Other(1) 17.2 | | | | (1) | Represents purchases | Purchases of property, plant and equipment that are reimbursable by third parties. | $ | 168.3 | |
(1) Represents purchases of property, plant and equipment that are reimbursable by third parties.
Acquisitions and Divestitures. Below is a summary of the acquisitions and divestitures which impacted our investing activities during the years ended December 31, 2020 and 2019.
•In April 2020, we acquired NGL assets from Plains for approximately $162 million; •In April 2019, Crestwood Niobrara acquired Williams’s 50% equity interest in Jackalope for approximately $462.1 million, net of cash acquired of approximately $22.5 million; and
•In October 2020, we sold our Fayetteville gathering assets for approximately $23 million.
Investments in Unconsolidated Affiliates. Pursuant to our joint venture agreements with our respective equity investments, we periodically make contributions to our equity investments to fund their expansion projects and for other operating purposes. During the yearyears ended December 31, 2020 and 2019, we contributed approximately $3.4 million and $28.3 million to our Crestwood Permian equity investment primarily to fund its expansion projects and we contributed $6.0 million and $8.6 million during 2020 and 2019 to our Stagecoach Gas, Tres Holdings and PRBICother equity investments for other operating purposes. We also contributed $24.4 million to our Jackalope equity investment during 2019 prior to our acquisition of the remaining 50% equity interest in Jackalope from Williams, and this contribution was primarily utilized by us after Jackalope’s consolidation to fund its growth capital expenditures. During 2018 and 2017, we contributed approximately $64.4 million and $58.0 million to our equity investments to fund their expansion projects and other operating activities.For further details regarding these contributions, see Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 6.
Acquisition and Divestitures. Below is a summary of the acquisition and divestitures which impacted our investing activities during the years ended December 31, 2019, 2018 and 2017.
In April 2019, Crestwood Niobrara acquired Williams’ 50% equity interest in Jackalope for approximately $462.1 million, net of cash acquired of approximately $22.5 million;
In October 2018, we sold our West Coast facilities to a third party for net proceeds of approximately $70.5 million; and
In December 2017, we sold 100% of our equity interests in US Salt to an affiliate of Kissner Group Holdings LP for net proceeds of approximately $223.6 million.
Financing Activities
Significant items impactingThe following equity and debt transactions which impacted our financing activities during the years ended December 31, 2019, 20182020 and 20172019 included the following:
Equity and Debt Transactions
In April•During the year ended December 31, 2020, distributions to our partners increased by $10.3 million compared to 2019, primarily due to the increase in our quarterly distribution from $0.60 per limited partner unit to $0.625 per limited partner unit;
•During the year ended December 31, 2019, Crestwood Niobrara issued $235 million in new Series A-3 preferred unitsPreferred Units to CN Jackalope Holdings LLC in conjunction with Crestwood Niobrara’s acquisition of the remaining 50% equity interest in Jackalope from Williams. For a further discussion of this transaction, see Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 12; •During the years ended December 31, 2020 and 2019, Crestwood Niobrara paid cash distributions of $37.1 million and $25.0 million to its non-controlling partner. In addition, during the year ended December 31, 2020, Crestwood Niobrara received contributions of $2.8 million from its non-controlling partner; •During the year ended December 31, 2020, our taxes paid for unit-based compensation vesting increased by approximately $4.6 million compared to 2019, primarily due to higher vesting of unit-based compensation awards; •During the year ended December 31, 2020, we paid approximately $12.6 million to repurchase and cancel approximately $12.8 million of our senior notes due 2023; •During the year ended December 31, 2019, we received net proceeds of approximately $591.1 million from the issuance of our senior notes due 2027; and •During the year ended December 31, 2020, our debt-related transactions resulted in net proceeds of approximately $161.9 million compared to net borrowings of approximately $22.3 million during the year ended December 31, 2019.
Guarantor Summarized Financial Information
Crestwood Midstream and Crestwood Midstream Finance Corp. are issuers of our debt securities (the Issuers). Crestwood Midstream is a holding company and owns no operating assets and has no significant operations independent of its subsidiaries. Crestwood Midstream Finance Corp. is Crestwood Midstream’s 100% owned subsidiary and has no material assets or operations other than those related to its service as co-issuer of our senior notes. Obligations under Crestwood Midstream’s senior notes and its credit facility are jointly and severally guaranteed by substantially all of its subsidiaries (collectively, the Guarantor Subsidiaries), except for Crestwood Infrastructure Holdings LLC, Crestwood Niobrara LLC, Crestwood Pipeline and Storage Northeast LLC, Powder River Basin Industrial Complex LLC, and Tres Palacios Holdings LLC and their respective subsidiaries (collectively, Non-Guarantor Subsidiaries). The assets and credit of our Non-Guarantor Subsidiaries are not available to satisfy the debts of the Issuers or Guarantor Subsidiaries, and the liabilities of our Non-Guarantor Subsidiaries do not constitute obligations of the Issuers or Guarantor Subsidiaries. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 12;9 for additional information regarding our credit facility and senior notes and related guarantees. In December 2017, Crestwood Niobrara redeemed 100%
The following tables provide summarized financial information for the Issuers and Guarantor Subsidiaries (collectively, the Obligor Group) on a combined basis after elimination of significant intercompany balances and transactions between entities in the outstanding Series A preferred units issuedObligor Group. The investment balances in the Non-Guarantor Subsidiaries have been excluded from the supplemental
summarized combined financial information. Transactions with other related parties, including the Non-Guarantor Subsidiaries, represent affiliate transactions and are presented separately in the summarized combined financial information below.
Summarized Combined Balance Sheet Information (in millions)
| | | | | | | December 31, 2020 | Current assets | $ | 371.3 | | Current assets - affiliates | $ | 1.1 | | Property, plant and equipment, net | $ | 2,295.2 | | Non-current assets | $ | 696.2 | | | | Current liabilities | $ | 345.4 | | Current liabilities - affiliates | $ | 5.0 | | Long-term debt, less current portion | $ | 2,483.8 | | Non-current liabilities | $ | 157.4 | |
Summarized Combined Income Statement Information (in millions)
| | | | | | | Year Ended December 31, 2020 | Revenues | $ | 2,150.5 | | Revenues - affiliates | $ | 29.1 | | Cost of products/services sold | $ | 1,579.5 | | Cost of products/services sold - affiliates | $ | 21.1 | | Operations and maintenance expenses(1) | $ | 111.8 | | General and administrative expenses(2) | $ | 86.7 | | Operating income | $ | 158.4 | | Net income | $ | 25.0 | |
(1) We have operating agreements with certain of our affiliates pursuant to which we charge them operations and maintenance expenses in accordance with their respective agreements, and these charges are reflected as a subsidiaryreduction of General Electric Capital Corporationoperations and GE Structured Finance, Inc. (collectively, GE) for an aggregate purchase pricemaintenance expenses in our consolidated statements of $202.7 million and issued $175 million of new Series A-2 preferred units to Jackalope Holdings. For a further discussion of this transaction, see Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 12. We began making distributions to Jackalope Holdings on its Series A-2 preferred units in April 2018.
During the years ended December 31, 2019, 2018 and 2017, Crestwood Niobrara paid cash distributions of approximately $25.0 million, $9.9 million and $15.2 million to its non-controlling partner;
During the years ended December 31, 2019, 2018 and 2017, we made cash distributions of approximately $60.1 million, $60.1 million and $15 million to our preferred unitholders. Prior to September 30, 2017, we paid quarterly distributions to our preferred unitholders by issuing additional preferred units;
operations. During the year ended December 31, 2019,2020, we charged $28.5 million to our distributions to partners increased by approximately $1.6 million compared to 2018 and approximately $3.2 million during 2018 compared to 2017. These increases were due to an increase in our common units outstanding;affiliates under these agreements. During the year ended December 31, 2017, we received net proceeds of approximately $15.2 million from the issuance of CEQP common units; and
During the year ended December 31, 2019, our taxes paid for unit-based compensation vesting increased by approximately $3.6 million compared to 2018 and by approximately $1.9 million during 2018 compared to 2017, primarily due to higher vesting of unit-based compensation awards.
Debt Transactions
During the year ended December 31, 2019, our debt-related transactions resulted in net proceeds of approximately $568.8 million compared to net proceeds of approximately $253.4 million in 2018 and net repayments of approximately $76.3 million in 2017. During 2019, we issued $600 million unsecured senior notes due 2027 and during 2017, we issued $500(2) Includes $26.7 million of senior unsecured notes due in 2025. During 2017, we redeemed all amounts previously outstanding under Crestwood Midstream’s senior notes due in 2020net general and 2022. For a further discussionadministrative expenses that were charged by our affiliates to us.
Contractual Obligations
We are party to various contractual obligations. A portion of these obligations are reflected in our consolidated financial statements, such as long-term debt, leases and other accrued liabilities,asset retirement obligations, while other obligations, such as capital and other commitments and contractual interest amounts are not reflected on our consolidated balance sheets. The following table and discussion summarizes our contractual cash obligations as of December 31, 20192020 (in millions): | | | Less than 1 Year | | 1-3 Years | | 3-5 Years | | Thereafter | | Total | | Less than 1 Year | | 1-3 Years | | 3-5 Years | | Thereafter | | Total | Long-term debt: | | | | | | | | | | Long-term debt: | | | | | | | | | | Principal | $ | 0.2 |
| | $ | 0.4 |
| | $ | 1,257.0 |
| | $ | 1,100.0 |
| | $ | 2,357.6 |
| | Interest(1) | 128.6 |
| | 257.1 |
| | 158.2 |
| | 85.9 |
| | 629.8 |
| | Principal(1) | | Principal(1) | $ | 0.2 | | | $ | 1,406.4 | | | $ | 500.0 | | | $ | 600.0 | | | $ | 2,506.6 | | Interest(2) | | Interest(2) | 123.1 | | | 209.0 | | | 103.4 | | | 45.1 | | | 480.6 | | Standby letters of credit | 31.7 |
| | — |
| | — |
| | — |
| | 31.7 |
| Standby letters of credit | 23.9 | | | — | | | — | | | — | | | 23.9 | | Future minimum payments under leases(2) | 24.5 |
| | 32.9 |
| | 12.8 |
| | 7.5 |
| | 77.7 |
| | Future minimum payments under leases(3) | | Future minimum payments under leases(3) | 19.8 | | | 20.2 | | | 9.5 | | | 5.0 | | | 54.5 | | | Asset retirement obligations | 1.5 |
| | — |
| | — |
| | 33.3 |
| | 34.8 |
| Asset retirement obligations | 1.0 | | | — | | | — | | | 34.1 | | | 35.1 | | Fixed price commodity purchase commitments(3)(4) | 712.3 |
| | 80.1 |
| | — |
| | — |
| | 792.4 |
| 1,398.2 | | | 200.6 | | | — | | | — | | | 1,598.8 | | Purchase commitments and other contractual obligations(4)(5) | 133.3 |
| | — |
| | — |
| | — |
| | 133.3 |
| 25.7 | | | — | | | — | | | — | | | 25.7 | | Total contractual obligations | $ | 1,032.1 |
| | $ | 370.5 |
| | $ | 1,428.0 |
| | $ | 1,226.7 |
| | $ | 4,057.3 |
| Total contractual obligations | $ | 1,591.9 | | | $ | 1,836.2 | | | $ | 612.9 | | | $ | 684.2 | | | $ | 4,725.2 | |
| | (1) | $557.0 million of our long-term debt is variable interest rate debt at the Alternate Base rate or Eurodollar rate plus an applicable spread. These rates plus their applicable spreads were between 3.96% and 6.00% at December 31, 2019. These rates have been applied for each period presented in the table. |
| | (2) | Includes our operating and finance leases. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 15 for a further discussion of these obligations. |
| | (3) | Fixed price purchase commitments are volumetrically offset by third party fixed price sale contracts. |
| | (4) | Primarily related to growth and maintenance contractual purchase obligations in our gathering and processing segment and environmental obligations included in other current liabilities on our balance sheet. Other contractual purchase obligations are defined as legally enforceable agreements to purchase goods or services that have fixed or minimum quantities and fixed or minimum variable price provisions, and that detail approximate timing of the underlying obligations. |
(1) In January 2021, Crestwood Midstream issued $700 million of 6.00% unsecured senior notes due 2029. We utilized the proceeds from the issuance of the 2029 Senior Notes to repurchase and cancel $399.2 million outstanding on our 2023 Senior Notes. We intend to redeem and cancel the remaining 2023 Senior Notes after they become callable at par in April 2021.
(2) $719.0 million of our long-term debt is variable interest rate debt at the Alternate Base rate or Eurodollar rate plus an applicable spread. These rates plus their applicable spreads were between 2.40% and 4.50% at December 31, 2020. These rates have been applied for each period presented in the table.
(3) Includes our operating and finance leases. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 11 for a further discussion of these obligations. (4) Fixed price purchase commitments are volumetrically offset by third party fixed price sale contracts. (5) Primarily related to growth and maintenance contractual purchase obligations in our gathering and processing segment and environmental obligations included in accrued expenses and other liabilities on our consolidated balance sheets. Other contractual purchase obligations are defined as legally enforceable agreements to purchase goods or services that have fixed or minimum quantities and fixed or minimum variable price provisions, and that detail approximate timing of the underlying obligations.
Off-Balance Sheet Arrangements
As of December 31, 2019,2020, we have not entered into any transactions, agreements or other arrangements that would result in off-balance sheet liabilities.
Our equity interest in Crestwood Permian is considered to be a variable interest entity. We are not the primary beneficiary of Crestwood Permian and as a result, we account for our investment in Crestwood Permian as an equity method investment. For a further discussion of our investment in Crestwood Permian, see Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 6.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
In order to maintain a cost effective capital structure, it is our policy to borrow funds using a mix of fixed rate debt and variable rate debt. The market risk inherent in our debt instruments is the potential change arising from increases or decreases in interest rates as discussed below.
For fixed rate debt, changes in the interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect our future earnings and cash flows. As of December 31, 2020 and 2019, both the carrying value and fair value of our fixed rate debt instruments was approximately $1.8$1.8 billion. As of December 31, 2018, the carrying value and fair value of our fixed rate debt instruments was approximately $1.2 billion and $1.1 billion. in each period. For a further discussion of our fixed rate debt, see Part IV, Item 15. Exhibits, and Financial Statement Schedules, Note 9.
We are subject to the risk of loss associated with changes in interest rates on our credit facility. At December 31, 2019,2020, we had obligations totaling $557.0$719.0 million outstanding under the credit facility. These floating rate obligations expose us to the risk of increased interest payments in the event of increases in short-term interest rates. Floating rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates. If the interest rate on our credit facility were to fluctuate by 1% from the rate as of December 31, 2019,2020, our annual interest expense would have changed by approximately $5.6$7.2 million.
Commodity Price, Market and Credit Risk
Inherent in our business are certain business risks, including market risk and credit risk.
Market Risk
We typically do not take title to the natural gas, NGLs or crude oil that we gather, store, or transport for our customers. However, we do take title to (i) the NGLs and crude oil marketed or supplied by our NGL and crude oil supply and logistics operations (MS&L segment); (ii) NGLs under certain of our percentage-of-proceeds contracts (G&P segment); and (iii) crude oil and natural gas purchased from our Arrow producer customers (G&P segment). Our current business model is designed to minimize our exposure to fluctuations in commodity prices, although we are willing to assume commodity price risk in certain processing and marketing activities. We remain subject to volumetric risk under contracts without minimalminimum volume commitments or take-or-pay pricing terms, but absent other market factors that could adversely impact our operations (i.e., market conditions that negatively influence our producer customers’ decisions to develop or produce hydrocarbons), changes in the price of natural gas, NGLs or crude oil should not materially impact our operations.
In our marketing, supply and logistics operations, we consider market risk to be the risk that the value of our NGL and crude services portfolio will change, either favorably or unfavorably, in response to changing market conditions. We take an active role in managing and controlling market risk and have established control procedures, which are reviewed on an ongoing basis. We monitor market risk through a variety of techniques, including daily reporting of the portfolio’s position to senior management. 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 assets fromour price risk management activities as of December 31, 2019, wereare energy marketers, propane retailers, resellers, and dealers.
We engage in hedging and risk management transactions, including various types of forward contracts, options, swaps and futures contracts, to reduce the effect of price volatility on our product costs, protect the value of our inventory positions and to help ensure the availability of propane during periods of short supply. We attempt to balance our contractual portfolio by
purchasing volumes only when we have a matching purchase commitment from our marketing customers. However, we may experience net unbalanced positions from time to time, which we believe to be immaterial in amount. In addition to our ongoing policy to maintain a balanced position, for accounting purposes we are required, on an ongoing basis, to track and report the market value of our derivative portfolio. These derivatives are not designated as hedges for accounting purposes.
The fair value of the derivatives contracts related to price risk management activities as of December 31, 20192020 were assets of $43.2$27.2 million and liabilities of $6.7 million.$76.3 million. We use observable market values for determining the fair value of our trading instruments.these derivative contracts. In cases where actively quoted prices are not available, other external sources are used that incorporate
information about commodity prices in actively quoted markets, quoted prices in less active markets and other market fundamental analysis. Our risk management function regularly compares valuations to independent sources and models on a quarterly basis. The following table represents the impact that a 10% change in market prices would have on the underlying fair value of our commodity-based derivative instruments, along with the net unbalanced position of ourthose commodity-based derivatives at December 31, 2019, the change in market value of our commodity-based derivatives based upon a theoretical change of 10% in the underlying value of the respective derivatives,2020 and the inventory positionsposition that would substantially offset thisthat theoretical change:change at December 31, 2020:
| | | | | | | | | | | | | | | | | | | December 31, 2020 | | Change in Fair Value of Commodity-Based Derivatives (in millions) | | Net Unbalanced Derivative Position | | Inventory Position | Natural gas | $ | 0.7 | | | 2.6 Bcf | | 0.5 Bcf | NGLs | $ | 8.7 | | | 2.8 MMBbls | | 2.6 MMBbls | Crude oil | $ | 4.2 | | | 0.9 MMBbls | | 0.8 MMBbls | | | | | | |
| | | | | | | | | | | | December 31, 2019 | | Net Unbalanced Position (MMBbls) | | Market Value Change (in millions) | | Inventory Position (MMBbls) | Natural gas | 0.5 |
| | $ | 1.1 |
| | — |
| NGLs | 2.4 |
| | 4.4 |
| | 1.9 |
| Crude oil | 0.7 |
| | 3.9 |
| | 0.5 |
| Total | 3.6 |
| | $ | 9.4 |
| | 2.4 |
|
Credit Risk
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 and controlling credit risk and have established control procedures, which are reviewed on an ongoing basis. We have diversified our credit risk through having long-term contracts with many investment grade customers and creditworthy producers. Additionally, we perform credit analyses of our customers on a regular basis pursuant to our corporate credit policy. We have not had any significant losses due to failures to perform by our counterparties.
In November 2019, Chesapeake, our major customer in the Powder River Basin, announced that continued low commodity prices could negatively impact their cash flows and financial condition, and raised substantial doubt about its ability to continue as a going concern given the financial covenants contained in their debt agreements. Subsequent to their announcement, Chesapeake announced that it had refinanced certain amounts of its debt and amended its debt covenants to alleviate certain of its liquidity concerns. Although Chesapeake is current on all amounts due to us, we are closely monitoring our exposure to Chesapeake to ensure they continue to promptly pay amounts invoiced to them.
Under a number of our customer contracts, there are provisions that provide for our right to request or demand credit assurances from our customers including the posting of letters of credit, surety bonds, cash margin or collateral held in escrow for varying levels of future revenues. We continue to closely monitor our producer customer base since a majority of our customers in our gathering and processing and storage and transportation operations are either not rated by the major rating agencies or had below investment grade credit ratings.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and report of independent registered public accounting firm included later in this report under Part IV, Item 15. Exhibits, Financial Statement Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of December 31, 2019,2020, Crestwood Equity and Crestwood Midstream carried out an evaluation under the supervision and with the participation of their respective management, including the Chief Executive Officers and Chief Financial Officers of their General Partners, as to the effectiveness, design and operation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (Exchange Act) Rules 13a-15(e) and 15d-15(e)). Crestwood Equity and Crestwood Midstream maintain controls and procedures designed to provide reasonable assurance that information required to be disclosed in their respective reports that are filed or submitted under the Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC, and that information is accumulated and communicated to their respective management, including the Chief Executive Officers and Chief Financial Officers of their General Partners, as appropriate, to allow timely decisions regarding required disclosure. Such management, including the Chief Executive Officers and Chief Financial Officers of their General Partners, does not expect that the disclosure controls and procedures or the internal controls will prevent and/or detect all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Crestwood Equity’s and Crestwood Midstream’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and the Chief Executive Officers and Chief Financial Officers of their General Partners concluded that such disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2019.2020.
Changes in Internal Control over Financial Reporting
There have been no changes in Crestwood Equity’s or Crestwood Midstream’s internal control over financial reporting during the fourth quarter of 20192020 that have materially affected, or are reasonably likely to materially affect Crestwood Equity’s and Crestwood Midstream’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Crestwood Equity’s and Crestwood Midstream’s management is responsible for establishing and maintaining adequate internal control over financial reporting, pursuant to Exchange Act Rules 13a-15(f). Crestwood Equity’s and Crestwood Midstream’s internal control systems were designed to provide reasonable assurance to their respective management and board of directors regarding the preparation and fair presentation of published financial statements in accordance with GAAP.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and fair presentation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
On April 9, 2019, we acquired the remaining 50% equity interest in Jackalope from Williams. Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting as of December 31, 2019 excluded Jackalope. The financial reporting systems of Jackalope were not fully integrated into our financial reporting systems throughout 2019. Therefore, we did not have the practical ability to perform an assessment of their internal controls in time for this current year-end. We fully expect to include Jackalope in next year’s assessment. Jackalope constituted $1,147.3 million, $70.1 million and $20.9 million in total assets, revenues and net income, respectively, in our consolidated financial statements.
Under the supervision and with the participation of Crestwood Equity’s and Crestwood Midstream’s management, including the Chief Executive Officers and Chief Financial Officers of their General Partners, Crestwood Equity and Crestwood Midstream assessed the effectiveness of their respective internal control over financial reporting as of December 31, 2019.2020. In making this assessment, Crestwood Equity and Crestwood Midstream used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based upon such assessment, Crestwood Equity and Crestwood Midstream concluded that, as of December 31, 2019,2020, their respective internal control over financial reporting is effective, based upon those criteria.
Crestwood Equity’s independent registered public accounting firm, Ernst & Young LLP, issued an attestation report dated February 21, 2020,26, 2021, on the effectiveness of our internal control over financial reporting, which is included herein.
Item 9B. Other Information
On February 20, 2020, John W. Somerhalder, II provided notice of his resignation from the board of directors (the Board) of Crestwood Equity GP LLC, a Delaware limited liability company (CEQP GP) and the general partner of Crestwood Equity Partners LP, a Delaware limited partnership (the Partnership), effective immediately. The resignation of Mr. Somerhalder is not as a result of any disagreement with CEQP GP or the Partnership regarding any matter related to the operations, policies or practices of CEQP GP or the Partnership. Mr. Somerhalder resigned from the Board due to his appointment as the interim President and Chief Executive Officer of CenterPoint Energy, Inc.
None.
PART III
Item 10, “Directors, Executive Officers and Corporate Governance;” Item 11, “Executive Compensation;” Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters;” and Item 13, “Certain Relationships and Related Transactions, and Director Independence” have been omitted from this report for Crestwood Midstream pursuant to the reduced disclosure format permitted by General Instruction I to Form 10-K.
Item 10. Directors, Executive Officers and Corporate Governance
Our General Partner Manages Crestwood Equity Partners LP
Crestwood Equity GP LLC, our general partner, manages our operations and activities. Our general partner is not elected by our unitholders and will not be subject to re-election on a regular basis in the future. Our general partner may not be removed unless that removal is approved by the vote of the holders of not less than 66 2/3% of the outstanding units, including units held by the general partner and their affiliates, and we receive an opinion of counsel regarding limited liability and tax matters. Any removal of the general partner is also subject to the approval of a successor general partner by the vote of the holders of a majority of the outstanding common units. Unitholders do not directly or indirectly participate in our management or operations. Our general partner owes a fiduciary duty to the unitholders. Our general partner is liable, as a general partner, for all of our debts (to the extent not paid from our assets), except for specific nonrecourse indebtedness or other obligations. Whenever possible, our general partner intends to incur indebtedness or other obligations that are nonrecourse. As is commonly the case with publicly-traded limited partnerships, we are managed and operated by the officers of our general partner and are subject to the oversight of the directors of our general partner. The board of directors of our general partner is presently composed of eightnine directors. Directors and Executive Officers The following table sets forth certain information with respect to the executive officers and members of the board of directors of our general partner. Executive officers and directors will serve until their successors are duly appointed or elected. | | | | | | | | | Executive Officers and Directors | Age | Position with our General Partner | Robert G. Phillips | 6566 | President, Chief Executive Officer and Director | Robert T. Halpin | 3637 | Executive Vice President, Chief Financial Officer | Steven M. Dougherty | 4748 | Executive Vice President, Chief Accounting Officer | Joel C. Lambert | 5152 | Executive Vice President, Chief Legal, Compliance and Safety Officer | William H. Moore | 4041 | Executive Vice President, Corporate Strategy | Alvin Bledsoe | 7172 | Director | William Brown | 3839 | Director | Warren H. Gfeller | 6768 | Director | Janeen S. Judah | 6061 | Director | David Lumpkins | 6566 | Director | Gary D. Reaves | 4041 | Director | John J. Sherman | 6465 | Director | Frances M. Vallejo | 55 | Director |
Robert G. Phillips was elected Chairman, President and Chief Executive Officer of our general partner in June 2013 and has served on the Management Committee of Crestwood Holdings since May 2010. He served as Chairman, President and CEO of Legacy Crestwood from November 2007 until October 2013. Previously, Mr. Phillips served as President and Chief Executive Officer and a Director of Enterprise Products Partners L.P. from February 2005 until June 2007 and Chief Operating Officer and a Director of Enterprise Products Partners L.P. from September 2004 until February 2005. Mr. Phillips also served on the Board of Directors of Enterprise GP Holdings L.P., the general partner of Enterprise Products Partners L.P., from February 2006 until April 2007. He previously served as Chairman of the Board and CEO of GulfTerra Energy Partners, L.P. (GTM) from 1999 to 2004 prior to GTM’s merger with Enterprise Product Partners, LP, and held senior executive management positions with El Paso Corporation, including President of El Paso Field Services from 1996 to 2004. Prior to that he was Chairman, President and CEO of Eastex Energy, Inc. from 1981 to1995. Mr. Phillips previously served as a Director of Pride
International, Inc. from October 2007 to May 31, 2011, one of the world’s largest offshore drilling contractors, and was a member of its audit committee. Mr. Phillips has served as a Director of Bonavista Energy Corporation, a Canadian independent oil and gas producer, sincefrom May 2015.2015 to March 2020. Mr. Phillips holds a B.B.A. from The University of Texas at Austin and a Juris
Doctorate from South Texas College of Law. Mr. Phillips was selected to serve as the Chairman of the Board of our general partner because of his deep experience in the midstream business, expansive knowledge of the oil and gas industry, as well as his experience in executive leadership roles for public companies in the energy industry and operational and financial expertise in the oil and gas business generally.
Robert T. Halpin was appointed Executive Vice President, Chief Financial Officer in August 2017. He previously served as the Senior Vice President, Chief Financial Officer from March 2015 to August 2017, Vice President, Finance from January 2013 to March 2015 and as Vice President, Business Development from January 2012 to January 2013. Prior to joining Crestwood, from July 2009 to January 2012, he was an Associate at First Reserve and from July 2007 to June 2009, he was an investment banker in the Global Natural Resources Group at Lehman Brothers and subsequently, Barclays Capital following its acquisition of Lehman Brothers’ Investment Banking Division in September 2008. Mr. Halpin holds a B.B.A. in Finance from The University of Texas at Austin.
Steven M. Dougherty was appointed Executive Vice President and Chief Accounting Officer of our general partner in January 2020. He served as Senior Vice President and Chief Accounting Officer of our general partner from October 2013 to January 2020. He served as Senior Vice President, Interim Chief Financial Officer and Chief Accounting Officer of Legacy Crestwood from January 2013 to October 2013. Mr. Dougherty had served as Vice President and Chief Accounting Officer of Legacy Crestwood since June 2012. Prior to joining Legacy Crestwood, Mr. Dougherty was Director of Corporate Accounting at El Paso Corporation (El Paso) since 2001, with responsibility over El Paso’s corporate segment and in leading El Paso’s efforts in addressing complex accounting matters. Mr. Dougherty also had seven years of experience with KPMG LLP, working with public and private companies in the financial services industry. Mr. Dougherty holds a Master of Public Accountancy from The University of Texas at Austin and is a certified public accountant in the State of Texas.
Joel C. Lambert was appointed Executive Vice President, Chief Legal, Compliance and Safety Officer in January 2020. He served as Senior Vice President, General Counsel and Chief Compliance Officer of our general partner from August 2017 to January 2020. He served as Senior Vice President, General Counsel and Corporate Secretary of our general partner from October 2013 to August 2017. He served as a director of Legacy Crestwood from October 2010 to October 2013. From 2007 until October 2013, Mr. Lambert served as Vice President, Legal of First Reserve Corporation, a private equity company which invests exclusively in the energy industry. From 1998 to 2006, Mr. Lambert was an attorney in the Business and International Section of Vinson & Elkins LLP. In 1997, he was an Intern at the Texas Supreme Court, and has served as a Military Intelligence Specialist for the United States Army. Mr. Lambert holds a Bachelor of Environmental Design from Texas A&M University and a Juris Doctorate from The University of Texas School of Law.
William H. Moore was appointed Executive Vice President, Corporate Strategy of our general partner in January 2020. He served as Senior Vice President, Strategy and Corporate Development of our general partner from October 2013 to January 2020. He joined Legacy Inergy in 2005 as a legal analyst and has held various positions in corporate and business development, including Vice President, Corporate Development. Mr. Moore holds an M.B.A from Fort Hays State University, and a Juris Doctorate from the University of Kansas School of Law.
Alvin Bledsoe was appointed a director of our general partner in October 2013. He served as a director of Crestwood Midstream GP LLC (CMLP GP) from October 2013 to October 2015 and as a director of Legacy Crestwood from July 2007 until October 2013. Mr. Bledsoe currently serves as a director and audit committee chair of SunCoke Energy, Inc. and as a directorChairman of the Board of Gulfport Energy Corporation. Prior to his retirement in 2005, Mr. Bledsoe served as a certified public accountant and served in various senior roles for 33 years at PricewaterhouseCoopers (PwC). From 1978 to 2005, he was a senior client engagement and audit partner for large, publicly-held energy, utility, pipeline, transportation and manufacturing companies. From 1998 to 2000, Mr. Bledsoe served as Global Leader of PwC’s Energy, Mining and Utilities Industries Assurance and Business Advisory Services Group, and from 1992 to 2005 as a managing partner and regional managing partner. During his career, Mr. Bledsoe also served as a member of PwC’s governing body. Mr. Bledsoe was selected to serve as a director of our general partner due to his extensive background in public accounting and auditing, including experience advising publicly-traded energy companies.
William Brown was appointed a director of our general partner in May 2019. Mr. Brown is a Managing Director at First Reserve, a leading global private equity investment firm exclusively focused on energy, which he joined in 2006. Prior to joining First Reserve as an Associate, he was an Investment Banking Analyst at Banc of America Securities LLC. Mr. Brown was appointed to serve as a director of our general partner due to his years of experience in investment origination and
structuring, due diligence, execution and monitoring, with an emphasis on the equipment, manufacturing and midstream energy sectors. Mr. Brown holds a B.S. from Duke University and a M.B.A. from Columbia Business School.
Warren H. Gfeller has been a member of our general partner’s board of directors since March 2001. He served as a director of CMLP GP from December 2011 to October 2015. He has engaged in private investments since 1991. From 1984 to 1991, Mr.
Gfeller served as president and chief executive officer of Ferrellgas, Inc., a retail and wholesale marketer of propane and other natural gas liquids. Mr. Gfeller began his career with Ferrellgas in 1983 as an executive vice president and financial officer. Prior to joining Ferrellgas, Mr. Gfeller was the Chief Financial Officer of Energy Sources, Inc. and a CPA at Arthur Young & Co. He has served as a director of HC2 Holdings, Inc. since June 2016 and non-executive Chairman of the Board since April 2020. He previously served as a director of Inergy Holdings GP, LLC, Zapata Corporation and Duckwall-Alco Stores, Inc. Mr. Gfeller worked for many years in the energy industry. This experience has given him a unique perspective on our operations, and, coupled with his extensive financial and accounting training and practice, has made him a valuable member of our board of directors.
Janeen S. Judah was appointed as a director of our general partner in November 2018. She currently serves as a Directordirector at Patterson-UTI Energy, Inc. and Aethon Energy. Additionally, Ms. Judah serves on the University Lands Advisory Board. She previously served as a director at Jagged Peak Energy Inc. Ms. Judah previously held numerous leadership positions at Chevron Corporation (Chevron), including general manager for Chevron’s Southern Africa business unit, president of Chevron Environmental Management Company and general manager of Reservoir and Production Engineering for Chevron Energy Technology Company. Ms. Judah was appointed to the board due to her more than 35 years of operational and managerial experience within the energy industry. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from The University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. Ms. Judah’s diverse energy experience as well as her environmental expertise adds significant value to our board of directors. David Lumpkins has been a director of our general partner since November 2015. He is Chairman of PetroLogistics II, LLC, a petrochemical development company. He was the co-founder and Executive Chairman of Petrologistics, a NYSE listed company which was acquired by Flint Hills Resources in July 2014. Mr. Lumpkins was also previously the co-founder and Chairman of PL Midstream, a pipeline transportation and storage company based in Louisiana, which was sold to Boardwalk Partners in 2012. Prior to the formation of these companies, Mr. Lumpkins worked in the investment banking industry for 17 years, principally for Morgan Stanley and Credit Suisse. In 1995, Mr. Lumpkins opened Morgan Stanley’s Houston office and served as head of the firm’s southwest region. He is a graduate of The University of Texas where he also received his MBA. Mr. Lumpkins also servesserved as a director of Westlake Chemical Partners LP.LP from January 2015 until November 2019. Mr. Lumpkins’ extensive experience in the petrochemical, energy midstream and finance industries adds significant value to our board of directors.
Gary D. Reaves was appointed to the board of our general partner in January 2019. Mr. Reaves is a Managing Director at First Reserve, a leading global private equity investment firm exclusively focused on energy, which he joined in 2006. Prior to joining First Reserve, he held roles in the Global Energy Group at UBS Investment Bank and Howard Frazier Barker Elliott, Inc. Mr. Reaves was electedappointed to serve as a director of our general partner due to his years of experience in financing energy related companies, including his energy investment experience at First Reserve and his general knowledge of upstream and midstream energy companies. Mr. Reaves holds a B.B.A from The University of Texas.
John J. Sherman has served as a director of our general partner since March 2001 and previously served as a director of CMLP GP. He served asMr. Sherman is the former Chief Executive Officer and President of our general partner from March 2001Inergy, L.P. and Inergy Midstream, L.P., and served in those positions until June 20132013. Additionally, he served as President, Chief Executive Officer and director of our predecessor from 1997 until July 2001.Inergy Holdings GP, LLC. Currently, he is the Chairman and CEO of the Kansas City Royals Club. Prior to joining our predecessor, he was a vice president with Dynegy Inc. from 1996 through 1997. He was responsible for all downstream propane marketing operations, which at the time were the country’s largest. From 1991 through 1996, Mr. Sherman was the president of LPG Services Group, Inc., a company he co-founded and grew to become one of the nation’s largest wholesale marketers of propane before Dynegy acquired LPG Services in 1996. From 1984 through 1991, Mr. Sherman was a vice president and member of the management committee of Ferrellgas. He alsoMr. Sherman previously served as President, Chief Executive Officer anda director of Inergy Holdings GP, LLC. He is currentlyon the Chairman and CEO of the Kansas City Royals and Chief Executive Officer of MLP Holdings, LLC, and a directorboards of Evergy and Tech Accel LLC. We believe the breadth of Mr. Sherman’s experience in the energy industry and his past employment described above, as well as his current board of director positions, has given him valuable knowledge about our business and our industry that makes him an asset to our board of directors.
Frances M. Vallejo was appointed to the board of our general partner on February 1, 2021. She is a former executive officer of ConocoPhillips where she began her career in 1987. She served as Vice President Corporate Planning and Development from April 2015 until December 2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager Corporate Planning and Budgets, Vice President Upstream Planning and Portfolio
Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. Ms. Vallejo has served as a member of the board of Cimarex Energy since May 2017, a member of the Board of Trustees of Colorado School of Mines from 2010 until 2016 and is a member of the Colorado School of Mines Foundation Board of Governors. Ms. Vallejo was appointed to serve as a director of our general partner due to her significant financial and corporate planning and development experience.
Independent Directors
Because we are a limited partnership, the listing standards of the NYSE do not require that we or our general partner have a majority of independent directors on the board, nor that we establish or maintain a nominating or compensation committee of the board. We are, however, required to have an audit committee consisting of at least three members, all of whom are required to be independent as defined by the NYSE. The board of directors has determined that Alvin Bledsoe, Warren Gfeller, Janeen Judah, and David Lumpkins, John Sherman and Frances Vallejo qualify as independent pursuant to independence standards established by the NYSE as set forth in Section 303A.02 of the manual. To be considered an independent director under the NYSE listing standards, the board of directors must affirmatively determine that a director has no material relationship with us other than as a director. In making this determination, the board of directors adheres to all of the specific tests for independence included in the NYSE listing standards and considers all other facts and circumstances it deems necessary or advisable.
Board Committees
Audit Committee
The members of the audit committee are Alvin Bledsoe (Chairman), Janeen Judah, David Lumpkins and David Lumpkins.Frances Vallejo. Our board has determined that each of the members of our audit committee meet the independence standards of the NYSE and is financially literate. In addition, the board has determined that Mr. Bledsoe is an audit committee financial expert based upon the experience stated in his biography. The audit committee’s primary responsibilities are to monitor: (a) the integrity of our financial reporting process and internal control system; (b) the independence and performance of the independent registered public accounting firm; and (c) the disclosure controls and procedures established by management. Our audit committee charter may be found on our website at www.crestwoodlp.com.
Compensation Committee
The members of the compensation committee are Warren Gfeller (Chairman) and Alvin Bledsoe. Although we are not required by NYSE listing standards to have a compensation committee, two members of our board of directors also serve as members of our compensation committee, which oversees compensation decisions for the executive officers of our general partner, as well as the compensation plans described below. Our compensation committee charter may be found on our website at www.crestwoodlp.com.
Conflicts Committee
Our general partner has established a conflicts committee to review specific matters which the board of directors believes may involve conflicts of interest. The conflicts committee will determine if the resolution of any conflict of interest submitted to it is fair and reasonable to us. In addition to satisfying certain other requirements, the members of the conflicts committee must meet the independence standards for service on an audit committee of a board of directors, which standards are established by the NYSE. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners and not a breach by our general partner of any duties it may owe us or our unitholders.
Finance Committee
The members of the finance committee are David Lumpkins (Chairman), Warren Gfeller and Warren Gfeller.Frances Vallejo. Our general partner has established a finance committee to assist the board of directors in fulfilling its oversight responsibilities across the principal areas of corporate finance and risk management.
Sustainability Committee
The membermembers of the sustainability committee isare Janeen Judah (Chairman)., William Brown and Frances Vallejo. Our general partner has established a sustainability committee to provide oversight of our sustainability initiatives and to ensure that environmental, social and governance risks are incorporated into our long-term business strategy. The sustainability committee will also oversee the development of our sustainability strategy, as well as review and recommend to the board for approval any sustainability reporting and disclosure.
Board Leadership Structure
The board has no policy that requires that the positions of the Chairman of the Board (the Chairman) and the Chief Executive Officer be separate or that they be held by the same individual. The board believes that this determination should be based on circumstances existing from time to time, including the composition, skills and experience of the board and its members, specific challenges faced by us or the industry in which it operates, and governance efficiency. Based on these factors, Robert Phillips serves as our Chairman and Chief Executive Officer.
Risk Oversight
We face a number of risks, including environmental and regulatory risks, and others, such as the impact of competition. Management is responsible for the day-to-day management of risks our company faces, while the board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In fulfilling its risk oversight role, the board of directors must determine whether risk management processes designed and implemented by our management are adequate and functioning as designed. Senior management regularly delivers presentations to the board of directors on strategic matters, operations, risk management and other matters, and is available to address any questions or concerns raised by the board. Our board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. The audit committee assists with risk management oversight in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements and our risk management policy relating to our hedging program. The compensation committee assists the board of directors with risk management relating to our compensation policies and programs. The sustainability committee assists the board on matters relating to sustainability, which include environmental risks and opportunities, social responsibility and impacts, employee, contractor and community health and safety, and activities related to stakeholder engagement and community investment.
Meetings of Non-Management Directors Our non-management directors meet in regularly scheduled sessions. Our non-management directors have appointed Warren Gfeller as the lead director to preside at such meetings. In addition, our independent directors meet in executive session at least once a year.
Communication with the Board of Directors
We have established a procedure by which unitholders or interested parties may communicate directly with the board of directors, any committee of the board, any of the independent directors or any one director serving on the board of directors by sending written correspondence addressed to the desired person, committee or group to the attention of Joel C. Lambert, Executive Vice President, Chief Legal, Compliance and Safety Officer, 811 Main Street, Suite 3400, Houston, TX 77002. Communications are distributed to the board of directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication.
Code of Ethics/Governance Guidelines We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, as well as to all of our other employees. Additionally, the board of directors has adopted corporate governance guidelines for the directors and the board. In February 2021, our board of directors approved certain amendments to the corporate governance guidelines to add the following items:
•Duties of the Lead Director;
•Attendance Policy (directors expected to attend at least 75% of board and committee meetings); •Director Stock Ownership Guidelines (maintain equity at least five times the annual cash retainer); •Statement on Board Diversity and Inclusion; and •Limitation on Service on other Boards (CEO should not serve on more than two other boards of a public company and other directors should not serve on more than four other boards of public companies).
The Code of Business Conduct and Ethics and corporate governance guidelines may be found on our website at www.crestwoodlp.com.
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires our company’s directors and executive officers, and persons who own more than 10% of any class of equity securities of our company registered under Section 12 of the Exchange Act, to file with the Securities and Exchange Commission initial reports of ownership and report of changes in ownership in such securities and other equity securities of our company. Securities and Exchange Commission regulations require directors, executive officers and greater than 10% unitholders to furnish our company with copies of all Section 16(a) reports they file. To our knowledge, based solely on review of the reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2019,2020, all section 16(a) filing requirements applicable to our directors, executive officers and greater than 10% unitholders, were met.
Item 11. Executive Compensation
Compensation Discussion and Analysis Introduction
We do not directly employ any of the persons responsible for managing our business. Crestwood Equity GP LLC, our general partner, currently manages our operations and activities, and its board of directors and officers make decisions on our behalf. The compensation of the directors and the executive officers of our general partner is determined by the board of directors of our general partner based on the recommendations of our compensation committee.
All of our executive officers also serve in the same capacities as executive officers of our subsidiaries and the compensation of the Named Executive Officers (NEOs) discussed below reflects total compensation for services to all Crestwood entities described in more detail below. For purposes of this Compensation Discussion and Analysis our NEOs for Fiscal 20192020 were comprised of:
•Robert G. Phillips, our current President and Chief Executive Officer and Director (Principal Executive Officer); •Robert T. Halpin, our Executive Vice President and Chief Financial Officer (Principal Financial Officer); •William H. Moore, our Executive Vice President, Corporate Strategy; •Steven M. Dougherty, our Executive Vice President and Chief Accounting Officer; and •Joel C. Lambert, our Executive Vice President, Chief Legal, Compliance and Safety Officer; andOfficer J. Heath Deneke, our former Executive Vice President and Chief Operating Officer
Compensation Philosophy and Objectives
We employ a compensation philosophy that emphasizes pay for performance. The primary measure of our long-term performance is our ability to maintain sustainable cash distributions to our unitholders and the related unitholder value realized. We believe that by tying a substantial portion of each NEO’s total compensation to financial, operational and safety performance metrics that support sustainability in distributable cash, our pay-for-performance approach aligns the interests of our executive officers with that of our unitholders. Accordingly, the objectives of our total compensation program consist of:
•aligning executive compensation incentives with the creation of unitholder value; •balancing short and long-term performance; •tying short-andshort-term and long-term compensation to the achievement of performance objectives (company, business unit, department and/or individual); and •attracting and retaining the best possible executive talent for the benefit of our unitholders.
By accomplishing these objectives, we intend to optimize long-term unitholder value.
Compensation Setting Process
Role of Management
In order to make pay recommendations, management, with assistance from management’s consultant, provides the CEO with data from the annual proxy statements and annual reports of companies in our comparator group along with pay information compiled from nationally recognized executive and industry-related compensation surveys. The survey data is used to confirm that pay practices among companies in the comparator group are aligned with the market as a whole.
Chief Executive Officer’s Role in the Compensation Setting Process
Our CEO plays a significant role in the compensation setting process. The most significant aspects of his role are:
•assisting in establishing business performance goals and objectives; •evaluating executive officer and company performance; •recommending compensation levels and awards for executive officers other than himself; and •implementing the approved compensation plans.
Our CEO makes recommendations to the compensation committee with respect to financial metrics to be used and determination of performance for performance-based awards as well as other recommendations regarding non-CEO executive compensation, which may be based on our performance, individual performance and the peer group compensation market analysis. The compensation committee considers this information when establishing the total compensation packages of our executive officers. The CEO’s performance and compensation is reviewed, evaluated and established separately by the compensation committee and the full board based on criteria similar to those used for non-CEO executive compensation. The board of directors reviews and ratifies all aspects of executive compensation based on the reports and recommendations from the compensation committee.
Role of the Compensation Committee
For all NEOs, except the CEO, the compensation committee reviews the CEO’s recommendations, supporting market data, and individual performance assessments. In addition, the compensation committee reviews the reasonableness of the CEO’s pay recommendations based on a competitive market study that includes proxy and annual report data from the approved comparator peer group and published compensation survey data. For the CEO, in fiscal 20192020 the board of directors met in executive session without management present to review the CEO’s performance. In this session, the board of directors reviewed:
•Evaluations of the CEO completed by the board members; •The CEO’s written assessment of his own performance compared with the stated goals; and •Business performance of the Company relative to established targets.
The compensation committee used these evaluations and the competitive market study to determine the CEO’s long-term incentive amounts, annual cash incentive target, base pay, and any performance adjustments to be made to the CEO’s annual cash incentive payment.
Role of the Compensation Consultant
Willis Towers Watson is our third-party compensation consultant. Our compensation committee and management believe it is beneficial to have an independent third-party analysis to assist in evaluating and setting executive compensation. Management, in consultation with the compensation committee, chose Willis Towers Watson based on its extensive experience in providing executive compensation advice, including specific experience in the oil and gas industry. For fiscal 2019,2020, Willis Towers Watson provided management and the compensation committee with an analysis of our executive compensation programs, including total direct compensation comprised of base salary, annual incentive and long-term incentive compensation, in order to assess the competitiveness of our programs and to provide conclusions and recommendation. Our compensation committee has taken and will take into consideration the discussions, guidance and compensation studies produced by our compensation consultant in order to make compensation decisions. The compensation committee has assessed the independence of the
compensation consultant and has concluded that the compensation consultant’s work for the compensation committee does not raise any conflict of interest.
Competitive Benchmarking and Peer Group
Our compensation committee considers competitive industry data in making executive pay determinations. Pursuant to our compensation committee’s decisions to maintain a peer group for executive compensation purposes and in view of evolving industry and competitive conditions, Willis Towers Watson, with the assistance of management, proposed certain peer group companies for our compensation committee’s review.
After discussion with Willis Towers Watson and reviewing its recommendation of a peer group based on companies with annual revenues, assets and net income similar to ours and taking into account geographic footprint and employee count, our compensation committee determined that the peer group listed below was the most appropriate for purposes of the 20192020 executive compensation analyses.
| | | | | | | | | | | | | | | | | | | | | Company | | Ticker Symbol | | Revenue (LTM) (1) | | Market Cap (1) | Targa Resources Corp. | | TRGP | | $ | 9,879 | | | $ | 9,232 | | DCP Midstream, LP | | DCP | | $ | 9,294 | | | $ | 3,746 | | EnLink Midstream, LLC | | ENLC | | $ | 7,633 | | | $ | 3,927 | | MPLX LP | | MPLX | | $ | 6,430 | | | $ | 30,252 | | Buckeye Partners, L.P. | | BPL | | $ | 3,805 | | | $ | 6,329 | | Sprague Resources LP | | SRLP | | $ | 3,619 | | | $ | 395 | | Enable Midstream Partners, LP | | ENBL | | $ | 3,408 | | | $ | 5,130 | | Magellan Midstream Partners, L.P. | | MMP | | $ | 3,834 | | | $ | 15,018 | | Genesis Energy LP | | GEL | | $ | 2,689 | | | $ | 2,651 | | SemGroup Corporation | | SEMG | | $ | 2,488 | | | $ | 1,295 | | Western Midstream Partners, LP | | WES | | $ | 2,828 | | | $ | 11,194 | | NuStar Energy L.P. | | NS | | $ | 1,916 | | | $ | 3,029 | | EQM Midstream Partners, LP | | EQM | | $ | 1,545 | | | $ | 6,471 | | Tallgrass Energy Partners, LP | | TGE | | $ | 829 | | | $ | — | | Summit Midstream Partners, LP | | SMLP | | $ | 492 | | | $ | 399 | | 75th Percentile | | | | $ | 5,118 | | | $ | 7,851 | | Median | | | | $ | 2,834 | | | $ | 3,927 | | 25th Percentile | | | | $ | 2,122 | | | $ | 1,973 | | Crestwood Equity Partners LP | | CEQP | | $ | 3,217 | | | $ | 2,609 | | Percent Rank | | | | 55 | % | | 28 | % |
(1)Information is as of October 1, 2019 | | | Buckeye Partners, L.P. | NuStar Energy, L.P. | DCP Midstream Partners, LP | SemGroup Corporation | Enable Midstream Partners, LP | Summit Midstream Partners, LP | EnLink Midstream Partners, LP | Sprague Resources LP | EQM Midstream Partners, LP | Tallgrass Energy Partners, LP | Genesis Energy LP | Targa Resources Corp. | Magellan Midstream Partners, L.P. | Western Gas Partners, LP | MPLX, LP | |
Willis Towers Watson compiled compensation data for the peer group from a variety of sources, including proxy statements and other publicly filed documents, and compiled published survey compensation data from multiple sources. This compensation data was then presented to the compensation committee and used to compare the compensation of our NEOs to our peer group where the peer group had individuals serving in similar positions and to the market.
The compensation committee strives to maintain average total compensation for our executive officers between the 50th and 75th percentile of the peer group with target base and short-term incentives at the 50th percentile and target long-term incentives at the 75th percentile.
Elements of Compensation
The principal elements of compensation for the NEOs are the following:
•base salary; •incentive awards; •long-term incentive plan awards; and
•retirement and health benefits.
In addition, certain NEOs have received incentive units from Crestwood Holdings, a subsidiary of First Reserve, which plays a key role in enabling our general partner to attract, recruit, hire and retain qualified executive officers.
Base Salary
Base salary is designed to compensate executives commensurate with the level of the position they hold and for sustained individual performance (including experience, scope of responsibility, results achieved and potential). The initial base salaries for our NEOs were determined in 2013 and documented in employment agreements we entered into with each of our executive officers in January 2014 (the Executive Employment Agreements). For a more detailed description of the Executive Employment Agreements, see “Narrative Disclosure to Summary Compensation and Grants of Plan Based Awards Tables-Employment Agreements.”
Base salaries for our NEOs are reviewed on an annual basis and at the time of promotion or other change in responsibilities. In determining the amount of any adjustments, the compensation committee uses market data as a tool for assessing the reasonableness of the base salary amounts of the NEOs as compared to the compensation of executives in similar positions with similar responsibility levels in our industry. However, the final determination of base salary amounts was within the compensation committee’s discretion. Based on our objective to maintain target average base compensation at the 50th percentile of the market data, the compensation committee approved increases for our NEOs effective January 1, 2018.2020. Accordingly, the annual base salaries were increased as follows: Mr. Phillips ($775,000)800,000), Mr. Halpin ($465,000)500,000), Mr. Dougherty ($422,000)435,000), Mr. Lambert ($435,000)470,000) and Mr. Moore ($385,000)395,000).
Annual Incentive Awards
Incentive bonuses are granted based on a percentage of each NEO’s base salary. Incentive awards are designed to reward the performance of key employees, including the NEO’s, by providing annual incentive opportunities for the partnership’s achievement of its annual financial, operational, and individual performance goals. In particular, these bonus awards are provided to the NEOs in order to provide competitive incentives to these individuals who can significantly impact performance and promote achievement of our short-term business objectives.
Annual incentive target payouts were initially established for each of our NEOs pursuant to their Employment Agreements. For a more detailed description of the Executive Employment Agreements, see “Narrative Disclosure to Summary Compensation and Grants of Plan BasedPlan-Based Awards Tables-ExecutiveTable - Executive Employment Agreements.” The annual target bonus amounts of our NEOs are reviewed on an annual basis and at the time of promotion or other change in responsibilities. In determining the amount of any adjustments, the compensation committee uses market data as a tool for assessing the reasonableness of the annual incentive targets of the NEOs as compared to executives in similar positions with similar responsibility levels in our industry. However, the final determination of annual target bonus amounts is within the compensation committee’s discretion.
Actual bonuses for 20192020 were determined based on our achievement of compensation committee approved key performance indicators (KPIs) and a board discretionary component. The KPIs for fiscal 20192020 were Distributable Cash Flow Per Common Unit, Adjusted EBITDA, Total Shareholder Return Relative to Peers, Safety, and Optimization and Sustainability.Sustainability Achievements. Each KPI is then weighted based on the relative impact to our overall compensation philosophy and objectives. Actual results between the minimum and maximum target thresholds are pro-rated based on the percentage of target reached. Actual results above the maximum threshold are capped at 140% and results below 40% achievement result in 0% achievement for that KPI, excluding total shareholder return relative to peers. The board discretionary component allows our board of directors the ability to increase the total recommended bonus pool as much as 25% or decrease the bonus pool by as much as 20% based on qualitative factors deemed relevant by the board.
| | | | | | | | | | | | | | | | 2019 Annual Incentive Awards KPIs | | Weighting | | 2019 Target | | 2019 Actual | | % Achievement | Distributable Cash Flow Per Common Unit | | 30 | % | | $ | 3.86 |
| | $ | 4.17 |
| | 108 | % | Adjusted EBITDA | | 30 | % | | $ | 511.6 |
| | $ | 526.5 |
| | 103 | % | Relative Total Shareholder Return | | 10 | % | | 100 | % | | 140 | % | | 140 | % | Total Recordable Incident Rate | | 4 | % | | 1.6 |
| | 0.7 |
| | 140 | % | Preventable Vehicle Incident Rate | | 4 | % | | 1.6 |
| | 1.1 |
| | 131 | % | Lost Time Injury Rate | | 4 | % | | 0.8 |
| | 0.6 |
| | 125 | % | Contractor TRIR on Growth/Maintenance Capital | | 2 | % | | 1.6 |
| | 1.0 |
| | 138 | % | Safety and Compliance Leading Indicators (1) | | 6 | % | | * |
| | * |
| | 109 | % | Optimization and Sustainability Achievements (2) | | 10 | % | | * |
| | * |
| | 90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2020 | | % | | | | Weighting | | 2020 Annual Incentive Awards KPIs | | Actuals | | Target | | Achieved | | Weighting | | Achieved | | Consolidated Distributable Cash Flow Per Common Unit | | $4.91 | | $5.07 | | 97 | % | | 30 | % | | 29 | % | | Consolidated Adjusted EBITDA | | $580 | | $608 | | 72 | % | | 30 | % | | 22 | % | | Total Shareholder Return Relative to Peers | | 101 | % | | 100 | % | | 101 | % | | 10 | % | | 10 | % | | Safety | | | | | | | | | | | | Total Recordable Incident Rate | | 0.96 | | | 1.3 | | | 126 | % | | 4 | % | | 5 | % | | Lost Time Injury Rate | | 0.48 | | | 0.7 | | | 131 | % | | 4 | % | | 5 | % | | Preventable Vehicle Incident Rate | | 1.19 | | | 1.4 | | | 115 | % | | 4 | % | | 5 | % | | Contractor TRIR on Growth/Maintenance Capital | | 1.81 | | | 1.3 | | | 61 | % | | 2 | % | | 1 | % | | Safety and Compliance Leading Indicators(1) | | | | | | | | 6 | % | | 6 | % | | Optimization and Sustainability Achievements(2) | | | | | | | | 10 | % | | 13 | % | | Total Achievement | | | | | | | | | | 96 | % | | | | | | | | | | | | | |
| | (1) | Safety and compliance leading indicators consist of near miss/unsafe act reporting, on-time completion of compliance tasks, positive inspection reports and training completion. |
| | (2) | Optimization and sustainability achievements consist of achieving cost savings goals, on-time sustainability report issuance, implementing new system/process improvements, on-time HR initiative execution and completion of certain projects on-time and on-budget. |
(1)Safety and Compliance Leading Indicators consisted of employee safety goals and near miss reports and completion of compliance tasks and training. (2)Optimization and Sustainability Achievements consisted of operations and maintenance and general and administrative costs, growth capital expenditures, ratings by ESG agencies and cybersecurity training and penetration testing.
Based on the company’s KPI achievement, the actual annual incentive bonus pool for fiscal 20192020 was establishedcalculated at 115%96% of target amount. target. The board then utilized its discretionary authority to increase the recommended bonus pool by 5.5%. The board cited management’s COVID-19 response and execution, ESG leadership, and the completion of several strategic transactions as the rationale for increasing the bonus pool.
The actual bonus amount paid to the individual NEO is then further adjusted based on the individual performance review for such NEO. For 2019, fourAll of our NEOs received the highest performance rating of “1” which increased the actual percentage for such individuals to 140%120% of target, which is equivalent to the company-wide target payout for “1” performance ratings. One NEO received a “2” performance rating, which increase the actual percentage for such individual to 125% of target.
The 20192020 bonus payouts were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | 2020 Base Salary ($) | | Target Bonus ($) | | Percentage of Target Bonus | | Total ($) | Robert G. Phillips | | 800,000 | | 1,000,000 | | 120% | | 1,200,000 | Robert T. Halpin | | 500,000 | | 500,000 | | 120% | | 600,000 | William H. Moore | | 395,000 | | 395,000 | | 120% | | 474,000 | Steven M. Dougherty | | 435,000 | | 391,500 | | 120% | | 469,800 | Joel C. Lambert | | 470,000 | | 423,000 | | 120% | | 507,600 |
| | | | | | | | | | Name | | 2019 Base Salary ($) | | Target Bonus ($) | | Percentage of Target Bonus | | Total ($) | Robert G. Phillips | | 775,000 | | 775,000 | | 140% | | 1,085,000 | Robert T. Halpin | | 465,000 | | 465,000 | | 140% | | 651,000 | William H. Moore | | 385,000 | | 385,000 | | 140% | | 539,000 | Steven M. Dougherty | | 422,000 | | 337,600 | | 140% | | 472,640 | Joel C. Lambert | | 435,000 | | 348,000 | | 125% | | 435,000 |
In addition to annual incentive awards, from time to time the compensation committee may award one-time project completion bonuses.The amount of these awards is recommended by management to the compensation committee based on the size of the
project, the strategic importance of the project to the company and the respective individual’s efforts in sourcing and completing the project. There were no
On January 2, 2020, the compensation committee made one-time project completion bonusrestricted unit awards to each of Mr. Halpin, Mr. Moore and Mr. Dougherty for their efforts in 2019.sourcing, financing and closing the company’s acquisition of the 50% interest in Jackalope Gas Gathering Services, L.L.C. from The Williams Companies in April 2019, which was an important strategic transaction in our efforts to expand our operational footprint in our core growth basins. The restricted units awarded were as follows:
| | | | | | | | | | | | | | | Name | | Units Awarded(1) | | Value at Grant Date ($) | Robert T. Halpin | | 16,223 | | 506,482 | William H. Moore | | 16,223 | | 506,482 | Steven M. Dougherty | | 8,112 | | 253,257 |
(1)The units vest in full three years from the grant date.
Long-Term Incentive Plan Awards
Long-term incentive awards for the NEOs are granted under the Crestwood Equity Partners LP Long Term Incentive Plan in order to promote achievement of our primary long-term strategic business objective of increasing distributable cash flow and increasing unitholder value. This plan was designed to align the economic interests of key employees and directors with those of our common unitholders and to provide an incentive to management for continuous employment with the general partner and its affiliates. Long-term incentive compensation is based upon the common units representing limited partnership interests in us. For fiscal 2019,2020, awards consisted of grants of restricted common units which vest based upon continued service. Long-term incentive plan awards are designed to attract and retain executive talent and to align their economic interests with those of common unitholders.
The initial annual long-term equity incentive targets for our NEOs were established in their Employment Agreements. For a more detailed description of the Executive Employment Agreements, see “Narrative Disclosure to Summary Compensation and Grants of Plan BasedPlan-Based Awards Tables-EmploymentTable - Employment Agreements.” The annual target long-term equity incentives for our NEOs are reviewed on an annual basis and at the time of promotion or other changes in responsibilities. In determining the amount of any adjustments, the compensation committee uses market data as a tool for assessing the reasonableness of long-term incentive targets of the NEOs as compared to executives in similar positions with similar responsibility levels in our industry. However, the final determination of long-term equity awards is within the compensation committee’s discretion. Based on our objective of setting long-term incentive equity awards at the 75th percentile of market data, the annual target long-term incentive awards were increased in 2019 as follows: Mr. Phillips (400%), Messrs. Halpin and Deneke (275%), Mr. Lambert (250%) and Messrs. Moore and Dougherty (225%). Accordingly, theThe following annual restricted unit awards were made to our NEOs in 2019:2020:
| | | | | | | | | | | | | | | | | | | | | Name | | Target Equity Percentage | | 2020 Restricted Units Awarded(1) | | Value at Grant Date ($) | Robert G. Phillips | | 400% | | 103,829 | | 3,264,384 | Robert T. Halpin | | 275% | | 44,614 | | 1,402,664 | William H. Moore | | 225% | | 28,837 | | 906,635 | Steven M. Dougherty | | 225% | | 31,757 | | 998,440 | Joel C. Lambert | | 250% | | 38,125 | | 1,198,650 |
(1)The annual restricted unit grants pay cash distributions in the same amount that would be payable to the holder of common units. | | | | | | | | Name | | Target Equity Percentage | | 2019 Restricted Units Awarded (#) | | Value at Grant Date ($) | Robert G. Phillips | | 400% | | 111,071 | | 3,476,522 | Robert T. Halpin | | 275% | | 45,817 | | 1,434,072 | William H. Moore | | 225% | | 31,037 | | 971,458 | Steven M. Dougherty | | 225% | | 34,020 | | 1,064,826 | Joel C. Lambert | | 250% | | 38,965 | | 1,219,605 | J. Heath Deneke | | 275% | | 53,207 | | 1,665,379 |
The annual restricted unit grants pay partnership distributions in cash in the same amount that would be payable to the holder as if he/she were the holder of common units.
In addition to the annual restricted unit grants, our NEOs are eligible to receive performance phantom unit awards. In fiscal 2019,2020, each of our NEOs received a grant of performance phantom units. These performance phantom units vest over a three-year performance period and are paid out based on a performance multiplier ranging between 50% and 200%, determined based on the actual performance in the third year of the performance period compared to pre-established performance goals. The performance goals were based on achieving a specified level of Adjusted EBITDA, distributable cash flow per unit, Adjusted EBITDA, return on capital invested, and three-year relative total shareholder return, based on the Partnership’s percentile ranking as compared with companies that are contained in the Alerian MLP Index at the time the goals were set. The compensation committee selected these metrics because we believe these are the key value indicators for our unitholders and will most closely align the interests of our NEOs with those of our unitholders. The compensation committee then weighted the four performance measures as follows:
| | | | | | | | | Performance Unit Metric | | Weighting | Adjusted EBITDA | | 30% | Distributable Cash Flow per Unit | | 30% | Return on Capital Invested | | 20% | Total Unitholder Return | | 20% |
For all performance unit grants, the last year of the respective performance period is used to measure whether the performance goal is achieved. The payout multiplier for performance equal to or greater than the threshold is determined on a linear scale between performance levels.
In making the 20192020 performance unit grants to our NEOs, the compensation committee considered: •peer benchmarking data specific to each named executive officer; and •each NEO’s contribution to our long-term growth.
Based on this analysis, the compensation committee approved the following grants of performance units to our named executive officers on February 12,December 16, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Units | | | Name | | Minimum (#) | | Target (#) | | Maximum (#) | | Value at Grant Date ($) | Robert G. Phillips | | 25,898 | | 51,796 | | 103,592 | | 1,416,414 | Robert T. Halpin | | 6,907 | | 13,813 | | 27,626 | | 377,733 | William H. Moore | | 5,180 | | 10,360 | | 20,720 | | 283,305 | Steven M. Dougherty | | 5,180 | | 10,360 | | 20,720 | | 283,305 | Joel C. Lambert | | 6,475 | | 12,949 | | 25,898 | | 354,105 |
| | | | | | | | | | | | Performance Units | | | Name | | Minimum (#) | | Target (#) | | Maximum (#) | | Value at Grant Date ($) | Robert G. Phillips | | 53,744 | | 107,488 | | 214,976 | | 3,677,599 | Robert T. Halpin | | 14,332 | | 28,663 | | 57,326 | | 980,668 | William H. Moore | | 10,749 | | 21,497 | | 42,994 | | 735,506 | Steven M. Dougherty | | 10,749 | | 21,497 | | 42,994 | | 735,506 | Joel C. Lambert | | 13,436 | | 26,872 | | 53,744 | | 919,393 | Heath Deneke | | 16,123 | | 32,246 | | 64,492 | | 1,103,263 |
The performance phantom units are entitled to partnership distributions in the same amount that would be payable to the holder of common units. However, distributions paid on performance phantom units are paid in additional performance units in lieu of cash and such additional performance units are subject to the same performance, vesting and forfeiture provisions as the original performance phantom units. For performance units granted in 2020, the value of the distributions is converted into units each quarter based on the closing price of CEQP units on the payment date.
Risk Assessment Related to our Compensation Structure
We believe that the compensation plans and programs for our executive officers, as well as other employees, are appropriately structured and are not reasonably likely to result in a material risk. We believe these compensation plans and programs are structured in a manner that does not promote excessive risk-taking that could reward poor judgment. We also believe that we have allocated compensation among base salary and shortshort-term and long-term compensation in such a way as to not encourage excessive risk-taking. In particular, we generally do not adjust base annual salaries for our executive officers and other employees significantly from year to year, and therefore the annual base salary of our employees is not generally impacted by our overall financial performance or the financial performance of an operating segment.
Severance and Change of Control Benefits
Our NEOs are entitled to certain severance and change in control benefits as provided in their respective Executive Employment Agreements. For a detailed description of the Executive Employment Agreements for our NEOs, see “Potential Payments upon a Change in Control or Termination during Fiscal 2019.2020.”
Other Compensation Related Matters
Retirement and Health Benefits
We offer a variety of health and welfare and retirement programs to all eligible employees. The NEOs are eligible for these programs on the same basis as other employees. We maintain a 401(k) retirement plan that provides eligible employees with an opportunity to save for retirement on a tax advantaged basis. We match 6% of the deferral to the retirement plan (not to exceed the maximum amount permitted by law) made by eligible participants. Our executive officers are also eligible to participate in additional employee benefits available to our other employees.
Perquisites and Other Compensation
We do not provide perquisites or other personal benefits to any of the NEOs.
Tax Deductibility of Compensation
With respect to the deduction limitations under Section 162(m) of the Code, we are a limited partnership and do not meet the definition of a “corporation” under Section 162(m). Thus, the compensation that we pay to our employees is not subject to the deduction limitations under Section 162(m) of the Code.
Compensation Committee Report
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Members of the Compensation Committee
Warren Gfeller Alvin Bledsoe
Summary Compensation Table for Fiscal 20192020
The following table sets forth the cash and non-cash compensation earned by our NEOs for the fiscal years ended December 31, 2020, 2019 2018, and 2017.2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Fiscal Year | | Salary ($) | | Bonus ($) | | Unit Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($)(2) | |
Total ($) | Robert G. Phillips President, Chief Executive Officer and Director | | 2020 | | 829,807 | | — | | 4,783,070 | | 1,200,000 | | 153,409 | | 6,966,286 | | 2019 | | 774,038 | | — | | 7,154,121 | | 1,085,000 | | 52,138 | | 9,065,297 | | 2018 | | 747,102 | | — | | 4,120,109 | | 1,125,000 | | 17,388 | | 6,009,599 | Robert T. Halpin Executive Vice President, Chief Financial Officer | | 2020 | | 517,884 | | — | | 2,314,193 | | 600,000 | | 21,402 | | 3,453,479 | | 2019 | | 464,423 | | — | | 2,414,740 | | 651,000 | | 21,705 | | 3,551,868 | | 2018 | | 448,538 | | — | | 3,123,311 | | 675,000 | | 16,344 | | 4,263,193 | William H. Moore Executive Vice President, Corporate Strategy | | 2020 | | 409,807 | | — | | 1,716,894 | | 474,000 | | 20,266 | | 2,620,967 | | 2019 | | 385,000 | | — | | 1,706,964 | | 539,000 | | 20,379 | | 2,651,343 | | 2018 | | 384,058 | | — | | 2,319,731 | | 577,500 | | 16,254 | | 3,297,543 | Steven M. Dougherty Executive Vice President, Chief Accounting Officer | | 2020 | | 451,230 | | — | | 1,555,474 | | 469,800 | | 24,222 | | 2,500,726 | | 2019 | | 421,538 | | — | | 1,800,332 | | 472,640 | | 21,654 | | 2,716,164 | | 2018 | | 409,087 | | — | | 2,178,202 | | 492,000 | | 16,470 | | 3,095,759 | Joel C. Lambert Executive Vice President, Chief Legal, Compliance and Safety Officer | | 2020 | | 486,730 | | — | | 1,578,347 | | 507,600 | | 22,902 | | 2,595,579 | | 2019 | | 434,038 | | — | | 2,138,998 | | 435,000 | | 22,839 | | 3,030,875 | | 2018 | | 409,087 | | — | | 2,178,202 | | 492,000 | | 16,614 | | 3,095,903 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Name and Principal Position | | Fiscal Year | | Salary ($) | | Bonus ($) | | Unit Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($)(3) | |
Total ($) | Robert G. Phillips President, Chief Executive Officer and Director | | 2019 | | 774,038 | | — | | 7,154,121 | | 1,085,000 | | 52,138 | | 9,065,297 | | 2018 | | 747,102 | | — | | 4,120,109 | | 1,125,000 | | 17,388 | | 6,009,599 | | 2017 | | 674,650 | | 1,000 | | 4,702,856 | | 961,875 | | 44,439 | | 6,384,820 | Robert T. Halpin Executive Vice President, Chief Financial Officer | | 2019 | | 464,423 | | — | | 2,414,740 | | 651,000 | | 21,705 | | 3,551,868 | | 2018 | | 448,538 | | — | | 3,123,311 | | 675,000 | | 16,344 | | 4,263,193 | | 2017 | | 412,000 | | 1,000 | | 2,091,101 | | 554,040 | | 16,344 | | 3,074,485 | William H. Moore Executive Vice President, Corporate Strategy | | 2019 | | 385,000 | | — | | 1,706,964 | | 539,000 | | 20,379 | | 2,651,343 | | 2018 | | 384,058 | | — | | 2,319,731 | | 577,500 | | 16,254 | | 3,297,543 | | 2017 | | 360,500 | | 201,000 | | 1,385,905 | | 503,550 | | 16,254 | | 2,467,209 | Steven M. Dougherty Executive Vice President, Chief Accounting Officer | | 2019 | | 421,538 | | — | | 1,800,332 | | 472,640 | | 21,654 | | 2,716,164 | | 2018 | | 409,087 | | — | | 2,178,202 | | 492,000 | | 16,470 | | 3,095,759 | | 2017 | | 386,250 | | 1,000 | | 1,412,505 | | 429,840 | | 16,470 | | 2,246,065 | Joel C. Lambert Executive Vice President, Chief Legal, Compliance and Safety Officer | | 2019 | | 434,038 | | — | | 2,138,998 | | 435,000 | | 22,839 | | 3,030,875 | | 2018 | | 409,087 | | — | | 2,178,202 | | 492,000 | | 16,614 | | 3,095,903 | J. Heath Deneke(1) Former Executive Vice President and Chief Operating Officer | | 2019 | | 192,421 | | — | | 2,768,642 | | — | | 1,097,728 | | 4,058,791 | | 2018 | | 525,000 | | 10,000 | | 1,421,359 | | 984,375 | | 16,470 | | 2,957,204 | | 2017 | | 504,375 | | 11,000 | | 4,434,069 | | 740,036 | | 16,387 | | 5,705,867 |
| | (1) | On March 25, 2019, Crestwood Operations LLC entered into a Separation Agreement and Release (Separation Agreement) with J. Heath Deneke, the Company’s former Executive Vice President and Chief Operating Officer. Under the Separation Agreement, Mr. Deneke’s employment terminated effective April 15, 2019. Mr. Deneke received (i) $1,078,620 of severance payments, (ii) reimbursement for the employer contribution portion of elected COBRA coverage for a period of up to 12 months and (iii) accelerated vesting of all his unvested restricted units. |
| | (2) | (1)The material terms of our outstanding LTIP awards are described in “Compensation Discussion and Analysis - Long-Term Incentive Plan Awards.” Unit award amounts reflect the aggregate grant date fair value of unit awards granted during the periods presented calculated in accordance with Accounting Standards Codification Topic 718, Compensation - Stock Compensation (ASC 718), disregarding forfeitures. For performance units granted in 2020, the value of the distributions is converted into units each quarter based on the closing price of CEQP units on the payment date and this value is included in the total unit awards amounts. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 13 for a discussion of the assumptions used to determine the FASB ASC 718 value of the awards. |
(3)(2) All Other Compensation for Fiscal Year 20192020 consisted of the following:
| | Name | | 401(k) Matching Contributions ($) | | Group Term Life Insurance ($) | | Other ($) | | Total ($) | Name | | 401(k) Matching Contributions ($) | | Group Term Life Insurance ($) | | Other ($) | | | Total ($) | Robert G. Phillips | | 16,800 | | 9,017 | | 26,321 (1) | | 52,138 | Robert G. Phillips | | 17,100 | | 8,239 | | 128,070 (1) | | | 153,409 | Robert T. Halpin | | 16,800 | | 4,905 | | — | | 21,705 | Robert T. Halpin | | 17,100 | | 4,302 | | — | | | 21,402 | William H. Moore | | 16,800 | | 3,579 | | — | | 20,379 | William H. Moore | | 17,100 | | 3,166 | | — | | | 20,266 | Steven M. Dougherty | | 16,800 | | 4,854 | | — | | 21,654 | Steven M. Dougherty | | 17,100 | | 4,722 | | 2,400 (2) | | | 24,222 | Joel C. Lambert | | 16,800 | | 6,039 | | — | | 22,839 | Joel C. Lambert | | 17,100 | | 5,802 | | — | | | 22,902 | J. Heath Deneke | | 16,800 | | 2,308 | | 1,078,620 (2) | | 1,097,728 | |
| | (1) | Represents the incremental cost to the Company of the personal use of the Company aircraft. |
| | (2) | Represents severance payments made to Mr. Deneke pursuant to the Separation Agreement. |
(1) Represents the incremental cost to the Company of the personal use of the Company aircraft. (2) Represents the transfer of certain personal seat licenses.
Grants of Plan-Based Awards Table for Fiscal 20192020
The following table provides information concerning each grant of an award made to our NEOs during fiscal 2019.2020. | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payout Under Equity Incentive Plan Awards(2) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payout Under Equity Incentive Plan Awards(2) | | Name | | Grant Date | | Threshold ($) | | Target ($) | |
Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | All Other Unit Awards (#)(3) | | Grant Date Fair Value of Unit and Option Awards ($)(4) | Name | | Grant Date | | Threshold ($) | | Target ($) | |
Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | All Other Unit Awards (#)(3) | | Grant Date Fair Value of Unit and Option Awards ($)(4) | Robert G. Phillips | | 01/10/19 | | 111,071 | | 3,476,522 | Robert G. Phillips | | 01/03/20 | | 103,829 | | 3,264,384 | | 02/12/19 | | 53,744 | | 107,488 | | 214,976 | | 3,677,599 | | 02/10/20 | | 25,898 | | 51,796 | | 103,592 | | 1,416,414 | | | 310,000 | | 775,000 | | 1,162,500 | | | 400,000 | | 1,000,000 | | 1,400,000 | | Robert T. Halpin | | 01/10/19 | | 45,817 | | 1,434,072 | Robert T. Halpin | | 01/02/20 | | 16,223 | | 506,482 | | 02/12/19 | | 14,332 | | 28,663 | | 57,326 | | 980,668 | | 01/03/20 | | 44,614 | | 1,402,664 | | | 186,000 | | 465,000 | | 697,500 | | | 02/10/20 | | 6,907 | | 13,813 | | 27,626 | | 377,733 | | | | 200,000 | | 500,000 | | 700,000 | | | | William H. Moore | | 01/10/19 | | 31,037 | | 971,458 | William H. Moore | | 01/02/20 | | 16,233 | | 506,482 | | 02/12/19 | | 10,729 | | 21,497 | | 42,994 | | 735,506 | | 01/03/20 | | 28,837 | | 906,635 | | | 154,000 | | 385,000 | | 577,500 | | | 2/10/20 | | 5,180 | | 10,360 | | 20,720 | | 283,305 | | | | 158,000 | | 395,000 | | 553,000 | | Steven M. Dougherty | | 01/10/19 | | 34,020 | | 1,064,826 | Steven M. Dougherty | | 01/02/20 | | 8,112 | | 253,257 | | 02/12/19 | | 10,729 | | 21,497 | | 42,994 | | 735,506 | | 01/03/20 | | 31,757 | | 998,440 | | | | 135,040 | | 337,600 | | 506,400 | | | 2/10/20 | | 5,180 | | 10,360 | | 20,720 | | 283,305 | | | | 156,600 | | 391,500 | | 548,100 | | Joel C. Lambert | | 01/10/19 | | 38,965 | | 1,219,605 | Joel C. Lambert | | 01/03/20 | | 38,125 | | 1,198,650 | | 02/12/19 | | 13,436 | | 26,872 | | 53,774 | | 919,393 | | 2/10/20 | | 6,475 | | 12,949 | | 25,898 | | 354,105 | | | 139,200 | | 348,000 | | 522,000 | | | 169,200 | | 423,000 | | 592,200 | | J. Heath Deneke(5) | | 01/10/19 | | 53,207 | | 1,665,379 | | | 02/12/19 | | 16,123 | | 32,246 | | 64,492 | | 1,103,263 | |
| | (1) | Actual amounts paid pursuant to the annual incentive bonus are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The amount of the annual bonus may be increased at the discretion of the compensation committee, irrespective of actual KPI performance, as described above in the “Compensation Discussion and Analysis - Incentive Awards.” |
| | (2) | Represents grants of performance phantom units granted under the Long-Term Incentive Plan. The vesting of the performance units is subject to the attainment of pre-established performance goals based on adjusted distributable cash flow per unit, Adjusted EBITDA, adjusted return on capital employed and total shareholder return relative to the Alerian MLP Index during the third year of a three-year fiscal period. The grant date fair value of the performance unit awards reflected in the table is based on a target payout of such awards. |
| | (3) | Represents grants of restricted units granted under the Long-Term Incentive Plan. The restricted units vest ratably (33.33%) over a three year period beginning on the first anniversary of the grant date. |
| | (4) | Unit award amounts reflect the aggregate grant date fair value of unit awards granted during 2019 calculated in accordance with ASC 718, disregarding forfeitures. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 13 for a discussion of the assumptions used to determine the value of the awards. |
| | (5) | The vesting date of Mr. Deneke’s outstanding restricted units and his 2019 performance phantom units was accelerated to April 15, 2019 pursuant to the terms of the Separation Agreement. |
(1) Actual amounts paid pursuant to the annual incentive bonus are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The amount of the annual bonus may be increased at the discretion of the compensation committee, irrespective of actual KPI performance, as described above in the “Compensation Discussion and Analysis - Incentive Awards.” (2) Represents grants of performance phantom units granted under the Long-Term Incentive Plan. The vesting of the performance units is subject to the attainment of pre-established performance goals based on Adjusted EBITDA, distributable cash flow per unit, return on capital invested and total shareholder return relative to the Alerian MLP Index during the third year of a three-year fiscal period. The grant date fair value of the performance unit awards reflected in the table is based on a target payout of such awards. (3) Represents grants of restricted units granted under the Long-Term Incentive Plan. The restricted units vest ratably (33.33%) over a three-year period beginning on the first anniversary of the grant date. (4) Unit award amounts reflect the aggregate grant date fair value of unit awards granted during 2020 calculated in accordance with ASC 718, disregarding forfeitures. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 13 for a discussion of the assumptions used to determine the value of the awards.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
During January 2014, Crestwood Operations, LLC (Crestwood Operations)We have entered into new employment agreements (the Executive Employment Agreements) with each of our named executive officers. The Executive Employment Agreements each have an initial term ending December 31, 2015 and will renew automatically for additional one-year periods thereafter if neither party gives advance notice of non-renewal. The Executive Employment Agreements provide for the base salary, target bonus amounts and a target equity compensation grant described in our “Compensation Discussion and Analysis.”
Under the terms of the Executive Employment Agreements, if the named executive officer’s employment is terminated during the initial term or a subsequent one-year renewal by Crestwood Operations without “employer cause” or the executive resigns due to “employee cause” or the named executive officer’s employment with Crestwood Operations terminates as a result of Crestwood Operations’ election not to renew the Executive Employment Agreement or due to the executive’s death or
permanent disability, the executive will be entitled to receive, subject to the executive’s execution of a release of claims, severance equal to two (or, in the case of Mr. Phillips, three) times the sum of the executive’s base salary and average annual bonus for the prior two years, payable in equal installments over an 18-month period following termination. In addition, the named executive officer would be entitled to certain subsidized medical benefits over such 18-month period. If the named executive officer fails to comply with covenants in the Executive Employment Agreement, the release of claims or similar agreement, he forfeits the right to receive any severance payment installments following such failure to comply. On February 22, 2018, Crestwood Operations entered into an Omnibus Amendment to each Executive Employment Agreement (“Omnibus Amendment”). Pursuant to the Omnibus Amendment, if the employment of Messrs. Halpin, Moore, Dougherty or Lambert is terminated during the period beginning three months prior to a Change in Control and ending twelve months after a Change in Control, then the severance amount payable shall be increased to three (3) times base salary and average annual bonus for the prior two years.
The foregoing summary of the material provisions of the Executive Employment Agreements and the Omnibus Amendment is intended to be general in nature and is qualified by the full text of the Executive Employment Agreements and the Omnibus Amendment, each of which is incorporated by reference herein as an exhibit to this report.
Outstanding Equity Awards at 20192020 Fiscal Year-End
The following table summarizes the outstanding equity awards as of the end of Fiscal 20192020 for the each of our NEOs. The table includes restricted units and phantom performance units granted under the Crestwood Equity Partners LP Long Term Incentive Plan.
| | | | | | | | | | | | | | | | | UNIT AWARDS | Name | | Number of Units That Have Not Vested(1)(2) | | Market Value of Units That Have Not Vested ($)(3) | Robert G. Phillips | | 448,945 | | 8,520,976 | Robert T. Halpin | | 226,904 | | 4,306,639 | William H. Moore | | 162,929 | | 3,092,392 | Steven M. Dougherty | | 157,869 | | 2,996,354 | Joel C. Lambert | | 167,771 | | 3,184,294 |
| | | | | | | | UNIT AWARDS | Name | | Number of Units That Have Not Vested (#)(1)(2) | | Market Value of Units That Have Not Vested ($)(3) | Robert G. Phillips | | 466,376 | | 17,008,182 | Robert T. Halpin | | 225,032 | | 7,746,086 | William H. Moore | | 160,419 | | 5,552,072 | Steven M. Dougherty | | 160,031 | | 5,540,115 | Joel C. Lambert | | 170,351 | | 5,858,178 | J. Heath Deneke | | 33,268 (4) | | 1,024,320 |
| | (1) | Mr. Phillips' restricted units vest as follows: 25,636 units vest on January 5, 2020, 29,070 units vest on January 8, 2020, 37,023 units vest on January 10, 2020, 104,070 units vest on January 8, 2021, 37,024 units vest on January 8, 2021 and 37,024 units vest on January 8, 2021. Mr. Phillips' restricted units vest as follows: 34,609 units vest on January 3, 2021, 104,070 units vest on January 8, 2021, 37,024 units vest on January 10, 2021, 34,610 units vest on January 3, 2022, 37,024 units vest on January 10, 2022 and 34,610 units vest on January 3, 2023. Mr. Phillips' phantom performance units vests as follows: 107,488 units vest on February 12, 2022 and 59,510 units vest on February 10, 2023. Mr. Halpin's restricted units vest as follows: 14,871 units vest on January 3, 2021, 90,989 units vest on January 8, 2021, 15,272 units vest on January 10, 2021, 14,871 units vest on January 3, 2022, 15,273 units vest on January 10, 2022, 16,223 units vest on January 2, 2023 and 14,872 units vest on January 3, 2023. Mr. Halpin's phantom performance units vests as follows: 89,041 units vest on February 15, 2020 and 107,488 units vest on February 12, 2022. Mr. Halpin's restricted units vest as follows: 16,178 units vest on January 5, 2020, 15,988 units vest on January 8, 2020, 15,272 units vest on January 10, 2020, 90,989 units vest on January 8, 2021, 15,272 units vest on January 10, 2021 and 15,273 units vest on January 10, 2022. Mr. Halpin's phantom performance units vests as |
follows: 27,397 units vest on February 15, 2020 and 28,663 units vest on February 12, 2022.2022 and 15,870 units vest on February 10, 2023. Mr. Moore's restricted units vest as follows: 9,7859,612 units vest on January 5, 2020, 13,776 units vest on January 8, 2020, 10,345 units vest on January 10,3, 2021, 63,776 units vest on January 8, 2021, 10,346 units vest on January 10, 2021, and9,612 units vest on January 3, 2022, 10,346 units vest on January 10, 2022.2022, 16,223 units vest on January 2, 2023 and 9,613 units vest on January 3, 2023. Mr. Moore's phantom performance units vests as follows: 20,548 units vest on February 15, 2020 and 21,497 units vest on February 12, 2022.2022 and 11,904 units vest on February 10, 2023. Mr. Dougherty's restricted units vest as follows: 10,12810,585 units vest on January 5, 2020, 11,919 units vest on January 8, 2020, 11,340 units vest on January 10, 2020,3, 2021, 61,919 units vest on January 8, 2021, 11,340 units vest on January 10, 2021, and10,586 units vest on January 3, 2022, 11,340 units vest on January 10, 2022.2022, 8,112 units vest on January 2, 2023 and 10,586 units vest on January 3, 2023. Mr. Dougherty's phantom units vests as follows: 20,548 units vest on February 15, 2020 and 21,497 units vest on February 12, 2022.2022 and 11,904 units vest on February 10, 2023. Mr. Lambert's restricted units vest as follows: 10,12812,708 units vest on January 5, 2020, 11,919 units vest on January 8, 2020, 12,988 units vest on January 10, 2020,3, 2021, 61,919 units vest on January 8, 2021, 12,988 units vest on January 10, 2021, and12,708 units vest on January 3, 2022, 12,989 units vest on January 10, 2022.2022 and 12,709 units vest on January 3, 2023. Mr. Lambert's phantom performance units vests as follows: 20,548 units vest on February 15, 2020 and 26,872 units vest on February 12, 2022.2022 and 14,878 units vest on February 10, 2023. The above vesting schedule does not include the unitized accrued distributions on the performance phantom unit grants.granted in 2019.
| | (2) | Does not includes unitization of the accrued distributions on the performance phantom unit grants and does not include the potential increase/decrease in the number of performance phantom units that ultimately vest based on satisfaction of the performance factors summarized in the Compensation Discussion & Analysis. |
| | (3) | Market value for CEQP units based on the NYSE closing price of $30.82 on December 31, 2019. |
| | (4) | Represents Mr. Deneke’ss 2017 performance phantom unit grant that was not subject to accelerated vesting upon his termination of employment. |
(2) Does not includes unitization of the accrued distributions on the performance phantom units granted in 2019 and does not include the potential increase/decrease in the number of performance phantom units that ultimately vest based on satisfaction of the performance factors summarized in the Compensation Discussion & Analysis. (3) Market value for CEQP units based on the NYSE closing price of $18.98 on December 31, 2020.
Units Vested During Fiscal 20192020
The following table provides information regarding restricted and performance units vesting during Fiscal 20192020 for each of the NEOs. ValueFor the restricted units, the value realized on vesting was calculated by using the NYSE closing price of Crestwood Equity Partners LP on the day immediately prior to the date that the award vested. For the performance units, the value realized on vesting was calculated by using the NYSE closing price of Crestwood Equity Partners LP on the day the award vested. | | | | UNIT AWARDS | | UNIT AWARDS | Name | | Number of Units Acquired On Vesting (#) | | Value Realized on Vesting ($) | Name | | Number of Units Acquired On Vesting | | Value Realized on Vesting ($) | Robert G. Phillips | | 92,589 | | 2,775,617 | Robert G. Phillips | | 316,206 | | 9,283,531 | Robert T. Halpin | | 52,182 | | 1,567,675 | Robert T. Halpin | | 116,505 | | 3,465,266 | William H. Moore | | 38,658 | | 1,175,547 | William H. Moore | | 85,708 | | 2,547,172 | Steven M. Dougherty | | 34,697 | | 1,039,496 | Steven M. Dougherty | | 85,189 | | 2,530,033 | Joel C. Lambert | | 34,697 | | 1,039,496 | Joel C. Lambert | | 86,837 | | 2,582,209 | J. Heath Deneke | | 281,160 (1) | | 9,985,499 | |
| | (1) | The vesting date of Mr. Deneke’s outstanding restricted units and his 2019 performance unit grant was accelerated to April 15, 2019 pursuant to the terms of the Separation Agreement. |
Vesting of 2017 Performance Grants | | | | | | | | | | | | | | | Metric | | Highest Performance Level | | Performance Achieved | Adjusted EBITDA | | $480 | | $523 | Distributable Cash Flow Per Unit | | $3.50 | | $4.17 | Return on Capital Invested | | 17.5% | | 17.0% | Total Unitholder Return | | >75th Percentile | | >75th Percentile |
The final performance achievement resulted in a weighted average of 196% multiplier which resulted in the issuance of 448,950 common units (net of 268,964 common units withheld to satisfy tax withholding obligations) being issued to the NEOs related to the 2017 performance unit grants.
Pension Benefits during Fiscal 20192020
We do not offer any pension benefits.
Non-qualified Deferred Compensation during Fiscal 20192020
On November 10, 2016, ourOur compensation committee adopted the Crestwood Nonqualified Deferred Compensation Plan (the “NQDC”). The NQDC is a nonqualified deferred compensation plan under which designated eligible participants may elect to defer compensation. Eligible participants include the executive officers, certain other senior officers and members of the Board.
Subject to applicable tax laws, participants may elect to defer up to 50% of their base salary and up to 100% of incentive compensation earned and equity grants. In addition to elective deferrals, the NQDC permits us to make matching contributions and discretionary contributions. Participants may elect to receive payment of their vested account balances in a single cash payment or in annual installments for a period of up to five (5) years. Payments will be made on March 15 of any year at least one year after the deferral date, or upon separation from service. If a participant’s employment terminates before the designated year, payment is accelerated and paid in a lump sum. Compensation deferred under the Plan represents an unsecured obligation of the Company.
Currently, none of our NEOs participate in the NQDC. Mr. Bledsoe deferred his unit awards pursuant to the Non-Qualified Deferred Compensation Plan and Mr. Somerhalder deferred his unit awards and fees pursuant to the Non-Qualified Deferred Compensation Plan.
Potential Payments upon a Change in Control or Termination during Fiscal 20192020
Under the terms of the Executive Employment Agreements, if the named executive officer’s employment is terminated during the initial term or a subsequent one-year renewal by Crestwood Operations without “employer cause” or the executive resigns due to “employee cause” or the named executive officer’s employment with Crestwood Operations terminates as a result of death, permanent disability, or Crestwood Operations’ election not to renew the Executive Employment Agreement, the
executive will be entitled to receive, subject to the executive’s execution of a release of claims, severance equal to two (or, in the case of Mr. Phillips, three) times the sum of the executive’s base salary and average annual bonus for the prior two years, payable in equal installments over an 18-month period following termination. In addition, the named executive officer would be entitled to certain subsidized medical benefits over such 18-month period and all restricted and phantom units held by the named executive officer would vest in full. Under the terms of the Executive Employment Agreements (other than Mr. Phillips), if the named executive officer is terminated during the period beginning three months prior to a Change in Control and ending twelve months after a Change in Control, then the severance amount payable shall be increased to three (3) times his base salary and average annual bonus for the prior two years.
The following table presents information about the gross payments potentially payable to our named executive officers pursuant to the Executive Employment Agreements, assuming each such named executive officer experienced a qualifying termination of employment on December 31, 2019.2020. | | Name | | Cash Severance ($)(1) | | Accelerated Vesting of Restricted Units ($)(2) | | Benefit Continuation ($)(3) | | Total ($) | Name | | Cash Severance ($)(1) | | Accelerated Vesting of Restricted Units ($)(2) | | Benefit Continuation ($)(3) | | Total ($) | Robert G. Phillips | | 5,715,000 | | 17,008,182 | | 24,198 | | 22,747,380 | Robert G. Phillips | | 5,715,000 | | 8,520,976 | | 24,198 | | 14,260,174 | Robert T. Halpin | | 2,326,000 | | 7,746,086 | | 28,003 | | 10,100,089 | Robert T. Halpin | | 2,326,000 | | 4,306,639 | | 28,003 | | 6,660,642 | William H. Moore | | 1,906,500 | | 5,552,072 | | 28,009 | | 7,486,581 | William H. Moore | | 1,906,500 | | 3,092,392 | | 28,009 | | 5,026,901 | Steven M. Dougherty | | 1,834,640 | | 5,540,115 | | 28,009 | | 7,402,764 | Steven M. Dougherty | | 1,834,640 | | 2,996,354 | | 28,009 | | 4,859,003 | Joel C. Lambert | | 1,867,000 | | 5,858,178 | | 28,009 | | 7,753,187 | Joel C. Lambert | | 1,867,000 | | 3,184,294 | | 28,395 | | 5,079,689 |
| | (1) | As described above, amounts reflect cash severance payments payable upon a qualifying termination without “employer cause” or the named executive officer resigns due to “employee cause” that the named executive officer will be entitled to receive pursuant to his Employment Agreements, subject to the executive’s execution of a release of claims. The severance payments are equal to two (or, in the case of Mr. Phillips, three) times the sum of the named executive officer’s base salary and average annual bonus for the prior two years. The cash severance payable to each of Messrs. Halpin, Moore, Dougherty and Lambert would increase to $3,489,000, $2,859,750, $2,751,960, and $2,800,500, respectively, in the event his qualifying termination was in connection with a Change in Control. |
| | (2) | The amounts reflected in the table above include the value of restricted units and performance phantom units which would be subject to accelerated vesting upon a change of control or termination without “employer cause” or the named executive officer resigns due to “employee cause.” The value reflected for the restricted units is based on the NYSE closing price of $30.82 for CEQP units on December 31, 2019. This value does not reflect the unitization of the accrued distributions on the performance phantom unit grants. |
| | (3) | As described above, amounts reflect the value of 18 months’ subsidized medical benefit coverage provided upon a qualifying termination without “employer cause” or the named executive officer resigns due to “employee cause” the named executive officer will be entitled to receive pursuant to his Employment Agreement, subject to the executive’s execution of a release of claims. |
(1)As described above, amounts reflect cash severance payments payable upon a qualifying termination without “employer cause” or the named executive officer resigns due to “employee cause” that the named executive officer will be entitled to receive pursuant to his Employment Agreements, subject to the executive’s execution of a release of claims. The severance payments are equal to two (or, in the case of Mr. Phillips, three) times the sum of the named executive officer’s base salary and average annual bonus for the prior two years. The cash severance payable to each of Messrs. Halpin, Moore, Dougherty and Lambert would increase to $3,489,000, $2,859,750, $2,751,960, and $2,800,500, respectively, in the event his qualifying termination was in connection with a Change in Control. (2)The amounts reflected in the table above include the value of restricted units and performance phantom units which would be subject to accelerated vesting upon a change of control or termination without “employer cause” or the named executive officer resigns due to “employee cause.” The value reflected for the restricted units is based on the NYSE closing price of $18.98 for CEQP units on December 31, 2020. This value does not reflect the unitization of the accrued distributions on the performance phantom unit grants. (3)As described above, amounts reflect the value of 18 months’ subsidized medical benefit coverage provided upon a qualifying termination without “employer cause” or the named executive officer resigns due to “employee cause” the named executive officer will be entitled to receive pursuant to his Employment Agreement, subject to the executive’s execution of a release of claims.
Director Compensation Table for Fiscal 20192020
The following table sets forth the cash and non-cash compensation for Fiscal 20192020 by each person who served as a non-employee director of our general partner during such time.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash ($) | | Unit Awards ($)(1) | | Non-Qualified Deferred Comp Earnings ($) | | Total ($) | Alvin Bledsoe | | 120,000 | | 111,424 | | 3,848 | | 235,272 | William Brown | | — | | 111,424 | | — | | 111,424 | Warren Gfeller | | 140,000 | | 111,424 | | — | | 251,424 | Janeen Judah | | 120,000 | | 111,424 | | — | | 231,424 | David Lumpkins | | 120,000 | | 111,424 | | — | | 231,424 | Gary Reaves | | — | | 111,424 | | — | | 111,424 | John Sherman | | 100,000 | | 111,424 | | — | | 211,424 |
(1)Reflects the value of restricted unit awards, calculated in accordance with ASC 718, disregarding estimated forfeitures. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 13 for a discussion of the assumptions used to determine the FASB ASC Topic 718 value of the awards. These restricted unit grants will vest on the first anniversary of the grant date and as of December 31, 2020, our non-employee directors held the following restricted unit awards: Mr. Brown, Mr. Gfeller, Ms. Judah, Mr. Lumpkins, Mr. Reaves and Mr. Sherman each held 3,569 restricted units. Mr. Bledsoe deferred his unit awards pursuant to the Non-Qualified Deferred Compensation Plan.
| | | | | | | | | | Name | | Fees Earned or Paid in Cash ($) | | Unit Awards ($)(1) | | Non-Qualified Deferred Comp Earnings ($) | | Total ($) | Alvin Bledsoe | | 120,000 | | 103,985 | | 2,815 (2) | | 226,800 | William Brown | | — | | 94,735 | | — | | 94,735 | Warren Gfeller | | 130,000 | | 103,985 | | — | | 233,985 | Janeen Judah | | 120,000 | | 103,985 | | — | | 223,985 | David Lumpkins | | 120,000 | | 103,985 | | — | | 223,985 | Gary Reaves | | — | | 110,683 | | — | | 110,683 | John Sherman | | 100,000 | | 103,985 | | — | | 203,985 | John Somerhalder II(3) | | 120,000 | | 103,985 | | 23,591 (2) | | 247,576 |
| | (1) | Reflects the value of restricted unit awards, calculated in accordance with ASC 718, disregarding estimated forfeitures. See Part IV, Item 15. Exhibits, Financial Statement Schedules, Note 13 for a discussion of the assumptions used to determine the FASB ASC Topic 718 value of the awards. These restricted unit grants will vest on the first anniversary of the grant date and as of December 31, 2019, our non-employee directors held the following restricted unit awards: Mr. France, Mr. Gfeller, Ms. Judah, Mr. Lumpkins and Mr. Sherman each held 3,582 restricted units. Mr. Reaves was appointed to the CEQP board of directors on January 22, 2019 and received 3,582 restricted units and Mr. Brown was appointed to the CEQP board of directors on May 3, 2019 and received 2,686 restricted units. Mr. Bledsoe and Mr. Somerhalder deferred their unit awards pursuant to the Non-Qualified Deferred Compensation Plan. |
| | (2) | Mr. Bledsoe deferred his equity awards pursuant to the Non-Qualified Deferred Compensation Plan. Mr. Somerhalder deferred his equity awards and fees pursuant to the Non-Qualified Deferred Compensation Plan. |
(3) Mr. Somerhalder II resigned from the board of directors effective February 20, 2020.
Compensation of Directors during Fiscal 20192020
Officers of our general partner who also serve as directors do not receive additional compensation. Each director receives cash compensation of $100,000 per year for serving on our board of directors. The lead director, audit committee chairperson, conflicts committee chairperson, finance committee chairperson and financesustainability committee chairperson each receive additional cash compensation of $20,000 per year and the compensation committee chairperson receives additional cash compensation of $10,000$20,000 per year. All cash compensation is paid to the non-employee directors in quarterly installments. Additionally, each non-employee director receives an annual grant of restricted units under our long-term incentive plan equal to approximately $100,000$110,000 in value that vests on the first anniversary of the date of issuance. Each non-employee director is reimbursed for out-of-pocket expenses in connection with attending meetings of the board of directors or committees.
In December 2019, our board of directors approved an increase in the annual grant of restricted units to our directors to approximately $110,000 in value and increased the fee paid to the compensation committee chair to $20,000 per year. These changes became effective on January 1, 2020.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO.
We identified the median employee by examining the 20192020 total taxable cash and equity compensation (again, to the extent taxed to the employee in 2019)2020), as reflected in our payroll records as reported to the Internal Revenue Service on Form W-2, for all individuals, including our CEO, who were employed on December 31, 2019.2020. We included all salaried and hourly employees, whether employed on a full-time, part-time, temporary or seasonal basis. As of December 31, 2019,2020, we employed 899699 such persons. We annualized the compensation for any employees that were not employed for all of 20192020 (not including seasonal or temporary employees), but did not make any other assumptions, adjustments, or estimates with respect to total cash compensation or equity. Since all of our employees, including our CEO, are located in the United States, we did not make any cost of living adjustments in identifying the median employee. We believe the use of total cash and equity compensation for all employees is the most appropriate compensation measure since it includes the main elements of compensation for the majority of our employees.
After identifying the median employee based on total cash and equity compensation, we calculated annual 20192020 compensation for the median employee using the same methodology used to calculate the Chief Executive Officer’s total compensation as reflected in the Summary Compensation Table above. The median employee’s annual 20192020 compensation was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Year | | Salary | | Bonus | | Stock Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Total | Median Employee | | 2020 | | $89,385 | | $11,411 | | $— | | $— | | $94 | | $100,890 |
| | | | | | | | | | | | | | | | Name | | Year | | Salary | | Bonus | | Stock Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Total | Median Employee | | 2019 | | $90,737 | | $— | | $— | | $— | | $— | | $90,737 |
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 20192020 Summary Compensation Table included in this Annual Report, which was $9,065,297.$6,966,286. Our 20192020 ratio of Chief Executive Officer total compensation to our median employee’s total compensation is reasonably estimated to be 99:69:1.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters
The following table sets forth certain information as of February 17, 2020,18, 2021, regarding the beneficial ownership of our common units by:
•each person who then beneficially owned more than 5% of such units then outstanding; •each of the named executive officers of our general partner; •each of the directors of our general partner; and •all of the directors and executive officers of our general partner as a group.
All information with respect to beneficial ownership has been furnished by the respective directors, executive officers or 5% or more unitholders, as the case may be. | | | | | | | Name of Beneficial Owner (1) | | Common Units Beneficially Owned | | Percentage of Common Units Owned | Crestwood Gas Services Holdings LLC(2)(3)(4) | | 9,985,462 |
| | 13.6% | Crestwood Holdings LLC(2)(3) | | 7,484,449 |
| | 10.2% | ALPS Advisors, Inc.(5) | | 5,915,659 |
| | 8.1% | Goldman Sachs Asset Management(6) | | 4,075,975 |
| | 5.6% | Alvin Bledsoe(7) | | 40,768 |
| | * | William Brown | | 6,255 |
| | * | Steven M. Dougherty | | 253,430 |
| | * | Warren H. Gfeller | | 51,983 |
| | * | Robert T. Halpin | | 362,320 |
| | * | Janeen S. Judah | | 7,898 |
| | * | Joel C. Lambert | | 200,099 |
| | * | David Lumpkins | | 41,590 |
| | * | William H. Moore | | 234,662 |
| | * | Robert G. Phillips | | 650,380 |
| | * | Gary D. Reaves | | 7,151 |
| | * | John J. Sherman | | 3,231,482 |
| | 4.4% | Directors and executive officers as a group (12 persons) | | 5,088,018 |
| (8) | 6.9% |
| | | | | | | | | | | | | | | | | | | Name of Beneficial Owner(1) | | Common Units Beneficially Owned | | Percentage of Common Units Owned | | | | | | | | | | | | | | | | | | | | | | | Crestwood Gas Services Holdings LLC | | 9,985,462 | | (2)(3)(4) | 13.4% | | | | | Crestwood Holdings LLC | | 7,484,449 | | (2)(3) | 10.1% | | | | | ALPS Advisors, Inc.(5) | | 6,419,825 | | | 8.6% | | | | | Alvin Bledsoe | | 26,611 | | (6) | * | | | | | William Brown | | 12,050 | | | * | | | | | Steven M. Dougherty | | 284,399 | | | * | | | | | Warren H. Gfeller | | 57,778 | | | * | | | | | Robert T. Halpin | | 400,509 | | | * | | | | | Janeen S. Judah | | 13,693 | | | * | | | | | Joel C. Lambert | | 232,156 | | | * | | | | | David Lumpkins | | 47,385 | | | * | | | | | William H. Moore | | 246,806 | | | * | | | | | Robert G. Phillips | | 779,466 | | | 1% | | | | | Gary D. Reaves | | 9,377 | | | * | | | | | John J. Sherman | | 3,237,277 | | | 4.4% | | | | | Frances M. Vallejo | | 5,795 | | | | | | | | Directors and executive officers as a group (13 persons) | | 5,353,302 | | (7) | 7.2% | | | | |
* Indicates less than 1%
(1) Unless otherwise indicated, the contact address for all beneficial owners in this table is 811 Main Street, Suite 3400, Houston, Texas 77002. (2) Crestwood Holdings LLC has shared voting power and shared investment power with Crestwood Gas Services Holdings LLC on 9,985,462 common units. Crestwood Holdings LLC, FR Crestwood Management Co-Investment LLC, Crestwood Holdings Partners LLC, FR XI CMP Holdings LLC, FR Midstream Holdings LLC, First Reserve GP XI, L.P., First Reserve GP XI, Inc., and William E. Macaulay have control over 17,469,911 common units. | | (3) | Common units owned by Crestwood Gas Services Holdings LLC and Crestwood Holdings LLC are pledged as collateral under the Crestwood Holdings term loan. |
| | (4) | Does not include 438,789 subordinated units. The subordinated units may be converted to common units on a one-for-one basis upon the termination of the subordination period as set forth in the Crestwood Equity Partners LP Partnership Agreement. |
| | (3) Common units owned by Crestwood Gas Services Holdings LLC and Crestwood Holdings LLC are pledged as collateral under the Crestwood Holdings term loan. (4) Does not include 438,789 subordinated units. The subordinated units may be converted to common units on a one-for-one basis upon the termination of the subordination period as set forth in the Crestwood Equity Partners LP Partnership Agreement. (5) | Based on Schedule 13G filed by ALPS Advisors, Inc. on February 7, 2020. The address of ALPS Advisors, Inc. is 1290 Broadway, Suite 1000, Denver, CO 80203. |
(6) Based on Schedule 13G filed by Goldman Sachs Asset ManagementALPS Advisors, Inc. on February 4, 2020.9, 2021. The address of Goldman Sachs Asset ManagementALPS Advisors, Inc. is 200 West Street, New York, NY 10282.1290 Broadway, Suite 1000, Denver, CO 80203.
| | (7) | Includes 14,157 restricted units held in the Crestwood Nonqualified Deferred Compensation Plan. |
| | (8) | Excludes 305,295 performance phantom units granted to our executive officers pursuant to the Crestwood Equity Long-Term Incentive Plan. |
(6) Excludes 19,952 restricted units held in the Crestwood Nonqualified Deferred Compensation Plan. (7) Excludes 373,277 performance phantom units granted to our executive officers pursuant to the Crestwood Equity Long-Term Incentive Plan.
See Part II, Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities of this report for certain information regarding securities authorized for issuance under our equity compensation plans.
Item 13. Certain Relationships, Related Transactions and Director Independence
For a discussion of director independence, see Item 10. Directors, Executive Officers and Corporate Governance. Transactions with Related Persons
First Reserve Joint Venture
In October 2016, Crestwood Infrastructure Holdings LLC, our wholly-owned subsidiary, and an affiliate of First Reserve formed a joint venture, Crestwood Permian Basin Holdings LLC (Crestwood Permian), to fund and own the Nautilus gathering system and other potential investments in the Delaware Permian. On June 21, 2017, the Company contributed to Crestwood Permian 100% of the equity interest of Crestwood New Mexico Pipeline LLC (Crestwood New Mexico), its wholly-owned subsidiary that owns our Delaware Basin assets located in Eddy County, New Mexico. These assets consisted of two dry gas gathering systems (Las Animas systems) and one rich gas gathering system and processing plant (Willow Lake system). In conjunction with this contribution, First Reserve contributed to Crestwood Permian the first $151 million of capital cost required to fund the expansion of the Delaware Basin assets, including a new processing plant located in Orla, Texas and associated pipelines (Orla processing plant), which went into service in July 2018. We received 100% of the available cash flow generated by Crestwood New Mexico through June 30, 2018. Beginning with the third quarter of 2018, both parties will receive distributions on a 50/50 basis.
Review, Approval or Ratification of Transactions with Related Persons Our related person transactions policy applies to any transaction since the beginning of our fiscal year (or currently proposed transaction) in which we or any of our subsidiaries was or is to be a participant, the amount involved exceeds $120,000 and any director, director nominee, executive officer, 5% or greater unitholder (or their immediate family members) had, has or will have a direct or indirect material interest. A transaction that would be covered by this policy would include, but not be limited to, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships. Under our related person transactions policy, related person transactions may be entered into or continue only if the transaction is deemed to be “fair and reasonable” to us, in accordance with the terms of our partnership agreement. Under our partnership agreement, transactions that represent a “conflict of interest” may be approved in one of three ways and, if approved in any of those ways, will be considered “fair and reasonable” to us and the holders of our common units. The three ways enumerated in our related person transactions policy for reaching this conclusion include: | | (i) | approval by the Conflicts Committee of the Board (the Conflicts Committee) under Section 7.9 of our partnership agreement (Special Approval); |
| | (ii) | approval by our Chief Executive Officer applying the criteria specified in Section 7.9 of our partnership agreement if the transaction is in the normal course of the partnership’s business and is (a) on terms no less favorable to the partnership than those generally being provided to or available from unrelated third parties or (b) fair to the partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership); and |
| | (iii) | approval by an independent committee of the Board (either the Audit Committee or a Special Committee) applying the criteria in Section 7.9 of our partnership agreement. |
(i) approval by the Conflicts Committee of the Board (the Conflicts Committee) under Section 7.9 of our partnership agreement (Special Approval); (ii) approval by our Chief Executive Officer applying the criteria specified in Section 7.9 of our partnership agreement if the transaction is in the normal course of the partnership’s business and is (a) on terms no less favorable to the partnership than those generally being provided to or available from unrelated third parties or (b) fair to the partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership); and (iii) approval by an independent committee of the Board (either the Audit Committee or a Special Committee) applying the criteria in Section 7.9 of our partnership agreement. Once a transaction is approved in any of these ways, it is “fair and reasonable” and accordingly deemed (i) approved by all of our partners and (ii) not to be a breach of any fiduciary duties of general partner. Our general partner determines in its discretion which method of approval is required depending on the circumstances. Under our partnership agreement, when determining whether a related party transaction is “fair and reasonable,” if our general partner elects to adopt a resolution or a course of action that has not received Special Approval, then our general partner may consider: •the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; •any customary or accepted industry practices and any customary or historical dealings with a particular person; •any applicable generally accepted accounting practices or principles; and
•such additional factors as the general partner or conflicts committee determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. A related party transaction that is approved by the conflicts committee is, as discussed in greater detail above, conclusively deemed to be fair and reasonable to us. Under our partnership agreement, the material facts known to our general partner or any of our affiliates regarding the transaction must be disclosed to the conflicts committee at the time the committee gives its approval. When approving a related party transaction, the conflicts committee considers all factors it considers relevant, reasonable or appropriate under the circumstances, including the relative interests of any party to the transaction, customary industry practices and generally accepted accounting principles. Under our partnership agreement, in the absence of bad faith by the general partner, the resolution, action or terms so made, taken or provided by the general partner with respect to approval of the related party transaction will not constitute a breach of our partnership agreement or any standard of fiduciary duty.
Under our related person transactions policy, as well as under our partnership agreement, there is no obligation to take any particular conflict to the conflicts committee-empaneling that committee is entirely at the discretion of the general partner. In many ways, the decision to engage the conflicts committee can be analogized to the kinds of transactions for which a Delaware corporation might establish a special committee of independent directors. The general partner considers the specific facts and circumstances involved. Relevant facts would include: •the nature and size of the transaction (i.e., transaction with a controlling unitholder, magnitude of consideration to be paid or received, impact of proposed transaction on the general partner and holders of common units); •the related person’s interest in the transaction; •whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances; •if applicable, the availability of other sources of comparable services or products; and •the financial costs involved, including costs for separate financial, legal and possibly other advisors at our expense. When determining whether a related party transaction is in the normal course of our business and is (a) on terms no less favorable to us than those generally being provided to or available from unrelated third parties or (b) fair to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us), the general partner considers any facts and circumstances that it deems to be relevant, including: •the terms of the transaction, including the aggregate value; •the business purpose of the transaction; •the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; •whether the terms of the transaction are comparable to the terms that would exist in a similar transaction with an unaffiliated third party; •any customary or accepted industry practices; •any applicable generally accepted accounting practices or principles; and •such additional factors as the general partner or the conflicts committee determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances.
Item 14. Principal Accountant Fees and Services
The Audit Committee of the Board of Directors of Crestwood Equity GP LLC approved the engagement of Ernst & Young LLP as the principal accountant to audit the partnership’s financial statements as of and for the fiscal year ending December 31, 2019.2020. The following table summarizes the fees for professional services rendered by Ernst & Young LLP for the years ended December 31, 20192020 and 20182019 (in millions). | | | | | | | | | | | | | 2020 | | 2019 | Audit-related fees(1) | $ | 1.6 | | | $ | 1.9 | | All other fees(2) | — | | | 0.1 | | Total | $ | 1.6 | | | $ | 2.0 | |
| | | | | | | | | | 2019 | | 2018 | Audit-related fees(1) | $ | 1.9 |
| | $ | 1.8 |
| All other fees(2) | 0.1 |
| | 0.2 |
| Total | $ | 2.0 |
| | $ | 2.0 |
|
(1)Includes fees related to the performance of the annual audit and quarterly reviews (including internal control evaluation and reporting) of the consolidated financial statements of Crestwood Equity and Crestwood Midstream and its subsidiaries. (2)Includes fees primarily associated with acquisitions, dispositions and issuances of debt and equity.
| | (1) | Includes fees related to the performance of the annual audit and quarterly reviews (including internal control evaluation and reporting) of the consolidated financial statements of Crestwood Equity and Crestwood Midstream and its subsidiaries. |
| | (2) | Includes fees primarily associated with acquisitions, dispositions and issuances of debt and equity. |
The audit committee of Crestwood Equity’s general partner reviewed and approved all audit and non-audit services provided during 2019.2020. Crestwood Midstream is a wholly-owned subsidiary of Crestwood Equity and, as such, it does not have a separate audit committee. Crestwood Equity’s audit committee has adopted a pre-approval policy for audit and non-audit services. For information regarding the audit committee’s pre-approval policies and procedures, see Crestwood Equity’s audit committee charter on its website at www.crestwoodlp.com.
PART IV
Item 15. Exhibits, Financial Statement Schedules
| | (a) | Exhibits, Financial Statements and Financial Statement Schedules: |
(a)Exhibits, Financial Statements and Financial Statement Schedules:
1.Financial Statements:
See Index Page for Financial Statements
| | 2. | Financial Statement Schedules: |
2.Financial Statement Schedules: Schedule I: Parent Only Condensed Financial Statements Schedule II: Valuation and Qualifying Accounts
Other financial statement schedules have been omitted because they are either not required, are immaterial or are not applicable or because equivalent information has been included in the financial statements, the notes thereto or elsewhere herein. 3.Exhibits:
| | | | | Exhibit Number
| | Description | 2.1 | | Agreement and Plan of Merger, dated as of May 5, 2015, by and among Crestwood Equity Partners LP, Crestwood Equity GP LLC, CEQP ST SUB LLC, MGP GP, LLC, Crestwood Midstream Holdings LP, Crestwood Midstream Partners LP, Crestwood Midstream GP LLC and Crestwood Gas Services GP LLC (incorporated by reference to Exhibit 2.1 to Crestwood Equity Partners LP’s Form 8-K filed May 6, 2015) | | | | 2.2 | | | | | | 2.3 | | | | | | 3.1 | | | | | | 3.2 | | | | | | 3.3 | | | | | | 3.4 | | | | | | 3.5 | | | | | | 3.6 | | | | | | 3.7 | | | | | | 3.8 | | | | | |
Exhibit
Number
| | Description | | | | | | | 3.9Exhibit Number | | Description | 3.9 | | | | | | 3.10 | | | | | | 3.11 | | | | | | 3.12 | | | | | | 3.13 | | | | | | 3.14 | | | | | | 3.15 | | | | | | 3.16 | | | | | | 3.17 | | | | | | 3.18 | | | | | | 3.19 | | | | | | 3.20 | | | | | | 3.21 | | | | | | 3.22 | | | | | | 3.23 | | | | | | 4.1 | | | | | | 4.2 | | | | | |
Exhibit
Number
| | Description | | | | | | | 4.3Exhibit Number | | Description | 4.3 | | | | | | 4.4 | | | | | | 4.5 | | | | | | 4.6 | | | | | | 4.7 | | | | | | 4.8 | | | | | | 4.9 | | | | | | 4.10 | | | | | | 4.11 | | | | | | 4.12 | | | | | | 4.13 | | | | | | 4.14 | | | | | | 4.15 | | | | | | **4.16 | | | | | | *10.1 | | Second AmendedIndenture, dated January 21, 2021, among Crestwood Midstream Partners LP, Crestwood Midstream Finance Corp., the guarantors named therein and Restated Employment Agreement, dated July 21, 2017, between Heath Deneke and Crestwood Operations LLCU.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 10.14.1 to Crestwood Equity Partners LP’s Form 8-K filed on July 25, 2017)January 21, 2021) | | | |
| | | | | | | | | Exhibit Number | | Description | *10.1 | | | | | | *10.310.2 | | | | | | *10.410.3 | | | | | | *10.510.4 | | | | | | *10.610.5 | | | | | | *10.710.6 | | | | | | *10.810.7 | | | | | | *10.910.8 | | | | | | *10.1010.9 | | | | | | *10.1110.10 | | | | | | *10.1210.11 | | | | | | 10.1310.12 | | | | | | 10.1410.13 | | | | | | 10.1510.14 | | | | | | 10.1610.15 | | | | | | 10.17 | | | | | | 10.18 | | Gas Gathering and Processing Agreement, dated as of April 6, 2016, among BlueStone Natural Resources II, LLC, as Producer, Cowtown Pipeline Partners L.P., as Gatherer, and Cowtown Gas Processing Partners LP, as Processor (incorporated herein by reference to Exhibit 10.4 to Crestwood Equity Partners LP’s Form 10-Q filed on August 4, 2016) | | | | 10.19 | | | | | |
| | | | Exhibit
Number 10.16 | | Description | 10.20 | | | | | | 10.21 | | | | | | 10.22 | | | | | | 10.23 | | | | | | 10.2410.17 | | | | | | 10.25*10.19 | | | | | | 10.26 | | | | | | *10.27 | | | | | |
| | | | | | | | | *10.28Exhibit Number | | Description | *10.20 | | | | | | *10.2910.21 | | | | | | *10.3010.22 | | | | | | *10.3110.23 | | | | | | *10.3210.24 | | | | | | 10.3310.25 | | | | | | 10.3410.26 | | | | | | *10.3510.27 | | | | | | 16.1 | | | | | | **21.1 | | | | | |
| | | | Exhibit
Number **22.1 | | Description | | | | **23.1 | | | | | | **23.2 | | | | | | **31.1 | | | | | | **31.2 | | | | | | **31.3 | | | | | | **31.4 | | | | | | **32.1 | | | | | | **32.2 | | | | | | **32.3 | | | | | | **32.4 | | | | | | **99.1 | | | | | | **101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | |
| | | | | | | | | Exhibit Number | | Description | **101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | **101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | **101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | **101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | **101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | 104 | | Cover Page Interactive Data File (contained in Exhibit 101) |
| | | | | | * | Management contracts or compensatory plans or arrangements | ** | Filed herewith |
(b)Exhibits.
See exhibits identified above under Item 15(a)3.
| | (c) | Financial Statement Schedules. |
(c)Financial Statement Schedules.
Financial Statements for Stagecoach Gas Services LLC as of December 31, 20192020 and 20182019 and for the years ended December 31, 2020, 2019 2018 and 20172018 (audited) pursuant to Rule 3-09 of Regulation S-X (17 CFR 210.3-09) and is filed herein as Exhibit 99.1.
Crestwood Equity Partners LP Crestwood Midstream Partners LP
Index to Financial Statements | | | | | | Crestwood Equity Partners LP | | | | Crestwood Equity Partners LP | | | | Report of Independent Registered Public Accounting Firm | | | | Report of Independent Registered Public Accounting Firm on Internal Controls Over Financial Reporting | | | | Audited Consolidated Financial Statements: | | | | Consolidated Balance Sheets | | | | Consolidated Statements of Operations | | | | Consolidated Statements of Comprehensive Income | | | | Consolidated Statements of Partners’ Capital | | | | Consolidated Statements of Cash Flows | | | | Notes to Consolidated Financial Statements | | | | Crestwood Midstream Partners LP | | | | Report of Independent Registered Public Accounting Firm | | | | | | | | Audited Consolidated Financial Statements: | | | | Consolidated Balance Sheets | | | | Consolidated Statements of Operations | | | | Consolidated Statements of Partners’ Capital | | | | Consolidated Statements of Cash Flows | | | | Notes to Consolidated Financial Statements | |
Report of Independent Registered Public Accounting Firm
The Board of Directors of Crestwood Equity GP LLC and Unitholders of Crestwood Equity Partners LP
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Crestwood Equity Partners LP (the Partnership) as of December 31, 20192020 and 2018, and2019, the related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the three years in the period ended December 31, 2019,2020, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership's internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 21, 202026, 2021 expressed an unqualified opinion thereon.
Adoption of ASU No. 2014-09
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue recognition in 2018 due to the adoption of Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606).”
Basis for Opinion These financial statements are the responsibility of the Partnership'sPartnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate. | | | | | | | | | Valuation of goodwillRevenue recognition – Measuring variable consideration | Description of the Matter | The Partnership’s goodwill is attributable to past acquisitions and is assigned to reporting units as of the acquisition date. As discussed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level. At December 31, 2019, the Partnership’s goodwill in its Powder River Basin (“PRB”) reporting unit was $80.3 million.
Auditing management’s annual goodwill impairment test for the PRB reporting unit was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting unit and the sensitivity of the fair value compared to the carrying amount for this reporting unit. The fair value estimate was sensitive to significant assumptions, such as the weighted average cost of capital, revenue growth rate, operating margin, and terminal value, which are affected by expectations about future market or economic conditions.
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Partnership’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above.
To test the estimated fair value of the Partnership’s PRB reporting unit, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Partnership in its analysis. We compared the significant assumptions used by management to current industry and economic trends, changes to the Partnership’s business model, and other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the PRB reporting unit that would result from changes in the assumptions. We also involved our valuation specialist to assist in our evaluation of the valuation methodologies applied by the Partnership and the significant assumptions used in estimating the fair value of the PRB reporting unit. We also tested management’s reconciliation of the fair value of all the Partnership’s reporting units to the market capitalization of the Partnership.
| | Accounting for acquisition of Jackalope Gas Gathering Services |
| | | Description of the Matter | As described in Note 3 to the consolidated financial statements, during 2019, the Partnership acquired the remaining 50% interest in Jackalope Gas Gathering Services, LLC (“Jackalope”) for $484.6 million. The transaction was accounted for as a business combination.
Auditing the Partnership’s accounting for its acquisition of Jackalope was complex due to the significant estimation uncertainty in the Partnership’s determination of the fair value of the customer contract intangible asset of $306 million. The significant estimation uncertainty was primarily due to the sensitivity of the fair value to underlying assumptions about the future performance of the acquired business. The Partnership used a discounted cash flow model to measure the customer contract intangible asset. The significant assumptions used to estimate the fair value of the customer contract intangible asset included the discount rate and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates and capital expenditures). These significant assumptions are forward looking and could be affected by future economic and market conditions.
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Partnership's controls over its accounting for the acquisition. For example, we tested controls over the estimation of the fair value of the customer contract intangible asset, including the valuation models and underlying assumptions used to develop such estimates.
To test the estimated fair value of the customer contract intangible asset, we performed audit procedures that included, among others, evaluating the Partnership's use of the income approach (the excess earnings method) and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to current industry, market and economic trends, to customer contract terms, to the historical results of the acquired business and to other guidelines used by companies within the same industry. We also involved our valuation specialist to assist in our evaluation of the valuation methodology applied by the Partnership and the significant assumptions used in estimating the fair value of the customer contract intangible asset.
| | Revenue recognition - Measuring variable consideration |
| | | Description of the Matter | As described in Note 2 to the consolidated financial statements, the Partnership recognizes revenues for services and products under revenue contracts as obligations to perform services or deliver/sell products under the contracts are satisfied. For a significant customer contract associated with the Partnership’s Powder River Basin gathering and processing assets, consideration to be received under the contact is estimated over the life of the contract and the contract’s transaction price is allocated to each performance obligation in the contract and recognized as revenue when, or as, the performance obligation is satisfied.
Auditing the Partnership'sPartnership’s measurement of variable consideration under this contract involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of future revenues including forecasted production of its customer over the life of the contract. For example, the future revenues estimate reflects management's assumptions about future economic conditions and expected volumes to be gathered and processed, and changes in those assumptions can have a material effect on the amount of revenue recognized.
|
| | | | | | How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Partnership’s process to calculate the variable consideration, including the underlying assumptions about estimates of expected volumes.
Our audit procedures included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management'smanagement’s calculation. This included testing management's estimated future revenues by obtaining the customer’smanagement’s forecasted volumes through comparison to analyst forecasted commodity prices and historical production and the recalculation of revenue based on the volumes and executed contract rates. In addition, we performed sensitivity analyses to evaluate the changes in variable consideration that would result from changes in the Partnership's significant assumptions.
| | Consolidation - Voting Interest ModelPartnership’s forecasted volumes. |
| | | Description of the Matter | As disclosed in Note 3 to the consolidated financial statements, on April 9, 2019, Crestwood Niobrara LLC (“CWN”) issued $235 million of new Series A-3 preferred units and amended the Limited Liability Company (“LLC”) agreement for the existing Series A-2 preferred units in connection with the acquisition of Jackalope Gas Gathering Services, LLC. The Partnership consolidated CWN pursuant to the voting interest model.
Auditing management’s application of the voting interest model to this transaction, including the process of evaluating CWN for consolidation based on whether the holders of the preferred units have protective versus participating rights, required significant judgment. In particular, we had to make significant judgments to audit management’s determination of (1) whether CWN has sufficient equity at risk to finance its activities without additional subordinated financial support and (2) whether the holders of preferred units in CWN participate in significant financial and operating decisions of CWN that are made in the ordinary course of business.
|
| | | How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Partnership’s application of the voting interest model. For example, we tested controls over management’s process of evaluating whether the entity is a voting interest entity and whether the Partnership controls the significant financial and operating decisions of CWN.
To test whether CWN has sufficient equity at risk to finance its activities without additional subordinated financial support, our audit procedures included, among others, evaluating the equity that is considered “at risk,” testing the related fair value and evaluating whether the equity is sufficient to induce other investors to provide the funds necessary for CWN to conduct its activities. For example, we compared certain information to underlying legal documents and tested the fair value of the equity with the assistance of our valuation specialists. We also considered the amount of equity at risk at other similar entities that finance their operations with no additional subordinated financial support to assess whether CWN has sufficient equity. In addition, to test the Partnership’s assertion that it has control over CWN’s significant financial and operating decisions, we performed audit procedures that included, among others, reviewing management’s analysis of the significant activities (e.g., financing decisions, capital decisions and operating decisions) and evaluating which party has the control over such activities. Our evaluation considered the legal rights of the preferred unit holders (e.g., participating and protective) and whether these rights are substantive in nature such that they would prevent the Partnership from controlling the significant financial and operating decisions of CWN. We also compared the rights of each party to underlying legal documents, the LLC agreement, and management committee minutes.
|
/s/ Ernst & Young LLP
We have served as the Partnership’s auditor since 2013. Houston, Texas February 21, 202026, 2021
Report of Independent Registered Public Accounting Firm on Internal Controls Over Financial Reporting The Board of Directors of Crestwood Equity GP LLC and Unitholders of Crestwood Equity Partners LP
Opinion on Internal Control over Financial Reporting We have audited Crestwood Equity Partners LP’s internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Crestwood Equity Partners LP (the Partnership) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 20192020 and 20182019 and related consolidated statements of operations, comprehensive income, partners’ capital and cash flows for each of the three years in the period ended December 31, 2019,2020, and the related notes and financial statement schedules listed in the Index at Item 15(a) of the Partnership and our report dated February 21, 202026, 2021 expressed an unqualified opinion thereon.
Basis for Opinion The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Jackalope Gas Gathering Services, LLC (Jackalope), which is included in the 2019 consolidated financial statements of the Partnership and constituted 21% and 45% of total and net assets, respectively, as of December 31, 2019 and 2% and 7% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of the Partnership also did not include an evaluation of the internal control over financial reporting of Jackalope.
Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP
Houston, Texas February 21, 2020 26, 2021
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED BALANCE SHEETS (in millions, except unit information) | | | | | | | | | | December 31, | | 2019 | | 2018 | Assets | | | | Current assets: | | | | Cash | $ | 25.7 |
| | $ | 0.9 |
| Restricted cash | — |
| | 16.3 |
| Accounts receivable, less allowance for doubtful accounts of $0.3 million at both December 31, 2019 and 2018 | 242.2 |
| | 251.5 |
| Inventory | 53.7 |
| | 64.6 |
| Assets from price risk management activities | 43.2 |
| | 34.7 |
| Prepaid expenses and other current assets | 11.6 |
| | 11.3 |
| Total current assets | 376.4 |
| | 379.3 |
| Property, plant and equipment | 3,612.5 |
| | 2,598.1 |
| Less: accumulated depreciation | 703.4 |
| | 568.4 |
| Property, plant and equipment, net | 2,909.1 |
| | 2,029.7 |
| Intangible assets | 1,076.3 |
| | 770.3 |
| Less: accumulated amortization | 271.1 |
| | 216.5 |
| Intangible assets, net | 805.2 |
| | 553.8 |
| Goodwill | 218.9 |
| | 138.6 |
| Operating lease right-of-use assets, net | 53.8 |
| | — |
| Investments in unconsolidated affiliates | 980.4 |
| | 1,188.2 |
| Other non-current assets | 5.5 |
| | 4.9 |
| Total assets | $ | 5,349.3 |
| | $ | 4,294.5 |
| Liabilities and capital | | | | Current liabilities: | | | | Accounts payable | $ | 189.2 |
| | $ | 213.0 |
| Accrued expenses and other liabilities | 161.7 |
| | 112.4 |
| Liabilities from price risk management activities | 6.7 |
| | 5.8 |
| Current portion of long-term debt | 0.2 |
| | 0.9 |
| Total current liabilities | 357.8 |
| | 332.1 |
| Long-term debt, less current portion | 2,328.3 |
| | 1,752.4 |
| Other long-term liabilities | 301.6 |
| | 173.6 |
| Deferred income taxes | 2.6 |
| | 2.6 |
| Total liabilities | 2,990.3 |
| | 2,260.7 |
| Commitments and contingencies (Note 15) |
|
| |
|
| Interest of non-controlling partner in subsidiary (Note 12) | 426.2 |
| | — |
| Crestwood Equity Partners LP partners' capital (72,282,942 and 71,659,385 common and subordinated units issued and outstanding at December 31, 2019 and 2018) | 1,320.8 |
| | 1,240.5 |
| Preferred units (71,257,445 units issued and outstanding at December 31, 2019 and 2018) | 612.0 |
| | 612.0 |
| Total Crestwood Equity Partners LP partners’ capital | 1,932.8 |
| | 1,852.5 |
| Interest of non-controlling partner in subsidiary (Note 12) | — |
| | 181.3 |
| Total partners’ capital | 1,932.8 |
| | 2,033.8 |
| Total liabilities and capital | $ | 5,349.3 |
| | $ | 4,294.5 |
|
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED BALANCE SHEETS (in millions, except unit information) | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Assets | | | | Current assets: | | | | Cash | $ | 14.0 | | | $ | 25.7 | | | | | | Accounts receivable, less allowance for doubtful accounts of $0.9 million and $0.3 million at December 31, 2020 and 2019 | 262.2 | | | 242.2 | | Inventory | 89.1 | | | 53.7 | | Assets from price risk management activities | 27.2 | | | 43.2 | | | | | | Prepaid expenses and other current assets | 13.4 | | | 11.6 | | Total current assets | 405.9 | | | 376.4 | | Property, plant and equipment | 3,759.6 | | | 3,612.5 | | Less: accumulated depreciation | 842.5 | | | 703.4 | | Property, plant and equipment, net | 2,917.1 | | | 2,909.1 | | Intangible assets | 1,126.1 | | | 1,076.3 | | Less: accumulated amortization | 331.8 | | | 271.1 | | Intangible assets, net | 794.3 | | | 805.2 | | Goodwill | 138.6 | | | 218.9 | | Operating lease right-of-use assets, net | 36.8 | | | 53.8 | | Investments in unconsolidated affiliates | 943.7 | | | 980.4 | | Other non-current assets | 7.3 | | | 5.5 | | Total assets | $ | 5,243.7 | | | $ | 5,349.3 | | | | | | Liabilities and capital | | | | Current liabilities: | | | | Accounts payable | $ | 160.3 | | | $ | 189.2 | | Accrued expenses and other liabilities | 122.0 | | | 161.7 | | Liabilities from price risk management activities | 76.3 | | | 6.7 | | Contingent consideration - current | 19.0 | | | 0 | | Current portion of long-term debt | 0.2 | | | 0.2 | | Total current liabilities | 377.8 | | | 357.8 | | Long-term debt, less current portion | 2,483.8 | | | 2,328.3 | | Contingent consideration | 38.0 | | | 57.0 | | Other long-term liabilities | 253.3 | | | 244.6 | | Deferred income taxes | 2.7 | | | 2.6 | | Total liabilities | 3,155.6 | | | 2,990.3 | | Commitments and contingencies (Note 10) | 0 | | 0 | Interest of non-controlling partner in subsidiary (Note 12) | 432.7 | | | 426.2 | | Crestwood Equity Partners LP partners' capital (73,970,208 and 72,282,942 common and subordinated units issued and outstanding at December 31, 2020 and 2019) | 1,043.4 | | | 1,320.8 | | Preferred units (71,257,445 units issued and outstanding at December 31, 2020 and 2019) | 612.0 | | | 612.0 | | | | | | | | | | Total partners’ capital | 1,655.4 | | | 1,932.8 | | Total liabilities and capital | $ | 5,243.7 | | | $ | 5,349.3 | |
See accompanying notes.
| | | | | | | | | | | | | | | | | | CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per unit data) | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Revenues: | | | | | | Product revenues: | | | | | | Gathering and processing | $ | 240.2 | | | $ | 455.8 | | | $ | 670.5 | | | | | | | | Marketing, supply and logistics | 1,552.8 | | | 2,296.6 | | | 2,639.2 | | Related party (Note 19) | 27.3 | | | 2.9 | | | 0 | | | 1,820.3 | | | 2,755.3 | | | 3,309.7 | | Service revenues: | | | | | | Gathering and processing | 391.2 | | | 380.0 | | | 276.1 | | Storage and transportation | 13.8 | | | 20.4 | | | 17.1 | | Marketing, supply and logistics | 28.5 | | | 26.2 | | | 50.2 | | Related party (Note 19) | 0.5 | | | 0 | | | 1.0 | | | 434.0 | | | 426.6 | | | 344.4 | | Total revenues | 2,254.3 | | | 3,181.9 | | | 3,654.1 | | | | | | | | Costs of product/services sold (exclusive of items shown separately below): | | | | | | Product costs | 1,558.8 | | | 2,469.7 | | | 2,950.5 | | Product costs - related party (Note 19) | 21.0 | | | 45.4 | | | 134.7 | | Service costs | 20.7 | | | 29.8 | | | 44.2 | | Total costs of products/services sold | 1,600.5 | | | 2,544.9 | | | 3,129.4 | | | | | | | | Operating expenses and other: | | | | | | Operations and maintenance | 131.8 | | | 138.8 | | | 125.8 | | General and administrative | 91.5 | | | 103.4 | | | 88.1 | | Depreciation, amortization and accretion | 237.4 | | | 195.8 | | | 168.7 | | Loss on long-lived assets, net | 26.0 | | | 6.2 | | | 28.6 | | Goodwill impairment | 80.3 | | | 0 | | | 0 | | Gain on acquisition | 0 | | | (209.4) | | | 0 | | | | | | | | | 567.0 | | | 234.8 | | | 411.2 | | | | | | | | | | | | | | | | | | | |
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per unit data) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Revenues: | | | | | | Product revenues: | | | | | | Gathering and processing | $ | 455.8 |
| | $ | 670.5 |
| | $ | 1,369.1 |
| Marketing, supply and logistics | 2,296.6 |
| | 2,639.2 |
| | 2,093.1 |
| Related party (Note 16) | 2.9 |
| | — |
| | — |
| | 2,755.3 |
| | 3,309.7 |
| | 3,462.2 |
| Service revenues: | | | | | | Gathering and processing | 380.0 |
| | 276.1 |
| | 317.3 |
| Storage and transportation | 20.4 |
| | 17.1 |
| | 37.2 |
| Marketing, supply and logistics | 26.2 |
| | 50.2 |
| | 62.4 |
| Related party (Note 16) | — |
| | 1.0 |
| | 1.8 |
| | 426.6 |
| | 344.4 |
| | 418.7 |
| Total revenues | 3,181.9 |
| | 3,654.1 |
| | 3,880.9 |
| | | | | | | Costs of product/services sold (exclusive of items shown separately below): | | | | | | Product costs | 2,469.7 |
| | 2,950.5 |
| | 3,309.5 |
| Product costs - related party (Note 16) | 45.4 |
| | 134.7 |
| | 15.3 |
| Service costs | 29.8 |
| | 44.2 |
| | 49.9 |
| Total costs of products/services sold | 2,544.9 |
| | 3,129.4 |
| | 3,374.7 |
| | | | | | | Operating expenses and other: | | | | | | Operations and maintenance | 138.8 |
| | 125.8 |
| | 136.0 |
| General and administrative | 103.4 |
| | 88.1 |
| | 96.5 |
| Depreciation, amortization and accretion | 195.8 |
| | 168.7 |
| | 191.7 |
| Loss on long-lived assets, net | 6.2 |
| | 28.6 |
| | 65.6 |
| Gain on acquisition | (209.4 | ) | | — |
| | — |
| Goodwill impairment | — |
| | — |
| | 38.8 |
| Loss on contingent consideration | — |
| | — |
| | 57.0 |
| | 234.8 |
| | 411.2 |
| | 585.6 |
| Operating income (loss) | 402.2 |
| | 113.5 |
| | (79.4 | ) |
| | | | | | | | | | | | | | | | | | CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per unit data) | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Operating income | 86.8 | | | 402.2 | | | 113.5 | | | | | | | | Earnings from unconsolidated affiliates, net | 32.5 | | | 32.8 | | | 53.3 | | Interest and debt expense, net | (133.6) | | | (115.4) | | | (99.2) | | Gain (loss) on modification/extinguishment of debt | 0.1 | | | 0 | | | (0.9) | | Other income (expense), net | (0.7) | | | 0.6 | | | 0.4 | | Income (loss) before income taxes | (14.9) | | | 320.2 | | | 67.1 | | Provision for income taxes | (0.4) | | | (0.3) | | | (0.1) | | Net income (loss) | (15.3) | | | 319.9 | | | 67.0 | | Net income attributable to non-controlling partner | 40.8 | | | 34.8 | | | 16.2 | | Net income (loss) attributable to Crestwood Equity Partners LP | (56.1) | | | 285.1 | | | 50.8 | | Net income attributable to preferred units | 60.1 | | | 60.1 | | | 60.1 | | Net income (loss) attributable to partners | $ | (116.2) | | | $ | 225.0 | | | $ | (9.3) | | | | | | | | | | | | | | | | | | | | Net income (loss) per limited partner unit: (Note 14) | | | | | | Basic | $ | (1.59) | | | $ | 3.11 | | | $ | (0.13) | | Diluted | $ | (1.59) | | | $ | 2.93 | | | $ | (0.13) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted-average limited partners’ units outstanding: | | | | | | Basic | 73.2 | | | 71.8 | | | 71.2 | | Dilutive | 0 | | | 5.1 | | | 0 | | Diluted | 73.2 | | | 76.9 | | | 71.2 | |
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (continued) (in millions, except per unit data) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Earnings from unconsolidated affiliates, net | 32.8 |
| | 53.3 |
| | 47.8 |
| Interest and debt expense, net | (115.4 | ) | | (99.2 | ) | | (99.4 | ) | Loss on modification/extinguishment of debt | — |
| | (0.9 | ) | | (37.7 | ) | Other income, net | 0.6 |
| | 0.4 |
| | 1.3 |
| Income (loss) before income taxes | 320.2 |
| | 67.1 |
| | (167.4 | ) | (Provision) benefit for income taxes | (0.3 | ) | | (0.1 | ) | | 0.8 |
| Net income (loss) | 319.9 |
| | 67.0 |
| | (166.6 | ) | Net income attributable to non-controlling partner | 34.8 |
| | 16.2 |
| | 25.3 |
| Net income (loss) attributable to Crestwood Equity Partners LP | 285.1 |
| | 50.8 |
| | (191.9 | ) | Net income attributable to preferred units | 60.1 |
| | 60.1 |
| | 62.5 |
| Net income (loss) attributable to partners | $ | 225.0 |
| | $ | (9.3 | ) | | $ | (254.4 | ) | | | | | | | Subordinated unitholders’ interest in net income | $ | 1.4 |
| | $ | — |
| | $ | — |
| Common unitholders’ interest in net income (loss) | $ | 223.6 |
| | $ | (9.3 | ) | | $ | (254.4 | ) | Net income (loss) per limited partner unit: | | | | | | Basic | $ | 3.11 |
| | $ | (0.13 | ) | | $ | (3.64 | ) | Diluted | $ | 2.93 |
| | $ | (0.13 | ) | | $ | (3.64 | ) | Weighted-average limited partners’ units outstanding: | | | | | | Basic | 71.8 |
| | 71.2 |
| | 69.8 |
| Dilutive | 5.1 |
| | — |
| | — |
| Diluted | 76.9 |
| | 71.2 |
| | 69.8 |
|
See accompanying notes.
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Net income (loss) | $ | 319.9 |
| | $ | 67.0 |
| | $ | (166.6 | ) | Change in fair value of Suburban Propane Partners, L.P. units | 0.3 |
| | (0.7 | ) | | (0.8 | ) | Comprehensive income (loss) | 320.2 |
| | 66.3 |
| | (167.4 | ) | Comprehensive income attributable to non-controlling partner | 34.8 |
| | 16.2 |
| | 25.3 |
| Comprehensive income (loss) attributable to Crestwood Equity Partners LP | $ | 285.4 |
| | $ | 50.1 |
| | $ | (192.7 | ) |
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Net income (loss) | $ | (15.3) | | | $ | 319.9 | | | $ | 67.0 | | Change in fair value of Suburban Propane Partners, L.P. units | 0 | | | 0.3 | | | (0.7) | | Comprehensive income (loss) | (15.3) | | | 320.2 | | | 66.3 | | Comprehensive income attributable to non-controlling partner | 40.8 | | | 34.8 | | | 16.2 | | Comprehensive income (loss) attributable to Crestwood Equity Partners LP | $ | (56.1) | | | $ | 285.4 | | | $ | 50.1 | |
See accompanying notes.
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Preferred | | Partners | | | | | | Units | | Capital | | Common Units | | Subordinated Units | | Capital | | Non-Controlling Partner | | Total Partners’ Capital | Balance at December 31, 2017 | 71.3 | | | $ | 612.0 | | | 70.3 | | | 0.4 | | | $ | 1,393.5 | | | $ | 175.0 | | | $ | 2,180.5 | | Cumulative effect of accounting change (Note 2) | — | | | — | | | — | | | — | | | 7.5 | | | — | | | 7.5 | | Distributions to partners | — | | | (60.1) | | | — | | | — | | | (170.8) | | | (9.9) | | | (240.8) | | Unit-based compensation charges | — | | | — | | | 1.1 | | | — | | | 28.5 | | | — | | | 28.5 | | Taxes paid for unit-based compensation vesting | — | | | — | | | (0.2) | | | — | | | (7.4) | | | — | | | (7.4) | | Change in fair value of Suburban Propane Partners, L.P. units | — | | | — | | | — | | | — | | | (0.7) | | | — | | | (0.7) | | Other | — | | | — | | | — | | | — | | | (0.8) | | | — | | | (0.8) | | Net income (loss) | — | | | 60.1 | | | — | | | — | | | (9.3) | | | 16.2 | | | 67.0 | | Balance at December 31, 2018 | 71.3 | | | 612.0 | | | 71.2 | | | 0.4 | | | 1,240.5 | | | 181.3 | | | 2,033.8 | | Distributions to partners | — | | | (60.1) | | | — | | | — | | | (172.4) | | | (6.6) | | | (239.1) | | Unit-based compensation charges | — | | | — | | | 1.0 | | | — | | | 42.4 | | | — | | | 42.4 | | Taxes paid for unit-based compensation vesting | — | | | — | | | (0.3) | | | — | | | (11.0) | | | — | | | (11.0) | | Non-controlling interest reclassification (Note 12) | — | | | — | | | — | | | — | | | — | | | (178.8) | | | (178.8) | | Change in fair value of Suburban Propane Partners, L.P. units | — | | | — | | | — | | | — | | | 0.3 | | | — | | | 0.3 | | Other | — | | | — | | | — | | | — | | | (4.0) | | | 0.1 | | | (3.9) | | Net income | — | | | 60.1 | | | — | | | — | | | 225.0 | | | 4.0 | | | 289.1 | | Balance at December 31, 2019 | 71.3 | | | 612.0 | | | 71.9 | | | 0.4 | | | 1,320.8 | | | 0 | | | 1,932.8 | | Distributions to partners | — | | | (60.1) | | | — | | | — | | | (182.7) | | | — | | | (242.8) | | Unit-based compensation charges | — | | | — | | | 2.1 | | | — | | | 34.0 | | | — | | | 34.0 | | Taxes paid for unit-based compensation vesting | — | | | — | | | (0.6) | | | — | | | (15.6) | | | — | | | (15.6) | | | | | | | | | | | | | | | | Other | — | | | — | | | 0.2 | | | — | | | 3.1 | | | — | | | 3.1 | | Net income (loss) | — | | | 60.1 | | | — | | | — | | | (116.2) | | | — | | | (56.1) | | Balance at December 31, 2020 | 71.3 | | | $ | 612.0 | | | 73.6 | | | 0.4 | | | $ | 1,043.4 | | | $ | — | | | $ | 1,655.4 | |
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | Preferred | | Partners | | | | | | Units | | Capital | | Common Units | | Subordinated Units | | Capital | | Non-Controlling Partner | | Total Partners’ Capital | Balance at December 31, 2016 | 66.5 |
| | $ | 564.5 |
| | 69.1 |
| | 0.4 |
| | $ | 1,782.0 |
| | $ | 192.5 |
| | $ | 2,539.0 |
| Distributions to partners | 4.8 |
| | (15.0 | ) | | — |
| | — |
| | (167.6 | ) | | (15.2 | ) | | (197.8 | ) | Unit-based compensation charges | — |
| | — |
| | 0.8 |
| | — |
| | 25.5 |
| | — |
| | 25.5 |
| Taxes paid for unit-based compensation vesting | — |
| | — |
| | (0.2 | ) | | — |
| | (5.5 | ) | | — |
| | (5.5 | ) | Change in fair value of Suburban Propane Partners, L.P. units | — |
| | — |
| | — |
| | — |
| | (0.8 | ) | | — |
| | (0.8 | ) | Issuance of common units | — |
| | — |
| | 0.6 |
| | — |
| | 15.2 |
| | — |
| | 15.2 |
| Redemption of non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | (202.7 | ) | | (202.7 | ) | Issuance of non-controlling interest | — |
| | — |
| | — |
| | — |
| | — |
| | 175.0 |
| | 175.0 |
| Other | — |
| | — |
| | — |
| | — |
| | (0.9 | ) | | 0.1 |
| | (0.8 | ) | Net income (loss) | — |
| | 62.5 |
| | — |
| | — |
| | (254.4 | ) | | 25.3 |
| | (166.6 | ) | Balance at December 31, 2017 | 71.3 |
| | 612.0 |
| | 70.3 |
| | 0.4 |
| | 1,393.5 |
| | 175.0 |
| | 2,180.5 |
| Cumulative effect of accounting change (Note 2) | — |
| | — |
| | — |
| | — |
| | 7.5 |
| | — |
| | 7.5 |
| Distributions to partners | — |
| | (60.1 | ) | | — |
| | — |
| | (170.8 | ) | | (9.9 | ) | | (240.8 | ) | Unit-based compensation charges | — |
| | — |
| | 1.1 |
| | — |
| | 28.5 |
| | — |
| | 28.5 |
| Taxes paid for unit-based compensation vesting | — |
| | — |
| | (0.2 | ) | | — |
| | (7.4 | ) | | — |
| | (7.4 | ) | Change in fair value of Suburban Propane Partners, L.P. units | — |
| | — |
| | — |
| | — |
| | (0.7 | ) | | — |
| | (0.7 | ) | Other | — |
| | — |
| | — |
| | — |
| | (0.8 | ) | | — |
| | (0.8 | ) | Net income (loss) | — |
| | 60.1 |
| | — |
| | — |
| | (9.3 | ) | | 16.2 |
| | 67.0 |
| Balance at December 31, 2018 | 71.3 |
| | 612.0 |
| | 71.2 |
| | 0.4 |
| | 1,240.5 |
| | 181.3 |
| | 2,033.8 |
| Distributions to partners | — |
| | (60.1 | ) | | — |
| | — |
| | (172.4 | ) | | (6.6 | ) | | (239.1 | ) | Unit-based compensation charges | — |
| | — |
| | 1.0 |
| | — |
| | 42.4 |
| | — |
| | 42.4 |
| Taxes paid for unit-based compensation vesting | — |
| | — |
| | (0.3 | ) | | — |
| | (11.0 | ) | | — |
| | (11.0 | ) | Non-controlling interest reclassification (Note 12) | — |
| | — |
| | — |
| | — |
| | — |
| | (178.8 | ) | | (178.8 | ) | Change in fair value of Suburban Propane Partners, L.P. units | — |
| | — |
| | — |
| | — |
| | 0.3 |
| | — |
| | 0.3 |
| Other | — |
| | — |
| | — |
| | — |
| | (4.0 | ) | | 0.1 |
| | (3.9 | ) | Net income | — |
| | 60.1 |
| | — |
| | — |
| | 225.0 |
| | 4.0 |
| | 289.1 |
| Balance at December 31, 2019 | 71.3 |
| | $ | 612.0 |
| | 71.9 |
| | 0.4 |
| | $ | 1,320.8 |
| | $ | — |
| | $ | 1,932.8 |
|
See accompanying notes.
| | | | | | | | | | | | | | | | | | CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Operating activities | | | | | | Net income (loss) | $ | (15.3) | | | $ | 319.9 | | | $ | 67.0 | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | Depreciation, amortization and accretion | 237.4 | | | 195.8 | | | 168.7 | | Amortization of debt-related deferred costs | 6.5 | | | 6.2 | | | 6.8 | | | | | | | | Unit-based compensation charges | 30.7 | | | 47.0 | | | 28.5 | | Loss on long-lived assets, net | 26.0 | | | 6.2 | | | 28.6 | | Goodwill impairment | 80.3 | | | 0 | | | 0 | | Gain on acquisition | 0 | | | (209.4) | | | 0 | | | | | | | | | | | | | | (Gain) loss on modification/extinguishment of debt | (0.1) | | | 0 | | | 0.9 | | Earnings from unconsolidated affiliates, net, adjusted for cash distributions received | 6.5 | | | 6.9 | | | 0.5 | | Deferred income taxes | 0.1 | | | 0 | | | (0.7) | | Other | (0.1) | | | 0 | | | 0.2 | | Changes in operating assets and liabilities: | | | | | | Accounts receivable | (27.5) | | | 42.9 | | | 167.8 | | Inventory | (33.7) | | | 10.9 | | | (24.1) | | Prepaid expenses and other current assets | (3.7) | | | 0.1 | | | (3.1) | | Accounts payable, accrued expenses and other liabilities | (1.2) | | | (23.3) | | | (138.6) | | Reimbursements of property, plant and equipment | 15.7 | | | 24.8 | | | 21.7 | | Change in price risk management activities, net | 86.5 | | | (7.6) | | | (70.6) | | Net cash provided by operating activities | 408.1 | | | 420.4 | | | 253.6 | | | | | | | | Investing activities | | | | | | Acquisitions, net of cash acquired (Note 3) | (162.3) | | | (462.1) | | | 0 | | Purchases of property, plant and equipment | (168.3) | | | (455.5) | | | (305.5) | | Investments in unconsolidated affiliates | (9.4) | | | (61.3) | | | (64.4) | | Capital distributions from unconsolidated affiliates | 39.4 | | | 35.5 | | | 49.2 | | | | | | | | Net proceeds from sale of assets | 27.3 | | | 0.8 | | | 79.5 | | Other | 0 | | | (1.1) | | | 0 | | Net cash used in investing activities | (273.3) | | | (943.7) | | | (241.2) | |
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Operating activities | | | | | | Net income (loss) | $ | 319.9 |
| | $ | 67.0 |
| | $ | (166.6 | ) | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | Depreciation, amortization and accretion | 195.8 |
| | 168.7 |
| | 191.7 |
| Amortization of debt-related deferred costs | 6.2 |
| | 6.8 |
| | 7.2 |
| Unit-based compensation charges | 47.0 |
| | 28.5 |
| | 25.5 |
| Loss on long-lived assets, net | 6.2 |
| | 28.6 |
| | 65.6 |
| Gain on acquisition | (209.4 | ) | | — |
| | — |
| Goodwill impairment | — |
| | — |
| | 38.8 |
| Loss on contingent consideration | — |
| | — |
| | 57.0 |
| Loss on modification/extinguishment of debt | — |
| | 0.9 |
| | 37.7 |
| Earnings from unconsolidated affiliates, net, adjusted for cash distributions received | 6.9 |
| | 0.5 |
| | (0.1 | ) | Deferred income taxes | — |
| | (0.7 | ) | | (2.1 | ) | Other | — |
| | 0.2 |
| | 0.9 |
| Changes in operating assets and liabilities: | | | | | | Accounts receivable | 42.9 |
| | 167.8 |
| | (170.7 | ) | Inventory | 10.9 |
| | (24.1 | ) | | (9.9 | ) | Prepaid expenses and other current assets | 0.1 |
| | (3.1 | ) | | 1.8 |
| Accounts payable, accrued expenses and other liabilities | (23.3 | ) | | (138.6 | ) | | 140.1 |
| Reimbursements of property, plant and equipment | 24.8 |
| | 21.7 |
| | 19.6 |
| Change in price risk management activities, net | (7.6 | ) | | (70.6 | ) | | 19.4 |
| Net cash provided by operating activities | 420.4 |
| | 253.6 |
| | 255.9 |
| | | | | | | Investing activities | | | | | | Acquisition, net of cash acquired (Note 3) | (462.1 | ) | | — |
| | — |
| Purchases of property, plant and equipment | (455.5 | ) | | (305.5 | ) | | (188.4 | ) | Investment in unconsolidated affiliates | (61.3 | ) | | (64.4 | ) | | (58.0 | ) | Capital distributions from unconsolidated affiliates | 35.5 |
| | 49.2 |
| | 59.9 |
| Net proceeds from sale of assets | 0.8 |
| | 79.5 |
| | 225.2 |
| Other | (1.1 | ) | | — |
| | — |
| Net cash provided by (used in) investing activities | (943.7 | ) | | (241.2 | ) | | 38.7 |
| | | | | | |
| | | | | | | | | | | | | | | | | | CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | | | | | | | Financing activities | | | | | | Proceeds from the issuance of long-term debt | 1,125.1 | | | 2,307.3 | | | 2,274.8 | | | | | | | | | | | | | | | | | | | | Payments on long-term debt | (975.8) | | | (1,729.5) | | | (2,015.7) | | | | | | | | | | | | | | | | | | | | Payments on finance/capital leases | (3.1) | | | (3.5) | | | (1.6) | | Payments for deferred financing costs | 0 | | | (9.0) | | | (5.7) | | | | | | | | | | | | | | Net proceeds from issuance of non-controlling interest | 2.8 | | | 235.0 | | | 0 | | Distributions to partners | (182.7) | | | (172.4) | | | (170.8) | | Distributions to non-controlling partner | (37.1) | | | (25.0) | | | (9.9) | | Distributions to preferred unitholders | (60.1) | | | (60.1) | | | (60.1) | | | | | | | | | | | | | | | | | | | | | | | | | | Taxes paid for unit-based compensation vesting | (15.6) | | | (11.0) | | | (7.4) | | Other | 0 | | | 0 | | | (0.1) | | Net cash provided by (used in) financing activities | (146.5) | | | 531.8 | | | 3.5 | | | | | | | | Net change in cash and restricted cash | (11.7) | | | 8.5 | | | 15.9 | | Cash and restricted cash at beginning of period | 25.7 | | | 17.2 | | | 1.3 | | Cash and restricted cash at end of period | $ | 14.0 | | | $ | 25.7 | | | $ | 17.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | Cash paid for interest | $ | 129.8 | | | $ | 123.7 | | | $ | 97.4 | | Cash paid for income taxes | $ | 0.6 | | | $ | 0.6 | | | $ | 3.1 | | | | | | | | Supplemental schedule of noncash investing activities | | | | | | Net change to property, plant and equipment through accounts payable and accrued expenses | $ | 40.0 | | | $ | (27.7) | | | $ | 0.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CRESTWOOD EQUITY PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in millions) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Financing activities | | | | | | Proceeds from the issuance of long-term debt | 2,307.3 |
| | 2,274.8 |
| | 2,838.6 |
| Payments on long-term debt | (1,729.5 | ) | | (2,015.7 | ) | | (2,913.9 | ) | Payments on finance/capital leases | (3.5 | ) | | (1.6 | ) | | (2.7 | ) | Payments for deferred financing costs | (9.0 | ) | | (5.7 | ) | | (1.0 | ) | Redemption of non-controlling interest | — |
| | — |
| | (202.7 | ) | Net proceeds from issuance of non-controlling interest | 235.0 |
| | — |
| | 175.0 |
| Distributions to partners | (172.4 | ) | | (170.8 | ) | | (167.6 | ) | Distributions to non-controlling partner | (25.0 | ) | | (9.9 | ) | | (15.2 | ) | Distributions to preferred unitholders | (60.1 | ) | | (60.1 | ) | | (15.0 | ) | Net proceeds from issuance of common units | — |
| | — |
| | 15.2 |
| Taxes paid for unit-based compensation vesting | (11.0 | ) | | (7.4 | ) | | (5.5 | ) | Other | — |
| | (0.1 | ) | | (0.1 | ) | Net cash provided by (used in) financing activities | 531.8 |
| | 3.5 |
| | (294.9 | ) | | | | | | | Net change in cash and restricted cash | 8.5 |
| | 15.9 |
| | (0.3 | ) | Cash and restricted cash at beginning of period | 17.2 |
| | 1.3 |
| | 1.6 |
| Cash and restricted cash at end of period | $ | 25.7 |
| | $ | 17.2 |
| | $ | 1.3 |
| | | | | | | Supplemental disclosure of cash flow information | | | | | | Cash paid during the period for interest | $ | 123.7 |
| | $ | 97.4 |
| | $ | 95.1 |
| Cash paid during the period for income taxes | $ | 0.6 |
| | $ | 3.1 |
| | $ | 3.1 |
| | | | | | | Supplemental schedule of noncash investing activities | | | | | | Net change to property, plant and equipment through accounts payable and accrued expenses | $ | (27.7 | ) | | $ | 0.3 |
| | $ | (20.4 | ) |
See accompanying notes.
Report of Independent Registered Public Accounting Firm
The Board of Directors of Crestwood Equity GP LCCLLC
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Crestwood Midstream Partners (the Partnership) as of December 31, 20192020 and 2018,2019, and the related consolidated statements of operations, partners’ capital and cash flows for each of the three years in the period ended December 31, 2019,2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with U.S. generally accepted accounting principles.
Adoption of ASU No. 2014-09
As discussed in Note 2 to the consolidated financial statements, the Partnership changed its method of accounting for revenue recognition in 2018 due to the of adoption of Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606).”
Basis for Opinion These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. | | | | | | | | | Revenue recognition – Measuring variable consideration | Description of the Matter | As described in Note 2 to the consolidated financial statements, the Partnership recognizes revenues for services and products under revenue contracts as obligations to perform services or deliver/sell products under the contracts are satisfied. For a significant customer contract associated with the Partnership’s Powder River Basin gathering and processing assets, consideration to be received under the contact is estimated over the life of the contract and the contract’s transaction price is allocated to each performance obligation in the contract and recognized as revenue when, or as, the performance obligation is satisfied.
Auditing the Partnership's measurement of variable consideration under this contract involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of future revenues including forecasted production of its customer over the life of the contract. For example, the future revenues estimate reflects management's assumptions about future economic conditions and expected volumes to be gathered and processed, and changes in those assumptions can have a material effect on the amount of revenue recognized
|
| | | | | | How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Partnership’s process to calculate the variable consideration, including the underlying assumptions about estimates of expected volumes.
Our audit procedures included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management’s calculation. This included testing management’s forecasted volumes through comparison to analyst forecasted commodity prices and historical production and the recalculation of revenue based on the volumes and executed contract rates. In addition, we performed sensitivity analyses to evaluate the changes in variable consideration that would result from changes in the Partnership’s forecasted volumes. | | |
/s/ Ernst & Young LLP
We have served as the Company’sPartnership’s auditor since 2013.2013 Houston, Texas February 21, 202026, 2021
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED BALANCE SHEETS (in millions) | | | | | | | | | | December 31, | | 2019 | | 2018 | Assets | | | | Current assets: | | | | Cash | $ | 25.4 |
| | $ | 0.2 |
| Restricted cash | — |
| | 16.3 |
| Accounts receivable, less allowance for doubtful accounts of $0.3 million at both December 31, 2019 and 2018 | 241.9 |
| | 249.9 |
| Inventory | 53.7 |
| | 64.6 |
| Assets from price risk management activities | 43.2 |
| | 34.7 |
| Prepaid expenses and other current assets | 11.6 |
| | 11.3 |
| Total current assets | 375.8 |
| | 377.0 |
| Property, plant and equipment | 3,942.6 |
| | 2,928.2 |
| Less: accumulated depreciation | 875.1 |
| | 725.9 |
| Property, plant and equipment, net | 3,067.5 |
| | 2,202.3 |
| Intangible assets | 1,076.3 |
| | 770.3 |
| Less: accumulated amortization | 271.1 |
| | 216.5 |
| Intangible assets, net | 805.2 |
| | 553.8 |
| Goodwill | 218.9 |
| | 138.6 |
| Operating lease right-of-use assets, net | 53.8 |
| | — |
| Investments in unconsolidated affiliates | 980.4 |
| | 1,188.2 |
| Other non-current assets | 2.4 |
| | 2.1 |
| Total assets | $ | 5,504.0 |
| | $ | 4,462.0 |
| Liabilities and partners’ capital | | | | Current liabilities: | | | | Accounts payable | $ | 186.6 |
| | $ | 210.5 |
| Accrued expenses and other liabilities | 160.4 |
| | 111.3 |
| Liabilities from price risk management activities | 6.7 |
| | 5.8 |
| Current portion of long-term debt | 0.2 |
| | 0.9 |
| Total current liabilities | 353.9 |
| | 328.5 |
| Long-term debt, less current portion | 2,328.3 |
| | 1,752.4 |
| Other long-term liabilities | 295.6 |
| | 171.0 |
| Deferred income taxes | 0.7 |
| | 0.6 |
| Total liabilities | 2,978.5 |
| | 2,252.5 |
| Commitments and contingencies (Note 15) | | | | Interest of non-controlling partner in subsidiary (Note 12) | 426.2 |
| | — |
| Partners’ capital | 2,099.3 |
| | 2,028.2 |
| Interest of non-controlling partner in subsidiary (Note 12) | — |
| | 181.3 |
| Total partners’ capital | 2,099.3 |
| | 2,209.5 |
| Total liabilities and capital | $ | 5,504.0 |
| | $ | 4,462.0 |
|
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED BALANCE SHEETS (in millions) | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Assets | | | | Current assets: | | | | Cash | $ | 13.7 | | | $ | 25.4 | | | | | | Accounts receivable, less allowance for doubtful accounts of $0.9 million and $0.3 million at December 31, 2020 and 2019 | 262.2 | | | 241.9 | | Inventory | 89.1 | | | 53.7 | | Assets from price risk management activities | 27.2 | | | 43.2 | | | | | | Prepaid expenses and other current assets | 13.4 | | | 11.6 | | Total current assets | 405.6 | | | 375.8 | | Property, plant and equipment | 4,089.6 | | | 3,942.6 | | Less: accumulated depreciation | 1,028.3 | | | 875.1 | | Property, plant and equipment, net | 3,061.3 | | | 3,067.5 | | Intangible assets | 1,126.1 | | | 1,076.3 | | Less: accumulated amortization | 331.8 | | | 271.1 | | Intangible assets, net | 794.3 | | | 805.2 | | Goodwill | 138.6 | | | 218.9 | | Operating lease right-of-use assets, net | 36.8 | | | 53.8 | | Investments in unconsolidated affiliates | 943.7 | | | 980.4 | | Other non-current assets | 5.2 | | | 2.4 | | Total assets | $ | 5,385.5 | | | $ | 5,504.0 | | | | | | Liabilities and partners’ capital | | | | Current liabilities: | | | | Accounts payable | $ | 157.8 | | | $ | 186.6 | | | | | | Accrued expenses and other liabilities | 120.1 | | | 160.4 | | Liabilities from price risk management activities | 76.3 | | | 6.7 | | Contingent consideration, current portion | 19.0 | | | 0 | | Current portion of long-term debt | 0.2 | | | 0.2 | | Total current liabilities | 373.4 | | | 353.9 | | Long-term debt, less current portion | 2,483.8 | | | 2,328.3 | | Contingent consideration | 38.0 | | | 57.0 | | Other long-term liabilities | 251.8 | | | 238.6 | | Deferred income taxes | 0.7 | | | 0.7 | | Total liabilities | 3,147.7 | | | 2,978.5 | | Commitments and contingencies (Note 10) | | | | Interest of non-controlling partner in subsidiary (Note 12) | 432.7 | | | 426.2 | | | | | | | | | | Partners’ capital | 1,805.1 | | | 2,099.3 | | | | | | | | | | | | | | Total liabilities and capital | $ | 5,385.5 | | | $ | 5,504.0 | |
See accompanying notes.
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Revenues: | | | | | | Product revenues: | | | | | | Gathering and processing | $ | 455.8 |
| | $ | 670.5 |
| | $ | 1,369.1 |
| Marketing, supply and logistics | 2,296.6 |
| | 2,639.2 |
| | 2,093.1 |
| Related party (Note 16) | 2.9 |
| | — |
| | — |
| | 2,755.3 |
| | 3,309.7 |
| | 3,462.2 |
| Service revenues: | | | | | | Gathering and processing | 380.0 |
| | 276.1 |
| | 317.3 |
| Storage and transportation | 20.4 |
| | 17.1 |
| | 37.2 |
| Marketing, supply and logistics | 26.2 |
| | 50.2 |
| | 62.4 |
| Related party (Note 16) | — |
| | 1.0 |
| | 1.8 |
| | 426.6 |
| | 344.4 |
| | 418.7 |
| Total revenues | 3,181.9 |
| | 3,654.1 |
| | 3,880.9 |
| | | | | | | Costs of product/services sold (exclusive of items shown separately below): | | | | | | Product costs | 2,469.7 |
| | 2,950.5 |
| | 3,309.5 |
| Product costs - related party (Note 16) | 45.4 |
| | 134.7 |
| | 15.3 |
| Service costs | 29.8 |
| | 44.2 |
| | 49.9 |
| Total costs of products/services sold | 2,544.9 |
| | 3,129.4 |
| | 3,374.7 |
| | | | | | | Operating expenses and other: | | | | | | Operations and maintenance | 138.8 |
| | 125.8 |
| | 136.0 |
| General and administrative | 98.2 |
| | 83.5 |
| | 93.1 |
| Depreciation, amortization and accretion | 209.9 |
| | 181.4 |
| | 202.7 |
| Loss on long-lived assets, net | 6.2 |
| | 28.6 |
| | 65.6 |
| Gain on acquisition | (209.4 | ) | | — |
| | — |
| Goodwill impairment | — |
| | — |
| | 38.8 |
| Loss on contingent consideration | — |
| | — |
| | 57.0 |
| | 243.7 |
| | 419.3 |
| | 593.2 |
| Operating income (loss) | 393.3 |
| | 105.4 |
| | (87.0 | ) | Earnings from unconsolidated affiliates, net | 32.8 |
| | 53.3 |
| | 47.8 |
| Interest and debt expense, net | (115.4 | ) | | (99.2 | ) | | (99.4 | ) | Loss on modification/extinguishment of debt | — |
| | (0.9 | ) | | (37.7 | ) | Other income, net | 0.2 |
| | — |
| | 0.8 |
| Income (loss) before income taxes | 310.9 |
| | 58.6 |
| | (175.5 | ) | Provision for income taxes | (0.3 | ) | | — |
| | — |
| Net income (loss) | 310.6 |
| | 58.6 |
| | (175.5 | ) | Net income attributable to non-controlling partner | 34.8 |
| | 16.2 |
| | 25.3 |
| Net income (loss) attributable to Crestwood Midstream Partners LP | $ | 275.8 |
| | $ | 42.4 |
| | $ | (200.8 | ) |
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Revenues: | | | | | | Product revenues: | | | | | | Gathering and processing | $ | 240.2 | | | $ | 455.8 | | | $ | 670.5 | | | | | | | | Marketing, supply and logistics | 1,552.8 | | | 2,296.6 | | | 2,639.2 | | Related party (Note 19) | 27.3 | | | 2.9 | | | 0 | | | 1,820.3 | | | 2,755.3 | | | 3,309.7 | | Service revenues: | | | | | | Gathering and processing | 391.2 | | | 380.0 | | | 276.1 | | Storage and transportation | 13.8 | | | 20.4 | | | 17.1 | | Marketing, supply and logistics | 28.5 | | | 26.2 | | | 50.2 | | Related party (Note 19) | 0.5 | | | 0 | | | 1.0 | | | 434.0 | | | 426.6 | | | 344.4 | | Total revenues | 2,254.3 | | | 3,181.9 | | | 3,654.1 | | | | | | | | Costs of product/services sold (exclusive of items shown separately below): | | | | | | Product costs | 1,558.8 | | | 2,469.7 | | | 2,950.5 | | Product costs - related party (Note 19) | 21.0 | | | 45.4 | | | 134.7 | | Service costs | 20.7 | | | 29.8 | | | 44.2 | | Total costs of products/services sold | 1,600.5 | | | 2,544.9 | | | 3,129.4 | | | | | | | | Operating expenses and other: | | | | | | Operations and maintenance | 131.8 | | | 138.8 | | | 125.8 | | General and administrative | 86.7 | | | 98.2 | | | 83.5 | | Depreciation, amortization and accretion | 251.5 | | | 209.9 | | | 181.4 | | Loss on long-lived assets, net | 26.0 | | | 6.2 | | | 28.6 | | Goodwill impairment | 80.3 | | | 0 | | | 0 | | Gain on acquisition | 0 | | | (209.4) | | | 0 | | | | | | | | | 576.3 | | | 243.7 | | | 419.3 | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income | 77.5 | | | 393.3 | | | 105.4 | | Earnings from unconsolidated affiliates, net | 32.5 | | | 32.8 | | | 53.3 | | Interest and debt expense, net | (133.6) | | | (115.4) | | | (99.2) | | Gain (loss) on modification/extinguishment of debt | 0.1 | | | 0 | | | (0.9) | | Other income, net | 0 | | | 0.2 | | | 0 | | Income (loss) before income taxes | (23.5) | | | 310.9 | | | 58.6 | | (Provision) benefit for income taxes | 0.1 | | | (0.3) | | | 0 | | Net income (loss) | (23.4) | | | 310.6 | | | 58.6 | | Net income attributable to non-controlling partner | 40.8 | | | 34.8 | | | 16.2 | | Net income (loss) attributable to Crestwood Midstream Partners LP | $ | (64.2) | | | $ | 275.8 | | | $ | 42.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes.
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (in millions) | | | | | | | | | | | | | | Partners | | Non-controlling Partners | | Total Partners’ Capital | Balance at December 31, 2016 | $ | 2,550.7 |
| | $ | 192.5 |
| | $ | 2,743.2 |
| Distributions to partners | (174.0 | ) | | (15.2 | ) | | (189.2 | ) | Unit-based compensation charges | 25.5 |
| | — |
| | 25.5 |
| Taxes paid for unit-based compensation vesting | (5.5 | ) | | — |
| | (5.5 | ) | Redemption of non-controlling interest | — |
| | (202.7 | ) | | (202.7 | ) | Issuance of non-controlling interest | — |
| | 175.0 |
| | 175.0 |
| Other | (0.5 | ) | | 0.1 |
| | (0.4 | ) | Net income (loss) | (200.8 | ) | | 25.3 |
| | (175.5 | ) | Balance at December 31, 2017 | 2,195.4 |
| | 175.0 |
| | 2,370.4 |
| Cumulative effect of accounting change (Note 2) | 7.5 |
| | — |
| | 7.5 |
| Distributions to partners | (238.4 | ) | | (9.9 | ) | | (248.3 | ) | Unit-based compensation charges | 28.5 |
| | — |
| | 28.5 |
| Taxes paid for unit-based compensation vesting | (7.4 | ) | | — |
| | (7.4 | ) | Other | 0.2 |
| | — |
| | 0.2 |
| Net income | 42.4 |
| | 16.2 |
| | 58.6 |
| Balance at December 31, 2018 | 2,028.2 |
| | 181.3 |
| | 2,209.5 |
| Distributions to partners | (235.8 | ) | | (6.6 | ) | | (242.4 | ) | Unit-based compensation charges | 42.4 |
| | — |
| | 42.4 |
| Taxes paid for unit-based compensation vesting | (11.0 | ) | | — |
| | (11.0 | ) | Non-controlling interest reclassification (Note 12) | — |
| | (178.8 | ) | | (178.8 | ) | Other | (0.3 | ) | | 0.1 |
| | (0.2 | ) | Net income | 275.8 |
| | 4.0 |
| | 279.8 |
| Balance at December 31, 2019 | $ | 2,099.3 |
| | $ | — |
| | $ | 2,099.3 |
|
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (in millions) | | | | | | | | | | | | | | | | | | | | | | | Partners | | Non-controlling Partners | | Total Partners’ Capital | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2017 | | $ | 2,195.4 | | | $ | 175.0 | | | $ | 2,370.4 | | Cumulative effect of accounting change (Note 2) | | 7.5 | | | — | | | 7.5 | | Distributions to partners | | (238.4) | | | (9.9) | | | (248.3) | | Unit-based compensation charges | | 28.5 | | | — | | | 28.5 | | Taxes paid for unit-based compensation vesting | | (7.4) | | | — | | | (7.4) | | Other | | 0.2 | | | — | | | 0.2 | | Net income | | 42.4 | | | 16.2 | | | 58.6 | | Balance at December 31, 2018 | | 2,028.2 | | | 181.3 | | | 2,209.5 | | Distributions to partners | | (235.8) | | | (6.6) | | | (242.4) | | Unit-based compensation charges | | 42.4 | | | — | | | 42.4 | | Taxes paid for unit-based compensation vesting | | (11.0) | | | — | | | (11.0) | | Non-controlling interest reclassification (Note 12) | | — | | | (178.8) | | | (178.8) | | Other | | (0.3) | | | 0.1 | | | (0.2) | | Net income | | 275.8 | | | 4.0 | | | 279.8 | | Balance at December 31, 2019 | | 2,099.3 | | | 0 | | | 2,099.3 | | Distributions to partner | | (242.6) | | | — | | | (242.6) | | Unit-based compensation charges | | 29.3 | | | — | | | 29.3 | | Taxes paid for unit-based compensation vesting | | (15.6) | | | — | | | (15.6) | | Other | | (1.1) | | | — | | | (1.1) | | Net loss | | (64.2) | | | — | | | (64.2) | | Balance at December 31, 2020 | | $ | 1,805.1 | | | $ | 0 | | | $ | 1,805.1 | |
See accompanying notes.
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Operating activities | | | | | | Net income (loss) | $ | 310.6 |
| | $ | 58.6 |
| | $ | (175.5 | ) | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | Depreciation, amortization and accretion | 209.9 |
| | 181.4 |
| | 202.7 |
| Amortization of debt-related deferred costs | 6.2 |
| | 6.8 |
| | 7.2 |
| Unit-based compensation charges | 47.0 |
| | 28.5 |
| | 25.5 |
| Loss on long-lived assets, net | 6.2 |
| | 28.6 |
| | 65.6 |
| Gain on acquisition | (209.4 | ) | | — |
| | — |
| Goodwill impairment | — |
| | — |
| | 38.8 |
| Loss on contingent consideration | — |
| | — |
| | 57.0 |
| Loss on modification/extinguishment of debt | — |
| | 0.9 |
| | 37.7 |
| Earnings from unconsolidated affiliates, net, adjusted for cash distributions received | 6.9 |
| | 0.5 |
| | (0.1 | ) | Deferred income taxes | 0.2 |
| | (0.1 | ) | | — |
| Other | — |
| | 0.2 |
| | 0.9 |
| Changes in operating assets and liabilities: | | | | | | Accounts receivable | 41.6 |
| | 169.3 |
| | (170.5 | ) | Inventory | 10.9 |
| | (24.1 | ) | | (9.9 | ) | Prepaid expenses and other current assets | 0.1 |
| | (3.1 | ) | | 1.8 |
| Accounts payable, accrued expenses and other liabilities | (23.3 | ) | | (138.1 | ) | | 142.0 |
| Reimbursements of property, plant and equipment | 24.8 |
| | 21.7 |
| | 19.6 |
| Change in price risk management activities, net | (7.6 | ) | | (70.6 | ) | | 19.4 |
| Net cash provided by operating activities | 424.1 |
| | 260.5 |
| | 262.2 |
| | | | | | | Investing activities | | | | | | Acquisition, net of cash acquired (Note 3) | (462.1 | ) | | — |
| | — |
| Purchases of property, plant and equipment | (455.5 | ) | | (305.5 | ) | | (188.4 | ) | Investment in unconsolidated affiliates | (61.3 | ) | | (64.4 | ) | | (58.0 | ) | Capital distributions from unconsolidated affiliates | 35.5 |
| | 49.2 |
| | 59.9 |
| Net proceeds from sale of assets | 0.8 |
| | 79.5 |
| | 225.2 |
| Other | (1.1 | ) | | — |
| | — |
| Net cash provided by (used in) investing activities | (943.7 | ) | | (241.2 | ) | | 38.7 |
| | | | | | |
| | | | | | | | | | | | | | | | | | CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Operating activities | | | | | | Net income (loss) | $ | (23.4) | | | $ | 310.6 | | | $ | 58.6 | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | Depreciation, amortization and accretion | 251.5 | | | 209.9 | | | 181.4 | | Amortization of debt-related deferred costs | 6.5 | | | 6.2 | | | 6.8 | | Unit-based compensation charges | 30.7 | | | 47.0 | | | 28.5 | | Loss on long-lived assets, net | 26.0 | | | 6.2 | | | 28.6 | | Goodwill impairment | 80.3 | | | 0 | | | 0 | | Gain on acquisition | 0 | | | (209.4) | | | 0 | | | | | | | | (Gain) loss on modification/extinguishment of debt | (0.1) | | | 0 | | | 0.9 | | Earnings from unconsolidated affiliates, net, adjusted for cash distributions received | 6.5 | | | 6.9 | | | 0.5 | | Deferred income taxes | 0 | | | 0.2 | | | (0.1) | | Other | (0.1) | | | 0 | | | 0.2 | | Changes in operating assets and liabilities: | | | | | | Accounts receivable | (27.8) | | | 41.6 | | | 169.3 | | Inventory | (33.7) | | | 10.9 | | | (24.1) | | Prepaid expenses and other current assets | (4.6) | | | 0.1 | | | (3.1) | | Accounts payable, accrued expenses and other liabilities | (6.1) | | | (23.3) | | | (138.1) | | Reimbursements of property, plant and equipment | 15.7 | | | 24.8 | | | 21.7 | | Change in price risk management activities, net | 86.5 | | | (7.6) | | | (70.6) | | Net cash provided by operating activities | 407.9 | | | 424.1 | | | 260.5 | | | | | | | | Investing activities | | | | | | Acquisitions, net of cash acquired (Note 3) | (162.3) | | | (462.1) | | | 0 | | Purchases of property, plant and equipment | (168.3) | | | (455.5) | | | (305.5) | | Investments in unconsolidated affiliates | (9.4) | | | (61.3) | | | (64.4) | | Capital distributions from unconsolidated affiliates | 39.4 | | | 35.5 | | | 49.2 | | Net proceeds from sale of assets | 27.3 | | | 0.8 | | | 79.5 | | Other | 0 | | | (1.1) | | | 0 | | Net cash used in investing activities | (273.3) | | | (943.7) | | | (241.2) | |
CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in millions) | | | CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | CRESTWOOD MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | Year Ended December 31, | | | | | | | | | | 2020 | | 2019 | | 2018 | | Year Ended December 31, | | | 2019 | | 2018 | | 2017 | | Financing activities | | | | | | Financing activities | | Proceeds from the issuance of long-term debt | 2,307.3 |
| | 2,274.8 |
| | 2,838.6 |
| Proceeds from the issuance of long-term debt | 1,125.1 | | | 2,307.3 | | | 2,274.8 | | Payments on long-term debt | (1,729.5 | ) | | (2,015.7 | ) | | (2,913.9 | ) | Payments on long-term debt | (975.8) | | | (1,729.5) | | | (2,015.7) | | Payments on finance/capital leases | (3.5 | ) | | (1.6 | ) | | (2.7 | ) | Payments on finance/capital leases | (3.1) | | | (3.5) | | | (1.6) | | Payments for deferred financing costs | (9.0 | ) | | (5.7 | ) | | (1.0 | ) | Payments for deferred financing costs | 0 | | | (9.0) | | | (5.7) | | Redemption of non-controlling interest | — |
| | — |
| | (202.7 | ) | | | Net proceeds from issuance of non-controlling interest | 235.0 |
| | — |
| | 175.0 |
| Net proceeds from issuance of non-controlling interest | 2.8 | | | 235.0 | | | 0 | | Distributions to partner | (235.8 | ) | | (238.4 | ) | | (174.0 | ) | Distributions to partner | (242.6) | | | (235.8) | | | (238.4) | | Distributions to non-controlling partner | (25.0 | ) | | (9.9 | ) | | (15.2 | ) | Distributions to non-controlling partner | (37.1) | | | (25.0) | | | (9.9) | | | Taxes paid for unit-based compensation vesting | (11.0 | ) | | (7.4 | ) | | (5.5 | ) | Taxes paid for unit-based compensation vesting | (15.6) | | | (11.0) | | | (7.4) | | Other | — |
| | 0.1 |
| | 0.2 |
| Other | 0 | | | 0 | | | 0.1 | | Net cash provided by (used in) financing activities | 528.5 |
| | (3.8 | ) | | (301.2 | ) | Net cash provided by (used in) financing activities | (146.3) | | | 528.5 | | | (3.8) | | | | | | | | | Net change in cash and restricted cash | 8.9 |
| | 15.5 |
| | (0.3 | ) | Net change in cash and restricted cash | (11.7) | | | 8.9 | | | 15.5 | | Cash and restricted cash at beginning of period | 16.5 |
| | 1.0 |
| | 1.3 |
| Cash and restricted cash at beginning of period | 25.4 | | | 16.5 | | | 1.0 | | Cash and restricted cash at end of period | $ | 25.4 |
| | $ | 16.5 |
| | $ | 1.0 |
| Cash and restricted cash at end of period | $ | 13.7 | | | $ | 25.4 | | | $ | 16.5 | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | Supplemental disclosure of cash flow information | | Cash paid during the period for interest | $ | 123.7 |
| | $ | 97.4 |
| | $ | 95.1 |
| | Cash paid during the period for income taxes | $ | 0.6 |
| | $ | 0.6 |
| | $ | 0.6 |
| | Cash paid for interest | | Cash paid for interest | $ | 129.8 | | | $ | 123.7 | | | $ | 97.4 | | Cash paid for income taxes | | Cash paid for income taxes | $ | 0.5 | | | $ | 0.6 | | | $ | 0.6 | | | | | | | | | | | | | | Supplemental schedule of noncash investing activities | | | | | | Supplemental schedule of noncash investing activities | | Net change to property, plant and equipment through accounts payable and accrued expenses | $ | (27.7 | ) | | $ | 0.3 |
| | $ | (20.4 | ) | Net change to property, plant and equipment through accounts payable and accrued expenses | $ | 40.0 | | | $ | (27.7) | | | $ | 0.3 | | |
See accompanying notes.
CRESTWOOD EQUITY PARTNERS LP CRESTWOOD MIDSTREAM PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Description of Business
The accompanying notes to the consolidated financial statements apply to Crestwood Equity Partners LP (the Company, Crestwood Equity or CEQP) and Crestwood Midstream Partners LP (Crestwood Midstream or CMLP) unless otherwise indicated.
Organization
Crestwood Equity Partners LP. CEQP is a publicly-traded (NYSE: CEQP) Delaware limited partnership formed in March 2001. Crestwood Equity GP LLC, which is indirectly owned by Crestwood Holdings LLC (Crestwood Holdings), owns our non-economic general partnership interest. Crestwood Holdings, which is substantially owned and controlled by First Reserve Management, L.P. (First Reserve), also owns approximately 25%24% of Crestwood Equity’s common units and all of its subordinated units. Crestwood Midstream Partners LP. Crestwood Equity owns a 99.9% limited partnership interest in Crestwood Midstream and Crestwood Gas Services GP LLC (CGS GP), 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.
The diagram below reflects a simplified version of our ownership structure as of December 31, 2019:
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.
Description of Business
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 the United States. We own and operate a diversified portfolio of NGL, crude oil, and 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.
Our financial statements reflect 3 operating and reporting segments described below.
| | • | Gathering and Processing. Our gathering and processing (G&P) operations provide gathering and transportation services (natural gas, crude oil and produced water) and processing, treating and compression services (natural gas) to producers in unconventional shale plays and tight-gas plays in North Dakota, Wyoming, West Virginia, Texas, New Mexico and Arkansas. This segment primarily includes (i) our operations that own crude oil, rich and dry gas gathering systems, produced water gathering systems and processing plants in the Bakken, Powder River Basin, Marcellus, Barnett and Fayetteville Shale plays; and (ii) a joint venture that owns rich and dry gas gathering systems and processing systems in the Delaware Permian region.
|
| | • | Storage and Transportation. Our storage and transportation (S&T) operations provide crude oil and natural gas storage and transportation services to producers, utilities and other customers. This segment primarily includes (i) the COLT Hub which consists of our integrated crude oil loading, storage and pipeline terminal located in the heart of the Bakken and Three Forks Shale oil-producing areas in Williams County, North Dakota; and (ii) joint ventures that own regulated natural gas storage and transportation facilities in New York and Pennsylvania, natural gas storage facilities in Texas and a crude-by-rail terminal in Wyoming.
|
| | • | Marketing, Supply and Logistics. Our marketing, supply and logistics (MS&L) operations provide NGL, crude oil and natural gas marketing, storage and transportation services to producers, refiners, marketers and other customers. This segment primarily includes (i) our fleet of rail and rolling stock, which includes our rail-to-truck NGL terminals located in Florida, New Jersey, New York, Rhode Island, North Carolina and Connecticut, and our truck maintenance facilities located in North Dakota, Indiana, West Virginia and New Jersey; (ii) our Bath and Seymour NGL storage facilities located in New York and Indiana; and (iii) our crude oil transportation assets.
|
•Gathering and Processing. Our gathering and processing (G&P) operations provide natural gas, crude oil and produced water gathering, compression, treating, processing and disposal services to producers in multiple unconventional resource plays in some of the largest shale plays in the United States in which we have established footprints in the “core of the core” areas.
•Storage and Transportation. Our storage and transportation (S&T) operations provide crude oil and natural gas storage and transportation services to producers, utilities and other customers.
•Marketing, Supply and Logistics. Our marketing, supply and logistics (MS&L) operations provide NGL, crude oil and natural gas marketing, storage, terminal and transportation services to producers, refiners, marketers and other customers.
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements are prepared in accordance with GAAP and include the accounts of all consolidated subsidiaries after the elimination of all intercompany accounts and transactions. Certain amounts in prior periods have been
reclassified to conform to the current year presentation, none of which impacted our previously reported net income, earnings per unit or partners’ capital. 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.
Significant Accounting Policies
Principles of Consolidation
We consolidate entities when we have the ability to control or direct the operating and financial decisions of the entity or when we have a significant interest in the entity that gives us the ability to direct the activities that are significant to that entity. The determination to consolidate or apply the equity method of accounting to an entity can also require us to evaluate whether that entity is considered a variable interest entity (VIE). This evaluation, along with the determination of our ability to control, direct or exert significant influence over an entity involves the use of judgment. We apply the equity method of accounting where we can exert significant influence over, but do not control or direct the policies, decisions or activities of an entity and in the case of a VIE, are not the primary beneficiary. We use the cost method of accounting where we are unable to exert significant influence over the entity. All of our consolidated entities and equity method investments are not VIEs except for our investment in Crestwood Permian Basin Holdings LLC (Crestwood Permian).
Our equity interest in Crestwood Permian is considered a VIE because CEQP has provided a guarantee to a third party that requires CEQP to pay up to $10 million if Crestwood Permian fails to honor its obligations to its equity investee, Crestwood
Permian Basin LLC (Crestwood Permian Basin), in the event Crestwood Permian Basin fails to satisfy its obligations under its gas gathering agreement with a third party. We account for our investment in Crestwood Permian as an equity method investment because we are not the primary beneficiary of the VIE as of December 31, 20192020 and 2018.2019. See Note 6 for a further discussion of our investment in Crestwood Permian.
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts we report as assets, liabilities, revenues and expenses and our disclosures in these consolidated financial statements. Actual results can differ from those estimates.
Cash
We consider all highly liquid investments with an original maturity of less than three months to be cash.
Restricted Cash
Accounts Receivable
On
Effective January 1, 2018,2020, we adopted the provisions of ASU 2016-18,2016-13, Statement of Cash FlowsFinancial Instruments - Credit Losses (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) 326), which changed the classificationprovides revised guidance on evaluating accounts and presentation of restricted cash in the statement of cash flows. The standard requires us to include restricted cash in our total cashnotes receivable and other financial instruments for impairment. We record accounts receivable when reconciling the beginning of periodproducts or services are delivered and end of period amounts shownit is probable that payment will be received for those products or services, and we do not record any interest or penalties on our consolidated statements of cash flows. The retrospective application of this ASU did not have an impact on our consolidated statement of cash flows for the year ended December 31, 2017.
Our restricted cash represents cash heldaccounts receivable that are past due under the terms of the related arrangement or invoice until those amounts are received. Topic 326 requires companies to evaluate their financial instruments for impairment by recording an allowance for doubtful accounts and/or bad debt expense based on certain contractual agreementscategories of instruments rather than a specific identification approach. We adopted the provisions of this standard using a method to estimate the allowance for doubtful accounts that considered both the aging of our accounts receivable and is classified as current onthe projected loss rate of our consolidated balance sheets. The $16.3receivables. We write off accounts receivable, and the related allowance for doubtful accounts, when it becomes remote that payment for products or services will be received. On January 1, 2020, we recorded a $0.7 million increase to our allowance for doubtful accounts and a $0.7 million decrease in restricted cash duringto partners’ capital to reflect the year endedcumulative effect of adopting the new standard. In addition, on January 1, 2020, Crestwood Permian, our 50% equity investment, also adopted the provisions of Topic 326 and we recorded a decrease of approximately $0.2 million to our equity investment and a corresponding decrease to our partners’ capital to reflect our proportionate share of the cumulative effect of accounting change recorded by the equity investment related to the new standard. The adoption of this standard was not material to our other equity investments. Our allowance for doubtful accounts was approximately $0.9 million at December 31, 2019 and the $16.3 million increase in restricted cash during the year ended December 31, 2018 is included in operating activities (change in accounts payable, accrued expenses and other liabilities) in the consolidated statements2020.
Inventory
Our inventory is stated at the lower of cost or net realizable value and cost is computed predominantly using the average cost method. Inventory consisted of the following at December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | December 31, | | 2019 | | 2018 | Crude oil and NGLs | $ | 53.2 |
| | $ | 64.2 |
| Spare parts | 0.5 |
| | 0.4 |
| Total inventory | $ | 53.7 |
| | $ | 64.6 |
|
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | NGLs, crude oil and natural gas | $ | 88.0 | | | $ | 53.2 | | Spare parts | 1.1 | | | 0.5 | | Total inventory | $ | 89.1 | | | $ | 53.7 | |
Property, Plant and Equipment
Property, plant and equipment is recorded at is original cost of construction or, upon acquisition, at the fair value of the assets acquired. For assets we construct, we capitalize direct costs, such as labor and materials, and indirect costs, such as overhead and interest. We capitalize major units of property replacements or improvement and expense minor items. Depreciation is computed by the straight-line method over the estimated useful lives of the assets, as follows:
| | | | | | | Years | Gathering systems and pipelines | 15 - 20 |
| Facilities and equipment | 3 - 25 |
| Buildings, rights-of-way and easements | 1 - 40 |
| Office furniture and fixtures | 5 -5- 10 |
| Vehicles | 5 |
|
We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such events or changes in circumstances are present, a loss is recognized if the carrying value of the asset is in excess of the sum of the undiscounted cash flows expected to result from the use of the asset
and its eventual disposition. An impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is typically based on discounted cash flow projections using assumptions as to revenues, costs and discount rates typical of third party market participants, which is a Level 3 fair value measurement.
During 20192020 and 2017,2019, we recorded impairments of our property, plant$3.1 million and equipment and we reflected these impairments in long on long-lived assets in our consolidated statements of operations. We did not record impairments of our property, plant and equipment during the year ended December 31, 2018. During 2019, we incurred $4.3 million of impairments of our property, plant and equipment primarily related to certainthe removal and retirement of ourcertain water gathering facilities in response to several produced water releases on our Arrow operationssystem over the past few years, which is further discussed in Note 15. During 2017, we incurred $81.4 million of10. We did not record any other material impairments of our property, plant and equipment related to our MS&L West Coast operations, which resulted from decreasingduring the forecasted cash flows to be generated by those operations. Atyears ended December 31, 2017, our estimates of fair value considered a number of factors, including the potential value if2020, 2019 or 2018. During 2020, we sold the asset,our Fayetteville assets and recorded a 12% discount rateloss on long-lived assets of approximately $19.9 million and projected cash flows, which is a Level 3 fair value measurement. Duringduring 2018, we sold our MS&L West Coast operations for $70.5 million, and recorded a loss on long-lived assets of approximately $26.9 million (including $9.0 million related to the write off of goodwill).million. See “Goodwill” below and Note 3 for a further information on the salediscussion of these assets.asset sales.
Projected cash flows of our property, plant and equipment are generally based on current and anticipated future market conditions, which require significant judgment to make projections and assumptions about pricing, demand, competition, operating costs, constructions costs, legal and regulatory issues and other factors that may extend many years into the future and are often outside of our control. Due to the imprecise nature of these projections and assumptions, actual results can and often do, differ from our estimates.
Identifiable Intangible Assets
Our identifiable intangible assets consist of customer accounts, trademarks and certain revenue contracts. These intangible assets have arisen primarily from acquisitions. We amortize certain of our revenue contracts based on the projected cash flows associated with these contracts if the projected cash flows are readily determinable, otherwise we amortize our revenue contracts on a straight-line basis. We recognize acquired intangible assets separately if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.
We did not record impairments of our intangible assets during the years ended December 31, 2019 and 2018. During 2017, we fully impaired $0.8 million of intangible assets related to our MS&L West Coast operations, which resulted from decreasing forecasted cash flows to be generated by those operations and we reflected the impairment in loss on long-lived assets in our consolidated statements of operations. During 2018, we sold our MS&L West Coast operations for $70.5 million, and recorded a $26.9 million of loss on long-lived assets associated with the sale. See Note 3 for further information on the sale of these assets.
Projected cash flows of our intangible assets are generally based on current and anticipated future market conditions, which require significant judgment to make projections and assumptions about pricing, demand, competition, operating costs, construction costs, legal and regulatory issues and other factors that may extend many years into the future and are often outside of our control. Due to the imprecise nature of these projections and assumptions, actual results can and often do, differ from our estimates.
We did not record any impairments of our intangible assets during the years ended December 31, 2020, 2019 and 2018.
Certain intangible assets are amortized on a straight-line basis over their estimated economic lives, as follows:
| | | | | | | Weighted-Average Life (years) | Customer accounts and revenue contracts | 20 |
22 | TrademarksRevenue contracts | 1018 | Trademarks |
10 |
Goodwill
Our goodwill represents the excess of the amount we paid for a business over the fair value of the net identifiable assets acquired. We evaluate goodwill for impairment annually on December 31, and whenever events indicate that it is more likely than not that the fair value of a reporting unit could be less than its carrying amount. This evaluation requires us to compare the fair value of each of our reporting units to its carrying value (including goodwill). If the fair value exceeds the carrying amount, goodwill of the reporting unit is not considered impaired.
We estimate the fair value of our reporting units based on a number of factors, including discount rates, projected cash flows and the potential value we would receive if we sold the reporting unit. We also compare the total fair value of our reporting units to our overall enterprise value, which considers the market value for our common and preferred units. Estimating projected cash flows requires us to make certain assumptions as it relates to the future operating performance of each of our reporting units (which includes assumptions, among others, about estimating future operating margins and related future growth in those margins, contracting efforts and the cost and timing of facility expansions) and assumptions related to our customers, such as their future capital and operating plans and their financial condition. When considering operating performance, various factors are considered such as current and changing economic conditions and the commodity price environment, among others. Due to the imprecise nature of these projections and assumptions, actual results can and often do, differ from our estimates. If the assumptions embodied in the projections prove inaccurate, we could incur a future impairment charge. In addition, the use of the income approach to determine the fair value of our reporting units (see further discussion of the use of the income approach below) could result in a different fair value if we had utilized a market approach, or a combination thereof.
The following table summarizes the goodwill of our reporting units (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | G&P | | MS&L | | | | Arrow | | Powder River Basin | | NGL Marketing and Logistics | | Total | January 1, 2019 | $ | 45.9 | | | $ | 0 | | | $ | 92.7 | | | $ | 138.6 | | Jackalope Acquisition (Note 3) | 0 | | | 80.3 | | | 0 | | | 80.3 | | December 31, 2019 | 45.9 | | | 80.3 | | | 92.7 | | | 218.9 | | Impairment | 0 | | | (80.3) | | | 0 | | | (80.3) | | December 31, 2020 | $ | 45.9 | | | $ | 0 | | | $ | 92.7 | | | $ | 138.6 | |
During 2020, current and forward commodity prices significantly declined from their levels at December 31, 2019 due primarily to the decreases in energy demand as a result of the outbreak of the COVID-19 pandemic and actions taken by the Organization of the Petroleum Exporting Countries, Russia, the United States and other oil-producing countries relating to the oversupply of oil. We believe that the decrease in commodity prices has had and will continue to have a negative impact on certain of our customers in our gathering and processing segment, which could adversely impact the financial performance of certain of the reporting units within those operations.
Upon acquisition, we are required to record the assets, liabilities and goodwill of a reporting unit at its fair value on the date of acquisition. As a result, any level of decrease in the forecasted cash flows of these businesses or increases in the discount rates utilized to value those businesses from their respective acquisition dates would likely result in the fair value of the reporting unit falling below the carrying value of the reporting unit, and could result in an assessment of whether that reporting unit’s goodwill is impaired.
Current commodity prices are significantly lower compared to commodity pricesWe acquired our Powder River Basin reporting unit in 2019 and recorded it at fair value at that time. Based on the events that occurred during 2014, and2020 described above, we determined that decrease has adversely impactedthe forecasted cash flows, discount rates and stock/therefore the fair value, of our Powder River Basin reporting unit prices for most companies insignificantly decreased during 2020, and accordingly performed a quantitative impairment assessment of the midstream industry, including us. As a result,goodwill related to that reporting unit during that period. Based on our quantitative assessment, which utilized the income approach, we determined that the goodwill associated with the Powder River Basin reporting unit should be fully impaired, and accordingly we recorded an $80.3 million impairment of the goodwill impairments on several of ourattributed to that reporting unitsunit during 2017.the year ended December 31, 2020. We did not record any impairments of the goodwill associated with our goodwillArrow or NGL Marketing and Logistics reporting units during 2020, as we did not have indicators that it was more likely than not that the years endedfair value of those reporting units had declined to below their carrying value at December 31, 2019 and 2018.2020. At December 31, 2019,2020, our accumulated goodwill impairments at CEQP and CMLP were approximately $1,656.5$1,736.8 million and $1,399.3$1,479.6 million, respectively. The following table summarizes the goodwill of our various reporting units (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goodwill Impairments during the Year Ended December 31, 2017 | | Goodwill at January 1, 2018 | | Other | | Impact of Sale of West Coast | | Goodwill at December 31, 2018 | | Goodwill Addition during the Year Ended December 31, 2019 | | Goodwill at December 31, 2019 | G&P | | | | | | | | | | | | | | Arrow | $ | — |
| | $ | 45.9 |
| | $ | — |
| | $ | — |
| | $ | 45.9 |
| | $ | — |
| | $ | 45.9 |
| Powder River Basin | — |
| | — |
| | — |
| | — |
| | — |
| | 80.3 |
| (3) | 80.3 |
| MS&L | | |
| | | | | |
| | | | | NGL Marketing and Logistics | — |
| | — |
| | 101.7 |
| (1) | (9.0 | ) | (2) | 92.7 |
| | — |
| | 92.7 |
| West Coast | 2.4 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Supply and Logistics | — |
| | 101.7 |
| | (101.7 | ) | (1) | — |
| | — |
| | — |
| | — |
| Storage and Terminals | 36.4 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Total | $ | 38.8 |
| | $ | 147.6 |
| | $ | — |
| | $ | (9.0 | ) | | $ | 138.6 |
| | $ | 80.3 |
| | $ | 218.9 |
|
| | (1) | Reflects the combination of the MS&L reporting units into one NGL Marketing and Logistics reporting unit as further discussed below. |
| | (2) | In October 2018, we sold our West Coast assets and wrote off the goodwill attributable to these assets as further discussed below. |
| | (3) | In April 2019, we acquired the remaining 50% equity interest in Jackalope from Williams. See Note 3 for a further discussion of the acquisition. |
Leases
On January 1, 2018, we combined the four reporting units included in the MS&L segment
We enter into one NGL Marketing and Logistics reporting unitleases with third parties for the purpose of evaluating goodwill for impairment on an ongoing basis. We combined these reporting units based on a strategic shift in the way in which we manage, operate and report our NGL operations as an integrated platform instead of as four individual stand-alone operations. We allocated approximately $9.0 million of the
goodwill associated with our NGL Marketing and Logistics reporting unitright to the West Coast facilities during 2018, and this goodwill was included in the loss on the sale of the West Coast assets. See Note 3 for a further discussion of the sale of our West Coast assets.
The goodwill impairments recorded during 2017 related to our MS&L West Coast and Storage and Terminals operations. The goodwill impairment related to our MS&L West Coast operations resulted from decreasing forecasted cash flows to be generated by those operations. Our West Coast customers experienced headwinds during 2017, with both producers and refineries located in the Western U.S. experiencing regulatory challenges and an inflow of NGLs from the Eastern U.S., which caused demand for gathering, processing and logistics services from our West Coast operations to remain relatively flat over the past several years. The goodwill impairment related to our MS&L Storage and Terminals operations resulted from decreasing forecasted cash flows to be generated by those operations. During 2017, we experienced NGL market headwinds in the Northeast with NGL exports and other market dynamics causing price differentials to narrow between purchasing NGLs in the summer (which are then stored in our NGL facilities) and selling NGLs in the winter. These dynamics also caused the rates that we are able to charge for storing NGLs in our facilities to decline from their historical levels. Although our MS&L Storage and Terminals operations’ results have been relatively consistent over the past several years, these operations have not experienced growth as fast or to the decrease that we expected when we merged with Inergy, LP in 2013, and during 2017, we revised our forecasted cash flows to reflect current market dynamics, which we believe will continue for the foreseeable future. We utilized the income approach to determine the fair value of our reporting units given the limited availability of comparable market-based transactions during 2017, and we utilized discount rates ranging from 10% to 12% in applying the income approach to determine the fair value of our reporting units with goodwill as of December 31, 2017, which is a Level 3 fair value measurement.
Leases
We maintain leases in the ordinary course of our business activities. Our leases include those forutilize certain office buildings, crude oil railroad cars, certain vehicles and other operating facilities and equipment. For contracts that extend for a period greater than 12 months, we recognize a right of use asset and a corresponding lease liability on our consolidated balance sheet based on the present value of each lease, which is based on the future minimum lease payments and is determined by discounting these payments using an incremental borrowing rate. We also sublease certainrecognize operating lease expense on our consolidated statements of our crude oil railroad carsoperations as either costs of product/services sold, general and trucks toadministrative expenses or operations and maintenance expenses on a third party.straight-line basis over the lease term. We do not have any material leases where we are considered to be the lessor. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Prior to January 1, 2019, we classified our leases as either capital or operating leases under ASC Topic 840, Leases (Topic 840). We recognized assets (included in property, plant and equipment) and liabilities (included in accrued expenses and other liabilities and other long-term liabilities) related to our capital leases on our consolidated balance sheets. We also recognized depreciation expense and interest expense related to our capital leases on our consolidated statements of operations. The majority of our lease arrangements were classified as operating leases, under which we did not recognize assets or liabilities on our consolidated balance sheets, but rather recognized lease payments on our consolidated statements of operations as either costs of product/services sold or operations and maintenance expense on a straight-line basis over the lease term.
On January 1, 2019, we adopted the provisions of ASC Topic 842, Leases (Topic 842), which revises the accounting for leases by requiring certain leases to be recognized as assets and liabilities on the balance sheet, and requiring companies to disclose additional information about their leasing arrangements. We adopted the standard using the modified retrospective method. Based on the practical expedients allowed for in the standard, we did not reassess the current GAAP classification of leases, easements and rights of way that existed as of January 1, 2019, and we did not utilize the hindsight method in determining the assets and liabilities to be recorded for our existing leases on January 1, 2019. The adoption of this standard required us to make significant judgments on whether our revenue and expenditure-related contracts were considered to be leases (or contain leases) under Topic 842, and if contracts were considered to be leases whether they should be considered operating leases or finance leases under the new standard. We do not have any material revenue contracts that are considered leases under Topic 842.
leases.
Upon the adoption of this standard, on January 1, 2019, we recorded a $67.5 million increase to our operating lease right-of-use assets, an $18.6 million increase to our accrued expenses and other liabilities and a $48.9 million increase to our long-term operating lease liabilities, related to reflecting our operating leases on our consolidated balance sheet as a result of adopting the new standard. We also recorded a $1.6 million increase to our property, plant and equipment, $0.3 million increase to our accrued expenses and other liabilities and a $1.3 million increase to our other long-term liabilities, related to our finance leases (which were all formerly capital leases under
Topic 840) as a result of applying the provisions of the new standard to the leases. The adoption of the standard did not result in a material cumulative effect of accounting change to our consolidated financial statements. See Note 15 for a further discussion of our leases.
Investments in Unconsolidated Affiliates
Equity method investments in which we exercise significant influence, but do not control and are not the primary beneficiary, are accounted for using the equity method of accounting. Differences in the basis of investments and the separate net asset values of the investees, if any, are amortized into net income or loss over the remaining useful lives of the underlying assets and liabilities, except for the excess related to goodwill. We evaluate our equity method investments for impairment when events or circumstances indicate that the carrying value of the equity method investment may be impaired and that impairment is other than temporary. If an event occurs, we evaluate the recoverability of our carrying value based on the fair value of the investment. If an impairment is indicated, or if we decide to sell an investment in an unconsolidated affiliate, we adjust the carrying values of the asset downward, if necessary, to their estimated fair values. We did not record impairments of our equity method investments during the years ended December 31, 2020, 2019 2018 and 2017.2018.
Asset Retirement Obligations
An asset retirement obligation (ARO) is an estimated liability for the cost to retire a tangible asset. We record a liability for legal or contractual obligations to retire our long-lived assets associated with our facilities and right-of-way contracts we hold. We record a liability in the period the obligation is incurred and estimable. An ARO is initially recorded at its estimated fair value with a corresponding increase to property, plant and equipment. This increase in property, plant and equipment is then depreciated over the useful life of the asset to which that liability relates. An ongoing expense is recognized for changes in the fair value of the liability as a result of the passage of time, which we record as depreciation, amortization and accretion expense on our consolidated statements of operations.
We have various obligations to remove property, plant and equipment on rights-of-way and leases for which we cannot currently estimate the fair value of those obligations because the associated assets have indeterminate lives. An asset retirement obligation liability (and related assets), if any, will be recorded for these obligations once sufficient information is available to reasonably estimate the fair value of the obligations. Our current AROs are reflected in accrued expenses and other liabilities and our long-term AROs are reflected in other long-term liabilities on our consolidated balance sheets. See Note 5 for a further discussion
Deferred Financing Costs
Deferred financing costs represent costs associated with obtaining long-term financing and are amortized over the term of the related debt using a method which approximates the effective interest method and has a weighted average remaining life of fivefour years. Our net deferred financing costs are reflected as a reduction of long-term debt on our consolidated balance sheets.
Revenue Recognition
We provide gathering, processing, compression, storage, fractionation, and transportation (consisting of pipelines, truck and rail terminals, truck/trailer units and rail cars) services and we sell commodities (including crude oil, natural gas NGLs and water)NGLs) under various contracts. These contracts include:
| | • | •Fixed-fee contracts. Under these contracts, we do not take title to the underlying crude oil, natural gas, NGLs and water but charge our customers a fixed-fee for the services we provide, which can be a firm reservation charge and/or a charge per volume gathered, processed, compressed, stored, loaded and/or transported (which, in certain contracts, can be subject to a minimum level of volumes); •Percentage-of-proceeds service contracts. Under these contracts, we take title to crude oil, natural gas or NGLs after the commodity leaves our gathering and processing facilities. We often market and sell those commodities to third parties after they leave our facilities and we will remit a portion of the sales proceeds to our producers; •Percentage-of-proceeds product contracts. Under these contracts, we take title to crude oil, natural gas or NGLs before the commodity enters our facilities. We market and sell those commodities to third parties and we will remit a portion of the sales proceeds to our producers; and •Purchase and sale contracts. Under these contracts, we purchase crude oil, natural gas or NGLs before the commodity enters our facilities, and we market and sell those commodities to third parties.
. Under these contracts, we do not take title to the underlying crude oil, natural gas, NGLs and water but charge our customers a fixed-fee for the services we provide, which can be a firm reservation charge and/or a charge per volume gathered, processed, compressed, stored, loaded and/or transported (which, in certain contracts, can be subject to a minimum level of volumes);
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| | • | Percentage-of-proceeds service contracts. Under these contracts, we take title to crude oil, natural gas or NGLs after the commodity leaves our gathering and processing facilities. We often market and sell those commodities to third parties after they leave our facilities and we will remit a portion of the sales proceeds to our producers;
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| | • | Percentage-of-proceeds product contracts. Under these contracts, we take title to crude oil, natural gas or NGLs before the commodity enters our facilities. We market and sell those commodities to third parties and we will remit a portion of the sales proceeds to our producers; and
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| | • | Purchase and sale contracts. Under these contracts, we purchase crude oil, natural gas or NGLs before the commodity enters our facilities, and we market and sell those commodities to third parties.
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On January 1, 2018, we adopted the provisions of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted the standard using the modified retrospective method for all revenue contracts that involve revenue generating
activities that occur after January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new standard, while amounts prior to January 1, 2018 continue to be reported in accordance with our historic accounting under Revenue Recognition (Topic 605).
Prior toOn January 1, 2018, we recognized revenues for services and products when allrecorded a net increase of $7.5 million to our partners’ capital (including a $9.5 million decrease to reflect our proportionate share of the following criteria were met under Topic 605: (i) services had been rendered or products delivered or sold; (ii) persuasive evidencecumulative effect of an exchange arrangement existed; (iii)accounting change related to Jackalope’s adoption of the price for services was fixed or determinable; and (iv) collectability was reasonably assured. We recorded deferred revenue when we received amounts from our customers but had not yet metnew standard) as a result of applying the criteria listed above. We recognized deferred revenue in our consolidated statementcumulative impact of operations whenadopting the criteria had been met and all services had been rendered.new standard.
Beginning January 1, 2018, weWe recognize revenues for services and products under revenue contracts as our obligations to perform services or deliver/sell products under the contracts are satisfied. A contract’s transaction price is allocated to each performance obligation in the contract and recognized as revenue when, or as, the performance obligation is satisfied. Our fixed-fee contracts and our percentage-of-proceeds service contracts primarily have a single performance obligation to deliver a series of distinct goods or services that are substantially the same and have the same pattern of transfer to our customers. For performance obligations associated with these contracts, we recognize revenues over time utilizing the output method based on the actual volumes of products delivered/sold or services performed, because the single performance obligation is satisfied over time using the same performance measure of progress toward satisfaction of the performance obligation. The transaction price under certain of our fixed-fee contracts and percentage-of-proceeds service contracts includes variable consideration that varies primarily based on actual volumes that are delivered under the contracts. Because the variable consideration specifically relates to our efforts to transfer the services and/or products under the contracts, we allocate the variable consideration entirely to the distinct service utilizing the allocation exception guidance under Topic 606, and accordingly recognize the variable consideration as revenues at the time the good or service is transferred to the customer.
Certain of our fixed-fee contracts contain minimum volume features under which the customers must utilize our services to gather, compress or load a specified quantity of crude oil or natural gas or pay a deficiency fee based on the difference between actual volumes and the contractual minimum volume. We recognize revenues from these contracts when actual volumes are gathered, compressed or loaded and the likelihood of a customer exercising its remaining rights to make up the deficient volumes under minimum volume commitments becomes remote.
We recognize revenues at a point in time for performance obligations associated with our percentage-of proceeds product contracts and purchase and sale contracts, and these revenues are recognized because control of the underlying product is transferred to the customer when the distinct good is provided to the customer.
The evaluation of when performance obligations have been satisfied and the transaction price that is allocated to our performance obligations requires significant judgments and assumptions, including our evaluation of the timing of when control of the underlying good or service has transferred to our customers and the relative standalone selling price of goods and services provided to customers under contracts with multiple performance obligations. Actual results can significantly vary from those judgments and assumptions. We did not have any material contracts with multiple performance obligations or under which we receive material amounts of non-cash consideration during the year ended December 31, 2019.
2020.
Contract Assets and Contract Liabilities
.
Amounts due from our customers under our revenue contracts are typically billed as the service is being provided or on a weekly, bi-weekly or monthly basis and are due within 30 days of billing. Under certain of our contracts, we recognize revenues in excess of billings which we present as contract assets on our consolidated balance sheets.
Under certain contracts, we may beare entitled to receive payments in advance of satisfying our performance obligations under the contract.contracts. We recognize a liability for these payments in excess of revenue recognized and present it as deferred revenue or contract liabilities on our consolidated balance sheets. Our deferred revenue primarily relates to:
| | • | •Capital Reimbursements. Certain contracts in our G&P segment require that our customers reimburse us for capital expenditures related to the construction of long-lived assets utilized to provide services to them under the respective revenue contracts. Because we consider these amounts as consideration from customers associated with ongoing services to be provided to customers, we defer these upfront payments in deferred revenue and recognize the amounts in revenue over the life of the associated revenue contract as the performance obligations are satisfied under the contract.
•Contracts with Increasing (Decreasing) Rates per Unit. Certain of our contracts have fixed rates per volume that increase and/or decrease over the life of the contract once certain time periods or thresholds are met. We record revenues on these contracts ratably per unit over the life of the contract based on the remaining performance obligations to be performed, which can result in the deferral of revenue for the difference between the consideration received and the ratable revenue recognized.
Certain contracts in our G&P segment require that our customers reimburse us for capital expenditures related to the construction of long-lived assets utilized to provide services to them under the revenue contracts. Because we consider these amounts as consideration from customers associated with ongoing services to be provided to customers, we defer these upfront payments in deferred revenue and recognize the amounts in revenue over the life of the associated revenue contract as the performance obligations are satisfied under the contract. On January 1, 2018, we recorded an $87.6 million increase to our property, plant and equipment, net, a $69.1 million increase to our deferred revenue liability and an $18.5 million increase to partners’ capital as a result of applying the cumulative impact of adopting the new standard on these types of contracts.
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| | • | Contracts with Increasing (Decreasing) Rates per Unit. Certain contracts in our G&P, S&T and MS&L segments have fixed rates per volume that increase and/or decrease over the life of the contract once certain time periods or thresholds are met. We record revenues on these contracts ratably per unit over the life of the contract based on the remaining performance obligations to be performed, which can result in the deferral of revenue for the difference between the consideration received and the ratable revenue recognized. On January 1, 2018, we recorded a $1.5 million increase to our deferred revenue liability and a corresponding decrease to partners’ capital as a result of applying the cumulative impact of adopting the new standard on these types of contracts.
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Credit Risk and Concentrations
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.
Income Taxes
Crestwood Equity is a master limited partnership and Crestwood Midstream is a limited partnership. Partnerships are generally not subject to federal income tax, although publicly-traded partnerships are treated as corporations for federal income tax purposes and therefore are subject to federal income tax, unless the partnership generates at least 90% of its gross income from qualifying sources. If the qualifying income requirement is satisfied, the publicly-traded partnership will be treated as a partnership for federal income tax purposes. We satisfy the qualifying income requirement and are treated as a partnership for federal and state income tax purposes. Our consolidated earnings are included in the federal and state income tax returns of our partners. However, legislation in certain states allows for taxation of partnerships, and as such, certain state taxes have been included in our accompanying financial statements as income taxes due to the nature of the tax in those particular states as discussed below. In addition, federal and state income taxes are provided on the earnings of the subsidiaries incorporated as taxable entities. We are required to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities using expected rates in effect for the year in which the differences are expected to reverse.
We are responsible for the Texas Margin tax computed on theincluded in our Texas franchise tax returns. The margin tax qualifies as an income tax under GAAP, which requires us to recognize the impact of this tax on the temporary differences between the financial statement assets and liabilities and their tax basis attributable to such tax.
Net earnings for financial statement purposes may differ significantly from taxable income reportable to unitholders as a result of differences between the tax basis and the financial reporting basis of assets and liabilities and the taxable income allocation requirements under the partnership agreement.
Environmental Costs and Other Contingencies
We recognize liabilities for environmental and other contingencies when there is an exposure that indicates it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Where the most likely outcome of a contingency can be reasonably estimated, we accrue a liability for that amount. Where the most likely outcome cannot be estimated, a range of potential losses is established and if no one amount in that range is more likely than any other, the low end of range is accrued.
We record liabilities for environmental contingencies at their undiscounted amounts on our consolidated balance sheets as accrued expenses and other liabilities when environmental assessments indicate that remediation efforts are probable and costs can be reasonably estimated. Estimates of our liabilities are based on currently available facts and presently enacted laws and regulations, taking into consideration the likely effects of other societal and economic factors. These estimates are subject to revision in future periods based on actual costs or new circumstances. We capitalize costs that benefit future periods and recognize a current period charge in operations and maintenance expenses when clean-up efforts do not benefit future periods.
We evaluate potential recoveries of amounts from third parties, including insurance coverage, separately from our liability. Recovery is evaluated based on the solvency of the third party, among other factors. When recovery is assured, we record and report an asset separately from the associated liability on our consolidated balance sheet.
Price Risk Management Activities
We utilize certain derivative financial instruments to (i) manage our exposure to commodity price risk, specifically, the related change in the fair value of inventory, as well as the variability of cash flows related to forecasted transactions; and (ii) ensure the availability of adequate physical supply of commodity; and (iii) manage our exposure to the interest rate risk associated with fixed and variable rate borrowings.commodity. We record all derivative instruments on the balance sheet at their fair values as either assets or liabilities measuredon our consolidated balance sheets at their fair value.values. Changes in the fair value of these derivative financial instruments are recorded through current earnings.
We diddo not have any derivatives designated as fair value hedges or cash flow hedges for accounting purposes during the years ended December 31, 2019, 2018 or 2017.purposes.
Unit-Based Compensation
Long-term incentive awards are granted under the Crestwood Equity incentive plan.Partners LP Long Term Incentive Plan (Crestwood LTIP). Unit-based compensation awards consist of restricted units and performance units that are valuedrecognized in our consolidated statements of operations based on their grant date at fair value. For restricted units, we generally recognize the closingexpense over the vesting period on a straight line basis. For performance units, we remeasure compensation expense at each balance sheet date because the vesting is subject to the attainment of certain performance and market price of CEQP’s common units on the date of grant, which reflects the fair value of such awards.goals over a three-year period. For those awards that are settled in cash, the associated liability is remeasured at every balance sheet date through settlement, such that the vested portion of the liability is adjusted to reflect its revised fair value through compensation expense. We generally recognize the expense associated with the award over the vesting period on a straight line basis.
New Accounting Pronouncement Issued But Not Yet Adopted
As of December 31, 2019, the following accounting standard had not yet been adopted by us:
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides guidance on how companies should evaluate their accounts and notes receivable and other financial instruments for impairment. The standard requires companies to evaluate their financial instruments for impairment by recording an allowance for doubtful accounts and/or bad debt expense based on certain categories of instruments rather than a specific identification approach. We utilized a method to estimate the allowance for doubtful accounts that considered both the aging of our accounts receivable and the projected loss rate of our receivables to adopt the provisions of this standard effective January 1, 2020. Upon adoption of this standard, we anticipate increasing our allowance for doubtful accounts by approximately $0.7 million.
Note 3 – AcquisitionAcquisitions and Divestitures
Acquisitions
NGL Asset Acquisition
In April 2020, we acquired several NGL storage and rail-to-truck terminals from Plains All American Pipeline, L.P. for approximately $162 million (NGL Asset Acquisition). The acquired assets include 7 MMBbls of NGL storage and 7 terminals, and resulted in an increase of approximately $110 million to our property, plant and equipment, $50 million to our intangible assets and $2 million to our other assets and liabilities, net. The identifiable intangible assets primarily consist of customer accounts with a weighted-average remaining life of 20 years on the date of acquisition. We allocated the purchase price to these assets and liabilities based on their fair values, which are Level 3 fair value measurements and were developed by management with the assistance of a third-party valuation firm utilizing market-related information about the property, plant
and equipment and customer relationships acquired. These assets are included in our marketing, supply and logistics segment. The transaction costs related to this acquisition were not material during the year ended December 31, 2020.
Jackalope Acquisition
On April 9, 2019, Crestwood Niobrara LLC (Crestwood Niobrara), our consolidated subsidiary, acquired Williams Partners LP’s (Williams)Williams’s 50% equity interest in Jackalope Gas Gathering Services, L.L.C. (Jackalope) for approximately $484.6 million (Jackalope Acquisition). The acquisition was funded through a combination of borrowings under the CMLP credit facility and the issuance of $235 million of new preferred units to CN Jackalope Holdings LLC (Jackalope Holdings) (see Note 12 for a further discussion of the issuance of the new preferred units). Prior to the Jackalope Acquisition, Crestwood Niobrara owned a 50% equity interest in Jackalope, which we accounted for under the equity method of accounting. As a result of this transaction, Crestwood Niobrara controls and owns 100% of the equity interests in Jackalope. The financial results of Jackalope are included in our gathering and processing segment from the date of the acquisition. Transaction costs related to the Jackalope Acquisition were approximately $2.8 million during the year ended December 31, 2019. These costs are included in operations and maintenance expenses in our consolidated statements of operations.
The fair values of the assets acquired and liabilities assumed were determined primarily utilizing market-related information and other projections on the anticipated performance of the assets acquired, including an analysis of the future discounted cash flows to be generated by the acquired assets at a discount rate of approximately 12%. Those fair values are Level 3 fair value measurements and were developed by management with the assistance of a third-party valuation firm.
The following table summarizes the final valuation of the assets acquired and liabilities assumed at the acquisition date (in millions):
| | | | | Cash | $ | 22.5 |
| Other current assets | 30.9 |
| Property, plant and equipment | 532.9 |
| Intangible assets | 306.0 |
| Goodwill | 80.3 |
| Current liabilities | (30.4 | ) | Other long-term liabilities | (21.5 | ) | Estimated fair value of 100% interest in Jackalope | 920.7 |
| Less: | | Elimination of equity investment in Jackalope | 226.7 |
| Gain on acquisition of Jackalope | 209.4 |
| Total purchase price | $ | 484.6 |
|
| | | | | | | | Cash | $ | 22.5 | | Other current assets | 30.9 | | Property, plant and equipment | 532.9 | | Intangible assets | 306.0 | | Goodwill | 80.3 | | | | Current liabilities | (30.4) | | Other long-term liabilities | (21.5) | | Estimated fair value of 100% interest in Jackalope | 920.7 | | Less: | | Elimination of equity investment in Jackalope | 226.7 | | Gain on acquisition of Jackalope | 209.4 | | Total purchase price | $ | 484.6 | |
The identifiable intangible assets primarily consists of a customer contract that haswith a weighted-average remaining life of 17 years.years on the date of acquisition. The goodwill recognized relatesrelated primarily to anticipated operating synergies between the assets acquired and our existing operations. The fair value of the assets acquired and liabilities assumed in the Jackalope Acquisition exceeded the sum of the cash consideration paid and the historical book value of our 50% equity interest in Jackalope (which was remeasured at fair value and derecognized) and, as a result, we recognized a gain of approximately $209.4 million.million during the year ended December 31, 2019. This gain is included in gain on acquisition in our consolidated statements of operations.
Our consolidated statements of operations include the results of Jackalope in our gathering and processing segment since April 9, 2019, the closing date of the acquisition. During the year ended December 31, 2019, we recognized approximately $70.1 million of revenues and $20.9 million of net income related to Jackalope’s operations.
The tables below presents selected unaudited pro forma information as if the Jackalope Acquisition had occurred on January 1, 20172018 (in millions). The pro forma information is not necessarily indicative of the financial results that would have occurred if the transaction had been completed as of the dates indicated. The amounts have been calculated after applying our accounting policies and adjusting the results to reflect the depreciation, amortization and accretion expense that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been made at the beginning of the respective reporting period. The pro forma net income also includes the effects of interest expense on incremental borrowings and recognition of deferred revenue.
Crestwood Equity | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | Revenues | $ | 3,202.6 | | | $ | 3,729.5 | | Net income | $ | 313.5 | | | $ | 45.0 | |
| | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Revenues | $ | 3,202.6 |
| | $ | 3,729.5 |
| | $ | 3,935.4 |
| Net income (loss) | $ | 313.5 |
| | $ | 45.0 |
| | $ | (193.0 | ) |
Crestwood Midstream | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | Revenues | $ | 3,202.6 | | | $ | 3,729.5 | | Net income | $ | 304.2 | | | $ | 36.6 | |
| | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | Revenues | $ | 3,202.6 |
| | $ | 3,729.5 |
| | $ | 3,935.4 |
| Net income (loss) | $ | 304.2 |
| | $ | 36.6 |
| | $ | (201.9 | ) |
Divestitures
Fayetteville Assets
On October 1, 2020, we sold our gathering systems in the Fayetteville Shale to a third party for approximately $23 million, and during the year ended December 31, 2020, we recognized a loss on the sale of approximately $19.9 million, which is included in loss on long-lived assets, net on our consolidated statement of operations. The sale of our Fayetteville assets resulted in a decrease of approximately $44.4 million of property, plant and equipment, net and a decrease of approximately $1.4 million in our asset retirement obligation liabilities. Our Fayetteville assets were previously included in our gathering and processing segment and consisted of five natural gas gathering systems and related compression, dehydration and treating facilities located in Arkansas.
West Coast Assets
In October 2018, we sold our West Coast assets to a third party for proceeds of approximately $70.5 million. The West Coast assets included a gas gathering and processing system, fractionator, butamer and various rail and truck terminal and storage facilities located in California, Nevada, Wyoming and Utah. The sale of West Coast resulted in a decrease of $61.8 million of
property, plant and equipment, net, $9.0 million of goodwill and $26.6 million of other assets and liabilities, net. During the year ended December 31, 2018, we recognized a loss from the sale of approximately $26.9 million, (including the goodwill write off discussed in Note 2), which is included in loss on long-lived assets, net in our consolidated statement of operations. Our West Coast assets were previously included in our MS&Lmarketing, supply and logistics segment.
In December 2017, we sold 100% of our equity interests in US Salt, a solution-mining and salt production company located on the shores of Seneca Lake near Watkins Glen in Schuyler County, New York, to an affiliate of Kissner Group Holdings LP, for net proceeds of approximately $223.6 million, and we recognized a gain from the sale of approximately $33.6 million, which is included in loss on long-lived assets, net in our consolidated statement of operations. US Salt was previously included in our MS&L segment.
Note 4 – Certain Balance Sheet Information
Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2019 | | 2018 | | 2019 | | 2018 | Gathering systems and pipelines and related assets | $ | 1,017.8 |
| | $ | 758.6 |
| | $ | 1,160.6 |
| | $ | 901.5 |
| Facilities and equipment | 1,797.7 |
| | 1,230.7 |
| | 1,982.8 |
| | 1,415.9 |
| Buildings, land, rights-of-way, storage rights and easements | 370.6 |
| | 331.7 |
| | 374.3 |
| | 335.4 |
| Vehicles | 27.7 |
| | 17.9 |
| | 26.0 |
| | 16.1 |
| Construction in process | 368.7 |
| | 230.8 |
| | 368.7 |
| | 230.8 |
| Office furniture and fixtures | 30.0 |
| | 28.4 |
| | 30.2 |
| | 28.5 |
| | 3,612.5 |
| | 2,598.1 |
| | 3,942.6 |
| | 2,928.2 |
| Less: accumulated depreciation | 703.4 |
| | 568.4 |
| | 875.1 |
| | 725.9 |
| Total property, plant and equipment, net | $ | 2,909.1 |
| | $ | 2,029.7 |
| | $ | 3,067.5 |
| | $ | 2,202.3 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2020 | | 2019 | | 2020 | | 2019 | Gathering systems and pipelines and related assets | $ | 1,050.8 | | | $ | 1,017.8 | | | $ | 1,193.6 | | | $ | 1,160.6 | | Facilities and equipment | 2,177.9 | | | 1,797.7 | | | 2,363.0 | | | 1,982.8 | | Buildings, land, rights-of-way, storage rights and easements | 389.0 | | | 370.6 | | | 392.7 | | | 374.3 | | Vehicles | 13.9 | | | 12.8 | | | 12.1 | | | 11.1 | | Construction in process | 83.6 | | | 368.7 | | | 83.6 | | | 368.7 | | Finance leases | 13.3 | | | 14.9 | | | 13.3 | | | 14.9 | | Office furniture and fixtures | 31.1 | | | 30.0 | | | 31.3 | | | 30.2 | | | 3,759.6 | | | 3,612.5 | | | 4,089.6 | | | 3,942.6 | | Less: accumulated depreciation | 842.5 | | | 703.4 | | | 1,028.3 | | | 875.1 | | Total property, plant and equipment, net | $ | 2,917.1 | | | $ | 2,909.1 | | | $ | 3,061.3 | | | $ | 3,067.5 | |
Depreciation. CEQP’s depreciation expense totaled $174.8 million, $139.5 million $123.6 million and $135.9$123.6 million for the years ended December 31, 2020, 2019 2018 and 2017.2018. CMLP’s depreciation expense totaled $188.9 million, $153.5 million $137.7 million and $150.0$137.7 million for the years ended December 31, 2020, 2019 2018 and 2017.2018.
Capitalized Interest. During the years ended December 31, 2020, 2019, 2018 and 2017,2018, CEQP and CMLP capitalized interest of $14.4$2.7 million,, $5.0 $14.4 million and $2.9$5.0 million related to certain expansion projects.
Finance Leases. We had finance lease assets of $9.5 million and $9.7 million included in property, plant and equipment, net at December 31, 2019 and 2018, primarily related to certain vehicle leases. See Notes 2 and 15 for a further discussion of our finance lease assets.
Intangible Assets IntangibleOur intangible assets at CEQP and CMLP consisted of the following at December 31, 20192020 and 20182019 (in millions):
| | | | | | | | | | | | | | | | | December 31, | | | 2020 | | 2019 | Customer accounts(1) | | $ | 488.7 | | | $ | 438.9 | | | | | | | Revenue contracts | | 631.2 | | | 631.2 | | | | | | | | | | | | Trademarks | | 6.2 | | | 6.2 | | | | | | | | | 1,126.1 | | | 1,076.3 | | Less: accumulated amortization | | 331.8 | | | 271.1 | | Total intangible assets, net | | $ | 794.3 | | | $ | 805.2 | |
| | | | | | | | | | | | December 31, | | | 2019 | | 2018 | Customer accounts | | $ | 438.9 |
| | $ | 438.9 |
| Gas gathering, compression and processing contracts (1) | | 631.2 |
| | 325.2 |
| Trademarks | | 6.2 |
| | 6.2 |
| | | 1,076.3 |
| | 770.3 |
| Less: accumulated amortization | | 271.1 |
| | 216.5 |
| Total intangible assets, net | | $ | 805.2 |
| | $ | 553.8 |
|
(1)As of December 31, 2020, this amount includes $49.8 million related to customer accounts acquired in conjunction with the NGL Asset Acquisition which is further discussed in Note 3.
| | (1) | Includes $306.0 million related to a revenue contract acquired from the Jackalope Acquisition, which is further discussed in Note 3. |
The following table summarizes total accumulated amortization of CEQP’s and CMLP’sour intangible assets at December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | December 31, | | 2019 | | 2018 | Customer accounts | $ | 134.4 |
| | $ | 112.1 |
| Gas gathering, compression and processing contracts | 132.5 |
| | 100.8 |
| Trademarks | 4.2 |
| | 3.6 |
| Total accumulated amortization | $ | 271.1 |
| | $ | 216.5 |
|
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Customer accounts | $ | 158.5 | | | $ | 134.4 | | | | | | Revenue contracts | 168.6 | | | 132.5 | | | | | | | | | | Trademarks | 4.7 | | | 4.2 | | | | | | Total accumulated amortization | $ | 331.8 | | | $ | 271.1 | |
Crestwood Equity’s amortization expense related to its intangible assets for the years ended December 31, 2020, 2019, 2018 and 2017,2018, was approximately $60.7 million, $54.6 million $43.5 million and $53.7$43.5 million. Crestwood Midstream’s amortization expense related to its intangible assets for the years ended December 31, 2020, 2019 2018 and 20172018 was approximately $60.7 million, $54.6 million and $42.1 million and $50.6 million.
Estimated amortization of CEQP’s and CMLP’sour intangible assets for the next five years is as follows (in millions): | | | | | Year Ending December 31, | | 2020 | $ | 58.9 |
| 2021 | $ | 58.9 |
| 2022 | $ | 58.9 |
| 2023 | $ | 55.0 |
| 2024 | $ | 50.1 |
|
| | | | | | | | Year Ending December 31, | | | | 2021 | $ | 61.4 | | | | 2022 | $ | 61.4 | | | | 2023 | $ | 57.6 | | | | 2024 | $ | 54.2 | | | | 2025 | $ | 51.5 | | | | | | | | | | | |
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following at December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2019 | | 2018 | | 2019 | | 2018 | Accrued expenses(1) | $ | 61.6 |
| | $ | 64.8 |
| | $ | 60.3 |
| | $ | 63.7 |
| Accrued property taxes | 6.1 |
| | 2.6 |
| | 6.1 |
| | 2.6 |
| Income tax payable | 0.3 |
| | 0.3 |
| | 0.3 |
| | 0.3 |
| Interest payable | 25.6 |
| | 19.8 |
| | 25.6 |
| | 19.8 |
| Accrued additions to property, plant and equipment | 38.0 |
| | 10.5 |
| | 38.0 |
| | 10.5 |
| Operating leases | 18.1 |
| | — |
| | 18.1 |
| | — |
| Finance leases | 3.2 |
| | 2.4 |
| | 3.2 |
| | 2.4 |
| Deferred revenue | 8.8 |
| | 12.0 |
| | 8.8 |
| | 12.0 |
| Total accrued expenses and other liabilities | $ | 161.7 |
| | $ | 112.4 |
| | $ | 160.4 |
| | $ | 111.3 |
|
| | (1) | Includes $16.2 million of related party accrued expenses at December 31, 2018 related to deposits received from Jackalope prior to the acquisition of the remaining 50% equity interest in Jackalope from Williams in April 2019. |
| | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2020 | | 2019 | | 2020 | | 2019 | Accrued expenses | $ | 48.3 | | | $ | 61.6 | | | $ | 46.4 | | | $ | 60.3 | | Accrued property taxes | 8.4 | | | 6.1 | | | 8.4 | | | 6.1 | | | | | | | | | | Income tax payable | 0.2 | | | 0.3 | | | 0.2 | | | 0.3 | | Interest payable | 24.9 | | | 25.6 | | | 24.9 | | | 25.6 | | Accrued additions to property, plant and equipment | 12.3 | | | 38.0 | | | 12.3 | | | 38.0 | | Operating leases | 14.7 | | | 18.1 | | | 14.7 | | | 18.1 | | Finance leases | 2.9 | | | 3.2 | | | 2.9 | | | 3.2 | | Deferred revenue | 10.3 | | | 8.8 | | | 10.3 | | | 8.8 | | | | | | | | | | Total accrued expenses and other liabilities | $ | 122.0 | | | $ | 161.7 | | | $ | 120.1 | | | $ | 160.4 | |
Other Long-Term Liabilities
Other long-term liabilities consisted of the following at December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2019 | | 2018 | | 2019 | | 2018 | Contract liabilities | $ | 144.7 |
| | $ | 65.4 |
| | $ | 144.7 |
| | $ | 65.4 |
| Contingent consideration | 57.0 |
| | 57.0 |
| | 57.0 |
| | 57.0 |
| Operating leases | 41.5 |
| | — |
| | 41.5 |
| | — |
| Asset retirement obligations | 33.3 |
| | 27.6 |
| | 33.3 |
| | 27.6 |
| Other | 25.1 |
| | 23.6 |
| | 19.1 |
| | 21.0 |
| Total other long-term liabilities | $ | 301.6 |
| | $ | 173.6 |
| | $ | 295.6 |
| | $ | 171.0 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2020 | | 2019 | | 2020 | | 2019 | Contract liabilities | $ | 172.2 | | | $ | 144.7 | | | $ | 172.2 | | | $ | 144.7 | | Operating leases | 28.5 | | | 41.5 | | | 28.5 | | | 41.5 | | Asset retirement obligations | 34.1 | | | 33.3 | | | 34.1 | | | 33.3 | | Other | 18.5 | | | 25.1 | | | 17.0 | | | 19.1 | | Total other long-term liabilities | $ | 253.3 | | | $ | 244.6 | | | $ | 251.8 | | | $ | 238.6 | |
Note 5 - Asset Retirement Obligations
We have legal obligations associated with our facilities and right-of-way contracts we hold. Where we can reasonably estimate the ARO, we accrue a liability based on an estimate of the timing and amount of settlement. We record changes in these estimates based on changes in the expected amount and timing of payments to settle our obligations. We did not have any material assets that were legally restricted for use in settling asset retirement obligations as of December 31, 20192020 and 2018.2019.
The following table presents the changes in theour net asset retirement obligations for the years ended December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Net asset retirement obligations at January 1 | $ | 34.8 | | | $ | 28.1 | | Liabilities acquired(1) | 0.3 | | | 1.7 | | Liabilities incurred | 0.3 | | | 3.4 | | Liabilities settled | (0.8) | | | (0.1) | | Accretion expense | 1.9 | | | 1.7 | | Other(2) | (1.4) | | | 0 | | Net asset retirement obligations at December 31(3) | $ | 35.1 | | | $ | 34.8 | |
| | | | | | | | | | 2019 | | 2018 | Net asset retirement obligations at January 1 | $ | 28.1 |
| | $ | 28.1 |
| Liabilities acquired (1) | 1.7 |
| | — |
| Liabilities incurred | 3.4 |
| | 1.2 |
| Liabilities settled | (0.1 | ) | | (2.8 | ) | Accretion expense | 1.7 |
| | 1.6 |
| Net asset retirement obligations at December 31 (2) | $ | 34.8 |
| | $ | 28.1 |
|
| | (1) | Relates to the Jackalope Acquisition, which is further discussed in Note 3. |
| | (2) | Includes $1.5 million and $0.5 million of current ARO liabilities at December 31, 2019 and 2018. |
(1)Primarily relates to the NGL Asset Acquisition in 2020 and the Jackalope Acquisition in 2019. See Note 3 for a further discussion of these acquisitions.
(2)Relates to obligations included in the sale of our Fayetteville assets. See Note 3 for a further discussion of this divestiture.
(3)Includes $1.0 million and $1.5 million of current ARO liabilities at December 31, 2020 and 2019.
Note 6 - Investments in Unconsolidated Affiliates
Net Investments and Earnings (Loss)
Our net investments in and earnings (loss) from our unconsolidated affiliates are as follows (in millions, unless otherwise stated):
| | | | | | | | | | | | | | | | | | | | | | | | | Ownership Percentage | | Investment | | Earnings (Loss) from Unconsolidated Affiliates | | December 31, | | December 31, | | Year Ended December 31, | | 2019 | | 2019 | | 2018 | | 2019 | | 2018 | | 2017 | Stagecoach Gas Services LLC | 50.00 | % | | $ | 814.4 |
| | $ | 830.4 |
| | $ | 34.2 |
| | $ | 29.3 |
| | $ | 25.3 |
| Jackalope Gas Gathering Services, L.L.C.(1) | — | % | (1) | — |
| | 210.2 |
| | 3.7 |
| | 18.1 |
| | 10.5 |
| Crestwood Permian Basin Holdings LLC(2) | 50.00 | % | | 121.8 |
| | 104.3 |
| | (5.8 | ) | | 4.4 |
| | 8.4 |
| Tres Palacios Holdings LLC | 50.01 | % | | 35.9 |
| | 35.0 |
| | 0.9 |
| | — |
| | 2.2 |
| Powder River Basin Industrial Complex, LLC | 50.01 | % | | 8.3 |
| | 8.3 |
| | (0.2 | ) | | 1.5 |
| | 1.4 |
| Total | | | $ | 980.4 |
| | $ | 1,188.2 |
| | $ | 32.8 |
| | $ | 53.3 |
| | $ | 47.8 |
|
| | (1) | On April 9, 2019, Crestwood Niobrara acquired Williams’ 50% equity interest in Jackalope and, as a result, Crestwood Niobrara controls and owns 100% of the equity interests in Jackalope. See Note 3 for a further discussion of this acquisition. |
| | (2) | Pursuant to the Crestwood Permian limited liability company agreement, we were allocated 100% of Crestwood New Mexico’s earnings through June 30, 2018. Effective July 1, 2018, our equity earnings from Crestwood New Mexico is based on our ownership percentage of Crestwood Permian, which is currently 50%. |
Description of Investments
Stagecoach Gas Services LLC
Crestwood Pipeline and Storage Northeast LLC, our wholly-owned subsidiary, owns a 50% equity interest in Stagecoach Gas Services LLC (Stagecoach Gas), and Con Edison Gas Pipeline and Storage Northeast, LLC (CEGP) owns the remaining 50% equity interest in Stagecoach Gas. We account for our 50% equity interest in Stagecoach Gas under the equity method of accounting. Our Stagecoach Gas investment is included in our storage and transportation segment.
Pursuant to the Stagecoach Gas limited liability company agreement, we may be required to make payments of up to $57 million to CEGP after December 31, 2020 if certain criteria are not met by Stagecoach Gas by December 31, 2020, including achieving certain performance targets on growth capital projects. These growth capital projects depend on the construction of other third-party expansion projects, and during 2017, those third-party projects experienced regulatory and other delays that caused Stagecoach Gas to delay its growth capital projects. As a result, our consolidated balance sheets reflect an other long-term liability of $57 million at December 31, 2019 and 2018, and our consolidated income statement for the year ended December 31, 2017 reflects a $57 million loss on contingent consideration related to this obligation.
Jackalope Gas Gathering Services, L.L.C.
On April 9, 2019, Crestwood Niobrara, our consolidated subsidiary, acquired Williams’ 50% equity interest in Jackalope and, as a result, Crestwood Niobrara controls and owns 100% of the equity interests in Jackalope. As a result of this transaction, we eliminated our historical equity investment in Jackalope of approximately $226.7 million as of April 9, 2019 and began consolidating Jackalope’s operations. Our Jackalope investment was included in our gathering and processing segment.
Variable Interest Entity
On January 1, 2018, Jackalope adopted the provisions of
Topic 606, and we recorded a $9.5 million decrease to our equity method investment and a corresponding decrease to our partners’ capital to reflect our proportionate share of the cumulative effect of accounting change recorded by Jackalope related to the new standard. In addition, our earnings from unconsolidated affiliates decreased by approximately $9.7 million during the year ended December 31, 2018 to reflect our proportionate share of Jackalope’s deferred revenues related to the new standard.
Crestwood Permian Basin Holdings LLC
Crestwood Infrastructure Holdings LLC (Crestwood Infrastructure), our wholly-owned subsidiary, owns a 50% equity interest in Crestwood Permian and an affiliate of First Reserve owns the remaining 50% equity interest in Crestwood Permian. We manage and account for our 50% ownership interest in Crestwood Permian, which is a VIE, under the equity method of accounting as we exercise significant influence, but do not control Crestwood Permian and we are not its primary beneficiary due to First Reserve’s rights to exercise control over the entity.
Net Investments and Earnings (Loss)
We account for each of our investments in unconsolidated affiliates under the equity method of accounting. Our Stagecoach Gas Services LLC (Stagecoach Gas), Tres Palacios Holdings LLC (Tres Holdings) and Powder River Basin Industrial Complex, LLC (PRBIC) equity investments are included in our storage and transportation segment. Our Crestwood Permian equity investment is included in our gathering and processing segment.
Prior to October 2017,Our net investments in and earnings (loss) from our unconsolidated affiliates are as follows (in millions, unless otherwise stated):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ownership Percentage | | Investment | | Earnings (Loss) from Unconsolidated Affiliates | | | December 31, | | December 31, | | Year Ended December 31, | | | 2020 | | 2020 | | 2019 | | 2020 | | 2019 | | 2018 | | Stagecoach Gas Services LLC | 50.00 | % | | $ | 792.5 | | | $ | 814.4 | | | $ | 37.8 | | | $ | 34.2 | | | $ | 29.3 | | | Tres Palacios Holdings LLC | 50.01 | % | | 35.5 | | | 35.9 | | | 0 | | | 0.9 | | | 0 | | | Powder River Basin Industrial Complex, LLC | 50.01 | % | | 3.6 | | | 8.3 | | | (4.3) | | | (0.2) | | | 1.5 | | | Crestwood Permian Basin Holdings LLC | 50.00 | % | | 112.1 | | | 121.8 | | | (1.0) | | | (5.8) | | | 4.4 | | | Jackalope Gas Gathering Services, L.L.C.(1) | — | % | | 0 | | | 0 | | | 0 | | | 3.7 | | | 18.1 | | | Total | | | $ | 943.7 | | | $ | 980.4 | | | $ | 32.5 | | | $ | 32.8 | | | $ | 53.3 | | |
(1)On April 9, 2019, Crestwood Permian ownedNiobrara acquired Williams’s 50% equity interest in Jackalope and, as a result, Crestwood Niobrara controls and owns 100% of the equity interestinterests in Jackalope. Our Jackalope equity investment was previously included in our gathering and processing segment. See Note 3 for a further discussion of this acquisition.
Summarized Financial Information of Unconsolidated Affiliates
Below is summarized financial information for our significant unconsolidated affiliates (in millions; amounts represent 100% of unconsolidated affiliate information):
Financial Position Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2020 | | 2019 | | | Current Assets | | Non-Current Assets | | Current Liabilities | | Non-Current Liabilities | | Members’ Equity | | Current Assets | | Non-Current Assets | | Current Liabilities | | Non-Current Liabilities | | Members’ Equity | Stagecoach Gas (1) | | $ | 47.4 | | | $ | 1,645.5 | | | $ | 3.9 | | | $ | 1.4 | | | $ | 1,687.6 | | | $ | 50.6 | | | $ | 1,686.3 | | | $ | 3.9 | | | $ | 1.5 | | | $ | 1,731.5 | | Other(2) | | 23.5 | | | 661.9 | | | 33.6 | | | 233.7 | | | 418.1 | | | 27.6 | | | 664.7 | | | 37.3 | | | 193.2 | | | 461.8 | | Total | | $ | 70.9 | | | $ | 2,307.4 | | | $ | 37.5 | | | $ | 235.1 | | | $ | 2,105.7 | | | $ | 78.2 | | | $ | 2,351.0 | | | $ | 41.2 | | | $ | 194.7 | | | $ | 2,193.3 | |
(1)As of December 31, 2020, our equity in the underlying net assets of Stagecoach Gas exceeded our investment balance by approximately $51.3 million. This excess amount is entirely attributable to goodwill and, as such, is not subject to amortization. (2)Includes our Crestwood Permian, Tres Holdings and PRBIC equity investments. As of December 31, 2020, our equity in the underlying net assets of Crestwood Permian Basin LLC (Crestwood Permian Basin)exceeded our investment balance by approximately $8.7 million, and this excess amount is not subject to amortization. As of December 31, 2020, our equity in the underlying net assets of Tres Holdings exceeded our investment balance by approximately $22.7 million. As of December 31, 2020, our equity in the underlying net assets of PRBIC approximates our investment balance. During the year ended December 31, 2020, we recorded our share of a long-lived asset impairment recorded by our PRBIC equity investment, which eliminated our $5.5 million historical basis difference between our investment and the equity in the underlying net assets of PRBIC.
Operating Results Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | 2018 | | | Operating Revenues | | Operating Expenses | | Net Income (Loss) | | Operating Revenues | | Operating Expenses | | Net Income | | Operating Revenues | | Operating Expenses | | Net Income | Stagecoach Gas | | $ | 154.3 | | | $ | 78.8 | | | $ | 75.5 | | | $ | 163.8 | | | $ | 83.6 | | | $ | 80.6 | | | $ | 171.4 | | | $ | 79.3 | | | $ | 92.1 | | Crestwood Permian | | 89.7 | | | 92.7 | | | (2.6) | | | 64.8 | | | 76.0 | | | (11.1) | | | 82.2 | | | 81.3 | | | 5.7 | | Other(1) | | 31.6 | | | 53.4 | | | (22.0) | | | 55.1 | | | 49.9 | | | 5.1 | | | 116.9 | | | 81.5 | | | 35.6 | | Total | | $ | 275.6 | | | $ | 224.9 | | | $ | 50.9 | | | $ | 283.7 | | | $ | 209.5 | | | $ | 74.6 | | | $ | 370.5 | | | $ | 242.1 | | | $ | 133.4 | |
(1)Includes our Tres Holdings, PRBIC and Jackalope (prior to the acquisition of the remaining 50% interest from Williams in April 2019) equity investments. We amortize the excess basis in certain of our equity investments as an increase in our earnings from unconsolidated affiliates. We recorded amortization of the excess basis in our Tres Holdings equity investment of approximately $1.3 million for each of the years ended December 31, 2020, 2019 and 2018, which we amortize over the life of Tres Palacios’s sublease agreement. We recorded amortization of the excess basis in our PRBIC equity investment of approximately $0.4 million and $0.5 million for the years ended December 31, 2019 and 2018, which we amortized over the life of PRBIC’s property, plant and equipment. We recorded amortization of the excess basis in our Jackalope equity investment of less than $0.1 million for each of the years ended December 31, 2019 and 2018, which we amortized over the life of Jackalope’s gathering and processing agreement with Chesapeake Energy Corporation (Chesapeake).
Distributions and Contributions
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions | | Contributions | | | Year Ended December 31, | | Year Ended December 31, | | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | Stagecoach Gas(1) | | $ | 59.7 | | | $ | 52.3 | | | $ | 48.7 | | | $ | 0 | | | $ | 2.1 | | | $ | 0 | | Tres Holdings | | 6.4 | | | 6.3 | | | 5.3 | | | 6.0 | | | 6.3 | | | 2.5 | | PRBIC | | 0.4 | | | 0 | | | 1.9 | | | 0 | | | 0.2 | | | 0.2 | | Crestwood Permian(1) | | 11.9 | | | 5.0 | | | 14.7 | | | 3.4 | | | 28.3 | | | 12.6 | | Jackalope | | 0 | | | 11.6 | | | 32.4 | | | 0 | | | 24.4 | | | 49.1 | | Total | | $ | 78.4 | | | $ | 75.2 | | | $ | 103.0 | | | $ | 9.4 | | | $ | 61.3 | | | $ | 64.4 | |
(1)In January 2021, we received cash distributions from Stagecoach Gas and Crestwood Permian Basin has a long-term agreement with SWEPI LP (SWEPI), a subsidiary of Royal Dutch Shell plc,approximately $14.0 million and $3.3 million, respectively. In January 2021, we made cash contributions of approximately $6.9 million and $3.3 million to construct, ownour Tres Holdings and operate a natural gas gathering system (the Nautilus gathering system) in SWEPI’s operated position in the Delaware Permian. In conjunction with the Crestwood Permian Basin’sequity investments.
Other
Contingent Consideration. Pursuant to the Stagecoach Gas limited liability company agreement, with SWEPI, Crestwood Permian granted Shell Midstream Partners L.P. (Shell Midstream), a subsidiary of Royal Dutch Shell plc, an optionwe are required to purchase up to 50% equity interest in Crestwood Permian Basin. In October 2017, Shell Midstream exercised its option and purchased a 50% equity interest in Crestwood Permian Basin from Crestwood Permian for approximately $37.9 million in cash. Crestwood Permian distributed to us approximately $18.9make $57 million of payments to Con Edison Gas Pipeline and Storage Northeast, LLC because certain performance targets on growth capital projects were not achieved by December 31, 2020. As a result, our consolidated balance sheets reflect a $57 million liability related to the cash proceeds received.settlement of this obligation, of which $19 million was classified as current at December 31, 2020.
Guarantee. CEQP issued a guarantee in conjunction with the Crestwood Permian Basin gas gathering agreement with SWEPI described above, under which CEQP agreed to fund 100% of the costs to build the Nautilus gathering system if Crestwood Permian failed to do so. In conjunction with the expiration of that guarantee during 2019, a guarantee became effective that would require CEQPbe required to pay up to $10 million if Crestwood Permian fails to honor its obligations to Crestwood Permian Basin, a 50% equity investment of Crestwood Permian, in the event Crestwood Permian Basin fails to satisfy its obligations under its gas gathering agreement with SWEPI.a third party. We do not believe that it is probable that this guarantee is probable of resultingwill result in future losses based on our assessment of the nature of the guarantee, the financial condition of the guaranteed party and the period of time that the guarantee has been outstanding, and as a result, we have not recorded a liability related to this guarantee on our consolidated balance sheetsheets at December 31, 20192020 and 2018.
Tres Palacios Holdings LLC
Crestwood Midstream owns a 50.01% ownership interest in Tres Palacios Holdings LLC (Tres Holdings) and is the operator of Tres Palacios Gas Storage LLC (Tres Palacios) and its assets. Brookfield Infrastructure Group owns the remaining 49.99% ownership interest in Tres Holdings. We account for our investment in Tres Holdings under the equity method of accounting. Our Tres Holdings investment is included in our storage and transportation segment.
Powder River Basin Industrial Complex, LLC
Crestwood Crude Logistics LLC, our wholly-owned subsidiary, owns a 50% ownership interest in PRBIC which we account for under the equity method of accounting. Twin Eagle Powder River Basin, LLC owns the remaining 50% ownership interest in PRBIC. Our PRBIC investment is included in our storage and transportation segment
Summarized Financial Information of Unconsolidated Affiliates
Below is summarized financial information for our significant unconsolidated affiliates (in millions; amounts represent 100% of unconsolidated affiliate information):2019.
Financial Position Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2019 | | 2018 | | | Current Assets | | Non-Current Assets | | Current Liabilities | | Non-Current Liabilities | | Members’ Equity | | Current Assets | | Non-Current Assets | | Current Liabilities | | Non-Current Liabilities | | Members’ Equity | Stagecoach(1) | | $ | 50.6 |
| | $ | 1,686.3 |
| | $ | 3.9 |
| | $ | 1.5 |
| | $ | 1,731.5 |
| | $ | 50.1 |
| | $ | 1,725.1 |
| | $ | 4.2 |
| | $ | 0.9 |
| | $ | 1,770.1 |
| Crestwood Permian(2) | | 15.9 |
| | 386.8 |
| | 16.3 |
| | 72.1 |
| | 314.3 |
| | 17.7 |
| | 372.6 |
| | 16.8 |
| | 94.7 |
| | 278.8 |
| Other(3) | | 11.7 |
| | 277.9 |
| | 21.0 |
| | 121.1 |
| | 147.5 |
| | 59.3 |
| | 658.0 |
| | 17.4 |
| | 129.6 |
| | 570.3 |
| Total | | $ | 78.2 |
| | $ | 2,351.0 |
| | $ | 41.2 |
| | $ | 194.7 |
| | $ | 2,193.3 |
| | $ | 127.1 |
| | $ | 2,755.7 |
| | $ | 38.4 |
| | $ | 225.2 |
| | $ | 2,619.2 |
|
| | (1) | As of December 31, 2019, our equity in the underlying net assets of Stagecoach Gas exceeded our investment balance by approximately $51.3 million. This excess amount is entirely attributable to goodwill and, as such, is not subject to amortization. |
| | (2) | As of December 31, 2019, the difference of approximately $11.5 million between our equity in Crestwood Permian’s net assets and our investment balance is not subject to amortization.
|
| | (3) | Includes our Tres Holdings and PRBIC equity investments at December 31, 2019 and 2018, and our Jackalope equity investment at December 31, 2018. As of December 31, 2019, our equity in the underlying net assets of Tres Holdings and PRBIC exceeded our investment balance by approximately $24.0 million and $5.5 million, respectively. |
Operating Results Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2019 | | 2018 | | 2017 | | | Operating Revenues | | Operating Expenses | | Net Income (Loss) | | Operating Revenues | | Operating Expenses | | Net Income | | Operating Revenues | | Operating Expenses | | Net Income | Stagecoach | | $ | 163.8 |
| | $ | 83.6 |
| | $ | 80.6 |
| | $ | 171.4 |
| | $ | 79.3 |
| | $ | 92.1 |
| | $ | 168.6 |
| | $ | 77.7 |
| | $ | 91.1 |
| Crestwood Permian | | 64.8 |
| | 76.0 |
| | (11.1 | ) | | 82.2 |
| | 81.3 |
| | 5.7 |
| | 87.3 |
| | 74.1 |
| | 14.1 |
| Other(1) | | 55.1 |
| | 49.9 |
| | 5.1 |
| | 116.9 |
| | 81.5 |
| | 35.6 |
| | 94.5 |
| | 69.5 |
| | 24.8 |
| Total | | $ | 283.7 |
| | $ | 209.5 |
| | $ | 74.6 |
| | $ | 370.5 |
| | $ | 242.1 |
| | $ | 133.4 |
| | $ | 350.4 |
| | $ | 221.3 |
| | $ | 130.0 |
|
| | (1) | Includes our Jackalope (prior to the acquisition of the remaining 50% interest from Williams in April 2019), Tres Holdings and PRBIC equity investments. We amortize the excess basis in certain of our equity investments as an increase in our earnings from unconsolidated affiliates. We recorded amortization of the excess basis in our Jackalope equity investment of less than $0.1 million for each of the years ended December 31, 2019, 2018 and 2017, which we amortized over the life of Jackalope’s gathering agreement with Chesapeake Energy Corporation (Chesapeake). We recorded amortization of the excess basis in our Tres Holdings equity investment of approximately $1.3 million for each of the years ended December 31, 2019, 2018 and 2017, which we amortize over the life of Tres Palacios’ sublease agreement. We recorded amortization of the excess basis in our PRBIC equity investment of approximately $0.4 million, $0.5 million and $0.6 million for the years ended December 31, 2019, 2018 and 2017, which we amortize over the life of PRBIC’s property, plant and equipment. |
Distributions and Contributions | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions | | Contributions | | | Year Ended December 31, | | Year Ended December 31, | | | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | Stagecoach Gas | | $ | 52.3 |
| | $ | 48.7 |
| | $ | 47.3 |
| | $ | 2.1 |
| | $ | — |
| | $ | 0.8 |
| Jackalope | | 11.6 |
| | 32.4 |
| | 26.3 |
| | 24.4 |
| | 49.1 |
| | 3.5 |
| Crestwood Permian(1) | | 5.0 |
| | 14.7 |
| | 23.4 |
| | 28.3 |
| | 12.6 |
| | 117.5 |
| Tres Holdings(2) | | 6.3 |
| | 5.3 |
| | 9.0 |
| | 6.3 |
| | 2.5 |
| | 5.6 |
| PRBIC(3) | | — |
| | 1.9 |
| | 1.6 |
| | 0.2 |
| | 0.2 |
| | — |
| Total | | $ | 75.2 |
| | $ | 103.0 |
| | $ | 107.6 |
| | $ | 61.3 |
| | $ | 64.4 |
| | $ | 127.4 |
|
(1) On June 21, 2017, we contributed to Crestwood Permian 100% of the equity interest of Crestwood New Mexico Pipeline LLC (Crestwood New Mexico) at our historical book value of approximately $69.4 million. This contribution was treated as a non-cash transaction between entities under common control.
(2) Tres Holdings is required, within 30 days following the end of each quarter, to make quarterly distributions of its available cash (as defined in its limited
liability company agreement) to its members based on their respective ownership percentage.
(3) PRBIC is required to make quarterly distributions of its available cash to its members based on their respective ownership percentage.
Stagecoach Gas. Stagecoach Gas is required, within 30 days following the end of each quarter, to distribute its available cash (as defined in its limited liability company agreement) to its members. Pursuant to the Stagecoach limited liability company agreement, our share of Stagecoach’s available cash increased from 40% to 50% effective July 1, 2019. Prior to July 1, 2019, Stagecoach Gas distributed 40% of its available cash to us and prior to July 1, 2018, Stagecoach Gas distributed 35% of its available cash to us. Because our ownership and distribution percentages differed prior to July 1, 2019, equity earnings from Stagecoach Gas were determined using the Hypothetical Liquidation at Book Value (HLBV) method. Under the HLBV method, a calculation is prepared at each balance sheet date to determine the amount of cash an equity investment would distribute to its members if the equity investment were to liquidate all of its assets, as valued in accordance with GAAP. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the members’ share of the earnings or losses from the equity investment
for the period, which approximates how earnings are allocated under the terms of the limited liability company agreement. In January 2020, we received a cash distribution from Stagecoach Gas of approximately $15.5 million.
Crestwood Permian. Crestwood Permian is required, within 30 days following the end of each quarter to distribute 100% of its available cash (as defined in its limited liability company agreement) to its members based on their respective ownership percentages. Pursuant to Crestwood Permian's limited liability company agreement, we received 100% of Crestwood New Mexico's available cash (as defined in the limited liability company agreement) through June 30, 2018, and subsequent to June 30, 2018, our distributions are based on the members respective ownership percentages. Because our ownership and distribution percentages differed prior to June 30, 2018, equity earnings from Crestwood Permian were determined using the HLBV method discussed above. In January 2020, we received a cash distribution from Crestwood Permian of approximately $3.8 million.
Note 7 – 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 2 and Note 8.8.
Commodity Derivative Instruments and Price Risk Management
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 theour consolidated balance sheets, and changes in the fair value of these derivatives that impact theour 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 costs of product sold in our consolidated statements of operations. The following table summarizes the impact to our consolidated statements of operations related to our commodity-based derivatives reflected in operating revenues and costs of product/services sold during the years ended December 31, 2020, 2019 2018 and 20172018 (in millions): | | | | | | | | | | | | | | | | December 31, | | | 2019 | | 2018 | | 2017 | Product revenues | | $ | 252.3 |
| | $ | 343.3 |
| | $ | 234.1 |
| Gain (loss) reflected in costs of product/services sold | | $ | 19.5 |
| | $ | 29.6 |
| | $ | (31.2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2020 | | 2019 | | 2018 | Product revenues | | $ | 214.3 | | | $ | 252.3 | | | $ | 343.3 | | Gain (loss) reflected in costs of product/services sold | | $ | (20.7) | | | $ | 19.5 | | | $ | 29.6 | | | | | | | | |
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 costs of product/services sold related to these instruments.
Commodity Price and Credit Risk
Notional Amounts and Terms
The notional amounts and terms of our derivative financial instruments include the following: | | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | | Fixed Price Payor | | Fixed Price Receiver | | Fixed Price Payor | | Fixed Price Receiver | Propane, ethane, butane, heating oil and crude oil (MMBbls) | 33.5 |
| | 36.6 |
| | 27.8 |
| | 30.1 |
| Natural gas (Bcf) | 3.7 |
| | 8.7 |
| | 1.8 |
| | 1.8 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Fixed Price Payor | | Fixed Price Receiver | | Fixed Price Payor | | Fixed Price Receiver | Propane, ethane, butane, heating oil and crude oil (MMBbls) | 72.7 | | | 76.5 | | | 33.5 | | | 36.6 | | Natural gas (Bcf) | 22.6 | | | 28.6 | | | 3.7 | | | 8.7 | |
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 3736 months or less; however, 85%86% of the contracted volumes will be delivered or settled within 12 months.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. In addition, we have margin requirements with a New York Mercantile Exchange (NYMEX) broker related to our net asset or liability position with such broker. 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.
The following table presents the fair value of our commodity derivative instruments with credit-risk-related contingent features and their associated collateral (in millions): | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Aggregate fair value of derivative instruments with credit-risk-related contingent features(1) | $ | 38.5 | | | $ | 1.6 | | NYMEX-related net derivative asset (liability) position | $ | 35.9 | | | $ | (28.8) | | NYMEX-related cash collateral (received) posted | $ | (18.3) | | | $ | 40.4 | | Cash collateral received, net | $ | 12.4 | | | $ | 16.9 | |
| | | | | | | | | | December 31, | | 2019 | | 2018 | Aggregate fair value of derivative instruments with credit-risk-related contingent features(1) | $ | 1.6 |
| | $ | 2.2 |
| NYMEX-related net derivative liability position | $ | 28.8 |
| | $ | 9.4 |
| NYMEX-related cash collateral posted | $ | 40.4 |
| | $ | 21.7 |
| Cash collateral received, net | $ | 16.9 |
| | $ | 14.2 |
|
(1) At December 31, 20192020 and 2018,2019, we posted less than $0.1 million of collateral associated with these derivatives.
Note 8 – 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—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities and US government treasury securities.
•Level 2—Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category include non-exchange-traded derivatives such as over the counter (OTC) forwards, options and physical exchanges.
•Level 3—Pricing inputs include 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.
Cash, Accounts Receivable and Accounts Payable
As of December 31, 2019 and 2018, the carrying amounts of cash, accounts receivable and accounts payable approximate fair value based on the short-term nature of these instruments.
Credit Facility
The fair value of the amounts outstanding under our Crestwood Midstream credit facility approximates the carrying amounts as of December 31, 2019 and 2018, due primarily to the variable nature of the interest rate of the instrument, which is considered a Level 2 fair value measurement.
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):
| | | | | | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | 2023 Senior Notes | $ | 695.1 |
| | $ | 714.0 |
| | $ | 693.6 |
| | $ | 668.1 |
| 2025 Senior Notes | $ | 494.4 |
| | $ | 514.4 |
| | $ | 493.4 |
| | $ | 466.2 |
| 2027 Senior Notes | $ | 592.1 |
| | $ | 610.1 |
| | $ | — |
| | $ | — |
|
Financial Assets and Liabilities
As of December 31, 20192020 and 2018,2019, 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 heating oil, crude oil, NGLs and NGLs.natural gas. Our derivative instruments consist of forwards, swaps, futures, physical exchanges and options.
Our derivative instruments that are traded on the NYMEX have been categorized as Level 1.
Our derivative instruments also include OTC contracts, which are not traded on a public exchange. The fair values of these derivative instruments are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. These instruments have been categorized as Level 2.
Our OTC options are valued based on the Black Scholes option pricing model that considers time value and volatility of the underlying commodity. The inputs utilized in the model are based on publicly available information as well as broker quotes. These options have been categorized as Level 2.
Our financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
The following tables set forth by level within the fair value hierarchy, our financial instruments that were accounted for at fair value on a recurring basis at December 31, 20192020 and 20182019 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | | | 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 | $ | 20.2 | | | $ | 480.5 | | | $ | 0 | | | $ | 500.7 | | | | | | | $ | (455.0) | | | $ | (18.5) | | | $ | 27.2 | | Suburban Propane Partners, L.P. units(2) | 2.1 | | | 0 | | | 0 | | | 2.1 | | | | | | | — | | | — | | | 2.1 | | Total assets at fair value | $ | 22.3 | | | $ | 480.5 | | | $ | 0 | | | $ | 502.8 | | | | | | | $ | (455.0) | | | $ | (18.5) | | | $ | 29.3 | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Liabilities from price risk management | $ | 25.1 | | | $ | 494.0 | | | $ | 0 | | | $ | 519.1 | | | | | | | $ | (455.0) | | | $ | 12.2 | | | $ | 76.3 | | | | | | | | | | | | | | | | | | | | Total liabilities at fair value | $ | 25.1 | | | $ | 494.0 | | | $ | 0 | | | $ | 519.1 | | | | | | | $ | (455.0) | | | $ | 12.2 | | | $ | 76.3 | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | | | 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 | $ | 3.7 | | | $ | 164.0 | | | $ | 0 | | | $ | 167.7 | | | | | | | $ | (122.3) | | | $ | (2.2) | | | $ | 43.2 | | Suburban Propane Partners, L.P. units(2) | 3.1 | | | 0 | | | 0 | | | 3.1 | | | | | | | — | | | — | | | 3.1 | | Total assets at fair value | $ | 6.8 | | | $ | 164.0 | | | $ | 0 | | | $ | 170.8 | | | | | | | $ | (122.3) | | | $ | (2.2) | | | $ | 46.3 | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Liabilities from price risk management | $ | 2.8 | | | $ | 151.9 | | | $ | 0 | | | $ | 154.7 | | | | | | | $ | (122.3) | | | $ | (25.7) | | | $ | 6.7 | | Total liabilities at fair value | $ | 2.8 | | | $ | 151.9 | | | $ | 0 | | | $ | 154.7 | | | | | | | $ | (122.3) | | | $ | (25.7) | | | $ | 6.7 | |
(1)Amounts represent the impact of legally enforceable master netting agreements that allow us to settle positive and negative positions. (2)Amount is reflected in other assets on CEQP’s consolidated balance sheets. The $1.0 million decrease in fair value of these units for the year ended December 31, 2020 is reflected in other income (expense), net on our consolidated statements of operations.
Cash, Accounts Receivable and Accounts Payable
As of December 31, 2020 and 2019, the carrying amounts of cash, accounts receivable and accounts payable approximate fair value based on the short-term nature of these instruments.
Credit Facility
The fair value of the amounts outstanding under our Crestwood Midstream credit facility approximates the carrying amounts as of December 31, 2020 and 2019, due primarily to the variable nature of the interest rate of the instrument, which is considered a Level 2 fair value measurement.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | | | 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 | $ | 3.7 |
| | $ | 164.0 |
| | $ | — |
| | $ | 167.7 |
| | $ | (122.3 | ) | | $ | (2.2 | ) | | $ | 43.2 |
| Suburban Propane Partners, L.P. units(2) | 3.1 |
| | — |
| | — |
| | 3.1 |
| | — |
| | — |
| | 3.1 |
| Total assets at fair value | $ | 6.8 |
| | $ | 164.0 |
| | $ | — |
| | $ | 170.8 |
| | $ | (122.3 | ) | | $ | (2.2 | ) | | $ | 46.3 |
| | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | Liabilities from price risk management | $ | 2.8 |
| | $ | 151.9 |
| | $ | — |
| | $ | 154.7 |
| | $ | (122.3 | ) | | $ | (25.7 | ) | | $ | 6.7 |
| Total liabilities at fair value | $ | 2.8 |
| | $ | 151.9 |
| | $ | — |
| | $ | 154.7 |
| | $ | (122.3 | ) | | $ | (25.7 | ) | | $ | 6.7 |
| | | | | | | | | | | | | | | | December 31, 2018 | | | | 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 | $ | 12.4 |
| | $ | 160.7 |
| | $ | — |
| | $ | 173.1 |
| | $ | (140.3 | ) | | $ | 1.9 |
| | $ | 34.7 |
| Suburban Propane Partners, L.P. units(2) | 2.8 |
| | — |
| | — |
| | 2.8 |
| | — |
| | — |
| | 2.8 |
| Total assets at fair value | $ | 15.2 |
| | $ | 160.7 |
| | $ | — |
| | $ | 175.9 |
| | $ | (140.3 | ) | | $ | 1.9 |
| | $ | 37.5 |
| | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | Liabilities from price risk management | $ | 7.0 |
| | $ | 144.7 |
| | $ | — |
| | $ | 151.7 |
| | $ | (140.3 | ) | | $ | (5.6 | ) | | $ | 5.8 |
| Total liabilities at fair value | $ | 7.0 |
| | $ | 144.7 |
| | $ | — |
| | $ | 151.7 |
| | $ | (140.3 | ) | | $ | (5.6 | ) | | $ | 5.8 |
|
| | (1) | Amounts represent the impact of legally enforceable master netting agreements that allow us to settle positive and negative positions. |
| | (2) | Amount is reflected in other assets on CEQP’s consolidated balance sheets. |
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):
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | 2023 Senior Notes | $ | 683.8 | | | $ | 691.5 | | | $ | 695.1 | | | $ | 714.0 | | 2025 Senior Notes | $ | 495.5 | | | $ | 509.9 | | | $ | 494.4 | | | $ | 514.4 | | 2027 Senior Notes | $ | 593.2 | | | $ | 594.1 | | | $ | 592.1 | | | $ | 610.1 | |
Note 9 – Long-Term Debt
Long-term debt consisted of the following at December 31, 20192020 and 2018,2019, (in millions): | | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Credit Facility | $ | 719.0 | | | $ | 557.0 | | 2023 Senior Notes | 687.2 | | | 700.0 | | 2025 Senior Notes | 500.0 | | | 500.0 | | 2027 Senior Notes | 600.0 | | | 600.0 | | Other(1) | 0.4 | | | 0.6 | | Less: deferred financing costs, net | 22.6 | | | 29.1 | | Total debt | 2,484.0 | | | 2,328.5 | | Less: current portion | 0.2 | | | 0.2 | | Total long-term debt, less current portion | $ | 2,483.8 | | | $ | 2,328.3 | |
| | | | | | | | | | December 31, | | 2019 | | 2018 | Credit Facility | $ | 557.0 |
| | $ | 578.2 |
| 2023 Senior Notes | 700.0 |
| | 700.0 |
| 2025 Senior Notes | 500.0 |
| | 500.0 |
| 2027 Senior Notes | 600.0 |
| | — |
| Other | 0.6 |
| | 1.5 |
| Less: deferred financing costs, net | 29.1 |
| | 26.4 |
| Total debt | 2,328.5 |
| | 1,753.3 |
| Less: current portion | 0.2 |
| | 0.9 |
| Total long-term debt, less current portion | $ | 2,328.3 |
| | $ | 1,752.4 |
|
(1)Represents non-interest bearing obligations related to certain companies acquired in 2014 with payments due through 2022.
Credit Facility
In October 2018, Crestwood Midstream entered into a Second Amended and Restated Agreement (the CMLP Credit Agreement). The CMLP Credit Agreement provides for aMidstream’s five-year $1.25 billion revolving credit facility (the CMLP Credit Facility), which expires in October 2023 and is available to fund acquisitions, working capital and internal growth projects and for general partnership purposes. The CMLP Credit Facility allows Crestwood Midstream to increase its available borrowings under the facility by $350.0 million, subject to lender approval and the satisfaction of certain other conditions, as described in the CMLP Credit Agreement.credit agreement. The CMLP Credit Facility also includes a sub-limit of up to $25.0 million for same-day swing line advances and a sub-limit up to $350.0 million for letters of credit. 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, Crestwood Niobrara, Crestwood Pipeline and Storage Northeast LLC (our wholly-owned subsidiary which owns a 50% equity interest in Stagecoach Gas), PRBIC and Tres Holdings and their respective subsidiaries. The Company also guarantees Crestwood Midstream’s payment obligations under its $1.25 billion credit agreement.
Prior to amending and restating its credit agreement in October 2018, Crestwood Midstream had a five-year $1.5 billion senior secured revolving credit facility, which would have expired September 2020 (2020 Credit Facility). We recognized a loss on modification of debt of approximately $0.9 million for the year ended December 31, 2018 in conjunction with amending and restating the CMLP Credit Agreement.
Borrowings under the CMLP Credit Facility (other than the swing line loans) bear interest at either:
the Alternate Base Rate, which is defined as the highest of (i) the federal funds rate plus 0.50%; (ii) Wells Fargo Bank’s prime rate; or (iii) the Eurodollar Rate adjusted for certain reserve requirements plus 1%; plus a margin varying from 0.50% to 1.50% at December 31, 2019 depending on Crestwood Midstream’s most recent consolidated total leverage ratio; or
the Eurodollar Rate, adjusted for certain reserve requirements plus a margin varying from 1.50% to 2.50% at December 31, 2019 depending on Crestwood Midstream’s most recent consolidated total leverage ratio.
Swing line loans bear interest at the Alternate Base Rate as described above. The unused portion of the CMLP Credit Facility is subject to a commitment fee ranging from 0.25% to 0.45% according to its most recent consolidated total leverage ratio. Interest on the Alternate Base Rate loans is payable quarterly, or if the adjusted Eurodollar Rate applies, interest is payable at certain intervals selected by Crestwood Midstream.
At December 31, 2019, Crestwood Midstream had $661.3 million of available capacity under its credit facility considering the most restrictive covenants in its credit agreement. At December 31, 2019 and 2018, Crestwood Midstream’s outstanding standby letters of credit were $31.7 million and $68.0 million. Borrowings under the credit facility accrue interest at prime or Eurodollar based rates plus applicable spreads, which resulted in interest rates between 3.96% and 6.00% at December 31, 2019 and 4.63% and 6.75% at December 31, 2018. The weighted-average interest rates on outstanding borrowings as of December 31, 2019 and 2018 was 4.00% and 4.79%.
In April 2019, Crestwood Niobrara acquired the remaining 50% equity interest in Jackalope and funded approximately $250 million of the total purchase price through borrowings under Crestwood Midstream’s credit facility. Contemporaneously with the acquisition of the remaining interest in Jackalope, Crestwood Midstream entered into the First Amendment to the CMLP Credit Agreement to modify certain defined terms and calculations, among other things, to account for the Jackalope Acquisition. The CMLP Credit Facility contains various covenants and restrictive provisions that limit our ability to, among other things, (i) incur additional debt; (ii) make distributions on or redeem or repurchase units; (iii) make certain investments and acquisitions; (iv) incur or permit certain liens to exist; (v) merge, consolidate or amalgamate with another company; (vi) transfer or dispose of assets; and (vii) incur a change in control at either Crestwood Equity or Crestwood Midstream, including an acquisition of Crestwood Holdings’ ownership of Crestwood Equity’s general partner by any third party, including
Crestwood Holdings’ debtors under an event of default of their debt since Crestwood Equity’s non-economic general partner interest is pledged as collateral under that debt.
Borrowings under the CMLP Credit Facility (other than the swing line loans) bear interest at either:
•the Alternate Base Rate, which is defined as the highest of (i) the federal funds rate plus 0.50%; (ii) Wells Fargo Bank’s prime rate; or (iii) the Eurodollar Rate adjusted for certain reserve requirements plus 1%; plus a margin varying from 0.50% to 1.50% at December 31, 2020 depending on Crestwood Midstream’s most recent consolidated total leverage ratio; or
•the Eurodollar Rate, adjusted for certain reserve requirements plus a margin varying from 1.50% to 2.50% at December 31, 2020 depending on Crestwood Midstream’s most recent consolidated total leverage ratio.
Swing line loans bear interest at the Alternate Base Rate as described above. The unused portion of the CMLP Credit Facility is subject to a commitment fee ranging from 0.25% to 0.45% according to its most recent consolidated total leverage ratio. Interest on the Alternate Base Rate loans is payable quarterly, or if the adjusted Eurodollar Rate applies, interest is payable at certain intervals selected by Crestwood Midstream.
Crestwood Midstream is required under its credit agreement to maintain a net debt to consolidated EBITDA ratio (as defined in its credit agreement) of not more than 5.50 to 1.0, a consolidated EBITDA to consolidated interest expense ratio (as defined in its credit agreement) of not less than 2.50 to 1.0, and a senior secured leverage ratio (as defined in its credit agreement) of not more than 3.75 to 1.0. At December 31, 2019,2020, the net debt to consolidated EBITDA was approximately 4.134.02 to 1.0, the
consolidated EBITDA to consolidated interest expense was approximately 4.474.77 to 1.0, and the senior secured leverage ratio was 0.981.15 to 1.0.
At December 31, 2020, Crestwood Midstream had $507.1 million of available capacity under its credit facility considering the most restrictive covenants in its credit agreement. At December 31, 2020 and 2019, Crestwood Midstream’s outstanding standby letters of credit were $23.9 million and $31.7 million. Borrowings under the credit facility accrue interest at prime or Eurodollar based rates plus applicable spreads, which resulted in interest rates between 2.40% and 4.50% at December 31, 2020 and 3.96% and 6.00% at December 31, 2019. The weighted-average interest rates on outstanding borrowings as of December 31, 2020 and 2019 was 2.45% and 4.00%.
If Crestwood Midstream fails to perform its obligations under these and other covenants, the lenders’ credit commitment could be terminated and any outstanding borrowings, together with accrued interest, under the CMLP Credit Facility could be declared immediately due and payable. The CMLP Credit Facility also has cross default provisions that apply to any of its other material indebtedness.
Senior Notes
2023 Senior Notes. The 6.25% Senior Notes due 2023 (the 2023 Senior Notes) mature on April 1, 2023, and interest is payable semi-annually in arrears on April 1 and October 1 of each year.
2025 Senior Notes. The 5.75% Senior Notes due 2025 (the 2025 Senior Notes) mature on April 1, 2025, and interest is payable semi-annually in arrears on April 1 and October 1 of each year. The net proceeds from the private offering of approximately $492 million were used to repay amounts previously outstanding under CMLP’s senior notes due in 2020 and 2022 as discussed below.
2027 Senior Notes. In April 2019, Crestwood Midstream issued $600 million of 5.625% unsecured senior notes due 2027 (the 2027 Senior Notes). The 2027 Senior Notes mature on May 1, 2027, and interest is payable semi-annually in arrears on May 1 and November 1 of each year, beginning November 1, 2019. The net proceeds from this offering of approximately $591.1 million were used to fund the acquisition of the remaining 50% equity interest in Jackalope.
2029 Senior Notes. In January 2021, Crestwood Midstream issued $700 million of 6.00% unsecured senior notes due 2029 (the 2029 Senior Notes). The 2029 Senior Notes will mature on February 1, 2029, and interest is payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, 2021.
In general, each series of Crestwood Midstream’s senior notes are fully and unconditionally guaranteed, joint and severally, on a senior unsecured basis by Crestwood Midstream’s domestic restricted subsidiaries (other than Crestwood Midstream Finance Corp., which has no assets). The indentures contain customary release provisions, such as (i) disposition of all or substantially all the assets of, or the capital stock of, a guarantor subsidiary to a third person if the disposition complies with the indentures;
(ii) designation of a guarantor subsidiary as an unrestricted subsidiary in accordance with its indentures; (iii) legal or covenant defeasance of a series of senior notes, or satisfaction and discharge of the related indenture; and (iv) guarantor subsidiary ceases to guarantee any other indebtedness of Crestwood Midstream or any other guarantor subsidiary, provided it no longer guarantees indebtedness under the CMLP Credit Facility.
The indentures restrictsrestrict the ability of Crestwood Midstream and its restricted subsidiaries to, among other things, sell assets; redeem or repurchase subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred units; create or incur certain liens; enter into agreements that restrict distributions or other payments to Crestwood Midstream from its restricted subsidiaries; consolidate, merge or transfer all or substantially all of their assets; engage in affiliate transactions; create unrestricted subsidiaries; and incur a change in control at either Crestwood Equity or Crestwood Midstream, including an acquisition of Crestwood Holdings’ ownership of Crestwood Equity’s general partner by any third party including Crestwood Holdings’ debtors under an event of default of their debt since Crestwood Equity’s non-economic general partner interest is pledged as collateral under that debt. These restrictions are subject to a number of exceptions and qualifications, and many of these restrictions will terminate when the senior notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and no default or event of default (each as defined in the respective indentures) under the indentures has occurred and is continuing.
At December 31, 2019,2020, Crestwood Midstream was in compliance with the debt covenants and restrictions in each of its credit agreements discussed above.
Crestwood Midstream’sThe CMLP Credit Facility and senior notes are secured by the net assets of its guarantor subsidiaries. Accordingly, such assets are only available to the creditors of Crestwood Midstream. Crestwood Equity had restricted net assets of approximately $2,099.3$1,805.1 million as of December 31, 2019.
2020.
Repayments.
Senior Notes Repayments. During the year ended December 31, 2017,2020, Crestwood Midstream paid approximately $349.9 million and $457.8$12.6 million to purchase, redeem and/orrepurchase and cancel allapproximately $12.8 million of the principal amounts previously outstanding under CMLP’sits 2023 Senior Notes. In January 2021, Crestwood Midstream issued $700 million of 6.00% unsecured senior notes due in 20202029, and 2022, respectively. Crestwood Midstream fundedutilized the repayments with a combinationproceeds to repurchase and cancel approximately $399.2 million of net proceeds from the issuance of the 2025its 2023 Senior Notes described above and borrowingsto repay indebtedness under the 2020 Credit Facility. In conjunction with these note repayments, Crestwood Midstream (i) recognized a loss on extinguishment of debt of approximately $37.7 million during the year ended December 31, 2017 (including the write off of approximately $6.8 million of deferred financing costs associatedits credit facility.
with the senior notes due in 2022); and (ii) paid $5.1 million and $1.0 million of accrued interest on CMLP’s senior notes due in 2020 and 2022, respectively, on the date they were tendered.
Other Obligations
Our non-interest bearing obligations due under noncompetition agreements consist of agreements between Crestwood Midstream and sellers of certain companies acquired in 2014 with payments due through 2022 and imputed interest ranging from 5.02% to 6.75%. Non-interest bearing obligations at December 31, 2019 and 2018 consisted of $0.7 million and $1.7 million in total payments due under these agreements, less unamortized discount based on imputed interest of $0.1 million and $0.2 million, respectively.
Maturities
The aggregate maturities of principal amounts on our outstanding long-term debt and other notes payable as of December 31, 20192020 for the next five years and in total thereafter are as follows (in millions): | | | | | | 2020 | | $ | 0.2 |
| 2021 | | 0.2 |
| 2022 | | 0.2 |
| 2023 | | 1,257.0 |
| 2024 | | — |
| Thereafter | | 1,100.0 |
| Total debt | | $ | 2,357.6 |
|
| | | | | | | | | 2021 | | $ | 0.2 | | 2022 | | 0.2 | | 2023 | | 1,406.2 | | 2024 | | 0 | | 2025 | | 500.0 | | Thereafter | | 600.0 | | Total debt | | $ | 2,506.6 | |
Note 10 - Earnings Per Limited Partner Unit– 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. Linde claims damages of $55 million in unpaid invoices and other damages. This matter is not an insurable event based on our insurance policies, and we are unable to predict the outcome for 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 December 31, 2020 and 2019, we had approximately $10.4 million and $10.7 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 net income (loss) attributableoperations are subject to Crestwood Equity Partners is allocatedstringent 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.
During 2014, 2015 and 2019, we experienced produced water releases on our Arrow water gathering system located on the Fort Berthold Indian Reservation in North Dakota. In August 2015, we received a Notice of Violation (2015 NOV) from the Three Affiliated Tribes’s Environmental Division related to the subordinated2014 and limited partner unitholders2015 water releases. In December 2020, we settled the 2015 NOV for approximately $2.3 million (including fines and penalties). In January 2021, we received a Notice of Violation and Opportunity to Confer from the EPA related to the 2019 water releases and we are currently conferring with the EPA. In all instances, we immediately notified the National Response Center, the Three Affiliated Tribes and numerous other regulatory authorities. We are also substantially complete with all remediation efforts at all release sites and continue to monitor any remaining impacts. We will continue our remediation efforts to ensure that lands impacted by the produced water releases are fully remediated. In response to the water releases, we removed several miles of gathering pipeline from the system that remained in service and replaced those sections with a pipeline composed of higher capacity material that is more suitable to the environment and climate conditions in the Bakken. The replaced pipeline increased water gathering capacity on the Arrow system and furthers our commitment to sustainability and environmental stewardship in the areas where we live and operate.
We believe these events are insurable under our policies, and our insurers have reimbursed us for certain of our remediation costs. We have not recorded an insurance receivable as of December 31, 2020.
At December 31, 2020 and 2019, our accrual of approximately $1.3 million and $6.7 million was based on their ownership percentage after giving effectour undiscounted estimate of amounts we will spend on compliance with environmental and other regulations, and any associated fines or penalties. We estimate that our potential liability for reasonably possible outcomes related to net income attributableour environmental exposures could range from approximately $1.3 million to $2.1 million at December 31, 2020.
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 preferred units. We calculate basic net income per limited partner unitaggregate liability for claims incurred using certain assumptions followed in the two-class method. Diluted net income per limited partner unitinsurance industry and based on past experience. The primary assumption utilized is computed using the treasury stock method, which considers the impact to net income oractuarially determined loss attributable to Crestwood Equity Partners and limited partner unitsdevelopment 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 potential issuancehistorical trends. We believe changes in health care costs, trends in health care claims of limited partner units.our employee base, accident
frequency and severity and other factors could materially affect the estimate for these liabilities. We exclude potentially dilutive securities fromcontinually 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 determinationdevelopment of diluted earnings per unit (as well as their related income statement impacts) when their impact on net income attributableclaims for our previously disposed of retail propane operations, provided they were reported prior to Crestwood Equity Partners per limited partner unit is anti-dilutive.August 1, 2012. The following table summarizes information regarding the weighted-average of common units excluded during the years endedCEQP’s and CMLP’s self-insurance reserves at December 31, 2019, 20182020 and 20172019 (in millions): | | | | | | | | | | | | | Year Ended December 31, | | | 2019 | | 2018 | | 2017 | Preferred units (1) | | 7.1 |
| | 7.1 |
| | 7.0 |
| Crestwood Niobrara’s preferred units(1) | | — |
| | 6.5 |
| | 7.1 |
| Subordinated units(2) | | — |
| | 0.4 |
| | 0.4 |
| Stock-based compensation performance units(2) | | — |
| | 0.4 |
| | 0.3 |
|
| | (1) | See Note 12 for additional information regarding the potential conversion of our preferred units and Crestwood Niobrara’s preferred units to common units. |
| | (2) | For a description of our subordinated and stock-based compensation performance units, see Note 12 and Note 13, respectively. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | CEQP | CMLP | | | December 31, | | December 31, | | | 2020 | | 2019 | | 2020 | | 2019 | Self-insurance reserves(1) | | $ | 7.7 | | | $ | 9.7 | | | $ | 6.7 | | | $ | 8.3 | |
(1)At December 31, 2020, CEQP and CMLP classified approximately $4.8 million and $4.1 million, respectively of these reserves as other long-term liabilities on their consolidated balance sheets. Purchase Commitments
We periodically enter into agreements with suppliers to purchase fixed quantities of NGLs, distillates, crude oil and natural gas at fixed prices. At December 31, 2020, the total of these firm purchase commitments was $1,598.8 million, of which approximately $1,398.2 million will occur over the next twelve months. We also enter into non-binding agreements with suppliers to purchase quantities of NGLs, distillates, crude oil and natural gas at variable prices at future dates at the then prevailing market prices.
We have entered into certain purchase commitments which totaled approximately $24.4 million at December 31, 2020. These purchase commitments primarily relate to future growth projects and maintenance obligations in our gathering and processing segment. The table below shows CEQP’s net income (loss) per limited partner unit basedpurchases associated with our commitments are expected to occur over the next twelve months.
Guarantees and Indemnifications
We are involved in various joint ventures that sometimes require financial and performance guarantees. In a financial guarantee, we are obligated to make payments if the guaranteed party fails to make payments under, or violates the terms of, the financial arrangement. In a performance guarantee, we provide assurance that the guaranteed party will execute on the numberterms of basicthe contract. If they do not, we are required to perform on their behalf. We also periodically provide indemnification arrangements related to assets or businesses we have sold. For a further description of our guarantees associated with our joint ventures, see Note 6.
Our potential exposure under guarantee and diluted limited partner units outstanding forindemnification arrangements can range from a specified amount to an unlimited dollar amount, depending on the year endednature of the claim, specificity as to duration, and the particular transaction. As of December 31, 2019, 2018 and 2017 (in millions, except per unit data):2020, we have no amounts accrued for these guarantees. | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2019 | | 2018 | | 2017 | Common unitholders’ interest in net income (loss) | | $ | 223.6 |
| | $ | (9.3 | ) | | $ | (254.4 | ) | Net income attributable to subordinated units | | 1.4 |
| | — |
| | — |
| Diluted net income (loss) | | $ | 225.0 |
| | $ | (9.3 | ) | | $ | (254.4 | ) | | | | | | | | Weighted-average limited partners’ units outstanding - basic | | 71.8 |
| | 71.2 |
| | 69.8 |
| Dilutive effect of Crestwood Niobrara preferred units | | 4.3 |
| | — |
| | — |
| Dilutive effect of stock-based compensation performance units | | 0.4 |
| | — |
| | — |
| Dilutive effect of subordinated units | | 0.4 |
| | — |
| | — |
| Weighted-average limited partners’ units outstanding - diluted | | 76.9 |
| | 71.2 |
| | 69.8 |
| | | | | | | | Basic earnings per unit: | | | | | | | Net income (loss) per limited partner unit | | $ | 3.11 |
| | $ | (0.13 | ) | | $ | (3.64 | ) | Diluted earnings per unit: | | | | | | | Net income (loss) per limited partner unit | | $ | 2.93 |
| | $ | (0.13 | ) | | $ | (3.64 | ) |
Note 11 - Income TaxesLeases
The (provision) benefit for income taxes forfollowing table summarizes the years ended balance sheet information related to our operating and finance leases at December 31, 2020 and 2019 (, in millions2018, and 2017 consisted of the following (in millions)): | | | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | Year Ended December 31, | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 (1) | Current: | | | | | | | | | | | | Federal | $ | (0.1 | ) | | $ | (0.5 | ) | | $ | (1.1 | ) | | $ | 0.1 |
| | $ | 0.1 |
| | $ | — |
| State | (0.2 | ) | | (0.3 | ) | | (0.2 | ) | | (0.2 | ) | | (0.2 | ) | | — |
| Total current | (0.3 | ) | | (0.8 | ) | | (1.3 | ) | | (0.1 | ) | | (0.1 | ) | | — |
| Deferred: | | | | | | | | | | | | Federal | 0.1 |
| | 0.5 |
| | 2.1 |
| | — |
| | — |
| | — |
| State | (0.1 | ) | | 0.2 |
| | — |
| | (0.2 | ) | | 0.1 |
| | — |
| Total deferred | — |
| | 0.7 |
| | 2.1 |
| | (0.2 | ) | | 0.1 |
| | — |
| (Provision) benefit for income taxes | $ | (0.3 | ) | | $ | (0.1 | ) | | $ | 0.8 |
| | $ | (0.3 | ) | | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Operating Leases | | | | Operating lease right-of-use assets, net | $ | 36.8 | | | $ | 53.8 | | | | | | Accrued expenses and other liabilities | $ | 14.7 | | | $ | 18.1 | | Other long-term liabilities | 28.5 | | | 41.5 | | Total operating lease liabilities | $ | 43.2 | | | $ | 59.6 | | Finance Leases | | | | Property, plant and equipment | $ | 13.3 | | | $ | 14.9 | | Less: accumulated depreciation | 7.9 | | | 5.4 | | Property, plant and equipment, net | $ | 5.4 | | | $ | 9.5 | | | | | | Accrued expenses and other liabilities | $ | 2.9 | | | $ | 3.2 | | Other long-term liabilities | 1.9 | | | 5.2 | | Total finance lease liabilities | $ | 4.8 | | | $ | 8.4 | |
| | (1) | For the year ended December 31, 2017, our benefit for income taxes was not material to CMLP’s consolidated statement of operations. |
The effectivefollowing table presents the weighted-average remaining lease term and the weighted-average discount rate differsassociated with our operating and finance leases as of December 31, 2020 and 2019:
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Weighted-average remaining lease term (in years): | | | | Operating leases(1) | 4.3 | | 4.4 | Finance leases(2) | 1.7 | | 2.6 | Weighted-average discount rate: | | | | Operating leases(3) | 6.2 | % | | 5.9 | % | Finance leases(3) | 7.3 | % | | 7.3 | % |
(1) Remaining terms vary from one year to 19 years as of December 31, 2020. (2) Remaining terms vary from one year to four years as of December 31, 2020. (3) As of December 31, 2020 and 2019, we utilized discount rates ranging from 2.6% to 12.8% and 3.5% to 8.3%, respectively, to estimate the statutory ratediscounted cash flows used in estimating our right-of-use assets and lease liabilities, which were primarily based on our credit-adjusted collateralized incremental borrowing rate.
The estimation of our right-of-use assets and lease liabilities requires us to make significant assumptions and judgments about the terms of the leases, variable payments, and discount rates. Certain of our operating leases have renewal options to extend the leases from one year to 10 years at the end of each lease term, or terminate the leases at our sole discretion. In addition, certain of our finance leases have options to purchase the lease property by the end of the lease term. We make significant assumptions on the likelihood on whether we will renew our leases or purchase the property at the end of the lease terms in determining the discounted cash flows to measure our right-of-use assets and lease liabilities. The estimation of variable lease payments in determining discounted cash flows, including those with usage-based costs, also requires us to make significant assumptions on the timing and nature of the variability of those payments based on the lease terms.
We recognize operating lease expense and amortize our right-of-use assets for our finance leases on a straight-line basis over the term of the respective leases. We have applied the practical expedient of not separating the lease and non-lease components for our leases where the predominant consideration paid related to the underlying operating and finance lease contracts relate to the lease component. The following table presents the costs and sublease income associated with our operating and finance leases for the years ended December 31, 2020 and 2019 2018 and 2017, primarily due to the partnerships not being treated as a corporation for federal income tax purposes as discussed (in Note 2. Deferred income taxes related to CEQP’s wholly owned subsidiaries, IPCH Acquisition Corp. and Crestwood Gas Services GP LLC, and our Texas Margin tax which reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Components of our deferred income taxes at millionsDecember 31, 2019 and 2018 are as follows (in millions).):
| | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2019 | | 2018 | | 2019 | | 2018 | Total deferred tax asset(1) | $ | 0.2 |
| | $ | 0.2 |
| | $ | — |
| | $ | — |
| Total deferred tax liability(1) | (2.8 | ) | | (2.8 | ) | | (0.7 | ) | | (0.6 | ) | Net deferred tax liability | $ | (2.6 | ) | | $ | (2.6 | ) | | $ | (0.7 | ) | | $ | (0.6 | ) |
| | (1) | Relates to the basis difference in the stock of a company. |
| | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | Operating leases: | | | | Operating lease expense(1)(2) | $ | 27.2 | | | $ | 28.3 | | Sublease income(3) | (1.7) | | | (1.0) | | Total operating lease expense, net | $ | 25.5 | | | $ | 27.3 | | Finance leases: | | | | Amortization of right-of-use assets(4) | $ | 3.5 | | | $ | 3.6 | | Interest on lease liabilities(5) | 0.5 | | | 0.7 | | Total finance lease expense | $ | 4.0 | | | $ | 4.3 | |
Uncertain Tax Positions.
(1)We evaluate the uncertaintyApproximately $17.6 million and $17.5 million is included in tax positions taken or expected to be takencosts of product/services sold, $6.7 million and $8.0 million is included in the course of preparingoperations and maintenance expense and $2.9 million and $2.8 million is included in general and administrative expense on our consolidated financial statements to determine whether the tax positions are more likely than not of being sustained by the applicable tax authority. Such tax positions, if any, would be recorded as a tax benefit or expense in the current year. We believe that there were no uncertain tax positions that would impact our results of operations for the years ended December 31, 20192020 and 2019. (2), Includes short-term and variable lease costs of approximately $5.5 million and $3.7 million for the years ended December 31, 2020 and 2019. (3)2018Included in marketing, supply and logistics service revenues on our consolidated statements of operations. (4)Included in depreciation, amortization and accretion expense on our consolidated statements of operations. (5)Included in interest and debt expense, net on our consolidated statements of operations.
The following table presents supplemental cash flow information for our operating and finance leases for the years ended December 31, 2020 and 2019 (in millions):
| | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | Cash paid for lease liabilities: | | | | Operating cash flows from operating leases | $ | 21.3 | | | $ | 22.9 | | Operating cash flows from finance leases | $ | 0.5 | | | $ | 0.7 | | Financing cash flows from finance leases | $ | 3.1 | | | $ | 3.5 | | Right-of-use assets obtained in exchange for lease obligations: | | | | Operating leases | $ | 2.1 | | | $ | 4.2 | | Finance leases | $ | 0.4 | | | $ | 1.8 | |
The following table presents the future minimum lease liabilities under Topic 842 for our leases as of December 31, 2020 for the next five years and in total thereafter (2017in millions and that no provision for income tax was required for these consolidated financial statements. However, our conclusions regarding the evaluation of uncertain tax positions are subject to review and may change based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.):
| | | | | | | | | | | | | | | | | | | | | | | | Year Ending December 31, | Operating Leases | | Finance Leases | | Total | | | | | | | 2021 | $ | 16.6 | | | $ | 3.2 | | | $ | 19.8 | | | | | | | | 2022 | 11.3 | | | 1.8 | | | 13.1 | | | | | | | | 2023 | 7.0 | | | 0.1 | | | 7.1 | | | | | | | | 2024 | 6.3 | | | 0 | | | 6.3 | | | | | | | | 2025 | 3.2 | | | 0 | | | 3.2 | | | | | | | | Thereafter | 5.0 | | | 0 | | | 5.0 | | | | | | | | Total lease payments | 49.4 | | | 5.1 | | | 54.5 | | | | | | | | Less: interest | 6.2 | | | 0.3 | | | 6.5 | | | | | | | | Present value of lease liabilities | $ | 43.2 | | | $ | 4.8 | | | $ | 48.0 | | | | | | | |
Note 12 – Partners’ Capital and Non-Controlling Partner
Preferred Units
Subject to certain conditions, the holders of the preferred units will have the right to convert preferred units into (i) common units on a 1-for-10 basis, or (ii) a number of common units determined pursuant to a conversion ratio set forth in Crestwood Equity’s partnership agreement upon the occurrence of certain events, such as a change in control. The preferred units have voting rights that are identical to the voting rights of the common units and will vote with the common units as a single class, with each preferred units entitled to one vote for each common unit into which such preferred unit is convertible, except that the preferred units are entitled to vote as a separate class on any matter on which all unitholders are entitled to vote that adversely affects the rights, powers, privileges or preferences of the preferred units in relation to CEQP’s other securities outstanding.
In 2018, Crestwood Equity registered 71,257,445 preferred units under a shelf registration statement filed with the SEC under which holders of the preferred units may sell their preferred units. The preferred units representing limited partner interests are listed on the NYSE under the symbol “CEQP-P.”
Common Units
On August 4, 2017, we entered into an equity distribution agreement with certain financial institutions (each, a Manager), under which we may offer and sell from time to time through one or more of the Managers, common units having an aggregate offering price of up to $250 million. Common units sold pursuant to this at-the-market (ATM) equity distribution program are issued under a registration statement that became effective on April 12, 2017. We are required to pay the Managers an aggregate fee of up to 2.0% of the gross sales price per common unit sold under our ATM equity distribution program. There were 0 units issued under our ATM equity distribution program during the years ended December 31, 2019 and 2018. During the year ended December 31, 2017, we issued 633,271 common units under the ATM equity distribution program for net proceeds of approximately $15.2 million and we paid a manager fee of approximately $0.3 million related to the sale of these common units.
Subordinated Units
In conjunction with Crestwood Holdings’ acquisition of Crestwood Equity’s general partner, Crestwood Equity issued 438,789 subordinated units, which are considered limited partnership interests, and have the same rights and obligations as its common units, except that the subordinated units are entitled to receive distributions of available cash for a particular quarter only after each of our common units has received a distribution of at least $1.30 for that quarter. The subordinated units convert to common units after (i) CEQP’s common units have received a cumulative distribution in excess of $5.20 during a consecutive four quarter period; and (ii) its Adjusted Operating Surplus (as defined in the agreement) exceeds the distribution on a fully dilutive basis.
Distributions
Crestwood Equity
Limited Partners. Crestwood Equity makes quarterly distributions to its partners within approximately 45 days after the end of each quarter in an aggregate amount equal to its available cash for such quarter. Available cash generally means, with respect to each quarter, all cash on hand at the end of the quarter less the amount of cash that the general partner determines in its reasonable discretion is necessary or appropriate to:
•provide for the proper conduct of its business; •comply with applicable law, any of its debt instruments, or other agreements; or •provide funds for distributions to unitholders for any one or more of the next four quarters;
plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. The amount of cash CEQP has available for distribution depends primarily upon its cash flow (which consists of the cash distributions it receives in connection with its ownership of Crestwood Midstream).
A summary of CEQP’s limited partner quarterly cash distributions for the years ended December 31, 2020, 2019 2018 and 20172018 is presented below: | | | | | | | | | | | | Record Date | | Payment Date | | Per Unit Rate | | Cash Distributions (in millions) | 2019 | | | | | | | February 7, 2019 | | February 14, 2019 | | $ | 0.60 |
| | $ | 43.1 |
| May 8, 2019 | | May 15, 2019 | | 0.60 |
| | 43.1 |
| August 7, 2019 | | August 14, 2019 | | 0.60 |
| | 43.1 |
| November 7, 2019 | | November 14, 2019 | | 0.60 |
| | 43.1 |
| | | | | | | $ | 172.4 |
| 2018 | | | | | | | February 7, 2018 | | February 14, 2018 | | $ | 0.60 |
| | $ | 42.7 |
| May 8, 2018 | | May 15, 2018 | | 0.60 |
| | 42.7 |
| August 7, 2018 | | August 14, 2018 | | 0.60 |
| | 42.7 |
| November 7, 2018 | | November 14, 2018 | | 0.60 |
| | 42.7 |
| | | | | | | $ | 170.8 |
| 2017 | | | | | | | February 7, 2017 | | February 14, 2017 | | $ | 0.60 |
| | $ | 41.8 |
| May 8, 2017 | | May 15, 2017 | | 0.60 |
| | 41.8 |
| August 7, 2017 | | August 14, 2017 | | 0.60 |
| | 41.8 |
| November 7, 2017 | | November 14, 2017 | | 0.60 |
| | 42.2 |
| | | | | | | $ | 167.6 |
|
| | | | | | | | | | | | | | | | | | | | | Record Date | | Payment Date | | Per Unit Rate | | Cash Distributions (in millions) | 2020 | | | | | | | February 7, 2020 | | February 14, 2020 | | $ | 0.625 | | | $ | 45.3 | | May 8, 2020 | | May 15, 2020 | | $ | 0.625 | | | 45.7 | | August 7, 2020 | | August 14, 2020 | | $ | 0.625 | | | 45.7 | | November 6, 2020 | | November 13, 2020 | | $ | 0.625 | | | 46.0 | | | | | | | | $ | 182.7 | | 2019 | | | | | | | February 7, 2019 | | February 14, 2019 | | $ | 0.60 | | | $ | 43.1 | | May 8, 2019 | | May 15, 2019 | | $ | 0.60 | | | 43.1 | | August 7, 2019 | | August 14, 2019 | | $ | 0.60 | | | 43.1 | | November 7, 2019 | | November 14, 2019 | | $ | 0.60 | | | 43.1 | | | | | | | | $ | 172.4 | | 2018 | | | | | | | February 7, 2018 | | February 14, 2018 | | $ | 0.60 | | | $ | 42.7 | | May 8, 2018 | | May 15, 2018 | | $ | 0.60 | | | 42.7 | | August 7, 2018 | | August 14, 2018 | | $ | 0.60 | | | 42.7 | | November 7, 2018 | | November 14, 2018 | | $ | 0.60 | | | 42.7 | | | | | | | | $ | 170.8 | |
On February 14, 2020,12, 2021, we paid a distribution of $0.625$0.625 per limited partner unit to unitholders of record on February 7, 20205, 2021 with respect to the fourth quarter of 2019.2020.
Preferred Unitholders. The holders of our preferred units are entitled to receive fixed quarterly distributions of $0.2111 per unit. Through the quarters ending September 30, 2017 (the Initial Distribution Period), distributions on the preferred units could be made in additional preferred units, cash, or a combination thereof, at our election. We paid distributions on our preferred units through the issuance of additional preferred units through and for the quarter ended June 30, 2017. The number of units distributed was calculated as the fixed quarterly distribution of $0.2111 per unit divided by the cash purchase price of $9.13 per unit. We accrued the fair value of such distribution at the end of the quarterly period and adjusted the fair value of the distribution on the date the additional preferred units were distributed. Distributions on the preferred units following the Initial Distribution Period will beare paid in cash unless, subject to certain exceptions, (i) there is no distribution being paid on our common units; and (ii) our available cash (as defined in our partnership agreement) is insufficient to make a cash distribution to
our preferred unitholders. If we fail to pay the full amount payable to our preferred unitholders in cash, following the Initial Distribution Period, then (x) the fixed quarterly distribution on the preferred units will increase to $0.2567 per unit, and (y) we will not be permitted to declare or make any distributions to our common unitholders until such time as all accrued and unpaid distributions on the preferred units have been paid in full in cash. In addition, if we fail to pay in full any Preferred Distributionpreferred distribution (as defined in our partnership agreement), the amount of such unpaid distribution will accrue and accumulate from the last day of the quarter for which such distribution is due until paid in full, and any accrued and unpaid distributions will be increased at a rate of 2.8125% per quarter.
During each of the yearyears ended December 31, 2020, 2019 and 2018, we made cash distributions to our preferred unitholders of approximately $60.1 million in both periods. In November 2017, we made a cash distribution to our preferred unitholders of approximately $15.0 million for the quarter ended September 30, 2017. During the year ended December 31, 2017, we issued 4,724,030 preferred units to our preferred unitholders in lieu of paying quarterly cash distributions of $43.1 million. On February 14, 2020,12, 2021, we made a cash distribution of approximately $15.0 million to our preferred unitholders for the quarter ended December 31, 2019.2020.
Crestwood Midstream
In accordance with the partnership agreement, Crestwood Midstream’s general partner may, from time to time, cause Crestwood Midstream to make cash distributions at the sole discretion of the general partner. During the years ended December 31, 2020, 2019 2018 and 2017,2018, Crestwood Midstream made distributions of $242.6 million, $235.8 million $238.4 million and $174.0$238.4 million, which represented net amounts due to Crestwood Midstream related to cash advances to CEQP for its general corporate activities.
Non-Controlling Partner
Crestwood Niobrara our consolidated subsidiary, issued a preferred interest (Series A Preferred Units) to a subsidiary of General Electric Capital Corporation and GE Structured Finance, Inc. (collectively, GE) in conjunction with the acquisition of its initial 50% equity interest in Jackalope. In December 2017, Crestwood Niobrara redeemed 100% of the outstanding Series A Preferred Units from GE for an aggregate purchase price of approximately $202.7 million and issued $175 million in newof Series A-2 Preferred UnitsInterests to CN Jackalope Holdings LLC (Jackalope Holdings), which is reflected as in conjunction with its equity interest of non-controlling partner in subsidiary and a component of total partners’ capital on our consolidated balance sheet at December 31, 2018.Jackalope. In April 2019, Crestwood Niobrara issued $235 million in new Series A-3 Preferred Units (collectively with the Series A-2 Preferred Units defined as the Crestwood Niobrara Preferred Units) to Jackalope Holdings in conjunction with Crestwood Niobrara’s acquisition of the remaining 50% equity interest in Jackalope from Williams. In connection with the issuance of the Series A-3 Preferred Units, we entered into a Third Amended and Restated Limited Liability Company Agreement (Crestwood Niobrara Amended Agreement) with Jackalope Holdings, pursuant to which we serve as managing member of Crestwood Niobrara. The Crestwood Niobrara Amended Agreement modified certain provisions under the previous limited liability company agreement related to the conversion and redemption of the Series A-2 Preferred Units, as follows:
•The Crestwood Niobrara Preferred Units are convertible by the preferred interest holder starting on January 1, 2021 into Crestwood Niobrara common units. The preferred interest holder has the option to contribute additional capital to Crestwood Niobrara to increase their common ownership percentage in Crestwood Niobrara to 50% upon the conversion.
•The Crestwood Niobrara Preferred Units are redeemable by the preferred interest holder starting on December 31, 2023 for an amount equal to the Liquidation Preference (as defined in the Crestwood Niobrara Amended Agreement). If redemption is elected by the preferred interest holder, we have the option to elect to give consideration equal to the Liquidation Preference in either (i) unregistered CEQP common units (subject to a Registration Rights Agreement) with a total value of up to $100 million and/or cash; or (ii) proceeds from a full liquidation of Crestwood Niobrara’s assets and unregistered CEQP common units (subject to a Registration Rights Agreement).
•The Crestwood Niobrara Preferred Units are redeemable by us starting on January 1, 2023 for either (i) unregistered CEQP common units (subject to a Registration Rights Agreement) with a total value of up to $100 million and/or cash; or (ii) proceeds from a full liquidation of Crestwood Niobrara’s assets and registered CEQP common units (subject to a Registration Rights Agreement).
As a result of the modification of the conversion and redemption provisions of the Crestwood Niobrara Preferred Units, we continue to consolidate Crestwood Niobrara and have reflected thesethe preferred interests as a non-controlling interest in
subsidiary apart from partners’ capital (i.e., temporary equity) on our consolidated balance sheetsheets at December 31, 2020 and 2019. We adjust the carrying amount of the non-controlling interest to its redemption value each period through net income attributable to non-controlling partner.
The following table shows the change in the interest of our non-controlling interestpartner in subsidiary at December 31, 2020 and 2019 (in millions): | | | | | | Balance at April 9, 2019(1) | | $ | — |
| Reclassification of Series A-2 Preferred Units | | 178.8 |
| Issuance of Series A-3 Preferred Units | | 235.0 |
| Distributions to non-controlling partner | | (18.4 | ) | Net income attributable to non-controlling partner(2) | | 30.8 |
| Balance at December 31, 2019 | | $ | 426.2 |
|
| | | | | | | | | (1) | For further detail related to our non-controlling interest in subsidiary for the periodBalance at December 31, 2018 to April 8, 2019, see our consolidated statements of partners’ capital. |
| $ | 0 | | (2)Reclassification of Series A-2 Preferred Units | We adjust the carrying amount | 178.8 | | Issuance of ourSeries A-3 Preferred Units | | 235.0 | | Distributions to non-controlling interest to its redemption value each period through netpartner | | (18.4) | | Net income attributable to non-controlling partner.partner | | 30.8 | | Balance at December 31, 2019 | | 426.2 | | Contributions from non-controlling partner | | 2.8 | | Distributions to non-controlling partner | | (37.1) | | Net income attributable to non-controlling partner | | 40.8 | | Balance at December 31, 2020 | | $ | 432.7 | |
Crestwood Niobrara is required to make quarterly cash distributions on its preferred interestinterests within 30 days after the end of each quarter. During the years ended December 31, 2020, 2019 2018 and 2017,2018, Crestwood Niobrara paid cash distributions of $37.1 million, $25.0 million and $9.9 million and $15.2 million to its preferred interest owners.Jackalope Holdings. In January 2020,2021, Crestwood Niobrara paid a cash distribution of $9.2$9.3 million to Jackalope Holdings for the quarter ended December 31, 2019.2020.
Note 13 - Equity Plans
Long-term incentive awards are granted under the Crestwood Equity Partners LP Long Term Incentive Plan (Crestwood LTIP)LTIP in order to align the economic interests of key employees and directors with those of CEQP’s common unitholders and to provide an incentive for continuous employment. Long-term incentive compensation consist of grants of restricted, phantom and performance units which vest based upon continued service.
The following table summarizes information regarding restricted, phantom and performance unit activity during the years ended December 31, 2019, 2018 and 2017. | | | | | | | | | | | Units | | Weighted-Average Grant Date Fair Value | Unvested - January 1, 2017 | | 1,292,330 |
| | $ | 24.67 |
| Granted - restricted units | | 919,411 |
| | $ | 25.69 |
| Granted - phantom units | | 15,849 |
| | $ | 25.02 |
| Granted - performance units | | 405,620 |
| | $ | 30.21 |
| Vested - restricted units | | (607,115 | ) | | $ | 28.00 |
| Vested - performance units | | (31,106 | ) | | $ | 30.27 |
| Forfeited - restricted units | | (140,137 | ) | | $ | 23.73 |
| Forfeited - performance units | | (24,756 | ) | | $ | 30.45 |
| Unvested - December 31, 2017 | | 1,830,096 |
| | $ | 25.21 |
| Granted - restricted units | | 1,144,017 |
| | $ | 25.80 |
| Granted - phantom units | | 7,750 |
| | $ | 26.10 |
| Granted - performance units | | 901 |
| | $ | 25.60 |
| Vested - restricted units | | (617,807 | ) | | $ | 23.73 |
| Vested - phantom units | | (105,809 | ) | | $ | 49.45 |
| Vested - performance units | | (11,772 | ) | | $ | 28.87 |
| Forfeited - restricted units | | (53,530 | ) | | $ | 23.36 |
| Forfeited - phantom units | | (6 | ) | | $ | 49.45 |
| Forfeited - performance units | | (5,870 | ) | | $ | 30.45 |
| Unvested - December 31, 2018 | | 2,187,970 |
| | $ | 24.78 |
| Granted - restricted units | | 988,096 |
| | $ | 31.48 |
| Granted - phantom units | | 7,164 |
| | $ | 29.03 |
| Granted - performance units | | 238,263 |
| | $ | 34.21 |
| Vested - restricted units | | (985,751 | ) | | $ | 23.39 |
| Vested - performance units | | (32,246 | ) | | $ | 34.21 |
| Forfeited - restricted units | | (47,547 | ) | | $ | 27.85 |
| Unvested - December 31, 2019 | | 2,355,949 |
| | $ | 28.94 |
|
As of December 31, 20192020 and 2018,2019, we had total unamortized compensation expense of approximately $34.6$29.7 million and $28.0$34.6 million related to restricted, phantom, and performance units, which will be amortized during the next three years (or sooner in certain cases, which generally represents the original vesting period of these instruments), except for grants to non-employee directors of our general partner, which vest over one year. We recognized compensation expense of approximately $35.1 million, $45.1 million $24.3 million and $22.4$24.3 million under the Crestwood LTIP during the years ended December 31, 2020, 2019 2018 and 2017,2018, which is included in general and administrative expenses on our consolidated statements of operations. During the yearyears ended December 31, 2020 and 2019, compensation expense includes approximately $1.4 million and $4.6 million related to equity awards under the Crestwood LTIP that was included in accrued expenses and other liabilities on our consolidated balance sheet. As of February 10, 2020,12, 2021, we had 2,593,8851,230,527 units available for issuance under the Crestwood LTIP.
Restricted Units. UnitsUnder the. The Crestwood LTIP participants who have been grantedpermits grants of restricted units may electthat are designed to have us withhold commonprovide an incentive for continuous employment to certain key employees. Restricted units vest over a three-year period following the grant date or, if earlier, upon change of control of Crestwood Equity’s general partner or due to satisfy minimum statutory tax withholding obligations arising in connection with the vesting of non-vested common units. Any such common units withheld are returned to the Crestwood LTIP on the applicable vesting dates, which correspond to the times at which income is recognized by the employee. When we withhold these common units, we are required to remit to the appropriate taxing authorities the fair valuedeath or disability of the units withheld as of the vesting date. The number of units withheld is determined based on the closing price per common unit as reported on the NYSE on such dates. During the years ended December 31, 2019, 2018, and 2017, we withheld 336,548, 221,576 and 206,600 common units to satisfy employee tax withholding obligations.employee.
Phantom Units. The Crestwood LTIP permits grants of phantom units that entitle the holder thereof to receive upon vesting one CEQP common unit granted pursuant to the Crestwood LTIP and a phantom unit award agreement (thethe Crestwood Equity
Phantom Unit Agreement).Agreement. The Crestwood Equity Phantom Unit Agreement provides for vesting to occur at the end of three years following the grant date or, if earlier, upon the named executive officer’s termination without cause or due to death or disability or the named executive officer’s resignation for employee cause (each, as defined in the Crestwood Equity Phantom Unit Agreement). In addition, the Crestwood Equity Phantom Unit Agreement provides for distribution equivalent rights with respect to each phantom unit which are paid in additional phantom units and settled in common units upon vesting of the underlying phantom units.
Performance Units. The Crestwood LTIP permits grants of performance units that are designed to provide an incentive for continuous employment to certain key employees. Performance units vest over a three-year performance period and the number of units issued are based on a performance multiplier ranging between 50% and 200%, determined based on the actual performance in the third year of the performance period compared to pre-established performance goals. The performance goals are based on achieving a specified level of distributable cash flow per unit, Adjusted EBITDA, return on capital invested, and three-year relative total shareholder return. 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.
The following table summarizes information regarding restricted, phantom and performance unit activity during the years ended December 31, 2020, 2019 and 2018.
| | | | | | | | | | | | | | | | | Units | | Weighted-Average Grant Date Fair Value | Unvested - January 1, 2018 | | 1,830,096 | | | $ | 25.21 | | Granted - restricted units | | 1,144,017 | | | $ | 25.80 | | Granted - phantom units | | 7,750 | | | $ | 26.10 | | Granted - performance units | | 901 | | | $ | 25.60 | | Vested - restricted units | | (617,807) | | | $ | 23.73 | | Vested - phantom units | | (105,809) | | | $ | 49.45 | | Vested - performance units | | (11,772) | | | $ | 28.87 | | Forfeited - restricted units | | (53,530) | | | $ | 23.36 | | Forfeited - phantom units | | (6) | | | $ | 49.45 | | Forfeited - performance units | | (5,870) | | | $ | 30.45 | | Unvested - December 31, 2018 | | 2,187,970 | | | $ | 24.78 | | Granted - restricted units | | 988,096 | | | $ | 31.48 | | Granted - phantom units | | 7,164 | | | $ | 29.03 | | Granted - performance units | | 238,263 | | | $ | 34.21 | | Vested - restricted units | | (985,751) | | | $ | 23.39 | | | | | | | Vested - performance units | | (32,246) | | | $ | 34.21 | | Forfeited - restricted units | | (47,547) | | | $ | 27.85 | | | | | | | | | | | | Unvested - December 31, 2019 | | 2,355,949 | | | $ | 28.94 | | Granted - restricted units | | 1,569,451 | | | $ | 25.42 | | Granted - phantom units | | 17,726 | | | $ | 28.48 | | Granted - performance units | | 715,674 | | | $ | 28.46 | | Vested - restricted units | | (906,275) | | | $ | 28.75 | | Vested - phantom units | | (2,118) | | | $ | 26.63 | | Vested - performance units | | (846,306) | | | $ | 29.85 | | Forfeited - restricted units | | (149,001) | | | $ | 28.24 | | Forfeited - phantom units | | (14,157) | | | $ | 27.91 | | Forfeited - performance units | | (17,087) | | | $ | 27.35 | | Unvested - December 31, 2020 | | 2,723,856 | | | $ | 26.62 | |
Under the Crestwood LTIP, participants who have been granted restricted units and/or performance units may elect to have us withhold common units to satisfy minimum statutory tax withholding obligations arising in connection with the vesting of non-vested common units. Any such common units withheld are returned to the Crestwood LTIP on the applicable vesting dates, which correspond to the times at which income is recognized by the employee. When we withhold these common units, we are required to remit to the appropriate taxing authorities the fair value of the units withheld as of the vesting date. The number of units withheld is determined based on the closing price per common unit as reported on the NYSE on such dates. During the years ended December 31, 2020, 2019, and 2018, we withheld 581,608, 336,548 and 221,576 common units to satisfy employee tax withholding obligations for the restricted and performance units.
Employee Unit Purchase Plan
In August 2018, the board of directors of our general partner approved an employee unit purchase plan under which employees of the general partner may purchase our common units through payroll deductions up to a maximum of 10% of the employees’ eligible compensation, not to exceed $25,000 for any calendar year. Under the plan, we anticipate purchasing our common units on the open market for the benefit of participating employees based on their payroll deductions. In addition, we may match up to 10% of participating employees’ payroll deductions to purchase additional Crestwood common units for participating employees. The board of directors of our general partner authorized 1,500,000 common units (subject to
adjustment as provided in the employee unit purchase plan) to be available for purchase. During the yearyears ended December 31, 2020 and 2019, 29,784 and 6,341 common units were purchased under the plan. There were 0 common units purchased under the employee unit purchase plan in 2018.
Note 14 - Earnings Per Limited Partner Unit
We calculate basic net income per limited partner unit using the two-class method. Our income (loss) is allocated to our common units and other participating securities (i.e.,subordinated units) based on the amount of dividends paid in the current period plus an allocation of the undistributed earnings or excess distributions over earnings to the extent that each security participates in income (loss) or excess distributions over income (loss). 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. The dilutive effect of the Preferred units and Crestwood Niobrara preferred units are calculated 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.
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 years ended December 31, 2020, 2019 and 2018 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | 2018 | Preferred units (1) | | 7.1 | | | 7.1 | | | 7.1 | | Crestwood Niobrara’s preferred units(1) | | 5.7 | | | 0 | | | 6.5 | | Subordinated units(2) | | 0.4 | | | 0 | | | 0.4 | | Stock-based compensation performance units(2) | | 0.1 | | | 0 | | | 0.4 | |
(1)See Note 12 for additional information regarding the potential conversion of our preferred units and Crestwood Niobrara’s preferred units to common units. (2)For a description of our subordinated and stock-based compensation performance units, see Note 12 and Note 13, respectively.
The following table shows net income (loss) and weighted-average limited partner units used in computing basic and diluted net income (loss) per limited partner unit for the years ended December 31, 2020, 2019 and 2018 (in millions, except per unit data):
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | 2018 | Common unitholders’ interest in net income (loss) | | $ | (116.2) | | | $ | 223.6 | | | $ | (9.3) | | | | | | | | | | | | | | | | Dilutive effect of net income attributable to subordinated units | | 0 | | | 1.4 | | | 0 | | Diluted net income (loss) | | $ | (116.2) | | | $ | 225.0 | | | $ | (9.3) | | | | | | | | | Weighted-average limited partners’ units outstanding - basic | | 73.2 | | | 71.8 | | | 71.2 | | Dilutive effect of Crestwood Niobrara preferred units | | 0 | | | 4.3 | | | 0 | | | | | | | | | Dilutive effect of subordinated units | | 0 | | | 0.4 | | | 0 | | Dilutive effect of stock-based compensation performance units | | 0 | | | 0.4 | | | 0 | | Weighted-average limited partners’ units outstanding - diluted | | 73.2 | | | 76.9 | | | 71.2 | | | | | | | | | Net income (loss) per limited partner unit: | | | | | | | Basic | | $ | (1.59) | | | $ | 3.11 | | | $ | (0.13) | | Diluted | | $ | (1.59) | | | $ | 2.93 | | | $ | (0.13) | |
Note 15 - Employee Benefit Plan
A 401(k) plan is available to all of our employees after meeting certain requirements. The plan permits employees to make contributions of up to 90% of their salary, upsubject to statutory limits, which was $19,500 in 2020, $19,000 in 2019 and $18,500 in 2018 and $18,000 in 2017.2018. We match 100% of participantsparticipants’ basic contributioncontributions up to 6% of eligible compensation. Employees may participate in the plans immediately and certain employees are not eligible for matching contributions until after a 90-day waiting period. AggregateDuring the years ended December 31, 2020, 2019 and 2018, aggregate matching contributions made by us were $4.2 million, $4.7 million and $4.6 millionmillion.
Note 16 – Segments
Financial Information
We have 3 operating and $4.0 million duringreportable segments: (i) gathering and processing; (ii) storage and transportation; and (iii) marketing, supply and logistics. Our corporate operations include all general and administrative expenses that are not allocated to our reportable segments. For a further description of our operating and reporting segments, see Note 1. We assess the performance of our operating segments based on EBITDA, which is defined as income before income taxes, plus debt-related costs (net interest and debt expense and loss on modification/extinguishment of debt) and depreciation, amortization and accretion expense.
Below is a reconciliation of CEQP’s and CMLP’s net income (loss) to EBITDA (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | Year Ended December 31, | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | Net income (loss) | $ | (15.3) | | | $ | 319.9 | | | $ | 67.0 | | | $ | (23.4) | | | $ | 310.6 | | | $ | 58.6 | | Add: | | | | | | | | | | | | Interest and debt expense, net | 133.6 | | | 115.4 | | | 99.2 | | | 133.6 | | | 115.4 | | | 99.2 | | (Gain) loss on modification/extinguishment of debt | (0.1) | | | 0 | | | 0.9 | | | (0.1) | | | 0 | | | 0.9 | | Provision (benefit) for income taxes | 0.4 | | | 0.3 | | | 0.1 | | | (0.1) | | | 0.3 | | | 0 | | Depreciation, amortization and accretion | 237.4 | | | 195.8 | | | 168.7 | | | 251.5 | | | 209.9 | | | 181.4 | | EBITDA | $ | 356.0 | | | $ | 631.4 | | | $ | 335.9 | | | $ | 361.5 | | | $ | 636.2 | | | $ | 340.1 | |
The following tables summarize CEQP’s and CMLP’s reportable segment data for the years ended December 31, 2020, 2019 and 2018 (,in millions). Intersegment revenues included in the following tables are accounted for as arms-length transactions that apply our revenue recognition policy described in Note 2. Included in earnings from unconsolidated affiliates below was approximately $42.9 million, $42.1 million and $42.3 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 years ended December 31, 2020, 2019 and 2018, and 2017.respectively.
Note 15 – Commitments and Contingencies
Legal Proceedings
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2020 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Crestwood Midstream | | | | | | | | | | Revenues | $ | 631.4 | | | $ | 13.8 | | | $ | 1,609.1 | | | $ | 0 | | | $ | 2,254.3 | | Intersegment revenues | 159.8 | | | 9.2 | | | (169.0) | | | 0 | | | 0 | | Costs of product/services sold | 261.5 | | | 0.2 | | | 1,338.8 | | | 0 | | | 1,600.5 | | Operations and maintenance expense | 84.9 | | | 3.6 | | | 43.3 | | | 0 | | | 131.8 | | General and administrative expense | 0 | | | 0 | | | 0 | | | 86.7 | | | 86.7 | | Gain (loss) on long-lived assets, net | (23.8) | | | 0 | | | (2.4) | | | 0.2 | | | (26.0) | | Goodwill impairment | (80.3) | | | 0 | | | 0 | | | 0 | | | (80.3) | | | | | | | | | | | | | | | | | | | | | | Earnings (loss) from unconsolidated affiliates, net | (1.0) | | | 33.5 | | | 0 | | | 0 | | | 32.5 | | | | | | | | | | | | Crestwood Midstream EBITDA | $ | 339.7 | | | $ | 52.7 | | | $ | 55.6 | | | $ | (86.5) | | | $ | 361.5 | | Crestwood Equity | | | | | | | | | | General and administrative expense | 0 | | | 0 | | | 0 | | | 4.8 | | | 4.8 | | | | | | | | | | | | Other expense | 0 | | | 0 | | | 0 | | | (0.7) | | | (0.7) | | Crestwood Equity EBITDA | $ | 339.7 | | | $ | 52.7 | | | $ | 55.6 | | | $ | (92.0) | | | $ | 356.0 | |
Linde Lawsuit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Crestwood Midstream | | | | | | | | | | Revenues | $ | 835.8 | | | $ | 20.4 | | | $ | 2,325.7 | | | $ | 0 | | | $ | 3,181.9 | | Intersegment revenues | 175.0 | | | 14.2 | | | (189.2) | | | 0 | | | 0 | | Costs of product/services sold | 526.1 | | | 0.2 | | | 2,018.6 | | | 0 | | | 2,544.9 | | Operations and maintenance expense | 98.7 | | | 4.0 | | | 36.1 | | | 0 | | | 138.8 | | General and administrative expense | 0 | | | 0 | | | 0 | | | 98.2 | | | 98.2 | | Gain (loss) on long-lived assets, net | (6.2) | | | 0 | | | (0.2) | | | 0.2 | | | (6.2) | | Gain on acquisition | 209.4 | | | 0 | | | 0 | | | 0 | | | 209.4 | | | | | | | | | | | | | | | | | | | | | | Earnings (loss) from unconsolidated affiliates, net | (2.1) | | | 34.9 | | | 0 | | | 0 | | | 32.8 | | Other income, net | 0 | | | 0 | | | 0 | | | 0.2 | | | 0.2 | | Crestwood Midstream EBITDA | $ | 587.1 | | | $ | 65.3 | | | $ | 81.6 | | | $ | (97.8) | | | $ | 636.2 | | Crestwood Equity | | | | | | | | | | General and administrative expense | 0 | | | 0 | | | 0 | | | 5.2 | | | 5.2 | | | | | | | | | | | | Other income | 0 | | | 0 | | | 0 | | | 0.4 | | | 0.4 | | Crestwood Equity EBITDA | $ | 587.1 | | | $ | 65.3 | | | $ | 81.6 | | | $ | (102.6) | | | $ | 631.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2018 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Crestwood Midstream | | | | | | | | | | Revenues | $ | 946.7 | | | $ | 17.1 | | | $ | 2,690.3 | | | $ | 0 | | | $ | 3,654.1 | | Intersegment revenues | 192.4 | | | 10.5 | | | (202.9) | | | 0 | | | 0 | | Costs of product/services sold | 767.0 | | | 0.2 | | | 2,362.2 | | | 0 | | | 3,129.4 | | Operations and maintenance expense | 71.7 | | | 3.3 | | | 50.8 | | | 0 | | | 125.8 | | General and administrative expense | 0 | | | 0 | | | 0 | | | 83.5 | | | 83.5 | | Gain (loss) on long-lived assets, net | (3.0) | | | 0 | | | (27.3) | | | 1.7 | | | (28.6) | | | | | | | | | | | | | | | | | | | | | | Earnings from unconsolidated affiliates, net | 22.5 | | | 30.8 | | | 0 | | | 0 | | | 53.3 | | | | | | | | | | | | Crestwood Midstream EBITDA | $ | 319.9 | | | $ | 54.9 | | | $ | 47.1 | | | $ | (81.8) | | | $ | 340.1 | | Crestwood Equity | | | | | | | | | | General and administrative expense | 0 | | | 0 | | | 0 | | | 4.6 | | | 4.6 | | | | | | | | | | | | Other income | 0 | | | 0 | | | 0 | | | 0.4 | | | 0.4 | | Crestwood Equity EBITDA | $ | 319.9 | | | $ | 54.9 | | | $ | 47.1 | | | $ | (86.0) | | | $ | 335.9 | |
Other Segment Information
| | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | Year Ended December 31, | | Year Ended December 31, | | 2020 | | 2019 | | 2020 | | 2019 | Total Assets | | | | | | | | Gathering and Processing | $ | 3,464.6 | | | $ | 3,715.3 | | | $ | 3,609.7 | | | $ | 3,874.7 | | Storage and Transportation | 944.6 | | | 980.2 | | | 944.6 | | | 980.2 | | Marketing, Supply and Logistics | 805.0 | | | 624.7 | | | 805.0 | | | 624.7 | | Corporate | 29.5 | | | 29.1 | | | 26.2 | | | 24.4 | | Total Assets | $ | 5,243.7 | | | $ | 5,349.3 | | | $ | 5,385.5 | | | $ | 5,504.0 | |
| | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Purchases of property, plant and equipment (1) | | | | | | Gathering and Processing | $ | 159.7 | | | $ | 447.7 | | | $ | 294.7 | | Storage and Transportation | 0.4 | | | 0.1 | | | 0.6 | | Marketing, Supply and Logistics | 7.1 | | | 5.8 | | | 5.6 | | Corporate | 1.1 | | | 1.9 | | | 4.6 | | Total Purchases of property, plant and equipment | $ | 168.3 | | | $ | 455.5 | | | $ | 305.5 | |
(1). On December 23, 2019, Linde Engineering North America Inc. (Linde) filed a lawsuit in Harris County, Texas alleging that Arrow Field Services, LLC, our consolidated subsidiary,Amounts represent both Crestwood Midstream and Crestwood Midstream breached a contract entered into in MarchEquity.
Major Customers
No customer accounted for 10% or more of our total consolidated revenues for the years ended December 31, 2020 and 2018 under which Linde was to provide engineering, procurement and construction services to us related toat CEQP or CMLP. For the completion of the construction of the Bear Den II cryogenic processing plant. Linde claims damages of $55 million in unpaid invoices and other damages. This matter is not an insurable event based on our insurance policies and, we are unable to predict the outcome for 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 ofyear ended December 31, 2019, revenues from British Petroleum and 2018,its affiliates of approximately $333.9 million (reflected primarily in our Marketing, Supply and Logistics segment) accounted for approximately 10% of our total consolidated revenues at CEQP and CMLP.
Note 17- 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 Topic 606 totaled $219.9 million and $225.0 million for both CEQP and CMLP had approximately $10.7 millionat December 31, 2020 and $0.1 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 impact2019, and are included in accounts receivable on our consolidated financial statements. As we learn
new facts concerning contingencies, we reassessbalance sheets. Our contract assets are included in other non-current assets on our position both with respect toconsolidated 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 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 naturelong-term liabilities. The majority 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.
During 2014, we experienced 3 releases totaling approximately 28,000 barrels of produced water on our Arrow water gathering system located on the Fort Berthold Indian Reservation in North Dakota. We immediately notified the National Response Center, the Three Affiliated Tribes and numerous other regulatory authorities. Thereafter, we contained and cleaned up the releases, and placed the impacted segments of these water lines back into service. In May 2015, we experienced a release of approximately 5,200 barrels of produced water on our Arrow water gathering system, immediately notified numerous regulatory authorities and other third parties, and thereafter contained and cleaned up the releases.
In August 2015, we received a notice of violation from the Three Affiliated Tribes’ Environmental Division related to our 2014 produced water releases on the Fort Berthold Indian Reservation. The notice of violation imposes fines and requests reimbursements exceeding $1.1 million; however, the notice of violation was stayed on September 15, 2015. Our discussions regarding the notice of violation continue with the Three Affiliated Tribes.
During September 2019, we experienced 2 produced water releases totaling approximately 5,000 barrels on our Arrow system located on the Fort Berthold Indian Reservation in North Dakota. We immediately notified the National Response Center, the State of North Dakota, the Three Affiliated Tribes, affected landowners and numerous other regulatory authorities. We are substantially complete with the remediation efforts and continue to monitor the impact of both spills.
In response to the water releases on our Arrow system, we removed approximately 30 miles of water gathering pipeline from service and incurred a $4.3 million impairment charge during the three months ended December 31, 2019 related to idling those facilities. In addition, we are currently in the process of replacing approximately 12 miles of water gathering pipeline with pipeline composed of higher capacity material that is more suitable to the environment and climate conditions in the Bakken, which will increase water gathering capacity on the Arrow system and further our commitment to sustainability and environmental stewardship in the areas where we live and operate.
We will continue our remediation efforts to ensure the impacted lands are restored to their prior state. We believe these releases are insurable events under our policies, and we have notified our carriers of these events. We have not recorded an insurance receivable as of December 31, 2019.
At December 31, 2019 and 2018, our accrual of approximately $6.7 million and $1.8 million was based on our undiscounted estimate of amounts we will spend on compliance with environmental and other regulations, and any associated fines or penalties. We estimate that our potential liability for reasonably possible outcomes related to our environmental exposures could range from approximately $6.7 million to $11.1 million at December 31, 2019.
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 primarilyrevenues associated with medical claims, workers’ compensation claims and general, product, vehicle and environmental liability. Lossesour deferred revenues is expected to be recognized as the performance obligations under the related contracts are accrued based upon management’s estimatessatisfied over the next 16 years.
The following table summarizes CEQP’sour contract assets and CMLP’s self-insurance reserves at December 31, 2019 and 2018contract liabilities (in millions): | | | | | | | | | | | | | | | | | | | | CEQP | CMLP | | | December 31, | | December 31, | | | 2019 | | 2018 | | 2019 | | 2018 | Self-insurance reserves(1) | | $ | 9.7 |
| | $ | 11.3 |
| | $ | 8.3 |
| | $ | 9.6 |
|
| | | | | | | | | | | | | | | | | December 31, |
| | 2020 | | 2019 | Contract assets (non-current) | | $ | 1.0 | | | $ | 1.2 | | Contract liabilities (current)(1) | | $ | 10.3 | | | $ | 8.8 | | Contract liabilities (non-current)(1) | | $ | 172.2 | | | $ | 144.7 | |
| | (1) | At December 31, 2019, CEQP and CMLP classified approximately $6.2 million and $5.2 million, respectively of these reserves as other long-term liabilities on their consolidated balance sheets. |
Leases(1)During the year ended December 31, 2020, we recognized revenues of approximately $11.6 million that were previously included in contract liabilities at December 31, 2019. The remaining change in our contract liabilities during the year ended December 31, 2020 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 balance sheet information relatedtransaction price allocated to our operating and finance leases atremaining performance obligations under certain contracts that have not been recognized as of December 31, 2020 (in millions):
| | | | | | 2021 | $ | 94.2 | | 2022 | 54.1 | | 2023 | 8.0 | | 2024 | 3.3 | | | | | | Total | $ | 159.6 | |
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 years ended December 31, 2020, 2019 and 2018 (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 represent revenues related to our commodity-based derivatives. | | | | | Operating Leases | | Operating lease right-of-use assets, net | $ | 53.8 |
| | | Accrued expenses and other liabilities | $ | 18.1 |
| Other long-term liabilities | 41.5 |
| Total operating lease liabilities | $ | 59.6 |
| Finance Leases | | Property, plant and equipment | $ | 14.9 |
| Less: accumulated depreciation | 5.4 |
| Property, plant and equipment, net | $ | 9.5 |
| | | Accrued expenses and other liabilities | $ | 3.2 |
| Other long-term liabilities | 5.2 |
| Total finance lease liabilities | $ | 8.4 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2020 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Intersegment Elimination | | Total | Revenues: | | | | | | | | | | Topic 606 revenues | | | | | | | | | | Gathering | | | | | | | | | | Natural gas | $ | 140.6 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 140.6 | | Crude oil | 95.3 | | | 0 | | | 0 | | | 0 | | | 95.3 | | Water | 92.6 | | | 0 | | | 0 | | | 0 | | | 92.6 | | Processing | | | | | | | | | | Natural gas | 31.9 | | | 0 | | | 0 | | | 0 | | | 31.9 | | | | | | | | | | | | Compression | | | | | | | | | | Natural gas | 23.9 | | | 0 | | | 0 | | | 0 | | | 23.9 | | Storage | | | | | | | | | | Crude oil | 1.1 | | | 4.0 | | | 0 | | | (2.4) | | | 2.7 | | NGLs | 0 | | | 0 | | | 13.1 | | | 0 | | | 13.1 | | Pipeline | | | | | | | | | | Crude oil | 0 | | | 6.1 | | | 0 | | | (2.0) | | | 4.1 | | NGLs | 0 | | | 0 | | | 0.3 | | | 0 | | | 0.3 | | Transportation | | | | | | | | | | Crude oil | 6.2 | | | 0 | | | 1.9 | | | (0.1) | | | 8.0 | | NGLs | 0 | | | 0 | | | 10.9 | | | 0 | | | 10.9 | | | | | | | | | | | | Rail Loading | | | | | | | | | | Crude oil | 0 | | | 11.8 | | | 0 | | | (4.4) | | | 7.4 | | | | | | | | | | | | Product Sales | | | | | | | | | | Natural gas | 53.4 | | | 0 | | | 90.9 | | | (52.8) | | | 91.5 | | Crude oil | 292.2 | | | 0 | | | 660.7 | | | (53.0) | | | 899.9 | | NGLs | 54.0 | | | 0 | | | 614.2 | | | (53.6) | | | 614.6 | | Other | 0 | | | 1.1 | | | 1.1 | | | (0.7) | | | 1.5 | | Total Topic 606 revenues | 791.2 | | | 23.0 | | | 1,393.1 | | | (169.0) | | | 2,038.3 | | Non-Topic 606 revenues | 0 | | | 0 | | | 216.0 | | | 0 | | | 216.0 | | Total revenues | $ | 791.2 | | | $ | 23.0 | | | $ | 1,609.1 | | | $ | (169.0) | | | $ | 2,254.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Intersegment Elimination | | Total | Revenues: | | | | | | | | | | Topic 606 revenues | | | | | | | | | | Gathering | | | | | | | | | | Natural gas | $ | 163.2 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 163.2 | | Crude oil | 75.0 | | | 0 | | | 0 | | | 0 | | | 75.0 | | Water | 79.6 | | | 0 | | | 0 | | | 0 | | | 79.6 | | Processing | | | | | | | | | | Natural gas | 28.9 | | | 0 | | | 0 | | | 0 | | | 28.9 | | | | | | | | | | | | Compression | | | | | | | | | | Natural gas | 24.9 | | | 0 | | | 0 | | | 0 | | | 24.9 | | Storage | | | | | | | | | | Crude oil | 1.9 | | | 5.4 | | | 0 | | | (2.3) | | | 5.0 | | NGLs | 0 | | | 0 | | | 6.3 | | | 0 | | | 6.3 | | Pipeline | | | | | | | | | | Crude oil | 0 | | | 7.9 | | | 0 | | | (2.7) | | | 5.2 | | Transportation | | | | | | | | | | Crude oil | 7.0 | | | 0 | | | 5.8 | | | (0.1) | | | 12.7 | | NGLs | 0 | | | 0 | | | 11.7 | | | 0 | | | 11.7 | | Water | 0 | | | 0 | | | 0.2 | | | 0 | | | 0.2 | | Rail Loading | | | | | | | | | | Crude oil | 0 | | | 16.7 | | | 0 | | | (5.7) | | | 11.0 | | | | | | | | | | | | Product Sales | | | | | | | | | | Natural gas | 56.8 | | | 0 | | | 72.3 | | | (33.4) | | | 95.7 | | Crude oil | 532.1 | | | 0 | | | 1,315.6 | | | (121.1) | | | 1,726.6 | | NGLs | 41.4 | | | 0 | | | 659.3 | | | (20.0) | | | 680.7 | | Other | 0 | | | 4.6 | | | 1.2 | | | (3.9) | | | 1.9 | | Total Topic 606 revenues | 1,010.8 | | | 34.6 | | | 2,072.4 | | | (189.2) | | | 2,928.6 | | Non-Topic 606 revenues | 0 | | | 0 | | | 253.3 | | | 0 | | | 253.3 | | Total revenues | $ | 1,010.8 | | | $ | 34.6 | | | $ | 2,325.7 | | | $ | (189.2) | | | $ | 3,181.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2018 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Intersegment Elimination | | Total | Revenues: | | | | | | | | | | Topic 606 revenues | | | | | | | | | | Gathering | | | | | | | | | | Natural gas | $ | 134.9 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 134.9 | | Crude oil | 38.8 | | | 0 | | | 0 | | | 0 | | | 38.8 | | Water | 58.0 | | | 0 | | | 0 | | | 0 | | | 58.0 | | Processing | | | | | | | | | | Natural gas | 10.7 | | | 0 | | | 0 | | | 0 | | | 10.7 | | NGLs | 0 | | | 0 | | | 6.1 | | | 0 | | | 6.1 | | Compression | | | | | | | | | | Natural gas | 29.1 | | | 0 | | | 0 | | | 0 | | | 29.1 | | Storage | | | | | | | | | | Crude oil | 1.8 | | | 4.2 | | | 0 | | | (1.5) | | | 4.5 | | NGLs | 0 | | | 0 | | | 8.6 | | | 0 | | | 8.6 | | Pipeline | | | | | | | | | | Crude oil | 0 | | | 7.1 | | | 0 | | | (2.3) | | | 4.8 | | Transportation | | | | | | | | | | Crude oil | 2.9 | | | 0 | | | 5.9 | | | 0 | | | 8.8 | | NGLs | 0 | | | 0 | | | 26.9 | | | 0 | | | 26.9 | | Water | 0 | | | 0 | | | 0.3 | | | 0 | | | 0.3 | | Rail Loading | | | | | | | | | | Crude oil | 0 | | | 14.3 | | | 0.2 | | | (5.2) | | | 9.3 | | NGLs | 0 | | | 0 | | | 3.1 | | | 0 | | | 3.1 | | Product Sales | | | | | | | | | | Natural gas | 55.8 | | | 0 | | | 70.9 | | | (16.6) | | | 110.1 | | Crude oil | 722.9 | | | 0 | | | 978.0 | | | (151.3) | | | 1,549.6 | | NGLs | 84.2 | | | 0 | | | 1,247.0 | | | (24.5) | | | 1,306.7 | | Other | 0 | | | 2.0 | | | 0 | | | (1.5) | | | 0.5 | | Total Topic 606 revenues | 1,139.1 | | | 27.6 | | | 2,347.0 | | | (202.9) | | | 3,310.8 | | Non-Topic 606 revenues | 0 | | | 0 | | | 343.3 | | | 0 | | | 343.3 | | Total revenues | $ | 1,139.1 | | | $ | 27.6 | | | $ | 2,690.3 | | | $ | (202.9) | | | $ | 3,654.1 | |
Note 18 - Income Taxes
The (provision) benefit for income taxes for the years ended December 31, 2020, 2019, and 2018 consisted of the following (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | Year Ended December 31, | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | Current: | | | | | | | | | | | | Federal | $ | (0.2) | | | $ | (0.1) | | | $ | (0.5) | | | $ | 0.1 | | | $ | 0.1 | | | $ | 0.1 | | State | (0.1) | | | (0.2) | | | (0.3) | | | 0 | | | (0.2) | | | (0.2) | | Total current | (0.3) | | | (0.3) | | | (0.8) | | | 0.1 | | | (0.1) | | | (0.1) | | Deferred: | | | | | | | | | | | | Federal | (0.1) | | | 0.1 | | | 0.5 | | | 0 | | | 0 | | | 0 | | State | 0 | | | (0.1) | | | 0.2 | | | 0 | | | (0.2) | | | 0.1 | | Total deferred | (0.1) | | | 0 | | | 0.7 | | | 0 | | | (0.2) | | | 0.1 | | (Provision) benefit for income taxes | $ | (0.4) | | | $ | (0.3) | | | $ | (0.1) | | | $ | 0.1 | | | $ | (0.3) | | | $ | 0 | |
The following table presentseffective rate differs from the weighted-average remaining lease term andstatutory rate for the weighted-average discount rate associated with our operating and finance leases as ofyears ended December 31, 2019:2020, 2019 and 2018, primarily due to the partnerships not being treated as a corporation for federal income tax purposes as discussed in Note 2. | | | | Weighted-average remaining lease term (in years):
| | Operating leases(1)
| 4.4 |
| Finance leases(2)
| 2.6 |
| Weighted-average discount rate: | | Operating leases(3)
| 5.9 | % | Finance leases(3)
| 7.3 | % |
| | (1) | Remaining terms vary from one year to 20 years. |
| | (2) | Remaining terms vary from one year to four years. |
| | (3) | We utilized discount rates ranging from 3.5% to 8.3% to estimate the discounted cash flows used in estimating our right-of-use assets and lease liabilities as of December 31, 2019, which were primarily based on our credit-adjusted collateralized incremental borrowing rate. |
The estimation of our right-of-use assets and lease liabilities requires us to make significant assumptions and judgments about the terms of the leases, variable payments, and discount rates. Our operating leases have renewal options to extend the leases from one year to 10 years at the end of each lease term, or terminate the leases at our sole discretion. In addition, our finance leases have options to purchase the lease property by the end of the lease term. We make significant assumptions on the likelihood on whether we will renew our leases or purchase the property at the end of the lease terms in determining the discounted cash flows to measure our right-of-use assets and lease liabilities. The estimation of variable lease payments in determining discounted cash flows, including those with usage-based costs, also requires us to make significant assumptions on the timing and nature of the variability of those payments based on the lease terms.
We recognize operating lease expense and amortize our right-of-use assets for our finance leases on a straight-line basis over the term of the respective leases. We have applied the practical expedient of not separating the lease and non-lease components for our leases where the predominant consideration paidDeferred income taxes related to the underlying operatingoperations of CEQP’s wholly-owned taxable subsidiaries, IPCH Acquisition Corp. and finance lease contracts relateCrestwood Gas Services GP LLC, and the impact of Texas Margin tax on our operations, and reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Components of our deferred income taxes at December 31, 2020 and 2019 are as follows (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | CEQP | | CMLP | | December 31, | | December 31, | | 2020 | | 2019 | | 2020 | | 2019 | | | | | | | | | | | | | | | | | Total deferred tax asset(1) | $ | 0.2 | | | $ | 0.2 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | | Total deferred tax liability(1) | (2.9) | | | (2.8) | | | (0.7) | | | (0.7) | | Net deferred tax liability | $ | (2.7) | | | $ | (2.6) | | | $ | (0.7) | | | $ | (0.7) | |
(1)Relates to the lease component.basis difference in the stock of a company.
Uncertain Tax Positions. The following table presentsWe evaluate the costs and sublease income associated withuncertainty in tax positions taken or expected to be taken in the course of preparing our operating and finance leasesconsolidated financial statements to determine whether the tax positions are more likely than not of being sustained by the applicable tax authority. Such tax positions, if any, would be recorded as a tax benefit or expense in the current year. We believe that there were no uncertain tax positions that would impact our results of operations for the yearyears ended December 31, 2020, 2019 (in millions):and 2018 and that no provision for income tax was required for these consolidated financial statements. However, our conclusions regarding the evaluation of uncertain tax positions are subject to review and may change based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof. | | | | | Operating leases: | | Operating lease expense(1)(2) | $ | 28.3 |
| Sublease income(3) | (1.0 | ) | Total operating lease expense, net | $ | 27.3 |
| Finance leases: | | Amortization of right-of-use assets(4) | $ | 3.6 |
| Interest on lease liabilities(5) | 0.7 |
| Total finance lease expense | $ | 4.3 |
|
| | (1) | Approximately $17.5 million is included in costs of product/services sold and $10.8 million is included in operations and maintenance expense on our consolidated statements of operations for the year ended December 31, 2019. |
| | (2) | Includes short-term and variable lease costs of approximately $3.7 million for the year ended December 31, 2019. |
| | (3) | Included in marketing, supply and logistics service revenues on our consolidated statements of operations. |
| | (4) | Included in depreciation, amortization and accretion expense on our consolidated statements of operations. |
| | (5) | Included in interest and debt expense, net on our consolidated statements of operations. |
The following table presents supplemental cash flow information for our operating and finance leases for the year ended December 31, 2019 (in millions):
| | | | | Cash paid for lease liabilities: | | Operating cash flows from operating leases | $ | 22.9 |
| Operating cash flows from finance leases | $ | 0.7 |
| Financing cash flows from finance leases | $ | 3.5 |
| Right-of-use assets obtained in exchange for lease obligations: | | Operating leases(1) | $ | 4.2 |
| Finance leases | $ | 1.8 |
|
| | (1) | Includes approximately $2.9 million of operating leases obtained from the Jackalope Acquisition, which is further discussed in Note 3. |
The following table presents the future minimum lease liabilities under Topic 842 for our leases as of December 31, 2019 for the next five years and in total thereafter (in millions):
| | | | | | | | | | | | | Year Ending December 31, | Operating Leases | | Finance Leases | | Total | 2020 | $ | 20.9 |
| | $ | 3.6 |
| | $ | 24.5 |
| 2021 | 16.3 |
| | 3.6 |
| | 19.9 |
| 2022 | 11.1 |
| | 1.9 |
| | 13.0 |
| 2023 | 6.7 |
| | 0.1 |
| | 6.8 |
| 2024 | 6.0 |
| | — |
| | 6.0 |
| Thereafter | 7.5 |
| | — |
| | 7.5 |
| Total lease payments | 68.5 |
| | 9.2 |
| | 77.7 |
| Less: Interest | 8.9 |
| | 0.8 |
| | 9.7 |
| Present value of lease liabilities | $ | 59.6 |
| | $ | 8.4 |
| | $ | 68.0 |
|
Purchase Commitments
We periodically enter into agreements with suppliers to purchase fixed quantities of NGLs, distillates, crude oil and natural gas at fixed prices. At December 31, 2019, the total of these firm purchase commitments was $792.4 million, of which approximately $712.3 million will occur over the course of the next twelve months. We also enter into non-binding agreements with suppliers to purchase quantities of NGLs, distillates and natural gas at variable prices at future dates at the then prevailing market prices.
We have entered into certain purchase commitments primarily related to our gathering and processing segment. At December 31, 2019, our total purchase commitments were approximately $126.6 million, which primarily relate to future growth projects and maintenance obligations in our gathering and processing segment. The purchases associated with these commitments are expected to occur over the next twelve months.
Guarantees and Indemnifications
We are involved in various joint ventures that sometimes require financial and performance guarantees. In a financial guarantee, we are obligated to make payments if the guaranteed party fails to make payments under, or violates the terms of, the financial arrangement. In a performance guarantee, we provide assurance that the guaranteed party will execute on the terms of the contract. If they do not, we are required to perform on their behalf. We also periodically provide indemnification arrangements related to assets or businesses we have sold. For a further description of our guarantees associated with our joint ventures, see Note 6.
Our potential exposure under guarantee and indemnification arrangements can range from a specified amount to an unlimited dollar amount, depending on the nature of the claim, specificity as to duration, and the particular transaction. As of December 31, 2019, we have no amounts accrued for these guarantees.
Note 1619 – Related Party Transactions
Crestwood Holdings indirectly owns both CEQP’s and CMLP’s general partner. The affiliates of Crestwood Holdings and its owners are considered CEQP’s and CMLP’s related parties. We enter into transactions with our affiliates within the ordinary course of business, and the services are based on the same terms as non-affiliates, including gas gathering and processing services under long-term contracts, product purchases and sales, marketing and various operating agreements. We also enter into transactions with our affiliates related to services provided on our expansion projects. During the years ended December 31, 20192020 and 2018,2019, we paid approximately $9.9$3.5 million and $7.2$9.9 million of capital expenditures to Applied Consultants, Inc., an affiliate of Crestwood Holdings. Below is a discussion of certain of our related party agreements.
Shared Services. CMLP shares common management, general and administrative and overhead costs with CEQP, and as such, CMLP allocates a portion of its costs to CEQP. CEQP grants long-term incentive awards under the Crestwood LTIP as discussed in Note 13 and, as such, CEQP allocates a portioncertain of its unit-based compensation costs to CMLP.
Stagecoach Gas Management Agreement. In May 2016, Crestwood Midstream Operations, LLC (Crestwood Midstream Operations), our wholly-owned subsidiary and Stagecoach Gas entered into a management agreement under which Crestwood Midstream Operations provides the management and operating services required by Stagecoach Gas’Gas’s facilities. The initial term of the agreement will expire in May 2021, and is automatically extended for three-year periods unless otherwise terminated pursuant to the terms of the agreement. Reimbursements received from Stagecoach Gas under this agreement are reflected as a reduction of operations and maintenance expenses at CEQP and CMLP in the table below.our consolidated statements of operations.
Tres PalaciosHoldings Operating Agreement. ACMLP Tres Manager, LLC, a consolidated subsidiary of Crestwood Midstream, entered into an operating agreement with Tres Palacios,Holdings, pursuant to which we assumed the responsibility of operatingoperate and maintaining themaintain their facilities as well as provide certain administrative and other general services identified in the agreement. Under the operating agreement, Tres PalaciosHoldings reimburses us for all costs incurred on its behalf. These reimbursements are reflected as a reduction of operations and maintenance expenses at CEQP and CMLP in the table below.our consolidated statements of operations.
Crestwood Permian Operating Agreement. In October 2016, Crestwood Midstream Operations entered into an operating agreement with Crestwood Permian, pursuant to which we provide operating services for Crestwood Permian’s facilities, as well as certain
administrative and other general services identified in the agreement. Under this operating agreement, Crestwood Permian reimburses us for all costs incurred on its behalf. These reimbursements are reflected as a reduction of operations and maintenance expenses at CEQP and CMLP in the table below.our consolidated statements of operations.
Jackalope Gas GatheringMarketing Services L.L.C.Agreement. On April 9, 2019, Crestwood Niobrara, our consolidated subsidiary, acquired Williams’Williams’s 50% equity interest in Jackalope, and as a result, Crestwood Niobrara controls and owns 100% of the equity interests in Jackalope. Prior to the acquisition of the remaining interest in Jackalope, a consolidated subsidiary of Crestwood MidstreamNiobrara entered into a marketing services agreement with Jackalope under which we provided marketing services for Jackalope as well as certain administrative and other general services identified in the agreement. Under this marketing services agreement, Jackalope reimbursed us for all costs incurred on its behalf. These reimbursements are reflected as a reduction of operations and maintenance expenses at CEQP and CMLP in the table below.our consolidated statements of operations.
The following table shows transactions with our affiliates which are reflected in our consolidated statements of operations for the years December 31, 2020, 2019, 2018 and 20172018 (in millions): | | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Revenues at CEQP and CMLP | $ | 2.9 |
| | $ | 1.0 |
| | $ | 1.8 |
| Costs of product/services sold at CEQP and CMLP(1) | $ | 45.4 |
| | $ | 134.7 |
| | $ | 15.3 |
| Operations and maintenance expenses at CEQP and CMLP(2) | $ | 25.9 |
| | $ | 28.7 |
| | $ | 22.3 |
| General and administrative expenses charged by CEQP to CMLP, net(3) | $ | 41.4 |
| | $ | 20.7 |
| | $ | 19.4 |
| General and administrative expenses at CEQP charged from Crestwood Holdings, net(4) | $ | (0.6 | ) | | $ | (2.7 | ) | | $ | (1.7 | ) |
| | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Revenues at CEQP and CMLP(1) | $ | 27.8 | | | $ | 2.9 | | | $ | 1.0 | | Costs of product/services sold at CEQP and CMLP(2) | $ | 21.0 | | | $ | 45.4 | | | $ | 134.7 | | Operations and maintenance expenses at CEQP and CMLP(3) | $ | 21.8 | | | $ | 25.9 | | | $ | 28.7 | | General and administrative expenses charged by CEQP to CMLP, net(4) | $ | 31.1 | | | $ | 41.4 | | | $ | 20.7 | | General and administrative expenses at CEQP charged to (from) Crestwood Holdings, net(5) | $ | 6.5 | | | $ | (0.6) | | | $ | (2.7) | |
| | (1) | (1)Includes (i) $27.8 million, $1.0 million and $1.0 million during the year ended December 31, 2020, 2019 and 2018 related to the sale of NGLs to a subsidiary of Crestwood Permian; (ii) $1.2 million during the year end December 31, 2019 related to the sale of natural gas to a subsidiary of Stagecoach Gas: and (iii) $0.7 million during the year ended December 31, 2019 related to the sale of NGLs to our affiliate, Westlake Chemical Corporation. (2)Includes (i) $20.0 million, $19.0 million and $56.1 million during the years ended December 31, 2020, 2019 and 2018 related to purchases of NGLs from a subsidiary of Crestwood Permian; (ii) $0.6 million during the year ended December 31, 2020 related to storage services provided by a subsidiary of Tres Holdings; (iii) $0.4 million, $23.9 million and $78.6 million during the years ended December 31, 2020, 2019 and 2018 related to an agency marketing agreement with Ascent Resources - Utica, LLC (Ascent); (iv) $0.2 million during the year ended December 31, 2019 related to purchases of NGLs from Blue Racer Midstream, LLC (Blue Racer); and (v) $2.3 million during the year ended December 31, 2019 related to purchases of natural gas from a subsidiary of Stagecoach Gas. Ascent and Blue Racer are affiliates of Crestwood Holdings for the respective periods presented. (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 described above. During the year ended December 31, 2020, we charged $6.6 million to Stagecoach Gas, $4.1 million to Tres Holdings and $11.1 million to Crestwood Permian. During the year ended December 31, 2019, we charged $7.5 million to Stagecoach Gas, $4.4 million to Tres Holdings, $13.5 million to Crestwood Permian and $0.5 million to Jackalope. During the year ended December 31, 2018, we charged $7.9 million to Stagecoach Gas, $3.8 million to Tres Holdings, $15.9 million to Crestwood Permian and $1.1 million to Jackalope. (4)Includes $35.1 million, and $56.1 million during the years ended December 31, 2019 and 2018 related to purchases of NGLs from a subsidiary of Crestwood Permian; (ii) $23.9 million and $78.6 million during the years ended December 31, 2019 and 2018 related to an agency marketing agreement with Ascent Resources - Utica, LLC (Ascent); (iii) $0.2 million during the year ended December 31, 2019 related to an agreement with Blue Racer Midstream, LLC (Blue Racer); (iv) $2.3 million during the year ended December 31, 2019 related to purchases of natural gas from a subsidiary of Stagecoach Gas; and (v) $15.3 million during the year ended December 31, 2017 related to natural gas purchases from Sabine Oil and Gas (Sabine). Ascent, Blue Racer and Sabine are affiliates of Crestwood Holdings for the respective periods presented. |
| | (2) | 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 year ended December 31, 2019, we charged $7.5 million to Stagecoach Gas, $4.4 million to Tres Palacios, $13.5 million to Crestwood Permian and $0.5 million to Jackalope. During the year ended December 31, 2018, we charged $7.9 million to Stagecoach Gas, $3.8 million to Tres Palacios, $15.9 million to Crestwood Permian and $1.1 million to Jackalope. During the year ended December 31, 2017, we charged $8.4 million to Stagecoach Gas, $3.5 million to Tres Palacios, $10.0 million to Crestwood Permian and $0.4 million to Jackalope. |
(3) Includes $45.1 million and $24.3 million and $22.4 million of net unit-based compensation charges allocated from CEQP to CMLP for the years ended December 31, 2020, 2019 2018 and 2017.2018. In addition, includes $4.0 million, $3.7 million $3.6 million and $3.0$3.6 million of CMLP’s general and administrative costs allocated to CEQP during the years ended December 31, 2020, 2019 2018 and 2017.
| | (4) | Includes $1.9 million, $4.2 million and $3.1 million of unit-based compensation charges allocated from Crestwood Holdings to CEQP and CMLP during the years ended December 31, 2019, 2018 and 2017. |
2018.
(5)Includes a $4.4 million reduction of unit-based compensation charges allocated from Crestwood Holdings to CEQP and CMLP during the year ended December 31, 2020 and $1.9 million and $4.2 million of unit-based compensation charges allocated from Crestwood Holdings to CEQP and CMLP during the years ended December 31, 2019 and 2018. In addition, includes $2.1 million, $1.3 million and $1.5 million of CEQP’s general and administrative costs allocated to Crestwood Holdings during the years ended December 31, 2020, 2019 and 2018.
The following table shows accounts receivable and accounts payable from our affiliates as of December 31, 20192020 and 20182019 (in millions): | | | | | | | | | | December 31, | | 2019 | | 2018 | Accounts receivable at CEQP and CMLP | $ | 7.3 |
| | $ | 4.1 |
| Accounts payable at CEQP | $ | 15.6 |
| | $ | 16.1 |
| Accounts payable at CMLP | $ | 13.1 |
| | $ | 13.6 |
|
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Accounts receivable at CEQP and CMLP | $ | 2.5 | | | $ | 7.3 | | Accounts payable at CEQP | $ | 7.5 | | | $ | 15.6 | | Accounts payable at CMLP | $ | 5.0 | | | $ | 13.1 | |
Note 17 – Segments
Financial Information
We have 3 operating and reportable segments: (i) gathering and processing operations; (ii) storage and transportation operations; and (iii) marketing, supply and logistics operations. Our corporate operations include all general and administrative expenses that are not allocated to our reportable segments. For a further description of our operating and reporting segments, see Note 1. We assess the performance of our operating segments based on EBITDA, which is defined as income before income taxes, plus debt-related costs (net interest and debt expense and loss on modification/extinguishment of debt) and depreciation, amortization and accretion expense.
Below is a reconciliation of CEQP’s net income (loss) to EBITDA (in millions):
| | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Net income (loss) | $ | 319.9 |
| | $ | 67.0 |
| | $ | (166.6 | ) | Add: | | | | | | Interest and debt expense, net | 115.4 |
| | 99.2 |
| | 99.4 |
| Loss on modification/extinguishment of debt | — |
| | 0.9 |
| | 37.7 |
| Provision (benefit) for income taxes | 0.3 |
| | 0.1 |
| | (0.8 | ) | Depreciation, amortization and accretion | 195.8 |
| | 168.7 |
| | 191.7 |
| EBITDA | $ | 631.4 |
| | $ | 335.9 |
| | $ | 161.4 |
|
Below is a reconciliation of CMLP’s net income (loss) to EBITDA (in millions):
| | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Net income (loss) | $ | 310.6 |
| | $ | 58.6 |
| | $ | (175.5 | ) | Add: | | | | | | Interest and debt expense, net | 115.4 |
| | 99.2 |
| | 99.4 |
| Loss on modification/extinguishment of debt | — |
| | 0.9 |
| | 37.7 |
| Provision for income taxes | 0.3 |
| | — |
| | — |
| Depreciation, amortization and accretion | 209.9 |
| | 181.4 |
| | 202.7 |
| EBITDA | $ | 636.2 |
| | $ | 340.1 |
| | $ | 164.3 |
|
The following tables summarize CEQP’s and CMLP’s reportable segment data for the years ended December 31, 2019, 2018 and 2017 (in millions). Intersegment revenues included in the following tables are accounted for as arms-length transactions that apply our revenue recognition policy described in Note 2. Included in earnings from unconsolidated affiliates below was approximately $42.1 million, $42.3 million and $32.5 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 years ended December 31, 2019, 2018 and 2017, respectively.
Crestwood Equity
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Revenues | $ | 835.8 |
| | $ | 20.4 |
| | $ | 2,325.7 |
| | $ | — |
| | $ | 3,181.9 |
| Intersegment revenues | 175.0 |
| | 14.2 |
| | (189.2 | ) | | — |
| | — |
| Costs of product/services sold | 526.1 |
| | 0.2 |
| | 2,018.6 |
| | — |
| | 2,544.9 |
| Operations and maintenance expense | 98.7 |
| | 4.0 |
| | 36.1 |
| | — |
| | 138.8 |
| General and administrative expense | — |
| | — |
| | — |
| | 103.4 |
| | 103.4 |
| Gain (loss) on long-lived assets, net | (6.2 | ) | | — |
| | (0.2 | ) | | 0.2 |
| | (6.2 | ) | Gain on acquisition | 209.4 |
| | — |
| | — |
| | — |
| | 209.4 |
| Earnings (loss) from unconsolidated affiliates, net | (2.1 | ) | | 34.9 |
| | — |
| | — |
| | 32.8 |
| Other income, net | — |
| | — |
| | — |
| | 0.6 |
| | 0.6 |
| EBITDA | $ | 587.1 |
| | $ | 65.3 |
| | $ | 81.6 |
| | $ | (102.6 | ) | | $ | 631.4 |
| Goodwill | $ | 126.2 |
| | $ | — |
| | $ | 92.7 |
| | $ | — |
| | $ | 218.9 |
| Total assets | $ | 3,715.3 |
| | $ | 980.2 |
| | $ | 624.7 |
| | $ | 29.1 |
| | $ | 5,349.3 |
| Purchases of property, plant and equipment | $ | 447.7 |
| | $ | 0.1 |
| | $ | 5.8 |
| | $ | 1.9 |
| | $ | 455.5 |
|
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2018 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Revenues | $ | 946.7 |
| | $ | 17.1 |
| | $ | 2,690.3 |
| | $ | — |
| | $ | 3,654.1 |
| Intersegment revenues | 192.4 |
| | 10.5 |
| | (202.9 | ) | | — |
| | — |
| Costs of product/services sold | 767.0 |
| | 0.2 |
| | 2,362.2 |
| | — |
| | 3,129.4 |
| Operations and maintenance expense | 71.7 |
| | 3.3 |
| | 50.8 |
| | — |
| | 125.8 |
| General and administrative expense | — |
| | — |
| | — |
| | 88.1 |
| | 88.1 |
| Gain (loss) on long-lived assets, net | (3.0 | ) | | — |
| | (27.3 | ) | | 1.7 |
| | (28.6 | ) | Earnings from unconsolidated affiliates, net | 22.5 |
| | 30.8 |
| | — |
| | — |
| | 53.3 |
| Other income, net | — |
| | — |
| | — |
| | 0.4 |
| | 0.4 |
| EBITDA | $ | 319.9 |
| | $ | 54.9 |
| | $ | 47.1 |
| | $ | (86.0 | ) | | $ | 335.9 |
| Goodwill | $ | 45.9 |
| | $ | — |
| | $ | 92.7 |
| | $ | — |
| | $ | 138.6 |
| Total assets | $ | 2,633.4 |
| | $ | 1,004.4 |
| | $ | 612.5 |
| | $ | 44.2 |
| | $ | 4,294.5 |
| Purchases of property, plant and equipment | $ | 294.7 |
| | $ | 0.6 |
| | $ | 5.6 |
| | $ | 4.6 |
| | $ | 305.5 |
|
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Revenues | $ | 1,688.2 |
| | $ | 37.2 |
| | $ | 2,155.5 |
| | $ | — |
| | $ | 3,880.9 |
| Intersegment revenues | 134.5 |
| | 6.7 |
| | (141.2 | ) | | — |
| | — |
| Costs of product/services sold | 1,480.8 |
| | 0.3 |
| | 1,893.6 |
| | — |
| | 3,374.7 |
| Operations and maintenance expense | 68.4 |
| | 4.2 |
| | 63.4 |
| | — |
| | 136.0 |
| General and administrative expense | — |
| | — |
| | — |
| | 96.5 |
| | 96.5 |
| Loss on long-lived assets | (14.4 | ) | | — |
| | (48.2 | ) | | (3.0 | ) | | (65.6 | ) | Goodwill impairment | — |
| | — |
| | (38.8 | ) | | — |
| | (38.8 | ) | Loss on contingent consideration | — |
| | (57.0 | ) | | — |
| | — |
| | (57.0 | ) | Earnings from unconsolidated affiliates, net | 18.9 |
| | 28.9 |
| | — |
| | — |
| | 47.8 |
| Other income, net | 0.8 |
| | — |
| | — |
| | 0.5 |
| | 1.3 |
| EBITDA | $ | 278.8 |
| | $ | 11.3 |
| | $ | (29.7 | ) | | $ | (99.0 | ) | | $ | 161.4 |
| Purchases of property, plant and equipment | $ | 162.7 |
| | $ | 1.3 |
| | $ | 17.7 |
| | $ | 6.7 |
| | $ | 188.4 |
|
Table of Contents
Crestwood Midstream
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Revenues | $ | 835.8 |
| | $ | 20.4 |
| | $ | 2,325.7 |
| | $ | — |
| | $ | 3,181.9 |
| Intersegment revenues | 175.0 |
| | 14.2 |
| | (189.2 | ) | | — |
| | — |
| Costs of product/services sold | 526.1 |
| | 0.2 |
| | 2,018.6 |
| | — |
| | 2,544.9 |
| Operations and maintenance expense | 98.7 |
| | 4.0 |
| | 36.1 |
| | — |
| | 138.8 |
| General and administrative expense | — |
| | — |
| | — |
| | 98.2 |
| | 98.2 |
| Gain (loss) on long-lived assets, net | (6.2 | ) | | — |
| | (0.2 | ) | | 0.2 |
| | (6.2 | ) | Gain on acquisition | 209.4 |
| | — |
| | — |
| | — |
| | 209.4 |
| Earnings (loss) from unconsolidated affiliates, net | (2.1 | ) | | 34.9 |
| | — |
| | — |
| | 32.8 |
| Other income, net | — |
| | — |
| | — |
| | 0.2 |
| | 0.2 |
| EBITDA | $ | 587.1 |
| | $ | 65.3 |
| | $ | 81.6 |
| | $ | (97.8 | ) | | $ | 636.2 |
| Goodwill | $ | 126.2 |
| | $ | — |
| | $ | 92.7 |
| | $ | — |
| | $ | 218.9 |
| Total assets | $ | 3,874.7 |
| | $ | 980.2 |
| | $ | 624.7 |
| | $ | 24.4 |
| | $ | 5,504.0 |
| Purchases of property, plant and equipment | $ | 447.7 |
| | $ | 0.1 |
| | $ | 5.8 |
| | $ | 1.9 |
| | $ | 455.5 |
|
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2018 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Revenues | $ | 946.7 |
| | $ | 17.1 |
| | $ | 2,690.3 |
| | $ | — |
| | $ | 3,654.1 |
| Intersegment revenues | 192.4 |
| | 10.5 |
| | (202.9 | ) | | — |
| | — |
| Costs of product/services sold | 767.0 |
| | 0.2 |
| | 2,362.2 |
| | — |
| | 3,129.4 |
| Operations and maintenance expense | 71.7 |
| | 3.3 |
| | 50.8 |
| | — |
| | 125.8 |
| General and administrative expense | — |
| | — |
| | — |
| | 83.5 |
| | 83.5 |
| Gain (loss) on long-lived assets, net | (3.0 | ) | | — |
| | (27.3 | ) | | 1.7 |
| | (28.6 | ) | Earnings from unconsolidated affiliates, net | 22.5 |
| | 30.8 |
| | — |
| | — |
| | 53.3 |
| EBITDA | $ | 319.9 |
| | $ | 54.9 |
| | $ | 47.1 |
| | $ | (81.8 | ) |
| $ | 340.1 |
| Goodwill | $ | 45.9 |
| | $ | — |
| | $ | 92.7 |
| | $ | — |
| | $ | 138.6 |
| Total assets | $ | 2,807.1 |
| | $ | 1,004.4 |
| | $ | 612.5 |
| | $ | 38.0 |
| | $ | 4,462.0 |
| Purchases of property, plant and equipment | $ | 294.7 |
| | $ | 0.6 |
| | $ | 5.6 |
| | $ | 4.6 |
| | $ | 305.5 |
|
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2017 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Corporate | | Total | Revenues | $ | 1,688.2 |
| | $ | 37.2 |
| | $ | 2,155.5 |
| | $ | — |
| | $ | 3,880.9 |
| Intersegment revenues | 134.5 |
| | 6.7 |
| | (141.2 | ) | | — |
| | — |
| Costs of product/services sold | 1,480.8 |
| | 0.3 |
| | 1,893.6 |
| | — |
| | 3,374.7 |
| Operations and maintenance expense | 68.4 |
| | 4.2 |
| | 63.4 |
| | — |
| | 136.0 |
| General and administrative expense | — |
| | — |
| | — |
| | 93.1 |
| | 93.1 |
| Loss on long-lived assets, net | (14.4 | ) | | — |
| | (48.2 | ) | | (3.0 | ) | | (65.6 | ) | Goodwill impairment | — |
| | — |
| | (38.8 | ) | | — |
| | (38.8 | ) | Loss on contingent consideration | — |
| | (57.0 | ) | | — |
| | — |
| | (57.0 | ) | Earnings from unconsolidated affiliates, net | 18.9 |
| | 28.9 |
| | — |
| | — |
| | 47.8 |
| Other income, net | 0.8 |
| | — |
| | — |
| | — |
| | 0.8 |
| EBITDA | $ | 278.8 |
| | $ | 11.3 |
| | $ | (29.7 | ) | | $ | (96.1 | ) | | $ | 164.3 |
| Purchases of property, plant and equipment | $ | 162.7 |
| | $ | 1.3 |
| | $ | 17.7 |
| | $ | 6.7 |
| | $ | 188.4 |
|
Major Customers
For the year ended December 31, 2019, we had revenues from British Petroleum and its affiliates of approximately $333.9 million, reflected primarily in our Marketing, Supply and Logistics segment, which exceeded 10% of the total consolidated revenues at CEQP and CMLP. No customer accounted for 10% or more of our total consolidated revenues for the years ended December 31, 2018 or 2017 at CEQP or CMLP.
Note 18- 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 Topic 606 totaled $225.0 million and $209.7 million for both CEQP and CMLP at December 31, 2019 and 2018, 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 17 years.
The following table provides a summary of the opening and closing balances of our contract assets and contract liabilities (in millions):
| | | | | | | | | | | | December 31, |
| | 2019 | | 2018 | Contract assets (non-current) | | $ | 1.2 |
| | $ | 1.0 |
| Contract liabilities (current)(1) | | $ | 8.8 |
| | $ | 12.0 |
| Contract liabilities (non-current)(1) | | $ | 144.7 |
| | $ | 65.4 |
|
| | (1) | During the year ended December 31, 2019, we recognized revenues of approximately $13.3 million that were previously included in contract liabilities (current) at December 31, 2018. The remaining change in our contract liabilities during the year ended December 31, 2019 partially related to approximately $21.5 million of deferred revenues recorded in the purchase price allocation for the Jackalope Acquisition described in more detail in Note 3, and the remainder related primarily 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 December 31, 2019 (in millions):
| | | | | 2020 | $ | 99.4 |
| 2021 | 86.2 |
| 2022 | 79.3 |
| 2023 | 7.4 |
| 2024 | 3.3 |
| Total | $ | 275.6 |
|
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 years ended December 31, 2019 and 2018 (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.
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Intersegment Elimination | | Total | Revenues: | | | | | | | | | | Topic 606 revenues | | | | | | | | | | Gathering | | | | | | | | | | Natural gas | $ | 163.2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 163.2 |
| Crude oil | 75.0 |
| | — |
| | — |
| | — |
| | 75.0 |
| Water | 79.6 |
| | — |
| | — |
| | — |
| | 79.6 |
| Processing | | | | | | | | | | Natural gas | 28.9 |
| | — |
| | — |
| | — |
| | 28.9 |
| Compression | | | | | | | | | | Natural gas | 24.9 |
| | — |
| | — |
| | — |
| | 24.9 |
| Storage | | | | | | | | | | Crude oil | 1.9 |
| | 5.4 |
| | — |
| | (2.3 | ) | | 5.0 |
| NGLs | — |
| | — |
| | 6.3 |
| | — |
| | 6.3 |
| Pipeline | | | | | | | | | | Crude oil | — |
| | 7.9 |
| | — |
| | (2.7 | ) | | 5.2 |
| Transportation | | | | | | | | | | Crude oil | 7.0 |
| | — |
| | 5.8 |
| | (0.1 | ) | | 12.7 |
| NGLs | — |
| | — |
| | 11.7 |
| | — |
| | 11.7 |
| Water | — |
| | — |
| | 0.2 |
| | — |
| | 0.2 |
| Rail Loading | | | | | | | | | | Crude oil | — |
| | 16.7 |
| | — |
| | (5.7 | ) | | 11.0 |
| Product Sales | | | | | | | | | | Natural gas | 56.8 |
| | — |
| | 72.3 |
| | (33.4 | ) | | 95.7 |
| Crude oil | 532.1 |
| | — |
| | 1,315.6 |
| | (121.1 | ) | | 1,726.6 |
| NGLs | 41.4 |
| | — |
| | 659.3 |
| | (20.0 | ) | | 680.7 |
| Other | — |
| | 4.6 |
| | 1.2 |
| | (3.9 | ) | | 1.9 |
| Total Topic 606 revenues | 1,010.8 |
| | 34.6 |
| | 2,072.4 |
| | (189.2 | ) | | 2,928.6 |
| Non-Topic 606 revenues(1) | — |
| | — |
| | 253.3 |
| | — |
| | 253.3 |
| Total revenues | $ | 1,010.8 |
| | $ | 34.6 |
| | $ | 2,325.7 |
| | $ | (189.2 | ) | | $ | 3,181.9 |
|
| | (1) | Represents revenues primarily related to our commodity-based derivatives. See Note 7 for additional information related to our price risk management activities. |
| | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2018 | | Gathering and Processing | | Storage and Transportation | | Marketing, Supply and Logistics | | Intersegment Elimination | | Total | Revenues: | | | | | | | | | | Topic 606 revenues | | | | | | | | | | Gathering | | | | | | | | | | Natural gas | $ | 134.9 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 134.9 |
| Crude oil | 38.8 |
| | — |
| | — |
| | — |
| | 38.8 |
| Water | 58.0 |
| | — |
| | — |
| | — |
| | 58.0 |
| Processing | | | | | | | | | | Natural gas | 10.7 |
| | — |
| | — |
| | — |
| | 10.7 |
| NGLs | — |
| | — |
| | 6.1 |
| | — |
| | 6.1 |
| Compression | | | | | | | | | | Natural gas | 29.1 |
| | — |
| | — |
| | — |
| | 29.1 |
| Storage | | | | | | | | | | Crude oil | 1.8 |
| | 4.2 |
| | — |
| | (1.5 | ) | | 4.5 |
| NGLs | — |
| | — |
| | 8.6 |
| | — |
| | 8.6 |
| Pipeline | | | | | | | | | | Crude oil | — |
| | 7.1 |
| | — |
| | (2.3 | ) | | 4.8 |
| Transportation | | | | | | | | | | Crude oil | 2.9 |
| | — |
| | 5.9 |
| | — |
| | 8.8 |
| NGLs | — |
| | — |
| | 26.9 |
| | — |
| | 26.9 |
| Water | — |
| | — |
| | 0.3 |
| | — |
| | 0.3 |
| Rail Loading | | | | | | | | | | Crude oil | — |
| | 14.3 |
| | 0.2 |
| | (5.2 | ) | | 9.3 |
| NGLs | — |
| | — |
| | 3.1 |
| | — |
| | 3.1 |
| Product Sales | | | | | | | | | | Natural gas | 55.8 |
| | — |
| | 70.9 |
| | (16.6 | ) | | 110.1 |
| Crude oil | 722.9 |
| | — |
| | 978.0 |
| | (151.3 | ) | | 1,549.6 |
| NGLs | 84.2 |
| | — |
| | 1,247.0 |
| | (24.5 | ) | | 1,306.7 |
| Other | — |
| | 2.0 |
| | — |
| | (1.5 | ) | | 0.5 |
| Total Topic 606 revenues | 1,139.1 |
| | 27.6 |
| | 2,347.0 |
| | (202.9 | ) | | 3,310.8 |
| Non-Topic 606 revenues(1) | — |
| | — |
| | 343.3 |
| | — |
| | 343.3 |
| Total revenues | $ | 1,139.1 |
| | $ | 27.6 |
| | $ | 2,690.3 |
| | $ | (202.9 | ) | | $ | 3,654.1 |
|
| | (1) | Represents revenues related to our commodity-based derivatives. See Note 7 for additional information related to our price risk management activities. |
Note 19 – Crestwood Midstream Condensed Consolidating Financial Information
Crestwood Midstream is a holding company (Parent) and owns no operating assets and has no significant operations independent of its subsidiaries. Obligations under Crestwood Midstream’s senior notes and its credit facility are jointly and severally guaranteed by substantially all of its subsidiaries, except for Crestwood Infrastructure, Crestwood Niobrara, Crestwood Northeast, PRBIC and Tres Holdings and their respective subsidiaries (collectively, Non-Guarantor Subsidiaries). Crestwood Midstream Finance Corp., the co-issuer of the senior notes, is Crestwood Midstream’s 100% owned subsidiary and has no material assets, operations, revenues or cash flows other than those related to its service as co-issuer of the Crestwood Midstream senior notes.
The tables below present condensed consolidating financial statements for Crestwood Midstream as Parent on a stand-alone, unconsolidated basis, and Crestwood Midstream’s combined guarantor and combined non-guarantor subsidiaries as of and for the years ended December 31, 2019, 2018 and 2017. The financial information may not necessarily be indicative of the results of operations, cash flows or financial position had the subsidiaries operated as independent entities.
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Balance Sheet | December 31, 2019 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Assets | | | | | | | | | | Current assets: | | | | | | | | | | Cash | $ | 1.8 |
| | $ | — |
| | $ | 23.6 |
| | $ | — |
| | $ | 25.4 |
| Accounts receivable | — |
| | 229.1 |
| | 12.8 |
| | — |
| | 241.9 |
| Inventory | — |
| | 53.7 |
| | — |
| | — |
| | 53.7 |
| Other current assets | — |
| | 54.6 |
| | 0.2 |
| | — |
| | 54.8 |
| Total current assets | 1.8 |
| | 337.4 |
| | 36.6 |
| | — |
| | 375.8 |
| | | | | | | | | | | Property, plant and equipment, net | — |
| | 2,331.3 |
| | 736.2 |
| | — |
| | 3,067.5 |
| Goodwill and intangible assets, net | — |
| | 650.7 |
| | 373.4 |
| | — |
| | 1,024.1 |
| Operating lease right-of-use assets, net | — |
| | 51.0 |
| | 2.8 |
| | — |
| | 53.8 |
| Investments in consolidated affiliates | 4,451.6 |
| | — |
| | — |
| | (4,451.6 | ) | | — |
| Investments in unconsolidated affiliates | — |
| | — |
| | 980.4 |
| | — |
| | 980.4 |
| Other non-current assets | — |
| | 1.9 |
| | 0.5 |
| | — |
| | 2.4 |
| Total assets | $ | 4,453.4 |
| | $ | 3,372.3 |
| | $ | 2,129.9 |
| | $ | (4,451.6 | ) | | $ | 5,504.0 |
| | | | | | | | | | | Liabilities and capital | | | | | | | | | | Current liabilities: | | | | | | | | | | Accounts payable | $ | — |
| | $ | 175.9 |
| | $ | 10.7 |
| | $ | — |
| | $ | 186.6 |
| Other current liabilities | 25.8 |
| | 123.9 |
| | 17.6 |
| | — |
| | 167.3 |
| Total current liabilities | 25.8 |
| | 299.8 |
| | 28.3 |
| | — |
| | 353.9 |
| | | | | | | | | | | Long-term liabilities: | | | | | | | | | | Long-term debt, less current portion | 2,328.3 |
| | — |
| | — |
| | — |
| | 2,328.3 |
| Other long-term liabilities | — |
| | 174.8 |
| | 120.8 |
| | — |
| | 295.6 |
| Deferred income taxes | — |
| | 0.7 |
| | — |
| | — |
| | 0.7 |
| Total liabilities | 2,354.1 |
| | 475.3 |
| | 149.1 |
| | — |
| | 2,978.5 |
| | | | | | | | | | | Interest of non-controlling partner in subsidiary | — |
| | — |
| | 426.2 |
| | — |
| | 426.2 |
| Partners’ capital | 2,099.3 |
| | 2,897.0 |
| | 1,554.6 |
| | (4,451.6 | ) | | 2,099.3 |
| Total liabilities and capital | $ | 4,453.4 |
| | $ | 3,372.3 |
| | $ | 2,129.9 |
| | $ | (4,451.6 | ) | | $ | 5,504.0 |
|
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Balance Sheet | December 31, 2018 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Assets | | | | | | | | | | Current assets: | | | | | | | | | | Cash | $ | 0.2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 0.2 |
| Restricted cash | 16.3 |
| | — |
| | — |
| | — |
| | 16.3 |
| Accounts receivable | — |
| | 246.3 |
| | 19.9 |
| | (16.3 | ) | | 249.9 |
| Inventory | — |
| | 64.6 |
| | — |
| | — |
| | 64.6 |
| Other current assets | — |
| | 46.0 |
| | — |
| | — |
| | 46.0 |
| Total current assets | 16.5 |
| | 356.9 |
| | 19.9 |
| | (16.3 | ) | | 377.0 |
| | | | | | | | | | | Property, plant and equipment, net | — |
| | 2,202.3 |
| | — |
| | — |
| | 2,202.3 |
| Goodwill and intangible assets, net | — |
| | 692.4 |
| | — |
| | — |
| | 692.4 |
| Investments in consolidated affiliates | 3,800.4 |
| | — |
| | — |
| | (3,800.4 | ) | | — |
| Investments in unconsolidated affiliates | — |
| | — |
| | 1,188.2 |
| | — |
| | 1,188.2 |
| Other non-current assets | — |
| | 2.1 |
| | — |
| | — |
| | 2.1 |
| Total assets | $ | 3,816.9 |
| | $ | 3,253.7 |
| | $ | 1,208.1 |
| | $ | (3,816.7 | ) | | $ | 4,462.0 |
| | | | | | | | | | | Liabilities and partners’ capital | | | | | | | | | | Current liabilities: | | | | | | | | | | Accounts payable | $ | 16.3 |
| | $ | 210.5 |
| | $ | — |
| | $ | (16.3 | ) | | $ | 210.5 |
| Other current liabilities | 20.0 |
| | 81.8 |
| | 16.2 |
| | — |
| | 118.0 |
| Total current liabilities | 36.3 |
| | 292.3 |
| | 16.2 |
| | (16.3 | ) | | 328.5 |
| | | | | | | | | | | Long-term liabilities: | | | | | | | | | | Long-term debt, less current portion | 1,752.4 |
| | — |
| | — |
| | — |
| | 1,752.4 |
| Other long-term liabilities | — |
| | 114.0 |
| | 57.0 |
| | — |
| | 171.0 |
| Deferred income taxes | — |
| | 0.6 |
| | — |
| | — |
| | 0.6 |
| Total liabilities | 1,788.7 |
| | 406.9 |
| | 73.2 |
| | (16.3 | ) | | 2,252.5 |
| | | | | | | | | | | Partners’ capital | 2,028.2 |
| | 2,846.8 |
| | 953.6 |
| | (3,800.4 | ) | | 2,028.2 |
| Interest of non-controlling partner in subsidiary | — |
| | — |
| | 181.3 |
| | — |
| | 181.3 |
| Total partners’ capital | 2,028.2 |
| | 2,846.8 |
| | 1,134.9 |
| | (3,800.4 | ) | | 2,209.5 |
| Total liabilities and partners’ capital | $ | 3,816.9 |
| | $ | 3,253.7 |
| | $ | 1,208.1 |
| | $ | (3,816.7 | ) | | $ | 4,462.0 |
|
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Statements of Operations | Year Ended December 31, 2019 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Revenues | $ | — |
| | $ | 3,111.8 |
| | $ | 70.1 |
| | $ | — |
| | $ | 3,181.9 |
| Costs of product/services sold | — |
| | 2,544.9 |
| | — |
| | — |
| | 2,544.9 |
| Operating expenses and other: | | | | | | | | | | Operations and maintenance | — |
| | 120.0 |
| | 18.8 |
| | — |
| | 138.8 |
| General and administrative | 51.2 |
| | 47.0 |
| | — |
| | — |
| | 98.2 |
| Depreciation, amortization and accretion | — |
| | 179.4 |
| | 30.5 |
| | — |
| | 209.9 |
| Loss on long-lived assets, net | — |
| | 6.2 |
| | — |
| | — |
| | 6.2 |
| Gain on acquisition | — |
| | — |
| | (209.4 | ) | | — |
| | (209.4 | ) | | 51.2 |
| | 352.6 |
| | (160.1 | ) | | — |
| | 243.7 |
| Operating income (loss) | (51.2 | ) | | 214.3 |
| | 230.2 |
| | — |
| | 393.3 |
| Earnings from unconsolidated affiliates, net | — |
| | — |
| | 32.8 |
| | — |
| | 32.8 |
| Interest and debt income (expense), net | (115.5 | ) | | — |
| | 0.1 |
| | — |
| | (115.4 | ) | Other income, net | — |
| | 0.2 |
| | — |
| | — |
| | 0.2 |
| Equity in net income (loss) of subsidiaries | 442.5 |
| | — |
| | — |
| | (442.5 | ) | | — |
| Income (loss) before income taxes | 275.8 |
| | 214.5 |
| | 263.1 |
| | (442.5 | ) | | 310.9 |
| Provision for income taxes | — |
| | (0.3 | ) | | — |
| | — |
| | (0.3 | ) | Net income (loss) | 275.8 |
| | 214.2 |
| | 263.1 |
| | (442.5 | ) | | 310.6 |
| Net income attributable to non-controlling partner | — |
| | — |
| | 34.8 |
| | — |
| | 34.8 |
| Net income (loss) attributable to Crestwood Midstream Partners LP | $ | 275.8 |
| | $ | 214.2 |
| | $ | 228.3 |
| | $ | (442.5 | ) | | $ | 275.8 |
|
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Statements of Operations | Year Ended December 31, 2018 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Revenues | $ | — |
| | $ | 3,654.1 |
| | $ | — |
| | $ | — |
| | $ | 3,654.1 |
| Costs of product/services sold | — |
| | 3,129.4 |
| | — |
| | — |
| | 3,129.4 |
| Operating expenses and other: | | | | | | | | | | Operations and maintenance | — |
| | 125.8 |
| | — |
| | — |
| | 125.8 |
| General and administrative | 55.1 |
| | 28.4 |
| | — |
| | — |
| | 83.5 |
| Depreciation, amortization and accretion | — |
| | 181.4 |
| | — |
| | — |
| | 181.4 |
| Loss on long-lived assets, net | — |
| | 28.6 |
| | — |
| | — |
| | 28.6 |
| | 55.1 |
| | 364.2 |
| | — |
| | — |
| | 419.3 |
| Operating income (loss) | (55.1 | ) | | 160.5 |
| | — |
| | — |
| | 105.4 |
| Earnings from unconsolidated affiliates, net | — |
| | — |
| | 53.3 |
| | — |
| | 53.3 |
| Interest and debt expense, net | (99.2 | ) | | — |
| | — |
| | — |
| | (99.2 | ) | Loss on modification/extinguishment of debt | (0.9 | ) | | — |
| | — |
| | — |
| | (0.9 | ) | Equity in net income (loss) of subsidiaries | 197.6 |
| | — |
| | — |
| | (197.6 | ) | | — |
| Net income (loss) | 42.4 |
| | 160.5 |
| | 53.3 |
| | (197.6 | ) | | 58.6 |
| Net income attributable to non-controlling partner | — |
| | — |
| | 16.2 |
| | — |
| | 16.2 |
| Net income (loss) attributable to Crestwood Midstream Partners LP | $ | 42.4 |
| | $ | 160.5 |
| | $ | 37.1 |
| | $ | (197.6 | ) | | $ | 42.4 |
|
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners | Condensed Consolidating Statements of Operations | Year Ended December 31, 2017 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Revenues | $ | — |
| | $ | 3,880.9 |
| | $ | — |
| | $ | — |
| | $ | 3,880.9 |
| Costs of product/services sold | — |
| | 3,374.7 |
| | — |
| | — |
| | 3,374.7 |
| Operating expenses and other: | | | | | | | | | | Operations and maintenance | — |
| | 136.0 |
| | — |
| | — |
| | 136.0 |
| General and administrative | 67.6 |
| | 25.5 |
| | — |
| | — |
| | 93.1 |
| Depreciation, amortization and accretion | — |
| | 202.7 |
| | — |
| | — |
| | 202.7 |
| Loss on long-lived assets, net | — |
| | 65.6 |
| | — |
| | — |
| | 65.6 |
| Goodwill impairment | — |
| | 38.8 |
| | — |
| | — |
| | 38.8 |
| Loss on contingent consideration | — |
| | — |
| | 57.0 |
| | — |
| | 57.0 |
| | 67.6 |
| | 468.6 |
| | 57.0 |
| | — |
| | 593.2 |
| Operating income (loss) | (67.6 | ) | | 37.6 |
| | (57.0 | ) | | — |
| | (87.0 | ) | Earnings from unconsolidated affiliates, net | — |
| | — |
| | 47.8 |
| | — |
| | 47.8 |
| Interest and debt expense, net | (99.4 | ) | | — |
| | — |
| | — |
| | (99.4 | ) | Loss on modification/extinguishment of debt | (37.7 | ) | | — |
| | — |
| | — |
| | (37.7 | ) | Other income, net | — |
| | 0.8 |
| | — |
| | — |
| | 0.8 |
| Equity in net income (loss) of subsidiaries | 3.9 |
| | — |
| | — |
| | (3.9 | ) | | — |
| Net income (loss) | (200.8 | ) | | 38.4 |
| | (9.2 | ) | | (3.9 | ) | | (175.5 | ) | Net income attributable to non-controlling partner | — |
| | — |
| | 25.3 |
| | — |
| | 25.3 |
| Net income (loss) attributable to Crestwood Midstream Partners LP | $ | (200.8 | ) | | $ | 38.4 |
| | $ | (34.5 | ) | | $ | (3.9 | ) | | $ | (200.8 | ) |
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Statements of Cash Flows | Year Ended December 31, 2019 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Cash flows from operating activities: | $ | (171.0 | ) | | $ | 469.1 |
| | $ | 126.0 |
| | $ | — |
| | $ | 424.1 |
| | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | Acquisition, net of cash acquired | — |
| | — |
| | (462.1 | ) | | — |
| | (462.1 | ) | Purchases of property, plant and equipment | — |
| | (258.1 | ) | | (197.4 | ) | | — |
| | (455.5 | ) | Investment in unconsolidated affiliates | — |
| | — |
| | (61.3 | ) | | — |
| | (61.3 | ) | Capital distributions from unconsolidated affiliates | — |
| | — |
| | 35.5 |
| | — |
| | 35.5 |
| Net proceeds from sale of assets | — |
| | 0.8 |
| | — |
| | — |
| | 0.8 |
| Other | — |
| | (1.1 | ) | | — |
| | — |
| | (1.1 | ) | Capital contributions to consolidated affiliates | (203.8 | ) | | — |
| | — |
| | 203.8 |
| | — |
| Net cash provided by (used in) investing activities | (203.8 | ) | | (258.4 | ) | | (685.3 | ) | | 203.8 |
| | (943.7 | ) | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | Proceeds from the issuance of long-term debt | 2,307.3 |
| | — |
| | — |
| | — |
| | 2,307.3 |
| Payments on long-term debt | (1,728.6 | ) | | (0.9 | ) | | — |
| | — |
| | (1,729.5 | ) | Payments on finance leases | — |
| | (3.5 | ) | | — |
| | — |
| | (3.5 | ) | Payments for debt-related deferred costs | (9.0 | ) | | — |
| | — |
| | — |
| | (9.0 | ) | Net proceeds from the issuance of non-controlling interest | — |
| | — |
| | 235.0 |
| | — |
| | 235.0 |
| Distributions to partners | (235.8 | ) | | — |
| | (25.0 | ) | | — |
| | (260.8 | ) | Contributions from parent | — |
| | — |
| | 203.8 |
| | (203.8 | ) | | — |
| Taxes paid for unit-based compensation vesting | — |
| | (11.0 | ) | | — |
| | — |
| | (11.0 | ) | Change in intercompany balances | 26.2 |
| | (195.3 | ) | | 169.1 |
| | — |
| | — |
| Net cash provided by (used in) financing activities | 360.1 |
| | (210.7 | ) | | 582.9 |
| | (203.8 | ) | | 528.5 |
| | | | | | | | | | | Net change in cash and restricted cash | (14.7 | ) | | — |
| | 23.6 |
| | — |
| | 8.9 |
| Cash and restricted cash at beginning of period | 16.5 |
| | — |
| | — |
| | — |
| | 16.5 |
| Cash and restricted cash at end of period | $ | 1.8 |
| | $ | — |
| | $ | 23.6 |
| | $ | — |
| | $ | 25.4 |
|
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Statements of Cash Flows | Year Ended December 31, 2018 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Cash flows from operating activities: | $ | (131.7 | ) | | $ | 339.2 |
| | $ | 53.0 |
| | $ | — |
| | $ | 260.5 |
| | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | Purchases of property, plant and equipment | — |
| | (305.5 | ) | | — |
| | — |
| | (305.5 | ) | Investment in unconsolidated affiliates | — |
| | — |
| | (64.4 | ) | | — |
| | (64.4 | ) | Capital distributions from unconsolidated affiliates | — |
| | — |
| | 49.2 |
| | — |
| | 49.2 |
| Net proceeds from sale of assets | — |
| | 79.5 |
| | — |
| | — |
| | 79.5 |
| Capital distributions from consolidated affiliates | 27.9 |
| | — |
| | — |
| | (27.9 | ) | | — |
| Net cash provided by (used in) investing activities | 27.9 |
| | (226.0 | ) | | (15.2 | ) | | (27.9 | ) | | (241.2 | ) | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | Proceeds from the issuance of long-term debt | 2,274.8 |
| | — |
| | — |
| | — |
| | 2,274.8 |
| Payments on long-term debt | (2,014.8 | ) | | (0.9 | ) | | — |
| | — |
| | (2,015.7 | ) | Payments on capital leases | — |
| | (1.6 | ) | | — |
| | — |
| | (1.6 | ) | Payments for deferred financing costs | (5.7 | ) | | — |
| | — |
| | — |
| | (5.7 | ) | Distributions to partners | (238.4 | ) | | — |
| | (9.9 | ) | | — |
| | (248.3 | ) | Distributions to parent | — |
| | — |
| | (27.9 | ) | | 27.9 |
| | — |
| Taxes paid for unit-based compensation vesting | — |
| | (7.4 | ) | | — |
| | — |
| | (7.4 | ) | Change in intercompany balances | 103.4 |
| | (103.4 | ) | | — |
| | — |
| | — |
| Other | — |
| | 0.1 |
| | — |
| | — |
| | 0.1 |
| Net cash provided by (used in) financing activities | 119.3 |
| | (113.2 | ) | | (37.8 | ) | | 27.9 |
| | (3.8 | ) | | | | | | | | | | | Net change in cash and restricted cash | 15.5 |
| | — |
| | — |
| | — |
| | 15.5 |
| Cash and restricted cash at beginning of period | 1.0 |
| | — |
| | — |
| | — |
| | 1.0 |
| Cash and restricted cash at end of period | $ | 16.5 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 16.5 |
|
| | | | | | | | | | | | | | | | | | | | | Crestwood Midstream Partners LP | Condensed Consolidating Statements of Cash Flows | December 31, 2017 | (in millions) | | Parent | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated | Cash flows from operating activities: | $ | (162.3 | ) | | $ | 379.2 |
| | $ | 45.3 |
| | $ | — |
| | $ | 262.2 |
| | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | Purchases of property, plant and equipment | — |
| | (188.4 | ) | | — |
| | — |
| | (188.4 | ) | Investment in unconsolidated affiliates | — |
| | — |
| | (58.0 | ) | | — |
| | (58.0 | ) | Capital distributions from unconsolidated affiliates | — |
| | — |
| | 59.9 |
| | — |
| | 59.9 |
| Net proceeds from sale of assets | — |
| | 225.2 |
| | — |
| | — |
| | 225.2 |
| Capital contributions to consolidated affiliates | 4.3 |
| | — |
| | — |
| | (4.3 | ) | | — |
| Net cash provided by (used in) investing activities | 4.3 |
| | 36.8 |
| | 1.9 |
| | (4.3 | ) | | 38.7 |
| | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | Proceeds from the issuance of long-term debt | 2,838.6 |
| | — |
| | — |
| | — |
| | 2,838.6 |
| Payments on long-term debt | (2,912.6 | ) | | (1.3 | ) | | — |
| | — |
| | (2,913.9 | ) | Payments on capital leases | — |
| | (2.7 | ) | | — |
| | — |
| | (2.7 | ) | Payments for deferred financing costs | (1.0 | ) | | — |
| | — |
| | — |
| | (1.0 | ) | Redemption of non-controlling interest | — |
| | — |
| | (202.7 | ) | | — |
| | (202.7 | ) | Net proceeds from issuance of non-controlling interest | — |
| | — |
| | 175.0 |
| | — |
| | 175.0 |
| Distributions to partners | (174.0 | ) | | — |
| | (15.2 | ) | | — |
| | (189.2 | ) | Distributions to parent | — |
| | — |
| | (4.3 | ) | | 4.3 |
| | — |
| Taxes paid for unit-based compensation vesting | — |
| | (5.5 | ) | | — |
| | — |
| | (5.5 | ) | Change in intercompany balances | 406.7 |
| | (406.7 | ) | | — |
| | — |
| | — |
| Other | — |
| | 0.2 |
| | — |
| | — |
| | 0.2 |
| Net cash provided by (used in) financing activities | 157.7 |
| | (416.0 | ) | | (47.2 | ) | | 4.3 |
| | (301.2 | ) | | | | | | | | | | | Net change in cash and restricted cash | (0.3 | ) | | — |
| | — |
| | — |
| | (0.3 | ) | Cash and restricted cash at beginning of period | 1.3 |
| | — |
| | — |
| | — |
| | 1.3 |
| Cash and restricted cash at end of period | $ | 1.0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1.0 |
|
Supplemental Selected Quarterly Financial Information (Unaudited)
Summarized unaudited quarterly financial data is presented below (in millions, except per unit information):
| | | | | | | | | | | | | | | | | | | | | | | | Crestwood Equity | Quarter Ended | | March 31 | | June 30 | | September 30 | | December 31 | 2020 | | | | | | | | Revenues | $ | 727.9 | | | $ | 352.7 | | | $ | 519.2 | | | $ | 654.5 | | Operating income(1) | 3.6 | | | 1.1 | | | 27.8 | | | 54.3 | | | | | | | | | | Earnings from unconsolidated affiliates, net | 5.5 | | | 8.4 | | | 10.5 | | | 8.1 | | Net income (loss) | (23.4) | | | (24.3) | | | 4.6 | | | 27.8 | | Net income (loss) attributable to partners | (48.3) | | | (49.5) | | | (20.7) | | | 2.3 | | Net income (loss) per limited partner unit: | | | | | | | | Basic and Diluted | $ | (0.66) | | | $ | (0.68) | | | $ | (0.28) | | | $ | 0.03 | | | | | | | | | | 2019 | | | | | | | | Revenues | $ | 835.2 | | | $ | 683.4 | | | $ | 823.6 | | | $ | 839.7 | | Operating income(2) | 32.0 | | | 249.3 | | | 53.7 | | | 67.2 | | | | | | | | | | Earnings from unconsolidated affiliates, net | 6.9 | | | 3.7 | | | 10.4 | | | 11.8 | | Net income | 14.1 | | | 225.0 | | | 33.6 | | | 47.2 | | Net income (loss) attributable to partners | (4.9) | | | 199.4 | | | 8.7 | | | 21.8 | | Net income (loss) per limited partner unit: | | | | | | | | Basic | $ | (0.07) | | | $ | 2.76 | | | $ | 0.12 | | | $ | 0.30 | | Diluted | $ | (0.07) | | | $ | 2.58 | | | $ | 0.12 | | | $ | 0.28 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Crestwood Midstream | Quarter Ended | | March 31 | | June 30 | | September 30 | | December 31 | 2020 | | | | | | | | Revenues | $ | 727.9 | | | $ | 352.7 | | | $ | 519.2 | | | $ | 654.5 | | Operating income (loss)(1) | 1.5 | | | (1.4) | | | 25.5 | | | 51.9 | | | | | | | | | | Earnings from unconsolidated affiliates, net | 5.5 | | | 8.4 | | | 10.5 | | | 8.1 | | Net income (loss) | (25.6) | | | (26.8) | | | 2.3 | | | 26.7 | | Net income (loss) attributable to partner | (35.5) | | | (37.0) | | | (8.0) | | | 16.3 | | 2019 | | | | | | | | Revenues | $ | 835.2 | | | $ | 683.4 | | | $ | 823.6 | | | $ | 839.7 | | Operating income(2) | 29.6 | | | 247.3 | | | 51.3 | | | 65.1 | | | | | | | | | | Earnings from unconsolidated affiliates, net | 6.9 | | | 3.7 | | | 10.4 | | | 11.8 | | Net income | 11.6 | | | 222.9 | | | 31.2 | | | 44.9 | | Net income attributable to partner | 7.6 | | | 212.3 | | | 21.3 | | | 34.6 | |
(1)Amount for the three months ended March 31, 2020 includes a goodwill impairment of $80.3 million related to our Powder River Basin reporting unit. See Note 2 for a further discussion of this goodwill impairment. Amount for the three months ended September 30, 2020 includes a loss on long-lived assets of $19.9 million related to the sale of our gathering systems in the Fayetteville Shale. See Note 3 for a further discussion of this transaction.
(2)Amount for the three months ended June 30, 2019 includes a gain on acquisition of $209.4 million related to the acquisition of the remaining 50% equity interest in Jackalope from Williams. See Note 3 for further discussion of this transaction. | | | | | | | | | | | | | | | | | Crestwood Equity | Quarter Ended | | March 31 | | June 30 | | September 30 | | December 31 | 2019 | | | | | | | | Revenues | $ | 835.2 |
| | $ | 683.4 |
| | $ | 823.6 |
| | $ | 839.7 |
| Operating income(1) | 32.0 |
| | 249.3 |
| | 53.7 |
| | 67.2 |
| Earnings from unconsolidated affiliates, net | 6.9 |
| | 3.7 |
| | 10.4 |
| | 11.8 |
| Net income | 14.1 |
| | 225.0 |
| | 33.6 |
| | 47.2 |
| Net income (loss) attributable to partners | (4.9 | ) | | 199.4 |
| | 8.7 |
| | 21.8 |
| Net income (loss) per limited partner unit: | | | | | | | | Basic | $ | (0.07 | ) | | $ | 2.76 |
| | $ | 0.12 |
| | $ | 0.30 |
| Diluted | $ | (0.07 | ) | | $ | 2.58 |
| | $ | 0.12 |
| | $ | 0.28 |
| 2018 | | | | | | | | Revenues | $ | 1,115.0 |
| | $ | 840.5 |
| | $ | 930.2 |
| | $ | 768.4 |
| Operating income (loss)(2) | 46.0 |
| | (9.1 | ) | | 4.8 |
| | 71.8 |
| Loss on modification/extinguishment of debt | — |
| | — |
| | — |
| | (0.9 | ) | Earnings from unconsolidated affiliates, net | 12.4 |
| | 12.0 |
| | 15.1 |
| | 13.8 |
| Net income (loss) | 34.1 |
| | (21.5 | ) | | (5.2 | ) | | 59.6 |
| Net income (loss) attributable to partners | 15.1 |
| | (40.6 | ) | | (24.3 | ) | | 40.5 |
| Net income (loss) per limited partner unit: | | | | | | | | Basic and Diluted | $ | 0.21 |
| | $ | (0.57 | ) | | $ | (0.34 | ) | | $ | 0.57 |
|
| | | | | | | | | | | | | | | | | Crestwood Midstream | Quarter Ended | | March 31 | | June 30 | | September 30 | | December 31 | 2019 | | | | | | | | Revenues | $ | 835.2 |
| | $ | 683.4 |
| | $ | 823.6 |
| | $ | 839.7 |
| Operating income(1) | 29.6 |
| | 247.3 |
| | 51.3 |
| | 65.1 |
| Earnings from unconsolidated affiliates, net | 6.9 |
| | 3.7 |
| | 10.4 |
| | 11.8 |
| Net income | 11.6 |
| | 222.9 |
| | 31.2 |
| | 44.9 |
| Net income attributable to partner | 7.6 |
| | 212.3 |
| | 21.3 |
| | 34.6 |
| 2018 | | | | | | | | Revenues | $ | 1,115.0 |
| | $ | 840.5 |
| | $ | 930.2 |
| | $ | 768.4 |
| Operating income (loss)(2) | 44.4 |
| | (11.1 | ) | | 2.2 |
| | 69.9 |
| Loss on modification/extinguishment of debt | — |
| | — |
| | — |
| | (0.9 | ) | Earnings from unconsolidated affiliates, net | 12.4 |
| | 12.0 |
| | 15.1 |
| | 13.8 |
| Net income (loss) | 32.4 |
| | (23.5 | ) | | (7.8 | ) | | 57.5 |
| Net income (loss) attributable to partner | 28.4 |
| | (27.5 | ) | | (11.9 | ) | | 53.4 |
|
| | (1) | Amount for the three months ended June 30, 2019 includes a gain on acquisition of $209.4 million related to the acquisition of the remaining 50% equity interest in Jackalope from Williams. See Note 3 for further discussion of this transaction. |
| | (2) | Amount for the three months ended June 30, 2018 and September 30, 2018 includes a loss on long-lived assets of $24.5 million and $2.4 million related to the sale of our West Coast facilities. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | | | | CRESTWOOD EQUITY PARTNERS LP | | | | | | | CRESTWOOD EQUITY PARTNERS LP | | | | | | | By Crestwood Equity GP, LLC | | | (its general partner) | | | | | | | CRESTWOOD MIDSTREAM PARTNERS LP | | | | | | | By Crestwood Midstream GP LLC | | | (its general partner) | | | | | Dated: | February 21, 202026, 2021 | By | /s/ ROBERT G. PHILLIPS | | | | Robert G. Phillips | | | | President, Chief Executive Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following officers of Crestwood Equity GP, LLC, as general partner of Crestwood Equity Partners LP, and Crestwood Midstream GP LLC, as general partner of Crestwood Midstream Partners LP, and the following directors of Crestwood Equity GP LLC in the capacities and on the dates indicated. | | | | | | | | | Date | | Signature and Title | February 21, 202026, 2021 | | /s/ ROBERT G. PHILLIPS Robert G. Phillips, President, Chief Executive Officer and Director (Principal Executive Officer) | | | | February 21, 202026, 2021 | | /s/ ROBERT T. HALPIN Robert T. Halpin, Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | | | February 21, 202026, 2021 | | /s/ STEVEN M. DOUGHERTY Steven M. Dougherty, Executive Vice President and Chief Accounting Officer (Principal Accounting Officer) | | | | February 21, 202026, 2021 | | /s/ ALVIN BLEDSOE Alvin Bledsoe, Director | | | | February 21, 202026, 2021 | | /s/ WILLIAM BROWN
William Brown, Director | | | | February 21, 202026, 2021 | | /s/ GARY D. REAVES Gary D. Reaves, Director | | | | February 21, 202026, 2021 | | /s/ WARREN H. GFELLER Warren H. Gfeller, Director | | | | February 21, 202026, 2021 | | /s/ JANEEN S. JUDAH Janeen S. Judah, Director | | | | February 21, 202026, 2021 | | /s/ DAVID LUMPKINS David Lumpkins, Director | | | | February 21, 202026, 2021 | | /s/ JOHN J. SHERMAN John J. Sherman, Director | | | | February 26, 2021 | | /s/ FRANCES M. VALLEJO Frances M. Vallejo, Director |
Schedule I
Crestwood Equity Partners LP Parent Only Condensed Balance Sheets (in millions)
| | | | | | | | | | | | | December 31, | | 2020 | | 2019 | Assets | | | | Current assets: | | | | Cash | $ | 0.2 | | | $ | 0.2 | | | | | | | | | | | | | | Total current assets | 0.2 | | | 0.2 | | | | | | Property, plant and equipment, net | 0.9 | | | 1.0 | | | | | | Investments in subsidiaries | 1,655.7 | | | 1,935.9 | | Other assets | 2.1 | | | 3.1 | | Total assets | $ | 1,658.9 | | | $ | 1,940.2 | | | | | | Liabilities and partners’ capital | | | | Current liabilities: | | | | Accounts payable | $ | 0.1 | | | $ | 0.1 | | Accrued expenses | 1.9 | | | 1.3 | | | | | | Total current liabilities | 2.0 | | | 1.4 | | | | | | | | | | Other long-term liabilities | 1.5 | | | 6.0 | | | | | | Total partners’ capital | 1,655.4 | | | 1,932.8 | | Total liabilities and partners’ capital | $ | 1,658.9 | | | $ | 1,940.2 | |
| | | | | | | | | | December 31, | | 2019 | | 2018 | Assets | | | | Current assets: | | | | Cash | $ | 0.2 |
| | $ | 0.2 |
| Total current assets | 0.2 |
| | 0.2 |
| | | | | Property, plant and equipment, net | 1.0 |
| | 1.1 |
| Investments in subsidiaries | 1,935.9 |
| | 1,854.7 |
| Other assets | 3.1 |
| | 2.8 |
| Total assets | $ | 1,940.2 |
| | $ | 1,858.8 |
| | | | | Liabilities and partners’ capital | | | | Current liabilities: | | | | Accounts payable | $ | 0.1 |
| | $ | 2.6 |
| Accrued expenses | 1.3 |
| | 1.1 |
| Total current liabilities | 1.4 |
| | 3.7 |
| | | | | Other long-term liabilities | 6.0 |
| | 2.6 |
| | | | | Total partners’ capital | 1,932.8 |
| | 1,852.5 |
| Total liabilities and partners’ capital | $ | 1,940.2 |
| | $ | 1,858.8 |
|
See accompanying notes.
Schedule I
Crestwood Equity Partners LP
Parent Only
Condensed Statements of Operations
(in millions)
| | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Revenues | $ | — |
| | $ | — |
| | $ | — |
| Expenses | 5.3 |
| | 6.1 |
| | 6.7 |
| Operating loss | (5.3 | ) | | (6.1 | ) | | (6.7 | ) | Equity in net income (loss) of subsidiaries | 290.0 |
| | 56.5 |
| | (185.7 | ) | Other income, net | 0.4 |
| | 0.4 |
| | 0.5 |
| Net income (loss) attributable to Crestwood Equity Partners LP | $ | 285.1 |
| | $ | 50.8 |
| | $ | (191.9 | ) |
See accompanying notes.
Schedule I
Crestwood Equity Partners LP Parent Only Condensed Statements of Comprehensive Income (in millions)
| | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Revenues | $ | 0 | | | $ | 0 | | | $ | 0 | | Expenses | 4.9 | | | 5.3 | | | 6.1 | | Operating loss | (4.9) | | | (5.3) | | | (6.1) | | Equity in net income (loss) of subsidiaries | (50.5) | | | 290.0 | | | 56.5 | | Other income (expense), net | (0.7) | | | 0.4 | | | 0.4 | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to Crestwood Equity Partners LP | (56.1) | | | 285.1 | | | 50.8 | | Other comprehensive income (loss) | | | | | | Change in fair value of Suburban Propane Partners, L.P. units | 0 | | | 0.3 | | | (0.7) | | Comprehensive income (loss) attributable to Crestwood Equity Partners LP | $ | (56.1) | | | $ | 285.4 | | | $ | 50.1 | |
| | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Net income (loss) attributable to Crestwood Equity Partners LP | $ | 285.1 |
| | $ | 50.8 |
| | $ | (191.9 | ) | Change in fair value of Suburban Propane Partners, LP units | 0.3 |
| | (0.7 | ) | | (0.8 | ) | Comprehensive income (loss) attributable to Crestwood Equity Partners LP | $ | 285.4 |
| | $ | 50.1 |
| | $ | (192.7 | ) |
See accompanying notes.
Schedule I
Crestwood Equity Partners LP Parent Only Condensed Statements of Cash Flows (in millions)
| | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | 2018 | Cash flows from operating activities | $ | (9.4) | | | $ | (3.7) | | | $ | (3.8) | | | | | | | | Cash flows from investing activities | 242.6 | | | 235.8 | | | 238.4 | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | Distributions paid to partners | (242.8) | | | (232.5) | | | (230.9) | | | | | | | | Change in intercompany balances | 9.6 | | | 0.4 | | | (3.8) | | | | | | | | Net cash used in financing activities | (233.2) | | | (232.1) | | | (234.7) | | | | | | | | Net change in cash | 0 | | | 0 | | | (0.1) | | Cash at beginning of period | 0.2 | | | 0.2 | | | 0.3 | | Cash at end of period | $ | 0.2 | | | $ | 0.2 | | | $ | 0.2 | |
| | | | | | | | | | | | | | Year Ended December 31, | | 2019 | | 2018 | | 2017 | Cash flows from operating activities | $ | (3.7 | ) | | $ | (3.8 | ) | | $ | (3.6 | ) | | | | | | | Cash flows from investing activities | 235.8 |
| | 238.4 |
| | 174.0 |
| | | | | | | Cash flows from financing activities: | | | | | | Distributions paid to partners | (232.5 | ) | | (230.9 | ) | | (182.6 | ) | Proceeds from issuance of common units | — |
| | — |
| | 15.2 |
| Change in intercompany balances | 0.4 |
| | (3.8 | ) | | (3.0 | ) | Net cash used in financing activities | (232.1 | ) | | (234.7 | ) | | (170.4 | ) | | | | | | | Net change in cash | — |
| | (0.1 | ) | | — |
| Cash at beginning of period | 0.2 |
| | 0.3 |
| | 0.3 |
| Cash at end of period | $ | 0.2 |
| | $ | 0.2 |
| | $ | 0.3 |
|
See accompanying notes.
Schedule I
Crestwood Equity Partners LP Parent Only Notes to Condensed Financial Statements
Note 1. Basis of Presentation
In the parent-only financial statements, our investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Our share of net income of our unconsolidated subsidiaries is included in consolidated income using the equity method. The parent-only financial statements should be read in conjunction with our consolidated financial statements.
The condensed statements of operations for the years ended December 31, 2018 and 2017 include reclassifications
that were made to conform to the current year presentation, none of which impacted previously reported net income (loss) attributable to Crestwood Equity Partners LP or partners’ capital.
Note 2. Distributions
During the years ended December 31, 2020, 2019 2018 and 2017,2018, we received cash distributions from Crestwood Midstream Partners LP of approximately $242.6 million, $235.8 million $238.4 million and $174.0$238.4 million.
Schedule II
Crestwood Equity Partners LP Crestwood Midstream Partners LP Valuation and Qualifying Accounts For the Years Ended December 31, 2020, 2019 2018 and 20172018 (in millions)
| | | | | | | | | | | | | | | | | | | | | | Balance at beginning of period | | Charged to costs and expenses | | Other Additions | | Deductions (write-offs) | | Balance at end of period | Allowance for doubtful accounts | | | | | | | | | | 2019 | $ | 0.3 |
| | $ | 0.1 |
| | $ | — |
| | $ | (0.1 | ) | | $ | 0.3 |
| 2018 | $ | 2.4 |
| | $ | 0.2 |
| | $ | — |
| | $ | (2.3 | ) | | $ | 0.3 |
| 2017 | $ | 1.9 |
| | $ | 1.5 |
| | $ | — |
| | $ | (1.0 | ) | | $ | 2.4 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of period | | Charged to costs and expenses | | Other Additions(1) | | Deductions (write-offs) | | Balance at end of period | Allowance for doubtful accounts | | | | | | | | | | 2020 | $ | 0.3 | | | $ | 0.5 | | | $ | 0.7 | | | $ | (0.6) | | | $ | 0.9 | | 2019 | $ | 0.3 | | | $ | 0.1 | | | $ | 0 | | | $ | (0.1) | | | $ | 0.3 | | 2018 | $ | 2.4 | | | $ | 0.2 | | | $ | 0 | | | $ | (2.3) | | | $ | 0.3 | |
(1)Amount represents the cumulative effect of adopting the provisions of Topic 326 recorded on January 1, 2020, which is further discussed in Note 2.
|