SemGroup Corporation Reports Second Quarter 2014 Results

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| Source: SemGroup Corporation

Increased Quarterly Dividend by 12.5%

Completed White Cliffs Pipeline Expansion

TULSA, Okla., Aug. 7, 2014 (GLOBE NEWSWIRE) -- SemGroup® Corporation (NYSE:SEMG) today announced its financial results for the three months ended June 30, 2014.

SemGroup's adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) was $57.5 million for the second quarter 2014, compared to $67.3 million for the first quarter 2014 and $43.6 million for the second quarter 2013, a decrease of approximately 15% over the previous quarter but up 32%, year over year. Adjusted EBITDA, which is a non-GAAP measure, is reconciled to net income below.

"We are pleased with the strong contribution from our new growth projects during the quarter," said Carlin Conner, president and chief executive officer of SemGroup. "We're on track to meet guidance for the year and continue our growth momentum with increased volumes in our crude and gas businesses in the U.S. In addition, we continued to advance our strategic growth initiatives with the recent completion of the White Cliffs Pipeline expansion. Looking forward, we initiated new projects including the acceleration of our Rose Valley II gas plant in northern Oklahoma and the expansion of our Northwest Wapiti Pipeline in Canada. These new assets will increase our size and strategic position while creating additional value for our shareholders."

Second Quarter 2014 Highlights

Compared to the First Quarter 2014

  • As previously announced, on June 23, 2014, Rose Rock acquired the remaining one-third interest in SemCrude Pipeline, L.L.C., which owns 51% of White Cliffs Pipeline, L.L.C.;
     
  • Crude segment Adjusted EBITDA decreased $4.8 million primarily due to lower marketing volumes and increased G&A expenses which more than offset higher transportation volumes;
     
  • SemGas Adjusted EBITDA increased $1.8 million reflecting higher processing volumes from our new Rose Valley I plant;
     
  • SemCAMS Adjusted EBITDA decreased $3.7 million due primarily to lower volumes from the planned outage at the K3 plant; and
     
  • SemMaterials Mexico Adjusted EBITDA decreased $2.1 million due to lower volumes and increased operating and G&A costs.

SemGroup reported revenues for second quarter 2014 of $482.2 million with net loss attributable to SemGroup of $17.6 million, or a loss of $0.41 per diluted share, compared to revenues of $498.9 million with a net income attributable to SemGroup of $13.6 million, or $0.29 per diluted share, for the first quarter 2014. For the second quarter 2013, revenues totaled $324.2 million with net income attributable to SemGroup of $3.6 million, or $0.08 per diluted share. Current quarter net income was negatively impacted by two non-cash items including a $19 million change in warrant expense due to SemGroup stock price appreciation and an additional $20 million loss recognized on the sale of the SemGas Eufaula gathering system.

Dividend

The SemGroup board of directors declared a quarterly cash dividend to common shareholders of $0.27 per share, resulting in an annualized distribution of $1.08 per share. This represents a 12.5% increase from the previous quarterly dividend of $0.24 and a 35% increase over our dividend one year ago. The dividend will be paid on August 28, 2014 to all common shareholders of record on August 18, 2014.

2014 Guidance

SemGroup updated its 2014 consolidated Adjusted EBITDA guidance on June 23, 2014, to between $260 and $275 million, up from the previous guidance range of $245 million to $265 million. The company is on target to deploy approximately $475 million in capital expenditures in 2014, increased from the previous guidance of $415 million. SemGroup also updated its targeted 2014 dividend growth rate to a range of 40 to 45% year-over-year, up from the prior guidance of a 25 to 30% growth rate.

Recent Developments

  • Completed the White Cliffs Pipeline expansion - August 2014; and
     
  • SemGroup announces the acceleration of its SemGas Rose Valley II plant due to increased volumes and outlooks. The plant is expected to be complete in mid-2015.

Earnings Conference Call

SemGroup will host a joint conference call with Rose Rock Midstream®, L.P. (NYSE:RRMS) for investors tomorrow, August 8, 2014, at 11 a.m. ET. 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 72312545. 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 first quarter 2014 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 uses its Investor Relations website and social media outlets as channels of distribution of material company information. Such information is routinely posted and accessible on our Investor Relations website at ir.semgroupcorp.com, our Twitter account and LinkedIn account.

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 performance. 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, thereby diminishing its utility. 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, our anticipated annual dividend growth rate, 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 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, the factors discussed above; our ability to comply with the covenants contained in the instruments governing our indebtedness and to 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; 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.

Condensed Consolidated Balance Sheets    
(in thousands, unaudited)    
     
  June 30, 2014 December 31, 2013
ASSETS    
Current assets  $ 903,844  $ 534,014
Property, plant and equipment, net 1,212,421 1,105,728
Goodwill and other intangible assets 239,254 236,859
Equity method investments 633,375 565,124
Other noncurrent assets, net 33,550 28,889
Total assets  $ 3,022,444  $ 2,470,614
LIABILITIES AND OWNERS' EQUITY    
Current liabilities:    
Current portion of long-term debt  $ 4,357  $ 37
Other current liabilities 456,373 499,177
Total current liabilities 460,730 499,214
Long-term debt, excluding current portion 1,213,068 615,088
Other noncurrent liabilities 183,743 142,449
Total liabilities 1,857,541 1,256,751
Total owners' equity 1,164,903 1,213,863
Total liabilities and owners' equity  $ 3,022,444  $ 2,470,614
           
Condensed Consolidated Statements of Operations          
(in thousands, except per share amounts, unaudited)          
           
  Three Months Ended Six Months Ended
  June 30, March 31, June 30,
  2014 2013 2014 2014 2013
Revenues  $ 482,224  $ 324,244  $ 498,883  $ 981,107  $ 611,940
Expenses:          
Costs of products sold, exclusive of depreciation and amortization shown below 368,527 212,709 385,113 753,640 425,078
Operating 59,424 69,682 50,778 110,202 110,453
General and administrative 21,850 16,898 18,736 40,586 33,935
Depreciation and amortization 22,062 12,814 23,637 45,699 25,450
Loss (gain) on disposal of long-lived assets, net 19,315 (376) (58) 19,257 (538)
Total expenses 491,178 311,727 478,206 969,384 594,378
Earnings from equity method investments 19,187 14,861 14,962 34,149 32,206
Gain on issuance of common units by equity method investee 8,127 8,127
Operating income 10,233 27,378 43,766 53,999 49,768
Other expenses, net 29,489 10,613 7,497 36,986 38,475
Income (loss) from continuing operations before income taxes (19,256) 16,765 36,269 17,013 11,293
Income tax expense (benefit) (6,672) 9,288 16,526 9,854 (44,718)
Income (loss) from continuing operations (12,584) 7,477 19,743 7,159 56,011
Income (loss) from discontinued operations, net of income taxes 35 (5) (5) 67
Net income (loss) (12,584) 7,512 19,738 7,154 56,078
Less: net income attributable to noncontrolling interests 5,025 3,943 6,150 11,250 9,065
Net income (loss) attributable to SemGroup Corporation  $ (17,609)  $ 3,569  $ 13,588  $ (4,096)  $ 47,013
Net income (loss) attributable to SemGroup Corporation  $ (17,609)  $ 3,569  $ 13,588  $ (4,096)  $ 47,013
Other comprehensive income (loss), net of income taxes 6,685 (5,354) (2,972) 3,713 (10,412)
Comprehensive income (loss) attributable to SemGroup Corporation  $ (10,924)  $ (1,785)  $ 10,616  $ (383)  $ 36,601
Net income (loss) per common share:          
Basic  $ (0.41)  $ 0.08  $ 0.32  $ (0.10)  $ 1.12
Diluted  $ (0.41)  $ 0.08  $ 0.29  $ (0.10)  $ 1.11
Weighted average shares (thousands):          
Basic 42,682 42,211 42,631 42,657 42,145
Diluted 42,682 42,526 43,761 42,657 42,424
           
Reconciliation of net income to Adjusted EBITDA:          
(in thousands, unaudited)          
           
  Three Months Ended Six Months Ended
  June 30, March 31, June 30,
  2014 2013 2014 2014 2013
Net income (loss)  $ (12,584)  $ 7,512  $ 19,738  $ 7,154  $ 56,078
Add: Interest expense 10,360 4,495 9,227 19,587 6,891
Add: Income tax expense (benefit) (6,672) 9,288 16,526 9,854 (44,718)
Add: Depreciation and amortization expense 22,062 12,814 23,637 45,699 25,450
EBITDA 13,166 34,109 69,128 82,294 43,701
Selected Non-Cash Items and Other Items Impacting Comparability 44,361 9,526 (1,846) 42,515 35,437
Adjusted EBITDA  $ 57,527  $ 43,635  $ 67,282  $ 124,809  $ 79,138
           
Selected Non-Cash Items and          
Other Items Impacting Comparability          
(in thousands, unaudited)          
           
  Three Months Ended Six Months Ended
  June 30, March 31, June 30,
  2014 2013 2014 2014 2013
Loss (gain) on disposal of long-lived assets, net  $ 19,315  $ (376)  $ (58)  $ 19,257  $ (538)
Loss (income) from discontinued operations, net of income taxes (35) 5 5 (67)
Foreign currency transaction loss (gain) 167 (349) (683) (516) (516)
Remove NGL equity earnings including gain on issuance of common units (4,968) (4,200) (11,718) (16,686) (11,116)
NGL cash distribution 5,671 4,426 5,341 11,012 8,698
Employee severance expense 20 9 9 29 9
Unrealized loss (gain) on derivative activities (851) (827) 606 (245) (1,295)
Change in fair value of warrants 18,929 6,398 (980) 17,949 32,194
Depreciation and amortization included within equity earnings 4,251 2,404 3,450 7,701 4,809
Bankruptcy related expenses 661 216 877
Recovery of receivables written off at emergence (300) (364) (664)
Non-cash equity compensation 1,466 2,076 2,330 3,796 3,259
Selected Non-Cash Items and Other Items Impacting Comparability  $ 44,361  $ 9,526  $ (1,846)  $ 42,515  $ 35,437
       
2014 Adjusted EBITDA Guidance Reconciliation      
       
(in millions, unaudited) 2014 Guidance(1)
  Low   High
Net income  $ 31    $ 40
Add: Interest expense 51   53
Add: Income tax expense 20   21
Add: Depreciation and amortization 93   96
EBITDA  $ 195    $ 210
Selected Non-Cash and Other Items Impacting Comparability 65   65
Adjusted EBITDA  $ 260    $ 275
       
       
Selected Non-Cash and Other Items Impacting Comparability      
Depreciation and amortization included within equity earnings   18  
Loss on disposal of long-lived assets, net   19  
Change in fair value of warrants   19  
Non-cash equity compensation   9  
Selected Non-Cash and Other Items Impacting Comparability    $ 65  
       
(1) Guidance is on a cash basis for equity investments in NGL, includes fully consolidated Rose Rock Midstream      
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