Overview and Performance Metrics

We are a growth-oriented publicly traded Delaware master limited partnership engaged in the gathering, processing, treating, compression, transportation and sales of natural gas and the delivery of NGLs produced from the geological formations of the Barnett Shale in north Texas, the Fayetteville Shale in northwestern Arkansas, the Granite Wash in the Texas Panhandle, the Marcellus Shale in northern West Virginia, the emerging Avalon Shale trend in southeastern New Mexico, and the Haynesville/Bossier Shale in western Louisiana. We provide midstream services to various producers that focus on developing unconventional resources across the United States. Our largest producer is Quicksilver Resources Inc. (Quicksilver). For the three and nine months ended September 30, 2012, Quicksilver's production volumes accounted for 46% and 50% of our total revenues. We also gather certain natural gas volumes that Quicksilver purchases from Eni SpA, which comprised 5% of our total revenues for both the three and nine months ended September 30, 2012.

We conduct all of our operations in the midstream sector in eight operating segments, four of which are reportable. Our operating segments reflect how we manage our operations and are generally reflective of the geographic areas in which we operate. Our reportable segments consist of Barnett, Fayetteville, Granite Wash and Marcellus. Our operating segments are engaged in gathering, processing, treating, compression, transportation and sales of natural gas and delivery of NGLs in the United States.

The results of our operations are significantly influenced by the volumes of natural gas gathered and processed through our systems. We gather, process, treat, compress, transport and sell natural gas pursuant to fixed-fee and percent-of-proceeds contracts. Under our fixed-fee contracts, we do not take title to the natural gas or associated NGLs. For the nine months ended September 30, 2012, approximately 98% of our gross margin, which we define as total revenue less product purchases, is derived from fixed-fee service contracts, which minimizes our commodity price exposure and provides us with less volatile operating performance and cash flows. Under our percent-of-proceeds contracts, we take title to the residue gas, NGLs and condensate and remit a portion of the sale proceeds to the producer based on prevailing commodity prices. For the nine months ended September 30, 2012, the net revenues from percent-of-proceeds contracts accounted for approximately 2% of our gross margin.

Although we do not have significant direct commodity price exposure, lower natural gas prices could have a potential negative impact on the pace of drilling in dry gas areas - such as areas in the Barnett Shale (gathered by the Alliance and Lake Arlington Systems), the Fayetteville Systems and the Sabine System (part of the Haynesville/Bossier Shale). We operate five systems located in basins that include NGL rich gas shale plays: (i) the Cowtown System (which includes the West Johnson County System acquired in the Devon Acquisition), part of the Barnett segment; (ii) the Granite Wash System; (iii) the Las Animas Systems in the Avalon Shale; and (iv) two systems acquired by Crestwood Marcellus Midstream LLC (CMM), our unconsolidated affiliate), in the Marcellus segment. For the three and nine months ended September 30, 2012, our consolidated systems (i.e., excluding CMM) located in NGL rich gas basins contributed approximately 55% and 54% of our total revenues and 33% and 29% of our total gathering volumes. For the three and nine months ended September 30, 2012, our consolidated and unconsolidated systems located in NGL rich gas basins (i.e., including 100% of CMM's results), when combined, would have contributed approximately 61% and 58% of our total consolidated and unconsolidated revenues and 54% and 46% of total consolidated and unconsolidated gathering volumes. A prolonged decrease in the commodity price environment could result in our customers reducing their production volumes which would result in a decrease in our revenues.

Our management uses a variety of financial and operational measures to analyze our performance. We view these measures as important factors affecting our profitability and unitholder value and therefore we review them monthly for consistency and to identify trends in our operations. These performance measures are outlined below.

Volume - We must continually obtain new supplies of natural gas to maintain or increase throughput volumes on our gathering and processing systems. We routinely monitor producer activity in the areas we serve to identify new supply opportunities. Our ability to achieve these objectives is impacted by:

• the level of successful drilling and production activity in areas where our systems are located;

• our ability to compete with other midstream companies for production volumes; and

• our pursuit of new acquisition opportunities.

Operations and Maintenance Expenses - We consider operations and maintenance expenses in evaluating the performance of our operations. These expenses are comprised primarily of labor, parts and materials, insurance, taxes other than income taxes, repair and maintenance costs, utilities and contract services. Our ability to manage operations and maintenance expenses has a significant impact on our profitability and ability to pay distributions.

EBITDA and Adjusted EBITDA - We believe that EBITDA and Adjusted EBITDA are widely accepted financial indicators of a company's operational performance and its ability to incur and service debt, fund capital expenditures and make distributions. EBITDA and Adjusted EBITDA are not measures calculated in accordance with accounting principles generally accepted in the United States of America (GAAP), as they do not include deductions for items such as depreciation, amortization and accretion, interest and income taxes, which are necessary to maintain our business. In addition, Adjusted EBITDA considers certain expenses related to non-recurring matters identified in a specific reporting period. Additionally, Adjusted EBITDA considers the adjusted earnings impact of our unconsolidated affiliate by adjusting our equity earnings from our unconsolidated affiliate for our proportionate share of its depreciation, amortization and accretion, interest and other non-recurring charges for a specific reporting period. EBITDA and Adjusted EBITDA should not be considered an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP. EBITDA and Adjusted EBITDA calculations may vary among entities, so our computation may not be comparable to measures used by other companies.

See our reconciliation of Net Income to EBITDA and Adjusted EBITDA in Results of Operations below.

Current Year Highlights

Below is a discussion of events that highlight our core business and financing activities.

Operational and Industry Highlights

Shale gas production in the United States has grown rapidly in recent years as the natural gas industry has improved drilling and extraction methods while increasing exploration efforts. The United States has a wide distribution of shale formations containing vast resources of natural gas, NGLs and oil. Led by the rapid development of the Barnett Shale in Texas, shale gas activity has expanded into other areas such as the Marcellus, Fayetteville and Haynesville/Bossier shale plays.

Growth through Diversification - Our operating results reflect our ability to diversify our shale play portfolio and increase volumes not only through our base business located in the Barnett Shale, but also through strategic acquisitions in a number of attractive shale plays in the United States. During the first half of 2012, we focused on acquisitions in NGL rich gas shale plays such as the southwest portion of the Marcellus Shale. Our business strategy going forward will focus on developing new greenfield opportunities in rich gas plays like the Permian, the Utica and the Niobrara and continuing to seek "bolt-on" acquisitions similar to our latest acquisition from Devon Energy Corporation (Devon), which will provide operating synergies and allow for the development of our business in rich gas infrastructure plays.

Our consolidated systems gathered 592 MMcf/d during the nine months ended September 30, 2012 which is an increase of 10% from 539 MMcf/d during the same period in 2011. Additionally, our processed volumes increased slightly from 143 MMcf/d for the nine months ended September 30, 2011 to 157 MMcf/d for the same period in 2012. The increase in volumes resulted in a 7% increase in our overall revenues for the nine months ended September 30, 2012 compared to the same period in 2011.

Additionally, in March 2012, we made an equity investment in CMM, a joint venture, which purchased gathering assets in the Marcellus Shale. For the three and nine months ended September 30, 2012, CMM gathered 289 MMcf/d and 273 MMcf/d. Our earnings from our unconsolidated affiliate were approximately $2 million for both the three and nine months ended September 30, 2012. We believe that this investment will be an integral component of our growth-oriented business model.

Distribution Growth - For the three and nine months ended September 30, 2012, we declared a distribution of $0.51 and $1.51 per limited partner unit compared to $0.48 and $1.38 per limited partner unit during the same periods in 2011. This represents a 6% and 9% increase when comparing the three and nine months ended September 30, 2012 to the same periods in 2011.

Devon Acquisition

On August 24, 2012, we completed the acquisition of certain gathering and processing assets in the NGL rich gas region of the Barnett Shale from Devon for approximately $87 million (the Devon Acquisition). The assets acquired consist of a 74 mile low pressure natural gas gathering system, a 100 MMcf/d cryogenic processing facility and 23,100 horsepower of compression equipment, and are located in Johnson County, Texas near our Cowtown gathering system. Additionally, we entered into a 20 year, fixed-fee gathering, processing and compression agreement with Devon, under which we will gather and process Devon's natural gas production from a 20,500 acre dedication. Natural gas production under the agreement was approximately 78 MMcf/d as of September 30, 2012.

The West Johnson County system acquired in the Devon Acquisition has approximately 230 producing wells as of September 30, 2012. Additionally, due to the NGL rich gas quality of the natural gas production in this portion of the Barnett Shale, Devon has maintained an active drilling and development plan for the Johnson County area in 2012 and expects to continue to further develop the dedicated properties in 2013.

Investment in an Unconsolidated Affiliate

On March 26, 2012, we invested approximately $131 million in cash in exchange for a 35% interest in CMM, which is held by our wholly-owned subsidiary. Crestwood Holdings LLC and its affiliates invested $244 million for the remaining 65% interest. CMM is a new joint venture formed to acquire certain of Antero Resources Appalachian Corporation's (Antero) Marcellus Shale gathering system assets located in Harrison and Doddridge Counties, West Virginia. CMM's purchase price to acquire the assets was $380 million. Antero may earn additional payments of up to $40 million based upon average annual production levels achieved during 2012, 2013 and 2014.

Additionally, CMM entered into the 20 year, fixed-fee, Gas Gathering and Compression Agreement (GGA) with Antero, which provides for an area of dedication of approximately 127,000 gross acres, largely located in the rich gas corridor of the southwestern core of the Marcellus Shale play. As part of the GGA, Antero committed to delivery of minimum annual volumes to CMM for a seven year period from January 1, 2012 to January 1, 2019, ranging from an average of 300 MMcf/d in 2012 to an average of 450 MMcf/d in 2018.

The assets acquired by CMM at closing include approximately 33 miles of low pressure gathering pipelines gathering approximately 210 MMcf/d 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.

Financing Activities

Equity Offerings

During the three months ended September 30, 2012, we completed a public offering of 4,600,000 common units, representing limited partner interests, at a price of $26.00 per common unit ($24.97 per common unit, net of underwriting discounts), providing net proceeds of approximately $115 million. We used the net proceeds from the offering to fund the amounts paid for the Devon Acquisition and to reduce indebtedness under our Credit Facility. In connection with the issuance of common units, our General Partner made an additional capital contribution of $3 million to maintain its 2% general partner interest.

On January 13, 2012, we completed a public offering of 3,500,000 common units, representing limited partner interests, at a price of $30.73 per common unit ($29.50 per common unit, net of underwriting discounts), providing net proceeds of approximately $103 million. The net proceeds from the offering were used to reduce indebtedness under our Credit Facility. Our General Partner did not make an additional capital contribution at the time of the offering, resulting in a reduction in our General Partner's general partner interest to approximately 1.74%. On April 12, 2012, our General Partner made an additional capital contribution of approximately $3 million in exchange for the issuance of an additional 118,862 General Partner units, increasing the General Partner interest from 1.74% to 2%.

Results of Operations

Three and Nine Months Ended September 30, 2012 Compared with Three and Nine
Months Ended September 30, 2011

The following table summarizes our results of operations (In thousands):



                                          Three Months Ended September 30,               Nine Months Ended September 30,
                                            2012                    2011                  2012                    2011
Total operating revenues               $        55,037         $        58,615       $       156,972         $       146,530
Product purchases                               10,341                  13,482                26,755                  26,010
Operations and maintenance expense              10,127                  10,573                28,725                  26,165
General and administrative expense               5,777                   5,566                19,451                  17,996
Depreciation, amortization and
accretion expense                               10,943                   9,595                32,427                  23,981
Gain from exchange of property,
plant and equipment                                 -                    1,106                    -                    1,106

Operating income                                17,849                  20,505                49,614                  53,484

Earnings from unconsolidated
affiliate                                        1,764                      -                  2,205                      -
Interest and debt expense                        8,202                   7,100                24,045                  19,925
Income tax expense                                 306                     347                   884                     898

Net income                             $        11,105         $        13,058       $        26,890         $        32,661
Add:
Interest and debt expense                        8,202                   7,100                24,045                  19,925
Income tax expense                                 306                     347                   884                     898
Depreciation, amortization and
accretion expense                               10,943                   9,595                32,427                  23,981

EBITDA                                 $        30,556         $        30,100       $        84,246         $        77,465

Non-recurring expenses                             932                     129                 2,710                   3,166
Gain from exchange of property,
plant and equipment                                 -                   (1,106 )                  -                   (1,106 )
Earnings from unconsolidated
affiliate                                       (1,764 )                    -                 (2,205 )                    -
Adjusted earnings from
unconsolidated affiliate                         2,237                      -                  4,113                      -

Adjusted EBITDA                        $        31,961         $        29,123       $        88,864         $        79,525

EBITDA in the table above includes operating results from our Barnett, Fayetteville and Granite Wash segments and other operations, earnings from our unconsolidated affiliate (our Marcellus segment), general and administrative expenses, and the gain from exchange of property, plant and equipment. The following table summarizes the results of our Barnett, Fayetteville and Granite Wash segments and other operations (In thousands):

                                                                                         Three Months Ended September 30,
                                                    Barnett               Fayetteville             Granite Wash                 Other                    Total
                                               2012         2011        2012        2011         2012         2011        2012        2011         2012         2011
Gathering revenues                           $ 24,737     $ 29,042     $ 7,043     $ 6,534     $    465     $    113     $ 3,152     $   158     $ 35,397     $ 35,847
Processing revenues                             8,540        7,842          -           -            29           33          -           -         8,569        7,875
Product sales                                      69           -          131         547       10,208       12,529         663       1,817       11,071       14,893

Total operating revenues                     $ 33,346     $ 36,884     $ 7,174     $ 7,081     $ 10,702     $ 12,675     $ 3,815     $ 1,975     $ 55,037     $ 58,615
Product purchases                                  60           -          137         454        9,481       11,264         663       1,764       10,341       13,482
Operations and maintenance expense              6,963        6,015       1,855       3,965          560          499         749          94       10,127       10,573

EBITDA                                       $ 26,323     $ 30,869     $ 5,182     $ 2,662     $    661     $    912     $ 2,403     $   117

Gathering volumes (in MMcf)                    40,252       46,641       8,403       7,813        1,856        1,473       5,041       1,037       55,552       56,964
Processing volumes (in MMcf)                   14,671       11,975          -           -         1,859        1,475          -           -        16,530       13,450

                                                                                            Nine Months Ended September 30,
                                                    Barnett                 Fayetteville              Granite Wash                 Other                      Total
                                              2012          2011          2012         2011         2012         2011         2012        2011         2012          2011
Gathering revenues                          $  74,567     $  79,892     $ 20,037     $ 13,095     $    874     $    208     $  7,952     $   419     $ 103,430     $  93,614
Processing revenues                            24,156        23,553           -            -           128           37           -           -         24,284        23,590
Product sales                                      69            -           331        1,069       27,019       24,965        1,839       3,292        29,258        29,326

Total operating revenues                    $  98,792     $ 103,445     $ 20,368     $ 14,164     $ 28,021     $ 25,210     $  9,791     $ 3,711     $ 156,972     $ 146,530
Product purchases                                  60            -           343        1,012       24,514       21,739        1,838       3,259        26,755        26,010
Operations and maintenance expense             18,438        18,528        6,399        6,356        1,619          998        2,269         283        28,725        26,165

EBITDA                                      $  80,294     $  84,917     $ 13,626     $  6,796     $  1,888     $  2,473     $  5,684     $   169

Gathering volumes (in MMcf)                   117,434       126,471       23,049       15,146        4,576        3,011       17,149       2,655       162,208       147,283
Processing volumes (in MMcf)                   38,493        36,028           -            -         4,566        2,941           -           -         43,059        38,969

EBITDA and Adjusted EBITDA - EBITDA increased by less than $1 million and approximately $7 million for the three and nine months ended September 30, 2012 compared to same periods during 2011. In the same manner, Adjusted EBITDA increased by approximately $3 million and $9 million for the three and nine months ended September 30, 2012 compared to the respective periods in 2011. Adjusted EBITDA considers expenses for evaluating certain transaction opportunities and other non-recurring matters. For the three and nine months ended September 30, 2012, these adjustments to EBITDA were approximately $1 million and $3 million. Additionally, Adjusted EBITDA includes less than $1 million and approximately $2 million of net earnings adjustments related to adding back our proportionate share of our unconsolidated affiliate's depreciation, amortization and accretion expense (DA&A), interest and debt expense and non-recurring expenses for the three and nine months ended September 30, 2012.

Below is a discussion of the factors that impacted EBITDA by segment for the three and nine months ended September 30, 2012 compared to the same periods in 2011:

Barnett:

For both the three and nine months ended September 30, 2012, our Barnett segment's EBITDA was approximately $5 million lower than the same periods in 2011, primarily due to lower gathering revenues.

Revenues and Volumes - Revenues in our Barnett segment decreased by approximately $4 million and $5 million during the three and nine months ended September 30, 2012 compared to the same periods in 2011, primarily due to lower dry gas gathering volumes. Our gathering revenues for our Barnett segment were flat during the third quarter of 2012 compared to the second quarter of 2012, but lower than the first quarter of 2012. The decrease in gathering volumes primarily related to reduced production from existing wells and well shut-ins at our Alliance and Lake Arlington gathering systems. These decreases in volumes were partially offset by producers connecting 11 and 43 new wells during the three and nine months ended September 30, 2012. We anticipate that the number of new wells connected to our systems may be impacted by moderated drilling activity in dry gas areas for the remainder of 2012.

Also, partially offsetting the decline in gathering revenues and volumes discussed above was an increase in gathering and processing revenues due to the Devon Acquisition, which was completed on August 24, 2012. During the three and nine months ended September 30, 2012, the acquired assets generated approximately $2 million of gathering and processing revenues for our Barnett segment.

In addition to the items discussed above, our revenues were also unfavorably impacted by a compressor building fire at our Corvette processing plant that occurred on September 6, 2012, which reduced revenues by approximately $0.5 million. Additional impacts to the Barnett segment's EBITDA as a result of the compressor building fire are further discussed below.

Operations and Maintenance Expense - Operations and maintenance expenses in our Barnett segment increased by approximately $1 million or 16% for the three months ended September 30, 2012 when compared to the same period in 2011, while remaining relatively flat year over year. The increase in operations and maintenance expenses was primarily due to (i) the Devon Acquisition;
(ii) approximately $0.2 million of costs related to a condensate spill at our Corvette facility; and (iii) a compressor building fire at our Corvette processing plant. As a result of the building fire at our Corvette processing plant, we impaired assets of approximately $1.6 million, incurred repair costs of approximately $0.8 million, and recorded an insurance receivable of approximately $2.2 million, all of which resulted in a net impact to our operations and maintenance expenses of approximately $0.2 million.

Fayetteville:

Our Fayetteville segment EBITDA increased approximately $2.5 million and $6.8 million during the three and nine months ended September 30, 2012 compared with the same periods in 2011, primarily due to higher revenues and volumes during both periods. Also contributing to the increase in our Fayetteville segment EBITDA during the three months ended September 30, 2012, were lower operations and maintenance expenses.

Revenues and Volumes-During the three months ended September 30, 2012, BHP Billiton Petroleum, Plc. (BHP) connected six new wells on our Twin Groves System, contributing to an increase in revenues and volumes in our Fayetteville segment. Additionally, we recognized nine months of revenues in 2012 versus six months during 2011 due to the acquisition of our operations in Fayetteville on April 1, 2011.

Operations and Maintenance Expense - Operations and maintenance expenses in our Fayetteville segment decreased by approximately $2.1 million during the three months ended September 30, 2012 compared to the same period in 2011, primarily due to the cancellation of several operating leases in January 2012.

Granite Wash:

During the three and nine months ended September 30, 2012, our Granite Wash segment's EBITDA was approximately $0.2 million and $0.6 million lower than the same periods in 2011 primarily due to lower product sales margin and higher operations and maintenance expenses.

Revenues/Margin and Volumes-For the three and nine months ended September 30, 2012, Granite Wash's EBITDA decreased compared to the same period in 2011, due to lower margins earned on our percent-of-proceeds contracts, which primarily resulted from lower NGL and natural gas prices experienced during the three and nine months ended September 30, 2012 coupled with relatively consistent costs per volume. Partially offsetting this decrease in product sales margin was higher gathering revenues due to new wells connected by Le Norman Operating LLC (Le Norman) during the three months ended September 30, 2012.

Operations and Maintenance Expense-For the three and nine months ended September 30, 2012 compared to the same periods in 2011, operations and maintenance expenses were higher due to the increase in volumes resulting from the new wells connected by Le Norman.

Other:

Our other operations include our assets in the Haynesville/Bossier Shale (Sabine . . .