SOURCE: Crestwood Midstream Partners LP

Crestwood Midstream Partners LP

April 01, 2011 17:27 ET

Crestwood Midstream Partners LP Completes Acquisition of Gathering, Processing and Treating Assets in the Fayetteville Shale and Granite Wash

HOUSTON, TX--(Marketwire - April 1, 2011) - Crestwood Midstream Partners LP (NYSE: CMLP) ("Crestwood LP" or the "Partnership") announced today it has completed the previously announced acquisition of midstream assets in the Fayetteville Shale and the Granite Wash plays from Tulsa, Oklahoma based Frontier Gas Services, LLC ("Frontier" or the "Frontier acquisition") for approximately $338 million cash paid at closing.

The acquired assets in the Fayetteville Shale, located in Northwest Arkansas, consist of approximately 127 miles of gathering pipelines with a capacity of approximately 510 million cubic feet per day ("MMcf/d"), treating capacity of approximately 165 MMcf/d and approximately 35,000 hp of compression serving dedicated acreage and natural gas production currently under contracts with BHP Billiton Petroleum, BP America and ExxonMobil's XTO subsidiary. The Granite Wash assets, located in the Texas Panhandle, include a 28 mile natural gas and natural gas liquids pipeline system and a 36 MMcf/d cryogenic processing plant serving dedicated acreage and natural gas production currently under contracts with Chesapeake Energy and Linn Energy. Crestwood LP plans to install a second processing plant with approximately 60 MMcf/d of additional capacity with plans to be in service by the end of 2011 to support expected growth in volumes from the emerging Granite Wash play. 

"We are pleased to complete this important acquisition of high quality, midstream assets which are located in two of the nation's premier natural gas and natural gas liquids shale plays. This deal, coming on the heels of our October 2010 acquisition of Barnett Shale midstream assets in North Texas, is evidence of our long term strategy to expand Crestwood LP's geographic and operating footprint and diversify the Partnership's customer portfolio to include some of the leading producers in the shale or unconventional resource development business," said Robert G. Phillips, President and Chief Executive Officer of Crestwood LP's general partner.

"The Fayetteville Shale, like the Barnett Shale, is considered to be a 'world-class' natural gas resource play and the Granite Wash is a fast-emerging shale play driven by significant natural gas liquids production. Both of these new areas should provide Crestwood with solid near-term growth and numerous organic expansion opportunities in the future due to long-term acreage dedications associated with the producer contracts under the Frontier acquisition. Importantly, the Frontier assets fit well with our existing asset base and will be quickly integrated into Crestwood LP's Barnett Shale operations during the second quarter of 2011," Phillips added. 

The acquisition was financed in part with $153 million in net proceeds received from the Partnership's previously announced private placement of approximately 6.2 million units of new Class C limited partner interests, at a per unit price of $24.50. The Class C units are substantially similar to Crestwood LP's existing common units, representing limited partner interests, except that Crestwood LP may elect to pay distributions in respect of the Class C units through the issuance of additional Class C units rather than cash. The Class C units will convert into common units on a one-for-one basis on the second anniversary of the closing date of the Frontier acquisition. In addition, Crestwood LP closed its previously announced private placement of $200 million aggregate principal amount of 7.75 percent Senior Notes due 2019 (the "Senior Notes"). Crestwood LP received aggregate net proceeds from the sale of the Senior Notes of approximately $193 million, after deducting the initial purchaser's commissions and estimated expenses.

"The proceeds received from the issuance of the Class C units and Senior Notes allowed us to substantially fund the Frontier acquisition with new sources of capital while maintaining our conservative capital structure and ample liquidity for future growth in the Partnership's business. In contemplation of increased capital project opportunities in 2011-12, due largely to the Frontier acquisition, we have received commitments from lenders in Crestwood LP's existing revolving credit facility to increase the maximum borrowing capacity to $500 million from the current $400 million. As we stated when we announced this deal, we believe the Frontier acquisition will be immediately accretive to our existing unit holders. After a short period of integration of the new assets and operations, we plan to provide updated guidance to the market regarding our 2011 performance expectations," Phillips stated. 

The Class C units were sold to accredited investors in a private placement in accordance with Section 4(2) under the Securities Act of 1933, as amended (the "Securities Act"). The Notes were sold to qualified institutional buyers in reliance on the exemption from registration set forth in Rule 144A under the Securities Act, and outside the United States to non-U.S. persons in reliance on the exemption from registration set forth in Regulation S under the Securities Act. Neither the Class C units, the Senior Notes nor the subsidiaries guarantee have been registered under the Securities Act or any state securities laws and unless so registered may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

About Crestwood Midstream Partners LP

Houston, Texas-based Crestwood LP is a growth-oriented, midstream master limited partnership which owns and operates predominately fee-based gathering, processing, treating and compression assets servicing natural gas producers in the Barnett Shale in North Texas, the Fayetteville Shale in Northwest Arkansas, the Granite Wash area in the Texas Panhandle and the Avalon Shale area of Southeastern New Mexico. For more information about Crestwood LP, visit www.crestwoodlp.com.

Forward-Looking Statements

The statements in this news release regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements. Although these statements reflect the current views, assumptions and expectations of Crestwood LP's management, the matters addressed herein are subject to numerous risks and uncertainties which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction involving Crestwood Holdings and Crestwood LP, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts. Factors that could result in such differences or otherwise materially affect Crestwood LP's financial condition, results of operations and cash flows include: changes in general economic conditions; fluctuations in natural gas prices; failure or delays by our customers in achieving expected production from natural gas projects; competitive conditions in our industry; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions and successfully integrate the acquired business and our ability to realize any cost savings and other synergies from any acquisition, including the one described in this press release; any disruption from the Frontier acquisition making it more difficult to maintain relationships with customers, employees or suppliers; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; construction costs or capital expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; and the effects of existing and future litigation; risks related to our substantial indebtedness as well as other factors disclosed in Crestwood LP's filings with the Securities and Exchange Commission. You should read our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2010 and our subsequently filed Quarterly Reports on Form 10-Q, for a more extensive list of factors that could affect results. 

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