HOUSTON, TX — (Marketwire) — 08/08/11 — Crestwood Midstream Partners LP (NYSE: CMLP) (“Crestwood LP” or the “Partnership”) reported today its second quarter 2011 financial results.
Crestwood LP–s adjusted earnings before interest, income taxes, depreciation, amortization and accretion (“EBITDA”) increased 59 percent to $29.8 million for the three months ended June 30, 2011, compared to adjusted EBITDA of $18.8 million during the second quarter 2010. Adjusted distributable cash flow increased 46 percent to $23.4 million in the recent quarter as compared to $16.1 million in the second quarter 2010. Adjusted net income for the second quarter 2011, increased by 36 percent to $13.8 million from the comparable period in 2010. Results for the second quarter 2011 have been adjusted to reflect approximately $1.1 million of expenses related to the acquisition of certain midstream assets from Frontier Gas Services, LLC (“Frontier”) on April 1, 2011 and $2.5 million of financing fees related to a bridge credit facility that was terminated in connection with the issuance of $200 million in aggregate principal amount of 7.75 percent fixed-rate senior notes on April 1, 2011.
Net income for the second quarter 2011 was $10.2 million, compared to $10.1 million during the second quarter 2010. Net income per unit reflects the issuance of 6.2 million Class C units on April 1, 2011 and 1.8 million common units on May 4, 2011.
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 that are defined and reconciled later in this press release to their most directly comparable U.S. GAAP financial measures.
“The second quarter 2011 was another outstanding quarter for the Partnership and the third consecutive quarter of improving performance since we took over management of the Partnership on October 1, 2010,” stated Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood LP–s general partner. “The recent quarter–s performance reflects continued volume growth in the Barnett Shale due to new pipeline projects and improved well performance. Additionally, our newly acquired assets in the Fayetteville Shale and Granite Wash made a meaningful contribution to our quarterly performance as we transitioned these assets from Frontier to Crestwood. The Partnership–s adjusted distributable cash flow of $23.4 million was 1.4 times the cash distribution declared for the second quarter 2011 and enabled us to increase the distribution to $0.46 per unit, which represented a 9.5 percent increase over the distribution paid for the same period last year,” continued Phillips.
“We continue to execute on our midstream shale play strategy. As we continue to develop the Crestwood organization, we are evaluating additional opportunities in other high growth shale plays that will expand our organic growth potential. This is a very exciting time to be in the midstream business,” noted Phillips.
Operating revenues totaled $55.5 million for the second quarter 2011, compared to $27.2 million for the second quarter 2010. Operating revenues from the Fayetteville Shale and Granite Wash assets acquired in 2011 totaled $19.6 million, including $12.5 million from product sales. Operating revenues attributable to the Barnett Shale assets increased $8.7 million, or 32 percent, from the second quarter 2010.
Natural gas volumes gathered during the second quarter 2011 averaged 560 million cubic feet per day (MMcf/d), as compared to 438 MMcf/d and 325 MMcf/d gathered during the first quarter 2011 and second quarter 2010, respectively. In the Barnett Shale, 65 additional wells were connected during the six months ended June 30, 2011, compared with 49 wells connected during the same period in 2010. Additionally, well production has been improved due to the benefits of longer laterals being drilled and improved completion techniques by producers. During the second quarter 2011 gathering volumes on the Alliance System, Cowtown System and Lake Arlington Dry System totaled 196 MMcf/d, 150 MMcf/d and 104 MMcf/d, respectively, representing increases of 33 percent, 18 percent and 105 percent, respectively, over the second quarter 2010, reflecting continued producer development in the core areas surrounding the Alliance and Lake Arlington gathering areas. Gathering volumes from the assets in the Fayetteville Shale and Granite Wash acquired on April 1, 2011 totaled 98 MMcf/d for the second quarter 2011. During the second quarter 2011, Crestwood transitioned midstream operations from Frontier, and worked with both Chesapeake Energy Corporation (Chesapeake) and BHP Billiton Petroleum (BHP) to assist in the transition of production operations relating to BHP–s acquisition of Chesapeake–s Fayetteville Shale assets which closed on March 31, 2011.
Operations and maintenance (“O&M”) expenses totaled $8.6 million in the second quarter 2011, compared with $6.0 million in the second quarter 2010. O&M expense attributable to the Barnett Shale, which included Las Animas, totaled $5.7 million in the second quarter 2011. O&M expense for the acquired assets in the Fayetteville Shale and Granite Wash totaled $2.9 million in the second quarter 2011. Second quarter performance reflects a combination of more efficient operations and the benefit of higher utilization rates in the Barnett Shale. O&M expenses per unit of throughput on our gathering systems for the second quarter 2011 and 2010 were $0.14 per thousand cubic feet (Mcf) and $0.17 per Mcf, respectively, which excludes property tax expense of $1.4 million and $1.0 million in the respective periods.
General and administrative expenses totaled $6.1 million in the second quarter 2011, including $1.1 million of non-recurring expenses related to the Frontier acquisition noted above. Excluding the non-recurring expenses, general and administrative expenses increased $2.6 million compared to the second quarter of 2010. The increased expense in 2011 reflects the transition to a stand-alone midstream entity coupled with the increased scope of business activity.
At June 30, 2011, Crestwood LP had $437.5 million of debt outstanding, comprised of the $200 million principal amount of 7.75 percent fixed-rate senior notes, and $237.5 million of borrowings under its revolving credit facility. The weighted average interest rate of revolving credit facility borrowings was 3.1 percent at June 30, 2011. Effective April 1, 2011, Crestwood LP expanded the capacity under its revolving credit facility by $100 million, bringing total availability to $500 million.
Capital spending for the six months ended June 30, 2011 totaled $16.9 million, comprised of $11.1 million in the Barnett Shale, $5.1 million in the Fayetteville Shale and Granite Wash assets acquired on April 1, 2011, and maintenance capital spending of $0.7 million. Growth capital spending in the Barnett Shale was primarily used for the expansion of the Alliance System. Capital spending for the Fayetteville Shale and Granite Wash was comprised primarily of new laterals in the Prairie Creek and Woolly Hollow gathering areas and progress payments on a new gas processing facility.
Crestwood LP will host a conference call for investors and analysts on Monday, August 8, 2011, beginning at 10:30 a.m. Central Time, to discuss the second quarter 2011 performance. Interested parties may participate in the call by calling 877-681-3374 and entering passcode 3715524. 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 3715524 or through the Investor Relations section on our website.
This news release and the accompanying schedules include the non-GAAP financial measures of adjusted net income, adjusted net income per unit, EBITDA, adjusted EBITDA, distributable cash flow and adjusted distributable cash flow. 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.
Houston, Texas-based Crestwood LP 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 area in the Texas Panhandle and the Avalon Shale area of Southeastern New Mexico. For more information about Crestwood LP, 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 LP–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 LP–s financial condition, results of operations and cash flows include: changes in general economic conditions; fluctuations in natural gas prices; failure or delays by our customers in achieving expected production from natural gas projects; competitive conditions in our industry; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions and successfully integrate the acquired business and our ability to realize any cost savings and other synergies from any acquisition; any disruption from the recent acquisition of midstream assets from Frontier Gas Services, LLC making it more difficult to maintain relationships with customers, employees or suppliers; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; construction costs or capital expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; and the effects of existing and future litigation; risks related to our substantial indebtedness as well as other factors disclosed in Crestwood LP–s filings with the Securities and Exchange Commission. You should read our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2010, our subsequently filed Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, for a more extensive list of factors that could affect results. All forward-looking statements in this news release are made as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, further events or otherwise.
Mark Stockard
832-519-2207