This paper presents a theoretical investigation of the movement of liquid droplets and slugs in hydrophobic microchannels and develops a compact model for this type of two-phase flow. This model is used in the prediction of pressure drop and liquid water coverage ratio, key parameters in the operation of Proton Exchange Membrane Fuel Cells (PEMFC), the primary motivation for this work. A semi-empirical, periodic-steady two-phase separated flow compact model is formulated to characterize the slug flow behavior. The momentum equation includes the effects of acceleration, friction and surface tension on the pressure drop. The model considers spatial changes in slug velocity through the use of a force balance formulation. The model uses a departure scheme that computes slug size and shape at entrainment. The steady state slug flow compact model is capable of predicting liquid water coverage ratio and pressure drop using liquid and gas now rates and advancing/receding triple point contact angles as its only inputs. The results indicate that the pressure drop increases as the droplet formation frequency increases.