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8-K - FORM 8-K - SemGroup Corpsemgform8-k2012x3qearnings.htm
Exhibit 99.1

SemGroup Corporation Reports Third Quarter 2012 Results
Third Quarter Adjusted EBITDA Increased 9% Over Previous Quarter;
Capex guidance increases 28%

Tulsa, OK November 8, 2012 SemGroup® Corporation (NYSE: SEMG) ("SemGroup") today announced its financial results for the three months ended September 30, 2012.

SemGroup's adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was $32.9 million for the third quarter 2012, compared to $30.3 million for the second quarter 2012 and $29.1 million for the third quarter 2011. Key factors impacting our results, compared to the second quarter 2012, included an increase in marketing and transportation margin in our crude segment and a 4% increase in volumes at White Cliffs Pipeline. Adjusted EBITDA, which is a non-GAAP measure, is defined and reconciled to net income below.

Management is maintaining the company's 2012 Adjusted EBITDA guidance of $125 to $135 million. We continue to experience a strong performance in our crude segment. However, we anticipate being at the lower end of our guidance range due to low natural gas and natural gas liquids prices as well as ongoing challenges in the European storage market throughout this year. The company is increasing its capital expenditure guidance to $230 million for 2012, as a result of an increased ownership of the Glass Mountain Pipeline and the previously announced White Cliffs Pipeline expansion.

SemGroup reported revenues for third quarter 2012 of $277.9 million with net loss attributable to SemGroup of $2.8 million, or loss of $0.07 per share, compared to revenues of $331.1 million with net income attributable to SemGroup of $5.1 million, or $0.12 per share for the second quarter 2012. For the third quarter 2011, revenues totaled $391.5 million with net income of $14.3 million, or $0.34 per share. Third quarter 2012 operating income increased over the second quarter 2012 and the third quarter 2011. However, net income was negatively affected by $16.4 million of non-cash items during the current period. SemGroup recognized a non-cash expense of $9.5 million related to a change in the fair value of warrants and a net loss from equity earnings of NGL Energy Partners LP (NGL) of $6.9 million, primarily driven by their seasonal business as well as one-time charges related to an acquisition which were recorded by NGL in the quarter ending June 30, 2012.

Recent Developments
White Cliffs Pipeline completed a successful open season and received sufficient binding shipper commitments and necessary partner approvals to move forward with its expansion project which will allow the company to provide additional crude oil transportation service from Platteville, Colorado, to Cushing, Oklahoma.
We now own 50% of the previously announced Glass Mountain Pipeline. The pipeline project is on track and will have an initial capacity of approximately 140,000 barrels per day and 440,000 barrels of intermediate storage. We expect to have the pipeline up and running by the end of 2013.
On September 12, 2012, we signed a purchase and sale agreement to sell our SemStream Arizona Propane assets to J.P. Energy Partners, L.P.

"We continue to execute on our long-term strategic growth plans, focused on infrastructure demands in the midcontinent," said Norm Szydlowski, president and chief executive officer of SemGroup. "We're increasing our presence in our key growth areas. As the demand for midstream services continues to grow, our projects like the expansion of White Cliffs Pipeline, the previously announced Glass Mountain Pipeline and the Wattenberg Oil Trunkline will help meet this need," said Szydlowski.



Exhibit 99.1

Earnings Conference Call
SemGroup will host a conference call for investors tomorrow, November 9, 2012, at 11 a.m. EST. The call can be accessed live over the telephone by dialing 877.359.3652, or for international callers, 720.545.0014. The pass code for the call is 34165494. Interested parties may also listen to a simultaneous webcast of the conference call by logging onto SemGroup's Investor Relations website at ir.semgroupcorp.com. A replay of the webcast will also be available for a year following the call at ir.semgroupcorp.com on the Calendar of Events-Past Events page. The third quarter 2012 earnings slide deck will be posted under Presentations.

About SemGroup
Based in Tulsa, OK, SemGroup® Corporation (NYSE: SEMG) is a publicly traded midstream service company providing the energy industry the means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end-users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminalling and storing energy.
SemGroup®, SemGas®, SemMaterialsMèxicoMR, SemStream® and White Cliffs Pipeline® are registered trademarks of SemGroup Corporation.
Non-GAAP Financial Measures
Adjusted EBITDA is not a generally accepted accounting principles (GAAP) measure and is not intended to be used in lieu of a GAAP presentation of net income/loss. Adjusted EBITDA is presented in this Press Release because SemGroup believes it provides additional information with respect to its financial performance and its ability to meet future debt service, capital expenditures and working capital requirements. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, adjusted for selected items that SemGroup believes impact the comparability of financial results between reporting periods. Although SemGroup presents selected items that it considers in evaluating its performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in SemGroup's operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions and numerous other factors. These types of variances are not separately identified in this Press Release. Because all companies do not use identical calculations, SemGroup's presentation of Adjusted EBITDA may be different from similarly titled measures of other companies. Reconciliations of net income (loss) to Adjusted EBITDA for the periods presented are included in the tables at the end of this Press Release.
Forward-Looking Statements
Certain matters contained in this Press Release include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical fact, included in this Press Release including the prospects of our industry, our anticipated financial performance, NGL Energy Partners LP (NYSE: NGL) anticipated financial performance, management's plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters, may constitute forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as



Exhibit 99.1

assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, our ability to comply with the covenants contained in and maintain certain financial ratios required by our credit facilities; NGL's operations, which we do not control; the ability of our subsidiary, Rose Rock Midstream L.P. (NYSE: RRMS), to make minimum quarterly distributions; the possibility that our hedging activities may result in losses or may have a negative impact on our financial results; any sustained reduction in demand for the petroleum products we gather, transport, process and store; our ability to obtain new sources of supply of petroleum products; our failure to comply with new or existing environmental laws or regulations or cross border laws or regulations; the possibility that the construction or acquisition of new assets may not result in the corresponding anticipated revenue increases; any future impairment to goodwill resulting from the loss of customers or business; changes in currency exchange rates; and the risks and uncertainties of doing business outside of the U.S., including political and economic instability and changes in local governmental laws, regulations and policies, as well as other risk factors discussed from time to time in each of our documents and reports filed with the SEC.
Readers are cautioned not to place undue reliance on any forward-looking statements contained in this Press Release, which reflect management's opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements.
Contacts:
Investor Relations:
Alisa Perkins
918-524-8081
investor.relations@semgroupcorp.com
Media:
Liz Barclay
918-524-8158
lbarclay@semgroupcorp.com
 



Exhibit 99.1


Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
 
September 30,
2012
December 31,
2011
ASSETS
 
 
Current assets
$
496,431

$
389,735

Property, plant and equipment, net
800,231

733,925

Goodwill and other intangible assets
18,137

18,403

Equity method investments
378,522

327,243

Other noncurrent assets, net
17,744

21,875

Total assets
$
1,711,065

$
1,491,181

LIABILITIES AND OWNERS' EQUITY

 
Current liabilities:

 
Current portion of long-term debt
$
2,096

$
26,058

Other current liabilities
364,443

270,453

Total current liabilities
366,539

296,511

Long-term debt, excluding current portion
189,569

83,277

Other noncurrent liabilities
153,605

132,728

Total liabilities
709,713

512,516

Total owners' equity
1,001,352

978,665

Total liabilities and owners' equity
$
1,711,065

$
1,491,181




Exhibit 99.1


Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
 
 
Three Months Ended
Nine Months Ended
 
September 30,
June 30,
September 30,
 
2012
2011
2012
2012
2011
Revenues
$
277,852

$
391,522

$
331,113

$
921,660

$
1,135,087

Expenses:
 
 
 
 
 
Costs of products sold, exclusive of depreciation and amortization shown below
189,830

313,490

219,282

651,283

896,871

Operating
52,367

41,772

82,378

172,750

116,384

General and administrative
16,680

16,883

16,563

53,073

56,443

Depreciation and amortization
12,081

12,894

11,881

35,687

38,355

Loss (gain) on disposal or impairment of long-lived assets, net
(3,615
)

119

(3,496
)
(136
)
Total expenses
267,343

385,039

330,223

909,297

1,107,917

Earnings from equity method investments
3,116

4,016

12,289

22,903

10,166

Operating income
13,625

10,499

13,179

35,266

37,336

Other expenses (income), net
11,701

(5,834
)
5,587

24,904

31,327

Income from continuing operations before income taxes
1,924

16,333

7,592

10,362

6,009

Income tax (benefit) expense
2,091

1,308

(93
)
985

3,202

Income (loss) from continuing operations
(167
)
15,025

7,685

9,377

2,807

Loss from discontinued operations, net of income taxes
(265
)
(686
)
(442
)
(456
)
(735
)
Net income (loss)
(432
)
14,339

7,243

8,921

2,072

Less: net income attributable to noncontrolling interests
2,336


2,096

7,915


Net income (loss) attributable to SemGroup Corporation
$
(2,768
)
$
14,339

$
5,147

$
1,006

$
2,072

Net income (loss) attributable to SemGroup Corporation
$
(2,768
)
$
14,339

$
5,147

$
1,006

$
2,072

Other comprehensive income (loss), net of income taxes
12,072

(18,103
)
(9,897
)
14,930

(11,465
)
Comprehensive income (loss) attributable to SemGroup Corporation
$
9,304

$
(3,764
)
$
(4,750
)
$
15,936

$
(9,393
)
Net income (loss) attributable to SemGroup Corporation per common share:
 
 
 
 
 
Basic
$
(0.07
)
$
0.34

$
0.12

$
0.02

$
0.05

Diluted
$
(0.07
)
$
0.34

$
0.12

$
0.02

$
(0.15
)
Weighted average shares (thousands):
 
 
 
 
 
Basic
41,949

41,642

41,934

41,930

41,621

Diluted
42,234

41,958

42,133

42,182

41,621




Exhibit 99.1


Reconciliation of net income to Adjusted EBITDA:
(in thousands, unaudited)
 
Three Months Ended
Nine Months Ended
  
September 30,
June 30,
September 30,
  
2012
2011
2012
2012
2011
Net income (loss)
$
(432
)
$
14,339

$
7,243

$
8,921

$
2,072

Add: Interest expense
1,992

6,013

2,112

7,763

49,321

Add: Income tax (benefit) expense
2,091

1,308

(93
)
985

3,202

Add: Depreciation and amortization expense
12,081

12,894

11,881

35,687

38,355

EBITDA
15,732

34,554

21,143

53,356

92,950

Selected Non-Cash Items and Other Items Impacting Comparability
17,205

(5,426
)
9,121

37,957

(9,237
)
Adjusted EBITDA
$
32,937

$
29,128

$
30,264

$
91,313

$
83,713

Selected Non-Cash Items and
Other Items Impacting Comparability
(in thousands, unaudited)

  
Three Months Ended
Nine Months Ended
  
September 30,
June 30,
September 30,
  
2012
2011
2012
2012
2011
Loss (gain) on disposal or impairment of long-lived assets
$
(3,615
)
$

$
119

$
(3,496
)
$
(136
)
Loss (income) from discontinued operations
265

686

442

456

735

Foreign currency transaction (gain) loss
355

(2,874
)
(34
)
358

(3,430
)
Remove NGL equity earnings
6,905


(3,828
)
2,150


NGL cash distribution
2,090


1,812

5,063


Employee severance expense


(27
)
354

4,374

Unrealized (gain) loss on derivative activities
(554
)
(2,301
)
(24
)
(432
)
(9,394
)
Change in fair value of warrants
9,544

(4,684
)
3,552

17,083

(8,258
)
Reversal of allowance on goods and services tax receivable




(4,144
)
Depreciation and amortization included within equity earnings of White Cliffs
2,546

2,659

2,543

7,630

7,967

Defense costs


2,899

5,899


Allowance on (recovery of) receivable from AGE Refining

(300
)


(900
)
Recovery of income tax receivable written off at emergence
(1,940
)


(1,940
)

Non-cash equity compensation
1,609

1,388

1,667

4,832

3,949

Selected Non-Cash Items and Other Items Impacting Comparability
$
17,205

$
(5,426
)
$
9,121

$
37,957

$
(9,237
)



Exhibit 99.1


Reconciliation of net cash provided by (used in)
operating activities to Adjusted EBITDA
(in thousands, unaudited)
 
  
Three Months Ended
Nine Months Ended
  
September 30,
June 30,
September 30,
 
2012
2011
2012
2012
2011
Net cash provided by (used in) operating activities
$
27,606

$
(78,831
)
$
25,494

$
51,758

$
(8,234
)
Add:
 
 
 
 
 
Amortization and write down of debt issuance costs
(323
)
(694
)
(311
)
(2,078
)
(23,235
)
Deferred tax benefit (expense)
1,455

8,501

624

3,738

4,019

Provision for uncollectible accounts receivable
1,460

204

(562
)
828

5,340

Changes in operating assets and liabilities
(16,481
)
94,667

(6,247
)
(5,790
)
54,726

Income tax expense (benefit)
2,091

1,308

(93
)
985

3,202

Loss (income) from discontinued operations
265

686

442

456

735

NGL distribution in excess of equity earnings
4,831


233

5,064


Change in fair value of warrants
9,544

(4,684
)
3,552

17,083

(8,258
)
Reversal of allowance on goods and services tax receivable




(4,144
)
Depreciation and amortization included within equity in earnings of White Cliffs
2,546

2,659

2,543

7,630

7,967

Depreciation and amortization in historical results of discontinued operations
(109
)
(401
)
(395
)
(437
)
(1,200
)
Defense costs


2,899

5,899


Allowance on (recovery of) receivable from AGE Refining

(300
)


(900
)
Recovery of income tax receivable written off at emergence
(1,940
)


(1,940
)

Employee severance expense


(27
)
354

4,374

Interest expense
1,992

6,013

2,112

7,763

49,321

Adjusted EBITDA
$
32,937

$
29,128

$
30,264

$
91,313

$
83,713






Exhibit 99.1

2012 Adjusted EBITDA Guidance Reconciliation*
 
(in millions, unaudited)
Low
High
Net income
$
16.5

$
26.3

Add: Interest expense
10.0

9.7

Add: Income tax expense
8.4

8.9

Add: Depreciation and amortization
51.5

51.5

EBITDA
$
86.4

$
96.4

Selected Non-Cash Items and Other Items Impacting Comparability
38.6

38.6

Adjusted EBITDA
$
125.0

$
135.0

 
*
Guidance is on a cash basis for NGL and White Cliffs Pipeline and includes fully consolidated Rose Rock Midstream
 
Selected Non-Cash Items and Other Items Impacting Comparability
 
Change in fair value of warrants
$
17.1

Depreciation and amortization included within equity in earnings of White Cliffs
9.5

Defense costs
5.9

Non-cash equity compensation
6.1

Selected Non-Cash Items and Other Items Impacting Comparability
$
38.6