Crestwood Announces Second Quarter 2012 Results and Confirms Schedule to Close Acquisition of Assets From Devon Energy Corporation
(firmenpresse) - HOUSTON, TX -- (Marketwire) -- 08/06/12 -- Crestwood Midstream Partners LP (NYSE: CMLP) ("Crestwood" or the "Partnership") reported today its second quarter 2012 financial results and confirmed that the acquisition of gathering and processing assets from certain subsidiaries of Devon Energy Corporation ("Devon") is expected to be completed in the third quarter 2012 as previously announced.
(1) Volumes gathered include only Crestwood's 100% owned systems. Volumes attributable to Crestwood Marcellus Midstream LLC ("CMM") are described below and in Segment Performance.
Crestwood's adjusted earnings before interest, taxes, depreciation, amortization and accretion ("Adjusted EBITDA") for the second quarter and six months ended June 30, 2012, was $28.5 million and $56.9 million, compared to $29.8 million and $50.4 million, respectively, for the same periods in 2011. Second quarter 2012 performance was approximately flat with first quarter 2012 Adjusted EBITDA of $28.4 million. Crestwood's total 100% owned gathering system volumes for the recent quarter averaged 561 million cubic feet per day ("MMcf/d"), down 8% from 611 MMcf/d gathered in the first quarter 2012 and flat to 560 MMcf/d gathered in the second quarter 2011. Approximately 90% of the volume decline from the first quarter 2012 occurred in the Barnett segment (45 MMcf/d), with the remaining 10% of the decline in the Fayetteville segment (5 MMcf/d). The majority of the Barnett volume reduction occurred on Crestwood's Alliance and Lake Arlington dry gas gathering systems due to delayed completions of new wells, modest amounts of economic shut-ins and the temporary shut-in of nearby wells for producer fracking operations.
During the second quarter 2012, 29 new wells were connected to Crestwood's 100% owned gathering systems (including 12 new wells on the Alliance system added late in the second quarter which should increase third quarter volumes), compared to 16 new wells in the first quarter 2012, and 25 new wells in the second quarter 2011. Second quarter 2012 volumes on the Fayetteville dry gas systems were down 6% compared to the first quarter 2012, and were also affected by delayed well completions and temporary shut-ins for producer fracking operations. Crestwood connected 6 new wells to the Fayetteville systems at the end of the second quarter (15 wells total year-to-date) and expects a similar number of new wells to be connected in the second half of 2012 based on current producer activity. To facilitate the expected increase in Fayetteville volumes in the second half of 2012, Crestwood is expanding its Prairie Creek gathering system and adding treating capacity. Additionally, Crestwood is expanding its Indian Creek gathering system in the Granite Wash area to handle new rich gas volumes which were connected to the system in July and to support LeNorman Operating Inc.'s new Granite Wash development program in the area of Crestwood's assets.
Gathering volumes attributable to CMM for the second quarter 2012 averaged 257 MMcf/d allowing CMM to contribute Adjusted EBITDA of approximately $1.9 million to Crestwood based upon its 35% indirect interest in the joint venture. CMM was formed March 26, 2012 to acquire certain Marcellus Shale gathering systems from Antero Resources Appalachia Corporation ("Antero"). Crestwood assumed operations of the CMM gathering systems and field operations from Antero on June 1, 2012, one month ahead of schedule under the Transition Services Agreement between CMM and Antero. Antero added 11 new wells and one new production station (Pike Fork) to the CMM systems in the second quarter 2012 compared to 9 new wells in the first quarter 2012 prior to the sale to CMM. Antero currently has 7 rigs running in the area of dedication ("AOD") committed to CMM with the majority of the drilling activity located in the rich gas portion of the AOD. Based on current producer plans, Crestwood expects approximately 40 additional wells to be connected to the system in the second half of 2012.
Crestwood expects to close the recently announced acquisition of Devon's West Johnson County pipeline system and processing plant located in the liquids-rich area of the Barnett Shale during the third quarter 2012. Crestwood expects the acquisition to be accretive to distributable cash flow per unit by approximately 5% in 2013. Devon has already connected 30 wells to the system in 2012, and post-close, Crestwood expects to connect an additional 15 to 18 wells through year-end. Current volumes through the Devon gathering system are approximately 95 MMcf/d, and are expected to increase as additional wells are connected throughout the remainder of 2012. Upon closing, Crestwood plans to consolidate the West Johnson system with its existing Cowtown gathering system and will process all of Devon's West Johnson County natural gas production at Crestwood's existing Cowtown and Corvette processing plants. This integration is expected to result in future cost savings for Crestwood and provide Devon with lower wellhead pressures, higher natural gas liquids recoveries and expanded market outlets. In addition, Crestwood will own an idle processing plant that can be utilized for opportunities currently being pursued in other areas.
"Second quarter 2012 results were below our expectations primarily due to slower development activity on our Barnett Shale dry gas systems, while the rest of our business performed relatively well," stated Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood's general partner. "As gas prices have remained stubbornly low in the past few months, producers have not been in a hurry to drill and complete dry gas wells, or put wells back into service after they have been shut-in for fracking operations on existing pads. However, we have seen continued solid development in the rich gas areas near our Marcellus Shale, Granite Wash and Barnett Shale rich gas systems. We had a good second quarter in the Marcellus, as we took over operations from Antero one month early, fully staffed our operations and support group for this region, connected some great new wells to the system and are getting ready for a strong second half of the year," added Phillips.
"The Granite Wash play is finally improving for us with current volumes up approximately 40% from the second quarter 2012 average due to recent well additions, with another 2 to 3 wells expected by year-end based on producer drilling plans and infrastructure requests," Phillips observed. "In addition, we announced a definitive agreement for another important rich gas acquisition immediately after the quarter. The acquisition from Devon is the type of bolt-on acquisition that we have been seeking since acquiring the Barnett Shale assets in 2010. Importantly, we completed a very successful equity offering last week which will allow us to fund the Devon acquisition while maintaining our conservative balance sheet and ensuring adequate liquidity going forward. The Devon acquisition, Granite Wash expansion and increasing distributions from the CMM joint venture will be important growth drivers for the remainder of 2012," Phillips noted.
Adjusted net income, adjusted net income per unit, adjusted EBITDA and adjusted distributable cash flow are non-generally accepted accounting principles ("non-GAAP") financial measures. The accompanying schedules of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance.
Operating revenues in the Barnett segment totaled $31.5 million in the second quarter 2012, compared with $34.7 million in the second quarter 2011. Gathering volumes totaled 401 MMcf/d in 2012, compared with 450 MMcf/d in 2011. The decrease of 49 MMcf/d was primarily due to lower volumes in the Alliance and Lake Arlington areas noted above. Processing volumes totaled 129 MMcf/d in the second quarter 2012, compared to 144 MMcf/d in the prior year. Operating and maintenance expenses totaled $5.3 million, a decrease of $0.2 million from the second quarter 2011, due primarily to lower volume activity in the second quarter 2012.
Operating revenues in the Fayetteville segment, net of product purchases, totaled $6.2 million in the second quarter 2012, compared with $6.5 million in the second quarter 2011. Gathering volumes totaled 78 MMcf/d during the second quarter 2012, compared to 81 MMcf/d in the second quarter 2011. Operating and maintenance expenses totaled $2.2 million for the second quarter 2012, a decrease of $0.2 million from the prior year.
Operating revenues in the Granite Wash segment, net of product purchases, totaled $1.0 million in the second quarter 2012, compared to $2.1 million in the second quarter 2011. The decrease reflects lower margins realized on the sale of NGLs related to percent-of-proceeds contracts on processing volumes. Operating and maintenance expenses totaled $0.5 million in both the second quarter of 2012 and 2011.
Other operating revenues include the Sabine gathering system in the Haynesville/Bossier Shale, which was acquired in the fourth quarter 2011, and the Las Animas system in the emerging Avalon Shale trend acquired in the first quarter 2011. Gathering volumes on the Sabine and Las Animas systems totaled 57 MMcf/d and 9 MMcf/d, respectively, during the second quarter 2012. Gathering volumes on the Las Animas system totaled 12 MMcf/d in the second quarter 2011.
General and administrative expenses totaled $6.9 million in the second quarter 2012, compared to $6.1 million in the second quarter 2011. Expenses during the second quarter 2012 included approximately $1.7 million of non-recurring costs primarily related to due diligence activities. Second quarter 2011 expenses included approximately $1.1 million of transaction related expenses for the acquisition of assets in the Fayetteville and Granite Wash segments on April 1, 2011.
Equity earnings from Crestwood's investment in CMM totaled $0.4 million for the second quarter 2012, which represents a 35% ownership interest in CMM. Crestwood's pro-rata portion of Adjusted EBITDA totaled $1.9 million. CMM paid a $1.7 million distribution to Crestwood during the second quarter 2012. Volumes gathered by CMM during the second quarter 2012 averaged 257 MMcf/d.
At June 30, 2012, Crestwood had approximately $561 million of debt outstanding, comprised of the $200 million principal amount of 7.75 percent fixed-rate senior notes, and approximately $361 million of borrowings under its revolving credit facility. On July 30, 2012, and August 2, 2012, Crestwood issued an aggregate of 4.6 million common units in an underwritten public offering. Net proceeds of approximately $115 million were used to partially repay the outstanding balance of its revolving credit facility. Approximately $90 million is expected to be borrowed during the third quarter 2012 to fund the acquisition of additional gathering and processing assets from Devon described above.
Capital spending for the six months ended June 30, 2012, totaled $21.5 million (excluding acquisition capital), comprised of $19.9 million on growth capital projects and $1.6 million for maintenance capital spending. Growth capital was primarily used for the construction of pipeline laterals and compression equipment in the Fayetteville and Barnett segments. Total capital spending for the full year 2012 is expected to be approximately $30 million, comprised of approximately $25 million for growth related projects and $5 million on maintenance capital spending.
Crestwood will host a conference call for investors and analysts on Monday, August 6, 2012, beginning at 10:30 a.m. Central Time, to discuss the second quarter 2012 performance. Interested parties may participate by joining the conference call at 888-437-9315 and entering passcode 3402935. The conference call will also be webcast live and can be accessed through the Investor Relations section of our website at . A replay will be available for 30 days following the conference call by dialing 888-203-1112 and entering the replay passcode 3402935.
Houston, Texas based Crestwood is a growth-oriented, midstream master limited partnership which owns and operates predominately fee-based gathering, processing, treating and compression assets servicing natural gas producers in the Barnett Shale in north Texas, the Fayetteville Shale in northwest Arkansas, the Haynesville/Bossier Shale in western Louisiana, the Granite Wash in the Texas Panhandle, the Avalon Shale in southeastern New Mexico and the Marcellus Shale in northern West Virginia. For more information about Crestwood, visit .
The statements in this news release regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements. Although these statements reflect the current views, assumptions and expectations of Crestwood's management, the matters addressed herein are subject to numerous risks and uncertainties which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Such forward-looking statements include, but are not limited to, statements about the future financial and operating results, objectives, expectations and intentions and other statements that are not historical facts. Factors that could result in such differences or otherwise materially affect Crestwood's financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in oil, natural gas and NGL prices; the extent and success of drilling efforts, as well as the extent and quality of natural gas volumes produced within proximity of our assets; failure or delays by our customers in achieving expected production in their natural gas projects; competitive conditions in our industry and their impact on our ability to connect natural gas supplies to our gathering and processing assets or systems; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions, successfully integrate the acquired businesses, realize any cost savings and other synergies from any acquisition; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; timely receipt of necessary government approvals and permits, our ability to control the costs of construction, including costs of materials, labor and right-of-way and other factors that may impact our ability to complete projects within budget and on schedule; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing and future litigation; and risks related to our substantial indebtedness, as well as other factors disclosed in Crestwood's filings with the U.S. Securities and Exchange Commission. You should read our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011, and our most recent Quarterly Reports and Current Reports for a more extensive list of factors that could affect results.
Mark Stockard
832-519-2207
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Datum: 06.08.2012 - 11:45 Uhr
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