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Why CEQP Expects Its EBITDA to Decline in 2017

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Crestwood Equity Partners’s 2017 EBITDA guidance

Crestwood Equity Partners (CEQP) announced its 2017 financial guidance during its 4Q16 earnings release. The partnership expects its 2017 adjusted EBITDA[1. earnings before interest, taxes, depreciation, and amortization] to lie between $360 million–$390 million. At the midpoint, this represents a 17.7% decline compared to its 2016 EBITDA of $455.6 million.

The huge decline in the partnership’s 2017 EBITDA is mainly due to the full-year impact of the Stagecoach JV it formed with Consolidated Edison (ED) and the expiration of its important rail loading contract at Colt Hub.

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According to Robert Phillips, CEQP’s CEO and president, “We view 2017 as a transition year where system volumes stabilize, key systems are expanded and overall volumes and cash flow begin to pick up in the second half of the year with increasing activity around our Delaware Permian, Bakken, Marcellus, PRB Niobrara and Barnett systems.”

Crestwood Equity Partners’s 2017 distribution guidance

The partnership expects flat distribution for 2017, most likely due to a decline in distributable cash flow driven by lower EBITDA. CEQP expects its distributable cash flow to lie between $200 million–$230 million, which is 23.8% lower than its 2016 cash flow. This distributable cash flow level could result in lower distribution coverage.

In comparison, American Midstream Partners (AMID), another MLP backed by a private equity firm, expects 5% distribution growth in 2017 and 2018 following its merger with JP Energy Partners (JPEP).

The partnership expects to resume distribution growth in 2018, driven by cash flow growth through expansion projects placed into service and recovery in drilling activity.

Crestwood Equity Partners’s 2017 growth plans

CEQP expects to spend between $130 million–$150 million on organic projects in 2017. This includes its contribution in the JVs (joint ventures). Out of this, the partnership expects to spend $55 million on the Arrow system and $45 million on the Nautilus natural gas gathering system. CEQP’s proposed spending is backed by a long-term contract with SWEPI LP, a subsidiary of Royal Dutch Shell.

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