UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q/A

(Amendment No. 1)







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

For the quarterly period ended March 31, 2011

or



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

For the transition period from              to

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
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|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   ̈

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   ̈    No   ̈

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    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 April 29, 2011
|Common Units   |  | 31,187,696                      
|Class C Units  |  | 6,243,000                       









---

DEFINITIONS

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

Bbl(s)means barrel or barrels

Btumeans British Thermal units, a measure of heating value

EBITDAmeans earnings before interest, taxes, depreciation and accretion

hpmeans horsepower

LIBORmeans London Interbank Offered Rate

Managementmeans management of Crestwood Midstream Partners LPs General Partner

MMBtumeans million Btu

MMBtudmeans million
Btu per day

Mcfmeans thousand cubic feet

MMcfmeans million cubic feet

MMcfdmeans
million cubic feet per day

MMcfemeans MMcf of natural gas equivalents, calculated as one Bbl of oil or NGLs
equaling six Mcf of gas

MMcfedmeans MMcfe per day

NGL(s)means natural gas liquids

Oilincludes crude oil and condensate

COMMONLY USED TERMS

Other commonly used terms and their definitions follow:

Alliance Midstream
Assetsmeans gathering and treating assets purchased from Quicksilver in January 2010 in the Alliance Airport area of Tarrant and Denton Counties, Texas

Alliance Systemmeans the Alliance Midstream Assets and subsequent additions

CMLPmeans Crestwood Midstream Partners LP and our wholly owned subsidiaries, formerly known as Quicksilver Gas Services LP, which trades under the ticker symbol CMLP

Credit Facilitymeans, our senior secured credit facility, as amended, dated effective October 1, 2010

Crestwoodmeans Crestwood Holdings Partners, LLC and its affiliates

Crestwood Holdingsmeans Crestwood Holdings LLC and its affiliates

Crestwood Transactionmeans the sale to Crestwood by Quicksilver of all its interests in CMLP that was completed on October 1, 2010

Exchange Actmeans the Securities Exchange Act of 1934, as amended

FASBmeans the Financial Accounting Standards Board, which promulgates accounting standards

FASCmeans the FASB Accounting Standards Codification

Fayetteville Shalemeans the pipeline, compression and treating assets located in Northwest Arkansas that were purchased
in the Frontier Gas Acquisition on April 1, 2011

Frontiermeans Frontier Gas Services, LLC, a Delaware limited
liability company

Frontier Gas Acquisitionmeans the purchase of midstream assets in the Fayetteville Shale and
Granite Wash from Frontier that was completed on April, 1, 2011

GAAPmeans generally accepted accounting principles
in the United States

General Partnermeans Crestwood Gas Services GP LLC, formerly known as Quicksilver Gas
Services GP LLC

Granite Wash Systemmeans the pipeline, compression and processing assets and subsequent additions
that were purchased in the Frontier Gas Acquisition on April 1, 2011

IDRmeans Incentive Distribution Rights
as defined in the Partnership Agreement

Joinder Agreementmeans the additional commitments received from certain
lenders under our Credit Facility, dated April 1, 2011, which expanded total borrowing capacity to $500 million

Lake
Arlington Systemmeans gathering and compression assets purchased from Quicksilver in 2008 located in eastern Tarrant County, Texas

Las Animas System means the gathering assets acquired in February 2011, located in Eddy County, New Mexico

NYSEmeans the New York Stock Exchange

Omnibus
Agreementmeans the Omnibus Agreement, dated October 8, 2010, among our General Partner and Crestwood

Partnership Agreementmeans the Second Amended and Restated Agreement of Limited Partnership of Crestwood Midstream Partners
LP, dated February 19, 2008, as amended

Senior Notesmeans the $200 million aggregate principal amount of
7.75% Senior Notes due 2019 issued by CMLP on April 1, 2011

Quicksilvermeans Quicksilver Resources Inc. and
its wholly owned subsidiaries

SECmeans the U.S. Securities and Exchange Commission



2



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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 March 31, 2011, filed
with the Securities and Exchange Commission on May 10, 2011 (the Original 10-Q) to correct an error in the Condensed Consolidated Statement of Cash Flows. This correction relates to the receipt of proceeds received by the Partnership on
March 31, 2011 for its Class C units prior to the closing of the Class C unit offering which occurred on April 1, 2011. The Partnership is restating its Condensed Consolidated Statement of Cash Flows in order to reflect the receipt of the proceeds
as a financing activity instead of an operating activity as previously presented. This Amendment does not impact the Partnerships previously reported net increase in cash and cash equivalents in its Condensed Consolidated Statement of Cash
Flows for the three months ended March 31, 2011 and has no impact on our previously reported statements of income, balance sheets, statements of changes in partners capital and does not affect our Credit Facility.

This Amendment also amends and restates the exhibit list in Part II Item 6. Exhibits 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, as well as Part I Item 1. Financial Statements  Note 12
Condensed Consolidated Financial Information, Part I Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital Resources.

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.



3



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CRESTWOOD MIDSTREAM PARTNERS LP

INDEX TO FORM 10-Q/A

For the Period Ended March 31, 2011



|                              |  |                                                                                       |    |  |    | 
|----------------------------- |  | ------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I. FINANCIAL INFORMATION |  |                                                                                       | 6  | 
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements (Unaudited)                                                      |    |  | 6  | 
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |    |  | 19 | 
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |  | 26 | 
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |    |  | 26 | 
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                       | 27 | 
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |    |  | 27 | 
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |    |  | 27 | 
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |    |  | 28 | 
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |    |  | 28 | 
|                              |  |                                                                                      
|Item 4.                       |  | (Removed and Reserved)                                                                |    |  | 28 | 
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |    |  | 28 | 
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |    |  | 29 | 
|                              | 
|Signatures                    |  |                                                                                       | 30 | 



4



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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 recent acquisition of midstream assets from Frontier 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.



5



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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 March 31, |       
|                                                                   |  | 2011                         |        |  | 2010 |  
|Revenue                                                            |  |                              |        |  |      |   |        | 
|Gathering revenue - related party                                  |  | $                            | 23,351 |  |      | $ | 16,389 | 
|Gathering revenue                                                  |  |                              | 1,476  |  |      |   | 1,115  | 
|Processing revenue - related party                                 |  |                              | 6,637  |  |      |   | 6,479  | 
|Processing revenue                                                 |  |                              | 516    |  |      |   | 756    | 
|Gas sales                                                          |  |                              | 400    |  |      |   |       | 
|                                                                   |  |                              |        |  |      |   |        | 
|Total revenue                                                      |  |                              | 32,380 |  |      |   | 24,739 | 
|                                                                   |  |                              |        |  |      |   |        | 
|Expenses                                                           |  |                              |        |  |      |   |        | 
|Operations and maintenance                                         |  |                              | 7,381  |  |      |   | 7,393  | 
|General and administrative                                         |  |                              | 6,370  |  |      |   | 3,061  | 
|Depreciation and accretion                                         |  |                              | 6,025  |  |      |   | 5,365  | 
|                                                                   |  |                              |        |  |      |   |        | 
|Total expenses                                                     |  |                              | 19,776 |  |      |   | 15,819 | 
|                                                                   |  |                              |        |  |      |   |        | 
|Operating income                                                   |  |                              | 12,604 |  |      |   | 8,920  | 
|Interest expense                                                   |  |                              | 3,006  |  |      |   | 2,678  | 
|                                                                   |  |                              |        |  |      |   |        | 
|Income before income taxes                                         |  |                              | 9,598  |  |      |   | 6,242  | 
|Income tax provision                                               |  |                              | 222    |  |      |   | 53     | 
|                                                                   |  |                              |        |  |      |   |        | 
|Net income                                                         |  | $                            | 9,376  |  |      | $ | 6,189  | 
|                                                                   |  |                              |        |  |      |   |        | 
|General partner interest in net income                             |  | $                            | 888    |  |      | $ | 357    | 
|Common unitholders interest in net income                         |  | $                            | 8,488  |  |      | $ | 5,832  | 
|Basic income (loss) per unit:                                      |  |                              |        |  |      |   |        | 
|Net income per limited partner unit - basic                        |  | $                            | 0.27   |  |      | $ | 0.20   | 
|Diluted income (loss) per unit:                                    |  |                              |        |  |      |   |        | 
|Net income per limited partner unit - diluted                      |  | $                            | 0.27   |  |      | $ | 0.20   | 
|Weighted average number of common units outstanding:               |  |                              |        |  |      |   |        | 
|Basic                                                              |  |                              | 31,188 |  |      |   | 28,502 | 
|Diluted                                                            |  |                              | 31,324 |  |      |   | 29,019 | 
|Distributions declared per unit (attributable to the period ended) |  | $                            | 0.44   |  |      | $ | 0.39   | 

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



6



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CRESTWOOD MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands, except for unit data - Unaudited



|                                                                                                     |  |               |         |  |                  |   |         | 
|---------------------------------------------------------------------------------------------------- |  | ------------- | ------- |  | ---------------- | - | ------- | 
|                                                                                                     |  | March 31,2011 |         |  | December 31,2010 |  
|ASSETS                                                                                               |  |               |         |  |                  |   |         | 
|Current assets                                                                                       |  |               |         |  |                  |   |         | 
|Cash and cash equivalents                                                                            |  | $             | 11,546  |  |                  | $ | 2       | 
|Accounts receivable                                                                                  |  |               | 1,383   |  |                  |   | 1,679   | 
|Accounts receivable - related party                                                                  |  |               | 29,177  |  |                  |   | 23,003  | 
|Prepaid expenses and other                                                                           |  |               | 601     |  |                  |   | 1,052   | 
|                                                                                                     |  |               |         |  |                  |   |         | 
|Total current assets                                                                                 |  |               | 42,707  |  |                  |   | 25,736  | 
|Property, plant and equipment, net                                                                   |  |               | 531,526 |  |                  |   | 531,371 | 
|Other assets                                                                                         |  |               | 12,824  |  |                  |   | 13,520  | 
|                                                                                                     |  |               |         |  |                  |   |         | 
|Total assets                                                                                         |  | $             | 587,057 |  |                  | $ | 570,627 | 
|                                                                                                     |  |               |         |  |                  |   |         | 
|LIABILITIES AND PARTNERS CAPITAL                                                                    |  |               |         |  |                  |   |         | 
|Current liabilities                                                                                  |  |               |         |  |                  |   |         | 
|Accounts payable - related party                                                                     |  | $             | 4,580   |  |                  | $ | 4,267   | 
|Accrued additions to property, plant and equipment                                                   |  |               | 4,209   |  |                  |   | 11,309  | 
|Accounts payable and other                                                                           |  |               | 21,263  |  |                  |   | 2,917   | 
|                                                                                                     |  |               |         |  |                  |   |         | 
|Total current liabilities                                                                            |  |               | 30,052  |  |                  |   | 18,493  | 
|Long-term debt                                                                                       |  |               | 292,800 |  |                  |   | 283,504 | 
|Asset retirement obligations                                                                         |  |               | 10,081  |  |                  |   | 9,877   | 
|Commitments and contingent liabilities (Note 9)                                                      |  |               |         |  |                  |   |         | 
|Partners capital                                                                                    |  |               |         |  |                  |   |         | 
|Common unitholders (31,187,696 units issued and outstanding at March 31, 2011 and December 31, 2010) |  |               | 253,429 |  |                  |   | 258,069 | 
|General partner                                                                                      |  |               | 695     |  |                  |   | 684     | 
|                                                                                                     |  |               |         |  |                  |   |         | 
|Total partners capital                                                                              |  |               | 254,124 |  |                  |   | 258,753 | 
|                                                                                                     |  |               |         |  |                  |   |         | 
|                                                                                                     |  | $             | 587,057 |  |                  | $ | 570,627 | 
|                                                                                                     |  |               |         |  |                  |   |         | 

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



7



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CRESTWOOD MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands  Unaudited



|                                                                                            |  |                              |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                            |  | Three Months Ended March 31, |        
|                                                                                            |  | 2011                         |         |   | 2010 |  
|                                                                                            |  | (as restatedSee Note 2)      |         |   |      |  
|Operating activities:                                                                       |  |                              |         |   |      |   |         |  
|Net income                                                                                  |  | $                            | 9,376   |   |      | $ | 6,189   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                              |         |   |      |   |         |  
|Depreciation                                                                                |  |                              | 5,890   |   |      |   | 5,250   |  
|Accretion of asset retirement obligations                                                   |  |                              | 135     |   |      |   | 115     |  
|Deferred income taxes                                                                       |  |                              |        |   |      |   | 53      |  
|Equity-based compensation                                                                   |  |                              | 283     |   |      |   | 667     |  
|Non-cash interest expense                                                                   |  |                              | 678     |   |      |   | 1,464   |  
|Changes in assets and liabilities:                                                          |  |                              |         |   |      |   |         |  
|Accounts receivable                                                                         |  |                              | 296     |   |      |   | 232     |  
|Prepaid expenses and other                                                                  |  |                              | 468     |   |      |   | (274    | )
|Accounts receivable - related party                                                         |  |                              | (6,174  | ) |      |   | (16,367 | )
|Accounts payable - related party                                                            |  |                              | 313     |   |      |   |        |  
|Accounts payable and other                                                                  |  |                              | 6,097   |   |      |   | 1,214   |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) operating activities                                         |  |                              | 17,362  |   |      |   | (1,457  | )
|                                                                                            |  |                              |         |   |      |   |         |  
|Investing activities:                                                                       |  |                              |         |   |      |   |         |  
|Capital expenditures                                                                        |  |                              | (13,076 | ) |      |   | (17,163 | )
|Distribution to Quicksilver for Alliance Midstream Assets                                   |  |                              |        |   |      |   | (80,276 | )
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash used in investing activities                                                       |  |                              | (13,076 | ) |      |   | (97,439 | )
|                                                                                            |  |                              |         |   |      |   |         |  
|Financing activities:                                                                       |  |                              |         |   |      |   |         |  
|Proceeds from credit facility                                                               |  |                              | 38,400  |   |      |   | 112,000 |  
|Repayments of credit facility                                                               |  |                              | (29,104 | ) |      |   | (11,600 | )
|Issuance of common units - net of offering costs                                            |  |                              |        |   |      |   | 11,050  |  
|Distributions paid to unitholders                                                           |  |                              | (14,288 | ) |      |   | (11,564 | )
|Proceeds related to Class C units                                                           |  |                              | 12,250  |   |      |   |        |  
|Taxes paid for equity-based compensation vesting                                            |  |                              |        |   |      |   | (1,144  | )
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash provided by financing activities                                                   |  |                              | 7,258   |   |      |   | 98,742  |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Net cash increase (decrease)                                                                |  |                              | 11,544  |   |      |   | (154    | )
|Cash and cash equivalents at beginning of period                                            |  |                              | 2       |   |      |   | 746     |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $                            | 11,546  |   |      | $ | 592     |  
|                                                                                            |  |                              |         |   |      |   |         |  
|Cash paid for interest                                                                      |  | $                            | 2,388   |   |      | $ | 1,214   |  
|Non-cash transactions:                                                                      |  |                              |         |   |      |   |         |  
|Working capital related to capital expenditures                                             |  |                              | 4,209   |   |      |   | 16,430  |  

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



8



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CRESTWOOD MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL

In thousands  Unaudited



|                                     |  |                         |         |   |                |   |      |       |  |   |         |  
|------------------------------------ |  | ----------------------- | ------- | - | -------------- | - | ---- | ----- |  | - | ------- | -
|                                     |  | Limited PartnersCommon |         |   | GeneralPartner |   |      | Total | 
|Balance at December 31, 2010         |  | $                       | 258,069 |   |                | $ | 684  |       |  | $ | 258,753 |  
|Equity-based compensation recognized |  |                         | 283     |   |                |   |     |       |  |   | 283     |  
|Distributions paid to partners       |  |                         | (13,411 | ) |                |   | (877 | )     |  |   | (14,288 | )
|Net income                           |  |                         | 8,488   |   |                |   | 888  |       |  |   | 9,376   |  
|                                     |  |                         |         |   |                |   |      |       |  |   |         |  
|Balance at March 31, 2011            |  | $                       | 253,429 |   |                | $ | 695  |       |  | $ | 254,124 |  
|                                     |  |                         |         |   |                |   |      |       |  |   |         |  

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



9



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CRESTWOOD MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

UNAUDITED

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 March 31, 2011 our ownership is as follows:



|                          |  |                      |      |   |        |  |      |       |  |  |       |  
|------------------------- |  | -------------------- | ---- | - | ------ |  | ---- | ----- |  |  | ----- | -
|                          |  | Ownership Percentage |     
|                          |  | Crestwood            |      |   | Public |  |      | Total | 
|General partner interest  |  |                      | 1.5  | % |        |  |     |       |  |  | 1.5   | %
|Limited partner interest: |  |                      |      |   |        |  |      |       |  |  |       |  
|Common unitholders        |  |                      | 61.7 | % |        |  | 36.8 | %     |  |  | 98.5  | %
|                          |  |                      |      |   |        |  |      |       |  |  |       |  
|Total interests           |  |                      | 63.2 | % |        |  | 36.8 | %     |  |  | 100.0 | %
|                          |  |                      |      |   |        |  |      |       |  |  |       |  

Description of Business We are primarily engaged in the gathering, processing, compression
and treating of natural gas and the delivery of NGLs produced from the Barnett Shale formation in the Fort Worth Basin located in North Texas. We provide these midstream services under long-term, fixed fee contracts, whereby we receive fees for
performing gathering, processing, compression and treating services. We do not typically take title to the natural gas or associated NGLs thereby avoiding direct commodity price exposure.

We conduct our operations primarily through our Cowtown, Lake Arlington and Alliance systems as described below:

Cowtown System

The Cowtown
System, located principally in Hood and Somervell counties in the southern portion of the Fort Worth Basin, includes:



| |  |  | the Cowtown Pipeline, consisting of a gathering system and related gas compression facilities. This system gathers natural gas produced by our
customers and delivers it to the Cowtown and Corvette Plants for processing;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Cowtown Plant, consisting of two natural gas processing units with a total capacity of 200 MMcfd that extract NGLs from the natural gas stream and
deliver our customers residue gas and extracted NGLs to unaffiliated pipelines for sale downstream; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Corvette Plant, consisting of a 125 MMcfd natural gas processing unit that extracts NGLs from the natural gas stream and delivers our
customers residue gas and extracted NGLs to unaffiliated pipelines for sale downstream.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Lake Arlington
System

The Lake Arlington System, located in eastern Tarrant County, consists of a gas gathering system and related gas compression
facility with capacity of 230 MMcfd. This system gathers natural gas produced by our customers and delivers it to unaffiliated pipelines for sale downstream.

Alliance System

The Alliance System, located in the Alliance Airport area of
Tarrant and Denton Counties, consists of a gathering system and related compression facility with a capacity of 300 MMcfd, an amine treating facility with capacity of 360 MMcfd and a dehydration treating facility with capacity of 300 MMcfd. This
system gathers natural gas produced by our customers and delivers it to unaffiliated pipelines for sale downstream.

Acquisitions and Financings 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, 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.



10



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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, 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 Assets

The Fayetteville Shale assets consist of high
pressure and low pressure gathering pipelines with capacity of approximately 510 MMcfd, treating capacity of approximately 165 MMcfd and approximately 35,000 hp of compression. The Fayetteville Shale assets which interconnect with multiple
interstate pipelines are supported by long-term, fixed-fee contracts with producers in the core of the Fayetteville Shale. These contracts have initial terms that extend through 2020 with rights by either party to exercise a five year extension.



| |  |  | Twin Groves / Prairie Creek / Woolly Hollow Systems. Located in Conway and Faulkner Counties, Arkansas and consists of a gathering system and a related
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 the Boardwalk Gas Transmission, the Ozark Gas Transmission and the Fayetteville Express
Pipeline.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Rose Bud System. Located in White County, Arkansas and consists of a gathering system and a related compression facility with a capacity of 60 MMcfd.
This system gathers natural gas produced by BHP / BP and ExxonMobil, and interconnects with the 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 the Ozark Gas Transmission.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Granite Wash System

The Granite
Wash assets, located in Roberts County, Texas, consists of a natural gas and NGL pipeline system of approximately 9,400 hp of compression and the Indian Creek cryogenic gas processing plant with capacity of 36 MMcfd which extracts NGLs from
the natural gas stream. This system delivers NGLs produced by Chesapeake Energy Corporation and others to the Mid-America Pipeline for ultimate delivery to Mt. Belvieu and residue gas is delivered into the ANR Pipeline.

In connection with the Frontier Gas Acquisition, we entered into the following financing transactions:



| |  |  | the issuance by us of approximately 6.2 million units of new Class C units representing limited partner interests, issued at a price of
$24.50 per unit, to certain institutional investors through a private placement transaction, resulting in net proceeds of approximately $153 million; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuance of the Senior Notes.
| | - |  | ---------------------------------

The $338 million purchase price paid at closing was financed through a combination of equity and debt as described in Notes 3 and 5 to our condensed consolidated interim financial statements in this
Quarterly Report.

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 on Form S-3 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 indebtedness under our Credit Facility and for general partnership purposes.

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.



11



---

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 reclassifications have been made to the 2010 financial statements for presentations adopted
in 2011. The amount of the reclassification is approximately $0.6 million from operations and maintenance expense to general and administrative expense.

Subsequent to the issuance of the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2011, we determined that proceeds received on March 31, 2011 related to the Class C
unit offering, which closed on April 1, 2011, should have been classified as a financing activity instead of an operating activity as previously presented. The Partnership is restating its Condensed Consolidated Statement of Cash Flows to reflect
this correction. The following table presents the line items on the Condensed Consolidated Statement of Cash Flows that have been restated:



|                                                              |  |                                                       |        |   |                                            |   |        | 
|------------------------------------------------------------- |  | ----------------------------------------------------- | ------ | - | ------------------------------------------ | - | ------ | 
|                                                              |  | Three monthsendedMarch 31, 2011As previouslypresented |        |   | Three monthsendedMarch 31, 2011As restated |  
|Changes in assets and liabilities:
Accounts payable and other |  | $                                                     | 18,347 |   |                                            | $ | 6,097  | 
|                                                              |  |                                                       |        |   |                                            |   |        | 
|Net cash provided by (used in) operating activities           |  | $                                                     | 29,612 |   |                                            | $ | 17,362 | 
|                                                              |  |                                                       |        |   |                                            |   |        | 
|Proceeds related to Class C units                             |  | $                                                     |       |   |                                            | $ | 12,250 | 
|                                                              |  |                                                       |        |   |                                            |   |        | 
|Net cash provided by (used in) financing activities           |  | ($                                                    | 4,992  | ) |                                            | $ | 7,258  | 
|                                                              |  |                                                       |        |   |                                            |   |        | 

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.

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 months ended March 31, 2011 and 2010.



|                                              |  |                                      |        |  |      |   |        | 
|--------------------------------------------- |  | ------------------------------------ | ------ |  | ---- | - | ------ | 
|                                              |  | Three Months Ended March 31,         |       
|                                              |  | 2011                                 |        |  | 2010 |  
|                                              |  | (In thousands, except per unit data) |       
|Common unitholders interest in net income    |  | $                                    | 8,488  |  |      | $ | 5,832  | 
|Weighted-average common units - basic         |  |                                      | 31,188 |  |      |   | 28,502 | 
|Effect of unvested phantom units              |  |                                      | 136    |  |      |   | 517    | 
|                                              |  |                                      |        |  |      |   |        | 
|Weighted-average common units - diluted       |  |                                      | 31,324 |  |      |   | 29,019 | 
|                                              |  |                                      |        |  |      |   |        | 
|Basic earnings per unit:                      |  |                                      |        |  |      |   |        | 
|Net income per limited partner unit - basic   |  | $                                    | 0.27   |  |      | $ | 0.20   | 
|Diluted earnings per unit:                    |  |                                      |        |  |      |   |        | 
|Net income per limited partner unit - diluted |  | $                                    | 0.27   |  |      | $ | 0.20   | 

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. 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 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 on Form S-3 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 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 the General Partner interest in us to reduce to 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.



12



---

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



|                        |  |                                  |  |                      |      |  |                        |   |      |                            |  |   |       | 
|----------------------- |  | -------------------------------- |  | -------------------- | ---- |  | ---------------------- | - | ---- | -------------------------- |  | - | ----- | 
|Payment Date            |  | Attributable to theQuarter Ended |  | Per UnitDistribution |      |  | Total CashDistribution |   |      | Total Cash IDRDistribution | 
|                        |  |                                  |  |                      |      |  | (In millions)          |   |      | (In millions)              | 
|Pending Distributions   |  |                                  |  |                      |      |  |                        |   |      |                            |  |   |       | 
|May 13, 2011            |  | March 31, 2011                   |  | $                    | 0.44 |  |                        | $ | 14.7 |                            |  | $ | 0.759 | 
|Completed Distributions |  |                                  |  |                      |      |  |                        |   |      |                            |  |   |       | 
|2011                    |  |                                  |  |                      |      |  |                        |   |      |                            |  |   |       | 
|February 11, 2011       |  | December 31, 2010                |  | $                    | 0.43 |  |                        | $ | 14.3 |                            |  | $ | 0.665 | 
|2010                    |  |                                  |  |                      |      |  |                        |   |      |                            |  |   |       | 
|November 12, 2010       |  | September 30, 2010               |  | $                    | 0.42 |  |                        | $ | 13.9 |                            |  | $ | 0.570 | 
|August 13, 2010         |  | June 30, 2010                    |  | $                    | 0.42 |  |                        | $ | 12.7 |                            |  | $ | 0.522 | 
|May 14, 2010            |  | March 31, 2010                   |  | $                    | 0.39 |  |                        | $ | 11.6 |                            |  | $ | 0.261 | 

Cash distribution includes 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. Class C unitholders will not receive a distribution of cash, but instead, will be issued additional Class C units as permitted under the terms of the
Second Amendment to our Partnership Agreement.

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:



|                                             |  |                |         |   |                  |   |         |  
|-------------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                             |  | March 31,2011  |         |   | December 31,2010 |  
|                                             |  | (In thousands) |        
|Gathering systems                            |  | $              | 167,362 |   |                  | $ | 158,975 |  
|Processing plants and compression facilities |  |                | 364,054 |   |                  |   | 365,208 |  
|Construction in progress - gathering         |  |                | 22,968  |   |                  |   | 26,385  |  
|Rights-of-way and easements                  |  |                | 34,283  |   |                  |   | 32,054  |  
|Land                                         |  |                | 4,251   |   |                  |   | 4,251   |  
|Buildings and other                          |  |                | 3,494   |   |                  |   | 3,494   |  
|                                             |  |                |         |   |                  |   |         |  
|                                             |  |                | 596,412 |   |                  |   | 590,367 |  
|Accumulated depreciation                     |  |                | (64,886 | ) |                  |   | (58,996 | )
|                                             |  |                |         |   |                  |   |         |  
|Net property, plant and equipment            |  | $              | 531,526 |   |                  | $ | 531,371 |  
|                                             |  |                |         |   |                  |   |         |  

5. DEBT

Debt consisted of the following:



|                |  |                |         |  |                  |   |         | 
|--------------- |  | -------------- | ------- |  | ---------------- | - | ------- | 
|                |  | March 31,2011  |         |  | December 31,2010 |  
|                |  | (In thousands) |        
|Credit Facility |  | $              | 292,800 |  |                  | $ | 283,504 | 
|                |  |                |         |  |                  |   |         | 
|Total           |  | $              | 292,800 |  |                  | $ | 283,504 | 
|                |  |                |         |  |                  |   |         | 

Credit Facility - At March 31, 2011, we had $292.8 million outstanding under our
$400 million Credit Facility. Our Credit Facility permits us to expand our borrowing capacity up to $500 million subject to certain financial ratios being met and lender approval. The weighted-average interest rate as of
March 31, 2011 was 3.1% on our Credit Facility. 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. On April 1, 2011, we entered into a
Joinder Agreement with certain lenders under our Credit Facility, which expanded our borrowing capacity from $400 million to $500 million.

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 terminated on April 1, 2011 in connection with the closing of the Senior Notes described below. We will recognize approximately $2.5 million of commitment fees in the second quarter of
2011, which will be included in interest expense, related to the bridge loans.



13



---

7.75% Senior Notes due 2019 -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
accrue at a rate of 7.75% per annum, and are 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.

6. 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                                |  |   | 69     | 
|Accretion expense                                    |  |   | 135    | 
|                                                     |  |   |        | 
|Asset retirement obligations as of March 31, 2011    |  | $ | 10,081 | 
|                                                     |  |   |        | 

As of March 31, 2011, no assets are legally restricted for use in settling asset retirement obligations.

7. EQUITY-BASED COMPENSATION

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



|                                         |  |                  |         |   |                                      |   |       | 
|---------------------------------------- |  | ---------------- | ------- | - | ------------------------------------ | - | ----- | 
|                                         |  | Payable in units |        
|                                         |  | Units            |         |   | WeightedAverage GrantDate Fair Value |  
|Unvested phantom units - January 1, 2011 |  |                  | 121,526 |   |                                      | $ | 27.11 | 
|Vested                                   |  |                  |        |   |                                      |   |      | 
|Issued                                   |  |                  | 18,391  |   |                                      |   | 27.73 | 
|Cancelled                                |  |                  | (4,353  | ) |                                      |   | 27.11 | 
|                                         |  |                  |         |   |                                      |   |       | 
|Unvested phantom units - March 31, 2011  |  |                  | 135,564 |   |                                      | $ | 27.19 | 
|                                         |  |                  |         |   |                                      |   |       | 

At January 1, 2011, we had total unvested compensation cost of $2.6 million related to phantom
units. We recognized compensation expense of approximately $0.3 million during the three months ended March 31, 2011. Grants of phantom units during the three months ended March 31, 2011 had an estimated grant date fair
value of $0.5 million. We had unearned compensation expense of $2.8 million at March 31, 2011. There were not any phantom units that vested during the three months ended March 31, 2011.

On January 3, 2011, we awarded annual equity grants totaling 18,391 phantom units to the non-employee directors. Each phantom
unit will settle in CMLP units and had a grant date fair value of $27.73, 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. At March 31, 2011, 626,442 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.

8. 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.

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



14



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9. COMMITMENTS AND CONTINGENT LIABILITIES

See Note 9 to the consolidated financial statements in our 2010 Annual Report on Form 10-K for a description of our
commitments and contingencies.

10. 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 ended March 31, 2011, Quicksilver accounted for more than 90% of our total revenue. Approximately 11% of our gathered volumes 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 $0.2 million of expense related to this agreement during
the three months ended March 31, 2011.

The Crestwood Transaction was funded by Crestwood through an equity contribution
from funds managed by First Reserve Corporation, an equity contribution from members of Crestwood management and a $180 million senior secured term loan obtained by Crestwood Holdings payable to multiple financial investors. Crestwood
Holdings ownership in us is pledged as collateral and is dependent on distributions from us to service the Crestwood Holdings debt obligations which is not included in our financial position.

11. SUBSEQUENT EVENTS

On April 1, 2011, we completed the previously announced Frontier Gas Acquisition for a purchase price of
approximately $338 million, with an additional $15 million to be paid to Frontier if certain operational objectives are met within six months of the closing date. The $338 million purchase price paid at closing was financed
through a combination of equity and debt as described in Notes 3 and 5 to our condensed consolidated interim financial statements in this Quarterly Report. The final purchase price is pending the finalization of appraisal valuations of certain
tangible and intangible assets acquired and other customary purchase price adjustments that are included in the purchase sale agreement .

In connection with the consummation of the Frontier Gas Acquisition, we entered into the following additional financing transactions:



| |  |  | the issuance by us of approximately 6.2 million units of new Class C units representing limited partner interests, issued at a price of
$24.50 per unit, to certain institutional investors through a private placement transaction, resulting in net proceeds of approximately $153 million; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuance of the Senior Notes.
| | - |  | ---------------------------------

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 on Form S-3 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 indebtedness under our Credit Facility and for
general partnership purposes.



15



---

12. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Condensed consolidated financial information for CMLP is presented below:

Condensed Consolidated Statements of Income



|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|-------------------------------------------------------- |  | ----------------------------------------- | ------ | - | ------------------------------- | - | ------ | ------------ |  | - | ----------------------------------------- | - |  | - | ------ | 
|                                                         |  | For the Three Months Ended March 31, 2011 |       
|                                                         |  | CrestwoodMidstreamPartners LP             |        |   | RestrictedGuarantorSubsidiaries |   |        | Eliminations |  |   | CrestwoodMidstreamPartners LPConsolidated |  
|                                                         |  | (in thousands)                            |       
|Revenue                                                  |  | $                                         |       |   |                                 | $ | 32,380 |              |  | $ |                                          |   |  | $ | 32,380 | 
|Operating expenses                                       |  |                                           | 6,372  |   |                                 |   | 13,404 |              |  |   |                                          |   |  |   | 19,776 | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Operating income                                         |  |                                           | (6,372 | ) |                                 |   | 18,976 |              |  |   |                                          |   |  |   | 12,604 | 
|Interest expense                                         |  |                                           | 3,006  |   |                                 |   |       |              |  |   |                                          |   |  |   | 3,006  | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Income before income tax                                 |  |                                           | (9,378 | ) |                                 |   | 18,976 |              |  |   |                                          |   |  |   | 9,598  | 
|Income tax provision                                     |  |                                           |       |   |                                 |   | 222    |              |  |   |                                          |   |  |   | 222    | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Net income before equity in net earnings of subsidiaries |  |                                           | (9,378 | ) |                                 |   | 18,754 |              |  |   |                                          |   |  |   | 9,376  | 
|Equity in net earnings of subsidiaries                   |  |                                           | 18,754 |   |                                 |   |       |              |  |   | (18,754                                   | ) |  |   |       | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Net Income                                               |  | $                                         | 9,376  |   |                                 | $ | 18,754 |              |  | $ | (18,754                                   | ) |  | $ | 9,376  | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 



|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|-------------------------------------------------------- |  | ----------------------------------------- | ------ | - | ------------------------------- | - | ------ | ------------ |  | - | ----------------------------------------- | - |  | - | ------ | 
|                                                         |  | For the Three Months Ended March 31, 2010 |       
|                                                         |  | CrestwoodMidstreamPartners LP             |        |   | RestrictedGuarantorSubsidiaries |   |        | Eliminations |  |   | CrestwoodMidstreamPartners LPConsolidated |  
|                                                         |  | (in thousands)                            |       
|Revenue                                                  |  | $                                         |       |   |                                 | $ | 24,739 |              |  | $ |                                          |   |  | $ | 24,739 | 
|Operating expenses                                       |  |                                           | 3,061  |   |                                 |   | 12,758 |              |  |   |                                          |   |  |   | 15,819 | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Operating income                                         |  |                                           | (3,061 | ) |                                 |   | 11,981 |              |  |   |                                          |   |  |   | 8,920  | 
|Other income                                             |  |                                           |       |   |                                 |   |       |              |  |   |                                          |   |  |   |       | 
|Interest expense                                         |  |                                           | 2,678  |   |                                 |   |       |              |  |   |                                          |   |  |   | 2,678  | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Income before income tax                                 |  |                                           | (5,739 | ) |                                 |   | 11,981 |              |  |   |                                          |   |  |   | 6,242  | 
|Income tax provision                                     |  |                                           |       |   |                                 |   | 53     |              |  |   |                                          |   |  |   | 53     | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Net income before equity in net earnings of subsidiaries |  |                                           | (5,739 | ) |                                 |   | 11,928 |              |  |   |                                          |   |  |   | 6,189  | 
|Equity in net earnings of subsidiaries                   |  |                                           | 11,928 |   |                                 |   |       |              |  |   | (11,928                                   | ) |  |   |       | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 
|Net income                                               |  | $                                         | 6,189  |   |                                 | $ | 11,928 |              |  | $ | (11,928                                   | ) |  | $ | 6,189  | 
|                                                         |  |                                           |        |   |                                 |   |        |              |  |   |                                           |   |  |   |        | 



16



---

Condensed Consolidated Balance Sheet



|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|--------------------------------------- |  | ----------------------------- | ------- |  | ------------------------------- | - | ------- | ------------ |  | - | ----------------------------------------- | - |  | - | ------- | 
|                                        |  | March 31, 2011                |        
|                                        |  | CrestwoodMidstreamPartners LP |         |  | RestrictedGuarantorSubsidiaries |   |         | Eliminations |  |   | CrestwoodMidstreamPartners LPConsolidated |  
|                                        |  | (in thousands)                |        
|ASSETS                                  |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Current assets                          |  | $                             | 369,482 |  |                                 | $ | 24,809  |              |  | $ | (351,584                                  | ) |  | $ | 42,707  | 
|Properties, plant and equipment - net   |  |                               | 9,225   |  |                                 |   | 522,301 |              |  |   |                                          |   |  |   | 531,526 | 
|Investment in subsidiaries              |  |                               | 186,363 |  |                                 |   |        |              |  |   | (186,363                                  | ) |  |   |        | 
|Other assets                            |  |                               | 12,203  |  |                                 |   | 621     |              |  |   |                                          |   |  |   | 12,824  | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Total assets                            |  | $                             | 577,273 |  |                                 | $ | 547,731 |              |  | $ | (537,947                                  | ) |  | $ | 587,057 | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|LIABILITIES AND PARTNERS CAPITAL       |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Current liabilities                     |  | $                             | 30,348  |  |                                 | $ | 351,288 |              |  | $ | (351,584                                  | ) |  | $ | 30,052  | 
|Long-term liabilities                   |  |                               | 292,800 |  |                                 |   | 10,081  |              |  |   |                                          |   |  |   | 302,881 | 
|Partners capital                       |  |                               | 254,125 |  |                                 |   | 186,362 |              |  |   | (186,363                                  | ) |  |   | 254,124 | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Total liabilities and partners capital |  | $                             | 577,273 |  |                                 | $ | 547,731 |              |  | $ | (537,947                                  | ) |  | $ | 587,057 | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 



|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|--------------------------------------- |  | ----------------------------- | ------- |  | ------------------------------- | - | ------- | ------------ |  | - | ----------------------------------------- | - |  | - | ------- | 
|                                        |  | December 31, 2010             |        
|                                        |  | CrestwoodMidstreamPartners LP |         |  | RestrictedGuarantorSubsidiaries |   |         | Eliminations |  |   | CrestwoodMidstreamPartners LPConsolidated |  
|                                        |  | (in thousands)                |        
|ASSETS                                  |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Current assets                          |  | $                             | 291,637 |  |                                 | $ | 23,843  |              |  | $ | (289,744                                  | ) |  | $ | 25,736  | 
|Properties, plant and equipment - net   |  |                               | 11,142  |  |                                 |   | 520,229 |              |  |   |                                          |   |  |   | 531,371 | 
|Investment in subsidiaries              |  |                               | 228,587 |  |                                 |   |        |              |  |   | (228,587                                  | ) |  |   |        | 
|Other assets                            |  |                               | 12,890  |  |                                 |   | 630     |              |  |   |                                          |   |  |   | 13,520  | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Total assets                            |  | $                             | 544,256 |  |                                 | $ | 544,702 |              |  | $ | (518,331                                  | ) |  | $ | 570,627 | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|LIABILITIES AND PARTNERS CAPITAL       |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Current liabilities                     |  | $                             | 1,999   |  |                                 | $ | 306,238 |              |  | $ | (289,744                                  | ) |  | $ | 18,493  | 
|Long-term liabilities                   |  |                               | 283,504 |  |                                 |   | 9,877   |              |  |   |                                          |   |  |   | 293,381 | 
|Partners capital                       |  |                               | 258,753 |  |                                 |   | 228,587 |              |  |   | (228,587                                  | ) |  |   | 258,753 | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 
|Total liabilities and partners capital |  | $                             | 544,256 |  |                                 | $ | 544,702 |              |  | $ | (518,331                                  | ) |  | $ | 570,627 | 
|                                        |  |                               |         |  |                                 |   |         |              |  |   |                                           |   |  |   |         | 



17



---

Condensed Consolidated Statement of Cash Flows



|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  
|--------------------------------------------------- |  | ----------------------------------------- | ------- | - | ------------------------------- | - | ------- | ------------ |  | - | -------------------------------------------- |  |  | - | ------- | -
|                                                    |  | For the Three Months Ended March 31, 2011 |        
|                                                    |  | CrestwoodMidstreamPartners LP(1)          |         |   | RestrictedGuarantorSubsidiaries |   |         | Eliminations |  |   | CrestwoodMidstreamPartners LPConsolidated(1) | 
|                                                    |  | (in thousands)                            |        
|Net cash (used in) provided by operating activities |  | $                                         | (6,010  | ) |                                 | $ | 23,372  |              |  | $ |                                             |  |  | $ | 17,362  |  
|Capital expenditures                                |  |                                           |        |   |                                 |   | (13,076 | )            |  |   |                                             |  |  |   | (13,076 | )
|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  
|Net cash used in investing activities               |  |                                           |        |   |                                 |   | (13,076 | )            |  |   |                                             |  |  |   | (13,076 | )
|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  
|Proceeds from revolving credit facility borrowings  |  |                                           | 38,400  |   |                                 |   |        |              |  |   |                                             |  |  |   | 38,400  |  
|Repayments of credit facility                       |  |                                           | (29,104 | ) |                                 |   |        |              |  |   |                                             |  |  |   | (29,104 | )
|Distributions to unitholders                        |  |                                           | (14,288 | ) |                                 |   |        |              |  |   |                                             |  |  |   | (14,288 | )
|Proceeds related to Class C units                   |  |                                           | 12,250  |   |                                 |   |        |              |  |   |                                             |  |  |   | 12,250  |  
|Advances to Affiliates                              |  |                                           | 52,376  |   |                                 |   | (52,376 | )            |  |   |                                             |  |  |   |        |  
|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  
|Net cash (used in) provided by financing activities |  |                                           | 59,634  |   |                                 |   | (52,376 | )            |  |   |                                             |  |  |   | 7,258   |  
|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  
|Net cash increase (decrease)                        |  |                                           | 53,624  |   |                                 |   | (42,080 | )            |  |   |                                             |  |  |   | 11,544  |  
|Cash and cash equivalents at beginning of period    |  |                                           | 2       |   |                                 |   |        |              |  |   |                                             |  |  |   | 2       |  
|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  
|Cash or cash equivalents at end of period           |  | $                                         | 53,626  |   |                                 | $ | (42,080 | )            |  | $ |                                             |  |  | $ | 11,546  |  
|                                                    |  |                                           |         |   |                                 |   |         |              |  |   |                                              |  |  |   |         |  



|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  
|---------------------------------------------------------- |  | ----------------------------------------- | ------- | - | ------------------------------- | - | -------- | ------------ |  | - | ----------------------------------------- |  |  | - | ------- | -
|                                                           |  | For the Three Months Ended March 31, 2010 |        
|                                                           |  | CrestwoodMidstreamPartners LP             |         |   | RestrictedGuarantorSubsidiaries |   |          | Eliminations |  |   | CrestwoodMidstreamPartners LPConsolidated | 
|                                                           |  | (in thousands)                            |        
|Net cash (used in) provided by operating activities        |  | $                                         | (3,699  | ) |                                 | $ | 2,242    |              |  | $ |                                          |  |  | $ | (1,457  | )
|Capital expenditures                                       |  |                                           |        |   |                                 |   | (17,163  | )            |  |   |                                          |  |  |   | (17,163 | )
|Distributions to Quicksilver for Alliance Midstream Assets |  |                                           |        |   |                                 |   | (80,276  | )            |  |   |                                          |  |  |   | (80,276 | )
|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  
|Net cash used in investing activities                      |  |                                           |        |   |                                 |   | (97,439  | )            |  |   |                                          |  |  |   | (97,439 | )
|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  
|Proceeds from revolving credit facility borrowings         |  |                                           | 112,000 |   |                                 |   |         |              |  |   |                                          |  |  |   | 112,000 |  
|Repayments of credit facility                              |  |                                           | (11,600 | ) |                                 |   |         |              |  |   |                                          |  |  |   | (11,600 | )
|Proceeds from issuance of equity                           |  |                                           | 11,088  |   |                                 |   |         |              |  |   |                                          |  |  |   | 11,088  |  
|Equity issuance cost paid                                  |  |                                           | (38     | ) |                                 |   |         |              |  |   |                                          |  |  |   | (38     | )
|Distributions to unitholders                               |  |                                           | (11,564 | ) |                                 |   |         |              |  |   |                                          |  |  |   | (11,564 | )
|Taxes paid for equity-based compensation vesting           |  |                                           | (1,144  | ) |                                 |   |         |              |  |   |                                          |  |  |   | (1,144  | )
|Advances to Affiliates                                     |  |                                           | 138,529 |   |                                 |   | (138,529 | )            |  |   |                                           |  |  |   |        |  
|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  
|Net cash (used in) provided by financing activities        |  |                                           | 237,271 |   |                                 |   | (138,529 | )            |  |   |                                          |  |  |   | 98,742  |  
|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  
|Net cash increase (decrease)                               |  |                                           | 233,572 |   |                                 |   | (233,727 | )            |  |   |                                          |  |  |   | (154    | )
|Cash and cash equivalents at beginning of period           |  |                                           | 746     |   |                                 |   |         |              |  |   |                                           |  |  |   | 746     |  
|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  
|Cash or cash equivalents at end of period                  |  | $                                         | 234,318 |   |                                 | $ | (233,727 | )            |  | $ |                                          |  |  | $ | 592     |  
|                                                           |  |                                           |         |   |                                 |   |          |              |  |   |                                           |  |  |   |         |  



|(1) | Amounts herein have been restated to reflect the receipt of proceeds on March 31, 2011 of $12.25 million related to the Class C units as a financing activity instead of
an operating activity as discussed in Note 2, Summary of Significant Accounting PoliciesChanges in Presentation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



---

ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations

The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our condensed consolidated interim financial statements, and notes thereto, and the other financial data included elsewhere in this Quarterly Report. The following discussion should also be read in conjunction
with our audited consolidated financial statements, and notes thereto, and Managements Discussion and Analysis of Financial Condition and Results of Operations included in our 2010 Annual Report on Form 10-K.

As discussed in the Explanatory Note and Note 2, we have restated our previously issued condensed consolidated financial statements;
accordingly, Managements Discussion and Analysis of Financial Condition and Results of Operations have been revised for the effects of the restatement.

Overview

We are a growth-oriented publicly traded Delaware master limited
partnership engaged in gathering, processing, compression and treating of natural gas and delivery of NGLs produced in North Texas and in Southeastern New Mexico. We began operations in 2004 to provide midstream services primarily to
Quicksilver as well as to other natural gas producers in the Fort Worth Basin. Additionally, all our revenues are derived from operations in the Fort Worth Basin and Southeastern New Mexico. During the quarter ended March 31, 2011,
more than 90% of our total gathering and processing volumes were comprised of natural gas owned or controlled by Quicksilver. Approximately 11% of our gathered volumes are comprised of natural gas purchased by Quicksilver from Eni SpA and
gathered under Quicksilvers Alliance System gathering agreement.

Our Operations

Our results of operations are significantly influenced by the volumes of natural gas gathered and processed through our systems. We
gather, process, compress and treat natural gas pursuant to long term, fixed fee-based contracts. We do not take title to the natural gas or associated NGLs that we gather and process, and therefore, we avoid direct commodity price
exposure. However, a prolonged low commodity price environment could result in our customers reducing their production volumes which would cause a decrease in our revenue. Almost all of our natural gas volumes gathered and processed during
the quarter ended March 31, 2011 were subject to fee-based contracts.

Operational Measurement

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 opportunities.
| | - |  | ---------------------------------

Operating Expenses  We consider operating expenses in evaluating the performance of our operations. These expenses are comprised primarily of direct labor, insurance, property taxes,
repair and maintenance expense, utilities and contract services, and are largely independent of the volumes through our systems, but may fluctuate depending on the scale of our operations during a specific period. Our ability to manage
operating expenses has a significant impact on our profitability and ability to pay distributions.

EBITDA We
believe that EBITDA is a widely accepted financial indicator of a companys operational performance and its ability to incur and service debt, fund capital expenditures and make distributions. EBITDA is not a measure calculated in
accordance with GAAP, as it does not include deductions for items such as depreciation, interest and income taxes, which are necessary to maintain our business. 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 calculations may vary among entities, so our computation may not be comparable to EBITDA measures of other entities. In evaluating EBITDA, we believe
that investors should also consider, among other things, the amount by which EBITDA exceeds interest costs, how EBITDA compares to principal payments on debt and how EBITDA compares to capital expenditures for each period. A reconciliation of
EBITDA to amounts reported under GAAP is presented in Results of Operations.

EBITDA is also used as a
supplemental performance measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:



| |  |  | financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
| | - |  | --------------------------------------------------------------------------------------------------------------------



19



---

| |  |  | our operating performance as compared to those of other companies in the midstream industry without regard to financing methods, capital structure or
historical cost basis; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the viability of acquisitions and capital expenditure projects and the rates of return on investment opportunities.
| | - |  | -------------------------------------------------------------------------------------------------------------------

2011 Recent Developments

Las Animas
Acquisition  Effective February 1, 2011, we acquired approximately 46 miles of 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 are supported by long-term, fixed-fee contracts which include existing Morrow/Atoka production and dedications of approximately 57,000 acres.

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. On April 1, 2011, the commitment was terminated in connection with the closing of the Senior Notes described below. We will recognize
approximately $2.5 million of commitment fees in the second quarter of 2011, which will be included in interest expense, related to the bridge loans.

Frontier Gas Acquisition On April 1, 2011, the Partnership completed the previously announced Frontier Gas Acquisition for a purchase price of approximately $338 million, with an
additional $15 million to be paid to Frontier if certain operational objectives are met within six months of the closing date. The $338 million purchase price paid at closing was financed through a combination of equity and debt as
described in Notes 3 and 5 to our condensed consolidated interim financial statements in this Quarterly Report.

The Fayetteville Shale
assets, located in Arkansas, consist of approximately 127 miles of high pressure and low pressure gathering pipelines with capacity of approximately 510 MMcfd, treating capacity of approximately 165 MMcfd and approximately 35,000 hp of
compression. The Fayetteville Shale assets which interconnect with multiple interstate pipelines are supported by long-term, fixed-fee contracts with producers who have dedicated approximately 100,000 acres in the core of the Fayetteville Shale
to Frontier Gas. These contracts have initial terms that extend through 2020 with a five year extension.

The Granite Wash assets,
located in the Texas Panhandle, consist of a 28 mile pipeline system and a 36 MMcfd cryogenic processing plant. This area has emerged as a highly economic liquids-rich natural gas play with active drilling programs and the Granite Wash assets
are supported by long-term contracts. We are working on a plan to install a second processing plant with 60 MMcfd of capacity to support growth in volumes from this region.

With the completion of the Frontier Gas Acquisition, we own and/or operate over 700 miles of natural gas gathering pipelines, and NGL, gas lift, residue and production lines.

Class C Units 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 293,948 General Partner units, increasing the General Partner interest in us to 2%.

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 accrue at a rate of 7.75% per annum, and are 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.

Joinder Agreement to Credit Facility On April 1, 2011, we entered into a Joinder Agreement with certain lenders under our Credit
Facility, which expanded our borrowing capacity from $400 million to $500 million.

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 on Form S-3 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 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 the General Partner interest in us to reduce to 1.9%.



20



---

RESULTS OF OPERATIONS

Three Months Ended March 31, 2011 Compared with Three Months Ended March 31, 2010

The following discussion compares the results of operations for the three months ended March 31, 2011 to the three months ended March 31, 2010, which we refer to as the 2011 quarter and the 2010
quarter, respectively.



|                                   |  |                              |        |  |      |   |        | 
|---------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------ | 
|                                   |  | Three Months Ended March 31, |       
|                                   |  | 2011                         |        |  | 2010 |  
|                                   |  | (In thousands)               |       
|Total revenues                     |  | $                            | 32,380 |  |      | $ | 24,739 | 
|Operations and maintenance expense |  |                              | 7,381  |  |      |   | 7,393  | 
|General and administrative expense |  |                              | 6,370  |  |      |   | 3,061  | 
|                                   |  |                              |        |  |      |   |        | 
|EBITDA                             |  |                              | 18,629 |  |      |   | 14,285 | 
|Depreciation and accretion expense |  |                              | 6,025  |  |      |   | 5,365  | 
|Interest expense                   |  |                              | 3,006  |  |      |   | 2,678  | 
|Income tax provision               |  |                              | 222    |  |      |   | 53     | 
|                                   |  |                              |        |  |      |   |        | 
|Net income                         |  | $                            | 9,376  |  |      | $ | 6,189  | 
|                                   |  |                              |        |  |      |   |        | 

The following table summarizes our volumes:



|                      |  |           |        |  |            |  |        |      |  |  |        |  |  |  |        | 
|--------------------- |  | --------- | ------ |  | ---------- |  | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                      |  | Gathering |        |  | Processing | 
|                      |  | 2011      |        |  | 2010       |  |        | 2011 |  |  | 2010   | 
|                      |  | (MMcf)    |       
|Cowtown System        |  |           | 12,184 |  |            |  | 11,430 |      |  |  | 10,960 |  |  |  | 11,244 | 
|Lake Arlington System |  |           | 9,549  |  |            |  | 4,410  |      |  |  |       |  |  |  |       | 
|Alliance System       |  |           | 17,150 |  |            |  | 9,957  |      |  |  |       |  |  |  |       | 
|Las Animas System     |  |           | 518    |  |            |  |       |      |  |  |       |  |  |  |       | 
|                      |  |           |        |  |            |  |        |      |  |  |        |  |  |  |        | 
|Total                 |  |           | 39,401 |  |            |  | 25,797 |      |  |  | 10,960 |  |  |  | 11,244 | 
|                      |  |           |        |  |            |  |        |      |  |  |        |  |  |  |        | 

The following table summarizes the changes in our revenue:



|                                                  |  |                |        |   |            |   |       |       |  |   |       |  |  |   |        |  
|------------------------------------------------- |  | -------------- | ------ | - | ---------- | - | ----- | ----- |  | - | ----- |  |  | - | ------ | -
|                                                  |  | Gathering      |        |   | Processing |   |       | Other |  |   | Total | 
|                                                  |  | (In thousands) |       
|Revenue for the three months ended March 31, 2010 |  | $              | 17,504 |   |            | $ | 7,235 |       |  | $ |      |  |  | $ | 24,739 |  
|Volume changes                                    |  |                | 9,231  |   |            |   | (183  | )     |  |   |      |  |  |   | 9,048  |  
|Price changes                                     |  |                | (1,908 | ) |            |   | 101   |       |  |   | 400   |  |  |   | (1,407 | )
|                                                  |  |                |        |   |            |   |       |       |  |   |       |  |  |   |        |  
|Revenue for the three months ended March 31, 2011 |  | $              | 24,827 |   |            | $ | 7,153 |       |  | $ | 400   |  |  | $ | 32,380 |  
|                                                  |  |                |        |   |            |   |       |       |  |   |       |  |  |   |        |  

Total Revenueand Volumes The increase in revenue was principally due to
$4.3 million in higher revenue due to increased volumes on the Alliance System and $2.9 million in higher revenues on the Lake Arlington System. The increased revenue is due to the connection of 48 wells in the 2011 period compared to
21 for the 2010 period with the increase primarily on the Alliance and Lake Arlington Systems.

Operations and Maintenance
Expense The decrease in operations and maintenance expense was mainly due to a decrease in pipeline lease expense of approximately $0.3 million on our Alliance System.

General and Administrative Expense The increase in general and administrative expense was primarily due to transaction
costs associated with the Frontier Gas Acquisition, an increase in compensation and benefits costs, costs of a new corporate location and transition costs related to the transition services agreement with Quicksilver, which expired March 31,
2011. Transaction costs related to the Crestwood Transaction and Frontier Gas Acquisition amount to approximately $2.0 million for the 2011 period. General and administrative expense includes $0.2 million and $0.7 million of
equity-based compensation expense for the quarters ended March 31, 2011 and 2010, respectively.



21



---

EBITDA As a percentage of revenue, EBITDA has stayed consistent at 58% of
revenues in the 2010 quarter and 2011 quarter.

Depreciation and Accretion Expense Depreciation and accretion
expense increased primarily as a result of continuing expansion of our asset base, which included the expansion of the Alliance System.

Interest Expense Interest expense increased primarily due to the increases in the borrowings under our Credit Facility, principally used to fund capital projects, partially offset by the
absence of any liability related to subordinated note.

The following table summarizes the details of interest expense for the three months
ended March 31, 2011 and 2010.



|                          |  |                              |       |   |      |   |       | 
|------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | 
|                          |  | Three Months Ended March 31, |      
|                          |  | 2011                         |       |   | 2010 |  
|                          |  | (In thousands)               |      
|Interest:                 |  |                              |       |   |      |   |       | 
|Revolving Credit Facility |  | $                            | 3,042 |   |      | $ | 2,082 | 
|Subordinated note         |  |                              |      |   |      |   | 596   | 
|                          |  |                              |       |   |      |   |       | 
|Total                     |  |                              | 3,042 |   |      |   | 2,678 | 
|Less interest capitalized |  |                              | (36   | ) |      |   |      | 
|                          |  |                              |       |   |      |   |       | 
|Interest expense          |  | $                            | 3,006 |   |      | $ | 2,678 | 
|                          |  |                              |       |   |      |   |       | 



22



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Liquidity and Capital Resources

Our sources of liquidity include:



| |  |  | cash generated from operations;
| | - |  | -------------------------------



| |  |  | borrowings under our Credit Facility; and
| | - |  | -----------------------------------------



| |  |  | future capital market transactions.
| | - |  | -----------------------------------

We believe that the cash generated from these sources will be sufficient to meet our expected $0.44 per unit quarterly cash distributions during 2011 and satisfy our short-term working capital and
maintenance capital expenditure requirements.

Since the inception of operations in 2004, our cash flows have been
significantly influenced by Quicksilvers production in the Fort Worth Basin. As Quicksilver and others have developed the Fort Worth Basin, we have expanded our gathering and processing facilities to serve the additional volumes produced
by such development. We expect to benefit from the Las Animas and Frontier Gas Acquisitions which will result in lower dependency on Quicksilver and our Fort Worth Basin operations.

Known Trends and Uncertainties

Our financial condition and results
of operations, including our liquidity and profitability, can be significantly affected by the following:



| |  |  | natural gas prices;
| | - |  | -------------------



| |  |  | dependency on Quicksilver and the Fort Worth Basin; and
| | - |  | -------------------------------------------------------



| |  |  | regulatory requirements.
| | - |  | ------------------------

The volumes of natural gas that we gather and process are dependent upon the natural gas volumes produced by our customers, which may be affected by prevailing natural gas prices, their derivative
programs, and the availability and cost of their capital. We cannot predict future changes to natural gas prices or how any such pricing changes will influence producers behaviors. If reduced drilling and development programs in the
Fort Worth Basin were to be sustained over a prolonged period of time, we could experience a reduction in volumes through our system and therefore reductions of revenue and cash flows.

At this time, substantially all of our revenue is derived from our operations in the Fort Worth Basin. In addition, more than 90% of
our total gathering and processing revenue is associated with natural gas volumes owned or controlled by Quicksilver. The risk of revenue fluctuations in the near-term is somewhat mitigated by the use of fixed-fee contracts for providing
gathering and processing and treating services to our customers, but we are still susceptible to volume fluctuations. To reduce the concentration risk associated with our dependency on one producer and one geographic area, we continue to
regularly review opportunities for both organic growth projects and acquisitions in other producing basins and with other producers.

We are subject to environmental laws, regulations and permits, including green house gas requirements that may expose us to significant costs or obligations. In general, these laws, regulations, and
permits have become more stringent over time and are subject to further changes and could materially affect our financial condition and results of operations in the future.

Significant Economic Factors That Impact our Business

Changes in
natural gas supply such as new discoveries of natural gas reserves, declining production in older fields and the introduction of new sources of natural gas supply, such as non-conventional and emerging natural gas shale plays, affect the demand from
producers for our services. As these supply dynamics change, we anticipate that we will actively pursue projects that will allow us to provide midstream services to producers associated with the growth of new sources of supply. Changes in
demographics, the amount of natural gas fired power generation, liquefied natural gas imports and shifts in industrial and residential usage affect the overall demand for natural gas.

We believe that the key factors that impact our business are natural gas prices, our customers drilling and completion activities,
and government regulation on natural gas pipelines. These key factors play an important role in how we evaluate our operations and implement our long-term strategies.



23



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Cash Flows



|                                                    |  |                             |         |   |      |   |         |  
|--------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                    |  | Three Months EndedMarch 31, |        
|                                                    |  | 2011                        |         |   | 2010 |  
|                                                    |  | (In thousands)              |        
|Net cash provided by (used in) operating activities |  | $                           | 17,362  |   |      | $ | (1,457  | )
|Net cash used in investing activities               |  |                             | (13,076 | ) |      |   | (97,439 | )
|Net cash provided by financing activities           |  |                             | 7,258   |   |      |   | 98,742  |  

Cash Flows Used in Operating Activities The increase in cash flows from operating
activities resulted from an increase in collections from Quicksilver. The March 31, 2010 balance included a receivable from Quicksilver of $10.8 million for the reimbursement of the purchase price adjustment for the Alliance Midstream
Assets.

Cash Flows Used in Investing Activities The decrease in cash flows used in investing activities resulted
from the distribution to Quicksilver of $80.3 million related to the purchase of the Alliance Midstream Assets in the prior year. For the 2011 period, we spent $13.1 million for gathering assets and processing facilities, of which
$5.1 million relates to the purchase of the Las Animas acquisition.

Cash Flows Used in Financing Activities Changes in cash flows used in financing activities during the 2011 period resulted primarily from the net borrowings under our Credit Facility of $9.3 million compared with the 2010 period net borrowings of $100.4 million. This change
is largely reflective of our funding of the purchase of the Alliance Midstream Assets for $84.4 million in the 2010 period. In addition, we distributed $2.7 million more to our unitholders during the 2011 period. We have
increased our quarterly distribution by 12.8% from the 2010 period to the 2011 period. In January 2010, the underwriters of our equity offering exercised their option to purchase an additional 549,200 common units, which generated proceeds
of $11.1 million for which there was no comparable 2011 event. In addition, on March 31, 2011, we received approximately $12.25 million from a purchaser of Class C units prior to the issuance of the Class C units on
April 1, 2011. The receipt of the funds is reflected in our cash balance and as a increase in accounts payable and other on March 31, 2011.

Information regarding historical and pending cash distributions is included in Note 3 to our condensed consolidated interim financial statements included in Item 1 of Part I of this Quarterly
Report.

Capital Expenditures

The midstream energy business is capital intensive, requiring significant investment for the acquisition or development of new facilities. We categorize our capital expenditures as either:



| |  |  | expansion capital expenditures, which are made to construct additional assets, expand and upgrade existing systems, or acquire additional
assets; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | maintenance capital expenditures, which are made to replace partially or fully depreciated assets, to maintain the existing operating capacity
of our assets and extend their useful lives.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We anticipate that we will continue to make capital
expenditures to develop our gathering and processing network as Quicksilver and other producers continue to expand their development efforts in the Fort Worth Basin, Fayetteville, Granite Wash areas and on the Las Animas System. Consequently,
our ability to develop and maintain sources of funds to meet our capital requirements is critical to our ability to meet our growth objectives and to maintain our distribution levels.

We budgeted approximately $90 million in capital expenditures for 2011, of which approximately $30-$35 million relates to the
Fort Worth Basin and approximately $45-$50 million relates to the Frontier capital program. In addition, we have budgeted approximately $8 million as maintenance capital expenditures.

During the three months ended March 31, 2011, we increased gross property, plant and equipment by $6 million, including
expansion capital expenditures of approximately $5.5 million, $0.4 million in maintenance capital expenditures and $0.1 million in asset retirement cost.



24



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Other Matters

We regularly review opportunities for both organic growth projects and acquisitions that will enhance our financial performance. Since we distribute all of our available cash to our unitholders, we
will depend on a combination of borrowings under our Credit Facility, operating cash flows and debt or equity offerings to finance any future growth capital expenditures or acquisitions.

Debt

Credit Facility- At March 31, 2011, we had
$292.8 million outstanding under our $400 million Credit Facility. Our Credit Facility permits us to expand our borrowing capacity up to $500 million subject to certain financial ratios being met and lender approval. The
weighted-average interest rate as of March 31, 2011 was 3.1% on our Credit Facility. Note 7 to the consolidated financial statements in our 2010 Annual Report on Form 10-K contains a more complete description of our indebtedness. On
April 1, 2011, we entered into a Joinder Agreement with certain lenders under our Credit Facility, which expanded our borrowing capacity to $500 million from $400 million.

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. On April 1, 2011, the commitment was terminated in connection with the closing of the Senior Notes described below. We will recognize
approximately $2.5 million of commitment fees in the second quarter of 2011, which will be included in interest expense, related to the bridge loans.

7.75% Senior Notes due 2019- 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 accrue at a rate of 7.75% per annum, and are 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. For a further discussion of the restrictive covenants, see our Current Report on Form 8-K filed with the SEC on April 5, 2011.

Contractual Obligations and Commercial Commitments

There have been no other significant changes to our contractual obligations and commercial commitments as disclosed in Item 7 in our 2010 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements within the definition of Item 303(a)(4) of SEC Regulation S-K.

Recently Issued Accounting Standards

The information regarding
recent accounting pronouncements is included in Note 2 to our condensed consolidated interim financial statements included in Item 1 of Part I of this Quarterly Report.

Critical Accounting Estimates

Managements discussion and
analysis of financial condition and results of operations are based on our condensed consolidated interim financial statements and related footnotes contained within Item 1 of Part I of this Quarterly Report. The process of preparing
financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Our critical accounting estimates used in the preparation of the
consolidated financial statements were discussed in Item 7 in our 2010 Annual Report on Form 10-K. These critical estimates, for which no significant changes have occurred in the three months ended March 31, 2011, include estimates
and assumptions pertaining to:



| |  |  | depreciation expense for property, plant and equipment;
| | - |  | -------------------------------------------------------



| |  |  | asset retirement obligations; and
| | - |  | ---------------------------------



| |  |  | equity-based compensation.
| | - |  | --------------------------

These estimates and assumptions are based upon what we believe is the best information available at the time of the estimates or assumptions. The estimates and assumptions could change materially as
conditions within and beyond our control change. Accordingly, actual results could differ materially from those estimates.



25



---

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have established policies and procedures for managing risk within our organization, including internal
controls. The level of risk assumed by us is based on our objectives and capacity to manage risk.

Credit Risk

Our primary credit risk relates to our dependency on Quicksilver for the majority of our natural gas volumes, which
causes us to be subject to the risk of nonpayment or late payment by Quicksilver for gathering and processing fees. Quicksilvers credit ratings are below investment grade, where they may remain for the foreseeable
future. Accordingly, this risk could be higher than it might be with a more creditworthy customer or with a more diversified group of customers. Unless and until we significantly diversify our customer base, we expect to continue to be
subject to non-diversified risk of nonpayment or late payment of our fees. Additionally, we perform credit analyses of our customers on a regular basis pursuant to our corporate credit policy. We have not had any significant losses due to
counter-party failures to perform.

Interest Rate Risk

Although our base interest rates remain low, our leverage ratios directly influence the spreads charged by lenders. The credit
markets could also drive the spreads charged by lenders upward. As base rates or spreads increase, our financing costs will increase accordingly. Although this could limit our ability to raise funds in the capital markets, we expect that
our competitors would face similar challenges with respect to funding acquisitions and capital projects. We are exposed to variable interest rate risk as a result of borrowings under our Credit Facility.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of March 31, 2011, our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2011, that materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



26



---

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

Our operations are subject to a variety of risks and disputes normally incident to our business. As a result, we may, at any given time, be a defendant in various legal proceedings and litigation
arising in the ordinary course of business. However, we are not currently subject to any material lawsuits or other legal proceedings.

Item 1A. Risk Factors

You should review our Annual Report on Form 10-K for the year ended December 31, 2010 which contains a detailed description of risk factors that may materially affect our business, financial
condition, results of operations and cash flows. Aside from the additional risk factors set forth below, there were no material changes to the risk factors previously described in Part I, Item 1A. Risk Factors included in
our Annual Report on our Form 10-K for the year ended December 31, 2010:

We are exposed to the credit risks of Quicksilver, and
other third-party customers and any material non-payment or non-performance by these customers could adversely affect our business, results of operations and financial condition and our ability to make cash distributions to our unitholders.

We are dependent on Quicksilver for the volumes that we gather and process, and are consequently subject to the risk of non-payment or
non-performance by Quicksilver. Quicksilvers credit ratings are below investment grade, where we expect them to remain for the foreseeable future. Accordingly, this risk is higher than it would be with a more creditworthy customer or
with a more diversified group of customers. Unless and until we significantly diversify our customer base, we expect to remain subject to non-diversified risk of non-payment or late payment of our fees. Any material non-payment or
non-performance by Quicksilver could adversely affect our business, results of operations and financial condition and our ability to make cash distributions to our unitholders. Furthermore, Quicksilver is highly leveraged and subject to its own
operating and regulatory risks, which could increase the risk that it may default on its obligations to us.

In addition, on March 31,
2011, Chesapeake announced the completion of the sale of all of its interests in approximately 487,000 net acres of leasehold and producing natural gas properties in the Fayetteville Shale play in central Arkansas to BHP. As a result of the
Chesapeake/BHP Transaction and our consummation of the Frontier Gas Acquisition, BHP has become one of our customers. As a result, any material non-payment or non-performance by BHP could adversely affect our business, results of operations and
financial condition and our ability to make cash distributions.

Our pipelines may be subject to more stringent safety regulation.

New pipeline safety legislation requiring more stringent spill reporting and disclosure obligations has been introduced in the U.S.
Congress and was passed by the U.S. House of Representatives in 2010, but was not voted on in the U.S. Senate. Similar legislation is likely to be considered in the current session of Congress, either independently or in conjunction with the
reauthorization of the Pipeline Safety Act. The U.S. Department of Transportation has also recently proposed regulations providing for more stringent oversight of pipelines and increased penalties for violations of safety rules, which is in
addition to the Pipeline and Hazardous Materials Safety Administrations (the PHMSA) announced intention to strengthen its rules. Such legislative and regulatory changes could have a material effect on our operations through
more stringent and comprehensive safety regulations and higher penalties for the violation of those regulations.

Our level of
indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in our business or our industry and place us at a competitive disadvantage.

As of December 31, 2010, on a pro forma basis after giving effect to the Frontier Gas Acquisition and related financings, the total outstanding
principal amount of our senior long-term indebtedness would have been $483.5 million, $283.5 million of which would be secured indebtedness under our Credit Facility.

If we do not generate sufficient cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:



| |  |  | refinancing or restructuring our debt;
| | - |  | --------------------------------------



27



---

| |  |  | selling assets;
| | - |  | ---------------



| |  |  | reducing or delaying scheduled expansions and capital investments; or
| | - |  | ---------------------------------------------------------------------



| |  |  | seeking to raise additional capital.
| | - |  | ------------------------------------

We cannot assure you that we would be able to enter into these alternative financing plans on commercially reasonable terms or at all. However, any alternative financing plans that we undertake, if
necessary, may not allow us to meet our debt obligations. Our inability to generate sufficient cash flow to satisfy our debt obligations or to obtain alternative financing could materially and adversely affect our business, results of
operations, financial condition and business prospects.

Our debt could have important consequences to our unitholders. For example, it
could:



| |  |  | increase our vulnerability to general adverse economic and industry conditions;
| | - |  | -------------------------------------------------------------------------------



| |  |  | limit our ability to fund future capital expenditures and working capital, to engage in future acquisitions or development activities, or to
otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow from operations to payments of interest and principal on our debt or to comply with any restrictive terms of our
debt;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | result in an event of default if we fail to satisfy our obligations with respect to our indebtedness or fail to comply with the financial and
other restrictive covenants contained in agreements governing our indebtedness, which event of default could result in all of our debt becoming immediately due and payable and could permit our lenders to foreclose on any of our assets securing such
debt;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness,
therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase our cost of borrowing;
| | - |  | -------------------------------



| |  |  | restrict us from making strategic acquisitions or causing us to make non-strategic divestitures;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business or industry in which we operate, placing us at a competitive
disadvantage compared to our competitors who are less highly leveraged and who therefore may be able to take advantage of opportunities that our leverage prevents us from exploring;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | impair our ability to obtain additional financing in the future; and
| | - |  | --------------------------------------------------------------------



| |  |  | place us at a competitive disadvantage compared to our competitors that have less debt.
| | - |  | ---------------------------------------------------------------------------------------

In addition, if we fail to comply with the covenants or other terms of any agreements governing our debt, our lenders may have the right to accelerate
the maturity of that debt and foreclose upon the collateral securing that debt. Realization of any of these factors could adversely affect our financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Not Applicable.

Item 5. Other Information

None.



28



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Item 6. Exhibits:



|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                              
|           | 
|2.1        |  | Purchase and Sale Agreement by and between Frontier Gas Services, LLC and Crestwood Midstream Partners LP, dated as of February 18, 2011 (incorporated by reference to
Exhibit 2.1 of the Companys Current Report on Form 8-K filed with the Commission on February 22, 2011)                                                                                                                                                           
|           | 
|3.1        |  | Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Crestwood Midstream Partners LP dated as of April 1, 2011 (incorporated by reference to
Exhibit 3.1 of the Companys Current Report on Form 8-K filed with the Commission on April 5, 2011)                                                                                                                                                          
|           | 
|4.1        |  | Indenture, dated April 1, 2011, among Crestwood Midstream Partners LP and Crestwood Midstream Finance Corporation, the Guarantors named therein and The Bank of New York Mellon
Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of the Companys Current Report on Form 8-K filed with the Commission on April 5, 2011).                                                                                       
|           | 
|4.2        |  | Form of Note representing all 7.75% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 of the Companys Current Report on Form 8-K filed with the
Commission on April 5, 2011).                                                                                                                                                                                                                                             
|           | 
|4.3        |  | Registration Rights Agreement, dated April 1, 2011, among Crestwood Midstream Partners LP and Crestwood Midstream Finance Corporation, the Guarantors named therein and UBS
Securities LLC, BNP Paribas Securities Corp., RBC Capital Markets, LLC and RBS Securities Inc., as the initial purchasers. (incorporated by reference to Exhibit 4.3 of the Companys Current Report on Form 8-K filed with the
Commission on April 5, 2011).
|           | 
|4.4        |  | Class C Unit Registration Rights Agreement, dated April 1, 2011, by and between Crestwood Midstream Partners LP and the purchasers named therein (incorporated by reference
to Exhibit 4.4 of the Companys Current Report on Form 8-K filed with the Commission on April 5, 2011).                                                                                                                                                      
|           | 
|10.1       |  | Class C Unit Purchase Agreement by and among Crestwood Midstream Partners LP and the purchasers named therein, dated as of February 18, 2011 (incorporated by reference to
Exhibit 2.1 of the Companys Current Report on Form 8-K filed with the Commission on February 22, 2011)                                                                                                                                                       
|           | 
|*31.1      |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                 
|           | 
|*31.2      |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                 
|           | 
|*32.1      |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                  



|* | Filed herewith
|- | --------------



29



---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

Dated: December 16, 2011



CRESTWOOD MIDSTREAM PARTNERS LPBy: CRESTWOOD GAS SERVICES GP LLC, its General PartnerBy:

/S/    WILLIAM G.
MANIASWilliam G. ManiasSenior Vice President  Chief Financial Officer




30



---

EXHIBIT INDEX



|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                              
|           | 
|2.1        |  | Purchase and Sale Agreement by and between Frontier Gas Services, LLC and Crestwood Midstream Partners LP, dated as of February 18, 2011 (incorporated by reference to
Exhibit 2.1 of the Companys Current Report on Form 8-K filed with the Commission on February 22, 2011)                                                                                                                                                           
|           | 
|3.1        |  | Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Crestwood Midstream Partners LP dated as of April 1, 2011 (incorporated by reference to
Exhibit 3.1 of the Companys Current Report on Form 8-K filed with the Commission on April 5, 2011)                                                                                                                                                          
|           | 
|4.1        |  | Indenture, dated April 1, 2011, among Crestwood Midstream Partners LP and Crestwood Midstream Finance Corporation, the Guarantors named therein and The Bank of New York Mellon
Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of the Companys Current Report on Form 8-K filed with the Commission on April 5, 2011).                                                                                       
|           | 
|4.2        |  | Form of Note representing all 7.75% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 of the Companys Current Report on Form 8-K filed with the
Commission on April 5, 2011).                                                                                                                                                                                                                                             
|           | 
|4.3        |  | Registration Rights Agreement, dated April 1, 2011, among Crestwood Midstream Partners LP and Crestwood Midstream Finance Corporation, the Guarantors named therein and UBS
Securities LLC, BNP Paribas Securities Corp., RBC Capital Markets, LLC and RBS Securities Inc., as the initial purchasers. (incorporated by reference to Exhibit 4.3 of the Companys Current Report on Form 8-K filed with the
Commission on April 5, 2011).
|           | 
|4.4        |  | Class C Unit Registration Rights Agreement, dated April 1, 2011, by and between Crestwood Midstream Partners LP and the purchasers named therein (incorporated by reference
to Exhibit 4.4 of the Companys Current Report on Form 8-K filed with the Commission on April 5, 2011).                                                                                                                                                      
|           | 
|10.1       |  | Class C Unit Purchase Agreement by and among Crestwood Midstream Partners LP and the purchasers named therein, dated as of February 18, 2011 (incorporated by reference to
Exhibit 2.1 of the Companys Current Report on Form 8-K filed with the Commission on February 22, 2011)                                                                                                                                                       
|           | 
|*31.1      |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                 
|           | 
|*31.2      |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                 
|           | 
|*32.1      |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                  



|* | Filed herewith
|- | --------------