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Crestwood (CEQP) Falls 8.1% Since Q2 Earnings Miss Estimates

Crestwood Equity Partners LP’s CEQP units have declined 8.1% since it reported weaker-than-expected second-quarter results on Jul 27. The firm reduced 2021 adjusted EBITDA expectation, primarily due to the Stagecoach divestiture.

It incurred second-quarter 2021 adjusted loss per unit of 49 cents versus the Zacks Consensus Estimate of earnings of a penny. The bottom line improved from the year-ago adjusted loss of 68 cents per unit.

Total revenues surged to $929.6 million from $352.7 million in the prior-year quarter. However, the top line missed the consensus mark of $1,053 million.

Weaker-than-expected second-quarter results were caused by decreased contribution from storage and transportation as well as marketing, supply and logistics businesses. Also, the Stagecoach divestment played a spoilsport. The negatives were partially offset by higher gas gathering and processing along with decreased operating expenses.

Segmental Performance

Gathering and Processing: The segment generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $123.5 million, up from $83.6 million in the year-ago quarter. Operating and maintenance expenses decreased to $14.7 million from the year-ago level of $19.3 million.

Total gas gathering volumes for the quarter were 902.2 million cubic feet per day (MMcf/d), up from 888.3 MMcf/d a year ago. Gathering volumes declined in Marcellus and Barnett, while rose in Delaware, Bakken - Arrow and Powder River Basin. Total processing volumes increased to 377.6 MMcf/d from the year-ago level of 304 MMcf/d. Yet, compression volumes declined to 249.1 MMcf/d from 336.6 MMcf/d in the year-ago period.

Storage and Transportation: The unit generated operating loss of $23.6 million against a profit of $14.1 million in the year-ago quarter, primarily due to the Stagecoach divestment. Operating and maintenance expenses increased to $1 million from the year-ago level of $0.7 million.

Firm storage services in the Gulf Coast storage declined to 273.6 MMcf/d from 313.9 MMcf/d in the prior-year quarter. Nevertheless, rail loading at the COLT hub increased to 46.1 thousand barrels per day (MBbls/d) from 40.7 MBbls/d a year ago.

Marketing, Supply and Logistics: It generated a loss of $20.1 million against a $2.3 million profit in the year-ago quarter, primarily due to limited storage opportunities for all products and market backwardation. Operating and maintenance expenses decreased to $10.1 million from the year-ago level of $11.6 million.

NGL volumes sold or processed in the second quarter came in at 114 MBbls/d, up from 59.7 MBbls/d in the year-ago period.

Expenses

Total operating expenses and others decreased to $107.1 million from $125.9 million in the year-ago period.

Operations and maintenance costs decreased to $25.8 million from $31.6 million a year ago. General and administrative expenses declined to $22.8 million for the June quarter from $29.5 million in second-quarter 2020.

Cash Flow

Distributable cash flow for the second quarter was recorded at $85.8 million, up from $74.4 million in the year-ago period.

Free cash flow after distributions was recorded at $40.1 million for the June quarter versus an outflow of $21.5 million in the year-ago period.

Balance Sheet

As of Jun 30, 2021, the partnership had $16.6 million in cash, up from $16.3 million at first quarter-end. Total debt of $2,621.8 million at second quarter-end increased from $2,588.4 million at first quarter-end. The partnership had a long-term debt to capitalization of 62%.

Guidance

The partnership reduced 2021 adjusted EBITDA expectation to the $570-$600 million range from the prior guidance of $575-$625 million, primarily due to the Stagecoach divestiture. Net income is now expected within a loss of $25 million and profit of $5 million. The partnership now estimates free cash flow after paying distributions within $150-$180 million, higher than the previous projection of $130-$180 million.

Furthermore, it expects capital spending related to growth projects of $35-$45 million. Maintenance capital is expected within $20-$25 million. Crestwood anticipates volumes from Bakken, Powder River Basin, Delaware and Barnett to increase in the second half of the year.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #4 (Sell). Some better-ranked stocks from the energy space include Range Resources Corporation RRC, NOW Inc. DNOW and Summit Midstream Partners, LP SMLP, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Range Resources’ earnings for 2021 is pegged at $1.53 per share, indicating a massive improvement from the year-ago loss of 9 cents.

NOW’s profits for 2021 are expected to jump 100% year over year.

Summit Midstream’s bottom line has witnessed two upward estimate revisions and no downward movement in the past 30 days.


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