Market Overview

Crestwood Announces Fourth Quarter 2016 Financial and Operating Results; Provides 2017 Outlook

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Crestwood Equity Partners LP (NYSE: CEQP) ("Crestwood") reported today
its financial and operating results for the three months and year ended
December 31, 2016.

Fourth Quarter and Full-Year 2016 Highlights1

  • Fourth quarter 2016 net loss of $64.3 million, compared to a net loss
    of $1.4 billion in the fourth quarter 2015; Full-year 2016 net loss of
    $192.1 million, compared to a net loss of $2.3 billion in 20152
  • Fourth quarter 2016 Adjusted EBITDA of $125.6 million, compared to
    $118.9 million in the fourth quarter 2015; Full-year 2016 Adjusted
    EBITDA of $455.6 million, compared to $527.4 million in 2015
  • Fourth quarter 2016 distributable cash flow to common unitholders of
    $77.8 million, compared to $71.9 million in fourth quarter 2015,
    resulting in a fourth quarter 2016 cash distribution coverage ratio of
    approximately 1.9x; Full-year 2016 distributable cash flow to common
    unitholders of $301.9 million, compared to $361.5 million in 2015,
    resulting in a full-year 2016 cash distribution coverage ratio of
    approximately 1.8x
  • Ended 2016 with approximately $1.6 billion in total debt and a 3.7x
    leverage ratio. Crestwood has substantial liquidity available under
    its $1.5 billion revolver with $77 million drawn as of December 31,
    2016
  • Declared fourth quarter 2016 cash distribution of $0.60 per common
    unit, or $2.40 per common unit on an annualized basis, paid on
    February 14, 2017 to unitholders of record as of February 7, 2017

Management Commentary

"Despite record commodity price volatility and challenging industry
conditions in 2016, Crestwood delivered on all of the strategic
initiatives we laid out to investors at the beginning of the year,"
stated Robert G. Phillips, Chairman, President and Chief Executive
Officer of Crestwood's general partner. "With strong fourth quarter
Adjusted EBITDA of $126 million, Crestwood delivered full-year 2016
Adjusted EBITDA of $456 million and achieved the upper end of our 2016
guidance range, resulting in a full-year distribution coverage ratio of
1.8x and a year-end leverage ratio of 3.7x. Also during 2016, we
favorably resolved longstanding producer issues on our Barnett and PRB
Niobrara gathering systems, reduced our outstanding debt by $1 billion,
reduced operating and G&A expenses by another 15%, adjusted our common
unit distribution to retain excess cash flow for reinvestment in new
projects during 2016 and 2017, and repositioned Crestwood for long-term
growth through the Nautilus system with Shell, and the formation of
strategic partnerships with Con Edison in the Northeast and with First
Reserve in the fast growing Delaware Permian."

Mr. Phillips continued, "Heading into 2017, our commercial teams are
having success expanding assets and services in three core areas:
Delaware Permian, Bakken and Marcellus. Our 2017 capital budget is
currently concentrated on Arrow system expansions and the Nautilus
build-out, and our teams continue to work on developing several new
capital projects that we expect to finalize and announce later this
year. Our 2017 adjusted cash flow guidance is lower than 2016 due to a
full-year deconsolidation of the Stagecoach assets and contract
expirations at the COLT Hub. As such, we view 2017 as a transition year
where system volumes stabilize, key systems are expanded and overall
volumes and cash flow begin to pick up in the second half of the year
with increasing activity around our Delaware Permian, Bakken, Marcellus,
PRB Niobrara and Barnett systems."

"We are very pleased with where Crestwood is positioned today and are
very confident in our ability to execute on our conservative 2017 plan.
The improved outlook in our base business, along with 2017 expansion
projects currently underway or in development in the Delaware Permian
and Bakken regions, and longer-term projects around our Stagecoach
assets, should allow Crestwood to deliver increased cash flows, maintain
prudent leverage targets and potentially lead to a resumption of
distribution growth in 2018," added Mr. Phillips.

Fourth Quarter and Full-Year 2016 Segment Results

Gathering and Processing ("G&P") segment EBITDA totaled $61.9 million in
the fourth quarter 2016 compared to $8.2 million in the fourth quarter
2015, which includes a $51.4 million equity investment impairment and
excludes non-cash goodwill impairments and losses on long-lived assets
in the fourth quarter 2015. During the fourth quarter 2016, average
natural gas gathering volumes were 883 million cubic feet per day
("MMcf/d"), crude oil gathering volumes were 64 thousand barrels per day
("MBbls/d"), processing volumes were 217 MMcf/d and compression volumes
were 411 MMcf/d. Segment EBITDA increased quarter-over-quarter as a
result of a 5% reduction in operating expenses and increased EBITDA
generated by the Arrow, Willow Lake and PRB Niobrara systems. Full-year
G&P segment EBITDA totaled $253.7 million compared to $211.4 million in
2015, excluding goodwill impairments and losses on long-lived assets.
For the full-year 2016 compared to 2015, the G&P segment EBITDA
increased primarily due to the equity investment impairment described
above.

Storage and Transportation ("S&T") segment EBITDA totaled
$33.2 million in the fourth quarter 2016 compared to $29.2 million in
the fourth quarter 2015, excluding goodwill impairments and gains on
long-lived assets. Fourth quarter 2016 segment EBITDA reflects
Crestwood's 35% share of Stagecoach JV earnings and the recognition of
$14.3 million of deficiency payments at the COLT Hub. During the fourth
quarter 2016, natural gas storage and transportation volumes averaged
1.9 Bcf/d, compared to 2.0 Bcf/d in the fourth quarter 2015, and 1.8
Bcf/d in the third quarter 2016. Fourth quarter 2016 volumes increased
4% sequentially from the third quarter 2016 primarily as a result of
increased Northeast storage withdrawals offset by lower volumes at the
Tres Palacios storage facility. Full-year S&T segment EBITDA totaled
$154.2 million compared to $197.1 million in 2015, excluding goodwill
impairments and losses on long-lived assets. For the full year 2016
compared to 2015, the S&T segment reflects lower EBITDA primarily as a
result of seven months of deconsolidated operating results related to
the formation of the Stagecoach JV in June 2016.

Marketing, Supply and Logistics ("MS&L") segment EBITDA totaled $22.1
million in the fourth quarter 2016 compared to $28.2 million in the
fourth quarter 2015. Both periods are exclusive of non-cash goodwill
impairments and losses on long-lived assets. Fourth quarter 2016 segment
EBITDA reflects lower activity in Crestwood's trucking and terminal
business units, offset by higher margins on NGL marketing volumes in the
Northeast, due to more normalized winter weather related demand, and
record product sales at US Salt due to capital investments in recent
years. Full-year MS&L segment EBITDA totaled $60.9 million compared to
$89.8 million in 2015, excluding non-cash goodwill impairments and
losses on long-lived assets. For the full year 2016 compared to 2015,
the MS&L segment was impacted by significantly warmer than normal winter
weather during the first quarter 2016 and a full-year lower contribution
from the trucking business.

Combined O&M and G&A expenses for the full-year 2016, net of unit based
compensation and other significant costs, decreased by $37.7 million, or
15%, compared to full-year 2015. Crestwood exceeded its cost reduction
goals in 2016 by reducing employee costs, improving maintenance
practices and reducing expenses by utilizing strategic purchasing and
professional service agreements.

Business Update and Outlook

Bakken - Arrow Gathering System

On the Arrow system, average crude oil, natural gas and produced water
volumes increased 16%, 10% and 12%, respectively, in the fourth quarter
2016 compared to volumes in the third quarter 2016 despite weather in
the region that negatively impacted production levels and typically
strong year-end drilling and completions. In 2016, 48 wells were
connected to the Arrow system and it is expected that approximately 70
wells will be connected in 2017. In 2017, Crestwood plans to invest
approximately $55 million on the Arrow system to expand and upgrade
water handling facilities, increase natural gas gathering capacity and
complete an interconnect with the Dakota Access Pipeline ("DAPL") which
is expected to provide Arrow producers with access to new crude oil
markets for Bakken production and potentially higher net-back prices.
Additionally, due to the expectation of increasing gas volumes on the
Arrow system, Crestwood is evaluating a long-term gas processing
solution that will lead to increased development activity, enhanced flow
assurance, reduced flaring and improved producer natural gas net-backs
across the Arrow system. This project is not included in the current
capital spending guidance for 2017.

Delaware Basin Update

In September 2016, Crestwood contracted with a subsidiary of Royal Dutch
Shell (SWEPI) to construct, own and operate the Nautilus natural gas
gathering system in Loving and Ward counties, Texas. The system is owned
by the 50%/50% joint venture with First Reserve, which expects to invest
$90 million, $45 million net to Crestwood, for the initial system
build-out in 2017. Pipeline engineering and right of way acquisition are
substantially complete, system construction is underway with a targeted
in-service date before July 1, 2017.

During the fourth quarter 2016, the Willow Lake system averaged
gathering volumes of 43 MMcf/d and processing volumes of 38 MMcf/d
compared to volumes of 21 MMcf/d and 11 MMcf/d, respectively, in the
fourth quarter 2015. Additional Wolfcamp and Bone Springs wells are
scheduled to be connected in 2017, bringing the Willow Lake system and
plant to full capacity. Crestwood continues to work with area producers
to evaluate 2017 and 2018 drilling plans which may result in an
expansion of the Willow Lake processing facility or the construction of
the previously proposed Delaware Ranch processing plant. This project is
not included in the current capital spending guidance for 2017.

Crestwood extended and continues to operate on an exclusive basis with
an anchor shipper to develop the RIGS system located in Reeves County,
Texas in the Delaware Basin. The RIGS system, located adjacent to the
Nautilus system, will be included in the joint venture with First
Reserve. This project is not included in the current capital spending
guidance for 2017.

PRB Niobrara – Jackalope Joint Venture

On January 1, 2017, Crestwood and Williams Partners L.P. (50%/50% joint
venture) executed a new 20-year gathering and processing agreement with
Chesapeake Energy. The new fixed-fee contract, which replaces the
original cost-of-service agreement, includes minimum annual revenue
guarantees over the next five to seven years that will provide baseline
cash flow to Crestwood. During the fourth quarter 2016, Chesapeake
resumed development activity on the Jackalope system and is currently
running two drilling rigs. Crestwood expects to connect 20 to 25 wells
in 2017. No additional capital is required on the Jackalope system in
2017 as the system is currently running at 40% of total capacity.

SW Marcellus Gathering System

Crestwood has been notified that Antero Resources is completing its 22
drilled-but-uncompleted wells on Crestwood's eastern area of dedication
in 2017. Completion crews are currently onsite with four wells expected
online by the end of the first quarter 2017 and four additional wells by
the end of the second quarter 2017. The remaining 14 wells are expected
to be brought online beginning in the second half of 2017.

Barnett Shale Gathering Systems

During the fourth quarter 2016, dry and rich gathering volumes were flat
quarter-over-quarter as BlueStone Natural Resources implemented a
workover program to offset natural field decline. Recently, BlueStone
completed seven drilled but uncompleted wells and is expected to
continue workover activity to offset natural field decline on the
Barnett system in 2017.

Stagecoach Gas Services – Con Edison Joint Venture

Stagecoach Gas Services (50%/50% joint venture) in the fourth quarter
benefited from heavy storage withdrawals driven by colder winter
temperatures. These above average withdrawals reaffirm the value of
Stagecoach assets and their proximity to key East Coast demand markets.
Stagecoach is encouraged by the recent progress in the Northeast
regulatory environment enabling some previously announced infrastructure
projects in the basin to move forward. An increase in long haul
infrastructure projects is expected to benefit Stagecoach's base
business and prospects for future growth opportunities.

COLT Hub

On November 30, 2016, contracts for 60 MBbls/d of take-or-pay rail
loading volumes expired reducing the level of remaining take-or-pay rail
loading volumes to 40 MBbls/d at a weighted average rail loading fee of
approximately $1.60 per barrel. Rail loading volumes for the month of
January 2017 averaged approximately 65 MBbls/d resulting in
approximately $4.5 million of monthly cash flow. Rail loading volumes
are exceeding take-or-pay contracts levels due to increased utilization
from daily spot customers and new short-term contracts. Crestwood
connected the COLT Hub to DAPL in the fourth quarter 2016, which is
expected to attract additional volumes to the facility after DAPL is
placed into service.

NGL Marketing & Logistics

In the fourth quarter 2016, Crestwood expanded its West Coast NGL
business with the acquisition of Turner Gas Company for approximately $7
million. The acquisition included significant long-term Western US
propane customers, numerous Rocky Mountain contracts for direct NGL
supplies from processing plants and fractionators, three rail-to-truck
terminals located in Nevada and Wyoming and a truck terminal in Salt
Lake City, Utah. The acquired assets will enhance Crestwood's ability to
provide supply, transportation and storage services to wholesale
customers in the western and north central regions of the United States
and augment Crestwood's West Coast refineries services business.
Crestwood is developing a greenfield rail-to-truck NGL terminal in
Montgomery, NY that will increase propane supply reliability across the
Northeast markets. The terminal, which is expected to be placed into
service in the summer of 2017, will be supported by product controlled
by Crestwood from multiple producers in the Marcellus and Utica regions.

2017 Outlook

Based upon the business update and outlook noted above, Crestwood's 2017
guidance is provided below. These projections are subject to risks and
uncertainties as described in the "Forward-Looking Statements" section
at the end of this release.

  • Net income of $0 to $30 million
  • Adjusted EBITDA of $360 million to $390 million
  • Contribution by operating segment is set forth below:
                $US millions   Adj. EBITDA Range
Operating Segment Low High
Gathering & Processing $265 - $275
Storage & Transportation 80 - 90
Marketing, Supply & Logistics 80 - 90
Less: Corporate G&A (65) (65)
FY 2017 Totals $360

-

$390
  • Distributable cash flow of $200 million to $230 million
  • Cash distributions of $2.40 per common unit resulting in full-year
    2017 cash distribution coverage ratio of approximately 1.2x to 1.4x
  • Targeted 2017 leverage ratio between 4.0x and 4.5x
  • Growth project capital spending and joint venture contributions in the
    range of $130 million to $150 million
  • Maintenance capital spending in the range of $20 million to $25 million

Robert T. Halpin, Senior Vice President and Chief Financial Officer,
commented, "In 2017, Crestwood plans to fund all currently budgeted
capital requirements through our regional joint ventures and ample
liquidity under our revolving credit facility. Crestwood remains
committed to maintaining our targeted distribution coverage and leverage
goals as we execute our organic growth projects in the Delaware Permian
and Bakken, which will drive growing cash flows and increased
distribution coverage in 2018."

Capitalization and Liquidity Update

As of December 31, 2016, Crestwood had approximately $1.6 billion of
debt outstanding, comprised primarily of $1.5 billion of fixed-rate
senior notes and $77 million outstanding under its $1.5 billion
revolving credit facility. Crestwood's leverage ratio was 3.7x compared
to the leverage covenant under its revolving credit facility of 5.5x.
Crestwood currently has 68.0 million preferred units outstanding which
pay an annual distribution of 9.25% payable quarterly in cash or through
the issuance of additional preferred units.

Goodwill and Long-Lived Asset Charges

Generally Accepted Accounting Principles ("GAAP") required Crestwood to
record the assets and goodwill in its storage and transportation segment
and marketing, supply and logistics segment at fair value when the
assets were acquired in 2013, and further require subsequent analysis to
assess the recoverability of assigned values, including goodwill.

As a result of this analysis, Crestwood recorded goodwill and long-lived
asset impairments of $84 million during the fourth quarter of 2016 ($228
million for full-year 2016), primarily related to its COLT Hub and
trucking assets, and impairments of $1.3 billion during the fourth
quarter of 2015 ($2.2 billion for full-year 2015), primarily related to
its COLT Hub, trucking and Barnett shale assets. These impairments
primarily resulted from decreasing forecasted cash flows from these
assets and increasing the discount rate utilized in determining the fair
value of these assets when taking into consideration continued commodity
price weakness and its impact on the midstream industry and Crestwood's
customers in these areas.

Upcoming Conference Participation

Crestwood Management will participate in the following MLP and energy
conferences during the first quarter 2017. Prior to the each conference
presentation materials will be posted to the Investors section of
Crestwood's website at www.crestwoodlp.com.

  • Barclays MLP Corporate Access Day on February 28 – March 1, in New
    York, NY
  • Morgan Stanley MLP/Diversified Natural Gas, Utilities & Clean Tech
    Conference on February 28 – March 1, in New York, NY
  • J.P. Morgan 2017 Global High Yield and Leveraged Finance Conference on
    February 27 – March 1, in Miami, FL
  • Capital Link 4th Annual MLP Investing Forum on March 2, in
    New York, NY

2017 K-1 Tax Packages

Crestwood's K-1 tax packages are expected to be made available online
and mailed the week of Monday, March 6, 2017.

Earnings Conference Call Schedule

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 will be able to
connect to the webcast via the "Investors" page of Crestwood's website
at 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

This news release contains forward-looking statements within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 and Section
21E of the Securities and Exchange Act of 1934. The words "expects,"
"believes," anticipates," "plans," "will," "shall," "estimates," and
similar expressions identify forward-looking statements, which are
generally not historical in nature. Forward-looking statements are
subject to risks and uncertainties and are based on the beliefs and
assumptions of management, based on information currently available to
them. Although Crestwood believes that these forward-looking statements
are based on reasonable assumptions, it can give no assurance that any
such forward-looking statements will materialize. Important factors that
could cause actual results to differ materially from those expressed in
or implied from these forward-looking statements include the risks and
uncertainties described in Crestwood's reports filed with the Securities
and Exchange Commission, including its Annual Report on Form 10-K and
its subsequent reports, which are available through the SEC's EDGAR
system at www.sec.gov
and on our website. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's view only as of
the date made, and Crestwood assumes no obligation to update these
forward-looking statements.

About Crestwood Equity Partners LP

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

1 Please see non-GAAP reconciliation table included at the
end of the press release. Financial results reflect Crestwood's
contribution of its Northeast Storage and Transportation assets to
Stagecoach Gas Services JV ("Stagecoach") and its 35% share of
Stagecoach's earnings beginning June 2016.

2 Net loss for the fourth quarter 2016 and 2015 includes
$228.2 million and $2.2 billion of non-cash goodwill and long-lived
asset impairment charges resulting from decreasing cash flows due to the
weakness in commodity prices and increased discount rates used to
determine the fair value of its assets during those periods.

   
CRESTWOOD EQUITY PARTNERS LP

Consolidated Statements of Operations

(in millions, except unit and per unit data)

(unaudited)

Three Months Ended
December 31,

    Year Ended December 31,
2016   2015 2016   2015
 
Revenues:
Gathering and processing $ 330.6 $ 327.4 $ 1,116.2 $ 1,377.1
Storage and transportation 33.8 65.2 165.3 266.3
Marketing, supply and logistics 430.1 235.6 1,236.4 985.5
Related party 0.5   0.9   2.6   3.9  
795.0 629.1 2,520.5 2,632.8
Costs of product/services sold:
Gathering and processing 280.8 255.6 899.3 1,075.0
Storage and transportation 0.2 4.3 5.1 20.1
Marketing, supply and logistics 360.0 179.5 1,003.0 759.5
Related party 4.0   5.7   17.7   28.9  
645.0 445.1 1,925.1 1,883.5
Expenses:
Operations and maintenance 38.2 46.4 158.1 190.2
General and administrative 18.0 25.4 88.2 116.3
Depreciation, amortization and accretion 52.6   75.6   229.6   300.1  
108.8 147.4 475.9 606.6

Other operating expense:

Loss on long-lived assets, net (30.8 ) (817.3 ) (65.6 ) (821.2 )
Goodwill impairment (52.9 ) (515.4 ) (162.6 ) (1,406.3 )

Operating loss

(42.5 ) (1,296.1 ) (108.7 ) (2,084.8 )

Earnings (loss) from unconsolidated affiliates, net

5.4 (72.0 ) 31.5 (60.8 )
Interest and debt expense, net (27.2 ) (35.4 ) (125.1 ) (140.1 )
Gain (loss) on modification/extinguishment of debt

-

(0.2 ) 10.0 (20.0 )
Other income, net 0.1   0.1   0.5   0.6  
Loss before income taxes (64.2 ) (1,403.6 ) (191.8 ) (2,305.1 )
(Provision) benefit for income taxes (0.1 ) 1.2   (0.3 ) 1.4  
Net loss (64.3 ) (1,402.4 ) (192.1 ) (2,303.7 )
Net income (loss) attributable to non-controlling partners 6.2   5.9   24.2   (636.8 )
Net loss attributable to Crestwood Equity Partners LP $ (70.5 ) $ (1,408.3 ) $ (216.3 ) $ (1,666.9 )
Net income attributable to preferred units 12.1   6.2   28.7   6.2  
Net loss attributable to partners $ (82.6 ) $ (1,414.5 ) $ (245.0 ) $ (1,673.1 )
 
 
Net loss per limited partner unit:
Basic and diluted $ (1.20 ) $ (20.77 ) $ (3.55 ) $ (54.00 )
 
Weighted-average limited partners' units outstanding (in thousands):
Basic and diluted 69,060   68,119   69,017   30,983  
 
CRESTWOOD EQUITY PARTNERS LP

Selected Balance Sheet Data

(in millions)

(unaudited)

    December 31,
2016   2015

Cash

$

1.6

$ 0.5
 

Outstanding debt:

Crestwood Equity Partners LP
Other $

-

$ 0.2
Crestwood Midstream Partners LP (a)
Revolving Credit Facility $ 77.0 $ 735.0
Senior Notes 1,475.2 1,800.0
Other   5.5   8.6
Subtotal 1,557.7 2,543.6
Less: deferred financing costs, net   34.0   40.9
Total debt $ 1,523.7   $ 2,502.9
 
Total partners' capital $ 2,539.0   $ 2,946.9
 

Crestwood Equity Partners LP partners'
capital

Common units outstanding 69.5 68.6
 

(a) CEQP and its subsidiaries do not provide credit support or
guarantee any amounts outstanding under the credit facility or
senior notes of Crestwood Midstream.

 
CRESTWOOD EQUITY PARTNERS LP

Reconciliation of Non-GAAP Financial Measures

(in millions)

(unaudited)

   

Three Months Ended
December 31,

    Year Ended December 31,
2016   2015 2016   2015

EBITDA

Net loss $ (64.3 ) $ (1,402.4 ) $ (192.1 ) $ (2,303.7 )
Interest and debt expense, net 27.2 35.4 125.1 140.1
(Gain) loss on modification/extinguishment of debt

-

0.2 (10.0 ) 20.0
Provision (benefit) for income taxes 0.1 (1.2 ) 0.3 (1.4 )
Depreciation, amortization and accretion 52.6   75.6   229.6   300.1  

EBITDA (a)

$ 15.6 $ (1,292.4 ) $ 152.9 $ (1,844.9 )
Significant items impacting EBITDA:
Unit-based compensation charges 5.8 4.1 19.2 19.7
Loss on long-lived assets, net 30.8 817.3 65.6 821.2
Goodwill impairment 52.9 515.4 162.6 1,406.3
Earnings (loss) from unconsolidated affiliates, net (5.4 ) 72.0 (31.5 ) 60.8
Adjusted EBITDA from unconsolidated affiliates, net 19.7 6.9 61.1 25.3
Change in fair value of commodity inventory-related derivative
contracts
5.8 (5.3 ) 14.1 5.4
Significant transaction and environmental related costs and other
items
0.4   0.9   11.6   33.6  
Adjusted EBITDA (a) $ 125.6 $ 118.9 $ 455.6 $ 527.4
 

Distributable Cash Flow

Adjusted EBITDA (a)

$ 125.6 $ 118.9 $ 455.6 $ 527.4
Cash interest expense (b) (25.2 ) (33.5 ) (117.7 ) (132.3 )
Maintenance capital expenditures (c) (4.4 ) (10.0 ) (13.3 ) (23.4 )
(Provision) benefit for income taxes (0.1 ) 1.2 (0.3 ) 1.4
Deficiency payments (14.3 ) (0.9 ) (7.2 ) 3.6  
Distributable cash flow attributable to CEQP 81.6 75.7 317.1 376.7
Distributions to Niobrara Preferred (3.8 ) (3.8 ) (15.2 ) (15.2 )
Distributable cash flow attributable to CEQP common (d) $ 77.8   $ 71.9   $ 301.9   $ 361.5  
 
(a)

EBITDA is defined as income before income taxes, plus debt-related
costs (net interest and debt expense and gain or loss on
modification/extinguishment of debt) and depreciation,
amortization and accretion expense. Adjusted EBITDA considers the
adjusted earnings impact of our unconsolidated affiliates by
adjusting our equity earnings or losses from our unconsolidated
affiliates to reflect our proportionate share (based on the
distribution percentage) of their EBITDA, excluding impairments.
Adjusted EBITDA also considers the impact of certain significant
items, such as unit-based compensation charges, gains and losses
on long-lived assets, impairments of long-lived assets and
goodwill, gains and losses on acquisition-related contingencies,
third party costs incurred related to potential and completed
acquisitions, certain environmental remediation costs, certain
costs related to our historical cost savings initiatives, the
change in fair value of commodity inventory-related derivative
contracts, and other transactions identified in a specific
reporting period. The change in fair value of commodity
inventory-related derivative contracts is considered in
determining Adjusted EBITDA given that the timing of recognizing
gains and losses on these derivative contracts differs from the
recognition of revenue for the related underlying sale of
inventory that these derivatives relate to. Changes in the fair
value of other derivative contracts is not considered in
determining Adjusted EBITDA given the relatively short-term nature
of those derivative contracts. EBITDA and Adjusted EBITDA are not
measures calculated in accordance with 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 less amortization of deferred financing costs
plus bond premium amortization.
(c) Maintenance capital expenditures are defined as those capital
expenditures which do not increase operating capacity or revenues
from existing levels.
(d) Distributable cash flow is defined as Adjusted EBITDA, less cash
interest expense, maintenance capital expenditures, income taxes and
deficiency payments (primarily related to deferred revenue).
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 GAAP 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 EQUITY PARTNERS LP

Reconciliation of Non-GAAP Financial Measures

(in millions)

(unaudited)

   

Three Months Ended
December 31,

    Year Ended December 31,
2016   2015 2016   2015

EBITDA

Net cash provided by operating activities $ 96.4 $ 139.1 $ 340.9 $ 440.7
Net changes in operating assets and liabilities (11.1 ) (52.4 ) (57.9 ) (98.0 )
Amortization of debt-related deferred costs, discounts and premiums (1.8 ) (2.3 ) (6.9 ) (8.9 )
Interest and debt expense, net 27.2 35.4 125.1 140.1
Market adjustment on interest rate swap

-

-

-

0.5
Unit-based compensation charges (5.8 ) (4.1 ) (19.2 ) (19.7 )
Loss on long-lived assets, net (30.8 ) (817.3 ) (65.6 ) (821.2 )
Goodwill impairment (52.9 ) (515.4 ) (162.6 ) (1,406.3 )

Earnings (loss) from unconsolidated affiliates, net, adjusted for
cash distributions

(6.3 ) (75.2 ) (2.4 ) (73.6 )
Deferred income taxes 2.2 1.1 3.1 3.6
Provision (benefit) for income taxes 0.1 (1.2 ) 0.3 (1.4 )
Other non-cash expense (1.6 ) (0.1 ) (1.9 ) (0.7 )

EBITDA (a)

$ 15.6 $ (1,292.4 ) $ 152.9 $ (1,844.9 )
Unit-based compensation charges 5.8 4.1 19.2 19.7
Loss on long-lived assets, net 30.8 817.3 65.6 821.2
Goodwill impairment 52.9 515.4 162.6 1,406.3
(Earnings) loss from unconsolidated affiliates, net (5.4 ) 72.0 (31.5 ) 60.8
Adjusted EBITDA from unconsolidated affiliates, net 19.7 6.9 61.1 25.3
Change in fair value of commodity inventory-related derivative
contracts
5.8 (5.3 ) 14.1 5.4
Significant transaction and environmental related costs and other
items
0.4   0.9   11.6   33.6  
Adjusted EBITDA (a) $ 125.6   $ 118.9   $ 455.6   $ 527.4  
 
(a) EBITDA is defined as income before income taxes, plus debt-related
costs (net interest and debt expense and gain or loss on
modification/extinguishment of debt) and depreciation, amortization
and accretion expense. Adjusted EBITDA considers the adjusted
earnings impact of our unconsolidated affiliates by adjusting our
equity earnings or losses from our unconsolidated affiliates to
reflect our proportionate share (based on the distribution
percentage) of their EBITDA, excluding impairments. Adjusted EBITDA
also considers the impact of certain significant items, such as
unit-based compensation charges, gains and losses on long-lived
assets, impairments of long-lived assets and goodwill, gains and
losses on acquisition-related contingencies, third party costs
incurred related to potential and completed acquisitions, certain
environmental remediation costs, certain costs related to our
historical cost savings initiatives, the change in fair value of
commodity inventory-related derivative contracts, and other
transactions identified in a specific reporting period. The change
in fair value of commodity inventory-related derivative contracts is
considered in determining Adjusted EBITDA given that the timing of
recognizing gains and losses on these derivative contracts differs
from the recognition of revenue for the related underlying sale of
inventory that these derivatives relate to. Changes in the fair
value of other derivative contracts is not considered in determining
Adjusted EBITDA given the relatively short-term nature of those
derivative contracts. EBITDA and Adjusted EBITDA are not measures
calculated in accordance with 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 EQUITY PARTNERS LP

Segment Data

(in millions)

(unaudited)

   

Three Months Ended
December 31,

    Year Ended December 31,
2016   2015 2016   2015

Gathering and Processing

Revenues $ 363.8 $ 340.5 $ 1,227.4 $ 1,447.7
Costs of product/services sold 284.8 261.3 917.0 1,103.9
Operations and maintenance expense 20.9 22.0 77.0 89.0
Loss on long-lived assets, net

-

(786.1 ) (2.0 ) (787.3 )
Goodwill impairment

-

(69.9 ) (8.6 ) (329.7 )

Earnings (loss) from unconsolidated affiliates

3.8   (49.0 ) 20.3   (43.4 )
EBITDA $ 61.9 $ (847.8 ) $ 243.1 $ (905.6 )
 

Storage and Transportation

Revenues $ 35.0 $ 65.2 $

169.5

$ 266.3
Costs of product/services sold 0.2 4.3 5.1 20.1
Operations and maintenance expense 3.2 8.7 21.4 31.7
Gain (loss) on long-lived assets 0.6

-

(32.2 ) (1.6 )
Goodwill impairment (31.2 ) (275.4 ) (44.9 ) (623.4 )
Earnings (loss) from unconsolidated affiliates 1.6   (23.0 ) 11.2   (17.4 )
EBITDA $ 2.6 $ (246.2 ) $ 77.1 $ (427.9 )
 

Marketing, Supply and Logistics

Revenues $ 396.2 $ 168.9 $ 1,123.6 $ 918.8
Costs of product/services sold 360.0 125.0 1,003.0 759.5
Operations and maintenance expense 14.1 15.7 59.7 69.5
Loss on long-lived assets (31.4 ) (31.2 ) (31.4 ) (32.3 )
Goodwill impairment (21.7 ) (170.1 ) (109.1 ) (453.2 )
EBITDA $ (31.0 ) $ (173.1 ) $ (79.6 ) $ (395.7 )
 
Total Segment EBITDA $ 33.5 $ (1,267.1 ) $ 240.6 $ (1,729.2 )
Corporate (17.9 ) (25.3 ) (87.7 ) (115.7 )
EBITDA $ 15.6   $ (1,292.4 ) $ 152.9   $ (1,844.9 )
 
CRESTWOOD EQUITY PARTNERS LP

Operating Statistics

(unaudited)

   

Three Months Ended
December 31,

    Year Ended December 31,
2016   2015 2016   2015

Gathering and Processing (MMcf/d)

 
Arrow 45.2 43.7 43.3 43.0
Marcellus 362.1 431.7 406.7 550.1
Barnett rich 126.8 114.6 118.6 128.0
Barnett dry 192.8 194.6 192.3 213.3
Fayetteville 51.3 66.4 55.8 72.5
PRB Niobrara - Jackalope Gas Gathering (a) 49.0 78.1 60.3 79.7
Other 55.8   50.7   59.5   49.7  
Total gathering volumes 883.0 979.8 936.5 1,136.3
Processing volumes 217.0 220.6 218.8 216.5
Compression volumes 410.6 459.7 463.0 579.0
Arrow Midstream
Crude oil (MBbls/d) 64.1 69.9 61.6 65.7
Water (MBbls/d) 30.0 27.9 27.8 26.4
 

Storage and Transportation

Northeast Storage - firm contracted capacity (Bcf) (a) 35.8 34.4 35.5 34.4
% of operational capacity contracted 100 % 99 % 100 % 99 %
Firm storage services (MMcf/d) (a) 242.3 277.9 215.5 336.7
Interruptible storage services (MMcf/d) (a) 1.4 17.6 11.5 71.2
Northeast Transportation - firm contracted capacity (MMcf/d) (a) 1,438.4 1,265.0 1,385.2 1,214.8
% of operational capacity contracted 81 % 87 % 81 % 87 %
Firm services (MMcf/d) (a) 1,316.0 1,139.7 1,154.4 1,209.7
Interruptible services (MMcf/d) (a) 69.7 199.8 101.3 190.2
Gulf Coast Storage - firm contracted capacity (Bcf) (a) 30.4 28.9 30.1 26.4
% of operational capacity contracted 79 % 75 % 78 % 69 %
Firm storage services (MMcf/d) (a) 227.8 196.1 193.1 161.2

Interruptible storage services (MMcf/d) (a)

26.8 161.7 60.9 137.3
COLT Hub
Rail loading (MBbls/d) 84.8 107.4 89.6 117.3
Connector pipeline (MBbls/d) (b) 9.1 13.1 11.4 7.5
 

Marketing, Supply and Logistics

Crude barrels trucked (MBbls/d) 4.3 16.0 8.4 24.1
NGL Operations
Supply & Logistics volumes sold (MBbls/d) 94.1 81.2 87.4 95.4
West Coast volumes sold or processed (MBbls/d) 20.7 23.2 22.0 26.3
NGL volumes trucked (MBbls/d) 64.4 65.3 52.4 64.0
 
(a) Represents 50% owned joint venture, operational data reported at
100%.
(b) Represents only throughput leaving the terminal. Total connector
pipeline throughput, including receivables was 34.9 MBbls/d and 40.3
MBbls/d for the three and twelve months ended December 31, 2016, and
38.2 MBbls/d and 33.7 MBbls/d for the three and twelve months ended
December 31, 2015.
 
CRESTWOOD EQUITY PARTNERS LP

Full Year 2017 Adjusted EBITDA and Distributable Cash Flow
Guidance

Reconciliation to Net Income

(in millions)

(unaudited)

    Expected 2017 Range
Low - High
Net income $0 - $30
Interest and debt expense, net 110
Depreciation, amortization and accretion 195
Unit-based compensation charges 25
Earnings from unconsolidated affiliates (50) - (55)
Adjusted EBITDA from unconsolidated affiliates 80 - 85
Adjusted EBITDA $360 - $390
 
Cash interest expense (a) (105)
Maintenance capital expenditures (b) (20) - (25)
Cash distributions to preferred unitholders (c) (30)
Distributable cash flow attributable to CEQP (d) $200 - $230
 
(a) Cash interest expense less amortization of deferred financing costs
plus bond premium amortization plus or minus fair value adjustment
of interest rate swaps.
(b) Maintenance capital expenditures are defined as those capital
expenditures which do not increase operating capacity or revenues
from existing levels.
(c) Includes cash distributions to Crestwood Niobrara preferred
unitholders and cash distributions to Class A preferred unit holders.
(d) 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
public Crestwood Midstream LP unitholders interest in CMLP
distributable cash flow. 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 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.

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