**UNITED STATES**

### **SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM10-Q**

| **x**                                            | **QUARTERLY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------|-----------------------------------------------------------------------------------------------|
| ** **                                       | ** **                                                                                    |
| **For the Quarterly Period Ended June 30, 2007** |
| ** **                                       |
| **OR**                                           |
| ** **                                       |
| **o**                                            | **TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

**For the transition period from               to              **

**CommissionFile Numbers: 001-33078**

**UNIVERSAL COMPRESSION PARTNERS, L.P.**

(Exact name of registrant as specifiedin its charter)

| **DELAWARE**                    |   | **22-3935108**   |
|---------------------------------|--------|------------------|
| (State or Other Jurisdiction of |   | (I.R.S. Employer |
| Incorporation or Organization)  |   | Identification   |
|                            |   | No.)             |
|                            |   |             |
| **4444 BRITTMOORE ROAD**        |   | ** **       |
| **HOUSTON, TEXAS**              |   | **77041**        |
| (Address of Principal Executive |   | (Zip Code)       |
| Offices)                        |   |             |

**(713) 335-7000**

(Registrant’s telephone number,including area code)

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

|  |   |               Yes  x No o |   |   |
|--|--------|-------------------------------------------------------------------------------------------------|--------|--------|

 

Indicate by check mark whether the registrant is alarge accelerated filer, accelerated filer, or non-accelerated filer (asdefined in Rule 12b-2 of the Exchange Act).

|                          Large Accelerated Filer o |   | Accelerated Filer o |   |     Non-Accelerated  Filer x |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------------------------------------------------|

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

|  |   |               Yes  o No x |   |   |
|--|--------|-------------------------------------------------------------------------------------------------|--------|--------|

 

Asof August 2, 2007, there were 10,353,790 common units and 6,325,000subordinated units outstanding.

 

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**PART I. FINANCIAL INFORMATION**

**ITEM 1. *FinancialStatements***

**UNIVERSAL COMPRESSION PARTNERS, L.P.**

**CONSOLIDATED BALANCE SHEETS**

**(In thousands)**

**(unaudited)**
| ** **                                                                                                                           | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                           |       |                        |       |                            |       |
| Current assets:                                                                                                                      |       |                        |       |                            |       |
| Cash and cash  equivalents                                                                                                           |       | $                           | 1,158      |                            | $          | 2,430 |   |
| Accounts  receivable, trade, net of allowance for bad debts of $56 and zero as of June  30, 2007 and December 31, 2006, respectively |       | 4,355                       |       | 5,676                           |       |
| Accounts  receivable, affiliate                                                                                                      |       | 25,636                      |       | 4,732                           |       |
| Total current  assets                                                                                                                |       | 31,149                      |       | 12,838                          |       |
| Contract compression  equipment                                                                                                      |       | 211,185                     |       | 193,957                         |       |
| Accumulated  depreciation                                                                                                            |       | (45,481                     | )          | (40,759                         | )          |
| Net contract  compression equipment                                                                                                  |       | 165,704                     |       | 153,198                         |       |
| Goodwill                                                                                                                             |       | 36,549                      |       | 36,549                          |       |
| Derivative financial  instrument                                                                                                     |       | 373                         |       | —                          |       |
| Other assets                                                                                                                         |       | 1,090                       |       | 1,076                           |       |
| Total assets                                                                                                                         |       | $                           | 234,865    |                            | $          | 203,661 |   |
| **LIABILITIES  AND PARTNERS’ CAPITAL**                                                                                          |       |                        |       |                            |       |
| Current liabilities:                                                                                                                 |       |                        |       |                            |       |
| Accounts  payable, trade                                                                                                             |       | $                           | 444        |                            | $          | 1,641 |   |
| Accounts  payable, affiliate                                                                                                         |       | 36,507                      |       | 5,204                           |       |
| Accrued  liabilities                                                                                                                 |       | 1,400                       |       | 234                             |       |
| Accrued interest                                                                                                                     |       | 653                         |       | 597                             |       |
| Total current liabilities                                                                                                            |       | 39,004                      |       | 7,676                           |       |
| Long-term debt                                                                                                                       |       | 121,000                     |       | 125,000                         |       |
| Derivative financial  instrument                                                                                                     |       | —                      |       | 1,528                           |       |
| Total  liabilities                                                                                                                   |       | 160,004                     |       | 134,204                         |       |
| Commitments and  contingencies (Note 9)                                                                                              |       |                        |       |                            |       |
| Partners’ capital:                                                                                                              |       |                        |       |                            |       |
| Common units                                                                                                                         |       | 122,320                     |       | 122,142                         |       |
| Subordinated  units                                                                                                                  |       | (54,171                     | )          | (57,468                         | )          |
| General partner  units                                                                                                               |       | 5,561                       |       | 5,496                           |       |
| Accumulated  other comprehensive income (loss)                                                                                       |       | 1,151                       |       | (713                            | )          |
| Total partners’  capital                                                                                                        |       | 74,861                      |       | 69,457                          |       |
| Total liabilities and  partners’ capital                                                                                        |       | $                           | 234,865    |                            | $          | 203,661 |   |

 

See accompanying notes tounaudited consolidated financial statements.

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**UNIVERSAL COMPRESSION PARTNERS, L.P.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per unit amounts)**

**(unaudited)**
| ** **                                                  | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                  | ** ** | **2007**                                    | ** ** |
|                                                        |       |                                        |       |                                      |       |
| Revenue                                                     |       | $                                           | 18,804     |                                      | $          | 36,389 |   |
| Costs and  expenses:                                        |       |                                        |       |                                      |       |
|  Cost of sales (excluding depreciation)                |       | 7,573                                       |       | 14,591                                    |       |
|  Depreciation                                          |       | 2,968                                       |       | 5,750                                     |       |
|  Selling, general and administrative                   |       | 3,915                                       |       | 7,174                                     |       |
|  Interest expense, net                                 |       | 2,093                                       |       | 4,226                                     |       |
|  Other (income) expense, net                           |       | (3                                          | )          | (9                                        | )          |
|  Total costs and expenses                              |       | 16,546                                      |       | 31,732                                    |       |
| Income before  income taxes                                 |       | 2,258                                       |       | 4,657                                     |       |
| Income tax  (benefit) expense                               |       | (6                                          | )          | 50                                        |       |
| Net income                                                  |       | $                                           | 2,264      |                                      | $          | 4,607 |   |
|                                                        |       |                                        |       |                                      |       |
| General partner  interest in net income                     |       | $                                           | 45         |                                      | $          | 92 |   |
| Limited partner  interest in net income                     |       | $                                           | 2,219      |                                      | $          | 4,515 |   |
|                                                        |       |                                        |       |                                      |       |
| Weighted average  limited partners’ units outstanding: |       |                                        |       |                                      |       |
| Basic                                                       |       | 12,650                                      |       | 12,650                                    |       |
| Diluted                                                     |       | 12,709                                      |       | 12,676                                    |       |
|                                                        |       |                                        |       |                                      |       |
| Earnings per  limited partner unit—Basic               |       | $                                           | 0.18       |                                      | $          | 0.36 |   |
| Earnings per limited  partner unit—Diluted             |       | $                                           | 0.17       |                                      | $          | 0.36 |   |

 

See accompanying notes tounaudited consolidated financial statements.

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**UNIVERSAL COMPRESSION PARTNERS, L.P.**

**CONSOLIDATED STATEMENT OF CASH FLOWS**

**(In thousands)**

**(unaudited)**
| ** **                                                                      | ** ** | **Six Months  Ended  June 30,**

**2007** | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
|                                                                            |       |                                                |       |
| Cash flows from  operating activities:                                          |       |                                                |       |
| Net income                                                                      |       | $                                                   | 4,607      |   |
| Adjustments to reconcile net income to cash provided  by operating activities:  |       |                                                |       |
| Depreciation                                                                    |       | 5,750                                               |       |
| Amortization of debt issuance cost                                              |       | 112                                                 |       |
| Unit based compensation expense                                                 |       | 1,891                                               |       |
| (Increase) decrease in other assets                                             |       | (126                                                | )          |
| (Increase) decrease in accounts receivable, trade                               |       | 1,321                                               |       |
| Increase (decrease) in accounts payable, trade                                  |       | (1,197                                              | )          |
| Increase (decrease) in accrued liabilities                                      |       | 1,222                                               |       |
|  Net cash provided by operating activities                                 |       | 13,580                                              |       |
| Cash flows from  investing activities:                                          |       |                                                |       |
|  Additions to contract compression equipment                               |       | (16,150                                             | )          |
|  Net cash used in investing activities                                     |       | (16,150                                             | )          |
| Cash flows from  financing activities:                                          |       |                                                |       |
| Net borrowings (repayments) under revolving credit  facility                    |       | (4,000                                              | )          |
| Distribution to unitholders                                                     |       | (8,105                                              | )          |
| (Increase) decrease in net accounts  receivable/accounts payable with affiliate |       | 13,403                                              |       |
| Net cash provided by financing activities                                       |       | 1,298                                               |       |
| Net decrease in  cash and cash equivalents                                      |       | (1,272                                              | )          |
| Cash and cash  equivalents at beginning of period                               |       | 2,430                                               |       |
| Cash and cash  equivalents at end of period                                     |       | $                                                   | 1,158      |   |

 

See accompanying notes tounaudited consolidated financial statements.

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**UNIVERSAL COMPRESSION PARTNERS, L.P.**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**June 30, 2007**

**1.****     Basis of Presentation**

Universal Compression Partners, L.P. (the “Partnership”)is a publicly held Delaware limited partnership formed on June 22, 2006, toacquire certain contract compression customer service agreements and a relatedcompressor fleet used to service those customers from Universal CompressionPartners Predecessor.  UniversalCompression Partners Predecessor’s operations are owned by UniversalCompression Holdings, Inc. and its subsidiaries (“Universal CompressionHoldings”).

These unaudited consolidated financial statementsshould be read in conjunction with the consolidated financial statementspresented in the Partnership’s Annual Report on Form 10-K for the period fromJune 22, 2006 through December 31, 2006. That report contains a morecomprehensive summary of the Partnership’s major accounting policies. In theopinion of management, the accompanying unaudited consolidated financial statementscontain all appropriate adjustments, all of which are normally recurringadjustments unless otherwise noted, considered necessary to present fairly thefinancial position of the Partnership and its consolidated subsidiaries and theresults of operations and cash flows for the respective periods. Operatingresults for the three-month and six-month periods ended June 30, 2007 are notnecessarily indicative of the results that may be expected for the twelvemonths ending December 31, 2007.

Because the Partnership was formed on June 22, 2006and had no operations prior to October 20, 2006, Consolidated Statement ofOperations and Consolidated Statement of Cash Flows are not presented for thesix months ended June 30, 2006. Financial statements and notes for UniversalCompression Partners Predecessor can be found elsewhere in this report.

*Goodwill*

The Partnership performs animpairment test for goodwill assets annually, or more often if indicators ofpotential impairment exist. The Partnership’s goodwill impairment test involvesa comparison of its reporting unit’s fair value with its carrying value. Thefair value is determined using discounted cash flows and other market-relatedvaluation models. Certain estimates and judgments are required in the applicationof the fair value models. As of February 2007, the Partnership performed itsannual impairment analysis in accordance with the Financial AccountingStandards Board’s (“FASB”) Statement ofFinancial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other IntangibleAssets,” and determined that no impairment had occurred.  If for anyreason the fair value of the Partnership’s goodwill or that of its reportingunit declines below the carrying value in the future, the Partnership may incurcharges for the impairment.

*Unit-Based Compensation*

Effective June 22, 2006, thePartnership adopted SFAS No. 123R, “Share-Based Payment,” which requiresthat compensation cost relating to share-based payment transactions berecognized in the financial statements. That cost will be measured based on the fair value of the equity orliability instruments issued.

*Income Taxes*

As apartnership, all income, gains, losses, expenses, deductions and tax creditsgenerated by the Partnership generally flow through to the unitholders of thePartnership.  However, Texas, through arecently enacted margin tax, imposes an entity-level income tax onpartnerships.

TheState of Texas margin tax will become effective for tax reports originally dueon or after January 1, 2008.  This margintax requires partnerships and other forms of legal entities to pay a tax of1.0% on its “margin,” as defined in the law, based on 2007 results.  The margin tax base to which the tax ratewill be applied is either the lesser of 70% of the Partnership’s total revenuesfor federal income tax purposes or total revenue less cost of goods sold orcompensation for federal income tax purposes. For the six months ended June 30, 2007, the Partnership recorded anaccrued liability related to the Texas margin tax of $50,000.

*Segment Reporting*

SFASNo. 131, “Disclosures about Segments of an Enterprise and Related Information,”established standards for entities to report information about the operatingsegments and geographic areas in which they operate. The Partnership operatesin only one segment and all of its operations are located in the United Statesof America.

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*Earnings Per Limited Partner Unit*

Thecomputation of earnings per limited partner unit is based on the weightedaverage number of common and subordinated units outstanding during theapplicable period. Basic earnings per limited partner unit is determined bydividing net income, after deducting the amount allocated to the generalpartner interest (including its incentive distribution in excess of its 2%interest), by the weighted average number of outstanding limited partner unitsduring the period.

The only potentially dilutivesecurities issued by the Partnership are unit options and phantom units,neither of which would impact the calculation of net income for dilutiveearnings per unit purposes.  The dilutiveeffects of unit option and phantom unit grants outstanding for the three monthsand six months ended June 30, 2007 were 59,000 units and 26,000 units, respectively.  For the three months and six months endedJune 30, 2007, no unit options or phantom units were excluded from thecomputation of diluted earnings per unit.

**2.  New Accounting Pronouncements**

InJune 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting forUncertainty in Income Taxes, an interpretation of FASB Statement No. 109.”  FIN 48 was issued to clarify the accountingfor uncertainty in income taxes recognized in an entity’s financial statementsby prescribing a recognition threshold and measurement attribute for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Partnership adopted the provisions of FIN48 on January 1, 2007.  The adoption ofFIN 48 did not have an impact on its consolidated financial statements.

InJune 2006, the FASB’s Emerging Issues Task Force (“EITF”) reached a consensuson Issue 06-3, “How Taxes Collected from Customers and Remitted to GovernmentalAuthorities Should Be Presented in the Income Statement (That Is, Gross versusNet Presentation),” that concludes that the presentation of taxes within EITF06-3’s scope is an accounting policy decision that should be disclosed. If thetaxes are reported on a gross basis, companies are required to disclose theamounts of those taxes if such amounts are deemed significant. Thispronouncement is effective for interim and annual reporting periods beginningafter December 15, 2006.  The Partnershippresents the taxes within the scope of EITF 06-3 on a net basis.  The adoption of EITF 06-3 did not have animpact on the Partnership’s consolidated financial statements.

InSeptember 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”which defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles and expands disclosures about fairvalue measurements. SFAS No. 157 is effective for fiscal years beginningafter November 15, 2007. The Partnership is currently evaluating theimpact that the adoption of SFAS No. 157 will have on its consolidatedfinancial statements.

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities,” which permits entities to chooseto measure many financial instruments and certain other items at fair valuethat are not currently required to be measured at fair value.  SFAS No. 159 will be effective for thePartnership on January 1, 2008.  ThePartnership is currently evaluating the impact that the adoption of SFAS No.159 will have on its consolidated financial statements.

**3.  Related Party Transactions**

Uponthe closing of the Partnership’s initial public offering, it entered into anomnibus agreement (“Omnibus Agreement”) with Universal Compression Holdings,its general partner and others. The Omnibus Agreement will terminate on achange of control of the Partnership’s general partner or the removal orwithdrawal of its general partner, and certain provisions will terminate upon achange of control of Universal Compression Holdings (see Note 10).

Underthe Omnibus Agreement, Universal Compression Holdings agreed that, for a periodthat will terminate on December 31, 2008, the Partnership’s obligation toreimburse Universal Compression Holdings for (1) any cost of sales that itincurs in the operation of the Partnership’s business will be capped at anamount equal to $16.95 per horsepower (after taking into account any such coststhe Partnership incurs and pays directly) on a quarterly basis; and (2) anyselling, general and administrative costs allocated to the Partnership will becapped at $2.5 million per quarter (after taking into account any such coststhe Partnership incurs and pays directly). These caps may be subject to increasesin connection with expansions of the Partnership’s operations through theacquisition or construction of new assets or businesses (see Note 11).  For the three months and six months endedJune 30, 2007, the Partnership’s cost of sales exceeded the cap by $1.7 millionand $3.1 million, respectively.  For thethree months and six months ended June 30, 2007, the Partnership’s selling,general and administrative expense exceeded the cap by approximately $0.1million and $0.3 million, respectively. The excess amounts over the caps are being accounted for as a capitalcontribution.  The Omnibus Agreement wasamended in July 2007 and, among other things, increased the caps (see Note 11).

6

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Duringthe six months ended June 30, 2007, the Partnership purchased $13.4 million ofnew compression equipment from Universal Compression Holdings and UniversalCompression Holdings contributed $1.8 million of cost to overhaul compressionequipment to the Partnership.  Thesecosts relate to overhauls on equipment that was contributed to the Partnershipby Universal Compression Holdings on the date of the Partnership’s initialpublic offering and where the overhaul was in-progress on that date.

Forthe three months and six months ended June 30, 2007, the Partnership had revenueof $0.3 million and $0.5 million, respectively, and cost of sales of $1.0million and $1.4 million, respectively, with affiliates related to leases ofcompression equipment.

**4.Long-Term Debt**

As of June 30, 2007, the Partnership had approximately$121.0 million outstanding under its revolving credit facility (see Note11).  Covenantsin the credit facilities require that the Partnership maintain variousfinancial ratios.  As of June 30, 2007,the Partnership was in compliance with all financial covenants.

 **5.  CashDistributions**

On February 14,2007, the Partnership distributed approximately $3.6 million, or $0.278 perunit, which reflects the pro rata portion of the quarterly distribution rate of$0.35, covering the period from the closing of the initial public offering onOctober 20, 2006, through December 31, 2006. On May 15, 2007, the Partnership distributed approximately $4.5 million,or $0.35 per unit, the Partnership’s minimum quarterly distribution coveringthe period from January 1, 2007 to March 31, 2007.

OnJuly 30, 2007, the board of directors of the Partnership’s general partnerapproved a cash distribution of $0.35 per unit, or approximately $6.0million.  The distribution reflects thePartnership’s minimum quarterly distribution rate of $0.35 and covers the timeperiod from April 1, 2007 to June 30, 2007. The record date for this distribution is August 9, 2007 and payment isexpected to occur on August 14, 2007. Because the Partnership issued approximately 4.1 million common andgeneral partner units on July 9, 2007, prior to the record date, to fund itsrecent acquisition of contract compression assets from Universal CompressionHoldings (see Note 11), this distribution will also be paid to the holders ofthose units.

**6. Unit-Based Compensation**

The following table presents theunit-based compensation expense included in the Partnership’s results ofoperations (in thousands):
|                                       | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|---------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                            | ** ** | **2007**                                    | ** ** |
| Unit options                          |       | $                                           | 1,301      |                                      | $          | 1,887 |   |
| Phantom units                         |       | 2                                           |       | 4                                         |       |
| Total unit-based compensation expense |       | $                                           | 1,303      |                                      | $          | 1,891 |   |

 

There was no unit-basedcompensation cost capitalized during the three months and six months ended June30, 2007.  During the six months endedJune 30, 2007, no unit options or phantom units were granted, exercised orcancelled.

**7. Accounting for Interest Rate Swap Agreements**

In accordance with SFASNo. 133, “Accounting for Derivative Instruments and Hedging Activities,”as amended, all derivative instruments must be recognized on the balance sheetat fair value, and changes in such fair values are recognized in earningsunless specific hedging criteria are met. Changes in the values of derivativesthat meet these hedging criteria will ultimately offset related earnings effectsof the hedged item pending recognition in earnings.

As of June 30, 2007, the notionalamount of the interest rate swap agreement related to the Partnership’srevolving credit facility was $125.0 million and the fair value of thisinterest rate swap agreement as of June 30, 2007 was a derivative asset ofapproximately $0.4 million.  The swapagreement terminates in December 2011 and has a fixed rate of 5.28%.  As of June 30, 2007, all of our outstandingvariable rate debt had been converted to a fixed rate through the swapagreement.  Because the terms of thehedged item and this swap do not substantially coincide, the Partnershipperforms calculations to determine the amount of ineffectiveness, if any.  For the three months and six months endedJune 30, 2007, the Partnership recorded approximately $36,000 ofineffectiveness.

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**8. Comprehensive Income**

Comprehensive income consisted of the following (inthousands):
|                             | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|-----------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                  | ** ** | **2007**                                    | ** ** |
| Net income                  |       | $                                           | 2,264      |                                      | $          | 4,607 |   |
| Other comprehensive income: |       |                                        |       |                                      |       |
| Interest rate swap gain     |       | 2,413                                       |       | 1,864                                     |       |
|                        |       |                                        |       |                                      |       |
| Comprehensive income        |       | $                                           | 4,677      |                                      | $          | 6,471 |   |

 

**9. Commitments and Contingencies**

In theordinary course of business, the Partnership is involved in various pending orthreatened legal actions. In the opinion of management, the amount of ultimateliability, if any, with respect to these actions will not have a materialadverse effect on the Partnership’s financial position, results of operations orcash flows; however, because of the inherent uncertainty of litigation, thePartnership cannot provide assurance that the resolution of any particularclaim or proceeding to which it is a party will not have a material adverseeffect on the Partnership’s financial position, results of operations or cashflows for the period in which that resolution occurs.

**10. Proposed Merger BetweenUniversal Compression Holdings and Hanover Compressor Company**

In February 2007, Universal Compression Holdings andHanover Compressor Company (“Hanover”) entered into a merger agreement. Uponconsummation of the transactions set forth in the merger agreement, each commonshare of Hanover will be converted into 0.325 shares of common stock of a newlycreated holding company, Exterran Holdings, Inc. (“Exterran”), and each commonshare of Universal Compression Holdings will be converted into one share ofExterran. Hanover will be treated as the acquirer for accounting purposes.

Themerger agreement has been unanimously approved by both companies’ boards ofdirectors. Completion of the merger is subject to a number of conditions,including the approval of the stockholders of both companies and customaryregulatory approvals, including the expiration of the applicable waiting periodunder the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“Hart-Scott-RodinoAct”).  On July 3, 2007, UniversalCompression Holdings and Hanover each received notice that the waiting periodrequired by the Hart-Scott-Rodino Act with respect to the merger had beenterminated.  On July 10, 2007, the SECdeclared effective the registration statement relating to the proposedmerger.  Each company has scheduled itsannual meeting of stockholders, at which the proposed merger will beconsidered, for August 16, 2007. Universal Compression Holdings and Hanover expect the merger to close onor about August 20, 2007, but no assurances can be given as to the timing ofthe satisfaction of all closing conditions or that all required approvals willbe received.

Themerger agreement requires Universal Compression Holdings and Hanover tocontinue to operate their businesses in the ordinary course of business and toobtain the other party’s consent prior to engaging in certain specifiedactivities, such as issuing or repurchasing securities, acquiring or disposingof businesses above specified thresholds, incurring new debt other than belowspecified thresholds and for specified purposes, paying dividends or grantingawards with respect to their common stock (other than under employeecompensation arrangements).  Theseagreements are subject to specified exceptions, including those (1) permittingUniversal Compression Holdings to repurchase up to an additional $75 million ofits common stock in accordance with its previously announced open-market stockrepurchase program, (2) permitting the Partnership to make cash distributionsin accordance with its partnership agreement, (3) permitting UniversalCompression Holdings to make contributions of its domestic compression assetsto the Partnership, subject to certain limitations, and (4) permittingUniversal Compression Holdings to redeem its 7 1/4% senior notes due 2010.

Upon theclosing of the proposed merger, the Partnership will remain a subsidiary ofUniversal Compression Holdings, and Universal Compression Holdings will becomea wholly owned indirect subsidiary of Exterran.

Theclosing of the proposed merger of Universal Compression Holdings and Hanoverwill constitute a change of control of Universal Compression Holdings under theOmnibus Agreement, which will cause a termination of the non-competition andequipment-sharing provisions of the Omnibus Agreement.  The Partnership expects to negotiate andenter into suitable substitute arrangements with Universal Compression Holdingsthat would take effect upon the termination of these provisions of the OmnibusAgreement, although it cannot provide any assurance that it will be able to doso.

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**11.  SubsequentEvents**

InJuly 2007, the Partnership acquired from Universal Compression Holdingscontract compression customer service agreements with eight customers and afleet of 722 compressor units, comprising 281,992 horsepower, or 13% (byavailable horsepower) of the combined domestic contract compression business ofUniversal Compression Holdings and the Partnership. These compressor unitsserve the compression service needs of the eight customers that becamecustomers of the Partnership upon the closing of the acquisition.  Inconnection with this acquisition, the Partnership assumed $159.6 million indebt from Universal Compression Holdings and issued to Universal CompressionHoldings approximately 2.0 million common units and approximately 82,000general partner units.  Additionally, the Partnership issued approximately2.0 million common units for proceeds of $69.1 million (net of privateplacement fees of $0.9 million) to institutional investors in a privateplacement.  The Partnership used the proceeds from the private placementto repay a portion of the debt assumed from Universal Compression Holdings.

Additionally,in connection with this acquisition, the Partnership expanded its revolvingcredit facility from $225 million to $315 million and borrowed an additional$90 million under that facility, which it used, along with available cash, torepay the remainder of the debt assumed from Universal Compression Holdings inconjunction with this acquisition.

InJuly 2007, the Partnership entered into two interest rate swap agreementsrelated to its revolving credit facility. Each swap agreement has a notional amount of $40 million.   These swap agreements both terminate inOctober 2011 and have a weighted average fixed rate of 5.33%.

Also,in connection with the closing of the acquisition, the Partnership entered intoan amendment (the “First Amendment”) to the Omnibus Agreement.  The First Amendment, among other things,increased the cap on selling, general and administrative costs allocable fromUniversal Compression Holdings to the Partnership based on such costs incurredby Universal Compression Holdings on behalf of the Partnership from $2.5million per quarter to $4.75 million (after taking into account any such coststhat the Partnership incurs and pays directly) per quarter and increased thecap on cost of sales from $16.95 per horsepower per quarter to $18.00 perhorsepower (after taking into account any such costs that the Partnershipincurs and pays directly) per quarter. These caps are scheduled to terminate on December 31, 2008, aspreviously agreed.

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**UNIVERSAL COMPRESSION PARTNERS PREDECESSOR**

**COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVEINCOME**

**(In thousands)**

**(unaudited)**
| ** **                                   | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|----------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                    | ** ** |
|                                         |       |                                        |       |                                      |       |
| Revenue                                      |       | $                                           | 101,460    |                                      | $          | 195,505 |   |
|                                         |       |                                        |       |                                      |       |
| Cost of sales (excluding depreciation)       |       | 35,792                                      |       | 68,706                                    |       |
| Depreciation                                 |       | 19,192                                      |       | 38,001                                    |       |
| Selling, general and administrative expenses |       | 13,028                                      |       | 22,479                                    |       |
| Other (income) expense, net                  |       | (527                                        | )          | (577                                      | )          |
| Net income and comprehensive income          |       | $                                           | 33,975     |                                      | $          | 66,896 |   |

 

See accompanying notes tounaudited combined financial statements.

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**UNIVERSAL COMPRESSION PARTNERS PREDECESSOR**

**COMBINED STATEMENT OF CASH FLOWS**

**(In thousands)**

**(unaudited)**
| ** **                                                                     | ** ** | **Six Months  Ended  June 30,  2006** | ** ** |
|--------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| Cash flows from operating activities:                                          |       |                                            |       |
| Net income                                                                     |       | $                                               | 66,896     |   |
| Adjustments to reconcile net income to cash provided  by operating activities: |       |                                            |       |
| Depreciation                                                                   |       | 38,001                                          |       |
| Gain on asset sales                                                            |       | (575                                            | )          |
| (Increase) decrease in receivables                                             |       | (33,979                                         | )          |
| Increase (decrease) in accrued liabilities                                     |       | 743                                             |       |
| Net cash provided by operating activities                                      |       | 71,086                                          |       |
| Cash flows from investing activities:                                          |       |                                            |       |
| Additions to property and equipment                                            |       | (51,905                                         | )          |
| Proceeds from sale of property and equipment                                   |       | 4,721                                           |       |
| Net cash used in investing activities                                          |       | (47,184                                         | )          |
| Cash flows from financing activities:                                          |       |                                            |       |
| Net distributions to parent                                                    |       | (23,902                                         | )          |
| Net cash used in financing activities                                          |       | (23,902                                         | )          |
| Increase (decrease) in cash and cash equivalents                               |       | —                                          |       |
| Cash and cash equivalents at beginning of period                               |       | —                                          |       |
| Cash and cash equivalents at end of period                                     |       | $                                               | —     |   |

 

See accompanying notes tounaudited combined financial statements.

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**UNIVERSAL COMPRESSION PARTNERS PREDECESSOR**

**NOTES TOUNAUDITED COMBINED FINANCIAL STATEMENTS**

**1. Basis of Presentation and Summary ofSignificant Accounting Policies**

*Organization*

Thesenotes apply to the unaudited combined financial statements of the natural gascontract compression business that is provided in the United States of America(“United States”) by Universal Compression Holdings, Inc. (along with its subsidiaries,“Universal Compression Holdings”) and its subsidiaries (the “Predecessor”).

In October 2006, a subsidiary of Universal CompressionHoldings, Universal Compression Partners, L.P. (along with its subsidiaries, “thePartnership”), completed an initial public offering of 6,325,000 common unitsrepresenting limited partner interests in the Partnership, at a price of $21.00per unit, including 825,000 common units sold pursuant to the exercise of theunderwriters’ overallotment option. As of the closing of the initial publicoffering, Universal Compression Holdings contributed to the Partnership aportion of the Predecessor’s business comprising contract compression servicescontracts with nine customers and a fleet of compressor units to service those customers,comprising approximately 330,000 horsepower, or approximately 17% (by availablehorsepower) of the Predecessor’s business. For financial reporting purposes, the Predecessor is deemed to be thepredecessor of the Partnership.  Asubsidiary of Universal Compression Holdings is the general partner of thePartnership.

*Basis of Presentation*

Thecombined financial statements include the accounts of the Predecessor and havebeen prepared in accordance with accounting principles generally accepted in theUnites States. The combined statements of operations include all revenue andcosts directly attributable to the Predecessor. In addition, cost of sales(excluding depreciation expense) and selling, general and administrativeexpenses include costs incurred by Universal Compression Holdings and allocatedto the Predecessor based on allocation factors that it believes are reasonable.These costs include, among other things, indirect field labor, vehicle fuelcost, vehicle and field operations facilities repair and maintenance costs,miscellaneous supplies cost and centralized corporate functions such as legal,accounting, treasury, insurance administration and claims processing, riskmanagement, health, safety and environmental, information technology, humanresources, credit, payroll, taxes and other corporate services and the use offacilities that support these functions. These allocations may not benecessarily indicative of the costs and expense that would result if thePartnership was an independent entity.

*Comprehensive Income*

ThePredecessor had no items of other comprehensive income for the period presentedin the Combined Statements of Operations and Comprehensive Income. As a result,net income and comprehensive income are the same for the periods presented.

*Segment Reporting*

SFASNo. 131, “Disclosures about Segments of an Enterprise and Related Information,”established standards for entities to report information about the operatingsegments and geographic areas in which they operate.  The Predecessor only operates in one segmentand all of its operations are located in the United States.

 *Non-cash Financing and Investing Activities*

Netdistributions to parent on the Combined Statement of Cash Flows for the sixmonths ended June 30, 2006 exclude certain non-cash transactions related to nettransfers of contract compression equipment (from)/to the Predecessor andfrom/(to) other subsidiaries of Universal Compression Holdings.

**2.  Related Party Transactions**

ThePredecessor has no employees. The employees supporting the Predecessor areemployees of Universal Compression Holdings. Services provided by UniversalCompression Holdings to the Predecessor include support of the contractcompression services provided by the Predecessor to its customers utilizingequipment owned by the Predecessor, such as designing, sourcing, installing,operating, servicing, repairing and maintaining the equipment. Additionally,Universal Compression Holdings provides to the Predecessor centralizedcorporate functions such as legal, accounting, treasury, insuranceadministration and claims processing, risk management, health, safety andenvironmental, information technology, human resources, credit, payroll, taxesand other corporate services and the use of facilities that support thesefunctions. Costs

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incurred byUniversal Compression Holdings on behalf of the Predecessor and that can bedirectly identified to the Predecessor are included in the Predecessor’sresults of operations. Costs incurred by Universal Compression Holdings thatare indirectly attributable to the Predecessor and Universal CompressionHoldings’ other operations are allocated among the Predecessor and UniversalCompression Holdings’ other operations. For the three months and six monthsended June 30, 2006, Universal Compression Holdings’ defined contribution401(k) plan and employees’ supplemental savings plan expense allocated to thePredecessor was $0.4 million and $0.7 million, respectively. The allocationmethodologies vary based on the nature of the charge and include, among otherthings, revenue, employee headcount and net assets. Management believes thatthe allocation methodologies used to allocate indirect costs to it arereasonable.

ThePredecessor purchases new natural gas compression equipment from UniversalCompression Holdings and other services related to existing equipment that arecapitalized such as overhauls and repackaging. In addition, the Predecessor hastransferred used and idle natural gas compression equipment to subsidiaries ofUniversal Compression Holdings. Such transfers were recorded at historical costand treated as a decrease in net parent equity.

ThePredecessor’s balance sheets contain no cash. All payments made on behalf ofthe Predecessor, such as direct costs, indirect costs and capital expendituresdiscussed above, are paid by Universal Compression Holdings and have beenrecorded as increases in net parent equity. All payments received on behalf ofthe Predecessor, such as receipts for revenue earned or sales of assets, are receivedby Universal Compression Holdings and have been recorded as decreases in netparent equity.

**3. Universal Compression HoldingsStock-Based Compensation**

UniversalCompression Holdings grants stock options and restricted stock to designatedemployees. Effective January 1, 2006, Universal Compression Holdings adoptedSFAS No. 123R, “Share-Based Payment,” which requires that compensation costrelating to share-based payment transactions be recognized in the financialstatements. That cost will be measured based on the fair value of the equity orliability instruments issued.

Aportion of the stock-based compensation expense incurred by UniversalCompression Holdings is an indirect cost allocated to the Predecessor based onfactors discussed in Note 2.  In thethree months and six months ended June 30, 2006, the adoption of SFAS No. 123Rby Universal Compression Holdings impacted the Predecessor’s results ofoperation by increasing selling, general and administrative expenses by $0.6million and $1.1 million, respectively, as compared to the expense that wouldhave been recognized under APB 25.

**4. Commitments and Contingencies**

In theordinary course of business, the Predecessor is involved in various pending orthreatened legal actions. In the opinion of management, the amount of ultimateliability, if any, with respect to these actions will not have a materialadverse effect on the Predecessor’s financial position, results of operationsor cash flows; however, because of the inherent uncertainty of litigation, thePredecessor cannot provide assurance that the resolution of any particularclaim or proceeding to which it is a party will not have a material adverseeffect on the Predecessor’s financial position, results of operations or cashflows for the period in which that resolution occurs.

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**ITEM 2.  *Management’s Discussion and Analysis of FinancialCondition and Results of Operations***

*Referencesin Management’sDiscussion and Analysis of Financial Condition and Results of Operations to “we,”“our,” “us” or like terms refer to Universal Compression Partners, L.P.  References to “our predecessor” or like termsrefer to the natural gas contract compression business that is provided in theUnited States of America (“United States”) by Universal Compression Holdings,Inc. and its subsidiaries (“Universal Compression Holdings”).   In connection with our initial public offeringwhich was completed in October 2006, approximately 17% (by availablehorsepower) of our predecessor’s business was contributed to us by UniversalCompression Holdings. The following discussion analyzes the historicalfinancial condition and results of operations of us and our predecessor and should be read in conjunction with ourunaudited financial statements, and notes thereto, and our predecessor’sunaudited combined financial statements and notes thereto appearingelsewhere in this report, as well as our consolidated financial statements andour predecessor’s combined financial statements and Management’s Discussion andAnalysis of Financial Condition and Results of Operations in our annual reporton Form 10-K for the period from June 22, 2006 through December 31, 2006.*

**DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS**

This report contains “forward-lookingstatements” within the meaning of Section 21E of the Securities Exchange Act of1934, as amended. All statements other than statements of historical factcontained in this report are forward-looking statements, including,without limitation, statements regarding future financial position, businessstrategy, proposed acquisitions, budgets, litigation, projected costs and plansand objectives of management for future operations. You can identify many ofthese statements by looking for words such as “believes,” “expects,” “will,” “intends,”“projects,” “anticipates,” “estimates” or similar words or the negativethereof.

Such forward-lookingstatements in this report include, without limitation, statements regarding:

·                                          our business growth strategy and projected costs;

·                                          our future financial position;

·                                          the sufficiency of available cash flows to makecash distributions;

·                                          the expected amount of our capital expenditures;

·                                          anticipated cost savings, future revenue, grossmargin and other financial or operational measures related to our business;

·                                          the future value of our equipment;

·                                          plans and objectives of our management for ourfuture operations;

·                                          any potential contribution of additional assetsfrom Universal Compression Holdings to us and the effect of any suchcontribution; and

·                                          the ability of Universal Compression Holdings andHanover Compressor Company (“Hanover”) to successfully complete theiranticipated merger.

Such forward-lookingstatements are subject to various risks and uncertainties that could causeactual results to differ materially from those anticipated as of the date ofthis report.  Although we believe thatthe expectations reflected in these forward-looking statements are basedon reasonable assumptions, no assurance can be given that these expectationswill prove to be correct.  Theseforward-looking statements are also affected by the risk factors andforward-looking statements described in our Annual Report on Form 10-K for theperiod from June 22, 2006 through December 31, 2006 and those set forth fromtime to time in our filings with the Securities and Exchange Commission (“SEC”),which are available through our website and through the SEC’s Electronic DataGathering and Retrieval System (“EDGAR”) at www.sec.gov. Important factors thatcould cause our actual results to differ materially from the expectationsreflected in these forward-looking statements include, among otherthings:

·                                          conditions in the oil and gas industry, includinga sustained decrease in the level of supply or demand for natural gas and theimpact on the price of natural gas;

·                                          competition among the various providers of naturalgas compression services;

·                                          our ability to negotiate and enter into suitablesubstitute arrangements with Universal Compression Holdings that would takeeffect upon the termination of the Omnibus Agreement;

·                                          the ability of Universal Compression Holdings andHanover to obtain necessary approvals for the proposed merger and the successof the merger if approved and consummated;

·                                          employment workforce factors, including ourability to hire, train and retain key employees;

·                                          changes in safety and environmental regulationspertaining to the production and transportation of natural gas;

·                                          acts of war or terrorism or governmental ormilitary responses thereto;

·                                          introduction of competing technologies by othercompanies;

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·                                          our ability to grow our asset base, particularlyour fleet of compressors;

·                                          our ability to retain and grow our customer base;

·                                          an IRS challenge to our valuation methodologies,which may result in a shift of income, gain, loss and deduction between thegeneral partner and the unitholders;

·                                          our level of indebtedness and ability to fund ourbusiness; and

·                                          liability claims related to the use of ourproducts and services.

All forward-looking statementsincluded in this report are based on information available to us on the date ofthis report. Except as required by law, we undertake no obligation to publiclyupdate or revise any forward-looking statement, whether as a result ofnew information, future events or otherwise. All subsequent written and oralforward-looking statements attributable to us or persons acting on ourbehalf are expressly qualified in their entirety by the cautionary statementscontained throughout this report.

**Overview**

We are a Delaware limitedpartnership recently formed by Universal Compression Holdings to providenatural gas contract compression services to customers throughout the UnitedStates. Our contract compression services include designing, sourcing, owning,installing, operating, servicing, repairing and maintaining equipment to providecompression to our customers.

InOctober 2006, we completed an initial public offering of 6,325,000 of ourcommon units at a price of $21.00 per unit, including 825,000 common units soldpursuant to the exercise of the underwriters’ overallotment option. The commonunits sold to the public represent a 49% limited partner interest in us.

**Recent Developments**

*UniversalCompression Holdings Pending Merger With Hanover*

InFebruary 2007, Universal Compression Holdings and Hanover entered into a mergeragreement. Upon consummation of the transactions set forth in the mergeragreement, each common share of Hanover will be converted into 0.325 shares ofcommon stock of a newly created holding company, Exterran Holdings, Inc. (“Exterran”),and each common share of Universal Compression Holdings will be converted intoone share of Exterran. Hanover will be treated as the acquirer for accountingpurposes.

Themerger agreement has been unanimously approved by both companies’ boards ofdirectors. Completion of the merger is subject to a number of conditions,including the approval of the stockholders of both companies and customaryregulatory approvals, including the expiration of the applicable waiting periodunder the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“Hart-Scott-RodinoAct”).  On July 3, 2007, UniversalCompression Holdings and Hanover each received notice that the waiting periodrequired by the Hart-Scott-Rodino Act with respect to the merger had beenterminated.  On July 10, 2007, the SECdeclared effective the registration statement relating to the proposedmerger.  Each company has scheduled itsannual meeting of stockholders, at which the proposed merger will beconsidered, for August 16, 2007. Universal Compression Holdings and Hanover expect the merger to close onor about August 20, 2007, but no assurances can be given as to the timing ofthe satisfaction of all closing conditions or that all required approvals willbe received.

Themerger agreement requires Universal Compression Holdings and Hanover tocontinue to operate their businesses in the ordinary course of business and toobtain the other party’s consent prior to engaging in certain specifiedactivities, such as issuing or repurchasing securities, acquiring or disposingof businesses above specified thresholds, incurring new debt other than belowspecified thresholds and for specified purposes, paying dividends or grantingawards with respect to their common stock (other than under employeecompensation arrangements).  Theseagreements are subject to specified exceptions, including those (1) permittingUniversal Compression Holdings to repurchase up to an additional $75 million ofits common stock in accordance with its previously announced open-market stockrepurchase program, (2) permitting us to make cash distributions in accordancewith our partnership agreement, (3) permitting Universal Compression Holdingsto make contributions of its domestic compression assets to us, subject tocertain limitations, and (4) permitting Universal Compression Holdings toredeem its 7 1/4% senior notes due 2010.

Upon theclosing of the proposed merger, we will remain a subsidiary of UniversalCompression Holdings, and Universal Compression Holdings will become a whollyowned subsidiary of Exterran.

The closingof the proposed merger of Universal Compression Holdings and Hanover willconstitute a change of control of Universal Compression Holdings under theomnibus agreement (“Omnibus Agreement”), among us, our general partner,Universal Compression Holdings and others, which will cause a termination ofthe non-competition and equipment-sharing provisions of the OmnibusAgreement.  We expect to negotiate andenter into suitable substitute arrangements with Universal Compression Holdingsthat

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would take effect upon thetermination of these provisions of the Omnibus Agreement, although we cannotprovide any assurance that we will be able to do so.

*July 2007Contract Compression Acquisition*

InJuly 2007, we acquired from Universal Compression Holdings contract compressioncustomer service agreements with eight customers and a fleet of 722 compressorunits, comprising 281,992 horsepower, or 13% (by available horsepower) of thecombined domestic contract compression business of Universal CompressionHoldings and us. These compressor units serve the compression service needs ofthe eight customers that became our customers upon the closing of theacquisition.  In connection with this acquisition, we assumed $159.6million in debt from Universal Compression Holdings and issued to UniversalCompression Holdings approximately 2.0 million common units and approximately82,000 general partnership units.  Additionally, we issued approximately2.0 million common units for proceeds of $69.1 million, (net of private placementfees of $0.9 million) to institutional investors in a private placement. We used the proceeds from the private placement to repay a portion of the debtassumed from Universal Compression Holdings.

Additionally,in connection with this acquisition, we expanded our revolving credit facilityfrom $225 million to $315 million and borrowed an additional $90 million underthat facility, which we used, along with available cash, to repay the remainderof the debt assumed from Universal Compression Holdings in conjunction withthis transaction.

InJuly 2007, the Partnership entered into two interest rate swap agreementsrelated to its revolving credit facility. Each swap agreement has a notional amount of $40 million.   These swap agreements both terminate inOctober 2011 and have a weighted average fixed rate of 5.33%.

Also, inconnection with the closing of the acquisition, we entered into an amendment(the “First Amendment”) to the Omnibus Agreement.  The First Amendment, among other things,increased the cap on selling, general and administrative costs allocable fromUniversal Compression Holdings to us based on such costs incurred by UniversalCompression Holdings on our behalf from $2.5 million per quarter to $4.75million (after taking into account any such costs that we incur and paydirectly) per quarter and increases the cap on cost of sales from $16.95 perhorsepower per quarter to $18.00 per horsepower (after taking into account anysuch costs that we incur and pay directly) per quarter.  These caps are scheduled to terminate onDecember 31, 2008, as previously agreed.

**Items Impacting the Comparability of Our FinancialResults**

Our future and historicalresults of operations may not be comparable to the historical results ofoperations for the periods presented below for our predecessor, for the reasonsdescribed below: 

·                                          Onlyapproximately 17% (by available horsepower) of our predecessor was contributedto us upon closing of our initial public offering. Accordingly, the results ofoperations of our predecessor reflect a substantially larger business than thebusiness contributed to us;

·                                          Dueto the contribution of only operating horsepower in connection with our initialpublic offering, our utilization was initially 100%, which is higher than thehistorical utilization achieved by our predecessor. As of June 30, 2007, ourspot utilization rate was 92.7 %.  Weexpect our utilization rate to continue to decline over time, ultimatelyapproximating the utilization rates of our predecessor;

·                                          Becausethe average horsepower of the compression assets contributed to us inconnection with the initial public offering was larger than the averagehorsepower of the fleet of our predecessor, we generate lower revenue per horsepowerand incur lower costs per horsepower than our predecessor, however, we expectthis difference to become less pronounced over time as we acquire additionalassets and grow our business;

·                                          Becausewe own a substantially smaller fleet of compressors than our predecessor, ouroperating costs per horsepower may be subject to more variability than those ofour predecessor. This additional variability in our operating costs perhorsepower may result from, among other things, the fact that repair costs associatedwith our compressors that experience unanticipated downtime will be allocatedover our smaller fleet of compressors;

·                                          Becauseour revenue per horsepower is currently lower than that for our predecessor andbecause our selling, general and administrative expenses are allocated to us byUniversal Compression Holdings based on horsepower,

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ourselling, general and administrative expenses are higher as a percentage ofrevenue than historically experienced by our predecessor;

·                                          Becausewe lease compression equipment from Universal Compression Holdings to meet thespecific compression needs of our customers, we incur lease expense thatincreases our cost of sales (excluding depreciation expense) and reduces ourgross margin percentage as compared to our predecessor;

·                                          Weanticipate incurring incremental selling, general and administrative expensesof approximately $2.5 million per year as a result of being a publicly tradedlimited partnership, including costs associated with annual and quarterlyreports to unitholders, financial statement audit, tax return and Schedule K-1preparation and distribution, investor relations activities, registrar andtransfer agent fees, incremental director and officer liability insurance costsand director compensation; and

·                                          AtJune 30, 2007, we had $121.0 million outstanding under our revolving creditfacility and will incur related interest expense, whereas our predecessorhistorically had no debt.

**Operating Highlights**

Thefollowing table summarizes total available horsepower, average operatinghorsepower and horsepower utilization percentages of us and our predecessor forthe periods presented.  We were formed inJune 2006, but we commenced operations on October 20, 2006.  As a result, operating data is shown for usfor the period in 2006 in which we had operations.
| ** **                                  | ** ** | **Universal Compression Partners, L.P.** | ** ** | **Universal Compression Partners  Predecessor** | ** ** |
|---------------------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                  | ** ** | **Three Months  Ended  June 30,**             | ** ** | **Six Months  Ended  June 30,**                 | ** ** | **October 20, 2006  through  December 31,** | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
| ** **                                  | ** ** | **2007**                                                | ** ** | **2006**                                                  | ** ** | **2006** | ** ** |
|                                        |       |                                                    |       |                                                      |       |   |   |   |   |   |   |
| Total Available  Horsepower (at period end) |       | 386,988                                                 |       | 386,988                                                   |       | 343,010 |   | 1,988,798 |   | 1,988,798 |   |
| Average Operating Horsepower                |       | 347,852                                                 |       | 340,092                                                   |       | 330,276 |   | 1,793,551 |   | 1,797,425 |   |
| Horsepower  Utilization:                    |       |                                                    |       |                                                      |       |   |   |   |   |   |   |
| Spot (at period end)                        |       | 92.7                                                    | %          | 92.7                                                      | %          | 96.9 | % | 89.6 | % | 89.6 | % |
| Average                                     |       | 93.1                                                    | %          | 94.1                                                      | %          | 98.6 | % | 90.6 | % | 91.1 | % |

 

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**Financial Results of Operations**

*The three months and six months endedJune 30, 2007 — Universal Compression Partners, L.P.*

The following table summarizesour revenue, gross margin, gross margin percentage, expenses and net income:
|                                     | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|-------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **2007**                                    | ** ** |
| ** **                          | ** ** | **(In thousands)**                     | ** ** |
|                                |       |                                        |       |                                      |       |
| Revenue                             |       | $                                           | 18,804     |                                      | $          | 36,389 |   |
| Gross margin (1)                    |       | 11,231                                      |       | 21,798                                    |       |
| Gross margin percentage             |       | 59.7                                        | %          | 59.9                                      | %          |
| Expenses:                           |       |                                        |       |                                      |       |
| Depreciation                        |       | $                                           | 2,968      |                                      | $          | 5,750 |   |
| Selling, general and administrative |       | 3,915                                       |       | 7,174                                     |       |
| Interest expense, net               |       | 2,093                                       |       | 4,226                                     |       |
| Other (income) expense, net         |       | (3                                          | )          | (9                                        | )          |
| Income tax (benefit) expense        |       | (6                                          | )          | 50                                        |       |
| Net income                          |       | $                                           | 2,264      |                                      | $          | 4,607 |   |

 

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(1)                                  For a reconciliationof gross margin to its most directly comparable financial measure calculatedand presented in accordance with GAAP, please read Part I, Item 2 (“Management’sDiscussion and Analysis of Financial Condition and Results of Operations –Non-GAAP Financial Measures”) of this report.

 

*Revenue.*  Revenueper average monthly operating horsepower for the three months and six monthsended June 30, 2007 was $18.02 and $17.83, respectively.  Average monthly operating horsepower for thethree months and six months ended June 30, 2007 was 347,852 and 340,092,respectively.

*Gross Margin.*  Grossmargin (defined as revenue less cost of sales, excluding depreciation expense)for the three months and six months ended June 30, 2007 was $11.2 million and$21.8 million, respectively.  Cost ofsales includes direct costs such as labor and parts associated with themaintenance and repair of our compressor fleet, oil and fluids, transportationcost of units and remote monitoring cost. Cost of sales includes indirect costssuch as fuel cost and repair and maintenance cost related to our servicevehicle fleet, field supplies, tools, facilities and communication cost, amongothers. Gross margin, a non-GAAP financial measure, is reconciled to net income, its most directly comparable financialmeasure calculated and presented in accordance with GAAP within Part I,Item 2 (“Management’s Discussion and Analysis of Financial Condition andResults of Operations – Non-GAAP Financial Measures”) of this report.

*Gross Margin Percentage. *Grossmargin percentage (defined as gross margin as a percentage of revenue) for thethree months and six months ended June 30, 2007 was 59.7% and 59.9%, respectively.

*Selling, General and Administrative (“SG&A”)Expenses.  *SG&A expenses are primarily comprised of anallocation from Universal Compression Holdings of expenses for the three monthsand six months ended June 30, 2007.  Theseallocated costs include costs for personnel support and related expendituresfor legal, accounting, treasury, insurance administration and claimsprocessing, risk management, information technology, human resources, credit,payroll, internal audit, taxes, facilities management, investor relations, ERP,training, executive, sales and business development.  In addition, we incurred directly expensesfor ad valorem taxes, compensation related to our unit options and phantomunits and professional service fees related to the preparation of our K-1schedules.  We grant unit options toindividuals who are not our employees, but who are employees of UniversalCompression Holdings.  Because we grant unit options to non-employees, weare required to re-measure the fair value of the unit options each period andto record a cumulative adjustment of the expense previously recognized.  The cumulative effect recognized in SG&Aexpenses as a result of the re-measurement of fair value of the unit optionsfor the three months and six months ended June 30, 2007 was $1.2 million and$1.7 million, respectively.  SG&Aexpenses for the three months and six months ended June 30, 2007 represented20.8% and 19.7%, respectively, of revenues.

*DepreciationExpense. *Depreciation expense isrelated to our contract compressionfleet and for the three months and six months ended June 30, 2007 was $3.0 million and $5.8 million,respectively.

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*Interest Expense, Net. * Interest expense for the three months and sixmonths ended June 30, 2007 includes interest on the borrowings outstandingunder our revolving credit facility and amortization of deferred financingcosts incurred to obtain that facility.

*IncomeTax (Benefit) Expense.* Income tax (benefit) expense reflects taxes recorded under the Texasmargins tax.

*The three months and six months endedJune 30, 2006 – Universal Compression Partners Predecessor*

The following table summarizesthe revenue, gross margin, gross margin percentage, expenses and net income ofour predecessor for the period presented:
|                                     | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|-------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **2006**                                    | ** ** |
| ** **                          | ** ** | **(In thousands)**                     | ** ** |
|                                |       |                                        |       |                                      |       |
| Revenue                             |       | $                                           | 101,460    |                                      | $          | 195,505 |   |
| Gross margin(1)                     |       | 65,668                                      |       | 126,799                                   |       |
| Gross margin percentage             |       | 64.7                                        | %          | 64.9                                      | %          |
| Expenses:                           |       |                                        |       |                                      |       |
| Depreciation                        |       | $                                           | 19,192     |                                      | $          | 38,001 |   |
| Selling, general and administrative |       | 13,028                                      |       | 22,479                                    |       |
| Other (income) expense, net         |       | (527                                        | )          | (577                                      | )          |
| Net income                          |       | $                                           | 33,975     |                                      | $          | 66,896 |   |

 

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(1)                                  Fora reconciliation of gross margin to its most directly comparable financialmeasure calculated and presented in accordance with GAAP, please read Part I,Item 2 (“Management’s Discussion and Analysis of Financial Condition andResults of Operations – Non-GAAP Financial Measures”) of this report.

 

*Revenue.*  Revenueper average monthly operating horsepower for the three months and six monthsended June 30, 2006 was $18.86 and $18.13, respectively.  Average monthly operating horsepower for thethree months and six months ended June 30, 2006 was 1,793,551 and 1,797,425,respectively.

*Gross Margin.*  Grossmargin, a non-GAAP financial measure, isreconciled to net income, its most directly comparable financial measurecalculated and presented in accordance with GAAP within Part I, Item 2,(“Management’s Discussion and Analysis of Financial Condition and Results ofOperations – Non-GAAP Financial Measures”) of this report.  Gross margin for the three months and six months ended June 30, 2006 was $65.7 millionand $126.8 million, respectively.

*Gross Margin Percentage. *Gross margin percentage forthe three months and six months ended June 30, 2006 was 64.7% and 64.9%,respectively.

*SG&A Expenses. *SG&A**expensesare allocations of indirect corporate overhead from Universal CompressionHoldings to cover costs of centralized corporate functions such as legal,accounting, treasury, insurance administration and claims processing, riskmanagement, health, safety and environmental, information technology, humanresources, credit, payroll, taxes and other corporate services. SG&Aexpenses also include an allocation of costs from Universal CompressionHoldings related to costs associated with its office building and otherfacilities that we use. The allocated SG&Aexpenses for the three months and six months ended June 30, 2006 represented12.8% and 11.5%, respectively, of revenues. 

*Depreciation Expense. *Depreciation expense is related to ourpredecessor’s contract compressionfleet and for the three months and six months ended June 30, 2006 was $19.2million and $38.0 million, respectively.

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**Liquidity and Capital Resources**

Wehave established our own bank accounts but Universal Compression Holdings’personnel will continue to manage our cash and investments.

Ourprimary sources of cash are operating activities and financing activities.  Our primary uses of cash are operatingexpenditures and capital expenditures. The following table summarizes our sources of cash for the six monthsended June 30, 2007 (in thousands):

|                                 | ** ** | **Six Months  Ended  June 30,  2007** | ** ** |
|---------------------------------|------------|-------------------------------------------------|------------|
| Net cash provided by (used in): |       |                                            |       |
| Operating activities            |       | $                                               | 13,580     |   |
| Investing activities            |       | (16,150                                         | )          |
| Financing activities            |       | 1,298                                           |       |
|                                 |            |                                                 |            |  |

 

|                                                   | ** ** | **As of  June 30,  2007** | ** ** |
|---------------------------------------------------|------------|-------------------------------------|------------|
| Cash and cash equivalents                         |       | $                                   | 1,158      |   |
| Working capital, net of cash and cash equivalents |       | (9,013                              | )          |
|                                                   |            |                                     |            |  |

 

*Investing Activities. * Capital expenditures for the six months endedJune 30, 2007 were $16.2 million, consisting of $13.4 million for fleetadditions and $2.8 million for compressor maintenance activities.  There were no asset sales for the three orsix months ended June 30, 2007.

*Financing Activities. *Net cash provided by financing activities for the six months ended June30, 2007 was $1.3 million which was the result of distributions to unitholders,changes in accounts receivable and accounts payable with affiliates andrepayment of debt obligations under our revolving credit facility.

*Capital Requirements.*The natural gas compression business is capital intensive, requiringsignificant investment to maintain and upgrade existing operations. Both ourand our predecessor’s capital requirements have consisted primarily of, and weanticipate that our capital requirements will continue to consist of, thefollowing: 

·                                 maintenancecapital expenditures, which are capital expenditures made to maintain theexisting operating capacity of our assets and related cash flows furtherextending the useful lives of the assets; and

·                                 expansioncapital expenditures, which are capital expenditures made to expand or toreplace partially or fully depreciated assets or to expand the operatingcapacity or revenue generating capabilities of existing or new assets, whetherthrough construction, acquisition or modification.

 

Givenour objective of growth through acquisitions, expansion capital expenditureprojects and other internal growth projects, we anticipate that we willcontinue to invest significant amounts of capital to grow and acquire assets.We will actively consider a variety of assets for potential acquisitions andexpansion projects. We expect to fund future capital expenditures withborrowings under our credit facility, the issuance of additional partnershipunits and future debt offerings.

*Long-term Debt.*As of June 30, 2007, we had approximately$121.0 million in outstanding debt obligations under our revolving creditfacility.   All amounts under therevolving credit facility mature in October 2011.  Covenants within our credit facility requirethat we maintain various financial ratios. As of June 30, 2007, we were in compliance with all financialcovenants.

We expect our future sources of liquidity to include cash generatedfrom operations, borrowings under our revolving credit facility, issuance ofadditional partnership units and debt offerings. We believe that cash generatedfrom these sources will be sufficient to meet our short-term working capitalrequirements, long-term capital expenditure requirements and quarterly cashdistributions.

*Distributions to Unitholders. *Our partnership agreementrequires us to distribute all of our “available cash” quarterly. Under thepartnership agreement, available cash is defined to generally mean, for eachfiscal quarter, (i) our cash on hand at the end of the

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quarter in excess of the amount of reserves ourgeneral partner determines is necessary or appropriate to provide for theconduct of our business, to comply with applicable law, any of our debtinstruments or other agreements or to provide for future distributions to ourunitholders for any one or more of the upcoming four quarters, plus, (ii) ifour general partner so determines, all or a portion of our cash on hand on thedate of determination of available cash for the quarter.

On February 14,2007, the board of directors of our general partner approved a cashdistribution of approximately $3.6 million, or $0.278 per unit, which reflectsthe pro rata portion of the quarterly distribution rate of $0.35, covering theperiod from the closing of the initial public offering on October 20, 2006,through December 31, 2006.  On May 15,2007, the board of directors of our general partner approved a cash distributionof approximately $4.5 million, or $0.35 per unit, the Partnership’s minimumquarterly distribution covering the period from January 1, 2007 to March 31,2007.

On July 30, 2007,the board of directors of our general partner approved a cash distribution of$0.35 per unit, or $6.0 million.  Thedistribution reflects the minimum quarterly distribution rate of $0.35 per unitand covers the time period from April 1, 2007 to June 30, 2007.  The record date for this distribution isAugust 9, 2007 and payment is expected to occur on August 14, 2007.  Because we issued approximately 4.1 millioncommon and general partner units on July 9, 2007, prior to the record date, tofund our recent acquisition of contract compression assets from UniversalCompression Holding, as described within Part I, Item 2, (“Management’sDiscussion and Analysis of Financial Condition and Results of Operations –Recent Developments”) of this report, this distribution will also be paid tothe holders of those units.

*July 2007Contract Compression Acquisition. *InJuly 2007, we acquired from Universal Compression Holdings contract compressioncustomer service agreements with eight customers and a fleet of 722 compressorunits comprising 281,992 horsepower, or 13% (by available horsepower) of thecombined domestic contract compression business of Universal CompressionHoldings and us. These compressor units serve the compression service needs ofthe eight customers that became customers of us upon the closing of thetransaction.  In connection with the acquisition, we assumed $159.6million in debt from Universal Compression Holdings and issued to UniversalCompression Holdings approximately 2.0 million common units and approximately82,000 general partnership units.  Additionally, we issued approximately2.0 million common units for proceeds of $69.1 million, (net of privateplacement fees of $0.9 million) to institutional investors in a privateplacement.  We used the proceeds from the private placement to repay aportion of the debt assumed from Universal Compression Holdings.

Additionally,in connection with this acquisition, we expanded our revolving credit facilityfrom $225 million to $315 million and borrowed an additional $90 million underthat facility, which we used, along with available cash, to repay the remainderof the debt assumed from Universal Compression Holdings in conjunction withthis acquisition.

In July 2007, weentered into two interest rate swap agreements related to our revolving creditfacility.  Each swap agreement has a notionalamount of $40 million.   These swapagreements both terminate in October 2011 and have a weighted average fixedrate of 5.33%.

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**Non-GAAP Financial Measures**

We and our predecessordefine gross margin as total revenue less cost of sales (excluding depreciationexpense).  Gross margin is included as asupplemental disclosure because it is a primary measure used by our and ourpredecessor’s management as it represents the results of revenue and cost ofsales (excluding depreciation expense), which are key components of our and ourpredecessor’s operations.  As anindicator of our and our predecessor’s operating performance, gross marginshould not be considered an alternative to, or more meaningful than, net incomeas determined in accordance with GAAP. Our and our predecessor’s gross margin may not be comparable to asimilarly titled measure of another company because other entities may notcalculate gross margin in the same manner.

Thefollowing table reconciles our and our predecessor’s net income to gross margin(in thousands):
| ** **                                | ** ** | **Universal Compression Partners, L.P.** | ** ** | **Universal Compression Partners  Predecessor** | ** ** |
|-------------------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                | ** ** | **Three Months  Ended  June 30,**             | ** ** | **Six Months  Ended  June 30,**                 | ** ** | **Three Months  Ended  June 30,** | ** ** | **Six Months  Ended  June 30,** | ** ** |
| ** **                                | ** ** | **2007**                                                | ** ** | **2006**                                                  | ** ** |
| ** **                                |       |                                                    |       |                                                      |       |   |   |   |   |
| **Net income**                            |       | $                                                       | 2,264      |                                                      | $          | 4,607 |   | $ | 33,975 |   | $ | 66,896 |   |
|  Depreciation                        |       | 2,968                                                   |       | 5,750                                                     |       | 19,192 |   | 38,001 |   |
|  Selling, general and administrative |       | 3,915                                                   |       | 7,174                                                     |       | 13,028 |   | 22,479 |   |
|  Interest expense, net               |       | 2,093                                                   |       | 4,226                                                     |       | — |   | — |   |
|  Other (income) expense, net         |       | (3                                                      | )          | (9                                                        | )          | (527 | ) | (577 | ) |
|  Income tax (benefit) expense        |       | (6                                                      | )          | 50                                                        |       | — |   | — |   |
| **Gross margin**                          |       | $                                                       | 11,231     |                                                      | $          | 21,798 |   | $ | 65,668 |   | $ | 126,799 |   |

 

**ITEM 3.  *Quantitative and Qualitative Disclosures About MarketRisk***

                                              We are exposed to market risk due to variableinterest rates under our financing and interest rate swap arrangement.

As of June 30, 2007, the notionalamount of the interest rate swap agreement related to our revolving creditfacility was $125.0 million and the fair value of this interest rate swapagreement as of June 30, 2007 was a derivative asset of approximately $0.4million.  The swap agreement terminatesin December 2011 and has a fixed rate of 5.28%. As of June 30, 2007, all of our outstanding variable rate debt has beenconverted to a fixed rate through the swap agreement. Because the terms of thehedged item and this swap do not substantially coincide, the Partnershipperforms calculations to determine the amount of ineffectiveness, if any.  For the three months and six months endedJune 30, 2007, the Partnership recorded approximately $36,000 ofineffectiveness.

**ITEM4T.  Controls and Procedures**

*Management’s Evaluation ofDisclosure Controls and Procedures*

As required byRule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”),our general partner’s management, including the Chief Executive Officer andChief Financial Officer of our general partner, evaluated as of the end of theperiod covered by this report, the effectiveness of the Partnership’sdisclosure controls and procedures as defined in Exchange Act Rule13a-15(e).  Based on that evaluation, theChief Executive Officer and Chief Financial Officer of our general partnerconcluded that the Partnership’s disclosure controls and procedures, as of theend of the period covered by this report, were effective for the purpose ofensuring that information required to be disclosed by the Partnership in thisreport is recorded, processed, summarized and reported within the time periodsspecified by the rules and forms under the Exchange Act and is accumulated andcommunicated to management, including the Chief Executive Officer and ChiefFinancial Officer of our general partner, as appropriate to allow timelydecisions regarding required disclosures.

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**PART II. OTHER INFORMATION**

**ITEM1.  *Legal Proceedings***

Additionalinformation concerning legal proceedings of Universal Compression Partners,L.P. and Universal Compression Partners Predecessor is contained in Note 9 andNote 4, respectively, to the unaudited consolidated and combined financialstatements included in Part I, Item 1 (“Financial Statements”) of this report,which we have incorporated by reference into this Item 1.

**ITEM1a.  *Risk Factors***

Inaddition to the other information included in this Quarterly Report on Form10-Q and the risk factors reported in our Annual Report on Form 10-K for theperiod from June 22, 2006 through December 31, 2006, you should consider thefollowing risk factor in evaluating our business and future prospects.  If any of the risks contained in thisQuarterly Report or our Annual Report occur, our business, results ofoperations, financial condition and ability to make cash distributions to ourunitholders could be materially adversely affected.

***We have adopted certain valuation methodologiesthat may result in a shift of income, gain, loss and deduction between thegeneral partner and the unitholders.  TheIRS may challenge this treatment, which could adversely affect the value of thecommon units.***

When weissue additional units or engage in certain other transactions, we determinethe fair market value of our assets and allocate any unrealized gain or lossattributable to our assets to the capital accounts of our unitholders and ourgeneral partner.  Our methodology may beviewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss and deductionbetween certain unitholders and the general partner, which may be unfavorableto such unitholders.  Moreover,subsequent purchasers of common units may have a greater portion of theirInternal Revenue Code Section 743(b) adjustment allocated to our tangibleassets 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 tangibleand intangible assets, and allocations of income, gain, loss and deductionbetween the general partner and certain of our unitholders.

Asuccessful IRS challenge to these methods or allocations could adversely affectthe amount of taxable income or loss being allocated to our unitholders. Italso could affect the amount of gain from our unitholders’ sale of common unitsand could have a negative impact on the value of the common units or result inaudit adjustments to our unitholders’ tax returns without the benefit ofadditional deductions.

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**ITEM 6**.  ***Exhibits***
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1         |       | Contribution  Conveyance and Assumption Agreement, dated May 29, 2007, by and among  Universal Compression Partners, L.P., Universal Compression, Inc., UCO  Compression 2005 LLC, UCI Leasing Holding GP LLC, UCI Leasing Holding LP LLC,  UCI Compressor Holding, L.P., UCO GP, LLC, UCI GP LP LLC, UCO General  Partner, LP, UCI MLP LP LLC, UCLP OLP GP LLC, UC Operating Partnership, L.P.,  UCLP Leasing GP LLC and UCLP Leasing, L.P. (incorporated by reference to  Exhibit 2.1 to Current Report on Form 8-K filed on May 30, 2007). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 2.2         |       | Amended and  Restated Contribution Conveyance and Assumption Agreement, dated July 6,  2007, by and among Universal Compression Partners, L.P., Universal  Compression, Inc., UCO Compression 2005 LLC, UCI Leasing LLC, UCO GP, LLC,  UCI GP LP LLC, UCO General Partner, LP, UCI MLP LP LLC, UCLP Operating LLC  and UCLP Leasing LLC. (incorporated by reference to Exhibit 2.1 to Current  Report on Form 8-K filed on July 11, 2007).                                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.1        |       | Common Unit  Purchase Agreement dated June 19, 2007 (incorporated by reference to Exhibit  10.1 to Current Report on Form 8-K filed on June 25, 2007).                                                                                                                                                                                                                                                                                                                                                                                        |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.2        |       | First Amendment  to Omnibus Agreement, dated July 9, 2007, by and among Universal Compression  Partners, L.P., Universal Compression Holdings, Inc., Universal Compression,  Inc., UCO GP, LLC, UCO General Partner, LP and UCLP Operating LLC (incorporated  by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 11,  2007).                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.3*       |       | Registration  Rights Agreement dated July 9, 2007, by and among Universal Compression  Partners, L.P., Kayne Anderson Energy Total Return Fund, Inc. and each party  listed as signatory thereto.                                                                                                                                                                                                                                                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.1        |       | Certification of  the Chief Executive Officer of UCO GP, LLC (as ultimate general partner of  the general partner of Universal Compression Partners, L.P.) pursuant to Rule  13a-14 under the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.2        |       | Certification of  the Chief Financial Officer of UCO GP, LLC (as ultimate general partner of  the general partner of Universal Compression Partners, L.P.) pursuant to Rule  13a-14 under the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 32.1        |       | Certifications  of the Chief Executive Officer and Chief Financial Officer of UCO GP, LLC (as  ultimate general partner of the general partner of Universal Compression  Partners, L.P.) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                           |

 

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*                                         Filedherewith.

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**SIGNATURES**

Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|                      | Universal Compression Partners, L.P.                                                                                                                                                                                                                                                   |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                   |
| Date: August 7, 2007 | By: UCO GENERAL PARTNER, LP                                                                                                                                                                                                                                                            |
|                 | its General Partner                                                                                                                                                                                                                                                                    |
|                 |                                                                                                                                                                                                                                                                                   |
|                 | By: UCO GP, LLC                                                                                                                                                                                                                                                                        |
|                 | its General Partner                                                                                                                                                                                                                                                                    |
|                 |                                                                                                                                                                                                                                                                                   |
|                 | By:                                                                                                                                                                                                                                                                                    | /s/ DANIEL K. SCHLANGER |   |
|                 | Daniel K. Schlanger                                                                                                                                                                                                                                                                    |
|                 | Senior Vice  President, Chief Financial Officer and Director, UCO GP, LLC    As General Partner of UCO General Partner, LP         As General Partner of Universal  Compression Partners, L.P.    (Principal Financial Officer) |
|                 |                                                                                                                                                                                                                                                                                   |
|                 |                                                                                                                                                                                                                                                                                   |
|                 | By:                                                                                                                                                                                                                                                                                    | /s/ KENNETH R. BICKETT |   |
|                 | Kenneth R. Bickett                                                                                                                                                                                                                                                                     |
|                 |                                                                                                                                                                                                                                                                                   |
|                 | Vice President and Controller, UCO GP, LLC    As General Partner of UCO General Partner, LP         As General Partner of Universal  Compression Partners, L.P.    (Principal Accounting Officer)                               |
|                 |                                                                                                                                                                                                                                                                                   |
|                 |                                                                                                                                                                                                                                                                                   |

 

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EXHIBIT INDEX
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1         |       | Contribution  Conveyance and Assumption Agreement, dated May 29, 2007, by and among  Universal Compression Partners, L.P., Universal Compression, Inc., UCO  Compression 2005 LLC, UCI Leasing Holding GP LLC, UCI Leasing Holding LP LLC,  UCI Compressor Holding, L.P., UCO GP, LLC, UCI GP LP LLC, UCO General  Partner, LP, UCI MLP LP LLC, UCLP OLP GP LLC, UC Operating Partnership, L.P.,  UCLP Leasing GP LLC and UCLP Leasing, L.P. (incorporated by reference to  Exhibit 2.1 to Current Report on Form 8-K filed on May 30, 2007). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 2.2         |       | Amended and  Restated Contribution Conveyance and Assumption Agreement, dated July 6,  2007, by and among Universal Compression Partners, L.P., Universal  Compression, Inc., UCO Compression 2005 LLC, UCI Leasing LLC, UCO GP, LLC,  UCI GP LP LLC, UCO General Partner, LP, UCI MLP LP LLC, UCLP Operating LLC  and UCLP Leasing LLC. (incorporated by reference to Exhibit 2.1 to Current  Report on Form 8-K filed on July 11, 2007).                                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.1        |       | Common Unit  Purchase Agreement dated June 19, 2007 (incorporated by reference to Exhibit  10.1 to Current Report on Form 8-K filed on June 25, 2007).                                                                                                                                                                                                                                                                                                                                                                                        |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.2        |       | First Amendment  to Omnibus Agreement, dated July 9, 2007, by and among Universal Compression  Partners, L.P., Universal Compression Holdings, Inc., Universal Compression,  Inc., UCO GP, LLC, UCO General Partner, LP and UCLP Operating LLC  (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K  filed on July 11, 2007).                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.3*       |       | Registration  Rights Agreement dated July 9, 2007, by and among Universal Compression  Partners, L.P., Kayne Anderson Energy Total Return Fund, Inc. and each party  listed as signatory thereto.                                                                                                                                                                                                                                                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.1        |       | Certification of  the Chief Executive Officer of UCO GP, LLC (as ultimate general partner of  the general partner of Universal Compression Partners, L.P.) pursuant to Rule  13a-14 under the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.2        |       | Certification of  the Chief Financial Officer of UCO GP, LLC (as ultimate general partner of  the general partner of Universal Compression Partners, L.P.) pursuant to Rule  13a-14 under the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 32.1        |       | Certifications  of the Chief Executive Officer and Chief Financial Officer of UCO GP, LLC (as  ultimate general partner of the general partner of Universal Compression  Partners, L.P.) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                           |

 

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*                                         Filedherewith.

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