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                                                                   EXHIBIT 10.39
                                                                  EXECUTION COPY


                              SECURITY AGREEMENT

        SECURITY AGREEMENT, dated as of June 15, 1999, made by HANOVER EQUIPMENT
TRUST 1999A, a Delaware business trust (the "Borrower"), in favor of THE CHASE
MANHATTAN BANK, as Agent (in such capacity, the "Agent") for the Lenders parties
to the Credit Agreement, dated as of the date hereof (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Agent and such Lenders.

                             Preliminary Statement

        A. Pursuant to the Credit Agreement, the Lenders have severally agreed
to make Loans to the Borrower upon the terms and subject to the conditions set
forth therein; and

        B. It is a condition precedent to the obligation of the Lenders to make
their respective Loans to the Borrower under the Credit Agreement that the
Borrower shall have executed and delivered this Security Agreement to the Agent
for the ratable benefit of the Lenders.

        NOW, THEREFORE, in consideration of the premises and to induce the Agent
and the Lenders to enter into the Credit Agreement and to induce the Lenders to
make their respective Loans to the Borrower, the Borrower hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:

        1. Defined Terms.

        1.1 Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the respective meanings, and this Agreement shall be
interpreted in accordance with the rules of usage, set forth in Annex A attached
to the Participation Agreement dated as of the date hereof among the Lessee, the
Borrower, the Investors, the Trust Company, the Agent and the Lenders, and the
following terms shall have the following meanings:

        "Agreement": this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

        "Code": the Uniform Commercial Code as from time to time in effect in
the State of New York.

        "Collateral": as defined in Section 2.
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        "Equipment": the equipment set forth on Schedule 1 annexed hereto, and
all other tangible personal property now or hereafter acquired by the Borrower,
together with any and all accessions, additions, improvements, substitutions and
replacements thereto and therefor.

        "Obligations": shall mean the Guaranteed Obligations.

        "Proceeds": as defined in the Code.

        2. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, the Borrower hereby grants to the
Agent for the ratable benefit of the Lenders a security interest in all of its
respective right, title and interest, whether the same be goods, fixtures,
equipment, general intangibles, accounts or chattel paper, in and to (a) the
Equipment, (b) rights and interests of Borrower as Lessor pursuant to the Lease,
(c) all books and records pertaining to the foregoing, (d) all warranties and
guarantees given by any Person with respect to any of the foregoing, as well as
all chooses in action, claims, and causes of action arising from any breach
thereof, and (e) to the extent not otherwise included, all Proceeds and products
of the foregoing, in each case whether now existing or hereafter acquired
(collectively, the "Collateral"), subject to the rights of the Lessee, as Lessee
under the Lease, so long as no Lease Event of Default has occurred and is
continuing.

        3. Representations and Warranties.

        3.1 Equipment. The Borrower hereby represents and warrants that, the
Equipment will be kept at the locations listed on Schedule 1 subject only to the
Lessee's rights to relocate the Equipment as provided for in the Operative
Agreements.

        3.2 Chief Executive Office. The Borrower hereby represents and warrants
that the Borrower's chief place of business, chief executive office and office
where the documents, accounts and records related to the Collateral are kept is
located at 1100 North Market Street, Wilmington, Delaware 19890.

        3.3 Farm Products. The Borrower hereby represents and warrants that none
of the Collateral constitutes, or is the Proceeds of, Farm Products.

        4. Covenants. From and after the date of this Agreement until the
Obligations shall have been paid in full and the Commitments shall have expired
or otherwise been terminated:

        4.1 Further Documentation. At any time and from time to time, upon the
written request of the Agent, and at the sole expense of the Borrower, the
Borrower will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of
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any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests created
hereby.

        4.2 Changes in Locations. (a) Except with respect to the rights of the
Lessee under the Operative Agreements, the Borrower will not permit any of the
Equipment to be kept at a location other than those listed on Schedule 1; and

        (b) The Borrower will not change the location of its chief executive
offices from that specified in Section 3.2.

        4.3 Change in Name. The Borrower will not change its name, identity or
structure to such an extent that any financing statement filed by the Agent in
connection with this Agreement would become seriously misleading, unless they
shall have given the Agent at least 30 days' prior written notice of such
change.

        4.4 Further Identification of Collateral. The Borrower will cause the
Lessee to furnish to the Agent from time to time statements and schedules
further identifying and describing the Collateral and its location and such
other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.

        5. Remedies.

        5.1 Code Remedies. If a Credit Agreement Event of Default shall occur
and be continuing, the Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law or as referred to below) to or upon
the Borrower, the Lessee or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived to the extent permitted
by law), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk, but subject to the rights of the Lessee under the Lease so long
as no Lease Event of Default shall have occurred and be continuing. The Agent or
any Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrower, which right or equity is hereby waived or released
to the extent permitted by law. The Borrower further agrees, at the Agent's
request, to assemble the Collateral and make it available to the Agent at places
which the Agent shall reasonably select. The Agent shall apply the net proceeds
of any action taken by it pursuant to this subsection, after deducting all
reasonable costs
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and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in accordance with Section 8.2 of the
Credit Agreement, and only after such application and after the payment by the
Agent of any other amount required by any provision of law, including, without
limitation, Section 9- 504(1)(c) of the Code, need the Agent account for the
surplus, if any, to the Borrower. To the extent permitted by applicable law, the
Borrower waives all claims, damages and demands it may acquire against the Agent
or any Lender arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Agent agrees that if it
shall proceed to foreclose the Lien of this Agreement, it shall, to the extent
that it is entitled to do so hereunder and under the other Operative Agreements,
and is not then stayed or prevented from doing so by law or otherwise, proceed
(to the extent it has not already done so) to exercise one or more of the
significant possessory remedies referred to in the Lease (as it shall determine
in its sole good faith discretion).

        6. Agent's Appointment as Attorney-in-Fact; Agent's Performance of
Obligations.

        6.1 Powers. The Borrower hereby irrevocably constitutes and appoints the
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Borrower and in the name of the Borrower or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, the
Borrower hereby gives the Agent the power and right, on behalf of the Borrower,
without notice to or assent by the Borrower, to do any or all of the following:

        (a) pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or any insurance called for by the
terms of the Lease and pay all or any part of the premiums therefor and the
costs thereof;

        (b) execute, in connection with any sale provided for in Section 5.1,
any indorsements, assignments or other instruments of conveyance or transfer
with respect to the Collateral; and

        (c) (1) sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (2) commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any Collateral;
(3) defend any suit, action or proceeding brought against the Borrower with
respect to any Collateral; (4) settle, compromise or adjust any such suit,
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action or proceeding and, in connection therewith, to give such discharges or
releases as the Agent may deem appropriate; and (5) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Agent were the absolute owner
thereof for all purposes, and do, at the Agent's option and the Borrower's
expense, at any time, or from time to time, all acts and things which the Agent
deems necessary to protect, preserve or realize upon the Collateral and the
Agent's and the Lenders' security interests therein and to effect the intent of
this Agreement, all as fully and effectively as the Borrower might do.

        Anything in this subsection to the contrary notwithstanding, the Agent
agrees that it will not exercise any rights under the power of attorney provided
for in this subsection unless a Credit Agreement Event of Default shall have
occurred and be continuing.

        6.2 Performance by Agent of Borrower's Obligations. If the Borrower
fails to perform or comply with any of its agreements contained herein, the
Agent, at its option, but without any obligation so to do, may perform or
comply, or otherwise cause performance or compliance, with such agreement.

        6.3 Borrower's Reimbursement Obligation. The expenses of the Agent
incurred in connection with actions undertaken as provided in this Section,
together with interest thereon after a Credit Agreement Event of Default at the
Overdue Rate from the date of payment by the Agent to the date reimbursed by the
Borrower, shall be payable by the Borrower to the Agent on demand.

        6.4 Ratification; Power Coupled With An Interest. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.

        7. Duty of Agent. The Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise to the extent permitted by law, shall be
to deal with it in the same manner as the Agent deals with similar property for
its own account. Neither the Agent, any Lender nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Borrower or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Agent and the Lenders hereunder are solely to protect the
Agent's and the Lenders' interests in the Collateral and shall not impose any
duty upon the Agent or any Lender to exercise any such powers. Neither the
Agent, the Lenders nor any of their officers, directors, employees or agents
shall be responsible to the Borrower for any act or failure to act hereunder,
except for the negligence or willful misconduct of the Agent, any Lender or any
of their officers, directors, employees or agents.

        8. Execution of Financing Statements. Pursuant to and to the extent
permitted by Section 9-402 of the Code, the Borrower authorizes the Agent to
file financing statements with respect to
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the Collateral without the signature of the Borrower in such form and in such
filing offices as the Agent reasonably determines appropriate to perfect the
security interests of the Agent under this Agreement. A carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.

        9. Authority of Agent. The Borrower acknowledges that the rights and
responsibilities of the Agent under this Agreement with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Agent and the Lenders, be governed
by the Credit Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Agent and the Borrower,
the Agent shall be conclusively presumed to be acting as agent for the Lenders
with full and valid authority so to act or refrain from acting, and the Borrower
shall not be under any obligation, or entitlement, to make any inquiry
respecting such authority.

        10. Notices. Unless otherwise specifically provided herein, all notices,
requests and demands required or permitted by the terms hereof to be given to
any person shall be given pursuant to and in accordance with Section 13.3 of the
Participation Agreement.

        11. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

        12. Amendments in Writing; Cumulative Remedies.

        12.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Borrower and the Agent, provided that any
provision of this Agreement imposing obligations on the Borrower may be waived
by the Agent in a written instrument executed by the Agent.

        12.2 Remedies Cumulative. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
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        13. Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.

        14. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns the Borrower and shall inure to the benefit of the Agent
and the Lenders and their successors and permitted assigns.

        15. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the law of the State of New York.

        16. Obligations Are Without Recourse. Anything in this Agreement to the
contrary notwithstanding, the Borrower's liability hereunder shall be limited as
provided in Section 9.17 of the Credit Agreement.

        17. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same instrument.

        IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.

                                HANOVER EQUIPMENT TRUST 1999A

                                By: Wilmington Trust Company, not
                                individually but solely as trustee

                                By:__________________________________________
                                   Name:
                                   Title:
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                                                                      Schedule 1


                                   EQUIPMENT
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                               JOINDER OF LESSEE

        HANOVER COMPRESSOR COMPANY, a Delaware corporation ("Lessee") hereby
joins in the Security Agreement dated as of June 15, 1999 made by HANOVER
EQUIPMENT TRUST 1999A, as the Borrower in favor of The Chase Manhattan Bank, as
the Agent for the Lenders (the "Security Agreement") in order to, and HEREBY
GRANTS TO THE AGENT FOR THE RATABLE BENEFIT OF THE LENDERS A SECURITY INTEREST
IN all of its right, title and interest, if any, in and to the Collateral for
the purpose of securing the Obligations. Lessee acknowledges and agrees that,
upon the occurrence of a Credit Agreement Event of Default and subject to the
terms of the Lease, the Agent on behalf of the Lenders shall have the right to
exercise any and all of its remedies hereunder as against the Collateral.

        Lessee expressly agrees that the rights of the Agent and the Lenders,
under the Security Agreement, shall in no way be affected or impaired by reason
of the occurrence of any of the following events: (i) the waiver by the Agent or
the Lenders of the performance or observance by the Borrower, Lessee or any
other party of any terms of the Operative Agreements; (ii) the extension, in
whole or in part, of the time for payment by the Borrower of any sums owing or
payable under the Operative Agreements; (iii) any failure, delay or inability of
the Agent or the Lenders in enforcing any remedies or any other provisions under
the Operative Agreements; (iv) the occurrence of any event described in Section
7.1(1) of the Credit Agreement; or (v) the inability of the Borrower to perform
(or the release of the Borrower's performance) under the Operative Agreements
due to any Legal Requirement. Notwithstanding the foregoing, Lessee shall not
have any personal liability under this Security Agreement and Joinder in excess
of its personal liability under the Guaranty and the other Operative Agreements.

        This Joinder shall be considered part of the Security Agreement to which
it is attached, and all references in the Operative Agreements to the Security
Agreement shall mean the Security Agreement together with this Joinder.
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        All capitalized terms used herein and not otherwise defined herein shall
have the meaning ascribed to such terms in the Security Agreement.

        This Joinder has been duly executed by Lessee as of June 15, 1999.

                                        HANOVER COMPRESSOR COMPANY

                                        By: _______________________
                                            Name:
                                            Title: