Crestwood Announces Third Quarter 2016 Financial and Operating Results; On-Track to Achieve 2016 Guidance; Delaware Basin Expansion Projects Underway

Crestwood Equity Partners LP (NYSE:CEQP) (“Crestwood”) reported today
its financial and operating results for the three months ended September
30, 2016.

Third Quarter 2016 Highlights¹

• Third quarter 2016 net income of $3.0 million, compared to a net loss
  of $623.4 million in the third quarter 2015²
• Third quarter 2016 Adjusted EBITDA of $103.5 million, compared to
  $133.5 million in the third quarter 2015
• Third quarter 2016 distributable cash flow of $74.7 million, compared
  to $91.6 million in the third quarter 2015, providing a third quarter
  2016 coverage ratio of approximately 1.8x, or 1.5x including the
  impact of preferred units
• Declared third quarter 2016 cash distribution of $0.60 per common
  unit, or $2.40 per common unit on an annualized basis, to be paid on
  November 14, 2016 to unitholders of record as of November 7, 2016
• On-track to achieve 2016 Adjusted EBITDA guidance range of $435
  million to $465 million

Recent Announcements

• Signed 20-year natural gas gathering and compression agreement with
  SWEPI LP (“SWEPI or Shell”), a subsidiary of Royal Dutch Shell plc, to
  construct, own and operate the Nautilus System in Loving and Ward
  counties, Texas in the Delaware Permian Basin; Targeted in-service
  date on or before July 1, 2017
• Extended exclusivity and reimbursement agreement, through December 31,
  2016, with an anchor shipper to develop the previously announced
  3-product gathering system (the RIGS System) in Reeves County, Texas
  in the Delaware Permian Basin; Crestwood anticipates formal project
  approvals and execution of definitive agreements in the first half of
  2017
• Formed Delaware Basin joint venture with First Reserve to own and
  finance the Nautilus System and pursue additional infrastructure
  opportunities in the region; each party initially committing $250
  million to the joint venture
• Entered into a binding letter of intent with Chesapeake Energy
  Corporation (“Chesapeake”) to restructure and expand the dedication of
  the Powder River Basin (PRB) gathering and processing agreement to a
  20-year, fixed-fee contract with minimum annual revenue guarantees
  over the next five to seven years; new contract improves producer
  economics to incentivize near term ramp-up in drilling activity;
  Chesapeake characterizes PRB acreage as “emerging oil growth giant” at
  recent investor day and stated plans to add 1-2 rigs in 2017

Management Commentary

“During the third quarter, Crestwood generated strong Adjusted EBITDA
and distributable cash flow, resulting in a coverage ratio of 1.8x and a
leverage ratio of 4.0x, and further demonstrating our commitment to
optimization of our assets and continued financial discipline,” stated
Robert G. Phillips, Chairman, President and Chief Executive Officer of
Crestwood’s general partner. “Additionally, our Delaware Permian growth
strategy is beginning to pay off as our Willow Lake facilities had a
record quarter in the northern Delaware, we announced another high
quality gathering and compression project with Shell affiliate SWEPI and
we extended our exclusivity and reimbursement agreement with the anchor
party to our proposed RIGS gathering system adjacent to the SWEPI
system. These projects are examples of accretive greenfield
opportunities within our portfolio that will generate quality long-term
cash flow growth. Importantly, finalizing the Delaware joint venture
with First Reserve, our general partner, solidifies our ability to
flexibly finance these projects and maintain our strong balance sheet.”

Mr. Phillips continued, “Crestwood is well-positioned to achieve our
2016 Adjusted EBITDA guidance range of $435 million to $465 million, as
our G&P segment has significantly outperformed year-to-date expectations
offsetting the decrease in S&T contribution, due to the formation of the
Stagecoach Gas Service joint venture (“Stagecoach”) with Con Edison in
the second quarter, and lower MS&L performance due to seasonal factors.
Other positive 2016 year-to-date accomplishments include: an 11%
decrease in expenses and improved customer creditworthiness across the
portfolio. For 2017, we are committed to maintaining significant
coverage on our distributions and a strong balance sheet as we execute
on announced projects and finalize others in the growing opportunity set
around our operating footprints in the Delaware Permian, Bakken and
Marcellus regions.”

Third Quarter 2016 Segment Results

Gathering and Processing (“G&P”) segment EBITDA totaled $66.1 million in
the third quarter 2016 compared to $64.8 million in the third quarter
2015, excluding 2015 goodwill impairments and losses on long-lived
assets. During the third quarter 2016, average natural gas gathering
volumes were 926 million cubic feet per day (“MMcf/d”), crude oil
gathering volumes were 55 thousand barrels per day (“MBbls/d”),
processing volumes were 231 MMcf/d and compression volumes were 472
MMcf/d. Improved year-over-year third quarter operating performance from
the Arrow, Barnett, Delaware Basin and PRB Niobrara systems offset
natural volume declines and curtailments in the Southwest Marcellus and
Fayetteville systems.

Storage and Transportation (“S&T”) segment EBITDA totaled
$25.1 million in the third quarter 2016 compared to $49.9 million in the
third quarter 2015, excluding 2015 goodwill impairments and losses on
long-lived assets. Segment EBITDA reflects the first full quarter of
Crestwood’s share of Stagecoach JV earnings. During the third quarter
2016, natural gas storage and transportation volumes averaged 1.8 Bcf/d,
compared to 1.9 Bcf/d in the third quarter 2015, and 1.5 Bcf/d in the
second quarter 2016. Third quarter 2016 volumes increased 19%
sequentially from the second quarter 2016 as a result of Marcellus
producers completing new wells and returning existing wells to full
production in response to improved natural gas pricing. Additionally,
volumes at Tres Palacios increased as a result of higher customer
utilization driven by increased Gulf Coast and Mexico gas demand.

Marketing, Supply and Logistics (“MS&L”) segment EBITDA totaled $17.5
million in the third quarter 2016 compared to $28.4 million in the third
quarter 2015. Both periods are exclusive of goodwill impairments, losses
on long-lived assets, and non-cash fair value adjustments on commodity
inventory-based derivative contracts, and the third quarter 2015 also
excludes non-cash goodwill impairments noted below. Third quarter 2016
segment EBITDA was lower due to reduced marketing, storage and terminals
and trucking contributions, largely as a result of lower seasonal NGL
demand in the Northeast, compared to a relatively strong third quarter
2015 which exceeded expectations and was above the baseline plan.
Offsetting those results within the MS&L segment, US Salt has delivered
record year-to-date 2016 EBITDA performance based on higher production
volumes and improved pricing as compared to 2015 results which included
a one-time contract settlement.

Combined O&M and G&A expenses year-to-date 2016, net of unit based
compensation and other significant costs, decreased by $21 million, or
11%, compared to the same period in 2015. These expense reductions have
been achieved across all of Crestwood’s assets through lower employee
costs, improved maintenance practices and better pricing through
strategic purchasing and professional service agreements. Crestwood will
significantly exceed its targeted $10 million year-over-year costs
reductions in 2016 and will continue to maintain low cost operations to
drive greater profitability.

Net growth and maintenance capital expenditures were $64.3 million
year-to-date 2016, compared to $85.3 million during the same period in
2015, or a 25% decrease year-over-year, driven by Crestwood’s continued
efforts to control capital spend in 2016.

Business Update and Outlook

Delaware Basin Update

During the third quarter 2016, the Willow Lake system averaged gathering
volumes of 49 MMcf/d and processing volumes of 44 MMcf/d compared to
average gathering volumes of 19 MMcf/d and processing volumes of 10
MMcf/d in the third quarter 2015. Willow Lake in the third quarter 2016
generated EBITDA of $3.6 million compared to $0.4 million in the third
quarter 2015. Additional well connects, reduced gathering system
pressures and stronger well performance in the Wolfcamp and Bone Spring
formations continue to drive volume growth at Willow Lake. Based on
recent well results by offset operators, which have reported 24-hour
initial production rates as high as 2,400 barrels of oil equivalent per
day (approximately 10 MMcf/d of associated gas), we are evaluating
additional expansion options to provide customers incremental processing
capacity.

Crestwood entered into a long-term agreement with SWEPI to construct,
own and operate the Nautilus natural gas gathering system on
approximately 100,000 acres of Shell’s position in the Delaware Basin.
The system, located in Loving and Ward counties, Texas, will be owned by
a 50%/50% joint venture with First Reserve, Crestwood’s indirect general
partner and largest unitholder. Crestwood estimates the full build-out
of the Nautilus gathering system will cost approximately $180 million
and consist of approximately 230 miles of low and high pressure
pipelines. Crestwood is currently finalizing right-of-ways, engineering
and surveys, and the procurement process for construction. The initial
in-service date for the Nautilus system is expected by July 1, 2017.

Also during the quarter, Crestwood extended its exclusivity and
reimbursement agreement through December 31, 2016 with an anchor shipper
to develop the RIGS system located in Reeves County, Texas in the
Delaware Basin. The RIGS system, located adjacent to the Nautilus
system, will be included in the joint venture with First Reserve. The
system will consist of approximately 600 miles of pipelines and will
span an area in excess of 400,000 acres. Based on current discussions,
Crestwood anticipates formal project approvals and execution of
definitive agreements in the first half of 2017.

Bakken - Arrow Gathering System

On the Arrow system, average crude oil, natural gas and produced water
volumes decreased 6%, 4% and 3%, respectively, in the third quarter 2016
compared to volumes in the second quarter 2016. The slight decline was
primarily related to shut-in volumes from Halcon Resources Corporation
(“Halcon”) as it worked through its corporate restructuring. Halcon
completed its restructuring in September 2016 and in early October
returned all shut-in wells to full production. As a result, volumes on
the Arrow system have returned to normal rates and are currently flowing
approximately 70 MBbls/d of crude oil, 50 MMcf/d of natural gas, and 30
MBbls/d of water. During the third quarter, 5 wells were connected to
Arrow with 25 well connections anticipated in the fourth quarter 2016.

PRB Niobrara – Jackalope Joint Venture

Crestwood and Williams Partners L.P. (50%/50% Jackalope joint venture)
announced a restructured agreement with Chesapeake relating to the
Jackalope natural gas gathering system and Buckinghorse processing
plant. The new 20-year contract replaces the existing cost-of-service
agreement with a fixed-fee structure that includes minimum annual
revenue guarantees over the next five to seven years. The new deal
significantly expands the Jackalope dedication to include all zones in
this multi-stacked play and improves Chesapeake’s economics to support a
ramp-up in near term development and production. During its recent
investor day presentation, Chesapeake highlighted substantial resource
potential within its 730,000 equivalent stacked pay acreage position in
the Powder River Basin with sub-$40 per barrel breakeven prices, and the
potential to grow production to more than 100,000 boe/d over the next
five to seven years.

Stagecoach Gas Services – Con Edison Joint Venture

Crestwood and Con Edison Transmission (50%/50% Stagecoach joint venture)
continue to pursue a number of expansion opportunities as the
partnership remains encouraged by the favorable long-term outlook for
natural gas growth and the continued need for midstream infrastructure,
such as the MARC II project, to service key demand markets around the
Stagecoach assets. Additionally, recent industry reports predict higher
heating degree days and a significant weather pattern shift to more
normalized winter conditions during the fourth quarter 2016 relative to
the mild winter experienced in the fourth quarter 2015. As a result,
Crestwood expects increased demand to drive higher quarter-over-quarter
utilization of storage, transportation and hub services during the
fourth quarter 2016.

Barnett Shale Gathering Systems

In the Barnett, gathering volumes increased 4% from the second quarter
2016 as a result of BlueStone Natural Resources returning all previously
shut-in wells to production and continued improvement in production
operations. Additionally, in the third quarter 2016, Crestwood benefited
from higher gathering fees due to recent improvements in natural gas
prices resulting in a 34% increase in quarter-over-quarter Barnett
EBITDA.

NGL Marketing & Logistics

Crestwood expects fourth quarter 2016 segment EBITDA to increase versus
fourth quarter 2015 as business fundamentals and weather conditions in
the Northeast begin to improve. Crestwood is well-positioned for the
upcoming demand season and expects to realize additional margin
opportunities from recent growth projects, including a new terminal at
Montgomery, NY, increased storage capacity of 150 MBbls at Bath and new
marketing agreements during the fourth quarter 2016 and the full year of
2017.

Capitalization and Liquidity Update

As of September 30, 2016, Crestwood had approximately $1.6 billion of
debt outstanding, comprised primarily of $1.5 billion of fixed-rate
senior notes and $133 million outstanding under its $1.5 billion
revolving credit facility. Crestwood’s leverage ratio was 4.0x compared
to the leverage covenant under its revolving credit facility of 5.5x.

Crestwood currently has 65.0 million preferred units outstanding which
pay an annual distribution of 9.25% payable quarterly in cash or through
the issuance of additional preferred units. On November 14, 2016,
holders of the preferred units will receive 1.5 million additional
preferred units related to the third quarter 2016 distribution declared.

Upcoming Conference Participation

Crestwood Management will participate in the following MLP and energy
conferences during the fourth quarter 2016. Prior to the each conference
presentation materials will be posted to the Investors section of
Crestwood’s website at www.crestwoodlp.com.

• RBC Capital Markets 2016 MLP Conference on November 16 – 17, 2016 in
  Dallas, TX.
• Jefferies 2016 Energy Conference on November 29 – 30, 2016 in Houston,
  TX. Robert G. Phillips, Chairman, President and Chief Executive
  Officer, will make a formal presentation at approximately 9:30 a.m.
  Central Time on Wednesday, November 30, 2016.
• 15th Annual Wells Fargo Pipeline, MLP and Utility Symposium on
  December 6 – 7, 2016 in New York, NY.

Earnings Conference Call Schedule

Management will host a conference call for investors and analysts of
Crestwood today at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) which
will be broadcast live over the Internet. Investors will be able to
connect to the webcast via the “Investors” page of Crestwood’s website
at www.crestwoodlp.com.
Please log in at least 10 minutes in advance to register and download
any necessary software. A replay will be available shortly after the
call for 90 days.

2015 Goodwill and Long-Lived Asset Charges

Generally Accepted Accounting Principles (“GAAP”) required Crestwood to
record the assets and goodwill in its storage and transportation segment
and marketing, supply and logistics segment at fair value when the
assets were acquired in 2013, and further require subsequent analysis to
assess the recoverability of assigned values, including goodwill. During
the third quarter 2015, as a result of this analysis, Crestwood recorded
goodwill impairments of $609.9 million, primarily related to its COLT
Hub and trucking assets. These impairments primarily resulted from
increasing the discount rate utilized in determining the fair value of
these assets when taking into consideration continued commodity price
weakness and its impact on the midstream industry and Crestwood’s
customers in these areas during 2015.

Non-GAAP Financial Measures

Adjusted EBITDA and adjusted distributable cash flow are non-GAAP
financial measures. The accompanying schedules of this news release
provide reconciliations of these non-GAAP financial measures to their
most directly comparable financial measures calculated and presented in
accordance with GAAP. Our non-GAAP financial measures should not be
considered as alternatives to GAAP measures such as net income or
operating income or any other GAAP measure of liquidity or financial
performance.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 and Section
21E of the Securities and Exchange Act of 1934. The words “expects,”
“believes,” anticipates,” “plans,” “will,” “shall,” “estimates,” and
similar expressions identify forward-looking statements, which are
generally not historical in nature. Forward-looking statements are
subject to risks and uncertainties and are based on the beliefs and
assumptions of management, based on information currently available to
them. Although Crestwood believes that these forward-looking statements
are based on reasonable assumptions, it can give no assurance that any
such forward-looking statements will materialize. Important factors that
could cause actual results to differ materially from those expressed in
or implied from these forward-looking statements include the risks and
uncertainties described in Crestwood’s reports filed with the Securities
and Exchange Commission, including its Annual Report on Form 10-K and
its subsequent reports, which are available through the SEC’s EDGAR
system at www.sec.gov
and on our website. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management’s view only as of
the date made, and Crestwood assumes no obligation to update these
forward-looking statements.

About Crestwood Equity Partners LP

Houston, Texas, based Crestwood Equity Partners LP (NYSE:CEQP) is a
master limited partnership that owns and operates midstream businesses
in multiple unconventional shale resource plays across the United
States. Crestwood Equity is engaged in the gathering, processing,
treating, compression, storage and transportation of natural gas;
storage, transportation, terminalling, and marketing of NGLs; and
gathering, storage, terminalling and marketing of crude oil.

¹ Please see non-GAAP reconciliation table included at the
end of the press release. Financial results reflect Crestwood’s
contribution of its Northeast Storage and Transportation assets to
Stagecoach Gas Services JV (“Stagecoach”) and its 35% share of
Stagecoach’s earnings beginning June 2016.

² Net loss for the third quarter 2015 includes $609.9 million
of non-cash goodwill impairment charges resulting from the decline in
Crestwood’s unit price, weakness in commodity prices and increased
discount rates used to determine the fair value of its assets during
that period.

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