While most energy-oriented master limited partnerships (MLP) continue to focus on unconventional production from the prolific US shale plays, one energy services MLP is busy diversifying into foreign markets. Compressco Partners LP (NSDQ: GSJK), which was spun off by oil and gas services company Tetra Technolgies Inc (NYSE: TTI) in mid-2011, is employed by oil and natural gas drillers to boost their production with its wellhead-compression services.

Wells eventually decline in both pressure and production, and Compressco’s compression-based technology not only enhances output, but also increases total recoverable reserves. The company also provides well-monitoring services on an ongoing basis.

In addition to these services, Compressco manufactures the majority of the compressors it uses, including its GasJack compressor, which has the flexibility to provide solutions to an array of scenarios, ranging from compression for production to gas gathering.

Although the company makes its own compressors, the vast majority of Compressco’s revenue comes from compression and other services. Compression services accounted for 94.2 percent of 2012 revenue, with sales of compressors and related parts representing the balance.

With a market cap of just over $300 million, this tiny company is less than one-third the size of the other compression-services MLP in our coverage universe, Exterran Parners LP (NSDQ: EXLP). And Exterran is currently the US market leader in full-service natural gas compression.

But while the general partners (GP) of Compressco and Exterran both have international operations, thus far Exterran’s footprint has been limited to the US. Indeed, its GP intends Exterran to be the primary vehicle for its US contract operations business.

By contrast, Compressco derived almost 31 percent of its $108.6 million in 2012 revenue from Latin America (particularly in Mexico), another 4 percent from Canada, and 6 percent from Eastern Europe and the Asia-Pacific region (the latter two were lumped together in the company’s segment reporting).

This international presence helped the MLP weather the dramatic drop in domestic natural gas prices resulting from overproduction in the shale plays. In fact, revenue from the company’s Latin America operations jumped 120 percent from the prior year, more than offsetting a nearly 6 percent decline in revenue from its US segment.

That performance required significant capital expenditures, which climbed 87.5 percent to $21 million from a year ago. Much of this money was spent on manufacturing or upgrading compressors. But management expects this investment to be amply rewarded by services revenue, as growth from its Latin America operations accelerates. Management forecasts full-year 2013 revenue of $128 million to $137 million, with the low end of that range an almost 18 percent improvement from 2012. 

To be sure, Compressco does face some uncertainty from its operations in Mexico. In the past, results from this geography have been dampened by security disruptions as well as budgetary constraints at PEMEX, Mexico’s state-owned energy giant.

Indeed, PEMEX now accounts for about 26 percent of Compressco’s overall revenue. And contracts accounting for a majority of the company’s revenue from PEMEX will be up for bid during the second quarter. However, management expects that it should be able to win new contracts on favorable or at least similar terms.

Beyond that, wellhead compression is a highly competitive industry where Compressco faces numerous larger players deploying a variety of other technologies. The company believes its edge comes from meeting its competitors on pricing, while offering customers superior service.

In the fourth quarter, Compressco’s distributable cash flow grew 55.1 percent from a year ago to $10 million, with a conservative coverage ratio of 1.49. The MLP’s most recent quarterly payout was $0.42 per unit, up 8.4 percent from its first full distribution in November 2011. For now, the MLP’s Safety Rating is 1, which reflects the relatively high risk it faces in maintaining and growing its distribution.

At year-end, Compressco had $13 million in cash on its balance sheet and just $10 million in long-term debt.

Compressco’s units trade just 4.5 percent below their 52-week high and currently yield 8.4 percent.