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Bakken Leak Puts Spotlight on Fast-Growing Crestwood Midstream

Stocks in this article: CMLP PDH

NEW YORK (TheStreet) -- Pipelines are the safest way to move oil and gas from a field to market. Breaks are uncommon, but each break is a potential catastrophe.

One such break came over the July 4 weekend in a saltwater line owned by a unit of Crestwood Midstream Partners (CMLP), putting an unwanted spotlight on the Houston-based company.

The underground line contained brine from fracking operations. The brine is between 10 and 30 times saltier than sea water. Some of the roughly 1 million gallons of brine lost got into Bear Den Bay in North Dakota. The bay leads to a lake that supplies water for a local Indian tribe, according to press reports.

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Bear Den Bay feeds the Missouri River, and the leak took a week to find because the line did not have electronic monitoring.

Crestwood had just finished plugging some major financial leaks when the leak occurred.

Those came from the acquisition of Inergy, a larger pipeline operator bought in June, 2013, and Arrow Midstream, acquired in October.

The two deals make Crestwood a major player in the Bakken, an oil and gas play centered in western North Dakota that produced 937,263 barrels of oil per day in April, according to state figures, nearly 10 times the production level of early 2009.

The two deals have put a substantial leak in Crestwood finances, which the company is also trying to clean up. After booking $69 million in revenue for the quarter ending in September, 2013, Crestwood had $658.6 million in revenue during the fourth quarter.

That fell to $537 million for the March quarter, but the bottom line swung from a net loss of $20 million in December to a net profit of $2.4 million for March. Crestwood is due to report results for the June quarter on Aug. 5. The balance sheet currently shows a little more than $1 in debt for each $4 in assets.

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