Crestwood Equity Partners LP

Crestwood reported second-quarter 2023 adjusted EBITDA of $176 million, down 2% year over year, and distributable cash flow of $86 million. Q2 segment EBITDA included $137 million in gathering and processing north, down 10% year over year; $35 million in gathering and processing sales, up 42%; and $30 million in storage and logistics, up 185%. The quarter also included an approximately $8 million EBITDA hit from percentage-of-proceeds exposure, a $5 million non-cash inventory mark-to-market loss in NGL logistics, and about $6 million of lower-than-budget EBITDA in G&P North from Arrow downtime. Crestwood reaffirmed full-year 2023 adjusted EBITDA guidance of $780 million to $860 million, though management expects results in the lower half of the range; growth capital is expected to be $135 million to $155 million for 2023, and the company ended Q2 with $3.3 billion of total debt, $417 million drawn on its revolver, leverage of about 4.25x, and more than $950 million of available borrowing capacity.

Bob Phillips said the quarter was pressured by unusually weak commodity prices and temporary production shut-ins at Arrow, but emphasized that underlying producer activity remained strong across the portfolio. He pointed to 73 new well connects in the quarter, type-curve outperformance in the Bakken and Permian, and record Delaware processing volumes as signs that the asset base is gaining traction. His tone was cautious on Q2 results but confident on the second half of 2023 and especially 2024, citing strong rig activity, dedicated acreage turnover in the Delaware, and expanding infrastructure in the Williston.

Johnny Black said Q2 adjusted EBITDA of $176 million was down 2% year over year, with performance hurt by lower commodity prices, non-cash NGL inventory marks, and reduced Arrow volumes. He noted $86 million of distributable cash flow, a $0.655 quarterly distribution, and coverage of about 1.3x. On the balance sheet, he cited $3.3 billion of total debt, leverage of approximately 4.25x, and over $950 million of borrowing capacity, while saying leverage should fall through year-end as EBITDA improves, working capital unwinds, and free cash flow is used for debt paydown. He also said 2024 growth capex could fall to roughly $100 million-$110 million from a 2023 midpoint of about $145 million, and discussed the $435 million Niobrara preferred, including the option to redeem about $255 million in January 2024 while rolling $180 million for two more years at 11%.

Analysts focused on Arrow downtime, asking whether frac protection and maintenance issues would ease in the second half; management said the second quarter was unusually affected by producer shut-ins but expects volumes to recover and noted customers may accelerate drilling to catch up. Questions also centered on capital allocation, leverage, and the Niobrara preferred: management said it wants to get leverage back near 3.5x before considering broader unitholder returns, and highlighted the amended preferred as a way to partially redeem $255 million in early 2024 while preserving flexibility. On the Delaware, management said the 10-well shift into 2024 was mainly due to M&A-related asset integration at Novo/Earthstone and Percussion/Callon rather than a structural issue with the basin.