Breaking News

EU Agrees to Curbs on Russian Banks, Export of Some Technology
Tweet TWEET

Crestwood Announces Fourth Quarter and Full Year 2012 Financial and Operating Results and 2013 Outlook

Crestwood Announces Fourth Quarter and Full Year 2012 Financial and Operating 
Results and 2013 Outlook 
HOUSTON, TX -- (Marketwire) -- 02/26/13 --  Crestwood Midstream
Partners LP (NYSE: CMLP) ("Crestwood" or the "Partnership") reported
today its unaudited financial results for the three months and year
ended December 31, 2012. Key financial and operating results for 2012
included the following: 
2012 Financial Highlights 


 
--  Reported adjusted earnings before interest, taxes, depreciation,
    amortization and accretion ("Adjusted EBITDA") of $119.3 million for
    the year ended December 31, 2012, a 9% increase compared to the $110.0
    million reported for the year ended 2011. Adjusted EBITDA was $30.5
    million for the fourth quarter 2012, which was consistent with the
    fourth quarter 2011;
--  Reported adjusted distributable cash flow of $91.2 million for the
    year ended December 31, 2012, a 4% increase from 2011. Adjusted
    distributable cash flow was $23.3 million for the fourth quarter 2012,
    which was consistent with the fourth quarter 2011;
--  Improved liquidity through the issuance of additional senior notes,
    and increased the maximum borrowing capacity and extended the maturity
    date of its revolving credit facility; and
--  Paid total cash distributions of $2.02 per common unit for the year
    ended 2012; an 8% increase compared to distributions paid for the year
    ended 2011. The cash distribution of $0.51 per common unit for the
    fourth quarter 2012 was 4% higher than the distribution paid for the
    fourth quarter 2011.

  
2012 Operational Highlights 


 
--  Repositioned and further diversified the Partnership with substantial
    future growth visibility from liquids rich basins through the
    acquisition of approximately $560 million of gathering, processing and
    compression assets. Including Crestwood Marcellus Midstream LLC
    ("CMM"), gathering volumes in rich gas areas represented 62% of
    Crestwood's total gathering volumes in the fourth quarter 2012,
    compared to 26% in the fourth quarter 2011;
--  Acquired a strong growth position in the rich gas portion of the
    Marcellus Shale, located in Harrison and Doddridge Counties, West
    Virginia,
 through the purchase of midstream assets and a 20 year
    fixed-fee services contract from Antero Resources Appalachian
    Corporation ("Antero") in March 2012. Results from Antero in the
    region vastly exceeded expectations with volumes growing from
    approximately 200 million cubic feet per day ("MMcf/d"), in early 2012
    to approximately 400 MMcf/d at year end 2012. In response to Antero's
    rapidly expanding activity in the area, Crestwood opened regional
    operating offices in Clarksburg and Charleston, West Virginia and has
    increased its Marcellus staff to 20 full time equivalents. By year end
    2013, volumes from Crestwood's Marcellus region are expected to
    surpass its Barnett Shale segment as the largest segment contributor
    in Crestwood's portfolio and Antero will become Crestwood's largest
    customer by volume;
--  Established a North American business development team in July 2012 to
    expand Crestwood's ability to source, execute, and finance greenfield
    development projects in the industry's most prolific rich gas and
    crude oil plays. This new organic growth strategy is based on the
    recognition that large scale acquisitions in the current market are
    becoming prohibitively expensive based upon recent transactions.
    Crestwood is currently developing or in advanced stages of
    negotiations for projects in the Niobrara Shale, Avalon Shale/Bone
 
   Spring area of the Permian Basin and Utica Shale regions;
--  Initiated a "bolt-on" acquisition strategy, focused on acquiring
    assets near Crestwood's existing assets where significant operating
    synergies exist, by acquiring the West Johnson County gas gathering
    and processing system from Devon Energy Corporation ("Devon") in
    August 2012. During the fourth quarter 2012, Crestwood successfully
    restarted idled processing capacity at the Cowtown processing plant
    and shut down the processing plant acquired in the transaction.
    Crestwood is now diverting approximately 90 MMcf/d of dedicated Devon
    production to the Cowtown plant, allowing Crestwood to increase system
    operating efficiencies that enhances natural gas liquids ("NGL")
    recoveries for Devon and provides lower operating costs to Crestwood.
    Additionally, Crestwood now has the 100 MMcf/d processing plant
    acquired from Devon ready to be redeployed to new liquids rich areas
    where Crestwood's business development team is making progress on
    greenfield development opportunities;
--  Continued the "bolt-on" acquisition strategy with CMM acquiring E.
    Marcellus Asset Company, LLC ("EMAC") from Enerven Compression LLC
    ("Enerven") in December 2012. EMAC's assets include four compression
    and dehydration stations, and the transaction expands Crestwood's
    "value-chain" of services provided to Antero in the rapidly expanding
    Marcellus Shale region. The transaction enhances Crestwood's services
    and margins through an additional source of long-term contracted
    fee-based revenues, adds a significant component to Crestwood's future
    growth plans, and most importantly, provided a catalyst for an
    accelerated drop-down transaction of CMM to Crestwood; and
--  Reported consolidated gathering volumes during the fourth quarter 2012
    averaged 966 MMcf/d, a 46% increase over the fourth quarter 2011, and
    an 8% increase over the third quarter 2012.

  
"When looking back at 2012, we are pleased with the results of several
highly successful acquisitions and the continued growth of our
organization to strategically reposition Crestwood into high growth
rich gas plays," stated Robert G. Phillips, Chairman, President and
Chief Executive Officer of Crestwood's general partner. "To counter
the impact of declining natural gas prices and the challenge of
increasing valuations in the midstream M&A market, our 2012
achievements, including the strong entry into the Marcellus Shale,
timely and accretive bolt-on acquisitions and the start-up of a
highly talented business development team provided a near-term and
long-term pivot opportunity for Crestwood in 2012."  
"The immediate result is a dramatic shift to rich gas volume growth
in our overall portfolio supported by stronger producer dril
ling
activity in the rich gas plays and improved growth visibility via
substantial Marcellus contracted organic capital spending and
additional bolt-on acquisition opportunities. With a full year
contribution from the 2012 acquisitions and expected volume growth in
the Marcellus Shale, we believe 2013 will be another transition year
but will likely deliver significant improvement over 2012 as our 2013
guidance reflects. Importantly, Crestwood's record organic capital
expenditures forecasted in our 2013 budget should provide substantial
earnings growth visibility in 2014 and support a quicker return to
our traditional 8-10% per year distribution growth objectives,"
concluded Phillips.  
Fourth Quarter 2012 Financial and Operating Results 
Crestwood's Adjusted EBITDA for the fourth quarter 2012 was
approximately $31 million, compared to $32 million in the third
quarter 2012, and $30 million in the fourth quarter 2011. The
decrease in our Adjusted EBITDA from third quarter 2012 reflects the
impacts of declining volumes in our Barnett segment, higher than
anticipated operating expenses incurred related to the
decommissioning of the West Johnson County processing facility and
higher general and administrative expenses, primarily related to
significant increases in our business development activities.  These
decreases were partially offset by a full quarter's contribution from
our West Johnson County assets acquired in August 2012. 
Gathering volumes on Crestwood's 100% owned systems averaged 606
MMcf/d in the fourth quarter 2012, which was consistent with third
quarter 2012, but down from the 662 MMcf/d gathered in the fourth
quarter 2011 due to lower volumes in the dry gas areas of the Barnett
Shale. Fourth quarter 2012 processing volumes increased 48% from the
fourth quarter 2011 due to higher volumes in rich gas areas including
the West Johnson County system acquired from Devon, which contributed
approximately $4 million of operating margin in the fourth quarter
2012. CMM gathering volumes (which Crestwood operates but only held a
35% interest during 2012 prior to consolidating in the drop-down
transaction completed in January 2013) totaled 360 MMcf/d during the
fourth quarter 2012. CMM contributed $3 million of Adjusted EBITDA to
Crestwood's fourth quarter 2012 results (i.e. Crestwood's 35%
interest in CMM's $9 million of Adjusted EBITDA), up 32% from third
quarter 2012. The Enerven acquisition, completed in late December
2012 had a minimal impact on CMM's fourth quarter results but is
expected to contribute approximately $11 million to $12 million of
operating margin in 2013.  
Marcellus Shale Update 
On January 8, 2013, Crestwood completed the consolidation of 100% of
CMM's natural gas gathering, compression and dehydration business
located largely in the rich gas window of the southwestern core of
the Marcellus Shale play. The assets, located in Harrison and
Doddridge Counties, West Virginia, consist of approximately 40 miles
of low pressure gathering pipeline connected to approximately 120
Marcellus Shale wells and 43,000 horsepower of compression assets
acquired from Enerven. The business is supported by long term
fixed-fee gathering and compression services contracts with Antero
covering approximately 136,000 net acres (the "Eastern Area of
Dedication") and include a seven year minimum annual volume guarantee
on the Eastern Area of Dedication and the right of first offer to
acquire additional Antero midstream assets on approximately 105,000
net acres adjacent to the Eastern Area of Dedication. Antero is
currently running 13 rigs across its West Virginia acreage and has
announced 4.8 trillion cubic feet equivalent ("Tcfe") of proved
reserves at year end 2012 with over 3,000 potential drillable
locations. 
At year-end 2012, spot volumes on Crestwood's Marcellus Shale
gathering systems were approximately 400 MMcf/d and are expected to
grow to approximately 500 MMcf/d by the end of 2013 with the
connection of approximately 60 to 70 new wells. Based upon Antero's
current 2013 drilling and development plans, Crestwood's 2013
Marcellus Shale capital projects in the Eastern Area of Dedication
include the installation of an 18 mile expansion of the gathering
system and two new compressor stations with nominal capacity of 100
MMcf/d. The projects are expected to be completed and placed in
service in phases beginning as early as June 2013 and throughout the
remainder of 2013 at an estimated cost of approximately $80 million.  
Business Development Update 
Crestwood's business development and project management team is
focused on greenfield development projects in a number of the most
prolific rich gas and crude oil plays in North America. The team has
made significant progress and is currently in various stages of
discussions, negotiations and project development on opportunities in
the Niobrara Shale, Permian Basin and Utica/Point Pleasant Shale
unconventional resource plays. While these projects are not currently
included in Crestwood's 2013 capital budget or operating guidance, an
update on these opportunities is described below. 
Niobrara Shale 
During the fourth quarter 2
012, Crestwood and RKI Exploration &
Production LLC ("RKI"), signed a series of letter agreements relating
to RKI's interest in a gathering system (the "Jackalope System") and
current and future rich natural gas production from the Powder River
Basin Niobrara Shale and other high potential proven formations
located in Converse County, Wyoming. Among other things, the
agreements provide a framework for the potential acquisition by
Crestwood of RKI's 50% ownership interest in the Jackalope System and
a long term dedication to gathering and processing agreements of
potentially all of RKI's 50% interest in approximately 750,000 acres
in the area. The agreements also authorize Crestwood to initiate
certain development activities with respect to planned processing
facilities required for the eventual build-out of the Jackalope
System infrastructure, subject to reimbursement by RKI. Crestwood and
RKI continue to conduct due diligence on the existing Jackalope
System, the ultimate production development scope and corresponding
infrastructure build-out plans. A final agreement will be subject to
negotiation and execution of definitive documentation which is
expected to be completed in the first half of 2013. 
RKI, based in Oklahoma City, Oklahoma, is a privately-owned, leading
independent exploration and production company focused in the Powder
River, Permian and Denver-Julesberg Basins. RKI is developing its
interest in the Powder River Basin through a joint development
agreement with Chesapeake Energy Corporation. RKI owns 50% of the
crude oil, natural gas and NGL production from the joint development
area under consideration. 
Permian Basin 
Due to increased drilling activity for rich natural gas production in
the Delaware Sands, Avalon Shale, Bone Spring and Wolfcamp formations
in the Delaware Permian, Crestwood is moving forward with plans to
convert its Las Animas gathering systems from dry gas to rich gas
service. Based on discussions with area producers, during 2013
Crestwood plans to connect the Laguna Grande and Dublin Ranch
systems, install JT skid or comparable heavy NGL separation equipment
at central locations on the combined system and provide truck or rail
NGL takeaway options. Depending upon the results of those activities
during 2013, Crestwood will assess whether it will install one of its
surplus cryogenic processing facilities in the area.  
Utica Shale 
Crestwood is developing plans to create a large scale rich gas and
condensate gathering system and gas processing facilities targeting
rich gas Utica Shale/Point Pleasant producers in northeast Ohio and
northwest Pennsylvania. Crestwood is currently in discussions with
multiple producers in the Utica Shale/Point Pleasant play for the
development of gathering and processing services. 
2013 Outlook  
Crestwood expects Adjusted EBITDA for the full year 2013 to be in the
range of $170 million to $185 million, which represents a 50%
increase over 2012. The primary drivers include the consolidation of
100% of CMM, continued volume growth in the Marcellus region and the
full year impact of the West Johnson County assets and Enerven
operations acquired in August 2012 and December 2012, respectively.  
Crestwood anticipates average 2013 gathering volumes in the range of
1,000 MMcf/d to 1,100 MMcf/d, an overall increase of 30% from 2012;
average processing volumes of approximately 225 MMcf/d to 240 MMcf/d,
a 55% increase from 2012; and compression volumes of approximately
320 MMcf/d to 340 MMcf/d attributable to the recent Enerven
acquisition. Gathering volumes in rich gas areas are expected to
increase 65% to 75% relative to 2012, primarily the result of
increasing drilling activity from Antero in the Marcellus Shale and a
full year contribution from the West Johnson County asset acquisition
in the Barnett rich gas area.  
The Barnett Shale continues to be an important producing area to
Crestwood. We anticipate that our 2013 gathering volumes from the
Barnett rich gas area will be 32% higher than 2012, which will be
partially offset by a 12% decline in the gathering volumes from the
Barnett dry gas areas as compared to 2012. Our anticipated 2013
volumes are consistent with those recently forecasted by Quicksilver
Resources, Inc. ("Quicksilver"). Our forecasted 2013 net revenues
from the rich and dry gas areas of the Barnett Shale are summarized
in the table below (in millions): 


 
                                                                            
                                                              % of Total    
                             Net Revenues(1)  % Increase    Net Revenues(2) 
                            -----------------              ---------------- 
                              2013     2012   (Decrease)     2013     2012  
                            -------- -------- ----------   -------  ------- 
                                                                            
Barnett Rich - Quicksilver  $     58 $     58         --        22%      33%
Barnett Rich - Devon and                                                    
 Other                            33       18         83%       13%      10%
                            -------- --------      
                         
Total Barnett Rich                91       76         20%       35%      43%
                                                                            
Barnett Dry - Quicksilver         46       55        (16%)      18%      31%
Barnett Dry - Other                                                         
 Producers                         3        2         50%        1%       1%
                            -------- --------                               
Total Barnett Dry                 49       57        (14%)      19%      33%
                            -------- --------                               
                                                                            
Total Barnett               $    140 $    133          5%       54%      76%
                            ======== ========                               
                                                                            
Total Quicksilver           $    104 $    113         (8%)      40%      65%
                            ======== ========                               

 
(1) Revenue estimates are approximations based on 2013 forecasted
volumes. 
(2) Excludes revenues related to acquisitions assumed in 2013
forecast.  
Capital spending on contracted projects and maintenance capital for
the full year 2013 is expected to be in the range of $120 million to
$150 million. Additionally, Crestwood maintains a substantial backlog
of identified bolt-on acquisition opportunities around its existing
asset footprint and expects to execute on approximately $150 million
to $250 million of those opportunities in 2013. Following the
acquisition of the remaining interest in CMM, Crestwood had
approximately $210 million of capacity on its revolving credit
facility and approximately $70 million of capacity on the CMM
revolving credit facility. Consistent with past practices and its
long-term financing strategy, Crestwood will fund future growth
capital spending and acquisitions with a balanced mix of debt and
equity.  
Fourth Quarter and Full Year 2012 Segment Performance 
CMM Operations 
Equity earnings and Adjusted EBITDA from Crestwood's 35% ownership
interest in CMM totaled $1.6 million and $3 million for the fourth
quarter 2012, respectively. On a 100% basis, CMM's Adjusted EBITDA
was $8.5 million for the fourth quarter 2012, an increase of 33% from
$6.4 million of Adjusted EBITDA for the third quarter 2012. Volumes
gathered by CMM during the fourth quarter 2012 averaged 360 MMcf/d, a
25% increase over third quarter 2012. Beginning in the first quarter
2013, CMM will be fully consolidated into the operations of
Crestwood.  
Barnett Segment 
Operating revenues, net of product purchases, in the Barnett segment
totaled $34 million in the fourth quarter 2012, compared with $33
million in the third quarter 2012 and $37 million in the fourth
quarter 2011. Operating revenues, net of product purchases, for the
twelve months ended December 31, 2012, totaled $133 million, compared
with $140 million of net revenues in 2011. Gathering volumes totaled
442 MMcf/d in the fourth quarter 2012, compared to 438 MMcf/d and 504
MMcf/d of gathering volumes during the third quarter 2012 and fourth
quarter of 2011, respectively. For the full year 2012, gathering
volumes totaled 432 MMcf/d, compared with 474 MMcf/d during 2011. The
decrease from 2011 was primarily due to reduced volumes on our Lake
Arlington and Alliance systems. Processing volumes totaled 200 MMcf/d
in the fourth quarter 2012, a 25% increase over the third quarter
2012, and a 52% increase over the fourth quarter 2011. For the full
year 2012, processing volumes totaled 155 MMcf/d, compared with 132
MMcf/d during 2011. The increases were attributable to the West
Johnson County acquisition and increased third party processing
volumes on our Cowtown system. Operating and maintenance expenses
increased to $8 million during the fourth quarter 2012, $2 million
higher than fourth quarter 2011 due to the addition of the acquired
West Johnson County assets.  
Fayetteville Segment 
Operating revenues in the Fayetteville segment, net of product
purchases, totaled $7 million in the fourth quarter 2012, which was
consistent with third quarter 2012 revenues and 10% higher than
fourth quarter 2011. Operating revenues, net of product purchases,
for the full year of 2012 totaled $27 million, 38% higher than the
year ended December 31, 2011, reflecting the full year of ownership
of the Fayetteville system acquired in April 2011, as well as volume
growth in the second half of 2012. Gathering volumes totaled 93
MMcf/d during fourth quarter 2012, compared to 91 MMcf/d in the third
quarter of 2012, and 90 MMcf/d in fourth quarter 2011. Operating and
maintenance expenses totaled $2 million for the fourth quarter 2012,
a decrease of $1 million from the fourth quarter 2011, due primarily
to lower expenses for leased compression.  
Granite Wash 
Operating revenues in the Granite Wash segment, net of product
purchases, totaled $1.4 million in the fourth quarter 2012, an
increase of 11% over the third quarter of 2012, but 10% below fourth
quarter 2011 due to lower NGL and natural gas prices. For the year
ended December 31, 2012, operating revenues, net of product
purchases, totaled $4.9 million, which was consistent with the year
ended 2011. Operating and maintenance expenses totaled $0.6 million
during the fourth quarter 2012, which was consistent with the fourth
quarter 2011.  
Other Operations 
Operating revenues, net of product purchases, on our other systems
(which include the Sabine gathering system in the Haynesville/Bossier
Shale and the Las Animas system in the Avalon Shale) totaled $2.3
million for the fourth quarter 2012, compared with $2.0 million in
the fourth quarter 2011. For the year ended December 31, 2012,
operating revenues, net of product purchases, totaled $10.2 million,
compared to $2.5 million for the year ended 2011, reflecting the full
year of ownership of the Sabine gathering system acquired in November
2011. Gathering volumes on the Sabine and Las Animas systems totaled
50 MMcf/d during the fourth quarter 2012, compared to 55 MMcf/d
during the third quarter of 2012. Operating and maintenance expenses
related to these assets totaled $0.7 million during the fourth
quarter 2012, which was consistent with third quarter 2012.  
General and Administrative Expenses 
General and administrative expenses totaled $6.4 million in the
fourth quarter 2012, including $1.1 million of transaction and due
diligence related expenses compared to $6.2 million in the fourth
quarter 2011, including $0.2 million of acquisition related expenses.
General and administrative expenses incurred by CMM totaled $1.2
million during the fourth quarter 2012.  
Capital Investment and Resources 
At December 31, 2012, Crestwood had approximately $557 million of
debt outstanding, comprised of $350 million of 7.75% fixed-rate
senior notes due 2019, and approximately $207 million of borrowings
under its $550 million revolving credit facility. During the fourth
quarter 2012, Crestwood issued an additional $150 million of its
7.75% senior notes, increased the maximum borrowing capacity of its
revolving credit facility from $500 million to $550 million, and
extended the maturity date of the revolver to November 2017. At
December 31, 2012, CMM had approximately $127 million of debt
outstanding under its $200 million revolving credit facility due
March 2017, including approximately $95 million borrowed by CMM to
fund the acquisition of the Enerven compression assets on December
28, 2012.  
Crestwood capital spending excluding acquisition capital, for the
year ended December 31, 2012, totaled $36 million, comprised of $32
million of growth capital and $4 million of maintenance capital.
Crestwood's growth capital was primarily related to the construction
of pipeline laterals and compression equipment in the Fayetteville
Shale and Barnett Shale. Growth capital spending by CMM, which is
funded under its revolving credit facility, totaled $17 million since
commencing operations in the Marcellus Shale region at the end of
March 2012.  
Non-GAAP Financial Measures 
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 f
or investors and analysts on
Tuesday, February 26, 2013, beginning at 10:00 a.m. Central Time, to
discuss the fourth quarter 2012 performance and the outlook for 2013.
Interested parties may participate by joining the conference call at
888-430-8683 and entering passcode 6909041. 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 6909041. 
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
Avalon Shale/Bone Spring 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 latest Annual Report on Form 10-K, 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        Year Ended           Ended     
                      December 31,          December 31,      September 30, 
                  --------------------  --------------------  ------------- 
                     2012       2011       2012       2011         2012     
                  ---------  ---------  ---------  ---------  ------------- 
Operating                                                                   
 revenues                                                                   
 Gathering                                                                  
  revenue -                                                                 
  related party   $  20,971  $  26,721  $  88,091  $ 102,427  $      21,658 
 Gathering                                                                  
  revenue            13,110     10,620     49,420     28,528         13,739 
 Processing                                                                 
  revenue -                                                                 
  related party       6,033      7,075     25,652     28,798          6,298 
 Processing                                                                 
  revenue             3,816        847      8,481      2,714          2,271 
 Product sales       13,059     14,027     42,317     43,353         11,071 
                  ---------  ---------  ---------  ---------  ------------- 
   Total                                                                    
    operating                                                               
    revenues         56,989     59,290    213,961    205,820         55,037 
                  ---------  ---------  ---------  ---------  ------------- 
                                                                            
Operating                                                                   
 expenses                                                                   
 Product                                                                    
  purchases          (2,902)    12,777     23,853     38,787         10,341 
 Product                                                                    
  purchases -                                                               
  related party      15,152          -     15,152          -              - 
 Operations and                                                             
  maintenance        11,892     10,138     40,617     36,303         10,127 
 General and                                                                
  administrative      6,439      6,157     25,890     24,153          5,777 
 Depreciation,                                                              
  amortization                                                              
  and accretion      13,299      9,831     45,726     33,812         10,943 
                  ---------  ---------  ---------  ---------  ------------- 
   Total                                                                    
    operating                                                               
    expenses         43,880     38,903    151,238    133,055         37,188 
                  ---------  ---------  ---------  ---------  ------------- 
                                                                            
Gain from                                                                   
 exchange of                              
                                  
 property, plant                                                            
 and equipment            -          -          -      1,106              - 
                  ---------  ---------  ---------  ---------  ------------- 
                                                                            
Operating income     13,109     20,387     62,723     73,871         17,849 
                                                                            
Earnings from                                                               
 unconsolidated                                                             
 affiliate            1,642          -      3,847          -          1,764 
                                                                            
Interest and debt                                                           
 expense             (9,573)    (7,692)   (33,618)   (27,617)        (8,202)
                  ---------  ---------  ---------  ---------  ------------- 
                                                                            
Income before                                                               
 income taxes         5,178     12,695     32,952     46,254         11,411 
                                                                            
Income tax                                                                  
 expense                322        353      1,206      1,251            306 
                  ---------  ---------  ---------  ---------  ------------- 
                                                                            
Net income        $   4,856  $  12,342  $  31,746  $  45,003  $      11,105 
                  =========  =========  =========  =========  ============= 
                                                                            
 General                                                                    
  partner's                                                                 
  interest in net                                                           
  income          $   4,131  $   2,792  $  15,075  $   7,735  $       4,240 
 Limited                                                                    
  partners'                                                                 
  interest in net                                                           
  income          $     725  $   9,550  $  16,671  $  37,268  $       6,865 
                                                                            
 Basic income per                                                           
  unit:                                                                     
  Net income per                                                            
   limited                                                                  
   partner unit   $    0.01  $    0.24  $    0.37  $    1.00  $        0.15 
                                                                            
 Diluted income                                                             
  per unit:                                                                 
  Net income per                                                            
   limited                                                                  
   partner unit   $    0.01  $    0.24  $    0.37  $    1.00  $        0.15 
                                                                            
 Weighted-average                                                           
  number of                                                                 
  limited partner                                                           
  units:                                                                    
  Basic              48,252     39,527     45,223     37,206         46,564 
  Diluted            48,475     39,641     45,420     37,320         46,767 
 Distributions                                                              
  declared per                                                              
  limited partner                                                           
  unit                                                                      
  (attributable                                                             
  to the period                                                             
  ended)          $    0.51  $    0.49  $    2.02  $    1.87  $        0.51 
                                                                            
                                                                            
                                                                            
                       CRESTWOOD MIDSTREAM PARTNERS LP                      
                         CONSOLIDATED BALANCE SHEETS                        
                    (In thousands, except for unit data)                    
                                 (Unaudited)                                
                                                                            
                                                December 31,   December 31, 
                                                    2012           2011     
                                               -------------- --------------
                    ASSETS                                                  
 Current assets                                                             
   Cash and cash equivalents                   $           21 $          797
   Accounts receivable - related party                 23,863         27,312
   Accounts receivable                                 15,123         11,926
   Insurance receivable                                 2,920              -
   Prepaid expenses and other                           1,941          1,935
                                               -------------- --------------
     Total current assets                              43,868         41,970
                                                                            
 Investment in unconsolidated affiliate               128,646              -
 Property, plant and equipment, net of                                      
  accumulated depreciation of $126,524 in 2012        784,371        746,045
  and $89,860 in 2011                                                       
 Intangible assets, net of accumulated                                      
  amortization of $10,138 in 2012 and $2,440          163,021        127,760
  in 2011                                                                   
 Goodwill                                              95,031         93,628
 Deferred financing costs, net                         17,149         16,699
 Other assets                                           1,321            790
                                               -------------- --------------
     Total assets                              $    1,233,407 $    1,026,892
                                               ============== ==============
                                                                            
LIABILITIES AND PARTNERS' CAPITAL                                           
 Current liabilities                                                        
   Accrued additions to property, plant and                                 
    equipment                                           3,829          7,500
   Capital leases                                       3,862          2,693
   Accounts payable - related party                     3,088          1,308
   Accounts payable, accrued expenses and                                   
    other liabilities                                  27,423         31,794
                                               -------------- --------------
     Total current liabilities                         38,202         43,295
                                                                            
 Long-term debt                                       558,161        512,500
 Long-term capital leases                               3,161          3,929
 Asset retirement obligations                          13,188         11,545
 Commitments and contingent liabilities                                     
                                                                            
 Partners' capital                                                          
   Common unitholders (41,164,737 and                                       
    32,997,696 units issued andoutstanding at                               
    December 31, 2012 and 2011)                       442,348        286,945
   Class C unitholders (7,165,819 and                                       
    6,596,635 units issued andoutstanding at                                
    December 31, 2012 and 2011)                       159,908        157,386
   General partner (979,614 and 763,892 units                               
    issued andoutstanding at December 31, 2012                              
    and 2011)                                          18,439         11,292
                                               -------------- --------------
     Total partners' capital                          620,695        455,623
                                               -------------- --------------
     Total liabilities and partners' capital   $    1,233,407 $    1,026,892
                                               ============== ==============
                                                                            
                                                                            
                                                                            
                      CRESTWOOD MIDSTREAM PARTNERS LP                       
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                               (In thousands)                               
                                (Unaudited)                                 
                                                                            
                                                                            
                                                    Year Ended December 31, 
                                                   ------------------------ 
                                                       2012         2011    
                                                   -----------  ----------- 
  Cash flows from operating activities                                      
    Net income                                     $    31,746  $    45,003 
      Adjustments to reconcile net income to net                            
       cash provided by operating activities:                               
        Depreciation, amortization and accretion        45,726       33,812 
        Equity-based compensation                        1,877          916 
        Gain from exchange of property, plant and                           
         equipment                                           -       (1,106)
        Other non-cash income items                      4,284        3,473 
      Changes in assets and liabilities:                                    
        Accounts receivable - related party              3,449       (4,309)
        Accounts receivable                             (3,197)      (7,348)
        Insurance receivable                            (1,251)           - 
        Prepaid expenses and other assets                2,113          249 
        Accounts payable - related party                 1,780       (2,959)
        Accounts payable, accrued expenses and                              
         other liabilities                               2,740       18,600 
                                                   -----------  ----------- 
  Net cash provided by operating activities             89,267       86,331 
                                                   -----------  ----------- 
                                                                            
  Cash flows from investing activities                                      
        Acquisitions, net of cash acquired             (87,247)    (414,073)
        Capital expenditures                           (35,493)     (48,405)
        Proceeds from exchange of property, plant                           
         and equipment                                       -        5,943 
        Investment in unconsolidated affiliate        (131,250)           - 
        Capital distributions from unconsolidated                           
         affiliate                                       2,604            - 
        Proceeds from sale of property, plant and                           
         equipment                                          20            - 
                                                   -----------  ----------- 
  Net cash used in investing activities               (251,366)    (456,535)
                                                   -----------  ----------- 
                                                                            
  Cash flows from financing activities                                      
        Proceeds from issuance of senior notes         151,500      200,000 
        Proceeds from credit facility                  411,700      215,200 
        Repayments of credit facility                 (517,500)    (186,204)
        Payment of Tristate Acquisition deferred                            
         payment                                        (7,839)           - 
        Payments on capital leases                      (2,993)      (1,966)
        Deferred financing costs paid                   (4,994)      (6,982)
        Proceeds from issuance of Class C units,                            
         net                                                 -      152,671 
        Proceeds from issuance of common units,                             
         net              
                             217,483       53,550 
        Contributions from partners                      5,930        8,741 
        Distributions to partners                      (91,558)     (64,011)
        Taxes paid for equity-based compensation                            
         vesting                                          (406)           - 
                                                   -----------  ----------- 
  Net cash provided by financing activities            161,323      370,999 
                                                   -----------  ----------- 
                                                                            
  Change in cash and cash equivalents                     (776)         795 
                                                                            
  Cash and cash equivalents at beginning of period         797            2 
                                                   -----------  ----------- 
                                                                            
  Cash and cash equivalents at end of period       $        21  $       797 
                                                   ===========  =========== 
                                                                            
                                                                            
  Supplemental cash flow information:                                       
        Interest paid, net of amounts capitalized  $    26,948       20,281 
                                                                            
                                                                            
                                                                            

 
                                                                            
                                                                            
                                                                            
                      CRESTWOOD MIDSTREAM PARTNERS LP                       
                           OPERATING STATISTICS                             
                              (In thousands)                                
                                (Unaudited)                                 
                                                                            
                                                                Three Months
                     Three Months Ended        Year Ended          Ended    
                        December 31,          December 31,     September 30,
                   --------------------- --------------------- -------------
                      2012       2011       2012       2011         2012    
                   ---------- ---------- ---------- ---------- -------------
Barnett:                                                                    
Gathering revenues $   24,322 $   28,813 $   98,889 $  108,705 $      24,737
Processing                                                                  
 revenues               9,847      7,826     34,003     31,379         8,540
Product sales              72          -        141          -            69
                   ---------- ---------- ---------- ---------- -------------
 Total operating                                                            
  revenues         $   34,241 $   36,639 $  133,033 $  140,084 $      33,346
Product purchases          65          -        125          -            60
Operations and                                                              
 maintenance                                                                
 expense                8,443      6,619     26,881     25,147         6,963
                   ---------- ---------- ---------- ---------- -------------
 EBITDA            $   25,733 $   30,020 $  106,027 $  114,937 $      26,323
                   ========== ========== ========== ========== =============
                                                                            
Gathering volumes                                                           
 (in MMcf)             40,653     46,367    158,087    172,838        40,252
Processing volumes                                                          
 (in MMcf)             18,351     12,084     56,844     48,112        14,671
                                                                            
Fayetteville:                                                               
Gathering revenues $    6,949 $    6,326 $   26,986 $   19,421 $       7,043
Product sales             181        310        512      1,379           131
                   ---------- ---------- ---------- ---------- -------------
 Total operating                                                            
  revenues         $    7,130 $    6,636 $   27,498 $   20,800 $       7,174
Product purchases         180        290        523      1,302           137
Operations and                                                              
 maintenance                                                                
 expense                2,138      2,636      8,537      8,992         1,855
                   ---------- ---------- ---------- ---------- -------------
 EBITDA            $    4,812 $    3,710 $   18,438 $   10,506 $       5,182
                   ========== ========== ========== ========== =============
                                                                            
Gathering volumes                                                           
 (in MMcf)              8,568      8,275     31,617     23,421         8,403
                                                                            
Granite Wash:                                                               
Gathering revenues $      560 $      138 $    1,434 $      346 $         465
Processing                                                                  
 revenues                   2         96        130        133            29
Product sales          11,973     12,769     38,992     37,734        10,208
                   ---------- ---------- ---------- ---------- -------------
 Total operating                                                            
  revenues         $   12,535 $   13,003 $   40,556 $   38,213 $      10,702
Product purchases      11,181     11,506     35,695     33,245         9,481
Operations and                                                              
 maintenance                                                                
 expense                  631        501      2,250      1,499           560
                   ---------- ---------- ---------- ---------- -------------
 EBITDA            $      723 $      996 $    2,611 $    3,469 $         661
                   ========== ========== ========== ========== =============
                                                                            
Gathering volumes                                                           
 (in MMcf)              1,864      1,544      6,440      4,555         1,856
Processing volumes                                                          
 (in MMcf)              1,854      1,560      6,420      4,501         1,859
                                                                            
Other:                                                                      
Gathering revenues $    2,250 $    2,064 $   10,202 $    2,483 $       3,152
Product sales             833        948      2,672      4,240           663
                   ---------- ---------- ---------- ---------- -------------
 Total operating                                                            
  revenues         $    3,083 $    3,012 $   12,874 $    6,723 $       3,815
Product purchases         824        981      2,662      4,240           663
Operations and                                                              
 maintenance                                                                
 expense        
          680        382      2,949        665           749
                   ---------- ---------- ---------- ---------- -------------
 EBITDA            $    1,579 $    1,649 $    7,263 $    1,818 $       2,403
                   ========== ========== ========== ========== =============
                                                                            
Gathering volumes                                                           
 (in MMcf)              4,622      4,677     21,770      7,332         5,041
                                                                            
                                                                            
                      CRESTWOOD MIDSTREAM PARTNERS LP                       
               RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                
                  (In thousands, except for per unit data)                  
                                (Unaudited)                                 
                                                                            
                                                               Three Months 
                   Three Months Ended        Year Ended           Ended     
                      December 31,          December 31,      September 30, 
                  --------------------  --------------------  ------------- 
                     2012       2011       2012       2011         2012     
                  ---------  ---------  ---------  ---------  ------------- 
                                                                            
Net income        $   4,856  $  12,342  $  31,746  $  45,003  $      11,105 
Items impacting                                                             
 net income:                                                                
  Significant                                                               
   transaction-                                                             
   related                                                                  
   expenses           1,095        219      3,805      3,385            932 
  Gain from                                                                 
   exchange of                                                              
   property,                                                                
   plant and                                                                
   equipment              -          -          -     (1,106)             - 
  Non-cash                                                                  
   interest                                                                 
   expense                                                                  
   (write-off of                                                            
   deferred                                                                 
   financing                                                                
   costs)                 -          -        370          -              - 
  Interest                                                                  
   expense                                                                  
   (bridge loan                                                             
   fees)                  -          -          -      2,500              - 
                  ---------  ---------  ---------  ---------  ------------- 
 Adjusted net                                                               
  income          $   5,951  $  12,561  $  35,921  $  49,782  $      12,037 
                  =========  =========  =========  =========  ============= 
                                                                            
Net income per                                                              
 limited partner                                                            
 unit (diluted                                                              
 basis)           $    0.01  $    0.24  $    0.37  $    1.00  $        0.15 
Items impacting                                                             
 net income            0.02       0.01       0.09       0.13           0.02 
                  ---------  ---------  ---------  ---------  ------------- 
 Adjusted net                                                               
  income per                                                                
  limited partner                                                           
  unit (diluted                                                             
  basis)          $    0.03  $    0.25  $    0.46  $    1.13  $        0.17 
                  =========  =========  =========  =========  ============= 
                                                                            
                                                              Three Months  
                  Three Months Ended        Year Ended            Ended     
                     December 31,          December 31,       September 30, 
                --------------------  --------------------  --------------- 
                   2012       2011       2012       2011          2012      
                ---------  ---------  ---------  ---------  --------------- 
                                                                            
Net income      $   4,856  $  12,342  $  31,746  $  45,003  $        11,105 
Depreciation,                                                               
 amortization                                                               
 and accretion                                                              
 expense           13,299      9,831     45,726     33,812           10,943 
Income tax                                                                  
 expense              322        353      1,206      1,251              306 
Amortization of                                                             
 deferred                                                                   
 financing fees     1,250        931      4,506      3,473              931 
Non-cash equity                                                             
 compensation         349         65      1,877        916              534 
Maintenance                                                                 
 capital                                                                    
 expenditures      (1,212)      (384)    (4,084)    (1,409)          (1,279)
                ---------  ---------  ---------  ---------  --------------- 
 Distributable                                                              
  cash flow        18,864     23,138     80,977     83,046           22,540 
Add:                                                                        
 Significant                                                                
 transaction-                                                               
 related                                                                    
 expenses           1,095        219      3,805      3,385              932 
Add:                                                                        
 Significant                                                                
 minimum volume                                                             
 deficiency                                                                 
 payment            1,292          -      2,718          -            1,426 
Add: Interest                                                               
 expense                                                                    
 (bridge loan                                                               
 fees)                  -          -          -      2,500                - 
Less: Gain from                                                             
 exchange of                                                                
 property,                                                                  
 plant and        
                                                          
 equipment              -          -          -     (1,106)               - 
Less: Equity                                                                
 earnings from                                                              
 unconsolidated                                                             
 affiliate         (1,642)         -     (3,847)         -           (1,764)
Add: Adjusted                                                               
 DCF from                                                                   
 unconsolidated                                                             
 affiliate          3,688          -      7,500          -            2,062 
                ---------  ---------  ---------  ---------  --------------- 
 Adjusted                                                                   
  distributable                                                             
  cash flow     $  23,297  $  23,357  $  91,153  $  87,825  $        25,196 
                =========  =========  =========  =========  =============== 
                                                                            
                                                              Three Months  
                  Three Months Ended        Year Ended            Ended     
                     December 31,          December 31,       September 30, 
                --------------------  --------------------  --------------- 
                   2012       2011       2012       2011          2012      
                ---------  ---------  ---------  ---------  --------------- 
                                                                            
Total operating                                                             
 revenues       $  56,989  $  59,290  $ 213,961  $ 205,820  $        55,037 
Product                                                                     
 purchases         12,250     12,777     39,005     38,787           10,341 
Operations and                                                              
 maintenance                                                                
 expense           11,892     10,138     40,617     36,303           10,127 
General and                                                                 
 administrative                                                             
 expense            6,439      6,157     25,890     24,153            5,777 
Gain from                                                                   
 exchange of                                                                
 property,                                                                  
 plant and                                                                  
 equipment              -          -          -      1,106                - 
Earnings from                                                               
 unconsolidated                                                             
 affiliate          1,642          -      3,847          -            1,764 
                ---------  ---------  ---------  ---------  --------------- 
 EBITDA            28,050     30,218    112,296    107,683           30,556 
Items impacting                                                             
 EBITDA:                                                                    
Add:                                                                        
 Significant                                                                
 transaction-                                                               
 related                                                                    
 expenses           1,095        219      3,805      3,385              932 
Less: Gain from                                                             
 exchange of                                                                
 property,                                                                  
 plant and                                                                  
 equipment              -          -          -     (1,106)               - 
Less: Equity                                                                
 earnings from                                                              
 unconsolidated                                                             
 affiliate         (1,642)         -     (3,847)         -           (1,764)
Add: Adjusted                                                               
 earnings from                                                              
 unconsolidated                                                             
 affiliate          2,961          -      7,074          -            2,237 
                ---------  ---------  ---------  ---------  --------------- 
 Adjusted                                                                   
  EBITDA           30,464     30,437    119,328    109,962           31,961 
Less:                                                                       
 Depreciation,                                                              
  amortization                                                              
  and accretion                                                             
  expense          13,299      9,831     45,726     33,812           10,943 
 Interest and                                                               
  debt expense      9,573      7,692     33,618     27,617            8,202 
 Income tax                                                                 
  expense             322        353      1,206      1,251              306 
 Items                                                                      
  impacting                                                                 
  EBITDA            2,414        219      7,032      2,279            1,405 
                ---------  ---------  ---------  ---------  --------------- 
  Net income    $   4,856  $  12,342  $  31,746  $  45,003  $        11,105 
                =========  =========  =========  =========  =============== 
                                                                            
                                                                            
                                                                            
                     CRESTWOOD MARCELLUS MIDSTREAM LLC                      
                            OPERATING STATISTICS                            
                               (In thousands)                               
                                (Unaudited)                                 
                                                                            
                                                                            
                           Three Months     Three Months      Year to Date  
                               Ended            Ended       (from inception 
                           September 30,     December 31,   of February 23, 
                                2012             2012            2012)      
                          ---------------  ---------------  --------------- 
Operating revenue                                                           
 Gathering revenue        $         7,976  $        10,499  $        25,502 
                          ---------------  ---------------  --------------- 
   Total operating                                                          
    revenue                         7,976           10,499           25,502 
                          ---------------  ---------------  --------------- 
                                                                            
Operating expenses                                                          
 Operations and                                                             
  maintenance                         815            1,163            2,491 
 General and        
                                                        
  administrative                      793            1,178            3,692 
 Depreciation,                                                              
  amortization and                                                          
  accretion                           625            2,700            6,182 
                          ---------------  ---------------  --------------- 
   Total operating                                                          
    expenses                        2,233            5,041           12,365 
                          ---------------  ---------------  --------------- 
                                                                            
Operating income                    5,743            5,458           13,137 
                                                                            
Interest and debt expense            (703)            (767)          (2,147)
                          ---------------  ---------------  --------------- 
                                                                            
                                                                            
Net income                $         5,040  $         4,691  $        10,990 
                          ---------------  ---------------  --------------- 
                                                                            
Add:                                                                        
Interest and debt expense             703              767            2,147 
Depreciation,                                                               
 amortization and                                                           
 accretion                            625            2,700            6,182 
                          ---------------  ---------------  --------------- 
                                                                            
EBITDA                    $         6,368  $         8,158  $        19,319 
                                                                            
Significant transaction-                                                    
 related expenses                      22              302              892 
                          ---------------  ---------------  --------------- 
                                                                            
Adjusted EBITDA           $         6,390  $         8,460  $        20,211 
                          ===============  ===============  =============== 
                                                                            
Net income                $         5,040  $         4,691  $        10,990 
Depreciation,                                                               
 amortization and                                                           
 accretion expense                    625            2,700            6,182 
Non-cash interest                     317              316              949 
Maintenance capital                                                         
 expenditures                        (115)            (103)            (218)
                          ---------------  ---------------  --------------- 
 Distributable cash flow            5,867            7,604           17,903 
Add: Significant                                                            
 transaction-related                                                        
 expenses                              22              302              892 
Add: Significant minimum                                                    
 volume deficiency                                                          
 payment                                -            2,634            2,634 
                          ---------------  ---------------  --------------- 
 Adjusted distributable                                                     
  cash flow               $         5,889  $        10,540  $        21,429 
                          ===============  ===============  =============== 
                                                                            
Volumes:                                                                    
Gathering volumes (in                                                       
 MMcf)                             26,585           33,138           83,147 
                                                                            
CMLP's 35% interest in                                                      
 Crestwood Marcellus                                                        
 Midstream LLC:                                                             
                                                                            
Equity earnings           $         1,764  $         1,642  $         3,847 
EBITDA                    $         2,229  $         2,855  $         6,762 
Adjusted EBITDA           $         2,237  $         2,961  $         7,074 
Distributable cash flow   $         2,053  $         2,661  $         6,266 
Adjusted distributable                                                      
 cash flow                $         2,062  $         3,688  $         7,500 
Gathering volumes (in                                                       
 MMcf)                              9,305           11,598           29,101 
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                       CRESTWOOD MIDSTREAM PARTNERS LP                      
                   Full Year 2013 Adjusted EDITDA Guidance                  
  
                      Reconciliation to Net Income                        
                                                                            
                                                                            
                                                                            
Adjusted EBITDA                              $170 million to $185 million   
                                                                            
Depreciation, amortization and accretion                                    
 expense                                             $80 million            
                                                                            
Interest expense, net                                $50 million            
                                                                            
Income tax provision                                  $2 million            
                                                                            
Net income                                    $38 million to $53 million    

  
Investor Contact: 
Mark Stockard
832-519-2207
mstockard@crestwoodlp.com