Crestwood Equity Partners LP

Good morning and welcome to today's conference call to discuss Crestwood Equity Partners' fourth quarter 2022 financial and operating results and 2023 outlook. Before we begin the call, listeners are reminded that the company may make certain forward-looking statements as defined in the Securities and Exchange Act of 1934 that are based on assumptions and information currently available at the time of today's call. please refer to the company's latest filings with the SEC for a list of risk factors that may cause actual results to differ. Additionally, certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, reputable cash flow, and free cash flow will be discussed. Reconciliations to the most comparable GAAP measures are included in the news release issued this morning. Joining us today with prepared remarks are founder, chairman, and chief executive officer Robert Phillips, President Robert Halpin, and Executive Vice President and Chief Financial Officer Johnny Black. Additional members of the senior management team will be available for the question and answer session with Crestwood's current analysis following the prepared remarks. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keyboard. As a reminder, today's call is being recorded. It is now my pleasure to introduce your host, Bob Phillips. Thank you, sir. You may begin.

And thank you, operator, and good morning to everyone. Thanks for joining us today. I'm going to start us off with a recap of the strategic transition that we've made over the past couple of years, and then I'll turn it over to Robert to discuss our operational results and our segment outlooks, and then finally to Johnny to dive deeper into our 2022 financial results and our 23 guidance. So let me start with 2022. There's another extremely important year for Crestwood as we push forward with our regional consolidation strategy, which was designed to establish Crestwood as a top three gatherer processor in the Williston, Delaware, and Powder River basins. This follows a portfolio realignment strategy, which we started in 2021 to core up our competitive position in oil-weighted resource plays which have better long-term producer economics and decades of undrilled inventory, which are dedicated to our system. And we've done this while divesting assets in gas-weighted, low-growth basins and businesses. And we think this streamlines our portfolio, and it kept our balance sheet in a good spot while we made the transition. So effectively, we've been transitioning away from the widely diversified midstream portfolio we put together in the first few years of Crestwood, and it served us well during the formative years, to a much more concentrated gathering and processing position in the basins that offer stable long-term production profiles and more visible growth potential at what we think are realistic commodity prices going forward. Very proud of it. I think that we've accomplished that. We're in a good spot as we look to the future. Just as a recap transactionally in 2021, I'll remind you that we acquired First Reserve's general partner and limited partner interest. We converted our governance structure to a publicly elected board. We sold our northeast stagecoach gas storage facility. And late in the year, we announced the OASIS midstream deal to make us bigger in the Williston. In 2022, we closed the OASIS midstream merger. doubling our size in the Williston Basin. We increased our annual distribution by 5%. We organized a significant stock buyback of CEQP units from Cord, which was created through the merger of Oasis Production and Whiting. We also sold our legacy Barnett and Marcellus gathering and processing assets, which were on PDP decline. And we significantly expanded our Delaware position by buying out First Reserves CPJV interest in acquiring the Sendero midstream assets. So a big year in 21 and in 22. Cutting across both years, we built the Continental Express pipeline to connect all of Continental's acreage in the Powder River Basin, which dramatically improves the long-term outlook for the PRB. And we successfully integrated all of our acquired assets with our legacy assets in the Williston and Delaware basins, which gave us cost savings, operating synergies, significantly more processing capacity, new commercial opportunities, and made our capital program much more efficient due to the larger scale in each of these basins. Now, I can say while I'm disappointed in our actual 22 results, which came in short of our expectations and the market's expectations due largely to extreme winter events, and producer development delays which were caused further by industry-wide oilfield services and supply chain challenges, I am very pleased strategically with the repositioning of our portfolio and the assimilation of these new assets and the positive growth outlook that we have in all three basins for 2023 and beyond. I think that Crestwood is a much better, stronger, and more resilient company one of the top gathering and processing franchises in the industry, a leader in midstream ESG, and an MLP with significant upside potential for our unit holders who are looking for stable distributions and growing total return. So as we begin 2023, we're continuing to focus on our balance sheet with a successful, recently with a successful $600 million senior note deal in January that was upsized and significantly oversubscribed. And we termed out our revolver and significantly enhanced our liquidity going forward with that very successful note deal. And just this morning, Crestwood and our joint venture partner Brookfield have announced the sale of our Trace Palacios gas storage facility for $335 million in total proceeds. The sale represents for Crestwood our fourth non-core divestiture at a highly compelling valuation and allows Crestwood to utilize our $168 million in cash proceeds to pay down debt and further strengthen our balance sheet. I want to take a moment to personally thank the hardworking field employees at Trace Palacios that have contributed so much to our success over the last decade. They fully embody Crestwood's operating principles. And I'm proud to say that they have the longest string of net zero, triple zero safety performance in the entire company. So we're really proud of the Trace Palacios folks. They did a great job for us. The divestiture of Trace Palacios, I think, culminates our strategic repositioning plan over the last couple of years. And we're now laser focused on maximizing free cash flow out of the portfolio and reducing debt over the next few years through what we think is a very streamlined and very competitive asset portfolio in the three basins that we operate. Robert and Johnny are going to get into the details, but I do think that the industry is much better equipped to manage some of the supply chain challenges that we saw last year going forward. And certainly our producer portfolio is in much better shape, both financially and operationally, to deliver on their forecasted development activity in 2023. We expect to add approximately 260 new well connects in 2023. That is an increase of over 15% from last year. And we're going to continue to carefully and efficiently spend growth capital to expand backbone infrastructure of our strategically located systems and plants and make new well connections primarily in the Williston and Delaware basins, and we have budgeted more than 8% increase in cash flow year over year at our midpoint in the guidance. So let me close by highlighting our current distribution rate of $2.62 per unit annually. At that rate, Crestwood is returning approximately $276 million to common unit holders this year, And our distribution is very well covered at more than 1.7 times. And that enables Crestwood to deliver what we think is one of the best investment opportunities in the midstream space. Really proud of the work that the team has gotten done last year and so far this year. We're in a really good spot. And with that, I'll turn the call over to Robert and Johnny to provide additional details on our 22 operations and our 23 guidance.

Robert? Thank you, Bob, and good morning to everyone. I would like to echo Bob's thoughts around the strength of our reposition portfolio and the outlook over the coming years. Additionally, we are excited to pivot our focus on execution in 2023, following an active year of M&A and integrating our newly acquired assets to fully maximize throughput across our systems. Starting in the Williston Basin, we connected 21 wells across the Arrow and Roughrider systems during the fourth quarter. bringing the full year total to 86 wells, which was below our initial expectations due to the extreme winter weather, which we discussed in our January 11th operational update. While we cannot control the weather, we can control how Crestwood responds to these events. I am extremely pleased with our operations teams on both the Arrow and the Rough Rider systems, as they did a tremendous job during the quarter working with producers to get production back online and flowing as quickly as possible. As we look to 2023, we expect an active drilling program across our dedicated acreage, led by Cord Energy and Devon Energy, driving approximately 120 well connects in the Williston, or about 40% more than in 2022. We anticipate an average of four to five rigs running throughout the year, driving approximately 5% to 10% volume growth year over year. With respect to growth capital, Roughly half of our 2023 capital budget will be invested in the Wilson Basin as we continue to build out of the multi-product gathering system for core energies, painted woods, and city of Wilson acreage, and complete smaller incremental expansions on the aero system. Now turning to the Delaware Basin, we connected 35 wells during the quarter for a full year of 128 well connects across Crestwood's gathering systems. We expect our diverse set of public and private operators to continue their active drilling and completion programs in 2023, resulting in approximately 125 WellConnex across our assets. That should drive a 10% to 15% volume growth year over year. Our commercial teams are actively capturing incremental low pressure and high pressure gathering and processing opportunities across our New Mexico and Texas assets, which will position Crestwood to fully optimize our 550 million cubic feet per day of in-service processing capacity. Approximately 40% of our 2023 capital budget will be invested in the Delaware Basin, primarily on well connects, system expansions, and compression additions in New Mexico. Now, finally, in the Powder River Basin, We expect between 10 to 20 new well connects on the Jackalope system. Continental Resources, Crestwood's largest customer in the basin, continues to delineate its large acreage position, targeting multiple formations. We continue to work with other large operators in the area to bring new volumes on the Jackalope system and capitalize on our excess processing capacity at the Bucking Horse facilities. In the storage and logistics segment, with the divestiture of Trace Palacios announced this morning, the NGL logistics business will now make up about 90% of the earnings for the segment going forward. We expect the earnings for the S&L segment to return to normalized levels in 2023, as our 2022 hedges have rolled off at the end of 2022, and the current contango in the NGL forward curves present incremental margin opportunities around our NGL storage assets. I'll turn the call over to Johnny to cover our financial results in 2023 guidance. Thank you, Robert.