Compressco Partners, L.P. Initial Public Offering

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements [Abstract]

Compressco Partners, L.P. Initial Public Offering

NOTE C - COMPRESSCO PARTNERS, L.P. INITIAL PUBLIC OFFERING

On June 20, 2011, our subsidiary, Compressco Partners, L.P. (Compressco Partners), completed the initial public offering of 2,670,000 of its common units (representing a 17.3% limited partner interest) in exchange for $53.4 million of gross proceeds (the Offering). As a result of the Offering, our ownership in Compressco Partners was reduced to 82.7%, including common units, subordinated units and a 2% general partner interest. In connection with the Offering, certain of our wholly owned subsidiaries, including Compressco Partners GP Inc. (the General Partner), contributed substantially all of our Compressco segment's natural gas wellhead compression-based production enhancement service business, operations, and related assets and liabilities into Compressco Partners and its wholly owned subsidiaries. In exchange, Compressco Partners issued to us 6,026,757 common units (representing a 39.0% limited partner interest), 6,273,970 subordinated units (representing a 40.7% limited partner interests), an aggregate 2.0% notional general partner interest, and incentive distribution rights. Also, certain directors, executive officers, and other employees of the General Partner were then issued 157,870 restricted units (representing a 1.0% limited partner interest) granted pursuant to a long-term incentive plan. The issuance of the 2,670,000 common units in the Offering, at a $20 per unit Offering Price, resulted in Compressco Partners receiving $53.4 million of gross proceeds, $32.2 million of which was distributed to us to repay an intercompany loan balance. Approximately $10.5 million of the Offering proceeds was used to satisfy Offering expenses, including underwriters' discount and approximately $7.3 million that was paid to us by Compressco Partners  to reimburse us for costs we incurred on their behalf. The contribution transactions described above represent transactions between entities under common control. Consequently, the contributed assets were recorded at our carrying value.

Also pursuant to the Offering, the underwriters received an option whereby they could purchase 400,500 common units at the $20 per unit Offering Price. At July 15, 2011, this underwriters' option expired unexercised, resulting in the additional 400,500 units being issued to us. As a result, our ownership of Compressco Partners increased to 83.2%

The contribution of the majority of the operations and related assets and liabilities of our Compressco segment were effected pursuant to the terms of a Contribution, Conveyance and Assumption Agreement (the Contribution Agreement). Compressco Partners' is to be governed by the First Amended and Restated Agreement of Limited Partnership (the Partnership Agreement). The Partnership Agreement requires Compressco Partners to distribute all of its available cash, as defined in the Partnership Agreement, to the common units, the subordinated units, the 2% general partner interest, and the incentive distribution rights in accordance with the terms of the Partnership Agreement. The Partnership Agreement also provides for the management of Compressco Partners by the General Partner. The reimbursement of direct and indirect costs incurred by us or the General Partner in providing personnel and services on behalf of Compressco Partners, as well as other transactions between us and Compressco Partners, is governed by the terms of an Omnibus Agreement between us and Compressco Partners.

Following the Offering, as of June 30, 2011, the 17.3% portion of Compressco Partners then owned by public unitholders is reflected as a noncontrolling interest in our consolidated financial statements.