USA Compression Partners, LP (USAC): A High-Yield Energy Infrastructure Play in a Rising Commodity Cycle

In a market where energy infrastructure is increasingly seen as a defensive asset, USA Compression Partners, LP (NYSE: USAC) has emerged as a standout player. The company's Q2 2025 results, coupled with its strategic positioning in the natural gas sector, make a compelling case for long-term income investors seeking a high-yield MLP with durable cash flow and growth potential.

Q2 2025: A Catalyst for Confidence

USAC's second-quarter 2025 performance was nothing short of impressive. The partnership reported record revenue of $250.1 million, a $14.8 million increase year-over-year, driven by robust demand in the Permian and Marcellus basins. This growth was underpinned by a 5% rise in average revenue per horsepower to $21.31, reflecting pricing power and operational efficiency.

Equally critical was the company's Distributable Cash Flow (DCF) coverage ratio of 1.40x, which ensures the $0.525 per-unit quarterly distribution (annualized at $2.10) is well-supported. This ratio provides a 40% buffer against potential volatility, a rarity in the MLP space. With DCF of $89.9 million in Q2 2025, USAC reaffirmed its commitment to distribution stability, a key draw for income-focused investors.

Strategic Positioning: A Tailwind for Growth

USAC's dominance in the natural gas compression sector is not accidental. The company operates 3.55 million revenue-generating horsepower, with utilization rates at 94.4%—a testament to its ability to meet surging demand. As U.S. natural gas prices climbed to $3.19/MMBtu in 2025 (up 50% from prior-year levels), USAC's clients—ranging from independent producers to major energy firms—increased their reliance on its services to maintain pipeline pressure and optimize production.

The partnership is also activating a backlog of 40,000 idle horsepower units, with full deployment expected by 2026. This expansion, combined with a shift in capital structure (e.g., the conversion of 100,000 preferred units to common units in June 2025), positions USAC to scale operations without diluting unitholder value.

Defensive Characteristics in a Rising Commodity Cycle

While USAC's yield of 8.98% is attractive, its true strength lies in its defensive profile. The company's $1.6 billion revolving credit facility remains undrawn, with $828.6 million in unused availability, providing liquidity to weather short-term headwinds. Additionally, no debt maturities until December 2026 reduce refinancing risks, a critical factor in a rising interest rate environment.

USAC's geographic diversification further enhances its resilience. Over 60% of its fleet is deployed in the Permian and Gulf Coast, regions poised to benefit from LNG export growth. Meanwhile, its presence in the Northeast aligns with electrification trends, ensuring demand from utilities and data centers.

Why USAC Stands Out for Income Investors

For long-term investors, USAC offers a rare combination of high yield, stable cash flow, and growth potential. Its 1.40x DCF coverage ratio is among the strongest in the MLP sector, reducing the risk of distribution cuts. Meanwhile, its strategic focus on high-growth basins and disciplined capital allocation (2025 capex of $120–140 million) ensures that growth is sustainable.

Analysts project USAC to reach $1.1 billion in revenue and $173 million in EBITDA by 2028, assuming gas prices remain above $3.00/MMBtu. With a current price of $23.38 and a fair value estimate of $26.67, the stock appears undervalued, offering upside for both income and capital appreciation.

Investment Thesis

USA Compression Partners is a defensive high-yield MLP with a clear path to outperform in a rising commodity cycle. Its Q2 2025 results validate its operational strength, while its strategic positioning in key growth regions ensures long-term relevance. For investors seeking a stable income stream with exposure to energy infrastructure, USAC represents a compelling opportunity.

Key Takeaway: Buy USAC for its 8.98% yield, 1.40x DCF coverage, and exposure to a sector poised for sustained demand. Monitor utilization rates and gas prices as critical indicators of future performance.