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Investor Presentation October 2012
Forward Looking Statements
This presentation contains forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regarding future events, occurrences, circumstances, activities, performance, outcomes and results of Crestwood Midstream Partners LP (“Crestwood” or “CMLP”). Although these statements reflect the current views, assumptions and expectations of Crestwood’s management, the matters addressed herein are subject to numerous risks and uncertainties, which could cause actual activities, performance, outcomes and results to differ materially from those indicated. However, a variety of factors could cause actual results to materially differ from Crestwood’s current expectations in financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in natural gas prices; the extent and success of drilling efforts, as well as the extent and quality of natural gas volumes produced within proximity of our assets; failure or delays by our customers in achieving expected production in their natural gas projects; competitive conditions in our industry; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions, successfully integrate acquired businesses, and realize any cost savings and other synergies from any acquisition; 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; timely receipt of necessary government approvals and permits, our ability to control the costs of construction, including costs of materials, labor and rights-of-way and other factors that may impact our ability to complete projects within budget and on schedule; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing and future litigation; and risks related to our substantial indebtedness; and other factors disclosed in Crestwood’s filings with the Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date of this presentation, and we undertake no obligation to update any of these forward-looking statements to reflect new information, future events or circumstances except to the extent required by applicable law.
2
Crestwood Overview Crestwood Midstream Partners LP: (NYSE: CMLP)
General Partner owned by First Reserve and Crestwood Management team
~$2 billion enterprise value; current yield ~ 8.5%
Midstream services: gathering, processing, treating and compression
95% fixed-fee portfolio – stable cash flows
Leading midstream player in Marcellus, Granite Wash, Barnett, Avalon, Fayetteville, Haynesville unconventional plays
3
Experienced Management Team and Sponsor Crestwood Management Team
World’s leading private equity firm specializing in the energy industry Over 25 years of investing experience solely in the energy industry Currently investing out of $8.8 billion Fund XII
$615 MM equity investment in Crestwood Highly incentivized to support the growth of CMLP through additional
investments at Holdco, joint ventures with CMLP or drop downs to CMLP
34 years Industry Experience President and CEO and a Director of Enterprise Products Partners L.P. (NYSE:EPD) Chairman, President and CEO of GulfTerra Energy Partners, L.P. (NYSE:GTM) President of El Paso Field Services (El Paso Corporation; NYSE:EP)
24 years Industry Experience Chief Financial Officer of TEPPCO Partners, LP (NYSE:TPP) Vice President of Strategic Planning at Enterprise Product Partners, LP (NYSE:EPD) Vice President and Chief Financial Officer of GulfTerra Energy Partners (NYSE:GTM)
32 years Industry Experience Senior Vice President of Crosstex Energy, L.P. (NASDAQ: XTEX) Senior Vice President for Enterprise Products Partners, LP (NYSE: EPD) Responsible for gas processing, fractionation and marketing in El Paso Corporation (NYSE: EP)
16 years Industry Experience Vice President of Project Development & Engineering for El Paso Corporation (NYSE: EP) Director of Marketing & Asset Optimization for Tennessee Gas Pipeline – El Paso (NYSE: EP) Manager of Business Development & Strategy for Southern Natural Gas - El Paso (NYSE: EP)
Robert G. Phillips Chairman, President and CEO
William G. Manias Senior Vice President and Chief Financial Officer
Joel D. Moxley Senior Vice President – Chief Operating Officer
J. Heath Deneke Senior Vice President – Chief Commercial Officer
4
Investment Thesis
5
$200+ billion anticipated midstream infrastructure required to support upstream development of unconventional assets over the next 2-3 decades
Current Crestwood Operating Areas
US Shale Plays
Future Greenfield
Development Crestwood Midstream Partners LP
(NYSE: CMLP)
Enterprise Value: $2.1 Bn
42% LP/GP
Public and Class C
Unit holders
Crestwood Holdings LLC (Holdco)
First Reserve and
Management
58% LP
Strong GP/LP Alignment of Interest
Fayetteville Shale
CMM Marcellus
Shale
Granite Wash
Haynesville Shale
Barnett Shale
65% Interest
Avalon Shale
6
Barnett Shale Rich Dry
35% Interest
Future Drop-Down
Phase I: Initial Acquisitions
Acquired diverse portfolio of midstream assets across leading shale plays
Achieved critical mass in operations at ~1 Bcf/d throughput
Phase II: M&A Drop-Downs
Equity support from First Reserve for high-growth acquisitions
Phase III: Greenfield Development
Development team aggressively pursuing opportunities
Drop-Down to CMLP once in-service and generating cash flow
Evolving Growth Strategy
Track Record of Value Creation Since establishing Crestwood Holdings, six midstream acquisitions with an aggregate transaction value of ~$1.6 billion completed
7
Crestwood Holdings Formed
KGS Barnett Shale
Acquisition
CMLP issues 1.8MM
common units
Acquisition of Fayetteville Shale and Granite Wash
assets
Acquisition of Haynesville/Bossier
Shale assets
Formation of CMM joint venture and
acquisition of Marcellus Shale
assets
CMLP issues 6.2MM Class C
units and $200MM of
Senior Notes
Acquisition of Avalon
Shale assets
CMLP issues 3.5MM
common units
Crestwood Holdings
establishes $400MM term loan (replaced existing loan)
Crestwood Joint Venture establishes
$200MM credit facility
May 2010
July 2010
February 2011
November 2011
April 2011
May 2011
March 2012
October 2010
January 2012
FRC & Management Initial Equity and
Crestwood Holdings establishes
$180MM term loan
30% Total Return to CMLP Unitholders: July 22, 2010 to Sep 30, 2012 (1)
(1) CMLP total return since Crestwood Holdings’ acquisition of KGS announced on 7/22/10, assuming distribution reinvestment. Source: Bloomberg
Bolt-on Acquisition in
liquids-rich area of
Barnett Shale
July 2012
CMLP issues 4.6MM
common units
Established Field Services Platform
Avalon Shale
Granite Wash
13,000+ acres; growing
rich-gas play
55,000 acres; emerging
liquids-rich area
Fayetteville Shale
140,000+ acres; 10-20 year
contracts; 55% developed
Barnett Shale
20,000 acres; 5-10 year contracts;
HBP phase
Haynesville Shale
100,000+ acres; 15 year contracts; 10-20% developed
127,000+ acres; 20 year contracts; 7-year minimum volume contract
Marcellus Shale
Key Operating Statistics (1)
Miles of Pipeline 830
Processing Plants 5
Compression HP (000’s) 226
Gathering Volume (MMcf/d) 965
Processing Volume (MMcf/d) 220
(1) As of 10/1/12. Includes 100% of Crestwood Marcellus Midstream joint venture
8
Growth Drivers for 2012 / 2013 Crestwood built solid operating platform across major shale
plays through 6 acquisitions (2010-2012)
Lower natural gas prices have slowed development of dry gas systems in Barnett dry, Fayetteville and Haynesville shale plays
2012-2013 growth will come from rich gas areas including Barnett, Marcellus and Granite Wash systems due to strong producer drilling economics (NGL upgrade) which drive development activity
Additional accretive bolt-on acquisitions and drop-downs from CMM and Holdco will supplement growth 2013+
New green field development projects will position Crestwood for long term growth 2014+
9
Recent Acquisition - Barnett Rich Gas CMLP’s largest operations are located
in the Barnett Shale
$87MM bolt on acquisition from Devon Energy substantially increases CMLP’s gathering and processing assets in the rich gas portion of the Barnett shale
~5%-8% distributable cash flow accretion in 2H 2012 and 2013
20-year fixed-fee contract with Devon 20,500 acreage dedication Annual fee escalator
74 mile gathering system and 100 MMcf/d gas processing plant
Current volumes of ~78 MMcf/d (1)
Transaction closed on 8/24/12
Corvette Plant
Devon Plant
Cowtown Plant
Legend Processing Plants CMLP Cowtown Gathering System
Devon Gathering System
10
(1) As of 10/1/12
Recent Acquisition - Marcellus Shale Marcellus Shale in the Northeast US is the
industry’s fasting growing natural gas play
Crestwood Marcellus Midstream (CMM) is a joint venture between CMLP and Crestwood Holdings formed to acquire gathering assets
CMM Ownership: Crestwood Holdings 65%; CMLP 35% with quarterly distributions
$377MM acquisition by CMM in March 2012
~340 MMcf/d currently flowing through CMM systems (1)
$200MM revolver at CMM to fund growth capital needs to build-out system
20-year fixed-fee contract with Antero Resources 127,000 acre area of dedication 7-year minimum volume guarantee Annual fee escalator
11
Rich Gas Area Dry Gas Area
Legend Area of Dedication (AOD) Planned MWE Sherwood Plant Pipeline in Service at YE 2012
Planned Pipeline (2013 – 2016) Existing and Planned Third Party Pipeline
(1) As of 10/1/12
Development Update - Granite Wash Granite Wash is an expanding
unconventional play located in the Texas Panhandle
CMLP acquired gathering and processing assets in April 2011
Le Norman Operating, a First Reserve portfolio E&P company, is developing acreage adjacent to CMLP facilities
First two Le Norman completions IP’d at combined rate of ~10.5 MMcf/d and ~1,600 Bpd of oil
Le Norman drilling plan Phase 1: 13 wells over next 18 months
(37 locations over next 5 years) Phase 2: Potential 37,000 acreage
expansion based on 2H 2012 and 2013 drilling results
Potential to exceed current Indian Creek plant capacity of 38 MMcf/d
Phase 1
Phase 2
Current
Indian Creek Plant
12
$1.39 $1.52
$1.66
$1.87 $2.02
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
2008 2009 2010 2011 2012Guidance
$148
$55
$149
$462
$250
$-
$100
$200
$300
$400
$500
2008 2009 2010 2011 2012Guidance
$ MM
$50 $64
$77
$110 $128
$-
$25
$50
$75
$100
$125
$150
2008 2009 2010 2011 2012Guidance
$ MM
193 257
343
570
900
0
200
400
600
800
1,000
2008 2009 2010 2011 2012Guidance
MMcf/day
Building Impressive Growth Story Gathering Volumes Adjusted EBITDA
Capital Expenditures Distributions Paid per Unit
(1) Represents midpoint of 2012 guidance. Volume data includes 100% of CMM gathering volumes since acquisition (~300 MMcf/d). (2) Adjusted EBITDA includes net 35% ownership contribution from CMM. (3) Does not include additional acquisitions after 8/24/12.
(1) (2)
(3)
13
14
Key Financial Metrics - 1H 2012
2012 2011 % Increase
Gathering (MMcf/d) (1) 843.4 499.0 + 69%Processing (MMcf/d) 145.8 141.0 + 3%
Revenues ($MMs) $101.9 $87.9 + 16%Adjusted EBITDA ($MMs) $56.9 $50.4 + 13%
Distributions per Unit $1.00 $0.90 + 11%
Total Debt ($MMs) $550.5 $437.5Debt to Capitalization 46% 48%
Debt to Pro Forma LTM EBITDA 4.1x 4.3xBorrowing Capacity ($MMs) $165.5 $185.1
(1) 2012 includes 257 MMcf/d of gathering volumes by CMM, which represents 100% of gathering volumes since acquistion on March 26, 2012.(2) As defined in CMLP's credit agreement. Debt includes capital lease obligations, $8.0 million deferred purchase of Tristate acquisition that will be paid Q4 2012,
$90 million for the pending Devon Acquisition, offset by $116.9 million of equity proceeds received in Q3 2012. Latest twelve months EBITDA is pro forma for theTristate Acquisition and the pending Devon Acquisition.
Six Months Ended June 30,
Operating Statistics:
Leverage Metrics (2):
Key Investment Considerations
Over $600 million invested by First Reserve and Crestwood Management
Highly experienced management team with history of creating investor value
Long term contracts with top-tier shale producers (Antero, BHP Billiton, BP, Chesapeake, Devon, Exxon Mobil, Quicksilver)
95% fixed-fee portfolio – stable cash flows Operations in leading unconventional plays (Marcellus,
Granite Wash, Barnett, Avalon, Fayetteville, Haynesville)
Bolt-on acquisitions with operating synergies Business development team to generate greenfield
infrastructure investment opportunities Drop-down opportunities from the general partner
Established Field Services
Platform
Visible Growth
Strategy
Strong GP/LP Alignment Of Interest
15
Non-GAAP Financial Measures
The following slides of this presentation provide reconciliations of the non-GAAP financial measures adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance. We define adjusted EBITDA as net income from continuing operations adjusted for interest expense, income taxes, depreciation, amortization and accretion expense and certain non-recurring expenses, including but not limited to items such as transaction related expenses and gains/losses on the exchange of property, plant and equipment. Adjusted EBITDA is commonly used as a supplemental financial measure by senior management and by external users of our financial statements, such as investors, research analysts and rating agencies, to assess the financial performance of our assets without regard to financing methods, capital structures or historical cost basis.
16
Non-GAAP Reconciliations
17
2008 2009 2010 2011 2011 2012
Total revenues 76,084$ 95,881$ 113,590$ 205,820$ 87,915$ 101,935$
Product purchases - - - (38,787) (12,528) (16,414)
Operations and maintenance expense (19,395) (21,968) (25,702) (36,303) (15,592) (18,598)
General and administrative expense (6,407) (9,676) (17,657) (24,153) (12,430) (13,674)
Gain from exchange of property, plant and equipment and other 11 1 - 1,106 - -
EBITDA 50,293 64,238 70,231 107,683 47,365 53,690
Add: Non-recurring expenses - - 6,318 2,279 3,037 1,778
Less: Equity earnings from unconsolidated affiliates - - - - - (441)
Add: Adjusted earnings from unconsolidated affiliates - - - - - 1,876
Adjusted EBITDA 50,293 64,238 76,549 109,962 50,402 56,903
Less:
Depreciation and accretion expense 13,131 20,829 22,359 33,812 14,386 21,484
Interest expense 8,437 8,519 13,550 27,617 12,825 15,843
Income tax provision (benefit) 253 399 (550) 1,251 551 578
Non-recurring items impacting net income - - 6,318 2,279 3,037 3,213
Net income from continuing operations 28,472$ 34,491$ 34,872$ 45,003$ 19,603$ 15,785$
Six Months EndedYear Ended December 31, June 30,
($ in thousands)
Non-GAAP Reconciliation: 2012 Forecast
18
Net income $38 to $43
Add: Depreciation, amortization and accretion expense $45
Add: Interest expense $35
Add: Income tax provision $1
EBITDA $119 to $124
Add: Non-recurring expenses (1) $2
Deduct: Equity earnings from Crestwood Marcellus Midstream ("CMM") ($3)
Add: 35% of CMM's Adjusted EBITDA $7
Adjusted EBITDA $125 to $130
(1) Includes approximately $2 million of non-recurring expenses primarily related to due diligence activitiesof a potential acquisition that is not expected to be completed.
Reconciliation of Net Income to Adjusted EBITDA(in millions)