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CMM Announces Bolt-On Acquisition of Compression Assets

Source: 11/26/2012, Location: North America

Crestwood Midstream Partners LP (Crestwood), as operator and 35% owner of Crestwood Marcellus Midstream LLC (CMM), announced today an agreement by CMM to acquire natural gas compression and dehydration assets from Enerven Compression, LLC (Enerven) for approximately $95 million. The assets, located on CMM’s gathering systems in Harrison and Doddridge Counties, West Virginia, serve the Marcellus Shale development of Antero Resources Appalachian Corp. (Antero).

The assets are currently operating under a five year compression services agreement with Antero and are expected to contribute approximately $11-12 million of contracted earnings before interest, taxes, depreciation and amortization (“EBITDA”) to CMM in 2013. The acquisition is expected to close before December 31, 2012 and will be financed through CMM’s existing $200 million credit facility.

Enerven Compression Assets
The Enerven assets, constructed in 2010-2012, include four compression and dehydration stations comprised of 31 two and three stage, reciprocating natural gas compressor units and 10 glycol dehydration units. The compressor stations receive Antero’s gas production from CMM’s low pressure gathering facilities for redelivery to downstream high-pressure pipelines and processing plants. CMM is acquiring 43,100 horsepower of compression designed to provide aggregate capacity of 295 million cubic feet per day (“MMcf/d”) to Antero. Currently, all of the Enerven compressor stations are being fully utilized with ongoing projects to expand two of the four stations by approximately 25 MMcf/d. Antero’s gas is also being compressed by third party compression not currently owned by Enerven or CMM.

“I am pleased to announce a second bolt-on acquisition in recent months as we execute our strategy to expand Crestwood’s national exposure to rich gas shale plays,” stated Robert G. Phillips, President and Chief Executive Officer of Crestwood’s general partner. “The Enerven assets are already connected to our Marcellus gathering system and are under long term contract with Antero, our largest producer in the area. When combined with our existing assets in the Marcellus, this acquisition creates significant operating synergies, extends the value chain to Antero, offers an attractive purchase multiple and is forecasted to increase CMM’s 2013 EBITDA by approximately 25%.”

Update on Antero and Crestwood Marcellus Activity
As discussed in Crestwood’s third quarter 2012 earnings call, Antero continues to increase its Marcellus Shale development activity and natural gas production volumes on CMM’s gathering systems. Antero is currently running 6 rigs on the 127,000 acre area of dedication (Eastern AOD) under CMM’s 20-year gathering and compression agreement, and up to 12 rigs in the area including the Antero leased acreage adjacent and to the west of the Eastern AOD where CMM holds a seven-year right of first offer to acquire midstream assets owned by Antero. Production volumes on the Eastern AOD have increased steadily throughout 2012 from approximately 200 MMcf/d at the beginning of 2012 to an average of 257 MMcf/d in the second quarter 2012, an average of 289 MMcf/d in the third quarter 2012 and a spot volume of approximately 376 MMcf/d on November 1, 2012. CMM currently has two major pipeline and two major compressor station projects with a combined capacity of 100 MMcf/d underway to support Antero’s 2013 development program which is expected to add over 60 Marcellus Shale wells to the 100 producing wells currently connected to the CMM gathering systems.

“We are excited to expand our relationship with Antero through the Enerven acquisition which positions CMM to be both Antero’s gathering company and compression company of choice in this area of the Marcellus,” stated Phillips. “We believe the Enerven assets extend our value chain and provide an excellent opportunity for organic growth as gathering infrastructure in this rich gas region continues to be built at an exciting pace.”

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