ARCHROCK PARTNERS CITI ONE-ON-ONE MLP / MIDSTREAM INFRASTRUCTURE CONFERENCE August 6, 07
Forward Looking Statements All statements in this presentation (and oral statements made regarding the subjects of this presentation) other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 995. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of Archrock Partners, L.P. ( Archrock Partners or APLP ) and Archrock, Inc. ( Archrock or AROC ). Forward-looking information includes, but is not limited to: the industry fundamentals, including the attractiveness of returns and valuation, stability of cash flows, demand dynamics and overall outlook, and Archrock Partners ability to realize the benefits thereof; Archrock Partners expectations regarding future economic and market conditions and trends; Archrock Partners operational and financial strategies, including growth activities, Archrock Partners ability to successfully effect those strategies and the expected results therefrom; Archrock Partners financial and operational outlook and ability to fulfill that outlook; demand and growth opportunities for Archrock Partners services; statements related to performance, profitability, structural and process improvement initiatives, the expected timing thereof, Archrock Partners ability to successfully effect those initiatives and the expected results therefrom; the operational and financial synergies provided by Archrock s and Archrock Partners size; and statements about Archrock Partners distributions, the anticipated impact of the distribution rate on its business and the anticipated impact of Archrock Partners actions on its balance sheet, liquidity position and need for future capital. While Archrock Partners and Archrock believe that the assumptions concerning future events are reasonable, they caution that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of their businesses. The factors that could cause results to differ materially from those indicated by such forward-looking statements include, but are not limited to: actions by governmental and regulatory authorities; local, regional and national economic and financial market conditions and the impact they may have on Archrock Partners and its customers; changes in tax laws that impact master limited partnerships; conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for oil or natural gas or a sustained decrease in the price of oil or natural gas; changes in economic conditions in key operating markets; the financial condition of Archrock Partners customers; the failure of any customer to perform its contractual obligations; and changes in safety, health, environmental, tax and other regulations. These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Archrock Partners Annual Report on Form 0-K for the year ended December 3, 06, Archrock s Annual Report on Form 0-K for the year ended December 3, 06, and those set forth from time to time in Archrock Partners and Archrock s filings with the Securities and Exchange Commission, which are currently available at www.archrock.com. Except as required by law, Archrock Partners and Archrock expressly disclaim any intention or obligation to revise or update any forwardlooking statements whether as a result of new information, future events or otherwise.
Key Archrock Partners Investment Highlights Visible Long-Term Growth U.S. natural gas demand is forecasted to increase to ~89 bcf/d by 0 from ~75 bcf/d in 06; an approximate 9% increase Business tied to long-term natural gas production Fee-based contracts for must-run production and midstream infrastructure assets Relative Cash Flow Stability Production, not drilling and completions, leveraged business model generates steady demand for services and relatively stable cash flow Cash flow generation provides capital to fund investments in an upcycle and stability in a down-cycle Largest Player with Benefit of Scale and Market Presence Largest fleet among outsourced compression services providers Fleet is deployed across all major U.S. producing basins Combined operating fleet of 3. mm HP with Archrock Access to Capital Free cash flow positive with liquidity of $80 million at AROC 3 and $70 million at APLP 4 Total leverage covenant of 5.95x Debt to EBITDA 5 through 07 Data from Bentek and EIA. As of June 30, 07. 3 As of June 30, 07, Archrock Inc. had undrawn capacity of $69.4 million under its revolving credit facility. The Archrock Inc. credit agreement limits the Total Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 4.5 to.00. As a result of this limitation, $89.9 million of the $69.4 million of undrawn capacity under Archrock s revolving credit facility was unavailable to Archrock for additional borrowings as of June 30, 07. 4 Presented pro forma for $5.5 million of cash proceeds from the sale of 4,000,000 common units priced on August 3, 07. As of June 30, 07 and including the pro forma impact of the equity offering priced on August 3, 07, Archrock Partners had undrawn capacity of $460.5 million under its revolving credit facility. The Archrock Partners credit agreement limits the Total Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 5.95 to.0; and the Senior Secured Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 3.50 to.00. As a result of this limitation, $90.6 million of the pro forma $460.5 million of undrawn capacity under our revolving credit facility was unavailable for additional borrowings as of June 30, 07. 5 As defined in the Archrock Partners credit agreement. 3
Archrock Partners Recent Highlights Received cash proceeds of $5.5 million from the sale of 4 million common units in August 07 Second quarter results Recent Highlights & Second Quarter 07 EBITDA, as adjusted of $67 million; up $6 million from Q-07 Highest consolidated quarterly level of new orders since Q4-04 Operating horsepower growth of 34,000 horsepower Gross margin percentage increased 00 bps quarter over quarter to 6% Distributable cash flow coverage of.04x $70 million of available but undrawn debt capacity See Addendum I regarding non-gaap measures for information on Archrock Partners distributable cash flow & distributable cash flow coverage. Presented pro forma for $5.5 million of cash proceeds from the sale of 4,000,000 common units priced on August 3, 07. As of June 30, 07 and including the pro forma impact of the equity offering priced on August 3, 07, Archrock Partners had undrawn capacity of $460.5 million under its revolving credit facility. The Archrock Partners credit agreement limits the Total Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 5.95 to.0; and the Senior Secured Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 3.50 to.00. As a result of this limitation, $90.6 million of the pro forma $460.5 million of undrawn capacity under our revolving credit facility was unavailable for additional borrowings as of June 30, 07. 4
Full Cycle Compression Provider Well Capitalized Long-term capital structure with attractive cost of debt $700 million of outstanding 6% Senior Notes at Archrock Partners $. billion credit facility at Archrock Partners $350 million credit facility at Archrock All Archrock Partners distributions are paid in cash Distributable cash flow coverage of.04x at Archrock Partners for the second quarter of 07 Full Cycle Maintenance Costs Management team with experience managing maintenance costs through full compressor life cycle Well maintained fleet with average age of 3 years Fleet diversified across horsepower ranges Archrock Partners has invested over $70 million in growth capital expenditures over the past five years 3% of the consolidated Archrock fleet is less than seven years old 3 Long-term Operating History 954 South Coast Gas Compression Established 000 IPO of Universal Compression See Addendum I regarding non-gaap measures for information on Archrock Partners distributable cash flow & distributable cash flow coverage. Five years ended December 3, 06. 3 As of December 3, 06. 5 990 s to 000 s Industry consolidation into companies that would become Universal & Hanover 997 IPO of Hanover Compressor 007 Merger of Universal & Hanover to form Exterran 05 Spin-off of International Services and Global Fabrication businesses Present Largest pure-play provider of U.S. natural gas compression services 5
Overview of Archrock Partners Archrock Partners is a pure play U.S. provider of contract compression Archrock Companies Structure and Asset Overview AROC Assets Public Stockholders (AROC) ~$66 million Debt GP and IDRs of APLP (%) 9 mm LP Units Operating HP ~0.3mm U.S. Aftermarket Services Business 00% GP 4% LP % GP 00% IDR APLP Assets Public Unitholders 57% (APLP) ~$.4 billion Debt Operating HP ~.9mm Distributable Cash Flow Coverage of.04x for the quarter ended June 30, 07 3 Based on APLP units outstanding as of June 30, 07 pro forma for the sale of 4,000,000 common units priced on August 3, 07. As of June 30, 07. 3 See Addendum I regarding non-gaap measures for information on Archrock Partners distributable cash flow and distributable cash flow coverage. 6
What Does Compression Do? Increases pressure from suction to discharge Suction Pressure 50 PSI Inlet Sources Wellhead Gathering System Discharge Pressure,00 PSI Outlet Sources Gathering System Pipeline Processing Plant Storage Facility Reservoir Pressures based on an illustrative example from the Eagle Ford shale. 7
Where is Compression Used? Compression is an essential service utilized all along the production cycle to transport gas to the end user 78% of Fleet Power Generation Storage Industrial Natural Gas Wellhead Production Gathering System Processing Residential Exports - Pipelines LNG Chemical Feed-Stocks and Fuels Crude Oil Gas Lift % of Fleet Enhanced Oil Recovery Based on operating horsepower of Archrock and Archrock Partners combined U.S. compression fleet as of June 30, 07. 8
Compression Applications & Customers Services Provided Average HP / Unit, Units Overview Customer Types Archrock Focus Wellhead 359,48 Compression located at the well site Often smaller units that are compressing a single well Upstream E&P Gathering 93,98 Transports gas from multiple wells to a compressor or compressor station Often larger units compared to wellhead Upstream E&P Midstream G&P Gas Lift 334,08 Use of gas to artificially lift oil or fluids from a well Unit size can vary based on the volume and number of wells being lifted Upstream E&P Other 63 39 Includes plant compression, flash gas, residue plant compression, CO injection and storage Various More limited opportunities Horsepower reported as original equipment manufacturer (OEM) horsepower and unit data as of June 30, 07. Data represents Archrock and Archrock Partners combined U.S. compression fleet as of June 30, 07. 9
Leader in U.S. Contract Compression Services Archrock Partners is the largest outsourced compression provider in the U.S. U.S. Outsourced Compression Competitors Archrock Partners Highlights 3,600 Archrock Partners is the 3,000 3,8 58 Operating HP at largest contract compression provider in the U.S. with approximately.9 million,400 operating horsepower Operating HP (000s),800,00,860 Operating HP at,478,400 864 70 Archrock s business size and scale provide significant operational and financial synergies 600 45 400 79 0 Archrock USA Compression Energy Transfer/ CDM CSI Compressco J-W Operating Axip Kodiak Natural Gas Services Other We are proud of the quality of our service, delivering an average service availability of SEC filings and management estimates as of June 30, 07. over 99% 0
Archrock Partners Geographic Diversity Archrock Partners geographic diversity provides stability and growth opportunities across the U.S. Presence in All Major U.S. Producing Basins HP by Play Type HP by Application Source: Energy Information Administration Note: Excludes offshore units in the Gulf of Mexico. Horsepower reported as original equipment manufacturer (OEM) horsepower as of June 30, 07 for both Archrock and Archrock Partners combined U.S. compression fleet.
Stability of Business Model Fee-based compression services provide relatively stable cash flow Consolidated Compression Services Revenue and Oil & Gas Prices,,3 Note: Historical data should not be relied upon as being indicative of future results. Henry Hub indexed to $5.63 per million BTU at December 3, 008; WTI indexed to $44.60 per barrel at December 3, 008. Prices presented through July 5, 07. Data represents combined Archrock and Archrock Partners U.S. compression services revenue for the periods presented. 3 In December 03, Archrock abandoned its contract water treatment business. All periods exclude results from Archrock s contract water treatment business.
Archrock Partners Profitability Trend Archrock Partners gross margin per horsepower benefitted from profit improvement initiatives and fleet high grading including the MidCon acquisitions Gross Margin per Horsepower per Month $.00 $0.00 $8.00 $.3 $0.94 $0.85 $0.57 $0.65 $0.58 $0.89 $0.6 $0.53 $0.75 $9.75 $9.9 $0.5 $9.67 $9.84 $9.97 $9.95 $9.44 $9.88 $9.00 $8.78 $8.43 $8.0 $7.93 $7.6 $7.40 $6.00 $4.00 $.00 $0.00 Q- Q- 3Q- 4Q- Q- Q- 3Q- 4Q- Q-3 Q-3 3Q-3 4Q-3 Q-4 Q-4 3Q-4 4Q-4 Q-5 Q-5 3Q-5 4Q-5 Q-6 Q-6 3Q-6 4Q-6 Q-7 Q-7 Contribution from operation of two processing plants Contribution from Sale of Two Processing Plants Note: Historical data should not be relied upon as being indicative of future results. See Addendum I regarding non-gaap measures for information on gross margin and gross margin per horsepower. A customer s exercise of purchase options on two natural gas processing plants increased gross margin per average operating horsepower per month by $0.97 in the second quarter 03. 3
Proven Track Record Our financial results have benefitted from growth and performance improvement initiatives Archrock Partners Operating Horsepower Archrock Partners EBITDA, as adjusted $ 350 $35 $ 300 $80 $ 4 $78 $65 $ 50 $39 $ 5 ($ millions) $ 00 $ 50 $ 00 $40 $ 3 $8 $ 5 $4 $66 $35 $78 $65 $56 $ 50 $07 $ 0 0 0 03 04 05 06 LTM Q- 7 Cost Caps provided by AROC EBITDA, as adjusted (without the benefit of cost caps) Note: Historical data should not be relied upon as being indicative of future results. See Addendum I regarding non-gaap measures for information on Archrock Partners EBITDA, as adjusted. 4
U.S. Forecasted Production Growth Driven by Strong Demand Outlook Sources of Demand Forecasted Supply 3 U.S. LNG Exports U.S. Natural Gas Demand Growth Us Gas Demand (Bcf/d) 90 88 86 84 8 80 78 76 74 7 70 74.8..3. North America LNG Export Terminals approved by the Federal Energy Regulatory Commission and under construction as of May 9, 06. Timing estimates based management estimates and sponsor publications.. Data from Bentek (August 06). 3. Data from EIA Annual Energy Outlook 06 (May 7, 06)..3 05 Industrial Power MX Exports LNG Exports Other 0 5.8. 85.8 5
Overview of Growth Strategies Demonstrated track record of executing growth strategies Growth Third Party Acquisitions Demonstrated ability to source and execute deals with MidCon acquisitions Opportunity to source from customers and competitors Dual currency structure provides cost of capital and execution advantages Drop Down Growth Successfully executed drop downs of contract compression assets in 05 & 06 Organic Growth and Operational Enhancements Strategy to leverage our market position, service capability, and existing fleet and capital strength Secular growth drivers expected to increase natural gas production and compression demand ~. million HP of new units added to combined AROC/APLP fleet in last ~5 years Continued focus on improving field operations, operating costs, and competitiveness and profitability of fleet Five years ended December 3, 06; includes units added through third party acquisitions. 6
Archrock Partners Distributions & Coverage Distributable Cash Flow Coverage,,4.67x Total Distributions Declared,4.50x.5x.50x $60 $54.6x $40 $37.04x.00x.80x $0 $3.50x.5x.4x.36x.9x.x.6x.3x.x.4x.4x.7x ($ in millions) $00 $80 $74 $9 $ $34 $7 $77.00x $60 $04 $85 $40 $70 $7 $75 0.50x $0 0.00x 3 0 0 03 Q4 Q4 3Q4 4Q4 Q5 Q5 3Q5 4Q5 Q6 Q6 3Q6 4Q6 Q7 Q7 $0 $5 $6 $9 $5 $ $ $ 0 0 03 04 05 06 Q 07 Annualized Excluding Cost Caps Including Cost Caps Note: Historical data should not be relied upon as being indicative of future results. GP Interest See Addendum I regarding non-gaap measures for information on distributable cash flow and distributable cash flow coverage. Distribution levels with respect to future quarters have not been declared and will be determined by the board of the managing general partner of APLP. 3 Q-4 pro forma for acquisition of compression assets from MidCon closed April 0, 04. 4 Archrock Partners cash distribution of $0.85 per limited partner unit for the first-quarter of 06 through the second-quarter of 07 is approximately 50 percent lower than the fourth-quarter 05 distribution. LP Interest 7
Enhanced Credit Profile Archrock Partners has ample access to capital to execute its growth strategy Highlights Will opportunistically term out debt as markets allow Committed to maintaining leverage and liquidity metrics through the cycle APLP covenant allows for 5.95x leverage through 07 Liquidity Profile $,400 $,00 $,000 Debt Maturity Profile $460 Archrock Partners Liquidity Revolving credit facility capacity $,00.0 Revolving credit facility unavailable due to covenant constraints ($90.6) Borrowings under facility ($639.5) Liquidity at Archrock Partners Standalone $69.9 Archrock Standalone Liquidity Revolving credit facility capacity $350.0 Borrowings under facility and letters of credit ($80.6) Revolving credit facility unavailable due to covenant constraints ($89.9) Liquidity at Archrock Standalone $79.5 Total Liquidity of Archrock Companies $449.4 ($ in millions) $800 $600 $400 $00 $0 $640 $350 $350 $69 $8 07 08 09 00 0 0 03 3 AROC RCF APLP RCF APLP Notes As of June 30, 07, Archrock had undrawn capacity of $69.4 million under its revolving credit facility. The Archrock credit agreement limits the Total Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 4.5 to.00. As a result of this limitation, $89.9 million of the $69.4 million of undrawn capacity under Archrock s revolving credit facility was unavailable to Archrock for additional borrowings as of June 30, 07. Archrock Partners Presented pro forma for $5.5 million of cash proceeds from the sale of 4,000,000 common units priced on August 3, 07. As of June 30, 07 and including the pro forma impact of the equity offering priced on August 3, 07, Archrock Partners had undrawn capacity of $460.5 million under its revolving credit facility. The Archrock Partners credit agreement limits the Total Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 5.95 to.0; and the Senior Secured Debt (as defined in the credit agreement) to EBITDA ratio (as defined in the credit agreement) to not greater than 3.50 to.00. As a result of this limitation, $90.6 million of the pro forma $460.5 million of undrawn capacity under our revolving credit facility was unavailable for additional borrowings as of June 30, 07. 8 3 Archrock Partners $. billion asset-based credit facility will mature the earlier of (i) March 30, 0 or (ii) December, 00 if any portion of Archrock Partners Senior Notes due April 0 are outstanding on such date. Graph assumes Senior Notes due 0 are refinanced prior to December, 00.
Current Yield MLP Industry Yields August 4, 07 Source: Barclays Capital - Energy Infrastructure Weekly August 4, 07; Price data as of August 4, 07. 9
Key Archrock Partners Investment Highlights Relative Stability Available Liquidity Largest Fleet Deployed to Major Basins Optimized Structure for Growth Full Cycle Outsourced Provider Long-term Growth Opportunities 0
Addendum I: Non-GAAP Financial Measures
Non-GAAP Financial Measures Archrock Partners, L.P. (Exterran Partners, L.P. pre-spin): EBITDA, as adjusted, a non-gaap measure, is defined as net income (loss) (a) excluding income taxes, interest expense, depreciation and amortization expense, impairment charges, restructuring charges, expensed acquisition costs, debt extinguishment costs, non-cash selling, general and administrative ( SG&A ) costs and other items (b) plus the amounts reimbursed to Archrock Partners by Archrock as a result of caps on cost of sales and SG&A costs provided in the omnibus agreement to which Archrock and Archrock Partners are parties (the Omnibus Agreement ), which amounts are treated as capital contributions from Archrock for accounting purposes. Under the Omnibus Agreement, the caps on cost of sales and SG&A costs terminated effective January, 05. EBITDA, as adjusted (without the benefit of the cost caps) is defined as EBITDA, as further adjusted, less the amounts reimbursed to Archrock Partners by Archrock as a result of caps on cost of sales and SG&A costs provided in the Omnibus Agreement. Distributable cash flow, a non-gaap measure, is defined as net income (loss) (a) plus depreciation and amortization expense, impairment charges, restructuring charges, expensed acquisition costs, non-cash SG&A costs, debt extinguishment costs, interest expense and any amounts reimbursed to Archrock Partners by Archrock as a result of the caps on cost of sales and SG&A costs provided in the Omnibus Agreement, which amounts are treated as capital contributions from Archrock for accounting purposes, (b) less cash interest expense (excluding amortization of deferred financing fees, amortization of debt discount and non-cash transactions related to interest rate swaps) and maintenance capital expenditures, and (c) excluding gains or losses on asset sales and other items. Under the Omnibus Agreement, the caps on cost of sales and SG&A costs terminated effective January, 05. Distributable cash flow (without the benefit of cost caps) is defined as distributable cash flow less the amounts reimbursed to Archrock Partners by Archrock as a result of caps on cost of sales and SG&A costs provided in the Omnibus Agreement. Gross margin, a non-gaap measure, is defined as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin percentage is defined as gross margin divided by total revenue. Addendum I-A
Non-GAAP Financial Measures Archrock Partners, L.P. ($ in thousands) 007 008 009 00 0 0 03 04 05 06 Net income (loss) $ 9,40 $ 9,847 $ 4,784 $ (3,333) $ 6,053 $ 0,509 $ 64,03 $ 6,79 $ (84,05) $ (0,757) Depreciation and amortization 6,570 7,053 36,45 5,58 67,930 88,98 03,7 8,96 55,786 53,74 Long-lived asset impairment - - 3,5 4,976,060 9,560 5,350,80 38,987 46,58 Restructuring charges - - - - - - - 70-7,309 Goodwill impairment - - - - - - - - 7,757 - Selling, general and administrative 3,730 6,085 4,6 34,830 39,380 49,889 6,97 80,5 85,586 79,77 Interest expense,658 8,039 0,303 4,037 30,400 5,67 37,068 57,8 74,58 77,863 Other income, net () (,430) (,08) (34) (39) (35) (9,48) (74) (,39) (,594) Provision for income taxes 7 555 54 680 98 945,506,33,035,4 Gross margin 6,609 90,49 98,49 3,394 45,349 04,333 64,48 34,998 398,36 35,949 Cap on operating costs provided by AROC 8,68,480 7,46,404 6,49 6,56,38,536 - - Cap on selling, general and administrative costs provided by AROC 83 0 55 3,36 5,905 8,96,798,34 - - Non-cash selling, general and administrative costs 3,84 (,090) 8,09 53 797,74,376,059,03 Expensed acquisition costs (in Other (income) expense, net) - - 803 356 54 695 8,47 30 53 Plus: Non-recurring cash selling, general and administrative reimbursement (848) - - - - - - - - - Less: Selling, general and administrative (3,730) (6,085) (4,6) (34,830) (39,380) (49,889) (6,97) (80,5) (85,586) (79,77) Less: Other income, net,430,08 34 39 35 9,48 74,39,594 EBITDA, as adjusted 59,38 86,004 84,643 05,63 39,804 80,79 38,833 80,48 35,48 77,55 Less: Provision for income taxes (7) (555) (54) (680) (98) (945) (,506) (,33) (,035) (,4) Less: Gain on sale of property, plant and equipment (in Other income, net) - (,435) (,0) (667) (99) (689) (0,40) (,466) (,747) (3,585) Less: loss on non-cash consideration in March 06 acquisition 635 Less: Cash interest expense (,58) (7,567) (9,697) (,087) (8,8) (,76) (3,80) (53,55) (70,8) (73,594) Less: Maintenance capital expenditures (7,079) (9,45) (,585) (5,898) (8,86) (38,368) (4,40) (45,36) (5,89) (3,900) Distributable cash flow $ 40,59 $ 56,996 $ 49,809 $ 66,83 $ 90,84 $ 7,966 $ 5,976 $ 77,68 $ 90,690 $ 75,696 Distributions declared to all unitholders for the period, including incentive distribution rights $ 4,575 $ 34,64 $ 39,404 $ 54,93 $ 74,4 $ 9,67 $,705 $ 36,89 $ 54,349 $ 7,646 Distributable cash flow coverage 3.65x.67x.6x.x.x.9x.36x.30x.4x.45x Distributable cash flow coverage (without the benefit of the cost caps) 3,4.9x.30x.07x 0.77x 0.78x.0x.3x.0x.4x.45x EBITDA, as adjusted $ 59,38 $ 86,004 $ 84,643 $ 05,63 $ 39,804 $ 80,79 $ 38,833 $ 80,48 $ 35,48 $ 77,55 Less: Cap on operating and selling, general and administrative costs provided by AROC (8,90) (,600) (7,798) (4,70) (3,397) (4,758) (5,80) (3,850) - - EBITDA, as adjusted (without the benefit of the cost caps),4 $ 50,37 $ 73,404 $ 76,845 $ 80,443 $ 07,407 $ 55,97 $ 3,653 $ 66,398 $ 35,48 $ 77,55 Distributable cash flow $ 40,59 $ 56,996 $ 49,809 $ 66,83 $ 90,84 $ 7,966 $ 5,976 $ 77,68 $ 90,690 $ 75,696 Less: Cap on operating and selling, general and administrative costs provided by AROC (8,90) (,600) (7,798) (4,70) (3,397) (4,758) (5,80) (3,850) - - Distributable cash flow (without the benefit of the cost caps),4 $ 3,68 $ 44,396 $ 4,0 $ 4, $ 57,887 $ 93,08 $ 7,796 $ 63,778 $ 90,690 $ 75,696 See Addendum I-A for information on gross margin, EBITDA, as adjusted, EBITDA, as adjusted (without the benefit of the cost caps), distributable cash flow and distributable cash flow (without the benefit of the cost caps). Consists of a cash reimbursement from Archrock of non-cash merger-related expenses incurred by Archrock Partners. 3 Defined as distributable cash flow divided by distributions declared to all unit holders for the period, including incentive distributions rights. 4 Provisions in the Omnibus Agreement that provided caps on our obligation to reimburse Archrock for operating and SG&A expenses terminated on January, 05. Excluding the benefit of the cost caps from our previously defined non-gaap measures of EBITDA, as adjusted, and distributable cash flow provides external users of our consolidated financial statements comparable measures to assess operating performance in the current year period with operating performance in the prior year periods. 3 Addendum I-B
Non-GAAP Financial Measures Archrock Partners, L.P. ($ in thousands) Q Q 3Q 4Q Q Q 3Q 4Q Q 3 Q 3 3Q 3 4Q 3 Net income (loss) $ 3 $ (,938) $ 3,53 $ 4,55 $ 4,505 $ (9,050) $ 0,380 $ 4,674 $ 4,733 $ 7,896 $ 0,035 $,359 Depreciation and amortization 4,49 5,459 9,087 9,35 0,36,788,930 3,8,706 7,030 7,58 6,87 Long-lived asset impairment - 305 384 37 805 8, - 633,540 95 784,0 Restructuring charges - - - - - - - - - - - - Goodwill impairment - - - - - - - - - - - - Selling, general and administrative 0,6 9,97 0,594 8,643, 3,450,76,455,607 5,03 6,948 7,3 Interest expense 7,075 7,553 7,860 7,9 5,88 6,399 6,465 6,4 7,44 0,99 9,735 9,60 Other (income) expense, net () 455 (338) (88) 57 (6) (37) (64) (407) (7,70) (639) (,65) Provision for (benefit from) income taxes 35 56 4 85 8 77 7 5 407 56 309 9 Gross margin 3,677 3,07 4,08 40,573 44,584 5,75 50,67 57,35 59,00 74,644 64,330 66,64 Cap on operating costs provided by AROC 6,877 8,349 6,93 5,073 5,33 3,5 5,84,886 3,503,79 3, 3,938 Cap on selling, general and administrative costs provided by AROC,5,85,80 -,48,80,090,85,854,368 4,64 4,4 Non-cash selling, general and administrative costs 364 53 (07) 345 40 7 40 53 335 85 30 Expensed acquisition costs (in Other (income) expense, net) - 54 - - 695 - - - 575 - - 46 Less: Selling, general and administrative (0,6) (9,97) (0,594) (8,643) (,) (3,450) (,76) (,455) (,607) (5,03) (6,948) (7,3) Less: Other income (expense), net (455) 338 88 (57) 6 37 64 407 7,70 639,65 EBITDA, as adjusted 3,75 3,50 38,64 37,53 40,680 44,997 46,50 48,90 5,995 7,43 55,68 59,03 Less: (Provision for) benefit from income taxes (35) (56) (4) (85) (8) (77) (7) (5) (407) (56) (309) (9) Less: Gain on sale of property, plant and equipment (in Other (income) expense, net) () (5) (39) (73) (74) (44) (7) (44) (935) (7,49) (64) (,34) Less: Loss on non-cash consideration in March 06 Acquisition - - - - - - - - - - - - Less: Cash interest expense (4,07) (4,65) (4,95) (5,0) (5,08) (5,78) (5,905) (5,930) (6,98) (9,036) (8,80) (8,774) Less: Maintenance capital expenditures (5,457) (8,454) (7,38) (7,568) (8,7) (,46) (0,345) (8,490) (8,349) (9,558) (,675) (0,89) Distributable cash flow $,064 $ 9,05 $ 5,70 $ 4,475 $ 6,900 $ 7,34 $ 9,50 $ 34,3 $ 37,06 $ 44,739 $ 33,8 $ 37,849 Distributions declared to all unitholders for the period, including incentive distribution rights $ 6,43 $ 9,06 $ 9,3 $ 9,58 $,480 $,76 $ 3,044 $ 3,33 $ 7,598 $ 7,97 $ 8,340 $ 8,840 Distributable cash flow coverage².30x.00x.33x.5x.0x.0x.8x.47x.34x.60x.7x.3x Distributable cash flow coverage (without the benefit of the cost caps),3 0.73x 0.46x 0.9x 0.99x 0.85x 0.9x 0.98x.3x.5x.46x 0.9x.0x EBITDA, as adjusted $ 3,75 $ 3,50 $ 38,64 $ 37,53 $ 40,680 $ 44,997 $ 46,50 $ 48,90 $ 5,995 $ 7,43 $ 55,68 $ 59,03 Less: Cap on operating and selling, general and administrative costs provided by AROC (9,9) (0,00) (7,995) (5,073) (7,805) (6,3) (6,93) (3,70) (5,357) (4,097) (7,376) (8,350) EBITDA, as adjusted (without the benefit of the cost caps),3 $,046 $,30 $ 30,69 $ 3,440 $ 3,875 $ 38,676 $ 39,9 $ 45,0 $ 47,638 $ 67,046 $ 48,306 $ 50,663 Distributable cash flow $,064 $ 9,05 $ 5,70 $ 4,475 $ 6,900 $ 7,34 $ 9,50 $ 34,3 $ 37,06 $ 44,739 $ 33,8 $ 37,849 Less: Cap on operating and selling, general and administrative costs provided by AROC (9,9) (0,00) (7,995) (5,073) (7,805) (6,3) (6,93) (3,70) (5,357) (4,097) (7,376) (8,350) Distributable cash flow (without the benefit of the cost caps),3 $,935 $ 8,85 $ 7,75 $ 9,40 $ 9,095 $,0 $,570 $ 30,5 $ 3,749 $ 40,64 $ 5,906 $ 9,499 See Addendum I-A for information on gross margin, EBITDA, as adjusted, EBITDA, as adjusted (without the benefit of the cost caps), distributable cash flow and distributable cash flow (without the benefit of the cost caps). Defined as distributable cash flow divided by distributions declared to all unit holders for the period, including incentive distribution rights. 3 Provisions in the Omnibus Agreement that provided caps on our obligation to reimburse Archrock for operating and SG&A expenses terminated on January, 05. Excluding the benefit of the cost caps from our previously defined non-gaap measures of EBITDA, as adjusted, and distributable cash flow provides external users of our consolidated financial statements comparable measures to assess operating performance in the current year period with operating performance in the prior year periods. 4 Addendum I-C
Non-GAAP Financial Measures Archrock Partners, L.P. ($ in thousands) Q 4 Q 4 3Q 4 4Q 4 Q 5 Q 5 3Q 5 4Q 5 Q 6 Q 6 Q3 6 Q4 6 Net income (loss) $ 6,939 $ 7,75 $ 8,03 $ 8,95 $ 0,085 $,37 $,498 $ (37,935) $ 50 $ 3,3 $ (567) $ (4,0) Depreciation and amortization 7,9 3,708 33,598 34,969 36,05 39,487 40,6 39,93 39,37 38,67 38,087 37,790 Long-lived asset impairment,486,99 3,558 4,775 3,484,86 7,63 6,54 6,35 8,83 7,909 3,75 Restructuring charges 379 98 5 - - - - - 4,39,08,946 6 Goodwill impairment - - - - - - - 7,757 - - - - Selling, general and administrative 9,376 9,047 0,734,364,69 0,7 0,79,967 3,679 9,74 7,97 8,380 Interest expense 9,689 4,756 6,4 7,5 7,83 9,08 9,048 8,69 8,74 9,33 0,034 9,774 Other (income) expense, net 87 (34) (649) (6) (9) (,5) 585 (73) 838 7 (890) (,64) Provision for (benefit from) income taxes 8 54 (99) 889 643 (7) 3 333 94 87 88 943 Gross margin 67,843 85,859 9,3 97,985 99,7 0,859 99,46 97,94 93,564 90,74 84,64 84,09 Cap on operating costs provided by AROC,536 - - - - - - - - - - - Cap on selling, general and administrative costs provided by AROC 3,60,399,685 3,60 - - - - 99 - - - Non-cash selling, general and administrative costs 756 8 348 54 59 47 98-8 33 400 Expensed acquisition costs (in Other (income) expense, net),544-866 6-30 - - 7 - - 35 Less: Selling, general and administrative (9,376) (9,047) (0,734) (,364) (,69) (0,7) (0,79) (,967) (3,679) (9,74) (7,97) (8,380) Less: Other income (expense), net (87) 34 649 6 9,5 (585) 73 (838) (7) 890,64 EBITDA, as adjusted 56,05 68,563 75,5 80,508 78,74 83,99 78,00 75,34 69,48 7,0 67,90 69,004 Less: (Provision for) benefit from income taxes (8) (54) 99 (889) (643) 7 (3) (333) (94) (87) (88) (943) Less: Gain on sale of property, plant and equipment (in Other (income) expense, net) (673) (70) (,44) (09) (80) (,78) 566 (5) 53 03 (795) (,946) Less: Loss on non-cash consideration in March 06 Acquisition - - - - - - - - 635 - - - Less: Cash interest expense (8,838) (3,563) (4,96) (6,6) (6,768) (7,893) (7,780) (7,740) (8,08) (8,57) (8,449) (8,600) Less: Maintenance capital expenditures (0,6) (,896) (3,366) (9,838) (0,079) (5,94) (5,69) (0,765) (8,047) (5,878) (4,785) (5,90) Distributable cash flow $ 36,43 $ 4,393 $ 45,68 $ 53,40 $ 50,97 $ 48,30 $ 45,64 $ 46,54 $ 43,947 $ 46,7 $ 43,703 $ 4,35 Distributions declared to all unitholders for the period, including incentive distribution rights $ 33,093 $ 33,649 $ 34,764 $ 35,33 $ 35,903 $ 39,084 $ 39,68 $ 39,680 $ 7,57 $ 7,53 $ 7,53 $ 9,07 Distributable cash flow coverage².09x.6x.3x.5x.4x.4x.4x.7x.5x.67x.50x.6x Distributable cash flow coverage (without the benefit of the cost caps),3 0.9x.x.4x.4x.4x.4x.4x.7x.5x.67x.50x.6x EBITDA, as adjusted $ 56,05 $ 68,563 $ 75,5 $ 80,508 $ 78,74 $ 83,99 $ 78,00 $ 75,343 $ 69,48 $ 7,0 $ 67,90 $ 69,004 Less: Cap on operating and selling, general and administrative costs provided by AROC (6,56) (,399) (,685) (3,60) - - - - - - - - EBITDA, as adjusted (without the benefit of the cost caps),3 $ 49,896 $ 67,64 $ 7,440 $ 76,898 $ 78,74 $ 83,99 $ 78,00 $ 75,34 $ 69,48 $ 7,0 $ 67,90 $ 69,004 Distributable cash flow $ 36,43 $ 4,393 $ 45,68 $ 53,40 $ 50,97 $ 48,30 $ 45,64 $ 46,53 $ 43,947 $ 46,7 $ 43,703 $ 4,35 Less: Cap on operating and selling, general and administrative costs provided by AROC (6,56) (,399) (,685) (3,60) - - - - - - - - Distributable cash flow (without the benefit of the cost caps),3 $ 9,987 $ 40,994 $ 4,997 $ 49,800 $ 50,97 $ 48,30 $ 45,64 $ 46,53 $ 43,947 $ 46,7 $ 43,703 $ 4,35 See Addendum I-A for information on gross margin, EBITDA, as adjusted, EBITDA, as adjusted (without the benefit of the cost caps), distributable cash flow and distributable cash flow (without the benefit of the cost caps). Defined as distributable cash flow divided by distributions declared to all unit holders for the period, including incentive distribution rights. 3 Provisions in the Omnibus Agreement that provided caps on our obligation to reimburse Archrock for operating and SG&A expenses terminated on January, 05. Excluding the benefit of the cost caps from our previously defined non-gaap measures of EBITDA, as adjusted, and distributable cash flow provides external users of our consolidated financial statements comparable measures to assess operating performance in the current year period with operating performance in the prior year periods. 5 Addendum I-C Continued
Non-GAAP Financial Measures Archrock Partners, L.P. ($ in thousands) Q 7 Q 7 Net income (loss) $ (4,36) $ 5,75 Depreciation and amortization 36,885 36,75 Long-lived asset impairment 6,0 3,08 Restructuring charges - - Goodwill impairment - - Selling, general and administrative 0,3 8,303 Interest expense 0,3,99 Debt extinguishment costs 9 - Other (income) expense, net (933) Provision for (benefit from) income taxes,30 960 Gross margin 8,08 84,60 Cap on operating costs provided by AROC - - Cap on selling, general and administrative costs provided by AROC - - Non-cash selling, general and administrative costs 50 37 Expensed acquisition costs (in Other (income) expense, net) - - Less: Selling, general and administrative (0,3) (8,303) Less: Other income (expense), net () 933 EBITDA, as adjusted 6,5 66,97 Less: (Provision for) benefit from income taxes (,30) (960) Less: Gain on sale of property, plant and equipment (in Other (income) expense, net) 48 (907) Less: Loss on non-cash consideration in March 06 Acquisition - - Less: Cash interest expense (8,54) (9,659) Less: Maintenance capital expenditures (7,75) (6,30) Distributable cash flow $ 34,43 $ 39,08 Distributions declared to all unitholders for the period, including incentive distribution rights $ 9,0 $ 9, Distributable cash flow coverage².80x.04x Distributable cash flow coverage (without the benefit of the cost caps),3.80x.04x EBITDA, as adjusted $ 6,5 $ 66,97 Less: Cap on operating and selling, general and administrative costs provided by AROC - - EBITDA, as adjusted (without the benefit of the cost caps),3 $ 6,5 $ 66,97 Distributable cash flow $ 34,43 $ 39,08 Less: Cap on operating and selling, general and administrative costs provided by AROC - - Distributable cash flow (without the benefit of the cost caps),3 $ 34,43 $ 39,08 See Addendum I-A for information on gross margin, EBITDA, as adjusted, EBITDA, as adjusted (without the benefit of the cost caps), distributable cash flow and distributable cash flow (without the benefit of the cost caps). Defined as distributable cash flow divided by distributions declared to all unit holders for the period, including incentive distribution rights. 3 Provisions in the Omnibus Agreement that provided caps on our obligation to reimburse Archrock for operating and SG&A expenses terminated on January, 05. Excluding the benefit of the cost caps from our previously defined non-gaap measures of EBITDA, as adjusted, and distributable cash flow provides external users of our consolidated financial statements comparable measures to assess operating performance in the current year period with operating performance in the prior year periods. 6 Addendum I-C Continued
Non-GAAP Financial Measures Archrock Partners, L.P. (in thousands) Q Q 3Q 4Q Q Q 3Q 4Q Q 3 Q 3 3Q 3 4Q 3 Revenue $ 68,79 $ 7,84 $ 84,437 $ 83,67 $ 88,697 $ 97,7 $ 99,34 $ 0,30 $ 06,06 $ 5,453 $ 5,808 $ 8,870 Gross margin $ 3,677 $ 3,07 $ 4,08 $ 40,573 $ 44,584 $ 5,75 $ 50,67 $ 57,35 $ 59,00 $ 74,644 $ 64,330 $ 66,64 Gross margin percentage 46% 45% 49% 49% 50% 53% 5% 56% 56% 59% 56% 56% Average Operating Horsepower,387,44,69,706,763,96,94,960,98,36,7,4 Gross margin per Horsepower per Quarter $.84 $.0 $ 4.9 $ 3.78 $ 5.9 $ 7.00 $ 6.34 $ 9.6 $ 9.77 $ 33.38 $ 9.0 $ 9.5 Gross margin per Horsepower per Month $ 7.6 $ 7.40 $ 8.0 $ 7.93 $ 8.43 $ 9.00 $ 8.78 $ 9.75 $ 9.9 $.3 $ 9.67 $ 9.84 Q 4 Q 4 3Q 4 4Q 4 Q 5 Q 5 3Q 5 4Q 5 Q 6 Q 6 3Q 6 4Q 6 Revenue $,046 $ 45,694 $ 53,63 $ 6,33 $ 64,95 $ 67,80 $ 63,93 $ 6,49 $ 5,44 $ 40,05 $ 35,478 $ 35,406 Gross margin $ 67,843 $ 85,859 $ 9,3 $ 97,985 $ 99,7 $ 0,859 $ 99,46 $ 97,94 $ 93,564 $ 90,74 $ 84,64 $ 84,09 Gross margin percentage 56% 59% 60% 6% 60% 6% 6% 6% 6% 65% 6% 6% Average Operating Horsepower,69,708,877,985 3,034 3,8 3,9 3,065,96,85,75,86 Gross margin per Horsepower per Quarter $ 9.90 $ 3.7 $ 3.74 $ 3.83 $ 3.67 $ 3.56 $ 3.87 $ 3.95 $ 3.60 $ 3.4 $ 30.76 $ 9.84 Gross margin per Horsepower per Month $ 9.97 $ 0.57 $ 0.58 $ 0.94 $ 0.89 $ 0.85 $ 0.6 $ 0.65 $ 0.53 $ 0.75 $ 0.5 $ 9.95 Q 7 Q 7 Revenue $ 37,95 $ 38,55 Gross margin $ 8,08 $ 84,60 Gross margin percentage 59% 6% Average Operating Horsepower,86,843 Gross margin per Horsepower per Quarter $ 8.3 $ 9.64 Gross margin per Horsepower per Month $ 9.44 $ 9.88 See Addendum I-A for information on gross margin and gross margin percentage. 7 Addendum I-D