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An Analysis of Crestwood Equity’s Cash Flow Measures

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Crestwood Equity’s adjusted EBITDA

Crestwood Equity’s (CEQP) 2Q16 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell to $106.5 million from $133.1 million in 2Q15, a YoY (year-over-year) fall of 20.0%.

Crestwood Equity revised its financial guidance for 2016 after the announcement of its deal with Consolidated Edison. The new guidance assumes “five months of Crestwood’s ownership at 100% and seven months of Crestwood’s proportionate share of Stagecoach Gas Services’ earnings of 35%,” according to Crestwood in its 2Q16 earnings release.

Crestwood’s Northeast storage and transportation assets were transferred to Stagecoach Gas Services. Based on its new guidance, CEQP expects its 2016 EBITDA to lie between $435 million and $465 million, which at the midpoint is ~10.9% lower than its previous guidance.

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Crestwood Equity’s distributions

Crestwood Equity Partners declared a distribution of $0.58 per unit in 2Q16, flat compared to the previous quarter. The partnership announced a distribution cut in 1Q16 to strengthen its balance sheet and to improve its distribution coverage. Its distribution coverage stood at 1.7x at the end of 2Q16.

CEQP joined Kinder Morgan (KMI), Boardwalk Pipeline Partners (BWP), and Teekay LNG Partners (TGP), the other three midstream companies that had cut their per unit distributions in the past.

Crestwood Equity’s capital expenditure

CEQP spent ~$25 million on organic expansion in 2Q16. The partnership expects to spend between $50 million and $75 million on growth projects in 2016. Its growth capital expenditure is expected to rise considerably in 2017–2018. 

CEQP is pursuing organic expansion through its formation of various joint ventures, including “First Reserve in the Delaware ­Permian; Con Ed in the Northeast; Brookfield in South Texas around Tres for Mexico gas and LNG,” according to its 2Q16 earnings release.

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