Crestwood Equity Partners LP

Good morning and welcome to today's conference call to discuss Crestwood Equity Partners' first quarter 2023 financial and operating results. 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 and adjusted EBITDA, distributable cash flow, and free cash flow will be discussed. Reconciliations to the most comparable GAAP financial measures are included in the news release issued this morning. Joining us on today's Call with prepared remarks are founder, chairman, and chief executive officer, Bob Phillips, president, Robert Halpin, and executive vice president and chief financial officer, Johnny Black. Additionally, additional members of the management team are available for the question and answer session with Crestwood's current analysts following the prepared remarks. Today's call is being recorded. If anyone should require or operate assistance during the conference, please press star zero on your telephone keypad. At this time, I will turn the call over to Bob Phillips.

Thank you, operator, and good morning, everyone. Thank you for joining us today to discuss our first quarter 2023 results and a little discussion on how we're positioned for the rest of the year. I'll begin by a few opening remarks and then turn it over to Robert for an operational review of the quarter, and then finally to Johnny to review the first quarter financial results in more detail. As I start, as a reminder, when we went into a lot of detail last quarter, about our strategic M&A, but let me just give you a reminder that we have repositioned the Crestwood portfolio in the last couple of years through strategic M&A, specifically to bulk up our G&P isets in the areas that we operate and extend our long-term producer-dedicated inventory in those core oil-weighted resource plays, which are the Williston, Delaware, and Powder River basins. Our producer customer portfolio continues to improve year-over-year through upstream consolidation. We believe oil fundamentals will remain strong throughout the decade, and natural gas prices, while lower today due to oversupply, will start to improve beginning in the second half of this year and on into 2024. We expect that to occur due to a pullback in gas-directed rig activity in the short term. and LNG demand growth over the long term, so we're bullish on gas prices going forward. As producers are becoming more disciplined in their development programs across the industry, we think our GMP portfolio is strategically located on or near some of the best undeveloped acreage in these oil-weighted basins with the lowest break-even cost and the highest potential for production growth And we think this is indicated by the 70 new wells that we connected to Crestwood assets in the first quarter. So let me give you a high level update on our core areas. First in the Williston. We're seeing the Arrow system slowly catch up to last year's volumes as we expect to connect more than double the new wells in 2023 than we connected last year. Our key producers, Devon, Exxon, Interplus, are maintaining active new drilling or duct completion programs, and they have a number of work over rigs coming back in the field, bringing weather-related shut-in production back online. So a lot of activity around Arrow. On the Rough Rider system, Cord is spot on on their 2023 development schedule, and we just placed the very important City of Williston three-product gathering project in service last week And this is critical infrastructure to support CORD's 2023 and 2024 drilling program in the western acreage dedicated to us. And let me finally say that our Williston operations team continues to do a great job in reducing operating costs, continuing to find integration synergies, and mitigating winter weather disruptions that we've experienced in the fourth quarter and the first quarter of this year. Now on to the Delaware. Now that our Sendero, CPJV, Willow Lake, and Orla assets are fully integrated, we continue to see solid performance in producer drilling activity, new well connects, IP rates, system volumes, and third-party processing opportunities. The efficient integration of our Delaware assets has allowed us to maximize available gathering, compression, and processing capacity while minimizing or delaying growth capital to capture new supplies. We have years of great Delaware inventory dedicated to our systems there with access to multiple competitive downstream markets. We're very well positioned for future growth in the Delaware. With in-basin gas production continuing to hit record levels, the market for gas processing capacity has become very tight. which places a significant premium on unutilized processing capacity. Based on our current schedules, we expect to see a significant amount of organic production growth over the next 12 to 18 months that we think will drive near full utilization of our processing capacity. So good timing on the Sendero and CPJV acquisition last year. Great integration effort by our operations team. Extremely well done build out by our EPM team with new gathering compression and we're beginning to utilize all of that processing capacity that we bought last year. Now to the Powder River Basin, the future continues to look bright. We've recently had meetings with Continental and they continue to ramp up their long-term development across all three dedicated acreage blocks. We expect to see that continue to grow over the next few years. With excess gathering, compression, and processing capacity on the legacy system that we built for Chesapeake pre-bankruptcy, Crestwood's very well positioned to compete for not only the growth of continental volumes, but significant new producer supplies that are being developed in the PRB in and around our gathering systems. Now quickly to the finance side, despite all the changes in our portfolio, Crestwood continues to maintain strong distribution coverage and conservative financial metrics compared to our peer group. To keep our balance sheet in check, we divested legacy low growth and non-core GNP assets in the Barnett Marcellus. Plus, we sold JV interest in our gas storage assets at Stagecoach and Trace Palacios. We got better than expected prices for those assets. and are able to reduce our debt back to four times leverage on a pro forma basis. We continue to believe that was a really good trade for Crestwood as we scaled up our GNP portfolio with visible long term growth in top tier oil weighted basins. And we expect that to drive continued declines in leverage in 2023 and 24. We're also continuing to streamline the Crestwood organization through the efficient integration of these new assets resulting in lower per unit operating costs and importantly reduced emissions on the newly acquired assets using Crestwood's leading carbon management plan. Our operations plan this year is now to focus on execution, optimization, and value creation while our capital allocation strategy for 23 remains focused on utilizing free cash flow after distributions to pay down debt and enhance Crestwood's financial flexibility. So a couple of final notes before I hand the call over to Robert. I want to reiterate that Crestwood's off to a great start in 23. We've got volumetric growth on key systems. Our quarterly performance was very much in line with market expectations, and we continue to enhance our financial flexibility, closing the trace transaction and getting our leverage ratio back to 4.0. pro forma. After a busy 22, we're excited to focus on this year's priorities to execute on our 23 guidance, grow EBITDA and free cash flow by optimizing our asset base and creating long-term value for our unit holders through deleveraging of the balance sheet and paying out our well-covered distribution of $276 million a year to common unit holders. We think the combination of all these strengths across the Crestwood organization will continue to represent a compelling total return opportunity for Crestwood investors. And we're really pleased with how we're well positioned for the next several years to grow in all these areas. And with that overview, happy to turn the call over to Robert and Johnny to cover the quarter's operational and financial results. Robert. Thank you, Bob.

And good morning, everyone. As Bob mentioned, I am very pleased with Crestwood's great start to the year and believe that the outlook for the remainder of the 2023 timeframe looks very strong across all of our assets. Starting in the Wilson Basin, we connected 29 wells across the Arrow and Rough Rider systems during the first quarter, which was in line with our expectations as producers turned in line wells on schedule and on time. This was a fantastic accomplishment for our operations teams up in North Dakota as well as for our producer customers as this past winter proved to be exceptionally challenging as record snowfall and cold temperatures hit North Dakota and surrounding states. While we did experience some lingering volumetric impacts associated with the weather in the first quarter of this year, we are seeing positive trends across the assets as warmer weather has arrived. Also important, it appears as though our customers have successfully mitigated some of the supply chain and labor challenges that we faced in North Dakota over the past year as DNC schedules year to date have been right in line and planned wells for Q1 and the early part of Q2 have turned in line on or even ahead of schedule. To that end, we continue to anticipate strong producer activity across the rest of the year and remain on track to connect between 115 to 125 new wells by year end. The majority of these new well connections are coming from key Bakken operators Devon Energy and Cord Energy. Our growth capital spend in the basin, approximately half of our 2023 budget, is progressing as planned and is focused on the western expansion of the Rough Rider system as well as incremental expansions on the Aero system. We are excited to bring our Rough Rider expansion into service as we are optimistic about the growth potential of the dedicated acreage and the third-party opportunity set in the Western Wilson Basin. In the Delaware Basin, we connected 35 wells across our New Mexico and Texas gathering assets during the quarter, which drove natural gas gathering volumes of 495 million cubic feet per day, or over a 100% year-over-year growth. This is in part due to our acquisition of Sendero Midstream but also is a result of substantial volume growth on our legacy Willow Lake system by both public and private operators, with gathering and processing volumes growing by 60% and 50% year over year respectively. For the balance of the year, the development activity for our assets remains strong, and we continue to expect 120 to 130 new well connections through the end of 2023. And finally, our capital spend in the Delaware Approximately 40% of our 2023 budget remains on track and is focused primarily on well connects, system expansions, and compression additions in New Mexico to accommodate continued development from our dedicated customers. Now moving to the Powder River Basin, we connected six wells during the first quarter and Crestwood remains on track to connect between 10 to 20 new wells throughout 2023. Additionally, we are actively pursuing commercial opportunities with large operators in the basin to bring new volumes onto the Jackalope system and capitalize on our unutilized processing capacity at the Bucking Horse facility. And finally, in the storage and logistics segment, our NGL logistics business, which constitutes about 90% of segment earnings following the trace divestiture, had a successful quarter optimizing our NGL storage and transportation assets in response to increased demand from winter weather in the Midwest and East Coast. The 10 million barrels of NGL storage and 13 terminals, the NGL logistics business is well positioned this year to capitalize on continued commodity price volatility and deliver a solid year of results. And now I'll turn the call over to Johnny to cover our financial results.