CSI COMPRESSCO LP Management report and analysis of financial condition and results of operations. (Form 10-K)

The following discussion is intended to analyze major elements of our
consolidated financial statements and provide insight into important areas of
management's focus. This section should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes included elsewhere in
this Annual Report. Statements in the following discussion may include
forward-looking statements. These forward-looking statements involve risks and
uncertainties. See "Item 1A. Risk Factors," for additional discussion of these
factors and risks.

Previously, our operations included our new unit sales business that consisted
of the fabrication and sale of new standard and custom-designed, engineered
compressor packages fabricated primarily at our facility in Midland, Texas. In
the fourth quarter of 2020, we fully exited the new unit sales business. These
operations were previously included in equipment sales revenues and are now
reflected as discontinued operations for all periods presented.

On January 29, 2021, Spartan acquired from TETRA the Partnership's general
partner, IDRs and 10.95 million common units in the Partnership in the GP Sale.
In connection with the GP Sale, on January 29, 2021, TETRA entered into the
Transition Services Agreement with the Partnership, pursuant to which TETRA
provided certain accounting, information technology and back office support
services to the Partnership for a period of up to one year following closing.
The Transition Services Agreement with TETRA expired on January 31, 2022.

On November 10, 2021, the Partnership entered into the Contribution Agreement
with CSI Compressco GP, Spartan and Compressco Sub. Pursuant to the terms of the
Contribution Agreement, Spartan contributed Spartan Treating to the Partnership.
As the Partnership and Spartan Treating were under common control at the time of
the Spartan Acquisition, the results of operations have been combined for the
Partnership and Spartan Treating from the date common control began, January 29,
2021. See Note 4 - "Common Control Acquisition" in the Notes to Consolidated
Financial Statements in this Annual Report for further information.

Company Overview


  We provide services including natural gas compression and treating services.
Natural gas compression equipment is used for natural gas and oil production,
gathering, artificial lift, production enhancement, transmission, processing,
and storage. We also provide a variety of natural gas treating services. Our
compression business includes a fleet of approximately 4,800 compressor packages
providing approximately 1.2 million in aggregate horsepower, utilizing a full
spectrum of low-, medium-, and high-horsepower engines. Our treating fleet
includes amine units, gas coolers, and related equipment. Our aftermarket
business provides compressor package overhaul, repair, engineering and design,
reconfiguration and maintenance services, as well as the sale of compressor
package parts and components manufactured by third-party suppliers. Our
customers operate throughout many of the onshore producing regions of the United
States, as well as in a number of international locations, including Mexico,
Canada, Argentina, Egypt and Chile.

  Demand for our services is directly driven by the production of crude oil and
associated natural gas from unconventional shale plays, production of natural
gas from conventional plays and the transmission of natural gas to and within
sales pipelines. Our fleet of compressors, ranging from 20 to 2,500 horsepower
per unit, allows us to service our customers compression needs at the wellhead
through high-horsepower compression needs at centralized gathering and gas lift
facilities.

During 2020, macroeconomic uncertainty in the oil and natural gas industry drove
steep declines in spending by oil and gas operators which led to a decline in
our compression fleet utilization and impacted revenues and pricing. Oil prices
began to stabilize during the third and fourth quarters of 2020 and gained
strength throughout 2021, reaching an average of $77 per barrel in the fourth
quarter of 2021. This improvement in commodity prices, as well as the beginning
of a recovery in the general economy and the energy sector, has resulted in an
increase in activity levels from our contract services and aftermarket services
customers. Revenue from contract services increased each quarter in 2021. In
addition, we secured orders from key customers for high-horsepower and electric
compressors that started generating revenues in the fourth quarter of 2021 and
will continue to be deployed in the first half of 2022. Our customers continue
to be focused on capital discipline; however, we continue to see improvement in
the levels of quote activity and awards. As the market environment continues to
evolve, competition for field employees has increased and inflationary pressures
have driven certain costs higher. In addition, supply chain disruptions have
impacted the availability of parts and supplies. In addition, war and other
armed conflicts, including conflict related to Russia's invasion of Ukraine, and
any resulting economic downturn could adversely affect our results of
operations, impair our ability to raise capital or otherwise adversely impact
our ability to realize certain business strategies. We will continue to monitor
these risks and take the necessary actions to mitigate them.
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We have and will continue to evaluate the sale of non-core assets, including our low-power compressor fleet. We cannot guarantee that we will achieve a future sale of our fleet of low power compressors.


In 2020, we took an aggressive approach towards cost management to improve our
financial performance and liquidity. We implemented temporary and permanent cost
reductions, including reductions in capital expenditures, workforce, and
salaries. We also implemented furloughs, a reduction in the cash retainers for
the directors of our general partner, the suspension of 401(k) matching
contributions for our employees, targeted reduction in selling, general and
administrative expenses, rationalization of our real estate facilities, and
negotiated reductions in expenditures with many of our suppliers. In 2021, with
the improvement in market conditions, we have reversed most of the
cost-reduction actions taken in 2020 and have increased capital allocated to
growth. With the rapidly changing market environment, we will continue to
proactively manage our capital allocation strategies and monitor our expenses
and financial performance.

While we are not able to predict how long the COVID-19 pandemic will continue to
impact overall market conditions, the demand for oil and gas and the effect it
will ultimately have on our business, we continued to see activity levels
increase in the fourth quarter of 2021. We are encouraged by the strong oil and
gas commodity prices and projections for demand recovery; however, the risk of
additional strains of COVID-19, risk that developed vaccines may not be
successful in preventing COVID-19 or its spread or the potential outbreak of a
new or mutated virus, and the possibility of future lockdowns makes any forecast
for improvement uncertain. In addition, continued capital discipline throughout
the energy sector may limit production growth even when the economy recovers
from the pandemic. Despite challenging and changing market conditions, we will
continue to maintain our commitment to safety and service quality for our
customers.
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Operating results


The following data should be read in conjunction with the Consolidated Financial
Statements and the associated Notes contained elsewhere in this document. On
November 10, 2021, Spartan contributed Spartan Treating to the Partnership. As
the Partnership and Spartan Treating were under common control at the time of
the Spartan Acquisition, the results of operations have been combined for the
Partnership and Spartan Treating from the date common control began which was
January 29, 2021. See Note 4 - "Common Control Acquisition" in the Notes to
Consolidated Financial Statements in this Annual Report for further information.
Previously, our equipment sales business included our new unit sales business
that consisted of the fabrication and sale of new standard and custom-designed,
engineered compressor packages fabricated primarily at our facility in Midland,
Texas. We sold the Midland facility in July 2020. In the fourth quarter of 2020,
we fully exited the new unit sales business and we have reflected these
operations as discontinued operations for all periods presented. See Note 10 -
"Discontinued Operations" in the Notes to Consolidated Financial Statements in
this Annual Report for further information. Used equipment sales revenue
continues to be included in equipment sales revenue.

2021 Compared to 2020

                            Year Ended December 31,
                                                                                               Period-to-Period Change                             Percentage of Total Revenues                     Period-to-Period Change
Consolidated Results of Operations                       2021               2020                                           2021 vs. 2020                          2021                  2020                                      2021 vs. 2020
                                                                               (In Thousands)
Revenues:
Contract services                                    $ 234,998          $ 228,088                                        $        6,910                              77.3  %               75.6  %                                           3.0  %
Aftermarket services                                    53,534             60,290                                                (6,756)                             17.6  %               20.0  %                                         (11.2) %
Equipment rentals                                       12,903                  -                                                12,903                               4.2  %                  -  %                                         100.0  %
Equipment sales                                          2,736             13,209                                               (10,473)                              0.9  %                4.4  %                                         (79.3) %
 Total revenues                                        304,171            301,587                                                 2,584                             100.0  %              100.0  %                                           0.9  %
Cost of revenues:
Cost of contract services                              118,702            108,843                                                 9,859                              39.0  %               36.1  %                                           9.1  %
Cost of aftermarket services                            45,578             52,444                                                (6,866)                             15.0  %               17.4  %                                         (13.1) %
Cost of equipment rentals                                1,065                  -                                                 1,065                               0.4  %                  -  %                                         100.0  %
Cost of equipment sales                                  3,342             12,946                                                (9,604)                              1.1  %                4.3  %                                         (74.2) %
 Total cost of revenues                                168,687            174,233                                                (5,546)                             55.5  %               57.8  %                                          (3.2) %
Depreciation and amortization                           78,234             80,007                                                (1,773)                             25.7  %               26.5  %                                          (2.2) %
Impairments and other charges                                -             15,367                                               (15,367)                                -  %                5.1  %                                        (100.0) %
Insurance recoveries                                         -               (517)                                                  517                                 -  %               (0.2) %                                        (100.0) %
Selling, general, and administrative expense            43,299             34,295                                                 9,004                              14.2  %               11.4  %                                          26.3  %

Interest expense, net                                   54,791             54,468                                                   323                              18.0  %               18.1  %                                           0.6  %

Other (income) expense, net                              3,868              3,544                                                   324                               1.3  %                1.2  %                                           9.1  %
Loss before taxes and discontinued operations          (44,708)           (59,810)                                               15,102                             (14.7) %              (19.8) %                                         (25.2) %
Provision for income taxes                               4,952              3,144                                                 1,808                               1.6  %                1.0  %                                          57.5  %
Loss from continuing operations                        (49,660)           (62,954)                                       $       13,294                             (16.3) %              (20.9) %                                         (21.1) %
Loss from discontinued operations, net of
taxes                                                     (612)           (10,886)                                       $       10,274                              (0.2) %               (3.6) %                                         (94.4) %
Net loss                                             $ (50,272)         $ (73,840)                                       $       23,568                             (16.5) %              (24.5) %                                         (31.9) %



Revenues

  Contract services revenues increased by $6.9 million, or 3.0%, during 2021
compared to the prior year primarily due to the Spartan Acquisition which
generated $11.1 million of contract services revenue in 2021 from the date of
common control. This increase in revenues was partially offset by a decrease in
revenues resulting from the impact of the COVID-19 pandemic on revenue in 2020
and 2021. The overall compression fleet horsepower utilization rate as of
December 31, 2021 increased to 80.8% compared to 76.4% as of December 31, 2020.
In addition, in 2021 we discontinued some of the pricing concessions given in
2020.
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  Aftermarket services revenues decreased $6.8 million, or 11.2%, during 2021
compared to the prior year partially due to decreased demand for parts and
services as customers delayed re-starting maintenance programs on their owned
equipment. Additionally, due to the increase in demand for our compression
services, our facilities and workforce were consumed with make-ready and
redeployment work limiting the availability for aftermarket services jobs. The
contribution of Spartan Treating generated $0.7 million in aftermarket services
revenue in 2021 from the date of common control.

Equipment rental revenue increased $12.9 millionor 100.0%, in 2021 due to the acquisition of Spartan.


  Equipment sales revenues decreased $10.5 million, or 79.3%, during 2021
compared to the prior year due to a decrease in used unit sales. In 2020, the
Partnership increased efforts to sell non-core used compressors to strengthen
liquidity during the market downturn.

Revenue cost


Cost of contract services increased compared to the prior year consistent with
increased revenues and includes the addition of Spartan Treating which had $6.3
million of cost in 2021 from the date of common control. Cost of contract
services as a percentage of contract services revenues increased from 47.7% in
2020 to 50.5% in 2021. This increase was partially due to higher make-ready
expenses and start-up costs in 2021 which contributed to higher revenues in the
fourth quarter of 2021 and will continue to do so in 2022. In addition,
inflationary pressures have resulted in increased costs in certain operating
cost categories in 2021 including field labor costs and fuel costs.

  Cost of aftermarket services decreased in 2021 compared to 2020 consistent
with the decrease
in revenues. The addition of Spartan Treating added $0.4 million of costs in
2021 from the date of common control. The cost of aftermarket services was also
impacted by inflation in 2021.

The cost of renting equipment has increased $1.1 millionor 100%, in 2021 due to the acquisition of Spartan.

Cost of equipment sales decreased in 2021 compared to 2020, in line with lower associated revenues.

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 and the amortization of
intangibles. The contribution of Spartan Treating resulted in $4.3 million of
depreciation and amortization in 2021. Depreciation and amortization expense
decreased compared to the prior year primarily due to impairments recorded in
2020, reducing the cost basis of our compression fleet.

Depreciation and other charges


  During the year ended December 31, 2020, we recorded impairments and other
charges of $15.4 million primarily on non-core used compressor equipment-the
low-horsepower class of our compression fleet and field inventory for
compression and related services. There were no impairments recorded in the
current year.

Insurance recoveries

Insurance recoveries relate to proceeds from insurance claims received in 2020 associated with fleet compressor assemblies that were damaged in the prior year.

Selling, general and administrative expenses


  Selling, general, and administrative expenses increased during 2021 compared
to 2020 largely due to increased employment expenses, including wages,
incentives, benefits, and other employee-related expenses of $6.2 million, the
addition of Spartan Treating, which added $3.7 million in expenses in 2021 from
the date of common control, increased professional services fees of $0.2 million
and increased general expenses such as
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office expenses, taxes and insurance $0.3 million. These increases were offset by a decrease in bad debts of $1.2 million.

Interest expense, net


Interest expense, net increased to $54.8 million during 2021 compared to $54.5
million in 2020 due to higher interest rates associated with our Second Lien
Notes following the June 2020 debt exchange.

Other (income) expenses, net


Other (income) expense, net, was $3.9 million of expense during 2021 compared to
$3.5 million of expense in 2020. This increase in expense is primarily due to
$5.2 million of increased losses on disposal of assets and increased foreign
currency losses of $1.2 million, partially offset by $4.8 million of decreased
fees associated primarily with the unsecured debt exchange transaction in 2020.

Provision for income taxes


  As a partnership, we are generally not subject to income taxes at the entity
level, and our partners are separately taxed on their share of our 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.
Certain of our operations are located outside of the United States and the
Partnership, through its foreign subsidiaries, is responsible for income taxes
in these countries.

  Our effective tax rate for the year ended December 31, 2021, was negative
11.1% primarily due to taxes in certain foreign jurisdictions and Texas gross
margin taxes combined with losses generated in entities for which no related tax
benefit has been recorded. Included in our deferred tax assets are net operating
loss carryforwards and tax credits that are available to offset future income
tax liabilities in the U.S. as well as in certain foreign jurisdictions.

Profit (loss) from discontinued operations, net of tax


Income (loss) from discontinued operations, net of tax decreased from a $10.9
million loss for the year ended December 31, 2020 to a $0.6 million loss for the
year ended December 31, 2021. The Partnership exited the new unit sales business
during 2020, with final deliveries made in October. The prior year loss includes
$36.8 million of new unit sales revenues and $0.8 million of other income,
offset by $38.5 million of cost of sales, $5.5 million of impairments, and $3.9
million of selling, general, and administrative expenses.

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,
quarter-to-quarter, 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. The costs of other materials
consumed while performing our services, ad valorem taxes, other labor costs,
truck maintenance, rent on storage facilities, vehicle leases 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 personnel,
as well as expenses related to their training and safety. Additional information
regarding our operating expenses for the year ended December 31, 2021 is
provided within the Results of Operations sections above.

Adjusted EBITDA. We view Adjusted 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 (typically compared to the prior month, prior year period, and to
budget). We define Adjusted EBITDA as earnings before interest, taxes,
depreciation and amortization, and before certain charges, including
impairments, bad debt expense attributable to bankruptcy of customers, equity
compensation, non-cash costs of compressors sold, gain on extinguishment of
debt, write-off of
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unamortized financing costs, severance payments and other non-recurring or unusual expenses or charges. Adjusted EBITDA is used as a supplemental financial measure by our management to:


•assess our ability to generate available cash sufficient to make distributions
to our common unitholders and general partner;
•evaluate the financial performance of our assets without regard to financing
methods, capital structure, or historical cost basis;

•measure operational performance and return on capital against those of our competitors; and

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


The following table reconciles net income (loss) to Adjusted EBITDA for the
periods indicated:

                                                                                Year Ended December 31,
                                                                               2021                    2020
                                                                                     (In Thousands)
Net income (loss)                                                      $     (50,272)             $    (73,840)
Provision for income taxes                                                     4,952                     3,211
Depreciation and amortization                                                 78,234                    80,533
Impairments and other charges                                                      -                    20,841

Interest expense, net                                                         54,791                    54,468
Equity compensation                                                            1,954                     1,389
Transaction costs                                                              2,146                         -
ERP Write Off                                                                  4,635                         -
Reorganization costs                                                             754                         -

Debt exchange expenses                                                             -                     4,892
Severance                                                                        114                     2,034
Non-cash cost of compressors sold                                              3,368                    12,812
Prior year sales tax accrual adjustment                                          367                         -
Manufacturing engine order cancellation charge                                   300                         -

Provision for income taxes, depreciation and amortization attributed to discontinued operations

     256                         -
Other                                                                           (137)                    2,438
Adjusted EBITDA                                                        $     101,462              $    108,778



  Free Cash Flow. We define Free Cash Flow as cash from operations less capital
expenditures, net of sales proceeds. Management primarily uses this metric to
assess our ability to retire debt, evaluate our capacity to further invest and
grow, and measure our performance as compared to our peers. The following table
reconciles cash provided by operations, net, to Free Cash Flow for the periods
indicated:

                                                         Year Ended December 31,
                                                           2021                2020
                                                             (In Thousands)
     Net cash provided by operating activities     $      27,156           

$20,762

Capital expenditures, net of sales proceeds (42,098)

(12,334)

     Midland facility sale proceeds                            -           
  17,000
     Free cash flow                                $     (14,942)           $ 25,428



Net cash provided by operating activities for the year ended December 31, 2021
includes $40.0 million of revenues in excess of cash expenses partially offset
by $12.9 million in working capital changes.

Adjusted EBITDA and Free Cash Flow are financial measures that are not consistent with we GAAP and should not be considered an alternative to net income, operating income, cash flow from operating activities or any other

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other measure of financial performance presented in accordance with U.S. GAAP.
These measures may not be comparable to similarly titled financial metrics of
other entities, as other entities may not calculate Adjusted EBITDA or Free Cash
Flow in the same manner as we do. Management compensates for the limitations of
Adjusted EBITDA and Free Cash Flow as analytical tools by reviewing the
comparable U.S. GAAP measures, understanding the differences between the
measures, and incorporating this knowledge into management's decision-making
processes. Adjusted EBITDA and Free Cash Flow should not be viewed as indicative
of the actual amount of cash 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.

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 services
fleet as of such date. Management primarily uses this metric to determine our
future need for additional compressor packages for our service fleet and to
measure marketing effectiveness.

The following table shows the total power of our compressor fleet, our total power in service and our rate of power utilization by each power class of our compressor fleet on the dates indicated.

                                                            December 31,
                                                       2021             2020
            Horsepower
            Total horsepower in fleet               1,196,842       

1,175,075

            Total horsepower in service               967,085          897,446
            Total horsepower utilization rate            80.8  %          76.4  %


The following table shows our power utilization rates by each power class of our compressor fleet on the dates indicated.

                                                          December 31,
                                                        2021           2020
             Horsepower utilization rate by class
             Low-horsepower (0-100)                       57.3  %     59.4  %
             Medium-horsepower (101-1,000)                80.4  %     74.5  %
             High-horsepower (1,001 and over)             86.1  %     81.5  %
             Total Horsepower utilization rate            80.8  %     76.4  %



The total horsepower utilization rate and the utilization rate for the medium
and high-horsepower class each increased in 2021 compared to 2020 due to an
increase in customer activity levels. The market environment improved in 2021
resulting in an increase in total utilization of 4% compared to the utilization
rate as of December 31, 2020, with meaningful gains in utilization in the medium
and high-horsepower categories.

Net Increases/Decreases in Compression Fleet Horsepower. We measure the net
increase (or decrease) in our compression fleet horsepower during a given period
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 (or decrease) in our compression fleet horsepower in service during a
given period 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.

Cash and capital resources


Our primary cash requirements are for distributions, working capital
requirements, debt service, normal operating expenses, and capital expenditures.
Our potential sources of funds are our existing cash balances, cash generated
from our operations, asset sales, and long-term and short-term borrowings, which
we believe will be sufficient to meet our working capital and growth capital
requirements during 2022. We have secured orders from
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key customers for power and electric compressors that will drive our growth capital investments and consume cash in 2022.


Oil and natural gas commodity prices recovered in the second half of 2020 and
throughout 2021 from their lows in the first half of 2020. During the beginning
of 2022, commodity prices have continued to increase with the West Texas
Intermediate price of oil rising to $119.26 per barrel as of March 7, 2022 and
the Henry Hub price for natural gas rising to $4.61 per MMBtu as of March 8,
2022. Although uncertainty remains, the outlook for the energy sector has
improved significantly. If oil and natural gas prices decrease from current
levels, our businesses could be negatively impacted. Despite these
uncertainties, we remain committed to a long-term growth strategy. Our near-term
focus is to balance our investment in growth against our investment in
maintaining our revenue-generating assets, while continuing to preserve and
enhance liquidity through strategic operating and financial measures. We
periodically evaluate engaging in strategic transactions and may consider
divesting assets where our evaluation suggests such transactions are in the best
interests of our business. We are subject to business and operational risks that
could materially and adversely affect our cash flows and, when coupled with
risks associated with current debt and equity market conditions, our ability or
desire to issue securities. Please read "Item 1A. Risk Factors."

In November of 2021, in connection with the Spartan Acquisition, we closed a
private placement of common units to certain investors for gross proceeds of
$52.7 million (the "Private Placement") and issued $10 million in aggregate
principal amount of our 10.000%/10.750% Senior Secured Second Lien Notes due
2026 (the "New Second Lient Notes") pursuant to a securities purchase agreement
(the "Second Lien Notes Sale"). The proceeds of the Private Placement and Second
Lien Notes Sale were used for general Partnership purposes, including the
redemption of all $80.7 million of our senior unsecured notes in December 2021.
These and other transactions completed in the fourth quarter of 2021 improved
our overall financial condition and liquidity position.

  Following the redeployment of our idle assets, meeting increased demand for
our contract services will require ongoing capital expenditure investment, which
could be significant. We expect to fund any future capital expenditures, along
with potential acquisitions, if any, with existing cash balances and cash flow
generated from our operations. We may also seek to expand our compression fleet
through finance leases with third parties.

The level of future growth capital expenditures depends on demand for our
contract services, the level of cash available to fund these expenditures and
our decisions whether to utilize available cash to fund increases in our
quarterly common unit distribution, retire debt, or make capital expenditures.
We expect capital expenditures in 2022 will range from $50.0 million to $60.0
million. These capital expenditures include approximately $18.0 million to $22.0
million of maintenance capital expenditures, approximately $24.0 million to
$28.0 million of capital expenditures primarily associated with the expansion of
our contract services fleet and $8.0 million to $10.0 million of capital
expenditures related to investments in technology and other initiatives, which
include the development and implementation of our new ERP system. The foregoing
estimates were based on assumptions regarding current market conditions and the
ongoing impact of the COVID-19 pandemic. We expect cash on hand and cash
generated from operations will be sufficient to meet cash needs throughout 2022
without the need to incur additional debt or issue additional equity.

  On January 20, 2022, our general partner declared a cash distribution
attributable to the quarter ended December 31, 2021 of $0.01 per common unit.
This distribution equates to a distribution of $0.04 per outstanding common unit
on an annualized basis. This quarterly distribution was paid on February 14,
2022 to each of the holders of common units of record as of the close of
business on January 31, 2022.

Cash flow


A summary of our sources and uses of cash during the year ended December 31,
2021 and 2020 is as follows:

                                             Year Ended December 31,
                                                2021                2020
               Operating activities    $      27,156             $ 20,762
               Investing activities          (40,509)               5,183
               Financing activities            3,377              (11,685)



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Operational activities


Net cash provided by operating activities increased by $6.4 million during the
year ended December 31, 2021 to $27.2 million compared to $20.8 million provided
by operating activities in 2020. Our cash provided from operating activities was
primarily generated from the provision of contract compression and treating
services and, for the prior year, the sale of new compressor packages. The
increase in cash provided by operating activities was primarily due to the
contribution of Spartan Treating.

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, the timing of
collection of our receivables, and the repatriation of cash generated by our
international operations.
Investing Activities

Capital expenditures during the year ended December 31, 2021 increased by $28.7
million compared to 2020 due to increased activity levels and increasing demand
for our compression services from our customers. In 2020, capital expenditures
were largely offset by proceeds of $17.0 million from the sale of our Midland
manufacturing facility. Total capital expenditures during 2021 were $47.0
million, offset by $3.4 million from compression units sold. Total capital
expenditures for 2021 include $12.8 million of maintenance capital expenditures.

The level of growth capital expenditures depends on our ability to redeploy
existing fleet equipment and demand for compression services. If the demand for
compression services increases or decreases, the amount of planned expenditures
on growth and expansion will be adjusted. We continue to review all capital
expenditure plans carefully in an effort to conserve cash and fund our liquidity
needs.

Financing Activities

Distributions

Beginning with the distribution to common unitholders during February 2019, we
reduced our common unit distributions from $0.75 per unit per year (or $0.1875
per quarter) to $0.04 per unit per year (or $0.01 per quarter). Accordingly,
during the year ended December 31, 2021, we distributed $1.9 million of cash
distributions to our common unitholders and general partner.

credit agreement


  As of December 31, 2021, and subject to compliance with the covenants,
borrowing base, and other provisions of the agreements that may limit borrowings
under the Credit Agreement, we had availability of $15.2 million. On January 29,
2021, the Partnership amended the Loan and Security Agreement dated June 29,
2018 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"). The Credit Agreement
provides for maximum revolving credit commitments of $35.0 million and includes
a $5.0 million reserve, which results in reduced borrowing availability. The
Credit Agreement was amended on January 29, 2021 to temporarily increase the
size of the reserve to $10.0 million and also required that Spartan backstop all
of our outstanding letters of credit. These temporary restrictions expired on
April 30, 2021. The Credit Agreement includes a $25.0 million sublimit for
letters of credit.

The maturity date of the Credit Agreement is June 29, 2023. As of December 31,
2021, we had an outstanding balance of $0.8 million and had $2.1 million in
letters of credit against our Credit Agreement. As of March 10, 2022, we had no
balance outstanding under our Credit Agreement and $2.1 million in letters of
credit, leaving availability under the Credit Agreement of $14.9 million. The
amounts the Partnership may borrow under the Credit Agreement are based on the
amounts of the Partnership's accounts receivable and the value of certain
inventory. Decreases in the amount of the Partnership's accounts receivable and
the value of its inventory would result in reduced borrowing availability under
the Credit Agreement.

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Spartan Credit Agreement


On November 10, 2021, certain unrestricted subsidiaries of the Partnership,
Spartan Energy Services LLC, as borrower, and Treating Holdco, as new guarantor,
entered into the First Amendment to Loan, Security and Guaranty Agreement (the
"Spartan Amendment") amending the Loan, Security and Guaranty Agreement dated
January 29, 2021 (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the "Spartan Credit Agreement") with Bank
of America, N.A., in its capacity as agent, and the other lenders and loan
parties party thereto. As of December 31, 2021, and subject to compliance with
the covenants, borrowing base, and other provisions of the agreements that may
limit borrowings under the Spartan Credit Agreement, we had availability of
$10.9 million.

The maturity date of the Spartan Credit Agreement is January 29, 2024. As of
December 31, 2021, we had a $59.0 million outstanding balance. As of March 10,
2022, we have $60.0 million balance outstanding under our Credit Agreement and
no letters of credit, leaving availability under the Spartan Credit Agreement of
$4.0 million. The amounts that may be borrowed under the agreement are based on
the amounts of accounts receivable, the value of certain inventory, and fixed
asset net book value. Decreases in the amount of accounts receivable and the
value of its inventory and fixed assets would result in reduced borrowing
availability under the Spartan Credit Agreement.

Remarks


We may from time to time seek to retire or purchase certain amounts of our
outstanding senior notes through cash purchases, in open market purchases,
privately negotiated transactions or otherwise. Such repurchases, if any, will
depend on prevailing market conditions, our liquidity requirements, contractual
restrictions and other factors.

7.25% senior bonds due 2022


On November 10, 2021, the Partnership delivered a notice of redemption with
respect to the 7.25% Senior Notes due 2022 (the "2022 Notes") calling for
redemption on December 13, 2021 of all of the outstanding 2022 Notes at a
redemption price equal to 100.0% of the principal amount of the 2022 Notes to be
redeemed, plus accrued and unpaid interest, if any, on the 2022 Notes (the
"Redemption"). The Redemption was financed with the net proceeds from the
Private Placement and the issuance of the New Second Lien Notes, among other
sources of cash.

7.50% Senior Notes Due 2025


As of December 31, 2021, our 7.50% First Lien Notes due 2025 (the "First Lien
Notes") had $399.8 million outstanding net of unamortized discounts, unamortized
deferred financing costs and deferred restructuring gains. Interest on these
notes is payable on April 1 and October 1 of each year. The First Lien Notes are
secured by a first-priority security interest in substantially all of the
Partnership's and its subsidiaries assets, subject to certain permitted
encumbrances and exceptions, and are guaranteed on a senior secured basis by
each of the Partnership's U.S. restricted subsidiaries (other than Finance Corp,
certain immaterial subsidiaries and certain other excluded U.S. subsidiaries).

10.000%/10.750% Junior Notes due 2026


As of December 31, 2021, our 10.000%/10.750% Second Lien Notes due 2026 (the
"Second Lien Notes") had $173.0 million outstanding, net of unamortized
discounts, unamortized deferred financing costs and deferred restructuring
gains. Interest on the Second Lien Notes is payable on April 1 and October 1 of
each year. The Second Lien Notes are secured by a second-priority security
interest in substantially all of the Partnership's and its subsidiaries assets,
subject to certain permitted encumbrances and exceptions, and are guaranteed on
a senior secured basis by each of the Partnership's U.S. restricted subsidiaries
(other than Finance Corp, certain immaterial subsidiaries and certain other
excluded U.S. subsidiaries). In connection with the payment of PIK Interest (as
defined below), if any, in respect of the Second Lien Notes, the issuers will be
entitled, to increase the outstanding aggregate principal amount of the Second
Lien Notes or issue additional notes ("PIK notes") under the Second Lien Notes
indenture on the same terms and conditions as the already outstanding Second
Lien Notes. Interest will accrue at (1) the annual rate of 7.250% payable in
cash, plus (2) at the election of the Issuers (made by delivering a notice to
the Second Lien Trustee not less than five business days prior to the record
date), the annual rate of (i) 2.750% payable in cash (together with the annual
rate set forth in clause (1), the "Cash Interest Rate") or (ii) 3.500% payable
by increasing the principal amount of the outstanding Second Lien Notes or by
issuing additional PIK notes,
                                       42
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in each case rounding to the nearest $1.00 (such increased principal amount or additional PIK Notes, the “PIK Interest”).


In addition, the indentures governing our First Lien Notes and Second Lien Notes
contain customary covenants restricting our ability and the ability of our
restricted subsidiaries to: (i) pay distributions on, purchase, or redeem our
common units, make certain investments and other restricted payments, or
purchase or redeem any subordinated debt; (ii) incur or guarantee additional
indebtedness or issue certain kinds of preferred equity securities; (iii) create
or incur certain liens securing indebtedness; (iv) sell assets, including
dispositions of the collateral securing our First Lien Notes and Second Lien
Notes; (v) consolidate, merge, or transfer all or substantially all of our
assets; (vi) enter into transactions with affiliates; and (vii) enter into
agreements that restrict distributions or other payments from our restricted
subsidiaries to us. Our Second Lien Notes indenture further restricts our
ability to make distributions in respect of our common units in any amount
exceeding $0.04 per common unit per year, unless such increased distribution is
funded by proceeds from an equity offering. These covenants are subject to a
number of important limitations and exceptions, including certain provisions
permitting us, subject to the satisfaction of certain conditions, to transfer
assets to certain of our unrestricted subsidiaries. The indentures also contain
customary events of default and acceleration provisions relating to events of
default, which provide that upon an event of default under the indentures, the
Trustee or the holders of at least 25% in aggregate principal amount of the then
outstanding First Lien Notes and Second Lien Notes may declare all of the First
Lien Notes and Second Lien Notes to be due and payable immediately. We are in
compliance with all covenants of the First Lien Notes and Second Lien Notes
indentures as of December 31, 2021.

Leases

We have operating leases for certain of our office space, warehouses, operating sites, machinery and equipment. Our leases have remaining terms ranging from 1 to 10 years. Some of our leases have extension options for various periods, while others have termination options with generally 30 days or six months notice. See Note 6 – “Leases” in the Notes to the consolidated financial statements of this annual report for more information.

Other funding


In December 2020, TETRA sold 15 high horsepower compressors to Spartan Energy
Services LLC, a subsidiary of Spartan, which were subject to an existing lease
with the Partnership. In connection with the GP sale, TETRA also assigned the
leases for that compression services equipment with the Partnership to Spartan.
As of December 31, 2020, all compression units pursuant to this arrangement were
completed. See Note 8 - "Related Party Transactions" in the Notes to
Consolidated Financial Statements in this Annual Report for further information.

Off-balance sheet arrangements


As of December 31, 2021, 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.


Additional financial information about the guarantor


The $400.0 million and $172.7 million in aggregate principal amounts outstanding
of the First Lien Notes and the Second Lien Notes, respectively, as of
December 31, 2021 are fully and unconditionally guaranteed, subject to certain
customary release provisions, on a joint and several senior secured basis, by
the following U.S. restricted subsidiaries which are each a 100% owned
subsidiary (each a "Guarantor Subsidiary" and collectively the "Guarantor
Subsidiaries"):

    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
    Rotary Compressor Systems, Inc.

As a result of these guarantees, we present the following summarized financial information of the group of obligors in accordance with Rule 1-02 (bb) of Regulation SX. These tables are presented using the equity method for all periods presented. Under this method, investments in subsidiaries are recognized at cost and

                                       43
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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
First Lien Notes or the Second Lien Notes. In addition to the financial
information of the Partnership, financial information of the Issuers includes
CSI Compressco Finance Inc., which had no assets or operations for any of the
periods presented.

                                                               December 31, 2021
                                                                 (In Thousands)
                                                              Guarantor                Other
                                          Issuers            Subsidiaries           Subsidiaries           Eliminations           Consolidated
Revenues                                $       -          $     424,599          $      64,157          $    (184,585)         $     304,171
Cost of revenues (excluding
depreciation and amortization
expense)                                        -                321,454                 31,818               (184,585)               168,687
Depreciation and amortization                   -                 69,954                  8,280                      -                 78,234

Selling, general, and
administrative expense                      2,286                 35,807                  5,304                    (98)                43,299

Interest expense, net                      58,229                 (2,472)                  (966)                     -                 54,791

Other expense, net                             38                  5,442                 (1,508)                  (104)                 3,868
Equity in net (income) loss of
subsidiaries                              (10,281)               (17,433)                     -                 27,714                      -
Income (loss) before taxes and
discontinued operations                   (50,272)                11,847                 21,229                (27,512)               (44,708)
Provision for income taxes                      -                    954                  3,796                    202                  4,952
Income (loss) from continuing
operations                                (50,272)                10,893                 17,433                (27,714)               (49,660)
Loss from discontinued
operations, net of taxes                        -                   (612)                     -                      -                   (612)
Net income (loss)                         (50,272)                10,281                 17,433                (27,714)               (50,272)
Other comprehensive income                    (11)                   (11)                   (11)                    22                    (11)
Comprehensive income (loss)             $ (50,283)         $      10,270          $      17,422          $     (27,692)         $     (50,283)



                                       44
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                                                                       December 31, 2021
                                                                        (In Thousands)
                                                                        Guarantor
                                                   Issuers            Subsidiaries           Other Subsidiaries           Eliminations           Consolidated
ASSETS
Current assets                                   $       -          $       56,781          $           43,998          $           -          $     100,779

Total non-current assets          170,960,000      586,150                 551,621                     119,130               (635,319)               621,582
Total assets                                     $ 586,150          $      608,402          $          163,128          $    (635,319)         $     722,361

LIABILITIES AND PARTNERS'
CAPITAL
Other current liabilities                        $  12,351          $       41,802          $           16,880          $           -          $      71,033

Current liabilities associated
with discontinued operations                             -                     262                           -                      -                    262
Long-term debt                                     572,640                     456                      58,045                      -                631,141

Operating lease liabilities                              -                  17,586                          62                      -                 17,648

Long-term affiliate payable and
other liabilities                                        -                 377,435                      37,755               (415,190)                 

Other long-term liabilities                              -                     (99)                      1,217                      -                  1,118
Total liabilities                                  584,991                 437,442                     113,959               (415,190)               721,202
Total partners' capital                              1,159                 170,960                      49,169               (220,129)                 1,159
Total liabilities and partners'
capital                                          $ 586,150          $      608,402          $          163,128          $    (635,319)         $     722,361



Significant Accounting Policies and Estimates


This discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements. We prepared
these financial statements in conformity with U.S. GAAP. In preparing our
consolidated financial statements, we make assumptions, estimates, and judgments
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
periods presented. We base these estimates on historical experience, available
information, and various other assumptions that we believe are reasonable under
the circumstances. We periodically evaluate these estimates and judgments, which
may change as new events occur, as new information is acquired, and with changes
in our operating environment. Actual results are likely to differ from current
estimates, and those differences may be material. The following critical
accounting policy reflects the most significant judgments and estimates used in
the preparation of our financial statements.

Business combinations


When we acquire a business from an entity under common control, whereby the
companies are ultimately controlled by the same party both before and after the
transaction, it is treated similar to the pooling of interests method of
accounting, where the assets and liabilities are recorded at the transferring
entity's historical cost instead of reflecting the fair market value of assets
and liabilities.

Impairment of long-lived assets


We conduct a determination of impairment of long-lived assets whenever
indicators of impairment are present. If such indicators are present, the
determination of the amount of impairment is based on our judgments as to the
future operating cash flows to be generated from these assets throughout their
estimated useful lives. If an impairment of a long-lived asset is warranted, we
estimate the fair value of the asset based on a present value of these cash
flows or the value that could be realized from disposing of the asset in a
transaction between market participants. The estimation of future operating cash
flows is inherently imprecise, and, if our estimates are materially incorrect,
it could result in an overstatement or understatement of our financial position
and results of operations. In particular, the oil and gas industry is cyclical,
and estimates of the period over which future cash flows will be generated, as
well as the predictability of these cash flows, can have an additional
significant impact on the
                                       45
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carrying value of these assets and, particularly in periods of prolonged down
cycles, may result in impairment charges. Historically, our business has not
experienced significant impairments of its long-lived compression assets, as
utilized compressor packages generate cash flows sufficient to support their
carrying values. Unutilized assets are maintained and evaluated on a regular
basis. Serviceable compressor packages that are currently unutilized are
anticipated to be placed in service in future years as demand increases or as
fully depreciated packages in service are replaced. Sales of compressor packages
have historically been at selling prices in excess of asset cost. Intangible
assets recognized as part of the CSI acquisition include trademark/tradename,
customer relationships, and other intangible assets that are supported primarily
by the estimated future cash flows of our operations. There were no impairments
recorded in 2021. During the year ended December 31, 2020, we recorded
impairments of $15.4 million on certain long-lived assets where the carrying
values exceeded their respective fair values, including non-core used compressor
equipment, the low-horsepower class of our compression fleet, certain classes of
our compression fleet that are under-utilized due to market preferences, and
field inventory for compression and related services. Impairments of our
long-lived assets could occur in the future, particularly in the event of a
significant and sustained deterioration of natural gas production or pricing.

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.

Recently issued accounting pronouncements

For a discussion of new accounting pronouncements that may impact our consolidated financial statements, see Note 2 – “Summary of Significant Accounting Policies, New Accounting Pronouncements” in the Notes to the Consolidated Financial Statements of this Annual Report .

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