Crestwood Midstream, Crestwood Holdings to acquire Marcellus gathering assets from Antero Resources

Crestwood Midstream Partners

Crestwood Midstream Partners LP, Crestwood Holdings Partners LLC and Antero Resources Appalachian Corp. have executed definitive agreements whereby CMLP and Crestwood Holdings, through a newly formed joint venture (Crestwood Marcellus Midstream), have agreed to acquire certain of Antero’s Marcellus Shale gathering system assets located in Harrison and Doddridge Counties, West Virginia for $375 million in cash plus an earn-out which would allow Antero to earn additional purchase price payments of up to $40 million based upon average annual production levels achieved during 2012 and 2013.

Additionally, at closing, the parties have agreed to enter into a 20-year gas gathering and compression agreement, which will provide for an Area of Dedication of approximately 127,000 gross acres, or 104,000 net acres, largely located in the rich gas window of the southwestern core of the Marcellus Shale play.

The transaction will have a January 1, 2012 effective date and is expected to close in March 2012, subject to regulatory approvals and customary closing conditions.

Antero is a Marcellus Shale producer with 220,000 net acres in the heart of the play, with approximately 75% of the acreage expected to have rich gas potential. Antero is currently running 6 rigs in the area of dedication and has recently announced year end 2011 net proved reserves of approximately 2.8 Tcfe attributable to its total Marcellus Shale acreage.

The assets to be acquired by Crestwood Marcellus Midstream include 33 miles of low pressure gathering pipelines currently gathering approximately 210 million cubic feet per day from 59 existing horizontal Marcellus Shale wells. The gathering pipelines deliver Antero’s Marcellus Shale production to various regional pipeline systems including Columbia, Dominion and Equitrans and later this year will begin deliveries to intermediate systems which will connect to MarkWest Energy Partners’ Sherwood Gas Processing Plant, expected to be placed in service in the third quarter of 2012.

Paul M. Rady, chairman and CEO of Antero commented that “this is a strategic transaction for Antero that allows us to redeploy capital into further drilling and acreage consolidation in Appalachia. We look forward to working closely with Crestwood as our midstream partner in this development going forward.”

“Crestwood is pleased to partner with Antero in the long term development of this exceptional Marcellus Shale acreage,” stated Robert G. Phillips, President and Chief Executive Officer of CMLP’s general partner. “The transaction is an excellent fit with our strategy and adds to our portfolio another great shale focused producer, a long-term fixed-fee contract and core acreage dedication in the rich gas window of the premier natural gas shale play in the industry. This acquisition will be immediately accretive to CMLP, is supported by a minimum volume commitment and offers tremendous visible growth potential for many years as volumes increase and the systems expand. We are also very pleased to work with First Reserve, through its indirect ownership of Crestwood Holdings, to fashion an acquisition and financing structure that enables CMLP to maintain sufficient liquidity and conservative leverage which highlights the value of strong general partner sponsorship.”

At closing, Crestwood Holdings, through its indirect subsidiary, Crestwood Holdings LLC, will contribute approximately $244 million in exchange for its 65% ownership interest in the joint venture, while CMLP will contribute approximately $131 million in exchange for its 35% ownership interest in the joint venture. At closing, the joint venture will also enter into a $200 million revolving credit facility to finance future capital requirements related to growth in the area of dedication. CMLP will fund its joint venture contribution with available capacity under its existing $500 million credit facility. Crestwood Holdings has arranged long term financing to support its share of the joint venture acquisition through financing commitments from a syndicate of banks including BofA Merrill Lynch, BNP Paribas, Citigroup, RBC Capital Markets, The Royal Bank of Scotland plc and UBS Securities which will also participate in the joint venture credit facility.

The proceeds from the sale will be used for further development of Antero’s Appalachian drilling inventory as well as for future leasehold acquisition. Following closing, Antero is expected to have approximately $780 million of undrawn bank commitments and over $1.1 billion of unused borrowing base capacity.

Barclays Capital acted as financial advisor and Vinson & Elkins LLP acted as legal counsel to Antero in connection with the transaction.

Locke Lord LLP and Simpson Thacher & Bartlett LLP acted as legal counsel to Crestwood Midstream Partners LP and Crestwood Holdings LLC in connection with the transaction.

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