Accelerated producer activity and operational
optimization drives strong 2020 results with full-year 2020 net
loss of $15.3 million and Adjusted EBITDA1 of $580.3 million, a 10%
increase over full-year 2019 and above the upper end of the revised
guidance range
Fourth quarter outperformance driven by record
volumes on the Arrow gathering system in the Bakken as producers
accelerated new well connections into the fourth quarter driving
strong utilization across Crestwood’s expanded infrastructure
2021E Adjusted EBITDA1 guidance range of $550
million to $610 million; 2021E growth capital program of $35
million to $45 million represents a 72% reduction year-over-year
and positions Crestwood to generate meaningful free cash flow after
distributions2
Continued commitment to ESG/Sustainability
efforts in 2020 and new 2021 initiatives focused on further
enhancing Crestwood’s culture of continuous improvement and
advancing Crestwood’s midstream sector ESG leadership position
across the industry
Crestwood Equity Partners LP (NYSE: CEQP) (“Crestwood”) reported
today its financial and operating results for the three months
ended December 31, 2020.
Fourth Quarter and Full-Year 2020 Highlights1
- Fourth quarter 2020 net income of $27.8 million, compared to
net income of $47.2 million in fourth quarter 2019; Full-year net
loss of $15.3 million, compared to net income of $319.9 million in
2019
- Fourth quarter 2020 Adjusted EBITDA of $165.1 million, compared
to $149.0 million in the fourth quarter 2019; Full-year Adjusted
EBITDA of $580.3 million, compared to $526.5 million in 2019, an
increase of 10% year-over-year
- Fourth quarter 2020 distributable cash flow (“DCF”) to common
unitholders of $106.3 million; The fourth quarter 2020 coverage
ratio was 2.3x; Full-year DCF of $361.2 million; The full-year
coverage ratio was 2.0x
- Ended 2020 with approximately $2.5 billion in total debt and a
4.0x leverage ratio; Crestwood has substantial liquidity available
under its $1.25 billion revolver with $719 million drawn as of
December 31, 2020
- Fourth quarter 2020 cash distribution of $0.625 per common
unit, or $2.50 per common unit on an annualized basis, flat
quarter-over-quarter, paid on February 12, 2021, to unitholders of
record as of February 5, 2021
Recent Developments and 2021 Capital Summary
- On January 21, Crestwood closed on the previously announced
issuance of $700 million 6.00% senior unsecured notes due 2029
extending its next significant senior note maturity date to 2025
and reducing interest expense by approximately $2 million
annually
- In February, Crestwood’s primary customer in the Powder River
Basin, Chesapeake Energy (NYSE: CHK) (“Chesapeake”), exited
bankruptcy; Crestwood and Chesapeake proactively reached mutually
beneficial commercial agreements on both the Jackalope system in
the Powder River Basin and with Stagecoach Gas Services
(“Stagecoach”) in the Northeast Marcellus during the bankruptcy
process
- Crestwood continues to monitor legal proceedings on the Dakota
Access Pipeline (“DAPL”) and remains well-positioned to manage
crude oil volumes at Arrow and the COLT Hub through alternative
pipelines, storage, and crude-by-rail services in the event of a
temporary shut-down; Crestwood’s integrated asset footprint and
market connectivity through diverse takeaway options positions
Crestwood to mitigate any risks from a DAPL disruption and creates
opportunities for further market share capture in the basin through
increasing utilization and optimization of its rail loading,
storage, and marketing services
- Total 2021 capital investment includes $35 million to $45
million of growth capital focused on the expansion and enhancement
of the Arrow produced water gathering system, optimization of the
Arrow crude oil and natural gas gathering systems, and well
connections in the Powder River Basin and Delaware Permian; and $20
million to $25 million of maintenance capital for asset integrity
projects
Management Commentary
“Despite 2020 being one of the more challenging years our
industry has ever faced, I am very proud of the performance of our
team and assets here at Crestwood as we delivered Adjusted EBITDA
of $580.3 million and Distributable Cash Flow of $361.2 million.
These record annual results were both increases of more than 10%
over 2019, well above consensus estimates and the highest levels we
have reported in our ten year history despite the unprecedented
volatility the industry experienced in the second and third
quarters of 2020 due to the pandemic. Most importantly, in a year
where most of our industry took a step backwards, we continued to
move forward by enhancing our strategic and financial position with
strong year-end leverage and coverage ratios of 4.0x and 2.0x,
respectively. These results highlight the quality of Crestwood’s
integrated asset portfolio and our team’s ability to manage
customer relationships in a tough market, keep operating expenses
low while delivering reliable services and execute our business
plans through adversity,” commented Robert G. Phillips, Chairman,
President and Chief Executive Officer of Crestwood’s general
partner. “Despite historic commodity price volatility throughout
2020, our gathering and processing segment bounced back in the
second half of the year with new rig activity in the Bakken,
Delaware Basin and Barnett shale driving increased volumes, which
combined with stable contributions from our legacy gas assets, high
utilization of our premier northeast storage and transportation
infrastructure, and the expansion of our NGL logistics business,
drove positive free cash flow after capital expenditures and
distributions. These factors led to strong year-end exit rates and
resulted in record fourth quarter 2020 performance for Crestwood,
which positions the partnership with significant momentum as we
begin 2021.”
Mr. Phillips continued, “Looking into 2021, we are increasingly
optimistic that the recent improvements in commodity prices are
reflective of constructive market fundamentals underpinned by
increasing hydrocarbon demand as the vaccination rollout continues
and economies begin to fully reopen. With that backdrop, Crestwood
expects to generate 2021 Adjusted EBITDA of $550 million to $610
million, with the expectation that the upper end of that guidance
range becomes increasingly likely as producers continue to increase
activity in a prolonged $55 to $60 per barrel crude oil price
environment. During 2021, we have a modest number of highly
accretive capital projects to expand key gathering systems for new
production under existing contracts. Based on this guidance range,
Crestwood expects to generate between $90 million and $160 million
in free cash flow after paying its current distribution, that we
intend to allocate toward increasing financial flexibility with
further debt reduction until we achieve our long-term leverage
ratio target between 3.5x and 4.0x. Based on our expected free cash
flow generation, our strengthening balance sheet and financial
flexibility, and our commitment to leading the MLP industry in
sustainability initiatives, Crestwood is well-positioned to benefit
from improving markets conditions and to maximize total returns for
our unitholders in 2021.”
Fourth Quarter 2020 Segment Results
Gathering and Processing (G&P) segment EBITDA totaled $128.1
million in the fourth quarter 2020, an increase of 13%, compared to
$112.9 million in the fourth quarter 2019. During the fourth
quarter 2020, segment EBITDA increased primarily as a result of
volume growth across the Arrow system in the Bakken as producers
accelerated well connections and achieved higher initial production
rates. Compared to the fourth quarter 2019, Arrow natural gas
processing volumes increased 45%, natural gas gathering volumes
increased 38%, water gathering volumes increased 21%, and oil
gathering volumes increased 5%. In the fourth quarter 2020,
Crestwood had producer rig activity in the Bakken, Delaware Permian
and the Barnett shale as producers resumed drilling and completion
activities in the backdrop of rising crude prices.
Storage and Transportation segment EBITDA totaled $14.7 million
in the fourth quarter 2020, compared to $16.8 million in the fourth
quarter 2019. Fourth quarter 2020 natural gas storage and
transportation volumes averaged 2.2 Bcf/d, compared to 2.0 Bcf/d in
the fourth quarter 2019. During the fourth quarter 2020, Stagecoach
achieved record volumes on its transportation assets as producers
continue to benefit from stronger dry gas economics that led to an
increase in development capital to the region. These assets are
also fully contracted for 2021. During the fourth quarter 2020,
Stagecoach proactively entered into a new commercial agreement with
Chesapeake as part of its bankruptcy process that was approved by
the Federal Energy Regulatory Commission (FERC). This new agreement
positions Chesapeake and Stagecoach to continue their strong
working relationship in the Northeast Marcellus, which Chesapeake
has highlighted as a core focus area going forward. At the Tres
Palacios facility, Crestwood has continued to see an increased
interest in storage from natural gas operators and LNG exporters in
the Gulf Coast region, and recently completed a new interconnect
with Kinder Morgan’s Permian Highway Pipeline that is expected to
drive incremental producer volumes and producer interest in the
facility. At the COLT Hub, fourth quarter 2020 rail loading volumes
of 44 MBbls/d decreased compared to the fourth quarter 2019 due to
reduced production in the Bakken over the course of 2020. Based on
continued uncertainty around DAPL, the COLT Hub is beginning to
benefit from increased contracts for take-or-pay services as
producers begin to diversify take-aways options in the Bakken.
Marketing, Supply and Logistics (MS&L) segment EBITDA
totaled $27.5 million in the fourth quarter 2020, compared to $19.3
million in the fourth quarter 2019. For full-year 2020, the
MS&L segment generated EBITDA of $89.2 million, which includes
nine months of contribution from the Plains All American (“Plains”)
assets acquired in early April 2020. All periods exclude the
non-cash change in fair value of commodity inventory-related
derivative contracts. During the fourth quarter 2020, the NGL
marketing and logistics business benefited from consistent demand
as a result of on-going stay-at-home orders, slightly offset by
more moderate than normal weather in October and November. In 2021,
Crestwood estimates its NGL marketing and logistics business to
grow year-over-year based on the full integration of the Plains
assets, opportunities to capture additional market share, and
consistent upstream and downstream demand.
Combined O&M and G&A expenses, net of non-cash
unit-based compensation, in the fourth quarter 2020 were $45.7
million compared to $53.1 million in the fourth quarter 2019. The
decrease in expenses in fourth quarter 2020 was due to Crestwood’s
efforts during the second quarter of 2020 to permanently reduce
costs.
Fourth Quarter 2020 Business Update and FY 2021
Outlook
Bakken Update
Arrow
During the fourth quarter 2020, the Arrow system averaged crude
oil gathering volumes of 130 MBbls/d, a 21% increase over the third
quarter of 2020, natural gas gathering volumes of 142 MMcf/d, 19%
above the third quarter 2020, and produced water gathering volumes
of 98 MBbls/d, 1% above the third quarter 2020. Stable commodity
pricing during the quarter enabled producers to accelerate well
connections originally scheduled for 2021 into the fourth quarter
2020 and resulted in the Arrow system achieving new gathering
records on all three products during the quarter. During the fourth
quarter 2020, producers on the Arrow system connected 21
three-product wells resulting in a total of 70 three-product well
connections and 14 water-only well connections in 2020. At current
strip pricing, Crestwood estimates there are approximately 500 to
600 three-product drilling locations and approximately 350 to 450
water-only drilling locations on the Arrow system. The Bear Den
processing complex averaged volumes of 138 MMcf/d, an increase of
20% over the third quarter 2020. Volumes on the Arrow system
continue to benefit from enhanced recovery methods that have driven
average initial production rates as high as 10,000 Boe/d allowing
Arrow producers to maintain stronger volumes with reduced drilling
activity.
In 2021, Crestwood’s capital investments in the Bakken will
remain focused on the enhancement and expansion of the produced
water gathering system, ongoing natural gas and crude oil
optimization projects to support producer development plans, and
incremental system compression. Based on current producer
forecasts, in a $45 to $50 per barrel crude oil price environment,
Crestwood estimates 25 – 35 three-product well connects and 20 - 25
water-only well connects in 2021, and in a $60 per barrel crude oil
price environment, estimates more than 45 three-product well
connects, resulting in year-over-year growth in natural gas and
produced water gathering volumes.
DAPL Update
Crestwood continues to actively monitor the legal proceedings on
DAPL and remains well-positioned to manage its Bakken operations
under any potential outcome for the pipeline. Over the past few
months, Crestwood’s customers have mitigated their exposure to a
DAPL shutdown by beginning to establish shipper history on other
takeaway options, resulting in significant decrease in customer
nominated Arrow redeliveries to DAPL despite overall volume growth
on the Arrow system. Currently, in addition to DAPL, Arrow offers
its customers connectivity to Kinder Morgan’s Hiland pipeline,
Tesoro’s High Plains pipeline, and the True Companies’ Bridger Four
Bears pipeline system, in addition to the COLT Hub and trucking
takeaway. In total, Arrow has over 200 MBbls/d of takeaway capacity
for customers, allowing it to competitively clear all of its
producers’ product from the basin in the event operations on DAPL
are temporarily suspended. Additionally, Crestwood has already
begun to experience increased demand for crude-by-rail services at
the COLT Hub facility which 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 MBbls/d.
Powder River Basin Update
During the fourth quarter 2020, the Jackalope system averaged
gathering volumes of 82 MMcf/d and processing volumes of 84 MMcf/d,
increases of 14% and 18%, respectively, over the third quarter of
2020. During the fourth quarter 2020, Chesapeake continued to bring
shut-in wells back online and had 90% of its wells flowing by the
end of 2020. The remaining shut-in wells were brought back online
in January 2021, driving an incremental increase in volumes through
the system which is currently flowing approximately 110 - 115
MMcf/d. Crestwood connected 11 wells to the Jackalope system during
2020.
In February 2021, Chesapeake emerged from bankruptcy as a
relatively stronger E&P company with a new capital structure,
lower operating expenses, and sufficient liquidity to support
on-going operations. During the bankruptcy process, Crestwood
proactively entered into new commercial agreements with Chesapeake
in the Powder River Basin and Northeast Marcellus. Under the new
commercial agreement in the Powder River Basin, Chesapeake is in
the best position possible to successfully produce and develop its
acreage with reduced fees in the short-term that mitigate shut-in
risk, and incentivized rates that leverage recent capacity
additions to support incremental development over the next few
years. The new agreement protects Crestwood’s downside exposure
with extended minimum volume commitments (MVCs), and provides
upside to Crestwood with a higher long-term fee that generates NPV
(net present value) positive economics with new development.
In 2021, Crestwood expects capital investments in the Powder
River Basin to support new well connections across the Jackalope
gathering system. Based on current producer forecasts, Crestwood
expects 15 - 20 new wells to be connected to the Jackalope system
in 2021 from the system’s primary producers providing incremental
volumes and offsetting natural field decline.
Delaware Basin Update
During the fourth quarter 2020, 18 wells were connected to
Crestwood’s Delaware Basin natural gas gathering systems, resulting
in average volumes of 172 MMcf/d. Volumes decreased 7% compared to
the third quarter 2020 due to frac protection and the new well
connections coming later in the quarter and thus driving higher
volumes to start 2021. During 2020, 47 wells were connected to the
natural gas gathering systems driven by Royal Dutch Shell’s
(“Shell”) development program on the Nautilus gathering system and
activity by Concho Resources Inc. and Mewbourne Oil Company on the
Willow Lake gathering system. Volumes on the recently constructed
produced water infrastructure averaged 44 MBbl/d during the fourth
quarter 2020, a decrease of 6% quarter-over-quarter, as the anchor
producer re-used incremental barrels for fracking as a part of its
development program during the quarter. Based on the producer’s
current forecast, Crestwood expects average annual produced water
volumes to materially increase in 2021.
In 2021, Crestwood expects growth capital in the Delaware Basin
to include Nautilus and Willow Lake gathering system expansions and
well connections. Based on current producer forecasts, Crestwood
estimates 65 - 75 wells to be connected to the Delaware Basin
gathering systems during 2021, driven by Shell’s three-rig program
on acreage dedicated to the Nautilus system and various operators
on the Willow Lake system.
Federal Land Exposure Update
Following the recent executive orders and actions by the Biden
Administration, Crestwood continues to assess the impact to its
business related to the temporary suspension of new leasing on
federal lands. Based on the initial assessment, Crestwood believes
that it is well-positioned to manage the orders made to date on its
federal land exposure in the Bakken, Powder River and Delaware
Basins. In the Bakken, the Arrow system is located on the Fort
Berthold Indian Reservation and the Department of the Interior
excluded tribal lands from its executive actions; thereby, allowing
the Bureau of Indian Affairs (BIA) to continue issuing new permits,
rights-of-way, and leases. In the Powder River Basin, Crestwood has
minimal surface exposure to federal lands and does not expect any
issues with obtaining incremental rights-of-way for additional
gathering lines. Crestwood estimates approximately 55% - 60% of its
primary producers’ mineral acreage is located on private lands and
data from the BLM indicates there are approximately 330 federally
approved drilling permits on the Jackalope system, allowing
producers to develop new wells in the basin for the foreseeable
future with limited impact from any regulatory limitations on
federal lands. In New Mexico, the Willow Lake system is 86% on
private land; therefore, Crestwood does not expect material issues
gaining incremental rights-of-way. Additionally, the major
producers on the Willow Lake system have been proactive in
permitting wells located on federal lands prior to the Biden
Administration taking office.
Barnett Shale Update
In the Barnett shale, there is currently one rig running on the
Lake Arlington system and Crestwood expects an eight well pad to be
connected in early second quarter 2021. Crestwood anticipates the
incremental volumes from this activity to more than offset natural
field decline for the year.
2021 Financial Guidance
Crestwood’s 2021 guidance reflects the general business update
and outlook noted above, the most recent feedback from customers,
and Crestwood’s current outlook on commodity prices. Given
continued commodity price volatility resulting from the ongoing
demand recovery from COVID-19, Crestwood has factored commodity
price sensitivities into the guidance ranges provided below. The
guidance range is generally estimated to reflect Crestwood’s
business performance at an oil price environment of $45 to $50 per
barrel on the low end of the range, up to approximately $60 per
barrel at the upper end of the guidance range, taking into
consideration the impact commodity price movements may have on
Crestwood’s customers’ development plans, as well as the limited
direct commodity price exposure Crestwood has under its percent of
proceeds and marketing contracts. 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 $85 million to $145 million
- Adjusted EBITDA of $550 million to $610 million
- Contribution by operating segment is set forth below:
$US millions
Adj. EBITDA Range
Operating Segment
Low
High
Gathering & Processing
$435
-
$485
Storage & Transportation
75
-
80
Marketing, Supply & Logistics
95
-
100
Less: Corporate G&A
(55)
(55)
FY 2021 Totals
$550
-
$610
- Distributable cash flow available to common unitholders of $320
million to $380 million
- Free cash flow after distributions of $90 million to $160
million
- Full-year 2021 coverage ratio of 1.7x to 2.0x
- Full-year 2021 leverage ratio between 3.75x and 4.25x
- Growth project capital spending and joint venture contributions
in the range of $35 million to $45 million
- Maintenance capital spending in the range of $20 million to $25
million
Capitalization and Liquidity Update
Crestwood invested approximately $5.7 million in consolidated
growth capital projects and joint venture contributions during the
fourth quarter 2020 and approximately $143.8 million during
full-year 2020, coming in at the low end of the revised guidance
range. As of December 31, 2020, Crestwood had approximately $2.5
billion of debt outstanding, comprised of $1.787 billion of
fixed-rate senior notes and $719 million outstanding under its
$1.25 billion revolving credit facility, resulting in a leverage
ratio of 4.0x.
On January 6, 2021, Crestwood priced an offering of $700 million
6% senior unsecured notes due 2029 and concurrently launched a
tender offer for its existing $700 million 6.25% senior unsecured
notes due 2023. Approximately 58% of the 2023 notes were validly
tendered and Crestwood closed the offering and funded the tender
settlement on January 21, 2021. Pro forma for the closing of the
transactions, Crestwood has $2.1 million of senior notes
outstanding and approximately $430 million drawn on its revolving
credit facility. Crestwood expects to redeem the remaining 2023
senior notes when they become callable at par on April 1, 2021.
Crestwood expects growth capital for 2021 to be in a range of
$35 million to $45 million, primarily focused on optimizations to
the Arrow gathering system in the Bakken and well connects in the
Delaware Permian and Powder River Basin. Crestwood expects to
invest between $20 million to $25 million on maintenance capital
projects for the year. Based on the current outlook, Crestwood
expects to fund its total 2021 capital program with retained cash
flow and to generate meaningful free cash flow after
distributions.
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
Since 2018, Crestwood has been a leader in the midstream ESG
space by advancing ESG initiatives both within the company and
across the energy industry. Recent ESG/Sustainability achievements
and milestones for Crestwood include,
- December 2020: Crestwood provided
a leadership role with the EIC/GPA (Energy Infrastructure
Council/Gas Processors Association) ESG working group, with Bob
Phillips co-chairing the committee that developed the first ever
ESG midstream reporting template.
- December 2020: Crestwood joined
ONE Future, a coalition of 32 natural gas companies working
together to voluntarily reduce methane emissions across the natural
gas value chain to 1% or less by 2025.
- January 2021: Crestwood was one of
three midstream companies included in the 2021 Bloomberg
Gender-Equality Index (GEI). The GEI brings transparency to
gender-related practices and policies at publicly listed companies
increasing the breadth of ESG data available to investors.
- January 2021: Crestwood received
Wildlife Habitat Council certification of its Grassland Reclamation
program on the Fort Berthold Indian Reservation in North Dakota,
further highlighting its commitment to Biodiversity and Land Use.
The Wildlife Habitat Council’s certification program is the only
voluntary sustainability standard designed for broad-based
biodiversity enhancements and conservation education activities on
corporate lands.
- February 2021: Frances Vallejo was
appointed as the ninth member of the Board of Directors, bringing
the number of independent directors to six and the number of women
on the board to two.
- February 2021: Crestwood linked
the reduction of its methane emissions intensity rate as well as
its advancement of internal Diversity and Inclusion (D&I)
initiatives to all-employee and executive compensation for
2021.
With the achievement of these significant ESG milestones and
enhanced transparency, Crestwood’s ESG scores improved with the key
ESG rating and ranking organizations, including recent upgrade by
MSCI, improvement of its 2020 Sustainalytics score by 21% and its
2019 Bloomberg ESG score improved by 65%.
Mr. Phillips commented, “ESG is a fundamental part of how
Crestwood conducts its business, and I am proud of the continued
enhancements our company has made throughout 2020 and into 2021. As
we continue to encourage enhanced transparency and disclosure
within the energy industry, Crestwood was one of the first to
complete and publish its performance metrics in the new EIC/GPA ESG
reporting template this past December. Last month, Crestwood was
honored to join Enbridge Inc. and TC Energy as the only three
midstream companies included in the 2021 Bloomberg Gender-Equality
Index which showcases the advancements our company has made in
D&I over the past year and Crestwood has also taken another
step to engrain these values into its culture by tying a portion of
executive and all-employee compensation to our D&I
initiatives.”
Mr. Phillips concluded, “Oil and gas will be an essential
contributor to the transition to a lower carbon future and it is
imperative that Crestwood, and the rest of our industry, addresses
the dual challenge of meeting the world's growing energy demand
while also being mindful of the potential risks associated with
climate change. Crestwood is pleased to join other natural gas
companies as a part of ONE Future and will continue to reduce
methane emissions across its assets through enhanced detection and
repair practices and other methane emission reduction
technologies.”
Crestwood remains on track to publish its third annual
sustainability report in June 2021 in accordance with the Global
Reporting Initiative (GRI) and the Sustainability Accounting
Standards Board (SASB) Midstream Framework, and this year will
incorporate additional disclosures through the Task Force on
Climate-Related Financial Disclosures (TCFD).
For more information on Crestwood’s approach to sustainability,
please visit https://esg.crestwoodlp.com.
Upcoming Conference Participation
Crestwood’s management will 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.
- Barclays Midstream & Clean Infrastructure Corporate Access
Day, February 24 – 25, 2021
- J.P. Morgan Global High Yield & Leveraged Finance
Conference, March 1 – 3, 2021
- Morgan Stanley Global Energy & Power Conference, March 1 –
3, 2021
- Truist Securities, Midstream & Alternative Energy Summit,
March 25, 2021
2020 K-1 Tax Packages
Crestwood’s K-1 tax packages are expected to be made available
online and mailed the week of March 15, 2021. Once available, K-1s
can be found online at www.taxpackagesupport.com/CEQP for the
common units or www.taxpackagesupport.com/CEQP_Preferred for the
preferred units.
2020 Annual Report Form 10-K
Crestwood plans to file its annual report on Form 10-K with the
Securities and Exchange Commission for the year ended December 31,
2020 on February 26, 2021. The 10-K report will be available to
view, print or download on the Investors page of Crestwood’s
website at www.crestwoodlp.com. Crestwood will also provide a
printed copy of the annual report on Form 10-K, free of charge upon
request. Such requests should be directed in writing via email to
investorrelations@crestwoodlp.com or via mail to Investor
Relations, 811 Main St., Suite 3400, Houston, TX 77002.
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, distributable cash flow and free 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 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;
gathering, storage, terminalling and marketing of crude oil; and
gathering and disposal of produced water. Visit Crestwood Equity
Partners LP at www.crestwoodlp.com; and to learn more about
Crestwood’s sustainability efforts, please visit
https://esg.crestwoodlp.com.
Source: Crestwood Equity Partners LP
1 Please see non-GAAP reconciliation tables included at the end
of the press release
2 Defined as distributable cash flow attributable to common
unitholders less growth capital expenditures and distributions to
common unitholders
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,
2020
2019
2020
2019
Revenues:
Gathering and processing
$
156.8
$
196.0
$
631.4
$
835.8
Storage and transportation
3.7
3.6
13.8
20.4
Marketing, supply and logistics
492.1
640.0
1,581.3
2,322.8
Related party
1.9
0.1
27.8
2.9
Total revenues
654.5
839.7
2,254.3
3,181.9
Costs of products/services sold
481.7
654.7
1,600.5
2,544.9
Operating expenses and other:
Operations and maintenance
31.6
39.5
131.8
138.8
General and administrative
27.5
19.0
91.5
103.4
Depreciation, amortization and
accretion
59.5
55.2
237.4
195.8
(Gain) loss on long-lived assets, net
(0.1
)
4.1
26.0
6.2
Goodwill impairment
—
—
80.3
—
Gain on acquisition
—
—
—
(209.4
)
118.5
117.8
567.0
234.8
Operating income
54.3
67.2
86.8
402.2
Earnings from unconsolidated affiliates,
net
8.1
11.8
32.5
32.8
Interest and debt expense, net
(33.3
)
(32.1
)
(133.6
)
(115.4
)
Gain on modification/extinguishment of
debt
0.1
—
0.1
—
Other income (expense), net
(0.9
)
0.3
(0.7
)
0.6
Income (loss) before income taxes
28.3
47.2
(14.9
)
320.2
Provision for income taxes
(0.5
)
—
(0.4
)
(0.3
)
Net income (loss)
27.8
47.2
(15.3
)
319.9
Net income attributable to non-controlling
partner
10.4
10.3
40.8
34.8
Net income (loss) attributable to
Crestwood Equity Partners LP
$
17.4
$
36.9
$
(56.1
)
$
285.1
Net income attributable to preferred
units
15.1
15.1
60.1
60.1
Net income (loss) attributable to
partners
$
2.3
$
21.8
$
(116.2
)
$
225.0
Net income (loss) per limited partner
unit:
Basic
$
0.03
$
0.30
$
(1.59
)
$
3.11
Diluted
$
0.03
$
0.28
$
(1.59
)
$
2.93
CRESTWOOD EQUITY PARTNERS
LP
Selected Balance Sheet
Data
(in millions)
(unaudited)
December 31,
2020
2019
Cash
$
14.0
$
25.7
Outstanding
debt:
Revolving Credit Facility
$
719.0
$
557.0
Senior Notes
1,787.2
1,800.0
Other
0.4
0.6
Subtotal
2,506.6
2,357.6
Less: deferred financing costs, net
22.6
29.1
Total debt
$
2,484.0
$
2,328.5
Partners'
capital
Total partners' capital
$
1,655.4
$
1,932.8
Common units outstanding
74.0
72.3
CRESTWOOD EQUITY PARTNERS
LP
Reconciliation of Non-GAAP
Financial Measures
(in millions)
(unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
EBITDA
Net income (loss)
$
27.8
$
47.2
$
(15.3
)
$
319.9
Interest and debt expense, net
33.3
32.1
133.6
115.4
Gain on modification/extinguishment of
debt
(0.1
)
—
(0.1
)
—
Provision for income taxes
0.5
—
0.4
0.3
Depreciation, amortization and
accretion
59.5
55.2
237.4
195.8
EBITDA(a)
$
121.0
$
134.5
$
356.0
$
631.4
Significant items impacting EBITDA:
Unit-based compensation charges
13.4
5.4
30.7
47.0
(Gain) loss on long-lived assets, net
(0.1
)
4.1
26.0
6.2
Goodwill impairment
—
—
80.3
—
Gain on acquisition
—
—
—
(209.4
)
Earnings from unconsolidated affiliates,
net
(8.1
)
(11.8
)
(32.5
)
(32.8
)
Adjusted EBITDA from unconsolidated
affiliates, net
17.8
21.2
75.4
74.9
Change in fair value of commodity
inventory-related derivative contracts
20.9
(4.2
)
33.6
2.7
Significant transaction and environmental
related costs and other items
0.2
(0.2
)
10.8
6.5
Adjusted EBITDA(a)
$
165.1
$
149.0
$
580.3
$
526.5
Distributable
Cash Flow(b)
Adjusted EBITDA(a)
$
165.1
$
149.0
$
580.3
$
526.5
Cash interest expense(c)
(31.7
)
(33.6
)
(129.9
)
(123.7
)
Maintenance capital expenditures(d)
(2.7
)
(5.2
)
(10.7
)
(19.1
)
Adjusted EBITDA from unconsolidated
affiliates, net
(17.8
)
(21.2
)
(75.4
)
(74.9
)
Distributable cash flow from
unconsolidated affiliates
15.9
20.0
70.4
69.6
PRB cash received in excess of recognized
revenues(e)
2.4
4.9
24.1
17.8
Provision for income taxes
(0.5
)
—
(0.4
)
(0.3
)
Distributable cash flow attributable to
CEQP
130.7
113.9
458.4
395.9
Distributions to preferred
(15.1
)
(15.1
)
(60.1
)
(60.1
)
Distributions to Niobrara preferred
(9.3
)
(9.2
)
(37.1
)
(30.9
)
Distributable cash flow attributable to
CEQP common
$
106.3
$
89.6
$
361.2
$
304.9
(a)
EBITDA is defined as income before income
taxes, plus debt-related costs (interest and debt expense, net, and
gain (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
or losses on long-lived assets, gains on acquisitions, impairments
of long-lived assets and 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 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 December
31,
Year Ended December
31,
2020
2019
2020
2019
EBITDA
Net cash provided by operating
activities
$
112.8
$
142.1
$
408.1
$
420.4
Net changes in operating assets and
liabilities
(9.2
)
(28.6
)
(36.1
)
(47.8
)
Amortization of debt-related deferred
costs
(1.6
)
(1.6
)
(6.5
)
(6.2
)
Interest and debt expense, net
33.3
32.1
133.6
115.4
Unit-based compensation charges
(13.4
)
(5.4
)
(30.7
)
(47.0
)
Gain (loss) on long-lived assets, net
0.1
(4.1
)
(26.0
)
(6.2
)
Goodwill impairment
—
—
(80.3
)
—
Gain on acquisition
—
—
—
209.4
Earnings from unconsolidated affiliates,
net, adjusted for cash distributions received
(1.1
)
—
(6.5
)
(6.9
)
Deferred income taxes
(0.5
)
—
(0.1
)
—
Provision for income taxes
0.5
—
0.4
0.3
Other non-cash expense
0.1
—
0.1
—
EBITDA(a)
$
121.0
$
134.5
$
356.0
$
631.4
Unit-based compensation charges
13.4
5.4
30.7
47.0
(Gain) loss on long-lived assets, net
(0.1
)
4.1
26.0
6.2
Goodwill impairment
—
—
80.3
—
Gain on acquisition
—
—
—
(209.4
)
Earnings from unconsolidated affiliates,
net
(8.1
)
(11.8
)
(32.5
)
(32.8
)
Adjusted EBITDA from unconsolidated
affiliates, net
17.8
21.2
75.4
74.9
Change in fair value of commodity
inventory-related derivative contracts
20.9
(4.2
)
33.6
2.7
Significant transaction and environmental
related costs and other items
0.2
(0.2
)
10.8
6.5
Adjusted EBITDA(a)
$
165.1
$
149.0
$
580.3
$
526.5
(a)
EBITDA is defined as income before income
taxes, plus debt-related costs (interest and debt expense, net, and
gain (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
or losses on long-lived assets, gains on acquisitions, impairments
of long-lived assets and 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 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 December
31,
Year Ended December
31,
2020
2019
2020
2019
Gathering and
Processing
Revenues
$
217.4
$
259.2
$
791.2
$
1,010.8
Costs of product/services sold
68.7
115.1
261.5
526.1
Operations and maintenance expense
19.2
28.5
84.9
98.7
Loss on long-lived assets, net
(0.1
)
(4.1
)
(23.8
)
(6.2
)
Goodwill impairment
—
—
(80.3
)
—
Gain on acquisition
—
—
—
209.4
Earnings (loss) from unconsolidated
affiliates, net
(1.3
)
1.4
(1.0
)
(2.1
)
EBITDA
$
128.1
$
112.9
$
339.7
$
587.1
Storage and
Transportation
Revenues
$
6.0
$
7.5
$
23.0
$
34.6
Costs of product/services sold
(0.1
)
0.1
0.2
0.2
Operations and maintenance expense
0.8
1.0
3.6
4.0
Earnings from unconsolidated affiliates,
net
9.4
10.4
33.5
34.9
EBITDA
$
14.7
$
16.8
$
52.7
$
65.3
Marketing, Supply
and Logistics
Revenues
$
431.1
$
573.0
$
1,440.1
$
2,136.5
Costs of product/services sold
413.1
539.5
1,338.8
2,018.6
Operations and maintenance expense
11.6
10.0
43.3
36.1
Gain (loss) on long-lived assets, net
0.2
—
(2.4
)
(0.2
)
EBITDA
$
6.6
$
23.5
$
55.6
$
81.6
Total Segment EBITDA
$
149.4
$
153.2
$
448.0
$
734.0
Corporate
(28.4
)
(18.7
)
(92.0
)
(102.6
)
EBITDA
$
121.0
$
134.5
$
356.0
$
631.4
CRESTWOOD EQUITY PARTNERS
LP
Operating Statistics
(unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Gathering and
Processing
Gas gathering volumes (MMcf/d)
Bakken - Arrow
142.2
103.1
117.5
88.0
Marcellus
243.2
278.7
255.7
296.1
Barnett
213.1
238.4
221.6
247.9
Delaware (a)
172.3
209.5
194.3
181.6
Powder River Basin - Jackalope
82.4
154.2
99.7
145.3
Other
—
30.3
20.6
34.3
Total gas gathering volumes
853.2
1,014.2
909.4
993.2
Processing volumes (MMcf/d)
Bakken - Arrow
137.8
94.8
112.4
54.1
Powder River Basin - Jackalope
84.2
129.0
96.0
125.2
Other
137.5
199.8
141.6
170.8
Total processing volumes
359.5
423.6
350.0
350.1
Compression volumes (MMcf/d)
345.4
371.5
354.4
374.3
Arrow
Bakken - Crude oil gathering volumes
(MBbls/d)
130.0
124.0
113.3
103.6
Bakken - Water gathering volumes
(MBbls/d)
97.6
80.4
89.2
68.5
Delaware (a) - Water gathering volumes
(MBbls/d)
43.6
—
34.0
—
Storage and
Transportation
Northeast Storage - firm contracted
capacity (Bcf) (a)
34.4
34.8
34.5
33.8
% of operational capacity contracted
99
%
100
%
99
%
97
%
Firm storage services (MMcf/d) (a)
188.2
169.5
179.3
210.6
Interruptible storage services (MMcf/d)
(a)
—
29.0
0.5
21.9
Northeast Transportation - firm contracted
capacity (MMcf/d) (a)
1,780.7
1,646.2
1,671.1
1,597.3
% of operational capacity contracted
97
%
90
%
91
%
87
%
Firm services (MMcf/d) (a)
1,676.6
1,491.4
1,523.2
1,402.0
Interruptible services (MMcf/d) (a)
15.3
6.9
18.7
11.7
Gulf Coast Storage - firm contracted
capacity (Bcf) (a)
30.5
28.5
30.2
28.5
% of operational capacity contracted
79
%
74
%
79
%
74
%
Firm storage services (MMcf/d) (a)
282.3
272.0
293.5
319.4
Interruptible services (MMcf/d) (a)
58.4
45.2
62.8
55.9
COLT Hub
Rail loading (MBbls/d)
44.0
61.8
47.0
56.9
Outbound pipeline (MBbls/d) (b)
8.7
16.5
13.6
17.0
Marketing, Supply
and Logistics
NGL volumes sold or processed
(MBbls/d)
128.2
103.7
93.1
95.6
NGL volumes trucked (MBbls/d)
18.8
28.4
18.2
35.0
(a)
Represents 50% owned joint venture,
operational data reported at 100%.
(b)
Represents only throughput leaving the
terminal.
CRESTWOOD EQUITY PARTNERS
LP
Full Year 2021 Adjusted
EBITDA, Distributable Cash Flow and Free Cash Flow Guidance
Reconciliation of Non-GAAP
Financial Measures
(in millions)
(unaudited)
Expected 2021 Range
Low - High
Net Income Reconciliation
Net income
$85 - $145
Interest and debt expense, net (a)
150 - 155
Depreciation, amortization and
accretion
235 - 240
Unit-based compensation charges
25 - 30
Earnings from unconsolidated
affiliates
(30) - (35)
Adjusted EBITDA from unconsolidated
affiliates
75 - 80
Adjusted EBITDA
$550 - $610
Cash interest expense (b)
(135) - (140)
Maintenance capital expenditures (c)
(20) - (25)
PRB cash received in excess of recognized
revenues (d)
25 - 30
Adjusted EBITDA from unconsolidated
affiliates
(75) - (80)
Distributable cash flow from
unconsolidated affiliates
70 - 75
Cash distributions to preferred
unitholders (e)
(100)
Distributable cash flow attributable to
CEQP (f)
$320 - $380
Cash Flows from Operating Activities
Reconciliation
Net cash provided by operating activities,
net
$395 - $455
Interest and debt expense, net (a)
150 - 155
Adjusted EBITDA from unconsolidated
affiliates
75 - 80
Earnings from unconsolidated
affiliates
(30) - (35)
Amortization of debt-related deferred
costs
(5) - (10)
Changes in operating assets and
liabilities, net
(35) - (40)
Adjusted EBITDA
$550 - $610
Cash interest expense (b)
(135) - (140)
Maintenance capital expenditures (c)
(20) - (25)
PRB cash received in excess of recognized
revenues (d)
25 - 30
Adjusted EBITDA from unconsolidated
affiliates
(75) - (80)
Distributable cash flow from
unconsolidated affiliates
70 - 75
Cash distributions to preferred
unitholders (e)
(100)
Distributable cash flow attributable to
CEQP (f)
$320 - $380
Less: Growth capital expenditures
35 - 45
Less: Distributions to common
unitholders
185
Free cash flow after distributions
(g)
$90 - $160
(a)
Includes gain (loss) on
modification/extinguishment of debt, net
(b)
Cash interest expense less amortization of
deferred financing costs.
(c)
Maintenance capital expenditures are
defined as those capital expenditures which do not increase
operating capacity or revenues from existing levels.
(d)
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.
(e)
Includes cash distributions to preferred
unitholders and Crestwood Niobrara preferred unitholders.
(f)
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 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 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
companies.
(g)
Free cash flow after distributions is
defined as distributable cash flow attributable to common
unitholders less growth capital expenditures and distributions to
common unitholders. Free cash flow after distributions should not
be considered an alternative to cash flows from operating
activities or any other measure of liquidity calculated in
accordance with generally accepted accounting principles as those
items are used to measure liquidity or the ability to service debt
obligations. We believe that free cash flow provides additional
information for evaluating our ability to generate cash flow after
paying our distributions to common unitholders and paying for our
growth capital expenditures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210223005316/en/
Crestwood Equity Partners LP Investor Contacts
Josh Wannarka, 713-380-3081 josh.wannarka@crestwoodlp.com Senior
Vice President, Investor Relations, ESG & Corporate
Communications
Rhianna Disch, 713-380-3006 rhianna.disch@crestwoodlp.com
Director, Investor Relations
Sustainability and Media Contact
Joanne Howard, 832-519-2211 joanne.howard@crestwoodlp.com Vice
President, Sustainability and Corporate Communications
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