Investing.com -- S&P Global has revised its outlook for USA Compression Partners L.P. (NYSE: USAC ) to stable from positive, citing slower growth expectations. The ratings firm made this announcement on February 21, 2025, following the company's conservative earnings guidance for the year.

On February 11, 2025, USAC reported its 2025 outlook, which forecasted more modest earnings growth than previously expected. Despite strong fundamentals in natural gas compression demand and recontacting prospects, the company's management projected EBITDA growth of only 2%-4% in 2025. This led S&P Global to adjust its expectations, anticipating that USAC's leverage, as adjusted by S&P Global Ratings, would remain above 4.0x over the next 12 months.

In line with the revised outlook, S&P Global has also affirmed its 'B+' issuer credit rating on USAC and the same 'B+' issue-level rating on the company's senior unsecured debt.

USAC's full-year 2025 EBITDA guidance, as adjusted by S&P Global Ratings, is set between $590 million and $610 million. This is lower than the previous EBITDA expectation of $610 million-$640 million set in August 2024. Despite strong demand for natural gas compression, the company's guidance indicates limited growth potential for pricing on renewed contracts.

The company's leverage is expected to remain between 4.4x and 4.6x in 2025 due to these revised growth expectations and limited prospects for debt repayment. The conversion of remaining preferred shares is uncertain, especially as the stock price has stayed significantly above the conversion price of $20.0115 since the start of 2025. Even if the existing $169 million in preferred units were converted, S&P Global still expects USAC's leverage to remain above 4.0x throughout the fiscal year.

S&P Global also projects that USAC will generate minimal discretionary cash flow in 2025 after accounting for capital expenditure and distributions. The company's distribution policy lacks flexibility, and lower growth investment levels further limit the potential for leverage reduction through EBITDA growth or debt repayment.

The revised stable outlook reflects S&P Global's expectation that USAC will maintain utilization in excess of 90%, resulting in leverage of 4.4x-4.6x in 2025. The firm treats the partnership's preferred units as 100% debt.

S&P Global stated that it could consider a negative rating action if USAC maintains leverage above 5.0x on a sustained basis. This could occur if the partnership’s performance is weaker than current expectations or if it pursues a more aggressive financial policy. Conversely, a positive rating action could be considered if the company is expected to sustain leverage under 4x and maintain utilization above 90%.

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