Good morning, and welcome to USA Compression Partners LP's Third Quarter 2020 Earnings Call. During today's call, all parties will be in a listen only mode. And following the call, the conference will be open for questions. This conference will be recorded today, November 3, 2020. I would now like to turn today's call over to Chris Porter, Vice President, General Counsel and Secretary.
Please go ahead.
Good morning, everyone, and thank you for joining us. This morning, we released our financial results for the quarter ended September 30, 2020. You can find our earnings release as well as a recording of this call in the Investor Relations section of our website at usacompression.com. The recording will be available through November 13, 2020. During this call, our management will discuss certain non GAAP measures.
You will find definitions and reconciliations of these non GAAP measures to the most comparable GAAP measures in the earnings release. As a reminder, our conference call will include forward looking statements. These statements include projections and expectations of our performance and represent our current beliefs. Actual results may differ materially. Please review the statements of risk included in this morning's release and in our SEC filings.
Please note that information provided on this call speaks only in management's views as of today, November 3, and may no longer be accurate at the time of a replay. I'll now turn the call over to Eric Long, President and CEO of USA Compression.
Thank you, Chris. Good morning, everyone, and thanks for joining our call. Also with me is Matt Liuzzi, our CFO. This morning, we released our financial and operational results for the Q3 of 2020, which reflect a fair amount of stability, both operationally and financially. Coming out of the Q2, there was still a good deal of uncertainty in the marketplace.
And as we've managed through the Q3, we are encouraged by the resiliency demonstrated by both the natural gas market as well as USA Compressions business. While we are no means out of the woods just yet, we expect the relatively attractive macro environment for natural gas should continue to support our business as we get through the remainder of the year and into the beginning of 20 21. Over the course of USA Compression's existence, we've experienced multiple cycles. Throughout all of them, we've never changed our primary focus on large horsepower compression used in larger regional infrastructure oriented facilities. As we've come out of each of those previous downturns, the business model has been proven out.
Our customers and the demand driven applications, which our assets serve, with very large amounts of natural gas. These facilities are constantly operating 24 hours a day, 7 days a week, 3 65 days a year and the barriers to exit to demobilize and return our equipment, the cost of which is borne by our customers can be substantial. We believe this creates relative stability in our business, which differentiates USA Compression from other service providers, whether compression, oilfield service providers or even some midstream operators. We continue to deliver Our employees continue to work hard within the current environment to deliver the excellent service that USA Compression has been known for. Despite the challenges that COVID-nineteen has brought to the businesses throughout the country, I am proud of the dedication by our entire team to do their job safely and efficiently.
Turning to the Q3, we saw a modest decrease in revenues distributable cash flow versus the 2nd quarter as we felt the impact of unit returns during the Q2 as well as some continued pricing concessions. Total revenues were $162,000,000 approximately 4% below Q2. Similar to last quarter, we were able to continue to manage the expense side aggressively, resulting in adjusted EBITDA for the 3rd quarter of approximately $104,000,000 representing less than a 2% decrease from Q2. We delivered strong operating margins with adjusted gross margin and adjusted EBITDA margin of 71.1% 64.3%, respectively. These results point to the stability of our business model in times when many others in the energy industry are struggling.
Average utilization throughout the quarter was 83.9%, down as expected from the Q2 level of 88%. As we mentioned in the prior quarter, barring any major events, we expected Q3 would be the trough in terms of utilization and we continue to believe that will be the case at this time. While we did experience some utilization degradation, the rate of equipment returns was much less than what we experienced in the second quarter. As customers continue to evaluate businesses, especially as they headed into the budget season, we saw some units return, which was not unexpected. We ended the Q3 with approximately 3,000,000 active horsepower, which was off a little less than 4% from the end of Q2, while the total fleet remained consistent at about 3,700,000 horsepower.
Just to add a little perspective to this, by comparing it to the end of the Q1 back in March, the utilization is down about 8.5 percentage points, which is similar to what we saw during the 2014 through 2016 downturn. Average pricing across the fleet decreased about 1% during the 3rd quarter, which reflected both unit returns and the continued impact of selective temporary service rate decreases. A good portion of these rate concessions have run their course and in many of these cases pricing has returned to the contractual levels in place before the pandemic and commodity upheaval started in the Q1. Average monthly revenue of $16.62 per horsepower was down slightly from $16.79 in the 2nd quarter. Capital spending continued to moderate during the quarter with growth CapEx of $15,300,000 and maintenance CapEx of $4,700,000 The growth CapEx included delivery of approximately 11,000 new horsepower, all of which was in the mid to large horsepower range.
Maintenance capital was consistent with the prior quarter as we continued to limit spending, awaiting an uptick in activity. For the year, we expect expansion capital spending to total between $90,000,000 $100,000,000 Based on the 3rd quarter results, the Board decided to keep the distribution consistent at $0.525 per unit, which resulted in distributable cash flow coverage ratio of 1 point one two times, which was largely consistent with Q2. Our bank covenant leverage ratio was 4.76 times for the quarter. As we mentioned previously, our Board of Directors determines the quarterly distribution on a quarterly basis and the Board can opt to maintain, reduce or suspend the distribution as it deems most appropriate. Now let's turn to the overall marketplace.
Like to make a few general observations about the energy markets and where we are watching and ultimately how we think it could impact our business going forward. It's hard to believe that just 8 months ago, we were all faced with the unprecedented one two punch of an emerging worldwide pandemic coupled with a crude oil price war. As you'll recall, there were dire predictions of tremendous global and domestic demand destruction, both with regards to crude oil as well as natural gas, which were both predicted to last well into next year. As regions around the world and throughout our country began to close down indefinitely, along with substantially weak commodity prices, it caused a hit to demand, which forced many in our industry to take decisive action. CapEx budgets were slashed, drilling was slowed or stopped and in some cases even existing production was curtailed.
It is remarkable when you look back at how quickly we found the bottom of commodity prices as well as a relative speed with which crude natural gas prices rebounded and ultimately stabilized. Crude oil traded at an average price of about $40 per barrel during the Q3. Natural gas spot prices average about $2 per MMBtu and the 12 month forward NYMEX strip now averages over $3 per MMBtu. Part of the reason for the rebound and subsequent stability is due to the more positive demand outlook today than we experienced back in March April. Overall, the expectations for demand destruction in 2020 have been meaningfully reduced, driven by the reopening of economies and the growing economic activity.
The EIA in a recent report estimates total U. The stability of USA Compression's business model is driven by the resiliency of demand for natural gas in this country, and that resiliency is contributing to our operational and financial results through the 1st 9 months of this year. While USA Compression's demand is natural gas driven, we have been impacted somewhat by reduced oil drilling and production activities predominantly in the Mid Continent and Permian and Delaware Basin regions where associated gas production has been impacted. However, there are signs that could point to improving the longer term oil fundamentals and an improving oil market will help support associated gas production, which is positive for our business. One important facet of the oil industry that is often overlooked in this regard has to do with the global inventory levels and the ever changing crude oil inventory dynamics.
Let me spend a minute and share a few statistics with you. First, the U. S. Is one of 37 OECD countries, not quite 3% of the total, yet our oil storage is estimated to comprise 45% of the total. So what goes on in the U.
S. Is what tends to drive global inventories. Next, OECD North America and OECD Pacific comprise approximately 2 thirds of global storage. So the demand in China and the U. S.
Are the 2 dominant markets driving inventories. With the economy in China already picking up, demand has as well. 3rd, and this is hard to believe, but number 1, U. S. Crude oil storage, including the Strategic Petroleum Reserve, is within spitting distance of the 5 year average.
2, U. S. Gasoline stocks are already at year ago pre COVID and normal levels. And 3, U. S.
Jet fuel inventories are now below a year ago and back to their normal 5 year average. Finally, the oil futures market now has open interest over 30 times the world demand, which appears to be trading lockstep with COVID news. The lockdown measures in Europe over the past weekend set crude prices tumbling. The trading in paper barrels somewhat disconnects from the fundamentals of the physical market, driven in no small part by market psychology. So remember, barely 6 months ago, headlines were focused on domestic oil storage overflowing and now inventories are back at fairly normalized levels.
So now that we've apparently worked off some of the excess inventory, what happens going forward? Well, using the IEA Q4 demand projections and assuming that OPEC production remains at a similar level during the last 2 months of the year, the implied global oil inventory draw could approach 5,000,000 barrels a day. That would equate to over 400,000,000 barrels for the quarter. Those are dramatic numbers and could have meaningful implications for the overall oil market. What's more, apart from the projected Q4 inventory decline being multiple times larger than the 5 year average, is that if this Q4 demand figure holds up during the quarter, it could work off the remaining excess stockpile build from the 2nd quarter with all of the COVID induced demand reduction.
No, we're not out of the woods yet. The pace of the demand recovery is still critical for recovery in the energy sector. But there have only been 4 instances in the last 36 years when inventories didn't decline in the final quarter of the year. And even if the IEA demand forecast completely misses the mark, we expect to see a meaningful inventory decline, a major step forward for the sector. So what I see coming up is that supply and demand fundamentals appear to be coming into equilibrium and setting up a much improved scenario in the future.
For the past several quarters, most in the industry have maintained capital discipline as we all wanted to see what the rest of the year would bring post the COVID induced slowdown. You're seeing some very modest uptick in rig counts, currently around 280 total onshore rigs, down more than 75% from recent peak levels. Oil rigs have seen a greater percentage decrease, while gas rigs are down, but less severely. We expect to see this decreased level of rig activity to continue for some time with continued scarcity of capital for E and P Companies. This will coincide with the continuing decline of shale well production curves.
When coupled with both crude oil storage and natural gas demand statistics I previously cited, the production side of the equation may cause for a tight supply demand balance as we get to the end of 2020 and into 2021. In fact, with the regional curtailments and CapEx reductions, there is a sense that the U. S. Could find itself in an undersupplied natural gas situation in 2021 and certainly the natural gas futures prices would indicate as such recently getting up to the near $3.50 per MMBtu area for certain near term months in 2021. As it always does, the market will balance itself out and higher prices will spur additional production.
The more gas is moving around the country, the more compression you will need. As I mentioned earlier, capital budgets, both the USA Compression and throughout the broader energy industry remain very much in focus, and we expect this will continue to be the case as everyone works through their 2021 budgets. This has already impacted and we believe will continue to impact production growth, which will also highlight the nature of production curves in shale wells. After the flush production of the initial years, these wells will move into more of a steady state environment as the curves Assuming the Assuming the CapEx moderation and discipline we witnessed the last few quarters hold, we expect to see a higher proportion of overall production in that flat steady state part of the curve where decline has meaningfully slowed. As I've noted, this is a favorable situation for USA Compression because our business is focused on the infrastructure applications that support these steady state operations.
As the wells age, the natural gas volumes exhibit a very stable profile. Remember, as long as gas is being produced and moved throughout the system, pipelines, processing plants, etcetera, compression is required. Another critical dynamic in our business is a relationship between compression horsepower and declining reservoir pressure. As pressures decline, to move the same volume of gas requires an exponential increase in compression horsepower. We expect to continue to witness this dynamic, especially as new well drilling activity is substantially reduced in the coming years.
In this instance, compression stays around for a long time and requires more effort, I. E. Horsepower to move that gas. So in all types of applications, even though gas volumes may be declining, the compression required may actually increase as pressures also decline. The dynamics I've mentioned above, along with relatively resilient demand have historically made large horsepower compression a less volatile business.
The business model that USA Compression is based on is a business model that can easily adapt to current markets, one that doesn't require multiyear capital projects and commitments, it is one that is able to move between growth mode and stability mode with relative ease. When required, we grow with our customers. During periods of reduced activity and even production declines, our large horsepower customers. In terms of customer behavior on a whole, our customers continue to take a cautious approach to the remainder of 2020. Both quote activity as well as unit deployment has picked up during the quarter as well as conversations regarding 2021 compression needs.
As we've seen in the past, given the infrastructure nature of the large horsepower equipment, our customers place a lot of value on the reliability and customer service we provide. But as I mentioned, we are all in the middle of budget and so there is naturally some uncertainty out there that will get worked through over the next few months. Our geographic diversity has been an advantage in this time of somewhat disconnected energy markets. Through our customers, we have exposure to different producing regions and depending on the customer, varying motivations are driving different behaviors. We have seen the trajectory of returning underutilized assets experienced in Q2 and early Q3 decrease significantly.
Our customers have moderated their drilling, completion and development activities following the market dynamics earlier in the year. And while there remains a fair amount of uncertainty out there, the stability in the marketplace of late combined with the continued strong demand has a lot of people working to figure out how to meet that demand in 2021. The vast majority of our assets serve either dry gas activities and natural gas handling activities, such as those connected to gas processing plants or large volume centralized gas lift applications beyond the flush production stage and in the stable shallow decline steady state mode. With the geographical diversity of our asset base, we have exposure to different producing regions and as such, have a balance throughout the fleet. Events in one particular area, like associated gas declines in the Permian and Delaware basins, while they affect us, have been partially offset by increased activity in other regions like Appalachia and Haynesville.
Our contract structure and portfolio continue to benefit the business and enhance its stability. While historically, we would typically have between 40% 50% of our assets on a month to month basis, we have brought that number down meaningfully, and we are currently below 30%, reducing our month to month exposure significantly. While we are no means out of the woods, things certainly feel better than 3 months ago when we last communicated with all of you. As I've discussed, the slowing level of unit returns combined with some steady recent redeployment activity gives us a bit of cautious optimism. We have taken the necessary actions with regards to cost cutting and capital spending to weather the storm and expect to see an eventual recovery, although the exact timing and extent is difficult to predict.
We have purposely focused on large horsepower, multiunit, centralized compressor stations over the recent years, which applications serve that resilient natural gas demand discussed earlier. We expect that demand to continue as it has proven the last several months and as the physics of natural gas production kick in, we expect to see aging wells and declining reservoir pressures, all of which is beneficial for our compression services business. I will now turn the call over to Matt to walk through some of the financial highlights of the quarter. Matt?
Thanks, Eric, and good morning, everyone. Today USA Compression reported 3rd quarter results, including quarterly revenue of $162,000,000 adjusted EBITDA of $104,000,000 and DCF to limited partners of $57,000,000 I would note during the quarter we had approximately $5,000,000 of non recurring benefits primarily certain tax refunds from previous periods which positively impacted adjusted gross margin and adjusted EBITDA. In October, we announced a cash distribution to our unitholders of $0.525 per LP common unit consistent with the previous quarter, which resulted in coverage of 1.12 times. Our total fleet horsepower at the end of the quarter was largely consistent with where we ended the 2nd quarter at approximately 3,700,000 horsepower. Our revenue generating horsepower at period end decreased approximately 4% to a little over 3,000,000 horsepower, reflecting the impact of the return of units, although as Eric mentioned, the rate of units returned has considerably slowed since Q2.
Our average horsepower utilization for the Q3 was 83.9%, about 4% down from the end of Q2. Pricing as measured by average revenue per revenue generating horsepower per month was $16.62 for Q3, which was a slight decrease from the previous quarter's level of $16.79 Of the total revenue for the Q3 of $162,000,000 approximately $160,000,000 reflected our core contract operations revenues, while parts and service revenue was about $2,000,000 Adjusted gross margin as a percentage of revenue was 71.1 percent in Q3 helped in part by those non recurring benefits already mentioned. Net income for the quarter was $6,500,000 and operating income was $38,800,000 Net cash provided by operating activities was $48,200,000 in the quarter. Maintenance capital totaled $4,700,000 in the quarter. And last cash interest expense net was $29,800,000 As it regards full year guidance for 2020, we're increasing the midpoint for adjusted EBITDA due to the non recurring benefits mentioned earlier.
We currently expect 2020 adjusted EBITDA between $405,000,000 $415,000,000 and DCF between $210,000,000 $220,000,000 Last, we expect to file our Form 10 Q with the SEC as early as this afternoon. And with that, we'll open the call to questions.
Thank Our first question will be from Jeremy Tonet from JPMorgan.
Hi, good morning guys. I just wanted to quickly touch upon capital allocation here. Just thinking about DCF this year, keeping it stable for next year, its coverage being almost stable here. I just want to understand given a shift in how the view has changed at the parent level ET distribution outlook, Want to understand how you guys think about cutting down distribution or if any potential for asset sales to deliver quickly Or what do you think is the comfortable leverage position here? How should we think about capital allocation?
Sure. It's Matt. I'll jump in first. I think, first of all, to address the question about ET, obviously we are a separate company with a separate Board. And so decisions that are made at the ET level, obviously, our board looks at our business and we'll make those decisions appropriately.
So I don't know that I would connect the 2 in any way shape or form. Our Board will make those distribution decisions kind of in due course every quarter like they always have. But in terms of capital allocation, leverage wise, we've always obviously pointed towards a desire to lower leverage, work on the leverage over time. Obviously, we were headed in the right direction before the March of this year happened and we took some actions to make sure we didn't run into any trouble. But there's really I don't think there's any difference in our view of over time working down leverage.
So I think just with the events of the last couple of quarters, it's obviously going to take a little bit longer. But I think as we talk about capital spending and new unit delivery, obviously, the new unit delivery this quarter was down significantly from earlier in the year. We kind of locked in a bunch of stuff earlier in the year. We spent the money that was committed for this quarter, but significantly decreased from earlier in the year. And then I think in the Q4, you'll see a continued much, much lower spending level.
So we haven't given out anything in terms of spending for next year, but I think right now we're sort of in a stability mode and I'd be surprised if the capital spending on new units next year is anything super meaningful or significant. So I think with that without a whole lot of new unit spending, we'll continue to assuming that distribution stays where it is, you'll continue to chip away at that leverage over time because we obviously won't be borrowing as much as we have in the past to fund those new units.
Got it. Thanks. So is it fair to assume you guys are comfortable with this leverage and you're okay to go it slow versus then cut down distribution for accelerating it or that's the way to think about it?
Yes. I think when we look at it, when we've been through this before, we saw it back in 2014, 2015, 2016, where I think a lot of folks looked at it and said, your revenues are going to be cut in half and your cash flow is going to be cut in half. And in our view is obviously the business is probably a lot more stable than a lot of people give us credit for. So, obviously, the Board makes that distribution decision every quarter. And so we look at the results every quarter and you can see even this quarter, I think we were probably a little bit ahead of what most people expected.
So I think the stability as long as the stability continues and we see in the future an ability to kind of chip away at that leverage, I don't know that we see a burning need to either sell assets or do something with the distribution. But like Eric said, the timing and sort of duration of sort of the recovery is, I think, uncertain for all of us these days. And so I think our view is we'll take it one day at a time, 1 quarter at a time and we'll cross those bridges if we get to a point where we think it's unsustainable. But for right now, we've been I think we've been pretty pleased with how the business has held up and how we've been able to manage through the last couple of quarters.
Got it. Thanks, Matt. That's very helpful. Just wanted to quickly touch upon ESG side. I mean, there's a lot of noise about in the markets right now.
And some of the large midstream names have already talked about electrification of compressor fleet there and reducing emissions. I just want to understand if you guys have thought of any opportunity set for USAC here?
Yes, this is Eric. And obviously, having one of the newest fleets in the industry, one of the most emissions efficient fleet, kind of gives us a competitive leg up. There are lots of things that we're exploring and looking at, and maybe a fair way to say it is, it's premature for us to comment, but ESG is front and foremost on our radar screen and something that you'll hear more from us in the future going forward.
Got it. That's it for me. Thanks.
Thank you.
Our next question
will be from TJ Schultz with RBC Capital Markets.
Hey guys, good morning. So on utilization, if that bottomed this last quarter and as you redeploy assets back into the field, is your mix shifting anymore to gas directed basins or if you can just speak a bit more geographically where you see some more opportunities? And then on the cost side, I understand maybe new unit orders probably are fairly limited. But are there more maintenance capital costs or OpEx we need to consider to bring back some of those idle units? Thanks.
Yes, T. J, let me touch on kind of what we're seeing with Basal activity, and then Matt can chat a little bit about some of the other goodies there. It's fair to say that the dry gas areas, the Haynesville and Appalachia in particular, we're seeing a lot of incremental demand increases. We've seen softness in the Mid Continent in particular, kind of the SCOOPSTACK merge area has been hit pretty hard with reductions in rig count, completion activity and development of the DUCs. The Permian in Delaware has slowed down, but it hasn't completely stopped.
And with increasing GORs and more importantly, I think with some potential new takeaway capacity that's coming on stream here very, very quickly. Basis differential will start to improve in the Permian on the associated gas side and we'll start to see some tick up in activity there. So I don't think you'll see an environment where USA Wholesale relocates 100 of 1000 of horsepower out of 1 basin into another. I think a fair way to say is that as activity has bottomed, activity starts to tick up. The combination of stability and the decline curves, if new activity moderates and the ever decreasing pressures, we'll have just a natural increase in requirements for compression horsepower.
So probably the best way to say a TJ is rather than build new horsepower, we'll work off excess idle capacity out of our fleet, very similar to what we and our peers did back in the 2014, 2015, 2016 range. And even in prior periods as a private company, which we have done in the past. So I don't see wholesale relocation of equipment, but what I do see is the ability to meet improving demand and improving requirements out of our existing base fleet horsepower that has become idled over the course of the last few quarters.
And hey, TJ, it's Matt. On the capital spending question, I think you're sort of on the right track in terms of new unit deliveries for the Q4. Right now, we have 3 of the large units scheduled for delivery during the quarter. So that's a total of 7,500 horsepower and that is it. And so I think what you will see, not that maintenance capital is really going to bump up, but what you'll see towards the end of this year, but then as we think about next year is we'll have more growth capital, but spent on not more growth capital than this year, but a higher proportion of the growth capital will be spent on what we would call reconfigurations, which is kind of altering a unit to put it into service in a different area, in a different application, etcetera.
So yes, you're going to see I think the balance flip from new units, majority of new unit capital to the majority of it being this reconfiguration capital. And again, that's to Eric's point of putting these units back out and extending the life of them in a maybe in a different area. So, yes, you will see that trend, I think, continue.
Okay, makes sense. That's all I had. I appreciate it guys.
Okay. Thanks, TJ.
Thanks, TJ.
Thank you. Our next question will be from Shneur Gershuni from UBS.
Hi, everyone. This is Brian Reynolds on for Shneur. Just following up on the previous capital allocation question. Is there an updated long term view for leverage? Is it 4 times?
Or is it kind of, as you said, a quarter by quarter basis?
Yes, Brian, it's Matt. I don't know that there's a I don't know that we've changed our view on it. We've always said kind of we would like to trend down towards something in the low 4s to 4 range. And so I just think the timing of it's gotten pushed out a little bit obviously. And so that's why we made the took the amendment to the credit facility earlier in the summer just to kind of give us a little bit of cushion as we continue to work down towards that level.
But really that just allowed us a little bit of time cushion. It doesn't I don't think it should be interpreted as changing our view of where we want to ultimately probably what I'd say, probably nothing more specific than that. Okay. And then just probably what I'd say, probably nothing more specific than that.
Great. Thanks. And as a quick follow on, just given ETS' recent distribution cut, has the long term view and its ownership in USAC changed at all? Kind of in other words, would a distribution cut support USAC's equity value in the event that they would look like to divest the USAC units to support deleveraging? Just kind of any color around that would be helpful.
No. I don't think their view has changed. They will tell you that they're content with the investment. I think they've obviously have a sense of value that they associate with the investment. And I would say probably given where the markets been bouncing around the last several quarters, it's probably not quite there.
But they've been they're happy with the investment. But I think like everything they've said, look, this is not a long term holding for them. So but I think for there, it's going to come down to value, transaction structure, etcetera, in terms of whether they do anything. But I don't think they're in any rush to I don't think that has changed their view on their ultimate timing and I don't think they're in any rush to get rid of it just yet.
Great, thanks. And if I could just have one quick follow-up on pricing. How should we think about that kind of going forward? Typically, rig pricing lags, rig count by a few months. Just given the dramatic drop off in March from OPEC and COVID, should we assume that the price bottom is in at this point?
Or should we kind of see that in early 2021 given rig count bottoms in August?
Yes, Brian, it's right now it's interesting and obviously we've got the 2 kind of the two parts of the business, the small horsepower and the large horsepower. Interestingly, the large on the really large stuff, the 3,600 series, we do not have many of those units laying around. And I don't think others who do what we do have much laying around either. And so I think for those large horsepower units that we've all kind of been investing in, we have not any real degradation in the pricing. I think we found the top over the last couple of years.
And so I wouldn't expect it to go up a bunch, but in terms of that large, large horsepower class, I think it's probably likely to stay stable. The middle, what I would say is that the 3,500 class, that's about a 1300, 1400 horsepower unit. That's where, I think overall the industry, there's a higher number of those units out there in the industry and there's probably a higher number of units that came home over the last couple of quarters. So, I think that has that part of it. Again, units weren't really you didn't have tons and tons of units going out over the last couple of quarters.
That has started up again. And so in terms of the pricing, it's a little hard to look at it and base it on what you've seen in the last couple of quarters because we hadn't had tons of new stuff get signed. But stuff is getting signed and again we've been I think like in past the past downturn most recently 14 through 16, we didn't we purposely didn't chase uneconomic deals. And so while we had competitors that were out there maybe putting stuff out at relatively lower prices, we were happy to kind of sit back a little bit and wait for the market to tighten up and then put our stuff out. So I don't think you're going to see anything different out of us this year because again you it just in our view we look at Eric mentioned kind of the macro gas market and the futures prices and in some of the activity on the gas side, which I think is all pretty positive.
So again, if you told me I had to take a deal this quarter or wait a couple of quarters and get something that was 10%, fifteen percent higher, I think I'd rather wait. So I think we're going to be try to be as disciplined as we possibly can be in terms of reading the demand that's out there so that we can get economic attractive prices on those units when we do put them out. But I think you'll have I mean you saw our pricing went down just a little bit over the quarter over quarter. I think you'll probably see I mean, I don't want to give specific guidance on pricing for the quarter, but I think you're going to see probably similar type feel in the Q4 as we had in the Q3. And then I think next year sort of hopefully a new ballgame, but obviously we'll give you some more color as the quarter goes through.
Great. Thanks for all the info. Have a great day guys.
Thanks, Brian.
Thank you. I'm showing no further questions at this time. I'd like to turn it back over to our speakers for closing comments.
Thanks, Gary. I think it's fair to say that Q3 came in better than many expected, especially 6 months ago when the world was turned upside down. We previously said that we expected to see the impact of commodity price volatility and the global pandemic really show up during the second half of this year. And while that was true in Q3, I think the commodity rebound has taken place more quickly than many had expected. While there is still a fair amount of uncertainty on the extent and duration of the current cycle, we are encouraged by how things have settled down as well as the encouraging signs we begin to see from our customers.
We have not changed how we approach the business or the present uncertainty. This business is a business built on natural gas demand, whose long term importance to this country and the world we continue to be optimistic about. We believe the underlying stability of our large horsepower infrastructure focused contract compression services business model and the science behind the need for compression and the interplay between pressures and volumes will be a key point of positive differentiation for USA Compression. We have continued to focus on what we can influence, a strong focus on cost, restraining spending and making sure our customers are receiving the excellent customer service they have come to know from USA Compression. Thanks for joining us, and please be safe.
We look forward to speaking with everyone on our next call.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.