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N e w s R e l e a s e CRESTWOOD MIDSTREAM PARTNERS LP 717 Texas Avenue, Suite 3150 Houston, TX 77002 www.crestwoodlp.com |
Crestwood Midstream Partners LP Announces
Second Quarter 2011 Results
Second Quarter 2011 Results
Recent Acquisitions Boost Second Quarter Performance to Record Levels
HOUSTON, TEXAS, August 8, 2011 — Crestwood Midstream Partners LP (NYSE: CMLP) (“Crestwood LP”
or the “Partnership”) reported today its second quarter 2011 financial results.
Second Quarter Summary Results
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands, except as noted) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net income |
$ | 10,227 | $ | 10,113 | $ | 19,603 | $ | 16,302 | ||||||||
Net income, adjusted |
$ | 13,799 | $ | 10,113 | $ | 25,140 | $ | 16,302 | ||||||||
Net income per unit (diluted basis) |
$ | 0.22 | $ | 0.31 | $ | 0.49 | $ | 0.52 | ||||||||
Adjusted net income per unit
(diluted basis) |
$ | 0.31 | $ | 0.31 | $ | 0.64 | $ | 0.52 | ||||||||
Adjusted EBITDA |
$ | 29,808 | $ | 18,773 | $ | 50,402 | $ | 33,058 | ||||||||
Adjusted distributable cash flow |
$ | 23,421 | $ | 16,090 | $ | 41,547 | $ | 28,178 | ||||||||
Volumes gathered (MMcf) |
50,918 | 29,609 | 90,319 | 55,406 | ||||||||||||
Volumes processed (MMcf) |
14,559 | 11,494 | 25,519 | 22,738 | ||||||||||||
Crestwood LP’s adjusted earnings before interest, income taxes, depreciation, amortization and
accretion (“EBITDA”) increased 59 percent to $29.8 million for the three months ended June 30,
2011, compared to adjusted EBITDA of $18.8 million during the second quarter 2010. Adjusted
distributable cash flow increased 46 percent to $23.4 million in the recent quarter as compared to
$16.1 million in the second quarter 2010. Adjusted net income for the second quarter 2011,
increased by 36 percent to $13.8 million from the comparable period in 2010. Results for the second
quarter 2011 have been adjusted to reflect approximately $1.1 million of expenses related to the
acquisition of certain midstream assets from Frontier Gas Services, LLC (“Frontier”) on April 1,
2011 and $2.5 million of financing fees related to a bridge credit facility that was terminated in
connection with the issuance of $200 million in aggregate
principal amount of 7.75 percent fixed-rate senior notes on April 1,
2011.
-more-
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Net income for the second quarter 2011 was $10.2 million, compared to $10.1 million during the
second quarter 2010. Net income per unit reflects the issuance of 6.2 million Class C units on
April 1, 2011 and 1.8 million common units on May 4, 2011.
Adjusted net income, adjusted net income per unit, adjusted EBITDA and adjusted distributable cash
flow are non-generally accepted accounting principles (“non-GAAP”) financial measures that are
defined and reconciled later in this press release to their most directly comparable U.S. GAAP
financial measures.
“The second quarter 2011 was another outstanding quarter for the Partnership and the third
consecutive quarter of improving performance since we took over management of the Partnership on
October 1, 2010,” stated Robert G. Phillips, Chairman, President and Chief Executive Officer of
Crestwood LP’s general partner. “The recent quarter’s performance reflects continued volume growth
in the Barnett Shale due to new pipeline projects and improved well performance. Additionally, our
newly acquired assets in the Fayetteville Shale and Granite Wash made a meaningful
contribution to our quarterly performance as we transitioned these assets from Frontier to
Crestwood. The Partnership’s adjusted distributable cash flow of $23.4 million
was 1.4 times the cash distribution declared for the second quarter
2011 and enabled us to
increase the distribution to $0.46 per unit, which represented a 9.5 percent increase over the
distribution paid for the same period last year,” continued Phillips.
“We continue to execute on our midstream shale play strategy. As we continue to develop the
Crestwood organization, we are evaluating additional opportunities in other high growth shale plays
that will expand our organic growth potential. This is a very exciting time to be in the midstream
business,” noted Phillips.
Review of Operating Performance
Operating revenues totaled $55.5 million for the second quarter 2011, compared to $27.2 million for
the second quarter 2010. Operating revenues from the Fayetteville
Shale and Granite Wash assets acquired in 2011 totaled $19.6 million,
including $12.5 million from product sales. Operating revenues attributable to the Barnett Shale
assets increased $8.7 million, or 32 percent, from the second quarter 2010.
Natural gas volumes gathered during the second quarter 2011 averaged 560 million cubic feet per day
(MMcf/d), as compared to 438 MMcf/d and 325 MMcf/d gathered during the first quarter 2011 and
second quarter 2010, respectively. In the Barnett Shale, 65 additional wells were connected during
the six months ended June 30, 2011, compared with 49 wells connected during the same period in
2010. Additionally, well production has been improved due to the benefits of longer laterals being
drilled and improved completion techniques by producers. During the second quarter 2011 gathering
volumes on the Alliance System, Cowtown System and Lake Arlington Dry System totaled 196 MMcf/d,
150 MMcf/d and 104 MMcf/d,
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respectively, representing increases of 33 percent, 18 percent and 105 percent, respectively,
over the second quarter 2010, reflecting continued producer development in the core areas
surrounding the Alliance and Lake Arlington gathering areas. Gathering volumes from the assets in
the Fayetteville Shale and Granite Wash acquired on April 1, 2011 totaled 98 MMcf/d for the second
quarter 2011. During the second quarter 2011, Crestwood transitioned midstream operations from
Frontier, and worked with both Chesapeake Energy Corporation (Chesapeake) and BHP Billiton
Petroleum (BHP) to assist in the transition of production operations relating to BHP’s acquisition
of Chesapeake’s Fayetteville Shale assets which closed on March 31, 2011.
Operations and maintenance (“O&M”) expenses totaled $8.6 million in the second quarter 2011,
compared with $6.0 million in the second quarter 2010. O&M expense attributable to the Barnett
Shale, which included Las Animas, totaled $5.7 million in the second quarter 2011. O&M expense for
the acquired assets in the Fayetteville Shale and Granite Wash totaled $2.9 million in the second
quarter 2011. Second quarter performance reflects a combination of more efficient operations and
the benefit of higher utilization rates in the Barnett Shale. O&M expenses per unit of throughput
on our gathering systems for the second quarter 2011 and 2010 were $0.14 per thousand cubic feet
(Mcf) and $0.17 per Mcf, respectively, which excludes property tax expense of $1.4 million and $1.0
million in the respective periods.
General and administrative expenses totaled $6.1 million in the second quarter 2011, including $1.1
million of non-recurring expenses related to the Frontier acquisition noted above. Excluding the
non-recurring expenses, general and administrative expenses increased $2.6 million compared to the
second quarter of 2010. The increased expense in 2011 reflects the transition to a stand-alone
midstream entity coupled with the increased scope of business activity.
At June 30, 2011, Crestwood LP had $437.5 million of debt outstanding, comprised of the $200
million principal amount of 7.75 percent fixed-rate senior notes, and $237.5 million of borrowings
under its revolving credit facility. The weighted average interest rate of revolving credit
facility borrowings was 3.1 percent at June 30, 2011. Effective April 1, 2011, Crestwood LP
expanded the capacity under its revolving credit facility by $100 million, bringing total
availability to $500 million.
Capital spending for the six months ended June 30, 2011 totaled $16.9 million, comprised of $11.1
million in the Barnett Shale, $5.1 million in the Fayetteville
Shale and Granite Wash assets
acquired on April 1, 2011, and maintenance capital spending of $0.7 million. Growth capital
spending in the Barnett Shale was primarily used for the expansion of the Alliance System. Capital
spending for the Fayetteville Shale and Granite Wash was comprised primarily of new laterals in the Prairie Creek
and Woolly Hollow gathering areas and progress payments on a new gas processing facility.
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Conference Call
Crestwood LP will host a conference call for investors and analysts on Monday, August 8, 2011,
beginning at 10:30 a.m. Central Time, to discuss the second quarter 2011 performance. Interested
parties may participate in the call by calling 877-681-3374 and entering passcode 3715524. The
conference call will also be webcast live and can be accessed through the Investor Relations
section of our website at www.crestwoodlp.com.
A replay will be available for 30 days following the conference call by dialing 888-203-1112 and
entering the replay passcode 3715524 or through the Investor Relations section on our website.
Use of Non-GAAP Financial Measures
This news release and the accompanying schedules include the non-GAAP financial measures of
adjusted net income, adjusted net income per unit, EBITDA, adjusted EBITDA, distributable cash flow
and adjusted distributable cash flow. The accompanying schedules of this news release provide
reconciliations of these non-GAAP financial measures to their most directly comparable financial
measures calculated and presented in accordance with generally accepted accounting principles in
the United States of America (“GAAP”). Our non-GAAP financial measures should not be considered as
alternatives to GAAP measures such as net income or operating income or any other GAAP measure of
liquidity or financial performance.
About Crestwood Midstream Partners LP
Houston, Texas-based Crestwood LP is a growth-oriented, midstream master limited partnership which
owns and operates predominately fee-based gathering, processing, treating and compression assets
servicing natural gas producers in the Barnett Shale in North Texas, the Fayetteville Shale in
Northwest Arkansas, the Granite Wash area in the Texas Panhandle and the Avalon Shale area of
Southeastern New Mexico. For more information about Crestwood LP,
visit www.crestwoodlp.com.
Forward-Looking Statements
The statements in this news release regarding future events, occurrences, circumstances,
activities, performance, outcomes and results are forward-looking statements. Although these
statements reflect the current views, assumptions and expectations of Crestwood LP’s management,
the matters addressed herein are subject to numerous risks and uncertainties which could cause
actual activities, performance, outcomes and results to differ materially from those indicated.
Such forward-looking statements include, but are not limited to, statements about the future
financial and operating results, objectives, expectations and intentions and other statements that
are not historical facts. Factors that could result in such differences or otherwise materially
affect Crestwood LP’s financial condition, results of
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operations and cash flows include: changes in
general economic conditions; fluctuations in natural gas prices; failure or delays by our customers
in achieving expected production from natural gas projects; competitive conditions in our industry;
actions or inactions taken or non-performance by third parties, including suppliers, contractors,
operators, processors, transporters and customers; our ability to consummate acquisitions and
successfully integrate the acquired business and our ability to realize any cost savings and other
synergies from any acquisition; any disruption from the recent acquisition of midstream assets from
Frontier Gas Services, LLC making it more difficult to maintain relationships with customers,
employees or suppliers; fluctuations in the value of certain of our assets and liabilities; changes
in the availability and cost of capital; operating hazards, natural disasters, weather-related
delays, casualty losses and other matters beyond our control; construction costs or capital
expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and
governmental regulations, including
environmental and climate change requirements; and the effects of existing and future litigation;
risks related to our substantial indebtedness as well as other factors disclosed in Crestwood LP’s
filings with the Securities and Exchange Commission. You should read our filings with the
Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended
December 31, 2010, our subsequently filed Quarterly Reports on Form 10-Q and our Current Reports on
Form 8-K, for a more extensive list of factors that could affect results. All forward-looking
statements in this news release are made as of the date hereof and we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information,
further events or otherwise.
Investor Contact:
Mark Stockard
832-519-2207
mstockard@crestwoodlp.com
832-519-2207
mstockard@crestwoodlp.com
###
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CRESTWOOD MIDSTREAM PARTNERS LP
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per unit data — Unaudited
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per unit data — Unaudited
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue |
||||||||||||||||
Gathering revenue — related party |
$ | 24,515 | $ | 18,405 | $ | 47,866 | $ | 34,794 | ||||||||
Gathering revenue |
8,425 | 1,340 | 9,901 | 2,455 | ||||||||||||
Processing revenue — related party |
7,903 | 6,774 | 14,540 | 13,253 | ||||||||||||
Processing revenue |
659 | 675 | 1,175 | 1,431 | ||||||||||||
Product sales |
14,033 | — | 14,433 | — | ||||||||||||
Total revenue |
55,535 | 27,194 | 87,915 | 51,933 | ||||||||||||
Expenses |
||||||||||||||||
Operations and maintenance |
8,634 | 6,022 | 15,592 | 13,415 | ||||||||||||
Product purchases |
12,105 | — | 12,528 | — | ||||||||||||
General and administrative |
6,060 | 2,399 | 12,430 | 5,460 | ||||||||||||
Depreciation, amortization and accretion |
8,361 | 5,642 | 14,386 | 11,007 | ||||||||||||
Total expenses |
35,160 | 14,063 | 54,936 | 29,882 | ||||||||||||
Operating income |
20,375 | 13,131 | 32,979 | 22,051 | ||||||||||||
Interest expense |
9,819 | 2,945 | 12,825 | 5,623 | ||||||||||||
Income from continuing operations before income taxes |
10,556 | 10,186 | 20,154 | 16,428 | ||||||||||||
Income tax provision |
329 | 73 | 551 | 126 | ||||||||||||
Net income |
$ | 10,227 | $ | 10,113 | $ | 19,603 | $ | 16,302 | ||||||||
General partner interest in net income |
$ | 1,628 | $ | 677 | $ | 2,516 | $ | 778 | ||||||||
Limited partners’ interest in net income |
$ | 8,599 | $ | 9,436 | $ | 17,087 | $ | 15,524 | ||||||||
Basic income per unit: |
||||||||||||||||
Net earnings per limited partner unit — basic |
$ | 0.27 | $ | 0.33 | $ | 0.54 | $ | 0.54 | ||||||||
Diluted income per unit: |
||||||||||||||||
Net earnings per limited partner unit — diluted |
$ | 0.22 | $ | 0.31 | $ | 0.49 | $ | 0.52 | ||||||||
Weighted average number of common units outstanding: |
||||||||||||||||
Basic |
32,315 | 28,502 | 31,754 | 28,502 | ||||||||||||
Diluted |
38,694 | 31,958 | 35,029 | 31,952 | ||||||||||||
Distributions declared per unit (attributable to the period ended) |
$ | 0.46 | $ | 0.42 | $ | 0.90 | $ | 0.81 | ||||||||
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CRESTWOOD MIDSTREAM PARTNERS LP
CONSOLIDATED BALANCE SHEETS
In thousands, except for unit data — Unaudited
CONSOLIDATED BALANCE SHEETS
In thousands, except for unit data — Unaudited
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 551 | $ | 2 | ||||
Accounts receivable |
8,582 | 1,679 | ||||||
Accounts receivable — related party |
26,002 | 23,003 | ||||||
Prepaid expenses and other |
2,578 | 1,052 | ||||||
Total current assets |
37,713 | 25,736 | ||||||
Property, plant and equipment, net |
688,398 | 531,371 | ||||||
Intangible assets, net |
115,471 | — | ||||||
Goodwill |
91,168 | — | ||||||
Other assets |
19,905 | 13,520 | ||||||
Total assets |
$ | 952,655 | $ | 570,627 | ||||
LIABILITIES AND PARTNERS’ CAPITAL |
||||||||
Current liabilities |
||||||||
Capital leases |
$ | 2,652 | $ | — | ||||
Accounts payable — related party |
4,048 | 4,267 | ||||||
Accrued additions to property, plant and equipment |
10,331 | 11,309 | ||||||
Accounts payable and other |
17,421 | 2,917 | ||||||
Total current liabilities |
34,452 | 18,493 | ||||||
Long-term debt |
437,500 | 283,504 | ||||||
Long-term capital leases |
5,286 | — | ||||||
Asset retirement obligations |
10,664 | 9,877 | ||||||
Partners’ capital |
||||||||
Common unitholders (32,987,696 and 31,187,696,units issued
and outstanding at June 30, 2011 and December 31, 2010) |
300,752 | 258,069 | ||||||
Class C unit holders (6,337,093 and 0 units issued and
outstanding at
June 30, 2011 and December 31, 2010, respectively) |
154,056 | — | ||||||
General partner |
9,945 | 684 | ||||||
Total partners’ capital |
464,753 | 258,753 | ||||||
| $ | 952,655 | $ | 570,627 | |||||
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CRESTWOOD MIDSTREAM PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands — Unaudited
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands — Unaudited
| Six Months Ended June 30, | ||||||||
| 2011 | 2010 | |||||||
Operating activities: |
||||||||
Net income |
$ | 19,603 | $ | 16,302 | ||||
Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |
||||||||
Depreciation and amortization |
14,110 | 10,765 | ||||||
Accretion of asset retirement obligations |
276 | 242 | ||||||
Deferred income taxes |
— | 126 | ||||||
Equity-based compensation |
565 | 1,334 | ||||||
Non-cash interest expense |
1,610 | 2,709 | ||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
(6,568 | ) | 141 | |||||
Prepaid expenses and other |
(1,612 | ) | (1,011 | ) | ||||
Accounts receivable — related party |
(2,999 | ) | (6,323 | ) | ||||
Accounts payable — related party |
(219 | ) | — | |||||
Accounts payable and other |
13,791 | 2,464 | ||||||
Net cash provided by operating activities |
38,557 | 26,749 | ||||||
Investing activities: |
||||||||
Capital expenditures |
(16,888 | ) | (34,845 | ) | ||||
Acquisitions, net of cash acquired |
(353,966 | ) | — | |||||
Distribution to Quicksilver for Alliance Midstream Assets |
— | (80,276 | ) | |||||
Net cash used in investing activities |
(370,854 | ) | (115,121 | ) | ||||
Financing activities: |
||||||||
Proceeds from senior notes |
200,000 | — | ||||||
Proceeds from credit facility |
64,200 | 124,500 | ||||||
Repayments of credit facility |
(110,204 | ) | (23,100 | ) | ||||
Debt issuance costs paid |
(6,982 | ) | — | |||||
Proceeds from issuance of Class C units, net |
152,671 | — | ||||||
Proceeds from issuance of Common units, net |
53,550 | 11,054 | ||||||
Contributions by partners |
8,741 | — | ||||||
Distributions paid |
(29,130 | ) | (23,128 | ) | ||||
Taxes paid for equity-based compensation vesting |
— | (1,144 | ) | |||||
Net cash provided by financing activities |
332,846 | 88,182 | ||||||
Net cash increase (decrease) |
549 | (190 | ) | |||||
Cash and cash equivalents at beginning of period |
2 | 746 | ||||||
Cash and cash equivalents at end of period |
$ | 551 | $ | 556 | ||||
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CRESTWOOD MIDSTREAM PARTNERS LP
OPERATING STATISTICS
Unaudited
OPERATING STATISTICS
Unaudited
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Volume Data: |
||||||||||||||||
Volumes gathered (MMcf) |
50,918 | 29,609 | 90,319 | 55,406 | ||||||||||||
Volumes processed (MMcf) |
14,559 | 11,494 | 25,519 | 22,738 | ||||||||||||
CRESTWOOD MIDSTREAM PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
In thousands, except for per unit data — Unaudited
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
In thousands, except for per unit data — Unaudited
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income |
$ | 10,227 | $ | 10,113 | $ | 19,603 | $ | 16,302 | ||||||||
Items impacting net income attributable to the closing
of the Crestwood and Frontier acquisitions: |
||||||||||||||||
Transition related expenses |
1,072 | — | 3,037 | — | ||||||||||||
Interest expense (bridge loan fees) |
2,500 | — | 2,500 | — | ||||||||||||
Adjusted net income |
$ | 13,799 | $ | 10,113 | $ | 25,140 | $ | 16,302 | ||||||||
Net income per limited partner unit (diluted basis) |
$ | 0.22 | $ | 0.31 | $ | 0.49 | $ | 0.52 | ||||||||
Items impacting net income attributable to the closing
of the Crestwood and Frontier acquisitions |
0.09 | — | 0.15 | — | ||||||||||||
Adjusted net income per limited partner unit (diluted basis) |
$ | 0.31 | $ | 0.31 | $ | 0.64 | $ | 0.52 | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income from continuing operations |
$ | 10,227 | $ | 10,113 | $ | 19,603 | $ | 16,302 | ||||||||
Depreciation, amortization and accretion expense |
8,361 | 5,642 | 14,386 | 11,007 | ||||||||||||
Income tax provision |
329 | 73 | 551 | 126 | ||||||||||||
Non-cash interest expense |
932 | 1,245 | 1,610 | 2,709 | ||||||||||||
Non-cash equity compensation |
282 | 667 | 565 | 1,334 | ||||||||||||
Maintenance capital expenditures |
(282 | ) | (1,650 | ) | (705 | ) | (3,300 | ) | ||||||||
Distributable cash flow |
19,849 | 16,090 | 36,010 | 28,178 | ||||||||||||
Add: Non-recurring transaction related expenses |
3,572 | — | 5,537 | — | ||||||||||||
Adjusted distributable cash flow |
$ | 23,421 | $ | 16,090 | $ | 41,547 | $ | 28,178 | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Total revenues |
$ | 55,535 | $ | 27,194 | $ | 87,915 | $ | 51,933 | ||||||||
Operations and maintenance expense |
8,634 | 6,022 | 15,592 | 13,415 | ||||||||||||
Product purchases |
12,105 | — | 12,528 | — | ||||||||||||
General and administrative expense |
6,060 | 2,399 | 12,430 | 5,460 | ||||||||||||
EBITDA |
28,736 | 18,773 | 47,365 | 33,058 | ||||||||||||
Non-recurring transaction related expenses |
1,072 | — | 3,037 | — | ||||||||||||
Adjusted EBITDA |
29,808 | 18,773 | 50,402 | 33,058 | ||||||||||||
Less: |
||||||||||||||||
Depreciation, amortization and accretion expense |
8,361 | 5,642 | 14,386 | 11,007 | ||||||||||||
Interest expense |
9,819 | 2,945 | 12,825 | 5,623 | ||||||||||||
Income tax provision |
329 | 73 | 551 | 126 | ||||||||||||
Non-recurring transaction related expenses |
1,072 | — | 3,037 | — | ||||||||||||
Net income from continuing operations |
$ | 10,227 | $ | 10,113 | $ | 19,603 | $ | 16,302 | ||||||||