Crestwood Midstream Announces Second Quarter 2014 Financial and Operating Results

  Crestwood Midstream Announces Second Quarter 2014 Financial and Operating
  Results

Business Wire

HOUSTON -- August 6, 2014

Crestwood Midstream Partners LP (NYSE:CMLP) (“Crestwood”) reported today its
financial results for the three months ended June 30, 2014.

“Crestwood’s second quarter 2014 results showed continued quarterly
improvement, posting an 11% increase in Adjusted EBITDA over the first quarter
2014, and a 29% increase over the third quarter 2013, which was the initial
quarter we reported combined results following our merger last year,” stated
Robert G. Phillips, Chairman, President and Chief Executive Officer of
Crestwood’s general partner. “During the quarter, our three operating segments
and key assets in the Marcellus, Bakken and Barnett shale plays all delivered
better performance due to improving volume growth on our systems and higher
demand for our services. In fact, we achieved record natural gas and crude oil
volumes through our systems during the quarter. As a result, our cash
distribution coverage ratio increased to 0.96 times quarterly distributions
paid for the second quarter, which is an important 2014 goal for the
partnership.”

Financial and Operating Highlights ^(1)

                          Three Months Ended
                           June 30,  March 31,  December 31,  September 30,
$ Millions                 2014       2014       2013           2013
                                                                 
Adjusted EBITDA ^(2)       $109.7     $98.9       $90.9          $85.3
Net income (loss)          $11.7      $5.5        $(42.3)        $11.6
Distributable cash flow    $81.5      $70.3       $64.3          $64.3
^(2)
Distribution coverage      0.96x      0.83x       0.76x          0.82x
ratio ^(3)
Natural gas volumes        3,049      2,982       2,833          2,706
(MMcf/d)
Crude oil volumes          200        152         140            83
(MBbls/d)


       Following the Crestwood-Inergy merger completed in October 2013,
       Crestwood restated its combined financial and operating results to the
       beginning of the third quarter 2013. Where appropriate, we have
       compared second quarter 2014 results to first quarter 2014 or third
^(1)  quarter 2013 for purposes of providing more meaningful disclosure to
       investors. In addition, results discussed herein do not include the
       natural gas liquids (“NGL”) business and the Gulf Coast natural gas
       storage and transportation assets owned by Crestwood Equity Partners
       LP.
       Adjusted EBITDA and distributable cash flow are non-GAAP measures.
^(2)   Please refer to the financial tables accompanying this release for
       reconciliation to GAAP.
       Represents distributable cash flow divided by cash distribution
^(3)   declared for the quarter with respect to our limited partners units.
       This calculation does not include the impact of any non-cash
       distributions on preferred securities we have issued.

  *Adjusted earnings before interest, taxes, depreciation, amortization and
    accretion (“Adjusted EBITDA”) totaled $109.7 million in the second quarter
    2014, an 11% sequential increase over the first quarter 2014 and a 29%
    increase over the third quarter 2013.
  *Net income (loss) for the three months ended June 30, 2014, March 31, 2014
    and December 31, 2013 included non-cash accruals of $6.5 million, $2.1
    million, and $31.4 million, respectively, related to an earn-out premium
    associated with the acquisition of the Marcellus gathering system from
    Antero Resources (“Antero”) in 2012.
  *Distributable cash flow increased to $81.5 million in the second quarter,
    a 16% increase from first quarter 2014, resulting in continued improvement
    of the cash distribution coverage ratio to 0.96x for the second quarter
    2014.
  *Crestwood announced a quarterly cash distribution of $0.41 per common
    unit, or $1.64 per common unit on an annualized basis. The announced
    distribution will be paid on August 14, 2014, to common unitholders of
    record as of the close of business on August 7, 2014.
  *Crestwood completed an important long-term financing in the second quarter
    2014 by raising $500 million of new equity capital through the issuance of
    $300 million of Class A preferred units, with an additional $200 million
    of Class A preferred units to be issued by September 30, 2015. The
    additional equity resulted in an improved leverage ratio, another 2014
    goal of the partnership, and will provide sufficient growth capital for
    the remainder of 2014 and well into 2015.

2014 Guidance

Based on Crestwood’s first half 2014 results, we have revised our estimate of
full year 2014 Adjusted EBITDA to a range of $440 million to $460 million as
compared to the original estimate of $465 million to $510 million. This change
is largely the result of a slower than forecast ramp up of Bakken crude oil
volumes at the COLT Hub and the Arrow gathering system primarily due to the
colder than normal winter of 2013-14 and its impact on crude production and
drilling activities. Additionally, the revised estimate reflects delays in
achieving certain expected merger integration cost savings and operational
synergies during the first half of 2014. Crestwood’s revised full year 2014
distributable cash flow estimate is now $320 million to $340 million as
compared to the original estimate of $330 million to $360 million due to lower
cash interest payments and the expected receipt of customer deficiency
payments.

Second Quarter 2014 Financial and Operating Segment Results

Gathering and processing segment EBITDA totaled $51.0 million in the second
quarter, compared to $48.2 million in the first quarter 2014, excluding the
impact of the non-cash accrual for the Antero earn-out which has now been
fully accrued and will be paid in the first quarter 2015. Natural gas
gathering volumes increased 7% to a record 1,213 million cubic feet per day
(“MMcf/d”) during the second quarter compared to the first quarter, based on a
10% increase in Marcellus shale volumes and 24% increase in Barnett dry
volumes.

Storage and transportation segment EBITDA totaled $37.8 million during the
second quarter 2014 compared to $36.8 million in the first quarter 2014. The
increase resulted from higher revenues from usage fees on our firm natural gas
storage and transportation contracts and increased revenues on interruptible
transportation revenues due to increased Marcellus shale producer activity and
increased locational basis spreads in the Northeast.

NGL and crude services segment EBITDA totaled $34.7 million during the second
quarter 2014, a 32% sequential increase from $26.3 million in the first
quarter 2014. The increase was primarily attributable to higher gathering
volumes of crude oil, natural gas and produced water on the Arrow system,
which increased 27%, 44% and 53%, respectively, over the first quarter 2014.
Additionally, rail loading volumes at the COLT Hub increased to 112 thousand
barrels per day (“MBbls/d”) in the second quarter 2014, a 14% sequential
increase over the first quarter.

Corporate expenses include general and administrative expenses not allocated
to the operating segments above. Corporate expenses during the second quarter
2014 totaled $21.3 million, compared with $24.1 million in the first quarter
2014. The decrease was attributable to lower significant transaction-related
expenses, which totaled $1.5 million in the second quarter 2014 compared with
$5.8 million in the first quarter 2014, partially offset by increased non-cash
equity compensation expense.

Project Update / Business Outlook

Marcellus Shale

In the rich gas southwest portion of the Marcellus Shale, Antero’s active
drilling program and the completion of several Crestwood gathering and
compression projects in recent months drove increased volumes. In the eastern
area of dedication, the Stark compressor station was completed in July 2014,
increasing total system gathering capacity to 750 MMcf/d. The Banner
compressor station is expected to be completed in the fourth quarter 2014
increasing gathering capacity to approximately 875 MMcf/d. Gathering volumes
in the second quarter 2014 totaled 585 MMcf/d, an increase of 10% over the
first quarter and 41% over the second quarter 2013. Gathering volumes in July
2014 have averaged more than 655 MMcf/d and we continue to expect that
gathering volumes will increase to approximately 750 MMcf/d by the end of
2014. During the second quarter of 2014, we also completed an additional 120
MMcf/d compressor station in Antero's western development area leading to
total compression volumes of 471 MMcf/d in the second quarter, a 5% increase
from the first quarter 2014 and 65% over the second quarter 2013.

In the dry gas northern portion of the Marcellus Shale, our storage and
transportation assets continued to operate at record volume levels during the
second quarter 2014 as a result of increasing regional production. Firm
storage and transportation services increased 14% over the first quarter 2014
to 1.6 billion cubic feet per day. As a result of an open season held earlier
in 2014, customer precedent agreements for an additional 117,000 dekatherms
per day (“Dth/d”) of firm capacity on these systems have been executed and are
expected to begin in the first quarter of 2015 following the installation of
additional compression capacity on the systems.

Bakken Shale

Production continues to increase in the Bakken Shale, following the harsh
winter that negatively impacted our first quarter 2014 results and led to the
downward revision to Crestwood’s original 2014 guidance. In the second quarter
2014, Crestwood’s Bakken crude business handled a combined total of 200
MBbls/d, up 32% from the first quarter 2014.

Arrow crude oil gathering volumes averaged 56 MBbls/d, natural gas gathering
volumes averaged 29 MMcf/d and produced water gathering averaged 19 MBbls/d,
up 27%, 44%, and 53%, respectively, over the first quarter 2014. Gathering
volumes of crude oil, natural gas and produced water in July 2014 averaged 60
MBbls/d, 37 MMcf/d, and 20 MBbls/d, respectively. Due to increased producer
drilling and completion activities in the second quarter, 36 wells were
connected to the Arrow system, compared to 9 in the first quarter, and we
expect an additional 43 wells to be connected to our system in the second half
of 2014.

Crude-by-rail loadings at our COLT Hub continued to increase, with second
quarter volumes of 112 MBbls/d, up 14% over the first quarter, and pipeline
deliveries of 9 MBbls/d. We are on schedule to complete an additional release
and departure track at the COLT Hub in the fourth quarter 2014, which will
increase the capacity for our customers to load additional unit trains. The
COLT Hub is contracted on a take-or-pay basis and in the second quarter 2014
we recognized $3.8 million of deficiency payments in distributable cash flow
under these contracts.

During the second quarter 2014, we completed the acquisition of another Bakken
trucking business which expands our crude oil and produced water trucking
business to 48 MBbls/d. In addition, we acquired 10 MBbls/d of firm
transportation capacity on Tesoro’s High Plains crude oil pipeline, which is
being expanded and connects our Arrow system and COLT Hub. The expansion
capacity is expected to be placed into service in September 2014.

Powder River Basin (PRB) Niobrara

Expansion of the Jackalope gas gathering system and construction of the 120
MMcf/d Bucking Horse gas processing plant remains on schedule to be completed
in the fourth quarter 2014.Gas gathering volumes on the Jackalope system in
the second quarter 2014 were 44 MMcf/d and were constrained due to third-party
processing limitations. Under Jackalope’s cost of service structure, gathering
fees in 2014 have been increased substantially to offset lower than expected
volumes on the Jackalope system. Chesapeake continues to operate three
drilling rigs on the Jackalope acreage and has developed an inventory of
approximately 36 drilled but uncompleted wells available to be connected to
the system when the Bucking Horse plant is placed in service. Recently,
Chesapeake and RKI announced an acreage exchange resulting in a more
concentrated acreage position owned by Chesapeake in the Jackalope gathering
area. As part of that announcement, Chesapeake announced favorable drilling
results in the area and the plan to potentially increase drilling activity on
the dedicated area in 2015.

Crestwood’s 50%-owned Douglas crude rail terminal, located approximately eight
miles from the Bucking Horse plant, was converted to unit train service in May
2014. Chesapeake’s crude production volumes continue to increase at the
facility and have recently loaded up to 11 MBbls/d in the later part of July.
The terminal is being expanded to provide up to 20 MBbls/d of unit train rail
loading capacity and to include 240,000 barrels of working storage capacity by
the end of 2014.

Barnett Shale

Gas gathering volumes on our Barnett Shale systems increased 13% to 439 MMcf/d
in the second quarter compared to 387 MMcf/d in the first quarter 2014. This
increase was largely attributable to a 24% increase in dry gas volumes to 264
MMcf/d in the second quarter due to new wells connected, increased gas lift
volumes, lower wellhead pressures and additional volumes received from
third-party pipelines. Second quarter gathering volumes in the rich gas areas
were flat with first quarter 2014 volumes due to lower wellhead operating
pressures and enhanced recovery that offset production decline rates. We have
recently entered into an incentive gathering fee arrangement with Quicksilver
Resources which should lead to increased drilling and volumes from new acreage
dedications. We expect Quicksilver to run at least one drilling rig in the
Barnett throughout the remainder of 2014 and continue to optimize well
performance to minimize natural production declines.

Delaware/Permian

Crestwood completed a 20 MMcf/d expansion of its Willow Lake processing
facility in July 2014 and expects gas volumes to ramp up from increased
drilling activity by Legend Production Holdings, LLC and other area producers
during the second half of 2014. In the second quarter 2014, the Willow Lake
facility handled gas volumes of 6 MMcf/d being developed from the Bone Spring
2 formation in Eddy County, New Mexico.

Capital Spending and Liquidity

Growth capital expenditures and joint venture contributions for the six months
ended June 30, 2014 totaled approximately $191 million, including pipeline
laterals and compression equipment in the Marcellus Shale, expansion of the
COLT Hub and Arrow gathering system in the Bakken, and construction of the
Bucking Horse processing facility in the PRB Niobrara. Capital spending and
joint venture contributions for the full year 2014 are forecasted to total
between $425 million and $450 million, including approximately $20 million for
maintenance capital projects.

At June 30, 2014, Crestwood had approximately $1,871 million of debt
outstanding, composed primarily of $1,450 million of fixed-rate senior notes
and approximately $412 million outstanding under its revolving credit
facility. The revolving credit facility has a maximum borrowing capacity of
$1.0 billion and matures in 2019. As noted above, Crestwood has $200 million
of remaining equity commitment available under its $500 million Class A
preferred equity commitment as well as $300 million of common units available
for issuance under an at-the-market (“ATM”) offering program.

Conference Call

Management will host a conference call for investors and analysts of Crestwood
today at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) which will be
broadcast live over the Internet. Investors may participate in the call either
by phone or audio webcast.

              Dial 719-457-2689 at least 10 minutes before the call and ask
By Phone:    for the Crestwood Earnings Call. A replay will be available
              until August 20, 2014 by dialing 888-203-1112 and using the
              access code 7830581#.
              
              Connect to the webcast via the “Presentations” page in the
              Investor Relations section of Crestwood’s website at
By Webcast:   www.crestwoodlp.com. Please log in at least 10 minutes in
              advance to register and download any necessary software. A
              replay will be available shortly after the call for 90 days.
              

Non-GAAP Financial Measures

Adjusted EBITDA and adjusted distributable cash flow are 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
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.

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 include, without limitation, the possibility that
expected synergies will not be realized, or will not be realized within the
expected timeframe; fluctuations in crude oil, natural gas and NGL prices; the
extent and success of drilling efforts, as well as the extent and quality of
natural gas and crude oil volumes produced within proximity of Crestwood
assets; failure or delays by customers in achieving expected production in
their oil and gas projects; competitive conditions in the industry and their
impact on our ability to connect supplies to Crestwood gathering, processing
and transportation assets or systems; actions or inactions taken or
non-performance by third parties, including suppliers, contractors, operators,
processors, transporters and customers; the ability of Crestwood 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 Crestwood’s control; timely
receipt of necessary government approvals and permits, the ability of
Crestwood to control the costs of construction, including costs of materials,
labor and right-of-way and other factors that may impact Crestwood’s 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 the substantial indebtedness, of either company, as well
as other factors disclosed in Crestwood’s filings with the U.S. Securities and
Exchange Commission. You should read filings made by Crestwood with the U.S.
Securities and Exchange Commission, including Annual Reports on Form 10-K and
the most recent Quarterly Reports and Current Reports for a more extensive
list of factors that could affect results. Readers are cautioned not to place
undue reliance on forward-looking statements, which reflect management’s view
only as of the date made. Crestwood does not assume any obligation to update
these forward-looking statements.

About Crestwood Midstream Partners LP

Houston, Texas, based Crestwood (NYSE: CMLP) is a master limited partnership
that owns and operates midstream businesses in multiple unconventional shale
resource plays across the United States. Crestwood is engaged in the
gathering, processing, treating, compression, storage and transportation of
natural gas; storage, transportation and terminalling of NGLs; and gathering,
storage, terminalling and marketing of crude oil.

About Crestwood Equity Partners LP

Houston, Texas, based Crestwood Equity Partners LP (NYSE: CEQP) (“Crestwood
Equity”) is a master limited partnership that owns the general partner
interest, the incentive distribution rights and an approximate 4% limited
partner interest of Crestwood. In addition, Crestwood Equity’s operations
include a natural gas storage business in Texas and an NGL supply and
logistics business that serves customers in the United States and Canada.

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)

Consolidated Statements of Operations

(in millions, except unit and per unit data)

(unaudited)
                   Three Months Ended      Six Months Ended
                                                               Three Months Ended
                   June 30,                June 30,
                                                                  March 31,   December    September
                   2014       2013(a)     2014       2013(a)               31,        30,
                                                                  2014
                                                                              2013        2013
Revenues:
Gathering and      $  82.7     $ 46.5      $ 161.3     $ 93.3     $ 78.6      $ 76.0      $  47.0
processing
Storage and        45.4        5.5         89.7        5.5        44.3        42.5        42.1
transportation
NGL and crude      543.5       3.1         953.4       3.1        409.9       243.5       23.5
services
Related party      4.1        25.0       8.3        50.6      4.2        4.0        27.5    
                   675.7       80.1        1,212.7     152.5      537.0       366.0       140.1
Costs of
product/services
sold (excluding
depreciation,
amortization and
accretion as
shown below):
Gathering and      7.8         6.2         15.5        12.9       7.7         5.9         5.3
processing
Storage and        3.8         0.4         7.0         0.4        3.2         4.3         4.0
transportation
NGL and crude      497.7       0.9         873.9       0.9        376.2       219.8       9.7
services
Related party      9.8        7.8        20.8       14.6      11.0       10.3       7.6     
                   519.1       15.3        917.2       28.8       398.1       240.3       26.6
Expenses:
Operations and     32.7        13.4        60.7        26.4       28.0        25.2        21.7
maintenance
General and        21.3        11.0        45.4        18.8       24.1        36.7        25.2
administrative
Depreciation,
amortization and   54.9       20.9       105.7      38.3      50.8       48.3       35.1    
accretion
                   108.9       45.3        211.8       83.5       102.9       110.2       82.0
Other operating
income
(expense):
Goodwill           —           —           —           —          —           —           (4.1    )
impairment
Gain on
long-lived         1.1         —           1.6         —          0.5         1.0         4.4
assets
Loss on
contingent         (6.5    )   —          (8.6    )   —         (2.1    )   (31.4   )   —       
consideration
Operating income   42.3        19.5        76.7        40.2       34.4        (14.9   )   31.8
(loss)
Earnings (loss)
from               (1.5    )   —           (1.6    )   —          (0.1    )   0.3         (0.4    )
unconsolidated
affiliates, net
Interest and
debt expense,      (29.0   )   (12.5   )   (57.1   )   (23.9  )   (28.1   )   (28.0   )   (19.5   )
net
Income (loss)
before income      11.8        7.0         18.0        16.3       6.2         (42.6   )   11.9
taxes
Provision
(benefit) for      0.1        0.3        0.8        0.7       0.7        (0.3    )   0.3     
income taxes
Net income         11.7        6.7         17.2        15.6       5.5         (42.3   )   11.6
(loss)
Net income
attributable to    (3.7    )   —          (6.8    )   —         (3.1    )   (3.0    )   (1.9    )
non-controlling
partners
Net income
(loss)
attributable to    8.0         6.7         10.4        15.6       2.4         (45.3   )   9.7
Crestwood
Midstream
Partners LP
Net income
attributable to    (1.1    )   —          (1.1    )   —         —          —          —       
Class A
preferred units
Net income
(loss)             $  6.9     $ 6.7      $ 9.3      $ 15.6    $ 2.4      $ (45.3 )   $  9.7  
attributable to
partners
                                                                                                  
General
partner's          $  7.5     $ 7.8      $ 15.0     $ 13.0    $ 7.5      $ 7.5      $  6.3  
interest in net
income
Payment to
Legacy Crestwood   $  —       $ —        $ —        $ —       $ —        $ 34.9     $  —    
unitholders
Limited
partners’          $  (0.6 )   $ (1.1  )   $ (5.7  )   $ 2.6     $ (5.1  )   $ (87.7 )   $  3.4  
interest in net
income (loss)
                                                                                                  
Net income (loss) per limited partner unit:
Basic              $  —       $ (0.01 )   $ (0.03 )   $ 0.04    $ (0.03 )   $ (0.50 )   $  0.02 
Diluted            $  —       $ (0.01 )   $ (0.03 )   $ 0.04    $ (0.03 )   $ (0.50 )   $  0.02 
                                                                                                  
Weighted-average limited partners’ units outstanding (in thousands):
Basic              187,998    75,986     187,920    70,352    187,840    175,451    161,575 
Diluted            187,998    75,986     187,920    70,352    187,840    175,451    161,575 
                                                                                                  

      Financial data presented for the three and six months ended June 30,
      2013 reflects the operations of Legacy Crestwood for the entire period,
      and the operations of Legacy Inergy Midstream from June 19, 2013 to June
(a)  30, 2013. This presentation is required under U.S. Generally Accepted
      Accounting Principles (“GAAP”). We have also compared second quarter
      2014 results to first quarter 2014, fourth quarter 2013 and third
      quarter 2013 for purposes of providing more meaningful disclosure to
      investors.
      

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)

Selected Balance Sheet Data

(in millions)
                                                   June 30,     December 31,
                                                    2014          2013
                                                    (unaudited)
Cash and cash equivalents                           $ 17.3        $   2.7
                                                                  
Outstanding debt:
                                                                  
Crestwood Midstream Partners LP
Credit Facility                                     $ 412.3       $   414.9
2019 Senior Notes                                   350.0         350.0
Premium on 2019 Senior Notes                        1.1           1.2
2020 Senior Notes                                   500.0         500.0
Fair value adjustment of 2020 Senior Notes          4.3           4.7
2022 Senior Notes                                   600.0         600.0
Other                                               3.5          —
Total debt                                          $ 1,871.2    $   1,870.8
                                                                  
Total partners' capital                             $ 4,371.7    $   4,193.1

Crestwood Midstream Partners LP partners' capital
                                                                  
Class A preferred units outstanding                 12.0          —
Limited partner units outstanding                   187.9         187.2
                                                                  

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)

Reconciliation of Non-GAAP Financial Measures

(in millions)

(unaudited)
                Three Months Ended    Six Months Ended      Three Months Ended
                 June 30,               June 30,
                                                               March      December    September
                 2014       2013       2014       2013       31,       31,        30,
                                                               2014       2013        2013
EBITDA
Net income       $ 11.7      $ 6.7      $ 17.2      $ 15.6     $ 5.5      $ (42.3 )   $  11.6
(loss)
Interest and
debt expense,    29.0        12.5       57.1        23.9       28.1       28.0        19.5
net
Provision
(benefit) for    0.1         0.3        0.8         0.7        0.7        (0.3    )   0.3
income taxes
Depreciation,
amortization     54.9       20.9      105.7      38.3      50.8      48.3       35.1    
and accretion
EBITDA ^(a)      $ 95.7      $ 40.4     $ 180.8     $ 78.5     $ 85.1     $ 33.7      $  66.5
Significant
items
impacting
EBITDA:
Non-cash
equity           5.2         1.1        9.8         1.7        4.6        9.3         4.8
compensation
expense
Gain on
long-lived       (1.1    )   —          (1.6    )   —          (0.5   )   (1.0    )   (4.4    )
assets
Goodwill         —           —          —           —          —          —           4.1
impairment
Loss on
contingent       6.5         —          8.6         —          2.1        31.4        —
consideration
Earnings
(loss) from
unconsolidated   1.5         —          1.6         —          0.1        (0.3    )   0.4
affiliates,
net
Adjusted
EBITDA from      0.4         —          2.1         —          1.7        1.9         0.6
unconsolidated
affiliates
Significant
transaction
related costs    1.5        4.8       7.3        5.5       5.8       15.9       13.3    
and other
items
Adjusted         $ 109.7     $ 46.3     $ 208.6     $ 85.7     $ 98.9     $ 90.9      $  85.3
EBITDA ^(a)
                                                                                              
Distributable
Cash Flow
Adjusted         $ 109.7     $ 46.3     $ 208.6     $ 85.7     $ 98.9     $ 90.9      $  85.3
EBITDA ^(a)
Cash interest    (27.2   )   (11.4  )   (53.5   )   (21.8  )   (26.3  )   (21.9   )   (18.6   )
expense ^(b)
Maintenance
capital          (4.7    )   (2.0   )   (7.4    )   (2.9   )   (2.7   )   (5.0    )   (3.7    )
expenditures ^
(c)
(Provision)
benefit for      (0.1    )   (0.3   )   (0.8    )   (0.7   )   (0.7   )   0.3         (0.3    )
income taxes
Deficiency       3.8         —          4.9         —          1.1        —           1.6
payment
Other            —          —         —          0.1       —         —          —       
adjustments
Distributable
cash flow
attributable     $ 81.5      $ 32.6     $ 151.8     $ 60.4     $ 70.3     $ 64.3      $  64.3

to CMLP ^(d)
                                                                                              

      EBITDA is defined as income before income taxes, plus net interest and
      debt expense, and depreciation, amortization and accretion expense. In
      addition, Adjusted EBITDA considers the adjusted earnings impact of our
      unconsolidated affiliates by adjusting our equity earnings or losses
      from our unconsolidated affiliates for our proportionate share of their
      depreciation and interest, the impact of certain significant items, such
      as non-cash equity compensation expenses, gains and impairments of
      long-lived assets and goodwill, third party costs incurred related to
      potential and completed acquisitions, loss on contingent consideration,
(a)  and other transactions identified in a specific reporting period. EBITDA
      and Adjusted EBITDA are not measures calculated in accordance with
      accounting principles generally accepted in the United States of America
      (GAAP), as they do not include deductions for items such as
      depreciation, amortization and accretion, interest and income taxes,
      which are necessary to maintain our business. EBITDA and Adjusted EBITDA
      should not be considered an alternative to net income, operating cash
      flow or any other measure of financial performance presented in
      accordance with GAAP. EBITDA and Adjusted EBITDA calculations may vary
      among entities, so our computation may not be comparable to measures
      used by other companies.
(b)   Cash interest expense is book interest expense less amortization of
      deferred financing costs plus bond premium amortization.
      Maintenance capital expenditures are defined as those capital
(c)   expenditures which do not increase operating capacity or revenues from
      existing levels.
      Distributable cash flow is defined as Adjusted EBITDA, less cash
      interest expense, maintenance capital expenditures, income taxes,
      deficiency payments (primarily related to deferred revenue), and other
      adjustments. Distributable cash flow should not be considered an
      alternative to cash flows from operating activities or any other measure
      of financial performance calculated in accordance with generally
(d)   accepted accounting principles as those items are used to measure
      operating performance, liquidity, or the ability to service debt
      obligations. We believe that distributable cash flow provides additional
      information for evaluating our ability to declare and pay distributions
      to unitholders. Distributable cash flow, as we define it, may not be
      comparable to distributable cash flow or similarly titled measures used
      by other corporations and partnerships.
      

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)

Reconciliation of Non-GAAP Financial Measures

(in millions)

(unaudited)
                Three Months Ended    Six Months Ended      Three Months Ended
                 June 30,               June 30,
                                                               March      December   September
                 2014       2013       2014       2013       31,       31,       30,
                                                               2014       2013       2013
EBITDA
Net cash
provided by      $ 37.3      $ 34.4     $ 95.4      $ 68.5     $ 58.1     $ 55.0     $  63.0
operating
activities
Net changes in
operating        43.0        (4.8   )   50.0        (10.8  )   7.0        (3.5   )   (10.4   )
assets and
liabilities
Amortization
of
debt-related     (1.8    )   (0.9   )   (3.6    )   (2.0   )   (1.8   )   (6.1   )   (1.0    )
deferred costs
and premiums
Interest and
debt expense,    29.0        12.5       57.1        23.9       28.1       28.0       19.5
net
Non-cash
equity           (5.2    )   (1.1   )   (9.8    )   (1.7   )   (4.6   )   (9.3   )   (4.8    )
compensation
expense
Gain on
long-lived       1.1         —          1.6         —          0.5        1.0        4.4
assets
Goodwill         —           —          —           —          —          —          (4.1    )
impairment
Loss on
contingent       (6.5    )   —          (8.6    )   —          (2.1   )   (31.4  )   —
consideration
Earnings
(loss) from
unconsolidated   (1.5    )   —          (1.6    )   —          (0.1   )   0.3        (0.4    )
affiliates,
net
Deferred         —           —          (0.5    )   —          (0.5   )   —          —
income taxes
Provision
(benefit) for    0.1         0.3        0.8         0.7        0.7        (0.3   )   0.3
income taxes
Other non-cash
(income)         0.2        —         —          (0.1   )   (0.2   )   —         —       
expense
EBITDA ^(a)      $ 95.7      $ 40.4     $ 180.8     $ 78.5     $ 85.1     $ 33.7     $  66.5
Non-cash
equity           5.2         1.1        9.8         1.7        4.6        9.3        4.8
compensation
expense
Gain on
long-lived       (1.1    )   —          (1.6    )   —          (0.5   )   (1.0   )   (4.4    )
assets
Goodwill         —           —          —           —          —          —          4.1
impairment
Loss on
contingent       6.5         —          8.6         —          2.1        31.4       —
consideration
(Earnings)
loss from
unconsolidated   1.5         —          1.6         —          0.1        (0.3   )   0.4
affiliates,
net
Adjusted
EBITDA from      0.4         —          2.1         —          1.7        1.9        0.6
unconsolidated
affiliates
Significant
transaction
related costs    1.5        4.8       7.3        5.5       5.8       15.9      13.3    
and other
items
Adjusted         $ 109.7     $ 46.3     $ 208.6     $ 85.7     $ 98.9     $ 90.9     $  85.3
EBITDA ^(a)
                                                                                             

      EBITDA is defined as income before income taxes, plus net interest and
      debt expense, and depreciation, amortization and accretion expense. In
      addition, Adjusted EBITDA considers the adjusted earnings impact of our
      unconsolidated affiliates by adjusting our equity earnings or losses
      from our unconsolidated affiliates for our proportionate share of their
      depreciation and interest, the impact of certain significant items, such
      as non-cash equity compensation expenses, gains and impairments of
      long-lived assets and goodwill, third party costs incurred related to
      potential and completed acquisitions, loss on contingent consideration,
(a)  and other transactions identified in a specific reporting period. EBITDA
      and Adjusted EBITDA are not measures calculated in accordance with
      accounting principles generally accepted in the United States of America
      (GAAP), as they do not include deductions for items such as
      depreciation, amortization and accretion, interest and income taxes,
      which are necessary to maintain our business. EBITDA and Adjusted EBITDA
      should not be considered an alternative to net income, operating cash
      flow or any other measure of financial performance presented in
      accordance with GAAP. EBITDA and Adjusted EBITDA calculations may vary
      among entities, so our computation may not be comparable to measures
      used by other companies.
      

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)
Segment Data

(in millions)

(unaudited)
                                                             
                                                                   Three
                    Three Months Ended     Six Months Ended        Months
                    June 30,               June 30,                Ended

                                                                   March 31,
                    2014        2013       2014        2013        2014
Gathering and
Processing
Operating           $ 83.4      $ 71.1     $ 162.9     $ 143.5     $  79.5
revenues
Costs of
product/services    17.6        14.0       36.3        27.5        18.7
sold
Operations and
maintenance         14.7        12.6       28.1        25.6        13.4
expense
Gain on             0.5         —          1.0         —           0.5
long-lived assets
Loss on
contingent          (6.5    )   —          (8.6    )   —           (2.1      )
consideration
Earnings (loss)
from                (0.6    )   —         (0.3    )   —          0.3       
unconsolidated
affiliate
EBITDA              $ 44.5      $ 44.5     $ 90.6      $ 90.4      $  46.1

Storage and
Transportation
Operating           $ 45.4      $ 5.5      $ 89.7      $ 5.5       $  44.3
revenues
Costs of
product/services    3.8         0.4        7.0         0.4         3.2
sold
Operations and
maintenance         4.4         0.6        8.7         0.6         4.3
expense
Gain on             0.6        —         0.6        —          —         
long-lived assets
EBITDA              $ 37.8      $ 4.5      $ 74.6      $ 4.5       $  36.8

NGL and Crude
Services
Operating           $ 546.9     $ 3.5      $ 960.1     $ 3.5       $  413.2
revenues
Costs of
product/services    497.7       0.9        873.9       0.9         376.2
sold
Operations and
maintenance         13.6        0.2        23.9        0.2         10.3
expense
Loss from
unconsolidated      (0.9    )   —         (1.3    )   —          (0.4      )
affiliate
EBITDA              $ 34.7      $ 2.4      $ 61.0      $ 2.4       $  26.3
                                                                             
Total Segment       $ 117.0     $ 51.4     $ 226.2     $ 97.3      $  109.2
EBITDA
Corporate           (21.3   )   (11.0  )   (45.4   )   (18.8   )   (24.1     )
EBITDA              $ 95.7     $ 40.4    $ 180.8    $ 78.5     $  85.1   
                                                                             

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)
Operating Statistics

(unaudited)
                                                            
                      Three Months Ended    Six Months Ended      Three Months
                      June 30,              June 30,              Ended
                                                                  March 31,
                      2014        2013      2014        2013      2014
Gathering and
Processing (MMcf/d)
Marcellus             584.7       415.0     558.0       396.0     531.0
Barnett rich          174.8       203.9     174.6       207.5     174.3
Barnett dry           264.1       233.9     238.5       235.7     212.7
Fayetteville          102.2       84.6      107.5       83.7      112.8
PRB Niobrara -
Jackalope Gas         44.2        —         48.5        —         52.9
Gathering^(a)
Other                 43.2       55.4     44.4       60.9     45.6      
Total gathering       1,213.2     992.8     1,171.5     983.8     1,129.3
volumes
Processing volumes    190.9       217.3     190.1       220.7     189.4
Compression volumes   470.5       284.4     459.3       277.1     448.0
                                                                            
Storage and
Transportation
Storage
Storage capacity,
100% firm             34.8        —         34.8        —         34.8
contracted (Bcf)
Firm storage          474.0       —         480.1       —         486.2
services (MMcf/d)
Interruptible
storage services      23.1        —         45.0        —         66.9
(MMcf/d)
Transportation -
firm contracted       955.0       —         915.0       —         875.0
capacity (MMcf/d)
% of operational      100     %   —     %   100     %   —     %   100       %
capacity contracted
Firm services         1,072.0     —         982.7       —         893.3
(MMcf/d)
Interruptible         237.7       —         311.7       —         385.6
services (MMcf/d)
                                                                            
NGL and Crude
Services
Arrow Midstream
Crude oil (MBbls/d)   55.8        —         50.0        —         44.1
Natural gas           29.0        —         24.6        —         20.2
(MMcf/d)
Water (MBbls/d)       19.0        —         15.7        —         12.4
COLT Hub
Rail loading          111.6       —         104.8       —         98.1
(MBbls/d)
NGL Storage -         1,500.0     —         1,500.0     —         1,500.0
capacity (MBbls)
% of operational      100     %   —     %   100     %   —     %   100       %
capacity contracted
                                                                            

(a)  Represents 50% owned joint venture, operational data reported at 100%.
      

CRESTWOOD MIDSTREAM PARTNERS LP (FORMERLY INERGY MIDSTREAM, L.P.)

Full Year 2014 Adjusted EBITDA and Distributable Cash Flow Guidance

Reconciliation to Net Income

(in millions)

(unaudited)
                                                
Net income                                           $90 - $110
Interest and debt expense, net                       $120
Depreciation, amortization and accretion             $230
Adjusted EBITDA                                      $440 - $460
                                                     
Cash interest expense ^(a)                           ($100)
Maintenance capital expenditures ^(b)                ($20)
Distributable cash flow attributable to CMLP         $320 - $340
                                                     

(a)  Cash interest expense is book interest expense less amortization of
      deferred financing costs plus bond premium amortization.
      Maintenance capital expenditures are defined as those capital
(b)   expenditures which do not increase operating capacity or revenues from
      existing levels.

Contact:

Crestwood Midstream Partners LP
Mark Stockard, 832-519-2207
Vice President, Investor Relations
mstockard@crestwoodlp.com
 
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