EXTERRAN HOLDINGS INC. Reports Operating Results (10-Q)
Exterran Holdings Inc. has a market cap of $1.67 billion; its shares were traded at around $26.42 with and P/S ratio of 0.6. EXH is in the portfolios of John Keeley of Keeley Fund Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Pioneer Investments, Columbia Wanger of Columbia Wanger Asset Management, Chuck Royce of Royce& Associates, PRIMECAP Management, Jeremy Grantham of GMO LLC, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:We are the indirect majority owner of the Partnership, a master limited partnership that provides natural gas contract operations services to customers throughout the U.S. As of September 30, 2010, public unitholders held a 42% ownership interest in the Partnership and we owned the remaining equity interest, including the general partner interest and all incentive distribution rights. The general partner of the Partnership is our subsidiary and we consolidate the financial position and results of operations of the Partnership. It is our intention for the Partnership to be the primary vehicle for the growth of our U.S. contract operations business and for us to continue to contribute U.S. contract operations customer contracts and equipment to the Partnership over time in exchange for cash, the Partnerships assumption of our debt and/or additional interests in the Partnership. As of September 30, 2010, the Partnership had a fleet of approximately 4,236 compressor units comprising approximately 1,655,000 horsepower, or 40% (by available horsepower) of our and the Partnerships combined total U.S. horsepower.
Natural Gas Consumption and Production. Natural gas consumption in the U.S. for the twelve months ended July 31, 2010 increased by approximately 4% over the twelve months ended July 31, 2009. Total U.S. natural gas consumption is projected by the U.S. Energy Information Administration (EIA) to increase by 4.6% in 2010 and 0.1% in 2011, and is expected to increase by an average of 0.7% per year thereafter until 2035. Natural gas consumption worldwide is projected to increase by 1.4% per year until 2035, according to the EIA.
Natural gas marketed production in the U.S. for the twelve months ended July 31, 2010 increased by approximately 3% over the twelve months ended July 31, 2009. In 2008, the U.S. accounted for an estimated annual production of approximately 21 trillion cubic feet of natural gas, or 18% of the worldwide total of approximately 116 trillion cubic feet. The EIA estimates that the U.S.s natural gas production level will be approximately 23 trillion cubic feet in 2035, or 15% of the worldwide total of approximately 155 trillion cubic feet.
The decrease in revenue and gross margin (defined as revenue less cost of sales, excluding depreciation and amortization expense) was primarily due to an 8% decrease in average operating horsepower and a 2% reduction in our revenue per average operating horsepower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Gross margin, a non-GAAP financial measure, is reconciled, in total, to net income (loss), its most directly comparable financial measure in Note 15 to the Financial Statements. The decrease in average operating horsepower and pricing was due to the continued challenging market conditions in the North America natural gas energy industry. The decrease in gross margin and gross margin percentage was also due to an increase in our field operating expenses, the primary driver of which were costs to make idle units ready to be placed back into operation.
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