,416			1,464
Intangible assets, net of accumulated amortization of $9,697 as of June 30, 2015 and $3,826 as of December 31, 2014	58,972			62,974
Deferred financing costs and other assets	15,565			16,689
Total other assets	309,339			314,675
Total assets	$	1,223,399		$	1,232,461
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable	$	29,698		$	37,815
Unearned income	54,684			65,778
Accrued liabilities and other	31,557			29,178
Amounts payable to affiliates	7,351			6,480
Deferred tax liabilities	1,481			1,117
Total current liabilities	124,771			140,368
Other liabilities:
Long-term debt, net	578,212			539,961
Deferred tax liabilities	956			1,788
Other long-term liabilities	396			63
Total other liabilities	579,564			541,812
Commitments and contingencies
Partners' capital:
General partner interest	10,881			11,341
Common units (33,183,294 units issued and outstanding at June 30, 2015 and 33,142,114 units issued and outstanding at December 31, 2014)	513,196			542,276
Accumulated other comprehensive income (loss)	(5,013		)	(3,336		)
Total partners' capital	519,064			550,281
Total liabilities and partners' capital	$	1,223,399		$	1,232,461

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Statement of Partners’ Capital

(In Thousands)

(Unaudited)



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

Balance at December 31, 2014	$	11,341		$	542,276		$	(3,336	)	$	550,281
Net income	719			2,252			—			2,971
Distributions ($0.98 per unit)	(1,179		)	(32,536		)	—			(33,715		)
Equity compensation	—			1,204			—			1,204
Other comprehensive income (loss)	—			—			(1,677		)	(1,677		)
Balance at June 30, 2015	$	10,881		$	513,196		$	(5,013	)	$	519,064

See Notes to Consolidated Financial Statements

CSI Compressco LP

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



	Six Months Ended June 30,
	2015			2014
Operating activities:
Net income	$	2,971		$	9,498
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization	40,617			7,433
Provision (benefit) for deferred income taxes	(433		)	(141		)
Equity compensation expense	1,204			437
Provision for doubtful accounts	98			212
Other non-cash charges and credits	1,710			153
(Gain) Loss on sale of property, plant, and equipment	(104		)	266
Changes in operating assets and liabilities:
Accounts receivable	22,161			2,765
Inventories	(185		)	(1,434		)
Prepaid expenses and other current assets	(801		)	5
Accounts payable and accrued expenses	(14,758		)	2,043
Other	(278		)	(281		)
Net cash provided by operating activities	52,202			20,956
Investing activities:
Purchases of property, plant, and equipment, net	(57,092		)	(10,882		)
Advances and other investing activities	(64		)	(1,405		)
Net cash used in investing activities	(57,156		)	(12,287		)
Financing activities:
Proceeds from long-term debt	38,153			7,348
Distributions	(33,715		)	(14,258		)
Net cash provided by (used in) financing activities	4,438			(6,910		)
Effect of exchange rate changes on cash	(271		)	(396		)
Increase (decrease) in cash and cash equivalents	(787		)	1,363
Cash and cash equivalents at beginning of period	34,066			9,477
Cash and cash equivalents at end of period	$	33,279		$	10,840
Supplemental cash flow information:
Interest paid	$	17,346		$	—
Income taxes paid	$	1,748		$	997

See Notes to Consolidated Financial Statements

CSI Compressco LP

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

We are a provider of compression services and equipment for natural gas and oil production, gathering, transportation, processing, and storage. We also sell standard and custom-designed compressor packages and oilfield fluid pump systems, and provide aftermarket services and compressor package parts and components manufactured by third-party suppliers. We provide these compression services and equipment to a broad base of natural gas and oil exploration and production, midstream, and transmission companies operating throughout many of the onshore producing regions of the United States as well as in a number of foreign countries, including Mexico, Canada, and Argentina. We design and fabricate a majority of our compressor packages and use these compressor packages in conjunction with other equipment and personnel from affiliated companies to provide services to our customers.

Presentation

Our unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. In the opinion of our management, our unaudited consolidated financial statements as of June 30, 2015, and for the three and six month periods ended June 30, 2015 and 2014, include all normal recurring adjustments that are necessary to provide a fair statement of our results for the interim periods. Operating results for the period ended June 30, 2015 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2015.

Results of operations for the three and six month periods ended June 30, 2015, reflect the impact of our acquisition of Compressor Systems, Inc. ("CSI"), a Delaware corporation, on August 4 2014. For further discussion of the acquisition, see Note B - Acquisition.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission ("SEC") and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in connection with the financial statements for the year ended December 31, 2014, and notes thereto included in our Annual Report on Form 10-K, which we filed with the SEC on March 19, 2015.

Certain previously reported financial information has been reclassified to conform to the current year period’s presentation. The impact of such reclassifications was not significant to the prior year period’s overall presentation. These reclassifications include the final allocation of the purchase price of CSI. See Note B - Acquisitions for further discussion.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For further discussion of fair value measurements in connection with the allocation of the purchase price of the CSI acquisition, see Note B - Acquisition. Actual results could differ from those estimates, and such differences could be material.

Cash Equivalents

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

Foreign Currencies

We have designated the Canadian dollar and Argentine peso as the functional currencies for our operations in Canada and Argentina, respectively. We are exposed to fluctuations between the U.S. dollar and certain foreign

currencies, including the Canadian dollar, the Mexican peso, and the Argentine peso, as a result of our international operations. Foreign currency exchange gains and (losses) are included in Other Expense and totaled $1.2 million and $1.7 million during the three and six month periods ended June 30, 2015, respectively, and $0.0 million and $(0.7) million during the three and six month periods ended June 30, 2014, respectively.

Inventories

Inventories consist primarily of compressor package parts and supplies and work in progress and are stated at the lower of cost or market value. For parts and supplies, cost is determined using the weighted average cost method. The cost of work in progress is determined using the specific identification method. Significant components of inventories as of June 30, 2015, and December 31, 2014, are as follows:



	June 30, 2015		December 31, 2014
	(In Thousands)
Parts and supplies	43,884		43,202
Work in progress	69,644		70,141
Total inventories	$	113,528	$	113,343

Work in progress inventories consist primarily of new compressor units located at our fabrication facility in Midland, Texas.

Compression and Related Services Revenues and Costs

Our compression and related services revenues include revenues from our U.S. corporate subsidiaries' operating lease agreements with customers. For the three and six month periods ended June 30, 2015 and 2014, the following operating lease revenues and associated costs were included in compression and related service revenues and cost of compression and related services, respectively, in the accompanying consolidated statements of operations.



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(In Thousands)
Rental revenue	$	36,187	$	2,778	$	81,886	$	5,610
Cost of rental revenue	$	22,664	$	1,843	$	44,110	$	3,625

Earnings Per Common and Subordinated Unit

The computations of earnings per common and subordinated unit are based on the weighted average number of common and subordinated units, respectively, outstanding during the applicable period. Our subordinated units met the definition of a participating security, and, therefore, we are required to use the two-class method in the computation of earnings per unit. Effective August 18, 2014, all of our 6,273,970 subordinated units were automatically converted into common units on a one-for-one basis. Basic earnings per common and subordinated unit are determined by dividing net income (loss) allocated to the common units and subordinated units, respectively, after deducting the amount allocated to our General Partner (including any distributions to our General Partner on its incentive distribution rights), by the weighted average number of outstanding common and subordinated units, respectively, during the period.

When computing earnings per common and subordinated unit under the two-class method when distributions are greater than earnings, the amount of the distribution is deducted from net income and allocated to our General Partner (including incentive distribution rights, if any) for the period to which the calculation relates. The excess of distributions over earnings is allocated between the General Partner, common, and subordinated units based on how our partnership agreement allocates net losses.

When earnings are greater than distributions, we determine cash distributions based on available cash and determine the actual incentive distributions allocable to our General Partner based on actual distributions. When

computing earnings per common and subordinated unit, the amount of the assumed incentive distribution rights, if any, is deducted from net income and allocated to our General Partner for the period to which the calculation relates. The remaining amount of net income, after deducting the assumed incentive distribution rights, is allocated between the General Partner, common and subordinated units based on how our Partnership Agreement allocates net earnings.

The following is a reconciliation of the weighted average number of common and subordinated units outstanding to the number of common and subordinated units used in the computations of net income (loss) per common and subordinated unit.



	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015
	Common Units	Subordinated Units	Common Units	Subordinated Units
Number of weighted average units outstanding	33,161,286	—	33,153,039	—
Restricted units outstanding	—	—	—	—
Average diluted units outstanding	33,161,286	—	33,153,039	—



	Three Months Ended June 30, 2014		Six Months Ended June 30, 2014
	Common Units	Subordinated Units	Common Units	Subordinated Units
Number of weighted average units outstanding	9,284,500	6,273,970	9,280,242	6,273,970
Restricted units outstanding	85,541	—	62,946	—
Average diluted units outstanding	9,370,041	6,273,970	9,343,188	6,273,970

For the three and six month periods ended June 30, 2015, the average diluted units outstanding excludes the impact of all of the outstanding restricted unit awards, as the inclusion of these units would have been antidilutive.

Accumulated Other Comprehensive Income

Certain of our international operations maintain their accounting records in the local currencies that are their functional currencies. For these operations, the functional currency financial statements are converted to United States dollar equivalents, with the effect of the foreign currency translation adjustment reflected as a component of accumulated other comprehensive income. Accumulated other comprehensive income is included in partners’ capital in the accompanying consolidated balance sheets and consists of the cumulative currency translation adjustments associated with such international operations. Activity within accumulated other comprehensive income during the three and six month periods ended June 30, 2015 and 2014, is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In Thousands)
Balance, beginning of period	$	(3,160	)	$	(2,555	)	$	(3,336	)	$	413
Foreign currency translation adjustment	(1,853		)	77			(1,677		)	(2,891		)
Balance, end of period	$	(5,013	)	$	(2,478	)	$	(5,013	)	$	(2,478	)

Activity within accumulated other comprehensive income includes no reclassifications to net income.

Allocation of Net Income (Loss)

Our net income (loss) is allocated to partners’ capital accounts in accordance with the provisions of our partnership agreement.

Distributions

On January 20, 2015, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended December 31, 2014 of $0.485 per unit. This distribution equates to a distribution of $1.94 per outstanding unit on an annualized basis. This cash distribution was paid on February 13, 2015, to all unitholders of record as of the close of business on January 31, 2015.

On April 21, 2015, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended March 31, 2015 of $0.495 per unit. This distribution equates to a distribution of $1.98 per outstanding unit on an annualized basis. This cash distribution was paid on May 15, 2015 to all unitholders of record as of the close of business on May 1, 2015.

On July 20, 2015 , the board of directors of our General Partner declared a cash distribution attributable to the quarter June 30, 2015 of $0.500 per unit. This distribution equates to a distribution of $2.00 per outstanding unit on an annualized basis. This cash distribution is to be paid on August 14, 2015 to all unitholders of record as of the close of business on July 31, 2015.

Fair Value Measurements

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

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

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets and goodwill (a level 3 fair value measurement). Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets, including goodwill (a level 3 fair value measurement). The fair value of our financial instruments, which may include cash, accounts receivable, short-term borrowings, and variable-rate long-term debt pursuant to our bank credit agreement, approximate their carrying amounts. The fair values of our long-term 7.25% Senior Notes at June 30, 2015 and December 31, 2014, were approximately $336.9 million (a level 2 fair value measurement) and $354.9 million, respectively, compared to an aggregate principal amount of $350.0 million, as current rates on those dates were different from the stated interest rates on the 7.25% Senior Notes. We calculate the fair value of our 7.25% Senior Notes as of December 31, 2014 internally, using current market conditions and average cost of debt (a level 2 fair value measurement).

We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value as determined by our counterparty financial institution (a level 2 fair value measurement). A summary of these fair value measurements as of June 30, 2015 is as follows:



			Fair Value Measurements Using
Description	Total as of June 30, 2015		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Asset for foreign currency derivative contracts	$	44	$	—	$	44	$	—
	$	44

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements in the Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of the ASU is 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. This ASU is effective for our first quarter in fiscal 2017, pending a one year deferral currently under consideration by the FASB, under either full or modified retrospective adoption. Early application is not permitted. We are currently assessing the potential effects of these changes to our consolidated financial statements. On July 9, 2015, the FASB voted to approve a one year deferral of the ASU which would make it effective for annual periods beginning after December 15, 2017, and interim periods within those years.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Topic 250). The ASU provides guidance on management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certain circumstances to provide related footnote disclosures. The ASU is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In January 2015, the FASB issued ASU No. 2015-01, “Income Statements - Extraordinary and Unusual Items” (Sub-Topic 225-20), which eliminates from U.S. GAAP the concept of extraordinary items. The ASU eliminates the separate presentation of extraordinary items on the income statement, net of tax and the related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or occurring infrequently. The ASU is effective for the annual period beginning after December 15, 2015 and interim periods within those annual periods, with early adoption permitted, and may be applied prospectively or retrospectively. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. The ASU requires entities that have historically presented debt issuance costs as an asset to present those costs as a direct deduction from the carrying amount of the related debt liability. This presentation will result in the debt issuance costs being presented the same way debt discounts have historically been handled. The ASU does not change the recognition, measurement, or subsequent measurement guidance for debt issuance costs. The ASU is effective for the annual period beginning after December 15, 2015 and interim periods within those annual periods and is to be applied retrospectively. Early adoption is permitted. We plan to adopt this change retrospectively, and do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

NOTE B – ACQUISITION

Acquisition of Compressor Systems, Inc.

On August 4, 2014, pursuant to a stock purchase agreement dated July 20, 2014, one of our subsidiaries acquired all of the outstanding capital stock of CSI for $825.0 million cash (the "CSI Acquisition"). Prior to the acquisition, CSI owned one of the largest fleets of natural gas compressor packages in the United States. Headquartered in Midland, Texas, CSI fabricates, sells, and maintains natural gas compressors and provides a full range of compression products and services that covers compression needs throughout the entire natural gas production and transportation cycle to natural gas and oil producing clients. CSI derives revenues through three primary business lines: compression and related services, equipment and parts sales, and aftermarket services. Strategically, the acquisition affords us the opportunity to capture significant synergies associated with our product and service offerings and our fabrication operations, further penetrate new and existing markets, and to achieve administrative efficiencies and other strategic benefits.

Our allocation of the purchase price to the estimated fair value of the CSI net assets is as follows (in thousands):



Current assets	$	101,411
Property and equipment	571,706
Intangible assets	68,000
Goodwill	161,387
Total assets acquired	902,504

Current liabilities	77,504
Total liabilities assumed	77,504
Net assets acquired	$	825,000

The allocation of purchase price includes approximately $161.4 million allocated to deductible goodwill recorded, and is supported by the strategic benefits discussed above that are expected to be generated from the acquisition. Adjustments to the allocation of purchase price affecting inventory, property, plant, and equipment, intangible assets, and other current assets and liabilities have been reflected in the accompanying consolidated balance sheets as of June 30, 2015 and December 31, 2014. The adjustment to the previously presented goodwill balance as of December 31, 2014 was $0.1 million. These adjustments to the allocation of purchase price for long-lived assets did not have a material impact on the depreciation and amortization of these assets. The acquired property, plant, and equipment is stated at fair value, and depreciation on the acquired property, plant, and equipment is computed using the straight-line method over the estimated useful lives of each asset. Buildings are depreciated using useful lives of 15 to 30 years. Machinery and equipment is depreciated using useful lives of 2 to 16 years. Automobiles and trucks are depreciated using useful lives of 3 to 4 years. The acquired intangible assets represents approximately $33.7 million for trademarks/trade names, approximately $21.4 million for customer relationships, and approximately $12.9 million for other intangible assets that are stated at estimated fair value and are amortized on a straight-line basis over their estimated useful lives, which range from 2 to 15 years. These intangible assets are recorded net of approximately $9.7 million of accumulated amortization as of June 30, 2015.

For the three month period ended June 30, 2015, our revenues, depreciation and amortization, and pretax earnings, excluding $8.0 million of allocated interest and administrative expense, included $96.3 million, $16.5 million, and $6.7 million, respectively, associated with the CSI Acquisition. For the six month period ended June 30, 2015, our revenues, depreciation and amortization, and pretax earnings, excluding $15.8 million of allocated interest and administrative expense, included $167.5 million, $32.4 million, and $13.6 million, respectively, associated with the CSI Acquisition. Approximately $16.6 million of deferred financing costs were incurred in connection with the acquisition and included in Other Assets as of the acquisition date, and will be amortized over the term of the related debt. An additional $6.7 million of interim financing costs related to the acquisition were incurred and reflected in other expense during the year ended December 31, 2014.

Pro Forma Financial Information

The pro forma information presented below has been prepared to give effect to the CSI Acquisition as if it had occurred at the beginning of the period presented and includes the impact of the allocation of the purchase price for the CSI Acquisition on revenues, depreciation and amortization, and net income. The pro forma information is presented for illustrative purposes only and is based on estimates and assumptions we deemed appropriate. The pro forma information is not necessarily indicative of the historical results that would have been achieved if the acquisition had occurred in the past, and our operating results may have been different from those reflected in the pro forma information below. Therefore, the pro forma information should not be relied upon as an indication of the operating results that we would have achieved if the transaction had occurred at the beginning of the period presented or the future results that we will achieve after the transaction.



	Three Months Ended June 30,		Six Months Ended June 30,
	2014		2014
	(In Thousands, Except Per Unit Amounts)

Revenues	$	109,426	$	232,267
Depreciation and amortization	18,636		37,002
Net income	1,939		5,835

Per share information:
Net income per common unit:
Basic	$	0.06	$	0.17
Diluted	$	0.06	$	0.17

Net income per subordinated unit:
Basic and diluted	$	0.06	$	0.17

NOTE C – LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:



		June 30, 2015		December 31, 2014
	Scheduled Maturity	(In Thousands)
Credit Agreement	August 4, 2019	$	233,000	$	195,000
7.25% Senior Notes (presented net of the unamortized discount of $4.8 million as of June 30, 2015 and $5.0 million as of December 31, 2014)	August 15, 2022	345,212		344,961
		578,212		539,961
Less current portion		—		—
Total long-term debt		$	578,212	$	539,961

We are in compliance with all covenants and conditions of our debt agreements as of June 30, 2015.

NOTE D – MARKET RISKS AND DERIVATIVE CONTRACTS

We are exposed to financial and market risks that affect our business. We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. As a result of our variable rate bank credit facility, we face market risk exposure related to changes in applicable interest rates. We have concentrations of credit risk as a result of trade receivables owed to us by companies in the energy industry. Our financial risk management activities may at times involve, among other measures, the use of derivative financial instruments, such as swap and collar agreements, to hedge the impact of market price risk exposures. We formally document our risk management objectives and our strategies for undertaking various derivative transactions.

Foreign Currency Derivative Contracts

As of June 30, 2015, we had the following foreign currency derivative contracts outstanding relating to a portion of our foreign operations:



Derivative Contracts	US Dollar Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward sale Canadian dollar	$	780	1.25	7/17/2015
Forward sale Mexican peso	$	2,066	15.71	7/17/2015

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

The fair values of our foreign currency derivative instruments are based on quoted market values as reported to us by our counterparty (a level 2 fair value measurement). The fair values of our foreign currency derivative instruments as of June 30, 2015 and December 31, 2014, are as follows:



Foreign currency derivative instruments	Balance Sheet	Fair Value at
Foreign currency derivative instruments	Location	June 30, 2015		December 31, 2014
		(In Thousands)
Forward sale contracts	Current assets	$	44	$	—
Net asset		$	44	$	—

None of the foreign currency derivative contracts contains credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the three and six month periods ended June 30, 2015, we recognized approximately $0.0 million and $0.2 million, respectively, of net gains associated with our foreign currency derivative program, and such amount is included in other expense, net, in the accompanying consolidated statement of operations.

NOTE E – RELATED PARTY TRANSACTIONS

Set forth below is a description of one of the agreements we entered into with related parties.

Omnibus Agreement

On June 20, 2014, CSI Compressco LP (the "Partnership"), CSI Compressco GP Inc. (the "General Partner") and TETRA Technologies, Inc. ("TETRA") entered into a First Amendment to Omnibus Agreement (the "First Amendment"). The First Amendment amended the Omnibus Agreement previously entered into on June 20, 2011 (as amended, the "Omnibus Agreement") to extend the term thereof. The Omnibus Agreement will terminate on the earlier of (i) a change of control of the General Partner or TETRA, or (ii) upon any party providing at least 180 days' prior written notice of termination.

Under the terms of the Omnibus Agreement, our General Partner provides all personnel and services reasonably necessary to manage our operations and conduct our business (other than in Mexico, Canada, and Argentina), and certain of TETRA’s Latin American-based subsidiaries provide personnel and services necessary for the conduct of certain of our Latin American-based businesses. In addition, under the Omnibus Agreement, TETRA provides certain corporate and general and administrative services as requested by our General Partner, including, without limitation, legal, accounting and financial reporting, treasury, insurance administration, claims processing and risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, and tax services. Pursuant to the Omnibus Agreement, we reimburse our General Partner and TETRA for services they provide to us.

Under the terms of the Omnibus Agreement, we or TETRA may, but neither of us are under any obligation to, perform for the other such production enhancement or other oilfield services on a subcontract basis as are needed or desired by the other, for such periods of time and in such amounts as may be mutually agreed upon by TETRA and our General Partner. Any such services are required to be performed on terms that are (i) approved by the conflicts committee of our General Partner’s board of directors, (ii) no less favorable to us than those generally being provided to or available from non-affiliated third parties, as determined by our General Partner, or (iii) fair and reasonable to us, taking into account the totality of the relationships between TETRA and us (including other transactions that may be particularly favorable or advantageous to us), as determined by our General Partner.

Under the terms of the Omnibus Agreement, we or TETRA may, but neither of us are under any obligation to, sell, lease or exchange on a like-kind basis to the other such production enhancement or other oilfield services equipment as is needed or desired to meet either of our production enhancement or other oilfield services obligations, in such amounts, upon such conditions and for such periods of time, if applicable, as may be mutually agreed upon by TETRA and our General Partner. Any such sales, leases, or like-kind exchanges are required to be on terms that are (i) approved by the conflicts committee of our General Partner’s board of directors, (ii) no less favorable to us than those generally being provided to or available from non-affiliated third parties, as determined by our General Partner, or (iii) fair and reasonable to us, taking into account the totality of the relationships between TETRA and us (including other transactions that may be particularly favorable or advantageous to us), as determined by our General Partner. In addition, unless otherwise approved by the conflicts committee of our General Partner’s board of directors, TETRA may purchase newly fabricated equipment from us at a negotiated price, provided that such price may not be less than the sum of the total costs (other than any allocations of general and administrative expenses) incurred by us in fabricating such equipment plus a fixed margin percentage thereof, and TETRA may purchase from us previously fabricated equipment for a price that is not less than the sum of the net book value of such equipment plus a fixed margin percentage thereof.

This description is not a complete discussion of this agreement and is qualified in its entirety by reference to the full text of the complete agreement, which is filed, along with other agreements, as exhibits to our filings with the SEC.

TETRA and General Partner Ownership

To finance a portion of the $825.0 million CSI Acquisition purchase price, we issued and sold 15,280,000 additional common units for net proceeds of $346.0 million (the "Common Unit Offering"). TETRA, through a subsidiary of our General Partner, purchased 1,390,290 of these common units for approximately $32.7 million. In addition, in connection with our Common Unit Offering, our General Partner made a $7.3 million capital contribution to us in order to maintain its approximate 2% general partnership interest in us. Following the August 11, 2014, exercise by the underwriters in the Common Unit Offering of their option to purchase 2,292,000 additional common units, our General Partner made an additional $1.1 million capital contribution in order to maintain its approximate 2% general partnership interest in us.

Prior to the Common Unit Offering and other transactions described above, TETRA's ownership in us was approximately 82% through its aggregate ownership of common units, subordinated units, and indirect general partner interest. Common units held by the public represented an approximately 18% ownership in us prior to the above transactions. However, following the CSI Acquisition, the completion of our Common Unit Offering, and the underwriters' exercise of their option to purchase additional common units, TETRA's ownership interest in us was reduced to approximately 44%, with the common units held by the public representing an approximate 56% interest in us. TETRA's ownership is through various wholly owned subsidiaries and consists of approximately 42% of the

limited partner interests plus the approximately 2% general partner interest, through which it holds incentive distribution rights.

NOTE F – INCOME TAXES

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

In connection with the CSI Acquisition, we and the seller of CSI made a joint Section 338(h) (10) election under the U.S. Internal Revenue Code to treat the purchase of CSI as an asset acquisition for U.S. federal income tax purposes. Accordingly, no U.S. federal deferred tax assets or liabilities were recorded as part of the acquisition.

NOTE G – COMMITMENTS AND CONTINGENCIES

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

NOTE H – SEGMENTS

ASC 280-10-50, “Operating Segments”, defines the characteristics of an operating segment as (i) being engaged in business activity from which it may earn revenues and incur expenses, (ii) being reviewed by the company's chief operating decision maker ("CODM") to make decisions about resources to be allocated and to assess its performance, and (iii) having discrete financial information. Although management of our General Partner reviews our products and services to analyze the nature of our revenue, other financial information, such as certain costs and expenses, net income, and EBITDA, are not captured or analyzed by these items. Therefore discrete financial information is not available by product line and our CODM does not make resource allocation decisions or assess the performance of the business based on these items, but rather in the aggregate. Based on this, our General Partner believes that we operate in one business segment.

NOTE I — SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

The $350 million in aggregate principal amount of 7.25% Senior Notes (the "7.25% Senior Notes") are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several senior unsecured basis, by the following domestic restricted subsidiaries (each a "Guarantor Subsidiary" and collectively the "Guarantor Subsidiaries"):

Compressor Systems, Inc.

CSI Compressco Field Services International LLC

CSI Compressco Holdings LLC

CSI Compressco International LLC

CSI Compressco Leasing LLC

CSI Compressco Operating LLC

CSI Compressco Sub, Inc.

CSI Compression Holdings, LLC

Pump Systems International, Inc.

Rotary Compressor Systems, Inc.

As a result of these guarantees, we are presenting the following condensed consolidating financial information pursuant to Rule 3-10 of Regulation S-X. These schedules are presented using the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and

adjusted for our share in the subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions. The Other Subsidiaries column includes financial information for those subsidiaries that do not guarantee the 7.25% Senior Notes. Financial information of the Issuers includes CSI Compressco Finance Inc., which had no assets or operations for any of the periods presented.

Condensed Consolidating Balance Sheet

June 30, 2015

(In Thousands)



	Issuers		Guarantor Subsidiaries		Other Subsidiaries		Eliminations			Consolidation
ASSETS
Current assets	$	254	$	180,639	$	27,596	$	—		$	208,489
Property, plant, and equipment, net	—		681,936		23,635		—			705,571
Investments in subsidiaries	544,784		16,510		—		(561,294		)	—
Intangible and other assets, net	9,014		298,568		1,757		—			309,339
Intercompany receivables	321,968		—		—		(321,968		)	—
Total non-current assets	875,766		997,014		25,392		(883,262		)	1,014,910
Total assets	$	876,020	$	1,177,653	$	52,988	$	(883,262	)	$	1,223,399

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities	$	11,699	$	100,690	$	5,031	$	—		$	117,420
Amounts payable to affiliates	45		2,954		4,352		—			7,351
Long-term debt	345,212		233,000		—		—			578,212
Intercompany payables	—		295,800		26,168		(321,968		)	—
Other long-term liabilities	—		425		927		—			1,352
Total liabilities	356,956		632,869		36,478		(321,968		)	704,335
Total partners' capital	519,064		544,784		16,510		(561,294		)	519,064
Total liabilities and partners' capital	$	876,020	$	1,177,653	$	52,988	$	(883,262	)	$	1,223,399

Condensed Consolidating Balance Sheet

December 31, 2014

(In Thousands)



	Issuers		Guarantor Subsidiaries		Other Subsidiaries		Eliminations			Consolidation
ASSETS
Current assets	$	28	$	197,485	$	34,277	$	—		$	231,790
Property, plant, and equipment, net	—		669,145		16,851		—			685,996
Investments in subsidiaries	562,290		17,303		—		(579,593		)	—
Intangible and other assets, net	9,650		303,252		1,773		—			314,675
Intercompany receivables	335,151		—		—		(335,151		)	—
Total non-current assets	907,091		989,700		18,624		(914,744		)	1,000,671
Total assets	$	907,119	$	1,187,185	$	52,901	$	(914,744	)	$	1,232,461

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities	$	11,634	$	116,577	$	5,677	$	—		$	133,888
Amounts payable to affiliates	44		987		5,449		—			6,480
Long-term debt	344,961		195,000		—		—			539,961
Intercompany payables	—		311,389		23,762		(335,151		)	—
Other long-term liabilities	199		942		710		—			1,851
Total liabilities	356,838		624,895		35,598		(335,151		)	682,180
Total partners' capital	550,281		562,290		17,303		(579,593		)	550,281
Total liabilities and partners' capital	$	907,119	$	1,187,185	$	52,901	$	(914,744	)	$	1,232,461

Condensed Consolidating Statement of Operations

and Comprehensive Income

Three Months Ended June 30, 2015

(In Thousands)



	Issuers			Guarantor Subsidiaries			Other Subsidiaries			Eliminations			Consolidation
Revenues	$	—		$	117,667		$	11,729		$	(2,931	)	$	126,465
Cost of revenues (excluding depreciation and amortization expense)	—			78,678			8,938			(2,931		)	84,685
Selling, general and administrative expense	877			9,212			465			—			10,554
Depreciation and amortization	—			19,841			788			—			20,629
Interest expense, net	6,472			1,489			—			—			7,961
Other expense, net	318			442			410			—			1,170
Equity in net income of subsidiaries	(8,830		)	(821		)	—			9,651			—
Income before income tax provision	1,163			8,826			1,128			(9,651		)	1,466
Provision (benefit) for income taxes	—			(4		)	307			—			303
Net income	1,163			8,830			821			(9,651		)	1,163
Other comprehensive income (loss)	(1,853		)	(1,853		)	(1,853		)	3,706			(1,853		)
Comprehensive income (loss)	$	(690	)	$	6,977		$	(1,032	)	$	(5,945	)	$	(690	)

Condensed Consolidating Statement of Operations

and Comprehensive Income

Three Months Ended June 30, 2014

(In Thousands)



	Issuers			Guarantor Subsidiaries			Other Subsidiaries			Eliminations			Consolidation
Revenues	$	—		$	23,671		$	11,096		$	(2,659	)	$	32,108
Cost of revenues (excluding depreciation and amortization expense)	—			10,670			9,282			(2,659		)	17,293
Selling, general and administrative expense	235			4,012			761			—			5,008
Depreciation and amortization	—			3,448			303			—			3,751
Interest expense, net	—			148			(3		)	—			145
Other expense, net	—			422			76			—			498
Equity in net income of subsidiaries	(5,114		)	(1,037		)	—			6,151			—
Income before income tax provision	4,879			6,008			677			(6,151		)	5,413
Provision (benefit) for income taxes	—			894			(360		)	—			534
Net income	4,879			5,114			1,037			(6,151		)	4,879
Other comprehensive income (loss)	77			77			77			(154		)	77
Comprehensive income	$	4,956		$	5,191		$	1,114		$	(6,305	)	$	4,956

Condensed Consolidating Statement of Operations

and Comprehensive Income

Six Months Ended June 30, 2015

(In Thousands)



	Issuers			Guarantor Subsidiaries			Other Subsidiaries			Eliminations			Consolidation
Revenues	$	—		$	220,688		$	22,397		$	(13,731	)	$	229,354
Cost of revenues (excluding depreciation and amortization expense)	—			141,592			16,931			(13,731		)	144,792
Selling, general and administrative expense	1,354			19,454			995			—			21,803
Depreciation and amortization	—			38,461			2,156			—			40,617
Interest expense, net	12,941			2,926			—			—			15,867
Other expense, net	619			861			929			—			2,409
Equity in net income of subsidiaries	(17,885		)	(885		)	—			18,770			—
Income before income tax provision	2,971			18,279			1,386			(18,770		)	3,866
Provision for income taxes	—			394			501			—			895
Net income	2,971			17,885			885			(18,770		)	2,971
Other comprehensive income (loss)	(1,677		)	(1,677		)	(1,677		)	3,354			(1,677		)
Comprehensive income (loss)	$	1,294		$	16,208		$	(792	)	$	(15,416	)	$	1,294

Condensed Consolidating Statement of Operations

and Comprehensive Income

Six Months Ended June 30, 2014

(In Thousands)



	Issuers			Guarantor Subsidiaries			Other Subsidiaries			Eliminations			Consolidation
Revenues	$	—		$	46,882		$	20,306		$	(5,270	)	$	61,918
Cost of revenues (excluding depreciation and amortization expense)	—			21,604			17,042			(5,270		)	33,376
Selling, general and administrative expense	437			6,948			1,717			—			9,102
Depreciation and amortization	—			6,839			594			—			7,433
Interest expense, net	—			332			(28		)	—			304
Other expense, net	—			125			912			—			1,037
Equity in net income of subsidiaries	(9,935		)	(353		)	—			10,288			—
Income before income tax provision	9,498			11,387			69			(10,288		)	10,666
Provision (benefit) for income taxes	—			1,452			(284		)	—			1,168
Net income	9,498			9,935			353			(10,288		)	9,498
Other comprehensive income (loss)	(2,891		)	(2,891		)	(2,891		)	5,782			(2,891		)
Comprehensive income (loss)	$	6,607		$	7,044		$	(2,538	)	$	(4,506	)	$	6,607

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2015

(In Thousands)



	Issuers			Guarantor Subsidiaries			Other Subsidiaries			Eliminations			Consolidation
Net cash provided by (used in) operating activities	$	—		$	42,771		$	9,431		$	—		$	52,202
Investing activities:
Purchases of property, plant, and equipment, net	—			(46,638		)	(10,454		)	—			(57,092		)
Intercompany investment activity	33,715			—						(33,715		)	—
Advances and other investing activities				(64		)	—						(64		)
Net cash provided by (used in) investing activities	33,715			(46,702		)	(10,454		)	(33,715		)	(57,156		)
Financing activities:
Proceeds from long-term debt	—			38,153			—			—			38,153
Distributions	(33,715		)	—			—			—			(33,715		)
Intercompany contribution (distribution)	—			(33,715		)	—			33,715			—
Net cash provided by (used in) financing activities	(33,715		)	4,438			—			33,715			4,438
Effect of exchange rate changes on cash	—			—			(271		)	—			(271		)
Increase (decrease) in cash and cash equivalents	—			507			(1,294		)	—			(787		)
Cash and cash equivalents at beginning of period	—			23,343			10,723			—			34,066
Cash and cash equivalents at end of period	$	—		$	23,850		$	9,429		$	—		$	33,279

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2014

(In Thousands)



	Issuers			Guarantor Subsidiaries			Other Subsidiaries			Eliminations			Consolidation
Net cash provided by (used in) operating activities	$	—		$	18,484		$	2,472		$	—		$	20,956
Investing activities:
Purchases of property, plant, and equipment, net	—			(9,708		)	(1,174		)	—			(10,882		)
Intercompany investment activity	14,258			—						(14,258		)	—
Advances and other investing activities	—			(1,405		)	—			—			(1,405		)
Net cash provided by (used in) investing activities	14,258			(11,113		)	(1,174		)	(14,258		)	(12,287		)
Financing activities:
Proceeds from long-term debt	—			7,348			—			—			7,348
Distributions	(14,258		)	—			—			—			(14,258		)
Intercompany contribution (distribution)	—			(14,258		)	—			14,258			—
Net cash provided by (used in) financing activities	(14,258		)	(6,910		)	—			14,258			(6,910		)
Effect of exchange rate changes on cash	—			—			(396		)	—			(396		)
Increase (decrease) in cash and cash equivalents	—			461			902			—			1,363
Cash and cash equivalents at beginning of period	—			4,339			5,138			—			9,477
Cash and cash equivalents at end of period	$	—		$	4,800		$	6,040		$	—		$	10,840

NOTE J – SUBSEQUENT EVENTS

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

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this Quarterly Report. In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K filed with the SEC on March 19, 2015. This discussion includes forward-looking statements that involve certain risks and uncertainties.

Business Overview

The CSI Acquisition, which closed on August 4, 2014, significantly impacted our revenues, results of operations, and operating cash flow during the three month period ended June 30, 2015 compared to the corresponding prior year period. Revenues generated by CSI during the second quarter of 2015 totaled approximately $96.3 million, increasing consolidated revenues for the second quarter of 2015 to $126.5 million, compared to $32.1 million during the second quarter of 2014. CSI revenues during the second quarter of 2015 included approximately $43.3 million of compression and $4.7 million of aftermarket services revenues, primarily in the U.S., and approximately $48.3 million of equipment and parts sales revenues. Due to decreased oil and natural gas prices during the current year period compared to the corresponding prior year period, there has been a reduction in demand for production enhancement compression services, including in liquids-rich resource plays and vapor recovery applications. Despite this decreased demand, our pre-CSI Acquisition compression service revenues remained relatively consistent during the three month period ended June 30, 2015 compared to the corresponding prior year period, decreasing by approximately $0.5 million. We expect that oil and gas exploration activity levels will continue to be decreased during the remainder of 2015 compared to 2014, while most ongoing customer projects supporting gas gathering, midstream, and processing will proceed to completion. Much of our current equipment sales fabrication backlog is associated with such customer projects. Our equipment sales fabrication backlog decreased as of June 30, 2015 compared to December 31, 2014, as completed equipment sales during the first half of 2015 exceeded new equipment sales orders. However, the level of sales orders and completed sales both increased during the second quarter of 2015 compared to the first quarter of 2015. Although our compressor fleet horsepower utilization rate has decreased as of the end of each of the past two quarters, we feel the diversity of our compressor package fleet and the existing levels of natural gas production will continue to support the demand for our compressor packages and services, despite current prices for oil and natural gas.

Including the increased horsepower (HP) added from the CSI Acquisition, our total HP offering has increased from approximately 187,000 prior to the acquisition to over 1,139,000 as of June 30, 2015, and this increase allows us to utilize a wide range of compressor packages (from 20 HP to 2,370 HP) to provide compression services to customers. The CSI Acquisition dramatically expanded our service and equipment sales offerings in the over-100 HP compression services market, complementing our existing strong presence in the below-100 HP compression services market. Strategically, the acquisition afforded us the opportunity to capture significant synergies associated with our service and product offerings and our fabrication operations, to further expand into new and existing markets, and to achieve administrative efficiencies and other strategic benefits.

The continued growth of our operations is particularly dependent upon our continued capital expenditure program. Capital expenditures during the first six months of 2015 totaled $57.1 million and we anticipate that our total capital expenditures during all of 2015 will be approximately $105 million, including approximately $14 million of maintenance capital expenditures. We plan to fund this continuing investment through our Credit Agreement, undistributed operating cash flows, and potentially other sources, if necessary.

How We Evaluate Our Operations

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

Our labor costs consist primarily of wages and benefits for our field and fabrication personnel, as well as expenses related to their training and safety. Additional information regarding our operating expenses for the three month period ended June 30, 2015, is provided within the Results of Operations sections below.

EBITDA. We view EBITDA as one of our primary management tools and we track it on a monthly basis, both in dollars and as a percentage of revenues (compared to the prior month, prior year period, and to budget). We define EBITDA as earnings before interest, taxes, depreciation, and amortization. EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements, including investors, to:


•	assess our ability to generate available cash sufficient to make distributions to our unitholders and General Partner;


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


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


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

EBITDA should not be considered an alternative to net income, operating income, cash flows from operating activities, or any other measure of financial performance presented in accordance with generally accepted accounting principles ("GAAP"). Our EBITDA may not be comparable to EBITDA or similarly titled financial metrics of other entities, as other entities may not calculate EBITDA in the same manner as we do. Management compensates for the limitations of EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making processes. EBITDA should not be viewed as indicative of the actual amount we have available for distributions or that we plan to distribute for a given period, nor should it be equated with “available cash” as defined in our partnership agreement.

The following table reconciles net income to EBITDA for the periods indicated:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(In Thousands)
Net income	$	1,163	$	4,879	$	2,971	$	9,498
Provision for income taxes	303		534		895		1,168
Depreciation and amortization	20,629		3,751		40,617		7,433
Interest expense, net	7,961		145		15,867		304
EBITDA	$	30,056	$	9,309	$	60,350	$	18,403

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



	Six Months Ended June 30,
	2015			2014
	(In Thousands)
Cash flow from operating activities	$	52,202		$	20,956
Changes in current assets and current liabilities	(6,139		)	(3,098		)
Deferred income taxes	433			141
Other non-cash charges	(2,908		)	(1,068		)
Interest expense, net	15,867			304
Provision for income taxes	895			1,168
EBITDA	$	60,350		$	18,403

The CSI Acquisition has had, and is expected to continue to have, a significant impact on EBITDA going forward.

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

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



	June 30,
	2015	2014
Horsepower
Total horsepower in fleet	1,138,656	187,513
Total horsepower in service	952,442	162,453

Net Increases in Compression Fleet Horsepower. We measure the net increase in our compression fleet horsepower during a given period of time by taking the difference between the aggregate horsepower of compressor packages added to the fleet during the period, less the aggregate horsepower of compressor packages removed from the fleet during the period. We measure the net increase in our compression fleet horsepower in service during a given period of time by taking the difference between the aggregate horsepower of compressor packages placed into service during the period, less the aggregate horsepower of compressor packages removed from service during the period. Management uses these metrics to evaluate our operating performance and our relative size in the market.

Manufacturing and Backlog. Our equipment and parts sales business includes the fabrication and sale of standard compressor packages, custom-designed compressor packages, and oilfield fluid pump systems designed and fabricated primarily at our facilities in Midland, Texas and Oklahoma City, Oklahoma. The equipment is fabricated to applicable customer and standard specifications. Our custom fabrication projects are typically greater in size and scope than standard fabrication projects, requiring more labor, materials, and overhead resources. Our fabrication business requires diligent planning of those resources and project and backlog management in order to meet the customer delivery dates and performance criteria. As of June 30, 2015, our fabrication backlog was approximately $86.9 million, of which approximately $67.1 million is expected to be recognized through the year ended December 31, 2015, based on title passing to the customer, the customer assuming the risks of ownership, reasonable assurance of collectability, and delivery occurring as directed by our customer. Our fabrication backlog consists of firm customer orders for which a purchase or work order has been received, satisfactory credit or financing arrangements exists, and delivery has been scheduled. Our fabrication backlog is a measure of marketing effectiveness that allows us to plan future labor needs and measure our success in winning bids from our customers.

Critical Accounting Policies

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our Form 10-K for the year ended December 31, 2014, except as described below. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We periodically evaluate these estimates and judgments, including those related to potential impairments of long-lived assets (including goodwill), the useful life of long-lived assets, the collectability of accounts receivable, and the allocation of acquisition purchase price. Our estimates are based on historical experience and on future expectations that we believe are reasonable. The fair values of a large portion of our total assets and liabilities are measured using significant unobservable inputs. The combination of these factors forms the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates may change as new events occur, as new information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material.

Impairment of Goodwill

Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired in purchase transactions. We perform a goodwill impairment test on an annual basis or whenever indicators of impairment are present. We perform the annual test of goodwill impairment following the fourth quarter of each year, and determined that no impairment of goodwill was required as of December 31, 2014. Our annual assessment for goodwill impairment begins with a qualitative assessment of whether it is “more likely than not” that the fair value of our business is less than its carrying value. This qualitative assessment requires the evaluation, based on the weight of evidence, of the significance of all identified events and circumstances. Based on this qualitative assessment, we determined that due to the decrease in the market price of our common units that resulted in our market capitalization being less than the book value of our consolidated partners' capital as of December 31, 2014, it was “more likely than not” that the fair value of our business was less than its carrying value as of December 31, 2014.

When the qualitative analysis indicates that it is “more likely than not” that our business’ fair value is less than its carrying value, the resulting goodwill impairment test consists of a two-step accounting test being performed. The first step of the impairment test is to compare the estimated fair value with the recorded net book value (including goodwill) of our business. If the estimated fair value is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value is below the recorded net book value, then a second step must be performed to determine the goodwill impairment required, if any. In this second step, the estimated fair value from the first step is used as the purchase price in a hypothetical acquisition. Purchase business combination accounting rules are followed to determine a hypothetical purchase price allocation to assets and liabilities. The residual amount of goodwill that results from this hypothetical purchase price allocation is compared to the recorded amount of goodwill, and the recorded amount is written down to the hypothetical amount, if lower. Our estimates of our fair value, if required, are based on a combination of an income approach and a market approach. These estimates are imprecise and subject to our estimates of the future cash flows of our business and our judgment as to how these estimated cash flows translate into our business’ estimated fair value. These estimates and judgments are affected by numerous factors, including the general economic environment at the time of our assessment, which affects our overall market capitalization. If we overestimate the fair value of our business, the balance of our goodwill asset may be overstated. Alternatively, if our estimated fair values are understated, an impairment might be recognized unnecessarily or in excess of the appropriate amount.

During the first half of 2015, global oil and natural gas commodity prices, particularly crude oil, were significantly decreased compared to early 2014. This decrease in commodity prices has had, and is expected to continue to have, a negative impact on industry drilling and capital expenditure activity, which affects the demand for a portion of our products and services. The accompanying decrease in the price of our common units during the last half of 2014 caused an overall reduction in our market capitalization. Although the price of our common units increased as of June 30, 2015 compared to December 31, 2014, and our market capitalization exceeds our recorded net book value, uncertain market conditions resulting from current oil and natural gas prices continue. We have updated our internal business outlook to consider the current global economic environment that affects our operations. As part of the first step of goodwill impairment testing, we updated our assessment of our future cash flows, applying expected long-term growth rates, discount rates, and terminal values that we consider reasonable. We have calculated a present value of the cash flows to arrive at an estimate of fair value under the income approach, and then used the market approach to corroborate this value. As a result of these estimates, we determined that there was no impairment of goodwill as of December 31, 2014 or June 30, 2015. However, because our estimated fair value exceeded our carrying value by approximately 10%, there is a reasonable possibility that the $233.4 million of goodwill may be impaired in a future period resulting in a non-cash charge to earnings, and the amount of such impairment may be material. Specific uncertainties affecting our estimated fair value include the impact of competition, the prices of oil and natural gas, future overall activity levels in the regions in which we operate, the activity levels of our significant customers, and other factors affecting the rate of our future growth. These factors will continue to be reviewed and assessed going forward. Adverse developments with regard to these factors could have a further negative effect on our fair value.

Results of Operations

Results of operations for the three months ended June 30, 2015, reflect the impact of the CSI Acquisition acquired in August 2014.

Three months ended June 30, 2015 compared to three months ended June 30, 2014



	Three Months Ended June 30,
					Period-to-Period Change			Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2015		2014		2015 vs. 2014			2015		2014		2015 vs. 2014
	(In Thousands)
Revenues:
Compression and related services	72,826		30,043		$	42,783		57.6	%	93.6	%	142.4	%
Aftermarket services	4,671		—		$	4,671		3.7	%	—	%	—	%
Equipment and parts sales	48,968		2,065		46,903			38.7	%	6.4	%	2,271.3	%
Total revenues	126,465		32,108		$	94,357		100.0	%	100.0	%	293.9	%
Cost of revenues:
Cost of compression and related services	37,490		16,227		21,263			29.6	%	50.5	%	131.0	%
Cost of aftermarket services	4,195		—		$	4,195		3.3	%	—	%	—	%
Cost of equipment and parts sales	43,000		1,066		41,934			34.0	%	3.3	%	3,933.8	%
Total cost of revenues	84,685		17,293		$	67,392		67.0	%	53.9	%	389.7	%
Selling, general and administrative expense	10,554		5,008		5,546			8.3	%	15.6	%	110.7	%
Depreciation and amortization	20,629		3,751		16,878			16.3	%	11.7	%	450.0	%
Interest expense, net	7,961		145		7,816			6.3	%	0.5	%	5,390.3	%
Other expense, net	1,170		498		672			0.9	%	1.6	%	134.9	%
Income before income taxes	1,466		5,413		$	(3,947	)	1.2	%	16.9	%	(72.9	)%
Provision for income taxes	303		534		(231		)	0.2	%	1.7	%	(43.3	)%
Net income	$	1,163	$	4,879	$	(3,716	)	0.9	%	15.2	%	(76.2	)%

Revenues

Revenues during the second quarter of 2015 significantly increased compared to the prior year period, primarily due to the acquired operations of CSI, which generated aggregate revenues of approximately $96.3 million during the second quarter of 2015. Compression and related services revenues increased by $42.8 million, due to approximately $43.3 million of compression and related services revenues generated by CSI. Service revenues from pre-CSI Acquisition operations decreased approximately $0.5 million, due in part to a significant decrease in oil and natural gas prices compared to the prior year period. Decreased commodity prices have adversely impacted the demand for production enhancement compression services applications, including for liquids-rich resource plays and vapor recovery applications. An additional $4.7 million of aftermarket services revenues were also realized as a result of the CSI Acquisition. Demand for compression and related services in the U.S. has been driven by the significant investments made in recent years related to increased exploration and production of oil and natural gas and the related infrastructure, including midstream gas transmission, gathering, processing, vapor recovery, and wellhead compression. We have continued to increase the overall size of our compressor package service fleet, particularly our mid- and high-horsepower fleet, both in the U.S. and certain foreign markets, to serve the current levels of demand for services.

In addition to the increase in consolidated compression and related services and aftermarket services revenues, there was an increase of approximately $46.9 million in revenues from the sales of equipment and parts during the three months ended June 30, 2015, compared to the prior year period. This increase is primarily due to the acquisition of CSI, which generated equipment and parts sales revenues of $48.3 million during the current year period. This increase was partially offset by decreased equipment and parts sales from our non-CSI operations. The level of revenues from equipment and parts sales is volatile and typically difficult to forecast, as these revenues are

tied to specific projects that vary in scope, design, complexity, and customer needs. In comparison, our revenues from compression and related services and aftermarket services are typically more consistent and predictable.

Cost of revenues

The increase in cost of compression and related services revenues during the quarter ended June 30, 2015, compared to the prior year period was primarily due to the impact of the CSI Acquisition, which generated approximately $21.2 million of cost during the second quarter of 2015. Cost of compression and related services as a percentage of compression and related services revenues was 51.5% during the quarter ended June 30, 2015, compared to 54.0% from the prior year period. CSI cost of compression services as a percentage of compression services revenues was 48.8% during the current year period. We are continuing to capture additional synergies anticipated as part of the integration of CSI's operations. These efforts will continue going forward, and are expected to result in increased cost and income tax efficiencies in future periods.

Cost of equipment and parts sales increased compared to the prior year due to the increased sales, primarily related to the CSI Acquisition, discussed above.

Selling, general and administrative expense

Selling, general and administrative expense increased for the three months ended June 30, 2015, compared to the three months ended June 30, 2014, primarily due to approximately $5.0 million of added administrative personnel and facility costs from the CSI Acquisition. Also, selling, general and administrative costs increased approximately $1.0 million as a result of increased allocated costs from TETRA pursuant to our Omnibus Agreement as a result of increased administrative requirements resulting from the CSI Acquisition. Selling, general and administrative expenses were also increased compared to the prior year period due to $0.2 million of increased professional fees, primarily associated with audit, tax, and legal expenses. Professional fee expenses during the second quarter of 2015 decreased approximately $0.2 million compared to the first quarter of 2015, as these costs are typically highest during the first quarter of each year due to year end reporting requirements. These increases were partially mitigated by administrative cost reductions and integration efficiencies achieved. The ongoing efforts to integrate the administrative functions of CSI are expected to result in further efficiencies going forward. Selling, general and administrative expense as a percentage of revenues decreased significantly compared to the prior year period, reflecting the increased efficiency of our expanded operations.

Depreciation and amortization

Depreciation and amortization expense primarily consists of the depreciation of compressor packages in our service fleet. In addition, it includes the depreciation of other operating equipment and facilities. Depreciation and amortization expense increased compared to the prior year period primarily as a result of approximately $16.5 million of depreciation and amortization from the CSI Acquisition, and includes the impact of the allocation of the purchase price to the estimated fair values of CSI's property, plant, and equipment and identified intangible assets.

Interest expense

Interest expense increased compared to the prior year period due to increased borrowings under the Credit Agreement and the issuance of the 7.25% Senior Notes in connection with the CSI Acquisition. As of June 30, 2015, our total outstanding borrowing under our Credit Agreement was $233.0 million. Interest expense is expected to continue to be increased compared to the periods prior to the CSI Acquisition as a result of the borrowings associated with the CSI Acquisition and with the financing of capital expenditures.

Other expense, net

Other expense, net, was $1.2 million during the second quarter of 2015 compared to $0.5 million of expense during the corresponding prior year period, primarily due to approximately $0.3 million of financing cost amortization during the current year period, and approximately $0.4 million of increased foreign currency losses compared to the prior year period.

Provision for income taxes

Our U.S. operations are not subject to U.S. federal income tax other than with respect to the operations that are conducted through our taxable U.S. corporate subsidiaries. We also incur state and local income taxes in certain states, and we incur income taxes related to our foreign operations in the foreign countries in which we operate.

Results of Operations

Results of operations for the six months ended June 30, 2015, reflect the impact of the CSI Acquisition acquired in August 2014.

Six months ended June 30, 2015 compared to six months ended June 30, 2014



	Six Months Ended June 30,
					Period-to-Period Change			Percentage of Total Revenues				Period-to-Period Change
Consolidated Results of Operations	2015		2014		2015 vs. 2014			2015		2014		2015 vs. 2014
	(In Thousands)
Revenues:
Compression and related services	148,114		57,970		90,144			64.6	%	93.6	%	155.5	%
Aftermarket services	14,121		—		14,121			6.2	%	—	%	—	%
Equipment and parts sales	67,119		3,948		63,171			29.3	%	6.4	%	100.0	%
Total revenues	229,354		61,918		167,436			100.0	%	100.0	%	270.4	%
Cost of revenues:
Cost of compression and related services	74,468		31,381		43,087			32.5	%	50.7	%	137.3	%
Cost of aftermarket services	12,367		—		12,367			5.4	%	—	%	—	%
Cost of equipment and parts sales	57,957		1,995		55,962			25.3	%	3.2	%	100.0	%
Total cost of revenues	144,792		33,376		111,416			63.1	%	53.9	%	333.8	%
Selling, general and administrative expense	21,803		9,102		12,701			9.5	%	14.7	%	139.5	%
Depreciation and amortization	40,617		7,433		33,184			17.7	%	12.0	%	446.4	%
Interest expense, net	15,867		304		15,563			6.9	%	0.5	%	5,119.4	%
Other expense, net	2,409		1,037		1,372			1.1	%	1.7	%	132.3	%
Income before income taxes	3,866		10,666		(6,800		)	1.7	%	17.2	%	(63.8	)%
Provision for income taxes	895		1,168		(273		)	0.4	%	1.9	%	(23.4	)%
Net income	$	2,971	$	9,498	$	(6,527	)	1.3	%	15.3	%	(68.7	)%

Revenues

Revenues during the six months ended June 30, 2015 significantly increased compared to the prior year period primarily due to the acquired operations of CSI, which generated aggregate revenues of approximately $167.5 million during the six months ended June 30, 2015. Approximately $87.8 million of the $90.1 million increase in compression and related services revenues were generated by CSI. In addition, service revenues from pre-CSI Acquisition operations increased approximately $2.4 million. Decreased oil and natural gas commodity prices have adversely impacted the demand for production enhancement compression services applications, includng for liquids-rich resource plays and vapor recovery applications. An additional $14.1 million of aftermarket services revenues were also added as a result of the CSI Acquisition. Demand for compression and related services in the U.S. has been driven by the significant investments made in recent years related to increased exploration and production of oil and natural gas and the related infrastructure, including midstream gas transmission, gathering, processing, vapor recovery, and wellhead compression. We have continued to increase the overall size of our compressor package service fleet, particularly our mid- and high-horsepower fleet, both in the U.S. and certain foreign markets, to serve the current levels of demand for services.

In addition to the increase in consolidated compression and related services and aftermarket services revenues, there was an increase of approximately $63.2 million in revenues from the sales of equipment and parts during the six months ended June 30, 2015, compared to the prior year period. This increase is primarily due to the acquisition of CSI which generated equipment and parts sales revenues of $65.7 million during the current year period. This increase was partially offset by decreased equipment and parts sales from our non-CSI operations.

Cost of revenues

The increase in cost of compression and related services revenues during the six months ended June 30, 2015, compared to the prior year period was primarily due to the impact of the CSI Acquisition, which generated approximately $41.3 million of cost during the six months ended 2015. Cost of compression and related services as a percentage of compression and related services revenues was 50.3% during the six months ended June 30, 2015, compared to 54.1% from the prior year period. CSI cost of compression services as a percentage of compression services revenues was 47.1% during the current year period. We are continuing to capture additional synergies anticipated as part of the integration of CSI's operations. These efforts will continue going forward, and are expected to result in increased cost efficiencies in future periods.

Cost of equipment and parts sales increased compared to the prior year period due to the increased sales, primarily related to the CSI Acquisition, discussed above.

Selling, general and administrative expense

Selling, general and administrative expense increased for the six months ended June 30, 2015, compared to the six months ended June 30, 2014, primarily due to approximately $10.8 million of added administrative personnel and facility costs from the CSI Acquisition. Also, selling, general and administrative costs increased approximately $1.8 million compared to the prior year period as a result of increased allocated costs from TETRA pursuant to our Omnibus Agreement as a result of increased administrative requirements resulting from the CSI Acquisition. Selling, general and administrative expenses were also increased due to $1.1 million of increased professional fees, primarily associated with audit, tax, and legal expenses associated with year end reporting. Such costs are typically highest during the first quarter of each year. These increases were partially mitigated by administrative cost reductions and integration efficiencies achieved. The ongoing efforts to integrate the administrative functions of CSI are expected to result in further efficiencies going forward. Selling, general and administrative expense as a percentage of revenues decreased significantly compared to the prior year period, reflecting the increased efficiency of our expanded operations.

Depreciation and amortization

Depreciation and amortization expense primarily consists of the depreciation of compressor packages in our service fleet. In addition, it includes the depreciation of other operating equipment and facilities. Depreciation and amortization expense increased approximately $32.4 million due to depreciation and amortization from the CSI Acquisition, and includes the impact of the allocation of the purchase price to the estimated fair values of CSI's property, plant, and equipment and identified intangible assets.

Interest expense

Interest expense increased due to increased borrowings under the Credit Agreement and the issuance of the 7.25% Senior Notes in connection with the CSI Acquisition. As of June 30, 2015, our total outstanding borrowing under our Credit Agreement was $233.0 million. Interest expense is expected to continue to be increased compared to the periods prior to the CSI Acquisition as a result of the borrowings associated with the CSI Acquisition and the financing of capital expenditures.

Other expense, net

Other expense, net, was $2.4 million during the six months ended June 30, 2015, compared to $1.0 million of expense during the corresponding prior year period, primarily due to approximately $1.3 million of financing cost amortization during the current year period and approximately $0.1 million of increased foreign currency losses compared to the prior year period.

Provision for income taxes

Liquidity and Capital Resources

Our primary cash requirements are for distributions, working capital requirements, normal operating expenses, and capital expenditures. Our sources of funds are our existing cash balances, cash generated from our operations, long-term and short-term borrowings, and operating leases, which we believe will be sufficient to meet our working capital requirements. Increasingly competitive market environments, along with the continuation of decreased oil and natural gas prices experienced beginning in late 2014, have resulted in additional challenges in many of our domestic and international business regions. We reported significantly increased revenues and gross profit as a result of the acquisition of CSI. Despite the growth in revenues and gross profit, we continue to experience decreased activity from project delays by certain customers as a result of the oil and natural gas price declines that began in 2014.

Our cash flows from operating activities increased for the six months ended June 30, 2015, when compared to the corresponding prior year period, by $31.2 million, primarily as a result of the increased operations following the CSI Acquisition. Cash flows used in investing activities for the six months ended June 30, 2015, increased $44.9 million when compared to the same period in 2014, reflecting the increased capital expenditures stemming from expanded operations subsequent to the CSI Acquisition. Cash flows provided by financing activities was $4.4 million for the six months ended June 30, 2015, as compared to cash flows used by financing activities of $6.9 million in the prior year period, primarily as a result of the proceeds from increased borrowings. Our sources and uses of cash during the six month periods ended June 30, 2015 and 2014 are as follows:



	Six Months Ended June 30, 2015
	2015			2014
Operating activities	$	52,202		$	20,956
Investing activities	(57,156		)	(12,287		)
Financing activities	4,438			(6,910		)

As a result of the transactions undertaken to finance the CSI Acquisition in 2014, our consolidated capital structure significantly changed. We believe that we have sufficient liquid assets, cash flow from operations, and other capital resources to meet our financial commitments, debt service obligations, and anticipated capital expenditures. We expect to fund any future acquisitions and capital expenditures with cash flow generated from our expanded operations, funds borrowed under our Credit Agreement and funds received from the issuance of additional debt and equity. However, we are subject to business and operational risks that could materially adversely affect our cash flows. Please read Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Continued growth in our operations, both internationally and in the U.S, will require ongoing significant capital expenditure investment. We anticipate that our total capital expenditures during 2015 will be approximately $105 million, including approximately $14 million of maintenance capital expenditures. Continued growth or expansion of our operations or increased working capital requirements could result in the need for additional borrowings or equity offerings.

Our capital expenditure program consists of both expansion capital expenditures and maintenance capital expenditures. Expansion capital expenditures consist of expenditures for acquisitions or capital improvements that increase our capacity, either by fabricating new compressor packages to expand our compressor fleet, purchasing support equipment or other assets, or through the upgrading of existing compressor packages to increase their capabilities. Expansion capital expenditures generally result in our ability to generate increased revenues. Maintenance capital expenditures consist of expenditures to maintain our compressor package fleet or support equipment without increasing its capacity. Maintenance capital expenditures are intended to maintain or sustain the

current level of operating capacity and include the maintenance of existing assets and the replacement of obsolete assets.

On July 20, 2015, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended June 30, 2015 of $0.50 per unit. This distribution equates to a distribution of $2.00 per outstanding common unit on an annualized basis. This quarterly cash distribution is to be paid on August 14, 2015 to all common unitholders of record as of the close of business on July 31, 2015. The amount to be distributed on August 14, 2015, will also include the impact of incentive distribution rights of our General Partner, for amounts distributed in excess of $0.445625 per common unit.

Cash Flows

Operating Activities

Net cash from operating activities increased by $31.2 million during the six month period ended June 30, 2015 to $52.2 million compared to $21.0 million for the corresponding prior year period. Cash provided from operating activities increased during the first six months of 2015 as a result of increased operations following the CSI Acquisition.

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

Investing Activities

Capital expenditures during the six month period ended June 30, 2015 increased by $46.2 million compared to the corresponding prior year period, reflecting the impact of our expanded operations subsequent to the CSI Acquisition. The capital expenditure requirements of CSI are significantly increased compared to our pre-CSI Acquisition operations, due to the size and scope of the operations of CSI and the significantly higher horsepower of CSI compressor packages. Total capital expenditures during the current year period of $57.1 million include $4.2 million of maintenance capital expenditures. Our expansion capital programs for 2015 are focused on increasing our fleet to meet customer needs, and we currently plan to spend up to approximately $105 million on capital expenditures during all of 2015 including approximately $14 million of estimated maintenance capital expenditures.

Financing Activities

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to our unitholders of record on the applicable record date and to our General Partner. During the six month period ended June 30, 2015, we distributed approximately $33.7 million to our unitholders and General Partner. On July 20, 2015, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended June 30, 2015 of $0.500 per unit. This cash distribution is to be paid on August 14, 2015 to all unitholders of record as of the close of business on July 31, 2015.

7.25% Senior Notes

In August 2014, we and one of our indirect wholly owned subsidiaries, CSI Compressco Finance Inc., a Delaware corporation (we, together with CSI Compressco Finance Inc., the "Issuers"), issued $350.0 million aggregate principal amount of the Issuers’ 7.25% Senior Notes due 2022 (the "7.25% Senior Notes") in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to a Note Purchase Agreement dated July 29, 2014. The CCLP Senior Notes were subsequently registered through a public exchange offer that closed on July 20, 2015.

The obligations under the 7.25% Senior Notes are jointly and severally, and fully and unconditionally, guaranteed on a senior unsecured basis by each of our domestic restricted subsidiaries (other than CSI Compressco Finance) that guarantee our other indebtedness (the "Guarantors" and together with the Issuers, the "Obligors"). The 7.25% Senior Notes and the subsidiary guarantees thereof (together, the "Securities") were issued pursuant to an indenture described below.

The Obligors issued the Securities pursuant to the Indenture dated as of August 4, 2014 (the "Indenture") by and among the Obligors and U.S. Bank National Association, as trustee (the "Trustee"). The 7.25% Senior Notes accrue interest at a rate of 7.25% per annum. Interest on the 7.25% Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2015. The 7.25% Senior Notes are scheduled to mature on August 15, 2022.

The Indenture contains customary covenants restricting our ability and the ability of our restricted subsidiaries to: (i) pay dividends and make certain distributions, investments and other restricted payments; (ii) incur additional indebtedness or issue certain preferred shares; (iii) create certain liens; (iv) sell assets; (v) merge, consolidate, sell or otherwise dispose of all or substantially all of our or their assets; (vi) enter into transactions with affiliates; and (vii) designate our or their subsidiaries as unrestricted subsidiaries under the Indenture. The Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the 7.25% Senior Notes then outstanding may declare all amounts owing under the 7.25% Senior Notes to be due and payable. We are in compliance with all covenants and conditions of the Indenture as of June 30, 2015.

Bank Credit Facilities

Under the Credit Agreement, we and our CSI Compressco Sub, Inc. subsidiary are named as the borrowers and all obligations under the Credit Agreement are guaranteed by all of our existing and future, direct and indirect, domestic restricted subsidiaries (other than domestic subsidiaries that are wholly owned by foreign subsidiaries). The Credit Agreement includes a maximum credit commitment of $400.0 million, and included within such amount is availability for letters of credit (with a sublimit of $20.0 million) and swingline loans (with a sublimit of $60.0 million). As of August 11, 2015, we have a balance outstanding under the Credit Agreement of $233.0 million, and $6.1 million letters of credit and performance bonds outstanding, leaving availability under the Credit Agreement of $160.9 million.

The Credit Agreement is available to provide our working capital needs, letters of credit, and for general partnership purposes, including capital expenditures and potential future expansions or acquisitions. So long as we are not in default, the Credit Agreement can also be used to fund our quarterly distributions at the option of the board of directors of our General Partner (provided, that after giving effect to such distributions, the borrowers will be in compliance with the financial covenants). The maturity date of the Credit Agreement is August 4, 2019.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at our option, either (a) LIBOR (adjusted to reflect any required bank reserves) for an interest period equal to one, two, three, or six months (as selected by us), plus a leverage based margin or (b) a base rate plus a leverage-based margin; such base rate shall be determined by reference to the highest of (1) the prime rate of interest per annum announced from time to time by Bank of America, N.A. (2) the Federal Funds rate plus 0.50% per annum and (3) LIBOR (adjusted to reflect any required bank reserves) for a one-month interest period on such day plus 1.00% per annum. LIBOR based loans will have an applicable margin that will range between 1.75% and 2.50% per annum and base rate loans will have an applicable margin that will range between 0.75% and 1.50% per annum, each based on our consolidated total leverage ratio when financial statements are delivered. In addition to paying interest on outstanding principal under the Credit Agreement, we are required to pay a commitment fee in respect of the unutilized commitments thereunder at the applicable rate ranging from 0.375% to 0.50% per annum, paid quarterly in arrears based on our consolidated total leverage ratio. We are required to pay a customary letter of credit fee equal to the applicable margin on revolving credit LIBOR loans, fronting fees and other fees agreed to with the administrative agent and lenders.

The Credit Agreement requires us to maintain (i) a minimum consolidated interest coverage ratio (ratio of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest charges) of 3.0 to 1.0, (ii) a maximum consolidated total leverage ratio (ratio of consolidated total indebtedness to consolidated EBITDA ) of 5.5 to 1.0 (with step downs to 5.0 to 1.0), and (iii) a maximum consolidated secured leverage ratio (consolidated secured indebtedness to consolidated EBITDA ) of 4.0 to 1.0, in each case, as of the last day of each fiscal quarter, calculated on a trailing four quarters basis. In addition, the Credit Agreement includes customary negative covenants that, among other things, limit our ability to incur additional debt, incur, or permit certain liens to exist, or make certain loans, investments, acquisitions, or other restricted payments. The Credit Agreement provides that we can make distributions to holders of our common units, but only if there is no default or

event of default under the facility. We are in compliance with all covenants and conditions of the Credit Agreement as of June 30, 2015.

All obligations under the Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a first lien security interest in substantially all of our assets and the assets of our existing and future domestic subsidiaries, and all of the capital stock of our existing and future subsidiaries (limited in the case of foreign subsidiaries, to 65% of the voting stock of first tier foreign subsidiaries).

Off Balance Sheet Arrangements

As of June 30, 2015, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

Commitments and Contingencies

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

Contractual Obligations

Our contractual obligations and commitments principally include obligations associated with our outstanding indebtedness and obligations under operating leases. During the first six months of 2015, there were no material changes outside of the ordinary course of business in the specified contractual obligations.

For additional information about our contractual obligations as of December 31, 2014, see "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, 2014.

Cautionary Statement for Purposes of Forward-Looking Statements

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

Such forward-looking statements reflect our current views with respect to future events and financial performance and are based on assumptions that we believe to be reasonable but such forward-looking statements are subject to numerous risks, and uncertainties, including, but not limited to:


•	economic and operating conditions that are outside of our control, including the supply, demand, and prices of crude oil and natural gas;


•	the levels of competition we encounter;


•	the activity levels of our customers;


•	the availability of adequate sources of capital to us;


•	our ability to comply with contractual obligations, including those under our financing arrangements;


•	our operational performance;


•	risks related to acquisitions and our growth strategy, including our recent acquisition of Compressor Systems, Inc.;


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


•	risks related to our foreign operations;


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


•	other risks and uncertainties under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, and as included in our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC website at www.sec.gov.

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. We do not take title to any natural gas or oil in connection with our services and, accordingly, have no direct exposure to fluctuating commodity prices. While we have a significant number of customers who have retained our services through periods of high and low commodity prices, we generally experience less growth and more customer attrition during periods of significantly high or low commodity prices. For a discussion of our indirect exposure to fluctuating commodity prices, please read “Risk Factors — Certain Business Risks” in our Annual Report on Form 10-K filed with the SEC on March 19, 2015. We depend on domestic and international demand for and production of natural gas and oil and a reduction in this demand or production could adversely affect the demand or the prices we charge for our services, which could cause our revenues and cash available for distribution to our unitholders to decrease in the future. We do not intend to hedge, our indirect exposure to fluctuating commodity prices.

Interest Rate Risk

Through June 30, 2015, there have been no material changes in the information pertaining to our interest rate risk exposures as disclosed in our Form 10-K for the year ended December 31, 2014.

Exchange Rate Risk

We have exposure to changes in foreign exchange rates associated with our operations in Latin America and Canada. Most of our billings under our contracts with PEMEX and other clients in Mexico are denominated in U.S. dollars; however, a large portion of our expenses and costs under those contracts are incurred in Mexican pesos, and we retain cash balances denominated in Mexican pesos. As such, we are exposed to fluctuations in the value of the Mexican peso against the U.S. dollar. As Mexican peso denominated assets are largely offset by Mexican peso denominated liabilities, a hypothetical increase or decrease in the U.S. dollar-Mexican peso foreign exchange rate of 10.0% would have a $108,000 impact on our net income for the three month period ended June 30, 2015.

We enter into 30-day foreign currency forward derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected transactions of certain foreign subsidiaries. As of June 30, 2015, we had the following foreign currency derivative contract outstanding relating to a portion of our foreign operations:



Derivative Contracts	US Dollar Notional Amount		Traded Exchange Rate	Settlement Date
	(In Thousands)
Forward sale Canadian dollar	$	780	1.25	7/17/2015
Forward sale Mexican peso	$	2,066	15.71	7/17/2015

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

The fair value of foreign currency derivative instruments are based on quoted market values as reported to us by our counterparty (a Level 2 fair value measurement). The fair value of our foreign currency derivative instruments as of June 30, 2015, is as follows:



	Balance Sheet	Fair Value at
Foreign currency derivative instruments	Location	June 30, 2015
		(In Thousands)
Forward sale contracts	Current assets	$	44
	Current liabilities	—
Net asset		$	44

None of the foreign currency derivative contracts contain credit risk related contingent features that would require us to post assets or collateral for contracts that are classified as liabilities. During the period ended June 30, 2015, we recognized approximately $0.00 million of net gains associated with our foreign currency derivative program, and such amount is included in Other Income in the accompanying consolidated statement of operations.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer of our General Partner, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the Principal Executive Officer and Principal Financial Officer of our General Partner concluded that, except with respect to the event described below, our disclosure controls and procedures were effective as of June 30, 2015, the end of the period covered by this quarterly report.

We are currently integrating CSI into our internal control over financial reporting processes. In executing this integration, we are analyzing, evaluating, and, where necessary, making changes in controls and procedures related to the CSI business, which we expect to be completed in fiscal year 2015.

Other than the changes described above in the preceding paragraph, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

There have been no material changes in the information pertaining to our Risk Factors as disclosed in our Annual Report on Form 10-K filed with SEC on March 19, 2015.

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

(a) None.

(b) None.



Period	Total Number of Units Purchased	Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Units that May Yet be Purchased Under the Publicly Announced Plans or Programs
April 1 – April 30, 2015	—	$	—	N/A	N/A
May 1 – May 31, 2015	—	—		N/A	N/A
June 1 – June 30, 2015	—	—		N/A	N/A
Total	—			N/A	N/A

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits:



10.1	Registration Rights Agreement, dated as of April 30, 2015, by and among CSI Compressco LP, TETRA Technologies, Inc., and Wells Fargo Energy Capital, Inc., in its capacity as noteholder representative (incorporated by reference to Exhibit 10.1 to the Partnership's Form 8-K filed on May 6, 2015 (SEC File No. 001-35195))
10.2	CSI Compressco LP Amended and Restated 2011 Long Term Incentive Plan, as amended through March 3, 2015.
31.1*	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+	XBRL Instance Document
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed with this report.


**	Furnished with this report.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six month periods ended June 30, 2015 and 2014; (ii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2015 and 2014; (iii) Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014; (iv) Consolidated Statement of Partners’ Capital for the six month period ended June 30, 2015; (v) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2015 and 2014; and (iv) Notes to Consolidated Financial Statements for the six months ended June 30, 2015.

SIGNATURES

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



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

Date:	August 11, 2015	By:	/s/Timothy A. Knox
			Timothy A. Knox, President
			Principal Executive Officer

Date:	August 11, 2015	By:	/s/James P. Rounsavall
			James P. Rounsavall
			Chief Financial Officer, Treasurer and Secretary
			Principal Financial Officer

Date:	August 11, 2015	By:	/s/Susan R. Makovy
			Susan R. Makovy
			Controller
			Principal Accounting Officer

EXHIBIT INDEX



10.1	Registration Rights Agreement, dated as of April 30, 2015, by and among CSI Compressco LP, TETRA Technologies, Inc., and Wells Fargo Energy Capital, Inc., in its capacity as noteholder representative (incorporated by reference to Exhibit 10.1 to the Partnership's Form 8-K filed on May 6, 2015 (SEC File No. 001-35195))
10.2	CSI Compressco LP Amended and Restated 2011 Long Term Incentive Plan, as amended through March 3, 2015.
31.1*	Certification of Principal Executive Officer Furnished Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Furnished Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+	XBRL Instance Document
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed with this report.


**	Furnished with this report.

EXHIBIT 10.2

CSI COMPRESSCO LP

AMENDED AND RESTATED 2011 LONG TERM INCENTIVE PLAN


SECTION 1.	Purpose of the Plan.

The CSI Compressco LP Amended and Restated 2011 Long Term Incentive Plan (the “Plan”) amends and restates the Compressco Partners, L.P. 2011 Long Term Incentive Plan (the (“Original Plan”). The Plan has been adopted by CSI Compressco GP Inc. (the “Company”), the general partner of CSI Compressco LP, a Delaware limited partnership (the “Partnership”). The Plan is intended to promote the interests of the Company and the Partnership by providing to Employees, Consultants and Directors incentive compensation awards based on Units to encourage superior performance. The Plan is also contemplated to enhance the ability of the Company, the Partnership and their Affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Company, the Partnership and their Affiliates and to encourage them to devote their best efforts to advancing the business of the Company, the Partnership and their Affiliates.


SECTION 2.	Definitions.

As used in the Plan, the following terms shall have the meanings set forth below:

“409A Award” means an Award that constitutes a “deferral of compensation” within the meaning of the 409A Regulations, whether by design, due to a subsequent modification in the terms and conditions of such Award or as a result of a change in applicable law following the date of grant of such Award, and that is not exempt from Section 409A of the Code pursuant to an applicable exemption.

“409A Regulations” means the applicable Treasury regulations and other interpretive guidance promulgated pursuant to Section 409A of the Code.

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Award” means a Restricted Unit, a Phantom Unit, a Unit Award, Option, Unit Appreciation Right, an Other Unit-Based Award or a Substitute Award granted under the Plan, and includes any tandem DERs granted with respect to Awards (other than Restricted Units and Unit Awards).

“Award Agreement” means the written or electronic agreement by which an Award shall be evidenced.

“Board” means the Board of Directors of the Company.

“Change of Control” means, and shall be deemed to have occurred upon, one or more of the following events:

(i) any transaction or series of transactions that results in any Person or group of Persons other than the Company (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof) or an Affiliate of the Company acquiring an ownership interest, directly or indirectly, in twenty-five percent (25%) or more of the Partnership (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof);

(ii) the limited partners of the Partnership approve, in one transaction or a series of transactions, a plan of complete liquidation of the Partnership;

(iii) the sale or other disposition by either the Company or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than the Company or an Affiliate of the Company;

(iv) a transaction resulting in a Person other than the Company (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof) or an Affiliate thereof being the general

partner of the Partnership (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof); or

(v) any other event specified as a “Change of Control” in an applicable Award Agreement.

Notwithstanding the foregoing, the Committee may elect in an Award Agreement to specify a different definition of “Change of Control” for purposes of complying with Section 409A of the Code or for any other reason as deemed appropriate by the Committee.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the entity appointed by the Board to administer the Plan, which may be the Board, any compensation committee of the Board, an Affiliate’s board of directors or a committee thereof, or such other committee as may be appointed by the Board.

“Consultant” means an individual who renders consulting services to the Company, the Partnership or an Affiliate of either the Company or the Partnership.

“Director” means a member of the Board who is not an Employee or a Consultant (other than in that individual’s capacity as a Director).

“Distribution Equivalent Right” or “DER” means a contingent right, granted in tandem with a specific Award (other than a Restricted Unit or a Unit Award), to receive with respect to each Unit subject to an Award an amount in cash, Units and/or Phantom Units, as determined by the Committee in its sole discretion, equal in value to the distributions made by the Partnership with respect to a Unit during the period such Award is outstanding.

“Employee” means an employee of the Company, the Partnership or an Affiliate of either the Company or the Partnership.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” means the closing sales price of a Unit on the principal national securities exchange or other market in which trading in Units occurs on the most recent date on which Units were publicly traded preceding the date with respect to which the Fair Market Value determination is made as reported in The Wall Street Journal (or other reporting service approved by the Committee). If Units are not traded on a national securities exchange or other market at the time a determination of fair market value is required to be made hereunder, the determination of fair market value shall be made by the Committee in good faith using a “reasonable application of a reasonable valuation method” within the meaning of the 409A Regulations (specifically, Treasury Regulation Section 1.409A-1(b)(5)(iv)(B)).

“Option” means an option to purchase Units granted under the Plan.

“Other Unit-Based Award” means an award granted pursuant to Section 6(c) of the Plan.

“Parent” means TETRA Technologies, Inc., a Delaware corporation and parent of the Company.

“Participant” means an Employee, Consultant or Director granted an Award under the Plan.

“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, governmental agency or political subdivision thereof or other entity.

“Phantom Unit” means a notional Unit granted under the Plan that entitles the Participant to receive, at the time of settlement, a Unit or an amount of cash equal to the Fair Market Value of a Unit, as determined by the Committee in its sole discretion,.

“Restricted Period” means the period established by the Committee with respect to an Award during which the Award remains subject to forfeiture and is either not exercisable by or payable to the Participant, as the case may be.

“Restricted Unit” means a Unit granted under the Plan that is subject to a Restricted Period.

“Retirement” means termination of a Participant’s employment with or consulting services to the Company and its Affiliates or membership as a Director, whichever is applicable, in each case, under circumstances that constitute retirement as determined by the Committee.

“Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act or any successor rule or regulation thereto as in effect from time to time.

“SEC” means the Securities and Exchange Commission or any successor thereto.

“Substitute Award” means an award granted pursuant to Section 6(g) of the Plan.

“Unit Distribution Right” or “UDR” means a distribution made by the Partnership with respect to a Restricted Unit.

“Unit” means a common unit of the Partnership.

“Unit Appreciation Right” means a contingent right granted under the Plan that entitles the holder to receive, in cash or Units, as determined by the Committee in its sole discretion, an amount equal to the excess of the Fair Market Value of a Unit on the exercise date of the Unit Appreciation Right (or another specified date) over the exercise price of the Unit Appreciation Right.

“Unit Award” means a grant of a Unit that is not subject to a Restricted Period.


SECTION 3.	Administration.

(a)Authority of the Committee. A majority of the Committee shall constitute a quorum, and the acts of the members of the Committee who are present at any meeting thereof at which a quorum is present, or acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. Subject to the following and any applicable law, the Committee, in its sole discretion, may delegate any or all of its powers and duties under the Plan, including the power to grant Awards under the Plan, to the then-current Chief Executive Officer of the Parent, subject to such limitations on such delegated powers and duties as the Committee may impose, if any, and provided that the Committee may not delegate its duties where such delegation would violate state corporate or partnership law, or with respect to making Awards to, or otherwise with respect to Awards granted to, Participants who are subject to Section 16(b) of the Exchange Act. Upon any such delegation all references in the Plan to the “Committee,” other than in Section 7, shall be deemed to include the Chief Executive Officer of the Parent. Any such delegation shall not limit the ability of the Chief Executive Officer of the Parent to receive Awards under the Plan; provided, however, the Chief Executive Officer of the Parent may not grant Awards to himself, a Director or any executive officer of the Company or an Affiliate, including the Parent, or take any action with respect to any Award previously granted to himself, an individual who is an executive officer or a Director. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Units to be covered by Awards; (iv) determine the terms and conditions of any Award, consistent with the terms of the Plan, which terms may include any provision regarding the acceleration of vesting or waiver of forfeiture restrictions and any other condition or limitation regarding an Award, based on such factors as the Committee shall determine, in its sole discretion; (v) determine whether, to what extent, and under what circumstances Awards may be vested, settled, exercised, canceled, or forfeited; (vi) interpret and administer the Plan and any instrument or agreement relating to an Award made under the Plan; (vii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or an Award Agreement in such manner and to such extent as the Committee deems necessary or appropriate, but in no event shall an action of the Committee materially reduce the rights or benefits of a Participant with respect to an Award without the consent of such Participant. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, the Partnership, any Affiliate, any Participant, and any beneficiary of any Award.

(b)Limitation of Liability. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to it, him or her by any officer or employee of the Company, the Partnership or their Affiliates, the Company’s or the Partnership’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company, the Partnership or any of their Affiliates acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination.

(c)Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant of any Awards to, or other transaction by, a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or another applicable exemption (except for transactions acknowledged by the Participant in writing to be non-exempt). Accordingly, if any provision of the Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 or such other exemption as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.


SECTION 4.	Units.

(a)Limits on Units Deliverable. Subject to adjustment as provided in Section 4(c), the number of Units that may be delivered with respect to Awards under the Plan will not exceed 1,537,122 Units. Units withheld from an Award or surrendered by a Participant to either satisfy the Company’s or an Affiliate’s tax withholding obligations with respect to the Award or pay the exercise price of an Award (including the withholding of Units, where applicable) shall not be considered to be Units delivered under the Plan for this purpose. If any Award is forfeited, cancelled, exercised, paid, or otherwise terminates or expires without the actual delivery of Units pursuant to such Award (the grant of Restricted Units is not a delivery of Units for this purpose), the Units subject to such Award shall again be available for Awards under the Plan (including Units not delivered in connection with the exercise of an Option or Unit Appreciation Right). There shall not be any limitation on the number of Awards that may be paid in cash.

(b)Sources of Units Deliverable Under Awards. Any Units delivered pursuant to an Award shall consist, in whole or in part, of Units acquired in the open market, from any Affiliate, the Partnership or any other Person, Units otherwise issuable by the Partnership, or any combination of the foregoing, as determined by the Committee in its discretion.

(c) Anti-dilution Adjustments. With respect to any “equity restructuring” event that could result in an additional compensation expense to the Company or the Partnership pursuant to the provisions of FASB Accounting Standards Codification, Topic 718 if adjustments to Awards with respect to such event were discretionary, the Committee shall equitably adjust the number and type of Units covered by each outstanding Award and the terms and conditions, including the exercise price and performance criteria (if any), of such Award to equitably reflect such restructuring event and shall adjust the number and type of Units (or other securities or property) with respect to which Awards may be granted after such event. With respect to any other similar event that would not result in a FASB Accounting Standards Codification, Topic 718 accounting charge if the adjustment to Awards with respect to such event were subject to discretionary action, the Committee shall have complete discretion to adjust Awards in such manner as it deems appropriate with respect to such other event. In the event the Committee makes any adjustment pursuant to the foregoing provisions of this Section 4(c), the Committee shall make a corresponding and proportionate adjustment with respect to the maximum number of Units that may be delivered with respect to Awards under the Plan as provided in Section 4(a) and the kind of Units or other securities available for grant under the Plan.

(d) Additional Issuances. Except as hereinbefore expressly provided, the issuance by the Company of units for cash, property, labor or services, upon direct sale, or upon the conversion of units or obligations of the Company convertible into such units, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Units subject to Awards theretofore granted pursuant to the Plan.


SECTION 5.	Eligibility.

Any Employee, Consultant or Director shall be eligible to be designated a Participant by the Committee and receive an Award under the Plan. Notwithstanding the foregoing, Employees, Consultants and Directors that provide services to Affiliates that are not considered a single employer with the Partnership under Section 414(b) of the Code or Section 414(c) of the Code shall not be eligible to receive Awards which are subject to Section 409A of the Code

until the Affiliate adopts the Plan as a participating employer in accordance with Section 10. Further, if the Units issuable pursuant to an Award are intended to be registered with the SEC on Form S-8, then only Employees, Consultants, and Directors of the Partnership or a parent or subsidiary of the Partnership (within the meaning of General Instruction A.1(a) to Form S-8) will be eligible to receive such an Award.


SECTION 6.	Awards.

(a)Restricted Units and Phantom Units. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Restricted Units and Phantom Units shall be granted, the number of Restricted Units or Phantom Units to be granted to each such Participant, the Restricted Period, the conditions under which the Restricted Units or Phantom Units may become vested or forfeited and such other terms and conditions as the Committee may establish with respect to such Awards.

(i)UDRs. To the extent provided by the Committee, in its discretion, a grant of Restricted Units may provide that the distributions made by the Partnership with respect to the Restricted Units shall be subject to the same forfeiture and other restrictions as the Restricted Unit and, if restricted, such distributions shall be held, without interest, until the Restricted Unit vests or is forfeited with the UDR being paid or forfeited at the same time, as the case may be. In addition, the Committee may provide that such distributions be used to acquire additional Restricted Units for the Participant. Such additional Restricted Units may be subject to such vesting and other terms as the Committee may prescribe. Absent such a restriction on the UDRs in the Award Agreement, UDRs shall be paid promptly to the holder of the Restricted Unit without vesting restrictions.

(ii)Forfeitures. Except as otherwise provided in the terms of the applicable Award Agreement, upon termination of a Participant’s employment with or consulting services to the Company and its Affiliates or membership as a Director, whichever is applicable, for any reason during the applicable Restricted Period, all outstanding, unvested Restricted Units and Phantom Units awarded the Participant shall be automatically forfeited on such termination unless the Committee, in its discretion, waives in whole or in part such forfeiture with respect to a Participant’s Restricted Units and/or Phantom Units, at which time the Award would become vested to the extent the Committee provides.

(iii)Lapse of Restrictions.

(A)Phantom Units. During the ten day period immediately following vesting of each Phantom Unit, subject to the provisions of Section 8(b), the Participant shall be entitled to settlement of such Phantom Unit and shall receive from the Company either one Unit or an amount in cash equal to the Fair Market Value of a Unit, as determined by the Committee in its discretion.

(B)Restricted Units. Upon the vesting of each Restricted Unit, subject to satisfying the tax withholding obligations of Section 8(b), the Participant shall be entitled to have the restrictions removed from his or her Award so that the Participant then holds an unrestricted Unit.

(b)Unit Awards. Unit Awards may be granted under the Plan to such Employees, Consultants and/or Directors and in such amounts as the Committee, in its discretion, may select.

(c)Other Unit-Based Awards. Other Unit-Based Awards may be granted under the Plan to such Employees, Consultants and/or Directors and in such amounts as the Committee, in its discretion, may select. An Other Unit-Based Award shall be an Award denominated or payable in, valued in or otherwise based on or related to Units, in whole or in part. The Committee shall determine the terms and conditions of any such Other Unit-Based Award. Upon or as soon as reasonably practical following vesting, an Other Unit-Based Award may be settled, as determined by the Committee in its sole discretion, in cash, Units (including Restricted Units) or any combination thereof as provided in the applicable Award Agreement.

(d)Options. The Committee may grant Options that are intended to comply with Treasury Regulation Section 1.409A-l(b)(5)(i)(A) only to Employees, Consultants or Directors performing services for the Partnership or a corporation or other type of entity in a chain of corporations or other entities in which each corporation or other entity has a “controlling interest” in another corporation or entity in the chain, starting with the Partnership and ending with the corporation or other entity for which the Employee, Consultant or Director performs services. For purposes of this Section 6(d), “controlling interest” means (i) in the case of a corporation, ownership of stock possessing at least 50% of total combined voting power of all classes of stock of such corporation entitled to vote or at least 50% of the total

value of shares of all classes of stock of such corporation; (ii) in the case of a partnership, ownership of at least 50% of the profits interest or capital interest of such partnership; (iii) in the case of a sole proprietorship, ownership of the sole proprietorship; or (iv) in the case of a trust or estate, ownership of an actuarial interest (as defined in Treasury Regulation Section 1.414(c)-2(b)(2)(ii)) of at least 50% of such trust or estate. The Committee may grant Options that are otherwise exempt from or compliant with Section 409A of the Code to any eligible Employee, Consultant or Director. The Committee shall have the authority to determine the number of Units to be covered by each Option, the purchase price therefor and the Restricted Period and other conditions and limitations applicable to the exercise of the Option, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan.

(i)Exercise Price. The exercise price per Unit purchasable under an Option that does not provide for the deferral of compensation under the 409A Regulations shall be determined by the Committee at the time the Option is granted but, except with respect to Substitute Awards, may not be less than the Fair Market Value of a Unit as of the date of grant of the Option. The exercise price per Unit purchasable under an Option that does not provide for the deferral of compensation by reason of satisfying the short-term deferral rule set forth in the 409A Regulations or that is compliant with Section 409A of the Code shall be determined by the Committee at the time the Option is granted.

(ii)Time and Method of Exercise. The Committee shall determine the exercise terms and the Restricted Period with respect to an Option grant, which may include, without limitation, a provision for accelerated vesting upon the achievement of specified performance goals or other events, and the method or methods by which payment of the exercise price with respect thereto may be made or deemed to have been made, which may include, without limitation, cash, check acceptable to the Company, withholding Units from an Award, a “cashless-broker” exercise through procedures approved by the Committee, or any combination of the above methods, having a Fair Market Value on the exercise date equal to the relevant exercise price.

(iii)Forfeitures. Except as otherwise provided in the terms of the Award Agreement, upon termination of a Participant’s employment or service with the Company and its Affiliates or membership on the Board, whichever is applicable, for any reason during the applicable Restricted Period, all unvested Options shall be forfeited by the Participant. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Options; provided that the waiver contemplated under this Section 6(d)(iii) shall be effective only to the extent that such waiver will not cause the Participant’s Options that are designed to satisfy Section 409A of the Code to fail to satisfy such section.

(e)Unit Appreciation Rights. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Unit Appreciation Rights shall be granted, the number of Units to be covered by each grant, whether Units or cash shall be delivered upon exercise, the exercise price therefor and the conditions and limitations applicable to the exercise of the Unit Appreciation Rights, including the following terms and conditions and such additional terms and conditions as the Committee shall determine, that are not inconsistent with the provisions of the Plan.

(i)Exercise Price. The exercise price per Unit Appreciation Right shall be determined by the Committee at the time the Unit Appreciation Right is granted and may be more or less than the Fair Market Value of a Unit as of the date of grant of the Award. Notwithstanding the foregoing, the exercise price per Unit that may be acquired under a Unit Appreciation Right that does not provide for the deferral of compensation under the 409A Regulations shall not be less than the Fair Market Value of a Unit as of the date of grant of the Unit Appreciation Right.

(ii)Time of Exercise. The Committee shall determine the Restricted Period and the time or times at which a Unit Appreciation Right may be exercised in whole or in part, which may include, without limitation, accelerated vesting upon the achievement of specified performance goals or other events.

(iii)Forfeitures. Except as otherwise provided in the terms of the Award Agreement, upon termination of a Participant’s employment with or service to the General Partner, the Partnership and their Affiliates or membership on the Board, whichever is applicable, for any reason during the applicable Restricted Period, all outstanding Unit Appreciation Rights awarded to the Participant shall be automatically forfeited on such termination. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Unit Appreciation Rights.

(f)DERs. To the extent provided by the Committee, in its discretion, an Award (other than a Restricted Unit or Unit Award) may include a tandem DER grant, which may provide that such DERs shall be paid directly to the Participant, be credited to a bookkeeping account (with or without interest in the discretion of the Committee) subject to the same vesting restrictions as the tandem Award, or be subject to such other provisions or restrictions as determined by the Committee in its discretion. Absent a contrary provision in the Award Agreement, DERs shall be paid to the Participant without restriction at the same time as ordinary cash distributions are paid by the Partnership to its unitholders. Notwithstanding the foregoing, DERs shall only be paid in a manner that is either exempt from or in compliance with Section 409A of the Code.

(g)Substitute Awards. Awards may be granted under the Plan in substitution of similar awards held by individuals who become Employees, Consultants or Directors as a result of a merger, consolidation or acquisition by the Partnership or an Affiliate of another entity or the assets of another entity. Such Substitute Awards that are Options or Unit Appreciation Rights may have exercise prices less than the Fair Market Value of a Unit on the date of the substitution if such substitution complies with Section 409A of the Code and the 409A Regulations and other applicable laws and exchange rules.

(h)General.

(i)Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

(ii)Limits on Transfer of Awards.

(A)Each Option and Unit Appreciation Right shall be exercisable only by the Participant during the Participant’s lifetime, or by the Person to whom the Participant’s rights shall pass by will or the laws of descent and distribution.

(B)No Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company, the Partnership or any Affiliate.

(iii)Issuance of Units. The Units or other securities of the Partnership delivered pursuant to an Award may be evidenced in any manner deemed appropriate by the Committee in its sole discretion, including, but not limited to, in the form of a certificate issued in the name of the Participant or by book entry, electronic or otherwise, and shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Units or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be inscribed on any such certificates or book entry to make appropriate reference to such restrictions.

(iv)Consideration for Grants. Awards may be granted for such consideration, including services, as the Committee shall determine.

(v)Restrictions on Awards. The right of a Participant to exercise or receive a grant or settlement of an Award, and the timing thereof, may be subject to service or performance conditions as may be specified by the Committee. The Committee may use such individual or business criteria or other measures of performance as it may deem appropriate in establishing any such conditions, and it may exercise its discretion to reduce or increase the amounts payable under any Award subject to such conditions.

(vi)Delivery of Units or other Securities and Payment by Participant of Consideration. Notwithstanding anything in the Plan or any Award Agreement to the contrary, delivery of Units pursuant to the exercise, vesting and/or settlement of an Award may be deferred for any period during which, in the good faith determination of the Committee, the Company is not reasonably able to obtain Units to deliver pursuant

to such Award without violating applicable law or the applicable rules or regulations of any governmental agency or authority or securities exchange. No Units or other securities shall be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including, without limitation, any exercise price or tax withholding) is received by the Company.


SECTION 7.	Amendment and Termination.

Except to the extent prohibited by applicable law:

(a)Amendments to the Plan and Awards. Except as required by applicable law or the rules of the principal securities exchange, if any, on which the Units are traded, the Board or the Committee may amend, alter, suspend, discontinue, or terminate the Plan in any manner, including increasing the number of Units available for Awards under the Plan, without the consent of any partner, Participant, other holder or beneficiary of an Award, or any other Person. Notwithstanding the foregoing, the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided that no change, other than pursuant to Section 7(b), 7(c), or 7(d) below, in any Award shall materially reduce the rights or benefits of a Participant with respect to an Award without the consent of such Participant.

(b)Recapitalizations. If the Company recapitalizes, reclassifies its equity securities, or otherwise changes its capital structure (a “recapitalization”), the number and class of Units covered by an Award theretofore granted shall be adjusted so that such Award shall thereafter cover the number and class of Units and securities to which the holder would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the recapitalization, the holder had been the holder of record of the number of Units then covered by such Award and the unit limitations provided in Section 4 shall be adjusted in a manner consistent with the recapitalization.

(c)Award Adjustment. In the event of changes in the outstanding Units by reason of recapitalization, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any Award and not otherwise provided for by this Section 7, any outstanding Awards and any agreements evidencing such Awards shall be subject to adjustment by the Committee at its discretion as to the number and price of Units or other consideration subject to such Awards. In the event of any such change in the outstanding Units, the share limitations provided in Section 4 may be appropriately adjusted by the Committee, whose determination shall be conclusive.

(d)Change of Control. Upon a Change of Control the Committee, acting in its sole discretion without the consent or approval of any holder, may affect one or more of the following alternatives, which may vary among individual holders and which may vary among Awards: (i) remove any applicable forfeiture restrictions on any Award; (ii) accelerate the time at which the Restricted Period shall lapse to a specific date, before or after such Change of Control, specified by the Committee; (iii) require the mandatory surrender to the Company by selected holders of some or all of the outstanding Awards held by such holders (irrespective of whether such Awards are then subject to a Restricted Period or other restrictions pursuant to the Plan) as of a date, before or after such Change of Control, specified by the Committee, in which event the Committee shall thereupon cancel such Awards and pay to each holder an amount of cash per unit equal to the amount calculated in Section 7(e) (the “Change of Control Price”); or (iv) make such adjustments to Awards then outstanding as the Committee deems appropriate to reflect such Change of Control; provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary to Awards then outstanding.

(e)Change of Control Price. The “Change of Control Price” shall equal the amount determined in clause (i), (ii), (iii), (iv) or (v), whichever is applicable, as follows: (i) the per unit price offered to Unit holders in any merger or consolidation, (ii) the per unit value of the Units immediately before the Change of Control without regard to assets sold in the Change of Control and assuming the Company has received the consideration paid for the assets in the case of a sale of the assets, (iii) the amount distributed per Unit in a dissolution transaction, (iv) the price per unit offered to Unit holders in any tender offer or exchange offer whereby a Change of Control takes place, or (v) if such Change of Control occurs other than pursuant to a transaction described in clauses (i), (ii), (iii), or (iv) of this Section 7(e), the Fair Market Value per unit of the units that may otherwise be obtained with respect to such Awards or to which such Awards track, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Awards. In the event that the consideration offered to unitholders of the Company in any transaction described in this Section 7(e) or Section 7(d) consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash.

(f)Acceleration of Vesting and Lapse of Restrictions. Unless otherwise provided in an Award Agreement, upon the Retirement of a Participant, or upon termination of a Participant’s employment with or consulting services to the Company and its Affiliates or membership as a Director, whichever is applicable, due to the Participant’s death or disability, the Committee, acting in its sole discretion without the consent or approval of any holder, may affect either or both of the following alternatives with respect to Awards held by such Participant, which may vary among individual holders and which may vary among Awards: (i) remove any applicable forfeiture restrictions on any Award; or (ii) accelerate the time at which the Restricted Period shall lapse to a specific date, before or after such Retirement or termination, specified by the Committee; provided, however, that no action shall be taken under this Section 7(f) with respect to a 409A Award if such action would cause the Award to fail to comply with Section 409A of the Code and the 409A Regulations. Any action taken by the Committee pursuant to this Section 7(f) shall be in writing specifying the effective date of such action.


SECTION 8.	General Provisions.

(a)No Rights to Award. No Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants. The terms and conditions of Awards need not be the same with respect to each recipient.

(b)Tax Withholding. Unless other arrangements have been made that are acceptable to the Company, the Company or any Affiliate is authorized to deduct or withhold, or cause to be deducted or withheld, from any Award, from any payment due or transfer made under any Award or from any compensation or other amount owing to a Participant the amount (in cash, Units, Units that would otherwise be issued pursuant to such Award or other property) of any applicable taxes payable in respect of the grant or settlement of an Award, its exercise, the lapse of restrictions thereon, or any other payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy its withholding obligations for the payment of such taxes.

(c)No Right to Employment or Services. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, to continue consulting services or to remain as a Director, as applicable. Furthermore, the Company or an Affiliate may at any time dismiss a Participant from employment or consulting free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan, any Award Agreement or other agreement.

(d)Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware without regard to its conflicts of laws principles.

(e)Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(f)Other Laws. The Committee may refuse to issue or transfer any Units or other consideration under an Award if, in its sole discretion, it determines that the issuance or transfer of such Units or such other consideration might violate any applicable law or regulation, the rules of the principal securities exchange on which the Units are then traded, or entitle the Partnership or an Affiliate to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.

(g)No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any participating Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any participating Affiliate pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the Company or any participating Affiliate.

(h)No Fractional Units. No fractional Units shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine in its sole discretion whether cash, other securities, or other property shall be paid

or transferred in lieu of any fractional Units or whether such fractional Units or any rights thereto shall be canceled, terminated or otherwise eliminated with or without consideration.

(i)Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

(j)Facility of Payment. Any amounts payable hereunder to any individual under legal disability or who, in the judgment of the Committee, is unable to manage properly his financial affairs, may be paid to the legal representative of such individual, or may be applied for the benefit of such individual in any manner that the Committee may select, and the Company shall be relieved of any further liability for payment of such amounts.

(k)Participation by Affiliates. In making Awards to Employees employed by an entity other than the Company, the Committee shall be acting on behalf of the Affiliate, and to the extent the Partnership has an obligation to reimburse the Company for compensation paid for services rendered for the benefit of the Partnership, such payments or reimbursement payments may be made by the Partnership directly to the Affiliate, and, if made to the Company, shall be received by the Company as agent for the Affiliate.

(l)Gender and Number. Words in the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural.

(m)Compliance with Section 409A. Nothing in the Plan or any Award Agreement shall operate or be construed to cause the Plan or an Award to fail to comply with the requirements of Section 409A of the Code. The applicable provisions of Section 409A the Code and the regulations thereunder are hereby incorporated by reference and shall control over any Plan or Award Agreement provision in conflict therewith. To the extent that any Award shall be subject to Section 409A of the Code, it shall be designed to comply with Section 409A of the Code.

(n)Specified Employee under Section 409A. Subject to any other restrictions or limitations contained herein, in the event that a “specified employee” (as defined under Section 409A of the Code and the 409A Regulations) becomes entitled to a payment under an Award which is a 409A Award on account of a “separation from service” (as defined under Section 409A of the Code and the 409A Regulations), such payment shall not occur until the date that is six months plus one day from the date of such separation from service. Any amount that is otherwise payable within the six month period described herein will be aggregated and paid in a lump sum without interest.


SECTION 9.	Term of the Plan.

The Plan shall be effective on the date on which the Original Plan was adopted by the Board. The provisions of the Original Plan, as amended from time to time including, without limitation, the Plan, shall be applicable to all Awards granted after the effective date. The Plan shall continue until the earliest of (i) the date terminated by the Board, (ii) all Units available under the Plan have been delivered to Participants, or (iii) the 10th anniversary of the date the Original Plan is adopted by the Board. However, any Award granted prior to such termination, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award, shall extend beyond such termination date.

SECTION 10. Adoption by Affiliates.

With the consent of the Committee, any Affiliate that is not considered a single employer with the Partnership under Section 414(b) of the Code or Section 414(c) of the Code may adopt the Plan for the benefit of its Employees, Consultants or Directors by written instrument delivered to the Committee before the grant to such Affiliate’s Employees, Consultants or Directors under the Plan of any 409A Award.

Exhibit 31.1

Certification Pursuant to

Rule 13a-14(a) or 15d-14(a) of the Exchange Act

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Timothy A. Knox, certify that:


1.	I have reviewed this report on Form 10-Q for the fiscal quarter ended June 30, 2015, of CSI Compressco LP;


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


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


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


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


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


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


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


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):


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


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



Date:	August 11, 2015	/s/Timothy A. Knox
		Timothy A. Knox
		President of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Executive Officer)

Exhibit 31.2

Certification Pursuant to

Rule 13a-14(a) or 15d-14(a) of the Exchange Act

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, James P. Rounsavall, certify that:


1.	I have reviewed this report on Form 10-Q for the fiscal quarter ended June 30, 2015, of CSI Compressco LP;


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


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


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


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


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


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


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


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):


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


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



Date:	August 11, 2015	/s/James P. Rounsavall
		James P. Rounsavall
		Chief Financial Officer of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Financial Officer)

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of CSI Compressco LP (the “Partnership”) on Form 10-Q for the period ending June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy A. Knox, President of CSI Compressco GP Inc., the General Partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.



Dated:	August 11, 2015	/s/Timothy A. Knox
		Timothy A. Knox
		President of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification Pursuant to

18 U.S.C. Section 1350

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of CSI Compressco LP (the “Partnership”) on Form 10-Q for the period ending June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James P. Rounsavall, Chief Financial Officer of CSI Compressco GP Inc., the General Partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.



Dated:	August 11, 2015	/s/James P. Rounsavall
		James P. Rounsavall
		Chief Financial Officer of CSI Compressco GP Inc.,
		General Partner of CSI Compressco LP
		(Principal Financial Officer)

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Form 10-Q CSI Compressco LP For: Jun 30

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