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Universal Compression Holdings Reports Third Quarter Results and Announces $200 Million Stock Repurchase Program

November, 07, 2006

HOUSTON, Nov. 7 /PRNewswire-FirstCall/ -- Universal Compression Holdings, Inc. (NYSE: UCO) today reported record net income of $25.0 million, or $0.80 per diluted share, in the three months ended September 30, 2006, including approximately $0.07 per diluted share of benefit related to employee benefit programs. Without this benefit, earnings per diluted share would have been $0.73. Universal reported net income of $21.8 million, or $0.70 per diluted share, in the three months ended June 30, 2006 and $17.7 million, or $0.54 per diluted share, in the prior year period.

Revenue was $246.9 million in the three months ended September 30, 2006, compared to $218.7 million in the three months ended June 30, 2006 and $181.1 million in the prior year period. EBITDA, as adjusted (as defined below), was a record $84.0 million in the three months ended September 30, 2006 as compared to $75.2 million in the three months ended June 30, 2006 and $66.2 million in the comparable period of the prior year.

Stock Repurchase Program

Universal's Board of Directors has authorized the repurchase of up to $200 million of Universal's common stock. This authorization extends until November 2008. Universal intends to make purchases from time to time as market conditions warrant and hold the repurchased shares in treasury for general corporate purposes.

Comments

"Our overall strong financial results in the third quarter reflect continued favorable business conditions in each of our contract compression, fabrication and aftermarket services segments. Due to the high activity levels in our fabrication facilities during the most recently completed quarter, we experienced some unexpected delays in the production of new units for third-party sales and for our contract compression fleet, delaying revenue recognition in both the contract compression and fabrication segments. We are incurring continuing expenses related to our new enterprise resource planning system and incremental costs associated with our newly formed public entity, Universal Compression Partners, L.P. (Nasdaq: UCLP). We believe both of these initiatives are important steps in driving our long term growth strategy," commented Stephen A. Snider, Universal's Chairman, President and Chief Executive Officer. "The outlook for domestic and international markets continues to be positive as reflected by a strong level of customer inquiries and orders for compression services and products well into 2007."

"We are very excited that the initial public offering of Universal's subsidiary, UCLP, was successfully completed last month and that UCLP has been well-received by investors. We believe that UCLP will create significant value to Universal's stockholders, as Universal intends to utilize UCLP's lower cost of capital to purchase the remainder of Universal's domestic contract compression fleet and for UCLP to be the primary growth vehicle for the domestic contract compression business," added Snider.

Guidance

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Factors affecting these forward-looking statements are detailed below under the section titled "Forward-Looking Statements." These statements do not include the potential impact of any acquisition, disposition, merger, joint venture or other material transactions that could occur in the future, including any additional future contributions of contract compression contracts and equipment from Universal to UCLP.

For the three months ending December 31, 2006, we expect revenue of $240 million to $250 million and earnings per diluted share of $0.70 to $0.74. For the twelve months ending December 31, 2006, we now expect revenue of $935 million to $945 million, earnings per diluted share of $2.88 to $2.92 and capital expenditures, net of sale proceeds, of approximately $210 million; this compares to previously reported guidance of revenue of $950 million to $970 million, earnings per diluted share of $2.85 to $2.95 and capital expenditures, net of sale proceeds, of $210 million to $240 million. Guidance for earnings per diluted share does not include any special charges associated with our recent refinancing activities in the fourth quarter.

Conference Call

Universal will host a conference call today, November 7, 2006, at 10:00 a.m. Central Time, 11:00 a.m. Eastern Time, to discuss the quarter's results and certain other corporate matters. The conference call will be broadcast live over the Internet to provide interested persons the opportunity to listen. The call will also be archived for approximately 90 days to provide an opportunity to those unable to listen to the live broadcast. Both the live broadcast and replay of the archived version are free of charge to the user.

Persons wishing to listen to the conference call live may do so by logging onto http://www.universalcompression.com (click UCO "Investor Information" section) at least 15 minutes prior to the start of the call. The replay of the call will be available at the website http://www.universalcompression.com.

EBITDA, as adjusted, is defined as net income plus income taxes, interest expense (including debt extinguishment costs and gain on termination of interest rate swaps), depreciation and amortization, foreign currency gains or losses, excluding non-recurring items (including facility consolidation costs), and extraordinary gains or losses.

Forward-Looking Statements

Statements about Universal's outlook and all other statements in this release (and oral statements made regarding the subjects of this release, including on the conference call announced herein) other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Universal's control, which could cause actual results to differ materially from such statements. Forward looking information includes, but is not limited to, statements regarding: the belief that UCLP will create significant value to Universal's stockholders; the intention of Universal for UCLP to be the primary growth vehicle for the domestic contract compression business; Universal's optimistic expectation regarding the positive outlook for domestic and international markets; Universal's expected revenue and earnings per diluted share for the fourth quarter of 2006; Universal's intentions with respect to acquiring its shares as part of the stock repurchase program; and Universal's expected revenue, earnings per diluted share and capital expenditures, net of sales proceeds, for the full year 2006. While Universal believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are the conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for natural gas and the impact on the price of natural gas; employment workforce factors, including our ability to hire, train and retain key employees; our ability to timely and cost-effectively obtain components necessary to conduct our business; changes in political or economic conditions in key operating markets, including international markets; our ability to timely and cost- effectively implement our enterprise resource planning system; changes in safety and environmental regulations pertaining to the production and transportation of natural gas; and the performance of UCLP.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Universal's Transition Report on Form 10-K for the nine months ended December 31, 2005 and those set forth from time to time in Universal's filings with the Securities and Exchange Commission, which are available through our website www.universalcompression.com. Universal expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events, or otherwise.

Universal, headquartered in Houston, Texas, is a leading natural gas compression services company, providing a full range of contract compression, sales, operations, maintenance and fabrication services to the domestic and international natural gas industry.

                     UNIVERSAL COMPRESSION HOLDINGS, INC.
               UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)

                                                 Three Months Ended
                                        September 30, June 30,  September 30,
                                             2006       2006       2005
    Revenue:
       Domestic contract compression        $101,058   $101,460   $81,964
       International contract compression     36,251     35,010    31,076
       Fabrication                            57,642     38,528    28,193
       Aftermarket services                   51,981     43,718    39,895
           Total revenue                     246,932    218,716   181,128

    Costs and expenses:
       Cost of sales (excluding depreciation
        and amortization expense):
           Domestic contract compression      34,866     35,792    29,849
           International contract
            compression                        8,968      8,430     8,087
           Fabrication                        47,594     33,797    24,769
           Aftermarket services               41,304     36,359    31,782
       Depreciation and amortization          31,154     30,013    26,439
       Selling, general and
        administrative                        30,149     29,461    21,012
       Interest expense, net                  15,152     14,605    13,034
       Foreign currency (gain) loss              (45)       299      (610)
       Other (income) loss, net                    3       (360)     (524)
           Total costs and expenses          209,145    188,396   153,838

    Income before income taxes                37,787     30,320    27,290

    Income tax expense                        12,827      8,504     9,611

       Net income                            $24,960    $21,816   $17,679

    Weighted average common and common
       equivalent shares outstanding:
       Basic                                  30,037     29,891    31,902

       Diluted                                31,163     31,040    32,836

    Earnings per share:
       Basic                                   $0.83      $0.73     $0.55

       Diluted                                 $0.80      $0.70     $0.54



                     UNIVERSAL COMPRESSION HOLDINGS, INC.
                      UNAUDITED SUPPLEMENTAL INFORMATION
                            (Dollars in thousands)

                                                  Three Months Ended
                                        September 30,  June 30,  September 30,
                                            2006         2006         2005
    Revenue:
        Domestic contract compression      $101,058    $101,460     $81,964
        International contract
         compression                         36,251      35,010      31,076
        Fabrication                          57,642      38,528      28,193
        Aftermarket services                 51,981      43,718      39,895
            Total                          $246,932    $218,716    $181,128

    Gross Margin:
        Domestic contract compression       $66,192     $65,668     $52,115
        International contract
         compression                         27,283      26,580      22,989
        Fabrication                          10,048       4,731       3,424
        Aftermarket services                 10,677       7,359       8,113
            Total                          $114,200    $104,338     $86,641

    Selling, General and Administrative     $30,149     $29,461     $21,012
        % of Revenue                             12%         13%         12%

    EBITDA, as adjusted                     $84,048     $75,237     $66,153
        % of Revenue                             34%         34%         37%

    Capital Expenditures                    $58,552     $59,402     $38,642
    Proceeds from Sale of PP&E                5,175       4,070       3,876
    Net Capital Expenditures                $53,377     $55,332     $34,766

    Gross Margin Percentage:
        Domestic contract compression            65%         65%         64%
        International contract
         compression                             75%         76%         74%
        Fabrication                              17%         12%         12%
        Aftermarket services                     21%         17%         20%
        Total                                    46%         48%         48%

    Reconciliation of GAAP to Non-GAAP
     Financial Information:
        Net income                          $24,960     $21,816     $17,679
        Income tax expense                   12,827       8,504       9,611
        Depreciation and amortization        31,154      30,013      26,439
        Interest expense, net                15,152      14,605      13,034
        Foreign currency (gain) loss            (45)        299        (610)
        EBITDA, as adjusted(1)               84,048      75,237      66,153
        Selling, general and
         administrative                      30,149      29,461      21,012
        Other (income) loss, net                  3        (360)       (524)
        Gross Margin(1)                    $114,200    $104,338     $86,641


                                        September 30,  June 30,  September 30,
                                            2006         2006         2005

    Debt and Capital Lease Obligations     $914,116    $898,855    $818,646
    Stockholders' Equity                   $927,662    $904,308    $908,605
    Total Debt to Capitalization              49.6%       49.8%       47.4%


    (1) Management believes disclosure of EBITDA, as adjusted and Gross
        Margin, non-GAAP measures, provide useful information to investors
        because, when viewed with our GAAP results and accompanying
        reconciliations, they provide a more complete understanding of our
        performance than GAAP results alone.  Management uses EBITDA, as
        adjusted and Gross Margin, as supplemental measures to review current
        period operating performance, comparability measures and performance
        measures for period to period comparisons.  In addition, EBITDA, as
        adjusted is used by management as a valuation measure.



                     UNIVERSAL COMPRESSION HOLDINGS, INC.
                      UNAUDITED SUPPLEMENTAL INFORMATION
                          (Horsepower in thousands)


                                                   Three Months Ended
                                         September 30, June 30,  September 30,
                                             2006       2006       2005
    Total Available Horsepower
     (at period end):
          Domestic contract compression      2,017      1,989      1,948
          International contract
           compression                         599        595        565
              Total                          2,616      2,584      2,513

    Average Operating Horsepower:
          Domestic contract compression      1,792      1,794      1,751
          International contract
           compression                         547        549        524
              Total                          2,339      2,343      2,275

    Horsepower Utilization:
          Spot (at period end)                89.8%      90.2%      91.0%
          Average                             90.0%      91.1%      91.0%

    Fabrication Backlog (in millions)         $268       $275       $114

SOURCE Universal Compression Holdings, Inc.
11/07/2006

CONTACT: David Oatman, Vice President, Investor Relations, of Universal Compression Holdings, Inc., +1-713-335-7460

9859 11/07/2006 07:00 EST http://www.prnewswire.com

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