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Incremental Annual Cash Flow Impact from Capital Projects
Committed high return expansion projects drive accretive DCF growth
in 2017-2021
(1) Current customers include Concho, Mewbourne, Matador, Cimarex, Marathon and ExxonMobil. Significant third party customers within close proximity of the Orla Plant’s anticipated location.
(2) Assumes First Reserves covers $160 million of plant capital in return for a 50% ownership in the Willow Lake gathering and processing assets.
Highlights
• High-grading organic expansion around core assets; focused on driving greatest DCF per unit accretion
• High rate of return project build multiples of 5x to 7x
• ~$120MM+ expected EBITDA contribution from current projects by 2021
Focused on 5x to 7x organic build multiples vs 12x to 15x M&A multiples
$0
$20
$40
$60
$80
$100
$120
2017 2018 2019 2020 2021
Incr
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h F
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Bakken Delaware Basin
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Self-Funded 2017 and 2018 Capital Programs
US Salt Divestiture
Crestwood is committed to maintaining a strong balance sheet and excess distribution coverage as it pursues organic growth projects
• Divested US Salt LLC, a non-core business in the MS&L segment, for approximately $225 million
• Valuation is ~11x 2017E distributable cash flow
• Transaction closed December 1, 2017
Crestwood is self-funding its 2017 and 2018 capital programs to maximize project returns and DCF/unit value creation
Retained DCF
Joint-Venture Strategy
• Forecasted cash flow growth allows Crestwood to maintain distribution coverage >1.2x and leverage <4.0x
• Crestwood will reinvest cash flow into accretive organic projects in Q4 2017 and FY 2018
• Strategic joint-ventures minimize project risk and capital commitments, while enhancing commercial opportunities:
– Delaware Basin: First Reserve and Shell Midstream (NYSE: SHLX)
– NE Marcellus: Consolidated Edison (NYSE:ED)
– PRB Niobrara: Williams Partners (NYSE:WPZ)
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Committed to Excellence
Customer Service
Community Engagement
Ranked #1 in the EnergyPoint Research Customer Satisfaction Survey for 2015-2017
In 2017, Crestwood has been recognized for its unwavering commitment to best in class customer service, community engagement, environmental stewardship and unitholder alignment
Unitholder Alignment
Crestwood was awarded the NDPC Excellence in Community Engagement Award for our commitment to the communities where we operate
~1/3rd common units owned by insiders; Crestwood scored #1 in Wells Fargo’s December 2017 midstream investor alignment report(1)
Environmental Stewardship Recognized by the EPA as a SmartWay
Partner, as a Company that demonstrates a standard of operations that minimizes their environmental footprint
Crestwood’s culture of excellence positions the partnership to be a responsible steward of capital and an attractive midstream investment
(1) Wells Fargo research report titled “The Midstream Alignment Scorecard.” Published on 12/5/2017. Ranking based on unit ownership, governance , safety metrics, structure and incentive compensation.
• Attractive total project returns of sub-6x; Phase 1
project accretive to DCF in 2018
Bear Den Plant – Phase 1
Better netbacks and more reliable service for Arrow producers than 3rd party processing alternatives
Improves competitive position and ability to attract incremental third parties in the area
Enables Crestwood to utilize integrated midstream value chain with incremental volumes
Bear Den plant phase-1
Crestwood purchases 100% of oil and gas volumes at the wellhead from its producers; full control of processing volumes
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Delaware Basin Growth Strategy
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Asset MapAsset Overview & Strategy
Crestwood is building competitive scale and fully integrated systems in the heart of the Delaware Basin, the most active shale play in the US
• 50/50 joint venture with First Reserve
• Current assets includes Willow Lake gathering & processing and Nautilus gathering & compression
– Total gathering capacity of 335 MMcf/d
– Total processing capacity of 85 MMcf/d
• Current growth projects: In-Service
– 30 MMcf/d dew point control skid Complete
– Orla Express Pipeline Q3 2018
– 200 MMcf/d Orla Processing Plant Q3 2018
• Future expansion opportunities:
– Crude oil gathering, terminalling and condensate stabilization/blending
– Produced water gathering and disposal
>$100 million of total Delaware Basin EBITDA potential by 2021 from identified expansion opportunities
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Delaware Basin Current G&P Assets
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Willow Lake and Nautilus gathering systems, combined gather over 110 MMcf/d, are at the center of significant development activity in the Delaware Basin
Delaware System MapsWillow Lake System
• Willow Lake Gathering and Processing System is at the epicenter of Northern Delaware Basin development in Eddy and Lea counties, NM
– ~82 miles low pressure gathering system
– Current processing capacity of 85 MMcf/d (includes 30 MMcf/d expansion to handle volume growth during 3Q17-2Q18)
• Existing acreage/well dedications with Concho and Mewbourne supported by 100,000 acre AMI around plant/system
• The Orla Express pipeline will connect the Willow Lake system to the Orla Processing Plant in 1H 2018
Nautilus System
Asset Ownership:Willow Lake
Orla Plant Nautilus
Crestwood 50% 50% 25%
First Reserve 50% 50% 25%
Shell Midstream - - 50%
• Nautilus Natural Gas Gathering System supports Shell’s Delaware Basin development program
– 20-year tiered fixed-fee gathering and compression contract
– 100,000 acreage dedication in Loving and Ward counties, TX
• ~$90MM of capital invested in 2017 at a ~5.0x build-multiple
• October 2017 – Shell Midstream exercises option to acquire 50% interest in the system; further aligning Crestwood’s and Shell’s interests
Over 200K dedicated acres
The Permian basin is the most important asset within Shell’s unconventional portfolio, Shell has around 270k acres in the Permian, and intends to invest $1 billion per year to grow production to 155 MBbls/d by 2020.” –SHLX Q2’17 Earnings Call
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Orla Express Pipeline & Orla Processing Plant
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200 MMcf/d processing plant and super-header integrates asset footprint to compete across the entire primary Delaware Basin catchment area
Premier G&P Footprint in Delaware Basin Core
WES/ETP Bone Spring
Project Overview
• Construction underway on 33 miles of 20” pipeline and 200 MMcf/d cryogenic gas plant in Orla, TX
– Plant capacity expandable to 600 MMcf/d
– Plant location offers multiple residue and NGL takeaway options
• Initial phase connects Willow Lake gathering to Orla Express and Orla plant
– Base scope capital of ~$170 million
– Targeted in-service date Q3 2018
• Expansion phase will connect the Nautilus system to Orla plant and new laterals connecting additional producers
Orla Plant: 200 MMcf/d cryogenic gas processing
plant
Orla Express Pipeline connecting existing
Willow Lake system to new Orla gas
processing plant
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(1) Assumes First Reserves covers $160 million of plant capital in return for a 50% ownership in the Willow Lake gathering and processing assets.
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Delaware Basin Water Solutions Next Leg of Growth
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Scalable infrastructure solutions for Delaware Basin water requirements; potential next phase of Delaware Basin growth strategy
Delaware Water Production
• Based on Crestwood’s current capture area, 2.4 MMBbls/d of produced water is forecasted by 2021
• Crestwood’s existing assets well-positioned to offer water gathering and disposal services to producers
• Crestwood has extensive experience gathering and disposing produced water in the BakkenCapture Area.
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Source: DrillingInfo and Wood Mackenzie.(1) Water forecast based on capture area gas forecast and converted to
water based on GORs and WORs for the Wolfcamp and Bone Spring type curves per Wood Mackenzie.
Eddy
Lea
Culberson
Jeff
Davis
Loving
Pecos
Reeves
Ward
Winkler
Daily Production
(BBL)
5-YR Delaware Basin Water Forecast(1)
MMBbls/d
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• Strategic 50/50 JV with Consolidated Edison (“Con Edison”)
• Extensive network of FERC regulated storage and pipeline
assets located at center of prolific Marcellus dry-gas resource
play
− 2.9 Bcf/d delivery capacity; over 180 miles of pipes
− 41 Bcf storage capacity
• Evaluating incremental takeaway projects out of the NE
Marcellus basin with downstream pipeline partners
• Stagecoach generated ~$145MM Adjusted EBITDA in
2016; Current CEQP cash flow distribution is 35%
− June 2018: Cash flow distribution steps up 5% to 40%
− June 2019: Cash flow distribution steps up 10% to 50%
NE Marcellus is largest US gas supply base and best potential for demand growth;
Stagecoach is strategically positioned to capture growth opportunities
23%
49%
28%
79%
13%
9%
NE Marcellus - Stagecoach Gas Services JV
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Assets MapStagecoach Overview
Stagecoach Storage Customers
Producers
Marketers
Marketers
Utility / LDCs
Producers
Stagecoach Transportation Customers
Utility/ LDCs
CON EDISON SERVICE AREA
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PRB Niobrara – Jackalope G&P JV
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CHK PRB Net Production Potential
Source: Chesapeake Energy Company Presentations.
• PRB Jackalope JV - Crestwood (50%) and Williams (50%) owns 180 MMcf/d gas gathering system and 120 MMcf/d processing plant in Converse Co., Wyoming
• 20-year fixed fee contract; Includes minimum revenue guarantees for 5 – 7 years
• Recently refinanced PRB Niobrara asset level preferred equity to reduce current distribution; accordion feature available to fund potential growth opportunities
• Chesapeake is currently drilling in the Turner, Parkman, Mowry, Sussex and Niobrara formations
− Gas volumes at >60 MMcf/d up from 46 MMcf/d in FY 2016
− Recent Turner tests: 2,886 Boe/d with 51% oil cut, 2,560 Boe/d with 80% oil cut; 1,700 Boe/d with 80% oil cut
• Potential to grow production to more than 100,000 boe/d over the next five to seven years
Overview
New G&P contract allows Chesapeake to accelerate development plans and achieve full potential of PRB Niobrara acreage
388KDedicated Acres
2,600Drilling Locations
Chesapeake is currently running 3 rigs on the Jackalope system andone dedicated frac crew; expect to add a 4th rig in Q1 2018
21 DUCs in 2017 increased daily volumes >150 MMcf/d
Well connections in 2017 highlight exceptional reservoir quality and significant upside growth potential with incremental activity
Mcf/d
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Balance Sheet Strength,
Disciplined Capital Allocation,
Accretive DCF Growth
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Delivering on 2017 Guidance
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EBITDA*
DCF*
Growth Capital*
Leverage
Coverage
Commitment to execution, lower cost structure and consistent quarterly results; delivering on increased 2017 financial guidance
$360 $390 $400$380
$200 $230$210
$130 $150 $250$225
4.0x 4.5x
1.2x 1.4x
Original Guidance Range Increased Guidance Range
*Dollar amounts shown in $US millions.
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Strong Balance Sheet & Liquidity
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• Top-tier leverage position
– Q3 2017 leverage of 4.1x or 3.8x pro forma for US Salt divestiture
– Current borrowing capacity ~$650 MM
• Committed to long-term leverage <4.0x once growth projects come online
• No near-term maturities; attractive long-term capital
• Evaluating divestitures to ensure leverage targets
Balance Sheet Positioned for Strength Current Capitalization
Preferred Equity Overview
• Crestwood has ~$650MM preferred equity outstanding
• Annual distribution of 9.25% payable quarterly
• Crestwood began cash payments attributable to the Q3 2017 distribution
• Preferred equity holders have option to convert into ~7.1MM CEQP common units
– Investor conversion unlikely and no forced conversion
Crestwood strengthened its balance sheet by repaying approximately $1 billion of debt in 2Q 2016; Crestwood targets YE 2017 leverage of 4.0x-4.5x
No Near-Term Debt Maturities
($MM)
RCF
6.25% Notes
5.75% Notes
Issue Price Yield
2023 104.00 4.9%
2025 103.00 5.1%
Actuals Actuals Actuals Pro Forma($ millions) 2015 2016 Q3 2017 US SALT
Cash $1 $2 $1 $1
Revolver $735 $77 $444 $219
Senior Notes 1,800 1,475 1,200 1,200
Other Debt 9 6 2 2
Total Debt $2,544 $1,558 $1,647 $1,422
Total Leverage Ratio 4.8x 3.7x 4.1x 3.8x
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The Crestwood Investment Opportunity
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Focused on aggressively executing growth opportunities while maintaining financial strength
• SELF-FUNDED near-term gathering and processing growth opportunities in the Bakken and Delaware Basin
• Long-term PRB and northeast Marcellus pipeline projects
In the meantime…
• Crestwood is well-positioned to deliver attractive yield to investors(1)
– Current Yield = 9.4%; Coverage Ratio = 1.2x; Leverage Ratio = 3.8x
• Diversified business mix and strong contract portfolio
• No incentive distribution rights
• Assets leveraged to volume growth with commodity price improvement
• Reversion to Peer Group / Alerian yield provides significant upside for units
Execution Drives Significant Upside Return Opportunity;CASH FLOW PER UNIT GROWTH TO RESUME IN 2018
(1) Current yield data as of 1/5/2018. Coverage ratio and leverage ratio as of 9/30/2017 and pro forma for the US Salt divestiture for $225 million.
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Appendix
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Appendix:
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CEQP Non-GAAP Reconciliations
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CRESTWOOD EQUITY PARTNERS LP
Full Year 2017 Adjusted EBITDA and Distributable Cash Flow Guidance
Reconciliation to Net Income
(in millions)
(unaudited)
Net income (loss) $(13) - $7
Interest and debt expense, net 105
Loss on modification/extinguishment of debt
38
Depreciation, amortization and accretion 195
Unit-based compensation charges
25
Earnings from unconsolidated affiliates
(50) - (55)
Adjusted EBITDA from unconsolidated affiliates
80 - 85
Adjusted EBITDA $380 - $400
Cash interest expense (a) (100)
Maintenance capital expenditures (b) (20) - (25)
Cash distributions to preferred unitholders (c)
(45)
Distributable cash flow attributable to CEQP common unitholders (d) $210 - $230
(a) Cash interest expense less amortization of deferred financing costs plus bond premium amortization plus or minus fair value adjustments.
(b) Maintenance capital expenditures are defined as those capital expenditures which do not increase operating capacity or revenues from existing levels.
(c) Includes cash distributions to Crestwood Niobrara preferred unitholders and cash distributions to preferred unitholders.
(d) Distributable cash flow is defined as Adjusted EBITDA, less cash interest expense, maintenance capital expenditures, income taxes, deficiency payments
(primarily related to deferred revenue). 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 corporations and partnerships.