CHKM Access Midstream Partners L.P.

Chesapeake Midstream Partners, L.P. (NYSE:CHKM) today announced financial results for the 2011 second quarter. Net income for the quarter totaled $41.1 million, an increase of $4.1 million, or 11%, versus the 2010 second quarter. Net income available to limited partners for the 2011 second quarter was $40.3 million, or $0.29 per limited partner unit. The Partnership’s adjusted ebitda for the 2011 second quarter was $79.3 million, up $17.8 million, or 29%, from the 2010 second quarter. Distributable cash flow (DCF) totaled $58.0 million, an increase of $15.0 million, or 35%, compared to the 2010 second quarter. Adjusted ebitda and DCF are defined on pages three and four of this release.

Total throughput for the 2011 second quarter was 195.5 billion cubic feet (bcf) of natural gas, or 2.15 bcf per day, an increase of 33% from 2010 second quarter throughput of 1.62 bcf per day. A key driver of the volume increase was throughput from the Haynesville Springridge gas gathering system acquired in December 2010. Partnership revenue for the 2011 second quarter was $133.2 million, an increase of $32.0 million, or 32%, from 2010 second quarter revenue of $101.2 million.

The Partnership connected 143 new wells to its gathering systems during the 2011 second quarter, an increase of 49% compared to the 2010 second quarter. Capital expenditures during the 2011 second quarter totaled approximately $109.7 million, including maintenance capital expenditures of approximately $18.5 million.

Partnership Increases Cash Distribution

On July 26, 2011, the Board of Directors of the Partnership’s general partner declared a quarterly cash distribution of $0.3625 per unit for the 2011 second quarter, a $0.0125, or 3.6%, increase over the 2011 first quarter. The distribution will be paid on August 12, 2011 to unitholders of record at the close of business on August 5, 2011. DCF for the 2011 second quarter of $58.0 million provided distribution coverage of 1.13 times the amount required for the Partnership to fund the distribution to both the general and limited partners.

Partnership Updates 2011 Financial Outlook

The Partnership’s projection of ebitda for the 12 months ending December 31, 2011 remains unchanged at $332 million. The ebitda projection includes a range of revenue associated with minimum volume commitments of between $10 million and $20 million. The revenue associated with minimum volume commitments will not be recognized until the fourth quarter of 2011. The Partnership is revising its estimate of growth capital expenditures for 2011 to $366 million from $256 million while the estimate of maintenance capital expenditures of $74 million remains unchanged. The increase in projected growth capital expenditures is the result of adjustments to timing of projects. The scope of the Partnership’s anticipated construction program remains unchanged.

Management Comments

J. Mike Stice, Chesapeake Midstream Partners’ Chief Executive Officer, commented, “I am extremely proud of our performance in 2011. Our construction teams have delivered a 66% increase in well connects year to date, while at the same time achieving an exceptional safety performance record. Our execution on both fronts has been outstanding. This strong operational performance is the basis for meeting our financial objectives and allowing for another distribution increase in the second quarter.”

Credit Facility Amendment

On June 10, 2011, the Partnership completed an amendment to its existing credit facility. As amended, the credit facility provides up to $800 million of borrowing capacity, an increase of $50 million. The maturity date was extended one year and will now mature in June 2016. The amended credit agreement also provides for other favorable term modifications, including improved borrowing rates and fees. The amended credit facility is an important aspect of the Partnership’s ability to maintain financial flexibility.

Conference Call Information

A conference call to discuss this release of financial results has been scheduled for Wednesday morning, August 10, 2011 at 9:00 a.m. EDT. The telephone number to access the conference call is 719-457-2630 or toll-free 888-401-4685. The passcode for the call is 7566669. We encourage those who would like to participate in the call to dial the access number between 8:50 and 9:00 a.m. EDT. For those unable to participate in the conference call, a replay will be available for audio playback from 12:00 p.m. EDT on August 10, 2011 through 12:00 p.m. EDT on August 24, 2011. The number to access the conference call replay is 719-457-0820 or toll-free 888-203-1112. The passcode for the replay is 7566669. The conference call will also be webcast live on the Internet and can be accessed by going to the Partnership’s website at www.chkm.com in the "Events" subsection of the "Investors" section of the website. An archive of the conference call webcast will also be available on the website.

Use of Non-GAAP Financial Measures

This press release and accompanying schedules include the non-GAAP financial measures of adjusted ebitda, DCF and adjusted DCF. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered as an alternative to GAAP measures such as net income, net cash provided by operating activities or any other measure of liquidity or financial performance calculated and presented in accordance with GAAP. Investors should not consider adjusted ebitda, DCF or adjusted DCF in isolation or as a substitute for analysis of the Partnership’s results as reported under GAAP. Because these non-GAAP financial measures may be defined differently by other companies in our industry, the Partnership’s definition of adjusted ebitda, DCF and adjusted DCF may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Adjusted Ebitda. The Partnership defines adjusted ebitda as net income (loss) before income tax expense, interest expense, depreciation and amortization expense and certain other items management believes affect the comparability of operating results. Adjusted ebitda is a non-GAAP financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• The Partnership’s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to capital structure, historical cost basis or financing methods;
• The Partnership’s ability to incur and service debt and fund capital expenditures;
• The ability of the Partnership’s assets to generate sufficient cash flow to make distributions to unitholders; and
• The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Management believes it is appropriate to exclude certain items from ebitda because management believes these items affect the comparability of operating results. The Partnership believes that the presentation of adjusted ebitda in this press release provides information useful to investors in assessing its financial condition and results of operations. The GAAP measure most directly comparable to adjusted ebitda is net income.

Distributable Cash Flow. The Partnership defines DCF as adjusted ebitda attributable to the Partnership adjusted for:

• Addition of interest income;
• Subtraction of net cash paid for interest expense;
• Subtraction of maintenance capital expenditures; and
• Subtraction of income taxes.

Management compares the DCF the Partnership generates to the cash distributions it expects to pay its partners. Using this metric, management computes a distribution coverage ratio. DCF is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flows at a level that can sustain or support an increase in its quarterly cash distributions. DCF is also a quantitative standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield, which is based on the amount of cash distributions a partnership can pay to a unitholder. The GAAP measure most directly comparable to DCF is net cash provided by operating activities.

Adjusted Distributable Cash Flow. The Partnership includes the quarterly impact of contractual minimum volume commitments that are not recognized until the fourth quarter of each year in its calculation of adjusted DCF for the purpose of calculating the distribution coverage ratio.

This press release includes forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. They include but are not limited to throughput volumes, revenues, net income, adjusted ebitda and distributable cash flow, as well as other statements concerning our business strategy and plans and objectives for future operations. We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this release, and we undertake no obligations to update this information. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under “Risk Factors” in our 2010 Annual Report on Form 10-K.

Chesapeake Midstream Partners, L.P. is one of the industry’s largest midstream master limited partnerships and owns, operates, develops and acquires natural gas gathering systems and other midstream energy assets. Headquartered in Oklahoma City, the Partnership's operations are focused on the Barnett Shale, Haynesville Shale and Mid-Continent regions of the U.S. The Partnership’s common units are listed on the New York Stock Exchange under the symbol CHKM. Further information is available at www.chkm.com, where the Partnership routinely posts announcements, updates, events, investor information and presentations and all recent press releases.

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per unit data)

(unaudited)

              Three Months Ended

June 30,

2011

Three Months Ended

June 30,

2010

Six Months Ended

June 30,

2011

Six Months Ended

June 30,

2010

Revenues, including revenue from affiliates (1)

$ 133,217 $ 101,239 $ 256,746 $ 196,625   Operating Expenses Operating expenses, including expenses from affiliates 44,284 32,385 86,845 63,078 Depreciation and amortization expense 32,747 22,102 63,685 42,712 General and administrative expense, including expenses from affiliates 9,659 7,387 18,605 14,123 Other operating (income) expense   923   (37 )   863   (67 )   Total operating expenses   87,613   61,837   169,998   119,846   Operating income 45,604 39,402 86,748 76,779   Other Income (Expense) Interest expense (3,837 ) (1,866 ) (5,277 ) (3,817 ) Other income   42   40   84   42   Income before income tax expense 41,809 37,576 81,555 73,004 Income tax expense   726   559   1,696   1,073   Net income $ 41,083 $ 37,017 $ 79,859 $ 71,931   Limited partner interest in net income Net income $ 41,083 $ N/A 79,859 N/A Less general partner interest in net income   (820 )   N/A   (1,596 )   N/A   Limited partner interest in net income $ 40,263 $ N/A   78,263   N/A   Net income per limited partner unit – basic and diluted Common units $ 0.29 $ N/A 0.56 N/A Subordinated units $ 0.29 $ N/A 0.56 N/A  

Weighted average limited partner units outstanding used for net income per unit calculation – basic and diluted (in thousands)

Common units 69,224 N/A 69,222 N/A Subordinated units 69,076 N/A 69,076 N/A  

(1) In the event either Chesapeake Energy Corporation (“Chesapeake”) or Total E&P USA, Inc. (“Total”) does not meet its minimum volume commitment to the Partnership in the Barnett Shale or Haynesville Shale regions, as applicable, under the applicable gas gathering agreement for specified annual periods, Chesapeake or Total, as applicable, is obligated to pay the Partnership a fee equal to the applicable fee for each mcf by which the party’s minimum volume commitment for the year exceeds the actual volumes gathered on the Partnership’s systems. The Partnership recognizes any associated revenue in the fourth quarter.

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)

(unaudited)

      As of

June 30,

2011

As of

December 31,

2010

Assets   Total current assets $ 60,114 $ 131,487   Property, plant and equipment Gathering systems 2,765,571 2,544,053 Other fixed assets 46,027 41,125 Less: Accumulated depreciation   (414,608 )   (358,269 )   Total property, plant and equipment, net   2,396,990   2,226,909   Intangible assets 164,223 172,481 Deferred loan costs, net   22,088   15,039   Total assets $ 2,643,415 $ 2,545,916   Liabilities and Partners’ Capital   Total current liabilities $ 112,353 $ 97,991   Long-term liabilities Long term debt 350,000 249,100 Other liabilities   4,352   4,257   Total long-term liabilities   354,352   253,357   Partners’ capital Partners' capital   2,176,710   2,194,568   Total partners’ capital   2,176,710   2,194,568   Total liabilities and partners’ capital $ 2,643,415 $ 2,545,916  

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(unaudited)

     

Six MonthsEnded

June 30,

2011

Six MonthsEnded

June 30,

2010

Cash flows from operating activities Net income $ 79,859 $ 71,931 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 63,685 42,712 Other non-cash items 3,771 2,571 Changes in assets and liabilities Decrease in accounts receivable 54,543 130,888 Decrease (increase) in other assets 1,004 (1,603 ) Increase in accounts payable 1,117 6,310 Increase (decrease) in accrued liabilities   2,009   (55,400 )   Net cash provided by operating activities   205,988   197,409   Cash flows from investing activities Additions to property, plant and equipment (216,251 ) (97,448 ) Proceeds from sale of assets   1,318   2,168   Net cash used in investing activities   (214,933 )   (95,280 )   Cash flows from financing activities Proceeds from credit facility borrowings 184,400 233,800 Payments on credit facility borrowings (433,500 ) (166,600 ) Proceeds from issuance of senior notes, net of offering costs 343,000 –- Distribution to unitholders (96,921 ) –- Initial public offering costs (1,280 ) –- Debt issuance costs (2,583 ) –- Distribution to partners –- (169,500 ) Contribution from predecessor –- 177 Other adjustments   4   –-   Net cash used in financing activities   (6,880 )   (102,123 )  

Net increase (decrease) in cash and cash equivalents

(15,825 ) 6   Cash and cash equivalents Beginning of period   17,816   3   End of period $ 1,991 $ 9  

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands)

(unaudited)

             

Three MonthsEnded

June 30,

2011

Three MonthsEnded

June 30,

2010

Six MonthsEnded

June 30,

2011

Six MonthsEnded

June 30,

2010

    Net Income $ 41,083 $ 37,017 $ 79,859 $ 71,931   Adjusted for: Interest expense 3,837 1,866 5,277 3,817 Income tax expense 726 559 1,696 1,073 Depreciation and amortization expense 32,747 22,102 63,685 42,712 (Gain) Loss on sale of assets   923   (37 )   863   (67 )   Adjusted EBITDA $ 79,316 $ 61,507 $ 151,380 $ 119,466     Cash provided by operating activities $ 68,719 79,084 205,988 197,409   Adjusted for: Changes in assets and liabilities 7,878 (18,688 ) (58,673 ) (80,195 ) Maintenance capital expenditures (18,500 ) (17,500 ) (37,000 ) (35,000 ) Other non-cash items   (127 )   26   (371 )   42   Distributable cash flow   57,970   42,922   109,944   82,256   Adjusted for: Implied minimum volume commitment   –-   14,219   5,268   31,395   Adjusted distributable cash flow $ 57,970 $ 57,141 $ 115,212 $ 113,651   Cash distribution Limited partner units ($0.3625 x 138,161,160 units) $ 50,084 General partner units ($0.3625 x 2,819,606 units)   1,022   Total cash distribution $ 51,106   Distribution coverage ratio   1.13  

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

OPERATING STATISTICS

(unaudited)

             

Three MonthsEnded

June 30,

2011

Three MonthsEnded

June 30,

2010

Six MonthsEnded

June 30,

2011

Six MonthsEnded

June 30,

2010

        Barnett Shale Wells connected during period 81 67 171 120 Total wells connected 2,006 1,685 2,006 1,685 Throughput, bcf per day 1.044 1.059 1.007 1.019 Approximate miles of pipe at end of period 824 700 824 700 Gas compression (horsepower) at end of period 137,210 136,565 137,210 136,565     Haynesville Shale Wells connected during period 18 –- 37 –- Total wells connected 201 –- 201 –- Throughput, bcf per day 0.563 –- 0.529 –- Approximate miles of pipe at end of period 241 –- 241 –- Gas compression (horsepower) at end of period 21,970 –- 21,970 –-     Mid-Continent Wells connected during period 44 29 90 60 Total wells connected 2,446 2,259 2,446 2,259 Throughput, bcf per day 0.541 0.565 0.543 0.558 Approximate miles of pipe at end of period 2,385 2,200 2,385 2,200 Gas compression (horsepower) at end of period 94,129 84,455 94,129 84,455     Total Wells connected during period 143 96 298 180 Total wells connected 4,653 3,944 4,653 3,944 Throughput, bcf per day 2.148 1.624 2.078 1.577 Approximate miles of pipe at end of period 3,450 2,900 3,450 2,900 Gas compression (horsepower) at end of period 253,979 221,020 253,979 221,020