USA Compression Sees Boost from Tight Natural Gas Market
USA Compression Partners has been boosted by analysts at RBC Capital Markets, who believe the company has a longer runway for growth.
The key factor driving this optimism is the tight demand for compression horsepower in the US natural gas market. According to RBC, the partnership's fleet will remain highly utilized due to the expected rise in US gas production to 140 billion cubic feet per day by 2031, with LNG exports playing a significant role in driving growth.
However, there is one potential drag on USA Compression's performance: lube oil costs are set to increase by around $1 million a month in the second half of the year. This may squeeze gross margins before any repricing can help offset the higher costs.
Despite this near-term challenge, RBC remains bullish on the company, nudging its price target to $31 from $30 and maintaining a sector-perform rating. The analysts also highlight the potential for operational tweaks, such as telemetry and remote monitoring, to improve unit economics without adding new machines.