Crestwood Equity Partners LP (CEQP)

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Crestwood Equity Partners LP (CEQP)

Q4 2017 Earnings Conference Call

February 20, 2018 9:00 AM ET


Bob Phillips – Chairman, President and Chief Executive Officer

Robert Halpin – Senior Vice President and Chief Financial Officer

Heath Deneke – Senior Vice President and Chief Operating Officer

Elizabeth Suman – Senior Manager of Investor Relations and Corporate Communications


J.R. Weston – Raymond James

Andrew Burd – J.P. Morgan

Kyle May – Capital One Securities

Ned Baramov – Well Fargo



Good morning, and welcome to today’s conference call to discuss Crestwood Equity Partners' Fourth Quarter 2017 Financial and Operating results and 2018 growth outlook.

Before we begin the call, listeners are reminded that the Company may make certain forward-looking statements as defined in the Securities and Exchange Act of 1934 that are based on assumptions and information currently available at the time of today's call. Please refer to the Company's latest filings with the SEC for a list of risk factors that may cause actual results to differ.

Additionally, certain non-GAAP financial measures, such as EBITDA, adjusted EBITDA and distributable cash flow will be discussed. Reconciliations for those comparable GAAP measures are included in the news release issued this morning.

Joining us today with prepared remarks are Chairman, President and Chief Executive Officer, Bob Phillips; and Executive Vice President and Chief Financial Officer, Robert Halpin; and Executive Vice President and Chief Operating Officer, Heath Deneke.

Additional members of the senior management team will be available for the question-and-answer session with Crestwood's current analysts following the prepared remarks. Today's call is being recorded.

[Operator Instructions]

At this time, I will turn the call over to Bob Phillips.

Bob Phillips

Thanks, Kevin and good morning to all our investors and Thanks for joining us. 2017 was a very good year for Crestwood and we believe that 2018 will be an even better year as we build on the momentum that we have in the business and the strong fundamentals that surround many of the assets in our portfolio.

I want to talk about several themes early on, before I turn it over to Robert and Heath to go over the results as well as an update on the project. First is execution. I think at Crestwood, the 2017 theme was execution of our business plan. Across the board, I'm proud of our organization's performance and I want to thank our employees and our business partners for delivering great results for our investors.

We generated adjusted EBITDA of $395 million last year, achieving the upper range of our increased guidance, which was $380 million to $400 million. Our project management teams did a great job of bringing into service the Delaware Basin Nautilus gathering system and the Bakken Bear Den processing plant, both under budget as well as without any safety incidents.

During the year, our commercial and operating teams were recognized by several institutions throughout the industry, EnergyPoint, the North Dakota Petroleum Council and the EPA in various degrees as a best-in-class midstream operator. We were acknowledged and recognized for customer service, community and environmental responsibility and transportation safety.

But most importantly, Crestwood generated a 10% total return for our unitholders in 2017 versus a negative 6.5% return for our peer group on the Alerian. And we think that shows that our ability to execute in this market is beginning to be recognized by investors.

The second theme I want to talk about is unitholder alignment. While safety continues to be our top operating priority at Crestwood, generating value for our investors is absolutely our No 1, goal. Crestwood is proud of our alignment of interest with our unitholders. As you'll recall, we completed simplification several years ago. We have no incentive distribution rights and a very clean corporate structure.

Our management team, Board of Directors and First Reserve, our general partner, collectively own about 30% of the common LP units and First Reserve, has been and continues to be a very committed general partner. As a JV partner, as you know, First Reserve has committed approximately $500 million of new capital to support the growth of our Delaware Permian business and I think that further highlights the strong long-term commitment that First Reserve has to Crestwood.

The next theme for 2017 and 2018 is financial discipline. As you know, we communicated to you in 2017 and will continue, going forward, to communicate how important financial discipline and financial strength are. These are the core principles as we manage our business.

Today, Crestwood offers investors a very attractive balance sheet with growth potential. We're committed to long-term leverage ratio of 4.0 time or below and a strong distribution coverage of 1.2 times or above. These metrics are our guidelines as we manage our very conservative capital structure and make important investment decisions about how to grow our business going forward.

The third theme is self-funded growth. I know that's been somewhat of a catchphrase throughout the industry, but at Crestwood, it really is important and it really is true. Our backlog of high-quality organic growth opportunities in the Bakken, the Delaware Permian, the Powder River Basin and over the long term, in the Northeast Marcellus has never been stronger. We currently estimate that our current committed growth projects will generate well over $120 million of incremental EBITDA by 2021.

Cash flow generated from these growth projects will more than offset the modest declines that we are currently seeing and expect from our legacy natural gas assets in the Southwest Marcellus, the Barnett and the Fayetteville.

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