UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-33631

Crestwood Midstream Partners LP

(Exact name of registrant as specified in its charter)

Delaware		56-2639586
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

717 Texas Avenue, Suite 3150, Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(832) 519-2200
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of the issuer’s common units and Class C units, as of the latest practicable date:

Title of Class		Outstanding as of July 29, 2011
Common Units		32,987,696
Class C Units		6,337,093

 

 

DEFINITIONS

As used in this report, unless the context otherwise requires:

COMMONLY USED TERMS

Other commonly used terms and their definitions follow:

Explanatory Note

Crestwood Midstream Partners LP is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to amend its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 8, 2011 (the “Original 10-Q”) to correct an error in the pro forma presentation of income table within footnote 3 “Acquisitions.” This Amendment has no impact on our previously reported statements of income, balance sheets, statements of cash flows, statements of changes in partners' capital, results of operations or liquidity and does not affect our Credit Facility.

In addition, this Amendment amends and restates Part I “Item 4. Controls and Procedures” and Part II “Item IA Risk Factors” to account for the error noted in this Amendment. This Amendment also amends and restates the exhibit list in Part II, Item 6 of the Original 10-Q and re-files certain exhibits specified herein, including currently dated certifications of our chief executive officer and chief financial officer as set forth as Exhibits 31.1, 31.2 and 32.1 hereto, and corrects information presented within footnote 2.

Except as described above, we have not modified or updated other disclosures contained in the Original 10-Q. Accordingly, this Amendment, with the exception of the foregoing, does not reflect events occurring after the date of filing of the Original 10-Q, or modify or update those disclosures affected by subsequent events. Consequently, all other information not affected by the corrections described above is unchanged and reflects the disclosures and other information made at the date of the filing of the Original 10-Q and should be read in conjunction with our filings with the SEC subsequent to the filing of the Original 10-Q, including amendments to those filings, if any.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

CRESTWOOD MIDSTREAM PARTNERS LP
INDEX TO FORM 10-Q/A
For the Period Ended June 30, 2011

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			6
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010			6
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010			7
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010			8
Condensed Consolidated Statements of Changes in Partners’ Capital for the six months ended June 30, 2011 and 2010			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3. Defaults Upon Senior Securities			35
Item 4. (Removed and Reserved)			35
Item 5. Other Information			35
Item 6. Exhibits			36
Signatures			37
Certification(s) Pursuant to Section 302
Certification Pursuant to Section 906
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

FORWARD-LOOKING INFORMATION

     Certain statements contained in this report and other materials we file with the SEC, or in other written or oral statements made or to be made by us, other than statements of historical fact, are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current expectations or forecasts of future events. Words such as “may,” “assume,” “forecast,” “predict,” “strategy,” “expect,” “intend,” “plan,” “aim,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements. Forward-looking statements can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements and should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

	•		changes in general economic conditions;
	•		fluctuations in natural gas prices;
	•		failure or delays by our customers in achieving expected production from 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;
	•		ability to consummate acquisitions and successfully integrate the acquired business and our ability to realize any cost savings and other synergies from such acquisitions;
	•		any disruption from the Frontier Gas Acquisition making it more difficult to maintain relationships with customers, employees or suppliers;
	•		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;
	•		construction costs or capital expenditures exceeding estimated or budgeted amounts;
	•		the effects of existing and future laws and governmental regulations, including environmental and climate change requirements;
	•		the effects of existing or future litigation;
	•		risks related to the substantial indebtedness incurred as a result of the Frontier Gas Acquisition; and
	•		certain factors discussed elsewhere in this Quarterly Report.

     The list of factors is not exhaustive, and new factors may emerge or changes to these factors may occur that would impact our business. Additional information regarding these and other factors may be contained in our filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. All such risk factors are difficult to predict and are subject to material uncertainties that may affect actual results and may be beyond our control. The forward-looking statements included in this report are made only as of the date of this report, and we undertake no obligation to update any of these forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.

All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CRESTWOOD MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per unit data — Unaudited

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Revenue
Gathering revenue — related party		$	24,515			$	18,405			$	47,866			$	34,794
Gathering revenue			8,425				1,340				9,901				2,455
Processing revenue — related party			7,903				6,774				14,540				13,253
Processing revenue			659				675				1,175				1,431
Product sales			14,033				—				14,433				—
Total revenue			55,535				27,194				87,915				51,933
Expenses
Operations and maintenance			8,634				6,022				15,592				13,415
Product purchases			12,105				—				12,528				—
General and administrative			6,060				2,399				12,430				5,460
Depreciation, amortization and accretion			8,361				5,642				14,386				11,007
Total expenses			35,160				14,063				54,936				29,882
Operating income			20,375				13,131				32,979				22,051
Interest expense			9,819				2,945				12,825				5,623
Income from continuing operations before income taxes			10,556				10,186				20,154				16,428
Income tax provision			329				73				551				126
Net income		$	10,227			$	10,113			$	19,603			$	16,302
General partner interest in net income		$	1,628			$	677			$	2,516			$	778
Limited partners’ interest in net income		$	8,599			$	9,436			$	17,087			$	15,524
Basic income per unit:
Net income per limited partner unit — basic		$	0.22			$	0.33			$	0.49			$	0.54
Diluted income per unit:
Net income per limited partner unit — diluted		$	0.22			$	0.31			$	0.49			$	0.52
Weighted average number of common units outstanding:
Basic			38,558				28,502				34,893				28,502
Diluted			38,694				31,958				35,029				31,952
Distributions declared per unit (attributable to the period ended)		$	0.46			$	0.42			$	0.90			$	0.81

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRESTWOOD MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

		June 30,				December 31,
		2011				2010
ASSETS
Current assets
Cash and cash equivalents		$	551			$	2
Accounts receivable			8,582				1,679
Accounts receivable — related party			26,002				23,003
Prepaid expenses and other			2,578				1,052
Total current assets			37,713				25,736
Property, plant and equipment, net			688,398				531,371
Intangible assets, net			115,471				—
Goodwill			91,168				—
Other assets			19,905				13,520
Total assets		$	952,655			$	570,627
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Capital leases		$	2,652			$	—
Accounts payable — related party			4,048				4,267
Accrued additions to property, plant and equipment			10,331				11,309
Accounts payable and other			17,421				2,917
Total current liabilities			34,452				18,493
Long-term debt			437,500				283,504
Long-term capital leases			5,286				—
Asset retirement obligations			10,664				9,877
Commitments and contingent liabilities (Note 13)
Partners’ capital
Common unitholders (32,987,696 and 31,187,696 units issued and outstanding at June 30, 2011 and December 31, 2010)			300,752				258,069
Class C unit holders (6,337,093 and 0 units issued and outstanding at June 30, 2011 and December 31, 2010, respectively)			154,056				—
General partner			9,945				684
Total partners’ capital			464,753				258,753
		$	952,655			$	570,627

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRESTWOOD MIDSTREAM PARTNERS LP

		Six Months Ended June 30,
		2011				2010
Operating activities:
Net income		$	19,603			$	16,302
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			14,110				10,765
Accretion of asset retirement obligations			276				242
Deferred income taxes			—				126
Equity-based compensation			565				1,334
Non-cash interest expense			1,610				2,709
Changes in assets and liabilities:
Accounts receivable			(6,568	)			141
Prepaid expenses and other			(1,612	)			(1,011	)
Accounts receivable — related party			(2,999	)			(6,323	)
Accounts payable — related party			(219	)			—
Accounts payable and other			13,791				2,464
Net cash provided by operating activities			38,557				26,749
Investing activities:
Capital expenditures			(16,888	)			(34,845	)
Acquisitions, net of cash acquired			(353,966	)			—
Distribution to Quicksilver for Alliance Midstream Assets			—				(80,276	)
Net cash used in investing activities			(370,854	)			(115,121	)
Financing activities:
Proceeds from senior notes			200,000				—
Proceeds from credit facility			64,200				124,500
Repayments of credit facility			(110,204	)			(23,100	)
Debt issuance costs paid			(6,982	)			—
Proceeds from issuance of Class C units, net			152,671				—
Proceeds from issuance of Common units, net			53,550				11,054
Contributions by partners			8,741				—
Distributions paid			(29,130	)			(23,128	)
Taxes paid for equity-based compensation vesting			—				(1,144	)
Net cash provided by financing activities			332,846				88,182
Net cash increase (decrease)			549				(190	)
Cash and cash equivalents at beginning of period			2				746
Cash and cash equivalents at end of period		$	551			$	556
Cash paid for interest		$	7,357			$	2,914
Non-cash transactions:
Working capital related to capital expenditures			10,331				12,112

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRESTWOOD MIDSTREAM PARTNERS LP

		Limited Partners’
		Common				Subordinated				General Partner				Total
Balance at December 31, 2009		$	281,239			$	3,040			$	558			$	284,837
Equity-based compensation			1,334				—				—				1,334
Distributions paid			(13,251	)			(8,980	)			(897	)			(23,128	)
Distributions to Quicksilver			(80,276	)			—				—				(80,276	)
Net income			9,253				6,271				778				16,302
Issuance of units, net of offering costs			11,054				—				—				11,054
Taxes paid for equity-based compensation vesting			(1,144	)			—				—				(1,144	)
Balance at June 30, 2010		$	208,209			$	331			$	439			$	208,979

		Limited Partners’
		Common				Class C				General Partner				Total
Balance at December 31, 2010		$	258,069			$	—			$	684			$	258,753
Equity-based compensation			565				—				—				565
Distributions paid			(27,134	)			—				(1,996	)			(29,130	)
Net income			15,702				1,385				2,516				19,603
Issuance of units, net of offering costs			53,550				152,671				—				206,221
Contributions by partners			—				—				8,741				8,741
Balance at June 30, 2011		$	300,752			$	154,056			$	9,945			$	464,753

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRESTWOOD MIDSTREAM PARTNERS LP

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

     Organization — Crestwood Midstream Partners LP is a publicly traded Delaware limited partnership formed for the purpose of acquiring and operating midstream assets. Our common units are listed on the New York Stock Exchange under the symbol “CMLP.” In this report, unless the context requires otherwise, references to “we,” “us,” “our” or the “Partnership” are intended to mean the business and operations of Crestwood Midstream Partners LP and its subsidiaries.

     As of June 30, 2011 our ownership is as follows:

		Ownership Percentage
		Crestwood				Public				Total
General partner interest			1.9	%			—				1.9	%
Limited partner interest:
Common unitholders			48.8	%			33.5	%			82.3	%
Class C unitholders			0.2	%			15.6	%			15.8	%
Total			50.9	%			49.1	%			100.0	%

     Description of Business — We are primarily engaged in the gathering, compression, processing and treating of natural gas and the delivery of NGLs produced in the Barnett Shale, Fayetteville Shale and Granite Wash. We provide these midstream services under long-term contracts, whereby we receive fees for performing gathering, compression, processing and treating services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation — The accompanying condensed consolidated interim financial statements and related notes present the financial position, results of operations, cash flows and changes in partners’ capital of our natural gas gathering and processing assets. In management’s opinion, all necessary adjustments to fairly present our results of operations, financial position and cash flows for the periods presented have been made and all such adjustments are of a normal and recurring nature.

     Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our 2010 Annual Report on Form 10-K.

     Changes in Presentation — Certain changes have been made to the 2010 financial statements for presentations adopted in 2011. The amount of the change is approximately $0.6 million and $1.2 million for the three and six months ended June 30, 2010, respectively, from operations and maintenance expense to general and administrative expense.

     Use of Estimates — The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities that exist at the date of the financial statements. Estimates and judgments are based on information available at the time such estimates and judgments are made. Although management believes the estimates are appropriate, actual results can differ from those estimates.

     Fair Value of Financial Instruments — The fair value of cash and cash equivalents, accounts receivable and long-term debt approximate their carrying amounts as of June 30, 2011.

     Revenue Recognition — Our primary service offerings are the gathering and processing of natural gas. We have fixed-fee contracts under which we receive revenue based on the volume of natural gas gathered and processed. We also have percent-of-proceeds contracts where we receive revenue based on the value of products sold to third parties which we classify as Product Sales. We recognize revenue when all of the following criteria are met:

	•		persuasive evidence of an exchange arrangement exists;
	•		services have been rendered;
	•		the price for its services is fixed or determinable; and
	•		collectability is reasonably assured.

     Segment Information — Our operations include three reportable operating segments. These operating segments reflect the way we manage our operations and make decisions. Our business segments reflect the areas in which we operate and consist of the Barnett Shale, the Fayetteville Shale and the Granite Wash. These business segments are engaged in the gathering, compression, processing and treating of natural gas and delivery of NGLs.

     Net Income per Limited Partner Unit — The following is a reconciliation of the components of the basic and diluted net income per limited partner per unit calculations for the three and six months ended June 30, 2011 and 2010. There have not been any units excluded due to being anti-dilutive.

          The weighted-average common units — basic and the net income per limited partner unit — basic amounts have been corrected to include the Class C units in the basic earnings per unit calculation. For the three months ended June 30, 2011 the net income per limited partner unit — basic previously presented was $0.27 and has been corrected to $0.22. For the six months ended June 30, 2011 the net income per limited partner unit — basic previously presented was $0.54 and has been corrected to $0.49.

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
						(In thousands, except per unit data)
Limited partners’ interest in net income		$	8,599			$	9,436			$	17,087			$	15,524
Impact of interest on subordinated note to Quicksilver (1)			—				627				—				1,213
Income available assuming conversion of convertible debt		$	8,599			$	10,063			$	17,087			$	16,737
Weighted-average common units — basic			38,558				28,502				34,893				28,502
Effect of unvested phantom units			136				517				136				517
Effect of subordinated note to Quicksilver (1)			—				2,939				—				2,933
Weighted-average common units — diluted			38,694				31,958				35,029				31,952
Basic earnings per unit:
Net income per limited partner unit — basic		$	0.22			$	0.33			$	0.49			$	0.54
Diluted earnings per unit:
Net income per limited partner unit — diluted		$	0.22			$	0.31			$	0.49			$	0.52
Conversion price (1)			N/A			$	19.38				N/A			$	19.42

     Comprehensive Income — Comprehensive income is equal to net income for the periods presented due to the absence of any other comprehensive income.

Recently Issued Accounting Standards

     Accounting standard-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements to determine their impact, if any, on our financial statements. No pronouncements materially affecting our financial statements have been issued since the filing of our 2010 Annual Report on Form 10-K.

3. ACQUISITIONS

     Effective February 1, 2011, we acquired natural gas gathering pipelines located in the Morrow/Atoka area and near the emerging Avalon Shale and Bone Spring trends in Southeastern New Mexico for $5.1 million from a group of independent producers. The pipelines, which we refer to as the Las Animas System, are supported by long-term, primarily fixed-fee contracts which include existing Morrow/Atoka production. The Avalon Shale is a liquids-rich oil and gas producing formation that is part of the Permian Basin located in West Texas.

     Las Animas System

The Las Animas System, located in Eddy County, New Mexico, in the Morrow/Atoka area and near the emerging Avalon Shale and Bone Spring trends in Southeastern New Mexico, consists of natural gas gathering pipelines that deliver gas to El Paso Natural Gas and Southern Union Gas Services. The Las Animas System is reflected in the Barnett Shale for segment reporting.

     On April 1, 2011, we completed the Frontier Gas Acquisition including assets in the Fayetteville Shale and the Granite Wash for a purchase price of $338 million, subject to adjustments, with an additional $15 million to be paid to Frontier if certain operational objectives are met within six months of the closing date. The Fayetteville Shale is a dry gas formation in the Arkoma basin located in Northwest Arkansas. The Granite Wash is a liquids-rich oil and gas producing formation in the Anadarko basin located in the Texas Panhandle.

     Fayetteville Shale System

The Fayetteville Shale System, located in Northwest Arkansas, consists of high pressure and low pressure gathering pipelines with a capacity of approximately 510 MMcfd, treating capacity of approximately 165 MMcfd and approximately 35,000 hp of compression. This system interconnects with multiple interstate pipelines and are supported by long-term, primarily fixed-fee contracts with producers in the core of the Fayetteville Shale, with initial terms through 2020 with five year extensions.

	•		Twin Groves / Prairie Creek / Woolly Hollow System. Located in Conway and Faulkner Counties, Arkansas and consists of a gathering system and a related gas compression facility with a capacity of 350 MMcfd and a dehydration and treating facility with capacity of 165 MMcfd. This system gathers natural gas produced by BHP Billiton Petroleum, a wholly owned subsidiary of BHP Billiton Limited (“BHP”) / BP p.l.c. (“BP”) and XTO Energy, Inc., a subsidiary of Exxon Mobil Corporation (“ExxonMobil”), and interconnects with interstate pipelines of Boardwalk Gas Transmission, Ozark Gas Transmission and Fayetteville Express Pipeline.
	•		Rose Bud System. Located in White County, Arkansas and consists of a gathering system and a related gas compression facility with a capacity of 60 MMcfd. This system gathers natural gas produced by BHP / BP and ExxonMobil, and interconnects with Ozark Gas Transmission.
	•		Wilson Creek System. Located in Van Buren County, Arkansas and consists of a gathering system and a related compression facility with a capacity of 100 MMcfd. This system gathers natural gas produced by BHP and SH Exploration and interconnects with Ozark Gas Transmission.

     Granite Wash System

The Granite Wash System located in Roberts County, Texas, consists of a gathering system and NGL pipeline system, approximately 9,000 hp of compression, and the Indian Creek Plant consisting of a 36 MMcfd natural gas processing unit that extracts NGLs from the natural gas stream. This system gathers natural gas produced by Chesapeake Energy Corporation and others and delivers NGLs to the Mid-America Pipeline for ultimate delivery to the Mt. Belvieu or Conway NGL market centers. Residue gas is delivered into ANR Pipeline Company.

     The final purchase price allocation is pending the finalization of appraisal valuations of certain tangible and intangible assets acquired, which may result in an adjustment to the preliminary purchase price allocation. The preliminary purchase price allocation is as follows ($ in thousands):

Purchase Price:
Total purchase price		$	348,867
Preliminary Purchase Price Allocation:
Accounts receivable			335
Prepaid expenses and other			750
Capital lease asset			8,587
Property, plant and equipment			140,683
Intangible assets			116,200
Other assets			178
Total assets		$	266,733
Current portion of capital leases			2,576
Other payables			64
Capital leases			6,011
Asset Retirement Obligations			383
Total liabilities		$	9,034
Goodwill		$	91,168

     The $338 million purchase price, subject to adjustment, paid at closing was financed through a combination of equity and debt as described in Notes 4 and 7 to our condensed consolidated interim financial statements in this Quarterly Report. The total purchase price paid of $349 million also includes $8 million in capital spend and $3 million of inventory purchased. Transaction costs for the three months ended June 30, 2011 were $3.6 million of which $1.1 was recorded in general and administrative expense and $2.5 million was recorded in interest expense.

     The following table is the presentation of income as if we had owned the Fayetteville and Granite Wash Systems for the three and six months ended June 30, 2010 and for six months ended June 30, 2011. Subsequent to the issuance of the financial statements, we determined the amounts previously presented contained errors. The information reflects corrections to expenses, which as previously presented did not include depreciation and general and administration expenses for the three and six months ended June 30, 2010 and for the six months ended June 30, 2011.

		Three Months Ended June 30, 2010												Three Months Ended June 30, 2010
		As Previously Presented												As Restated
		Crestwood												Crestwood
		Midstream				Fayetteville and								Midstream				Fayetteville and
		Partners LP				Granite Wash				Combined				Partners LP				Granite Wash				Combined
		(In thousands)												(In thousands)
Revenue		$	27,194			$	16,430			$	43,624			$	27,194			$	16,430			$	43,624
Expenses			(14,063	)			(10,762	)			(24,825	)			(14,063	)			(14,489	)			(28,552	)
Operating income		$	13,131			$	5,668			$	18,799			$	13,131			$	1,941			$	15,072
Basic earnings per limited partner unit:		$	0.33							$	0.53			$	0.33							$	0.21
Diluted earnings per limited partner unit:		$	0.31							$	0.48			$	0.31							$	0.20

		Six Months Ended June 30, 2010												Six Months Ended June 30, 2010
		As Previously Presented												As Restated
		Crestwood												Crestwood
		Midstream				Fayetteville and								Midstream				Fayetteville and
		Partners LP				Granite Wash				Combined				Partners LP				Granite Wash				Combined
		(In thousands)												(In thousands)
Revenue		$	51,933			$	31,730			$	83,663			$	51,933			$	31,730			$	83,663
Expenses			(29,882	)			(21,170	)			(51,052	)			(29,882	)			(28,344	)			(58,226	)
Operating income		$	22,051			$	10,560			$	32,611			$	22,051			$	3,386			$	25,437
Basic earnings per limited partner unit:		$	0.54							$	0.90			$	0.54							$	0.62
Diluted earnings per limited partner unit:		$	0.52							$	0.85			$	0.52							$	0.60

		Six Months Ended June 30, 2011												Six Months Ended June 30, 2011
		As Previously Presented												As Restated
		Crestwood												Crestwood
		Midstream				Fayetteville and								Midstream				Fayetteville and
		Partners LP (1)				Granite Wash (2)				Combined				Partners LP (1)				Granite Wash (2)				Combined
		(In thousands)												(In thousands)
Revenue		$	87,915			$	17,002			$	104,917			$	87,915			$	17,002			$	104,917
Expenses			(54,936	)			(12,420	)			(67,356	)			(54,936	)			(16,014	)			(70,950	)
Operating income		$	32,979			$	4,582			$	37,561			$	32,979			$	988			$	33,967
Basic earnings per limited partner unit:		$	0.49							$	0.63			$	0.49							$	0.37
Diluted earnings per limited partner unit:		$	0.49							$	0.62			$	0.49							$	0.37

4. PARTNERS’ CAPITAL AND DISTRIBUTIONS

     On April 1, 2011, we issued 6,243,000 Class C units, representing limited partner interests in us, in a private placement. The negotiated purchase price for the Class C Units was $24.50 per unit, resulting in net proceeds to us of approximately $153 million used to finance a portion of our Frontier Gas Acquisition. The Class C units are substantially similar in all respects to our existing common units, representing limited partner interests, except that we can elect to pay distributions for our Class C units through the issuance of additional Class C units or cash. The Class C units will convert into common units on a one-for-one basis on the second anniversary of the date of issuance.

     In connection with the issuance of the Class C units, our General Partner made an additional capital contribution of $8.7 million to us in exchange for us issuing an additional 293,948 general partner units, increasing the General Partner interest in us to 2%.

     On May 4, 2011, we completed a public offering of 1,800,000 common units, representing limited partner interests, in us under an existing shelf registration statement at a price of $30.65 per common unit ($29.75 per common unit, net of underwriting discounts and commissions), providing net proceeds of approximately $53 million. The net proceeds from the offering were used to reduce our indebtedness under our Credit Facility and for general partnership purposes. In connection with the issuance of the common units, our General Partner did not make an additional capital contribution resulting in a reduction of the General Partner’s interest in us to approximately 1.9%.

     Our Partnership Agreement requires that we make distributions within 45 days after the end of each quarter to unitholders of record on the applicable record date selected by the General Partner.

     The following table presents distributions attributable to quarters ended in 2011 and 2010:

		Attributable to the				Per Unit				Total Cash				PIK Units to Class								Total IDR
Payment Date		Quarter Ended				Distribution				Distribution				C unitholders				Total				Distribution
										(In millions)
Pending Distributions
August 12, 2011		June 30, 2011				$	0.46			$	16.8			$	3.1			$	19.9			$	1.5
Completed Distributions
2011
May 13, 2011		March 31, 2011				$	0.44			$	14.8			$	2.9			$	17.7			$	0.8
February 11, 2011		December 31, 2010				$	0.43			$	14.3			$	—			$	14.3			$	0.7
2010
November 12, 2010		September 30, 2010				$	0.42			$	13.9			$	—			$	13.9			$	0.6
August 13, 2010		June 30, 2010				$	0.42			$	12.7			$	—			$	12.7			$	0.5
May 14, 2010		March 31, 2010				$	0.39			$	11.6			$	—			$	11.6			$	0.3

     Cash distribution included amounts paid to common and subordinated unitholders. Beginning with the distributions starting with the quarter ended December 31, 2010, we no longer have any subordinated units due to the conversion of all subordinated units into common units. See Note 13 to the consolidated financial statements in our 2010 Annual Report on Form 10-K for a more complete description of our conversion of the subordinated units. We have the option to pay distributions to our Class C unitholders with cash or by issuing additional Class C units based upon the volume weighted average price of our limited partner units for the 10 trading days immediately preceding the date the distribution is declared. For the distribution that was paid May 13, 2011, attributable to the quarter ended March 31, 2011, we issued 94,093 additional Class C units. For the distribution that will be paid August 12, 2011, attributable to the quarter ended June 30, 2011, approximately 115,141 additional Class C units will be issued.

5. PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consisted of the following:

		June 30,				December 31,
		2011				2010
		(In thousands)
Gathering systems		$	269,887			$	158,975
Processing plants and compression facilities			410,589				365,208
Construction in progress — gathering			23,140				26,385
Rights-of-way and easements			47,565				32,054
Land			4,511				4,251
Buildings and other			5,083				3,494
			760,775				590,367
Accumulated depreciation			(72,377	)			(58,996	)
Net property, plant and equipment		$	688,398			$	531,371

     With the Frontier Gas Acquisition we have leased compressors which are accounted for as capital leases for a total of $8.6 million less accumulated amortization of $0.7 million as of June 30, 2011.

6. INTANGIBLE ASSETS AND GOODWILL

     Intangible assets consist of gas contracts. The following table summarizes the intangibles and goodwill associated with the purchase of the Frontier Gas Acquisition.

						Accumulated				Net Book
		Cost				Amortization				Value
						(In thousands)
Intangibles — subject to amortization:
Gas contracts		$	116,200			$	729			$	115,471
Intangibles — not subject to amortization:
Goodwill			91,168				—				91,168
		$	207,368			$	729			$	206,639

The intangible assets have useful lives of 6 to 17 years. Amortization expense recorded for the three and six months ended June 30, 2011 was approximately $0.7 million. The expected amortization of the intangible assets is as follows:

Years Ending (in thousands)

2011 (remaining)		$	1,458
2012			4,370
2013			5,870
2014			7,151
2015			8,016
Thereafter			88,606
Total		$	115,471

7. DEBT

     Debt consisted of the following:

		June 30,				December 31,
		2011				2010
		(In thousands)
Credit Facility		$	237,500			$	283,504
Senior Notes			200,000				—
			437,500				283,504
Current maturities of debt			—				—
Total		$	437,500			$	283,504

     Credit Facility — At June 30, 2011, we had $237.5 million outstanding under our $500 million Credit Facility at the weighted-average interest rate of 3.1%. Borrowings under the Credit Facility bear interest at LIBOR plus an applicable margin or a base rate as defined in the credit agreement. Under the terms of the Credit Facility, the applicable margin under LIBOR borrowings is 2.75%. On April 1, 2011, we entered into a Joinder Agreement with certain lenders of our Credit Facility, which expanded our borrowing capacity from $400 million to $500 million. See Note 7 to the consolidated financial statements in our 2010 Annual Report on Form 10-K for a more complete description of our indebtedness.

     The Credit Facility contains provisions that trigger an acceleration of indebtedness based solely on the occurrence of a material adverse change in our financial condition or results of operations. As of June 30, 2011, we were in compliance with our financial covenants.

     Bridge Loans — In February 2011, in connection with the Frontier Gas Acquisition, we obtained commitments from multiple lenders for senior unsecured bridge loans in an aggregate amount up to $200 million. The commitment was not drawn and was terminated on April 1, 2011 in connection with the closing of the Senior Notes described below. We recognized $2.5 million of commitment fees in the second quarter of 2011, which is included in interest expense, related to the bridge loans.

     Senior Notes — On April 1, 2011, we issued the Senior Notes. Our obligations under the Senior Notes are guaranteed on an unsecured basis by our current and future domestic subsidiaries. The proceeds were used to partially finance the Frontier Gas Acquisition. Interest on the Senior Notes accrues at a rate of 7.75% per annum, and is payable in cash semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2011, and mature April 2019.

     Our Senior Notes requires us to maintain a ratio of our consolidated trailing 12-month EBITDA (as defined in the senior notes indenture) to fixed charges of at least 1.75 to 1.0. As of June 30, 2011, we were in compliance with this covenant.

8. ACCOUNTS PAYABLE AND OTHER

     Accounts payable and other consist of the following:

		June 30,				December 31,
		2011				2010
		(In thousands)
Accrued operating expenses		$	3,099			$	758
Accrued property taxes			2,728				—
Product purchases payable			4,330				—
Compensation and benefits payable			1,485				—
Tax payable			650				280
Legal services			—				176
Consulting services			—				802
Interest payable			4,653				726
Other			476				175
		$	17,421			$	2,917

9. CAPITAL LEASES

     With the Frontier Gas Acquisition we have leased compressors which are accounted for as capital leases. The total liability outstanding at June 30, 2011 related to these leases is $7.9 million. Future minimum lease payments of capital leases (in thousands):

     Years Ending

2011 (remaining)		$	1,431
2012			2,860
2013			2,860
2014			1,161
Total payments			8,312
Imputed Interest			(374	)
Present value of future payments		$	7,938

10. ASSET RETIREMENT OBLIGATIONS

     Activity for asset retirement obligations is as follows (in thousands):

Asset retirement obligations as of December 31, 2010		$	9,877
Incremental liability			511
Accretion expense			276
Asset retirement obligations as of June 30, 2011		$	10,664

As of June 30, 2011, no assets are legally restricted for use in settling asset retirement obligations.

11. EQUITY-BASED COMPENSATION

     Awards of phantom units have been granted under our Third Amended and Restated 2007 Equity Plan (the “2007 Equity Plan”). The following table summarizes information regarding 2011 phantom unit activity:

		Payable in cash								Payable in units
						Weighted								Weighted
						Average Grant								Average Grant
		Units				Date Fair Value				Units				Date Fair Value
Unvested phantom units — January 1, 2011			—			$	—				121,526			$	27.11
Vested			—				—				—				—
Issued			3,012				28.85				18,391				27.73
Cancelled			—				—				(14,820	)			27.11
Unvested phantom units — June 30, 2011			3,012			$	28.85				125,097			$	27.20

     At January 1, 2011, we had total unvested compensation cost of $2.6 million related to phantom units. We recognized compensation expense of approximately $0.6 million during the six months ended June 30, 2011. Grants of phantom units during the six months ended June 30, 2011 had an estimated grant date fair value of $0.6 million. We had unearned compensation expense of $2.6 million at June 30, 2011, which is generally expected to be recognized over the vesting period of three years except for grants to non-employee directors of our General Partner in lieu of cash compensation, which vest after one year. No phantom units vested during the six months ended June 30, 2011. At June 30, 2011, 636,909 units were available for issuance under the 2007 Equity Plan.

     See Note 11 to the consolidated financial statements in our 2010 Annual Report on Form 10-K, for a more complete description of our 2007 Equity Plan.

12. INCOME TAXES

     No provision for federal income taxes is included in our results of operations as such income is taxable directly to the partners holding interests in us.

     We are subject to Texas Margin tax, our current tax liability will be assessed based on 0.7% of the gross revenue apportioned to Texas.

     See Note 10 to the consolidated financial statements in our 2010 Annual Report on Form 10-K for more information about our income taxes.

13. COMMITMENTS AND CONTINGENT LIABILITIES

     Litigation — At June 30, 2011, we are not currently subject to any material lawsuits or other legal proceedings that could have a material adverse effect on our results of operations, cash flows or financial condition or for which disclosure is required by Item 103 of Regulation S-K.

     Casualties or Other Risks — We maintain coverage in various insurance programs, which provide us with property damage and other coverages which are customary for the nature and scope of our operations.

     Management of our General Partner believes that we have adequate insurance coverage, although insurance will not cover every type of loss that might occur. As a result of insurance market conditions, premiums and deductibles for certain insurance policies have increased substantially and, in some instances, certain insurance may become unavailable, or available for only reduced amounts of coverage. As a result, we may not be able to renew existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all.

     If we were to incur a significant loss for which we were not adequately insured, the loss could have a material impact on our consolidated financial condition and results of operations and cash flows. In addition, the proceeds of any available insurance may not be paid in a timely manner and may be insufficient if such an event were to occur. Any event that interrupts our revenues, or which causes us to make significant expenditures not covered by insurance, could reduce our ability to meet our financial obligations.

     Regulatory Compliance — In the ordinary course of our business, we are subject to various laws and regulations. In the opinion of management of our General Partner, compliance with current laws and regulations will not have a material adverse effect on our financial condition or results of operations and cash flows.

     Environmental Compliance — Our operations are subject to stringent and complex laws and regulations pertaining to health, safety, and the environment. As an owner or operator of these facilities, we are subject to laws and regulations at the federal, state and local levels that relate to air and water quality, hazardous and solid waste management and disposal and other environmental matters. The cost of planning, designing, constructing and operating our facilities must incorporate compliance with environmental laws and

regulations and safety standards. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and potentially criminal enforcement measures. At June 30, 2010, we had recorded no liabilities for environmental matters.

     With the Frontier Gas Acquisition, we agreed to pay to Frontier up to an additional $15 million if certain commercial objectives are met within six months of the closing date.

14. RELATED-PARTY TRANSACTIONS

     We routinely conduct business with Quicksilver and its affiliates. For a more complete description of our agreements with Quicksilver, see Notes 2 and 12 to the consolidated financial statements in our 2010 Annual Report on Form 10-K.

     During the quarter and six months ended June 30, 2011, Quicksilver accounted for 58% and 71%, respectively of our total revenue. Approximately 10% of our gathered volumes for the six months ended June 30, 2011 are comprised of natural gas purchased by Quicksilver from Eni SpA and gathered under Quicksilver’s Alliance System gathering agreement.

     With the purchase of the Alliance Midstream Assets, we also entered into an agreement with Quicksilver to lease pipeline assets attached to the Alliance System that we did not purchase. We have recognized $0.3 million of expense related to this agreement during the six months ended June 30, 2011.

15. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

     On April 1, 2011, we issued the Senior Notes. Our obligations under the Senior Notes are guaranteed on an unsecured basis by our current and future domestic subsidiaries. Condensed consolidated financial information for CMLP is presented below:

		For the Three Months Ended June 30, 2011
														Crestwood
		Crestwood				Restricted								Midstream
		Midstream				Guarantor								Partners LP
		Partners LP				Subsidiaries				Eliminations				Consolidated
		(in thousands)
Revenue		$	—			$	55,535			$	—			$	55,535
Operating expenses			6,070				29,090				—				35,160
Operating income			(6,070	)			26,445				—				20,375
Interest expense			9,754				65				—				9,819
Income before income tax			(15,824	)			26,380				—				10,556
Income tax provision			—				329				—				329
Net income before equity in net earnings of subsidiaries			(15,824	)			26,051				—				10,227
Equity in net earnings of subsidiaries			26,051				—				(26,051	)			—
Net Income		$	10,227			$	26,051			$	(26,051	)		$	10,227

		For the Three Months Ended June 30, 2010
														Crestwood
		Crestwood				Restricted								Midstream
		Midstream				Guarantor								Partners LP
		Partners LP				Subsidiaries				Eliminations				Consolidated
		(in thousands)
Revenue		$	—			$	27,194			$	—			$	27,194
Operating expenses			2,399				11,664				—				14,063
Operating income			(2,399	)			15,530				—				13,131
Interest expense			2,945				—				—				2,945
Income before income tax			(5,344	)			15,530				—				10,186
Income tax provision			—				73				—				73
Net income before equity in net earnings of subsidiaries			(5,344	)			15,457				—				10,113
Equity in net earnings of subsidiaries			15,457				—				(15,457	)			—
Net Income		$	10,113			$	15,457			$	(15,457	)		$	10,113

		For the Six Months Ended June 30, 2011
														Crestwood
		Crestwood				Restricted								Midstream
		Midstream				Guarantor								Partners LP
		Partners LP				Subsidiaries				Eliminations				Consolidated
		(in thousands)
Revenue		$	—			$	87,915			$	—			$	87,915
Operating expenses			12,442				42,494				—				54,936
Operating income			(12,442	)			45,421				—				32,979
Interest expense			12,760				65				—				12,825
Income before income tax			(25,202	)			45,356				—				20,154
Income tax provision			—				551				—				551
Net income before equity in net earnings of subsidiaries			(25,202	)			44,805				—				19,603
Equity in net earnings of subsidiaries			44,805				—				(44,805	)			—
Net Income		$	19,603			$	44,805			$	(44,805	)		$	19,603

		For the Six Months Ended June 30, 2010
														Crestwood
		Crestwood				Restricted								Midstream
		Midstream				Guarantor								Partners LP
		Partners LP				Subsidiaries				Eliminations				Consolidated
		(in thousands)
Revenue		$	—			$	51,933			$	—			$	51,933
Operating expenses			5,460				24,422				—				29,882
Operating income			(5,460	)			27,511				—				22,051
Interest expense			5,623				—				—				5,623
Income before income tax			(11,083	)			27,511				—				16,428
Income tax provision			—				126				—				126
Net income before equity in net earnings of subsidiaries			(11,083	)			27,385				—				16,302
Equity in net earnings of subsidiaries			27,385				—				(27,385	)			—
Net Income		$	16,302			$	27,385			$	(27,385	)		$	16,302