Crestwood Equity Partners (NYSE:CEQP) has worked hard to turn itself around in recent years. The midstream master limited partnership (MLP) reduced its distribution, sold assets, and secured joint venture partners so that it could improve its financial profile and have access to the funding needed for expansion projects. While it has taken quite some time, the company's strategy is about to finally start paying dividends.

Turning the corner

When Crestwood reported first-quarter results earlier this year, the company showed a noticeable improvement. Earnings jumped 11.9% thanks to a big uptick in volumes flowing across its gathering and processing systems, helped in part by recently completed expansion projects. Distributable cash flow, on the other hand, slipped 10.1% due to an increase in cash paid out to investors holding recently issued preferred shares. However, if we adjust for this payout, cash flow was up 13.4% year over year.

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That turn will likely become even more pronounced when the company reports second-quarter results at the end of this month, since it should have continued benefit from ramping volumes on its legacy and newly built systems.

Stepping on the gas

The company's growth rate, meanwhile, appears poised to shift into a higher gear in the third quarter. That's because Crestwood recently announced the completion of several expansion projects in the fast-growing Permian Basin as well as some related strategic moves. 

The MLP said that it finished construction of its new Orla natural gas processing plant and brought the 33-mile Orla Express Pipeline online. That will connect the plant to its Willow Lake gathering system, which serves several producing customers. Meanwhile, the company expects to finish the 28-mile Nautilus-to-Orla pipeline soon; when done, it will join the plant to its Nautilus gathering system. That system is part of a joint venture with Shell Midstream Partners (NYSE:SHLX) to support the growth of big oil giant Royal Dutch Shell (NYSE:RDS-A)(NYSE:RDS-B) in the region. Shell currently expects to invest about $1 billion per year through 2020 to boost its output, which should yield steady volume growth across the Nautilus system. 

In addition to finishing those projects, Crestwood announced that it acquired an interest in the Orla-to-Benedum section of a new EPIC natural gas liquids (NGL) pipeline. That transaction will give it control over the capacity of this section so that it can move the NGL produced at Orla, as well as two future expansions, to markets along the Texas coast. That acquisition enabled the company to sign a long-term contract with Chevron Phillips Chemical Company -- a petrochemical joint venture between Chevron (NYSE:CVX) and Phillips 66 (NYSE:PSX) -- to deliver a raw NGL mix from Orla to Benedum. From there, the NGL can move on other pipelines to Chevron Phillips' Sweeny Complex along the Gulf Coast.

This string of strategic moves enabled Crestwood to develop a fully integrated system that has the scale to meet the needs of its customers in the region. Because of that, the company should experience a significant uptick in earnings and cash flow in the coming quarters. It anticipates a more than 15% compound annual growth rate in earnings and cash flow through at least 2020. That's an impressive growth rate for a company that currently yields 6.9%. Meanwhile, that growing cash-flow stream makes it highly likely that Crestwood will boost its high-yielding payout at a healthy rate over the next few years. 

A potential total-return juggernaut

The early stages of Crestwood's turnaround have already helped ignite its unit price, which is up 35% since the start of the year. However, even with that big rally, Crestwood remains undervalued versus its peers. It currently trades at less than nine times next year's earnings, which is the second lowest level in the peer group and well under the average, which is more than 11 times. That valuation disconnect suggests there could be upside ahead as the gap continues narrowing. Add that to its high-yielding dividend and fast-paced earnings growth, and Crestwood could continue generating market-crushing total returns over the next few years.

Matthew DiLallo owns shares of Crestwood Equity Partners LP and Phillips 66. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.