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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on May 9, 2012

Registration No. 333-174803

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 5
to

Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

USA COMPRESSION PARTNERS, LP
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  4922
(Primary Standard Industrial
Classification Code Number)
  75-2771546
(I.R.S. Employer
Identification Number)

100 Congress Avenue, Suite 450
Austin, Texas 78701
(512) 473-2662

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

J. Gregory Holloway
Vice President, General Counsel and Secretary
100 Congress Avenue, Suite 450
Austin, Texas 78701
(512) 473-2662

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Sean T. Wheeler
Keith Benson

Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
(713) 546-5400

 

Mike Rosenwasser
E. Ramey Layne

Vinson & Elkins L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 237-0000

        Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

        If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

        If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated May 9, 2012


PROSPECTUS

LOGO

USA Compression Partners, LP

Common Units

Representing Limited Partner Interests

        This is the initial public offering of our common units. We are offering            common units in this offering. No public market currently exists for our common units. We currently estimate that the initial public offering price will be between $            and $            per common unit. Our common units have been approved for listing (subject to official notice of issuance) on the New York Stock Exchange under the symbol "USAC".

        Investing in our common units involves risks. Please read "Risk Factors" beginning on page 23 of this prospectus.

        These risks include the following:

    We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to pay our minimum quarterly distributions to holders of our common units and subordinated units.

    A long-term reduction in the demand for or production of natural gas or crude oil in the locations where we operate could adversely affect the demand for our services or the prices we charge for our services, which could result in a decrease in our revenues and cash available for distribution to our unitholders.

    We have several key customers. The loss of any of these customers would result in a decrease in our revenues and cash available for distribution to our unitholders.

    Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors.

    Our general partner and its affiliates have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of us and our common unitholders.

    Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service were to treat us as a corporation for federal income tax purposes, then our cash available for distribution to our unitholders would be substantially reduced.

    Our unitholders' share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.

        We are an "emerging growth company" within the meaning of the federal securities laws and will be eligible for reduced reporting requirements.

       
 
 
  Per Common Unit
  Total
 

Public Offering Price

  $             $          
 

Underwriting Discounts and Commissions

  $             $          
 

Proceeds to USA Compression Partners, LP (before expenses)

  $             $          

 

        We have granted the underwriters a 30-day option to purchase up to an additional            common units on the same terms and conditions as set forth above if the underwriters sell more than             common units in this offering.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the common units on or about            , 2012.

Barclays Capital   Goldman, Sachs & Co.

                    , 2012


Table of Contents

        [GRAPHIC]


Table of Contents

TABLE OF CONTENTS

 
  Page  

Summary

    1  
   

Overview

    1  
   

Natural Gas Compression Fundamentals

    3  
   

Business Strategies

    3  
   

Competitive Strengths

    4  
 

Our Relationship with Riverstone

    6  
 

Risk Factors

    7  
 

Partnership Structure and Offering-Related Transactions

    8  
 

Organizational Structure After the Offering

    9  
 

Our Management

    10  
 

Principal Executive Offices and Internet Address

    10  
 

Summary of Conflicts of Interest and Fiduciary Duties

    10  
 

Implications of Being an Emerging Growth Company

    11  
 

The Offering

    12  
 

Summary Historical and Pro Forma Financial and Operating Data

    17  
 

Non-GAAP Financial Measures

    20  

Risk Factors

   
23
 
   

Risks Related to Our Business

    23  
   

Risks Inherent in an Investment in Us

    33  
   

Tax Risks to Common Unitholders

    41  

Use of Proceeds

   
46
 

Capitalization

   
47
 

Dilution

   
48
 

Our Cash Distribution Policy and Restrictions on Distributions

   
49
 
   

General

    49  
   

Our Minimum Quarterly Distribution

    50  
   

Pro Forma Cash Available for Distribution for the Twelve Months Ended December 31, 2011 and March 31, 2012

    52  
   

Estimated Cash Available for Distribution for the Twelve Months Ending March 31, 2013

    54  
   

Assumptions and Considerations

    57  

Provisions of our Partnership Agreement Relating to Cash Distributions

   
61
 
   

Distributions of Available Cash

    61  
   

Operating Surplus and Capital Surplus

    62  
   

Capital Expenditures

    64  
   

Subordination Period

    65  
   

Distributions of Available Cash From Operating Surplus During the Subordination Period

    66  
   

Distributions of Available Cash From Operating Surplus After the Subordination Period

    67  
   

General Partner Interest and Incentive Distribution Rights

    67  
   

Percentage Allocations of Available Cash From Operating Surplus

    68  
   

General Partner's Right to Reset Incentive Distribution Levels

    68  
   

Distributions From Capital Surplus

    71  
   

Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

    71  
   

Distributions of Cash Upon Liquidation

    72  

Selected Historical and Pro Forma Financial and Operating Data

   
74
 

Management's Discussion and Analysis of Financial Condition and Results of Operations

   
79
 
   

Overview

    79  
   

General Trends and Outlook

    79  
   

Factors That Affect Our Future Results

    80  
   

How We Evaluate Our Operations

    81  

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Table of Contents

 
  Page  
   

Accounting Terminology and Principals

    83  
   

Operating Highlights

    84  
   

Financial Results of Operations

    88  
   

Effects of Inflation

    94  
   

Liquidity and Capital Resources

    94  
   

Off Balance Sheet Arrangements

    98  
   

Critical Accounting Policies and Estimates

    98  
   

Recent Accounting Pronouncements

    100  

Natural Gas Compression Industry

   
101
 

Business

   
103
 
   

Overview

    103  
   

Business Strategies

    104  
   

Competitive Strengths

    105  
   

Our Operations

    106  

Management of USA Compression Partners, LP

   
115
 
   

Directors and Executive Officers

    116  
   

Reimbursement of Expenses of Our General Partner

    118  
   

Executive Compensation

    118  
   

Summary Compensation Table

    119  
   

Outstanding Equity Awards at December 31, 2011

    123  
   

Severance and Change in Control Arrangements

    123  
   

Director Compensation

    125  
   

2012 Long-Term Incentive Plan

    125  

Security Ownership of Certain Beneficial Owners and Management

   
128
 

Certain Relationships and Related Party Transactions

   
129
 
   

Distributions and Payments to Our General Partner and its Affiliates

    129  
   

Agreements Governing the Transactions

    130  
   

Relationship with Penn Virginia Resource Partners

    130  
   

Procedures for Review, Approval and Ratification of Related-Person Transactions

    131  

Conflicts of Interest and Fiduciary Duties

   
132
 
   

Conflicts of Interest

    132  
   

Fiduciary Duties

    137  

Description of the Common Units

   
140
 
   

The Units

    140  
   

Transfer Agent and Registrar

    140  
   

Transfer of Common Units

    140  

The Partnership Agreement

   
142
 
   

Organization and Duration

    142  
   

Purpose

    142  
   

Cash Distributions

    142  
   

Capital Contributions

    142  
   

Voting Rights

    143  
   

Applicable Law; Forum, Venue and Jurisdiction

    144  
   

Limited Liability

    145  
   

Issuance of Additional Partnership Interests

    146  
   

Amendment of the Partnership Agreement

    146  
   

Merger, Consolidation, Conversion, Sale or Other Disposition of Assets

    148  
   

Dissolution

    149  
   

Liquidation and Distribution of Proceeds

    150  
   

Withdrawal or Removal of Our General Partner

    150  
   

Registration Rights

    151  

ii


Table of Contents

 
  Page  
   

Transfer of General Partner Interest

    152  
   

Transfer of Ownership Interests in the General Partner

    152  
   

Change of Management Provisions

    152  
   

Limited Call Right

    152  
   

Non-Citizen Assignees; Redemption

    153  
   

Meetings; Voting

    153  
   

Status as Limited Partner

    154  
   

Indemnification

    154  
   

Reimbursement of Expenses

    154  
   

Books and Reports

    154  
   

Right to Inspect Our Books and Records

    155  

Units Eligible for Future Sale

   
156
 

Material Federal Income Tax Consequences

   
157
 
   

Partnership Status

    157  
   

Limited Partner Status

    159  
   

Tax Consequences of Unit Ownership

    159  
   

Tax Treatment of Operations

    166  
   

Disposition of Common Units

    167  
   

Uniformity of Units

    169  
   

Tax-Exempt Organizations and Other Investors

    170  
   

Administrative Matters

    171  
   

Recent Legislative Developments

    173  
   

State, Local, Foreign and Other Tax Considerations

    173  

Investment in USA Compression Partners, LP by Employee Benefit Plans

   
175
 

Underwriting

   
177
 

Validity of the Common Units

   
183
 

Experts

   
183
 

Where You Can Find More Information

   
183
 

Forward-Looking Statements

   
183
 

Index to Financial Statements

   
F-1
 

Appendix A—Form of Partnership Agreement

       

Appendix B—Glossary of Terms

       

        You should rely only on the information contained in this prospectus, any free writing prospectus prepared by or on behalf of us or any other information to which we have referred you in connection with this offering. We have not, and the underwriters have not, authorized any other person to provide you with information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of common units means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy the common units in any circumstances under which the offer or solicitation is unlawful.

        Until                        , 2012 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common units, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

iii


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SUMMARY

        This summary provides a brief overview of information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common units. You should read the entire prospectus carefully, including the historical and pro forma financial statements and the notes to those financial statements included in this prospectus. Unless indicated otherwise, the information presented in this prospectus assumes an initial public offering price of $           per common unit and that the underwriters' option to purchase additional common units is not exercised. You should read "Risk Factors" for more information about important risks that you should consider carefully before buying our common units. We include a glossary of some of the terms used in this prospectus as Appendix B.

        References in this prospectus to "USA Compression," "we," "our," "us," "the Partnership" or like terms refer to USA Compression Partners, LP and its wholly owned subsidiaries, including USA Compression Partners, LLC ("USAC Operating"). References to "USA Compression Holdings" refer to USA Compression Holdings, LLC, the owner of USA Compression GP, LLC, our general partner. References to "Riverstone" refer to Riverstone/Carlyle Global Energy and Power Fund IV, L.P., and affiliated entities, including Riverstone Holdings LLC.


Overview

        We are a growth-oriented Delaware limited partnership and, based on management's significant experience in the industry, we believe we are one of the largest independent providers of compression services in the U.S. in terms of total compression unit horsepower. As of March 31, 2012, we had 774,514 horsepower in our fleet and 123,842 horsepower on order for delivery by September 30, 2012, of which 92,671 horsepower on order was committed under customer contracts. In May 2012, we ordered 27,611 of additional new compression horsepower which is expected to be delivered between October 2012 and December 2012. We employ a customer-focused business philosophy in partnering with our diverse customer base, which is comprised of producers, processors, gatherers and transporters of natural gas. Natural gas compression, a mechanical process whereby natural gas is compressed to a smaller volume resulting in a higher pressure, is an essential part of the production and transportation of natural gas. As part of our services, we engineer, design, operate, service and repair our compression units and maintain related support inventory and equipment. The compression units in our modern fleet are designed to be easily adaptable to fit our customers' dynamic compression requirements. By focusing on the needs of our customers and by providing them with reliable and flexible compression services, we are able to develop long-term relationships, which lead to more stable cash flows for our unitholders. From 2003 through the first quarter of 2012, our average horsepower utilization was over 90%. We have been providing compression services since 1998.

        We focus primarily on large-horsepower infrastructure applications. As of March 31, 2012, we estimate that over 90% of our revenue generating horsepower was deployed in large-volume gathering systems, processing facilities and transportation applications. We utilize a modern fleet, with an average age of our compression units of approximately five years. Our standard new-build compression unit is generally configured for multiple compression stages, allowing us to operate our units across a broad range of operating conditions. This flexibility allows us to enter into longer-term contracts and reduces the redeployment risk of our horsepower in the field. Our modern and standardized fleet, decentralized field-level operating structure and technical proficiency in predictive and preventive maintenance and overhaul operations have enabled us to achieve average service run times consistently above the levels required by our customers.

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        The following table provides a summary of our compression units by horsepower as of March 31, 2012 (including additional new compression unit horsepower on order for delivery between April 2012 and September 2012):

Unit Horsepower
  Fleet
Horsepower
  Horsepower
on Order(1)
  Total
Horsepower(2)
  Percentage
of Total
Horsepower
 

<500

    140,524     3,790     144,314     16.1 %

>500 <1,000

    106,944     9,830     116,774     13.0 %

>1,000

    527,046     110,222     637,268     70.9 %
                   

Total

    774,514     123,842     898,356     100.0 %
                   

(1)
89,964 of this horsepower is expected to be delivered between April 2012 and June 2012, and 33,878 of this horsepower is expected to be delivered between July 2012 and September 2012. In May 2012, we ordered 27,611 of additional new compression horsepower which is expected to be delivered between October 2012 and December 2012.

(2)
Comprised of 1,164 compression units, including 97 new compression units on order.

        We generally provide compression services to our customers under long-term, fixed-fee contracts, with initial contract terms of up to five years. We typically continue to provide compression services to our customers beyond their initial contract terms, either through contract renewals or on a month-to-month basis. Our customers are typically required to pay our monthly fee even during periods of limited or disrupted natural gas flows, which enhances the stability and predictability of our cash flows. We are not directly exposed to natural gas price risk because we do not take title to the natural gas we compress and because the natural gas used as fuel by our compression units is supplied by our customers without cost to us.

        We provide compression services primarily in shale plays, including the Fayetteville, Marcellus, Woodford, Barnett, Eagle Ford and Haynesville shales. We believe compression services for shale production will increase in the future. According to the Annual Energy Outlook 2012 Early Release Overview prepared by the U.S. Energy Information Administration, or EIA, natural gas production from shale formations will increase from 23% of total U.S. natural gas production in 2010 to 49% of total U.S. natural gas production in 2035. Not only are the production and transportation volumes in these and other shale plays increasing, but the geological and reservoir characteristics of these shales are also particularly attractive for compression services. The changes in production volume and pressure of shale plays over time result in a wider range of compression requirements than in conventional basins. We believe we are well-positioned to meet these changing operating conditions as a result of the flexibility of our compression units. While our business focus is largely compression serving shale plays, we also provide compression services in more mature conventional basins. These conventional basins require increasing amounts of compression as they age and pressures decline, which we believe will provide an additional source of stable and growing cash flows for our unitholders.

        For the year ended December 31, 2011, our business generated revenues, net income and net income before interest, taxes, depreciation and amortization, and certain other adjustments, or Adjusted EBITDA, of $98.7 million, $0.1 million and $51.3 million, respectively. For the three months ended March 31, 2012, our business generated revenues, net income and Adjusted EBITDA of $27.1 million, $1.2 million and $14.3 million, respectively. Please read "—Non-GAAP Financial Measures" for an explanation of Adjusted EBITDA, which is a non-GAAP financial measure, and a reconciliation of Adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles, or GAAP.

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Natural Gas Compression Fundamentals

        Demand for our compression services is directly linked to the production and consumption of natural gas. We believe we will be able to build our business organically by capitalizing on the following positive long-term fundamentals for the domestic natural gas compression services industry:

    Natural gas is a critical component of energy supply in the U.S., accounting for approximately 25% of all energy used in the U.S. in 2010, according to the EIA Annual Energy Outlook 2012 Early Release Overview.

    The EIA forecasts in its Annual Energy Outlook 2012 Early Release Overview that natural gas consumption in the U.S. will increase approximately 10% from 2010 to 2035.

    New sources of natural gas are necessary not only to accommodate this increase in demand, but also to offset an established trend of declining production from maturing and aging basins that historically dominated U.S. natural gas production.

    The EIA estimates that natural gas production from shale formations will increase from 23% of total U.S. natural gas production in 2010 to 49% of total U.S. natural gas production in 2035.

    Due to the production profile of wells in these shale formations, producers are generally able to continue to produce natural gas economically across varying commodity price environments.

    Natural gas producers, processors, gatherers and transporters have continued to outsource some or all of their natural gas compression requirements.

    Outsourced compression services enable our customers to meet their changing compression needs more efficiently over time while limiting their capital investments in compression equipment and the cost of specialized employees.


Business Strategies

        Our principal business objective is to increase the quarterly cash distributions that we pay to our unitholders over time while ensuring the ongoing stability and growth of our business. We expect to achieve this objective by executing on the following strategies:

    Capitalize on the increased need for natural gas compression in conventional and unconventional plays.  We expect additional demand for compression services to result from the continuing shift of natural gas production to domestic shale plays as well as the declining production pressures of aging conventional basins. Our fleet of modern, flexible compression units, which are capable of being rapidly deployed and redeployed and many of which are designed to operate in multiple compression stages, will enable us to capitalize on opportunities both in these emerging shale plays as well as conventional fields.

    Continue to execute on attractive organic growth opportunities.  Between 2003 and 2011, we grew the horsepower in our fleet of compression units at a compound annual growth rate of 23% and grew our compression revenues at a compound annual growth rate of 24%, primarily through organic growth. We believe organic growth opportunities will continue to be our most attractive source of near-term growth. We seek to achieve continued organic growth by (i) increasing our business with existing customers, (ii) obtaining new customers in our existing areas of operations and (iii) expanding our operations into new geographic areas.

    Partner with customers who have significant compression needs.  We actively seek to identify customers with major acreage positions in active and growing areas. We work with these customers to jointly develop long-term and adaptable solutions designed to optimize their

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      lifecycle compression costs. We believe this is important in determining the overall economics of producing, gathering and transporting natural gas. Our proactive and collaborative approach positions us to serve as our customers' compression provider of choice.

    Pursue accretive acquisition opportunities.  While our principal growth strategy will be to continue to grow organically, we may pursue accretive acquisition opportunities, including the acquisition of complementary businesses, participation in joint ventures or purchase of compression units from existing or new customers in conjunction with providing compression services to them. We will consider opportunities that (i) are in our existing geographic areas of operations or new, high-growth regions, (ii) meet internally established economic thresholds and (iii) may be financed on reasonable terms. We have reviewed potential acquisition opportunities in the past, and will continue to do so in the future, but to date have not actively pursued any acquisitions.

    Maintain financial flexibility.  We intend to maintain financial flexibility to be able to take advantage of growth opportunities. Historically, we have utilized our cash flow from operations, borrowings under available debt facilities and operating leases to fund capital expenditures to expand our compression services business. This approach has allowed us to significantly grow our fleet and the amount of cash we generate, while maintaining our debt at levels we believe are manageable for our business. Pro forma for this offering, we will have $           million in borrowing capacity available under our revolving credit facility. We believe our financial flexibility positions us to take advantage of future growth opportunities without incurring debt beyond appropriate levels.


Competitive Strengths

        We believe that we are well positioned to successfully execute our business strategies and achieve our principal business objective because of the following competitive strengths:

    Stable and growing fee-based cash flows.  We charge our customers a fixed monthly fee for our compression services, regardless of the volume of natural gas we compress in that month. Our contracts have initial terms of up to five years and typically extend beyond their initial contract terms, either through contract renewals or on a month-to-month basis. We believe the long-term nature of our fixed-fee contracts enhances our ability to generate stable cash flows and mitigates our exposure to short-term volatility in natural gas and crude oil commodity prices. Our focus on large-horsepower compression installations associated with large-volume gathering and transportation-related applications also mitigates our exposure to the higher volatility associated with smaller wellhead applications.

    Modern and efficient large-horsepower compression fleet with multi-stage compression capabilities that can be rapidly and efficiently deployed or relocated.  We maintain and utilize a modern, flexible and reliable fleet of compression units to provide compression services. As of March 31, 2012, approximately 84% of our fleet by horsepower (including compression units on order) was comprised of units with greater than 500 horsepower. Our compression units are built on a standardized equipment package and have an average age of approximately five years. Approximately 70% of our fleet horsepower as of March 31, 2012 was comprised of convertible multi-stage compression units. The flexible configuration of our units enables us to quickly and effectively adapt to changing field conditions, allowing us to render our compression services across a broad range of operating conditions without the need to replace equipment. This adaptability results in lower downtime and operating costs for our customers, generally allowing us to obtain longer-term contracts and provide our compression services more efficiently within fields and across geographies.

    Long-standing and strategic customer relationships.  We have developed long-standing and strategic customer relationships by consistently delivering outstanding service run time and superior

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      service, and by effectively adapting to our customers' specific and continually changing compression needs. Our top ten customers, which accounted for 53% of our revenues for the year ended December 31, 2011, have contracted compression services from us for an average of nine years. Of these, six have been customers for over ten years and all have been customers for at least six years. These relationships provide a strong platform for continued organic growth as we respond to our customers' increasing and dynamic natural gas compression needs.

    Broad geographic presence in key domestic markets.  Our primary business focus is providing compression services in high-growth shale plays where typically steep declines in production volumes and changes in production pressures require significant compression. We also provide compression services in more mature conventional basins that will require increasing amounts of compression as these fields age and pressures decline.

    Experienced management team with a proven ability to deliver strong organic growth.  Our Chief Executive Officer, Eric D. Long, co-founded our company and has over 20 years of experience in the compression industry. The members of our management team have an average of over 25 years of experience in energy and service industries, and several key executive members of our sales and operating team have worked together for over 14 years. Our organic growth has resulted from our management's commitment to optimize compression lifecycle cost for our customers by delivering outstanding customer service.

    Supportive sponsor with significant industry expertise.  Riverstone is the principal owner of our general partner. Riverstone has substantial experience as a private equity investor in master limited partnerships, with current or prior investments in the general partners or managing members of Buckeye Partners, L.P., Kinder Morgan Energy Partners, L.P., Magellan Midstream Partners, L.P. and Niska Gas Storage Partners LLC. Riverstone's management has substantial experience in identifying, evaluating, negotiating and financing acquisitions and investments. By providing us with strategic guidance and financial expertise, we believe our relationship with Riverstone will greatly enhance our ability to grow our asset base and cash flow.

        The compression services business is highly competitive. Some of our competitors have a broader geographic scope, as well as greater financial and other resources than we do. Smaller companies that compete with us may be able to more quickly adapt to changes within our industry and changes in economic conditions as a whole. Additionally, the current availability of attractive financing terms makes the purchase of individual compression units increasingly affordable to our customers. For further discussion of the risks that we face, please read "Risk Factors."


Recent Developments

        On November 16, 2011, we amended our revolving credit facility, which increased the overall commitments under the facility from $400 million to $500 million and reduced our applicable margin for LIBOR loans from a range of 300 to 375 basis points above LIBOR (as defined in the credit agreement) to a range of 200 to 275 basis points above LIBOR, depending on our leverage ratio. At December 31, 2011, the interest rate on amounts borrowed under the revolving credit facility was 3.02%.

        On December 15, 2011, we purchased all the compression units previously leased from Caterpillar Financial Services Corporation, which we refer to as Caterpillar, for $43 million and terminated all the lease schedules and covenants under the facility. This purchase was funded with borrowings under our revolving credit facility.

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Our Relationship with Riverstone

        Over 97% of the equity in USA Compression Holdings is owned by Riverstone, with the balance owned by our current officers and employees and a small, non-controlling investor. Riverstone, a global energy- and power-focused private equity firm founded in 2000, has approximately $17 billion of assets under management across six investment funds. Riverstone conducts buyout and growth capital investments in the midstream, exploration and production, energy services, power and renewable sectors of the energy industry. With offices in New York, London and Houston, Riverstone has committed approximately $15.9 billion to 78 investments in North America, South America, Europe and Asia. As the owner of our general partner, approximately      % of our outstanding common units, all of our subordinated units and all of our incentive distribution rights, USA Compression Holdings and Riverstone are incentivized to support and promote the successful execution of our business plan.

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Risk Factors

        An investment in our common units involves risks. Below is a summary of certain key risk factors that you should consider in evaluating an investment in our common units. This list is not exhaustive. Please read the full discussion of these risks and other risks described under "Risk Factors."


Risks Related to Our Business

    We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to pay our minimum quarterly distributions to holders of our common units and subordinated units.

    The assumptions underlying our estimate of cash available for distribution described in "Our Cash Distribution Policy and Restrictions on Distributions" are inherently uncertain and subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause us to be unable to pay our minimum quarterly distributions to holders of our common units and subordinated units.

    A long-term reduction in the demand for, or production of, natural gas or crude oil in the locations where we operate could adversely affect the demand for our services or the prices we charge for our services, which could result in a decrease in our revenues and cash available for distribution to our unitholders.

    We have several key customers. The loss of any of these customers would result in a decrease in our revenues and cash available for distribution to our unitholders.

    We face significant competition that may cause us to lose market share and reduce our ability to make distributions to our unitholders.

    We depend on a limited number of suppliers and are vulnerable to product shortages and price increases, which could have a negative impact on our results of operations.

    We are subject to substantial environmental regulation, and changes in these regulations could increase our costs or liabilities.


Risks Inherent in an Investment in Us

    Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors.

    Our general partner and its affiliates, including USA Compression Holdings, have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of us and our common unitholders.

    Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.

    You will experience immediate and substantial dilution in pro forma net tangible book value of $      per common unit.


Tax Risks to Common Unitholders

    Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service, or IRS, were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, then our cash available for distribution to our unitholders would be substantially reduced.

    The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

    Our unitholders' share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.

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Partnership Structure and Offering-Related Transactions

        We were formed in 2008 as a Texas limited partnership and converted to a Delaware limited partnership in 2011. USA Compression Holdings, LLC currently holds all of our limited partner interests. In order to maximize operational flexibility, we will conduct our operations through subsidiaries. At or prior to the closing of this offering, the following transactions, which we refer to as the offering-related transactions, will occur:

    we will convert the general partner interest held by USA Compression GP, LLC, our general partner, into a 2.0% general partner interest in us and our incentive distribution rights;

    we will convert the limited partner interest held by USA Compression Holdings into    common units and       subordinated units, representing an aggregate      % limited partner interest in us;

    we will receive net proceeds of $           million from the issuance and sale of        common units to the public, representing a        % limited partner interest in us;

    we will use the net proceeds from this offering in the manner described in "Use of Proceeds"; and

    we will amend our revolving credit facility and, after using the net proceeds from this offering in the manner described in "Use of Proceeds," will have $         million of long-term borrowing capacity available to us under this revolving credit facility.

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Organizational Structure After the Offering

        The following diagram depicts our organizational structure and ownership after giving effect to this offering and the related offering-related transactions.

Public Common Units

      %(1)

Common Units held by USA Compression Holdings

      %(1)

Subordinated Units held by USA Compression Holdings

    49.0 %

Incentive Distribution Rights

          (2)

General Partner Interest

    2.0 %
 

Total

    100.0 %
       

(1)
Assumes the underwriters do not exercise their option to purchase additional common units.

(2)
Incentive distribution rights represent a potentially variable interest in distributions and thus are not expressed as a fixed percentage. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—General Partner Interest and Incentive Distribution Rights."

GRAPHIC

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Our Management

        Our general partner has sole responsibility for conducting our business and for managing our operations and is controlled by USA Compression Holdings, which is controlled by Riverstone. Our general partner will not receive any management fee or other compensation in connection with the management of our business or this offering, but it will be entitled to reimbursement of all direct and indirect expenses incurred on our behalf, which we expect to be approximately $                        for the year ending December 31, 2012. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us.

        The board of directors of our general partner will initially be comprised of five members, all of whom will be designated by USA Compression Holdings and one of whom will be independent. In compliance with the rules of the New York Stock Exchange, a second independent director will be appointed to the board of directors of USA Compression GP, LLC within 90 days of listing and a third independent director will be appointed within twelve months of listing. Neither our general partner nor its board of directors will be elected by our unitholders. USA Compression Holdings is the sole member of our general partner and will have the right to appoint our general partner's entire board of directors, including the independent directors.


Principal Executive Offices and Internet Address

        Our principal executive offices are located at 100 Congress Avenue, Suite 450, Austin, Texas 78701 and our telephone number is (512) 473-2662. Our website is located at www.usacpartners.com and will be activated in connection with the closing of this offering. We will make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission, or the SEC, available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.


Summary of Conflicts of Interest and Fiduciary Duties

        Our general partner has a legal duty to manage us in a manner beneficial to our partners. This legal duty originates in statutes and judicial decisions and is commonly referred to as a "fiduciary duty." However, the officers and directors of our general partner also have fiduciary duties to manage our general partner in a manner beneficial to its owner, USA Compression Holdings. Certain of the officers and directors of our general partner are also officers and directors of USA Compression Holdings. As a result, conflicts of interest will arise in the future between us and holders of our common units, on the one hand, and USA Compression Holdings and our general partner, on the other hand. For example, our general partner will be entitled to make determinations that affect the amount of distributions we make to the holders of common and subordinated units, which in turn has an effect on whether our general partner receives incentive distributions.

        Our partnership agreement limits the liability of, and reduces the fiduciary duties owed by, our general partner to holders of our common units. Our partnership agreement also restricts the remedies available to holders of our common units for actions that might otherwise constitute a breach of our general partner's fiduciary duties. By purchasing a common unit, the purchaser agrees to be bound by the terms of our partnership agreement, and pursuant to the terms of our partnership agreement each holder of common units consents to various actions and potential conflicts of interest contemplated in the partnership agreement that might otherwise be considered a breach of fiduciary or other duties under applicable state law.

        For a more detailed description of the conflicts of interest and the fiduciary duties of our general partner, please read "Conflicts of Interest and Fiduciary Duties."

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Implications of Being an Emerging Growth Company

        We are an "emerging growth company" within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to:

    provide an auditor's attestation report on management's assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,

    comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer,

    provide certain disclosure regarding executive compensation required of larger public companies, or

    hold shareholder advisory votes on executive compensation.

        We will remain an emerging growth company for five years unless, prior to that time, we have more than $1.0 billion in annual revenues, have a market value for our common units held by non-affiliates of more than $700 million, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced obligations. We have availed ourselves of the reduced reporting obligations with respect to executive compensation disclosure in this prospectus, and expect to continue to avail ourselves of the reduced reporting obligations available to emerging growth companies in future filings. For as long as we take advantage of the reduced reporting obligations, the information that we provide unitholders may be different than might be provided by other public companies in which you hold equity interests.

        We are also choosing to "opt out" of the extended transition period for complying with new or revised accounting standards available to emerging growth companies, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Under federal securities laws, our decision to opt out of the extended transition period is irrevocable.

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The Offering

Common units offered to the public

              common units.

 

            common units, if the underwriters exercise in full their option to purchase additional common units.

Units outstanding after this offering

 

            common units and            subordinated units, representing a            % and 49.0% limited partner interest in us, respectively. The exercise of the underwriters' option to purchase additional common units will not affect the total number of units outstanding or the amount of cash needed to pay the minimum quarterly distribution on all units. Our general partner will own a 2.0% general partner interest in us.

Use of proceeds

 

We expect to receive net proceeds from the issuance and sale of common units offered by this prospectus of approximately $       million, after deducting underwriting discounts and commissions and offering expenses.

 

We will use the net proceeds from this offering to repay indebtedness outstanding under our revolving credit facility. We will incur indebtedness under our revolving credit facility to fund capital expenditures, terminate interest rate swaps related to our revolving credit facility and for working capital needs. We have incurred indebtedness from time to time under our revolving credit facility to fund capital expenditures and for working capital purposes and on December 15, 2011 we used borrowings under the facility to purchase the compression units previously leased from Caterpillar. On November 16, 2011, we amended our revolving credit facility, which increased the overall commitments under the facility from $400 million to $500 million and reduced our applicable margin for LIBOR loans from a range of 300 to 375 basis points above LIBOR to a range of 200 to 275 basis points above LIBOR, depending on our leverage ratio. At March 31, 2012, the interest rate on amounts borrowed under the revolving credit facility was 3.0%.

 

We will use the net proceeds from any exercise of the underwriters' option to purchase additional common units to redeem from USA Compression Holdings a number of common units equal to the number of common units issued upon the exercise of the underwriters' option.

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Cash distributions

 

Our general partner will adopt a cash distribution policy that will require us to pay a minimum quarterly distribution of $      per unit ($      per unit on an annualized basis) to the extent we have sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its affiliates. We refer to this cash as "available cash," and it is defined in our partnership agreement included in this prospectus as Appendix A and in the glossary included in this prospectus as Appendix B. Our ability to pay the minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption "Our Cash Distribution Policy and Restrictions on Distributions." For the first quarter that we are publicly traded, we will pay a prorated distribution covering the period from the completion of this offering through June 30, 2012, based on the actual length of that period.

 

Our partnership agreement requires that we distribute all of our available cash each quarter in the following manner:

 

•       first, 98.0% to the holders of common units and 2.0% to our general partner, until each common unit has received the minimum quarterly distribution of $        , plus any arrearages from prior quarters;

 

•       second, 98.0% to the holders of subordinated units and 2.0% to our general partner, until each subordinated unit has received the minimum quarterly distribution of $        ; and

 

•       third, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unit has received a distribution of $        .        

 

If cash distributions to our unitholders exceed $          per unit in any quarter, our general partner will receive, in addition to distributions on its 2.0% general partner interest, increasing percentages, up to 48.0%, of the cash we distribute in excess of that amount. We refer to these distributions as "incentive distributions." Please read "Provisions of our Partnership Agreement Relating to Cash Distributions."

 

The amount of pro forma available cash generated during the year ended December 31, 2011 would have been sufficient to allow us to pay the full minimum quarterly distribution on all common units and a cash distribution of $          per quarter ($          on an annualized basis), or approximately          % of the minimum quarterly distribution, on all of our subordinated units for such period.

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The amount of pro forma available cash generated during the twelve months ended March 31, 2012 would have been sufficient to allow us to pay the full minimum quarterly distribution on all common units and a cash distribution of $          per quarter ($          on an annualized basis), or approximately          % of the minimum quarterly distribution, on all of our subordinated units for such period.

 

We believe that, based on our estimated cash available for distribution as described under the caption "Our Cash Distribution Policy and Restrictions on Distributions," we will have sufficient cash available for distribution to pay the minimum quarterly distribution of $          per unit on all common and subordinated units and the corresponding distributions on our general partner's 2.0% interest for the four-quarter period ending March 31, 2013. This estimate is based in part on the assumption that we will institute a distribution reinvestment plan, or DRIP, following completion of this offering, and that USA Compression Holdings will reinvest under the DRIP all distributions it receives on its common and subordinated units in additional newly issued common units, and that our general partner will invest in additional general partner units to maintain its 2.0% general partner interest in us. We have not assumed participation in the DRIP by any public unit holder. Please read "Risk Factors" and "Our Cash Distribution Policy and Restrictions on Distributions."

Subordinated units

 

USA Compression Holdings will initially own all of our subordinated units. The principal difference between our common and subordinated units is that in any quarter during the subordination period, holders of the subordinated units are not entitled to receive any distribution until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages.

Conversion of subordinated units

 

The subordination period will end on the first business day after we have earned and paid at least (i) $          (the minimum quarterly distribution on an annualized basis) on each outstanding unit and the corresponding distribution on our general partner's 2.0% interest for each of three consecutive, non-overlapping four-quarter periods ending on or after March 31, 2015 or (ii) $          (150.0% of the annualized minimum quarterly distribution) on each outstanding unit and the corresponding distributions on our general partner's 2.0% interest and the related distribution on the incentive distribution rights for the four-quarter period immediately preceding that date.

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When the subordination period ends, all subordinated units will convert into common units on a one-for-one basis, and all common units thereafter will no longer be entitled to arrearages. For a description of the subordination period, please read "Provisions of our Partnership Agreement Relating to Cash Distributions—Subordination Period."

General Partner's right to reset the target distribution levels                                                                                                                                                                   

 

Our general partner has the right, at any time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0%) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our cash distributions at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution, and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution.

 

If our general partner elects to reset the target distribution levels, it will be entitled to receive common units and general partner units. The number of common units to be issued to our general partner will equal the number of common units that would have entitled the holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to our general partner on the incentive distribution rights in the prior two quarters. Please read "Provisions of our Partnership Agreement Relating to Cash Distributions—General Partner's Right to Reset Incentive Distribution Levels."

Issuance of additional units

 

We can issue an unlimited number of units without the consent of our unitholders. Please read "Units Eligible for Future Sale" and "The Partnership Agreement—Issuance of Additional Partnership Units."

Limited voting rights

 

Our general partner will manage and operate us. Unlike the holders of common stock in a corporation, our unitholders will have only limited voting rights on matters affecting our business. Our unitholders will have no right to elect our general partner or its directors on an annual or continuing basis. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding units voting together as a single class, including any units owned by our general partner and its affiliates, including USA Compression Holdings. Upon consummation of this offering, USA Compression Holdings will own an aggregate of          % of our common and subordinated units. This will give USA Compression Holdings the ability to prevent the involuntary removal of our general partner. Please read "The Partnership Agreement—Voting Rights."

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Limited call right

 

If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a price that is not less than the then-current market price of the common units, as calculated pursuant to the terms of our partnership agreement. At the end of the subordination period (which could occur as early as March 31, 2013), assuming no additional issuances of common units (other than upon the conversion of the subordinated units), USA Compression Holdings will own an aggregate of approximately          % of our outstanding common units. Following completion of this offering, we intend to institute a DRIP. USA Compression Holdings has informed us that it intends to reinvest under the DRIP all distributions it receives on its common and subordinated units. To the extent that USA Compression Holdings participates in the DRIP, its percentage ownership of us will increase relative to public unit holders that do not participate in the DRIP. For additional information about this right, please read "The Partnership Agreement—Limited Call Right."

Estimated ratio of taxable income to distributions

 

We estimate that if you own the common units you purchase in this offering through the record date for distributions for the period ending December 31, 2014, you will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be          % or less of the cash distributed to you with respect to that period. For example, if you receive an annual distribution of $          per unit, we estimate that your average allocable federal taxable income per year will be no more than $          per unit. Please read "Material Federal Income Tax Consequences—Tax Consequences of Unit Ownership—Ratio of Taxable Income to Distributions."

Material tax consequences

 

For a discussion of other material federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the U.S., please read "Material Federal Income Tax Consequences." All statements of legal conclusions contained in "Material Federal Income Tax Consequences," unless otherwise noted, are the opinion of Latham & Watkins LLP with respect to the matters discussed therein.

Exchange listing                                                                                                                                                                                        

 

Our common units have been approved for listing on the New York Stock Exchange under the symbol "USAC".

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Summary Historical and Pro Forma Financial and Operating Data

        The following table presents our summary historical financial and operating data and pro forma financial data for the periods and as of the dates presented. The following table should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical and pro forma financial statements and accompanying notes included elsewhere in this prospectus.

        The summary historical financial and operating data has been prepared on the following basis:

    the historical financial information as of December 31, 2010 and 2011 and for the years ended December 31, 2009, 2010 and 2011 is derived from our audited financial statements, which are included elsewhere in this prospectus;

    the historical financial information as of December 31, 2009 is derived from our audited financial statements, which are not included in this prospectus;

    the historical financial information as of March 31, 2012 and for the three months ended March 31, 2011 and March 31, 2012 is derived from our unaudited financial statements, which are included elsewhere in this prospectus; and

    the historical financial information as of March 31, 2011 is derived from our unaudited financial statements, which are not included in this prospectus.

        We were acquired by USA Compression Holdings on December 23, 2010, which we refer to as the Holdings Acquisition. In connection with this acquisition, our assets and liabilities were adjusted to fair value on the closing date by application of "push-down" accounting. Due to these adjustments, our audited consolidated financial statements are presented in two distinct periods to indicate the application of two different bases of accounting between the periods presented: (i) the periods prior to the acquisition date for accounting purposes, using a date of convenience of December 31, 2010, are identified as "Predecessor," and (ii) the periods from December 31, 2010 forward are identified as "Successor." Please read note 1 to our audited financial statements as of December 31, 2011 included elsewhere in this prospectus.

        The summary pro forma financial information for the year ended December 31, 2011 and as of and for the three months ended March 31, 2012 is derived from our unaudited pro forma financial statements included elsewhere in this prospectus. The pro forma adjustments have been prepared as if the transactions described below had taken place on March 31, 2012, in the case of the pro forma balance sheet, or as of January 1, 2011, in the case of the pro forma statement of operations for the year ended December 31, 2011 and for the three months ended March 31, 2012. These transactions include:

    the entry into the second amendment to our revolving credit facility on November 16, 2011;

    the conversion of our limited partner interests held by USA Compression Holdings into                    of our common units and                    of our subordinated units;

    the conversion of our general partner interest held by USA Compression GP, LLC, our general partner, into                     general partner units, representing a 2.0% general partner interest in us;

    the issuance by us of all of our incentive distribution rights to USA Compression GP, LLC; and

    the issuance by us of                    common units to the public in exchange for net proceeds of approximately $                 million, all of which will be used to repay indebtedness outstanding under our revolving credit facility.

        The pro forma financial information should not be considered as indicative of the historical results we would have had or the results we will have after this offering.

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        The following table includes the non-GAAP financial measure of Adjusted EBITDA. We define Adjusted EBITDA as our net income before interest expense, income taxes, depreciation expense, impairment of compression equipment, share-based compensation expense, restructuring charges, management fees, expenses under our operating lease with Caterpillar and certain fees and expenses related to the Holdings Acquisition. For a reconciliation of Adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with GAAP, please read "—Non-GAAP Financial Measures."

 
  Historical   Pro Forma  
 
  Predecessor    
  Successor(1)    
   
 
 
  Year Ended
December 31,
 


  Year
Ended
December 31,

   
   
   
   
 
 
  Three Months
Ended
March 31,
2011
  Three Months
Ended
March 31,
2012
  Year
Ended
December 31,
2011
  Three Months
Ended
March 31,
2012
 
 
  2009   2010    
  2011  
 
  (in thousands, except per unit and operating data)
   
 

Revenues:

                                               
 

Contract operations

  $ 93,178   $ 89,785       $ 93,896   $ 22,758   $ 26,552   $ 93,896   $ 26,552  
 

Parts and service

    2,050     2,243         4,824     738     572     4,824     572  
                                   
 

Total revenues

    95,228     92,028         98,720     23,496     27,124     98,720     27,124  

Costs and expenses:

                                               
 

Cost of operations, exclusive of depreciation and amortization

    30,096     33,292         39,605     8,941     9,021     39,605     9,021  
 

Selling, general and administrative(2)

    9,136     11,370         12,726     2,703     3,694     12,726     3,694  
 

Restructuring charges(3)

                300             300      
 

Depreciation and amortization

    22,957     24,569         32,738     7,902     9,428     32,738     9,428  
 

(Gain) loss on sale of assets

    (74 )   (90 )       178     202     161     178     161  
 

Impairment of compression equipment

    1,677                              
                                   
 

Total costs and expenses

    63,792     69,141         85,547     19,748     22,304     85,547     22,304  
                                   

Operating income

    31,436     22,887         13,173     3,748     4,820     13,173     4,820  

Other income (expense):

                                               
 

Interest expense

    (10,043 )   (12,279 )       (12,970 )   (3,182 )   (3,534 )   (5,911 )   (2,702 )
 

Other

    25     26         21     5     5     21     5  
                                   
 

Total other expense

    (10,018 )   (12,253 )       (12,949 )   (3,177 )   (3,529 )   (5,890 )   (2,697 )
                                   

Income before income tax expense

    21,418     10,634         224     571     1,291     7,283     2,123  
                                   

Income tax expense(4)

    190     155         155     36     48     155     48  
                                   

Net income

  $ 21,228   $ 10,479       $ 69   $ 535   $ 1,243   $ 7,128   $ 2,075  
                                   
 

Adjusted EBITDA

 
$

56,917
 
$

51,987
     
$

51,285
 
$

12,874
 
$

14,253
 
$

51,285
 
$

14,253
 

Pro forma net income per limited partner unit:

                                               
 

Common unit

                                               
 

Subordinated unit

                                               

Other Financial Data:

                                               
 

Capital expenditures(5)

  $ 29,580   $ 18,886       $ 133,264   $ 4,765   $ 43,395              
 

Cash flows provided by (used in):

                                               
   

Operating activities

    42,945     38,572         33,782     9,871     4,523              
   

Investing activities

    (26,763 )   (18,768 )       (140,444 )   (4,250 )   (43,348 )            
   

Financing activities

    (16,545 )   (19,804 )       106,662     (3,070 )   38,828              

Operating Data (at period end, except averages)—unaudited

                                               
 

Fleet horsepower(6)

    582,530     609,730         722,201     622,039     774,514              
 

Total available horsepower(7)

    582,530     612,410         809,418     632,215     866,596              
 

Revenue generating horsepower(8)

    502,177     533,692         649,285     533,693     697,500              
 

Average revenue generating horsepower(9)

    489,243     516,703         570,900     534,007     680,063              
 

Revenue generating compression units

    749     795         888     793     920              
 

Average horsepower per revenue generating compression unit(10)

    655     667         692     673     748              
 

Horsepower utilization(11)

                                               
   

At period end

    92.0 %   91.8 %       95.7 %   90.4 %   95.7 %            
   

Average for the period(12)

    92.7 %   92.6 %       92.3 %   90.1 %   95.8 %            

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
  Predecessor    
  Successor(1)    
  Pro Forma  

Balance Sheet Data (at period end):

                                               
 

Working capital(13)

  $ (4,678 ) $ (3,984 )     $ (11,295 ) $ (2,848 ) $ (5,253 )       $ (5,253 )
 

Total assets

    352,757     614,718         727,876     612,591     763,633           763,783  
 

Long-term debt

    260,470     255,491         363,773     252,519     402,682           218,676  
 

Partners' capital

    72,626     338,954         339,023     339,489     340,266           524,422  

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(1)
Reflects the push-down of the purchase accounting for the Holdings Acquisition.

(2)
Pro forma selling, general and administrative expense does not include incremental general and administrative expenses we expect to incur as a result of being a publicly traded partnership. We expect these expenses to total approximately $3.1 million per year.

(3)
During the year ended December 31, 2011, we incurred $0.3 million of restructuring charges for severance and retention benefits related to the termination of certain administrative employees. These charges are reflected as restructuring charges in our consolidated statement of operations. We paid approximately $0.1 million of these restructuring charges in the three months ended March 31, 2012, and we expect to pay the remaining $0.2 million in the three month period ending June 30, 2012.

(4)
This represents the Texas franchise tax (applicable to income apportioned to Texas) which, in accordance with Financial Accounting Standards Board Accounting Standards Codification 740 "Income Taxes," or ASC 740, is classified as income tax for reporting purposes.

(5)
On December 15, 2011, we purchased all the compression units previously leased from Caterpillar for $43 million and terminated all the lease schedules and covenants under the facility. This amount is included in capital expenditures for the year ended December 31, 2011. On December 16, 2011, the Partnership entered into an agreement with a new compression equipment supplier to reduce certain previously made progress payments from $10 million to $2 million. The Partnership applied this $8 million credit to new compression unit purchases from this supplier in the three months ended March 31, 2012. Before the application of this credit, capital expenditures were $51.4 million for the three months ended March 31, 2012.

(6)
Fleet horsepower is horsepower for compression units that have been delivered to us (and excludes any units on order). As of March 31, 2012, we had 123,842 of additional new compression unit horsepower on order, of which 89,964 horsepower is expected to be delivered between April 2012 and June 2012, and 33,878 horsepower is expected to be delivered between July 2012 and September 2012. In May 2012, we ordered 27,611 of additional new compression horsepower which is expected to be delivered between October 2012 and December 2012.

(7)
Total available horsepower is revenue generating horsepower under contract for which we are billing a customer, horsepower in our fleet that is under contract but is not yet generating revenue, horsepower not yet in our fleet that is under contract not yet generating revenue that is subject to a purchase order and idle horsepower. Total available horsepower excludes new horsepower on order for which we do not have a compression services contract.

(8)
Revenue generating horsepower is horsepower under contract for which we are billing a customer.

(9)
Calculated as the average of the month-end revenue generating horsepower for each of the months in the period.

(10)
Calculated as the average of the month-end horsepower per revenue generating compression unit for each of the months in the period.

(11)
Horsepower utilization is calculated as (i)(a) revenue generating horsepower plus (b) horsepower in our fleet that is under contract, but is not yet generating revenue plus (c) horsepower not yet in our fleet that is under contract not yet generating revenue and that is subject to a purchase order, divided by (ii) total available horsepower less idle horsepower that is under repair. Horsepower utilization based on revenue generating horsepower and fleet horsepower at each applicable period end was 86.2%, 87.5% and 89.9% for the years ended December 31, 2009, 2010 and 2011, respectively, and 85.8% and 90.1% for the three months ended March 31, 2011 and 2012, respectively.

(12)
Calculated as the average utilization for the months in the period based on utilization at the end of each month in the period.

(13)
Working capital is defined as current assets minus current liabilities.

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Non-GAAP Financial Measures

        We include in this prospectus the non-GAAP financial measure of Adjusted EBITDA. We view Adjusted EBITDA as one of our primary management tools, and we track this item on a monthly basis both as an absolute amount and as a percentage of revenue compared to the prior month, year-to-date and prior year and to budget. We define Adjusted EBITDA as our net income before interest expense, income taxes, depreciation expense, impairment of compression equipment, share-based compensation expense, restructuring charges, management fees, expenses under our operating lease with Caterpillar and certain fees and expenses related to the Holdings Acquisition. Adjusted EBITDA is used as a supplemental financial measure by our management and external users of our financial statements, such as investors and commercial banks, to assess:

    the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;

    the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;

    the ability of our assets to generate cash sufficient to make debt payments and to make distributions; and

    our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods and capital structure.

        We believe that Adjusted EBITDA provides useful information to investors because, when viewed with our GAAP results and the accompanying reconciliations, it provides a more complete understanding of our performance than GAAP results alone. We also believe that external users of our financial statements benefit from having access to the same financial measures that management uses in evaluating the results of our business.

        Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance and liquidity. Moreover, our Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

        Adjusted EBITDA does not include interest expense, income taxes, depreciation expense, impairment of compression equipment, share-based compensation expense, restructuring charges, management fees, expenses under our operating lease with Caterpillar and certain fees and expenses related to the Holdings Acquisition. Because we borrow money under our revolving credit facility and have historically utilized operating leases to finance our operations, interest expense and operating lease expense are necessary elements of our costs. Because we use capital assets, depreciation and impairment of compression equipment is also a necessary element of our costs. Expense related to share-based compensation expense related to equity awards to employees is also necessary to operate our business. Therefore, measures that exclude these elements have material limitations. To compensate for these limitations, we believe that it is important to consider both net income and net cash provided by operating activities determined under GAAP, as well as Adjusted EBITDA, to evaluate our financial performance and our liquidity. Our Adjusted EBITDA excludes some, but not all, items that affect net income and net cash provided by operating activities, and these measures may vary among companies. Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management's decision-making processes.

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        The following table reconciles Adjusted EBITDA to net income and net cash provided by operating activities, its most directly comparable GAAP financial measures, for each of the periods presented:

 
  Historical   Pro Forma  
 
  Predecessor    
  Successor    
   
 
 
  Year Ended
December 31,
 


  Year
Ended
December 31,

   
   
   
   
 
 
  Three Months
Ended
March 31,
2011
  Three Months
Ended
March 31,
2012
  Year
Ended
December 31,
2011
  Three Months
Ended
March 31,
2012
 
 
  2009   2010    
  2011  
 
  (in thousands)
   
 
                                                 

Net income

 
$

21,228
 
$

10,479
     
$

69
 
$

535
 
$

1,243
 
$

7,128
 
$

2,075
 
 

Interest expense

   
10,043
   
12,279
       
12,970
   
3,182
   
3,534
   
5,911
   
2,702
 
 

Depreciation and amortization

    22,957     24,569         32,738     7,902     9,428     32,738     9,428  
 

Income taxes

    190     155         155     36     48     155     48  
 

Impairment of compression equipment(1)

    1,677                              
 

Share-based compensation expense

    269     382                          
 

Equipment operating lease expense(2)

    553     2,285         4,053     969         4,053      
 

Riverstone management fee(3)

                1,000     250         1,000      
 

Restructuring charges(4)

                300             300      
 

Fees and expenses related to the Holdings Acquisition(5)

        1,838                          
                                   
 

Adjusted EBITDA

  $ 56,917   $ 51,987       $ 51,285   $ 12,874   $ 14,253   $ 51,285   $ 14,253  
                                   
 

Interest expense

    (10,043 )   (12,279 )       (12,970 )   (3,182 )   (3,534 )            
 

Income tax expense

    (190 )   (155 )       (155 )   (36 )   (48 )            
 

Equipment operating lease expense

    (553 )   (2,285 )       (4,053 )   (969 )                
 

Riverstone management fee

                (1,000 )   (250 )                
 

Restructuring charges

                (300 )                    
 

Fees and expenses related to the Holdings Acquisition

        (1,838 )                            
 

Other

    288     3,362         (920 )   (167 )   (152 )            
 

Changes in operating assets and liabilities:

                                               
   

Accounts receivable and advance to employee

    1,865     (336 )       (976 )   529     (439 )            
   

Inventory

    (3,680 )   503         1,974     (180 )   (1,577 )            
   

Prepaids

    608     (18 )       (219 )   196     371              
   

Other non-current assets

    (4 )   1         (2,601 )       (163 )            
   

Accounts payable

    (857 )   (825 )       1,987     (473 )   (6,090 )            
   

Accrued liabilities and deferred revenue

    (1,406 )   455         1,730     1,529     1,902              
                                       

Net cash provided by operating activities

  $ 42,945   $ 38,572       $ 33,782   $ 9,871   $ 4,523              
                                       

(1)
Represents non-cash charges incurred to write down long-lived assets with recorded values that are not expected to be recovered through future cash flows.

(2)
Represents expenses for the respective periods under the operating lease facility with Caterpillar, from whom we historically leased compression units and other equipment. On December 15, 2011, we purchased the compression units that were

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    previously leased from Caterpillar for $43 million and terminated all the lease schedules and covenants under the facility. As such, we believe it is useful to investors to view our results excluding these lease payments.

(3)
Represents management fees paid to Riverstone for services performed during 2011. As these fees have not been paid by us after December 31, 2011 and will not be paid by us following this offering, we believe it is useful to investors to view our results excluding these fees.

(4)
During the year ended December 31, 2011, we incurred $0.3 million of restructuring charges for severance and retention benefits related to the termination of certain administrative employees. These charges are reflected as restructuring charges in our consolidated statement of operations. We paid approximately $0.1 million of these restructuring charges in the three months ended March 31, 2012, and we expect to pay the remaining $0.2 million in the three month period ending June 30, 2012. We believe that it is useful to investors to view our results excluding this non-core expense.

(5)
Represents one-time fees and expenses related to the Holdings Acquisition. These fees and expenses are not related to our operations, and we do not expect to incur similar fees or expenses in the future as a publicly traded partnership.

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RISK FACTORS

        Limited partner interests are inherently different from capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in the compression services business. You should consider carefully the following risk factors together with all of the other information included in this prospectus in evaluating an investment in our common units.

        If any of the following risks were to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, we may be unable to pay the minimum quarterly distribution to our unitholders, the trading price of our common units could decline and you could lose all or part of your investment.


Risks Related to Our Business

We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to pay our minimum quarterly distributions to holders of our common units and subordinated units.

        In order to pay our minimum quarterly distribution of $            per unit per quarter, or $            per unit per year, we will require available cash of approximately $             million per quarter, or approximately $             million per year, based on the number of common units, subordinated units and general partner units to be outstanding immediately after completion of this offering. Under our cash distribution policy, the amount of cash we can distribute to our unitholders principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

    the level of production of, demand for, and price of natural gas and crude oil, particularly the level of production in the locations where we provide compression services;

    the fees we charge, and the margins we realize, from our compression services;

    the cost of achieving organic growth in current and new markets;

    the level of competition from other companies; and

    prevailing global and regional economic and regulatory conditions, and their impact on our customers.

        In addition, the actual amount of cash we will have available for distribution will depend on other factors, including:

    the levels of our maintenance capital expenditures and expansion capital expenditures;

    the level of our operating costs and expenses;

    our debt service requirements and other liabilities;

    fluctuations in our working capital needs;

    restrictions contained in our revolving credit facility;

    the cost of acquisitions, if any;

    fluctuations in interest rates;

    our ability to borrow funds and access capital markets; and

    the amount of cash reserves established by our general partner.

        For a description of additional restrictions and factors that may affect our ability to make cash distributions, please read "Our Cash Distribution Policy and Restrictions on Distributions."

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On a pro forma basis we would not have had sufficient cash available for distribution to pay the full minimum quarterly distribution on all of our units for the twelve months ended December 31, 2011 and March 31, 2012.

        The amount of cash available for distribution we need to pay the minimum quarterly distribution for four quarters on the common units, the subordinated units and the general partner units to be outstanding immediately after this offering is approximately $             million. Our pro forma cash available for distribution generated during the twelve months ended December 31, 2011 and March 31, 2012 of $33.9 million and $33.6 million, respectively, would have been sufficient to allow us to pay the full minimum quarterly distribution on all of the common units, but would only allow us to pay        % and      %, respectively, of the full minimum quarterly distribution on all of the subordinated units during those periods. For a calculation of our ability to make distributions to unitholders based on our pro forma result for the twelve months ended December 31, 2011 and March 31, 2012, please read "Our Cash Distribution Policy and Restrictions on Distributions—Pro Forma Cash Available for Distribution for the Twelve Months Ended December 31, 2011 and March 31, 2012."

The assumptions underlying our estimate of cash available for distribution described in "Our Cash Distribution Policy and Restrictions on Distributions" are inherently uncertain and subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause us to be unable to pay our minimum quarterly distributions to holders of our common units and subordinated units.

        Our estimate of cash available for distribution set forth in "Our Cash Distribution Policy and Restrictions on Distributions" is based on assumptions that are inherently uncertain and subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those estimated. The estimate was prepared by our management, and we have not received an opinion or report on it from our independent registered public accounting firm or any other independent auditor. If we do not achieve the estimated results, we may not be able to pay the full minimum quarterly distribution or any amount on our common units or subordinated units, in which event the market price of our common units will likely decline materially.

A long-term reduction in the demand for, or production of, natural gas or crude oil in the locations where we operate could adversely affect the demand for our services or the prices we charge for our services, which could result in a decrease in our revenues and cash available for distribution to our unitholders.

        The demand for our compression services depends upon the continued demand for, and production of, natural gas and crude oil. Demand may be affected by, among other factors, natural gas prices, crude oil prices, weather, availability of alternative energy sources, governmental regulation and general demand for energy. Any prolonged, substantial reduction in the demand for natural gas or crude oil would, in all likelihood, depress the level of production activity and result in a decline in the demand for our compression services, which would reduce our cash available for distribution. Lower natural gas prices or crude oil prices over the long-term could result in a decline in the production of natural gas or crude oil, respectively, resulting in reduced demand for our compression services. Additionally, production from unconventional natural gas sources, such as tight sands, shales and coalbeds, constitute an increasing percentage of our compression services business. Such sources can be less economically feasible to produce in low natural gas price environments, in part due to costs related to compression requirements, and a reduction in demand for natural gas or natural gas lift for crude oil may cause such sources of natural gas to be uneconomic to drill and produce, which could in turn negatively impact the demand for our services. In addition, governmental regulation and tax policy may impact the demand for natural gas or impact the economic feasibility of development of new natural gas fields or production of existing fields.

We have several key customers. The loss of any of these customers would result in a decrease in our revenues and cash available for distribution to our unitholders.

        We provide compression services under contracts with several key customers. The loss of one of these key customers may have a greater effect on our financial results than for a company with a more

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diverse customer base. Our largest customer for the year ended December 31, 2011 and three months ended March 31, 2012 was Southwestern Energy Company and its subsidiaries, or Southwestern. Southwestern accounted for 15.9% of our revenue for the year ended December 31, 2011 and 13.5% of our revenues for the three months ended March 31, 2012. Our ten largest customers accounted for 53% of our revenues for the year ended December 31, 2011 and 54% of our revenues for the three months ended March 31, 2012. The loss of all or even a portion of the compression services we provide to our key customers, as a result of competition or otherwise, could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.

The erosion of the financial condition of our customers could adversely affect our business.

        During times when the natural gas or oil markets weaken, our customers are more likely to experience financial difficulties and the lack of availability of debt or equity financing, which could result in a reduction in our customers' spending for our services. For example, our customers could seek to preserve capital by using lower cost providers, not renewing month-to-month contracts or determining not to enter into any new compression service contracts. Reduced demand for our services could adversely affect our business, results of operations, financial condition and cash flows. In addition, in the event of the financial failure of a customer, we could experience a loss of all or a portion of our outstanding accounts receivable associated with that customer.

We face significant competition that may cause us to lose market share and reduce our ability to make distributions to our unitholders.

        The compression business is highly competitive. Some of our competitors have a broader geographic scope, as well as greater financial and other resources than we do. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain current revenue and cash flows could be adversely affected by the activities of our competitors and our customers. If our competitors substantially increase the resources they devote to the development and marketing of competitive services or substantially decrease the prices at which they offer their services, we may be unable to compete effectively. Some of these competitors may expand or construct newer, more powerful or more flexible compression fleets that would create additional competition for us. Additionally, there are lower barriers to entry for customers as competitors seeking to purchase individual compression units. All of these competitive pressures could have a material adverse effect on our business, results of operations, financial condition and reduce our ability to make cash distributions to our unitholders.

Our customers may choose to vertically integrate their operations by purchasing and operating their own compression fleet, or expanding the amount of compression units they currently own.

        Our customers that are significant producers, processors, gatherers and transporters of natural gas and crude oil may choose to vertically integrate their operations by purchasing and operating their own compression fleets in lieu of using our compression services. Currently, the availability of attractive financing terms from financial institutions and equipment manufacturers facilitates this possibility by making the purchase of individual compression units increasingly affordable to our customers. Such vertical integration or increases in vertical integration could result in decreased demand for our compression services, which may have a material adverse effect on our business, results of operations, financial condition and reduce our ability to make cash distributions to our unitholders.

A significant portion of our services are provided to customers on a month-to-month basis, and we cannot be sure that our customers will continue to contract for these services that have continued beyond the primary term.

        As of March 31, 2012, approximately 38% of our compression services on a horsepower basis (and 43% on a revenue basis for the three months ended March 31, 2012) were provided on a month-to-month basis to customers who continue to utilize our services following expiration of the primary term of their contracts with us. These customers can generally terminate their month-to-month

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compression services contracts on 30-days' written notice. If a significant number of these customers were to terminate their month-to-month services, or attempt to renegotiate their month-to-month contracts at substantially lower rates, it could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.

We may be unable to grow our cash flows if we are unable to expand our business, which could limit our ability to increase distributions to our unitholders.

        A principal focus of our strategy is to continue to grow the per unit distribution on our units by expanding our business. Our future growth will depend upon a number of factors, some of which we cannot control. These factors include our ability to:

    develop new business and enter into service contracts with new customers;

    retain our existing customers and maintain or expand the level of services we provide them;

    recruit and train qualified personnel and retain valued employees;

    expand our geographic presence;

    effectively manage our costs and expenses, including costs and expenses related to growth;

    consummate accretive acquisitions;

    obtain required debt or equity financing for our existing and new operations; and

    meet customer-specific contract requirements or pre-qualifications.

        If we do not achieve our expected growth, we may not be able to achieve our estimated results and, as a result, we may not be able to pay the aggregate minimum quarterly distribution on our common units and subordinated units and general partner units, in which event the market price of our common units will likely decline materially.

We may be unable to grow successfully through future acquisitions, and we may not be able to integrate effectively the businesses we may acquire, which may impact our operations and limit our ability to increase distributions to our unitholders.

        From time to time, we may choose to make business acquisitions to pursue market opportunities, increase our existing capabilities and expand into new areas of operations. While we have reviewed acquisition opportunities in the past and will continue to do so in the future, we have not actively pursued any acquisitions, and in the future we may not be able to identify attractive acquisition opportunities or successfully acquire identified targets. In addition, we may not be successful in integrating any future acquisitions into our existing operations, which may result in unforeseen operational difficulties or diminished financial performance or require a disproportionate amount of our management's attention. Even if we are successful in integrating future acquisitions into our existing operations, we may not derive the benefits, such as operational or administrative synergies, that we expected from such acquisitions, which may result in the commitment of our capital resources without the expected returns on such capital. Furthermore, competition for acquisition opportunities may escalate, increasing our cost of making acquisitions or causing us to refrain from making acquisitions. Our inability to make acquisitions, or to integrate successfully future acquisitions into our existing operations, may adversely impact our operations and limit our ability to increase distributions to our unitholders.

Our ability to grow in the future is dependent on our ability to access external expansion capital.

        We will distribute all of our available cash after expenses and prudent operating reserves to our unitholders. We expect that we will rely primarily upon external financing sources, including borrowings under our revolving credit facility and the issuance of debt and equity securities, to fund expansion capital expenditures. However, we may not be able to obtain equity or debt financing on terms favorable to us, or at all. To the extent we are unable to efficiently finance growth externally, our cash distribution policy will significantly impair our ability to grow. In addition, because we distribute all of

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our available cash, we may not grow as quickly as businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with other expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement on our ability to issue additional units, including units ranking senior to the common units. The incurrence of borrowings or other debt by us to finance our growth strategy would result in interest expense, which in turn would affect the available cash that we have to distribute to our unitholders.

Our ability to manage and grow our business effectively may be adversely affected if we lose management or operational personnel.

        We depend on the continuing efforts of our executive officers. The departure of any of our executive officers, and in particular, Eric D. Long, President and Chief Executive Officer of our general partner, could have a significant negative effect on our business, operating results, financial condition and on our ability to compete effectively in the marketplace.

        Additionally, our ability to hire, train and retain qualified personnel will continue to be important and will become more challenging as we grow and if energy industry market conditions continue to be positive. When general industry conditions are good, the competition for experienced operational and field technicians increases as other energy and manufacturing companies' needs for the same personnel increases. Our ability to grow or even to continue our current level of service to our current customers will be adversely impacted if we are unable to successfully hire, train and retain these important personnel.

We depend on a limited number of suppliers and are vulnerable to product shortages and price increases, which could have a negative impact on our results of operations.

        The substantial majority of the components for our natural gas compression equipment are supplied by Caterpillar (for engines), Air-X-Changers and Air Cooled Exchangers (for coolers), and Ariel Corporation (for compressor frames and cylinders). Our reliance on these suppliers involves several risks, including price increases and a potential inability to obtain an adequate supply of required components in a timely manner. We also rely primarily on two vendors, A G Equipment Company and Standard Equipment Corp., to package and assemble our compression units. We do not have long-term contracts with these suppliers or packagers, and a partial or complete loss of any of these sources could have a negative impact on our results of operations and could damage our customer relationships. Some of these suppliers manufacture the components we purchase in a single facility, and any damage to that facility could lead to significant delays in delivery of completed units. In addition, since we expect any increase in component prices for compression equipment or packaging costs will be passed on to us, a significant increase in their pricing could have a negative impact on our results of operations.

We are subject to substantial environmental regulation, and changes in these regulations could increase our costs or liabilities.

        We are subject to stringent and complex federal, state and local laws and regulations, including laws and regulations regarding the discharge of materials into the environment, emission controls and other environmental protection and occupational health and safety concerns. Environmental laws and regulations may, in certain circumstances, impose strict liability for environmental contamination, which may render us liable for remediation costs, natural resource damages and other damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners or operators or other third parties. In addition, where contamination may be present, it is not uncommon for neighboring land owners and other third parties to file claims for personal injury, property damage and recovery of response costs. Remediation costs and other damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing environmental laws and regulations or the adoption of new environmental laws and regulations

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could be substantial and could negatively impact our financial condition or results of operations. Moreover, failure to comply with these environmental laws and regulations may result in the imposition of administrative, civil and criminal penalties and the issuance of injunctions delaying or prohibiting operations.

        We conduct operations in a wide variety of locations across the continental U.S. These operations require U.S. federal, state or local environmental permits or other authorizations. We may need to apply for or amend facility permits or licenses from time to time with respect to storm water discharges, waste handling, or air emissions relating to equipment operations, which subjects us to new or revised permitting conditions that may be onerous or costly to comply with. Additionally, the operation of compression units may require individual air permits or general authorizations to operate under various air regulatory programs established by rule or regulation. These permits and authorizations frequently contain numerous compliance requirements, including monitoring and reporting obligations and operational restrictions, such as emission limits. Given the wide variety of locations in which we operate, and the numerous environmental permits and other authorizations that are applicable to our operations, we may occasionally identify or be notified of technical violations of certain requirements existing in various permits or other authorizations. We could be subject to penalties for any noncompliance in the future.

        We routinely deal with natural gas, oil and other petroleum products. Hydrocarbons or other hazardous substances or wastes may have been disposed or released on, under or from properties used by us to provide compression services or inactive compression unit storage or on or under other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigatory, remediation and monitoring requirements under federal, state and local environmental laws and regulations.

        The modification or interpretation of existing environmental laws or regulations, the more vigorous enforcement of existing environmental laws or regulations, or the adoption of new environmental laws or regulations may also negatively impact oil and natural gas exploration and production, gathering and pipeline companies, including our customers, which in turn could have a negative impact on us.

New regulations, proposed regulations and proposed modifications to existing regulations under the Clean Air Act, or CAA, if implemented, could result in increased compliance costs.

        On August 20, 2010, the U.S. Environmental Protection Agency, or the EPA, published new regulations under the CAA to control emissions of hazardous air pollutants from existing stationary reciprocating internal combustion engines. All engines subject to these regulations are required to comply by October 2013. The rule will require us to undertake certain expenditures and activities, including purchasing and installing emissions control equipment on a portion of our engines located at major sources of hazardous air pollutants and on all our engines over a certain size regardless of location, following prescribed maintenance practices for engines (which are consistent with our existing practices), and implementing additional emissions testing and monitoring. On January 5, 2011, the EPA approved a request by industry groups for reconsideration of the monitoring issues and on March 9, 2011, the EPA issued a new proposed rule and a direct final rule effective on May 9, 2011 to clarify compliance requirements related to operation and maintenance procedures for continuous parametric monitoring systems. We do not believe the costs associated with achieving compliance with these standards by the October 2013 compliance date will be material.

        On June 28, 2011, the EPA issued a final rule modifying existing regulations under the CAA that established new source performance standards for manufacturers, owners and operators of new, modified and reconstructed stationary internal combustion engines. The final rule will require us to undertake certain expenditures, including expenditures for purchasing, installing, monitoring and maintaining emissions control equipment on some of our natural gas compression fleet. Compliance with the final rule is not required until at least 2013. We are currently evaluating the impact that this final rule will have on our operations.

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        On April 17, 2012 the EPA finalized rules that establish new air emission controls for oil and natural gas production and natural gas processing operations. Specifically, the EPA's rule package includes New Source Performance Standards to address emissions of sulfur dioxide and volatile organic compounds, or VOCs, and a separate set of emission standards to address hazardous air pollutants frequently associated with oil and natural gas production and processing activities. The rules establish specific new requirements regarding emissions from compressors and controllers at natural gas processing plants, dehydrators, storage tanks and other production equipment. In addition, the rules establish new leak detection requirements for natural gas processing plants at 500 ppm. These rules may require a number of modifications to our operations, including the installation of new equipment to control emissions from our compressors at initial startup, or 60 days after the final rule is published in the Federal Register, whichever is later. Compliance with such rules could result in significant costs, including increased capital expenditures and operating costs, and could adversely impact our business.

        In addition, the Texas Commission on Environmental Quality, or the TCEQ, has finalized revisions to certain air permit programs that significantly increase the air permitting requirements for new and certain existing oil and gas production and gathering sites for 23 counties in the Barnett Shale production area. The final rule establishes new emissions standards for engines, which could impact the operation of specific categories of engines by requiring the use of alternative engines, compression packages or the installation of aftermarket emissions control equipment. The rule became effective for the Barnett Shale production area in April 2011, with the lower emissions standards becoming applicable between 2015 and 2030 depending on the type of engine and the permitting requirements. The cost to comply with the revised air permit programs is not expected to be material at this time. However, the TCEQ has stated it will consider expanding application of the new air permit program statewide. At this point, we cannot predict the cost to comply with such requirements if the geographic scope is expanded.

        These new regulations and proposals, when finalized, and any other new regulations requiring the installation of more sophisticated pollution control equipment could have a material adverse impact on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.

Climate change legislation and regulatory initiatives could result in increased compliance costs.

        Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas, are examples of greenhouse gases, or GHGs. In recent years, the U.S. Congress has considered legislation to reduce emissions of GHGs. It presently appears unlikely that comprehensive climate legislation will be passed by either house of Congress in the near future, although energy legislation and other initiatives are expected to be proposed that may be relevant to GHG emissions issues. In addition, almost half of the states have begun to address GHG emissions, primarily through the planned development of emission inventories or regional GHG cap and trade programs. Depending on the particular program, we could be required to control GHG emissions or to purchase and surrender allowances for GHG emissions resulting from our operations.

        Independent of Congress, the EPA is beginning to adopt regulations controlling GHG emissions under its existing Clean Air Act authority. For example, on December 15, 2009, the EPA officially published its findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to human health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth's atmosphere and other climatic changes. These findings by the EPA allow the agency to proceed with the adoption and implementation of regulations that would restrict emissions of GHGs under existing provisions of the federal Clean Air Act. In 2009, the EPA adopted rules regarding regulation of GHG emissions from motor vehicles. In addition, on September 22, 2009, the EPA issued a final rule requiring the reporting of GHG emissions in the United States beginning in 2011 for emissions occurring in 2010 from specified large GHG emission sources. On November 30, 2010, the EPA published a final rule expanding its existing GHG emissions reporting rule for petroleum and natural gas facilities, including natural gas transmission compression facilities that emit 25,000 metric tons or more of carbon dioxide equivalent per year. The rule, which

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went into effect on December 30, 2010, requires reporting of GHG emissions by such regulated facilities to the EPA by September 2012 for emissions during 2011 and annually thereafter. In 2010, the EPA also issued a final rule, known as the "Tailoring Rule," that makes certain large stationary sources and modification projects subject to permitting requirements for GHG emissions under the Clean Air Act. This new permitting program may affect some of our customers' largest new or modified facilities going forward. Several of the EPA's GHG rules are being challenged in court and, depending on the outcome of these proceedings, such rules may be modified or rescinded or the EPA could develop new rules.

        Although it is not currently possible to predict how any such proposed or future GHG legislation or regulation by Congress, the states or multi-state regions will impact our business, any legislation or regulation of GHG emissions that may be imposed in areas in which we conduct business could result in increased compliance costs, additional operating restrictions or reduced demand for our services, and could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.

Increased regulation of hydraulic fracturing could result in reductions or delays in natural gas production by our customers, which could adversely impact our revenue.

        A portion of our customers' natural gas production is from unconventional sources that require hydraulic fracturing as part of the completion process. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into the formation to stimulate gas production. Legislation to amend the Safe Drinking Water Act, or SDWA, to repeal the exemption for hydraulic fracturing from the definition of "underground injection" and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, were proposed in recent sessions of Congress. The U.S. Congress continues to consider legislation to amend the Safe Drinking Water Act. Scrutiny of hydraulic fracturing activities continues in other ways, with the EPA having commenced a multi-year study of the potential environmental impacts of hydraulic fracturing, the results of which are anticipated to be available by the end of 2012. EPA also has recently announced that it believes hydraulic fracturing using fluids containing diesel fuel can be regulated under the SDWA notwithstanding the SDWA's general exemption for hydraulic fracturing. Several states have also proposed or adopted legislative or regulatory restrictions on hydraulic fracturing. We cannot predict whether any such legislation will ever be enacted and if so, what its provisions would be. If additional levels of regulation and permits were required through the adoption of new laws and regulations at the federal or state level, that could lead to delays, increased operating costs and process prohibitions that could reduce the volumes of natural gas that move through our gathering systems, which would materially adversely affect our revenue and results of operations.

We do not insure against all potential losses and could be seriously harmed by unexpected liabilities.

        Our operations are subject to inherent risks such as equipment defects, malfunction and failures, and natural disasters that can result in uncontrollable flows of gas or well fluids, fires and explosions. These risks could expose us to substantial liability for personal injury, death, property damage, pollution and other environmental damages. Our insurance may be inadequate to cover our liabilities. Further, insurance covering the risks we face or in the amounts we desire may not be available in the future or, if available, the premiums may not be commercially justifiable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition could be adversely affected. Please read "Our Operations—Environmental and Safety Regulations" for a description of how we are subject to federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to protection of human health and environment.

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Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions.

        We have a $500 million revolving credit facility that matures on October 5, 2015. In addition, we have the option to increase the amount of available borrowings under the revolving credit facility by $50 million, subject to receipt of lender commitments and satisfaction of other conditions. Approximately $             million is expected to be outstanding under the revolving credit facility after the closing of this offering, assuming a price per unit in the offering equal to the midpoint of the range set forth on the cover page of this prospectus and the application of net proceeds as discussed under "Use of Proceeds."

        Following this offering, our ability to incur additional debt will be subject to limitations in our revolving credit facility. Our level of debt could have important consequences to us, including the following:

    our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;

    we will need a portion of our cash flow to make payments on our indebtedness, reducing the funds that would otherwise be available for operation, future business opportunities and distributions; and

    our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally.

        Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. In addition, our ability to service our debt under the revolving credit facility will depend on market interest rates, since we anticipate that the interest rates applicable to our borrowings will fluctuate with movements in interest rate markets. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We may be unable to effect any of these actions on satisfactory terms, or at all.

Restrictions in our revolving credit facility may limit our ability to make distributions to our unitholders and may limit our ability to capitalize on acquisition and other business opportunities.

        The operating and financial restrictions and covenants in our revolving credit facility and any future financing agreements could restrict our ability to finance future operations or capital needs or to expand or pursue our business activities. For example, our revolving credit facility restricts or limits our ability to:

    make distributions;

    grant liens;

    incur additional indebtedness;

    engage in a merger, consolidation or dissolution;

    enter into transactions with affiliates;

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    sell or otherwise dispose of assets, businesses and operations;

    materially alter the character of its business as conducted at the closing of this offering; and

    make acquisitions, investments and capital expenditures.

        Furthermore, our revolving credit facility contains certain operating and financial covenants. Our ability to comply with the covenants and restrictions contained in the revolving credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any of the restrictions, covenants, ratios or tests in our revolving credit facility, a significant portion of our indebtedness may become immediately due and payable, our lenders' commitment to make further loans to us may terminate, and we will be prohibited from making distributions to our unitholders. We might not have, or be able to obtain, sufficient funds to make these accelerated payments. Any subsequent replacement of our revolving credit facility or any new indebtedness could have similar or greater restrictions. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Description of Revolving Credit Facility."

An impairment of goodwill or other intangible assets could reduce our earnings.

        We have recorded approximately $157.1 million of goodwill and $83.8 million of other intangible assets as of March 31, 2012. Goodwill is recorded when the purchase price of a business exceeds the fair market value of the tangible and separately measurable intangible net assets. GAAP requires us to test goodwill for impairment on an annual basis or when events or circumstances occur indicating that goodwill might be impaired. Any event that causes a reduction in demand for our services could result in a reduction of our estimates of future cash flows and growth rates in our business. These events could cause us to record impairments of goodwill or other intangible assets. If we determine that any of our goodwill or other intangible assets are impaired, we will be required to take an immediate charge to earnings with a corresponding reduction of partners' capital resulting in an increase in balance sheet leverage as measured by debt to total capitalization. There was no impairment recorded for goodwill or other intangible assets for the year ended December 31, 2011 or during the three months ended March 31, 2012.

Terrorist attacks, the threat of terrorist attacks, hostilities in the Middle East, or other sustained military campaigns may adversely impact our results of operations.

        The long-term impact of terrorist attacks, such as the attacks that occurred on September 11, 2001, and the magnitude of the threat of future terrorist attacks on the energy industry in general and on us in particular are not known at this time. Uncertainty surrounding hostilities in the Middle East or other sustained military campaigns may affect our operations in unpredictable ways, including disruptions of natural gas supplies and markets for natural gas and natural gas liquids and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror. Changes in the insurance markets attributable to terrorist attacks may make certain types of insurance more difficult for us to obtain. Moreover, the insurance that may be available to us may be significantly more expensive than our existing insurance coverage. Instability in the financial markets as a result of terrorism or war could also affect our ability to raise capital.

If we fail to develop or maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud, which would likely have a negative impact on the market price of our common units.

        Prior to this offering, we have not been required to file reports with the SEC. Upon the completion of this offering, we will become subject to the public reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We prepare our consolidated

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financial statements in accordance with GAAP, but our internal accounting controls may not currently meet all standards applicable to companies with publicly traded securities. Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and to operate successfully as a publicly traded partnership. Our efforts to develop and maintain our internal controls may not be successful, and we may be unable to maintain effective controls over our financial processes and reporting in the future or to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404. For example, Section 404(a) will require us, among other things, to review and report annually on the effectiveness of our internal control over financial reporting. We must comply with Section 404(a) for our fiscal year ending December 31, 2013. In addition, our independent registered public accountants will be required to assess the effectiveness of an internal control over financial reporting at the end of the fiscal year after we are no longer an "emerging growth company" under the Jumpstart Our Business Startups Act, which may be for up to five fiscal years after the completion of this offering. Any failure to develop, implement or maintain effective internal controls or to improve our internal controls could harm our operating results or cause us to fail to meet our reporting obligations. Given the difficulties inherent in the design and operation of internal controls over financial reporting, we can provide no assurance as to our, or our independent registered public accounting firm's, conclusions about the effectiveness of our internal controls, and we may incur significant costs in our efforts to comply with Section 404. Ineffective internal controls will subject us to regulatory scrutiny and a loss of confidence in our reported financial information, which could have an adverse effect on our business and would likely have a negative effect on the trading price of our common units.


Risks Inherent in an Investment in Us

Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors.

        Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management's decisions regarding our business. Unitholders will have no right on an annual or ongoing basis to elect our general partner or its board of directors. USA Compression Holdings is the sole member of our general partner and will have the right to appoint our general partner's entire board of directors, including our independent directors. If the unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price. Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders' ability to influence the manner or direction of management.

USA Compression Holdings owns and controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including USA Compression Holdings, have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of us and our common unitholders.

        Following this offering, USA Compression Holdings, which is principally owned and controlled by Riverstone, will own and control our general partner and will appoint all of the officers and directors of our general partner, some of whom will also be officers and directors of USA Compression Holdings. Although our general partner has a fiduciary duty to manage us in a manner that is beneficial to us and our unitholders, the directors and officers of our general partner have a fiduciary duty to manage our general partner in a manner that is beneficial to its owners. Conflicts of interest will arise between USA Compression Holdings, Riverstone and our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts of interest, our general

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partner may favor its own interests and the interests of USA Compression Holdings and the other owners of USA Compression Holdings over our interests and the interests of our common unitholders. These conflicts include the following situations, among others:

    neither our partnership agreement nor any other agreement requires USA Compression Holdings to pursue a business strategy that favors us;

    our general partner is allowed to take into account the interests of parties other than us, such as USA Compression Holdings, in resolving conflicts of interest;

    our partnership agreement limits the liability of and reduces the fiduciary duties owed by our general partner, and also restricts the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;

    except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;

    our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership interests and the creation, reduction or increase of reserves, each of which can affect the amount of cash that is distributed to our unitholders;

    our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders and to our general partner and the ability of the subordinated units to convert to common units;

    our general partner determines which costs incurred by it are reimbursable by us;

    our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period;

    our partnership agreement permits us to classify up to $         million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or to our general partner in respect of the general partner interest or the incentive distribution rights;

    our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf;

    our general partner intends to limit its liability regarding our contractual and other obligations;

    our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if they own more than 80% of the common units;

    our general partner controls the enforcement of the obligations that it and its affiliates owe to us;

    our general partner decides whether to retain separate counsel, accountants or others to perform services for us; and

    our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner's incentive distribution rights without the approval of the conflicts committee of the board of directors of our general

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      partner or our unitholders. This election may result in lower distributions to our common unitholders in certain situations.

        Please read "Conflicts of Interest and Fiduciary Duties."

Our general partner intends to limit its liability regarding our obligations.

        Our general partner intends to limit its liability under contractual arrangements so that the counterparties to such arrangements have recourse only against our assets, and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our general partner. Our partnership agreement provides that any action taken by our general partner to limit its liability is not a breach of our general partner's fiduciary duties, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.

Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.

        We expect that we will distribute all of our available cash to our unitholders and will rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. As a result, to the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow.

        In addition, because we distribute all of our available cash, our growth may not be as fast as that of businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement or our revolving credit facility on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may impact the available cash that we have to distribute to our unitholders.

Our partnership agreement limits our general partner's fiduciary duties to holders of our common and subordinated units.

        Our partnership agreement contains provisions that modify and reduce the fiduciary standards to which our general partner would otherwise be held by state fiduciary duty law. For example, our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, or otherwise free of fiduciary duties to us and our unitholders. This entitles our general partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. Examples of decisions that our general partner may make in its individual capacity include:

    how to allocate business opportunities among us and its affiliates;

    whether to exercise its limited call right;

    how to exercise its voting rights with respect to the units it owns;

    whether to elect to reset target distribution levels; and

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    whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement.

        By purchasing a common unit, a common unitholder agrees to become bound by the provisions in the partnership agreement, including the provisions discussed above. Please read "Conflicts of Interest and Fiduciary Duties—Fiduciary Duties."

Even if holders of our common units are dissatisfied, they cannot initially remove our general partner without USA Compression Holdings' consent.

        The unitholders initially will be unable to remove our general partner because our general partner and its affiliates will own sufficient units upon completion of this offering to be able to prevent its removal. The vote of the holders of at least 662/3% of all outstanding common and subordinated units voting together as a single class is required to remove our general partner. Following the closing of this offering, USA Compression Holdings will own an aggregate of            % of our outstanding common and subordinated units. Also, if our general partner is removed without cause during the subordination period and no units held by the holders of the subordinated units or their affiliates are voted in favor of that removal, all subordinated units held by our general partner and its affiliates will automatically be converted into common units. If no units held by any holder of subordinated units or its affiliates are voted in favor of that removal, all subordinated units will convert automatically into common units and any existing arrearages on the common units will be extinguished. A removal of our general partner under these circumstances would adversely affect our common units by prematurely eliminating their distribution and liquidation preference over our subordinated units, which would otherwise have continued until we had met certain distribution and performance tests. Cause is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our general partner liable for actual fraud or willful misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor management of the business.

Our partnership agreement restricts the remedies available to holders of our common units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

        Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our partnership agreement:

    provides that whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity;

    provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith, meaning that it believed that the decisions were in the best interest of our partnership;

    provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or their assignees resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and

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    provides that our general partner will not be in breach of its obligations under the partnership agreement or its fiduciary duties to us or our unitholders if a transaction with an affiliate or the resolution of a conflict of interest is:

    approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval;

    approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates;

    on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or

    fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.

        In connection with a situation involving a transaction with an affiliate or a conflict of interest, any determination by our general partner must be made in good faith. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee and the board of directors of our general partner determines that the resolution or course of action taken with respect to the affiliate transaction or conflict of interest satisfies either of the standards set forth in subclauses (c) and (d) above, then it will be presumed that, in making its decision, the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.

Our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to its incentive distribution rights, without the approval of the conflicts committee of its board of directors or the holders of our common units. This could result in lower distributions to holders of our common units.

        Our general partner has the right, at any time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0%) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our distributions at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution, and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.

        If our general partner elects to reset the target distribution levels, it will be entitled to receive a number of common units and general partner units. The number of common units to be issued to our general partner will equal the number of common units which would have entitled the holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to our general partner on the incentive distribution rights in the prior two quarters. Our general partner's general partner interest in us (currently 2.0%) will be maintained at the percentage that existed immediately prior to the reset election. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion. It is possible, however, that our general partner could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units to our

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general partner in connection with resetting the target distribution levels. Please read "Provisions of our Partnership Agreement Relating to Cash Distributions—General Partner's Right to Reset Incentive Distribution Levels."

Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units.

        Unitholders' voting rights are further restricted by a provision of our partnership agreement providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their direct transferees and their indirect transferees approved by our general partner (which approval may be granted in its sole discretion) and persons who acquired such units with the prior approval of our general partner, cannot vote on any matter.

Our general partner interest or the control of our general partner may be transferred to a third party without unitholder consent.

        Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. Furthermore, our partnership agreement does not restrict the ability of USA Compression Holdings to transfer all or a portion of its ownership interest in our general partner to a third party. The new owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with its own designees and thereby exert significant control over the decisions made by the board of directors and officers.

An increase in interest rates may cause the market price of our common units to decline.

        Like all equity investments, an investment in our common units is subject to certain risks. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly traded partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.

You will experience immediate and substantial dilution in pro forma net tangible book value of $        per common unit.

        The assumed initial public offering price of $            per common unit exceeds our pro forma net tangible book value of $            per common unit as of March 31, 2012. Based on the initial public offering price of $            per common unit, you will incur immediate and substantial dilution of $            per common unit. This dilution results primarily because the assets contributed by our general partner and its affiliates are recorded in accordance with GAAP at their historical cost, and not their fair value. Please read "Dilution."

We may issue additional units without your approval, which would dilute your existing ownership interests.

        Our partnership agreement does not limit the number of additional limited partner interests that we may issue at any time without the approval of our unitholders. The issuance by us of additional common units, including pursuant to our planned DRIP, or other equity securities of equal or senior rank, will have the following effects:

    our existing unitholders' proportionate ownership interest in us will decrease;

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    the amount of cash available for distribution on each unit may decrease;

    because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;

    the ratio of taxable income to distributions may increase;

    the relative voting strength of each previously outstanding unit may be diminished; and

    the market price of the common units may decline.

USA Compression Holdings may sell units in the public or private markets, and such sales could have an adverse impact on the trading price of the common units.

        After the sale of the common units offered by this prospectus, USA Compression Holdings will hold an aggregate of                     common units and                    subordinated units. All of the subordinated units will convert into common units at the end of the subordination period and may convert earlier under certain circumstances. In addition, USA Compression Holdings may acquire additional common units in connection with our planned DRIP. We have agreed to provide USA Compression Holdings with certain registration rights for any common and subordinated units it owns. Please read "The Partnership Agreement—Registration Rights." The sale of these units in the public or private markets could have an adverse impact on the price of the common units or on any trading market that may develop.

Our general partner has a call right that may require you to sell your units at an undesirable time or price.

        If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price that is not less than their then-current market price, as calculated pursuant to the terms of our partnership agreement. As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return or a negative return on your investment. You may also incur a tax liability upon a sale of your units. At the completion of this offering, and assuming no exercise of the underwriters' option to purchase additional common units, USA Compression Holdings will own an aggregate of approximately        % of our outstanding common units. At the end of the subordination period (which could occur as early as March 31, 2013), assuming no additional issuances of common units (other than upon the conversion of the subordinated units), USA Compression Holdings will own an aggregate of approximately        % of our outstanding common units. For additional information about this right, please read "The Partnership Agreement—Limited Call Right."

Your liability may not be limited if a court finds that unitholder action constitutes control of our business.

        A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. Our partnership is organized under Delaware law, and we conduct business in a number of other states. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we do business. You could be liable for any and all of our obligations as if you were a general partner if a court or government agency were to determine that:

    we were conducting business in a state but had not complied with that particular state's partnership statute; or

    your right to act with other unitholders to remove or replace our general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute "control" of our business.

        For a discussion of the implications of the limitations of liability on a unitholder, please read "The Partnership Agreement—Limited Liability."

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Unitholders may have liability to repay distributions that were wrongfully distributed to them.

        Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"), we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Substituted limited partners are liable both for the obligations of the assignor to make contributions to the partnership that were known to the substituted limited partner at the time it became a limited partner and for those obligations that were unknown if the liabilities could have been determined from the partnership agreement. Neither liabilities to partners on account of their partnership interest nor liabilities that are non-recourse to the partnership are counted for purposes of determining whether a distribution is permitted.

There is no existing market for our common units, and a trading market that will provide you with adequate liquidity may not develop. The price of our common units may fluctuate significantly, and you could lose all or part of your investment.

        Prior to this offering, there has been no public market for our common units. After this offering, there will be only                     publicly traded common units. In addition, USA Compression Holdings will own an aggregate of                    common and                    subordinated units, representing an aggregate        % limited partner interest in us. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. You may not be able to resell your common units at or above the initial public offering price. Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of the common units and limit the number of investors who are able to buy the common units.

        The initial public offering price for the common units will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of the market price of the common units that will prevail in the trading market. The market price of our common units may decline below the initial public offering price. The market price of our common units may also be influenced by many factors, some of which are beyond our control, including:

    our quarterly distributions;

    our quarterly or annual earnings or those of other companies in our industry;

    announcements by us or our competitors of significant contracts or acquisitions;

    changes in accounting standards, policies, guidance, interpretations or principles;

    general economic conditions;

    the failure of securities analysts to cover our common units after this offering or changes in financial estimates by analysts;

    future sales of our common units; and

    other factors described in these "Risk Factors."

The New York Stock Exchange, or NYSE, does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements.

        Our common units have been approved for listing (subject to official notice of issuance) on the NYSE. Because we will be a publicly traded partnership, the NYSE does not require us to have a majority of independent directors on our general partner's board of directors or to establish a compensation committee or a nominating and corporate governance committee. Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of

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the NYSE corporate governance requirements. Please read "Management of USA Compression Partners, LP."

We will incur increased costs as a result of being a publicly traded partnership.

        We have no history operating as a publicly traded partnership. As a publicly traded partnership, we will incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002 and related rules subsequently implemented by the SEC and the NYSE have required changes in the corporate governance practices of publicly traded companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make activities more time-consuming and costly. For example, as a result of being a publicly traded partnership, we are required to have at least three independent directors, create an audit committee and adopt policies regarding internal controls and disclosure controls and procedures, including the preparation of reports on internal controls over financial reporting. In addition, we will incur additional costs associated with our publicly traded partnership reporting requirements. We also expect these new rules and regulations to make it more difficult and more expensive for our general partner to obtain director and officer liability insurance and result in our general partner possibly having to accept reduced policy limits and coverage. As a result, it may be more difficult for our general partner to attract and retain qualified persons to serve on its board of directors or as executive officers. We have included $3.1 million of estimated incremental costs per year associated with being a publicly traded partnership in our financial forecast included elsewhere in this prospectus. However, it is possible that our actual incremental costs of being a publicly traded partnership will be higher than we currently estimate.

Pursuant to recently enacted federal securities laws, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX for so long as we are an emerging growth company.

        We will be required to disclose changes made in our internal control over financial reporting on a quarterly basis, and we will be required to assess the effectiveness of our controls annually. However, for as long as we are an "emerging growth company" under federal securities laws, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX. We could be an emerging growth company for up to five years. See "Summary—Implications of Being an Emerging Growth Company." Even if we conclude that our internal control over financial reporting is effective, our independent registered public accounting firm may still decline to attest to our assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.


Tax Risks to Common Unitholders

        In addition to reading the following risk factors, please read "Material Federal Income Tax Consequences" for a more complete discussion of the expected material federal income tax consequences of owning and disposing of common units.

Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service, or IRS, were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, then our cash available for distribution to our unitholders would be substantially reduced.

        The anticipated after-tax economic benefit of an investment in the common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the IRS on this or any other tax matter affecting us.

        Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax

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purposes. Although we do not believe based upon our current operations that we are or will be so treated, a change in our business or a change in current law could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.

        If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay state and local income tax at varying rates. Distributions would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions or credits would flow through to you. Because a tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Therefore, if we were treated as a corporation for federal income tax purposes, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.

If we were subjected to a material amount of additional entity-level taxation by individual states, it would reduce our cash available for distribution to our unitholders.

        Changes in current state law may subject us to additional entity-level taxation by individual states. Because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. For example, we are required to pay Texas franchise tax each year at a maximum effective rate of 0.7% of our gross income apportioned to Texas in the prior year. Imposition of any similar taxes by any other state may substantially reduce the cash available for distribution to our unitholders and, therefore, negatively impact the value of an investment in our common units. Our partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to additional amounts of entity-level taxation, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us.

The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

        The present federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. For example, judicial interpretations of the U.S. federal income tax laws may have a direct or indirect impact on our status as a partnership and, in some instances, a court's conclusions may heighten the risk of a challenge regarding our status as a partnership. Moreover, members of the U.S. Congress have recently considered substantive changes to the existing federal income tax laws that would have affected the tax treatment of certain publicly traded partnerships. We are unable to predict whether any of these changes, or other proposals, will be reconsidered or will ultimately be enacted. Any such changes or differing judicial interpretations of existing laws could be applied retroactively and could negatively impact the value of an investment in our common units.

        Our partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us.

Our unitholders' share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.

        Because a unitholder will be treated as a partner to whom we will allocate taxable income that could be different in amount than the cash we distribute, a unitholder's allocable share of our taxable income will be taxable to it, which may require the payment of federal income taxes and, in some

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cases, state and local income taxes, on its share of our taxable income even if it receives no cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income.

If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution to our unitholders.

        We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter affecting us. The IRS may adopt positions that differ from the conclusions of our counsel expressed in this prospectus or from the positions we take, and the IRS's positions may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel's conclusions or the positions we take. A court may not agree with some or all of our counsel's conclusions or the positions we take. Any contest with the IRS, and the outcome of any IRS contest, may have a materially adverse impact on the market for our common units and the price at which they trade. In addition, our costs of any contest with the IRS will be borne indirectly by our unitholders and our general partner because the costs will reduce our cash available for distribution.

Tax gain or loss on the disposition of our common units could be more or less than expected.

        If our unitholders sell common units, they will recognize a gain or loss for federal income tax purposes equal to the difference between the amount realized and their tax basis in those common units. Because distributions in excess of their allocable share of our net taxable income decrease their tax basis in their common units, the amount, if any, of such prior excess distributions with respect to the common units a unitholder sells will, in effect, become taxable income to the unitholder if it sells such common units at a price greater than its tax basis in those common units, even if the price received is less than its original cost. Furthermore, a substantial portion of the amount realized on any sale of common units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture. In addition, because the amount realized includes a unitholder's share of our nonrecourse liabilities, a unitholder that sells common units may incur a tax liability in excess of the amount of cash received from the sale. Please read "Material Federal Income Tax Consequences—Disposition of Common Units—Recognition of Gain or Loss" for a further discussion of the foregoing.

Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.

        Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income. If you are a tax-exempt entity or a non-U.S. person, you should consult a tax advisor before investing in our common units.

We will treat each purchaser of common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.

        Because we cannot match transferors and transferees of common units and because of other reasons, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to you. Our counsel is unable to opine as to the validity of such filing

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positions. It also could affect the timing of these tax benefits or the amount of gain from your sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to your tax returns. Please read "Material Federal Income Tax Consequences—Tax Consequences of Unit Ownership—Section 754 Election" for a further discussion of the effect of the depreciation and amortization positions we will adopt.

We prorate our items of income, gain, loss and deduction for federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.

        We will prorate our items of income, gain, loss and deduction for federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The use of this proration method may not be permitted under existing Treasury Regulations, and, accordingly, our counsel is unable to opine as to the validity of this method. Recently, however, the U.S. Treasury Department issued proposed Treasury Regulations that provide a safe harbor pursuant to which publicly traded partnerships may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders. Nonetheless, the proposed regulations do not specifically authorize the use of the proration method we have adopted. If the IRS were to challenge our proration method or new Treasury regulations were issued, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders. Please read "Material Federal Income Tax Consequences—Disposition of Common Units—Allocations Between Transferors and Transferees."

A unitholder whose common units are loaned to a "short seller" to effect a short sale of common units may be considered as having disposed of those common units. If so, he would no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.

        Because a unitholder whose common units are loaned to a "short seller" to effect a short sale of common units may be considered as having disposed of the loaned common units, he may no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary income. Our counsel has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to effect a short sale of common units; therefore, our unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from loaning their common units.

We will adopt certain valuation methodologies and monthly conventions for federal income tax purposes that may result in a shift of income, gain, loss and deduction between our general partner and our unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units.

        When we issue additional units or engage in certain other transactions, we will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our general partner. Our methodology may be viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction between certain unitholders and our general partner, which may be unfavorable to such unitholders. Moreover, under our valuation methods, subsequent purchasers of common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to our tangible

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assets and a lesser portion allocated to our intangible assets. The IRS may challenge our valuation methods, or our allocation of the Section 743(b) adjustment attributable to our tangible and intangible assets, and allocations of taxable income, gain, loss and deduction between our general partner and certain of our unitholders.

        A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of taxable gain from our unitholders' sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders' tax returns without the benefit of additional deductions.

The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the termination of our partnership for federal income tax purposes.

        We will be considered to have technically terminated for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and our unitholders could receive two Schedules K-1 if relief was not available, as described below) for one fiscal year and could result in a deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of termination. A technical termination currently would not affect our classification as a partnership for federal income tax purposes, but instead we would be treated as a new partnership for such tax purposes. If treated as a new partnership, we must make new tax elections and could be subject to penalties if we are unable to determine that a termination occurred. The IRS has recently announced a publicly traded partnership technical termination relief program whereby a publicly traded partnership that technically terminated may request publicly traded partnership technical termination relief which, if granted by the IRS, among other things would permit the partnership to provide only one Schedule K-1 to unitholders for the year notwithstanding two partnership tax years. Please read "Material Federal Income Tax Consequences—Disposition of Common Units—Constructive Termination" for a discussion of the consequences of our termination for federal income tax purposes.

As a result of investing in our common units, you may become subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties.

        In addition to federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or control property now or in the future, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. We initially expect to conduct business in seventeen states. Many of these states currently impose a personal income tax on individuals. Many of these states also impose an income tax on corporations and other entities. As we make acquisitions or expand our business, we may control assets or conduct business in additional states or foreign jurisdictions that impose a personal income tax. It is your responsibility to file all foreign, federal, state and local tax returns. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in our common units.

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USE OF PROCEEDS

        We expect to receive net proceeds of approximately $             million from this offering, after deducting the underwriting discounts and commissions and offering expenses. Our estimate assumes an initial public offering price of $            per common unit and no exercise of the underwriters' option to purchase additional common units.

        We will use the net proceeds from this offering (excluding the net proceeds from any exercise of the underwriters' option to purchase additional common units) to repay $             of indebtedness outstanding under our revolving credit facility. We will incur indebtedness under our revolving credit facility to fund capital expenditures, terminate interest rate swaps related to our revolving credit facility and for working capital needs. We have incurred indebtedness from time to time under our revolving credit facility to fund capital expenditures and for working capital purposes. On December 15, 2011 we used borrowings under the facility to purchase the compression units previously leased from Caterpillar for $43 million. On November 16, 2011, we amended our revolving credit facility, which increased the overall commitments under the facility from $400 million to $500 million and reduced our applicable margin for LIBOR loans from a range of 300 to 375 basis points above LIBOR to a range of 200 to 275 basis points above LIBOR, depending on our leverage ratio. At March 31, 2012, the interest rate on amounts borrowed under the revolving credit facility was 3.0%. A $1.00 increase or decrease in the initial public offering price per common unit would cause the net proceeds from the offering, after deducting the underwriting discounts and commissions and offering expenses payable by us, to increase or decrease by approximately $             million. If the initial public offering price were to exceed $            per common unit or if we were to increase the number of common units in this offering (other than through the underwriters' exercise of their option to purchase additional units), we would repay more indebtedness under our revolving credit facility. If the initial public offering price were to be less than $            per common unit or if we were to decrease the number of common units in this offering, we would repay less indebtedness under the revolving credit facility, which will increase our pro forma interest expense and reduce our cash available for distribution.

        We will use the net proceeds from any exercise of the underwriters' option to purchase additional common units to redeem from USA Compression Holdings a number of common units equal to the number of common units issued upon the exercise of the underwriters' option.

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CAPITALIZATION

        The following table shows:

    our historical cash and capitalization as of March 31, 2012; and

    our historical cash and capitalization as of March 31, 2012, as adjusted to reflect this offering, the use of the net proceeds from this offering to repay $       million of indebtedness outstanding under our revolving credit facility, and the conversion of our limited partner and general partner interests in connection with the closing of this offering as described under "Summary—Partnership Structure and Offering-Related Transactions." See "Use of Proceeds."

        We derived this table from, and it should be read in conjunction with and is qualified in its entirety by reference to, the historical financial statements and the accompanying notes included elsewhere in this prospectus. You should also read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of March 31, 2012  
 
  Historical   As Adjusted  
 
  (in thousands)
 

Cash

  $ 7   $               
           

Long-term debt (including current maturities):

             
 

Revolving credit facility(1)

  $ 402,682   $    
 

Other notes payable

    29        
           
   

Total long-term debt

    402,711        

Partners' equity:

             
 

Limited partner's capital(2)

    337,902      
 

General partner's capital(3)

    2,364      
 

Common unitholders

           
 

Subordinated unitholder

           
 

General partner interest

           
           
   

Total partners' equity

    340,266        
           
     

Total capitalization

  $ 742,977   $    
           

(1)
As of                        , 2012, there was $       million outstanding under our revolving credit facility.

(2)
We will convert the limited partner interest held by USA Compression Holdings into common units and subordinated units, representing an aggregate       % limited partner interest in us.

(3)
We will convert the general partner interest held by USA Compression GP, LLC, our general partner, into a 2.0% general partner interest in us and our incentive distribution rights.

        A $1.00 increase or decrease in the initial public offering price per common unit would cause the net proceeds from the offering, after deducting the underwriting discounts and commissions and offering expenses payable by us, to increase or decrease by $             million. If the initial public offering price were to exceed $            per common unit or if we were to increase the number of common units in this offering (other than through the underwriters' exercise of their option to purchase additional units), we would repay more indebtedness under our revolving credit facility. If the initial public offering price were to be less than $            per common unit or if we were to decrease the number of common units in this offering, we would repay less indebtedness under our revolving credit facility. The as adjusted information set forth above is illustrative only and following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

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DILUTION

        Dilution is the amount by which the offering price paid by the purchasers of common units sold in this offering will exceed the pro forma net tangible book value per unit after the offering. On a pro forma basis as of March 31, 2012, after giving effect to the offering of common units and the application of the related net proceeds, and assuming the underwriters' option to purchase additional common units is not exercised, our net tangible book value was $             million, or $            per unit. Purchasers of common units in this offering will experience substantial and immediate dilution in net tangible book value per common unit for financial accounting purposes, as illustrated in the following table:

Assumed initial public offering price per common unit

        $               

Net tangible book value per unit before the offering(1)

  $                     

Decrease in net tangible book value per unit attributable to purchasers in the offering

             
             

Less: Pro forma net tangible book value per unit after the offering(2)

             

Immediate dilution in net tangible book value per common unit to new investors(3)

        $               
             

(1)
Determined by dividing the number of units (                common units,                     subordinated units and                    units representing the 2.0% general partner interest) to be issued to USA Compression Holdings and its affiliates in connection with this offering by the net tangible book value of the contributed interests.

(2)
Determined by dividing the total number of units to be outstanding after the offering (                common units,                     subordinated units and                 units representing the 2.0% general partner interest) by our pro forma net tangible book value.

(3)
For each increase or decrease in the initial public offering price of $1.00 per common unit, dilution in net tangible book value per common unit would increase or decrease by $            per common unit.

        The following table sets forth the number of units that we will issue and the total consideration contributed to us by our general partner and its affiliates and by the purchasers of common units in this offering upon consummation of the transactions contemplated by this prospectus:

 
  Units Acquired   Total
Consideration
 
 
  Number   Percent   Amount   Percent  

General partner and affiliates(1)

                     % $                %

New investors

                     % $                %
                   
 

Total

                   100.0 % $              100.0 %
                   

(1)
The units held by our general partner and its affiliates consist of            common units,                     subordinated units and                     general partner units.

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OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS

        You should read the following discussion of our cash distribution policy in conjunction with the factors and assumptions upon which our cash distribution policy is based, which are included under the heading "—Assumptions and Considerations" below. In addition, please read "Forward-Looking Statements" and "Risk Factors" for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our business. For additional information regarding our historical and pro forma operating results, you should refer to our historical financial statements and pro forma financial data, and the notes thereto, included elsewhere in this prospectus.


General

        Rationale for our cash distribution policy.    Our partnership agreement requires us to distribute all of our available cash quarterly. Our cash distribution policy reflects a judgment that our unitholders will be better served by our distributing rather than retaining our available cash. Generally, our available cash is our (i) cash on hand at the end of a quarter after the payment of our expenses and the establishment of cash reserves and (ii) cash on hand resulting from working capital borrowings made after the end of the quarter. Because we are not subject to an entity-level federal income tax, we have more cash to distribute to our unitholders than would be the case were we subject to federal income tax.

        Limitations on cash distributions and our ability to change our cash distribution policy.    There is no guarantee that our unitholders will receive quarterly distributions from us. We do not have a legal obligation to pay the minimum quarterly distribution or any other distribution except as provided in our partnership agreement. Our cash distribution policy may be changed at any time and is subject to certain restrictions, including the following:

    our cash distribution policy may be subject to restrictions on distributions under our revolving credit facility or other debt agreements entered into in the future. Our revolving credit facility contains financial tests and covenants that we must satisfy. Should we be unable to satisfy these restrictions, we may be prohibited from making cash distributions to you notwithstanding our stated cash distribution policy. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving Credit Facility;"

    our general partner will have the authority to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment or increase of those reserves could result in a reduction in cash distributions to you from the levels we currently anticipate pursuant to our stated distribution policy. Any determination to establish cash reserves made by our general partner in good faith will be binding on our unitholders;

    although our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including the provisions requiring us to make cash distributions contained therein, may be amended. Our partnership agreement generally may not be amended during the subordination period without the approval of our public common unitholders. However, our partnership agreement can be amended with the consent of our general partner and the approval of a majority of the outstanding common units (including common units held by USA Compression Holdings) after the subordination period has ended. At the closing of this offering, USA Compression Holdings will own our general partner and will own an aggregate of approximately        % of our outstanding common and subordinated units;

    even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement;

    under Section 17-607 of the Delaware Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets;

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    we may lack sufficient cash to pay distributions to our unitholders due to cash flow shortfalls attributable to a number of operational, commercial or other factors as well as increases in our operating or general and administrative expense, principal and interest payments on our debt, tax expenses, working capital requirements and anticipated cash needs. Our cash available for distribution to unitholders is directly impacted by our cash expenses necessary to run our business and will be reduced dollar-for-dollar to the extent such uses of cash increase. Our general partner is entitled to reimbursement of all direct and indirect expenses incurred on our behalf, which we expect to be approximately $                        for the twelve months ending March 31, 2013;

    if and to the extent our cash available for distribution materially declines, we may elect to reduce our quarterly distribution in order to service or repay our debt or fund expansion capital expenditures; and

    all available cash distributed by us on any date from any source will be treated as distributed from operating surplus until the sum of all available cash distributed since the closing of this offering equals the operating surplus from the closing of this offering through the end of the quarter immediately preceding that distribution. We anticipate that distributions from operating surplus will generally not represent a return of capital. However, operating surplus includes certain components, including a $         million cash basket, that represent non-operating sources of cash. Accordingly, it is possible that return of capital distributions could be made from operating surplus. Any cash distributed by us in excess of operating surplus will be deemed to be capital surplus under our partnership agreement. Our partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from this initial public offering, which is a return of capital. We do not anticipate that we will make any distributions from capital surplus.

        Our ability to grow is dependent on our ability to access external expansion capital.    Our partnership agreement requires us to distribute all of our available cash to our unitholders. As a result, we expect that we will rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. To the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow. In addition, because we distribute all of our available cash, our growth may not be as fast as that of businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement or our revolving credit facility on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which in turn may impact the available cash that we have to distribute to our unitholders.


Our Minimum Quarterly Distribution

        Upon completion of this offering, the board of directors of our general partner will establish a minimum quarterly distribution of $          per unit per complete quarter, or $          per unit per year, to be paid no later than 45 days after the end of each fiscal quarter beginning with the quarter ending                   . This equates to an aggregate cash distribution of approximately $           million per quarter, or approximately $           million per year, based on the number of common and subordinated units and the 2.0% general partner interest to be outstanding immediately after the completion of this offering. Our ability to make cash distributions equal to the minimum quarterly distribution pursuant to this policy will be subject to the factors described above under the caption "—General—Limitations on Cash Distributions and Our Ability to Change Our Distribution Policy."

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        If the underwriters' option to purchase additional common units is exercised, we will issue additional common units to the public and use the net proceeds to redeem an equivalent number of common units from USA Compression Holdings. Accordingly, the exercise of the underwriters' option will not affect the total number of units outstanding or the amount of cash needed to pay the minimum quarterly distribution on all units. Please read "Underwriting."

        Initially, our general partner will be entitled to 2.0% of all distributions that we make prior to our liquidation. In the future, our general partner's initial 2.0% interest in these distributions may be reduced if we issue additional units and our general partner does not contribute a proportionate amount of capital to us to maintain its initial 2.0% general partner interest.

        The table below sets forth the number of outstanding common units, subordinated units and general partner units upon the closing of this offering and the aggregate distribution amounts payable on such units at our minimum quarterly distribution rate of $          per unit per quarter ($          per unit on an annualized basis).

 
   
  Distributions  
 
  Number of
Units
  One
Quarter
  Four
Quarters
 

Publicly held common units

        $     $    

Common units held by USA Compression Holdings

                   

Subordinated units held by USA Compression Holdings

                   

General partner units held by USA Compression GP, LLC

                   
               
 

Total

        $     $    
               

        The subordination period generally will end if we have earned and paid at least $            on each outstanding common unit and subordinated unit and the corresponding distribution on our general partner's 2.0% interest for each of three consecutive, non-overlapping four-quarter periods ending on or after March 31, 2015. If, in respect of any quarter, we have earned and paid at least $            (150.0% of the annualized minimum quarterly distribution) on each outstanding common unit and subordinated unit and the corresponding distribution on our general partner's 2.0% interest and the related distribution on the incentive distributions rights for the four-quarter period immediately preceding that date, the subordination period will terminate automatically and all of the subordinated units will convert into an equal number of common units. Please read the "Provisions of our Partnership Agreement Relating to Cash Distributions—Subordination Period."

        If we do not pay the minimum quarterly distribution on our common units, our common unitholders will not be entitled to receive such payments in the future except during the subordination period. To the extent we have available cash in any future quarter during the subordination period in excess of the amount necessary to pay the minimum quarterly distribution to holders of our common units, we will use this excess available cash to pay any distribution arrearages related to prior quarters before any cash distribution is made to holders of subordinated units. Our subordinated units will not accrue arrearages for unpaid quarterly distributions or quarterly distributions less than the minimum quarterly distribution. Please read "Provisions of our Partnership Agreement Relating to Cash Distributions—Subordination Period."

        The requirement to distribute available cash quarterly, as provided in our partnership agreement, may not be modified or repealed without amending our partnership agreement. The actual amount of our cash distributions for any quarter is subject to fluctuations based on the amount of cash we generate from our business and the amount of reserves our general partner establishes in accordance with our partnership agreement as described above. We do not anticipate that our general partner will establish cash reserves as of the closing of this offering or during the twelve months ending March 31, 2013. We will pay our distributions on or about the 15th of each of February, May, August and

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November to holders of record on or about the 1st of each such month. If the distribution date does not fall on a business day, we will make the distribution on the business day immediately preceding the indicated distribution date. We will adjust the quarterly distribution for the period from the closing of this offering through June 30, 2012 based on the actual length of the period.

        In the sections that follow, we present in detail the basis for our belief that we will be able to fully fund our minimum quarterly distribution of $              per unit each quarter for the year ending December 31, 2012. In those sections, we present two tables, consisting of:

    "Unaudited Pro Forma Cash Available for Distribution," in which we present the amount of cash we would have had available for distribution on a pro forma basis for the twelve months ended December 31, 2011 and March 31, 2012, derived from our unaudited pro forma financial data included in this prospectus, as adjusted to give pro forma effect to the offering and the offering-related transactions; and

    "Estimated Cash Available for Distribution," in which we demonstrate our ability to generate the minimum estimated Adjusted EBITDA necessary for us to pay the minimum quarterly distribution on all units for each quarter for the twelve months ending March 31, 2013.


Pro Forma Cash Available for Distribution for the Twelve Months Ended December 31, 2011 and March 31, 2012

        If we had completed the transactions contemplated in this prospectus on January 1, 2011, our pro forma cash available for distribution for the twelve months ended December 31, 2011 and March 31, 2012 would have been approximately $33.9 million and $33.6 million, respectively. This amount would have been sufficient to pay the full minimum quarterly distribution on all of the common units for the twelve months ended December 31, 2011 and March 31, 2012, but would have been insufficient by approximately $         million and $         million, respectively, to pay the full minimum quarterly distribution on the subordinated units for these periods.

        The pro forma financial statements, upon which pro forma cash available for distribution is based, do not purport to present our results of operations had the transactions contemplated in this prospectus actually been completed as of the dates indicated. Furthermore, cash available for distribution is a cash accounting concept, while our pro forma financial statements have been prepared on an accrual basis. We derived the amounts of pro forma cash available for distribution shown above in the manner described in the table below. As a result, the amount of pro forma cash available for distribution should only be viewed as a general indication of the amount of cash available for distribution that we might have generated had we been formed in earlier periods. Please see our unaudited pro forma financial statements included elsewhere in this prospectus.

        The following table illustrates, on a pro forma basis, for the twelve months ended December 31, 2011 and March 31, 2012, the amount of available cash (without any reserve) that would have been available for distribution to our unitholders, assuming that the offering had been consummated on January 1, 2011. The pro forma adjustments presented below give effect to (i) this offering and the related transactions and (ii) the entry into the second amendment to our revolving credit facility in November 2011. Pro forma Adjusted EBITDA and pro forma cash available for distribution are further adjusted to give effect to (i) the purchase on December 15, 2011 of the compression units previously leased from Caterpillar for $43 million, (ii) the termination of interest rate swaps related to our revolving credit facility in connection with the closing of this offering and (iii) the elimination of management fees and restructuring charges that we do not expect to incur in future periods. Certain of the adjustments are explained in further detail in the footnotes to such adjustments.

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Unaudited Pro Forma Cash Available for Distribution

 
  Twelve Months Ended(1)  
 
  December 31,
2011
  March 31, 2012  
 
  (in thousands, except per unit and operating data)
 

Pro forma revenues:

             
 

Contract operations

  $ 93,896   $ 97,690  
 

Parts and service

    4,824     4,658  
           
 

Total pro forma revenues

    98,720     102,348  

Pro forma costs and expenses:

             
 

Cost of operations, exclusive of depreciation and amortization(2)

    39,605     39,685  
 

Selling, general and administrative

    12,726     13,717  
 

Restructuring charges(3)

    300     300  
 

Depreciation and amortization

    32,738     34,264  
 

(Gain) loss on sale of assets

    178     137  
           
 

Total pro forma costs and expenses

    85,547     88,103  
           

Pro forma operating income

    13,173     14,245  

Pro forma other income (expense):

             
 

Interest expense(4)

    (5,911 )   (7,195 )
 

Other

    21     21  
           
 

Pro forma total other expense

    (5,890 )   (7,174 )
           

Pro forma income before income tax expense

    7,283     7,071  

Pro forma income tax expense(5)

   
155
   
167
 
           

Pro forma net income

  $ 7,128   $ 6,904  
           

Adjustments to reconcile pro forma net income to pro forma Adjusted EBITDA(6):

             
 

Add:

             
   

Depreciation and amortization

    32,738     34,264  
   

Interest expense

    5,911     7,195  
   

Income tax expense

    155     167  
   

Share-based compensation expense

         
   

Equipment operating lease expense(7)

    4,053     3,084  
   

Riverstone management fee(8)

    1,000     750  
   

Restructuring charges

    300     300  
           

Pro forma Adjusted EBITDA

  $ 51,285   $ 52,664  

Adjustments to reconcile pro forma Adjusted EBITDA to pro forma cash available for distribution:

             
 

Less:

             
   

Cash interest expense before termination of interest rate swaps and equipment operating lease schedules(9)

    6,670     8,043  
   

Increase in cash interest expense due to the purchase of equipment and termination of the equipment operating lease schedules(10)

    717     634  
   

Income tax expense

    155     167  
   

Riverstone management fee

    1,000     750  
   

Expansion capital expenditures(11)

    124,303     170,259  
   

Maintenance capital expenditures(12)

    8,961     9,609  
 

Add:

             
   

Borrowings to fund expansion capital expenditures(13)

    124,303     170,259  
   

Reduction in cash interest expense due to termination of interest rate swaps(14)

    3,254     3,258  
           
 

Pro forma cash available for distribution

    37,036     36,719  
 

Less: Incremental general and administrative expenses associated with being a publicly traded partnership(15)

    3,100     3,100  
           

Pro forma cash available for distribution by USA Compression Partners, LP

  $ 33,936   $ 33,619  

Per unit minimum annual distribution(16)

             

Annual distributions to:

             
 

Publicly held common units

             
 

Common units held by USA Compression Holdings

             
 

Subordinated units held by USA Compression Holdings

             
 

General partner units held by our general partner

             

Total minimum annual cash distributions

             

Surplus / (Shortfall)

             

Fixed charge coverage ratio

             

(1)
Unaudited pro forma cash available for distribution for the year ended December 31, 2011 was derived from the unaudited pro forma financial statements included elsewhere in this prospectus. Unaudited pro forma cash available for distribution for the twelve months ended March 31, 2012 was derived by combining pro forma amounts for the nine months ended December 31, 2011 (not included in this prospectus) and the three months ended March 31, 2012 (included in this prospectus).

(2)
Includes $4.1 million and $3.1 million for the twelve months ended December 31, 2011 and March 31, 2012, respectively, of equipment operating lease expense related to compression units leased from Caterpillar. On December 15, 2011, we purchased the compression units that were previously leased under the operating lease facility for $43 million.

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(3)
During the year ended December 31, 2011, we incurred $0.3 million of restructuring charges that were for severance and retention benefits related to the termination of certain administrative employees. These charges are reflected as restructuring charges in our consolidated statement of operations for the year ended December 31, 2011. We paid approximately $0.1 million of these restructuring charges in the three months ended March 31, 2012, and we expect to pay the remaining $0.2 million in the three month period ending June 30, 2012.

(4)
On November 16, 2011 we amended our revolving credit facility to, among other things, increase the overall commitments under the facility from $400 million to $500 million. Our amended credit facility provides for an applicable margin for LIBOR loans of 200 to 275 basis points above LIBOR, depending on our leverage ratio, a reduction from 300 to 375 basis points above LIBOR prior to the amendment. Historical interest rates averaged 3.71% for the year ended December 31, 2011 and 3.02% for the three month period ended March 31, 2012. Pro forma interest expense is based on an average rate of 2.2% for the year ended December 31, 2011 and 2.3% for the three month period ended March 31, 2012.

(5)
This represents the Texas franchise tax (applicable to income apportioned to Texas beginning January 1, 2007) which, in accordance with ASC 740, is classified as an income tax for reporting purposes.

(6)
Adjusted EBITDA is defined as our net income before interest expense, income taxes, depreciation expense, impairment of compression equipment, share-based compensation expense, restructuring charges, management fees and expenses under our operating lease with Caterpillar. Please read "Selected Historical and Pro Forma Financial and Operating Data—Non-GAAP Financial Measures" for more information regarding Adjusted EBITDA.

(7)
Represents equipment operating lease expenses related to the Caterpillar equipment operating lease described in footnote (2) above. Because we purchased the compression units subject to this equipment operating lease from Caterpillar on December 15, 2011, we believe it is useful to investors to view our results excluding these payments.

(8)
Represents management fees paid to Riverstone, recorded in selling, general and administrative expense, for services performed during 2011. As these fees have not been paid by us after December 31, 2011 and will not be paid by us following this offering, we believe it is useful to investors to view our results excluding these fees.

(9)
Comprised of estimated interest expense of $5.9 million for the year ended December 31, 2011, (i) increased by the $2.6 million fair value gain on the interest rate swaps and (ii) less debt issuance amortization cost of $1.8 million for the year ended December 31, 2011. Comprised of estimated interest expense of $7.2 million for the twelve months ended March 31, 2012, (i) increased by the $2.7 million fair value gain on the interest rate swaps and (ii) less debt issuance amortization cost of $1.8 million.

(10)
Reflects a net increase in cash interest expense of $0.7 million and $0.6 million for the twelve months ended December 31, 2011 and March 31, 2012, respectively, from additional borrowings under our revolving credit facility to finance the purchase of compression units leased from Caterpillar as described in footnotes (2) and (7) above.

(11)
Reflects actual expansion capital expenditures for the period presented. Expansion capital expenditures are capital expenditures made to expand the operating capacity or revenue generating capacity of existing or new assets, including by acquisition of compression units or through modification of existing compression units to change their capacity. On December 15, 2011, we purchased all the compression units previously leased from Caterpillar for $43 million, which is included in expansion capital expenditures for the twelve months ended December 30, 2011. On December 16, 2011, we entered into an agreement with one of our new compression equipment suppliers to reduce certain previously made progress payments by $8 million and received a credit. We applied this $8 million credit to new compression units purchased from this supplier in the first quarter of 2012 and included the $8 million in expansion capital expenditures for the twelve months ended March 31, 2012.

(12)
Reflects actual maintenance capital expenditures for the period presented. Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the operating capacity of our assets and extend their useful lives, or other capital expenditures that are incurred in maintaining our existing business and related cash flow.

(13)
Represents borrowings we made under our revolving credit facility to fund expansion capital expenditures.

(14)
Reflects a reduction in cash interest expense of $3.3 million for the twelve months ended December 31, 2011 and March 31, 2012, due to the termination of out-of-the money interest rate swap agreements. We intend to terminate these interest rate swap agreements prior to the closing of this offering and, therefore, believe it is useful to investors to view our cash available for distribution excluding the impact of these swaps.

(15)
Reflects an adjustment for estimated incremental cash expenses associated with being a publicly traded partnership, including costs associated with annual and quarterly reports to unitholders, financial statement audits, tax return and Schedule K-1 preparation and distribution, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and director compensation. We estimate these incremental general and administrative expenses, some of which will be allocated to us by USA Compression Holdings, will increase our expenses by approximately $3.1 million per year.

(16)
Pro forma cash distributions are based on an assumed distribution of $        per unit per quarter. Our pro forma cash available for distribution for the twelve months ended December 31, 2011 and March 31, 2012 would have been sufficient to pay the full minimum quarterly distribution on the common units and          % and         %, respectively, of the minimum quarterly distribution on the subordinated units during this period.


Estimated Cash Available for Distribution for the Twelve Months Ending March 31, 2013

        As a result of the factors described in this section and in "—Assumptions and Considerations" below, we believe we will be able to pay the minimum quarterly distribution on all of our common units, subordinated units and general partner units for each quarter in the twelve months ending March 31, 2013.

        In order to pay the minimum quarterly distribution of $        per unit on all our common units, subordinated units and general partner units for four quarters, we estimate that our Adjusted EBITDA for the twelve months ending March 31, 2013 must be at least $         million. Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flows from operating activities

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or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure our operating performance, liquidity or ability to service debt obligations. Please read "Selected Historical and Pro Forma Financial and Operating Data—Non-GAAP Financial Measures" for an explanation of Adjusted EBITDA.

        We also anticipate that if our Adjusted EBITDA for such period is at or above our estimate, we would be permitted to make the minimum quarterly distributions on all the common units, subordinated units and general partner units under the applicable covenants, if any, under our revolving credit facility.

        We believe we will generate estimated Adjusted EBITDA of $65.6 million for the twelve months ending March 31, 2013, which includes approximately $3.1 million of estimated incremental cash expense associated with being a publicly traded partnership. You should read "—Assumptions and Considerations" below for a discussion of the material assumptions underlying this belief, which reflects our judgment of conditions we expect to exist and the course of action we expect to take. If our estimate is not achieved, we may not be able to pay the minimum quarterly distribution on all our units. We can give you no assurance that our assumptions will be realized or that we will generate the $             million in Adjusted EBITDA required to pay the minimum quarterly distribution on all our common units, subordinated units and general partner units for the four-quarter period ending March 31, 2013. There will likely be differences between our estimates and the actual results we will achieve, and those differences could be material. If we do not generate the estimated Adjusted EBITDA or if our maintenance capital expenditures or interest expense are higher than estimated, we may not be able to pay the minimum quarterly distribution on all units for the four-quarter period ending March 31, 2013.

        When considering our ability to generate our estimated Adjusted EBITDA of $65.6 million, you should keep in mind the risk factors and other cautionary statements under the heading "Risk Factors" and elsewhere in this prospectus. Any of these factors or the other risks discussed in this prospectus could cause our results of operations and cash available for distribution to our unitholders to vary significantly from those set forth below.

        We do not as a matter of course make public projections as to future revenues, earnings, or other results of operations. However, our management has prepared the prospective financial information set forth below to present the estimated cash available for distribution for the twelve months ending March 31, 2013. The accompanying prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of our management's knowledge and belief, the expected course of action and our expected future financial performance. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.

        Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

        We do not undertake any obligation to release publicly the results of any future revisions we may make to the financial forecast or to update this financial forecast to reflect events or circumstances after the date of this prospectus. In light of the above, the statement that we believe that we will have sufficient cash available for distribution to allow us to make the full minimum quarterly distribution on all our outstanding common units, subordinated units and general partner units for the four-quarter period ending March 31, 2013 should not be regarded as a representation by us or the underwriters or any other person that we will make such distributions.

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        The following table shows how we calculate the estimated Adjusted EBITDA necessary to pay the minimum quarterly distribution on all our common units, subordinated units and general partner units for the four quarters ending March 31, 2013. Our estimated Adjusted EBITDA presents the forecasted results of operations of USA Compression Partners, LP for the twelve months ending March 31, 2013. Our assumptions that we believe are relevant to particular line items in the table below are explained in the corresponding footnotes and in "—Assumptions and Considerations."


Estimated Cash Available for Distribution

 
  Twelve
Months
Ending
March 31,
2013
 
 
  (in thousands,
except per
unit data)

 

Revenues:

       
 

Contract operations

  $ 123,101  
 

Parts and service

    1,075  
       
 

Total revenues

    124,176  

Costs and expenses:

       
 

Cost of operations, exclusive of depreciation and amortization(1)

    40,999  
 

Selling, general and administrative(2)

    17,597  
 

Depreciation and amortization

    44,004  
       
 

Total costs and expenses

    102,600  
       

Operating income

    21,576  

Interest expense

   
(10,575

)
       

Income before income tax expense

    11,001  

Income tax expense(3)

   
206
 
       

Net income

  $ 10,795  
       

Adjustments to reconcile net income to estimated Adjusted EBITDA(4):

       
 

Add:

       
   

Depreciation and amortization

    44,004  
   

Interest expense

    10,575  
   

Income tax expense

    206  
       

Estimated Adjusted EBITDA

  $ 65,580  

Adjustments to reconcile estimated Adjusted EBITDA to estimated cash available for distribution:

       
 

Less:

       
   

Cash interest expense(5)

    9,111  
   

Income tax expense

    206  
   

Expansion capital expenditures(6)

    133,113  
   

Maintenance capital expenditures(7)

    11,292  
 

Add:

       
   

Borrowings to fund expansion capital expenditures

    133,113  
       

Estimated cash available for distribution

  $ 44,971  

Per unit minimum annual distribution

       

Annual distributions to:

       
 

Publicly held common units

       
 

Common units held by USA Compression Holdings

       
 

Subordinated units held by USA Compression Holdings

       
 

General partner units held by our general partner

       

Total minimum annual cash distributions

       

Excess of cash available for distributions over total minimum annual distributions

       

Fixed charge coverage ratio

       

(1)
Excludes equipment operating lease expense related to compression units leased from Caterpillar. On December 15, 2011, we purchased all the compression units that were previously leased from Caterpillar for $43 million and terminated all the lease schedules and covenants under the facility.

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(2)
Includes $3.1 million for estimated incremental cash expense associated with being a publicly traded partnership, including costs associated with annual and quarterly reports to unitholders, financial statement audits, tax return and Schedule K-1 preparation and distribution, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and director compensation. Also includes $            of estimated direct and indirect expenses for which our general partner will be entitled to reimbursement.

(3)
This represents the Texas franchise tax (applicable to income apportioned to Texas beginning January 1, 2007) which, in accordance with ASC 740, is classified as an income tax for reporting purposes.

(4)
Adjusted EBITDA is defined as our net income before interest expense, income taxes, depreciation expense, impairment of compression equipment and share-based compensation expense. Please read "Selected Historical and Pro Forma Financial and Operating Data—Non-GAAP Financial Measures" for more information regarding Adjusted EBITDA.

(5)
Estimated cash interest expense of $9.1 million is comprised of estimated interest expense of $10.6 million, which includes an adjustment to give effect to this offering and the use of the net proceeds of $         million, less debt issuance amortization cost of $1.5 million.

(6)
Reflects estimated expansion capital expenditures. Expansion capital expenditures are capital expenditures made to expand the operating capacity or revenue generating capacity of existing or new assets, including by acquisition of compression units or through modification of existing compression units to change their capacity.

(7)
Reflects estimated maintenance capital expenditures. Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the operating capacity of our assets and extend their useful lives, or other capital expenditures that are incurred in maintaining our existing business and related cash flow.


Assumptions and Considerations

        Based on a number of specific assumptions, we believe that, following completion of this offering, we will have sufficient cash available for distribution to allow us to make the full minimum quarterly distribution on all our outstanding common units, subordinated units and general partner units for the four-quarter period ending March 31, 2013. We believe that our assumptions, which include the following, are reasonable:

        Contract operations revenue.    We estimate that our contract operations revenue will be $123.1 million for the twelve months ending March 31, 2013, as compared to $97.7 million for the twelve months ended March 31, 2012 on a pro forma basis. The anticipated increase in our revenue is based upon the following assumptions:

    we expect to add significant new compression unit horsepower from March 31, 2012 through March 31, 2013, substantially all of which will be comprised of units greater than 1,000 horsepower, as we believe we will have strong demand for compression services in shale plays in the U.S.;

    our estimated revenue generating horsepower is based upon (i) customer commitments representing approximately         % of the 130,220 increase in revenue generating horsepower from March 31, 2012 to March 31, 2013, (ii) customer indications of horsepower needs related to their shorter-term field development drilling commitments and processing and transportation requirements and (iii) general discussions with our customers regarding their longer-term planned field development and enhancement programs; and

    the actual amount of revenue generating horsepower as of March 31, 2012, and the estimated amount of revenue generating horsepower for each quarter in the twelve months ending March 31, 2013, is as follows:

   
   
  Estimated  
   
  Actual
March 31,
2012
  June 30,
2012
  September 30,
2012
  December 31,
2012
  March 31,
2013
 
 

Revenue generating horsepower

    697,500     720,058     765,458     799,748     827,720  
 

Increase in revenue generating horsepower

          22,558     45,400     34,290     27,972  
 

Percentage increase

          3.2 %   6.3 %   4.5 %   3.5 %

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    for the twelve months ending March 31, 2013, the estimated service fee revenue assumes an average monthly revenue per revenue generating horsepower of $13.41 compared to $13.84 for the twelve months ended March 31, 2012 and revenue generating horsepower of 827,720 at March 31, 2013 compared to 697,500 at March 31, 2012.

    the decrease of our average monthly service fee per revenue generating horsepower results from the fact that market rates in 2009 and early 2010 were lower than market rates prior to 2009, and that as older contracts at higher rates expire, a larger percentage of our contracts are at the lower rates prevalent since 2009. Rates improved in the second half of 2010 and remained relatively stable through 2011. However, we expect to experience pricing pressure in 2012 across the horsepower ranges of our fleet (other than our largest horsepower units). The reduction in average monthly revenue per revenue generating horsepower is also related, in part, to the increase in the estimated average horsepower per revenue generating compression unit, which is estimated to be 807 for the twelve months ending March 31, 2013 as compared to 711 for the twelve months ended March 31, 2012. Over the long term, we expect that continued improved pricing will ultimately improve our average monthly revenue per revenue generating horsepower as contracts that we entered into in 2009 and early 2010 expire and we enter into new contracts at higher rates.

    we intend to grow the number of large-horsepower units in our fleet. While large-horsepower units in general generate better gross operating margin than lower-horsepower units, they also generate lower average revenue per revenue generating horsepower. If we continue to grow the number of large-horsepower units and deploy those units to provide services to our larger customers via multi-unit orders, our average revenue per revenue generating horsepower rates for the entire fleet will slightly decline while revenue generating horsepower increases.

    our average monthly service fee per revenue generating horsepower is calculated by averaging the service fee per revenue generating horsepower for each of the months in the applicable period. For the quarters ended June 30, 2011, September 30, 2011, December 31, 2011 and March 31, 2012, our pro forma average monthly service fee per revenue generating horsepower was $14.26, $13.97, $13.67 and $13.45 respectively;

    the increase in contract operations revenue of $25.4 million for the twelve months ending March 31, 2013 as compared to the twelve months ended March 31, 2012 is primarily attributable to the increase in revenue generating horsepower; and

    parts and services revenue represents repair services that are performed on compressor units owned by our customers and other third parties. Our estimate for parts and service revenue is consistent with our historical experience. We do not anticipate any significant increases in these revenues.

        Cost of operations, exclusive of depreciation and amortization.    We estimate that our cost of operations will be $41.0 million for the twelve months ending March 31, 2013, which excludes equipment operating lease expense related to compression units previously leased from Caterpillar that we purchased on December 15, 2011 for $43 million, as compared to $39.7 million for the twelve months ended March 31, 2012 on a pro forma basis, which includes $3.1 million of equipment operating lease expense. The anticipated increase in our cost of operations is based upon the following assumptions:

    we estimate that the average monthly cost of operations per revenue generating horsepower will be $4.47 for the twelve months ending March 31, 2013 as compared to $5.02 for the twelve months ended March 31, 2012 (excluding, for purposes of this comparison, $3.1 million of equipment operating lease expense). This decrease is primarily due to recognizing economies of scale from the addition of large-horsepower units, partially offset by estimates of cost escalations

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      including the effect of inflation, higher labor rates, increases in labor costs due to the hiring and training of new field technicians and increases in lubrication costs. Our average monthly cost of operations per revenue generating horsepower is calculated by averaging the monthly cost of operations per revenue generating horsepower for each of the months in the applicable period.

        Selling, general and administrative expense.    We estimate that selling, general and administrative expense will be $17.6 million for the twelve months ending March 31, 2013, which includes approximately $3.1 million in expenses associated with being a publicly traded partnership, as compared to $13.7 million for the twelve months ended March 31, 2012 on a pro forma basis. As a percentage of revenue, selling, general and administrative expense is expected to decrease in the twelve months ending March 31, 2013 (excluding the estimated $3.1 million of expenses associated with being a publicly traded partnership) as a result of the increase in revenue from period to period. Our estimate does not include any amounts for potential cash-based compensation awards pursuant to our 2012 Long-Term Incentive Plan. Any such cash-based awards would increase our selling, general and administrative expense and decrease our cash available for distribution.

        Depreciation and amortization expense.    We estimate that depreciation expense will be $44.0 million for the twelve months ending March 31, 2013, as compared to $34.3 million for the twelve months ended March 31, 2012 on a pro forma basis. Depreciation expense is consistently assumed to be based on the average depreciable asset lives and depreciation methodologies, taking into account estimated capital expenditures primarily for additional new compression units as described below.

        Interest expense.    The anticipated increase in interest expense and cash interest expense is based upon the following assumptions:

    the balance on our revolving credit facility was approximately $402.7 million at March 31, 2012 and is expected to be approximately $         million as of March 31, 2013. The $       million net decrease in the loan balance between March 31, 2012 and March 31, 2013 reflects the use of $        million of net proceeds from this offering to repay amounts outstanding under our revolving credit facility offset by borrowings to terminate interest rate swaps related to our revolving credit facility, incremental borrowings in connection with running our business and application of the net proceeds from this offering of $             million to repay borrowings under the revolving credit facility.

    we estimate average borrowings of approximately $           million under our revolving credit facility for the twelve months ending March 31, 2013, with an estimated average interest rate of 2.65% through March 31, 2013. An increase or decrease of 1.0% in the interest rate will result in increased or decreased, respectively, annual interest expense of $             million;

    interest expense includes commitment fees for the unused portion of our revolving credit facility at an assumed rate of 0.375%;

    we have assumed that distributions on common and subordinated units held by USA Compression Holdings will be reinvested in additional common units under a distribution reinvestment plan that we intend to institute following the completion of this offering. We assume that proceeds from the reinvested distributions will be used to reduce borrowings under our revolving credit facility, reducing interest expense by $                for the twelve months ending March 31, 2013; and

    we assume that we will remain in compliance with the financial and other covenants in our revolving credit facility.

        Cash interest expense.    Cash interest expense excludes $1.5 million in non-cash amortization of debt issuance costs incurred in connection with borrowings under our revolving credit facility.

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        Income tax expense.    Income tax expense represents Texas franchise tax calculated on the forecasted gross revenue apportioned to Texas for the twelve months ending March 31, 2013. The tax is estimated to be approximately $206,000 for the twelve months ending March 31, 2013, as compared to $167,000 for the twelve months ended March 31, 2012 on a pro forma basis. Our estimate of the franchise tax for the twelve months ending March 31, 2013 is based on a tax rate of 0.7% (the maximum effective rate after allowable deductions). This tax is reflected in our financials as an income tax in accordance with ASC 740.

        Capital expenditures.    The anticipated decrease in capital expenditures is based upon the following assumptions:

    we estimate expansion capital expenditures will be approximately $133.1 million for the twelve months ending March 31, 2013, compared to $170.3 million for the twelve months ended March 31, 2012. The estimated expansion capital expenditures for the twelve months ending March 31, 2013 include $118.0 million of expenditures for the addition of 154,240 horsepower of compression units to our fleet, which we initially intend to deploy primarily in the shale plays where our customers are most active, as well as expenditures for the acquisition of additional vehicles and other ancillary assets required to support our growth.

    we estimate that maintenance capital expenditures will be approximately $11.3 million for the twelve months ending March 31, 2013 compared to approximately $9.6 million for the twelve months ended March 31, 2012. Our maintenance capital expenditures are estimated based on the anticipated overhaul requirements of our compression units. We assume our maintenance capital expenditures for the twelve months ending March 31, 2013 will be higher than for the twelve months ended March 31, 2012, primarily due to the growing size of our fleet.

        Units Outstanding.    We assume that, following completion of this offering, the public will own                common units, representing a       % limited partner interest in us, and USA Compression Holdings will own                common units and                subordinated units, representing an aggregate      % limited partner interest in us. We also assume that, following this offering, our general partner, USA Compression GP, LLC, will own                general partner units, representing a 2.0% general partner interest in us, and all of our incentive distribution rights. Following completion of this offering, we intend to institute a distribution reinvestment plan, or a DRIP, pursuant to which owners of common and subordinated units can reinvest their distributions in additional common units. We have been informed by USA Compression Holdings that they intend to reinvest their distributions in additional common units for the foreseeable future, and we expect USA Compression GP, LLC will utilize its distributions to purchase additional general partner units to maintain its 2.0% general partner interest in us. We have assumed that            additional common units are issued as a result of the DRIP for the twelve month period ending March 31, 2013 at an assumed price of $            per common unit related to the common and subordinated units that will be held by USA Compression Holdings. We cannot predict the level of participation in the DRIP by holders of our common units other than USA Compression Holdings, and therefore have assumed no additional common units will be issued to them pursuant to the DRIP. The issuance of additional common units and general partner units as a result of the reinvestment of distributions by USA Compression Holdings under the DRIP will reduce our forecasted cash available for distribution on a per unit basis.

While we believe that our assumptions supporting our estimated Adjusted EBITDA and cash available for distribution for the twelve months ending March 31, 2013 are reasonable in light of management's current beliefs concerning future events, the assumptions are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those we anticipate. If our assumptions are not realized, the actual Adjusted EBITDA and cash available for distribution that we generate could be substantially less than that currently expected and could, therefore, be insufficient to permit us to make the full minimum quarterly distribution on all of our units for the four-quarter period ending March 31, 2013, in which event the market price of the common units may decline materially.

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PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH DISTRIBUTIONS

        Set forth below is a summary of the significant provisions of our partnership agreement that relate to cash distributions.


Distributions of Available Cash

        General.    Our partnership agreement requires that, within 45 days after the end of each quarter, beginning with the quarter ending June 30, 2012, we distribute all of our available cash to unitholders of record on the applicable record date. We will adjust the minimum quarterly distribution for the period from the closing of the offering through June 30, 2012.

        Definition of available cash.    Available cash, for any quarter, consists of all cash on hand at the end of that quarter:

    less, the amount of cash reserves established by our general partner to:

    provide for the proper conduct of our business;

    comply with applicable law, our revolving credit facility or other agreements; and

    provide funds for distributions to our unitholders for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for subordinated units unless it determines that the establishment of reserves will not prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages for the next four quarters);

    plus, if our general partner so determines, all or a portion of cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter.

Working capital borrowings are borrowings that are made under a credit facility, commercial paper facility or similar financing arrangement, and in all cases are used solely for working capital purposes or to pay distributions to partners and with the intent of the borrower to repay such borrowings within twelve months from sources other than additional working capital borrowings.

        Intent to distribute the minimum quarterly distribution.    We intend to distribute to the holders of common and subordinated units on a quarterly basis at least the minimum quarterly distribution of $          per unit, or $          on an annualized basis, to the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its affiliates. However, there is no guarantee that we will pay the minimum quarterly distribution on the units in any quarter. Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement.

        General partner interest and incentive distribution rights.    Initially, our general partner will be entitled to 2.0% of all quarterly distributions that we make after inception and prior to our liquidation. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest. Our general partner's initial 2.0% interest in our distributions may be reduced if we issue additional limited partner units in the future (other than the issuance of common units upon exercise by the underwriters of their option to purchase additional common units, the issuance of common units upon conversion of outstanding subordinated units or the issuance of common units upon a reset of the incentive distribution rights) and our general partner does not contribute a proportionate amount of capital to us to maintain its 2.0% general partner interest.

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        Our general partner also currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50.0%, of the cash we distribute from operating surplus (as defined below) in excess of $          per unit per quarter. The maximum distribution of 50.0% includes distributions paid to our general partner on its 2.0% general partner interest and assumes that our general partner maintains its general partner interest at 2.0%. The maximum distribution of 50.0% does not include any distributions that our general partner may receive on limited partner units that it owns.


Operating Surplus and Capital Surplus

        General.    All cash distributed will be characterized as either "operating surplus" or "capital surplus." Our partnership agreement requires that we distribute available cash from operating surplus differently than available cash from capital surplus.

        Operating surplus.    Operating surplus for any period consists of:

    $             million (as described below); plus

    all of our cash receipts after the closing of this offering, excluding cash from interim capital transactions, which include the following:

    borrowings (including sales of debt securities) that are not working capital borrowings;

    sales of equity interests;

    sales or other dispositions of assets outside the ordinary course of business; and

    capital contributions received;

    provided that cash receipts from the termination of a commodity hedge or interest rate hedge prior to its specified termination date shall be included in operating surplus in equal quarterly installments over the remaining scheduled life of such commodity hedge or interest rate hedge; plus

    working capital borrowings made after the end of the period but on or before the date of determination of operating surplus for the period; plus

    cash distributions paid on equity issued (including incremental distributions on incentive distribution rights) to finance all or a portion of the construction, acquisition or improvement of a capital improvement (such as equipment or facilities) in respect of the period beginning on the date that we enter into a binding obligation to commence the construction, acquisition or improvement of a capital improvement and ending on the earlier to occur of the date the capital improvement or capital asset commences commercial service and the date that it is abandoned or disposed of; plus

    cash distributions paid on equity issued (including incremental distributions on incentive distribution rights) to pay the construction period interest on debt incurred, or to pay construction period distributions on equity issued, to finance the capital improvements referred to above; less

    all of our operating expenditures (as defined below) after the closing of this offering; less

    the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less

    all working capital borrowings not repaid within twelve months after having been incurred; less

    any loss realized on disposition of an investment capital expenditure.

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        As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders and is not limited to cash generated by our operations. For example, it includes a basket of $             million that will enable us, if we choose, to distribute as operating surplus cash we receive in the future from non-operating sources such as asset sales, issuances of securities and long-term borrowings that would otherwise be distributed as capital surplus. In addition, the effect of including, as described above, certain cash distributions on equity interests in operating surplus will be to increase operating surplus by the amount of any such cash distributions. As a result, we may also distribute as operating surplus up to the amount of any such cash that we receive from non-operating sources.

        The proceeds of working capital borrowings increase operating surplus and repayments of working capital borrowings are generally operating expenditures, as described below, and thus reduce operating surplus when made. However, if a working capital borrowing is not repaid during the twelve-month period following the borrowing, it will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowing is in fact repaid, it will be excluded from operating expenditures because operating surplus will have been previously reduced by the deemed repayment.

        We define operating expenditures in the partnership agreement, and it generally means all of our cash expenditures, including, but not limited to, taxes, reimbursement of expenses to our general partner and its affiliates, payments made under interest rate hedge agreements or commodity hedge contracts (provided that (i) with respect to amounts paid in connection with the initial purchase of an interest rate hedge contract or a commodity hedge contract, such amounts will be amortized over the life of the applicable interest rate hedge contract or commodity hedge contract and (ii) payments made in connection with the termination of any interest rate hedge contract or commodity hedge contract prior to the expiration of its stipulated settlement or termination date will be included in operating expenditures in equal quarterly installments over the remaining scheduled life of such interest rate hedge contract or commodity hedge contract), officer compensation, repayment of working capital borrowings, debt service payments and maintenance capital expenditures, provided that operating expenditures will not include:

    repayment of working capital borrowings deducted from operating surplus pursuant to the penultimate bullet point of the definition of operating surplus above when such repayment actually occurs;

    payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness, other than working capital borrowings;

    expansion capital expenditures;

    investment capital expenditures;

    payment of transaction expenses relating to interim capital transactions;

    distributions to our partners (including distributions in respect of our incentive distribution rights); or

    repurchases of equity interests except to fund obligations under employee benefit plans.

        Capital surplus.    Capital surplus is defined in our partnership agreement as any distribution of available cash in excess of our cumulative operating surplus. Accordingly, capital surplus would generally be generated by:

    borrowings other than working capital borrowings;

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    sales of our equity and debt securities; and

    sales or other dispositions of assets for cash, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of normal retirement or replacement of assets.

        Characterization of cash distributions.    Our partnership agreement requires that we treat all available cash distributed as coming from operating surplus until the sum of all available cash distributed since the closing of this offering equals the operating surplus from the closing of this offering through the end of the quarter immediately preceding that distribution. Our partnership agreement requires that we treat any amount distributed in excess of operating surplus, regardless of its source, as capital surplus. We do not anticipate that we will make any distributions from capital surplus.


Capital Expenditures

        Maintenance capital expenditures are those capital expenditures required to maintain our long-term operating capacity and/or operating income. Capital expenditures made solely for investment purposes will not be considered maintenance capital expenditures.

        Expansion capital expenditures are those capital expenditures that we expect will increase our operating capacity or operating income over the long term. Expansion capital expenditures will also include interest (and related fees) on debt incurred to finance all or any portion of the construction of such capital improvement in respect of the period that commences when we enter into a binding obligation to commence construction of a capital improvement and ending on the earlier to occur of the date any such capital improvement commences commercial service and the date that it is abandoned or disposed of. Capital expenditures made solely for investment purposes will not be considered expansion capital expenditures.

        Investment capital expenditures are those capital expenditures that are neither maintenance capital expenditures nor expansion capital expenditures. Investment capital expenditures largely will consist of capital expenditures made for investment purposes. Examples of investment capital expenditures include traditional capital expenditures for investment purposes, such as purchases of securities, as well as other capital expenditures that might be made in lieu of such traditional investment capital expenditures, such as the acquisition of a capital asset for investment purposes or development of facilities that are in excess of the maintenance of our existing operating capacity or operating income, but which are not expected to expand, for more than the short term, our operating capacity or operating income.

        As described above, neither investment capital expenditures nor expansion capital expenditures will be included in operating expenditures, and thus will not reduce operating surplus. Because expansion capital expenditures include interest payments (and related fees) on debt incurred to finance all or a portion of the construction or improvement of a capital asset (such as gathering compressors) in respect of the period that begins when we enter into a binding obligation to commence construction of the capital asset and ending on the earlier to occur of the date the capital asset commences commercial service or the date that it is abandoned or disposed of, such interest payments are also not subtracted from operating surplus. Losses on disposition of an investment capital expenditure will reduce operating surplus when realized and cash receipts from an investment capital expenditure will be treated as a cash receipt for purposes of calculating operating surplus only to the extent the cash receipt is a return on principal.

        Capital expenditures that are made in part for maintenance capital purposes, investment capital purposes and/or expansion capital purposes will be allocated as maintenance capital expenditures, investment capital expenditures or expansion capital expenditure by our general partner.

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Subordination Period

        General.    Our partnership agreement provides that, during the subordination period (which we describe below), the common units will have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $      per common unit, which amount is defined in our partnership agreement as the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. These units are deemed "subordinated" because for a period of time, referred to as the subordination period, the subordinated units will not be entitled to receive any distributions until the common units have received the minimum quarterly distribution plus any arrearages from prior quarters. Furthermore, no arrearages will be paid on the subordinated units. The practical effect of the subordinated units is to increase the likelihood that during the subordination period there will be available cash to be distributed on the common units.

        Subordination period.    Except as described below, the subordination period will begin on the closing date of this offering and expire on the first business day after the distribution to unitholders in respect of any quarter, beginning with the quarter ending March 31, 2015, if each of the following has occurred:

    distributions of available cash from operating surplus on each of the outstanding common and subordinated units and the related distribution on the general partner interest equaled or exceeded the minimum quarterly distribution for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date;

    the "adjusted operating surplus" (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distribution on all of the outstanding common and subordinated units during those periods on a fully diluted weighted average basis and the related distribution on the general partner interest; and

    there are no arrearages in payment of the minimum quarterly distribution on the common units.

        Early termination of subordination period.    Notwithstanding the foregoing, the subordination period will automatically terminate on the first business day after the distribution to unitholders in respect of any quarter, if each of the following has occurred:

    distributions of available cash from operating surplus on each of the outstanding common and subordinated units and the related distribution on the general partner interest equaled or exceeded $            (150.0% of the annualized minimum quarterly distribution) for the four-quarter period immediately preceding that date;

    the "adjusted operating surplus" (as defined below) generated during the four-quarter period immediately preceding that date equaled or exceeded the sum of $            (150.0% of the annualized minimum quarterly distribution) on all of the outstanding common and subordinated units on a fully diluted weighted average basis and the related distribution on the general partner interest and incentive distribution rights; and

    there are no arrearages in payment of the minimum quarterly distributions on the common units.

        Expiration upon removal of the general partner.    In addition, if the unitholders remove our general partner other than for cause:

    the subordinated units held by any person will immediately and automatically convert into common units on a one-for-one basis, provided (i) neither such person nor any of its affiliates

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      voted any of its units in favor of the removal and (ii) such person is not an affiliate of the successor general partner; and

    if all of the subordinated units convert pursuant to the foregoing, all cumulative common unit arrearages on the common units will be extinguished and the subordination period will end.

        Expiration of the subordination period.    When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will then participate pro-rata with the other common units in distributions of available cash.

        Adjusted operating surplus.    Adjusted operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net increases in working capital borrowings and net drawdowns of reserves of cash generated in prior periods. Adjusted operating surplus for any period consists of:

    operating surplus generated with respect to that period (excluding any amounts attributable to the items described in the first bullet point under "—Operating Surplus and Capital Surplus—Operating Surplus" above); less

    any net increase in working capital borrowings with respect to that period; less

    any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to that period; plus

    any net decrease in working capital borrowings with respect to that period; plus

    any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of principal, interest or premium; plus

    any net decrease made in subsequent periods in cash reserves for operating expenditures initially established with respect to such period to the extent such decrease results in a reduction of adjusted operating surplus in subsequent periods pursuant to the third bullet point above.


Distributions of Available Cash From Operating Surplus During the Subordination Period

        Our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter during the subordination period in the following manner:

    first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;

    second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;

    third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and

    thereafter, in the manner described in "—General Partner Interest and Incentive Distribution Rights" below.

        The preceding discussion is based on the assumptions that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity interests.

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Distributions of Available Cash From Operating Surplus After the Subordination Period

        Our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter after the subordination period in the following manner:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and

    thereafter, in the manner described in "—General Partner Interest and Incentive Distribution Rights" below.

        The preceding discussion is based on the assumptions that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity interests.


General Partner Interest and Incentive Distribution Rights

        Our partnership agreement provides that our general partner initially will be entitled to 2.0% of all distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its 2.0% general partner interest if we issue additional units. Our general partner's 2.0% interest, and the percentage of our cash distributions to which it is entitled, will be proportionately reduced if we issue additional units in the future (other than the issuance of common units upon exercise by the underwriters of their option to purchase additional common units, the issuance of common units upon conversion of outstanding subordinated units or the issuance of common units upon a reset of the incentive distribution rights) and our general partner does not contribute a proportionate amount of capital to us in order to maintain its 2.0% general partner interest. Our partnership agreement does not require that the general partner fund its capital contribution with cash and our general partner may fund its capital contribution by the contribution to us of common units or other property.

        Incentive distribution rights represent the right to receive an increasing percentage (13.0%, 23.0% and 48.0%) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights separately from its percentage general partner interest, subject to restrictions in the partnership agreement.

        The following discussion assumes that our general partner maintains its 2.0% general partner interest, that there are no arrearages on common units and that our general partner continues to own the incentive distribution rights.

        If for any quarter:

    we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and

    we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;

then, our partnership agreement requires that we distribute any additional available cash from operating surplus for that quarter among the unitholders and the general partner in the following manner:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives a total of $            per unit for that quarter (the "first target distribution");

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    second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives a total of $            per unit for that quarter (the "second target distribution");

    third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives a total of $            per unit for that quarter (the "third target distribution"); and

    thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner.


Percentage Allocations of Available Cash From Operating Surplus

        The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general partner based on the specified target distribution levels. The amounts set forth under "Marginal percentage interest in distributions" are the percentage interests of our general partner and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column "Total quarterly distribution per unit." The percentage interests shown for our unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner include its 2.0% general partner interest, assume our general partner has contributed any additional capital to maintain its 2.0% general partner interest and has not transferred its incentive distribution rights and there are no arrearages on common units.

 
   
  Marginal percentage interest
in distributions
 
 
  Total quarterly
distribution per unit
  Unitholders   General partner  

Minimum Quarterly Distribution

  $     98.0 %   2.0 %

First Target Distribution

  up to $     98.0 %   2.0 %

Second Target Distribution

  above $    up to $     85.0 %   15.0 %

Third Target Distribution

  above $    up to $     75.0 %   25.0 %

Thereafter

  above $     50.0 %   50.0 %


General Partner's Right to Reset Incentive Distribution Levels

        Our general partner, as the holder of our incentive distribution rights, or IDRs, has the right under our partnership agreement to elect to relinquish the right to receive incentive distribution payments based on the initial cash target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and cash target distribution levels upon which the incentive distribution payments to our general partner would be set. Our general partner's right to reset the minimum quarterly distribution amount and the target distribution levels upon which the incentive distributions payable to our general partner are based may be exercised, without approval of our unitholders or the conflicts committee of our general partner, at any time when there are no subordinated units outstanding and we have made cash distributions to the holders of the incentive distribution rights at the highest level of incentive distribution for each of the prior four consecutive fiscal quarters. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly distribution amount and the target distribution levels prior to the reset such that our general partner will not receive any incentive distributions under the reset target distribution levels until cash distributions per unit following this event are above the reset first target distribution described below. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the existing levels of incentive distribution payments being made to our general partner.

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        In connection with the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by our general partner of incentive distribution payments based on the target cash distributions prior to the reset, our general partner will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the "cash parity" value of the average cash distributions related to the incentive distribution rights received by our general partner for the two quarters prior to the reset event as compared to the average cash distributions per common unit during this period. Our general partner will be issued the number of general partner units necessary to maintain its general partner interest in us immediately prior to the reset election.

        The number of common units that our general partner would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the target distribution levels then in effect would be equal to the quotient determined by dividing (x) the average amount of cash distributions received by our general partner in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election by (y) the average of the amount of cash distributed per common unit during each of these two quarters.

        Following a reset election by our general partner, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per unit for the two fiscal quarters immediately preceding the reset election (which amount we refer to as the "reset minimum quarterly distribution") and the target distribution levels will be reset to be correspondingly higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives an amount per unit equal to 115.0% of the reset minimum quarterly distribution for that quarter;

    second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives an amount per unit equal to 125.0% of the reset minimum quarterly distribution for the quarter;

    third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives an amount per unit equal to 150.0% of the reset minimum quarterly distribution for the quarter; and

    thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner.

        The following table illustrates the percentage allocation of available cash from operating surplus between the unitholders and our general partner at various cash distribution levels (i) pursuant to the cash distribution provisions of our partnership agreement in effect at the closing of this offering, as well as (ii) following a hypothetical reset of the minimum quarterly distribution and target distribution levels based on the assumption that the average quarterly cash distribution amount per common unit during the two fiscal quarters immediately preceding the reset election was $            .

 
   
  Marginal percentage interest
in distribution
   
 
   
  Quarterly distribution
per unit following

 
  Quarterly distribution
   
  General partner
 
  per unit prior to reset   Unitholders   hypothetical reset

Minimum Quarterly Distribution

  $     98.0 %   2.0 % $         

First Target Distribution

  up to $     98.0 %   2.0 % up to $    (1)

Second Target Distribution

  above $    up to $     85.0 %   15.0 % above $    (1) up to $    (2)

Third Target Distribution

  above $    up to $     75.0 %   25.0 % above $    (2) up to $    (3)

Thereafter

  above $     50.0 %   50.0 % above $    (3)

(1)
This amount is 115.0% of the hypothetical reset minimum quarterly distribution.

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(2)
This amount is 125.0% of the hypothetical reset minimum quarterly distribution.

(3)
This amount is 150.0% of the hypothetical reset minimum quarterly distribution.

        The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and our general partner, including in respect of IDRs, based on an average of the amounts distributed for a quarter for the two quarters immediately prior to the reset. The table assumes that immediately prior to the reset there would be            common units outstanding, our general partner has maintained its 2.0% general partner interest, and the average distribution to each common unit would be $            for the two quarters prior to the reset.

 
   
   
  Cash distributions to general
partner prior to reset
   
 
 
   
  Cash
distributions
to common
unitholders
prior to reset
   
 
 
  Quarterly
distribution
per unit
prior to reset
   
 
 
  Common
Units
  2.0% general
partner
interest
  Incentive
distribution
rights
  Total   Total
distributions
 

Minimum Quarterly Distribution

  $   $     $   $     $   $     $    

First Target Distribution

  above $    up to $                                  

Second Target Distribution

  above $    up to $                                    

Third Target Distribution

  above $    up to $                                    

Thereafter

  above $                                    
                               

      $     $   $     $     $     $    
                               

        The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and our general partner, including in respect of IDRs, with respect to the quarter in which the reset occurs. The table reflects that as a result of the reset there would be            common units outstanding, our general partner's 2.0% interest has been maintained, and the average distribution to each common unit would be $            . The number of common units to be issued to our general partner upon the reset was calculated by dividing (i) the average of the amounts received by our general partner in respect of its IDRs for the two quarters prior to the reset as shown in the table above, or $            , by (ii) the average available cash distributed on each common unit for the two quarters prior to the reset as shown in the table above, or $            .

 
   
   
  Cash distributions to general
partner after reset
   
 
 
   
  Cash
distributions
to common
unitholders
prior to reset
   
 
 
  Quarterly
distribution
per unit
prior to reset
  Common
Units issued in
connection
with reset
  2.0% general
partner
interest
  Incentive
distribution
rights
  Total   Total
distributions
 

Minimum Quarterly Distribution

  $   $     $     $     $   $     $    

First Target Distribution

  up to $                          

Second Target Distribution

  above $    up to $                          

Third Target Distribution

  above $    up to $                          

Thereafter

  above $                                

      $     $     $     $     $     $    
                               

        Our general partner will be entitled to cause the minimum quarterly distribution amount and the target distribution levels to be reset on more than one occasion, provided that it may not make a reset election except at a time when it has received incentive distributions for the prior four consecutive fiscal quarters based on the highest level of incentive distributions that it is entitled to receive under our partnership agreement.

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Distributions From Capital Surplus

        How distributions from capital surplus will be made.    Our partnership agreement requires that we make distributions of available cash from capital surplus, if any, in the following manner:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until the minimum quarterly distribution is reduced to zero, as described below;

    second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and

    thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus.

        The preceding paragraph assumes that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.

        Effect of a distribution from capital surplus.    Our partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from this initial public offering, which is a return of capital. Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the distribution had in relation to the fair market value of the common units prior to the announcement of the distribution. Because distributions of capital surplus will reduce the minimum quarterly distribution and target distribution levels after any of these distributions are made, it may be easier for our general partner to receive incentive distributions and for the subordinated units to convert into common units. However, any distribution of capital surplus before the minimum quarterly distribution is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.

        If we reduce the minimum quarterly distribution to zero, all future distributions will be made such that 50.0% will be paid to the holders of units and 50.0% to our general partner. The percentage interests shown for our general partner include its 2.0% general partner interest and assume our general partner has not transferred the incentive distribution rights.


Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

        In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we combine our units into fewer units or subdivide our units into a greater number of units, our partnership agreement specifies that the following items will be proportionately adjusted:

    the minimum quarterly distribution;

    the target distribution levels;

    the initial unit price as described below; and

    the per unit amount of any outstanding arrearages in payment of the minimum quarterly distribution.

        For example, if a two-for-one split of the units should occur, the minimum quarterly distribution, the target distribution levels and the initial unit price would each be reduced to 50.0% of its initial level. If we combine our common units into a lesser number of units or subdivide our common units into a greater number of units, we will combine or subdivide our subordinated units using the same ratio applied to the common units. Our partnership agreement provides that we do not make any adjustment by reason of the issuance of additional units for cash or property.

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        In addition, if as a result of a change in law or interpretation thereof, we or any of our subsidiaries is treated as an association taxable as a corporation or is otherwise subject to additional taxation as an entity for U.S. federal, state, local or non-U.S. income or withholding tax purposes, our general partner may, in its sole discretion, reduce the minimum quarterly distribution and the target distribution levels for each quarter by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter (after deducting our general partner's estimate of our additional aggregate liability for the quarter for such income and withholdings taxes payable by reason of such change in law or interpretation) and the denominator of which is the sum of (i) available cash for that quarter, plus (ii) our general partner's estimate of our additional aggregate liability for the quarter for such income and withholding taxes payable by reason of such change in law or interpretation thereof. To the extent that the actual tax liability differs from the estimated tax liability for any quarter, the difference will be accounted for in distributions with respect to subsequent quarters.


Distributions of Cash Upon Liquidation

        General.    If we dissolve in accordance with the partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will first apply the proceeds of liquidation to the payment of our creditors. We will distribute any remaining proceeds to the unitholders and the general partner, in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of our assets in liquidation.

        The allocations of gain and loss upon liquidation are intended, to the extent possible, to entitle the holders of units to a repayment of the initial value contributed by them to us for their units, which we refer to as the "initial unit price" for each unit. The initial unit price for the common units will be the price paid for the common units issued in this offering. The allocations of gain and loss upon liquidation are also intended, to the extent possible, to entitle the holders of outstanding common units to a preference over the holders of outstanding subordinated units upon our liquidation, to the extent required to permit common unitholders to receive their initial unit price plus the minimum quarterly distribution for the quarter during which liquidation occurs plus any unpaid arrearages in payment of the minimum quarterly distribution on the common units. However, there may not be sufficient gain upon our liquidation to enable the holders of common units to fully recover all of these amounts, even though there may be cash available for distribution to the holders of subordinated units. Any further net gain recognized upon liquidation will be allocated in a manner that takes into account the incentive distribution rights of our general partner.

        Manner of adjustments for gain.    The manner of the adjustment for gain is set forth in the partnership agreement. If our liquidation occurs before the end of the subordination period, we will allocate any gain to the partners in the following manner:

    first, to our general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances;

    second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until the capital account for each common unit is equal to the sum of: (i) the initial unit price; (ii) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; and (iii) any unpaid arrearages in payment of the minimum quarterly distribution;

    third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until the capital account for each subordinated unit is equal to the sum of: (i) the initial unit price; and (ii) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;

    fourth, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (i) the sum of the excess of the first target

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      distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less (ii) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed 98.0% to the unitholders, pro rata, and 2.0% to our general partner, for each quarter of our existence;

    fifth, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (i) the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less (ii) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85.0% to the unitholders, pro rata, and 15.0% to our general partner for each quarter of our existence;

    sixth, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (i) the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less (ii) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed 75.0% to the unitholders, pro rata, and 25.0% to our general partner for each quarter of our existence; and

    thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner.

        The percentage interests set forth above for our general partner include its 2.0% general partner interest and assume our general partner has not transferred the incentive distribution rights.

        If the liquidation occurs after the end of the subordination period, the distinction between common and subordinated units will disappear, so that clause (iii) of the second bullet point above and all of the third bullet point above will no longer be applicable.

        Manner of adjustments for losses.    If our liquidation occurs before the end of the subordination period, we will generally allocate any loss to our general partner and the unitholders in the following manner:

    first, 98.0% to holders of subordinated units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the subordinated unitholders have been reduced to zero;

    second, 98.0% to the holders of common units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the common unitholders have been reduced to zero; and

    thereafter, 100.0% to our general partner.

        If the liquidation occurs after the end of the subordination period, the distinction between common and subordinated units will disappear, so that all of the first bullet point above will no longer be applicable.

        Adjustments to capital accounts.    Our partnership agreement requires that we make adjustments to capital accounts upon the issuance of additional units. In this regard, our partnership agreement specifies that we allocate any unrealized and, for tax purposes, unrecognized gain or loss resulting from the adjustments to the unitholders and the general partner in the same manner as we allocate gain or loss upon liquidation. In the event that we make positive adjustments to the capital accounts upon the issuance of additional units, our partnership agreement requires that we allocate any later negative adjustments to the capital accounts resulting from the issuance of additional units or upon our liquidation in a manner which results, to the extent possible, in the general partner's capital account balances equaling the amount which they would have been if no earlier positive adjustments to the capital accounts had been made.

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SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

        The following table presents our selected historical financial and operating data and pro forma financial data for the periods and as of the dates presented. The following table should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical and pro forma financial statements and accompanying notes included elsewhere in this prospectus.

        The selected historical financial and operating data has been prepared on the following basis:

    the historical financial information as of December 31, 2010 and 2011 and for the years ended December 31, 2009, 2010 and 2011 is derived from our audited financial statements, which are included elsewhere in this prospectus;

    the historical financial information as of December 31, 2007, 2008 and 2009 and for the years ended December 31, 2007 and 2008 is derived from our audited financial statements, which are not included in this prospectus;

    the historical financial information as of March 31, 2012 and for the three months ended March 31, 2011 and March 31, 2012 is derived from our unaudited financial statements, which are included elsewhere in this prospectus; and

    the historical financial information as of March 31, 2011 is derived from our unaudited financial statements, which are not included in this prospectus.

        We were acquired by USA Compression Holdings on December 23, 2010. In connection with this acquisition, our assets and liabilities were adjusted to fair value on the closing date by application of "push-down" accounting. Due to these adjustments, our unaudited condensed consolidated financial statements are presented in two distinct periods to indicate the application of two different bases of accounting between the periods presented: (i) the periods prior to the acquisition date for accounting purposes, using a date of convenience of December 31, 2010, are identified as "Predecessor," and (ii) the periods from December 31, 2010 forward are identified as "Successor." Please read note 1 to our audited financial statements as of December 31, 2011 included elsewhere in this prospectus.

        The selected pro forma financial information for the year ended December 31, 2011 and as of and for the three months ended March 31, 2012 is derived from our unaudited pro forma financial statements included elsewhere in this prospectus. The pro forma adjustments have been prepared as if the transactions described below had taken place on March 31, 2012, in the case of the pro forma balance sheet, or as of January 1, 2011, in the case of the pro forma statement of operations for the year ended December 31, 2011 and the three months ended March 31, 2012. These transactions include:

    the entry into the second amendment to our revolving credit facility on November 16, 2011;

    the conversion of our limited partner interests held by USA Compression Holdings into                        of our common units and                        of our subordinated units;

    the conversion of our general partner interest held by USA Compression GP, LLC, our general partner, into                         general partner units, representing a 2.0% general partner interest in us;

    the issuance by us of all of our incentive distribution rights to USA Compression GP, LLC; and

    the issuance by us of                        common units to the public in exchange for net proceeds of approximately $             million, all of which will be used to repay indebtedness outstanding under our revolving credit facility.

        The pro forma financial information should not be considered as indicative of the historical results we would have had or the results we will have after this offering.

74


Table of Contents

        The following table includes the non-GAAP financial measure of Adjusted EBITDA. We define Adjusted EBITDA as our net income before interest expense, income taxes, depreciation expense, impairment of compression equipment, share-based compensation expense, restructuring charges, management fees, expenses under our operating lease with Caterpillar and certain fees and expenses related to the Holdings Acquisition. For a reconciliation of Adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with GAAP, please read "—Non-GAAP Financial Measures."

 
  Historical   Pro Forma  
 
  Predecessor    
  Successor(1)    
   
 
 
   
   
   
   
   
 


   
  Three
Months
Ended
March 31,
2011
  Three
Months
Ended
March 31,
2012
   
  Three
Months
Ended
March 31,
2012
 
 
  Year ended December 31,   Year
Ended
December 31,
2011
  Year
Ended
December 31,
2011
 
 
  2007   2008   2009    
  2010    
 
 
  (in thousands, except per unit and operating data)
 

Revenues:

                                                               
 

Contract operations

  $ 67,339   $ 87,905   $ 93,178       $ 89,785       $ 93,896   $ 22,758   $ 26,552   $ 93,896   $ 26,552  
 

Parts and service

    2,296     2,918     2,050         2,243         4,824     738     572     4,824     572  
                                               
 

Total revenues

    69,635     90,823     95,228         92,028         98,720     23,496     27,124     98,720     27,124  

Costs and expenses:

                                                               
 

Cost of operations, exclusive of depreciation and amortization

    20,513     29,320     30,096         33,292         39,605     8,941     9,021     39,605     9,021  
 

Selling, general and administrative(2)

    10,958     8,709     9,136         11,370         12,726     2,703     3,694     12,726     3,694  
 

Restructuring charges(3)

                            300             300      
 

Depreciation and amortization

    13,437     18,016     22,957         24,569         32,738     7,902     9,428     32,738     9,428  
 

(Gain) loss of sale of assets

    (3 )   (235 )   (74 )       (90 )       178     202     161     178     161  
 

Impairment of compression equipment

    1,028         1,677                                  
                                               
 

Total costs and expenses

    45,933     55,810     63,792         69,141         85,547     19,748     22,304     85,547     22,304  
                                               

Operating income

    23,702     35,013     31,436         22,887         13,173     3,748     4,820     13,173     4,820  

Other income (expense):

                                                               
 

Interest expense

    (16,468 )   (14,003 )   (10,043 )       (12,279 )       (12,970 )   (3,182 )   (3,534 )   (5,911 )   (2,702 )
 

Other

    43     20     25         26         21     5     5     21     5  
                                               
 

Total other expense

    (16,425 )   (13,983 )   (10,018 )       (12,253 )       (12,949 )   (3,177 )   (3,529 )   (5,890 )   (2,697 )
                                               

Income before income tax expense

    7,277     21,030     21,418         10,634         224     571     1,291     7,283     2,123  
                                               

Income tax expense(4)

    155     119     190         155         155     36     48     155     48  
                                               

Net income

  $ 7,122   $ 20,911   $ 21,228       $ 10,479       $ 69   $ 535   $ 1,243   $ 7,128   $ 2,075  
                                               
 

Adjusted EBITDA

 
$

40,562
 
$

53,274
 
$

56,917
     
$

51,987
     
$

51,285
 
$

12,874
 
$

14,253
 
$

51,285
 
$

14,253
 

Pro forma net income per limited partner unit:

                                                               
 

Common unit

                                                               
 

Subordinated unit

                                                               

Other Financial Data:

                                                               
 

Capital expenditures(5)

  $ 63,010   $ 92,708   $ 29,580       $ 18,886       $ 133,264   $ 4,765   $ 43,395              
 

Cash flows provided by (used in):

                                                               
   

Operating activities

    26,441     40,699     42,945         38,572         33,782     9,871     4,523              
   

Investing activities

    (62,642 )   (88,102 )   (26,763 )       (18,768 )       (140,444 )   (4,250 )   (43,348 )            
   

Financing activities

    37,591     46,364     (16,545 )       (19,804 )       106,662     (3,070 )   38,828              

Operating Data (at period end, except averages)—unaudited

                                                               
 

Fleet horsepower(6)

    453,508     542,899     582,530         609,730         722,201     622,039     774,514              
 

Total available horsepower(7)

    476,698     568,359     582,530         612,410         809,418     632,215     866,596              
 

Revenue generating horsepower(8)

    405,807     496,606     502,177         533,692         649,285     533,693     697,500              
 

Average revenue generating horsepower(9)

    370,826     455,673     489,243         516,703         570,900     534,007     680,063              
 

Revenue generating compression units

    613     763     749         795         888     793     920              
 

Average horsepower per revenue generating compression unit(10)

    665     651     655         667         692     673     748              
 

Horsepower utilization(11):

                                                               
   

At period end

    93.7 %   95.2 %   92.0 %       91.8 %       95.7 %   90.4 %   95.7 %