NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 – Organization and Business Description
The accompanying notes to the consolidated financial statements apply to Crestwood Equity Partners LP (Crestwood Equity or CEQP) and Crestwood Midstream Partners LP (Crestwood Midstream or CMLP) unless otherwise indicated.
The accompanying consolidated financial statements and related notes should be read in conjunction with our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 27, 2023. The financial information as of March 31, 2023 and for the three months ended March 31, 2023 and 2022, is unaudited. The consolidated balance sheets as of December 31, 2022 were derived from the audited balance sheets filed in our 2022 Annual Report on Form 10-K.
Unless otherwise indicated, references in this report to “we,” “us,” “our,” “ours,” “our company,” the “Partnership,” the “Company,” “Crestwood Equity,” “CEQP,” and similar terms refer to either Crestwood Equity Partners LP itself or Crestwood Equity Partners LP and its consolidated subsidiaries, as the context requires. Unless otherwise indicated, references to “Crestwood Midstream” and “CMLP” refer to Crestwood Midstream Partners LP and its consolidated subsidiaries, as the context requires.
Organization
Crestwood Equity Partners LP. CEQP is a publicly-traded (NYSE: CEQP) Delaware limited partnership formed in March 2001. Crestwood Equity GP LLC, our wholly-owned subsidiary, owns our non-economic general partnership interest.
Crestwood Midstream Partners LP. Crestwood Equity owns a 99.9% limited partnership interest in Crestwood Midstream and Crestwood Gas Services GP LLC, a wholly-owned subsidiary of Crestwood Equity, owns a 0.1% limited partnership interest in Crestwood Midstream. Crestwood Midstream GP LLC, a wholly-owned subsidiary of Crestwood Equity, owns the non-economic general partnership interest of Crestwood Midstream.
Business Description
Crestwood Equity develops, acquires, owns or controls, and operates primarily fee-based assets and operations within the energy midstream sector. We provide broad-ranging infrastructure solutions across the value chain to service premier liquids-rich natural gas and crude oil shale plays across North America. We own and operate a diversified portfolio of natural gas liquids (NGLs), crude oil, natural gas and produced water gathering, processing, storage, disposal and transportation assets that connect fundamental energy supply with energy demand across the United States. Crestwood Equity is a holding company and all of its consolidated operating assets are owned by or through its wholly-owned subsidiary, Crestwood Midstream.
See Note 13 for information regarding our operating and reporting segments.
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States (U.S. GAAP) and include the accounts of all consolidated subsidiaries after the elimination of all intercompany accounts and transactions. In management’s opinion, all necessary adjustments to fairly present our results of operations, financial position and cash flows for the periods presented have been made and all such adjustments are of a normal and recurring nature. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
Significant Accounting Policies
There were no material changes in our significant accounting policies from those described in our 2022 Annual Report on Form 10-K.
Note 3 – Acquisition
On February 1, 2022, we completed the merger with Oasis Midstream Partners LP (Oasis Midstream), in an equity and cash transaction which was valued at approximately $1.8 billion (the Oasis Merger). Pursuant to the merger agreement, Oasis Petroleum Inc., now known as Chord Energy Corporation (Chord), received $150 million in cash plus approximately 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 approximately 12.9 million newly issued CEQP common units in exchange for the approximately 14.8 million Oasis Midstream common units held by them. Additionally, under the merger agreement, Chord received a $10 million cash payment in exchange for its ownership of the general partner of Oasis Midstream.
Note 4 – Certain Balance Sheet Information
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in millions):
| | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | 2023 | | 2022 |
| CMLP | | | | |
| Accrued expenses | | $ | 49.2 | | | $ | 66.5 | |
| Accrued property taxes | | 6.0 | | | 8.4 | |
| Income tax payable | | 1.0 | | | 0.9 | |
| Interest payable | | 65.6 | | | 43.2 | |
| Accrued additions to property, plant and equipment | | 18.9 | | | 35.6 | |
| Operating leases | | 10.5 | | | 10.9 | |
| Finance leases | | 1.7 | | | 1.9 | |
| Contract liabilities | | 13.8 | | | 11.7 | |
| Asset retirement obligations | | 0.3 | | | 0.4 | |
| Total CMLP accrued expenses and other liabilities | | $ | 167.0 | | | $ | 179.5 | |
| CEQP | | | | |
| Accrued expenses | | 0.9 | | | 1.2 | |
| Income tax payable | | — | | | 0.1 | |
| Total CEQP accrued expenses and other liabilities | | $ | 167.9 | | | $ | 180.8 | |
Other Long-Term Liabilities
Other long-term liabilities consisted of the following (in millions):
| | | | | | | | | | | |
| March 31, | | December 31, |
| 2023 | | 2022 |
| CMLP | | | |
| Contract liabilities | $ | 205.9 | | | $ | 212.3 | |
| Intangible liabilities, net | 48.5 | | | 50.0 | |
| Asset retirement obligations | 37.3 | | | 36.4 | |
| Operating leases | 17.5 | | | 17.4 | |
| Other | 14.3 | | | 14.2 | |
| Total CMLP other long-term liabilities | $ | 323.5 | | | $ | 330.3 | |
| CEQP | | | |
| Other | 1.5 | | | 3.1 | |
| Total CEQP other long-term liabilities | $ | 325.0 | | | $ | 333.4 | |
Note 5 - Investments in Unconsolidated Affiliates
Net Investments and Earnings (Loss) of Unconsolidated Affiliates
Our net investments in and earnings (loss) from our unconsolidated affiliates are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Investment | | | | Earnings (Loss) from
Unconsolidated Affiliates |
| | | | | | | | | Three Months Ended |
| | | March 31, | | December 31, | | | | March 31, |
| | | 2023 | | 2022 | | | | | | 2023 | | 2022 |
Crestwood Permian Basin LLC(1) | | | $ | 74.8 | | | $ | 76.5 | | | | | | | $ | 0.3 | | | $ | — | |
Tres Palacios Holdings LLC(2) | | | 46.5 | | | 39.8 | | | | | | | 1.6 | | | 0.6 | |
Powder River Basin Industrial Complex, LLC(3) | | | 3.0 | | | 3.2 | | | | | | | (0.2) | | | (0.2) | |
Crestwood Permian Basin Holdings LLC(4) | | | — | | | — | | | | | | | — | | | 2.6 | |
| Total | | | $ | 124.3 | | | $ | 119.5 | | | | | | | $ | 1.7 | | | $ | 3.0 | |
(1)In July 2022, we acquired the remaining 50% equity interest in Crestwood Permian Basin Holdings LLC (Crestwood Permian), whose operations included its 50% equity interest in Crestwood Permian Basin LLC (Crestwood Permian Basin). As of March 31, 2023, our equity in the underlying net assets of Crestwood Permian Basin was less than the carrying value of our investment balance by approximately $2.3 million. During the three months ended March 31, 2023, we recorded amortization of less than $0.1 million related to this basis difference, which is reflected as a decrease in our earnings from unconsolidated affiliates in our consolidated statement of operations. Our Crestwood Permian Basin investment is included in our gathering and processing south segment.
(2)As of March 31, 2023, our equity in the underlying net assets of Tres Palacios Holdings LLC (Tres Holdings) exceeded the carrying value of our investment balance by approximately $19.9 million. During both the three months ended March 31, 2023 and 2022, we recorded amortization of approximately $0.3 million related to this excess basis, which is reflected as an increase in our earnings from unconsolidated affiliates in our consolidated statements of operations. Our Tres Holdings investment is included in our storage and logistics segment.
(3)As of March 31, 2023, our equity in the underlying net assets of Powder River Basin Industrial Complex, LLC (PRBIC) approximates the carrying value of our investment balance. Our PRBIC investment is included in our storage and logistics segment.
(4)As discussed above, in July 2022, we acquired the remaining 50% equity interest in Crestwood Permian and as a result, we control and own 100% of the equity interests in Crestwood Permian. Our Crestwood Permian investment was previously included in our gathering and processing south segment.
Tres Holdings Divestiture
On February 20, 2023, we and Brookfield Infrastructure Group (Brookfield) entered into an agreement with a subsidiary of Enbridge, Inc. to sell each of our respective interests in Tres Holdings for total consideration of approximately $335.0 million, plus working capital adjustments. The sale was completed on April 3, 2023 and we received net proceeds of approximately $178.3 million.
Distributions and Contributions
The following table summarizes our distributions from and contributions to our unconsolidated affiliates (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Distributions | | Contributions | | | | |
| | Three Months Ended | | Three Months Ended | | | | |
| | March 31, | | March 31, | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | | | |
| Crestwood Permian Basin | | $ | 2.0 | | | $ | — | | | $ | — | | | $ | — | | | | | |
| Tres Holdings | | — | | | — | | | 5.1 | | | 6.0 | | | | | |
| | | | | | | | | | | | |
| Crestwood Permian | | — | | | 8.5 | | | — | | | 8.5 | | | | | |
| Total | | $ | 2.0 | | | $ | 8.5 | | | $ | 5.1 | | | $ | 14.5 | | | | | |
Note 6 – Risk Management
We are exposed to certain market risks related to our ongoing business operations. These risks include exposure to changing commodity prices. We utilize derivative instruments to manage our exposure to fluctuations in commodity prices, which is discussed below. Additional information related to our derivatives is discussed in Note 7.
Risk Management Activities
We sell NGLs (such as propane, ethane, butane and heating oil), crude oil and natural gas to energy-related businesses and may use a variety of financial and other instruments including forward contracts involving physical delivery of NGLs, crude oil and natural gas. We periodically enter into offsetting positions to economically hedge against the exposure our customer contracts create. Certain of these contracts and positions are derivative instruments. We do not designate any of our commodity-based derivatives as hedging instruments for accounting purposes. Our commodity-based derivatives are reflected at fair value in our consolidated balance sheets, and changes in the fair value of these derivatives that impact the consolidated statements of operations are reflected in costs of product/services sold. Our commodity-based derivatives that are settled with physical commodities are reflected as an increase to product revenues, and the commodity inventory that is utilized to satisfy those physical obligations is reflected as an increase to product costs in our consolidated statements of operations. Our commodity-based derivatives that are settled financially are also reflected in product costs in our consolidated statements of operations. The following table summarizes the increase (decrease) in our product revenues and product costs, net, in our consolidated statements of operations related to our commodity-based derivatives (in millions):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2023 | | 2022 |
| Product revenues | | | | | $ | 145.8 | | | $ | 202.2 | |
| Product costs, net | | | | | $ | (7.2) | | | $ | 47.6 | |
We attempt to balance our contractual portfolio in terms of notional amounts and timing of performance and delivery obligations. This balance in the contractual portfolio significantly reduces the volatility in product costs related to these instruments.
Notional Amounts and Terms
The notional amounts of our derivative financial instruments include the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fixed Price
Payor | | Fixed Price
Receiver | | Fixed Price
Payor | | Fixed Price
Receiver |
| Propane, ethane, butane, heating oil and crude oil (MMBbls) | 63.4 | | | 65.5 | | | 67.2 | | | 70.2 | |
| Natural gas (Bcf) | 15.5 | | | 15.8 | | | 44.2 | | | 48.4 | |
Notional amounts reflect the volume of transactions, but do not represent the amounts exchanged by the parties to the financial instruments. Accordingly, notional amounts do not reflect our monetary exposure to market or credit risks. All contracts subject to price risk had a maturity of 36 months or less; however, 92% of the contracted volumes will be delivered or settled within 12 months.
Credit Risk
Inherent in our contractual portfolio are certain credit risks. Credit risk is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract. We take an active role in managing credit risk and have established control procedures, which are reviewed on an ongoing basis. We attempt to minimize credit risk exposure through credit policies and periodic monitoring procedures as well as through customer deposits, letters of credit and entering into netting agreements that allow for offsetting counterparty receivable and payable balances for certain financial transactions, as deemed appropriate. The counterparties associated with our price risk management activities are energy marketers and propane retailers, resellers and dealers.
Certain of our derivative instruments have credit limits that require us to post collateral. The amount of collateral required to be posted is a function of the net liability position of the derivative as well as our established credit limit with the respective counterparty. If our credit rating were to change, the counterparties could require us to post additional collateral. The amount of additional collateral that would be required to be posted would vary depending on the extent of change in our credit rating as well as the requirements of the individual counterparty. All collateral amounts have been netted against the asset or liability with the respective counterparty and are reflected in our consolidated balance sheets as assets and liabilities from price risk management activities. For a summary of the fair value of our commodity derivative instruments with credit-risk related contingent features and their associated collateral, see Note 7.
Note 7 – Fair Value Measurements
The accounting standard for fair value measurement establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
•Level 1 — Includes inputs that are observable in active markets for identical assets or liabilities as of the reporting date such as exchange-traded derivatives, listed equities and US government treasury securities.
•Level 2 — Includes inputs that are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Instruments in this category include non-exchange-traded derivatives such as over the counter (OTC) forwards, options and physical exchanges.
•Level 3 — Includes significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial Assets and Liabilities
As of March 31, 2023 and December 31, 2022, we held certain assets and liabilities that are required to be measured at fair value on a recurring basis, which include our derivative instruments related to crude oil, NGLs and natural gas. Our derivative instruments consist of forwards, swaps, futures, physical exchanges and options. Our derivative instruments that are traded on the New York Mercantile Exchange have been categorized as Level 1. Our derivative instruments also include OTC contracts, which have been categorized as Level 2.
The following tables summarize the fair value hierarchy of our financial instruments that were reflected in our consolidated balance sheets (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Gross Fair Value | | Contract Netting(1) | | Collateral/Margin Received or Paid | | Fair Value |
| Assets | | | | | | | | | | | | | |
| Assets from price risk management | $ | 17.4 | | | $ | 231.3 | | | $ | — | | | $ | 248.7 | | | $ | (219.6) | | | $ | 2.3 | | | $ | 31.4 | |
Other investments(2) | 2.6 | | | — | | | — | | | 2.6 | | | — | | | — | | | 2.6 | |
| Total assets at fair value | $ | 20.0 | | | $ | 231.3 | | | $ | — | | | $ | 251.3 | | | $ | (219.6) | | | $ | 2.3 | | | $ | 34.0 | |
| | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | |
| Liabilities from price risk management with credit-risk-related contingent features | $ | 13.6 | | | $ | 208.3 | | | $ | — | | | $ | 221.9 | | | $ | (219.6) | | | $ | 7.1 | | | $ | 9.4 | |
| Liabilities from price risk management without credit-risk-related contingent features | — | | | 2.7 | | | — | | | 2.7 | | | — | | | 1.1 | | | 3.8 | |
| Total liabilities at fair value | $ | 13.6 | | | $ | 211.0 | | | $ | — | | | $ | 224.6 | | | $ | (219.6) | | | $ | 8.2 | | | $ | 13.2 | |
| | | | | | | | | | | | | |
| December 31, 2022 |
| | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Gross Fair Value | | Contract Netting(1) | | Collateral/Margin Received or Paid | | Fair Value |
| Assets | | | | | | | | | | | | | |
| Assets from price risk management | $ | 62.8 | | | $ | 474.3 | | | $ | — | | | $ | 537.1 | | | $ | (452.1) | | | $ | (12.2) | | | $ | 72.8 | |
Other investments(2) | 2.6 | | | — | | | — | | | 2.6 | | | — | | | — | | | 2.6 | |
| Total assets at fair value | $ | 65.4 | | | $ | 474.3 | | | $ | — | | | $ | 539.7 | | | $ | (452.1) | | | $ | (12.2) | | | $ | 75.4 | |
| | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | |
| Liabilities from price risk management with credit-risk-related contingent features | $ | 65.7 | | | $ | 420.1 | | | $ | — | | | $ | 485.8 | | | $ | (452.1) | | | $ | (25.6) | | | $ | 8.1 | |
| Liabilities from price risk management without credit-risk-related contingent features | — | | | 11.9 | | | — | | | 11.9 | | | — | | | 3.9 | | | 15.8 | |
| Total liabilities at fair value | $ | 65.7 | | | $ | 432.0 | | | $ | — | | | $ | 497.7 | | | $ | (452.1) | | | $ | (21.7) | | | $ | 23.9 | |
(1)Amounts represent the impact of legally enforceable master netting agreements that allow us to settle positive and negative positions.
(2)Amount primarily relates to our investment in Suburban Propane Partners, L.P. units, which is reflected in other non-current assets on CEQP’s consolidated balance sheets.
Cash, Accounts Receivable and Accounts Payable
As of March 31, 2023 and December 31, 2022, the carrying amounts of cash, accounts receivable and accounts payable approximate fair value based on the short-term nature of these instruments.
Credit Facilities
The fair value of the amounts outstanding under our credit facilities approximates their respective carrying amounts as of March 31, 2023 and December 31, 2022, primarily due to the variable nature of the interest rates of the instruments, which is considered a Level 2 fair value measurement. See Note 8 for a further discussion of our credit facilities.
Senior Notes
We estimate the fair value of our senior notes primarily based on quoted market prices for the same or similar issuances (representing a Level 2 fair value measurement). The following table represents the carrying amount (reduced for deferred financing costs associated with the respective notes) and fair value of our senior notes (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Carrying
Amount | | Fair
Value | | Carrying
Amount | | Fair
Value |
| 2025 Senior Notes | $ | 497.9 | | | $ | 490.5 | | | $ | 497.6 | | | $ | 486.7 | |
| 2027 Senior Notes | $ | 595.6 | | | $ | 576.5 | | | $ | 595.3 | | | $ | 556.9 | |
| February 2029 Senior Notes | $ | 692.5 | | | $ | 669.0 | | | $ | 692.1 | | | $ | 642.1 | |
April 2029 Senior Notes(1) | $ | 475.7 | | | $ | 461.5 | | | $ | 476.7 | | | $ | 450.0 | |
| 2031 Senior Notes | $ | 591.1 | | | $ | 604.1 | | | $ | — | | | $ | — | |
(1) The carrying amount includes a fair value adjustment we recorded in conjunction with the merger with Oasis Midstream discussed in Note 3. For a further discussion of this fair value adjustment, see Note 8.
Note 8 – Long-Term Debt
Long-term debt consisted of the following (in millions):
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| CMLP Credit Facility | $ | 473.6 | | | $ | 922.3 | |
| CPBH Credit Facility | — | | | 206.8 | |
| 2025 Senior Notes | 500.0 | | | 500.0 | |
| 2027 Senior Notes | 600.0 | | | 600.0 | |
| February 2029 Senior Notes | 700.0 | | | 700.0 | |
| April 2029 Senior Notes | 450.0 | | | 450.0 | |
April 2029 Senior Notes fair value adjustment, net(1) | 25.7 | | | 26.7 | |
| 2031 Senior Notes | 600.0 | | | — | |
| | | |
| Less: deferred financing costs, net | 34.8 | | | 27.5 | |
| | | |
| | | |
| Total long-term debt | $ | 3,314.5 | | | $ | 3,378.3 | |
(1)In conjunction with the merger with Oasis Midstream discussed in Note 3, we assumed the April 2029 Senior Notes, and we recorded a fair value adjustment of approximately $30.7 million. During the three months ended March 31, 2023 and 2022, we recorded a reduction to our interest and debt expense of approximately $1.0 million and $0.7 million related to the amortization of the fair value adjustment.
Credit Facilities
CMLP Credit Facility. Crestwood Midstream’s five-year $1.75 billion revolving credit facility (the CMLP Credit Facility) is available to fund acquisitions, working capital and internal growth projects and for general partnership purposes. Subject to limited exception, the CMLP Credit Facility is guaranteed and secured by substantially all of the equity interests and assets of Crestwood Midstream’s subsidiaries, except for Crestwood Infrastructure Holdings LLC, Crestwood Niobrara LLC, PRBIC and Tres Holdings and their respective subsidiaries. In January 2023, Crestwood Permian and certain of its subsidiaries were designated as guarantor subsidiaries of Crestwood Midstream’s credit facility and senior notes.
In conjunction with the merger with Oasis Midstream on February 1, 2022, we borrowed amounts under the CMLP Credit Facility to fund the cash paid of $160 million to Oasis Petroleum and to repay approximately $218 million of borrowings on Oasis Midstream’s credit facility, which was retired on February 1, 2022.
Under the credit agreement, Crestwood Midstream is required to maintain a net debt to consolidated EBITDA ratio (as defined in the credit agreement) of not more than 5.50 to 1.0, a consolidated EBITDA to consolidated interest expense ratio (as defined in the credit agreement) of not less than 2.50 to 1.0, and a senior secured leverage ratio (as defined in the credit agreement) of
not more than 3.50 to 1.0. At March 31, 2023, the net debt to consolidated EBITDA ratio was approximately 4.18 to 1.0, the consolidated EBITDA to consolidated interest expense ratio was approximately 4.25 to 1.0, and the senior secured leverage ratio was 0.59 to 1.0.
At March 31, 2023, Crestwood Midstream had $1.1 billion of available capacity under the CMLP Credit Facility considering the most restrictive debt covenants in the credit agreement. At March 31, 2023 and December 31, 2022, outstanding standby letters of credit under the CMLP Credit Facility were $7.9 million and $8.2 million. Borrowings under the CMLP Credit Facility accrue interest at either prime or the Adjusted Term SOFR (as defined in the credit agreement) plus applicable spreads, which resulted in interest rates between 6.76% and 9.00% at March 31, 2023 and 6.28% and 8.50% at December 31, 2022. The weighted-average interest rate on outstanding borrowings as of March 31, 2023 and December 31, 2022 was 6.96% and 6.40%.
CPBH Credit Facility. In conjunction with the acquisition of the remaining 50% equity interest in Crestwood Permian in July 2022, we assumed a credit agreement entered into by CPB Subsidiary Holdings LLC (CPB Holdings), a wholly-owned subsidiary of Crestwood Permian (the CPBH Credit Facility). In January 2023, we utilized borrowings under the CMLP Credit Facility to repay and terminate the CPBH Credit Facility.
Senior Notes
2031 Senior Notes. In January 2023, Crestwood Midstream issued $600 million of 7.375% unsecured senior notes due 2031 (the 2031 Senior Notes). The 2031 Senior Notes will mature on February 1, 2031, and interest is payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2023. The net proceeds from this offering of approximately $592.5 million were used to repay borrowings outstanding under the CMLP Credit Facility.
Note 9 – Commitments and Contingencies
Legal Proceedings
Linde Lawsuit. On December 23, 2019, Linde Engineering North America Inc. (Linde) filed a lawsuit in the District Court of Harris County, Texas alleging that Arrow Field Services, LLC, our consolidated subsidiary, and Crestwood Midstream breached a contract entered into in March 2018 under which Linde was to provide engineering, procurement and construction services to us related to the completion of the construction of the Bear Den II cryogenic processing plant.
A jury trial concluded on June 17, 2022, and a final judgement was entered on October 24, 2022. The final judgment includes an award of damages of approximately $20.7 million, a pre-judgement interest award of approximately $17.7 million and attorney fees and other costs of approximately $4.7 million. We have insurance coverage related to certain pre-judgement interest awards but have not recorded a receivable related to any potential insurance recovery at March 31, 2023. On January 9, 2023, we paid approximately $21.2 million to the Court Registry under protest to mitigate the impact of post-judgement interest. We filed a Notice of Appeal on January 13, 2023, and we are unable to predict the ultimate outcome on the appeal related to this matter.
General. We are periodically involved in litigation proceedings. If we determine that a negative outcome is probable and the amount of loss is reasonably estimable, then we accrue the estimated amount. The results of litigation proceedings cannot be predicted with certainty. We could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid and/or accrued. As of March 31, 2023 and December 31, 2022, we had approximately $9.0 million and $35.0 million accrued for outstanding legal matters. Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures for which we can estimate will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures.
Any loss estimates are inherently subjective, based on currently available information, and are subject to management’s judgment and various assumptions. Due to the inherently subjective nature of these estimates and the uncertainty and unpredictability surrounding the outcome of legal proceedings, actual results may differ materially from any amounts that have been accrued.
Regulatory Compliance
In the ordinary course of our business, we are subject to various laws and regulations. In the opinion of our management, compliance with current laws and regulations will not have a material effect on our results of operations, cash flows or financial condition.
Environmental Compliance
Our operations are subject to stringent and complex laws and regulations pertaining to worker health, safety, and the environment. We are subject to laws and regulations at the federal, state, regional and local levels that relate to air and water quality, hazardous and solid waste management and disposal, and other environmental matters. The cost of planning, designing, constructing and operating our facilities must incorporate compliance with environmental laws and regulations and safety standards. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and potentially criminal enforcement measures. At both March 31, 2023 and December 31, 2022, our accrual for environmental matters was less than $1.0 million and our potential exposure related to environmental matters was less than $1.0 million at March 31, 2023.
Self-Insurance
We utilize third-party insurance subject to varying retention levels of self-insurance, which management considers prudent. Such self-insurance relates to losses and liabilities primarily associated with medical claims, workers’ compensation claims and general, product, vehicle and environmental liability. Losses are accrued based upon management’s estimates of the aggregate liability for claims incurred using certain assumptions followed in the insurance industry and based on past experience. The primary assumption utilized is actuarially determined loss development factors. The loss development factors are based primarily on historical data. Our self-insurance reserves could be affected if future claim developments differ from the historical trends. We believe changes in health care costs, trends in health care claims of our employee base, accident frequency and severity and other factors could materially affect the estimate for these liabilities. We continually monitor changes in employee demographics, incident and claim type and evaluate our insurance accruals and adjust our accruals based on our evaluation of these qualitative data points. We are liable for the development of claims for our previously disposed of retail propane operations, provided they were reported prior to August 1, 2012. The following table summarizes CEQP’s and CMLP’s self-insurance reserves (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | CEQP | | CMLP |
| | March 31,
2023 | | December 31, 2022 | | March 31,
2023 | | December 31, 2022 |
Self-insurance reserves(1) | $ | 5.5 | | | $ | 5.6 | | | $ | 4.7 | | | $ | 4.8 | |
(1)At March 31, 2023, CEQP and CMLP classified approximately $3.2 million and $2.7 million, respectively, of these reserves as other long-term liabilities on their consolidated balance sheets.
Indemnifications
We periodically provide indemnification arrangements related to assets or businesses we have sold. Our potential exposure under indemnification arrangements can range from a specified amount to an unlimited amount, depending on the nature of the claim, specificity as to duration, and the particular transaction. As of March 31, 2023 and December 31, 2022, we have no amounts accrued for these indemnifications.
Note 10 - Leases
The following table summarizes the balance sheet information related to our operating and finance leases (in millions):
| | | | | | | | | | | |
| March 31,
2023 | | December 31, 2022 |
| Operating Leases | | | |
| Operating lease right-of-use assets, net | $ | 24.4 | | | $ | 24.4 | |
| | | |
| Accrued expenses and other liabilities | $ | 10.5 | | | $ | 10.9 | |
| Other long-term liabilities | 17.5 | | | 17.4 | |
| Total operating lease liabilities | $ | 28.0 | | | $ | 28.3 | |
| Finance Leases | | | |
| Property, plant and equipment | $ | 13.5 | | | $ | 13.6 | |
| Less: accumulated depreciation | 8.9 | | | 8.9 | |
| Property, plant and equipment, net | $ | 4.6 | | | $ | 4.7 | |
| | | |
| Accrued expenses and other liabilities | $ | 1.7 | | | $ | 1.9 | |
| Other long-term liabilities | 2.7 | | | 2.7 | |
| Total finance lease liabilities | $ | 4.4 | | | $ | 4.6 | |
Lease expense. Our operating lease expense, net totaled $3.8 million and $3.5 million for the three months ended March 31, 2023 and 2022. Our finance lease expense totaled $0.8 million and $0.9 million for the three months ended March 31, 2023 and 2022.
Other. In March 2022, we exercised an option to purchase crude oil railcars under certain of our finance leases as a result of our plan to exit our crude oil railcar operations. During the three months ended March 31, 2022, we recognized a loss on long-lived assets of approximately $4.0 million related to our anticipated sale of these crude oil railcars.
Note 11 – Partners’ Capital and Non-Controlling Partner
Common Units
On February 1, 2022, we completed the merger with Oasis Midstream. Pursuant to the merger agreement, Chord received cash and approximately 20.9 million newly issued CEQP common units in exchange for its common units held in Oasis Midstream. In addition, Oasis Midstream’s public unitholders received approximately 12.9 million newly issued CEQP common units in exchange for the Oasis Midstream common units held by them. For a further discussion of the merger with Oasis Midstream, see Note 3.
Distributions
Crestwood Equity
Limited Partners. A summary of CEQP’s limited partner quarterly cash distributions for the three months ended March 31, 2023 and 2022 is presented below:
| | | | | | | | | | | | | | | | | | | | |
| Record Date | | Payment Date | | Per Unit Rate | | Cash Distributions (in millions) |
| 2023 | | | | | | |
| February 7, 2023 | | February 14, 2023 | | $ | 0.655 | | | $ | 68.9 | |
| | | | | | |
| | | | | | |
| | | | | | |
| 2022 | | | | | | |
| February 7, 2022 | | February 14, 2022 | | $ | 0.625 | | | $ | 60.9 | |
| | | | | | |
| | | | | | |
| | | | | | |
On April 20, 2023, we declared a distribution of $0.655 per limited partner unit to be paid on May 15, 2023 to unitholders of record on May 8, 2023 with respect to the quarter ended March 31, 2023.
Preferred Unitholders. During the three months ended March 31, 2023 and 2022, we paid cash distributions to our preferred unitholders of approximately $15 million in both periods. On April 20, 2023, the board of directors of our general partner authorized a cash distribution to our preferred unitholders of approximately $15 million with respect to the quarter ended March 31, 2023.
Crestwood Midstream
During the three months ended March 31, 2023 and 2022, Crestwood Midstream paid cash distributions of $85.9 million and $238.1 million to its partners.
On February 1, 2022, Crestwood Midstream received a non-cash contribution of approximately $1,075.1 million from Crestwood Equity related to net assets it acquired in conjunction with the merger with Oasis Midstream. In addition, on February 1, 2022, Crestwood Equity contributed cash acquired in conjunction with the merger with Oasis Midstream of approximately $14.9 million to Crestwood Midstream.
Non-Controlling Partner
Crestwood Niobrara LLC (Crestwood Niobrara) issued preferred interests to CN Jackalope Holdings LLC (Jackalope Holdings), which are reflected as non-controlling interest in subsidiary apart from partners’ capital (i.e., temporary equity) on our consolidated balance sheets. We adjust the carrying amount of our non-controlling interest to its redemption value each period through net income attributable to non-controlling partner.
The following tables show the change in our non-controlling interest in subsidiary at March 31, 2023 and 2022 (in millions):
| | | | | | | | |
Balance at December 31, 2022 | | $ | 434.4 | |
| | |
| Distributions to non-controlling partner | | (10.3) | |
| Net income attributable to non-controlling partner | | 10.2 | |
Balance at March 31, 2023 | | $ | 434.3 | |
| | | | | | | | |
| Balance at December 31, 2021 | | $ | 434.6 | |
| | |
| Distributions to non-controlling partner | | (10.3) | |
| Net income attributable to non-controlling partner | | 10.2 | |
Balance at March 31, 2022 | | $ | 434.5 | |
In April 2023, Crestwood Niobrara paid a cash distribution of approximately $10.3 million to Jackalope Holdings with respect to the quarter ended March 31, 2023.
Other
In February 2023, Crestwood Equity issued 245,929 performance units (the February 2023 Units) under the Crestwood Equity Partners LP 2018 Long-Term Incentive Plan (Crestwood LTIP). The performance units are designed to provide an incentive for continuous employment to certain key employees. The vesting of performance units is subject to the attainment of certain performance and market goals over a three-year period, and entitle a participant to receive common units of Crestwood Equity without payment of an exercise price upon vesting. As of March 31, 2023, we had total unamortized compensation expense of approximately $5.7 million related to the February 2023 Units. During the three months ended March 31, 2023, we recognized compensation expense of $0.4 million related to the February 2023 Units, which is included in general and administrative expenses on our consolidated statements of operations.
During the three months ended March 31, 2023, 161,278 performance units that were previously issued in 2020 under the Crestwood LTIP vested, and as a result of the attainment of certain performance and market goals and related distributions during the three years that the awards were outstanding, we issued 217,702 common units during the three months ended March 31, 2023 related to those performance units.
Note 12 - Earnings Per Limited Partner Unit
We calculate the dilutive effect of the preferred units and Crestwood Niobrara preferred units using the if-converted method which assumes units are converted at the beginning of the period (beginning with their respective issuance date), and the resulting common units are included in the denominator of the diluted net income per common unit calculation for the period being presented. Distributions declared in the period and undeclared distributions that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. The dilutive effect of the stock-based compensation performance units is calculated using the treasury stock method which considers the impact to net income or loss attributable to Crestwood Equity Partners and limited partner units from the potential issuance of limited partner units.
We exclude potentially dilutive securities from the determination of diluted earnings per unit (as well as their related income statement impacts) when their impact is anti-dilutive. The following table summarizes information regarding the weighted-average of common units excluded during the three months ended March 31, 2023 and 2022 (in millions):
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2023 | | 2022 |
Preferred units(1) | | | | | 7.1 | | | 7.1 | |
Crestwood Niobrara’s preferred units(1) | | | | | — | | | 3.6 | |
Unit-based compensation performance units(1) | | | | | — | | | 0.3 | |
(1)For additional information regarding the potential conversion/redemption of our preferred units and Crestwood Niobrara’s preferred units to CEQP common units, and additional information regarding our performance units, see our 2022 Annual Report on Form 10-K.
The following table shows Crestwood Equity’s common unitholders’ interest in net income (loss) and weighted-average limited partner units used in computing basic and diluted net income (loss) per limited partner unit for the three months ended March 31, 2023 and 2022 (in millions, except for per unit data):
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| | | | March 31, |
| | | | | | 2023 | | 2022 |
| Common unitholders’ interest in net income (loss) | | | | | | $ | 16.4 | | | $ | (3.0) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Diluted net income (loss) | | | | | | $ | 16.4 | | | $ | (3.0) | |
| | | | | | | | |
| Weighted-average limited partners’ units outstanding - basic | | | | | | 105.2 | | | 86.0 | |
| | | | | | | | |
| Dilutive effect of Crestwood Niobrara preferred units | | | | | | 4.5 | | | — | |
| Dilutive effect of unit-based compensation performance units | | | | | | 0.1 | | | — | |
| Weighted-average limited partners’ units outstanding - diluted | | | | | | 109.8 | | | 86.0 | |
| | | | | | | | |
| Net income (loss) per limited partner unit: | | | | | | | | |
| Basic | | | | | | $ | 0.16 | | | $ | (0.04) | |
| Diluted | | | | | | $ | 0.15 | | | $ | (0.04) | |
Note 13 – Segments
Our financial statements reflect three operating and reporting segments: (i) gathering and processing north operations; (ii) gathering and processing south operations; and (iii) storage and logistics operations. Our corporate operations include all general and administrative expenses that are not allocated to our reportable segments.
Below is a description of our operating and reporting segments.
•Gathering and Processing North. Our gathering and processing north operations provide natural gas gathering, compression, treating and processing services, crude oil gathering and storage services and produced water gathering and disposal services to producers in the Williston Basin and Powder River Basin.
•Gathering and Processing South. Our gathering and processing south operations provide natural gas gathering, compression, treating and processing services, crude oil gathering services and produced water gathering and disposal services to producers in the Delaware Basin.
•Storage and Logistics. Our storage and logistics operations provide NGLs, crude oil and natural gas storage, terminal, marketing and transportation (including rail, truck and pipeline) services to producers, refiners, marketers, utilities and other customers.
We assess the performance of our operating segments based on EBITDA, which is identified as income before income taxes, plus debt-related costs (net interest and debt expense) and depreciation, amortization and accretion expense. Below is a reconciliation of CEQP’s and CMLP’s net income to EBITDA (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | CEQP | | | | | | CMLP |
| | | Three Months Ended | | | | Three Months Ended |
| | | March 31, | | | | March 31, |
| | | | | 2023 | | 2022 | | | | | | 2023 | | 2022 |
| Net income | | | | | $ | 41.6 | | | $ | 22.2 | | | | | | | $ | 43.0 | | | $ | 20.2 | |
| Add: | | | | | | | | | | | | | | | |
| Interest and debt expense, net | | | | | 55.6 | | | 36.1 | | | | | | | 55.6 | | | 36.1 | |
| | | | | | | | | | | | | | | |
| Provision for income taxes | | | | | 0.3 | | | — | | | | | | | 0.3 | | | — | |
| Depreciation, amortization and accretion | | | | | 81.4 | | | 74.8 | | | | | | | 81.3 | | | 78.2 | |
| EBITDA | | | | | $ | 178.9 | | | $ | 133.1 | | | | | | | $ | 180.2 | | | $ | 134.5 | |
The following tables summarize CEQP’s and CMLP’s reportable segment data for the three months ended March 31, 2023 and 2022 (in millions). Intersegment revenues included in the following tables are accounted for as arms-length transactions that apply our revenue recognition policy described in our 2022 Annual Report on Form 10-K. Included in earnings from unconsolidated affiliates, net reflected in the tables below was approximately $2.5 million and $4.6 million of our proportionate share of interest expense, depreciation and amortization expense and gains (losses) on long-lived assets, net recorded by our equity investments for the three months ended March 31, 2023 and 2022.
Segment EBITDA Information
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| Gathering and Processing North | | Gathering and Processing South | | Storage and Logistics | | Corporate | | Total |
| Crestwood Midstream | | | | | | | | | |
Revenues | $ | 215.4 | | | $ | 130.9 | | | $ | 916.8 | | | $ | — | | | $ | 1,263.1 | |
| Intersegment revenues, net | 99.0 | | | 34.2 | | | (133.2) | | | — | | | — | |
Costs of product/services sold | 152.4 | | | 108.5 | | | 736.5 | | | — | | | 997.4 | |
Operations and maintenance expense | 29.3 | | | 15.1 | | | 12.2 | | | — | | | 56.6 | |
General and administrative expense | — | | | — | | | — | | | 30.2 | | | 30.2 | |
| Gain (loss) on long-lived assets, net | 0.1 | | | (0.8) | | | — | | | 0.3 | | | (0.4) | |
| | | | | | | | | |
| | | | | | | | | |
| Earnings from unconsolidated affiliates, net | — | | | 0.3 | | | 1.4 | | | — | | | 1.7 | |
| Crestwood Midstream EBITDA | $ | 132.8 | | | $ | 41.0 | | | $ | 36.3 | | | $ | (29.9) | | | $ | 180.2 | |
| Crestwood Equity | | | | | | | | | |
| General and administrative expense | — | | | — | | | — | | | 1.4 | | | 1.4 | |
| | | | | | | | | |
| Other income, net | — | | | — | | | — | | | 0.1 | | | 0.1 | |
| Crestwood Equity EBITDA | $ | 132.8 | | | $ | 41.0 | | | $ | 36.3 | | | $ | (31.2) | | | $ | 178.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Gathering and Processing North | | Gathering and Processing South | | Storage and Logistics | | Corporate | | Total |
| Crestwood Midstream | | | | | | | | | |
| Revenues | $ | 235.2 | | | $ | 30.7 | | | $ | 1,317.9 | | | $ | — | | | $ | 1,583.8 | |
| Intersegment revenues, net | 127.4 | | | — | | | (127.4) | | | — | | | — | |
| Costs of product/services sold | 205.6 | | | (0.6) | | | 1,159.4 | | | — | | | 1,364.4 | |
| Operations and maintenance expense | 23.7 | | | 6.7 | | | 12.0 | | | — | | | 42.4 | |
| General and administrative expense | — | | | — | | | — | | | 41.7 | | | 41.7 | |
| Gain (loss) on long-lived assets, net | — | | | 0.2 | | | (4.0) | | | — | | | (3.8) | |
| Earnings from unconsolidated affiliates, net | — | | | 2.6 | | | 0.4 | | | — | | | 3.0 | |
| Crestwood Midstream EBITDA | $ | 133.3 | | | $ | 27.4 | | | $ | 15.5 | | | $ | (41.7) | | | $ | 134.5 | |
| Crestwood Equity | | | | | | | | | |
| General and administrative expense | — | | | — | | | — | | | 1.7 | | | 1.7 | |
| Other income, net | — | | | — | | | — | | | 0.3 | | | 0.3 | |
| Crestwood Equity EBITDA | $ | 133.3 | | | $ | 27.4 | | | $ | 15.5 | | | $ | (43.1) | | | $ | 133.1 | |
Other Segment Information
| | | | | | | | | | | | | | | | | | | | | | | |
| CEQP | | CMLP |
| March 31, 2023 | | December 31, 2022 | | March 31, 2023 | | December 31, 2022 |
| Total Assets | | | | | | | |
| Gathering and Processing North | $ | 3,950.5 | | | $ | 4,003.6 | | | $ | 3,950.5 | | | $ | 4,003.6 | |
| Gathering and Processing South | 1,455.9 | | | 1,473.0 | | | 1,455.9 | | | 1,473.0 | |
| Storage and Logistics | 945.3 | | | 1,057.6 | | | 945.3 | | | 1,057.6 | |
| Corporate | 37.6 | | | 32.8 | | | 32.1 | | | 27.2 | |
| | | | | | | |
| Total assets | $ | 6,389.3 | | | $ | 6,567.0 | | | $ | 6,383.8 | | | $ | 6,561.4 | |
Note 14 - Revenues
Contract Assets and Contract Liabilities
Our contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Our receivables related to our revenue contracts accounted for under Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) totaled $340.0 million and $368.2 million at March 31, 2023 and December 31, 2022, and are included in accounts receivable on our consolidated balance sheets. Our contract assets are included in other non-current assets on our consolidated balance sheets. Our contract liabilities primarily consist of current and non-current deferred revenues. On our consolidated balance sheets, our current deferred revenues are included in accrued expenses and other liabilities and our non-current deferred revenues are included in other long-term liabilities. The majority of revenues associated with our deferred revenues is expected to be recognized as the performance obligations under the related contracts are satisfied over the next 14 years.
The following table summarizes our contract assets and contract liabilities (in millions):
| | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Contract assets (non-current) | | $ | 5.2 | | | $ | 5.4 | |
Contract liabilities (current)(1) | | $ | 13.8 | | | $ | 11.7 | |
Contract liabilities (non-current)(1) | | $ | 205.9 | | | $ | 212.3 | |
(1)During the three months ended March 31, 2023, we recognized revenues of approximately $8.0 million that were previously included in contract liabilities at December 31, 2022. The remaining change in our contract liabilities during the three months ended March 31, 2023 related to capital reimbursements associated with our revenue contracts and revenue deferrals associated with our contracts with increasing (decreasing) rates.
The following table summarizes the transaction price allocated to our remaining performance obligations under certain contracts that have not been recognized as of March 31, 2023 (in millions):
| | | | | |
| Remainder of 2023 | $ | 45.2 | |
| 2024 | 42.1 | |
| 2025 | 2.0 | |
| 2026 | 0.6 | |
| 2027 | 0.5 | |
| Thereafter | 0.6 | |
| Total | $ | 91.0 | |
Our remaining performance obligations presented in the table above exclude estimates of variable rate escalation clauses in our contracts with customers, and is generally limited to fixed-fee and percentage-of-proceeds service contracts which have fixed pricing and minimum volume terms and conditions. Our remaining performance obligations generally exclude, based on the following practical expedients that we elected to apply, disclosures for (i) variable consideration allocated to a wholly-unsatisfied promise to transfer a distinct service that forms part of the identified single performance obligation; (ii) unsatisfied performance obligations where the contract term is one year or less; and (iii) contracts for which we recognize revenues as amounts are invoiced.
Disaggregation of Revenues
The following tables summarize our revenues from contracts with customers disaggregated by type of product/service sold and by commodity type for each of our segments for the three months ended March 31, 2023 and 2022 (in millions). We believe this summary best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. Our non-Topic 606 revenues presented in the tables below primarily represents revenues related to our commodity-based derivatives.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| Gathering and Processing North | | Gathering and Processing South | | Storage and Logistics | | Intersegment Elimination | | Total |
Topic 606 revenues | | | | | | | | | |
Gathering | | | | | | | | | |
Natural gas | $ | 33.6 | | | $ | 4.3 | | | $ | — | | | $ | — | | | $ | 37.9 | |
Crude oil | 14.2 | | | 1.9 | | | — | | | — | | | 16.1 | |
Water | 42.5 | | | 8.6 | | | — | | | — | | | 51.1 | |
Processing | | | | | | | | | |
Natural gas | 19.2 | | | 5.4 | | | — | | | — | | | 24.6 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Storage | | | | | | | | | |
Crude oil | 0.6 | | | — | | | — | | | (0.1) | | | 0.5 | |
NGLs | — | | | — | | | 2.2 | | | — | | | 2.2 | |
Pipeline | | | | | | | | | |
Crude oil | 1.1 | | | 0.2 | | | 0.4 | | | — | | | 1.7 | |
NGLs | — | | | 5.2 | | | 0.1 | | | (5.2) | | | 0.1 | |
Transportation | | | | | | | | | |
| | | | | | | | | |
NGLs | — | | | — | | | 5.8 | | | — | | | 5.8 | |
| | | | | | | | | |
Rail Loading | | | | | | | | | |
Crude oil | — | | | — | | | 0.2 | | | — | | | 0.2 | |
| | | | | | | | | |
Product Sales | | | | | | | | | |
Natural gas | 45.2 | | | 34.0 | | | 78.7 | | | (65.0) | | | 92.9 | |
Crude oil | 109.3 | | | 0.1 | | | 278.8 | | | (30.0) | | | 358.2 | |
NGLs | 46.9 | | | 105.9 | | | 404.3 | | | (32.9) | | | 524.2 | |
Water | 1.0 | | | — | | | — | | | — | | | 1.0 | |
Other | 0.3 | | | — | | | 0.1 | | | — | | | 0.4 | |
Total Topic 606 revenues | 313.9 | | | 165.6 | | | 770.6 | | | (133.2) | | | 1,116.9 | |
Non-Topic 606 revenues | 0.5 | | | (0.5) | | | 146.2 | | | — | | | 146.2 | |
Total revenues | $ | 314.4 | | | $ | 165.1 | | | $ | 916.8 | | | $ | (133.2) | | | $ | 1,263.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Gathering and Processing North | | Gathering and Processing South | | Storage and Logistics | | Intersegment Elimination | | Total |
Topic 606 revenues | | | | | | | | | |
Gathering | | | | | | | | | |
Natural gas | $ | 25.9 | | | $ | 22.4 | | | $ | — | | | $ | — | | | $ | 48.3 | |
Crude oil | 14.8 | | | 1.0 | | | — | | | — | | | 15.8 | |
Water | 34.7 | | | 2.2 | | | — | | | — | | | 36.9 | |
Processing | | | | | | | | | |
Natural gas | 14.4 | | | 1.1 | | | — | | | — | | | 15.5 | |
| | | | | | | | | |
Compression | | | | | | | | | |
Natural gas | — | | | 3.5 | | | — | | | — | | | 3.5 | |
Storage | | | | | | | | | |
Crude oil | 0.5 | | | — | | | — | | | (0.1) | | | 0.4 | |
NGLs | — | | | — | | | 2.8 | | | — | | | 2.8 | |
Pipeline | | | | | | | | | |
Crude oil | 1.2 | | | 0.1 | | | 0.5 | | | — | | | 1.8 | |
| | | | | | | | | |
Transportation | | | | | | | | | |
| | | | | | | | | |
NGLs | — | | | — | | | 5.8 | | | — | | | 5.8 | |
| | | | | | | | | |
Rail Loading | | | | | | | | | |
Crude oil | — | | | — | | | 0.4 | | | — | | | 0.4 | |
| | | | | | | | | |
Product Sales | | | | | | | | | |
Natural gas | 63.9 | | | 0.3 | | | 98.7 | | | (52.1) | | | 110.8 | |
Crude oil | 128.1 | | | — | | | 374.0 | | | (11.2) | | | 490.9 | |
NGLs | 76.9 | | | — | | | 632.7 | | | (64.0) | | | 645.6 | |
| Water | 1.6 | | | — | | | — | | | — | | | 1.6 | |
Other | 0.2 | | | — | | | 0.3 | | | — | | | 0.5 | |
Total Topic 606 revenues | 362.2 | | | 30.6 | | | 1,115.2 | | | (127.4) | | | 1,380.6 | |
Non-Topic 606 revenues | 0.4 | | | 0.1 | | | 202.7 | | | — | | | 203.2 | |
Total revenues | $ | 362.6 | | | $ | 30.7 | | | $ | 1,317.9 | | | $ | (127.4) | | | $ | 1,583.8 | |
Note 15 – Related Party Transactions
We enter into transactions with our affiliates within the ordinary course of business, including product purchases, marketing services and various operating agreements, including operating leases. We also enter into transactions with our affiliates related to services provided on our expansion projects. For a further description of our related party agreements, see our 2022 Annual Report on Form 10-K. During the three months ended March 31, 2023, we paid approximately $0.5 million of capital expenditures to Applied Consultants, Inc., an affiliate of First Reserve.
The following table shows transactions with our affiliates which are reflected in our consolidated statements of operations (in millions).
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2023 | | 2022 |
Revenues at CEQP and CMLP(1) | | | | | $ | — | | | $ | 97.7 | |
Costs of product/services sold at CEQP and CMLP(2) | | | | | $ | 0.4 | | | $ | 68.5 | |
Operations and maintenance expenses at CEQP and CMLP(3) | | | | | $ | 2.4 | | | $ | 4.8 | |
General and administrative expenses charged by CEQP to CMLP, net(4) | | | | | $ | 8.9 | | | $ | 7.5 | |
General and administrative expenses at CEQP and CMLP(5) | | | | | $ | — | | | $ | 0.9 | |
(1)Includes (i) $59.0 million during the three months ended March 31, 2022 primarily related to the sale of crude oil and NGLs to a subsidiary of Chord; (ii) $36.6 million during the three months ended March 31, 2022 primarily related to gathering and processing services provided to a subsidiary of Chord; (iii) $1.6 million during the three months ended March 31, 2022 related to the sale of NGLs to a subsidiary of Crestwood Permian; and (iv) $0.5 million during the three months ended March 31, 2022 related to compressor leases with a subsidiary of Crestwood Permian.
(2)Includes (i) $0.3 million and $0.9 million during the three months ended March 31, 2023 and 2022 primarily related to purchases of natural gas from a subsidiary of Tres Holdings; (ii) $0.1 million during the three months ended March 31, 2023 related to gathering services under agreements Crestwood Permian Basin; (iii) $31.4 million during the three months ended March 31, 2022 primarily related to purchases of NGLs from a subsidiary of Chord; and (iv) $36.2 million during the three months ended March 31, 2022 related to purchases of natural gas and NGLs from a subsidiary of Crestwood Permian.
(3)We have operating agreements with certain of our unconsolidated 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 three months ended March 31, 2023, we charged $1.3 million to Tres Holdings and $1.1 million to Crestwood Permian Basin. During the three months ended March 31, 2022, we charged $1.2 million to Tres Holdings and $3.6 million to Crestwood Permian.
(4)Includes $10.0 million and $8.6 million of unit-based compensation charges allocated from CEQP to CMLP during the three months ended March 31, 2023 and 2022. In addition, includes $1.1 million of CMLP’s general and administrative costs allocated to CEQP during both the three months ended March 31, 2023 and 2022.
(5)Represents general and administrative expenses related to a transition services agreement with Chord.
The following table shows accounts receivable and accounts payable from our affiliates (in millions):
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| Accounts receivable at CEQP and CMLP | $ | 0.3 | | | $ | 1.6 | |
| Accounts payable at CEQP and CMLP | $ | 0.7 | | | $ | 3.0 | |
