Crestwood looks to grow in midstream sector after exit of private equity backer: CEO

Midstream operator Crestwood Equity Partners aims to grow and acquire assets, now that it is divorced from its private equity backer First Reserve, which sold its nearly 25% ownership stake this spring.

Crestwood CEO Robert Phillips said July 27 he is focusing on potential growth in the three core areas of the Bakken Shale, Delaware Basin and the Powder River Basin, and that Crestwood will have more opportunities following the closure of the sale of its Stagecoach Gas Services business in Pennsylvania and New York to Kinder Morgan by the end of the third quarter.

Phillips said he is bullish on the oil and gas sector's growth in the second half of the year and into 2022 as the world emerges more from the ongoing coronavirus pandemic and that the company will look for the right opportunities to expand.

"We're not actively looking for some big consolidation play," Phillips said during an earnings call. "That opportunity will come and, when it does, we'll take advantage of it because we can, not because we want to."

Earlier this year, longtime private equity backer, First Reserve, exited its investment in Crestwood, potentially giving Crestwood more options on how it should go forward and grow, he said.

"Not having to deal with a GP (general partner) that was a 25% shareholder that was ultimately going to get out -- and wanted to be the first guy out of the door -- probably prevented us from looking at some transactions in the past that maybe we would have taken a harder look at," Phillips said. "But that's easy for everybody to see. And that created the overhang on the stock, and we always believed that if we could eliminate that capital -- that structural governance problem and eliminate that overhang -- then we would see a lot more opportunities to do some interesting things in the business."

Chief Financial Officer Robert Halpin said one goal is to buy out more of the still-existing joint venture with First Reserve, which owns the Willow Lake and Orla gathering and processing assets in the Delaware Basin in New Mexico and Texas.

Phillips said Crestwood was forced to make tough decisions and shrink to survive in the aftermath of oil pricing collapses in 2014 and 2016. Then, Crestwood was focused on building out its asset bases in the Bakken, Delaware and Powder River Basin. Now, more acquisition opportunities should present themselves as the industry continues to consolidate, he said.

While 2020 was a particularly tough year because of the pandemic, Phillips said the slowdown in activity could still prove beneficial in the long run.

"We actually think in an odd sort of way that the COVID did us a little bit of a favor in terms of slowing down the development pace of a lot of the core acreage that's dedicated to us under long-term contracts," Phillips said. "We actually think that was a better thing in terms of creating long-term value."

In terms of earnings, Crestwood's second-quarter revenues jumped to $929.6 million, which compares to just $352.7 million during the same quarter last year amid the peak of pandemic-related economic lockdowns.