Crestwood Midstream Partners LP CMLP
Q4 2011 Earnings Call Transcript
Transcript Call Date 02/28/2012

Operator: Good day ladies and gentlemen and welcome to today's Crestwood Midstream Partners Fourth Quarter Earnings Call. As a reminder, today's call is being recorded.

It is now my pleasure to turn today's call over to Mr. Mark Stockard. Please go ahead, sir.

Mark Stockard - VP, Treasurer and IR: Thank you. Good morning, everyone, and welcome to our call. Bob Phillips, Crestwood's Chairman, President and CEO will open the call to review the highlights of the past year, as well as the transaction with the Antero Resources annual general partner that we announced yesterday. Bob, will also discuss Crestwood's outlook for 2012. Bill Manias, Senior Vice President and Chief Financial Officer will review the financial and operational performance for the quarter. After their reviews, we'll open the call up for your questions.

During the call, we'll make certain forward-looking statements as defined in the Securities and Exchange Act of 1934 based on the beliefs of the Company, as well as assumptions made by in information currently available to management. Although, management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.

In addition during this call, we'll be discussing certain financial measures such as Crestwood's EBITDA, adjusted EBITDA, distributable cash flow, and adjusted net income, which are non-GAAP measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the press release that we issued earlier this morning and posted on the Investor Relation section of our website at www.crestwoodlp.com.

With that, I'll turn the call over to Bob.

Robert G. Phillips - Chairman, President and CEO: Thanks, Mark, and good morning to everyone. We know that the analysts are quite busy today with the gathering and processing peer group, so we'll be efficient with your time. I'm going to start the discussion with an overview of the Antero Marcellus Shale Gathering acquisition which we announced yesterday and then cover the 2011 highlights, turn it back to Bill who will review the fourth quarter performance, balance sheet, liquidity, and then I will come back and talk to you about our outlook for 2012, and then we will be happy to answer any questions that you might have.

So, let me kick it off with an overview of the Antero deal, can't tell you how excited I am about this. We announced yesterday the formation of a joint venture between Crestwood and Crestwood Holdings Partners, or Holdco as we call it internally here, to acquire Antero Resources Marcellus Shale Gathering Assets in a $375 million transaction, with the potential $40 million earn-out over the next couple years. We expect the deal to close by the end of March of this year subject to regulatory approval, the normal closing conditions.

The joint venture that we are forming will be owned 65% by Holdco and 35% by Crestwood. Crestwood will be the operator of the joint venture and will operate the Marcellus assets on behalf of the joint venture. Holdco will finance its portion approximately $244 million of the purchase price with an equity commitment from First Reserve, our general partner and a debt financing arranged by a syndicate of six banks including Bank of America, Bank Paribas, Citi, RBC, RBS and UBS. And the bank group will also provide the joint venture with a $200 million revolving credit facility to finance the acquisition of the gathering system over the next several years.

Now, Crestwood will make its contribution of approximately $131 million to the joint venture by drawing on our existing $500 million revolving credit facility where we have plenty of liquidity to complete this transaction. So let me be clear, no capital markets activity will be required for Crestwood, to complete the Antero acquisition. Frankly, we think it's a great use of proceeds for January $103 million equity offering that we just recently completed.

The joint venture will acquire 33 miles of 8 to 16 inch low pressure gathering system, located in the Southwestern core fairway of Marcellus Shale play, specifically in the Northern West Virginia area. This system which was constructed over the last couple years by Antero currently gathers approximately 210 million cubic feet per day, from 51 horizontal Marcellus Shale wells that have been drilled by Antero, over the last couple of years and we expect the system to grow to average about 320 million cubic feet per day during 2012, based upon Antero's current drilling plan.

At closing, the joint venture will also enter into a 20-year gas gathering and compression agreement, which will cover a substantial area of dedication. It will provide for fixed fees with annual escalators for all low-pressure, high-pressure gathering and compression services that are provided to Antero within the area of dedication. We're going to be working off of an 18-month rolling, drilling and development plan with Antero.

As we expand the system currently we expect to spend about $55 million in expansion capital in 2012, at the joint venture level, about $200 million over the next five years and when we look out over the 10 year period the long-term plan forecast that we might build as much as 300 miles of potential system, as the acres that are dedicated to us are fully developed.

Now from a financial standpoint, the joint venture is acquiring the asset of approximately 11 to 12 times forecasted 2012 EBITDA that seems very competitive to us when compared to the multiples recently paid by MarkWest and Williams for acquisition in the high growth areas of the Marcellus shale.

The JV should see economics annually over the first several years of 6% to 12% cash on cash equity yields that will enable the joint venture to consistently make growing quarterly distributions to HoldCo and Crestwood and ultimately as we look at the joint venture economics we think it generates kind of an unlevered project level return in the mid-to-high teens assuming a full 10 year hold period.

From Crestwood's perspective based upon the expected distributions from the joint venture we should see 4% to 5% accretion to the LPs in the first couple of years based on how we are financing our share of the purchase price and of course the opportunity to acquire greater interest in the joint venture as the assets mature.

Now, let me touch on what I think are the six compelling highlights of this transaction for Crestwood; number one, deal puts us squarely in the core of the Marcellus shale, which as we all know has now become the premier shale play in North America. With that we've got Antero a very experienced shale producer to add to our customer list. Tudor Pickering recently said the Marcellus shale is the only onshore gas play that works at current gas prices and we certainly agree with that.

Antero has a leading position in the Marcellus shale with over 220,000 net acres of which about 75% have a rich gas potential. The infrastructure build out to fully develop these assets will be substantial and will take many years. Antero has already drilled 65 horizontal wells to-date in the Marcellus shale and they've produced some of the top tier wells in the play, averaging initial production rates of about 13 million a day and with average EURs of 9 Bcf per well, in fact 35% of the wells that have been completed so far by Antero have EURs well in excess of 10 Bcf.

The sale of the gathering system from Antero to Crestwood is a normal monetization that producers in shale plays typically go through to further finance future development of their acreage and clearly this transaction, announced yesterday along with Antero's capital budget for 2012 plays a big part in that.

Just to note Antero has announced record 2012 capital spending of $861 million with $562 million committed to drilling and completions in the Marcellus Shale in 2012 and we will be the substantial beneficiary of that through our gathering system. Benefit number two, this is a substantial rich gas play. The acreage dedication that is committed under our long-term contract is supported by very strong drilling economics.

Puts a great balance in the overall Crestwood portfolio and continues to drive our strategy to try to acquire more rich gas exposure. Total contract dedication under the gas gathering agreement will be 127,000 acres, consistent with our other large long-term contract and large acreage dedications in the Barnett and the Fayetteville. The acreage is 100% operated by Antero. They currently have six rigs running on the acreage.

They expect to drill 29 wells in 2012 of which they have designated two-thirds in the rich gas area, and one-third in the lean gas area. Looking at the total acreage dedication over time, we estimate that the drilling inventory of Antero wells is more than 800 wells on the 127,000 acres and that's assumed they don't acquire or consolidate any additional acreage in this AOD.

We also estimate based upon the amount of third-party acreage within the AOD that another 200 third-party wells could be drilled on third-party acreage and the producers in the area, although we don't have agreements with and are just now beginning to contact include East Resources or Shell, XTO or Exxon, Equitable and an independent PDC.

The rich gas that we gather will flow towards the new MarkWest Sherwood Gas Processing plant, which has been announced, is under construction and will be placed in service approximately in the third quarter of 2012. So the ramp-up of rich gas volumes from take it on to the MarkWest Processing plant.

The lean gas will flow through existing interconnects with Columbia, Dominion and Equitrans, and most importantly, with respect to the Area of Dedication in the transaction, we negotiated a very important seven-year (apply the) first offer on the acquisition of any additional Antero Gathering Assets that are constructed in the 100,000 acres adjacent to our AOD, that acreage surrounds the MarkWest Sherwood plant.

So, we are very excited about the upside potential of a future acquisition opportunity should Antero decide to construct gathering lines and monetize those after years as has been their customary practice.

The third benefit is a very significant seven-year minimum volume commitment, which provides ultimate downside protection for our investment. This is an annual true-up, which provides cash payments for any volume deficiencies between 2012 and 2018, starting with 300 million a day or approximately 94% of our volumetric forecast in 2012. It ramps up to 450 million a day, in years 2016, '17 and '18. In 2018 that's approximately 55% of our forecasted volumes.

On a cumulative payback basis, the minimum volume case, if we receive nothing other than seven years of true-ups would return about 83% of our purchase price, and therefore the way we structure this transaction that minimum volume commitment guarantees accretion to Crestwood through the entire seven year period.

Fourth, the joint venture structure enables Crestwood to buy meaningful percentage of this great Marcellus deal without stressing our balance sheet and provide the first real drop-down opportunity from First Reserve since we acquired this business back in October of 2010.

The joint venture essentially provides the upfront capital to incubate these assets, through the early build-out phase and provides real visibility to growth for Crestwood, through a traditional drop-down strategy and we're very excited to finally achieve the first transaction in the strategy that we announced almost two years ago today.

Benefit number five, a 20 year fixed fee gathering and compression contract, it's consistent with our strategy, it's another great shale play in our diversified portfolio, another experienced shale producer, Antero has drilled and completed more than 300 horizontal shale wells, across the Barnett, the Woodford, the Fayetteville and now the Marcellus. They are experienced, they've got substantial financial resources, and the contract also maintains our 95% fixed fee contract profile, which as you know is very unique in the gathering and processing space as it limits our commodity exposure.

Finally, and I guess, anecdotally here the six benefit is that the Antero acquisition because of where it is located provides a possible consolidation opportunity with our previously announced Tygart Valley pipeline project which is only 20 miles to the east. Both assets will (startle) common producers and common acreage and the Tygart Valley Pipeline once finally built and placed in service will present an attractive additional market outlook to Antero taking gas back to the east into the Baltimore and Washington DC market.

While I am on the subject of the Tygart Valley Pipeline project we also announced today in our earnings release one year extension of the Memorandum of Understanding with Mountaineer Keystone our producer up in that area on the plans to build the Tygart Valley pipeline due to a delay that they had in receipt of their first drilling rig until later in 2012 and clearly obvious impact of lower gas prices on the cost to carry of that pipeline in the first year. Remember it was a pipeline that was going to receive four years of firm demand charges to reserve that capacity.

Mountaineer Keystone has asked us to delay the start of the construction of the project until early 2013. We’ve agreed to that and we extended the Memorandum of Understanding for a year this ask is consistent with other producers that we talk to in the area that told us about delays in their 2012 drilling programs as well due to lower gas prices. So, we are going to continue to acquire right way of permits for the project in 2012 all subject to the reimbursement provision of the MoU with M.K. and we think this project will be moving forward by the end of the year and will be a great addition to our 2013 portfolio.

Before I leave my comments on the Antero acquisition I just want to say how proud we are to partner with Antero going forward to develop these important properties. Antero is a substantial and successful private equity-backed independent producer. They are of substantial size. They've got over 5 Tcfe of proved reserved 57% of which are in the Marcellus.

Their 3P reserves recently announced year-end 12/31 at 17.4 Tcfe, with 78% of those allocated to the Marcellus. They have a substantial five-year hedge book with over 710 Bcfe hedged average price of $5.53 and 84% of their 2012 forecasted volumes are hedged at an average price of $5.69. We're pleased to be the gatherer of choice for Antero in the Marcellus Shale.

So, now let me turn to the highlights of our 2011 Crestwood year, we think it was an outstanding year in every respect for our team. This management team has guided Crestwood since October 2010. We've significantly grown the partnership and I think we've delivered on all of our promises to diversify, to build, to expand and to make consistent distributions to our limited partners.

For the full year 2011 our gathering volumes increased 66% to 662 million a day of. It drove adjusted EBITDA increased by 44% to $110 million and as a result, we've increased cash for distributions in each quarter that we've managed the partnership.

The most recent increase was $0.49 per unit represented a 14% year-over-year increase in distributions. So, we certainly delivered on our original promises when we bought KGS. During 2011, we invested $462 million in acquisitions and capital projects. We raised $215 million in equity financing to maintain a very conservative leverage ratio, which came in debt to pro forma EBITDA of 4.3 times at year end 2011. Of course in early January, we raised an additional $103 million in a follow-on equity offering.

Crestwood, as you know, was the first MLP to issue equity in this calendar year, and we believe the early timing helped good placement and execution on the offering. In addition to our equity offerings over the last 12 to 15 months, we also issued $200 million of senior notes in April of last year to fund partially the Frontier acquisition, and I am excited to let you know that the senior notes are now trading at about 102, and that certainly provides a very attractive long-term source of capital at fixed rates for us.

With that quick overview of the Antero acquisition in our 2011, now I will turn the call over to Bill to review the fourth quarter in more detail and then I will come back and talk about guidance for 2012. Bill?

William G. Manias - SVP and CFO: Thanks Bob. Crestwood had another very successful fourth quarter and full year. Fourth quarter net income $12.3 million and adjusted EBITDA was a record $30.4 million. Adjusted EBITDA increased 36% from the $22.3 million we reported in the fourth quarter of 2010, and that's primarily due to contributions from the Frontier and the Tristate acquisitions, and continued volume growth in the Barnett.

Our adjusted distributable cash flow totaled $23.4 million, that's up 33% over the fourth quarter of 2010. As Bob said last month, we announced our fifth consecutive distribution increase to $0.49 per unit, which is a 14% increase over the distribution rate above the fourth quarter in 2010. For the year our distribution coverage ratio was a healthy 1.2 times.

Total gathering volumes in the fourth quarter was 662 million, up 67% compared to the 397 million we gathered during the fourth quarter of last year. The Barnett Shale volumes are up 27%, this was the fourth quarter of 2010 and contributed about 107 million a day to this increase. The Frontier and Haynesville acquisitions also contributed about 147 million to this increase.

Our total fourth quarter processed volumes at the Cowtown and Corvette plants were 131 million cubic feet a day, that's up 4% over the fourth quarter of 2010 and our processing volumes for the quarter at Indian Creek averaged around 17 million cubic feet a day. So for the fourth quarter, our Crestwood processing plants produced just around 18,000 barrels of NGLs per day.

Our operating expenses for the fourth quarter of 2011 were $10.1 million compared to $5.7 million in the fourth quarter of 2010 and majority of this increase in OpEx is really attributable just to the addition of the Frontier and Haynesville assets that we acquired during the past year.

Our G&A expense for the fourth quarter of 2011 was $6.2 million compared to $9.5 million in the fourth quarter of 2010. I recall in fourth quarter of 2010, G&A cost included about $5.4 million of transaction expenses that were related to the Quicksilver acquisition. So, if you exclude those transaction expenses, the increase in ongoing G&A cost primarily just reflects the higher back office costs associated with the growing organization as we've added more than $460 million of acquisitions and capital spending during the past year.

At December 31, 2011, we had $312.5 million outstanding on our $500 million credit facility. Including the $65 million in cash we paid for the Tristate's acquisition in November, our debt-to-pro forma EBITDA at 12/31 was 4.3 times. Now if you include the impact of the 103 million of equity that we faced in early January and the 131 million equity contribution that we will make for the Antero transaction that we announced yesterday the debt to pro forma EBITDA would be around 4.5 times.

So, as CMLP continues to receive in the future quarterly cash distributions from the Marcellus joint venture our leverage ratio will continue to decrease over time. Bob also mentioned that a revolver will be established at the joint venture entity to fund the expected growth capital, so all of the operating cash flow generated at the JV level will be available for distributions to CMLP and Crestwood Holdings.

Before I turn it back to Bob, I want to note that Crestwood's liquidity position remains very strong which has always been a real important part of our financial strategy. Our successful equity offering in January essentially enabled us to pre-fund the Marcellus opportunity that we announced yesterday.

We have no debt maturities until 2015 and we maintain plenty of excess borrowing capacity. In fact, if you pro forma for the equity offering that we did in January and the Marcellus investment that we are going to make we still have over 150 million of availability under our revolver which is more than enough liquidity to fund our 2012 CapEx performance.

With that I will turn it back to Bob.

Robert G. Phillips - Chairman, President and CEO: Thanks, Bill. The theme here is still building the platform for another great acquisition. Turning to our outlook for 2012 I think with lower gas prices bringing cloud over Tygart plays throughout the industry I think is terms like this that we see the real benefit of having a very strong general partner like First Reserve to help us grow through down cycles.

When we look at 2012 as we concluded in our press release this morning reasonable growth in volumes and adjusted EBITDA we expect adjusted EBITDA in the range of $125 million to $135 million for the year, about (19%) increase, consistent with an increase in volumes between 650 million a day and 700 million a day, also an 18% annual growth in volumes over 2011. Now importantly, these numbers do not include the Antero acquisition or the Tygart Valley Pipeline project.

When we close the Antero deal we'll come back to you with an estimate of the contribution from that deal in 2012. This guidance does include however the most recent estimates from our producers having -- that our producers have given us regarding their drilling and completion plans for 2012 and this has been a somewhat dynamic process as you can imagine because budgets that were handed to us in December of last year, probably were reviewed several times before recent announcements, most importantly the Quicksilver announcement yesterday as to their performance for the prior year and their expectation for 2012.

So, we do believe that our plans are in line with natural gas price forecast we're not overly optimistic and we think the general trends throughout the industry of reduced gas oriented drilling activity and a shift in focus from dry gas plays to rich gas plays is probably going to pursue throughout 2012. We are optimistic in 2013 though for a beginning of a gas price recovery, of course prices have dropped dramatically over the last year down about 35% year-over-year to roughly 250 to 270 depending upon where you are in the country.

So our forecast expect volumes in the Barnett Shale to be essentially flat year-over-year, but does include a very important shift of activity to the liquids-rich Cowtown area where we benefit from higher fees than what we received for the dry gas gathering at Alliance and Lake Arlington. This is very consistent with Quicksilver's announcement yesterday to maintain flat volumes to slightly up by using one drilling rig in the Barnett throughout 2012, but importantly, a shift down to the gathering and processing assets in the Cowtown area will be beneficial for us.

Our forecast also includes a full year contribution of volumes and revenues from the systems that we acquired last year, the Fayetteville Shale, the Granite Wash system, the Haynesville/Bossier Shale systems all had partial year contributions in 2011, and we expect to see a full year with a slight increase in volumes in Fayetteville, where BHP continues to run two drilling rigs in our Area of Dedication and they are currently drilling multi-well pads, which, as you know, tends to accelerate volume growth as opposed to the one well per section HBP program of the past.

In the Haynesville area, while drilling activity in Haynesville and the Bossier has clearly slowed and we've seen those announcements, we are excited to announce a new offload agreement which we've just reached with a nearby adjacent gathering system that will fill our system up and cause us to add an additional CO2 treating facility to handle the volumes. So, that system probably runs above acquisition expectations. Of course, we bought the Sabine system in Haynesville in November of last year at a very good price.

Capital spending under this budget is about $35million to $40 million in 2012. This includes about $7 million to $8 million for maintenance capital spending, and this is clearly a barebones forecast. It does not include any additional acquisition capital, does not include the potential for development projects that we continue to work on in the Granite Wash area and the Las Animas area, which we're making good progress on, still working with the producers, but we don't have a definitive agreement, until we do, we probably will not include the capital, the volumes or the EBITDA associated with those projects. But we're still very excited about those two rich gas areas.

The Granite Wash, we've got a small position up there, and a plant that we've already paid for is ready to be installed. We're just waiting for the right contract with our producers, out in the Avalon Shale area, a lot more drilling activity in recent months and maybe a good chance to install that processing plant down there. So, to the extent that we complete those projects, we'll come back to you with guidance about how that will add to our overall 2012 forecast.

I guess in summary, before I open the call up to questions, Mark, I just want to say how pleased we are with how we positioned Crestwood over the past six quarters now. We've delivered solid and consistent distributions. We continue to expand the base of the operation, expand the platform. We're now in six shale plays and some of the best long-term shale plays in America, with great long-term fixed fee contracts.

So, we very much executed on our strategy. We've looked lower gas prices and dry gas slowdowns in the phase and made a significant rich gas acquisition in the Marcellus with the help of our general partner First Reserve. So we're pretty excited about where we are strategically in this.

With that Mark, I'll turn it back to you for questions.

Mark Stockard - VP, Treasurer and IR: Thank you. Andre, please give quick instructions for the questions and open up the line please.

Transcript Call Date 02/28/2012

Operator: Gabe Moreen, Bank of America/Merrill Lynch.

Gabe Moreen - Bank of America/Merrill Lynch: Question for you and Bob you did a great job at describing the Antero deal but you had mentioned I think sort of producer plants behind some of your other systems being influx and I just was wondering in terms of getting more color on BHP and your discussions there how the communication is going sort of when the last time you just went over drilling plans with them since I think they’ve had some fairly recently updates?

Robert G. Phillips - Chairman, President and CEO: Gabe, we received one formal communication from them about 10 days ago which was the formal announcement that as of April 1, they intend to takeover under the transition services agreement and Chesapeake will officially be out as operator of those properties. Prior to that we received a definitive drilling plan in the last week in December and we worked that plan, we made our capital forecast associated with that, we provided BHP with notices under the contract for the expansion of treating and compression equipment required to meet the volume forecast. Since then they've asked us to wait for an update on their drilling plans. For the year we have not received that update and don't really know exactly when it is going to come. As is always the case between producer and its gather the specific information they provide us will very much be confidential. I will try to (indiscernible) it in a way that gives you a sense for what our volume growth will be for the year. At this point in time based upon current level of field activity I think we expect the volumes to be slightly up for the year and of course we are also going to get the benefit of a full year as opposed to three quarters of the year because we brought the business effective April 1. So, we don't have any more to tell you other than that. We have continued to meet new BHP employees and personnel that are coming into the organization they are good quality professionals, they know what they're doing, they're getting their arms around the play. It's a sizeable play for them in the Fayetteville, almost 0.5 million acres up there and a significant drilling program. We hear the same things you do publicly that they may be pulling back, but we don't have any evidence of that so far.

Gabe Moreen - Bank of America/Merrill Lynch: Then as a follow-up to those comments Bob, just in terms of the capital spend that you're planning for '12. How would you say I guess, there's some degree of downside risk to that 30 million-ish in gross capital and I guess the offset in terms of fewer volumes would be few less capital spend to the degree, is that fair?

Robert G. Phillips - Chairman, President and CEO: I don't think so, Gabe. I think we're pretty spot on, on that capital spend because there aren't any big items in there, I mean the biggest item in there is the compressor here or our treating facility there no more than $4 million or $5 million per unit. Last year we wound up spending almost $50 million less in our forecast, because we included projects that we thought were going to happen in the Granite Wash and they didn't happen and producers changed their mind. So, I guess in my old age I'll get a little smarter, I don't put those projects in the budget anymore and when we do get them done, we announce them and I come to you and tell you what the impact is on guidance. So, I think that $35 million to $40 million is probably spot on. Then, of course, all the capital expenditures I mentioned for the Antero project will be financed by the revolver at the joint venture level. So, Crestwood itself will not be contributing any additional capital to Antero and also announce that Tygart Valley is going to be pushed back a year or so. The $70 million we thought we were going to spend there probably gets fit in 2013 and it will be a 100% Crestwood project.

Gabe Moreen - Bank of America/Merrill Lynch: Last question for me, I guess I wanted to ask how you guys are thinking about distribution growth for '12, given I guess on the one hand the Antero deals it seems to be nicely accretive, but on the other hand I guess some of the dry gas, the change in the landscape there?

Robert G. Phillips - Chairman, President and CEO: Well, yeah, and, I guess, I'm happy any time and one of our analysts brings up dry gas, it gives me a chance to talk about all the ways that we have protected ourselves from a total collapse of drilling. Number one in the Fayetteville, in the BHP we have a sliding scale fee structure, so we have abandoned there probably 25% of our volumes where we are virtually revenue neutral. So, I would suggest that even with a dramatic pullback in drilling in decline of those fairly old wells up there, which the decline rate is not nearly significant today as it is the date that these wells are first placed in service. Our fees adjust to the point where we're virtually revenue neutral. Having said that, I think that in the Fayetteville, we expect slightly higher volumes, and so we're probably going to be well protected within that band to our cash flows and therefore, our distributions attributable to that. The Barnett is what the Barnett is and Quicksilver announced yesterday flat volumes with the move towards the rich gas play, where our fees are higher. So, I think our EBITDA associated with even slightly lower volumes might be slightly higher given the fact that we make twice as much on a fee basis in the Cowtown area as we do in the dry gas areas to the North. In the Haynesville, our last acquisition, I just announced that we've reached agreement with the producer for 20 million to 30 million a day additional offload agreement, that's firm, with firm fees throughout 2012. So, that's actually going to be accretive to our bottom line and I guess dry gas in general, I think, we're fairly well insulated to that. I know we mentioned in our 10-K that our rich gas activities totaled 53% of our total revenues in 2011. So I think there's some misinformation out there about how exposed we are to dry gas versus rich gas and the Antero acquisition with First Reserve is just going to improve our leverage to rich gas over time. So I don't think we're near as to leverage to a collapse in dry gas volumes as maybe people think we are.

Gabe Moreen - Bank of America/Merrill Lynch: Within that context, do you have any thoughts on distribution growth for 2012 or…?

Robert G. Phillips - Chairman, President and CEO: I'm not uncomfortable with what we did last year. We got the coverage ratio to handle that and an 18% to 20% increase in cash flow holding our expenses virtually flat as we continue to do, because we're good operators and our operating cost per unit continues to go down year-after-year. So I'm not comfortable with what we did last year.

Operator: Ron Londe, Wells Fargo.

Ron Londe - Wells Fargo: From the standpoint of Quicksilver can you give us kind of a quick rundown of your interpretation of what they are doing in the Barnett?

Robert G. Phillips - Chairman, President and CEO: The inside story is the same as the outside story. They really haven't told us much different, than they've told the public in their press release, and it's not at all inconsistent. They have one rig running up there and one frac group. They got ducks or drilled that are incomplete, and they continue to use up those ducks kind of on a very efficient basis. I think they talked about completing maybe 30 of those. So, they’ve got a pretty good duck inventory. We know what the one rig can do. So, our sense is that when Toby and Glenn and Phil said yesterday on their call that they expect your volumes to be flat with the bias towards Cowtown because of the better drilling economics that's exactly what we’ll experience. They haven't told us anything different and specifically we expect them to continue to maintain volumes up there which should be consistent with; a, what they've said and ;B, with their recent following up of an IPO for the part of their Barnett properties in the form of Master Limited Partnership. So, I think, they would want to maintain consistent volumes as they take that new MLP effective later in the year.

Ron Londe - Wells Fargo: Can you give me give me a breakdown of 462 million in CapEx for the year from acquisitions, expansions and maintenance?

Robert G. Phillips - Chairman, President and CEO: I can't. That's going to take, Mark, a minute to pull that. Bill, you got it?

William G. Manias - SVP and CFO: Ron, about 344 million was the adjusted purchase price on Tristate for the Frontier acquisition and then you had another 65 million to that – and that gets you up to total 410 and then we had about 50 million in CapEx that we spent so that kind of gets you to the 460.

Ron Londe - Wells Fargo: The Tygart Valley you said, that I was fairly close to the Keystone…

Robert G. Phillips - Chairman, President and CEO: Antero.

Ron Londe - Wells Fargo: Yes, Antero, 20 mile. Is that an easy 20 miles or is that a tough 20 miles?

Robert G. Phillips - Chairman, President and CEO: Joe, I don't think there is anything easy out there.

William G. Manias - SVP and CFO: Nothing in West Virginia is an easy run, but it's doable and there is productive properties (but we'll) be talking with the producers between those areas and just see if we can develop a project and tie them together.

Robert G. Phillips - Chairman, President and CEO: Let me say it this way. This part of the Marcellus is very much in its infancy from an infrastructure phase. Number of producers that have a mass large acreage positions out there have drilled early wells and have filled small diameter pipe or have connected with old low-pressure small diameter pipe that delivered downstream to Colombia or Equitrans or Dominion everybody in that part of the world have suffered from not having biggish low-pressure pipe to move this shale gas into. So, as we scoped out the Tygart Valley project we looked to the north and to the west of the Mountaineer Keystone acreage position to see PDC XTO and other producers all the way over to the one county over to the Antero acreage position, and we recognized that along with Consol and their joint venture with Noble that's an area that's just right for infrastructure to be built to accelerate producers development plants that was our initial strategy with the Tygart Valley project which I might remind which was a portfolio company producer of first reserve down there at Keystone. So, we had an insight early on as to that acreage position and we were working to leverage that project even larger to accommodate some of the aggregate that we're now talking about being able to connect between the two systems. So the area just cries out for some big inch pipeline, it hasn't been built yet. We now have 2-foot holes in the area, and I would say that we would have a strategic advantage to connect those two at some point in time. But I think we'll talk more about that as we get later in the year and Mountaineer Keystone firms up their rig availability and the development plan that they've laid out for us, and we think that will start later in 2012. So, we'll be back on that project as early as early 2013. But I see there is a real opportunity to connect the two systems. They are only one county apart.

Operator: T. J. Schultz, RBC Capital Markets.

T. J. Schultz - RBC Capital Markets: Congrats on the Antero announcement. Just a couple questions there. Maybe as you look at some of the near-term investment opportunities in the assets and then some of the anticipated volume ramp, any color on just kind of what extent you may be able to drive down that that stated 11 to 12 2012 EBITDA multiple as we move into 2013 and '14 or maybe just some color on how quickly you envision targeting that $200 million of investment over the next five years?

Robert G. Phillips - Chairman, President and CEO: T. J., this is Bob. Let me make a comment and then I will turn it over to Robert Halpin, who just joined us from First Reserve. He is our new Vice President of Business Development and has done a large part of the financial analysis of this transaction, so we are very happy to have Robert in our management team. In 2012, which we have great visibility to because Antero sold this deal to us and has shared in great detail about an 18-month development plan and that is the contractual arrangement within this 20 year gas gathering agreement as they develop their properties and as they move around in different parts of the area of dedication, and it's quite large with 127,000 gross acres and over 100,000 net acres. That we stay ahead of them as we build out infrastructure. So, again great visibility in 2012, so let me just give you, kind of a sense for that. In 2012, we kind of expect volumes, well as you'd expect I'm looking at the wrong one. Robert, you got that, and Jeff on that?

William G. Manias - SVP and CFO: I think that kind of a feedback what Bob was saying, but just in terms of driving the multiple down over time, in 2012 we've got kind of an estimated volume ramp up, like Bob said, about 210 million a day after 321 million a day in the 2012. One of the key components of this, because there's comfort in the ability to drive the multiple down is what level of that is actually fixed in the form of contractual obligations and volume indemnifications from the seller. So, the 321 million a day in 2012, 300 million of that is guaranteed through the minimum volume commitment and then again, looking forward to 2013, we've got ramping up kind of another ramp above that and kind of the 430 million, 440 million a day level and of that you've got about 75% to about 85% of that. It's guaranteed though the minimum volume commitment. The incremental capital it gets you there. It's kind of call it anywhere from 50 in the first year to another 50 to 60 in the second year. So, I think, if you drive, if you look at kind of on a key year out basis, you see that multiple come down pretty nicely over time, solely as a function of; A, do you expect the activity levels, but also the downside driving on that multiple guarantee through the form of a minimum commitment.

Robert G. Phillips - Chairman, President and CEO: T.J. I think we're very happy with kind of a high-single digit after the first year and dropping down consistent with what we would expect all of our investments to give us and that's kind of something ultimately in the seven times acquisition multiple. We clearly get there with this one, I can't stress enough how important that 7 year minimum volume commitment is even if it stop drilling. We still get the benefit of a substantial return on capital which I think in and of itself drives the investment multiple down. But with Antero hitting on all eight cylinders like we expect them to do and like they are currently set up do we would expect them to drive that down to even further over the next several years. It is not a significant capital spend and let me reemphasize that. Over the next 5 years our forecast is only $200 million of additional spend. So, if you have our volume curve you could figure out real quick what we are going to be driving that down to.

T. J. Schultz - RBC Capital Markets: Then I guess how quickly would you envision the assets being kind of mature enough for a drop?

Robert G. Phillips - Chairman, President and CEO: Well, that's a great question and one that we've debated here internally as we've modeled different scenarios. I will tell you that I am very pleased to have this first potential drop-down candidate. We establish that strategy early on and have worked hard with First Reserve, we've looked at – we've kissed a lot of frogs over the last 18 months to find the deal that works at HoldCo that Crestwood could by a meaningful position operate and be in great position to acquire additional interest over time. We think that's driven more by Crestwood's financial capability, the driver of the initial structure was how much could we afford to acquire in the joint venture without stretching our balance sheet and we came to the 35% based simply on what we felt, what was comfort zone on our balance sheet given the other things that we might want to do this year and next. So, what drove that was simply Crestwood's financial capability. So, I would say that as our financial capability improves to acquire additional assets, we would view this as a premier asset acquisition because A, we already have visibility to grow, B, we would already had operating experience with the asset, and C, see as you well know drop-down assets are typically at lower multiples than acquisitions of new assets in the new play. So I kind of leave it to you to think about how all that works out, but I would say it would largely be driven by when Crestwood can afford to own more of this.

T. J. Schultz - RBC Capital Markets: I guess just lastly on Antero, on the (indiscernible) for infrastructure on the adjacent acreage are there assets that are now or what is your expectation for timing of assets to be built?

Robert G. Phillips - Chairman, President and CEO: Actually there are no assets now or if they are they are de minimis. The Antero midstream team that built out the gathering system we're acquiring has moved out of this acreage area of dedication and into the new area of dedication to the west. And so they're going to replicate in the Western area which surrounds the MarkWest Sherwood processing plant which as I said starts out initially at 200 million a day, it will be expanded by another 200 million a day over time. So, as Antero drills well over there, their proprietary team will be hooking those up and at some point in time, we think over the next seven years Antero is going to want to monetize that because that's what they have done consistently in the Barnett, in the Woodford, and now the first phase of the Marcellus. So we think that's a very important feature of this deal, we fought hard to get it in. We think it has real value to us. It gives us a visibility into another great rich gas acquisition opportunity, and we're excited to have it in there, but I can't tell you when we would be able to execute on that. I will say based on our research, Antero tends to build out for about 2 to 3, maybe 4 years and then sell.

T. J. Schultz - RBC Capital Markets: Just moving away from Antero one last thing. You briefly mentioned that in your remarks, the processing plants, so just looking for some more color on plants for the idle Barnett plant or more specifics on timing for the 60 million a day plant in Granite Wash?

Robert G. Phillips - Chairman, President and CEO: We've got two plants that we can use. We've got the brand new 60 million a day cryo that we bought from Frontier, it was an Exterran plant, it's fully paid for and it's in the warehouse and ready to go. We've got a team of commercial guys that have been actively looking at Granite Wash opportunities, Permian opportunities, and Avalon Shale opportunities. In fact, they are on the road today pitching one of several different proposals to big time shale players that need processing infrastructure out in the Permian. We all know that we're waiting on long-term NGL takeaway capacity out there which isn't going to show up until '13. So we certainly haven't missed any critical milestones yet. In fact, most of the small-scale processing projects are just now starting to come together for producers out in that part of the world. The larger project would be a 120 million a day plant. We do have in excess 120 at Cowtown, it's a good plant, it's a Exterran (indiscernible), just a big brother, larger version of the 60 that we have in the warehouse at Exterran right now. We've pitched it separately and also pitched it on a combined basis with the 60 again in the same areas Granite Wash, Permian and in the emerging Avalon/Bone Spring play from Culberson County, Texas, all the way through to Eddy and recounting to Mexico. I'm excited about this. I think we've got a very experienced team, that's working on that. They've got great relationships with all the shale players out there and I'm optimistic that Joel and (Darryl) and the team will be able to find a spot for those plants. If so, it certainly would not impact 2012, but could make a meaningful impact in 2013 and as we announced our strategy, that's down the middle of the fairway, we're going to look largely at rich gas opportunities this year.

Operator: Brian Horey, Aurelian Management.

Brian Horey - Aurelian Management: Can you tell us what the third-party volumes in the Barnett were in Q4?

Robert G. Phillips - Chairman, President and CEO: Brian, if you give me just a minute, Mark's got that. Actually group we had always looking for the actual number. We have a nice offload with Chesapeake, we've got a nice offload with Devon, we've got a nice offload with Empire, we've got some third-party well head gas from Devon and from XTO and Nextera and I'm waiting.

Mark Stockard - VP, Treasurer and IR: We'll grab that number in just one second for you.

Brian Horey - Aurelian Management: What are your assumptions for 2012 in the Barnett what do they assume in terms of third-party as well?

Robert G. Phillips - Chairman, President and CEO: Slightly higher than what we did this year is going to make up for some of the difference and what we think is going to be slower year for Quicksilver at Alliance and Lake Arlington. Brian, we're going to have to come back to you with that number. Sorry, you caught us.

Brian Horey - Aurelian Management: In terms of the Haynesville what kind of exit rate did you have in the Haynesville in Q4?

Robert G. Phillips - Chairman, President and CEO: In Q4, that's not a good number but I am going to say it was about 65 million a day. Remember we bought the business November 1, we took over operations under the TSA in Late November there was a project to expand pipeline and get a three year backlog line there. So, we really didn’t get control of the asset until December. We probably hit a peak rate, Joe, between 65 and 70 million a day – for a week or so and then Chesapeake announced their reduction in volumes and so they have pulled back on a couple of Chesapeake wells and so I would say 65 million a day was probably the exit rate and we think we are going to add 20 million to 30 million a day with this new contract.

Brian Horey - Aurelian Management: That's a one year commitment on that new offload?

Robert G. Phillips - Chairman, President and CEO: Yes.

Brian Horey - Aurelian Management: In terms of the earn out that Frontier had – did they earned that in 2011?

Robert G. Phillips - Chairman, President and CEO: Frontier had an earn out applicable only to the granite wash processing project which is obviously we did not go forward with it, because the producer that they had under contract decided to go a different direction. So, Frontier did not earn an earn-out. Quicksilver did earn its earn-out, but that was payable by the holding company and they did earn approximately $41 million on their Barnett Shale volumes because they were up pretty significantly. So that was paid last week by the holding company.

Brian Horey - Aurelian Management: In the Fayetteville previously I think you've talked about 70 well HBP development drilling plan is that still in place as far as you can tell or do you have any update on that?

Robert G. Phillips - Chairman, President and CEO: I don't think so. I think low gas prices have pretty much killed the old style one well per section pickup the rig (demob) it move it to another area and drill the next well. I think most guys that we have contracts with most as we talk to move into a combination of multi-well pads and zipper fracs and the combination of those two tactics are A, increasing IPs in EURs, but B, reducing overall cost due to just lower (demob) and mob cost by picking a rig up and moving it somewhere else. So, for example in Fayetteville we've got a BHP on a pad that intends to drill six wells on that pad. Well the good news is you're going to get six wells about mid-year or say mid to late second quarter. Bad news is I'm getting one well at a time so it gets a little lumpy. But actually we want our producers to do whatever is economically feasible for them to keep the rigs running. So, if it goes to multi-well pads and zipper fracs and not HBPing the acreage that's fine with us. I think 70 well is way too high for that part of the world, given these gas prices, but again, we feel like we're going to see flat volumes or so. We exited the year in the 85 to 90 million a day range on those systems up there. I think we will see flat to up over the year, get a full year contribution which will be good, and hopefully gas prices will start to bounce back in the second half of the year. Do we have a third-party number?

William G. Manias - SVP and CFO: For the year that third-party volumes on average totaled about 34 million a day, total Barnett third party volumes for the year.

Operator: Avi Feinberg, Morningstar.

Avi Feinberg - Morningstar: Just one big picture question for me, Bob. Curious just talk a little bit more out on the horizon given your discussion of the Antero opportunities, but I am curious how you think about rich gas versus dry gas exposure as you further scale up that asset base. I mean, are you looking for a balanced portfolio that you kind of move towards at least on deals on the liquid side or is it possible there will be a lot more opportunities out there like Tristate where First Reserve can help you guys step in and pick up some pretty attractive deals possibly?

Robert G. Phillips - Chairman, President and CEO: I think that's a great long-term question and we debated every day here our math, and we are going to be talking to the rating agencies about this week. Our math with respect to rich gas, dry gas is very compelling right now, and I mentioned earlier I think when Gabe asked a question about our rich gas exposure, one of the analysts has – Robert find that page for me -- one of the analysts has I think incorrectly suggested that 90% of our business is in the dry gas area and frankly that's not just true. As we mentioned, in the 10-K, which hasn't been filed yet, will be filed later this week. 53% of our revenue was from our Cowtown and our Granite Wash areas. So, just as kind of an indicator there, we think that between 40% and 50% of our net revenue, or say it a different way, our gross margin, is going to be generated over the next several years from assets, that are gathering processing or treating gas, with very high liquids content and certainly the Antero transaction is important for us. In fact, we've done a layout of our Cowtown assets, our Granite Wash assets, our Avalon assets and our Antero assets, over the next four to five years, as much visibility as we have and how those are going to grow. We consistently stay in the low 40s to the high 40% range in terms of net margin. I don't know of anybody in the business that is that well balanced between a dry gas and rich gas. So, why wouldn't just run from dry gas, and the answer is very simple, as you pointed out; there are going to be some great deals in that part of the market over the next couple of years, particularly if gas prices persist at this level for more than a year or so we think there are going to be some fabulous deals. Remember, our entire investment thesis here is long-term contracts, long-term acreage dedications on good reserves and good properties. So, it's a not matter of if it's only a matter of when the producers drill these up. We are long-term players; we've made a great investment in some fabulous dry gas assets. They have got great contracts around them, fixed fee. They are insulated with revenue bands and now minimum volume commitments. So, we think that really provides a great safety net for the Company. Again as I said, we're really still building out the platform for Crestwood. We just started this thing a year and half ago. We are now in six shale plays. We're not embarrassed about any of the investments we've made. Going forward, we're going to emphasize rich gas because we think overall it's going to have better drilling economics, and therefore support better valuations over the next couple of years, but we're not going to miss an opportunity to make a great buy in a dry gas area as long as it exhibits the same characteristics of the assets we've acquired in the last year and a half.

Avi Feinberg - Morningstar: Have you seen any movement yet in terms of some of the multiples on packages out there with the dry gas? Are you seeing any of that through First Reserve yet or is that kind of yet to be determined?

Robert G. Phillips - Chairman, President and CEO: We haven't yet. I think there has been (favorable lock) on dry gas deals coming in the market. Last one that we saw was actually the Tristate steel that we acquired back in November. That deal came to market back in the summer of last year. So there hasn't been much activity in that part of the world. The rich gas assets frankly on the other hand have gone off the charts in terms of valuations. When we look at what MarkWest and Williams paid to buy out their partners, to buy out Liberty and to buy out Laser. Those are astronomical prices paid, but they are paid for clear high growth, highly visible assets in the premier shale play and the business. So, I think paying '11 to '12 for upfront for hockey stick growth supported by 75% to 80% minimum volume guarantees I think that's a great buy in this market.

Avi Feinberg - Morningstar: Great. Thanks so much.

Robert G. Phillips - Chairman, President and CEO: Andre I think we're through now. Are we?

Operator: We are, sir.

Robert G. Phillips - Chairman, President and CEO: Great. I want to thank everybody for joining us on the call today. Certainly Mark, and Bill and Robert are here to answer any additional questions that you might have probably most have gone on to the next conference call. But again, thanks to all the investors and the analysts that follow the stock. We're excited about this deal and looking forward to close it before the months out.

William G. Manias - SVP and CFO: Thank you again. We're going to end the call now. Thanks.

Operator: With that once again ladies and gentlemen that does conclude today's call. Thank you for your participation and have a great day.