Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Divestitures

Acquisition and Divestitures

Acquisition

On October 25, 2021, we entered into a merger agreement to acquire Oasis Midstream Partners LP (Oasis Midstream) in an equity and cash transaction (the Merger). Oasis Midstream is a master limited partnership which operates a diversified portfolio of midstream assets located in the Williston and Delaware Basins and its operations include natural gas services (gathering, compression, processing and gas lift supply), crude oil services (gathering, terminalling and transportation), and water services (gathering and disposal of produced and flowback water and freshwater distribution).

On February 1, 2022, we completed the merger with Oasis Midstream, which was valued at approximately $1.8 billion. Pursuant to the merger agreement, Oasis Petroleum Inc. (Oasis Petroleum) received $150 million in cash plus approximately 20.9 million newly issued CEQP common units in exchange for its 33.8 million common units held in Oasis Midstream. In addition, Oasis Midstream’s public unitholders received approximately 12.9 million newly issued CEQP common units in exchange for the approximately 14.8 million Oasis Midstream common units held by them. Additionally, under the merger agreement Oasis Petroleum received a $10 million cash payment in exchange for its ownership of the general partner of Oasis Midstream.

We accounted for the Merger as a business combination using the acquisition method of accounting. In addition, the purchase accounting reflects the adoption of Accounting Standards Update (ASU) 2021-08, Business Combinations (Topic 805) during the six months ended June 30, 2022. The financial results of Oasis Midstream’s Williston Basin operations are included in our gathering and processing north segment and Oasis Midstream’s Delaware Basin operations are included in our gathering and processing south segment from the date of acquisition. During the six months ended June 30, 2022, we recognized approximately $18.7 million of transaction costs related to the Merger, which are included in general and administrative expenses in our consolidated statements of operations.

The fair value of the assets acquired and liabilities assumed were determined primarily utilizing market related information and other projections on the performance of the assets acquired, including an analysis of discounted cash flows at a discount rate of approximately 12%. Certain fair values are Level 3 fair value measurements and were developed by management with the assistance of a third-party valuation firm. We estimated the fair value of the senior notes assumed based on quoted market prices for similar issuances which are considered Level 2 fair value measurements.

The following table summarizes the final valuation of the assets acquired and liabilities assumed at the acquisition date (in millions):

Cash	$	14.9
Other current assets	63.2
Property, plant and equipment	1,264.4
Intangible assets	464.0
Total assets acquired	1,806.5
Current liabilities	48.2
Long-term debt(1)	698.7
Other long-term liabilities(2)	25.8
Total liabilities assumed	772.7
Net assets acquired excluding goodwill	1,033.8
Goodwill	56.2
Net assets acquired	$	1,090.0

(1)    Consists of approximately $218 million outstanding borrowings under the Oasis Midstream credit facility, which was immediately repaid upon the closing of the Merger and approximately $450 million of unsecured senior notes and the related fair value adjustment of approximately $30.7 million. For a further discussion of the long-term debt assumed in conjunction with the Merger, see Note 8.

(2)    Consists primarily of liabilities for asset retirement obligations of approximately $16.1 million.

The identifiable intangible assets primarily consist of customer accounts with Oasis Petroleum and other customers with a weighted-average remaining life of 20 years. The goodwill recognized relates primarily to the anticipated operating synergies between the assets acquired and our existing operations. We reflected approximately $48.8 million of goodwill in our gathering and processing north segment and approximately $7.4 million in our gathering and processing south segment.

Our consolidated statements of operations include the results of Oasis Midstream since February 1, 2022, the closing date of the Merger. During the three and six months ended June 30, 2022, we recognized approximately $97.5 million and $164.3 million of revenues and $32.8 million and $56.3 million of net income related to Oasis Midstream’s operations.

The tables below present selected unaudited pro forma information as if the Merger had occurred on January 1, 2021 (in millions). The pro forma information is not necessarily indicative of the financial results that would have occurred if the Merger had been completed as of the date indicated. The amounts were calculated after applying our accounting policies and adjusting the results to reflect the depreciation, amortization and accretion expense that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been made at the beginning of the reporting period. The pro forma net income (loss) also includes the net effects of interest expense on incremental borrowings, repayments of long-term debt and amortization of the fair value adjustment to long-term debt.

Crestwood Equity

	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2022		2021
Revenues	$	1,024.9	$	3,066.4	$	2,157.9
Net income (loss)	$	(15.5)	$	67.8	$	(31.1)
Net income (loss) per limited partner unit:
Basic	$	(0.42)	$	0.18	$	(0.80)
Diluted	$	(0.42)	$	0.17	$	(0.80)

Crestwood Midstream

	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2022		2021
Revenues	$	1,024.9	$	3,066.4	$	2,157.9
Net income (loss)	$	(15.9)	$	11.8	$	(33.6)

Divestitures

On July 1, 2022, we sold our assets in the Barnett Shale to EnLink Midstream, LLC for approximately $290 million, including working capital adjustments. As a result of the sale, we reflected these assets as current assets held for sale, net, on our consolidated balance sheets at June 30, 2022. Crestwood Midstream recorded a loss on long-lived assets of approximately $53.3 million during the three months ended June 30, 2022 for the difference between the historical carrying value of the net assets and liabilities to be sold and the proceeds received from the sale. Crestwood Equity’s historical carrying value of the property, plant and equipment related to our Barnett Shale assets was less than the anticipated sales proceeds due to historical impairments previously recorded on the property, plant and equipment by Crestwood Equity and as a result, Crestwood Equity did not record a gain or loss on long-lived assets during the three and six months ended June 30, 2022 related to the reclassification of these net assets as current assets held for sale. The current assets held for sale at Crestwood Midstream were recorded at fair value based on the sales proceeds, which is a Level 3 fair value measurement. For a further description of our assets in the Barnett Shale, which are included in our gathering and processing south segment, see our 2021 Annual Report on Form 10-K. During the three months ended June 30, 2022, we recorded a loss on long-lived assets of approximately $7.0 million related to the sale of parts inventory related to our legacy Granite Wash operations.