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Investor Presentation August 2012

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Page 1: Crestwood Investor Presentation

Investor Presentation August 2012

Page 2: Crestwood Investor Presentation

Forward Looking Statements

This presentation contains forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regarding future events, occurrences, circumstances, activities, performance, outcomes and results of Crestwood Midstream Partners LP (“Crestwood” or “CMLP”). Although these statements reflect the current views, assumptions and expectations of Crestwood’s management, the matters addressed herein are subject to numerous risks and uncertainties, which could cause actual activities, performance, outcomes and results to differ materially from those indicated. However, a variety of factors could cause actual results to materially differ from Crestwood’s current expectations in financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in natural gas prices; the extent and success of drilling efforts, as well as the extent and quality of natural gas volumes produced within proximity of our assets; failure or delays by our customers in achieving expected production in their natural gas projects; competitive conditions in our industry; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions, successfully integrate acquired businesses, and realize any cost savings and other synergies from any acquisition; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; timely receipt of necessary government approvals and permits, our ability to control the costs of construction, including costs of materials, labor and rights-of-way and other factors that may impact our ability to complete projects within budget and on schedule; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing and future litigation; and risks related to our substantial indebtedness; and other factors disclosed in Crestwood’s filings with the Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date of this presentation, and we undertake no obligation to update any of these forward-looking statements to reflect new information, future events or circumstances except to the extent required by applicable law.

2

Page 3: Crestwood Investor Presentation

Key Investment Considerations First Reserve and Crestwood Management own 100% of the

General Partner and 41% of the outstanding LP units Raised ~$1.7 billion and invested ~$1.6 billion over past 18

months to create Crestwood’s operating platform Distribution growth of 19% since the acquisition of Quicksilver

Gas Services (1)

6 acquisitions in leading unconventional plays (Marcellus, Granite Wash, Barnett, Avalon, Fayetteville, Haynesville)

Long term contracts with top-tier shale producers (Antero, BHP Billiton, BP, Chesapeake, Devon, Exxon Mobil, Quicksilver)

95% fixed-fee portfolio – stable cash flows

Field services acquisitions established CMLP’s initial platform Now focused on bolt-on acquisitions with operating synergies Will evaluate value chain acquisitions to diversify cash flows Building experienced business development team to generate

greenfield infrastructure investment opportunities that offer better return potential than acquisitions at current valuations

Established Field Services

Platform

Evolving Growth Strategy

Strong GP/LP Alignment Of Interest

3

(1) 4th quarter 2010 through 2nd quarter 2012

Page 4: Crestwood Investor Presentation

Crestwood Midstream Partners LP

(NYSE: CMLP)

Enterprise Value: $2.1 Bn

42% LP/GP

Public and Class C

Unit holders

Crestwood Holdings LLC

First Reserve and Management

58% LP

Strong GP/LP Alignment of Interest

Fayetteville Shale

CMM Marcellus

Shale

Granite Wash

Haynesville Shale

Barnett Shale

65% Interest

Avalon Shale

4

Barnett Shale Rich Dry

35% Interest

First Reserve and Management have invested $600MM+ in equity capital to support CMLP growth

Phase I: M&A Drop-Downs Continued equity support from First

Reserve for early stage, high-growth acquisitions

CMM, our Marcellus Shale joint venture, provides model

Phase II: Greenfield Development New greenfield development team

aggressively chasing opportunities Projects financed outside CMLP with

equity capital from First Reserve and other private investors

Drop-Down to CMLP once in-service and generating cash flow

Continued Equity Support from Our General Partner

Page 5: Crestwood Investor Presentation

Established Field Services Platform

Avalon Shale

Granite Wash

13,000+ acres; growing

rich-gas play

55,000 acres; emerging

liquids-rich area

Fayetteville Shale

140,000+ acres; 10-20 year

contracts; 55% developed

Barnett Shale

20,000 acres; 5-10 year contracts;

HBP phase

Haynesville Shale

100,000+ acres; 15 year contracts; 10-20% developed

127,000+ acres; 20 year contracts; 7-year minimum volume contract

Marcellus Shale

Key Operating Statistics (1)

Miles of Pipeline 830

Processing Plants 5

Compression HP (000’s) 226

Gathering Volume (MMcf/d) 945

Processing Volume (MMcf/d) 235

(1) As of 8/15/12 Pro Forma for the pending Devon Acquisition

5

Page 6: Crestwood Investor Presentation

Evolving Growth Strategy M&A strategy focused exclusively on high-growth midstream assets at the wellhead faces

near-term challenges

Competitive landscape and abundant access to capital continues to support “blow-out” asset valuations

More competitive economics across the value chain and from bolt-on transactions where built-in synergies provide competitive advantage

Producer demand for required infrastructure creating significant greenfield opportunity

Drilling activity focused on unconventional crude oil and rich gas plays -- significant demand for infrastructure to transport associated natural gas and NGLs

$200+ billion in potential midstream infrastructure required to support the anticipated upstream development of unconventional assets over the next 2-3 decades

Talented managers currently in the market

Primarily the result of the Kinder Morgan / El Paso transaction Abundance of private capital currently targeting midstream infrastructure

The opportunity for investment created by the scale of the expected future infrastructure build-out has captured the attention of the financial community

Significant private capital seeking qualified teams to provide creative financing solutions

6

Page 7: Crestwood Investor Presentation

Competitive landscape and abundant access to capital continues to support “blow-out” asset valuations

Sellers of assets continue to utilize large auction processes to drive increased competition resulting in higher valuations (10x – 11x EBITDA now on the cheap side!)

Volatility in natural gas, NGL and even crude oil prices exploits near-term challenges in midstream M&A strategy at the wellhead

While long-term growth prospects and economics remain intact, producers are rationally allocating capital today to the highest return plays

M&A will always be a key component of CMLP’s growth strategy; however, current market conditions require a disciplined approach to evaluating new opportunities

M&A strategy shifting away from…

Wellhead gathering where growth prospects are solely dependent on producer activity

M&A strategy shifting towards…

Bolt-on acquisitions around existing assets where synergies drive meaningful accretion

Diversification throughout the value chain and across commodities

Disciplined Approach to M&A

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Page 8: Crestwood Investor Presentation

Investing in the Value Chain

Where We Are Going Where We Are

Gas Gathering Pipelines

CO2 Treating

Intrastate & Interstate Pipelines

Nat Gasoline

Iso-Butane

Butane

Propane

Ethane

Res

idue

G

as

Gas Gathering Pipelines

Gas Processing

Intrastate & Interstate Pipelines

Gas Storage

NGL Fractionation

Mixed NGL Pipelines

NGL Storage & NGL

Pipelines

Trucks, Barges & Crude Oil Pipelines

Crude Oil Storage

Crude Oil Refining Storage

Barges & Refined

Products Pipelines

Rich Gas

Enhance Crestwood’s customer service offerings with integrated solutions from wellhead to end market

Diversify Crestwood's operating platform functionally throughout the value chain Improve Crestwood’s long-term cash flow growth profile Broaden Crestwood’s opportunity set

8

Page 9: Crestwood Investor Presentation

Positioning for Greenfield Growth $200+ billion in potential midstream infrastructure required to support the

anticipated upstream development of unconventional assets over the next 2-3 decades

Currently evaluating $1.0+ billion in greenfield opportunities in developing plays (Utica, Marcellus, Niobrara and Avalon / Permian)

Heath Deneke, former VP Project Development and Engineering at El Paso, joins CMLP as SVP and Chief Commercial Officer bringing significant technical and commercial expertise to lead the development efforts

Development team will leverage the CMLP platform, including industry relationships and existing asset footprint, to aggressively pursue new opportunities

Abundant pool of private capital (private equity, infrastructure funds, asset managers and sovereign wealth) chasing the midstream infrastructure opportunity

Continued support from First Reserve, coupled with increasing appetite from new private capital sources, provides ability to pursue and finance early stage greenfield build-out at the general partner level

Strategy to build significant backlog of future growth at CMLP through the drop-down strategy

Building a World-Class

Team

Financing the Growth Strategy

Significant Greenfield Growth

Opportunities

9

Page 10: Crestwood Investor Presentation

Recent Acquisition - Marcellus Shale Crestwood Midstream Marcellus (CMM)

acquired Antero Resources’ Marcellus Shale gathering systems on March 26, 2012

Purchase price: ~$377MM

CMM Ownership: Crestwood Holdings 65% - CMLP 35% with quarterly distributions

Growth Capital: $200MM revolver at CMM level to fund growth capital needs

Operations: CMLP assumed operations from Antero in June 2012

Long Term Strategy: CMM is an appropriate ownership vehicle during the development phase of the Marcellus assets

Provides visible CMLP growth through planned drop downs from CMM

10

Rich Gas Area Dry Gas Area

Legend Area of Dedication (AOD) Planned MWE Sherwood Plant Pipeline in Service at YE 2012

Planned Pipeline (2013 – 2016) Existing and Planned Third Party Pipeline

Page 11: Crestwood Investor Presentation

Marcellus Transaction Merits

11

Very reasonable purchase price of ~11X 2012E EBITDA

Acquired early phase gathering and compression assets with significant long term growth potential based on producer plans, minimum volume commitments, current drilling economics and downstream infrastructure build-out

Assets located in core fairway of the Marcellus Shale with rich gas exposure

High BTU value provides processing upgrade which enhances drilling economics

127,000 acre Area of Dedication (AOD) de-risked through substantial production history and future development potential

63 wells producing ~ 200 MMcf/d at acquisition close

Over 800 Antero well locations and 300+ third party well locations in AOD

20 year 100% fixed fee contract structure with annual escalator

7 year Minimum Throughput Volume Guarantee by Antero ensures minimum quarterly cash flow to CMM and distributions to CMLP

7 year ROFO on Antero gathering systems on additional rich gas acreage located due west in Doddridge County, WV

Page 12: Crestwood Investor Presentation

Marcellus Development Update System volumes averaged 257

MMcf/d for 2Q 2012 with 11 new wells and one new production area connected

Antero currently running 9 rigs on the Antero acreage & AOD

~286 MMcf/d currently flowing through CMM systems (1)

~ 40 additional wells expected to be connected in 2H 2012

Expected FYE exit rate 380 MMcf/d (average 300 MMcf/d for 2012)

AOD well IP’s running ~ 20% better than acquisition forecast

Markwest Sherwood plant on track for 3Q 2012 in-service date

12

2,000

4,000

6,000

8,000

10,000

30 60 90

Antero CMM Wells 1st 90 Days

Mcf

d

Acquisition Type Curve

050,000

100,000150,000200,000250,000300,000350,000400,000

Antero CMM Volumes

Mcf

d

(1) As of 8/15/12

Minimum Annual Volume

Page 13: Crestwood Investor Presentation

Marcellus Operations Update Opened Charleston, West Virginia

(Commercial office) and Clarksburg WV (Operations office) in 2Q 2012 Fully staffed Marcellus team

Completing first new compression station installation in 4Q 2012

Currently building first full scale gathering system extension project Target in-service Nov 2012

CMM building new Greenbrier compression station Target in-service 2Q 2013

Revised CMM 2H 2012 capex of $20MM ($50MM original est.) due to increased pad drilling versus HBP drilling

13

Page 14: Crestwood Investor Presentation

Pending Acquisition – Barnett Rich Located in southwestern rich gas portion of

the Barnett Shale

$90MM pending acquisition of Devon Energy’s West Johnson County gathering and processing assets

HSR approval 8/13/2012 Expected to close by 9/1/2012

Acquiring 74 miles of gathering system and a 100 MMcf/d gas processing plant

Constructed in 2006-08 System capacity of 100 MMcf/d Current volumes of ~95 MMcf/d ~230 Devon wells connected

Signed 20-year fixed fee contract with Devon

20,500 acreage dedication Annual fee escalator

Corvette Plant

Devon Plant

Cowtown Plant

Legend Processing Plants CMLP Cowtown Gathering System

Devon Gathering System

14

Page 15: Crestwood Investor Presentation

Barnett Rich Transaction Merits

15

~5%-8% accretive transaction to CMLP in 2H 2012 and 2013 Ensures solid coverage of Class C unit conversion from PIK to cash pay in

2Q 2013 Acquisition of high quality rich gas midstream assets from Devon, a leading

North American unconventional resource play developer Should lead to additional acquisition and greenfield development

opportunities with Devon Allows for the integration of the Devon gathering system with Crestwood’s

Cowtown gathering system Optimize excess processing capacity at CMLP’s Cowtown and Corvette

plants Reduced wellhead pressures on Devon system provides 3-5% volume uplift Increased NGL recoveries at CMLP plants enhances Devon’s sales value

and future development activity After integration, provides CMLP with an additional 100 MMcf/d 2008 vintage

cryogenic processing plant to redeploy in new rich gas development areas Offers competitive advantage to CMLP as new 100 MMcf/d plants cost

$18-20MM and take over 1 year to manufacture

Page 16: Crestwood Investor Presentation

Barnett Rich Development Plan

Devon is one of the largest Barnett Shale producers by production volume

2Q 2012 ~ 1.3 Bcf/d

10 rigs running at June 30, 2012

Devon’s current West Johnson County rich gas volumes are ~95 MMcf/d

30 Devon wells connected YTD

17 Devon wells remaining for 2012

CMLP inherits 6 well connect projects w/ total capex of ~$1.5MM in 2H 2012

Expect 10-20 wells to be drilled on current acreage in 2013

4 4

2

3

2 2

3

16

Page 17: Crestwood Investor Presentation

Barnett Rich Integration Plan System Integration Strategy: Combine the

Cowtown and Devon gathering systems to enable processing of Devon volumes at CMLP’s Cowtown and Corvette processing plants

Approximately $7MM capital cost to connect (includes new NGL and gas interconnects)

Avoids paying Quicksilver lateral fee on current Devon offload volumes

Plant Optimization Strategy: Current CMLP plant capacity of 325 MMcf/d vs current Cowtown volumes of 140-150 MMcf/d

Current CMLP capacity utilization of ~40%

Excess capacity of 175 – 185 MMcf/d vs current Devon volumes of 95 MMcf/d

Improve capacity utilization to ~80%

Increase in plant and system compression efficiency

Lower operating costs per MCF than Devon plant on a standalone basis

17

Page 18: Crestwood Investor Presentation

Granite Wash Development Update Acquired the Indian Creek gathering system

and processing plant in Roberts County, Texas from Frontier Gas Services in April 2011

32 miles mid/low pressure gathering system; 36 MMcf/d cryogenic processing plant

Long term fixed fee/POP contracts with acreage dedications from Chesapeake, Linn and Great Plains

Le Norman Operating (FRC portfolio company) acquired Great Plains acreage and formed JV with Noble in May 2012

Le Norman commenced Granite Wash development program on Great Plains acreage and will then move to Noble acreage

1st Le Norman Granite Wash completion on Great Plains acreage currently flowing ~ 4.5 MMcf/d + 1,000 Bpd of oil

To MAPL

Existing Frontier Pipeline

Chesapeake Low Pressure Line

Pitco Low Pressure Line

Plains Low Pressure Line

Linn Low Pressure Line

CDP

Producing Gas Well

Permitted Gas Well Indian Creek North Station

Indian Creek Dedication Area

Great Plains Acreage

Indian Creek Plant Site

Existing Frontier Liquids Line

18

Page 19: Crestwood Investor Presentation

Granite Wash Development Update Current Le Norman Phase 1 drilling

plan calls for 13 wells over next 18 months

37 total well locations on Phase 1 acreage over next 5 years

Currently negotiating 5,000 acre addition to original Great Plains acreage dedication

$3MM CMLP capital project to receive higher volumes from Le Norman Phase 1 delivery points

Potential 37,000 acreage expansion (Phase 2) in the coming months based on 2H 2012 and 2013 drilling results

Long term volume forecasts (Phase 1 and Phase 2) may exceed current Indian Creek plant capacity of 38 MMcf/d

Phase 1

Phase 2

Current

Indian Creek Plant

19

Page 20: Crestwood Investor Presentation

Total Barnett Shale 2Q 2012 gathering volumes were 401 MMcf/d vs 450 MMcf/d in 2Q 2011 and 447 MMcf/d in 1Q 2012 Lower than expected volumes due to delayed

new well completions, extended shut-in of current volumes due to fracking operations, modest economic shut-ins and natural decline

12 new wells connected to Alliance system late 2Q 2012 added 50 MMcf/d IP rate

Current 3Q 2012 volumes averaging ~ 430 MMcf/d (1)

Total Barnett Shale 2Q 2012 processing volumes were 130 MMcf/d ~ flat over the last 3 quarters Current 3Q volumes averaging 143 MMcf/d

including ~ 35 MMcf/d third party volumes (1)

Quicksilver added 10 new wells in 1H 2012 with additional 8-10 wells expected in 2H 2012

Devon West Johnson County volumes will add ~ 95 MMcf/d net of offloads after closing

Barnett Shale 2Q Update

20

Alliance

Barnett Shale Asset Overview 420 miles of pipeline 850 MMcf/d gathering capacity 325 MMcf/d processing

capacity 160,000 HP compression 950 wells connected

Cowtown

Lake Arlington

(1) As of 8/15/12

Page 21: Crestwood Investor Presentation

Barnett Quicksilver Update

21

Quicksilver currently accounts for ~35% of total CMLP/CMM gathering volumes and ~40% of total CMLP/CMM revenues (1)

Quicksilver expects to scale back Barnett development plans in 2H 2012 15 wells connected 1H 2012; 8-10 wells to be connected in 2H 2012 24 drilled but uncompleted wells remaining at year-end 2012

Quicksilver is actively pursuing improvement in capital flexibility Amended credit agreement provides $440MM of availability; lower interest coverage

requirement through 2014 S&P revised its outlook of KWK’s credit rating (B-) to stable from negative in August

2012 reflecting improved assessment of liquidity Quicksilver Production Partners - Barnett Shale MLP cleared by the SEC in 2Q –

waiting on improved market conditions to proceed; analysts believe it is likely a 2013 event

Currently considering other Barnett related monetization strategies (i.e. development JV, asset sale or combination with MLP)

Long term Quicksilver / Barnett Shale outlook Barnett Rich Gas (Cowtown area) remains the best economic play in the Quicksilver

portfolio with an estimated value at the wellhead of $6.02 Mcf (2)

Barnett Shale still holds 4 TCF (proved and potential) resource base; 55% developed per KWK forecast (2)

(1) Based on preliminary Crestwood July 2012 gathering and revenue estimates and pro forma for the pending Devon acquisition (2) Per Quicksilver Resources July 2012 Investor Presentation

Page 22: Crestwood Investor Presentation

Fayetteville Shale 2Q Update Gathering volumes 78 MMcf/d vs 81 MMcf/d in 2Q

2011 and 83 MMcf/d in 1Q 2012 15 wells connected YTD; 13 additional wells

expected in 2H 2012 6 new wells connected to Twin Groves system

late 2Q 2012 added 12 – 17 MMcf/d IP rate Current 3Q volumes averaging ~ 86 MMcf/d

with recent highs of 93 MMcf/d (1)

BHP has 1 rig running in CMLP AOD with 2 rigs running in overall Fayetteville Shale play

On August 3, 2012 BHP announced a $2.84 billion impairment charge on carrying value of its Fayetteville Shale assets “The Fayetteville charge reflects the decline in

US domestic gas prices and the company’s decision to adjust its development plans to more liquids rich fields. We believe our dry gas assets are well positioned for the future given their competitive position on the industry cost curve” BHP CEO Marius Klopper

22

Fayetteville Shale Asset Overview 160 miles of pipeline 510 MMcf/d gathering capacity 165 MMcf/d treating capacity 28,000 HP compression 150 wells connected

Rose Bud

Wilson Creek

Prairie Creek

Twin Groves

Woolly Hollow

(1) As of 8/15/12

Page 23: Crestwood Investor Presentation

Other Gathering Systems 2Q Update Haynesville – Crestwood continues to

benefit from a firm transportation agreement with Wildcat Gathering which supports CMLP’s expected volumes through mid 2013. Producers on CMLP’s Sabine gathering system continue to implement restricted choke production practices which curtails volumes but enhances the long term reserve to production potential of dedicated wells.

55 miles of pipeline 100 MMcf/d gathering capacity 74 MMcf/d treating capacity 100 wells connected

Sabine System

Las Animas Systems

47 miles of pipeline 50 MMcf/d gathering capacity 60 wells connected

23

Avalon – Avalon Shale development has been slow to develop on our Las Animas gathering systems. Further development of CMLP’s adjacent Poker Lake rich gas gathering and processing project has been delayed by Chesapeake’s Permian Basin asset sales process expected to be completed before FYE 2012.

Page 24: Crestwood Investor Presentation

24

Key Financial Metrics as of 2Q 2012 2012 2011 % Increase

Gathering (Bcf) (1) 114.9 90.3 + 27%Processing (Bcf) 26.5 25.5 + 4%

Revenues ($MMs) $101.9 $87.9 + 16%Adjusted EBITDA ($MMs) $56.9 $50.4 + 13%

Distributions per Unit $1.00 $0.90 + 11%

Total Debt ($MMs) $550.5 $437.5Debt to Capitalization 46% 48%

Debt to Pro Forma LTM EBITDA 4.1x 4.3xBorrowing Capacity ($MMs) $165.5 $185.1

(1) Includes 35% proportionate ownership of Crestwood Marcellus Midstream LLC gathering volumes.(2) As defined in CMLP's credit agreement. Debt includes capital lease obligations, $8.0 million deferred purchase of Tristate acquisition that will be paid Q4 2012,

$90 million for the pending Devon Acquisition, offset by $116.9 million of equity proceeds received in Q3 2012. Latest twelve months EBITDA is pro forma for theTristate Acquisition and the pending Devon Acquisition.

Six Months Ended June 30,

Operating Statistics:

Leverage Metrics(2):

Page 25: Crestwood Investor Presentation

Revised 2012 Financial Guidance

$55

$38

$125 $125

$65

$43

$135 $130

$-

$20

$40

$60

$80

$100

$120

$140

$160

OriginalNet Income

RevisedNet Income

OriginalAdjusted EBITDA

RevisedAdjusted EBITDA

$ M

illio

ns

Low Range High Range

25

(1) Original guidance provided in February 28, 2012 earnings release

(1) (1)

Page 26: Crestwood Investor Presentation

Factors Effecting Revised 2012 Guidance Lower than expected 2Q 2012 gathering volumes on the

Alliance, Lake Arlington, Sabine, Prairie Creek and Woolly Hollow dry gas systems

Higher than expected DD&A and Interest expense Revised 2H 2012 producer drilling plans on dry gas systems

based on lower than expected natural gas prices for the remainder of 2012

Offset by: Increasing contribution from CMM in 3Q and 4Q 2012 Completion of pending Devon acquisition by 9/1/12 Recent new well production results and 2H 2012

development plans on the Indian Creek gathering system

26

Page 27: Crestwood Investor Presentation

Growth Drivers to Improved 2013 Performance Based on Current Crestwood 5-Year Plan Forecast

0 200 400 600 800 1,000 1,200

Dry Gas Systems

Rich Gas Systems(100% Owned)

Marcellus JointVenture

Total Rich GasVolumes

Total CrestwoodVolumes

Gathering Volumes MMcf/d

2012 2013

10%

26%

65%

49%

21%

27

Page 28: Crestwood Investor Presentation

Factors which could improve distribution growth and strengthen coverage

Improved natural gas prices leading to increased drilling on dry gas systems

Contributions from bolt-on or value chain acquisitions

Contributions from new greenfield infrastructure projects

Faster drop downs from Crestwood Holdings related to CMM

Current Crestwood 5-Year Plan Supports Solid Distribution Growth from Base Business

2011 2012 2013 2014 2015Annual Distributions

Crestwood maintains its 10% historical distribution growth target

28

Page 29: Crestwood Investor Presentation

Key Investment Considerations Experienced management team and strong general partner

Solid field services operating platform

New strategy to emphasize bolt-on and value chain acquisitions

Building competitive business development team to take advantage of historic midstream infrastructure opportunities

Access to multiple sources of growth capital Ample CMLP current liquidity to execute new acquisition and greenfield

project strategies

Focused on creating long term value through consistent distribution growth Remain committed to 10% annual distribution growth target

29

Page 30: Crestwood Investor Presentation

Non-GAAP Financial Measures

The following slides of this presentation provide reconciliations of the non-GAAP financial measures adjusted EBITDA and adjusted distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance. We define adjusted EBITDA as net income from continuing operations adjusted for interest expense, income taxes, depreciation, amortization and accretion expense and certain non-recurring expenses, including but not limited to items such as transaction related expenses and gains/losses on the exchange of property, plant and equipment. Adjusted EBITDA is commonly used as a supplemental financial measure by senior management and by external users of our financial statements, such as investors, research analysts and rating agencies, to assess the financial performance of our assets without regard to financing methods, capital structures or historical cost basis. We define adjusted distributable cash flow as net income from continuing operations adjusted for: (i) the addition of depreciation, amortization and accretion expense; (ii) the addition of income taxes; (iii) the addition of non-cash interest expense; (iv) the subtraction of maintenance capital expenditures and (v) certain non-recurring expenses, including but not limited to items such as transaction related expenses and gains/losses on the exchange of property, plant and equipment. The GAAP measure most directly comparable to adjusted distributable cash flow is net income from continuing operations.

30

Page 31: Crestwood Investor Presentation

Non-GAAP Reconciliations

31

2008 2009 2010 2011 2011 2012

Total revenues 76,084$ 95,881$ 113,590$ 205,820$ 87,915$ 101,935$

Product purchases - - - (38,787) (12,528) (16,414)

Operations and maintenance expense (19,395) (21,968) (25,702) (36,303) (15,592) (18,598)

General and administrative expense (6,407) (9,676) (17,657) (24,153) (12,430) (13,674)

Earnings from unconsolidated affiliate - - - - - 441

Gain from exchange of property, plant and equipment - - - 1,106 - -

Other income 11 1 - - - -

EBITDA 50,293 64,238 70,231 107,683 47,365 53,690

Add: Non-recurring expenses - - 6,318 2,279 3,037 1,778

Less: Equity earnings from unconsolidated affiliates - - - - - (441)

Add: Adjusted earnings from unconsolidated affiliates - - - - - 1,876

Adjusted EBITDA 50,293 64,238 76,549 109,962 50,402 56,903

Less:

Depreciation and accretion expense 13,131 20,829 22,359 33,812 14,386 21,484

Interest expense 8,437 8,519 13,550 27,617 12,825 15,843

Income tax provision (benefit) 253 399 (550) 1,251 551 578

Non-recurring items impacting net income - - 6,318 2,279 3,037 3,213

Net income from continuing operations 28,472$ 34,491$ 34,872$ 45,003$ 19,603$ 15,785$

Net income from continuing operations 28,472$ 34,491$ 34,872$ 45,003$ 19,603$ 15,785$

Depreciation and accretion expense 13,131 20,829 22,359 33,812 14,386 21,484

Income tax provision (benefit) 253 399 (550) 1,251 551 578

Amortization of deferred financing fees 6,096 3,836 4,961 3,473 1,610 2,325

Non-cash equity compensation 1,017 1,705 5,522 916 565 994

Maintenance capital expenditures (1,890) (10,000) (6,600) (1,409) (705) (1,593)

Distributable cash flow 47,079 51,260 60,564 83,046 36,010 39,573

Add: Non-recurring expenses - - 2,737 4,779 5,537 1,778

Less: Equity earnings from unconsolidated affiliates - - - - - (441)

Add: Adjusted DCF from unconsolidated affiliates - - - - - 1,750

Adjusted distributable cash flow 47,079$ 51,260$ 63,301$ 87,825$ 41,547$ 42,660$

Distributions declared for respective period 33,736 39,428 52,423 70,453 31,621 45,787

Distribution coverage 1.40x 1.30x 1.21x 1.25x 1.31x 0.93x

Six Months EndedYear Ended December 31, June 30,

($ in thousands)

Page 32: Crestwood Investor Presentation

Non-GAAP Reconciliation: 2012 Forecast

32

Net income $38 to $43

Add: Depreciation, amortization and accretion expense $45

Add: Interest expense $35

Add: Income tax provision $1

EBITDA $119 to $124

Add: Non-recurring expenses (1) $2

Deduct: Equity earnings from Crestwood Marcellus Midstream ("CMM") ($3)

Add: 35% of CMM's Adjusted EBITDA $7

Adjusted EBITDA $125 to $130

(1) Includes approximately $2 million of non-recurring expenses primarily related to due diligence activitiesof a potential acquisition that is not expected to be completed.

Reconciliation of Net Income to Adjusted EBITDA(in millions)