Arthur Lloyd Compressor Presentation PDF

Equipment Management
Conference & Exhibition

February 12 14, 2006
Compression Equipment
A Valuation Primer
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Arthur Lloyd LLC Business Confidential 2006

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February 12, 2006

Page 1
Introduction
Big topic time is short
We will briefly cover:
Definitions
Compressor Systems and compressor types
Applications
Key valuation issues
Costs
Lives
And a little bit on values
Included a glossary and sources of information
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Definitions - Compressor
Compressor A mechanical device that is used to increase the pressureor
Compressor Types
compressa gas.
Centrifugal Compressor Machines that use centrifugal force to compress gas by

feeling it into a wheel with radial vanes. The wheel is then seal inside of a cylinder and
spun. When the wheel rotates, the gas is thrown away from the wheel center. The outward
spinning motion compresses the gas.
Reciprocating Compressor Machines in which the compressing element is a piston

having a reciprocating motion in a cylinder.
Rotary Compressor Machines in which the compressing element is a set of rotating

elements (often screws or lobes). Also a type of compressor belonging to the group of
dynamic compressors characterized by having its flow in an axial direction.
Prime Mover the main mechanical power source of any number of devices. In
Compressor Station Any permanent combination of compressors that move
the energy industry it is typically an electric motor, reciprocating engine or

gas/steam turbine.
natural gas at increased pressure from fields, in transmission pipelines, or into

storage.
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Definitions Compressor (cont.)
Compressor Set Primary components of an assembled natural gas

compressor unit. Typically includes a tie-in which connects the system to a natural
gas supply pipeline, dryers, filters, prime mover, compressor, cooling unit, controls,
frame or skid and a sound enclosure that protects the equipment from the elements
and provides noise reduction.
Integral Compressor Typically, single piece construction and include an

integral compressor, meaning that the power cylinders and compression cylinders
are integrated on (share) the same crankshaft. These units are older technology,
and are typically comprised of components assembled by a single manufacturer.
Separable Compressor Typically consist of component construction, which

may include individual pieces comprising an assembled unit of varying
manufacture. These units are typically newer technology, may be of low to high
horsepowerpackages may exceed 8,000 HPare of higher speed750 1,000
RPMand have increased power density compared to integral units, which allows
operators to move large volumes with fewer machines. These units are typically
more flexible in application and operate at greater efficiencies than integral units.
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Definitions - Appraisal
Fair Market Value The estimated amount, expressed in terms of money, that
may reasonably be expected for property in an exchange between a willing buyer

and a willing seller, with equity to both, neither under any compulsion to buy or sell,
and both fully aware of all relevant facts, as of a specific date.
Fair Market Value Installed - The estimated amount, expressed in terms of
money, that may reasonably be expected for an installed property in an exchange

between a willing buyer and a willing seller, with equity to both, neither under any
compulsion to buy or sell, and both fully aware of all relevant facts, including
installation, as of a specific date. This amount includes all normal direct and
indirect costs, such as installation and other assemblage costs necessary to make
the property full operational.
Fair Market Value In Continued Use - The estimated amount, expressed in
terms of money, that may reasonably be expected for a property in an exchange

compulsion to buy or sell, and both fully aware of all relevant facts, including
installation, as of a specific date and assuming the business earnings support the
value reported. This amount includes all normal direct and indirect costs, such as
installation and other assemblage costs necessary to make the property full
operational.
Source: Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets, ASA 2005
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Definitions Appraisal (cont.)
Fair Market Value Removal The estimated amount, expressed in terms of

money, that may reasonably be expected for an item of property in an exchange
compulsion to buy or sell, and both fully aware of all relevant facts, considering
removal of the property to another location, as of a specific date.
Orderly Liquidation Value The estimated gross amount, expressed in terms

of money, that could typically be realized from a liquidation sale, given a
reasonable period of time to find a purchaser(s), with the seller being compelled to
sell on an as-is, where-is basis, as of a specific date.
Forced Liquidation Value The estimated gross amount, expressed in terms

of money, that could typically be realized from a properly advertised and conducted
public auction, with the seller being compelled to sell with a sense of immediacy on
an as-is, where-is basis, as of a specific date.
Residual Value (lease) The value (typically fair market value) of leased
equipment at the end of the lease term.
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Definitions Appraisal (cont.)
Economic Useful Life The estimated period of time that a new property may
be profitably used for the purpose for which it was intended. Stated another way, it
is the estimated number of years that a new property can be used before it would
pay the owner to replace it with the most economical replacement property that
could perform an equivalent service.
Normal Useful Life The physical life, usually in terms of years, that a new
property will actually be used before it is retired from service. A propertys normal
useful life relates to how long similar properties actually tend to be used, as
opposed to the more theoretical economic life calculation of how long a property
can profitably be used.
Remaining Useful Life The estimated period during which a property of a

certain effective age is expected to actually be used before it is retired from service.
Effective Age The apparent age of a property in comparison with a new

property of like kind; that is, the age indicated by the actual condition of a property.
(may be calculated by deducting the Remaining Useful Life from the Normal Useful
Life.
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Page 7
Compressor System
The general components of a compressed air system are illustrated

schematically in the figure below:
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Compressor System (cont.)
Many accessories exist for use in compressed air systems. Some are relatively
common and will be found in almost every installation, while others are special
purpose devices and may be found under certain circumstances. Locations and
application of devices that provide the "conditioning/drying" system function can be
found in the following schematic.
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Page 9
Types of Compressors
Reciprocating Compressors
Reciprocating compressors are positive displacement machines, meaning that they

increase the pressure of the air by reducing its volume. The relationship between
pressure and volume is illustrated in the figure below. This compressor has a
crankshaft, connecting rods, and pistons. Single-stage as well as multi-stage
reciprocating compressors are commercially available.
A performance curve for a positive displacement machine is provided in the figure

below. It can be seen that despite compressor discharge pressure, load remains
constant. Load reduction is achieved by unloading individual cylinders. Typically, this is
accomplished by throttling the suction pressure to the cylinder or bypassing air either
within or outside the compressor. Capacity control is achieved by varying speed in
engine-driven units through fuel flow control.
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Page 10
Screw Compressors
Screw compressors are positive displacement machines that consist of helicallygrooved rotors that mesh together as shown below. The volume of a trapped mass of
air is decreased along the rotor and the pressure is increased. Capacity control for
these compressors is accomplished by variable speed and variable compressor
displacement. For the latter control technique, a slide valve is positioned in the casing.
As the compressor capacity is reduced, the slide valve opens, bypassing a portion of
the compressed air back to the suction. Advantages of the rotary screw compressor
include smooth, pulse-free air output in a compact size with high output volume over a
long life.
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Page 11
Centrifugal Compressors
Centrifugal compressors produce high-pressure discharge by converting angular

momentum imparted by the rotating impeller (dynamic displacement), as illustrated in
the figure below. In order to do this efficiently, centrifugal compressors rotate at higher
speeds than the other types of compressors. These types of compressors are also
designed for higher capacity because flow through the compressor is continuous.
Adjusting the inlet guide vanes is the most common method to control capacity of a
centrifugal compressor. By closing the guide vanes, volumetric flows and capacity are
reduced.
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Page 12
Types of Engines
Gas
Natural Gas
Diesel
Electric
Turbine
Compressors may be driven by almost any prime mover a motor, steam

turbine, combustion turbine, or internal combustion engine. Historically,
electric motors have dominated the market. The use of natural gas engine
drives has become a popular alternative. Gas engine-drive compressors
can be used as the sole source of compressed air, or they may be used
as part of a hybrid system. A hybrid air system is one that employs both
electric motor and gas engine-driven air compressors.
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Page 13
Manufacturers
Compressors
Prime Mover (Engine)
Ariel
Caterpillar
Ajax
Cummins
Cooper-Bessemer
Rolls Royce
CSI
Waukesha
Frick
White
Gardner Denver
Gemini
Ingersoll-Rand
LeRoi
Sullair
Worthington
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Page 14
Applications
Well head compression
Gas gathering and storage systems
Pipeline
Pipeline station optimization
Refrigerator plant compression
Gas processing
Gas transmission
Gas lift
Fuel gas booster
Land fill
Carbon dioxide injection
Field
Transmission
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Compressor Package
Skid-Mounted Reciprocating Compressor
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Compressor Package
Skid-Mounted Reciprocating Compressor
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Compressor Package
Electric v-belt drive
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Compressor Package
Skid-Mounted Rotary Compressor
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Compressor Package
Non-Skidded Rotary Screw Compressor

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Compressor Package
Centrifugal Compressor
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Compressor Package
Skid-Mounted Rotary Screw Compressor

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Compressor Package
Turbine Driven Centrifugal Compressor
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Compressor Package
Electric Motor Driven Reciprocating Compressor
Turbine Driven Centrifugal Compressor
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Reciprocating Compressor
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Rotary Screw Compressor
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Rotary Screw Compressor
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Centrifugal Compressor
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Compressor Package
Cemented Foundation
Electric Motor Driven Reciprocating Compressor
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Gas Engine
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Gas Engine
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Electric Motor
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Turbine Engine
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Page 35
Compressor Station
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Compressor Station
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Compressor Station
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Compressor Station
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Processing Plant
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Page 40
Descriptive Information
Compressor
Drive
Other
Plant Name
Type of engine
Intercooler
Plant Address
Manufacturer
After Cooler (air/water)
Type of Compressor
Model
Oil Cooler
Manufacturer
Serial Number
Air/Oil Separator Tank Capacity
Model
Speed (RPM)
Oil Filter
Serial Number
Horsepower
Water Trap
Year Installed
Voltage (elect)
Air Filter
Year New
Fuel
Ventilation Fan
Rated Output Capacity (ACFM)
Year Installed
Air Dryer Information
Typical Peak Capacity (ACFM)
Year New
Silencers
Operating Pressures (Max. and

Normal PSIG)
Skid Mounted vs. Field Assembled
Number of Stages
Pollution Control Data (NOX, CO, O2)
Number of Cylinders (recip)
Catalytic Converter
Variable Speed
Enclosure
Throttle Intake
Heat Recovery System (water jacket,

exhaust)
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Page 41
Value Considerations
Compressor type
Engine type
Manufacturer (brand names)
Age (chronologic and effective)
Horsepower
Configuration
Compressor number of stages, suction/discharge pressures, controls,

etc.
Engine number of cylinders, stroke, cylinder bore, controls, etc.
Condition
Fleet compatibility
Spare parts availability
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Value Considerations (cont.)
Installation (skidded, non-skidded, grouted in, trailer mounted)
Environmental
Catalytic converter
Grandfathered
NOX, CO2
Hours since overhaul
Top end
Bottom end
Zero hour
Maintenance history (documented)
Overall cost of ownership (capital, energy, runtime, parts,

environmental, etc.)
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Page 43
Other Issues
Time frame for equipment sale
Production life of associated minerals (important for in-use

buyers)
Swapping engines and compressors
Types of buyers
Those that would buy the equipment and relocate it for a similar or alternative
use- such as domestic and foreign equipment dealers, brokers, speculators
and end-users that may be able to use the equipment for related purposes
Those that would purchase the entire mineral producing field inclusive of the
compressor units and all other assets necessary for continuing operations such
as other similar oil and gas production companies
Rental rates
Demand for new vs. used equipment
Cost of new equipment
Available alternative compression
Market Utilization
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Other Issues (cont.)
Premise of value (FMV-IU, FMV-Removal, OLV, etc.)
Commodity pricing
Geographic supply/demand
Lease terms and conditions
Exploration and production activity
New unit delivery time
Facts and circumstances
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Page 45
Costs
RCN typically quoted on a unit cost (dollar per horsepower ($/HP)) basis
Unit costs drop as capacity of system increases
Cost new for compressor package includes direct/indirect costs

Equipment
Engineering
Construction
Assembly
Testing
Licensing
Construction
Etc.
Installed costs include

Engineering
Labor
Installation
Transportation
Testing
Etc.
Note: Land, site ancillary or infrastructure assets, and spare parts are typically excluded in
determining asset replacement costs
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Costs (cont.)
RCN has decreased over time due to advances in materials, construction

techniques, technology and operating efficiencies.
Construction costs for annual FERC-related projects can be obtained from

the Oil and Gas Journal (O&GJ) as well as industry personnel.
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Page 47
Costs (cont.)
Compressor package (RCN) - $1,500 - $500 per horsepower
Installation costs 15% - 100%+ of equipment cost
Overhaul (zero hour) - $5,000 - $250,000
Skid - $5,000 - $50,000
Emissions Upgrade - $5,000 - $30,000
Important Notes
Representative ranges only BE CAREFUL!!!
Specific facts and circumstances determine costs
Know the equipment, do your homework
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Page 48
Life
What Life are we talking about?
Economic Useful Life
Normal Useful Life
Expected Useful Life
Remaining Useful Life
Life depends on many things
Equipment type
Field life
Application
Lease requirements
Configuration
Spare parts availability
How the equipment has been operated
Overall cost of ownership
The type and nature of preventive and

ongoing maintenance
Commodity pricing
The environment in which the equipment

was operated
Cost of new equipment
Available alternative compression
Overhauls, rebuilds, modifications
Market Utilization
Controls
Compressor equipment expected useful lives are often estimated at

20 - 25 years
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Page 49
Value
What Value are we talking about?
Fair Market Value
Orderly Liquidation Value
Fair Market Value Continued Use
Forced Liquidation Value
Fair Market Value Installed
Residual
Fair Market Value - Removal
Other
A Couple Rules of Thumb
60% - 80% of RCN for excellent equipment
50% or less of RCN for average equipment
25% or less of RCN for poor equipment and

parts
Notes
Fair market value estimates
Percentages based on equipment RCN only
Estimates reported by dealers/repackagers

within the last 18 months
Estimates are for skid-mounted units
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Page 50
Value (cont.)
Key market value drivers
Age
Equipment type
Name brand
Size
Skidded
Configuration (stages, etc.)
Hours
Rental rates
Parts availability
Quantity of units being bought/sold
Not the only drivers
Market conditions constantly change
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Sources of Information
American Gas Association www.aga.org
American Petroleum Institute www.api.org
Baker Hughes www.bakerhughes.com
BP www.bp.com
Compressor Systems, Inc. www.compressor-systems.com
E&Pnet.com www.eandpnet.com
Energy Information Administration (EIA) www.eia.doe.gov
Engineering News Record www.enr.com
FedStats www.fedstats.gov
Foster Associates, Inc. www.foster-fa.com
Gas Compressor Association www.gascompressor.org
Gas Processors Association www.gasprocessors.com
Hanover Compressor Company www.hanover-co.com
Hydrocarbon Processing www.hydrocarbonprocessing.com
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Sources of Information (cont.)
Independent Petroleum Association of America (IPAA) www.ipaa.org
Interstate Natural Gas Association of America www.ingaa.org
Natural Gas.Org www.naturalgas.org
Natural Gas Intelligence www.intelligencepress.com
Ohio Oil & Gas Association www.ooga.org
Oil & Gas Investor www.oilandgasinvestor.com
Oil & Gas Journal www.ogj.pennnet.com
Pennwell www.pennwell.com
Society of Petroleum Engineers www.spe.org
Universal Compression Holdings, Inc. www.universalcompression.com
US Department of Energy (DOE) www.doe.gov
UT Petroleum Extension Service (PETEX) www.utexas.edu/cee/petex
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Glossary
Absolute Pressure (PSIA) - Pressure in excess of a perfect vacuum. Absolute pressure is obtained by algebraically adding
gauge pressure to atmosphere pressure. Pressures reported in "Atmospheres" are understood to be absolute. Absolute pressure must
be used in equations of state and in all gas-law calculations. Gauge pressures below atmospheric pressure are called "vacuum.
Actual Capacity - Quantity of gas actually compressed and delivered to the discharge system at rated speed of the machine and
Adiabatic Compression - A type of compression where no heat is transferred to or from the gas during the compression
Aftercooler - Heat exchangers for cooling air or gas discharge from compressors. Designed to reduce the temperature and liquefy
condensate vapors. Both air cooled and water cooled units are available.
Atmosphere - The standard atmosphere is defined as the pressure exerted by a column of mercury 760 mm high with a density of
13,595 g/cm at the standard acceleration due to gravity of 9.8 m/s. The 760th part of this pressure unit is the torr. The technical
atmosphere (at) denotes the pressure of a force of 1 kg acting on an area of 1 cm.
Atmospheric Pressure - The pressure due to the weight of the atmosphere (air and water vapor) on the earth's surface. The
under rated pressure conditions.
process.
average atmospheric pressure at sea level (for scientific purposes) has been defined at 14.696 pounds per square inch absolute.
Axial Compressor - A compressor belonging to the group of dynamic compressors. Characterized by having its flow in the axial
direction.
Bag House - a dust-collection chamber containing numerous permeable fabric filters through which the exhaust gases pass. Finer
particulates entrained in the exhaust gas stream are collected in the filters for subsequent treatment/disposal.
Barrel of Oil Equivalent (BOE) - A term frequently used to measure oil and gas on a comparative basis. In Canada, 6 mcf of
natural gas is equivalent to one barrel of oil.
Base Pressure - The pressure used as a standard in determining gas volume. Volumes are measured at operating pressures and
then corrected to base pressure volume. Base pressure is normally defined in any gas measurement contract. The standard value for
natural gas in the United States is 14.73 psia, established by the American National Standards Institute as standard Z-132.1 in 1969.
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Glossary (cont.)
Booster Station - A facility containing equipment which increases pressure on oil or gas in a pipeline.
Brake Horsepower - The maximum rate at which an engine can do work as measured by the resistance of an applied brake.
British Thermal Unit (BTU) - The quantity of heat necessary to raise the temperature of one pound of water one degree
Fahrenheit from 58.5 to 59.5 degrees Fahrenheit under standard pressure of 30 inches of mercury at or near its point of maximum
density. One Btu equals 252 calories, (gram), 778 foot-pounds, 1,055 joules or 0.293 watt hours.
BTU/Cu ft - A measure of the heat available or released when one cubic foot of gas is burned.
Centrifugal Compressor - A dynamic compressor. A machine in which air or gas is compressed by the mechanical action of
rotating vanes or impellers imparting velocity and pressure to the air or gas. In a centrifugal compressor, flow is in a radial direction. Air
enters the compressor through the machine mounted inlet control valve and flows to the first stage where the impeller imparts velocity
energy to the air. The air then proceeds through a diffuser section which converts the velocity energy to pressure energy. A multistage
centrifugal compressor is a machine having two or more of these stages.
Cold Start - Starting a compressor from a state of total shutdown. Usually done with "local" control at the compressor. May be done
with "remote" control, but only advised with "heavy" instrumentation and monitoring accessories.
Compressed Natural Gas (CNG) - Natural gasmost often methane--in high-pressure surface containers that is highly
compressed (though not to the point of liquefaction). CNG is used extensively as a trans-portation fuel for automobiles, trucks and
buses in some parts of Italy, New Zealand, and in Western Canada, and has recently begun to penetrate some regions of the United
States. Small amounts of natural gas are also transported overland in high-pressure containers.
Compressor - A mechanical device for increasing the pressure of a gas.
Compressor Station - Locations along the interstate pipeline at which large (thousands of horsepower) natural gas-powered
engines increase the pressure of the market natural gas stream flowing through the station by compression.
Constant Speed Control - The unit that runs continuously and matches air supply to demand, by loading and unloading the
Expressed in horsepower, typically at the crankshaft.
compressor.
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Glossary (cont.)
Cubic Foot - The most common unit of measurement of gas volume. It is the amount of gas required to fill a volume of one cubic
foot under stated conditions of temperature, pressure, and water vapor.
Cubic Foot Standard - That quantity of gas which under a pressure of 14.73 psia and at a temperature of 60oF occupies a
volume of one cubic foot without adjustment for water vapor content.
Cubic Ft/day - The number of cubic feet of natural gas produced from a well over a 24 hour period, normally an average figure
from a longer period of time. Generally expressed as mcf/d = thousand cubic feet per day, mmcf/d = million cubic feet per day, or bcf =
billion cubic feet per day.
Cubic Ft/min (CFM) - An airflow measurement of volume.
Cubic M/sec - A volume. Cubic meters per second.
Dedicated Gas Reserves - Gas reserves dedicated to a natural gas pipeline company by contract. For a pipeline it is the sum of
all reserves dedicated to the company by contract.
Discharge Piping - Is the piping between the compressor and the aftercooler, the aftercooler separator and the air receiver.
Discharge Pressure - Is the total gas pressure (static plus velocity) at the discharge port of the compressor. Velocity pressure is
Discharge Temperature - Is the temperature existing at the discharge port of the compressor.
Distribution System - Generally mains, services, and equipment which carry or control the supply of gas from the point of local
Drive - A coupling between the compressor and the engine or motor. The three types of drives most common are; flange mounted
motor, V belt drive or direct coupling.
considered only with dynamic compressors.
supply to and including the sales meters. The system operates at various pressures as indicated below. a. High Pressure. A system
which operates at a pressure higher than the standard service pressure delivered to the customer; thus, a pressure regulator is
required on each service to control pressure delivered to the customer. Sometimes this is referred to as medium pressure. b. Low
Pressure or Utilization Pressure. A system in which the gas pressure in the mains and service lines is substantially the same as that
delivered to the customers' appliances; ordinarily a pressure regulator is not required on individual service lines.
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Glossary (cont.)
Drive - A coupling between the compressor and the engine or motor. The three types of drives most common are; flange mounted
motor, V belt drive or direct coupling.
Electronic Gas Measurement (EGM) - "Real time" monitoring of natural gas quantities, and characteristics, as it passes
through a specific location.
Ethane (C2H6) - A colorless hydrocarbon gas of slight odor having a gross heating value of 1,773 Btu per cubic foot and a specific
gravity of 1.0488. It is a normal constituent of natural gas.
Field Pressure - The pressure of natural gas as it is found in the underground formations from which it is produced.
Full Load - Achieved when the air compressor is running at full RPM with a fully opened inlet and discharge, delivering the
Gas Lift - The effect of gas pressure in an oil well which causes the oil to flow from the well. May be either natural or artificially
induced by injecting gas into the hole under pressure. Below the surface, gas intermixes with the oil, lightens the oil column, and
allows it to flow.
Gas Plant - Any plant which performs one of the following functions: removing liquefiable hydrocarbons from wet gas or casinghead
gas (gas processing); removing undesirable gaseous and particulate elements from natural gas (gas treatment); removing water or
moisture from the gas stream (dehydration). Also, the original cost of property, plant and equipment owned and used by the utility in its
gas operations and having an expectation of life in service of more than one year from the date of installation.
Gas Turbine - A prime mover in which gas, under pressure or formed by combustion, is directed against a series of turbine blades;
Gathering Station - A compressor station at which gas is gathered from wells by means of suction because pressure is not
Gathering System - A network of pipelines (mains) transporting natural gas from individual wells to compressor station,
maximum volume at the rated pressure.
the energy in the expanding gas is converted into mechanical energy supplying power at the shaft.
sufficient to produce the desired rate of flow into a transmission or distribution system.
processing point, or main trunk pipeline.
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Glossary (cont.)
Gauge Pressure (PSIG) - Pounds per square inch above atmospheric pressure.
Grouting - Installation of a compressor system whereby the a solid bond is created between the machine base and concrete
foundation, typically using an epoxy bonding material.
Horsepower - Is a unit of work equal to 33,000 foot pounds per minute, 550 foot pounds per second, or 746 Watts.
Hydrogen Sulfide (H2S) - A poisonous, corrosive compound consisting of two atoms of hydrogen and one of sulfur, gaseous in
its natural state. It is found in manufactured gas made from coals or oils containing sulphur and must be removed. It is also found to
some extent in some natural gas. It is characterized by the odor of rotten eggs.
Impeller - The part of the rotating element of a dynamic compressor that imparts energy to the flowing medium by means of
centrifugal force. It consists of a number of blades mounted so as to rotate with the shaft.
Inlet Pressure - Is the total pressure (static plus velocity) at the inlet flange of the compressor.
Inlet Temperature - Is the temperature at the inlet flange of the compressor.
Integral Compressor - Integral units are typically single piece construction and include an integral compressor, meaning that
the power cylinders and compression cylinders are integrated on the same crankshaft. These units are older technology, and are
typically comprised of components assembled by a single manufacturer. Integral compressor operating characteristics include higher
horsepower1,000 HP or greaterand lower speed operation300 revolutions per minute (RPM) or lesswhich generally results in
lower wear and tear.
Liquefied Natural Gas (LNG) - Natural gas which has been liquefied by reducing its temperature to minus 260 degrees
Fahrenheit at atmospheric pressure. It remains a liquid at -116 degrees Fahrenheit and 673 psig. In volume, it occupies 1/600 of that
of the vapor at standard conditions
Main System - The network of distribution piping to which customers' service lines are attached. Generally, large pipes are laid in
principal streets with smaller laterals extending along side streets and connected at their ends to form a grid; sometimes laterals are
brought to dead ends.
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Glossary (cont.)
MCF - The quantity of natural gas occupying a volume of one thousand cubic feet at a temperature of sixty degrees Fahrenheit and
MMCF - A million cubic feet.
MMCF/d - Millions of cubic feet per day (24 hours).
Methane (CH4) - The first of the paraffin series of hydrocarbons. The chief constituent of natural gas. Pure methane has a
MMBTU - A thermal unit of energy equal to 1,000,000 Btus, that is, the equivalent of 1,000 cubic feet of gas having a heating
Multi-Stage Compressor - A compressor employing two or more stages.
Name Plate Rating - The full-load continuous rating of a generator, prime mover, pump, compressor, or other equipment under
Natural Gas - A naturally occurring mixture of hydrocarbon and nonhydrocarbon gases found in porous geologic formations
OEM - Original equipment manufacturer.
at a pressure of fourteen and seventy-three hundredths pounds per square inch absolute.
heating value of 1012 Btu per cubic foot.
content of 1,000 Btus per cubic foot, as provided by contract measurement terms.
specified conditions as designated by the manufacturer. It is usually indicated on a name plate attached mechanically to the
individual machine or device.
beneath the earth's surface, often in association with petroleum. The principal constituent is methane. 1. Dry. Gas whose water
content has been reduced by a dehydration process. Gas containing little or no hydrocarbons commercially recoverable as liquid
product. Specified small quantities of liquids are permitted by varying statutory definitions in certain states. 2.Liquefied (LNG). See
LIQUEFIED NATURAL GAS. 3. Sour. Gas found in its natural state, containing such amounts of compounds of sulfur as to make it
impractical to use, without purifying, because of its corrosive effect on piping and equipment. 4.Sweet. Gas found in its natural state,
containing such small amounts of compounds of sulfur that it can be used without purifying, with no deleterious effect on piping and
equipment. 5. Wet. Wet natural gas is unprocessed natural gas or partially processed natural gas produced from strata containing
condensable hydrocarbons. The term is subject to varying legal definitions as specified by certain state statutes. (The usual
maximum allowable is 7lbs./MMcf water content and .02 gallons/Mcf of Natural Gasoline.)
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Glossary (cont.)
Oil System - Consists of a vessel which is a combination of oil sump and oil separator, an oil cooler and an oil filter.
Performance Curve - A plot of expected operating characteristics (e.g.., discharge pressure versus inlet capacity, shaft
horsepower versus inlet capacity).
Pipeline - All parts of those physical facilities through which gas is moved in transportation, including pipe, valves, and other
appurtenances attached to pipe, compressor units, metering stations, regulator stations, delivery stations, holders, and fabricated
assemblies.
Pressure Differential (PSID) - Pounds per square inch, differential.
Processing Plant - A plant, generally located at the terminus of a gathering system, in which liquefiable hydrocarbons such as
propane, butane, ethane, or natural gasoline are extracted from the gas stream.
Propane (C3H8) - A gas, the molecule of which is composed of three carbon and eight hydrogen atoms. Propane is present in
most natural gas and is the first product refined from crude petroleum. It has many industrial uses and may be used for heating and
lighting. Contains approximately 2,500 Btu per cubic foot.
Receivers - Tanks used for the storage of air discharged from compressors. They serve also to damp discharge line pulsations.
Reciprocating Compressor - Compressors in which the compressing element is a piston having a reciprocating motion in a
cylinder.
Rotary Compressor - Compressors in which compression is effected by the positive action of rotating elements.
Rotor - The rotating element of a machine and, in the case of a compressor, is composed of the impeller (impellers) and shaft, and
may include shaft sleeves and a thrust balancing device.
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Glossary (cont.)
SCFM - Standard cubic feet per minute., SCFM or scfm. Flow of free air measured at some reference point and converted to a
standard set of reference conditions (e.g., 14.4 psia, 80 F, and 60% relative humidity.) Scfm means cfm at standard conditions.
However, standards vary and some care is necessary. In the United states, the usual standard is 14.696 psiA and 60F. Some
chemical engineers will use one ATA and 0C, but usually will be specific about the reference point. Europeans normally use one
ATA and 0C. It is not the same to all people, therefore it is best that the reference pressure and temperature be definitely
specified.
Separable Compressor - Separable units typically consist of component construction, which may include individual pieces
comprising an assembled unit of varying manufacture. These units are typically newer technology, may be of low to high
horsepowerpackages may exceed 8,000 HPare of higher speed750 1,000 RPMand have increased power density
compared to integral units, which allows operators to move large volumes with fewer machines. These units are typically more
flexible in application and operate at greater efficiencies than integral units.
Skid - Portable platform designed specifically to house the components of a compressor or compressor package.
Sour Gas - Natural gas contaminated by corrosion inducing impurities such as hydrogen sulfide.
Stages - Steps in the compression of a gas, In reciprocating compressors, each stage usually requires a separate cylinder, in
dynamic compressors, each requires a separate rotor disc.
Steam/Gas Turbine - An enclosed rotary type of prime mover in which heat energy in steam or gas is converted into
Suction Pressure - This is the pressure found on the suction side of a refrigeration system.
Sweet Gas - Natural gas not contaminated by corrosion inducing impurities such as hydrogen sulfide, or with a low level of
Top End Overhaul - A maintenance level that includes an overhaul of the top end of the engine or compressor only.
mechanical energy by the force of a high velocity flow of steam or gas directed against successive rows of radial blades fastened
to a central shaft.
impurities.
Typically includes removal and overhaul of the cylinders, pistons, piston rings, valves and other components that are serviceable
without disassembling of the crankcase.
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Glossary (cont.)
Transmission System - Pipelines (mains) installed for the purpose of transmitting gas from a source or sources of supply
to one or more distribution centers, to one or more large volume customers, or a pipeline installed to interconnect sources of
supply. In typical cases, transmission lines differ from gas mains in that they operate at higher pressures, are longer, and the
distance between connections is greater.
Utilization Factor - The ratio in percentage of the time that the equipment is in operation to the total working time.
V-Belt Drive - A drive arrangement for power transmission to compressors.
Voting Alarm - (Compressors/Gas Turbines) Is an alarm system that has maybe 3 sensors connected to it and it will require
minimum of 2 of the 3 to alarm before the alarm will act. There is a controller connected that does the logic decision based on set
parameters.
Zero Hour Overhaul - A completely remanufacture a compressor prime mover to as new specifications.
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Remember This
Equipment may differ, valuation issues are similar
Due diligence is key
Understand the equipment
Understand the market today and in the future
Understand the lease terms & conditions and their impact on value
Remember the valuation issues
Keep track of the assets
Current valuation and residual forecasting is not an exact science
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Page 63
Thank You!
Jeffrey A. Hutton, Partner
Arthur Lloyd LLC
120 Oxford Court, Suite 100
Austin, Texas 78737
Office: (512) 301- 5364
E-mail: jeff.hutton@arthurlloyd.com
Web: www.arthurlloyd.com
About Arthur Lloyd LLC
Arthur Lloyd LLC is an asset valuation and consulting firm with offices in Austin and Dallas, Texas, providing a broad
range of valuation services to a variety of companies in a wide range of industries.
Our management team consists of two principals with more than 30 combined years of asset valuation, engineering and
business consulting experience.
We have extensive experience providing valuation and consulting services to Fortune 1000 companies both domestically
and internationally in the areas of mergers and acquisitions, federal tax and financial reporting, property tax planning and
appeal and asset based lending.
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Equipment Management

Conference & Exhibition

Arthur Lloyd LLC

Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Big topic time is short

We will briefly cover:

Compressor Systems and compressor types

Key valuation issues

And a little bit on values

Included a glossary and sources of information

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Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Compressor A mechanical device that is used to increase the pressureor

Centrifugal Compressor Machines that use centrifugal force to compress gas by

Reciprocating Compressor Machines in which the compressing element is a piston

Rotary Compressor Machines in which the compressing element is a set of rotating

Compressor Station Any permanent combination of compressors that move

the energy industry it is typically an electric motor, reciprocating engine or

natural gas at increased pressure from fields, in transmission pipelines, or into

Arthur Lloyd LLC

Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Definitions Compressor (cont.)

Compressor Set Primary components of an assembled natural gas

Integral Compressor Typically, single piece construction and include an

Separable Compressor Typically consist of component construction, which

Arthur Lloyd LLC

Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

may reasonably be expected for property in an exchange between a willing buyer

Fair Market Value Installed - The estimated amount, expressed in terms of

money, that may reasonably be expected for an installed property in an exchange

Fair Market Value In Continued Use - The estimated amount, expressed in

terms of money, that may reasonably be expected for a property in an exchange

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Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Definitions Appraisal (cont.)

Fair Market Value Removal The estimated amount, expressed in terms of

Orderly Liquidation Value The estimated gross amount, expressed in terms

Forced Liquidation Value The estimated gross amount, expressed in terms

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Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Definitions Appraisal (cont.)

Remaining Useful Life The estimated period during which a property of a

Effective Age The apparent age of a property in comparison with a new

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Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

The general components of a compressed air system are illustrated

Arthur Lloyd LLC

Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Compressor System (cont.)

Arthur Lloyd LLC

Arthur Lloyd LLC Business Confidential 2006

February 12, 2006

Reciprocating compressors are positive displacement machines, meaning that they

A performance curve for a positive displacement machine is provided in the figure