November 06, 2012 at 07:30 AM EST
Crestwood Announces Third Quarter 2012 Results
Reports Record Adjusted EBITDA and Adjusted Distributable Cash Flow on Higher Gathering Volumes

HOUSTON, TX -- (Marketwire) -- 11/06/12 -- Crestwood Midstream Partners LP (NYSE: CMLP) ("Crestwood" or the "Partnership") reported today its unaudited financial results for the three months ended September 30, 2012. Key financial and operating results with respect to the third quarter 2012 included the following:

Third Quarter 2012 Financial Highlights

  • Reported record adjusted earnings before interest, taxes, depreciation, amortization and accretion ("Adjusted EBITDA") of $32.0 million, up 12% from the $28.5 million reported in the second quarter 2012, on 9% higher gathering volumes on Crestwood's 100% owned gathering systems and 13% higher gathering volumes on Crestwood's 35% owned Marcellus Shale pipelines.
  • Reported record adjusted distributable cash flow of $25.2 million, up 22% from the $20.6 million reported for the second quarter 2012.
  • Announced a quarterly distribution increase with respect to the third quarter 2012 of $0.51 per common unit (equivalent to $2.04 per common unit on an annualized basis), representing a 6.3% increase compared to the distribution paid with respect to the third quarter 2011.
  • Crestwood's third quarter 2012 performance resulted in an improvement in distribution coverage ratio to 1.0x for the current quarter compared to 0.85x in the second quarter 2012.
  • Reported adjusted net income of $12.0 million, or $0.17 of adjusted earnings per limited partner unit, compared to analyst consensus estimates of $0.18 per limited partner unit.

Third Quarter 2012 Operational Highlights

  • In the rich gas portion of the Barnett Shale, Crestwood completed the acquisition of Devon Energy Corporation's ("Devon") West Johnson County gas gathering system and processing plant for $87 million. Crestwood is currently connecting the acquired system to its Cowtown rich gas gathering system and processing plants which will make the acquired processing plant available in the fourth quarter 2012 for redeployment in other rich gas areas where Crestwood is developing projects. In conjunction with the transaction, Crestwood entered into a 20 year gathering and processing agreement with Devon.
  • In the Marcellus Shale region, Crestwood continued to expand its operations group and completed its first major gathering system expansion since taking over operations from Antero Resources Appalachian Corporation ("Antero") in the second quarter 2012. During the third quarter 2012, gathering volumes increased to 289 million cubic feet per day ("MMcf/d") compared to 257 MMcf/d in the second quarter 2012, based on increased drilling activity by Antero and improved results from completed wells. October 2012 volumes averaged 362 MMcf/d and November 1, 2012 spot volumes totaled 376 MMcf/d.
  • Other activities impacting Crestwood's volumes during the third quarter 2012 compared to the second quarter 2012 were a 26% increase in processing volumes, 21% higher gathering volumes in the Fayetteville and Granite Wash segments and 10% higher volumes in the Barnett Shale segment despite lower volumes on the Lake Arlington system and a temporary shut-in of volumes on the Cowtown system due to a fire at our Corvette processing plant.

"We are pleased to deliver record Adjusted EBITDA and adjusted distributable cash flow in the third quarter as each of our business segments showed improvement over the second quarter of 2012," stated Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood's general partner. "In general, we saw increased drilling activity in all of our operating areas except the dry gas areas of the Barnett Shale and the Haynesville/Bossier Shale. Our 2012 rich gas acquisitions, the Antero Marcellus assets and the Devon Barnett assets, added significantly to our third quarter results and should continue to contribute sequential growth in future quarters based on current producer drilling and development plans. We continue to look for bolt-on acquisitions around our existing assets and opportunities to expand our rich gas exposure through organic development projects or diversifying acquisitions," stated Phillips.

Summary Third Quarter 2012 Financial and Operating Results

Crestwood's Adjusted EBITDA for the third quarter 2012 totaled $32.0 million, a 10% increase from Adjusted EBITDA of $29.1 million in the third quarter 2011. The increase in Adjusted EBITDA was primarily attributable to the contribution from Crestwood Marcellus Midstream ("CMM") due to growth of our rich gas volumes in the Marcellus Shale and assets acquired from Devon in the rich gas area of the Barnett Shale in the third quarter 2012. Also contributing to the increase was a 23% increase in Crestwood's Barnett and Granite Wash processing volumes, higher volumes in the Fayetteville segment and the contribution from our Haynesville assets which were acquired in the fourth quarter 2011.

Volumes on Crestwood's 100% owned gathering systems averaged 604 MMcf/d in the third quarter 2012, down 2% from 619 MMcf/d gathered in the third quarter 2011, but 8% higher than the 561 MMcf/d gathered in the second quarter 2012. Gathered volumes on the newly acquired assets in the rich gas area of the Barnett averaged 78 MMcf/d since closing on August 24, 2012, and contributed approximately $2.0 million of revenue during the quarter. Volumes gathered on the CMM systems (35% owned and operated by Crestwood) totaled 289 MMcf/d during the third quarter 2012. CMM had 100% Adjusted EBITDA of $6.4 million and contributed Adjusted EBITDA of $2.2 million to Crestwood during the third quarter 2012, up 19% from the second quarter 2012. Total gathering volumes for all systems operated by Crestwood for the third quarter 2012 were 893 MMcf/d.

Third Quarter 2012 Segment Performance

Barnett Segment

Operating revenues, net of product purchases, in the Barnett segment totaled $33.3 million in the third quarter 2012, compared with $36.9 million in the third quarter 2011, but 6% higher than the $31.5 million reported in the second quarter 2012. Gathering volumes totaled 438 MMcf/d in 2012, compared with 507 MMcf/d in 2011, but 9% over the 401 MMcf/d reported in the second quarter 2012. The year-to-year gathering volume decrease was primarily due to lower drilling activity on the Lake Arlington and Alliance systems but was partially offset by a 23% increase in higher margin processing volumes which totaled 160 MMcf/d, compared with 130 MMcf/d in the prior year and 129 MMcf/d in the second quarter of 2012. Third quarter 2012 revenues were negatively impacted by approximately $0.5 million due to system down-time following a compressor fire at the Corvette facility in September 2012. Operating and maintenance expenses totaled $7.0 million, an increase of $1.0 million from the third quarter 2011 which was primarily attributable to the addition of the new Devon assets and $0.5 million of additional clean-up expenses at the Corvette facility during the third quarter 2012.

Fayetteville Segment

Operating revenues in the Fayetteville segment, net of product purchases, totaled $7.0 million in the third quarter 2012, compared with $6.6 million in the third quarter 2011, but 13% higher than the $6.2 million reported in the second quarter 2012. Gathering volumes totaled 91 MMcf/d during the third quarter 2012, compared to 85 MMcf/d in the third quarter 2011 and 78 MMcf/d in the second quarter 2012. Crestwood connected 9 new wells from 3 new pads in the third quarter 2012 and new wells continue to show improved initial production performance. Operating and maintenance expenses totaled $1.9 million for the third quarter 2012, a decrease of $2.1 million from 2011 due primarily to lower expenses for leased compression and decreased costs for right-of-way maintenance.

Granite Wash

Operating revenues in the Granite Wash segment, net of product purchases, totaled $1.2 million in the third quarter 2012, compared to $1.4 million in the third quarter 2011, but 23% higher than the second quarter 2012. The year-to-year decrease reflects lower resale prices due to lower gas and NGL prices in 2012 despite higher volumes. Compared to the second quarter 2012, gathering and processing volumes were up 5 MMcf/d to 20 MMcf/d due to increased drilling by LeNorman Operating LLC in the area of our Indian Creek assets. Operating and maintenance expenses totaled $0.6 million, an increase of $0.1 million from the third quarter 2011.

Other Operations

Other operating revenues, net of product purchases, totaled $3.2 million and include the Sabine gathering system in the Haynesville/Bossier Shale, which was acquired in the fourth quarter 2011, and the Las Animas system in the Avalon Shale trend acquired in the first quarter 2011. Gathering volumes on the Sabine and Las Animas systems totaled 45 MMcf/d and 9 MMcf/d, respectively, during the third quarter 2012. Operating and maintenance expenses related to these assets totaled $0.7 million during the third quarter 2012.

CMM Contribution

Equity earnings from Crestwood's investment in CMM totaled $1.8 million for the third quarter 2012, which represents a 35% ownership interest in CMM. Crestwood's pro-rata portion of CMM's Adjusted EBITDA totaled $2.2 million. Volumes gathered by CMM during the third quarter 2012 averaged 289 MMcf/d, an increase of 12% over the second quarter 2012. During the third quarter 2012, Antero had an average of 6 drilling rigs running on acreage dedicated to CMM and completed 16 new Marcellus Shale wells which were connected to the CMM gathering systems. Wells added during the third quarter 2012 have ramped up to an October 2012 average of 362 MMcf/d and a November 1, 2012 spot volume of 376 MMcf/d indicating the prolific nature of the Antero wells after system debottlenecking and the addition of system compression.

General and Administrative Expenses

General and administrative expenses totaled $5.8 million in the third quarter 2012 (including $0.5 million of non-recurring costs primarily related to the acquisition of assets from Devon), compared to $5.6 million in the third quarter 2011. General and administrative expenses incurred by CMM totaled $0.8 million during the third quarter 2012.

Capital Investment and Resources

At September 30, 2012, Crestwood had approximately $533 million of debt outstanding, comprised of $200 million principal amount of 7.75 percent fixed-rate senior notes and approximately $333 million of borrowings under its $500 million revolving credit facility. During the third quarter 2012, Crestwood issued 4.6 million common units in an underwritten public offering. Net proceeds of approximately $115 million were used to fund the Devon acquisition, with the remaining proceeds used to reduce the outstanding balance of the revolving credit facility. In addition, CMM (which is an unconsolidated affiliate) had $19.5 million of debt outstanding under its $200 million revolving credit facility at September 30, 2012.

Capital spending for the nine months ended September 30, 2012, totaled $29.0 million (excluding acquisition capital), comprised of $26.1 million of growth capital and $2.9 million of maintenance capital. Growth capital was used to construct pipeline laterals and compression equipment in the Fayetteville and Barnett segments. Total capital spending for the full year 2012 is expected to be approximately $35 million, comprised of $30 million for growth projects and $5 million on maintenance. Growth capital spending by CMM, which is funded under its revolving credit facility, totaled $5.4 million since commencing operations at the end of March 2012. Growth capital spending by CMM for the full year 2012 is expected to total approximately $20 million.

Non-GAAP Financial Measures

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. 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.

Conference Call

Crestwood will host a conference call for investors and analysts on Tuesday, November 6, 2012, beginning at 10:00 a.m. Central Time, to discuss the third quarter 2012 performance. Interested parties may participate by joining the conference call at 888-600-4861 and entering passcode 8380645. 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 8380645.

About Crestwood Midstream Partners LP

Houston, Texas based Crestwood 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 in the Texas Panhandle, the Marcellus Shale in northern West Virginia, the emerging Avalon Shale trend in southeastern New Mexico, and the Haynesville/Bossier Shale in western Louisiana. For more information about Crestwood, 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'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's financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in oil, natural gas and NGL prices; the extent and success of drilling efforts, as well as the extent and quality of natural gas volumes produced within proximity of our assets; failure or delays by our customers in achieving expected production in their natural gas projects; competitive conditions in our industry and their impact on our ability to connect natural gas supplies to our gathering and processing assets or systems; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions, successfully integrate the acquired businesses, realize any cost savings and other synergies from any acquisition; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; timely receipt of necessary government approvals and permits, our ability to control the costs of construction, including costs of materials, labor and right-of-way and other factors that may impact our ability to complete projects within budget and on schedule; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing and future litigation; and risks related to our substantial indebtedness, as well as other factors disclosed in Crestwood's filings with the U.S. Securities and Exchange Commission. You should read our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011, and our most recent Quarterly Reports and Current Reports for a more extensive list of factors that could affect results.


                       CRESTWOOD MIDSTREAM PARTNERS LP
                      CONSOLIDATED STATEMENTS OF INCOME
                  (In thousands, except for per unit data)
                                 (Unaudited)

                                                                      Three
                                                                     Months
                            Three Months Ended   Nine Months Ended    Ended
                               September 30,       September 30,    June 30,
                            ------------------  ------------------  --------
                              2012      2011      2012      2011      2012
                            --------  --------  --------  --------  --------
Operating revenues
  Gathering revenue -
   related party            $ 21,658  $ 27,840  $ 67,120  $ 75,706  $ 21,616
  Gathering revenue           13,739     8,007    36,310    17,908    10,734
  Processing revenue -
   related party               6,298     7,183    19,619    21,723     6,550
  Processing revenue           2,271       692     4,665     1,867     1,198
  Product sales               11,071    14,893    29,258    29,326     8,104
                            --------  --------  --------  --------  --------
    Total operating
     revenues                 55,037    58,615   156,972   146,530    48,202
                            --------  --------  --------  --------  --------

Operating expenses
  Product purchases           10,341    13,482    26,755    26,010     7,441
  Operations and
   maintenance                10,127    10,573    28,725    26,165     8,887
  General and
   administrative              5,777     5,566    19,451    17,996     6,936
  Depreciation,
   amortization and
   accretion                  10,943     9,595    32,427    23,981    10,838
                            --------  --------  --------  --------  --------
    Total operating
     expenses                 37,188    39,216   107,358    94,152    34,102
                            --------  --------  --------  --------  --------

Gain from exchange of
 property, plant and
 equipment                         -     1,106         -     1,106         -
                            --------  --------  --------  --------  --------

Operating income              17,849    20,505    49,614    53,484    14,100

Earnings from
 unconsolidated affiliate      1,764         -     2,205         -       441

Interest and debt expense     (8,202)   (7,100)  (24,045)  (19,925)  (8,286)
                            --------  --------  --------  --------  --------

Income before income taxes    11,411    13,405    27,774    33,559     6,255

Income tax expense               306       347       884       898       275
                            --------  --------  --------  --------  --------

Net income                  $ 11,105  $ 13,058  $ 26,890  $ 32,661  $  5,980
                            ========  ========  ========  ========  ========

  General partner's
   interest in net income   $  4,240  $  2,426  $ 10,944  $  4,942  $  3,336
  Limited partners'
   interest in net income   $  6,865  $ 10,632  $ 15,946  $ 27,719  $  2,644

  Basic income per unit:
    Net income per limited
     partner unit           $   0.15  $   0.27  $   0.36  $   0.76  $   0.06

  Diluted income per unit:
    Net income per limited
     partner unit           $   0.15  $   0.27  $   0.36  $   0.76  $   0.06

Weighted-average number of
 limited partner units:
  Basic                       46,564    39,388    44,206    36,424    43,333
  Diluted                     46,767    39,504    44,395    36,540    43,534
Distributions declared per
 limited partner unit
 (attributable to the
 period ended)              $   0.51  $   0.48  $   1.51  $   1.38  $   0.50



                       CRESTWOOD MIDSTREAM PARTNERS LP
                         CONSOLIDATED BALANCE SHEETS
                    (In thousands, except for unit data)
                                 (Unaudited)

                                                September 30,   December 31,
                                                     2012           2011
                                                -------------  -------------
                     ASSETS
Current assets
  Cash and cash equivalents                     $          12  $         797
  Accounts receivable - related party                  22,632         27,312
  Accounts receivable                                  14,063         11,926
  Prepaid expenses and other                            5,567          1,935
                                                -------------  -------------
    Total current assets                               42,274         41,970

Investment in unconsolidated affiliate                129,603              -
Property, plant and equipment, net of
 accumulated depreciation of $116,486 in 2012
 and $89,860 in 2011                                  785,404        746,045
Intangible assets, net of accumulated
 amortization of $7,342 in 2012 and $2,440 in
 2011                                                 165,839        127,760
Goodwill                                               95,031         93,628
Deferred financing costs, net                          13,604         16,699
Other assets                                              694            790
                                                -------------  -------------
    Total assets                                $   1,232,449  $   1,026,892
                                                =============  =============

       LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Accrued additions to property, plant and
   equipment                                            1,899          7,500
  Capital leases                                        3,658          2,693
  Accounts payable - related party                        408          1,308
  Accounts payable, accrued expenses and other
   liabilities                                         36,280         31,794
                                                -------------  -------------
    Total current liabilities                          42,245         43,295

Long-term debt                                        533,200        512,500
Long-term capital leases                                3,429          3,929
Asset retirement obligations                           13,002         11,545
Commitments and contingent liabilities

Partners' capital
  Common unitholders (41,158,228 and 32,997,696
   units issued and outstanding at September
   30, 2012 and December 31, 2011)                    462,377        286,945
  Class C unitholders (6,991,589 and 6,596,635
   units issued and outstanding at September
   30, 2012 and December 31, 2011)                    159,800        157,386
  General partner                                      18,396         11,292
                                                -------------  -------------
    Total partners' capital                           640,573        455,623
                                                -------------  -------------
    Total liabilities and partners' capital     $   1,232,449  $   1,026,892
                                                =============  =============



                      CRESTWOOD MIDSTREAM PARTNERS LP
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                (Unaudited)

                                                       Nine Months Ended
                                                         September 30,
                                                   ------------------------
                                                       2012         2011
                                                   -----------  -----------
Cash flows from operating activities
  Net income                                       $    26,890  $    32,661
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation, amortization and accretion          32,427       23,981
      Equity-based compensation                          1,528          851
      Amortization/accretion of deferred financing
       costs and capital lease obligations               3,110        2,542
      Gain from exchange of property, plant and
       equipment                                             -       (1,106)
    Changes in assets and liabilities:
      Accounts receivable - related party                4,680       (5,675)
      Accounts receivable                               (2,137)      (5,359)
      Prepaid expenses and other assets                    783         (447)
      Accounts payable - related party                    (900)      (2,349)
      Accounts payable, accrued expenses and other
       liabilities                                       3,758       23,366
                                                   -----------  -----------
Net cash provided by operating activities               70,139       68,465
                                                   -----------  -----------

Cash flows from investing activities
      Capital expenditures                             (28,968)     (31,256)
      Acquisitions, net of cash acquired               (87,269)    (349,662)
      Proceeds from exchange of property, plant
       and equipment                                         -        5,943
      Investment in unconsolidated affiliate          (131,250)           -
      Capital distributions from unconsolidated
       affiliate                                         1,647            -
                                                   -----------  -----------
Net cash used in investing activities                 (245,840)    (374,975)
                                                   -----------  -----------

Cash flows from financing activities
      Proceeds from issuance of senior notes                 -      200,000
      Proceeds from credit facility                    350,200      100,200
      Repayments of credit facility                   (329,500)    (155,704)
      Payments on capital leases                        (2,155)           -
      Deferred financing costs paid                       (161)      (6,982)
      Proceeds from issuance of Class C units, net           -      152,671
      Proceeds from issuance of common units, net      217,508       53,550
      Contributions from partners                        5,930        8,741
      Distributions to partners                        (66,500)     (45,910)
      Taxes paid for equity-based compensation
       vesting                                            (406)           -
                                                   -----------  -----------
Net cash provided by financing activities              174,916      306,566
                                                   -----------  -----------

Change in cash and cash equivalents                       (785)          56

Cash and cash equivalents at beginning of period           797            2
                                                   -----------  -----------
Cash and cash equivalents at end of period         $        12  $        58
                                                   ===========  ===========



                       CRESTWOOD MIDSTREAM PARTNERS LP
                            OPERATING STATISTICS
                               (In thousands)
                                 (Unaudited)

                                                                      Three
                                                                     Months
                            Three Months Ended   Nine Months Ended    Ended
                               September 30,       September 30,    June 30,
                            ------------------  ------------------  --------
                              2012      2011      2012      2011      2012
                            --------  --------  --------  --------  --------
Barnett:
Gathering revenues          $ 24,737  $ 29,042  $ 74,567  $ 79,892  $ 23,771
Processing revenues            8,540     7,842    24,156    23,553     7,732
Product sales                     69         -        69         -         -
                            --------  --------  --------  --------  --------
  Total operating revenues  $ 33,346  $ 36,884  $ 98,792  $103,445  $ 31,503
Product purchases                 60         -        60         -         -
Operations and maintenance
 expense                       6,963     6,015    18,438    18,528     5,345
                            --------  --------  --------  --------  --------
  EBITDA                    $ 26,323  $ 30,869  $ 80,294  $ 84,917  $ 26,158
                            ========  ========  ========  ========  ========

Gathering volumes (in MMcf)   40,252    46,642   117,434   126,471    36,529
Processing volumes (in
 MMcf)                        14,671    11,975    38,493    36,028    11,765

Fayetteville:
Gathering revenues          $  7,043  $  6,534  $ 20,037  $ 13,095  $  6,228
Product sales                    131       547       331     1,069       102
                            --------  --------  --------  --------  --------
  Total operating revenues  $  7,174  $  7,081  $ 20,368  $ 14,164  $  6,330
Product purchases                137       454       343     1,012       124
Operations and maintenance
 expense                       1,855     3,965     6,399     6,356     2,231
                            --------  --------  --------  --------  --------
  EBITDA                    $  5,182  $  2,662  $ 13,626  $  6,796  $  3,975
                            ========  ========  ========  ========  ========

Gathering volumes (in MMcf)    8,403     7,813    23,049    15,146     7,112

Granite Wash:
Gathering revenues          $    465  $    113  $    874  $    208  $    270
Processing revenues               29        33       128        37        16
Product sales                 10,208    12,529    27,019    24,965     7,436
                            --------  --------  --------  --------  --------
  Total operating revenues  $ 10,702  $ 12,675  $ 28,021  $ 25,210  $  7,722
Product purchases              9,481    11,264    24,514    21,739     6,732
Operations and maintenance
 expense                         560       499     1,619       998       541
                            --------  --------  --------  --------  --------
  EBITDA                    $    661  $    912  $  1,888  $  2,473  $    449
                            ========  ========  ========  ========  ========

Gathering volumes (in MMcf)    1,856     1,473     4,576     3,011     1,367
Processing volumes (in
 MMcf)                         1,859     1,475     4,566     2,941     1,362

Other:
Gathering revenues          $  3,152  $    158  $  7,952  $    419  $  2,081
Product sales                    663     1,817     1,839     3,292       566
                            --------  --------  --------  --------  --------
  Total operating revenues  $  3,815  $  1,975  $  9,791  $  3,711  $  2,647
Product purchases                663     1,764     1,838     3,259       585
Operations and maintenance
 expense                         749        94     2,269       283       770
                            --------  --------  --------  --------  --------
  EBITDA                    $  2,403  $    117  $  5,684  $    169  $  1,292
                            ========  ========  ========  ========  ========

Gathering volumes (in MMcf)    5,041     1,037    17,148     2,655     6,044



                      CRESTWOOD MIDSTREAM PARTNERS LP
               RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                  (In thousands, except for per unit data)
                                (Unaudited)

                                                                     Three
                                                                    Months
                           Three Months Ended   Nine Months Ended    Ended
                              September 30,       September 30,    June 30,
                           ------------------  ------------------  --------
                             2012      2011      2012      2011      2012
                           --------  --------  --------  --------  --------

Net income                 $ 11,105  $ 13,058  $ 26,890  $ 32,661  $  5,980
Items impacting net
 income:
  Non-recurring expenses        932       129     2,710     3,166     1,727
  Gain from exchange of
   property, plant and
   equipment                      -    (1,106)        -    (1,106)        -
  Non-cash interest
   expense (write-off of
   deferred financing
   costs)                         -         -       370         -         -
  Interest expense (bridge
   loan fees)                     -         -         -     2,500         -
                           --------  --------  --------  --------  --------
  Adjusted net income      $ 12,037  $ 12,081  $ 29,970  $ 37,221  $  7,707
                           ========  ========  ========  ========  ========

Net income per limited
 partner unit (diluted
 basis)                    $   0.15  $   0.27  $   0.36  $   0.76  $   0.06
Items impacting net income     0.02     (0.03)     0.07      0.12      0.04
                           --------  --------  --------  --------  --------
  Adjusted net income per
   limited partner unit
   (diluted basis)         $   0.17  $   0.24  $   0.43  $   0.88  $   0.10
                           ========  ========  ========  ========  ========

                                                                     Three
                                                                    Months
                           Three Months Ended   Nine Months Ended    Ended
                              September 30,       September 30,    June 30,
                           ------------------  ------------------  --------
                             2012      2011      2012      2011      2012
                           --------  --------  --------  --------  --------

Net income                 $ 11,105  $ 13,058  $ 26,890  $ 32,661  $  5,980
Depreciation, amortization
 and accretion expense       10,943     9,595    32,427    23,981    10,838
Income tax expense              306       347       884       898       275
Amortization of deferred
 financing fees                 931       932     3,256     2,542     1,023
Non-cash equity
 compensation                   534       286     1,528       851       500
Maintenance capital
 expenditures                (1,279)     (320)   (2,872)   (1,025)   (1,079)
                           --------  --------  --------  --------  --------
  Distributable cash flow    22,540    23,898    62,113    59,908    17,537
Add: Non-recurring
 expenses                       932       129     2,710     3,166     1,727
Add: Non-recurring
 deficiency payment           1,426         -     1,426         -         -
Add: Interest expense
 (bridge loan fees)               -         -         -     2,500         -
Less: Gain from exchange
 of property, plant and
 equipment                        -    (1,106)        -    (1,106)        -
Less: Equity earnings from
 unconsolidated affiliate    (1,764)        -    (2,205)        -      (441)
Add: Adjusted DCF from
 unconsolidated affiliate     2,062         -     3,812         -     1,750
                           --------  --------  --------  --------  --------
  Adjusted distributable
   cash flow               $ 25,196  $ 22,921  $ 67,856  $ 64,468  $ 20,573
                           ========  ========  ========  ========  ========

                                                                     Three
                                                                    Months
                           Three Months Ended   Nine Months Ended    Ended
                              September 30,       September 30,    June 30,
                           ------------------  ------------------  --------
                             2012      2011      2012      2011      2012
                           --------  --------  --------  --------  --------

Total operating revenues   $ 55,037  $ 58,615  $156,972  $146,530  $ 48,202
Product purchases            10,341    13,482    26,755    26,010     7,441
Operations and maintenance
 expense                     10,127    10,573    28,725    26,165     8,887
General and administrative
 expense                      5,777     5,566    19,451    17,996     6,936
Gain from exchange of
 property, plant and
 equipment                        -     1,106         -     1,106         -
Earnings from
 unconsolidated affiliate     1,764         -     2,205         -       441
                           --------  --------  --------  --------  --------
  EBITDA                     30,556    30,100    84,246    77,465    25,379
Items impacting EBITDA:
Add: Non-recurring
 expenses                       932       129     2,710     3,166     1,727
Less: Gain from exchange
 of property, plant and
 equipment                        -    (1,106)        -    (1,106)        -
Less: Equity earnings from
 unconsolidated affiliate    (1,764)        -    (2,205)        -      (441)
Add: Adjusted earnings
 from unconsolidated
 affiliate                    2,237         -     4,113         -     1,876
                           --------  --------  --------  --------  --------
  Adjusted EBITDA            31,961    29,123    88,864    79,525    28,541
Less:
  Depreciation,
   amortization and
   accretion expense         10,943     9,595    32,427    23,981    10,838
  Interest and debt
   expense                    8,202     7,100    24,045    19,925     8,286
  Income tax expense            306       347       884       898       275
  Items impacting EBITDA      1,405      (977)    4,618     2,060     3,162
                           --------  --------  --------  --------  --------
    Net income             $ 11,105  $ 13,058  $ 26,890  $ 32,661  $  5,980
                           ========  ========  ========  ========  ========



                     CRESTWOOD MARCELLUS MIDSTREAM LLC
                            OPERATING STATISTICS
                               (In thousands)
                                (Unaudited)

                                                               Year to Date
                                   Three Months  Three Months      (from
                                       Ended         Ended       inception
                                     June 30,      September    of February
                                       2012        30, 2012      23, 2012)
                                   ------------  ------------  ------------
Operating revenue
  Gathering revenue                $      7,027  $      7,976  $     15,003
                                   ------------  ------------  ------------
    Total operating revenue               7,027         7,976        15,003
                                   ------------  ------------  ------------

Operating expenses
  Operations and maintenance                513           815         1,328
  General and administrative              1,721           793         2,514
  Depreciation, amortization and
   accretion                              2,857           625         3,482
                                   ------------  ------------  ------------
    Total operating expenses              5,091         2,233         7,324
                                   ------------  ------------  ------------

Operating income                          1,936         5,743         7,679

Interest and debt expense                  (677)         (703)       (1,380)
                                   ------------  ------------  ------------


Net income                         $      1,259  $      5,040  $      6,299
                                   ------------  ------------  ------------

Add:
Interest and debt expense                   677           703         1,380
Depreciation, amortization and
 accretion                                2,857           625         3,482
                                   ------------  ------------  ------------

EBITDA                             $      4,793  $      6,368  $     11,161

Non-recurring expenses                      568            22           590
                                   ------------  ------------  ------------

Adjusted EBITDA                    $      5,361  $      6,390  $     11,751
                                   ============  ============  ============

Volumes:
Gathering volumes (in MMcf)              23,424        26,585        50,009

CMLP's 35% Interest in Crestwood
 Marcellus Midstream LLC:

Equity earnings                    $        441  $      1,764  $      2,205
EBITDA                             $      1,678  $      2,229  $      3,907
Adjusted EBITDA                    $      1,876  $      2,237  $      4,113
Gathering volumes (in MMcf)               8,198         9,305        17,503

Investor Contact:

Mark Stockard
832-519-2207
mstockard@crestwoodlp.com

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