HOUSTON, TX — (Marketwire) — 11/06/12 — Crestwood Midstream Partners LP (NYSE: CMLP) (“Crestwood” or the “Partnership”) reported today its unaudited financial results for the three months ended September 30, 2012. Key financial and operating results with respect to the third quarter 2012 included the following:
Reported record adjusted earnings before interest, taxes, depreciation, amortization and accretion (“Adjusted EBITDA”) of $32.0 million, up 12% from the $28.5 million reported in the second quarter 2012, on 9% higher gathering volumes on Crestwood–s 100% owned gathering systems and 13% higher gathering volumes on Crestwood–s 35% owned Marcellus Shale pipelines.
Reported record adjusted distributable cash flow of $25.2 million, up 22% from the $20.6 million reported for the second quarter 2012.
Announced a quarterly distribution increase with respect to the third quarter 2012 of $0.51 per common unit (equivalent to $2.04 per common unit on an annualized basis), representing a 6.3% increase compared to the distribution paid with respect to the third quarter 2011.
Crestwood–s third quarter 2012 performance resulted in an improvement in distribution coverage ratio to 1.0x for the current quarter compared to 0.85x in the second quarter 2012.
Reported adjusted net income of $12.0 million, or $0.17 of adjusted earnings per limited partner unit, compared to analyst consensus estimates of $0.18 per limited partner unit.
In the rich gas portion of the Barnett Shale, Crestwood completed the acquisition of Devon Energy Corporation–s (“Devon”) West Johnson County gas gathering system and processing plant for $87 million. Crestwood is currently connecting the acquired system to its Cowtown rich gas gathering system and processing plants which will make the acquired processing plant available in the fourth quarter 2012 for redeployment in other rich gas areas where Crestwood is developing projects. In conjunction with the transaction, Crestwood entered into a 20 year gathering and processing agreement with Devon.
In the Marcellus Shale region, Crestwood continued to expand its operations group and completed its first major gathering system expansion since taking over operations from Antero Resources Appalachian Corporation (“Antero”) in the second quarter 2012. During the third quarter 2012, gathering volumes increased to 289 million cubic feet per day (“MMcf/d”) compared to 257 MMcf/d in the second quarter 2012, based on increased drilling activity by Antero and improved results from completed wells. October 2012 volumes averaged 362 MMcf/d and November 1, 2012 spot volumes totaled 376 MMcf/d.
Other activities impacting Crestwood–s volumes during the third quarter 2012 compared to the second quarter 2012 were a 26% increase in processing volumes, 21% higher gathering volumes in the Fayetteville and Granite Wash segments and 10% higher volumes in the Barnett Shale segment despite lower volumes on the Lake Arlington system and a temporary shut-in of volumes on the Cowtown system due to a fire at our Corvette processing plant.
“We are pleased to deliver record Adjusted EBITDA and adjusted distributable cash flow in the third quarter as each of our business segments showed improvement over the second quarter of 2012,” stated Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood–s general partner. “In general, we saw increased drilling activity in all of our operating areas except the dry gas areas of the Barnett Shale and the Haynesville/Bossier Shale. Our 2012 rich gas acquisitions, the Antero Marcellus assets and the Devon Barnett assets, added significantly to our third quarter results and should continue to contribute sequential growth in future quarters based on current producer drilling and development plans. We continue to look for bolt-on acquisitions around our existing assets and opportunities to expand our rich gas exposure through organic development projects or diversifying acquisitions,” stated Phillips.
Crestwood–s Adjusted EBITDA for the third quarter 2012 totaled $32.0 million, a 10% increase from Adjusted EBITDA of $29.1 million in the third quarter 2011. The increase in Adjusted EBITDA was primarily attributable to the contribution from Crestwood Marcellus Midstream (“CMM”) due to growth of our rich gas volumes in the Marcellus Shale and assets acquired from Devon in the rich gas area of the Barnett Shale in the third quarter 2012. Also contributing to the increase was a 23% increase in Crestwood–s Barnett and Granite Wash processing volumes, higher volumes in the Fayetteville segment and the contribution from our Haynesville assets which were acquired in the fourth quarter 2011.
Volumes on Crestwood–s 100% owned gathering systems averaged 604 MMcf/d in the third quarter 2012, down 2% from 619 MMcf/d gathered in the third quarter 2011, but 8% higher than the 561 MMcf/d gathered in the second quarter 2012. Gathered volumes on the newly acquired assets in the rich gas area of the Barnett averaged 78 MMcf/d since closing on August 24, 2012, and contributed approximately $2.0 million of revenue during the quarter. Volumes gathered on the CMM systems (35% owned and operated by Crestwood) totaled 289 MMcf/d during the third quarter 2012. CMM had 100% Adjusted EBITDA of $6.4 million and contributed Adjusted EBITDA of $2.2 million to Crestwood during the third quarter 2012, up 19% from the second quarter 2012. Total gathering volumes for all systems operated by Crestwood for the third quarter 2012 were 893 MMcf/d.
Barnett Segment
Operating revenues, net of product purchases, in the Barnett segment totaled $33.3 million in the third quarter 2012, compared with $36.9 million in the third quarter 2011, but 6% higher than the $31.5 million reported in the second quarter 2012. Gathering volumes totaled 438 MMcf/d in 2012, compared with 507 MMcf/d in 2011, but 9% over the 401 MMcf/d reported in the second quarter 2012. The year-to-year gathering volume decrease was primarily due to lower drilling activity on the Lake Arlington and Alliance systems but was partially offset by a 23% increase in higher margin processing volumes which totaled 160 MMcf/d, compared with 130 MMcf/d in the prior year and 129 MMcf/d in the second quarter of 2012. Third quarter 2012 revenues were negatively impacted by approximately $0.5 million due to system down-time following a compressor fire at the Corvette facility in September 2012. Operating and maintenance expenses totaled $7.0 million, an increase of $1.0 million from the third quarter 2011 which was primarily attributable to the addition of the new Devon assets and $0.5 million of additional clean-up expenses at the Corvette facility during the third quarter 2012.
Fayetteville Segment
Operating revenues in the Fayetteville segment, net of product purchases, totaled $7.0 million in the third quarter 2012, compared with $6.6 million in the third quarter 2011, but 13% higher than the $6.2 million reported in the second quarter 2012. Gathering volumes totaled 91 MMcf/d during the third quarter 2012, compared to 85 MMcf/d in the third quarter 2011 and 78 MMcf/d in the second quarter 2012. Crestwood connected 9 new wells from 3 new pads in the third quarter 2012 and new wells continue to show improved initial production performance. Operating and maintenance expenses totaled $1.9 million for the third quarter 2012, a decrease of $2.1 million from 2011 due primarily to lower expenses for leased compression and decreased costs for right-of-way maintenance.
Granite Wash
Operating revenues in the Granite Wash segment, net of product purchases, totaled $1.2 million in the third quarter 2012, compared to $1.4 million in the third quarter 2011, but 23% higher than the second quarter 2012. The year-to-year decrease reflects lower resale prices due to lower gas and NGL prices in 2012 despite higher volumes. Compared to the second quarter 2012, gathering and processing volumes were up 5 MMcf/d to 20 MMcf/d due to increased drilling by LeNorman Operating LLC in the area of our Indian Creek assets. Operating and maintenance expenses totaled $0.6 million, an increase of $0.1 million from the third quarter 2011.
Other Operations
Other operating revenues, net of product purchases, totaled $3.2 million and include the Sabine gathering system in the Haynesville/Bossier Shale, which was acquired in the fourth quarter 2011, and the Las Animas system in the Avalon Shale trend acquired in the first quarter 2011. Gathering volumes on the Sabine and Las Animas systems totaled 45 MMcf/d and 9 MMcf/d, respectively, during the third quarter 2012. Operating and maintenance expenses related to these assets totaled $0.7 million during the third quarter 2012.
CMM Contribution
Equity earnings from Crestwood–s investment in CMM totaled $1.8 million for the third quarter 2012, which represents a 35% ownership interest in CMM. Crestwood–s pro-rata portion of CMM–s Adjusted EBITDA totaled $2.2 million. Volumes gathered by CMM during the third quarter 2012 averaged 289 MMcf/d, an increase of 12% over the second quarter 2012. During the third quarter 2012, Antero had an average of 6 drilling rigs running on acreage dedicated to CMM and completed 16 new Marcellus Shale wells which were connected to the CMM gathering systems. Wells added during the third quarter 2012 have ramped up to an October 2012 average of 362 MMcf/d and a November 1, 2012 spot volume of 376 MMcf/d indicating the prolific nature of the Antero wells after system debottlenecking and the addition of system compression.
General and Administrative Expenses
General and administrative expenses totaled $5.8 million in the third quarter 2012 (including $0.5 million of non-recurring costs primarily related to the acquisition of assets from Devon), compared to $5.6 million in the third quarter 2011. General and administrative expenses incurred by CMM totaled $0.8 million during the third quarter 2012.
At September 30, 2012, Crestwood had approximately $533 million of debt outstanding, comprised of $200 million principal amount of 7.75 percent fixed-rate senior notes and approximately $333 million of borrowings under its $500 million revolving credit facility. During the third quarter 2012, Crestwood issued 4.6 million common units in an underwritten public offering. Net proceeds of approximately $115 million were used to fund the Devon acquisition, with the remaining proceeds used to reduce the outstanding balance of the revolving credit facility. In addition, CMM (which is an unconsolidated affiliate) had $19.5 million of debt outstanding under its $200 million revolving credit facility at September 30, 2012.
Capital spending for the nine months ended September 30, 2012, totaled $29.0 million (excluding acquisition capital), comprised of $26.1 million of growth capital and $2.9 million of maintenance capital. Growth capital was used to construct pipeline laterals and compression equipment in the Fayetteville and Barnett segments. Total capital spending for the full year 2012 is expected to be approximately $35 million, comprised of $30 million for growth projects and $5 million on maintenance. Growth capital spending by CMM, which is funded under its revolving credit facility, totaled $5.4 million since commencing operations at the end of March 2012. Growth capital spending by CMM for the full year 2012 is expected to total approximately $20 million.
Adjusted net income, adjusted net income per unit, Adjusted EBITDA and adjusted distributable cash flow are non-generally accepted accounting principles (“non-GAAP”) financial measures. The accompanying schedules of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance.
Crestwood will host a conference call for investors and analysts on Tuesday, November 6, 2012, beginning at 10:00 a.m. Central Time, to discuss the third quarter 2012 performance. Interested parties may participate by joining the conference call at 888-600-4861 and entering passcode 8380645. The conference call will also be webcast live and can be accessed through the Investor Relations section of our website at . A replay will be available for 30 days following the conference call by dialing 888-203-1112 and entering the replay passcode 8380645.
Houston, Texas based Crestwood is a growth-oriented, midstream master limited partnership which owns and operates predominately fee-based gathering, processing, treating and compression assets servicing natural gas producers in the Barnett Shale in north Texas, the Fayetteville Shale in northwest Arkansas, the Granite Wash in the Texas Panhandle, the Marcellus Shale in northern West Virginia, the emerging Avalon Shale trend in southeastern New Mexico, and the Haynesville/Bossier Shale in western Louisiana. For more information about Crestwood, visit .
The statements in this news release regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements. Although these statements reflect the current views, assumptions and expectations of Crestwood–s management, the matters addressed herein are subject to numerous risks and uncertainties which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Such forward-looking statements include, but are not limited to, statements about the future financial and operating results, objectives, expectations and intentions and other statements that are not historical facts. Factors that could result in such differences or otherwise materially affect Crestwood–s financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in oil, natural gas and NGL prices; the extent and success of drilling efforts, as well as the extent and quality of natural gas volumes produced within proximity of our assets; failure or delays by our customers in achieving expected production in their natural gas projects; competitive conditions in our industry and their impact on our ability to connect natural gas supplies to our gathering and processing assets or systems; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions, successfully integrate the acquired businesses, realize any cost savings and other synergies from any acquisition; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; timely receipt of necessary government approvals and permits, our ability to control the costs of construction, including costs of materials, labor and right-of-way and other factors that may impact our ability to complete projects within budget and on schedule; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing and future litigation; and risks related to our substantial indebtedness, as well as other factors disclosed in Crestwood–s filings with the U.S. Securities and Exchange Commission. You should read our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011, and our most recent Quarterly Reports and Current Reports for a more extensive list of factors that could affect results.
Mark Stockard
832-519-2207