Our Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the accompanying footnotes and Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K. 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; •outbreak of illness, pandemic or any other public health crisis, including the COVID-19 pandemic; •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; •the availability of storage for hydrocarbons; •the ability of members of theOrganization of Petroleum Exporting Countries (OPEC) and other oil-producing countries to agree and maintain oil price and production controls; •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); •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.
For additional factors that could cause actual results to be materially different from those described in the forward-looking statements, see Part I, Item 1A. Risk Factors of our 2021 Annual Report on Form 10-K.
Outlook and Trends
Our business objective is to create long-term value for our unitholders. We expect to create value for our investors by generating stable operating margins and improving cash flows from our diversified midstream operations by prudently financing investments in our assets and expansions of our portfolio, maximizing throughput and optimizing services on our assets, and effectively controlling our capital expenditures, operating and administrative costs. 39
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We have taken a number of strategic steps to better position the Company as a stronger, better capitalized company that can accretively grow cash flows and as an industry leader in Environmental, Social and Governance (ESG) efforts. We continue to drive our long-term growth strategy through disciplined capital investments utilizing our current financial flexibility, and onFebruary 1, 2022 , we acquired Oasis Midstream in an equity and cash transaction valued at approximately$1.8 billion . Pursuant to the merger agreement, Oasis Petroleum received$150 million in cash plus 20.9 million newly issued CEQP common units in exchange for its 33.8 million common units held in Oasis Midstream. In addition, Oasis Midstream's public unitholders received 12.9 million newly issued CEQP common units in exchange for the 14.8 million Oasis Midstream common units held by them. Additionally, under the merger agreement, Oasis Petroleum received a$10 million cash payment for its ownership of the general partner of Oasis Midstream. This transaction further solidifies Crestwood's competitive position in theWilliston Basin with exposure to approximately 1,200 drilling locations and 535,000 dedicated acres and expands the Company's relationship with Oasis Petroleum. Additionally,Oasis Midstream's Wild Basin gathering and processing assets are highly complementary with our Arrow gathering system and Bear Den processing facility which provides for immediate opportunities to drive cost savings and commercial synergies and better utilization of available gas processing capacity. InJuly 2022 , we completed a series of strategic transactions including (i) the acquisition of Sendero for$600 million , (ii) the acquisition of First Reserve's 50% equity interest in Crestwood Permian in exchange for 11.3 million CEQP common units, and (iii) the divestiture of ourBarnett Shale assets for approximately$290 million . The Sendero Acquisition adds more than 75,000 dedicated acres and over 1,200 drilling locations in theDelaware Basin . In addition, Sendero's assets are highly complementary to Crestwood Permian'sWillow Lake system and can be integrated with minimal capital investment, enabling the Company to capture substantial cost and commercial synergies and will result in approximately 550 MMcf/d of processing capacity. The acquisition of Sendero and First Reserve's 50% equity interest in the Crestwood Permian joint venture significantly increases the Company's position in theDelaware Basin .
The divestiture of the Cowtown,
In addition to the strategic transactions discussed above, we have also taken steps to (i) minimize capital expenditures to better align with development activity by our gathering and processing customers; (ii) realign our organization to reduce operating and administrative expenses; (iii) engage with our customers to maintain volumes across our asset portfolio; (iv) optimize our storage, transportation and marketing assets to take advantage of regional commodity price volatility; and (v) evaluate our debt and equity structure to preserve liquidity and ensure balance sheet strength. Given our efforts over the past few years to improve the partnership's competitive position in the businesses we operate, manage costs and improve margins and create a stronger balance sheet, we believe the Company is well positioned to execute its business plan. Recent Developments Bakken DAPL Matter. InJuly 2020 , aU.S. District Court (District Court) ordered the Dakota Access Pipeline (DAPL) to cease operation based on an alleged procedural permitting failure. OnAugust 5, 2020 , theU.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit ) stayed the DAPL shutdown, and subsequently issued an opinion upholding the District Court's decision on the merits, but not prohibiting DAPL's continued operation. The plaintiffs sought another injunction against DAPL's operation, which was denied by the District Court inMay 2021 . As required by the District Court, theU.S. Army Corps of Engineers is currently conducting an environmental impact statement, which is currently expected to be complete inSeptember 2022 . We expect DAPL will remain in operation while the environmental impact statement is being completed.The Oasis Midstream Wild Basin gathering system connects to the Arrow system and is capable of transporting all of its volumes to the Arrow system. The Arrow gathering system currently connects to the DAPL,Kinder Morgan Hiland , Tesoro and True Companies'Bridger Four Bears pipelines, providing significant downstream delivery capacity for our Arrow andWild Basin customers. Additionally, we can transport Arrow andWild Basin crude volumes to our COLT Hub facility by pipeline or truck, which mitigates the impact of any potential pipeline shut-downs to our producers with the ability to access multiple markets out of the basin.
Carbon Management. One of the core initiatives related to our ESG efforts surrounds our focus on managing the intensity of our emissions in order to reduce climate-related risk to our business.
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InJanuary 2022 , we published our first carbon management plan (CMP), which outlines near-term emissions reduction and management activities that we intend to implement over the next three years. The CMP includes several core objectives, including (i) reducing emissions intensity of our assets; (ii) evaluating opportunities to reduce Scope 2 greenhouse gas (GHG) emissions while managing our operations' energy efficiency; (iii) enhancing our process by which we manage GHG emissions; (iv) piloting methane emission monitoring devices at certain of our facilities; (v) participating in the development of responsibly sourced gas standards for the midstream sector; (vi) investing in technology to better inventory and calculate emissions data and integrating the technology into our operations; and (vii) participating in and providing leadership to trade associations focused on climate-related risks. We currently believe that our carbon management efforts will help to mitigate the potential impact that emissions may have on our capital expenditures or results of operations in the future, although we currently anticipate that these efforts will not have a material impact on our capital expenditures or results of operations in 2022.
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 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 gains and losses on long-lived assets and other impairments. Adjusted EBITDA also considers the impact of certain significant items, such as unit-based compensation charges, gains or losses on long-lived assets, impairments of goodwill, third party costs incurred related to potential and completed acquisitions, certain environmental remediation costs, the change in fair value of commodity inventory-related derivative contracts, costs associated with the realignment and restructuring of our operations and corporate structure, 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. 41
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Results of Operations
The following tables summarize our results of operations (in millions):
Crestwood Equity
Three Months Ended Six Months Ended Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2022 2021 2022 2021 2022 2021 2022 2021 Revenues$ 1,448.0 $
929.6
1,213.2 797.2 2,577.6 1,611.0 1,213.2 797.2 2,577.6 1,611.0 Operations and maintenance expense 46.6 25.8 89.0 58.6 46.6 25.8 89.0 58.6 General and administrative expense 26.5 22.8 69.9 41.5 25.0 19.7 66.7 36.9 Depreciation, amortization and accretion 80.6 58.8 155.4 118.0 83.0 62.2 161.2 125.0 (Gain) loss on long-lived assets, net 7.2 (0.3) 11.0 1.1 60.5 (0.3) 64.3 1.1 Operating income 73.9 25.3 128.9 132.1 19.7 25.0 73.0 129.7 Earnings (loss) from unconsolidated affiliates, net 6.0 (27.1) 9.0 (130.8) 6.0 (27.1) 9.0 (130.8) Interest and debt expense, net (40.1) (35.1) (76.2) (71.1) (40.1) (35.1) (76.2) (71.1) Loss on modification/extinguishment of debt - (1.2) - (6.7) - (1.2) - (6.7) Other income (expense), net (0.1) 0.1 0.2 0.1 - - - - Provision for income taxes (0.3) (0.1) (0.3) - (0.2) (0.1) (0.2) - Net income (loss) 39.4 (38.1) 61.6 (76.4) (14.6) (38.5) 5.6 (78.9) Add: Interest and debt expense, net 40.1 35.1 76.2 71.1 40.1 35.1 76.2 71.1 Loss on modification/extinguishment of debt - 1.2 - 6.7 - 1.2 - 6.7 Provision for income taxes 0.3 0.1 0.3 - 0.2 0.1 0.2 - Depreciation, amortization and accretion 80.6 58.8 155.4 118.0 83.0 62.2 161.2 125.0 EBITDA 160.4 57.1 293.5 119.4 108.7 60.1 243.2 123.9 Unit-based compensation charges 8.6 7.6 17.2 9.9 8.6 7.6 17.2 9.9 (Gain) loss on long-lived assets, net 7.2 (0.3) 11.0 1.1 60.5 (0.3) 64.3 1.1 (Earnings) loss from unconsolidated affiliates, net (6.0) 27.1 (9.0) 130.8 (6.0) 27.1 (9.0) 130.8 Adjusted EBITDA from unconsolidated affiliates, net 10.9 21.0 18.5 46.7 10.9 21.0 18.5 46.7 Change in fair value of commodity inventory-related derivative contracts (4.9) 32.6 0.8 2.1 (4.9) 32.6 0.8 2.1 Significant transaction and environmental related costs and other items 3.5 0.6 20.5 1.1 3.5 (1.4) 20.5 (1.1) Adjusted EBITDA$ 179.7 $ 145.7 $ 352.5 $ 311.1 $ 181.3 $ 146.7 $ 355.5 $ 313.4 42
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Table of Contents Crestwood Equity Crestwood Midstream Three Months Ended Six Months Ended Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2022 2021 2022 2021 2022 2021 2022 2021 Net cash provided by operating activities$ 29.5 $ 35.0 $ 252.0 $ 293.5 $ 31.3 $ 38.0 $ 255.2 $ 297.2 Net changes in operating assets and liabilities 106.9 33.1 (6.0) (89.7) 106.9 33.2 (5.9) (88.8) Amortization of debt-related deferred costs (0.4) (1.7) (1.2) (3.4) (0.4) (1.7) (1.2) (3.4) Interest and debt expense, net 40.1 35.1 76.2 71.1 40.1 35.1 76.2 71.1 Unit-based compensation charges (8.6) (7.6) (17.2) (9.9) (8.6) (7.6) (17.2) (9.9) Gain (loss) on long-lived assets, net (7.2) 0.3 (11.0) (1.1) (60.5) 0.3 (64.3) (1.1) Earnings (loss) from unconsolidated affiliates, net, adjusted for cash distributions received (0.2) (37.3) 0.2 (141.1) (0.2) (37.3) 0.2 (141.1) Deferred income taxes - 0.1 0.1 0.1 (0.1) - (0.1) - Provision for income taxes 0.3 0.1 0.3 - 0.2 0.1 0.2 - Other non-cash income (expense) - - 0.1 (0.1) - - 0.1 (0.1) EBITDA 160.4 57.1 293.5 119.4 108.7 60.1 243.2 123.9 Unit-based compensation charges 8.6 7.6 17.2 9.9 8.6 7.6 17.2 9.9 (Gain) loss on long-lived assets, net 7.2 (0.3) 11.0 1.1 60.5 (0.3) 64.3 1.1 (Earnings) loss from unconsolidated affiliates, net (6.0) 27.1 (9.0) 130.8 (6.0) 27.1 (9.0) 130.8 Adjusted EBITDA from unconsolidated affiliates, net 10.9 21.0 18.5 46.7 10.9 21.0 18.5 46.7 Change in fair value of commodity inventory-related derivative contracts (4.9) 32.6 0.8 2.1 (4.9) 32.6 0.8 2.1 Significant transaction and environmental related costs and other items 3.5 0.6 20.5 1.1 3.5 (1.4) 20.5 (1.1) Adjusted EBITDA$ 179.7 $ 145.7 $ 352.5 $ 311.1 $ 181.3 $ 146.7 $ 355.5 $ 313.4 Segment Results
The following table summarizes the EBITDA of our segments (in millions):
Three Months Ended Three Months Ended June 30, 2022 June 30, 2021 Gathering and Gathering and Storage and Gathering and Gathering and Storage and Processing North Processing South Logistics Processing North Processing South Logistics Revenues$ 279.4 $ 35.3$ 1,133.3 $ 148.6 $ 24.7$ 756.3 Intersegment revenues 151.6 - (151.6) 84.2 - (84.2) Costs of product/services sold 250.8 0.6 961.8 120.5 0.1 676.6 Operations and maintenance expenses 27.5 7.6 11.5 9.0 5.7 11.1 Gain (loss) on long-lived assets, net - (60.4) (0.1) 0.3 - - Earnings (loss) from unconsolidated affiliates, net - 4.8 1.2 - 1.0 (28.1) Crestwood Midstream EBITDA$ 152.7 $ (28.5) $ 9.5 $ 103.6 $ 19.9$ (43.7) Elimination of loss on long-lived assets(1) - 53.3 - $ - $ - $ - Crestwood Equity EBITDA$ 152.7 $ 24.8$ 9.5 $ 103.6 $ 19.9$ (43.7) (1)Represents the elimination of the loss on long-lived assets recorded by CMLP related to the sale of our assets in theBarnett Shale . For a further discussion of this loss on long-lived assets, see Item 1. Financial Statements, Note 3. 43
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Table of Contents Six Months Ended Six Months Ended June 30, 2022 June 30, 2021 Gathering and Gathering and Storage and Gathering and Gathering and Storage and Processing North Processing South Logistics Processing North Processing South Logistics Revenues$ 514.6 $ 66.0$ 2,451.2 $ 278.4 $ 49.3$ 1,634.6 Intersegment revenues 279.0 - (279.0) 189.5 - (189.5) Costs of product/services sold 456.4 - 2,121.2 236.7 0.4 1,373.9 Operations and maintenance expenses 51.2 14.3 23.5 24.1 12.0 22.5 Gain (loss) on long-lived assets, net - (60.2) (4.1) 0.1 (1.3) 0.1 Earnings (loss) from unconsolidated affiliates, net - 7.4 1.6 - 0.2 (131.0) Crestwood Midstream EBITDA$ 286.0 $ (1.1)$ 25.0 $ 207.2 $ 35.8$ (82.2) Elimination of loss on long-lived assets(1) - 53.3 - - - - Crestwood Equity EBITDA$ 286.0 $ 52.2$ 25.0 $ 207.2 $ 35.8$ (82.2) (1)Represents the elimination of the loss on long-lived assets recorded by CMLP related to the sale of our assets in theBarnett Shale . For a further discussion of this loss on long-lived assets, see Item 1. Financial Statements, Note 3.
Below is a discussion of the factors that impacted EBITDA by segment for the
three and six months ended
Gathering and Processing North
EBITDA for our gathering and processing north segment increased by approximately$49.1 million and$78.8 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021. OnFebruary 1, 2022 , we completed the merger with Oasis Midstream, and as a result, we began reflecting the financial results ofOasis Midstream's Williston Basin operations in our gathering and processing north segment. For a further discussion of this merger, see Item 1. Financial Statements, Note 3. Our gathering and processing north segment's revenues increased by approximately$198.2 million and$325.7 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021, while our costs of product/services sold increased by approximately$130.3 million and$219.7 million during those same periods. During the three and six months endedJune 30, 2022 , we recognized revenues of approximately$92.0 million and$155.5 million and product costs of approximately$28.3 million and$47.6 million , respectively, related to ourOasis Midstream Williston Basin operations. The remaining increases in our gathering and processing north segment's revenues and costs of product/services sold were primarily driven by our Arrow operations which experienced higher average commodity prices on its agreements under which it purchases and sells crude oil and natural gas, partially offset by lower volumes due to unusual winter weather conditions experienced in April and earlyMay 2022 that unfavorably impacted our operations and our customers' operations during the three and six months endedJune 30, 2022 . During both the three and six months endedJune 30, 2022 , Arrow's realized prices on its commodity sales increased by more than 50% compared to the same periods in 2021. Arrow's natural gas gathering and processing volumes decreased by 16% and 13% during the three and six months endedJune 30, 2022 compared to the same periods in 2021, and its crude oil volumes decreased by 32% during both the three and six months endedJune 30, 2022 compared to the same periods in 2021. Our gathering and processing north segment's operations and maintenance expenses increased by approximately$18.5 million and$27.1 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021, primarily due to ourOasis Midstream Williston Basin operations. 44
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Gathering and Processing South
EBITDA for CMLP's gathering and processing south segment decreased by approximately$48.4 million and$36.9 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021. CMLP's gathering and processing south segment's EBITDA was impacted by losses on long-lived assets we recorded during the three months endedJune 30, 2022 related to our Barnett and legacy Granite Wash operations which are further described below. In addition, upon the completion of the merger with Oasis Midstream described above, we began reflecting the financial results ofOasis Midstream's Delaware Basin operations in our gathering and processing south segment. Our gathering and processing south segment's revenues increased by approximately$10.6 million and$16.7 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021. During the three and six months endedJune 30, 2022 , we recognized revenues of approximately$5.5 million and$8.8 million related to ourOasis Midstream Delaware Basin operations. The remaining increase in our gathering and processing south segment's revenues was primarily driven by the impact that higher commodity prices had on our gathering and processing contracts whose realized prices are partially based on commodity prices, and a 7% increase in our natural gas gathering volumes on our Barnett system during the six months endedJune 30, 2022 compared to the same period in 2021. During the six months endedJune 30, 2021 , gathering volumes on our Barnett system were lower due to the extreme winter weather conditions experienced during that period. Our gathering and processing south segment's operations and maintenance expenses increased by approximately$1.9 million and$2.3 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021, primarily due to ourOasis Midstream Delaware Basin operations. CMLP's gathering and processing south segment's EBITDA was impacted by a loss on long-lived assets of approximately$53.3 million during the three months endedJune 30, 2022 related to our assets in theBarnett Shale which were sold onJuly 1, 2022 . For a further discussion on the sale of our assets in theBarnett Shale , see Item 1. Financial Statements, Note 3. In addition, during the three months endedJune 30, 2022 , we recorded a loss on long-lived assets of approximately$7.0 million related to the sale of parts inventory related to our legacy Granite Wash operations. Our gathering and processing south segment's EBITDA was also impacted by an increase in equity earnings of approximately$3.8 million and$7.2 million from our Crestwood Permian equity investment during the three and six months endedJune 30, 2022 compared to the same periods in 2021. During the three and six months endedJune 30, 2022 , Crestwood Permian experienced an increase in its natural gas gathering and processing revenues primarily due to the impact that higher commodity prices had on its gathering and processing contracts, and higher gathering and processing volumes which increased by more than 100% compared to the same periods in 2021. EBITDA for CEQP's gathering and processing south segment increased by approximately$4.9 million and$16.4 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021. The change in CEQP's gathering and processing south segment's EBITDA period over period was due to all of the factors discussed above for CMLP. However, CEQP did not record a loss on long-lived assets related to the reclassification of Barnett's net assets to current assets held for sale due to historical impairments previously recorded on Barnett's property, plant and equipment by CEQP, which is further discussed in Item 1. Financial Statements, Note 3.
Storage and Logistics
EBITDA for our storage and logistics segment increased by approximately$53.2 million and$107.2 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021. Our storage and logistics segment's EBITDA for the three and six months endedJune 30, 2021 was impacted by a reduction to the equity earnings from ourStagecoach Gas equity method investment as a result of recording our proportionate share of a loss on long-lived assets (including goodwill) recorded by the equity method investee as further discussed below. Our storage and logistics segment's revenues increased by approximately$309.6 million and$727.1 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021, while our costs of product/services sold increased by approximately$285.2 million and$747.3 million during those same periods. Our NGL marketing and logistics operations experienced an increase in revenues of approximately$193.6 million and$483.2 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021, and an increase in its costs of product/services sold of approximately$173.1 million and$502.4 million during those same periods. These increases were primarily driven by higher NGL prices as a result of overall increases in commodity prices during 2022 compared to 2021. Our 45
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NGL marketing and logistics operations' costs of product/services sold was impacted by the effect that increasing commodity prices on our assets and liabilities from price risk management activities. Included in our costs of product/services sold was a loss of$3.7 million and$51.3 million during the three and six months endedJune 30, 2022 , and a loss of$33.3 million and$41.4 million during the three and six months endedJune 30, 2021 related to our price risk management activities. These losses resulted in our revenues increasing more than our costs of product/services sold during the three months endedJune 30, 2022 , while during the six months endedJune 30, 2022 , these losses resulted in our costs of product/services sold increasing more than our revenues. Our crude oil and natural gas marketing operations experienced an increase in revenues of approximately$118.5 million and$247.4 million during the three and six months endedJune 30, 2022 , compared to the same periods in 2021, and an increase in product costs of approximately$111.5 million and$244.7 million during those same periods. These increases were primarily driven by higher crude oil purchases and sales as a result of increases in commodity prices during 2022 compared to 2021, as well as an increase in marketing activity surrounding our natural gas-related operations driven by higher natural gas prices. Our storage and logistics segment's EBITDA was impacted by a loss on long-lived assets of approximately$4.1 million during the six months endedJune 30, 2022 primarily due to the buyout of leases related to our exiting the crude oil railcar leasing business. For a further discussion of this matter, see Item 1. Financial Statements, Note 10. Our storage and transportation segment's EBITDA was also impacted by a net increase in earnings from unconsolidated affiliates of approximately$29.3 million and$132.6 million during the three and six months endedJune 30, 2022 compared to the same periods in 2021. During the three and six months endedJune 30, 2021 , our results included a loss from unconsolidated affiliates of approximately$28.0 million and$140.3 million from ourStagecoach Gas equity investment that was sold in mid-2021. This loss primarily related to a$35.5 million and$155.4 million reduction to the equity earnings recorded during the three and six months endedJune 30, 2021 as a result of recording our proportionate share of a loss on long-lived assets (including goodwill) recorded by the equity method investee. In addition, our earnings from unconsolidated affiliates during the six months endedJune 30, 2021 were also reduced by our proportionate share of transaction costs of approximately$3.0 million related to the sale of theStagecoach Gas equity investment. For a further discussion of this matter, see Item 1. Financial Statements, Note 5. During the three months endedJune 30, 2022 , earnings from ourTres Holdings equity investment increased by$1.4 million compared to the same period in 2021, primarily due to its ability to capture additional storage and transportation opportunities as a result of higher natural gas prices during 2022 compared to 2021. During the six months endedJune 30, 2022 , earnings from ourTres Holdings equity investment decreased by$7.3 million compared to the same period in 2021. During the six months endedJune 30, 2021 ,Tres Holdings experienced higher revenues from natural gas inventory sales and an increase in demand for its storage and transportation services as a result of the unusually cold weather experienced during early 2021. Other EBITDA Results General and Administrative Expenses. During the three and six months endedJune 30, 2022 , our general and administrative expenses increased compared to the same periods in 2021, primarily due to transactions costs incurred in conjunction with the merger with Oasis Midstream. In addition, we also experienced higher unit-based compensation charges during the three and six months endedJune 30, 2022 compared to the same periods in 2021, primarily due to higher average awards outstanding under our long-term incentive plans.Crestwood Equity's increase in its general and administrative expenses was partially offset by transaction costs it recorded during 2021 in conjunction with the Crestwood Holdings Transactions discussed in Item 1. Financial Statements, Note 11.
Items not affecting EBITDA include the following:
Depreciation, Amortization and Accretion Expense. During the three and six
months ended
Interest and Debt Expense, Net. During the three and six months endedJune 30, 2022 , interest and debt expense related to our senior notes increased due to theApril 2029 Senior Notes assumed in conjunction with the merger with Oasis Midstream. 46
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The following table provides a summary of interest and debt expense (in millions): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Credit facility$ 5.3 $ 5.4 $ 8.7 $ 8.9 Senior notes 35.1 27.0 67.2 56.8 Other 0.4 2.7 1.3 5.6 Gross interest and debt expense 40.8 35.1 77.2 71.3 Less: capitalized interest 0.7 - 1.0 0.2 Interest and debt expense, net$ 40.1 $ 35.1 $ 76.2 $ 71.1 Loss on Extinguishment of Debt. During the three and six months endedJune 30, 2021 , we recognized a loss on extinguishment of debt of approximately$1.2 million and$6.7 million in conjunction with the redemption of our 2023 Senior Notes.
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 theCrestwood Midstream credit facility, and sales of equity and debt securities. Our equity investments use cash from their respective operations and contributions from us 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 quarterly cash 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. We also pay quarterly cash distributions of approximately$15 million to our preferred unitholders and quarterly cash distributions of approximately$10 million toCrestwood Niobrara LLC's non-controlling partner. OnJuly 14, 2022 , we declared a quarterly cash distribution of$0.655 per unit to our common unitholders with respect to the second quarter of 2022, which will be paid onAugust 12, 2022 . Our Board of Directors evaluates the level of distributions to our common and preferred unitholders every quarter and considers a wide range of strategic, commercial, operational and financial factors, including current and projected operating cash flows. We believe our operating cash flows will exceed cash distributions to our partners, preferred unitholders and non-controlling partner, and as a result, we will have adequate operating cash flows as a source of liquidity for our growth capital expenditures. InMarch 2021 ,Crestwood Equity's board of directors authorized a$175 million common unit and preferred unit repurchase program effective throughDecember 31, 2022 . Pursuant to the program, we may purchase common and preferred units from time to time in the open market in accordance with applicable securities laws at current market prices. The timing and amount of purchases under the program will be determined based on growth capital opportunities, financial performance and outlook, and other factors, including acquisition opportunities and market conditions. The unit repurchase program does not obligate us to purchase any specific dollar amount or number of units and may be suspended or discontinued at any time. As ofJune 30, 2022 , we had$812.2 million of available capacity under theCrestwood Midstream credit facility considering the most restrictive debt covenants in the credit agreement. Upon the closing of the merger with Oasis Midstream onFebruary 1, 2022 , theCrestwood Midstream credit facility was increased to$1.5 billion . As ofJune 30, 2022 , we were in compliance with all of our debt covenants applicable to the credit facility and senior notes. See Part I, Item 1. Financial Statements, Note 8 for a description of the covenants related to our credit facility. In conjunction with the acquisition of the First Reserve's 50% equity interest in Crestwood Permian, we assumed Crestwood Permian's credit facility, which provides for revolving loans, letters of credit and swing line loans in an aggregate principal amount of up to$230 million . In addition, the Crestwood Permian credit facility has an accordion feature that allows Crestwood Permian to increase the available borrowings under the facility by up to an additional$85 million , subject to certain conditions. As ofJuly 11, 2022 , outstanding borrowings under the Crestwood Permian credit facility were approximately$140.8 million . We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. 47
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Table of Contents Cash Flows The following table provides a summary ofCrestwood Equity's cash flows by category (in millions): Six Months Ended June 30, 2022 2021 Net cash provided by operating activities$ 252.0 $
293.5
Net cash provided by (used in) investing activities
$ (45.1) $ (292.8) Operating Activities Our operating cash flows decreased by approximately$41.5 million during the six months endedJune 30, 2022 compared to the same period in 2021. The decrease was primarily driven by lower net cash inflow from working capital of approximately$83.7 million primarily related to our storage and logistics operations which was impacted by higher commodity prices and its impact on its price risk management activities. In addition, we experienced higher general and administrative expenses of approximately$28.4 million primarily due to transaction costs related to the merger with Oasis Midstream. Partially offsetting these decreases was the contribution from the Oasis Midstream operations acquired onFebruary 1, 2022 .
Investing Activities
Acquisition. OnFebruary 1, 2022 , we completed the merger with Oasis Midstream, which was valued at approximately$1.8 billion . We paid cash consideration of$160 million , net of cash acquired of approximately$14.9 million and issued approximately 33.8 million units to Oasis Midstream's unitholders. See Item 1, Financial Statements, Note 3 for a further discussion of the merger.
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
•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. As a result of the series of strategic transactions completed inJuly 2022 , which include the acquisitions of Sendero and the remaining 50% equity interest in Crestwood Permian and the divestiture of our assets in theBarnett Shale , we currently estimate that our growth capital expenditures during 2022 will be approximately$220 million to$240 million . In addition, we expect to spend between approximately$30 million and$35 million on maintenance capital expenditures and approximately$5 million to$15 million on capital expenditures that are directly reimbursable by our customers. Our growth capital expenditures during the year will increase the services we can provide to our customers and the operating efficiencies of our systems. We expect to finance our capital expenditures with a combination of cash generated by our operating subsidiaries, distributions received from our equity investments and borrowings under our credit facility. Additional commitments or expenditures will be made at our discretion, and any discontinuation of these construction projects could result in less future operating cash flows and earnings.
The following table summarizes our capital expenditures for the six months ended
Growth capital(1)$ 66.8 Maintenance capital 8.8 Other(2) 2.6 Purchases of property, plant and equipment$ 78.2
(1)Includes
(2)Represents purchases of property, plant and equipment that are reimbursable by third parties.
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Investments in Unconsolidated Affiliates. During the six months endedJune 30, 2022 and 2021, we contributed approximately$6.5 million and$6.9 million to ourTres Holdings equity investment primarily for its operating purposes. During the six months endedJune 30, 2022 and 2021, we contributed approximately$8.5 million and$3.3 million to our Crestwood Permian equity investment primarily to fund its expansion projects.
Financing Activities
The following equity and debt transactions impacted our financing activities
during the six months ended
Equity and Debt Transactions
•During the six months endedJune 30, 2022 , distributions to our partners increased by approximately$39.4 million compared to the same period in 2021, primarily due to an increase in common units outstanding as a result of the units issued in conjunction with the merger with Oasis Midstream as well as an increase in our distribution per limited partner unit from$0.625 per unit to$0.655 per unit; •During the six months endedJune 30, 2022 , our taxes paid for unit-based compensation vesting increased by approximately$7.4 million compared to the same period in 2021, primarily due to higher vesting of unit-based compensation awards; •During the six months endedJune 30, 2022 , we borrowed amounts under our revolving credit facility to fund the$160.0 million of cash consideration paid to Oasis Petroleum in conjunction with the merger with Oasis Midstream and to repay approximately$218.4 million outstanding under the Oasis Midstream credit facility assumed in conjunction with the merger; •During the six months endedJune 30, 2021 , we paid approximately$690.5 million to repurchase and cancel approximately$687.2 million of our senior notes that were due in 2023;
•During the six months ended
•During the six months endedJune 30, 2022 , our other debt-related transactions resulted in net borrowings of$17.3 million compared to net borrowings of$127.2 million during the same period in 2021.
Guarantor Summarized Financial Information
Crestwood Midstream andCrestwood Midstream Finance Corp. are issuers of our debt securities (the Issuers).Crestwood Midstream is a holding company and owns no operating assets and has no significant operations independent of its subsidiaries.Crestwood Midstream Finance Corp. isCrestwood Midstream's 100% owned subsidiary and has no material assets or operations other than those related to its service as co-issuer of our senior notes. Obligations underCrestwood Midstream's senior notes and its credit facility are jointly and severally guaranteed by substantially all of its subsidiaries (collectively, the Guarantor Subsidiaries), except forCrestwood Infrastructure Holdings LLC ,Crestwood Niobrara LLC ,Crestwood Pipeline and Storage Northeast LLC ,Powder River Basin Industrial Complex LLC , andTres Palacios Holdings LLC and their respective subsidiaries (collectively, Non-Guarantor Subsidiaries). The assets and credit of our Non-Guarantor Subsidiaries are not available to satisfy the debts of the Issuers or Guarantor Subsidiaries, and the liabilities of our Non-Guarantor Subsidiaries do not constitute obligations of the Issuers or Guarantor Subsidiaries. For additional information regarding our credit facility and senior notes and related guarantees, see our 2021 Annual Report on Form 10-K and Item 1. Financial Statements, Note 8 of this Quarterly Report on Form 10-Q. The following tables provide summarized financial information for the Issuers and Guarantor Subsidiaries (collectively, theObligor Group ) on a combined basis after elimination of significant intercompany balances and transactions between entities in theObligor Group . The investment balances in the Non-Guarantor Subsidiaries have been excluded from the supplemental summarized combined financial information. Transactions with other related parties, including the Non-Guarantor Subsidiaries, represent affiliate transactions and are presented separately in the summarized combined financial information below. 49
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Summarized Combined Balance Sheet Information (in millions)
June 30, 2022 December 31, 2021 Current assets$ 835.2 $ 574.3 Current assets - affiliates $ 71.2 $ 8.4 Property, plant and equipment, net$ 3,058.5 $ 2,161.5 Non-current assets$ 1,121.7 $ 642.3 Current liabilities$ 602.8 $ 578.9 Current liabilities - affiliates $ 37.0 $
14.7
Long-term debt, less current portion
$ 139.5 $ 138.7
Summarized Combined Statement of Operations Information (in millions)
Six Months Ended June 30, 2022 Revenues $ 2,762.6 Revenues - affiliates $ 231.9 Cost of products/services sold $
2,371.8
Cost of products/services sold - affiliates $
181.6
Operations and maintenance expenses(1) $
78.3
General and administrative expenses(2) $ 66.7 Operating income $ 100.5 Net income $ 24.1 (1) We have operating agreements with certain of our affiliates pursuant to which we charge them operations and maintenance expenses in accordance with their respective agreements, and these charges are reflected as a reduction of operations and maintenance expenses in our consolidated statements of operations. During the six months endedJune 30, 2022 , we charged$14.8 million to our affiliates under these agreements.
(2) Includes
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