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MarketScreener Homepage  >  Equities  >  Nyse  >  Crestwood Equity Partners LP    CEQP

CRESTWOOD EQUITY PARTNERS LP

(CEQP)
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CRESTWOOD EQUITY PARTNERS LP : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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02/21/2020 | 05:24pm EDT

Our Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the accompanying footnotes.


This report, including information included or incorporated by reference herein,
contains forward-looking statements concerning the financial condition, results
of operations, plans, objectives, future performance and business of our company
and its subsidiaries. These forward-looking statements include:

• statements that are not historical in nature, including, but not limited

to: (i) our belief that anticipated cash from operations, cash

distributions from entities that we control, and borrowing capacity under

our credit facility will be sufficient to meet our anticipated liquidity

       needs for the foreseeable future; (ii) our belief that we do not have
       material potential liability in connection with legal proceedings that

would have a significant financial impact on our consolidated financial

condition, results of operations or cash flows; and (iii) our belief that

our assets will continue to benefit from the development of unconventional

       shale plays as significant supply basins; and


• statements preceded by, followed by or that contain forward-looking

terminology including the words "believe," "expect," "may," "will,"

"should," "could," "anticipate," "estimate," "intend" or the negation

thereof, or similar expressions.




Forward-looking statements are not guarantees of future performance or results.
They involve risks, uncertainties and assumptions. Actual results may differ
materially from those contemplated by the forward-looking statements due to,
among others, the following factors:

• our ability to successfully implement our business plan for our assets and

operations;

• governmental legislation and regulations;


•      industry factors that influence the supply of and demand for crude oil,
       natural gas and NGLs;

• industry factors that influence the demand for services in the markets

(particularly unconventional shale plays) in which we provide services;



• weather conditions;


•      the availability of crude oil, natural gas and NGLs, and the price of
       those commodities, to consumers relative to the price of alternative and
       competing fuels;


• economic conditions;


•      costs or difficulties related to the integration of acquisitions and
       success of our joint ventures' operations;

• environmental claims;

• operating hazards and other risks incidental to the provision of midstream

services, including gathering, compressing, treating, processing,

fractionating, transporting and storing energy products (i.e., crude oil,

NGLs and natural gas) and related products (i.e., produced water), as well

as terrorism, cyber-attacks or domestic vandalism;

• interest rates;


•      the price and availability of debt and equity financing, including our
       ability to raise capital through alternatives like joint ventures; and


•      the ability to sell or monetize assets, to reduce indebtedness, to
       repurchase our equity securities, to make strategic investments, or for
       other general partnership purposes.



We have described under Part I, Item 1A. Risk Factors, additional factors that
could cause actual results to be materially different from those described in
the forward-looking statements. Other factors that we have not identified in
this report could also have this effect.

Overview

We own and operate crude oil, natural gas and NGL midstream assets and
operations. Headquartered in Houston, Texas, we are a fully-integrated midstream
solution provider that specializes in connecting shale-based energy supplies to
key demand markets. We conduct our operations through our wholly-owned
subsidiary, Crestwood Midstream, a limited partnership that owns and operates
gathering, processing, storage and transportation assets in the most prolific
shale plays across the United States.


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Our Company


We provide broad-ranging services to customers across the crude oil, natural gas
and NGL sector of the energy value chain. Our midstream infrastructure is
geographically located in or near significant supply basins, especially
developed and emerging liquids-rich and crude oil shale plays, across the United
States. Our operating assets, including those of our joint ventures, primarily
include:
•      natural gas facilities with approximately 3.3 Bcf/d of gathering capacity,

1.0 Bcf/d of processing capacity, 75.8 Bcf of certificated working storage

       capacity and 1.8 Bcf/d of operational transportation capacity;


• crude oil facilities with approximately 150,000 Bbls/d of gathering

capacity, 1.9 MMBbls of storage capacity, 20,000 Bbls/d of transportation

       capacity and 180,000 Bbls/d of rail loading capacity;


• NGL facilities with approximately 2.6 MMBbls of storage capacity, as well

as our portfolio of transportation assets (consisting of truck and rail

terminals, truck/trailer units and rail cars) capable of transporting

       approximately 1.3 MMBbls/d of NGLs; and


• produced water gathering facilities with approximately 110,000 Bbls/d of

       gathering capacity.



Our financial statements reflect three operating and reporting segments: (i)
gathering and processing, which includes our natural gas, crude oil and produced
water G&P operations; (ii) storage and transportation, which includes our crude
oil and natural gas storage and transportation operations; and (iii) marketing,
supply and logistics, which includes our NGL, crude oil and natural gas
marketing and logistics operations and NGL storage and rail loading facilities
and fleet. For a description of the assets included in our operating and
reporting segments, see Part I, Item 1. Business.

Gathering and Processing


Our G&P operations and investment are located in North Dakota, Wyoming, West
Virginia, Texas, New Mexico and Arkansas and provide gathering, compression,
treating and processing services to producers in multiple unconventional
resource plays, some of which are the largest shale plays in the United States
in which we have established footprints in the "core of the core" areas. We
believe that our strategy of focusing on prolific, low-cost shale plays
positions us well to (i) generate greater returns in varying commodity price
environments, (ii) capture greater upside economics when development activity
occurs, and (iii) in general, better manage through commodity price cycles and
production changes associated therewith.

Storage and Transportation


Our S&T operations and investments consist of our crude oil terminals in the
Bakken and Powder River Basin and our natural gas storage and transportation
assets in the Northeast and Texas Gulf Coast.

Marketing, Supply and Logistics


Our MS&L segment consists of our NGL, crude oil and natural gas marketing and
logistics operations, including our rail-to-truck terminals located in Florida,
New Jersey, New York, Rhode Island, North Carolina and Connecticut. We utilize
our trucking and rail fleet, processing and storage facilities, and contracted
storage and pipeline capacity on a portfolio basis to provide integrated supply
and logistics solutions to producers, refiners and other customers in over 30
states from New Mexico to Maine.

Outlook and Trends


Our business objective is to create long-term value for our unitholders. We
expect to create long-term value by consistently generating stable operating
margins and improved cash flows from operations by prudently financing our
investments, maximizing throughput on our assets, and effectively controlling
our operating and administrative costs. Our business strategy depends, in part,
on our ability to provide increased services to our customers at competitive
fees, including opportunities to expand our services resulting from expansions,
organic growth projects and acquisitions that can be financed appropriately.

We have taken a number of strategic steps to better position the Company as a
stronger, better capitalized company that can over time accretively grow cash
flows and sustainably resume growing our distributions. Those strategic steps
included (i) simplifying our corporate structure to eliminate our incentive
distribution rights (IDRs) and create better alignment of interests with our
unitholders; (ii) divesting assets to reduce long-term debt to ensure long-term
balance sheet strength; (iii) realigning

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our operating structure to significantly reduce operating and administrative
expenses; (iv) forming strategic joint ventures to enhance our competitive
position around certain operating assets; and (v) focusing our acquisitions and
growth capital expenditures on our highest return organic projects around our
core growth assets in the Bakken Shale, Powder River Basin and Delaware Permian.
We will remain focused on efficiently allocating capital expenditures by
investing in accretive, organic growth projects, maintaining low-cost operations
(through increased operating efficiencies and cost discipline) and maintaining
our balance sheet strength through continued financial discipline. We expect to
focus on expansion and greenfield opportunities to provide midstream services
for crude oil, natural gas, NGLs and produced water, including gathering,
storage and terminalling, condensate stabilization, truck loading/unloading
options and connections to third party pipelines and produced water gathering,
disposal and recycling in the Bakken Shale, Powder River Basin and Delaware
Permian in the near term, while closely monitoring longer-term expansion
opportunities in the northeast Marcellus. As a result, the Company is well
positioned to execute its business plan and capitalize on the current market
conditions around many of our core assets.

The Company continues to be positioned to generate consistent results in a low
commodity price environment without sacrificing revenue upside as market
conditions improve. For example, many of our more mature G&P assets are
supported by long-term, core acreage dedications in shale plays that are
economic to varying degrees based upon natural gas, NGL and crude oil prices,
the availability of infrastructure to flow production to market, and the
operational and financial condition of our diverse customer base. In addition, a
substantial portion of our midstream investments are based on fixed-fee or
minimum volume commitment agreements that ensure a minimum level of cash flow
regardless of actual commodity prices or volumetric throughput. Over time, we
expect cash flows from our more mature, non-core, assets to stabilize and
potentially increase with the current commodity price environment, while the
growth from our core assets in the Bakken Shale, Powder River Basin, Delaware
Permian and northeast Marcellus drive significant growth to the Company.

Business Highlights


Below is a discussion of events that highlight our core business and financing
activities. Through continued execution of our plan, we have materially improved
the strategic and financial position of the Company and expect to capitalize on
increasing opportunities in an improving but competitive market environment,
which will position us to achieve our chief business objective to create
long-term value for our unitholders.

Bakken. In the Bakken, we are expanding and upgrading our Arrow system water
handling facilities and increasing natural gas capacity on the system, which
should allow for substantial growth in volumetric throughput across all of our
crude oil, produced water and natural gas gathering systems to better serve our
customer demands. During 2019, we placed in service a 120 MMcf/d cryogenic plant
that will fulfill 100% of the processing requirements for producers on the Arrow
system. This expansion increases our gas processing capacity to 150 MMcf/d. We
believe the expansion of our gas processing capacity on the Arrow system will,
among other things, spur greater development activity around the Arrow system,
allow us to provide greater flow assurance to our producer customers and reduce
flaring of natural gas, and reduce the downstream constraints currently
experienced by producers on the Fort Berthold Indian Reservation.

In response to the water releases on our Arrow system, we removed approximately
30 miles of water gathering pipeline from service and incurred a $4.3 million
impairment charge during the three months ended December 31, 2019 related to
idling those facilities. In addition, we are currently in the process of
replacing approximately 12 miles of water gathering pipeline with pipeline
composed of higher capacity material that is more suitable for the environment
and climate conditions in the Bakken, which will increase water gathering
capacity on the Arrow system and further our commitment to sustainability and
environmental stewardship in the areas where we live and operate.

Powder River Basin. On April 9, 2019, Crestwood Niobrara acquired Williams' 50%
equity interest in Jackalope for approximately $484.6 million. The acquisition
of the remaining 50% equity interest in Jackalope was financed through a
combination of borrowings under the Crestwood Midstream credit facility and the
issuance of $235 million in new Series A-3 preferred units to Jackalope
Holdings. For a further discussion of the acquisition of the remaining 50%
equity interest in Jackalope, see Part IV, Item 15. Exhibits, Financial
Statement Schedules, Notes 3 and 12.

In the Powder River Basin, we are expanding the Jackalope gathering system and
Bucking Horse processing plant to increase processing capacity to 345 MMcf/d in
early 2020. The Phase 2 Jackalope expansion also includes gathering, compression
and a second processing plant which will add an additional 200 MMcf/d of
processing capacity to the Jackalope system. In addition, we are also
commissioning two compressor stations with 18,750 horsepower. These expansions
will allow us to attract incremental third party volumes in the growing Powder
River Basin.

Delaware Permian. In the Delaware Permian, we have identified gathering and
processing and transportation opportunities in and around our existing assets,
including our Crestwood Permian joint venture. In the Delaware Permian, we are
expanding

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our systems to include a produced water gathering and salt water disposal
system. We entered into a produced water gathering and disposal agreement with a
large integrated producer in the Delaware Permian in Culberson and Reeves
Counties, Texas for initial system capacity of 60 MBbls/d with long-term plans
to expand system capacity up to 120 MBbls/d based on producer activity. We have
begun construction on the required infrastructure and expect to handle first
volumes in the early second quarter 2020.

Crestwood Permian Basin, a 50% equity investment of Crestwood Permian, owns and
operates the Nautilus system in SWEPI's operated position in the Delaware
Permian. Crestwood Permian Basin provides gathering, dehydration and treating
services to SWEPI under a long-term fixed-fee gathering agreement. SWEPI has
dedicated to Crestwood Permian Basin the gathering rights for SWEPI's gas
production across a large acreage position in Loving, Reeves, Ward and Culberson
Counties, Texas. The Nautilus gathering system will be expanded over time, as
production increases, to include additional gathering lines and centralized
compression facilities which will ultimately provide over 250 MMcf/d of gas
gathering capacity.

Regulatory Matters


Many aspects of the energy midstream sector, such as crude-by-rail activities
and pipeline integrity, have experienced increased regulatory oversight over the
past few years. However, under the current Presidential Administration, we
anticipate changes in policy that could lessen the degree of regulatory scrutiny
we face in the near term.

On March 15, 2018, the FERC issued a Revised Policy Statement on Treatment of
Income Taxes (Revised Policy Statement) stating that it will no longer permit
master limited partnerships to recover an income tax allowance in their
cost-of-service rates. Also on March 15, 2018, the FERC issued a Notice of
Proposed Rulemaking (NOPR) proposing rules for implementation of the Revised
Policy Statement and the corporate income tax rate reduction with respect to
pipeline rates. On July 18, 2018, the FERC issued an order denying requests for
rehearing and clarification of its Revised Policy Statement because it is a
non-binding policy and parties will have the opportunity to address the policy
as applied in future cases. In the rehearing order, the FERC clarified that a
pipeline organized as a master limited partnership will not be precluded in a
future proceeding from providing support that it is entitled to an income tax
allowance and demonstrating that its recovery of an income tax allowance does
not result in a double-recovery of investors' income tax costs. Also on July 18,
2018, the FERC issued a final rule adopting procedures that are generally the
same as proposed in the NOPR with a few clarifications and modifications. With
limited exceptions, the final rule requires all FERC-regulated natural gas
pipelines that have cost-based rates for service to make a one-time Form No.
501-G filing providing certain financial information and to select one of four
options: (i) file a limited NGA Section 4 filing reducing its rates only as
required related to the Tax Cuts and Jobs Act and the Revised Policy Statement;
(ii) commit to filing a general NGA Section 4 rate case in the near future;
(iii) file a statement explaining why an adjustment to rates is not needed; or
(iv) take no other action. Stagecoach Gas submitted its Form No. 501-G on
December 6, 2018. In December 2019, Stagecoach Gas reached a final settlement
related to its NGA Section 5 rate proceeding, the results of which is not
anticipated to have a material impact on our current or future results of
operations.

On March 15, 2018, the FERC also issued a Notice of Inquiry (NOI) requesting
comments about whether, and if so how, the FERC should address changes relating
to accumulated deferred income taxes and bonus depreciation. Comments on the NOI
were filed by May 21, 2018, and any actions the FERC may take following receipt
of these responses to the NOI are unknown at this time, but could impact the
rates midstream companies are permitted to charge its customers for
transportation services in the future.

In addition, the FERC issued a NOI on April 19, 2018 (Certificate Policy
Statement NOI), thereby initiating a review of its policies on certification of
natural gas pipelines, including an examination of its long-standing Policy
Statement on Certification of New Interstate Natural Gas Pipeline Facilities,
issued in 1999, that is used to determine whether to grant certificates for new
pipeline projects. Comments on the Certificate Policy Statement NOI were due on
July 25, 2018, and we are unable to predict what, if any, changes may be
proposed as a result of the NOI that will affect our natural gas pipeline
business or when such proposals, if any, might become effective. We do not
expect that any change in this policy would affect us in a materially different
manner than any other similarly sized natural gas pipeline company operating in
the United States.

Although we do not have any consolidated operations that have FERC-regulated
pipelines, two of our equity investments (Stagecoach Gas and Tres Holdings) have
FERC-regulated operations. These equity investments receive revenues from
contracts that primarily have market-based rates or negotiated rates that are
not tied to cost-of-service rates, and we currently do not expect rates subject
to negotiated rates or market-based rates to be affected by the Revised Policy
Statement, the Final Rule or any final regulations that may result from the NOI.
As a result, we currently do not believe that the Revised Policy Statement, the
Final Rule or NOI will have a material impact on our results of operations, but
we continue to monitor developments at the FERC related to these matters to
assess whether the final regulations could have an impact on the future results
of our equity investments.

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Critical Accounting Estimates and Policies

Our significant accounting policies are described in Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 2.


The preparation of financial statements in conformity with GAAP requires
management to select appropriate accounting estimates and to make estimates and
assumptions that affect the reported amount of assets, liabilities, revenues and
expenses and the disclosures of contingent assets and liabilities. We consider
our critical accounting estimates to be those that require difficult, complex,
or subjective judgment necessary in accounting for inherently uncertain matters
and those that could significantly influence our financial results based on
changes in those judgments. Changes in facts and circumstances may result in
revised estimates and actual results may differ materially from those estimates.
We have discussed the development and selection of the following critical
accounting estimates and related disclosures with the Audit Committee of the
board of directors of our general partner.

Goodwill


Our goodwill represents the excess of the amount we paid for a business over the
fair value of the net identifiable assets acquired. We evaluate goodwill for
impairment annually on December 31, and whenever events indicate that it is more
likely than not that the fair value of a reporting unit could be less than its
carrying amount. This evaluation requires us to compare the fair value of each
of our reporting units to its carrying value (including goodwill). If the fair
value exceeds the carrying amount, goodwill of the reporting unit is not
considered impaired.

We estimate the fair value of our reporting units based on a number of factors,
including discount rates, projected cash flows and the potential value we would
receive if we sold the reporting unit. We also compare the total fair value of
our reporting units to our overall enterprise value, which considers the market
value for our common and preferred units. Estimating projected cash flows
requires us to make certain assumptions as it relates to the future operating
performance of each of our reporting units (which includes assumptions, among
others, about estimating future operating margins and related future growth in
those margins, contracting efforts and the cost and timing of facility
expansions) and assumptions related to our customers, such as their future
capital and operating plans and their financial condition. When considering
operating performance, various factors are considered such as current and
changing economic conditions and the commodity price environment, among others.
Due to the imprecise nature of these projections and assumptions, actual results
can and often do, differ from our estimates. If the assumptions embodied in the
projections prove inaccurate, we could incur a future impairment charge. In
addition, the use of the income approach to determine the fair value of our
reporting units (see further discussion of the income approach below) could
result in a different fair value if we had utilized a market approach, or a
combination thereof.

Upon acquisition, we are required to record the assets, liabilities and goodwill
of a reporting unit at its fair value on the date of acquisition. As a result,
any level of decrease in the forecasted cash flows of these businesses or
increases in the discount rates utilized to value those businesses from their
respective acquisition dates would likely result in the fair value of the
reporting unit falling below the carrying value of the reporting unit, and could
result in an assessment of whether that reporting unit's goodwill is impaired.

Current commodity prices are significantly lower compared to commodity prices
during 2014, and that decrease has adversely impacted forecasted cash flows,
discount rates and stock/unit prices for most companies in the midstream
industry, including us. In light of these circumstances, we evaluated the
carrying value of our reporting units and determined it was more likely than not
that the goodwill associated with several of our reporting units was impaired in
2017, and as a result, we recorded goodwill impairments on those reporting units
during 2017. We did not record any goodwill impairments during 2019 and 2018.


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The following table summarizes the goodwill impairments of our reporting units during 2017 and our goodwill at December 31, 2019 (in millions):

                                                           Goodwill
                                                          Impairments
                                                        during the Year
                                                        Ended December         Goodwill at
                                                           31, 2017         December 31, 2019
G&P
Arrow                                                  $             -     $            45.9
Powder River Basin                                                   -                  80.3
MS&L
NGL Marketing and Logistics                                          -                  92.7
West Coast                                                         2.4                     -
Storage and Terminals                                             36.4                     -
Total                                                  $          38.8     $           218.9



We continue to monitor our remaining goodwill, and we could experience
additional impairments of the remaining goodwill in the future if we experience
a significant sustained decrease in the market value of our common or preferred
units or if we receive additional negative information about market conditions
or the intent of our customers on our remaining operations with goodwill, which
could negatively impact the forecasted cash flows or discount rates utilized to
determine the fair value of those businesses. A 5% decrease in the forecasted
cash flows or a 1% increase in the discount rates utilized to determine the fair
value of our Arrow and NGL Marketing and Logistics reporting units would not
have resulted in a goodwill impairment of either of those reporting units.
Because our Powder River Basin reporting unit was acquired as a part of the
Jackalope acquisition and its assets and liabilities were recorded at fair value
in 2019, its fair value approximates its book value at December 31, 2019. For a
further discussion of the Jackalope acquisition, see Part IV, Item 15. Exhibits,
Financial Statement Schedules, Note 3.

Long-Lived Assets


Our long-lived assets consist of property, plant and equipment and intangible
assets that have been obtained through multiple business combinations and
property, plant and equipment that has been constructed in recent years. The
initial recording of a majority of these long-lived assets was at fair value,
which is estimated by management primarily utilizing market-related information,
asset specific information and other projections on the performance of the
assets acquired (including an analysis of discounted cash flows which can
involve assumptions on discount rates and projected cash flows of the assets
acquired). Management reviews this information to determine its reasonableness
in comparison to the assumptions utilized in determining the purchase price of
the assets in addition to other market-based information that was received
through the purchase process and other sources. These projections also include
projections on potential and contractual obligations assumed in these
acquisitions. Due to the imprecise nature of the projections and assumptions
utilized in determining fair value, actual results can, and often do, differ
from our estimates.

We utilize assumptions related to the useful lives and related salvage value of
our property, plant and equipment in order to determine depreciation and
amortization expense each period. Due to the imprecise nature of the projections
and assumptions utilized in determining useful lives, actual results can, and
often do, differ from our estimates.

To estimate the useful life of our finite lived intangible assets we utilize
assumptions of the period over which the assets are expected to contribute
directly or indirectly to our future cash flows. Generally this requires us to
amortize our intangible assets based on the expected future cash flows (to the
extent they are readily determinable) or on a straight-line basis (if they are
not readily determinable) of the acquired contracts or customer relationships.
Due to the imprecise nature of the projections and assumptions utilized in
determining future cash flows, actual results can, and often do, differ from our
estimates.
We continually monitor our business, the business environment and the
performance of our operations to determine if an event has occurred that
indicates that a long-lived asset may be impaired. If an event occurs, which is
a determination that involves judgment, we may be required to utilize cash flow
projections to assess our ability to recover the carrying value of our assets
based on our long-lived assets' ability to generate future cash flows on an
undiscounted basis. This differs from our evaluation of goodwill, for which we
perform an assessment of the recoverability of goodwill utilizing fair value
estimates that primarily utilize discounted cash flows in the estimation process
(as described above), and accordingly a reporting unit that has experienced a
goodwill impairment may not experience a similar impairment of the underlying
long-lived assets included in that reporting unit. During 2019, we recorded $4.3
million of impairments of our property, plant and equipment related to

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certain of our water gathering facilities in our Arrow operations, which is
further discussed in Part IV, Item 15. Exhibits, Financial Statement Schedules,
Note 15. During 2018, we did not record any material impairments of our
intangible assets and property, plant and equipment. During 2017, we incurred
$82.2 million of impairments of our property, plant and equipment and intangible
assets related to our MS&L West Coast operations, which resulted from decreasing
forecasted cash flows to be generated by those operations. During 2018, we sold
our MS&L West Coast operations for net proceeds of approximately $70.5 million,
and recorded a $26.9 million of loss on long-lived assets associated with the
sale. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 3 for
a further discussion of the sale of these assets.

Projected cash flows of our long-lived assets are generally based on current and
anticipated future market conditions, which require significant judgment to make
projections and assumptions about pricing, demand, competition, operating costs,
construction costs, legal and regulatory issues and other factors that may
extend many years into the future and are often outside of our control. If those
cash flow projections indicate that the long-lived asset's carrying value is not
recoverable, we record an impairment charge for the excess of the carrying value
of the asset over its fair value. The estimate of fair value considers a number
of factors, including the potential value we would receive if we sold the asset,
discount rates and projected cash flows. Due to the imprecise nature of these
projections and assumptions, actual results can and often do, differ from our
estimates.

We continue to monitor our long-lived assets, and we could experience additional
impairments of the remaining carrying value of these long-lived assets in the
future if we receive additional negative information about market conditions or
the intent of our long-lived assets' customers, which could negatively impact
the forecasted cash flows or discount rates utilized to determine the fair value
of those investments.

Equity Method Investments

We evaluate our equity method investments for impairment when events or
circumstances indicate that the carrying value of the equity method investment
may be impaired and that impairment is other than temporary. If an event occurs,
we evaluate the recoverability of our carrying value based on the fair value of
the investment. If an impairment is indicated, we adjust the carrying values of
the asset downward, if necessary, to their estimated fair values.

We estimate the fair value of our equity method investments based on a number of
factors, including discount rates, projected cash flows, enterprise value and
the potential value we would receive if we sold the equity method investment.
Estimating projected cash flows requires us to make certain assumptions as it
relates to the future operating performance of each of our equity method
investments (which includes assumptions, among others, about estimating future
operating margins and related future growth in those margins, contracting
efforts and the cost and timing of facility expansions) and assumptions related
to our equity method investments' customers, such as their future capital and
operating plans and their financial condition. When considering operating
performance, various factors are considered such as current and changing
economic conditions and the commodity price environment, among others. Due to
the imprecise nature of these projections and assumptions, actual results can
and often do, differ from our estimates.

We continue to monitor our equity method investments, and we could experience
additional impairments of the remaining carrying value of these investments in
the future if we receive additional negative information about market conditions
or the intent of our equity method investments' customers, which could
negatively impact the forecasted cash flows or discount rates utilized to
determine the fair value of those investments.

Our equity method investments have long-lived assets, intangible assets,
goodwill and equity method investments in their underlying financial statements,
and our equity investees apply similar accounting policies and have similar
critical accounting estimates in assessing those assets for impairment as we do.
Our Stagecoach Gas equity method investment has approximately $656.5 million of
goodwill in its financial statements, which it assesses for impairment annually
on December 31 or whenever events indicate that it is more likely than not that
its fair value could be less than its carrying amount. This assessment requires
Stagecoach Gas to make certain assumptions about its future operating
performance (which includes assumptions, among others, about estimating future
operating margins and related future growth in those margins, contracting
efforts and the cost and timing of facility expansions, in addition to current
and changing economic conditions, the commodity price environment and discount
rates). A significant decrease in the assumptions utilized by Stagecoach Gas
could result in impairments being recorded by Stagecoach Gas, which could result
in a significant reduction in our equity earnings from Stagecoach Gas. Our
investment in Stagecoach Gas was approximately $814.4 million at December 31,
2019.


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Variable Interest Entities


We evaluate all legal entities in which we hold an ownership interest to
determine if the entity is a variable interest entity (VIE). Our interests in a
VIE are referred to as variable interests. Variable interests can be
contractual, ownership or other interests in an entity that change with changes
in the fair value of the VIE's assets. When we conclude that we hold an interest
in a VIE we must determine if we are the entity's primary beneficiary. A primary
beneficiary is deemed to have a controlling financial interest in a VIE.

We consolidate any VIE when we determine that we are the primary beneficiary. We
must disclose the nature of any interests in a VIE that is not consolidated.
Significant judgment is exercised in determining that a legal entity is a VIE
and in evaluating our interest in a VIE. We use primarily a qualitative analysis
to determine if an entity is a VIE. We evaluate the entity's need for continuing
financial support; the equity holder's lack of a controlling financial interest;
and/or if an equity holder's voting interests are disproportionate to its
obligation to absorb expected losses or receive residual returns. We evaluate
our interests in a VIE to determine whether we are the primary beneficiary. We
use primarily a qualitative analysis to determine if we are deemed to have a
controlling financial interest in the VIE, either on a standalone basis or as
part of a related party group. We continually monitor our interests in legal
entities for changes in the design or activities of an entity and changes in our
interests, including our status as the primary beneficiary to determine if the
changes require us to revise our previous conclusions.

As a result of our VIE analysis, we concluded that our investment in Crestwood
Permian is a VIE that we are not the primary beneficiary of, and as a result, we
account for our investment in Crestwood Permian as an equity method investment.
Our other equity investments are not considered to be VIEs. In addition,
Crestwood Niobrara and Jackalope (after the acquisition of the remaining 50%
equity interest) are consolidated subsidiaries that are not considered to be
VIEs. However, any future changes in the design or nature of the activities of
these entities may require us to reconsider our conclusions associated with
these entities. Such reconsideration would require the identification of the
variable interests in the entity and a determination of which party is the
entity's primary beneficiary. If an equity investment were considered a VIE and
we were determined to be the primary beneficiary, the change could cause us to
consolidate the entity. The consolidation of an entity that is currently
accounted for under the equity method could have a significant impact on our
financial statements. See Part IV, Item 15. Exhibits, Financial Statement
Schedules, Note 6 for more information on our equity method investments.

Revenue Recognition


We recognize revenues for services and products under our revenue contracts as
our obligations to perform services or deliver/sell products under the contracts
are satisfied. A contract's transaction price is allocated to each performance
obligation in the contract and recognized as revenue when, or as, the
performance obligation is satisfied. Under certain contracts, we may be entitled
to receive payments in advance of satisfying our performance obligations under
the contract. We recognize a liability for these payments in excess of revenue
recognized and present it as deferred revenue or contract liabilities on our
consolidated balance sheets. At December 31, 2019 and 2018, we had deferred
revenues of approximately $153.5 million and $77.4 million. Our deferred
revenues primarily relate to:

• Capital Reimbursements. Certain contracts in our G&P segment require that

       our customers reimburse us for capital expenditures related to the
       construction of long-lived assets utilized to provide services to them
       under the revenue contracts. Because we consider these amounts as
       consideration from customers associated with ongoing services to be

provided to customers, we defer these upfront payments in deferred revenue

       and recognize the amounts in revenue over the life of the associated
       revenue contract as the performance obligations are satisfied under the
       contract.


• Contracts with Increasing (Decreasing) Rates per Unit. Certain contracts

       in our G&P, S&T and MS&L segments have fixed rates per volume that
       increase and/or decrease over the life of the contract once certain time
       periods or thresholds are met. We record revenues on these contracts

ratably per unit over the life of the contract based on the remaining

performance obligations to be performed, which can result in the deferral

       of revenue for the difference between the consideration received and the
       ratable revenue recognized.



The evaluation of when performance obligations have been satisfied and the
transaction price that is allocated to our performance obligations requires
significant judgments and assumptions, including our evaluation of the timing of
when control of the underlying good or service has transferred to our customers,
estimating the revenue to be generated per unit over the life of the contracts,
and determining the relative standalone selling price of goods and services
provided to customers under contracts with multiple performance obligations.
Actual results can significantly vary from those judgments and assumptions.


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How We Evaluate Our Operations

We evaluate our overall business performance based primarily on EBITDA and Adjusted EBITDA. We do not utilize depreciation, amortization and accretion expense in our key measures because we focus our performance management on cash flow generation and our assets have long useful lives.


EBITDA and Adjusted EBITDA - We believe that EBITDA and Adjusted EBITDA are
widely accepted financial indicators of a company's operational performance and
its ability to incur and service debt, fund capital expenditures and make
distributions. We believe that EBITDA and Adjusted EBITDA are useful to our
investors because it allows them to use the same performance measure analyzed
internally by our management to evaluate the performance of our businesses and
investments without regard to the manner in which they are financed or our
capital structure. 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 historical realignment of our
operations and related cost savings initiatives, and other transactions
identified in a specific reporting period. The change in fair value of commodity
inventory-related derivative contracts is considered in determining Adjusted
EBITDA given that the timing of recognizing gains and losses on these derivative
contracts differs from the recognition of revenue for the related underlying
sale of inventory to which these derivatives relate. Changes in the fair value
of other derivative contracts is not considered in determining Adjusted EBITDA
given the relatively short-term nature of those derivative contracts. EBITDA and
Adjusted EBITDA are not measures calculated in accordance with GAAP, as they do
not include deductions for items such as depreciation, amortization and
accretion, interest and income taxes, which are necessary to maintain our
business. EBITDA and Adjusted EBITDA should not be considered as alternatives to
net income, operating cash flow or any other measure of financial performance
presented in accordance with GAAP. EBITDA and Adjusted EBITDA calculations may
vary among entities, so our computation may not be comparable to measures used
by other companies.
See our reconciliation of net income to EBITDA and Adjusted EBITDA in Results of
Operations below.

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Results of Operations

The following table summarizes our results of operations (in millions).

                                                Crestwood Equity                    Crestwood Midstream
                                             Year Ended December 31,              Year Ended December 31,
                                        2019          2018          2017            2019            2018
Revenues                             $ 3,181.9$ 3,654.1$ 3,880.9$    3,181.9$ 3,654.1
Costs of product/services sold         2,544.9       3,129.4       3,374.7          2,544.9        3,129.4
Operations and maintenance expense       138.8         125.8         136.0            138.8          125.8
General and administrative expense       103.4          88.1          96.5             98.2           83.5
Depreciation, amortization and
accretion                                195.8         168.7         191.7            209.9          181.4
Loss on long-lived assets, net             6.2          28.6          65.6              6.2           28.6
Gain on acquisition                     (209.4 )           -             -           (209.4 )            -
Goodwill impairment                          -             -          38.8                -              -
Loss on contingent consideration             -             -          57.0                -              -
Operating income (loss)                  402.2         113.5         (79.4 )          393.3          105.4
Earnings from unconsolidated
affiliates, net                           32.8          53.3          47.8             32.8           53.3
Interest and debt expense, net          (115.4 )       (99.2 )       (99.4 )         (115.4 )        (99.2 )
Loss on modification/extinguishment
of debt                                      -          (0.9 )       (37.7 )              -           (0.9 )
Other income, net                          0.6           0.4           1.3              0.2              -

(Provision) benefit for income taxes (0.3 ) (0.1 ) 0.8

            (0.3 )            -
Net income (loss)                        319.9          67.0        (166.6 )          310.6           58.6

Add:

Interest and debt expense, net           115.4          99.2          99.4            115.4           99.2
Loss on modification/extinguishment
of debt                                      -           0.9          37.7                -            0.9
Provision (benefit) for income taxes       0.3           0.1          (0.8 )            0.3              -
Depreciation, amortization and
accretion                                195.8         168.7         191.7            209.9          181.4
EBITDA                                   631.4         335.9         161.4            636.2          340.1
Unit-based compensation charges           47.0          28.5          25.5             47.0           28.5
Loss on long-lived assets, net             6.2          28.6          65.6              6.2           28.6
Gain on acquisition                     (209.4 )           -             -           (209.4 )            -
Goodwill impairment                          -             -          38.8                -              -
Loss on contingent consideration             -             -          57.0                -              -
Earnings from unconsolidated
affiliates, net                          (32.8 )       (53.3 )       (47.8 )          (32.8 )        (53.3 )
Adjusted EBITDA from unconsolidated
affiliates, net                           74.9          95.6          80.3             74.9           95.6
Change in fair value of commodity
inventory-related derivative
contracts                                  2.7         (18.3 )         2.2              2.7          (18.3 )
Significant transaction and
environmental related costs and
other items                                6.5           3.1          12.4              6.5            3.1
Adjusted EBITDA                      $   526.5$   420.1$   395.4$      531.3$   424.3



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                                               Crestwood Equity                  Crestwood Midstream
                                           Year Ended December 31,             Year Ended December 31,
                                        2019         2018         2017            2019             2018
Net cash provided by operating
activities                           $  420.4$  253.6$  255.9$       424.1$  260.5
Net changes in operating assets and
liabilities                             (47.8 )       46.9         (0.3 )           (46.5 )         44.9
Amortization of debt-related
deferred costs                           (6.2 )       (6.8 )       (7.2 )            (6.2 )         (6.8 )
Interest and debt expense, net          115.4         99.2         99.4             115.4           99.2

Unit-based compensation charges (47.0 ) (28.5 ) (25.5 )

         (47.0 )        (28.5 )
Loss on long-lived assets, net           (6.2 )      (28.6 )      (65.6 )            (6.2 )        (28.6 )
Gain on acquisition                     209.4            -            -             209.4              -
Goodwill impairment                         -            -        (38.8 )               -              -
Loss on contingent consideration            -            -        (57.0 )               -              -
Earnings from unconsolidated
affiliates, net, adjusted for cash
distributions received                   (6.9 )       (0.5 )        0.1              (6.9 )         (0.5 )
Deferred income taxes                       -          0.7          2.1              (0.2 )          0.1
Provision (benefit) for income taxes      0.3          0.1         (0.8 )             0.3              -
Other non-cash income                       -         (0.2 )       (0.9 )               -           (0.2 )
EBITDA                                  631.4        335.9        161.4             636.2          340.1
Unit-based compensation charges          47.0         28.5         25.5              47.0           28.5
Loss on long-lived assets, net            6.2         28.6         65.6               6.2           28.6
Gain on acquisition                    (209.4 )          -            -            (209.4 )            -
Goodwill impairment                         -            -         38.8                 -              -
Loss on contingent consideration            -            -         57.0                 -              -
Earnings from unconsolidated
affiliates, net                         (32.8 )      (53.3 )      (47.8 )           (32.8 )        (53.3 )
Adjusted EBITDA from unconsolidated
affiliates, net                          74.9         95.6         80.3              74.9           95.6
Change in fair value of commodity
inventory-related derivative
contracts                                 2.7        (18.3 )        2.2               2.7          (18.3 )
Significant transaction and
environmental related costs and
other items                               6.5          3.1         12.4               6.5            3.1
Adjusted EBITDA                      $  526.5$  420.1$  395.4$       531.3$  424.3




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Segment Results
The following tables summarize the EBITDA of our segments (in millions):
                                             Gathering and           Storage and          Marketing, Supply
Crestwood Equity and Crestwood Midstream       Processing           Transportation          and Logistics
Revenues                                   $        835.8       $           20.4         $       2,325.7
Intersegment revenues                               175.0                   14.2                  (189.2 )
Costs of product/services sold                      526.1                    0.2                 2,018.6
Operations and maintenance expense                   98.7                    4.0                    36.1
Loss on long-lived assets, net                       (6.2 )                    -                    (0.2 )
Gain on acquisition                                 209.4                      -                       -
Earnings (loss) from unconsolidated
affiliates, net                                      (2.1 )                 34.9                       -
EBITDA for the year ended December 31,
2019                                       $        587.1       $           65.3         $          81.6

Revenues                                   $        946.7       $           17.1         $       2,690.3
Intersegment revenues                               192.4                   10.5                  (202.9 )
Costs of product/services sold                      767.0                    0.2                 2,362.2
Operations and maintenance expense                   71.7                    3.3                    50.8
Loss on long-lived assets, net                       (3.0 )                    -                   (27.3 )
Earnings from unconsolidated affiliates,
net                                                  22.5                   30.8                       -
EBITDA for the year ended December 31,
2018                                       $        319.9       $           54.9         $          47.1

Crestwood Equity
Revenues                                   $      1,688.2       $           37.2         $       2,155.5
Intersegment revenues                               134.5                    6.7                  (141.2 )
Costs of product/services sold                    1,480.8                    0.3                 1,893.6
Operations and maintenance expense                   68.4                    4.2                    63.4
Loss on long-lived assets, net                      (14.4 )                    -                   (48.2 )
Goodwill impairments                                    -                      -                   (38.8 )
Loss on contingent consideration                        -                  (57.0 )                     -
Earnings from unconsolidated affiliates,
net                                                  18.9                   28.9                       -
Other income, net                                     0.8                      -                       -
EBITDA for the year ended December 31,
2017                                       $        278.8       $           11.3         $         (29.7 )



Segment Results

Below is a discussion of the factors that impacted EBITDA by segment for the years ended December 31, 2019, 2018 and 2017.

Gathering and Processing

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018


EBITDA for our gathering and processing segment increased by approximately
$267.2 million during the year ended December 31, 2019 compared to 2018. The
comparability of our gathering and processing segment's EBITDA during the year
December 31, 2019 compared to 2018 was impacted by a $209.4 million gain related
to our acquisition of the remaining 50% equity interest in Jackalope discussed
below.

Our gathering and processing segment's costs of products/services sold decreased
by $240.9 million during the year ended December 31, 2019 compared to 2018,
while our revenues decreased by approximately $128.3 million during 2019
compared to 2018. These variances were driven primarily by our Arrow operations
which experienced lower average prices on its agreements under which it
purchases and sells crude oil as a result of the decrease in crude oil prices
during the year ended December 31, 2019 compared to 2018. Our costs of
product/services sold decreased faster than our revenues year over year due to
the offsetting impact of increasing volumes, which during the year ended
December 31, 2019, natural gas, crude oil and water volumes gathered by our
Arrow system increased by 33%, 32%, and 48%, respectively, compared to 2018. In
August 2019, Arrow placed into service a 120 MMcf/d cryogenic plant at its
natural gas processing facility which increased its

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processing capacity to 150 MMcf/d and, as a result, Arrow experienced a 124% increase in its processing volumes during the year ended December 31, 2019 compared to 2018.


Partially offsetting the decrease in our gathering and processing segment's
revenues related to our Arrow operations were operating revenues of
approximately $70.1 million recognized during the year ended December 31, 2019
related to our Jackalope operations. In April 2019, we acquired Williams' 50%
equity interest in Jackalope and, as a result, we began consolidating
Jackalope's operating results from the date of acquisition.

Our gathering and processing segment's operations and maintenance expenses
increased by approximately $27 million during the year ended December 31, 2019
compared to 2018, primarily due to the acquisition of the remaining 50% equity
interest in Jackalope. Also contributing to the increase in our gathering
processing segment's operations and maintenance expenses were environmental
costs related to water releases on our Arrow system, which are further described
in Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 15.

Our gathering and processing segment's EBITDA for the year ended December 31,
2019 was also impacted by a loss on long-lived assets of approximately $6.2
million, primarily related to the retirement of certain water gathering lines on
our Arrow system and the retirement and disposal of certain of our Granite Wash
gathering and processing assets.

Our gathering and processing segment's EBITDA was also impacted by a decrease in
earnings from unconsolidated affiliates of approximately $24.6 million during
the year ended December 31, 2019 compared to 2018. Equity earnings from our
Jackalope equity investment decreased by approximately $14.4 million during the
year ended December 31, 2019 compared to 2018, due to the acquisition of the
remaining 50% equity interest in Jackalope from Williams in April 2019. Our
gathering and processing segment also experienced lower equity earnings from our
Crestwood Permian equity investment of approximately $10.2 million during the
year ended December 31, 2019 compared to 2018, primarily due to lower average
margin generated on certain of its gathering contracts resulting from higher
transportation and fractionation fees during 2019 compared to 2018, and lower
gathering and processing volumes due to producer well shut-ins that resulted
from declining natural gas prices. Also impacting the decrease in equity
earnings from Crestwood Permian was our proportionate share of a $2.3 million
loss recorded by Crestwood Permian on the retirement of certain of its gathering
and processing assets in 2019 and an increase in its depreciation and accretion
expense due to placing the Orla processing plant into service in mid-2018.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017


EBITDA for our gathering and processing segment increased by approximately $41.1
million for the year ended December 31, 2018 compared to 2017. Our gathering and
processing segment's costs of product/services sold decreased by approximately
$713.8 million during the year ended December 31, 2018 compared to 2017, while
our revenues only decreased by $683.6 million year over year.

Our gathering and processing segment's revenues and product costs were impacted
by the modified retrospective adoption of ASU 2014-09, Revenue from Contracts
with Customers, during the year ended December 31, 2018, which decreased its
revenues and product costs by approximately $1,015.4 million and $1,026.8
million, respectively. Also impacting our gathering and processing segment's
EBITDA during the year ended December 31, 2018 compared to 2017, were lower
revenues and product costs of approximately $30.2 million and $21.8 million,
respectively, as a result of the deconsolidation of Crestwood New Mexico
Pipeline LLC (Crestwood New Mexico) in 2017.

The remaining increase in our gathering and processing segment's revenues and
costs of product/services sold of approximately $362.0 million and $334.8
million, respectively, during the year ended December 31, 2018 compared to 2017,
was primarily driven by our Arrow operations. Natural gas volumes and water
volumes gathered by our Arrow system increased by 40% and 30%, respectively,
during the year ended December 31, 2018 compared to 2017. These favorable
variances were driven by increased producer activity and expanded capacity on
our Arrow system. In addition, the Bear Den processing plant was placed into
service in late 2017, which increased natural gas volumes gathered and processed
by the Arrow system. Arrow also experienced higher average prices on its
agreements under which it purchases and sells crude oil as a result of the
increase in crude oil prices in 2018 compared to 2017.

Our gathering and processing segment's operations and maintenance expenses
increased by approximately $3.3 million during the year ended December 31, 2018
compared to 2017, primarily due to the increase in volumes related to our Arrow
operations described above.

Our gathering and processing segment's EBITDA for the year ended December 31,
2018 includes a loss on long-lived assets of approximately $3.0 million,
primarily related to the retirement and/or disposal of certain of our Arrow and
Granite Wash

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gathering and processing assets.


Our gathering and processing segment's EBITDA was favorably impacted by a net
increase in earnings from unconsolidated affiliates of approximately $3.6
million during the year ended December 31, 2018 compared to 2017. Equity
earnings from our Jackalope equity investment increased by approximately $7.6
million primarily due to a 73% and 57% increase in its gathering and processing
volumes during 2018 compared to 2017 resulting from increased producer activity
on its system. Our equity earnings from our Crestwood Permian equity investment
decreased by approximately $4.0 million during 2018 compared to 2017. Pursuant
to the Crestwood Permian limited liability company agreement, we were allocated
100% of the equity earnings from Crestwood New Mexico through June 30, 2018.
Subsequent to June 30, 2018, our equity earnings from Crestwood New Mexico were
allocated based on our ownership percentage in Crestwood Permian, which is
currently 50%.

Storage and Transportation

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018


EBITDA for our storage and transportation segment increased by approximately
$10.4 million during the year ended December 31, 2019 compared to 2018. Revenues
from our COLT Hub operations increased by approximately $7 million during the
year ended December 31, 2019 compared to 2018, primarily due to a 19% increase
in COLT's rail loading volumes due to higher demand for rail loading services
resulting from higher basis differentials between the Bakken and U.S. western
and eastern markets. The increase in demand also resulted in an increase in our
storage and transportations segment's operations and maintenance expense of $0.7
million during the year ended December 31, 2019 compared to 2018. Our storage
and transportation segment's costs of product/services sold related to our COLT
Hub operations were flat during the year ended December 31, 2019 compared to
2018.

Our storage and transportation segment's EBITDA was also impacted by a net
increase of approximately $4.1 million in earnings from unconsolidated
affiliates (primarily from our Stagecoach Gas equity investment) during the year
ended December 31, 2019 compared to 2018. Earnings from our Stagecoach Gas
equity investment increased by approximately $4.9 million during the year ended
December 31, 2019 compared to 2018 due to our share of its equity earnings
increasing from 40% to 50% effective July 1, 2019. Aside from this change in
earnings percentage, our earnings from our Stagecoach Gas equity investment were
relatively flat. This was due to demand for the natural gas storage and
transportation services provided by Stagecoach Gas being relatively flat given
that the Northeast market for natural gas in which Stagecoach Gas operates is
experiencing declining natural gas prices and basis differentials, offset by an
increase in producer activity and lack of new infrastructure being built, which
is keeping the demand for Stagecoach Gas's storage and transportation services
relatively stable. In addition, in December 2019, Stagecoach Gas reached a final
settlement related to its NGA Section 5 rate proceeding, the results of which is
not anticipated to have a material impact on our current or future results of
operations. We believe the Stagecoach Gas assets are well-positioned over the
long-term to benefit from increased producer activity and access to key markets
in the Northeast despite the current stable environment.

During the year ended December 31, 2019, earnings from our Tres Holdings equity
investment increased by approximately $0.9 million compared to 2018. During
2018, we recorded our proportionate share of a $0.8 million loss recorded by
Tres Holdings related to the disposition of certain of its assets. Earnings from
our PRBIC equity investment decreased by approximately $1.7 million during the
year ended December 31, 2019 compared to 2018, due to the expiration of a rail
loading contract with one of its customers in mid-2018.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017


EBITDA for our storage and transportation segment increased by approximately
$43.6 million during the year ended December 31, 2018 compared to 2017. The
comparability of our storage and transportation segment's EBITDA year over year
was impacted by a $57 million loss on contingent consideration recorded during
2017 related to our Stagecoach Gas joint venture as further described below.

During 2017 and early 2018, several of COLT's firm rail loading agreements
expired that provided COLT with take-or-pay revenues at rates that were higher
than spot market rates. As a result, COLT's revenues decreased by approximately
$16.3 million during the year ended December 31, 2018 compared to 2017 despite
its rail loading volumes increasing by 28% year-over-year. The increase in
volumes was due to higher demand for rail loading services resulting from higher
Bakken crude oil production and higher basis differentials between Bakken and
the U.S. western and eastern markets.


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Our storage and transportation segment's EBITDA was also impacted by a net
increase in earnings from unconsolidated affiliates during the year ended
December 31, 2018 compared to 2017. Earnings from our Stagecoach Gas equity
investment increased by approximately $4.0 million during 2018 compared to 2017,
primarily due to our share of Stagecoach Gas' equity earnings increasing from
35% to 40% effective July 1, 2018. Partially offsetting this increase were lower
equity earnings from our Tres Holdings equity investment of approximately $2.2
million due to higher repair and maintenance costs at the joint venture.

Marketing, Supply and Logistics

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018


EBITDA for our marketing, supply and logistics segment increased by
approximately $34.5 million during the year ended December 31, 2019 compared to
2018. The comparability of our marketing, supply and logistics segment's EBITDA
was impacted by a $26.9 million loss on sale of long-lived assets recorded
during the year ended December 31, 2018 related to the sale of our West Coast
assets.

The sale of our West Coast assets in late 2018 resulted in lower revenues of
approximately $196.2 million and lower costs of product/services sold of
approximately $184.5 million compared to 2018. In addition, the sale of our West
Coast assets and a related $2.9 million property tax refund received during 2019
were the primary drivers for lower operations and maintenance expenses of
approximately $14.7 million during the year ended December 31, 2019 compared to
2018.

Our NGL marketing and logistics operations (other than West Coast) experienced a
reduction in its revenues and costs of products/services sold of approximately
$439.1 million and $439.7 million, respectively, during the year ended December
31, 2019 compared to 2018, primarily as a result of decreasing NGL prices. NGL
prices decreased due to a combination of high NGL production and constrained NGL
infrastructure. During both 2019 and 2018, our NGL marketing and logistics
operations were able to take advantage of market disruptions, low NGL prices and
unusual weather and crop drying conditions to utilize its trucking, rail and
storage assets to economically source seasonal inventory and create strong
margin for delivery into forward markets. Included in our costs of
product/services sold was a gain of $19.5 million and $29.6 million during the
years ended December 31, 2019 and 2018, respectively, related to the change in
fair value of our derivative instruments which were also driven by the
decreasing NGL prices described above.

Our crude and natural gas marketing operations experienced an increase in its
revenues and costs of products/services sold of approximately $284.4 million and
$280.6 million, respectively, during the year ended December 31, 2019 compared
to 2018. These increases were driven by higher crude marketing volumes, as our
crude marketing operations were able to utilize excess storage capacity and
transportation assets to capitalize on opportunities created by widening WTI to
Bakken basis differentials.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017


EBITDA for our marketing, supply and logistics segment increased by
approximately $76.8 million during the year ended December 31, 2018 compared to
2017. The comparability of our marketing, supply and logistics segment's results
was impacted by the sale of certain of our assets during 2018 and 2017 and
approximately $121.0 million of goodwill, intangible assets and property, plant
and equipment impairments recorded during 2017, all of which are further
described below.

During the year ended December 31, 2018, we recorded a $26.9 million loss on
long-lived assets related to the sale of our West Coast facilities in October
2018, which also resulted in lower revenues and costs of product/services sold
of approximately $81.4 million and $71.4 million in 2018 compared to 2017.
During the year ended December 31, 2017, we recorded a $33.6 million gain
related to the sale of US Salt, which also resulted in lower revenues and costs
of product/services sold of approximately $59.8 million and $34.9 million during
the year ended December 31, 2018 compared to 2017.

EBITDA for our marketing, supply and logistics segment (excluding the impacts
from the sale of our West Coast and US Salt assets described above) was also
impacted by an increase in its revenues and costs of product/services sold of
approximately $614.3 million and $574.9 million during the year ended December
31, 2018 compared to 2017.

Our crude and natural gas marketing operations experienced an increase in its
revenues and product costs of approximately $564.5 million and $557.6 million.
These increases were driven by higher crude marketing volumes due to increased
marketing activity surrounding our crude-related operations.

The remaining $32.6 million increase in our revenues (net of costs of
product/services sold) during the year ended December 31, 2018 compared to 2017
was driven by our NGL marketing and logistics operations. Included in our costs
of product/

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services sold was a gain of $29.6 million and a loss of $31.2 million during the
years ended December 31, 2018 and 2017, respectively. Of the $29.6 million gain
in 2018, approximately $18.3 million related to the change in fair value of
commodity inventory-related derivative contracts that had not yet settled in
cash at December 31, 2018. The remaining increase in our revenues and costs of
product/services sold of our NGL marketing and logistics operations was
primarily the result of our ability to capture more marketing opportunities to
purchase and sell NGLs given the unusually cold weather during 2018. In
addition, we experienced increased demand for trucking, rail, storage and
terminal services as a result of an expanded US NGL supply base and market
dislocations caused by increased NGL supplies from various high growth regions
and regional pipeline outages.

During the year ended December 31, 2018, our marketing, supply and logistics
segment's operations and maintenance expenses decreased by approximately $12.6
million compared to 2017, primarily due to the sale of our West Coast and US
Salt assets described above, in addition to efforts to realign certain of its
operations.

Other EBITDA Results

General and Administrative Expenses. During the year ended December 31, 2019,
our general and administrative expenses increased compared to 2018, while we
experienced a decrease in these expenses during 2018 compared to 2017. Our
unit-based compensation charges increased by approximately $18.5 million during
the year ended December 31, 2019 compared to 2018 and increased by approximately
$3.0 million during 2018 compared to 2017. These increases were driven by the
acceleration of certain awards due to the Corporate restructuring that occurred
in early 2019 and higher average awards outstanding under our long-term
incentive plans during both years. In addition, during the year ended December
31, 2019, we incurred higher transaction-related costs primarily associated with
our Jackalope acquisition, while during the year ended December 31, 2017, we
incurred higher costs associated with the realignment of our Marketing, Supply
and Logistics operations.

Items not affecting EBITDA include the following:


Depreciation, Amortization and Accretion Expense. During the year ended December
31, 2019, our depreciation, amortization and accretion expense increased
compared to 2018, while we experienced a decrease in our depreciation,
amortization and accretion expense during 2018 compared to 2017. These changes
were primarily due to the Jackalope Acquisition in April 2019, partially offset
by the sale of our West Coast assets and US Salt operations during 2018 and
2017, respectively, and the deconsolidation of our Crestwood New Mexico
operations in 2017. For a further discussion of these transactions, see Part IV,
Item 15. Exhibits, Financial Statement Schedules, Notes 3 and 6.

Interest and Debt Expense, Net. During the year ended December 31, 2019,
interest and debt expense, net increased by approximately $16.2 million compared
to 2018, primarily due to the issuance of $600 million unsecured senior notes
due 2027 in April 2019 and higher average outstanding balances on our credit
facility that were primarily utilized to fund growth capital expenditures during
2019. During the year ended December 31, 2018, interest and debt expense, net
was relatively flat compared to 2017.

The following table provides a summary of our interest and debt expense, net (in
millions):
                                      Year Ended December 31,
                                      2019          2018      2017
Credit facilities               $     26.4$ 24.6$ 18.6
Senior notes                          96.6           72.5      76.4
Other debt-related costs               6.8            7.1       7.3

Gross interest and debt expense 129.8 104.2 102.3 Less: capitalized interest

            14.4            5.0       2.9

Interest and debt expense, net $ 115.4$ 99.2$ 99.4




Loss on Modification/Extinguishment of Debt. During the year ended December 31,
2018, we recognized a loss on modification of debt of approximately $0.9 million
in conjunction with amending and restating Crestwood Midstream's senior secured
revolving credit facility. During the year ended December 31, 2017, we
recognized a loss on extinguishment of debt of approximately $37.7 million in
conjunction with the tender of the principal amounts previously outstanding
under Crestwood Midstream's senior notes due in 2020 and 2022.

Liquidity and Sources of Capital


Crestwood Equity is a holding company that derives all of its operating cash
flow from its operating subsidiaries.  Our principal sources of liquidity
include cash generated by operating activities from our subsidiaries,
distributions from our joint ventures, borrowings under the Crestwood Midstream
credit facility, and sales of equity and debt securities. Our equity investments
use cash from their respective operations to fund their operating activities,
maintenance and growth capital expenditures, and service their outstanding
indebtedness. We believe our liquidity sources and operating cash flows are
sufficient to address our future operating, debt service and capital
requirements.

We make cash quarterly distributions to our common unitholders within
approximately 45 days after the end of each fiscal quarter in an aggregate
amount equal to our available cash for such quarter. In February 2020, we paid a
quarterly distribution of $0.625 per limited partner unit, an increase of
approximately 4% compared to the quarterly distributions declared throughout
2019, and we expect to maintain this quarterly distribution through 2020,
subject to the board of directors' quarterly approval. We also pay cash
quarterly distributions of approximately $15 million to our preferred
unitholders and quarterly cash distributions of approximately $9 million to
Crestwood Niobrara's non-controlling partner. We believe our operating cash
flows will well exceed cash distributions to our partners, preferred unitholders
and non-controlling partner at current levels, and as a result, we will have
substantial operating cash flows as a source of liquidity for our growth capital
expenditures.

As of December 31, 2019, we had $661.3 million of available capacity under our
revolving credit facility considering the most restrictive debt covenants in the
credit agreement. As of December 31, 2019, we were in compliance with all of our
debt covenants applicable to the credit facility and our senior notes. See Part
IV, Item 15. Exhibits, Financial Statement Schedules, Note 9 for a more detailed
description of the covenants related to our credit facility and senior notes.

Cash Flows


The following table provides a summary of Crestwood Equity's cash flows by
category (in millions):
                                                         Year Ended December 31,
                                                      2019        2018        2017
Net cash provided by operating activities           $ 420.4$ 253.6$ 255.9
Net cash provided by (used in) investing activities  (943.7 )    (241.2 )   

38.7

Net cash provided by (used in) financing activities 531.8 3.5

 (294.9 )



Operating Activities

Our operating cash flows increased by approximately $166.8 million during the
year ended December 31, 2019 compared to 2018. The increase was primarily driven
by lower costs of product/services sold of approximately $584.5 million
primarily from our marketing, supply and logistics segment's and gathering and
processing segment's operations, partially offset by lower revenues of
approximately $472.2 million primarily from these segments as discussed above in
Results of Operations above. In addition, we had a net cash inflow from working
capital requirements of approximately $47.8 million.

Our operating cash flows decreased by $2.3 million during the year ended
December 31, 2018 compared to 2017. We experienced higher revenues and costs
primarily from our gathering and processing segment's Arrow operations of $362.0
million and $334.8 million, respectively, and higher revenues (net of costs of
product/services sold) from our marketing, supply and logistics segment's NGL
marketing and logistics operations of approximately $32.6 million. Offsetting
these higher revenues and costs was a $16.3 million decrease in operating
revenues from our COLT Hub operations and a net cash outflow from working
capital requirements of approximately $47.2 million.

Investing Activities

Capital Expenditures. The energy midstream business is capital intensive, requiring significant investments for the acquisition or development of new facilities. We categorize our capital expenditures as either:

• growth capital expenditures, which are made to construct additional assets,

      expand and upgrade existing systems, or acquire additional assets; or



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• maintenance capital expenditures, which are made to replace partially or

      fully depreciated assets, to maintain the existing operating capacity of
      our assets, extend their useful lives or comply with regulatory
      requirements.



During 2020, we anticipate growth capital expenditures of approximately $150
million to $200 million, which includes contributions to our equity investments
related to their capital projects. In addition, we expect to spend between
approximately $20 million to $25 million on maintenance capital expenditures and
approximately $30 million to $40 million on capital expenditures that are
directly reimbursable by our customers. We anticipate that our growth and
reimbursable capital expenditures in 2020 will increase the services we can
provide to our customers and the operating efficiencies of our systems. We
expect to finance our capital expenditures with a combination of cash generated
by our operating subsidiaries, distributions received from our equity
investments and borrowings under our credit facility.

We have identified growth capital project opportunities for our reporting
segments. Additional commitments or expenditures will be made at our discretion,
and any discontinuation of the construction of these projects will likely result
in less future cash flows and earnings. The following table summarizes our
capital expenditures for the year ended December 31, 2019 (in millions):
Growth capital                             $ 384.2
Maintenance capital                           19.1
Other(1)                                      52.2

Purchases of property, plant and equipment $ 455.5

(1) Represents purchases of property, plant and equipment that are reimbursable

    by third parties.



Investments in Unconsolidated Affiliates. During the year ended December 31,
2019, we contributed approximately $28.3 million to our Crestwood Permian equity
investment primarily to fund its expansion projects and contributed $8.6 million
to our Stagecoach Gas, Tres Holdings and PRBIC equity investments for other
operating purposes. We also contributed $24.4 million to our Jackalope equity
investment prior to our acquisition of the remaining 50% equity interest in
Jackalope from Williams, and this contribution was primarily utilized by us
after Jackalope's consolidation to fund its growth capital expenditures. During
2018 and 2017, we contributed approximately $64.4 million and $58.0 million to
our equity investments to fund their expansion projects and other operating
activities.

Acquisition and Divestitures. Below is a summary of the acquisition and divestitures which impacted our investing activities during the years ended December 31, 2019, 2018 and 2017.

• In April 2019, Crestwood Niobrara acquired Williams' 50% equity interest

       in Jackalope for approximately $462.1 million, net of cash acquired of
       approximately $22.5 million;

• In October 2018, we sold our West Coast facilities to a third party for

net proceeds of approximately $70.5 million; and

• In December 2017, we sold 100% of our equity interests in US Salt to an

affiliate of Kissner Group Holdings LP for net proceeds of approximately

       $223.6 million.



Financing Activities

Significant items impacting our financing activities during the years ended December 31, 2019, 2018 and 2017 included the following:

Equity Transactions

• In April 2019, Crestwood Niobrara issued $235 million in new Series A-3

preferred units to Jackalope Holdings in conjunction with Crestwood

Niobrara's acquisition of the remaining 50% equity interest in Jackalope

from Williams. For a further discussion of this transaction, See Part IV,

Item 15. Exhibits, Financial Statement Schedules, Note 12;

• In December 2017, Crestwood Niobrara redeemed 100% of the outstanding

Series A preferred units issued to a subsidiary of General Electric

Capital Corporation and GE Structured Finance, Inc. (collectively, GE) for

an aggregate purchase price of $202.7 million and issued $175 million of

new Series A-2 preferred units to Jackalope Holdings. For a further

discussion of this transaction, see Part IV, Item 15. Exhibits, Financial

Statement Schedules, Note 12. We began making distributions to Jackalope

       Holdings on its Series A-2 preferred units in April 2018.



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•      During the years ended December 31, 2019, 2018 and 2017, Crestwood
       Niobrara paid cash distributions of approximately $25.0 million, $9.9
       million and $15.2 million to its non-controlling partner;


•      During the years ended December 31, 2019, 2018 and 2017, we made cash
       distributions of approximately $60.1 million, $60.1 million and $15

million to our preferred unitholders. Prior to September 30, 2017, we paid

quarterly distributions to our preferred unitholders by issuing additional

preferred units;

• During the year ended December 31, 2019, our distributions to partners

increased by approximately $1.6 million compared to 2018 and approximately

       $3.2 million during 2018 compared to 2017. These increases were due to an
       increase in our common units outstanding;


•      During the year ended December 31, 2017, we received net proceeds of
       approximately $15.2 million from the issuance of CEQP common units; and

• During the year ended December 31, 2019, our taxes paid for unit-based

compensation vesting increased by approximately $3.6 million compared to

       2018 and by approximately $1.9 million during 2018 compared to 2017,
       primarily due to higher vesting of unit-based compensation awards.


Debt Transactions • During the year ended December 31, 2019, our debt-related transactions

       resulted in net proceeds of approximately $568.8 million compared to net
       proceeds of approximately $253.4 million in 2018 and net repayments of

approximately $76.3 million in 2017. During 2019, we issued $600 million

unsecured senior notes due 2027 and during 2017, we issued $500 million of

senior unsecured notes due in 2025. During 2017, we redeemed all amounts

previously outstanding under Crestwood Midstream's senior notes due in

2020 and 2022. For a further discussion of these and other debt-related

       transactions, see Part IV, Item 15. Exhibits, Financial Statement
       Schedules, Note 9.



Contractual Obligations

We are party to various contractual obligations. A portion of these obligations
are reflected in our consolidated financial statements, such as long-term debt,
leases and other accrued liabilities, while other obligations, such as capital
and other commitments and contractual interest amounts are not reflected on our
consolidated balance sheets. The following table and discussion summarizes our
contractual cash obligations as of December 31, 2019 (in millions):
                          Less than 1
                             Year          1-3 Years       3-5 Years       Thereafter        Total
Long-term debt:
Principal                $       0.2$       0.4$   1,257.0$    1,100.0$  2,357.6
Interest(1)                    128.6           257.1           158.2             85.9          629.8
Standby letters of
credit                          31.7               -               -                -           31.7
Future minimum payments
under leases(2)                 24.5            32.9            12.8              7.5           77.7
Asset retirement
obligations                      1.5               -               -             33.3           34.8
Fixed price commodity
purchase commitments(3)        712.3            80.1               -                -          792.4
Purchase commitments and
other contractual
obligations(4)                 133.3               -               -                -          133.3
Total contractual
obligations              $   1,032.1$     370.5$   1,428.0$    1,226.7$  4,057.3

(1) $557.0 million of our long-term debt is variable interest rate debt at the

Alternate Base rate or Eurodollar rate plus an applicable spread. These rates

plus their applicable spreads were between 3.96% and 6.00% at December 31,

2019. These rates have been applied for each period presented in the table.

(2) Includes our operating and finance leases. See Part IV, Item 15. Exhibits,

Financial Statement Schedules, Note 15 for a further discussion of these

obligations.

(3) Fixed price purchase commitments are volumetrically offset by third party

fixed price sale contracts.

(4) Primarily related to growth and maintenance contractual purchase obligations

in our gathering and processing segment and environmental obligations

included in other current liabilities on our balance sheet. Other contractual

purchase obligations are defined as legally enforceable agreements to

purchase goods or services that have fixed or minimum quantities and fixed or

    minimum variable price provisions, and that detail approximate timing of the
    underlying obligations.




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Off-Balance Sheet Arrangements

As of December 31, 2019, we have not entered into any transactions, agreements or other arrangements that would result in off-balance sheet liabilities.


Our equity interest in Crestwood Permian is considered to be a variable interest
entity. We are not the primary beneficiary of Crestwood Permian and as a result,
we account for our investment in Crestwood Permian as an equity method
investment. For a further discussion of our investment in Crestwood Permian, see
Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 6.

© Edgar Online, source Glimpses

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