CRESTWOOD EQUITY PARTNERS LP Management’s Discussion and Analysis of Financial Position and Results of Operations (Form 10-Q)


Our Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements and the accompanying footnotes and Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations in our
2020 Annual Report on Form 10-K.

This report, including information included or incorporated by reference herein,
contains forward-looking statements concerning the financial condition, results
of operations, plans, objectives, future performance and business of our company
and its subsidiaries. These forward-looking statements include:

•statements that are not historical in nature, including, but not limited to:
(i) our belief that anticipated cash from operations, cash distributions from
entities that we control, and borrowing capacity under our credit facility will
be sufficient to meet our anticipated liquidity needs for the foreseeable
future; (ii) our belief that we do not have material potential liability in
connection with legal proceedings that would have a significant financial impact
on our consolidated financial condition, results of operations or cash flows;
and (iii) our belief that our assets will continue to benefit from the
development of unconventional shale plays as significant supply basins; and

• statements preceded, followed or containing forward-looking terminology, in particular the words “believe”, “expect”, “may”, “will”, “should”, “could”, “anticipate”, “estimate”, ” intention “or its negation, or similar expressions.

Forward-looking statements are not guarantees of future performance or results.
They involve risks, uncertainties and assumptions. Actual results may differ
materially from those contemplated by the forward-looking statements due to,
among others, the following factors:

•our ability to successfully implement our business plan for our assets and
operations;
•governmental legislation and regulations;
•industry factors that influence the supply of and demand for crude oil, natural
gas and NGLs;
•industry factors that influence the demand for services in the markets
(particularly unconventional shale plays) in which we provide services;
•weather conditions;
•outbreak of illness, pandemic or any other public health crisis, including the
COVID-19 pandemic;
•the availability of crude oil, natural gas and NGLs, and the price of those
commodities, to consumers relative to the price of alternative and competing
fuels;
•the availability of storage for hydrocarbons;
•the ability of members of the Organization of Petroleum Exporting Countries
(OPEC) and other oil-producing countries to agree and maintain oil price and
production controls;
•economic conditions;
•costs or difficulties related to the integration of acquisitions and success of
our joint ventures' operations;
•environmental claims;
•operating hazards and other risks incidental to the provision of midstream
services, including gathering, compressing, treating, processing, fractionating,
transporting and storing energy products (i.e., crude oil, NGLs and natural gas)
and related products (i.e., produced water);
•interest rates;
•the price and availability of debt and equity financing, including our ability
to raise capital through alternatives like joint ventures; and
•the ability to sell or monetize assets, to reduce indebtedness, to repurchase
our equity securities, to make strategic investments, or for other general
partnership purposes.

For additional factors that could cause actual results to be materially
different from those described in the forward-looking statements, see Part I,
Item 1A. Risk Factors of our 2020 Annual Report on Form 10-K and Part II, Item
1A. Risk Factors of this Quarterly Report on Form 10-Q.

Outlook and trends

Our business goal is to create long-term value for our unitholders. We plan to create value for our investors by driving stable operating margins and improving cash flow from our diversified middle business with prudence.

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financing investments in our assets and expansions of our portfolio, maximizing
throughput and optimizing services on our assets, and effectively controlling
our capital expenditures, operating and administrative costs.

We have taken a number of strategic steps to better position the Company as a
stronger, better capitalized company that can accretively grow cash flows and as
an industry leader in Environmental, Social and Governance (ESG) efforts.

During 2021, CEQP paid Crestwood Holdings approximately $268 million to (i)
acquire approximately 11.5 million CEQP common units, 0.4 million subordinated
units of CEQP and 100% of the equity interests of Crestwood Marcellus Holdings
LLC and Crestwood Gas Services Holdings LLC (whose assets consisted solely of
CEQP common and subordinated units and 1% of the limited partner interests in
Crestwood Holdings LP); and (ii) acquire the general partner and the remaining
99% limited partner interests of Crestwood Holdings LP (whose assets consist
solely of its ownership interest in Crestwood Equity GP LLC, which owns CEQP's
non-economic general partner interest) (collectively the Crestwood Holdings
Transactions). The purchase price was funded through borrowings under the
Crestwood Midstream credit facility. The Crestwood Holdings Transactions
resulted in CEQP retiring the common and subordinated units acquired from
Crestwood Holdings.

The Crestwood Holdings Transactions were a significant step in our strategy to
drive peer leading governance and set the stage for future growth by simplifying
our organizational structure, increasing our public float and liquidity and
enhancing our financial flexibility as we strive to generate long-term value for
our unitholders. Additionally, in connection with the Crestwood Holdings
Transactions, Crestwood Holdings repaid all of its outstanding debt which
further enhances CEQP's future flexibility around capital allocation priorities
and eliminates any potential future risks around a change of control related to
Crestwood Holdings' debt as previously described in Part I, Item 1A. Risk
Factors of our 2020 Annual Report on Form 10-K. In conjunction with the
completion of the Crestwood Holdings Transactions, CEQP will transition to a
traditional public company governance structure with a publicly elected board of
directors beginning in 2022 which further ensures alignment between management
and the Board of Directors with common unitholders and is consistent with our
long-term ESG program.

To further enhance our financial flexibility and execute our long-term business
strategy, in July 2021, Stagecoach Gas sold certain of its wholly-owned
subsidiaries to a subsidiary of Kinder Morgan, Inc. (Kinder Morgan) for
approximately $1.195 billion plus certain purchase price adjustments (Initial
Closing) pursuant to a purchase and sale agreement dated as of May 31, 2021
between our wholly owned subsidiary, Crestwood Pipeline and Storage Northeast
LLC (Crestwood Northeast), Con Edison Gas Pipeline and Storage Northeast, LLC
(CEGP), a wholly owned subsidiary of Consolidated Edison, Inc., Stagecoach Gas
and Kinder Morgan. Stagecoach Gas distributed to us approximately $614 million
as our proportionate share of the gross proceeds received from the sale.
Following the Initial Closing and subject to certain customary closing
conditions, Crestwood Northeast and CEGP will sell each of their equity
interests in Stagecoach Gas and its wholly-owned subsidiary, Twin Tier Pipeline
LLC (Second Closing) to Kinder Morgan for approximately $30 million, subject to
certain closing adjustments. We anticipate the Second Closing to occur either in
the fourth quarter of 2021 or first quarter of 2022. The Stagecoach Gas
divestiture enabled us to decrease our net debt to consolidated EBITDA ratio of
our revolving credit facility below 3.5x at September 30. 2021, which should
position us to utilize a greater portion of our cash flow going forward to
increase returns to our unitholders through continued distributions, prudent
capital investments around our higher-growth gathering and processing assets,
and opportunistic repurchases of our preferred and common units under our
approved $175 million unit repurchase program described below in "Liquidity and
Sources of Capital".

We continue to drive our long-term growth strategy through disciplined capital
investments utilizing our current financial flexibility, and on October 25,
2021, we entered into a merger agreement with Oasis Midstream Partners LP (Oasis
Midstream) under which we will acquire Oasis Midstream in an equity and cash
transaction valued at approximately $1.8 billion. Pursuant to the merger
agreement, Oasis Petroleum Inc. (Oasis Petroleum) will receive $150 million in
cash plus 21.0 million newly issued CEQP common units in exchange for its 33.8
million common units held in Oasis Midstream. In addition, Oasis Midstream's
public unitholders will receive 12.9 million newly issued CEQP common units in
exchange for the 14.8 million Oasis Midstream common units held by them.
Additionally, under the merger agreement, Oasis Petroleum will receive a $10
million cash payment for its ownership of the general partner of Oasis
Midstream. This transaction further solidifies Crestwood's competitive position
in the Williston Basin with exposure to approximately 1,200 drilling locations
and 535,000 dedicated acres and expands the company's relationship with Oasis
Petroleum. Additionally, Oasis Midstream's Wild Basin gathering and processing
assets are highly complementary with our Arrow gathering system and Bear Den
processing facility which provides for immediate opportunities to drive cost
savings and commercial synergies and better utilization of available gas
processing capacity.

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In addition to the strategic steps discussed above, we have also taken steps to
(i) minimize capital expenditures to better align with development activity by
our gathering and processing customers; (ii) realign our organization to reduce
operating and administrative expenses; (iii) engage with our customers to
maintain volumes across our asset portfolio; (iv) optimize our storage,
transportation and marketing assets to take advantage of regional commodity
price volatility; and (v) evaluate our debt and equity structure to preserve
liquidity and ensure balance sheet strength. Given our efforts over the past few
years to improve the partnership's competitive position in the businesses we
operate, manage costs and improve margins and create a stronger balance sheet,
we believe the Company is well positioned to execute its business plan.

Recent developments

Bakken DAPL Matter. In July 2020, a U.S. District Court (District Court) ordered
the Dakota Access Pipeline (DAPL) to cease operation based on an alleged
procedural permitting failure. On August 5, 2020, the U.S. Court of Appeals for
the District of Columbia Circuit (D.C. Circuit) stayed the DAPL shutdown, and
set an expedited briefing schedule to determine the merits of the District
Court's decision. The D.C. Circuit issued an opinion on January 26, 2021, which
upheld the District Court's decision on the merits, but did not rule on whether
DAPL should be prohibited from continued operation. The plaintiffs sought
another injunction against DAPL's continued operation, which was denied by the
District Court in May 2021. The U.S. Army Corps of Engineers is currently
conducting an environmental impact statement, which is expected to be complete
in 2022 and we expect that DAPL will remain in operation while the environmental
impact statement is being completed.

The Arrow gathering system currently connects to the DAPL, Hiland, Tesoro and
True Companies' Bridger Four Bears pipelines, providing significant downstream
delivery capacity for our Arrow customers. Additionally, we can transport Arrow
crude volumes to our COLT Hub facility by pipeline or truck, which mitigates the
impact to our producers with the ability to access multiple markets out of the
basin.

Regulatory Matters

The Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI)
on April 19, 2018 (2018 NOI) initiating a review of its policies on
certification of natural gas pipelines, including an examination of its
long-standing Policy Statement on Certification of New Interstate Natural Gas
Pipeline Facilities (1999 Policy Statement), issued in 1999, that is used to
determine whether to grant certificates for new pipeline projects. On February
18, 2021, the FERC issued another NOI (2021 NOI), reopening its review of the
1999 Policy Statement. Comments on the 2021 NOI were due on May 26, 2021, and
although the FERC has not taken any further action regarding the 2018 NOI or
2021 NOI, we are unable to predict what, if any, changes may be proposed as a
result of the NOIs that will affect our natural gas pipeline operations or when
such proposals, if any, might become effective.

How we evaluate our operations

We assess our overall business performance based primarily on EBITDA and Adjusted EBITDA. We do not use amortization and accretion charges in our key metrics because we focus our performance management on generating cash flow and our assets have a long useful life.

EBITDA and Adjusted EBITDA - We believe that EBITDA and Adjusted EBITDA are
widely accepted financial indicators of a company's operational performance and
its ability to incur and service debt, fund capital expenditures and make
distributions. We believe that EBITDA and Adjusted EBITDA are useful to our
investors because it allows them to use the same performance measure analyzed
internally by our management to evaluate the performance of our businesses and
investments without regard to the manner in which they are financed or our
capital structure. EBITDA is defined as income before income taxes, plus
debt-related costs (interest and debt expense, net and loss on
modification/extinguishment of debt) and depreciation, amortization and
accretion expense. Adjusted EBITDA considers the adjusted earnings impact of our
unconsolidated affiliates by adjusting our equity earnings or losses from our
unconsolidated affiliates to reflect our proportionate share (based on the
distribution percentage) of their EBITDA, excluding gains and losses on
long-lived assets and other impairments. Adjusted EBITDA also considers the
impact of certain significant items, such as unit-based compensation charges,
gains or losses on long-lived assets, impairments of goodwill, third party costs
incurred related to potential and completed acquisitions, certain environmental
remediation costs, the change in fair value of commodity inventory-related
derivative contracts, costs associated with the realignment and restructuring of
our operations and corporate structure, and other transactions identified in a
specific reporting period. The change in fair value of commodity
inventory-related derivative contracts is considered in determining Adjusted
EBITDA given that the timing of recognizing gains and losses on these derivative
contracts differs from the recognition of revenue for the related underlying
sale of inventory to which these derivatives relate. Changes in the fair value
of other derivative contracts is not considered in determining Adjusted EBITDA
given the relatively short-term nature of those
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derivative contracts. EBITDA and Adjusted EBITDA are not measures calculated in
accordance with GAAP, as they do not include deductions for items such as
depreciation, amortization and accretion, interest and income taxes, which are
necessary to maintain our business. EBITDA and Adjusted EBITDA should not be
considered as alternatives to net income, operating cash flow or any other
measure of financial performance presented in accordance with GAAP. EBITDA and
Adjusted EBITDA calculations may vary among entities, so our computation may not
be comparable to measures used by other companies.

Results of operations

The following tables summarize our operating results (in millions):

                                                                     Crestwood Equity                                                           

Crestwood Midstream

                                                 Three Months Ended                     Nine Months Ended                    Three Months Ended                     Nine Months Ended
                                                    September 30,                         September 30,                         September 30,                         September 30,
                                                2021               2020              2021               2020                2021               2020              2021               2020
Revenues                                   $   1,226.3          $ 519.2          $ 3,188.6          $ 1,599.8          $   1,226.3          $ 519.2          $ 3,188.6          $ 1,599.8
Costs of product/services sold                 1,099.3            358.7            2,710.3            1,118.8              1,099.3            358.7            2,710.3            1,118.8
Operations and maintenance expense                31.6             31.0               90.2              100.2                 31.6             31.0               90.2              100.2
General and administrative expense                25.9             19.6               67.4               64.0                 24.4             18.5               61.3               60.4
Depreciation, amortization and accretion          64.6             60.8              182.6              177.9                 68.2             64.2              193.2              188.4
Loss on long-lived assets, net                    18.5             21.3               19.6               26.1                 18.5             21.3               19.6               26.1

Goodwill impairment                                  -                -                  -               80.3                    -                -                  -               80.3
Operating income (loss)                          (13.6)            27.8              118.5               32.5                (15.7)            25.5              114.0               25.6
Earnings (loss) from unconsolidated
affiliates, net                                    4.9             10.5             (125.9)              24.4                  4.9             10.5             (125.9)              24.4
Interest and debt expense, net                   (30.9)           (33.7)            (102.0)            (100.3)               (30.9)           (33.7)            (102.0)            (100.3)
Loss on modification/extinguishment of
debt                                                 -                -               (6.7)                 -                    -                -               (6.7)                 -
Other income, net                                  0.1                -                0.2                0.2                    -                -                  -                  -
(Provision) benefit for income taxes              (0.1)               -               (0.1)               0.1                 (0.1)               -               (0.1)               0.2
Net income (loss)                                (39.6)             4.6             (116.0)             (43.1)               (41.8)             2.3             (120.7)             (50.1)
Add:
Interest and debt expense, net                    30.9             33.7              102.0              100.3                 30.9             33.7              102.0              100.3
Loss on modification/extinguishment of
debt                                                 -                -                6.7                  -                    -                -                6.7                  -
Provision (benefit) for income taxes               0.1                -                0.1               (0.1)                 0.1                -                0.1               (0.2)
Depreciation, amortization and accretion          64.6             60.8              182.6              177.9                 68.2             64.2              193.2              188.4
EBITDA                                            56.0             99.1              175.4              235.0                 57.4            100.2              181.3              238.4
Unit-based compensation charges                   12.9              8.1               22.8               17.3                 12.9              8.1               22.8               17.3
Loss on long-lived assets, net                    18.5             21.3               19.6               26.1                 18.5             21.3               19.6               26.1

Goodwill impairment                                  -                -                  -               80.3                    -                -                  -               80.3

(Earnings) loss from unconsolidated
affiliates, net                                   (4.9)           (10.5)             125.9              (24.4)                (4.9)           (10.5)             125.9              (24.4)
Adjusted EBITDA from unconsolidated
affiliates, net                                    9.8             20.4               56.5               57.6                  9.8             20.4               56.5               57.6
Change in fair value of commodity
inventory-related derivative contracts            46.8             (3.0)              48.9               12.7                 46.8             (3.0)              48.9               12.7
Significant transaction and environmental
related costs and other items                      0.8              0.6                1.9               10.6                  0.7              0.6               (0.4)              10.6
Adjusted EBITDA                            $     139.9          $ 136.0          $   451.0          $   415.2          $     141.2          $ 137.1          $   454.6          $   418.6


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                                                            Crestwood Equity                                                           Crestwood Midstream
                                        Three Months Ended                     Nine Months Ended                     Three Months Ended                     Nine Months Ended
                                           September 30,                         September 30,                          September 30,                         September 30,
                                       2021                2020              2021               2020                2021                2020              2021               2020
Net cash provided by operating
activities                       $     79.4             $ 111.9          $    372.9          $ 295.3          $     81.3             $ 112.9          $    378.5          $ 294.0
Net changes in operating assets
and liabilities                       (25.1)              (15.5)             (114.8)           (26.9)              (25.3)              (15.3)             (114.1)           (21.8)
Amortization of debt-related
deferred costs                         (1.7)               (1.7)               (5.1)            (4.9)               (1.7)               (1.7)               (5.1)            (4.9)
Interest and debt expense, net         30.9                33.7               102.0            100.3                30.9                33.7               102.0            100.3
Unit-based compensation charges       (12.9)               (8.1)              (22.8)           (17.3)              (12.9)               (8.1)              (22.8)           (17.3)
Loss on long-lived assets, net        (18.5)              (21.3)              (19.6)           (26.1)              (18.5)              (21.3)              (19.6)           (26.1)

Goodwill impairment                       -                   -                   -            (80.3)                  -                   -                   -            (80.3)

Earnings (loss) from
unconsolidated affiliates, net,
adjusted for cash distributions
received                                3.6                   -              (137.5)            (5.4)                3.6                   -              (137.5)            (5.4)
Deferred income taxes                   0.3                 0.1                 0.4              0.4                   -                   -                   -              0.1
Provision (benefit) for income
taxes                                   0.1                   -                 0.1             (0.1)                0.1                   -                 0.1             (0.2)
Other non-cash income                  (0.1)                  -                (0.2)               -                (0.1)                  -                (0.2)               -
EBITDA                                 56.0                99.1               175.4            235.0                57.4               100.2               181.3            238.4
Unit-based compensation charges        12.9                 8.1                22.8             17.3                12.9                 8.1                22.8             17.3
Loss on long-lived assets, net         18.5                21.3                19.6             26.1                18.5                21.3                19.6             26.1

Goodwill impairment                       -                   -                   -             80.3                   -                   -                   -             80.3

(Earnings) loss from
unconsolidated affiliates, net         (4.9)              (10.5)              125.9            (24.4)               (4.9)              (10.5)              125.9            (24.4)
Adjusted EBITDA from
unconsolidated affiliates, net          9.8                20.4                56.5             57.6                 9.8                20.4                56.5             57.6
Change in fair value of
commodity inventory-related
derivative contracts                   46.8                (3.0)               48.9             12.7                46.8                (3.0)               48.9             12.7
Significant transaction and
environmental related costs and
other items                             0.8                 0.6                 1.9             10.6                 0.7                 0.6                (0.4)            10.6
Adjusted EBITDA                  $    139.9             $ 136.0          $    451.0          $ 415.2          $    141.2             $ 137.1          $    454.6          $ 418.6



Segment Results

The following table summarizes the EBITDA of our segments (in millions):

                                                        Three Months Ended                                                       Three Months Ended
                                                        September 30, 2021                                                       September 30, 2020
                                                                                     Marketing,
                                 Gathering and              Storage and              Supply and           Gathering and             Storage and            Marketing, Supply
                                   Processing             Transportation              Logistics             Processing             Transportation            and Logistics
Revenues                        $       171.2          $              2.0          $    1,053.1          $       145.2          $             3.5          $        370.5
Intersegment revenues                   125.6                         2.3                (127.9)                  44.9                        1.9                   (46.8)
Costs of product/services sold          150.1                        (0.2)                949.4                   63.2                          -                   295.5
Operations and maintenance
expenses                                 19.5                         1.5                  10.6                   19.4                        0.7                    10.9
Loss on long-lived assets, net          (18.5)                          -                     -                  (19.1)                         -                    (2.4)

Earnings from unconsolidated
affiliates, net                           4.2                         0.7                     -                    0.5                       10.0                       -
EBITDA                          $       112.9          $              3.7          $      (34.8)         $        88.9          $            14.7          $         14.9


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                                                       Nine Months Ended                                                       Nine Months Ended
                                                      September 30, 2021                                                      September 30, 2020
                                                                                   Marketing,                                                              Marketing,
                                Gathering and             Storage and              Supply and           Gathering and             Storage and              Supply and
                                  Processing             Transportation             Logistics             Processing             Transportation             Logistics
Revenues                       $       498.9          $             6.0          $    2,683.7          $       474.6          $            10.1          $    1,115.1
Intersegment revenues                  315.1                        7.8                (322.9)                  99.2                        6.9                (106.1)
Costs of product/services sold         387.2                       (0.2)              2,323.3                  192.8                        0.3                 925.7
Operations and maintenance
expenses                                55.6                        3.1                  31.5                   65.7                        2.8                  31.7
Gain (loss) on long-lived
assets, net                            (19.7)                         -                   0.1                  (23.7)                         -                  (2.6)
Goodwill impairment                        -                          -                     -                  (80.3)                         -                     -
Earnings (loss) from
unconsolidated affiliates, net           4.4                     (130.3)                    -                    0.3                       24.1                     -
EBITDA                         $       355.9          $          (119.4)         $        6.1          $       211.6          $            38.0          $       49.0



Below is a discussion of the factors that impacted EBITDA by segment for the
three and nine months ended September 30, 2021 compared to the same periods in
2020.

Gathering and Processing

EBITDA for our gathering and processing segment increased by approximately $24.0
million and $144.3 million during the three and nine months ended September 30,
2021 compared to the same periods in 2020. Our gathering and processing
segment's EBITDA for the three and nine months ended September 30, 2021 and 2020
were impacted by losses we recorded related to our long-lived assets, which are
further described below, and an $80.3 million goodwill impairment recorded
during the nine months ended September 30, 2020 related to our Jackalope
operations (see Item 1. Financial Statements, Note 2 for a further discussion of
this impairment).

Our gathering and processing segment's revenues increased by approximately
$106.7 million and $240.2 million during the three and nine months ended
September 30, 2021 compared to the same periods in 2020, while our costs of
product/services sold increased by approximately $86.9 million and $194.4
million during those same periods. The increases were primarily driven by higher
volumes on our Arrow system (described below) and higher average prices (i.e.,
more than an 75% increase in commodity prices during the three months ended
September 30, 2021 compared to the same period in 2020) that our gathering and
processing segment realized on its agreements under which it purchases and sells
crude oil, natural gas and NGLs during the three and nine months ended September
30, 2021 compared to the same periods in 2020. During the three months ended
September 30, 2021, Arrow's natural gas gathering and processing volumes
increased by 17% and 14%, respectively and during the nine months ended
September 30, 2021, Arrow's natural gas gathering and processing volumes
increased by 27% and 28%, respectively, compared to the same periods in 2020.
Also contributing to the increase in our gathering and processing segment's
revenues and costs of product/services sold were higher gathering and processing
volumes on our Jackalope system during the three months ended September 30, 2021
compared to the same period in 2020, primarily due to its major customer
bringing production back online during late 2020 and early 2021. During the
three months ended September 30, 2021, Jackalope's natural gas gathering and
processing volumes increased by 41% and 37%, respectively. Partially offsetting
the increase in our gathering and processing segment's revenues for the nine
months ended September 30, 2021 were lower revenues from our Fayetteville
operations due to the sale of these assets in October 2020.

Our gathering and processing segment's operations and maintenance expenses
decreased by approximately $10.1 million during the nine months ended September
30, 2021 compared to the same period in 2020, primarily due to the sale of our
Fayetteville assets in October 2020 and efforts we undertook starting in the
second quarter of 2020 to reduce costs in response to lower commodity prices
during that period. Our gathering and processing segment's operations and
maintenance expenses were relatively flat during the three months ended
September 30, 2021 compared to the same period in 2020.

Our gathering and processing segment's EBITDA was impacted by a loss on
long-lived assets of approximately $19 million during the three and nine months
ended September 30, 2021 related to the abandonment and dismantlement of certain
of our Marcellus West Union compressor station assets. For a further discussion
on the abandonment and dismantlement of our Marcellus West Union compressor
station assets, see Item 1. Financial Statements, Note 2. Our gathering and
processing segment's EBITDA for the three and nine months ended September 30,
2020 was impacted by a loss on long-lived assets of approximately $19.9 million
related to the sale of our Fayetteville assets in October 2020. In addition,
during the nine months
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ended September 30, 2020, we recorded a loss on long-term assets of approximately $ 2.7 million related to the decommissioning of certain water collection pipes in our Arrow network.

Our gathering and processing segment's EBITDA was also impacted by an increase
in equity earnings of approximately $4 million from our Crestwood Permian equity
investment during both the three and nine months ended September 30, 2021
compared to the same periods in 2020. During the three and nine months ended
September 30, 2021, Crestwood Permian experienced an increase in its natural gas
gathering and processing revenues and volumes primarily due to its customers
connecting more wells to its system during 2021 as a result of the increases in
commodity prices compared to the same periods in 2020. During the nine months
ended September 30, 2021, Crestwood Permian experienced an increase in its water
gathering revenues and volumes compared to the same period in 2020 primarily due
to placing in-service its produced water gathering and disposal system in late
second quarter of 2020. Partially offsetting these increases during the nine
months ended September 30, 2021 were higher electricity costs experienced during
the first quarter of 2021 due to the unusual weather conditions experienced
during that period.

Storage and transport

EBITDA for our storage and transportation segment decreased by approximately
$11.0 million and $157.4 million during the three and nine months ended
September 30, 2021 compared to the same periods in 2020. Our EBITDA for the
three and nine months ended September 30, 2021 was impacted by a reduction to
the equity earnings from our Stagecoach Gas investment as further discussed
below.

During the both the three and nine months ended September 30, 2021, COLT's rail
loading volumes decreased by 4% compared to the same periods in 2020 due to
lower demand for rail loading services which resulted in a decrease in revenues
of approximately $1.1 million and $3.2 million. Our storage and transportation
segment's costs of product/services sold and operations and maintenance expenses
were relatively flat during the three and nine months ended September 30, 2021
compared to the same periods in 2020.

Our storage and transportation segment's EBITDA was also impacted by a net
decrease in earnings from unconsolidated affiliates during both the three and
nine months ended September 30, 2021 compared to the same periods in 2020. In
July 2021, Stagecoach Gas sold certain of its wholly-owned subsidiaries to a
subsidiary of Kinder Morgan, which resulted in a decrease in equity earnings
from our Stagecoach Gas equity investment of approximately $9.0 million during
the three months ended September 30, 2021 compared to the same period in 2020
due to our 2021 results not reflecting a full quarter of equity earnings from
the Stagecoach Gas assets which were sold. During the nine months ended
September 30, 2021, our earnings from our Stagecoach Gas equity investment were
reduced by approximately $155.4 million as a result of recording our
proportionate share of a loss on long-lived assets (including goodwill) recorded
by our Stagecoach Gas equity investment related to the sale of Stagecoach Gas.
In addition, our earnings from unconsolidated affiliates during the nine months
ended September 30, 2021 were also reduced by our proportionate share of
transaction costs of approximately $3.0 million related to the sale of the
Stagecoach Gas equity investment. For a further discussion of these matters, see
Item 1. Financial Statements, Note 5. During the nine months ended September 30,
2021, earnings from our Tres Holdings equity investment increased by
approximately $8.9 million compared to the same period in 2020, primarily due to
higher revenues from gas inventory sales and an increase in demand for its
storage and transportation services due to the unusually cold weather
experienced during early 2021 compared to 2020. During the nine months ended
September 30, 2021, earnings from our PRBIC equity investment increased by $4.4
million compared to the same period in 2020, primarily as a result of recording
our proportionate share of a loss on long-lived assets impairment recorded by
our PRBIC equity investment during 2020.

Marketing, Procurement and Logistics

EBITDA for our marketing, supply and logistics segment decreased by
approximately $49.7 million and $42.9 million during the three and nine months
ended September 30, 2021 compared to the same periods in 2020, which was driven
primarily by unrealized losses on our price risk management activities during
2021, which is further described below. Our marketing, supply and logistics
segment's revenues increased by approximately $601.5 million and $1,351.8
million during the three and nine months ended September 30, 2021 compared to
the same periods in 2020, while our costs of product/services sold increased by
$653.9 million and $1,397.6 million during those same periods.

Our NGL marketing and logistics operations experienced an increase in revenues
of approximately $415.5 million and $892.6 million during the three and nine
months ended September 30, 2021 compared to the same periods in 2020, and an
increase in its costs of product/services of approximately $464.1 million and
$938.9 million during those same periods. These increases were primarily due to
increases in NGL prices during 2021 compared to 2020 as a result of overall
increases in commodity
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prices and the unusually cold weather experienced during early 2021 compared to
2020. Our NGL marketing and logistics operations' costs of product/services sold
increased more than its revenues primarily due to the impact that the
significant increase in crude, natural gas and NGL commodity prices (described
above) had on our price risk management activities that primarily hedged our
company-wide commodity exposures during 2021. Included in our costs of
product/services sold was a loss of $53.4 million and $94.8 million during the
three and nine months ended September 30, 2021, and a loss of $1.8 million and a
gain of $13.4 million during the three and nine months ended September 30, 2020
related to our price risk management activities. Partially offsetting the impact
of our price risk management activities was the impact of the operating results
of the NGL assets acquired from Plains All American Pipeline, L.P. (Plains) in
April 2020, which increased our ability to capture additional opportunities in
the markets in which these assets operate.

Our crude and natural gas marketing operations experienced an increase in its
revenues of approximately $186.0 million and $459.2 million during the three and
nine months ended September 30, 2021 compared to the same periods in 2020, and
an increase in its product costs of approximately $189.8 million and $458.7
million during those same periods. These increases were driven primarily driven
by an increase in marketing activity surrounding our crude-related operations
primarily in the Bakken as a result of higher commodity prices and an increase
in marketing activity surrounding our natural-gas related operations driven by
unusual winter weather conditions experience during early 2021.

Other EBITDA results

General and Administrative Expenses. During the three months ended September 30,
2021, our general and administrative expenses increased by approximately $6
million compared to the same period in 2020, primarily due to higher unit-based
compensation charges driven by higher average awards outstanding under our
long-term incentive plans. Crestwood Midstream's general and administrative
expenses were relatively flat during the nine months ended September 30, 2021
compared to the same period in 2020 due to the impact of cost reductions we
under took beginning in the second quarter of 2020. Crestwood Equity's general
and administrative expenses increased by approximately $3.4 million during the
nine months ended September 30, 2021 compared to the same period in 2020 due to
transaction costs that were expensed related to the Crestwood Holdings
Transactions discussed in Item 1. Financial Statements, Note 1.

Items not affecting EBITDA are as follows:

Depreciation, Amortization and Accretion Expense. During the three and nine
months ended September 30, 2021 compared to the same periods in 2020, our
depreciation, amortization and accretion expense increased by approximately $4
million and $5 million, respectively, primarily due to acquisition of the NGL
assets acquired from Plains in April 2020, placing in-service the expansion of
our processing capacity at our Bucking Horse processing facility on our Powder
River Basin system in early 2020, and the expansion of our gathering and
processing facilities at our Arrow system. Partially offsetting these increases
was lower depreciation, amortization and accretion expense due to the sale of
our Fayetteville assets in late 2020.

Interest and Debt Expense, Net. Interest and debt expense, net decreased by
approximately $2.8 million during the three months ended September 30, 2021
compared to the same period in 2020, primarily due to lower average outstanding
balances on our Crestwood Midstream credit facility. During the nine months
ended September 30, 2021, our interest and debt expense, net increased by
approximately $1.7 million compared to the same period in 2020, primarily due to
the issuance of $700 million unsecured senior notes in January 2021 and lower
capitalized interest period over period due to the timing of growth capital
projects primarily in the Powder River Basin, partially offset by lower average
outstanding balances on our Crestwood Midstream credit facility.

The following table provides a summary of interest and debt expense (in
millions):
                                              Three Months Ended              Nine Months Ended
                                                September 30,                   September 30,
                                               2021             2020          2021          2020
    Credit facility                     $      3.1            $  5.5      $     12.0      $  18.0
    Senior notes                              26.1              26.6            82.9         79.7
    Other                                      1.8               1.7             7.4          5.3
    Gross interest and debt expense           31.0              33.8           102.3        103.0
    Less: capitalized interest                 0.1               0.1             0.3          2.7
    Interest and debt expense, net      $     30.9            $ 33.7      $    102.0      $ 100.3



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Loss on Extinguishment of Debt. During the nine months ended September 30, 2021,
we recognized a loss on extinguishment of debt of approximately $6.7 million in
conjunction with the redemption of our 2023 Senior Notes.

Liquidity and sources of capital

Crestwood Equity is a holding company that derives all of its operating cash
flow from its operating subsidiaries.  Our principal sources of liquidity
include cash generated by operating activities from our subsidiaries,
distributions from our joint ventures, borrowings under the Crestwood Midstream
credit facility, and sales of equity and debt securities. Our equity investments
use cash from their respective operations and contributions from us to fund
their operating activities, maintenance and growth capital expenditures, and
service their outstanding indebtedness. We believe our liquidity sources and
operating cash flows are sufficient to address our future operating, debt
service and capital requirements.

We make quarterly cash distributions to our common unitholders within
approximately 45 days after the end of each fiscal quarter in an aggregate
amount equal to our available cash for such quarter. On October 14, 2021, we
declared a quarterly cash distribution of $0.625 per unit to our common
unitholders, which will be paid on November 12, 2021 and was consistent with the
distribution paid in August 2021. Based on our financial performance during the
nine months ended September 30, 2021, and our estimates of our financial
performance for future quarters, we believe the current level of distributions
is appropriate. As described above, the Crestwood Holdings Transactions resulted
in Crestwood Equity acquiring and cancelling approximately 11.5 million common
units, which decreased our anticipated annual distributions (at the current
annual rate of $2.50 per unit) by approximately $29 million per year and
eliminates any future consideration by our board of directors regarding the
level of distributions to our unitholders of any risks created by Crestwood
Holdings' debt (which was fully repaid as of September 30, 2021). We also pay
quarterly cash distributions of approximately $15 million to our preferred
unitholders and beginning with the first quarter of 2021, we pay quarterly cash
distributions of approximately $10 million to Crestwood Niobrara's
non-controlling partner. We believe our operating cash flows will exceed cash
distributions to our partners, preferred unitholders and non-controlling
partner, and as a result, we will have adequate operating cash flows as a source
of liquidity for our growth capital expenditures.

In March 2021, Crestwood Equity's board of directors authorized a $175 million
common unit and preferred unit repurchase program effective through December 31,
2022. Pursuant to the program, we may purchase common and preferred units from
time to time in the open market in accordance with applicable securities laws at
current market prices. The timing and amount of purchases under the program will
be determined based on growth capital opportunities, financial performance and
outlook, and other factors, including acquisition opportunities and market
conditions. The unit repurchase program does not obligate us to purchase any
specific dollar amount or number of units and may be suspended or discontinued
at any time.

As of September 30, 2021, we had $985.3 million of available capacity under the
Crestwood Midstream credit facility considering the most restrictive debt
covenants in the credit agreement. As of September 30, 2021, we were in
compliance with all of our debt covenants applicable to the credit facility and
senior notes. We may from time to time seek to retire or purchase our
outstanding debt through cash purchases and/or exchanges for equity securities,
in open market purchases, privately negotiated transactions, tender offers or
otherwise. Such repurchases or exchanges, if any, will depend on prevailing
market conditions, our liquidity requirements, contractual restrictions and
other factors. The amounts involved may be material. During the nine months
ended September 30, 2021, we redeemed and cancelled approximately $687.2 million
of principal outstanding under the 2023 Senior Notes, utilizing a portion of the
proceeds from the issuance of the 2029 Senior Notes and borrowings under our
Crestwood Midstream credit facility. In July 2021, Stagecoach Gas closed on the
sale of certain of its wholly-owned subsidiaries to a subsidiary of Kinder
Morgan and distributed to us approximately $614 million as our proportionate
share of the gross proceeds received from the sale. We utilized approximately
$3 million of these proceeds to pay transaction costs related to the sale
described above, $40 million of these proceeds to pay our contingent
consideration obligation and related accrued interest, and the remainder of
these proceeds to repay a portion of the amounts outstanding under the Crestwood
Midstream credit facility.

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Cash flow

The following table provides a summary of Crestwood Equity's cash flows by
category (in millions):
                                                          Nine Months Ended
                                                            September 30,
                                                         2021           2020
Net cash provided by operating activities             $   372.9      $  

295.3

Net cash provided by (used in) investing activities $ 582.9 $ (297.7)
Net cash used in financing activities

                 $  (955.5)     $   (8.8)



Operating Activities

Our operating cash flows increased by approximately $77.6 million during the
nine months ended September 30, 2021 compared to the same period in 2020. The
increase was primarily driven by an increase in net cash inflow from working
capital of approximately $87.9 million, driven mostly by the sale of higher
levels of NGL inventory at the close of the winter season during the nine months
ended September 30, 2021 compared to the same period in 2020 due to increased
activity primarily from the NGL assets acquired from Plains during the second
quarter of 2020. Partially offsetting this net increase was higher costs of
product/services sold of approximately $1,591.5 million, partially offset by
higher operating revenues of approximately $1,588.8 million primarily from our
marketing, supply and logistics segment and gathering and processing segment as
discussed in Results of Operations above. In addition, during the nine months
ended September 30, 2021, our equity earnings from our Stagecoach Gas equity
investment were lower due to the sale of certain of its assets in July 2021
which resulted in a reduction in our net operating cash flows compared to the
same period in 2020.

Investing Activities

Capital expenditure. Intermediate energy activity is capital intensive, requiring significant investments for the acquisition or development of new facilities. We classify our capital expenditures as follows:

• growth capital expenditures, which are made to build additional assets, expand and upgrade existing systems, or acquire additional assets; Where

•maintenance capital expenditures, which are made to replace partially or fully
depreciated assets, to maintain the existing operating capacity of our assets,
extend their useful lives or comply with regulatory requirements.

Our growth capital expenditures during the year will increase the services we
can provide to our customers and the operating efficiencies of our systems. We
expect to finance our capital expenditures with a combination of cash generated
by our operating subsidiaries, distributions received from our equity
investments and borrowings under our credit facility. Additional commitments or
expenditures will be made at our discretion, and any discontinuation of these
construction projects could result in less future operating cash flows and
earnings.

The following table summarizes our capital expenditures for the nine month period ended. September 30, 2021 (in millions):

               Growth capital (1)                             $ 40.9
               Maintenance capital                              13.1
               Other (2)                                         1.8
               Purchases of property, plant and equipment     $ 55.8


(1) Includes $ 19.5 million paid in connection with an ongoing litigation over the construction of the Bear Den II cryogenic processing plant. (2) Represents purchases of tangible fixed assets reimbursable by third parties.

Investments in Unconsolidated Affiliates. During the nine months ended September
30, 2021 and 2020, we contributed approximately $6.9 million and $6.0 million to
our Tres Holdings equity investment for its operating purposes. During the nine
months ended September 30, 2021, we contributed approximately $3.3 million to
our Crestwood Permian equity investment primarily to fund its expansion
projects. During the nine months ended September 30, 2021, we received a
distribution from Stagecoach Gas of approximately $614 million, which
represented our proportionate share of the gross proceeds received by Stagecoach
Gas related to the sale of certain of its assets to Kinder Morgan as discussed
above.
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Financing Activities

The following equity and debt transactions impacted our financing activities during the nine months ended September 30, 2021:

Equity and debt transactions

• During the nine months ended September 30, 2021, the CEQP paid approximately $ 275.6 million in conjunction with the Crestwood Holdings Transactions;

•During the nine months ended September 30, 2021, distributions to our partners
decreased by approximately $11.7 million compared to the same period in 2020,
primarily due to the decrease in common units outstanding as a result of the
Crestwood Holdings Transactions;

• During the nine months ended September 30, 2021, we paid around $ 690.5 million redeem and cancel approximately $ 687.2 million our senior notes due 2023;

• During the nine months ended September 30, 2021, we received net proceeds of approximately $ 691 million the issuance of our senior notes maturing in 2029; and

• During the nine months ended September 30, 2021, our other debt-related transactions resulted in net repayments of approximately $ 471.1 million compared to a net proceeds of approximately $ 215.9 million during the same period in 2020.

Summary financial information of the guarantor

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. For additional information regarding our credit facility
and senior notes and related guarantees, see our 2020 Annual Report on Form 10-K
and Item 1. Financial Statements, Note 8 of this Quarterly Report on Form 10-Q.

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 Obligor 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.

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Information on the summary combined balance sheet (in millions)

                                        September 30, 2021      December 31, 2020
Current assets                         $            615.9      $            371.3
Current assets - affiliates            $              5.8      $              1.1
Property, plant and equipment, net     $          2,215.9      $          2,295.2
Non-current assets                     $            657.4      $            696.2
Current liabilities                    $            752.4      $            345.4
Current liabilities - affiliates       $             16.8      $            

5.0

Long-term debt, less current portion $ 2,024.9 $ 2,483.8 Non-current liabilities

                $            144.1      $            157.4



Information on the condensed combined income statement (in millions)

                                                                                 Nine Months Ended
                                                                                September 30, 2021
Revenues                                                                        $        3,105.2
Revenues - affiliates                                                           $           28.3
Cost of products/services sold                                                  $        2,603.0
Cost of products/services sold - affiliates                                     $          101.3
Operations and maintenance expenses(1)                                          $           76.2
General and administrative expenses, net(2)                                     $           61.3
Operating income                                                                $          121.5
Net income                                                                      $           14.8



(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 reduction of
operations and maintenance expenses in our consolidated statements of
operations. During the nine months ended September 30, 2021, we charged $23.9
million to our affiliates under these agreements.
(2)  Includes $19.8 million of net general and administrative expenses that were
charged by our affiliates to us.

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