Second quarter 2020 results exceeded revised
expectations delivering a net loss of $24.3 million, Adjusted
EBITDA of $127.8 million, a 5% year-over-year increase, and
Distributable Cash Flow of $74.4 million, a 15% year-over-year
increase
G&P volumes outperformed base case forecast
and MS&L segment benefitted from recently acquired NGL assets,
positioning Crestwood to maintain its distribution for the second
quarter and remain on-track to achieve full-year Adjusted EBITDA
within the revised guidance range
Better than forecasted cash flow contributions
combined with significantly reduced capital expenditures position
Crestwood to begin generating substantial free cash flow going
forward and further enhances Crestwood’s solid financial position
currently highlighted by approximately 4.2x leverage, more than
$400 million in liquidity and no near-term maturities until
2023
Crestwood Equity Partners LP (NYSE: CEQP) (“Crestwood”) today
reported its financial and operating results for the three months
ended June 30, 2020.
Second Quarter 2020 Highlights (1)
- Second quarter 2020 net loss of $24.3 million, compared to net
income of $225.0 million in second quarter 2019
- Second quarter 2020 Adjusted EBITDA of $127.8 million, an
increase of 5% compared to $121.3 million in the second quarter
2019
- Second quarter 2020 distributable cash flow to common
unitholders of $74.4 million; Second quarter 2020 coverage ratio
was 1.6x
- Ended June 30, 2020 with approximately $2.6 billion in total
debt and a 4.2x leverage ratio; Crestwood had $801 million drawn
under its $1.25 billion revolver as of June 30, 2020
- Announced second quarter 2020 cash distribution of $0.625 per
common unit, or $2.50 per common unit on an annualized basis,
payable on August 14, 2020, to unitholders of record as of August
7, 2020
Management Commentary
“Despite the unprecedented volatility and uncertainty faced by
the energy industry during the first half of the year, I am very
pleased with the resiliency of our diversified midstream portfolio
in the second quarter generating Adjusted EBITDA of $127.8 million
and Distributable Cash Flow of $74.4 million. Importantly, even in
an extremely challenging quarter, both cash flow metrics were
improved year-over-year and were well-above consensus estimates,
driving robust leverage and coverage metrics of 4.2x and 1.6x,
respectively, reflecting the current financial health of our
partnership,” said Robert G. Phillips, Chairman, President and
Chief Executive Officer of Crestwood’s general partner. “Our
stronger than expected second quarter results were driven by
improving oil demand, commodity prices and access to market that
allowed our Bakken and Delaware Basin producers to swiftly restart
shut-in production. Additionally, impressive contributions came
from our crude oil storage and terminal assets at COLT, Dry Fork
and Arrow, which enabled us to assist our Bakken producers during
the market disruption this quarter. Finally, our recently acquired
NGL storage and terminal assets were quickly integrated and made a
timely contribution to stronger than normal second quarter
performance by our MS&L segment.”
Mr. Phillips continued, “Looking to the second half of 2020, we
have increasing confidence in our ability to deliver the
mid-to-upper range of our revised annual guidance based on several
factors including lower shut-in production on our oil-weighted
systems, the resumption of completion activities of the DUC
inventory on the Bakken Arrow system, and higher operating margins
across our portfolio due to significantly reduced O&M and
G&A costs. Moreover, while we are currently dealing with
uncertainty regarding both the DAPL pipeline in the Bakken and the
bankruptcy of Chesapeake Energy, primarily affecting our Powder
River Basin and Marcellus assets, we do not expect these situations
to be long-term impediments to meeting our future expectations.
With respect to DAPL, Crestwood is taking aggressive steps to
mitigate the impact of a potential DAPL shut-in by enhancing our
other Arrow downstream connections and offering increased COLT
availability for our Arrow producers. On Chesapeake, our G&P
contracts in the Powder River Basin are not currently subject to
the bankruptcy proceeding and are market-based and competitive with
third parties in the region. Chesapeake is current on all payables
and we continue to provide critical midstream services in the
Powder River Basin and Marcellus. Chesapeake production volumes are
currently running at reduced levels in the Powder River Basin due
to current lower net-back prices but are at near-record production
levels in the Marcellus through our Stagecoach assets. As we work
through the challenges 2020 presents, our conservative financial
strategy will continue to focus on liquidity and balance sheet
strength to provide flexibility in a volatile market, and we will
continue to navigate the company through this down cycle to drive
increased value for our unitholders, including generating free cash
flow after capital expenditures and distributions beginning in the
third quarter.”
Second Quarter 2020 Segment Results and Outlook
Gathering and Processing segment EBITDA totaled $87.2 million in
the second quarter 2020 compared to $88.8 million in the second
quarter 2019. Second quarter 2019 results exclude a $209.4 million
non-cash gain related to the Jackalope acquisition in April 2019,
and both periods exclude losses on long lived assets. During the
second quarter 2020, segment EBITDA benefitted from a 148% increase
in Bakken processing volumes as a result of the in-service of the
Bear Den II processing plant in August 2019, a 14% increase in both
Bakken natural gas gathering and water gathering volumes, and a 14%
increase in Delaware gas gathering volumes over second quarter
2019, despite production curtailments across oil-weighted basins.
These production curtailments were primarily experienced across the
Bakken, Powder River Basin and Delaware Basin during the months of
May and June as a result of lower commodity prices during the first
half of the quarter driven by reduced hydrocarbon demand and
limitations on physical storage capacity. As market conditions
improved during the second half of the quarter and led to improved
commodity prices, producers were able to return shut-in production
quickly and efficiently resulting in production volumes exceeding
Crestwood’s base case forecast. Looking to the second half of 2020,
Crestwood anticipates oil-weighted volumes to be fully back online
and new completion activity on the Arrow system beginning in the
third quarter 2020.
Storage and Transportation segment EBITDA totaled $14.1 million
in the second quarter 2020 compared to $13.7 million in the second
quarter 2019. Second quarter 2020 natural gas storage and
transportation volumes averaged 2.1 Bcf/d, compared to 2.0 Bcf/d in
the second quarter 2019. At the Stagecoach Gas Services joint
venture with Consolidated Edison, Crestwood continues to see stable
transportation volumes driven by the strategic nature of 41 Bcf of
underground natural gas working storage capacity supporting
integral Northeast and mid-Atlantic markets. In the second quarter,
the COLT Hub experienced a decline in rail loading volumes as a
result of decreased production across the basin, which was offset
by increased demand for crude storage capacity and contango pricing
for crude oil. For the second half of 2020, Crestwood expects COLT
Hub rail loading volumes to increase as curtailed production
volumes in the basin continue to come back online and more
producers begin to utilize crude-by-rail to diversify takeaway
access out of the basin.
Marketing, Supply and Logistics (MS&L) segment EBITDA
totaled $23.8 million in the second quarter 2020, compared to $16.4
million in the second quarter 2019. Both periods exclude the
non-cash change in fair value of commodity inventory-related
derivative contracts. During the second quarter 2020, Crestwood’s
NGL logistics business was able to take advantage of decreased NGL
prices during the quarter to build NGL inventories and optimize its
newly acquired storage assets to generate margin opportunities. In
addition, similar to the NGL business, Crestwood’s crude marketing
operations were able to utilize storage capacity to take advantage
of the contango market and provide a market for stranded barrels.
In the current environment, Crestwood expects to be able to
optimize its expanded downstream marketing and storage assets as a
result of on-going price volatility for crude, gas and NGLs during
the pandemic.
Expenses
Combined O&M and G&A expenses, net of non-cash
unit-based compensation, in the second quarter 2020 were $47.5
million compared to $45.7 million in the second quarter 2019. Early
in the second quarter, Crestwood responded to the low-price
environment by proactively reducing its O&M and G&A
expenses primarily through a reduction in headcount and increased
efficiencies across the company, and incurred approximately $8
million of severance and other costs to achieve those reductions.
Crestwood expects these reductions will be fully reflected in its
third quarter 2020 results and total approximately $40 million on
an annual run-rate basis.
Second Quarter 2020 Business Update
Bakken Update
During the second quarter 2020, the Arrow system averaged crude
oil gathering volumes of 87 MBbls/d, natural gas gathering volumes
of 90 MMcf/d, natural gas processing volumes of 86 MMcf/d, and
water gathering volumes of 73 MBbls/d. Processing volumes increased
148% over second quarter 2019 as a result of the in-service of the
120 MMcf/d Bear Den II processing plant in August 2019. Second
quarter 2020 average volumes exceeded initial forecasts estimated
by Arrow producers and significantly exceeded Crestwood’s revised
guidance issued in May 2020, which assumed 50% of volumes on the
system would be shut-in through July 2020. Currently, approximately
90% of estimated available Arrow production is flowing and based on
current producer plans, Crestwood expects the Arrow system to
return to 100% flow rates during the third quarter 2020.
In the second quarter 2020, Crestwood invested $16 million in
the Bakken primarily for optimizations and improvements for the
Arrow water gathering system. In late July, Crestwood’s key
producers resumed completion activity on their DUC inventory and
began connecting new wells to the Arrow system which will provide
incremental volumes for the second half of 2020 and early 2021.
Currently, approximately 20% of the active rigs in the Bakken are
operating on the Fort Berthold Indian Reservation which drives
Crestwood’s full year 2020 three-product well connect estimate of
60 - 70 to the Arrow system. As producers reimburse Crestwood for
the majority of well connect capital, the company expects the
minimal remaining 2020 capital investment to be focused on
optimization projects to support producer water volumes.
DAPL Commentary
As previously announced, the status of the Dakota Access
Pipeline (“DAPL”) temporary shutdown is uncertain at this time. As
a result, Crestwood has been working with its Arrow customers to
ensure all crude oil gathered on the Arrow system will have
downstream market access. The Arrow gathering system currently
connects to the DAPL, Hiland and Tesoro pipelines and is close to
another long-haul takeaway pipeline to which the company is working
to connect. Additionally, Crestwood can transport Arrow crude oil
to COLT by pipeline or truck with total connectivity of
approximately 200,000 barrels per day. In the event operations on
DAPL are temporarily suspended, crude-by-rail facilities in the
Bakken will become increasingly valuable and relevant as an
alternative takeaway option. Crestwood’s COLT Hub facility is the
leading crude oil terminal in the Bakken with multiple pipeline
connections, storage capacity of 1.2 MMBbls and rail loading
capacity of 160,000 barrels of crude oil per day. Historically, the
COLT Hub, located on the BNSF rail line, has been a premier Bakken
supply and aggregation source for marketers and refiners in the
East and West coast markets, making it a natural supply aggregation
point to clear barrels out of the Bakken markets.
Powder River Basin Update
During the second quarter 2020, the Jackalope system averaged
gathering volumes of 91 MMcf/d and processing volumes of 87 MMcf/d.
Volumes in the second quarter 2020 were affected by Jackalope’s
anchor customer, Chesapeake Energy (“Chesapeake”) (OTC:CHKAQ),
shutting-in a portion of its wells due to the depressed commodity
price environment. Based on current market conditions and improving
basin differentials, Crestwood expects shut-in wells to be fully
brought back online by the beginning of the fourth quarter 2020 and
remain on natural field decline through the balance of 2021.
During the second quarter, Crestwood paid $34 million of
remaining invoices related to the 200 MMcf/d Bucking Horse II
processing plant project, which was completed in the first quarter
2020. Based on revised production forecasts for the basin,
Crestwood is actively engaged with other producers and midstream
providers in the region to consolidate volumes from older,
less-efficient third party processing plants in an effort to
optimize Bucking Horse spare capacity, reduce operating costs and
to provide better recoveries and improved netbacks for producers in
the current commodity price environment.
Chesapeake Energy Update
On June 28, 2020, Chesapeake voluntarily filed for bankruptcy
protection under Chapter 11 of the US Bankruptcy Code. To date, the
Jackalope contract has not been named as a midstream contract
Chesapeake is seeking to reject in the bankruptcy process. As a
reminder, the Jackalope gathering and processing contract was
renegotiated in January 2017 at market rates for a 20-year term and
includes acreage dedication and covenant running with the land
language. Additionally, Chesapeake is current on all receivables
owed to Crestwood and there are full letters of credit in place
supporting current operations. Crestwood is fully committed to
continuing to operate the Jackalope and Bucking Horse assets and
working with Chesapeake and its advisors throughout the bankruptcy
process.
Delaware Basin Update
During the second quarter 2020, Crestwood’s Delaware Basin
natural gas gathering assets averaged volumes of 190 MMcf/d, a 14%
increase compared to 167 MMcf/d in second quarter 2019. The
increase in gathering volumes in the Delaware Basin was driven by
Royal Dutch Shell’s (“Shell”) continued development program on the
Nautilus gathering system and lower than expected shut-ins during
the second quarter on the Willow Lake gathering system. There were
22 wells connected to the Nautilus system in the first half of
2020, and as of the end of July, there were three rigs running on
acreage dedicated to Crestwood.
In the second quarter, capital invested in the Delaware Basin
went towards the completion of the previously announced produced
water gathering and disposal system for a large producer customer.
During the quarter, Crestwood successfully drilled a deep salt
water disposal well and constructed related infrastructure that now
positions Crestwood to provide a safe and reliable produced water
gathering and disposal solution to producers active between the
company’s Willow Lake and Orla assets where produced water to oil
ratios continue to exceed 8:1.
Capitalization and Liquidity Update
Crestwood invested approximately $50 million in consolidated
growth capital projects during the second quarter 2020 which
focused on the remaining invoices for the Bucking Horse II
processing plant and Arrow water gathering system optimizations.
With these projects now largely complete, Crestwood expects to
invest minimal growth capital for the remainder of 2020 and as a
result, expects to begin generating significant free cash flow
beginning in the third quarter of 2020 that will be utilized to
maximize liquidity and preserve balance sheet strength through the
current down cycle.
As of June 30, 2020, Crestwood had approximately $2.6 billion of
debt outstanding, comprised of $1.8 billion of fixed-rate senior
notes and $801 million outstanding under its $1.25 billion
revolving credit facility, resulting in a leverage ratio of 4.2x.
Based on current market conditions and forecast, Crestwood
anticipates a leverage ratio between 4.25x and 4.75x for full year
2020. Crestwood has more than $400 million of liquidity under its
revolving credit facility. Crestwood remains committed to achieving
a leverage ratio of 4.0x or less over the next 12 to 18 months.
Going forward, the company expects to use availability under the
revolver and free cash flow to manage its future cash needs and
will continue to evaluate opportunistic non-core asset divestitures
as an incremental alternative to further accelerate the strategy of
preserving balance sheet strength through this down cycle.
Crestwood currently has 71.3 million preferred units outstanding
(par value of $9.13 per unit) which pay a fixed-rate annual cash
distribution of 9.25%, payable quarterly. The preferred units are
listed on the New York Stock Exchange and trade under the ticker
symbol CEQP-P.
Sustainability Program Update
In June 2020, Crestwood published its 2019 sustainability report
entitled Embracing a Culture of Sustainability. The second annual
report provides enhanced transparency on the company’s
environmental, social and governance (ESG) performance, and for the
first time it includes multi-year trend data and analysis.
Crestwood also highlights the progression on its three-year
sustainability strategy as it continues to integrate sustainability
into every aspect of its diversified midstream energy business. The
2019 sustainability report has been prepared in accordance with the
Global Reporting Initiative (GRI) Standards - Core option and is
aligned with the Sustainability Accounting Standards Board (SASB)
midstream reporting framework. Following the issuance of the 2019
report, Bloomberg increased Crestwood’s total company ESG ranking
by 65% to a revised score of 46.7, highlighting Crestwood’s
commitment to enhanced disclosures on waste and air emissions data,
as well the publication of its biodiversity policy. Additionally,
as an organization that is always looking to deliver best in class
performance, Crestwood understands diversity & inclusion is
essential to succeeding in a rapidly changing industry and
continues to foster a work environment founded on respect and
inclusion. For more information on Crestwood’s Diversity &
Inclusion statement and the 2019 sustainability report please visit
https://esg.crestwoodlp.com.
Upcoming Conference Participation
Crestwood’s management intends to participate in the following
upcoming virtual investor conferences. Prior to the start of each
conference, new presentation materials may be posted to the
Investors section of Crestwood’s website at
www.crestwoodlp.com.
- Citi One-on-One MLP/Energy Infrastructure Conference, August 12
– 13, 2020
- NYSE Utilities and Midstream Investor Access Day, September 16,
2020
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 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. 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 by 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 shale resource plays across the United
States. Crestwood is engaged in the gathering, processing,
treating, compression, storage and transportation of natural gas;
storage, transportation, terminalling, and marketing of NGLs;
gathering, storage, terminalling and marketing of crude oil; and
gathering and disposal of produced water. Visit Crestwood Equity
Partners LP at http://www.crestwoodlp.com; and to learn more about
Crestwood’s sustainability efforts, please visit
https://esg.crestwoodlp.com.
1 Please see non-GAAP reconciliation table
included at the end of the press release.
CRESTWOOD EQUITY PARTNERS LP
Consolidated Statements of Operations (in millions, except per unit
data) (unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenues:
Gathering and processing
$
114.5
$
199.7
$
329.4
$
382.0
Storage and transportation
3.1
4.9
6.6
12.7
Marketing, supply and logistics
227.6
477.5
729.6
1,121.4
Related party
7.5
1.3
15.0
2.5
Total revenues
352.7
683.4
1,080.6
1,518.6
Cost of products/services sold
225.7
537.2
760.1
1,232.8
Operating expenses and other:
Operations and maintenance
31.6
34.7
69.2
63.3
General and administrative
29.5
22.3
44.4
59.5
Depreciation, amortization and
accretion
61.0
49.3
117.1
89.1
Loss on long-lived assets, net
3.8
—
4.8
2.0
Goodwill impairment
—
—
80.3
—
Gain on acquisition
—
(209.4
)
—
(209.4
)
125.9
(103.1
)
315.8
4.5
Operating income
1.1
249.3
4.7
281.3
Earnings from unconsolidated affiliates,
net
8.4
3.7
13.9
10.6
Interest and debt expense, net
(34.0
)
(27.8
)
(66.6
)
(52.7
)
Other income, net
0.1
0.1
0.2
0.2
Income (loss) before income taxes
(24.4
)
225.3
(47.8
)
239.4
(Provision) benefit for income taxes
0.1
(0.3
)
0.1
(0.3
)
Net income (loss)
(24.3
)
225.0
(47.7
)
239.1
Net income attributable to non-controlling
partner
10.2
10.6
20.1
14.6
Net income (loss) attributable to
Crestwood Equity Partners LP
(34.5
)
214.4
(67.8
)
224.5
Net income attributable to preferred
units
15.0
15.0
30.0
30.0
Net income (loss) attributable to
partners
$
(49.5
)
$
199.4
$
(97.8
)
$
194.5
Subordinated unitholders' interest in net
income
$
—
$
1.2
$
—
$
1.2
Common unitholders' interest in net income
(loss)
$
(49.5
)
$
198.2
$
(97.8
)
$
193.3
Net income (loss) per limited partner
unit:
Basic
$
(0.68
)
$
2.76
$
(1.34
)
$
2.69
Diluted
$
(0.68
)
$
2.58
$
(1.34
)
$
2.53
Weighted-average limited partners’ units
outstanding:
Basic
73.2
71.8
73.0
71.8
Dilutive
—
11.2
—
5.2
Diluted
73.2
83.0
73.0
77.0
CRESTWOOD EQUITY PARTNERS LP
Selected Balance Sheet Data (in millions)
June 30, 2020
December 31, 2019
(unaudited)
Cash
$
6.7
$
25.7
Outstanding
debt:
Revolving Credit Facility
$
801.2
$
557.0
Senior Notes
1,800.0
1,800.0
Other
0.6
0.6
Subtotal
2,601.8
2,357.6
Less: deferred financing costs, net
25.9
29.1
Total debt
$
2,575.9
$
2,328.5
Partners'
capital
Total partners' capital
$
1,744.6
$
1,932.8
Common units outstanding
73.6
72.3
CRESTWOOD EQUITY PARTNERS LP
Reconciliation of Non-GAAP Financial Measures (in millions)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
EBITDA
Net income (loss)
$
(24.3
)
$
225.0
$
(47.7
)
$
239.1
Interest and debt expense, net
34.0
27.8
66.6
52.7
Provision (benefit) for income taxes
(0.1
)
0.3
(0.1
)
0.3
Depreciation, amortization and
accretion
61.0
49.3
117.1
89.1
EBITDA (a)
$
70.6
$
302.4
$
135.9
$
381.2
Significant items impacting EBITDA:
Unit-based compensation charges
13.6
11.3
9.2
28.6
Loss on long-lived assets, net
3.8
—
4.8
2.0
Gain on acquisition
—
(209.4
)
—
(209.4
)
Goodwill impairment
—
—
80.3
—
Earnings from unconsolidated affiliates,
net
(8.4
)
(3.7
)
(13.9
)
(10.6
)
Adjusted EBITDA from unconsolidated
affiliates, net
17.9
14.0
37.2
33.6
Change in fair value of commodity
inventory-related derivative contracts
21.5
3.7
15.7
4.8
Significant transaction and environmental
related costs and other items
8.8
3.0
10.0
6.4
Adjusted EBITDA (a)
$
127.8
$
121.3
$
279.2
$
236.6
Distributable
Cash Flow (b)
Adjusted EBITDA (a)
$
127.8
$
121.3
$
279.2
$
236.6
Cash interest expense (c)
(32.8
)
(31.0
)
(66.0
)
(57.2
)
Maintenance capital expenditures (d)
(3.4
)
(6.0
)
(6.4
)
(7.4
)
Adjusted EBITDA from unconsolidated
affiliates, net
(17.9
)
(14.0
)
(37.2
)
(33.6
)
Distributable cash flow from
unconsolidated affiliates
17.0
12.7
35.0
31.2
PRB cash received in excess of recognized
revenues (e)
7.9
6.0
12.2
6.0
(Provision) benefit for income taxes
0.1
(0.3
)
0.1
(0.3
)
Distributable cash flow attributable to
CEQP
98.7
88.7
216.9
175.3
Distributions to preferred
(15.0
)
(15.0
)
(30.0
)
(30.0
)
Distributions to Niobrara preferred
(9.3
)
(9.2
)
(18.5
)
(12.5
)
Distributable cash flow attributable to
CEQP common
$
74.4
$
64.5
$
168.4
$
132.8
(a)
EBITDA is defined as income before income
taxes, plus interest and debt expense, net 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 or losses on
long-lived assets, impairments of goodwill, third party costs
incurred related to potential and completed acquisitions, certain
environmental remediation costs, the change in fair value of
commodity inventory-related derivative contracts, costs associated
with the realignment and restructuring of our operations, 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 to which these derivatives relate. 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 as alternatives 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)
Distributable cash flow is defined as
Adjusted EBITDA, adjusted for cash interest expense, maintenance
capital expenditures, income taxes, the cash received from our
Powder River Basin operations in excess of revenue recognized, and
our proportionate share (based on the distribution percentage) of
our unconsolidated affiliates' 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 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
companies.
(c)
Cash interest expense less amortization of
deferred financing costs.
(d)
Maintenance capital expenditures are
defined as those capital expenditures which do not increase
operating capacity or revenues from existing levels.
(e)
Cash received from customers of our Powder
River Basin operations pursuant to certain contractual minimum
revenue commitments in excess of related revenue recognized under
FASB ASC 606.
CRESTWOOD EQUITY PARTNERS LP
Reconciliation of Non-GAAP Financial Measures (in millions)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
EBITDA
Net cash provided by operating
activities
$
64.2
$
63.0
$
183.4
$
193.9
Net changes in operating assets and
liabilities
(7.7
)
17.8
(11.4
)
(35.0
)
Amortization of debt-related deferred
costs
(1.6
)
(1.5
)
(3.2
)
(2.9
)
Interest and debt expense, net
34.0
27.8
66.6
52.7
Unit-based compensation charges
(13.6
)
(11.3
)
(9.2
)
(28.6
)
Loss on long-lived assets, net
(3.8
)
—
(4.8
)
(2.0
)
Gain on acquisition
—
209.4
—
209.4
Goodwill impairment
—
—
(80.3
)
—
Earnings from unconsolidated affiliates,
net, adjusted for cash distributions received
(0.9
)
(3.0
)
(5.4
)
(6.3
)
Deferred income taxes
0.1
(0.1
)
0.3
(0.3
)
Provision (benefit) for income taxes
(0.1
)
0.3
(0.1
)
0.3
EBITDA (a)
$
70.6
$
302.4
$
135.9
$
381.2
Unit-based compensation charges
13.6
11.3
9.2
28.6
Loss on long-lived assets, net
3.8
—
4.8
2.0
Gain on acquisition
—
(209.4
)
—
(209.4
)
Goodwill impairment
—
—
80.3
—
Earnings from unconsolidated affiliates,
net
(8.4
)
(3.7
)
(13.9
)
(10.6
)
Adjusted EBITDA from unconsolidated
affiliates, net
17.9
14.0
37.2
33.6
Change in fair value of commodity
inventory-related derivative contracts
21.5
3.7
15.7
4.8
Significant transaction and environmental
related costs and other items
8.8
3.0
10.0
6.4
Adjusted EBITDA (a)
$
127.8
$
121.3
$
279.2
$
236.6
(a)
EBITDA is defined as income before income
taxes, plus interest and debt expense, net 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 or losses on
long-lived assets, impairments of goodwill, third party costs
incurred related to potential and completed acquisitions, certain
environmental remediation costs, the change in fair value of
commodity inventory-related derivative contracts, costs associated
with the realignment and restructuring of our operations, 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 to which these derivatives relate. 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 as alternatives 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 June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Gathering and
Processing
Revenues
$
128.8
$
225.1
$
383.7
$
460.2
Costs of product/services sold
21.3
108.9
129.6
246.9
Operations and maintenance expenses
19.3
24.6
46.3
42.7
Loss on long-lived assets, net
(3.6
)
(0.2
)
(4.6
)
(2.0
)
Gain on acquisition
—
209.4
—
209.4
Goodwill impairment
—
—
(80.3
)
—
Loss from unconsolidated affiliates,
net
(1.0
)
(2.8
)
(0.2
)
(3.0
)
EBITDA
$
83.6
$
298.0
$
122.7
$
375.0
Storage and
Transportation
Revenues
$
5.5
$
8.1
$
11.6
$
19.5
Costs of product/services sold
0.1
—
0.3
—
Operations and maintenance expenses
0.7
0.9
2.1
1.9
Earnings from unconsolidated affiliates,
net
9.4
6.5
14.1
13.6
EBITDA
$
14.1
$
13.7
$
23.3
$
31.2
Marketing, Supply
and Logistics
Revenues
$
218.4
$
450.2
$
685.3
$
1,038.9
Costs of product/services sold
204.3
428.3
630.2
985.9
Operations and maintenance expenses
11.6
9.2
20.8
18.7
Loss on long-lived assets, net
(0.2
)
—
(0.2
)
(0.2
)
EBITDA
$
2.3
$
12.7
$
34.1
$
34.1
Total Segment EBITDA
$
100.0
$
324.4
$
180.1
$
440.3
Corporate
(29.4
)
(22.0
)
(44.2
)
(59.1
)
EBITDA
$
70.6
$
302.4
$
135.9
$
381.2
CRESTWOOD EQUITY PARTNERS LP
Operating Statistics (unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Gathering and
Processing
Gas gathering volumes (MMcf/d)
Bakken - Arrow
89.9
79.0
104.4
77.0
Powder River Basin - Jackalope
90.8
145.5
122.4
138.6
Marcellus
259.2
299.9
264.8
308.3
Barnett
226.6
249.5
230.3
255.9
Delaware (a)
190.0
166.5
210.5
171.4
Other
31.8
35.1
26.8
37.6
Total gas gathering volumes
888.3
975.5
959.2
988.8
Processing volumes (MMcf/d)
Bakken - Arrow
86.4
34.9
98.4
33.2
Powder River Basin - Jackalope
87.4
127.6
114.3
121.6
Other
130.2
141.3
143.6
152.0
Total processing volumes
304.0
303.8
356.3
306.8
Compression volumes (MMcf/d)
336.6
375.7
356.9
373.5
Arrow Midstream
Bakken Crude Oil gathering volumes
(MBbls/d)
87.1
88.9
108.1
90.9
Bakken Water gathering volumes
(MBbls/d)
73.1
63.9
81.2
59.9
Storage and
Transportation
Northeast Storage - firm contracted
capacity (Bcf) (a)
34.4
32.1
34.6
32.9
% of operational capacity contracted
99
%
92
%
99
%
95
%
Firm storage services (MMcf/d) (a)
199.5
235.9
166.7
243.3
Interruptible storage services (MMcf/d)
(a)
—
17.1
1.0
12.8
Northeast Transportation - firm contracted
capacity (MMcf/d) (a)
1,584.1
1,479.4
1,614.1
1,522.5
% of operational capacity contracted
87
%
81
%
88
%
83
%
Firm services (MMcf/d) (a)
1,463.1
1,364.9
1,377.8
1,300.8
Interruptible services (MMcf/d) (a)
27.3
19.7
24.4
17.6
Gulf Coast Storage - firm contracted
capacity (Bcf) (a)
30.5
27.2
29.9
28.5
% of operational capacity contracted
79
%
71
%
78
%
74
%
Firm storage services (MMcf/d) (a)
313.9
325.7
303.3
330.1
Interruptible services (MMcf/d) (a)
64.5
35.6
70.4
50.3
COLT Hub
Rail loading (MBbls/d)
40.7
60.4
50.8
59.6
Outbound pipeline (MBbls/d) (b)
9.8
11.5
11.6
14.3
Marketing, Supply
and Logistics
NGL volumes sold or processed
(MBbls/d)
59.7
72.3
82.7
94.4
NGL volumes trucked (MBbls/d)
15.3
37.8
19.7
41.1
(a)
Represents 50% owned joint venture,
operational data reported is at 100%.
(b)
Represents only throughput leaving the
terminal.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200804005228/en/
Crestwood Equity Partners LP Investor Contacts
Josh Wannarka, 917-922-1746 josh.wannarka@crestwoodlp.com Senior
Vice President, Investor Relations, ESG and Corporate
Communications
Rhianna Disch, 713-380-3006 rhianna.disch@crestwoodlp.com
Director, Investor Relations
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